EDITORIAL BOARD

Editor Dzafer Kudumovic Table of Contents

Secretary Nadja Sabanovic
Postage Stamps with hidden information in security Z values.......1466
Technical editor Eldin Huremovic Jana Ziljak Vujic, Maja Rudolf, Branka Moric, Martina Friscic
Cover design Almir Rizvanovic
On some lexical and stylistic characteristics of older
Lector Mirnes Avdic montenegrin short stories....................................................................1474
Lector Adisa Spahic Sanja Crnogorac
Members Vilko Ziljak (Croatia) Comparisons of algorithms for image reconstruction
Slobodan Kralj (Croatia) in the plane: C with MEX vs. MATLAB...........................................1483
Adis Alihodzic, Nedzad Dukic
Marin Milkovic (Croatia)
Davor Zvizdic (Croatia) Load-bearing capacity of timber member finger-joint
connections ...........................................................................................1498
Joza Duhovnik (Slovenia) Zikica Tekic, Aleksandra Nenadovic, Sasa Djordjevic
Janez Dijaci (Slovenia)
Impact of transition on attitudes of young consumers.....................1504
Ivan Polajnar (Slovenia) Vukasin Petrovic, Snezana Kirin, Vladimir Tomasevic,
Tadeja Zupancic (Slovenia) Violeta Talovic, Milan Mitrovic
Milan Medved (Slovenia) Invisible information on the transparent polymer
Jelena Ivanovic Sekularac food packaging with Infra V/Z technology........................................1512
(Serbia) Martina Friscic, Olivera Medjugorac, Lidija Tepes,
Nebojsa Vidanovic (Serbia) Denis Jurecic
Venceslav Grabulov (Serbia) Designing the space for urban regeneration: pros and cons...........1520
Tatjana Mrdjenovic, Miodrag Ralevic
Hasan Hanic (Serbia)
Zijah Burzic (Serbia) Financing the military-industrial complex by
the Ministry of defence of the Republic of Serbia............................1530
Amir Pasic
Ivan Milojevic, Drago Cvijanovic, Milan Mihajlovic
(Bosnia and Herzegovina)
Vesna Maric-Aleksic Behavior and attitudes about the use of seat belts
(Bosnia and Herzegovina) in Bosnia and Herzegovina..................................................................1535
Bojan Maric, Marko Subotic, Dejan Andjelkovic,
Avdo Voloder Abid Drobo, Adis Imamovic
(Bosnia and Herzegovina)
Effects of vertical earthquake component on the response
Samir Causevic
of an engineering structure ................................................................1546
(Bosnia and Herzegovina) Danijel Kukaras, Miroslav Besevic, Milan Trifkovic,
--------------------------------------- Goran Pejicic, Tihomir Milutinovic
Address of the Sarajevo, The use of satellite images to amend the content
Editorial Board Hamdije Kresevljakovica 7A of topographic maps ............................................................................1554
Miodrag Regodic, Goran Cirovic, Dragoljub Sekulovic,
phone/fax 00387 33 640 407
Sinisa Drobnjak
ttem_bih@yahoo.com,
Application of multidimensional statistics for ranking of
http://www.ttem.ba insurance companies in Bosnia and Herzegovina............................1561
Ademir Abdic, Rabija Somun – Kapetanovic, Emina Resic,
Published by DRUNPP, Sarajevo
Adem Abdic
Volume 8 Number 4, 2013 Quality control of construction works on the structure
ISSN 1840-1503 of Atlas capital center ..........................................................................1571
Nenad Ivanisevic, Marina Rakocevic, Milos Knezevic,
e-ISSN 1986-809X Snezana Rutesic, Bosko Stevanovic
Impact Factor 0.414
(ISI Journal Citation Reports 2012)
 Table of Contents
Research of the rock mass influence on the Calculating the gender inequality index:
mechanized hydraulic support construction (MHS) example of Serbia.................................................................... 1681
for the conditions in the underground mine Olgica Boskovic, Emilija Manic, Nikola Njegovan
»Strmosten« RMU »Rembas«............................................... 1579
Value network of cloud computing service ecosystem...... 1689
Jovo Miljanovic, Slobodan Majstorovic,
Imre Petkovic, Djerdji Petkovic, Aleksandra Tesic,
Vladimir Malbasic, Drazana Tosic
Edin Suljovic
Differences in the maximum isokinetic strength
Modeling and simulation of a complex hybrid
of lower extremities in elite and sub elite footballers......... 1586
electrical vehicle....................................................................... 1699
Eldin Jeleskovic, Haris Alic, Gordana Manic,
Dragoljub Radonjic, Zoran Marjanovic,
Predrag Nemec, Dragan Zivotic, Munir Talovic
Radomir Brzakovic
Research of correlation between reliability and
Quantitative approach to economic effects’ analysis
safety factor.............................................................................. 1592
considering electronic waste recycling ................................ 1707
Mileta Ristivojevic, Dragan Radovic, Dragan Markovic,
Jelena Stankovic, Marija Andjelkovic Pesic, Dragana
Zoran Stamenic, Djordje Jovanovic
Radenkovic Jocic, Bruno Bojic, Boban Stojanovic
Investments in science and technology as the key
A new model of economic growth and development
factors of the economic development................................... 1597
of Republic of Serbia............................................................... 1715
Nebojsa Djokic, Ljiljana Arsic, Borislav Radevic
Radmilo Nikolic, Aleksandra Fedajev, Zvonko
Zoran Milicevic
Damnjanovic, Dejan Riznic, Predrag Ranisavljevic
Effective risk management liquidity and general
Gray economy and tax evasion in Serbia............................ 1723
standards of liquidity.............................................................. 1604
Aleksandar M. Gajic, Mirjana I. Stevanovic,
Jovo Jednak, Dejan Jednak, Goran Milosevic,
Milorad S. Gajic
Srdjan Milasinovic, Nedzad Korajlic
The impact of social and demographic factors
Information technology impact on changes in
on management styles in sport organizations..................... 1731
company organizational structure........................................ 1612
Edita Kastratovic, Milan Dragic, Goran Kvrgic,
Zivko Kulic, Goran Milosevic, Srdjan Milasinovic,
Branislav Masic, Sandra Nesic
Zelimir Kesetovic, Slobodan Ristic
Causality and weak solutions of stochastic
An analysis of socially responsible business practice
differential equations with applications............................... 1736
of multinational corporations in Serbia............................... 1618
Dragana Valjarevic, Ljiljana Petrovic, Aleksandar
Marija Petrovic-Randjelovic, Maja Ivanovic-Djukic
Valjarevic, Jasmina Jovanovic, Dragan Radovanovic
The application of technical analysis indicators
Macroeconomic stability and competitiveness
for the purpose of investment strategy optimization
of the Republic of Serbia........................................................ 1743
in emerging market................................................................. 1629
Radmilo Nikolic, Aleksandra Fedajev,
Tomislav Brzakovic, Mirko Borisov, Miodrag Brzakovic
Zvonko Damnjanovic, Dejan Riznic
The nature and factors of economic prosperity.................. 1638
Analysis of contributions as the primary source
Zoran Njegovan, Nikola Njegovan, Drago Cvijanovic
of funding compulsory social insurance in Serbia............. 1751
Factors of successful sport event security management... 1645 Mirjana I. Stevanovic, Aleksandar Gajic,
Dejan Ilin, Zoran Milosevic, Nebojsa Maksimovic, Dragan Mihajlovic, Milorad S. Gajic
Radenko Matic, Zoran Kekovic
Impact of security protocols on performance in
Strategic games of banks in the product placement IEEE 802.11 wireless networks............................................. 1758
market....................................................................................... 1651 Dejan Tepsic, Mladen Veinovic, Aleksandar Miskovic,
Zdenka Dragasevic, Svetlana Rakocevic Slavisa Nikolic
Specifics, problems and prospects of innovations Responsibility of participants for public
in Serbia.................................................................................... 1660 procurement regularity.......................................................... 1766
Zivota Radosavljevic, Maja Andjelkovic, Mirjana Knezevic, Zaklina Spalevic, Milorad Bejatovic,
Milan Radosavljevic, Dragana Radosavljevic, Ivanka Spasic, Milan Pocuca
Analysis of the leadership approach in Difficulties encountered in defining and
HIP Petrohemija...................................................................... 1673 measuring intellectual capital ............................................... 1774
Slobodan Adzic, Branko Djedovic, Bosko Nadoveza, Marian Socoliuc, Veronica Grosu, Elena Hlaciuc,
Nikola Ugrcic Dorel Mates, Ionel Bostan,Ovidiu Bunget, Maria Moraru
Engineering management as a base and paradigm Web based education for power electronics
of competitiveness in industry............................................... 1677 supported with animations.................................................... 1780
Branko Djedovic, Bosko Nadoveza, Rade Knezevic Korhan Kayisli
 Table of Contents
Interactive multimedia as new teaching strategy in Risk management in insurance............................................. 1894
the course of programmable logic devices........................... 1790 Zdravko Petrovic, Aleksandra Tesic,
Kristijan Kuk, Ivan Milentijevic, Dejan Rancic, Natasa Mrvic Petrovic
Petar Spalevic, Marko Smilic, Zoran Trajcevski
A review of research on leader dispositions
Sensitivity analysis of fractional programming models ... 1798 of the gifted............................................................................... 1903
Marija Cileg, Tibor Kis, Otilija Sedlak Radovan Grandic, Jovana Milutinovic, Milena Stipic
Drivers of unpleasant experiences in virtual Epistemology and producing cultural memory in epos:
social network context............................................................ 1804 Possibility of inter-epos poem in Ivan Mazuranic’s
Milan Okanovic, Milos Milosavljevic, Slavica Cicvaric Smrt Smail Age Cengica......................................................... 1910
Kostic, Tamara Vlastelica Bakic Amila Kahrovic-Posavljak
Modelling insurance losses using inverse Gaussian Economic effects of investing in conventional
and log-normal distribution mixture................................... 1810 and organic agriculture.......................................................... 1914
Jelena Kocovic, Vesna Rajic, Samed Karovic, Jelena Birovljev, Nenad Djokic, Biljana Cetkovic
Mihailo Kocovic, Marija Jovovic
Effectiveness of integrated enterprise information
A rational approach to the acquisition, valuation systems education program................................................... 1920
and holding of assets............................................................... 1819 Ognjen Pantelic, Ana Pajic, Dragana B. Vujaklija,
Xi-Ping Ao, Roger Collins Mirko Vujosevic
The differences in isokinetic potential of knee Environmental assessment of buildings:
extensor and flexor in footbalers within different methodology for developing a national system .................. 1929
competition categories............................................................ 1827 Saja Kosanovic, Milica Jovanovic – Popovic
Haris Alic, Eldin Jeleskovic, Gordana Manic, Izet
Outside-in strategy approach in theory and praxis........... 1936
Bajramovic, Ekrem Colakhodzic, Ifet Mahmutovic
Slobodan Adzic, Nenad Markovic, Snezana Milosevic,
Measurements SO2, NOx and smoke in large cities Marija Milosevic
countries in transition............................................................. 1831
Instructions for the authors................................................... 1940
Dragana Vidakovic, Milovan Vukovic, Veljko Radicevic,
Dragan Jovanovic, Miroslav Piljusic
Comparative analysis of research on work-related
problems of occupational safety specialist in
Croatia and Serbia.................................................................. 1840
Snezana Zivkovic, Josip Taradi, Milisa Todorovic
Ecological aspects of aluminium usage in
contemporary building industry........................................... 1849
Uros Vesic, Darija Gajic
Research of economic efficiency of innovations
in the Republic of Serbia........................................................ 1856
Zivota Radosavljevic, Dragana Radosavljevic,
Milan Radosavljevic, Maja Andjelkovic,
Edita Kastratovic
Automatic obtaining of the strut-and-tie models
for RC plane elements............................................................. 1868
Anka Starcev-Curcin, Andrija Raseta, Zoran Brujic
Analysis of fuel bed height on a grate and its
relation with flue gas temperatures at the furnace
end and steam temperature at evaporator outlet............... 1876
Midhat Osmic, Sead Delalic, Dzafer Kudumovic,
Indir a Bul j ubasic
Cloud computing - development and implementation
opportunities in Serbia .......................................................... 1880
Jovica Djurkovic, Jelica Trninic
Influence of the specific sliding work on
tribological parameters of friction linings
for heavy vehicle clutches....................................................... 1889
Darko Danev, Milan Kjosevski, Simeon Simeonov
 technics technologies education management

Postage Stamps with hidden information in

security Z values
Jana Ziljak Vujic1, Maja Rudolf2, Branka Moric2, Martina Friscic2,3
1
Polytechnic of Zagreb, Croatia,
2
Faculty of Graphic Arts, Zagreb, Croatia,
3
Rotoplast, Zagreb, Croatia.

Abstract accommodate new demands. We use the theory of

Infraredesign [1] in planning of security with the
With new technology of CMYKIR separation
hypothesis that the cameras which surround us can
we create double space in design of postage stamp.
make use of the new design. Those cameras can be
The procedure is to connect the two images, visual
used to detect the protection of packaging, cloth-
and Infra information. Theme is divided to motif
ing and a variety range of products which need
and its’ hidden context. Purpose of camouflage,
protection against counterfeiting [2].
double information is discussed and analyzed on
The goal of designer solutions is for the prod-
small dimensions of postage stamp. New phases are
uct on the market to attract our attention, and
defined in preparation of graphics for new methods
make advantage in the countless competition. Re-
of separation channels of graphics to obtain effect
search in the field of infrared and ultraviolet color
of infrared hidden images in visible picture. We in-
characteristics have been conducted by different
troduce new technology of scanning in ultraviolet
approaches [3][4][5] to improve the image qual-
and infrared selections: 570, 715, and 850 nanome-
ity [6] and to secure the documents [7]. The in-
ters. At the same time ultraviolet colorants are set
vention of double information in composition of
with the migration from yellow to brown. Scanning
visual and infrared spectrum [8] can significantly
is conducted with the barrier of UV 254 nm. With
improve promotion and the visual identity of a
these methods of scanning we extend the tools for
product. We deliver new ways of planning of de-
authenticating postage stamp as security paper. Two
sign of postage stamps based on previous analyses
independent informations on a stamp are planned
[9] and the conclusion that the spectral character-
as graphical and printing solution with a goal of ex-
istic of documents and products is a way of veri-
tending the quality of printing process and develop-
fying the authenticity [10]. Design that includes
ment of new security inks.
Infraredesign (IRD) has special role in determin-
Key words: Infrared graphic, Z value, security
ing authenticity of printing product. Invention of
print, postage stamp, camouflage image, hidden
double image (visible and invisible) and applica-
information, CMYKIR separation
tion of Infraredesign with the goal of advanced vi-
sual communicating as well as advanced security
1. Introduction of postage stamp, has its’ special meaning.
We can say that IRD invention delivers indi-
The value Z is defined as the apsorption of
cated advantages. Products that, from the very be-
light at 1000 nanometers. Today we testify a great
ginning have planned protection elements as their
change in the world where we are surrounded with
integral part will have advantage above those that
many cameras that work day and night. They re-
do not pay significant attention to new ways of
cord the reality in two spectrums: daylight and
protection. By preparing the product for printing
near infrared light, especialy in the Z value. We
we design two images [10]. One is visible under
do not notice those IR cameras because their light
daylight and another that that is visible in infrared
sources are invisible for human eye. With this new
part of the spectrum. With design we need to de-
reality we are prepared for a different design of
fine the relation of two images and the quantity of
everything that surrounds us. Our assumption is
information that each image carries. With the use
that graphic products need two graphical states to

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 technics technologies education management

of Infraredesign, the new advanced method for Theme range of postage stamps have no restric-
marking and protecting the product, we make pos- tions. Events that have been important in some
sible to enhance the designed solution with same historical period are always annotated in postage
visual image that contains extended information stamps. Besides that, we encounter the motifs of
which disables copying. Product designed in such nature, science art, industry sport or historical in-
manner keeps its’ authenticity and can be easily dividuals or events. Motif can be represented in
detected from possible counterfeit. many different ways where important information
is emphasized while other information is reduced.
2. Double information and the protection On postage stamps the hierarchy of information is
of brand of postage stamps very important, where, due to limited space motif
would be “suppressed” by visual noise from multi-
With significantly simple use of Infraredesign tude of details. We consider that the motif of post-
the end user becomes certain that he buys original age stamp as a mark of contemporary phenomena
product and with that all the advantages and quali- deserves richness of graphic elements which are
ties that the product, or postage stamp or a certain equally distributed. If we wish to describe certain
brand represents. Visible versus invisible enables theme we would give it double context through
implementation of double information, but also, a double image. When we celebrate an artistic work
guarantee that the product is original. It represents we wish to give homage to the maker. Annotating
extended platform for delivering key messages and the scientific accomplishments we wish to present
ideas. With that there are new possibilities in manag- the image of the scientist. Architecture of a city
ing brand or graphic product such as postage stamp. hides the faces of architects behind those build-
IRD can be carrier of a certain message or create ings. Every theme field contains duality which
independent play of visible-invisible relation. cannot be appropriately approached with today’s
This article deals with the design of double im- design and printing methods.
age for postage stamp security. Postage stamps are Artistic solutions of contemporary postage
released with a motifs that explain different anni- stamps are limited to one message which contains
versaries, paying homage to events, births/deaths one set of graphical and textual elements. Consid-
of important individuals, and also as retrospect ering limited space, there is not enough room for
to many social, artistic or scientific works that rich graphic expression, but only for necessary in-
made some significance in human history. Postage formation by which postage stamp satisfies formal
stamp has, from its beginnings, been recognized norms. Typography has been unjustly deprived
as artistic work for itself outside the common use and its purpose was to poorly communicate basic
of paying for postage services. As a security paper, information. On the question of multiple images
postage stamp has legal notices in which graphical applied to postage stamps technology of today’s
elements are strictly defined. There are two types printing was not been able to give solution. With
of graphic elements present on a stamp. Manda- the development of new technologies in graphic
tory elements (strictly defined by law) and design- industry, and new knowledge in the field of mix-
er elements (which are defined by graphic artist). ing and measuring inks there was progress in the
Design is controlled in all phases of production. experiments of the extended range of spectrum.
The problem that all artists and designers en- By entering the parts of spectrum that are not vis-
counter is obvious; narrow and limited dimen- ible to human eye, but are easily measured with
sions of stamp against many information which instruments, it is possible to obtain extended range
it contains. Analysis of motifs and graphical solu- of designing graphics. Experiments that deal with
tions shows that many elements are omitted or di- manipulation of color that leaves controlled mark
minished to gain space for other elements. Graph- in near infrared spectrum enable new approach to
ics and typographical elements come into visual the issues of designing for a limited space. This
conflict, where text is minimized, sometimes to is the method that imposes as a solution of prob-
microscopic measures or some context elements lems of design of postage stamps with rich graph-
of lesser importance are omitted. ics which calls for multilevel information. Duality

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 technics technologies education management

that is assigned to every motif of a stamp, now is

divided to visible and invisible information/graph-
ic. New technology of Infraredesign enables print-
ing of multiple information on one surface which
has attributes of visibility in extended spectrum.
Visible graphic carries certain information, while
it carries programmatically embedded second pic-
ture or text which can be detected in near infrared
part of the spectrum. By contemporary techniques
graphic in the visual part can be described as work
of art, while new tools and technologies apply
supplemented or even new meaning and put it in
the context which is completely different from the
original. Examples presented in this experiment
demonstrate duality of messages that are modeled
by designer. In the approach of such design, art-
ist/designer requires knowledge of manipulating
graphics in such a way that two images are com-
pletely “fused”. He also requires knowledge in the
field of mixing inks which depend on the printing
technique and materials of medium on which the Figure 2. Printed postage stamps seen under
print is carried out. near infrared spectrum of 850 nm
Next examples of postage stamps show the
methods of manipulation in visible and infrared Figure 1. shows designed solutions of four
area that can extend context of the motif and cre- postage stamps released in respect of various indi-
ate additional space for placing the double images. viduals and artists. These stamps have visible and
hidden camouflage information, i.e. double image
in visible that serves as front “facade” and infra-
red that is “background” [10]. In designing pro-
cess graphical and textual elements are used to ob-
tain more information on respective subject. Vis-
ible images are embedded with other information
which change the context of original front image.
In this manner the viewer has integral information
of the observed motif. To put the visible graphic
into new context we add second set of graphi-
cal data that are planned to be viewed in infrared
spectrum. With a simple check of infrared cameras
which are very accessible, it is possible to verify
the camouflage picture. This new dimension, new
layer of information, changes the viewer’s experi-
ence. Motif is given multiple information in the
form of graphics and text and additionally ex-
plains its meaning. We have designed four experi-
mental postage stamps with different motifs. Two
stamps in the left column present the reproduction
of artistic paintings of artist Nada Žiljak. In her
Figure 1. Printed postage stamps in the visible work the artist applies the principles of Infraredart
part of the spectrum technology of mixing colorants which, too, cre-

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 technics technologies education management

ates double images in the extended spectrum from

400, 850 and 1000nm (Figure 2.). Her artistic ex-
pression with the rich coloring in visible part, and
bright, dynamic changes of color and textures,
hides another, black and white parallel world in
which new and intriguing stories appear. Images
that we observe in the infrared camera pointed in
the colorful canvas reveal different meaning of the
“inner world” of painted characters.
Second column of the example in Figure 1.
contains postage stamps with the architectural
motifs in the visible part, in the front, that can
stand as show of touristic attractions of two cit-
ies. In the background image two stamps contain
two portraits of the persons closely linked to two
buildings. In the hidden image in figure 2. Upper
motif describes “Stone gate” in the city of Zagreb,
and the background picture reveals portrait of
Zagreb mayor, who is also a member of society
that has its’ residence in respective building. With
the change of background image we completely
change the context in which we observe the im- Figure 3. Printing on flexible transparent mate-
age. Second building represents the indian temple rial, visible and infrared IRD image
in Kerale region. Background image in infrared
spectrum reveals the portrait of an Indian scientist 3. Phases of planning double images for
that has honored us with many lectures in the field visible and infrared spectrum
of graphic science and technology prof. Anayath
Rajendrakumar. With this postage stamp we have These processes require designers who possess
honored him and thanked him for his friendship. strong technological knowledge in the printing in-
Every element is given its space in which the dustry, considering that the efficacy of double im-
graphical conflict does not happen. Picture is man- age directly corresponds to technique and material
ifold enriched with information that do not disturb media on which the inks are applied. Prepress for
the visual harmony of the motif. If the two por- the paper is quite different than the prepress for
traits were to be put in single space of visible part, IRD printing on plastic materials (Fig. 3). Such
as in conventional design, it is evident that the de- graphics should be carefully planned in defined
sign would suffer from the clutter of many visual phases. There is a need for standardization of the
details that are related to portraits. process of preparation of graphics for visible and
Dividing the motif into double graphic, we ob- infrared imaging. Phases that are necessary in the
tain new space and harmonize the dual nature of process of prepress and print are divided into:
postage stamp with dual properties in spectral range. 1. Planning of graphics for visible part of the
Message is divided by theme and visually. Designer spectrum;
decides about the part of the motif that will be ap- 2. Planning of image design for infrared part
parently noticed, and part that will be instrumen- of the spectrum;
tally detected. Infrared image can be manipulated 3. Consolidation of two images through
in such a way that by controlled gradational mask- CMYKIR separation technology for given
ing we show only certain parts of the image, while printing technique;
other parts of the image remain white. 4. Printing of postage stamps.

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 technics technologies education management

On the example of one stamp form the present- coverage in infrared, while the richer colors (with
ed set, we describe the phases that pictures under- enough values of every CMYK component) can
go in design and implementation of double image. bear stronger ink coverage in the infrared spec-
trum. According to that fact we must align and
correct the color values of input graphics. In this
example the light areas of sky are not suitable
for carrying the IR effect hence it was necessary
to put the portrait in the parts of the architecture
which contain tones that are suitable for carrying
out the infrared effect.

4. CMYKIR channel separation of double

image
Figure 4. a) front, visible image only CMY can- When two graphics are adjusted and aligned
nelas, b) infrared image and positional control they are ready for the phase of CMYKIR chan-
- Y cannel nel separation [11]. In the accordance to set algo-
rithms new values of color are mixed for each pix-
Phase one (Figure 3.a) deals with planning the el of the image. In this phase two input images are
graphics for daylight visible part. Main motif is consolidated, and on the base of color data from
appointed and the picture is processed according each image the algorithm calculates exact rate of
to limitations of narrow dimensions that must be CMYK components that will produce controlled
preserved. We combine pixel graphics with vector response in the infrared spectrum. New separation
typographical elements. Motif is processed in con- method is called CMYKIR separation because by
ventional software for image editing as RGB input its mathematics we can manipulate the mixing of
image. In most cases color needs to be adjusted CMYK components to produce certain effect in
in a way that the gray component is added to the the infrared part.
overall image to adjust the original color values to The algorithms of CMYKIR separation are ad-
be more efficient in carrying the infrared informa- justed for known conditions of the printing tech-
tion. The contrast of the motif is downsized but nique. Different techniques imply different ratios
the reason we must proceed with this stage is the of ink to obtain the same visible tone. Because of
addition of a black K component in CMYK defini- that the preceding measurements and test prints
tion of colors to obtain enough black component are required to obtain the adequate coefficients for
which is the carrier of the infrared information. the CMYKIR algorithm. When the satisfactory
Second phase (Figure 3.b) of the design deals results are measured by testing we can guarantee
with the definition of graphics for the infrared that the infrared image will be hidden from the
part of the spectrum where the second group of visible part of the spectrum.
information is located. Picture is too, processed in Figure 4. shows the result of new separation
conventional image editing software as grayscale method where it is evident that the CMYK com-
input image. In the phase of determining the tone ponents are mixed under controlled conditions.
scale of the graphic the optimization of gradation Channel K carries the infrared information which
of minimal and maximal ink coverage necessary is completely different from the rest of the CMY
to obtain realistic infrared effect is exerted. channels which carry the visible part of the dou-
In the third phase (Figure 3.b) two images are ble image. The conventional methods of separa-
compare against each other to adjust the position- tion cannot control the CMYK channels in such a
ing of the information. The locating of graphics way, but distribute the black in the same amount
and text of IR part must be aligned with the in- of black throughout the whole image.
formation for visible part. For example light parts
of the visible image cannot carry out the full ink

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 technics technologies education management

Figure 5. CMYKIR separation channels of double

Figure 6. Scanned print of four postage stamps,
image: a) cyan, b) magenta, c) yellow, d) K black
wavelength of 570 nm

5. Proving the authenticity through barrier

scanning
Barrier scanning of the printed experimental
stamps show the change of visibility of inks ac-
cording to the set near infrared wavelength. First
scan (Figure 5.) on 570nm of wavelength shows
that the yellow component of the CMYK print
loses its visibility first. Also the infrared part of
the image begins to show in the black K channel.
The next barrier of scanned image is 715nm (Fig-
ure 6.) where the visibility of magenta tone is lost.
The partial visibility is only of the cyan ink and the
infrared black channel is becoming visibly clear.
On the scanning barrier of 850nm (Figure 2.) all
information of CMY colorants is lost and remains
only the image that is printed in black K channel.
By barrier scanning we prove that the whole pro-
cess of CYMKIR separation differs from the con-
ventional separation methods. As the end result of
CMYKIR separation produces double image that Figure 7. Scanned print of four postage stamps
is printed as the conventional images in only one under wavelength of 715 nm
passing of the paper through the printing machine.
Another area that is included in our research is Figure 7. shows scanned experimental print of
the ultraviolet spectral range that is obtained with postage stamps under 254 nm that corresponds to
ultraviolet inks. UV spectrum. Ultraviolet effect is obtained differ-

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 technics technologies education management

ently than infrared effect because we use special tion which can be observed from the range of yel-
inks that are mixed with process inks [11]. Infra- low to brown tones, depending on the process tone
red double image can be obtain solely by process with which was mixed. This additional UV invis-
inks because the black K channel is the carrier of ible effect can also be programmed in such a way
infrared response. On the contrary, process colors that produces controlled graphic information. This
do not possess ultraviolet characteristics so to pro- is a new approach of extending the reality into
duce the extended effect in the ultraviolet part of third spectral range thus creating new intriguing
the spectrum we are adding the inks that have ul- graphical effects with the design and protection
traviolet properties. value which requires further exploration. In these
experiments we opened a wide area of unexplored
ink properties which will be tested in detail in the
future experiments.

6. Conclusion
The invention of Infraredesign gives us new
way of approaching the printing of postage stamps.
It contributes the development of design profession
and it does not limit the creative expression of the au-
thor but, on the contrary, it offers new possibilities.
Simultaneous visibility and invisibility new possi-
bilities in marking the postage stamps are revealed.
They were impossible to carry out by conventional
methods used in today’s printing techniques. New
approach in hiding information is imposed through
the manipulation of colorants. Characteristics of
inks are used in the controlled absorption of light
in infrared and ultraviolet part of the spectrum.
Experiments and first implementations show that
Figure 8. Scanned print of four postage stamps with the application of Infraredesign the attractive-
under wavelength of 254 nm ness of small postage stamps is significantly raised
and that the manufacturer shows great care in their
Experiments that we conducted include invis- modernization. With this approach rises the confi-
ible and black ultraviolet inks which we applied to dence in buyers of such a product, the philatelists as
design of postage stamp. Inks are mixed with pro- well as user of postage services. The role of Infra-
cess colors and released in conventional four color redesign in postage stamps that carry two separate
print. Another, more conventional way would be to images in its wider range of thought is very com-
apply ultraviolet inks separately, on a new channel plex. New demands of design are enriched with a
and print with a new printing form. Our research goal of better functionality, technologically as well
extends to exploration of the interweaving effect as graphic content related. Considering that we live
that is produced when inks with infrared and ultra- in the information era the contribution of infrared
violet properties interact. With such mixing new visibly / invisible information becomes exceptional
colorants and new tones can be produced from discovery in the area of visual communication and
conventional ultraviolet and process inks. Figure graphic design. This invention widens the creative
7. shows the graphic solution of postage stamps space for designers as well as marketing experts.
with process inks that were mixed with different Spatial and contextual dimensions of graphics are
measures of ultraviolet inks in every channel. Ev- extended and we witness new ways of approaching
ery channel produces different effect of coloriza- design, preparation of double images and the print-
ing processes.

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References
1. Pap K, Žiljak I, Žiljak-Vujić J, Image Reproduction
for Near Infrared Spectrum and the Infraredesign
Theory, The Journal of imaging science and technol-
ogy. 2010; 54(1): 1-9.

2. Stanimirovic I Ž, Vujic JŽ, Moric B, Rudolf M. Secu-

rity printing with colorant control in the UV, visual
and INFRARED spectrum // TTEM, Technics tech-
nologies education management, ISSN 1840-1503,
2013; 8(2,5/6): 480-485.

3. Völz HG. Industrial color testing, fundamentals and

techniques, Weinheim: Wiley- VCH, 2002.

4. Mccann JJ. Color theory and color imaging systems

– past, present and future, Journal of Imaging Sci-
ence & Technology, 1998.; 42(1): 70-78.

5. Rudaz N, Hersch RD. “Protecting identity documents

by microstructure color differences”, Journal of
Electronic Imaging, 2004; 13(2): 315-323.

6. Žiljak I, Pap K, Žiljak V. Double separation method

for translation of the infrared information into a
visible area, Journal of Information and Organiza-
tional Sciences, 2009; 33: 219-225.

7. Rudolf M, Koren T, Žiljak-Vujić J, New postage

stamp design with tone gradation in Infraredesign
technology, Acta Graphica, 2012; 23 (3-4): 57-64.

8. Žiljak-Vujić J, Žiljak I, Međugorac O. Hidden

information in visual and infrared spectrum
Informatologia, 2012; 45(2): 96-102.

9. Žiljak V, Pap K, Stanimirović IŽ, Vijić JŽ. Managing

Dual color properties with the Z-parameter in the
Visual and NIR spectrum. // infrared physics & tech-
nology. 2012; 55: 326-336.

10. Stanić N, Stanimirović IŽ, Koren T. Managing Pixel

deformation with Pseudorandom values in Infrared
security graphics: TTEM, Technics technologies
education management, 2013; 8: 59-69.

11. Žiljak V, Pap K, Žiljak I. CMYKIR Security

graphics separation in the Infrared area. // Infrared
physics and technology. 2009; 52(2-3): 62-69.

Corresponding Author
Jana Ziljak Vujic,
Polytechnic of Zagreb,
Zagreb,
Croatia,
E-mail: janazv@tvz.hr

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 technics technologies education management

On some lexical and stylistic characteristics of

older montenegrin short stories
Sanja Crnogorac
University of Montenegro, Faculty of Philosophy, Niksic, Montenegro.

Abstract magazines and almanacs such as: Brankovo kolo,

We seek to identify the linguo-stylistic proce- Crnogorka, Glas Crnogorca, Luča, Nova Zeta,
dures used by the authors of older Montenegrin Sarajevski list, Stvaranje and Zeta, was prominent
short stories, with the aim of creating an inventory and significant in such a small country as Monte-
of fundamental issues therein. Particular attention negro was at that time.
has been paid to phono-stylistic, morpho-stylistic The subject of this study is the literary corpus
(morphono-stylistics), semanto-stylistic and lex- which coincides and overlaps linguistically and sty-
ico-stylistic devices applied in the Montenegrin listically but also differs in some less obvious fea-
short stories from the nineteenth century. The pa- tures. The artistic value of their literary texts and
per refers to the expressiveness of phonemes, the the expressive and emotional effects they make
multiple repetitions of lexemes, different rhythm on the recipient by their different linguistic means
of story-telling, the different intonation, the ac- and layered metaphorics lead us to believe that the
cumulation of linguistically and stylistically in- short stories are stylistically marked. The linguis-
teresting words in a sentence block, the use of tic and stylistic differences among the writers are
dialectisms, borrowings and neologisms. By ex- associated with their origins coming from different
amining various models of storytelling in the lan- parts of Montenegro and they also depend on the
guage of older Montenegrin writers, we endeav- clan social framework which defined them. The
our to trace the development of particular words writers use localisms of their region (Risan, Novi,
and their contextual interaction. Therefore, we Pastrovići, Cetinje, Danilovgrad, Grahovo), there-
discover that narrators in question possess a small fore their language contains numerous specific fea-
number of disyllabic words. They use multisyllab- tures. Montenegrin writers of this period began us-
ic constructs, whether original or borrowed from ing linguo-stylistic innovations, trying to creatively
foreign languages. By this, they have augmented differentiate themselves from their predecessors.
the language fund we are concerned with. Their expression became richer and perfected. The
Key words: lexis, phonometaplasms, morpho- old and the new language expression, the perfected
styleme, semantostyleme, neologisms. speech of the later Montenegrin short story, as well
as the innovative stylistic devices used by the Mon-
tenegrin authors, make the subject of our study.
1. Introduction
We have examined the most prominent Mon-
2. Goals and methods
tenegrin short stories published during the period
spanning from the time of Njegoš (1813-1851) un- Our aim has been to enable a more detailed
til the end of Kingdom of Montenegro (1918). Our insight into the development of linguo-stylistic
lexical and stylistic analysis focused on fourteen phenomena in the narrative texts of Montenegrin
Montenegrin narrators: Petar II Petrović Njegoš, writers. We have been trying to investigate the lin-
Stefan Mitrov Ljubiša, Marko Miljanov, Marko guo-stylistic characteristics of Montenegrin short
Car, Vicko Tripković, Vuk Vitez Vrčević, Rado- stories written in the time of transition between
van Perović, Filip J. Kovačević, Andrija Jovićević, Romanticism and Realism.
Đuro T. Perović, Luka Jovović, Jovan F. Ivaniševic, The complexity of characteristical linguistic and
Simo Šobajić and Novica Kovačević. The role stylistic markings of montenegrin short stories has
of these narrators, who published their works in stipulated the use of a combination of established

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linguistic methods and techniques, including the nomenon can be found in Njegos’ Gorski vijenac
descriptive method and historical linguistic com- [Mountain Wreath] 1277-1307, 2459-2469.
parison, as well as speech characteristcs analysis.
Our attempt to explain linguo-stylistic char- 3.3 Multiplequantitative models of narra-
acteristics of the language of Montenegrin short tion exist in Montenegrin short stories from the
stories is further motivated by fascinating peda- time of Njegoš to 1918. The words contain a larger
gogical benefits intrinsic to them. An integrated number of phonemes so we cannot speak of bi-
approach and a detailed analysis of language that phonemic or triphonemic structures apart from the
authors used in the crucial period of linguistic case of exclamatory expressions: Oj! Uuu! Ajj!
standardization, illustrates almost limitless possi- We find exclamatory expressions in the works of
bilities for application of these short stories in edu- earlier Montenegrin prose writers.
cation, by presenting some of the intricacies of the Both vowel and consonant phonemes are
development of literary language in Montenegro. equally applied.

3. Phonostylistics 3.4 Phonometaplasms

All the texts we have endeavored to analyze Phonometaplasms indicate specific local dia-
from the linguo-stylistic standpoint are prosaic texts, lects or the language of the folk character. This is
printed in either Cyrillic or Latin alphabets. Monte- not unusual considering the fact that Montenegrin
negrin writers use different narrative procedures. writers stuck to the dialectal basis they belonged to.
The study of expressive and impressive fea- The most frequent phonometaplasms in the lan-
tures of phonemes and phonemic variants is called guage of fourteen Montenegrin narrators are the
phonostylistics. mutational phonometaplasms which are formed
by the assimilation of sounds which often become
3.1 Considering the fact that the polyphonic identical.
system is found in the short stories, the voices of “-ao > o = rekao > reko, reka [said]; bolovao
characters are sometimes intentionally organized > bolovo or bolova [suffered from an illness];
with stylistic force and at other times the same čeznuo> čezno [was pining]; venuo >veno [was
phenomenon occurs unintentionally. The voices withering] etc. [1]
assist one another. A character in a story follows Transpositional phonometaplasms are
another with his speech or finishes his thoughts, frequent. E.g. sav [all] in most short stories is
completes his sentence. All the sounds are orga- changed into vas.
nized according to the Question-Response prin- Substantial phonometaplasms are not found
ciple, so while reading Montenegrin short stories, in Montenegrin short stories whose language and
it seems that everyone in the village responds to style we have been researching.
one another, urges one another to action, calls one Using the above mentioned devices an expres-
another for help. sion becomes deeper and the euphony is intensified.
The same result is obtained by restrictive pho-
3.2 The speed of narration varies. The narra- nometaplasms. They are based on the minus-
tive is sometimes fast, energetic and occasionally device. A structural element is omitted from the
slow. The rhythm is often in agreement with the primary form.
emotions of Montenegrin characters or with the The omittion of a sound at the beginning of
images the author brings to us. Using rhythm the a word produces apheresis. E.g. Zapad strijepi
Montenegrin narrator follows the cracks of rifles, a istok stenje; potonja mu se ugasi svijeća; a ni
the shouts and screams, the murmur of voices, the šaka ljudi na poharici s mora i sa suha, da se mi
tolling of church bells, the undulation of the sea, bijemo; vako pestima u glavu! [2]; ’Oćeš i tebe
the whisper of winds, the agitation of characters sad da ubijem! [3,4] ; A Milo Antović, ne pita’ te,
and their thoughts while preparing for the crucial što čini? Ma on ga ne uljega, niti ga je doma, ka
battle. Celebrated examples of this particular phe- ostaloga, ni na Božić, - ’nako kad što doždene;

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vazda je tamo, a strah me je, e će ga siromah 3.6. The potential impressive value of sounds
neko jutro platiti sjajno i prvo pitanje, e se mnogo and their expressivity
uplijeće [5],
The way the sounds are articulated enable their
3.5 Euphony of phonetic system depends to different expressivity. From the phonostylistic point
a large extent on our adjustment to that system. of view, movement and meaning can be in agree-
Even the sets of phonemes which, taken out of ment. The words taken from Montenegrin short sto-
context, seem incongruous, can increase their ex- ries which are found in colloquial language, have
pressiveness in the context. The accumulation of stronger meaning, for example, poljúbiti [to kiss],
high and low class consonants, e.g. s/r and g/r and tŕgnuti se [to twitch], dàhnuti [to breathe]. [7].
low class dark consonants in words give us differ- The sound and the movement affect the meaning of
ent impression. a word, emphasizing it, but the meaning of a word
E.g Grišna dušo – šapuće joj ljućkasto i kao da affects the sound and the movement of the signifier
kopka svrdlićem -: ti si u životu kao sve tvoje dru- too and may change it. The sound and the meaning
ge – po svoj prilici mnogo bludnih dila počinila, a of a word pervade each other.
što ne mogla počiniti dilom, ti si pohotljivo želila! The word smŕt [death] is a significant and often
... Kaj se! ... Kaj se! [6] encountered example. It contains a set of conso-
E.g I ona se čisto srdi na tu lijepu umjetnost, nants. The set begins with the consonant s, contin-
na tu ravnodušnu prirodu, što se nekako sročile da ues with sharp m and sonant r and ends with sharp
podstiču one demonske nagone, koje je on, zakleti dental t. The interchange of these sounds can make
protivnik praznog zemnog sjaja, čulnog uživanja, words with different meaning. Smrt is found in
pozvan da u ljudima guši i nemilosno progoni. [6] most of the short stories in our corpus. Some of the
The non-euphonic phenomenon in Montene- sentences containing this word are cited below.
grin short stories is hiatus or diaeresis, which is E.g. Srce mi se pred smrt uzdrmalo i izrešetalo
the reason why we usually don’t remove hiatuses prsi od nečuvene žalosti bratske [9]One dvije
from the written language. We find the insertion of ostadoše žive, ali u krvi s glave do noga, braneći
hiatus sonant j (kupijo, nosijo, radijo) [bought, svaka svojega djevera, pa najposle one dvije uzeše
carried, worked] in all Montenegrin short stories sa mrtvih djevera noževe, te jedna drugu na smrt
in our corpus. Indeed, ubi, a i nevolja im je. [10].

[Translation] 3.7. Multiple repetition of words

“Sometimes, though, hiatus is deleted in writ-
Multiple repetition of some words is present in
ten language in words which seem dialectal such
Montenegrin short stories. Notably, the Latinism
as: rekō, pisō (ao = o), rekā [said], pisā [wrote]
nostrom [boatswain] appears eighteen times from
etc.” [7]
p.145 to p.149 in the short story Iz renesanse. On
page 145 alone we encounter examples such as:
We also find repetition of the same syllables or
- Nema nostroma; biće opet neverina!
even words in Montenegrin short stories and we
- Uzalud je tog jutra iščekala nostrome Neze
do not consider this to be a euphonic phenome-
Tripova ...
non. E.g. Ono se isti dan uždila kuća moemu ocu,
- Nostromi su bili, upali taj dan u školu, i na-
u njoizi sve što e imao izgorjelo, i od nje se sve selo
kupili u konobi jedne od zapuštenih dobrockih pa-
uždilo i izgorjelo; u ta e požar mene mati izgorjela
lata ...
sestra i dva brata – or in the original cyrillic: Оно
-Od toga dana počam pa sve do čiste srijede,
се исти дан уждила кућа моему оцу, у нbоизи
kada su opet svi pet nostroma falili od škole, svaki
све што е имао изгорѢло, и од нѢ се све село
u Boga dan naizmjence su izostajali sa od preda-
уждило и изгорѢло; у та е пожар мене мати
vana nautike po dva.
изгорѢла сестра и два брата. [8]
-I na više mjesta krili pod sobe mladi nostro-
mi…[11]

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3.8. Rhythm 3.9. Intonation

Rhythm appears as a speech value of an expres- Full value of the language expression is accom-
sion. It consists of an accurate interchange of simi- plished by using different pitch of speech. A word,
lar phonemes, accents, pauses, same sounds, same a phonetic set, a section or even the whole short
words, similar duration of the speech – sentence story have their own melodic pitch. [7]. By nuanc-
blocks, sentences and their parts [7] The rhythm of ing in speech and story-telling various thoughts
the short stories depends on the speed of thoughts and emotions are being emphasized. In that way,
and emotions, on the value and the subject as well the Montenegrin authors accomplish greater af-
as on the kind of thought and emotion. Our narra- fectivity of their expression, complete a thought
tors express serene emotions slowly and, by con- or an emotion by an utterace or replace them with
trast, strong emotions are expressed rapidly. The other thoughts and emotions. Thus, words such
emotions such as bitterness, anger, surprising or as those which are repetitive, e.g. Ooŏ Risto Pu-
unexpected joy accelerate the rhythm of narration rov! ... Ooŏ, Markiša Đukanov! ... Ooŏ Mendžo
while the emotions of sorrow, shame, exhaustion Mojičiću! ... Ooŏ, Đuro Novakov Buzdoviću! ...
and alike are slowing it down [7]. Panic, of course, Ooŏ, Lale Midov!... [13,14], become an adequate
accelerates the rhythm. Somewhat surprisingly, way of expressing the emotional state of mind.
the rhythm of story-telling is faster if the thoughts
and emotions expressed are more complex in na- 4. Morpho-stylistics (morphono-stylistics),
ture. The rhythm also depends on the length of a semantics and semanto-stylistics
word used by a narrator. If they are polysyllabic
words they will certainly slow the narration down. 4.1 Morpho-styleme and morphono-styleme
The pauses determine the rhythm, too. They can
have a special expressive value. The pauses do not Morpho-stylemes intensify expressivity. If a
only signify the absence of sound but also the af- morpho-styleme is particularly expressive in its
fectivity expressed in a narrative. We shall corrob- resonance then it represents a morphono-styleme.
orate our findings with the following examples: [7] The narrators, especially the older ones, some-
I kad doždenem što – ništa da ti se falim – ni- times used very expressive morpho-stylemes,
kad od toga hajira vidio nijesam, no skupi sve selo for example those which are emphasized by the
na ručak: pobi volove, zakolji brave, kad koje- sound: Heeej! Ojjj! Ki-ki- ki! [13,14]
ga potrefi da dovedem, da ruča cijelo selo ka da
činim trpezu; no mi je stalo do toga, da pasju vjeru 4.2 Semanteme and semanto-styleme
zastrašim, da ne smiju ni iz kuće, no da im se i u
san prišnijevam, a što misliš?! [5]. The words in the short stories that make our
Plemeniti, Grade kom se Božica vječite mladosti corpus manifest themselves in different stylistic
uvijek smiješila i smiješi, nijesi ti bonik, kom proreko variants depending on the intention, intensity and
je skoru smrt vlastiti sin, nego ćeš uvijek capćeti i the degree of their affectivity.
muzama omiljelo boravište bit, jer nigdje jače ruža Pričaše mi pokojna mati. [My late ma was tel-
ne capti, nigdje gazija više ne miri; nigdje se lovor ling me me.]
silnije ne zeleni do na tvojim grudima; jer nigdje Pričaše mi pokojna majka. [My late mother
pučina kada počiva nije mirnija do pod uvijek kit- was telling me.]
nim Lokrumom; - i kad se Neptun razjari nigdje Pričaše mi – ona je na istinu a ja sam na laž. [15]
jače ne bijesni do pod tvojim stoljetnim bedemima; [She told me – she is of the truth and I am of the lie.]
nigdje žensko oko crnije, što kod tvojih ćeri! [12] All of the sentences have the same logical mean-
The author Luka Jovović particularly exhibits ing, but they contain different varieties of the word
fun expressed in the frantic rhythm of his short story majka (mati, majka) and the pronoun which re-
called Hajduci and Vuk Vrčević, using slow rhythm places the previously mentioned word and which
and raised intonation depicts the beauty of the island also has the same logical meaning but different
of Lokrum in his short story, Pomen Fabrisu. expressive-impressive i.e. stylistic value.[16]

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4.3. Doublets 5.1.1. The actualization accomplished by using

strong an expressive adjectives is also distin-
In Montenegrin short stories written in the pe- guishable:
riod of transition from the 19th into the 20th century bezbožne nepravde [18], bogohulne gordosti
we find words of the same logical meaning and [6], bućkastoj glavici [29], Čazbeni [30], cvje-
grammar form but functionally different. For ex- tonosnim livadama [14], frumentinova leba [5],
ample, the archaic / dialectal form of the pronoun iznavigan čovjek [29], kroničnim lišajem [29],
sav is vas. Doublets are usually formed by short- mrtvika preskubenijeh [13], objesna mladost
ening. [7] We find the following examples in our [11], popašnje sunce [31], proljetnim dahom [12],
corpus: [17] bratski [18]– brackoga [18]– bracke sinjgavoj kabanici [4], spletenosmršeni čitatelji
[19], gospođa [19]– gospa [11] gospodin [6]– gos- (сплетеносмршени читателbи) [8], urečeno
par [12], hajde [18] – ajde [9]– ajd’ [20]– ajdemo mjesto (уречено мјесто) [28], Zarđela [28].
[21], obveseliše [11]– obeseliše [11], šezdeset
[22]– šeset [19]. Doublets are the carriers of a par- 5.2. A part of lexis with potentially stylogenic
ticular expressive value. possibilities is frequent in both rural and urban
settings in the examined short stories. [32]
5. Lexis Examples: ižljegao s pisarom i kmetom,
pomoćnikom pod Kupić, i tu se raskarvanio u
All of the fourteen narrators select the lexical
kuću Kenja Mrgudova [33]; brez iđe ičesa [33];
units. They choose marked elements, which are un-
Bolesnica leži nauznak, sa upalim očima i oboren-
derlined and intensified in the speech layer in a very
im vjegjama [6]; U sobi se osjeća onaj zadah ish-
distinctive manner. These elements can be the car-
lapljenog tamjana i sagorelog voska [6]; Kad se
riers of the essential sense in the information itself.
nagje sam u kafani, barba Ivo utuli maličak smag-
The authors intentionally choose words and
nutu lampu, koja visaše sasred tavanice – ugasi
structures which most later authors avoid in their
još malo goreću (dotrajalu, dogorelu lampu) [29];
work. They use words from Montenegro of their
a tamo iza sela pružili se gusti mlazovi debelih sje-
time, but also the words of foreign origin. That is
nokosa i čitavo more listosjeka [34]; bila godina
the reason why Romanisms and Turkisms such
gladna, nerodna [34]; Bajo opazi, e tu se drugi
as: pjat [plate], konte [duke], kontesa [duch-
predrugojačio [34]; hajde brže da seirimo [34];
ess], / adet [custom], odžak [household], komšija
Svake godine o Vidovudne, u pučini ljeta, birala je
[neighbor] etc. [23] are frequent in these Monte-
skupština otvorito sugje i vlastelu; predavala im
negrin short stories. [24]
zakonik, starostavnik, knjigu i srebrni pečat; a oni
Everything in the short stories is attractive and
bi se kleli skupštini da će neumitno suditi; a za-
recognizable for the connoisseurs of Montenegrin
kone i odluke zborske vršiti. [2]; Kad bilo pri kre-
places, people and language.
tanju, prizove ga Trojica i kaže mu da je Skender-
paša postavio na sve putove busije [19].
5.1. As a rule our narrators choose words and
phrases whose rarity draws attention at first sight
5.3. Montenegrin authors also use words which
and which contain plentiful stylogenic possibili-
sound unusually in standard language or, create
ties. Examples:
new words, the so- called neologisms. Examples:
Alaburde [25], Bandunja [5]. Beznišnjake [26],
Beznišnjaci [26]; bucara [35]; intòpat’ [13],
beztrva (безтрва) [27] [8], bonik [12], čokrnj
kojevitezat’ [13], Maždrpci [35], načetalo [13],
[14], doždenem [25] fustuka [5] Iskalafataše [11],
Napaljetkovine [18], Patrdija [35], Skrklo [13],
Jamac (Јамац) [28] kibicer [29], kulete [30], Man-
slebutalo [13].
jkaje [17], Muzine [12], neviđelice [17], Oprući
[31], paoma [12], praznovima [26], pretili [5],
5.4. We also find compound words in the lan-
Prnje [13], Šišnjavac [5], Srčaniku (Срчанику)
guage of Montenegrin narrators:
[9], tintilina [11], Ućopeči [14], udadbenica [26],
Bogosazdane (Богосаздане) [35], Nakrst
Vašela [11], Vedenije (Веденије) [9].
(Накрст) [15], Poluokamenjene (Полуокамењене)

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[35], samoodržanja (самоодржања) [35], Sitnogo- prose. [37] They have become an integral, insepa-
rice (Ситногорице) [20], Šupljoglavče (Шупљо- rable part of it. These narrators, in an almost mas-
главче) [21]. terful way, present the ethical dimension of the
Neologisms and compounds create the intensi- Montenegrin milieu.
fication of the stylistic values of the text. E.g.
The stylistic function of compounds and neolo- Ja pođem za njim, i uljezemo onijema velikolj-
gisms is multiple: epnijema vratima. Kad unutra pogledam, ali eto
Some of the previously mentioned compounds gomila različitih ljudih.
posses sarcastic value Upitam starca koji su ovo, i on mi odgovori:
Others are used to express a feeling of unity in „Ovo su razbojnici, zločinci, pohititelji i razoritelji
times of urgency (skrklo, slebutalo, načetalo) sirotinjski i najviši krvopije ljudski.
Compounds may posses a pejorative meaning Otolen se drugijem krajem kuće vratimo i
(E.g. Šupljoglavče). Such words have special co- nađemo u oboru množestvo sirotah, koje plaka-
lour and intensity. hu, jaukahu i bijahu se rukama u prsi. Upitamo
ih: Što vi je tako nevolja, ter ste toliko plačem i
5.5. Numerous words the Montenegrin narrator žalošću razdražene? One se stanu žalit i različne
used have their own stylistic force. Some of those nepravde prikazivat i krivosuđa koja su učinjena
words are given below: protivu njih u istome dvoru đe se nalazahu. Ali
bezđetka [36], brstinaste [31], Džagaduri sada već starac, razjareni tolikom žalošću, povi-
(Џǎгадури) [15], handraku [25,5] hrlovanju [31], ka: Ej, nepravdo, da te već ne bude! No daj, bože
ječermu (jечерму) [20], ,kalagiju [15], kolo- pravdu među ljude. [8,18]
matu [15], Miritam (Миритам) [15], Načokrnja
(Начокрња) [11], nečesove novitade [15], oкојасиле 5.8. The world of Montenegrin real-life char-
[6], Oрубаше [15], oскубемо [6], patrdija [15], Po- acters of the age was depicted as follows: Stoji
suktao (Посуктао) [20], Preforam (Префорам) on u sinjgavoj kabanici, s popletenim opancima i
[15], Sansarije (Сансарије) [11], šipurakovca [14], izlinjalim dokoljenicama, visoka, malo pogrbljena
skapulati [3], Slicati (Слицати) [15], Sperutaš stasa, s razbarušenom, oštrom i prosijedom ko-
(Сперуташ) [15], Trambolosu (Трамболосу) [20], som, s upalim i svijetlim očicama i neobično kos-
Ućopeči [13], bапори [15], zaman [19]. matim obrvama, s blijedim licem išaranim jasnim
These words leave a particular impression on i mnogim borama i polako miče usnama moleći se
readers. Bogu i krsteći se, često. A kad se klekne, on spusti
nabrano čelo na ploču, pod nogama, i dugo ostaje
5.6. This kind of impression on the recipient tako pogružen od kajanja.
is accomplished by accumulation of interesting On polazi kao sjenka, kao da ne poznaje nikog,
and original words in a sentence block. a lice mu zamračeno dugom i mučnom samoćom.
A mi hćasmo vazda uveče rasporedi. Đe nije Kao da odavno ne živi za svijet. [3,4].
tako, tu ne gleda alavije, no odmah dio, a mari- The narrators provide their world with such
fedžije i džogaduri nafištikavaj teke da se s tom attributes which are actualizing it in even greater
kućom bucara nabija. Ma istom naši i bez toga degree, even more powerfully. In the previous ci-
paškijavanja ne mogu da se pogode, no naponiti; tation, we see only one social class described, the
sve kundurisaju jedno drugom što je bilo od baban one who lived on the rocky mountains of Monte-
zamana. [15] negro and its crags. In reality, there were different
Many stylogenic procedures and means which social classes which were forced to live together
produce different effects are concentrated here in and share the same reality. By describing those
a relatively small space. people the Montenegrin narrators describe them-
selves since they were too a part of the Montene-
5.7. Dialectisms grin social and cultural milieu of that time. They
The abundance of dialectisms are present ev- use different words for such descriptions.
erywhere, in every layer of Montenegrin narrative

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5.9. The semantics in Montenegrin short sto- 5.11. If we wish to authentically represent the
ries is, at times, hard to recognize or altered but system of messages which the words in the short
the context is usually a sufficient indicator of the stories carry inside themselves we need to ap-
new meaning. Every expression in the short sto- proach them more closely and purposefully. In
ries is the carrier of a certain stylogenic value but both rural and urban environments of Montenegro,
the hierarchy can definitely be established. words acquire new, polyvalent meanings. Those
The Montenegrin narrators are well acquainted meanings are usually persuasive in a deep, psy-
with the language and the dialect of the parts they chological manner and phonologically expressive.
were born and raised in. They were familiar with In time more and more people from the rural parts
the customs, the morality, the psychology and the of the country came into towns. The population
beliefs of the people from their parts of the country coming from the rural environments was still lin-
because the writers themselves lived the lives akin guistically maladjusted to the more educated ur-
to that of their characters or observed persons who ban social classes. That is the reason why we find
inspired those characters, evaluated them and, one the following kinds of pronunciation: gracke [ur-
thing is for sure, they didn’t forget those people ban], gospocki [gentlemanly], reko’, ‘oćeš [you
even when they left their homes and went abroad want] instead of the correct gradske, gospodski,
to receive their education. rekao, hoćeš etc. in towns as well.
The dialectal basis is almost the same – Shto- Since the phonological level is often connected
kavian, with some specific features of older dia- to the morphological one, we can conclude that the
lects of Montenegro, e.g. človek [man], malina most frequent phonemes we have found and taken
[cluster (of people)], mnozina [crowd] instead of from the old corpus (f) and (h) still have unstable
čovjek, mali i veliki broj ljudi. [38] position in the speech of this population or the
Muslim gentry. The consonant h is not present in
5.10. In these short stories we observe examples every position in words in our corpus. The excep-
of: Jekavian – vjeka; Ekavian – najpre; Ikavian tions are the examples which come with or without
– sidi [sit], biži [run away], zvizda [star], vitar this sound. E.g. iljada / hiljada [thousand], oditi
[wind] and the phoneticism of Ijekavian accent / hoditi [to walk], oće / hoće [wants], odma / od-
which is prevalent in Montenegro. In some short mah [at once], aljina / haljina [dress], Ercegovina
stories we find Ijekavian and Ekavian used simul- / Hercegovina [Herzegovina] etc. [39]
taneously, even in the same sentence. Po parapetu
od samoga guvna posijedale seoske i plemenske 5.12 Diminutives, augmentatives and hypo-
starešine [13]. coristics have their stylogenic values.
The phoneticisms, obviously, interact with one
another. There are examples of their parallel ex- 5.12.1. The diminutive suffixes used by the au-
istence: ije / je i je / e: vijeka / vjeka / veka [of thors of this period are: - ance; - ašće; - ence; -
century]; svijest / svjest / svest [consciousness]; ešce; - ce; - će; - čić; - ičak; eljak; - uljak etc. [7].
ljeto / leto [summer]; zvijezde / zvjezde / zvezde
[stars]. These inconsistencies are the result of in- 5.12.2. Augmentative suffixes present in the
sufficient knowledge of (I)jekavian orthoepy or its lexis of Montenegrin authors are: - etina; - erina;
inadequate stabilization in that time. Expressions - ina; - urina; - uljina; - urda; - ušina; uština; -
in the examined short stories are at times archaic ština etc. [7].
when compared to the present linguistic situation:
I salte kad onog jednoga pomene na potljetku, 5.12.3. Hypocoristics are formed by these suf-
onadare će beli, doć sebi i svome kuvetu ... veli fixes: - o; - jo; - ja; - ćo; - ko etc.
hodža [13].
We may also find examples of Romance and 5.12.4. The prefixes used for forming diminu-
Turkish linguistic influence in one sentence. tives and augmentatives, for enlargement and nu-
ancing are: na - ; po - ; pri - ; o - ; while the
infixes used in the short stories are - kar - ; - uck -.

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The suffixes for diminutives are - ušan; - uljast; Conclusion

- unjav; - kast etc. [7]
The results of the analysis have shown that all the
The words created in this way represent devia-
narrators from the time of Njegoš to the end of the
tion from the basic forms and meanings of those
independent Montenegro in the aftermath of World
words.
War I, performed actualization of their narratives us-
The diminutives used in short stories from
ing: expressive adjectives, doublets, the words with
Njegoš to 1918:
stylogenic force, expressive sounds, different rhythm
of story-telling and variation in intonation. We find
Djače [21], gradića [19], jelečićem [26],
that all the sounds in the short stories assist one an-
kamičak [9], kapca [5], kmetići [19], komadić
other and that the sounds are organized according
[9], konopčić [31], ovčici [21] , pisarčić [6], popić
to the polyphonic principle. Every sound and every
[6], Robinjica [19], Sobicu [31], sokačića [36],
move affect the semantics of words but the mean-
zamčica [21].
ing of words also affects the sounds and moves of
- Augmentatives used in Montenegrin short
the signifiers and their variability. The domination
stories from the 19th century:
of mutational phonometaplasms over the restrictive
Čibučinu [13], Čoečina [2], Đečurliju [34],
ones exceptionally leads to assimilation of sounds.
Furunetine [35], Jaružine [13], Knjižurinu [19],
Ljudeskara [35], nosinom [13], Oblačine [34],
Opančinah [13], Palošinu (Палошину) [2], References
Stručetine [14] Tovarinom [14], Volinu [2], 1. Muratagić-Tuna H. Jezik i stil Ćamila Sijarića. Filozofski
Ženetina [31]. fakultet Priština i ITP „DAMAD“, Novi Pazar, 1993.
Hypocoristics:
Djedo (djed) [21], Gjiko, Gjikane (full name 2. Ljubiša SM. Kanjoš Macedonović, Izviriječ (Crno-
Gjikan) [21], Markiša (full name Marko) [13,14] gorska pripovjedačka proza od Njegoša do 1918.).
Grafički zavod, Titograd, 1973.
Neđo (full name Neđeljko) [40], Vukac (full name
Vuk) [5]. 3. Šobajić S. Seljak, Iz kršnog zavičaja. Narodna
Knjižnica, Beograd, bez oznake godine.
We have found a small number of hypocoristics
4. Šobajić S. Nalić, Iz kršnog zavičaja. Narodna
as well as words which carry the meaning of de- knjižnica, Beograd, bez oznake godine.
preciation of others in Montenegrin short stories.
If the narrators do depreciate, then the characters 5. Jovović L. Nametnut prsten, Luča. Godina I –
are mentioned in a humorous context so that they sveska IV za april, Crnogorska Državna štamparija,
Cetinje, 1895.
themselves become a part of the overall atmo-
sphere. E.g. mrcinu [13,14,21], [carrion]; mrcino 6. Car M. In hora mortis, Primorke –Nove pripovijesti.
[5] blenuti [to stare fixedly for a long period of Izdanje knjižarnice S. Artale, Zadar, 1911.
time]. E. g. Kako oni tako i svijet oko njih: samo
stoji i blene [13,14] Simo kako je vidio, tako i osta 7. Antoš A. Osnove lingvističke stilistike, Školska knji-
ga, Zagreb, 1972.
na mjesto, zinuo, blene pa ni da se makne [34].
In time, the language changed both in rural 8. Petrović Nj, P II. Žitije Mrđana Nesretnikovića, Grli-
and urban areas. In urban areas of the 19th century ca: Odjeljak Moralne pripovijetke. Cetinje, 1873.
the population mixed together speaking different
9. Vrčević VV. Prodaja na fišek – karti, Niz Srpskih Pri-
dialects or even different languages. This resulted povjedaka Vuka Viteza Vrčevića, većinom o narod-
in changes which manifested themselves differ- nom suđenju po Boki, Crnoj Gori i Hercegovini. Na-
ently; the vocabulary enrichment was performed kladom knjižare braće Jovanovića, Pančevo, 1881.
quantitatively (the number of lexical unites was
10. Vrčević VV. Zemaljski sud poslje pogibije dvoje
increased) and qualitatively - through the enlarge-
nesretno svatova, Niz srpskih pripovijedaka Vuka
ment of the functional and semantic fields of most Viteza Vrčevića, većinom o narodnom suđenju po
of the words. Boki, Crnoj Gori i Hercegovini, Nakladom knjižare
braće Jovanovića, Pančevo, 1881.

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 technics technologies education management

11. Tripković V. Iz renesanse, Srđ. List za književnost i 29. Car M. Glumci u Kastelribniku. Letopis Matice
nauku, Dubrovnik, 1904. Srpske, godina LXXXIV, knjiga 252, sveska VI.,
Novi Sad, 1908.
12. Tripković V. Pomen Fabrisu, Brankovo kolo.Srem-
ski Karlovci, 1903. 30. Popović MM. Đeloš i Franga, Život i običaji Arba-
nasa. Štamparija “Davidović”, Dečanska ulica br.
13. Perović R. Nemrčipuške. Izdavač: Knjižara Gece 14, Beograd, 1908.
Kona 1, Kneza Miloša: ulica, 1, Beograd, 1914.
31. Jovićević A. Radiši bog pomaže, Luča. Književni
14. Perović R. Među nečastivima, Sorlovskih krševa. list Društva „Gorski vijenac”: godina V. - sves-
Izdavač: Knjižara Gece Kona 1, Kneza Miloša: ka VII. i VIII. za Juli i Avgust, K. C. Državna
ulica, 1, Beograd, 1914. štamparija, Cetinje, 1899.
15. Jovović L. Prije i sad ili sedam noći kod đeda Jova, 32. The language of the rural parts of Montenegro is
Izviriječ (Crnogorska pripovjedačka proza od discussed in Radojičić L, O Krivošijama (seljanima
Njegoša do 1918.). Grafički zavod, Titograd, 1973. i običajima), Herceg Novi 1966.
16. Expressive value of words and sounds is discussed 33. Perović R. Sud Šuta Roganova, Srpski Književni
in Radulović Z, Alhemija riječi, Podgorica: ITP Glasnik, br. 215 (XXIVV, 1), Nova Štamparija
Unireks, 2003. „Davidović“: Dečanska 14, Beograd, 1810.
17. Popović MM. Bratski izgub, Celokupna dela. Bib- 34. Kovačević N. Razbratimila ih, Luča. Godina II
lioteka srpskih pisaca, Beograd, bez oznake godine. sveska XI za novembar, Književni list Društva
„Gorski vijenac”, Crnogorska Državna
18. Petrović Nj, P II. San na Božić, Izviriječ (Crnogo- štamparija, Cetinje, 1896.
rska pripovjedačka proza od Njegoša do 1918.).
Grafički zavod, Titograd, 1973. 35. Perović ĐT. Put u pakao, Izviriječ (Crnogorska
pripovjedačka proza od Njegoša do 1918.). Grafički
19. Ljubiša SM. Skočidjevojka, Pripovijesti crnogor-
zavod, Titograd, 1973.
ske i primorske. Dubrovnik, 1875.
36. Kovačević N. Vučić, Luča. Godina II sveska XI za
20. Šobajić S. Mirovi jadi, Izviriječ (Crnogorska
novembar, Književni list Društva „Gorski vijenac”,
pripovjedačka proza od Njegoša do 1918.). Grafički
Crnogorska Državna štamparija, Cetinje, 1896.
zavod, Titograd, 1973.
37. On the dialectal base in Montenegro see Ostojić B,
21. Ljubiša SM. Prokleti kam, Pripovijesti crnogorske i
O crnogorskom književnom izazu, Nikšić,1985;1(1);
primorske. Dubrovnik, 1889.
Nikšić, 1999; 2 ; Podgorica, 2003: 3.
22. Vrčević VV. Kam tamo a kam ovamo, Izviriječ
38. See monographs on the Montenegrin dialects:
(Crnogorska pripovjedačka proza od Njegoša do
Stevanović M, Istočnocrnogorski dijalekat; Miletić
1918.). Grafički zavod, Titograd, 1973.
B, Crmnički govor; Pešikan M, Starocrnogrski,
23. Lipovac-Radulović V. Romanizmi u Crnoj Gori. srednjokatuniski i lješanski govori; Vujičić M,
MBM-plas, Novi Sad. 2004; 267, 172, 231. Rječnik govora Prošćenja (kod Mojkovca); Ćupić
D, Govor Bjelopavlića.
24. One may find a comprehensive list of Turkisms in
Škaljić A, Turcizmi u srpsko-hrvatskom jeziku. Sv- 39. The sound (h) is particularly present in the speech
jetlost, Sarajevo, 1966; 69,499,413. of the Muslim population in Montenegro.

25. Jovović L, Hajduci, Luča. Godina I – sveska I za jan- 40. Ivanišević JF. Živi Svetac. Izviriječ (Crnogorska
uar, Crnogorska državna štamparija, Cetinje, 1895. pripovjedačka proza od Njegoša do 1918.). Grafički
zavod, Titograd, 1973.
26. Kovačević FJ. Sreća prosjaka, Crnogorka. II/1885,
Crnogorska Državna štamparija, Cetinje, 1885; 19,
20, 21. Corresponding Author
Sanja Crnogorac,
27. In further text, the original cyrillic form will be University of Montenegro,
given in parentheses, where applicable. Faculty of Philosophy,
Niksic,
28. Tripković V. Iz uspomena, Brankovo kolo. Sremski Montenegro
Karlovci, 1903. E-mail: crnogoracsanja@yahoo.com

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 technics technologies education management

Comparisons of algorithms for image

reconstruction in the plane: C with MEX vs.
MATLAB
Adis Alihodzic, Nedzad Dukic
Faculty of Science, Department of Mathematics, University of Sarajevo, Bosnia and Herzegovina.

Abstract rithms were designed for particular classes of im-

ages. Besides deterministic methods [5,6,7], heu-
In this paper, we shall perform a reconstruction
ristic [8] and evolutionary approaches [9,10,11]
of a digital image in plane based on dots, i.e. based
shown their reconstruction ability, too.
on 1D projections (photons) that can be generated
Suppose we are given an object f, but can only
by CT devices. More precisely, we shall assume
see its surface. Could we determine the nature of
that an object f is given with its surface. We shall
the object f without cutting it open? In 1917, an
give a pair of algorithms for a reconstruction,
Austrian mathematician named Johann Radon
with which we shall approximately see the inner
showed that this could be done provided the total
structure of the object f without cutting it open.
density (x-ray projection) of every line through
We shall also make comparisons between these
the object was known.We can think of the density
algorithms that will be applied on 2D head phan-
of an object at a specific point as the amount of
tom. We shall give the implementations of these
material comprising the object at that point. The
algorithms in MATLAB and C with MEX files.
total density along a line is the sum of the indi-
Namely, MATLAB provides a script, called mex,
vidual densities or amounts of material. In order to
for compiling a MEX file to a shared object or dll
see approximately the nature of the object f, we are
that can be loaded and executed inside a MAT-
going to apply the following algorithms for the re-
LAB session. This script is able to call and parse a
construction [12] on sinogram: Back-Projection
custom C code directly from MATLAB in order to
(BP), Filtered Back-Projection(FBP), Filter-
create greater optimization. At the end of this pa-
ing After Back-Projection (FABP) and Fourier
per, we shall show the CPU time comparisons be-
Slice Theorem (FST). The above algorithms for
tween the implemented algorithms in MATLAB
the reconstruction of the digital image [13] for in-
and C with MEX files.
put arguments will take the 1D projections (sino-
Key words:Back-Projection,Filtered Back-
gram), obtained by applying the Radon Transform
Projection, Filtering After Back-Projection, Fou-
on the original image.
rier Slice Theorem

2. Algorithms for Reconstruction of Digital

1. Introduction
Image in Plane
The goal of computerized tomography [1] is
The first algorithm for image reconstruction
the recovery of 2D objects from their 1D projec-
in the plane is based on a Back-Projection [14].
tions. In the general case, in order to obtain high
The Back-Projection of the Radon transform
resolution of image, several angles are required.
is denoted by and defined by:
Discrete tomography [2] is the particular recon-
struction case of objects which have a few density
values. Under certain conditions it is possible to
reduce the number of required angles. Unfortu-
nately, the reconstruction task is quite complex where parameters and are used to determine
when many projections [3] or a small set of them the position of the line l that is perpendicular to and
[4] are used. Anyhow, custom reconstruction algo- which is located units from the origin. Hence, the

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Back-Projection allows us to make a recon- main. In such case, instead of the original image
struction of the original image , by integrating , we consider
[15] along the 1D projections . That way we
obtain the blurred (not original) image that
represents an approximation of the original image
. The following theorem shows us that there where the Hilbert transform is denoted by
is a difference between the blurred and the [18].
original image . The third algorithm for image reconstruction
Theorem 2.1: Let’s given Ra- in the plane is based on using the Filtering After-
don transform of the function , i.e. Back-Projection [19]. Hence, the original image
. Then, is determined approximately through the
the original image is defined by: following steps:

The second algorithm for the image recon-

struction in the plane is based on using the Filtered
Back-Projection [16]. The Filtered Back-Projec-
tionis defined by

where operator is given by However, in practice the 2D inverse filter

is replaced by physically realiz-
able approximations, which are given in the fol-
lowing table.
The fourth algorithm for image reconstruc-
while and are the 1D and the inverse 1D
tion in the plane is based on using the Fourier Slice
Fourier transforms respectively [17]. Note that
Theorem [20, 21, 22]. In this algorithm, the Ra-
in the Fourier domain a signal is filtered using a
don transform has been inverted in ,
high-frequency filter .
where the inversion is based on using the Fourier
The Filtered Back-Projection can be expressed
transform. Namely, there is a fundamental relation
without the use of filtering in the frequency do-
between the 1D Fourier transform of the Radon
Table 2.1 Most commonly used filters in the paper
Filter Frequency response H(w) Impulse response h(s) Discrete impulse response h(m)

Ram-Lak

Shepp-Logan
Low-pass
Cosine
General
Hamming

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transformand the 2D Fourier transform. This re-

lation is called the Fourier Slice Theorem or the
Projection Theorem.
Theorem 2.2: The1D Fourier transform of the
Radon transform by variable is equal
to the central slice at the angle of the 2D image
spectrum . where is the position of the first sample on
Theorem 2.2 can be rewritten in two parts:
the -axis, is sampling interval of , and is the
number of samples of . The same description is
valid for other parameters. The parameters , , ,
, are free parameters, while we must find the pa-
rameters and . Let us assume that the image
is square, i.e. and . Then the samples
will be in a symmetric interval around zero. Due to
Therefore, this theorem allows us to invert the sampling, we will take the starting point for sam-
Radon transform using 1D and 2D Fourier trans- pling to be zero, i.e. . On the other hand,
form. In the above algorithms, we assumed that we -sampling interval should be contained in the inter-
had been dealing with a perfect inversion. However, val , and we will take . This way we have
algorithms for an image reconstruction will never obtained the remaining parameters. The sampling
give an inverse image to match an original image described above causes a problem when a value of
because of the use of filters in reconstructing the
original image. Therefore, the reconstructed image is
will be approximately equal to the original image. , for all and . In this case, we do not have an ap-
propriate sample. Therefore, it is necessary to per-
form a 2D linear interpolation of and . Because
2.1 Discretization of Algorithms for Image
of the additional noise and sensitivity of the 2D
Reconstruction
linear interpolation on it, we will use 1D linear in-
In this section, we will present a pseudo code terpolation instead of 2D interpolation. Taking into
for the implementation of the following algo- account that , we obtain two instances:
rithms: Radon transform, Back-Projection, Filter-
For and we
ing After Back-Projection, Filtered Back-Projec-
tion and Fourier Slice Theorem. obtain where
In order to implement the algorithm for Ra-
don transform, we have to perform an approxi- , .
mation of the integral with the sum: For and , we
obtain , where
,

The algorithm for Back-Projection is imple-

mentedas the previous algorithm. Namely, the in-
tegral that appears in the Back-Projection
where is linear sampling of variable from Section 2, will be approximated by the sum.
, i.e. , . By sampling All variables introduced by switching to a dis-
the function , we obtain the digital image crete case have analogously been defined as in the
. We define the parameters , above algorithm. During the sampling, linear in-
, , as follows terpolation will be used.

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In order to implement the algorithm for Fil- ter, while we will duplicate the other half from the
tering After Back-Projection, first we have to first half due to the complex conjugate symmetry.
implement Back-Projection. This way we obtain After the multiplication by the filter, we will apply
the matrix . The filtering is carried out by the inverse 2D FFT that gives us a complex image
applying a high-pass filter to the matrix . from which we extract the real part, and the imagi-
Finding the spectrum of an image can be done in nary part should be zero. The implementation of the
two ways: high-pass filter by 2D FFT should include multipli-
a. By using the 2D FFT algorithm cation by a window in order to reduce the edge ef-
b. By using the 1D FFT algorithm on all the fects, due to periodical behaviour of the spectrum.
rows first and then on all the columns of the For this reason, two relevant choices of windows we
image will analyse are the following: Cropped 2D Ramp
Filter and Hanning Window.
The finding under b) can be carried out because Cropped 2D Ramp Filt e r is denoted by
the discrete spectrum can be rewritten as and defined by:

Hanning Filter is denoted by and

defined by:

where width ( ) and height ( ) of the image

must be powers of two, because of the use
of 2D FFT algorithm. If it happens that or
for all the numbers , then the matrix of
the image is expanded by adding zero rows
or zero columns in order to get that or
for some . After we apply the Back-Projection
on a sinogram, we will have an image with a large
number of non-zero values ​​that lie outside of it. By In both cases, the frequency of satisfies the
filtering out the last image with the 2D FFT, prob- inequality . This cut-off frequency varies
lems will occur with the image edges. In order to depending on the level of noise. A high level of
prevent that, we need to apply the Back-Projection noise implies that the reconstructed image will be
on the sinogram whose dimensions are powers of slightly blurred. This method is often used for a
two (i.e. the sinogram will be slightly higher than the medical image reconstruction.
initial sinogram), whereupon the 2D filtering of the The algorithm forthe Filtered Back-Projection
expanded image is performed. At the end, cropping consists of filtering and integration. In this algorithm,
of the filtered image to the dimensions of the source
the function is
image is done. The 2D-filtering is very simple if the
approximated by the sum
spectrum is calculated properly. We will multiply
the complex spectrum by a sampled version of the
filter , where and are replaced by
,
and , respectively.If it occurs that or where denotes the filtered sinogram. During
, then we change the with or with the approximation, we will make the 1D linear in-
. Due to the presence of symmetry, we will multiply terpolation by coordinate. By using a linear in-
the first half of the complex spectrum with the fil- terpolation, the function becomes

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After that, we will apply the 2D inverse Fourier

transform on a 2D quadratic frequency spectrum,
in order to reconstruct the original image. For the
where is interpolation in this paper, we will use a linear in-
terpolation, because the use of the nearest neigh-
bouring interpolation reduces CPU costs, but
causes interferences on the reconstructed image.
These interferences will not be visible by the use
of the bilinear interpolation. This direct Fourier
method will take less time than the Filtered Back-
This method is most commonly used for the Projection and the Filtering after Back-Projection,
reconstruction of medical images because of its if we use the method of the nearest neighbours for
reliability. the 2D interpolation. However, if we use the linear
interpolation for the 2D interpolation, this method
Algorithm for the Fourier Slice Theoremis will give the best quality of the reconstructed im-
based on calculating a discrete spectrum of the si- age, but not the least time. This method is rarely
nogram for every angle . Based on Theorem 2.2, used in practice because of its unreliability.
we see that the spectrum is analysed as polar coor-
dinates. We obtain this polar spectrum by applying
2.2 The Implementation details of Algorithms
the 1D Fourier transform on the sinogram
for Image
. Furthermore, the last spectrum is mapped onto
a quadratic frequency spectrum. To achieve this, Reconstruction in MATLAB and C with MEX
we use 2D interpolation in the frequency domain.

P1 - Main function implemented by MATLAB

functionoutputImage=reconstruction(inputImage,method)
[MN]=size(inputImage);deltaX=1.0;deltaY=1.0;thetaMin=0.0;
inputParam=getInputParam(M,N,deltaX,deltaY,thetaMin);%inputParam - Input param-
eters
drawImage(inputImage,inputParam(2),’x’,’y’,’Head Phantom’);
sinogram=getRadonTransformLI(inputImage,inputParam);% Generating of sinogram
if method==1 % Filtering before Back-Projection
filteredSinogram=getFilterSinogram(sinogram);%Creating of filtered sinogram over
FFT and IFFT
outputParam=getOutputParam(M,N,deltaX,deltaY,filteredSinogram);%Output param.for
filtered sin
outputImage=getBackProjectionLI(filteredSinogram,outputParam);%Reconstructed image
over FBBP
elseif method==2 %Filtering after Back-Projection
outputParam=getOutputParam(M,N,deltaX,deltaY,sinogram);
backProjection=getBackProjectionLI(sinogram,outputParam);
outputImage=getFilterBackProjekction(backProjection,deltaX,deltaY);%Rec.im-
age over FABP
else% Fourier Slice Theorem
outputParam=getOutputParam(M,N,deltaX,deltaY,sinogram);
outputImage=getSliceTheoremLI(sinogram,outputParam);%Reconstructed image over
FST
end
end
drawImage(outputImage,outputParam(2),’x’,’y’,’Reconstructed Head Phantom’);
End

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P2 – Implementation by C and MEX Functions

Implementation of the Radon transform by using a linear interpolation

#include <stdio.h>
#include <math.h>
#include “mex.h”

// After compiling, we obtain the first mex script that is calledgetRadonTrans-

formLI.mexw32
voidmexFunction(int nlhs,mxArray *plhs[],int nrhs,const mxArray *prhs[])
{
double *firstInputParam, *secondInputParam, *outputParam;
if (nrhs!=2)mexErrMsgTxt(“Error: Enter two input parameters, please!”);
if (nlhs>1)mexErrMsgTxt(“Error: Number of output parameters must be equal to
one!”);
if (mxGetM(prhs[0])==0||mxGetN(prhs[0])==0)mexErrMsgTxt(“Error: Input matrix is
zero matrix!”);
firstInputParam=mxGetPr(prhs[0]);
secondInputParam=mxGetPr(prhs[1]);
plhs[0]=mxCreateDoubleMatrix(secondInputParam[3],secondInputParam[5],mxREAL);
outputParam=mxGetPr(plhs[0]);
getRadonTransformLI(outputParam,firstInputParam,secondInputParam);//Call for Ra-
don transformation
}//End of MEX function

//Pure C-function getRadonTransformLI.C with a return value void

getRadonTransformLI(double* output,double* input,double* parameters)
{
int index,m,n,M,r,R,t,T,mMin,mMax,nMin,nMax;
double inverseDeltaX,dxSinusTheta,dxCosinusTheta,sum,xMin,deltaX,deltaRho,rhoMin,
deltaTheta;
doubletheta,thetaMin,cosinusTheta,sinusTheta,m1,n1,w,alfa,beta,factorRho,epsilon=
1e-9;

M = parameters[0];
xMin = parameters[1];
deltaX= parameters[2];
T = parameters[3];
deltaTheta = parameters[4];
R = parameters[5];
rhoMin = parameters[6];
deltaRho = parameters[7];
thetaMin = parameters[8];

inverseDeltaX=1.0/deltaX;output[0]=1;

for(t=0; t<T;t++)
{
theta=thetaMin+t*deltaTheta;
sinusTheta=sin(theta);
cosinusTheta=cos(theta);
factorRho=xMin*(cosinusTheta+sinusTheta);
if (sinusTheta>sqrt(0.5)){
dxSinusTheta=deltaX/sinusTheta;
alfa=-cosinusTheta/sinusTheta;
for(r=0; r<R; r++ ){
beta=(r*deltaRho+rhoMin-factorRho)/(deltaX*sinusTheta);

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if (alfa>epsilon){
mMin=(int)ceil((epsilon-beta)/alfa);
mMax=1+(int)floor((M-beta-1-epsilon)/alfa);
}elseif (alfa<-epsilon){
mMin=(int)ceil((M-beta-1-epsilon)/alfa);
mMax=1+(int)floor((epsilon-beta)/alfa);
}elseif ((beta>1) && (beta<M-2)){
mMin=0;
mMax=M;
}else{
mMin=0;
mMax=-1;
}
if (mMin<0) mMin=0;
if (mMax>M) mMax=M;
sum=0.0;
for (m=mMin;m<mMax;m++)
{
n1=m*alfa+beta;
n=(int)n1;
w=(n1-n)*inverseDeltaX;
index=m+M*n;
sum+=input[index]*(1-w)+input[(index+M)]*w; //linear interpolation
}
output[t+T*r]=sum*dxSinusTheta;
}
}else{
dxCosinusTheta=deltaX/fabs(cosinusTheta);
alfa=-sinusTheta/cosinusTheta;
for(r=0; r<R; r++){
beta=(r*deltaRho+rhoMin-factorRho)/(deltaX*cosinusTheta);
if (alfa>epsilon){
nMin=(int)ceil((epsilon-beta)/alfa);
nMax=1+(int)floor((M-beta-1-epsilon)/alfa);
}elseif (alfa<-epsilon){
nMin=(int)ceil((M-beta-1-epsilon)/alfa);
nMax=1+(int)floor((epsilon-beta)/alfa);
}elseif ((beta>1) && (beta<M-2)){
nMin=0;
nMax=M;
}else{
nMin=0;
nMax=-1;
}
if (nMin<0) nMin=0;
if (nMax>M) nMax=M;
sum=0.0;
for (n=nMin;n<nMax;n++){
m1=beta+n*alfa;
m=(int)m1;
w=(m1-m)*inverseDeltaX;
index=m+M*n;
sum+=input[index]*(1-w)+input[index+1]*w;
}output[t+T*r]=sum*dxCosinusTheta;
}
}
}
}

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Implementation of the Back-Projection by using a linear interpolation

#include <stdio.h>
#include <math.h>
#include “mex.h”

// After compiling, we obtain the second mex script that is called getBackProjec-
tionLI.mexw32
voidmexFunction(int nlhs,mxArray *plhs[],int nrhs,const mxArray *prhs[])
{
double *firstInputParam, *secondInputParam, *outputParam;
if (nrhs!=2)mexErrMsgTxt(“Error: Enter two input parameters, please!”);
if (nlhs>1)mexErrMsgTxt(“Error: Number of output parameters must be equal to
one!”);
if (mxGetM(prhs[0])==0||mxGetN(prhs[0])==0)mexErrMsgTxt(“Error: Input matrix is
zero matrix!”);
firstInputParam=mxGetPr(prhs[0]);
secondInputParam=mxGetPr(prhs[1]);
plhs[0]=mxCreateDoubleMatrix(secondInputParam[0],secondInputParam[3],mxREAL);
outputParam=mxGetPr(plhs[0]);
getBackProjectionLI(outputParam,firstInputParam,secondInputParam);//Call for
Back-Projection
}//End of MEX function

//Pure C-function getBackProjectionLI.C with a return value void

getBackProjectionLI(double* output,double* input,double* parameters)
{
int m,n,t,rl,M,N,R,T;
double**matrixCos,**matrixSin,xm,yn,factorRho,xMin,yMin,theta,deltaX,rm;
double*cosinusTheta,*sinusTheta,deltaTheta,deltaRho,rhoMin,sum,deltaY,w;

M = parameters[0];
xMin = parameters[1];
deltaX= parameters[2];
N = parameters[3];
yMin = parameters[4];
deltaY= parameters[5];
T = parameters[6];
deltaTheta = parameters[7];
R = parameters[8];
rhoMin = parameters[9];
deltaRho = parameters[10];
factorRho=rhoMin/deltaRho;

matrixCos=(double **)malloc(M*sizeof(double*));
if(NULL==matrixCos){free(xc);printf(“Error: Failed to allocate
memory!”);exit(-1);}
matrixSin=(double**)malloc(N*sizeof(double*));
if(NULL==matrixSin){free(xc); printf(“Error: Failed to allocate
memory!”);exit(-1);}
sinusTheta=(double*)malloc(T*sizeof(double));
if(NULL==sinusTheta){free(sinusTheta);printf(“Error: Failed to allocate memo-
ry!”); exit(-1);}
cosinusTheta=(double*)malloc(T*sizeof(double));
if(NULL==cosinusTheta){free(cosinusTheta);printf(“Error: Failed to allocate
memory!”);exit(-1);}
for(m =0;m<M;m++){
matrixCos[m]=(double *)malloc(T*sizeof(double));

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if(NULL==matrixCos[m]){
free(matrixCos[m]);printf(“Error: Failed to allocate memory!”);exit(-1);}
}
for(n =0;n<N;n++){
matrixSin[n]=(double *)malloc(R*sizeof(double));
if(NULL==matrixSin[n]){
free(matrixSin[n]);printf(“Error: Failed to allocate memory!”);exit(-1);}
}
for(t=0;t<T;t++){
theta=t*deltaTheta;cosinusTheta[t]=cos(theta);
sinusTheta[t]=sin(theta);
}
for(m=0;m<M;m++)
for(t=0;t<T;t++)matrixCos[m][t]=0;
for(n=0;n<N;n++)
for(t=0;t<T;t++)matrixSin[n][t]=0;

for(m=0;m<M;m++){
xm=(xMin+m*deltaX)/deltaRho;
for(t=0;t<T;t++)
matrixCos[m][t]=xm*cosinusTheta[t];
}

for(n=0;n<N;n++)
yn=(yMin+n*deltaY)/deltaRho;
for(t=0;t<T;t++)matrixSin[n][t]=yn*sinusTheta[t]-factorRho;
}

for (m=0; m<M; m++){

for (n=0; n<N;n++){
sum=0.0;
for(t=0;t<T;t++){
rm=matrixCos[m][t]+ matrixSin[n][t];
rl=(int)(rm);w=(rm-rl);
sum+=(1-w)*input[t+rl*T]+w*input[t+T*(rl+1)];//linear interpolation
}
output[m+M*n]=sum/deltaTheta;
}
}
free(sinusTheta);
free(cosinusTheta);
for (m=0;m<M; m++)free(matrixCos[m]);
for (n=0;n<N; n++)free(matrixSin[n]);
free(matrixCos);free(matrixSin);
}

P3 – Implementation by the built-in and the writtenMATLAB Functions

A) Source code for the function getInputParam

functionparameters=getInputParam(M,N,deltaX,deltaY,thetaMin)
parameters=zeros(9,1);
parameters(1)=M;%The functionszeros, sqrtand ceil are built-in in Matlab
parameters(2)=-(M-1)*0.5*deltaX;%xMin
parameters(3)=deltaX;
parameters(4)=ceil(pi*(M-1)/2)-1;
parameters(5)=pi/parameters(4);%pi is the constant in Matlab
parameters(6)=2*N-1;

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parameters(7)=-(deltaY/sqrt(2))*(parameters(6)-1)*0.5;
parameters(8)=deltaY/sqrt(2);
parameters(9)=thetaMin;
end

B) Source code for the function getOutputParam

functionparameters=getOutputParam(M,N,deltaX,deltaY,image)
parameters=zeros(11,1);%The functionszerosand size are built-in in Matlab
parameters(1)=M;
parameters(2)=-(M-1)*0.5*deltaX;
parameters(3)=deltaX;
parameters(4)=N;
parameters(5)=-(N-1)*0.5*deltaY;
parameters(6)=deltaY;
parameters(7)=size(image,1);
parameters(8)=pi/parameters(7);% pi is the constant in Matlab
parameters(9)=size(image,2);deltaRho=deltaY/sqrt(2);rhoMin=-
deltaRho*(parameters(9)-1)*0.5;
parameters(10)=rhoMin;
parameters(11)=deltaRho;
end

C) Source code for the function ramLakFilter

function output= ramLakFilter(numOfBeams)

%The functionslinspace, floor and fliplr are built-in in Matlab
a1 = linspace(0,floor(numOfBeams/2),floor(numOfBeams/2));
hf = [a1 fliplr(a1(1:floor(numOfBeams/2)))];
if mod(numOfBeams,2)==1%The function mod is built-in in Matlab
hf(numOfBeams)=0;
end;
output=hf .* hamming(numOfBeams)’;%hamming is built-in function in Matlab
end

D) Source code for the function getFilterSinogram

functionoutput=getFilterSinogram(sinogram)
[m n]=size(sinogram);
h=ramLakFilter(n);
output=zeros(m,n);
f=zeros(m,n);
%The functionssize, zeors and lengthare built-in in Matlab
for t=1:m
for r=1:n
f(r)=sinogram(t,r);
end
x=fft(f);%The function fft is built-in in Matlab
convolution=real(ifft(x.*h));%The theorem about convolution,where ifft is
buid in MATLAB
for r=1:length(convolution)
output(t,r)=convolution(r);
end
end
end

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E) Source code for the function getFilterBackProjection

functionoutput=getFilterBackProjection(input,deltaX,deltaY)
filteredImage=fft2(input);%The function fft2 is built-in in Matlab
[M N]=size(input);resX=zeros(1,M);resY=zeros(1,N);
for m=1:M
mM=m-1;
if(mM>=(M/2))
mM=M-(m-1);
end
resX(m)=((mM/M)^2)/(deltaX^2);
end
forn=1:N
nN=n-1;
if(nN>=(N/2))
nN=N-(N-1);
end
resY(n)=((nN/N)^2)/(deltaY^2);
end
for m=1:M
for n=1:N
res=sqrt(resX(m)+resY(n));%performing of filtering,where sqrt is built-inin
Matlab
filteredImage(m,n)=filteredImage(m,n)*res;
end
end
output=real(ifft2(filteredImage));%The functions ifft2 and realare built-in
in Matlab
end

F) Source code for the function getSliceTheoremLI

functionoutput=getSliceTheoremLI(input,parameters)
transposeInput=input’;[n m]=size(transposeInput);
n2=(n-1)/2;xv=[-n:n];
transposeInput(:,m+1)=flipud(transposeInput(:,1));%Add columnbehindlast column
transposeInput(n2+3:n+n2+2,:)=transposeInput;%insert matrix in the existing ma-
trix transpose
transposeInput(1:n2+2,:)=0;%fill in block of matrix with zeros from the first to
row n2+2
transposeInput(n+n2+3:2*n+2,:)=0;%fill in block of matrix with zeros from row
n+n2+3 to 2n+2
transposeInput=fftshift(transposeInput);%prepare matrix transposeInput for the
algorithmfft

% Operations with columns. Above functions flipud and fftshift are built-in in
Matlab
transposeInput=fft(transposeInput);%1D FFT is applied on each column
transposeInput=fftshift(transposeInput);%The content of transposeInput is shifted
back
transposeInput(1,:)=[];%We remove the first column, because of length of the vec-
tor xv

%Make the square matrixes r and theta containcoordinatesfor all the

(2n+1)*(2n+1)
%gridpoints in the 2D Fourier plane
[xx,yy]=meshgrid(-xv,xv);%The function meshgrid is buit-in in Matlab

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[theta,r]=cart2pol(yy,-xx);%The function cart2pol is buit-in in Matlab

template=theta<0; %We make template
theta(template)=theta(template)+pi;
r(template)=-r(template);
%We perform 2D linaer interpolation during transfering data from Polar to Carte-
sian
%coordinate system
transposeInput=interp2(linspace(0,pi,m+1),xv,transposeInput,theta,r,’linear’);
transposeInput(isnan(transposeInput))=0;%We remove values which are not used
newMatrix=zeros(2*n+2);
newMatrix(2:end,2:end)=transposeInput;%The first row and column remain equal to
zero
newMatrix=fftshift(newMatrix);%We return 2D Fourier data
output=ifft2(newMatrix);%We perform 2D inverse Fourier transform
output=fftshift(output);
output=real(output);%We remove imaginary parts from the matrix output
output=output(n2+3:n+n2+2,n2+3:n+n2+2);%We return on the size n
output=output/max(max(output));%We perform the normalization of the matrix output
end

G) Source code for the function drawImage

function [H1,H2,H3]=drawImage(matrix,parameter,xLabel,yLabel,figLabel)
maxElement=max(max(matrix));minElement=min(min(matrix));
if (minElement<maxElement)
%if n>N-1,thenn=maxElement and %if n<0,then n=minElement
matrix=(matrix<=maxElement).*matrix+(matrix>maxElement).*maxElement;
matrix=(matrix>=minElement).*matrix+(matrix<minElement).*minElement;
end
fig=figure;set(fig,’PaperType’,’a4letter’);
matrix=matrix’;%transposed matrix
if minElement==maxElement
maxElement=minElement+1;
end;
matrix = matrix-minElement;maxValue =maxElement-minElement;
scale=63.0/maxValue; matrix=64-matrix*scale;
maxXRange=0.75;maxYRange=0.75;colormap(gray);
H1=axes(‘Position’, [0.1 0.125 maxXRange maxYRange]);
axes(H1),image([parameter,-parameter],[parameter,-parameter],matrix);
set(H1,’Xcolor’,[1,0,0],’FontSize’,15);%define color on x-axis
set(H1,’Ycolor’,[1,0,0],’FontSize’,15);%define color on y-axis
xlabel(‘x’,’FontSize’,20);
ylabel(‘y’,’FontSize’,20);
title(figLabel,’FontSize’,20);
set(H1,’Ydir’,’normal’);
H2=axes(‘Position’,[maxXRange+0.1625 0.125 0.05 0.75]);
set(H2,’Xtick’,[]);set(H2,’Ydir’,’normal’);
set(H2,’Xcolor’,[0 1 0],’FontSize’,15);
set(H2,’Ycolor’,[0 1 0],’FontSize’,15);
H3=axes(‘Position’,[maxXRange+0.1625 0.125 0.05 0.75]);
axes(H3),image([1:64]’);
set(H3,’Xtick’,[]);set(H3,’Ytick’,[]);
set(H3,’Xcolor’,[0 0 0]); set(H3,’Ycolor’,[0 0 0]);
set(get(H1,’Title’),’color’,[0 0 0]);drawnow;
end

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3. Examples and CPU Execution Time brain) that contains several smaller ellipses (parts
of the brain). We obtain the Figure 3.2 by apply-
In this section, we present the results of the ing the discrete Back-Projection to the Image 3.1
above algorithms applied on the human head phan- with the following sampling parameters: R=255,
tom. The phantom of the size T=201, , ,
is an idealized model of the real object consisting , . It is clearly seen in the Figure 3.2 that
of ellipses, as depicted in the figure below. some parts are well recognized, while others are
either blurred or not recognized at all. Therefore,
the last image has to be filtered. By performing fil-
tering, we obtain an improved Image 3.3 (Figure).
This way we have applied the algorithm for the
Filtering After Back-Projection.

Figure 3.1 Idealized model of human head figure

Figure 3.3 Head phantom reconstructed by FABP

Figure 3.2 Head phantom reconstructed using BP

We will take that the density within each ellipse

is constant, i.e. for .
The Figure 3.1 consists of a large ellipse (human
Figure 3.4 Head phantom reconstructed by FBP

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Processor: AMD(R) Athlon (TM) 64x2 Dual-

Coreprocessor TK-55 (1.8 GHz, 2x256 KB L2
cache);
Memory (RAM): 2GB;
Software:MATLAB 7.1.0.246 (R14) Service
Pack 3, Dev-C++ 4.9.9.2.
By implementing the functions for the image
reconstruction in MATLAB without using the
mex script, we obtain poorer times in comparison
with the times in the Table 3.1, as shown in the
following Table.
Hence, we conclude that the functions imple-
mented using the C-programming language in
combination with the mex script give better times
compared to purely implemented functions in
MATLAB.
Figure 3.5 Head phantom reconstructed by FST
4. Conclusion
By applying the algorithms for the Filtered
Back-Projection and the Fourier Slice Theorem to In this paper, we have described and imple-
the Figure 3.1, we obtain the Figures 3.4 and 3.5 mented methods for the reconstruction of an image
respectively. From the Figures 3.3 and 3.4 we see in the plane from a series of 1D projections. From
that all parts of the phantom are recognized almost a mathematical point of view, to obtain 1D projec-
as much in what they were in the original image. tion of an arbitrarily given image , we
We may notice disadvantages in the Figure 3.4 in have used a discrete approximation of the Radon
terms of texture (they are inside and outside of the transform. During the approximation, by using a
phantom), which are not present in the Figure 3.3. large number of angles, a much better quality of
Hence, by applying the algorithm FABP, we obtain the reconstructed image is obtained. We have ex-
a clearer image than the algorithm FBP.The CPU perimentally demonstrated in the previous section
time needed for the computation of the inverse that the reconstructions made only with MATLAB
discrete Radon transform by using the algorithms functions give poorer times compared to those that
described above is shown in the Table 3.1. The ex- have been implemented using the programming
periment was carried out on a local machine. The language C and MEX functions. Further research
local machine has the following performance: in this area could be continued in the direction of
Operating System:Windows 7; using artificial neural networks (ANN) and GPU

Table 3.1 Comparison Time of Algorithms above Implemented by MATLAB, C and MEX Functions
Reconstruction algorithms Time
BP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.381
FBP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.455
FABP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.415
FST 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 1.403
Table 3.2 Comparison Time of Algorithms above Implemented by MATLAB
Reconstruction algorithms Time
BP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.865
FBP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.955
FABP 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 0.889
FST 128 -63.5 1.0 128 -63.5 1.0 255 -89.8 0.70 199 0.0 0.01 1.403

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programming in order to accelerate the image re- 13. Jain AK. Fundamentals of Digital Image Process-
construction in the plane. In addition, instead of ing, Englewood Cliffs, NJ: Prentice Hall. 1989.
the Fourier transform, the Wavelet transform can 14. Sahiner B, Yagle AE. A fast algorithm for backpro-
be used to reduce the time required for the recon- jection with linear interpolation, October 1993;
struction of an object in the plane. 2(4): 547–550.

15. John J, Czaja BW. Integration and Modern Analy-

References sis, Boston: Birkhäuser. 2009.
1. Kak AC, Slaney M. Principles of Computerized To- 16. Basu S, Bresler Y. Fil-
mography Imaging. Society for Industrial Mathemat- tered Back-Projection reconstruction algorithm for
ics, 2001. tomography, IEEETrans. on Image Processing, Oct.
2000; 9: 1760–1773.
2. Herman GT, Kuba A. (eds.) Discrete Tomography:
Foundations, Algorithms, and Applications, Birkhäu- 17. Lokenath D, Dambaru B. Integral transforms and
ser, Basel 1999. their applications, second edition, Boca Raton: Cham-
pan & Hall/CRC, Taylor & Francis Group. 2007.
3. Gardner RJ, Gritzmann P, Prangenberg D. On the
computational complexity of reconstructing lattice 18. Zeng Gengsheng L. Image reconstruction via the fi-
sets from their X-rays, Discrete Mathematics 202, nite Hilbert transform of the derivative of the back-
1999; 45–71. projection, Med. Phys. June 2007; 34: 2837–2843.
4. Wang B, Zhang F. On the precise number of 19. Markoe A. Analytic tomography, New York: Cam-
(0,1)-matrices in U(R,S), Discrete Mathematics 187, bridge University Press. 2006.
1998; 211–220.
20. Nandy D. Using the Fourier slice theorem for
5. Ryser HJ. Combinatorial properties of matrices of representation of object views and models with ap-
zeros and ones, Canadian Journal of Mathematics 9, plication to face recognition, IEEETrans. on Image
1957; 371–377. Processing, Oct. 1997; 3: 332–335.
6. Svalbe I, van der Spek D. Reconstruction of tomo- 21. Napel S, Dunne S, Rutt BK. Fast FourierProjection
graphic images using analog projections and the for MR Angiography, Magnetic Resonance in Medi-
digital Radon transform, Linear Algebra and its Ap- cine, 1991; Vol. 19: 393-405.
plications 339, 2001; 125–145.
22. Chiou-Shann Fuh, Shih-Schon Lin, The Fourier
7. Herman GT, Kuba A. Discrete Tomography: Foun- slice theorem for range data reconstruction, Image
dations, Algorithms, and Applications In: Binary and Vision Computing, July 1998; Vol. 16: 689-701.
Tomography Using Gibbs Priors, Birkhäuser, Basel
1999; 191–212.
Corresponding Author
8. Valenti C. A genetic algorithm for discrete tomo-
Adis Alihodzic,
graphy reconstruction. Genetic Programming and
Faculty of Science,
Evolvable Machines 9, 2008; 85–96.
Department of Mathematics,
University of Sarajevo,
9. Batenburg JK. An evolutionary algorithm for discre-
Sarajevo,
te tomography. Discrete Applied Mathematics 151,
Bosnia and Herzegovina,
2005; 36–54.
E-mail: adis_mtkn@yahoo.com
10. Balázs P, Gara M. An Evolutionary Approach for
Object-Based Image Reconstruction.

11. Using Learnt Priors. In: Salberg, A.-B., Hardeberg,

J.Y., Jenssen, R. (eds.) SCIA 2009. LNCS, Springer,
Heidelberg 2009; 5575: 520–529.

12. Parker JR. Algorithms for Image Processing and

Computer Vision, New Jersey: John Wiley & Sons.
1997.

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Load-bearing capacity of timber member

finger-joint connections
Zikica Tekic, Aleksandra Nenadovic, Sasa Djordjevic
Faculty of Architecture, University of Belgrade, Belgrade, Serbia.

Abstract in the LKV system (lightweight roof trusses).

Metal connector is powerful joining tool, but, de-
This paper demonstrates the results of experi-
pending on its geometry, it can have certain draw-
mental determination of load-bearing capacity of
backs that may be of importance for its application
structural timber member glued finger-joint con-
in the case of spanning longer distances. During
nection and analyses the possibility of application
the dimensioning of the connection formed by
of this type of connection in timber trusses. Load-
metal connectors, it is necessary to confirm the
bearing capacity of connections, formed in this
strength of the splice joint, which includes analy-
way, is determined on the multiple samples of tim-
sis of stresses in the metal-wood contact (lateral-
ber members, with different dimensions of cross-
resistance or tooth withdrawal) and in the critical
section, loaded up to the ultimate limit state. The
cross-section of the metal connector (tension and
recommendations for further research in the subject
shear strength of the steel net section) [2]. The
area are given after the discussion of the test results.
problem that is present in standard types of metal
Key words: finger-joint, adhesive, axial ten-
connectors is their weakened cross-section as a
sion, structural member connection, timber truss
result of the sheet perforation or teeth formation.
The loss of strength is different in two orthogonal
1. Introduction directions and, in its final form, has a major im-
Structural timber member connections can be pact on the load-bearing capacity of the connec-
formed in two ways: by mechanical connectors tor critical section during the action of the axial
and by bonding with technical adhesives. Design tensile or compressive forces. Therefore, the main
and construction of joints and connections of tim- problem is to achieve equal capacity of the lateral-
ber members is subjected to strict rules which are resistance and tension and shear strength of the
dictated by physical and mechanical properties of steel net section. A classic example of such a joint
wood as a building material. Technical adhesive is continuous joint between members in a chord of
is the primary element of glued laminated timber the timber truss, which is loaded by axial tension
structures formation. It is used for end-joining of force. The way to solve this problem could be the
boards during the lamella formation, with scarf or thickening of the sheet metal of the connectors,
finger-joints, for the bonding of lamellas in cross- but there is the question of cost-effectiveness of
lapped joint, for the bonding of lamellas together such solution, especially if that would serve only
across the interface to form the cross-section with for solving a problem mentioned above.
larger dimensions compared to the classical (tradi- A possible solution for this problem is to con-
tional) timber structures [1]. struct the structural timber member finger-joint
Forming the continuous joints between mem- connection (Figure 1). This type of connection is
bers in order to construct the chord of the timber common for glued laminated timber structures,
truss is conditioned by standard length of timber but with the proof of load-bearing capacity it can
elements. For the long span trusses it is neces- be used in the case of timber trusses. This may be
sary to construct the continuous joint in order to considered as non-conventional way of forming
form a truss (Figure 1). One of the contemporary continuous joints between members of a timber
mechanical connectors is metal connector plate truss, but in terms of the realization of a wooden
which is used to form nodal connections, includ- structure it may be of particular importance. The
ing continuous joints of the timber truss members realization of this idea requires the experimental

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Figure 1. Continuous joint between members in a chord of the timber truss

determination of load-bearing capacity of timber tions can be compared, including the comparison
member glued finger-joint connection. For this of the test results from different laboratories [3].
purpose, the experimental determination of load- Load capacity testing was performed in the In-
bearing capacity of connection is performed on stitute of Materials and Structures, at Faculty of
the multiple samples of timber members. Based Civil Engineering in Belgrade, on the hydraulic ten-
on the test results obtained and the discussion of sile testing machine (Figure 2), made by J. Amsler-
results, conclusions are drawn about the possibili- Laffon & Sohn. During the application of particular
ties of the application of glued finger-joint con- force, deformations were registered with mechani-
nection in order to form continuous joint between cal deformation indicators, with 0.01 mm accuracy,
members of a timber trusses. which were positioned in finger-joint area in order
to obtain relevant values of deformations in the
2. Experimental testing procedure connection (Figure 3). Two of these mechanical de-
formation gauges were positioned on each sample,
The experimental determination of load-bear- in order to record the deformation of connection on
ing capacity of connection of timber elements re- the both sides of the sample. Testing procedure was
quires implementation of specific tests in laborato- conducted in way that the values of deformation
ries, which are equipped for this purpose, in order in particular phases were read 30 second after ap-
to obtain specific information on the strength of plication of the particular force. Application of the
these connections. During the experimental test- particular force was carried out in steps of 5.0 kN.
ing it was necessary to determine the ultimate limit
state of the finger-joint connection and to find out 3. Samples for experimental testing
if the fracture is going to occur in the finger-joint
or in the cross-section of the timber member, out- Testing was conducted on samples with cross-
side the connection. Preparation of test samples sectional dimensions b/d=42/148 mm - type A
included conditioning of the wooden elements, (Figure 6) and b/d=42/128 mm - type B (Figure
prior to the construction of the finger-joints, and 9), with three sets of one type, making a total of
then the conditioning of the finished samples, af- 6 samples tested. Wood that is used for samples
ter the connection was formed. According to ISO is from class II conifers with humidity of 15%.
554 standard, atmosphere for the preparation of Finger-joint (Figure 4) was glued with polyure-
samples is 20/65, which means the air temperature thane adhesive Jowapur® 686.20. This adhesive is
of 20° and humidity of 65%. By respecting these certified for structural wood bonding applications
rules, load-bearing capacity of the tested connec- and corresponds to the standards DIN 68 141 and

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ONORM EN 301/302 (adhesives for load-bearing

timber structures). Experimental test have not in-
cluded the influence of the bending moment on a
finger-joint. It only included the influence of the
axial force on the observed connection (Figure 5).

Figure 4. Geometry of finger-joint

Figure 5. Axial tension (schematic view)

Figure 2. Hydraulic tensile testing machine
“J. Amsler-Laffon & Sohn”
4. Results of the experimental testing
Results of the experimental testing are shown
in the form of diagrams, separately for every sam-
ple type. Individual deformations (Figure 7, Fig-
ure 10) and mean average deformations (Figure
8, Figure 11) are shown on the diagrams, for the
samples of the same type. The analysis of the ratio
of the applied load and measured deformations is
given in the discussion of the test results.

Figure 6. Samples A.1., A.2. i A.3.

5. Discussion of the test results

Based on the performed experimental tests on
the 6 samples from the series A and B, it can be
Figure 3. Deformation gauge concluded that there was no fracture of the tim-

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Figure 7. Deformations (individual values) - samples A.1., A.2. i A.3.

Figure 8. Deformations (mean value) - samples A.1., A.2. i A.3.

Figure 9. Samples B.1., B.2. i B.3.

Figure 10. Deformations (individual values) - samples B.1., B.2. i B.3.

Figure 11. Deformations (mean value) - samples B.1., B.2. i B.3.

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ber member cross-section in the area of the finger- T 15 5 ⋅ 1 0 −3

joint (Figure 12 and Figure 13). The testing was s t || = =
(b ⋅ d ) ⋅ n (0.0 4 2 ⋅ 0.1 4 8) ⋅ 2. 7 5
discontinued when the ultimate tensile capacity
of the cross-section was reached. Ultimate ten-
s t|| = 9. 0 6 M P a > s t| d = 8. 5 M P a .......... (1)
sile capacity was higher than the allowable tensile
capacity of the cross-section defined by the stan-
T 135 ⋅ 1 0 −3
dard SRPS U.C9.200, for the value of the factor s t|| = =
of safety (n = 2.75). At that point finger-joint was (b ⋅ d ) ⋅ n (0.0 4 2 ⋅ 0.1 2 8) ⋅ 2.7 5
still compact.
s t|| = 9.13 M P a > s t| d = 8.5 M P a ........... (2)

Tested samples showed almost linear relation-

ship between deformations and the applied load.
Deformations of the tested samples Measured
deformations, at time when testing was discontin-
ued, were less than 0.40 mm and they represent
the axial elongation of tension member, which is
a function of member length, tension force and
modulus of elasticity of wood.

6. Conclusion
Based on explanation given in the introduction,
Figure 12. Sample from series A about the possible solution for the realization of the
continuous joint of chord members of timber truss,
in the form of finger-joint, as well as on the results
obtained by experimental tests, it can be concluded:
1. It was emphasized that the finger joint is
characteristic for the end-joining of boards
during the lamella formation, as part of the
process of glued laminated timber member
formation, but that such a connection is not
excluded as a possibility in the case of the
continuous joint of the axially tensioned
members of the timber trusses, but only
with the experimental proof of load-bearing
capacity of the connection. The testing was
Figure 13. Sample from series B performed in order to determine the level
of the load-bearing capacity of finger-joint,
For the samples from series A, load application in relation to the allowable capacity of the
was discontinued at the force level of 155 kN, and continual timber tension member defined by
for the samples from series B at the force level of the current SRPS standard.
135 kN. The actual longitudinal tension stress, re- 2. After the test conducted, where the samples
duced by the factor of safety, given in the formula were subjected to axial tension, there was
(1) and (2), for the forces listed above, was higher no fracture of the sample in the area of the
compared to the allowable tensile stress defined finger-joint. Geometry of the finger-joint of
by the standard SRPS U.C9.200, for the class II all samples was unchanged, compared to the
conifers [4]: initial geometry. Measured deformations,
with the order of magnitude of few tens of

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millimeters, can practically be attributed Corresponding Author

to the strains which are in accordance with Zikica Tekic,
Faculty of Architecture,
Hooke law, which means that the strains
University of Belgrade,
are proportional to the stress and inversely Belgrade,
proportional to the modulus of elasticity Serbia,
and that they in fact represent the axial E-mail: ztekic@arh.bg.ac.rs
elongation of the member in tension.
3. Experimental proofs of the load-bearing
capacity of the subject samples justified
expectations to a large degree, that the
member connected in this way can be used
in the prefabricated timber trusses, for the
realization of the continuous chord tension
members, together with the strict conditions
for the control of finger-joint formation
and bonding. Testing was conducted on
two samples with different cross-sectional
geometry (b / d = 42 / 148 mm and b / d =
42 / 128 mm), which is of great importance
as the original data, but as a step forward
to the proposed solution, it is necessary to
consider the possibility of testing new series
of samples with different cross-sectional
geometry, compared to the cross-sectional
geometry of the tested samples.

References
1. Kujundžić V, Tekić Ž, Đorđević S. Savremeni sistemi
drvenih konstrukcija, Prvo izdanje, Orion art, Beo-
grad, 2004.

2. Tekić Ž. Savremeni koncepti primene metalnih konek-

tera u sistemima drvenih struktura, Prvo izdanje,
Arhitektonski fakultet Univerziteta u Beogradu, Beo-
grad, 2007.

3. Evrokod 5. Proračun drvenih konstrukcija, Prvo iz-

danje, Građevinski fakultet Univerziteta u Beogradu,
Beograd, 2009.

4. Zbirka Jugoslovenskih pravilnika i standarda za

građevinske konstrukcije, Knjiga 4 - Drvene kon-
strukcije, Prvo izdanje, Građevinski fakultet Uni-
verziteta u Beogradu u saradnji sa Jugoslovenskim
društvom građevinskih konstruktera i Saveznim zavo-
dom za standardizaciju, Beograd, 1995.

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Impact of transition on attitudes of young

consumers
Vukasin Petrovic¹, Snezana Kirin², Vladimir Tomasevic³, Violeta Talovic4, Milan Mitrovic5
¹ Prima international school, Belgrade, Serbia,
² Innovation center, Faculty of Mechanical Engineering in Belgrade, Belgrade, Serbia,
³ Faculty of Engineering Management, Belgrade, Serbia,
4
“Vecernje novosti” , Belgrade, Serbia,
5
Faculty of Management of SMEs, Belgrade, Serbia.

Abstract and lack of discipline with the family nucleus, so-

Marketing success depends on one’s ability to cial integration and inclusion, success or failure,
understand consumer behaviour. Understanding loneliness, and insecurity, [1].
consumer behaviour of adolescents under specific The main focus of the literature is on psycho-
social conditions demands well targeted market- logical and social processes and achieving mental
ing messages which are pivotal to formulating maturity and levels of mental health. Changing at-
communications strategies. Furthermore, market- titudes also influence marketing activities, particu-
ing success depends on understanding adolescent larly with respect to the key questions of: when,
behaviour with the construct of their society. The why, how, and where are consumer products
aim of this paper is to point out to the changing bought; and what influences the decision making
of attitudes of adolescents in transition economies processes of consumers.
and their consumer behaviour. Globally, understanding consumer behavior in
Key words: Adolescents in transition econo- the process of decision making, both at an individ-
mies, transition, attitudes, consumer behaviour, ual or group level, requires studies of both individ-
marketing ual and society characteristics. Demographic and
attitude changes also influence our understanding
of marketing influences on young people.
1. Introduction
Marketing studies which concern themselves
Up until the 1980’s, the territory now defined with the relationship between its activities and
as Former Socialist Federative Republic of Yugo- target groups are powerful tools in the analysis
slavia, exerted onto its younger population what of consumer behavior as it is vital for marketing
would be termed as “socialist thinking” in terms activities to be aware of what the consumer per-
of maturing, education, employment, and family. ceives as a true value. Customer loyalty is also of
From that point onwards, these standards are rede- paramount importance and consumer relationship
fined. Consequences of transition are perception management based on customization of products
of financial and social insecurity in certain ech- and services plays a vital role [2].
elons of society which in turn had their effects on Consumers endeavor in internal and external
social psychology and growing up. searches; internal being memory recollection and
There were two main influences which had an external being exploratory. Internal psychologi-
effect on their maturing process: the dealing with cal processes are closely tied to internal searches
war wounds healing and economic and social col- and they are defined by personal memory recol-
lapse of the 1990’s and the need to adapt to the lection, personal cognition, and historic experi-
new economic and political construct of Euro- ences. Functional, personal psychological aspects,
integrations. The discrepancy and duality of these of information gathering are related to evaluation
two forces causes social impairment and social at the moment when the consumer compares one
frustrations. Regional literature deals with and or more products and weighs his decision. It is at
analyses behavior of young people in the spheres this moment that a decision is made vis-à-vis pur-
of fear, domination, hyperactivity, social distance chasing and it is also determined that having an

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intention to make a purchase does not necessar- referent group is a standard which the individual
ily end in the act of purchasing. Product market- uses not only to assess others but to also evaluate
ing has to take into account internal psychological oneself. An individual may also be a part of more
processes relating to purchasing in the sense that it than one referent group. It is for this reason that
should integrate both the decision making process referent groups have an important role to play in
and the external stimuli which affect the outcome the development of the individual.
of the process. Current literature also takes into Referent groups in our region are under sub-
account and explains the post-purchasing evalua- stantive forces which exert change, these changes
tion concepts as a form of feedback to the product make the development of personalities of young
or service provider. This is the key to post sales people difficult and cause an instability of identity.
evaluation. Mastering of both the post-purchasing The phase which Ericsson calls “the identity form-
evaluation process together with the perceptions ing phase” is a phase when concepts of human-
of quality and external stimuli tied to post sales ity, social justice, social and intellectual courage,
achieves a greater and more positive outcome in together with the concept of homeland represent
customer relationship management. ideals which define affections of adolescents dur-
Internal decision making processes of indi- ing their maturation. This is in fact an effort to cre-
viduals are under the influence of demographic ate a wider, more complete, and final identity of
conditions, everyday events personality traits, mo- the individual. If the adolescent came out of the
tives, knowledge, attitudes, beliefs, and feelings. earlier phases with feelings of security and high
Marketing activates are geared towards these in- self-esteem, if these phases were hindered in some
fluences so that there is a perception of satisfaction way, there may come out a confusion of identity,
on behalf of the consumer. self disrespect, lack of confidence, and an insuf-
External factors should also be considered as ficiently clear picture of oneself and others within
they are made up of cultural influences, sub cultur- the construct of society where they live [4]
al reference value frames, geographic locality, eth- The individual and the reference group ac-
nicity, social class, family, and other groupthink or tively react to their surroundings making choices
group shift effects. between situation and institutions, for or against
objects or other subjects, interpersonal relations or
2. Attitudes intergroup relations. Both the group and the indi-
vidual make observations of items as valuable or
When discussing internal factors, it is the per- worthless, they either love them or dislike them,
sonality of the consumer which has the domineer- and actively chose to identify themselves with or
ing role which in its own right is a part of the wider against certain ideas.
collective and should also be represented as such. The individuals’ attitude, reaction towards sub-
Human behavior is also an expression of most jects or occurrences, as well as to people within
fundamental existentialist needs. which they exist is relatively continuous and com-
Humans continually express the need to find plicated (encompasses many mental processes)
new explanations for the dichotomies within their and allows for prediction of human behavior. It is
universes and to find a higher form of unity with for this reason that attitudes are the most important
nature, other humans, and ultimately with one- product of socialization and the most interesting
self. This is the source of all psychological pow- area of research in psychology [5] .
ers which motivate man, his passions, affects, and Marketing also utilizes the predetermination
worries [3]. This need also refers to the attitudes of interests towards attitudes as the changes of at-
with which an individual develops through life. titudes under social circumstances and happenings
Different referent groups, with which an in- are a common group and individual fact which can
dividual may identify with, bring about value be found within a group of young people, and it can
systems, norms beliefs, and acceptable codes of be easily identified in their consumer behavior.
behavior or referent value frames which an indi- Krech and Crutchfiled define attitudes as rela-
vidual may strive to achieve or fulfill. Thus the tively continuous of positive or negative evaluation,

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feelings or tendencies for an individual to either as change are the most important cultural factors
take action for or against something with respect which define the majority of socially acceptable
to other objects [6]. The analysis of this definition attitudes. These attitudes are also a product of his-
shows that once an individual relates towards an torical circumstance, and it is rare for any one cul-
object (forms an attitude) he tends to want to evalu- ture to exert the same forces onto its constituent
ate it and become better acquainted with it. elements. Cultural influences are not only differ-
Ease of recognition and value systems with re- ing but are also very contradictory [7].
spect to an object are a foundation for emotional The concept of attitude according to Krech and
reacting of an individual and with such a refer- Crutchfiled points towards or against an object or
ence model of recognition and emotional attitude, event with a clear emotional and affective stance
ones behavior towards such a subject is formed. towards them [8].
An individual is not born with attitudes, the in- Rot states that under the term conviction, which
dividual acquires them and changes them during is different to attitude, an intellectual operation is
social change and his ability and agility to react prominent, and this author also states that intellec-
is based on experience. This is a very important tual basis is less prominent with attitudes than with
attitude characteristic which points to the fact that opinions and emotional moment is lees prominent
there is a possibility of change of attitudes within in thinking than in thinking. Attitudes are broader
social circumstances. It also points out that one and more permanent yet thoughts are more specific
can change attitudes and point them in different and more temporary [9]. Attitudes are an integra-
directions which are deemed socially acceptable tion of more specific thoughts of a certain subject
if planned in accordance with certain activities. It according the Hartley. Thoughts are manifestations
is a well documented fact that certain attitudes af- of attitudes in certain circumstances.
fect behavior. Attitudes contain three components: Attitudes have their characteristics and can be
cognition, emotion, and action (connotative). identified with:
All three components are rarely in balance and – definition, which points out to the fact
depending on their representation are somewhat whether a personality is against or in a favor
different; of a certain object,
– attitudes with an exacerbated emotional – extremism, for which the literature in social
component and with a insufficient knowledge psychology points out towards a degree
and willingness for action (affective of acceptance (with a positive or negative
association), attitude)
– intellectualized attitudes with a prominent – complexity,
knowledge of substance where the emotional – congruence, which a dual meaning in: First
reaction and willingness to act is absent, congruence with respect to fundamental
– action oriented attitudes, with a diminished dimensions of attitudes and secondly, the
emotional and cognitive component, and congruence of the attitude towards those are
– balanced attitudes with equally prominent similar,
cognitive, affective, emotional and – persistence, the willingness of the individual
connotative components. for maintaining an attitude towards an object
or situation with time
In everyday life, the wide usage of attitude has – strength of attitude, which is demonstrated
also brought about the incorporation of other ideas in the resilience of attitude in a given
into the concept of attitude, such as: convictions, situation, and
beliefs, thoughts, opinions, values, and sentiments, – openness and explicit demonstration of
are all categories which are closely tied to attitude. attitude which refers to the explicit capability
In attitude formation, there are three groups of fac- of a person to demonstrate the attitude...
tors: culture, primary and secondary social group-
ing, and personal traits. The nature of social inter- Krech and Crutchfiled believe that it is culture
action and values within a given society as well which sets the bounds of limits of attitudes and

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within those bounds there is ample space for dem- that all societies undergo a permanent transition.
onstrating individual differences. The belonging Highly developed societies are changing from in-
to certain groups is a factor which demonstrates dustrialist to post industrialist societies, post so-
conspicuous influence onto attitudes. It is of spe- cialist of authoritarian regimes towards pluralist
cial importance for primary groups such as fam- and democratic societies, underdeveloped nations
ily, close friends, and immediate work surround- form traditional to industrial societies. The term is
ing. Also, congruence is specifically noticeable used to denote the tr4ansition or change from one
between parents and children onto different so- system to another [11].
cial events. This relationship presumes close ties. Young people are the most vulnerable during
There can be a difference in attitudes even when period of social transition. This group finds itself
family is perceived as harmonious. It is due to dif- in the age group ranging from adolescent towards
ferent educational backgrounds or backgrounds of those who are maturing. It is from here that we
systems within which they have grown up. These draw a question and possibility of sacrificing cer-
attitudes do not come out of antagonism but rather tain generations and of defining possible futures
out of differing perceptions of immediate sur- for a new-age generation [12].
roundings. Personal characteristic also influence In catastrophic social circumstances, there are
the forming of attitudes. This important factor has social demands in the sense of global support for
two components: events, participation in them, and even delaying
1. Current motivation. life and service until the events come toa closure.
2. Long term personal traits. Generational responses may be at the end of the
projects life, i.e. having offspring and in the dif-
However, under the category of current motiva- ficulties of, or even having at all any offspring.
tion, we classify current events. The occurrence, Catastrophic life events with respect to social
situation, social grouping, or an institution either demands, define three generational groups:
facilitate or debilitate the achievement of certain 1. generation (by force) of ended life,
individual goals. Thus it may have positive or 2. generation of the underdog life, subdued to
negative effects on ones attitudes. Attitudes which the point of bare existence, and
one adopts become a part of their personality and 3. generation do delayed living.
in large number of situations have an effect onto
their behavior. Attitudes have an influence onto dif- From here it is obvious that the stratification
ferent mental functions of observational skills and of experiences do not only come between but also
onto other more complicated functions of thought. within generations. Thus it has an internal as well
All of the factors which have a certain influence on as an external character. In the internal character,
the formation of attitudes are responsible for their we arrive to the generational unit. A generational
own maintaining. Attitudes change with difficulty unit, according to Manheim, are subgroups (con-
and each change is at one point met by internal re- tain common experiences). In every case these
sistance [10]. Besides the personal characteristics, are generational units which are defined by large
humans are sociable beings and their behavior will stress driven events. Thus we differentiate:
be geared towards social and group norms. Epode effect, which understands that events
and experiences have a large influence into differ-
3. Effects of economic transition on con- ent age groups and bring about similar reactions
sumer behavior of young people and behavior. Cohort effect, presupposes the influ-
ences of the same or similar historic experiences
Western literature in the 1970’s has first coined onto a specific view of the world or attitudes or be-
the term transition as a sign for the transformation havior which have the common denominator [13].
from an industrial to the postindustrial society. It Those who were at the begin gin of the 1990’s in
is a question of a global rather than a regional pro- their age of adolescence, which was the beginning
cess. This social process i not only tied to the prac- of a prominent period of transition, now are 30some-
tices of post-socialist societies. It could be argued things and should under normal circumstance be the

Volume 8 / Number 4 / 2013 1507

 technics technologies education management

motor of national transition as a part of the industrial The listed fundamental values which the young
and political elite in key working place [14]. poses today are more general and the young tend
Based on a sample of 100 interviewees from to group themselves in thinking this. In the process
Belgrade, at the age 30-35 years of age, 36% of of transition, fundamental values are questioned
the sample was female. The married were 68% as they are sometimes perceived as contradictory.
of which 31% were living with a newly founded The characteristic of extremism in the attitudes
family in their parental homes, 16% lived separate of young during transition is highlighted in the
from their parents with their newly founded fami- sense that they have a negative attitude towards
lies, while 13% lived alone in rented accommoda- social events.
tion or real-estate which they own.

Figure 1. Employment breakdown of interviewees Figure 3. Interest in social events

The attitude towards social events shows that Tao the complexity of attitudes, social events
there is a perception that there is a belief that they have an influence onto the development and matu-
have no influence on the events that surround rity of the young. To the question whet ether they
them. In the column titled “I show little interest fully understand social events; the sample gave
into events”, 59% of the respondents, intermedi- the following Reponses:
ate demonstration of interest is at 27%, only 7%
of the sample cannot define their level of inter-
est, and 7% have no interest. A large section of
this group is outside the social sphere ova events,
which makes them a lost generation. This genera-
tion changes its attitude when it comes to interde-
pendence between social events and their attitudes Figure 4. Understanding of social events
[15]. Attitudes of young in transition change as
transition is a multidimensional problem in which As grown up individuals, they possess a certain
psychological factors are largely ignored. congruence of attitudes which can be compared
Focus, as a characteristic of attitude, in transi- to the proximity of other attitudes. Thus, young in
tion, changes the attitudes of the young. Focus of transition do not pose these fundamental dimen-
organized societies is under the influence such as sions. In the aforementioned can be seen that there
humanity, freedom or equality. is little congruence in attitudes. Young in stress-rid-
dled societies do not poses this characteristic as they
cannot transfer it onto new situations To his, one
should also add the strength of the attitude which
is necessary for social stability which would then
in turn be mirrored in social resilience to change of
social surroundings. In general, attitudes developed
the well-being of the individual by doing four func-
tions: adapting, cognition function, function of self-
Figure 2. Focus expression, and function of ego-defense.

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 technics technologies education management

Attitudes are intermediaries between the inner attitudes toward a product or competition. It af-
and external world of the individual in this part of fects the consumer by a strategy of augmentation
the world which is experiencing transition. Once of belief in key attributes in its products. The sec-
diminished motifs for learning are added, we find ond strategy pleases focus onto the augmentation
that, it is marketing that gives an opportunity for of known attributes, with the third it gives new
product placements. meaning to products, with the fourth it diminishes
The function of adapting refers to the attitudes the meaning of continues attribute, and in the fifth
which allow a certain person to achieve a goal it diminishes the role of competition.
while evading discomfort. The openness of atti- The effects of marketing strategies are tempting
tude of the young in transition is under great pres- for changing of the knowing function of attitudes
sure of adolescent resistance and bares with itself in ten period of maturing of young. The function of
an additional discomfort and psychological pain self-expression, admits to itself the need for others
of expression. It is a hedonistic variant which al- to say things of oneself. To eh question of “What
lows an individual to increase please whilst evad- do others know of you?” our respondent answered:
ing punishment and pain.
When asked “what makes you buy seething”
the sample group responded as follows:

Figure. 6. What do others know about you?

This function completes the vide which occurs
as the result of instability of younger generations
Figure. 5. Response to the question “What and their attitudes which transition brings. Mar-
makes you buy seething” keting strategies which have an aim to change
the attitude have an efficient role in the process of
The hedonistic variant is very common when communicating with younger consumers and with
shopping during the periods of transition. Changes consumers in general. It is thought that by using
of attitude in this domain are a reflection of ado- persuasive propaganda, there is a realistic chance
lescent resistance with respect to social events. The in changing of attitudes of consumers. To the ques-
hedonistic variant presupposed that temporary psy- tion “How propaganda does influences you when
chological escapism achieves though financial gain purchasing?”, we received the following responses:
and in constant acquisition through purchasing. A
great deal of attention is paid to the interdependence
of attitudes and behavior of the consumer behavior
in marketing. Baring in mind the hedonistic variant,
marketing, gets a more complete picture of the cur-
rent markets. Particular attention is paid in market-
ing to the sales forecast of new product sales.
The finding out function of the attitudes re- Figure 7. “How does propaganda influences you
lates to the attitudes relates to the information a when purchasing?”
person possesses so that the world may seem less
unknown and frightening. Marketing uses five The facts are based on the knowledge that con-
strategies in this segment to change or reiterate the sumers in general have latent an passive desires and

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 technics technologies education management

do not always know exactly what they want. Which 5. Conclusion

is particularly noticeable in the periods of growing
Transition economies are a well documented
up and in societies in transition? These young con-
phenomenon today. The essence of economic
sumers appear to be open to persuasion. The func-
transition influences technological processes, eco-
tion of ego-defense suggests that the attitudes could
nomic relations, social and cultural relations. They
serve as a defense of the individual from others.
are further enhances and promoted by technologi-
Bearing in mind this self-preservation, the attitudes
cal advancement in sciences and thus fundamen-
can serve a function of maintaining one’s own per-
tally changes the principle upon which we define
ceived sense of image. A great amount of psycho-
personalities.
logical energy is expended in maintaining attitudes
In Serbia, these changes have also brought
in the function of ego defense which actually di-
about changes in interpersonal relations, personal
minishes the activities of young [16].
values systems, how the world is viewed. Simul-
taneously, young people in these surroundings,
besides having their formal social values, also de-
velop a new value set.
The aforementioned parameters disable and
hinder personality development of young people
and affect their view of society.
The processed data vis-a-vis young people’s
Figure. 8. Do you prefer branded clothing? attitudes in transition economies demonstrate that
personal focus, personal attitudes, adaptability,
The need for recognition respect o belonging
self-expression, and all other functions with re-
comes out of the psychological state as a whole
spect to ego boosting and defense have changed
and in particular of the psychological state pro-
and continue to change, and thus all marketing ac-
duced by young in the period of transition. The
tivities have to take this into account.
concept of personal image presupposes that a
It is possible to influence opinions of young
young consumer favors branded items’ which are
people through marketing activities as their at-
congruent with their social status and that their
titudes change in line with external stimuli pro-
social statues are not determined by the process
duced by the society.
of transition. New tendencies have defines the so
Creation of any new marketing campaigns
called “ideal image” which denotes ones percep-
need to take this into account as adaptable and
tion of what one is not but would aspire to become.
well thought out marketing campaigns can influ-
It is called the “ego-self-concept” [17].
ence the perceptions of young people, particularly
Baring in mind that the generation unit decided
when it comes to consumer behavior.
by character and content of the response to social
and political demand which social and political
elite are excreting towards a certain generational References
group, a generational unit can shape social stress- 1. Munjiza M. Socijalno patološke pojave i psihopato-
riddled events which are for all intents and pur- logija, Nolit, Beograd, 2008.
poses historical [18].
A well created marketing campaign can change 2. http://en. Wikipedia. org/viki/Consumer-Behavior,
opinions and attitudes which is the desired and re- pristup: 3. 02. 201120. 56.
sults. The fundamental principle of marketing is 3. Fromm E. Zdravo društvo, 1984; 8-22.
continuity. In order for continuity to be achieved,
it is important to approach marketing at several 4. Ericsson EH. Omladina, knjiga, identifikacija, Pob-
levels: planning, procedure placement, structur- jeda, Podgorica, 1999; 56.
ing, implementation and monitoring. Changes and 5. Hrnijca S. Opšta psihologija s psihologijom ličnosti,
needs need to be continuously so that attitudes of Ibidem, 332.
young can be changed with respect to new input.

1510 Volume 8 / Number 4 / 2013

 technics technologies education management

6. Krech D, Crtutchfiled RS. Individual in Society,

McGraw Hill, 1969, prevod Zavod za izdavanje
udžbenika, Beograd 1999; 139.

7. Krech D, Crtutchfiled RS. Individual in Society,

McGraw Hill, 1969, prevod Zavod za izdavanje
udžbenika, Beograd 1999; 696.

8. Krech D, Crtutchfiled RS. Individual in Society,

McGraw Hill, 1969, prevod Zavod za izdavanje
udžbenika, Beograd 1999, 67.

9. Rot N. Osnovi sociajalne psihologije, Zavod za

udžbenike, Beograd, 1983; 45.

10. Krech D, Crtutchfiled RS. Individual in Society,

McGraw Hill, 1969, prevod Zavod za izdavanje
udžbenika, Beograd 1999; 696.

11. Hrnjica S. Opšta psihologija ličnosti, IBIDEM,

336-337.

12. Mijatović B. Opšti pregled tranzicije u Srbiji, Centar

za liberalno-demokratske studije, Beograd, 2008.

13. Mannhein K. Diagnosis of our time, The problem of

Generations, prevod, Mediterran Publishing, Novi
Sad 2009; 50-55.

14. Mannhein K. Diagnosis of our time, The problem

of Generations, Mediterran Publishing, Novi Sad
2009; 25-29.

15. Nikolić M, et al. Mladi izgubljeni u tranziciji, cen-

tar za proučavanje alternative, Center for Policy
studies, Beograd, 2004; 31.

16. Šarm Z. Hrvatsko akademsko društvo, Subotica, Vred-

nost i devijantno ponašanje mladih, 2005; 66-70.

17. Plut D. Psihološki problemi u kontekstu društvenih

promena, Filozofski fakultet u Beogradu, br. 149018.

18. Vučićević L. (Miladinović,, Kriza identiteta, Petar

Pan u tranziciji, Biznis i finansije, br.48. Beograd,
2008.

Corresponding Author
Snezana Kirin,
Innovation center,
Faculty of Mechanical Engineering in Belgrade,
Belgrade,
Serbia,
E-mail: snezanakirin@yahoo.com

Volume 8 / Number 4 / 2013 1511

 technics technologies education management

Invisible information on the transparent polymer

food packaging with Infra V/Z technology
Martina Friscic1, Olivera Medjugorac2, Lidija Tepes2, Denis Jurecic2
1
Rotoplast, Zagreb, Croatia,
2
Polytechnic of Zagreb, Zagreb, Croatia.

Abstract nologically and as those related to the minimally

The procedure of application of Infraredesign® regulated contents.
(IRD) security on the polypropylene transparent The Infraredesign phenomenon is contained
food packaging was used in this article. For the giv- in the following words: double image, hidden im-
en infrared parameter Z=0,4 an algorithm of cre- age, visual (400 to 700 nm) and near infrared area
ating process twins of polypropylene colors with on 1000 nm with the Z value. The first reports were
the same spectral information in the visible part of explaining the security graphic on documents [1,
the spectrum is being defined. The process twins of 2]. The emphasis was on the spot colors by using
polypropylene colors created in this way make the the new theory of mixing process CMYK dyes [1,
base of dual information for the given parameter Z 3]. A new theoretical way to understanding [4] the
in the NIR (near infra red) spectrum. By regressive connection of two images into one graphic prepa-
analysis of the information on color twins, algo- ration was suggested. A few articles about the ex-
rithms for development of a dual color space for the ceptional applications that followed were written in
entire visible part of the spectrum are being created. scientific journals [5, 6] and on congresses [7, 8].
In this way the hidden infrared information, invis- The first postal stamp was realized in the Zagreb
ible for the eye, are being planned. It is impossible post (Zagrebačka pošta) which followed after the
to forge, scan and re-embed such hidden informa- article published on the [9] Printing & Design 2013
tion. Considering the fact that dyes and design must Congress. The same thing happened with the design
keep their property of transparency, the dyes which of antiterrorist clothing for the army and the po-
are able to achieve a simultaneous duality accord- lice. The technology way described in TTEM [10]
ing to the IRD theory as twin dyes for the visual and journal after the prototypes were made and shown
infrared spectrum have been chosen. to the competent authorities. A significant develop-
Key words: CMYKIR separation, Infrared ment followed after the method of measuring the
spectrum, food packaging, INFRAREDESIGN light absorption in two spectral areas was published.
A new unit was introduced (unit Z) with which the
strength of the wave length absorption on 1000 nm
1. Introduction
is being determined [6].After this recommendation,
Nowadays packing in the food industry has a many measurements for different materials have
triple function – it has its role in the supply chain, followed. This enabled entry into the area of beaux-
product promotion and it has a function in the arts. Painting: oil on canvas with the first publish-
product storage and usage / consumption. Pack- ing in the same journal. Difficulties arise when one
aging contains and protects a food product, it mathematical model wants to be applied on dyes and
ensures its freshness and it represents a platform materials that have not passed through a procedure
for highlighting all the information the consumer of determining correlations between CMY dyes and
should know about by law, and those are the full K dyes with a satisfactory level of equalizing V and
name of the product, ingredients, expiry date, stor- Z twins. Some authors have applied the Infra mark-
age conditions, net weight, usage instructions and ing system only on their machines [11] and with
the name of the responsible subject. The role of their own toner. In the protection program for docu-
the packaging design is extremely complex in its ments, the separation with spot dyes which imitate
wider consideration and the demands regarding its process CMYK dyes was started. The exchange of
poly-functionality are daily increasing, both tech- carbon K dye with a fluorescent color F was enabled

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 technics technologies education management

because a dye with a positive Z value was created, give information about the printing house, pub-
even though this dye is a typical “ultraviolet dye” lisher, product origin, operation instructions, a
[12]. In this paper only the results for polypropylene code hidden from our plain sight and some oth-
materials and pertaining dyes are being described. It er brandings. The IRD technology improves the
is about conventional flexible printing. A new kind packaging, gives the design a new meaning, it im-
of a mathematical model is introduced. The big step proves the security of packing, storing and care of
was made when the ZRGB camera [13] was con- the polymer transparent packaging.
nected to the printing machine in order to control the On the entirely transparent area the hidden Z-
double image in the transparent material. graphics cannot be managed. On the light parts
of the design, the technology with “spiky” raster
2. INFRAREDESIGN® on transparent shapes is being used. Those are individualized, de-
flexo food packaging formed, rotated and transferred raster shapes which
are being obtained by programming graphics on
Today’s food packaging contains only informa- the PostScript level for making the print form. The
tion in the visible part of the spectrum which has raster elements are taken care of by entering one
been performed with legally strictly proscribed another, especially if it is about the same tone, about
dyes and materials. The special kind of proscribed the twin pair. For such solutions, high resolutions
materials and dyes for packaging which contain are being used, by transferring the raster element
food is a new approach to a mathematical model in a bit-map while it is still in the computer, before
of matching twin dyes. In this article suppositions the print form is made. Bit-map algorithm antici-
of protection of transparent packaging in the near pates the use of dyes in order to achieve the bigger
infra red area (NIR) with standard polypropylene graphic transparency on polymer materials.
dyes which are being used in the flexible printing
of food packaging are being set. Specific transpar- 3. Experimental research of the twin dyes
ent food packaging narrows the planning of the for polypropylene
IRD method because of the limited space and be-
cause of the transparency property of dyes which The experimental research and the develop-
carry a hidden Z picture (light absorption on 1000 ment of the model are being done in the flexible
nanometers) in the visual (V – 400 to 700 nm) printing technique. The printing form is made
spectrum. Two starting images in two independent from a polymer material in a 3D relief, printing
V and Z spectra can be seen. After Infra-CMYKIR elements are elevated (high printing), while the
technology the method of integration of two pieces free surfaces are leveled with a bearer layer of the
of information for two spectral areas depends on printing form.
the material, dyes and design limitations. The IRD Printing form is made by a digital process (laser
technology does not make the packaging produc- finishing) even though it could have been made in
tion more expensive. It uses the same basic print an analogue way (through a film). On the print-
dyes, equal number of working printing stations ing form the dye (HUBER manufacturer) is be-
and it does not slow down the print. ing floated consisting of: 50% pigment paste, 25%
A mathematical model for the polypropylene system additive (adhesive) and 25% are solvents.
with adequate dyes for food product packag- Dyeing pigments are either of animal or plant ori-
ing was given as a base of CMYKIR separation. gin dissolved in alcohol. Pigment adhesive for the
Through such model it will be possible to apply undercoat are resins with a nitrocellulose or poly-
the IRD method of protection on various kinds of urethane base. The solvents are drying bearers and
transparent flexible packaging. It is being suggest- they consist of 85% of ethyl alcohol. In order to
ed that the visual V design carries the information accelerate the drying process, ethyl acetate or eth-
regulated by law, for example: about the product oxy propanole are being added in order to deceler-
contents, expiration date, price, brand logo. At the ate the drying process. Flexible printing dyes carry
same time with an infrared camera in the NIR/Z a DIN4 norm and their viscosity is 22 seconds (1
area a text or an image are becoming visible which dl capacity and 4 mm of the outflow diameter).

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 technics technologies education management

In the beginning of the process in the experimen- twins in the visual spectrum. Testing and experi-
tal plan, dyes that would be talons for creating the ments have been performed in the flexible print-
twins through process polypropylene dyes, which ing on polypropylene (Figure 2). Recording was
are by default being used today on the transparent performed with a ZRGB camera for the visual and
food packaging, have been selected (Figure 1). infrared state of sunlight absorption.
The selected dyes are being converted into
digital information in the visible part of the spec-
trum. Color twins are designed as a circle and a
pointy square; Z twin. Even though some twins
have the same color tone, the circular V twin is
not detectable in the infrared Z spectrum. Z twin
absorbs 40% of light on 1000 nm. In Figure 1, 144
twins that cover a catalog of colors for the design
of broad application of infra V/Z transparent tech-
nology on polymer materials have been shown.
By using CMYKIR separation, the starting, but
not the final twin value is being suggested for ev-
ery color. Such starting CMYK value of the digital
information of the targeted twin is being iterative-
ly corrected by repeating of the print.

Figure 2. A flexible printing twins for a Z spectrum

on the flexible transparent polypropilen

The dyes of the individual twins have the same

color tone, the same spectrograms for the visual
area, the same values in RGB, CIELab and HSB
systems. The visual distinction is being measured
in the CIELab area with a ΔE [14 Kipphan] pa-
rameter. In order to pronounce two color twins,
the aim is to reach an amount of ΔE between them
which is less than 3. Both dyes are visible in the
visual spectrum. The twins are being distinguished
based on the Z value of light absorption on 1000
nm. The second dye has a property to absorb the
near infrared light, while the first twin (the circular
one) does not absorb wave lengths above 750 nm.
Spectography is being applied for both twins,
Figure 1. Polypropylene process dyes’ twins but only for the visual area. This is the area where
we hide the second graphics, the Z-graphics. For
In each iteration there is a striving to keep the each color tone the condition is that all the twin
given level of the Z parameter with the 0,4 value spectrograms are maximally equal on the whole
and equal spectral information for the both printed area from 400 to 700 nm. The high precision of

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the twin identification is needed in order for the In Figure 3 a spectral reflectance of x5E-V and
Z-graphics to be entirely hidden from our RGB x5E-Z twins is being shown which are printed by
sensory color system. Z-graphics cannot be dis- using flexography on polypropylene. The aberra-
cerned with the naked eye. The goal is that the tion of one reflectance from the other is visible in
twins camouflage between themselves in the vi- the whole area from 400 to 700 nm. In this way in
sual spectrum. By looking with the naked eye V the next phase the correction with the goal of de-
and Z pictures cannot be discerned, nor can it be creasing the ΔE as a quantifying value of the differ-
found out which one of them carries the hidden ence of the human color perception can be directed.
information. The twins assemble the visual infor- Table 1. Measuring CIELab and ΔE results of the
mation together. The parts composed of Z-twins experimental x5E
are being detected only with the detection on 1000 x5E CIELab ΔE=3,82 C, M, Y,K %
nm. Those parts carry their own information. The V 49.30; 0.27; 5.50 62, 52, 52, 0
Z-twin is the visible part of the graphics and it ap- Z 50.67; -0.63; 1.67 35, 23, 38, 40
pears only where the V-design is visible as well.
Our research is concentrated on the color fami-
ly with the same Z value. Experimentally, through
the application of ZRGB cameras [13], the value
of 40% of Z value for daily sun infrared com-
ponent and artificial night IR led lighting is be-
ing proposed. For each color the starting, but not
the final twin value is being proposed by means
of the general CMYKIR separation. Such starting
CMYK value of digital information of the target-
ed twin is being corrected iteratively through the
process of flexible printing. In each iteration the
goal is to maintain the given level of the parameter
Z=0,4 and equal spectral information for the both Figure 3. Spectral reflectance of x5E-V and x5E-Z
printed twins in the visual spectrum.
The first criterion for uniformity is the visual In table 2 the creating of brown tone twins is
identification, then the ΔE parameter [14] is being shown (mark 5F). The given ΔE=2,27 guarantees
measured in order to quantify that difference, and a complete sameness of twins 5F-V for human
then it is being directed with a spectrogram where eyes by comparison with 5F-Z which in itself con-
to increase or decrease the values of a C, M, Y for tains a projected NIR resonance Z=0,4.
the following iteration of producing the best pos- Table 2. Measuring CIELab and ΔE results of the
sible twin. In Table 1 the creating of a pair of twins 5F twins
of an experimental color is being shown, under the 5F CIELab ΔE=2,27 C, M, Y,K %
name x5E. The goal is for both these twins to have V 43.12, 18.24, 13.80 39,52,44,0
an approximately same visual component so that Z 44.32, 17.74, 10.83 0,35,30,40
the human eye cannot discern between them eas-
ily. The twin with an x5E-V tag does not have the Such a match can also be seen on a spectrogram
NIR component while the x5E-Z twin has the NIR (Figure 4) of the printed twins 5F-V and 5F-Z on
component in the amount of Z=0,4. polypropylene.
In the experimental work of CIELab, the val- Twins with an x6C mark have a ΔE=2,34 (table
ues with the accompanying spectrogram were 3) which provides a good ability to hide the NIR
acquired on a spectrophotometer GretagMacbeth information for the amount Z=0,4.
with the adjusted Pol, Abs, D65 and 2° measuring The third ton x6C-Z and x6C-V twins have a very
conditions for the assortment type Flexo/engrav- big affinity throughout the almost entire interval be-
ing Gecko Bond. The ΔE values are expressed in tween 400 to 700 nm (Figure 5). There is a small dif-
the ΔECIE2000 standard. ference in the interval between 450 and 550 nm.

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Table 4. Measured and calculated values for X0

(C0, M0, Y0) and X40 (C40, M40, Y40) twins.
X0 (k=0)

values for Mk40

values for Ck40

values for Yk40

Regression

Regression

Regression
Mk40
Ck40

Yk40
C0 M0 Y0

44 95 28 0 2,33 90 90,04 0 3,3

86 42 76 75 78,77 4 8,52 70 72,59
52 80 24 20 16,01 65 67,4 1 0,8
38 33 74 0 -0,21 1 2,46 67 67,29
Figure 4. Spectral reflectance of 5F-V and 5F-Z 46 60 49 7 9,36 35 39,8 31 33,7
42 71 71 1 4,06 53 56,26 62 59,32
Table 3. Measuring CIELab and ΔE: x6C twins 44 62 23 0 3,69 45 42,77 1 1,08
x6C-V and x6-Z 48 31 19 10 11,64 0 -2,2 0 0,18
x6C CIELab ΔE=2,34 C, M, Y,K % 47 36 19 8 9,71 7 5,09 0 -0,5
V 30,50; .12.94; -30.19 90,78 ,32,0 42 71 45 0 1,8 56 56,09 25 27,1
Z 32.36; -9.65; -35.93 73, 58,0,40 38 40 75 1 -0,5 11 12,48 67 67,68
42 31 19 1 1,72 1 -1,34 1 -0,3
87 44 18 79 75,28 7 10,84 0 0,55
65 37 18 42 39,31 0 3,95 0 -0,39
43 45 19 0 2,61 21 18,55 0 -1,9
50 42 19 15 14,34 15 13,25 0 -0,97
40 63 74 1 1,45 44 45,12 65 63,84
51 93 53 14 16,17 86 86,35 32 35,1
77 80 23 59 57,23 60 63,83 1 1,6
44 45 26 4 4,87 21 18,45 7 6,84
54 36 23 22 21,63 3 4,12 5 5,02
47 61 34 7 9,65 44 40,98 15 15,07
91 91 91 83 85,67 82 78,06 88 85,69
88 81 20 76 75,09 67 63,68 0 -1,34
Figure 5. Spectral reflectance of x6C-V and x6C-Z 39 60 39 0 -3,06 44 40,72 22 20,74
twins printed by using flexography on polypropyl- 85 55 85 77 77,19 31 27,34 83 82,1
ene 81 34 82 73 71,47 0 -2,17 80 80,58
38 50 90 5 0,25 25 26,9 82 85,07
38 83 86 2 -1,89 77 74,11 80 76,14
4. Mathematical model for creating twins 44 32 69 9 9,32 0 0,14 62 61,7
of process polypropylene colors for food 40 85 24 0 -4,08 73 76,27 0 -0,77
packaging
For the given infrared parameter Z=0,4, a By the regression analysis of all the selected
mathematical algorithm of creating process twins and experimentally tested twins, regression coef-
of polypropylene colors with an equal spectral in- ficients which are becoming an integral part of the
formation in the visible part of the spectrum was mathematical algorithm for the automatic creation
created. The process polypropylene color twins of twins for the entire visible part of the spectrum
created in such way constitute a base of dual spec- are being created.
tral information for the given Z parameter.

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 technics technologies education management

Table 5. Regression coefficients of the models for creating the process polypropylene color twins when
Z=0,4.
p r s t
C40 1 0,086828529 -0,05446083 1,652204125 -67,62433075
M40 2 0,006882207 1,431491188 -0,142354049 -39,87653605
Y40 3 1,23936622 -0,12039934 0,081425673 -23,54126053

C40 = p1*Y0 + r1*M0 + s1*C0 + t1

M40 = p2*Y0 + r2*M0 + s2*C0 + t2......(1)
Y40 = p3*Y0 + r3*M0 + s3*C0 + t3

With coefficients defined in such way, the equa-

tion system (1) forms a mathematical model for
creating twins by using process polypropylene col-
ors for food packaging from the color X0 (C0, M0,
Y0) into the color X40 (C40, M40, Y40) which has
a built in resonance where Z=0,4 in the NIR area.
In table 4 all measured and calculated values
for all the twins are shown. For each one of them,
spectral information for V and Z option were made
as has been shown in the selected examples in the a) b)
previous chapter. X0 (C0, M0, Y0) values refer to Figure 6a. Food packaging, the visible spectrum.
the digital amounts of polypropylene process dyes Figure 6b. Food packaging on 1000 nm
which will result in print without the NIR resonance
Z=0, and X40 (C40, M40, Y40) values for the digi-
tal color recording which will give the NIR reso-
nance Z=0,4 on flexible printing on polypropylene.

5. Experimental results of using a

mathematical model for creating dual
spectral information on the food
packaging
A mathematical model (1) becomes a driver for
possibilities of an algorithm embedding of desired
invisible information which will be detectable
on 1000 nm (Z area). In this way hidden infrared
information, invisible for the human eye, can be
embedded. Depending on the designed visible in- a) b)
formation on the transparent packaging, the math- Figure 7a. Food packaging, the visible spectrum.
ematical algorithm creates all possible twins for Figure 7b. Food packaging on 1000 nm
the infrared usage. Figures 6a and 6b show a food
packaging prototype in a polypropylene flexible Figure 7 shows a packaging prototype for a
transparent packaging that has dual spectral infor- different kind of food and design. Every initial
mation. In the visible part of the spectrum (Figure original digital recording of a color in the visible
6a) one type of information can be seen, while in part of the spectrum was transformed according
the invisible part of the spectrum (Figure 6b) en- to a mathematical model (1) into its twin with Z
tirely different information can be seen. resonance on a desired position for embedding the
infrared information.

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 technics technologies education management

6. Conclusion indirectly used to protect the product, and by that

the consumer as well, such as, for example, the in-
In the food industry there is surely the larg-
formation about the origin of the product necessary
est variety of packaging material usage, which is
for establishing the traceability in the supply chain.
logic considering the huge amount of various food
Recent crisis in the food industry caused by
products. First of all, when we talk about food
falsely declared horse meat is the best example
packaging the notion of helath compliance of the
of the insufficient information about the real ori-
packaging cannot be avoided. The sanative valid-
gin of the product. At the same time, the newest
ity of packaging has been regulated by the Food
initiative for complementation of the FIC Regu-
Act (NN 46/07, HR) and the Subjects of the Gen-
lation n°1169/2011, considers the possibility of
eral Use Act (NN 85/06, 75/09 i 43/10, HR), and
declaring not only the manufacturing country but
Regulations about the health compliance of the
also the origin of the raw material, especially in
material and subjects which come in an immedi-
the meat industry, which additionally burdens the
ate contact with food (NN 125/09 i 31/11, HR).
packaging and already scarce area intended for the
Therefore dyes and materials which have not been
customer’s information.
included in the strict standards must not be used.
Infra V/Z designer technology for transparent
In this paper a method of embedding an efficient
materials consists of connecting two pictures that
food packaging protection only with allowed dyes
mutually protect themselves. By Infra V/Z tech-
and materials was setup.
nology the product and the customer are being
Many products need double information and
protected and the subject placing the product on
use of security printing. IRD proved to be the
the market cannot repeat the process outside the
ideal method out of two reasons. Firstly, the same
authorized printing house. Infra V/Z information
Panton mixing components which are by default
can neither be scanned, copied nor altered.
used for the food packaging are being used, mean-
Infra V/Z technology for transparent flexible
ing there is no additional cost in acquiring “spe-
packaging opens new possibilities of product
cial protective” dyes. It is necessary to create your
marking which were unimaginable by the date of
own recipes of “duality”, one dye state in the visu-
this discovery, as well as the new possibilities of
al spectrum opposed to the state of the same color
effective fight against the product misuse regard-
tone in the infrared resonance. Secondly, the new
ing the origin or expiry date. At the same time, the
recipes are owned by the printing house which
first realizations are showing that by applying the
protects all the participants in the process of mak-
Infra V/Z technology the product becomes more
ing a graphic product. Recipes for flexible print-
attractive and the manufacturers themselves show
ing on polypropylene are unique and very far from
concern about the improvement and moderniza-
the dye composition for other printing techniques
tion of the packaging, that is about the customers’
and other materials. In the further development it
and consumers’ trust.
is necessary to make multi-settings for separation
of the simultaneous use of process and spot dyes.
Product declaration is obligatory and extremely References
important. Through this declaration the manufac- 1. Pap K, Žiljak I, Žiljak Vujić J. Image Reproduction for
turers communicate with the consumers but also Near Infrared Spectrum and the Infraredesign Theory;//
with the inspection and other responsible authori- Journal of Imaging Science and Technology, Volume 54,
ties. All of them need to get complete information Number 1, January 2010; 10502-1-10502-9(9).
about the product in order to properly use it and 2. Žiljak V, Barišić M, Žiljak Vujić J. Banknote Typogra-
evaluate it. The product declaration segment has phy with a Particular Reference to Croatia through the
been regulated by the Regulations about general 20th Century; // Libellarium: Journal for the history of
food declaring or marking (NN 114/04, RH). writing, books and memory institutions; 2011; 4(2).
Now there is a possibility of embedding addi-
3. Agić D, Stanimirović Žiljak I, Agić A, Stanić Loknar
tional information in the invisible part of the spec- N. Degradation of Dual Image for Visual and near
trum which cannot be forged in any way and it is Infrared Spectrum at repeated CMYK/RGB Ren-

1518 Volume 8 / Number 4 / 2013

 technics technologies education management

dering; Journal of graphic engineering and de- Corresponding Author

sign; ISSN 2217-379X ; ISSN; 2217-9860 ; UDK: Martina Friscic,
655.778.186 655.535-1. 4(1): 13-16. Rotoplast Zagreb,
Zagreb,
4. Ž. Vujić J, Agić A, Stanić Loknar N. Picture informa- Croatia,
tion in expanded color management from visual to E-mail: martina.friscic@rotoplast.hr
near infrared spectral domain // Technics Technolo-
gies Education Management, 2013; 8(3).

5. Žiljak Stanimirović I, Agić D, Žiljak Vujić J. Hidden

infrared image in a uniform CMYK separation hue;//
Journal of Graphic Engineering and Design, UDK:
655.027 : 535.624 : 535-15/2, 2012; 3 (2): 8-11.

6. Žiljak V, Pap K, Ž. Stanimirović I, Ž. Vijić J. Manag-

ing Dual color properties with the Z-parameter in
the Visual and NIR spectrum. // infrared physics &
technology. 2012; 55: 326-336

7. Matas M. Anayath Rajendrakumar, Ana Hoić;

Uloga dizajnera u dvostrukoj infracrvenoj grafici
;// Printing & Design http://www.tiskarstvo.net/
printing&design2013/ ; ISBN 9789537064204; CIP
NSK RH 843314. 2013.

8. Ziljak Stanimirovic I, Matas M, Ziljak Vujic J. Infra-

red colorants as twins for security printing of docu-
ments and securities, // International circleToronto .
Jahreskonferenz: Internationaler Kreis der Lehrinsti-
tute für die Polygraphische Industrie; 2013; 45.

9. Manolis Politis A, Rudolf M, Žiljak Vujić J. CMYKIR

separacija dva portreta za poštansku marku ;//
Printing & Design ; http://www.tiskarstvo.net/
printing&design 2013/ ; ISBN 9789537064204; CIP
NSK RH 843314. 2013.

10. Z. Stanimirovic I, Z. Vujic J, Stanic Loknar N.

Marking of the camouflage uniform for visual and
near infrared spectrum, //Technics technologies
education management, 2013; 8(3): 920-927.

11. Eschbach R, Bala R, Maltz M, Zhao I. Creating vari-

able data infrared signals for security applications, //
Electronic Imaging; doi: 10.1117/12.811573; SPIE-
IS&T/ Vol. 7241 72411E-1; 2009.

12. Ž. Stanimirovic I, Ž. Vujic J, Moric B, Rudolf M.

Security printing with colorant control in the UV,
visual and INFRARED spectrum //, Technics tech-
nologies education management, ISSN 1840-1503,
2013; 8 (2,5/6): 480-485.

13. Žiljak V, Pap K, Žiljak-Stanimirović I. Development

of a prototype for ZRGB infraredesign device // Tech-
nical Gazette., IF 0,601 , 2011; 18(2): 153-159.

14. Kipphan H. (ed.) Handbook of Print Media: // Tech-

nologies and Production Methods (Springer- Verlag,
Berlin, Germany, ISBN 978-3-540-67326-2, 2001.

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 technics technologies education management

Designing the space for urban regeneration:

pros and cons
Tatjana Mrdjenovic, Miodrag Ralevic
University of Belgrade, Faculty of architecture, Belgrade, Serbia.

Abstract and cultural development, and as such they have

the power to stimulate themselves, regions and
This research discusses the issues in designing
states to grow and develop” [3].
the process of urban regeneration. It criticizes pres-
According to Madanipour, urban design is a
ent theoretical orientations in urban design for sus-
multidimensional process: subjective-imaginative,
tainable urban regeneration and integrative space,
socially communicative, collaborative, interdisci-
providing an insight into the Serbian context. The
plinary, strategic, and technical [4]. Its multilevel
urban design process is not equally accepted among
attributes can overcome the obstacles that come
stakeholders. This poses a hypothesis that the level
from conflicts regarding barriers in the communi-
of acceptance varies according to the profile and
cation process. The conflicts come from various
the practical routine of the stakeholders. The aim
interests, values, and identities in the process of
of this paper is to explain these varying levels. The
framing and creating inclusive future urban places.
hypothesis will be proved on a real case in Serbia,
The artistic dimension of urban design gives to it a
named “Integrative urban design in Bač settlement
leading position in urban development. According
regeneration”. The results of the paper are based
to many authors, such as Forester, Healey, Jacobs,
on two sources. The first explores data acquired
and Gospodini [5] [6] [7] [8], the art and imagi-
through the case analysis. The second consists of
nation can provide ‘common sense’ and ‘common
the responses to questionnaires by stakeholders
places’ for Castells’s ‘frustrated identities’ in plu-
in Bač. The paper seeks to define the criteria that
ral society. This means that local cultures and ur-
would ensure the quality of the urban design pro-
ban spaces and places can be regenerated, creating
cess in regeneration in terms of specific contexts.
Castells’s ‘project identity’ based on past, present,
Key words: urban design, sustainability, inte-
and future images [9].
grative space, globalization, urban regeneration
Therefore, this paper discusses the opportu-
nities regarding sustainable urban regeneration.
1. Introduction These opportunities are considered due to the cre-
Urban design is seen by authorities as a disci- ation of livable places using Habermas’s ‘commu-
pline that can give urbanism a new chance in a nicative action’ in Landry’s ‘creative milieu’ [10]
plural and global society. Globalization as a pro- for achieving ‘communicative consensuses’ [11].
cess has its shiny and its dark sides. On the one This ‘communicative consensus’ should form the
hand, it creates wide disparities among ‘the strong future identity for urban places. The theoretical dis-
and the weak’; on the other hand, it provides a cussion is proved on a real case: integrative urban
chance to local communities to become stronger design for urban regeneration of Bač settlement in
in the global game by creating a specific ‘glocal’ Serbia. Therefore, it becomes possible to compare
identity. This identity makes urban places recog- contemporary theory with domestic practice and
nizable on the global map. “[...] the regeneration routine as well as with the stakeholders’ openness
takes a key role in the creating a recognizable “im- to new approaches in urban development. The
age of the city”” [1] pp 543. According to Castells, case was implemented as a part of the Summer
being out of this global network is like living in a School of Architecture in Bač in 2010 and 2011,
‘local cage’ without any opportunity to revel in the which provided Healey’s ‘soft infrastructure’ for
richness of any kind that globalization can bring creativity, open communication, and flow of ideas
to localities [2]. “Today, cities are drivers of social among various stakeholders.

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 technics technologies education management

2. Designing urban regeneration: what is holistic manner. On the other hand, the ‘bottom-
the issue? up’ approach is more ‘collaborative’ and incre-
mental in its essence. Here, I believe that urban
Urban regeneration is a term used differently
regeneration becomes a process of recreating or
among professionals, stakeholders, and other sub-
re-generating things on past, present, and future
jects in urban development. Over time the prac-
foundations. This distinction explains ambiguous-
tice of urban regeneration has leaned to favoured
ly usage of the term. In my opinion all the terms
urban paradigm. According to Hall, it has em-
reflect their paradigm values. Regarding that, I
phasized economic development, social justice,
claim that “[...] both paradigms rational and col-
aesthetics, beauty, environmental issues, and sus-
laborative are in line with sustainable and integrat-
tainability principles [12]. Similarly, Reeves links
ed development in plural society. Rational para-
urban paradigms, concepts of urban space, and
digm provides vertical and systematic integration
urban development issues [13]. Here I stress the
while collaborative horizontal mediating different
interdependence between urban regeneration and
pictures of reality into coherent whole.” [15].
urban paradigms. Furthermore, I believe that the
Nowadays, sustainable development seeks to
subject of urban regeneration varies according to
integrate the positive aspects of all paradigms cre-
the paradigm and its space conception. (Table 1)
ating glocal, integrative space. The space becomes
The table shows that urban regeneration has
as an arena for mediating differences in plural
been practiced ‘top-down’ or ‘bottom-up’ regard-
society. This integration means making linkages
ing the dominant urban paradigm(s). In other
not only between the sectors of sustainability and
words, its essence is more ‘rational’ or ‘collabo-
different interests, but also linkages between dif-
rative’. Top-down /‘rational’/ theories and prac-
ferent levels of governance, both horizontal and
tices make urban regeneration a product of plans
vertical. Therefore, I believe that sustainable ur-
and policies on a higher level. Lazarević-Bajec
ban regeneration is a process of creating glocal
says that the rational approach “[...] is based on
identities and places using integrative space as
instrumental rationality, namely on expert’s analy-
an instrument for developing Healey’s “hard and
sis [...]” [14]. Therefore, physical space becomes
soft” infrastructure (6) or Giddens’s “structures
its main attribute, and urban regeneration is more
and agencies” [16]. Here, I stand on Dovey’s point
wide-scale reconstruction than re-generation3 in a
that mediation in integrative space should be more

Table 1. Subject of urban regeneration in relation to the urban paradigms and concept of space1
Concept of Subject of urban regeneration:
Paradigm Urban regeneration type
space understanding improvement
Economic Economic
Economic, financial factors Urban reconstruction – gentrification
growth space
Social Social and environmental Quality of living of the socially
Social space
development “recovery” endangered
Physical Visual, aesthetic, spatial-physical
Physical space Physical “recovery”
development improvement
Coordination of different
Public Administrative Functionalist approach towards Faludi’s
levels of governance and
administration space multiplanning agencies2
developmental sectors
Green, open
Environmental “Greening” the city Soft green approach
space
Community as improvement,
Collaborative Shared space Integration of different relative values
process
Glocal, Integrative place (space), Integration of different sectors of
Sustainable
integrative combination of socioeconomic improvement, different traditions and
development
space and environmental factors objectification of different values.

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 technics technologies education management

“power to then power over” (16). In line with that, cording to Tomić, the conflicts come mostly from
my thought is that creating, developing, and main- communication barriers that can be cultural, se-
taining integrative space becomes a main subject mantic, ideological, and psychological, related to
of sustainable regeneration [17]. Thus, the ques- power and to social and human capital [22]. On the
tion: How do we create, develop, and maintain the other hand, I believe the barriers can challenge the
integrative space? The answer needs further elab- development of the model. My attitude introduces
oration on the model of integrative space. the main issues in designing the process, stated as
In my opinion the model should provide glocal follows: In which situations should the urban de-
identities, spaces, and places that are in between sign process for regeneration be ‘guided’, ‘medi-
CIAM and New Urbanism. Here, I lean on Cas- ated’, or ‘facilitated’? Should and can Landry’s
tells’s attitude that individuals and local and na- “creative milieu” [10] overcome the obstacles in
tional identities are “frustrated” by the process of communication? Can it create preconditions for
globalization. According to him they should cre- open communication, an argumentative approach,
ate “project identity” based on memory, present and Habermas’s “communicative consensus” [11]?
moment, and dreams of the future. This identity Most authorities, such as Forester, Harvey, and
makes them pro-active actors in the global com- Jacobs, believe that creativity and design can give
munity. Such actors are ready to develop new at- ‘common meaning’ to the fragment society [5]
tributes with care and protection of traditional ones [19] [7]. The ‘common meaning’ develops ‘new
[9]. Only in that way the ‘ratio’ can be renewed on rationality’ for the ‘New Unity’ of individuals,
solid bases, integrating plural identities and values organizations, institutions, communities, and na-
into a coherent whole: “I believe in rationality, and tions. The imaginative dimension of urban design
in possibility of calling upon reason […] I believe provokes urban designers to become leaders in
in the chances of meaningful social action, and creating/designing the urban regeneration process.
transformative politics, without necessarily drift- Furthermore, according to Madanipour, urban de-
ing toward the deadly rapids of absolute utopias.” sign is a multidimensional discipline: subjective
[2]. I also believe in Baudrillard’s objective space - imaginative, communicative - collaborative,
[18], opposing the ‘legality’ of the mutual pres- rational - technical, interdisciplinary [4]. It tides
ence of relative rationalities that postmodern time different rationalities into a coherent whole using
favours [19] [20]. This ‘new rationality’ deter- a variety of methods and techniques. The further
mines and supports a model of integrative space, discussion focuses on two questions: Can urban
as presented in Figure 1. designers develop themselves into wider social
emancipators, as Groat believes [23]. Can mem-
bers of the local community understand and ac-
cept the change and their new role in the process?
In other words, how should urban designers com-
municate their imagination to the wider society to
avoid the manipulation that creativity and art can
bring into the process4? How can the different lev-
Figure 1. Model of integrative space and place. els of creativity in society be managed? If the level
T. Mrđenović [21] is low, how can it be evoked?
I believe that design can create the precondi-
The model is challenged by conflicts among dif- tions for Habermas’s “field of intersubjectivity”
ferences, as it should provide and develop the integ- [11], argumentative approach, and integrative
rity of individuals, communities, and nations into a space and place. However, I think that some condi-
‘new rationality’. This rationality is more a hierar- tions should be met before and during the process.
chical puzzle or dynamic, live-fractal than it is uni- Moreover, I stand with the position of Woolcock
versal. These conflicts can develop or destroy ‘the and Fukuyama that the process of emancipation
fractal’ and ‘New Unity’ regarding the ‘elements’ should be iterative in developing human and so-
and ‘design’ of the urban regeneration process. Ac- cial capital from bounding, linking, and partner-

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ship making [24] [25]. Those are the standards for the Serbian context in relation to the matters pre-
the development of the model of integrative space. viously discussed. On the theoretical level, urban
The design and art should make good spirit for regeneration and urban design are widely seen as
change. Regarding the conditions, I would point multidimensional processes that should provide
out several criteria: sustainable places. Bajec, Maruna, Bazik, Vaništa,
1. The process should not start if there are big Đukić, Živković, Brković, Tošković, and Petrić
disparities among the stakeholders (NC); see them as strategic, iterative, inclusive, both ‘top
2. If there are big disparities, the programs down’ and ‘bottom up’ processes of creating sus-
of human capacity-building should be tainable urban solutions [26] [27] [28] [29] [30]
provided (NC); [31]. On the other hand, the legislative framework
3. When disparities become smaller, the art and usual practice are more instrumental than col-
and design can play a key role in integration laborative – in other words, more ‘top-down’ then
(SC 1,2); ‘bottom-up’5. This opinion is shared by Živković,
4. Urban designers should not design the who says that urban design in Serbia is narrowed
process alone (NC); to designing large-scale urban designs as products
5. The process should be designed by an of higher-level urban plans. However, she empha-
interdisciplinary team, but urban designers sizes the need for the development of domestic
can play a crucial role in designing it (NC) theory and practice in urban design towards the
(See Figure 2). integration of different disciplines and dimensions
of urban space and place production [29].
In the following sections these criteria are This ‘disintegration’ comes from the socio-po-
tested on a real case and on data acquired through litical situation, and Nikezić and Đokić believe that
questionnaires. Here I introduce different design the problem is in the interpretation of ‘common
paths that link the criteria and the model of inte- sense’ and the ethical aspect of all protagonists of
grative space (Figure 2). the prevailing rationalities [32]. This is in line with
Vujović’s “consensual chaos” 6, Vujošević and
Petovаr’s “general mobilization of bias” [33] and
Vujošević “hybrid society” [34]. I believe that the
problem in the integration of different rationalities
lies in ‘manipulative integration’. Therefore, the
model of integrative space should transfer the phe-
nomenon of “consensual chaos” into the phenom-
enon of “consensual identity”7. The following sec-
tions should test the possibilities of this transfer.

3. Designing the Process of Bač Settlement

Regeneration: New Unity?
In this section I describe the process of Bač
settlement regeneration applied twice in the form
of inclusive workshops. The first one was on the
topic “Participatory Approach in Urban Design of
Public Spaces of Bač Fortress Suburbium”. The
second was on “Integrative Urban Design in Bač
Figure 2. Linkages between the model of inte- Settlement Regeneration” [35]. According to the
grative space and the criteria Statistical Office of the Republic of Serbia, Bač
Municipality has 16268 inhabitants, out of which
Before proceeding to the next sections I need to 6087 live in Bač settlement. The Municipality of
briefly describe urban regeneration conditions in Bač is national, multiethnic, and multicultural8. The

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 technics technologies education management

local authority represents the multiethnic commu- settlement was formed (Image 1). Moreover, the
nity. The area of Bač Municipality is 365km2, with integrative urban design game as a method was
six settlements [36]. The largest is Bač settlement, implemented and innovated for the first workshop
with average urban area of 2.88km2, in which 8.7% [39]. It developed elements of integrative space
is under the area of “Bač Fortress and its Subur- and place (Figure 3, Image 2).
bium“, dated from the 14th century and protected as
an area of great cultural importance [37].
Both workshops were designed to achieve ‘New
Unity’ [38] using the integrative urban design pro-
cess for the regeneration of various urban areas.
They included local and regional stakeholders on
different levels of participation according to their
willingness to participate. Nevertheless, both work-
shops included all relevant stakeholders, the first
one more than the second. This disparity in the level
of inclusiveness is the subject of the research and
will be examined through questionnaires. It is im-
portant to point out that both workshops were part
of the regular curricula of the Faculty of Architec-
ture in Belgrade, and students were included as a
group of stakeholders9, educated and trained on dif- Figure 3. Integrative concept of urban regenera-
ferent methods and techniques of integrative urban tion of Bač settlement12
design process10.
The first workshop treated the area of Bač For- The integrative concept of the urban regeneration
tress Suburbium, the second the whole area of Bač of Bač settlement (Figure 3) represents the product
settlement. Both workshops sought to build the ‘soft of the process that integrated different identities,
infrastructure’11 creating the integral concept of Bač values, interests, imaginations, and rationalities into
settlement regeneration in a sustainable manner. a coherent whole. The process included relevant
The results of the first workshop were integrated stakeholders at various levels of inclusiveness and
in the second that treated the whole settlement and was checked in the second cycle of the workshop
included its specific ambients (due to the fact that as well as through questionnaires among partici-
the polygon of the first workshop was a cultural- pants. The stakeholders included representatives of
historical part/ambient of the settlement and is cat- the local authority (top decision makers, economic
egorized as an area of great cultural importance sector, social sector, sector for cultural protection
[37]. The ambients were formed according to their and development), representatives of the Tourist
unique cultural, socioeconomic, and natural specifi- Organization of Bač Municipality, representatives
cities, as well as to their spatial distribution in the of the Directorate for Building and Construction of
settlement and in the larger spatial context. Moreo- Bač Settlement, and representatives of The Institute
ver, the ambients varied according to the formed of Culture of Vojvodina “Pretrovaradin”.
and recognized identity among local and regional This integrative concept was visualized us-
stakeholders. It is important to emphasize that all of ing three-dimensional techniques and presented
the ambients carry the identity that is more or less a starting point for the development of specific
‘visible’ and recognized among people. measures for each ambient of the settlement. As
The workshops aimed to crystallize the identi- may be seen in Image 1, the settlement was di-
ties through an integrative urban design process vided into 11 ambients according to their ‘hidden
and regenerate them on past, present, and future or visible’ identity as well as to their spatial distri-
bases using the phases, methods, and techniques bution in the settlement and its surroundings. For
of integrative urban design. As a result, the inte- each ambient the vision and identity was created
grative concept of the urban regeneration of Bač using integrative methods and techniques13 using

1524 Volume 8 / Number 4 / 2013

 technics technologies education management

symbols, slogans, and text. On the other level, the of the stakeholders participated at the same level
vision and identity were formed for the whole Bač of inclusiveness. This fact is the basis for review-
Settlement. Therefore, the process passed through ing the acceptance of the process and for clarify-
different phases of the integrative urban design ing its positive and negative aspects, for further
process in an iterative manner (Figure 4). implementation of the integrative urban design
process in urban regeneration. It is also the basis
for clarifying the uniting power of the integrative
urban design game.

Figure 4. The path of going through phases of

Integrative urban design for the both workshops14

Figure 6. Process of place making using Integra-

Figure 5. Developed elements of integrative tive urban design game
space and place using Integrative urban design
game in the workshop15 4. Acceptance of the Process: Failure or
Success of ‘New Unity’?
Figure 6 presents the integrative urban design
game method for the development of the integra- In this section I present the results from the
tive concept of Bač Fortress Suburbium and Bač questionnaires accomplished by relevant stake-
settlement. According to my assumption in the holders of Bač Settlement, as mentioned above.
game, the art of visualizing writing, brainstorm- The results are discussed in relation to the fail-
ing, and storytelling were crucial points for unit- ures and successes of ‘New Unity’ and provide a
ing differences and making ‘common sense’ for solid base for concluding on the pros and cons in
livable places. In this artistic game an integrative designing the process of urban regeneration. The
model of future places was created, flourishing questionnaire contained three sections: a) opinions
their specificities and identities in a sustainable about sustainable urban regeneration, b) opinions
manner. The model was exhibited in the ‘Cultural about urban design, and c) opinions about under-
Centre of Bač’ where the wider citizenry could see standing of and willingness to participate in the
and react to the creations of professionals, stake- integrative urban design game in the future. For
holders, and students. As mentioned earlier, not all this research the most relevant questions are in the

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 technics technologies education management

section on the respondents’ understanding of and gic, artistic, technical, and integrative components.
willingness to participate more intensely in the This opinion should be further tested in a new cycle
game/method in the future, and thus they will be of the urban design process where the ‘integrative
the most presented. concept’ and ‘integrative model’ for urban regener-
The respondents varied according to their profes- ation would be further considered, developed, and
sion, experience, and age. Among the respondents, rationalized. So far the thinking is that the main ob-
28.57% were in the sector of the economy (tourism stacle is lack of knowledge in the community about
or management), 14.28% in the environment (en- contemporary approaches to urban design and ur-
ergy efficiency or protection of natural resources), ban regeneration. This leads to the conclusion that
14.28% in law, 21.42% in media and culture, 7.14% urban designers should work on the edges of their
in the protection of cultural heritage, 7.14% in civil discipline, making good partnerships with other
engineering, and 7.14% in other areas. relevant disciplines and forming interdisciplinary
According to the results, 50% of economists teams that will design, facilitate, and lead the pro-
characterize the integrative urban design game cess. However, the imagination of urban designers
and its process as integrative regarding different puts them on the front line of the team.
sectors of urban regeneration. The other 50% of This leads me to the general conclusion that
them see it as artistic, spatial-technical, and rich further workshops and trainings in the commu-
in regeneration options. Among the heritage pro- nity should be designed and implemented using
tectors, 100% see the game as integrative regard- the integrative urban design game. The workshops
ing different sectors of urban regeneration. All should stress ‘capacity building’ in terms of raising
the lawyers think of it as strategic-planning, as do knowledge about sustainable urban regeneration
civil engineers, others, and environmentalists, the and the role of urban design in it. They should be
last adding the spatial-technical dimension. From designed based on the previous game results. The
media and culture 66.66% see it as strategic-plan- positive fact is that the community is open to new
ning and 33.34% think of it as integrative regard- approaches, as only 7.14% of stakeholders think
ing different sectors of urban regeneration and of that resistance to change is an obstacle to imple-
its being rich in regeneration options. menting the method and new approaches. There-
More than three quarters of all respondents fore, I believe there are more successful points in
(78.57%) would participate more intensely in the game than there are failures. Furthermore, I
the process in the future because they believe the conclude that the role of the Faculty16 could be that
method would provide better solutions for urban of facilitating the game process regarding building
regeneration in Bač. On the other hand, 7.14% partnerships among different professions, values,
have the opposite attitude and 14.28% are uncom- identities, interests, and levels of governance due
mitted. The prevailing thinking among all is that to possible improvements in the present legisla-
the following are positive sides of the method: tive framework. This can overcome the obstacle
creating a common vision for urban regeneration, recognized as a lack of financial and legislative
variety of ideas for possible solutions, building support for this kind of the process.
trust among various stakeholders in the communi-
ty, creating partnerships for implementation, and 5. Conclusions: Proving the Criteria
developing an urban design framework. However,
92.86% see a lack of knowledge regarding con- Regarding the theoretical discussion, the practi-
temporary approaches to urban design and urban cal routine in the Serbian context, and the introduc-
regeneration as the main obstacle for implementa- tion of new approaches to urban design and urban
tion of the method in the Bač community. Only a regeneration, the paper posed a hypothesis that all
few of them (7.14%) partly believe that the ob- mentioned variables can be formulated as follows:
stacle can be the resistance to change. The level of acceptance of the new approaches var-
The results show that the method has positive ies according to the profile and the practical rou-
sides regarding possibilities for ‘New Unity’. The tine of the stakeholders. The stakeholders’ profile
prevailing thinking is that the method has strate- includes their professional orientation, their open-

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 technics technologies education management

ness to new adits in urban regeneration and urban Finally, I would conclude that the integrative
design, their human and social capital, and their urban design game can be a uniting method, over-
opinions and attitudes regarding change. coming the gap between theory and practical rou-
The theoretical and practical discussion led to tine. The process of integrative urban design game
the conclusion that the practice of urban design and should be designed according to the local context
regeneration in Serbia is still on post-socialistic and following several criteria:
traditional ruts. Therefore, there is a gap between 1. The process should not start if there are big
contemporary urban design and regeneration theo- disparities among stakeholders;
ry and the practical routine in the domestic context. 2. If there are big disparities the programs of
In line with this I have developed a model of inte- human capacity building should be provided;
grative urban design space, as well as the process 3. When disparities become smaller the art and
that should overcome this gap using the innovative design can play a key role in integration;
integrative urban design game as a method. 4. Urban designers should not design the
The method should integrate the different di- process alone;
mensions of sustainable urban regeneration and ur- 5. The process should be done by an
ban design, combining disciplinary, interdisciplin- interdisciplinary team, but urban designers
ary, argumentative, collaborative, creative, artistic, must play a crucial role in designing it.
and technical methods and techniques. The process
should be tailor-made according to local specificities 6. Acknowledgements
and the local identity. In this manner it can provide
conditions for Habermas’s communicative action, This paper is a result of work at Faculty of
Healey’s ‘soft and hard infrastructure’, Forester’s Architecture in Belgrade, Scientific project: TR
and Jabos’s ‘common sense’, Castells’s ‘project 36035 “Spatial, Environmental, Energy and So-
and glocal identity of place’, and Dovey’s ‘power cial Aspects of Developing Settlements and Cli-
to rather than power over’. I have also posed crite- mate Change – Mutual Impacts, financed by the
ria that the process should follow to be integrative, Ministry of Education, Science and Technology of
leading towards ‘New Unity’ and the totality of inte- the Republic of Serbia from 2011 to 2014” and
grative space. These criteria I have proved on a real collaboration with Municipality of Bač, Serbia.
case in the first cycle of Bač settlement regeneration Therefore, I give my thanks to people and students
using questionnaires among relevant stakeholders. who participated and gave their rich contribution.
The respondents/stakeholders varied accord-
ing to their profession, experience, and age. Of References
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Global Positioning of Local Identities. Essen: Real
ambijentalnih celina u kontekstu održivog razvoja
Corp Change for Stability: Lifecycles of Cities and Re-
- Podgrađe Tvrđave Bač / Urban regeneration of
gions - The Role and Possibilities of Foresighted Plan-
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development - Bač Fortress Suburbium. 1st Edition.
Beograd : Univerzitet u Beogradu - Arhitektonski 39. Mrđenović T. Report from the workshop: Participa-
fakultet, 2011; 310-334. tive approach in the shaping of Bač Fortress and
its Suburbium’s open space. University of Belgrade
22. Tomić Z. Komunikologija. Beograd : Čigoja, 2003.
- Faculty of Architecture. Belgrade : University of
23. Groat L, Wang D. Architectural research methods. Belgrade - Faculty of Architecture. Scientific and
New York : John Wiley&Sons, 2002. practical results of the workshop to the Ministry od
24. Woolcock M, Narayan D. Social Capital: Implica- education and science, 2010.
tions for Development Theory, Research and Policy. 40. Merriam-Webster. http://www.merriam-web-
World Bank Research Observer, 1999; 1-49. ster.com/dictionary/regeneration?show=0
25. Fukuyama F. Social capital, civil society and devel- &t=1304180027. [Online] 2012. Cited: 10 Septem-
opment. Third World Quarterly, 2001; 22(1): 7-20. ber 2010.
26. Lazarević Bajec N, Maruna M. Strateški urbani 41. Šuvaković M. Diskurzivna analiza. [ed.] Andrija
dizajn i kulturna raznolikost. Beograd : Arhitekton- Đukić. 1st Edition. Beograd : Univerzitet umetnosti
ski fakultet, 2009. u Beogradu, 2006.
27. Bazik D. Iniciranje regeneracije javnih gradskih 42. РС. Закон о планирању и изградњи. Београд :
prostora. [book auth.] Ružica Bogdanović. Urbani Службени гласник РС, 2009.

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43. Vujović S. Akteri urbanih promena u Srbiji. [book 6. “The syntagm ‘organized irresponsibility’ is most
auth.] Anđelka Milić. Društvena transformacija i suitable to refer to such a state. In the gray zone of
strategija društvenih grupa - svakodnevica Srbije building construction and urban planning, we can en-
na početku trećeg milenijuma. Beograd : Institut za counter the reactivated micro-network of solidarity,
sociološka istraživanja FIlozofskog fakulteta u Beo- which certainly is not motivated by sentiment, but by
gradu, 2004; 151-193. necessity. Those are horizontal networks, opposite
44. UN-Habitat. What is participatory planning? [book clientelism that is also encountered and that can be
auth.] UN-Habitat and SIRP. Belgrade: UN-Habi- referred to as a vertical network. Horizontal networks
tat, 2005. of solidarity function between equals, and the verti-
cal one between hierarchized stakeholders.” [43]
7. Term, T. Mrđenović (21).
Corresponding Author 8. 47.33% Serbs, 0.35% Montenegrians, 5.02% Yu-
Таtjana Mrdjenovic, goslavs, 0.04% Albanians, 0.02% Bosniaks, 0.01%
Faculty of Architecture in Belgrade, Bulgarians, 0.06% Bunjevci, 6.18% Hungarians,
Belgrade, 0.07% Macedonians, 1.35% Muslims, 0.55% Ger-
Serbia, mans, 1.98% Romas, 3.55% Romanians, 0.04%
E-mail:tmrdjenovic@gmail.com Russians, 0.06% Rusyns, 20.02% Slovacs, 0.05%
Slovenians, 0.57% Ucrainians, 8.65% Croats, 0.83%
Czechs, 3.27% uncommitted. (36)
(Endnotes) 9. As future young experts
10. The mentor of both workshops was Tatjana
1. Based on Reeves categorization and adapted from
Mrđenović, assisted by Jelica Jovanović. The stu-
Mrđenović (Mrđenović, Urban regeneration of pro-
dent participants were Tijana Bukvić, Tijana Ilić,
tected ambients in the context of sustainable develop-
Dragana Ćiprijanović, Jovana Jeremić, Emilija
ment - Bač Fortress Suburbium 2011)
Josipović, Katarina Mijić, Uroš Nedić, Suzana
2. Faludi’s multiplanning agencies are based on system
Obradović, Ana Virijević, Dušan Dopuđa, Đurđica
approach to urban development, coordination, effec-
Stanojković, Dušan Stanojević, Daša Spasojević,
tiveness and efficiency. The consensus on common
Predrag Milić, Peđa Selaković, Marija Trifunović,
aims is coincided (Faludi 1984).
Darko Baribović, David Bilobrk, Tanja Đurđić, Mi-
3. The term urban regeneration is widely used and
haila Hrkalović, Darko Jović, Jovana Madžarević,
therefore pretty unclear among different actors in
Dušan Milanović, Ivan Notaroš, Dragana
urban development. The regeneration /regenerare/ is
Ranitović, Anja Topalović, Jovana Tošić, Marija
defined as rebuilding, spiritual rebirth, renewal, mak-
Zakula, Đulija Zlatanović, Milena Mihajlović,Tina
ing things better (usually after degradation), and act
Đekanović, Ivan Notaroš, Ana Savić, Miroslav
of complete reformation or improvement [40]
Dimitrijević, Anđelija Višnjić, Vesna Miletić,
4. In my opinion creativity is not possessed by each per-
Ksenija Stefanović, Aleksandar Vučković, Dina
son equally, nor can it be much developed during the
Haljeta, Bogdana Vukobrat, Damir Dizdarević.
time as some of the paradigms seek to prove. I believe
11. “Summer School of Architecture in Bač” in 2010
that people possess specific degrees of creativity that
and 2011 provided a ‘soft infrastracture’. The au-
can be evoked in the urban design process. Therefore,
thors of the School are Jelica Jovanović and Dra-
I make a strict distinction between carriers of creativ-
gana Petrović. The workshops were the integrative
ity and the factors of creativity. The first are urban
part of the School, designed and realized by Tatjana
designers and architects who have the talent to visual-
Mrđenović.
ize things as well as work on the boundaries of their
12. http://elearning.amres.ac.rs/moodle/course/view.
discipline. The second are people whose creativity are
php?id=148
in their experience and social knowledge, and can be
13. The integrative urban design game is a method that
evoked in the process, if the process is facilitated and
integrates other methods and techniques that are disci-
led in ethical manner. Here, I stand on Baudrillard’s
plinary, collaborative, creative, rational, and technical.
point that ethics should find solutions in aesthetics
In that sense the game uses art to compose and design
(Бодријар 2001). Therefore, I see aesthetics as a sci-
the process towards usage of an appropriate method
ence rather than a philosophy of art as the postmodern
or technique in the right time and in an appropriate
paradigm promotes [19] In line with this, I believe that
position, creating added value - ‘New Unity’.
art is a uniting factor of differences in plural society
14. The general schemas on phases of the process are
and aesthetic science should ensure ethical standards
given by UN-Habitat methodology [44]
to avoid manipulation.
15. http://elearning.amres.ac.rs/moodle/course/view.
5. By the law on urban planning and construction of the
php?id=148.
Republic of Serbia, urban design is blueprint product of
16. And students’ incisiveness
urban planning and developmental plans. Also, there is
a narrow range of urban design instruments [42]

Volume 8 / Number 4 / 2013 1529

 technics technologies education management

Financing the military-industrial complex by the

Ministry of defence of the Republic of Serbia
Ivan Milojevic¹, Drago Cvijanovic², Milan Mihajlovic1
¹ Military academy, University of Defence Belgrade, Belgrade, Serbia,
² Institute of agricultural economics Belgrade, Belgrade, Serbia.

Abstract sand of course utility value in a time interval.This

paper shall provide a financing model to satisfy all
Production of military equipment and capital
above mentioned requirements, at the same time
armament assets requires permanent financing
respecting positive legal and sublegal provisions
during the long time interval. The time interval as
effective in the Republic of Serbia.
established in the regulatory system of the Repub-
lic of Serbia is limited by budget periods which
makes financing interval nonintegral.Therefore, Development and serial production as
the question is how to make this nonintegrality conditioned phases
permanent in financial sense. In this text, we shall Production of armament and military equip-
explain and present such form of financing at the ment requires compliance with procedures ex-
model of financng capital projects in the area of plained in detail by internal sublegal regulations,
armament and military equipment. prescribing,besides procedures, management lev-
Key words: financing, budget accounting sys- elsof authority for making related decisions, reso-
tem, armament and military equipment. lutions and studies [1]. In the economy transition
in the Republic of Serbia, major part of public sec-
Introduction tor, which could function independently, has been
Financial concept of budget system is limited transformed into companies in accordance with
and strictly normatively defined. This definining the new legal organization forms.So, even the
qualityhas, in most cases, a positive effect on bud- largest companies manufacturing armament and
get sector when it comes to specific purpose expen- military equipment have been organized as com-
diture and budgetary discipline, but also a negative panies with state ownership as major sharehold-
one when the effectiveness (achievement) of state er, , in most cases,(a minorshareholder being the
apparatus bodies is considered.In this paper we shall company “Trajal korporacija” from Kruševac).
focus on the part of effectiveness (achievement)of Abandoning the public sector system, introduc-
defence bodies dealing with procurements and their tion of financial discipline through BUDGET and
problemcontentsin the domain of providing means budget system [2], implementation of procedures
of armament and military euipment necessary for for public procurement [3] and part of confiden-
the needed level of army efficiency. tial procurement [4] which are separated from
Production of armament and military equip- the public procurement domain by integrating
ment is most frequently conducted in two phases: payment system in the Treasury system, foreign
development phase and serial production phase. exchangepayment through the National Bank,
They are characterized by long time intervals, es- introduction of changes in the enforced payment
pecially when it comes to more complex means. system, etc., caused theprovision of armament and
On the other side, we have production value military equipment from the development and se-
which often, in more complex cases, reach sev- rial production phase to be slowed down in large
eral tens of millions of euros. In thus observed part, not to say disabled.
environment, the question is how to satisfy mul- This normative environment influenced the oc-
ticriteria demandfor limited efficiency, reliable curence of larger import because time is an expen-
financing, financing integrality, safety, timelines- sive, often priceless factor. We will mention only

1530 Volume 8 / Number 4 / 2013

 technics technologies education management

one example of this; budget year limitation effects globally observed, represent the process of arma-
the necessity to spend budget funds [5] until the ment and military equipment production. It should
end of the budgetary period (31.12.).Due to the be mentioned here that this is a systematically pre-
impossibility to use the funds in this way as the sented production process, that is, in these phases,
productiontakes longer time, there is a tendency to a series of processes and procedures that have to
purchase finished product from the market which be complied withis established, in order to satisfy
is easier and faster, and, of course, in compliance- conditions mentioned above.
with the budgetary period. Development phase
in manufacturing sense (this is the development Financial aspects of production
phase observed from the aspect of manufacture, as
there is a large part which preceeds the prototype When agreeing onarmament and military equip-
production but it is not the subject of this paper) ment production, the funds approved are, in most
starts from the prototype through pilot run to the cases, not sufficient to satisfy the estimated value
approval for batch production. of prototype or pilot run.Accordingly, it is neces-
It is only after the completion of pilot run and sary to form the accountof producer’sspecial-pur-
the reception of part of the batch or complete pose funds, which will function on the model of a
batch, that the decision about aceptance is made financial fund, but the funds paid to the producer
or the conditioned approval for batch production account would be strictly controlled and paid spe-
start-up, (we have to mention here that it is neces- cifically for the production needs.
sary to accept at least one product from pilot run In order to realize this mehod of finance, it is
in order to conditionally start with the batch pro- necessary to precisely define all elements in the
duction), that is, it is possible to start with batch agreement, starting from funds payment through
production before the acceptance of the complete their withdrawal from the special-purpose ac-
pilotrun due to the needs of armament and military count, to their return in case the producer is not
equipment procurement. able to meet the obligations. Funds payment to the
If the production is more complex, persons who special-purpose account would be followed by a
control the production and direct its flow are then protective clause related to the exemption of pub-
sent to the manufacturer. It is clear, from the above lic property funds collection [6], that is, the arma-
mentioned,that it is a continuing process and that ment and military equipment funds, in case that
each interruption results in distorsions, that is, re- the regular company account is blocked through
quires additional funds for checking the previously the enforced payment.
manufactured products. Therefore, we can see that It is necessary to pay financial assets to two
financing of such production is conditioned by its separate special-purpose funds such as:one for the
physical needs, not only by the budget period. needs of domestic payment systemand the other
During the development, quantity of material for the import payment,which is necessary to se-
needed for production of certain product is estab- cure with firmcurrency (most often with euro or
lished (material normative) and amount of time dollar mark) depending onthe market from which
necessary to spend for production (time normative). the predominant import of production components
By the time pilot run is finished, both normatives is planned. Funds attributed as interest earned
have to be fully determined. On the other side, there from deposited fundswould represent theyield-
is the price of material and the hour norm price as which would be used for production and consid-
two values setin order toarrive to the cost price. ered as an amount paid by the Republic of Serbia.
By multiplyingspecified values we arrive to the What essentially makes this method of financ-
production price cost which, in this case, is sell- ing possible? It provides the possibility to comply
ing price for the defence system.By transferring to with budget discipline, and on the other hand, as-
batch production,meansare, according to the need, sets time integrality throughout the whole produc-
produced in prescribed quantities (±deviation), tion period. Account balance monitoring is made
for which material cost growth and labour cost possible through depositing specimensignatureof
increase are annually determined, which, in total, both partners in contract, which would, by collec-

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 technics technologies education management

tive signature keep the special-purpose account what degree will realization be conformed with
dimension. delivery terms and pace, does not depend on the
It is important to mention that it is necessary buyer any longer, but exclusively on the producer.
to follow the disposingof thus paid funds, in two Trial balances would be made up in the following
phases. The first phase consists of thoroughcheck- manner:the actual state of means in the warehouse
up of meansto be acquired. This phase is secured would be compared to the amount of invoiced
by involving competent persons of technical-tech- assets paid from the specific-purpose account by
nological profile, who would, before the produc- control procedures of harmonizing account bal-
tion components acquisition, check their charac- ance with invoice book, reception book in com-
teristics and bring them into line with agreed char- pany warehouse entry and warehouse records in-
acteristics. The second phase consists of checking storehouse. Of course, these control procedures
the payment sigurnosti security, financial position would result in custom procedure control related
and solvencyof the party in agreement which is to to forwarding accounting, import commissions,
deliver production components, that is, if finance acquisition tax calculation, all dependent costs,
funds are paid to the appropriate accounts or if etc. Complexity of controlling procedures indi-
they are paid to notional accounts. Ontological cates that highly qualified professional with re-
experiences indicate that in some casesthere are lated experience is needed for this type of control
some company accounts that could be considered- and accounting work.
notional. Of course, this sample cannot be the rep-
resentative one, but this occurence has also been Capital projects from the financing aspect
reported. This phase is also significant because
of the need to pay labour force, on which occa- The most significant segment of capital project
sion it is defined how much and in what way has productionis conditioned by the quality and produc-
the number and norm hour price been calculated, tion potential of the monopolist, considering the fact
what justifies it and if there are conditions for its that the armament is a clear product of one monopo-
payment, etc. Professionals with economic and fi- ly and one, more or less monopsonist, if we exclude
nancial qualifications participate in this phase ac- import [7] . For the needs of armament and military
tivities.They have to be familiar with commerical equipment production, the development of such
and technical issues, besides financial issues. That consignment goods is of particular importance. Not
is necessary because it can happen that the agreed counting nonmaterial values that these producers
means for which production standards are set, are appropriate from developmental institutions, which,
acquired at markets by production partners, which in the Republic of Serbia, can be observed through
breaches agreed continuity. It is possible to ob- the institution of the Military-Technical Institute and
serve such cases only if substantial control is per- its cooperants, capital products have their estimated
formed in the phase of funds disposal. The prac- (approximate) valueand the one realistically deter-
tise has showed that producer submits for payment mined in the production process.
an order which directs the assets to subcontractor, Taking into consideration the creation of non-
although production has been normed (produc- material values, the price of development norm
tion norm hours) without subcontractor. After the hour is higher than the series price of norm hour.
second control phase has been finished, the person This is influenced by a great deal of work at tool
whose specimen signature is provided on the bank production, machine and installation production,
card, may sign the transfer order. labour force introduction to work and training,
Monitoring financial flow of the assets, CASH and adjusting production capacities to the specific
FLOW, is thus made possible, providing excel- character of production program. Contamplating
lent grounds for program budgeting, as it enables development phase of project financing in this
continuity of access to outflows and phases of re- way, one may get the impression that this is all
alization of a particular program. Major part of about a very complex and financially often un-
the assets is successively monitored and the level predictable procedure from the planning domain.
of realization is determined by trial balances. To The actual price often exceeds the estimated one

1532 Volume 8 / Number 4 / 2013

 technics technologies education management

in the development phase for more than 20%. That duction worker needs to produce each part, so that
is why it can be concluded that it is necessary to the total working hour fund is thus determined.
realize production savings of financial character, The norm hour price covers total costs (depri-
too, (interests on late payments, interests on unde- ciation, salaries, nonmaterial costs and other, except
livered assets, exchange rate differences, penalties material costs). Model for determining the norm
for exceeding deadlines, etc.). These savings are hour price assumes that a norm hour price is deter-
possible if the fund uses special-purpose accounts mined as the relation between production cost, ex-
for financing capital production of armament and cept material (without energy), and number of pro-
military equipment projects. duction workers, increased for the relation between
Providing fundsis often conditioned by insuffi- management and cost of sales, and total number of
cient budget solvency, so that projects are partially workers per one hour. Production workers are taken
financed from revenues to be collected, loans tak- as denominator in the first manifolds of the norm
en by state or donations. The assets conditioned in hour price because they participate in generating
this way, enforce negotiators to try to compensate value with their major part, and from the norm hour
for the lack of assets by using barters, which is def- price it is necessary to cover all production costs of
initely not the best solutions.Related to the above the company as basic production function.
named is the fact that it is impossible to control Total number of workers (production and non-
the assets in physical form when they are at other production workers) is taken into consideration at
person’s disposal, so that these assets cannot be determining second manifolds of the norm hour
returned in the same condition. That conditions price. In this way, management costs and costs of
the issues of missed profit, market value, breach sales are included in the total price cost.
of legal regulations and similar conditions and
principles. Ontologically viewed, sublegal norms Pn/č = (Tp /np + Tup / nu) / dg
are very often used in an attempt to avoid legal
norm dispositions, in order to shorten up certain pn/č - price of one norm hour
proceedings timewise or achieve certain results, Tp – production costs excludingmaterial costs
which often affects constitutional and legal order. np – number of production workers
Material component of capital project is estab- Tup – management cost and cost of sales
lished on the basis of real market prices, compa- nu – total number of workers
rable at free market, both domestic and foreign. dg – average annual number of working hours
Due to thus presented liquid documents of pay-
ment with documents of assets physical delivery, That can be illustrated with an example. If pro-
their liquidation is carried out as well as their com- duction cost, excluding material cost and manage-
parison with agreed assets. ment cost and cost of sales is RSD 10, 000,000.00,
In the development phase, deviations up and the number of production workers 100, the num-
down due to different efficiency level of means of ber of non-production workers 20, the manage-
production are often permitted, but those deviations ment cost and cost of sales RSD 600,000.00, then
must not have negative harmonization coefficient the costof one norm hour can be calculated in the
when they are compared to assembly-line produc- following way:
tion. Harmonizationis conducted in accordance
with MRS 2, and they can often be conditioned by [(10,000,000.00/100) + (600,000.00/120)]/2112h=
stock exchange character of input used in produc- = (100,000.00 + 5,000.00)/2112 =
tion [8]. Material component, in the phase of de- =105,000.00/2112 = 49.72 ≈ RSD 50.00 /h
velopment and batch production, must not deviate
from the degree of utilization of material assets, In practice, the problem may occur during sep-
as on the contrary it would be the cost not recog- aration of categories of non-production and pro-
nized in the total cost of production cost price. The duction workers number, as well as of their sala-
number of norm hours is determined by production ries, which is solved by manufacturing order, as
standardization, that is, by measuring time a pro- individual, that is, serial production is considered.

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 technics technologies education management

Companies producing armament and military References

equipment are often forced to reduce non-pro- 1. Public Procurement Law (Official Herald of RS 116/08)
duction worker number in order to increase pro-
ductivity, since the norm hour price should secure 2. Law on Production and Turnover of Armament and
coverage of producion costs, as well as supply Military Equipment (Official Herald of FRY No. 41/96)
costs, keeping, storaging, and other costs. Norm
3. Milojević I, et al. Fundamentals of Budget Accountancy,
hour price must not be higher than average branch BK University, Beograd, 2007.
price. Most frequently asked question in the do-
main of financing capital projects of armament 4. Regulation on Specific-PurposeAssets (Official Herald
and military equipment is, actually, connected of RS No. 82/08 i 47/10)
with the number and price of work norm hour. 5. Rulebook on ArmyEquipmentProvision NGO (SVL
16/96)
Conclusion
6. Đorđević D. Microeconomy – Modern Approach, Com-
Production of capital projects of armament mercial Academy, Novi Sad, 2006.
and military equipment is inconceivable without 7. Raičević B. Public Finance, Faculty of Economics,
permanent source of finance and manufacturer Beograd, 2008.
production potential (primarily solvency and
technical equipment). In order to secure these re- 8. Stojiljković S, Guzina V. Application of International
Accounting Standards Beograd, 2004.
quirements in budget finance and program budget
conditions it is necessary to hold on to the fund
financing when negotiating production, develop- Corresponding Author
ment or series ofarmament and military equip- Ivan Milojevic,
ment. Fund financingimplies that payments se- Military academy,
University of Defence Belgrade,
cured by the Buyer, that is, the Republic of Serbia
Belgrade,
in its budget distribution, are made to special-pur- Serbia,
pose accounts. In this way, regular and permanent E-mail: drimilojevic@gmail.com
availability in fund spending would be ensured.
Of course, control, which is in this part un-
avoidable factor, would have good grounds and
full availability (all documents would be available
before payments from the account), which would
ensure each control aspect. This method of finance
is, of course, transitory solution, until the Army
Development Fund is settled. In the end, it is nec-
essary to point out the significance of production
price setting, which consists of material and work-
ing component turned into norm hour price and
material price at the market with its dependent
costs. The above described method would enable
proper planning, programming, budgeting and re-
alization as well as finance control. That would
certainly result in proper and rational spending of
funds in long term. Proposed model is practically
tested in several projectsand shortcomings have
not been observed.

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 technics technologies education management

Behavior and attitudes about the use of seat

belts in Bosnia and Herzegovina
Bojan Maric1, Marko Subotic1, Dejan Andjelkovic2, Abid Drobo3, Adis Imamovic4
1
Faculty of Transport and Traffic Engineering, University of East Sarajevo, Doboj, Bosnia and Herzegovina,
2
Faculty of Tehnical Sciences, Kosovska Mitrovica, Serbia,
3
Municipality Travnik, Travnik, Bosnia and Herzegovina,
4
Ministry of the Interior of Zenica-Doboj Canton, Zenica, Bosnia and Herzegovina.

Abstract titudes about the traffic and traffic safety. In accor-

dance to that, one of most correct attitudes from
Large number of drivers are aware that the the field of traffic safety, at which development
seat belt is reducing the risk from serious injuries, one must constantly work, is regular and constant
although, there are still insecurities among them seat belt usage while driving. That is the measure
related to the seat belt efficiency in situations of in traffic safety policy in almost all countries in the
interaction with the air-bags, situations of speed world. The results gained at research [1], showed
at which it is most efficient, and fear of entrap- that the number of fatalities in the traffic accidents,
ment. The goal of this research is determination of while passenger at the front seat is using the seat
level of seat belt usage at the microlocation level, belt, is lower for 40% and at the back seats about
at the town of Doboj, in Bosnia and Herzegovina, 25% low. Effects (the traffic accident consequence
using two different methods (self-reported behav- alleviation) of air-bags are about 20% at the front
ior), as well analysis of driver attitudes related to seats, but in combination with the seat belt, they
the usage and efficiency of seat belt for given con- grow to over 45% [2].
ditions. The statistical analysis of gathered data, At the annual report about the traffic safety,
using the χ2 test, has been implemented with this World Health Organization (WHO) is listing the
purpose. This work also showss the existence of troublesome data about the seat belt usage at the
statistically significant difference, between the countries, as one of the pointers of the traffic safe-
results gained through the self-reported behavior ty conditions. In the report from 2009, it has been
and intermediate observation. In regard to that, listed that the official information for Bosnia and
and in relation to the necessary determination of Herzegovina are not available. In comparison with
real state at the field, it is possible to choose the the most developed countries, where the seat belt
method for research. Repressive measures and usage at the front seats is higher than 90% [3], it
force are staitistically dominant factors that can assumes that this percentage is much lower in Bos-
influence the increase of level of seat belt usage nia and Herzegovina. According to the research by
with perpetrators. On contrary, the dominant fac- [4] which has been implemented in Republic of
tor of safety is predominant with regulators. Srpska, percentage of seat belt usage by drivers is
Key words: seat belt, level of usage, risk, at- 52%, and by front seat passengers 46%. Therefore,
titudes. there is large need for activities by the authorized
institutions, which should endlessly start to work on
1. Introduction resolving of this problm, which would include the
Attitudes, more than knowledge, are influenc- inclusion in the SARTRE project. Such access, and
ing the safety of traffic participants. Constant ef- in accordance to the research model established by
forts have been invested, in that sense, to develop [5] , the existing condition would be determined,
and rout the correct attitudes about safety in traffic. and desired conditions would be defined, and the
In development pocess of positive attitudes about appropriate procedures for data gathering could be
the traffic safety, it is hardest to eliminate negative introduced, and finally should start the activities for
influences, i.e., to prevent forming of negative at- increase of level of seat belt usage.

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2. Literature Overview In a research, which has been employed at the

territories of two cities in China, the researchers
Numerous researches about the efficiency
[15] have discovered that the level of seat belt
of seat belts have been employed all around the
usage is statistically, more significant for drivers
world in the past. These researches also involved
(49,9% and 47,45%), when it is compared to the
the factors which are influencing the level of seat
front-seat passengers (9,1% and 1,0%). This per-
belts usage, as well as analysis about the social at-
centage is practically negligible (0,5% and 0,2%).
titudes, which are related to the seat belts usage.
Large number of researches has pointed that the
seat belt usage statistically significant reduces the 3. Goals
number of fatalities and injured during the traffic According to the SARTRE project, which in-
accident [6, 7, 1, 8, 9, 10, 11, 12]. The fact is that cludes the majority of European countires, re-
the regular seat belt usage while driving is most search has been implemented at one microlocation
efficient measure in drivers and passengers safety in Bosnia and Herzegovina. The behavior (method
at the vehicle, which brought to situation that the of observing and self-reported behavior) and at-
seat belt usage has been introduced as the legal ob- titudes of drivers related to the seat belt usage and
ligation all around the world. [13] at the polling of efficiency, have been analysed in the research.
students from the most developed countries of Eu- One of the tasks was to determine if the statisti-
ropean Union and USA, pointed in their research caly significant difference exists between results
that the quality legal regulation has key influence gained through the self-reported behavior of driv-
at the level of seat belt usage during driving. ers and their real behavior at the field.
Beside the efficiency of seat belt, which is un- In accordance to that, basic goals of this re-
arguable in the scientific discussions, the frequent search are following:
attempt by the researchers is related to the con- to determine the degree of inclination in accor-
nection of the level of seat belt usage with some dance to the law, from the aspect of seat belt usage
personal characteristics of beneficiary, such as in certain conditions, and for certain categories of
age, drivers experience, attitudes, social status, participants in research;
education, gender, etc. Authors of this work, [4], to research if the statistically significant differ-
made a research on seat belt use at the territory of ence between the results gained through the poll-
Republic of Srpska. This work had shown that the ing research (self-reported behavior) and direct
male drivers are generally not in favor of seat belt field observation;
use outside the inhabitancy, in comparison to fe- to overview the social attitudes of drivers on
male drivers. Drivers of most expensive vehicles the road, related to acceptance (usage) and effi-
had most often used the seat belt, while the drivers cience of seat belt during the automobile driving.
with the less expensive vehicles had lowest per- in conditions of traffic, overview the structure
centage of seat belt usage while driving. Beside of vehicle flow, and drivers at the concrete road.
that, authors had shown that the level of seat belt
usage is increasing in relation to the road category,
namely, that the percentage of seat belt usage is 4. Methodology
highest at the main roads outside the inhabitancies, Research has been implemented in a period
and lowest, at the roads inside the inhabitancies. from 21st March to 19th April 2011, at the territo-
In their research, [14] attempted to determine ry of the main road, detour around Doboj, in Bos-
existence of significant predictors (in this case, nia and Herzegovina. Weather and climatic con-
driver attitudes), on the basis of which could help ditions have been optimal (dry weather with the
to predict the drivers behavior (seat belt using/not average temperature for given time of year). Such
using), with certain probability. Given results had weather conditions enabled the researchers higher
shown that the certain attitudes of drivers could punctuality during the observation, and easier and
statistically significant influence the behavior of more direct approach to the drivers and polling
drivers while driving (seat belt usage). process as such. According to that, there were no

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serious influential factors which would disturb the To fulfill the condition (simple random sample)
research process. during the observation, the vehicles in certain time
intervals have been marked. χ2-test (frequency anal-
4. 1. Method ysis) has been used for data from questionnaires and
tables, that has been filled during the direct observa-
Research is composed from two parts: tion at the field, along with the direct and compara-
– polling research (self-reported behavior) and tive statistical analysis and that all with the objective
– intermediate observation. to gain the results with certain scientific weight.

Survey/polling of drivers have been done in the 5. Results

parking area zone, at three different gas-stations
along the main road M-17 in direction from Doboj 5.1. Survey - level of seat belt usage
to Derventa, while two following locations have
been chosen for direct observation: General characteristics of observed samples
– location at the inhabitancy - at the crossroads in this survey have been given at the table 1. that
for Sveti Sava and Cara Dusana streets at included the total number of polled drivers, their
the downtown Doboj and personal characteristics, and technical and exploi-
– location outside the inhabitancy - main road tation characteristic of their vehicles.
M-17, at the intersection with main street at The results of the survey related to the first set
the town of Doboj. of questions are presented at the following table,
with the goal of determining the level of seat belt
Drivers have chosen using the method of ran- usage in given conditions.
dom sample. Researchers have approached the In continuation, (table 3, table 4 and table 5)
drivers, who were at the vehicle, or outside of it, through analysis of answers related to seat belt us-
in certain time intervals, and those drivers who ac- age in given conditions (inhabitancy, main road
cepted the polling, the asked them questions from and highway), we were striving to determine the
the survey questionnaire. In such manner, every level of seat belt usage among different age cat-
driver had equal chance to take part in research. egories participants in survey.
Research questionnaire consisted of two types of Given results in these tables (3, 4 and 5), be-
questions. First set of questions has been related sides the degree of seat belt usage for certain age
to the seat belt use in various roles of driver, front categories, should be showing if these differences
seat passenger, back seat passenger, insisting on (and if they exist), are statistically significant.
seat belt use, etc., with goal to compare the levels of
seat belt usage for certain groups and environments 5.2. Direct observation
(inhabitancy, main road outside the inhabitancy and
highway). The answers to the second set of ques- The level of seat belt usage with drivers and
tions have been used to overview the attitudes of front-seat passengers have been directly deter-
drivers about the efficiency of seat belt usage and mined at the field in this part of the research, whose
the degree of bad convictions related to the seat belt intention has been comparison of results which
usage, i.e., the delusions among drivers. Total num- were given earlier, through the implemented survey
ber of 320 drivers of various types and categories research. The data from table 6 is pointing out that
of motor vehicles have been polled in the research. the majority of drivers are male (88,7%), while ma-
After the first part of research has been finished, the jority of front-seat passengers are female (53,2%).
information about the seat belt usage for drivers and
the front seat passengers have been collected, using 5.3. Survey and direct observation
the method of direct observation:
– 400 vehicles at the inhabitancy and To get the answer to question „If there is sta-
– 400 vehicles outisde the inhabitancy (main tistic correlation between the level of seat belt us-
road M-17) age, received through the survey and level of seat

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Table 1. General information (survey)

Male (66,3%; n = 212)
Gender
Female (33,7%; n = 108)
To 30 years of age (38,8%; n = 124)
From 30 to 50 (45,9%; n = 147)
Age of drivers
From 50 to 60 (12,2%; n = 39)
Over 60 years of age (3,1%; n = 10)
Unfinished primary school (0,3%; n = 1)
Primary school (2,2%; n = 7)
Level of education High school (60%; n = 192)
Academy (10,3%; n = 33)
University (27,2%; n = 87)
To 5 years. (22,2%; n = 71)
From 6 to 10 years. (22,5%; n = 72)
From 11 to 15 years. (19,4%; n = 62)
Drivers service
From 16 to 20 years. (12,5%; n = 40)
From 21 to 25 years. (10,6%; n = 34)
Over 25 years. (12,8%; n = 41)
To 5.000km (14,1%; n = 45)
From 5.000÷50.000km (33,4%; n = 107)
Total mileage
From 50.000÷500.000km (39,1%; n = 125)
Over 500.000km (13,4%; n = 43)
Sport utility vehicle (2,2%; n = 7)
Sport (0,6%; n = 2)
Luxurious (18,1%; n = 58)
Type of passengers vehicle
Semi-trailer (6,3%; n = 20)
medium (59,1%; n = 189)
small (13,8%; n = 44)
Only front (26,5%; n = 85)
Seat belt equipped
Front and back (73,5%; n=235)
N = 320

Table 2. Seat belt usage in certain conditions

Inhabitancy Main road Highway Result
Driver 55,6%; (n = 178) 73,1%; (n = 234) 86,9%; (n = 278) χ = 81,682*
2

Front-seat passenger 51,6%; (n = 165) 69,1%; (n = 221) 82,2%; (n = 263) χ2 = 76,764*

Back-seat passenger 7,0%; (n = 23) 8,4%; (n = 27) 14,1%; (n = 45) χ2 = 11,863**
Insisting for other passengers to
38,1%; (n = 122) 49,7%; (n = 159) 58,4%; (n = 187) χ2 = 30,864*
use the seat belt
Seat belts for children to age 12 56,0%; (n = 159) 62,3%; (n = 177) 69,4%; (n = 197) χ2 = 16,521*
Note: * - p<0,01; ** - p<0,05

Table 3. Inhabitancy
To age 30 From age 31 ÷ 50 Over age 50 Result
Driver 49,2%; (n = 64) 53,9%; (n = 76) 65,3%; (n = 32) χ = 3,913***
2

Front-seat passenger 48,5%; (n = 63) 49,6%; (n = 70) 57,1%; (n = 28) χ2 = 1,733***

Back-seat passenger 3,8%; (n = 5) 5,0%; (n = 7) 12,2%; (n = 6) χ2 = 6,059***
Note: *** - no significant statistical difference.

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Table 4. Main roads

To age 30 From age 31 ÷ 50 Over age 50 Result
Driver 70,0%; (n = 91) 72,3%; (n =102) 75,5%; (n = 37) χ2 = 2,992***
Front-seat passenger 68,5%; (n = 89) 68,1%; (n = 96) 73,5%; (n = 36) χ2 = 5,950***
Back-seat passenger 4,6%; (n = 6) 7,8%; (n = 11) 14,3%; (n = 7) χ2 = 5,623***
Note: *** - no significant statistical difference.

Table 5. Highway
To age 30 From age 31 ÷ 50 Over age 50 Result
Driver 81,5%; (n = 106) 86,5%; (n = 122) 95,9%; (n = 47) χ = 6,560***
2

Front-seat passenger 81,5%; (n = 106) 77,3%; (n = 109) 77,6%; (n = 38) χ2 = 3,839***

Back-seat passenger 10,0%; (n = 13) 11,3%; (n = 16) 28,6%; (n = 14) χ2 = 12,225**
Note: ** - p<0,05; ***- no significant statistical difference.

Table 6. General information (intermediate observation)

Driver Front-seat passenger
Gender Male (88,7%; n = 710) Male (46,8%; n = 153)
Female (11,3%; n = 90) Female (53,2%; n = 174)
Table 7. Seat belt usage (driver and front-seat passenger)
Inhabitancy Main road Result
Driver 41,5%; (n = 166) 62,5%; (n = 250) χ = 35,337*
2

Front-seat passenger 37,3%; (n = 47) 63,2%; (n = 127) χ2 = 20,839*

Note: * - p<0,001

Table 8. Driver
Survey Observation Result
Inhabitancy 55,6%; (n = 178) 41,5%; (n = 166) χ = 14,216*
2

Main road 73,1%; (n = 234) 62,5%; (n = 250) χ2 = 9,108*

Note: * - p<0,01

Table 9. Front-seat passenger

Survey Observation Result
Inhabitancy 51,6%; (n = 165) 37,3%; (n = 47) χ = 7,372*
2

Main road 69,1%; (n = 221) 63,2%; (n = 127) χ2 = 1,923***

Note: * - p<0,01
*** - no significant statistical difference p<0,01

belt usage given by the direct observation?“, the At this part of research, in accordance to the be-
sample has been analysed by the χ2-test for infor- havior, it should be determined individually, if any
mation given for drivers (table 8) and front-seat of the given answers represent the determination
passengers (table 9). of majority of drivers, i.e., if there are statistically
significant differences in percentages of given an-
5.4. Survey - attitudes swers. If these differences are statistically signifi-
cant, it is possible to draw the conclusion about
Results of the survey for second set of ques- that if the attitude is ingrained among the drivers
tions are related to the examination of attitudes re- in Bosnia and Herzegovina, or not.
lated to the seat belt usage and efficiency, that are
given in table 10.

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Table 10. Results (attitudes)

Answers
Attitude Result
Large Medium Small I do not know
Seat belt is efficient if speed: 43,8%(186) 24,7%(105) 16,2%(69) 15,3%(65) χ2 = 88,948*
I have no
I agree I dissagree
opinion
The seat belt is unnecessary if the air-bags
24,4%(78) 62,2%(199) 13,4%(43) χ2 = 125,63*
are installed.
Seat belt is unnecesary if I drive carefully. 19,4%(62) 70,9%(227) 9,7%(31) χ2 = 208,13*
In most of the traffic accidents, seat belt
reduces the risk from serious injuries for 81,9%(262) 9,7%(31) 8,4%(27) χ2 = 339,38*
drivers and passengers.
When I use seat belt, I feel less
45,9%(147) 42,8%(137) 11,3%(36) χ2 = 70,694*
comfortable.
When I do NOT use seat belt I feel less
28,8%(92) 52,8%(169) 18,4%(59) χ2 = 59,744*
comfortable.
Passenger that does not use the seat belt
during driving presents the danger for 36,9%(118) 41,6%(133) 21,6%(69) χ2 = 21,006*
other passengers.
If I use seat belt, there is a danger that I
could be trapped if the traffic accident 54,7%(175) 19,4%(62) 25,9%(83) χ2 = 67,731*
happens.
That police More frequent
Education Higher fees
uses control
Violators – What would determine you, so
12,6% 20,5% 30,4% 18,4% χ2 = 27,629*
you start using the seat belt more often?
Family Safety Fines
Reverers – What determines you to use
16,7% 45,2% 35,6% χ2 = 65,81*
the seat belt?
Note: * - p<0,001

6. Discussion with the passenger vehicle type, and the level of

seat belt equipment. The above mentioned data
6.1. Survey are clearly pointing that the older vehicles are
driven in the detour zone around Doboj in Bosnia
In the overall sample of surveyed drivers (table 1)
and Herzegovina (the level of vehicles equipped
of this research, majority are male drivers (66,3%).
with the seat belts at the front seats and back seats
If we pay attention to the age range of drivers, we
is about 27%), as well as smaller vehicles („medi-
will notice that the largest group are those from 30
um“ about 59%), and at the same time with much
to 50 years of age (45,9%) and in the article related
lower value in relation to the average in other de-
to the education, we can see that the largest number
veloped western European countries.
of surveyed drivers are the drivers with high school
Given results in table 2 are evidence that all
education (60%). The structure of surveyed in ac-
situations that include driver, front seat passen-
cordance to the service as a driver has also been giv-
ger, back seat passenger, where it is insisted that
en in this table, where it can be seen that the group of
other passengers use seat belt, and seat belt use
inexperienced and insufficiently experienced drivers
for children up to 12 years of age for conditions of
is predominant in this research (44,7%).
inhabitancy, the road outside the inhabitancy and
The information about the total mileage of
highway there are statistically significant differ-
drivers have also been given in the paper, along
ences in levels of seat belt usage.

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 technics technologies education management

It has been evident that the results of some over 50 years of age, despite the role of driver, front
earlier researches [15, 16, 17, 18, 19] have been seat passenger or back seat passenger, as well as the
confirmed here, while it has been concluded that road category, main road or highway which con-
the percentage of seat belt use on the basis of sta- firms the results of previous researches [21].
tistical analysis is higher by drivers, in relation to
other passengers in the vehicle. The level of seat 6.2. Direct observation
belt use is increased gradually, as the data goes
from the inhabitancy roads towards the main roads Through the analysis of data given from the di-
outside the inhabitancy, while the level of the seat rect observation at the field, with the results for self-
belt usage is highest at the highways, irrespective reported behavior, it has been concluded that there
of the fact if the category taken in account is driv- are statistically significant differences in levels of
er (86,9%), front seat passenger (82,2%), or back seat-belt usage witih drivers and front-seat passen-
seat passengers (14,1%). These results are show- gers, in regard to the road type, whether it is the
ing that speed represents the dominant factor for road at the inhabitancy, or outside of it (table 7).
majority of surveyed, that directly influences their Level of seat-belt usage with drivers at the inhab-
determination about the seat belt usage, although itancy is 41,5%, while outside inhabitancies, at the
reasearches confirmed that the seat belt is most ef- main roads, it is 62,5%. Similar situation is taken
ficient at the lower speeds [20] . It is troublesome into account for the front-seat passengers, where
that the level of seat belt usage does not overcome the level for seat-belt usage at the inhabitancy is
60% (highest is for children, up to age 12 and it 37,3%, and at the main roads, it is almost 63%.
gives total of 56%) in neither of the listed cases
related to the inhabitancies (table 2), although ac- 6.3. Self-reported behavior and direct
cording to all statistics, largest number of total observation
sum of traffic accidents occurs at the inhabitancy
(during 2011, 71% of total number of traffic acci- To determine the degree of seat belt usage, two
dent that occured in Republic of Srpska had hap- methods are used today in the world: direct obser-
pened at the inhabitancy1, while 90% of all traffic vation and self-reported behavior. Certain number
accidents in Serbia, during 2010 year happened at of researchers [22, 23] proved that the method of
the inhabitancy2). We can notice here that the neg- self-reported behavior is not confident enough and
ligible number of the survey participants are using that is to a certain degree result of dishonesty and
seat belt during driving at the back seat of the ve- biasness of surveyed participants.
hicle (almost 10%, if we consider all three men- However, overall and larger-scope researches
tioned cases – inhabitancy, main roads, and high- of this type at the territory of Republic of Srpska
ways). Simillar situation is by percentage of those (BiH) are neccessary to be implemented, with the
drivers who insisted that other passengers in the goal to determine the difference between the results
vehicle should use seat belt (58% for highway). of self-reported and real behavior of drivers. Only
Unlike the implemented research by [7], analys- then it would be possible to determine the connec-
ing the answers by certain age categories (table 3, tion between two mentioned research methods on a
4 and 5) it has not been proven that there is sta- basis of gained results (difference in results). Based
tistically significant difference in the levels of seat on such relationship, it would be possible to deter-
belt usage. The excuse has been in the case „back mine the real degree of seat belt usage by using re-
seat passenger – highway“. However, besides that sults gained with self-reported method.
it is evident that the average level of seat belt use is Thus, comparing the results of survey and di-
highest for the group of the surveyed participants rect observation of drivers at the inhabitancies and
at the roads outside inhabitancies (table 8), it was
concluded that there was statistically significant
1 Official statistics for Republic of Srpska of the Ministry
difference between the responses given by survey
of Interior
2 Official statistics for Republic of Srpska of the Ministry research (self reported behavior) and the results
of Interior obtained by direct observation.

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 technics technologies education management

It has also been determined that the result of sta- ers are not undermining the efficiency of seat belt.
tistical analysis for the front seat passengers are sig- However, they are still not using it. One of reasons
nificantly different for seat-belt usage at the inhab- is comfort, i.e. the claim „I feel less comfortable
itancy, while the case when the survey participants when I am using it“, which had 46% surveyed driv-
are driving the main road does not have statistically ers agreeing on it. Similar result has been given for
significant differences (table 9). According to that, the claim „When I am NOT using the seat belt, I feel
the level of seat-belt usage given on a basis of self- elss comfortable“ where almost 71% of surveyed
reported behavior should be observed with certain stated that they do not have an attitude, or that they
reserve, since such manner of research apparently are not agreeing with it, while the level of the ones
gives better picture, i.e. higher level of seat-belt us- falling acceding upon this claim in countries such
age in relation to the real situation at the field. as Sweden, Ireland, Austria and Finland, is up to
80% (SARTRE, 2004). On a claim that seat-belt re-
6.4. Survey - attitudes duces the risk from the serious injuries in majority
of traffic accidents almost 82% of surveyed persons
The attitudes of drivers have been analysed on a gave positive answer.
basis of certain claims (table 10) and the result had The drivers in the traffic in Bosnia and Herze-
shown that the replies of surveyed persons are sta- govina have not accomodated the habit to use the
tistically significantly diverse, which confirms the seat belt, while many of them are considering that
information that the surveyed hold certain knowl- it is their personal issue, or that they are victims of
edge, or ignorance related to the seat belt efficiency. other prejudices. With the claim that the passenger
Based on the given answers, it has been con- that is not using the seat belt, represents the danger
cluded that almost 59% of survey participants do for other passengers in the vehicle, only 37% of
not know, or they consider that the seat belts are drivers agreed with, although unfortunatelly, there
most efficient at high speeds. This fact is very con- were many examples until today of how much
cerning, since they are the ones that are avoiding risk represents such passenger in the vehicle for
to use the seat belts at the inhabitancies with lower self and for other passengers in the vehicle. Large
speeds (with largest number of accidents), which is number of surveyed drivers (55%) are affraid or
direct consequence of their understanding of seat- do not have an attitude (26%) about the possibility
belt efficiency in high speeds. On a claim if the of „entrapment“ during the traffic accident, while
seat belt usage during driving is unnecessary if the according to SARTRE (2004) this percentage is
vehicle is equipped with the airbags, almost 38% significantly lower in some European countries
drivers replied as affirmative. It can be concluded and it is not higher than 30%.
out of above mentioned, that there is extremelly Among the factors overall, that would have
large number of people that are unaware about the most-efficient influence at the perpetrators of le-
efficiency of front-seat airbags is increased almost gal regulations, there are statistically significant
two times if the seat belt is used at the same time, differences and the force and repressive measures
as well as the seat belt is necessary, although ve- are dominant (almost 30,4%) which confirms the
hicle is equipped with the airbags, since they are conclusions of some of the previous researches
projected as additional protection system which [24, 25, 26, 27].
works properly only in synergy with the seat-belt. Two of the most influential factors that deter-
71% of surveyed stated that the seat belt has to mine some drivers to use the seat belt are safe-
be used even if you are driving carefully, while ac- ty (45,2%) and penalty (35,6%). Therefore, it is
cording to SARTRE (2004) this percentage in de- evident that force and repressive measures have
velopped countries a such as Denmark is (93%), dominant influence for perpetrators and the degree
Finland (95%), Germany (92%), Austria (91%). of seat belt usage overall.
Based upon the claims that the seat belt is reducing Unlike from perpetrators, for the regulators
the level of serious injuries in most of the traffic ac- (drivers that are using seat belt) safety is dominant
cidents, almost 82% of surveyed gave the positive factor. This had pointed that it is very important to
answer. That means that most of the surveyed driv- educate the perpetrators, besides implementation

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 technics technologies education management

of repressive measures in traffic, i.e., to apply their of seat belt efficiences and in regard to that, they
way of thinking about the potential risks in traffic give the answers which gives illusion on a “better“
and traffic safety overall. picture overall than the realistic condition on the
Following constraints are present and have field. According to that, the authors refference is
been determined throughout this research: to use direct observation as basic method to deter-
– certain number of drivers did not accept the mine the level of seat belt usage. Contrary to that,
survey, which can reflect to the quality of method of self-reported behavior is conductive for
sample, attitudes and oppinions research, as well as rough
– it is impossible to determine if the vehicle in determining of level of seat belt usage. Further
movement has the seat-belts at the back seats research on above mentioned ways of research
using only the method of direct observation of could help to determine the connection between
vehicle in movement. Therefore, only front- these two methods, which would help in a forth-
seat passenger and driver have been observed, coming period, to make easier estimation for seat
– insufficiently careful, namely, dishonest belt usage in certain region, based on the results of
fulfillment of the survey questionnaires self-reported behavior.
(hurry, presence of other persons, etc.). Besides the fact that this work also shows that
the majority of drivers is aware that seat belt is re-
With the goal of further improvement of the ducing danger from serious injuries, there are still
method of research and behaviors related to the certain delusions (wrong attitudes among the driv-
aspect of usage and efficiency of seat-belt the rec- ers) related to the seat belt efficiency. The force of
comended guidelines for further researches on this the legal regulations and repressive measures had
matter should be following: shown itself as dominant factors that can influence
– enforce the research at the larger number of at the raising of level of awareness of seat belt us-
locations, age by the drivers-perpetrators. Beside the repres-
– data collection using the method of direct sive measures, it is significant to direct the work of
observation and in continuation of surveying all authorized subjects at the raising of wareness
the same – „observed“ drivers (this is the and knowledge of drivers and passengers in the
method for receiving the same sample for vehicle, as well as breaking of illusions and form-
self-reported behavior, as well as for direct ing the correct attitudes about the traffic safety. To
observation) and support this thesis, the fact that the safety is domi-
– to direct the research towards the certain nant factor that influences at the percentage of seat
factors more (gender, age, education, social belt usage by drivers-regulators.
and economical status), that are influencing Bosnia and Herzegovina today and especially
the behavior and opinions of drivers. Republic of Srpska (adopted Strategy of safety
in the mid-2012) is following some of the most
7. Conclusions developed west-European countries and has the
strategy of safety in traffic develloped. However,
Result of research is inacceptably low level of only parts of the strategy are used in the individual
seat belt usage at all seats in the vehicle, especially entities. Only with the coherent strategy usage and
while driving through the inhabitancy. This shows introduction of contemporary legal regualtions,
the tendency of seat belt usage, as well as in other as well as increase of number and constant sys-
countries in the world and it shows that the de- tematic implementation of education and informa-
gree of seat belt usage is reverse proportional to tion campaigns would as a consequence give the
the road category. The degree of seat belt usage increase of seat belt usage. Along with that, the
is lower at the inhabitancy, than on the road out- wrong oppinions and attitudes related to the effi-
side the inhabitancy. This work shows that there ciency of seat belt usage by drivers and passengers
is statistically significant difference between the would be gradually eradicted,
results given through the methods of self-reported
behavior and direct observation. Drivers are aware

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References 13. Wang Z, Jiang J. An overview of research advances

in road traffic trauma in China. Traffic Injury Pre-
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25. Dee TS. Reconsidering the effects of seat belt laws

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Prevention, 1998; 30(1): 1–10.

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Corresponding Author
Bojan Maric,
Faculty of Transport and Traffic Engineering,
University of East Sarajevo,
Bosnia and Herzegovina.
E-mail: bojomaric@yahoo.com

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Effects of vertical earthquake component on

the response of an engineering structure
Danijel Kukaras1, Miroslav Besevic1, Milan Trifkovic1, Goran Pejicic2, Tihomir Milutinovic3
1
University of Novi Sad, Faculty of Civil Engineering Subotica, Subotica, Serbia,
2
Faculty of Engineering, European University, Brcko Distrikt , Bosnia and Herzegovina,
3
HE “DABAR”, Trebinje, Bosnia and Herzegovina.

Abstract on the structure. Repeated cycles of inelastic de-

formations allow energy dissipation. Near-source
The study focuses on response of the frame
earthquakes, on the other hand, are far richer in
with a cantilever subjected to four selected strong
the frequency content and consist of, both, strong
near-source ground motions. Ground motions were
P and strong S waves. Their horizontal ground
recorded during the 1994 Northridge earthquake.
motions often have characteristic unidirectional
Epicentral distances of chosen ground motions were
pulse-type motions or long period pulses [1]. Near-
2.3, 6.5, 12.7 and 25.1 km. Transient dynamic anal-
source vertical ground motions have high frequen-
ysis of the structure was performed for each ground
cy and can be of the same magnitude as horizontal
motion excitation in order to emphasize the differ-
one, or even stronger. Unique effect of near-source
ences in the structural behaviour with and without
earthquake is that horizontal pulse does not allow
the effect of the earthquake’s vertical component.
the structure to dissipate energy through repeated
Analyses were performed for the horizontal excita-
cycles of inelastic behavior. When combined with
tion alone and for simultaneous vertical and hori-
strong vertical accelerations it can often cause a
zontal excitations. The results were then compared
sudden failure of the structure [2]. Vertical com-
and discussed. The investigation shows that consid-
ponent is mainly associated with high frequency
eration of the horizontal ground motions alone can
P-waves. Usually, the natural frequencies of the
lead to a misjudgement of the structural response.
vertical structural vibration are also high. There-
Key words: near-source earthquake, frame,
fore, different vibration modes will be excited,
cantilever, horizontal ground motions, vertical
and they will consequently activate different forc-
ground motions, simultaneous ground excitation,
es in the structures [3]. When earthquake occurs,
dynamic structural response
seismic waves propagate in all directions, causing
the ground to vibrate at frequencies ranging from
1. Introduction about 0.1 to 30 Hertz. The P and S waves mainly
Advances in geology and acquisition and moni- cause high-frequency vibrations (greater than 1
toring of earthquake ground motion data enabled Hertz). Rayleigh and Love waves mainly cause
scientists to estimate the locations and possibilities low-frequency vibrations. These waves cause the
of future earthquakes. Hazardous sites are being ground, and consequently a building, to vibrate
identified and specific characteristics of near-source in a complex manner. The damage to a structure
and far-source earthquakes are being identified. takes place if it cannot withstand these vibrations.
Compared to the far-source earthquake, near-source With this in mind, the objective of earthquake-
earthquakes have characteristics that are of major resistant design is to construct a building so that
importance to the structural response and they are it can withstand the ground shaking caused by
clearly distinguishable from the far-source earth- body and surface waves [4]. Amplitudes of low-
quakes. In current earthquake design codes, these frequency vibrations decay less rapidly than high-
differences are either neglected or underestimated frequency vibrations as distance from the fault
what can lead to inadequate design of structures. increases. This fact, combined with the lack of
Far-source earthquakes consist mainly of the the earthquake records in the near-source regions,
low frequency waves. These waves, although can lead to the neglecting of some specific ground mo-
be strong, have cyclic and more predictable impact tion characteristics in these regions [5]. Recently,

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however, there were numerous earthquakes where Figures 1 to 4 show an overview of accelera-
structural damages could not be explained with tion time histories for all chosen records. All re-
conventional understanding of the earthquake cords were obtained through “Cosmos Virtual
effects. Structures expected to withstand ground Data Center” [9]. An overview of acceleration
motion, collapsed during Northridge and Kobe time histories is given in the Table 1.
earthquakes [6]. The structural damages recorded
after El Asnam (1980), Duzce (1999) and many
others appeared to be much higher then expected
for their magnitudes. It is important to note that
this occurred in the countries with highest stan-
dards for earthquake design in the world.
Modern seismic codes neglect or underestimate
the effect of vertical ground motion on the structures
[7]. When the vertical component is taken into con-
sideration at all, it is only done for special structures.
Even then, it is defined as a fraction of the horizon-
tal component. Normally, it is assumed to be 0.5 to
0.7 of the horizontal component [8]. This procedure,
however, is based on the knowledge of far-source
earthquakes where the vertical component is smaller Figure 1. Accelerogram - Saticoy St.
than the horizontal components. There are signifi-
cant differences between the response of the struc-
ture due to horizontal and to vertical ground exci-
tations. Vertical ground motion causes fluctuating
axial forces in columns that are uncoupled from the
axial forces caused by the horizontal motions.

2. Chosen ground motions

In this study, four ground motions from the
1994 Northridge earthquake were chosen. All of
the records have near-source ground motion char-
acteristics. The data was recorded at distances be-
tween 2,3 and 25,1 km from the epicenter. General
Figure 2. Accelerogram - Topanga....
information on considered ground motions are
given in the Table 1.
Table 1. Chosen ground motion records
Peak Epicent.
Station Comp. accel. distance
[m/s2] [km]
17645 Saticoy S00E 4,44
2,31
street UP 7,85
7769 Topanga S16W 3,81
6,45
Canyon B. UP 4,09
14145 Mulholl. N81W 4,77
12,74
Drive UP 3,12
16628 Lost Canyon N90W 4,46
25,12
Drive UP 2,80
Figure 3. Accelerogram - Mulholland...

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Figure 4. Accelerogram - Lost Canyon...

Figure 6. Model - side view
The ground motion records were chosen so that
they emphasize how vertical earthquake compo- Since the aim of this study was to emphasize
nent can be significantly higher than the horizontal the differences in structural behavior for the struc-
one and that it is quickly damped out as it moves tures subjected to horizontal ground excitations and
away from the source. combination of horizontal and vertical ground exci-
tations, a linear model was used without going into
3. Investigated structure and numerical more sophisticated nonlinear transient dynamic anal-
simulation ysis. The structural behavior was analyzed by means
of transient dynamic analysis in which the structure
For this study, reinforced concrete structure was subjected to all four chosen ground motions for
with pronounced cantilever was chosen [10], Fig- horizontal only, vertical only and combination of
ure 5 and 6. The structure is aproximatively 9,0 m horizontal and vertical ground excitations.
wide and 11,5 m high. The cantilever has a span of
aproximatively 8,0 m.
4. Structural response
Due to the nature of each ground motion com-
ponent it is understandable that the most signifi-
cant effect of vertical ground accelerations is relat-
ed to vertical direction. Consideration of vertical
ground excitations has different effect on different
structural elements. Here, following time histories
are presented: vertical displacement of the cantile-
ver tip (uy,3), bending moment at the joint between
the cantilever and the column (Mz,2) bending mo-
ment and axial force at the base of the column
(Nx,1; Mz,1). Each time history is given for horizon-
tal acceleration and for simultaneous action of the
horizontal and vertical acceleration.

4.1. Saticoy Street records

Figures 7 to 10, represent time histories of
Figure 5. Model - isometric view
characteristic results obtained when the structure

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was subjected to accelerations recorded at 17645

Saticoy Street station.

Figure 10. Bending moment Mz,1

A summary of peak values of obtained results

for Saticoy Street record are given in the Table 2.
Figure 7. Displacement uy,3 time history
Table 2. Saticoy St. results
Accel. V/H V/H
Res. Min. Max.
direct. [%] [%]
H -9.84 8.45
uy,3
V -1.26 13 1.54 18
[mm]
H+V -9.95 8.81
H -2025.00 1831.00
Mz,2
V -687.80 34 544.90 30
[kNm]
H+V -2229.00 2271.00
H -2650.00 3287.00
Mz,1
V -835.90 32 1051.00 32
[kNm]
H+V -3138.00 4136.00
H -1165.00 1133.00
Figure 8. Bending moment Mz,2 Nz,1
V -380.00 33 437.60 39
[kNm]
H+V -1405.00 1053.00

4.2. Topanga Canyon Blvd. records

Figures 11 to 14, represent time histories of
characteristic results obtained when the structure
was subjected to accelerations recorded at 7769
Topanga Canyon Blvd. station.

Figure 9. Axial force Nx,1

Figure 11. Displacement uy,3 time history

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Table 3. Topanga Canyon Blvd. results

Accel. V/H V/H
Res. Min. Max.
direct. [%] [%]
H -7.02 8.44
uy,3
V -0.80 11 0.94 11
[mm]
H+V -7.09 8.45
H -1100.00 1228.00
Mz,2
V -299.00 27 378.60 31
[kNm]
H+V -1172.00 1551.00
H -2472.00 2606.00
Mz,1
V -408.40 17 477.50 18
[kNm]
Figure 12. Bending moment Mz,2 H+V -2650.00 2745.00
H -856.20 870.10
Nz,1
V -190.70 22 212.70 24
[kNm]
H+V -855.80 870.80

4.3. Mulholland Drive records

Figures 15 to 18, represent time histories of
characteristic results obtained when the structure
was subjected to accelerations recorded at 14145
Mulholland Drive station.

Figure 13. Axial force Nx,1

Figure 15. Displacement uy,3 time history

Figure 14. Bending moment Mz,1

A summary of peak values of obtained results

for Topanga Canyon Blvd. records are given in the
Table 3.

Figure 16. Bending moment Mz,2

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 technics technologies education management

Figure 17. Axial force Nx,1 Figure 19. Displacement uy,3 time history

Figure 20. Bending moment Mz,2

Figure 18. Bending moment Mz,1

A summary of peak values of obtained results for

Mulholland Drive records are given in the Table 4.
Table 4. Mulholland Drive results
Accel. V/H V/H
Res. Min. Max.
direct. [%] [%]
H -9.19 7.90
uy,3
V -1.11 12 1.41 18
[mm]
H+V -9.67 7.42
H -1634.00 1732.00
Mz,2
V -437.00 27 674.70 39
[kNm] Figure 21. Axial force Nx,1
H+V -1694.00 1752.00
H -2864.00 2759.00
Mz,1
V -840.20 29 648.00 23
[kNm]
H+V -3302.00 3007.00
H -1279.00 1396.00
Nz,1
V -356.50 28 476.00 34
[kNm]
H+V -1448.00 1530.00

4.4. Lost Canyon records

Figures 11 to 14, represent time histories of
characteristic results obtained when the structure
was subjected to accelerations recorded at 16628
Lost Canyon Drive station. Figure 22. Bending moment Mz,1

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 technics technologies education management

A summary of peak values of obtained results

for Lost Canyon Drive records are given in the
Table 5.
Table 5. Lost Canyon results
Accel. V/H V/H
Res. Min. Max.
direct. [%] [%]
H -5.21 4.34
uy,3
V -1.20 23 1.03 24
[mm]
H+V -5.75 5.05
H -1183.00 1361.00
Mz,2
V -315.30 27 242.60 18
[kNm]
H+V -1201.00 1462.00 Figure 23. Eccentricity of axial force Nx,1 at the
H -1589.00 1787.00 base of the column (gravity load included)
Mz,1
V -451.50 28 437.60 24
[kNm]
H+V -1895.00 1719.00 Results obtained for effects of horizontal ac-
H -934.10 1091.00 celerations alone show that maximum eccentric-
Nz,1
V -161.60 17 164.90 15 ity is reached at approximatively 9,5 seconds into
[kNm]
H+V -955.50 1187.00 the earthquake, while consideration of simulta-
neous, horizontal and vertical acceleration, show
4.5. Results overview and discussion the highest eccentricity at approximatively 7,0
seconds. This can lead to a conclusion that earth-
As expected, in all considered cases, simulta- quake, especially if it has strong vertical compo-
neous ground excitation increased peak values of nent such as this one, can change the nature of in-
observed displacements and internal forces. When ternal forces in the columns cross section. Instead
peak values are analyzed, this is approximative- being designed for simultaneous compression and
ly 30% what is in agreement with current code bending induce it can actually have to be designed
guidelines. Time histories reveal higher frequency for bending alone or event simultaneous tension
fluctuations of observed quantities that are more and bending. Frequency content of the vertical
pronounced in the initial phase of the earthquake, earthquake components is higher, approx. 10 Hz,
when vertical component is strongest. They also and that it is closer to vertical oscillation modes of
show that peak values for horizontal accelerations the majority engineering structures such as resi-
and for vertical accelerations do not always coin- dential buildings. On the other hand, horizontal
cide. This observation can prove significant con- earthquake components are closer to horizontal
sidering that the earthquake, as dynamic load, can oscillation modes of engineering structures. These
cause damage to structures both by the power of properties of near-source earthquakes can be fatal
induced forced but also by the dynamic properties for structures when ground motions in horizontal
of these forces [11]. direction coincide with the vertical ground motion
Figure 23. shows the eccentricity of the axial in the downward direction. This increases bend-
force at the base of the column for the Saticoy St. ing moments while reducing the compression
records. This representation can be significant for force, decreases the shear capacity of the column
the design of reinforced concrete columns, so it and can lead to structural failure. Of course, the
includes maximum gravity loads as well as earth- action can be opposite, when vertical component
quake induced forces. increases the compression force therefore making
the structure more resistant to strong horizontal
movements.

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 technics technologies education management

5. Conclusions 3. Chouw N, Hirose S. Behavior of the structure dur-

ing near-source earthquakes, Proceedings of the
This study addresses the effects of near-source 14th European Conference on Structural Dynamics,
earthquake characteristics on the response of the Prague, Czech Republic, 1999.
reinforcement concrete frame. Ground motions
4. Hays WW. Facing Geologic and Hydrologic Haz-
used in this study were recorded during the 1994 ards, Earth Science Considerations, U. S. Geological
Northridge earthquake and they show that near- Survey Professional Paper 1240B, 108, 1981.
source ground motions can have ratio of peak
ground acceleration in vertical and horizontal di- 5. Earthquakes, Faults, Plate Tectonics, Earth Struc-
ture, Web Site USGS, http://www.usgs.gov, 2003.
rection significantly larger than 2/3 as assumed by
many design codes. In the case of the presented 6. Comartin CD, Greene M, Tubbesing SK. The Hyogo-
17645 Saticoy Street records this ratio is 1,77. Ken Nanbu Earthquake: Great Hanshin Earthquake
Strong vertical ground motions are damped at dis- Disaster January 17, 1995. Preliminary Reconnais-
tances greater than 25÷30 km from the epicenter. sance Report 95-04, Earthquake Engineering Re-
search Institute, 1995.
A linear numerical model was used in order to
point out general differences between the effects of 7. Lađinović Đ. Savremene metode seizmičke analize
earthquake loads on the response of the structure konstrukcija zgrada. Materijali i konstrukcije, 2008;
with and without consideration of vertical com- 51(2): 25-40.
ponent of the ground motion. The responses were
8. Eurocode 8, Design Provisions for the Earthquake
compared and the differences were determined. Resistance of Structures, ENV 1998-1, translation,
The time coincidence of ground motion peaks Civil Engineering Faculty, Belgrade, 1997.
played a significant role in this behavior. When the
peak vertical acceleration in the upward direction 9. “Cosmos virtual data center”, California, http://
db.cosmos-eq.org/
coincides with the peak horizontal acceleration,
the damage increases. 10. Kardos Z. Diploma Thesis, Faculty of Civil Engi-
The results of this study show that the effects neering Subotica - University of Novi Sad, Sub-
of near-source earthquakes on the reinforced con- otica, 2011.
crete structures are not adequately taken into con-
11. Kukaras D. Near source earthquake characteristics
sideration by the modern codes for earthquake and its importance for structural response, Journal
resistant design. The vertical component of earth- of the Faculty of Civil Engineering, Faculty of Civil
quake ground motion showed considerable effect Engineering Subotica - University of Novi Sad,
on the structure’s behavior. Subotica, 2004.
More research on the effect of near-source
earthquake characteristics on the reinforced struc- Corresponding Author
tures is needed. The investigations should include Danijel Kukaras,
more earthquake ground motion records and great- University of Novi Sad,
er diversity of structural systems, especially those Faculty of Civil Engineering,
sensitive to increased fluctuating vertical loads. Subotica,
Serbia,
E-mail: danijel.kukaras@gmail.com
References
1. Hamilton CH, Pardoen GC, Kazanjy RP, Hose YD.
Experimental and analytical assessment of simple
bridge structures subjected to near-fault ground mo-
tions, Proceedings of the 14th International Confer-
ence on Engineering Mechanics and Computation
2001, Cape Town, South Africa, 2001.

2. De Pineres OG. The earthquake equation of motion,

First International Symposium on Earthquake Resistant
Engineering Structures, Thessaloniki, Greece, 1996.

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 technics technologies education management

The use of satellite images to amend the

content of topographic maps
Miodrag Regodic1, Goran Cirovic2, Dragoljub Sekulovic1, Sinisa Drobnjak3
1
Ministry of Defence of the Republic of Serbia, University of Defence in Belgrade, Serbia,
2
The Belgrade University College of Civil Engineering and Geodesy, Belgrade, Serbia,
3
Military Geographical Institute of the Republic of Serbia, Belgrade, Serbia.

Abstract The solution to these problems is finding ap-

propriate ways to use many different types of re-
Outdated content of topographic maps (TM) is
mote recording products, especially those used for
mainly the result of real economic difficulties in de-
processing quality satellite images.
veloping new and modifying existing publications.
The aim of this study is to use theoretical con-
This, along with the increasingly difficult situation
siderations and conducted experiments to search
regarding the development of other geo-topograph-
and explore the possibilities and methods of col-
ic materials (GTM), greatly hampers the function-
lecting, processing and use of spatial data obtained
ing of land surveying services. The solution to
by remote sensing, for the purpose of amending
these problems is finding appropriate ways to use
topographic maps with geographic elements.
many different types of remote recording products,
especially those used for processing quality satel-
lite images. This paper suggests adding the miss- 2. Mathematical relationship between
ing topographic map content by taking advantage image and field coordinates
of the great possibilities of remote sensing, satellite In order to execute photo-interpretation it is nec-
imagery and related quality software solutions. essary to establish a direct mathematical relation-
Key words: topographic map, satellite imag- ship between image and ground coordinates i.e.
ery, geographic elements. relationship between the image and instrument on
one hand and the corresponding field on the other.
1. Introduction This relationship (equations 4 and 5) is established
by a photogrammetry method of aerial triangula-
Numerous natural and social phenomena are tion of a bundle of rays (bundle blocks) [1].
continually monitored, surveyed, recorded, and
analyzed as an expression of man’s attempt to in-
fluence their course. Permanent and temporary sat-
ellite tracking and imagery, conducted for different
purposes, are increasingly more present. They can
be carried out for testing and monitoring of meteo-
rological conditions and their changes, the study of
large body of water, monitoring the movement of
people and weapons for military intelligence pur-
poses, etc. Results can be used for the development
and maintenance of topographic and thematic maps
and other geo-topographic material.
Outdated content of topographic maps is mainly
the result of real economic difficulties in develop-
ing new and modifying existing publications. This,
along with the increasingly difficult situation re- Figure 1. Straight line connection of exposure
garding the development of other GTM, greatly station O with image point P’ and object point P
hampers the functioning of land surveying services. (concept of collinearity) [4]

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Basically, this method employs simple expres- x, h – denote measured image coordinates,
sions that establish a link between the measured X, Y, Z – denote ground coordinates,
photogrammetric coordinates and ground coordi- xo, ho, c – denote elements of internal orienta-
nate system (equation 4 and 5). tion of the camera,
In the moment of exposure, object point P, im- (xo, ho – principle image points coordiantes, c –
age point P¢ and exposure station O were lined up camera constant),
in a straight line (Figure 1). Xo, Yo, Zo – denote exposure station coordi-
This, so called collinearity concept can be pre- nates in filed coordinate system,
sented in the X¢, Y¢, Z¢ – field coordinate system, r11, r21, . . . r33 – elements of the rotation matrix
whose axis are parallel to x, h, z – image coordinate R, which defines the spatial postion of the image
system (z = 0 for all points in the image plane, and z relative to the field coordinate system – X,Y,Z, and
= c for the center of projection), which was spatially represent functions of the rotation angles w,f,k
rotated in relation to the principal ground coordinate
system – X, Y, Z, using the following two equations: In order for X¢, Y¢, Z¢– system to be parallel
with x, h, z – image coordinate system, r and k
x − x 0 X ¢ − X 0¢ elements should be:
=
c Z 0¢ − Z ¢ – the values of cosines of angles between the
............................. (1)
h − h0 Y ¢ − Y0¢ axis of the image and ground coordinate
=
c Z 0¢ − Z ¢
systems, that is
Using the solution of both equations of image – functions of w,f,k angles for which the
coordinates: image was rotated in the moment of
exposure relative to the ground coordinate
X ¢ − X 0¢ system
x = x0 − c
Z ¢ − Z 0¢ ............................ (2)
Y ¢ − Y0¢ Expanding the equation (4) on field coordinates
h = h0 − c
Z ¢ − Z 0¢ X and Y, results in:

coordinates of X¢ object and X¢o exposure sta- r11 (x − x 0 ) + r12 (h − h0 ) + r13c

tion can be replaced by X or Xo coordinates in the X = X 0 + (Z − Z 0 )
r31 (x − x 0 ) + r3 2 (h − h0 ) + r3 3c
principle ground coordinate system. X¢, Y¢, Z¢ sys-
tem, in relation to the X, Y, Z system, has been r21 (x − x 0 ) + r2 2 (h − h0 ) + r2 3c
Y = Y0 + (Z − Z 0 )
spatially rotated, so it follows: r31 (x − x 0 ) + r3 2 (h − h0 ) + r3 3c
........................................ (5)
 X − X 0   r11r1 2 r13  X ¢ − X 0¢ 
   
 Y − Y0  =  r21r2 2 r2 3  Y ¢ − Y0¢  ............... (3) Expressions (4) and (5) represent the collinear-
 Z − Z   
 Z ¢ − Z 0¢ 
 0   r31r3 2 r3 3  ity equations which are the relation between im-
age coordinates (x,h) as measured data and ele-
After substituting the equation (3) with equa-
ments of internal (xo,ho,c) and external orientation
tion (2) we will get the connection between image
(Xo,Yo,Zo, w,f,k) as unknown parameters.
and ground coordinates, where equation (3) must
Application of modern, computer-aided photo-
first be multiplied on the left side with RT R-1 (vec-
grammetry systems and methods now allow the
tor and matrix symbols are underlined):
possibility of image restitution.

r11 ( X − X 0 ) + r21 (Y − Y0 ) + r31 (Z − Z 0 ) Zx 3. Digital image processing

x = x0 − c = x0 − c
r13 ( X − X 0 ) + r2 3 (Y − Y0 ) + r33 (Z − Z 0 ) N
r12 ( X − X 0 ) + r2 2 (Y − Y0 ) + r3 2 (Z − Z 0 ) Zy Satellite imagery today is primarily delivered
h = h0 − c = h0 − c in digital form ready for further processing. Imag-
r13 ( X − X 0 ) + r2 3 (Y − Y0 ) + r33 (Z − Z 0 ) N
es intended for analysis and interpretation within
........................................ (4) the conducted experiment were also submitted in

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digital form, and further processing was carried – targets may be a point, line or area and
out through four mutually conditioned stages. – the target must be distinguishable; it must
This enabled for the imagery to be adapted to a contrast with other features in the image.
form that enables further use [7]. Imagery pro-
cessing stages are: Basically, we distinguish two types of image
– Pre-treatment, analysis – visual or logical analysis, and instru-
– Image quality improvement, mental or formal analysis. The first type of analy-
– Image transformation, sis involves human interpretation of differences
– Image classification and analysis. and distinguished properties of areas. One draw-
back of this method is the fact that human eye
All these procedures are very important for has a limited ability to distinguish many different
quality image processing, but will not be subject shades of one property, as well as human subjec-
to a detailed presentation in this paper. Their suc- tivity in the evaluation of the properties. Another
cessful implementation contributes to the success form of analysis is commonly referred to as the
of the implementation of the procedures that fol- digital analysis, because it is performed on digi-
low. Before reaching the desired information, two tal images using a computer. This makes analysis
very important procedures are image analysis and somewhat easier because computers can be as-
interpretation. signed algorithmic values of wavelengths of elec-
tromagnetic radiation, or previously mentioned
4. Analysis and interpretation of digital spectral response, by which a computer can “rec-
imagery ognize” specific forms that appear in the image.
Image processing method used in this experiment
Image analysis and interpretation are two very combined the two types of analysis. Instrumental
important stages in satellite image processing. or digital analysis had a decisive influence on the
Analysis and interpretation of images can be: identification of objects in the images.
visual or instrumental (computer). Both analyses Both the visual and digital analyses have their
rely heavily on image resolution i.e. the ability of advantages and disadvantages. One of the ad-
distinguishing content in the images. The follow- vantages of visual analysis is that apart from the
ing types of image resolution are of equal impor- image it does not require other resources, while
tance [6]: digital analysis requires specialized and costly
– spatial resolution (distance to field), equipment. The best results are achieved through
– spectral resolution (type and amount of a combination of these procedures.
spectral channels), In terms of remote sensing, interpretation im-
– radiometric resolution (related to signal plies interpreting i.e. providing meaning to areas
strength; stronger signal provides easier of different properties obtained in the analytical
automatic classification), procedure. Interpretation is carried out exclusively
– temporal resolution (frequency of shooting). through logic. The process of interpretation neces-
sitates human input in terms of knowledge and abil-
Image analysis is the process of determining ity to properly select data. Modern computer tech-
the difference in properties and separation of ob- nology has enabled the identification of specific
jects or field areas according to specific properties. areas detected in the image and their proper mark-
These properties entail, for example, relief charac- ing with appropriate symbols to be performed us-
teristics (drainage density, depth of incision, slope ing computers. However, this procedure cannot be
angle, etc.), differences in vegetation cover, the in- considered an instrumental interpretation because it
tensity of shades in black and white images, or dif- requires human input i.e. actual classification and
ferent colors on color, false color and composite interpretation of objects must be entered into a com-
images, etc. Features or objects in remote sensing puter by a human. The computer only identifies,
images can be analyzed and interpreted provided compares and groups the areas with same proper-
they have the following characteristics [3]: ties i.e. it performs instrumental analysis procedure.

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Analysis and interpretation are two distinct pro- resolution, using vector form, missing geographical
cesses and stages in the process of remote sensing features were successfully mapped – annex 1, after
only in cases when performing formal or instru- which that content was entirely transferred onto a
mental analysis. large-scale topographic map 1 : 50 000 (TK50), thus
amending the topographic map – annex 2.
Information
Data is a representation of an object, phenome- Processing and analysis of Ikonos2 satellite
non or process in real time, while only a processed images for the purpose of amending topo-
data ready for use is referred to as information. graphic maps
Information obtained by remote sensing are Recordings obtained from aircraft and satellite
specific compared to other environmental re- platforms are an important source of information
searches. The results obtained through remote used for studying and representation of natural and
sensing allow the synthesis of certain aerial data artificial occurrences of Earth’s surface. Under-
as well as research of a much wider area compared standing connections and relationships between
to field research [8]; they are much cheaper and digital pixel values recorded on a sensor and field
more rational compared to field work. information enables proper image interpretation
The end result and goal of image interpretation and analysis [10].
and analysis, or the entire remote sensing process The subject of the experiment presented in this
represents useful information on ground objects. paper is the satellite image of urban area, taken by
The information obtained by remote sensing of an IKONOS2 satellite, a product of European Space
area is qualitatively and quantitatively different from Imaging Company. It belongs to the GEO Ortho
the results obtained through other types of research. Kit category of products, which means that it is
A new quality of remote sensing data is ob- partially geo-referenced and fully orthorectified.
tained by recording invisible parts of electromag- Table 1 shows image data.
netic spectrum. Remote sensing detectors are de- Table 1. Basic image parameters [9]
signed to register specific EM radiation range, and Name Ikonos2
a combination of different sensors set to different Company European Space Imaging
channels (bands) can improve the analysis and in- Spatial resolution 1m
terpretation of the recorded content. Imagery product Geo Ortho Kit
Field measurements can never cover the en- Image type Panchromatic
tire surface of the investigated area. By applying Bit register 11-bit register
remote sensing methods, logical or instrumental Map projection UTM
analysis and interpretation, measurements are per- Ellipsoid WGS84
formed on the entire image. Terrain serviceability, Orbit altitude 450 km
weather conditions, period of the day and other Optical axis tilt angle 73,0927°
limiting factors pertaining to field work have no Time of recording 2003-04-29 09:58 GMT
effect on remote sensing measurements. Scan direction Against orbit
Quantitative and qualitative value of information Scan azimuth 254,2177°
obtained by remote sensing, as well as other, differ-
ent categories of data, do not exclude the results of The main reason for choosing this image is the
traditional methods of measurement. They rather fact that it is a high-quality image, with high spa-
complement each other, making them more objec- tial resolution of 1m.
tive and reliable. The use of remote sensing allows In addition to the satellite image, an appropri-
for the entire surveying process to become more effi- ate topographic map was also provided for this
cient and rational. To best show the vast possibilities experiment. The TK50 topographic map contain-
of the use of satellite imagery in cartography, qual- ing the territory with unmapped geographic fea-
ity software solutions were applied in this experi- tures (Figure 3) was used for the purposes of map
ment to amend the missing content of topographic amendment. One of the objectives of the research
maps. On the basis of satellite images of high spatial presented in this paper was to determine the pos-

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 technics technologies education management

sibilities and methods for TK50 amendment by

adding missing geographic features to its content.

Figure 3. Topographic map 1:50 000

The possibilities of presentation of spatial data
compiled in ArcGIS are numerous. Alphanumeric
Figure 2. A section of IKONOS2 satellite image data can be presented in the form of tables, graphs,
reports, drawings, etc. and digital data in the form
Initial and compulsory activity that precedes of maps of different formats, depending on respec-
the overall image processing and map update is tive requirements. The output can also be present-
the scanning process i.e. conversion of the working ed on photosensitive materials (using PostScript
material into digital form [2]. Since the satellite im- file), which is important in terms of reproduction.
age was delivered in digital form only topographic Apart from modules, which are integral part of
maps were scanned. Conversion of analog data into this software, ArcGIS can also contain the following
digital form was carried out using SHARP JX 6-10 modules: grid analysis, areal image analysis, and 3D
scanner in 300 dpi resolution. The scanner offers 1 analysis. This is an open source program that con-
200 x 1 200 dpi resolution, 16 million colors, and 9 tains modules that allow additional programming
600 x 9 600 dpi interpolated resolution [11]. operations, depending on respective needs.
The great possibilities in the use of satellite
imagery in cartographic practice, coupled with
the use of quality software solutions, are best re-
flected in the fact that the objective of the experi-
ment to amend the topographic map with missing
topographic data was achieved. On the basis of
satellite images of high spatial resolution a part of
an urban area was successfully mapped, in vec-
tor form – Appendix 1, after which the content
was fully transferred onto the TK50, and thus the
process of amendment of the missing content was
complete – Appendix 2. This process was carried
out using the ArcGIS software, which is one of the
most widespread commercial GIS (Geographic
Information System) software. It is mainly used
in the processing of geographic data, for different
purposes and in different resolutions. ArcGIS uses Figure 4. Partial image from IKONOS2 satellite
Windows operating system [12]. with vector content

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 technics technologies education management

Figure 5 shows the vector content separately. Since the amendment of the TK50 using satel-
lite images was successfully carried out in this ex-
periment, it can be concluded that a smaller scale
amendment of the TK50, using this program, is
entirely feasible.

Appendix 1

Figure 5. Vector content

Bežanijska Kosa urban area – vector map

Appendix 2

Figure 6. Scanned portion of the old map

Updated topography map

Figure 7. New map with amended content and

corrections

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 technics technologies education management

5. Conclusion References
Commercial satellite systems produce high 1. Canada centre for remote sensing: Fundamentals of
quality images with spatial resolution that can Remote Sensing, Natural Resources Canada, 2002.
reach values below one meter. Institutions in con- 2. Mikhail ME, Bethel SJ, McGlone JC. Introduction to
trol of satellite systems, and in charge of sales and modernPhotogrammetry, John Wiley & Sons, 2001.
distribution of satellite images, have increased the
level of image processing and now offer ready- 3. Jensen RJ. Introductory Digital Image Processing –
Remote Sensing Perspective, Third Edition, Prentice
made satellite images in widely used formats and
Hall, 2004.
widespread coordinate systems.
The achieved level of development of com- 4. Kraus K. Photogrammetry, Volume 1 – Fundamen-
puter equipment can ensure successful detection, tals and Standard Processes, Naucna knjiga, Bel-
identification, technical analysis, and presenta- grade, 1986.
tion of geographic features in the process of map 5. Karsten J. Orthoimages and DEMs by QuickBird
amendment. and IKONOS, EARSeL Symposium Prague, 2002.
Amendment of topographic maps with geo-
graphic features of topographic surface can be 6. Oluić M. Filming and researching Earth from space,
satellites – sensors – application, Croatian Academy
carried out with required accuracy on the basis of
of Arts and Sciences, Zagreb, 2001.
remote sensing i.e. by means of computer process-
ing and interpretation of images of different origin 7. Pavlović R, Čupković T, Marković M. Remote sens-
(mostly satellite images) it is possible to gather ing, Faculty of Mining and Geology, Belgrade, 2001.
relevant geographical data and include them on a
8. Wolf RP, DeWitt AB. Elements of Photogrammetry
map and therefore amend it. with Applications in GIS, McGraw-Hill, 2000.
With the increase of spatial resolution in sat-
ellite imagery and lower costs, aerial imagery is 9. Regodić M. Updating of working maps using field
now carried out almost exclusively for the purpos- remote sensing, doctoral thesis, Military Academy,
es of compiling large-scale survey maps and other Belgrade, 2007.
specific needs. 10. Regodić M. Remote sensing as spatial data gather-
In future, the methodology of application of ing method, Military-technical Gazette, Belgrade,
satellite imagery in map amendment will have an 2008; No 1: 91 –112.
increasingly important role. It offers new possi-
11. htpp://images.google.com/images, november 2011.
bilities for data representation in digital form, and
therefore its main role was applied in TK50 map 12. htpp://www.nrsc.co.uk, november 2011.
amendment. With the advent of satellite imagery
of high spatial resolution – HRSI (such as IKO-
NOS, QuickBird, WorldView or GeoEye) these Corresponding author
Miodrag Regodic,
images can be used for large-scale survey maps, Ministry of Defence of the Republic of Serbia,
so it would be reasonable to expect their increased University of Defence in Belgrade,
use in the future. Serbia,
E-mail: mregodic62@gmail.com

Acknowledgements
The work reported in this paper is a part of the
investigation within the TR 36017 research proj-
ect supported by the Ministry for Science and
Technology, Republic of Serbia. This support is
gratefully acknowledged.

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Application of multidimensional statistics for

ranking of insurance companies in Bosnia and
Herzegovina
Ademir Abdic, Rabija Somun – Kapetanovic, Emina Resic, Adem Abdic
School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina.

Abstract government agencies responsible for evaluation

of performance of insurance companies, it is very
In the practice, ranking of insurance companies
useful to know which insurance companies are
was mostly based on just one indicator of perfor-
stable both from financial and managerial aspect
mance. The basic goal of this research is to create
of performance. Also, investors have large ben-
multidimensional model for ranking of insurance
efits from recognizing quality investment oppor-
companies in Bosnia and Herzegovina. The scientif-
tunities for investing their capital.
ic contribution of this research lies in the answer to
Traditional measure of performance of insur-
the question: How large number of indicators which
ance companies is based on analysis of set of fi-
can be used to quantify the success of performance
nancial indicators. However, unique model that
of insurance companies be comprised in smaller
could fulfil all the needs for analysis and valua-
number of synthetically chosen benchmarks and
tion of success of performance in insurance com-
used as a basis for ranking of insurance companies?
panies was not developed in practice. Overview
Key words: AHP, multidimensional decision
of the available literature showed that only a few
making, insurance companies, ranking
researches deal with the problem of ranking of
insurance companies in Bosnia and Herzegovina
1. Introduction and they were conducted using only one indica-
tor: gross premium, net profit, total assets and to-
The success of insurance companies is often
tal capital [1], calculated premium [2], calculated
understood and measured through the prism of just
gross premium, change in calculated gross pre-
one indicator of performance. However, the fact is
mium, net revenue and change in net revenue [3],
that researches pointed out to multidimensionality
total gross premium and its market share in whole
of success of performance in terms of profitability,
sector [4], capital, total premium, total assets and
liquidity, security and other latent measures of suc-
return on assets [5], total assets [6], value of to-
cess. While ranking insurance companies, it is im-
tal premium, value of paid benefits and total gross
portant to provide an answer to two key questions:
revenue [7]. In this way, separate ranking lists were
a. Which insurance company is the most
constructed regarding total premium, total benefits
successful based on multiple dimensions
paid, total revenue, market share, total assets, etc.
(determinants) of performance?
However, all of the previously mentioned rank-
b. Which dimension can be regarded as
ings are based on single indicator of performance
the most important one in the process of
and comprehensive overview was never made. It
ranking?
is not possible to make ranking list of insurance
companies in proper way by analyzing single indi-
Development of model for ranking of insur-
cators. Therefore, it is necessary to develop multi-
ance companies is of great importance. Insured
valued approach to ranking – approach developed
persons are provided with the largest benefit from
on the basis of multiple indicators, which reveals
ranking of insurance compa-nies. With timely
specificities of performance, success and security
identification of successful insurance companies,
in insurance industry.
it is possible to avoid losses or, at least, minimize
the damages which they carry. For the state, and

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2. Central problem inclusion of criteria and alternatives with both

qualitative and quantitative values.
Business environment in which insurance com-
AHP method allows interactive sensitivity
panies are operating has significantly changed dur-
analysis of the process of valuation on final ranks
ing last years. Special attention should be given
of elements in hierarchy. Also, during the valua-
to larger exposure to different types of risk which
tion of elements of hierarchy, consistency of rea-
can result in negative consequences. Risks can of-
soning of decision maker is evaluated as well as
ten be so large that insurance companies cannot, or
correctness of obtained rankings of alternatives
partly are unable to, cover current liabilities which
and criteria and weights of their benchmarks.
were taken by signing insurance contracts with
the clients. Uncertain political-legal and socio-
economic environment of countries in transition 3.1. Comparison according to pairs
serve this situations. By taking this into account Term of comparison according to pairs is, with
and the fact that insurance companies are among hierarchies, the most important for multi-criteria
the largest institutional investors, majority of at- decision making by using hierarchies. Ai and Aj are
tention, both of insured persons and shareholders, two alternatives that we want to compare with the
is given to reputation or ranking of the company. criteria Kp. We have the following possibilities:
The aims of the research is to analyze possible a. decision maker is indifferent – alternatives
determinants of success of performance of insur- Ai and Aj are equally preferred compared to
ance companies, to determine key dimensions criteria Kp.
(variables) which contribute the most to rank of b. decision maker prefers alternative Ai over Aj
insurance companies and to create multidimen- compared to criteria Kp.
sional model for ranking of insurance companies c. decision maker prefers alternative Aj over Ai
in Bosnia and Herzegovina. compared to criteria Kp.

3. Methodology It is not important to state only the preferred al-

ternative but also determine the weight of the pref-
The Analytic Hierarchy Approach (AHP) rep-
erence. Saaty recommended scale with follow-
resents multi-criteria model for decision making
ing modalities: equal priorities, medium priority,
which results in better solution of research prob-
strong priority, very strong priority and absolute
lem by initially separating complex problem into
priority. Following table represents Saaty’s scale
smaller ones and obtaining separate solutions.
for comparison of relative importance of elements
AHP method is the well known methods of sci-
in AHP model.
entific scenario analysis and decision making by
In the previous table, descriptive preferences
consistent valuation of hierarchies.
were mentioned. They are adjoined with proper
Model was developed by Thomas L. Saaty [8].
scale. For the cases where alternative Aj is chosen
Hierarchical structure of AHP model is divided
over alternative Ai,, scale is uniquely determined
into three parts: on the top of the structure is the
on the basis of mentioned values. The following
goal, in the middle of the structure are criteria, and 1
on the bottom of the structure are alternatives or equation is always true: aij =
a ji
possibilities. Hierarchy always has one goal. The
goal is what we want to accomplish. The goal is Let us assume that we are observing n objects
on the top and it is not compared with other ele- of research Oe, e =1, 2, ..., n which represent al-
ments in the pyramid. Criteria can be multiple and ternatives and that we have recorded m beginning
they are determined by experts from certain field variables Xi, i= 1, 2, ..., m which represent criteria.
of study. Alternatives are uniquely determined If the m number of criteria whose relative weights
and those are objects (units) whose characteristics (priorities) wi, i=1, 2, ..., m should be determined
need to be determined. Graphical AHP method is on the basis of valuation of their relative ratios
very similar to decision tree. AHP method allows

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Table 1. Saaty’s scale for comparison of relative importance of elements [9]

Evaluation
Definition Explanation
priorities
1 Equal priority Two elements have equal contribution to the goal
2 Equal to medium priority Compromise or further division has to be made
Based on experience and evaluation, medium priority is
3 Medium priority
given to one element in comparison to another
4 Medium to strong priority Compromise or further division has to be made
Based on experience and evaluation, one element is
5 Strong priority
strongly preferred compared to another
6 Strong to very strong priority Compromise or further division has to be made
7 Very strong priority Dominance of one element is confirmed in practice
8 Very strong to absolute priority Compromise or further division has to be made
9 Absolute priority Dominance of highest degree

wi nding vector of unique values of matrix A can be

which are denoted with aij where aij = . wi and used as vector of approximate values of weights
wj
w = ( w1 , w2 , w3 ,.., wm ) . Matrix A for the case of
T
wj represent relative weighted coefficients of ele-
ments i and j. On the basis of mutual comparison consistent assesments for which a= ij aik ⋅ akj satis-
of all objects (elements), matrix of comparison is fies the equation:
formed and denoted as matrix A. Matrix A which
represents ratios of relative weighted coefficients A ⋅ w = m ⋅ w ..............................
(2) (2)
of elements i and j is presented by the following:
and if the matrix A is multiplied from the right
K1 K2 ... K m side with vector w = ( w1 , w2 , w3 ,.., wm ) , the fol-
T

K1  a11 a12 ... a1m  lowing is obtained:

K 2  a21 a22 ... a2 m  ................. (1)
A= (1) w1 w1 w1 
...  ... ... ... ...  w ...
  w2 wm 
K m  am1 am 2 ... amm   1   w1   w1 
 w2 w2 w2    w 
... w
= Aw = w1 w2 wm   2  m  2  ..(3)
  ...  ... (3)
Matrix A has the following characteristics:  ... 
 ... ... ... ...     
a. all rows in the matrix are proportional to the   wm 
  wm 
first row,  wm wm ... wm 
b. all rows in the matrix are positive and it is  w1 w2 wm 
true that aij = 1 / aji,
c. only one unique characteristic of matrix is
Vector of unique values in the matrix A (vector
different from zero and it is equal to m.
w) is calculated by solving the system of homoge-
neous linear equations:
3.2. Method of eigenvector
Aw = λ w ................................. (4)
There are various methods of extraction of val-
eT w = 1 (4)
ues of weights which could be close approxima-
tions for corresponding elements of matrix A. Saa-
where:
ty used potential method for obtaining eigenvector.
λ – main unique characteristic of matrix A
He recommended that unique value λmax should be
used as maximum value for matrix A. Correspo- e – n component unit vector, eT = (1,1,1,..,1)

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If decision maker is consistent, then λ = m and d. Determination of the final solution (goal) –
usually λ > m. Previous system of linear equations synthetic benchmark.
has non-trivial solution if and only if m is unique
value of matrix A – if determinant of matrix (A- It is necessary to develop hierarchical model
mI) is equal to zero. of problem of decision making with defined goal
There are other techniques for determination of on the top, defined criteria at the lower levels and
vectors of weights w. They are also recommended chosen alternatives on the bottom of the hierar-
by Saaty [10]. Those techniques include: chies in the first phase. Elements of the structure
a. sum of rows in matrix of results of compa- on each level of hierarchical structure are com-
rison and normalization of calculated sums pared in pairs. Preferences of decision makers are
expressed using appropriate scale which has five
m
wi  m 1  levels of descriptive intensities and corresponding
=∑ wj
w=
∑
i  , i 1, 2,3,..., m numerical values for those in the interval from one
=j 1 =  j 1 wj  to nine (as it was described in the table 1)
If we denote number of criteria for ranking
b. sum of reciprocal values of columns  m  m(m − 1)
of matrix of results of comparison and with m, we will have   = criteria for
2  2
normalization of calculated sums
comparison in total. Results of comparison of ob-
m
wi 1  m  jects (elements) on the given level of hierarchy are
=∑ =  ∑ wi  , j 1, 2,3,..., m
wj wj  j 1 
joined to corresponding decision matrices. If we
=i 1 =
mutually compare n objects in relation to corre-
sponding criteria on higher level of hierarchy, then
c. normalization of geometrical mean of ele- by comparing object i in relation to object j, nu-
ments according to rows in matrix comparison merical coefficient aij is determined according to
of results which is rarely used in practice. Saaty’s scale and positioned on a proper place in
decision matrix (matrix A). If our decision matrix
After the vector of weights w is determined by is based on m criteria, then it has following form:
using any of the mentioned methods, it is multi-
plied by weight of element from upper level which K1 K2 ... Km
was used as a criterion for comparison. The same K1  a11 a12 ... a1m 
procedure is repeated from the top of hierarchy to K 2  a21 a22 ... a2 m  ................. (5)
the lower levels of hierarchy. Weights are calculat- A= (5)
...  ... ... ... ... 
ed for each element on a given level and are used  
for determination of, so called, composite relative K m  am1 am 2 ... amm 
weights on the lower levels.
Afterwards, vectors of priorities are calculated.
If the difference between vectors is minor, further
3.3. Phases of AHP model calculation of priority vectors is not necessary.
Procedure in AHP model consists of four phas- Priority vector is last normalized vector. Criterion
es [11]: with the largest value among priority vectors rep-
a. Definition of the problem of decision resents the most important criterion.
making with the goal on top, criteria at In the same manner, comparison of pairs of al-
lower levels and alternatives on the bottom ternatives will be made. If we denote number of
of the hierarchies. alternatives for ranking by n, then we will have
b. Determination of the most important criteria  n  n(n − 1)
 = comparisons. If the decision ma-
– benchmark of criteria.  2 2
c. Determination of the most significant trix is based on n alternati-ves, it has the following
alternative – benchmark of alternatives. form for each of m criteria:

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A1 A2 ... An λmax − n
CI = (9)
............................. (9)
A1  b11 b12 ... b1n  n −1
A2 b21 b22 ... b2 n  ................... (6) where λmax is maximum unique value of com-
B= (6)
...  ... ... ... ...  parison matrix. As λmax is closer to number n, the
  inconsistency will be smaller. In order to calculate
An bn1 bn 2 ... bnn 
λmax, we have to multiply comparison matrix with
vector of weights in order to determine vector b:
Alternative with the highest value among pri-
ority vectors (within one criterion) represents the  a11 a12 ... a1n   w1   b1 
most significant alternative. Procedure is repeated a a22 ... a2 n   w2  b2 
for each of n alternatives and in the end, priority  21 = ............ (10)
(10)
 ... ... ... ...   ...   ... 
matrix of alternatives is formed:     
 an1 an 2 ... ann   wn  bn 
K1 K2 ... Km
A1  r11 r12 ... r1m  By dividing adequate elements vectors b and
  w, we get the following expression:
A2  r21 r22 ... r2 m  .................. (7)
Y= (7)
...  ... ... ... ...   b1 
  w 
An  rn1 rn 2 ... rnm 
 1   λ1 
 b2   
After ranking the criteria and alternatives in com-  w   λ2  .............................(11)
 2  =  ...  (11)
parison to each of the criterion, synthetic benchmark  ...   
should be calculated separately and it takes into ac-    λn 
count weights of criterion and alternatives compared  bn 
w 
to separate criterion. By multiplying priority matrix  n
of alternatives (R) and priority vectors of criterion
(y), we get priority vector of goal (β): finally:

K1 K2 ... Km 1 n
A1  r11 r12 ... r1m   y1   b1 
λmax = ∑ λi ...........................
n i =1
(12) (12)
     
A2  r21 r22 ... r2 m   y2   b 2  .......... (8)
⋅ = (8) By inserting λmax into relation (9), we calculate
...  ... ... ... ...   ...   ... 
      consistency index. Finally, degree of consistency
An  rn1 rn 2 ... rnm   ym   b n  (CR) which represents relati-on between consis-
tency index (CI) and random index (RI) can be
In the end, synthetic benchmark determined expressed in the following form:
ranking of alternatives.
CI ............................... (13)
CR = (13)
RI
3.4. Calculation of consistency in AHP model
AHP method has the ability to identify and ana- Value of consistency index is compared with so
lyze (in)consistency of decision maker which can called random index which is calculated as an aver-
occur in the process of judgement and valuation of age CI for large number of randomly generated re-
elements of hierarchy. For the measurement of de- ciprocal matrices of the same type. Random index
gree of consistency of decisions (CR), Saaty rec- depends on the row of matrix and it is taken from
ommended consist-ency index CI which has the table 2 in which first row represents comparisons,
following mathematical representation: while the second row represents random indices.

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Table 2. V alues of random index RI

Dimension of
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
matrix
Random index 0,0 0,0 0,58 0,9 1,12 1,24 1,32 1,41 1,45 1,49 1,51 1,48 1,56 1,57 1,59

CI companies and experts from insurance industry, the

If the ratio is equal or less than 0,1, then following criteria are included into analysis (table 3).
RI
Mentioned criteria include quantitative indica-
corresponding approximation of w of real vector
tors which are actually standard financial ratios of
of weights is accepted – approximations of rela-
special aspects of performance of insurance com-
tive importance of criteria (priority of alternatives)
panies. Alternatives are insurance companies. Hi-
is considered acceptable. Otherwise, we consi-der
erarchical structure of AHP model can be seen as
that approximations were not consistent enough to
the one on figure 1.
base decision on then and results should be analyzed
again and reasons for inconsistency determined.

4. Results and Discussion

Choice of best insurance company is not unam-
biguous because according to one criterion, one in-
surance company is the best; according to second
criterion, other insurance company is better; accord-
ing to third, third insurance company is the best, etc. Figure 1. Hierarchical structure of AHP model
By using AHP method, the choice between several
alternative on the basis of multiple criteria is empha- Each insurance company was compared ac-
sized. In order to construct AHP model, it is impor- cording to each of fifteen criteria in pairs. For the
tant to define goal, criteria and alternatives. Goal of needs of making ranking list of insurance compa-
this model is to rank insurance companies from the nies, it is necessary to evaluate relative importance
best to the worst one. Criteria can be chosen accord- of alternatives according to each pair and each cri-
ing to various characteri-stics. On the basis of ques- terion. Assessment of relative importance of cri-
tionnaire conducted among managers of insurance teria in pair was conducted in two separate ways:

Table 3. Criteria for ranking insurance companies

Criteria Name of criteria
C1 Number of employees in insurance company
C2 Total premium (in KM)
C3 Total revenues (in KM)
C4 Reported and solved damages (in KM)
C5 Gross profit (in KM)
C6 Capital (in KM)
C7 Total assets (in KM)
C8 Premium / number of employees in insurance company (in KM)
C9 Total revenue / number of employees in insurance company (in KM)
C10 Profit /number of employees in insurance company (in KM)
C11 Profit / total revenue (%)
C12 Paid damages / premium (%)
C13 Return on assets ROA (%)
C14 % solved damages
C15 Return on equity ROE (%)

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a. Model 1 (all criteria have the same relative according to criteria, we calculate total benchmark
importance) and which takes into account both weights of criteria
b. Model 2 (relative importance of criteria is and weights of alternatives compared to individ-
benchmarked on the basis of questionnaires ual criteria. In the end, total benchmarks give the
conducted on manage-ment of insurance ranking of alternatives.
companies and experts from practice. Based on the results obtained using AHP meth-
od, we have created ranking list of insurance com-
Model 1 panies for the year 2010. which shows that the best
insurance company is Croatia osiguranje, followed
Based on relative importance of criteria, we by Bosna Sunce Osiguranje, Euroherc osiguranje,
have calculated benchmarks of 15 criteria in the Sarajevo osiguranje and Triglav osiguranje.
programme Expert Choice 2000. All criteria have Special benefit of AHP method is possibility of
the same benchmark which is equal to 0,067. For measurement of consistency of subjective assess-
each of fifteen criteria from table 3, ten different ment of researcher. If all of the assessments are
levels of intensities were determined which were consistent, then consistency index will be equal
derived on the basis of interval to which their val- to 0. However, in reality, many situations are not
ues belong. Intervals were determined according consistent and therefore, allowed value of degree
to the principle that was explained graphically in of consistency is up to 0,1 (10%). In our model,
the figure 2. The levels of intensities of criteria level of inconsistency is equal to 0,0.
were used as entry information in AHP model.
While comparing insurance companies based Model 2
on one criterion, their local weight were obtained
by assessment of their relative importance accord- In the following table, grades of priority of cri-
ing to Saaty’s scale. After determining relative re- teria are given based on results of questionnaires.
lations between the criteria and relative relations

Figure 2. Scale for determination of border values of criteria and levels of intensity of criteria

Figure 3. Ranking list of insurance companies for the year 2010

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Table 4. Grade of priority of criteria based on questionnaires

Criteria Name of criteria Evaluation priorities
C1 Number of employees in insurance company 1
C2 Total premium (in KM) 7
C3 Total revenues (in KM) 5
C4 Reported and solved damages (in KM) 8
C5 Gross profit (in KM) 5
C6 Capital (in KM) 8
C7 Total assets (in KM) 6
C8 Premium / number of employees in insurance company (in KM) 3
C9 Total revenue / number of employees in insurance company (in KM) 3
C10 Profit /number of employees in insurance company (in KM) 3
C11 Profit / total revenue (%) 4
C12 Paid damages / premium (%) 6
C13 Return on assets ROA (%) 4
C14 % solved damages 6
C15 Return on equity ROE (%) 4

Figure 4. Benchmarks of criteria

Figure 5. Ranking list of insurance companies for 2010

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In the programme Expert Choice 2000, bench- intervals to which their values belong. Therefore,
marks of criteria were determined based on ques- it was necessary to assess individual importance
tionnaires and they are shown in the figure 4. of alternatives according to all pair and all criteria
Levels of intensities within individual criteria for the needs of creating ranking lists of insurance
were determined in the same way as for Model 1 companies.
and were afterwards used as entry data for Model After determining relative relations between
2. After we determined relative relations between criteria and relative relations according to criteria,
criteria and relative relations between alternatives total ponder is determined which takes into ac-
according to criteria, we calculate total benchmark count both weight of criteria and weights of the
which incorporates both weights of criteria and alternatives in relation to individual criteria. In the
weights of alternatives compared to individual cri- end, ranking lists of insurance companies for the
teria. In the end, we obtain rankings of alternatives year 2010 were created based on total benchmark.
as it is represented on figure 5. According to this model, five most successful in-
The results obtained by AHP method point that surance companies are: Croatia osiguranje, Bosna
the best insurance company is Croatia osiguranje Sunce osiguranje, Euroherc osiguranje, Sarajevo
and it is followed by Bosna Sunce osiguranje, Sa- osiguranje and Triglav osiguranje, respectively.
rajevo osiguranje, Euroherc osiguranje and Tri- Indicators of performance of insurance compa-
glav osiguranje. Degree of inconsistency in our nies are related to the year 2010. The choice of one
model is 0,08 which is within the borders of al- year was necessary due to difficulties in collect-
lowed degree of inconsistency. ing data and constraints of the work for graphical
and table representation of ranking lists of insur-
5. Concluding Remarks ance companies for longer time period. This work
showed that application of AHP method can be
In the research part of the work, on the basis used to create adequate ranking lists of insurance
of data from the reports of Insurance supervisory companies. Unavailability and inadequacy of nec-
agency of Bosnia and Herzegovina, Insurance essary data for all insurance companies for the
supervisory agency of Federation of Bosnia and given period was the major constraint for conduct-
Herzegovina, Agency for Insurance of Republic ing analysis. Therefore, in order to improve the
of Srpska and individual financial statements of analysis, it is necessary to be able to access all the
insurance companies in Bosnia and Herzegovina, data about performance of insurance companies.
multi-dimensional AHP model of decision mak- This is primarily directed at the analytical data
ing is applied. By using AHP model, importance about operating revenues and expenses in order to
is given to multiple alternatives on the basis of include other meaningful indicators for ranking in
multiple criteria. Goal, criteria and alternatives the analysis. Those are: reserves for damages, pre-
are determined. The goal of this paper was to cre- miums sold for re-insurance, business expenses,
ate ranking lists of insurance companies from the acquisition costs, other technical expenses that in-
least to the most successful one and we used 15 surance companies incur, technical reserves, non-
indicators of performance of insurance companies insurance-technical reserves, reserves for bonuses
as criteria. Alternatives were 25 insurance com- and discounts as well as individual indicators for
panies in Bosnia and Herzegovina. Mathematical different insurance companies.
model of this method was based on mutual com-
parison of relative relations between criteria and
relative relation of alternatives according to crite-
ria. Preferences of decision maker are expressed
by the means of Saaty’s scale because the assump-
tion was that intensity of preferences between two
alternatives can be expressed by using scales. For
each of 15 criteria, we have determined ten levels
of intensities which were derived on the basis of

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References
1. Deloitte Slovenija (Deloitte Touche Tohmatsu Limited)

2. Poslovni savjetnik, Septembar, 2011.

3. Deloitte Hrvatska (Deloitte Touche Tohmatsu Limited)

4. online magazin ‘’Investitor.ba’’

5. “Finance Central Europe”, 2009.

6. “Biznis i finansije”, 2011.

7. Statistika tržišta osiguranja u Bosni i Hercegovini,

Agencija za osiguranje u BiH, 2010.

8. Saaty T. The Analytic Hierarchy Process, McGraw-

Hill, New York, 1980.

9. Saaty T. Decision making with the analytic hierarchy

process, Services Sciences, 2008; 1(1): 86.

10. Saaty T.L. Multicriteria Decision Making, The

Analytic Hierarchy Process: Planning, Priority
Setting, Resource Allocation, RWS Publications,
Pittsburgh, 1992.

11. Saaty T. Decision making with the analytic hierar-

chy process, Services Sciences, 2008;1(1): 85.

Corresponding Author
Ademir Abdic,
School of Economics and Business,
University of Sarajevo,
Bosnia and Herzegovina,
E-mail: ademir.abdic@efsa.unsa.ba

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Quality control of construction works on the

structure of Atlas capital center
Nenad Ivanisevic1, Marina Rakocevic2, Milos Knezevic2, Snezana Rutesic2, Bosko Stevanovic1
1
University of Belgrade, Faculty of Civil Engineering, Belgrade, Serbia,
2
University of Montenegro, Faculty of Civil Engineering, Podgorica, Montenegro.

Abstract In the Montenegrin legal system, construction

contracts are mainly governed by the Law of Ob-
Foreign investors have imposed application
ligations [2], which with its mainly dispositive
of international FIDIC conditions of contracts on
norms allows contractual parties to almost freely
large projects they finance in Montenegro. Al-
regulate their mutual relations. The Law on Spa-
though these conditions define in detail the rights
tial Planning and Construction [3], whit its man-
and obligations of the contractual parties during the
datory rules imposes obligations and responsibili-
construction process, a problem arose because, in
ties to the all parties in the construction process,
some issues, these conditions do not comply with
which cannot be changed by the will of the par-
the Montenegrin legal system and the usual prac-
ties. Construction in Montenegro is also regulated
tise. Especially there are significant differences in
by the current technical legislation and standards
the way of controlling the works and the role of the
which do not fully comply with the regulations of
supervisor in achieving the requested quality.
the European countries.
Construction of a big residential and business
Development of civil engineering is inconceiv-
building Atlas Capital Center (ACC) in Podgorica
able without constant communication with the envi-
was contracted according to FIDIC Conditions
ronment. This causes the need for adjustment to the
of Contract for Construction (FIDIC Red Book).
international markets, i.e. demands of foreign inves-
This paper presents the organization of construc-
tors and to enable the free flow of goods and services.
tion works on ACC with special emphasis on the
Comparing Montenegrin legislation and the
internal and external quality control procedures.
usual domestic practise with FIDIC conditions of
Key words: FIDIC, quality control, works,
contract, it is concluded that a major difference
supervision
appears in the part related to the supervision of
works. When FIDIC conditions of the contract are
1. Introduction used, among other, the organization of the man-
In the period between years 2000 and 2009 agement team and the roles and responsibilities
construction industry in Montenegro had a great of the project manager and the supervision team
boom. Investments in construction of buildings, leader are different to their custom roles in Monte-
with a great contribution of foreign investors, have negro. Also strictly defined procedures are applied
been significantly higher than the investments in when FIDIC is used, especially for communica-
previous periods. Such a situation lasted until the tion between parties and for the quality control in
start of the current global economic crisis. the broadest sense.
According to official data, during the period
between 2005 and 2009 the inflow of foreign di- 2. Organization of construction works
rect investments was more than € 1.8 billion (net
amount), out of which about 48% was invested in The construction works consist of several pro-
real estate, especially in the period 2006-2008 [1]. duction processes. By good organization and se-
Foreign investors imposed international stan- quencing of activities it is possible to increase the
dards of contracting and application of FIDIC productivity, taking into account the required qual-
contract models, which are based on the British ity and planned deadlines [4]. Execution of the
legal system and in which the rights and obliga- works is conducted in the following stages: prepa-
tions of contractual parties are defined in detail. ration, production/construction and taking over.

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 technics technologies education management

The preparation phase includes preparation of underground part of the building is 40.450 m2, while
technical documentation, selection of the Contrac- the total area of building is about 90.000m2. The un-
tor and selection of the Supervisor. This preparation derground part of the building is shaped like a trian-
phase includes the familiarizing of all participants gle and is constructed as one structure. In the under-
with the technical and contract documentation. ground part, three floors are designed as garages and
Production or construction phase includes: pre- one floor is for commercial purposes. Above-ground
paratory construction works, construction and craft part consists of seven structures (“buildings”) out of
works, installation works, mounting of equipment which three are designed for business activities and
and facilities etc. four are for residential purposes.
Taking over phase includes technical inspec- The building is designed in accordance with the
tion, the beginning of the usage of the works and highest standards, with materials and equipment
the start of the Defects Notification Period. of excellent quality, not only in technical and tech-
In each of the stated phases, participants: In- nological terms, but also in terms of the design.
vestor, Supervision and Contractor, have obliga-
tions and responsibilities which are regulated by 4. Description of the technology of works
legislation and contracts. (method statement)
At the beginning of the project Contractor, based
on the mentioned documentation, performs an anal- Before the start of construction works it is nec-
ysis of events and prepares plans. All significant essary to perform preliminary investigations and
events need to be followed by written documents. detailed analysis of the conditions for the execu-
Procedures of information flow are one of the first tion of works. Based on the gathered information,
steps that should be prepared and afterwards applied a selection of the optimal technology is performed,
in the “production” faze of works. These procedures separately for each kind of works. The practise
define the way in which gathering, distribution and shows that every kind of work can be performed
control of information will be performed. Modern in more than one way. Taking into account the
means of communication allow faster flow of in- conditions for construction of the actual building,
formation and make communication more efficient. there is always one which is optimal and economi-
Participants in the project usually exchange lists of cally most beneficial.
e-mail addresses for external communication. The choice of methods and defining the tech-
nological processes for construction, with an ap-
3. General information about the atlas propriate selection and sizing of work resources
capital center is the first step in determining the method and
sequence of work [5], [6], [7], [8]. Technology
Contract for construction of an exclusive resi- of works needs to be in line with the technical
dential and business building Atlas Capital Cen- and other necessary building site documentation.
ter (ACC) in Podgorica was signed according to Also, it is necessary to comply with the technical
FIDIC Conditions of Contract for Construction requirements for construction works and technical
– FIDIC Red Book. Investors of this grandiose specifications for materials and equipment which
building are the “Atlas Group” and “Capital In- will be installed.
vestment”, while the Contractor is the construc- The Contractor defines the technology of works
tion company “Bitermo Mng” Ltd whose parent in accordance with available:
company is “Bitermo” Ltd. from Portoroz. Project – machinery and means of work,
management, cost management and supervision – material,
are entrusted to the company “Mace” d.o.o. which – workforce,
is part of “Mace Group”.
The basis of the building has an area of about In order to achieve their optimum usage, re-
10,112.5 m2. The building has four underground quired quality of works and time for completion.
floors and, depending on the part of the building: Based on the above flow diagrams and process
six, nine or eleven above-ground floors. Area of the charts are defined.

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 technics technologies education management

Construction of reinforced concrete structure of

the ACC is an example of good organization and
technology of works. Using well-defined techno-
logical steps, 9581m3 of concrete and 735 tons of
reinforcement were successfully built into the foun-
dation slab during summer time with extremely
high temperatures, for only 75 days. In the four un-
derground floors 15,660m3 of concrete and 2,223.9
tons of reinforcement, were built into the structural
elements during a period of four months. With good
organization and proper selection of technological
steps, in the above-ground structural elements of
ACC complex, about 21.200m3 of concrete and
3.372 tons of reinforcement were built in. Works Figure 2. Preparation for concreting of reinforced
on the structure were completed within the planned concrete slab, pipes of stationary pump
time, meeting the designed quality.
At the beginning of the project, before the im- Method statement for reinforcement works in-
plementation phase, general technology of works cluded the number of reinforcement preparation
on the concrete structure, in line with the Concrete plants, the number of workers with data on their
Design, was prepared by the Contractor, and given needed qualifications, organizational chart, trans-
through the Method statement for the structure. port of materials, time schedule of production and
During the execution of works, there was a need accomplishment of works, method of installing,
for a more detailed Method statement for certain quality control and safety at work measures.
positions. Detailed descriptions of construction It was necessary to define the technology of
technology for carpentry, reinforcement and con- concrete works in details in order to prevent pos-
crete works, according to the types and positions sible problems during concreting. Description of
of works, were prepared. the method included the special procedures of pro-
Method statement for the carpentry work in- duction, delivery to the site and placing of con-
cluded a list of resources for the work, the number crete. Due to large quantities of concrete that had
of suitably qualified staff, the organization chart, to be placed the Method statement defined special
the process of setting formworks for certain posi- control procedures during:
tions of work, a detailed schedule, quality control – the production of concrete,
and safety at work measures. – transportation of concrete to the site,
– placing of concrete on site, and
– curing of placed concrete.

A more detailed description of the placing of

concrete was needed because of the size of the
building (the basis around 10,112.5 m2), and the
extremely high summer temperatures. In case of
emergency situations specific procedures and al-
ternative solutions were given. Figure 2 shows the
mean for transporting concrete to the place of its
incorporation into the structure, while Figure 3
shows phased progress of works on the concrete
structure of the business parts of ACC.
According to the positions that are concreted spe-
Figure 1. Concreting of the reinforced concrete cial method statements were defined for foundations,
foundation slab side walls, walls, cores, columns and floor slabs.

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 technics technologies education management

The complex geometry of the building, floor Control Plan in an efficient and appropriate man-
heights, overall height of the building and thick- ner. External control is conducted by the Supervi-
ness of floor slabs demanded preparation of a spe- sor. The Supervisor approves the proposed Meth-
cial method statement for the slabs scaffold. This od statements and Quality Control Plan.
method statement included the static calculation
of supports for the above-ground floor slabs. Due
to the large number of supports that were needed
on the building, in order to prevent disasters due to
damage of supports (geometric and material non-
linearities), and in order to receive horizontal forc-
es arising during the placing of concrete, the sup-
ports were linked by brace of tubular scaffolding.
This way of linking supports was very effective.

5. Quality control
Quality control during the construction works
should be organized and implemented in hierar-
chy levels, with defined responsibilities and ob- Figure 3. Works in progress on concrete blocks
ligations of each participant. Organization of the on the business part of ACC
quality control is proposed by the Contractor by
submitting to the Supervisor the Quality Control
Plan for each work position, individually. After
receiving the approval from the Supervisor, the
Contractor implements the plan.
The Quality Control Plan includes measures
and procedures for:
– review and audit of Quality Control Plan,
– purchase and control of materials and
equipment,
– control of transport and storage of materials
and equipment,
– control of documents,
– inspection and certification, Figure 4. Structure of the business part of ACC
– control of performance,
– implementation of regulations and standards, The works on the structure of ACC were per-
– communication and correspondence, formed by the Contractor and his subcontractors.
– problems of non-compliance (in case of Contractor and each Subcontractor appointed their
unsatisfactory quality) responsible persons to carry out internal quality
– solving the problem of non-compliance, control. During the external quality control of per-
– control of the Subcontractors formed works the presence of the responsible per-
– approval of procedures and measures. son of the Contractor was required. The following
procedures and types of controls were used during
Quality control is implemented through inter- the quality control of the foundation slab of ACC:
nal and external quality control. Internal quality 1. Preparation for works on foundations:
control is conducted by the Contractor and it in- Inspection of the foundation base is done by
cludes also the control procedure of Subcontrac- surveying methods of observation and measure-
tors. Contractor appoints a person, the quality ment. Internal control includes daily checks by
manager, responsible for performing the Quality Subcontractors and the occasional inspection by

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 technics technologies education management

the Contractor. This activity is a hold point for the External control is occasional and involves control-
Subcontractor and he needs a written permission ling of the flatness, thickness and quality of blind-
of the Contractor to continue works on the next ing concrete – number of taken concrete samples;
position. External control is occasional, associated 6. Installation of formwork and openings:
with control of following documentation and con- The control includes quality control of the
trol of the compression module of the substrate; formwork, its dimensions and positions. The
2. Blinding concrete d=8cm, Grade MB15: methods of monitoring, measurement and survey-
The inspection includes the control of surfaces, ing are defined in the detailed method statement.
dimensions and elevations, as well as the quality Acceptable criteria for approving are given in the
control of blinding concrete, where the methods of Project documentation. Internal control includes
monitoring, surveying and control of taking con- daily checks by Subcontractors and periodical
crete samples are applied in accordance with the control by the Contractor. External control is per-
Concrete Design. Internal control includes daily formed occasionally and involves controlling of
checks by Subcontractors and periodical control dimensions, positions and quality of formwork;
by the Contractor. External control is occasional 7. Montage of the lower reinforcement zone:
and involves controlling of the flatness, thickness The control includes quality control of rein-
and quality of blinding concrete – number of taken forcement, its dimensions and positions, where
concrete samples; the methods of observation and measurement are
3. Preparation of Bentofix waterproofing: defined in the Project documentation. Acceptable
The control includes control of materials, po- criteria for approving are given in the Project doc-
sitions and overlaps according to the detailed umentation - drawings of reinforcement. Internal
Method statement for this type of material where control includes daily checks by Subcontractors
the methods of observation and measurement are and periodical control by the Contractor. External
defined. Internal control includes daily checks by control is occasional and involves controlling of
Subcontractors and periodical control by the Con- dimensions, positions and quality of reinforce-
tractor. External control is occasional; ment - visual control and control of attest docu-
4. Acceptance of Bentofix waterproofing: ments. Also the control included taking reinforce-
Acceptance of waterproofing is done accord- ment samples;
ing to detailed Method statement for this type of 8. Montage of anchors for the columns and walls:
material where the methods of observation and The control includes quality control of anchors,
measurement are defined. This is a hold point for dimensions and positions, where the methods of
the Subcontractor, because the Contractor needs monitoring and surveying are defined in the Proj-
to perform a detailed inspection before the next ect documentation. Acceptable criteria for approv-
position of works can start. Contractor by signing ing are given in the Project documentation - draw-
the check list confirms that he has performed the ings of reinforcement. Internal control includes
control of this position after which the external daily checks by Subcontractors and periodical
inspection will be carried out by the Supervisor, control by the Contractor. External control is occa-
who also, by signing or commenting the list of ful- sional and involves controlling of the dimensions,
filment of conditions (check list) confirms that he positions and quality of anchors - visual control
has performed the inspection; and control of attest documents;
5. Blinding concrete d=8cm, Grade MB15 – 9. Montage of the upper reinforcement zone:
protection layer of waterproofing: The control includes quality control of rein-
Control includes the control of the surface, di- forcement, its dimensions and positions, where
mensions and elevations, as well as the quality the methods of observation and measurement are
control of blinding concrete, where the methods of defined in the Project documentation. Acceptable
monitoring, surveying and taking concrete samples criteria for approving are given in the Project doc-
are defined in accordance with the Concrete Design. umentation - drawings of reinforcement. Internal
Internal control includes daily checks by Subcon- control includes daily checks by Subcontractors
tractors and periodical control by the Contractor. and periodical control by the Contractor. External

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 technics technologies education management

control is occasional and involves controlling of procedures, especially for the quality of concrete
dimensions, positions and quality of reinforce- and number of taken concrete samples;
ment - visual control and control of attest docu- 13. Curing of concrete:
ments. Also reinforcement control samples are Control includes controlling of continuity of
taken, too; curing during the period set by the Concrete De-
10. Final positioning and setup, preparation for sign, all in accordance with the detailed Method
concreting: statement for concrete works. Internal control by
The control includes checking of the position, the Contractor is occasional. External control by
stability and cleanliness of reinforcement and the Supervisor is also occasional.
control of the equipment for concreting where An integral part of Quality Control Plan of the
the methods of observation and measurement are foundation slab is a “check” list or a list of fulfilment
defined in the Project documentation, including of requirements for concreting the concrete block of
surveying. Acceptable criteria for approving are the reinforced-concrete foundation slab. This list
given in the Project documentation and Method contains the work positions that are defined in the
statement. Internal control includes inspection by detailed Method statement which must be checked
Subcontractors and then inspection by the Con- as stated above, and verified by the responsible per-
tractor with filling the check list (list of fulfilment sons of the Subcontractor, then by the responsible
of requirements) for concreting and its submission person of the Contractor, and at the end, by the
to the Supervisor. External control by the Supervi- Supervisor. Verifying the check list the Supervisor
sor is occasional; confirms that he has performed the control in accor-
11. Acceptance of the concrete block for dance with the Control Plan. The list contains space
concreting: for comments of the Contractor and Supervisor.
The control involves verifying the correctness of During the execution of works on the structure of
executed works where the methods of observation ACC (Figure 4), a need for defining additional de-
and measurement are defined in the Project docu- tailed control procedures for vertical concrete struc-
mentation. Criteria for acceptance are given in the tural elements appeared. This inspection procedure
Project documentation. This is a hold point for the was created as a consequence of inadequate control
Subcontractor because the Contractor needs to per- of position of anchors for reinforced-concrete col-
form a detailed inspection before the next work po- umns and walls by the Contractor. Due to this ad-
sition can start. Contractor, by signing the “check” ditional control successful measures for correction
list, confirms that he has performed the inspection of the positions of anchors have been applied. The
of this position after which the external inspection procedure includes the following control steps:
is carried out by the Supervisor, who also by sign- 1. The Contractor is required to check the
ing or commenting the list verifies fulfilment of position of anchors for vertical elements
conditions for concreting. If the Supervisor does immediately after completed concreting
not agree or does not sign the “check” list, the Con- of reinforced-concrete slab. Surveying
tractor is obliged to amend the given objections and records are submitted to the Supervisor
then to repeat the control procedure; on the same day when the concreting took
12. Concreting of concrete block for reinforced place (regardless of whether the position of
concrete foundation slab d=90cm, Grade anchors is in compliance with the design, or
MB30: there are major or minor deviations).
The control includes the quality control of con- The record includes:
crete, dimensions and elevations, as well as the con- ○ Name of the element or part of the
trol of means for work. During the control methods structure, floors, etc..;
of monitoring and taking of concrete samples are ○ Document Number and date of issue;
applied in accordance with the Concrete Design. ○ Name and signature of authorized person.
Subcontractor performs sampling of concrete with
Contractor’s inspection. External control includes Depending on the case, the Supervisor in-
confirmation by the Supervisor of the above control dependently and / or in collaboration with

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the Designer of the structure, decides on the By signing of the check list the Supervisor,
measures for amending the established de- approves the concreting;
viations of anchor positions; 9. If necessary, the Contractor shall, during the
2. When the anchors are properly placed, concreting, perform the geodetic survey and
surveyors mark the position of the vertical control of the formwork;
elements; 10. Formwork is removed not earlier than 48
3. Before inviting the Supervisor, the Contractor hours after completion of concreting of a
shall check the mounted reinforcement and vertical element, all in accordance with a
other elements which should be installed. detailed description of the position;
Responsible person of the Contractor checks 11. Contractor, after dismantling of formwork,
whether this element is placed according to controls the verticality of concrete element.
designed documentation; In case of deviations, he immediately
4. When the mounted reinforcement is properly notifies the Supervisor in writing. After
placed, including the possible installation consultation with all parties (Supervisor,
of structural stirrups and other devices that Designer, Contractor) the Supervisor brings
are designed to maintain the reinforcement a decision on taking appropriate measures to
in the designed position before and during remedy identified deficiencies;
the concreting, the responsible person shall 12. Before mounting of formwork for slabs
notify the Supervisor that the concrete above the vertical elements an approval
element is ready for control and approval from the Supervisor is needed.
for concreting;
5. Contractor submits the check lists of By applying the above control procedures the
elements to the Supervisor with signatures quality of these works on ACC was raised to a
of the responsible person of the Contractor. high level.
Lists with invitation for control of elements
and approval for concreting shall be 6. Conclusion
submitted daily to the Supervisor from
9:00 am to 10:00 am and from 17:00 pm to With good organization and adequate choice
18:00 pm. Supervisor performs the control of working methods, together with constant
in a short period of time, not longer than 24 quality control of the execution of works, the re-
hours, after which he returns the lists to the quired quality within the planned period of time
Contractor; is achieved. Using special procedures for the se-
6. After confirmation that the reinforcement lection of materials, changes in the design and the
and other elements are mounted correctly, contracted Bill of quantities, result in better con-
the closure of formworks begins all in trol of the money flow and allow staying within
accordance with the design and details, the budget while meeting the designed quality.
with prior application of special material for Performed works on the structure of the resi-
connection between old and new concrete; dential and business building Atlas Capital Center
7. Contractor controls the set formwork and is an example of good organization. During the
checks whether its position is structurally period of 18 months 46,441m3 of concrete and
and geodetically correct (verticality 6,331 tonnes of reinforcement were incorporated
and its disposition). After this check the into the structure without any serious health and
responsible person of the Contractor signs safety problems [9], [10]. Construction contract
the appropriate positions in the check list; was signed according to the FIDIC Red Book. The
8. If all previous conditions are satisfied the size of the basis, geometry and dimensions of the
check list is submitted to the Supervisor at building required not only preparation of a general
least 6 hours before the scheduled start of Method statement for the construction of the struc-
concreting in order to allow him time for ture, but also the preparation of detailed Method
his control of formwork and scaffolding. statements for all work positions. According to

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 technics technologies education management

the Quality Control Plan an internal control was Corresponding Author

performed by the responsible persons of the Sub- Milos Knezevic,
University of Montenegro,
contractor and the Contractor, while the external
Faculty of Civil Engineering,
control was performed by the Supervisor. Quality Podgorica,
control was verified by the check lists containing Montenegro,
positions defined in detailed Method statements. E-mail:milosknezevic@hotmail.com
Control of works organized in this way resulted
in the achieved quality of the structure of ACC
which was completely in line with regulations and
the project documentation.

References
1. Fabris N, Kilibarda B. et.al. Foreign Direct Invest-
ments as an Initiator of the Economic Development
of Montenegro (working paper No. 16.). Central
Bank of Montenegro, Podgorica, 2008.

2. Law of Obligations, Official Gazette of Montenegro

No. 47/08, August 7th, 2008.

3. Law on Spatial Planning and Construction, Official

Gazette of Montenegro No. 51/08, August 22nd, 2008

4. Klepac J. Organization of Construction Works.

University of Zagreb, Faculty of Civil Engineering,
Zagreb, 1984.

5. Ćirović G, Mitrović S. Construction Technology,

Belgrade, 2008.

6. Muravljov M. Basis of the Theory and Technology of

Concrete. Građevinska knjiga ad, Belgrade, 2008.

7. Rakočević M, Žižić T, Burić V, Mrdak I. Technology

of construction works on the underground structure
of Atlas Capital Center. DGKS 13.Kongres,
September 2010.

8. Rakočević M, Žižić T, Burić V, Mrdak I. Technol-

ogy of Construction Works on the Above Ground
Structure of Atlas Capital Center. DGKS 13.Kongres,
Zlatibor, September 2010.

9. Prebiračević S, Rakočević M. Safety at Work Mea-

sures in Construction Industry. GNP 2010, Žabljak,
February 2010.

10. Prebiračević S, Rakočević M, Žižić T. Safety at

Work Measures During Construction of Atlas Capi-
tal Center in Podgorica. GNP 2010, Žabljak, Feb-
ruary 2010.

1578 Volume 8 / Number 4 / 2013

 technics technologies education management

Research of the rock mass influence on the

mechanized hydraulic support construction
(MHS) for the conditions in the underground
mine »Strmosten« RMU »Rembas«
Jovo Miljanovic, Slobodan Majstorovic, Vladimir Malbasic, Drazana Tosic
University of Banjaluka, Mining faculty Prijedor, Prijedor, Bosnia and Herzegovina.

Abstract The problem of rock mass controling is very

The mechanized hydraulic support, as a part of important because it can to exclude the possibili-
mechanized equipment complex for coal longwall ty of such type of excavation and inadequate and
excavation in last decades was the subject of re- not correct analysis may to inititate the choice of
search in our literature inadequate equipment and the improper structural
Interaction between the mechanized hydrau- parameters of stope construction[2].
lic support and rock mass is only possible to de- In complex and different conditions of coal
fine on the basic knowledge of the geotechnical mines in Serbia is applied a number and specific
properties of working environment and character- technical and technological solutions of undergro-
istics of mechanized hydraulic support. Accord- und exploitation processes with the continuos ef-
ing to importance and need for re-introduction of forts to be more adapted to the each ore deposit
mechanized complex in the underground mines conditions [3],[4].
of coal deposits in Serbia, the paper approached In the coal underground exploitation, for secure
the previous analysis of the problem as a whole (safer), more efficient, more reliable and more hu-
and connecting of natural- geological conditions mane work it is used the mechanized hydraulic
respectively understanding of their influence on support (MHS), as a specific type of equipment
the selection of the type and design of mechanical used for supporting the longwall stopes [5].
hydraulic support. Study of underground pressure to the stopes
During research and load calculation on mech- and hanging wall controlling are closely associa-
anized hydraulic support applied the finite ele- ted with development of new MHS construction.
ment method and experimental methods, with [6] Phenomenon of underground pressure on the
defined optimal methodology for the choice of stope have influence to the choice of mechanized
mechanized hydraulic support. Methodology of hydraulic support type or mechanized hydraulic
mechanized hydraulic support choice was applied support have a influence to appearance of un-
to the real conditions in coal deposits »Rembas«, derground pressure on stope.
in the underground mine »Strmosten«, and re- A reliable prognosis of underground rock mass
search results at this deposit were referred to the and mechanized hydraulic support interaction pre-
validity and necessity of methodological research sent a one of the primary conditions of successful
especially to each deposit. usage of MHS during longwall coal excavation.
Key words: rock mass, coal, mechanized hy- [7] This prognosis is possible to provide only on
draulic support, construction the basic knowledge of geomechanical properti-
es of working environment and the mechanized
hydraulic support characteristics.
1. Introduction
One of the basic parameters in the choice of
Coal exploitation by mechanized complex mechanized hydraulic support, which will have a
requires the solving of many problems in the un- favorable interaction with the rock massif is the
derground production system that have a influence choice of optimal support capacity, which is a one
to success of this procedure [1]. of the most important and also one of the most

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 technics technologies education management

controversial question of mechanized hydraulic research of mechanized hydraulic support stability

support choice for specific mining and geological conducted for excavation conditions of total thic-
conditions. [8] kness of coal seam in the one cut.[15]
For a long time there are the several approaches
of solving the problem of proper choice of MHS 3. The basic characteristics of deposit in
capacity. According to one of the approaches, it the underground mine »Strmosten«
is necessary to choose a mechanized support,
which reaction will prevent the excessive conver- Based on the results from geological research, it
gence, while the second approach not support the was found that deposit »Strmosten« is composed
choice with the maximum reaction, which would by lithological units, from the surface, Figure 1: [2]
completely prevent separation of the layers in the – The Pliocene and Quaternary sediments,
space above the forehead. By limiting factors in – Formation of Permian red sandstones,
the second approach there is a specific pressure on – Coal seam roof,
the hanging wall and floor of seam which shall not – The coal seam,
excees the strength of immediate hangingwall or – Floor of coal seam,
footwall.[9] – Basal series and
The use of different methodologies or procedu- – Cretaceous limestones with andesite
res for choice of necessary mechanized hydraulic intrusion.
support capacity in the world has caused a wide
range of mechanized hydraulic support types.[10]

2. The researh tasks, problem definition

and used software tools
In the process of mechanized longwall coal exca-
vation the mechanized hydraulic support is in con-
stant interaction with the surrounding rock masses.
[11] Mining method involves a continuous caving
of overcut massif behind the shield and stable exca-
vated area in front of shield during the disintegration
of coal cutting. [12], [13].The task of this study is to
define the influences of surrounding mass to support
during of excavation process in order to define, to
select, to check, the shield support construction for
conditions in deposit »Strmosten«. The second task
of this research was to define the maximum step of
development that will provide the stability of un-
supported stope in front of the shield. [14]
The research was conducted using a numerical
model of rock mass and support construction in
the process of stress-strain analysis by finite ele-
ment method.
For model research was used the finite element
program PHASE 2 V 6.028 from 18.06.2008. Ro-
cscience Inc Toronto. It is a specialized software
specially developed for stress-strain analysis of Figure 1. Lithological column of underground
the mining constructions. mine »Strmosten«
It is important to note that the stress-strain
analysis with using the finite element method and

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4. Stress-strain deformation analysis by

finite elements method
On the basis of the characteristic profile shown
in Figure 2., is designated a model of finite ele-
ments, Figure 3. The model is composed by 5605
triangular elements and 2876 nodes. In this model
is used a plane state of deformation and integrati-
on is done by the Gaussian elimination. The total
area up to the surface and gravitational stress field
was modeled. [8]
The top of model edge that represents the surface
of field was a free, and the left and right sides of
model has prevented movement from side and free
movement to the vertical, and the lower edge of the
models has prevented movement to up and down
and free movement from left to the right. Excava- Figure 3. Finite element model with boundary
tion in the second coal seam is modeled, with the condition
bottom of the excavation where was left non exca-
vated panel of coal 0,2 m thick and excavated height
5. Analysis of rock mass influence on the
without overcut of coal seam is 3,8 m. The thickness
support construction
of overcut coal seam which was obtained by draw
off to the front end conveyor is 2,0-2,5 m. [2] For the finite element model described above,
simulated the coal excavation by lonwall caving.
To determined the influences of the caved oversto-
pe mass on the support construction this process
was simulated in 12 phases with the six characte-
rized phases decribed in this paper, (Figure 4). The
first phase was modeled for intact rock mass to de-
termine the initial stress state. [8]
In the second phase was simulated excavation of
part of coal seam in the dimension of support con-
struction. In this phase has been set a support con-
struction which is simulated with a couple beams
(linear support). In the third, fourth and fifth phase
was simulated coal excavation behind the support
construction and caving of overstope massif. [13]
In the sixth phase was simulated the coal exca-
vation in front of support construction about 0.8
Figure 2. Geotechnical model of rock mass m long. In the next phases of 7 to 12, amount of
according to characteristic profile advance is increased to 0.2 per meter to determi-
ne the maximum amount of advance at which not
occur to caving of coal immediate roof in front of
support construction.

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 technics technologies education management

tecnological process were graphicaly represented

only come of the parameters in the characterictic
stages, which represent the state of rock mass and
support construction. Figures 5 and 6 give a grap-
hical layout of the maximum and minimum prin-
cipal stresses distribution in the rock mass around
Phase 1 the support construction in the characteristic sixth
phase of processing. In Figure 7 is shown the layout
of failure zone of rock mass, also in the sixth phase,
the crosses indicate the failure due to shearing and
the circles indicate the failure due to tensile. [8]

Phase 2

Figure 5. Distribution of the maximum principal

Phase 3 stress with the stress trajectories

Phase 4

Figure 6. Distribution of the minimum principal

stress with the stress trajectories

Phase 5

Figure 7. Layout of the failure zones of rock

mass (zone of plastification)
Phase 6
Figure 4. The phases of model processing In the characteristic sixth phase the support
construction state was presented with diagrams of
From calculated parameters of the massif sta- axial forces and the moments on support construc-
ges and support construction in the 12 phases of tion, Figure 8 and Figure 9.

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 technics technologies education management

The diagram provides an illustrative layout of In the hydraulic shield and hydraulic prop are
forces and moments with the maximum and mini- given the special diagrams of normal forces and
mum values. moments (Figure 11, 12, 13, and 14). What can
be seen at first view of these diagrams is a minor
loading of support construction at beginning of
work, immediately after installation (phase 2) and
load increase at the later phases.
By the analysis of loading in the hydraulic prop
of support construction can be observed a constant
increase of the normal forces and moments with ad-
vance of excavation, when it stop with increasing, it
stabilize in the sixth phase. Further increase of prop
Figure 8. Diagram of the axial forces distribution load (the phases of 7 to 12) refers to the various
in support construction amount of advance (from 0.8 to 2.0 m). The higher
amount of advance implies the higher load of hy-
draulic prop. In this case are the higher values of
axial forces in ratio to small moment values.

Figure 9. Diagram of the moments distribution

in support construction

For a more accurate analysis of support con-

struction loading was required the actual values Figure 11. Distribution of axial forces on the
of the forces and moments in the characteristic shield in the characteristic phases
elements of support construction during the chara-
cteristic excavation phases. [16],[17] Because that
the forces and moments was presented on the dia-
grams to read out the correct number values in the
desired locations for each characteristic technolo-
gical phase of excavation. For better identification
in Figure 10 are given the numbered marks of the
support construction segments.

Figure 12. Distribution of axial forces on the

hydraulic prop in the characteristic phases

In a case of shield the loading is more complex.

In ratio to the small initial loading after construc-
tion mounting (phase 2) after beginning of cav-
ing process is noticed a peak value of the normal
forces in the part of shield toward the ruined area,
the segments 4-12 and maintain of more and less
Figure 10. Numbered marks of the support their constant values for the all values of advance.
construction segments

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 technics technologies education management

On the other hand, can be noticed decline of nor- process of excavation and after that is determined
mal forces values in the other parts of construction the maximum amount of advance which provide
with increasing of advance. It is obvious the faster the stability of non supported stope in front of the
decrease of axial forces in the upper part of hanging shield. [19]
wall of the support construction. The distribution of The research is conducted using a numerical
moments has a different character. The high values model of rock mass and support construction in
of moments is retained in the part of shield toward the process of stress-strain analysis by method of
to the ruined area (segments 4-12) and relatively a finite elements.
small amount of moments in the other parts of con- For model are used the finite element program
struction. The moment values have a small changes PHASE2 V 6.028 from 18.06.2008. Rocscience
except in the places of connection of hydraulic cyl- Inc. Toronto, the specialized software for stress-
inder with roof and foor part of the shield. strain analysis for the mining constructions.
By analysis of calculated results is detrmined
that loading in the hydraulic prop of support con-
struction has a constant increase of axial forces and
moments with the advance of excavation, when it
stop to increase and stabilize in the sixth phase.
Further increase of prop loading refers to the
different amounts of advance ( from 08. to 2.0
m). Much higher amount of advance involves the
larger load of hydraulic prop. The values of axial
Figure 13. Distribution of moments in the shield forces is higher then values of moments.
in the characteristic phases In the shield, in ratio to a small initial load, af-
ter beginning of caving is noticed a peak value of
the axial forces in the part of shield to ruined area
and maintain (more or less) of their constant val-
ues for all amounts of advance.
On the other hand, it can be noticed that the val-
ues of axial forces decline in the other parts of sup-
port construction with increasing of advance. In
the part of shield to ruined area also retain the high
values of moments and relative small amounts of
Figure 14. Distribution of momentson the moments in the other parts of construction.
hydraulic prop in the characteristic phases Research results point to a strong connection of
physical and mechanical properties of rock mass
5. Conlusions and the choice of stope support construction, whi-
ch increases the importance and role of geomecha-
For the selection of the appropriate type and nical research.[20]
construction of MHS for coal exploitation by lon-
gwalls on the principle of the vertical concentra-
tions the researches were done under conditions
for coal deposits in the underground mine »Str-
mosten« for the excavatioon of main coal seam.
There also sholud be noted that this is a deposit
with the complex natural and geologicl conditions
and with planned exploitation of whole thickness
of coal seam in the one cut.[18],[19]
In this study is defined the influence of surroun-
ding rock mass to support construction during the

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References 13. Djukanovic D, Popovic M, Zecevic D. Ekonomic

effects of the waste use from coal separation in
1. Ivkovic M. Systematization of Natural and Geologi- the Ibar mines. Journal of Mining Engineering,
cal Conditions Affecting the Choice of the Under- No.1/2011, Bor, (in Serbian), 2011.
ground Mining System in the Active Coal Deposits in
Serbia. Journal of Mining Engineering, No. 2/2011, 14. Stjepanovic M. State of security and technical secu-
Bor, 2011. rity in the coal underground mines in Serbia, Jour-
nal of Mining Engineering No. 1/2001, Bor 2001.
2. Miljanovic J. Methods of selection the type and con-
struction of mechanized hydraulic support for the 15. Popovic R, Ljubojev M, Bugarin M. Basics Settings
conditions of coal deposit in Serbia. Belgrade, 2010. of Mechanical Models of Support Interaction in the
Rock Mass. Journal of Mining Engineering, No.1-
3. Miljanovic J. Influential Factors in Realization the 2/2006, Bor, (in Serbian), 2006.
Anticipated Coal Production in the Underground
Mines in the Republic of Serbia. Journal of Mining 16. Ljubojev M, Ivkovic M, Zecevic D. Solution of dis-
Engineering, No.1/2001, Bor, 2001. playing of overburding dumping on the stone-Coal
opencast mine Tadenje-Usce. Journal of Mining
4. Langovic Z, Bukumirovic D, Kadralija F. The Mine Engineering, No.2/2009, Bor, (in Serbian), 2009.
“Štavalj” - Mining and Investments by 2009. Mining
Engineering, No.1-2/2005, Bor, (in Serbian), 2005. 17. Ljubojev M, Popovic, R, Rakic D. Development of
Dynamic Phenomena in the rock mass, Journal of
5. Cokorilo V, Miljanovic J, Bogdanovic D, Denic Mining Engineering, No.1/2011, Bor, 2011.
M. The development of underground mining in the
world. Journal of Mining Engineering, No. 1/2001, 18. Stjepanovic M, Mitic R, Mitic S, Stjepanovic J. The
Bor, 2001. possible diseases and dangers with the mining prof-
fession. Journal of Mining Engineering, No.3/2011,
6. Ljubojev M, Popovic R, Ivkovic M. Rock mass defor- Bor, (in Serbian), 2011.
mation and subsidence of ground surface caused by
underground exploitation of ore. Journal of Mining 19. Milicevic Z, Svrkota I. Caving of coal roof - the most
Engineering No. 1/2001, Bor 2001. important phase of coal seam excavation. Journal of
Mining Engineering No. 1-2/2003, Bor 2003.
7. Magdalinovic N, Jovanovic R, Stanujkic D, Kalinovic
M. Optimization of mining project and production. 20. Ivkovic M, Mladenovic A. Modernization of coal
Journal of Mining Engineering No.2/2009, Bor 2009. underground exploitation in order to increase pro-
duction and staff protection. Journal of Mining En-
8. Torbica S, Cokorilo V, Milosavljevic V, Miljanovic J. gineering No. 1/2001, Bor 2001.
Study of rock mass control in deposit “Strmosten” by ex-
ploitation of mechanized complex. RGF, Belgrade, 2009.
Corresponding Author
9. Milicevic Z, Milic V, Vukosevic N, Svrkota I. Pos- Jovo Miljanovic,
sibility of change of excavation method in the under- University of Banja Luka,
ground mines in Serbia, Journal of Mining Engineer- Mining faculty Prijedor,
ing No. 1/2002, Bor 2002. Prijedor,
Bosnia and Herzegovina,
10. Sokolovic D. Risk identification in the mine design, ex- E-mail: miljanovic.jovo@gmail.com
ploitation and combustion of oil shale, Journal of Min-
ing Engineering, No.1/2010, Bor, (in Serbian), 2010.

11. Ivkovic M, Ljubojev M, Perendic S. Research of

working area condition in the order to introducing
of mechanized method of mining of I coal seam in
the underground mine “Lubnica”. Journal of Min-
ing Engineering No.1/2001, Bor, 2001.

12. Cosic S, Okanovic H. Modeling of stress-defor-

mation state using the numerical methods in the
longwall mining. Journal of Mining Engineering,
No.2/2010, Bor, 2010 (in Serbian);

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Differences in the maximum isokinetic strength

of lower extremities in elite and sub elite
footballers
Eldin Jeleskovic1, Haris Alic1, Gordana Manic2, Predrag Nemec3, Dragan Zivotic3, Munir Talovic1
1
Faculty of Sport and Physical Education, University of Sarajevo, Bosnia and Herzegovina,
2
Faculty of Health Sciences, University of Sarajevo, Bosnia and Herzegovina,
3
Alpha University, Belgrade, Serbia.

Abstract tactical knowledge, physiological, psychometric

and psychological factors [12,13] These are nec-
The aim of this study is to establish the differ-
essary qualities during the match and when in ball
ences in isokinetic parameters in a group of foot-
possession if a high level of play is to be kept within
ballers within different competition category. The
the 90 minutes of the match [14], resulting in quick
study required testing 160 footballers from two
responses and adjustments to new circumstances,
divisions (elite and sub elite), with the help of iso-
and regulation of mental attributes before and dur-
kinetic parameters of 7 different variables.
ing the match. All these abilities are manifested on
The parameters show the difference in the
a higher or smaller scale, depending on the level of
Structure Matrix of discriminant function and data
the game, positions within the team and the style of
which support the differences in these categories,
the game. These likewise vary according to the age
all in favour of the elite division footballers, who
groups, genders and different aspects of the foot-
have a greater performance of strength character-
ball season. The basis of first class performance in
istics detected by the isokinetic instruments.
football can be presented by a variety of skills and
However, the fact that these parameters of both
tactical sense of each player. Coaches must grow
divisions are not within the limits, tell us that prac-
and incorporate tactical knowledge in a profile of
tical training is not directed towards development
top players, because the success of the entire team
and maintenance of those areas that can cause dis-
depends on how collective of individual players
turbances in football achievement.
becomes an effective and compound entity [15].
Key words: Isokinetic, footballers, differenc-
When two teams of equal technical and tactical
es, two divisions.
abilities meet, the one psychologically prepared and
with a higher level of motor and conditional skills
Introduction will prevail, allowing them to have the highest and
most dynamic performance [16]. number of authors
Bosnia and Herzegovina is a country of a domi-
[3,12] consider football an aerobic and anaerobic
nant sport culture and tradition [1], where love to-
sport. Thorough observation of the game reveals
wards football is expressed emotionally, by athletes
high aerobic load in footballers, and research has
and other participators in sport events [2]. Playing
shown that an overall intensity during the game is
football requires certain skills, knowledge and abil-
at the limit of anaerobic threshold, therefore we can
ities which are manifested through the game [3, 4,
categorise football as an aerobic sport [4] Likewise,
5 ] . The game demands a lot from the participants
training enhances the running efficiency, as well as
if we take into account that a footballer breaks into
endurance, where as a result we can draw a con-
sprint every 90 sec. [6] where every sprint lasts
clusion that force and strength represent significant
from 2 to 4 seconds. In addition every footballer
characteristics in footballers [16].
changes direction during the game from 1000 to
The aim of this study is to conclude the dif-
1400 times [6, 7, 8, 9, 10, 11]. Football consists of a
ferences in isokinetic parameters in the group of
number of attributes and competencies, it is multi-
footballers in different competition category.
variational and specific comprising of technical and

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 technics technologies education management

Methods Thigh muscle strength was measured under

isokinetic conditions using Biodex isokinetic dy-
Subjects
namometer (Biodex Corp., Shirley, New York) in
For the purpose of this study we used a group
concentric-concentric mode according to standard
of footballers in the junior category (U19) sampled
testing protocol for subjects in sitting position. Prior
from 8 football clubs (4 clubs – 80 footballers- B&H
to every test the machine was calibrated, ROM was
elite division and 4 clubs -80 footballers Entity youth
set at 90º and a warm up consisting of bicycle run
league), which equals a total of 160 subjects.
and stretching of quadriceps and hamstring muscles
Sample variables were applied. A more specific warm up consisting
Using isokinetic testing for measuring muscle of 3-4 sub maximal repetitions at the testing speed
potential of knee stabilizers, we acquired informa- of 60 deg/sec for both quadriceps (knee extensors
tion regarding knee extensor and flexor muscle - KE) and hamstring (knee flexors - KF) muscles
potential and their correlation. in order to prepare subjects for regular testing. Af-
Variables which include potential of leg exten- ter 2 min the subjects performed 4 repetitions of
sor muscle: maximal voluntary contractions of thigh muscles.
– Maximum momentum of the right leg The same person conducted all measurements and
extensor muscle (KE-R) the same protocol for both legs was used [17, 18]
– Maximum momentum of the left leg Relative peak values of thigh muscle torques were
extensor muscle (KE-L) recorded: right and left knee extensors (KE-R and
KE-L respectively) and right and left knee flexors
Variables which include potential of leg flexor (KF-R and KF-L respectively).
muscle:
Data processing methods
– Maximum momentum of the right leg flexor
In order to distinguish the differences in maxi-
muscle (KE-R)
mum isokinetic strength of lower extremities in elite
– Maximum momentum of the left leg flexor
and sub elite footballers in junior category, multi-
muscle (KE-L)
variate analyses of variance, and dicriminant analy-
sis was used for establishing of how much certain
Variables which include the correlation be-
variables contribute to the observed difference.
tween the extensor and flexor muscle potential:
– The ratio of muscles (hamstring/quadriceps)
of the right leg (H/Q-R) The results
– The ratio of muscles (hamstring/quadriceps) The analysis of Table 1. shows that there are
of the left leg (H/Q-L) statistically significant differences between elite
and sub elite footballers once you compare the
Tests for evaluating balance variables of the maximum momentum for front
– Stability Index (IS) and back side of the both thigh muscles, while
there are no statistically significant differences in
muscle ratio and stability index.

Table 1. Test for differences among the group means

Variables Wilks’ Lambda F df1 df2 p
KE-R 0.912 14.147 1 146 0.000
KE-L 0.924 11.996 1 146 0.001
KF-R 0.950 7.625 1 146 0.006
KF-L 0.954 7.076 1 146 0.009
H/Q-R 0.998 0.344 1 146 0.558
H/Q-L 0.998 0.264 1 146 0.608
IS 1.000 0.022 1 146 0.883

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 technics technologies education management

Table 2. Box test results

Test Results
Box’s M 81.572
Approx. 2.764
df1 28
F
df2 71491.156
p 0.000
Table 3. The significance of the isolated discriminative function
Function Eigenvalue % of Variance Cumulative % Canonical Correlation
1 0.158a 100.0 100.0 0.370
Table 4. Wilks’ Lambda
Wilks’ Lambda
Test of Function(s) Wilks’ Lambda Chi-square df p
1 0.863 20.939 7 0.004

Using Box’s M test (table 2) we tested the simi- Position of group centroids (table 6) clearly
larity of covariance matrix in two subsamples [19] states the differences in isokinetic parameters be-
i.e. among elite and sub elite subjects. It is notice- tween two divisions, likewise supported by the
able that there is a considerable difference in the discriminant analysis.
covariance matrix (p<.01), which allows for fur- Table 6. Group centroids
ther procedure in discriminant analysis. Function
Applying the discriminant analysis within the Division
1
limits of isokinetoc parameters (Table 3) one dis-
I division -0.369
criminative function has been isolated since it is II division 0.423
statistically relevant (p<0.01), while the canonical
correlation coefficient is low on the scale (0.37).
Table 4 demonstrates high value of discrimi- Discussion
nant force of applied variables (Wilks’L=0.86). With the help of discriminative analysis of the
The structure of discriminant function (Table differences in isokinetic parameters in groups of
5) shows that the variables used for the assess- different divisions, we can conclude that the values
ment of maximum momentum of right and left tested by isokinetic dynameter show the differenc-
leg extensor and flexor muscle have contributed es between elite and sub elite divisions. Variable
to the differences on the global scale in isokinetic coefficients which contribute to the statistically
parameters between the players of different divi- relevant difference of the above mentioned groups
sions, where all the variables are negative. This are the variables of the maximum rotational mo-
concludes that all the resulting differences go in mentum for the right and left leg, front and back
favour of elite division. side of the lower leg. The coefficients of variables
Table 5. Structure of discriminant function in the muscle ratio and stability index do not con-
Function tribute to the differences in two divisions.
1 There were a number of studies whose main
KE-R -0.782 goal was to analyse the strength parameters of
KE-L -0.720 thigh muscles within a healthy population. [20]
KF-R -0.574 conducted a research of male and female subjects
KF-L -0.553 divided into two age groups (younger and older),
H/Q-R 0.122 with a purpose of displaying functional character-
H/Q-L -0.107 istics in front and back thigh muscle, and how the
IS -0.031 ageing affects the muscle strength. The group con-

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 technics technologies education management

sisting of younger male subjects, not physically we perform testing of the same group in a number
active, exhibits an average value of peak torque of different velocities, where the relation between
of 206±46 Nm for extensors and 92±12 Nm for agonists and antagonists is measured. This contri-
flexors. In similar study [21], a group of healthy bution is relevant with acyclical sports, with sports
sport students were isokinetically tested using two where certain muscle groups prevail in strength
velocities (90°/s and 180°/s) separately for the left [29, 30] and in performing martial arts [31].
and for the right leg. The results for the velocity Once this parameter is taken into account we
of 90°/s are as follows: the right leg 145.38 Nm can conclude that a thigh’s back side deficit com-
and 99.25 Nm (quadriceps, hamstring) and the pared to its front side deficit with elite division
left leg 143.44 Nm and 99 Nm (quadriceps, ham- footballers equals to 13 % while sub elite division
string). The results for the velocity of 180°/s are: deficit equals to 12 % for the right foot. The left
the right leg 119.13 Nm and 98 Nm (quadriceps, foot ratio is bigger in comparison, with elite divi-
hamstring), left leg 115.75 Nm and 98.25 Nm sion footballers it equals to 15,24 % and 16,18 %
(quadriceps, hamstring). [22] have analysed judo- for footballers in sub elite division.
kas, footballers and students in establishing vari- The parameters indicate the difference in the
able in strength of the thigh muscle and shoulders. matrix structure of the dicriminative function and
The differences were significant in relation to the they provide data which accounts for the differ-
students, where judokas dominated in strength of ences in these groups, that footballers of elite di-
the upper extremities for both groups. visions are stronger, i.e. they have a higher level
Isokinetic dynametar can give us results based of performance abilities detected by the isokinetic
on which we can draw conclusions whether there dynameter. However a very important parameter
is an imbalance between the front and the back is the muscle ratio of the two thigh muscle groups
side of a thigh muscle, and between the left and the which should not exceed 10% because if the value
right leg [21, 23] Exactly these measurements will is higher, there is a higher possibility for injury.
serve for the discussion in establishing the differ- Kicking the ball can cause unilateral imbalance
ences between elite and sub elite divisions, since between flexor and extensor thigh muscle, where
these parameters assess the quality of skill and ef- as a result a specific strength of quadriceps is man-
fort in strengthening of lower extremities among ifested. From this aspect we can state that sub elite
tested clubs. Isokinetic diagnostic is significant footballers are exposed to a higher risk of injury
in preventing injuries and damages to muscular- than the elite footballers, even though both divi-
skeletal system [24, 22, 25, 14] , Drapsin and co- sions are located within the ‘red’ zone. Data also
authors, 2013 which is of grave importance to the reveals the imbalance between dominant and non-
athletes whose system of movement has great re- dominant leg (with elite footballers : DN 13%,
quirements. However, even in this age, the knee is NDN 15,24%; with sub-elite footballers: DN
the centre of attention, which reflects a great de- 12%, NDN 6,18%), which in football can occur
velopment in the knee and shoulder surgery, reha- not just as a consequence of innate dominant leg,
bilitation after trauma and operation [26,27]. but by a badly developed kick technique of a non-
Ratio of flexor and extensor knee muscle is a dominant leg.
relatively good indicator of normal-physiological This all indicates that the clubs do not have a
balance in the strength of knee muscle antagonist, training system for improving strength, and that
but it greatly depends on the speed of isokinetic the specific training activities are not enough to
testing [28]. Testing smaller speed (0º/s – 60º/s) increase abilities, they have led to a state of mus-
equals to 50 % - 60% depending on the group cle imbalance due to constant use of a dominant
tested and the testing instrument. Unilateral rela- leg while performing each specific game element.
tionship (agonists /antagonists) in thigh muscle is There is a big possibility that a number of elite
marked as “H/Q ratio“. The correlation between footballer’s training units have contributed to
agonists and antagonists can point to the weakness quantitative differences in isokinetic parameters
within a certain muscle group. The significance of favouring elite footballers. The fact remains that
this comparison is brought to our attention when the logic of the football game and its demands are

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conditioned by divisions and their quality, includ- ence to development of fatigue. Journal of Sports
ing game requirements, training conditions, coach Science, 2003; 21: 519-528.
expertise, and requirements of training units. 7. Bangsbo J, Nørregaard L, Thorsø F. Activity profile
of competition soccer. Canadian Journal of Sport
Conclusion Science, 1991; 16: 110-116.

The position of centroid groups clearly indicates 8. Bangsbo J, Nørregaard L, Thorsø F. The effect of
carbohydrate diet on intermittent exercise perfor-
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ball players aged 10-12. Serbian Journal of Sports
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achievements, and the deficit and not just the abil-
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13. Joksimović A, Smajić M, Molnar S, Stanković D. An
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501-536. 17. Gleeson NP, Mercer TH. The utility of isokinetic
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5. Radoman M, Smajić M. The importance of the ele- function. Sports Medicine, 1996; 21(1): 18-34.
ments of game stoppage for the final score of a
football match. Serbian Journal of Sports Sciences, 18. Madsen OR. Torque, total work, power, torque ac-
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6. Mohr M, Krustrup P, Bangsbo J. Match performance sor and flexor strength measurements. European
of high-standard soccer players with special refer- Journal of Applied Physiology, 1996; 74: 206-210.

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19. Rađo I, Wolf B. Metode za klasifikaciju u sportu. 31. Drid P, Drapšin M, Trivić T, Bratić M, Obadov S.
Sarajevo: Fakultet za fizičku kulturu. 2002. Thigh muscles flextion/extension ratio in elite judo
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Faculty of Sport and Physical Education,
21. Dervišević E, Hadžić V, Karpljuk D, Radjo I. The University of Sarajevo,
influence of different ranges of motion testing on Sarajevo,
the isokinetic strength of the quadriceps and ham- Bosnia and Herzegovina,
strings. Isokinetics and Exercise Science, 2006; E-mail: jela_13@hotmail.com
14(3): 269-278.

22. Radjo I, Mekic A, Drapsin M, Trivic T, Kajmovic H,

Drid P. Isokinetic strength profile of shoulder rota-
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23. Drid P. Teorija sportskog treninga. Novi Sad:

Fakultet sporta i fizičkog vaspitanja. 2012.

24. Drid P, Drapsin M, Trivic T, Lukač D, Obadov S, Mi-

losevic Z. Asymmetry of muscle strength in elite ath-
letes. Biomedical Human Kinetics, 2009a; 1(1): 3-5.

25. Drid P, Ostojic S, Vujkov S, Purkovic S, Trivic

T, Stojanovic M. Physiological adaptations of a
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Nichols CE. Treatment of anterior cruciate liga-
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Drid P, Radjo I. The effects of rehabilitation on ath-
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Knee flexion strength and H/Q ratio in high – level
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concept for isokinetic hamstring/quadriceps muscle
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range eccentric antagonistic/ concentric agonist
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 technics technologies education management

Research of correlation between reliability

and safety factor
Mileta Ristivojevic1, Dragan Radovic2, Dragan Markovic1, Zoran Stamenic1, Djordje Jovanovic2
1
University of Belgrade, Faculty of Mechanical Engineering, Serbia,
2
Faculty of management, Sremski Karlovci and University Union - Nikola Tesla, Belgrade, Serbia.

Abstract The growing complexity of machine construc-

tions requires higher costs of development, produc-
Machinery quality is increasingly being ana-
tion and exploitation. Thereby, the machinery op-
lyzed from reliability, environmental and energy
erational reliability becomes significant measure of
efficiency point of view. As a basic measure of
quality [1, 2, 3, 4, 5, 6]. High reliability significant-
machine parts quality, from the aspect of volume
ly reduces the maintenance costs, but at the same
and surface capacity, safety factor becomes the
time it also requires great economic inputs in cre-
function of desired reliability. Analysis of ma-
ation of machine constructions. For that reason, the
chine parts capacity, on the basis of safety factor
appropriate analysis from techno-economic aspect
only, sometimes implies “overengineering” which
is necessary. It should provide the most economic
can result in irrational and excessive mass.
consumption of material and production time of re-
The aim of this paper is to establish the func-
liable machine constructions [7].
tional dependence between safety factor and reli-
Due to the lack of systematized data of applied
ability. Based on it, more accurate boundary val-
and critical stress distribution, the conventional cal-
ues of safety factor can be defined. The influences
culations of machine parts on the basis of safety fac-
of basic statistical indicators of operational and
tor are still dominant [8, 9, 10, 11, 12]. Until the new
critical stress, its mean values and dispersions, on
calculation methods for machine parts capacity on
safety factor, are analyzed in this paper. On the ba-
the basis of reliability are founded, it is necessary to
sis of the results obtained, the quality of machine
establish the appropriate dependence between safety
constructions can simultaneously be evaluated
factor and reliability. In that way, the machine parts
from two criteria: factor of safety and reliability.
quality would be checked on the basis of these two
Key words: machine part, operational stress,
criteria, from the aspect of load capacity.
critical stress, dispersion, reliability, safety factor.
The dependence between reliability and safety
factor, under the normal distribution of operational
1. Introduction and critical stress, is investigated in this paper. The
impact of standard deviations of operational and crit-
Today’s explosion of technological achieve-
ical stress is analyzed, when they are equal and dif-
ments has brought a large number of different
ferent. In addition, the influence of the relationship
products. These products have enabled much more
between mean operational stress and its standard de-
comfortable life on the planet. At the same time,
viation was also considered. Based on dependences
the level of comfort has become a direct function
obtained, it is possible to define boundary values of
of reliability. For that reason, the decision to buy
safety factor for the appropriate reliability.
a new product or not, depends from one question:
how reliable is it? Unreliability results not only
with high costs and lost of time, but it also generates 2. Safety factor and reliability as the criteria
great psychological effects. Psychological effects of operational ability
of unreliability have a great impact on consumers’
Quality of machine constructions depends on
confidence. If a household appliance or a car breaks
the quality of its components, subassemblies and
down frequently, the manufacturers of those prod-
assemblies. These qualities are considered on the
ucts will quickly lose the customers, i.e. the market.
basis of technical and economic criteria. Techni-

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cal criteria, criteria of operational ability include and influence of safety. High values of safety fac-
the requirements of load capacity (volume and sur- tor imply unnecessary increasing of dimensions
face), then the requirements of stiffness and stabil- and mass for the machine parts, as well as great
ity. The machine parts load capacity is in the first material waste. All of this is reflected on weak
place, among the conditions of operational ability. economic effect of the final machine construction.
Analysing machine parts operational ability from Too small values of safety factor in dangerous
the aspect of load capacity, two boundary condi- cross sections of a machine part, can lead to the
tions needs to be defined. Operational condition, critical condition appearance.
corresponded to operational requirements and criti- Conventional approach to design, based on safe-
cal condition, corresponded to critical occurrences, ty factor, provides very high reliability. It is most
under which machine part cannot perform its func- frequently achieved by increasing the dimensions,
tion. Therefore, physical value that is authoritative i.e. mass. At the time of economic and energy crisis,
for describing these boundary conditions, needs to there is a less space for such designs. Therefore, it is
be recognized. In case of strength conditions, those necessary, in accordance with the required reliabil-
are the stresses: operational and critical. ity, to accurately quantitatively define the appropri-
The criteria of operational ability of machine ate boundary values of safety factor.
parts, from the aspect of the load capacity is defined The parameters, which are the starting point in
on the basis of safety factor by the ratio of average determining the safety factor, have statistical na-
values of the critical [s ] and operational stress s : ture, which means that they have a whole range of
values. Number of cases where the variability of

S=
[s ] ................................. (1) these values is equal to zero, is small. Critical and
operational stresses are random values, Figure 1.
s
Their distributions are described by standard dis-
The studies aimed to obtaining as accurate persion Sσ, S[σ] and mean stress values s , [ s ],
evaluation of operational ability of machine parts Figure 1. Accordingly, it follows that the values
as possible, on the basis of safety factor from the of safety factor, determined by the expression (1),
aspect of the load capacity, are pointed in two are valid under the assumption that mean values
directions: towards determining operational and of the stress (both: critical and operational), are
critical condition as accurately as possible (in or- generated simultaneously. This assumption has a
der to obtain a more accurate evaluation of the random character, which means that the values of
safety factor value), and towards as accurate as safety factor are random as well. The assumption
possible evaluation of boundary values of safety is, that after a certain period in exploitation, due
factor that provide sufficient operational ability of to the change of operational conditions, there was
machine parts in exploitation conditions. a change of standard deviations of the operational
Selection of minimal values of safety factor and/or critical stress.
represents one of the most responsible and diffi-
cult tasks in the analysis of machine parts opera-
tional ability.

n
S min = ∏ a i ............................. (2)
i =1

where:
ai -are the influential factors on boundary val-
ues of safety factor.

Among the most important influential factors Figure 1. Mutual position of the functions of
are: accuracy level of the operational and critical operational and critical stress distribution for
stress values, then the influence of material quality S>1 and R=1

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 technics technologies education management

Such determined boundary values of safety x = [ s ] – s ............................. (4)

factor provide optimal design from the aspect of
rational mass and load capacity. New distributions In accordance with the functions of operational
of critical and operational stress are shown in Fig- and critical load distribution, the expression (3)
ure 2. In case of these distributions, mean values can be written as:
of operational and critical stress are the same as
in case of distributions shown in Figure 1. In ac- ∞
∞ 
cordance with the expression (1), values of safety R = ∫ f (s ) ∫ f [s ]d [s ] d s ............... (5)
factor have remained the same, despite the fact −∞ s 
that distributions of operational and critical stress
overlaps, Figure 2. According to the convention- In accordance with the expression (2), for distri-
al procedure, this critical case of overlapping of butions of operational and critical stress, shown in
critical and operational stress distributions is most Figure 1, the reliability from the aspect of the load ca-
frequently overcome by prescribing higher bound- pacity is maximum R=1, and for distributions shown
ary values of safety factor. In that way, due to the in Figure 2, it is less than maximum value R<1.
increased values of machine parts dimensions, the In order for the verification of operational abili-
intensity of operational stress is reduced, which is ty of machine parts, according to the conventional
procedure, and on the basis of safety factor, to be
reflected on the increase of distance x , Figure 1. more efficient from the aspect of rationality of the
This increasing of difference, between mean mass and failure appearance, it is necessary to de-
values of the critical and operational stress should fine boundary values of safety factor on the basis
prevent the occurrence of overlapping of critical of reliability criterion. For that purpose, it is nec-
and operational stress distributions. Boundary val- essary to establish the appropriate dependences
ues of safety factor are usually evaluated empiri- between reliability and safety factor.
cally, without enough reliable data. Because of this,
it may occur that, in altered operational conditions,
the case of distributions shown in Figure 1, gets 3. Correlation between safety factor and
transformed into the case shown in Figure 2. reliability in conditions of normal of
operational and critical stress distribution
In case of normal distribution of operational
and critical stress, the expression (5) can be writ-
ten in the following form:
∞ z2
1 −
R=
2π
∫e
z
2
d z ........................ (6)

where:
Figure 2. Mutual position of functions of operation- x −x
z=
al and critical stress distribution for S>1 and R<1 Sx
............................ (7)
Relation to the criterion of safety factor, which x = [s ] − s
represents a ratio of mean values of critical and
operational stress, the criterion of reliability is de- Based on (1), and for ξ=0, the expression (7)
fined by the probability that the critical stress is for the standardized random quantity can be writ-
higher than operational stress: ten in the following form:

R= p (x > 0 ) ............................. (3) S − 1 ........................... (8)

z = −r
1 + q2
where:

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 technics technologies education management

where S is safety factor and Based on the results obtained, we can get the
following conclusions:
s S [s ] With the increase of safety factor, reliability is
r= q= ......................... (9)
Ss Ss also increased. In addition, sensitivity of the reli-
ability to the change of safety factor is the highest
Based on the expressions (5) and (8), the depen- in the area of small values of safety factors (Fig’s.
dence of safety factor and reliability for different 3, 4 and 5).
values of parameters r and q, can be analyzed. The The reliability sensitivity to the change of safe-
overview of these dependences is shown in Fig’s 3, ty factor is rapidly reduced, when safety factor
4 and 5. reaches boundary value. These boundary values
of safety factor depend on the parameters of op-
erational and critical stress distribution.
Based on dependences shown in Figures 3, 4,
and 5, we can identify boundary values of safe-
ty factor after which sensitivity of reliability to
the change of safety factor is changed negligibly
small. High values of reliability, which are close
to maximum value, correspond to these boundary
values of safety factor.
Based on dependences shown in Fig’s. 3, 4 and
Figure 3. Dependence of reliability and safety 5, it can be observed that the reliability sensitivity
factor on the parameters of operational and critical to the change of safety factor mostly depends on
stress distribution for ρ=5 and q= (0,5; 1; 2) the size of the ratio of mean value of operational
stress and its standard deviation, and the relation-
ship between standard deviations of operational
and critical stress is significantly small. In addi-
tion, when s /Sσ > 20, the influence of the ratio
of standard deviations of critical and operational
stress is negligibly small.
Based on the model, developed for each specif-
ic case of machine part, accordingly to the neces-
sary reliability, we can determine the correspond-
Figure 4. Dependence of reliability and safety fac- ing boundary values of safety factor.
tor on the change of operational and critical stress
distribution parameters for ρ=10 and q=(0,5; 1; 2) 4. Conclusion
Based on the formed functional dependence
of safety factor and reliability, we can much bet-
ter evaluate the operational ability of machine
parts from the aspect of volume and surface load
capacity. Gradient of the change (sensitivity) of
reliability is the highest in the area of small val-
ues of safety factor. The gradient intensity mostly
depends on the relation between mean value of
operational stress and his standard deviation. In
Figure 5. Dependence of reliability and safety case of boundary values of safety factor, gradient
factor on the parameters of operational and critical of reliability line is negligibly small. The optimal
stress distribution for ρ=20 and q= (0,5; 1; 2) dimensions of machine parts, from the aspect of
mass rationality, correspond to these boundary

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 technics technologies education management

values of safety factor. Machinery composed of 10. Shigley J. Mechanical Engineering Design. Mc-
such machine parts is significantly better in eco- Graw Hill, New York, 1986.
nomic, energy and environmental aspect. 11. ISO/CD 6336-2 Calculation of surface durability
(pitting), 2003.
Acknowledgments
12. ISO/CD 6336-3 Calculation of tooth bending
This research has been developed within the strenght, 2003.
activity of the Projects TR35029 and TR35034, fi-
nanced by the Ministry of Education and Science Coresponding Author
of the Republic of Serbia Mileta Ristivojevic,
University of Belgrade,
Faculty of Mechanical Engineering,
References Belgrade,
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681-5, 2009; 43-49.

2. Zuo M.J. Optimal Reliability Modeling: Principles

and Applications. John Wiley and Sons Chichester,
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3. Kuo W, Velaga R, Tillman FA, Hwang CL. Optimal

Reliability Design: Fundamentals and Applications.
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4. O’ Connor P. Practical Reliability Engineering. John

Wiley and Sons, Chichester, UK, 1996.

5. Kapur KC. Techniques of Estimating Reliability at

Design Stage. Handbook of Reliability Engineering
and Management. McGraw-Hill, New York, 1995;
241-243.

6. Tavakkoli-Moghaddam, Safari R, Sassani JF. Reli-

ability optimization of series-parallel systems with a
choice of redundancy strategies using a genetic al-
gorithm. Reliability Engineering and System Safety,
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7. Klarin MM, Spasojevic Brkic VK, Sajfert ZD, Brkic

ADj, Curovic D. Methodology of physical occurrenc-
es analogy in researching vehicle lifetime. Technics
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819-828.

8. Nniemann G, Winter H, Hohn B. Maschinenel-

emente. Band 1,Springer, Berlin, 2005.

9. Sajfert Z, Ristivojević M, Rosić B, Radović D. The

Influence of Gear Parameters on the Surface Dura-
bility of Tooth Flanks. Jurnal Strojarstvo, Zagreb,
ISSN 0562-1887, 2011; 53(5): 281-290.

1596 Volume 8 / Number 4 / 2013

 technics technologies education management

Investments in science and technology as the

key factors of the economic development
Nebojsa Djokic1, Ljiljana Arsic1, Borislav Radevic², Zoran Milicevic1
1
Faculty of Economics, Universitiy of Pristina, Serbia,
² State University of Novi Pazar, Serbia.

Abstract development, and the ability to absorb those re-

searches in practice is the basis of the future pros-
Investments in science and technology are the
perity. The most important in all is that knowledge
motor in the development of economy and society.
is the key resource in the 21st century.
This paper presents a comparative analysis and
The question is if the EU does invest enough in
benchmarking of the results of the leading world,
science and technology?
EU economies and the economy of The Republic
Researches have shown a slight increase in the
of Serbia has also been done. Lisbon strategy was
investments of the EU in this area, unlike its Asian
started as an answer to globalization. The idea was
competitors who have intensified their investments
to see the EU and its member countries cooperat-
made a 20% increase [1]. Over the period 2000-
ing in the reforms that were set with the goal to
2009 investments stagnated from 1,85% of GDP in
enable growth and greater number of work posi-
2000 to 2,01% of GDP in 2009. After the continuous
tions by investing in the intellectual capital, thus
fall during the first half of this decade in the USA
overcoming the recession and turning the EU into
investment in research and development have be-
a sustainable, greener and more innovative econo-
gun to grow since 2005 up to 2,76% of GDP, while
my. The EU has revised its growth strategy for the
Asian countries have invested more than 3,44% of
period after 2010 by the introduction of further re-
GDP (good examples are South Korea, Japan and
forms at all levels. The new strategy tends to help
China). In the absolute sense the EU has invested
the EU in overcoming the crisis and its movement
225 trillion EUR, the USA 310 trillion EUR or 40%
towards the knowledge based society. There are
more than the EU, whereas Japan, China and South
three key growth agents lying in the basis of the
Korea have invested 34 trillion EUR more than the
new strategy that should be implemented through
EU in retrospective [2]. This gap between the econ-
defined activities at national and EU levels: a
omy of the EU and the other advanced economies
smart, sustainable and inclusive growth. This
is bigger in the last decade which can compromise
battle for growth and new work positions requires
its present and future competitiveness.
acceptance of this strategy at all levels and the mo-
Crisis and lack of scientific talents are the key
bilization of all participants all over Europe. On its
reasons for the development of the so called “blue
way towards the EU Serbia must synchronize its
card“ by the EU. Similar to the American model
growth strategy with those requirements if it really
of the “green card“ it should enable Europe to pre-
wants to join up the EU family.
serve and take over a part of the world’s scien-
Key words: Investment, science and technol-
tific talent. The USA are planning to double their
ogy, economic growth
expences for science over the forecoming decade
which shall additionally encourage the immigra-
Introduction tion of the scientific talent from all over the world.
The best and biggest talents shall be valuable and
Investment in knowledge is of crucial impor-
at the range of the many [3].
tance for research and development. High invest-
The world’s economic crisis in the 2009 has left
ments in research and development are the gen-
deep consequences. The fall of the GDP of 4,2%,
erators of development of economy and society.
particularly the great fall of the industrial produc-
Researches of private and public investments in
tion, has brought Europe back to the level of the
scienca and technology are the pre condition for
90s of the previous century. It has also had a great

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 technics technologies education management

impact on the economy of Sebia, foreign trade behind the developed countries, as well as behind
exchange with the European countries making up the countries in its immediate surrounding.
to 85% of the total exchange with the rest of the One of the key goals of the Lisbon agenda was
world. In 2009 export was reduced by 19,8% com- that only one third of the planned 3% of GDP should
paring to 2008, whereas import was reduced by come from the budgets of the Euripean countries
30,2% for the same period. The aim of the paper and the EU, and two thirds should be investments
is to analyse investments in science and research of economies in research. Even though all Europe-
in the EU as compared to their main competitors. an countries are not close to the fulfillment of this
Special attention shall be given to the state of the goal, the European average shows that only 35,4%
investments in science and technology in The Re- investments in science have come directly from the
public of Serbia which is a EU candidate. budget, 54% from economy and 10,6% from other
national and international sources.
State in the EU in 2010. Some countries, such as the USA, Sweden,
Germany, Switzerland and China have already
In March 2000 The European Council made an achieved that the investments of their economies in
appeal in Lisbon, asking that the old continent in- science make up to two thirds of their total invest-
crease its funds for research and development from ments. In Japan the part of economy has reached
1,9% to 3% of GDP in 2010. Two years after Lis- the record 76,1%. Even the countries of the EU
bon, The Action Plan regarding to the increase of the have achieved considerable investments of the pri-
level of investments in research and development vate sector in science: in The Check Republic 54%
was ratified. The average annual funds for science of the investments in science come from industry,
in the USA are 2,6% of GDP, in Japan it is 3,3%, in in Estonia 38,5%, in Hungary 39,4% and in Roma-
China 1,3%, in Russia 1,1%, whereas the average of nia 37,2%. The consequence of such trends is that
the European countries was 1,84% (Figure 1). scientific researches are not done solely at universi-
ties and state science institutes, which has enabled
the employment of a considerable number of sci-
entists in the private sector where some of the most
advanced scientific researches are taking place.
In 2007 the EU invested 6,6% of GDP in uni-
versity education, whereas the USA invested
9,2%, Southh Korea 9,2% and Japan 7,5% of their
wealth. In the evolutionary sense South Korea
intensified its annual investments by 2,5% from
2000 to 2007, Japan and the USA for 0,1 to 0,4%.
In 2009 more than 30% of population aged 25-34
in the EU had university education, whereas the
same percentage in South Korea and Japan was
over 57%, which is definitely important for the ap-
plication and use of the research results (Figure 2).
Figure 1. Evolution of R&D Intensity, Over the last decade the numer of doctorate ti-
2000-2009. [2] tles for the people aged 25-34 was around 110.073
in the EU, 63.712 in the USA, 16.296 in Japan and
One of the biggest concerns is the fact that The 9.369 in South Korea. When it comes to the gen-
Republic of Serbia is considerably behind the rest der structure among the doctorate titles, the situa-
of the countries in its surrounding which, apart tion is positive, for in the EU 45% are women.
from Albania, invest over 0,5% of GDP, whereas Comparing to the other developed economies,
Slovenia, the Check Republic and Croatia invest EU has the biggest number of researchers in the
over 1% of their GDP. Thus, comparative analysis world today (1.5 million researchers). What should
shows that The Republic of Serbia is considerably be taken into account is the fact that European re-

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 technics technologies education management

searches mostly work in the public sector, whereas of energy efficiency by 20%. Reduction of the
in the USA 80% of the researchers and more than early dropping out from school by 10% was also
60% of the researchers in Japan and South Korea planned, as well as the increase of the number of
work in private companies. This initiates many is- citizens with university diplomas to 40%, as well
sues within the total development. as the reduction in the number of people living be-
low the line of poverty by 25% [5].

The State in The Republic of Serbia up to 2010

On its way towards the EU The Republic of
Serbia must model and implement its develop-
ment strategy by taking into account the require-
ments of the Lisbon agenda [6], in order to pro-
vide a sucessful reform. Crisis brings to surface all
the basic structural problems in the economy and
society of Serbia.
Firstly, the average growth pf GDP of 5,4% over
Figure 2. Share of population aged 25-34 having the previous period was achieved due to two fun-
completed tertiary education, 2000 and 2009. [2] damental macro-economic disbalances. This can
definitely not be sustained over the forecoming
In the EU small and medium companies domi- period. The growth up to 2009 was based, primar-
nate and are the key actors in the economy. Chang- ily, on home demand, whereas the part of exports
es in the structure of the economy also condition was mere 25%. About 80% of the economy growth
investments in research and develpment. Howev- came from sectors that produce inexchangeable
er, small and medium companies make small in- goods (telecommunications, trade, financial servic-
vestments in research and development, this being es), and over 70% of direct foreign investments was
the case with 99% of the EU companies. Success- alocated to these three sectors. On the other hand,
ful economies are characterized by the appearance total consumption was about 25% bigger compared
of the new and fast growing companies, this being to the achieved GDP. This difference was covered
the case with Japan where large conglomerates are from import financed by privatization incomes and
dominant. The new stratedgy reinforced in 2010 credits from abroad. Already in 2008, before the
named “Europe 2020“ [4] is a replacement for the crisis, all this led to the record deficite in the foreign
Lisbon agenda form 2000 which did not make the trade and the current balance of payments.
EU “the most dynamic world economy based on Another important problem is the low level of
knowledge“, which was its primary goal. Poor education and investments in human resources,
monitoring of the national reform programmes is research and technological development, these
considered one of the greatest weaknesses of the being the base for fast economy growth. Serbia
Lisbon strategy. This was corrected in The New invests 4,5% of GDP in education and about 0,3%
Strategy which stipulates strict monitoring. The of GDP in science. However, over 90% of these
new strategy is “the strategy for a smart, sustain- funds is used for salaries of the employeed in these
able and inclusive growth“. It interconnects three sectors, whereas a smaller part is used to cover the
prioritized areas and five main goals. The five huge needs for investment in development. In-
main goals by 2020 are: the increase of the level vestments in education and science infrastructure
of the employed among the population aged 20 to and equipment have been modest over the past 20
64 from 69% to 75%; the increase of the percent- years and their quality is at an extremely low level.
age of the GDP intended for education from 1,9% Furthermore, the results seen in the qualification
to 3%; reduction of the gas emission causing the structure of the human resources, thier skills, the
greenhouse effect by 20%, the increase of the part number of registered pattents etc., do not meet the
of renewable energy sources by 20% and the level demand of the market, which points to the inef-

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ficient spending of already small funds. It is, thus, towards the creation of the science and research
necessary, to speed up the reforms initiated in offspring. Women make up to 43% of the total
these areas, which directs the focus of growth to- number of researchers, making the scientist gen-
wards those sectors that have bigger added value. der structure positive and better than in most of the
The third problem is the ever growing falling European countries. Bearing in mind the negative
of Srebia behind the countries of the EU when it demographic trend in The Republic of Serbia it is
comes to the availability and quality of infrastruc- particularly important to preserve and create new
ture, road infrastructure not being the only one, scientists, all this being conditioned by good uni-
but also energetic, telecommunication, logistic versity education policy as well. The current 8%
and public service infrastructures as well, and all of the university educated compared to the total
that is necessary to attract investments [7]. population cannot provide development in The
Finally, Serbia is facing serious demographic Republic of Serbia.
problems. Like in most European countries there One of the important issues in the preservation
has been a birth tendency over the past few de- and strenghtening of the science community is the
cades that does not provide simple reproduction emigration of the university educated people. In
in the population, this causing depopulation and the period between 1990 and 2000 73.000 inhab-
visible demographic aging. These conditions re- itants left The Republic of Serbia, 17000 of this
duce the number of the working population and bearing a university diploma. The main reason
increases the coefficient of economic dependence. for the emigration of the scientists besides bigger
The vision of The Republic of Serbia is to be- salaries were better research conditions. Students
come an innovative countries where scientists going to their master and doctorate studies make
reach European and world standards, contribute to a great number of young people leaving The Re-
the total level of knowledge in the society and pro- public of Serbia (14% of the university educated
mote technological development of the economy. emigrants). Since 2000, emigration has continued,
Low level of science productivity is one of the and around 50.000 people have left Serbia, 2.000
biggest obstacles to The Republic of Serbia on its of them bearing a university diploma.
way towards economic development and com- The greatest number of people with university
petitiveness. In the area of technological devel- degrees who have left the country work in the ar-
opment, apart form biotechnics and agricultural eas of technical and technological sciences (infor-
industry which get 12,3 milion euros annually, no mation technology) or the natural sciences.
other area gets more than 5 milion euros a year. Over the period between 2001 and 2010 re-
Total science budget of The Republic of Serbia is searchers in Srebia have achieved highly encour-
around 100 milion euros (The Institute for Nucle- aging innitial results in the international and tech-
ar Science “Vinča“ gets around 12 milion euros) nological cooperation. Basic programmes, frame-
which cannot even be compared to some big uni- works and instruments [9] realized are the Sixth
versity centres or institutes in the world with bud- and the Seventh framework programmes of the
gets over one billion euros. EU, COST, EUREKA, and programmes of The
What should be emphasised is that Serbia has International Atomic Enery Agency, UNESCO, as
no scientist among the top 5000 most quoted sci- well as the bilateral cooperation programmes.
entists in the world, no university among top 500
in the world, whereas Slovenia has one such uni- Investments in science and technology as
versity in the list and New Zeland has five. pre-conditions for economic development
According to The National Statistics Institute
[8] there are 10.220 rersearchers in The Republic Many papers (theoretic and empirical) point to
of Srebia, 8.800 working on the projects of The the crucial importance of science-research (SR)
Ministry of Science and Technology Development and research-development (RD) as well as inno-
(MSTD). The average age of a researcher is 44,3 vation activities as growth generators in the ar-
which is more than the average age of the popula- eas of employment and competitiveness, and the
tion and indicates the need to undertake activities results of SR and RD activities and innovations

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 technics technologies education management

are ther base for the development of the economy In order to change the present state, The Re-
and the state. According to numerous studies, the public of Serbia must set a goal and act in order to
level of efficiency to be reached which sets a faster realize it, similar to what the EU has done.
rhythm of support to the SR and RD as well as Support to the SR and RD as well a innova-
innovation activities in a state is 1% of the GDP. tion activities is considered base in the strategy
Only a small number of states in the EU – 15 have adopted by The European Council (in Lisbon in
not reached the level of 1% for SR and RD activi- 2000 and Brussels in 2010) with the aim to realize
ties in the GDP of the state. When talking about the goal of the EU as a dinamic economy based on
countries that joined in the EU in 2003 – 12, only knowledge, with a sustainable economic growth,
Romenia, Bulgaria and Malta have not achieved with more job positions and better life conditions
0,5% by the year 2005. On the average, countries (Table 1 shows examples of national priorities in
of the EU have spent 1,84% of the GDP on SR and the leading world economies).
RD activities, i.e. 412 euros per inhabitant. When In The Republic of Serbia analysis of science
takinhg into account countries of the Wester Bal- areas has identified seven national priorities in the
kans Hrvatska stands out with 1,22%, whereas The domain of science and technology that can be ap-
Republic of Serbia with 0,3% and Macedonia with plied in the development of economy as well [7]:
0,24% still fall far behind the level of 1% [10]. – Biomedicine;
Besides expenses for SR and RD activities, indi- – Ner materials and nanosciences;
cators of the hired human resources in SR and RD – Environment protection and climate changes;
systems complete the picture of the scale of devel- – Energetics and energy efficiency;
opment resources in a country. The average number – Agriculture and food;
of FTE (Full Time Equivalent, or “the equivalent – Information and communication technologies;
of the full time employees“) researchers per 10.000 – Promotion of state decisions and affirmation
inhabitants in the EU is 24,8%, in Slovenia 19,19%, of national identity.
in Croatia 16,07%, whereas The Republic of Serbia
has less than 11,55%, this being somewhat better Science in Serbia can have positive effects only
than the situation in Macedonia with 7,05%. if it adopts a unique national innovation system.
What is interesting is that the EU with 1.2 mil- The Republic of Serbia, with a hundred milion
ion in 2005 did not catch up with the USA (al- euros of state investments in science a year and
most 1.4 milion) when it came to the number of almost none from economy has more reasons to
FTE researchers, and that China was very close to focus its efforts on the science-research work.
the EU (1.1 milion). The number of 11,55% per The annual budget of The Republic of Serbia is
10.000 inhabitants in Serbia make mere 8600 FTE ten times smaller than the budget of any important
researchers, which points to the necessity of sig- university or institute in the world.
nificant increase of university educated resources In order to ensure development in the fore-
in SR and RD sectors in The Republic of Serbia. coming period, Serbia must implement the ad-
For The Republic of Serbia, investment in opted strategy and rely on the given priorities in
knowledge is the only way towards a sustainable order to provide the necessary number of young
economy and society. Serbian export is character- people dedicated to research activities. One of the
ized by unfavourable sector structure. Products pre-conditions for it is the consistent enrollment
from the lower production stages dominate, mostly policy and efficiency at universities with priori-
raw materials and semi-products. Intermediatory ties in the areas of science and technology in The
products make up to more than 50% of the total Republic of Serbia. In the Republic of Serbia uni-
income. When one adds energy and other goods versity education can be gained at seven accred-
export (mostly agricultural goods) it can be no- ited state universities (with 83 faculties), eight pri-
ticed that the sector structure of the Serbian export vate universities (with 46 faculties) and six high
is highly infavourable (one of the measures of the schools of academic studies. The number of the
economic policy that should improve it is to encour- enrolled students (238.710) has been doubled over
age the founding and development of clusters) [11]. the past ten years, as well as the number of the

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graduated students (29.406). However, the ratio der to make the EU an attractive place for invest-
between the enrolled and graduated students is ments and work, open new work positions and en-
concerning [12]. Enrollment policy has brought able growth by greater investment in knowledge.
up to the inadequate number of enrolled students Bearing in mind the problems global economy is
in professional and science areas in regard to the facing due to the economic crisis at the beginning
needs of development of sceince and technology. of this decade, as well as the particularities in the
For example, the ratio of the graduated students growth of Serbian economy up to 2010, it is nec-
at The University of Belgrade in 2006/2007 was: essary to define clearly the current position of The
social-humane sciences 45,5%, technical-technol- Republic of Serbia and where it wants to be. The
ogy sciences 31,5%, medical sciences 16,9% and first step in the process is to define a concept and
natural-mathematical sciences 6,0%. The ratio of general directions of development. The new indus-
the graduated students according to science areas trial policy must be defined through the process, as
is similar at all other universities as well. Bear- well as the conditions for the growth of competi-
ing in mind the success in studies so far, it can tiveness and easier integration into the common
be expected that the number of graduated students market of the EU. The concep of development of
is 20% of the enrolled. In the Republic of Serbia The Republic of Serbia should comprise all social
this is one fifth of 250.000, i.e. 50.000 graduated and economic aspects, rise the level of social in-
students a year. At the institutional level, in the volvement of all levels of society, define clear so-
forecoming five year period at least one university cial policy of the country in the next decade and
from The Republic of Serbia should enter the list enable Serbia to become the factor of stability and
of 500 top universities in the world[13]. safety in the region. In order to achieve all this,
The Center for Technology Transfer has been it is necessary to change the political, legal and
started, its primary goal being to enable a faster economic ambient which should be in the service
transfer of technologies, as well as to help and fas- of the economic growth and general welfare of the
ten the development and usage of innovation poten- population, the government of the law and protec-
tials in NIO, as well as in technological economic tion of freedom and rights of the citizens.
societies. Furthermore, it is necessary to enable
partnership within the system through rationaliza- References
tion of the network of science-research organiza-
tion and closer cooperation of institutes and facul- 1. Povrenovic D. Analysis of innovative activities in
Serbia. The Educational Resource Center, the Intel-
ties. Science societies are the next important factor
lectual Property Office, ATC Beogad, 2011; 27.
in the polarization of science-research activities,
for they gather young researchers and scientists, 2. http://ec.europa.eu/research/innovation-union/pdf/
thus being one of the most important factors in the competitiveness-report/2011/ chapters/overall_pic-
popularization of science at the local level. A more ture_chapter_2.pdf .
intensive cooperation with science societies shall 3. www.europa.eu.int/comm/off/white/index_en.htm
have influence on the growth of interest among the
young to start up science-research activities as well 4. Europe 2020. A Europan strategy for smart, inclusive
as to work on the application of the results of such and sustanable growth, European Commission, Brus-
activities in economy [14]. sels, http://ec.europa.eu/eu2020/, 3.3.2010.

5. Strategy Guide to Europe, European Movement.

Conclusion www.emins.org/gr/publikacije/knjige/11-vodic-kroz-
evropu2020/pdf. 2020.
Unfulfilled strategic goals of the Lisbon Agen-
6. www.europa.eu.int/comm/agenda2000/index_en.htm
da on the development of the EU by 2010 are the
base used to define a new short term strategy that 7. Serbian 2020, Concept of the Republic of Serbia un-
should also mend any consequences left by the til 2020. http://www.predsednik.rs/mwc/pic/doc/ SR-
crisis and recession. The new strategy must enable BIJA 20FINAL% 2018122010.pdf . December, 2010.
a sucessful reform and adequate action plans in or-

1602 Volume 8 / Number 4 / 2013

 technics technologies education management

8. Statistical Yearbook, RSO, Science, 18: 339-370.

9. Law on Scientific Research Activity, 110/05 and

50/06 OGRS

10. Scientific technological development strategy of

Serbia in the period from 2010 to 2015. Focus and
Partnership, Ministry of Science and Technological
Development of Serbia, June 2009, adopted by the
RS Assembly 25.02.2010.

11. Clusters in the strategy of Scientific and Techno-

logical Development of Serbia for the period from
2010 to 2015. Official Gazette of the PS, 2010; 13.

12. Ministry of Education Republic of Serbia,

www.mp.gov.rs.

13. http://www.srbija.gov.rs/vesti/dokumenti_sekcija.
php?id=45678

14. Premovic J, Arsic Lj, Premovic T. The knowledge

society and knowledgebased economy. Proceedings
of the međunarosnog Scientific Conference: Tech-
nology, information and education-for learning and
knowledge society, 2011; 81-87.

Corresponding Author
Ljiljana Arsic,
Faculty of Economics,
University of Pristina,
Pristina,
Serbia,
E-mail: ljiljana.arsic@pr.ac.rs

Volume 8 / Number 4 / 2013 1603

 technics technologies education management

Effective risk management liquidity and

general standards of liquidity
Jovo Jednak1, Dejan Jednak2, Goran Milosevic3, Srdjan Milasinovic3, Nedzad Korajlic4
1
Project Management College, Belgrade, Serbia,
2
Privredna banka Beograd a.d., Belgrade, Serbia,
3
The Academy of Criminalistic and Police Studies, Belgrade, Serbia,
4
Faculty for Criminal Justice, Criminology and Security Studies, University of Sarajevo, Sarajevo, Bosnia and
Herzegovina.

Abstract like other risks that threaten the solvency of finan-

cial institutions, liquidity risk is a normal aspect of
Liquidity risk is the risk of adverse effects (un-
daily management of financial institutions, i.e. of
expected losses) on financial results and equity due
banks. In extreme cases, the problems of liquidity
to bank’s inability to properly fulfill its obligations.
risk are developing in the problems of solvency risk.
Risk management is very important, given that the
Liquidity risk is less subjective to formal types
insolvency of one bank can have far-reaching ef-
of risk measurement, than market, credit and oper-
fects on the entire financial system and the global
ational risks. Also, the Basel Committee on Bank-
environment, as confirmed by the crisis in the U.S.
ing Supervision - BCBS did not introduce any
mortgage market, which began by subprime loans
formal forms of equity compensation for liquid-
in 2007 and then spilled over to the entire world.
ity risk, although it was concluded:”Liquidity is
Many debt holders refused or were unable to stop
crucial for any bank organization willing to have
their investments creating huge problems of fund-
capital sustainability in business activities. Bank
ing for financial institutions. These problems are
capital positions can have an effect on their ability
exacerbated their difficulties to sell their assets to
to maintain liquidity, especially during the crisis
secure financial resources. This paper analyzes the
periods” [1]. Therefore, it is of particular impor-
sources of liquidity, including liquidity risk and as-
tance for the financial institutions to assess, moni-
set liquidity risk financing (funding). Liquidity of
tor and manage the liquidity risk.
assets is analyzed as the ability to generate cash,
depending on market conditions, spread (bid-ask
price) and the impact of the market, and the time 2. Sources of Liquidity Risk
horizon of liquidation, and the value at risk (VaR) The lack of liquidity may cause bankruptcy of
is extended to VaR adjusted liquidity. Funding li- financial institutions, even if it is technically sol-
quidity risk analysis, based on an assessment of the vent (i.e., when the value of assets exceeds the val-
basic structure of liabilities and off-balance sheet ue of the liabilities). Commercial banks have an
items, using gap analysis, emphasizes the impor- inherent imbalance between the liquidity of their
tance of contingency planning functions financing, assets (long-term) and their liabilities (deposits
practical experiences of managing liquidity risk and and debt capital market instruments). As a result,
introduction of general-Basel III liquidity. the crisis of confidence may initiate depositors to
Key words: liquidity, liquidity of assets, require the withdrawal or immediate money pay-
spread, funding liquidity risk, financing gap, li- ment. Even though the bank has sufficient funds to
quidity risk management and Basel III. cover deposits, it might not be able to liquidate its
assets quickly enough, and to affordable price, in
1. Introduction order to meet the demands of depositors.
Liquidity is defined as the ability of financial in- Liquidity risk includes the liquidity risk assets
stitutions to provide funds for the growth of assets, and funding liquidity risk. The Committee of Eu-
on the one hand, and to meet its liabilities without ropean Banking Supervision (CEBS) gives the
gaining unexpected losses, on the other hand. Un- following definitions [2]:

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 technics technologies education management

The liquidity risks of assets, also referred to as treasury funds market, this function is a flat line,
the liquidity market/product risk, is the risk when meaning that a large number of transactions does
the situation cannot easily be solved or compen- not affect much its price. Suppose that Si is the rel-
sated, in the short terms, without significant im- evant proportion of market-offered spread under
pact on the market price because of inadequate normal market conditions of the i financial instru-
market depth or market disruption, and ment, owned by the financial institution and αi is
The liquidity risk of financing or funding is the value (in Euros) of the instrument position, then
current or potential risk arose from the inability the cost of liquidity may be calculated using the fol-
of financial institutions to cover its debts and ob- lowing equation:
ligations as their due dates approach, as well as to
avoid unacceptable losses. The liquidity cost i (normal market) = ∑
n
1
S i a i .....(2)
(2)
i =1 2

3. Liquidity Risk Assets

If a financial institution transactions bills of
a) The assessment of liquidity risk assets. To as- 20 million Euros at a cost of one-half of the re-
sess the liquidity risk assets, it is necessary to clas- quired-offered 0.10% spread, it will make the cost
sify market conditions for the traded assets. The of 20000000 Euros x 0.10% / 2 = 10000 Euros,
bid-ask spread measures the costs of buying and which is very low.
selling transactions of some assets quantity, within In contrast to this, in non-liquidity assets,
the normal market size – NMS. If P (ask) is asking spreads are wide and transactions may affect the
price, P (bid) offered price, then P (mid) is aver- price in the prompt manner. The liquidity measure
aged (market) price = [P (requested) + P (offered)] is the cost of liquidity in stressed market condi-
/ 2, and the proportional spread is defined as: tions in a given period, namely:

S = [P (requested) – P (offered)]............... (1) n

1
The liquidity cost i (stressed) = ∑ ( m i + ë i + s i ) a i (3),
P (averaged) i =1 2

..........................................(3)
Assets with good liquidity will have a sparse
spread. Scarcity or tightness is a measure of differ-
where: μi and σi are the standard deviations of
ence between the actual transaction price and the
the proposed proportional sought-front spread, and
market averaged price. Assets with liquidity are
the parameter λi shows the required level of con-
characterized by good market depth, which is a
fidence for the spread. For example, bank loans,
measure of possible trading volume with no big im-
which are traded over the counter (OTC) may have
pact on the price (i.e., the offered prices). In contrast
spread of up to 10%. Selling assets of 20000000
to this is a shallow market with its consequences.
Euros would then lower the price by 5%, giving
For larger transactions, the liquidity of assets can
the cost of 20000000 Euros x 10% / 2 = 1000000
be estimated on the basis of price-quantity function,
Euros, which is much higher than in the previous
which is called the impact of the market, and in-
example. Selling of the ​​twice as much amount
cludes the impact of the amount of transactions to
(40 mil. Euros) would cause even greater decline
the price of assets. Sometimes this is called endog-
in prices of about 10%. Therefore, the prices of
enous liquidity, which means that the fall in prices
non-liquidity assets are more affected by current
depends on the size of positions. In contrast, the po-
demands and supply conditions. As a result, they
sition of the normal market size is characterized by
are much more variable than liquidity assets, if it
exogenous liquidity. When a large block of assets of
ever comes to a trade. In addition, the last example
the liquidity markets is sold, prices may temporar-
shows that the liquidity is the function of the time
ily be lowered, but should quickly be restored or
horizon. If the price-quantity function is steep, im-
recovered. In this sense, resistance is a measure of
mediate sale would significantly reduce the cost.
the front where price fluctuations in trading affect
Patient investor can get a better price by distribut-
their drop. For highly assets with liquidity, such as

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ing the sales orders to some extent, in days, thus traded on centralized exchange markets, such as
creating less impact on market prices. Figure 1 [3], futures and common stocks, can easily be resold to
shows the comparison of price-quantity function the highest bidder, and therefore are very change-
for liquidity and non-liquidity assets. For liquidity able. By contrast, private negotiation of deriva-
assets, spread (supply-demand) is small, since the tives requires agreement of the parties in order to
market has greater depth, including more markets trade, and one of the parties may request a dis-
of normal sizes, and the lines of the impact of the count in order to nullify positions.
market posses lower slopes. It can be concluded that the liquidity risk as-
sets depend on several factors: (1) market condi-
tions (demand-offer spread and market impact),
(2) time horizon of liquidation, (3) the type and
price of assets and securities, and (4) interchange-
ability of assets. In addition, the lack of liquidity
may depend on market and time. However, major
changes in market liquidity occur regularly, in-
cluding the credit crisis that began in 2007. Crises
are often characterized by a flight to quality, which
occurs when there are changes in demand from
low-ranked to high-ranked securities, especially
to government bonds. Low-ranked market then
becomes insolvent with declining prices. This re-
Figure 1. Comparison of liquidity and non-liquidity
flects to the increase in the yield spread between
assets
corporate and government securities issue.
b) Liquidity adjusted VaR. Liquidity risk assets
Generally, assets that have higher trading vol-
is less susceptible to formal methods of measure-
ume are of a higher liquidity. The volume of trade
ment than the traditional market risk. Non-liquidity
transactions reflects different views of investors,
could be included in the measurement of VaR, by
but also depends on the presence of active specu-
increasing the time horizon or a selective increase
lators, particularly hedge funds that are active in
in volatility. However, these adjustments are gen-
multiple markets, thus increasing the market li-
erally ad-hoc. Therefore, we can try to incorporate
quidity. The individual assets price depends on
the effects of the spread (supply-demand) into risk
the average market price, number of selling as-
measures. When the spread S is fixed, liquidity ad-
sets, selling rate and economic conditions. In ad-
justed VaR can be defined as:
dition, assets with easily determined price are of a
higher liquidity, such as treasury bills with fixed
 1 
coupons, unlike structured notes with complicated L V a R = V a R + L1 = W a s + (S) ....... (4)
(4)
 2 
payments, that are much more difficult to assess
and hedge. The spread of such notes will be much where: W is initial wealth or the value of the
broader than the bills. Liquidity is variable for portfolio. If the VaR measures from zero (relative
some classes of assets and may be specific to the to the initial value of the portfolio), we have to
securities. Securities that have a higher outstand- subtract μ from αs, in the eq. (3). Supposing that
ing amount or were issued recently, are more ac- we have a 10 million Euros invested in 30-year
tive and show higher liquidity, and are referred to treasury bills with daily variability of s = 1% and
as on-the-run securities. Because they have the the spread of S = 0.10%. One day LVaR at a confi-
same credit risk (defined by the government) and dence level λi of 95% is
market risk (both have the 30 years maturity), their 20 million Euros [1,645 x 0.01) +1 / 2 (0.0010)]=
yield spread has to be a liquidity premium. = 329000 Euros + 10000 Euros = 339000 Euros.
In addition, the costs of assets liquidation de-
In this case, the correction is small. In the for-
pend on its exchangeability. Contracts that are
mer case, the correction was 1000000 Euros, for

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 technics technologies education management

a bank loan. If the spread supply-demand varies why the spread increases sharply. Eurodollar of LI-
significantly, eq. (4) can be adapted to take into ac- BOR and Treasury is known as the TED spread. It
count the worst case, i.e. the spread growth at some maintains the expected credit losses as well as li-
level of confidence. Distribution of the spread can quidity risk premiums.
−
be described as its mean S and standard deviation
ss values. The worst case of LVaR is:

−
LVaR = VaR + L2= W[αs + 1/2 ( S +α¢ ss)]...... (5)

Adding the higher losses for market and liquid-

ity risk, the correlation between these two risk-
driving forces were effectively shown. In prac-
tice, the assessment of the spread distribution is
a real challenge. Spread tends to be stable for a
long time, and then to explode in times of crisis.
To measure the risk at the highest level, the risk
manager needs to assess the correlation along the Figure 2. Comparison of interest rates in the
spread, but with the amount of transactions in the short term
normal market size. Otherwise, the immediate
forced sale of large amounts of assets would also Figure 2 shows the behavior of the interest rate
exert markets influence. during the critical period of 2007 and 2008 in the
United States. A rapid reduction in the federal fund
rates shows that the Federal Reserve supported the
4. Financing (Funding) Liquidity Risk
implementation of aggressive and expansionary
a) Indicators of financing liquidity risk. Liquidity monetary policy. The yields of treasury bills were
risk was the main risk factor in the credit crisis that also reduced. However, LIBOR rates remained ex-
started in 2007. As the commercial and investment tremely high, reflecting the overstrained conditions
banks began to accumulate losses initially due to in the credit market. In particular, the TED spread,
subprime of loans supported by securities, secured which is usually about 25 bp, was rapidly growing,
with subprime asset-backed securities, banks were running up to 500 bp after the bankruptcy of Lehm-
reluctantly providing loans fearing that the other an on 15 September 2008. Companies with volatile
party would not fulfill its duties. Accordingly, the loaning rate had to face even higher rates, if they
conditions in the monetary market can be evaluated were even able to provide any form of financing.
by comparing the three-month rate for bills, three- b) Estimations of funding liquidity risk. Basel
month LIBOR rate and state funds (reserves). To Committee provides a clear definition of liquidity
ensure comparability, all rates are expressed in the risk financing [4]: Liquidity risk financing (fund-
same currency (dollars or Euros or other curren- ing) is the risk of the company not being able to
cies). Rate of bills has no credit risk - except those fulfill both, expected and unexpected, and current
coming from the government. In contrast, the LI- and future cash flow and collateral needs, and that
BOR and state reserves are intended for unsecured this does not affect the daily operations or finan-
loans. The difference between the LIBOR and the cial company situation.
state funds is only in the spread. It can be present- In Table 1, particular attention should be paid
ed as a call option credit price. The bank that gave to the debt obligations that can be divided into se-
overnight loan (till the next working day) may de- cured and unsecured funding. Within the category
cide not to renew the loan if something wrong hap- of unsecured funding, retail deposits are more sta-
pens, but the bank obligated to a three-month loan ble than capital market instruments. For example,
does not have that option. As usual, the value of the under stressed conditions, investors in the money
option increases in volatile times, which explains market may demand more compensation, due to

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the risk, or require payment in short time period, this. Finally, banks were forced to postpone the se-
or even to refuse to extend the financing at all. Off- curitization, which led to the accumulation of large
balance sheet commitments, loan commitments, amounts of credit that should be funded.
letters of credit and financial guarantees provided
by a bank create a very strong pressure on liquid- 5. Liquidity Risk Management
ity, especially if being significantly increased.
Table 1. Liquidity Risk Management a) The steps in the management of liquidity
Balance sheet risk. Liquidity risk management requires robust
Assets Liabilities internal management, the application of appropri-
Highly liquid assets (cash, ate tools for identification, measurement, monitor-
Unsecured Financing
etc.). ing and controlling liquidity risk [5]. The Board of
Other, unencumbered assets • Retail deposits Directors is responsible for the strategy of liquid-
(can be collateral) • Capital Market ity of financial institutions.
Other, encumbered assets Secured funding Effective liquidity risk management began
Capital with operating liquidity, which exposes agenda
New issues of shares payments and provides inflow and outflow of
Off-balance sheet money. However, this is not an easy job. In re-
Assets Liabilities cent years, the method of repayment and settle-
Financial Derivatives Derivatives ment systems (for example, gross settlement sys-
Purchased credit lines Warranties tems in real time and CLS Bank net payment in
Commitments foreign currency) was improved, while reducing
SPV the time between payments. Such systems reduce
credit and operational risk, but disable the liquid-
Also, financial derivatives may initiate a need ity management. The next step is the tactical man-
for cash flow if the other party asks for higher col- agement that assesses the presence of unsecured
lateral in the case of crisis. Moreover, usually an funding and liquidity characteristics analysis of
investment bank or securities – special-purpose their assets. These information are integrated into
vehicles - SPVs, may make a contingent liquidity a strategic perspective that is based on the current
risk exposure. Some structures, such as channels assets, liabilities and off-balance sheet items. All
provided by the Bank have explicit support of its these information are used to build a matrix of
banks and are able to provide liquidity lines even funding, which explains, in detail, the purpose of
if the SPV is unable to reinvest the debt. Other financing of various maturity. Any funding of gaps
structures, such as structured investment vehicles should be covered by the plans, i.e. to raise addi-
- SIV do not have explicit support, but the bank tional funds, either by borrowing or selling assets.
still may decide to provide liquidity support for b) Financing of gaps. Table 2 illustrates an ex-
business reasons or because of the reputation. ample of pure run-off model (for example, no new
If we take a look at the asset side of the balance projects and refinancing loans). Here, the matrix
sheet, the funding of gaps can be solved by selling of financing starts with balance sheet assets, loans,
assets. Cash or liquid assets provide a surface that deposits, other short-term debt and long-term debt.
can be used immediately. Unencumbered securi- These items have a cash flow that is either fixed or
ties are defined as those that do not have their own stochastic, and maturity, which is either fixed or
debt, and cannot be sold, probably at a lower price stochastic. For example, coupons and depreciation
that maintains the liquidity risk assets. In the sec- rates for fixed-rate debt will have a fixed cash flow
ond case, they can be sold through pre-sales con- and maturity.
tract as collateral for cash or to a private contractor The second category includes the items such as
or to the central bank. In addition, the cash can be loans with a variable interest rate and bonds with
obtained from the derivative positions that make the stochastic cash flow and deterministic matu-
money. In addition, institutions may establish bank rity. The third category includes the items such as
credit lines, to rely on them, if the liquidity requires callable bonds or loans with flexible repayment

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Table 2. Analysis of the gap financing gap (in mil. €)

Time profile
Balance O/N 7D 14D 1M 3M IY Cumulative
Matrix of Financing:
Loans 200 10 10 6 30 10 10 76
Retail deposit -100 -10 -10 -10 -16 -10 -10 -66
Short-term debt -60 -20 -10 -10 -10 -10 0 -60
Long-term debt -60 0 0 0 -10 0 0 -10
Total: Financy gap -20 -10 -14 -6 -10 0 -60
Closing the gap:
Cash 10 10 0 0 0 0 0 10
Unencumbered securities 40 20 16 4 0 0 0 40
Total: 30 16 4 0 0 0 50
Financy net gap: 10 6 -10 -6 -10 0 -10
Cumulative 10 16 6 0 -10 -10

period and with stochastic maturity, and with the market, in general. Example scenarios specific to
deterministic flow of money. The last category the state could be a sudden restriction of currency
includes the items with stochastic cash flow and convertibility, or the crisis or emerging markets.
maturity, as are the retail deposits, the use of credit In addition, in the extremely stressful situation,
lines and revolving loans. liquidity funding is likely to have a negative interac-
Table 2 shows the initial loan balance of 200 tion with liquidity risk assets, since it may be harder
million Euros. The table shows the cash outflow of to sell assets under these conditions. Just because of
this amount for various maturities. Some of these the fulfilling functions of reputation risk, the liquid-
loans will be paid over the next year. The follow- ity institutions problems may impair its ability to
ing item as retail deposits, then short-term debt that sell assets at a reasonable and fair price. In addition,
will be paid at the maturity in one year. Total assets it is necessary to analyze the liquidity risk in stress
generate time profile for the financing of the gap. or extreme situations, because it is a serious prob-
In this case, the net cumulative funding of the gap lem to the liquidity of financial institutions.
for one-year period is -60 million Euros. The table d) The control of the liquidity risk. The liquid-
also shows the items of the gap closing. Accord- ity risk can be controlled in various ways, includ-
ingly, the cash can immediately be used to cover ing relying onto the stable sources of funding and
the outflow of funds. Unencumbered securities may diversification of the funding sources, setting the
be sold over time, or be used to cover liquidity risk priorities of choosing funding sources based on
assets. The sum of funding the gap and gap clos- the estimated time and costs, geographic location
ing items are expected net financing of the gap. and maturity of debt. Similarly, the liquidity risk
The longer the period of its positive throughout, the assets can be controlled by setting limits on certain
bank is more secured. In this case, the survival pe- markets or products, but also through diversifica-
riod is the time when the cumulative net financing tion. Also, the funding of gaps should be subject
gap becomes negative, and it is one-month period. to the determination of the limits in different time
c) Stress Test. Risk management is taking periods. Some regulators require a minimum level
the unexpected events in the business activities. of liquid assets, limits on maturity mismatch limits
Therefore, financial institutions should assess the or those that rely to a particular source of funding.
stress scenarios where cash flows from the expect- According to the Senior Supervisors Group (SSG)
ed paths, as well as the sources of funding, are un- report of 2008, the institutions that have demon-
expectedly diverted. Institutions should take into strated better performances than others during the
account a wide range of scenarios, including those crisis have adopted a perspective that explicitly
that are specific to the institution, state and the calculates liquidity risk [6].

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 technics technologies education management

e) The contingency funding plans. The aim of which must be adequate business strategy
contingency funding plans – CFP is to set a plan and its role in the financial system;
of action at the local and global level, if some of – The senior management should develop a
the liquidity stress scenarios occur. The bank trea- strategy, policies and practices to manage
sury function is responsible for determining the liquidity risk in accordance with acceptable
moment when the necessary actions are to be tak- risk tolerance of the institution, but also
en. In a crisis situation, the management usually to make sure that the bank will maintain
does not have much time to react, so the earlier sufficient liquidity;
designed plan is very useful. CFP should define – Each bank should have a defined process
a driving milestones, clear lines of responsibility for identifying, measuring, monitoring and
for the implementation, plan alternative sources controlling liquidity risk exposure, and
of funding, prioritize funding operations with the comprehensive projection of cash flows
Central Bank in order to maintain liquidity, define arising from assets, liabilities and off-
the responsibility for liquidity risk management balances for a longer time and
and define the procedures for quick management – Bank should employ the stress tests for
notification, as well as measures that are to be crisis events on a regular basis in relation
taken in emergency situations. Also, the effects of to these exposures, and to regularly publish
reputation should be taken into account, when an- information and thus enable all participants
nouncing the completed financing plan. in the financial market to make decisions
Public disclosure of the liquidity risk manage- based on quality information about its
ment procedures can help to calm investors and to liquidity position.
show that the institution has developed a process
to deal with liquidity risk. Thus, the principle, which is related to the
role of supervision, recommended a comprehen-
6. Basel III: introduction of standards of sive approach to the assessment framework for
overall liquidity liquidity risk management in the bank. In an ef-
fort to complete and implement these principles
The global financial crisis in 2007, caused and further strengthen the framework for liquidity
mainly by the liquidity risk, set the center of the risk management in the bank, the Committee has
attention to the importance of banking experts and developed two minimum standards for funding li-
the efficient liquidity policy. In fact, many finan- quidity: a) Liquidity Coverage Ratio - LCR and b)
cial institutions, in spite of adequate capital base, Net Stable Funding Ratio - NSFR.
have a problem in business activities having risk a) Liquidity Coverage Ratio (LCR ratio) should
profile, particularly in the area of ​​liquidity man- provide resilience to disruptions in liquidity
agement. The crisis has shown that the policy of for a period longer than 30 days, because of
higher profitability as a source of funding and bet- which it should have the high-quality liquidity
ter capital adequacy of financial institutions must assets to be held as reserve to offset the net
be driven in a way not to jeopardize liquidity. cash outflows. The ratio is determined based
The Basel Committee has responded to such a on the results of short-term stress scenario
course of events, and in 2008 published Principles that is created based on the conditions defined
of Supervision and Good Management of Liquidi- in the document Basel III [7] (a significant
ty Risk [3]. In this document, the Basel Committee reduction of the public institutions credit
wanted to initiate the improvement of risk man- rating, partial loss of deposits, etc.). High-
agement in this area, giving the following recom- quality liquid assets that should be held in
mendations: reserve should not be burdened, meaning that
– The bank is primarily responsible for the it has to show liquidity on the market in times
efficient management of liquidity, and that of stress and approval by the central bank.
includes the limits of tolerance in terms of b) Net Stable Funding Ratio (NSFR ratio)
exposure to this and other financial risks, requires a minimum amount of stable funding

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 technics technologies education management

in the bank compared to the profile of liquid published Principles of supervision and good li-
assets, as well as the potential for contingent quidity risk management with recommendations:
liquidity needs arising from off-balance the bank (institution) is responsible for the ef-
sheet liabilities, for a period exceeding one ficient management of liquidity, management
year. This ratio has been modeled to provide should develop an effective strategy, each bank
a sustainable maturity structure of assets has to identify, measure, monitor and control li-
and liabilities in the bank’s balance sheet, in quidity risk exposures and to conduct stress tests
the sense of vanishing the gap payments and for crisis events and to regularly publish informa-
receivables. tion on its liquidity position.

After a period of review (in 2011), LCR be- References

comes the minimum standard as of 1 January
2015, and NSFR as of 1 January 2018. The Com- 1. Paragraph 741 in BCBS, International Convergence
of Capital Measurement and Capital Standards, Ba-
mittee will conduct a rigorous reporting process
sel: 2006.
in order to monitor the ratios during the transition
period and will continue to review the effects of 2. Committee on Banking Supervisors, Second part of
the introduction of these standards on the financial CEBS’s Technical Advice to the European Commission
market, credit and economic growth, by treating on Liquidity Risk Management. London: CEBS, 2008.
unintended consequences as required. 3. Jorion F. Financial Risk Manager Handbook, John
Wiley & Sons, 2011; 641-649.
7. Conclusion
4. Basel Committee on a Banking Supervisors, Prin-
The effective liquidity risk management is the ciples for sound liquidity Risk Management and Su-
pervision, Basel: BIS, 2008.
key activity of the bank for its daily operations and
maintenance of the overall stability of the finan- 5. Bangia A, Diebold F, Sehnermann T, Strughair J.
cial system. There are two basic types of liquidity Liquidity on the Outside Risk. 2008; 12: 68-73.
risk: the risk of trading liquidity and asset liquidity
6. Senior Supervisor Group, Observations on Risk
financing (funding).
Management Practices during the Recent Market
The liquidity risk trading assets depends on Turbulence. Basel: BIS, 2008.
the nature of the assets, how many assets will be
sold, how quickly assets will be sold as well as 7. Bazelski komitet za bankarsku superviziju, Bazel III:
of the economic conditions. Liquid assets can be Globalni regulatorni okvir za stabilnije banke i ban-
karske sisteme. www.bis.org. December, 2010.
measured as the proportion sought-offered spread
– the difference between the requested and of-
fered price divided by the average of the required- Corresponding Author
offered price. Consequently, the optimum trading Nedzad Korajlic,
strategy depends on: a) the value of the currency Faculty for Criminal Justice,
Criminology and Security Studies,
offered-sought spread, as a function of the quality University of Sarajevo,
of the trading session and b) the probability of dis- Sarajevo,
tribution of daily changes in asset prices. Liquid- Bosnia and Herzegovina,
ity risk is based on forecasting the cash amount E- mail: dean@fkn.unsa.ba
needed for the normal and stressed market con-
ditions. Needs on cash depend on deposits, credit
lines, guarantees, options for financial instruments
conversion into cash, money borrowing in the
monetary market as well as on the Central Bank,
asset securitization, new deposits and so on.
To ensure the desired level of liquidity of fi-
nancial institutions, the Basel Committee in 2008

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 technics technologies education management

Information technology impact on changes in

company organizational structure
Zivko Kulic1, Goran Milosevic2, Srdjan Milasinovic2, Zelimir Kesetovic3, Slobodan Ristic4
1
Megatrend University - Belgrade, Serbia,
2
Academy of Criminalistic and Police Studies - Belgrade, Serbia,
3
Faculty of Security Studies, University in Belgrade, Serbia,
4
Faculty of Organization Sciences, University in Belgrade, Serbia.

Abstract ture. Contemporary organizations use information

technologies in both their work and management
The nature of production, market competition
process. In the first case, the technologies are used
and the development of human society suggest
to perform certain operations instead of a man, con-
that the technical and technological development
tributing to the increase of productivity, efficiency
is the condition for economic progress. Engineer-
and effectiveness of work. In the second case, they
ing and technology in all their dynamics have be-
are used to provide appropriate information and
come both a condition and assumption of further
data important for the preparation and managerial
development of a society. Thanks to new techno-
decision making, i.e. for successful performance
logical achievements in information sphere the
of managerial activities. In both cases information
assumptions have been created for more efficient
technology contributes to more rational business
and more productive business activities.
management, more humane treatment of human
Information Technology (IT) has powerful in-
resources in the labour process and improvement
fluence on the entire structure of a company, al-
of the overall position of the employees.
though it is not realized to the same extent or in
The organizational structure means the work
the same way within all of its segments. It is more
inside the company, the division in certain parts
pronounced in some cases and less in some oth-
which represent organizational units where cer-
ers. However, the IT influence is increasing and in
tain functions and tasks are realized. In order for
many ways it becomes more important if compared
the company to be able to function as a system,
with the influence of other situation factors which
the matter, energy and information must flow
determine the company organizational structure.
through it. Organizational structure of a company
Key words: engineering, technology, econ-
represents a dynamic element which is directed
omy, Information Technologies, organizational
towards the achievement of company’s aims and
structure, company, management.
they result from the strategy of its development.
The influence of both internal and external factors
1. Introduction on companies is very important from the aspect
of shaping company’s organizational structure,
The term Information Technology (IT)1 has
which means that the company operating in an un-
been in use since the mid-20th century. In expert
stable environment must change its organizational
literature the opinion prevails that this expression
structure more often than in case of a stable en-
was used for the first time at the end of 1950s,
vironment. The organizational structure has been
when the professional public was presented scien-
studied by many theorists. Thus Peter Drucker
tific assumptions on the organization of the future,
is of the opinion that “all organizational parts of
i.e. on information organization, which thanks to
a company must be interconnected and integrat-
the advantages and possibilities of information
ed with each other in order to act harmoniously
technologies would lead to considerable shifts in
and homogenously. This unique system of com-
the production process and organizational struc-
pany organizational parts is called organizational
structure“; while for William Scot “organizational
1 The plural – Information Technologies – is also used. structure is a logic relationship between the level

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management and the area of functions which en- cluded that information technology has a powerful
able successful achievement of company’s goals.” influence on company production and logistics, in
Chandler, on the other hand, says that “organiza- other words on organizational structure they re-
tional structure is a means of integrated use of the flect in. According to many opinions, this is the
existing resources of an organization.” highest degree of company informatization. [3]
Millions of employed, who used to be a part of
2. Influence of information technology on this operative part under the traditional business
individual parts of a company or conditions were moved to other corresponding
organizational structure sectors or were left without jobs. In the countries
where transition goes on slowly, these processes
IT contributes to faster and more successful ad- are only just getting into full swing.
aptation of a company to environmental changes.
Ever increasing presence of information technolo- 2.2. Influence of information technology on
gies both in the company and its business opera- innovative part of the company
tions contributes to changing its structure. Although
it could be discussed in more details, our attention Innovative part of the company consists of spe-
here will focus only on the effects achieved by the cial services, expert teams and other organizational
IT influence on: [1] 1) production and logistics; 2) entities where experienced experts and talented
innovative part of the company, and 3) technical individuals work. Since their knowledge and capa-
support and technical services of a company. [2] bilities are above average, they are given the most
sensitive and the most creative jobs in the com-
2.1. Influence of information technology on pany. They research, check, test, analyse, predict,
production and logistics plan, initiate and warn and they are supposed to see
what the others cannot. The development policy
Production and logistics of the company con- and long-term aims of the company most often rely
sist of everyday operative jobs performed in the on their assessments and evaluations. If they fail,
sphere of production, purchase, storage, transport, the entire company would fail, and their mistakes
control, sales and similar, as well as of financial- are more serious than the mistakes of other employ-
accounting, book-keeping, and other expert jobs. ees. The company management depends largely on
All these jobs can be informatized without much their capabilities and this is why the top manage-
difficulty, but the highest level of technicisation ment largely relies on their knowledge, assessments
and automation, as a rule, is provided in the do- and vision. No matter how developed and powerful,
main of control, financial-accounting, commercial information technology cannot fully replace a man
and other corresponding jobs. In the sphere of and his intellectual and creative abilities, particu-
production, this level is constantly increasing, par- larly in this specific and more and more important
ticularly in those companies operating in the most sphere of human work and activities. [4] However,
developed countries. certain changes have occurred nevertheless.
The companies operating in our environment, First of all, it should be pointed out that the
like more or less in other countries in transition as activities of knowledgeable men in the company
well, most often cannot rely on information tech- largely rely on computer and other information
nology and its almost limitless possibilities to the equipment. Everyday communication between
sufficient extent. Under the conditions of general experts, as well as between innovative and other
lack of funds and operating at the limit of profit- parts of the company has become faster, simpler,
ability, the majority of companies are reconciled cheaper, more reliable and more direct. For the
to the fact that they must survive until the better people who are involved in science and research
time comes. The problems are more serious if we work, planning the future development, analyzing
know that the process of information technology the existing state of affairs, suggesting new and
introduction is the least visible in production op- more rational solutions, innovations and similar,
erative of the company. Therefore, it can be con- such a manner of communication is of enormous

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 technics technologies education management

importance. Updated databases become available The process of computerization has not spread
to all those who need them. Instead through many to all technical services and jobs equally. Informa-
advisors, specialists and other experts, necessary tion technology, no matter how much it develops,
data and information are provided by computers cannot replace a man everywhere. There are sensi-
and other information equipment. A part of so- tive and specific jobs which can be performed by
called headquarter managers are thus pushed out human beings only. These are, for instance, the jobs
of perspective and actually become surplus. When resulting from supervision over the work of the ex-
all this is taken into account, it can be said that isting workers, training and education of new work-
information technology has certain influence on ers, establishing of dominant attitudes, principles
innovative part of the company as well. Commu- and rules of conduct in the company, and similar.
nication between that part and the management,
i.e. other parts of the company, has become faster, 3. Implications of information technology
more secure and more direct. The innovative part on company organization
of the organization gets a high degree of freedom
and independence in work, which helps them ded- Application of information technology also af-
icate to tasks allocated to them to the larger extent fect the overall organizational structure. In the the-
and in more professional manner. ory of organizational sciences, in principle, there is
no dispute about whether the process of informa-
2.3. Influence of information technology on tization influences organization and organizational
technical support and technical services features of the company, having positive impact on
of the company its organization and business operations. Implica-
tions of information technology on organizational
In large companies with complex and multi- characteristics of the company are numerous, very
level organizational structure, it is usual for a important, and thanks to their influence: [1]
number of technical services to operate. With the – The structure of the company transforms
appearance of information technology, there have from mechanic into organic, in other words
been considerable changes in the sphere of techni- from hierarchical to adaptive structure;
cal services and technical support of the company. – The organization of the company becomes
Machines which are made capable to learn, mem- more flexible, and the entire company
orize, analyse and think, have taken over very fast becomes more adapted system of organiza-
a large part of so-called technical jobs. Computer tion and functioning;
and other information systems more and more suc- – The production costs are reduced, since the
cessfully engage in operational research, produc- share of human labour per product unit is
tion preparation, making of technical and design more and more reduced and rationalized,
documentation, and similar. The jobs which were resulting in the decrease of the number
earlier performed by dozens of workers with solid of employees in the company, especially
technical knowledge and experience can now be administrative, logistic and technical
performed by one average worker with the sup- personnel;
port of information technology. Computerizing – The conditions are created for further
certain jobs and activities provides for additional humanization of working conditions, since
preconditions for successful business operation of under the newly created circumstances
the company and its organizational parts. Reduc- labour is seen less as hardship and
tion of the number of employees in relation to the existential necessity and more as a pleasure
product unit reduced the business operation costs. and opportunity to prove oneself;
Mistakes in measurements, design, modelling, – Big companies with complex organizational
production preparation, and similar are reduced to structure transform more and more into the
minimum. The issue of rejects is not in the spot- networks of small interlinked companies;
light as it used to be before, especially in highly – So-called scale economy gives place
information-based companies. to “economy of width”, since thanks to

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information technology and its adequate 3.1. Organizational assumptions and

application small companies are enabled limitations of informatization
to produce inexpensive products, which in
traditional conditions of economy could For the undisturbed development and success-
be produced by big large-scale production ful application of information technology, the ap-
companies only; propriate assumptions are required, which are not
– The communication inside the company always entirely fulfilled.
(between management and lower levels of
administration and management, as well 3.2. Organizational assumptions of
as among other parts of the organization) informatization
becomes more direct, more reliable, simpler
The organizational assumptions of informatiza-
and faster;
tion include organizational changes, which are car-
– Companies decide mainly in favour of
ried out in order to adapt to new and ever increas-
organizing, i.e. establishing of innovative
ingly improving technology and its ever greater use
part, which consists of specialized services,
in companies. The most important changes occur
expert teams and other centres of knowledge
in the domain of organizational culture and struc-
of a kind, where talented individuals work
ture, reflecting also in working culture, moral and
who are given the most creative and most
discipline. [2] New technologies change the sys-
sensitive jobs, and similar.
tem of values and modernize the way of thinking.
Organizational culture transforms from tradition-
Information data processing, computer en-
al-bureaucratic into participative-organic culture.
gineering, administrative information systems
Under influence of IC the organizational climate
and other corresponding processes have largely
changes (attitudes and feelings of employees, the
changed not only the appearance and contents
role of employees within the system of manage-
of the company organizational structure but also
ment of company, its business operations and its
working and employment conditions. Knowledge,
resources, the system of rewards and promotions,
capabilities and skills become values which are
personnel policy and similar), as a segment derived
particularly respected and additionally rewarded.
from company culture. Without changes of organi-
Without innovations, rationalization and creative
zational culture2 and structure, as well as structures
thinking, free from strict hierarchy and tradition-
of power and decision making within the company,
al bonds, there is no progress or survival in the
new technologies are harder to accept.
market. Everything, even the most rational solu-
tions are subject to constant testing and critical
reconsideration. Differences in organizational 3.3. Organizational limitations of
structure between small and big companies are informatization
blurring. Small companies become capable of in-
A company cannot have adequate benefit from
expensive production and big ones are ready for
technological progress if it does not take care of
fast and painless adapting to great changes in the
the scope, quality and speed of organizational
environment. Differences between centralized and
changes. As much as timely and balanced orga-
decentralized organization, or between centralized
nizational changes contribute to greater and more
and decentralized model of administration and de-
successful application of information technology,
cision making are largely made relative. The ap-
so the culture and climate which are not adapted
plication of information technology enables even
contribute to its insufficient and inadequate ap-
the centralized organization to apply decentralized
plication. Inadaptability of organizational culture
mechanisms of management, decision making and
coordination, and vice versa.
2 Adapting the company culture does not include only the
changes of certain segments of dominant, or basic culture
and climate but also the corresponding adjustments of
established company sub-cultures.

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 technics technologies education management

and structure of a company to technological devel- companies which do not use computers in Serbia
opment can manifest in many ways: nowadays, which are not connected to the Internet
– By absence of organizational changes, i.e. and Intranet. Therefore, there is an ongoing pro-
the changes of company culture resulting cess of organizational restructuring of companies
from not understanding its true importance; and organizations under the influence of new tech-
– Deciding in favour of inadequate change of nology in Serbia as well.
company culture (inadequate consideration As a part of empirical study carried out by
of things, wrong beliefs and inappropriate Čudanov, Jaško and Jevtić, which focused on de-
manner of action); termining the influence of using information and
– Deciding in favour of inadequate changes of communication technologies on company decen-
company organizational structure; tralization, it has been determined that IT adoption
– Favouring traditional and basically inadap- is more frequently expressed in decentralized com-
table system of company administration and panies, empirically described by dominant liberal
management, and similar. style of management, although IT adoption can also
lead to centralization in some cases, depending on
Each of the stated limitations represent an ad- other factors in the organization[5]. In addition to
ditional problem for the company whose manage- literature analysis, there were two main sources
ment is not capable of considering the situation for this research. The first one is consulting experi-
in a right way and apportion their managerial and ence in four major Serbian enterprises and second
other activities. Those who do not understand the is wider research in 72 companies of various size,
importance of new technologies and the impor- industry and success.3 Each company was analyzed
tance of organizational changes should not run a using the existing documentation, interviews with
company. Each manager, but an employee as well, management and interviews with employees.
should understand that without new technologies The most important findings in this research
and constant adaptations of organizational culture are presented in table 1.
and structure, as well as system of management, It can be concluded from observations and in-
there is not a successful business. terviews in companies where authors have had
consulting experience that decentralization is not a
3.4. Influence of information technology on discrete, but continuous process, and that authority
organizational structure of Serbian migrates slowly to organizational unit where infor-
companies mation is concentrated. When technology is dis-
cussed, it is useful to remember that standards often
Although Serbia, as a developing country hav- evolve slower than people think (and wish) in the
ing certain economic problems, does not fall into short run, but that their impact is often much deeper
the category of highly information-based coun- than expected in the long run[6]. Process of author-
tries and technological leaders, there is more and
more intensive use of IT in all spheres, particularly 3 Companies were selected from various industries, and
11 companies were in ICT industries. They were of
in economy. There are rather a small number of various sizes, ranging from 7 to 2894 employees.

Table 1. Descriptive statistics in analysis of correlation of Composite ICT adoption

95% Confidence
Std. Interval for Mean
N Mean Std. Error Min Max.
Deviation Lower Upper
Bound Bound
Autocratic 27 14,9922 53,64 10,32 -6,23 36,21 ,00 280,43
Democratic 31 18,3071 36,28 6,52 5,00 31,62 ,24 184,14
Liberal 7 40,9171 120,08 45,39 -61,14 160,97 1,83 322,15
Total 65 20,3343 56,99 7,07 6,21 34,45 ,00 322,15
index , Source: Čudanov, M., et al.

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 technics technologies education management

ity migration is often informal in nature at the begin- main the same in the future. On the other hand, in
ning, the superiors still keep right to sign formal de- order to get a new idea, it is necessary to activate
cisions and documents, but lower-level employees the mechanisms of encouragement, stimulation
with necessary information in fact make the deci- and reward for innovators and those in constant
sion.4 Also, IT itself does not direct organization to- search of new and more efficient ways to perform
ward more or less decentralization, but widens pos- business activities, so that in that sense the role of
sibilities for adjusting the level of decentralization to management in the future will focus on motivating
other internal or external parameters characteristic the employees and creating favourable conditions
to the organization. The development of IT leaves for innovation development.
much more freedom to the designers and consultants
to accommodate organizations to other influences, References
both internal and external.[7] It is, however, impor-
tant catalyst for application for liberal management 1. Kulić Ž, Mrdak G, Milošević G. Organizacija i po-
slovne komunikacije. Vranje, 2011.
style, as decentralization factor. The authors also
found that sometimes IT specialists cannot see that 2. Eggeberecht A, Flemming J, Muller AV, Meyer G,
common managers, clerks and workers down be- Oppolzer A, Paulinyi A, Schneider H. Povjest rada
low in ordinary organizations do not utilize even the od starog Egipta do danas. Zagreb, 1987.
part of potentials provided by advancements in their
3. Ekonomska i poslovna enciklopedija. Savremena ad-
fields and that such ordinary companies still form ministarcija, Beograd, 1994.
majority and have larger potential of improvement
in application of IT. In addition to this, sometimes 4. Haralambos M, Holborn M. Sociologija – teme i
organizational culture, attitudes, ignorance and fear perspective. Zagreb, 2002.
from the unknown play much more important role
5. Čudanov M, Jaško O, Jevtić M. Influence of Informa-
than the features of the technology itself. [5] tion and Communication Technologies on Decen-
tralization of rganizational Structure. ComSIS , June
2009; 6(1).
4. Instead of a conclusion
6. Duval E. Learning Technology
There is no doubt that information technologies
Standardization:Making Sense of it All. ComSIS,
have become strategic resource of every organiza- 2004; 1(1): 33-43.
tion in the contemporary world and that corporate
success today cannot be imagined without them. 7. Ziadi J, Kuofie M. Impact OF ICT On Organizations
This is also supported by the fact that overall costs In Tunisia. The Electronic Journal on Information
Systems in Developing Countries, 2006; 28(4): 1-8.
of information technology (hardware, software) in
the developed countries have exceeded the overall
costs related to other capital assets. Corresponding Author
Information and communication technologies Goran Milosevic,
are used to collect, store, process and analyze as Zemun,
Belgrade,
well as disseminated data and information impor- Serbia,
tant for planning, organizing, implementing and E- mail: goran.milosevic@kpa.edu.rs
monitoring of all elements of production process. dekan@kpa.edu.rs
The consequences of application of the new tech-
nologies are thorough change of company organi-
zational structure in all its segments.
However, it turned out that computers cannot
replace a man in creating ideas and this will re-

4 That could be seen in banks, as authority for issuing

smaller loans is shifted toward desk clerks equipped with
information system.

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 technics technologies education management

An analysis of socially responsible business

practice of multinational corporations in Serbia
Marija Petrovic-Randjelovic, Maja Ivanovic-Djukic
University of Niš, Faculty of Economics, Serbia.

Abstract ist the relationship of mutually interconnection and

interdependence. That view is indicatively indicate
Multinational corporations due to great eco-
on the existence of trade-offs between these two
nomic strength and foreign direct investment can
concepts: it is practically meant that the high rates
directly contribute to increasing the host country
of economic growth can be achieved at the expense
competitiveness. However, great political power
of increasingly worsening the environment, and
can provide them the opportunity to circumvent na-
conversely that greater environmental protection
tional regulations and with irresponsible business
limits the opportunities for accelerating the pace of
create numerous social and environmental prob-
economic growth, so States have been exclusively
lems in the host country. Problems related to corpo-
oriented towards economic performance, with in-
rate social responsibility occupy an important place
observance about the environmental protection.
in the international political agenda, particularly
Many environmental problems that have become
because multinational corporations today exercised
alarming (“greenhouse effect” and the disturbing
the greatest influence on the sustainable develop-
climate change, the destruction of many natural
ment of economies around the world. The question
ecosystems, etc.) led to the actualization of envi-
arises: What is the relationship of benefits and costs
ronmental issues. In order to solve these problems
that multinational corporations can create entering
it have been adopted several declarations (UN Con-
into the host country market? Or in other words,
vention on Climate Change in Rio de Janeiro, the
what benefits in the host country can be achieved by
Kyoto Protocol) by which the states commit to pro-
applying the principles of social responsibility into
tect the natural environment. In most countries exist
the business of multinational corporations? Consid-
the environmental legislation under which econom-
ering the fact that the concept of socially respon-
ic entities are committed to respect environmental
sible business is at the beginning of development
principles, and in the same time it provides a num-
in Serbia, in this paper will be analyzed precisely
ber of incentives for companies that contribute to
the current practice of multinational corporations in
environmental protection, apply cleaner technolo-
this area in Serbia. The aim of this paper is that on
gies, rational use of natural resources and energy-
the basis of identification the benefits and develop-
efficient they are with the time. In this way the
ment degree of socially responsibile business prac-
concepts of sustainable development and corporate
tice, indicate to macroeconomic policy makers in
social responsibility develop and become more ac-
which direction they should route their activities in
cepted at the micro and macro level [1].
order to multinational corporations activities make
In addition to international institutions and
compatible with the realization of the strategic vi-
countries, a significant role in increasing aware-
sion of sustainable development.
ness of the importance of conservation and envi-
Key words: multinational corporations, sus-
ronmental protection in a globalized world econ-
tainable development, socially responsible busi-
omy had a non-governmental organizations and
ness, competitiveness.
various social groups (for example, groups for
environmental protection, etc.). These new driv-
1. Introduction ing forces influenced the abandonment of the tra-
Until 1970s of 20th century there was the belief ditional cognition of the relationship between eco-
that between the concept of rapid economic devel- nomic development and environmental protection
opment and environmental protection does not ex- and have become the key promoters of the idea of​​

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the possibility of simultaneously achieving greater social responsibility of multinational corporations

economic efficiency in the development and envi- in Serbia, in fifth part of the paper we will give
ronmental protection. some recommendations for the future activities
State pressure and specified social groups of national government authorities in the field of
forced the company to start taking into account development the practice of socially responsible
about the impact of its operations on the environ- business in Serbia. In the final part of this paper,
ment and society in which they operate. But the we will give some concluding observations.
problem remained with multinational corpora-
tions. Multifunctional system of organization of 2. Significance of multinational corporations
multinational corporations business does not al- for sustainable development
low control of their overall activities by the host
country, so that one country can not control their Attracting multinational corporations as a in-
entire business and prevent adverse impacts on the stitutional bearers of foreign direct investment
environment and society that they can create. At has become a key element of national policy and
the same time economic ability and political pow- development strategy, particularly in developing
er of multinational corporations may be greater countries and countries in transition. Government
that the power of many states in which they oper- of potential host countries face the challenge of
ate, so that some states can not have a significant creating effective tools and policies to attract for-
influence on their business [2]. eign direct investment, since in the last two de-
Many multinational corporations are abusing cades, foreign direct investments have proved to
their economic power, as well as differences in leg- have enormous potential that can be used as an op-
islation and economic characteristics of individual portunity for accelerated economic development.
countries, carry out many activities in the immoral It is worth to notice that foreign direct investment
and socially unacceptable way. Such activities are of multinational corporations not only contribute
carried multinational corporations huge profits, but to increasing the capital in the host country, and
at the same time create a large number of social and therefore, increasing the possibilities for financ-
environmental problems worldwide. The problems ing development. Practical research has found that
that have caused multinational corporations have the inflow of foreign direct investment is followed
created strong consumer boycotts and other inter- by a number of positive development implica-
est groups that have threatened the competitiveness tions, including increased employment, due to the
and reputation of multinational corporations. Man- horizontal expansion of capital and creating new
agement of multinational corporations recognizes jobs, increasing the level of technological devel-
that irresponsible business in the short term could opment, through a vertical expansion of capital,
endanger the reputation of the company that has capital growth in depth and increasing productiv-
built up for years. Therefore, multinational corpora- ity through the transfer of modern technologies,
tions accept the idea of socially responsible business development of human capital and rising the ef-
become its key promoters, especially in developing ficiency and competitiveness of the host country.
countries and countries in transition such as Serbia. One of the issues around which the scientific
According to the aim and the subject of this pa- community often led controversy is why multi-
per, it is structured as follows. After brief introduc- national corporations prefer foreign direct invest-
tion that is given in this part of the paper, the atten- ment than other forms of export of technology
tion will be routed towards the explaining the sig- and knowledge into the potential host country.1
nificance of multinational corporations in achiev-
ing sustainable development of the host country. 1 It is well known, namely, that international technology
The third part of the paper is devoted to awareness transfer can take place via three main channels, which also
development of the need to implement the basic represent the basic modalities of access of developing to
this resource of development: through trade, apropos the
principles of socially responsible behaviour into export of goods of high technological content, through
the business activities of multinational corpora- foreign direct investment and through contractual
tions. After the analysis of the current practice of arrangements, such as licensing of technology.

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Technology licensing agreements have represent- non-renewable, in a sustainable manner, thereby

ed from the long time the most significant form increasing the efficiency of their use, and contrib-
of exports of technology and knowledge in the uting to the reduction of waste as a by-product of
host country. However, their main characteristic economic activity, and due to the production of
is reflected in the absence of control over the ac- new, environmentally sound goods and services,
tivities of using the non tangible company assets. thereby contributing to meeting the needs and in-
Whereas in this way the risk of losing the value crease consumer welfare by minimizing adverse
of non tangible capital capital increases, in the environmental impact. In fact, “technology is a
multinational corporations interests is to transfer double-edged sword. It is both a cause of many
technology and know-how through foreign direct environmental problems and a key to solving
investment, which now represent the preferred al- them. It is a matter of fact that the technologies of
ternative in the exploitation of ownership-specific the past, still dominating in transport, energy, in-
advantages of multinational corporations. Moti- dustry and agriculture, are undermining our basic
vation of owners of non tangible capital that its life supporting systems – clean water, fresh air and
assets exploit through foreign direct investment fertile soil. However, in each of these sectors there
is higher in case of a sale of modern technology, are new technologies available or emerging, that
because this modality provides him greater con- may, if widely used, essentially solve the environ-
trol over such transfer. In fact, the special quality mental problems. Thus, new technologies have
of this form of international movements of private the potential to contribute to a decoupling of eco-
capital is reflected in the transfer of environmen- nomic growth from pressure on natural resources.
tally sound technologies and know-how, that give The fact is that we face a choice between techno-
a key advantage to foreign direct investment in logical change at historically unprecedented rates
promoting the objectives of sustainable develop- or a change in atmospheric composition unlike
ment of host country. any experienced since the dawn of humanity“ [4].
“The potential for technology transfer to contrib- Transfer of modern environmentally clean tech-
ute to sustainable development has been recognised nologies through foreign direct investment by mul-
at the highest international levels. In the Rio Dec- tinational corporations represents an area of excep-
laration, States declared that they should cooperate tional importance for understanding the contempo-
“… by enhancing the development, adaptation, dif- rary practice of corporate social responsibility. Seen
fusion and transfer of technologies, including new from an economic viewpoint, increasing environ-
and innovative technologies”. Agenda 21 devoted mental awareness of multinational corporations is in
a whole chapter to the transfer of technology, and the function of promoting friendly oriented relation-
numerous initiatives were launched to facilitate ship towards the environment, through increased
technology co-operation and transfer between de- investment in the development of environmentally
veloped and developing countries“ [3]. clean technologies and methods of production and
The modern globalized economy is faced with consumption of natural resources. Empirical re-
certain restrictions in achieving the vision of sus- search has found that the benefit of such investments
tainable development both in terms of greater are not necessarily limited to multinational corpo-
availability and use of environmentally clean tech- rations, in form of reduction of operating costs and
nologies, and in terms of available capacity of the thereby increase profits, as well as reputation of the
biosphere to absorb the effects of increased human corporation, but also that there are significant indi-
activities. Development and application of envi- rect social implications of such transfers.
ronmentally sound technologies in the produc- Besides of the transfer of environmentally ef-
tion process is of crucial importance for achieving ficient technologies, companies that undertake to
sustainable development. This especially for the adhere to the principle of socially responsible busi-
reason because the application of environmentally ness are included in activities of giving the support
clean technologies is the main agent of change of the wider social community, but also demon-
in the field of sustainable production and con- strate proactive approach to finding new solutions
sumption, due to the use of resources, especially to improve relations with employees. Practice has

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confirmed that the company’s larger commitment lowed by numerous blame articles in international
to the business under the principles of social re- journals in 1995 [5]. Irresponsible business of mul-
sponsibility carries a latent potential for providing tinational corporations in particular began to attract
incentives to employees to better engage in those public attention since the 80’s, when the number of
areas that contribute to improving corporate per- social and environmental problems they have cre-
formance and raise its competitiveness. ated become large (employment of minor children,
Changes in the behaviour of multinational cor- selling products injurious to health, excessive use
porations are a consequence of radical changes in of resources at the expense of future generations,
the business environment within which they exer- pollution of the environment, etc.) [6].
cise their activities. They are especially induced by The management of multinational corporations
the current process of globalization of world econo- realize that one thoughtless decision may lead to
my which has achieved a decisive influence on the the reputation destruction of the company that has
transformation of corporations attitude to social and built up for years, so the cost of irresponsible be-
environmental aspects of host country development. haviour (to society) is extremely high. For these
The redefinition of the current business practices of reasons, management of multinational corporation
multinational corporations towards strengthening its are increasingly starting to take care of business
social and environmental responsible components impact of its company to society [7].
carries also a greater risk and greater accountability These and similar series of events led to ac-
of multinational corporations to social and environ- ceptance of the idea that “anyone who has great
mental consequences of their activities. Therefore, power in society should have a great responsibil-
the dynamic changes in current business environ- ity”, in management theory as well as in practice
ment impose the requirement on multinational cor- of multinational corporations. Thus, in parallel
porations that in order to maintain competitive ad- with the concept of sustainable development at
vantage and reputation they need to adopt flexible the macroeconomic level the concept of socially
business strategies and policies that are sustainable responsible business at the microeconomic level
in so far as to allow the achievement, in addition of has increasingly promoted and accepted.
financial, and better non-financial performances of Besides of the strong pressure of various stake-
corporation and therefore, minimizing the potential holders on the companies due to the more serious
commercial risks. problems in environment and society, the concept
of corporate social responsibility is becoming
3. Development of the awareness on the more accepted as managers of multinational cor-
need of socially responsible business of porations realize that this concept contributes to
multinational corporations improving competitive advantage and maximizing
shareholder value. Whereas the economic motives
The increasing attention towards social respon- (making profits, providing a sustainable competi-
sibility in business of multinational corporations tive advantage, increase shareholders value etc..),
did not happen by accident (voluntary). Many com- are primary drivers of business activities of profit
panies have become aware of the need for social oriented organizations, multinational corporations
responsibility, not until they were surprised by pub- conducted a variety of programs and measures
lic reaction to some of their previous ill-considered which through improving the environment and the
actions that have shaken the public. For example, community directly or indirectly contribute to im-
“Nike” met with strong consumer boycott because proving their competitiveness.
“New York Times” and other media published a re- According to Porter and Kramer (2006), cor-
port on the practice of child labour abuses in facto- porate social responsibility can influence on the
ries supplier company in early 1990s. The decision improvement of competitiveness in several ways
of the company “Shell Oil” to flood outdated tech- depending on the measures implemented by mul-
nology for the processing of oil (Brent Spar) in the tinational corporation. All programs of corporate
North Sea, caused a strong protest of organizations social responsibility they classified into the fol-
for the protection of the environment and was fol- lowing categories:

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a. Generic social issues (measures) - petitive advantage (through increasing the number
Measures by which general social problems of users of its services, an increase favour the envi-
can be resolved, and which influence on ronment, gaining confidence as a result of the be-
multinational corporation competitiveness haviour of good citizens, etc.) [8]. These measures
through good reputation building; lead to improvements in the competitive context of
b. Value Chain Social Impacts – Measures by multinational corporation, which in turn contributes
which the negative impact of operational to increasing their competitiveness [9].
activities can be mitigated, which bring to
increase the competitiveness of multinational
corporation due to lowering cost or increasing
the quality of products/services;
c. Social Dimensions of Competitive Context
- innovations that create added value
(environmental or social) for consumers,
while multinational corporation has
positioned as a leader in the industry and
gain competitive advantage.

Generic social issues (measures), may be im-

portant for society, but not significantly covered
by operations (jobs) of multinational corporation,
Figure 1. The four elements of Competitive context
nor affect directly its sustainable competitiveness. Source: Porter, M., & Kramer, M. (2006). Strategy and Soci-
The implementation some of these measures by ety: The Link Between Competitive Advantage and Corporate
companies provides great benefit to the community Social Responsibility.
and contribute to the solving of some social prob-
lems. For example, volunteer work of employees Second group consist of measures by which
or donating funds or products to the disadvantaged the manner of execution of some activities of the
social groups provide the direct benefit to the com- company value chain is improved, so that the com-
munity. At the same time, such behaviour encour- pany adverse effects on society is reduced (Value
ages other companies, non-governmental organiza- Chain Social Impacts). These measures lead to
tions (NGOs) and other interest groups to engage in improved operational activities of the company,
the improvement of the community, thus achieving often to reduce costs, attract the most talented
multiple benefits to society. On the other side, these work force, attracting the most profitable custom-
programs do not directly affect the achievement of ers, attracting the suppliers that offer rare or scarce
business goals of the company and its competitive resources which directly contributes to increasing
position, but indirectly affect the sustainable com- the competitiveness of enterprises and at the same
petitive advantage, due to building a good reputa- time leads to a reduction of harmful effects on the
tion in the community, strengthen brands, attracting enterprise environment. Managers should identify
new customers, establishment of partnerships with those activities where the application of best prac-
institutions of the community and the like. tice works best for the company and the commu-
Effective behaviour initiative2 as a good “corpo- nity, by the analysis of the value chain [5].
rate citizen” create goodwill and improve relations More empirical studies have shown that the
with local authorities and other relevant stakehold- improvement in the value chain activity produces
ers. Multinational corporation creates positive rep- direct positive financial effects and improve the
utational capital, which becomes a source of com- competitiveness of company. For example, im-
proving operational efficiency through optimiza-
tion of energy consumption directly reduces pro-
2 The initiatives are aligned with the goals and strategy
of the company or initiatives to help solve an important
duction costs and the price, thanks to which the
social problem company becomes more competitive [10].

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The biggest challenge for management is the is responsible to shareholders (Garriga and Mele,
introduction of environmental innovations that en- 2004). Companies will apply CSR as long as they
able enterprises to differentiate themselves, doing can benefit economically from conducting socially
things differently from its competitors and offer- responsible behaviour, such as creating a brand that
ing customers added value, based on environmen- will improve marketing (Lantos, 1999). Thus, the
tal or social investment. At the same time, these main motivation is increasing profit” [12].
innovations that contribute to the creation of envi- Improvement of environmental performances
ronmental product provide great benefits not only of corporations not only contribute to increasing
consumers, but also the wider community, because the prestige and reputation among its corporate
they are generated based on “green” procurement, partners, improving the economic and financial
manufacturing, marketing or sales [10]. performance and raising the level of competitive-
The impact of social responsibility on business ness, but also represents one of the factors improv-
performances and competitive advantage have in- ing the global environment and reducing poverty
vestigated by many consulting firms. For example, through the provision of contributions to the ac-
a consulting firm Morgan Stanley in cooperation celeration of global economic development. “For
with the firm Oekom Research, carried out the these and many other reasons MNCs are becoming
research impact of social responsibility on the fi- more engaged in the community by implementing
nancial results of companies and competitiveness. various programs of CSR” [9].
They analyzed 602 business companies into the
framework of the Morgan Stanley Capital Interna- 4. The main characteristics of socially
tional (MSCI) index. On the basis of eight hundred responsible business practice of
indicators of social responsibility, companies are multinational corporations in Serbia
ranked and divided into two groups. One group con-
sisted of first-ranked 186 companies from Oekom In countries in transition, intensive compe-
Research list which are called leaders in the field tition has set a requirement for adaptation and
of social responsibility, while the remaining 416 adoption of new rules of the global market, by
companies ranked to another portfolio. The analy- taking a strategic approach, among that social re-
sis results indicated that the first group of compa- sponsibility has become the condition of survival
nies achieved better performance in the market for and determinant of company business progress.
as much as 23.39% (in the period 1998-2003) than To illustrate, prior to the transient process “state
the other group companies and for some 4% bet- owned companies in most of Central and East-
ter results than the all companies on MCSI index. ern Europe implemented large-scale and costly
In this way has been proven that there is a positive social programs, often referred to as the compa-
correlation between corporate social responsibility ny’s “sphere of obligations.” This approach en-
and their financial performance [11]. tailed voluntarily “giving back” time and money
Due to this fact, multinational corporations as to provide “good works” that contributed to the
a key drivers of the ongoing process of globaliza- well-being of various societal stakeholders, even
tion, become aware of the fact that the global profit if doing so cost the firm profits. Collective owner-
maximization, as the ultimate goal of their activi- ship and central planning were intended to ensure
ties, is conditioned by a number of factors, among that the stake of the entire community was recog-
which the most important are: the existence of nized and safeguarded“ [13]. Entering the transi-
strong interaction between economic and social de- tion process set a number of problems, but also
velopment goals, establishing good relations with new challenges for macroeconomic policy makers
the local community and key stakeholders, and re- and especially for business. Wit the launching the
spect the principles of environmental sustainability programs of mass privatization of state enterprises
as an integral element of corporate social respon- and changing the course of state policy towards
sibility. “In economic theory, CSR is seen only foreign capital, the basic conditions are created for
as a strategic tool to achieve economic objectives the penetration and affirmation of the practice of
and ultimately, wealth creation, where company socially responsible business in countries in tran-

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sition. “In most cases, the first steps in develop- mic growth, productive employment and
ing corporate social responsibility practices have improvement the state of the environment,
been taken by large multinational investors who and
brought with them a tradition of community en- 4) In a relatively short period of time, with the
gagement, environment-friendly technologies, a establishment of a new ownership structure
new management culture, and a practiced eye for over the means of production and increasing
how business might help solve social and environ- the share of private sector in the economy,
mental challenges (Simpson 2002). These leaders there has been an affirmation of new business
set standards for their suppliers and offer business trends in Serbia, apropos development the
models for others. In many countries in the region, concept of socially responsible business.
local companies have also started adopting corpo-
rate social responsibility practices, as privatization This model of privatization, which implies
progresses and the process of building new busi- promotion of foreign direct investment, provide
nesses has advanced“ [13]. an opportunity for penetration of a large number
Despite the good starting position for the real- of multinational corporations on Serbian market.
ization of large-scale transition and reform pro- Multinational corporations have become promot-
cesses in Serbia, a number of limited, socio-eco- ers of the concept of corporate social responsibil-
nomic and political factors from its internal and ity, seeing this concept is relatively new concept
external environment in the last decade of the 20th for Serbia.
century influences to postponement of radical re- In a relatively short period of time, concept of
form of the Serbian economy and society and the socially responsible business has evolved from
time delay relative to other countries in transition an unknown concept in the most current topic in
in the issue of building a market economy, demo- business circles in Serbia. The results of the in-
cratic society and the development of the concept vestigations of the socially responsible business
of corporative social responsibility in Serbia. practice, that are performed in Serbia in the pe-
Radical reforms in the Serbian economy, es- riod 2005-2010, showed that the public awareness
pecially intensified after 2001 confirmed the new of the need for corporate social responsibility, as
course of government economic policy and its well as knowledge of this concept, have gradually
commitment to the affirmation of a new model of increased in Serbia in the period since 2001. How-
growth and development of Serbian economy and ever the majority of Serbian citizens still do not
society. Experience gained during the last ten years understand the whole essence and importance of
in the implementation process of privatization the socially responsible business.
enterprise in state and social property, according According to the latest survey of public opin-
to the model that includes the participation of for- ion conducted in October 2010 on a representative
eign investors, clearly confirms the following: sample, it was shown that only 34% of respon-
1) An open model of privatization proved to dents have heard of the concept of socially respon-
be a basic prerequisite for the introduction sible business, while 11% of this number cited the
of better corporate governance system of examples of companies that apply the principles
production factors, which consequently of socially responsible business. The same survey
resulted in increasing the efficiency of the confirmed that consumer awareness about this
domestic economy, concept is in a very low level. This proves the fact
2) The liberalization of the regime towards that 60% of respondents declare that they do not
foreign direct investment enabled the take into account the ethics of the company, when
transfer of material and intangible resources buying products and services [12].
necessary for development and raising the Socially responsible business is generally un-
level of technological development and derstood as a marketing tool that contributes to the
modernization of the Serbian economy, promotion of better performance of the company,
3) Leaving the insider privatization model so philanthropic activities continue to dominate
created the conditions for a dynamic econo- the social responsible business programs. It is also

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a way to build a good reputation of the company From the internal dimensions of socially respon-
in a society which does not attach strategic impor- sible business the greatest importance is given to
tance. Involvement in the community is an area the creation of an enabling business environment,
where more attention is given by multinational including developing a dialogue with employees,3
corporations in Serbia. consistent and transparent implementation of equal
Most of the multinational corporations perform opportunities policy and respecting employees’
the investigation of the needs of the local commu- rights, continuing employees education and encour-
nity, upon which activities and programs of sup- age the volunteer work programs [14]. During 2010
port have to be created. These activities and pro- has been implementing various projects of employ-
grams are mostly single and periodic, while only ees volunteering, so that year can be characterized
a small number are implemented in long term and as a period in which was introduced new aspects
strategically [2]. of socially responsible dusiness practice in Serbia.
Viewed from the perspective of relevant stake- Many multinational corporations do not operate in
holders, the protection of vulnerable people, pro- accordance with the principles of business ethics, as
viding assistance to children and young people evidenced by the fact that they do not meet the obli-
and the environmental protection are areas that gations under the sales agreements, do not perform
attract the most attention to multinational corpora- all of their obligations to employees for the payment
tions in Serbia. However, despite the significant of wages and obligations to the state, tax evasion
support of the Government, there has not been and social security contributions, do not respect the
significant progress in the employment of persons provisions of the safety and health at work, but it is
with special needs [14]. Besides, a large number not rare case that they do not fully comply with the
of multinational corporations support education, provisions of collective agreements.
arts, culture and sports by sponsorships of cultural, It can be concluded that although the certain
sporting and educational events and the like [15]. progress is achieved in raising the awareness about
However, a major failing is absence of activities the importance of socially responsible business,
related to the promotion of entrepreneurship and in practice of multinational corporations are not
employment of vulnerable groups. substantial changes occurred. Significant progress
After improvement of the community, multi- has been made in bringing qualitative changes, un-
national corporations in Serbia dedicate the great planned movement from philanthropic activities to
importance to the environmental dimension of so- the strategic resolution of problems of the commu-
cially responsible business. Many multinational nity and environment. However, despite the fact that
corporations in Serbia have introduced some of the promoters of the concept of socially responsible
the environmental systems and standards (ISO business in Serbia are large multinational corpora-
14001 or some of the specific standards for the tions, the results of benefits of their social responsi-
industry or branch of the company itself) for envi- bility activities are much less than in EU countries,
ronmental management, or have such systems and and besides they generate a multitude social prob-
standards in the introduction. In this area are much lems. The reason for this is that the state does not
more common “ad hoc” programs that are mainly apply the appropriate enforcement measures and
related to cleaning and landscaping in urban ar- that there is not yet sufficiently established system
eas and in areas protected by law as national parks of incentives. To change this situation it is neces-
[16]. An increasing number of companies publish sary that the state act proactively, apropos by the
reports on socially responsible business, while usage of appropriate economic policy instruments
many of them are using internationally accepted contribute to the creation of an persuasive environ-
methodology of the Global Reporting Initiative. ment for the maximum effectuate the benefits from
Analysis of the impact of corporate activities on socially responsible business practice.
society and the environment leads to increased
transparency of corporate operations, and at the 3 Over 80% of companies striving to maintain a dialogue
same time to spread good practice in implement- with employees to determine their satisfaction in the
ing principles on social responsible business [17]. workplace and opinions on the operations of the company.

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 technics technologies education management

5. Possible directions of the state activities 5. Promotion of Serbia as a country in which

in the area of socially responsible busi- rule the principles of social responsibility
ness development in Serbia which would contribute to increasing the
attractiveness of business environment for
The strategy of promoting and developing of
foreign investments, whereas the systematic
socially responsible business in Republic of Serbia
monitoring and reporting on social
for the period 2010-2015 represents an important
responsibility of companies significantly
strategic document which confirms the readiness of
reduces the risks for doing business and
Republic of Serbia to, in the context of involving
represents an important instrument in
into the European integration structures, be fully
attracting potential foreign investors;
engaged in promoting corporate social responsibil-
6. Removing defects and improving the legal
ity in order to ensure the social balance and achiev-
and regulatory framework to stimulate
ing sustainable competitiveness and development.
socially responsible behavior of business
The role of government in achieving such strategic
actors (such as the development of an
vision should be reflected primarily in creating an
effective system of consumer protection);
environment which will support sustainable busi-
7. Promotion dialogue and development
ness growth and development, as a prerequisite for
cooperation with other stakeholders in
achieving social inclusion and prevent environmen-
promoting of socially responsible business;
tal degradation. In immediate tasks, which should
8. Raise public awareness of the importance
contribute to the development of the concept of
of socially responsible business by using
socially responsible business in Serbia, according
the capacity of the media as a mechanism
to the standards of best practice in internationally
for dissemination of information on
framework, can be stated as follows:
the importance and benefits of socially
1. Development of the Action Plan and the
responsible business practices and
formation of a national body that will
instruments to encourage the introduction of
be responsible for implementing and
qualitative novelty in business by presenting
monitoring the implementation of the
examples of good business practice;
Strategy of development and promotion of
9. Directly related to the previous, organizing
socially responsible business in the Republic
media campaigns and different forms of
of Serbia for the period 2010-2015;
forums and meetings with good media
2. In order to improve the socially responsible
support, through which the state will
business, the state should by implementing
announce the key elements of the national
appropriate instruments to encourage the
plan and the measures which it intends
introduction of best practices and models
to implement in order to increase social
of socially responsible business in the
responsible business;
European Union, especially the member
10. Complete the restructuring of public
countries in the immediate environment and
enterprises and the integration of socially
the candidate countries;
responsible business principles in their
3. Stimulation transparency with the aim to
business;
promote the practice of public publishing
11. The inclusion of the academic community
reports on socially responsible business,
in the promotion and development of
based on monitoring and measuring impact
socially responsible business, by innovating
and performance;
curricula, especially universities curricula,
4. Promoting socially responsible behaviour
by introducing of socially responsible
of the state government administrations
business as a separate subject, and
in order to set an example, apropos to
coordination of activities at the university
encourage economic subjects to respect the
level, as well as inter-university level.
principles of corporate social responsibility,
the so-called follow-effect;

1626 Volume 8 / Number 4 / 2013

 technics technologies education management

6. Conclusion of promotion of socially responsible business prac-

tices by the competent national authority will be of
Socially responsible business basically repre-
paramount importance in providing support to fur-
sents a strategy for corporations to manage business
ther develop best business practices and stimulat-
activities in a way that is ethically and socially ac-
ing larger inflows of foreign direct investment for
ceptable. However, taking responsibility or corpo-
growth and development of Serbian economy.
rations for social and environmental consequences
of their actions does not mean simultaneously the
transfer of responsibility for solving these problems Acknowledgments
from the state to private companies. As a corporate Research presented in this paper is financialy
strategic action, the practice of corporate social re- supported by the Ministry of Education and Sci-
sponsibility is a complementary mechanism to sup- ence of the Republic of Serbia, under the project
port state activities of promotion social develop- No. 179066.
ment and environmental protection.
Multinational corporations that operating in
Serbia largely have a strategic approach to so- References
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the case with other domestic companies in Serbia. Ending the Stalemate. Harvard Business Review,
Some multinational corporations even have an in- 1995; 73 (5): 120–134.
novative approach to socially responsible business
2. Ivanović-Đukić M. Promovisanje društveno odgovor-
and try to adapt their global approach to socially nog poslovanja preduzeća u Srbiji. Sociologija,2011;
responsible business and transfer practices ac- 53 (1): 21-42.
quired in other countries to Serbia. Certain num-
ber of multinational corporations implement much 3. Tébar Less C, McMillan S. Achieving the Successful
Transfer of Environmentally Sound Technologies:
less measures of social responsibility in their busi-
Trade-related Aspects. OECD Trade and Environ-
ness operations Serbia compared to the same ac- ment Working Papers, 2005/02, OECD Publishing:
tivities which they conducted in the home country, http://dx.doi.org/10.1787/308662648512. 2005.
so they apply double standards on numerous is-
sues in the field of corporate social responsibility. 4. Centre for Environment and Sustainability. Technol-
ogy and Policy for Sustainable Development. Chalm-
Development problems with which Serbian ers University of Technology and the Göteborg Uni-
economy in transition is faced today are further bur- versity. February 5, 2002.
dened by the negative impacts of the global financial
and economic crisis. Worsening business climate in 5. Porter M, Kramer M. Strategy and Society: The Link
the condition of crisis affected not only on the mod- Between Competitive Advantage and Corporate So-
cial Responsibility. Harvard Business Review, 2006;
est inflow of foreign direct investment by multina- 84 (12): 78-94.
tional corporations and the deterioration of the state
in the balance of payments, due to reduced exports, 6. Figar N. Društvena odgovornost preduzeća od nepri-
yet had already resulted in reducing the number of hvatanja do integrisanja u poslovnu strategiju. Teme,
2010; 34 (2); 569-584.
philanthropic and charitable activities of multina-
tional corporations. Constructive solutions in times 7. Predić B, Stefanović S, Ivanović-Đukić М. Strategija
of crisis can be found in the use of socially respon- društvene odgovornosti preduzeća. Teme, 2009; 33
sible busienss as a tool to improve corporative com- (4): 1501-1517.
petitiveness, by improving communication with
8. Krstić B,Ivanović-Đukić M. Povezivanje ciljeva DOP
employees, providing financial assistance, train- sa strategijom za povećanje konkurentnosti. Tematski
ing and so on. In such circumstances this approach zbornik Nauka i svetska ekonomska kriza, Ekonomski
would allow companies to build better reputation of fakultet Niš, 2011; 269-279.
conscientious citizen, and to provide a better com-
petitive position after the release of the economy 9. Porter M. Kramer M. The Competitive Advantage of
Corporate Philantrophy. Harvard Business Review,
from the crisis. In the same time, aggressive policy 2002; 68 (12): 5-16.

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10. Ivanović-Đukić M, Krstić B. Ostvarivanje ener-

getske efikasnosti kao ekološke dimenzije održivog
razvoja u funkciji unapređenja konkurentnosti MSP
u Srbiji. 16. tematski naučni skup Regionalni razvoj
i demografski tokovi zemalja jugoistočne Evrope.
Niš: Faculty of Economics Niš, 2011; 619-634.

11. Lončar D, Rajić V. Merenje i značaj rejtinga ko-

rporativne socijalne odgovornosti. Međunarodni
naučni skup SYMORG: www.symorg2008.fon.rs/
radovi. 2008.

12. Cetindamar, Husoy K. Corporate Social Responsibil-

ity Practices and Environmentally Responsible Behav-
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Journal of Business Ethics, 2007; 76: 163–176.

13. The Development Communication Division (Dev-

Comm), EXT The World Bank. (2005). Opportu-
nities and Options for Governments to Promote
Corporate Social Responsibility in Europe and
Central Asia: Evidence from Bulgaria, Croatia, and
Romania. Working Paper.

14. Vlada Republike Srbije. Strategija razvoja i promocije

društveno odgovornog poslovanja u Republici Srbiji
za period od 2010. do 2015. godine. Beograd. 2010.

15. Hajiyev E. Baseline Study on Corporate Social

Responsibility Practices in the Western Bal-
kans. http://europeandcis.undp.org/home/show/
D2AA88B4-F203-1EE9-BE0B4A0E76120982. 2008.

16. Marinović D, Damnjanović S. Izveštaj baze dobre

prakse društveno odgovornog poslovanja: analiza i
preporuke. Tim potpredsednika Vlade za implemen-
taciju Strategije za smanjenje siromaštva, Agencija
za strana ulaganja i promociju izvoza. 2009.

17. Crnobrnja M. Savet stranih investitora (eds.).

Bela knjiga: Predlozi za poboljšanje poslovnog
okruženja u Srbiji. FIC, Beograd. 2011.

Corresponding Author
Marija Petrovic-Randjelovic,
University of Nis,
Faculty of Economics,
Nis,
Serbia,
E-mail: marija.petrovic@eknfak.ni.ac.rs

1628 Volume 8 / Number 4 / 2013

 technics technologies education management

The application of technical analysis

indicators for the purpose of investment
strategy optimization in emerging market
Tomislav Brzakovic1, Mirko Borisov2, Miodrag Brzakovic1
1
Faculty of Management Small and Medium Size Enterprises, Belgrade, Serbia,
2
Faculty of Technical Science, Novi Sad, Serbia.

Abstract impression that the price move at random walk. In

Numerous studies in the finance literature have other words, the participants in capital market are
investigated technical analysis to determine its not able to achieve extra return constantly on the
validity as an investment tool. This study is an basis of available information, which is explained
attempt to explore whether some forms of tech- by capital market efficiency. According to [1] the
nical analysis can predict stock price movement market in which the prices always completely re-
and make excess profits based on certain trad- flect the available information is called “efficient”.
ing rules in emerging market. This paper exam- By efficient market, [2] implies the market in
ines predictive power and profitability of simple which it is impossible to achieve economic profit
trading rules based on technical indicators as the by trade on the basis of specific set of information.
Simple Moving Average, the Crossover SEMA/ For years back the market efficiency hypothesis
LEMA, the Moving Average Convergence-Diver- [3] had been accepted by a large number of econo-
gence (MACD) and the Relative Strength Index mists with university education, who supported
(RSI). Research results show that in most cases it the thesis that the information spread with great
is possible to achieve more favourable return by speed and incorporate in prices without delay, not
application of strategies based on technical analy- providing the possibility either to technical or to
sis indicators in relation to “Buy and Hold” strat- fundamental analysts to achieve the return larger
egy. The proof that it is possible to achieve more than the return obtained on the basis of randomly
favourable result on the basis of historical prices selected portfolio. [4] goes so far as to state that
information than the result obtained by “Buy and even chimpanzee with blindfold over its eyes can
Hold” strategy, is in favour of disputing the weak- select by throwing darts the portfolio which is as
form market efficiency hypothesis. good as the portfolio selected by experts.
Key words: technical analysis, market effi- From the end of the twentieth century, more
ciency, investment strategy, transaction costs and more economists can be found who dispute
the market efficiency hypothesis, i.e. who believe
that it is still possible to predict the future share
1. Introduction
prices trend, which they most often explain by
The market prices of shares have been among numerous anomalies of prices (January effect,
the most often analysed economic data during the Monday effect, small companies shares, securi-
last half of the century, and one of the reasons lies ties in relation to incremental shares and other).
in the attempt to find the answer to the question However, despite the anomalies in prices, the
whether it is possible to predict the share prices investors very often do not succeed in achieving
trend in the future. The main motive because of the extra return in relation to pertaining risk when
which the people try to find out the share prices transaction costs are deducted. There is an inter-
trend pattern is the profit which follows after each esting paradox concerning the market efficiency,
correct prediction. Because the prices change un- as Lorie (1985) noticed, that market efficiency is
der the influence of information, the uncertainty as made possible precisely by the participants who
regards the occurrence of events and difficulty in do not believe in it, and therefore they constantly
adequate interpretation of information create the process new information, by which they affect the

Volume 8 / Number 4 / 2013 1629

 technics technologies education management

prices. In other words, if everybody would believe ysis. The problem lies in inconsistency, i.e. in the
in market efficiency and passively observe the non-existence of defined clear rules in finding the
changes in prices in the market, the market effi- patterns and in their subjective interpretation.
ciency would be brought into question. The early studies (until 1980) of application of
technical analysis based strategies show that they
2. Objectives can be profitable in Foreign exchange and Futures
markets, but not in shares market, too. [6] shows
The purpose of research in this paper is to give that by application of filter rules strategy it is pos-
answer to the question whether the application of sible to achieve small abnormal returns, but that
selected technical analysis indicators can provide they cease when transaction costs are included. So
the higher return in relation to simple “Buy and [7] concludes that empirical data confirm random
Hold” (B/H) strategy. Starting from that purpose, walk theory and that technical analysis does not
the following hypotheses are formulated: provide the investors the possibility to achieve
Hypothesis 0: The application of simple “Buy the realistic returns. Modern studies are based on
and Hold” strategy can give equal or higher return advanced theories and use of improved analytical
in relation to application of alternative strategies techniques and statistical methods with significant
based on technical analysis indicators. support of computer technology. Out of 92 mod-
Statistically, it is written as follows: : 0 ern studies, according to [8], 58 studies discovered
where is populatiom mean difference between positive results in technical analysis application,
two paired observation (“Buy and Hold” strategy 24 showed negative results, while in 10 studies the
versus alternative strategies based on technical results were mixed (positive and negative). [9], in
analysis indicators). analysing Dow Jones index during the period from
Hypothesis 1: The application of technical 1897-1986, on the basis of VMA (variable moving
analysis indicators can give higher return in rela- average), FMA (fixed moving average) and TRB
tion to simple “Buy and Hold” strategy. (trading range breakout), came to the conclusion
Statistically, it is written as follows: : 0 the by using technical indicators there is the pos-
The paper is organized in the following man- sibility to predict the prices. By replicating the
ner: after the introduction, in Chapter 2 theoretical application of [9] method, [10] discovered that
basis of the paper follows, in Chapter 3 methodol- in UK market such trading rules have predicting
ogy of work is presented, in Chapter 4 data are power by application on stock exchange index in
presented, and empirical results are presented in long time series, and Bessembinder and [11] also
Chapter 5. In the last, Chapter 6, the research re- established that the same applies to emerging mar-
sults are summed up. kets of Malaysia, Thailand and Taiwan. However,
Hudson established that transaction costs elimi-
3. Theoretical basis of the paper nated technical trading profit, and [12] came to
the same conclusion for Swiss Stock Market. [13]
Two basic investing frameworks which are are able to establish profitable trading rules and
used the most often are fundamental and technical find that traders who use information contained
analysis. The technical analysis supporters do not in market statistics do better than traders who do
believe in market efficiency, i.e. they believe that not. Weak-form inefficiency at Athens Stock Ex-
the prices often deviate from so called intrinsic change was established by [14, 15, 16], in analys-
value, which creates the opportunity for profitable ing the technical indicators application, Moving
investing. Instead of fundamental analysis, which Average (MA) and Relative Strength Index (RSI),
requires much data processing, technical analysts with a view to discovering the signals of entry and
consider their technique to be much simpler, be- exist from share market of the companies within
cause charts and technical indicators contain the Singapore Stock Exchange (SES), came to the
expectations and sentiments of all participants in conclusion that using of indicators can generate
the capital market [5]. Technical indicators are significant positive result. In summary, the results
among the most often used tools of technical anal- of various investment strategies testing indicate

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that in a large number of cases by application of “signal line”. Purchase signal occurs when faster
technical indicators it is possible to achieve abnor- MACD line passes above the slower – signal line
mal return, which in some cases vanishes because (9-day exponential moving average), and sale sig-
of transaction costs [17]. The investment success nal is when faster MACD line falls below slower
achieved by application of technical analysis re- – signal line. The optimization for MACD trigger
futes the weak-form market efficiency, which is was made within the range from 2-20.
based on historical price information. The Relative Strength Index (RSI) is one of the
most popular oscillator. The RSI is a price-follow-
4. Methodology of drawing up the paper ing oscillator that ranges between 0 and 100. The
RSI usually tops above 70 and bottoms below 30.
In technical analysis there are a large number The optimization of RSI indicator was made with-
of indicators and trading systems which indicate in the range from 6-24.
the changes in prices and give trading signals. For Considering the fact that various investment
the needs of this paper, Simple Moving Average strategies are tested on the same sample, and as
(SMA), Crossover SEMA/LEMA, Moving Aver- they are, according to [18], observations dependent,
age Convergence/Divergence indicator (MACD) t-paired comparisons test was used for statistical
and Relative Strength Index (RSI) are selected. proving of hypothesis. T-test was used for testing
On each mentioned indicator optimization has of the relation between two investment strategies,
been carried out, thanks to which the strategy with with 95% confidence level. By calculating a stan-
maximum return was obtained for various periods dard error based on differences, t-test takes account
of time, with included transaction costs, as well as of correlation between the observations.
without such costs. MetaStock Software and Mi-
crosoft Excel Data Analysis Tools have been used 5. DATA
for data processing. SMA is one of the most reli-
able and most often used technical indicators. It The subject of this paper’s research is ordinary
is calculated by dividing the sum of prices for the shares which are traded in Belgrade stock ex-
observed period, most often the closing prices, by change, 15 issuers within the index Belex15. In
the number of periods. In practice, the wide range Table 1 in the first column full name and registered
of various periods is applied, but the shorter pro- office of the security issuer are stated, while the
cesses are more sensitive to price trends, which symbol under which it is maintained in Belgrade
is shown through more frequent trading, larger stock exchange is stated in the second column.
transaction costs, wrong signals caused by acci- Table 1. Belex15 – Index basket
dental short term change in prices. SMA optimisa- Issuer Simbol
tion is made within the range (5-50). In practice, AIK banka a.d. , Niš AIKB
Crossover SEMA/LEMA is often used, i.e. the Komercijalna banka a.d. , Beograd KMBN
combination of two (or more) exponential mov- Energoprojekt holding a.d. , Beograd ENHL
ing averages (EMA) of various length, where the Agrobanka a.d. , Beograd AGBN
purchase signal appears when shorter moving av- Univerzal banka a.d. , Beograd UNBN
erage (SEMA) surpasses longer moving average Soja protein a.d. , Bečej SJPT
(LEMA), and sale signal when SEMA falls below Imlek a.d. , Beograd IMLK
LEMA. The optimization for SEMA was made Metalac a.d. , Gornji Milanovac MTLC
within the range 3-18, and for LEMA the optimi- Metals banka a.d. , Novi Sad MTBN
zation was made for indicators range from 20-100. Privredna banka a.d. , Beograd PRBN
The Moving Average Convergence/Diver- Messer Tehnogas a.d. , Beograd TGAS
gence indicator (MACD), as prescribed by Gerald Tigar a.d. , Pirot TIGR
Appel, is calculated by subtracting the value of Alfa plam a.d. , Vranje ALFA
a 0.075 (26-period) exponential moving average Telefonija a.d. , Beograd TLFN
from a 0.15 (12-period) exponential moving av- Veterinarski zavod Subotica a.d. , Subotica VZAS
erage. A 9-period exponential moving average is Source: Belgrade Stock Exchange

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 technics technologies education management

The data used in this paper include the period shown without transaction costs, under (b) opti-
from the beginning of 2007 to the end of 2009, mum strategies are shown with included transac-
i.e. they include the period of 3 years. The data tion costs, and under (c) returns from B/H strategy
are taken over from Belgrade Stock Exchange are shown. In all cases costs per transaction are
web site. The application of investment strategies calculated in the amount of 0.5%.
was tested for the entire period from January 08,
2007 to December 31, 2009 (754 trading days), 6. Results and discussions
in three sub-periods. The first sub-period is from
January 08, 2007 to December 31, 2007 (251 trad- During the entire observed period from 2007-
ing days). The second sub-period is from Janu- 2009 the average return on shares within Belex15
ary 03, 2008 to December 31, 2008 (254 trading on the basis of B/H strategy is negative (-51.23%).
days). The third sub-period is from January 05, Considered by sub-periods, two years were posi-
2009 to December 31, 2009 (249 trading days). tive (2007, 2009), while in 2008 exceptionally
Table 2 shows the results of application of opti- negative return was recorded (-76.07%). Table 2
mum SMA strategy in relation to B/H strategy for shows that by application of OPT SMA (5) strat-
the mentioned periods of time, Table 3 shows the egy during the entire period better result was
results of optimum SEMA/LEMA strategy, Table achieved (smaller negative return of -10.51%) in
4 shows the results of application of optimum relation to B/H strategy without transaction costs,
MACD strategy, and Table 5 shows the results of with average 88.47 performed transactions, while
application of optimum RSI strategy in relation to with included transactions costs, in spite of de-
B/H strategy for the mentioned periods of time. In crease to 25 average transactions by application
Tables 2-5 the symbols of stock at Belgrade stock of OPT SMA (30) strategy, the achieved return is
exchange are shown in the first column, and in considerably more unfavourable than the return
columns the following is shown for each period from B/H strategy. Considered by sub-periods in
of time: under (a) optimum investment strategy is 2007 the application of SMA strategies gave worse
Table 2. Trading result based on the optimized SMA (in %)
2007-2009 2007 2008 2009
OPT OPT OPT OPT OPT OPT OPT OPT
B/H B/H B/H B/H
Simbol SMA SMA SMA SMA SMA SMA SMA SMA
perf. perf. perf. perf.
(5) (30). (5) (25) (40) (40) (35) (35)
(a) (b) (c) (a) (b) (c) (a) (b) (c) (a) (b) (c)
AIKB -25.01 -119.83 -57.01 12.87 23.93 70.45 0.08 -1.82 -73.47 52.57 49.76 5.73
KMBN 90.90 -0.86 -61.67 72.22 22.42 30.53 -7.92 -10.03 -73.44 64.81 57.42 10.58
ENHL 53.00 52.59 -45.64 55.86 -40.79 107.14 3.86 3.12 -80.56 81.98 73.00 34.45
AGBN -26.31 -104.83 -79.24 -35.46 -33.74 -45.14 -1.18 -2.02 -81.42 191.72 180.40 95.42
UNBN -38.03 -1.82 -71.94 29.36 -6.09 41.14 -27.76 -31.13 -71.10 25.52 19.94 -21.59
SJPT 44.21 -419.91 -56.34 48.11 -10.36 53.70 4.23 1.83 -75.71 44.92 36.54 22.81
IMLK 29.92 -2405.84 14.62 45.92 31.17 107.54 -6.15 -10.04 -59.27 28.32 21.13 37.45
MTLC -56.69 -20.15 -36.92 -35.95 -66.14 9.05 16.01 13.73 -57.61 69.05 63.92 40.73
MTBN -1.98 -0.35 -83.69 -21.75 -57.60 -3.39 7.14 6.23 -86.23 85.87 78.52 41.15
PRBN -11.34 -1.47 -76.21 0.19 -59.35 18.12 -13.89 -16.46 -87.39 101.54 98.77 60.79
TGAS -8.08 -102.99 -34.58 76.29 49.36 100.00 -13.54 -15.31 -78.57 99.27 92.48 63.55
TIGR -17.53 -121.31 -56.12 -28.18 -0.79 1.59 -8.74 -14.75 -71.37 84.54 78.19 53.81
ALFA -36.78 10.16 -75.54 -12.49 -27.61 -31.27 0.48 -0.83 -78.37 89.91 79.75 54.35
TLFN -56.20 -0.25 -67.43 14.93 -70.76 91.70 -15.63 -17.13 -86.83 62.43 58.06 23.59
VZAS -97.70 -3351.15 19.25 81.38 -67.42 328.66 -3.67 -5.04 -79.66 54.15 48.45 39.02
Average -10.51 -439.20 -51.23 20.22 -20.92 58.65 -4.44 -6.64 -76.07 75.77 69.09 37.46
Source: Author´s calculations

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 technics technologies education management

results than B/H strategy, while the results in 2008 better result was achieved (less negative return
were more favourable (smaller negative return in of -39.14%) in relation to B/H strategy without
relation to B/H strategy). In 2009 the application transaction costs, while with included transac-
of OPT SMA (35) strategy gave considerably bet- tions costs the return is more unfavourable than
ter results of 75.77%, respectively 69.09% with the return from B/H strategy. Considered by sub-
included transaction costs in relation to return of periods in 2007 the application of MACD strat-
37.46% from B/H strategy. egy gave poorer results than B/H strategy, while
Table 3 shows that by application of OPT the results in 2008 were more favourable (smaller
SEMA/LEMA (15/20) strategy during the whole negative return in relation to B/H strategy), as well
period better result was achieved (70.57%) with- as in 2009 when the application of OPT MACD
out and with included transaction costs of OPT (14) strategy gave considerably more favourable
SEMA/LEMA (15/40) (7.29%) in relation to B/H results in relation to return from B/H strategy.
strategy (-51.23%). Considered by sub-periods Table 5 shows that by application of OPT RSI
in 2007, the application of strategies without and (8) strategy during the entire period considerably
with included transaction costs gave poorer results more unfavourable result was achieved in rela-
than B/H strategy, while the results in 2008 were tion to B/H strategy. Considered by sub-periods,
more favourable (less negative return in relation to only in the year 2008 the application of OPT RSI
B/H strategy), as well as in 2009, when the appli- (22) strategy gave better results (smaller negative
cation of OPT SEMA/LEMA(9/20) strategy gave return) than B/H strategy. The mentioned results
more favourable results of 75.74%, respectively of the strategy based on RSI are in accordance
66.83% with included transaction costs in relation with the attitude that RSI is good indicator in non-
to return of 37.46% from B/H strategy. trending environment.
Table 4 shows that by application of OPT In Table 6, t-statistics is shown for the men-
MACD (14) strategy during the entire period tioned strategies, by time periods of observation,
Table 3. Trading result based on the optimized SEMA/LEMA (in %)
2007-2009 2007 2008 2009

OPT OPT OPT OPT OPT OPT OPT OPT

SEMA/ SEMA/ B/H SEMA/ SEMA/ B/H SEMA/ SEMA/ B/H SEMA/ SEMA/ B/H
Simbol
LEMA LEMA perf. LEMA LEMA perf. LEMA LEMA perf. LEMA LEMA perf.
(15/20) (15/40) (12/20) (12/20) (3/100) (18/100) (9/20) (9/20)

(a) (b) (c) (a) (b) (c) (a) (b) (c) (a) (b) (c)
AIKB 31.81 12.55 -57.01 67.51 60.38 70.45 0.00 0.00 -73.47 26.86 23.99 5.73
KMBN 38.52 17.77 -61.67 28.00 19.66 30.53 -2.04 0.00 -73.44 71.30 66.02 10.58
ENHL 82.43 92.67 -45.64 70.86 56.46 107.14 -11.09 -13.85 -80.56 82.33 77.54 34.45
AGBN -4.74 2.87 -79.24 -18.56 -23.40 -45.14 0.00 0.00 -81.42 189.25 186.58 95.42
UNBN -72.13 -2.26 -71.94 -39.48 1.14 41.14 0.00 0.00 -71.10 15.96 12.96 -21.59
SJPT 66.13 59.05 -56.34 58.07 -591.77 53.70 -11.71 -15.10 -75.71 40.90 34.91 22.81
IMLK 114.85 -179.83 14.62 48.38 96.46 107.54 0.00 0.00 -59.27 38.93 34.24 37.45
MTLC 234.26 -198.51 -36.92 13.10 12.54 9.05 -9.41 -16.25 -57.61 60.24 55.95 40.73
MTBN 1.06 1.81 -83.69 -4.06 0.42 -3.39 -12.14 -18.20 -86.23 68.52 66.36 41.15
PRBN 10.95 -5.95 -76.21 37.19 -136.09 18.12 0.00 0.00 -87.39 89.21 85.17 60.79
TGAS 11.52 87.44 -34.58 92.22 8.49 100.00 0.00 0.00 -78.57 104.66 101.49 63.55
TIGR 11.53 47.38 -56.12 22.41 534.16 1.59 0.00 0.00 -71.37 91.34 86.53 53.81
ALFA -9.34 -1.63 -75.54 -15.03 -19.05 -31.27 0.00 0.00 -78.37 60.95 56.48 54.35
TLFN 139.16 -55.85 -67.43 142.12 131.67 91.70 0.00 0.00 -86.83 73.12 71.04 23.59
VZAS 402.51 231.91 19.25 351.88 331.81 328.66 -8.66 -11.82 -79.66 47.56 43.18 39.02
Average 70.57 7.29 -51.23 56.98 32.19 58.65 -3.67 -5.02 -76.07 70.74 66.83 37.46
Source: Author´s calculations

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Table 4. Trading result based on the optimized MACD (in %)

2007-2009 2007 2008 2009
OPT OPT OPT OPT OPT OPT OPT OPT
B/H B/H B/H B/H
Simbol MACD MACD MACD MACD MACD MACD MACD MACD
perf. perf. perf. perf.
(14) (14) (4) (14) (20) (20) (14) (14)
(a) (b) (c) (a) (b) (c) (a) (b) (c) (a) (b) (c)
AIKB -36.94 -58.23 -57.01 28.17 -35.12 70.45 -26.70 -30.16 -73.47 80.07 75.97 5.73
KMBN -7.48 -23.87 -61.67 50.01 42.39 30.53 -17.45 -21.84 -73.44 80.55 75.91 10.58
ENHL 26.29 11.14 -45.64 23.14 -1.48 107.14 -14.04 -16.87 -80.56 77.74 72.48 34.45
AGBN -73.33 -89.83 -79.24 -57.04 -80.59 -45.14 -29.55 -32.87 -81.42 127.93 117.72 95.42
UNBN -97.61 -115.04 -71.94 -16.46 -25.97 41.14 -26.71 -30.51 -71.10 7.99 3.94 -21.59
SJPT 35.85 17.16 -56.34 29.92 89.11 53.70 -15.60 -18.17 -75.71 55.91 50.33 22.81
IMLK 77.85 53.31 14.62 18.62 55.74 107.54 -5.89 -10.87 -59.27 76.20 72.51 37.45
MTLC -17.10 -35.69 -36.92 -9.41 -2.00 9.05 -28.69 -34.65 -57.61 54.58 47.32 40.73
MTBN -37.35 -48.68 -83.69 -42.42 -27.10 -3.39 2.88 0.34 -86.23 50.23 41.85 41.15
PRBN -89.43 -102.74 -76.21 -52.29 -73.91 18.12 -20.00 -21.40 -87.39 107.49 100.70 60.79
TGAS 122.39 104.08 -34.58 109.35 93.01 100.00 -9.76 -13.02 -78.57 112.91 107.58 63.55
TIGR -12.88 -32.63 -56.12 29.00 5.39 1.59 -26.57 -33.71 -71.37 122.06 116.87 53.81
ALFA -40.41 -47.67 -75.54 -22.72 -26.39 -31.27 -17.25 -19.73 -78.37 73.95 66.51 54.35
TLFN -231.09 -250.45 -67.43 79.46 -18.48 91.70 -42.11 -45.55 -86.83 73.94 67.03 23.59
VZAS -205.86 -258.80 19.25 32.43 -130.64 328.66 -11.44 -14.64 -79.66 30.98 24.94 39.02
Average -39.14 -58.53 -51.23 13.32 -9.07 58.65 -19.26 -22.91 -76.07 75.50 69.44 37.46
Source: Author´s calculations

Table 5. Trading result based on the optimized RSI (in %)

2007-2009 2007 2008 2009
OPT OPT OPT OPT OPT OPT
OPT OPT B/H B/H B/H B/H
Simbol RSI RSI RSI RSI RSI RSI
RSI (8) RSI (8) perf. perf. perf. perf.
(24) (24) (22) (22) (23) (23)
(a) (b) (c) (a) (b) (c) (a) (b) (c) (a) (b) (c)
AIKB -93.22 -104.03 -57.01 -11.04 -12.80 70.45 -54.01 -54.54 -73.47 47.01 46.24 5.73
KMBN -104.88 -112.00 -61.67 -22.80 -24.22 30.53 -27.76 -28.93 -73.44 14.90 13.98 10.58
ENHL -95.00 -106.44 -45.64 2.14 0.08 107.14 -55.93 -56.40 -80.56 33.92 31.54 34.45
AGBN -53.91 -58.56 -79.24 -26.79 -27.47 -45.14 -55.94 -56.41 -81.42 28.94 28.08 95.42
UNBN -58.02 -68.91 -71.94 8.05 6.68 41.14 -42.90 -43.40 -71.10 2.62 1.68 -21.59
SJPT -91.19 -98.61 -56.34 -26.16 -27.83 53.70 -52.91 -53.42 -75.71 39.24 38.31 22.81
IMLK 66.15 48.30 14.62 0.00 0.00 107.54 -29.73 -30.28 -59.27 26.48 25.36 37.45
MTLC -56.38 -62.65 -36.92 -19.15 -20.34 9.05 -1.36 -2.72 -57.61 62.81 61.81 40.73
MTBN -90.67 -95.00 -83.69 -19.62 -20.68 -3.39 -59.45 -59.88 -86.23 29.31 28.51 41.15
PRBN -106.22 -110.87 -76.21 -36.36 -37.73 18.12 -58.64 -59.06 -87.39 0.00 0.00 60.79
TGAS -148.87 -156.09 -34.58 -9.09 -11.14 100.00 -56.48 -56.98 -78.57 31.39 30.67 63.55
TIGR -101.29 -106.10 -56.12 -12.35 -13.43 1.59 -0.80 -1.09 -71.37 77.94 75.25 53.81
ALFA -74.86 -78.14 -75.54 -14.84 -15.60 -31.27 -62.23 -62.76 -78.37 9.07 7.57 54.35
TLFN -196.02 -203.20 -67.43 -1.65 -3.58 91.70 -44.32 -44.67 -86.83 86.34 85.38 23.59
VZAS -397.70 -420.50 19.25 0.00 0.00 328.66 -56.92 -57.41 -79.66 58.29 57.27 39.02
Average -106.81 -115.52 -51.23 -12.64 -13.87 58.65 -43.96 -44.53 -76.07 36.55 35.44 37.46
Source: Author´s calculations

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namely without included transactions costs under while under number 7 it is shown whether is ac-
(a), and with included transactions costs under (b). cepted or rejected.
In the paper, all t-statistics is compared with criti- Summarily, it can be stated that out of 32 con-
cal t-value of -1.76 at the 5% level, i.e. left-side sidered possibilities (by application of four differ-
test was used for n-1 of samples (14). Under num- ent technical indicators for 4 different periods of
ber 1 in Table 6 the difference is shown between time in two alternatives – with and without trans-
the return achieved by B/H strategy and the return actions costs) the zero hypothesis is rejected in 18
achieved by alternative strategy, under numbers 2 cases (or to put it differently, in 56.25% cases the
and 3 Standard Error and Standard deviation are alternative strategies based on technical analysis in-
shown, number 6 contains the t-statistic value, dicators application gave better results than simple

Table 6. t-statistic for OPT SMA, OPT SEMA/LEMA, OPT MACD, OPT RSI strategies
Whole period 2007-2009 2007 2008 2009
r/b OPT SMA
(a) (b) (a) (b) (a) (b) (a) (b)
1 Mean Diff. -0.40724 3.879712 0.384348 0.795719 -0.71621 -0.69423 -0.383151 -0.31631
2 Stand. Error 0.157698 2.685855 0.170587 0.259931 0.032124 0.034623 0.058235 0.056663
3 Stand. Dev. 0.610761 10.40227 0.660681 1.006707 0.124417 0.134094 0.225545 0.219456
4 Kurtosis 2.677748 5.295939 7.560215 7.236116 0.95886 0.619464 3.378642 2.788429
5 Skewness 0.830043 2.489822 2.371879 2.449899 0.689389 0.649153 -0.548525 -0.24051
6 t Stat. -2.58239 1.444498 2.253087 3.06127 -22.2951 -20.0513 -6.57933 -5.582361
7 Reject yes no no no yes yes yes yes
OPT SEMA/ Whole period 2007-2009 2007 2008 2009
r/b
LEMA (a) (b) (a) (b) (a) (b) (a) (b)
1 Mean Diff. -1.217981 -0.58525 0.016791 0.264639 -0.72396 -0.7105 -0.33284 -0.29372
2 Stand. Error 0.2501176 0.272911 0.087927 0.589057 0.026138 0.030183 0.061555 0.062594
3 Stand. Dev. 0.9687015 1.056978 0.340541 2.281408 0.10123 0.116899 0.2384 0.242426
4 Kurtosis 3.1016702 2.468577 1.14431 6.160867 1.26088 1.882199 1.72341 1.771081
5 Skewness -1.721201 1.549924 1.080209 0.446213 0.753794 0.97311 -1.07105 -1.05573
6 t Stat. -4.86963 -2.14449 0.190967 0.449259 -27.6981 -23.5397 -5.40727 -4.6925
7 Reject yes yes no no yes yes yes yes
OPT Whole period 2007-2009 2007 2008 2009
r/b
MACD (a) (b) (a) (b) (a) (b) (a) (b)
1 Mean Diff. -0.12092 0.072983 0.453368 0.677242 -0.56807 -0.53156 -0.38044 -0.31987
2 Stand. Error 0.246332 0.26369 0.202322 0.305757 0.037246 0.039825 0.060345 0.062566
3 Stand. Dev. 0.954041 1.021269 0.78359 1.18419 0.144255 0.154241 0.233714 0.242317
4 Kurtosis 2.371105 3.157058 7.992229 9.50606 0.873819 0.650904 -0.33111 -0.45525
5 Skewness 1.403071 1.631661 2.547434 2.847717 -0.29816 -0.18712 0.203814 0.155433
6 t Stat. -0.49087 0.276775 2.240823 2.214971 -15.2516 -13.3474 -6.30441 -5.1125
7 Reject yes no no no yes yes yes yes
OPT Whole period 2007-2009 2007 2008 2009
r/b
RSI (a) (b) (a) (b) (a) (b) (a) (b)
1 Mean Diff. 0.55575 0.642878 0.712997 0.725254 -0.32108 -0.31536 0.009061 0.020123
2 Stand. Error 0.285192 0.293481 0.214646 0.214256 0.03907 0.038828 0.096124 0.095721
3 Stand. Dev. 1.104544 1.136646 0.831322 0.829809 0.151316 0.150382 0.372286 0.370724
4 Kurtosis 9.010246 9.463197 6.680958 6.572413 1.881503 2.057437 -0.50236 -0.50035
5 Skewness 2.771333 2.86974 2.194956 2.168705 -1.5435 -1.56875 0.362103 0.341934
6 t Stat. 1.948685 2.190527 3.321728 3.38499 -8.21821 -8.12193 0.094262 0.21023
7 Reject no no no no yes yes no no
Source: Author´s calculations

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 technics technologies education management

B/H strategy. If the entire period of 3 years (2007- becomes especially important in the conditions of
2009) is considered, conclusion can be made that great price fluctuations with small trading volume,
by application of one investment strategy (SEMA/ which is the characteristic of developing markets,
LEMA) superior return was achieved in relation to such as Serbian market. Also, including transac-
B/H strategy with and without included transaction tion costs in analysis leads to strategy modifica-
costs, that by application of two investment strate- tion in relation to the strategy without transaction
gies (SMA and MACD) higher return was achieved costs included.
in relation to B/H strategy, but that those strategies It is important to emphasize that limitations
become inferior in relation to B/H strategy when such as short time framework of data included,
transactions costs are included, while the applica- small trading volumes, respectively market illi-
tion of one investment strategy (RSI) does not pro- quidity, and especially the limitation concerning
vide better results than B/H strategy. taking only long positions, restrict the integral ap-
plication of technical indicators to certain extent.
7. Conclusion The results would probably be more convincingly
in favour of alternative in relation to B/H strategy
If by application of alternative strategies based if short positions were applied, because the prac-
on technical analysis indicators the return could tice shows that they are the most profitable in de-
not be achieved which is higher that the return clining market conditions, as Serbian market was
achieved by application of simple B/H strategy, during the observed period.
that would mean that technical indicators do not
have the power to predict the price trends. In other References
words, if on the basis of historical information
on prices it is not possible to achieve the result 1. Fama EF. Efficient Capital Markets: A Review of
more favourable than the result obtained by B/H Theory and Empirical Work, Journal of Finance,
1970; 25: 383-417.
strategy, this would provide support to weak-form
market efficiency hypothesis. 2. Jensen MC. Some Anomalous Evidence Regarding
The research results presented in this paper in- Market Efficiency. Journal of Financial Economics,
dicate that by application of strategies based on 1978; 6: 95-101.
technical analysis indicators in the most cases it is 3. Malkeil Burton G. The Efficient Market Hypothesis
possible to achieve the return more favourable in and Its Critics. Journal of Economic Perspectives,
relation to B/H strategy. More favourable return 2003; 17(1): 59-82.
in this context implies the higher positive respec-
tively lower negative return in relation to B/H 4. Malkeil Burton G. A Random Walk Down Wall Street,
New York. W.W. Norton & Co. 1973.
strategy. This also means that the research results
bring into doubt the weak-form market efficiency 5. Pring MJ. Technical Analysis Explained, New York,
hypothesis, because they demonstrate that by ap- NY:McGraw-Hill.2002.
plication of certain investment strategies based on
6. Alexander SS. Price movements in speculative mar-
historical information, it is possible to success-
kets: Trends or random walks. Industrial Manage-
fully predict the price trend in the future. ment Review, 1961; 2: 7-26.
The research results also show that strategies
exist which achieve better results than B/H strate- 7. Fama E. The Behavior of stock market prices, Jour-
gy regardless of transaction costs amount, but that nal od Business, 1965; 38: 34-105.
the traders must also take transaction costs into 8. Park CH, Irwin HS. The Profitability of Technical
account, because strategies exist which become Analysis: A Review, AgMAS Project Research Re-
inefficient precisely because of those costs. As all port, 04, 2004.
alternative strategies are not superior all the time
9. Brock W, Lakonishok J, LeBaron B. Simple technical
and in all conditions in relation to B/H strategy,
trading rules and the stochastic properties of stock re-
care must be taken about optimal strategies selec- turns. The Journal of Finance, 1992; 47: 1731-1764.
tion for all securities in each period of time. This

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10. Hudson R, Dempsey M, Keasey K. A note on the

weak form efficiency of capital markets. The ap-
plication of simple technical trading rules to UK
stock prices - 1935 to 1994, Journal of Banking &
Finance, 1996; 20: 1121-1132.

11. Bessembinder H, Chan K. The profitability of tech-

nical trading rules in Asian stock markets. Pacific-
Basin Finance Journal, 1995; 3: 257-284.

12. Isakov D, Hollistein M. Application of simple tech-

nical trading rules to Swiss stock prices: Is it profit-
able? Financial Markets and Portfolio Manage-
ment, 1999; 13(1): 9-26.

13. Blume L, Easley D, O´Hara M. Market statistic and

technical analysis: the role of volume. Journal of
Finance, 1994; 49: 155-181.

14. Spyrou SI. Random walks in the Greek Stock Ex-

change: is the Greek capital market informatiomal-
ly efficient?, Synthesis: Review of Modern Greek
Studies, 1998; 2(2): 33-41.

15. Koutmos G, Negakis C, Theodossiou P. Stockhastic

behaviour of the Athens Stock Exchange. Applied
Financial Economics, 1993; 3: 119-126.

16. Wong WK, Manzur M, Chew BK. How Rewarding

Is Technical Analysis? Evidence from Singapore
Stock Market, Applied Financial Economics, 2003;
13: 543-551.

17. Lo A, Mamaysky H, Wang J. Foundations of techni-

cal analysis: Computational algorithms, statistical
inference, and empirical implementation. Journal of
Finance, 2000; 55: 1705-1770.

18. DeFusco RA, at al. Quantitative Methods for In-

vestment Analysis, 2nd.ed. Baltimore: United Book
Press inc. 2004.

Corresponding Author
Tomislav Brzakovic,
Faculty of Management Small and Medium Size
Enterprises,
Belgrade,
Serbia,
E-mail: tbrzakovic@kbkbroker.rs

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 technics technologies education management

The nature and factors of economic prosperity

Zoran Njegovan¹, Nikola Njegovan², Drago Cvijanovic³,
¹ University of Novi Sad, Faculty of Agriculture, Novi Sad, Serbia,
² University of Belgrade, Faculty of Economics, Belgrade, Serbia,
³ Agricultural Economics Institute, Belgrade, Serbia.

Abstract cant work “The structure of Scientific Revolutions”

[2] that scientific paradigms may isolate the society
Authors of the paper are trying to emphasise the
from the vital problems that cannot be reduced to
difference between the economic doctrine theory
parts in a scientific puzzle, because they cannot be
and its creation in the specific moment of history,
expressed by conceptual and instrumental means
i.e. the difference between theories and practice on
that paradigm disposes with. With respect to that
one side, and the policies that are implemented in
the results brought disorientation in development
real life on the other. They are combining the eco-
and negative effects to many countries, namely,
nomic doctrinal history with implementation of
inability to make their position and prospects bet-
theory in specific circumstances. They are also dis-
ter. Therefore, the dominant economic theory op-
cussing and criticizing the approach that very often
erates all the time with assumptions that are not
happens in the reality of many countries, especially
significantly linked to reality, and not only does it
the underdeveloped. This approach is showing that
provides wrong answers, but sometimes even asks
reality of those countries is often shaped by using
the wrong questions. That is why it is necessary to
the inappropriate economic doctrinal theories. They
work, parallel with the profiling of a country, on
are also commenting the sources of wealth of the
building awareness of the existence of a soft of dis-
developed countries and the ways the so called now
parity between theory and practice.
developed countries were using them in that pro-
Aware of this anomaly, many economists tried to
cess. On that basis they are traying to specifie the
point it out in their works and then, thinking that it is
main factors that are providing a base for efficient
not always accidental, to reveal the essence as well
catch up strategies implementation.
as range related to the degree of exhibited disparity.
Key words: Economic theory; Economic Pol-
For example, it is well known that at the time Adam
icy; Economic Prosperity, Investing in People,
Smith was explaining in his Wealth of Nations [3]
Globalization of Activities.
the freedom of trade theory as the only right one,
and pointed at the need for its implementation, Eng-
Introduction land was still practicing a century later extremely
The interest of numerous economists, soci- high customs duty protection. It is not necessary to
ologists and philosophers in the newer history has go far back in history to show this. While the USA
often been related to theory as well as practice of was promoting free trade for all at a certain period
socioeconomic events accompanying growth and of time, it at the same time was in reality subsidizing
development of the society. Almost as a rule, a di- and protecting its farmers and its companies dealing
lemma appears in the process related to the fact of in high technologies, which it has continued to do to
existence of significant difference between theory this days. This is done to such extent that even cer-
and practice, namely, differences between the way tain American economists like Paul Krugman [4],
theories present life, on one side and what life is ac- has pointed out that in his own country his favorite
tually in reality, on the other. And as much as little theories have no impact on the practical policy. Of
attention was paid to this in less developed coun- course, this is not alone example. It can, therefore,
tries, in the developed countries theories were for- be unequivocally concluded that there is a great dif-
mulated which suggested the behavior that deviated ference between the official and, to a great extent,
to a great extent from the concrete – actual situation abstract theories, on one side and what is going on
[1]. Thomas Kuhn pointed out in his most signifi- in practice, on the other.

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 technics technologies education management

The thing that can be observed is that the mod- scientists and institutions (IBRD, IMF, etc.) that do
els based on experience – reality represent by far not try to relativize the relation between rhetoric
more undefined models that do not provide clear (theory) and action (practice), but try to adapt re-
answers. On the other hand, the models from eco- ality to theoretical solutions. Furthermore, theories
nomic theory represent much more determined are launched occasionally that are then promoted in
models with much clearer answers often consid- other countries, whereas, at the same time utterly
ering the actual situation unimportant. Hence, the different policy is implemented in own country.
situation is often such that the reality is simply It is important also to point out that a standard
modeled according to theoretical assumptions, in- theory used for developing countries, presumes
stead of the theory being used to resolve the prob- totality without diversity and variations, without
lems taking place in real life. Perhaps it is more il- friction and conflicts in which perfect state of infor-
lustrative to use Schumpeter’s position that there is mation rules, which is in no way the case in prac-
a choice between simple explanations that are not tice. Hence that is huge qualitative and quantitative
relevant or complicated explanations which are rel- differences that reproduce poverty on one side and
evant, namely, as some like to point out, most of the opulence and development on the other. Finally,
economists like to make accurate errors, instead of the German economists pointed out back in the 19th
being approximately right. Also, proffessor Victor century that such theories represent a quantification
Norman would say for the current standard theory of qualityless sizes, capital and knowledgless labor.
that one of the pretty things with economy is that Therefore, theoretical models based on simplified
it just represents the way of thinking, whereas the schemes of comprehending reality, similar as in
actual knowledge does not exist [5]. Finally, Albert physics, include the very factors that create wealth,
Einstein himself said that as far as the laws of math- and these are, first of all, the already mentioned in-
ematics refer to reality, they are not certain, and as novations and technologies; synergic effects as well
far as they are certain, they do not refer to reality. as an economy of scale.
Accordingly, on a global scale, except from The above represents a sort of a problem. It’s
time to time, the economists were unable to im- much more drastic form is exhibited when the
pose overly the need for studying history of eco- theoreticians try to use different theories for dif-
nomic policies, namely, what was actually being ferent goals. This brings us partially to the story
done and what was the reality. On the other hand, why some nations are poor and others always rich.
study of history of economic theory was quite le-
gitimate, namely, what the various theoreticians Sources of wealth of develped countries
preached that needed to be done [6].
It could be also added that this so called igno- Perhaps it is easiest to find the theoretical basis
rance is mostly a consequence of the fact that in for an answer to the raised question concerning the
the process of resolving the arisen development sources of welth of development countries further
problems, valid assumptions are not taken into more in the well known and mutually opposed
consideration [7]. That is why there are situations globalization theories of two Nobel Prize winners,
where e.g. countries in transition and/or unde- Paul Samuelson and Gunnar Myrdal [8, 9].
veloped countries cannot resolve developmental Paul Samuelson’s theory claims that free inter-
problems, but reproduce poverty by their activi- national trade will lead over time to equalizing of
ties. This is also indicated by the position that suc- the prices of the production factors – labor and cap-
cessful and efficient strategies and policies cannot ital. On the other hand, quite contrary, the Swedish
be made on wrong assumptions. economist Gunnar Myrdal deemed that free trade
On the other hand, one should not blame this will lead over time to an even greater polarization
solely on the rich countries. These countries have between the poor and the rich. His theory is also
a tendency to impose theories on the poor that that corroborated in practice as it is known from the
they alone do not implement, or at least do not im- later times that Samuelson’s economic theory, fol-
plement under certain macroeconomic conditions. lowed first of all by the World Bank and MMF, is
Such approach is lately significantly aided by the unable to establish the development balance, but, on

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the contrary, creates an extreme polarization of the Analyzing the individual periods in the eco-
countries – the so called economic imperialism and nomic history it can be observed that in the phases
hegemony of individual countries. This theory was of prosperity in development of the, so called,
also the basis for the so called triumph of capitalism now developed countries, interventionist indus-
that took place with the fall of the Berlin Wall, which trial, trade and technological policies were imple-
proved also during the period after to be unrealistic. mented for the promotion of infantile industries
It is becoming more and more clearr that the theory throughout the period until they caught up and
that insists on the concept of exchange and not on become competitive. In such a policy, customs
the concept of production does not provide the so protection plays an important role, and subsidies,
called catch up for less developed countries. Hence, refunds, premiums and compensations were often
the heated exchanges being conducted in the world used to stimulate export. The governments pro-
today on whether broadly accepted and globally vided industrial subsidies and used various public
valid so called good policies formed on the basis investment programs, particularly in infrastruc-
of the so called Washington consensus, and which ture but also in production. They stimulated ac-
are often promoted as economic conditions through quisition of foreign technologies, sometimes by
bilateral and multilateral financial support to insuf- legal and sometimes by illegal means – industrial
ficiently developed countries are suitable or unsuit- espionage, smuggling of competitive technology
able as a paradigm for their economic development. and refusal to acknowledge foreign patents and
They include a restrictive macroeconomic policy, licenses. Furthermore, the development of domes-
liberalization of international trade and investment, tic technological capacities was stimulated by in-
privatization and deregulation. Democracy, good vestment and research, education and acquisition
bureaucracy, independent judiciary, highly protect- of skills. Raising the awareness of the importance
ed private rights (including intellectual property), of new technologies by e.g. erecting model plants,
transparent and marked-oriented corporate man- organization of exhibitions, assistance in import
agement (including as well an independent central of equipment for the requirements of private com-
bank) are listed as good accompanying institutions panies etc. Furthermore, institutional mechanisms
of this developmental approach, which can be found of public-private partnership were also promoted.
in developed countries as well, particularly the An- Following this, when the required level of devel-
glo-American countries [10]. The argumentation opment is reached, these countries shift to liber-
for their implementation that is most often quoted is alization of development – international relations
the position that these policies and institution were which provide greater chances for success com-
implemented in developed countries when they pared to the less developed countries. In that sense,
were beginning their development. On the other they go so far as to exert significant pressure on
hand, the historical approach to the analysis of their less developed countries to make a move to more
development does not aid to this thesis, consider- radical liberalization and international opening.
ing that their history is full of situations where they It would therefore be necessary on the part of the
based their development on implementation of the undeveloped countries to keep up and analyze the
so called bad trade and industrial policies such as physiognomy and effects of the so called catch-up
e.g. protection of infantile industries, until the mo- strategies in order not to make the same mistake
ment they became really developed. Only then did again and continue to perpetuate poverty.
these countries abandon the means used to reach The belief that the market, namely, economic
success and continue to promote the principles of liberalism (economic openness and free trade)
policy of the Washington consensus. This is also will automatically create an economic harmony
corroborated by the position formed long ago by and not the knowledge, technology, synergy ef-
the author Friedrich List, that relying on free trade fects, economy of scope – in other word produc-
brings benefits only if the countries have a similar tivity, and finally, adequate institutions such as the
level of development, whereas in case of major de- so called soft infrastructure, are capable of quite
velopment risks, free trade does not suite countries deceiving the less developed countries. It is our
that are less developed. opinion that the warning by Friedrich List (given

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back in 1840), that free trade should not be intro- sition with large globalized industrial and service
duced before the country is industrialized, is still sectors of developed countries. Poverty is greater
applicable today. than it had been before. This is indicated by the
Someone might say that the 1840ies are rather fact that UN has almost given up on development
far away and that List’s warning does not apply of poor countries. One should just look at the mil-
today. However, many scientists point out that lennium goals that have “inherited” the develop-
those years are quite similar by their character- ment efforts of several decades of this organiza-
istics to the 1990ies, considering that both these tion and one can easily see that they consist of
periods are characterized by orientation to imple- attempts to remedy the most drastic symptoms of
mentation of fruits of technological revolution and poverty by the FAO [12].
simply by explosion of productivity in central eco- It seems that there is a prevailing approach that
nomic branches. Hence, it seems a paradox that, does not allow industrialization which had led
at the time the technology is essentially chang- the West itself to be developed, but an orientation
ing the economy, the economists turn to theories to mitigate the unfavorable position of the poor,
that do not include technology and knowledge. which are sinking deeper into poverty every day,
And while Adam Smith promoted free trade dur- and reduce poverty to which they have sunk and
ing the industrial revolutions, the rich countries from which there is no saving.
were industrializing until the eve of World War
One. This, of course, caused the establishing of Investing in people – innovations and new
serious differences between the rich and the poor. technologies
Based on everything stated above, it is relatively
easy to conclude that the second round of the so Innovations and new technologies have checked
called globalization (newer name for liberaliza- the vicious circles of falling income as the central
tion of world trade) will not result differently. part of Malthusian theory at the end of XIX century
This is indicated by the unsuccessful attempt to (1898). Namely, the new understanding of time and
create, in the middle of the twentieth century, the space as the basis of further spreading of the market
so called medium rich economies with a relatively represented the basis for development of mercantil-
developed industry. Their industry, albeit, was not ist ideas and practically endless spreading of econ-
internationally competitive, and it was therefore omy. At that, the very essence of the process of eco-
not difficult to destroy such economy quickly by nomic growth under such conditions is innovation
broader liberal policy, and in the nineties, after the (geographic and scientific innovations) that stimu-
fall of the Berlin Wall, with further liberalization lated the process of division of labor and thus the
policy, practically in the majority of cases, to dein- growth of productivity. Europe was reaching this
dustrialize it – impoverish it completely. There is a over a period of couple of hundred years with the
saying by Abraham Lincoln which fully corrobo- state being the one that was developing its industry
rates this: “Free trade is a good thing… it’s a pity and trying in the process to damage the industry of
that we still don’t have the money for it”. other countries. Hence, it is quite clear that it is nec-
The new globalization period currently in ef- essary to copy the economic structure of developed
fect, has not changed the approach to the develop- countries and not their economic policy, because
ment factors. Practically the same factors of Smith the states that are already rich can conduct a com-
[3] and Ricardo [11] are in effect with a vision of pletely different policy from the ones that have not
harmonious development based on division of la- reached prosperity yet.
bor in which some countries export raw material Speaking of structure, it is necessary to point
and import industrial goods and services. There is out that innovations and technological develop-
a moral base in force for neocolonialism where an ment are equally immanent to all activities. Even
economic structure of poor countries resembles under the conditions of the same rate of innova-
more and more the structure similar to that from tions, the scope of changes realized by innova-
colonialism. Small markets are not integrated tions and technology development in two activi-
which puts them more and more in an unequal po- ties may vary greatly. On the other hand, innova-

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 technics technologies education management

tions and technology development in two markets ity will drop and not grow. As an example, it is
with different buying power are not of the same natural to use in the beginning the best land, best
proportions and they dictate the economy of scope pastures and mines, however, as the production
that is necessary for full efficiency. Therefore, the grows, the income will drop more and more as
technology development and innovations that rep- poor quality resources will be introduced. Thus, if
resent the result of continuous accumulation of there is no alternative labor market in a country –
knowledge serve the largest possible market and if there is no industry, people will be forced to live
provide efficiency only after the following as- off natural resources – agriculture etc. This means
sumption – economy of scale. that if we specialized more for such production,
we would become growingly poorer.
Globalization and the economics of scale
People motivation and synergy effects
Globalization, understood as a process of inter-
nalization of all economic activities with the aim It could be observed in former elaboration that
of cutting down the costs of production per unit of throughout history individual countries had imple-
product, hence, relativization of fixed costs, is a tru- menting, various rules of the game, if we could call
ly significant process. However, globalization has them that. Hence, only history can teach us how
its other – less popular dimension. Understood in the yesterday’s choice affects our decision making
the spirit carried out by the institutions of Washing- today. Accordingly, various rules of the game are
ton, as current economic integration of the rich and introduced in these countries in line with the vari-
the poor states based on free trade and international ous customs, ideologies and interests. They can
flow of capital, it brings no good to the poor. On give these rules different mandate in case of obser-
the contrary, it deepens to the extreme the chasm vation of human rights, ownership rights, freedom
between the rich and the poor. Related to this polar- of contracting, commercial judiciary, arbitration,
ization grows to extreme limits at all levels. level of state – public consumption etc. [13]. On
Understood as economy of scale which in trans- the other hand, the fact should be clear that it is
lation means the production with growing income, necessary to be aware of the difference between
globalization is certainly highly desirable for each economic activities and that it should be taken as a
country. The greater the market and the more being basis for understanding unequal economic growth.
produced, subject to the goods or services having In such an approach, motivation and the syn-
lower unit prices, the economic success is more ergy and cluster effects, as phenomena that provide
guaranteed. It is necessary to point out, however, in the best and most efficient manner the progress
that it is quite difficult to differentiate in practice of knowledge, should provide linking of compa-
whether the result was achieved due to techno- nies and achievement of competitiveness for work
logical changes and innovations on one part or by in complementary activities, in a way that could
implementing the economy of scale. Furthermore, not be achieved if they were working alone in these
it is necessary to point out that the economy of business activities. Namely, motivation toward
scale does not take place in all business activities, cluster and synergy effects is highly important and
namely, with all products. If the fixed costs of pro- not of same proportions in all cases. Furthermore,
duction of a product are high, it makes the situa- if the economy of one country rests on work inten-
tion for entering of competition very hard. Hence, sive productions, hence, productions that cannot
the conclusion that nations that are specialized in be mechanized in most part, it is illusory to talk
export of e.g. raw material, sooner or later come about an economy based on knowledge. A country
into a position that is contrary to the effect of the that does not carry out the economic policy accord-
economy of scale, in other words, falling income. ing to which jobs would be created for educated
This means in further interpretation that if the state people it is wasting time and money by promot-
increases the production in e.g. agriculture, fish- ing an economy based on knowledge. The fact that
ing, trade, minings and in everything else where educated people are desired in rich countries where
the law of falling income prevails, the productiv- they can have an adequate standard of living and

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working jeopardizes the social synergy because ics hegemony that lasts for a centuries up to the
the best and the most skilled move abroad. On the end of World War II when USA took the lead and
other hand, the issuing country is only bearing the nowadays we are withnisses of China economic
high costs of education that feeds the other – much boost during last decades. The structure of China
richer countries. Someone will say that the eco- success as a recent one is based upon the depressed
nomic migrants are, nevertheless, sending part of currency value, huge trade surplasses, strong pro-
the earned capital back to their home country. This tectionism, and globalised activities with a grow-
is true, however, there is still the argumentation ing importance of innovation and technology im-
that the largest part of that money is invested in pact, economy of scale and synergy effects. Its lat-
consumption instead of production, and the effects est movements toward economics prosperity and
to the economy are indirect. economy of welfare are confirming once more the
There is a universal opinion that by sending thesis that there is a big difference between the
any capital to the poor countries where there is theory’s sugestion on what is right to do and the
no developed entrepreneurship, or state policy, economics practice. Namely, those are differences
or any type of industrial system, does not provide between the way theories present life and what
for a more serious development and growth. The life is actually in reality. So it could be concluded
result of such activity may just be an even worse that it is necessary to work, parallel with the pro-
position of these countries because the income on filing of a country, on building awareness of the
the placed capital is not such to cover the interest existence of a soft of disparity between theory and
or capital costs on the assets borrowed from de- practice. The main factors of prosperity are tied
veloped countries. This is proof at the same time for the investments in people that are bringing in-
of Schumpeter’s claim on banal understanding of novations and new technologies as well as in the
the role of capital as prime mover of capitalism. people’s motivation for synergy i.e. cluster effects
Unfortunately, there is no sign of synergy here. It on one side, and globalization of its activities on
cannot be exhibited in societies with weak indus- the basis of economy of scale. So, although the
tries. At the same time, famine and poverty are ex- analyses of this sort are endless, this paper, in view
hibited, as a rule, in societies that are specialized of economic and political situation in less devel-
in agriculture and where synergy yields a nega- oped countries, could nevertheless end with the
tive effect due to the law of falling income. This expression of Italian economist Ferdinand Galini:
particularly emphasizes the importance of synergy “... don’t be afraid of the crooks and evil people,
and cluster effects in the industry-oriented societ- because they show themselves sooner or later for
ies. Thus, one could conclude that the societies what they are. Be afraid of the sincere people that
specialized in Malthusian activities, reproduce err. They do it with best intentions, they are well
and increase poverty and the societies specialized wishing and everyone trusts them: but, unfortu-
in, let’s call them, Schumpeter’s activities, slowly nately, they err in methods they use to stimulate
but surely rush to wealth and development. Less the good in the people“.
developed countries are very far from this aware-
ness, so we are afraid that attempts in that respect References
will fall on deaf ears.
1. Reinert SE. Globala Ekonomija, kako su bogati
postal bogati i zašto siromašni postaju siromašniji.
Conclusion Čigoja, Beograd, 2006; 156.

The nature and the causes of economic pros- 2. Kuznets S. Economic Growth and Structure. London,
perity and welfare of nations from the time of A. Heineman Educational Books, 1965; 378.
Smith and on are usually analysed and comment-
3. Smit A. Istraživanje prirode i uzroka bogatstva naro-
ed as a result of trade and protectionism such as da. Global Book, 1998; 758.
is was introduced by the mercantilism ideas. The
economic hegemony of Spain and Neatherlands in 4. Kuhn T. The Structure of Scientific Revolutions. The
the very beginning is replaced by British econom- University of Chicago Press, Chicago, USA, 1996; 264.

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5. Brainard CW, Perry LG. Brookings Institution Press,

USA, 2002; 177.

6. Shumpeter J. Povijest ekonomske analize. Zagreb,

Informator, 1975; 1, 2: 1066.

7. Samuelson K. From Great Power to Welfare State.

George Allen & Unwin Limited, Sweden, 1972; 304.

8. Myrdal G. Economic Theory and Underdeveloped

Regions. Gerald Duckworth & Company, Limited,
1957; 167.

9. Næringsliv D. Privreda danas. Beograd, Čigoja,

1994; 212.

10. FAO, The Chellenge of the Millenium Development

Goals. The Road Ahead; Rome, FAO, 2005; 48.

11. Rikardo D. O principima političke ekonomije i

oporezivanja. Službeni glasnik, Beograd, 2012; 376.

12. Krugman P. Okončajte ovu depresiju, odmah. He-

liks, Smederevo i Interkomerc, Beograd, 2012; 262.

13. Myrdal G. The Political Element in the Develop-

ment of Economic Theory. Simon and Schuster,
1969; 248.

Corresponding Author
Zoran Njegovan,
University of Novi Sad,
Faculty of Agriculture,
Novi Sad,
Republic of Serbia,
E-mail:njegovan@polj.uns.ac.rs

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 technics technologies education management

Factors of successful sport event security

management
Dejan Ilin1, Zoran Milosevic2, Nebojsa Maksimovic2, Radenko Matic2, Zoran Kekovic3
1
Police department, Novi Sad, Serbia,
2
Faculty of Sport and Physical Education, Novi Sad, Serbia,
3
Faculty of Security, Belgrade, Serbia.

Abstract Therefore, after all terrorist incidents the mod-

ern world was faced with, it is clear why there is
The aim of this study was to determine the rela-
such an expansion of the research on this field by
tionships between factors of successful management
a large number of authors [1, 2, 3, 4]. A significant,
of sport event security. The questionnaire about
growing number of modern researchers focused on
sport event security containing 76 questions and
the problem of security of mass gatherings, such as
composed of three logical sections, was realized on
most sport events [5, 6]. From the sociological and
a sample of 394 respondents. Those logical sections
cultural point of view, this issue is dealt by many
were: 1) Identification questions, 2) Estimate of a
authors [7, 8, 9]. From the aspect of mass sport
sport event security level, 3) Evaluation of the influ-
events organizing, risk management and security of
ence and the role of a sport event security subjects.
sport events is dealt by [10, 11, 12, 13].
By means of logistic regression analysis, with the
Research of deeper, socio-cultural, socio-eco-
appropriate level of statistical significance, followed
nomic, socio-psychological factors of aggressive
by the modeling in the Path-analysis it was deter-
behavior of the audience at sporting events, espe-
mined that the strongest effect on the evaluation of
cially the younger adolescent population, attracts
the success of the sport event security management
the attention of researchers. Determining of the
stems from the combined effects of two factors: the
factors influencing active or passive (sedentary)
work of judicial bodies à Legal police powers =
lifestyle of youth, provides orientation also for un-
0,034. The second strongest effect on the evalua-
derstanding the role of a number of institutional
tion of the success of the sport event security man-
factors in shaping the behavior of participants in
agement stems from the combined effects of other
major sport events. Based on this insight, it is pos-
two factors: Age à Legal police powers = 0.019.
sible to elaborate the elements of a comprehensive
In conclusion, taking the educational position by
system of sport events security management. One
the sports federations and other sports associations
of the recent surveys of lifestyle of the adoles-
(professional associations, educational institutions-
cents in Vojvodina [14], suggests an association
universities, including similar police institutions)
between socio-economic conditions in local com-
represents a necessary first step towards the said
munities (municipalities) and the state of a family
shift in the evaluation of the sport event security.
as a backbone in shaping of adolescents behavior.
Key words: sport event, security, risk manage-
The authors of this study confirmed the special
ment
importance of a childhood lifestyle, to later suc-
cumbing of the adolescents to an influence of a
Introduction series of risk factors (from the use of harmful sub-
stances to antisocial and criminal behavior).
Sports organizations would not exist without
Risk factors are, in terms of management, divid-
appearances on the competitions, including the
ed to external and internal: external risk factors of
organization of the relevant sport events on their
the sport event – the fans, the audience, local com-
own grounds, in the halls and stadiums. Risk cre-
munities, are all factors on which management has
ated by concentration of masses of spectators and
no direct influence – only can estimate the probabil-
participants of a large sport event, is one of the
ity of influence, etc. Internal risk factors of the sport
important aspects of the sport events management.
event - clubs, sports facilities, represents the factors

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 technics technologies education management

on which the management of the clubs and sports The second stage of the research began with the
facilities (and the surrounding facilities, medical variables selection by use of cross-tabulation and
institutions, etc.) can influence, act proactively and corresponding tests (chi-square test, lambda test,
directly intervene during the event so as to elimi- correlation) to be able to extract samples of vari-
nate or reduce risk. Figure 1 shows a theoretical ables, appropriate for further multivariate analysis
model of a sport event security management. - linear and Binomial logistic regression, so as to
formulate empirical model of variables relation-
ships, which may explain the successful security
management of sport events in our country.
By use of logistic regression analysis in this
study we aim to extract the narrower set of variables
that can be used, with the appropriate level of statis-
tical significance, for modeling in the path-analysis
process. The procedure was performed using the
BLR method Backward Stepwise (Conditional) (in
SPSS19). Path coefficients of the full model (ar-
rows) were derived from a series of stratified (lay-
ered) multiple regression analysis (path coefficients
Figure 1. Theoretical model of a sport event are beta coefficients from the regression analysis).
security management
Results
The aim of this study is to determine the em-
pirical model of relationships between factors that Binomial logistic analysis model successfully
explain the successful sport event security man- classified 72.6% of cases, which can be considered
agement. satisfactory result of fitting the empirical data into
theoretical (logistic) model. Wald’s Chi-square test
applied on the constant entered into the model is at
Method
an acceptable level of p = 0,000. Based on previous
The survey was conducted during March-April methods of reduction of the total set of variables, a
2010. Selection of the respondents was performed final set of variables was obtained. Starting from the
randomly, by a random sampling method and in- theoretical assumptions about the relationships be-
cluded respondents from different social groups: tween the variables identified in previous analysis,
schools, political parties, labor organizations, state first the full model was formulated (Figure 2) with
agencies, sports organizations (sports athletes and all paths of variables that can be meaningfully de-
judges), police, students of the Criminal Police fined as significant for explaining of the relationships
Academy, and fans at sport events. A total of 450 between factors of sport event security management
respondents were surveyed, while 394 survey ques-
tionnaires were entered into the statistical analysis.
Survey questionnaire about the sporting events
security contains a total of 76 questions and is
composed of three logical sections: 1) Identifica-
tion questions, 2) Estimate of a sport event security
level, 3) Evaluation of the influence and the role of
a sport event security subjects. From the frame of
variables which were included in the second logical
section, criterion variable “The general evaluation
of the sporting events security” was constructed,
while the predictor variables included the first and
third section of the survey questionnaire. Figure 2. Full (over-identified) model 1

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By entering all extracted variables into the model Review of the path coefficients of the obtained
in Figure 2, multiple linear regression procedure led full model, allows conclusions:
to results that require further reduction of variables, – that for variable “The general evaluation of
primarily those for the layer of criterion variable the sport event security” a direct proportional
“The general level of sporting events security”. The effect of variables “Age” and “Work of
upper model is simplified by keeping the paths (other judicial bodies” can be observed, with “Work
paths are not included in the procedure of linear re- of judicial bodies” having the strongest effect.
gression). Model 2 was obtained, which corresponds For the variable “The general evaluation
to the requirements of Path-analysis (Figure 3). of the sport event security”, the percentage
of explained variance was 93.5% (Ei =
SQR(1-R2) = SQR(1-0,93) = 0,63). ANOVA
of this layer (sub-model) shows the value of
F = 13,97 p = 0,00 and that p values of t-test
for beta coefficients for all paths that lead
from the variables “Legal police powers”,
“Monitorial service”, “Age” and “Work of
judicial bodies” are higher than 0,05, i.e. that
the level of conclusion validity here is higher
than the expected 95%.
– that the direct effects of variable “Legal police
powers” are more clearly manifested due to
higher values of the effects of variables “Age”
Figure 3. Full (over-identified) model 2
and “Work of judicial bodies” in comparison
with variables “Number of children” and
In this model 14 parameters were defined (8
“Monitorial service” entered into the full
paths with arrows, three covariances defined by arch
model. The two entered predictor variables
without arrows and 3 error indicators for the vari-
explained 94,7% of the variability of criterion
ance Ei = SQR(1-R2). Requirement for analysis of
variable “Legal police powers”. ANOVA
this model is met (number of observations n = 394
of this layer shows F = 16,75 with p = 0,00.
is greater than the number of model parameters).
T-test of beta coefficients for all paths and
Character of the variables (interval and binomial
Subjective characteristics of informants and
variables) allows the application of OLS multiple
The general circumstances of the property
regression analysis used for calculation of the path
law system is lower than defined value of p
coefficients (beta coefficients in linear regression).
<0.05.
For the full model shown above, three layers of
– that the direct effects on the variable
multiple regression are needed:
“Monitorial service” were expressed by
1. with variable “The general evaluation of the
slightly lower values ​​of beta coefficients and
sport event security” as criterion and “Legal
with no relationship be t ween this variable
police powers” and “Monitorial service”
and the variable “Legal police powers” due
(two endogenous variables), “Age” and
to very low values ​​of beta coefficients entered
“Work of judicial bodies” (two exogenous
into the full model. The two entered predictor
variables) as predictor variables;
variables explain 98 , 6% of the variability
2. with variable “Legal police powers” as
of criterion variabl e “ M onitorial service”.
criterion and “Age” and “Work of judicial
ANOVA of this layer shows F = 5,697 with
bodies” as predictor variables;
p = 0,004. T-test of be t a coefficients for
3. with variable “Monitorial service” as
both paths of the General circumstances and
criterion and the “Work of judicial bodies”
the Property law sys t em and the External
and “Relationship between clubs and fans”
environment of interest shows value lower
as predictor variables.
than defined value of p <0.05.

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 technics technologies education management

Given the previous findings, it can be conclud- achieve safety on sporting events, “Legal police
ed that the full (over-identified) model 2 does not powers” which in an empirical model represents
require further reduction of paths and that based the operating part of the public safety system.
on its beta coefficients, assessing of the effects of
extracted factors on criterion variable “Level of Discussion
sport event security” can be performed. Summa-
rizing the effects of variables entered into model The riots in stadiums involving the conflict be-
2 on criterion variable “The general evaluation of tween the organized groups of fans-hooligans and
sport event security”, from Tables 1 and 2, the fol- security forces, along with the destruction and ca-
lowing results were obtained: sualties, placed the security issue both in front of
The presented result of path analysis shows the sport event organizers and the police, and the
that the overall effects - direct and indirect – give researchers. Because of the specificity and com-
their small contribution to a set of entities rep- plexity of security situation in the most frequent
resented by the sample of survey respondents public meetings in the South-Backa district, the
and sports referees as direct participants in sport issue of sporting events security also gained im-
matches, to more accurately assess the success of portance in this largest urban area of Vojvodina.
​​
sports event security management. Indirect effects Binomial logistic regression allowed the ex-
are 3.4 times greater than direct effects. The stron- traction of the following set of seven v a riables
gest effect on evaluation of success of sport event (one from each of the postulated groups of factors)
security management stems from the combined as factors that contribute to the classification of re-
effects of two factors: Work of judicial bodiesà spondents into a group that assesses the level of
Legal police powers=0,034. The second strongest security as low or a group that assesses that level
effect on evaluation of success of sport event secu- as high: 1) Year of birth, 2) Number of children
rity management stems from the combined effects in the family (only child or more) is reflected in
of the other two factors: Ageà Legal police pow- the behavior of family members at sport events, 3)
ers=0,019. It should be noted that the full model The total work of the judiciary bodies in achieving
2 explains 93.5% of the variance of criterion vari- security at sporting events is mostly su ccessful,
able The general evaluation of level of sport event 4) The relationships between sport clubs and fan
security – Binomial criterion variable “The gen- groups have impact on the sport events security,
eral evaluation of sport event security”, and that 5) Sport referees influence sports events security
it also explains 95% of the variability of mediat- (the variable is not statistically sign ificant at p
ing variable Police has adequate legal powers to <0.05, 6) The police has adequate legal powers to

Table 1. The direct effects of variables from model 2 on criterion variable the general evaluation of sport
event security
The direct effects of variables
AgeàThe general evaluation of the sport event security 0,119
Work of judicial bodiesà The general evaluation of the sport event security 0,207
Total direct efects 0,119 * 0,207 = 0,024
Table 2. The indirect effects of variables from model 2 on criterion variable the general evaluation of
sport event security
The indirect effects of variables
Age à Legal police powers 0,150*0,132 = 0,019
Work of judicial bodies à Legal police powers 0,262*0,132 = 0,034
Work of judicial bodies à Monitorial service 0,128*0,124 = 0,015
Relationship between clubs and fans à Monitorial service 0,108*0,124 = 0,013
Total indirect efects 0,083
The total effect = Total direct * Total indirect = 0,024 * 0,083 = 0,002

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 technics technologies education management

achieve security at sporting events and 7) Moni- Finally, there is an important question of the role
torial service has a appropriate role in achieving of the judiciary and its coordination with the opera-
sport events security. tional actions of the police, whose prompt effects
This research is oriented towards the practice are necessary for ending the flourishing of the cul-
of sport events security management. It revealed a ture of aggression and violence at sports events.
gap between the public security system, especially
police and judiciary, on the one hand, and an unde- References
veloped system of internal risk management and,
within it, the security management at sport events, 1. O’Connor TJ. Before the show begins. Security Man-
agement, 2004; 93-97.
organized or participated in by sport organizations.
The notion that so-called sports public, from hetero- 2. Connors E. Planning And Managing Security For
geneous sports audience, the media and sports su- Major Special Events: Guidelines for Law Enforce-
perstructure (unions, etc.) to sport organizations (in- ment. Alexandria, Virginia: U.S. Department of
cluding clubs and sports facilities), takes a passive Justice, Office of Community Oriented Policing Ser-
vices, Washington, D.C., 2007.
approach to security. The risk of security incidents
is transmitted to other security structures (especially 3. Yu Y, Klauser F, Chan G. Governing Security at the
the police), setting the requirement to reverse the 2008 Beijing Olympics. International Journal of the
sport-police relationship, so the focus of ensuring of History of Sport, 2009; 26(3): 390-405.
sport events security is on sport, especially on sport
4. Jennings W, Lodge M. Governing Mega Events:
clubs, and then, the sports facilities (if not owned Tools of Security Risk Management for the FIFA
by sport clubs, societies, etc.). This finding is in line 2006 World Cup in Germany and London 2012
with the suggestions for the successful organization Olympic Games. Government and Opposition, 2011;
of sports events, stated by [15, 16]. Achieving of this 46(2): 192-222.
turnaround assumes the changed attitude towards
5. Emery P. Past, present, future major sport event
safety in sport clubs, both in terms of the value management practise: The practitioner perspective.
(adoption of the importance of security, nurturing Sport management review, 2010; 13: 158-170.
the culture of mutual support, protect persons and
property, etc.) and in terms of investment in sport 6. Atkinson M, Young K. Shadowed by the corpse of
war: Sport spectacles and the spirit of terrorism. In-
facilities safety equipment. Taking the educational ternational Review for the Sociology of Sport, 2012;
position by sports federations and other sports as- 47(3): 286-306.
sociations (professional associations, educational
institutions (universities), including such police in- 7. Horne J, Manzenreiter W. An introduction to the
stitutions) is a necessary first step towards the said sociology of sports mega events. In J. Horne & W.
Manzenreiter (Eds.), Sports mega-events, The Edito-
turnaround in the evaluation of sport security. The rial Board of the Sociological Review, 2006; 1-24.
knowledge about how to treat security aspects in
sports management research is closely related to the 8. Kokovic D. Society, Violence and Sport. Mediteran
above suggestion [17, 18, 19, 7, 20]. Publishing, Novi Sad, 2010.
For the science of sports management and se-
9. Giullianotti R, Klauser F. Security Governance and
curity of public mass events, such as most sports Sport Mega-Events: Toward an Interdisciplinary Re-
events, open questions and topics for further re- search Agenda. Journal of Sport and Social Issues,
search may be indicated. From the conclusions of 2010; 34(1): 49-61.
this paper several of these questions derive: How
10. Alpert G, Flynn D. Community Policing and Ma-
to provide reliable information on the internal jor Special Events: A Case Study of Super Bowl
risk management as a component of the overall XXXIII, in B. Corina and E. Gratto (eds.), Problem
management of sports clubs? How to connect a Oriented Policing, 2000; 169-185.
sport event security management emanating from
the system of management of sport organizations 11. Masic Z. Sports Security Management. Faculty of
Management in Sport, Belgrade, 2008.
(clubs, facilities, associations, Olympic Commit-
tee) with the system of public safety?

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 technics technologies education management

12. Milašinović S, Kešetović Z. Crisis Management. 20. Philippe HB. Mega-events transport and security
Faculty of Civil Defense, Belgrade, 2009. (TS): the Olympic Games case. Security of Major
Events Seminar, London, Stansted, October 25th,
13. Maksimovic N, Raic A. Sports Management. Facul- 2006.
ty of Sport and Physical Education, Novi Sad, 2012.

14. Maksimovic N, Milosevic Z. Lifestyles of young Corresponding Author

people of Vojvodina. Faculty of Sport and Associa- Dejan Ilin,
tion for School Sports and Olympics Education of Police department,
the Novi Sad, Novi Sad, 2008. Novi Sad,
Serbia,
15. Nichter AD. Staging a successful performance. Se- E-mail: dejanilin@gmail.com
curity Management, 2001; 45(1): 108-112.

16. Wolf J. The secret to security. Successful Meetings,

2003; 52(12): 38-41.

17. Berlonghi A. The special event risk management

manual, Mansfield, Bookmasters Inc., Revised,
Ohio, 1994.

18. Keković Z, Nikolić V. Proces integralnog upravl-

janja rizicima u organizacijama. Bezbednost, 2006;
48(3): 414-424.

19. Maksimovic N, Milosevic Z. Strategic approaches

to changes of sport organizations environment.
Sport Mont, 2006; 10-11(4): 538-544.

Appendix 1. List of variables

External risk factors for sports events Internal risk factors for sports events
• Athletes
Subjective characteristics of respondents
• Referees
Socio-cultural and social environment - Police–security management factor
• School
• Peers
• Family-parents Actions, restrictions
• Substance consumption
• Religion
• Parties-politicians
General circumstances and property law system - Other security management factors
• Еconomic and political circumstances • Spоrts Federations
• Legislation • Clubs
• Judiciary • Experts
• Government • Objects
• Ministries • Monitorial service
• Clubs privatization
External environment of interest Criterion variable
• Fans
• Меdia • Security level
• Spоrts public

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Strategic games of banks in the product

placement market
Zdenka Dragasevic, Svetlana Rakocevic
Faculty of Economics in Podgorica, Montenegro

Abstract fer lower prices than the competition, prices can

fall to the level of production costs and so firms do
Unlike markets of perfect competition and
not make a profit. If prices fell below production
monopolistic markets, where firms, while mak-
costs, in this case the firm would lose customers
ing decisions do not have to analyze the impact
rather than continue to operate at a loss.
of their decisions on the activities of the compet-
However, if your competitors doubt that you
ing firms, in an oligopolistic market characterized
(as well) might respond to cutting prices, (they)
by the existence of only a few firms, each firm
can lower the price to see your reaction. Besides,
must consider the impact of its own decisions on
if they are convinced that it will take you several
the decisions of its competitors who are relatively
months to respond, they can cut prices so as to at-
few in number. In situations where the participants
tract and win over some of your customers. The
have conflicting interests, as in all those situations
period that you need to react might allow for a
where the final solution depends not only on the
short-term sales growth for the competition that
person who makes the decision, it is possible to
will more than make up for their launching an “in-
use the apparatus of game theory in decision mak-
significant” price war and a threat of retaliation
ing. Game theory represents one of the answers to
is not always a sufficient reason to suspend price
complex problems economic science deals with.
competition [2]. If there were no anti-trust laws,
Key words: oligopoly, price competition,
the easiest way to prevent destructive price com-
game theory
petition would be an agreement among firms to set
the same price for their products.
1. Introduction Making decisions on pricing and other business
In the course of their business, enterprises con- decisions can be formulated and analyzed using the
test, contend, and compete with each other in dif- principles of game theory. Game theory provides an
ferent areas of business. However, a struggle over answer to a question that can be defined as follows,
price, is the most important struggle, because price “What is the optimal decision to be made or activity
is one of the most important strategic variables to be performed by a player while anticipating the
to be taken into account while entering a market optimal activities of their opponents?” Therefore, a
[1]. Although the struggle between manufacturers game presents a mathematical model of a real con-
about price level, can be called a game, firms view flict, while a strategy is a rule or an action plan on
the game, that is, the competition, much more seri- how to play a game. For example, for an oligopolis-
ously. Each firm is interested in achieving as good tic firm which is to determine the price of their prod-
an outcome as possible at the end of the game, or ucts possible strategies are “to maintain a high price
as much profit as possible, because profit maximi- while my competitors are doing the same, but when
zation is the main driving force of all firms. some of my competitors lower the price, I will lower
Price competition is a ruthless game because my prices further” [3]. Therefore, game theory rep-
low prices are visible and attractive to consumers. resents very faithfully real competitive situations in
Consumers usually do not notice that a firm pro- our environment, thus becoming an important “ad-
duces a higher quality product than a competing visor” in crafting optimal business strategies.
firm, but they do note that the price offered by an- In this paper we will show which strategic
other (competitive) firm is lower. In the case when games banks can play in the funds investment
both firms, in order to attract customers, try to of- market, whereby we place emphasis on credit

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investments banks provide to business entities. In accordance with the assumption of the Ber-
Funds investment is the most important business trand model, the demand curve is of the form
of a bank, because lending to businesses enables
an economic development of a country. Q ( P) = a − b P ........................... (1)
The aim of the paper is to show how oligopoly
marginal costs are constant, i.e. MC = c, while
pricing models can be used to choose banks’ business
the fixed cost is zero. The cost function is
strategies. From this aim the hypothesis has arisen
that when determining the price of a product, making C (Q) = c q ............................... (2)
the first move, that is, determining the price before it
has been set by the competitor, is not an advantage. Analyzing the price to be set for their product,
However, despite significant generalizations and un- firms are faced with three strategies. These are:
reality of certain assumptions, oligopoly models are – The price is lower than the marginal cost
useful in explaining real business strategies. (p < c). The firm operates at a loss. This
situation is unacceptable for the firm.
– The price is greater than marginal cost (p >
2. The bertrand model of price competition
c). The firm makes a profit.
2.1. Price competition with homogeneous – The price is equal to marginal cost (p = c).
products
According to the Bertrand model, in which
Assumptions to start with in the Bertrand mo- firms produce homogeneous products, consumers
del are: will buy from the manufacturer offering the lowest
– The existence of only two firms (duopoly), price. This means that, if there are only two firms
without the possibility of new businesses in the market, the firm which sets a lower price will
entering win the entire market, and therefore the entire prof-
– The product is homogeneous, so the total it. In this case, the best business strategy is to set a
production (Q) is equal to the sum of the price lower than the price one assumes will be set
quantities produced by duopolists (Q=q1+q2) by one’s competitor. However, another firm thinks
– A static analysis, i.e., one period of production the same way and, therefore, uses the same strategy.
and sales is observed But if the price equals the marginal cost, then no
– The market demand curve is a linear price firm wants to lower its price because it is the lowest
function as follows Q ( P) = a − b P price at which a firm is ready to sell their products.
– Each firm has constant and equal marginal Both firms will sell their products at a price
costs (MC = c), and therefore equal average equal to marginal cost, and will achieve the best
costs, which are constant (AC = 0). possible score (zero economic profit). In this case,
– A strategic variable is the price of a firms are in a state of equilibrium. This means that
product and consumers purchase from the the equilibrium price is the competitive price (the
manufacturer that offers a lower price. price covering costs and normal return on invest-
ment). Since the market determines the amount of
In the Bertrand model firms are faced with the the product that will sell, it is assumed that both
demand curve Q=f(P) where Q represents the de- competitors will produce and sell the same amount
manded product quantity, while P is the market of the product and the firms will share the market,
price. This model differs from the Cournot model that is, each firm will win half the market.
in that the Bertrand model assumes that each firm Based on the previous assumptions we are led
expects its rival to keep the price unchanged, re- to the conclusion that the profits of each firm de-
gardless of what decision on the price the firm it- pend on its own price and the price of their com-
self makes. Because of this assumption, each firm petitor. Accordingly, the profit of Firm 1, for the
faces the same market demand curve and tries to nonnegative prices, which are lower than the co-
maximize its profit, assuming that the competi- efficients ratio a/b, from the demand function (1)
tor’s price remains unchanged. will be [4]

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 ( p1 − c) (a − b p2 ), c < p1 < p2 reason for the realization of the equilibrium price

1 at the level of marginal cost. We will proceed by

π1 ( p1 p2 ) =  ( p1 − c) (a − b p 2), c < p1 = p2 explaining why it is so.
2 Let us assume that each firm chooses the price
0 p1> p2 equal to marginal cost c, and that at that price the
......................................... (3) Nash equilibrium is achieved. In such a case each
firm will win half the market and earn zero eco-
The profit of Firm 1 will be positive if the price nomic profit, because each unit of the product is
p1 is greater than marginal cost. The lower the sold at the cost price. If one firm increased its price
price set by Firm 1 compared to the competitor’s, above marginal cost, this firm would have no more
albeit still higher than marginal cost, the greater demand for their product, because the competi-
the profit of Firm 1. If both firms charge the same tor’s price would be lower. The consequence of
price (p1=p2), the firms will share profits. If the this situation would be the competitor’s winning
price set by Firm 1 were higher than the price of the entire market, and thereby earning a huge prof-
the competitor, then Firm 1 would not make a prof- it. That is why, in an oligopolistic market, in the
it, because customers would buy their competi- Bertrand model with homogeneous products, it is
tor’s products, which are cheaper. Analogously, not possible to earn higher profits than the zero
the profits Firm 2 makes can be calculated. economic profit.
When are the oligopoly firms from the Bertrand No price above marginal cost can be the equi-
model in equilibrium? When the market is in equi- librium price; the only equilibrium is the com-
librium, the firms operate in the best possible way petitive equilibrium. This result is known as Ber-
and have no reason to change the prices of their trand’s paradox: In the Bertrand equilibrium all
products. The balance achieved in an oligopolis- firms earn zero profit [7].
tic market is known as the Nash equilibrium. The Given the above mentioned assumptions, the
Nash equilibrium is based on the fact that every Bertrand model can be criticized on several grounds:
firm does business in the best possible way taking – First, when firms produce a homogeneous
into account the performance of their competitors. product it is more natural to compete with
When firms are in the Nash equilibrium, neither quantity rather than price.
of the firms has reasons to break it, because using – Second, even when firms set prices and
the selected strategy they achieve the best perfor- choose the same price, what share in the
mance possible, and achieve the highest profit (as total production will each firm actually
well as their competitors) [5]. have? The model assumes that the sales will
If Firm 1 determines the price which is correct- be divided equally, but there is no evidence
ly assumed by Firm 2, Firm 2 will do the same and to confirm this.
set the price expected to be determined by Firm – Third, even slight changes in price lead to
1. In that case, neither firm will be disappointed, huge changes in the quantity of goods, that
because each firm will do its best at the same time is, a complete loss of demand for the firm
respecting the actions of its competitor. The result charging the higher price.
of the Bertrand model is that the price equals mar-
ginal cost, and that firms achieve zero economic The Bertrand model shows that each firm max-
profit [6]. The same result is obtained with perfect imizes its profit, but does not maximize industry
competition. The only difference is that in perfect profits (the joint profit of both firms), because the
competition there is a great number of firms, while firms act naively [8]. They always assume that a
in this model there are only two, but large, firms. competitor will not change its price, although in
Given that in the Bertrand model price is the practice it proved the opposite. Industry profits
strategic variable, the firm that has a lower price could be increased if the firms noticed their mis-
will win the entire market and each firm has a takes and dismissed the Bertrand behaviour. This
stimulus to deceive a competitor. This effect is the model is closed, which means it does not allow the
entry of new competitors.

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2.2. Price competition with differentiated The reaction curve of Firm 1 shows the rela-
products tionship between the price at which the firm earns
the maximum profit and the price it believes will
In an oligopolistic market we often find differ- be determined by Firm 2. And conversely, the
entiated products, which differ from other prod- reaction curve of Firm 2 shows the relationship
ucts not only in price, but also in design, quality, between the price at which the firm achieves the
durability, etc. of products. In these circumstances maximum profit and the price it believes will be
it is natural that firms compete on the basis of determined by Firm 1. At the intersection of the
price rather than quantity. In this case, the Ber- reaction curves of the duopolists there is the Nash
trand model is applicable, and the two problems equilibrium, because at this point each firm does
that existed in markets with homogeneous prod- business the best it can taking into account the
ucts are overcome. The firm will establish a price price of its competitor, and neither firm has a rea-
that is greater than their marginal cost and prices son to change its price.
are becoming sensitive to demand conditions [5]. The Nash equilibrium:
Equilibrium is achieved at a price higher than mar-
ginal cost. The more differentiated the products, p1 = p 2 = p * = R C ( p * )
the higher the difference between price and mar-
ginal cost will be . The equilibrium price is
In the Bertrand model with differentiated prod-
ucts, duopolists face a demand function which is a a + c b1 ............................ (9)
p* =
function of both firms’ prices, i.e. Q=f(p1, p2) [9], or 2 b1 − b2

q1= f(p1, p2) = a – b1p1 + b2p2 And the equilibtrium quantity will be:
q2= f(p1, p2) = a – b1p2 + b2p1.................. (4)
b 1[a + c (b 2 − b 1 ]
The cost function is q1 = q 2 = q * = .......... (10)
2 b 1− b 2
C(Q(p1, p2)) = cq.......................... (5)
The paper analyzes the banking market of
The Profits for each firm will be: Montenegro. Eleven banks operate in this market,
with four banks covering almost 70% of the total
π 1 = p1q1 ( p1 , p2 ) − C [q1 ( p1 , p2 )] credit investments, so it can be considered an oli-
π 2 = p2 q2 ( p1 , p2 ) − C [q2 ( p1 , p2 )] gopolistic market. For purposes of this paper, two
banks will be observed, which create a duopoly
or (NLB Montenegro and Montenegrin Commer-
cial Bank (CKB)), because they have the largest
π 1 = p1 − c(a − b1 p1 + b2 p2 )
................ (6) single shares in the investment market. Investment
π 2 = p2 − c(a − b1 p2 + b2 p2 ) market is interesting in terms of analysis because
banks earn the greatest profits in this very market.
When the partial derivatives of profit func- Suppose that each bank has a fixed cost of 10 €,
tions at the price set by the firm mentioned from and no variable costs. Assume also that the demand
the expression (6) become equal to zero, the reac- curve of NLB Montenegro is presented as function
tion curves are obtained at whose cross point is the
Nash equilibrium. q1 = 80 – 2p1 + p2
The reaction curves (RC) are
and the demand curve of CKB is presented as
a + cb 1 + b2 p 2 ..................... (7) function
RCp1 =
2b1
q2 = 80 – 2p2 + p1
a + cb 1 + b2 p1 .................... (8) where:
RCp 2 =
2b1

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p1 and p2 are prices of loan approval, to be However, whatever the price charged by the other
charged by each bank individually duopolist - CKB, the NLB Montenegro Bank’s
q1 and q2 are number of loans that each bank profit will be maximized when the extra profit
will provide. from the small price p1 increase is zero, therefore
it follows that
The number of loans that a bank will provide
depends on the price at which both banks offer Δπ1/Δp1 = – 4p1 + 80 + p2
loans (here we ignore the many other conditions p1= 20 + 1/4p2
that affect the number of loans that a bank will
which is the reaction curve of the NLB Monte-
approve; therefore, we are talking about prices as
negro. Based on the reaction curve, the NLB Mon-
strategic variables). The number of loans decreas-
tenegro determines the price of its product, taking
es with increasing their own prices, but increases
into account the price set by the other bank.
with the rise of the competitor’s price.
In a similar way the reaction curve for CKB
Banks can apply one of the following strategies:
can be determined. Since
– The strategy of simultaneous pricing of its
services. π2 = – 2p22 + 80p2 + p1p2 – 10
– The strategy of collusion on prices that will
it follows that
maximize joint profits, which would later be
shared. Δπ2/Δp2 = – 4p2 + 80 + p1
– The strategy in which one of the banks
i.e, the CKB reaction curve is
determines the price of its services first while
its competitor, the other bank, determines its p2 = 20 + 1/4p1 ...........................(11)
price after it.
At the intersection of the reaction curves, equi-
What happens to the profits of the banks in the librium is achieved. In the point of equilibrium
previous three situations? Which situation is the each bank will charge loan approval fees at a price
best for the bank? Is being first in the pricing of of € 26,67. The profit that the NLB Montenegro
products an advantage? Is an agreement between will make at that price is π1 = € 1,412.31, which
competitive banks possible? is the the same as the profit generateed by CKB,
while the number of approved loans will be 53.33.
2.2.1. The simultaneous determination of
pricing strategy 2.2.2. The collusion strategy

When duopolists determine the price of their Another situation that may occur in the Ber-
products simultaneously, then, in order to deter- trand model is that duopolists have a secret agree-
mine equilibrium it is best to use the Cournot ment and agree on the price, thus acting as a cartel
model [3]. Each firm or, in our case, each bank de- [10]. Guided by the profit motive, the firms will
termines the price of their product (service) inde- determine the price well above marginal cost, and
pendently assuming that the competitor’s price is thus achieve greater monopoly profits. In this case,
fixed. NLB will, in this case make a profit equal to duopolists charge the same, higher price obtained
from the common demand functions. The demand
π 1 = p1 × q1 − c
curves are:
that is
q1 = 80 – 2p1 + p2
π1 = – 2p12 + 80p1 + p1p2 – 10 q2 = 80 – 2p2 + p1
What price should the NLB Montenegro Bank But since p1 = p2 = P, the market demand curve
choose in order to maximize its profit? The first will be
duopolist’s (NLB Montenegro) price will depend
on the price p2 which this bank considers fixed. Q = 160 – 2P ........................... (12)

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The profit function is now termines the price, and then CKB determines the
π = P*Q – (FC1 + FC2) price of their service, based on the price set by the
NLB Montenegro Bank.
that is NLB Montenegro profit function is identical to
equation (1), but the price p2 will be replaced by
π = 160P – 2P2 – 20 ...................... (13)
the CKB reaction curve. It follows that
From (13), the price both banks will charge is π1 = – 2p12 + 80p1+ p1(20 + 1/4p1) – 10
obtained. Since π1 = – 1,75p12 + 100p1 – 10................ (14)
Δπ/ΔP = 1600 – 4P
From the condition
It follows that the price will be ∂π 1
=0
P = p1 = p2 = 40. ∂p1

The profits, which duopolists will make togeth- the price that NLB Montenegro will charge is
er, calculated from (13) amounts to € 3,180. The obtained, that is, p1 = € 28.57. The profit this bank
assumption is that the banks will share the profits, generates will amount to € 1418.57 and the num-
so that each will generate the following profit: ber of approved loans is 50.
The price to be charged by CKB is obtained
π1 = π2 = 1590 from the reaction curve (11) and is p2 = € 27.14.
This bank will generate the profit of € 1,463.43,
When the value of the obtained prices is entered while the number of approved loans is 54.29 units.
in the equation (12), we obtain the total number of Therefore, the bank which decides on the price
loans to be approved by the duopolists, which is first (in our case, the NLB Montenegro), will be at
80, i.e., the bank will grant 40 loans each. a disadvantage compared to the other bank. Why
Compared to the first situation, when the banks is this so? This is so due to the fact that, in such
adopted decisions on the price simultaneously a case, CKB can cause damage to their competi-
they now set a higher price, grant fewer loans, but tor by setting a bit lower price, with which it will
earn higher profits. win a larger market share, and thus higher profits.
Unlike the Stackelberg model, in the Bertrand mo-
2.2.3. Strategy in which one duopolist (a bank) del determining the price first is not an advantage.
first determines the price
The third strategy in the Bertrand model is that 2.2.4. The prisoner’s dilemma in the case of
one duopilist first determines the price of its pro- collusion among banks
ducts (services) and then it is done by the other. In In the Bertrand model, firms can collude to set
the Stackelberg model, when one strategic varia- higher prices than those they would achieve in the
ble is the quantity of the product, the advantage Nash equilibrium. In this way they would earn
is on the side of the firm that first determines the higher profits. However, strong anti-trust laws do
quantity, because the firm which publicizes first not allow collusion and all activities directed to-
the level of production leaves no “room for ma- wards achieving monopoly earnings are strictly
neuvre” to the other one. Regardless of what the punishable. Managers, naturally, do not want to
competitor does, the first firm’s production will risk by signing explicit agreements.
be huge. To maximize profit, the second firm, has Is profit a motive strong enough to make firms
to take the first firm’s production as a given value collaborate without an explicit agreement? Why
and set a lower production level. don’t firms act cooperatively and determine a hi-
Will one bank have an advantage over the other gher price hoping that the competitor will do the
if they first determine the price of their services? same but without an explicit agreement? In this
Let us suppose that the NLB Montenegro first de- case, both firms would earn higher profits. The

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 technics technologies education management

problem is that the competitor is unlikely to act profits are in such a case achieved at the expense of
cooperatively, as they would benefit more (gene- the NLB Montenegro, which in this situation, when
rate higher profits) if they only slightly lowered adhering to the agreement earns significantly lower
the price of their product bellow the agreed price. profits because it has lost part of the market share.
We have seen that in the Nash equilibrium, the In Table 1 are presented the outcomes or the
banks will charge the price of p* = € 26.67, and values of the profits that the duopolists in our ex-
thereby earn profits of π = € 1,412.31 each. In the ample can achieve, depending on whether they
case of collusion, the banks would charge a price play a cooperative or a non-cooperative game. A
of p = €40, and earn a profit of π = € 1590. Let us cooperative play is a situation where duopolists
suppose the banks agreed to charge the price of 40 negotiate the price to be determined, and a non-
€ (the price of collusion). The NLB Montenegro cooperative game is when they make decisions on
is hoping that CKB will adhere to the agreement. price simultaneously.
Nevertheless, CKB decides to charge the Nash The matrix of payments shows that if both banks
equilibrium price. charge €26.67, they will earn a profit of € 1,412
The profits which CKB will generate in such a each, and if both charge a higher price (€40), they
case is will realize a profit of € 1,590 each. If the NLB
Montenegro charges € 26.67 for its services, and
π2 = p2q2 – 10 CKB raises the price of its services to €40, the NLB
π2 = p2(80 – 2p2 + p1) – 10 Montenegro will achieve the profit of € 1,768, and
Since CKB the profit of € 1,057. Conversely, if CKB
chooses a strategy of lower prices and charges €
p1 = 40 p2 = 26,67 26.67 for its services,while the NLB Montenegro
it follows that charges €40, then CKB realizes a greater profit.
Why don’t banks behave cooperatively? A co-
π2 = 26,67(80 – 2*26,67 + 40) – 10 operative behavior would mean that the duopo-
π2 = 1767,8 lists charge €40 for their services thereby earning
a profit of € 1,590 each. The problem is that each
The profits which the NLB Montenegro will
of the duopolists would earn more if they charged
generate in such a case is
the price of €26.67, regardless of the competitor’s
π 1 = p1q1 – 10 actions. If the NLB Montenegro knows that CKB
will charge the price of €26.67, it is the most prof-
π 1 = p1(80 – 2p1 + p2) – 10
itable for the bank to charge the same price. And
π 1 = 40(80 – 2*40 + 26,67) – 10 vice versa. As a result, neither of the firms can ex-
π 1 = 1056,8 pect the competitor to charge a higher price.
In game theory this phenomenon is explained
These results would also be valid in the reverse through “the prisoner’s dilemma” and oligopoly
situation, i.e., if the NLB Montenegro failed to firms find themselves in this dilemma very often.
comply with the agreement, while CKB adhered to Oligopoly firms must decide whether to aggressive-
it. Based on the results obtained it can be concluded ly compete with prices (lowering prices to the level
that it is the most profitable for CKB if they charge of marginal costs) or cooperate (passive competi-
a price of €26,67, because in this case they will tion with high prices). If firms compete passively,
achieve much higher market share and higher prof- set high prices and limit production, they will earn
its than in the Nash equilibrium. CKB increasing higher profits than when aggressively competing.
Table 1. Matrix of payments
CKB
Price 26.67 40
NLB Montenegro 26.67 1412; 1412 1768; 1057
40 1057; 1768 1590; 1590

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 technics technologies education management

Like “prisoners” every firm is tempted to breach The Bertrand model shows that firms can real-
the agreement and lower their price below the com- ize a profit by selling differentiated products. If the
petitor’s while at the same time knowing that the products are homogenous, firms in this model can
competitor is tempted to do the same. Firms are in not charge a price higher than marginal cost. Zero
the prisoner’s dilemma where none of them could economic profit is realized in such a case which is
believe the competitor will set a high price. equal to the profits that firms would generate in the
In our example, the Pareto equilibrium is competitive market. With differentiated products,
(1590; 1590), while the banks following personal they can charge a price greater than marginal cost
interests achieve the Nash equilibrium, thus gain- and make a high profit. To achieve the highest pos-
ing a small profit (1412; 1412). Does the “pris- sible profit firms try to achieve a high degree of dif-
oner’s dilemma” force oligopolistic firms - banks, ferentiation of their products. With this policy they
to aggressively compete and generate low profits? reach average prices in the market and welfare.
Can a firm find a way out of the “prisoner’s di- In this paper we have showed that when price is
lemma”? This serious problem could be solved in a strategic variable being first is no advantage, and
repeated games, where players recognize the ne- the bank deciding on the price first will be at a disad-
cessity of mutual cooperation [9]. Most firms de- vantage compared to the other bank. Then, the other
termine the price (and quantity) many times, with bank may, by setting a slightly lower price, gain a
constant monitoring of the competitors’ behavior. larger share of the market, and thus higher profits.
In reality, firms play repetitive games. If a game The game played by firms in an oligopolis-
is played only once, then the Nash equilibrium is tic market, in order to achieve monopoly profits
the optimal solution. If a game is repeated indefi- is similar to the game played by prisoners in the
nitely, then the optimal solution is reached through “prisoner’s dilemma”. If oligopolists make deci-
the Pareto equilibrium. sions on the price of their products individually,
they will rely on the Nash equilibrium, which
3. Conclusion means charging lower prices and smaller profit re-
alization. If they cooperate or passively compete
It is almost impossible to restrict price compe- with high prices, higher profits will be realized.
tition in situations where multiple firms sell the “The prisoner’s dilemma” describes many real
same product. If the price exceeds the production life situations and shows that cooperation is some-
costs, each firm will endeavor to offer slightly times difficult to achieve, even when it proves to
lower prices than the competition in order to win be better for both players.
a greater share of the market. Unfortunately, when
everyone tries to do so, prices fall to the level of References
costs and in this case no profit is generated. In this
case game theory demonstrates that firms should 1. Maksimović Lj, Kostić M. Modeli cenovne konkuren-
avoid entering those markets where there are a cije na oligopolskom tržištu i njihova primenljivost.
Ekonomski horizonti, 2010; 12(2).
number of competing firms and firms which sell
almost identical products. When firms compete 2. Kopal R, Korkut D. Teorija igara-praktična primjena
in prices, high profits becomes unsustainable. If u poslovanju. Zagreb, 2011.
competition is necessary, it is always good to have
3. Pindyck R, Rubinfeld D. Mikroekonomija. Mate, Za-
a confusing pricing plan that will make it difficult greb, 2005.
for customers to compare and choose from.
A common feature of all duopoly models is that 4. Jehle G, Reny P. Advanced Microeconomic Theory.
they assume the existence of certain forms of com- Prentice Hall, London, 2011.
petitors’ reactions and if the „expected” response
5. 5. Perloff J. Microeconomics. Pearson Addison
is not achieved, the firms retain the initial assump- Wesley, Boston, 2007.
tion. In other words, it is assumed that the firms
never learn from past experience, which makes 6. Besanko D, Braeutigam R. Microeconomics. Wiley,
their behaviour naive (if not stupid). USA, 2005.

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 technics technologies education management

7. Radović S. Teorija igara i strateško ponašanje oligo-

pola. Zbornik radova Ekonomskog fakulteta, Univer-
zitet u Istočnom Sarajevu, 2011; 5.

8. Koutsoyannis A. Moderna mikroekonomija. Mate,

Zagreb, 1979.

9. Xavier V. Oligopoly Pricing: Old Ideas and New

Tools. MIT Press, 2001.

10. Varijan H. Mikroekonomija – moderan pristup.

Ekonomski fakultet Beograd, 2003.

11. Rakočević S. Game Theory – Base for Economic

Behavior. Montenegrin Journal of Economics, Pod-
gorica, 2006; 3(2).

Corresponding Author
Zdenka Dragasevic,
Faculty of Economics in Podgorica,
Podgorica,
Montenegro,
E-mail: zdenka@ac.me

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Specifics, problems and prospects of

innovations in Serbia
Zivota Radosavljevic¹, Maja Andjelkovic¹, Milan Radosavljevic², Dragana Radosavljevic¹
¹ Faculty for Education of the Executives, Novi Sad, Serbia,
² Faculty for strategic and operational management, Belgrade, Serbia.

Abstract Countries in transition and Serbia have not fo-

cused enough of their attention to innovation as
Innovation is the application of new and im-
one of the key factors of social and economic de-
proved ideas, procedures, goods, services, pro-
velopment. Moreover, the transition destroyed or
cesses that bring new benefits or quality in the
reduced research and development potential of in-
implementation. Under the conditions of fierce
dividual countries, measured in terms of research
competition and a saturated market companies
and development organizations, with the reduced
that do not innovate, stagnate, and stagnation is an
inflow of financial funds scientific research orga-
introduction to extinction. Developed countries al-
nizations, reducing the number of employees in
locate large funds to support and promote innova-
organizations and intellectual deterioration of the
tive activities, in order to maintain the competitive
technical equipment. The above deterioration is
advantage which they have on the global market.
operated separately, but each of them affects the
On the other hand, countries in transition and Ser-
other elements, thereby deteriorating state of in-
bia do not pay enough attention to innovations as
novation at the level of Serbia.
a key factor of social and economic development.
Republic of Serbia has not had a serious research
Innovations in the Republic of Serbia are in poor
on the topic of innovation, or the status, opportuni-
condition according to all criteria and issues.
ties and prospects of developing strategies to in-
Key words: innovation, social and economic
crease the number of innovations and innovations.
development, innovation activities, organization.
Official statistics can deal with this problem started
since 2006, still with insufficient elements on which
1. Introduction one can reach the objective of the research results.
Scientific and technical researches and evidence However, with the analytical approach and using
suggests that innovation had the most influence on other sources, it is possible on based of such a short
the development of civilization i.e.on increasing the period to reach an objective picture, where are in-
efficiency and life of the people. Given their im- novations in Serbia today, so appropriate measures
portance, the most developed market countries al- to increase and improve can be taken.
locate huge funds for the support and promotion of The paper aims to clarify the situation and
innovative activities. It is estimated that over 50% problems of innovation activities in business and
of U.S. economic growth since World War II was other organizations of the Republic of Serbia, in
the result of ongoing innovations and introduction order to make them efficient and effective.
of new technologies. Today, U.S.stresses the need
for change in attitude towards technology and in- 2. Determinants and methodological
creased investment in research, primarily the natu- framework of research
ral sciences, mathematics and physics. In this con-
text, there is a need - “doubling federal funding of It is evident that the attitudes towards inno-
basic scientific research, including its tax breaks for vation vary. Governments of wealthy countries
research and experimentation, enabling companies consider innovation as the way to prevent stagna-
to obtain long-term security for investing in local tion, while poor countries innovations consider as
research and development [1]. The situation is simi- a significant factor of growth and development.
lar to other developed market economies. Business systems i.e. their management, consider

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innovation as a significant instrument, i.e. a factor “significant”, this includes improvements in tech-
in achieving competitive advantage in the market nical and functional characteristics, components
and achieving satisfactory profitability. and materials, embedded software, customer ori-
Research shows that developing countries and entation. In this context, it makes no difference
countries in transition have become aware of the whether the new product or innovation is new for
importance of innovation and introduction inno- business entity that produces it, or is new to the
vations in business and other organizations. They market where it sells.
are mostly followers of what is happening in the Process innovation is the implementation of new
developed countries, which puts them in a subor- or significantly improved methods of production or
dinate role, i.e. to the extent that applied with de- delivery of goods or services. Here we estimate the
lay what developed countries have implemented change in technique, equipment or software used in
long ago, and often use the things developed coun- the manufacture of products or services.
tries do not use anymore. Organizational innovations include the use of
Innovative activity is a form of economic ac- new methods, techniques, or concepts in the man-
tivity related to the transformation of scientific agement and organization of business entities, or
research and development into new and more significant changes in order to improve business
sophisticated techniques and technologies, new efficiency and improve business flows. These in-
products and quality services, which can be eval- novations are related to elements of the manage-
uated on the market.In this context, it takes into ment process, i.e. planning, design, coordination,
account the definition that includes any innova- guidance and control in all parts of the functional
tor, regardless of where and by whom is applied. areas of the subject.
This is an important point because, according to Innovation in marketing is the application of
Schumpeter’s view, innovation is just the first ap- new marketing methods and techniques in all
plication of something new in products, services, performance of products and services, including
processes, organization, etc., while any subse- changes in design, packaging, marketing and pro-
quent application is not an innovation. Such a dif- motion, including its sale, or collection of prod-
ferent understanding and definition of innovation ucts and services.
is creating difficulties and limitations in the study, Innovations in this study were analyzed at the
because the things that are not well defined can macro level, i.e. the level of the Republic of Serbia,
provide the correct answer to the wrong question. and from the businesses size point of view in order
Accordingly, in the context of this research, the to determine whether and to what extent this factor
innovation of the application involves new or sig- influences the innovation activities. As a criterion
nificantly improved products, services or processes, for determining the size of businesses, a number of
marketing methods or new organizational method employees was taken, namely, (1) small businesses
in business management, organization of work or are those economic entities with 10-49 employees,
business entity relationship with the environment. (2) medium are with 50-249 employees, and (3) big
Of course, it is necessary to include a relationship are those with 250 and more employees.
in determining of innovation activities or a change Official statisticsi.e. the Statistical Office of the
of the relationship of the organization for the envi- Republic of Serbia collects data on innovation ac-
ronment in which it works as well as innovation of tivities every two years, using traditional, Web, or
products and services that are new to the business on line questionnaires. In the period 2008-2010,
entity or new to the market in which it is placed. data collection was carried out from 3,982 large
Each of these innovations for research must be and 3,500 small and medium sized businesses.
clearly defined in order to study it as objectively as Respondents should indicate at least one of the in-
possible, which requires detail explanation [2]. novations introduced by the business. Sample was
Product innovation, i.e. service is launching made from the Statistical Business Register, which
on the market products or services with a new or contains 12,141 business entities with 10 or more
significantly improved characteristics, features employees. Of the total surveyed businesses, 71%
or usage. Regardless of the relevance of the term of the sample was correct, 14% of subjects did not

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respond, and 15% were blocked, i.e. bankrupted. influence of the size of businesses on innovation
Provided data were weighted and calculated on activities, (3) the influence of type of activity on
the level of individual businesses. innovation activities, (4) the impact of innovation
Thus, between 2006-2008 and 2008-2010 re- on the type of innovation activities.
search were focused on Serbian companies that It is shown that all these factors, in fact are the
were focused on four types of innovations, namely internal forces controlled by management, as in-
(1) product innovation, (2) process innovation, (3) dividual factors may be redesign or exposed to
organizational and (4) marketing innovation. It is greater or lesser changes to the dynamic innova-
evident that the economic entities recognize the tion activities taking place in organizational sys-
need to introduce innovation management inno- tems. Accordingly, there remains a group of ex-
vations, which by its nature belong to the innova- ternal factors over which management of the or-
tions in the field of organization. ganization has no significant impact, which is not
discussed in this paper.
3. The research results of innovation
activities in Serbia 3.1. The influence of competence on innovation
activities in Serbia
In analyzing contemporary business concepts
regarding the creation and implementation of in- Under the competence in this study, wemean
novation, it should be noted that the Serbian com- the organization’s ability to use existing resources
panies at the beginning of the third millennium, better than the competition. In other words, orga-
remained relatively sterile atmosphere and lack nizations can achieve superior performance only
of focus on increasing market competitiveness. if knows better than the competition to develop a
Insufficient managerizationSerbian economy has product that it produces, manages the logistics, to
prevented the rational actions of economic enti- sell it better, to service it or to maintain the superi-
ties. In these circumstances, the inventors and ority which adds value for consumers, but also for
the subjects of scientific research could not be in- other stakeholders.
volved in a serious sphere of economic activity. The general hypothesis and starting point in in-
The current situation is partially exacerbated by vestigating the impact of competence on innova-
the unification of the Ministry of Education with tion activities is that between the level of compe-
the Ministry of Science and Technology, creating tence i.e. professional skillsand innovation activi-
the bulk ministry where science and technology has ties there is a high degree of correlation, i.e. that
become a secondary activity. Scientific research the state or the corporate system that has a higher
funds are significantly reduced, and funds that are percentage of professional and scientific men
planned in this field are used for other purposes should have the higher level of innovative activity
in order to solve daily problems. In this context is and vice versa. Training and education are essen-
the reduction of scientific and technical journals, tial for the quality of every organization. Training
and the reason is alleged lack of funds. Current for all employees, especially management-man-
scientific research and innovation centers, due to agers is required [3]. Therefore, the management
the difficult economic situation are closed, as well should ensure that more competent people, where-
as centers of innovation in business organizations. as this is not considered to be objective, but one of
Thus, scientific and innovation infrastructure in the most effective instruments to achieve the goal,
Serbia is largely destroyed, or not at the level that which is to provide a better competitive ability of
can be aimed at increasing business performance the state, or business system.
of the economy and society. Given the importance According to researches that were conducted in
of innovation for business success, there is a need the period 2008-2010 in the Republic of Serbia,
to establish relationships and connections between it is evident that the economic entities involved
individual factors and innovation activities in Ser- in 48% of cases in at least one innovation, while
bia, namely: (1) the correlation between expertise 52% of businesses did not have any innovations.
and competence and innovation activities, (2) the So, in this period, Serbian companies have inno-

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vated less, while most companies did not have any regions.The situation is almost identical compar-
innovation in two years, which is of concern, if ing the competence of the regions measured by the
one takes into account the speed of change and ratio of employees with faculty diploma in the total
turbulence in terms of introducing new technolo- number of employees. For example, the Belgrade
gies, products, processes, etc [4]. If in the context region in the overall number of employees is 26%
of this analysis definition of innovation given by of employees with graduate faculty, however, the
Schumpeter were going to be applied, the percent- smaller number of innovations is in Sumadija and
age of companies that had no innovation would be western Serbia, where the number is more than
many times larger. half the size. Therefore, Serbia is a rare country
External benchmarking shows that EUcoun- where between competence, i.e. expertise and in-
tries have the most highly educated and competent novation activities there is no governing ratio, i.e.
people, and that these countries are in the group of that a better qualification structure leads to a larger
countries with the highest pace of innovation ac- number of innovators i.e. innovations.
tivities. Some of them are leaders in innovation ac- The reasons for these inconsistencies needs to
tivities. For example, we will mention that leading be found partly in inadequate, insufficient, or er-
business entities in the field of technology comes roneous models of motivating highly skilled and
from following countries - the Netherlands, Austria, competent workers.Therefore, competence itself
Germany, Denmark and Ireland participated in the does not bring a large number of innovations, it is
innovation of 62-75%. In these countries life expec- necessary to adequately motivated highly skilled
tancy of products, processes, organizational design, workers to use their expertise to introduce innova-
etc.is much shorter than in the other, especially tran- tions. To the above well-known researchers warn
sition countries, including the Republic of Serbia. in this field, Hendriks and Sousa [6] with their
statement, “Creativity, teamwork, knowledge
3.1.1. The influence of competence on sharing and other development processes, depend
innovation activities in the regions of largely on the motivation of workers’ knowledge.
Serbia Lack of constant motivation in organizations that
are not sufficiently oriented knowledge is often
In the period 2008-2010, competence showed considered the main culprit of failed initiatives
a different impact on particular regions of the Re- and programs of change and innovation. It turns
public of Serbia measured by the number of inno- out that the current general concepts and programs
vators, which table 1 illustrates [5]. of work motivation are not applicable to workers
It is evident that a better qualification structure of knowledge, or that the same models of motiva-
in Serbia does not contribute to significant im- tion applied tentatively to “the manual” and intel-
provement of innovation activities. Moreover, it lectual workers, although it is clear that they have
is shown that the regions of Sumadija and West- different motives that should be applied to differ-
ern Serbia having half the percentage share less ent motivational techniques. Specifically, knowl-
of highly educated people in the total number of edge workers have increased needs for autonomy,
employees, has a greater number of innovations, their careers are established externally in relation
while the region of Vojvodina, which has a slightly to the organization, but they are loyal, especially
larger share of highly skilled personnel in total, has to the network of their colleagues and their pro-
a lower intensity of investment activities of these fession, and their organization. Accordingly, one
Table 1.
High educated Number of
Serbian regions Number of innovators
employees in % non-innovators
Belgrade region 26 49.99 50.01
Region of Vojvodina 11 43.10 56.90
Region of Sumadija and West Serbia 10 50.10 49.90
Region of South and Eastern Serbia 10 48.50 51.50

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of the reasons why knowledge workers do not 3.3 Number of innovators in the manufacturing
achieve a higher level of innovation is insufficient and service sectors
or poor motivation.
Innovation activity and activity in the Republic
of Serbia is determined by the type of activity that
3.2. Number of (no) innovators depending on companies do. Based on the information given in
the businesses size the study of the Statistical Office, the innovations
It is evident that on the innovation processes and in the manufacturing and service sectors were
innovation the size of economic entities, primarily analyzed, i.e. organizations that manufacture and
measured by the number of employees, and the ac- organizations involved in service business. It is
tivity of economic entities that are involved has a evident that the total number of innovations in the
significant effect. These factors showed a significant manufacturing sector accounts for 56%, and the
effect on the companies that made by one type of innovation in the services sector, about 44%, as
innovation, which can be seen from the table 2: [5] can be seen from the table 3: [5]
The table shows, as so far stated, that in the Re- In the manufacturing sector, 56% of businesses
public of Serbia, most businesses do not innovate innovate, while 44% did not introduce any inno-
and that this percentage is 52%, which is of concern, vation. The result was expected, given that Serbia
bearing in mind the previous observations on the im- is dominated by manufacturing business philoso-
portance of innovation to increase competitiveness. phy, which is obsolete in developed countries in
The overall structure of innovation shows that the second half of the last century. Therefore, the
the lowest participation in innovation activities services sector in the Republic of Serbia in terms
have small business entities and entrepreneurs, who of innovation activities is far behind, while often
account for 44%, followed by medium businesses considered unproductive and as such non-produc-
with 57%, and at the end are the large businesses, tive part of the economy.
with 70%. The size of the legality of the subject is It should be noted that a large part of the service
in direct proportion to the number of innovators, as sector (particularly banking system, telecommuni-
opposed to theoretical knowledge and practice in cations business, etc.), introduced at the beginning
developed countries, that most innovation comes of the new millennium innovations, so the innova-
from the entrepreneurial sector, which is cited as tion activities in the last two years of the first decade
the main advantage to the entrepreneur is willing of this century were less pronounced. Following
to incur the riskand investing in new technologies trends in developed countries, the services sector in
and new market niches and market uncertainty. Serbia in the future will gain in importance, which
On the other hand, it should be noted that the large will require greater investment activities, especially
business systems are mostly state owned having since these innovations do not require a greater fi-
research centers that funded innovation activities nancial investment, especially when it comes to or-
thanks to the allocation of funds from the budget. ganizational and marketing innovations.

Table 2.
Type of business entities Total and money Innovators Non-innovators %
Small 9,347 4,143 5,204 44
Medium 2,237 1.280 957 57
Large 557 389 167 70
Total 12,141 5,812 6,329 48
Table 3.
Industry sector Total number of innovation Innovators Non-Innovators %
Manufacturing businesses entities 4,141 2,314 1,827 56
Businesses entities providing services 8,000 3,498 4,502 44
Total 12,141 5,812 6,329 48

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3.4. The structure of innovation activities by cent period of innovation activities was improved
type of innovation by about 10 in all types of innovation, except that
innovations in products and services were up by
Innovation activity is substantially dependent 20% over the period 2006-2008.
on the type of innovation being introduced. It Of the total number,52% of businesses entities
turns out that there are different criterions for clas- do not innovate, while this percentage in the peri-
sification of innovation, and related to the above, od 2006-2008 was about 60%. This clearly shows
different types of innovation. The subject of fur- that some types of innovations affected the Serbi-
ther interest is directed to consider four types of an economy and the percentage of all types of in-
innovations including: new product innovation, novation increases from year to year, even in times
process innovation, organizational innovation and of economic and financial crisis, as seen from the
innovation in marketing. following illustration:
It is evident that total number of entrepreneurs
that innovate, the greatest number of innovations
refers to innovation in the field of organization,
with 32% followed by the marketing innovation
with 29%, then the production of the service inno-
vation process with 28%, and at the end the prod-
uct innovation and services with around 27%.The
structure of certain types of innovations in total in-
novative developments in the period 2006 - 2008
shows that the great number of the innovations
was made in the field of organization with 29%,
while in the process innovations and marketing
amounted to 26%, i.e. in product innovation - the Figure 2. The structure of (non-) innovators in
services with 19% [5].These relationships can be the period 2006 - 2008 and 2008 – 2010
represented as follows:
3.5 The structure of the innovation types
depending on the size of business subjects
The size of the business entity, as an internal
factor, exerts a significant influence on innovation
activity. At the level of the Republic of Serbia, the
intensity of innovation depending on the size of
Figure 1. The structure of innovative activities by the subject is given in the table 4: [5]
type of innovation The table shows that in Serbia, small busi-
ness entities innovate the most in organizational
It is evident that the percentage of innovative design, with 32%, while the percentage in 2006-
activities in the period 2008-2010 was promoted 2008 amounted to 29%. In second place are the
in all types of innovations, compared to the period innovations in marketing with 30%, while this
2006-2008. According to statistics, the most re- percentage in the previous two-year period was

Table 4.
% Innovations
The size of business entities of products of processes of organizations of marketing Non-innovators
Small 25 25 32 30 52
Middle 33 36 40 38 43
Large 45 47 57 46 30
Total 27 28 33 29 52

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26%. According to statistics identical to the per- certain regions of Serbia. It is clear that the north-
centage of innovations was the creation of new ern parts of Serbia and Belgrade developed part of
products and processes in an amount of 25%. In R. Serbia and those they exist in a different num-
the previous two-year period based on the percent- ber of innovators and innovations of all kinds.
age of innovation processes in small firms were
26%, and the innovation of products and services 3.6.1 The number of (non) innovators in the
19%, which means that in the period 2008-2010 regions
for small enterprises reduced participation in the
innovation of products and services. Between the number of innovators and innova-
In medium-sized enterprises, most of the inno- tion activities is an iterative relationship. This state-
vations came from organizations with 40%, while ment is true for Serbia. Specifically, a number of
this percentage in the previous period was 29%, inventors should have a positive effect on the in-
from marketing to 38%, while the percentage in tensity of innovation, which is consistent with the
2006-2008 was 27.3%, followed by innovation in trends and the claims made at the beginning of this
product, process or service by 36%, whereas in the paper. Taking into account the four regions, namely
previous period was 26% and finally the creation of Belgrade, Vojvodina region, Region of Sumadija
new or modifications of existing products with 33%, and Western Serbia, Southern and Eastern Region
whereas in the previous period, the percentage was of Serbia, the number of innovators for the period
18 %. Thus, medium-sized enterprises in the peri- 2008-2010 it is possible to form the table 5: [4]
od 2008-2010 in relation to the period 2006-2008 The data confirm the legality that exists in
increase all types of innovation, but innovation in other countries regarding the number of innova-
products and services, which saw a decline of 100%. tors. So, most of innovators has Vojvodina Region
Large commercial entities are at least in the with 57% of business entities involved in the total
field of product innovation, with 45%, more in- number of innovators, while 43% of organizations
novation in marketing with 46% i.e. 47% process in this region do not innovate.
and organizational innovation in the highest with Second and third place takes the Belgrade re-
57%. Comparing the innovation activities in the gion and the region of Sumadija and Western Ser-
period 2008-2010 with the previous two-year pe- bia with 50% of organizations who innovate and as
riod (2006-2008) the situation is almost identical many who are not engaged in innovation activities
to the small and medium sized businesses. in the studied period. This is surprising, especially
Based on this, we can conclude that the innova- when it comes to the region of Belgrade, which
tion of products and services is an administrative has the largest scientific research and development
proportionality between the size of businesses and potential, but they alone do not lead to leadership
level of innovation.In other words, if management when it comes to the number of innovators.
wants to increase its innovative activities should Region of Southern and Eastern Serbia has the
consider increasing the company i.e. the scope of lowest proportion of innovators - 48% and 52% of
operations, production line, and assortment. organizations in this region for the period 2008-
2010 did not have any innovation, as expected,
3.6 Innovation activity by region having in mind the economic development of
these compared to other regions of Serbia.
Number of innovators and innovation activity The fact is that Serbia, as a whole,has no strong
is conditioned by the territorial characteristics of scientific research and development centers in
Table 5.
Regions Innovators % Non-innovators %
Belgrade region 50 50
Vojvodina region 57 43
Region of Sumadija and W. Serbia 50 50
Region of S. and E. Serbia 48 52

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large urban centers in Serbia, which would repre- novations and on the same level of Serbia and the
sent a “driving force” for the intensification of in- Serbian region - South has a number of innovations
novation activities. These centers have a developed compared to the average of the Republic of Serbia.
market country and some neighboring countries. The same situation is in terms of innovation coming
In Europe, most scientific research centers areUK, from small enterprises in the region Serbia - North
France and Finland. Russia has several scientific and Serbian regions - South. Thus, from thesmall
technopoleis, and has recently started construction enterprises of Serbian region - South comes 46%
of the Russian version of “Silicon Valley”. Slo- innovation, and from the small enterprises of Ser-
venia and Croatia have experience in supporting bian region - North comes 43% of innovation.
the technology parks. Serbia has recently started
construction of four technology parks, which will 3.7. Innovation activity by economic activity
be located in Belgrade, Novi Sad,Kragujevac, and
Nis [7]. These parks should be connected with The creation, development and application of
universities, just like in developed countries. innovation are dependent on economic activity. In
fact, in some industries is reflected greater intensi-
3.6.2 Innovation activities in the regions ty of innovation activities, while in others the pro-
depending on the size of the businesses cess is smaller or significantly slowed. Innovative
entity activities allow faster growth through increased
productivity, new forms of interaction between
It has already been noted that the intensity of sectors and individual industries.
innovation is dependent on development of the re- At least innovation activities in innovative
gion, but also the size of the companies located in products and processes, and in the sphere of orga-
certain regions. This section provides information nization and marketing is present in the real estate
for the region of Serbia - north and the Serbian business, where that percentage was 36%, while
region - South compares that intensity with the av- a slightly higher level of innovation is achieved
erage at the level of the Republic of Serbia. in the sector of accommodation and food (cater-
According to data provided in studies conducted ing and the hotel business) and in the transport
in the period 2008-2010, the table 6 may be formed: sectorand storage with the 38%, in mining 41%,
The previous table shows that in both regions in trade 44%, in 48% in agriculture, forestry and
the largest share in the number of innovations fisheries, which was innovated in the manufactur-
have the large enterprises and their share ranges ing industry also (48%).
from 64% in the Serbian-South region to 73% in The high degree of innovationswas achieved
the region, Serbia - North. Therefore, a Serbia - in the financial sector and insurance sector with
North region is above the percentage of innova- 67%. In the sector of information and communica-
tion that exists at the level of Serbia. tion is achieved 56%, and in the sector of profes-
In the group of medium-sized enterprises, shows sional, scientific, and technical innovation activi-
that the Serbian region - South has a higher percent- ties - 51%.
age of innovation in relation to the Serbian region These quantifications in relatively good way
- North, and that it is 58%. This further means that can be illustrated using the following diagrams, as
the Serbian region of North-by the number of in- follows:

Table 6.
Companies that innovate in %
Innovators Non-innovators
Small Medium Large
Regions %
Serbian-Sever 43 57 73 53
Serbia - South 46 58 64 51
Republic of Serbia 44 57 70 52

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 technics technologies education management

with 50% and supply of electricity, gas and steam

with 43%, took the third and fourth place.
The lowest level of innovation for these types
of innovation is manifested in the real estate busi-
ness with 17%, transport and storage with 26%,
agriculture, civil engineering with 30%, forestry
and fisheries with 31%, which was recorded in
mining area too.
Figure 3. Innovation activity by economic
activities

It should be noted that a period of two years does

not give a reliable assessment of innovation capacity
of individual sectors of the economy, because some
activities have introduced new technological, orga-
nizational and marketing innovations, and the peri-
od had shown the need for a change or innovations. Figure 5. The degrees of innovation by the type
If the structure is analyzed by type of innova- of innovation
tion in certain industries, then it could be conclud-
ed that innovation in products and processes, the From the above it can be concluded in which
highest level achieved financial sector, with 57%, direction and at what pace the Serbian economy
manufacturing industry with 47%, followed by in- moves, and which segments i.e. to which kind of
formation and communication activities with 46 innovations special attention should be paid.
% and the professional, scientific and technical in-
novation and technical activities with 42%, as can 4. The future of innovation potentials in
be seen from the following diagram: Serbia
Previous analysis has shown that innovations in
the Republic of Serbia are in poor state by all cri-
teria and issues. In the above-mentioned context,
the question is what the perspective of innovation
activities in Serbia is in the future and whether the
numerous disadvantages can be transformed into
favorable and positive trends. The prospect of in-
novative activity in the Republic of Serbia will be
Figure 4. Structure of innovation by the type in
largely conditioned by the action of two groups of
specific industries
factors and influential powers, namely: the influ-
ence of positive i.e. negative factors.
In the field of organizational and marketing in-
Corporate management should to amplify, or to
novations, the greatest innovations have been re-
exploit the positive factors of influence and power
corded in finance and insurance sector with 63%,
largely, and on the other side to eliminate or re-
which is understandable considering the entry of
duce the negative factors and forces.
large banking system in Serbia and the intensive use
According to a survey conducted in the period
of e-business in all elements in the field of provid-
March - April 2012, in which 105 respondents from
ing services. The second in rank in the innovation
different economic sectors and organizations par-
system is the sector of information and communi-
ticipated, on the question which factors would pro-
cation - 54%, especially when it comes to progress
vide the greatest contribution to the improvement
in information technology, mobile telephony and
of innovation activities in their organizations, the
its union with the Internet. Manufacturing industry
following answers were provided in the table 7:[8]

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Table 7.
Factors affecting the improvement of innovations %
1. Competence and professionalism of employees and management 33%
2. Flexibility of the organization 22%
3. Tangible incentives 16%
4. Interpersonal relations 16%
5. Other factors 10%

4.1. Competence and professionalism of a high business school, i.e. those with MBA (Mas-
employees and management ter Business Administration) and that has sufficient
knowledge, skills, life and work experience that
Of all respondents, 33% think that it is pos- can take the most complex and hardest duties in
sible to improve the innovation effects by raising business and other organizations. So, not the first,
the competence of employees and the top man- second or third thing, but finished business school,
agement of the company, i.e. general, executive, the knowledge and skills and abilities, life and work
or managers under different names. The analysis experience, because it is one of the most complex
shows that secondary education and skilled work- and most responsible professions which one can
ers who by the nature do not have sufficient inno- deal with and of whose success depends not only
vative and creative potential that is able to provide corporate, but national success too.
ideas i.e. to find new ways to perform tasks or to It turns out that 50 of the most successful ex-
introduce new products, etc. dominate in Serbian ecutives in the world (CEOs) in the period 1995
companies. Comparing the situation regarding this - 2010, stayed in leadership positions in average
issue with the Western European companies, it can about 8 years, while the most successful even more
be concluded that Serbian companies are lagging than 12 years. Also, of the 50 most successful in
behind, especially if one bears in mind that almost this period was taking leading positions in the age
100% employees with high education is employed of 42 – 46 years, after spending ten years or more
in high technology fields. at appropriate positions in the company, such as
Personal note of the author: For example, the technical director, director of finance, personnel,
Austrian company Kapsha from Vienna, engaged research and development, etc. The above shows
in manufacturing, installation, maintenance and that the length of survival at the highest hierarchi-
staff training in the field of automatic toll payment cal level and business performance in which inno-
promote this attitude, demanding the same thing vation has a significant share there is a high level
from its collaborators and its employees. That is of correlation [9]. Therefore, temporary work of
why this company is the leader in electronic toll strategic management reduces exploiting of the
payment. The situation is similar in some French, innovation potentials in organizational systems.
German, English and Swedish companies. To realize the previous measure, it is neces-
It is clear that only through highly intellectu- sary to eliminate the political and ideological
alized organizations and through the “white col- management, as dominant in Serbian companies
lar” workers, a satisfactory innovation activity in the last ten years. Generally, thin is not about
and market competitiveness can be achieved. Of management, but more about party officials who
course, the future belongs to “white collar” and gave priority to their policy and attitude and not
“gold collar” workers, which mean that “blue col- the strategy of the company. In the last two de-
lar” as a traditional feature of the classical indus- cades, Serbia produced some 30,000 specialists
trial organization, go to the “history.” with titles of graduate managers, managers who
In this section, respondents emphasized the need are certified and trained to manage organizational
for the introduction of competent, professional and systems. Of this number, over 50% of graduates
top management and the necessity of its appoint- and managers have acquired sufficient experience
ment for a longer period of time. Under these terms, in a variety of jobs. They are familiar with the or-
we should include management that has completed

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ganizational and other problems, but the mental- emphasize that this procedure did not required any
ity, customs and culture in general and organiza- additional financial resources and investments,
tional behavior of employees and the environment enabling the countries in transition, and Serbia
in which organizations operate. By eliminating of to primarily use organization as a mechanism for
the so-called party management, so-called parti- achieving greater business success. In this way,
cracy would create conditions for increasing com- the ideological components of the organizations
petence in organizations, especially when it comes would be eliminated.
to top management, thus creating a favorable in-
novation atmosphere and better use of innovation 4.3 Tangible incentives
potentials in general.
A tangible incentive is the third element in
4.2. Flexibility of the organization which the subjects saw a way to increase innova-
tion in organizational systems. This factor opted
Another factor i.e. the flexibility of the organi- 21%, i.e. nearly one in five respondents. This fact
zation is directly related to previous. Of total num- is surprising if one bears in mind that in the cri-
ber of respondents, 22% believe that increasing the sis tangible incentives are particularly important.
flexibility of the organization i.e. creation of mod- However, if the material incentives connect with
ern organizational forms is the second best way other responses, it can be concluded that indiffer-
to increase innovation in Serbia. Reinaldo Garcia, ent and incompetent management, as the insuffi-
CEO GE for Latin America admits, “Many ideas ciently flexible organization become slowing, i.e.
and innovations on emerging markets have not limiting factors of improving the atmosphere of
achieved either because the priority wasn’t given innovation and better use of innovations.
to the ideas or are not strongly supported. The new Respondents are not encouraged to innovate,
organization should be designed to accelerate the and they fear to approach the design and imple-
localization and to focus attention and resources mentation of some innovations, because if the ex-
on ideas that have always been there but didn’t periment fails, they can be financially penalized.
have enough power to become reality.”[10] This is understandable why, if we consider that the
Given the above, the organizations suitable Serbian economy and society for a long time lived
for the innovation are those that are “shallow” in and worked in so-called sterile operating condi-
its hierarchical design, and in which there is no a tions, which are required to work in the so-called
classic hierarchy of superiority and inferiority. In peaceful and stable environment and to do what is
such organizations, it is possible to free up enor- required, and that any deviation, even when better
mous creative potential that exists in every person result is achieved, sanctions.
and organization and use of the human mind to Respondents believe that the right to make mis-
seek for new solutions and ways of doing things. takes in innovative organizations is a fundamental
Of course, shallow and intellectualized organiza- right and that the errors are regularly attached to
tion can only respond to high levels of turbulence innovation activities, but they are welcome too.
and changes that exists in the modern business. Charles Svob warns with its statement, “When my
According to well-known CEO of Motorola, Ed people do not make mistakes, I am concerned.” In
Zander, it is essential to open clogged arteries for other words, people do not make mistakes when
the flow of ideas and their implementation. When they do not innovate, but in that time the mistake
attempting to restart the Motorola, which in 2004 is the biggest one, because pragmatism and lon-
recorded the significant decline he said, “Many gevity of products and processes is a big problem
companies have clogged arteries, which should be for any organization. It is therefore necessary to
unblocked”. Thanks to this approach in the third provide a “wandering mind” for each employee,
quarter of 2004, he was able to increase sales by because the human mind is naturally endowed
26% over the same period in 2003, while the ship- to work on multiple tasks, if people do not limit
ment of all of its products was increased by 15% themselves by creating a blockade in their own
over the previous year” [11]. It is important to minds. Industrial systems in the 20 century strictly

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controlled, requiring of employees not to use their ticipation in the preparation of teamwork and stra-
minds in the performance of job. The management tegic decision-making, higher budget allocations
of these organizations influenced the human mind from the innovation companies, creation of inno-
to focus on their tasks to fulfill them, which is not vation centers in companies, better cooperation of
the nature of human beings and the mind.[12] companies with scientific research organizations,
deregulation of scientific research, etc.
4.4 Interpersonal relations Interestingly, the respondents were not signifi-
cantly emphasized the lack of financial resources
Good interpersonal relations took the fourth as one of the causes of reduced innovation activi-
place according to the above-mentioned research. ties, which is amazing because this fact is often
Of the total number of respondents, 16% think that used to justify certain acts or omissions. In the
on the high quality innovation activity in compa- above, it should clarify the dilemma whether the
nies a significant influence have good human rela- lack of funds is a cause or a consequence of re-
tions. The fact is that in Serbian organizations there duced innovation activities.
are numerous reasons for dissatisfaction, distrust
and uncertainty, as numerous layoffs, reductions 5. Conclusion
in real earnings, deteriorating living conditions and
working conditions and general lack of perspective Innovation is the most important factor for so-
occurred, and so on. This statement applies to the cial and economic development. In the contempo-
global level, which has caused the need for com- rary conditions it represent a new production work
panies to invest more in the department of human force i.e. a factor that has contributed to developed
resources and development of working systems countries to gain significant competitive advan-
based on knowledge as the most valuable resource tage, and thus a satisfactory level of profitability in
in achieving business success. Therefore, the use of the feedback that enables the introduction of new
human capital for the launch of innovative activi- technologies, products and services. Thus, the un-
ties and increasing performance has become a key derdevelopment of a country or failure of business
factor in U.S. companies [13]. systems, is not the cause but the consequence of
It is shown that good interpersonal relations are inadequate or lack of innovation activities, espe-
crucial in achieving a higher level of synergy be- cially in the field of organization and management.
tween individuals i.e. parts of organizations and Countries in transition and Serbia also have not
the relationships with the environment in which yet become aware of the importance of innovation
companies operate. It leads to the situations that for social and economic development. The problem
organizations that have good interpersonal rela- is in the fact that the primacy is given to techno-
tions achieve greater effects than the sum of par- logical not organizational innovations in the field
tial effects. In this context, the management strives of management, which often do not require large
to achieve exchange of views, opinions or ideas financial resources for implementation, which can
through interaction and communication, because give great effects. Of all kinds of innovations, the
it turns out that one plus another idea is never innovations in organization are present the most
equal to two, but usually occurs a third idea, which in Serbia, so we can say that most of the Serbian
is generally of higher quality than previous ones. economy has a classic organizational structure, and
Therefore, in modern organizations, a special at- it differs from the modern organization, and due to
tention is paid to good interpersonal relations and that is not able to provide adequate performance.
proper communication. This fact is even more serious if we consider
there are no significant studies of this phenom-
4.5 Other Factors enon, especially when it comes to the state of in-
novations by different criteria, as well as share of
In the group of other factors, 10% of the re- revenues generated from new products or services
spondents indicated following thing to improve in the total revenue generated at the level of in-
the innovation activities in Serbia - increased par- dividual business systems, branches, regions, etc.

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 technics technologies education management

Therefore, it is difficult to determine the actual 11. Kramer RM. The Great Intimidators”, Harvard
level of different types of innovation, their rep- Business Review, February 2006; 90.
resentation by region, type, and size of the busi- 12. Molinski A, Davenport T, Davidson B, Davidson
nesses. It is clear that without these elements, no C. Three Skills Every 21st-Centry Manager Needs.
country is able to formulate the policy of econom- Harvard Business Review, 2012.
ic and social development, especially the strategy
in order to realize a specific national policy. 13. Kochan TA. A Jobs Compact for Americas Future.
HBR, 2012.
The future of innovation activities in the Repub-
lic of Serbia will largely depend on the implementa-
tion of the measures outlined in this paper, to which Corresponding Autor
respondents indicated. Therefore, it is necessary to Zivota Radosavljevic,
increase the competence of employees, especially Faculty of Business Studies and Law,
Beolgrade,
the governing elite at all levels, the establishment of Republic of Serbia,
a modern organization that will foster and appreci- E-mail: zivota.radosavljevic@fpsp.edu.rs
ate innovation activities and operations; the intro-
duction of incentive measures and good interper-
sonal relationships, i.e. better treatment of human
potential, especially those who innovate. In this
context, we should bear in mind the saying of the
famous philosopher F. Engels pronounced in 1820,
“An ounce of action is worth a ton of theory”.

References
1. Obama B. Change – We can believe in. Random
House, Inc. New York.

2. OECD, Oslo Manual, 2005; 3: 103–107.

3. Moracanin V, Besic C, Dedic S, Kljaic-Dervic M.

Competence education and training for quality,
TTEM, 2011/1; 6.

4. Statistical Office of the Republic of Serbia, Commu-

nication, December 31, 2011; 347.

5. Statistical Office of the Republic of Serbia, Commu-

nication , modified, 347.

6. Hendriks PHJ, Sousa CAA. Motivation for Knowl-

edge Work. Encyclopedia of Knowledge Manage-
ment, Idea Group Inc, 2006; 657.

7. “Tehnopolisistalno u radu”, Planeta, Belgrade, 48: 6.

8. Research made in the period March-April, 2012, in

Serbian companies organized by the Centre for Educa-
tion of the Executives and Consulting, Belgrade, 2012.

9. Radosavljevic Z. Secrets of Success of the World Best

Leaders. ANTiM , Belgrade, Serbia, 2012; 1-15.

10. Wasnburn N, Hunsaker BT. Finding Great Ideas in

Emerging Markets. HBR, September 2011; 120.

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 technics technologies education management

Analysis of the leadership approach in HIP

Petrohemija
Slobodan Adzic1, Branko Djedovic1, Bosko Nadoveza1, Nikola Ugrcic2
1
University Alfa in Belgrade, Faculty of Management in Novi Sad, Republic of Serbia,
2
Pancevo, Republic of Serbia.

Abstract 2. History of Petrohemija and the impact

of the economic crisis on company
Although prominent in global practice for cen-
turies, leadership presents a new management dis- HIP Petrohemija was founded in 1972, and
cipline. We are all witnesses to an increasing num- production began in 1977 with a projected capac-
ber of papers on leadership in the West. This trend ity of 1.1 million tons per year. Full capacity pro-
is likely to continue in the future as well. Slowly duction took place until 1991. The UN economic
but surely, it is also being replicated in our country. sanctions (1992-1996) interrupted the production
A large domestic company, HIP Petrohemija and delivery of ethylene and propylene to neigh-
from Pancevo, where we noticed a leadership ap- boring countries. The full projected capacity pro-
proach in management, but also failure in the im- duction was re-launched in May of 1996. During
plementation of changes, will serve as an example the NATO bombing in 1999, the lines of chlorine
of leadership analysis in Serbian practice. In the in the VCM and chlorine plant were destroyed.
analysis of the HIP Petrohemija case study, we Since 2000, an average of 600,000 tons of petro-
analyzed the data by using a model, taking into ac- chemicals has been produced per year. Production
count the specificities of the case study interpreta- with reduced capacity generates loss.
tion, which required the analysis to be conducted Due to the global reduction of industrial pro-
only in the context of space and time covered by duction, demand and purchasing power, the price
the case study. of one of the main raw materials of Petrohemija,
Key words: Leadership, Resistance to Chang- virgin naphtha, has started to plummet starting
es, Organizational Culture, Petrohemija. from the third quarter of 2008. In the past, the
growth of the petrochemical industry in Europe
1. Introduction followed the cycle of economic growth at a rate of
120% to 140% of GDP growth. Prior to the global
In this paper we present a business case study economic crisis, it was estimated that the growth
of an unsuccessful leadership approach in the in demand for petrochemical products in Central
Serbian state-owned company Petrohemija (Pet- and Eastern Europe would reach 4.4%. Growth
rochemistry). After introducing the history of the rates of production, capacity utilization, demand
company and the kind of impact the global eco- and consumption, which were positive a few years
nomic crisis had on it, we provide the evidence of ago, started not only decreasing, but have also
a good start of operations for the new leader and changed to a negative value. In previous years,
his leadership team. These results brought about the production of ethylene in Europe amounted
a new management strategy, and the effects were to 2.8% per annum. In 2008, there manifested a
fruitful - a business partner sent a Letter of In- negative trend amounting to -6.2%.
tent in which he expressed his willingness to buy In order to illustrate the effects of the economic
Petrohemija from the Republic of Serbia govern- crisis, the projected financial results for the year
ment. Further analysis presented in this paper will 2009, under the assumption that the processing of
demonstrate why the changes never occurred and virgin naphtha was at a maximum level of 1,560 t/
why the new leader decided to resign. day generate multi-million losses (almost 10 million
Euros) even when factory running “full steam” [1].

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 technics technologies education management

3. The arrival of the new director and the company, wherein the strategic partner would fi-
new strategic plan nance the PP plant, while Petrohemija would pro-
vide the land, infrastructure and raw materials.
The Petrohemija Managing Board voted a new
The following step would be to purchase certain
CEO, and then a new and completely altered Exec-
other Petrohemija factories in order for the strate-
utive Board of Directors. The company was taken
gic partner to round off the entire production pro-
over in extremely difficult circumstances. In the
cess by way of purchase. Thus, the entire process
context of the overall cost and operation optimiza-
would go through a new legal entity.
tion, the leadership team was able to reduce the loss-
On the basis of this analysis, a business part-
es on a monthly basis. Consequently, the monthly
ner and a big buyer became interested in becom-
loss from December 2008 until March 2009 was
ing Petrohemija’s strategic partner. However, upon
reduced by more than 260 million dinars, but due to
receiving a Letter of Intent from the potential stra-
the afore-mentioned operating conditions, the loss
tegic partner (Fig. 1), a scheduled meeting at the
was still over 500 million dinars per month.
Ministry of Economy and Regional Development
The new leadership team developed a new
never took place. Soon after that, the resignation of
strategic plan of the Petrohemija development and
the Petrohemija CEO ensued in the August of 2009.
investments. The total amount of projected invest-
ment was approx. € 94.3 million, of which more
than a half (50 mil.) was intended for the new
PP (polypropylene) factory. The HDPE factory
requires € 8 million for the completion of the re-
construction process, taking into consideration the
fact that the purchased equipment is worth € 3 mil-
lion, whereas the estimate for LDPE is € 17.5 mil-
lion. The modernization and the achievement of
the highest level of eco-standards for the purpose
of ethylene plant energy savings is projected to Figure 1. Letter of Intent of the potential strategic
amount to € 16.5 million, and the waste water fac- partner sent to Petrohemija in 2009
tory requires another € 2.5 million. The marginal
analysis of investments shows that the additional 5. Leadership situation in HIP Petrohemija
monthly income, based on the increase in capacity Labor unions, organized to protect the rights of
and the recomposition of the production program, workers, often remain blind to the problems which
calculated solely on the basis of meritorious stock organizations and companies are faced with. This
market prices, amounts to € 3,763,085, or rather lack of reality on their part causes an enormous re-
€ 41,393,935 annually (the operating year equals sistance to change, and their actions have retrograde
8,000 hours, or 11 months). If we take into con- or even undesirable effects. The unions often have
sideration the fact that investments amount to € forgotten their raison d’être and they are becoming
94.5 million, we can calculate that the return on involved with matters outside their jurisdiction. The
investment is only 2.28 years. Therefore, we can situation is similar with the unions in Petrohemija.
conclude that the validity of investment in Petro- Three representative labor unions, disunited when
hemija is extremely profitable [2]. it comes to their interests, but united when it comes
to company business matters, which is beyond their
4. Business policy toward strategic partners jurisdiction, have been persistent in exerting pres-
sure on the management and the government to
The investment program implies an investment abandon the changes so that nothing would change
in a polypropylene factory and an enhancement of in Petrohemija. In their opinion, the Government is
polyethylene capacities. The interest of the strate- supposed to keep the company afloat by granting
gic partner is profit with a minimal risk, and this monthly subsidies. It was also the case in the past
can be achieved by establishing a joint venture that they were more committed to the replacement

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 technics technologies education management

of directors and interference in business matters

than focused on labor rights.
The Republic of Serbia government has played
a very active role in their relations with Petrohemi-
ja and it has even made decisions which presented
a profound encroachment upon the authority of
the managing board and that of the director (e.g.
wage rate determination). However, Professor
Slavisa Tasic [3] makes a claim in the magazine
NIN that “the privatization process in our coun-
try was necessary precisely due to the fact that the
government or, more precisely, the politicians do
not know how to manage a company unless they Figure 2. Stakeholder matrix of the case study
are not given monopoly. And if the government HIP Petrohemija
does not know how to manage companies, how
can we expect it to save them?” Yukl [7] argue that the CEO has little impact on
It is obvious from the example of Petrohemija organizational performance if restricted by strong
that the Government did not follow the advice and stakeholders, internal coalitions, a strong culture,
the analysis of the leadership team. On the con- scarce resources, a fierce competition and an unfa-
trary, the Government sided with the union, which vorable economic situation. We completely agree
confirms the theory of the political analyst Dusan with his opinion, since all the stated Yukl elements
Pavlovic [4] proposed in an author article in NIN also befell the CEO in our case, which eventually
that the economic disruptions in Serbia are a con- resulted in his resignation.
sequence of the captured Serbian economy (state
capture) in which certain groups, such as unions,
manage to impose their individual interests above
the common ones. The “captured” state of the gov-
ernment, the destructive power of union protests
and the inability of the unempowered leadership
team can be graphically analyzed by means of the
Stakeholder matrix [5], in which the participants
are positioned on the basis of their stance towards
the changes in Petrohemija and their impact (Fig.
2). The matrix also displays the recommended
strategies for effectuating changes according to
the participants’ positions.
Such relations have contributed to the leader- Figure 3. Leaderless style of the Petrohemija
ship team of Petrohemija finding itself in a posi- leadership team
tion in which the direction and actions of stake-
holders under their main influence, the govern- 6. Conclusion
ment of Serbia, were unknown in the process of
managing complex change. On the basis of the un- Finally, we can conclude that the vision and
known direction and action, and the high degree of strategy of the leadership team from the Petrohe-
change and uncertainty, we can conclude that the mija case study were positive and that it was pos-
leadership style enforced by the management of sible to expect that the proposed actions in Petro-
Petrohemija was in fact leaderless (Fig. 3). Such a hemija would result in its shift from the zone of
style must inevitably result in failure [6]. loss to the zone of profit. Therefore, the reason
for the failure does not lie in the proposed stra-
tegic solutions, but rather in the shortcomings of

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the leadership approach, which in turn caused the

changes never to occur. Leadership and change
are synonymous, but the grouping of unions and
the government on the opposite end of the spec-
trum from the vision of change, contributed to the
leadership team finding itself in a hopeless situa-
tion and having to practice a leaderless style.
It is obvious that the existing culture and the
behavior patterns have had a particularly signifi-
cant impact on the failure of the leadership team,
since the new vision and the changes have not been
ingrained in the new culture, which was “mission
impossible” for the leadership team in the form of
an unempowered leaderless-style management.

References
1. Adzic S. Role of leader in creating change in a com-
pany. (PhD thesis), Megatrend University, Belgrade,
2011.

2. Adžić S, Ocić O. HIP Petrohemija: the current status

and the future expectations. Energija/Ekonomija/
Ekologija, 2012; 14(1-2): 309-313.

3. Djakovic P. Save or dissolve. NIN, 3102. 2010.

4. Pavlovic D. Can the NBS be independent?. NIN,

3103. 2010.

5. Balogun J, Hailey VH. Exploring Strategic Change.

(2nd Edition), FT Prentice Hall, UK. 2004.

6. Adzic S. Leadership: integrative aspect. Cekom

Books, Novi Sad. 2011.

7. Yukl G. Leadership In Organizations. (5th Edition),

Prentice-Hall, USA. 2002.

Corresponding Author
Slobodan Adzic,
University Alfa,
Faculty of Management,
Novi Sad,
Serbia,
E-mail: s.adzic@gmail.com

1676 Volume 8 / Number 4 / 2013

 technics technologies education management

Engineering management as a base and

paradigm of competitiveness in industry
Branko Djedovic1, Bosko Nadoveza1, Rade Knezevic2
1
University Alfa in Belgrade, Faculty of Management in Novi Sad, Republic of Serbia,
2
University Alfa in Belgrade, Faculty of Strategic and Operational Management in Belgrade, Republic of Serbia.

Abstract entific synergy in the society-economy-technology-

management quadrangle. New economies and new
The theory and practice of Engineering Man-
technologies have currently taken the stage.
agement support the development and progress
of society, helping it to interpret technological ad-
vancement, new processes and phenomena prop- 2. Engineering management in the maze of
erly. The processes arising from the changes are technological advancement
primarily characterized by their globalist nature, The nature of technological changes, as a
new technologies and new economies, which di- primary challenge of company management, is
rectly determine all the segments of the lives led reflected in a high degree of ambiguity and un-
by the individuals living in this society. Engineer- certainty in social relations, cultural values, the
ing Management exerts major influence in the new economic system and policy, and ecological re-
business philosophy. Creative work and socially quirements - all in the interest of desirable con-
beneficial responsibility represent the universal sumer response and the goods and services’ mar-
tasks, the strategy, the vision and the mission of ket validation. The wish and the intention to place
contemporary Engineering Management. all the processes under control and focus them in
Key words: Engineering Management, Strat- the desired direction imply the existence of a new
egy, Society, Changes, New Technologies. company philosophy. The established philosophy
and comprehensively devised business manage-
1. Introduction ment represent a concept and practice defined as
Engineering Management. [1].
In its complex process of progression and Engineering Management represents a response
change, modern European society, with special and an effort to provide and carry out radical
reference to Central and South East Europe, is changes in management with a high level of tech-
introducing new forms of their paradigm mani- nical-technological processes integration, and ever
festation on a daily basis. Therefore, according more complex requirements and needs of individu-
to the action-reaction principle, it induces a new als, tinged with technical achievements. Its power
inventive energy of the business and educational reaches each individual both directly and indirectly,
potential which directs and actualizes changes. and to a greater or lesser extent, provides him with
The higher education system supports contempo- the tools for generating new benefits of socially
rary business processes and leads their mobilized justified values. Highly educated individuals and
human resources into the broadest, systematic and groups, knowledgeable in the field of Engineering
legal activity of competency development and Management, are qualified to direct social reforms
knowledge acquisition among its members, en- and determine priority trends. They manage the fu-
abling them to meet needs and challenges. ture and evaluate its prospectively oriented educa-
Engineering Management philosophy and poli- tional activities in the context of synergy between
cy, the structure of its functions, and the algorithm management and technologies [2].
of the process, are at the very top of the management The cause and effect relationship between Engi-
hierarchy pyramid according to the significance of neering Management, new technologies, and social
study, the possibility of taking action, and the sci- categories it participates in, can be conceptually

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 technics technologies education management

outlined in the Figure 1 diagram. The system of a of thinking and acting generates a new product,
society’s cultural values, its economic potential, the a new service, a new technology, a new social
technical and technological achievement and politi- benefit. All this is united in the chain of values
cal tendencies, mark out the scope and the intensity by the concept called Engineering Management.
of technological modernization. This also paves Engineering Management analytically studies the
the way for engineering management in the context altered role of technology in modern times. The
of a society’s capability to create new socially ben- altered role of technologies in modern times has
eficial values and verify them in practice. substantially contributed to the new comprehen-
sion of the role and significance of research, cre-
ativity and development in creating and pursuing
the policy and strategy of society development [3].
The hierarchy of advantages and benefits of
Engineering Management in the chain of values
of the new business philosophy can be represented
by the illustration outlined in Figure 2.

Figure 1. Relationship between engineering

management, new technologies and social
categories

3. Engineering management and social

creativity
Technological progress, properly guided and
directed, has reached its primary significance in
achieving strategic goals of a society. The society
is searching for an answer to the question: How
to direct the new opportunities and manage new
demands in the best interest of all, how to motivate
individuals and groups to contribute to techno-
logical progress in particular and social advance-
ment in general by acquiring higher education
and employing their creativity. Being in the center
Figure 2. Engineering Management hierarchy of
of economic developments and business activities,
advantages and benefits
technological progress enables, and Engineering
Management explains, how to build and maintain Engineering Management as a new scientific
the competency and competitiveness of creative concept incorporates the knowledge of engineer-
work in the best interest and for the benefit of both ing and management scientific disciplines, which
the society and the individual. enables it to create a powerful synergetic advan-
According to the issues it deals with and the tage effect. It integrates new technologies into
subject it examines, the methods it uses, the goals the structure of the new organization, which is
it focuses on and its scientific hypothesis, Engi- a key attribute of the strategic advantage of the
neering Management is based on the synergy of present and future business system. [4] This has
factors comprising organization, performance laid the foundation for new business opportuni-
and innovativeness. Innovativeness in the way ties and the foundation of potential success. The

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stated claim arises from the scope of education valuable resource capacities and capabilities.
based on technical-technological and engineering These comprise: technology and engineering re-
approach, and also on the best-established corre- search and development strategy; chain of supply
spondence with the needs of society and the laws management strategy; production strategy; sales
of economics and the business system embedded strategy; human resources strategy; and the strat-
in it. Engineering Management offers companies egy of funding [5].
the best way of understanding their internal and Engineering Management encourages perma-
external environment and in this context provides nent product innovation as a result of team work
them with a complex systematic and scientific re- aided by information acquired from market re-
sponse to predicting the possibilities, the needs search, the research and development of a new
and the scope of a company’s future development. product, design and engineering. The key concept
The mathematical precision of the analysis and the behind this process is expertise which essentially
synthesis of the process, as well as the logic be- implies a set comprising: - expertise in executing
hind the claims made by natural sciences, which the given activity; - comprehensive expertise; -
are a part of the engineering managers’ education- recognizable expertise. This leads to the conclu-
al algorithm, present an entirely relevant scientific sion that not all competitive capabilities are equal,
milieu which will determine the present and the since different kinds of expertise provide different
future knowledge of managers. Their claims, axi- kinds of competitive capabilities. Within a busi-
oms and hypothesis will be used to solve numer- ness system, it is desirable to prefer the strongest
ous examples of complex practice, the outcomes – superior expertise, on the basis of which new
of which will represent the managerial challenges values are to be developed and the operative level
of the new age, a confirmation of the new scien- of resources increased.
tific achievements in the field of management and Toshiba computers, which were neither faster
the new ways of satisfying consumers, resulting nor equipped with larger memory than their com-
from the new needs and dynamic desires of those petition, are prominently mentioned in literature
who use these products and services. as a good example of a successful differential ap-
Among all the currently present opinions re- proach to competitive values. Nevertheless, Toshi-
garding management, Engineering Management ba has become a market leader by combining good
is the best in eliminating all the dilemmas with resource capacities and strategic partnership with
regard to the scientific value, purpose, goals, ap- suppliers of components, which was reflected in
plication, benefits, effectiveness, and efficiency, the following: efficient assembly, expert design,
always using the power of the quantitative crite- wide range of various models, and attractive mix-
rion confirmation. ture of imbedded performances in each model [6].
In addition to all the outlined advantages of
engineering knowledge related to management, 5. Conclusion
Engineering Management does not disqualify all
other management knowledge. It uses the best Engineering Management, in addition to its ut-
possible way to incorporate this knowledge into most commitment to developing the competitive
the new philosophy of business management by advantage of products or services of the business
networking the methods and techniques of both in system, it also has a responsibility and a need for
the search for the best alternative of a good prod- undertaking targeted action in the process of edu-
uct and a good service. cation and training of the managerial staff in the
society which it is a part of. Technification of the
4. Engineering management in generating society changes its creative dimensions, moves
competitive advantages the boundaries of achievement, and demands that
Engineering Management understand it, follow
All efforts made in developing competitive its course and find a socially beneficial applica-
advantage also provide essential functional char- tion for it. When discussing the not so straight-
acteristics for the development of competitively forward issue regarding the relationship between

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 technics technologies education management

Engineering Management, new technologies and

competitive advantages of a company, it is nec-
essary to take into account prioritizing the needs
and related demands and expectations of custom-
ers. Engineering Management, as a scientific con-
cept, is in need of society support, and the society
needs pragmatically established professional and
scientific higher education institutions which will
interpret and usefully apply its manifestations in
the present and future age of knowledge.

References
1. Hannagan T. Management concept & practices. Pit-
man Publishing, London, UK. 1995.

2. Stevenson W. Operations Management. McGraw-

Hill, New York, USA. 2005.

3. Levi – Jaksic M, Komazec G. Management of Opera-

tions. Megatrend University, Belgrade. 2003.

4. Wisniewski M. Quantative Methodos for Decision

Makers. Prentice Hall, USA. 2009.

5. Đedović B, Nadoveza B. Quantitative methods in

Management. FMMSP, Belgrade. 2008.

6. Artur A, Thompson Jr. Strickland III AJ, Gamble JE.

Strategic Management. Croatian edition, Mate, Za-
greb. 2008.

Corresponding Author
Branko Djedovic,
University Alfa,
Faculty of Management,
Novi Sad,
Serbia,
E-mail: brankodjedovic@yahoo.com

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 technics technologies education management

Calculating the gender inequality index:

example of Serbia
Olgica Boskovic, Emilija Manic, Nikola Njegovan
The Faculty of Economics University of Belgrade, Belgrade, Serbia.

Abstract ties and employment is constantly dropping, the

unemployment rates of women is rising, the aver-
Gender inequality remains a major barrier to
age period of waiting for employment is growing,
human development and the situation in Serbia
whereas the concentration of women in typically
does not differ much from the other countries in
female professions is on a rise. And the women
transition. Although many positive changes had
position in labour market represents one of the key
been done in Serbia since the beginning of the
aspects of gender equality in one society. Apart
transition period, the main indicators still show
from that, women’s position in labour market is of
significant gender differences.
significant importance for their complete position
The aim of this paper is to present the method-
in the society. At the same time, the possibility of
ology of GII calculating for Serbia in the context of
analyzing and assessing the labour market condi-
showing existing gender inequality in Serbia (the
tion and needs, as well as forecasting employer
authors tried to rank Serbia among other countries
needs are a prerequisite for determining the appro-
and compare it with some countries in the region).
priate measures and activities for striking a bal-
This was a challenge considering that the calcula-
ance between labour market supply and demand.
tion for Serbia was preformed never before and
The aim of this paper is not just to indicate
the harmonization of national monitoring process
the gender inequality in labour market in Serbia,
and statistical methodology were needed to cope
but to reveal this inequality through quantitative
with international standards in the given area.
methods, using gender inequality index (GII)
Key words: Gender inequality index (GII),
calculation. GII for Serbia has been never calcu-
employment, discrimination, labour market
lated before which was a big obstacle earlier in
comparative analysis of Serbian gender inequal-
1. Introduction ity to some other countries. The differences that
In order to stimulate employment of the active appear in the regional analysis of gender inequal-
labour force and social inclusion of hard-to-em- ity mostly depend on regional variations of three
ploy individuals and vulnerable categories in the segments: reproductive health, empowerment and
labour market, it is necessary to survey the current the labour market. And the best way to perceive
situation on the labour market, but also predict fu- differences among these components in different
ture trends. regions/countries is to compare GII.
The gender inequality appears as the result of
different factors and it exists in almost all spheres 2. Theoretical insights
in the world of work and living. Above all, the cul-
tural and social factors seem to be the greatest. It Support to gender equality is of extreme im-
would be expected that over time, with the glo- portance, bearing in mind that a significant part of
balization process and continually improvement professional identity is formed on the basis of so-
of women position in the society, women would cial influences and social system of values, which
achieve much better position in the labour mar- in a certain measure is in favour of men [1, 2, 3,
ket. However, this is not the case. The past decade 4, 5]. This is particularly expresses in the low in-
indicates that the position of women in the world come society and in the transition countries and
of labour market has been continuously growing societies during the past two decades [6, 7, 8, 9,
worse. Their participation in the economic activi- 10, 11, 12, 13, 14]. However these disparities and

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inequalities are present within developed countries eas of work, work experience and period of wait-
and integrations, too [15, 8, 16, 17, 18, 19]. And ing for employment [32].
one of the mesure that reflects this problem is the The gender inequality analysis in Serbian la-
Gender Inequality Index (GII). It shows women’s bour market becomes one of the priority tasks in
disadvantage in three dimensions (reproductive approaching to European gender equality concept.
health, empowerment and the labour market) and This is important because it is the very base for
for as many countries as data of reasonable quality creating the political decision as well as for de-
allow (applied to 138 countries around the world, velopment strategy creation and new legislative
covering all regions and parts of the HDI spectrum frame adoption.
[20, 21]. The GII is a composite measure reflect-
ing inequality in achievements between women 3. The empirical research and methodology
and men in three dimensions: reproductive health,
empowerment and position in the labour market. The fact that the labour market in Serbia is cur-
It is the fact that women are less present in en- rently characterized by a labour supply that exceeds
trepreneurship and higher levels of management. demand and that is of an inferior quality compared
Participation and employment rates of men are to demand, indicates the need to examine their re-
significantly higher than those of women [22]. But lationship in order to undertake timely and appro-
the participations of women in the labour market priate measures, both on local and national level.
are higher in those jobs requiring lower qualifica- Indeed, understanding their relationship and reduc-
tions and which are less well paid [9, 23, 24, 25]. ing the gap between the two, is one of the National
In spite of legal provisions on discrimination pre- Employment Action Plan (NEAP) priority goals for
vent in many counters all over the world, women are 2011 such as: matching labour market supply and
still in less favourable position to men in the labour demand, creating new jobs, improving education
market. Measures against gender inequality require and training in order to develop qualified labour,
consistent implementation of the legislation politics: stimulating hard-to-employ and vulnerable groups
improvement of women’s position, enhancement of and decentralizing and stimulating regional and lo-
their employment in the labour market, and better cal employment policy development. In addition,
involvement of the women into existing programs bearing in mind that today’s labour market requires
of active labour market measures [26]. qualified labour force with a high level of compe-
Serbia is one of those countries where socio- tencies, promotes the concept of life-long learning,
economic transition process just worsens the posi- further education and training and that the competi-
tion of vulnerable groups on Serbian labour mar- tion on the supply side is progressively increasing,
ket [27, 28, 29, 30, 31]. According to some statis- there is a need to collect adequate data on labour
tical research during the last decade, labour force market changes, in order to harmonize the estab-
participation rate of Serbian women and men was lished labour needs with the educational system.
quite different (women 54.9 %, men 71.9 %). Labour market forecasts are therefore a requirement
At the first glance it indicates gender inequality for implementing an efficient educational system
of Serbian labour market, which is confirmed by reform and one of the important factors in address-
data about men and women unemployment rate in ing the issue of unemployment. In order to achieve
Serbia (it is higher for women than for men (21.7 these priorities, it is first of all necessary to match
and 16.5 per cent, respectively). However, some labour market supply and demand. The fact that the
numbers will show that women position was bet- labour market in Serbia is currently characterized
ter over the period 2000-2010. This is not because by a labour supply that exceeds demand and that
women position on labour market in Serbia be- is of an inferior quality compared to demand, indi-
come better, but the fact that traditional women’s cates the need to examine their relationship in order
jobs are less fluctuating in the period of crisis [28]. to undertake timely and appropriate measures, both
The women make the majority of the unemployed, on local and national level. Indeed, understanding
and these numbers are more or less the same for their relationship and reducing the gap between the
the regions and districts, as well as for different ar- two, is one of the NEAP priority goals for 2011. In

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addition, bearing in mind that today’s labour mar- participation [34]. It shows, actually, the loss in
ket requires qualified labour force with a high level human development due to inequality between fe-
of competencies, promotes the concept of life-long male and male achievements in these dimensions.
learning, further education and training and that The norms, or ideals, are set at zero for the ad-
the competition on the supply side is progressively verse reproductive health outcomes of adolescent
increasing, there is a need to collect adequate data fertility (defined as the number of births per 1,000
on labour market changes, in order to harmonize women ages 15-19) and maternal mortality rates,
the established labour needs with the educational and at parity with male achievements on the edu-
system. Labour market forecasts are therefore a re- cation, economic, and political fronts. The score
quirement for implementing an efficient education- can thus be interpreted as characterizing where a
al system reform and one of the important factors in country lies in reference to normative ideals for
addressing the issue of unemployment [33]. key indicators of women’s health, empowerment,
Women in labour market represent one seg- and economic status [20].
ment of vulnerable groups together with other Gender desegregation of the main trend indica-
threatened groups of working population in Ser- tors in the labour market in Serbia during the 2000-
bia. Measuring the gender inequality has played 2010 periods may be followed from the basic data
an important role in raising awareness of the prob- of the Labour Force Survey, presented in Table 1.
lem and helping in resolving it. Gender equal- It indicates the existence of difference among the
ity represents the gender discrimination absence rates of employment (ER), unemployment (UR)
which reflects into equal possibilities for sexes, and the activity (AR) between men and women.
equal resources allocation and services access. According to the activity rate (AR), the labour
The idea of gender equality principle integration market in Serbia is constantly dropping down in
into all national politics and programmes has been the ten-year period (2000-2010). The exception is
promoted firstly by UN and later by other inter- the year 2001 when the AR was slightly bigger in
national organizations such as: European Union both groups. An employment rate (ER) was differ-
(EU), European Council (EC), World Bank (WB) ent between men and women (59, 1% men, to 41,
and International monetary fund (IMF). Taking 8% women), but its decrease was in both groups.
into account all this, it seems that calculating the This rate is lower at women group than it is in
GII as composite index is the best measurement men’s, but its decrease in women group was small-
of the country’s performance in the dimensions of er since the beginning of economic crisis. This is
reproductive health, empowerment and economic the consequence of bigger women employment in

Table 1. Main groups of population according to activity, employment, unemployment and gender in
Serbia 2000-2010 [35]
Indicator AR* ER** UR***
Year Total Men Women Total Men Women Total Men Women
2000. 57,0 65,8 48,9 50,1 59,1 41,8 12,1 10,1 14,6
2001. 57,3 67,0 48,1 50,3 59,9 41,1 12,2 10,5 14,5
2002. 56,1 65,2 47,5 48,6 57,5 40,3 13,3 11,8 15,2
2003. 55,7 66,0 45,9 47,6 56,9 38,7 14,6 13,8 15,8
2004. 55,5 64,6 47,0 45,2 54,9 36,3 18,5 15,1 22,9
2005. 53,5 63,0 44,6 42,3 52,4 32,9 20,8 16,8 26,2
2006. 51 60,1 42,5 40,4 49,3 32 20,9 17,9 24,7
2007. 51 59,7 42,8 41,8 50,3 33,8 18,1 15,8 21
2008. 51,5 60,4 43,3 44,4 53,2 36,5 13,6 11,9 15,8
2009. 49,1 57,7 41,4 41,2 49,1 34 16,1 14,8 17,8
2010. 46,9 55,5 39 37,9 45,3 31,1 19,2 18,4 20,2
Source: Anketa o radnoj snazi, 2010. Beograd: Republički zavod za statistiku, 2010.
*activity rate (AR), **employment rate (ER), ***unemployment rate (UR)

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public sector where the jobs are more secured than ratio (MMR) which is the number of women who
it is the case with private sector. Consequently, an die during pregnancy and childbirth per 100.000
unemployment rate (UR) was increasing in both live births, labor force participation rate (LFPR)
genders throughout the given period, but women which is the proportion of the population ages 15
UR was slightly smaller because the above men- and older that is economically active, adolescent
tioned reasons. At the same time, up–to-date re- fertility rate (AFR) which is the number of births
searches about vulnerable groups position at la- per 1.000 women ages 15-19, the female parlia-
bour market in Serbia, indicate sort of paradox – mentary representation of countries reporting 0
there are greater number of employed women than percent (PR), gender differences SE. Based on a
men with high education, and at the same time sig- complex statistical procedure combining differ-
nificantly bigger number of employed men than ent measures of central tendencies (arithmetic,
women with low education [36]. The consequence harmonic and geometric mean), GII is obtained
of this is the fact that the differences between ER through several stages [5]. Aggregating across di-
and UR of men and women are smaller since the mensions for each gender group by the geomet-
economic crisis has begun. This is not the result of ric mean makes the GII association sensitive. For
improvement of women position in labour market, women and girls, the aggregation formula is:
but because bigger number of men has left without
jobs in the given period respectively.
1 1
However, one way to make a comparison be- = GF 3 ( ⋅ ) ⋅ ( PRF ⋅ SEF ) ⋅ LFPRF
tween Serbian labour market and other countries MMR AFR
considering gender inequality is to use GII. This ......................................... (1)
is much better measurement of gender inequal-
ity because it enables much deeper analysis and and for men and boys the formula is:
more precise determination of the labour markets
changes. GII varies between 0 (equal position of GM =⋅ 3
1 ( PRM ⋅ SEM ) ⋅ LFPRM ............. (2)
men and women) and 1 (existence of difference in
position between men and women in all observed
dimensions). Higher GII value indicates a worse The female and male indices are aggregated by
position of women and greater gender inequality. the harmonic mean to create the equally distrib-
The GII is designed to reveal the extent to which uted gender index:
the realization of a country’s human development −1

potential is curtailed by gender inequality, and HARM (G , G ) =  (GF ) + (GM )  ...(3)

-1 -1

provides empirical foundations for policy analy-

F M  2 
 
sis and advocacy efforts. Considering three seg-
ments that are incorporate in calculating GII, the Using the harmonic mean of geometric means
methodology of GII calculation must be explained within groups captures the inequality between
through the calculation of these segments. women and men and adjusts for association be-
The health care dimension is measured by two tween dimensions. For women and girls, the ag-
indicators: mortality of mothers and rate of fertil- gregation formula is:
ity of adolescents; the empowerment dimension is
measured by two indicators: participation in the
1 1
parliament and participation in the middle and = GF 3 ( ⋅ ) ⋅ ( PRF ⋅ SEF ) ⋅ LFPRF
higher level of education; and the work dimen- MMR AFR
sion is measured by the participation of women ......................................... (4)
in the labour market. GII calculation procedure
is conducted in several phases of calculating the and for men and boys the formula is:
geometric, arithmetic and harmonic mean of the
relevant indicators [20]. The main indicators used
GM =⋅ 3
1 ( PRM ⋅ SEM ) ⋅ LFPRM ............. (5)
in calculation of GII are: the maternal mortality

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The female and male indices are aggregated by LFPRF + LFPRM .................... (10)
the harmonic mean to create the equally distrib- L=
2
uted gender index:
Comparing the equally distributed gender in-
dex to the reference standard yields the GII:
−1
 (G ) + (GM )  ......... (6)
-1 -1

HARM (GF , GM ) =  F 
 2  Harm (GF , GM ) ...................(11)
GII=1 -
GF,M
The reference standard for computing inequal-
ity is obtained by aggregating female and male
indices using equal weights (thus treating the 4. The research results
genders equally) and then aggregating the indices
Based on the analysis of GII estimation for Ser-
across dimensions:
bia (Table 2), it was determined that the approxi-
mate GII value for Serbia is 0.315.
G F ,M = 3
H × E × L ....................... (7) The results of GII calculations put Serbia at the
approximate rank 22 comparing to the data of other
where are: countries [20], but this is just an approximate GII
value obtained on the basis of available data and au-
H - Arithmetic means of Health (Health should
thor’s estimate (there are other countries for which
not be interpreted as an average of corresponding
there are no official GII data in the UNDP statistical
female and male indices but as half the distance
data bases, such as Belarus, Montenegro, Liechten-
from the norms established for the reproductive
stein, The Former Yugoslav Republic of Macedo-
health indicators—fewer maternal deaths and
nia, Uzbekistan etc, so the status of Serbia estimate
fewer adolescent pregnancies)
is necessary to take as an estimation).
E - Arithmetic means of Empowerment The GII value for Serbia has been calculated us-
L - Arithmetic means of Labour market par- ing the existing methodology of the Serbian statisti-
ticipation rate cal office, which is different from that in UN or EU-
ROSTAT’s reports [32]. Because of that the derived
1 1 results on GII value for Serbia are approximate and
H= ( ⋅ + 1) / 2 .................. (8) that they would have slightly different value if the
MMR AFR
international methodology was taken in the moni-
E = ( PRF × SEF + PRM × SEM )/2 .......... (9) toring process of the required indicators.
However, the calculation of GII value for Ser-
bia still has significant importance because it gives

Table 2. Basic data for estimation of GII for Serbia [37, 38, 39]
Reproductive health
Empowerment Labor market (2009)
(2008)
Maternal Adolescent Parliament Attainment at secondary Labor market
mortality ratio fertility rate representation and higher education** participation rate***
Female 8 21 0,26 0,46 0,528
Male na* na* 0,74 0,54 0,687
* na – not applicable
** Gender differences in attainment persist at all levels of education but are not always consistent with employment patterns
and outcomes of higher education
*** Labor force participation rate is the proportion of the population ages 15 and older that is economically active.
Source: Trends in Maternal Mortality: 1990-2008. Estimates Developed by WHO, UNICEF, UNFPA and the World Bank;
Trends in Maternal Mortality: 1990-2008. Estimates Developed by WHO, UNICEF, UNFPA and the World Bank; Statistički
godišnjak Srbije 2009. Statistical Office of the Republic of Serbia, 2010.

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 technics technologies education management

to the analysts at least vague idea of the state and of the spatial distribution of GII in the region. How-
changes in Serbian gender inequality situation. ever, the result is produced by influence of different
Based on the available data for 2008, the top 10 factors (maternal mortality, women seats in parlia-
countries based on attained level of GII are ranked ment and labour force participation).
following some expected way (the most devel-
oped countries have the lowest values of GII – the
best results) (Table 3).
According to the GII rate, closest to Serbia (rank
22, GII=0.316) are Greece (rank 23, GII=0.317) and
Luxembourg (rank 24, GII=0.318). Worse position
then Serbia has: New Zealand (rank 25, GII=0.320),
Ireland (rank 29, GII=0.344), Czech Republic (rank
27, GII=0.330), Slovakia (rank 31, GII=0.352), and
etc. However, these comparison is only conditional
because above mentioned difference in the monitor-
ing methodology for the key indicators.
Table 3. Gender Inequality Index
Country Rank Value
Netherlands 1 0,174 Figure 1. GII of Serbia and neighbouring
Denmark 2 0,209 countries
Sweden 3 0,212
Switzerland 4 0,228 After entering the European Union (EU), some
Norway 5 0,234 of the mentioned countries of the region has been
Belgium 6 0,236 significantly improve the women employment
Germany 7 0,240 rate. This proofs that incentives of EU politics and
Finland 8 0,248 created strategies gave the results in gender equal-
Italy 9 0,251 ization at the national labour markets as well as at
Singapore 10 0,255 the EU labour market.
Serbia 22 0,315
Source: Guy A., Klugman J., Kovacevic M., Twigg S., Jeni, 5. Conclusions
Zambrano E., (2010). Human Development Research Pa-
per 2010/46 - Measuring Key Disparities in Human De- The position of women in the labour market is
velopment: The Gender Inequality Index. United Nations
just one of the factors that need to be considered
Development Programme Human Development Reports
- Research Paper, New York. in strategic development documents and politics
of labour market. One should make an environ-
Although we don’t have date for all countries ment in which the equality of women and men and
in the Serbian neighbourhood, it would be inter- principle of equal chances are guaranteed. In try-
esting to compare Serbia by this index with some ing to achieve these, it is necessary to know the
countries in the region. characteristics of gender inequality and to be able
Serbia has second ranking position of GII in the to measure it. The GII is one of the best ways of
region only to Slovenia (GII = 0.293). Very close to its measurement. Calculating it for Serbia brought
Serbia is Greece (GII = 0.317) and Croatia (GII = a chance not only to compare Serbia with other
0.345). These countries are in one group (Map 1). countries in the world or in the region, but also
Hungary and Bulgaria make third group of coun- to show the pathway through which is possible to
tries with GII values of 0.382 and 0.399. At the bot- improve all the disadvantages.
tom of this scale stand Romania (0.478) and Alba- The lack of GII calculation in Serbia is the con-
nia (0.545), countries that are in the fourth and fifth sequence of still incompatible Serbian database
group. Given classes are made within GIS analysis and methodology with those in EUROSTAT and
others (WB, UN, etc).

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 technics technologies education management

The problem in determining GII for Serbia is References

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 technics technologies education management

Value network of cloud computing service

ecosystem
Imre Petkovic1, Djerdji Petkovic1, Aleksandra Tesic2, Edin Suljovic3
1
University of Novi Sad, The Faculty of Economics, Subotica, Serbia,
2
MIKRO DOO, Belgrade, Serbia,
3
University of Novi Sad, The Faculty of Economics, Subotica, Finance manager, MIKAN doo, Novi Pazar, Serbia.

Abstract paradigm (Nicolas Carr in [1], and today, it is cer-

tain that CC will exerts influence very much on
Cloud computing (CC) is an increasingly as-
not only company business policy but on all the
similated practice of information technology (IT)
fields of our private life. The description is given
and the applications for start-up companies, as
in Section 1.
well as for small and medium-sized companies.
As the most contemporary forms of coordina-
There are many reasons for it, and contra reasons,
tion of production/services after market and hi-
too. However, it is the fact that the tendency of its
erarchies, there have appeared ecosystems (J.F.
application is monotonously increasing. The mod-
Moore in [1], where a perfect cooperation/coevo-
el of computation in the form of cloud computing
lution of partners in carrying out and realization of
is complex: there are many services organized at
innovative products and services is characteristic.
high levels offered by providers specialized for
The CC paradigm is planned and established on
some classes of services. As services upgrade one
the principle of a specific service ecosystem. Sec-
on other and providers are connected mutually
tion 2 gives the essential description of character-
with a view of rendering refined services. Besides
istics of business and service ecosystems with spe-
connected providers, there are service aggregators,
cial attention to the service CC ecosystem model.
users, cloud auditors and cloud carriers providing
Based on the service CC ecosystem model,
connection, i.e. service transport between bidders
principle actors can be formulated and who can
and users of cloud services forming in this way
be used to compose CC value networks. “ A value
the rich service ecosystem for the CC paradigm.
network model shows actors who are exchanging
Besides the survey of CC and its service ecosys-
things of economic value with one other,”… e.g.
tem, the work reviews the value network for cloud
„presents what is offered to whom and what is re-
computing service ecosystem with all the actors
quested for that in return in the economic sense.”
participating in this complex model of IT use.
[2]. The value network/model can be constructed
Key words: cloud computing, cloud comput-
practically for every business and service ecosys-
ing service ecosystem, value network for cloud
tem. Section 3 shows the value model including
computing service ecosystem
all the actors of the CC service ecosystem.
As far as we know, such a complete value net-
1. Introduction work model has not yet appeared in reports up to
now, therefore, this work can be considered the
The era of intensive CC applications started
contribution of this work
several years ago in the U.S.A. and now it has
The objective of the work is to point, by de-
come in our regions. The first service providers
scribing the CC paradigm itself and surveys, (from
have appeared. After the starting period, where
the economic standpoint): (1) CC service eco-
there were criticism and skepticism relating to
system, and (2) a detailed generic value network
quality, service availability, trust, control, pri-
model and its functions and motivations in this
vacy and data safety, as well as the reliability of
service model. It is done for easier understanding
the whole system functioning, this computational
the mechanisms moving this complex business
model has proved, by constant growth in market
and creation of the whole and complex picture on
share, to have its future. Some authors predicted,
business of the CC service ecosystem.
at the beginning, the bright future for this new

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2. Cloud computing NIST differentiates three today well-known

services with classic contents (from the standpoint
CC is a concept of using computer resources
of the user) for which all the previously cited es-
(hardware, software, platform, database servers,
sential characteristics:
application, software package) over a network (In-
1. Software as a Service (SaaS). Software rent
ternet) and those about service-level understand-
(software on demand) via the Internet for
ing of the processing and payment [3]. The idea of
using on thin client (web browser) on all
service computing originates from the professor at
computers and mobile devices.
MIT, John McCarty in 1961 [4]. The word cloud
2. Platform as a Service (PaaS). The rent of
in the title of this paradigm has been “borrowed”
computation platform (platform on demand)
from the telephone company where the term cloud
with necessary software of special use
is applied to a situation where the contracted band-
(developmental environments, i.e. program
width is not specific wire pairs to deliver, but at
languages, different libraries of programs for
the time of the transfer free phone lines activated
development purposes, tools and services)
to ensure guaranteed bandwidth. The cloud is then
for applications development.
referred to the state it is still impossible to pinpoint
3. Infrastructures as a Service (IaaS). It is the
the specific transmission lines [5].
rent of basic computer equipments in the
It is not possible to find a generally accepted def-
form of virtual machines and networks.
inition for CC. The most often used definition (in
professional literature, before all) is the formula-
There are many proposed, realized and classi-
tion of The National Institute of Standards (NIST)
fied services organized at different levels (layers)
to describe CC depicting the original version of
of CC architecture. The first and the most cited
service from the standpoint of the provider ([6]).
service classification per levels originates from
“Cloud computing is a model for enabling ubiqui-
Youseff et al. [8] (Figure 1 [8]).
tous, convenient, on-demand network access to a
shared pool of configurable computing resources
(e.g., networks, servers, storage, applications, and
services) that can be rapidly provisioned and re-
leased with minimal management effort or service
provider interaction.” From definitions, originated
from academic circles, the most often used is that
given by Armbrust et al [7], where cloud refers to
delivered services over the Internet and to hard-
ware and software of datacenter. Public cloud is
considered service utility computing (where they
offer Software as a Service-SaaS, too), and pri-
vate clouds are not included in the CC concep-
tion. NIST, describing CC [6] defines the basic Figure 1. Layer/Service model of Cloud Computing
characteristics of the model, service models and New services on layered model shown on Fig-
deployment model (he proposed the notion model ure 1 have the following meaning:
for identifying participants/actors of CC services. 1. Data-Storage as a Service (DaaS). This is a
He specially pointed to the interactions between data storage on demand that allows consumer
actors – these are, in fact, the elements of busi- to store his data via internet at remote disks
ness, in this case, service ecosystem). In the cited and access them anytime from any place with
document, NIST emphasizes five essential CC any internet accessable devices.
characteristics: (1) on-demand self-service, (2) 2. Communication as a Service (CaaS). This
ubiquitous, broad network access, (3) location- service provides communication encription,
independent resource pooling, (4) rapid elasticity network monitoring, dedicated bandwith,
and (5) measured service-pay-per-use. guaranteed message delay, virtual overlays

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for traffic isolation, etc. (VoIP, audio level of quality and innovativeness in services for
conferencing, video conferencing) [9] consumers [13].
3. Hardware as a Service (HaaS). This is a data The deployment models from the point of view
center on demand that includes the actual of locality of realization (from the point of view of
physical hardware and switches that with a consumers) are [14]:
help of clasterization form the backbone of 1. Internal cloud – services are offered by an
the cloud. internal IT organization (indoors realization)
to internal usage (usually) (internal
In the meantime, almost day after day, there ap- computer clouds which are physically inside
pear suppositions for new services from different the organizations themselves (and protected
sources: six new services from Gartner, the set of by the organizational firewall). The access is
the ten new and current services from academic provided via the intranets and they are used
researchers [10], and the following concrete ser- for internal usage.
vices have been launched from software houses, 2. External cloud – cloud computing services
press and cloud providers: (a) Data Warehouse as are not hosted by internal IT organization
a Service (DWaaS, (b) Information Technology as (outdoors realization). An external cloud
a Service (ITaaS), (c) Desktop as a service (DaaS), can be public or private, but must be
(d) Network-as-a-Service (NaaS), (e) Integration implemented by an external IT organization
Platform as a Service (iPaaS) and (f) Education as (external computer clouds organized outside
a Service (EaaS) [11]. the users’ organization by cloud providers
From the aspect of deployment of cloud com- within their ecosystem.
puting, instead of NIST description, we shall illus-
trate the classification from this author [12] where, The deployment models from the aspect of or-
in fact, there are three (not exclusive) classifica- ganization of maintenance:
tions, which are based on: (a) publicity of usage, 1. In-house maintenance of cloud computing
(b) locality of realization and (c) organization of services
maintenance. 2. Outsourcing the maintenance of cloud
The deployment models from the aspect of computing services.
publicity of usage are:
1. Private cloud. The cloud infrastructure NIST proposed the conceptual model in de-
is dedicated for exclusive use to a single scribing CC architecture (The Conceptual Refer-
organization with a large number of workers/ ence Model) on which the roles/participants and
end users. their activities/functions are marked in the cloud
2. Community cloud. The type of cloud service computing environment (Figure 2. [15]). Except
provisioned for a specific group of persons these the most known roles/actors (cloud con-
or organizations with common or interes. sumer and cloud provider) three new one appear:
3. Public cloud. The type of cloud deployment cloud carrier, cloud auditor and cloud broker. The
that provided offer to any consumer for open Cloud Carrier is the organization which provides
use over the public internet. the transferring the data from cloud provider to
4. Hybrid cloud. These realizations of cloud cloud consumer. The roles of the auditor and the
deployments present the mix or combination broker (their description follows), at this level
of two or three types of cloud deployment of cloud computing development, are still in the
models (private, community, or public). shadow. There are only few of them on market.
Some sources articulate quite rightly new ac-
In some references, new names/suggestions of tors, besides the above-cited NIST actors. On the
deployment models as consumer cloud are cited one side, CC practice has shown that one provider
(like Facebook), although it is a typical example of can provide all three basic services (IaaS, PaaS
public cloud or governments cloud (in the U.S.A. and SaaS), and there are situations that there is one
and South Korea) in order to emphasize the higher special provider for every basic service. Thus, it

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is logical that instead of actors of cloud provider system appeared, the new way of organization of
three new will appear: SaaS provider, PaaS pro- products and services. „Markets, hierarchies and
vider and IaaS provider. About the above-cited ecosystems are the pillars of modern business
services, special independent providers offer them, thinking...“ [20]. In the market-oriented approach
which use (rent) one or more different services. (invisible hand of market), attention is placed on
the perfectness of transaction transparency in the
business world. In hierarchies (visible hand of
the firm) perfect control of tasks is forced, and
in the ecosystem („might be termed the “visible
imagination”) because the transactions that are
coordinated are not primarily for goods or activi-
ties, but for commitments to the future” [1]), the
principal objective is the perfect cooperation in in-
novation development among partners. Day after
day, buyers have more and more requirements for
more complex and technically perfect products
Figure 2. The Conceptual Reference Model and services per low prices. Leading and success-
ful business people realized that, disregarding
Some authors ([16], [17], [18]) point to new their effort in the field of innovation, they could
primary (active participants of realizing the main not meet modern business challenges. A solution
functions,, i.e. missions) in their works, but also to was found very soon. „Managers establish busi-
secondary actors (withouth whom the succesful- ness ecosystems to coordinate innovation across
ness of mission of the business ecosystem would complementary contributions arising within mul-
not be at the expected level) in the CC environment. tiple markets and hierarchies. “ [20]. According to
Based on them, CC market/economic actors can Moore’s conclusion, the role of entities/organiza-
be discovered/formulated, about which we’ll talk tions in the business ecosystem is double, cooper-
more detailed in Section 2. Based on the generally ative and competitive at the same time: „In a busi-
accepted layer model (Figure 1), it has been con- ness ecosystem, companies coevolve capabilities
cluded many times ([8], [19]) that the CC paradigm around a new innovation: they work cooperatively
cannot be considered to be radical from the techni- and competitively to support new products, sat-
cal-technological aspect, but only revolutionary or isfy customer needs, and eventually incorporate
revolutionary innovation (looking technically-tech- the next round of innovations.” [21]. The number
nologically, the CC model is the model that applies of organizations/members in the ecosystem de-
revolutionary sustainable innovations in the form of pends on the product/service itself, and there can
the application of virtuelization and the Internet). be several, even several hundred (product: Apple
From the standoint of business approach, however, Iphone). Organizations, participants (members)
because of the way of realization and application/ in the ecosystem can, even have to be from dif-
functioning of CC in the business/service ecosys- ferent economic fields and the business world in
tem of rendering IT services, cloud computing can order their product /service could be qualitative
be considered radical innovation (evaluation ac- in all details and functionalities disregarding how
cording to Christensen criteria for radical innova- complex CC is. The idea of business ecosystem is
tion is found in [17]). often used by different authors ([20], [15], [22],
[23], [1]), but nobody has ever given a detailed
3. Generic cloud computing service and precise definition and it points to the complex-
ecosystem ity of this field. The best knowledge on the busi-
ness ecosystem is given by the source [24] where
In the middle of the1990th of the last century, we can read that the business ecosystem is a self-
there was the attitude that, after market and hier- organizing, self-sustaining, coevolutive, emerging
archy, a new entity of economy management: eco- and complex adaptive (or complex evolving) sys-

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tem (where is both competition and cooperation virtual machines and virtual networks.
present simultaneously) with a dynamic structure For that purpose, he provides computer
which consists of (only one or) a few, several or servers/server farms, physical network
many interconnected population of organizations equipments, big physical memory blocks/
(small firms, large companies, research centers, systems, OS and hypervisor software for
universities, public organizations and other par- virtualization.
ties) in order to survive.
In Section 1, CC is described and, as we can – Cloud broker – Use and integration of CC
conclude from the survey, it is about an extremely services can be very complex for users
complex service. It is a big network/hierarchy of of CC services. To solve the problems of
services where services upgrade one on the other. integration of different services, users can
Services at the higher levels are built on services use physical persons or companies (cloud
at the lower levels integrating them in more quali- brokers). These services can be classified,
tative, sophisticated complex services. All the according to NIST, into three fields: (a)
servicers in the CC service ecosystem try to buy mediation and improvement of services
cheaply input services (they represent the basis to between providers and consumers (service
build their own services), and to sell as expensive access management, identity management,
as possible the services they offer. following up and reporting on performance
The actors (roles) of generic CC ecosystem are of the provider’s CC services, etc.), (b)
([11], [25], [26], [16], [27], [1], [19], [17]): service integration/aggregation of different
– Cloud consumer – The physical or legal cloud providers (providing completeness
person that uses CC services based on and integrity of data provided and processed
service-level agreement (SLA) by the by many providers), and (c) service
provider in accordance with agreement arbitration for following up providers’
conditions. Technical characteristics of CC offers and flexible/dynamic redistribution of
services and payment are also integral parts services of the best evaluated providers).
of the agreement. – Cloud auditor – Cloud auditor services can
– Cloud provider – It is the organization or the be rendered by an organization or a person
person that provides and manages computer skilled to carry out independent analysis/
and telecommunication infrastructure with control of harmonization of the cloud service
a view of providing different service in with accepted standards and signed service-
cloud by means of appropriate software level agreement (SLA) between providers
support. The cloud provider must provide and consumers and to give skilled and
the realization and orchestration of services, objective opinion. The field of cloud auditor’s
as well as supervision/management paying activities are the following: (a) safety control
attention to safety and privacy of every user. (evaluation of management, operative and
○ SaaS provider provides necessary infra- technical protection measures with of view of
structures for safe work and installs, protecting trust, integrity and availability of
configures, maintains and, if necessary, applications and data), (b) control of privacy
modifies software applications for his (evaluation of harmonization of used CC
users. applications, as well as their development
○ PaaS provider manages infrastructures and in all the stages of usage in accordance with
provides components for software platform current regulations and laws on the privacy
in the form of development environment of individuals and confidence, integrity and
(SDK - Software Development Kit, IDE availability of personal data), and (c) control
- Integrated Development Environment), of performances (defined by standards and
databases and middleware software. SLA).
○ IaaS provider offers the computing – Cloud carrier – The company intermediating
framework for users in the form of in transport of CC services from the

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provider to the consumer by providing – Cloud integrator – The task of the

physical network, i.e. communication organization or people carrying out activities
connections and access to services by of the cloud integrator is double: (a) data
consumers with all devices to access that transfer in cloud or any other application/
the consumer has. Based on the special service in cloud (similar to the process ETL
requirement initiated by either provider or – extract-transform-load – in practice of
consumer, the cloud carrier can provide (a) using data warehouse), and (b) adaptation
dedicated connections for the consumer and integration of using cloud service in the
and/or encrypted messages/packets of data current IT infrastructure.
in transfer in order to keep/attain desired – Cloud assembler – the name that is used as
privacy of communications, (b) redundant the synonym for cloud aggregators.
equipments of high confidence with the – Cloud adopter/vendor – rarely used name
consumer to provide constant system for the actor who, buying cloud services,
availability, and (c) redundant physical enriches them and offers in the form of
connections/lines that can be provided by SaaS consumers. Instead of the term
building alternative internal and external cloud adopter/vendor, cloud broker, cloud
physical communication connections for the aggregator or cloud integrator is used.
consumer. – Cloud implementer – this actor does not
– Cloud consultant – Physical entities and appear in the service ecosystem model, as
organizations having the basic knowledge it is usually a person or organization within
about CC services and business (business the provider. The cloud implementer realizes
processes and specificities of the economic cloud (servers, network and systems for data
branch) of the enterprise that plans to warehousing) ad/or the operative system
introduce CC services can help in decision- that manages work and controls cloud OS).
making on introduction of CC services by – Cloud market – Market became mostly and,
their advices, evaluations, and experience. in general sense, become virtual long ago,
Only this actor/role itself does not contribute and the tendency of virtualization of CC
concretely to CC services. Providers of all market is even more expressive. Virtual CC
the levels (IaaS provider, PasS provider, market is the aggregation of all supplies and
SaaS provider), aggregator, integrator and demands of individual participants in CC
broker can carry out this role/function. ecosystem with a view to connect buyers
– Cloud aggregator – Companies or and providers of CC services ([16], [17]).
individuals that buy services of different
providers in order to, from the current The above-cited actors represent one kind of
services or even some parts of services, classification of organizations and/or individuals
assemble new, more valuable, richer, more that realize service and/or consumption, i.e. ser-
complex, more requested and/or cheaper vice-consumption centers with fewer or bigger set
services and offer them to consumers are of services.
called cloud aggregators. Two basic accesses The CC service ecosystem in literure is presented
of cloud aggregators are: (a) recombination in many ways ([1], [28], [29], [30], [31], [32]). The
of current services or service modules into a general service ecosystem model for cloud comput-
new service, and (b) enrichment of current ing that reflects all the combinations of possibili-
or obtained CC services by recombination. ties for receiving and rendering all services of cloud
Some people consider that the role of the computing can be seen in Figure 3 (own view/ex-
aggregator belongs to the field of activity hibit). Actors of the generic service CC ecosystem
of the broker; others think that brokers are in Figure 3 are illustrated in ellipses, except cloud
closer to consultants or mediators between carrier and cloud auditor that are actors, too, but for
providers and consumers, and aggregators better survey of the figure, and fewer lines cut (that
are similar to integrators. point to the cooperation between actors), these two

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actors are illustrated between the concentric ellipses are performed parallel), it is rarely used for cloud,
drawn by the broken line. instead of it, value network is applied. Organiza-
tions, actors in CC service ecosystem, bacause of
specificities of services themselves are in a more
complex interdependence (forming the network,
not the chain), and, on the other side, they can play
various role (providers, buyeers, competitors).
Therefore, it is better to use value network for
them. To describe value network, it is possible to
find many definitions in professional literature. To
Christensen, „The concept of the value network—
the context within which a firm identifies and re-
sponds to customers’ needs, solves problems, pro-
cures input, reacts to competitors, and strives for
profit—is central to this synthesis. Companies are
embedded in value networks because their prod-
ucts generally are embedded, or nested hierarchi-
cally, as components within other products and
Figure 3. Generic service ecosystem model for eventually within end systems of use. The defini-
cloud computing tion of a value network goes beyond the attributes
of the physical product.” [34]. The other authors
4. e3-value network model for cloud com- emphasize the role of value creation in value net-
puting service ecosystem work: „Within this value network, value is created
by providing services that are valuable for other
Service ecosystem scenarios at the microeco- participants of the network. Infrastructure services
nomic level are well described by means of val- (in CC) for example are essential for all other ac-
ue chains in Mohammed et al. [33], but detailed tors within the value network, who consume this
works on the macroeconomic perspectives of CC service to provide their service offering. All the
ecosystems have not been found. In this part of the actors, within the value network, exchange servic-
work, the viewpoint of value network models with es for money, add value for other actors through
market ecosystem actors and their value exchange service refinement and eventually provide servic-
relationship will be given. es that fulfill the customers’ needs.” [1]. But, the
The key ideas relating to micro and macroeco- definition can be very concise and simple: „A val-
nomic perspectives of CC systems presentation are ue model shows actors who are exchanging things
as follow. Value chain can be defined as connected of economic value with each other.” [2].
set of primary activities (which provide additional To illustrate generic value network of the CC
value in the process of transformation of inputs in service ecosystem model, e3-value methodology
output products and/or services, and which can is chosen because it shows the most concise and
provide part of the organization, the whole orga- the most compact essence of actors and their inter-
nization or more organizations in cooperation). dependence in cloud computing ecosystem. e3 on-
Their subordinate auxiliary activities (which indi- tology itself differentiates three viewpoints [35]:
rectly support or enable the performance of pri- 1. The global actor viewpoint,
mary operations with the same combination of 2. The detailed actor viewpoint, and
participation in realization as primary activities) 3. The value activity viewpoint
are performed within one organization or in coop-
eration of more organizations ([19], [27], [32]). Having in mind the complexity of C computing
As value chain perfectly pictures the sequential business ecosystem and descriptions of the con-
logic production processes, but it is too limited to tents of the above cited reviews, the presentation
present the CC service ecosystem (where activities of value network will be done according to a de-

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tailed actor viewpoint. Necessary terms and nota- In Figure 4, cloud computing value network –
tions of detailed actor viewpoint e3-value method- detailed actor view is illustrated, on which there
ology are described as follows. The actor is a legal are composite actors around the elementary actor
or phisycal person represented by the rectangle, “Consumer” (created by the analysis of CC eco-
characterized by the name or role having in the CC system functioning), composed of described actors
ecosystem. Actors exchange value objects (ser- in Section 2 with their interactions, exchanges and
vice, product, advice, money, etc.) whose name value flows. The role of cloud market platform pro-
reflects the essence of exchange, and it is indicated posed by ([16], [17] and [19]) according to available
on or near value exchange. Value exchange con- sources, it is insignificant now; therefore, it is not il-
nects two value ports and marks one or more po- lustrated in Figure 4. Besides the formulation and
tential (not current) exchanges between them. It is description of actors of CC ecosystem, the above
illustrated by a directed line (arrow). The actor can illustrated complete value network represents the
exchange value objects with other actors through principal contribution of this work. In Figure 4, we
value ports (it is illustrated by a small shaded cir- can see how services are created (appeared) and
cle) that is directed and it can be input (in-port - exchanged and and how annd in how many ways
if value objects come into value port) or output new, subtle, rich services in CC service ecosystem
(out-port - in the opposite case). Every actor has are composed (by adding new values or recombina-
one value interface at least, which usually has two tion of the current services) from the simple ones.
value ports (one in-port and one out-port). It is il- Composite actors are created according to function-
lustrated by a rounded rectangle on the edge of ality and cooperation between elementary actors in
the rectangle of the actor. The detailed actor view- them, as well as mutually created or used services.
point shows elementary actors (that contain only Cloud Computing Service as a composite actor pro-
own value interfaces) and composite actors, e.g. vides a rich set of services that appear in different
actor-partnerships, where actors mutually supply combinations of cooperation of elementary actors.
or demand products and/or services (but elemen- These services are offered to the elementary actor,
tary actors of composite actors can appear alone the Consumer, and the composite actor, the Final
with their own supply and demand). Supply Service. Service applicants (Consumer and

Figure 4. Cloud computing value network – detailed actor view

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Final Supply Service) can turn to elementary actors ing the new value system, i.e. the moment for new
of composite actor Cloud Computing Service for innovative ideas is in front of us again.
their concrete services, and the consumer can re-
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versity of Technology, Printed by Cityoffset Oy, 34. Christensen C. The Innovator’s Dilemma - When
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24. Peltoniemi M, Vuori E. Business ecosystem as

the new approach to complex adaptive business Corresponding Author
environments. Proceedings of eBusiness Research Imre Petkovic,
Forum, Tampere 20.-22.9.2004. University of Novi Sad,
The Faculty of Economics,
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Computing Technology Roadmap, Release 1.0
(Draft), NIST, November 2011; 2.

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Modeling and simulation of a complex hybrid

electrical vehicle
Dragoljub Radonjic1, Zoran Marjanovic2, Radomir Brzakovic3
¹ Faculty of Engineering, University of Kragujevac, Kragujevac, Serbia,
² City of Kragujevac - City Administration for an Inspection, Kragujevac, Serbia,
³ Fiat Automobiles Serbia, Kragujevac, Serbia.

Abstract The Toyota Prius (HEV), which came out in

In this paper shows an example computer sim- Japan at the end of 1997, is designed to reduce
ulation of a hybrid electric vehicle. This example emissions in urban areas. The Prius mainly relies
shows a multi-domain simulation of a hybrid elec- on two features to optimize efficiency and reduce
tric vehicle. The hybrid electric vehicle is of the emissions [4]:
complex type, such as the one found in the Toyota – its engine only runs at an efficient speed and
Prius car. This hybrid electric vehicle has two kinds load - In order to reduce emissions, the Prius
of motive power sources: an electric motor and an can accelerate to a speed of about 24 km/h
internal combustion engine, in order to increase before switching on the gasoline engine.
the drive train efficiency and reduce air pollution. The engine only starts once the vehicle has
It combines the advantages of the electric motor passed a certain speed. And once the engine
drive (no pollution and high available power at low starts, it operates in a narrow speed band,
speed) and the advantages of an internal combus- – it uses a unique power split device - Gasoline
tion engine (high dynamic performance and low engines can be tuned to run most efficiently
pollution at high speeds). Demonstration of a hy- in certain speed and load ranges. The power
brid electric vehicle using SimPowerSystems™ split device on the Prius allows the engine
and SimDriveline™ (Matlab 7). to stay in its most efficient load and speed
Key words: modelling, simulation, hybrid range most of the time.
electric vehicle, matlab
Toyota designed the 1,5-liter engine in the Pri-
us to run at a maximum speed of only 4500 rpm,
1. Introduction
where it makes 70 horsepower. Keeping the maxi-
Formulated by International Electrotechni- mum speed of the engine low allows for the use of
cal Committee general definition of Hybrid Elec- lighter components that improve efficiency. The
tric Vehicle (HEV) sounds as: HEV is a vehicle electric motor on the Prius is rated at 44 horsepower
in which propulsion energy is available from two from 1040÷5600 rpm. It produces of torque from 0
or more kinds or types of energy stores, sources to 400 rpm, which is more than enough to get the
or converters, and at least one of them can deliver car going without the aid of the gasoline engine [5].
electrical energy [1]. The most popular definition of The Prius was honored as the 2004 North
HEV is: a hybrid vehicle needs to have on board at American Car of the Year, therefore the results
least two energy sources and it is a necessary condi- computer simulation of this vehicle are described
tion that one of them is a secondary energy source. in this paper.
The secondary energy source can transform energy
from one kind into another in a reversible mode and
2. Hybrid components and hybrid structure
is able to store energy [2]. Hybrid vehicles, compar-
ing to conventional vehicles, can save energy due to The main components in a hybrid car are gaso-
the unique characteristics [3]: line engine (internal combustion engine – ICE),
– regenerative braking, electric motor, generator, batteries, transmission,
– optimal point of ICE operation, converter (Figure 1).
– lower size of ICE.

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The generator is similar to an electric motor,

but it acts only to produce electrical power.
The batteries in a hybrid car are the energy stor-
age device for the electric motor. Unlike the gasoline
in the fuel tank, which can only power the gasoline
engine, the electric motor on a hybrid car can put
energy into the batteries as well as draw energy from
them. The batteries most common in today’s hybrid
vehicle are nickel metal hydride batteries (NiMH)
which have improved specific energy around 60
Wh/kg and can be fully discharged over 1000 times.
Figure 1. The Toyota Prius - a hybrid concept
In the near future, lithium ion batteries may be more
vehicle [6]
common than NiMH since they have even higher
energy densities around 120 Wh/kg [10].
The internal combustion engine (ICE) as a
The transmission on a HEV performs the same
primary energy source guarantees confidence of
basic function as the transmission on a conven-
functioning in every conditions. Moreover, in
tional car.
HEV solutions it enables the recharging of the bat-
We can combine these descriptive compo-
tery in areas without zero emission requirements
nents in different hybrid structures: parallel hy-
and purely electrical functioning of the propulsion
brid, series hybrid and complex hybrid. In a par-
in the areas with zero emission requirements. Be-
allel hybrid both the electric motor and the ICE
cause of limitations of conversion of chemical en-
can provide propulsion power. By contrast, in a
ergy of the fuel into thermal energy ensuing from
series hybrid the ICE turns a generator, and the
Carnot cycle, ICEs are characterized by low ef-
generator can either charge the batteries or power
ficiency [7]. Maximum efficiency of ICEs reaches
an electric motor that drives the transmission. The
34% at high power (0,6÷0,8 maximum power).
complex hybrid is a combination of a parallel and
Another disadvantage is also lack of possibility of
series hybrid, this hybrid concept is also called a
fulfillment of strict requirements of exhaust gases
parallel-series hybrid. This solution is implement-
toxicity norms and large losses of friction due to
ed by Toyota in all there hybrid cars. The complex
many moving parts. In hybrid solutions it is also
hybrid merges the advantages of both a parallel
possible to use both advanced construction ICE
hybrid and a series hybrid. Figure 2 shows a typi-
and modern engines with compression ignition.
cal complex hybrid.
Power trains of HEV is based on ICE with 700-
ccm cubic capacity [8].
The electric motor is an important component
in the HEV. The electric motor is often used as a
generator to recharge the batteries and also as a
motor to consume energy from the batteries and
provide more power to the wheels. Electric motors
can operate in excess of 90% efficiency which is Figure 2. Typical complex hybrid [11]
much greater than ICE. This usually means that
the electric motor should be used to supplement Depending on the situation the complex hybrid
the internal combustion engine when the ICE is can work as pure parallel or series hybrid. The main
operating at a poor efficiency. The electric motor factor that determines this is speed. At low speeds
should be design so that the maximum torque is for example the car can work as a series hybrid or
high at low speeds; this is done to achieve good purely electric. At higher speeds the car also need
stating properties. The electric motor most com- help from the combustion engine for the propulsion
mon in today’s hybrid vehicle is permanent mag- and it becomes a parallel hybrid. A combination of
net synchronous motor (PMSM) [9]. these two principles is also possible [12].

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a) Normal or acceleration b) Battery recharge c) Pure electric drive d) Regenerative braking

(the battery gives power)
Figure 3. The examples of different power flows of a complex hybrid [14]

The combustion engine will therefore drive the Driveline. The HEV is of the complex type, such
generator and deliver power to the wheels at the as the one found in the Toyota Prius car. The most
same time. The power from the generator can then important blocks are the ICE model, the electrical
be distributed to the electrical propulsion motor or to model (the electrical machine model, the battery
the battery. When the generator takes power from the model, the DC/DC converter model), the vehicle
internal combustion engine it can affect the engines dynamics model, the planetary gear model, the en-
working point. A better chosen working point in- ergy management model (Figure 4).
creases the efficiency of the combustion engine [13]. The power train contains an internal combustion
There are many different combinations de- engine and two permanent magnet AC synchronous
pending on the situation how the power flows in machines with their drives (AC6 blocks of SimPow-
the system. Some examples of different power erSystems). One AC machine works as a motor (50
flows can be seen in Figure 3. kW) and the other one as a generator (30 kW). The
electrical system (Figure 5) contains also a DC/DC
3. Modeling and simulation of a complex converter and the batteries. The role of the DC/DC
hybrid electric vehicle converter is to adapt the low voltage of the battery
(202 V) to the DC bus which feeds the AC motor at
This example shows a multi-domain simulation a voltage of 500 V. The electric battery model simu-
of a HEV based on SimPowerSystems and Sim- lates a Nickel-Metal-Hydride battery of 6,5 Ah.

Figure 4. Simulink model of a complex hybrid electric vehicle [15]

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 technics technologies education management

For modeling the ICE (Figure 6), we simply transmits the mechanical motive force from the
took the gasoline engine block from the SimPow- engine, the motor and the generator by allocating
erSystems library and specified the torque-speed and combining them.
curve for ICE (maximum power P=57 kW and . The energy management model (Figure 8) de-
maximum speed n=6000 rpm). termines the reference signals for the ICE and the
two electric motor drives at each time step in order
to improve the energy efficiency of the drive train.
These signals are calculated using mainly the po-
sition of the accelerator, which is between 0 and
100%, and the measured HEV speed.
The vehicle dynamics block model (Figure 9)
is used to represent the vehicle dynamics and mo-
tion influence on the overall system. The transmis-
sion system transmits the power from the ring of
the planetary gear to the tires. It uses a variable ra-
Figure 5. Simulink electrical model [15] tio gear. A differential gear splits the input torque
into two equal torques.
The simulation shows the different operat-
ing modes of the HEV over one complete cycle:
starting, accelerating, recharging the battery while
cruising and regenerative braking (Figure 10).
At t = 0 s, the HEV is stopped and the driver
pushes the accelerator pedal to 60% (Figure 11).
As long as the required power is lower than 15 kW
and the vehicule speed is less than 20 km/h, the
Figure 6. Simulink ICE model [15] HEV moves using only the electric motor power
fed by the battery. The generator and the ICE pro-
The power train also includes a power split vide no power.
device. It uses a planetary gear (Figure 7), which

Figure 7. Simulink planetary gear model [15]

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Figure 8. Simulink energy management model [15]

Figure 9. Simulink vehicle dynamics model [15]

At t = 1,06 s, the required power becomes At t = 6 s, the state of charge (SOC) of the
greater than 15 kW (see Figure 12) triggering the battery becomes lower that 40 %, see Figure 13
hybrid mode. In this case, the HEV power comes (it was initialised to 41,82% at the beginning of
from the ICE and the battery (via the motor). The the simulation) therefore the battery needs to
motor is fed by the battery and also by the genera- be recharged. The power supply to the motor is
tor. In the planetary gear, the ICE is connected to switched off. The ICE shares its power between
the carrier gear, the generator to the sun gear and the ring and the sun. Therefore, some of the power
the motor and transmission to the ring gear. turns the generator, which in turn charges the bat-

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tery. The available power on the ring is the power Small transients appear at t = 1,06 s, t = 6 s, and
used to move the HEV. In the electrical model, we t = 14 s with the change of the operating modes.
can observe that the battery power is negative (see The HEV speed increases until 70 km/h at t = 14
Figure 15). It means that the battery receives some s (see Figure 14), and then decreases when the
power from the ICE via the generator and recharg- braking operating mode is used. All these corre-
es while the HEV is cruising. late well with realistic performance.

Figure 13. SOC of the battery

Figure 10. Cycles of the HEV (start, acceleration,

normal, brake, recharge)

Figure 14. HEV speed

Figure 11. Accelerator pedal

Figure 15. Electrical components power

The results of simulation for electric motor

Figure 12. HEV power
(stator current, motor speed, motor torque), gen-
erator (stator current, motor speed, motor torque),
At t = 14 s, regenerative braking is simulated.
ICE (engine speed, engine power, engine torque)
This is done by switching off the generator and
and transmission (drive shaft torque, gear ratio,
by ordering the motor to act as a generator driven
differential torque) are given in Figure 16.
by the vehicle’s wheels. The kinetic energy of the
HEV is transformed as electrical energy which is
stored in the battery.

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Figure 16. Results of simulation

4. Conclusion paper. Simulations depicting the dynamic behav-

ior of a complex HEV in Matlab 7 (Simulink).
Nowadays the price of fuel increases rapidly
The developed simulation can be diversified by
and the large CO2 emissions destroy our environ-
installing new type of engine, electrical machine
ment. So we have to search after new possibili-
and battery models; also it can be run on any driv-
ties of travelling. One step to reduce the fuel con-
ing cycle. Also, it offers a base to complicated
sumption is combining the conventional ICE with
models, which can utilize more detailed engine
an electric motor (HEV). So we can use the ICE
models, defining the fuel consumptions and calcu-
at more efficient points and can store the braking
lating the emissions.
energy. In areas with zero-emissions requirements
Until a breakthrough in fuel cell or battery
HEV can use pure electrical propulsion and in oth-
technology occurs, hybrid electrical vehicles will
ers areas it can use internal combustion engine for
be the most popular new vehicle trend for some
storage battery charging.
decades. Increase of the prices in petroleum is also
This paper provides information about complex
supporting this trend.
hybrid electrical vehicle’s technology and defines
tools for modeling the vehicle. The schematic of
the modeling of the Toyota Prius is shown in this

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References 15. Marjanović Z. Risk application the asynchronous

engine of cars and means risk management aside
1. Beckers J. Matlab Simulink modelling of a hybrid techniques, economics and ecologies. Master Thes-
vehicle. Master Thesis, Technical University, Eind- is, Center for interdiciplinary and multidiciplinary
hoven: 2005; 12-25. studies and researches, Kragujevac, Serbia: 2007;
105-127.
2. Juda Z. Hybrid-electric city car simulation. Journal
of KONES Internal Combustion Engines, 2003; 10
(1-2): 56-65. Corresponding Author
Dragoljub Radonjic,
3. Ghorbani R, Bibeau E, Zanetel P, Karlis A. Dynamic Faculty of Engineering,
model of a plug in Hybrid Electric Vehicle. Proceed- University of Kragujevac,
ings of International Mechanical Engineering Con- Kragujevac,
gress and Exposition, Chicago Illinois, USA: 2006; Serbia,
79-84. E-mail: drago@kg.ac.rs
4. McGuiness P, Stefan J. Fuelling the Car of the Futu-
re. Strojniški vestnik – Journal of Mechanical Engi-
neering, 2008; 54 (5): 356-363.

5. Bargar H, Goering D. Modeling and Verification of

Hybrid Electric HMMWV Performance. IECON’03,
2003; 1 (1): 939-944.

6. Gökce C. Modeling and Simulation of a Series-

Parallel Hybrid Electrical Vehicle. Master Thesis,
Technical University, Istanbul: 2005; 35-74.

7. Radenković B, Stanojević M, Marković A. Computer

of simulation. Science’s book, Faculty of organiza-
tional sciences, Belgrade: 2001; 123-129.

8. Janković A. Modeling and analysis system. Script lec-

tures, Center for interdiciplinary and multidiciplinary
studies and researches, Kragujevac: 2005; 5-11.

9. Chao С. Optimal gear ratio design for a gearbox used

in hybrid vehicles. Master thesis, Chalmers University
of Technology, Göteborg, Sweden: 2005; 37-43.

10. Su-Ming FВ. Modeling and simulation of a hybrid

electric vehicle using MATLAB/Simulink. Master the-
sis, Universi- ty of Waterloo, Canada: 2007; 56-62.

11. Maddala R. Modeling of hybrid electric vehicle bat-

teries. Master thesis, Tech University, Texas: 2003;
72-76.

12. Cross WP. System modeling and energy manage-

ment strategy development for series hybrid ve-
hicles. Master thesis, Institute of Technology, Geor-
gia: 2008; 25-29.

13. Strandh P. Combustion engine models for hybrid

vehicle system development. Master thesis, Institute
of Technology, Lund: 2002; 14-18.

14. МАТLAB Documentation – Version 7 , The Math

Works Inc, Natick: 2008; 9-12.

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 technics technologies education management

Quantitative approach to economic effects’

analysis considering electronic waste recycling
Jelena Stankovic1, Marija Andjelkovic Pesic1, Dragana Radenkovic Jocic1, Bruno Bojic2, Boban Stojanovic3
1
University of Nis, Faculty of Economics, Nis, Serbia,
2
Foreign Trade Chamber of Bosnia and Herzegovina, Sarajevo, Bosnia and Herzegovina,
3
University of Nis, Faculty of Economics, Nis, Serbia.

Abstract no location for disposal of hazardous waste or an

Without questioning environmental signifi- authorized facility for treatment that type of waste.
cance of recycling electrical and electronic waste, Through the Law on Waste Management Ser-
the aim of this paper is to show that projects of bia has provided the harmonization with European
construction recycling facilities are economically Union, concerning some legal regulations. How-
profitable investments. The research described in ever, the situation in waste management area is not
the paper was conducted at two levels. At the pri- at the level that characterizes developed countries
mary level was carried out case study about evalu- from EU. With the percentage of 9.6% Serbia is
ation of investing in projects of recycling e-waste far below the EU average of 40% of waste recy-
on the basis of data on real investment that is cur- cled or Japan, which recycles 90% of waste.
rently under implementation in the area of south- Waste management is one of the priority prob-
ern Serbia. In the same case study was conducted lems in the field of environmental protection in Ser-
the survey of conditions for doing business in the bia, while at the same time waste recycling industry
field of recycling and an overview of purchasing represents has great significance due to its develop-
and sales markets, as well as SWOT analysis of ment capacity. The growth of natural resources con-
the development opportunities of investors. The sumption, and continued growth of industrial goods
second level of research is related to the quantita- consumption, permanently increases quantities and
tive analysis of the impact of state and local au- types of generated waste. In this regard, invest-
thorities in improving e-waste management in the ments in infrastructure for treatment and disposal
region of southern Serbia. For analytical purposes of waste and plants for its recycling are becoming a
was created a multi-criteria model that established necessity of Serbia in terms of environmental stan-
the link between all the stakeholders and the fac- dards, but its development opportunity, also, since
tors relevant for establishing a successful system it is about the industrial production, which creates
for processing e-waste and its reuse as secondary value competitive at the international market.
raw materials in the production process Especially economically important type of
Key words: E-waste, Evaluation of the Invest- waste is electronic waste (e-waste). This type of
ment Projects, Economic Efficiency, Multi-Crite- waste recorded significant growth in recent years.
ria Analysis. The growth rate of electrical and electronic waste
has been increasing by five percent annually, and
about four percent of the total municipal waste in
Introduction
the world represents e-waste, which due to that may
One of the greatest problems in Republic of Ser- be considered as a global and national problem.
bia in the area of environment protection is very Recycling of electronic waste is very complex
low level of waste management awareness, at each because there are a number of different raw ma-
level: national, organizational, and individual. terials on a relatively small area (at one so-called
The main factors of this problem are insuffi- “printed” plate size 20 x 20 cm there can be iden-
ciently developed infrastructure and low level of tified over 100 different raw materials). The basic
awareness concerning environment protection. idea in recycling of electronic and electrical waste
There is no systematically and organized collec- is to reduce its volume with treatment, which may
tion, sorting and recycling of waste. Also, there is reduce its hazard, if it exists. The treatment of elec-

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tronic and electrical waste includes its classification, – Transport of waste,

volume reduction, separation, and recycling on the – Establishment, operation, closure and main-
one hand, and treatment of hazardous waste on the tenance of facilities for waste treatment,
other hand, because according to the Law on Waste – Monitoring,
Management (Article 50) electrical and electronic – Counselling and education related activities
waste may not be mixed with other types of waste. and activities in waste management.

The Characteristics of Waste Management This system requires usage of efficient technolo-
in Serbia gies and implementation of legislation. The introduc-
tion of integrated waste management system does
Bearing in mind that in December 2009 Repub- not have the same intensity in local governments,
lic of Serbia submitted a request for membership of which depends on their possibilities and problems
the European Union, one of the conditions, consider- of waste management that are different in local en-
ing EU integration, is the existence of an integrated vironments and unevenly expressed. “The problems
waste management system. This area represent one in waste management in Serbia are the following:
of the priorities in the field of environmental pro- the lack of infrastructure for treatment and disposal,
tection of Republic of Serbia, due to the economic common disposal of municipal and hazardous waste
growth, increased consumption of natural resources, from households, the lack of data on composition of
as well as industrial goods, and waste of all kinds [1]. the waste streams, the lack of facilities for the stor-
With the development of industry, amount age, treatment and disposal of hazardous waste, pol-
of industrial waste is increasing, and it requires lution of surface and groundwater” [4].
proper treatment in order to protect the environ- Application of a new package of legislation in
ment and human life and health. According to the the field of environmental protection, which has
Regulation on the methodology for development been adopted in May 2009, represents the compli-
of integrated cadastre of polluters [2] there is an ance with EU standards. Within this package of
obligation of reporting on the quantities of pollut- legislation there are the Law on Waste Manage-
ants and characteristics of waste that is produced ment and the Law on Packaging and Packaging
in plants in order to gather data on quantities, type, Waste [5, 6, 7], which have provided that the local
composition and methods of treatment and dispos- regulations are consistent with EU legislation.
al of waste in Republic of Serbia. For example, in National Waste Management Strategy, with
2009, within the statutory period, 334 companies the program for approaching the European Union,
reported 1,864,303.66 tons of industrial waste. from 2003, represents the basic document for sus-
At the EU level the reduction of waste is pro- tainable waste management in the Republic of
moted, in accordance with the principle of reduc- Serbia. Harmonization of domestic and European
ing the waste problem at the source. With this legislation, concerning waste management, is car-
purpose there are a lot of campaigns to introduce ried out and the basic principles for improving
cleaner technologies and expand public awareness waste management at the territory of our country
on the subject. However, in the EU there is a sig- are adopted. They are:
nificant difference in the percentage of waste re- – The principle of reducing the quantity of
cycling, which ranges from 10-65%. The situation waste generated,
is even worst when it is about disposal to landfill, – The principle of prevention of waste
which ranges from 10-90%. generation,
Integrated waste management system includes [3]: – The principle of solving the problem of
– Prevention of waste, waste at the source,
– Reduction of waste and its hazardous – The principle of waste separation,
characteristics, – The principle of recycling large quantities
– Treatment of waste, of waste,
– Planning and control activities concerning – The principle of rational use of existing
waste streams, facilities for processing waste,

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– The principle of rational construction of The Articles 79 - 81 of Law on Waste Manage-

waste treatment plants, ment stipulates the payment of compensation by the
– The principle of monitoring pollution in manufacturer or importer of products, which, after
order to preserve environmental quality [3]. have been used, become a special waste streams.
Upon payment of these fees in the budget of the Re-
Application of the basic principles of waste man- public of Serbia, income that has been generated is
agement actually means implementation of the ba- used, through the Fund, for covering investments and
sic principles adopted in the EU in this area. It also operating costs for managing special waste streams.
means prevention of the further risks for the envi- The implementation of regional and local waste
ronment and human health. In the National Strategy, management plans and construction of the storage,
as an important solution for many problems, there treatment and disposal of waste are the responsi-
is formation of infrastructure facilities network in bility of local authorities and are funded from ear-
function of efficient waste management in Serbia. marked funds through local government budgets,
The sources of waste management funding loans, grants and funds of legal entities that manage
are numerous and they include: the state budget, waste, and other sources of funding in accordance
revenue from fees, grants, loans, international aid with the Law. It is also stipulate that the Republic
funds, programs and funds of the EU, UN and of Serbia, autonomous provinces and local govern-
other international organizations. A system for ments may use earmarked funds through the Fund
synchronized collection of data on investment of for Environmental Protection, or special accounts
public and private sector for this purpose is not in accordance with the decision of the autonomous
established yet. However, based on real data on province or local authorities. “From the income of
the funds invested in this area it can be concluded the Fund for Environmental Protection, or special
that they are far below the level planned by the accounts may be funded programs, projects and
National program of environmental protection. other investment and operational activities in the
By comparison, the EU members’ investments in field of waste management, including:
environmental protection in pre-accession period 1. Construction of waste management facili-
were between 1.5-2.5% of GDP (Figure 1). ties,
2. The improvement of waste management
organization,
3. Managing the used batteries and accumu-
lators, waste oils, waste tires, waste from
electrical and electronic products (e-waste),
waste from fluorescent tubes containing
mercury and waste vehicles,
4. Encouraging separated collection of waste,
5. Encouraging development of market of
recycled materials,
6. Implementation of regional waste manage-
ment plans under Article 12 this law,
7. Development of information systems for
Figure 1. Projection of investments in environment waste management,
protection [4] 8. Assistance in developing and applying new
technologies for waste treatment,
New obligations of the Fund are prescribed by 9. Recovery of long-term pollution,
the Law on Fund for Environmental Protection and 10. Education and public awareness about
the special laws in this area from 2009. By adopting environmental issues and waste management,
and implementing the laws, revenue of the Fund 11. Other expenses, in accordance with the law”
will be increased compared to the previous period, [7].
as well as the number of approved projects.

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Following the example of the European Union, is calculated in the amount of 3% and is
according to the medium-term programs of the attributed to the main debt.
Fund for the period 2010-2012, “the Fund will,
among other things, finance the construction of The procedure of loan approval means that, at
regional centres for waste management, remedia- the first level, Fund for Development of Republic
tion and closure of existing landfills and dumps of Serbia evaluates investment plan, which includes
registered, the construction of transfer stations evaluating the financial condition and creditworthi-
and recycling yards, utility equipment procure- ness, based on the security instruments and eco-
ment (trucks, containers, presses, etc.), encour- nomic evaluation of the project. After that, Fund for
aging separate collection, reuse and utilization the Environmental Protection decides on the alloca-
of waste as secondary raw material or for energy tion of credit funds. Finally, the annual contract is
production. Fund grants of loans for investment in concluded between the Fund and beneficiaries.
projects to encourage waste and emissions, waste New legislation from 2009 has introduced fi-
management and exploitation of valuable proper- nancial incentives for reuse and utilization of
ties of waste, and use of renewable energy sourc- waste as secondary raw material or for energy
es. The funds are earmarked for the investment in production. Incentives are related to: waste that is
equipment and devices that serve this purpose. used or re-use for the same or other purposes, re-
cycling and waste treatment in order to obtain raw
Analysis of economic effects of projects materials, waste that is used as a secondary raw
concerning e-waste recycling material, energy utilization of waste and produc-
tion of reusable packaging. The funds of the Fund
In Europe, the four kilograms of electrical and are distributed to the beneficiaries in the amount
electronic waste per capita has being processed, and under conditions determined by regulation of
while in Serbia, this amount is much smaller, about the amount and conditions for provision of incen-
40 grams. Namely, in Serbia as much as 90 per- tive funds [10]. For calculation of investor’s in-
cent of electronic waste is not recycled. The need come, the revenue realized from subsidies should
for increasing quantity of recycled e-waste is not be taken into account, as well.
only ecological but also economic. The first part of For investment in new facilities for managing
the research in this paper refers to a case study of electrical and electronic waste, collective operator
the construction of a recycling yard and provision may be granted with financial subsidies as follows:
of equipment for e-waste recycling. It is a real in- 1. In the first investment year 80% of the
vestment of one of the Cluster members, but due to investment, but not more than 75% of
the necessity of keeping business secret it will be the amount paid by members of the
presented only those data on investment which are collective operator for the same period, as
relevant for scientific and expert opinion. a compensation for products which become
The analysis of economic profitability of in- specific waste after the use.
vestment in recycling starts with the fact that the 2. Investments in the second year in the amount
investment is partly financed by the Fund for En- of 40% of the investment, but not more than
vironmental Protection [8]. As a result, the analy- 37.5% of the amount paid as compensation
sis is based on the current terms of granting loans for products after which use the separation
by the Fund, which includes the following [9]: of waste become paid by members of the
– Maximum amount of allocated funds can be collective operator, in the same period of
40,000,000.00 RSD, time [11].
– The interest rate is 3% per annum, using
comfortably interest rates, with the use of Regarding to e-waste, fee payers [12] are pro-
foreign currency clause, ducers or importers of electrical and electronic
– The repayment period is up to 5 years, products which use those products as end-users or
with quarterly instalments and grace period sell them on the Serbian market. The fee is cal-
of one year in which compound interest culated according to the quantity of produced or

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imported electrical and electronic products and its the Law on Waste Management and the Law on
height is the coverage of the costs of waste man- Packaging and Packaging Waste in 2009, Serbia
agement for those electrical and electronic prod- has made the harmonization of national legislation
ucts. Calculation of the fee amount is based on the with the applicable legal regulations of the EU.
classification of electrical and electronic equip- Problem of recyclers is not the sell market, con-
ment in ten different grades. Payers make up the sidering that the most of them are export-oriented
quarterly payment of fee, according to calculation (Figure 2), and well positioned in the foreign mar-
of the Fund. Agency gives the annual reports based ket, competitive even for the European Union con-
on data submitted to the Fund for payers who have ditions. However, the real problem of recyclers is
to pay fee and the Fund calculates and makes the the supply market, because regardless of the state
decision on payment of a fee. The fee amount is strategy, the system of collection and disposal does
adjusted annually with a growth rate of retail price not functioning well. This assertion is supported
according to the data of the Bureau of Statistics. by the fact that there are still a number of obsolete
The parameters of the investment that is at landfills operated by public utilities (164), and over
the centre of this case study are as follows. For 4400 illegal dumps [13]. Solving this problem in
the purchase of recycling equipment it is neces- the future can be realized through public-private
sary to provide about 2.5 million €, in 5-year re- partnership. The main reason for this is that the
payment period, with the share of own funds of state budget and public utilities do not have enough
80%. At the same time, obtaining the necessary funds for the construction of modern landfills that
resources is the biggest problem for Serbian re- fulfil all the standards for collecting, sorting and
cyclers. However, on the other side, such invest- primary processing of waste into secondary raw
ments are very profitable, as confirmed by static materials suitable for use in the recycling industry.
and dynamic evaluations of economic efficiency
of the project. The actual investment of 2.5 mil-
lion Euros is characterized by productivity per
employee (measured in years after the return of
funds invested in the project) from 19,100 Euros.
Accumulation in the useful life of the project is
1.29 and in the reference year (the year of return
of investment) is 0.38, while the effectiveness in
the first case is 1.69 and 1.55 in the second. When
it comes to dynamic economic efficiency indica-
tors of the project, in this case the internal rate of Figure 2. The structure of the market activity of
return exceeds 20% and the period of return is less recyclers in Serbia
than 4 years, which is considered very much ac-
ceptable in terms of investors. One of the local initiatives, in terms of improv-
ing waste management, as well as the develop-
ment of recycling industries, is the formation of
Current issues of e-waste recycling - case clusters “South Recycling” in 2010, whose mem-
study for the region of southern Serbia bers include companies from a broad territory of
In Serbia, the greatest problem in the field of Niš, dealing with collection and processing of var-
environmental protection is a low level waste ious types of waste. The idea of this initiative is to
management. The main causes of this problem are strengthen regional cooperation in environmental
under-developed infrastructure and low awareness protection and sustainable development activities
about environmental protection. Therefore, there incorporating business entities involved in waste
is no systematic and organized collection, sorting management, particularly recycling, in the territo-
and recycling waste. Also, there is no location for ry of south-eastern Serbia. Summary of conditions
disposal of hazardous waste, or an authorized fa- that describe the business of recycling of e-waste
cility for treatment these types of waste. Adopting are given the by SWOT analysis in Table 1. The

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SWOT matrix is made according to data analyzed waste management on the factors that are relevant
in research of cluster member’s business activities for waste management. For the purpose of forming
and includes business performances and market model [15], stakeholders who have been pointed
position of the investor. out as important are: (1) State Government - SG,
Guided by the principle of subsidies application (2) Local Self-Government - LSG, (3) Population
[14], by which state authorities or local government - P and (4) Professional Societies in the field of
authorities take measures to reduce pressures on Recycling - PS-R.
the environment by applying economic and other Evaluation of efficiency of these institutions is
stimulation, choosing the best available techniques, carried out by giving a qualitative assessment of
facilities and equipment that does not require ex- their contribution and their implemented measures
cessive costs and selection of products and services, on the Lykert-type scale from 1 for the lowest lev-
it can be concluded that it is necessary to intensify el of contribution to 5 for the absolute importance
cooperation between state authorities and local au- of contribution.
thorities and Cluster, in order to increase the partici- At the other side, the important factors for de-
pation of recyclers, members of the cluster, in using termination of success level of waste management
the available subsidies. It should be emphasized are: (1) Environmental, (2) Financial, (3) Social
that the activity of members of the Cluster mainly and (4) Technological.
focused on waste management, which is considered Environmental factors include external fac-
a priority in the Fund Program in 2010. tors such as pollution levels, the existence of il-
legal dumps, and so on. Financial factors are (lim-
Quantification of the influence of state and ited) financial funds available for investment in
local authorities to waste management factors waste management [16]. These funds are primar-
ily generated from the budget of the Republic of
The topic of this title refers to the second part of Serbia, as well as fee income from the disposal
the research which was carried out among compa- of the Fund for the Environment [17] and Local
nies in the field of recycling. During the research Self Government. [18]. Social factors refer to the
they rated the impact of some key stakeholders for level of awareness of inhabitants and their willing-
the development of the recycling industry, accord- ness to accept modern methods of waste disposal.
ing to their contribution to the relevant factors that Social factors also include legislation that would
determine the level of waste management. provide adequate sorting and disposal of waste. At
For the purpose of quantification is used multi- the end, technical equipment necessary for land-
criteria analysis. Multi-criteria analysis considers fills and recycling industry has key importance for
the effects of key stakeholders in the process of the good waste management. Specifically, the low

Table 1. SWOT matrix

Internal environment External environment
Strengths Weaknesses Opportunities Threats
- Available production - Insufficient funds - Weak competitive in e-waste - Companies from the
capacity; for investment in recycling industry in South Serbia; Western Balkan region
- Professional human e-waste recycling - Increasing of quantity of could potentially move
recourses; capacity; electrical and electronic waste; their production
- Knowledge about e-waste - Increasing the awareness of in- capacities in Serbia;
recycling technologies; habitants about disposal and
- Management with collecting waste;
experience in field; - Wiliness of state authorities to
- Technological domination finance the project in this field;
in region of South Serbia; - Certain sell market for products
of recycling;

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technological level of existing landfills is signifi- At the other hand Local Self Government has
cant constraint for development of recycling in- the greatest influence on social factors. The relative
dustry, because there are no adequate facilities for importance of social factors under the influence of
waste treatment. The described model is shown in Local Self Government is fuzzy value (0.542182,
Figure 3 [15] 0.543273, 0.530492). On the basis of that re-
sult (Table 3) it can be concluded that Local Self
Government has the biggest influence on creating
awareness of necessary environmental protection.

Conclusion

Figure 3. Hierarchical model for multi-criteria The main challenges of waste management in
analysis waste management [15] Serbia concern increasing capacity for collection,
transportation and disposal of different kinds of
For solving the model it is used Analytical Hi- waste, which can be considered essential services
erarchy Process (AHP method), because there is in this domain. Municipal waste is dominant in the
an evident hierarchical structure of the problem. structure of waste, and therefore it needs greater
As well, because of imprecise data, conditioned attention. Local authorities, as well as state must
by the qualitative assessment as a consequence of establish a greater degree of cooperation with re-
preference of the companies surveyed, the fuzzy cyclers and provide them adequate legal frame-
approach of the AHP method is applied [19]. The work, and incentives to successfully develop their
results are presented in Table 2 and Table 3. businesses. Examples from practice, precisely the
Table 2. Relative importance of factors according one presented in this paper, show that the recyclers
to State Government influence [15] from the Nis region do not use all available pos-
sibilities for financial support in the form of soft
Weights
loans and incentives approved by the Fund for En-
Lower Medium Upper vironmental Protection.
E 0.056967 0.057614 0.059316 Economic analysis of investments in projects
F 0.494073 0.498954 0.508705 concerning waste management confirms the at-
S 0.097852 0.098791 0.099756 tractiveness of this kind of business. Though, en-
T 0.273778 0.288071 0.290586 vironmental aspect of waste management invest-
ments is usually promoted at the national level, the
Table 3. Relative importance of factors according
main task of the state is to promote the economic
to Local Self Government influence [15]
aspect of waste management investments. This rec-
Weights ommendation proceeds from the economic logic,
Lower Medium Upper which dictates that each and every business activity
E 0.291306 0.288353 0.293543 must have justification in economic results.
F 0.084093 0.084421 0.084739 The other part of the paper indicates the main ef-
S 0.542182 0.543273 0.530492 fects or the main field of influence of certain stake-
T 0.046532 0.044808 0.045529 holders, involved in waste management process.
Multi-criteria analysis has shown that state authori-
The results clearly show that the state govern- ties have the greatest influence on financial factors
ment has the biggest influence to financial fac- when it is about waste management. Therefore,
tors. The relative importance of financial factors activities of the state government must take place
in terms of State Government influence is fuzzy towards improvement activities of the Fund for en-
value (0.484073, 0.498954, 0.508705) as it is giv- vironmental protection. On the other side, when it
en in Table 2. This is understandable, because the is about the other very important factor, social fac-
waste management activities are mainly financed tor, the best results may provide local government
from the republic budget. itself, since it acts and the concrete area and knows

Volume 8 / Number 4 / 2013 1713

 technics technologies education management

the specificities of the people and their local cul- lution and taxpayers. www.sepf.gov.rs/index.
ture. Therefore, it may be concluded that the state php?option=com_content&view=article&id=19&
Itemid=25
has to take care and provide the financial support
for recyclers in order to motivate their involvement 13. Local Plan for Waste Management on the Territory
in waste management activities, while the local au- of City of Nis 2011-2021. www.ni.rs/uploads/doc/
thorities have to promote responsibility of citizens uprave/ukdes/110310LPUotpad.pdf
as individuals, as well as social responsibility of en-
14. Fund for Environmental Protection. The public an-
terprises and other legal entities. nouncement for subsidies of the Fund for Environ-
mental Protection. www.sepf.gov.rs
References
15. Stanković J, Anđelković-Pešić M, Janković-Milić
1. Stanković J, Radukić S, Anđelković-Pešić M. Ecolog- V. The importance of institutions for development
ical effects of state and local assistance in the field of of recycling industry in south Serbia. International
waste recycling. Economics of Enterprise, Belgrade, Scientific Conference Market Failures and the Role
Mart/April, 2011; 193-205. of Institutions Miločer, Montenegro September 22-
24, 2011.
2. Regulation on the methodology for development of
integrated cadastre of polluters. Official gazette of 16. www.scdhec.gov/environment/lwm/recycle/pubs/
Republic of Serbia, 94/2007. economic_benefits_of_recycling.pdf

3. Agency for environmental protection, www.sepa.gov.rs 17. www.epa.gov/osw/conserve/tools/localgov/docs/

economic-impact-of-recycling-sc.pdf
4. Agency for environmental protection, Report on
environmental state in Republic of Serbia in 2009, 18. Official Gazette of City of Nis, Decision on Public
Republic of Serbia, Belgrade. www.sepa.gov.rs/ Hygiene, 89/2005.
download/ Izvestaj%20o%20 stanju%20zivotne%20
sredine%20u%20Republici%20Srbiji%20za%20 19. Stanković J, Anđelković-Pešić M. Application of
2009%20godinu.pdf. 2010. Quantitative Methods and Models in Business De-
cision-Making. SaTCIP Vrnjačka Banja, 2010.
5. Law on Packaging and Packaging Waste. Official
Gazette of Republic of Serbia, 36/09.
Corresponding Author
6. Law on Amending the Law on Environmental Protec- Jelena Stankovic,
tion. Official Gazette of Republic of Serbia, 36/09. University of Nis,
Faculty of Economics,
7. Law on Waste Management. Official Gazette of Re- Nis,
public of Serbia, 36/09. Serbia,
E-mail: jelena.stankovic@eknfak.ni.ac.rs
8. Fund for Environmental Protection, Annual Pro-
gramme of Fund for Environmental Protection for
2010. www.sepf.gov.rs/dokumenti/aktivnosti/PRO-
GRAM_ 2010.pdf. 2010.

9. Fund for Environmental Protection. The public an-

nouncement for loans of the Fund for Environmental
Protection. www.sepf.gov.rs

10. Regulation on the amount and conditions for

awarding incentives.Official Gazette of Republic of
Serbia, 88/09.

11. Regulation on products which, after use, are be-

coming separate waste flows. Official Gazette of
Republic of Serbia, 89/09.

12. Regulation on types of pollution, the criteria for

calculating compensation for environmental pol-

1714 Volume 8 / Number 4 / 2013

 technics technologies education management

A new model of economic growth and

development of Republic of Serbia
Radmilo Nikolic1, Aleksandra Fedajev1, Zvonko Damnjanovic1, Dejan Riznic1, Predrag Ranisavljevic2
1
University of Belgrade, Technical faculty in Bor, Serbia,
2
High Business School in Leskovac, Serbia.

Abstract 1. Introduction
Serbian economy for many years has facing Crisis has been “a host” in Serbia for a long
serious difficulties in its development. Rate of time now. It influences practically each segment
economic growth declines, unemployment in- of economy and society. In some areas, the situa-
creases and the external and internal imbalances tion is getting more and more complicated.
also, high indebtedness and macroeconomic insta- Many analyses had shown that the crisis orig-
bility are becoming more prominent the limiting inated in the early 70’s of the last century. New
factors of improving the business environment. Constitution, established in 1974, brought many
The global economic crisis has greatly worsened changes in the economy. The unique economic
situation, deepen existing gaps, and point out new market in former Yugoslavia was divided into sev-
risks. The concept of market economy, which has eral specific markets, arranged by former Yugo-
been applying for more than two decades, applies slav republics’ authorities [1].
slowly and difficultly. Market institutions are un- The new Constitution brought new a economy
derdeveloped and the infrastructure development model, a new system, with very questionable eco-
late. Therefore, the degree of economic freedom nomic institutions and infrastructure. Such a sys-
of economic entities is on very low level, with tem was more theoretical, it has never been truly
still too much government influence on business applied. Instead, we had Government which dic-
trends in the economy. However, in recent years tated each segment of economy [2].
are present a very intense transition processes in In the early 90’s, the economic crisis was fol-
the field of de-etatisation, deregulation and lib- lowed by a political one. Unfortunately, the political
eralization. The aim is adjustment to contempo- crisis escalated into civil war and break-out of the
rary market economy conditions. Precisely due country, with huge human and material losses. The
to these changes the Republic of Serbia became a republics of former Yugoslavia became independent
candidate for EU accession. Additionally, in order countries, and Serbia faced more challenges – UN
to improve the business economy and to exit the economic sanctions and NATO military campaign.
current economic crisis, authorities accessed to After all of that, Serbian economy was ruined [3].
change of old model of doing business. Instead of At the beginning of this century, the situation
the consumer one, oriented to consumption, when gets slightly better. However, the recovery is go-
it was spent far more than it was earned and the dif- ing slowly and difficultly. The world economic
ference was being covered with new borrowing, a crisis, which began in 2008, stopped some posi-
new model of economic growth and development tive economic trends and significantly reduced
is based on reindustrialization, increase of exports positive results. The economy of the country faced
and reduce of public expenditure. It is a model that a new challenge, and recession is very close.
is pro-investment and export oriented, and where In such a situation, we have a need for new and
the dominance of consumption growth is replaced radical economic processes. Current model of eco-
with the domination of investment growth. nomic development, based on expenditure, is not
Key words: Economic growth and develop- sustainable. Instead, more investments, increase
ment, economic crisis, reform processes, market of employment, increase of export and decrease
economy. of public expenditure should be the priorities of
future economic development of Serbia.

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2. The achieved level of economic Also, some significant changes occurred in the
development structure of GDP. Share of industry is reduced,
while share of trading and services is growing.
First decade of this century brought gradual
recovery of Serbian economy. After terrible 90’s,
there was finally a spark of optimism. However,
the situation was very unfavorable: ruined econo-
my, obsolete technology, over utilized equipment
in industry, low productivity, low life standard –
1,600 € GDP and average wages up to 50 € per
month. Besides, there were significant debts from
the previous period, with estimated 150 million €
GDP losses [4]. We will keep our focus at some
main indicators of development in this period. Figure 1. Structure of GDP

2.1. GDP flow In 2001, share of industrial production in GDP

was 43.86 %, while in 2010 it was reduced to
Gross Domestic Product is an important indica- 28.5 %, which is a 35 % decrease. Main reason
tor of the level of economic development. It reflects for this is difficult situation in two main industrial
overall business activity achieved by national econ- sectors – agriculture and processing industry. At
omy. It could be calculated as a cumulative, for the the beginning of the last decade, these two sectors
entire country, or “per capita”, i.e. per citizen. shared 34.73% of GDP, but at the end of it their
In a period after 2000, GDP has a trend of con- share was reduced to 22.96%.
stant increase, except in 2009, when the growth During the transition process, especially in late
slowed down due to world economic crisis. How- 90’s, Serbian industry suffered a serious blow.
ever, this GDP level is still way beyond GDP level Many business entities were out of business, es-
in the late 80’s. In 2010, GDP reached 72 % of pecially large systems which were the carriers of
GDP in late 80’s. economic development [6]. Later, due to world
Table 1. GDP flow [5] economic crisis, industrial production at the end
GDP in GDP per of the last decade was far beyond the level reached
GDP, at the beginning of transition process (in 1989),
current prices, capita,
Year Billions only at 47% of that level. In Serbia, agriculture has
Billions of Billions
of €
RSD of € a strong influence on national economy and social
2001 762.2 12,820.9 1,708.7 stability. This is an industrial sector with long tra-
2002 972.6 16,028.4 2,137.1 dition. In time, it provided employment and exis-
2003 1,125.8 17,305.9 2,313.4 tence to majority of people. Today, some 11% of
2004 1,380.7 19,026.2 2,549.4 the population is employed in this sector.
2005 1,683.5 20,305.6 2,729.0 Huge ups and downs are typical for agriculture,
2006 1,962.1 23,304.9 3,144.4 especially in crop production.
2007 2,276.9 28,467.9 3,856.6 Animal husbandry is a bit more stable, but with
2008 2,661.4 32,668.2 4,444.5 constant decrease of livestock. In most difficult
2009 2,713.2 28,883.4 3,945.4 circumstances, the agriculture held most of the cri-
2010 2,986.6 28,984.9 3,966.9 sis burden, but with high price. Its share in GDP
fell down from 19.37% to only 10.03%.
In this period, GDP increased 3.9 times in
RSD, or 2.3 times in €. At the same time, GDP per 2.2. Employment
capita increased from 1,708.7 € in 2001 to 3,966.9
€ in 2010, but still remained low comparing to the Transition, unfavourable privatization, eco-
countries in the region. nomic crisis and other unfavorable circumstances

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caused a constant trend of decrease of employment. Covering of import by export is still low. But,
In the period between 2001 and 2010, number of in recent years, the situation has improved. Cover-
employees decreased by 15% or 306,000 employ- ing rose from 40% in 2001 to 59% in 2010, which
ees. Crisis of employment is present in each seg- is an improvement of 48%.
ment of economy, but especially in processing in- Important contribution to Serbian foreign trade
dustry, with 50% decrease, and agriculture (56%). comes from agriculture. In 2010, export of agricul-
Also, Serbia has very high unemployment tural goods exceeded 2 billion and surplus reached
rate, which almost reached 20% in 2010. A total 650 million US $. But, that is still far from actual
of 729,520 people are unemployed. 40% of them potential in this field. Serbian export of agricul-
have a university or high school degree, 33% are tural goods per hectare of arable land is 477 US $,
qualified and 27% have lower education. Signifi- which is one of the lowest in Europe.
cant share of unemployed population are young Internal imbalance is shown through budget def-
people, but there are also older people with many icit. Except for 2005, in entire last decade the rev-
years of service, which became unemployed due enues couldn’t cover the expenditures. With minor
to transition process. variations, the deficit has had a trend of constant
growth, especially since 2006. In 2010 it exceeded
2.3. External and internal balance a billion € and its share is 3.6% in GDP. This bud-
get imbalance was covered by new indebtedness,
Yet another problem in our country’s develop- thus increasing the level of public debt [7].
ment is an imbalance. Some measures were taken As a consequence, external and internal imbal-
in order to improve the situation, but it is getting ance had a negative influence to macroeconomic
more complicated. stability, causing inflation, depreciation of domes-
In the first decade of this century, Serbian foreign tic currency, increase of interest rates, etc.
trade had a constant growth. Export was increased
by 3.8, and import by 2.7 times. However, deficit is 2.4. Indebtedness and Public Debt
very high, and it reached 5 billion € in 2010.
The levels of indebtedness and public debt
are still potential limitation factors of economic
growth. They are more related to developing
countries, although some developed countries are
facing these problems, too.
Indebtedness is one of the serious problems
in our country, and the situation is getting worse.
Only in the last ten years external debt was en-
larged by 2.5 times.
Figure. 2. Serbian foreign trade By the end of 2010 external debt reached 23,786
million €, or 82.1 % GDP. It means that each resi-
Most of the export activities are focused on dent of Serbia has a debt of 3,341 €. Since the debt
EU, around 57% in 2010. Most of them were re- exceeds 80 %, our country belongs to a group of
alized in Italy and Germany. Besides EU, export highly – indebted countries by methodology of the
activities include CEFTA countries and the Rus- World Bank. Similar evaluation could be gained
sian Federation. from the aspect of debt servicing. Annual debt ser-
Most of the import comes from Russian Feder- vice reaches 15 % of GDP, which is 5 % over the
ation (13%), EU and China. Serbia has favorable limit for highly indebted countries. With current
foreign trade arrangements with many countries. indebtedness and export level, it would take three
Problem is that export hasn’t been able do years to completely repay the debt. These facts
“cover” import, which caused increase of deficit. lead us to a conclusion that indebtedness is one
In 2008, for instance, the deficit outreached export of the most important limiting factors of growth
by 22%. and development. Positive side is the amount of

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Table 2. State of indebtedness, in million € [5]

External Share of external Short-term Servicing of External debt/export Foreign exchange
Year
debt debt in GDP, % external debt external debt of goods and services reserves
2001 9,561 74.6 1,163 102 497 1,325
2002 9,402 58.7 606 218 427 2,186
2003 9,678 55.9 529 348 396 2,836
2004 9,466 49.8 442 736 334 3,104
2005 12,196 60.1 948 945 338 4,921
2006 14,182 60.9 958 1,635 278 9,020
2007 17,139 60.2 1,050 2,885 266 9,634
2008 21,088 64.6 2,143 3,453 284 8,162
2009 22,487 77.9 2,005 3,314 377 10,602
2010 23,786 82.1 1,830 3,403 322 10,002
Table 3. Business environment of the west Balkan countries [8]
Bosnia FYR
Segment of reform Albania Croatia Montenegro Serbia
and Herzegovina Macedonia
Business startup 61 162 67 6 47 92
Obtaining building permit 183 163 143 61 173 175
Electricity supply 15 157 56 121 71 79
Registration of ownership 118 100 102 49 108 39
Crediting 24 67 48 24 8 24
Investment protection 16 97 133 17 29 79
Paying taxes 152 110 32 26 108 143
Foreign trade 76 108 100 76 34 79
Contract implementation 85 125 48 60 133 104
Insolvency management 64 80 94 55 52 113
Overall ranking 82 125 80 22 56 88

foreign exchange reserves and their tendency of parameters. In recent years Global Competitiveness
constant increase. Index (GCI) has varied, and in 2010 it reached 3.84.
Share of public debt (external and internal) in
GDP has been in constant decrease till 2008, when
it raises rapidly. Economic crisis in recent years has
forced the Government to get into new indebted-
nesses. In 2010, public debt reaches 12 billion €, or
41.9 % of GDP, with the tendency of further growth.
At least, it is still lower than the limit of 45 % GDP.

2.5. Competitiveness of economy

Modern times and globalization require a high Figure 3. GCI flow in Serbia
level of competitiveness. Each country tries to in-
crease its share in international trade. That is espe- According to the World Economic Forum, Ser-
cially important for the countries going through a bia is 96th out of 139 ranked countries by GCI. Most
transition process, trying to improve their business of the west Balkan countries have a higher ranking.
environment. The situation is not much better in business envi-
Regardless to numerous reforms in many seg- ronment ranking. Serbia takes 88th place out of 183
ments, Serbia failed to improve its competitiveness countries. In the region, only Bosnia and Herzegov-

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 technics technologies education management

ina has a lower ranking, while FYR Macedonia and growth of expenditure 7.3% and growth of GDP
Montenegro are the most successful. 5.4%. In 2008, demand exceeded GDP by 23%.
The results show that business environment in Almost 19% of domestic demand was covered by
Serbia is not satisfactory. Excluding a registration excessive import.
of the ownership and crediting, the values of pa- A leading position in production of tradable
rameters are worse than for other countries in the goods belongs to industry. In the considered period,
region. It means that competitiveness is low and it it didn’t provide significant contribution to GDP
causes a low level of direct investments. growth. That is why re-industrialization has to be
one of the main goals. According to the new model
3. New model of economic growth and of growth and development, in the period 2011 to
development 2020 industrial production growth rate should be
6.9% per year, and 7.3% for the processing industry.
Previous analyses have shown that economical It would provide a share of 19.1% of GDP for entire
reality of Serbia is very unfavorable. Huge stagna- industry and 14.7% for processing industry. Indus-
tion in the 90’s couldn’t be compensated in rela- trial sectors which could provide more added value
tively short period of time. Besides, new challenges would be more encouraged in development, such
and risks occurred. Reforms and transition to mar- as chemical industry, industry of agricultural ma-
ket economy didn’t bring expected improvements. chines, production of means of transport and elec-
The effects of privatization are insignificant, many tronic industry. Considering the level of develop-
people lost their jobs, unemployment increased, as ment and resources, food industry should be added
well as external and internal imbalance, indebted- to this list, too. To achieve these goals, it is necessary
ness and the level of public debt have drastically to establish favorable environment for development
decreased the life standard, etc. [9]. Also, there are of industry, primarily processing industry, where the
two major macroeconomic imbalances: Government has to take most of the responsibility.
1. Faster increase of expenditure (personal and Another important prerequisite is foreign invest-
public) than GDP, and ments, which should reach at least 9 billion €.
2. High share of non-tradable goods in GDP. Second important industrial segment is agricul-
ture. In the last decade, growth rate of agricultural
Such a situation is not sustainable. Existing production reached 1.3%, and gross value 1.9%,
economic model is exhausted and what we need which is much lower than in the 80’s. Effects of
is a radical turnover to a new economic model. It agriculture on GDP and national economy are far
should be focused to investments and export. One bellow its possibilities.
of the main goals should be increase of production For the 2011-2020 period, projected growth
and export of tradable goods. The current model rate for agricultural production is 3.4%. Such op-
encouraged growth of services as a base of eco- timistic design is based on available resources, in-
nomic growth, and it was proved wrong. crease of productivity and changes in production
structure. Crop production relies on increase of
3.1. Production and export of tradable goods yield in production of grains, fruit and vegetables,
as well as increase of arable areas for industrial
In the transition period, production of tradable plants, fruit and grapes. Also, an increase of share
goods decreased heavily. It is especially obvious of animal husbandry in overall total production is
in processing industry and agriculture. Descent of expected, through preventing cattle population de-
production led to descent of supply and increase crease and production of meat.
of demand for imported products, thus causing In construction industry, projected annual
foreign trade deficit, and furthermore, disturbance growth rate is 9.7%, and its share in GDP in 2020
of macroeconomic balance. We should add that should reach 6.9%.
at the same time we had higher growth of de- Finally, growth rate of services should be 5.5%,
mand than growth of GDP. In the period between in order to gradually reduce their share in GDP to
2001 and 2008, growth of demand reached 7.5%, 52.9% in 2020.

Volume 8 / Number 4 / 2013 1719

 technics technologies education management

depreciation of domestic currency, etc. Macroeco-

nomic stability sub-index shows these trends.
Table 4. Macroeconomic stability sub-index flow [8]
Year 2007 2008 2009 2010 2011
Macroeconomic
stability 4.61 4.72 3.88 4.05 4.5
sub-index

Till 2008 and the world economic crisis, sub-

index increases, then it has a strong decrease in
2009 and a new growth since 2010. In 2011, ac-
Figure 4. Cumulative growth of production and cording to macroeconomic stability, Serbia takes
services [10] 91st place out of 142 ranked countries.
The new model of economic growth and de-
In the period between 2011 and 2020, cumulative velopment includes significant changes in mac-
growth of industry and construction should reach roeconomics. The average annual growth rate of
106.52%, services 70.2% and agriculture 39.7%. final domestic demand should reach 4.7%, which
Increase of production of tradable goods would is way bellow GDP growth rate of 5.8%. Further-
provide increase of export and share of tradable more, significant share of tradable goods demand
goods in GDP. The main goals in export till 2020 would be covered by the increased domestic pro-
are as follows: duction, instead of import. The predicted GDP in
1. Average annual growth rate of export of 2020 is 52.7 billion €, and per capita 7,500 €. The
goods and services should reach 13.5%; predicted cumulative increase of productivity is
2. Share of goods and services in GDP at the 50.4%, employment 16.9%, or 440,000 new em-
level of 65%; ployees, so the total number of employees in the
3. Value of export should reach 34.2 billion € country would reach 3 million.
in 2020;
4. Share of tradable goods at 72.5%;
5. Foreign trade deficit at 12% in 2020.

Model of economic growth and development

based on production and export should eliminate,
or at least reduce negative trends currently present
in national economy, such as: huge foreign trade
deficit, indebtedness, difficult debt servicing, de-
preciation of domestic currency, etc.

3.2. Macroeconomic stability

Macroeconomic stability has a strong influ-
ence on economy of any country and it is an im- Figure 5. The predicted cumulative growth of
portant prerequisite for its successful functioning. GDP, productivity and employment in a period
Instability in this segment has a negative influence between 2011 and 2020
on competitiveness, investments and economic
growth and development. Such a dynamic GDP growth can be achieved
Regardless of some positive signs, macroeco- only with huge investments. The predicted annual
nomic stability in Serbia is still on a low level. investment growth till 2020 is 9.7%, in order to
Main problems are external and internal imbal- reach 15 billion € in 2020, with a share of gross
ance, high inflation, fluctuation of exchange rate, domestic savings in gross investments of 61%.

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 technics technologies education management

The expected investments in this period reach 4. Conclusion

22.7 billion €.
In economy, like in life, it is necessary to always
However, many predictions haven’t been ful-
change something, even if it works well, because it
filled in first years of the period. GDP growth in
could always work better. But in case of the Republic
2011 reached 1.6%, while a new prediction for
of Serbia, radical changes are necessary and obliga-
2012 is 0.5%, with a possibility of even negative
tory. Current model of economy has exhausted all
GDP rate. This means that other related param-
of its possibilities, so further forcing of such a model
eters also have to be corrected.
could only bring more agony and deeper crisis.
Considering the inflation, its presence is still ex-
New model of economic growth and develop-
pected like in other transition countries [11], but it
ment is a huge turn in economic politics of the
should be reduced to acceptable level by elimina-
country. Current orientation to expenditure is re-
tion of its generators. Predicted inflation in 2020 is
placed by new approach based on the increase of
3%. Such a low level of inflation should have a pos-
production and export of tradable goods, increase
itive effect on investments and economic growth.
of investments and reducing of public expenditure.
Also, the depreciation of domestic currency
The expected growth rate of GDP in the period be-
would be continued, but with very low deprecia-
tween 2011 and 2020 is 5.8%, investments growth
tion rate, 2% per year till 2015, and after that only
rate 9.7% and export growth rate 13.5%. It would
by the level of inflation.
enable reducing of foreign trade deficit to 12% and
One of the important sources of instability is
fiscal deficit to 1%, while cumulative employment
budget deficit, due to very high public expendi-
growth should reach 16.9%. All of that would be
ture. Most of the expenses go to wages, pensions
followed by solid macroeconomic stability.
and public procurements. More than one third of
Serbia has very favorable development poten-
employees in Serbia are employed in public sec-
tials, but hasn’t been able to successfully valorize
tor. Although there was a general opinion that a
them yet. Many circumstances had made it diffi-
number of employees has to be reduced, it has not
cult. That is why there are huge expectations from
happened yet. Besides, half of the amount needed
new economic model. First of all, to enable getting
for payment of pensions comes from the budget.
out of crisis, then to provide stable and sustainable
The relation between the number of employ-
economic growth and development. It should be
ees and pensioners is one to one. Sometimes the
possible since the model is adjusted according to
amount of pension payments exceeds the amount
modern economic logic and business environment.
of wages. The reform of pension system has not
been done yet. Also, there are many problems with
public procurements. References
In the previous period, deficit has been cov- 1. Urošević S, Fedajev A, Nikolić R. Significance and
ered from incomes gained by privatization and perspectives of textile industry in Republic of Serbia,
by debts. When there were no more incomes, and in transitional environment. Industria textilă, 2011;
public debt reached its limit, the only remaining 134-140.
way of decreasing deficit was reducing expen-
2. Jakšić M, Praščević A. The New Political Macro-
diture. Of course, this reduction can not include economics in Modern Macroeconomics and Its Ap-
capital investments financed from the budget. The pliance to Transition Processes in Serbia. Panoeco-
only way to achieve this is to reform this area. nomicus, 2011; 4: 545-557.
Finally, according to new model of economic
3. Uvalić M. Transition in Southeast Europe. Under-
growth and development, the predicted fiscal defi-
standing Economic Development and Institutional
cit should decrease to 1% by 2020. This is opti- Change, World Institute for Development Economic
mistic, but possible. Research, Working Paper, 2010; 41.
Time series can be approximated using polyno-
mial regression models [12-14]. 4. Nikoli R, Fedajev A, Svrkota I. Serbian economy in
transition period. Economics Management Informa-
tion Tehnology (EMIT),2012; 1(1): 1-19.

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5. Documentation of National Bank of Serbia, Belgrade.

6. Cerović B., Nojković A. Transition and growth: What

was taught and what happened, Economic Annals,
2009; 54(183): 7-30.

7. Documentation of Serbian Ministry of Finance,

Belgrade.

8. Documentation of World Bank, Washington.

9. Documentation of Serbian Privatization Agency,

Belgrade.

10. Documentation of National Bureau of Statistics,

Belgrade.

11. Barlow D., How did structural reform influence

inflation in transition economies? Economic Sys-
tems,2010; 34: 198-210.

12. Dašić P. Software package CoP2TV: Choice of

Power Polinomial Between Two Variables. ver. 2.0.
Vrnjačka Banja, 2010.

13. Dašić P. Approximation of cutting tool wear functi-

on using polynomial regression equation. Journal
of Research and Development in Mechanical Indu-
stry (JRaDMI), 2011; 3(3): 171-180.

14. Dašić P. Application of polynomial regression mo-

dels for approximation of time series. Journal of
Economic and Management Based on New Techno-
logies (JEMoNT), 2012; 1(2): 81-140.

Corresponding Author
Aleksandra Fedajev,
Technical Faculty in Bor,
University of Belgrade, Serbia,
E-mail: afedajev@tf.bor.ac.rs

1722 Volume 8 / Number 4 / 2013

 technics technologies education management

Gray economy and tax evasion in Serbia

Aleksandar M. Gajic1, Mirjana I. Stevanovic2, Milorad S. Gajic3
1
Academy for Economy and Security, Belgrade, Serbia,
2
Faculty of Business Economy and Entrepreneurship, Serbia,
3
Megatrend University Faculty of Business Studies, Požarevac, Serbia.

Abstract for their own interest. Tax payers use law for their
own interest in for their needs. Tax payers take cer-
Participation of gray economy in GDP in the
tain measures and actions, partially and in whole,
EU countries ranges up to 15%, 13% in Nether-
but don’t violate a single legal regulation. Ways in
lands, 10% in Austria, while in Serbia it goes up to
which evasion can be done: relocation of the place
36%. Gray economy is present mainly in flea mar-
of residence or place of activity, vertical concentra-
kets and car open markets, than in civil construc-
tion in economy, decrease of expenditure, abstain-
tion, craftsmanship, trade, but also in services.
ing from purchase of high-tax products, use of so-
Around 40% of annual trade of goods and services
called “legal black holes”. Illegal evasion is present
in Serbia is effected in gray economy, making the
when a tax payer avoids payment of tax violating
annual turnover in grey economy valid around 10
legal regulations. These actions are limited either
billion Euros. Tax evasion and grey economy have
to the act of not paying taxes, or failing to act in
to be considered as equal activities. Consequence
accordance with requirements of tax administration
of tax evasion, as well as of grey economy, is
relation, which are enforced to tax payers in order
weakening of total economy of a country. In prac-
to provide fulfillment of tax obligation (submitting
tice, it results in decreased budgetary revenues,
of tax report, regular keeping of accounting, allow-
social layering, enormous accumulation of wealth
ing the tax inspection, etc.) [2, 3,4]. That is each
by individuals who don’t pay a single kind of tax.
form in which a tax payer doesn’t pay tax owed to
Key words: shadowe economy, tax evasion,
the government. The tax payer avoids the liability
completenes.
intentionally, comes into a conflict with law, i.e.,
violates law by his/her actions or lack of action,
1. Introduction in order to avoid paying the tax in the county of
Tax evasion is as old as government, that is, we residence. Forms of illegal avoiding of taxation are:
can say that ever since there are countries and gov- evasion and smuggling.
ernments, there is tax evasion. Resistance to pay-
ing of tax has been and will be always present. In 2. Notion, factors and consequences of tax
some cases resistance to paying of tax has grown evasion
to real rebellions, uprisings [1]. Twentieth century
ceased mass rebellions of peoples, but that is the Factors of evasion are: total economic situa-
time when individual cases of avoiding of taxa- tion – if economy of a county is in crisis, recession
tion started. One of the most frequent factors that or if unemployment is high, tax evasion by tax
inhibit implementation of tax policy is tax evasion. payers will be present in higher extent as a form
Evasion includes actions taken by a tax payer to of compensation for insufficient income and bad
decrease or fully avoid tax liability. There are two business; if the government doesn’t familiarize tax
kinds of tax evasion: legal and illegal. Legal eva- payers with expenses that are paid from collected
sion implies transfer of assets or capital to a kind of tax, resistance to payment of tax will be higher;
activity with lower tax rate, or abstaining from pur- economic causes – the higher seizure of the gov-
chase of products for whish various taxes are paid ernment, the higher are the effects of evasion; tax
making impact on their prices. This means that tax ethics – in previous periods (figure 1), payment
payers intentionally use a regulative ambiguity or of tax provided moral satisfaction, reputation in
circumstances take advantage of a legal regulation society, right to vote and to be elected. Tax ethics

Volume 8 / Number 4 / 2013 1723

 technics technologies education management

is a part of total, general ethics and reflects in the mulation of enormous wealth by individuals who
way the individual treat their tax liability, as well don’t pay a single form of tax.
as in the way the society treats individuals who The basic characteristics of the state (economy
have made violation or have avoided paying tax in crisis, high unemployment rate, higher expens-
[5]; consistency of economic and non-economic es than revenues ...) of the registered taxpayers
parameters – quality of quantity of tax bodies, (who regularly settle tax liabilities, operating in le-
kinds and amounts of tax rates, tax justice, clarity gal frames, using the state institutions’ services ...)
of legal tax regulations. Consequences of evasion and those that operate in the gray zone, or do not
are: inhibited efficient implementation of tax pol- have the status of registered taxpayers (not sub-
icy; unloyal competition; unequal position in the ject to tax regulations, do not pay tax liabilities,
market; dissatisfaction of conscientious tax payers the origin of their goods is debatable ...) are given
and occurrence of tax evasion by them. in the figure.
Introduction of the principle of generality and
3. Analysis of tax evasion and grey economy payment according to economic wealth of citizens
in Serbia would result in direct decrease of grey economy
(figure 1.).
The fact is that share of grey economy in GDP Following tables show results of a survey made
of our country is approximately 36%. We have to among tax payers who do business within legal
draw a sign of equality between tax evasion and frame, i.e. registered legal persons and entrepre-
grey economy. Consequence of evasion, as well as neurs who have the status of tax payers, about
of grey economy, is weakening of total economy their opinion weather Serbian tax system is char-
of a country. In practice, they result in decreased acterized by equity, and weather taxes should be
budgetary revenues, social layering, and accu- paid based on economic wealth. The survey was

Persons who have no status of tax

Persons who have status of tax
Country payers and perform some kind of
payers
activity
They reflect each economic
Economy in crisis Accumulation of personal wealth
change in the country
They are subject to laws, tax
High rate of unemployment They are not subject to tax regulations
regulations
Large and expensive administration
They pay all kinds of legal They use services of educational,
(number of officers in government,
revenues enforced by law medical and government institutions
public sector, number of ministries)
Higher expenditures that revenues They keep accounting, reports... They don’t pay public revenues
Lack of principles of generality, They renounce a part of their Smuggling – sports equipment,
justice, taxation based on economic income in order to pay their clothes, perfumes, cosmetics, cars in
wealth liabilities to the government all economic spheres)
Lack of generality in the process of
They do business within legal So-called flea markets, markets (all
fiscalization (lawyers, tax drivers,
framework kinds of goods are present)
transport service providers,)
Origin of goods is suspicious (stolen,
They are subject to legal sanctions
counterfeits)
They accomplish rights of social
Absence of tax ethics
and medical care
They use services of government
institutions
Figure 1. Lack of instruments of tax generality

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 technics technologies education management

made having in view level of training of tax pay- gradless of the kind of tax they pay. Following ta-
ers, company owners and entrepreneurs. bles compare all categories of subjects. The issue
that is survayed is equity of the system, i.e. relation
(χ2e= 6.949 < χ2t (DF = 4 and 0.05)= 9.488 => of subject’s replies about equality of tax payers for
p > 0.05 => H0) ; C = 0.184 Lqw, as well as about payment of tax based on eco-
nomic wealth of individual tax payer.
75.7% of subjects, owners of business compa-
nies, entrapreneurs with fourth level of training (χ2e= 89.729 > χ2t (DF = 4 and 0.01)= 15.227 =>
believe that Serbian tax system is not character- p < 0.05 => H1); C = 0. 557
ized by equity. The same opinion have 68.4% of
subjects with sixth level of training and 66.7% of Out of 199 subjects, as many as 144 of them
subjects with seventh level of training (table 1). believe that Serbian tax system is characterized
by equity, and 141 of subjects believe that all tax
(χ2e= 9.496 > χ2t (DF = 4 and 0.05)= 9.488 => payers are not equal for law. That this phenom-
p < 0.05 => H1); C = 0. 210 enon is not accidental in Serbian tax system was
confirmed by statistic test for nominal distribution
93% of subjects, company owners, entrapre- of frequencies where resulting empirical test val-
neurs with fourth level of training believe that tax ues are higher that supposed theoretical values, so
should be paid based on economic wealth of tax with certainty of 99%, we can believe that differ-
payer. Positive answer was given also by 96.5% ences are so big that they cannot be considered ac-
subjects with sixth level of training and 96.3% cidental (table 3).
subjects with seventh level of training (table 2).
The higher level of equity, the higher is awarenes (χ2e= 16,075 > χ2t (DF = 4 i 0,01)= 15,227 =>
of tax payers that everybody is equal for Law, re- p < 0,05 => H1); C = 0, 273

Table 1. Replies of subjects to the question “Is Serbian tax system characterized by equity?”
LEVEL OF TRAINING
Total
Fourth level Sixth level Seventh level
No. 25 14 5 44
YES
% 21.7% 24.6% 18.5% 22.1%
Equity of tax No. 87 39 18 144
NO
system % 75.7% 68.4% 66.7% 72.4%
No. 3 4 4 11
MAYBE
% 2.6% 7.0% 14.8% 5.5%
No. 115 57 27 199
Total
% 100.0% 100.0% 100.0% 100.0%
Table 2. Replies of subjects to the question “Do you believe that tax should be paid based on economic
wealth of individuals?”
LEVEL OF TRAINING
Total
Fourth level Sixth level Seventh level
No. 107 55 26 188
YES
% 93.0% 96.5% 96.3% 94.5%
Economic
No. 0 2 0 2
wealth of tax NO
% 0.0% 3.5% 0.0% 1.0%
payer
No. 8 0 1 9
MAYBE
% 7.0% 0.0% 3.7% 4.5%
No. 115 57 27 199
Total
% 100.0% 100.0% 100.0% 100.0%

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 technics technologies education management

Table 3. Legal equality – equity of the system

Equity of the system
Total
Yes No Maybe
No. 28 24 3 55
YES
% 63.6% 16.7% 27.3% 27.6%
No. 16 120 5 141
Legal equality NO
% 36.4% 83.3% 45.5% 70.9%
No. 0 0 3 3
MAYBE
% 0.0% 0.0% 27.3% 1.5%
No. 44 144 11 199
Total
% 100.0% 100.0% 100.0% 100.0%
Table 4. Criterium of economic wealth – equity of the system
Equity of the system
Total
Yes No Maybe
No. 44 136 8 188
YES
% 100.0% 94.4% 72.7% 94.5%
Criterium
No. 0 2 0 2
of economic NO
% 0.0% 1.4% 0.0% 1.0%
wealth
No. 0 6 3 9
MAYBE
% 0.0% 4.2% 27.3% 4.5%
No. 44 144 11 199
Total
% 100.0% 100.0% 100-0% 100.0%

Aa many as 94.5% of company owners and en- can be sure that the differences are so high that they
trepreneurs included in the survay said that taxex cannot be considered incidental, but real (table 4).
should have been paid based on economic wealth If we analyze tax payer who pay taxes based on
of individuals, while 4.5% subjects had no definite flat rate and tax payers who keep accounting, we
opinion (table 4). come to conclusion that tax payers who pay taxes
That such a phenomena in Serbian tax system is based on flat rate pay higher taxes. Following ta-
not incidental was confirmed also by statistic test bles show examples of tax amounts paid by a tax
for nominal division of frequencies which resulted payer-beginner who pays tax based on flat rate and
in empirical test values higher than supposed theo- the amount paid by a restaurant owner performing
retical values, so with certainty as high as 99% we the activity for twenty years.

Advance income tax is determined for incomes generated from performing of an independent activity
in the period between January 1st, 2009 and December 31st, 2009
TAX PAYER: .................................
ACTIVITY: Consulting and Management Activities
RESIDENCE: ...........................................................
BUSINESS ADDRESS: ........................................
Liabilities based on public revenues for the period between January 1st, 2009 and December 31st, 2009 are:
I. INCOME TAX FOR INCOMES FROM INDEPENTENT ACTIVITY
1. basis–lump-sum income
33,062.70
2. calculated citizen income tax (No. 1x10%)
3,306.27
II. TOTAL 3,306.27
Figure 2. Excerpt from Tax administration decision

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 technics technologies education management

I Advance charge for contributions for social insurance is determined for the period between January
1 , 2009 and December 31st, 2009
st

TAX PAYER: .................................

ACTIVITY: Accounting, Inspection Activities, etc.
RESIDENCE: ...........................................................
BUSINESS ADDRESS: ........................................
Basis for social Retirement Fund Unemployment
Medical insurance
Month insurance Contribution contribution
contribution 12.3%
contribution 22 % 1.5 %
January 33,062.70 7,273.79 4,066.71 495.94
February 33,062.70 7,273.79 4,066.71 495.94
March 33,062.70 7,273.79 4,066.71 495.94
April 33,062.70 7,273.79 4,066.71 495.94
Total 29,095.18 16,266.85 1,983.76
Figure 3. Excerpt from Tax administration decision

N Item Amount
1. A. BUSINESS PROFIT AND LOSSES 3 2 8 1 1
I. Financial result in Income Sheet
Profit in the business year
2. Loss in the business year
Figure 4. Excerpt from tax balance of a tax payer
The excerpt from the Tax administration deci- dinars 191.67 of income tax for 2009, which he
sion shows that a taxpayer who has registered the pays monthly during the calendar year. That is,
business activity for consulting and management here coming to the fore is the difference between
services, is taxed at a flat rate and pays income tax taxpayer taxated at the flat rate monthly paying the
in the monthly fixed amount of dinars 3.306.27. income tax in the amount of dinars 3.306,27 and
Meaning that regardless of whether he if he oper- the taxpayer keeping business records on his own,
ates with a positive or negative balance he pays calculating and reporting the income nad reporting
the determined monthly amount (Figure 2). it through the tax balance, that is the one paying di-
Also given is the example of a decision on order- nars 191,67 for income tax. The implied conclusion
ing a payment of social security contributions for a is that greater control the Tax Administration of the
taxpayer, also at flat rate, engaged in consulting and taxpayers who are keeping the business records is
management, and paying monthly contributions up necessary, and the reason for it is reporting of ex-
to the amount of dinars 11.835,90. Tax administra- tremely small incomes and also in the vast number
tion, based on the Regulation, classifies the taxpay- of cases present in practice are the “losers”, that is
er who is taxed at a flat rate in a particular group illegal evasion in business undertakings is obvious-
(bearing in mind the activity performed) and orders ly present in a large scale (Figure 5).
him/her by the decision a fixed monthly amount of The excerpt from the Tax administration decision,
such payment obligation in 2009 (Figure 3). for the taxpayer, caterer, who has been given the ob-
The excerpt from tax balance of the taxpayer, ligation to pay social security contributions, based
performing catering opertions for twenty years, on the reported profit from the tax balance, in the
shows that he/she reported profits for 2009 in the monthly amount of dinars 6.210,58. Or, the differ-
amount of dinars 32.811,00 (Figure 4). ence in respect to the taxable flat rate of the taxpayer
Tax Administration by the decision and based from the previous example paying monthly amount
on tax balance, debits the taxpayer, caterer, with of dinars 11.835,90, is almost double (Figure 6).

Volume 8 / Number 4 / 2013 1727

 technics technologies education management

Advance citizen income tax is determined for incomes generated from performing of individual activities
for the period between January 1st, 2009 and December 31st, 2009
TAX PAYER: .................................
ACTIVITY: Bars
RESIDENCE: ...........................................................
BUSINESS ADDRESS: ........................................
Liabilities based on public revenues for the period between January 1st, 2009 and December 31st, 2009 are:
INCOME TAX FOR INCOMES FROM INDEPENTENT ACTIVITY
1. taxable profit – tax basis
1,916.67
2. calculated citizen income tax (No. 1x10%)
191.67
3. tax stimulations – decrease of calculated tax
based on investment in capital assets
0.00
based on investment in capital assets (Article 48 of the Law)
0.00
for investments according to regulations which govern stimulation
of investment in Serbian economy
0.00
4. Total tax for payment (2-3)
191.67
MONTHLY ADVANCE TAX LIABILITY IN 2009 IS 191.67
Figure 5. Excerpt from tax balance of a tax payer

I Advance charge for contributions for social insurance is determined for the period between January
1st, 2009 and December 31st, 2009

TAX PAYER: .................................

ACTIVITY: Bars
RESIDENCE: ...........................................................
BUSINESS ADDRESS: ........................................
Basis for social Retirement Fund Unemployment
Medical insurance
Month insurance Contribution contribution
contribution 12.3%
contribution 22 % 1.5 %
January 16,141.00 3,551.02 1,985.34 242.12
February 17,348.00 3,816.56 2,133.80 260.22
March 17,348.00 3,816.56 2,133.80 260.22
April 17,348.00 3,816.56 2,133.80 260.22
Total 15,000.70 8,386.76 1,022.78
Figure 6. Excerpt from tax balance of a tax payer

The Law on Fiscal cashiers was passed in 2004, to respective Tax administration) are released from
but it is not applied to all tax payers. Tax payers obligation to have fiscal cashier. Layers, taxi driv-
who pay taxes based on flat rate and don’t do busi- ers, transport service providers, owners of counters
ness with natural persons (with statement given un- in flee markets also don’t have legal obligation to
der material and criminal responsibility that they do have fiscal cashiers. “If fiscalization to be conduct-
business exclusively with legal persons, presented ed, it has to apply to all activities and all tax payers.”

1728 Volume 8 / Number 4 / 2013

 technics technologies education management

The major sources of gray economy in Serbia (figure 8). That is, in addition to the Republic In-
are flee markets. For example, there are 1,650 coun- spection, the control of the gray zone should first
ters in the flee market in Pancevo. Annual trade in be delegated to the Tax Administration in order to
the market is approximately 200 million Euros. effectively control the labor and business people
Having in view number of registered tax payers working in the informal sector (grey zone), in or-
(companies, entrepreneurs, associations), totaling der to achieve the results as quickly as possible
340.461 thousand, we can state with high level which would aim to reduce the number of persons
of certainty that there are another approximately who operate illegally, categorize all of them under
250,000 in gray zone. These are persons engaged the legal frameworks, immediately determining
in various services like hair dressers, craftsmen their obligations and prescribe much higher penal-
(table 5). ties in these cases. All mentioned above shows that
Table 5. Number of registered legal persons and tax system of Serbia is destimulative. Introduction
entrepreneurs in Serbia in 2009 of the principle of generality and payment of taxes
Organization form Number based on economic wealth of citizens would result
Business companies 111,357 directly in decrease of grey economy.
Entrepreneurs 224,531
Associations 4,521 Person violating the Law Amount of penalty
Foreign Associations 52 Person without status of
Up to 5,000 RSD
tax payer
Penalties for tax violations are enormous in Confiscation of goods
Serbia for all entities registered under the law, that Figure 8. Penalties for unregistered persons
is having the status of tax payer. If the taxpayer
is late with payment of salaries to the employees, 4. Conclusion
that is if he is in the legal entity status, he/she pays
a fine of dinars 100.000 to 1.000.000, and if being Actions that should be taken by the government
a contractor for the same violation ranges from di- for decreased tax evasion and grey economy in Ser-
nars 5.000 to 50.000 (Figure 7). bia are: increase of production, increased export in
Serbian taxation system is characterized by relation to import, decreased rate of unemployment,
very high penalties for tax payers who work with- change of penalty policy for grey economy, i.e. its
in legal frames. participants, decrease of the contribution rate (born
by employers and by employees), inclusion of all
Person violating persons working in grey economy in legal frame
Amount of penalty (joint action of all republic inspections and Tax
the Law
Legal person Administration on frequent inspection in all fields
from 100,000 to 1,000,000 RSD (civil construction, industry, flee markets...), fiscal-
Responsible person
from 5,000 to 50,000 RSD ization of all activities without exceptions. Such ac-
in the legal person
Entrepreneur from 50,000 to 500,000 RSD. tions would result in: increased revenues, leaving
Figure 7. Penalties for persons who don’t calcu- out the increased tax rates for settling of budgetary
late and pay contributions or calculate and pay expenditures, higher level of tax culture and tax eth-
incorrect amount of contributions parallel with ics, and by that of tax discipline, easier operation
payment of salary or other income, i.e. in stipu- of small and medium companies, entrepreneurs, all
lated time [6] for loyal competition.
In papers [7-12] is shown tax evasion for dif-
Grey economy is responsibility of Republic ferent countries.
Inspection, and the table shows that for a person
found performing an activity without being regis-
tered, the only measure that is taken is confiscation
of goods and monetary penalty up to 5,000 RSD

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 technics technologies education management

References
1. Hrustić H. Public Finances and Tax Law. Belgrade,
2007.

2. Kulc M. Financial management, The Megatrend

University. Belgrade, 2010; p. 129.

3. Kulc M. Tax Evasion and Smuggling. Belgrade, 1999.

4. Kulc M. Legal and Tax Practice of the Republic Ad-

ministration of Public Revenues and Grey Economy.
Law and Economy, 3-6, Belgrade, 1995.

5. Stepanovic М. Idea and Kinds of Tax Evasion. Taxation

and Tax Law, Faculty of Law, Belgrade, 1988; 398.

6. Law on Contibutions for Mandatory Social Insur-

ance. Official Gazette of RS, No. 62/06.

7. Otusanya OJ. The role of multinational companies in

taxevasion and tax avoidance: The case of Nigeria.
Critical Perspectives on Accounting, March 2011;
22(3): 316-332.

8. Richardson G. The relationship between culture and

tax evasion across countries: Additional evidence
and extensions. Journal of International Accounting,
Auditing and Taxation, 2008; 17(2): 67-78.

9. Tsakumis GT, Curatola AP, Porcano TM. The rela-

tion between national cultural dimensions and tax
evasion. Journal of International Accounting, Audit-
ing and Taxation, 2007; 16(2): 131-147.

10. Kenyon T. Tax Evasion, Disclosure, and Participa-

tion in Financial Markets: Evidence from Brazilian
Firms. World Development, November 2008; 36(11):
2512-2525.

11. Bird RM, Zolt EM. Dual Income Taxation: A Promising

Path to Tax Reform for Developing Countries. World
Development, October 2011; 39(10): 1691-1703.

12. Mokhtari M, Ashtari M. Understanding tax reform

in the Central Asian Republics. Journal of Asian
Economics. April 2012; 23(2): 168-178.

Corresponding Author
Mirjana I. Stevanovic,
G.S.C.M. Consulting and Management Services
Agency,
Smederevska Palanka,,
Serbia,
E-mail: mira.stev@open.telekom.rs

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 technics technologies education management

The impact of social and demographic factors

on management styles in sport organizations
Edita Kastratovic1, Milan Dragic1, Goran Kvrgic1, Branislav Masic2, Sandra Nesic3
1
College of business economy and entrepreneurship, Belgrade, Serbia,
2
ALFA University, Belgrade, Serbia,
3
FEFA, Singidunum University, Belgrade, Serbia.

Abstract ganizing, leading and controlling the work of the

members of an organization and using all dispos-
This paper studies the leadership styles applied
able means of the organization to achieve its most
by managers in sports organizations. The objec-
important objectives [2]. Sajfert et. al define man-
tive of the research was the analysis of social and
agement as a way of solving chaos in an orgnaisa-
demographic indicators as predictor variables and
tion with necessary efficiency and effectiveness [3].
defining their impact on managerial styles, applied
A managment style presents the way a leader
by managers in sports organizations. Another ob-
behaves in a group – the behaviour that is char-
jective of the reseach was the practical implemen-
acteristic of him regardless of the situation [4].
tation of the results in terms of familiarization of
Managers in sports organizations face the problem
managers and athletes with the results of the man-
of balancing their leadership style with the needs
agerial styles research.
imposed by the game, i.e. a competitive element
The research was carried out in the period 2009-
on one side and profit as a necessity of modern
2010 and encompassed the interviews with 348 re-
sport on the other. The success of an organization
spondents in sports organizations of different type
management depends on the implementation and
(sports clubs, sports associations and sports federa-
coordination of management principles. Besides,
tions) in the territory of the Republic of Serbia.
it is important to implement an appropriate strat-
The results show that managers are more
egy as the rational response of an organization to
democratically oriented, with the largest number
the events in its environment in which it performs
of managers of strongly democratic orientation.
its core-business and its broader mission [5]. The
Looking at the results obtained on the dimension
way to apply and adjust management principles
of the orientation towards people-tasks, it can be
depends on the managers of the organization, their
concluded that the managers are more people-
knowledge, character, their attitudes, beliefs, in
oriented. In terms of Adizes styles, managers are
one word – their STYLE. Management styles are
more oriented to achieving results (production
different and specific to each manager. In order to
function – P) and interpersonal relationships (in-
be properly used, managerial styles must be clearly
tegrative function – I). The general conclusion is
defined and managers must be familiar with them.
that: profession and work status present important
Beside theoretical coverage, management styles
factors of differentiation of managers in terms of
must also be practically tested in research projects,
management styles that they apply.
and through the daily activities of sports organiza-
Key words: Management, management styles,
tions. Only in this way can the principles of sports
social and demographic factors.
management, applied in practice, be seen.
Sport is developing at a tremendous speed,
1. Introduction which causes the implementation of new methods
Management is defined as coordinating activi- and more multidisciplinary approach to the study
ties in connection with work, respecting the prin- of phenomena related to sport. Sport is not just a
ciples of efficiency and effectiveness, with people contest of physical and mental capabilities of peo-
and with the help of other people [1]. Management ple, but it is an integral part of our daily lives, our
can be also defined as the process of planning, or- culture and lifestyle content, the process of educa-

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 technics technologies education management

tion, a strong source of moral norms and positive influence of the research results with the aim of
energy that gives strength and meaning to the life accepting the importance of permanent training
of each individual [6]. Sports organizations that of managers and their development within sports
would like to achieve significant results must or- organizations. The aim is the familiarization of
ganize the function of research and development managers, but also sportsmen and all the members
of their own sport activity [7]. Organizations must of sport organizations with the importance of sci-
also develop marketing as a business function that entific research and possibilities of the results im-
connect an organization with its customers [8]. plementation in sports. The research is also going
Also, the quality of business implies management in the direction of educating students as potential
approach which means the QM of company busi- managers, and training athletes to understand and
ness identified by the compliance with international accept the style, applied by their coaches-manag-
qauality standards [9]. The importance of scientific ers. The research tasks are the following:
approach to the phenomenon study, that emerges in – To define management styles and social and
group structures of sport organizations, is reflected demographic factors;
in practical enforcement of all laws passed on the – To produce questionnaires and carry out
basis of the research. If the research results serve surveys;
for the purpose of education of future managers and – To process the data;
athletes, the implementation of the research will be – To draw conclusions.
even more justified and purposeful.
The subject of this research are social and de- 3. Methods of work
mographic features within sports organizations of
different types on one hand and the management The research included social and demographic
styles on the other. Each social and democratic features (profession, sex, age, education level, the
factor influences, to a certain extent, the manage- years of employment and work status), amd man-
ment styles that managers apply in their everyday agement styles (autocratic-democratic styles, the
activities. The factors have different effects, as the orientation towards people- tasks and Adizes styles).
research is planned to confirm, including the extent The transversal study of an experimental char-
to which each of the factors effect a management acter was used in the study with the help of biblio-
style. Practical implementation of the research re- graphic and empirical methods. The research was
sults is also reflected in the fact that sport organiza- carried out in the period 2009-2010 and encom-
tions’ managers can be familiar with the manage- passed 348 respondents (managers of all levels)
ment styles that are dominant in sport organizations from sports organizations of different types (sports
and according to their needs, adjust their own styles clubs, sports assosiations and sports federations)
with the aim to contribute to better functioning and in the territory of the Republic of Serbia. Descrip-
sports organizations’ development. The research tive and comparative statistical procedures were
results will contribute to a clearer insight into the applied on the data collected in the survey process.
styles applied by managers, as well as the factors
that influence the choice of a particular style. 4. Results
The examined managers were viewed through
2. The study objective
the prism of descriptive and comparative statis-
The study objective was the analysis of the tics. Subjects were assessed on three dimensions:
impact of social and demographic features on the autocratic-democratic styles, the orientation to-
management styles of the respondents (manag- wards people-tasks and Adizes styles (P, A, E, I).
ers) in sport. The aim of the research was also the
practical implementation of the results in the sense The results of descriptive statistics
of familiarization of managers and athletes with Looking at the results obtained in the dimen-
the results of management styles’ research. The sions of autocratic - democratic leadership, it
objective of the research was also the educational can be concluded that managers are more demo-

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 technics technologies education management

cratically oriented (Mean = 8.77), with the larg- The results of comparative statistics
est number of managers with strongly democratic The values of the significance degree (p) indicate
orientation (40%). a statistically significant difference between manag-
ers in terms of autocratic-democratic styles, as well
as in terms of orientation towards people- tasks.
Table 1. T- test – Profession (aut. – dem. styles)
Profession N M Sd t-test p
Managers 155 9.19 1.03
5.33 0.00
Coaches 193 8.43 1.52
N – Frequency; M – Arithmetic mean; Sd – Standard deviati-
on; t – t-test value; p – significance level

Graph 1. Frequency (autocratic-democratic Table 2. T-test – Profession (Orientation towards

style) people-tasks)
Profession N M Sd t-test p
Managers 155 4.22 1.00
2.23 0.03
Coaches 193 3.97 1.04

By using the analysis of variance (ANOVA), it

can be stated that managers of different age (years)
are statistically significantly different in terms of
autocratic-democratic styles.
Table 3. ANOVA – Age (aut. / dem. style)
Graph 2. Frequency (orientation towards people- Sum of Mean
tasks) Age df F p
Square Square
Between Groups 18.11 4 4.53 2.42 0.048
Looking at the results obtained in the dimen- Within Groups 641.50 343 1.87
sions of orientation towards people-tasks, it can Total 659.61 347
be concluded that managers are more oriented to-
wards people (Mean = 4.08), with the largest num- Table 4. Post hoc Multiple Comparisons – LSD;
ber of managers with devided orientation (51.2%). (aut./dem. stil)
Mean Std.
Age p
Difference Error
<30 -0.6(*) 0.23 0.01
31-40 -0.58(*) 0.23 0.01
51-60
41-50 -0.63(*) 0.23 0.01
>60 -0.3 0.36 0.41

The mean difference is significant at the .05 level.

Based on the results obtained by applying
Kruskal-Wallis test (table 5) it can be concluded
that there is a statistically significant difference
Graph 3. Frequency (Adizes styles PAEI) between managers of different education level re-
garding the importance that they attach to the ob-
The interviewed managers belong to the field servance of regulations (Administrative style - A)
of sport in whose nature is competing and achiev- and creativity (Creative style - E).
ing success, so the greatest number of managers, Based on the rank values (Mean Rank, table 6),
who were oriented towards results (success), can it can be confirmed that managers with secondary
be considered quite logical. school education statistically significantly differ

Volume 8 / Number 4 / 2013 1733

 technics technologies education management

in the importance they attach to the observance of Table 8. Post hoc Multiple Comparisons Scheffe
regulations and creativity. The managers with sec- (aut./dem. styles)
ondary education attach more importance to the ob- Mean Std.
Work status p
servance of regulations (Administrative style) then Difference Erro
the managers with college or university education. professional -0.29 0.18 0.29
In terms of creativity (Creative style), the managers Part-time
voluntary -0.47* 0.19 0.05
with college education attach less importance to it
professional 0.18 0.17 0.6
than those with college and university degree. Voluntary
Table 5. Kruskal -Wallis Test (Education level) part-time 0.47* 0.19 0.05
* The mean difference is significant at the .05 level.
Education Adizes styles
level P A E I
According to the results of the Kruskal –Wallis
Chi-Square 0.46 6.87 7.16 0.73 test it can be concluded that there is a statistically
df 2 2 2 2
significant difference between the executives of
Asymp. Sig 0.79 0.03 0.03 0.69
different work status in terms of creativity (The
creative style – E).
Table 6. RANKS – Education level Table 9. Kruskal -Wallis Test - Work status
Education level N Mean Rank
Work status P A E I
secondary 79 170.35
Chi-Square 0.8 3.05 6.36 3.43
P college 103 171.88
df 2 2 2 2
university 166 178.10
Asymp. Sig 0.67 0.22 0.04 0.18
secondary 79 153.45
A college 103 191.37
Table 10. Ranks – Work status
university 166 174.05
Adizes Mean
secondary 79 199.58 Work status N
styles Rank
E college 103 167.18
university 166 167.11 134 168.75
professional part-time
secondary 79 180.82 P 96 177.24
voluntary
I college 103 168.67 118 178.8
university 166 175.11 134 184.49
professional part-time
A 96 161.99
voluntary
The application of the analysis of variance 118 173.33
(ANOVA) showed that the executives of the men- 134 158.7
professional part-time
tioned groups significantly differ in the ways that af- E 96 188.28
voluntary
118 181.23
fect the people they manage in terms of autocratic-
democratic styles of leadership (F=3.09; p = 0.05). 134 184.16
professional part-time
Table 7. Table X: ANOVA – Work status (aut./dem. I 96 176.41
voluntary
118 161.97
style)
Sum of Mean
Work status df F p Professionally hired managers attach more
Square Squar
importance to creativity (Mean Rank) than those
Between Groups 11.6 2 5.8 3.09 0.05 who are hired as part-time managers or who are
Within Groups 648.01 345 1.88
hired voluntarily.
Total 659.61 347

Scheffe’s test confirms the existence of statis- 5. Conclusion

tically significant differences between the volun- Looking at the results obtained in the dimen-
tarily and part-time hired managers in terms of the sions of autocratic - democratic leadership it has
democratic-autocratic styles. been found that managers are more democratically
oriented, with the largest number of those who are

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 technics technologies education management

strongly democratic. The study of the diversity of pendent variable, one can make a general conclu-
managers on the basis of all dependent variables sion that profession and work status are significant
with regard to their orientation toward people and factors of managers’ differentiation in connection
tasks, was based on determining the importance with management styles that they apply.
that managers attach to tasks from one hand and
interpersonal relationships on the other. Looking References
at the results obtained in the dimension of the ori-
entation towards people/tasks, it can be concluded 1. Robbins SP, Coulter M. Management. Pearson-Pren-
tice Hall, Indiana University, 2007; 10-12
that managers are more oriented towards people.
The results obtained in the dimension of Adizes 2. Kastratović SE. Introduction to Management (Uvod
styles show that the biggest number of managers u menadžment). FMS, Belgrade, 2006; 12.
attach the most importance to achieving results
(production function – P) and interpersonal rela- 3. Sajfert Z. et al. Researching the characteristics of
leaders in Serbia. Techniques Technologies Educa-
tionships (integrative function – I). Significantly tion Management - TTEM, 2011; Sarajevo, 2011;
fewer managers attach the most importance to 6(1): 140-146.
compliance with regulations within sport organi-
zations (administrative function – A) and creativ- 4. Franceško M. How to Improve Management
ity (creative function – E). The received results in a Company (Kako unaprediti menadžemnt u
preduzeću). Prometej, Novi Sad, 2003; 65.
only confirm how important for managers the
achieved results in sports are. Results and their 5. Mašić B, Strategic Management (Strategijski
measurability are the basis of sport. Sport emerged menadžment). Singidunum University, Belgrade;
from a game and distanced itself thanking to the 2009; pp 53-56.
measurement of results and its competitive objec- 6. Kastratović SE. Sports Management and Ethical
tive. Sociological principles in sport increasingly Principles (Menadžment u sportu i etički principi).
emphasize the importance of interpersonal rela- časopis Pravni život, 10-2, Belgrade. 2009; 213-215.
tionships in sport organizations and their impact
on the achieved results. Managers are gradually 7. Tomić M. Sports Management (Menadžment u spor-
tu). Astimbo, Belgrade; 2001; 31-35.
accepting the importance of collectivism without
any tendencies for marginalizing individualism. 8. Sajfert Z. et al. Researching needs of marketing ma-
Individual quality is expressed in its full glory just nagers in Serbia. Techniques Technologies Education
in the sound pillars of the collective quality. Management - TTEM, 2010; 5(2): 286-295.
The research results have been processed by the
9. Bešić C. Benefits from implemented quality manage-
procedures of comparative statistics. The impor- ment system-the research in Serbian economy. Tech-
tance of managers’ differentiation has been stud- nics Technologies Education Management-TTEM,
ied according to independent variables, in terms 2010; 5(1): 189-197.
of styles that are applied in the process of leader-
ship. According to the results received, it can be
Corresponding Author
concluded that: profession, the age of respondents Edita Kastratovic,
and work status are important factor of manag- College of business economy and entrepreneurship,
ers’ differentiation in connection with autocratic Belgrade,
and democratic management styles. The research Serbia,
E-mail: kastratovice@yahoo.com
results regarding the dimension of the orientation
towards people-tasks show that profession is the
only important factor of managers’ differentiation.
The results in terms of the importance that man-
agers attach to Adizes styles show that education
level and work status are the important facotrs of
managers’ differentiation. Based on the results and
individual conclusions on the level of each inde-

Volume 8 / Number 4 / 2013 1735

 technics technologies education management

Causality and weak solutions of stochastic

differential equations with applications
Dragana Valjarevic1, Ljiljana Petrovic2, Aleksandar Valjarevic3, Jasmina Jovanovic4, Dragan Radovanovic3
1
Faculty of Science, Department of Mathematics, Kosovska Mitrovica, Serbia,
2
Faculty of Economics, Department of Mathematics and Statistics, Belgrade, Serbia
3
Faculty of Science, Department of Geography, Kosovska Mitrovica, Serbia,
4
Faculty of geography, Belgrade, Serbia.

Abstract [3]) generalized the main results from [1], [2] and
proved the existence of weak solution (in the strict
The paper considers a statistical concept of
sense) for the equation which is more general then
causality in continuous time in filtered probability
equation (1), involving random measures. He intro-
spaces which is based on Granger’s definitions of
duced a slightly different notion of weak solution
causality. Then, the given causality concept is ap-
and established conditions for regularity.
plied to regular solutions of stochastic differential
In the second part of this paper we give pre-
equations. We show the equivalence between some
liminaries and definitions of the causality relation-
models of causality and weak uniqueness (for weak
ship between flows of information (represented by
solutions of stochastic differential equations with
filtrations). Especially, we give a generalization
driving semimartingales) and give in terms of cau-
of a causality relationship “G causes J within H’’
sality a definition of regular weak solution for some
which was first given in [4] and which is based on
type of stochastic differential equations. Also, we
Granger’s definitions of causality (see [5]).
gave an application of stochastic differential equa-
In the third part of this paper, we consider the
tions and concept of causality in hydrology.
stochastic differential equation that is more general
Key words: Causality, stochastic differential
then equation of the form (1). We give a new defi-
equation, regular weak solution, hydrology.
nition of a regular weak solution for this equation
driven by semimartingales in term of causality.
1. Introduction In the fourth part of this paper we give applica-
tion of stochastic differential equation in hydrol-
In this paper we consider regular weak solu-
ogy (see [6,7]). For example, total rainfall can be
tions of stochastic differential equations with driv-
modelled by the stochastic differential equations
ing semimartingales. Jacod and Memin (in [1],
driven by Wiener process and the precipitation is
[2]) have studied the existence and uniqueness of
closely connected with the concept of causality.
solutions of the equation

d X t = u t ( X ) d Z t 2. Concept of statistical causality

 ................... (1)
X 0 = x The study of Granger-causality has been main-
ly preoccupied with time series. But, many of the
where the driving process Z = {Z t , t ∈ [0, + ∞) } systems to which it is natural to apply tests of cau-
is m -dimensional semimartingale ( Z 0 = 0 ) and sality, take place in continuous time, so we will
consider continuous time processes.
the coefficient ut ( X ) is n × m -predictable process A probabilistic model for a time-dependent
which depends on the path of X. They proved the
existence of probability measure for which there system is described by (Ω, F, F t , P) , where
(Ω, F, P) is a probability space and {F t , t ∈ T }
exist a solution-process X = { X t , t ∈ T } . Such
is a “framework” filtration, i.e. (Ft) are all events
a measure they called the solution measure, but
in the model up to and including time t and (Ft)
it is also known as a weak solution. Lebedev (in

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 technics technologies education management

is a subset of F. We suppose that the filtration (Ft)

If G and H are such that G|< G; G ∨ H
satisfy the “usual conditions”, which means that
(where G ∨ H is a family determined by
{F t , t ∈ T } is right continuous and each (Ft) is
complete. (G ∨ Η )t = Gt ∨ Η t ), we shall say that H does
Analogous notation will be used for filtrations not cause G. It is clear that the interpretation of
Granger-causality is now that H does not cause G
H = {Η t } , G = {Gt } and J = {Jt } .
A family of s -algebras induced by a stochastic if G|< G; G ∨ H (see [8]). It can be shown without
difficulty that this term and the term “H does not
process X = { X t , t ∈ T } is given by anticipate G’’ (as introduced in [11]) are identical.
F X = {F tX , t ∈ T } , This definition can be applied to stochastic pro-
cess: it will be said that stochastic processes are in
where Ft X = s{ X u , u ∈ T , u £ t} , being the a certain relationship if and only if the correspond-
smallest s -algebra with respect to which the ran- ing induced filtrations are in this relationship. For
dom variables X u , u £ t are measurable. The pro- example, (Ft) - adapted stochastic process { X t }
cess { X t } is (F ) -adapted if F tX ⊆ F t for each t . is its own cause if F X = (F tX ) is its own cause
t
The intuitively plausible notion of causality is
given in ([8]) for families of Hilbert spaces (which within F = (F t ) i.e. if F X |< F X ; F ; P.
is a generalization of the notion from ([9]). Now, We shall give some properties of causality rela-
we consider causality between arbitrary filtrations tionship from Definition 2.1 which will be needed
J, G and H. We can say that “G causes J within later.
H” if Lemma 2.2 (compare with [8]) J |< G; H
J∞ ⊥ Η t | Gt ............................. (2) if and only if J∞ ⊆ Η ∞ , G⊆H and
E (J∞ | Η t ) = E (J∞ | Gt ) for each t.
because the essence of (2) is that all informa-
tion about (J∞) that gives (H ) comes via (Gt) for The assertion G|< G; H ; P implies that
t
arbitrary t ; equivalently, (Gt) contains all infor- Gt = Η t ∩ G∞ for every t £ 0 . Also, (Gt) is a fil-
mation from the (Ht) needed for predicting (J∞). tration generated by the continuous martingales of
(2) is equivalent to J∞ ⊥ Η t ∨ Gt | Gt . The last re- the form M t = P( A | Η t ), A ∈ G∞ .
It is easy to see that the following result holds.
lation means that the condition G ⊆ H does not
Proposition 2.1 (compare with [12]) From
represent essential restriction. Thus, it is natural
to introduce the following definition of causality G|< G; F ; P it follows E ( M t | F t ) = E ( M t | G∞ ).
between filtrations.
Definition 2.1 (compare with [8]) It is said that 3. Stochastic differential equations with
G causes J within H relative to P (and written as driving semimartingales
J |< G; H ;P) if J∞ ⊆ Η ∞ , G ⊆ Η and if (J∞) is
Now we consider some kinds of stochastic dif-
conditionally independent of (Ht) given (Gt) for
ferential equations and existence of a weak solu-
each t. If there is no doubt about P, we omit “rela-
tive to P”. tion to these equations. Let (Ω, F, F t , P), t ∈ T
Intuitively, J |< G; H means that, for arbitrary be a filtered probability space with {F t } right
t, information about (J∞) provided by (Ht) is not continuous and complete. We consider the sto-
“bigger’’ than that provided by (Gt). chastic differential equation (1), where the driving
If G and H are such that G|< G; H , we shall process Z = {Z t , t ∈ [0, + ∞) } is m-dimensional
say that G is its own cause within H (compare with
semimartingale (Z0=0) and the coefficient ut ( X )
[10]). It should be mentioned that the notion of sub-
is n × m -dimensional predictable functional (in
ordination (as introduced in [11]) is equivalent to the
the sense of [10]).
notion of being one’s own cause, as defined here.

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Mykland (in [10]) found conditions, in a terms The canonical space of m -dimensional driving
of causality for Z , under which the equation (1)  = D ( R m ) (the space
process Z is the space Ω
would have a regular weak solution. For the stochas- [0,∞ )
of all right-continuous functions with left-hand
tic differential equation (1) (Ω, F, F t , P, X t , Z t ) is limits and with values in R m on [0, ∞) ). The set
a regular weak solution if:
of all continuous functions C[0,∞ ) ( R m ) is a subset
1. m Z ( A) = P ( Z ∈ A) coincides with a prede-
termined measure on the function space on which  = D ( R m ) and is closed. The s -algebra
of Ω [0,∞ )
Z takes values,  = s{Z , s ∈ T } is generated by process Z, so
F
2. X and Z satisfy (1), s

F t =  s{Z r , r„£ s} is natural filtration of the

3. Z is its own cause within F = {F t } relative s >t
to P. process.
The canonical space of n -dimensional solu-
The solution is regular in the sense of [3]. tions is of the form Ω = D[0,∞ ) ( R n ) of all right
The regular weak solution is weakly continuous left-hand limited functions. The s -al-
unique if and only if for every regular solution gebra is generated by process X and the filtration
(Ω, F, F t , P, X t , Z t ) of the equation (1) there is is natural filtration of the process.
We denote by Y the process on Ω of the form
no measure Q on (F ∞X ,Z ) , Q ≠ P on (F ∞X ,Z ) , so
Y = ( Z , X ) , where the first m coordinates are
that (Ω, F ∞X ,Z , F tX ,Z , Q, X t , Z t ) is a regular weak components of process Z and the last n coordi-
solution of (1).
nates are of the process X . Obviously, the joint
The following theorem gives the conditions
canonical space is of the form Ω = Ω × Ω , the s
under which the weak solution of equation (1) is
weakly unique. -algebra is F = s{Ys , s ∈ T } and (Ft) is natural fil-
Theorem 3.1 ([13]) Every weak solution of sto- tration of the Y .
chastic differential equation (1) is weakly unique
The definition of the space L p (Ω, F, P) is car-
if and only if ( X t , Z t ) is its own cause within ried over from [14]. The following theorem gives
F = {F t } relative to P. a solution of the problem (3).
Theorem 3.2 For each extremal regular weak
We now consider the problem solution (Ω, F, F t , P, X t , Z t ) of equation (1) there
is a measurable set A in the function space where
d Xtd= Xu tt =
( Xu)td( X
Z )t d Z t (Z, X) takes values so that (Ω, F, F t , P, X t , Z t ) is
  a n d a n( Z
d , X()Z∈, XA)..∈ A (3)
......
 X 0 =Xx0 = x a regular weak solution of the system (3) and so
that (3) has a weakly unique regular solution.
Proof. The statement that any solution of (1) is
where A is a measurable set. Solution of this
a solution of (3) is obvious if we take for A the
problem and its weak uniqueness are directly con-
nected to extremal regular weak solutions of the set of all possible paths of (Z, X) (that is A = Ω ,
equation (1). An extremal regular weak solution the canonical space). This holds even for non ex-
tremal solutions.
(Ω, F, F t , P, X t , Z t ) is one where it holds that if Suppose that set of objects (Ω, F, F t , P, X t , Z t )
there are measures P1 and P2 on (F ∞X ,Z ) , so that is a regular weak solution of system (3). This solution
is extremal for equation (1) and according to Theo-
P = a1P1 + a2 P2 (a1 , a2 > 0 ) on (F ∞X ,Z ) and so that
X ,Z X ,Z
rem 2.1 in [15], P is extreme if and only if L1 (F ∞Z , P)
(Ω, F ∞ ,F t , Pi , X t , Z t ) , i = 1, 2 is a regular is separable (the set is finite, countably generated or
weak solution, then P1 = P2 = P on (F ∞X ,Z ) . it has a dense subset). So, by [3], P admits an exten-
First, we give some new notions (see [1]). sion from ( F ∞Z ) to ( F ∞Z , X ) and, by Theorem 3.(a) in

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 technics technologies education management

For weak solution by Definition 1.7 in [2] the

[14], measure P is unique on ( F ∞Z , X ) . So, it follows measure P¢ is specified on the canonical space
that the solution (Ω, F, F t , P, X t , Z t ) of system (3)  ,F  , P ) where Z takes values and is satisfied
 ,F
(Ω t
is weakly unique.
Now, we consider stochastic differential equation that and ϕ ( P¢) = P , On the space (Ω, F, F , P¢) , t
Z is a semimartingale and X = b¢ ⋅ Z up to P¢ -eva-
d X t = a t ( X ) d t + b t ( X ) d Z t nescent set. Set
 .............. (4)
X 0 = 0
P¢ ψ = P ⇒ ψ ( P¢) = P,ψ −1 ( P ) = P¢. .......... (5)
We give a new definition of a regular weak so-
lution for this stochastic differential equation driv- There is a projection mapping ϕ : Ω → Ω 
en by semimartingales. First, we consider a weak defined with ϕ (w , w ) = w on the product space
solution for equation (1) (it is a special case of
 
(4)). The following result gives conditions under Ω = Ω × Ω, where is ϕ ( Z ) = Z .
which the equation (1) has at least one solution. On the other side we have
Theorem 3.3 ([2]) The following assumptions (ψ  ϕ ) (w , w ) = ϕ (ψ (w , w ) ) = ϕ (w , w ¢) = w = ϕ (w , w )
imply(ψthe ϕexistence
 ) (w , w )of
=ϕat
 (least
ψ (w ,one
w ) )weak solution
= ϕ (w , w ¢) = w = ϕ (w , w ) and ϕ ( P) = (ψ  ϕ ) ( P ) = ϕ (ψ ( P ) =
for equation (1):
1. the coefficient u is bounded; = ϕ ( P ¢) = P . So, the measure P is specified on
   
2. for all w  ∈Ω , t £ 0, the mapping the canonical space (Ω, F, F t , P) , also.
Because of (5) there is
w → ut ( w , w) is continuous on Ω endowed with
¢ ¢
uniform topology (i.e. the topology with metric m Z ( A) ψ = P ( Z ∈ A) ψ = P( Z ∈ A) = m Z ( A).
δ (w − w ¢) = sup | w − w ¢ | ). On the space (Ω, F, F t , P¢) we have that
t
F Z |< F Z ; F ; P¢ holds, or equivalently,
So, we can prove the following theorem.
Theorem 3.4 Suppose that equation (1) has a ∀A ∈ F <Z∞ P¢( A | F t ) = P¢( A | F tZ ) .......... (6)
regular weak solution. Then, for every coefficient
By well known results in [16] chapter X sec-
bt ( X ) satisfying conditions of Theorem 3.3, equa-
tion 2-a, Z ψ = ψ ( Z ) is a semimartingale on the
tion (4) also has a regular weak solution.
Proof. Introduce the bijective measurable map- space (Ω, F, F t , P) and since, by construction,
ping ψ : Ω → Ω defined by Z ψ = Z .
ψ (w , w ) = (w , w ¢) It is clear that ψ (F tZ ) = F tZ and A ψ = A , so we
where w ¢(t ) = w (t ) − at (w , w ) . have P¢( A | F t )  ψ = P( A  ψ | F t ) = P( A | F t )
Let b satisfy conditions of Theorem 3.3, and according to Theorem 7.6 in [2]. Also,
let b¢ = b ψ −1 ⇒ ψ −1 (bt ) = bt¢ ∨ ψ (bt¢) = bt and P¢( A | F tZ )  ψ = P( A  ψ | F tZ ) = P( A | F tZ ).
Z ψ = Z ⇒ ψ ( Z ) = ψ −1 ( Z ) = Z . Now, from (6) it follows

Since bt ( X ) is a F-adapted process, it is ob- ∀A ∈ F <Z∞ P( A | F t ) = P( A | F tZ ) or

viously ψ (F t ) = ψ −1 (F t ) = F t . Processes at ( X ) F Z |< F Z ; F ; P . Then

and bt ( X ) are defined on Ω . X  ψ = (b ¢  ψ ) ( Z  ψ ) ⇒ ψ ( X ) =
Then b¢ is another F -predictable process on
t
Ω , satisfying conditions of Theorem 3.3. By our = ψ (b ¢) ⋅ψ ( Z ) ⇒ X ¢ = b ⋅ Z ⇒ X − a = b ⋅ Z ⇒ X = a + b
hypothesis, equation X = b¢ ⋅ Z admits a regular
weak solution of the (b ¢) ⋅ψ
= ψform (Ω( Z FX
, F) ,⇒ , P¢¢,=Xb ,⋅ ZZ )⇒
. X − a = b⋅Z ⇒ X = a +b⋅Z
t t t

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 technics technologies education management

up to a P -evanescent set. By construction we 4. X is continuous, (Ft) - adapted process and

have that b¢ ψ = b and X ψ = X − at ( X ) , so satisfy the equation (7) P -a.s., or
t t
(Ω, F, F t , P, X t , Z t ) is a weak solution of equa- X t = X 0 + ∫ a s ( X ) d s + ∫ bs ( X ) d Ws , ∀ t ∈T .
0 0
tion (4).
Condition that bt is bounded implies that the By Theorem 3.1 weak solution of equation (7)
is weakly unique if and only if the solution process
stochastic integral ∫ bs ( X ) d Z s is well defined.
X is its own cause, or F X |< F X ; F ; P . That is so,
Now, we can give a definition of regular weak so-
lution for equation (4). because for weak solution holds (FWt ) ⊂ (F tX ) ,
Definition 3.1 Set of objects
so (FWt , X ) = (F tX ) (see [4, 10, 12, 13]).
(Ω, F, F t , P, X t , Z t ) is a regular weak solution of
equation (4) if 4. Application in hydrology
1. m Z ( A) = P( Z ∈ A) coincides with a prede-
termined measure on the function space on which Theory of stochastic differential equations has
Z takes values,
a wide application in physics, biology, chemistry
and especially in mathematical finance (see [6,7]).
t Many phenomena from the nature are modelled
2. ∫ | a ( X ) | d s < ∞ , and b (X )
0
s t is bounded
by these equations.
(in the sense of Theorem 3.3), The Wiener process is usually not used as a
3. Z is its own cause within F = {F t } relative model for measurable variables, but for random
to P , i.e. F Z |< F Z ; F ; P , influences that are virtually uncorrelated in space
4. X and Z are (Ft)-adapted for each and time, e.g. measurement noise or fluctuations in
input, parameters and boundary conditions which
t ∈ [0,+ ∞) , and satisfy the equation
have much smaller space or time scales than the
t t target variable of interest.
X t = ∫ a s(X ) d s + ∫ b s(X ) d Zs .
0 0 Example 4.1 Because of the actions of many
different influences, weather is highly variable
Example 3.1 One of the most important exam-
and climatic quantities can be considered stochas-
ples is stochastic differential equation driven with
tic processes. Consider, for example, the annual
the Wiener process:
precipitation data, given in [6]. This data exhibits
a Wiener-like behavior of precipitation.
d X t = at ( X ) d t + bt ( X ) d Wt
 ............... (7) Let us now consider a total rainfall at a certain
X 0 = 0 location, over some period. As a physical problem,
a simple stochastic model for the rainfall at a cer-
where at ( X ) ( d -dimensional vector) and
tain location over a period of decades is developed.
bt ( X ) ( d × d matrix) are causal functionals, Wt In this situation, a small time interval may be con-
is d -dimensional Wiener process. By Theorem sidered as one year. Let r (t ) be the total rainfall at
3.4, the object (Ω, F, F t , P,Wt , X t ) is said to be time t where r (0) = 0 for a starting time t = 0 .
a weak solution of (7) when Consider the possible changes in the total rain-
1. Wt is its own cause within (Ft), fall over a very small interval of time ∆t . The pos-
sible changes in the rainfall for time interval ∆t are
2. the process Wt induces a Wiener measure
assumed to be (∆r )1 = γ and (∆r ) 2 = 0 with prob-
mW on Β(C d ) ,
abilities p1 = λ ∆t and p2 = 1 − λ ∆t , respectively.
t0 t0 t0 t0
∫ ∫| a s| (aXs ()Xd )sd|<s ∞|< , ∞, ∫ ∫|0bs|(bXs ()X| ) d| sd<s ∞< ∞ ( P (−Model
2 2
3. P − for total rainfall r (t ) leads to the stochastic
0 0 0
differential equation of the form (see [6]):
(P-a.s.),

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 technics technologies education management

d r (t ) = m d t + s d W (t ) over the advective source region, and U is the mean

 ................ (8) wind speed of air, vertically integrated with spe-
r (0) = 0 cific humidity weighting, transferring water vapor
Let consider the annual precipitation p, that is across the territory.
described by Wiener process. Note that by (8) Variability in general circulation features and
advection was introduced by modelling parameter
r (t + ∆t ) − r (t ) = m ∆ t + s (W (t + ∆ t ) − W (t )). a t as a serially independent random function,
Letting ∆t = 1 the annual precipitation for the a t d t = a d t + s d Wt .....................(11)
i -th year satisfies the model pi = m + s h i for
where Wt stands for the standard Wiener pro-
i = 1,2,... Let mention that by Theorem 3.4 sto-
cess (which represents the meteorological ele-
chastic differential equation (8) has a weak solu-
ments: mean precipitable water content and mean
tion if process of precipitation is caused by itself.
wind speed of air).
It is very well known fact that when are fulfilled
Equation (10) now can be written in a more
all meteorological conditions for the precipitation,
compact form as the stochastic differential equa-
it doesn’t mean that the precipitation will occur.
tion.
Example 4.2 Consider stochastic differential
equation which modell the concentration in a lake: d s t = G ( st ) d t + s g ( st ) d Wt .............. (12)
dC
v = −v K (t ) C + q i n .................... (9) where the drift term is
dt
G ( s ) = a (1 + a b ( s ))(1 − R ( s ) ) − bb ( s )
where the random process K(t) is a stationary
process (and it may depend on temperature, which and diffusion term is g ( s ) = ab ( s ) (1 − R( s ) also
fluctuates in the order of weeks or even months).
However, suppose it is meant to incorporate the Pa Ep
a= ,b =
influence of turbulence on the decay rate. n Zr nZ r
The long-term (non-seasonal, continuous time)
areal-mean soil moisture balance equation at con- So, by Theorem 3.4, for the stochastic differ-
tinental scales is written as ential equation (12) soil moisture is characterized
by stochastic processes of the precipitation and the
ds wind speed that are caused by itself.
nZ r = P ( s ) (1 − R( s ) ) − E ( s ) ........... (10)
dt Remark 4.1. The consequence of
where s is relative soil saturation (dimension- F X , Z |< F X , Z ; F ; P is
less); n soil porosity (dimensionless), Zr hydrolog-
ically active depth of soil; P(s), rainfall rate; R(s), ∀A ∈ F <X∞,Z P( A | F tX ,Z ) = P( A | F t ) ,
runoff ratio (dimensionless); and E(s) evapotrans-
piration rate. which links Granger-causality with the con-
The rainfall over large regions is made up of cept of adapted distribution which have been
two components: 1) the advective precipitation Pa studied by D.J. Aldous (Weak Convergence and
resulting from the flux of external (advective) wa- the General Theory of Processes, Unpublished
ter vapor formed by evaporation outside the given manuscript), D.N. Hoover (Synonymity, General-
territory, and 2) the internal component Pm, result- ized Martingales and Subfiltrations, Ann. Prob.,
ing from the flux of water vapor formed by local 12, (1984), 703-713) and D.N. Hoover and J.H.
evaporation; and therefore dependent on soil mois- Keisler (Adapted Probability Distributions, Trans.
ture. The atmosphere overlying the land surface has Am.Math.Soc., 286, (1984), 159-201).
an advective moisture influx WU where W is the
mean precipitable water content of the atmosphere

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 technics technologies education management

References 15. Stroock DW, Yor M. On Extremal Solutions of Mar-

tingale Problems, Ann. scient. Ec. Norm. Sup., t.
1. Jacod J, Weak and Strong Solutions of Stochastic Dif- 1980; 13: 95-164.
ferential Equations, Stochastics, 1980; 3: 171-191.
16. Jacod J. Calcul Stochastique et Problemes de Mar-
2. Jacod J, Memin J. Existence of Weak Solutions for tingales, Lecture Notes, Berlin, 1979.
Stochastic Differential Equation with Driving Semi-
martingales Stochastics, 1981; 4: 317-337.
Corresponding Author
3. Lebedev VA. On the Existence of Weak Solutions for Dragana Valjarevic,
Stochastic Differential Equations with Driving Mar- Faculty of Science,
tingales and Random Measures, Stochastics, 1981; Department of Mathematics,
9: 37-76. Kosovska Mitrovica,
Serbia,
4. Mykland Per A. Stable subspaces over regular solu- E-mail: dragana_stan@yahoo.com
tions of martingale problems, Report No.5, Univer-
sity of Bergen, 1986.

5. Granger CWJ. Investigating Causal Relations by

Econometric Models and Cross Spectral Methods,
Econometrica, 1969; 37 : 424-438.

6. Allen E. Modelling with Ito Stochastic Differential

Equations, Springer, New York.

7. Wang J, Bras R, Entekhabi D. Structure in fluctua-

tions of large-scale soil moisture climate due to
external random forcing and internal feedbacks, Sto-
chastic Hydrology and Hydraulics, 1997; 11: 95-114.

8. Petrović Lj. Causality and Markovian Reductions

and Extensions of a Family of Hilbert Spaces, J.
Math. Systems, Estimat. Control, 1998; 8( 4): 12.

9. Gill JB, Petrović Lj. Causality and Stochastic Dy-

namic Systems, SIAM J. Appl. Math. 1987; 47(6):
1361-1366.

10. Mykland Per A. Statistical Causality, University of

Bergen, 1986.

11. Rozanov Yu A. Innovation Processes, V. H. Winston

and Sons, New York, 1977.

12. Petrović Lj. Stanojević D. Statistical Causal-

ity, Extremal Measures and Weak Solutions of
Stochastical Differential Equations With Driving
Semimartingales, J.Math.Model.Algor. 2010; 9:
113-128.

13. Petrović Lj, Stanojević D. Some Models of Causal-

ity and Weak Solutions of Stochastic Differential
Equations with Driving Semimartingales, Facta
Universitatis, (Niš), Ser. Mathematics and Informat-
ics, 2005; 5: 103-112.

14. Lebedev VA. Behavior of Random Measures Under

Filtration Change, Theory Prob. Appl., 1997; 40:
645-652.

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 technics technologies education management

Macroeconomic stability and competitiveness

of the Republic of Serbia
Radmilo Nikolic, Aleksandra Fedajev, Zvonko Damnjanovic, Dejan Riznic
University of Belgrade, Technical faculty in Bor, Serbia.

Abstract the same time preserving and long-term increas-

ing the actual income of the population. A coun-
Continuous improvement of a national econo-
try’s competitiveness level is based on more supe-
my’s competitiveness in regional and global sur-
rior productivity of a certain country.
roundings is one of the major imperatives of the
To evaluate the level of competition is neither
contemporary economies. Competitiveness is de-
easy nor simple, since numerous and complex fac-
fined as a set of factors, policies and institutions
tors affect the competitiveness of an economy. The
which determine the level of a country’s produc-
most often used indicators of competitiveness are
tivity, whereas the level of productivity deter-
published in the World Economic Forum’s Global
mines the sustainable level of development which
Competitiveness Report.
an economy can achieve. The Global Competi-
One should keep in mind that competitiveness
tiveness Index – GCI is most often used as indica-
is affected by both macroeconomic and microeco-
tor of competitiveness of particular country, for-
nomic factors. However, in practice it is difficult to
mulated by the members of the World Economic
distinguish microeconomic from macroeconomic
Forum, who classify competitiveness factors into
factors. The success of enterprises, among other
three categories: heritage and natural resources,
things, depends on the efficiency of the public
macroeconomic competitiveness and microeco-
institutions, the quality of the education system,
nomic competitiveness. The aim of this paper is to
as well as on the overall macroeconomic stability
observe the state of macroeconomic competitive-
in the country where they operate [1]. Unlike mi-
ness factors, primarily the level of macroeconom-
croeconomic, macroeconomic factors indirectly
ic stability, based on changes of macroeconomic
contribute to the level of productivity of the firms
indicators in the Republic of Serbia in the period
in a country. These factors create conditions for
from 2007 to 2010, and therefore to indicate com-
increasing the productivity, but have no effect on
petitive position and comparative advantages of
whether the company will really take advantage of
Serbian economy at the global level.
any favorable macroeconomic conditions or not.
Key words: macroeconomic stability, foreign
Macroeconomic stability in Serbia, as a coun-
and domestic imbalances, competitiveness.
try in transition, was primarily influenced by the
delayed and accumulated transitional problems,
1. Introduction political risks, reduction in aggregate demand, in-
In contemporary conditions of doing business, sufficient foreign direct investments, foreign trade
issues of improving competitiveness and securing imbalance and considerable lack of liquidity in the
more favorable national business environment are conditions of the global economic crisis.
getting more and more significance, especially af-
ter world economic crisis. That particularly refers 2. Macroeconomic stability in the Republic
to inadequately developed countries, in which the of Serbia
escape from being economically backward is seen
in an increase of the share in international trade. An insight into macroeconomic factors of com-
In other words, in free and equal marketing con- petitiveness is based on the analysis of macroeco-
ditions, national competitiveness is a measure of nomic indicators, as well as insight to actions of
a country’s ability to produce goods and services macroeconomic policy in the observed economy.
which undergo a test of international market, at Determining the basic macroeconomic indicators

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 technics technologies education management

is based on four key macroeconomic sectors: real, previous period. GDP per capita recorded a sig-
financial, public and external sector, whereas, in nificant growth ending in 2008, and then a decline
framework of macroeconomic policy it must be after that period, which was a result of the coun-
followed, above all, actions of monetary, fiscal try’s economic activity decline, on one side, but
and foreign trade policy [2]. also of the depreciation of the dinar against the
Real sector - Indicators which indicate the state euro, on the other side [3].
in real sector of economy are: It is significant to emphasize that economic
1. Indicators of national production, growth up to 2008 had been based on the expan-
2. Indicators of price increase i.e. inflation and sion of domestic demand which had been financed
3. Indicators of employment and wages. and encouraged by the considerable inflow of the
foreign capital. However, the world economic crisis
Among macroeconomic aggregates, indicators caused a fall in the demand through a decrease of
of production have by far the greatest significance. public and personal consumption and reduced cred-
Industrial production in the Republic of Serbia in its, which together with the decreased export, due to
the period 2007-2010, is not at a satisfactory level. the lower import demand in the world economies,
The biggest decline was in 2009, when industrial in 2009 led to the fall of GDP by 3.1%. A decline of
production decreased by 12% compared to the foreign capital inflows also has a significant influ-
previous year (Table 1). ence on GDP decrease, as a result of the investors
After that, in 2010, there was a slight increase in caution and worsening state in the world financial
production by 3%. Agricultural production shows markets. The above mentioned increase in demand
the largest growth in 2008 by 8.5%, but after that was not followed by a corresponding expansion in
the production significantly decreases, recording production, primarily in sectors whose products are
negative growth rate of 1.7% the following year. intended for export, such as manufacturing indus-
An average growth rate of GDP in the Republic of try. That is why economic growth should be based
Serbia in the observed period was merely 3.24%. on encouraging the development and increasing of
At the beginning of this period a slight increase production especially in these sectors of industry in
of GDP was recorded, which was interrupted in the future. Therefore, competitiveness of domestic
2009 due to the escalation of the world economic production should be one of the priorities of eco-
crisis. Afterwards, the growth of GDP is recorded nomic policy. Besides, according to ownership
again, but this time at the rate of 1.5%, which was sectors, the structure of GDP was changed. Private
considerably lower than the rates achieved in the sector participation in creating the GDP increased

Table 1. Economic activity in the Republic of Serbia in the period 2007-2010

Indicators of national production 2007 2008 2009 2010
Indices of physical volume of production
− Industry 3.7 1.1 -12.1 3.0
− Agriculture -8.0 8.5 1.0 -1.7
BDP u mil RSD
GDP in mil of RSD
− in current prices 2,302 2,723 2,815 3,034
− in constant prices 1,282 1,352 1,310 1,333
GDP, in 000 USD 39,389 48,834 41,649 38,707
Real growth of GDP (in %) 6.9 5.5 -3.1 1.5
GDP per capita
− in RSD 311,886 368,817 381,354 411,203
− in USD 5,336 6,647 5690 5233
Structure of GDP per sectors of property
− Private sector 55 60 60 60
− Public sector 45 40 40 40

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in 2008 from 55 to 60% and remained at that level number of employees in the social and public sector
until the end of 2010. lost their jobs due to restructuring and privatization
Another important indicator which reflects the of enterprises. In addition, the whole observed peri-
condition in the real sector of economy is the level od is characterized by high, double-digit unemploy-
of inflation in the country. Monitoring the flow of ment rates. It is the lowest in 2008 being 14.4%.
inflation rates in the Republic of Serbia in the ob- Then, in 2010, the unemployment rate increased to
served period, it can be concluded that price stability as much as 20%, thus approaching the unemploy-
in the period 2007-2010 was not at the satisfactory ment rate at the beginning of the period.
level. The average of total inflation rate was 8.44%. Real growth rate of wages in the whole ob-
Inflation rates varied from year to year under the in- served period was positive, but it can be noticed
fluence of various factors, so that no stable, single- a trend of slowing down of its growth, especially
digit inflation rate was achieved (Table 2). since 2008. Namely, the real growth rate of wag-
As from this Table 2 can be seen, in the period es in the period was the highest in 2007. Then, it
2007-2010, periods of single-digit and double- reports a sudden decline in 2008, by as much as
digit inflation alternated. Double-digit inflation 15.6%, and after that, considerably lower rates of
rates in 2007 and 2009 were primarily a result of wages growth were achieved. Such trend of real
the increase of the regulated prices, especially oil, wages was considerably influenced by the increase
electricity and food, as well as the increase of their in retail prices, as well as depreciation of the dinar
share in the consumer prices index. against the dollar [5]. Also, wages in the Republic
While analyzing macroeconomic situation in of Serbia are among the lowest in the region and
a particular economy, it is necessary to consider are below the average consumer goods basket. It
another important segment of the real sector of should be noted that, during 2007, the labor pro-
economy - the labor market. Labor market in Ser- ductivity rate was considerably below real growth
bia in the observed period is characterized by a rate of wages. That should include the fact that
high level of unemployment and the decrease of real wage growth by the end of 2009 was above
the real growth rate of wages (Table 3). the real growth of GDP so, as a result of this, there
Employment rate records growth in 2007 and was a significant increase of aggregate demand
2008, and after that it starts to decline, so that in and import, causing inflationary pressure and gen-
2010 it reaches the level of 47.2%. The decrease erating a current account deficit, which reflected
of employment rate is result of world economic negatively on the economy competitiveness.
crisis which affected the total economic activity, Financial sector - Since August 2006, The Cen-
and therefore the labor market, too. Besides, a large tral Bank, in its conducting the monetary policy,

Table 2. Inflation in the Republic of Serbia in the period 2007-2010 (in %) [4]
Change of prices indicator 2007 2008 2009 2010
Total inflation (in %) 10.1 6.8 10.4 8.3
Core inflation (in %) 7.9 10.8 3.6 8.6
Consumer prices – CPI (in %) 11.0 8.6 6.6 10.3
Regulated prices (in %) 14.3 3.8 18.8 10.3
Share of regulated prices in CPI (in %) 5.7 5.8 5.9 6.0
Table 3. Employment and earnings trend in the Republic of Serbia in the period 2007-2010
Employment and earnings 2007 2008 2009 2010
Employment rate (in %) 51.5 53.7 50.4 47.2
Unemployment rate(in %) 18.8 14.4 16.9 20.0
Average net wages (in RSD) 27,759 32,746 31,733 34,009
Average net wages(in USD) 414.25 587.27 470.33 436.52
Real rates of the wages growth (in %) 19.5 3.9 0.2 0.7
Labor productivity rate 8.1 5.6 2.6 5.8

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shifted from targeting the exchange rate, as the food prices and the significant depreciation of the di-
main instrument of monetary policy, to targeting nar against the USD. In addition, throughout the pe-
the interest rate, by adopting the Memorandum on riod, the money supply i.e. the monetary aggregate
principles of a new monetary policy framework. M3 recorded a constant nominal growth, primarily
The key policy rate in 2007 was estimated at 10%, due to the increased foreign currency deposits and
after which it was changing in accordance with eco- significant exchange rate differentials. Savings in
nomic activity and inflation projections (Table 4). commercial banks were increased. At the end of
The highest level of key policy rate was 2010 they were 9,400,100,822 USD, mainly in for-
achieved in 2008 due to the escalation of the glob- eign currencies. Along with that, at the beginning of
al economic crisis and, in this regard, due to the 2011, the country’s credit rating was improved from
strong inflationary expectations. The interest rate “BB-” to “BB”, but it is still below the investment
spread, with some oscillations, tends to decrease credit rating. This will enable lower cost of borrow-
in 2009 and 2010 compared to 2008, which coin- ings in the international financial market but also the
cides with the improvement of credit rating of the prospects for investing in Serbia.
Republic of Serbia, but is still high. Until mid-2006, the National Bank of Serbia
With the first signs of recovery, the National Bank had had a policy of managed floating exchange
of Serbia began to lead a mild expansionary mone- rate, shifting to floating exchange rate regime af-
tary policy, gradually reducing the key policy rate in ter that. In 2008, it was achieved the significant
2009, so by the end of the year it was 9.5%. The key appreciation of the dinar against the dollar which
policy rate reduction was achieved thanks to the fa- was the result of significant inflows of foreign di-
vorable balance of payment, a stable exchange rate rect investment as well as the increased borrow-
and decline in aggregate demand. After that, the Na- ing of the companies and commercial banks. Such
tional bank of Serbia initiated more restrictive mon- exchange rate flows had a calming effect on infla-
etary policy by increasing rate of required reserve tionary pressures in the given period. Then, in the
and key policy rate, to curb inflationary pressures period 2009-2010 there was a significant decrease
which began in 2010, primarily due to increase of in the inflow of foreign capital and, in this regard,

Table 4. Monetary indicators in the Republic of Serbia in the period 2007-2010

Monetary and Foreign Exchange
2007 2008 2009 2010
Indicators
Money supply M3, millions of RSD 903,871 992,151 1,205,570 1,361,526
The rate of national savings 12.21 7.68 15.21 14.84
Reference interest rate of National Bank
10.00 17.75 9.50 11.50
of Serbia, end of period
Interest rate spread 7.05) 10.79 6.46 7.27
RSD/USD, end of period 53.73 62.90 66.73 79.3
S&P and Fitch: S&P and Fitch: S&P and Fitch: S&P: and Fitch:
Country’s credit rating
BB-/stable BB-/negative BB-/stable BB-/stable
Table 5. Fiscal indicators in the Republic of Serbia in the period 2007-2010 [8]
Fiscal Indicators 2007 2008 2009 2010
Public revenues, millions of RSD 1,002.0 1,143.6 1,146.5 1,223.4
Public expenditure, millions of RSD 1,046.8 1,214.0 1,267.9 1,359.9
Consolidated fiscal result , millions of RSD -44.8 -70.4 -121.4 -136.5
Consolidated fiscal result (% of GDP) -2.0 -2.6 -4.3 -4.5
Total public debt, USD1) mill. 13,065.3 12,221.2 14,189.1 16,244.2
Public debt (% GDP) 31.4 26.3 32.9 40.7
External debt, USD2) mill. 25,230.3 29,348.2 32,394.8 31,782.9
External debt (% GDP) 59.5 63.1 75.0 79.6

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the depreciation of the dinar against the dollar, of economic competitiveness, insufficient produc-
which was obviously based on fluctuation in both tion of goods for export, inadequate economic
the average exchange rate and the exchange rate policies and more.
at the end of the year. This caused the increase in Due to the effects of the world economic cri-
imports simultaneously with the reducing exports, sis, in 2009 there was a significant decrease of
which led to a significant current account deficit. foreign capital inflow, depreciation of the dinar,
Public sector - Public sector in the Republic of decline in foreign trade, and therefore a reduction
Serbia is characterized by accelerated growth of of the foreign deficit. Export-import coverage ra-
public expenditure in relation to the government tio was increased from 45.1% in 2008 to 58.6%
revenues, resulting in significant increasing of the in 2010. The degree of openness of the economy,
budget deficit (Table 5). as the ratio of the sum of exports and imports to
During the observed period, the budget defi- GDP, is ranged to 75-89% of GDP. Considering
cit increased 3 times. Moreover, its share in GDP the fact that a degree of openness for the countries
had a tendency to increase from 2% in 2007 to of similar size typically varies to 50-80%, it can be
4.5% in 2010. It should be noted that the Repub- concluded that the openness of Serbian economy
lic of Serbia in 2009 exceeded the limit of fiscal in the observed period was at a high level. But, it
deficit growth by 3% of GDP prescribed in the should borne in mind that the structure of foreign
Maastricht Treaty. In addition, the share of pub- trade dominated by import, so it can be concluded
lic expenditure exceeds 40% of GDP. Until 2008, that the increasing openness was achieved primar-
public debt of the Republic of Serbia has a trend ily due to the increased import (Table 6).
of decreasing both in absolute and relative terms, The overall balance of payments recorded a neg-
as a share of GDP, and after that start to growth, ative trend until 2009, when it recorded a surplus
so in 2010 reaches the level of 40.7% of GDP. At of 3.337 billion dollars. Afterwards, there is wors-
the same time, there is a growth in external debt, ening in balance of payment again, due to the net
which, at the same year, amounts to 79.6% of capital outflows and the reduced inflow of foreign
GDP. The achieved level of the budget deficit and investments, which resulted in the current deficit of
external debt is unsustainable in the light of eco- 1.189 billion dollars in 2010. To increase foreign
nomic stability which greatly affects international trade in the future, it is necessary to increase eco-
competitiveness of Serbian economy [6, 7]. nomic activity and the export of products of higher
External sector – In the field of foreign trade processing level as well as reduce exports of raw
the balance is negative. There is a high level of materials and intermediate products. In order to
foreign trade deficit due to significantly greater achieve this goal, it is primarily necessary to ensure
import compared to export, but also due to a faster a substantial inflow of direct foreign investments,
increase of import compared to export increase. considering that their amount is significantly re-
Such situation is, above all, a result of low level duced in 2009 and 2010. Namely, the inflow of for-

Table 6. Foreign trade exchange and the state of balance of payments in the Republic of Serbia in the
period 2007-2010 [9]
Indicators of external position of the country 2007 2008 2009 2010
Exports of goods, USD mill. 8,756.4 10,957.4 8,365.1 9.808.0
Imports of goods, USD mill. -18,477.7 -23,503.2 -15,485.5 -16,142.7
Current account balance, USD mill. -6,931.7 -10,438.8 -2,858.9 -2,794.9
Export-import ratio coverage (in %) 47.92 47.96 51.96 59.22
Balance of payments, USD mill. 1,022.3 -2,349.9 3,337.0 -1,189.0
Balance of payment (% GDP) 2.6 -5.1 7.9 -3.2
Degree of openness of the economy 84.3 83.9 75.2 88.3
Foreign exchange reserves of National Bank Of
14,220.5 11,398.0 15,273.2 13,364.7
Serbia, USD mill.
Foreign direct investment, net in 000 USD 2,523,220 2,717,551 1,864,753 1,156,762

Volume 8 / Number 4 / 2013 1747

 technics technologies education management

eign investments in the period from 2008 to 2010 is with economic trends in Republic of Serbia. Name-
reduced by 54.16%, i.e. from 2.52 billion as was in ly, in 2008 the value of GCI increased from 3.78
2008 to 1.16 billion dollars in 2010. in 2007, to 3.90 in 2008 i.e. by 3.18%, and just a
year later it fell to 3.77, due to the effects of the
3. The achieved level of competitiveness of global economic crisis, being almost equal to its
the Serbian economy value in 2007. In this way some progress, which
was achieved in 2008, was neutralized. After that
One of the most commonly used indicators of in 2010, the value of GCI was increased by 1.86%
competitiveness is the Global Competitiveness In- compared to 2009, amounting to 3.84, which is the
dex, which is published each year in the reports value approximately realized in 2008. All this sug-
of World Economic Forum. In the report of the gests that in the observed period there was no sig-
World Economic Forum for 2010, the Republic nificant progress in the field of competitiveness.
of Serbia, according to GCI, occupies the 96th The other countries in the region which are
position among 139 ranked countries, with the at the second level of development are Albania,
total score of 3.84. Since the number of covered Bosnia and Herzegovina, Bulgaria, FYR Mace-
countries from year to year has been changing, in donia, Montenegro and Romania. If we compare
order to gain an insight into the progress of the the state of competitiveness of efficiency-driven
Serbian economy in the field of competitiveness, economies in the region, we come to the situation
it is necessary to perceive how the value of GCI shown in the Table 8.
was changing in this period (Table 7). If we observe the column containing the data
Table 7. GCI in the Republic of Serbia in the pe- for the Republic of Serbia, it is evident that the top
riod 2007-2010 ranked sub-index is health and primary education
Year 2007 2008 2009 2010 (50th position) and the worst are for goods market
GCI Values 3,78 3,90 3,77 3,84 efficiency and sophistication of business process-
es, both at 125 position. In addition, it should be
It may be noted that the value of GCI in the ob- noticed that also for three very important sub-indi-
served period varied cyclically and in accordance ces the rank is lower (being higher than 100) and
Table 8. Competitiveness of the efficiency-driven economies in the region in 2010 [10]
GCI and factors affecting the Country
GCI SRB BIH MNE MAC ALB ROM BUL
GCI 96 102 49 79 88 67 71
Institutions 120 126 45 80 63 81 114
Infrastructure 93 98 67 91 89 92 80
Macroeconomic environment 109 81 37 47 101 78 42
Health and primary education 50 89 33 69 56 63 58
Higher education and training 74 88 52 72 84 54 67
Goods market efficiency 125 127 44 57 63 76 82
Labor market efficiency 102 94 39 71 63 76 58
Financial market development 94 113 28 87 100 81 91
Technological readiness 80 85 44 64 72 58 48
Market size 72 93 129 106 103 43 63
Business sophistication 125 115 70 96 87 93 95
Innovations 88 120 45 97 121 87 92
The best rank in the region
The worst rank in the region
The best rank in the country
The worst rank in the country

1748 Volume 8 / Number 4 / 2013

 technics technologies education management

these are: institutions (120th position), macroeco- Unfavorable macroeconomic stability substan-
nomic stability (109th position), and labor market tially contributed to the low level of economic
efficiency (102nd position). competitiveness. The Republic of Serbia, accord-
ing to the GCI in 2010 takes the 96th position, out
4. The relationship between macroeconomic of 139 analyzed countries, with the total score of
stability and competitiveness of the 3.84. Also, out of 16 countries of the Central and
Serbian economy Southeastern Europe, which are in the process of
transition to Serbia, according to its competitive-
Macroeconomic stability has a large economic ness, takes the 15th position, the penultimate po-
impact on doing business of domestic companies sition before Bosnia and Herzegovina. This state
and thus on the competitiveness of the economy. is, besides macroeconomic factors, is greatly in-
Macroeconomic indicators of Serbian economy co- fluenced by the weaknesses in certain areas such
incides with the trend of the macroeconomic stabil- as: goods market efficiency, business sophistica-
ity sub-indicator score, which is shown in Table 9. tion and especially the institutional environment
Table 9. Sub-indices of macroeconomic stability – expressive government regulation, weak legal
in the Republic of Serbia in the period 2007-2010 system, judicial inefficiency, corruption and insuf-
Year 2007 2008 2009 2010 ficient application of antitrust legislation.
Macroeconomic stability 4,61 4,72 3,88 4,05
References
Based on the data from Table 9 and previous anal-
1. Őnsel Ş, Űlengin F, Ulusoy G, Aktaş E, Kabak Ő,
ysis of macroeconomic stability in Serbia, it can be
ĺlker TY. A new perspective on the competitiveness of
concluded that by 2008, in the period of slight rise nations. Socio-Economic Planning Sciences,2008;
of economic activities in Serbia and improvement 42(4): 221-246.
of most macroeconomic variables, macroeconomic
stability sub-indicator was growing. Then, with the 2. Nikolic R, Fedajev A, Svrkota I. Serbian economy in
worsening of the economy performance during the transition period. Economics Management Informa-
tion Tehnology (EMIT),2012; 1(1): 1-19.
global economic crisis in 2009 this sub-indicator
shows a significant decline. With the index 4.72 in 3. Fedajev A, Nikolic R, Uroševic S. Macroeconomic
2008, when it reached its highest value in the ob- stability in Serbia in the period of 2006-2010. 1st
served period, sub-index of macroeconomic stability International Conference “Economics and Manage-
decreased to mere 3.88 in 2009, reaching its lowest ment–Based on New Tehnologies (EMoNT), Vrnjacka
level in this period. After that, with the improvement banja, Serbia, 2011; 222-231.
of macroeconomic performances, there is a slight in-
4. The National Bank of the Republic of Serbia, The
crease in GCI, as it was already shown in Table 7. report on inflation, Belgrade. http://www.nbs.rs/in-
ternet/ english/90/ioi.html. 2011.
5. Conclusion
5. Robajac A, Momirovic D. The influence of taxes for
The economic reality of the Republic of Ser- added value on the movement of the general level of
bia today is characterized, among other things, prices in the Republic of Serbia. Singidunum review,
by unfavorable macroeconomic stability and low 2011; 8(1): 97-106.
competitiveness of the economy. Such a condition
6. Dašić P. Approximation of cutting tool wear function
is present in a rather long period. The economic
using polynomial regression equation. Journal of
crisis made the problems more complex and deep- Research and Development in Mechanical Industry
ened the already present imbalances and risks. De- (JRaDMI), 2011; 3(3): 171-180.
spite some progress in certain segments, the mac-
roeconomic environment is still not at a high level. 7. Dašić P. Application of polynomial regression mod-
Out of 139 covered countries, Serbia, according els for approximation of time series. Journal of Eco-
nomic and Management Based on New Technologies
to the macroeconomic stability in 2010 was at the (JEMoNT), 2012; 1(2): 81-140.
109th position with the score 4.05.

Volume 8 / Number 4 / 2013 1749

 technics technologies education management

8. The data of the Ministry of Finance of the Repub-

lic of Serbia, http://www.mfin.gov.rs/pages/issue.
php?id=3.

9. The data of the Statistical Office of the Republic of

Serbia, http://webrzs.stat.gov.rs/WebSite/public/Re-
portView.aspx.

10. Schwab K, Martin XS, Greenhill R. The global

competitiveness report 2010-2011. Geneva, World
economic forum, http://www3.weforum.org/docs/
WEF_GlobalCompetitivenessReport_2010-11.pdf.
2010.

Corresponding Author
Aleksandra Fedajev,
Technical Faculty in Bor,
University of Belgrade,
Serbia,
E-mail: afedajev@tf.bor.ac.rs

1750 Volume 8 / Number 4 / 2013

 technics technologies education management

Analysis of contributions as the primary source

of funding compulsory social insurance in Serbia
Mirjana I. Stevanovic1, Aleksandar Gajic2, Dragan Mihajlovic3, Milorad S. Gajic4
1
Faculty of Business Economy and Entrepreneurship, Serbia,
2
Academy of Economics and Security, Belgrade, Serbia,
3
Megatrend University, Faculty of Management, Zajecar, Serbia,
4
Megatrend University, Faculty of Business Studies, Pozarevac, Serbia.

Abstract to pay, the benefit of an individual or a family

member, the funds raised are earmarked and de-
Serbia is still in transition, in the midst of the
termined in advance, the amount of compensation
global economic crisis, falling living standards,
and rights depend on the contributions paid, ben-
falling gross domestic product, higher imports than
efits and rights shall be exercised after the expira-
exports, falling industrial production, and a further
tion of a period of time (retirement, illness, unem-
increase in inflation, growth of unemployment ...
ployment). Social security contributions include:
Thus total contribution rate is high. The facts are:
pension and disability insurance, health insurance
increased number of unemployed persons (at the
and unemployment insurance. In many countries
end of 2009 the number of unemployed persons
the pension and disability insurance is organized
registered with the National Employment Service
as a public, obligatory and private, voluntary in-
was 737.160 persons), year 2009 recorded a dras-
surance [1-4]. Switzerland combines the compul-
tic decline in the number of employees at an aver-
sory public pension insurance fund with 40% and
age of about 14,000 workers per month losing their
private fund, whereas Germany only applies com-
jobs, increased number of employees working un-
pulsory public pension insurance fund (Figure 1).
registered (people working with employers, but not
registered, approximately about 600.000 of them),
Country Type of pension scheme
more employers late with contributions payments
(private employers, state authorities and local gov- Compulsory public pension insurance
ernments as well as public companies), or even a fund covers the pension of 40% of
Switzerland
average salary and is complemented by
general failure to pay contributions for registered
private fund
workers (we have cases of employees working five
years for an employer who has never paid a penny Compulsory public pension insurance
Germany
fund
of contributions to any of them), lack of cooperation
Figure 1. Representation of pension scheme
between tax authorities and branches of the pension
models in selected countries
and social insurance considering the number and
records of registered workers. All this supports the
The following table shows the average amount
fact that contribution rates should be reduced.
of pension in the average taxable income in se-
Key words: contributions, obligation to pay,
lected countries of the European Union. If we look
contribution rates, contribution base, tax exemp-
at the year 2000 as the basis, one can see that till
tions, penalty provisions
2030, Germany does not predict the increase of
participation of the average pension amount in the
1. Introduction average taxable income, while Sweden, Greece,
Contributions are the primary source of fund- Austria predict the increase of 1% (Table 1).
ing the compulsory social insurance (pension and During the adjustment of pensions economic
disability insurance, health insurance and unem- trends are taken into account and the pensions
ployment insurance). General characteristics of are adjusted in relation to the amount of average
contributions are the following: the obligation earnings and trends in retail prices. The following

Volume 8 / Number 4 / 2013 1751

 technics technologies education management

figure shows the methods used in the adjustment vour and on the behalf of the insured. The insurant is
of pensions in selected European Union countries. a natural person compulsory insured under the laws
Austria applies the method of net earnings trends, governing the system of compulsory insurance. The
while Sweden applies the method of retail price- employee is an insurant - a natural person that per-
earnings trends (Figure 2). forms work for the employer under the laws govern-
Table 1. Participation of the average amount of ing labor relations. Contribution base for employ-
pension in the average taxable income in selected ees and employers is a salary and fringe benefits, or
countries of the European Union (%) [5] salary in accordance with the law governing labor
Country 2000 2010 2020 2030 relations, general act or contract. The basis of contri-
Austria 46,6 47,4 47,4 47,6 butions cannot be lower than the minimum monthly
France 48,7 47,1 contribution base, which is the amount of 35% of
Germany 33,5 33,5 33,5 33,5 the average monthly salary in the Republic paid in
Greece 40,6 41 41,3 41,3 the previous quarter. Contribution base for entrepre-
Sweden 30,3 29 30 31,4 neurs is taxable income or lump sum determined by
Great Britain 40 35 33 30 income that is taxed by the law governing personal
income tax. Until the final determination of taxable
Country Adjustment method income for the current year, entrepreneurs pay a
Austria Net earnings trend monthly advance contribution to the base consist-
France Retail price trend ing of the base for a monthly advance payment of
Germany Net earnings trend income tax. The following table presents the move-
Greece Earnings trend ment of the lowest monthly basis for pension and
Sweden Retail price trend – earnings disability insurance from 2000 to 2009 (table 2).
Great Britain Earnings trend Table 2. The movement of the lowest monthly ba-
Figure 2. Methods of adjusting pensions in the sis for pension and disability insurance from 2000
selected countries of the European Union [5] to 2009 [6,7]
Year The lowest monthly basis
2. Contribution basis and rate trend from 2000 3.799,00
2000 to 2009 2001 8.691,00
2002 13.260,00
Contributions are based on the following prin- 2003 14.923,00
ciples: the principle of legality – means that they 2004 14.925,83
can be introduced only by law, that the law defines 2005 9.473,08
taxpayers, rate, basis, tax exemption cases, guaran- 2006 11.806,00
tees legal certainty, the principle of obligation – it 2007 12.879,33
is compulsory for all natural and legal persons, the 2008 15.217,25
principle of elasticity – means that contributions are 2009 15.797,75
adjusted, that they can increase or decrease, the prin-
ciple of proportionality – contributions paid accord- Approximation of the data in Table 2 was car-
ing to proportional rates, the principle of earmarked ried out based on the methodology described in
use – means that all funds are used exclusively to the works [8, 9], using a software package CoP-
finance the functioning of social insurance. Types of 2TV [10]. The polynomial of 4th degree has shown
contributions: for pension and disability insurance, to be the adequate model for the approximation of
for health insurance, for unemployment insurance. these data (Figure 3).
The contribution payer is an insurant and the em- Based on the monthly movement of the base it
ployer or income payer, against whom the contri- can be seen that there are fluctuations depending
bution is paid. Account payer, who calculates and on the year. When all values are taken into account
pays contributions, is the insured and the employer through the regression line it is evident that the fu-
or other payer of income who is required to account ture values will increase. That is, the value of one
for and pay contributions on their own behalf or fa- causes the increase in the value of another. Corre-

1752 Volume 8 / Number 4 / 2013

 technics technologies education management

lation coefficient is R=0,93147 and coefficient of The highest monthly contribution base is five
determination is R2=0,86764 which means that the times the average monthly salary paid per employ-
relationship of the two is strong (figure 3). ee according to the latest published data from the
authorities responsible for statistics, and it is ap-
plied from the first day of the following month after
the publication of the data on average monthly sal-
ary paid off per employee in the Republic. The rates
for calculating and paying the contributions are the
following: for the compulsory pension and disabil-
ity insurance 22%; for the compulsory health insur-
ance 12,3%; for unemployment insurance 1,5%.
The following table presents the movement of
the rate at which contributions were calculated in
the period from 2000 to 2010.
Figure 3. The movement of the lowest monthly When contributions are paid from the base and to
basis for pension and disability insurance from the base at the same time, the calculation of the con-
2000 to 2009. tribution is made according to the following rates
(paid by employer and employees): for the compul-
Based on the regression equation the value of sory pension and disability insurance 11%; for the
future monthly basis can be calculated. The fol- compulsory health insurance 6,15%; for unemploy-
lowing table gives the projection of the monthly ment insurance 0,75%. Total contribution rate (paid
base for pension and disability insurance from by employer and employee) is 38% (table 4).
2010 to 2015 (table 3). For a country like ours, which is still in transi-
Table 3. The following table gives the projection tion, in the midst of the global economic crisis, the
of the monthly base for pension and disability in- fall of living standard, falling GDP growth, higher
surance from 2010 to 2015 [10] imports than exports, the fall in industrial pro-
The lowest monthly basis for pension duction (as if there is none), and further inflation
Year
and disability insurance growth, unemployment growth, it follows that the
2010 18.500 total contribution rate is high. When the state cre-
2011 20.100 ates conditions for the growth of production, ex-
2012 21.650 ports and living standard, then it would be realistic
2013 23.150 to apply the rates that are in effect today under the
2014 24.600 applicable laws and regulations. The facts are as
2015 26.000 follows: increased number of unemployed persons
(at the end of 2009 the number of unemployed

Table 4. The movement of the rate at which contributions were calculated in the period from 2000 to
2010 [11,12,13]
Year Pension and disability insurance Health insurance Unemployment insurance
2000 18% 18% 1,8%
2001 18% 18% 1,8%
2002 18% 18% 1,8%
2003 20,60% 14,40% 1,10%
2004 20,60%/22% 14,40%/12,3% 1,10%/1,5%
2005 22% 12,3% 1,5%
2006 22% 12,3% 1,5%
2007 22% 12,3% 1,5%
2008 22% 12,3% 1,5%
2009 22% 12,3% 1,5%

Volume 8 / Number 4 / 2013 1753

 technics technologies education management

persons registered with the National Employment policy for employers with unregistered workers, to
Service was 737.160 persons), year 2009 recorded conduct an effective cooperation among state au-
a drastic decline in the number of employees at an thorities (tax authorities, labor inspection, pension
average of about 14,000 workers per month losing and social insurance) in order to reduce the number
their jobs, increased number of employees work- of people working in the gray economy (unregis-
ing unregistered (people working with employers, tered workers), to change the penalties for employ-
but not registered, approximately about 600.000 ers who hold unregistered workers, so that the em-
of them), more employers late with contributions ployer has an obligation to employ the worker for
payments (private employers, state authorities and at least one year. Since contribution base cannot
local governments as well as public companies), be lower than the minimum monthly contribution
or even a general failure to pay contributions for base, which is the amount of 35% of the average
registered workers (we have cases of employees monthly salary in the Republic paid in the previous
working five years for an employer who has nev- quarter, the following table presents the lowest bas-
er paid a penny of contributions to any of them), es for the period from 2003 to 2009 monthly (the
lack of cooperation between tax authorities and period is determined with respect to the year when
branches of the pension and social insurance fund the calculation and payment of contributions paid
considering the number and records of registered by employers and workers came into the jurisdic-
workers, penalty clause for the case of unregis- tion of the Tax Administration) (table 6).
tered workers that provides only the calculation
and payment of income tax and is subject only to 3. Tax exemptions and penalties
misdemeanor charges (table 5).
The reasons for these data are: completion of Cases of tax exemption: when an employer hires
the transition process, privatization as well as the a person of over 50 years of age on the day of the
economic recession. What is needed is the follow- conclusion of contract and that person has a status
ing: to lower contribution rates to the level of: for of unemployment benefit holder or is registered as
compulsory pension and disability insurance 9%; unemployed in the National Employment Agency
for compulsory health insurance 4,15%; for com- for at least six months without interruption, the em-
pulsory unemployment insurance 0,50%, so that ployer is exempt from the obligation to pay contri-
the total contribution rate is 27,30%, stricter penal butions for compulsory social insurance paid by the

Table 5. Review of employed and unemployed persons in Serbia in 2009 [14]

Year Unemployed Employed in the public sector Employed in the private sector Unregistered workers
2009 737160 550000 950000 600000
Table 6. Representation of the lowest contribution bases for the period from 2003 to 2009 payed by
employers and employees [6,7]
Y/M 2003 2004 2005 2006 2007 2008 2009
I 14589 18004 8460 10511 12851 13687 16141
II 14589 18004 9186 11508 12580 15072 17348
III 14589 18004 9186 11508 12580 15072 17348
IV 14589 18004 9186 11508 12580 15072 17348
V 14589 18004 8865 11281 12265 14631 14677
VI 14589 18004 8865 11281 12265 14631 14677
VII 15257 19088 8865 11281 12265 14631 14677
VIII 15257 19088 10014 12364 13264 15843 15482
IX 15257 7995 10014 12364 13264 15843 15482
X 15257 7995 10014 12364 13264 15843 15482
XI 15257 8460 10511 12851 13687 16141 15454
XII 15257 8460 10511 12851 13687 16141 15454

1754 Volume 8 / Number 4 / 2013

 technics technologies education management

employer for a period of two years, when an em- governing the tax procedure and tax administra-
ployer hires a person of over 45 years of age on the tion. Contribution payer is obliged to report to the
day of the conclusion of contract and that person Tax Administration about the contributions paid,
has a status of unemployment benefit holder or is in accordance with the law governing the tax pro-
registered as unemployed in the National Employ- cedure and tax administration, and to the relevant
ment Agency for at least six months without inter- institutions of compulsory social insurance, in ac-
ruption, the employer has the right to pay the contri- cordance with the regulations governing compul-
butions for compulsory social insurance calculated sory social insurance [15,16]. The criminal policy
at rates reduced by 80% during the period of two pursued by the state for this tax form, is best illus-
years, when an employer hires a person who is con- trated by the following scheme (figure 4).
sidered a trainee, and is on the day of conclusion of It is necessary to change the penalty provi-
the contract of employment under the age of 30 and sions, or fine, and this is especially true of state
registered at the National Employment Agency as bodies and local self-governments. It is the state
unemployed, the employer is exempt from the ob- that passes laws, and from that follows that it must
ligation to pay contributions for compulsory social not violate them. There must not be a case that
insurance to be paid at the expense of the employer, state authorities violate the legal provisions. There
when an employer hires full-time person with dis- should not exist such a range of punishments be-
ability, the employer is exempt from the obligation tween state authorities and entrepreneurs and the
to pay contributions for compulsory social insur- entire private sector. The laws apply to everyone.
ance to be paid at the expense of the employer for a The state authorities should show by example how
period of three years. to comply with applicable legislation. When they
These incentives provided by law do not have do it first, then they have the right to ask for the
any effect in practice, since over 600.000 persons same from others and to punish them for contempt
are unregistered by employers, which means that of legislative provisions.
the method of universality of taxation must be ap-
plied, or the state, the Tax Authority and all rel- 4. Conclusion
evant agencies should put unregistered persons
in the system of taxation. Such a measure would The measures that the State should take in-
reduce the share of gray economy in GDP, which clude: lower contribution rates (for compulsory
is now about 36%. The obligation to calculate and pension and disability insurance 9%, for compul-
pay contributions from the base and at the base is sory health insurance 4.15%, for unemployment
the employer’s. The employer is obliged to calcu- insurance 0.50%, so that the total contribution rate
late and pay contributions at the same time with is 27, 30%), repeal the existing tax exemptions,
the payment of wages. If the employer does not introduce the principle of comprehensiveness,
pay salaries until 30th of the current month for the reduce the number of “employees” in the “gray
previous month, he shall not later than that date zone”, stricter penal policy for employers with
calculate and pay contributions for the previous unregistered workers, conduct effective coopera-
month to the lowest monthly basis. Tax Admin- tion between the competent state bodies (tax au-
istration monitors the calculation and payment of thorities, labor inspection, the pension and social
contributions, in accordance with the regulations insurance fund) in order to reduce staff working in

Offender Fine
Legal person from 100.000 to 1.000.000 dinars
Responsible person in the legal person from 5.000 to 50.000 dinars
Entrepreneur from 50.000 to 500.000 dinars
State authority, local government from 5.000 to 50.000 dinars
Figure 4. Representation of the penalties for persons who fail to calculate and pay contributions si-
multaneously with the payment of salaries or other income in the required period, or calculate or pay
them incorrectly [12]

Volume 8 / Number 4 / 2013 1755

 technics technologies education management

the gray economy (unregistered workers), change Corresponding Author

the penalties for employers who have unregistered Mirjana I. Stevanovic,
G.S.C.M. Consulting and Management, Services
workers so that the employer must employ the
Agency,
worker for at least one year. Smederevska Palanka,
Serbia,
E-mail: mira.stev@open.telekom.rs
References
1. Bingulac Z, Kulić M. Javne finansije. Univerzitet
Megatrend, Beograd, 2006.

2. Vunjak N. Finansijski menadžment. Subotica, 2001.

3. Gorčić J. Javne finansije, finansijsko pravo i eko-

nomija javnog sektora. Beograd, 2005.

4. Popović D. Nauka o porezima i poresko pravo. Beo-

grad, 1997.

5. Evropska ekonomija The European Commission of

the Directorate-General for Economic and Financial
Affairs.1996.

6. Republički zavod za statistiku (RZS) repblike Srbije:

http://www.rzs.rs.ba/.

7. Cekos-in: http://www.cekos.rs/.

8. Dašić P. Application of polynomial regression mod-

els for approximation of time series. Journal of Eco-
nomic and Management Based on New Technologies
(JEMoNT), 2012; 1(2): 81-140.

9. Dašić P. Approximation of cutting tool wear function

using polynomial regression equation. Journal of
Research and Development in Mechanical Industry
(JRaDMI), 2011; 3(3): 171-180.

10. Dašić P. Software package CoP2TV: Choice of

Power Polinomial Between Two Variables. ver. 2.0.
Vrnjačka Banja: SaTCIP Ltd. 2010.

11. Službeni Glasnik Republike Srbije, br. 61/2005.

12. Službeni Glasnik Republike Srbije, br. 62/2006.

13. Službeni Glasnik Republike Srbije, br. 5/2009.

14. Nacionalna služba za zapošljavanje: http://www.

nsz.gov.rs/.

15. Kroft K. Takeup, social multipliers and optimal so-

cial insurance. Journal of Public Economics, April
2008; 92(3–4): 722-737.

16. Leung CKY. Productivity growth, increasing income

inequality and social insurance: the case of China?
Journal of Economic Behavior & Organization,
December 2001; 46(4): 395-408.

1756 Volume 8 / Number 4 / 2013

 technics technologies education management

Impact of security protocols on performance

in IEEE 802.11 wireless networks
Dejan Tepsic1, Mladen Veinovic2, Aleksandar Miskovic1, Slavisa Nikolic1
1
Singidunum University, Department of Postgraduate Studies and International Cooperation, Belgrade, Serbia,
2
Singidunum University, Department of Informatics and Computing, Belgrade, Serbia.

Abstract lationship between these two problems [1, 2]. The

objective of this research is to understand and quan-
This paper explores and quantifies the impact
tify the relationship between security and perfor-
of different security protocols on the performance
mance in wireless networks. To conduct this study,
of IEEE 802.11 wireless networks. Experiments
experiments were performed in a wireless network
were conducted under laboratory conditions on
environment with using of security protocols for
a wireless network infrastructure that consists of
encryption of TCP and UDP traffic generated at
wireless access point and wireless network clients.
speeds of 2 Mbps, 5 Mbps and 12 Mbps. In order to
The goal of this work was to measure the over-
gain as more relevant results of experiments, same
head associated with applying different security
measurements were performed with two wireless
protocols on the performance of the wireless net-
access points of different manufacturers and char-
works. Obtained data analysis throughput, trans-
acteristics. Wireless channel throughput on the
fer time and packet loss performances in different
wireless access point is limited to 11 Mbps, which
security scenarios. In this paper analyzed are TCP
enabled simulation of uncongested and congested
and UDP transport flows generated at three differ-
wireless network. The effect of the presence of mul-
ent packet transmission speeds. The effect of the
tiple clients on a wireless network is simulated in a
wireless radio channel congestion is also quanti-
scenario where the traffic is generated at a speed of
fied. The results showed that there is no significant
12 Mbps, or faster than the value of the throughput
degradation of performance in IEEE 802.11 wire-
of wireless channel.
less networks when security protocols are enabled.
The building blocks of security protocols are
Keywords: 802.11, WEP, wireless, WLAN,
cryptographic algorithms, which are selected
WPA, WPA2.
based on the security objectives that are to be
achieved by the protocol. Security protocols used
1. Introduction in experiments are basic WEP protocol with key
lengths of 64 and 128 bits, his successor WPA
Dependence on wireless networks in all spheres
with TKIP encryption algorithm, and advanced
of life has created a need for increased reliability
WPA2 protocol with usage of AES encryption.
and security of these networks. Security risks in
To quantify and compare the impact of security
wireless networks are much greater than those in
protocols, experiments were conducted for the
wired networks, given the nature of wireless radio
case when encryption is not used. Data obtained
waves which are transmitted on a shared wireless
in these experiments quantifies and compares the
medium. The security of data during transmission
relationship of performances, such as throughput,
represents the most important requirement in a
transmission time and packet loss.
modern wireless networks. In order to reduce se-
Transport flows in different experiments were
curity risks to a tolerable level new security mea-
generated using the JPerf and IP Traffic software
sures must be explored and adopted.
packages, and overall traffic was recorded using
In addition to safety, performance is another
Wireshark software tool. The results of experi-
major problem of wireless networks. These prob-
ments performed in a wireless network environ-
lems are discussed almost entirely separate. A small
ment are shown in tabular and graphical.
number of papers exist in understanding of the re-

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2. Literature review computers with wireless network adapters, as

shown in Figures 1, 2.
The main focus of this work is need for stron-
ger security and better performance in wireless
networks. The relationship between these the two
factors have to be studied. Existing works in this
field have partly described this and have shown
different results [3, 4, 5].
In [3], examined is impact of different encryp-
tion protocols on traffic that contains combined
packages: data and voice. The results do not show
a decrease in throughput during the transmission
of data when using different encryption tech-
niques. However, for voice packets, the results Figure 1. Wireless network environment (Cisco
show a substantial increase in inequality (jitter) WAP)
and delay in receiving packets.
In [4], analyzed is impact of WEP security pro-
tocol on throughput in ad hoc networks. The results
showed a decrease in the amount of transferred traf-
fic due to the presence of security protocol.
In [5], the performances of wireless computer
networks with a large number of associated clients
are compared. The results show performance deg-
radation with increasing number of clients which
share the same wireless medium. Similar applies
for the greater degree of safety.
It turned out that most of the relevant papers in Figure 2. Wireless network environment (TP-
this field study the impact of security techniques Link WAP)
primarily on throughput, thereby ignoring the loss
of packets and transmission time, factors that in- Technical specifications of used wireless net-
fluence the performance of wireless networks in work devices:
the great level. In this paper an attempt is done to – Cisco WAP with the following characteristics
quantify these parameters equally with the usage [6]:
of various security mechanisms in wireless com- ○ Model: Aironet 1242AG supports IEEE
puter networks. 802.11a/b/g standards.
○ It has 13 radio channels in the 2.4 GHz
band and 19 channels in the range of 5
3. Wireless network environment
GHz with data transfer speeds up to 54
A miniature IEEE 802.11 wireless network Mbps or 108 Mbps if both radio frequency
platform was implemented in laboratory to carry bands are simultaneously used.
out measurements of impact of different security ○ Supports WEP with a key length of 64
protocols on the performance of IEEE 802.11 and 128 bits, WPA-TKIP and WPA2-
wireless networks. AES security protocols.
○ Has a separate hardware chip for support
of WPA2-AES protocol.
3.1 Hardware and software selection
○ Supported authentication methods are
Wireless network environment used in the open system, system with a shared key
study consists of the Cisco wireless access point and 802.1X authentication.
(WAP), TP-Link WAP and two Toshiba laptop

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– TP-Link WAP with the following – WPA: in this scenario experiments are perfor-
characteristics [7]: med using a TKIP encryption algorithm.
○ Model: TL-WR941ND supports IEEE – WPA2: in this scenario the strongest
802.11b/g/n standards. encryption algorithm is used, AES.
○ It has 13 radio channels in the range of
2.4 GHz with a maximum data transfer In described experiments TCP and UDP traffic
speeds up to 300 Mbps in the case of flows are used. UDP traffic represents the voice
using the IEEE 802.11n standard. and video packets which are transmitted over
○ Supports WEP with a key length of 64, computer networks, while the TCP traffic rep-
128 and 152 bits, WPA-TKIP and WPA2- resents standard network traffic, such as HTTP,
AES security protocols. FTP and others. Distinguishing between these two
○ WPA2-AES protocol is processed within types of traffic is crucial for understanding the re-
the hardware on the wireless access point. sults of experiments. UDP traffic flow allows us
○ Supported authentication methods are to determine the maximum throughput of wireless
open system, system with a shared key networks, because it has no mechanism for check-
and 802.1X authentication. ing the receipt of sent packets.
Traffic was generated and received by JPerf
– Toshiba laptop computers with wireless software tool installed on each wireless client.
network adapter: JPerf is a free software tool with a graphical inter-
○ Model: Toshiba Satellite [8] with Intel ® face from which the parameters are set to generate
Core ™ i3 processor and Intel ® PRO / a TCP or UDP traffic flow. It consists of server
Wireless 2200BG network adapter. component that runs on a wireless client which
○ Operating system: Microsoft Windows 7 sends packets, and client component that runs on
x64. a wireless client that receives the packets. Simply,
by changing the settings on each wireless client
Software used: traffic can be generated in the opposite direction.
– Wireshark, software for recording and Also, to generate and receive TCP/UDP traffic
analyzing network traffic. IP Traffic software tool is used. Previously it must
– JPerf, software for generating network traffic, be installed on each wireless client. IP Traffic is an
either TCP or UDP, at different speeds. advanced software tool with a graphical interface
– IP Traffic, an advanced software package from which the parameters are set for generating
for generating network traffic (TCP, UDP, TCP, UDP, or both types of traffic simultaneously.
or both types of traffic simultaneously) at It consists of server component that runs on a wire-
different speeds. less client which sends packets, and client compo-
nent that runs on a wireless client that receives the
3.2 Security scenarios packets. Simply, by changing the settings on each
wireless client traffic can be generated in the op-
Experiments were carried out in two wireless posite direction.
network environments for various security sce- Both wireless access points used in these ex-
narios (Table 1) and traffic flows: periments support data rates up to 54 Mbps when
– Without security protocol: in this scenario, using the IEEE 802.11g standard. Unlike the Cis-
clients communicate over WAP without co wireless access point, TP-Link wireless access
any authentication and encryption of traffic. point supports higher data transfer speeds up to the
These results are used as a reference for theoretical 300 Mbps in the case when the IEEE
comparison with scenarios where security 802.11n standard is used. Since the Cisco WAP
protocols are enabled. does not have support for IEEE 802.11n standard,
– WEP: in this scenario RC4 encryption for the uniformity of results IEEE 802.11g stan-
algorithm is used. Experiments were carried dard supported on both wireless access points is
out for key lengths of 64 and 128 bits. used.

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Table 1. Brief description of security scenarios

Security scenario Title Description
Without security protocol S1-Cisco Without authentication and encryption of traffic
Without security protocol S1-TP-Link Without authentication and encryption of traffic
RC4 encryption algorithm with 64-bit key;
WEP-64 S2-Cisco
Authentication is performed based on the knowledge of shared key
RC4 encryption algorithm with 64-bit key;
WEP-64 S2-TP-Link
Authentication is performed based on the knowledge of shared key
RC4 encryption algorithm with 128-bit key;
WEP-128 S3-Cisco
Authentication is performed based on the knowledge of shared key
RC4 encryption algorithm with 128-bit key;
WEP-128 S3-TP-Link
Authentication is performed based on the knowledge of shared key
For encryption TKIP algorithm is used;
Michael’s algorithm is used for the calculation of the control value of
WPA-TKIP S4-Cisco
integrity;
Authentication is performed based on the knowledge of shared key
For encryption TKIP algorithm is used;
Michael’s algorithm is used for the calculation of the control value of
WPA-TKIP S4-TP-Link
integrity;
Authentication is performed based on the knowledge of shared key
AES encryption is used for calculating the control value and integrity;
WPA2-AES S5-Cisco
Authentication is performed based on the knowledge of shared key
AES encryption is used for calculating the control value and integrity;
WPA2-AES S5-TP-Link
Authentication is performed based on the knowledge of shared key

Maximum throughput of a radio channel is Measurements are recorded only when the re-
fixed at data rate of 11 Mbps on WAP. Selected sults from two different attempts were similar at
speeds of generated traffic from one client to the least ninety percent.
other are 2 Mbps, 5 Mbps and 12 Mbps. These
values are selected to simulate the behavior of un- 4. Experimental results
congested and congested wireless network. Since
the data rate on the wireless access point is fixed This chapter presents the results of experiments
at 11 Mbps, generating traffic at rate of 2 Mbps performed in a wireless network environment. To
represents the unobstructed network, while the 12 measure the network performance, it was impor-
Mbps generated traffic depicts the congested net- tant to define measurable parameters that reflect
work. Generated traffic at 5 Mbps is used as the the performance of the wireless networks. Data
mean value between these two cases. obtained process the average value of throughput,
transmission time and packet loss for different se-
3.3 Measurement procedures curity scenarios and speeds of generated traffic.

Transport flows in different experiments were 4.1 Average throughput value

generated using the JPerf and IP Traffic software
packages, and overall traffic was recorded using Table 2 shows the average value of the through-
Wireshark software tool. Following rules were put for various security scenarios at data transfer
used during data collection: speeds of 2 Mbps, 5 Mbps and 12 Mbps. To facili-
To make a wireless network environment stabi- tate comparison results are given in graphs created
lized, first measurement was discarded. in Microsoft Excel 2010, as shown in Figures 3-5.
Each experiment was performed at least five
times for the reliability of data.

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Table 2. Average throughput value for the traffic generated at speeds of 2 Mbps, 5 Mbps and 12 Mbps
Average Throughput Value [Mbps]
Security scenario Title 2 Mbps 5 Mbps 12 Mbps
TCP UDP TCP UDP TCP UDP
Without security protocol S1-Cisco 2,048 2,048 5,083 5,118 5,667 6,067
Without security protocol S1-TP-Link 2,047 2,048 5,077 5,116 5,656 6,044
WEP-64 S2-Cisco 2,045 2,046 5,041 5,116 5,482 6,002
WEP-64 S2-TP-Link 2,045 2,047 5,034 5,112 5,446 5,936
WEP-128 S3-Cisco 2,047 2,048 5,033 5,118 5,472 6,009
WEP-128 S3-TP-Link 2,047 2,047 5,030 5,117 5,469 5,986
WPA-TKIP S4-Cisco 2,044 2,046 4,929 5,107 5,208 5,778
WPA-TKIP S4-TP-Link 2,042 2,045 4,917 5,098 5,211 5,780
WPA2-AES S5-Cisco 2,047 2,048 4,992 5,119 5,404 5,901
WPA2-AES S5-TP-Link 2,046 2,046 4,965 5,115 5,381 5,882

The obtained results revealed the following:

There is no large degradation of the average val-
ue of the throughput after the inclusion of security
protocols: WEP 64, WEP-128 and WPA2-AES.
Reduced throughput with WPA-TKIP proto-
col is higher than in other security scenarios. This
may be due to a number of computational opera-
tions involved in this algorithm.
Figure 3. Average throughput value for the traffic WPA2-AES offers a highest level of security.
generated at speed of 2 Mbps It is interesting that it gives better performance
results than WPA-TKIP protocol, due to the fact
that it is computationally more efficient, and that
AES is supported on hardware of the tested wire-
less network devices.
In scenarios where traffic was generated at
rate of 2 Mbps and 5 Mbps, the average value of
throughput is close to the rate of generated traffic.
However, in scenarios where traffic is generated at
rate of 12 Mbps, the average value of throughput
Figure 4. Average throughput value for the traffic is much smaller than the rate of generated traffic.
generated at speed of 5 Mbps This result is a consequence of wireless radio chan-
nel congestion, because the maximum throughput
value of the radio channel on the wireless access
point is fixed at a value of 11 Mbps.

4.2 Average packet transmission time

Average packet transmission time for vari-
ous security scenarios at data transfer speeds of 2
Mbps, 5 Mbps and 12 Mbps is presented in Table
Figure 5. Average throughput value for the traffic 3 and Figure 6. When performing experiments file
generated at speed of 12 Mbps of 25 MB is transferred from source to destination
client through the WAP.

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Table 3. Average packet transmission time for various security scenarios

Average packet transmission time [seconds]
Security scenario 2 Mbps 5 Mbps 12 Mbps
Title
TCP UDP TCP UDP TCP UDP
Without security protocol S1-Cisco 102,14 101,76 40,97 40,61 34,91 22,38
Without security protocol S1-TP-Link 102,11 101,68 41,01 40,62 34,75 22,50
WEP-64 S2-Cisco 102,17 101,82 41,44 40,70 39,34 23,02
WEP-64 S2-TP-Link 102,20 101,84 41,48 40,72 40,13 23,30
WEP-128 S3-Cisco 102,22 101,82 41,62 40,70 38,96 22,82
WEP-128 S3-TP-Link 102,18 101,78 41,59 40,69 39,52 23,16
WPA-TKIP S4-Cisco 102,29 101,89 42,33 40,84 41,14 23,65
WPA-TKIP S4-TP-Link 102,31 101,93 42,51 40,82 41,88 23,91
WPA2-AES S5-Cisco 102,24 101,83 41,89 40,68 39,39 23,32
WPA2-AES S5-TP-Link 102,26 101,86 42,05 40,75 40,30 23,56

encryption even up to 2.5 times higher as a result of

frequent packet retransmissions and packet losses,
due to congestion on the wireless network.
Also, noticeable is the difference in efficiency
of WPA2-AES encryption algorithm on Cisco
WAP with regard to TP-Link WAP. Both wireless
access points are running WPA2-AES calcula-
tions within the hardware, but it is evident that the
Cisco WAP processor is more efficient. Generally,
wireless access points without strong hardware
support have significantly lower scores in WPA2-
Figure 6. Average packet transmission time for
AES encryption and decryption.
various security scenarios

For scenarios where traffic is generated at 4.3 Average packet loss

speeds of 2 Mbps and 5 Mbps the results of ex- In this experiment UDP packets are generated
periments showed that there is no significant dif- and sent from one wireless client to another wire-
ference in packet transmission time when security less client. The total number of generated and sent
protocols are used. The exception is slightly WPA- UDP packets from the source client is the 20000.
TKIP algorithm that showed the weakest packet Size of sent packets is a fixed size of 1460 bytes.
transmission times due to encryption and decryp- On the receiving client number is measured of re-
tion of transmitted traffic. ceived UDP packets originated from a source cli-
When traffic is generated at a rate of 12 Mbps, ent. Based on these values and the known number
file of 25 MB should be transferred in 16.67 seconds of generated UDP packets on source, percentage
(file size [Mbit] / packet transmission rate [Mbps]). of lost UDP packets is accounted, as shown in Ta-
However, due to congestion on the wireless network, ble 4 and Figures 7, 8.
and ever present radiation and interference from Measuring the number of transmitted TCP pack-
other wireless devices on the same or close radio fre- ets is not meaningful, because the TCP protocol has
quency range, in the case of UDP packet transmis- a mechanism for the check of receipt of the packet,
sion time is increased by 34% in comparison with and as a consequence, the TCP retransmission of
the scenario without any security protocol. In the lost packets occurs. So, in any given scenario the
case of WPA-TKIP encryption this time increases to number of 20000 TCP packets is received on the
43%. When TCP packets are transmitted the value receiving side, with the difference in the number of
obtained is doubled, and in the case of WPA-TKIP retransmitted TCP packets and transfer time.

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Table 4. Average number of received and percentage of lost UDP packets

Average number of received and percentage of lost UDP packets
2 Mbps 5 Mbps 12 Mbps
Security scenario Title Number Number Number
of Packet loss of Packet loss of Packet loss
received percentage received percentage received percentage
packets packets packets
Without security protocol S1-Cisco 19998 0,01 19960 0,20 18104 9,48
Without security protocol S1-TP-Link 19999 0,00 19891 0,54 18256 8,72
WEP-64 S2-Cisco 19989 0,05 19866 0,67 18054 9,73
WEP-64 S2-TP-Link 19986 0,07 19856 0,72 18023 9,88
WEP-128 S3-Cisco 19995 0,02 19952 0,24 18112 9,44
WEP-128 S3-TP-Link 19992 0,04 19911 0,44 18099 9,50
WPA-TKIP S4-Cisco 19981 0,09 19689 1,55 17489 12,55
WPA-TKIP S4-TP-Link 19982 0,09 19783 1,08 17472 12,64
WPA2-AES S5-Cisco 19990 0,05 19889 0,55 17828 10,86
WPA2-AES S5-TP-Link 19987 0,06 19798 1,01 17778 11,11

For the scenarios in which traffic is generated

at a rate of 12 Mbps packet loss is quite high (be-
tween 8.72 and 12.64%) due to effect of conges-
tion on wireless radio channel. This experiment re-
vealed apparent slight inefficiency of WPA-TKIP
in comparison to all other security protocols.
Experimental results confirm the fact that UDP
traffic is subject to packet loss in congested wire-
less networks. The results also show no significant
increase in packet loss during the transmission of
Figure 7. Average number of received UDP packets
UDP traffic in wireless networks due to the inclu-
sion of security protocols.

5. Discussion and interpretation of

experimental results
In this paper was created a wireless network
environment with a single wireless access point
and two wireless network clients. In order to gain
as more relevant results of experiments, the same
measurements were performed with two wireless
Figure 8. Average UDP packet loss percentage access points of different manufacturers and char-
acteristics. The effect of the presence of multiple
It turned out that in scenarios where the traffic is clients on a wireless network is simulated in a sce-
generated at rates of 2 Mbps and 5 Mbps packet loss nario where the traffic is generated at a speed of 12
is almost negligible. These results were expected due Mbps, or faster than the value of the throughput of
to the fact that the packet transmission rates are much wireless channel which is fixed at 11 Mbps.
smaller than the maximum value of the throughput Results showed unambiguously that the WPA-
of wireless channels. Such, in these scenarios con- TKIP has a worse performance than other security
gestion is not present on the wireless channel. protocols. More importantly, these results indicate

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that the WPA2-AES algorithm is only slightly identical to the speed of generated traffic by the
slower than the basic WEP algorithm. Important source client. However, the results obtained in a
question is why the TKIP encryption and decryp- scenario where source client generates traffic at a
tion performs slower than AES algorithm. WPA2- speed of 12 Mbps showed that the average value
AES encryption in modern wireless networks is of throughput is only 5.75 Mbps, which is far less
typically performed in the hardware of wireless value. This result is a consequence of conges-
access points and wireless clients, while TKIP tion on the wireless channel caused due to a large
performed software, which could be a major cause amount of traffic generated by the source client,
of reduced performance of TKIP encryption algo- and is far less than the maximum value of the lim-
rithm. This is due to the fact that TKIP was devel- ited throughput on wireless channel of 11 Mbps.
oped as a software upgrade for the WEP security For the traffic generated at speeds of 2 Mbps and
protocol while maintaining compatibility with ex- 5 Mbps results indicate nearly the same transmis-
isting hardware devices, without the need to re- sion time for TCP and UDP packets. In the scenar-
place them. AES encryption algorithm is provid- io where traffic is generated at speed of 12 Mbps
ing greater level of security than previous security transmission time of TCP packets is by 50 to 75
mechanisms and as the results showed it is only percent higher than the UDP packet transmission
slightly slower than proven insecure WEP. There- time. This result is consequence of the increased
fore, the new wireless network devices should number of retransmitted packets and packet loss for
only use WPA2-AES security protocol. TCP protocol in relation to scenarios in which there
WPA2-AES security protocol requires more pro- is no congestion on the wireless channel.
cessing power compared to WPA-TKIP, so it can Packet loss during transport through the wire-
slow down wireless network if it is built on hard- less network in experiments in which there is no
ware platform that is not strong enough. If it is used congestion on the wireless channel is negligible,
an old wireless access point that AES encryption while on congested network this value ranges from
algorithm processed solely within software, chanc- 9 to 12.5 percent for the traffic generated at a rate
es are that WPA2-AES may slow down the entire of 12 Mbps on the source wireless client. Results
wireless network. If new wireless network devices demonstrate that there is no significant degrada-
are used that WPA2-AES process within hardware tion in the transmission time or in increased num-
decrease in performances will be negligible. ber of lost packets when security protocols are
Measurements made on the Cisco WAP with used. The exception is in some extent WPA-TKIP
a powerful processor capable of performing fast security mechanism that in almost all experiments
encryption and decryption process shows thereby demonstrates the weakest results.
different results from results that were obtained on
the TP-Link WAP with a less processor power. The 6. Conclusion and future work
fact is that the Cisco WAP is designed to work in an
enterprise environment with association of a large In this paper quantified is impact of security
number of wireless clients. TP-Link WAP, although protocols on performance in modern IEEE 802.11
has weaker hardware, supports all wireless stan- wireless networks. The survey was conducted in
dards and security protocols as well as the powerful a wireless network environment that consists of
Cisco WAP. Therefore, TP-Link WAP can be posi- wireless access point and wireless network clients.
tioned in home or less demanding enterprise envi- Experiments were carried out in several different
ronment, where there is no need for the association security scenarios in which TCP and UDP packets
of a large number of wireless clients. are generated at speeds of 2 Mbps, 5 Mbps and
Experimental results demonstrate that there is 12 Mbps on the source client. Wireless channel
no significant decrease in the average value of the throughput on the wireless access point is limited
throughput for various security scenarios. For the to 11 Mbps, which enabled simulation of uncon-
traffic generated at speeds of 2 Mbps and 5 Mbps gested and congested wireless network. Security
effect of wireless channel congestion is not repre- protocols used in experiments are basic WEP pro-
sented, as the average throughput value is almost tocol with key lengths of 64 and 128 bits, his suc-

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cessor WPA with TKIP encryption algorithm, and protocols with the presence of authentication of
advanced WPA2 protocol with usage of AES en- wireless clients to wireless access point.
cryption. For comparison, measurements are per-
formed also for the case when none of the security Acknowledgments
protocols are used.
The results of performed experiments have This paper is supported by the Ministry of
proved the efficiency of security protocols used Education and Science of the Republic of Serbia
in wireless networks, and the fact that encryp- through the projects TR32054 and ON174008.
tion does not introduce significant degradation of
performance in wireless networks. The values of References
throughput, transmission time and packet loss are
slightly weakened in relation to a case which does 1. Begh GR, Mir AH. Quantification of the Effect of Se-
curity on Performance in Wireless LANs. Third Inter-
not use any security algorithm. Therefore, there is
national Conference on Emerging Security Informa-
no good reason for enabling open access, or not us- tion, Systems and Technologies, 2009; 57-62.
ing security protocols in wireless networks. From
the point of a high level of security recommended 2. Gheryani A, Veinovic M. Quantification of the Dif-
is usage of WPA2-AES security algorithm. ferent Security Algorithms in Wireless Network.
International Journal of Computer Science and Net-
Certainly, the results obtained in this paper work Security (IJCSNS), 2012; 12(6): 18-27.
should be taken with a dose of reserve due to the
fact that the experiments are limited to the usage 3. Boulmalf M, Barka E, Lakas A. Analysis of the Ef-
of one wireless access point and two wireless net- fect of Security on Data and Voice Traffic in WLAN.
work clients, while the effect of congestion is sim- Computer Communications, 2007; 30: 2468-2477.
ulated by traffic flow generated at greater value 4. Saleh M, Al Khatib I. Throughput Analysis of WEP
than throughput of wireless channel. Wireless net- Security in Ad Hoc Sensor Networks. The Second
work environment is created within closed space, International Conference on Innovations in Informa-
so that interference present in atmospheric condi- tion Technology, Dubai, 2005.
tions and disruption that result from radiation from
5. Baghaei N, Hunt R. IEEE 802.11 Wireless LAN
other wireless devices operating in close range of Security Performance Using Multiple Clients. The
frequencies are not taken into account. For con- 12th IEEE International Conference on Networks
sistency of results obtained in different scenarios, (ICON2004), Singapore, 2004.
the wireless access point and clients are placed at
6. Cisco, Cisco Aironet 1240AG Series 802.11a/b/g
fixed sites, and thereby the effect of mobility is Access Point Datasheet, [Online]. Available: www.
not considered. Experimental wireless network cisco.com
environment described in this paper represents
an infrastructure wireless local area network, and 7. TP-Link, Wireless N Router TL-WR941ND Data-
therefore the results and conclusions may not be sheet, [Online]. Available: www.tp-link.com
valid for ad hoc wireless networks. 8. Toshiba, Toshiba Satellite Product Specification,
Although this study attempted to record data as [Online]. Available: www.toshiba.com
accurately as possible, it could be done even more
accurately if an automated process was developed
Corresponding Author
to track wireless network performances over a pe-
Dejan Tepsic,
riod of time and afterwards report the results. Singidunum University,
There are several directions of research in this Department of Postgraduate Studies and
area. Future studies of security protocols may use International Cooperation,
different performance metrics. Extensive studies Belgrade,
Serbia,
can be done by considering other security proto-
E-mail: dejan.tepsic.10@singimail.rs
cols and newest encryption algorithms which are
used or will be used in the near future. An exten-
sive study can be carried over the same security

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Responsibility of participants for public

procurement regularity
Mirjana Knezevic1, Zaklina Spalevic2, Milorad Bejatovic3, Ivanka Spasic3, Milan Pocuca3
1
Faculty of Economics, University of Kragujevac, Serbia,
2
Faculty of Law, University Sinergija, Bijeljina, Bosnia and Herzegovina,
3
Faculty of Law for Economy end Justice, University Business Academy, Novi Sad, Serbia.

Abstract struggle among the bidders, the state can achieve

the best buy and thus achieve the highest utility
It is of great importance improvement of public
value for the funds that had been spent. In that way,
procurements for integration process of Republic
the state is showing its citizens that the state is dis-
of Serbia into EU. Measures for improvement of
posing with their money in order to maximize the
public procurement system are capacity building
benefit of every dinar spent. This creates an envi-
of institutions and subjects, centralization of pub-
ronment that is conducive for the implementation
lic procurements, more efficient system of rights
programs, supported by the EU pre-accession funds
protection, more efficient control in public pro-
financed by European taxpayers.
curements, protection of competition in the area
Transparency, free competition and legal cer-
of public procurements, and rise of awareness of
tainty in the field of public procurement reduce the
participants. Some of the outstanding laws should
whole overall business risk of the country so that
be altered in accordance with the Law on public
it becomes more attractive for foreign companies
procurements and Law on concessions in order to
and investors, which has significant effect on the
provide full functionality of public procurements
dynamics of future economic development of Ser-
system. Through increase of visibility of work of
bia. The republic of Serbia aspires to become a full
all the institutions in public procurement system is
member of the European Union and continuously
provided necessary recognition by general public.
adjusts its legislation with European Union. This
Framework agreement is recommended technique,
adjustment applies to the regulations in public pro-
manner of procurement proscribed by EU Direc-
curement. Law on Public procurement of 2002 was
tives that define the area of public procurement. In
in compliance with the directives set out earlier in
order to achieve efficiency of public procurements
this area, while the current law on public procure-
procedures, as one of the measure for improvement
ment, for the most part, is in compliance with the
public procurement system, Law on public procure-
directives EU 2004/18/E3 and EU 2004/17/E3.
ment should be altered in order to simplify the way
of proving fulfilment of conditions by the bidders,
then enable annulment of formal deficiencies of 2. Concept, principles and the importance
bids, and reduce the content of tender documents, of Public procurement in the Republic of
under the conditions that it contains all relevant Serbia
data that are basis for bidders to create their bids. Public procurement is a set of actions and ac-
Key words: Public Procurement, Responsibil- tivities undertaken by purchaser for the supply of
ity and Protection of Participants in Public Pro- good services or the evecution of works and for
curement, Parallel legal overview. which allocated funds are provided. The contract
of public procurement is a contract concluded be-
1. Introduction tween the client and the bidder, in written or elec-
tronic form, which has as its object the purchase of
Well organized and uniform system of pub- goods, rendering services or carrying out the works.
lic procurement is also useful for the country as a The contract of public procurement is relating to the
buyer and for the the companies either. By creating purchase, leasing hire purchase, with or without an
conditions for free, non-discriminating competitive option to buy goods, including necessary site prepa-

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ration works and installation services. Procurement the principle of transparency of the proceedings;
of goods and services through public procurement principle of equal treatment of bidders. Purchaser
are required to implement the national authorities, is obliged to provide an economical and rational
government bodies, organizations and other ben- use of public funds and to take measures to en-
eficiaries of the budget of the Republic of Serbia sure competition among potential bidders in ac-
and other public funds; local government, local cordance with the law. The contracting authority
government organizations and institutions that are may not restrict competition among bidders, and
beneficiaries of the budget of local self-government in particular not possible to restrict the vendor, by
and other public funds; organizations for social in- unjustified application of using measure that favor
surance, established in accordance with the laws a particular vendor. Subjects who prepare the bid-
governing these types of insurance; companies and ding documents or their parts cannot act as bid-
other legal entities in which the Republic or local ders subcontractors or sub-contractors and cannot
government or other payers of this Law have more work with the bidders when preparing the offer, if
than 50% of the shares or interest in the property or it threatens competition. The principle of transpar-
who have more than half the members of the man- ency means that public procurement procedures
agement body and that deal with the public interest must be public which is provided by publication
and not having an industrial or commercial charac- of a tender and a decision on the best offer in the
ter; legal entities who are using for the purchase of manner, prescribed by this law and standard forms
used assets, as a subsidy or a guarantee provided by of public procurement. Supplier who participated
the Republic or local government or other person in the public procurement has the right to inspect
applying this act. and obtain information on the conduct of public
Procurement may be in electronic form in procurement procedure, after obtaining a contract
which is conducted trough the electronic system award notice in accordance with the law. The con-
for public procurement, the computerized access tracting authority has to ensure that all the bidders
to public use the internet which is used in order in all phases of procurement are treated equally.
to ensure greater efficiency and effectiveness in The value of public procurement in the Republic
public procurement. The electronic procurement of Serbia in 2010 amounted to 273 billion or 9,96%
means the use of digital and information tech- of grass domestic product. Given that the share of
nologies in a way that public procurement makes public procurement in GDP, in 2005, amounted
it easier, faster and cheaper for both contracting to 7,41%, and that GDP, in the period 2005-2010
authorities and tenderers or to carry out public years grew, it follows that public procurement is
procurement procedures as more regular with the growing rapidly and that their relative importance
least effort and cost. Electronic offer is any of- increased during the five years of observations.
fer or part of an offer determined in terms of the This, also, means that public procurement
tender notice, kept in electronic form and which is very important for the Serbian economy and
corresponds to the principles of secure e-business growth in living standard, and that this trend will
according to the law on electronic signature which continue to increase the relative importance in
with other parts of the same bidder clearly makes the future, bearing in mind that the average share
a rounded and logical unit [1,2]. of public procurement in the EU GDP, in 2008,
The customer must specify format and manner amounted 17%. Although the current laws on pub-
of delivery of documents or parts of documents lic procurement, it is possible to implement a cen-
in electronic form in the tender documents. Elec- tralized public procurement, public procurement
tronic media is electronic processing equipment, system in Serbia is decentralized. Directorate for
including digital compression and storage of data Public Procurement in 2010. year reports were sub-
transmitted communicated and received by wire, mitted to the 3529 client. The largest share in the
radio, optical or other electromagnetic means. number of clients (54%) has public institutions in
The basic principles of public procurement are: the field of health, education and culture, followed
the principle of economy and efficiency in the by local governments with 19%. The total value of
use of public funds, the principle of competition, public procurement, public institutions accounted

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for 14% and local governments with 8%. This lic procurement about the conducted public pro-
means that 73% of customers ‘purchases 22% of curement and contracts, establishing the Republic
the total value of public procurement, which indi- commission for the protection of rights in public
cates that in these two categories of customers, the procurement as an independent body and etc. The
fragmentation of public procurement is the most accession of the Republic of Serbia to the EU in-
pronounced. On the other hand, public enterprises volves the establishment of appropriate institu-
account for 18% of the total number of clients, and tional set up in accordance with good practice and
in the total value of public procurement with 59%. consistent implementation of EU legislation in all
The bodies of state administration and judiciary areas of public procurement. Negotiation process
account for 9% of the total number of clients, and will be focused on establishing a regulatory and
with a total amount with a total value 19%. It fol- institutional framework that will ensure consistent
lows that 27% of clients participating in the total implementation of public procurement policy that
value of public procurement with 78% [3]. is aligned with the legacy of the EU. The National
Strategy of Serbia for EU accession in particular,
3. Regulatory and institutional framework point out the importance of public procurement
of public procurement in the EU accession process: “The area of public
procurement is of particular importance because
Law on Public Procurement, which came into its performance affects the relationship between
effect in 2009. represents a basic and general law in government and business sectors, the proper use
the public procurement system of the Republic of of the Budget, the Economic Development of Ser-
Serbia [4]. Also, from the standpoint of the public bia, but also to other non-economic parameters,
procurement system is significant and the Law on such as the fight against corruption”. It shows the
Concessions and Law on Public-Private Partner- importance of the amendments of the Law on Pub-
ships And Concessions [5]. According to Direc- lic procurement by the need to ensure coherence
tives 2004/17/EC and 2004/18/EC [6,7], conces- and coordination of public procurement in Serbia
sion area, namely the concession of public works, with demands by the EU acquisition. The sub-
together with public procurement, represents the ject of the regulation 2004/17/EC and Directive
area of awarding public contracts and is regulated 2004/18/EC, which regulates the area of public
in a uniform manner [8]. Also important for the procurement in the EU are works concession. The
public procurement system and other laws whose Contracts which are the subject of regulating of
application with respect to the subject of public these directives, contracts on public procurement,
procurement and other matters that are relevant concession contracts of works are considered to be
to the implementation of public procurement, it public contracts. Law on Public Procurement does
is not specifically regulated by the Law on Public not include concession contracts, which are regu-
Procurement. The law regulates the field of pub- lated by the Law on Concessions of 2003. year.
lic procurement in a comprehensive manner. It is The references to the law on public procure-
regulating the whole procurement process and the ment are missing in the law of concession, and the
rights protection procedure in public procurement; law itself contains a definition of concession which
obligations of the customer in terms of reporting; does not meet the definition of the EU directives.
defined the basic concepts of public procurement, Also, the public utilities act of 1998 year in special
such as public procurement contract, the term manner arrange transfer of public utility facilities
customer, subject of public procurement, procure- company or entrepreneur [9]. A special regula-
ment procedures, public procurement in sectors tion on public-private partnerships does not exist.
(energy, transport, water management, mining and Electronic procurement is introduced into the sys-
communications). The law introduced several im- tem of the public procurement by the Directives
portant innovations in the public procurement sys- 2004/17/EC and EU Directive 2004/18/EC, which
tem: certification of the employee for the public terms are governing the following key concepts:
procurement; electronic advertising on the Public the electronic means of communication, e-signa-
procurement portal; quarterly reporting of the pub- ture, dynamic procurement system, e-auctions,

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e-catalogs, e -advertising, e-documents. In the Re- mind that for the full regulation of public procure-
public of Serbia there is a necessary legal frame- ment must be changed and some laws of the juris-
work for the introduction of electronic procure- diction of other institutions, it is clear that coordi-
ment. Namely, The Law on Public Procurement nation in the institutions is essential for successful
provides the possibility of electronic submission reform of public procurement. Subject Ministry of
of bids and implementation of electronic bidding, Finance is also responsible for state administration
as these procedures are more governed by more relating to public procurement [10].
special laws. There are three main types or lev- The Public Procurement Office is a special or-
els of e-procurement, which is commonly used in ganization which is carrying out professional work
the practice of the EU, and through which the best in the field of public procurement, providing condi-
view of the future development of e-procurement tions for economic, efficient and transparent use of
in Serbia too: electronic advertising, electronic public funds for public procurement and promot-
tendering and electronic shopping. However, in ing competition and equality of bidders in public
Serbia there is not yet available and valid system procurement procedures. The Public Contracts
for the implementation of electronic tenders, or no carry out professional activities aimed at improv-
practical experience in their application. ing the public procurement system and the cre-
Several laws must be compliant with the law on ation of good practice in implementing the Law on
Public procurement and concession act in order to Public Procurement. The Republic Commission
get full functionality of the public procurement sys- for Protection of Rights in public procurement is
tem. These laws and needed changes are: the Law an independent entity in the Republic of Serbia,
on Budget System (it is necessary to resolve the is- which ensures the protection of bidders’ rights and
sue of planning funds in case of multi-year contract, public interest in public procurement procedures.
or the issue of funding one-year contracts whose The Republic Committee is the second instance
duration does not coincide with the calendar year); in the system of law. The State Audit Office is the
Law on Public Debt (it should regulate the relation- most autonomous and independent body for audit-
ship of law and Law on Public Procurement; Law ing public finances in the Republic of Serbia. The
on Public Enterprises and Activities of general in- anti-corruption is autonomous and an independent
terest (necessary to harmonize the list of activities body. The anti-corruption within its legal authority
of common interest with the EU), the Law on Com- monitors the implementation of the National Strat-
munal Activities (provisions which regulate the pro- egy for Combating Corruption Action Plan for the
cedures of awarding contracts need to be excluded); implementation of national strategies and sectoral
Law on Minor offences (the deadline for initiating action law. One of the strategies is related to pub-
criminal proceedings need to be extended); the Law lic procurement. Also, the Agency shall decide on
on Registration of Companies (a single record of conflicts of interest, initiate proceedings and pro-
data, which are mandatory requirements for the nounces measures for violation of the agency to
participation of bidders in public procedures, need fight corruption monitor and perform tasks related
to be introduced); Law on Public Property (the law to the organization of coordinating the work of state
is regulating the issue of ownership of the state, ter- bodies in the fight against corruption.
ritorial authority or local self-government and the
way of managing public property which is of the 4. Participant´s responsibility and rights
special significance for the concessions and public- protection in the public procurement
private partnership.) procedure
The main institutions in the public procurement
are: the Ministry of Finance, Public Procurement, The corruption can happen in public procure-
the National Commission for Protection of Rights ment in various stages of procurement and in vari-
in Public Procurement and the state Audit Insti- ous forms. Therefore, the issue of fighting against
tution. In addition to these institutions important the corruption cannot be considered exclusively in
roles have Anti-Corruption and the Ministry of a matter of implementation of specific anti-corrup-
Economy and Regional Development. Bearing in tion measures, but as the goal that permeates many

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aspects of the reform of public procurement, for items of the supplies. Another form of corruption in
example, transparency, monitoring. Equally, we procurement planning reflects the incorrect selec-
should bear in mind that all other mechanisms that tion of procurement procedure which is going to be
lead to the realization of basic principles of public applied (in particular the negotiation, which limits
procurement, work against corruption, even when competition) or determination of the high value of
they fight against corruption as such is not primary the planned acquisition. The third form of corrup-
goal. The Public Procurement law provides that tion related to procurement planning are situations
procuring entity shall reject a bid if there is a veri- where the client or the persons who work for him,
fiable proof that the offeror, directly or indirectly, only some potential bidders provide more informa-
give, offer or put into the appearance of a gift or tion on the subject of future purchases, as this pro-
other benefit section of the Public Procurement of- vides a significant advantage in times when the pro-
fice, a person who participated in the preparation curement process begins, for example, so they can
of tender documentation, a person who participates in advance obtain goods and in that way achieve
in the planning of procurement or any other person an advantage based on a faster time of delivery.
in order to find out confidential information or to During the implementation of public procurement,
influence the treatment decision or making decision corruption can occur in many ways and in connec-
at any stage of the procurement procedure. tion with any action of the customer. Starting from
Anti-corruption policy of the Law on Public general principles to combat corruption in public
Procurement has proved to be impractical and has procurement, measures to be undertaken can be
not been applied in practice, and therefore could classified into several groups depending of time and
not be effective at combating corruption in pub- forms of corrupt activities. Corruption may occur
lic procurement. Since it is clear that corruption in connection with changing the provisions of the
in public procurement has, this rule should be contract, approving the fulfillment which is not in
amended. The supposed reason for non-applica- accordance with the contract, non-use of collateral
tion is the absence of credible evidence to suggest and other remedies available to Employer for fail-
clients that there has been corruption in connec- ure to fulfill the contract or to silence the poor cus-
tion with public procurement. The more important tomer fulfillment of the contract to protect commer-
fact is to create effective mechanisms for knowl- cial interests of the bidder. Applicable law on public
edge that someone has tried to undermine corrup- procurement officer certification was introduced in
tion procurement process. These can be be special the public procurement system of the Republic of
measures designed to protect persons who would Serbia. The Law prescribes the obligation for each
provide such information or evidence, the opening client that within their set of job position the client
of the special email address or telephone lines for determine its position where the tasks of the public
reporting such cases (within the clients or within procurement are going to be performed.
an external supervisory body), as well as special For most clients there is an obligation to have a
incentives designed to inform the contracting par- Procurement Officer, a person who is permanently
ties or the control authority that the bidder or any employed, trained to perform the tasks in public
other person tried to bribe or exert pressure on the procurement and by taking examinations acquired
customer in connection with public procurement. an appropriate certificate. The certification process
Corruption, which came up during the planning is arranged by the Rules of Procedure of issuing cer-
of procurement is less noticeable, because it occurs tificates for public procurement officials. The goal
in a process that is not governed by special proce- of professionalism is that through training, expertise
dures. Budget planning process for the procurement and efficiency of those who are engaged in public
is associated with planning the budget for other procurement activities promote the implementation
needs, and therefore it is not subject of the special of the Act. The expected results are more efficient
discussion and consideration. The corruption in pro- and economical procurement through reduced costs
curement planning comes in many ways. The first in the form of time and money by reducing the num-
is that the planned acquisition of goods, services or ber of inefficient and irregular procedures carried
works that are not needed, or less needed than other out, the better quality of what is purchased, enabling

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a larger number of bidders to participate, reduc- and whose main purpose is that the objects of pub-
ing the risk of irregularities and corruption. A large lic procurement contracts describe in a consistent,
number of mandatory conditions for participation unique and distinctive way. The introduction of
that must be met by bidders may harm the effective these measures would contribute to better trans-
implementation of public procurement procedures if parency in our procurement, and development ef-
these conditions are not essential for the implemen- ficiency, because it would be easier to come to the
tation of the specific procurement. Despite the large bidders for the procurement that are interested in,
number of mandatory conditions for participation, thereby increasing the level of competitiveness,
efficient implementation of public procurement pro- and enhance communication between the parties
cedures threatens to complicate and to make difficult to the proceedings.
provement of the the fulfillment of these conditions Law on Public Procurement is a way to pro-
in a manner that is regulated by the Law [11]. In tect certain rights of bidders and the public inter-
considerable number of cases in the previous period, est in public procurement procedures and clearly
the purchaser due to current legal provisions were defined status of the President and members of
obliged to refuse the offers for the defects of the the Republican committee, which is a legal entity
submitted data. A large number of public procure- and for its work it is responsible to the National
ment procedures was unsuccessful because the bids, Assembly. The protection of tenderers’ rights and
which were obviously favorable for the purchaser, public interests throughout the procurement pro-
contained essentially unimportant formal defects. In cess ensures the Republican Commission for the
addition, the tender documentation is too extensive, Protection of the public procurement procedures,
especially those in public procurement procedures, the Republican committee, which is an indepen-
which because of its nature imply urgency, threaten dent organ of the Republic of Serbia. The request
the efficiency of public procurement and implemen- for the protection of rights may be submitted by
tation of the principles of economy and efficiency in any person having an interest in being awarded a
the use of public funds. contract for a specific procurement, and in case
One of the key principles of public procure- of violation of public interest, the Public Procure-
ment, which strongly influences the development ment Office, Attorney General and the state agen-
of the entire public procurement system is the cy or organization that is authorized to supervise
transparency that is achieved primarily through the operations of the customer. Applying for the
the Public Procurement Portal in which all the key protection of reserves still in the contracting ac-
information are published from this field. Unlike tivities of the procurement procedure.
advertisings, quarterly reports and decisions of
contracting authorities of the Republic Commis- 5. Parallel legal overview
sion for the Protection of the rights which must
be published on the Portal, the Act provides that With parallel legal overview of legal acts in the
the tender documentation may or may not be pub- field of public procurements in Serbia, Croatia and
lished by the purchasers, which in practice gives Slovenia conclusion can be derived about com-
very poor results. If you would introduce the obli- mon commitment of these countries as well as the
gation to publish the tender documents on the Por- countries from the region, to accepting similar so-
tal transparency would greatly increase, but also lutions in the goal of implementation of the public
achieve considerable savings in money and time procurement policy based on legal heritage of EU.
that is required for its production and distribution, Regulatory framework of public procurements in
which would result in improved overall efficiency. the Republic of Croatia is based on Public Procure-
Unique procurement vocabulary is introduced ment Act [12,13,14] in which provisions of directives
by the European Union, primarily in order to in- EU were set. Directive 2004/17/EC which aligns
crease transparency and efficiency in public pro- procedures of the procurement of the subject which
curement. For now, the law does not provide his act in the sectors of water supplies, energy, com-
introduction, that is in the practice of the EU, use merce and postal services [6]. Directive 2004/18/
when the announcement on public procurement, EC on coordination of procedures for the distribu-

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tion of public work contracts, public procurement law regulations on public procurements with the
contracts and public services contracts [7]. Directive directives of EU, through the constitution of the
2005/75/EC of the European Parliament and of the body for central public procurements and accept-
Council of 16 November 2005 correcting Directive ing existing solutions of countries in the region.
2004/18/EC on the coordination of procedures for
the award of public works contracts, public supply 6. Conclusion
contracts and public service contracts [15]. Direc-
tive 2005/51/EC which changes annex XX Direc- It is of the great importance improving the pro-
tive 2004/17/EC and Annex VIII Directive 2004/18/ curement process for the integration of Serbia into
EC [16]. Directive 2007/66/EC amending Directive the EU. Measures to improve public procurement
Directive 89/665//EEC and 92/13/EEC related to system are strengthening the capacity of institutions
improved effect of the revision procedure, which and companies, the centralization of procurement,
related to public procurement contract distribution more efficient system of protection, more effective
[17]. Articles 2., 12. and 13. Directives 2009/81/EC control in public procurement, protection of com-
on aligning procedures of procurement for specific petition in public procurement and awareness of
work contracts, procurement contracts and service participants. Some of the existing laws should be
contracts in the field of defense and safety which is changed and harmonized with the Law on Public
concluded between public purchasers or purchas- Procurement and Concessions in order to get full
ers and amendments and supplements of Directive functionality of the public procurement system.
2004/17/EC and 2004/18/EC [18]. Through increased visibility of all institutions in the
In the Republic of Slovenia, Public Procure- public procurement system the necessary recogni-
ment Act is in force in which the same directives tion is provided by the general public.
from the EU and the Republic of Croatia were The framework agreement is the preferred
implemented. Public Procurement system in the technique, the method of procurement prescribed
countries in the region, above all in the Republic by EU directives that is governing public procure-
of Croatia and the Republic of Slovenia differs ment. In order to achieve the efficiency of public
from the Republic of Serbia in the introduction of procurement procedures, as one of the measures
the system of centralized public procurements and for the improvement of public procurement must
conclusion of framework contracts. In these coun- be made to amend the Law on Public Procurement
tries, central procurement body was constituted as to simplify the method of proving the eligibility
a special organ which caries out centralized pro- of the bidders, then allow the elimination of the
curements and concludes framework agreements, shortcomings of formal bids and reduce the con-
all in a goal to increase efficiency of the public tents of tender documents provided that contains
procurements and restrain irregularity. That is the all relevant information on which bidders may
central body for public procurements of Croatia prepare their bids.
and Agency for public procurements of Slovenia.
Central bodies for public procurements have References
the lead role in the development of the electronic
public procurements which reduces formality in 1. The Law of Electronic Signature. Official Gazette of
the Republic of Serbia, 35(4).
procedures which represents one of the values of
the reformed and adjusted regulation in the field of 2. Besic C, Sedlak O, Grubor A, Ciric Z. Measurement
public procurements. In these countries, the pro- model for assessing the diffusion of e-business and
cedure for professionalization of the employees in e-marketing. TTEM, ISSN: 1840-1503, 2011;6(3):
the public procurements has been enforced, which 651-656.
leads to an adequate and complete application of 3. http://www.mfin.gov.rs; The Date of Accession
the law, and by that, to the more efficient and eco- Source: 21.4.2012.
nomic public procurements [19,20].
Serbia, in a goal to future development of pub- 4. Law on Public Procurement. Official Gazette of the
Republic of Serbia, 116(8).
lic procurements, inclines to adjusting existing

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5. Law on Concessions. Official Gazette of the Republic Corresponding Author

of Serbia, 55(3); Public-Private Partnerships and Zaklina Spalevic,
Concessions”, Official Gazette of the Republic of Faculty of Law,
Serbia”, 2011; 88. University Sinergija,
Bijeljina,
6. Directive 2004/17/EC of the European Parlia- Bosnia and Herzegovina,
ment and of the Council. Official Journal L 134, E-mail: zspalevic@sinergija.edu.ba
30.04.2004; 0001-0113.

7. Directive 2004/18/EC of the European Parlia-

ment and of the Council. Official Journal L 134,
30.04.2004; 0114-0240.

8. Milovanovic Dobrosav M. Management of public -

private partnership. Legal Life, ISSN: 0350-0500,
2005; 54(10): 25.

9. Law on Communal Activities. Official Gazette of the

Republic of Serbia, 16(97) and 42(98).

10. Law on Ministries. Official Gazette of the Republic

of Serbia, No. 16(11).

11. Rules of Procedure of issuing certificates for public

procurement officials. Official Gazette of the Repub-
lic of Serbia, 50(9).

12. Public Procurement Act. Official Gazette of the Re-

public of Croatia, 110(7).

13. Law on Amendments and Supplements of the Public

Procurement Act. Official Gazette of the Republic of
Croatia, 125(8).

14. Public Procurement Act. Official Gazette of the Re-

public of Croatia, 90(11).

15. Directive 2005/75/EC of the European Parlia-

ment and of the Council, Official Journal L 323,
9.12.2005; 0055 -0056.

16. Directive 2005/51/EC of the European Parlia-

ment and of the Council, Official Journal L 257,
1.10.2005; 0127 -0128.

17. Directive 2007/66/EC of the European Parlia-

ment and of the Council, Official Journal L 335,
20.12.2007; 0031-0046.

18. Directives 2009/81/EC of the European Parlia-

ment and of the Council, Official Journal L 216,
2008/2009; 0076-0135.

19. Milicevic V, Popovic M, Savic Z. Business rule ap-

proach as basis of e-bills payment system develop-
ment. TTEM, ISSN: 1840-1503, 2011; 6(1): 26-34.

20. Grandov Z, Djokic M, Jovanovic V. Transition pro-

cess and foreign direct investment flows in Serbia.
TTEM, ISSN: 1840-1503, 2011; 7(1): 28-38.

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 technics technologies education management

Difficulties encountered in defining and

measuring intellectual capital
Marian Socoliuc1, Veronica Grosu1, Elena Hlaciuc1, Dorel Mates2, Ionel Bostan1,Ovidiu Bunget2, Maria Moraru2
1
Doctoral School of Economics, Stefan cel Mare University, Suceava, Romania,
2
Doctoral School of Economics, West University d Timisoara, Timisoara, Romania.

Abstract presentation of qualitative elements that incorpo-

rate the characteristics of a business entity. Here-
Explaining and defining the concept of intellec-
in lies the need to identify and acknowledge the
tual capital (IC) and its components have become
presence of intangible assets that contribute to the
imperative in the current economic and social cir-
value created by the management of the company.
cumstances that are shaped by the rapid and unstop-
pable technological progress. The present paper fo-
cuses on the manner in which IC has been defined Difficulties arising in defining and
and understood in the economic theory and practice measuring IC
throughout time, by taking into account the fact that IC is a relatively new term that stems from the
the methods used to measure and evaluate IC have economic theory known as knowledge manage-
a considerable influence on the real economic value ment that focuses on preserving and distributing
of the business entity that manages it. knowledge.
Key word: intellectual capital (IC); valuation There are various definitions of IC advanced
methods; accounting indicators; financial reporting. by economic scholars, the concepts of IC, intan-
gible assets and knowledge assets being often sig-
Introduction nificantly different, despite the contrary beliefs of
some theoreticians who have attributed the same
The particular topic of IC has been the hot topic meaning to all three.
of economic and management sciences in the past An economic framework where the knowledge
few years [1, 2, 3, 4, 5, 6], as it is a key element to system is presented in a way that allows for all types
be taken into account when assessing the econom- of internal and external relationships, as well as the
ic performance and is also the basic principle of quality of the services rendered or of the products
the relationship between the company’s products/ provided, call for their constant updating and devel-
services and the intangible component of profes- opment in order to keep up with the constant and
sional knowledge. changing demand for new technological research
The advent of IC also draws attention to an- and advancements brought about by the increasing
other well-known but not always regarded as vital demand for such technologies on the market.
in the evaluation of economic performance; this is The main difficulty in measuring intangible
the only way that economic performance can be assets consists in their capitalization, and the
understood as a whole, as a set of results gained most frequently asked questions mainly revolve
from the use of both tangible and intangible assets. around: what makes a business entity competi-
[7] acknowledges the need to identify, to mea- tive? How can a sustainable profit be gained on a
sure and to valuate the intangible assets owned by medium and long term? Why are economic enti-
a company; this need only reveals the lack of ap- ties responsible with the measurement of these in-
propriate method that can be used to manage and tangible assets that actually need a more intuitive
itemize the elements that make up IC. and subtle approach that should result in optimum
The actual value of a company can no longer be valuations? What could prompt an entity to mea-
explained solely through the traditional economic sure and report such a value? If it is a generally
and financial valuation systems, but also requires accepted idea that the creation, development and
new measurement methods that also enable the distribution of knowledge should stand at the core

1774 Volume 8 / Number 4 / 2013

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of the performance of any business entity, then the IC has now become a strategic resource for all
main objective would consist in creating value by categories of stakeholders, whereas internal users
involving every available resource in the manage- have embraced it as a means to perform in such
ment and exchange of knowledge and know-how. a way as to provide services and products whose
The rules of competition can be divided into quality is short of excellence, all the while being
five competitive forces in any domestic or inter- aware that their efforts should not be confined to
national industry sector providing either goods or a regional level, but should be acknowledged and
services: the threat of new entrants; the threat of appreciated outside of it as well.
substitute products; the bargaining power of cus- IC management is closely related to its mea-
tomers; the bargaining power of suppliers and the surement: in order to be managed, IC has to be
competitive rivalry within the industry. The power measured, but it is also very important to capture
of the five forces varies from one economic sector and measure the real value of IC, a method that
to another and can be changed during the develop- is not included in the traditional accounting sys-
ment of each particular sector. tems. The attempts to systematically measure and
It is only natural that knowledge should be- manage IC are voluntary in nature and are highly
come an essential factor for long-term competi- stimulated by the legal, economic, social and eco-
tiveness and economic success in an increasingly nomic circumstances and, last but not least, are
globalised environment, since it can be defined in mainly urged by the stakeholders.
terms of the competencies and skills of the staff
operating in a knowledge intensive business entity. Subjectivity in IC measurement and the
Knowledge management is still defined as the limitations of the accounting indicators
key instrument that will lead to the development
of a new system that focuses on the IC capacity, The current economic conditions require more
but it is very important to stress the fact that IC than the economic performance valuation based
should not be mistaken for other intangible assets on the economic and financial aspects [10]. Enter-
that are recovered and subsequently included in prise valuation should also take into account the
the balance sheet. [8]. information system required by the stakeholders,
The thorough analysis of the various defini- the development of this system, the strengthening
tions and theories related to IC is not enough to of the relationships with the customers, suppliers
identify how much of the value of a company and and other business partners, as well as the training
of its hidden intangibles can be attributed to the and development of the employees, etc. All these
human or to the intellectual capital. aspects have given rise to the need to identify ad-
The success of a company is increasingly con- equate instruments and procedures to manage all
ditioned by the management’s ability to focus on intangible assets which, together with the com-
the critical factors in order to gain and maintain pany’s embedded knowledge, enable the creation
the competitive advantage. The relationship with and development of IC. [11].
the customers/subscribers, with the staff, with the The structural variables of IC that require the ac-
business partners and the research and development quisition and development of knowledge in terms
capacity are also variables that delineate the con- of value creation include: innovation, know-how,
cept of IC. One should also note that IC is closely business ideas, management quality, etc. The most
related to the notion of knowledge that can be con- widely accepted representation of IC in the financial
verted into value; as far as this aspect is concerned, literature was the following (see [1, 12, 13, 7] : rela-
economic scholars seem to have reached an agree- tional capital, structural capital and human capital.
ment, even though there still are various interpreta- All these categories that make up the structure
tions that have been related to the concept of value of IC include elements such as: innovation, knowl-
creation. “The relationship between the customers edge, operational quality and capacity, employee
and the management of a company has been thor- potential, organisational culture. [14] argues that
oughly” analysed by [9], who have emphasized the the concept of value creation is confined to a mac-
added value conveyed by relational capital. roeconomic level, while IC is the ability to turn in-

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tangible assets into resources that generate wealth, The three approaches we will quote here are:
both on a microeconomic and on a national level. a) capital budgeting – specific to short-term
Each business entity must constantly supervise decisions and based on the fact that a correct cal-
both the quality of the management procedures, i.e. culation must be founded on the idea that all the
the efficiency and effectiveness of resource alloca- significant values that may influence those par-
tion, and also the quality of the formula used to es- ticular decisions are future values that are to be
timate these indicators. If the influence of the exter- gained, while the values generated in the previous
nal environment is very slight or even non-existent, accounting period are believed to be irrelevant;
radical changes are required/recommended; if the b) the long-term formal planning model – en-
influence of the external environment is dynamic tails numerous critical aspects, the most serious of
and leads to discontinuity, there will be even more which being the red tape generated by the formal
numerous threats that will prompt the business en- planning systems that make use of numerous and
tity to perform certain changes in the elements of important intellectual resources, these efforts lead-
their own valuation formula. If strategic decisions ing to no significant results in terms of quality of the
cannot be entirely assigned certain values, neither undertaken decisions;
can the influence of these values over the impact of c) the strategy matrix model – that makes use
such deliberate decisions be underestimated. of logical models that can render a more structured
The reliability and accuracy of the reports on the form of the strategic rationale. The quantitative
profit of the company, as an essential factor in the variables, particularly the economic and financial
decision-making process, are outweighed by the values, are completely absent in this model, but
possibility of expressing this indicator by means they are partially or indirectly referenced through
of other adequate indicators that would prevent the the variables believed to be key elements of the
risk of providing distorted or erroneous signals. economic and financial equilibrium. The economic
The subject concerning the economic valuation valuations and strategic decisions can be briefly de-
of strategic decisions has benefitted from certain scribed in the figure 1.
approaches and models, but each of these ap- Just as [15] have argued, the professional knowl-
proaches has been only partially accepted. edge and skills are resources that influence the val-

Figure 1. Strategic decisions and specific interpretations

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ue creation process in that particular entity, but the indicators are subject to conventional accounting
measurement of this result is quite unpredictable. treatments in terms of the following capital assets:
IC management entails the presence of a con- stocks, fixed assets, patents, leasing, etc; b) they
siderable long term success factor, with particular cannot take into account the potential profitability
emphasis on the crucial aspects related to profitabil- that is not acquired during that specific accounting
ity and operational efficiency. The actual purpose period; c) these accounting indicators do not take
of a quantitative measurement is the knowledge into account the previous income statement.
conveyed to the decider; basically, the value of a The shortcomings of the accounting indicators
measurement in terms of management cannot be that measure profitability can be clearly identified
processed in terms of science, but pragmatically, by analysing the ratio between the value of equity
i.e. based on its ability to provide users with infor- (K) and ROE (return on equity).
mation that can assist them in reaching their goals. The economic value of K in stable economic
The selection of an IC valuation method is conditions is closely related to its book value,
rather subjective, as compared to the traditional as expressed by the ROE/r coefficient, where r-
accounting valuation systems; therefore, the most is the cost of capital. If the risk exposure of two
appropriate measurement method to be used in business entities differs, it is very likely that the
the company should take into account certain as- ratio between K and ROE will remain the same.
pects, such as: the type and level of organisational The difference between the profitability measured
culture; the concern manifested by the company’s by ROE and the cost of capital r entails certain
management about the inherent issues related to recommendations in terms of strategy, such as:
intangible assets; the ability to adequately match a) the strategic portfolio held by an entity should
the characteristics of the company with those of only consist of investments with a positive ROE/r
the possible IC valuation methods. value, since a negative value of this ratio would
However, since the main objective of our pa- cause such investments to be excluded from the
per is mainly related to the accounting indicators economic activity of the company; b) the capital
denoting the economic value, we will only focus will be first allocated to those investments with the
on whether or not the mirror the true value of the highest value of the ROE/r ratio and with the best
company. The most important accounting indica- economic growth potential.
tors are: ROE (Return on Equity), ROI (Return on There are certain limitations and disadvantages
Investment); EPS (Earnings Per Share) , since they caused by the fact that the ROE/r ratio is based on
best identify the strong correlation between the accounting indicators, for instance: this ratio does
market value of a company and its performance, not take into account an essential variable used to
measured by EPS or ROE. All these three indica- establish the economic value of equity, consisting
tors can be rather dangerous if, when employed in in development/growth prospects of the compa-
the analysis of the strategic plans, they designate ny’s value or of each activity; in an economic sec-
an erroneous allocation of the financial resources tor with plenty of opportunities, any investment
among various economic sectors or among the whose profitability only slightly exceeds the cost
strategic choices in terms of investments or types of capital may convey value to the company, more
of activities. As far as the operational plan is con- than the value conveyed by an activity whose
cerned, the balance type models analyse the in- ROE is much higher than r but with little subse-
tangible resources of a company and assign each quent development prospects.
a specific indicator that would prove necessary
in their management. Thus, a set of indicators is Conclusions
identified and subsequently used in the design of
a panel that synthesizes the chronological changes This paper can be seen as an attempt to define
occurring in the essential variables of IC which, in and establish the role played by IC within a compa-
turn, actively add value to the company. ny, as well as to identify those accounting indicators
On the subject of the previously mentioned ac- believed to be the most adequate in measuring IC;
counting indicators, we should note that: a) these this endeavour is the only way to emphasize the fact

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Figure 2. Relationship between the value of the company and the elements of the financial statements
“Another important instrument used to measure the economic profit of a company is EVA (Economic
Value Added)” [16].

that the correlation between a company’s market References

value and its equity book value is best established 1. Edvinsson L, Malone M. Intelectual capital: real-
by means of IC and its components. izing your company’s true value by finding its hidden
The definitions ascribed to IC and the methods brainpower. Harper Collins NY. 1997.
used to measure it have considerably developed
throughout the years, depending on the rising 2. Edvinsson L, Sullivan P. Developing a Model for
Managing Intellectual Capital. European Manage-
awareness generated by the dynamics of knowl- ment Journal, 1996; 14 (4): 356-364.
edge; all these methods used for the measuring,
valuation, management and internal or external re- 3. Johansson UG, Eklov M, Holmgren Martensson M.
porting of IC that have been developed so far, are Human Resource. Costing and Accounting versus
quite diverse in terms of the elements comprised in the Balanced Scorecard. Report prepared for OECD,
School of Business, Stockholm University, 1998.
the structure of IC, of the strategic reference points
or depending on the type of valuation. Therefore, 4. Larsen HT, Mouritsen J, Bukh PND. Intellectual cap-
it is recommended that each business entity should ital statements and knowledge management: mea-
implement an IC valuation and measurement suring, reporting and acting. Australian Accounting
Review, 1999; 9(3): 15-26.
method that best agrees with its strategic objec-
tives and employing those indicators believed to 5. Lipparini A. La gestione strategica del capitale intellet-
be relevant for that particular organisation. tuale e del capitale sociale. Il Mulino, Bologna. 2002.

6. Mouritsen J, Thorjornsen S, Bukh PN, Johansen MR.

Acknowledgements Intellectual capital new public management. Rein-
troducing enterprise. The Learning Organization,
”This work was supported by the project 2004b; 11(4/5): 380-392.
“Post-Doctoral Studies in Economics: train-
ing program for elite researchers - SPODE” co- 7. Stewart TA. The Case for Managing Structural Capi-
funded from the European Social Fund through tal. Health Forum Journal, 1999; 42(3): 30-33.
the Development of Human Resources Op- 8. www.liveintangibles.it
erational Programme 2007-2013, contract no.
POSDRU/89/1.5/S/61755.)”. 9. Vesna AM, Dragana B. Customer Relationship Man-
agement in Banking in the Context of Business Intel-

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ligence. Technics Technologies Education Manage-

ment, 2012; 7(1): 154-162.

10. Mateş D, David D. et al. Contabilitatea financiară

în conformitate cu Directiva a IV-a şi a VII-a a UE.
Editura Gutenberg, Arad, 2010; 368.

11. Giuliani M, Marasca S. Construction” and valu-

ation of intellectual capital: a case study. Journal
of Intellectual Capital, Emerald Group Publishing
Limited, 2011; 12(3): 377-391.

12. Edvinsson L, Malone M. Intellectual Capital. Pi-

atckus, London. 1997.

13. Roos G, Roos J. Measuring your Company’s Intel-

lectual Performance. Long Range Planning, 1997b;
30(3): 413-426.

14. Bradley K. Intellectual Capital and the New Wealth

of Nation. Business Strategy Review, 1997; 53-61.

15. Beckett A, Nayak A. The reflexive consumer. Mar-

keting Theory, 2008; 8 (3): 299-317.

16. Zakic V, Nenad V, Besic C, Simic J, Significance of

Economic Value Added in Shareholder Value Cre-
ation Process. Technics Technologies Education
Management, 2012; 7(1): 180-185.

Corresponding Author
Veronica Grosu,
“Stefan cel Mare” University,
Faculty of Economics and Public Administration,
Suceava,
Romania,
E-mail: doruveronica@yahoo.it

Volume 8 / Number 4 / 2013 1779

 technics technologies education management

Web based education for power electronics

supported with animations
Korhan Kayisli
Istanbul Gelisim University, Istanbul, Turkey

Abstract knowledged as effective methods for the purpose

of more rapid and sustained learning.
In this study, an educational tool presenting
A research including animations used to pro-
power electronics subjects supported with anima-
vide faster learning and interactive monitoring in
tions was designed for power electronics course
descriptive geometry course, performed by Garcia
for web-based education. This tool was used in
and his colleagues. Macromedia Flash software
power electronics course in electronics and com-
was preferred in this study because of the features
puter education department. The statistical analysis
such as taking up less space and easily access of
of the study includes pre-post-retention tests with
everyone on network [1] .Java programming lan-
control and experimental group. Traditional teach-
guage and Macromedia Flash used in another ap-
ing method was administered to control group and
plication designed for engineering students for de-
web-based teaching method supported with anima-
veloping an educational tool emphasizing the rela-
tions to the experimental group and then student
tion between interactivity and graphical design.[2]
achievement was compared. Screenshots related to
In another study in which static learning materials
prepared educational tool and data obtained from
and useful animations were compared, mathemat-
statistical methods are presented on tables. In the
ical concepts such as vector and matrix were used
light of research results, a significant difference was
in the development of computer games for under-
found between the post tests of control and experi-
graduate computing students.[3] At another paper
mental group. It was concluded that web based edu-
presenting interactive animation program in accor-
cation for power electronics supported with anima-
dance with Mayer’s multimedia design principles
tions had a significant effect on the achievement of
and Kristof’s & Satran’s interactivity theory, while
the students in the experimental group when com-
animation interactivity appears as an independent
pared with the control group.
variable, it was attempted to determine the effects
Key words: Interactive learning environments,
of animations on 123 college students with creat-
web based education, power electronics, distance
ing groups such as control, basic animation, basic
education, flash animation.
and practice. According to this study, animation
interactivity impacted students’ improvement on
Introduction understanding (p= .006) and lower-level applying
(p= .042) and animation interactivity did not sig-
Emerging developments in information tech-
nificantly impact student confidence and program
nologies with each passing day brings new meth-
perception. Students’ lack of cognitive skills and
ods and opportunities to educators for the devel-
the time limit might decrease the effect of the in-
opment of theoretical education and classroom en-
teractive animation. [4]
vironments. New software, developed algorithms,
In another research in which animations were
user interfaces, animations and hardware products
used with the aim of eliminating misunderstand-
can be used easily as a tool in distance education as
ings and providing meaningful learning, it was
well as in traditional education. While widespread
found that animations can increase student moti-
use of web-based interactive methods increase
vation evoke associations with daily life and make
slowly in education, virtual reality simulations
the material used interesting. [5] In another article,
and animations influence the learning process
firstly computer animation techniques are used in
of students positively and these methods are ac-
an application and then contributions of computer-

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aided education to the process of teaching are de- in web-based laboratories in engineering education
scribed. It is emphasized that educational value of and this is actually much different from the tradi-
animations are quite large and it helps to increase tional systems. In the concept of e-Learning, virtual
efficiency of education. Educational software de- laboratories have an important place. These virtual
veloped by using animations provides a more con- laboratories increase availability of the laboratory
crete understanding of the lecture content. With equipment for students and decrease maintenance
the help of the animations, these applications can costs. [12] A tool prepared with C++ programming
create a more effective learning environment. [6] language for power electronics circuits and this tool
Lattu and his colleagues who search more ef- has a flexible structure and a functional interface.
fective methods alternative to classical algorithm The circuit variables can, therefore, be changed eas-
education because of its difficulty and complexity, ily and the circuit responses under different condi-
have benefited visual tools containing animations tions can be examined by the help of graphs. On
and impressions for providing better understand- account of this feature, it can be used easily for both
ing of the subjects by the students. According to in their education and program development by in-
this study, when evaluating the existing visual- structors. The students were quite positive against
ization systems, it appears that most of them are this tool. [13] A virtual laboratory created by using
designed for illustrative purposes rather than ex- Pspice-based simulations and an assessment for the
plorative ones. However, this study suggests that effect of using instructional software has been pre-
flexibility is also a key element for successful vi- sented in this paper. There were statistically signifi-
sualization at least when the learning situation is cant differences in the achievement scores of stu-
bi-directional, as in the assignment sessions. [7] dents due to use of computers. [14] Kayisli and col-
In the same way, another study investigates effects lagues used simulations made by Matlab/simulink
of using animations for algorithm education. The and GUIs in describing DC-DC converters subject
results of this study suggest that one way anima- under power electronics course and underlined the
tions may aid learning of procedural knowledge positive effect of these method. [15]
and encourage learners to predict the algorithm’s In this study, an educational tool using anima-
behavior. However, such a learning improvement tions in the power electronics course is prepared
was also found when learners made predictions of for the students of Firat University Technical Edu-
an algorithm’s behavior from static diagrams. This cation Faculty Electronics and Computer Depart-
suggests that prediction, rather than animation per ment. No similar studies have been encountered
se, may have been the key factor in aiding learning in the literature about the working principles of
in the present studies. [8] circuit, currents and voltages with animations and
Besides the studies mentioned above, similar plotting input-output graphics with animations.
studies are available for foreign language edu- Macromedia Flash program is preferred because
cation i.e. a study based on flash animations for of less file size, easy usage, economically, flexibil-
eliminating some difficulties of Japanese educa- ity and fast working of its animations on web.
tion was presented. [9] The aim of this study is to compare the effects
When the applications of technical and engi- on student achievements between the traditional
neering educations examined, a study conducted by method and web based method supported with
Jirsa and Dušek (2010) real videos reinforced with animations at the power electronics course of elec-
flash based animations for supporting the labora- tronics education department.
tory exercises were investigated. [10] According
to this study, students can interactively simulate the Method
real practical laboratory exercise with the use of real
videos supported with animations. Likewise, flash This research is an experimental study that it is
animations for teaching transistors were used in based on pre-post-retention tests with control and
electric-electronics and computer education in an- experimental group. The traditional method on
other study. [11] Information technologies enable student achievements applied to control group and
use of new and highly quality education systems web based method supported with animations ap-

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plied to experimental group are compared in terms academic year as a pre-test in the first week of the
of student achievement. When experimental and study and 66 academic achievement tests were col-
control groups are created, neutrality is achieved lected from the study group after a 45 minute long
by the help of 10-item academic success scale. exam. At the end of four-week period in education
Thus, equivalence of both groups is obtained. Af- process, test-retest application was administered
ter the concept of pre-test and retest, retention is to control and experimental groups. 66 academic
tested with an academic achievement test as a last achievement tests were collected from these groups.
test following six-week period after the applica- However, 6 data of students regarded as invalid be-
tion of the post test. Symbolic view of used model cause of material errors. After six-weeks following
is shown in Table 1. the post-test application, academic achievement test
3rd year students of electronics education of re-applied to 60 students (30 students from control
Firat University Technical Education Faculty are group, 30 students from experimental group) and
composing the universe of this research. In form- data about retention was collected.
ing the control and experimental group, some Power electronics achievement test prepared
criteria were taken into consideration. The mean by researcher used as a pre-test at the start of the
scores of the students in electronics and vocational study and then it was used as a post-test. The input
lectures were taken into consideration. After the levels of the students and acquired behaviors of
groups were formed according to these criteria as students after program were specified with the help
unbiased, the pre-test points of the students were of this test. Achievement test consists of 10 ques-
also used to provide unbiasedness and it was con- tions in total. Achievement test applied a different
cluded that groups were formed unbiased accord- group (80 student which took the same course and
ing to the pre-test points. The sampling of this had been successful) for analyzing reliability and
study includes 33 students for control and 33 stu- validity. Item analysis was made for achievement
dents for experimental group. test and difficulty and discrimination indexes of
every item were calculated. Average difficulty of
Data Collection the test was calculated as 0,55.

Studies in the literature about the subject of this Prepared web-based Education Platform
research were investigated for academic achieve- supported with animations for power
ment test. The researcher then consulted with ex- electronics course
perts in the field of power electronic which are fac-
ulty members. After these steps, an achievement test In this study, a web-based education platform
developed by researcher was used to collect data. In supported with animations was prepared for pow-
the data collection process, academic achievement er electronics course. ASP and Macromedia Flash
scale were administered to the 3rd grade students of programs were used in this platform containing
Electronics Education department of Technical Edu- animations, circuit’s diagrams about subject and
cation Faculty of Fırat University in the 2009 -2010 current-voltage states at working conditions of

Table 1. Symbolic view of used model

Group Period 1 Period 2 Period 3 Period 4 Period 5 Period 6
C1 N P1.1 X P1.2 In the end of six-week period P1.3
C2 N P2.1 P2.2 In the end of six-week period P2.3
C1: Control group
C2: Experimental group
N: Neutrality in creating groups
X: Level of independent variable
P1.1, P2.1 : Pre-test application
P1.2, P2.2 : Post-test application
P1.3, P2.3 : Retention-test application

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these circuits, current and voltage graphics, exam- On one hand while the circuit is working on
ple applications and answered questions with so- the other hand necessary signals are plotting at the
lutions. This platform can be used as a supportive same screen. Consecutively captured screenshots
module in classroom teaching or as a stand-alone show how the current and voltages are plotting
self-learning module. This platform was used as with animations and they changes in time.
a stand-alone self-learning module in this study. In figure 2, the screenshots are given about the
Adobe Flash CS3 Professional and Action Script second chapter named single-phase inverter and
2.0 were used to create the interactive animation subheads. Different load conditions for single-
programs. The web pages and platform were de- phase full-bridge inverter are taken into account
signed with a 1024px-768px window. and R-L & R-L-C loads situations are observed.
In this prepared platform, the following sub- Current directions are shown with arrows and
jects were available; voltage polarities with flashing objects.
– Resonance commutated DC-DC chopper The screenshots of the web pages including ani-
– Single-phase inverter mations for current and voltage plotting and descrip-
○ Single-phase single-bridge inverter tion of subjects are shown in figure 3 and figure 4.
○ Frequency-voltage control methods Figure 5 shows the web pages including con-
○ Analysis of single-phase inverter secutively captured screenshots about another top-
– Analysis of 3-phase bridge 6-step inverter ic named PWM techniques, generating PWM with
– Examples electronics, how it is obtained by comparing sinu-
soidal and triangle signals and information about
Operating principle of the first chapter named how the inverters operating with this techniques.
as resonance commutated DC-DC chopper, input- The 3-phase six-step inverter is a comprehen-
output signals, voltage and current values, states sive subject and includes more details than previous
of switches and necessary information about this chapters. First, the basic structure of this circuit is de-
chapter can be seen in Figure 1. scribed and then the phase and phase-phase voltages

Figure 1. Consecutively captured screenshots including circuit diagram, operating principles, signals
and descriptions of resonance commutated DC-DC chopper

Figure 2. Single-phase inverter circuit, operating principle, switching states and output voltage levels

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 technics technologies education management

Figure 3. The screenshots including description of single-phase single-bridge inverter circuit under
R-L load condition by plotting output voltage and currents.

Figure 4. The screenshots including description of single-phase single-bridge inverter circuit underR-
L-C load condition by plotting output voltage and currents.

Figure 5. Consecutively captured screenshots about PWM techniques and the obtaining of two level
PWM signals

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 technics technologies education management

are plotted as shown in figure 6. The status of the Simulating the operation principles of circuit
6 switches (on-off status) and the connection order is an important issue and animations can be used
with 60 degrees of them are also shown in figure 6. for this simulation. In this study, when the subjects
The screenshots including the connecting of were being described, animations showed currents,
star and delta loads to this inverter circuits and voltages, switch states, signals and etc. At the same
circuit-voltage polarities are shown in Figure 7. time, for reinforcement of learned mathematical
Phase-phase voltage (Vab), phase currents (IR- expressions, extra examples with solutions were
IS-IT) and IDC are plotted and the consecutively given as an extra section. In figure 9, four examples
captured screenshots are given in Figure 8. The about this subject and solutions can be seen.
screenshots captured different order times because
showing animations is easy only by using pictures.

Figure 6. 3-Phase six-step inverter circuit, operating principles, consecutively captured screenshots
about phase and phase-phase voltage graphics

Figure 7. Star and delta load connected 3-phase six-step inverter circuit diagrams

Figure 8. Consecutively captured screenshots about phase-phase voltage, phase currents and dc cur-
rent of delta load connected 3-phase six-step inverter circuit

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 technics technologies education management

Figure 9. Screenshots of four examples about questions and solutions

Results The questions which were 0,30 and upper of

factor loads and item discrimination indexes with
Average difficulty level of academic achieve-
item difficulty indexes were within ideal range
ment test is obtained 0,55, being an ideal size.
were leaved after the result of factor analysis to
Item analysis was made for achievement test and
the examination including 17-item and prepared
difficulty and discrimination indexes of every item
for academic achievement test (10-item used in
were calculated (Table 2).
academic achievement because factor loads of
Table 2. Item discrimination index and difficulty
7-items was found under 0,30).
index values for every question of academic achie-
Table 3. shows that there isn’t any significant
vement test
difference (p=0,544) between the start points of
Question N Std. Deviation Mean rjx students in traditional education environment
01 80 ,49214 ,6000 0,43 (control group) and pre-test points of students in
02 80 ,45194 ,7182 0,32 web-based education platform supported with ani-
03 80 ,46423 ,6909 0,37 mations (experimental group) for power electron-
04 80 ,50221 ,5091 0,52 ics course. This situation is an indication of neu-
05 80 ,50221 ,5091 0,47 trality between control and experimental group
06 80 ,50196 ,4818 0,32 before the education process. Arithmetic mean of
07 80 ,49695 ,5727 0,45 pre-test points were determined for control group
08 80 ,49552 ,5818 0,53
09 80 ,49929 ,4455 0,45
as =5,400 and experimental group as =5,6333.
10 80 ,49820 ,4364 0,41 Thus, equivalent groups were defined according
to learning levels at the start of education process.
Table 3. The results of t-test (Levene) for pre-test points of control and experimental groups
t-test (Levene)
N SS
t sd p
Control Group 30 5,4000 2,59442
,335 58 ,544
Experimental Group 30 5,6333 2,79758
p<0,05 F=,373

Table 4. The results of t-test (Levene) for post-test points of control and experimental groups
t-test (Levene)
N SS
t sd p
Control Group 30 5,9333 2,37709
-1,735 58 ,033
Experimental Group 30 6,8333 1,55549
p<0,05 F=4,744

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Table 4 shows that there is a significant dif- very small at the end of the four-week education
ference (p<0,05) between the post-test points of process but this isn’t enough for creating signifi-
students in traditional education environment cant difference. This situation raises the need to
(control group) and post-test points of students in increase student’s motivations and participation to
web-based education platform supported with ani- lessons with exploring new stimulus in traditional
mations (experimental group) for power electron- education environment at learning.
ics course. Arithmetic mean of post-test points are It is shown in table 6 that there is a significant
determined for control group as =5,93 and as difference (p=0,032) between the pre-test points (
=6,83 for experimental group. The mean score of =5,6333) and post-test points ( =6,8333) of stu-
experimental group is higher than control group dents in experimental group for power electronics
and this results show that web-based education course. According to these points, it can be said that
platform supported with animations is more effec- the academic achievements of experimental group
tive for teaching the subjects in power electronics. increased significantly at the end of the four-week
Thus, it can be said that education environments education process. The post-test scores of experi-
supported and enriched with animations are im- mental group is higher than pre-test scores and this
portant factors in increasing the achievement. result show that web-based education platform sup-
It is shown in Table 5 that there isn’t any sig- ported with animations is an effective method for
nificant difference (p=0,058) between the pre-test teaching the subjects in power electronics.
points ( =5,400) and post-test points ( =5,9333) It is shown in table 7 that there isn’t any signifi-
of students in control group for power electronics cant difference (p=0,99) between the post-test points
course. According to these points, it can be said ( =5,9333) and retention-test points ( =5,8000) of
that the start points of control group increased students in control group for power electronics

Table 5. The results of t-test (Levene) for pre-test and post-test points of control group
t-test (Levene)
Control Group N SS
t sd p
Pre-test 30 5,4000 2,59442
-1,975 29 ,058
Post-test 30 5,9333 2,37709
p<0,05 standard deviation: 1,47936

Table 6. The results of t-test (Levene) for pre-test and post-test points of experimental group
t-test (Levene)
Experimental Group N SS
t sd p
Pre-test 30 5,6333 2,79758
-2,253 29 ,032
Post-test 30 6,8333 1,55549
p<0,05 standard deviation: 2,91725

Table 7. The results of t-test (Levene) for post-test and retention-test points of control group
t-test (Levene)
Control Group N SS
t sd p
Post-test 30 5,9333 2,37709
,218 58 ,99
Retention-test 30 5,8000 2,35475
p<0,05

Table 8. The results of t-test (Levene) for post-test and retention-test points of experimental group
t-test (Levene)
Experimental Group N SS
t sd p
Post-test 30 6,8333 1,55549
,249 58 ,942
Retention-test 30 6,7333 1,55216
p<0,05

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 technics technologies education management

course. From table 7, this can be said that the aca- cost. In addition to the low financial investment,
demic achievement level of control group after six- the developer benefits from a learning process
week then at the end of the education process isn’t that does not consume a great deal of time. The
show any change and learning become permanent. possibility of developing programs with superior
It is shown in table 8 that there isn’t any sig- graphic quality and efficient numerical processing
nificant difference (p=0,94) between the post- is likely to have the direct influence of raising stu-
test points ( =6,8333) and retention-test points ( dent interest and motivating students to utilize the
educational software. Finally, as all products are
=6,7333) of students in experimental group for based on Web technology, users can access them
power electronics course. From table 8, this can via the Internet, creating an increased possibility
be said that the academic achievement level of ex- of dissemination of the product. We hope that the
perimental group after six-week then at the end of methodology and solutions.
the education process isn’t show any change and
learning become permanent.
Acknowledgement
Discussion Dr. Korhan Kayisli received the BSc degree in
electronics education from Sakarya University, Sa-
With the rapid advance in flash technology, karya, Turkey in 2001 and the MSc degree in Elec-
using flash animations to teach the subjects has tronics and Computer Science from Firat University,
spread in education world. One can see many ani- Elazig, Turkey in 2004. He received Ph.D degree in
mations and colorful presentations in many web electric-electronic engineering from Firat University
pages and most creators of these pages have ben- in 2011. He is currently working in the Department
efited from these animations in order to receive of Electronics and Computer Science, Technical
interest and the situation is no different in the edu- Education Faculty, Firat University, Elazig, Turkey.
cation world. His main research interest is in power electronics,
In the education world, since theoretical subjects robust control, power factor correction, distance
are hard to understand for the students, it can be education and educational software & tools.
beneficial to use flash animations and multi-media
content in presenting these theoretical subjects in
order them to be understood by the students. In do- References
ing these, a careful planning and design should be 1. Garcia RR, Quiros JS, Santos RG, Gonzalez SM,
done because an expectation of just using flash ani- Fernanz SM. Interactive multimedia animation with
mations can positively affect the learning process is Macromedia Flash in Descriptive Geometry teach-
nonsense. Educators and material developers should ing. Computers & Education 2007; 49: 615–639.
put these animations on the content of the lecture 2. Barrettoa SFA, Piazzalungaa R, Ribeiroa VG, Dallaa
where necessary with a careful planning beforehand. MBC, Filhob RML. Combining interactivity and im-
In this study, the content was examined with proved layout while creating educational software for
great care and flash animations were used where the Web. Computers & Education 2003; 40:271–284.
necessary. Such a manner should have a positive
3. Taylor MJ, Pountney DC, Baskett M. Using anima-
effect in increasing the learning process of the stu- tion to support the teaching of computer game de-
dents as seen in the results of this study that lecture velopment techniques. Computer & Education 2008;
content supported with flash animations has made 50: 1258–1268.
a significant difference in the pre and posttests of
4. Wang PY, Vaughn BK, Liu M. The impact of anima-
the experimental group. tion interactivity on novices’ learning of introductory
The methodology presented here allows the statistics. Computer & Education 2011; 56: 300-311.
development of educational tools with Web tech-
nology. The methodology is based in an associa- 5. Barak M, Ashkar T, Dori YJ. Learning science via ani-
tion between two development packages: ASP and mated movies: Its effect on students’ thinking and mo-
tivation. Computer & Education 2011; 56: 839-846.
Flash. One can be purchased at an inexpensive

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 technics technologies education management

6. Arıcı N, Dalkılıç E. Animasyonların Bilgisayar

Destekli Öğretime Katkısı: Bir Uygulama Örneği.
Kastamonu Eğitim Dergisi, 2006; 14(2): 421-430.

7. Lattu M, Meisalo V, Tarhioc J. A visualisation tool as

a demonstration aid. Computer & Education 2003;
41: 133-148.

8. Byrnea MD, Catramboneb R, Staskoc JT. Evaluating

animations as student aids in learning computer algo-
rithms. Computer & Education 1999; 33: 253-278.

9. Bhattacharya Y, Bhattacharya M. Work in Progress:

Design of a Visual Learning Tool for Japanese. 36th
ASEE/IEEE Frontiers in Education Conference, Oc-
tober 28 – 31, San Diego, CA, 2006; 15-16.

10. Jirsa J, Dušek K. Assist Education Tool for Stu-

dent’s Preparation on Practical Laboratory Ex-
ercises. 33rd Int. Spring Seminar on Electronics
Technology, IEEE, 2010; 515-517.

11. İstanbullu A, Yumuşak N, Temurtaş F. Eeb Müh-

endislikleri İçin Bilgisayar Destekli Eğitim: Tran-
sistör Eğitim Yazılımı: Tey-1.0. II. Elektrik Elektron-
ik Bilgisayar Mühendislikleri Eğitimi Sempozyumu,
Samsun, Turkey. 2005.

12. Stefanovic M, Matijevic M, Cvijetkovic V, Simic V.

Web-Based Laboratory for Engineering Education.
Comput Appl Eng Educ , DOI 10.1002/cae.20222.
2010; 18: 526-536.

13. Elmas Ç, Sönmez Y. An Educational Tool for Power

Electronics Circuits. Comput Appl Eng Educ , DOI
10.1002/cae.20237. 2010; 18: 157-165.

14. Yamin HY, Altawil IA, Al-Ajlounı AF, Al-Fahoum

AS. A New Developed Educational Approach to
Improve Conventional Teaching Methodology of the
Power Electronics Laboratory. Comput Appl Eng
Educ , DOI 10.1002/cae.20304. 2011; 19: 193-200.

15. Kayisli K, Tuncer S, Poyraz M. An Educational

Tool for Fundamental DC-DC Converter Circuits.
Comput Appl Eng Educ (Early Review), DOI
10.1002/cae.20455. 2011.

Corresponding Author
Korhan Kayisli,
Istanbul Gelisim University,
Istanbul,
Turkey,
E-mail: kkayisli2@hotmail.com

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 technics technologies education management

Interactive multimedia as new teaching strategy

in the course of programmable logic devices
Kristijan Kuk1, Ivan Milentijevic2, Dejan Rancic2, Petar Spalevic3, Marko Smilic4, Zoran Trajcevski5
1
School of Electrical Engineering and Computer Science Applied Studies, Belgrade, Serbia,
2
Faculty of Electronic Engineering, Nis, Serbia,
3
Faculty of Technical Science, University of Pristina, Serbia,
4
Faculty of Technical Science, Kosovska Mitrovica, Serbia,
5
Agency for Electronic Communications, Skopje, Macedonia.
Abstract dents are expected to choose one or several offered
Multimedia content frequently helps professors answers or to fill in the gaps in the tests. This work
to improve the teaching process with a high level describes a type of multimedia applications in the
of students’ interest in this type of teaching mate- form of interactive tasks. That is an environment
rial. This paper describes types of multimedia ap- with the integrated main components of education
plications in the form of interactive tasks that are such as learning, teaching, testing and the use of
used by students as a teaching material for prac- system that gives students learning instructions. On
ticing the curriculum. Interactive tasks as types of the basis of the main types of interactive tasks much
educational multimedia applications lead students more complex and much more efficient multimedia
to the final accurate solution of tasks given to learning applications can be developed.
them, through visual indication. A simple and in- Multimedia applications have already been
tuitive interface in interactive tasks gives students used in education for a long time, and through
easiness and comfort in testing various phenomena new and dynamic visual shapes they are becom-
without fear that they would do something wrong. ing more interesting for users, especially younger
Furthermore, the use of multimedia content dur- ones. Very serious teaching contents are placed
ing the evaluation of students’ knowledge through in the form of 2D and 3D interactive simulations,
various forms of computer tests helps them to un- entertaining games or quizzes. Interactive applica-
derstand questions better. Nowadays, multimedia tions through which students practice the learned
objects and elements play a significant role in this material and use their knowledge in new situations
form of evaluation with the use of the so called are presented in this work as interactive tasks. This
“interactive tests”. Interactive tasks considerably type of educational multimedia applications lead
contribute to more successful solving of the tests students to the final accurate solution of the given
presented in this work. Using these tests, students task through visual indication. In case that a stu-
train and prepare themselves for a higher level of dent does not have sufficient prior knowledge for
interactivity while recognizing questions and the solving the task, he/she can find the solution for
way of answering them. the given example through the random selection
Key words: interactive multimedia, educa- method. In that way the student has a possibility to
tional technology, programmable logic devices, solve the task through the method of self-reveal-
knowledge management, computer applications. ing and learning through finding.

1. Introduction 2. Interactive multimedia in education

Interactive multimedia content offers possibili- Introduction of multimedia content in teaching
ties for improvement of learning performance by materials with the aim of producing the highest pos-
increasing satisfaction and engagement of users sible motivation and interest of students is neither
during the learning process. Multimedia content an easy nor a simple job. Engineering profession
also provides a better concept of task presentation becomes more demanding, thus it needs attracting
in tests for knowledge evaluation, which is not pos- more students in this field. The use of dynamic and
sible to see in conventional test formats, where stu- interactive pictures and animations for explanation

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of many phenomena is increasing [1]. In the inter- Authors Stuchlikova L’assassin, Gröna Michal
action between a man and a computer multimedia and Csabay Otto described an e-learning project
content has a very significant role, and animations, that was implemented at the Department of Mi-
graphics and sound have thus become very impor- croelectronic education in the Slovak University.
tant elements that efficiently produce acoustic and This project includes an interactive animation
visual sensations in the learning process [2]. Dur- with the aim to introduce students to the work
ing the past years, in the field of multimedia appli- of electronic circuits [11]. Interactive animations
cation in learning, there have been more and more in this project enabled students to independently
researchers presenting their solutions in the process change the parameters and animations based on
of teaching and evaluation of students’ knowledge. the response of the system to learn how to operate
Many courses in energy electronics for ad- electronic circuits. The set of all realized interac-
ditional learning use various types of simulation tive animations is given to students through the
of energy electronic devices created in simulation Internet portal “eLearn Central”.
programs such as Saber®, PSpice®, Caspoc®,
etc. The application of these programs is presented 3. Electronic course in the subject
in [3], [4]. There are numerous examples of learn- programmable logic devices
ing methods that combine both simulations and
animations in the same learning environment such Electronic courses represent a convenient tool
as those presented in [5], [6]. for acquisition of basic and additional knowledge
Using the advantages of advanced techniques in the field of designing and design implementation
of interactive graphics and animation, parts of in programmable logic. The most efficient way is to
their processes as well as their transitive condi- combine them with the classic teaching methods.
tions can be presented to students in a much easier It is convenient to implement electronic courses in
and more understandable way. Many universities the Moodle system for electronic learning, since
worldwide deal with the method of education in this free system enables the teacher to organize the
the field of electronics, including universities from teaching material and carry out the course more
the European Union. The European Union Project easily, while it provides an easy orientation in the
entitled INETELE gathers 8 Universities from dif- new learning environment for students [12].
ferent countries, with the aim of developing multi- Based on the primary research dedicated to cre-
media software for teaching the subject Electrical ation of the course profile supported by multime-
Engineering (EE) [7], [8]. dia tools, the teaching methodology for the subject
Simulations are most often created as Java ap- Programmable logic devices, taught at the first year
plets, and at the same time they offer huge poten- of vocational studies in Belgrade at the College of
tial in designing presentations of items in innova- Electrical Engineering and Computer Science pro-
tive tests. An example of such simulation - The fessional studies, was developed. While making
Voltage Circuit Simulator was created by Russell the electronic material for learning, we took into
[9], and with the drag-and-drop technique it en- consideration that in the learning process students,
abled students to close the current circuit with the in various ways, adopt the terms obtained through
use of offered movable electrical elements. At the books, computers or multimedia content. That im-
same time, through the virtual learning systems, plies that the effects of learning are considerably
professors put huge efforts into teaching of pro- influenced by distribution of content, the type of
grammable logic controllers (PLCs). An exam- content and the user interface design. On that basis,
ple of such environment is the Virtual PLC [10], the entire content in Moodle referring to teaching
which combines technologies of intelligent tutor of Programmable Logic Devices was organized
systems, animations, and simulations. within the separate units that can be divided into:
The use of simulations and tutors through the Web – Lectures (in the form of ppt presentations),
environment in the teaching material for learning – Laboratory exercises (online tutorials for
of PLC resulted in positive evaluation by students, Altera Quartus II 9.0 Software),
which was found out by a survey of their opinion. – Interactive tasks (for curriculum practicing),

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– Test for evaluation of knowledge (innovative The two levels of Bloom’s taxonomy used in
type of multimedia tests). interactive tasks presented in this work are the
level of analysis and the level of application. The
3.1. Intelligent learning environment level of analysis enables students to understand
content and structure of the teaching material. In
With the use of interactive animations it is pos- the given example of interactive tasks, the level of
sible to present a series of terms being taught, and analysis is given as a design description with the
it is also possible to show and notice their reaction use of truth tables or logical expressions based on
to various other terms influencing them. Simple and functional demands of the combination network.
intuitive interactive environments give students re- The level of application provides for the use of
lief and comfort in testing various phenomena with- the learned material in precise situations, which in
out fear that they would do something wrong. In- the case of interactive tasks represents complete
teractive tasks are independent applications that are implementation in the programmable logic device
thematically grouped within chapters of lectures or (filling of the AND matrix and creation of output
implemented within the online tutorial content. in the XOR circuit).

4. An example of interactive tasks

Through an adaptive approach, with visual
indication of the course of performing the task,
students are enabled to learn the procedures for
solving tasks from various fields and various com-
plexity levels. The very applications are created in
the well-known software package for creation of
multimedia content Adobe Flash CS4. Students’
interactivity within this type of applications was
achieved with the use of graphic symbols (differ-
ent types of buttons) and specific colors. The ex-
ample of interactive tasks are available online at
http://www.viser.edu.rs/images/animacije/index.
swf. Realized interactive tasks differ in:
– The way of giving answers,
– Visual guidance during the task execution,
Figure 1. Bloom’s six levels within the cognitive
– The level of complexity.
domain
Interactive tasks will not allow advancing to
While planning the teaching material presenta-
the next level of solving unless the student had ac-
tions, as well as possibilities for using a form of
curately filled or selected interactive fields in the
multimedia, most professors start from the famous
previous level [15]. From the pedagogical aspect,
Bloom’s taxonomy. As far back as 1956, Bloom
these applications stimulate students to make con-
identified six different levels of learning within the
clusions on the accuracy of achieved steps in solv-
cognitive domain, from the simplest (repetition of
ing the entire task on their own. In this interesting
facts) to more complex mental levels, to the high-
way, through self-revealing, students acquire the
est (evaluation), presented in Figure 1 [13]. In or-
needed knowledge quantity and thus carry out the
der to define intellectual behavior important for
learning process without tutor’s intervention or
learning, Pavol Bauer, et al. used in [14] all the
previous knowledge, through random guessing.
six learning levels at the development of multime-
dia based e-learning tools in the field of electrical
drives and power electronics.

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The last step of task solving demands bringing

of the specific logical level to the connection of
the XOR circuit (a small grey field in the lower
right corner), where on the output F2 we obtain
the output of the combination network described
by the implemented function (framed by a dotted
line). Visual guidance, as well as the way of an-
swering, is directly conditioned by the problems
elaborated in the task.

Figure 2. Filling of interactive task fields with Figure 3. An interactive task with higher level of
implementation of the logical function in PLA visual guidance during execution
circuit
The type of interactive tasks shown in Figure
The example of interactive tasks shown in Fig- 3 represents, in some situations, the first part of
ure 2 represents a simpler task in which the answer the task shown in Figure 2, since it stimulates stu-
is given by marking the connection of the logical dents, on the basis of the truth table and logical
device in programmable matrix and the appropri- function minimization with the use of Karnaugh
ate input signal with a red cross. The position of map, to discover the form of the logical expression
the cross is directly connected to the logical func- suitable for hardware implementation in program-
tion F (marked in yellow), which should be imple- mable logic devices of PLA or PAL type.
mented in the programmable logic. The indication of accurately filled truth table
The task solving is carried out within three inter- with values 0 or 1 based on the logical function
dependent levels. At the first level, the creation of (G), given in the form of full product sum, is re-
individual logical products is realized. The indica- flected in writing partial full products in the spe-
tion of accurately created logical product is given in cific field of truth table (the last column). At the
the form of transparent grey rectangles on outputs same time, the value 1 is written in the appropri-
of specific AND circuits. Only after creation of all ate fields in the Karnaugh map. If the entire truth
logical products, the advancement to the next level table is accurately filled, fields in the Karnaugh
can take place, where a sum of logical products map will be automatically grouped with contours
should be created through connecting to inputs of of different colors, on the basis of which appropri-
the appropriate OR logical device. The indication ate logical products from the falling menu should
of accurately realized sum is obtained by highlight- be selected. These logical products are automati-
ing the input of OR circuit in white color. cally written into empty fields on the bottom of the

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application, which results in an expression for the Accurate selection of the counter condition
logical function obtained by minimization. from the falling menu, based on the given time
diagrams of control signals (Figure 4), is a precon-
dition for solving of the second part of the task, in
which through time diagrams, the indication of the
counter going through a certain condition is given,
in compliance with the task.

Figure 4. An interactive task with direct indication

of the realization accuracy

A specific type of interactive tasks was used

for learning about the functioning principle of se-
quential networks. The interactive task in Figure 4
provides for an analysis of operation of the condi-
tion machine on the basis of the initial condition
and sequence of the input control signal (X). The
table is filled with the selection of the specific cur-
rent and following condition, as well as values of Figure 6. An interactive task with detection of
the signal leading to a change of condition, and the the counter condition by drawing segments of the
accuracy is monitored through the change in the time diagram
color of circles and lines on the condition diagram.
A similar principle of the realization of accuracy 5. Examples of tests based on interactive
indication is applied in the case of analysis of the tasks
synchronous binary counter operation with the use
of time diagrams (Figure 5 and Figure 6). Tests in the Moodle platform can be divided
into tests for individual evaluation of knowledge,
and tests for evaluation of the acquired knowledge.
Tests for individual evaluation of knowledge are
given at the end of each chapter of the electronic
textbook; they do not have a time limit for solving,
and can be accessed limitlessly. Nowadays, instead
of its primary purpose in computer games, cartoons
and video materials, multimedia has a considerable
role in a new form of testing, the so-called “interac-
tive tests”. Items in computer tests differ depending
on the field and type of given questions. Depending
on the needed skills that students should gain in a
specific field, the items are realized with different
visual elements and it is difficult to transform them
into a paper version of tests [16].
Figure 5. An interactive task with the indication Many answers representing items in tests are
of the counter condition change with the use of less frequently presented as short answers. They
time diagram are instead presented by professors in the form of
interactive graphic pictures that can be dragged

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and dropped as a whole, or this can be done with 6. Discussion

their individual parts. The liberal approach in in-
We computed means for students on the opin-
novative tests supports the view that multiple an-
ion survey where Figure 8 summarizes these re-
swers are presented as the falling menu that con-
sults. Students ratings were positive for all items,
tains partial answers. Through the selection of
and there was no significant difference in ratings
accurate items, students can complete the entire
between the items. In general, students felt that the
answer to a given question, which realizes a con-
module with interactive tasks in the Moodle plat-
structive approach in multiple-choice answers.
form was interactive, relevant, adequately paced,
Multimedia applications in the form of interac-
and easy to use and understand. We performed
tive tasks considerably contribute to more success-
tests of means and variance to see if there was sig-
ful solving of tests in the subject Programmable
nificant difference in ratings between the applica-
logic devices. In the task from the test presented in
tion with higher and lower level of visual guidance
Figure 6, where students are required to recognize
samples, using the question about understanding
the accurately filled Karnaugh map on the basis of
the content of tasks in the module with interactive
the function given in the form of full product sum,
tasks. Students who took the interactive task with
and then also to recognize accurate implementa-
a higher level of visual guidance rated the applica-
tion of the function in PLA circuit, better perfor-
tion’s “Ease of use” slightly more positively than
mance was noticed in students who had practiced
students who took the interactive task with a lower
for the exam using interactive tasks shown in Fig-
level of visual guidance.
ure 2 and Figure 3.
The tests used for evaluation of knowledge in
the field of sequential network design contain ele-
ments of interactive tasks to a great extent. The
example of interactive tasks shown in Figure 7
helps in preparation for solving tasks in tests that
demand filling in time diagrams by selecting an
appropriate combination of binary values through
the falling menu.
Figure 8. Results from the opinion survey

Figure 9. Perfomace of exams in two years

Exploring the impact of interactive tasks on stu-

dents’ success in acquiring the knowledge about
Figure 7. An example of tests with filling of time complex logic devices, operating principles and
diagrams by selecting values from the falling their implementation, at the end of the course we
menu conducted a survey. Survey included all students
who took classes in the subject Programmable
logic devices in 2009. Students of various study

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programs rated the content and concept of inter- test and verify the previously acquired knowledge.
active tasks with marks from 1 to 5. The survey The given types of such tasks in the Moodle sys-
results showed that most students gave the highest tem can be extended with new types of interactive
rating. Thus, it can be concluded that the concept tasks, which is going to be the topic of our future
and content of interactive tasks were very well ac- research work in this field.
cepted by students of all study programs. We also
explored how many students use the interactive Acknowledgements
tasks to prepare for the exam.
Analysis of the results of the programmable This paper is part of the research Project No. TR
logic circuits exam (Figure 9) showed that, com- 35026 and subproject 3 in Project No. III 47016,
paring to the results in 2007/2008 academic year, supported by the Ministry of Science and Tech-
the number of students who passed the exam in nological Development of the Republic of Serbia.
2008/2009 academic year increased, and the aver-
age exam mark increased, as well. References
1. Bodendorf F. Computer in der fachlichen und universi-
7. Conclusion tären Ausbildung. München, Wien: Oldenbourg, 1990.
In our system for learning, instead of the stan- 2. Mayer RE. Multimedia Learning. Cambridge Uni-
dard animation, the interactive animation is used versity Press: New York, NY. 2001.
as a kind of simulation game based on theoretical
principles that students need to learn. This paper 3. Fedák V, Bauer P. E-learning for Power Electron-
ics and Electrical Drives. in Proc. of Int. EDPE 2003
describes a new approach to learning through inter- Conf., The High Tatras, ISBN 80-89061-77-X, 567-572.
active tasks and new multimedia tests. By applying
the new approach in practice, the level of interest 4. Dobrucký B, Špánik P. Modelling and Simulation of
in the field of programmable circuits significantly Power Electronics Structures. Scientific Monograph.
rises. Summarizing the results and taking into con- EDIS, Žilina.Dec. 1999.
sideration a very good result in passing exams dur- 5. Fedák V. et. al., “Interactive e-Learning in Electrical
ing the academic year 2009, we can conclude that Engineering,” in Proc. of Int. EDPE 2003 Conf., The
interactive tasks produced very positive students’ High Tatras, ISBN 80-89114-45-4. 2003; 368-373.
reactions. Interactive tasks where knowledge is
6. Bauer P, Fedák V. Implementation of E-learning
checked or acquired by guessing the correct answer Platform for Electrical Engineering. in Proc. of the
with the help of visual indicators turned out to be a Int. Conf. Computer Based Learning in Science, Zi-
good teaching material. lina, Slovakia, Jul. 2005; 387-395.
However, these tasks appear insufficient for
exam preparation, but they represent additional 7. Bartal P, Hamar J, Jardan RK, Korondi P, Nagy I,
Sepa Z, Suto Z, Zaban K, Funato H, Masada E, Oga-
material modeled in a specific way.The posi- sawara S. Learning multimedia software for teaching
tive results stimulated us to continue improving nonlinear dynamics. in Proc. Control in Power Elec-
the existing tasks and to give a basic concept of tronics and Motion Control (IPEC’05), Apr. 2005.
their creation and implementation in other fields
as well. Different types of realized interactive 8. Fedak V, Bauer P, Hajek V, Weiss H, Davat B, Ma-
nias S, Nagy I, Korondi P, Miksiewicz R, Duijsen P,
tasks show possible ways of interaction between Smektal P. Interactive elearning in electrical engi-
students and the application for learning and prac- neering. in Proc. EDPE’03, Sep. 2003, 368–373.
ticing knowledge. The given examples can stimu-
late teachers and professors in academic circles to 9. Russell S. (no date), Voltage circuit simulator. [On-
line]. Available: http://java.sun.com/applets/archive/
present their teaching materials to pupils and stu-
beta/Voltage/
dents in a new and interesting way. With the use
of pleasant graphic environment and a multitude 10. Hsieh S, Hsieh PY. Integrating Virtual Learning Sys-
of multimedia interactive elements it is possible tem For Programmable Logic Controller. Journal of
to motivate students to learn on their own and to Engineering Education, 2004; 93(2):, 169–178.

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11. Lubica S, Michal G, Otto C. Interactive animations

in Microelectronics education. EWME 2008 — 7th
European Workshop on Microelectronics Educa-
tion, Budapest, Hungar, 2008.

12. Kuk K, Spalević P, Ilić S, Carić M, Trajčevski Z. A

Model for Student Knowledge Diagnosis through
Game Learning Environment. Technics technolo-
gies education management-TTEM, 2012; 7(1): str.
103-110.

13. Bloom SB, Krathwohl RD. Taxonomy of Educa-

tional Objectives: The Classification of Educational
Goals. by a committee of college and university
examiners. Handbook I: Cognitive Domain. New
York, Longmans, Green, 1956.

14. Bauer P, et al. e-Learning in Electrical (Power)

Engineering, from Idea to Reality: State of the
Art and Challenges.Proceedings of the 33rd IEEE
Power Electronic Specialists Conference, Cairns,
Australia, 2006.

15. Kuk K, Prokin D, Dimić G, Stanojević B. Interac-

tive Tasks as a Supplement to Educational Material
in the Field of Programmable Logic Devices. Elek-
tronika ir Elektrotechnika, 2010; 2(98): 63-66.

16. Parshall CG, Davey T, Pashley PJ. Innovative item

types for computerized testing. En W.J. van der Lin-
den y C.A.W. Glas (Eds.). Computerized adaptive
testing: Theory and practice Dordrecht: Kluwer
Academic Publishers. 2000; 129-14

Corresponding Author
Kristijan Kuk,
School of Electrical Engineering and Computer
Science Applied Studies,
Belgrade, Serbia,
E-mail: kristijan.kuk@viser.edu.rs

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 technics technologies education management

Sensitivity analysis of fractional programming

models
Marija Cileg, Tibor Kis, Otilija Sedlak
University of Novi Sad, Faculty of Economics in Subotica, Serbia.

Abstract objective function [1], while we apply the Martos’

criterion for solving the fractional problem and de-
Solved programming models that have frac-
rive sensitivity analysis introducing different pa-
tional criterion function only give information in
rameters into the numerator and the denominator,
a stagnant manner, i.e. conditions and coefficients
which gives new possibilities to analyze relations
in the objective function are strictly defined. A new
between coefficient changes.
approach proposed in this paper starts from param-
eterization of coefficients in the numerator and in
the denominator of the criterion function with dif- 2. Fractional programming models
ferent parameters. Applying the Martos criterion Fractional program means maximizing or mini-
the possibilities of tracking of effects of changes mizing the quotient of two real functions over a real
in coefficients on the program are derived, and the valued feasible set. Given the nominator and the
possibilities of adjusting the program aimed to keep denominator of the fraction are linear functions and
the optimal solution unchanged are pointed out. the feasible set is polyhedral, it is about the linear
Key words: fractional programming models, fractional program. There are applications where a
sensitivity analysis, Martos criterion single ratio is to be minimized or maximized, while
in other cases the objective function consists of sum
1. Introduction of fractions. Some kind of minimization of input to
Every economic decision requires complete output ratios was proposed by von Neumann as ear-
information and besides that every decision repre- ly as 1937 [2], but the first systematic approaches to
sents a part of an economic system, which by its this problem were published in [3] and [4]. Since
complexity, level of development and dynamism then there are lot of results published and system-
affects the process of decision making and the deci- atized in different monographs [5, 6, 7, 8, 9, 10, 11,
sion itself. This fact points to the necessity of exis- 12]. In the mentioned paper [3], Charnes and Coo-
tence of multiple criterions by which every decision per derived a transformation of the fractional pro-
is being made. A special problem arises here: how gram into a linear through modification of the fea-
to capture all the existing possible goals, how the sible set, while other approaches, where Martos’s
goals are mutually related – conflicting or synchro- [4] belongs as well, start from the original feasible
nized, less or more important etc., then how to rank region and solve sequence of linear programs.
them and make a choice among them. Is it possible The linear fractional model is given by:
to set two opposite goals which are negatively or n
positively correlated for an enterprise? E.g. how to ∑ c j x j +a
j =1 ........................... (1)
adjust maximization of revenues with minimization max n
of expenditures? In this latter case a relative index
of two goals may be appropriate, that is a fractional
∑ k j x j +b
j =1
criterion function. Quotient of economy, coefficient
of labor productivity and profitability are often used n
indices of economic success of a firm, which are s.t. ∑ a ij x j £ b i i =
1,2,...,m .................. (2)
j =1
appropriate for use as fractional criterion functions.
Other approaches to sensitivity analysis start from 1,2,...,n .......................... (3)
x j ³0 j =
equal changes of all the coefficients in the fractional

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 technics technologies education management

where: T T
xj is the primary variable j x d
cj is the coefficient of the primary variable j in y B
−1
B b
−1

the numerator T
z 1 c T −r T B −1A r B
T 1 T −1
−r B b−a (II)
kj is the coefficient of the primary variable j in
the denominator T
z 2 k T −n T B −1A −n T B −1 −n T B −1b−b
a and b are constant values
aij is the technical coefficient of primary vari- While the belonging row z 3 is:
T
able j in the constraint i
bi is the capacity (resource) i
The given model means that the set of values x0j (n B
T −1
)(
b+b  c −r B A , −r B

T T −1 T −1
) ( ) −( r B T −1
)(
b+a  k


( )( )( ) −( r B b+a )  ( k A ) ,( −n B )  £0
is to be determined so that conditions (2) and T(3)−1
b+b (1)
T −1 T T −1 T −1 T T −1 T −1 T
n Bfunction
are satisfied while c reaches
−r B itsA extreme
, −r B −n B
  
value. Rewrite the model (1)-(3) as:
......................................... (5)
T z +a
max c x+a = 1 ........................ (1’) where:
T
k x+b 2z +b
−1
B is the optimal inverse base
s. t. Ax £b ............................... (2’) r is the sub-vector that includes those elements
x ³ 0 .................................... (3’) of vector c which belong to primal variables in the
base
The model (1’)-(3’) shown in simplex tableau is: n is the sub-vector that includes those elements
T T of vector k which belong to primal variables in the
x d base.
d A I b −1
T T T B b = y is the vector of primary and comple-
z1 c 0 −a
(I) mentary variables in the base
T T T
z2 k 0 −b
3. Analysis of changes of elements in crite-
T T T T
z3 bc −ak 0 0 rion function

Different methods can be used to find solution 3.1. Separate analysis of changes in
to the problem, one of them - based on the simplex numerator and denominator of
method and Martos optimality criterion - is shown fraction criterion function
in the lower row of the tableau: As an important part of economic analyses there
z 3 =bc−ak £0 ............................. (4) are very often investigations in the possible range of
changes of the coefficients in the numerator and de-
Application of this method enables to consider nominator of the criterion function of the hyperbol-
the non-linear criterion function at every stage of ic model, while the value of the fraction is changed
the solving procedure; numeric values of the so- but not the structure of the optimal program [13, 14,
lution are given separately for the numerator and 15, 16, 17]. Let us assume that economic indices are
denominator. Therefore there is an easier possi- included into the model. At first consider the level
bility to give reasonable economic interpretation of economy, as a ratio of total income to total costs.
to the results. If the model satisfies the necessary Two sides of a question arise: - What is the possible
practical assumptions (the feasible set is bounded range of increasing of costs while prices are fixed,
and non-empty; the denominator of the criterion so that the program will remain unchanged?, and -
function differs from zero and is continuous over If costs exceed the above determined limits so that a
the feasible set), then after a finite number of itera- shift in the program by which one can obtain a new
tions one can get the next optimal tableau: optimum is caused, what are the necessary changes

Volume 8 / Number 4 / 2013 1799

 technics technologies education management

in prices that will preserve the old program to stay a) Adjusting the program, prices unchanged. A
optimal? These problems are especially of particu- new optimal solution is to be determined in this
lar interest in case of high inflation rate, unexpected case. This occurs when selling prices are fixed
changes in costs per unit, while the relative stability while costs are subject to changes. Similarly, if the
in prices could obtain better competition status for demand elasticity of products is high it is not con-
the producer on the market. venient to increase prices.
Let us formulate answers to these questions as b) Adjusting the prices, program unchanged.
follows. Let the parameter form of coefficients in With the given parameter a, the parameter form of
the denominator be: the numerator is as follows:
k t = k + t⋅1 ................................ (6)
(c T
+ a1
T
)x+a .......................... (10)
where
t is a parameter that shows the change in cost Starting from the optimality criterion, the value
per unit of xj, Vj of a will show the required range of changes in
prices that will keep the program unchanged.
1 is vector, all elements equal to 1.
In analysis above we started from changes in
In this case the belonging sub-vector n in table
the denominator, also it could be performed start-
(II) is modified:
ing from the numerator; that means that the pa-
n t = n+ t⋅i ............................... (7) rameter form of coefficients in the numerator is
formulated at first, and that is a basis for the analy-
where vector i consists of values 1 and 0, be- sis of changes in the structure of the optimal pro-
cause n does not include all the elements of vector gram and/or costs.
k. Using the parameter form of k and subsequently
n, the Martosh criterion derived from (5) becomes:
3.2. Analysis of simultaneous changes in
numerator and denominator of the
= (

T T −1
)  (
T T −1
)(
z 3  n + ti B b+b ⋅ c −r B A , −r B A , −r B
t T −1 T −1
)( ) − criterion function

b+a ⋅ ( k + t1 )−( n + ti ) B A ,− ( n + ti ) B  £0 Let us now reflect on the problem of simultane-

T −1 T T T T −1 T T −1 T
− r B
    ous changes in the numerator and the denomina-
......................................... (8) tor. It is obvious that changes as in the numera-
tor so in the denominator of the function affect its
Relation (8) represents a set of inequalities, t be- value, so what will happen if all the coefficients
ing the only unknown value; in case of optimum ele- (cost and prices) are modified? Let the parameter
ments of z3T are non-positive. The solution of (8) is: form of the coefficients in the numerator be:
−q 1 £ t £q 2 ................................ (9) c a = c+a1 ................................(11)

where with the belonging sub-vector:

q1 is the maximal extent of reducing the coef-
ficients in the denominator r a = r +ai ............................... (12)
q2 is the maximal extent of increasing the coef- The parameter form of the criterion function
ficients in the denominator. now is:
Quotient of economy being discussed, it is con-

( c +a1 ) x+a
venient to recalculate the limit values q1 and q2 into T T
relative indices. Results point to that very maximal
max ...................... (13)
( k +t1 )x+b
possible percentage of shift in costs which will either T T
not effect the program or the prices. If t exceeds its
limits given by (9) possible actions by which one
may intend to keep optimality are specific. For the If our model consists of (13), (2’) and (3’) then
criterion function is hyperbolic, there are two ways: the optimal tableau is:

1800 Volume 8 / Number 4 / 2013

 technics technologies education management

z1
T T T
c +a1 − r +ai ( T T
)B −1
A (
− r +ai
T T
)B −1
(
− r +ai
T T
)B −1
b−a
(III)
−( n )B −( n )B −( n )B
T T T T T −1 T T −1 T T −1
z2 k + t1 + ti A + ti + ti b−b

On the basis of the optimality criterion given in prices change so that a=-a2<-g1; the structure of
(4) two sets of inequalities are derived: the optimal program will remain unchanged if uni-
ty costs are lowered in the range -t3£t£-t2.
( T −1 T T −1 T −1 T −1 T −1
t i B bc −i B br B A+r B bi B A−r B b1 +ai B A−a1 +
T −1 T T −1 T
)
( T −1 T T −1 T −1 T −1 T −1
+a n B b1 −n B bi B A+i B bn B A−i B bk −bi B A+b1 +
T −1 T T −1 T
)
T −1 T T −1 T −1 T −1 T −1 T −1 T
+n B bc −n B br B A+r B bn B A−r B bk +
T −1 T −1 T T T
+an B A−br B A−ak +bc £0

....................................... (14)

( T −1 T −1
t −i B br B +r B bi B +ai B
T −1 T −1
)+a ( −n B bi B +i B bn B −bi B )−
T −1 T −1 T −1 T −1 T −1 T −1

)+−t(an−( i−BnB Bbrbr biBB B++rr +BBi BbibnbnBB B+a+ai −bnBiBB)+−ba ()−r−n BB £bi0 B +i B bn B −bi B )−
T −1 T −1 T −1 T −1 T −1 T −1 T
−1 T −1 T T−1 −1T T−1 −1 T T−1 −1T −T1 −1T −T1 −1 T −1 T −1 T −1 T −1 T −1
+ai B
−1 T −1 T −1 T
+an B −b−rn TBB −1br
£0T B −1 +r T B −1bn T B −1 +an T B −1 −br T B −1 £0 T
....................................... (15)

Inequalities (14)-(15) are linear since elements

a⋅t cancel. The solution of inequalities gives the
possible range of t and a: Figure 1. Changes in the numerator and
−q 1 £ t £q 2 .............................. (16) denominator of hyperbolic criterion function
−q 1 £ t £ q 2
−g 1 £ a In any case, it is very practical to have the pre-
−g 1 £a ................................. (17)
sented graph along with the optimal program, be-
which determine a feasible set M of points (a,t) cause it enables easy and prompt decision making
which give optimal solution to the problem. While when either prices, costs or program changes.
prices and costs vary within M, there is no need to
make a shift in the structure of the program. On 4. Changes in right-sides of constraints
Figure 1 the possible values of parameters t and a
are presented. Let the parameter form of the capacity vector
In the figure it is shown that while t follows in (2’) be:
(16) there is no need for a to be changed and vice b h = b+h⋅1 ............................. (18)
versa. Also the minimum necessary amount of
changes in a if t exceeds the determined limits where h shows changes in capacities. Deter-
can be found, so that the structure of the optimal mine h so that the optimal base obtained in (II)
program will remain unchanged. Same is with a remains unchanged! Now there are two sets of in-
changing out of its limits given by (17). Besides equalities:
that, there is a simple example presented in the - the first is the one usually taken into account
figure: let t=t1>q2, i.e. costs are increased over the with linear models:
upper limit; the structure of the optimal program −1
will be unchanged only if a³a1. Suppose now that B ( b+h1 )³0 .......................... (19)

Volume 8 / Number 4 / 2013 1801

 technics technologies education management

- and the second is specifically based on Martos References

optimality criterion (20): 1. Bitran GR, Magnanti TL. Duality and Sensitivity
Analysis for Fractional Programs. Operations Re-

( n B ( b+h1 )+b ) ( c −r B A )(, −r B ) −

T −1 T T −1 T −1 search 1976; 24(4): 675-699.

2. Von Neumann J. Über ein ökonomisches Gleichungs-

− ( r B ( b+h1 )+a ) ( k −n B A )(, −n B ) £0
T −1 T T −1 T −1 T system und eine Verallgemeinerung des Brouwer-
  schen Fixpuntsatzes. In K. Menger, editor, Ergebnisse
eines mathematischen Kolloquiums. Leipzig und
....................................... (20) Wien 1937; 8: 73–83.

With linear models the number of inequalities 3. Charnes A, Cooper WW. Programming with Linear
Fractional Functionals. Naval Research Logistics
is equal to or less than m, but in this case, while Quarterly 1962; 9: 181-186.
treating hyperbolic function the wider system con-
sists of m+n or less inequalities. Changes in ca- 4. Martos B. Hyperbolic programming. Logistics Quar-
pacities influence as the numerator so the denomi- terly 1964; 10: 135-155. (a) originally published in
nator of the criterion function, so it is convenient Mathematical Institute of Hungarian Academy of
Sciences 1960; 5: 383-406.
to consider the system (19)-(20), that was derived
applying the Martos criterion. The solution of sys- 5. Boyd S, Vandenberghe L. Convex Optimization.
tem (19)-(20) is the interval: Cambridge: University Press. 2004.

6. Craven B.D. Fractional Programming. Berlin: Hel-

−h 1 £ h £ h 2 ............................. (21)
dermann Verlag. 1988.

7. Frenk JBG, Schaible S. Fractional Programming,

where h1 is the possible amount of decreasing ERIM Report Series Research in Management, Rot-
capacities and h2 is the possible amount of increas- terdam: Erasmus Research Institute Of Management.
ing capacities while the structure of the program 2005.
and optimal base are unchanged. Above we con-
8. Niculescu C. Multiobjective fractional programming
sidered the case of changing all the capacities for
involving ρ-semilocally preinvex and related functions.
the same amount; the procedure of calculating the Rev. Roumaine Math. Pures appl. 2007; 52(1): 69–85.
limits for h is analogous in case of modifying one
or several capacities. 9. Schaible S. Analyse und Anwendungen von Quotien-
tenprogrammen. Ein Beitrag zur Planung mit Hilfe der
nichtlinearen Programmierung, Mathematical Systems
6. Conclusion remarks in Economics Meisenheim. Hain Verlag 1978; 42.

The application of quantitative methods can 10. Schaible S. Fractional programming. In R. Horst
improve and expedite decision making, and that and P.M. Pardalos, editors, Handbook of Global
is essential for quick and proper adaptation to the Optimization, Dordrecht: Kluwer Academic Pub-
lishers, 1995; 495–608.
external situation and its changes. Performing sen-
sitivity analysis of models (even smaller ones) one 11. Schaible S, Shi J. Fractional programming: the
can more easily connect partial models of produc- sum-of-ratios case. Optimization Methods and Soft-
tion units to a complex complete system in order ware 2003; 18: 219–229.
to adjust to changed circumstances. The shown
12. Stancu-Minasian IM. Fractional Programming:
procedures of parameterization of right-side of Theory, Methods and Applications. Kluwer, Dor-
constraints and of numerator and denominator of drecht: Academic Publishers, 1997.
hyperbolic criterion function present one of the
modes of deriving more useful information from 13. Borza M, Rambely AS, Saraj M. Solving Linear
Fractional Programming Problems with Interval
the model and its solution.
Coefficients in the Objective Function. A New Ap-
proach. Applied Mathematical Sciences 2012;
6(69): 3443-3452.

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 technics technologies education management

14. Cileg M, Kis T. Analiza osetljivosti ekoloskih

efekata u modelima poljoprivredne proizvodnje.
Simpozijum Menadzment, marketing i informacioni
sistemi u funkciji razvoja poljoprivrede, Zemun:
Poljoprivredni fakultet. 1993.

15. Cileg M, Kis T. et al. Multicriterial Analysis and the

Ecological Factor in Agricultural Modelling, 37th
EAAE Seminar, Vienna. 1994.

16. Gupta P, Mehlawat GP. Duality for a Convex Frac-

tional Programming under Fuzzy Environment,
International Journal of Optimization 2009; 1(3):
291-301.

17. Kheirfam B. Post optimal analysis in the coefficients

matrix of piecewise linear fractional programming
problems with non-degenerate optimal solution.
Opuscula Mathematica 2010; 30(3): 281-294.

Corresponding Author
Marija Cileg,
Faculty of Economics Subotica,
University of Novi Sad,
Novi Sad,
Serbia,
E-mail: cilegm@ef.uns.ac.rs

Volume 8 / Number 4 / 2013 1803

 technics technologies education management

Drivers of unpleasant experiences in virtual

social network context
Milan Okanovic, Milos Milosavljevic, Slavica Cicvaric Kostic, Tamara Vlastelica Bakic
University of Belgrade Faculty of Organizational Sciences, Belgrade, Serbia.

Abstract Extant literature explores the influence of SNS in

myriad of fields such as marketing [2], public re-
Social network sites have been attracting mil-
lations [3] etc. These studies are focused on creat-
lions of users worldwide for more than a decade.
ing and managing business reputation in Internet
The phenomenon of social networks and their
and social media context [4,5]. Nevertheless, the
benefits gain an extraordinary attention from aca-
downsides of social media and SNSs have been
demics and practitioners. However, numerous po-
widely neglected in academic and practical re-
tential downsides of virtual social networking and
searches, particularly considering the antecedents
factors influencing personal image are broadly
of negative virtual reputation and its influence
neglected in both extant literature and practice.
over real reputation.
This study examines and explores the scheme for
managing virtual and real image in the context of
social networks sites. The study particularly ad- 2. Aim of the paper
dresses antecedents of abominable virtual repu- By increase of SNSs users and the time they
tation affected by unpleasant experiences and its spent on SNSs, social networks have become a
possible influence over real image. large source of information and platform for cre-
Key words: social network sites, personal image ating and maintaining personal image. This study
examines the influence of virtual communication
1. Introduction on digital self-presence. Particularly, it aims to ex-
The last decade is characterized by the rapid de- plore the basic determinants of virtual self-pres-
velopment of Internet, social media and social net- ence, as well as the influence of each determinant
work sites (SNS). Digital space provides an oppor- on unpleasant online and offline experiences. Un-
tunity for open communication which differs from like previous studies [4,6], this study is focused on
face-to-face communication. Social media employ determinants of digital self-presence.
modern software tools and applications to create
a new dimension of communication among users. 3. Theoretical background
Scholars suggest that the new realm of social media
relates to the interactive platforms via which indi- SNSs have significantly changed the paradigm
viduals and communities share, co-create, discuss, of the information controllability. The information
and modify user-generated content [1]. which appears online becomes permanent and
Virtual social networks are created on the basis easily accessible [7]. Simply by using the Inter-
of social media. Social networks usually mean a net, any user is able to use the browser to collect
social system or social structure created by indi- information about a particular person, company or
viduals, which together with the mutual relations product. The paradigm change is represented by
create the basic unit structure of social networks. the fact that users were seeking for privacy on In-
From the point of view of the theory of social net- ternet at the beginning [8], whilst nowadays one of
working the individuals are referred to as nods. the basic goals is connecting with friends in both
Ties, or the various relations created among nods, virtual and real environment [9]. As an important
represent myriad of relations including friendship, side-effect of the democratization of social media,
hostility, kinships, dislikes, common political, na- the manoeuvring space for the individuals to con-
tional, confessional or other interests and beliefs. trol the information flow has been significantly re-

1804 Volume 8 / Number 4 / 2013

 technics technologies education management

duced. Consequently, the methods for the image study applies the approach based on the subjective
and reputation control are changing constantly. meaning of the ties on the extent to which they
In myriad of different ways, virtual and physical can correspond to real life relationships. The qual-
spaces are intermingling. Moreover, [10] suggests ity of relationships among users is described by
that a virtual reputation can easily influence physi- the extent to which real life and virtual relations
cal reputation including credit records, buddy lists, match. Therefore, the study hypothesizes that the
personal references, and other information regard- quality of relationships among nods may generate
ing reputation. The reduction in the quantity of unpleasant experiences.
techniques, procedures, measures and instruments
which an individual can influence over, does not 4. Methodology
necessarily mean that one can not in any way par-
ticipate in creating the image and reputation. Es- The study was based on primary data. The size
sentially, a person needs to use more sophisticated of the sample was 490 persons, and the response
tools in order to properly and functionally transfer rate was 73.88%. Data was collected via paper-
the virtual image to the real image and reputation. based questionnaire, considering the fact that online
Academics and practitioners from the field questionnaire could create a bias toward time spent
suggest numerous models for managing the time online. The In respect to gender, the sample was rel-
spent on social media either through the tips and atively imbalanced: 38.7% were male. Examinees
tools for organizing the information, activities were young adults aging from 18 to 40. [17] argues
and work, and avoiding the waist of time [11], or that focus on young adolescents is particularly im-
through the positive effects of social media chan- portant when researchers are to gain better of how
nels for larger engagement in social interaction such sites are being incorporated into people’s lives.
[12] . However, the quantity of time spent on SNSs Quantitative data was analyzed with demo-
may have downsides. Therefore, we hypothesize graphic statistics: percentages, means and stan-
that quantity of time spent on SNSs may generate dard deviation. For multiple comparisons the
unpleasant experiences. study used analysis of variance and standard devi-
Social media applications typically enable ation. Tukey and Tamhane post hoc test were used
communication in two ways: directly – which has for the identification of the sources of differences
been common on the Internet since early days, or between variables. Interdependence of determi-
indirectly - via media objects [13]. Hence, infor- nants and unpleasant experiences was determined
mation can be stored in data bases, which makes by correlation and multiple regression. As the
the Internet extraordinary medium for creation, dependent variables in the analysis we used hy-
exchange and transfer of information and knowl- pothesized antecedents of unpleasant experiences:
edge. However, storing posted content through time spent on SNSs (M=3.22, SD=1.069), posting
various forms such as such as photos, videos, frequency (M=2.7541, SD=.79597) and quality of
links, and comments also fosters difficulties in relationships among users (M=2.44, SD=1.190).
content management, especially by individuals.
Therefore, the study hypothesizes that the quan- 5. Results
tum of content posted on SNSs may generate un-
pleasant experiences. Considering gender issues, the research em-
The relationships between people in SNSs are ployed t-test independent samples in order to find
often described as social ties [14]. Relations in out whether there were meaningful differences
social networks can take various forms, and they among the level of posting frequencies, quality of re-
can be derived from the “circle”, from common lationships and time spent on SNSs among genders.
concerns, or some other relations [15]. Neverthe- The test confirmed meaningful difference regarding
less, the overall objective of this study is not to frequency of various content posting between men
explore and examine the nature of relationships, (M=2.8634, SD=.82132) and women (M=2.6813,
but to create an insight to the determinants of un- SD=.74862), t(360)=2.171 p=.031 (two-tailed).
pleasant experiences. Therefore, unlike [16] this Differences magnitude (mean difference=.18214,

Volume 8 / Number 4 / 2013 1805

 technics technologies education management

95% confidence interval of the differences: .01712 18-25 and 26-32 years, and between 18-25 and
do .34715) was weak (eta squared=.013). There- 33-40 for both determinants. Our study found that
fore, variance of posting frequencies is weakly ef- the first age group spent the most time in network-
fected by gender. The most popular SNSs are basi- ing on SNSs. Also, this age group had the poor-
cally created equally for female as male, but users est matching of real life and virtual relationships,
can create topics and contents that are more men or as they incautiously involve with peers via SNSs.
women oriented. In recent years, with expansions The age difference was irrelevant over determi-
of various social media, as well as social networks, nant posting frequencies (F(2,359)=.674, p=.518).
and number of their users, there is a couple of As displayed in Table 2, strong positive rela-
SNS mostly directed to women (providing content tion has been identified between posting frequen-
on beauty, fashion, health, parenting issues, well- cy and unpleasant experiences (r=.769, p<.01),
ness, shopping, cooking etc.) or men (business and time spent on SNSs and unpleasant experiences
techniques oriented networks). For remaining de- (r=.639, p<.01) and negative relation between
terminants, quality of relationships and time spent quality of relationships and unpleasant experienc-
on SNSs, the test did not confirm significant differ- es (r=-.244, p<.01). Therefore, the determination
ences regarding gender (t(322)=-1.353 p=.177 and coefficient explains that changes in determinants
t(271)=.361 p=.718 respectively). describe 59%, 41% and 6% of changes in unpleas-
With respect to age, the study employed one ant experiences, respectively.
way analysis of variance in order to determine Since the strong correlation between determi-
whether there were meaningful differences in the nants and unpleasant experiences had been re-
influence of determinants (Table 1). The exam- vealed, the study examined the influence and in-
inees were structured into 3 age groups: 18–25, tensity of determinants regarded as independent
26-32 and 33-40. The test confirmed significant variables, on unpleasant experiences regarded as a
difference considering the quality of relationships dependant variable. Results of multiple regression
(F(2,359)=5.351, p=.005) and time spent on SNSs analysis (Table 3) indicate that research model
(F(2,359)=9.964, p=.000). In order to find the source determinants predicted 64.1% (R² =.641) the vari-
of differences, the Tukey and Tamhane post hoc ance of unpleasant experiences. High significance
tests were employed, and the difference was de- of the F-test (p<.01), indicates the existence of lin-
termined between the examinees of two ranges: ear interdependence.

Table 1. One way analysis of variance

Test of
Homogeneity ANOVA
Std.
N Mean of Variances Tukey Tamhane
Deviation
Levene
Sig. F Sig
Statistic
18-25 169 2.8088 .78215
Posting 26-32 101 2.6483 .67455
7.517 .001 1.344 .262
frequency 33-40 92 2.7604 .88051
Total 362 2.7517 .78148
18-25 169 2.22 1.209 18-25 18-25
Quality of 26-32 101 2.59 1.210 26-32
1.790 .168 5.351 .005
relationships 33-40 92 2.66 1.072 32-40
Total 362 2.44 1.190
Time spent
18-25 169 3.49 1.070 11.401 .000 9.964 .000 18-25 18-25
on SNSs
26-32 101 2.98 .800 26-32
33-40 92 3.01 1.218 33-40
Total 362 3.22 1.069

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 technics technologies education management

Table 2. Correlation matrix

Correlations
Posting Quality of Time spent Unpleasant
frequency relationships on SNSs experiences
Pearson Correlation 1
Posting frequency Sig. (2-tailed)
N 362
Pearson Correlation -.225** 1
Quality of
Sig. (2-tailed) .000
relationships
N 362 362
Pearson Correlation .614** -.145** 1
Time spent on SNSs Sig. (2-tailed) .000 .006
N 362 362 362
Pearson Correlation .769** -.244** .639** 1
Unpleasant
Sig. (2-tailed) .000 .000 .000
experiences
N 362 362 362 362
**. Correlation is significant at the 0.01 level (2-tailed).

Table 3. Multiple regression analysis

Coefficientsa
Unstandardized Standardized Collinearity
Model Coefficients Coefficients T Sig. Statistics
B Std. Error Beta Tolerance VIF
(Constant) -1.211 .228 -5.318 .000
Posting frequency 1.127 .078 .589 14.456 .000 .605 1.654
1
Quality of relationships -.092 .041 -.073 -2.252 .025 .949 1.053
Time spent on SNSs .373 .056 .267 6.647 .000 .623 1.604
Dependent Variable: Unpleasant experiences
R=0.801 R2=.641
F=212.963 p=.000

6. Discussion ous feelings and behaviors. [21] reveal that the

time spent online affects the quantity of online
The results of this study confirmed that frequen-
relationships, but these relationships tend to be
cy of posting content is the most influential deter-
weak. This study also confirms that time spent
minant on unpleasant experiences. Tidwell and [18]
online negatively correlates to the quality of SNS
confirm that online interaction leads to higher avail-
relationships, by decreasing matching of SNS and
ability of personal information. We found that the
real life relationships. Furthermore, the research
availability of personal content increases the possi-
model test showed regression between time spent
bility for unpleasant experiences which further tunes
on SNSs and unpleasant experiences in virtual en-
personal image. The unpleasant experiences take
vironment which impair the personal image.
various forms. Firstly, it could be a misunderstand-
In the context of relations quality, recent re-
ing of certain content, such as posted comments, or
searches find the difference between offline and
impossibility to correct or delete history of conver-
online relationships [22, 23]. Scholars proved that
sation. Secondly, it could take a form of inadequate
online relationships are weak and that communi-
perception of multimedia contents. Finally, the most
cators are not close as they are in offline conversa-
serious issues could be attributed to the identity theft.
tions. [21] suggest that Internet users have more
Previous studies [19, 20] examine the influ-
online than real life relationships, which affects
ence of the time spent on Internet to myriad vari-
both positive and negative experiences. This study

Volume 8 / Number 4 / 2013 1807

 technics technologies education management

also explored matching of SNSs and real life rela- References

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ity and social psychology. Personality & Social Psy-
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14. Garton L, Haythornthwaite C, Wellman B. Studying

Online Social Networks‘. Journal of Computer-Me-
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B, Tom FM, Meeus Wim HJ. Different types of In-
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of offline and online friendship qualities at different
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Corresponding Author
Milan Okanovic,
University of Belgrade,
Faculty of Organizational Sciences,
Belgrade,
Serbia,
E- mail: okanovic@fon.bg.ac.rs

Volume 8 / Number 4 / 2013 1809

 technics technologies education management

Modelling insurance losses using inverse

Gaussian and log-normal distribution mixture
Jelena Kocovic¹, Vesna Rajic¹, Samed Karovic², Mihailo Kocovic³, Marija Jovovic¹
¹ University of Belgrade, Faculty of Economics, Belgrade, Serbia,
² University of Defence in Belgrade, Military academy, Belgrade, Serbia,
³ Dunav Insurance Company, Belgrade, Serbia.

Abstract homogeneous insurance portfolio is the basis for

developing probability distributions for the ag-
Obtaining accurate estimates of the losses that
gregate loss, and therefore has a great importance
could arise from insurance contracts is of outstand-
in insurance pricing, evaluation of reserves, sol-
ing importance for insurance companies, since the
vency, reinsurance arrangements, etc., or in deter-
expected value of losses is the most significant el-
mining the effects of different deductibles. Fitting
ement in the structure of insurance premiums. In
actuarial models to data incorporates four com-
addition to insurance premiums, on the basis of
ponents: selecting a set of candidate probability
available loss data derived probability distributions
distributions, estimating parameters, evaluating
determine reserves, solvency capital and insurance
the appropriateness of a model, and appointing
company’s retention. The use of probabilistic mod-
distribution which fits best [1]. The model which
els which approximate loss data to the best possible
matches the data well should be a result of con-
extent is a precondition for establishing adequate
sidering a limited number of possible models, in
insurance premium that provides sound and safe
order to avoid overfitting. Also, the model should
operations of insurers. In this paper we suggest the
permit a posibility of nonzero mode, as well as a
use of mixture of Inverse Gaussian and Log-normal
posibility of both light and heavy tails. Of course,
distribution to model insurance losses. Expectation-
the most important property of a distribution func-
maximization algorithm is used for estimating the
tion modelling insurance losses is that it fits the
unknown parameters. Goodness-of-fit tests are per-
observed data in a satisfactory manner.
formed for industrial fire insurance loss data. For-
In this paper we will consider the finite mixture
mulas for Value-at-Risk and conditional tail expec-
method employing the Inverse Gaussian and Log-
tation calculation are provided for individual and
normal distribution to model the real data set from
aggregate losses. The statistical tests together with
industrial fire insurance. The initial hypothesis of
a graphical comparison of the fitted and empirical
the paper is that, in situations where none of the
distribution demonstrate that the application of the
known theoretical distribution provides a satisfac-
suggested distribution mixture is justified. Compar-
tory reliability of insurance premium calculation,
ing the results obtained with a single log-normal or
the relatively better results can be obtained by cre-
Inverse Gaussian distribution, the highest reliability
ating a mixture of given distributions. The aim of
of premium calculation can be obtained with the
our paper is to define a relatively new model that
mixture of two distributions.
is quite well-adapted to loss data in the particular
Key words: insurance losses, mixture of distri-
type of non-life insurance, simultaneously provid-
butions, Inverse Gaussian distribution, log-normal
ing a premium that is with high certainty sufficient
distribution
to cover expected losses.
The structure of this paper is as follows. In Sec-
Introduction tion 1 we explain basic approaches to carrying out
Actuaries usually try to use the available set of probability distributions from data on insurance
loss data in non-life insurance in order to derive losses. Section 2 provides a review of relevant
the underlying probability distribution, and con- literature in the field of actuarial dedicated to the
sequently, the likelihood function used for param- application log-normal and inverse Gaussian distri-
eter estimating. Assesing the loss distribution for a butions, individually or in mixture with other types

1810 Volume 8 / Number 4 / 2013

 technics technologies education management

of distributions. In the following, the adequacy of that all the observations are generated by a unique
application of these distributions on concrete data process. If data exhibit multimodal characteristics,
sample on the losses in the industrial fire insurance which is not a rare case in non-life insurance, a
will be tested and the reliability of insurance pre- problem of their modeling arises, due to lack of
mium calculation will be determined. Section 4 will proper analytical form of the aggregate distribu-
cover mathematical formulation of a mixture of In- tion. In such situations, a combination of two or
verse Gaussian and Log-normal distribution, expla- more distributions provides better results in com-
nation of an EM algorithm implementation in order parison to their individual application.
to obtain Maximum Likelihood Estimators of that When none of the considered distributions fits
mixture and derivation of appropriate risk measures the sample data with sufficient accuracy, a mixture
for individual and aggregate losses, tailored to the of distributions could be employed to improve the
treated distribution mixture. The initial set of data fit. The mixing procedure could be applied to ar-
will be used to test the adequacy of application of bitrary distributions, resulting in a broad class of
the proposed distribution mixture and to determine distributions. In the general case, a mixture of two
the reliability of the resulting insurance premiums. distributions could be represented as:

1. Describing non-life insurance losses with F ( x ) = a F1 ( x ) + (1 − a ) F2 ( x ), a ∈ (0,1)

appropriate probability distributions
To test the quality of the fit of the model, the
There are three basic approaches to perform the parametres of F1 and F2, as well as coefficient a
derivation of loss distributions from data about in- have to be estimated. The most commonly used
surance claims: empirical, analytical, and moment in actuarial applications are mixture models of
based. Application of the empirical method requires exponential distributions. Keatinge (1999) advo-
a large sample size in order to accurately estimate cates the application of the mixed exponential dis-
the theoretical probability distribution. The analyti- tributions as an actuarial modelling tool because
cal approach consists of finding an explicit analyti- they better fit to the data compared to traditional
cal expression that describes well the observed data parametric distributions, and provide appropriate
and is easy to handle. It is probably the most fre- amount of smoothing compared to nonparametric
quently adopted approach, as seen from a practical distributions at the same time. The mixture of ex-
as well as from a theoretical point of view. Usually, ponentials distribution has a following cumulative
the observed (empirical) loss distribution is appro- distribution function:
priate for the small and medium size losses, while
large losses have to be modelled by an analytical
Fm ( x, a , θ , k ) = 1 − a 1e − x / θ1 − ... − a k e − x / θ k , x > 0
loss distributions, because of the data scarcity.
In the cases when the exact shape of the loss dis-
tribution is not required, the moment based approach where αi, i=1,2,...k, are nonnegative weights that
could be used. This approach involves estimation of sum to 1, θi , i=1,2,...,k, are exponential means, and
the lowest characteristics of the distribution, like the k is a positive integer. Unknown parameters and
mean, standard deviation and skewness. Fitting the weights can be evaluated within the appropriate
observed data could be very poor, because of the iterative procedure [2], or by applying the Expec-
fact that a distribution shape could not be fully de- tation-maximization (EM) algorithm [3]. However,
fined on the basis of only the lowest moments. Once exponential distributions are not absolutely suitable
the distribution class is selected and the parameters for modelling losses in non-life insurance, due to
are estimated using one of the available methods, their complete monotonicity [4]. Also, the mixture
the goodness-of-fit test has to be performed. of exponentials distribution has the drawback that
The statistical distributions that are commonly its mode is always at zero. In order to allow interior
used to model non-life insurance losses are Log- modes, Rioux and Klugman (2004) proposed the
normal, Gamma, Pareto, or Weibull distribution. augmeneted mixture of exponentials distribution,
Their implementation is based on the assumption with the following distribution function:

Volume 8 / Number 4 / 2013 1811

 technics technologies education management

FA ( x ) = m Fm ( x, a , θ , k ) + g F G (x ) + l F L (x ) + p Fdrawbacks
P ( x ), x > 0
are that the Laplace transform does not
have a closed form representation, the moment
x) + l F L (x ) + p F P (x ), x > 0 generating function does not exist, it is not pos-
sible to solve the integral in its characteristic func-
where m, g, l and p are nonnegative weights tion, nor to explicitly express the convolution of
that sum to 1 with either g=0 or l=0. FG(x), FL(x) Log-normal functions. Also, the Log-normal dis-
and FP(x) are the cumulative distribution functions tribution exhibits shortcomings in terms of the less
of a Gamma distribution, Log-normal distribution good fit to the small values of variable [12].
and Pareto distribution, respectively. However, The Inverse Gaussian distribution is recommend-
this mixture still only have three modes at most, ed as a model for non-life insurance losses, especial-
and do not provide analytical form for calculating ly because of its shape which is very similar to Log-
of common risk measures [5]. normal distribution [14]. Precisely, when variance is
Lee and Lin (2010) suggested mixture of Er- less than 1, the two density functions are close to
lang distributions with common scale parameter for each other. They differ with larger variance, i.e. the
modelling insurance loss data. Considering exist- Inverse Gaussian distribution becomes sharper than
ing method of parameter estimation [6] not satis- the corresponding Log-normal one. However, there
factory, they employed a modified EM algorithm in is a far less number of papers devoted to the use of
order to improve efficiency of the fit. The proposed Inverse Gaussian distribution for insurance losses
model allows calculation of risk measures such as modelling (e.g. [15]). Also, one example of using
Value-at-Risk and conditional tail expectation, and the Inverse Gaussian distribution in the actuarial
encompasses distributions which are closed under literature is the claim size modelling, including the
mixture, convolution and compounding. zero claims, in motor vehicle insurance, in [16].
There are several papers in actuarial literature
2. Literature review proposing the use of distribution mixtures that in-
clude Log-normal, or Inverse Gaussian distribution.
Significant part of actuarial literature is devot- [17] have shown that the combination of Gamma
ed to alternative distributions describing insurance and Log-normal distributions better matches au-
losses (e.g. [7], [8]). The Log-normal distribution tomobile bodily injury loss data in comparison to
appears as one of the most widely used distribu- individually used Log-normal distribution. An Ex-
tions in researches related to various types of in- ponential - Inverse Gaussian distribution (E-IG) has
surance. For example, Hogg and [9] employed that been advocated as a plausible model for loss data
distribution considering data of hurricane losses, without large tails in [18] They used an EM type
while [10] used two-parameter Log-normal dis- algorithm for Maximum Likelihood estimation for
tribution for modelling aggregate fire losses. [11] data concerning the size of car accident claims,
also applied Log-normal distribution when stud- obtained from a large Greek insurance company.
ied property insurance losses, and concluded that [19] fitted a two components Log-normal mixture
it outperforms the Pareto distribution for available model to a data set from fire and allied perils insur-
data. Also, Log-normal distribution has already ance, provided by a Romanian insurance company.
been used for modelling loss data in industrial fire On the other hand, in this paper proposed Inverse
insurance. [12] used it for evaluating industrial fire Gaussian – Log-normal mixture model, is not well
losses in Sweden for the period 1948-1952. [13] - known among actuaries, and we are not aware of
employed a three-parameter Log-normal distribu- previous application of it.
tion for describing loss data in this type of insur-
ance in Italy for 1963-1965.
3. Application of log-normal and Inverse
The right-skewness and a thick tail make the
Gaussian distributions for modeling losses
Log-normal distribution very useful in modelling
in industrial fire insurance
of insurance losses in many situations. The distri-
bution is infinitely divisible and closed under scale In order to illustrate ways of describing the
and power transformations. However, its main data on insurance losses with an appropriate prob-

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 technics technologies education management

Table 1. Kolmogorov-Smirnov test results for the data of industrial fire insurance losses
Accepted at 5% Accepted at 10% Accepted at 20%
Probability
Statistic Significant Level? Significant Level? Significant Level?
Distribution
Critical value=0.088 Critical value=0.079 Critical value=0.069
Inverse Gaussian 0.085 Yes No No
Log-normal 0.074 Yes Yes No

ability distribution, we used the sample comprised 33624.89 and μ = 1001621), according to which
of 239 observations on industrial fire insurance the expected value for a given distribution equals
losses registered in one town in Serbia from 1997 to 1001621 monetary units. The density of Log-
to 2003. The data are expressed in monetary units normal distribution is defined as:
and have already been used in [20]. Although the
data are confidential, some of their characteristics 1  ln x − m ' 
2

1 −  
are exhibited in the previously mentioned work: f ( x) = e
2  s ' 
, x ³ 0 ,1
– Mean of the data is 1001621 monetary units; x 2πs '
– Standard deviation is 6567824 monetary where s >0 and m >0 are continu-
units;
 m2 
– The skewness for the data is 12.3423, which ous parameters. Here, m ' = ln  ,
suggests that the data are heavy tailed.  s 2 + m 2 
2
After entering the data into statistical software s 
=s' ln(1 +   ) . Mean and variance of this
BestFit, two functions that are best suited for the m
data: the inverse Gaussian and log-normal func-
tion, are obtained. The results of Kolmogorov- distribution are E(X)= m and Var(X)= s . Using
2

Smirnov test are shown in Table 1. As can be Maximum Likelihood Method estimated values
seen on the table, the null hypothesis according of parameters of log-normal distribution are equal
to which empirical data follow the corresponding to σ = 1252582.4 and μ = 358613.3, according to
theoretical distributions is not rejected at the sig- which the expected value of the distribution equals
nificance level of 5%: to 358613.3 monetary units. For both distributions
In addition to the adequacy of probability distri- individually we need to calculate the probability
bution adjusting to the data, there is also interest to for the losses to be less than the net premiums. In
examine the reliability of insurance premium calcu- other words, we are interested in the confidence
lation, which results from their particular applica- level p, in which all claims would be lower than
tion. Namely, it is known that the net premium is net premium. i.e. p = P(X<E(X)). The results of
calculated as the expected value of the distribution calculation show that the corresponding reliability
of insurance losses, i.e. P = E(X). The density of the is 0.384 for the Inverse Gaussian, or 0.770 for the
Inverse Gaussian distribution is defined as: log-normal distribution. Although the considered
distributions are relatively well-adjusted to the
 λ ( x − m )2  data, the reliability of premium calculation in the
λ −  2 m 2 x  , x > 0 ,
f ( x) = e event of their application can not be considered
2π x3 sufficient, which results in the idea to define the
were λ > 0 and m > 0 are continuous param- corresponding mixture of the two distributions.
eters. Mean and variance of this distribution are of
1 Density of Log-normal distribution can also be
m 3
the form E(X)= m and Var(X)= . On the basis
2
1  ln x − m 
1 −  
λ represented in the form f ( x) = e 2 s  ,
x 2πs
of available historical data, estimated parameter
with a mean value and standard deviation of the form:
values of the Inverse Gaussian distribution are ob- 2 2

tained by the Maximum Likelihood method (λ = e m +s

2
/2 and e 2 m es (es − 1)
.

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 technics technologies education management

4. The mixture of Inverse Gaussian and N N N N

Q(Θ, Θ ) ∑ ln(a1 ) f (1|∑xi , Θ )1 + ∑ ln(ia2 ) f (2 | x∑
g ga ) f (1| x , Θ g ) + g a ) f (2 | x , Θ g ) +
log-normal distributions = g= Q ( Θ, Θ ) ln( ln(
i , Θ ) +2 i
==i 1= i 1= i 1 i 1
In this section we describe a mixture of Inverse N N N N

Gaussian and log-normal distributions. The den- ⋅ f f(1|

+ ln( f1 ( xi +| Θ1 ))ln( ∑
1 ( xxii ,| Θ ) +⋅ f (1|
Θg1 )) ∑
ln(xfi2,(Θ
g
∑
(2 f| 2x(i ,xΘi |gΘ
xi | )Θ+2 )) ⋅ fln( ) 2 )) ⋅ ∑ f (2 | xi , Θ
=
=i 1 =i 1 i 1 = i 1
sity of a mixture of these two distributions is de-
fined as: ......................................... (3)

f ( x=
| Θ) a1 f1 ( x | Θ1 ) + a2 f 2 ( x | Θ 2 ) , x > 0 , where Θ g = (s 1g , m1g , λ2g , m2g ) are the current
estimates of the parameters that we used to evalu-
or: ate the expectation and
2
1  ln x − m1'   λ2 ( x − m2 )2  g g
1 − 
2  s1' 

λ2 −  2 m x  g2 a y f y ( xi | Θ y )
=f ( x | Θ) a1 e + a2 e f ( yi | xi , Θ ) =g
2 i i i

x 2πs 1'
2π x 3
a1 f1 ( xi | Θ1g ) + a2g f 2 ( xi | Θ2g )
.
2 ......................................... (4)
1  ln x − m1'   λ2 ( x − m2 )2 
1 − 
2  s1' 

λ2 −  2 m2 2 x 

,...................... (1)
a1 e + a2 e The next step is to maximize the expectation
x 2πs 1'
2π x3
(3). When we maximize the expression:

N N
where Θ =(s 1 , m1 , λ2 , m2 ) is a set of parameters
∑ ln(a1 ) f (1| xi , Θ g ) + ∑ ln(a2 ) f (2 | xi , Θ g )
and weights a1 and a2 satisfy a1 + a= 1. We will
2 =
i 1 =i 1

denote by Θ1 =(s 1 , m1 ) a set of parameters for the we get:

Log-normal distribution and by Θ 2 =(λ2 , m2 ) a set
of parameters for the Inverse Gaussian distribution. 1 N
=a1
N
∑ f (1| x , Θ
i =1
i
g
) ,...................... (5)

4.1. Maximum likelihood estimators via EM

algorithm 1 N
=a2
N
∑ f (2 | x , Θ i
g
) ...................... (6)
The EM algorithm was proposed in [21]. This i =1

algorithm is very useful in estimating the parame-

ters of a finite mixture. Instead of the log-likelihood When we maximize the expression:
function, we consider the following function:
N
N ∑ ln( f1 ( xi | Θ1 )) ⋅ f (1| xi , Θ g ) +
ln L(Θ=
| X ,Y ) ∑ ln(a y f y ( xi | Θ y )) , .......
i i i
(2) i =1
i =1 N
∑ ln( f2 ( xi | Θ2 )) ⋅ f (2 | xi , Θ g )
i =1 ,
where X = ( x1 ,..., xN ) is a real data set,
Y = ( y1 ,..., y N ) , yi ∈ {1, 2} and yi = k if ith sample we get:
was generated by the kth mixture component. It is
N
clear that Θ is a set of parameters to be estimated.
Expected value of the expression (2) is:
∑ ln( x ) f (1| x , Θ
i i
g
)
m =
1
' i =1
N
, ................. (7)
∑ f (1| x , Θ
i =1
i
g
)

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 technics technologies education management

N 4.2. The calculation of risk measures for

∑ f (1| x , Θ i
g
) ⋅ (ln( xi ) − m ) ' 2
1 distribution mixture
s =' i =1 ,.......... (8)
1 N Risk quantification is fundamental to the insur-
∑ f (1| x , Θ
i =1
i
g
) ance companies, from the pricing of individual
contracts to determining the solvency capital and
N technical reserves of the company and perform-
∑ x ⋅ f (2 | x , Θ
i i
g
) ing capital allocation. Having established a loss
m2 = i =1 ,.................... (9) distribution, we need to exploit its characteristics
N
for the purposes of risk management. Important
∑ f (2 | x , Θ
i =1
i
g
)
tools of sound risk management are sophisticated
risk measures, such as Value-at-Risk (VaR) and
N
conditional tail expectation. Any insurance loss
∑ f (2 | x , Θ i
g
)
model attempting to be useful, should enable a
λ2 = i =1 ,............. (10)
N
( xi − m2 ) 2 calculation of risk measures for individual as well
∑
i =1 m2 xi
2
f (2 | xi , Θ g ) as for agreggate risks. Further details concerning
risk measures implementation for the purposes of
where determination of premium principles and capital
requirements could be found in [23]. In the con-
  2 text of the paper, derivation of formulas for risk
m12 s  measures of proposed distribution mixture is a
m = ln 
'
1  and=
s 1' ln(1 +  1  ) .
 s 12 + m12   m1  necessary prerequisite for its comparison with the
individual distributions of terms of reliability of
premium calculation.
On the basis of referred, the following expres-
Let X be a random variable that represents
sions are obtained:
losses and F(x) be its distribution function. We as-
s1' 2
sume that F(x) is a mixture of Inverse Gaussian
m= e ⋅e m1' 2
, ...........................(11) and Log-normal distributions.
1
Value-at-Risk (VaR) at confidence level p (de-
noted by Vp) is the 100p-th percentile of the dis-
' '2 '2
s 1= e 2 m1 ⋅ es1 ⋅ (es1 − 1) ................. (12) tribution i.e. F(Vp) = p. We can see that Vp is the
solution of:
Above equations perform the expectation and
maximization. As we can see, the EM algorithm  ln V p − m1'   λ  Vp   2 λ2
m2
 λ V
is one iteration method. The newly derived pa- a F   + a F  2
 − 1   + a e F − 2 
1  s  2
  2
 Vp 
 Vp  m2  
'

rameters are the guess for the next iteration. For  1  

the first iteration we must ln V p set
− m1' starting
  values
λ2  V p  
2 λ2
m2
 λ  Vp 
a1F   + a F   − 1   + a e F  − 2  + 1  =p ,..............(13)
(s 1g , m1g , λ2g , m2g ) . Many  consid-   Vp  m2  
2 2
Θg = s 1 scientists
'
  Vp  m2    
ered the problem of finding appropriate started
values. [22] implemented EM algorithm with dif-
 x−m 
ferent sets of randomly selected values in order to where F   is a normal distribution
obtain more appropriate estimates. The iterative  s 
process will stop when the difference between two function. Any computer program can be used to
iterative values is very small. find its value.
Conditional tail expectation at confidence
level p (or tail VaR or TVaR) is defined as
=TVaR E ( X | X > V p ) and can be calculated in
the following way:

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 technics technologies education management

= E ( X | X >EV( X
TVaR
TVaR= p)
| X > Vp ) mi +s 2j /2 s2 .
=m log(∑ e )−
+∞ 1  ln x − m1' 
2
+∞
 λ ( x − m2 )2  2
1 − 
2  s1' 

λ2 − 2 2 
=a1 ∫ x e dx + a2 ∫ x e  2 m2 x 
dx
Vp x 2πs 1
'
Vp
2π x 3
From the above, we can easily define a set of
 '
+∞ − 1  ln x − m1 
2
 λ ( x − m2 )2  parameters of the distribution of random variable
a1 2  s1'  a2 λ2 +∞
1 − 2 2 
S. Therefore,(14)
the calculation of VaR and TVaR fol-
2πs 1' Vp∫ ∫
 2 m2 x 
e dx + e dx
2π VP
x lows immediately from (13) and (14).
s1' 2
 ln Vp − m1' − s 1'2 
m1' +
= a1m1 + a2 m2 − a1e F 2
−
s 1' 4.3. Testing adequacy of the Inverse Gaussian
 
and log-normal distribution mixture
 λ  Vp   2 λ2
 λ  Vp   application on concrete data on insurance
-a2 m2 F  2  − 1  + a2 m2e m2 F  − 2  + 1  .
 V p  m2    V p  m2   losses
   
....................................... (14) After the application of EM algorithm on con-
sidered sample, it was found that the data can be
In addition to individual losses, risk measures described by mixture of Inverse Gaussian and Log-
can also be calculated for the aggregate losses. Let
normal distributions with parameters s 1' = 2.1
us suppose that number of losses has probability
function P(N = n) = pn, n= 0, 1,... and individual (respectively s 1 = 8071784.73 ), m1' = 11.5 (re-
losses have a mixture of Inverse Gaussian and Log- spectively m1 = 895376.9 ), λ2 = 36503 and
normal distribution with parameters s 1 , m1 , λ2 and m2 = 1822817 monetary units. For the distribu-
m2 and weights a1 and a2. The amount of the ag- tion with these parameters, the value of K-S statis-
gregate losses is: tic of 0.054999 is obtained, which means that the
null hypothesis according to which the distribu-
tion mixture describes the data satisfactorily can-
S = X 1 + X 2 + ... + X n
not be rejected.
Histogram of observed loss data and density
and S = 0 if N = 0. The positive portion of the
for the fitted distribution are shown on the Figure
distribution of S is again a mixture of Inverse
1. Loss data are presented on the x-axis and the
Gaussian and Log-normal distributions.
observed relative frequencies are presented on the
The reason for this is that the sum of n i.i.d.
y-axis.
random variables with Inverse Gaussian distribu-
tion with parameters λ and m has again Inverse
Gaussian distribution with parameters n 2 λ and
nm . The distribution of the sum of independent
Log-normally distributed variables with param-
eters s and m can be approximated by another
Log-normal distribution at the right tail. A com-
monly used method for this approximation is Fen-
ton-Wilkinson method (see [24]). If we use this
method, we obtain the mean and variance for the
sum of log-normally distributed variables:

 ∑ e2 m +s (es − 1) 
2 2

2
=s log  + 1 , Figure 1. Histogram of observed loss and density
 (∑ e m +s /2 ) 2 
2

  for the fitted distribution

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 technics technologies education management

From this figure it is observed that the fit is satis- serve as the basis in determining the retention of
factory, i.e. that the density curve of created mixture insurers, the reserves and so on. In the case that,
precisely envelopes the underlying histogram. The due to inadequately modeled losses, insurer fails
statistical tests together with a graphical compari- to assess the appropriate retention or underesti-
son of the fitted and empirical distribution demon- mate technical reserves, it is exposed to danger of
strated that the application of the mixture of Inverse entering the area of bankruptcy. It is therefore nec-
Gaussian and Log-normal distributions is justified. essary to perform the detailed analysis in order to
However, before the final acceptance of considered evaluate loss distribution models.
probability model, the actuary should determine In this paper we have showed that a mixture of
the level of confidence with which insurance pre- Inverse Gaussian and Log-normal distribution can
mium could be calculated in the case of its applica- fit insurance data well. Since this mixture distribu-
tion. Since under the above parameter values, the tion is not known among actuaries, we recommend
expected value of the given distribution mixture is its use in property insurance. For this distribution
equal to 1359096.95 monetary units, it is necessary we have also showed that useful risk measures can
to determine the confidence level p for which the be calculated for individual and aggregated inde-
requirement: p=P(X<1359096.95) is fulfilled. Us- pendent risks, as well as that adequate premium
ing the formula (13) and putting a premium instead could be determined with satisfactory reliability
of Vp, we find that the corresponding reliability on the basis of this mixture. At the same time, it
amounts to 0.892. Comparing the results obtained is especially emphasized that the choice of statisti-
with a single log-normal or Inverse Gaussian dis- cal distribution should take into account not only
tribution, the highest reliability of premiums can be its precision of adjustment to data, but also the
obtained with the mixture of two distributions. reliability of premium calculation. Although the
Although statistical tests showed that consid- paper analyzed particular distributions which are
ered data can be approximated by log-normal or manifold useful and widely represented in non-life
Inverse Gaussian distribution, the reliability of in- insurance, in specific situations actuaries have to
surance premium calculation in the cases of their conduct a careful and comprehensive analysis of
application is not satisfactory. This automatically the adequacy of their application. Statistical mod-
brings into question the adequacy of loss reserves, els are certainly inevitable, but not absolutely suf-
retention and solvency capital, and thus the sur- ficient condition for the establishing of adequate
vival of the insurance company. On the other hand, premium, which provides healthy and safe opera-
it is shown that in the case of applying a mixture tions of insurance companies.
of given distributions with relatively high reliabil-
ity can be argued that premiums are sufficient to References
cover expected losses. Therefore, when modeling
the data on losses from the past in order to predict 1. Rioux J, Klugman S. Toward a unified approach to
fitting loss models. North American Actuarial Jour-
the future, a reliable calculation of insurance pre-
nal, 2004; 10(1): 63-83.
mium should have priority over the chosen model
ability to approximate available data. The model 2. Keatinge C. Modeling losses with the mixed expo-
which is relatively well-adjusted to data can not nential distribution. Proceedings of the Casualty
be selected if it implies a risk of insufficiency of Actuarial Society. Arlington, Virginia: Casualty Actu-
arial Society. 1999; 86: 654-698.
insurance premiums in any particular case.
3. McLachlan G, Peel D. Finite mixture models. New
Conclusions Jersey: John Wiley & Sons, 2000.

On the basis of previously written, we can 4. Jewell N. Mixtures of exponential distributions. The
Annals of Statistics, 1982; 10(2): 479-484.
conclude that it is important for the insurers to
properly utilize information on claims in non-life 5. Lee S, Lin S. Modeling and Evaluating Insurance
insurance in order to obtain probability distribu- Losses via Mixtures of Erlang Distributions. North
tion to approximate the losses. These distributions American Actuarial Journal, 2010; 14(1): 107-130.

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6. Tijms H. Stochastic Models: An Algorithm Approach. 19. Vernic R, Teodorescu S, Pelican E. Two lognormal
Chichester: John Wiley & Sons. 1994. models for real data. Romanian Journal of Insur-
ance, Seria Matematica, 2009;17(3): 263-279.
7. Klugman S, Panjer H, Willmot G. Loss Models: From
Data to Decissions. New Jersey: John Wiley & Sons. 20. Cojbasic V, Tomovic A. Nonparametric Confidence
2004. Intervals for Population Variance of One sample
and the Difference of Variances of Two Samples.
8. Burnecki K, Misiorek A, Weron R. Loss distributions. Computational Statistics & Data Analysis, 2007;
In Čižek, P., Härdle, W. & Weron, R. (Eds.) Statistical 51: 5562-5578.
Tools for Finance and Insurance. Berlin: Springer,
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hood from Incomplete Data via the EM Algorithm.
9. Hogg V, Klugman A. On the estimation of long-tailed Journal of the Royal Statistical Society. Series B
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22. Kim S-H. Calibrated initials for an EM applied to
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M. Applications of the GB2 family of distributions putational Statistics & Data Analysis, 2002; 40:
in modeling insurance loss processes. Insurance: 97-110.
Mathematics & Economics, 1990; 9: 257–272.
23. Hardy M. An Introduction to Risk Measures for
11. Burnecki K, Kukla G, Weron R. Property insurance Actuarial Applications. CAS Exam Study Note. Ar-
loss distributions. Physica, A 2000; 278: 269-278. lington, Virginia: Casualty Actuarial Society. 2006;
1-31.
12. Benckert L. Lognormal model for the distribution of
one claim. ASTIN Bulletin, Brussels, Belgium: In- 24. Fenton F. The sum of lognormal probability distri-
ternational Actuarial Association. 1962; 2: 9-23. butions in scatter transmission systems. IRE Trans.
Commun. Syst., 1960; CS-8: 57–67.
13. Ferrara G. Distributions des sinistres incendie
selon leur coût. ASTIN Bulletin, 6, 31-41. Brussels,
Belgium: International Actuarial Association. 1971. Corresponding Author
Jelena Kocovic,
14. Clark D, Thayer C. A primer on the exponential University of Belgrade,
family of distributions. Casualty Actuarial Society Faculty of Economics,
Spring Forum, Arlington, Virginia: Casualty Actu- Belgrade,
arial Society. 2004; 117-148. Serbia,
E-mail: kocovic@ekof.bg.ac.rs
15. Crepeau H, Gendron M. On the computation of
the aggregate claim distribution when individual
claims are Inverse Gaussian. Insurance: Mathemat-
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16. Heller G, Stasinopoulos M, Rigby B. The zero-

adjusted Inverse Gaussian distribution as a model
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17. Hewitt JR, Lefkowitz B. Methods for fitting distri-

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Mathematics and Economics 2004; 35: 53-67.

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 technics technologies education management

A rational approach to the acquisition,

valuation and holding of assets
Xi-Ping Ao1, Roger Collins2
1
International College of Business and Technology, Tianjin University of Technology, China,
2
School of Business and Economics, Thompson Rivers University, Canada.

Abstract abstracted as “cash outflow – acquisition of assets

– use and consumption of the acquired assets – new
The value of assets comes essentially from their
products and service – sales of the new products
usefulness of the assets either in terms of their
and service – cash inflow”. The objective of pres-
value-in-use or the value-in-use that the assets can
ent cash expenditures (or assets outflow, creation
bring. Some assets only have value while others
of liabilities) is the future inflow of cash. In the
have value and value-in-use simultaneously. In jus-
operating process, the first step of operations is to
tifying the holding of assets from a rational perspec-
acquire assets through cash outflow. The acquired
tive it can be said that some assets are owned to be
assets can be classified into three types. In terms
used, and others are owned to be sold or converted
of attributes, some assets have value and value-in-
into cash. The article classifies assets according to
use simultaneously: Raw materials, buildings, and
the criteria laid out above. It discuses different as-
equipments are types of assets which can be used
set valuations and measurement methods for differ-
or consumed to produce new products and services.
ent types of assets, and tries to find the best match
They are classified and labeled as “Type 1 Assets”.
between the asset and the accounting measurement
Finished goods and inventory of the merchandising
on the basis of the analysis of asset valuation. The
enterprise are the assets which can be sold. They
article concludes with the analysis of the nature of
are classified and labeled as “Type 2 Assets”. The
asset valuation and the asset valuation model.
process from “Type 1 Assets” to “Type 2 Assets”
Key words: Rational approach, usefulness of
shows the process that the enterprise produces the
assets; value-in-use; assets valuation, China
new products and services by using and consuming
acquired assets. Other assets only have value, and
1. Introduction do not have value-in-use from the perspective of
The S&L crisis in 1980s and the financial cri- assets attributes: The investment of securities, op-
sis of 2008 onwards created intense controversies tions, futures and other financial assets and deriva-
around the issues of accounting measurement and tives are assets which cannot be used directly. They
asset valuation. The accounting profession has been are classified and labeled as “Type 3 Assets”.
making every effort to find an appropriate account- “Type 1 Assets” are expected to be used or
ing measurement and a suitable asset valuation consumed. The enterprise uses this type of asset
model. But it seems that each accounting measure- to produce new products and service, that is, to
ment has its own advantages and shortcomings. convert “Type 1 Assets” into “Type 2 Assets”, and
The article focuses on the fact that the value of as- then to get cash inflow by selling the products and
sets comes essentially from their usefulness, either services that result – namely,- “Type 2 Assets”.
in terms of their value-in-use or the value-in-use “Type 2 Assets” and “Type 3 Assets” are expected
that the assets can bring, and attempts to find the ap- to be sold or converted directly into cash.
propriate accounting measurement and the suitable
asset valuation model through the analysis of as- 2. Literature Review
set attributes and the asset value realization process.
The operating process of an enterprise is fun- The basic purpose of financial accounting is to
damentally a cycle by which assets are acquired, provide useful information for the decision mak-
converted and sold. Ignoring the type of the enter- ers [1]. The quality of financial information en-
prise, the operating process of any enterprise can be tirely depends on the quality of the reliability and

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 technics technologies education management

relevance of the information [2]. Accounting orig- sets in 1985 and 2010 as probable future economic
inated from fiduciary responsibilities and the reli- benefits obtained or controlled by a particular enti-
ability of accounting information is inherent [3]. ty as a result of past transactions or event[15, 16].
With the development of the economy, accounting The definition emphasizes the critical feature that
information begins to focusing on “decision use- assets are expected to bring future economic ben-
fulness”. Decision usefulness gradually became efits for this specific individual or individuals[17].
the generally accepted accounting information at- The future economic benefits the assets can bring
tribute that contemporary accounting standard set- to their holders are different because their inherent
ting institutions focus on [4]. But GAAP implies usefulness and uses are different. FASB states five
that to pursue the relevance of accounting infor- accounting measurement attributes in 1984: histori-
mation will weaken the requirement of reliability. cal cost, current cost, current market price, net real-
Such practices will cause the basis of accounting izable value, and present value of future cash flows
to change from “past transactions” to “future es- [18]. China’s new enterprise accounting standards
timate” [5]. In fact, the reliability of accounting (2006) proposed five accounting measurement at-
information is the foundation of the accounting tributes: historical cost, replacement cost, net real-
edifice, and the relevance of accounting informa- izable value, present value and fair value[19].
tion is established by reference to this foundation. Under historic cost, assets are valued and mea-
It is nonsense to discuss the relevance of account- sured by the cash or cash equivalent paid to acquire
ing information without reference to its reliability. them. Historical cost reflects the common evalua-
This leads to the conclusion that using the results tion of the buyer and seller of the assets [20]. In an
of the research into relevance to formulate ac- efficient market, the interaction between buyers and
counting standards is inappropriate [6]. sellers will result in a mutually agreed (though not
Accounting measurement is the core function necessarily mutually satisfactory) transaction price
of accounting information system [7], and asset and the completion of the transaction indicates their
valuation is the one of the most important compo- acceptance of the valuation of the assets.
nents of accounting measurement. IASB defines Historical cost has its own characteristics. First,
assets in its 1989 report and 2010 report as eco- it is evidenced by the past transaction records such
nomic resources which can be used and benefit its as the contract of sale/purchase, the invoice, and
future operations[8, 9]. This definition includes the payment with respect to the transaction. These
two meanings. One is that assets are economic re- items of evidence permit a high degree of verifiabil-
sources; it reveals the static characteristic of the ity. In an efficient market the equilibrium price can
assets. The other, and more important, is that the represent the value of the assets accurately. Second,
economic resources can be used for the benefit it reflects the past market equilibrium price. How-
of future operations, this is the dynamic charac- ever, the past price representing the value-in-use
teristic of the assets. As Canning (1929) pointed and value of the asset in the past may change as
out assets are dollar forms of future services, or the market and the environment change. The major
the future services that can be converted into dol- disadvantage of the historic cost is that it can not re-
lars[10]. In reality, accounts are concerned with veal the value of the assets at any point in time other
reporting the state of a specific entity, in order to than that at which the asset was acquired.
fulfill the accountability function to the external Under replacement cost, the assets in store are
users [11], and the deprival value of assets is more measured and valued by the cash or cash equiva-
useful to both internal and external users [12]. lent that should be paid in the event that the owner
According to Canning, the valuation of any as- of the assets wishes to purchase the same assets or
sets should be based on their expected revenues the similar assets at present. Replacement cost is
[10]. Sprouse and Moonitz (1962) also hold the the purchase price of the same or similar asset at
opinion that assets are future economic ben- current market value. It is a reference price with-
efits[13]. Economic value added is the key for a out the requirement of a real transaction.
successful management of the collection of the Under net realizable value, the assets are mea-
assets held by an enterprise[14]. FASB defines as- sured and valued with the cash or cash equivalent

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that the owner can receive after deducting sales ex- assets the enterprise owned can be classified as
pense, tax expense, and other expenses incurred to three types: Asset Type 1, Asset Type 2, and Asset
bring the assets to the condition of sale, supposing Type 3. Assets Type 1 are the assets which pos-
the owner of the assets wants to sell the same assets ses value and value-in-use simultaneously. They
or similar asset at present. It is also a reference price. are expected to be used by their owner - the enter-
Under present value measurement, assets are prise. This type of assets includes physical assets
valued by the present value of the future cash flows such as raw materials, equipments, buildings, land
that the assets would bring for the owner. It is one etc., and also includes unphysical assets such as
type of adjustment of estimated future cash flows prepaid expenses, trademark, copyright etc. Type
using the discount rate related to the risk of the cash 1 assets are use by the enterprise to produces new
flow. The assets that are expected to bring contrac- products, and services. The user of these assets
tual future cash inflow for the enterprise must pos- is specific – the enterprise (owner). Assets Type
sess value, whether or not they possess value-in- 2 are assets which posses value and value-in-use
use. The owners of these assets can use the contrac- simultaneously, but they are not expected to be
tual future cash flow which the assets are expected used by the enterprise (owner). Instead, they are
to bring to value and measure these assets. expected to be sold by the enterprise. Examples of
Under fair value, assets are valued with the equi- Type 2 assets are the finished goods of manufac-
librium price purchasers and sellers are willing to turing enterprises, and commodities of merchan-
complete the sale of the assets. FASB defined fair dising enterprises. Consumption goods such as
value as: “the price that would be received to sell garments, home appliance, and means of produc-
an asset or paid to transfer a liability in an orderly tion such as raw materials, and property, plant and
transaction between market participants at the mea- equipment are in this category. From the perspec-
surement date” [21]. The fair value of an asset is the tive of the present owner of this type of assets the
common agreement on evaluation of the value and users of this type of assets are unspecific. Since the
(or) value-in-use of the assets that all the market present owner does not expected to use them, but
participants reach at a specific point in time. It need expects to sell them to others, the possible users
not be based on an actual transaction, but it must be may be the entire market. Type 3 assets are those
based on an objective evaluation [22]. assets which only possess value, but do not pos-
sess value-in-use. The enterprise (owner) expects
3. Methods to convert them into cash and earn a margin, or
use them to hedge risks. Such assets are equity
The study is an exploratory research. It focuses investments, debt investments, options, futures,
on the value realization process of an asset held by receivables, and financial derivatives etc. this type
a specific enterprise, and quantitatively analyzes of assets is expected to be converted into cash, or
the composite accounting measurements in the to lock future transactions to hedge risks. These
current dynamic and complicated environment. assets do not possess value-in-use. But the benefit
or cash inflow they bring can be used to purchase
4. Discussion other assets with value-in-use their owner desires
– that is the fundamental reason for holding them.
(1). To classify assets based on their assets at- Although the final objective of the enterprise in
tributes and the rationale for holding the various holding the assets is to make a profit by receiving
classes of Marx’s political economics tells us that future cash inflow, the ways in which the value of
commodities possess dual characters which are assets is realized may differ considerably. Type 1
value-in-use and value [23]1. Based on the fact assets realize their value through being used by the
that assets possess value and (or) value-in-use, the enterprise, Type 2 assets realize their value through
being sold, and Type 3 assets realize their value by
1 Note however that Joan Robinson, a prominent economist being converted into cash or used to hedge risks. The
familiar with the works of Marx, is sceptical of the very
existence of any economic value separate from that described different ways of value realization of assets need dif-
by a transaction price. ferent asset valuation and measurement methods.

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(2). The valuation of the three types of assets ferent enterprises may appear same – that is the
and the application of the accounting measure- value reflection of their value-in-use expected by
ments the holder, or the value or measurement of these
assets, but the value that these assets finally real-
A. Historic Cost Used as the Initial Measure- ize is reflected through the sale of new products or
ment of Type 1 Assets and Replacement Cost Used services, and may be quite different.
for the Subsequent Measurement of Type 1 Assets For Type 1 assets, Historic cost is the most appro-
Type 1 Assets possesses value and value-in- priate initial measurement. Under the going concern
use simultaneously. The reason for the enterprise concept, the rational enterprise would thoroughly
to have such assets is to use them. The enterprise evaluate its capability to use these assets before it
uses these assets to produce new products or ser- acquires them. The enterprise expects to profit from
vices, and then sells these products and services to the use of these assets after the acquisition. For a
consumers in exchange for cash inflow. The value specific asset a specific enterprise holds and expects
of this class of asset with respect to value-in-use to use, the value it will realize or produce can be
is that they have a use. The value of such assets estimated; however, for the same asset in the mar-
is transferred into new products or services by the ketplace, the value it will realizes or produce is quite
process of conversion, and is realized in the en- uncertain because its user is uncertain and different
terprises’ output of products and or services. This users may have different capacities to make use of
type of asset is expected to be used by the enter- it. Thus the market value of this asset is the average
prise which holds them, so the use of the asset is evaluation made by the market, and this evaluation
specific. Their value-in-use should be evaluated may not be appropriate for the specific enterprise
by the holder, but the new products and services [24]. Historic cost reflects the common evaluation
produced using them will be marketed in a dif- of these assets by the holder and the market at the
ferent market. The value of the new products and time of the transaction. The historic cost of these
services, in other words, the value these assets re- assets is the real cost to the holder and, is also the
alize will be evaluated by the participants in that objective measure of the accepted price or valua-
new market. The operating process indicates that tion the holder agreed to. At the end of the account-
the value this type of asset embodies (the value-in- ing period, if the holder still has some of these as-
use) and the value realized (the value expressed by sets in stock, the value or the current market price
new products and service) are closely related, but (purchase price) of these (past acquired) assets may
not equivalent. The value this type of asset real- change as the market or the environment changes.
ized by the new products and services depends not Under the going concern assumption, the holder has
only on their own value (their value-in-use), but the option of using these past acquired assets in the
also on the efficiency and effectiveness of the en- next period. If the enterprise did not have these as-
terprise in using them. For example, McDonald’s sets, the enterprise would consider purchasing these
can profit from the purchase, holding and use of assets and using them in future operations at the
a refrigerator while another fast food restaurant current price. In other words, the enterprise would
which holds and uses the same type of refrigerator value these assets or the value-in-use of these assets
may have the opposite result – it may experience according to the changed market and changed envi-
a loss. This example shows that the realized value ronment. Naturally, the “real” value of these assets
of the refrigerator may be different for different in the holder’s eyes, or the real cost the holder would
uses, although the function of use of the refrig- incur to use these assets is the present purchase price
erator or the value-in-use of the refrigerator is the - also called replacement cost. In order to reflect the
same – it is used to freeze food. As can be seen, changes in the market and the environment, the en-
identical assets possess the same value-in-use, but terprise should revalue the held assets at the end of
their use in different enterprises may result in dif- the accounting period. The re-evaluation is called
ferent outcomes since different enterprises have “subsequent measurement”. The attribute of mea-
different degrees of ability to use them. The value surement used in the subsequent measurement of
of these assets on the financial statements of dif- Type 1 assets is replacement cost.

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Using replacement cost to subsequently mea- them in the market. Under the going concern as-
sure Type 1 assets indicates that the enterprise sumption, before the enterprise acquires these as-
will adjust the past valuation and measurement of sets, the enterprise would analyze the market for
these assets to be used in the changed environment these assets and consider its own ability to sell
and accept the new valuation and measurement of them. Historical cost reflects the enterprise’s and
these assets, so that the measurement is consistent the market’s common evaluation of these assets,
with the changed market reality. and so is the appropriate initial measurement. At
the end of the accounting period, if the enterprise
B. Historic Cost Used for the Initial Measure- still has some of these assets in stock, the value or
ment of Type 2 Assets and Net Realizable Value the market price (selling price) of these acquired
Used for the Subsequent Measurement of Type 2 assets may change as the market or the environ-
Assets ment changes.2 The holder of these assets will sell
Type 2 assets possess value and value-in-use them at the present market, so the holder as one of
simultaneously. The purpose for the enterprise to the market participants should adjust its past valu-
possess such assets is not to use them but to sell ation for these assets to meet the market changes.
them, and generate cash inflow. The value of these Under the going concern assumption, the enter-
assets is also embodied in their value-in-use since prise will continue to buy and sell these assets or
these assets will be used by their end users. The stop buying these assets and just liquidate the in-
value these assets at present is expressed in their ventory of these assets if sale of these assets is not
current market price (selling price). expected to be good in next period. So the enter-
For the holder, these assets are not expected to prise should revalue and re-measure these stocked
be used but to be sold. For the market, these assets assets using net realizable value at the end of the
are expected to be used eventually. The possible us- accounting period. Net realizable value is the sell-
ers may be any participant(s) in the market, and the ing price less any possible expenses expected to
evaluation of the value-in-use of the assets is made be incurred in the selling process, and appropriate
not by the specific enterprise but by the market. The attribute of measurement used in the subsequent
value these assets realize is the current market price measurement of Asset Type 2. Using net realiz-
- the result of the interaction of the sellers, poten- able value to subsequently measure these assets
tial sellers, buyers, and potential buyers. The buyers recognizes value increase or decrease in current
and potential buyers may become the end users of period. This is also in accordance with the prin-
these assets. So the value these assets embodied and ciple of accrual accounting.
the value they realize are closely related. Using net realizable value to subsequently mea-
In a competitive market, the selling price of sure Type 2 assets indicates that the enterprise will
these assets for different enterprises may be slight- adjust the past valuation and measurement of these
ly different, but the price difference for the identi- assets under changed environmental conditions and
cal goods would be very small and can be ignored accept the new valuation and measurement of these
[25]. In other words, the value these assets realize assets. The self expectation and evaluation is then
is the same for different holders. This reflects the consistent with the changed market reality.
common evaluation of the value-in-use of these The most important point for Type 1 assets and
assets made by the market. For example, other Type 2 assets is that both of them possess value-
things equal, the same model of refrigerators will in-use. All of them will eventually be used by their
be sold at the same price by “Gome” and “Sun- users and their value is embodied in their value-in-
ing” (two of the biggest home appliance retailers use. The value of these two types of assets has a
in China) since the value-in-use of this model is floor limit since they can be used and their value-
the same. The users of the refrigerator are neither
“Gome” nor “Suning”. The users are not specific.
2 In practice, organizations – and auditors of financial
Historic cost is the most appropriate initial statements – apply the concept of conservatism, meaning
measurement for these assets. The enterprise that that downward valuations are recorded but, except in
wants to sell these assets needs to first acquire limited circumstances, upward changes in value are not.

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in-use would not disappear, and the value of these judgment made by the market participants. Markets
two types of assets also has a ceiling limit since sometimes behave in irrational ways, causing mar-
there is some market substitutes to replace their ket for Type 3 assets to fluctuate dramatically. Under
value-in-use. So compared with Type 3 assets such circumstance, the evaluator should be aware
which only possesses value and no value-in-use, that whether the impairment of these assets is tem-
the price fluctuation of Type 1 assets and Type 2 porary or not. In other words, the evaluator should
assets is not big, the market change of these two assess whether the impairment is other-than-tem-
types of assets is relatively small, and the risk to porary in tight of all available information regard-
hold these assets is also small. For example, the ing the assets’ collectibility of cash flows before the
price of gold or securities is much fluctuated than evaluation [26]. In summary, these assets have no
that of crops and raw materials in reality. value-in-use, so the market evaluation of these as-
sets has a much higher ceiling limit and a floor limit
C. Fair Value (or Historic Cost, Present Value) and the risk to hold them is bigger than the other two
Used for the Initial Measurement of Type 3 Assets types of assets. For example, Shanghai stock index
and Fire Value Used for the Subsequent Measure- was driven to the highest point of 6124.04 in 2007,
ment of Type 3 Assets and dropped to below 2100 in 2011.
Type 3 assets possess only value. They can never Since the value of Type 3 assets depends on the
be used since they do not possess value-in-use. The market evaluation, and the result of the evaluation
purpose of the enterprise to hold the assets is either is reflected by the transaction price agreed on by the
to convert them into cash, such as equity and debt market participants, fair value (or historical cost,
investment, or to hedge future risk, such as option, present value) is the appropriate initiate measure-
futures, and other derivatives. The enterprise ex- ment for these assets, and because of the fluctuation
pects these assets to bring added value or to reduce of the value of Type 3 assets, fair value is the ap-
risk. The value of these assets is embodied in their propriate subsequent measurement for these assets.
future cash or benefit inflow, or in their future risk Using fair value to subsequently measure these as-
reductions for the enterprise. The holder of these as- sets reflect the value change of these assets.
sets can use the benefits the assets bring to get the
value-in-use they want in other assets. 5. Conclusion
Compared with Type 1 assets and Type 2 as-
sets, Type 3 assets have no value-in-use. The value Manufacturing enterprises acquire and hold in-
of these assets entirely depends on the benefit they ventories, machinery, equipments, buildings, land,
are expected to bring for the holder. The valua- etc. The purpose for these enterprises to have these
tion of these assets is the future benefit the market assets is to use them to produce new products and
expects them to bring. In reality, both the benefit services, and to sell these products and services to
these assets bring in the future and their valuation get cash inflow. The value of these assets attributes
by the market is affected by many uncertainties. to their value-in-use. The purpose for merchandis-
The valuation of these assets made by the mar- ing enterprises to acquire and hold inventories is to
ket is quite subjective and the value of these as- sell them to customers to get cash inflow. The value
sets such as the price of common stocks fluctuates of the inventories here also attributes to their value-
constantly. The market evaluation of these assets in-use. Manufacturing enterprises, merchandising
is displayed through the transaction price agreed enterprises, and other enterprises may also acquire
by buyers and sellers in the market. and hold common stocks, debt securities, deriva-
The value of these assets depends on the mar- tives etc. These assets have no value-in-use and the
ket evaluation of them but essentially the value of purpose for the holders is to provide a buffer against
these assets depends on the future cash inflow they uncertainty or to be exchanged for cash or other as-
would bring for the holder, and the value-in-use the sets. All assets share one thing in common - their
holder could buy using the cash obtained from their usefulness. This enables them to provide value-in-
sale. The amount and the timing of cash and the use for the holders – either they possess or they can
value-in-use the cash can bring reflect the subjective bring. So the valuation and measurement of assets

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converge on the common attribute shared by differ- 8. IASB. Framework for the Preparation and Presenta-
ent types of assets: the value-in-use the assets can tion of Financial Statements. 1989.
provide, and it should be entity-specific, since the 9. IASB. Conceptual Framework for Financial Report-
same assets may have different value since the us- ing. 2010.
ers of these assets are different in the assets evalu-
ation. Goodwill [27, 28] recognized in M&A can 10. Canning JB. Economics of Accountancy [M]. Ron-
better reveal this fact. ald Press Company. 1929.
In summary, the value of assets essentially comes 11. Whittington G. Measurement in Financial Report-
from the perceived usefulness that they have: the ing. Abacus 2010; 46(1): 104-109
value-in-use of the assets or the value-in-use the as-
sets can add for another asset. So the value of the 12. Macve R. The Case for Deprival Value. Abacus
2010; 46(1): 111-119
asset is embodied in the value-in-use it possesses
or the value-in-use it is expected to bring to another 13. Sprouse RT, Moonitz M. A Tentative Set of Broad
asset. Asset valuations may differ from one to an- Accounting Principles for Business Enterprises.
other because of the variation of asset attributes and New York, NY: AICPA. 1962.
the value realization process. One possible solution
14. Zakic V, Vunjak N, Besic C, Simic J. Significance
is to find the best match between the asset and the of Economic Value Added in Shareholder Value
accounting measurement. Given the rapid pace of Creation Process. Technics Technologies Education
change and development in the current economic Management. 2012; 7(1): 180-185.
environment, assets valuation will be a much dis-
15. FASB. Elements of Financial Statements. SFAC.
cussed topic, but the fundamental aspect of this is-
1985; 6.
sue - namely, that assets are held to be used and /or
exchanged to bring economic benefits to their hold- 16. FASB. Project Update Conceptual Framework - El-
ers, remains unchanged. ements and Recognition. Available at www.fasb.org/
project/cf_phase-b.shtml. (Accessed 3 December,
2011). 2010.
References
17. Munter P, Ratcliffe T. On the Attributes of an Asset.
1. FASB. Objectives of Financial Reporting by Business Abacus. 1980; 16(2): 116-123.
Enterprises. SFAC. 1978;1.
18. FASB. Recognition and Measurement in Financial
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formation. SFAC.1980;2.
19. Enterprise Accounting Standards, Economic Sci-
3. Xia DL. The Reliability and Characteristics of ence Press, Beijing, China, 2006.
Financial Accounting Information. Accounting Re-
search. 2004;1: 20-27. 20. Ge JS, Xu Y. Research on Measurement Attributes
of Accounting: Market Price, Historical Cost, Cur-
4. Higson A. An Exploration of the Financial Reporting rent Cost and Fair Value. Accounting Research.
Exceptions Gap. 2002. 2006; 9: 7-14.
5. Ijiri Y. US accounting standards and their environ- 21. FASB. Fair Value Measurements. SFAS157, 2006.
ment: a dualistic study of their 75-years of transition.
Journal of Accounting and Public Policy 2005; 24: 22. Ge JS, Dou JC, Chen CL. Dual Measurements: a
255–279. Necessary Choice in Measurement Model of Financial
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6. Holthausen RW, Watts RL. The Relevance of the Val-
ue – Relevance Literature for Financial Accounting 23. Robinson J. The Theory of Value Reconsidered.
Standard Setting: Another View. Journal of Account- Australian Economic Papers. 1969; 8(12): 13-19.
ing and Economics. 2001.
24. Xia DL, Li XQ. Assets Valuation and Investors’
7. Iriji Y. Theory of Accounting Measurement. New Decision-making. Relevance: China Accounting
York: Harvard University Business Press. 1979. Internationalization Conference Articles. 2003.

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25. Song W, Schein D. An exploratory study of Chinese

own brand strategy in the grocery sector. Interna-
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26. Arya A. et all. Recent Developments in Fair Value

Accounting. The CPA Journal (August), New York
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27. http://www.scribd.com/doc/78834733/Recent-De-
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Corresponding Author
Xi-Ping Ao,
International College of Business and Technology,
Tianjin University of Technology,
Tianjin,
China,
Email: owen_ao@163.com

1826 Volume 8 / Number 4 / 2013

 technics technologies education management

The differences in isokinetic potential of

knee extensor and flexor in footbalers within
different competition categories
Haris Alic1, Eldin Jeleskovic1, Gordana Manic2, Izet Bajramovic1, Ekrem Colakhodzic3, Ifet Mahmutovic1
1
Faculty of Sport and Physical Education, University of Sarajevo, Bosnia and Herzegovina,
2
Faculty of Health Sciences, University of Sarajevo, Bosnia and Herzegovina,
3
Faculty of Education, University of Mostar, Bosnia and Herzegovina.

Abstract with the other players’ body, explosive changes

The aim of this study: was to establish the dif- in movement direction, sideways running, back-
ferences in isokinetic potential of knee extensor wards running, running while controlling the ball,
and flexor muscle in footballers within different jumping, maximum sprint, slow and medium pace
competition categories. running [1]. In addition football is multivariate
Subjects and methods: The study was con- and specific, comprising of technical and tactical
ducted on a sample of 129 footballers, seniors of knowledge, physiological, psychomotor and psy-
different divisions (5 divisions): I-level (National chological factors. If the high level performance
Team), II-level (Premier League), III-level (First is to be maintained during the 90 minutes game,
League), IV-level (Second League), V-level (Can- all the following factors are necessary during the
tonal League). Isokinetic instruments were used for match and ball possession [2]: fast reactions and
the purposes of testing isokinetic potential, specifi- adjustments to changed circumstances, and regu-
cally the Biodex isokinetic system (speed 60 °/s). lations of mental attributes before and during the
Results: The study has shown statistically rel- game. Furthermore, structural analyses [3] states
evant differences in isokinetic potential of knee that football belongs to polystructural sport activi-
extensor and flexor among the following divisions: ties, which clearly indicates the fact that football
first (1) and fifth (5), second (2) and fifth (5), third requires a significant level of force, especially in
(3) and fifth (5), and fourth (4) and fifth (5). The lower extremities, knee flexor and extensor. Move-
other groups show no relevant statistical differences. ment activities such as kicking, rempling, landing,
Conclusion: Expected differences of different ball reception, dribbling, represent just some of
divisions were not provided by the research. The dif- football activities where it is necessary for play-
ferences in divisions were supposed to be more pro- ers to use force in their own musculature in order
nounced in regards to quality for all levels of compe- to complete the task. For players it is important to
titions, and not just between outmost divisions. symmetrically distribute their force. The muscles
Key words: maximum force momentum, foot- in left and right leg have to be of equal strength
ball, flexors, extensors, divisions, muscle symme- [4]. Information on this type of muscle activ-
try of lower extremities ity can be acquired by isokinetic diagnostic, that
represents a significant tool in preventing injuries
and damages to musculoskeletal system [5], [6],
Introduction
[7], [8], [9], [2], which is specifically significant
Football incorporates all patterns of natural for athletes whose movement system is effected
movement such as running, stopping, turning, by many requirements, as is the case in football.
jumping, falling, throwing, pushing, all performed We can easily make an assumption that the maxi-
with different intensity, rhythm and duration dur- mum force of knee flexor and extensor in football-
ing defence and offence actions. ers of different divisions is not the same, which
For the duration of the match, high-performance determines the level, quality, competition require-
player should effectively carry out a range of dif- ments, and the very intensification of the training.
ferent movement patterns: start, stop, turn, collide Isokinetic dynamometer can provide us with the

Volume 8 / Number 4 / 2013 1827

 technics technologies education management

results based on which we can conclude if there is ed: right and left knee extensors and right and left
an imbalance between front and back side of the knee flexors.
upper leg, and if there is an imbalance between the
left and right foot [10, 8]. The purpose of this pa- Sample variables
per was to determine the force of knee stabilizers The following muscle potential of knee exten-
in footballers according to their divisions, and to sor variables was measured by: max. force mo-
gain insight into the acquired differences. mentum of the left knee extensor (EXTLEF60);
The aim of this study was to record the differ- max. force momentum of the right knee
ences in the maximum strength momentum, that extensor(EXTRIG60); overall performance of the
is, the strength of knee flexor and extensor in foot- left knee extensor (EXTWLF60); overall perfor-
ballers of different divisions. mance of the right knee extensor (EXTWRG60);
average strenght of the left knee extensor (AV-
GPELF60) and average strenght of the right knee
Subjects and methods extensor (AVGPERG60). The muscle potential
Subjects of the knee flexor was measured by: max. force
As test subjects we used 129 footballers, of momentum of the left knee flexor (FLXLEF60);
senior representative and club divisions in Bosnia max. force momentum of the right knee flexor
and Herzegovina, The research was conducted in (FLXRIG60); overall performance of the left knee
the 2007/2008 season. The research included all flexor (FLXTWLF60); overall performance of the
the divisions and leagues: I-level (National Team right knee flexor (FXTWRG60); average strenght
U-21), II-level (Premier League), III-level (First of the left knee flexor (AVGPFLF60) and average
League ), IV-level (Second League) V-level (Can- strenght of the right knee flexor (AVGPFRG60).
tonal League). Isokinetic instruments were used
for the purposes of testing isokinetic potential of Data analyses methods
knee flexor and extensor, specifically the Biodex The data were subjected to one-way ANOVA
isokinetic system (speed 60 °/s). with post-hoc Newmann-Keuls’s test, ≤the level
of p0.05 being considered significant. Software
Testing protocol SPSS 15 was used in the process.
Testing procedure and measurements were un-
dertaken in diagnostic laboratory centre at Faculty Results
of Sport and Physical Education, University of
Sarajevo. Thigh muscle strength was measured Table 1 presents the results which indicate the
under isokinetic conditions using Biodex isoki- differences in isokinetic potential of knee flexor and
netic dynamometer (Biodex Corp., Shirley, New extensor in different divisions and other subjects. If
York) in concentric-concentric mode according we analyse the table it becomes quite evident that
to standard testing protocol for subjects in sit- there is a statistically relevant difference in variables
ting position. Prior to every test the machine was FLXTWL60 between Level I and Level II favouring
calibrated, ROM was set at 90º and a warm up the second level, however when comparing the first
consisting of bicycle run and stretching of quadri- and the third level no statistically relevant differences
ceps and hamstring muscles were applied. A more were found. There are statistically relevant differenc-
specific warm up consisting of 3-4 sub maximal es in all variables apart from FLXTWL60 benefitting
repetitions at the testing speed of 60 deg/sec for the first level in consideration to the fifth level.
both quadriceps and hamstring muscles in order No statistically relevant differences in the first
to prepare subjects for regular testing. After 2 min and third level were recorded, while there are some
the subjects performed 4 repetitions of maximal quite evident differences in the fourth level, which
voluntary contractions of thigh muscles. The same favours the second level at variables FLXTWR60
person conducted all measurements and the same and AVGPFL60. All the statistically relevant dif-
protocol for both legs was used [11]. Relative ferences among the tested variables favour the
peak values of thigh muscle torques were record- second level in relation to the fifth level.

1828 Volume 8 / Number 4 / 2013

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Table 1. The differences in isokinetic knee extensor and flexor potential in footballers within different
competition categories
Variable I-level II-level III-level IV-level V-level
EXTLEF60 (N-M) 234.75† 240.35‡ 236.19‡ 231.95† 209.15
EXTRIG60 (N-M) 239.01† 243.30‡ 248.23‡ 234.72 216.51
EXTWLF60 (J) 962.93† 1010.30‡ 1002.47‡ 995.13‡ 849.75
EXTWRG60 (J) 1020.02† 1054.25‡ 1071.21‡ 1015.41 924.73
AVGPEL60 (W) 158.59‡ 157.17‡ 149.70† 148.27 135.25
AVGPER60 (W) 163.99‡ 161.23‡ 160.39† 153.77 142.57
FLXLEF60 (N-M) 135.37† 143.36‡ 137.36‡ 135.80‡ 121.72
FLXRIG60 (N-M) 142.80† 147.51‡ 144.19‡ 139.52† 127.37
FLXTWL60 (J) 660.02 738.37*, ‡ 707.07‡ 693.31‡ 596.51
FLXTWR60 (J) 702.38† 758.55**, ‡ 726.92‡ 688.55† 620.17
AVGPFL60 (W) 103.46‡ 108.96**, ‡ 99.61† 98.44 89.89
AVGPFR60 (W) 109.97‡ 112.85‡ 105.63† 101.64 93.35
†
Significantly (p<0.05) than in V-level; ‡ Significantly (p<0.01) than in V-level; * Significantly (p<0.05) than in I-level; ** Signi-
ficantly (p<0.05) than in IV-level.

There are no apparent statistically relevant dif- quadriceps is the highest within the first league
ferences between third and fourth divisions, while footballers [13], the reason being stated as the
all the fifth level variables of relevant differences difference in activates, like walking and trotting
hold favour to the third level. Statistically rele- which are performed at lower level games, while
vant differences are presented in the favour of the games at a higher level include activities such as
fourth level in relation to the fifth level at variables running and sprinting. The higher level game re-
EXTLEF60, EXTWLF60 and FLXLEF60. quires more specific and intensive work, while the
games of lower level demonstrate lower rate of in-
Discussion tensity and a slower tempo of the game.
After a general analyses of the results, the dif-
Analysing the differences in isokinetic knee ferences are present between the first (I) and (V)
flexor and extensor potential of different divi- fifth, final division, where the first (I) level is not
sions, it becomes evident that the values tested different from second (II), third (III) or the fourth
by the isokinetic dynamometer show differences (IV) level, which is a surprising result. Likewise,
between different divisions of footballers. In any the resulting differences between the second and
number of studies we can find numerous research other levels are only present between the second
results with an aim to establish the strength pa- (II) and fifth (V) level, while there are no differ-
rameters of the upper knee musculature within a ences in relation to the other levels. The differenc-
healthy population. There are studies which fo- es are evident only in relation to the third (III) and
cused on researching the issues of differences in the last level, namely the fifth (V) level. Similarly
footballers in relation to their competition level, the differences in relation to the fourth (IV) and
positions within the game and age categories. [12] the fifth (V) level are evident. Acquired results of
used Biodex 3 system at the velocity of 600/s to the maximum strength in stabilizers demonstrate
compare the concentric and eccentric quadriceps differences regarding the outmost levels, the last
and hamstring muscle strength in professional fifth level (V), while statistically significant differ-
footballers within different leagues. Concentric ences in relation to the other levels, the first, sec-
contraction tests were conducted on 145 players, ond, third and fourth( I, II. III. IV) are nonexistent.
while 130 footballers took part in eccentric con- The results of this research have shown that in
traction testing. The results indicated the differ- general there are no logically and statistically rel-
ences in correlation with different leagues. The evant differences in isokinetic potential of knee
concentric and eccentric strength of left and right flexor and extensor in footballers of different divi-

Volume 8 / Number 4 / 2013 1829

 technics technologies education management

sions, aside from the difference in the last fifth (V) of the sportsmen from Vojvodina. HealthMED, 2013;
division. This raises the question as to why there 7(1): 47-55.
are any differences and why the existing differ- 3. Mikić B, Talović M, Rađo I. Training players. Mo-
ences have not followed the level and the quality star: Pedagogical Academy, 2003.
of the competition. It would be logical to conclude
that the first level according to its quality, compe- 4. Sporiš G, Mihačić V, Kubla B. Trening snage mladh
tition requirements, selection and training tech- nogmetaša. Zbornik radova. Kondicijska priprema
sportaša 2008; 323-326.
nologies, demonstrates the best results, followed by
other prearranged levels. It is to be expected that 5. Dervišević E, Hadžić V, Karpljuk D, Radjo I. The in-
the higher level of competition sets the conditions fluence of different ranges of motion testing on the iso-
for bigger requirements in the players performance kinetic strength of the quadriceps and hamstrings. Iso-
kinetics and Exercise Science, 2006;14(3): 269-278.
when it comes to muscle potential in knee flexor
and extensor, since their game requires a more in- 6. Drid P, Drapsin M, Trivic T, Lukač D, Obadov S, Mi-
tensive training. This study clearly indicates that the losevic Z. Asymmetry of muscle strength in elite ath-
differences in the isokinetic potential of knee flexor letes. Biomedical Human Kinetics, 2009; 1(1): 3- 5.
and extensor in footballers of different divisions are
7. Radjo I, Mekic A, Drapsin M, Trivic T, Kajmovic H,
not present, apart from the final level. Drid P. Isokinetic strength profile of shoulder rota-
We can assume that the unsystematic selection, tors and thigh muscle torques in elite judokas and
followed by inadequate and insufficient implemen- soccer players. TTEM, 2011; 6(3): 631-635.
tation of modern strength training technologies has
preconditioned the state where there are no differ- 8. Drid P, Ostojic S, Vujkov S, Purkovic S, Trivic T, Stoja-
novic M. Physiological adaptations of a specific mus-
ences among the levels. This supports the fact there cle-imbalance reduction training programme in elite
is an enormous reserve and possibility for improve- female judokas. Archives of Budo, 2011; 7(2): 61-64.
ment of strength and muscle potential of lower ex-
tremities in B&H footballers, which could affect 9. Golik-Peric D, Drapsin M, Obradovic B, Drid P.
Short-Term Isokinetic Training Versus Isotonic Train-
the very quality of the football performance.
ing: Effects on Asymmetry in Strength of Thigh Mus-
cles. Journal of Human Kinetics, 2011; 30: 29-35.
Conclusion
10. Drid P, Drapšin M, Trivić T, Bratić M, Obadov S.
At higher levels of competitions, football is Thigh muscles flextion/extension ratio in elite judo
players. Journal of Combat Sports and Martial
much more demanding than as the amateur sport,
Arts, 2010; 1(2): 21-25.
the only question is to what end. It is noticeable
that through the very research of European foot- 11. Madsen OR. Torque, total work, power, torque ac-
ball, the quality of the game performance and its celeration energy and acceleration time assessed on
players is placed into specific order by the realistic a dynamometer: reliability of knee and elbow exten-
sor and flexor strength measurements. European
hierarchical levels of competitions. Therefore the Journal of Applied Physiology, 1996; 74: 206-10.
greatest performances belong to the best, which
is the first division, the professional level, while 12. Ozberk ZN, Oner-Coskun O, Akim S, Korkusun F.
all the others in quality come after. The reasons Isokinetic stranght of quadriceps-hamsring muscle
can be traced back to the athlete selection, and the in soccer players playing in diferent leagues. Tur-
kiye Klinikleri J Sports Sci, 2009; 1(1): 17-23.
implemented training technologies.
13. Verheijen R. Condicionig for Soccer. BPF, Versand,
Leer. 1997.
References
1. Komes Z. Designing a functional strength training Corresponding Author
program in football. Proceedings. Conditioning of Haris Alic,
athletes 2008; 101-116. Faculty of Sport and Physical Education,
University of Sarajevo,
2. Drapsin M, Vujkov N, Vujkov S, Molnar S, Drid P, Bosnia and Herzegovina,
Radjo I. Anthropometrical and physiological profiles E-mail: harisalic@hotmail.com

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 technics technologies education management

Measurements SO2, NOx and smoke in large

cities countries in transition
Dragana Vidakovic1, Milovan Vukovic1, Veljko Radicevic2, Dragan Jovanovic3, Miroslav Piljusic1
1
Technical faculty in Bor, University in Belgrade, Bor, Serbia,
2
City Administration of Nis, Serbia,
3
State owned enterprise “ Roads of Serbia “ - Belgrade, Serbia.

Abstract institution “Economist Intelligence Unit” in col-

laboration with Siemens corporation. The Report
Belgrade, the capital and the largest urban unit
was presented at the UN Climatic changes in Co-
in Serbia, has serious problems connected to road
penhagen on 08.12.2009. Accordingly, Belgrade
traffic jam due to undeveloped road system net-
is ranked on the 27th position among 30 largest
work related to real needs.
cities in Europe (including Istanboul) concerning
Belgrade with the hinterground belongs to
ecological parameters (Figure 1, 2, 3).
a zone of high concentration of inhabitants. It
is characterised by relatively homogenous geo-
graphical, cultural, historical and other features.
The natural position of Belgrade is unique in Eu-
rope – the townsite is located on the conflux of two
big rivers the Danube and the Sava. The location
lies within the zone of the south perimeter of The
Panonian plain and the northern ridge of the Bal-
kan peninsula. The city has a complex morpho-
logical structure – the basic natural and the present
– appeared by the complex transformations and by
development of inherited city structure.
Measuring of pollutants concentration - SO2,
NOx, smoke (The Republic Hydrometeorological
Service of Serbia), meteorological data - tempera-
ture, air humidity, wind speed, heighth of clouds
(The Republic Hydrometeorological Service of
Serbia) and the traffic flow (State owned road
construction company “ Roads of Serbia“) have
been carried out within the urban part of Belgrade
in the period of time from the year 1996 to 2010.
Processing of certain parameters have been car-
ried out in order to consider and identify sources
of air pollution within the city central zone.
Key words: Belgrade, countries in transition,
air pollution, traffic flow. Figure 1. D. Vidakovic The complete results from
the index, including the overall result of each city
as well as the individual rankings withintwo of
Introduction
the eight categories.
The starting base causing this reserarch is the
report of ecological parameters titled as “Europe-
an Green City Index” [1], developed by research

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 technics technologies education management

Table 1. D.Vidakovic Percentage change in emi-

ssions, 2000 - 2004

According to the last census (2011), the popula-

tion of Belgrade is 1,639,121 [3]. Its metropolitan
territory is divided into 17 municipalities, each with
Figure 2. D.Vidakovic The link between wealth
its own local council. It covers 3.6% of Serbia’s ter-
and environmental performance
ritory, and 22.5% of the country’s population lives
in the city. The wider area of the city spreads on
322.268 ha, municipalities cover an area of 35.996
ha, 541 ha belongs to non residential islands on the
Sava and the Danube, while 2.225 ha are parts of
these two rivers. The city is situated on the conflu-
ence of two major rivers the Danube and the Sava.
Belgrade is positioned in the contact zone of the
southern edge of the lowlands of the Pannonia Ba-
sin and the northern edge of the Balkan Peninsula.
The geographical position of Belgrade is located
from the north end point (45006’N and 20023’E) to
the end point in the south (44016’N and 20018’E)
Figure 3. D.Vidakovic The link between population and from the end point in the east (and 44016’N
and environmental perfomance in east Europen 20018’E) to the end point in the west (44038’N and
cities 19059’E). The elevation of Belgrade is from 71 m
(the lowest point – the Danube coast at Grocka out-
The SEE region is highly diverse in terms of skirt) to 628 m (the highest point – southern out-
its ecosystems, ethnic groups, religions, cultures, skirts at Kosmaj mountain). The average elevation
economies and geographies, the latter of which of the city center is 132 m.
includes four of Europe‘s bio-geographical ar- Belgrade is situated in the moderate continen-
eas: Mediterranean, Central European, Alpine and tal climate zone. Another climatic characteristic of
Pannonic. Despite considerable reductions in air Belgrade is “Koshava”, a strong north-east wind
pollutant emissions in much of the pan-European of the Danube area, that considerably contributes
region, atmospheric pollution still poses a signifi- to the quality of air in the city.
cant threat to human health and the environment. Belgrade, as a city with the population close
In SEE, the impacts of sustained growth in road to two million, has serious problems connected to
transport and emissions from industry, power pro- road traffic jam due to undeveloped road system
duction and households all contribute to poor air network related to real needs. Belgrade is the larg-
quality in urban areas. Between 2000 and 2004, est city in Europe without underground railway
emissions of acidifying substances such as NOX, system. Beside this lack, the road system network
SO2 and NH3 in the region increased (Table 1), is inadequate. Having in mind that cars in Belgrade
and eutrophying emissions grew by 3.8% [2]. consume one third of the annual consumption of
petrol and diesel in Serbia (1.3 million ton), the air
pollution produced by car exhaust pipes, becomes
a serious issue. The main problem is exceeded un-

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 technics technologies education management

planned urbanisation resulted by so called toxic central zone (the highest values of pollutants in
heat island. However, Belgrade’s score is rela- the air have been recorded) related to peripherial
tively low because of its failure to pursue clean air parts of the city. However papers and studies deal-
policies more systematically. One important green ing with pollution samples at the central zone have
initiative by the city administration - aimed at im- not been found. If they exist, they should involve
proving energy efficiency and the quality of the division and distinguising of differences within the
air in the city - is the renewal and gasification of zone whose parts do not contribute comparably to
Belgrade’s district-heating system. general picture of air pollution within the city cen-
Sulphur dioxide (SO2), NOx (generalized form tral zone on the basis of the monitoring systems of:
for mono nitrogen oxides NO and NOx) and smoke – The Republic Hydrometeorological
are in the list of most frequent pollutants in the air Service of Serbia[4] (RHMSS) concerning
as a consequence of mostly car engines exhaust. daily values of climatological parameters
Sulphur dioxide (SO2) is a colourless gas of (temperature, air humidity, wind velocity,
hard suffocating smell occuring at sulphur com- cloudiness etc – Figure 4) and pollutants
bustion. SO2 is a byproduct of work of internal (SO2, NOx, smoke – Figure 5) and
combustion engines and industrial plants. This gas – State owned road construction company “
pollutes living environment and attacks pulmonal Roads of Serbia“ [5] concerning the traffic
systems of the human and animals. Dissolving in flow (Figure 6).
the air, it causes acid rains destroying vegetation,
steel constructions and buildings. Processing of certain parameters have been car-
NOx is a general form used for mono-nitro- ried out in order to consider and identify sources
gen oxides (NO and NO2). These oxides appear of air pollution within the city central zone with a
at combustion processes, especially at high tem- special attention to streets of so called canyon type.
perature combustion processes. The combustion
of mixture of air and fuel at internal combustion
engines, yields high enough temperature to start
endothermic reaction of atmospheric nitrogen and
oxigen in the flame. In large cities with dense traf-
fic as Belgrade, the amount of nitrogen oxides is
considerable and it can be also harmful.
Various particles in the air appear mostly in two
ways – by physical processes and chemical reac-
tions. Physical appearance of particles is a result of Figure 4. D.Vidakovic Average annual values of
mechanical dispersion of particles from the ground temperature (○C), air humidity (%), wind velocity
(whirling of dust at open pit mines, operations at con- (m / s) and cloudiness in the period 1996-2010
struction sites, road transport activities; from stacks
of thermoelectric power plants during their work etc)
or by condensation of steam (at fog rizing, formation
of cluods etc) as well as from whirling of spray from
water surface. The aforementioned chemical reac-
tions consist of combustion (yielding smoke), forma-
tion of acids in the air etc. At formation of particles,
their size is not equal but different diameter size.
Figure 5. D.Vidakovic Average annual values of
SO2, smoke and NOx (expressed in g/m3) in the
Methodology
period 1996-2010
By insight into published papers and studies, it
has been established that almost entire subject mat-
ter relates to problems of air pollution of the city

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 technics technologies education management

the most frequent pointsof Belgrade. This

boulevard directly connects two other
locations that are also in the list of most
frequent ones, they are Pancevo bridge
accross the Danube and Terazije tunnel
(under the central point of the city centre.
2. The location „Vracar“ (Karadjordjev park /
Bulevar oslobodjenja) positioned on 132 m
Figure 6. D. Vidakovic The average value of the a.s.l is important trafic location connecting
flow of traffic by season in 2008-2010 the central city communication line „Slavija“
(central city roundabout) and a part of the
In order to establish the fact that air pollution has international motorway M-75 known as the
higher values at streets of canyon type, measuring „Gazela bridge“ across the Sava river. The
of air pollution under equal climatological condi- communication line „Slavija“ – motorway
tions with data on number of registered vehicles M-75 are, beside Pancevo bridge and
and trafic flow through Belgrade have been carried Terazije tunnel, the most frequent road
out at the following locations (Figure 7) [6] : traffic communication lines within the city.
1. Bulevar Despota Stefana (boulevard in the 3. The location Kosutnjak (Kneza Viseslava
city centre - canyon type street), street) is positioned at 203 m a.s.l. and it
2. Vracar - Karadjordjev park / Bulevar has far less trafic frequency of two above
oslobodjenja (part of the city still within the mentioned locations.
city central zone),
3. Kosutnjak - Kneza Viseslava street (close Beside the above facts, these three locatons are
outrskirts - green area of the city). within the same zones by the following criteria[7] :
– Rezidental and industrial areas,
– Heat climatic zones and characteristic
parameters,
– Heat climatic zones and average annual
wind roses,
– Average annual amount of precipitation,
– Considerable continued sources of emission
in the air,
– Air quality at heat climatic zones.

Results were collected for the period of time

from the 1996 to 2010. However for the need of
factor analysis of parameters directly influencing
the concentration of pollutants in the air, the pe-
riod of time 2008 – 2010 was processed in details.
The main reasons for selection of time periods are
Figure 7. D. Vidakovic, Measuring of SO2, NOx the following ones:
and smoke in Belgrade, Display location – The period to the year 2000 – the country
was under UN sanctions,
Common characteristics of the listed locations is – The period after the year 2001 – numerous
that none of them has any polluting industry asone adopted legal regulations directly
of the most important factors of air pollution, how- – related to protection of the living environment,
ever there are considerable differences as: – The period 2008 – 2010 – there were no
1. The location Bulevar despota Stefana is changes of legal regulations directly related
positioned on 108 m a.s.l and it is one of to protection of living environment,

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 technics technologies education management

– The period 2008 – 2010 – there were no corded during the year 2009. The pollution was
considerable exceptions in measuring of decreased in the year 2010, however it was still
meteorological parameters, higher at all locations than in the year 2008.
– The period 2008 – 2010 – together
with equal legal frames and negiglible
meteorological exceptions, some differences
in concentration of polluting parameters
have been recorded.

For ranking and establishing of the most critical

zones related to concentration levels of noxious gas-
ses and compounds in the air, the method of mul- Figure 8. D. Vidakovic, Measuring of SO2, NOx
ticriterial decision making – MCDM was applied. and smoke in a canyon type street in Belgrade,
Software packages SPSS and Decision Lab 2000 Average concentration values of the parameters
for data processing and obtaining all results of this of pollution per µ/m3
ranking were used. The lines of communication of
road traffic in Serbia, by Theis method, were deter- After identifying the most endangered location –
mined on the basis of results obtained from counting canyon type street, where the highest pollution con-
of road traffic by automatic traffic counters (ABS). centrations parameters were measured, a detailed
At present, multicriterial analysis of the set of alter- analysis of parameters was started in order to estab-
natives used as criterias is carried out by means of lish the most contributing factors to this pollution.
PROMETHEE/GAIA [8,9] (Preference Ranking The obtained results (Table 2) indicate that the
Organization Method for Enrichment Evaluations). concentration of all pollutants measured in the
year 2001 shows a decrease where SO2 is percen-
The research results tually most present. However, measurings carried
out in the year 2010 show increase of SO2 and NOx
On the basis of completed measuring for the related to the year 2008. An increase of average
period of time 2008 – 2010, it is clear that the en- anual temperature in the first decade of this cen-
tire amount of pollution parameters (SO2, smoke, tury was seen by the analysis of meteorological
NOx) per µg/m3 was recorded at the location Bule- results factors, while other parameters remained
var despota Stefana (Figure 8). approximately constant. Also, it was observed that
By comparison of obtained results it is evident in the period of time 2008 – 2010 climatological
that the concentration of pollution parameters per parameters were approximately constant except
µg/m3 is highest at the location Bulevar despota temperature that was recorded as decreasing.
Stefana (canyon type street) while the lowest one For the taken period of time 2008 – 2010, a
is at the location Kosutnjak (Kneza Viseslava constant increase of SO2 value was observed. The
street). It is also evident that the highest concen- highest average annual values of smoke and NOx,
tration of pollution parameters per µg/m3 was re- within the observed period, were recorded in the

Table 2. D. Vidakovic, Measuring of SO2, NOx and smoke in a canyon type street in Belgrade, Analyzed
parameters at the location of Bulevar despota Stefana
SO2 Smoke NOx Temperature Air humidity Wind velocity The traffic
Cloudiness
(µg/m3) (µg/m3) (µg/m3) (○c) (%) (m/s) flow
1996 64.42 38.63 19.94 11.5 71 2.5 5.9 11331
2001 74.93 42.17 30.92 12.6 70 2.9 5.8 16099
2008 41.8 26.76 20.08 14 65 2.6 5.6 20384
2009 42.71 30.67 28.87 13.7 68 2.5 5.8 20441
2010 43.03 24.18 25.82 13.1 70 2.7 6.0 20695

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 technics technologies education management

Table 3. D. Vidakovic, Measuring of SO2, NOx and smoke in a canyon type street in Belgrade, Registe-
red road motor vehicles in the Republic of Serbia 1996-2010 year
Types of vehicles 1996 2001 2008 2009 2010
Motorcycles 39130 13097 31794 34500 38229
Passenger cars 1397047 1382396 1486174 1637002 1567113
Special passenger vehicles 17496 16723 13573 13475 79
Buses 11295 9287 8553 8853 8034
Trucks 95753 99019 139243 148255 162799
Special trucks 22048 22143 24166 23552 -
Work vehicles 2595 1705 1587 1434 1020
Towing vehicles 311823 117687 7344 7356 239295
Trailers 157716 93300 27665 28596 99025

year 2009, while the lowest in 2010 wherein a Conclusions

considerable difference existed – measured con-
On the basis of obtained values, after statistical
centration of smoke in the year 2010 was lower in
processing of data, a conclusion that a theoretical
relation to the year 2008, while the concentration
model on a considerable influence of certain me-
of NOx was higher in the year 2010 related to the
teorological factors and the traffic flow on concen-
year 2008. Trafic flow within this period of time
tration of pollutants in the air can be derived. This
shows constant increase.
conclusion is prooved with a certain statistical re-
The highest concentration of SO2 was measured
lation that can be seen in the Table 5.
in the winter time of the year 2009. The amount of
From the enclosed results it is evident that the
the concentration was 74.03 µg/m3 while the low-
concentration of these three pollutants depend on:
est concentration was recorded in the summer time
– SO2 on temperature, relative air humidity,
of the same year when amounted 28.08 µg/m3. The
cloudiness and vehicle flow, while wind
highest concentration of smoke was recorded in
speed has some lower dependency,
the autumn of the year 2009 amounting 44.78 µg/
– Smoke on temperature, wind speed and
m3 while the lowest was in the summer of the year
cloudness,
2010 when the measuring pointed 13.43 µg/m3.
– NOx on cloudness, wind speed and traffic
The highest concentration of NOx was recorded in
flow.
the autumn 2009 when it amounted 44.42 µg/m3,
while the lowest was in the spring of the same year
For research of the relation between the pollut-
when its amount was 14.38 µg/m3.
ants SO2 and NOx at one side and meteorological
For the needs of this research, data on number
factors and road traffic flow on the other, a par-
of registered vehicles[10] and data concerning
tial correlation, wherein the road traffic flow was
their age were taken into consideration [11] (Ta-
eliminated (Tables 6 and 7).
bles 3 and 4).
Assumptions of normality, linearity and ho-
Table 4. D. Vidakovic, Measuring of SO2, NOx and
mogenity were not disturbed as it was prooved
smoke in a canyon type street in Belgrade, The
by preliminary analyses. After elimination of the
average age of vehicle, 2011
road traffic flow influence to the pollutants, a
Year Average age of vehicles
negative partial correlation between SO2, air tem-
2008 14,9 perature, NOx and cloudness was established. At
2009 14,3 the other hand, positive correlations were estab-
2010 13,8 lished between SO2 and relative air humidity, SO2
and cloudness, SO2 and the wind speed, NOx and
cloudness. Comparison with calculated correla-
tion of the zero series shows that elimination of

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 technics technologies education management

Table 5. D. Vidakovic, Measuring of SO2, NOx and smoke in a canyon type street in Belgrade, The
correlation coefficients

Table 6. D. Vidakovic, Measuring of SO2, NOx and smoke in a canyon type street in Belgrade, Partial
correlation of SO2

Volume 8 / Number 4 / 2013 1837

 technics technologies education management

Table 7. D. Vidakovic, Measuring of SO2, NOx and smoke in a canyon type street in Belgrade, Partial
correlation of NOx

road traffic influence has small however existing tion-in-South-East-Europe-and-Eastern-Europe-

influence to the relation strength between pol- -Caucasus-and-Central-Asia). 2007.
lutants and meteorological parameters. From the 5. Statistical Office of the Republic of Serbia, Census of
obtained results it can be concluded that meteoro- population, households and dwelling in the Republic
logical parameters as well as road traffic flow con- of Serbia in 2011, Belgrade 2011.
tribute to concentration of polluting parameters.
6. Republic Hydrometeorological Service, Meteorologi-
cal yearbook and climate data, Annual Report 1996-
References 2010 year, Belgrade, 1996-2010.

1. EIU, European Green City Index, Copenhagen 7. PE “Roads of Serbia”, Average annual daily traffic,
Annual Report 1996-2010, Belgrade , 1996-2010.
2. (http://www.siemens.com/entry/cc/en/greencityindex.
htm). 2009. 8. http://maps.google.com/

3. EEA and UNEP. ‘’Sustainable consumption and pro- 9. Institute of Public Health of Belgrade, Agency for
duction in South East Europe and Eastern Europe, City Building Land and Development of Beograde,
Caucasus and Central Asia.’’ Evaluation of the Area of Belgrade Master plan-
Environmental atlas of Belgrade, Belgrade 2002.
4. (http://www.eea.europa.eu/publications/eea_re-
port_2007_3/Sustainableconsumption-and-produc-

1838 Volume 8 / Number 4 / 2013

 technics technologies education management

10. Brans JP, Mareschal B. PROMETHEE-GAIA. Une

Méthodologie d’Aide à la Décision en Présence de
Critères Multiples. Ellipses, Paris, France, 2002.

11. Brans JP, Mareschal B. PROMETHEE Meth-

ods. In J. Figueira, S. Greco, and M. Ehrgott,
editors,Multiple Criteria Decision Analysis: State
of the Art Surveys, pages 163-196. Springer Verlag,
Boston, Dordrecht, London, 2005.

12. Ministry of Internal Affairs of the Republic of Ser-

bia, Registered road motor vehicles in the Republic
of Serbia, Statistical Office of the Republic of Ser-
bia 1996-2010 year, Belgrade, 1996-2010.

13. TGI Serbia Mediana Adriastarost, Average age

of motor vehicles, Belgrade 2010 (http://www.
totalcars.rs/istrazivanje-sta-vozi-srbija-2010-10/),
2010.

Corresponding Author
Dragana Vidakovic,
Technical faculty in Bor,
University of Belgrade,
Belgrade,
Serbia,
E-mail: vidakovic.dragana@yahoo.com

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 technics technologies education management

Comparative analysis of research on work-

related problems of occupational safety
specialist in Croatia and Serbia
Snezana Zivkovic1, Josip Taradi2, Milisa Todorovic3
1
Faculty of Occupational Safety in Nis, Republic of Serbia,
2
University College of Applied Sciences in Safety, Zagreb, Croatia,
3
Tim protekt d.o.o., Stara Pazova, Republic of Serbia.

Abstract professional diseases and work-related diseases and

injures at work to the lowest possible degree i.e. cre-
The paper deals with comparative analysis of
ating work conditions in which an employee, while
research on work-related problems of independent
doing his professional assignments, would feel sat-
occupational safety specialist in the medium-sized
isfied are general interests of the society, all subjects
business organizations in Croatia and occupational
and an individual itself.
safety and health specialist in companies in Serbia.
The term occupational safety implies: the sys-
The research contains comparison of obtained re-
tem of legislative, social-economic, organizational,
sults according to seven hypotheses. Questionnaire
technical, sanitary, educational and other measures
with 93 exam questions has been used as the research
which are used for accomplishing employee’s health
instrument. Frequency, percentage, summation, av-
protection and protection of other people entitled to
erage, standard deviation, population variability co-
occupational safety. Occupational safety is a well-
efficient, chi-square test, Pearson correlation coef-
organized activity whose objective is to protect life
ficient, regression analysis etc. are statistic methods
and health of the employees from hazard at work
used for the research processing and review.
by conducting certain measures i.e. to protect em-
The results of the research are up-to-date and
ployees from injuries and professional diseases. Oc-
usable for those who deal with this subject matter.
cupational safety is reduced to those matters that are
The results have shown that both in Croatia and
the object of technical, hygienic and social security.
Serbia workers are aware that physical increase of
Occupational safety, however, does not include
hired occupational safety and health specialists is
only protection from hazards and professional dis-
not the main cause for the improvement of their
eases but also wider protection of the work envi-
work and state of safety in companies. They are
ronment. Occupational safety measures include
aware that for something like this, it is necessary
work conditions such as: working hours, condi-
to plan and conduct competence training, acquire
tions necessary for work in certain fields, salary,
knowledge related to management in this area and
holidays, food, transport and other conditions.
obtain larger technology support with the corre-
Occupational safety includes special protection of
sponding financial allowance for their work.
certain categories of people such as: children and
Key words: occupational safety specialist, oc-
youth, women, physically challenged, and people
cupational health and safety management, safety
employed in certain fields (sailors, fishermen etc.).
at work, state of safety
Work conditions imply salary, which lies at the
core of economic and social protection and is a
Introduction ground for creating organizational culture [1, 2].
Occupational safety and health implies accom- According to Cingula [3] “occupational safety is
plishing work conditions in which certain measures made of measures, methods and procedures whose
and activities are taken in order to protect life and aim is to prevent injuries at work, professional dis-
health of the employees. Accomplishing the highest eases and work-related diseases and preservation
level of occupational safety and health, minimizing of work ability”. In contemporary conditions, the

1840 Volume 8 / Number 4 / 2013

 technics technologies education management

concept of safety is widely understood, as absence work place and work environment. The term risk
of military, political, economical and ecological implies probable injury, disease or health damage
threats with regard to the state of protection of in- due to hazard. In our country, there is no adequate
terests that are vitally important in order to satisfy difference between the terms hazard and harm, but
needs and ensure possibilities of progressive devel- the term hazard implies sudden physical, mechani-
opment of an individual, state and society [4]. cal impact which leads to injuries, diseases and the
Although we claim that the change of term term harm implies impact of constant influences to
“Law on Occupational Safety” into “Law on Oc- a man and can lead to diseases [7].
cupational Safety and Health” is not debatable, Regulations of the manner and procedures for
from the scientific and linguistic point of view, we estimating risks at work place and environment [8]
cannot accept the explanation that “safety” is wider categorize hazards and harms into following groups:
and more modern term, and “protection” more nar- Hazards:
row and older one, which is very often presented in – Mechanical hazards that occur while using
practice. According to Anđelković [4], the concept work equipment;
of “safety” implies “the state” and the term “protec- – Hazards and harms related to the
tion” implies methods and procedures conducted in characteristics of a working place;
order to accomplish that state (safety). – Hazards that occur while using electricity.
Consequently, implementation of occupational
safety itself is more professional area and field Harms:
whereas occupational protection, as the protec- – Harms that occur or that are the result of the
tion in general and wider sense, is possible to be work process;
defined in a scientific field. According to Kacian – Harms that are the result of psychological or
[5], “occupational safety represents interdisciplin- psycho-physiological effort that are causally
ary and multidisciplinary scientific field. It is in- related to the working place and occupations
terdisciplinary because it comes out of the domain that an employee performs;
of the existing system of fundamental science and – Harms related to work organization;
deduced scientific disciplines, and it is multidisci- – Other harms that occur at a working place.
plinary since it is the part of the new field in which
multiple scientific disciplines exist which correlate The state of occupational safety, or efficiency
and make interdisciplinary and multidisciplinary and effectiveness of preventing injuries at work or
area of occupational safety and health and mate- professional diseases, depends on how successful
rial goods’ protection”. That field is made of: work occupational safety is practiced in relation to the
organization, technology, occupational medicine, existing work risks. In this way, the key precon-
occupational safety law, ergonomics, anthropol- dition for planning and practicing occupational
ogy, pedagogy and adult education, psychology, safety is the professional evaluation of work risks.
ecology, sociology, economics etc.
Owing to achieve occupational safety as good as Occupational safety management
possible in any industrial society, Šokčević [6] es-
tablishes “profound starting points for organization, The indicators of the occupational safety con-
arrangement and practicing occupational safety” dition in most cases are expressed by using statis-
and these are: regulations; work process organiza- tic data of work injuries and professional diseases
tion and implementation; employer responsibility; both in Serbia and around the world. According
general principles of occupational safety; estimat- to the official data in Serbia, from January to De-
ing hazards; employers’ written forms on occupa- cember 2010, 1,322 injuries have been registered
tional safety (employers’ autonomous files). altogether, 35 of which are death at work or re-
The need for implementing occupational safety lated to work, 1,026 of which are severe injuries,
is based on the existence of certain risks. Risk at 29 collective and 232 minor injuries [9]. In this
work is probable as well as the intensity of pos- way, apart from human and social factor, the eco-
sible harmful event related to work, employees, nomic factor of occupational safety is expressed,

Volume 8 / Number 4 / 2013 1841

 technics technologies education management

which causes the need for management, that is, for 18001 demonstrate the need and acceptance of
managing safety according to contemporary man- systematical occupational safety management in
agement rules. The basic definition of “occupa- business practice [17].
tional safety as the state that enables normal way
of business processes and functioning of indus- Research methodology
trial societies, as well as better business results”
and the position of the organization in “Compes” The problem of this research is deficiency of
safety shield goes in favor of that [10]. In broader current knowledge on the status of occupational
context of management theory, it should be em- safety and health specialists in companies in Ser-
phasized that Fayol (Administration Industrielle et bia, in accordance with obligations under the Oc-
Generale, 1916) has divided the industrial society cupational Safety and Health Law, as well as lack
activities into six basic groups: technical, com- of knowledge on current issues of independent oc-
mercial, financial, safety, accounting and manage- cupational safety specialist in medium-sized com-
rial [11]. Petersen, a contemporary occupational panies in Croatia.
safety management theoretician, in his systematic
approach to safety management, with “human ap- The aim of the research
proach to safety management” [12], connects sci-
entific methods and management techniques into The aim of the research is to determine current
safety management techniques, and on the basis of knowledge on the status of occupational safety
safety management concept according to the ob- and health specialists in companies in Serbia and
jectives, establishes “measures for tracking safety work issues of independent occupational safety
performance” for the purpose of analyzing effec- specialist in medium-sized companies in Croatia.
tiveness of the safety system in compliance with A comparative analysis of results on problems
economics and management rules [13]. related to work of the independent occupational
As Markič [14] points out “traditional view safety specialist in medium-sized companies in
of occupational safety as a profession or science Croatia and occupational safety and health spe-
should gradually allow space to new approaches cialist in companies in Serbia was performed. The
which are expected to create new type of profes- research includes a comparison of the results ob-
sional occupations that will be based on the occu- tained by the following hypotheses: H1: In most
pational safety management, health care and en- (more than 50%) medium-sized companies in
vironmental safety as general aspect of managing Croatia, which are liable to work organization of
industrial society, i.e. an organization”. Occupa- occupational safety specialists, in accordance with
tional safety management becomes the obligatory Article 20 of Law on Occupational safety [18] and
part of contemporary concepts of socially respon- Law on Occupational Safety and Health [19], this
sible businesses and social enterprises [15]. legal obligation is undertaken by a company to
The necessity of occupational safety man- employ at least one occupational safety specialist.
agement is seen in: the long-term viable way of H2: Number of employees responsible for occupa-
decreasing frequency and seriousness of risks at tional safety and health depends, statistically, on the
work; establishing preventive activities in an or- number of employed workers, state of occupational
ganized way - distribution of responsibilities in health and safety and the level of hazard at work in
occupational safety and health area at all levels; this company. H3: In all medium-sized companies
integration of OHSAS activities into business sys- that have introduced a system of managing health
tem and decision-making in companies; changing and safety at the international guideline OHSAS
attitudes towards occupational safety and health 18001, there is a significant improvement in safety
– employees’ participation in defining and follow- and health at work and work of occupational safety
ing occupational safety and health objectives [16]. specialist in these companies. H4: Occupational
Implementation and certification of occupa- safety specialist in medium-sized companies only
tional safety and health management system ac- work in the field of occupational health and safety
cording to the international directives OHSAS and do not work in other areas of protection. H5:

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 technics technologies education management

Among occupational safety specialists in medium- (with standard deviation of 0.94 and coefficient of
sized companies the majority (over 50%) is con- variability 24.56%) and it is placed in the initial area
sisted of specialists with qualifications in the field of a very good grade (more than 3.5 and less than
of safety. H6: Occupational safety specialists in 4.00). In regard to the Croat research, whose aver-
medium-sized companies evaluate their own work, age grade is 3.68, with standard deviation of 0.97
on all aspects with at least a very good grade (at and coefficient of variability of 26.36, the average
least 3.5 on a scale rating from 1-5). H7: Occupa- grade in Serbia is statistically higher. The span of
tional safety specialist in medium-sized companies individual average grades is from 3.47 (which is the
evaluate proposals for improving their work on all only one in the area of good grade) up to 4.15. Thus,
aspects with at least a very good grade (at least 3.5 the span of grades is lower than in Croatian research.
on a scale rating from 1-5). The satisfaction with occupational safety and health
specialists’ earnings has the lowest average grade
Research methods (3.47), and the tracing and analyzing data related to
the injuries at work and professional diseases has
Given the stated aim of the research and re- the highest average grade (4.15). These two issues
search hypotheses, as appropriate scientific re- have the extreme grades in Croatian research, too.
search methods were used: Sixteen questions have lower average grades from
average grades of all assessments of occupational
Method of survey safety and health specialists in companies and 15
questions have higher average grade. It has already
As a main research method to collect and obtain been mentioned that only the question on Satisfac-
current and original data and research findings, the tion with occupational safety and health specialists’
survey method was used. With this method, sub- earnings has lower grade than lower limit of a very
jective opinions and assessments of the respon- good grade, whereas in Croatian research even 8
dents - safety and health specialists were explored. questions have grades in the area of a good grade.
As a research instrument a questionnaire that The average grade of occupational safety and
contains 93 exam questions was used. health specialists’ cooperation with external partici-
pants from the occupational safety system is 3.76
Statistical methods (with standard deviation of 0.95 and coefficient of
variability 25.30) and it is placed in the initial area
For processing and presentation of the research, of a very good grade (it is higher than 3.5 and low-
the following statistical methods have been used: er than 4.00). In regard to the research in Croatia,
frequency, percentage, summation, average, stan- whose average grade is 3.54, with standard devia-
dard deviation, population variability coefficient, tion of 0.98 and coefficient of variability of 27.81,
chi-square test, Pearson correlation coefficient, re- the average grade in Serbia is higher but it is not
gression analysis, etc. statistically relevant. The span of individual aver-
age grades is from 3.44 up to 4.17. Thus, the span of
Sample grades is lower than in Croatian research. The valu-
ation of occupational safety as an economic factor
In Serbia, the sample was composed of 1,075 by the whole economic system and perception and
safety and health specialists in companies. valuation of occupational safety as a social value
In Croatia, the sample was composed of 338 by the public and society (this question is with the
safety and health specialists in medium-sized lowest grade in Croatian s research) have the lowest
companies. average grades (3.44) and cooperation with bodies
in charge of labour inspection-occupational safety
Research results and discussion has the highest average mark (4.17). In Croatian
research, cooperation with occupational medicine
The average grade of occupational safety and specialists has the highest grade. Six questions have
health specialists’ performance in companies is 3.84 lower average grades than the average grades of co-

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 technics technologies education management

operation between occupational safety and health ing of occupational safety and health specialists as
specialists and external participants from occupa- a class in the system of unique chambers for oc-
tional safety system, and 5 questions have higher cupational safety and health has the lowest average
average grades. Three questions have lower grade grade (3.74), and the highest average grade (3.95)
than lower limit of a very good grade, and in Croa- is given to questions-suggestions for Obligations of
tian research even 6 questions have grades in the continuous professional training for occupational
area of a good grade. safety and health specialists, Obligations of pro-
The average grade of specific suggestions for fessional training in knowledge and management
improving occupational safety and health special- skills (organization planning, leading, control etc.)
ists’ performance is 3.76 (with standard deviation for these people, and Improvement of information-
of 1.05 and coefficient of variability 27.91%) and sharing between specialists and external partici-
it is placed in the initial area of a very good grade pants from occupational safety system via the in-
(higher than 3.5 but lower than 4.00). This grade is ternet. In Croatian research, the question of more
a bit higher than the grade which is obtained in Cro- efficient inspection surveillance over application
atian research in which the average grade is 3.65 of occupational safety and health regulations and
with standard deviation of 1.08 and coefficient of obligation of determining occupational safety and
variability of 29.64. The span of individual average health specialists’ work has the lowest grade, and
grades is from 3.40 up to 3.92. The span of grades no. 89 has the highest grade, the same as the one of
is lower than in the research in Croatian. The ques- three with the same average grades in Serbia. The
tion which relates to suggestion for increasing the average grades of all suggestions in our research
number of employed occupational safety and health are very homogenous, but the lower average grade
specialists has the lowest average grade (3.40), and than the average grade for general suggestions for
the highest average grade (3.92) is given to sugges- improving occupational safety and health special-
tion for increasing salary and other benefits in or- ists’ performance is given to six questions, and five
der to synchronize with other employers’ services. questions have higher average grade. There are no
In Croatian research the lowest grade was given questions with lower grade from the lower limit of
to the question-suggestion no. 73, and the highest a very good grade, the same as in Croatian research.
grade was given to the question-suggestion no. 76, The average grade of occupational safety and health
which relates to additional schooling and profes- specialists’ performance in a company is 3.84, and
sional training of occupational safety and health it is higher than the grade for cooperation between
specialists. Three questions have lower average occupational safety and health specialists and ex-
grade than the average grades of specific sugges- ternal participants from occupational safety system
tions for improving occupational safety specialists’ (3.76), and both are in the area of a very good grade.
performance, and five questions have higher aver- The average grade of total average grades of specif-
age grades. Only one question has lower grade than ic suggestions (3.76) is lower than the total average
the lower limit of a very good grade, the same as in grade of general suggestions (3.86) for performance
Croatian research, but in Croatia that grade is 2.99. improvement of occupational safety and health spe-
The average grade of all grades for general sug- cialists. The average grade of total average grades
gestions for occupational safety and health special- for suggestions for improving occupational safety
ists’ performance improvement is 3.86 (with stan- and health specialists’ performance (3.81) is insigni-
dard deviation of 0.96 and coefficient of variability ficantly higher than the average grade of all average
of 24.91) and it is placed in the initial area of a very grades of occupational safety and health specialists’
good grade (more than 3.5 and less than 4.00). In performance assessment (3.80) and both are in the
Croatia, the average grade has the same value, with area of a very good grade. Therefore, the average
standard deviation of 0.96 and coefficient of vari- grade of all average grades (grades for performance
ability of 24.91. The span of individual average assessment and grades for suggestions) are in the
grades is from 3.74 up to 3.95. The span of grades area of a very good grade and it is 3.81 with stan-
is lower than in Croatia. The question which relates dard deviation of 0.98 and coefficient of variability
to the suggestion of compulsory chamber organiz- of 25.62. All quoted average grades are of higher

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 technics technologies education management

value in comparison with average grades from ployed experts is higher in larger companies with
Croatian research. more employees and higher level of risk at work.
Number of employed experts does not depend sig-
Conclusion nificantly on the safety condition in a company.
Bearing that in mind, there is evident need to de-
By this empirical research, with fulfilling set velop methods for assessing safety situation in a
tasks and confirming suitability of selected scien- company, particularly in terms of efficiency and
tific research methods, the set aim of the research achieved results of occupational safety, includ-
has been achieved. Current facts on work issues ing the economic factor of occupational safety, so
for occupational safety and health specialists in it could be completelly and correctly valued and
Serbian companies are established, and based on could have an impact on business decisions. The
result analysis of the conducted research, they are results match the results of research in Croatia.
reflected in acceptance or rejection of the set re-
search hypotheses and comparison of results was H3: In all companies that have implemented
made with the results of the research work of inde- occupational safety and health management sys-
pendent occupational safety specialist in Croatia. tem according to an international guideline OH-
SAS 18001, occupational safety and health situ-
H1: In majority of companies in Serbia, in ac- ation is essentially improved as well as activities
cordance with the Law, the employer is obliged to of occupational safety and health specialists. The
have an occupational safety and health specialist. hypothesis is rejected.
The hypothesis is accepted. Occupational health and safety management sys-
In vast majority (58.51%), companies imple- tem has been introduced and certified, according to
ment legal obligation to employ an occupational researchers, in 13.67% of companies according to
health and safety specialist. Also, in vast major- international standard OHSAS 18001, while in Cro-
ity (72.19%) medium-sized companies in Croatia atia the percentage is 6.21%. Among companies that
which are liable to occupational safety specialist introduced OHSAS 18001 standard, vast majority
work organization, in accordance with the Law on (78.23%) has significantly improved occupational
Occupational safety, this legal duty is performed safety situation and activities performed by occupa-
in a way that company employs at least one inde- tional safety and health specialists, while a positive
pendent occupational safety specialist. In line with mark is lacking in 21.77% of respondents. Among
this, it can be concluded that the need and possibil- the companies in Croatia which have introduced
ity for employing occupational safety and health OHSAS 18001 system, the condition of occupation-
specialists is reasonable and the persons will suc- al safety and occupational safety specialists’ work
cessfully perform occupational safety and health have significantly improved in the vast majority
activities with their own expertise and constant (80.95%), but not in all, while such a positive as-
engagement in their company. sessment failed at 19.05% of respondents. Accord-
ing to this, it is evident that it is necessary to engage
H2: The number of hired occupational safety more specialists responsible for occupational safety
and health specialists depends on the number of and health in these companies and to implement
employees, occupational safety situation and the standards consistently in order to achieve positive
level of hazards in that company. The hypothesis effects. Additionally, there is an extremely signifi-
is partially accepted. cant interest (43.26%) of occupational safety and
Model of multiple linear regression analysis, health specialists that are planning to introduce this
based on the results of survey research, shows standard in the company where they work.
that the number of occupational safety and health
specialists in the company statistically depends on H4: Occupational safety and health specialists
two or three independent variables: number of em- only work in the field of occupational safety and
ployees and level of risk at work in the company. health and do not work in other safety areas. The
The correlation is positive, so the number of em- hypothesis is rejected.

Volume 8 / Number 4 / 2013 1845

 technics technologies education management

At only 30.51% of companies, which is statis- earnings and valuating occupational safety as a so-
tically a large minority, occupational safety and cial value by the public and society. The highest
health specialists perform activities only in the average grade among the individual grades eval-
field of occupational safety. Also, the hypothesis uating co-operation of occupational safety and
is rejected in the research in Croatia, where in health specialists (4.17) has cooperation with the
only 7.10% of companies, a large minority, occu- bodies responsible for Labor inspection - occupa-
pational safety specialists perform activities only tional safety. The lowest individual average grades
in the field of occupational safety in their business (3.44) - belong to Evaluation of occupational safe-
practices. Based on this, there is a real need for ty as an economic factor by the entire economic
establishing integral safety as a set of activities for system and Evaluation of perception and value of
occupational safety and health specialists, where occupational safety as a social value by the public
they are real professionals in a company. and society, which beside Cooperation with pro-
fessional associations (3.46) are the only grades
H5: Among occupational safety and health in the area of a good grade. Therefore, the four
specialists, majority of them are specialists with grades are in the area good grades (in Croatia 14).
professional qualifications the field of safety. In On the basis of all stated above, we can give a
Serbia, the hypothesis is accepted, while in very good grade to occupational safety and health
Croatia it is rejected. specialists in the company, as well as to their co-
Experts with professional qualifications in the operation with external participants in occupation-
field of safety make as much as 60.84% (in Croa- al safety system, but the existence of four grades
tia 33.73%) of all occupational safety and health that are below a very good grade show the need
specialists in companies. This is certainly a conse- for further improvement of occupational safety
quence of the existance of educational institutions and health specialists.
specializing in education and scientific activity in
this area - Faculty of Occupational Safety. H7: Occupational safety and health specialists
assess proposals for improving their own work in
H6: Occupational safety and health specialists all aspects with at least a very good grade (mini-
in companies evaluate their own work, in all as- mum 3.5 on a scale from 1 to 5). The hypothesis
pects with at least a very good mark (minimum of is partially accepted.
3.5 on a scale from 1 to 5). The hypothesis is par- The average grade (mean) of all individual
tially accepted, while in Croatia it is rejected. evaluations of proposals for performance improve-
The average grade (mean) of all individual ment of occupational safety and health specialists
evaluations by occupational safety and health spe- is 3.81 (on scale 1-5), which is a very good grade.
cialists is 3.82 (scale 1-5), which is a very good Thereby, the average grade that includes only spe-
grade. The average grade that includes only evalu- cific proposals for improving performance of oc-
ation of performance of occupational safety and cupational safety and health specialists in compa-
health specialists in a company is a very good nies is 3.76, which is a very good grade, and the
grade 3.84, and the average grade that includes average grade that includes only general proposals
only evaluation of performance and collaboration for improving performance of these individuals is
with external participants from the occupational 3.86 - also a very good grade. In Croatian research
safety system is 3.76, also a very good grade. The the average grade (mean) of all individual evalu-
highest average grade between all the grades eval- ations of proposals for improving the work of oc-
uating performance of occupational safety and cupational safety specialists (total of 21 scores) is
health specialists (4.15) has the grade which eval- 3.77 (on scale 1-5), which is a very good grade.
uates the role of these persons in the monitoring The average score that includes only the as-
and analysing data related to work-related injuries sessment of specific proposals for improving the
and occupational diseases. The lowest individual work of occupational safety specialists related to
average grade (3.47) - the only one below 3.5 (a the company is 3.65, which is a very good grade,
good grade) is the one evaluating satisfaction with and the average score that includes only the as-

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 technics technologies education management

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the Internet. The lowest individual average grade 5. Kacian N. Fenomenologija zaštite na radu u sustavu
znanosti. Sigurnost, 1988; 30: p. 3.
(2.99) is given to the proposal for increasing the
number of people responsible for occupational 6. Šokčević S. Zaštita zdravlja i sigurnost na radu.
safety in company. This is the only grade which Zagreb: TIM press, Zbirka propisa s komentarskim
evaluated the proposal with a lower average grade bilješkama, 2006; p. 10.
than the lower limit of a very good grade (3.50).
7. Anđelković B. Razlike i potrebe usaglašavanja poj-
Based on such results of grading proposals for mova i izraza oblasti bezbednosti i zaštite. Svet rada
performance improvement of occupational health 2011; 7(3).
and safety specialists, which have been given by
the specialists themselves, it can be concluded that 8. Regulations of the manner and procedures for esti-
mating risks at work place and environment (Official
they are aware that increase in the number of em-
Gazzette of Republic of Serbia, No. 72/06). 2006.
ployed occupational safety and health specialists
is not the main condition for improving their per- 9. Živković S. Uloga i značaj lica za bezbednost i zdrav-
formance and safety conditions in the company. lje na radu u privrednim društvima u Republici Sr-
Also, they are aware that what is needed primarily biji. Fakultet zaštite na radu, Niš, 2011.
is professional training, acquiring knowledge in 10. Kacian N. Osnove sigurnosti. Zagreb: IPROZ,
the area of occuptional safety management and in- 2000; p. 64.
creasing IT support, with adequate financial com-
pensation for their work. 11. Ivanova JT, Prihodko IV. Теорија организације.
Fakultet zaštite na radu, Niš, 2008.

12. Petersen D. Safety Management: A Human Ap-

proach. Des Plaines, American society of safety
engineers, 2004.

13. Petersen D. Measurement of Safety Performance.

Des Plaines, American society of safety engineers,
2005.

14. Markič M. Menadžment zaštite i zdravlja na radu.

Rad i sigurnost, 1998; 2 (3): 223-242.

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 technics technologies education management

15. Cingula M, Taradi J. Entrepreneurial Social Re-

sponsibility and Business System Security. - In:
International Conference: “Entrepreneurship in
United Europe – Challenges and Opportunities“.
Sunny Beach: Bulgarian Association for Manage-
ment Development and Entrepreneurship, Univer-
sity of National and World Economy: Institute for
Entrepreneurship Development, 2006; 274-287.

16. Живкович С. Управление защитой - интеграция

на будущее. Ульяновск: Ульяновский
государственный университет. 2006.

17. Živković S, Todorović O. Improvements after

introduction of integrated management system
standards. Belgrade: 13. Međunarodna konfer-
encija “Upravljanje kvalitetom i pouzdanošću“
ICDQM-2010, 2010; 147-154.

18. Law on Occupational Safety (N.N. No. 59/96,

94/96, 114/03, 100/04, 86/08, 116/08, 75/09).

19. Law on Occupational Safety and Health (Official

Gazette of Republic of Serbia, no. 101/2005).

Corresponding Author
Snezana Zivkovic,
Faculty of Occupational Safety in Nis,
Republic of Serbia,
E-mail: snezana.zivkovic@znrfak.ni.ac.rs

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 technics technologies education management

Ecological aspects of aluminium usage in

contemporary building industry
Uros Vesic¹, Darija Gajic²
¹ University of Belgrade, Faculty of Architecture, Belgrade, Republic of Serbia,
² University of Banja Luka, Faculty of Architecture and Civil Engineering, Banja Luka, Bosnia and Herzegovina.

Abstract facade blinds and shade blade systems; roll-

ups, shutters, venetian blinds etc.)
Contemporary engineering uses aluminium
– Exterior elements and urban mobile
and its alloys, particulary in the domains of build-
features – (such as: banches, poles, dustbins,
ing envelope; urban exterior and interior. Constant
colonnettes, fences etc.)
augmentation of aluminium usage in global scope
– Interior design – (broad spectrum of
causes aggrandizement of types of products on the
standard and industrial aluminium
free market, thus increasing its global production.
profiles such as: tubes, rectangular tubes,
Due to depletion of natural resources, increase of
L-profiles, T-profiles, flats; furniture
economical price of energy and vital need for cut-
fittings; illumination features etc.) in order
ting global pollution of The Planet, aluminium in-
to take maximal adventage of their positive
dustry of the developed countries focused its efforts
properties and esthetic potentials.
in constant improvements of its’ own technologies
in order to achieve maximum energy efficiency and
Constant augmentation of all kinds of alumini-
environmentaly friendly solutions. In these coun-
um products on the market is the direct response to
tries, recycling process is dominant in comparison
progressive global needs, thus forceing the alumini-
with traditional ore extracting production of alu-
um industry to increase the production, i.e. – to con-
minium. Aluminium products trade reached global
sume more and more raw material, ore and energy.
level, with obvious trend to grow. Serbia tend to
The focus of this paper is the ecological impact
keep up with this ongoing global progress, despite
of production, refinement and usage of aluminium
noumerous economical, technological and environ-
and its alloys in buidling industry, in the matter of:
mental problems and poor results in recycling. This
energy consumption; greenhouse gases emissions;
paper focuses on aluminium, aluminium-related in-
toxic impact on users and the environment; and
dustries and their environmental impact - both on
their recycling potential. Thematically, this paper
global scope and Serbian level.
is devided in two parts. First part is the overview
Key words: aluminium; recycle process; re-
of the global trends in this field, and the second
duction of CO2 and greenhouse gases emissions;
part explores the actual situation in Serbia.
aluminium industry and recycling in Serbia

1. Introduction 2. Global attitude on ecological aspects of

aluminium usage
According to the actual global needs, trends
and architectural demands, contemporary building Aluminium is a metal that is produced by refine-
industry increases the usage of aluminium and its ment of boxite ore which is consisted of 30-50%
alloys, particulary in following domains: of various aluminium coadunations with oxygene
– Building envelope – (such as: facade and hydrogen (with certain amount of silicon, iron,
claddings and systems; thermal-insulated manganese and titanium tinge) [1]. Various techno-
panels and various kinds of corrugated sheet logical processes which are applied in refinement of
metals for roofs and walls; construction boxite lead to derivation of pure alumina (Al2O3).
parts of curtain-wall systems; aluminium Because of the strong chemical connection be-
profile systems for doors and windows; tween aluminium and oxygene, alumina’s melting

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 technics technologies education management

temperature is very high. In order to avoid stan- tices. (Chart 1). Further scope for greater energy ef-
dard melting process that uses enormous quantities ficiency gains also exist in technological processes
of heat and energy, production of pure aluminium other than electrolysis, such as: anode production,
from the alumina is done by electrolysis of mixture alumina refining and primary ingot casting.
of alumnia and liquid electrolyte (cryolite). To get 1
ton of pure aluminium in this way, it has to be spent:
2 tons of alumina, 100 kg of cryolite and over 60
MJ of electric power [1].
Main properties of elementary aluminium are [2]:
– Low specific gravity (2700 kg/m3)
– High corrosion-resistance (when aluminium
gets in touch with the air, a self-protecting
oxyde layer (Al2O3) is formed on the surface)
– Exceptional mellowness and plasticity (very
well forgeable and millable in cold way)
– Low firmness to tension (90-120 Mpa) Chart 1. Energy consumption in the production
of the primary aluminium [3]
In building industry, aluminum is strictly used
as alloy [2]. Molding alloys (so-called ’’silumins’’ Produced aluminium may also be concidered
– alloys of silicon and aluminium) and deform- as an “energy bank”, not only because it can be
able alloys (so-called ’’duraluminium’’ – alloys: recycled infinitely, (as most of the original input
Al+Mn; Al+Mg; Al+Mg+Si) are produced by us- can be recovered again and again every time the
ing various technological processes. By further product is recycled), but because the use of recy-
adaptation of duraluminium, a vast range of prod- cled metal in any aluminium product results in an
ucts is being made: strings, sheet-metals, foils, energy saving of up to 95 per cent over the use of
profiles, facade panels, joints etc. primary metal.

2.1. Energy consumption 2.2. Greenhouse gases (GHG)

The primary aluminium production process is International Aluminium Institute (IAI) seriously
energy-intensive, ergo, it demands huge quantities conciders all aspects of negative impact that alumin-
of energy. In its efforts to make the whole techno- ium industry has on the invironment, particularly in
logical process of aluminium production as energy the domain of smelter gases emissions. IAI makes
efficient as possible, aluminium industry has a long accessable on their official web-site relevant data
tradition of self-improvement throughout decades, that are going to be presented in this chapter [4] .
in order to reduce energy consumption and improve Climate change is now the main environmental
its related environmental performance parameters. issue for the global aluminium industry. The full
International Aluminium Institute (IAI), as an process of manufacturing new stocks of aluminium
authority in the domain of the aluminium produc- is responsible for 1% of the global human-induced
tion worldwide, makes accessable on their official GHG emissions that scientists with the United Na-
web-site (www.world-aluminium.org) relevant data tions’ Intergovernmental Panel on Climate Change
that are going to be presented in this chapter [3]. (IPCC) identify as a cause of global warming. Pri-
Average energy consumption and subsequent mary (new) metal production is responsible for
emissions per ton of new produced aluminium 0.4% and production of the energy required to turn
have been reduced by more than 70% over the past alumina into aluminium makes up a further 0.6%.
hundred years. By 2010, progress is being made to- The main challenge for the aluminium indus-
wards a 10% smelting energy efficiency (compared try lies in the relatively high-energy consumption
to 1990), through improvements in technology and greenhouse gas emissions associated with the
such as hardware, software and operational prac- production of primary aluminium. For example,

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 technics technologies education management

in 2005. the industrial processes (mining, refining, The development in fluoride reductions is best
smelting and casting) of the primary aluminium divided into three generations as follows:
industry were directly responsible for emitting – 1st generation plants 1940-1955 12-15 kg/t
about 30 million tonnes of two perfluorocarbon – 2nd generation plants 1955-1975 2-6 kg/t
compounds (PFCs) - tetrofluormethane (CF4) and – 3rd generation plants 1975-today 0.3-1 kg/t
hexofluormethane (C2F6) – which is equivalent to
pollution of 140 million tonnes of CO2 . Since the fluoride emissions have reduced to
On average, the smelting process produces 1.6 their current levels, vegetation previously affected
tonnes of CO2 per ton of aluminium (from the in plant environments has quickly recovered. Most
consumption of the carbon anodes during the elec- contemporary aluminium smelters are purpousely
trolysis) and the equivalent of an additional ton of surrounded by environmental control zones - nor-
CO2 from PFC emissions. PFCs are potent global mally farmland with plants and vegetation, and the
warming gases as compared to CO2 and have long environment in these zones is closely monitored.
atmospheric lifetimes. For example 1 kg of PFC
(CF4) is equivalent to 6500 kg of CO2. 2.2.2 Polycyclic aromatic hydrocarbons
The aluminium industry implemented a lifecy- (PAHs)
cle analysis (LCA) approach to address the chal-
lenges of climate change, focusing not only on the These substances are emitted during the manu-
energy required to produce aluminium products but facture of anodes for modern “pre-bake” alumin-
also on the energy savings to be made through their ium smelters, and during the electrolytic process
use and reuse. The LCA showed that the majority of itself in the older “Söderberg” type facilities. PAH
energy is consumed in ’’the use phase’’, and that up emissions from Söderberg facilities have been dra-
to 95% of the greenhouse gas emissions (generated matically reduced by the introduction of “dry an-
by the production of the metal from bauxite) can be ode technology” in the process as well as through
saved through the recyclng process. other process improvements and alterations in the
Following data which are presented in chapters raw materials used.
2.2.1, 2.2.2, 2.2.3 and 2.2.4 [5] are accessable on
the official web-site of International Aluminium 2.2.3 Sulphur dioxide
Institute.
This is generated from the sulphur content at
fossil-fueled power stations; steam generation in
2.2.1 Fluorides
alumina plants, ovens in anode plants; and anode
Most smelters nowadays have powerful scrub- consumption in the pots. The remedy is to use low
bing equipment which removes up to 99% of all sulphur fuel and coke if available, and wet scrub-
emissions from the pots, where this material can bers to remove the particles from the air.
then be re-used in the smelting process. As a result,
current average levels of emission to atmosphere 2.2.4 Carbon dioxide (CO2)
are as low as 1kg (or even 0.5kg for the new mod-
ern plants) of fluoride per ton of aluminium – in Carbon dioxide is an unavoidable feature of all
comparison with 3.9 kg per ton in 1974. metal processing that produces metal by electrol-
There are two main types of fluoride emissions: ysis from ores containing oxides. The gas forms
– Emission of inorganic fluorides (a mixture when the carbon in the anode combines with the
of the inorganic fluoride compounds (NaF, oxygen in aluminium oxide during the smelting
AlF3 and Na3AlF6 - as particulates, and HF process. Over the past 10 years the aluminium in-
- as a gas) – that can have a local effect in dustry has reduced its carbon dioxide output by
the area around a smelter around 10 % through the development by using
– Emission of organic perfluorcarbons better production techniques.
(PFCs): tetrafluoromethane (CF4) and
hexafluoroethane (C2F6)

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 technics technologies education management

2.3 Water use tion, the recycling of old scrap has already avoided
over one billion metric tons of CO2 emissions [7].
Significant water resources are required for the Nevertheless, it should be stated that produc-
production of aluminium, especially during the tion of new stocks of aluminium and aluminium
refining and smelting process. Regarding the con- recycling are not competitive branches. Both of
stant need of mankind for the fresh drinkable wa- these are necessary and compatible processes that
ter and the lack of water on the global scope, the should respond to an actual growing need for alu-
aluminium industry is already working on finding minium products.
the way to reduce the water consumption in the in- Recycling of aluminium is, in fact, continu-
dustrial process. IAI member companies have rec- ed aluminium use, as more than a third of all the
ognised that water supply is becoming an increas- aluminium currently produced globally originates
ingly important issue due to climate-change relat- from recycled scrap [7]. It’s a trend which is on the
ed factors – drought, extreme weather, increased increase. The aluminium recycling industry has
temperatures and so on. In 2004 they introduced effectively tripled its output from 5 million tons in
a voluntary objective to strive to reduce the fresh 1980 to over 16 million tons in 2006. During the
water consumption per ton of alumina produced same time primary metal use has grown from 15
and to report annually on their progress towards to 30 million tons [7].
meeting this objective. Efforts to minimise fresh Since the 1880s, when commercial manufac-
water consumption are particularly concentrated ture of aluminium began, it is estimated that over
to the areas where there are limited fresh water re- 700 million tons of aluminium has been produced
sources available, for example in high water stress in the world. About three quarters of that total is
areas. The IAI collects data on fresh water con- still in circulation due to the recycling industry [7].
sumption to track the performance of members’ The aluminium recycling industry recycles all the
facilities. aluminium scrap it can obtain from disposed pro-
ducts and aluminium by-products. Improving the
3. Aluminium recycling as a growing overall recycling rate is an essential element in the
economy pursuit of sustainable development.
According to the European Aluminium Associa-
The aluminium economy is a circular economy.
tion (EAA), Europe currently recycles about 1.9Mt
Aluminium can be recycled again and again with-
of aluminium annually [8]. Average recycling rate in
out any loss of its inherent properties, since its
Europe for the building sector reaches 85%. Howe-
atomic structure is not altered during melting. The
ver, individual countries can perform high recycling
high value of aluminium scrap is a key incentive
rates, while some other countries, achieve less than
and major economic impetus for recycling, inde-
half the regional average. The IAI makes the point
pendent of any legislative or political initiatives to
that recycling activity is influenced by regulation, so
encourage recycling. Aluminium scrap has consid-
that in areas with low levels of regulation (Greece,
erable market value because most of the energy re-
UK, Ireland, eastern Europe, Russia) recycling ra-
quired for the production of primary aluminium is
tios are low, while in tightly regulated countries
embodied in the metal itself and, consequently, in
such as Switzerland, Sweden, Finland and Germa-
the scrap [6]. Therefore, the energy needed to melt
ny, they are very high. In North America, recycling
aluminium scrap is only a fraction of that required
rates for building sectors levels of around 95% [8].
for primary aluminium production. Recycling of
Taking the global view, the automotive and
aluminium products needs only 5% of the energy
aerospace sectors have the highest aluminium re-
needed for primary aluminium production [7].
cycling rates (90-95%) followed by the building/
In addition, recycling of aluminium products
construction industry (80-85%). That these sectors
only emits 5% of the GHG emitted in primary alu-
have a good performance is doubly significant, be-
minium production. Recycling of scrap from used
cause between them the automotive and construc-
products („old scrap“) saved over 70 million tons of
tion industries represent about 70% of the global
GHG emissions worldwide in 2005. Since its incep-
market for aluminium [8].

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 technics technologies education management

Table 1. Global product life and recyling rate estimates (Courtesy IAI)
Average Average
Major End Markets Product Life Recycling Rate
Building and Construction 25-50 yrs 80-95%
Transportation-Cars 10-15 yrs 90-95%
Transportation-Aerospace 15-25 yrs 90-95%
Transportation-Marine 15-40 yrs 40-90%
Transp.-Trucks, Buses, Rails 15-30 yrs 50-90%
Engineerng-Machinery 10-30 yrs 30-90%
Engineering-Electrical 10-50 yrs 40-90%
Packaging-Cane 0.1-1.0 yrs 30-90%
Packaging-Foil 0.1-1.0 yrs 20-90%
* Sources: G.Rombach (RW TH Aachen); G. Kirchner-OEA Cannes 2001,
IAI Recycling Model 2001

Aluminium is used for various kinds of pro- 4.1 Aluminium production in Serbia
ducts, but their life cycles differ from one another. The only manufacturer of aluminium products
Product life cycles are typically 12 years in the au- in Serbia is ’’Impol Seval’’, the rolling-mill of alu-
tomotive sector and 30-40 years in building/con- minium from Sevojno; which is withal the biggest
struction and electrical engineering sector. In con- aluminium recycler. ’’Impol Seval’’ used to be one
trast, beverage packaging life cycle lasts as little as of the corporate giants in former Yugoslavia. The
60 days [8]. Quantity of aluminium that remains Aluminium Rolling Mill Sevojno was designed in
in use and quantity of aluminium that goes to the 1969 as a factory for processing aluminium into
recycling process, thus directly depend on the sec- semifinished articles to be used predominantly in
tor of use. Table 1 shows comparative overview the civil engineering industry, and to have an annual
of global product life and recycling rate estimates, output o 35.000 tons of rolled products. The trial
given for the major sectors of aluminium use. production started in 1973, and the regular full-time
production in 1975, and since then it have risen to a
4. Current production and use of aluminium very successful companiy both in serbia and abroad.
in Serbia The product from ’’Impol Seval’’ are present on the
european and american market and worlwide [9].
As still in the process of transition, Serbia still
The growth of the processing outputs is dis-
did not fulfill its maximum capacities in the domain
played in the Chart 2. Red line presents the hot
of production, usage and recycling of aluminium
rolling mill; blue stands for the cold rolling mill,
and its alloys. Existing production capacities in the
and yellow shows the casting process. These are
country do not offer all the necessary assortment of
maximum capacities, but from the Chart 3 it can
products. Noumerous infrastructural and building
be seen that the production declined beyond 1987,
projects which are now in various stages of realisa-
after constant growth in the 70-ties and mid 80-ties.
tion in Serbia (such as: Corridor 10, Railway cor-
The company transfered ino private property
ridor 10, Pipeline ’’South streem’’, Belgrade city
in 2002. From that moment on, the production in-
rail, Belgrade Metro system, skyscrapers in New
creased up to 65.000 tons in 2007.
Belgrade etc.) will certainly increase the need for
Permanent investments in the modernization
proper aluminium products of all kind in the near
of the existing equipment and the introduction of
future. If domestic production couldn’t be able to
the up-to-date technological processes and proce-
satisfy this need, Serbia will have to spend enor-
dures have resulted in a significant reduction of
mous amount for the equivalent import.
the environment and the working space pollutions.
Besides, all waste water and emulsion resulting
from the technological processes are purified in
the Waste Water Purification Plant [11].

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 technics technologies education management

Serbian Republic institute for statistics made

a table with data concernig quntities of industrial
products made of recycled metal scrap in Serbia, in
period 2004 – 2008 (Table 2) [12].
First thing that should be noticed from the Table
2 is the fact that Serbia recycles iron and nonalloyed
steel about a hundered times more than it recycles
aluminium and its alloys. Furthermore, production
of recycled metals products was increasing until
2008 (the year of the global econimic crisis begin-
Chart 2 [10]. The development of ’’Impal ing) when production significantly declined.
Seval’’ production capacities The impact of the global economic crisis is also
evident in the field of recyclation. Former compa-
ny ’’Matroz’’ from Sremska Mitrovica was sold in
2009 to a recycling company ’’Industrikum’’, who
announced 75 milion euro investment in the new
plant for aluminium recycling. The starting capacity
of this plant is planned to be 70.000 tons, and the
full capacitiy (after the second phase of building is
complete) will reach 150.000 tons of recycled alu-
minium [13]. Though local governmet was very in-
Chart 3 [10]. Production per year (from 1973 to
terested in realisation of this project that would turn
2007)
Sremska Mitrovica into a regional centre of alumin-
ium recycling [14], nothing was done so far, due to
5. Aluminium recycling in Serbia the lack of money caused by global economic crisis.
Serbian economy, government and society are
still making first steps towards establishing sus- 6. Conclusion
tainable recycling in Serbia, although recycling
business is nowadays considered as one of the Generaly speaking, future economical develop-
most profitable sectors whose impact and signifi- ment in the world is closely connected to building
cance will grow in the future. Since the global eco- sector, thus increasing the global need for alumini-
nomic crisis hit the Serbian economy, the concepts um products on the market. Aluminium industry, as
of recycling, energy efficiency and environmental a growing buisness that became aware of its’ nega-
care came into focus of debate how to improve re- tive impact on environment, is giving a great effort
source management in Serbia. to put its own technology, GHG emissions and pro-
There are 179 companies that are registered for duction of other by-products, energy consumption
collecting and recycling nonferrous metal scrap in and desirable development on the ecologically sus-
Serbia. Among the biggest are: ’’Impol Seval’’ roll- tainable level. Recycling of aluminium worldwide
ing mill from Sevojno, company ’’034’’ from Kra- has already imposed as a complemetary process to
gujevac, ’’RTB Bor grupa’’ from Bor and ’’Copper standard ore-extraction aluminium production, in
rolling mill’’ also from Sevojno. order to satisfy both market demands for aluminum

Table 2. Industrial products from recycled metal scrap (in tons)

Industrial products from
2004 2005 2006 2007 2008
recycled metal scrap (in tons)
Iron and common steel 107 180 153 346 197 625 261 115 205 954
Alloy steel 1 249 643 7 - -
Aluminium and its alloys 988 1 691 2 031 3 660 1 882
*Annotation: Only these three categoties were taken from the original table

1854 Volume 8 / Number 4 / 2013

 technics technologies education management

products and need for environmental preservation. 11. Ekologija. (n.d.). Retrieved August, 24, 2012. from
Share of recycled aluminium in total aluminium http://www.seval.rs/ecology-Ekologija. 2012.
production is ascending, which is a promising trend 12. Република Србија Републички завод за
towards sustainable development. статистику (2010). Индустријски производи
Serbia has a good tradition in aluminium pro- од рециклираног отпада. Retrieved May, 6, 2010.
duction. On the other side, aluminium recycle in from http://webrzs.stat.gov.rs/axd/drugastrana.php?
Serbia is still on the low level. The actual global Sifra=0010&izbor=odel&tab=444. 2010.
economic crisis and governmental efforts in im- 13. Uskoro fabrika za reciklažu aluminijuma. (n.d.)
plementing EU standards in Serbia are the oppor- Retrieved August, 24, 2012. from http://www.glas-
tunity to establish a good practice of aluminium javnosti.rs/clanak/srbija/glas-javnosti-01-03-2010/
recycling, as an intergral part of aluminium use. uskoro-fabrika-za-reciklazu-aluminijuma. 2012.

14. Još bez prerade aluminijuma? (n.d.). Retrieved

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Corresponding Author
2. Тrifunović P, Zeković M, Đukanović N. Rudarski Uros Vesic,
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Beogradu, Katedra za rudarske radove i izradu po- Faculty of Architecture,
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from http://www.world-aluminium.org/Sustainability/
Environmental+Issues/Smelter+emissions. 2010.

6. Aluminium in recycling: a profitable business activ-

ity! (n.d.) Retrieved August, 18, 2012. from http://
www.alueurope.eu/key-topics/recycling/. 2012.

7. Recycling (n.d.) Retrieved May, 16, 2010. from http://

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8. Millbank P. (2004, September 1). Aluminium recy-

cling vital to global supply chain. Retrieved May, 16,
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9. Istorija Valjaonice aluminijuma Sevojno. (n.d.). Re-

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Volume 8 / Number 4 / 2013 1855

 technics technologies education management

Research of economic efficiency of

innovations in the Republic of Serbia
Zivota Radosavljevic1, Dragana Radosavljevic1, Milan Radosavljevic2, Maja Andjelkovic1, Edita Kastratovic3
1
Faculty for Education of the Executives, Novi Sad, Serbia,
2
Faculty for strategic and operational management, Belgrade, Serbia,
3
College of business economy and entrepreneurship, Belgrade, Serbia.

Abstract Developed countries, and successful compa-

Successful companies and developed countries nies in innovation see the main factor in achiev-
allocate huge funds for research and development ing competitive advantage and profitability. They
recognizing that innovations is a major factor in allocate huge funds for the introduction of new
achieving a competitive advantage and profitability. technologies, new organizational solutions, and
Innovation is the most important factor for social designing new production and business processes
and economic development. The aim of this paper in all aspects of the organization. Today science
is to highlight the economics of innovations in Ser- parks, cities of mind, strong scientific research de-
bia and present the main issues and alternatives i.e. partments are established and founded, which are
possible improvements. The situation in terms of associated with research institutes and universities
innovations and their economic efficiency is similar to work together on research and development of
in other countries in transition. new products and services, processes, etc.
Key words: innovation, research, economic, Most countries in transition accepted practice
innovators, competitive advantage, enterprises. of developed market countries when it comes to
innovation.
However, Serbia has largely ignored the devel-
Introduction
opmental factors, especially science and education
Every innovation in the foreground highlights in each country that represents the major impetus
its economic value, i.e. how it affects the profit- for the initiation of economic and social activities.
ability of the company that introduced it, which is Consequently, innovations activities in the Serbian
natural, because if there is no financial interest in economy are marginalized to the extent that they
its introduction, innovation will remain an idea, or represent a limiting factor for further progress. In-
project. Thus, the economic dimension of innova- novation activities in Serbia are in many respects
tion has a primary role, which means that some controversial, partially active and organized and as
innovation can revitalize itself, if and when cus- such are used to create competitive advantage and
tomers accept it and assess that the performance greater profitability. Practice shows that most in-
of new products or services are better i.e. more ac- novations are the result of enthusiastic individuals,
ceptable than the current products. and no organized and systematic approach in carry-
Bearing this in mind, every company needs to test ing out this complex activity, which raises numer-
customer reactions to changes in products and ser- ous issues in this area.
vices, and why is it necessary to constantly research
the market and its demands. Relationship marketing
1. The structure of total income, financial
is a concept that implicates a long-lasting relation
aid, costs and other parameters of the
based on mutual interests of companies and custom-
business performance of enterprises in
ers, in such a way that both sides (seller and buyer)
Serbia based on the intensity of innovation
are focused on common objectives [1]. Thanks to
information technology, the companies in 2010 col- 1.1. The structure of total income
lected more customer information than in all previ-
ous years together, in order to innovate the real things Total income of businesses i.e. its structure ac-
and done the right things the right way [2]. cording to various parameters, shows where they

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come from and where the funds go and what is the services that are new on the market and 3% of new
economic efficiency in resource utilization. Balances products and services that are new from the stand-
are much more than economic indicators, as shown point of 7 companies %. It is clear that, according to
by the technical and the social side of the company. It Schumpeter’s definition, true innovation in Serbian
is shown that companies that innovate, as a rule have companies are worth about 3%, which is negligible
a greater business success, that life span of products compared to the current trends in this regard.
and services is short and that buyers and consum-
ers have more choices when it comes to products 1.2. The structure of financial assistance to
and services. Thus, the intensity of innovation often innovators in the Republic of Serbia in
chooses a lifestyle and philosophy of life and work. period 2008-2010
The innovative companies are living with permanent
changes and following the syntagm that “everything In this context, it should also specify the struc-
is changeable, but only the changes are permanent.” ture of the financial aid i.e. funding of innovators
It is evident that companies in Serbia the most in this period. According to the data, the structure
of the revenue realize from the sale of products of financial assistance to innovators in percentage
and services that have not been innovated. In the is given on the following illustration (Figure 2): [3]
period 2008-2010, that percentage accounted for
about 53% for non-innovated, 35% of the negli-
gibly changed products. It is clear that the Serbian
businesses are oriented to profit from new products
and services because nearly 90% of its revenue is
realized from non-innovative or negligible inno-
vative products and services. It is shown that such
participation of non-innovative products in the total
income of Serbian companies is a limiting factor
for further development and improvement. Figure 2. The structure of financial assistance
When it comes to income from innovations that to innovators in the Republic of Serbia in period
are new to the business entity who has applied them, 2008-2010
this percentage was 7%, and revenue from innova-
tions in products and services that appear for the From the previous illustrations is evident that
first time in the market amounted to 4% [3], which the inventors used the financial support by the lo-
can be seen from the following graphic (Figure 1): cal authorities of around 29%, the support of the
Government of the Republic of Serbia through
funds 82%, support from the EU about 11%. The
government has encouraged innovation activities
through the allocation and financing of certain
innovative activities, or the exemption of certain
types of innovators taxes, granting of subsidized
loans, or issuing bank and other guarantees. It is
Figure 1. Revenue structure of business entities evident that the economic entities in the Republic
in R. Serbia in relation to the level of innovation of Serbia are not funded by innovation activities,
2008-2010 which usually explains the lack of funds.
In the period 2008-2010 Serbian companies
If the above effects are compared to a share of that have innovated in products and (or) services,
revenue from innovations in the total income of i.e. processes, organization and marketing, placed
the innovators in the period 2006-2008, it can be those products mostly at the local i.e. regional
concluded that the revenue from non-innovative market, while the lowest number was placed in the
products in this period was higher and amounted EU countries or in another states, as can be seen
to 90% of revenues from product innovations and from the following table 1: [3]

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Table 1.
Innovators in product Innovators in the marketing
Markets
and process % and organization %
Local-regional market 31.5 34.6
Domestic market 25.1 27.3
EU and EFTA countries 13.0 12.9
Placement in other countries 11.1 10.8

It is evident that the EU and EFTA markets are largely given in their acts, that innovators have a
difficult for Serbian innovators to access as more fixed salary and is not individually or collectively
than 56% of innovated products and services sold rewarded for innovation, had significant contribu-
on the local or regional and national market, which tion because it is supposedly their regular job.
is the best barometer of the quality of innovations The structure of expenditure on innovation
and business innovation provided by Serbian in- activities in period 2006-2008 were: for the pur-
novators. chase of machinery, equipment and software,
about 44%, for the internal activities of scientific
1.3. The structure of expenditures in relation research about 6%, and for external research and
to innovation activities development some 3%, and for education and
training about 32%, etc.
Innovative organizations have financed the fi- It is clear that innovation activities in period
nance costs that have occurred on innovation ac- 2008-2010 were more dynamic, meaning there is
tivities such as: the purchase of machinery, equip- a willingness to extract the innovations and that
ment and software in the amount of 75%, the ac- the economic entities in the last two year separated
tivity of internal research and development 14%, more than in period 2006-2008. It should be borne
for the purchase of other forms of knowledge and in mind that the last analyzed period was followed
6% and the expenses for external research and de- by a big financial crisis, lack of liquidity and re-
velopment amounting to 5% from received fund- duced economic activities in the country.
ing, as can be seen in the following illustration
(Figure 3): 1.4. The structure of partnership between
innovators
Partnerships in each, particularly in innovative
activities produce a greater effect than the sum of
individual results, which is natural, because the
exchange of ideas gives a greater synergistic ef-
fect of innovation. When it comes to partners in
Serbia, with which innovators cooperated in the
Figure 3. The structure of expenditures in relation field of developing innovations, it is shown that
to innovations in the Republic of Serbia in period cooperation took place with businesses within the
2008-2010 group and economic activity with 68%, with sup-
pliers of equipment, machines and software in ap-
It is evident that one-quarter of expenses re- proximately 80%, with customers, clients or 72%,
late to activities in relation to research or personal competition and business partners 58%, consul-
expenses and rewards for researchers and inno- tants, agencies and other professionals to 59%,
vators, i.e. about 14% to the internal study. This colleges and higher educational institutions and
percentage is negligible and does not affect the de- 56% with the state i.e. public research institutes
velopment and stimulating of innovations. The at- and other public research centers, 43%. Partner-
titude of some innovative organization, which was ship with the aim to develop innovative activities

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in Serbia in the period 2008-2010 can be illustrat- number was constantly decreasing since 2005, so
ed as follows (Figure 4): in 2007 there were 25 research development units
Based on these illustrations, it is evident that within enterprises and institutions, which is two
the innovators the greatest cooperation on devel- and a half times less than what has existed in 1968.
opment of innovations had with vendors and sup-
pliers of equipment, machinery and software, as 2. The most significant effects of introduced
expected, given the need to get through the techni- technological innovations
cal capacity to create the conditions for dynamic
innovation activity, but also for suppliers of new Each introduction of some innovations is aimed
technologies to be able to participate in training at achieving specific effects, and utility. The effects
and innovation. In second place is the cooperation can be expressed in different ways and through
with customers and consumers, especially when it various elements of business organization. In the
comes to new product, or its functional modifica- period 2008-2010, in the Republic of Serbia, the
tion, or process and its redesign. This means that largest effect of introduced technological innova-
in Serbian companies the view of the importance tion is manifested in the improvement of quality
of markets and the need for consumer involve- of products and services with around 30%. This
ment in design and construction of a new product effect in 2006-2008 was evaluated with 42% by
is becoming more prevalent. the innovators, which means this effect declined
in 2010 to 2008 by almost 30%. [4]
Second place according to the effects of intro-
ducing innovation takes increasing the range of
products and services from 24%, which had a pos-
itive impact on the possibility of wider choice of
products and services. However, it is shown that in
the period 2006 - 2008 this effect was 33%, which
means that the impact of innovation on increasing
Figure 4. Important partners with which the
range of products and services in 2010 decreased
business entities have entered into cooperation
compared to the previous period by 27%.
agreements on innovations
The smallest effect of the introduction of tech-
nological innovation has been made in reducing
It is clear that innovators have a minimum co-
the cost of materials and energy per unit of prod-
operation with colleges and high school institu-
uct by 11%. Here is also noted reduced effect in
tions, which should be at the top of this coopera-
2010 compared to 2008 because the effect of re-
tion. This low level of collaboration of innovators
ducing the cost of materials and energy per unit
with higher educational institutions can be ex-
of output this year was 19%. The effect of reduc-
plained by the fact that universities are not enough
ing the harmful impact on the environment was
research-oriented and therefore cannot provide the
14%, whereas in the previous period analyzed
level of scientific and technical support required
was below 3%. This shows that the introduction
that would provide benefits from innovative or-
of innovations in Serbian companies increase the
ganizations. This also applies to state research in-
responsibility of protecting the environment and
stitutes, with which innovators have the worst co-
that it is increasingly becoming a socially respon-
operation, mainly due to inadequate solutions and
sible for ensuring sustainable economic and social
evaluation of scientific research, and financing it.
development.
Innovation activities have slowed largely due
Achieving of the above mentioned effects were
to the suspension or reduction of research and
different in small, medium and large organizations,
development units, which were composed of in-
suggesting that organization size has a significant
dividual companies, either as independent legal
impact on the achieved effects. According to the
entities, or as research units without legal person-
data, the greatest effect in improving the quality of
ality. According to the FBS data from 2009, this
products and services were made by big compa-

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nies with about 42%, followed by medium-sized cess that occurs in the mental construction of pos-
companies with 31% of small businesses and en- sible solutions or ideas embodied.[5]
trepreneurs from around 27%. So, as the company In the above should be borne in mind that inven-
is bigger, it shows a greater ability to improve the tion and innovation have something in common, i.e.
quality of products and services. that occur in the human brain and that man first de-
When it comes to innovation that increases the sign what will work, and then approach the realiza-
range of products and services, both large and me- tion of its ideas, or ideas. They have the same thought
dium sized companies with 30% gave the largest process and stages, namely: the preparatory phase,
contribution to the gross fixed effects, while small the phase of incubation, illumination and verifica-
companies are involved in this increase with 22%. tion at the end. Thus, both are the result of creative
Technological innovations that have had the potential that a man dispose of and which are pecu-
greatest effect on the replacement of obsolete prod- liar to man, as the only reasonable and conscious liv-
ucts or processes are coming from large companies ing being. Therefore, Nikola Tesla said, “Each was
with about 27%, followed by medium with 21% my invention was an image, what I had first con-
and from small to 19%. Slightly different situation ceived it in my mind. When I wanted to change the
is when it comes to technological innovations relat- way it works, it again had to be settled in my head,
ing to increasing the flexibility of products and ser-
and as such transferred to the new product.”
vices, where the greatest effect gave big companies However, invention and innovation are different
with 24%, then 18% of small and medium enter- in the fact that innovation is much more complex
prises at the end of 15%. Accordingly, only small than invention, and the fact there are differences in
businesses in the area to increase the flexibility ofthe formation stage of innovation. In other words,
products and services have a greater effect in rela- because of its complexity, many inventions have
tion to large and medium sized enterprises, which remained at the level of ideas and never were ap-
is consistent with the presence of the characteristics
plied in practice. Thus, the invention can marginal-
of these companies that they are more flexible and ize the economic and social dimension, but inno-
tougher than medium and small ones. vation must to emphasize these very characteristics
Medium compared to large enterprises are of the product or service. Every innovation that is
slightly more effective in introducing technologi- not accept by the purchasers or consumers, above
cal innovations in increasing the range of prod- all, cannot get a passing grade and as such remains
ucts and services (29.7% : 29.6%), and regarding outside of its application, which means that custom-
increasing production capacity to produce goods ers have a decisive role and impact of converting
and services where the effectiveness of medium- inventions into innovations.
sized enterprises is 23.8%, with a large, 22.9%. On innovation activities in Serbia, a significant
influence had two groups of factors i.e. forces: (1)
3. Factors that showed a negative impact factors that have a positive impact on innovation
on the economic efficiency of innovations activities, and (2) factors that have a negative im-
in the republic of Serbia pact on the dynamics of innovation. These factors
should be considered as a dynamic category, and
Each and consequently innovation activity those that are variable, but also from the point that
takes place in a business, cultural and technologi- the same factors affect different innovative activi-
cal environment, which can be favorable or un- ties and overall business performance. The most
favorable for innovators, as conscious and rea- significant negative factors that have demonstrat-
sonable beings. Thus, innovation has its source ed the greatest impact on innovation activities in
in the invention, as “the process of creation and Serbia were provided in this study.
retrieval, and general inventive imagination of The greatest negative influences have eco-
the act, which creates a new concept, or idea of​​ nomic and production factors. The economic fac-
performing certain tasks or improving structures, tors include inadequate financial support from the
processes, or phenomena. From the invention, the state, lack of own resources, low effective demand
innovation occurs as the result of the research pro- for new goods, the high cost of innovation, high

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economic risk and long term viability of innovated namely, lack of own funds and not the unwilling-
products, processes, organizational solutions, or ness of the state to such a situation and the response
marketing models. measures of fiscal policy in the sphere of innovation
Among the production factors that exert a neg- activity. Appropriate measures and mechanisms re-
ative impact on innovation is the lack of highly lieved of innovative organizations, able to reduce
qualified experts, the lack of information about direct costs and investments. This is more so be-
new technologies, lack of information on markets, cause it shows that investment in innovation in the
marketing, enterprise skepticism towards innova- long term are worthwhile.
tion, the impossibility of establishing partnerships Within this factor, the greatest negative impact
with other companies and research organizations, on innovation activities in this period was ex-
the lack of legislation, or its over-standardization. pressed by a factor of lack of partners and partner-
These factors are present more or less in other ships in general, with 11%, then the lack of profes-
transition countries, the only difference in the in- sional staff by 6%, the lack of information on mar-
tensity of effect of certain factors.[6] kets and 4% lack of information on technologies
Bearing in mind the fact that the Republic of 3%. So, if sufficient funds would be provided, a
Serbia is a country in transition, it is shown that all problem in creating innovations would be solved,
the factors that adversely affect innovation activi- because there are enough skilled people to create
ties can be divided into three groups (1) economic new products, processes, and provide new solu-
factors, (2) factors of competence, (3) market fac- tions to managerial and organizational spheres.
tors. Each of these groups has different subgroups The disadvantage of market factors on innova-
that exhibit a negative impact on innovation, tion activities in Serbia is manifested through the
which can be seen in the following table 2: uncertain demand for new products and the risk
From the table it can be concluded that the most that innovation alone carries 14% of the position
important factors for the development of innovative that the economic entity has a market, with 15%.
activities are economic factors i.e. in Serbia in the This factor is understandable, especially in condi-
period 2008-2010 they’ve had the greatest nega- tions of strong competition, as the final word on an
tive impact on development and innovation. In this innovation does not provide the entity that created
group the largest negative impact is manifested in the same, but the customer or market. If the market
the lack of own financial resources by 36%, then does not accept the innovated product, or service,
the high costs of direct investment by 30% and lack it has no practical value and thus no value at all.[7]
of external funding, primarily from state funds with The current situation is exacerbated by the
favorable terms of financing in the amount of 26%. union of the two ministries that have the greatest
So, Serbia is under “attack” of two extremely un- impact on the development of science and tech-
favorable factor in terms of innovative activities, nology, i.e. innovation in 2011: the Ministry of

Table 2.
Negative factors - Influential forces that affect innovations %
1. Economic factors
- Lack of financial resources in a business entity 36
- Lack of external funds (out of business entity) 26
- High costs of direct investments 30
2. Competencies:
- Lack of skilled personnel 6
- Lack of information on technologies 3
- Lack of information on markets 4
- Lack of partnerships 11
3. Market factors
- Market dominated by the positioned business entity 15
- Uncertain demand and investment risk of innovative products 14

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Education with the Ministry of Science and Tech- 4. The motivation of innovators in the
nology. The above union sought to rationalize the business systems in Serbia
state administration, but at the same time created
It has already been stated that in the Serbian in-
grossly ministry where science and technology has
novative practice there is a gap between competence
become a secondary activity. Scientific research
and the number of innovations, i.e. that regions that
funds are significantly reduced, and funds that
have a higher percentage of competent people in
are planned for these activities are used for other
the whole population does not show a number of
purposes, in order to solve daily problems. In this
innovations. The main or one of the main reasons
context is the reduction of scientific and technical
for such state is inadequate or improper motivation,
journals, and the reason is alleged lack of funds.
innovators and other factors as a function of innova-
Current scientific research and innovation centers
tion activities. Therefore, competence itself does not
are closing due to the difficult economic situation,
increase the number of innovations, it is necessary to
as well as centers of innovation in business organi-
introduce additional mechanisms, which is adequate
zations. Thus, scientific and innovation infrastruc-
to motivate innovators to use their intellectual and
ture in Serbia is largely destroyed, i.e. it is not at
creative potential in performing tasks and duties. In
the level that can be in the function of increasing
the above should keep in mind the statement of P.
business performance of the economy and society.
Davies, “The motivation is brain food.”
It would be interesting to investigate to what ex-
If the above is not achieved, competency will
tent the Serbian legislation affects innovation ac-
only be a possibility and opportunity. To the above
tivities. As for the transition countries, it is evident
well-known researchers warn in this field, Sousa and
that it is often said that the issue of innovative leg-
Hendriks with their statement, [9] “Creativity, team-
islation has not been solved in a satisfactory man-
work, knowledge sharing and other development
ner and that innovators are insufficiently protected,
processes, depend largely on the motivation of work-
and that in this area there is under-standardization.
ers’ knowledge. Lack of constant motivation in orga-
However, a problem that is increasingly showing
nizations that are not sufficiently oriented knowledge
in the innovation practice is over- standardization
is often considered the main culprit of failed initia-
of intellectual property protection, which is now
tives and programs of change and innovation. It turns
present at the global level. It is shown that the cur-
out that the current general concepts and programs
rent system protects the legitimate rights of inven-
of work motivation are not applicable to workers of
tors, but also stifles innovation, partnership and
knowledge, or that the same models of motivation
cooperation of not only different national, but also
applied tentatively to “the manual” and intellectual
corporate systems and entities. In this context, the
workers, although it is clear that they have different
U.S. has already announced a reform of the patent
motives that should be applied to different motiva-
system, in order that the Patent and Trademark Of-
tional techniques. Specifically, knowledge workers
fice (PTO) to provide financial resources needed
have increased needs for autonomy, their careers are
to improve the quality of patents and that the pro-
established externally in relation to the organization,
cess is open to citizens.[8]
but they are loyal, especially to the network of their
In analyzing contemporary business concepts
colleagues and their profession, and their organiza-
regarding the creation and implementation of in-
tion. Accordingly, one of the reasons why knowledge
novation, it should be noted that in the Serbian
workers do not achieve a higher level of innovation
companies at the beginning of the third millen-
is insufficient or poor motivation.
nium, remained relatively sterile atmosphere and
lack of focus on increasing market competitive-
ness. Insufficient managerization of Serbian econ- 4.1. Models of motivating innovators in
omy has prevented the rational actions of econom- Serbian companies
ic entities. In these circumstances, the inventors
It has already been stated, that inadequate moti-
and the subjects of scientific research could not be
vation of innovators is one of the key elements that
involved in a serious sphere of economic activity.
exhibit a negative impact on innovation activities

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in Serbia, which is natural, because the system of Third place in motivating employees and inno-
motivation and the economic efficiency there is a vators took the techniques of rotating personnel, as
high level of correlation. In other words, a qual- well as intangible stimulus that have increased em-
ity system, i.e. a model for motivating the score ployee satisfaction, and staff time and willingness
should have a satisfactory business performance. to invest effort in creating ideas and their imple-
Under the motivation to understand the internal mentation. This result is surprising, considering that
factors that consolidate the intellectual and physi- the rotation of personnel as a motivation technique
cal energy innovators, and initiate and organize is not sufficiently developed in Serbian companies,
individual activities directed behavior, and to set and regarding the management of human resources
the direction, intensity and duration.” [10] How- is more recent than the financial incentives.
ever, companies that in the period 2008-2010 used The fourth place takes so-called non-financial
some of stimulating techniques, achieved better incentives, which are reflected in their participa-
innovation activity and better effects, compared tion in decision making, creating good interper-
to non-motivated employees. Given the different sonal relationships, improving working condi-
methods i.e. techniques to motivate, in innovation tions, job security and permanence, and so on.
practice in Serbia following methods of stimula- Innovators in 26.9% of cases use this technique.
tion apply (table 3): [3] Non-financial mechanisms to motivate in such a
It is evident that the innovators in stimulat- low percentage of respondents are understandable
ing physical and creative energy and effort used if one bears in mind the great economic crisis that
to train employees to develop new ideas and cre- puts the spotlight on financial incentives, to pro-
ativity in the amount of 33%, which is natural, vide basic human needs.
considering that the Serbian society existed for a It is surprising that the techniques of creative
long time, so to say the “sterile conditions” and production, primarily in the Serbian brainstorm-
bureaucratic organization, which not only failed ing techniques have found innovative practices
to encourage ideas and creativity, but prevented it, and their application in about 14% of cases. How-
and often penalized. The training seeks to break ever, with the positive assessment should be noted
the “loops” that employees have in their heads, that this technique is applied to foreign companies
and training more employees to use their creative operating in Serbia and that is mainly is used clas-
potential in performing the tasks i.e. to innovate. sical technique of brainstorming and gathering
Another incentive technique to motivate the ideas. The analysis shows there were no anony-
innovators is of a material nature, i.e. financial mous brainstorming techniques, didactic, de-
incentives (28.6%), which are realized through in- structive-constructive brainstorming and creative
creased wages innovator, cash prizes, etc. that is elaboration techniques, which have significantly
understandable if one bears in mind that financial greater creative potential. We should expect in the
incentives make the biggest impact in the crisis future other Serbian companies to adopt this way
that exists in Serbia even today. The problem in of creating ideas, especially since it is not expen-
this way of motivating is that it usually provides sive and it is easy to use.
incentives for employees in a linear fashion as a Rosabeth Moss-Kanter, a well-known manage-
whole, i.e. that there are no special rules and in- ment expert, was one of the first to explore the re-
centive mechanisms for innovators. lationships and differences between the functional
Table 3.
Stimulation techniques Innovators in % Non-innovators in %
Brainstorming sessions 14.3 1.5
More functional work teams 21.4 3.1
Rotation of staff 28.5 4.5
Financial incentives to employees 28.6 3.8
Non-financial incentives to employees 26.9 4.7
Training employees to develop new ideas and creativity 33.1 4.3

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teams and their success in the field of innovation ent peoples, cultures, religions, customs, mentali-
and creation. Her results showed that the new com- ty, etc. or to be different, as more natural condition
pany deliberately used heterogeneous teams to than uniformity, which often means the death of
solve problems, and they employ more women and any organization i.e. a country and a global level.
“colored” people. Companies engaged in the lower For non-innovators mentioned techniques have
intensity of innovation, had a dominant share of been used less, compared to innovators. It is shown
homogeneous groups and teams. She also record- that non-innovators mostly used non-financial in-
ed that the companies that did not have discrimi- centives, i.e. this technique was applied in 4.7%,
nation on various grounds and sexual harassment which is five times lower compared to the use of
had higher levels of innovation. Recent analysis of this technique by innovators.
40-year old study supported by the Moss-Kanter’s The second place takes t he rotation of staff
concludes that diversity can encourage creativity from 4.5% and the third place with 4.3% of em-
and improve team decision making, and for that to ployee training techniques to develop new ideas
happen it is necessary to develop a culture in which and creativity, and the fourth, financial incentives
ethnocentrism, as a problem more or less all the for employees to 4.7%.
countries in transition will be marginalized.
Thus, different groups have a broader base of 4.2. Negative factors that have demonstrated
experience and perspective from which to ana- significant impact on economic efficiency
lyze and diagnose the problem. Heterogeneous of innovators in Serbia
functional teams, which have different values,
attitudes, educational level, experience, could That incentive system is not suitable for the de-
improve troubleshooting and performance. They velopment of innovation and creation of favorable
are more natural than the homogeneous one-sided innovatio n climate in Serbia, confirms research
and educational teams, which is understandable conducted in late 2011, in which 188 respondents
because the nature function on diversities of flora from companies in different industries, different
and fauna. Heterogeneous groups produce higher sizes and different forms of ownership partici-
quality decisions and had higher productivity than pated. The paper discusses the short explanation,
homogeneous groups. to the question, “Which three of the eight offered
However, the example of Serbian companies elements p revent the introduction of innovation
shows that the use of heterogeneous teams is in the organization. The answers were (1) fear of
much more prevalent in homogeneous or one-sid- failure, (2) bureaucratic management and (3) sub-
ed teams or teams that are formed by the similarity standard system of rewarding employees. Out of
of values ​​and attitudes that individuals have the these respondents, 33% opted for the fear of fail-
traditional ties of friendship and relationships, etc. ure, 28% f or the bureaucratic management, and
Of 183 respondents, 79% of respondents said they 39% for inadequate system of rewarding inven-
would rather work in homogeneous than hetero- tors, as described in the next illustration (figure 5).
geneous groups. Innovative companies in Serbia,
about 74% were those where there are family re-
lationships and a balanced level of expertise. Over
64% of respondents said they are not willing to
work in a variety of groups and teams. According-
ly, contrary to the practice in developed countries,
in Serbia as a negative motivational factor for in-
novation is the uniformity of groups and teams
and the unwillingness to innovate. Indicated im-
pose a need for changing the traditional organiza-
tional culture and behavior and the introduction of
a new system of values ​​and behaviors, especially Figure 5. Causes of the small number of innova-
since globalization is aimed at connecting differ- tions in the Serbian companies in 2011

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In short explanations of some obstacles to in- out of working hours, and if it is created
crease the number of innovations, respondents in- in the workplace and while performing
dicated the following: functional duties, a developer is not
– That employees are often afraid to look entitled to any compensation, despite the
for a better and more efficient way of usefulness of innovation.
doing business and jobs, because if they 2. Employees who have improved an action
don’t achieve success, may be sanctioned, and where was the exact quantification of
and often get fired also. In other words, the gain, the rewards are absent and this
employees are afraid to innovate, and prefer justified the lack of financial resources.
to perform the duties usual way, but they are Many, in these circumstances is not
willing to innovate. In this context, the result explanation, why are not rewarded, which
showed that the Serbian companies in nearly in itself speaks about the relationship
90% of cases makes revenue from non- between the organization’s innovators.
innovative products. It is shown that the fear It is clear that in such circumstances,
of mistakes is something that is overcome, the inventors are not willing to use their
and that organizations need to worry when mental energy on creating a better way of
there are no defects. Č. Švob said, “When doing their job, or discharge of duties.
my workers do not make mistakes, I am
concerned.” Of course, the error in this Given the lack of realized innovation activities,
context is something that is good, especially companies should reconsider Serbia motivation
if they appear in the search for efficient and techniques, so that the first plan put financial in-
effective ways of achieving goals. centives or financial reward through the plate, es-
– Bureaucratic management and handling is a pecially in current times of crisis. Along with the
major problem in Serbian companies, given growth of economic activity and living standards
the under-representation of professional should be applied and non-stimulants in a much
management. Bureaucrats seek to act wider range, than it does today.
according to their orders and instructions, with
any deviation, even brings the benefit of the 5. The necessity of changes in relation to
employee exhibit problems. Thus, managers imitations
are not willing to support employees in
innovation, and even to stand behind the The problem of innovations is far greater than
error, if it is committed to seeking new and its technical application. It is directly related to
more successful ways of doing things. Deep the invention that follows, and which precedes the
organizational structure, hierarchy and classic emergence of innovations, and by copying the in-
organizational relationships manifested novation that comes after, and which builds, in or-
through determinism, schematism, and red der to improve functional, or other characteristics
tape, prevent innovation rather than as a of innovation. Here there are at least two problems,
function of their incentives. namely (1) to protect innovation and other legal
– The biggest problem in stimulating Serbian and regulatory framework (2) to consider an imita-
companies is a bad system of rewarding tion of an unauthorized act, and often punishable,
inventors consisting of: i.e. immoral act. These views have been present for
1. Over 60% of organizations do not several decades and are the result of stereotypes
have a normative act that regulates that exist in the innovative practices and that should
the system of rewarding inventors. be abandoned, in order to open the opened wider
(2) 80% of entrepreneurs that have scope to imitations for improving innovation.
regulations on the remuneration of the Although imitation is a natural phenomenon
regulated this issue in the traditional way, or occurrence that happens in the natural order,
noting that the prize is awarded to those it has not received proper place in the sphere of
who are innovators and innovations come business, especially when it comes to innovation

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sphere. In fact, everything that exists in the orga- nomic efficiency. In this context, it is necessary to
nizational system is more or less an imitation of change the existing legal institution that treats imi-
what is happening, or used to happen in the ani- tation as theft, but as something that contributes
mal world. In any herd of animals there is a leader to increased business success. In other words, it is
who articulates the functioning of the herd, and necessary to protect the rights of another way to
that usually protects the territory of “intruders,” reward inventors for applied invention, especially
which was the forerunner of leadership that ex- since in the present conditions is difficult to prove
ist in organizational systems. The importance of that someone has the exclusive right to an innova-
leaders in the animal world has been accepted and tion and that pursuant to the above, it shall collect
organizational structures, and are often said, “The a fee for it. It is better to establish a special fund
better herd is the herd of deer led by a lion than a for paying means gained by the innovation effects
herd of lions led by a deer.” and use them to reward those who create the idea
It is shown that children often imitate their or innovation, and imitation too.
parents, that students imitate their teachers, work-
ers imitate their managers, etc., which means that 6. Conclusion
imitation is present in ordinary life that has almost
become an integral part of life and work. Only in Previous research has shown that the economic
the business world the imitation is prohibited, both efficiency of innovation in the Republic of Serbia is
from the regulations that were adopted at the na- very low as a result of lack of innovation activities
tional or global level, and from a moral standpoint. and the general lack of attention that is paid to this
In fact, imitation is often considered forbidden, and phenomenon. This conclusion comes from analysis
impersonators often equated with thieves and ma- of the structure of total revenues, expenses, finan-
nipulators of ideas, and people often end up in court cial aid innovators received, partnership, etc. The
wearing the label of counterfeiters and imitators. fact that Serbian companies most of their total rev-
However, the studies show that imitation is not enue is earned from non-innovative, new products
meaningless repetition or imitation of an innova- or only slightly innovated products in period 2006-
tion, but a smart search for the cause and effect. 2008 and 2008-2010, says that Serbian companies
It turns out that imitation is the primary source are still in the stage of “sterility” and that they are
of progress, even if scientists and inventors often not willing to create and design and implement new
evaluate that progress as unworthy and immoral. products or services, or even to create to organiza-
Examples of successful imitations, McDonalds, tion design, processes, marketing, etc.
which imitated White Castle, Visa, MasterCard The present paper discusses the factors that have
and American Express that borrowed the idea of demonstrated a negative impact on innovation ac-
plastic cards from Diners Club, etc. One of the big- tivities in Serbia. This is not competence but lack
gest trading companies from the store, Wal-Mart of funds and insufficient motivation for innovators
admitted that most of the practical ideas were bor- and innovations. Thus, models of incentives in Ser-
rowed from their predecessors, but then they were bian companies are inadequate; the normative acts
combined and improve in order to increase their that regulate the issue of encouraging innovators
performance. The same situation is with the intro- are made on the ancient principles and not in opera-
duction of quality systems, when U.S. companies tion to encourage innovators. It is evident that the
have transformed the quality control of the func- economic factor exerted a negative impact on in-
tion being performed at the end of the production novation activities, primarily through the reduction
process to the function being performed at the be- of funds to scientific research, reducing the number
ginning i.e. in all parts of the business process.[11] of innovation-development centers in companies,
Accordingly, it is necessary to change existing as well as reducing the number of people in the sci-
stereotypes of imitations and realize that it is not entific institutes and innovative development units.
only necessary, but that is the reality in the contem- In order to increase innovation activities, Serbian
porary world and the momentum that can increase companies must embrace the practice of developed
the value and innovation themselves, i.e. their eco- countries and to paid greater attention to the sphere

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 technics technologies education management

of research and innovation. This is especially true if

we bear in mind that inadequate motivation is one
of the main reasons for lack of innovation activi-
ties. Finally, we must remind you to the conclusion
of Bernard Shaw over a hundred and fifty years
ago, “Imagination is the beginning of creation. You
imagine what you desire, you will what you imagine
and at last you create what you will.”

References
1. Bešić C. Providing customer satisfaction: certain
aspects from Serbian case study, TTEM , 2010; 5.

2. Anderson ET, Simester D. A step by step guide to Smart

business. Harvar Business Review, mart 2011; 99.

3. Indicators of innovative activities in the Republic of

Serbia 2008-2010, Statistical Office of the Republic
of Serbia, Communication , December 30, 2011;
347: 3.

4. The data for the period 2006-2008 were taken from

FBS for 2010.

5. Vučenović V. Champion’s management.Obrazovni

biro, Belgrade, 2004; 92-93.

6. Solovjov VP. Competition in terms of innovative

models of economics development. Centre for Sci-
entific Research and Technical Potential of Histori-
cal Sciences, “G.M. Dobrov”, NAN, Kiev, Ukraine,
2006; 27-31.

7. Radosavljević Ž. Ekonomika trgovine. KUM, Beo-

grad, 2006; 58.

8. Obama B. Ibidem, 107.

9. Paul HJ, Nendriks, Sousa CAA. Motivation for

Knowledge Work“, Encyclopedia of Knowledge
Management, Idea Group Inc, 2006; 657.

10. Barjaktarević-Šiber F. Human Resources Manage-

ment. Golden Marketing, Zagreb, 1999; 503.

11. Shenkar O. Imitation is more valuable than Innova-

tion. Harvard Business Review, April, 2010; 30-31.

Corresponding Autor
Zivota Radosavljevic,
Fakultet za poslovne studije i pravo,
Belgrade,
Republic of Serbia,
E-mail: zivota.radosavljevic@fpsp.edu.rs

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Automatic obtaining of the strut-and-tie

models for RC plane elements
Anka Starcev-Curcin, Andrija Raseta, Zoran Brujic
Department of Civil Engineering and Geodesy, Faculty of Technical Sciences, University of Novi Sad, Novi Sad,
Serbia.

Abstract it cannot be represented with sufficient accuracy by

the theory of elasticity alone [3], [4]. Therefore, the
The paper presents a proposal for the determi-
equivalent truss model, used in the Strut-and-Tie
nation of the Strut-and-Tie models for reinforced
method for replacing the real reinforced concrete
concrete plane members. The Strut-and-Tie meth-
member, receives additional conditions and opens
od replaces the concrete parts of the member (sur-
the problem of ambiguity in modelling, while the
face or volume) with compressed elements, while
engineering experience plays an important role in
the tension elements replace the reinforcement.
determining the specific solutions.
The models can be used for the dimensioning of
the member and/or its parts, particularly in the
areas of a sudden change of static forces and/or 2. Objective of the work
geometric characteristics of the member. For the Each designed structure must satisfy the re-
purpose of analysis, the computer program “ST quirements of capacity, stability, serviceability and
method” has been developed, where the discrete durability. The methods of the theory of structures
topological optimization has been implemented determine the value of static forces and deforma-
for the truss used for the calculation of the stress- tions of loaded structure, needed for dimension-
strain state of the real member. ing the member, i.e. they determine the required
Key words: FEM, optimization, Strut-and-Tie amount of reinforcement in the member sections.
method, truss Technical bending theory covers the dimen-
sioning of the reinforced concrete members in the
1. Introduction cases where all of the static values of the element
The implementation of the Strut-and-Tie meth- axis length are changing gradually, in the so-called
od, as a design method for a part or the entire mem- B-regions, named after the English word beam and
ber, dates from the late 19th century, with the pio- the Bernoulli hypothesis on the linear distribution
neers being Hennebique, Ritter and Mörsch. The of the strains in the section. In the cases of discon-
Strut-and-Tie is a method that approximates the real tinuities that may occur due to sudden changes of
member with the truss system, i.e. the system of the static values (concentrated forces and/or concen-
compressed and tension simple elements. The con- trated moments) or due to sudden changes in the
crete parts of the member (surface or volume) are geometric characteristics of the beam (regions of
replaced by the compressed elements, and the re- reduced height, short elements, frame joints, holes
inforcement is replaced by the tension elements of in the member), the common way of design ends,
the truss system [1], [2]. The layout of the truss ele- and these member parts are referred to as D-re-
ments is determined by the distribution of stresses gions, after the English word discontinuity, Figure
and principal stress trajectories corresponding to 1 (uniformly loaded member).
the results of the theory of elasticity with the idea of
achieving the similar stress state as in the reinforced
concrete element. As the behaviour of the rein-
forced concrete is largely determined by the config-
uration of the load and the reinforcement, in terms
of the layout and the orientation of reinforcing bars, Figure 1. B and D regions

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 technics technologies education management

The boundaries between B and D regions are de- of a gradual removal of less loaded elements, Fig-
termined using the St. Venant’s rules, referring that ure 2. The criteria for removing the elements of the
the local disturbance of the stress field, affected by system can be implemented on the basis of diverse
the concentrated force, support vicinity or abrupt parameters such as stresses, displacements, stiff-
changes in geometry, is lost at a distance approxi- ness [7], deformation energy of the system, etc.
mately equal to the height of the element. D-regions
are practically solved by the designed treatment 4. A proposal for the automatic
based on engineering experience and recommenda- determination of the Strut-and-Tie models
tions, and their exact design confirmation is miss-
ing. This approach can result in poorly designed This paper proposes a discrete optimization pro-
and performed structure. Due to the aforesaid, there cedure that uses a correction of the axial stiffness
is a need for the designed and analysed D-regions, of the simple elements’ cross sections (EA), de-
using simple and rational models, and one of them pending on the character and the intensity of stress,
is the Strut-and-Tie method that provides an insight though without their complete removal. Cross sec-
into the real behaviour of reinforced concrete mem- tional area of individual simple elements of the
ber, the entire one or just its parts. truss system is determined by the expression:
From an economic point of view, the previous-
ly shown manner on the approximation of the real N i , j −1
Ai , j = b i , j ........................... (1)
member with the equivalent truss one allows for re- fd
ducing the design time for the entire reinforced con-
crete member or its part, because the Strut-and Tie where Ni,j-1 is the force in the ith simple ele-
design method that applies the Strut-and-Tie models ment of j-1 iteration, fd is the design strength of
is also simplified, unlike the usual, more complex reinforcement for tension or concrete for pres-
design methods applied in technical regulations. sure according to the axial force character in the
simple element (pressure or tension) and βi is the
3. Working methods reduction coefficient of the reinforcement layout
in the member. Tension elements in the model, ac-
In the paper a discrete topological optimization
cording to the demanded reinforcement direction,
is applied. Reinforced concrete member is mod-
can have values for the β coefficient from 0 to 1.
elled by the corresponding truss system obtained
The adoption of larger values of β coefficient in
by connecting all net nodes of the adopted finite
the analysis can favour certain directions in the
element mesh, i.e. simple elements [5], [6]. An
transmission of tensile forces. The beginning of
example of a discrete topological optimization of
the analysis involves the formation of linear finite
reinforced concrete member is shown in Figure 2.
element mesh with boundary conditions (supports
of nodes in the system) and external load (concen-
trated forces at the nodes of the system), which
model the considered domain. All the finite ele-
ment net nodes are connected by simple elements.
The analysis is performed iteratively. In the zero
iteration all the model elements have the same
mechanical and geometrical characteristics of the
cross sections. In the set model, the axial forces in
the elements are determined. Based on the charac-
ter of the axial forces (compression or tension), the
Figure 2. Discrete topological optimization of correction of the cross-section areas of elements is
the RC member performed according to the formula (1) and then
the appropriate elastic modulus for each element
The determination of the optimal structural (pressure – concrete or tension – steel) is set. In
shape from the initial system configuration consists this manner, the model is formed for the next it-

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eration. For other iterations, a model obtained by 5.1 Example 1

the correction of axial stiffness of the simple el-
ements’ cross section is used, which is obtained The wall member with the overhang loaded
from the character and the intensity of the axial by concentrated forces in the middle of the span
forces in the elements from the previous iteration. and at the end of the overhang is analyzed. Geo-
Monitoring the design convergence is performed metrical characteristics of the member are shown
over the difference value of the stiffness matrix in Figure 3 (E = 31.0GPa, µ = 0.2, dwall = 25cm).
determinant of the system associated with the un-
known displacements of two adjacent iterations.
The control of the completion of the design is de-
fined by the following expression:

(D( K ss ) i / D( K s ) i −1 ) £ 1 ± ε ................. (2)

where D(Kss)i and D(Kss)i-1 are the determinants
of the system stiffness matrix of the connected
members with the unknown displacements in the
ith and i-1 iteration respectively and ε is the differ-
ence factor with the recommended value 10-3.
Previously described discrete topological opti-
mization is implemented in the computer program
“ST method” developed by the authors of this pa-
per. The program allows the automatic obtaining
of the Strut-and-Tie model for plane reinforced Figure 3. The wall member with an overhang
concrete members and their dimensioning.
The computer program “ST method” uses the Finite element mesh of the reinforced concrete
finite element method for structural analysis of member in the “ST method” is shown in Figure 4.
reinforced concrete plane members. For the mod-
eling of the member behavior the linear finite ele-
ments are used. All finite elements are hingedly
connected in the network nodes and have the
following characteristics: they can only accom-
modate axial force, have a constant cross-section,
with a total of four degrees of movement freedom
(two degrees at both ends), and are characterized
by a homogeneous stress state and the relationship
between stress and dilatation is established using
Hooke law for uniaxial stress state.
Figure 4. The wall member with an overhang
5. Numerical analysis – FEM mesh (2D Truss Element – each node is
connected to every node)
The proposed procedure for determining the
Strut-and-Tie model according to the expression
Finite element mesh of reinforced concrete
(1) is applied on the reinforced concrete beams of
member in the commercial program is shown in
different geometry and loading. Analysis of the
Figure 5.
principal stress trajectories according to the theory
Trajectories of principal stresses determined by
of elasticity and topological optimization is per-
the commercial programs are shown in Figure 6.
formed using the commercial software for struc-
tural analysis.

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Topological optimization of the reinforced con-

crete member, which is determined by the com-
mercial program is shown in Figure 8.

Figure 5. The wall member with overhang – FEM

mesh (commercial program – SHELL93 8-Node
Structural Shell – rectangular finite element)
Figure 8. Strut-and-Tie model – FEM (commercial
program – SHELL93 8-Node Structural Shell –
rectangular finite element)

Based on the presented results it can be con-

cluded that the Strut-and-Tie model determined
by the “ST method” (Figure 7) coincides with the
topological optimization shape obtained by the
commercial program (Figure 8).

5.2 Example 2
Figure 6. Trajectories of principal stresses – FEM The wall member with a hole that is loaded by
mesh (commercial program – SHELL93 8-Node the concentrated force is analyzed. Geometrical
Structural Shell – rectangular finite element) characteristics of the member are shown in Figure
9 (E = 31.0GPa, µ = 0.2, dzida = 25cm).
Strut-and-Tie model of the reinforced concrete
member determined by the „ST method“ program
is shown in Figure 7.

Figure 7. Strut-and-Tie model – FEM (2D Truss

Element – each node is connected to every node)
Figure 9. The wall member with a hole

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 technics technologies education management

Finite element mesh of reinforced concrete

member in the “ST method” is shown in Figure 10.

Figure 12. Trajectories of principal stresses – FEM

mesh (commercial program – SHELL93 8-Node
Structural Shell – rectangular finite element)
Figure 10. The wall member with a hole – FEM
mesh (2D Truss Element – each node is connected
to every node)

Finite element mesh of reinforced concrete

member in the commercial program is shown in
Figure 11.

Figure 13. Strut-and-Tie model – FEM (2D Truss

Element – each node is connected to every node)

Figure 11. The wall member with a hole – FEM

mesh (commercial program – SHELL93 8-Node
Structural Shell – rectangular finite element)

Trajectories of principal stresses determined by

the commercial programs are shown in Figure 12.
Strut-and-Tie model of the reinforced concrete Figure 14. Strut-and-Tie model – FEM (commer-
member determined by the „ST metod“ program cial program – SHELL93 8-Node Structural Shell
is swown in Figure 13. – rectangular finite element)
Topological optimization of the reinforced con-
crete member, which is determined by the com- Based on the presented results it can be con-
mercial program is shown in Figure 14. clude that the Strut-and-Tie model determined by
“ST method” (Figure 13) coincides with the topo-
logical optimization shape obtained by commer-
cial program (Figure 14).

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5.4 Example 3
The wall member with a hole in the central
part that is loaded by the concentrated force in the
middle of the span is analyzed. Geometrical char-
acteristics of the member are shown in Figure 15
(E = 31.0GPa, µ = 0.2, dzida = 25cm).

Figure 17. The wall member with a hole in the

central part – FEM mesh (commercial program –
SHELL93 8-Node Structural Shell – rectangular
finite element)

Figure 15. The wall member with a hole in the

central part Figure 18. Trajectories of principal stresses – FEM
mesh (commercial program – SHELL93 8-Node
Finite element mesh of reinforced concrete Structural Shell – rectangular finite element)
member in the “ST method” is shown in Figure 16.

Figure 19. Strut-and-Tie model – FEM (2D Truss

Figure 16. The wall member with a hole in the Element – each node is connected to every node)
central part – FEM mesh (2D Truss Element –
each node is connected to every node)

Finite element mesh of reinforced concrete

member in the commercial program is shown in
Figure 17.
Trajectories of principal stresses determined by
the commercial programs are shown in Figure 18. Figure 20. Strut-and-Tie model – FEM (commer-
Strut-and-Tie model of the reinforced concrete cial program – SHELL93 8-Node Structural Shell
member determined by the „ST metod“ program – rectangular finite element)
is swown in Figure 19.
Topological optimization of the reinforced con- Based on the presented results it can conclude
crete member, which is determined by the com- that the Strut-and-Tie model determined by “ST
mercial program is shown in Figure 20. method” (Figure 19) coincides with the topologi-
cal optimization shape obtained by commercial
program (Figure 20).

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6. Conclusions and discussion system that is proposed for the Strut-and-Tie model
into a stable system by adding additional elements,
Reducing the real members to simpler models,
the so-called stabilizers. In the simple static systems
i.e. using the optimization of the whole structure or
this is easy to achieve, while in more complex sys-
its parts, leads to the faster and easier perception
tems it is not easy until someone reaches a suitable
in determining the stress and strain state, [8], [9].
kinematically stable member.
Discrete topological optimization approximates the
The proposed method for the determination of
real member with the corresponding truss system,
the Strut-and-Tie models for reinforced concrete
which is obtained by connecting all net nodes of the
members in the plane, implemented in the program
adopted finite element mesh by simple elements.
“ST method”, can be applied, as confirmed by pre-
The general approach for determining the optimum
vious analyses. Furthermore, the “ST method” has
structure of the initial system configuration consists
the possibility of dimensioning the member on the
in removing the less loaded elements and the cri-
basis of the determined Strut-and-Tie model, but
teria for that action can be stresses, displacements,
the emphasis in this paper is just in obtaining the
stiffness, deformation energy of the system, etc. [5].
Strut-and-Tie model, [10], [11], [12].
According to [7] the stiffness of the individual sys-
tem elements may be reduced on the basis of the
desired method of the reinforcement layout in the Acknowledgements
member, since the minimum amount of reinforce- The work has been done within the scientific re-
ment is aspired for in the design. search project TR 36043 “Development and appli-
The “ST method” presented in this paper applies cation of a comprehensive approach to the design
a discrete truss systems without completely remov- of new and safety assessment of existing structures
ing certain elements from the model. The formation for seismic risk reduction in Serbia”, which is fund-
of the Strut-and-Tie model is done iteratively, by ed by the Ministry of Science of Serbia.
changing the cross-sectional stiffness of the sim-
ple elements, according to expression (1). The “ST
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state. Application results of the described concept Structural Engineer 1991; 69( 6): 113-125.
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of practical application of the members and simple Concrete with Strut-and-Tie Models. American Con-
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Obtaining the unequivocal form of the Strut-and-
3. Brena Sergio F, Morrison MC. Factors affecting
Tie models in some cases, particularly complex, is strength of elements designed using strut-and-tie
not always possible to achieve, which is the result models. ACI Structural Journal, 104-S26, USA,
of the mesh size election and also of the favoured 2007; 267-277.
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ence, the final model, which indicates that the pro- signed using strut-and-tie models’. ACI Structural
gram has shown certain drawbacks. Journal, 104-S36, USA, 2008; 233-235.
The advantage of the “ST method” is the abil-
ity of the automatic obtaining of the Strut-and-Tie 5. Burns SA. Recent Advances in Optimal Structural
model and forces in its elements, i.e. simple ele- Design. By the Technical Committee on Optimal
Structural Design, American Society of Civil Engi-
ments of the truss. There are commercial programs neers, May 3, 2002.
that have the possibility of obtaining forces in the
Strut-and-Tie models, though the engineer is forced 6. Matteo B. Generating strut-and-tie patterns for rein-
to convert, based on the knowledge and experience forced concrete structures using topology optimiza-
tion. Computers and Structures, December 2009; 87
in the theory of structures, the kinematic unstable
(23-24): 1483–1495.

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7. Kostić N. Computer-based development of stress

fields. 6th International PhD Symposium in Civil En-
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mination of Strut-and-Tie models for planar rein-
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of rc plane elements by Strut-and-Tie models. Inter-
national Symposium about research and applica-
tion of modern achievements in civil engineering in
the field of materials and structures. XXV Congress,
Tara, Serbia, October 19-21, 2011; 195-202.

Corresponding Author
Anka Starcev-Curcin,
Department of Civil Engineering and Geodesy,
Faculty of Technical Sciences,
University of Novi Sad,
Novi Sad,
Serbia,
E-mail: astarcev@uns.ac.rs

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 technics technologies education management

Analysis of fuel bed height on a grate and

its relation with flue gas temperatures at
the furnace end and steam temperature at
evaporator outlet
Midhat Osmic, Sead Delalic, Dzafer Kudumovic, Indira Buljubasic
Faculty of Mechanical Engineering, University of Tuzla, Bosnia and Herzegovina

Abstract [t/h] fresh steam, and movable chain grate. Com-

bustion process in the chain lattice is carried out
An analysis was made regarding influence that
by cross-scheme of getting fuel and air. However,
boiler power and speed of furnace grate have on
there are modern structures with developed last
the height of bed, as well as to amount of the fuel
vault, whose role is to take hot flue gases back to-
on the grate. Finally, a relation was presented be-
ward the front part of the grid, and thus stabilize
tween the resulting simulation model on one side,
the process and burn heavy hydrocarbons extract-
and influencing parameters during the combustion
ed in the root layer while using older coal with a
process on the grate, on the other side. Since in
lower content of volatiles. Given the limited de-
both analyzed cases, parameters of the used coal
gree of heat release in the layer, an afterburning
were the same i.e. lower heat value and chemi-
process of non-burnt gases in the furnace must be
cal characteristics, using the amount of coal as
efficiently organized. For that reason, secondary
the most influencing parameter a connection was
air currents are taken to the position of their maxi-
made between simulation results and those re-
mum concentration in order to reach to that place
sulted from analysis and calculations of required
and intensify macro turbulence of gases [1,2,3].
height of bed, when coal is combusted on a mov-
When it comes to the combustion process on the
ing grate, with all of the above mentioned pre-
chain grate it is necessary to emphasize that coal
sented as functions of the boiler power i.e. fuel
with low ash melting temperature cannot burn on
consumption. The results showed that for each
the grate, because slag layers are made at the zone
temperature of steam and flue gases, there is the
of the most intensive combustion which signifi-
adequate height of the bed. In accordance with
cantly reduces the active surface of the grate [2].
the above mentioned, the conclusion is that an in-
Therefore, based on a variety of analysis and in-
crease in interaction between steam boiler models,
dicators of the degree of local productive forces
resulting from either specialized or conventional
development, political and economic develop-
software and classic design methods will result
ments, as well as of security, environmental and
in an increase of economic profit, decrease in off-
other conditions, it can be assumed that, in our
operation time of steam boilers as well as an in-
country, more complex energy objects with lower
crease in overall profitability, with the final goal of
power and capacity will get the priority [2,3]. In
increasing the total efficiency of the boiler units.
the present work, appropriate changes in the tem-
Key words: Combustion, steam boiler, mov-
perature of steam exiting the evaporator and the
ing grate
temperature of flue gases at the end of the furnace
were obtained. These changes were based on a set
1. Introduction simulation model of the combustion process in
Nowadays, process and chemical industry uses a steam boiler with the standard furnace and its
a construction of steam boilers with dry saturated known geometrical characteristics, assuming the
steam with pressure parameters from 8 to 12 bars, amount of fuel flow, inlet air temperature and the
temperature of 190-210 [o F], capacity of 8 – 25 coefficient of excess air. Based on these simula-

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tions flow quantity of coal has been found to be the flow of coal on the grate [Vg]. As in the case of sim-
most authoritative assessment of the observed pa- ulation as well as calculation of the bed height on
rameters for the output performance of the steam the grate we used coal of the same chemical com-
boiler. In these regard, appropriate sizes obtained position and thus lower thermal power [3] over the
from simulations were connected with the basic quantity of coal to establish a connection between
sizes of movable grates. Therefore, taking into ac- the steam temperature and flue gases obtained from
count the same boiler plant with combustion on the model, for the appropriate amount of coal, with
the grate, calculation of the coal layer amount on the required height of coal layer in case of combus-
the grate was made, depending on the change of tion on the movable grate, for different values of
the boiler power, i.e. changes in flow quantities of grate velocity. Furthermore, first analyzed is the
coal. Since in both cases, the fuel with the same combustion on the grate, i.e. the relation between
chemical composition was used and in the same the quantity of coal, coal bed height and grate
interval of change, dependence of flow changes in speed, and later given is connection between the
the amount of fuel was established in the function temperature obtained from simulations on one side
of the basic characteristics of movable grate, such and the height of the bed on the other. In order to
as the speed of the grate, the bulk layer height of adequately describe the mutual interaction between
fuels, and bulk density of the fuel on the grate and these parameters, it is necessary to define what their
then the bulk layer height of fuel on the grate was connection is. As the geometry of the furnace ob-
connected with temperatures of steam exiting the served constant, we get dimensions of length [b],
evaporator and the temperature of flue gases at the i.e. the length of grate [s] what is non-volatile dur-
end of the furnace obtained in function of changes ing the observation period [1,3]. Based on the boiler
in the quantity of fuel. The following presentation power and lower heating power of the coal used,
consists of possibilities and ways to improve the one gets the flow mass of coal, i.e. the quantity of
combustion process in furnaces with the constant coal that falls on the grate per unit of time (1), i.e.
geometry, and mutual relation of parameters ob-
tained in the simulation model (steam temperature .............. [1]
at the evaporator outlet and flue gasses tempera-
ture at the end of the combustion chamber) with Furthermore, based on mass and bulk density
the heights of bed on the grate, in the function of of coal it is obtained that the volume of coal is [1]:
the amount of coal flow and velocity of the grate.
............................... (2)
2. Analysis of bed elevation of coal on the
grate in the function of the quantity of where [kg/m3] is bulk density of coal.
coal On the other hand, the volume of coal equals
product of the width of grate, its speed and height
The following presentation will make a connec- of bed [1,2,3] i.e.
tion between the boiler model created in the Gate-
CycleTM software [1,4,5], package and the boiler ............................ (3)
of the same characteristics but with combustion on
the moving grate. More specifically, in this simu-
lation software [1,4], we obtained the parameters Finding relations between the two equa-
of steam temperature, flue gas exit temperature tions above gives the correct height of bed on the
and the data on the chemical composition of flue grate that will actually allow the calculated mass
gases in case of change of the observed parameters of coal (which depends on boiler strength and
(the amount of coal, air temperature, and the coef- lower calorific poer of coal) pass through the boil-
ficient of excess air).On the other hand, analyzing er. When calculating the height of bed, following
the combustion in a layer on a moving grate[3], the values of various parameters were adopted [1,3]:
following parameters were observed: height of bed Gate speed interval 0.2-0.8 [m/min]
[h], the speed of the grate [w], boiler power and the Bulk density of coal 700 [kg/m3]

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 technics technologies education management

Length of grate 5 [m] ties of coal, during the combustion on a movable

Width of grate 3.8 [m] grate with constant geometry, the relation was giv-
Thermal coal power 30122 [kJ/kg] en between steam temperature and flue gases ob-
The amount of coal 0.65-0.95 [kg/s] tained from the simulation model of combustion
on the standard furnace on one hand, and coal bed
By equating the expressions for the volume of height on the moving grate on the other, for differ-
coal (2) and (3) the expression for the height of ent values of the amount of coal. The diagram in
coal bed on the grate is obtained [1]: Figure 3 shows relation of the steam temperature
and coal bed height for variable grate speed.
................................. (4)

By adopting different values of thermal stress

and grate velocity, from the previous expression
different height of bed values were obtained, as
presented in the diagram in Figure 1. Height of bed
on the grate proportionally rises as the strength ob
boiler rises, or with the increase of the amount of Figure 3. Relation between height of bed and the
coal flow. temperature of steam exiting the evaporator at dif-
ferent flow quantity of coal and the speed of grate

The diagram in Figure 4 shows the relation be-

tween flue gases temperature obtained by simula-
tion model and the height of coal bed on the grate.

Figure 1. Height of bed depending on the

amount of coal flow and velocity of the grate

Figure 2 shows the wrong changes of bed

height in case of different grate movement veloc-
ity at a constant flow of coal. Figure 4. Relation between height of bed and flue
gases temperature at the end of the combustion
at different flow quantity of coal and speed of the
grate

4. Conclusion
By placing the simulation model and obtaining
the appropriate data, the conditions for the evalu-
Figure 2. Change of bed height on the grate in ation of the plant exploited were created. The data
the function of changes in floe quantities of coal obtained by simulations are used in a way that
for different speeds of grate movement appropriate connections between the parameters
from the simulation and the parameters of com-
3. Connection of coal bed height with bustion on the movable grate are made. In this pa-
steam temperature and flue gases per we have tried to determine how and to what
obtained by simulations extent the steam temperature and flue gases tem-
perature are associated with the height of coal bed
As previously stated, after the analysis and the on the grate. Linking is done by monitoring the
calculation of bed height for different flow quanti- flow quantities of coal, which is in a case of the

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 technics technologies education management

simulation model the same as the one on whose Corresponding Author

basis the bed heights were calculated, all based on Midhat Osmic,
University of Tuzla,
the required plant power. It is necessary to note
Faculty of Mechanical Engineering Tuzla,
that the steam and flue gases temperature, as well Tuzla,
as the height of bed, are directly dependent on the Bosnia and Herzegovina,
coal quantity and its chemical composition. As it E-email: midhat.osmic@untz.ba
is the same fuel, we came to the conclusion that
the same amount of coal in both cases should re-
sult in the same steam and flue gases temperature.
Thus, the observed bed height corresponds to a
mass flow of coal, and on the other side, the same
flow mass, which is given in the simulation model,
corresponds to proper temperature. Accordingly,
height of bed on a moving grate of 0.073 [m]
(which corresponds to the amount of fuel of 0.75
[kg/s]), with the speed of grate w=0.2 [m/min]
would fit the steam temperature of 468.2 [K] with
the coefficient of excess air of 1.4 and inlet air tem-
perature of 323.15 [K], or so that mentioned coal
bed height at the same grate speed corresponds to
the flue gases temperature of 621.7 [K].Observ-
ing the change of coal bed height in relation to the
grate speed, it can be concluded that temperature
changes of steam exiting the evaporator are the
most stable for the grate of 0.2-0.5 [m/min] [1].

References
1. Osmic M. Influence of geometrical characteristics
of the furnaces of steam boilers combustion process.
Master Thesis, Faculty of Mechanical Engineering,
University of Tuzla, 2011.

2. Brkic Lj, Živanovic T. Steam Boilers. Mechanical

Engineering Faculty of Belgrade, 1997.

3. Delalic S. Main project of boiler plant Studen –

AGRANA doo Brcko. Mechanical and electrical part,
November 2007.

4. Buljubasic I. Study of the dynamics of the process in

a steam boiler in order to minimize the consumption
of coal. Ph.D. thesis, 2008.

5. Buljubašić I. Modeling of processes in steam boilers

as a part of performance monitoring. TTEM – Jour-
nal of Society for Development of Teaching and Busi-
ness Processes NET Environment in BiH, ISSN1840-
1503, EBSCO Publishing (EP) USA. 1(2): 34-39.

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Cloud computing - development and

implementation opportunities in Serbia
Jovica Djurkovic, Jelica Trninic
University of Novi Sad, Faculty of Economics Subotica, Subotica, Serbia.

Abstract The qualitative changes in terms of structure and

performance of the “new economy” are also con-
This article looks into the current paradigms of
tributed to by Web based e-business systems, pro-
IT development and their application in the busi-
viding organisations oriented to networked busi-
ness environment. Implementation of new tech-
ness operations with competitive advantages. For
nologies and tools always entails considerable ad-
the purpose of successful operation defining and
vantages, but also raises the issue of disadvantag-
shaping an organisation model aimed at integrated
es, the problems of implementation and reliability.
analytic solution is an increasingly common op-
The focus of this article is on the possibility of us-
tion of choice, which, at the same time, implies the
ing cloud computing in Serbia, and consideration
application of software and technological innova-
of optimum solutions. Cloud technology should
tive toolkits as a support to cost-effective opera-
yield the most benefits to SMEs, which are par-
tion, production and distribution, with minimised
ticularly attracted by the elimination of capital in-
expenditure. Recently, the use of artificial intelli-
vestment in equipment and software, and reducing
gence, knowledge management, statistical analy-
operating costs to realistic and acceptable level, so
sis and data mining techniques have been quali-
it is this aspect that will be considered here.
tatively changing the significance and role of the
Key words: IT technology, cloud computing,
application of IT in organisation, and contributing
cloud technology, software.
their efficient and successful operation.
This article analyses new tendencies in the IT
1. Introduction area already available on the market and applicable
The emergence of social and economic chang- by organisations. Specifically, the research subject
es faced by the global community, undoubtedly is cloud computing, with an analysis of opportuni-
gives rise, or better to say, causes to a great extent, ties, possibilities and the existing instances of its
a continuous growth, integration and sophistica- practical application in organisations in Serbia.
tion of IT technologies. Communication activities
and interaction established in the domain of digital 2. Emergence, development and models of
business processes between organisations are se- cloud computing
cured by means of broad-spectrum networks. Rec-
ognition and implementation of the advantages The concept and its name (Cloud) are not re-
based on mutual networking in business are used cent. The expression was taken from telephone
by all players, i.e. organisations with their busi- technology, where the word “cloud” was used
ness partners. One of the key aspects of success- for situations when the contracted frequency
ful business operations of an organisation implies throughput range was not provided by telephone
defining the business strategy and performance of companies with previously dedicated connectors
the business system, as a prerequisite for apply- dedicated. Instead, required and currently avail-
ing contemporary information and technological able connectors are activated to provide the guar-
facilities. Application of technological solutions anteed frequency throughput range. Thus, a cloud
and implementation of software solutions that are referred to a situation when it was impossible to
not accompanied by appropriate strategies and define specific transmission connectors. The cloud
systemic verifications of the defined processes in computing paradigm is even older. [1, 2, 3, 4, 5].
internal operation will not yield good solutions. As early as 1961, John McCarthy formulated an

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idea, and presented it on the celebration of MIT’s NIST lists the following three service models:
centenary, that future IT, i.e. computation could – Software as a Service (SaaS) – softver kao
be organised as a public service (service business usluga
model), similar to electrical power supply or some – Platform as a Service (PaaS) – platforma
other public utility [3]. kao usluga
To date, cloud computing is not an unequivo- – Infrastructure as a Service (IaaS) –
cally defined concept. At the “Cloud Summit Ex- infrastruktura kao usluga
ecutive 2008” conference, the chairman of the
opening session said that he had asked twenty ex- The classification from NIST’s definition in-
perts how they would define cloud computing, and cludes four implementation models:
got different answers. – Private Cloud
There are different definitions of Cloud Com- – Community Cloud
puting, which are still comparatively similar, de- – Public Cloud
pending on the position of the person defining it. – Hybrid Cloud
For instance, people working in the service sector
have a different definition of Cloud Computing The question arises as to why cloud computing
than someone involved in system architecture. has been the prominent computation model over
Given that an unequivocal definition of Cloud the past few years, if the idea was known as early
Computing is still non-existent, we shall consider as 1960s? One of the answers may be that provid-
three most cited definitions – those given by IT ing such services has lacked adequate infrastruc-
analysis companies Gartner an Forrester, and the ture so far. This answer, however, is not complete-
definition proposed by NIST (US National Insti- ly satisfactory, as the Internet has existed for a long
tute of Standards and Technology): time. Another answer could be that this is due to
– “A style of Computing where scalable and the emergence of the latest global economic crisis
elastic IT capabilities are provided as a in 2008. This answer is also only partly correct.
service to multiple customers using Internet Several factors contributing to the advent of cloud
technologies” [6] (Gartner) computing are discernible, and they were most
– “A pool of abstracted, highly scalable, and concisely formulated by Gartner. In his opinion,
managed compute infrastructure capable “cloud computing is an emerging phenomenon –
of hosting end customer applications and in other words, a phenomenon that emerges when
billed by consumption” (Forrester) the conditions for it are ripe, and when numerous
factors allow it – in this particular case – service
Although Gartner and Forrester gave apt defi- orientation, virtualisation and standardisation of
nitions, NIST’s definition still seems to prevail: computing through the internet. Combined with
“cloud computing is a model for enabling ubiqui- the global economic crisis, cloud computing en-
tous, convenient, on-demand network access to a ables curbing certain IT related costs.” [7]
shared pool of configurable computing resources Cloud computing services are most often used
(e.g., networks, servers, storage, applications and through the internet and the dynamics of user re-
services) that can be rapidly provisioned and re- quests are not limited, with the additional advan-
leased with minimal management effort or service tage that service scaling is accomplished automat-
provider interaction. The model includes five es- ically, without special intervention by the user or
sential characteristics, three service models, and providers. Costs are billed based on the services
four deployment models”. used. Cloud computing is the highest step on the
The key characteristics of cloud technology are: development path: time sharing, grid computing,
– on-demand self-service, on-demand services, utility computing, service as
– broad network access, a service, cloud computing. The main characteris-
– resource pooling, tics can be formulated as follows [8,9]:
– rapid elasticity or expansion, and 1. on-demand self-service
– measured service. 2. ubiquitous network access

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3. location-independent resource pooling From the aspect of development and imple-

4. rapid elasticity mentation (the function model) of cloud comput-
5. scalability ing, there are as many as three (definitely not mu-
6. low usage costs tually exclusive at all costs) classifications: (1) ac-
7. reliability cessibility, (2) locality of implementation and (3)
8. safety organisation of maintenance.
1. Classification based on accessibility (public
Cloud computing implementation has another access to services) of cloud computing
aspect, which can be termed as cloud computing distinguishes between
provider model. It is a mode, or possibility of pro- b. private computer clouds, provide specialised
viding cloud computing services, that is, whether services, allocated to a single user or a
a single provider provides all services, or perhaps chosen group, and have available access
there is a separate independent provider for each through the internet or private networks
individual service. This aspect is shown in Figures (large organisations, universities, hospitals,
1 and 2 (Figures 4 and 5 – [10]). etc.)
c. public computer clouds offer general service
of open type, available to all interested
users through the internet (Amazon EC2,
Microsoft Azure, Google App Engine,
Salesforce CRM), i
d. hybrid computer clouds as a combination of
the above two classes
2. As regards the locality of implementation
(whether they are at the user’s premises or not),
there are
a. Internal computer clouds, physically
located within the organisations’ premises,
protected by the organisation’s firewall;
access is provided through the internet and
Figure 1. Cloud provided by a single provider are used internally
b. external computer clouds, organised outside
the user organisation, by the cloud provider,
within the provider’s environment
3. Organisation of maintenance (from the view-
point of whether the user performs the mainte-
nance or not) of a computer cloud is possible:
a. within the organisation, by the in-house
maintenance team, or
b. by outsourcing, when the cloud is maintained
by another organisation (as a rule, a cloud
provider)

Of all the possible combinations of options/ele-

ments of the above stated classification (12 in total),
not all are valid, of course. The two extreme combi-
nations are: (1) private internal computer cloud with
in-house maintenance and (2) public external com-
puter cloud with outsourced maintenances. Both op-
Figure 2. Cloud provided by three providers tions have both advantages and disadvantages.

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Private internal clout computing (where main- 5. Choice of a reliable network: a reliable and
tenance method is of secondary significance) is secure network must be chosen for any
the only acceptable solution if the enterprise per- chosen model.
forms activities on secret and/or confidential data,
or data critical for the functioning of the particular 3. Pros and cons of cloud computing
enterprise. In that case, the organisation itself sets
the dynamics and workflow, and, in addition, takes Current arguments in the expert community
care of safety measures by itself, protecting the se- and among IT users in the business community
curity and integrity of its own data. This, however, are charged with a certain degree of scepticism,
results in diminished cost-effectiveness in the use with a noticeable level of uncertainty and indeci-
of IT, which is exactly what cloud providers offer. siveness. Such a phenomenon is equally affected
Public external cloud computing implies out- by both positive and negative features of this new
sourcing, and, in addition to maintaining function- information technology.
ality, takes care of licensing, and also about adapt- Characteristics of cloud technology most often
ing the user’s requirements or processes to the listed as positive are:
public computer cloud. In this case, however, the a. Cost cutting: the most compelling feature
user can chose one of the available alternatives for of cloud is multiple savings in money, time,
the implementation of the use of loud computing, investment and human resources. The user
but cost-effectives of implementation remains. of this technology is spared from huge
Lately, IBM has been offering hybrid computer investment related to server farms, software
cloud of specific engineering, with applications licensing, purchasing and maintaining
deployed in a public external computer cloud, and applications. This also includes cost related
the data stored in a private internal cloud. This to IT sector personnel. All of these costs
type, that is, structure of a hybrid cloud could be are transferred to the provider. It must be
popular with companies that cannot use public ex- noted that the user pays real costs of system
ternal computer clouds due to security and/or legal utilisation with this concept, thus avoiding
reasons [11]. considerable fixed sots, paid regardless of
Regardless of the cloud model that the users the extent of system usage.
will opt for they must consider the following im- b. Flexibility: in the classic approach, the
plications: user is stuck with the chosen information
1. Security risk: private clouds are the most technology for at least five, and sometimes
secure, followed by community, hybrid, ten year. The cloud offers contemporary
and finally public cloud, which is the least technology and a choice of additional
secure, and the risk of unauthorised entry is possibilities that are not rapidly available
the highest. in the case of classical approach. In the
2. Data transfer volume: data transfer is limited conditions of virtual companies and business
by the capacity of the cloud network, but operations, when organisations operate
network capacity is adjustable in private in several countries and continents, the
clouds. cloud concept offers a possibility of doing
3. Hardware resources management: the business wherever the user is outside the
hardware resources management balance organisation headquarters. It interesting to
is taken care of by the provider, i.e. cloud note that this feature was the decisive factor
computing service provider, although this for as many as 53% respondents to transfer
service must be previously verified with the their business operations into a cloud, while
provider. only 16% stated cost-cutting as a dominant
4. Training: efficient use of the cloud concept factor in decision making.
requires a certain level of IT skills, and c. Security: cloud providers claim that data
certain level of knowledge of cloud safety is better than in traditional systems,
computing arguing that they can deal with this issue

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with better quality than many small and arises, or reduced when unnecessary. Cloud com-
medium-sized enterprises (SMEs). puting services are billed by consumption, like
Microsoft’s study shows that 35% of gas, electric power, water supply, or telephone.
American companies have achieved Analysts have calculated that only 17% of a com-
significantly higher security levels by opting puter’s potential is used, which is utterly unprof-
for cloud. In addition, 32% of them have stated itable. In view of this fact, cloud computing is a
that they spend less time worrying about more convenient solution.
intrusions, and SMEs doing their business Like any existing technology, cloud computing
operations spend 32% less time a week on has both advantages and disadvantages. The latter
security management than companies not are often discussed and pointed out.[1, 12, 13]. We
operating in a cloud. Moreover, costs related shall list the most common shortcomings:
to safety system are up to five times lower – Service performance of cloud computing
than in companies not operating in a cloud. defined in Software Licence Agreement
Time and money that SMEs used to spend (SLA) cannot always be delivered by the
on security can now be reinvested in overall provider, as access, speed of information
business growth and achieving competitive exchange between the user and the cloud
advantage (Small/Medium Busines(SMB) depends on the functioning and performance
Cloud Study, by comScore, May 2012). of the internet network. In case of broken
Although security is listed among advantages internet connection, cloud users cannot
here, it is data safety that causes sceptisism access certain services, whereas traditional
about adopting the new concept. users can be sure that their connection
d. Reliability: like in the case of security, to the in-house server will be stable. In
when it comes to system reliablity, addition, due to the complexity of cloud
providers claim to be able to provide high- computing, the likelihood of malfunction
quality support, better than companies’ IT on the provider’s side is higher than in an
departments. This claim is confirmed by the organisation’s in-house system.
fact that economies of scale provide such – Limited transferability of service between
cost-savings that enable high investments providers due to lack of standards results in
securing the required system security. too high a degree of the users’ dependence
e. Capital expenditure (CAPEX) reduction: on their own cloud provider.
Given that the cloud costs are billed by – Inconvenience, or even rigidity of the SLA
consumption, i.e. on a monthly basis, the user for the use of cloud services on the one hand,
is spared from high investments in equipment, and consistency of the provider on the other
systemic investment in equipment, systemic (e.g. dot-com boom) prejudice favouring
and application software. well-known, large cloud providers (which can
f. Quick recovery from disasters: we live in a be substantially more expensive than others).
time laden with daily risk of terrorism, or – Data privacy and security is an extremely
unpredictable natural disasters such as fires, important issue. The issue of safety is
floods and earthquakes. Gartner’s study significant when the data is inside the
cites incredible information that as many as organisation. The danger of security
40% of organisations that have suffered a breaches is even more acute when the data is
disastrous event discontinue their business. outside the organisation. The very fact that
Adopting cloud computing resolves this the cloud concept is based on the Internet
problem with almost negligible costs when leads to the possibility of data interception.
compared with traditional computing. The problem is partly solved by encryption,
but this does not ensure full security either.
Economically, cloud computing is convenient, – Return on investment (ROI) in cloud
as the resources of this technology can be adjusted computing is acceptable and appealing in the
to the user’s needs, i.e. expanded when the need short term (at current rate and price of use.

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There is, however, no guarantee that such cost management. This, in fact, means that eco-
market conditions will remain. nomic and legal regulations have the purpose to
– For some users, such as state authorities, force cloud computing service providers to main-
deploying data into a cloud is a sensitive tain a certain level in terms of risk management
question. In addition, large companies, that would be acceptable for the IT community.
which have invested significant funds into As the main driving force of risk management is
hardware, software and their own IT centre, harmonisation with these regulations, this will, no
are hardly likely to write off those high doubt, facilitate the acceptance of cloud comput-
investments. ing services.
– The most critical point of the cloud technology EU regulations pertaining cloud computing
is the fact that the organisation that has opted comprises the following Directives:
for this concept must outsource its data to 1. the Directive on Electronic Commerce deals
the provider’s server, and depend on it in the with IaaS, PaaS and SaaS services of cloud
future. If the provider experiences technical providers;
and technological problems, which is 2. the Directive on Privacy and Electronic
objectively possible, an organisation cannot Communications regulates data interception
approach services and its data, which causes and monitoring of cloud providers;
bottlenecks, and, logically, unexpected costs. 3. the Data Retention Directive defines the
A possible solution is transferring to a new, providers’ obligation to retain the data on
more stable provider. This, however, is a the use of their services; and
fairly complex, expensive, unpopular move, 4. the Data Protection Directive determines
requiring a certain time. the degree of protection of the personal
– A cloud provider is expected to be responsible, data of the EU citizen and regulates their
highly professional and offer guarantees that processing.
the provider’s internal problems will not
affect the users’ work. In practice, this is hard These Directives formulate five key legal is-
to achieve, and a small number of companies sues, defining the following five cloud computing
can guarantee and fulfil. risks: (a) data protection, (b) confidentiality, (c)
intellectual property, (d) professional negligence,
A practical question arises: what to do, what to and (e) outsourcing of services and changes in
opt for, what decision to make? monitoring [3].
The greatest vulnerability of cloud computing Actually, the greatest problem related to the use
is data safety. Advocates of cloud computing ar- of the Internet is achieving the satisfactory level of
gue that fears are exaggerated and unnecessary. safety, i.e. protection of data and devices in unse-
Still, the perceived risks are still high, especially cured environment (retail stores, newsstands etc.),
for data with the status of confidential information. which have the highest degree of risk for network
According to research conducted by the Infor- breaches (through cellular networks), physical and
mation Systems Audit and Control Association software intrusions into devices.
(ISACA), 45% of IT professionals believe that
risks exceed the benefits of the cloud technology. 4. The possibilities and application of cloud
In addition, 15% of respondents would use cloud computing in Serbia
only for low-risk services, whereas 26% do not
wish to get involved with cloud technology at all. IBM has prepared a system for monitoring the
We shall also mention the findings of two inde- use of computer cloud in the form of an innova-
pendent studies conducted by Forreseter Research tion portal, where providers and users (voluntari-
and ISACA. The prevalent position expressed in ly) record all implementations of cloud computing
these is that the main purpose of risk management in the world. It describes all the experiences and
in IT is to harmonise with economic and legal problems of implemented systems from the incu-
regulation, avoiding risks and achieving better bator software farm in the town of Wuxi outside

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 technics technologies education management

Shanghai, to counselling and system integrating distruction is only theoretical. The data are cop-
Sogeti, and university solution such as joint imple- ied to several geographically distant server, so that
mentation of IBM and Google at MIT, Berkeley system recovery flows almost unnoticed.
and Seattle [14]. It is also worth mentioning the control pannel
Unlike the developed world, cloud technology system for cloud hosting, which is the outcome of
is in its infancy in Serbia. Neglecting many advan- EUnet’s own development. The fact that foreign
tages, primarily economic, organisations in Serbia partners are considering the possibility of interna-
do not wish to accept the cloud concept more in- tional applications confirms tht EUnet has success-
tensively, quoting its lack of security as a reason. fully dreated and implemented its cloud system.
In addition, investment in information technolo- The use of this application offers the possibility of
gies is regarded as a cost rather than investment independent commissioning managing and control-
into development in Serbia, which further slows ling cloud servers and accompanying infrastruc-
down the adoption of new technologies. From the ture by using web browsers only. The application
economic point of view, due to low outsourced provides users with complete cost control, as they
programmers’ fees, companies find it more cost- pay only for the resources they are using. In addi-
effective to develop applications independently tion, the application has the ability of creating re-
and create their own databases. ports for employed cloud services. The range of
Some analyses and estimates indicate that the cloud technology services offered by EUnet is very
total IT market in Serbia is worth about 950 million broad, from renting clout servers (available in four
USD. Out of this, domestic organisations account varieties) to private cloud servers (also in four va-
for about 110 million, whereas the rest goes to for- rietis) and applications in the cloud for developing
eign companies accounts. Calculations show that, if nd managing complex portals (Web Cloud server,
organisations in Serbia opted for cloud computing, LAMP server with fireall and load balancing sup-
domestic IT companies would earn 210 million. port). In Serbia, EUnet also offers various web ser-
Cloud computing services in Serbia are avail- vices in the cloud domain, in the form of already
able through EUnet, which specialised in the devel- standard audio streaming, e-mail servers and mail-
opment and application of cloud technology. EU- ing lists, to telephone exchange and FTP server, as
net’s cloud platform is based on CA3 Tera AppLog- well as document manaement, Sugar CRM and Jira
ic platform. AppLogic offers a simple solution for (project/problem management) system.
everything, starting from less demanding users that In the area of cloud technology in Serbia,
find a single Linux or Windows server sufficient, to noteworthy cooperation is achieved between Tel-
companies seeking reliable storage for their inter- ekom and Coming, Belgrade, which also provides
net presentations. In addition, EUnet offers a large cloud service using globally leading platform and
number of already prepared Cloud applications in tools in this field: VMware, HP, NetApp, Cisco,
SaaS model, which enable simple and fast business and Microsoft hosted in data centres in Belgrade
communication with business partners, clients and and kragujevac. Services offered by Telekom and
employees without investment in hardware and Coming relate to process virtualisation by means
maintenance. EUnet uses Tier-3 and Tier-4 Data of virtual IT infrastructure – virtual desktop and
centres located in Belgrade, London and Miami server accessed through Thin Client device. Part-
for delivering professional hosting services. All nership of these two large companies guarantees
data centres meet the highest standards in terms of security and surveillance of their data centre in
security, have cutting-edge systems for protection compliance with the highest standards, safe VPN
against fire, power cuts, or other adverse events that connection, virtual fireqall, data encryption and
may affect system security and availability. System antivirus protection. Cloud computing infrastruc-
security in data centres is maintained by a team of ture services performed by this partnership pass
engineers 24 hours a day, 365 days a year.[15] through several support levels – from basic (nine
EUnet claims to provide almost 100% avail- hours daily, five days weekly) to three additional
ablility from any point in the world, regardless of packages offering 24/7 support with the addition
the time and device. The likelihood of data loss or of monitoring, administration of all subsystems,

1886 Volume 8 / Number 4 / 2013

 technics technologies education management

and performance optimisation. Business support grad, where HP equipped a classroom with cloud
to SMEs is extended through leasing infrastruc- technology.
ture only for backup or cancelling the primary Due to positive economic effects and consider-
sight, and also for providing seasonal and peak ca- able cost cutting offered by cloud technology, an-
pacity according to the user’s needs. [16] other notable example is the planned implementa-
The Serbian market also includes the pres- tion of this technology in the public and govern-
ence of the entire Microsoft cloud offer, with ment sector, which would reduce the deficit in the
their Office 365 SaaS service, and Windows Az- country’s deficit present for several years. Passing
ure platform. Office 365 is the online version of the final decision is determined by the issue of
Microsoft’s most significant products for com- data security and safety.
munication and collaboration, including: office The greatest benefits from cloud technologies
2010 Professional Plus and the cloud version of should be reaped by SMEs, which are especially
collaboration products: Exchange online, Share- attracted by the opportunity to eliminate capital
point online and Lync online. It is intended for investments in equipment and software, and op-
companies of all sizes, easy to use and administer, erative costs are reduces and realistically accept-
and enables considerable cost-cutting in business able. The use of cloud services only requires pow-
operation, along with improved productivity, effi- er plugs and internet connections, plus minimum
ciency and flexibility. The first company in Serbia computer infrastructure (laptop and printer).
that decided to test Office 365 in business is Delta Despite the impression that Serbia is making
sport. Windows Azure enabling a combination of only initial steps towards accepting cloud technol-
platform and infrastructure opportunities, as well ogy, it is an encouraging fact that the Government
as developing applications on premice, in cloud, of Serbia adopted the Strategy for the Develop-
or as a hybrid model, was officially launched in ment of Information Society until 2020, which
Belgrade on June 7. Azure platform is already be- highlights that special attention should be devoted
ing used by several insttutions in Serbia, including to developing and practical implementation of
Faculty of Philology in Belgrade [17]. cloud computing technology.
Net++ is the first official dealer of Symantec’s
cloud solution for integrated compute protec- 5. Conclusion
tion. In corporate environments, Symantec ranges
at the very top of the offer, and it is no wonder Shaping an organisational model aimed at an
that they established themselves in a compara- integrated analytical solution, which simultane-
tively short period and became available in our ously implies application of software and tech-
county as well. Hiring Symantec, a company or nological innovative devices as support to cost-
individual transfers the responsibility for IT secu- effective business operations, production and dis-
rity to a third party, i.e. the cloud, together with tribution with minimised expenditure is becoming
more than 10 million users worldwide. Updating an inevitable prerequisite of successful business.
the protection system is done automatically, and The available tools make qualitative changes in
maintenance is included in the initial service and the role and application of IT in organisations and
not charged additionally. In accordance with ex- contribute to their efficient and successful posi-
pectation the packages available for hiring are tioning on the market.
that for integrated protection of SMEs’ networks Considering the new tendencies in the area of
(Endpoint Protection.cloud), antivirus protection information technologies that are already avail-
compatible with all mail servers (Email Antivirus. able on the market and implementable by organ-
cloud) and AntiSpam.cloud package for blocking isations, a prominent place belongs to cloud com-
unwanted items in the e-mail system [18]. Specific puting and the possibility of the existing practice
implementations are still at the level of individual of its application in organisations in Serbia.
examples such as RTS, which deployed its portal Although cloud is in the initial stage of devel-
in a cloud. An interesting example is innovation opment in Serbia, implementation and acceptance
implemented at a primary school in Novi Beo- of the cloud concept is not very wide, as compa-

Volume 8 / Number 4 / 2013 1887

 technics technologies education management

nies claim that lack of reliability is still present. 10. Reeves D. et al. Cloud Computing: Transform-
This is incorrect, but investment in information ing IT, White paper, Burton Group, published
20.04.2009; 1.
technologies in our country is still regarded as ex-
penditure rather than investment in development. 11. Petkovič I. CRM in the Cloud. SISY 2010, 8th Inter-
Another excuse is mentioned – from the economic national Symposium on Intelligent Systems and In-
point of view, that organisations find it more cost formatic, IEEE Catalog Number: CFP1084C-CDR,
effective to develop applications independently ISBN: 978-1-4244-7395-3. September 10-11, 2010.
and create their own databases. Still, it must be 12. Erdogmus H. Cloud Computing: Does Nirvana Hide
pointed out that the available offer is considerable, behind Nebula? IEEE Software , in Frank Fischer,
and that a rapid trend of application will become Dr. Freda Turner: Cloud Computing as a Supply
obvious very fast, especially in view of the adopt- Chain, Business Operations-Systems Perspectives
ed Strategy of Development of Informatic Society. in Global Organizations (DDBA - 8110 - 7), Walden
University, published 10.07.2009 ; 4-6: 4.

References 13. Soat J. The Cloud’s Five Biggest Weaknesses,

2010. http://www.informationweek.com/cloud-com-
1. Armbrust M. et al. Above the Clouds: A Berkeley puting/blog/archives/2010/06/the_clouds_five.html,
View of Cloud Computing. Technical Report No. Retrieved February 10, 2013.
UCB/EECS-2009-28, 2009 http://www.eecs.berke-
ley.edu/Pubs/TechRpts/2009/EECS-2009-28.html, 14. Petkovič I, Trninić J, Đurković J. Podrška informa-
Retrieved February 15, 2013. cionih tehnologija u funkciji održivog razvoja. In-
ternational Scientific Conference, SM2013, 20013,
2. Wikipedia, Cloud Computing. http://en.wikipedia. Subotica, 2013; 18.
org/wiki/Cloud_computing, Retrieved February 10,
2009. 15. Eunet, Linux Cloud serveri, http://www.eunethosting.
com/cloud-ponuda, Retrieved February 10, 2013.
3. Wikipedia, John McCharty, http://en.wikipedia.org/
wiki/John_McCarthy_(computer_scientist) February 16. Coming, Cloud services, www.coming.rs , Retrieved
15, 2013. February 10, 2013.

4. Foster I. et al. Cloud Computing and Grid Comput- 17. Microsort, http://www.microsoft.com/serbia/
ing 360-Degree Compared.This paper appears in: press/2012/jun/20120629.mspx, Retrieved Febru-
Grid Computing Environments Workshop, 2008. ary 10, 2013.
GCE ‘08, Austin, TX, USA, ISBN: 978-1-4244-2860-
1. 12-16 Nov. 2008; 1-10. 18. Net++ technology, www.netpp.rs, Retrieved Febru-
ary 10, 2013.
5. Hasan A. Utility Based Cloud Computing Power!
Computers Journal, Monday, 2008.
Corresponding Author
6. Beard H. Cloud Computing Best Practices for Man- Jelica Trninic,
aging and Measuring Processes for On-demand University of Novi Sad,
Computing. Applications and Data centers in the Faculty of Economics Subotica,
Cloud with SLAs, London, UK, 2008; 9. Subotica,
Serbia,
7. Bozzabench. Šta je Cloud Computing? www.boz- E-mail: trninicj@ef.uns.ac.rs
zabench.com/Tests/TestView/tabid/95/id/43/Sta-je-
e2809eCloud-Computinge2809c.aspx, 2013, Re-
trieved February 10, 2013.

8. COMING - Computer Engineering, Cloud Comput-

ing, Toše Jovanovića 7, 11030 Beograd, Srbija, na
www.coming.rs/cloud/ciljne_grupe, Retrieved Febru-
ary 10, 2013.

9. Williams H. Spatial Cloud Computing (SC2), White

Paper, SKE Inc., November 2010.

1888 Volume 8 / Number 4 / 2013

 technics technologies education management

Influence of the specific sliding work on

tribological parameters of friction linings for
heavy vehicle clutches
Darko Danev1, Milan Kjosevski1, Simeon Simeonov2
1
“Ss. Cyril and Methodius” University in Skopje, Faculty of Mechanical Engineering, Skopje, Macedonia,
2
University “Goce Delcev” - Stip, Faculty of Mechanical Engineering. Skopje, Macedonia.

Abstract tion to the given terms, the specific outwear which

Motor vehicle friction clutches still have domi- presents the ratio of the volume of outwear lining
nant application in motor vehicles. Besides the fact and the total sliding work, should have small value.
that it`s basic concept is not changed, the quality Numerous researches available in literature
and performance requirements are more rigorous. point to the non-linear nature of the friction [3].
Fulfillment of these requirements seeks further As result, efforts are made for continuously im-
development of friction lining material structure, provement of the friction lining structures which
and also development of manufacturing technol- are constantly monitored by examining such ef-
ogy. The complex and profound nonlinear influ- fects on the individual clutch work characteristics
ence of the individual material components on [4], [5], [6], [7] and [8].
clutch characteristics request continuous research Analyzing the factors that most directly affect
of their interconnection. the value of the sliding work, it can be accepted
This paper shows the way of organizing this that the dominant effect has the value of the spe-
research, in order to determine the correlation cific sliding work in the process of connecting q
between the tribological parameters and specific (J/cm2). It is the ratio between the total sliding
sliding work in the process of actuating the clutch. work L (J) in the process of engaging the clutch
Key words: motor vehicles, friction linings, and the overall contact surface of the friction con-
clutches, tribological parameters nection Af (cm2). Starting from the fact that with
increasing of specific connection work increases
the specific lining outwear ϑ and thereby increases
Introduction
the temperature in the friction contact what direct-
Friction clutch is mechanism which is located be- ly affects the change in the value of the friction
tween the vehicle engine and its gearbox. The clutch coefficient μ, there is a need for determining the
transmits the torque from the propulsion to the trans- interdependence of changes in value q = q(μ, ϑ).
mission. The main reason for the insufficient life-
time of the clutch is the sliding work which appears 1. Research purpose and task
in the process of clutch engaging and disengaging
[1]. That leads to outwear and also can lead to burn- Based on what was given above as a purpose
ing through of the friction lining [2]. and task of these research is to determine the char-
Consequently the friction lining should be acter of the dependence of specific outwear ϑ and
characterized with high quality expressed through friction coefficient of friction connection μ of the
its trigological parameters, which are: specific sliding work q.
– coefficient of friction between the friction
surfaces μ ( - ) 2. Research methodology
– specific outwear of the lining ϑ(cm3/10MJ)
Research methodology includes the study of
The coefficient of the friction should be stable the available knowledge and experience of clutch
during temperature change, the specific pressure and and lining manufacturers as well as the literature
the sliding speed in the friction connection. In addi- data; own experimental research of the influence

Volume 8 / Number 4 / 2013 1889

 technics technologies education management

of the change of specific sliding work when en- Number of actuating per minutes is determined
gaging the clutch q to the change of the friction determine on the temperature on the friction sur-
coefficient and μ and specific clutch outwear ϑ; faces.
analysis of the results and conclusions.
3.2 Own research
3. Research In order to evaluate the influence of specific
sliding work q on tribological parameters (μ, ϑ)
3.1 State of friction lining and starting from the technical
Friction lining quality is checked by the manu- capabilities of the available test equipment the fol-
facturers on the basis of tests and through deter- lowing program is adopted.
mining their heat and tribological characteristics. 1. Tests were performed on test benches for
The main tests are determining the abrasive- clutches (figure 1) that operates on the principles
adhesion changes between the surfaces that are in running rotating masses which generate torque
friction. As a criteria for the quality of lining is equivalent to the moment of inertia of the vehicle
taken that friction coefficient μ should have great- whose clutch is tested.
er value than 0.22, whilst there is no abrasive-ad- 2. Based on capability analysis of the test bench
hesion phenomena in the contact between the sur- which is a product of the company Fichtel Sacks
faces in friction. Tribological tests are determining – type K-D-14 – Germany, and on the products of
the change of the friction coefficient μ depending main lining manufactures it is adopted the test to be
on temperature in the contact, from the specific performed with dimensions f350/f195/3.5, often
sliding work q in the process of engaging, etc. used in vehicles. Tests are performed for 2 regimes:
According to available information some man- – Regime A - Testing of thermal loading
ufactures perform the following tests given in ta- – Regime B - Testing to determine the
ble 1, 2 and 3. tribological parametars
Tests are performed on a test bench that works
in regime of braking so that sliding time (braking) In the tables 4 and 5 are given test indicators
of clutch is adjusted and the number of clutch ac- under regimes A and B.
tuating (engaging) is one engaging per 2 minutes.
Table 1. Regime of testing performed by the company Borg-Beck from England
dimension Test 1 Test 2 Test 3 Test 4
specific work J/cm 2
60 230 880 330
time of stopping s 1 4 15 4
number of cycles - 40 50 1 1
number of actuating 1/min 0,5 0,5 0,5 0,5
Temperature between friction surfaces <500° C
Table 2. Regime of testing performed by the company Raybestos from Germany
dimension Test 1 Test 2 Test 3
specific work J/cm2 160 230 340
number of actuating 1/min 1 1 1
number of cycles - 45 45 45
Friction coefficient mmin>0,22
Table 3. Regime of testing performed by the company Borg-Beck from Italy
dimension Test 1 Test 2 Test 3
specific work J/cm2 80 170 250
number of cycles - 1110 550 360
Temperature between friction surfaces ( 170-210) °C

1890 Volume 8 / Number 4 / 2013

 technics technologies education management

test-3: Heavier load when specific work is

(~150)J/cm2 and temperature between friction sur-
faces is Т~(220-250) ° C
test-4: Very heavy load when specific work is
(»200)J/cm2 and temperature between friction sur-
faces is Т~(250-280) ° C,

During the exploitation vehicles are loaded on

average 80% of nominal load and 20% with heavy
load. Very heavy load appears only in some ex-
a treme cases, but for security in this cases control
of load is performed.
3. In order to obtain reliable indicators tests are
performed on 6 linings from each manufacturer.
The test is conducted with prior alignment of fric-
tion surfaces with 500 cycles of load according to
test 1B after which were performed prior measure-
ments to flatness of the surface and to the thick-
ness of the lining. After this preparation is done,
the test of tribological parameters is conducted ac-
cording to the indicators of table 5.

3.3 Test results

b Based on conducted tests, results about tribolo-
Figure 1. Schematic preview and photography of gigal parameters i.e. about their dependents on the
test bench for friction clutches specific sliding work in the process of connecting
are obtained. The results mean value of testing the
Tests for determining the tribological parameters
samples are shown diagrammatic as follows:
are quantified by specific work load, including:
- On the figure 2 diagram are presented the re-
test-1: Normal load when specific work is (40-
sults for lining of manufacturer T1,
60)J/cm2 and temperature between friction surfac-
- On the figure 3 diagram are presented the re-
es is Т~(150-170) ° C ,
sults for lining of manufacturer T2, and
test-2: Heavy load when specific work is (80-
- On the figure 4 diagram are presented the re-
100)J/cm2 and temperature between friction sur-
sults for lining of manufacturer T3.
faces is Т~(200-220) ° C,
Table 4.
Test regime А dimension Test 1 Test 2 Test 3
number of revolutions 1/min 1900 1900 1900
specific work J/cm2 66 209 323
frequency of engaging 1/min 0,6 0,6 1,2
number of cycles - 40 50 25
Table 5.
Test regime B dimension Test 1 Test 2 Test 3 Test 4
number of revolutions 1/min 1600 1600 1600 1600
specific work J/cm2 46 107 149 210
frequency of engaging 1/min 1,5 1,5 1,5 1,5
number of cycles 1000 1000 250 90

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 technics technologies education management

3.4 Analysis and conclusions

According to the performed tests, the following
conclusion can be drawn:
- For the three types of the lining there are
different values for the friction coefficient and
the specific outwear depending on specific
working load. This difference occurs due to
their different quality.
- All three types of linings have in common that
by increasing the specific working load the
friction coefficient decreases and the specific
lining outwear increases.
- Conducted tests provide an opportunity for
Figure 2. Diagram of the trobological parameter
further research in the field of determining of
change а = а(μ, ϑ) for friction lining, product of
lining quality in terms of their structure and
the manufacturer Т1 – Ruen Kocani
manufacture technology in order to achieve
better tribological parameters.

References
1. Simeonov S. Influence of friction linings components
and structure on heavy vehicles friction clutches perfor-
mances. PhD Thesis. Skopje, (in Macedonian). 1999.

2. Danev D. Research of working load characteristics

of passenger car’s friction clutches. PhD Thesis. Bel-
grade, (in Serbian). 1978.

3. Urbakh M, Klafter J, Gourdon D, Israelachvili J.

The nonlinear nature of friction. 2004 Nature Pub-
lishingGroup; 10.1038/nature02750. June 2004.
Figure 3. Diagram of the trobological parameter
change а = а(μ, ϑ) for friction lining, product of 4. Bratcu O, Spânu C. Contributions to state concept
definition for sliding tribosystems material charac-
the manufacturer Т2 – Fiaz Mladenovac terisation. The annals of University “DUNĂREA DE
JOS“ of Galati fascicle VIII, Tribology. ISSN 1221-
4590. 2003.

5. Watson M, Byington C, Edwards D, Amin S. Dy-

namic Modeling and Wear-Based Remaining Useful
Life Prediction of High Power Clutch Systems. STLE
Tribology Transactions, April-June 2005; 48(2):
208-217.

6. Aravind V. Engagement characteristics of a friction

pad for commercial vehicle clutch system. Sadhana,
Indian Academy of Sciences. October 2010; 35(5):
585-595.

7. Mudhivarthi S. Dry Sliding Tribological Charac-

teristics of Hard, Flat Materials with Low Surface
Figure 4. Diagram of the trobological parameter Roughness. Master thesis. Department of Mechani-
change а = а(μ, ϑ) for friction lining, product of cal Engineering College of Engineering University of
South Florida. September 2003.
the manufacturer Т3 – Raybestos Germany

1892 Volume 8 / Number 4 / 2013

 technics technologies education management

8. Mi D, Xiao J. The Research of Early Time Wear on

the Dry Friction Type Clutch of Economic Automo-
bile. Mechanical Engineer 2008-09.

Corresponding Author
Darko Danev,
“Ss. Cyril and Methodius” University in Skopje,
Faculty of Mechanical Engineering,
Skopje,
Macedonia,
E-mail: darko.danev@mf.edu.mk

Volume 8 / Number 4 / 2013 1893

 technics technologies education management

Risk management in insurance

Zdravko Petrovic1, Aleksandra Tesic2, Natasa Mrvic Petrovic3
1
University ’Sigmund Freud’, Viena, Austria,
2
University ’Privredna akademija’, Novi Sad, Serbia,
3
‘Union’ university, Belgrade, Serbia.

Abstract panies take an important position in the financial

system as institutional investors. Within that con-
Insurance companies play an important role in
text, objectives of insurance companies are pro-
the financial system of every country, among other
viding additional liquitidy in the financial market,
things, as institutional investors. Within that con-
maximizing profits with acceptable level of risk,
text, objectives of insurance companies are: pro-
gathering free capital and allocation of those as-
viding additional liquidity on the financial market,
sets towards economic growth and development.
maximization of profit with acceptable level of
From this point of view, financial institutions
risk, gathering free capital and allocation of those
are exposed to numerous risks, ranging from in-
fuds towards economic growth and development.
sufficient diversification of business operations
From this point of view, financial institutions
and tendency to make risky but profitable arran-
are exposed to numerous risks, ranging from insuf-
gements - to quakes in stock exchange and global
ficient diversification of business operations and
financial crises. Increased demands for systema-
tendency to make risky but profitable arrangements
tic management and control of risk have its roots
- to quakes in stock exchange and global financial
in the fact that modern business strategy relies on
crises. Numerous empirical researches confirm
three important factors: money, time and risk. To
rather high interdependence between industrial and
that end, reports of financial institutions are the
economic development of the state and develop-
most important source of knowledge about their
ment leve of insurance sector. Basically, insurance
activities in the area of identifying and underta-
sector can contribute to maintaining economic sta-
king measures for risk management.
bility, intensityening social security, widening the
Numerous empirical researches confirm rather
spectrum of economic actvities, and promoting ef-
high interdependence between industrial and eco-
ficient risk management and mitigation of damage.
nomic development of the state and development
Development of science and technology, as
level of insurance sector. Basically, insurance sec-
well as methods of risk management, led to over-
tor can contribute to maintaining economic stabi-
coming of many known risks, so that frequency
lity, intensityening social security, widening the
of damages reduced in many technologically so-
spectrum of economic actvities and promoting ef-
phisticated processes and activities, but led to in-
ficient risk management and mitigating damages.
crease of destructive consequences of catastrophic
Development of science and technology, as well
accidents which happen today only as a result of
as methods of risk management, led to overcoming
interaction of people or across state borders.
many known risks, so that frequency of damages
Key words: risk management, insurance com-
is reduced in many technologically sophisticated
panies.
processes and activities, but led to increase of de-
structive consequences of catastrophic accidents. In
Introduction addition to this, in the last 30 years or so, there has
Primary role of insurance companies is provid- been increase of number of natural disasters which
ing indirect economic protection. From the stand- in some countries caused damages measuring up to
point of economic development, insurance com- 50% of gross annual product, that is the unrecove-
panies perform other functions as well, the most rable losses for developing and transition countri-
important of which is employing financial assets. es, which by the rule, have undeveloped insurance
In performing these operations, insurance com- sector and undeveloped financial markets.

1894 Volume 8 / Number 4 / 2013

 technics technologies education management

Abour risk management in general Concepts connected with risk in insurance

Risk management, in broad sense of the word, Before we go on with the study of risks in insur-
is ability to make decisions in unpredictable envi- ance, we need to clarify some basic concepts which
ronment. Risk management, as one of models of are often used in everyday conversation, and also in
managing business operations, appeared for the first describing insurance. Those concepts are:
time in Anglo-Saxon countries, and reaffirmed itself – loss,
especially in USA, where it has been on constant – danger,
rise from the 60's of the last century till today, as a – hazard.
very efficient model of managing business risks.[1]
Risk management means optimization of ex- Word loss in everyday use means to lose some-
penses of risk management in the manner where thing which was possessed previously. That could
no one suffers damage. This concept includes be 'loss of memory' or 'loss of time'.
business philosophy, culture and climate of or- However, when this word is used in insurance,
ganization, as well as some business functions of it has a more limited meaning. Typical insured
financial institutions. Risk management is central loss is unwanted, unplanned reduction of eco-
part of strategic management and corporate man- nomic value. Insured losses can be categorized as
agement of any business entity. [2] direct and indirect losses.
Emphasis of good risk management is on iden- Direct losses are momentary losses or primary
tification and mitigation (regulating, eliminating) results of insured danger.
risks. Objectives of risk management are: Indirect losses, or usage losses, are the second-
1. to enable a business entity to survive losses ary result of insured danger.
and make growth afterwards, ie to maximize For example, if fire destroys a home, loss of
its protif, home is direct loss. Expenses of living in a hotel,
2. to operate efficiently in risky environment, while the house is rebuild, is the example of indi-
3. to adjust operations to legal regulations. rect loss. Also, if earthquake destroys a restaurant,
damage caused on property is direct loss, while in-
When talking about risk management and in- direct loss is reduction of income in the period of
surance, it is important to point out that expression rebuilding business operation. So, what these ex-
risk management is broader than expression insur- amples show is that direct loss appears first and is
ance management, as it deals with risks we can followed by indirect loss. Property insurance poli-
insure against, and those we cannot insure against, cies are specific when providing cover for direct
by chosing proper technique of risk management. or indirect loss, or both.
However, risk management is narrower concept Danger is defined as potential cause of dam-
than overall management, as it does not contain age and loss [3]. Examples of dangers in insurance
management of business risks, except in rare occa- are: fire, earthqake, flood, criminal actions, heart
sions. Direct management is dealt with by experts attacks etc. Insurance policies provide financial
- risk managers, who should have good knowledge protection against such types of damage and loss.
of all the risks that a business entity is exposed to. Hazard is the circumstance which creates or
That risk management is relatively new discipline is increases danger and risk, ie probability of onset
confirmed by the fact that position of CRO - Chief of destructive event and loss [4], ie it is the cir-
Risk Officer in business entities, ie chief manager cumstance which increases either the frequency or
for risk management who studies risks to which seriousness of damage. Example of hazard can be
business entity is exposed and manages them, did 50 canisters of 5 litres of gas stored in basement of
no appear before 20's of the 20th century. Nowa- a house. Gasoline in basement of the house by it-
days, many business entities have highly qualified self does not pose hazard, however if a fire breaks
individuals who specialize in this field, so that they out, the gas will quite certainly, increase the effect
could minimize the exisiting and identify potential of fire and make damage which is much bigger
risks in adequate manner. than damage when the gas was not in the house.

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Poor lighting in parts of town in which rate of necessary, in order to collect higher benefit from
criminal activities is higher than usual, also poses medical insurance, then this type of hazard is re-
hazard, because it can lead to increase of the level sponsible for increased amount of loss. Insurers
of criminal activities which wouldn't exist if the can eliminate moral hazard and minimize con-
lighting was good. scious hazard with careful choice of insurer and
Poor lighting by itself will not cause loss, but by including special provisions in agreement, in
the fact that it acts as incentive to thieves to in- order to protect themselves from hazard.
crease criminal activity, makes it a hazard. Some-
times, hazard increases the frequency and inten- Risk as a concept in insurance
sity of loss, as in the case when a car is driven too
fast for the existing conditions. Word risk is most often connected with insur-
There are three types of hazard: physical, mor- ance. There are many definitions of risk, and one
al and mental. of them is that ‘risk is a calculated prediction of
Physical hazard can be defined as material re- likely damage, or in negative case, loss or danger.
quirements which increase probability that some To be under risk means to be subject of damage of
destructive event will happen. Example of physi- some process or activity. Level of risk is the func-
cal hazard is slippery road which increases prob- tion of probability and danger of damage”. [5]
ability of a car accident, which is the consequence Degree of risk is measure of punctuality of pre-
of colision which in this case poses danger. If an dicting possible result, based on chance. So, the
individual causes or in any way contributes to in- higher precision of prediction of possible result of
crease of damage in order to collect highest dam- event is, the smaller is the degree of risk and vice
ages from the insurer, then it is a fraud in insur- versa, the harder it is to predict result of event, high-
ance and loss is the result of moral hazard. er is the degree of risk. We can present this on the
Moral hazard is untruthfulness or bad char- example from insurance, if we observe 50 residen-
acter of individual which increases frequency or tial houses which are to be insured from fire. There
strenght of damage. Examples of moral hazard is the total of 51 possible results of the event, one
are most often connected with different types of of which is the possiblity that fire will not happen.
frauds in insurance in order to collect highest pos- However, if we have some information about these
sible damages from insurance. houses, for example, that all houses are younger
If someone sets fire to his own house in order to than 7 years, that they are in good condition and that
collect insurance, although the fire is case of loss, there is a fire department in the circle of 2 km from
moral hazard is in charge of increased frequency each house, we can narrow the range of predicitons.
of loss. If a thief steals for example 5,000 euros, In other words, risk in this case is reduced due
and owner reports to insurance that 15,000 euros to given information. If we know, on the basis of
were stolen, then 10,000 euros of committed fraud statistics from the past, that some 1% of average
are the result of moral hazard. It exists in all insur- group of homes with similar characteristics went
ances and it is hard to identify it. up in flames, we can make more precise prediction,
Insurers try to minimize moral hazard by vari- as additional information reduces level of risk even
ous measures such as: more. In view of the fact that insurance companies
– checking the person who filed application keep precise statistics on losses caused in the past,
for insurance; they can predict more exactly the number of losses
– establishing different mechanisms in insu- and total amount of quantity of monetary assets
rance technique. needed to cover losses which can happen in the fu-
ture. From this we can conclude that operations in
Mental hazard is defined as negligence or in- the system of insurance increase exactness in pre-
diference towards damage due to existence of in- dicting losses, that is to say, insurance reduces risk.
surance. Attitude 'why would I care, I am insured' Definition of risk as uncertainty in connection
is the simplest example of this type of hazard. If a with creating possible loss is useful because it
person intentionally stays longer in hospital than helps in explaining why people buy insurance.

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If a person, for example, does not insure his Finally, risk in insurance cannot be presented
house from fire, he will be uncertain in connection as danger which threatens the property or a per-
with it whether he will have to pay for loss from son, the implementation of which creates certain
possible fire in his home. That person is unsafe, as consequences.
he does not know in advance whether his house will As a legal concept, risk of insurance presents
go up in flames if fire occurs and how much loss possibility of onset of uncertain event which is
he will have on that basis. Once he buys insurance likely, economically destructive, which does not
form fire, he becomes safe that he will not have to depend only on the will of interested persons, and
pay if fire breaks out in his home. Insurance com- insurance of which is allowed by the law, public
pany will pay instead of him for the given losses. order and morale.
In this case, the owner of the house transferred
his uncertainty (risk) to insurance company, and Insurance companies and risk management
for that reason he does not feel uncertainty any
longer, after transferring risk to insurance com- Risks imply probability of onset of negative ef-
pany. Reason for this is that insurance company fects to business and financial results of company
combines exposure to risk from fire of several and position of society. Procedures, instructions,
home owners, and because of this, can predict to- actions and doings by which company manages
tal amount of required quantity of monetary assets risk within the system of internal control, include
if the loss happens. qualitative and quantitative method of managing
In view of the fact that loss can be predicted with that risk. Insurance company is liable to identify,
great precision, insurance company reduces uncer- estimate and measure risks to which it is exposed
tainty around number and amount of loss which in its business operation and manage those risks in
will happen. Insurance company this way reduced the manner which will permanently secure main-
the risk. In other words, individuals buy insurance taining the level of exposure to risks at the level
because they believe that by doing this they acquire which will not endanger property or business op-
economic advantage ie create economic benefit. In- eration of the company, ie which will secure pro-
surer will agree to sell protection from risk if the tection of interests of insuree, beneficiary of in-
risk can be predicted in advance. Holding on to surance, third damaged parties and other creditors
these principles, a question of which type of risk is of the company - in keeping with the laws and
insurer prepared to insure and what is it that makes other regulations, and its by-laws[6]. Company is
risk suitable for insurance, can be asked. obligated by its by-laws to regulate, organize and
For this question we can say that risk is suitable apply risk management which will enable com-
for insurance if: prehensive and preventive identifying of risks, as
– it is likely as an event; well as their measuring and estimate.
– is independent from will of insuree or third Risk management of the company must be in
interested party; keeping with regulations, rules of profession, good
– if it leads to destructive consequences; business practice and business ethics. Company in
– if it is uncertain, both regarding onset of event its operation is exposed to following basic types
itself, and the time of occurence of event; of risk: insurance risk, market risk, operational
– if it is allowed by the law, by agreement or risk, liquidity risk, risk of depositing and investing
if it is moral. funds of the company, legal risk, reputational risk
and other risks which depend on nature, scope and
Fullfillment of previous stated requirements complexity of company operation.
indicates that risk is insurable. However, the fact Insurance risk is the basic risk and presents
that potential loss does not satisfy completely pre- risk which is assumed in insurance. It is defined
viously stated criteria does not mean necessarily as impossibility of insurance company to absorb
that it cannot be insured, but that it would have to assumed risks on the basis of concluded insurance
be treated with special care, for example, would agreements. The very presence of risk cannot be
have to be jointly insured with other insurer. neutralized, but individuals and company can un-

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dertake certain measures which will partly control which will satisfy the needs of end users. Com-
the amount and time of creating risk and onset of panies whose aim is maximization of profits must
damage on that basis. lead risk policy in the manner which enables com-
Those activities are called risk management petitiveness, growth and development.
and if successfully implemented, they can reduce Functions of managing risks can be catego-
expenses of incurred losses [7]. rized chronologically into three categories:
For people not inclined to risk applies the rule: – period before risk is assumed,
‘Don’t put all eggs in the same basket’ but the – period of recognizing risk,
world of finance turned it into a science called: di- – period after recognizing risk.
versification.[8]
Insurance market is the example of real diversi- Period before risk is assumed - specific exam-
fication. From general economic point of view, role ples of this function of risk management include
of insurance companies is not complete elimination making products and their evaluation, setting basic
of risk, but its efficient distribution. Namely, risk rules and limitations, as well as investment strate-
divided among 1,000 shareholders of insurance gies, but also analysis of expenses and benefit. De-
company. As people are not inclined to risk 1,000 cisive function of risk management determines the
people will easily bear 1/1,000 risk than one man quantity of risk which can be assumed and what is
could bear the total risk. When petty investors with the allowed cost of assuming risk. This includes co-
their savings buy financial assets, they also can re- ordination and cooperation between different sec-
duce the risk by diversification. By buying shares tors of company, such as marketing, investments
of some company, buyer in fact bets on its future and finances. Functions such as strategic planning
profitability. Naturally this is rather risky, as it is di- and capital management also play significant role
fficult to predict the fate of certain company. in decision-making regarding risks in organization.
Fortunate circumstance is that shareholder Period of recognizing risk - Quality recogniti-
does not have to invest all his money in only one ion of risk is possible only when we have complete
company. Risk can be reduced by great number information. Such function of risk management
of smaller stakes instead of small number of big is spread all over the insurance company, where
ones. Risk of shares portfolio depends on the different parts are focused on different aspects.
number of shares in that portfolio and is measured Examples include: managing long term dam-
with standard deviation which expresses probabil- age claims, efforts to keep insurees and expense
ity of fluctuation of variable: the bigger standard management. Specific functions include: adjust-
deviation of portfolio yield is, the bigger the risk. ing funds and obligations, management strategies,
It is understood that it is impossible to eliminate reinsurance as well as stop-loss arrangemets. This
the risk completely by increasing the number of function is usually called underwritng and it is one
shares in portfolio. of the most important functions of risk manage-
Diversification can eliminate idiosyncratic risk ment in insurance comany. Related aspect of risk
- uncertainty connected with certain companies, management is control. Control function include
but cannot remove either aggregate risk - the risk internal revision and setting limitations.
which influences all economic entities at the same Period after recognizing risk - Basic principles
time, or aggregate risk - uncertainty connected of this stage are, for example, estimate of amount
with economy on the whole, which influences all of risk from mortality or disease of certain client
companies. When economy gets into recession, and taking care that charged premium is sufficient
in most companies there will be decline in sales, to cover the risk, or estimating value of credit risk
reduced protif and low yield on shares. So, diver- of certain assets (eg. mortgage or private place-
sification reduces risk of possessing shares, but it ments), as well as securing that refund on invested
never eliminates it completely. [9] funds is sufficient to cover the risk. After the com-
Companies whose emphasys is on eliminata- pany agreed to assume the risk for certain price,
tion of all existing risks stand no chance for profit- the focus of risk management reduces to minimi-
able operation and are not able to make products zation of actual expenses for the purpose of maxi-

1898 Volume 8 / Number 4 / 2013

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mization of profit. Recommendation is that insur- 2. Identification of risk - before anything is

ance companies should keep the profit within ac- done with risks that a business entity is faced with,
ceptable limits without reducing the overall profit. risk manager needs to identify potential risks to
which the given entity is exposed. For this reason,
Procedure of risk management identification of risk is basic element of the whole
process of risk management. Important aspect of
Success of business operation is primary aim risk identification is observing exposure to risk ie
of every business entity, and for this reason deci- potential damage can be connected with certain
sion about how to protect ourselves, ie what risks type of risk, in following categories: physical as-
to insure and what to keep and face them by our- sets (property - movable and immovable), finan-
selves, can be made by person who acts directly in cial assets (own or belonging to someone else),
the company, or person who has full knowledge of human resources and responsibility.
relevant elements for risk estimate. Identification of risk is the stage of risk man-
Basic functions of risk management in insur- agement in which, beside specifying risks in gen-
ance are: eral classification system and defining entities, are
– to indicate potential damage and most suitable determined causal-consequential relation of cer-
method of economic protection by analysis of tain risks. It is important to point out that identifi-
costs of programme of protective measures, cation deals with perception of risk. Perception re-
expenses of insurance premium, and expenses fers to ability to notice potential situation in which
of other methods of risk management; damage is caused ie to notice the risk which can be
– to create security to shareholders and mana- active cause of damage. In other words, identifica-
gement, and to eliminate fear from potential tion of risk represents the process of identifying
damage; exposure of some business entity to uncertainty.
– to change regulations on protection of Process of identification starts by recognizing
facilities and production processes. four categories of loss, namely:
– direct loss of property:
Risk management is logical process which is – losses on the basis of income and extra
applied both by legal and physical persons with expenses which are made as consequence of
the aim to minimize their own exposure to risks. loss of property;
In view of nature of insurance business, risk man- – losses which come from court actions;
agement is inseparable part of all activities of the – losses caused by death, disability or un-
company. Risk management is dynamic process planned retirement of key personnel.
and can be defined as identification, analysis and
economic control of all those risks threatening 3. Risk estimate – represents general process
the assets which bring profit. That is strategy of of risk analysis and risk estimate. Experts of the
planning source of assets before damage is made, company determine potential loss and probability
which will be used to cover them, if and when of incurring loss. Once they are identified, risks
they are made. must be estimated. Risk estimate is the stage in the
As we already said, risk management is the process of risk management in which intensity and
process which consists of several steps: frequency of individual risk is determined on the
1. Establishing aims - first stage is connected basis of data about movement of damages in the
with programme of risk management, in which is past. Risk analysis consists of:
precisely decided what a business entity expects – risk identification (described in detail in the
from the given programme. Primary aim is to main- next step),
tain efficiency of the business entity. Secondary aim – risk description and
is connected, for example, with primary protection – risk estimate.
of employees from injury. Other aims are connected
with eg. reduction of expenses, socially responsible Risk estimate can be qualitative, quantitative
behaviour, good public relations etc. and semi-quantitative in regard to probabiltiy of oc-

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curence of risky event and possible consequences. 4.1. Method of physical control
Different techniques can be used for analyzing risk. Avoiding risk is one of two methods which are
Results of risk analysis can be used for getting applied when it is possible to eliminate possibility
risk profile which gives estimate of importance for of onset of certain unfavorable event in advance.
each risk and secures set of instruments for defin- Postponement of travel due to bad weather condi-
ing priority in regulating risk. One set of criteria tions or avoiding building a house in shaky area
which can be used in establishing priority is that are examples of this method of physical control.
all causes are divided into three types [10]: Avoiding risks primarily is used by persons
– critical risks - those are all exposures with high degree of repulsion to risk. An advan-
in which potential losses could result in tage of this method is that it can eliminate the
bancruptcy of entity; very possiblity of onset of damage. However, this
– important risks - include all those exposeures method cannot be applied always because some
in which potential losses would not lead to risks simply cannot be avoided.
bancruptcy, but would require evaluation Reduction of the size of risk is the second type
by the entity in order to resume business of method of physical control. This method can
operation, and reduce frequenc and/or intensity of damage by
– insignificant risks - exposures in which using different measures of technical protection,
potential losses would be compensated by by education (marketing campaign about non-
existing assets or current income. smoking) and introducing standardization in busi-
ness operation. Also, it is important to point out
For evaluation of risk, the following elements that prevention is key segment of this method, so
are important: frequency of damage, intensity of that adequate example of it can be installation of
damage and value of object of insurance. Fre- automatic fire alarm in industrial plants or fitting
quency of damage represents number of repeats of air bags in cars.
creating risks over certain period. Frequency indi-
cates whether damage appears often or only occa- 4.2. Method of financial control
sionally. Intensity (size) of damage is percentage Self-insurance or self funding of risk represents
of damage of insured object. covering the risk by which a business entity retains
risk in full or only one part, and possible damages
4. Methods of risk management - after iden- are covered by his own assets. This method can ap-
tification and evaluation of risk, the following step ply only large companies which have sufficiently
represents discussion which approach could be large number of facilities to be insured, which are
used in risk management, as well as selection of of similar nature. Example for this are production
techniques for using each of them. Risk manage- halls or warehouses, ie facilities which are located
ment contains two basic approaches that individu- so that they cannot be damaged or destroyed by one
als and organizations are faced with, such as: destructive event. As already mentioned, this method
– method of physical control and includes retaining risk, transfer of risk and insurance.
– method of financial control (financing the
risk). 4.2.1. Retaining risk (self-insurance) can be:
– active, aware retaining of part of risk,
Method of physical control is based on mini- for example by negotiating self-funding
mizing loss risk to which entity is exposed, and (samopridržaja) in damage, all this with the
it includes method of avoiding risk and method aim to reduce premium allocation, and
of reducing the size of risk. Method of financial – passive, when retaining risk is uncertain
control is based on adjusting available assets for due to lack of knowledge of danger and
covering loss, which comes out from risk which indiference of entity toward danger.
terminates after application of technique of risk
control. This method includes maintaining the However, a question can be asked whether meth-
risk, transfer of risk and insurance. od of retaining risk is efficient and profitable to big

1900 Volume 8 / Number 4 / 2013

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companies? Purpose of Table 1, 2 is to indicate ad- Beneficiaries who opt for insurance as a meth-
vantages and disadvantages of this type of risk cover. od to cover risk, first of all should determine what
Table 1. Advantages and disadvantages of self risks will be covered by insurance. After first step,
insurance (retention) of risk cover following activity that beneficiary should do is to
Retaining the risk chose insurer, paying attention to quality of ser-
Advantages (+) Disadvantages (-) vices that insurer offers, cost of insurance services
Direct interest of economists Impossibility to cover and reputation of insurer in the market.
for application of measures loss in case of
for reducing risk catastrophic damage 5. Control of risk management programme
Impossibility to cover loss After potential risks have been identified and
Simplicity in compensating
if the given fund is not adequate plans for their processing conducted,
damage
sufficient to cover damage duty of risk manager is to constantly re- examine
Increase of expenses due chosen solutions, so that given needs are covered
Self management of the
funds for cover
to regular checks of self at any moment. This is not short term process, as
risk (which is performed conditions in business operation of any business
of possible damages
by insurer) entity are changed over time, and each change can
represent new risk and new potential damage to
4.2.2. Transfer of risk is method of transferring that entity. So it is very important to monitor and
risk to other entity update data in due time, as this can reduce the pos-
For example, in financial leasing, risk is most sibility of onset of risk.
often transferred to beneficiary of leasing or insur-
ance. In addition to leaing, risk can be transferred
Conclusion
in other ways:
– by contract, where producer undertakes Insurance sector can contribute to maintaining
repair of faulty product in warranty period, economic stability, intensifying social security,
– by purchase/sale of futures agreement [11] widening the spectrum of economic activity, and
by means of stock exchange operations etc. promoting more efficient management of risk and
mitigate damage. Development of science and tech-
Table 2. Advantages and disadvantages of self nology, as well as methods of risk management, led
insurance (retention) of risk cover to overcoming many known risks, so that frequen-
Transfer of risk cy of damages is reduced in many technologically
Advantages (+) Disadvantages (-) sophisticated processes and activities, but led to in-
Possibility to transfer It is possible that transfer of crease of destructive consequences of catastrophic
risks which are not risk is not made due to accidents which happen today only as consequence
commercially insurable deficiency of contract of interaction of people or accross the state border.
Lower expenses of If beneficiary is not able to
compensation in cover damage, the risk remains
relation to premium in ‘hands’ of the beneficiary
References
1. B. Matijević. Osiguranje-menadžment, ekonomija,
4.2.3. Insurance is the simplest and safest type pravo(Insurance-management, economy, law). „Nak-
or method of covering risk lada“ Zadar, 2010; 2.
This method offers following advantages: 2. Vaughan E, Vaughan T. Osnovi osiguranja-upravl-
– guarantee that on onset of risk which was janje rizikom (”Basics of inruance – risk manage-
previously insured, expected amount will be ment”). MATE, Zagreb, 2000; 29-42.
paid, which has been defined in advance by
3. Dorfman MS. Risk Management and Insurance.
agreement; Pearson, Prentice Hall, New Jersey, 2007; 9: 167.
– certainty and stability of business operations
incurred due to any reason or danger 4. Risk in an Industrial Society – Theory and Practice, ,
(primarily by legal entities). www.bbc.co.uk , October 2002.

Volume 8 / Number 4 / 2013 1901

 technics technologies education management

5. Saunders A, Allen L. Credit Risk Measurement. John

Wiley&Sons, Inc., USA, 2002; 38.

6. B. Matijević. Menadžment šteta u osiguranju( Dam-

age management in insurance). Magazine (’World
of Insurance’) „Svijet osiguranja“ , Tectus d.o.o.
Zagreb and M. Clarke: Policies and Perceptions
of Insurance, Clarendon Law Press Series, Oxford,
1997. 2002; 4.

7. Dreher M, Ballmaier C. Die unternehmenseigene

Risiko-und Solvabilitatsbeuerteilung(ORSA) nach
Solvency II und VAG 2012. Versicherunngrecht,
2012; 4: 129-143.

8. Mankiw G. Basics of economics. MATE d.o.o., Za-

greb, 2006; 585.

9. Tešić A. Investicioni menadžment( Investment man-

agement). University 'Privredna akademija' in Novi
Sad, Faculty of economics and engineering manage-
ment, 2011; 180-182.

10. Emmet V, Therese V. Osnovi osiguranja-upravljanje

rizikom(”Basics of insurance – risk management”).
MATE, Zagreb, 2000; 32.

11. Petrović Lj. Drekić Z. Upravljanje rizikom u osigu-

ranju života( Risk management in life insurance),
DUNAV PREVING, Beograd 2004.

Corresponding Author
Aleksandra Tesic,
University ’Privredna akademija’,
Novi Sad,
Serbia,
E-mail: mikrobelgrade@gmail.com

1902 Volume 8 / Number 4 / 2013

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A review of research on leader dispositions of

the gifted
Radovan Grandic, Jovana Milutinovic, Milena Stipic
Pedagogy at Faculty of Philosophy, University of Novi Sad. Novi Sad, Serbia.

Abstract skills necessary for any aspect of man’s activity

The text starts from the fact that leadership is – at home, at work, in social community. When
a controversial and often neglected field within leadership potential is nurtured, the ability to con-
gifted education. Even though gifted children are nect with others is improved, as well as commu-
often considered future leaders at local, state, na- nication skills, conflict resolving skills and deci-
tional and international level, little has been done in sion making skills. Through leadership develop-
order to help them develop their potential. Within ment basic human needs for belonging, success
such a framework, dealing with the phenomenon of and reaching one’s own potential can be realized.
leadership, the authors of the text offer an outline of Leadership skills can make a difference between
conducted studies dealing with leader disposition in talents, making them either fully used or unreal-
the field of giftedness according to the method of ized. Nevertheless, it seems that leadership is a
theoretical analysis in order to consider the possi- controversial and often neglected field within gift-
bility to introduce leadership into the curriculum for ed education [1] with a small number of programs
gifted students. It is assumed that an overview of including leadership it their curriculum [2].
research on leader dispositions of the gifted will of- The reasons to be found in relevant literature
fer guidelines to all those responsible for leadership [3] advocating for support of the gifted have at
development in gifted population. A conclusion is least two arguments: rightfulness and economic
made that there are many approaches according to prosperity. Namely, one of the basic human rights
which gifted students can be prepared for the roles in civilized society refers to the right of an indi-
of leaders so that every gifted student can under- vidual to have opportunities to completely devel-
stand the importance of being a leader, have a grasp op his/her own full potentials. Personal rewards
on one’s own leadership potential, acquire knowl- for the development of individual’s full potentials
edge and skills necessary for an efficient leader and are numerous, however, social benefits are equally
be exposed to all the ways of leadership develop- important. Prosperity of a country undisputedly
ment both in and out of school setting. depends on individuals who are leading experts in
Key words: giftedness, leadership, education, their field, who create knowledge and can contrib-
school. ute to solving problems we are to face in the future.
As a consequence, a call for more efficient leaders
cannot be neglected. It might be that in none other
1. Introduction period of civilization history we had greater need
In spite of the fact that the concept of “lead- for positive human interaction and ethical leader-
ership” is often studied, researched thoroughly ship. These aims are essential for the progress of
discussed, the “art of leadership” still remains human kind. Within such a framework, dealing
neglected and a phenomenon impossible to seize. with the phenomenon of leadership, the authors of
However, that can be with certainty stated is the the text offer an outline of conducted studies deal-
fact that leadership skills can be developed and ing with leader disposition in the field of gifted-
that it is necessary to have a number of organized ness according to the method of theoretical analy-
encounters in order to cultivate young leaders for sis in order to consider the possibility to introduce
more qualitative future. Among other things, we leadership into the curriculum for gifted students.
are talking about the need to develop interpersonal

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2. Leadership determination and paradigm on leadership require establishment of connec-

shift tions and community as key aspects of leadership
production [10].
The term “leadership” has different meanings
When talking about leadership phenomenon,
for many people. If we refer to literature, Burns
apart from changing theories, it is important to bear
[4] states that leadership involves a broad range of
in mind the change of opinion and behaviour pat-
life experiences of a person, suggesting the chang-
terns of generations, as well as how these changes
ing nature of the construct impossible to grasp.
influence their views on leadership. In such a way,
In such a framework, leadership is determined in
for example, certain authors [9] point out that the
following ways: management and coordination of
changes between the attitudes of generations reflect
group members work [5]; the ways people with
differences in human desire to respect formal au-
certain motives and purposes in competition or
thority, implying that leadership today is more an
conflict with others mobilise institutional, politi-
influence than an authority. Such a change in under-
cal, psychological and other resources in order to
standing of leadership points to the fact that leaders
cause, engage and satisfy the motives of their ad-
of today’s will have to find new ways to motivate
vocates [4]; the process of persuasion or giving an
new generations, get to know their needs and follow
example according to which an individual (or a
them. In spite of the diversity of analyzed genera-
leading team) encourages the group to follow the
tions, some authors [13] have noticed four common
aims the leaders has or shares with his followers
competencies: (1) adaptation – ability to adjust and
[6]; interpersonal relation in which others follow a
learn how to learn; (2) engagement – ability to cre-
leader because they want to, not because they have
ate shared sense; (3) a state – emotional intelligence
to [7]; an activity or set of activities going on in a
and perspective and (4) integrity. Even though there
group, organization or an institution, involving a
are similarities between the generations of leaders
leader and his/her followers dedicated to common
– from baby boomers, generation x to the Millen-
purposes and working together in order to reach
nium – each has developed its own life paradigm
them [8]; deep sensibility for the sense of a mis-
and a characteristic conditions [14, 15] According
sion, arising out of private reasons, or a necessity
to some authors [14], young people of today have
that can be so powerful that a person looses control
always lived fast. They have visual process which
[9]; ability to create visions for positive changes,
is much faster than the one of adults, they are used
ability to focus resources on proper solutions, in-
to multitasking and they get bored sooner. With
spire and motivate others and ensure possibilities
numerous available options it seems that young
for development and learning [10]. An overview
people today need more guidance in critical think-
of definitions in literature suggests that there are
ing and decision making, in order to develop them-
numerous factors influencing leadership, as well
selves as leaders.
as various perspectives the phenomenon can be
viewed from. However, even though determina-
tions of leadership differ in many aspects, major- 3. Trends in leadership: the importance of
ity of them is focused on today’s need for collec- emotional intelligence
tive and common leadership. The founders of the Centre for Creative Lead-
In regard to leadership theories, it can be said ership conducted a study in 2007 on the sample of
that one of the oldest is the theory of a Great Man, 247 senior managers around the world on the ten
according to which leaders are different from their trends in leadership [10]. The studies resulted in
followers in their inborn features [11]. However, important patterns focused on talent, innovation,
research efforts dedicated to identification of these cooperation and globalization (See Table 1)
abilities and features have, in most part, not suc- The above mentioned research is pedagogically
ceeded in finding a convincing proof that leaders rather relevant, having in mind that it points to the
and followers are really different [12]. Opposite need to integrate the described trends in education-
to the traditional theories focused on the features al practice, and especially to the need to recognize
and abilities of individuals, contemporary views the connection between leadership and emotional

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Table 1. Leadership Trends (Martin, 2007)

Trend Explanation Implications for Education
Seriousness and intensity of change will continue It is necessary to develop new leadership
Complex challenges growing due to the factors like marked dynamics, skills, like, for example, risk taking,
shortage of talents and globalization. adjustability and navigation challenge.
It is necessary to develop creative
The Innovation
Organizations look for people with unique ideas. thinkers, people who will be ready to take
Revolution
risks.
Organizations erase cultural and geographical It is necessary to develop people who
The Art of Virtual
borders, seeking for people with new leadership have developed written and verbal
Leadership
skills. communication skills.
In a complex, global setting with new technology, It is necessary to develop skills of
Collaboration
cooperation is of great importance for the work of building relations, cooperation and
Nation
a leader. innovation.
It is necessary to develop life
The World of Leaders often work in stressful environments, management strategies through the
Interruption decreasing productivity and increasing frustration. maintenance of focus and overcoming
obstacles.
Authentic leaders are able to manage their work
It is necessary to develop interpersonal
Authentic Leaders without compromising their values, beliefs or
skills, as well as self-understanding skills.
personality.
With about 83 million of individuals who will
start leaving the work force in about four years, It is necessary for organizations to find
Filling the
organizations will probably undergo the loss of a way and attract and keep both the
Leadership Void
institutional vision, knowledge, networks and younger and senior workers.
historical context.
With the increasing level of stress with all the
It is necessary to help young leaders
more complex world, health, diet and fitness will
Longevity understand the need for proper diet,
be necessary to ensure productive and sustainable
regular sleep and stress regulation.
careers.
Shift from autocratic
It is assumed that the future success of leaders will It is necessary to develop interpersonal
to participatory
depend on his/her ability to cooperate with others. skills and emotional intelligence.
leadership

intelligence. What is the main issue here is that know themselves well have a tendency to be more
the key skills and perspectives of leadership are open, transparent and authentic. Understanding of
connected with intrapersonal skills, self-aware- one’s strengths and weaknesses can help leaders
ness, self-understanding and interpersonal skills find people who complement them and compen-
(skills in building and maintaining the relations sate in the fields they are not good enough.
with others). Similar to Gardner’s [16] intraper-
sonal intelligence, emotional intelligence involves 4. Leadership in the Field of giftedness
self-knowledge, awareness of one’s own strengths
and limitations. The main idea is that when one Out of all giftedness types stated in various
knows oneself better, it is more likely that he/she countries and international definitions, leadership
will choose the right roles and make the best deci- is one of the least recognizable fields. Marland’s
sions. When leaders know themselves, they start report [17] offered a real formal definition of gift-
feeling more comfortable in their own skin, and edness which includes “leadership ability” as one
they begin to behave consistently in various situ- of giftedness fields. More recent definition of gift-
ations, deserving the trust of others. Those who ed and talented students [18] established that the

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concept “gifted and talented students” encodes the Conducting studies on the possibilities of lead-
children and young people who offer proofs for ership development of the gifted, some authors
high potentials in the fields like intellectual, cre- [24] focused on the research on the influence of a
ative, art or leadership abilities. Although leader- summer training program on the leadership of ado-
ship has been a part of definition for more than lescents. Assessment data were collected in the be-
thirty years now, many authors agree that this field ginning and in the end of the program, as well as
has been most neglected and least used in the field after three months. Having applied the Leadership
of giftedness [19, 20, 21, 22, 23, 24] . Quotient Index, it was found that the students had
In spite of the fact that gifted students are often significantly advanced at the scales of openness and
considered future leaders at local, state, national ability to persuade others. At Gordon Personal Pro-
and international level, little has been done in or- file Inventory, students had made important prog-
der to identify these young leaders and help them ress in “domination” or an ability to be verbally
develop their leadership potential. Leadership active in a group, to independently make decisions
negligence in the field of giftedness could be the and be self-confident in relations with others. The
consequence of the complex nature of leadership engaged staff emphasized that the participation in
concept [25] or the lack of consensus on its contri- the program had contributed to the increse of co-
bution [26,27] Some authors suggest that research operation between services and had led to better
leadership in the field of giftedness has been ne- personal relationships among the employed. After
glected due to the lack of valid and reliable mea- three months, the students evaluated three influ-
sures of leadership abilities [28, 29] ences of the program: team work encouragement,
development of the ability to listen to different
4.1. Research on leadership dispositions of viewpoints and take risks. It was concluded that the
the gifted leadership program resulted in changes of students
that also reflected on other settings.
Studies on literature dealing with leadership of Dealing with leadership of the gifted, certain au-
the gifted show that majority of authors identify thors [32] describe five components of leadership
qualities or sum up the opinions of students partic- education: (1) experience in anticipating and plan-
ipating in summer programs of leadership. Within ning, (2) explicit leadership training, (3) thinking
this frame there are particularly relevant studies of abilities, (4) experience in identifying and problem
the programs designed to teach students the skills solving and (5) dealing with the main concepts,
necessary for leadership development. So, for ex- themes, issues and ideas. What is emphasized along
ample, during 1985/86, over 100 students from 6th with leadership education is the need for a compre-
to 11th grade participated in a summer Program of hensive program which includes foreign language
leadership studies at the University of South Mis- learning, mentor work with leaders, early mastery
sissippi [30]. The students were taught the fol- of basic disciplines knowledge, experience in set-
lowing knowledge and skills: leadership bases, ting and formulating of aims, investigation of val-
decision making abilities, group dynamics skills, ues, ethical principles and philosophical system and
personal abilities and planning abilities. In or- early identification of special talents.
der to determine the level of progress they made, More recent studies [33] have shown that ig-
the Leadership Skills Inventory was applied [31] noring of the needs of students gifted for leader-
both in the beginning and in the end of the sum- ship can lead up to such a situation that students
mer program. It was established that in the end of never develop the skills necessary fore reaching
the mentioned program the students made much their full potential as leaders. It is suggested that
better results in all sub-scales (leadership bases, reading or listening to the biographies of great
written communication abilities, verbal communi- leaders from the past, the brainstorming of leader-
cation abilities, explaining values, decision mak- ship characteristics, making booklets about lead-
ing skills, group dynamics skills, problem solving ers, development of scenarios of partner decision
abilities, personal development abilities and plan- making through group work, playing of leadership
ning abilities). games, learning about leaders through reading of

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fairy-tales, fables and other literary works for chil- are correlated with sex [36], drama skills [37],
dren, drawing or writing stories about what they sa verbal abilities [38, 39] aggressive behaviour
will become when they grow up, partnership with [39], and, what is most important, task demands
parents can all be the activities or ways to develop [39, 40, 41]. Some authors [40, 41] point out that
leadership skills of young people. it seems that young people grouped according to
Certain authors [1] put the accent on the impor- heterogeneous abilities are more likely to develop
tance of introduction of moral development in the transformational leadership skills.
frames of leadership education, concluding that From pedagogical aspects the studies that are es-
giftedness in the field of giftedness does not eas- pecially important are those that have examined the
ily fit into pre-established stereotypes. As a conse- phenomenon of leadership among gifted students
quence, it is hold that leadership education should during problem solving through group work form.
deal with the consequences of the training, as well So, for example, some authors [39] have conducted
as with the legitimacy of the role of a leader, effects a research on the connection between leadership and
of leadership on group performance and satisfac- task demands and unstructured and new problems,
tion of members. Furthermore, it is believed that as well as the efficacy of a variety of leadership styles
moral education should focus on the development in group problem solving. The results show that flu-
of evaluation process in mature age: leaders have ent and “verbally aggressive” students have stood
to learn how to lead from the perspective of moral up as leaders. In the groups in which leadership had
sincerity. It is thought that learning through research not emerged at early stages, “passive leaders” have
and discovery opens up possibilities for leadership manifested leadership, taking personal responsibili-
giftedness development. Similarly, more recent re- ty for the completion and organization of group task.
search [34] has focused on the studies dealing with The leaders were inclined either to lead the group
the relation between emotional intelligence, moral using the power of their personalities (active lead-
judgement and leadership of academically gifted ers) or with the help of shaping of the group input
adolescents. The results of these studies have shown according to their own ideas (participating leaders).
that academically gifted students have greater lead- The groups with interpersonal leaders were inclined
ership potential and better moral judgement than the to create products of higher quality than those with
normative sample. On the other hand, the research authoritative type of leader. A conclusion has been
has shown that gifted students have no significant reached according to the study that the task nature
advantage in emotional intelligence when compared has an influence on the style and success of leader-
to heterogeneous group of adolescents. Due to the ship, suggesting that teachers could encourage vari-
shown weakness in the control of impulses in gifted- ous skills of management in students through the
ness population, it has been suggested for future re- structure and the aims of the tasks themselves.
search to examine the relation between the low level Similarly, certain authors [41] have studied the
of emotion control and academic giftedness. In spite possibilities to develop leadership skills of pre-
of the fact that academically gifted individuals have adolescent gifted students in small groups. The
shown better moral judgement and developing lead- research tried to provide an answer to the fol-
ership potential, the authors suggest that additional lowing questions: how can leadership behaviour
programs are needed in order to optimize and de- of gifted participants be noticed? Which forms
velop these attributes. Studies of other authors [35] of transformational leadership are manifested
imply that the students with higher emotional intel- when gifted students work with the gifted and
ligence are more efficient leaders, thus also pointing non-gifted peers? Is the frequency of transforma-
to the need for leader programs to put emphasis on tional leadership behaviour under the influence
not only practical skills, but also managements skills of teaching? The results have shown that trans-
and emotional intelligence of students. formational leadership strategies were used in the
Individual researchers have dedicated their case of cooperative groups. The following lead-
research efforts to examining the correlation be- ership dimensions were involved in the process:
tween a set of variables. In such a way, it has, identification and articulation of a vision, encour-
for example, been found that leadership abilities agement to accept group aims, provision of suit-

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able models, intellectual stimulation, insurance and gifted students own characteristics typical for
of individualized support, reward and culture de- effective leaders, leadership skills development
velopment. It is concluded that leadership can be is often neglected. The aim of cultivating young
improved by teaching interventions. leaders is essential, both for individuals and soci-
It is significant to mention that certain studies ety as a whole. Therefore such an aim should be-
[42] have drawn attention to the existing standard- come an integral part of school curriculum. With-
ized measures of leadership and have suggested out purposeful and deliberate approaches to the
courses to evaluate leadership in the future. These development of young leaders, only few students
studies have warned that some instruments of iden- are likely to become those efficient, adult leaders,
tification and assessment are not only technically and the world will still be looking for them.
inadequate, but they also lack clear conceptual base. A review of studies dealing with leadership dis-
According to the study of psychometrical character- positions certainly offers some guidelines to all of
istics of leadership measures, it is pointed out that those dealing with education, who are responsible
there are important shortcomings in the assessment for the development of leadership in the popula-
of leadership in children and young people, as well tion of the gifted. What is an issue here, before all,
as that the measures are inadequately standardized is that in order to cultivate young leaders, the con-
and that information on reliability and validity are cept of leadership has to be a more immediate part
missing. Thus, it is recommended that hose interest- of school curriculum, which, on the other hand,
ed in identification of gifted children for specialized should also be broadened through more flexible
programs should take the best existing measures and view on leadership as a chosen or more elaborate
complement them by the development of additional position in politics, government, business or in-
assessment procedures. The same issue is dealt with dustry, according to a more encompassing view
by [23], who, having examined 120 organizations on leadership permeating all life dimensions, all
of youth, established that “leaders” do not exist in- disciplines, ages, cultures and levels of society.
dependently of a situation. It has been shown by the Leadership should be introduced into broadly
study that to be a leader among young people means grounded concepts, issues and problems of teach-
something much more active, procedural and rela- ing programs for gifted students. Thereby, there are
tive. Leadership refers to the “wisdom of spontane- many approaches that can prepare gifted students
ity”, extracurricular experiences and professional for the roles of leaders. Teaching units on lead-
field. As a consequence, it has been recommended ership should be an integrative part of programs
that “teachers have to deal less with individuals and for the gifted. These units might involve learning
their features and teach the situations encouraging about history of leadership, great leaders, ethical
leadership far more…” [23]. It is obvious that more dimensions of leadership, theories and styles of
studies are necessary in the filed focused on obser- leadership, multicultural leadership, leadership
vations of leadership development in a set of situa- for the future, etc. However, even though teach-
tions appearing naturally, in order to design proper ing units on leadership are important, they are not
models, assessments and teaching programs. sufficient. Even individuals with broad leadership
knowledge can be weak leaders. What is the point
5. Concluding remarks here is that to know what to do is not the same as to
know when to do it, where and how. Consequent-
There are numerous correlations between the ly, leadership skills are also important. Leadership
characteristics used to describe an efficient leader through experience starts with the development
and a gifted individual. According to relevant lit- of intrapersonal and interpersonal skills. Gifted
erature, [43, 44, 45] both leaders and the gifted students also need guidance in self-understanding
are highly verbal, socially sensible, visionaries, and approach to their own feelings and emotions,
problems solvers, critical and creative thinkers, studying of individual strengths and limitations,
initiators, responsible and self-content. In spite of acceptance of those they cannot change and set-
the fact that in our complex and global world the ting goals leading to the development of the fields
need for more effective leaders is beyond dispute necessary for personal development and relations

1908 Volume 8 / Number 4 / 2013

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with people. What is also significant for leader- Acknowledgements

ship skills is the ability to observe events from the The paper presents the results of the project
perspective of others, ability to understand others “Pedagogical Pluralism as Fundamental Strategy
and connect with them, as well as the ability to of Education”, no. 179036 (2011-2014). It is fund-
become familiar with human needs and motives. ed by the Ministry of Science and Technological
[16] calls these skills a crown of human capacities, Development of Serbia.
managing other forms of intelligence.
Schools should offer specially designed leader-
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Jovana Milutinovic,
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Epistemology and producing cultural memory

in epos: Possibility of inter-epos poem in Ivan
Mazuranic’s Smrt Smail Age Cengica
Amila Kahrovic-Posavljak
Sarajevo, Bosnia and Herzegovina

Abstract in Balkan, first enemies mirrored in epics were

In this paper the tradition of epics that produces neighbor nations. This is very well said in text Na-
and re-produces cultural episteme as the basics for tions in epic mirror:
producing cultural memory is considered. Main part “Post-communist nationalist patterns in their
of this work is de-masking specific voices of acters remaking of history, Austro-Hungarian and Tur-
in this epic since it is interesting part of tradition for key, as the imperial forces that rule the southern
being written by very well known author instead of Slavic, are replaced with the communists and after
oral heritage. The aim of this paper is to show how that with their first neighbors, Slavic nations that
author’s choice of traditional part, he incorpotrates live in the same historical context. It is not nec-
in his song, shapes an ideological context. The way essary to remark that in this remaking of history
they produce episteme, and also, how those voices where first neighbors have the rule that whilom in-
shape picture of heroic world and how they are as vaders, national ideology is based on never-ending
well important in producing cultural memory is production of an enemies. Ultimate result is com-
particulary seen throught basic method of reading plete paradox of such an ideological interpretation
text. In conclusion, these aspects are conected. in use of the culture is that former emancipator
Key words: episteme, epic, cultural memory, and national liberation potential of romanticism
post-modernism, mnemotehnics. has turned into imperialistic cultural model.” [1]
From this we can see that basic pattern of this
type of epos is producing the enemy. On the other
1. Introduction
side, epos is very conductive for producing this sort
Tradition of epic has the central place in Bal- of identity because it produces uniformed picture of
kan for several reasons. Main reason is certainly the world primarily thanks to its form (in this par-
the fact that epic poetry produces national identity ticular moment it is not important is it in the field
(shaped by the romantic picture of world). This, of of orality or the written epical tradition because in
course produces narratives and ideological matrix- Balkan’s tradition it is fact that writers of romantic
es which exclude anyone who is different. Stron- epos imitate the picture that is produced in oral tra-
gest social event produced by this model is aspira- dition). So, the fundamentals of epos form are con-
tion for homogeneous nation which in its extreme stant and if it is written the only change is that while
way produced fascist ideologies that started war in in oral epos tradition is alive and is present, in writ-
the early 1990’s and yet this same ideology repro- ten epos there is choice from tradition in a way that:
duced this mythological picture of world. “That choice is individual because there is dou-
Primarily dangerous in this epic world is the ble selection from the material of tradition: one
fact that everything is constituted on two parallel selection is already done by epoch (baroque takes
planes. First is mythologization of own nation and only some elements which are traded from renais-
producing picture of the Other as the main evil sance and other traditions, the other elements are
and so dangerous for nation’s existence or even rejected), and the other selection is made by author
subsistence. Balkans tradition of epic produces himself (Gundulić chooses from plenty of baroque
pictures of world just this way. Collective mind possibilities only ones that suite him). In this way,
is the primary one and on the other side, historical there appears possibility that epoch can be defined
approach shows that after the imperialist forces, and that epos adjusts itself to the mainstream view

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 technics technologies education management

of literature. Furthermore, reflection subjects the cording to some of the interslavic researchers), fall of
totality of an epic tradition, not just what immedi- the tyrant can be read from two basic lines:
ately precedes” [2]. a. In the linear point of view this is the story of the
The functional showings in epics are given trough fall of tyrant Smail-aga Ćengić who’s strong
the voices of actors and (usually considered the less position is based on the evil. When his evil
important) by the pheriphrasis which are usually seen is undisguised there appears one extremely
like parts of the text used for the easier memorization weak man who is unable to understand basic
of the text (in oral epos) but they as well have ideo- processes and yet wants to be remembered as
logical function because the totality of epic produces the big hero, so he said Bauk to write poem
the totality of completely homogeneous world. about him. On this level it can be read as
This epic which was written in 1845, in the ep- the interesting position of possibility of epic
och of Croatian romanticism, highly influenced by poem in epic poem (or the question could
Ivan Gundulić in the language and in the verse, those two epos be mirrored to each other in
was motivated by historical event of death of a sense of mirrored texts in narratology), and
Smail-aga Čengić in 1840. there is at the same time affirmation of the
heroism written in basic epos because of the
2. De-masking voices in epos fact that wrong epos cannot be written (or
can be as a ridicule which would be perfectly
In this poem there are several voices, but very visible in its style) since there is no big hero.
specific is that those voices are insisting on the ho- Following this logic epos means and not
mogeneous picture of the world. Focalisator is al- represents the big history of nation because
ways extradiegetic (in stories similar to this would there must be great hero behind it or otherwise
be narrator). Because of the specific nature of the the epic would never be originated. This is
written epos there happens to be that narrator is at the position in epos that not only produces
the same time writer of this epic, so it makes in- this homogenous picture of the world, but
teresting relation to a tradition which can be even abolishes possibility of differently structured
more ideologically marked. Even the metaphysics world. On the semiotic level it would mean
of presence or the absence can be applied to this, that there is no world which is signed as the
it would only make the ideological purpose of the heroic one but those in epos.
written epos more intense, or otherwise this inten- b. The other level of producing this homogeneous
sifies ideological strength of the voices in epos. world is the fact that nation who focalises this
“He (author) is not just the transferor like oral particular historical moment is homogeneous
poet, he is creator of what he narrates; for that he itself. Its enemy is in text produced as the
has right to break the rules, to change them, to rees- structural opposition. But, this opposition
tablish them etc. besides, he consciously takes an at- appears in the unusual corp. Actually, linear
titude towards other spiritual activities (philosophy, speech is changed with those unlinear and
religion etc.), just for the reason that he knows that the others are presented as the divided ones
he is creating something specific in its character.”[2] and there are (from the entire spectrum of
Behind the story of fall of tyrant which produces beings in a hostile party shown as the real
the epistemological basic of subversive ethics, there literary beings are those subversive to Smail-
is central problem of the contemporary discourse aga) like real hero Novica or poet Bauk who
studies: why is the evil tyrant always the Other? writes verses as they are shown in the epos:
Writing of fall of tyrant in own nation would not fit “But when Bauk made the last word
the romantic idea of national awake and of reaffirma- By one stroke like thunderbolt
tion of national myths. At the same time this national Thru his brain sheared rash
awareness is made on the basic approach that own Commonalthy itself didn’t witness the blame
nation is homogenous, almost perfect and the other Commonalthy itself has no eyes and mouth;
nation is the evil one. So, there appears certain man- Beat the commonalthy, beat the Turks
ichaestic picture of the world. In this epic (poem, ac- Just keep the worthy memory.”[3]

1912 Volume 8 / Number 4 / 2013

 technics technologies education management

This part shows us subversion we just talked “The term of Totality is in mnemotechnical
about. Use this basic definition of the episteme, the theories replaced into term of Culture, or it is
one that has been given by Michel Foucault: “Epis- observed to idea of Universal Text (Text World).
teme is structurally unconscious cognitional space This idea of Culture which represents collection
of the certain historical period, network of denoting of all written texts and anthropomorphizing forces
relations between the things and the words which of collective memory includes the extremes: hy-
organizes images, praxes and texts.”[4] pertrophy of the sense and the complete seman-
After this, we will show that homogeneous pic- tic nihilism, which can be shown as cyclic fiction
ture of the world where Identitiy is always based and the destruction of the ruling symbolic orders
on the bad picture of the Alterity are producing the which is absorbed in entire twentieth century lit-
epistemas which can only situate possible rela- erature. Paradoxically, in the field of tensions of
tions between two (nations, cultures, etc.) on the the order and tendencies which are producing
level of conflict. There is wide field of the possible disorder, culture is being maintained in the move.
relations, and extreme are complete agreement Interpretation of culture as memory is subversive
(almost like losing own Alterity) to the war. Ho- to world of representation and classic mimetic be-
mogeneous picture of the world makes the Other cause other text becomes referent space of text or
always guilty for something so it produces relation there happens auto reference.”[5]
of suppression in which even the war is always At the same time in post-war Balkans culture
shown as the liberation from tyrane and evil Other this strategy is used to re-affirmate old, romantic
who is always blood thirsty: view of the world. It is used to produce big ide-
– “Aga stands, Turks stands ologies which are based on the lack of dialogue
– In this sad scene, and on which in their final stage are war producing
– Nourishing its furious eyes, ideologies. In the world outside the literature, it is
– And all the blood thirst seen in fascist ideologies in the twentieth century
– Vlach blood, vlach pain is quench.’’[3] since it was anti-Semite ideology, and all homog-
enous ideologies have to be based on anti-some-
3. Conclusion thing because they do not permit difference in
their own corpus. That would be basic epistemo-
Artistic or the written literature is always made logical impact of this type of poetry on the world.
for two purposes, to strengthen one picture of the
world or to destroy it, if we simplify the problem. References
Picture of homogeneous world is there to produce
the same homogeneousness in the nation. This 1. Kazaz E. Život, 1-2, 2003; 105.
particular production is not very innocuous. First 2. Pavličić P. Epsko pjesništvo. In: Uvod u književnost,
fact for this is actual fact that epos becomes a pub- Z. Škreb et A. Stamać; Globus: Zagreb (Croatia),
lic discourse and through this it becomes part of 1986; 425.
grammar that shapes cultural memory of a certain 3. Mažuranić I. Smrt smail-age Čengića, Veselin
community. Because of this phenomenon, epos Masleša Sarajevo, 1973;
is integral part of every national cannon. And the
4. Foucault M. Riječi i stvari in: Pojmovnik suvremene
intellectual centers of power are insisting on the
književne teorije, Zagreb, 1997; 83.
strategy of a new reader-reading1. In postmodern
world (which is already past) new reader’s reading 5. Moranjak- Bamburać N. Retorika tekstualnosti. Buy-
would be use for revaluing culture. book, Sarajevo, 2003; 134.

1 Bosnian academic community uses the term ponovljena Corresponding Author

lektira, and considering context of this locution, it would Amila Kahrovic-Posavljak,
be better translated with re-reading. First term would Sarajevo,
mean that there is a new reader which implies physical Bosnia and Herzegovina,
instance and the other would mean reading again the E-mail: emira_kahrovic@yahoo.com
same texts by new or old reader.

Volume 8 / Number 4 / 2013 1913

 technics technologies education management

Economic effects of investing in conventional

and organic agriculture
Jelena Birovljev1, Nenad Djokic2, Biljana Cetkovic1
1
Faculty of Economics Subotica, Subotica, Republic of Serbia,
2
Higher School of Professional Business Studies, Novi Sad, Republic of Serbia.

Abstract etc. The results of many studies, partly included in

the listed overviews, are often contradictory and
Comparison of organic and conventional pro-
do not give an unequivocal reply to the question
duction on different issues – for example the dif-
of superiority of one of the above alternatives over
ferences in yields and revenues, but also for its
the other by any of the criteria.
impact on human health and sustainable develop-
Agriculture is an essential industry for the devel-
ment in general – is often represented in the lit-
opment of the Republic of Serbia. This fact was no-
erature that deals with these issues. The results of
ticed as early as 1928 by Archibald Rice who wrote
various studies point to different, often mutually
of the contemporary bad practice of “pushing” as
conflicting conclusions. Having in mind the im-
many young people to study, so that they could be-
portance of agriculture in the Republic of Serbia
come state officials later, instead of rearing them to
in general and the growing presence of organic
become farmers who would know their business [6].
agriculture as well, it is necessary to propose a
A question that could be raised is how different it is
methodology that would allow farmers to choose
today. However, even if really exceptional attention
whether to involve in conventional or organic
were devoted to encouraging agricultural develop-
farming. The methodology presented in the article
ment, in the modern-day conditions, this question
is based on scenario analysis and dynamic meth-
could be extended with the dilemma between or-
ods of evaluation and investment project ranking
ganic or conventional agricultural production.
(net present value, profitability index and internal
Over the past few years, in the Republic of Ser-
rate of return) and measures only the economic
bia have been taken certain steps suggesting an
effects. However, it also gives the possibility of
interest in supporting the development of organic
involving external financial incentives that could
agriculture, such as adopting laws, establishing
be a consequence of acknowledging by the state
the National Association for Supporting Organic
of the importance of other effects of certain agri-
Agriculture, establishing organic farming devel-
cultural production. The article gives an example
opment centers in Selenča, Valjevo, Svilajnac
of applying the proposed methodology. Although
an Leskovac, or subsidizing organic farmers [7].
results from implementation of methodology in a
However, at the level of farmers as individuals,
single case cannot be generalised, it is indicative
one can identify the need for educating them on
that according to all applied methods, it is more
the economic effects of opting for organic rather
beneficial to choose organic agriculture.
than conventional agricultural production.
Key words: agriculture, scenario analysis, net
present value, profitability index, internal rate of
return. 2. The aim of the article
Literature identifies several motives for farm-
1. Introduction ers to become involved in organic production. Ac-
Organic and conventional agricultural produc- cording to the result of the project entitled OR-
tion are often subject to comparison based on vari- GANIC REVISION, conducted in the EU coun-
ous criteria: yield and profitability [1], health ben- tries between 2004 and 2007 [8], besides offering
efits [2], contribution to sustainable development substantial financial incentives to organic farmers,
[3], consumer perception [4], state subsidies [5], a significant role in deciding to opt for this type of

1914 Volume 8 / Number 4 / 2013

 technics technologies education management

farming is also played by producers’ ethical val- Profitability is the ratio of the present value of
ues. However, in the considerably less favourable future net cash flows and the present value of capital
economic circumstances of Serbian farmers (as investment. It can be calculated based on formula:
well as of other transitional countries’ farmers),
and certainly lack of trust in state subsidies, one n
Rt
can suppose that major involvement in organic ∑ (1 + k )
t =1
t
farming should, first of all, be viewed in correla- IP=
tion to economic effects for the producers. C
The objective of this article is to use a specific
This index transforms the total sum of profit-
example in order to present the methodology that
ability obtained by using the net present value
could be used for deciding whether the producers
method into an index showing the project’s rela-
will opt for conventional or organic production
tive profitability. The minimum condition for
based on economic effects.
project approval requires the value of this index at
the level of 1 or more in the case of independent
3. Method project, or selecting the project with the highest
The research uses scenario analysis method, calculated value of this index in the case of mutu-
whereby individual farmers make choice between ally exclusive projects.
two alternatives – organic or conventional farm- The internal rate of return is a discount rate equal-
ing. The criterion for choice is the economic ef- izing the present value of the future net cash flow
fect assessed by the dynamic methods of evalu- from project exploitation during its life cycle with
ating and ranking investment projects [9]. These the present value of capital investment into project.
include: the net present value method, profitabil- It is calculated based on the following formula:
ity index and the internal rate of return method.
n
These three are dynamic methods of assessing and Rt
ranking investment project considering the time
C= ∑ (1 + i )
i =1
t

dimension of money. The analysis was conducted

on data gathered by primary research, and the ar- where C is the present value of capital invest-
ticle presents a specific case study. ment into the project, R is the amount of the an-
The net present value method is based on the nual net cash flow in the project lifetime, i is the
difference between the net present value of net internal rate of return, and n is the project life
cash flow from project exploitation and the capi- cycle in years. The minimum condition for proj-
tal investment in that project. It can be calculated ect approval requires the internal rate of return to
based on the following formula: be higher or equal to the rate of the investment
criterion. If the investors confirm two projects,
n
Rt
NSV = ∑ −C both with internal rate of return higher than the
i =1 (1 + k )t rate of investment criterion in both projects, they
will chose the one where the internal rate of return
where R is the amount of the annual net cash is higher if the projects are mutually exclusive, or
flow during the project life cycle, C is the amount of both, if the projects are independent.
net capital investment in the project, k is the invest-
ment criterion rate – the cost of capital, and n is the 4. Assumptions of analysis
project life cycle in years. The minimum condition
that the project must meet is for net present value Given the authors’ decision to present an ex-
to be equal or more than zero. If this condition is ample that would demonstrate the use of meth-
not met, the project should be rejected. If the net odology, it is necessary to describe the conditions
present value equals 0, the project’s cash flow will where such an example is applied. It is a situation
suffice to return the capital invested in the project where in a farmer from the region of Srem, Serbia,
and provide the required rate of return on capital. already farming 25 hectares of land, is deliberat-

Volume 8 / Number 4 / 2013 1915

 technics technologies education management

ing whether to sow soybeans on 5 out of his 25 The farmer who makes the decision has owned
hectares, and whether it should be grown organi- a tractor and required machinery for 5 year already,
cally or conventionally. This assumption is in con- and it is assumed that it will be depreciated for an-
formity with the results of research on a typical or- other 10 years. This is also in compliance with the
ganic farmer in Serbia [10], stating that more than results of research on a typical organic producer
60% of them grow organic crops on an area under in Serbia, which states that investment in new ma-
6 hectares, i.e. that certified organic soil on farms chinery is extremely low. As well as the authors
accounts for 15 to 25% of the total available area. of this article, the observed farmer, has data avail-
To apply the described methodology, it is also able for 5 hectares of two other farmers, also from
necessary to project cash flows carefully. In other the region of Srem – one growing organic and the
words, the projection of cash flows of a particular other growing conventional soybeans.
investment project must be based on three key ele- The organic producer exports his products
ments [11]: net capital investment, net cash inflow to Italy, for which he had to pay 800 euros for a
from investment activities and net residual cash flow. certificate. This is a fixed cost borne only by the
A net capital investment comprises expenditure organic producer. In addition, depreciation must
required to initiate the investment and generate the be included in the fixed costs. A tractor with ac-
expected profit. The projection of net cash inflow cessories costs 21,000 euros. Given that a tractor
from the investment activity is complex and con- can serve a 25-hectare farm, over the five years
sists of three steps: that it has been owned by the producers, under the
- projection of revenue and expenditure for assumption of regular wear and tear and the as-
each year of the project life cycle; sumed product lifecycle of 15 years, the tractor’s
- determining the accounting earnings based value has been depreciated by 1/3 of the value, i.e.
on projected revenues and expenditures; 7,000 euros. The remaining sum to be depreciated
and is 14 euros. In view of the fact that the observed
- transformation of accounting earnings into area is 5 hectares, which is 1/5 of the total farm,
net cash flows for each year of the product this means depreciation of 2,800 euros. Given that
life cycle. the project is observed for 10 years, this means
that this amount it is 280 euros per annum.
To obtain the prognosis of accounting earnings, Table 1. Variable costs of organic and conventi-
it is necessary to classify planned expenditures into onal farmers from Srem on the area of 5 hectares
operating and capital ones. In this, operating costs for 2010 (in euros)
refer to expenditures relating to generating the Soybean producer
revenue at the present moment of time, and capital Data
Org. Conv.
costs leave effects during a longer period of time.
Variable costs 2,454 2,580
After that, capital expenditures are amortized over Seed 526 622
time. The amount of net tax must be deduced from Ploughing 395 395
earnings before interest and tax. To reach from sowing preparation 197 150
accounting gains to cash flow, the investor must earthing up and weeding 612 0
once again add non-cash expenses such as amorti- Sowing 198 170
zation. Non-cash expenses reduce the accounting Fertilisation 0 730
earnings, but not cash flows as well, so it is neces- Harvest 461 448
sary to add them to the net income when calculat- Transport 65 65
ing cash flows. Individual non-monetary expendi- Source: Primary data obtained by interviewing two farmers
tures, such as amortization, reduce the company’s from Srem.
tax liabilities and result in tax deductions.
The net residual cash flow is the expected cash In addition, in the organic production scenario,
revenue that the investor will receive upon the ex- the assumption is that the net cash flow over the
piry of the project lifecycle, from the sale of fixed first years on the above mentioned 5 hectares (the
and current assets used during the project. conversion period) amounts to zero. Although the

1916 Volume 8 / Number 4 / 2013

 technics technologies education management

situation is mostly more favourable in practice, we tant, is the fact that the organic farmer is selling his
started from the more negative assumption on pur- products on the Italian market, i.e. in the EU.
pose, to avoid the final result being questioned by The applied tax rate is 10%, whereas the dis-
farmers’ different experiences regarding the con- count rate was calculated by buildup method. In
version period. addition to this method, used in the conditions
Given that the farmer owns the land and the of underdeveloped markets, the discount rate is
machinery, the initial investment equals the vari- mostly calculated by the CAPM method. How-
able costs for 2010, where opportunity costs, i.e. ever, the local conditions suggest the use of the
the sum that the farmer would earn if he rented buildup method for establishing the discount rate.
the land to somebody else, are added to the initial The Regulation on Methodology for Assessment
investment, which is, in this case 5,000 euros. of Value of Capital and Assets [13] states that the
The organic farmer’s certification cost of 800 Agency for Privatisation determines the real rate
euros was also calculated into the initial invest- of return on risk-free investment, and the premium
ment in this case. Both farmer s’ historical data on for investment into the Republic of Serbia at six-
revenues they earned for the past years have been month level. However, one must bear in mind that
used for projecting future revenues. the given rates were announced only for the period
The revenues in the forthcoming 10 years are from October 2001 till April 2002, but they were
projected by monitoring the revenues in the past neither established nor announced ever since. This
years. The average growth rate can be calculated article uses those announced rates.
by the following formula: Despite being aware that the data is over a dec-
ade old, the authors highlight that the only avail-
able data is used, that it must be noted that these
rates account for a minor part of the calculated dis-
count rate, and that no dramatic changes are ex-
where n is ne number of years of observation, pected in these rates. In addition, the rate of return
which is 5 in this case. to risk-free investment was 4.5%, whereas the risk
Table 2. Revenue of conventional and organic rate for investment into the state is 7% [14].
soybean producers over the past 5 years In addition to above, the project-specific risks
revenue in euros revenue in euros must be calculated and added to the discount rate.
Year
conventional producer organic producer Very often, company-specific and project-specific
2006 2996.0 3240.0 risks are identical, so that the project-specific risk
2007 2530.5 4050.0 was established by analogy. Adding up individual
2008 4350.0 3990.0 risk rates assessed for the company size, quality
2009 3540.0 4304.0 of the organization, management and human re-
2010 4075.9 4986.0 sources, financial standing, production and sales
Source: Primary data obtained by interviewing two farmers potential and the possibility of reliable forecasts
from Srem of business operations results in obtaining the risk
rate for investment in the specific company [13].
Application of the formula resulted in the aver- In this case, the sum obtained was 12%. The ob-
age growth rate in organic farming S=11.38%, and tained value, added to the rate of return on risk-
S=8% in conventional farming. The calculated free investment of 4.5%, and the risk rate of in-
values were incorporated in revenue calculation vestment into the state of 7%, produced the dis-
over the project lifecycle, i.e. 10 years. count rate of 23.5% used in this article.
As for cost projection, the annual growth rate
of 2.12% was used, equal to the expected inflation
5. Results
rate in the EU [12]. The authors’ decision to use EU
inflation rate resulted from two reasons. First, one The basic indicators for two possible scenarios
must bear in mind that all the amounts in the project were calculated using the above described method-
are expressed in euros. Second, and more impor- ology and the assumptions of analyses. The first sce-

Volume 8 / Number 4 / 2013 1917

 technics technologies education management

nario relates to a farmer’s possible decision to grow Several implications and conclusions can be
soybeans conventionally on 5 hectares of land. The identified based on the literature cited in the article
second scenario shows economic indicators in the and the conducted primary research. Firstly, before
case of possible choice to grow organic soybeans. making the decision, it is necessary to analyze two
If the farmer opted for growing conventional scenarios: one in case of opting for organic, and the
soybeans the project would be acceptable accord- other, in case of opting for conventional farming.
ing to all three methods of investment project as- Secondly, to conduct the analysis, it is neces-
sessment and ranking. The total net present value sary to provide already existing data from farmers
in this case is about 1,193 euros, which means that involved in both conventional and organic farm-
all the discounted expected future net cash flows ing for a number of years. In addition to variable
exceed the investment by this amount. The profit- costs (seed, ploughing, sowing preparation, earth-
ability index of 1.16 exceeds the value of 1, which ing up and weeding, sowing, fertilization, harvest
also suggests feasibility of the project. The calcu- and transport), opportunity costs (such as renting
lated internal rate of return of 26.5% is higher the the land to others) should be incorporated into the
discount rate of 23.5%, so that the project is fea- initial calculation, as well as possible certification
sible under this criterion as well. costs for an organic farmer. In the example shown
In the scenario by which the farmer opts for in the article, the situation was somewhat more fa-
organic production, the net present value is about vourable for the organic farmer regarding the vari-
7,318 euros, the profitability index is 1.89, while able costs (2,454 euros for 2010 compared to 2,580
the internal return rate is 41.5%. All three methods euros for the conventional farmer), mainly due to
suggest feasibility as well. fertilisation costs. Future costs are projected onto
However, what the authors find especially im- that basis. However, when the certification cost of
portant is comparison between the two projects. 800 euros for certification is added, the initial in-
According to all three methods, opting for organic vestment is higher for the organic farmer, whereas
agriculture yields better results. Furthermore, the the same amount of opportunity costs is included
least favourable conditions were assumed in the in the initial investment in both cases. Based on the
calculation of opting for organic farming – all available historical data, it is also necessary to proj-
three years during the conversion period the net ect the revenue and costs in the project lifecycle,
cash flows amounted to zero, the producer paid the which is, in most cases, 10 years, plus establishing
costs of the certificate, and there are no state sub- the discount rate. The organic farmer’s key advan-
sidies. The only factor in favour of this production tage is higher sales price, plus the higher growth
is export, and this assumption was chosen because rate (11.38 compared to 8%), which managed to
the interviewed organic producer has decided so compensate for the less favourable initial situation
himself. In view of the export potential of these for the organic farmer over the project lifecycle,
products, the accomplishment of the assumption even bearing in mind the condition that the fore-
seems probable. seen net cash flow for the organic farmer amounted
to zero. However, in such a situation, the fact that
6. Conclusion identical cost growth rate (2.12%), tax rate (10%),
amortization (280 euros annually and discount rate
The literature does not provide consent in con- (23.5%) was in favour of the organic farmer.
clusions regarding the comparison of convention- Thirdly, the dynamic methods of assessing and
al and organic agricultural farming by any criteria, ranking investment projects, i.e. net present value,
including economic benefits for the producers. On profitability index and internal return rate, can be
the other hand, the development of organic farm- used for considering the economic effect of both
ing in Serbia and state support face the farmers possible scenarios. In the presented example, in
with the possible dilemma whether to engage in addition to establishing that both scenarios are
organic or conventional farming. In most cases, cost-effective by all three methods (the net present
the decision of such a dilemma would be made value for the organic farmer amounted to 7,318
based on the economic effects for the producer. euros compared to 1,193 for the conventional –

1918 Volume 8 / Number 4 / 2013

 technics technologies education management

both above zero level; profitability index for both 6. Rajs RA. Čujte Srbi! Čuvajte se sebe. Beograd, Sr-
was above 1, i.e. 1.89 for the organic and 1.16 for bija: Mali princ, 2006.
the conventional farmer; the internal return rate 7. Sudarević T, Salai S, Pupovac Lj. Marketing aspekti
for the organic farmer of 41.15% is higher than ponude organskih poljoprivrednih proizvoda u Srbiji
26.25% for the conventional). i okruženju. Anali Ekonomskog fakulteta u Subotici
The example shown in the article should be in- 2011, 47(26): 33-48.
terpreted as a demonstration of the application of
8. http://www.organic-revision.org/pub/D21_FOCUS_
the above described method rather than a univer- GROUPS_ON_VALUES1.pdf
sal conclusion of domination of the economic ef-
fects of organic in comparison with conventional 9. Krasulja D, Ivanišević M. Poslovne finansije. Beo-
farming. However, the overall results support the grad, Srbija: Ekonomski fakultet Beograd, 2011.
conclusion stated in the literature that small fam- 10. März U, Stolz T, Kalentić M, Stefanović E. Organic
ily farmers are the potential development carriers agriculture in Serbia 2012-At a Glance. Belgrade,
of organic agriculture in Serbia [15]. The exam- Serbia: National Association Serbia Organica, 2012.
ple described above should be understood as an
indicator of the possibility and necessity of care- 11. Stančić P. Savremeno upravljanje finansijama
preduzeća. Kragujevac, Srbija: Ekonomski fakultet
ful consideration of the economic effects of opt- Univerziteta u Kragujevcu, 2006.
ing for one of the two alternatives of agricultural
production on a scientific basis, rather than based 12. http://www.imf.org/external/pubs/ft/weo/2010/02/
on assumptions and prejudice. The described weodata
methodology could also be of importance for the
13. The Official Gazette of the Republic of Serbia,
representatives of the state and non-governmental 2001, 45.
organisations in providing possible incentive to
farmers to become involved in organic production. 14. The Official Gazette of the Republic of Serbia,
2001; 60.

References 15. Birovljev J, Štavljanin B. Razvoj organske proiz-

vodnje hrane zemalja komparativnih resursa u
1. Kilcher L. How Organic Agriculture Contributes to Evropi. Paper presented at the XVI International
Sustainable Development. In: Willer H, Yussefi M, Scientific Converence Strategic Management and
(Eds.) The World of Organic Agriculture - Statistics Decision Support Systems in Strategic Management
and Emerging Trends 2007; 82-91. (SM2011), Palić, Serbia, 2011.
2. Heaton S. Organic farming, food quality and human
health: A review of the evidence. Bristol: Soil Asso- Corresponding Author
ciation 2001; 1-88. Jelena Birovljev,
Faculty of Economics Subotica,
3. Berber N, Đokić N, Kočić-Vugdelija V. Organska Subotica,
poljoprivredna proizvodnja kao element strategije Republic of Serbia,
održivog razvoja Srbije. In: Tomić D, Ševarlić M, E-mail:birovljevj@ef.uns.ac.rs
Zekić S, (Eds.) Agrarna i ruralna politika u Srbiji-
nužnost ubrzanja reformi 2011; 129-147.

4. Hughner RS, McDonagh P, Prothero A, Shultz CJ,

Stanton J. Who are organic food consumers? A com-
pilation and review of why people purchase organic
food. Journal of Consumer Behaviour 2007; 6(2,3):
94-110.

5. Dimitri C, Oberholtzer L. Market-Led Versus Gov-

ernment-Facilitated Growth: Development of the
U.S. and EU Organic Agricultural Sectors. United
States Department of Agriculture, WRS-05-05. Au-
gust 2005; 1-26.

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 technics technologies education management

Effectiveness of integrated enterprise

information systems education program
Ognjen Pantelic, Ana Pajic, Dragana B. Vujaklija, Mirko Vujosevic
Faculty of Organizational Sciences, University of Belgrade, Belgrade, Serbia

Abstract transfer has been known since as far back as 1988:

“There is growing recognition of the ‘transfer prob-
The training level can directly contribute to a lem’ in organizational training today. It is estimated
more extensive utilization of business informa- that while American industries spend up to $ 100
tion systems and increase the organization’s pro- billion on training and development, it is estimated
ductivity. Being more and more accepted by busi- that not more than 10 percent of those expenditures
ness in general, integrated software solutions have actually result in transfer to the job... Researchers
become today a standard for more effective eco- have similarly concluded that much of the training
nomic operations. ERP systems offer reliable use conducted in organizations fails to transfer to the
and integration of all the functions of a business work setting.”[2].
system. Due to frequent unclear defining of the Investment into training and personal devel-
individuals’ tasks, authorizations and roles, initial opment of employees is meant to provide for the
problems occur in the utilization of information realization of business goals, as well as improve-
systems after their introduction.. Balanced Score- ments of business results. Since “Every hour of
card is a strategic tool that takes into account the needed end-user training is worth an average of
impact of intangible assets on the creation of val- five hours to the enterprise.” (Gartner Group Re-
ue, and evaluates nonfinancial key performance search Note), it is necessary to measure the effec-
indicators to measure the company’s progress. tiveness of the training program for the purpose of
The aim of the paper is to point out effectivness of directing its activities towards the desired goals.
the ERP trainig program. Therefore, this study will be addressing this issue.
Key words: ERP system, enterprise informa- The paper will attempt to find the answer to the
tion systems, balanced scorecard, education. already existing question: “Did the training con-
tribute to improved performance as planned?” or
1. Introduction did it produce a “return on the expectations” as the
In today’s changing and competitive business ultimate measure of training effectiveness [3].
environment, organizations are in a constant strug-
gle to obtain dominance in the market. Aware of 2. Research questions and literature review
the fact that human capital is their most important
resource, they set aside massive financial resources The field of research of this paper represents an
for the education of their employees. Furthermore, analysis of the theoretical discoveries and concepts
the rapid development of information systems and from the field of determination of the business
technologies calls for the establishment of a per- value derived from investing into staff training, as
manent development and education process, both well as the problem of knowledge transfer and its
on the individual, as well as organizational level. successful application in practice. The basic ques-
Today, a growing number of companies are moni- tion to be answered is how to measure and monitor
toring their business through Enterprise resource the effects of training implementation, in order to
planning (ERP) systems. improve the business results of the organization.
Many empirical studies have shown that the The starting point is the well known management
business value from investment into learning and principle: “What you measure is what you get!”.
development can be greater than the one being cur- Special attention is dedicated to the research of
rently achieved [1]. The problem of knowledge existing metrics, as well as the manner in which

1920 Volume 8 / Number 4 / 2013

 technics technologies education management

they provide insight into the value of a training It is not sufficient to merely perform financial
program. Their analysis should provide a basis for analyses and determine how much of financial
the selection of the most appropriate metrics in a resource was invested in the training of an em-
specific business environment, and can be a good ployee, but it is his or her desire and motivation to
starting point for further research and case studies. participate in the training program and apply the
The problem of determining the effects of dif- newly acquired knowledge in practice that is cru-
ferent types of training is receiving growing atten- cial. “Before trainees can benefit from any form
tion from scientists. Until now, the greatest num- of training…they must be motivated’” is the point
ber of papers was focused on case studies from that Goldstein [6] highlights in his book. Anvari
practice, while only a small number of them per- Roya, Salmiah Mohamad Amin, Wan Khairuzza-
formed empirical and conceptual studies on the man Wan Ismail and Ungku Norulkamar Ungku
mentioned topic. Ahmad [5] examined the relationship between the
Different types of training are in existence to- motivational level of employees and the effective-
day. The difference between them is whether they ness of organizational training programs, with
provide new technical knowledge or enhance the findings that the motivational level of employees
soft skills of employees. Regardless of the type, is its foundational component.
training needs to enable employees to perform their Although there is a great number of method-
work in a different manner. Therefore, it is neces- ologies, from quantitative metrics ROI (Return on
sary to measure the effectiveness of the training Investment), to higher qualitative metrics of the
through changes in behavior that will have an im- Balanced Scorecard (BSC), there is no best pos-
pact on the business results. Pfeffer and Sutton [4] sible solution or standard for measuring the value
have come to the conclusion that it is not enough of training programs. According to Kaplan and
to merely possess knowledge, but that it must re- Norton [7], the Balanced Scorecard is a strategic
sult in new activities and a change in behavior. tool that takes into account the impact of intan-
Some of the most common types of training meth- gible assets on the creation of value. It also evalu-
ods will be analyzed in the paper. Wick Calhoun, ates nonfinancial key performance indicators to
Pollock Roy and Jefferson Andrew [1] also dealt measure the company’s progress on the road to
with the described problem in the second edition implementation of strategic goals.
of their book, where they try to provide an answer The further subject of this research will be the
to the question “How to turn training and develop- review of metrics, and the creation of a conceptual
ment into business results”. Through the six disci- model for measuring the performance of training
plines of breakthrough learning, they emphasize programs.
the close connection between knowledge transfer
and evaluation of the achieved results. 3. Enterprise resource planning systems
Training can be quite expensive. The direct
costs of training implementation include the costs An Enterprise resource planning (ERP) system
of materials, instructors, training locations, as well is an integrated software solution whose purpose
as the opportunity cost of attending the training is to unite all of the business areas that are need-
rather than performing work. Bearing in mind the ed by an organization[8]. ERP systems are often
Gartner Group Research Note: “Every hour of adapted for certain branches of industry. In addi-
needed end-user training is worth an average of tion, the system can be adapted to meet the needs
five hours to the enterprise” [5], which has proven of every individual company through the use of
that training is inversely proportional to employee modules and predefined parameters. The conve-
turnover, we find that through strategic planning nience of using an ERP is reflected in the fact that
and implementation of the training process we can data is entered only once, which allows for a sig-
achieve benefits that exceed the costs of training. nificantly shorter processing time, reduces errors
During the evaluation of training we must not and prevents the duplication of data.
neglect its nature, which is responsible for the re- The ERP system always starts from the top of
alization of a large number of intangible benefits. the organization, bearing in mind the vision and

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 technics technologies education management

long term goals. The system includes defined increases certain costs of the company. Some of the
methods for translating strategic plans into tacti- limitations of the ERP can be reflected in its high
cal and detailed operational plans, and establishes price, inclusion of millions of Euros in sales of the
feedback control mechanisms for monitoring the manufacturer, additional investments into consult-
realization of the plans. The entire system provides ing expertise and internal development, as well as
each individual user with the ability to perform a strong influence on the future work of staff and
their tasks more easily, accurately and efficiently, their attitude towards the new solution. Mainly, the
providing them with all the necessary information advantages and benefits of the ERP are much great-
for the realization of their business functions. A er than the costs and limitations, especially if the
change that occurs during any business process, at planning and management of the project are per-
any time and place, is instantly visible in the en- formed in a precise and efficient manner.
tire business system, and enables for an adequate The introduction of information systems and
response of the executors, as well as management their adequate use have become a prerequisite of
of the organization at all levels. The main advan- modern business. Following the clear definition of
tages and disadvantages of the ERP system could criteria and set goals related to the use of a business
be systematized in the following manner. Advan- information system, it is also necessary to provide
tages are: adequate staff training. One of the problems that
– improves access to information, arise during the introduction, implementation and
– improves process flows and their efficiency, use of the system is the inadequate training of us-
– data is entered into the system only once, ers, which is very important for the proper and ap-
– built in rich experience of experts, propriate use of a business information system.
– allows for adaptation to needs,
– allows for re-engineering of business pro-
cesses and their improvement and
– eliminates expensive and inflexible existing
solutions.

Disadvantages are:
– implementation is long and expensive (12-
18 months for implementation and 1-3 years
of real transformation),
– maintenance is very difficult,
– errors are replicated throughout the system,
– does not always provide certain benefits,
difficult inte
– ration with other solutions, Figure 1. Published fields of the ERP [9]
– extensive user training and
– all users are brought to the same level of Figure 1 shows the areas that have been pub-
knowledge. lished in relation to the ERP. The research was
performed on 238 papers that were published after
The ERP offers an integrated system that is the year 2000. It can be noted that implementation
shared by all of its users, unlike certain solutions literature is still dominant (prior to the year 2000
where a separate set of computer applications bare- at about 50%, on a sample of 189 papers), but that
ly communicate among themselves, where each the least amount of attention was dedicated to the
one has its own set of data and files with which it training and practice on ERP systems. This paper
operates. During the entire consideration process aims to show how adequate methods can increase
of whether to implement the ERP, it should be de- the effectiveness of training, and thus greatly in-
termined whether there are pure benefits from in- crease the usefulness of the ERP solution as well
tegration of the ERP, and whether this logic also as employee satisfaction.

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 technics technologies education management

4. Performance evaluation framework of BSC has been widely adopted and used in the
business sector, the education sector has apparently
Kaplan S. Robert and Norton P. David [7] pre-
not embraced the BSC concept as widely, as is in-
sented a comprehensive framework for performance
dicated by the dearth of published research on this
evaluation, the Balanced Scorecard, through which
topic”[10]. The research “Applying the Balanced
the vision and strategy of an organization are trans-
Scorecard to Education” conducted by the South-
formed into a set of strategic objectives and perfor-
east Missouri State University, points out the differ-
mance measures. It is based on the determination
ences and similarities that occur between the BSC
of presently achieved results as well as future ben-
concept for business and for education. A necessity
efits, allowing the possibility for a clear overview
can be seen for adaptation of the concept in the field
of the business from multiple perspectives, for the
of education, where the key performance indicator
purpose of making better strategic decisions. In the
is the students’ satisfaction with the education pro-
age of information and knowledge, it is no longer
gram and the process of knowledge transfer.
sufficient to measure only financial performance,
The exception is represented in a case study
but instead it is necessary to determine the value of
conducted at the Institute of Technical Education
intangible assets through four interconnected per-
(ITE) in Singapore [11], where emphasis is given
spectives: finances, clients, internal processes and
to the application of the observed framework in
continuous development.
practice. One of the rare studies on this topic also
1. The financial perspective provides insight
represents the starting basis of this paper.
into financial results, into the performance of the
return on investment. The aim is to ensure the prof-
itability of business operation. 5. Model specification
2. The perspective of clients strives to harmo- Every educational institution strives to provide
nize the products and services portfolio with cur- its students with high professional knowledge and
rent and future market needs. competences for successful employment follow-
3. The perspective of internal processes mea- ing the completion of their studies. Students are
sures the performance of key business processes then ready to step into the world of real business
that lead towards the fulfillment of customer de- and become competitive on the market.
mands. We can list the cost of development and The Faculty of Organizational Sciences (FOS),
time spent on planning as an example. as a part of the Belgrade University, is the leader
4. Continuous development and learning is the in this field in the SEE region. It is one of the most
perspective that is oriented towards measuring the sought after faculties in its area, known for its nu-
value of intellectual capital and the development merous innovations and constant investment into
of human resources. the development of its educational programs. One
that stands out is the collaboration with the Mi-
Each perspective consists of the relevant stra- crosoft Company, and the obtaining of a license
tegic objectives and key performance indicators. for educational purpose usage of the business in-
The Balanced Scorecard is used around the world formation solution - Microsoft Dynamics NAV.
precisely due to its success in the inclusion of in- Through practical workshops, students have an
tangible values in the performance evaluation pro- opportunity to get acquainted with the manner of
cess. Its significance is also reflected in the moni- functioning of an ERP solution, and acquire the
toring and implementation of strategic objectives basic knowledge that will provide them with a
of an organization. It can be applied in all organi- competitive advantage on the market. The main
zations, regardless of their type. objective of introducing this program is the im-
Although the BSC was received very positively provement of quality in the process of knowledge
on the market, a lack of studies that analyze the per- transfer through its practical application. The pro-
formance of methodology application in the non- gram has proven to be very successful, attracting
profit and public sector can be noted, especially increasing attention of both students and potential
in the field of education. “Although the concept employers.

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 technics technologies education management

The mission of the organization is to provide its tomer satisfaction is in business. The student is the
students with high quality training for greater recog- center of attention, and his or her needs and desires
nition of their market value by employers. In order need to be noticed, understood and met in order to
to accomplish this, it is necessary to carry out perma- provide a quality service. The students’ satisfac-
nent improvements of the program. The Balanced tion with the program, its acceptance, their further
Scorecard methodology was introduced for this pur- development in the respective field and possession
pose. It is a methodology for determining and moni- of knowledge recognized by the Microsoft part-
toring current and future performance, where based ner, represent the strategic objectives in this per-
upon the obtained results, it is possible to undertake spective. However, a student cannot be fully iden-
certain measures to increase the quality of the very tified with a client, because the ultimate result of
service. The main goal is to attract as many students the training process is knowledge, or intellectual
and partner companies as possible, and to motivate capital, which is by many means different from
them to join and support the program. the goods or services provided to clients. There-
Seeing as how FOS is a public non-profit in- fore, emphasis is placed on the student learning
stitution, its activities are above all focused on perspective rather than the customer perspective.
increasing brand recognition among its stakehold- Within the Internal Business Perspective, key pro-
ers. The focus is not dedicated to achieving profit- cesses are identified which determine the effec-
able business operation, but to increasing the intel- tiveness of training programs, and related to them
lectual capital, or intangible benefits that are very are the following strategic objectives: expertise of
difficult to quantify. The knowledge that students the instructor, performance of the training and the
possess and the recognition of that knowledge by efficient use of resources. Taking good care of re-
the employer are the key performance indicators sults and resources can significantly increase the
of NAV training. Based on the given, it can be performance of a program, which affects the stu-
concluded that the originally defined concept of dents’ satisfaction. This is where the need was ob-
BSC, intended for profit organizations, does not served to link the two perspectives, Student learn-
fully suit the needs of a NAV training. It is neces- ing and Internal Business. The fourth BSC per-
sary to create a model of transition from the finan- spective is derived from the idea “to improve and
cial perspective to the stakeholder perspective, as create value”, and observed in the context of NAV
a “bottom line” priority. The adapted BSC model training it is reflected in continuous education and
[11] is shown in Figure 2. development of instructors. The creation of a posi-
tive organizational climate encourages active stu-
dent involvement in work and the following of the
latest trends. Motivation and satisfaction of the in-
structor have a direct impact on the improvement
of the quality of training. The term Stuff learning
and improvement perspective was accepted, which
better reflects the role of the instructors in program
development. It was adapted from Innovation and
Learning Perspective in the original BSC model.
A crucial role in the improvement of an instructor
may be held by stakeholders. Through attendance
Figure 2. Adapted BSC model for NAV training of various conferences and training sessions or-
ganized by the Microsoft partner, instructors are
What is the NAV program’s contribution to the able to extend their knowledge in the subject field,
creation of knowledge? How effectively does it and are motivated to transfer knowledge to their
transfer knowledge to students? These represent students. This is the manner in which stakehold-
the essential questions of the Student learning per- ers invest into future young experts. Based on the
spective. The student learning experience is the given, we can conclude that there is a bidirectional
key to success in any educational program, as cus- relationship between the perspective Stuff learn-

1924 Volume 8 / Number 4 / 2013

 technics technologies education management

Table 1. BSC model for NAV training

Perspective Strategy objective Key performance indicators (KPIs)
The program is supported by the Microsoft partners - Number of guest instructors
Stakeholder
Greater student interest - Intake rate (% of students annually)
Student satisfaction - Student Satisfaction Index
Student learning
Creation of future experts - Employed students
- Student employment
Effectiveness of the training
- Grade structure
Internal process
- Total cost of training
Efficient use of resources
- ROI
- Number of hours spent on education
Further development and keeping track of the latest
Stuff learning and of employees
trends
improvement - Use of current versions
Active student participation - Number of accepted student proposals

ing and improvement and Stakeholder, which does

not exist in the original BSC model [11].A defined
BSC with perspectives, as well as their goals and
indicators to be measured, can be found in Table 1.

6. Research results
For the purpose of monitoring the first perspec-
tive - stakeholder, the following relevant KPI’s were
set. Keeping track of the number of guest instruc- Figure 3. Satisfaction of students with the training
tors is meant to demonstrate the extent to which,
during the years, professional expert assistance The number of participants that attended the
has been realized in specific aspects of ERP sys- NAV training, as well as the number of students
tems. Not one year has passed, following the initial, that applied to attend, have been growing over the
without the support of appropriate instructors. Also years during which training was realized, which
the attendance of students has increased in a train- points to the greater interest of the listeners. Stu-
ing organized in such a manner. The percentage dents that have opted to listen to the course have
of students that have recognized this brand, which to the greatest extent chosen to focus their final pa-
has been developing for years, has been showing a pers on the same field, and practically apply their
growth rate from year to year. The monitoring of knowledge or conduct corresponding research or
students, as the second perspective of the BSC, was comparison of the solution in practice. This num-
realized through the monitoring of several KPIs. ber of students has increased during the years.
The satisfaction of the students with the training is Students who have completed the training, and
one of the most important. Over the years, numer- defended their final papers, have become candi-
ous surveys and questionnaires have been conduct- dates for future NAV operatives and have stepped
ed, in order to determine the extent and manner in out into the labor market. Within the Microsoft Cor-
which NAV training contributes to the creation of poration, its partner companies, and clients that are
knowledge, and motivates for further development. at NAV, the number of participants who have passed
The results show that the satisfaction of participants through the training in the employment structure of
is at a very high level each year, which directly af- these organizations can be considered more than
fects the rise in the number of students who wish to excellent, as is shown in Figure 4. Especially if we
attend this training, figure 3. take into account all of the circumstances that make
employment in the region difficult.

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 technics technologies education management

It should be noted that if we monitor universi-

ty training within the realization of scenarios and
compare it to the training of staff, the following can
be seen. Staff training can be realized in the ways
already mentioned. But if we were to guide our-
selves by the principle of greatest similarities with
the established model that has proven its effective-
ness, we could be able to set aside an appropriate
model for training in a company. If we avoid inef-
Figure 4. Graduate student employment ficient long lectures, or the use of only electronic
materials, training directed in such a manner will
One of the ways to measure the performance of be observed through the variables of the models
work training on the NAV system is to keep track that are different. The costs of computer use do not
of the number of students per year who have com- change, nor does the number of hours and class-
pleted the training. It can be seen in the graph that es. The price of a kW per hour is 0.036 e, while
a decreasing number of students are dropping out, the consumption is 0.2 kW / h. Through the use
or in other words are not managing to complete the of licenses of the company which on average cost
entire course and master the training. The number around 1500 euro, and the engagement of consul-
of participants who have successfully mastered tants who are responsible for the training at an av-
the training has gradually increased from year to erage hourly rate of around 50 euro, the following
year. Including the final year of this research, a conclusion can be reached. The University class on
very high percentage of passing participants has average can be observed through the amount of 4
been achieved. euro to 15 euro depending on the level of study,
The factor of participants’ passing is a signifi- and we can assume that the average is 10 euro.
cant indicator of the quality of the provided train- The used demo license is sufficient for realization
ing. It indicates that the choice of the right method of the set scenarios, and is free. With the price of
of training was adequate. It is also the indicator of the license included in the cost model, there would
the quality of evaluations from the students who be a drastic difference between the business model
have applied their knowledge, and realized rele- and the workshop model. But if we were to decide
vant scenarios which they became used to during not to include the price of the license in the staff
the workshop. The results of the participants are training, but instead have it paid for within the
shown in the following figure 5. It can be seen that implementation of the system, then the relation-
every year, the results became better, and that the ship between user training in companies and the
focus of the participants was placed on the quality workshop model.In addition, cost effectiveness is
of realization of the proposed scenarios. higher with a larger number of classes. The costs of
training are calculated using the following model

TC=P*N*k*Ck+Tr+L*F

Where: TC- total costs of training, N- num-

ber of hours in one class, P- number of classes,
K- number of instructors, Ck- price of instructors,
Tr- costs of computer use, L- price of license for
one active client and F – number of clients in the
system, which are simultaneously active.
The costs of using computers are calculated
based on:
Figure 5. Participant evaluations
Tr=Nkw*Ckw

1926 Volume 8 / Number 4 / 2013

 technics technologies education management

where: Nkw- number of used kW per hour, for program to them, as much as possible. Given the
the use of computers, Ckw- cost of electricity. temporal, economic, technological and other limi-
We are using ROI as a method that is an indica- tations, the feasible demands of participants are
tor of validity, as another KPI for the monitoring of accepted, and implemented into the program for
this type of training. As a record of what is obtained following generations.
through adequate training, we used the quality of We also must not neglect the creation of a posi-
the students and their employment in business sys- tive organizational climate, which greatly affects
tems that have an ERP, on which they were trained. the quality of the training and satisfaction, of both
The average starting salary of the employed partici- the participants as well as our stakeholders. The
pants in the region is up to 500 euro. creation and maintenance of a positive atmosphere
The fourth perspective, as the directions of that encourages work on personal development
specialization and future development, we moni- and the achievement of desired project results
tored through several indicators. The indicator of is the duty of the instructors. KPI satisfaction of
investment into personal development and that of the instructors with the participants is monitored
the team, as well as an increase in the quality of through the held training, and works of the partici-
training, was monitored through the staff develop- pants. Figure 19. clearly shows how the quality of
ment. In other words, attendance of conferences, the papers and the workshop has been constantly
symposia, seminars, courses, etc. Monitored was raised from the aspect of the instructor. For the
the number of hours per year that the instructors year 2011, only a certain number of participants
set aside for their own training and keeping track presented their papers, so the entire year cannot be
of trends, figure 6. fully viewed in the graph, but only partially.

7. Conclusion
Today, business information systems provide
organizations with an adequate competitive ad-
vantage. They lead to greater security and better
structure of organizational data, as well as the
greater efficiently of its use. ERP solutions offer
complete integration of organizational data, and
increase the possibility of meeting the specific
needs of businesses organizations.
For an ERP solution selected in such a manner, it
is necessary to implement adequate training through
the use of some of the training methods. In a set
Figure 6. Development of instructors virtual organization, training is realized through the
method of scenarios in which every employee has
As far as keeping track of trends is concerned, their role and powers, which are given to them for-
it is important that the implementers of the train- mally. With scenarios of the ERP system defined in
ing are developing and improving. But it is as such a manner, the participant, employee, or student
equally important that the participants have the can more effectively understand the performance
opportunity to work on the most current versions, of his or her work, observing it through the prism
while this can be observed by the criteria of the of the overall business activity of the organization.
latest versions of the NAV solution, or by the cur- In this manner, the level of staff expertise is in-
rent versions of the organizations in the region. creased for the management of business activities.
Also, the workshop implementation program and In the set environment, the participant can carry out
its evaluation are monitored each year based on the assignments at the workplace, through the de-
surveys. Proposals and improvements of the par- fined scenario, and in accordance with his author-
ticipants are discussed with an aim to adapt the ity. These tasks are the tasks that are also formally

Volume 8 / Number 4 / 2013 1927

 technics technologies education management

assigned to the participant in the business system. 2. Baldwin T, Ford J. Transfer of training: A review and
With such a virtual organization model, the realiza- directions for future research. Personnel Psychology,
1988; 15: 60 – 107.
tion of training in classes during studies, as well
as seminars and courses, is expected for learning 3. Kirkpatrick J, Kirkpatrick W. Kirkpatrick then and
throughout the entire lifetime. now: A strong foundation for the future. St. Louis,
However, the question arises of how effective a MO: Kirkpatrick Partners, LLC, 2009.
single training session can be, and whether it can
4. Pfeffer J, Sutton R. The knowing - doing gap: How
achieve the desired results. There is no such thing smart companies turn knowledge into Action. Bos-
as ideal training, and the choice of a training meth- ton: Harvard Business School Publishing, 2000.
od will precisely depend on the needs of a specific
business environment. Managers in the business 5. Anvari R, Salmiah MA, Wan K, Wan I, Ungku N,
Ungku A. Strategic training practices, effective or-
world, and professors in the field of education, face
ganizational commitment, and turnover intention:
that choice daily. They both have the same goal of The mediating role of psychological contract. Afri-
providing the trainees, whether they are employees can Journal of Business Management, 2010; 4(15):
or students, with the desired knowledge for per- 3393-3395, 3401-3403.
forming work in the future. To determine the busi-
6. Goldstein IL. Training In Work Organizations. In M.
ness value of NAV training, the set model of the D. Dunnette and L. M. Hough (Ed). Handbook of
Balanced Scorecard was used, with an aim to mea- industrial and organizational psychology. Palo Alto,
sure not only financial performance, but the value CA: Consulting Psychologists Press. 1991; 507–619.
of intangible assets as well. The model has enabled
the definition of strategic objectives and key perfor- 7. Kaplan SR, Norton PD. The Balanced Scorecard:
Measures That Drive Performance. Harvard Busi-
mance indicators, where continuous measures are ness Review, 1992; 4096: 1-7.
undertaken to improve the training process based
on the obtained results, and participants are offered 8. David LO. Managerial issues of enterptise resource
with a better quality service each year. planning systems. ISBN 0-07-286112-6, 2004; 2-78.
The BSC model covers all of the aspects that
9. Kristine D, David G, Bill H, Christopher W. Work,
influence the effectiveness of a training program. organisation and Enterprise Resource Planning sys-
The achieved results concerning the satisfaction tems: an alternative research agenda. New Technol-
of training participants with the process of knowl- ogy, Work and Employment, ISSN 0268-1072, 2006;
edge transfer, the satisfaction of staff, as well as 21(3): 201.
recognition of the participants’ knowledge by the 10. Karathanos D, Karathanos P. Applying the Bal-
partner, have led to a growing number of students anced Scorecard to Education. Southeast Missouri
and stakeholders who wish to join the project. State University, Journal of Education for Business,
Through acquisition of knowledge through practi- 2005; 80(4): 222-230.
cal application, the program enables participants
11. Yek TM, Penney D, Seow ACH. Using Balanced
to become competitive in the market, where many Scorecard (BSC) to Improve Quality and Per-
of them are being employed by the stakeholders. formance of Vocational Education and Training
Further development of this pilot project is ex- (VET). A Case Study in Singapore. AARE 2007
pected in the expansion of various functional sce- Conference, Fremantle, Australia. November 25 –
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ucts, keeping track of new trends and versions, as
well as the inclusion of business intelligence in the Corresponding Author
realization of the appropriate models. Ana Pajic,
Department of Information Systems,
Faculty of Organizational Sciences,
References University of Belgrade,
1. Wick C, Pollock R, Jefferson A. The Six Disciplines Belgrade,
of Breakthrough Learning; How to Turn Training Serbia,
and Development into Business Results. John Wiley E-mail: ana.pajic@fon.bg.ac.rs
& Sons, Inc. second edition. 2010.

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 technics technologies education management

Environmental assessment of buildings:

methodology for developing a national system
Saja Kosanovic1, Milica Jovanovic – Popovic2
1
University of Pristina, Faculty of Technical Sciences, Kosovska Mitrovica, Serbia,
2
University of Belgrade, Faculty of Architecture, Belgrade, Serbia.

Abstract We analyzed seven different national systems

for environmental assessment of buildings: [4],
The aim of the paper was to determine and de-
[5], [6], [7], [9], [10] and [11], and made follow-
scribe methodology for developing a comprehen-
ing conclusions:
sive and unified national system for environmental
– All studied systems examine items based on
assessment of new buildings. First task of the re-
environmental impacts of buildings.
search was to detect factors important for system
– Number and definition of environmental
development. These are: characteristics of life cy-
items vary among systems.
cle of buildings and of building materials, national
characteristics and typological characteristics of
There is a connection between defined envi-
buildings. We analyzed and explained all of them
ronmental items and conditions existing on the
and determined the ambits of influence. The results
territory for which certain system is designed.
are presented through defined structure, content and
For example, system created for a territory with
functioning manner of system. Generated electron-
deficient fresh water supply, as [11], places great
ic tool, also presented in the paper, indicates practi-
importance on water conservation.
cal mode in which system can be used.
There also is a connection with national legis-
Key words: environmental point, category,
lative in the field, meaning that system either con-
subcategory, criterion of environmental assess-
tains legal segments or is adopted in its entirety as
ment, environmental impact
a national standard, as [7].
Environmental items included in a system for
Introduction environmental assessment may also depend on the
building type.
Through the phases of life cycle, buildings use
The aim of this research is to define method-
natural resources: energy, water, raw materials and
ology for developing a national system for envi-
land and produce numerous negative changes in the
ronmental assessment of buildings, in a way that
environment. Inclusion of the environmental aspect
all environmental impacts of buildings, national
in architectural designing contributes to the reduc-
characteristics and differences between countries
tion of environmental impacts of buildings in a signif-
will be included.
icant scale; it is, hence, considered as necessary [1].
Different assessment systems that, indepen-
dently of each other, provide determination of Derivation of categories
environmental quality of a building and compari-
The initial task in our research was to determine
son among several buildings have been developed
environmental impacts of buildings. To achieve
worldwide [2], [3]. Some of the systems, as [4],
this, we defined, compared and aligned life cycles
have universal character; others, as [5], [6] and
of buildings (by observing them as a whole) and
[7], are created for just one building type, for ex-
of building materials. It was concluded that the
ample single family houses.
analyses necessary for the environmental impacts
In relation to the territory for which they are de-
determination are:
veloped, systems for environmental assessment of
– whole life-cycle analysis of building
buildings have international [8] or national character.
materials and

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 technics technologies education management

– analyses of building lifecycle phases: Prepa- Inclusion in the national system of the environ-
ration for construction, Construction, Use mental impacts that may occur during the phase of
and Maintenance and Renewal/Demolition. construction implies assessment of safety, security
and protection measures.
Identification of all (potential and actual, most- National system should also contain environ-
ly negative) environmental impacts and possible mental items derived from the environmental im-
modes for their change [12], further let us to de- pacts occurring during use and maintenance:
fine environmental items that should be embodied – operational energy consumption for heating,
in a national assessment system. cooling, ventilation, lighting, water heating
As negative impacts potentially occur in every and electrical appliances equipment, etc.;
phase of materials’ life cycle [13], we found that – operational water consumption, where the
the following environmental items should be test- accent should be put on rational use of
ed over national assessment system: water from public supply, introduction
– origin of building materials, availability and of alternative water sources (rainwater
prevalence of resources, energy and water and waste water) and on possibilities for
consumption and environmental damage reduction of water pollution;
occurring during obtaining the raw materials – free land occupation on the parcel – building
(pollution, erosion, impacts on biological footprint, materialized and green surfaces;
sphere, free land occupation and natural – impacts of building on original microclimate
ambient degradation); change, contribution to the local heat island,
– health impacts, consumption of energy and natural air flow changes and extent to which
water, generation of solid and liquid waste parcel is sealed;
and harmful emissions, all throughout the – pollution of surroundings with artificial
production stage; lighting, harmful gases, waste generation
– distance from the production to the and individual vehicles and furnaces in
construction site and later from the which the energy is obtained by combustion
decommissioning to the site of disposal, of conventional resources;
re-use or recycling, as well as methods of – quality of indoor environment, which
transport of materials; depends on the achieved comfort, space
– energy and water consumption and generation adaptability, installation maintenance and
of noise, vibrations, solid waste, particles and the behavior of users.
dust during the activities on installation and
decommissioning, type of building structural Finally, the system needs to examine the predicted
system and building methods; termination of building life cycle, where the advan-
– durability, impacts on health and wellbeing tage will be given to renewal over demolition [14].
of users and on the outdoor environment, After determining the environmental items that
cleaning and repairing methods, all during will be included in national system for environ-
the use and maintenance phase; mental assessment of buildings, we derived sys-
– possibility of biological decomposition, re- tem categories and determined their content.
usability and recyclability. Category “Parcel” contains items for land use
assessment, starting from location selection to the
With regard to environmental impacts that may way in which the created space is used.
occur in preparation for building construction, we “Energy efficiency” assesses the utilization of
propose that the national system should include as- operational energy.
sessment of: temporary structures on the construc- Assessment of outdoor and indoor water use
tion site; existing vegetation and the measures for will be conducted through category named “Effi-
its protection; land use; scope of works with the ciency of water use”.
soil and protection of the surroundings from the Aspects of building behavior during its exploi-
construction impacts. tation, except those connected with operational

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 technics technologies education management

energy and water, will be assessed within category avoided. This should especially be taken into con-
named “Other aspects of use and maintenance”. sideration while working on criteria with multiple
Category “Environmental quality of building significances, such as greening is, for example.
materials” refers to the assessment of ecologi- Indicators within criteria are the most detailed
cal characteristics of building materials in every set conditions. All indicators must comply with
phase of their life cycle. standardized measurement units. Priority should
Category “Preparation and execution of con- be given to the application of the indicators which
struction works” will contain environmental items allow measurement of impacts based on a build-
derived from impacts occurring throughout prepa- ing unit area (m2) or on a building user.
ration for construction and construction itself. In proposed category, named “Efficiency of
As defined categories cover whole life cycle water use”, for example, established subcategories
of buildings and of building materials, the assess- could be “Reduction of water consumption” and
ment conducted through them may be considered “Waste water recycling”. Subcategory “Reduc-
as comprehensive. tion of water consumption” could contain criteria:
Additionally, we propose to include two more “Maximum water consumption on a daily level”
factors in the system. Although these are not the and “Utilization of alternative water sources”.
products of direct negative environmental im- “Waste water recycling” subcategory could exam-
pacts, quality of a building will still depend on ine: “Gray water recycling” and “Black water re-
them in a significant scale. cycling”. Mentioned category, consequently, could
“Adaptation to climate change” will be includ- contain two subcategories and four criteria.
ed through the items for the assessment of capabil-
ity of buildings to adapt to altered state of climate. Superposition with national conditions
We emphasize that the system also implies the as-
sessment of measures for climate change mitiga- Categories of environmental assessment, set in
tion, but within other categories. the previous part of paper, were derived regardless
Last system category, named in this paper “Ad- of national characteristic. For detailed and precise
ditional points”, is intended for evaluation of those assessment, however, it is necessary to superpose
measures that contribute to environmental enhance- broad with the following conditions on national
ment but cannot be considered as typical for a larger level:
number of cases and therefore cannot be assessed in – Natural characteristics: climate, environment
a different way, but through this category. and expected manifestations of the climate
change;
Further development of a structure: – Characteristics from the aspects of adopted
derivation of subcategories and criteria categories, such as, for example, availability
of renewable energy sources;
Complexity of environmental fields covered by – Characteristics of building sector, in general
categories opens the road to introduction of sub- or of a certain type (if the system will be
categories. The number of subcategories set with- created for a single building type), seen
in every category of a national system depends on from the aspects of adopted categories, such
the subject field and its environmental items. as, for example, energy and water supply
The basic elements of assessment are environ- and consumption, waste water management,
mental criteria. Through them, all defined environ- solid waste treatment or land use are;
mental items will be assessed precisely. Every crite- – National and EU legislation and other
rion set within a certain subcategory must be adapt- sources which, observed from the aspect of
ed to maintaining the comfort conditions in indoor adopted categories, are significant and can
environment; in better case, the two parameters will be used for further system development.
have the tendency of growth at the same time.
Distribution of criteria through subcategories Potential changes in system structure that may
should be conducted in a way that the repeating is occur after considering the national conditions are:

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 technics technologies education management

– increased precision of adopted criteria We concluded that the environmental weight

definitions, indicators establishment or of criteria with voluntary application will depend
changes of conditions within defined criteria; on: significance of environmental problem on a
– addition or deduction of criteria within national level, general significance of an certain
established subcategories; environmental item examined through subject
– changes in terms of number and type of criterion, significance of category or subcategory
established subcategories; within which the subject criterion is set, number of
– changes in terms of number and type of criteria belonging to certain subcategory and the
established categories, which may be expected mutual comparison of their significances.
for the case that the national conditions are of Assigning environmental points to every cate-
great environmental significance. gory, subcategory and criterion and defining every
obligatory condition in a system further allow the
Assigning environmental points determination of threshold of environmental qual-
ity of buildings. Levels of environmental quality
Final, adopted structure of the system, in terms can be established above the defined threshold.
of established categories, subcategories and be- According to the achieved level, assessed build-
longing criteria, allows proceeding to the next step ings will be assigned corresponding certificates. It
in system generation, which is to assigning envi- is recommended to establish at least three levels
ronmental points. We propose to define the envi- of environmental quality of buildings (enhanced,
ronmental weight of segments in system structure medium and basic), where for every one of them
going from general to particular. This means that it will be necessary to fulfill all mandatory condi-
the weight of every category will be determined tions and to achieve the required minimum sum of
first. Image on a national level and detected criti- environmental points within every category of a
cal spots, life cycle analysis of buildings, good ar- system (Figure1).
chitectural practice and international and national
legislations are all the factors of importance that Electronic tool
are influencing the distribution of environmental
points over categories. Environmental points as- Development of electronic version presents the
signed to categories, subcategories and to criteria, final step in a system creation process. For the pur-
when summed together, must make 100%. pose of research presented in this paper, we created
Environmental significance of every criterion in a electronic tool in Microsoft EXCEL program. This
system is given through the conditions of voluntary program allows work with different types of data
or obligatory fulfillment and through the number of (numbers, text and formulas); it also has an option
assigned environmental points. The most important for creating various worksheets in which we could
criteria in a national system for environmental assess- develop typological alternatives of a national sys-
ment of buildings should be marked as obligatory. tem for environmental assessment of buildings.
They may be: set as more strict in comparison with Previously defined structure and content of a
actual regulations, estimated as minimum necessary system: categories, subcategories and criteria with
requirements for environmental quality achievement determined environmental weight and assigned
or estimated as necessary requirements for primary number of environmental points, will all enter the
environmental protection on a national level. structure of electronic tool. The example of tool
Environmental points should not be given to organization is given in Figure 1.
the criteria marked as obligatory. This recommen- All values (data) contained in electronic ver-
dation is given in purpose to simplify the assess- sion of a system can be divided into: set, input and
ment process. On the other side, to the criteria with calculated. Set values are “the oldest”, as they are
voluntary fulfillment environmental points will embodied at the same time with the tool creation
be assigned. In a case in which criterion contains (or its later alterations for improvement). These
both voluntary and compulsory condition, points data, valid for all cases of building evaluation,
should be assigned to the voluntary part. include quantitative and descriptive indicators

1932 Volume 8 / Number 4 / 2013

 technics technologies education management

Figure 1. Organization of the electronic tool for environmental assessment of buildings on national level

defined within criteria and prescribed number of egory “Efficiency of water use”, set data would be
points, given to voluntary criteria. defined criterion and its belonging indicator (for
The input values enter the tool when the as- example: Maximum indoor daily use of water from
sessment of specific building begins. These are, public supply does not exceed 100 l per person)
therefore, characteristics of the building which is and the number of points assigned to this criterion
to be assessed, expressed through the number of (for example: 1). Number of realistically gained
environmental points achieved by fulfillment of points, based on a fulfillment of condition given
conditions given in voluntary criteria. in the specified criterion, “1” in this case, would
Calculation values are the results obtained after be input value. If the condition in criterion was not
a series of calculations was conducted. These in- fulfilled, then input value would be “0”. Numbers
clude numbers of environmental points achieved of realistically gained environmental points in
in subcategories and categories and total number subcategory and category in which specified crite-
of gained points, given in the forms of Аrabic rion is placed present the calculated values.
number, percent and achieved level of environ-
mental quality (enhanced, medium or basic). Conclusions
In the case in which, according to total gained
points, assessed building didn’t exceed determined With the research conducted in this paper, we
threshold, program will report an error and mark defined methodology for the development of a
critical criteria that were not fulfilled. national system for environmental assessment of
new buildings. We found that system’s structure
Example and content depend on:
– characteristics of life cycle of buildings and
For criteria named “Maximum indoor water of building materials;
consumption on a daily level”, set within subcat- – national characteristics, including the
egory “Reduction of water consumption” and cat- characteristics of building sector;

Volume 8 / Number 4 / 2013 1933

 technics technologies education management

– legislation and other important guidelines, – existence of a minimum threshold of envi-

– typological characteristics of buildings and ronmental quality;
their purpose. – existence of at least three levels of environ-
mental quality: enhanced, medium and basic;
We also found that the characteristics of life cy- – compatibility with national conditions and
cle have crucial importance in forming a system, its – practical use of a system with the electronic
structure and content. As typological characteristics tool.
of buildings can provoke changes in life cycle and
in environmental impacts occurring during its vari- References
ous phases, the recommendation is to develop more
variants of a national system where each would be 1. Kosanovic S. Istrazivanje mogucnosti za promenu
ekoloskih uticaja zgrada na okruzenje. Magistarski
used separately and for environmental assessment
rad, Arhitektonski fakultet, Beograd, 2007.
of a single buildings type (residential or adminis-
trative buildings, for example). The results of en- 2. Gowri K. Green Building Rating Systems. An Over-
vironmental assessment of a building will be more view, ASHRAE Journal 2004; 9: 56-59.
precise and accurate by using the system variant
3. Kosanovic S. Ocena ekoloskog kvaliteta objekata za
designed for a corresponding building purpose. stanovanje – regulativa i praksa. Ecologica, 2011;
The extent to which national characteristics in- 62: 307 – 312.
fluence the system formation will be best observed
in a specified case of a certain country. Anyhow, it 4. Ministry of New and Renewable Energy, Government
is obvious that the differences between the coun- of India and the Energy and Resources Institute:
GRIHA Manual, Volume 1 – Introduction to National
tries will appear. The same is true regarding the Rating System GRIHA. Available: http://www.griha-
impacts of national legislation on system develop- india.org/files/Manual_VolI.pdf . 2010.
ment; systems created for the countries with more
developed legislation in the fields of interest will 5. Institute for Building Environment and Energy Conser-
vation (IBEC): CASBEE for Home (Detached House),
contain more legal items.
Technical Manual 2007 Edition. Available: http://ibec.
If a country has several regions characterized or.jp/CASBEE/english/download.htm. 2008.
by different natural and/or human made condi-
tions (as is the case, for example, in a country with 6. Canada Green Building Council: LEED Canada for
few different climates or strong local regulations), Homes. Available: http://www.cagbc.org/AM/PDF/
LEED_Canada_for_Homes_2009_RS+addendum_
then the system should be developed in a way so EN.pdf . 2009.
as to include these differences.
General and common characteristics of all na- 7. Communities and Local Government: Code for Sus-
tional systems formed according to the proposed tainable Homes, Technical Guide, Department for
methodology, regardless of the possible variants, Communities and Local Government, London. Avail-
able: http://www.planningportal.gov.uk/uploads/
will be: code_for_sustainable_homes_techguide.pdf . 2010.
– assessment of building characteristics over
the main environmental fields; 8. DGNB: DGNB International. Available: http://www.
– hierarchically organized structure, from dgnb-international.com . 2012.
categories and subcategories to criteria –
9. Building & Construction Authority of Singapore.
the most detailed items of environmental BCA Green Mark for Residential Building Version
assessment; RB/3.0.2.,2008. Available: http://www.bca.gov.sg
– division of system criteria on mandatory
conditions and voluntary measures through 10. Nelin V. Israeli Standard 5281 – Buildings with
Reduced Environmental Impact. Available: http://
which the environmental points are scored; heschel.org.il/ . 2007.
– expression of environmental quality through
number (sum of all scored environmental 11. New South Wels Government, Department of Plan-
points) and through percentage, where 100% ning: BASIX Certificate. Available: http://www.
means fulfillment of all voluntary criteria; basix.nsw.gov.au . 2005.

1934 Volume 8 / Number 4 / 2013

 technics technologies education management

12. Jovanovic – Popovic M, Samardzic S, Kosanovic S,

Markovic B. Unapredjenje energetske efikasnosti
gradova/zgrada kroz proces energetske sertifikacije,
Medjunarodni naucni skup. Odrzivi prostorni raz-
voj gradova, 25-26.01.2008., Beograd. Tematski
zbornik radova (drugi deo), Institut za arhitekturu i
urbanizam Srbije, Beograd, 2007; 229-240.

13. Jovanovic – Popovic M, Kosanovic S. The selection

of building materials based upon ecological char-
acteristics: priorities in function of environmental
protection. Spatium 20 , 2009; 9: 23-27.

14. Kosanovic S. Ekoloski ispravne zgrade – uvod u

planiranje i projektovanje. Monografija, Zaduzbina
Andrejevic, Beograd, 2009.

Corresponding Author
Saja Kosanovic,
University of Pristina,
Faculty of Technical Sciences,
Kosovska Mitrovica,
Republic of Serbia,
E-mail: kossanovic@gmail.com

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 technics technologies education management

Outside-in strategy approach in theory and

praxis
Slobodan Adzic1, Nenad Markovic1, Snezana Milosevic2, Marija Milosevic2
1
University Union Nikola Tesla in Belgrade, F@M Faculty of Management in Sremski Karlovci, Republic of Serbia,
2
Agency for Educational and Pedagogical Services CODEX, Pozarevac, Republic of Serbia.

Abstract tunities and threats. Positioning is not a short-term

game, it is a strategic game, because superior mar-
After 30 years of introducing and theory devel-
ket position is difficult to attain, but once an organ-
oping, outside-in models are still very well imple-
isation dominates it can be the source of sustained
mented in practice, and that this trend will continue
profitability. Being market leader is particularly im-
in the future is the main idea of this paper. Classic
portant; their bargaining power toward buyers and
examples of business cases: QWERTY keyboard
suppliers is always the strongest. The wise outside-
and railways are examples that support the outside-
in manager will attempt to anticipate market and
in approach, but also new business cases: petro-
industry development. For a manager, the firms’
chemical industry, insurance market, on-line bank-
resource base is not the starting point in strategy
ing, Internet and virtual companies, are vivid ex-
determination, but limiting condition on the firm’s
amples of modernity of outside-in approach today.
ability to implement the best strategy [1].
This paper presents all relevant outside-in theories
and theory arguments the pros and the cons of this
approach. The paper concludes that the future use 3. Key outside-in theories
of outside-in models is bright and certain. Porter’s models are obligatory material for any
Key words: strategy, strategic approaches, business school. His first book Competitive Strate-
outside-in, Michael Porter gy introduced Five Forces and Generic Strategies,
which I consider as the most important contribu-
1. Introduction tions of this book. The essence for Porter of for-
mulating strategy is relating a company to its en-
The strategy approach that put the business envi- vironment [2]. The key aspect of that environment
ronment of the company in front of the resources of is industry. Porters recognises Five competitive
the company, and that requires that company should forces – entry, threat of substitutions, bargaining
adapt to the environment, is the outside-in approach. power of buyers, bargaining power of suppliers,
In this paper, after explaining what the outside-in and rivalry among current competitors. Every of
approach is, we present the key outside-in theories. these forces have a number of sub-sources, as we
These are Michael Porter’s models: Five Forces can see from the Figure 1.
and Value Chain. After presenting PIMS outside-in Resolving all elements and sub-elements from
theory, we are presenting also the pros and the cons the model will result in the shape of competitive
arguments of outside-in theories. Finally, practical strength of the specific industry market. In cop-
examples of the use of these theories and academic ing with these forces, a firm should chose between
papers on practical value of these theories lead us to three successful generic strategies to outperform-
the conclusion to recommend practical application ing other firms in the industry: (1) Overall cost
of outside-in theory in the future also. leadership, (2) Differentiation, and (3) Focus [2].
In his second book Competitive Advantage Por-
2. What is outside-in approach? ter deepens his outside-in approach and introduces
the value chain, as the most important contribution
Firms should not be self-centred. The outside- of this book according to my opinion. Value chain
in managers are worrying about market positioning is systematic way of examining all the activities a
and understanding how to react to external oppor- firm performs [3]. Moreover, it is not just a list of

1936 Volume 8 / Number 4 / 2013

 technics technologies education management

activities; it is the way how those activities interact or services gained a strong market position, it will
to each other, e.g. supplier, channel and customer be difficult to dethrone that company. The general
activities, in order to achieve the competitive ad- advice from this study is to lead where possible.
vantage (Figure 2). Porter divides all activities into
primary and support activities. It is important to ac- 5. Pros of outside-in approach
centuate that value chain analysis is a valid compet-
itive analysis tool only if it has linkages throughout The Five forces model is extremely helpful and
the complete firm’s competitive environment. most widely used model in systematically diag-
nosing the competitive pressure in a market [5].
Day argues [6] that marketing always had outside-
in approach, because within marketing theory su-
perior business performance is always the result
of understanding and satisfying the customers.
Therefore not all capabilities are inside-out orient-
ed; some capabilities are outside-in capabilities,
such as market sensing, customer linking, channel
bonding and technology monitoring. He also dis-
tinguishes spanning capabilities that link inside-
out and outside-in capabilities. Strategy develop-
ment he sees as a spanning capability. That im-
portance of the marketing view about customers
Figure 1. Elements of Industry Structure [3] was acknowledged in one newer Prahalad article,
where Prahalad and Ramaswamy [7] claim that
companies must incorporate customer experience
into their business model. The new marketplace
feature is that consumers become a new source of
competence for the corporation.

6. Cons of outside-in approach

Porter’s approach cannot explain why different
firms perform differently within the same market
environment [8]. Shortcomings of outside-in mod-
els are that (1) present a static picture of market and
(2) de-emphasize the significance of single compa-
ny and overemphasize the importance of industry
Figure 2. The Value chain [3] [9]. Andrew Grove, the former CEO of Intel, has
argued that the Five Forces model is missing the
4. Other outside-in theories sixth forces – complementors. Complementors are
companies that sell complements to the firms’ prod-
Direct challenge to all inside-out theorists is uct offering, e.g. software for PCs [9]. That argu-
the research of PIMS (Profit Impact on Market ment has a strong foundation in economic theory,
Strategy) group [4]. This is a fifteen-years-long because they look both at substitutes and comple-
quantitative study of more than 3,000 business ments in a market demand analysis. Grand fallacy is
units. The main message is: market share and prof- that analysis can produce synthesis i.e. that through
itability are strongly related. Market share leads analytical techniques one can developed a strategy.
to economies of scale and experience advantage, Also strategy itself has a narrow focus, because the
which improve competitiveness and consequently outside-in approach places emphasis on generic po-
profit. Once a company with high quality products sition, not on unique perspective [10].

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 technics technologies education management

7. Outside-in approach in practice the question ‘What business are we really in?’ by
focusing on demand factors, not on supply factors,
A very convincing article on the importance of
i.e. the resources.
market in strategic management is the article about
QWERTY keyboard layout [11]. It offers an illus-
tration of how first movement can build enduring 8. The future of outside-in approach
competitive advantage and how then the market Porter models are still very alive and there are
can influence and punish all players afterwards. some articles that prove their effectiveness and use-
An 1867 patent, QWERTY is used by E. Rem- fulness in the strategy analysis, i.e. the article which
ington and Sons as production standard for type analyse the impact of the internet in the dynamic
writers. The reason was very practical. QWERTY banking industry [14], or the article where the value
is first line for left hand in the keyboard, full line chain model is used for an analysis of the UK retail
is QWERTYUIOP. When a salesman wants to life insurance industry [15]. A survey of 123 firms
sell a type writer, it is possible to make a short in South Korea found that Porter’s generic strategies
and powerful demonstration to the buyer – typing are relevant to electronic market [16]. Porter’s Five
the TYPE WRITER from the first line very fast, Forces “remained intact and had been too quickly
because it is not necessary to move hands or fin- cast aside” [17] after Porter’s model served well for
gers for that word. However, when DSK keyboard the analysis of the successful internet companies.
(Figure 3) was introduced in 1932, which was 40% We particularly emphasize a case study of
faster than QWERTY and possible to learn just in company HIP Petrohemija, Pancevo, Serbia,
a week, but it came late to the market. Touch typ- with the aim of generating feasible strategies for
ing schools were based on QWERTY standard, technological and economic development of this
which produced more customers who demanded company. [18]. The survey generated two feasible
QWERTY, which caused new competitors to also strategies of technological and economic develop-
sell QWERTY keyboard. “Dvorak’s (inventor of ment of HIP Petrohemija, and their analysis shows
DSK) death in 1975 released him for forty years of that for HIP Petrohemija will be more profitable
frustration with the world’s stubborn rejection of to merge with, in its value chain, to the distribu-
his contribution.” [11] tor of final products (polymers), not with the sup-
plier of raw material (virgin naphtha). This paper
highlights that the results could not be generated
without help of the modern analysis methods and
models. Porter’s contemporary models: the Five
Forces and the Value Chain, both confirmed the
advantage of the strategy of connecting with a
distributor in relation to the connection with the
supplier of raw materials, because the Five Forces
Figure 3. The forgotten DSK keyboard – an model showed that the competitive forces in the
example of an outside-in victory [12] environment of HIP Petrohemija are strong not
only for suppliers, but also for customers, particu-
Another example is given by Levitt in his influ- larly distributors, and the Value Chain analysis
ential HBR article, analysing the business failure discovers that a source of profit pool to is to the
of railroads [13]. Railroads are an example how distributor and that integration with the distribu-
improperly defined purpose and lack of imagina- tor for HIP Petrohemija provide synergy, which
tion to see opportunity in the market can destroy is the best strategy, because HIP Petrohemija’s
competitive position of the firm, or even all in- markets could be left to the distributor, which is
dustries. Railroads business is in trouble today much stronger in marketing and selling, while on
because they assumed themselves to be in the the other hand HIP Petrohemija can focus on the
railroad business rather than in the transportation production and provision of long-term quality of
business. This timeless marketing classic answers its products. This case, as well as other business

1938 Volume 8 / Number 4 / 2013

 technics technologies education management

outside-in cases presented in this paper, reinforces 11. David PA. “Clio and the Economics of QWERTY”,
our belief that the future of the outside-in strategic American Economic Review, 1985; 75(2).
analysis is bright and certain. 12. Cassingham R. “The Dvorak Keyboard: A Brief
Primer”, Source: http://www.dvorak-keyboard.com
9. Conclusions (31/07/12) 2011.

Analysis of the petrochemical industry in Ser- 13. Levitt T. “Marketing Myopia”, Harvard Business
Review, 1960; 38(4).
bia and the insurance market in the UK, as classical
industries, and on-line banking, virtual companies 14. Siaw I, Yu A. “An analysis of the Impact of the In-
and Internet companies, as emergent industries, ternet on competition in the Banking Industry, using
lead us to one conclusion. Models and tools of Porter’s Five Forces Model”, International Journal
strategic analysis of outside-in strategic approach of Management, 2004; 21(4).
are not only still alive, but their use in the future 15. Dommisse WR, Oosthuizen H. “Value Chain De-
can be considered as certain. Although outside-in construction in the United Kingdom Retail Life
approach puts more emphasis on the environment Insurance Industry and Resulting Strategic Options
of the company, rather than on the company itself for New Entrants to the Market”, South African
Journal of Business Management, 2004; 35(4).
and company’s resources, the marketing approach
to business, which is immanent to this approach, 16. Mo Koo C, et al. “An Examination of Porter’s Com-
is probably the reason why this approach is still so petitive Strategies in Electronic Virtual Markets: A
popular and successful today, and why it would be Comparison of Two On-line Business Models”, Inter-
in the future, as well. national Journal of Electronic Commerce, 2004; 9(1).

17. Samuel B, Venkataraman S. “Not Walls, Windows:

References Capturing Value in the Digital Age”, Journal of
Business Strategy, 2004; 25(3).
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Corresponding Author
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10. Mintzberg H, et al. Strategy Safari, Prentice Hall,

1998.

Volume 8 / Number 4 / 2013 1939

 technics technologies education management

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1940 Volume 8 / Number 4 / 2013