Table of Contents Editor Dzafer Kudumovic Using Principal Components Analysis and Clustering Analysis to Assess the Similarity Between Conveyor Belts

EDITORIAL BOARD Table of Contents Editor Dzafer Kudumovic Using principal components analysis and clustering analysis to assess the similarity between conveyor belts...... 4 Execute editor Lana Kudumovic Secretary Nadja Sabanovic Milos Grujic, Miriam Andrejiová, Daniela Marasová, Anna Pavlisková, Vladimír Taraba, Peter Grendel Technical editor Eldin Huremovic Lector Mirnes Avdic Project risk management in process of construction of hydrotechnical Lector Adisa Spahic supply tunnel...... 11 Members Amir Pasic Tamara Gvozdenovic, Slavko Arsovski, Dragan Rajkovic, Zoran (Bosnia and Herzegovina) Milojevic, Predrag Pravdic Davor Zvizdic On the fire resistance of building elements protected by intumescent (Croatia) paints ...... 18 Slobodan Kralj Esad Hadziselimovic, Kenan Suruliz, Suada Sulejmanovic (Croatia) Determinants of Wiki Diffusion in the Greek Education System...... 21 Joza Duhovnik Stavros Cotsakis, Vassili Loumos, Eleftherios Kayafas (Slovenia) Janez Grum Transition process and foreign direct investment flows in Serbia...... 28 (Slovenia) Zorka Grandov, Maja Djokic, Verica Jovanovic Janez Dijaci Motives and identification of different types of fans with a team in (Slovenia) Serbian soccer...... 39 Ivan Polajnar Nebojsa Maksimovic, Radenko Matic, Zoran Milosevic, Damjan Jaksic, (Slovenia) Megan Shreffler, Stephen Ross Tadeja Zupancic Determination of graphic design qualitative criteria...... 49 (Slovenia) Milan Medved Mario Tomisa, Nikola Mrvac, Marin Milkovic (Slovenia) Model and Algorithm for Minimization Project Compression Cost Milivoj Vulic under Fuzzy Environments...... 57 (Slovenia) Xun Liu, Zhuofu Wang, Honglian Yin Venceslav Grabulov Valuation of investment in processing plant for waste from ceramic (Serbia) brick and tile industry ...... 67 Zijah Burzic Vladislav Zekic, Jonjaua Ranogajec, Miroslava Radeka, Nedeljko Tica, (Serbia) Zoran Backalic, Dragan Milic Camil Sukic In The Development of Cyber culture: Internet Journalism and (Serbia) Attitudes of Adults by Education Level...... 74 Nebojsa Vidanovic Tuncay Sevindik (Serbia) Elvira Snagic The Influence of the Primary Color Stimuli Selection on the Neon (USA) Color Spreading...... 81 Vesna Maric-Aleksic Damir Vusic, Marin Milkovic, Nikola Mrvac (Bosnia and Herzegovina) The CCI effect on system performance in Kappa-Mu fading Avdo Voloder channels ...... 88 (Bosnia and Herzegovina) Mihajlo Stefanovic, Sinisa Minic, Sasa Nikolic, Stefan R. Panic, ------Milos Peric, Dragan Radenkovic, Milan Gligorijevic Address of the Sarajevo, Grbavicka 8A Editorial Board phone/fax 00387 33 640 407 Indexing on: [email protected], Science Citation Index Expanded EBSCO Publishing (EP) USA http://www.ttem-bih.org http://www.isiwebofknowledge.com http://www.epnet.com http://www.ttem.ba Published by DRUNPP, Sarajevo Volume 7 Number 1, 2012 ISSN 1840-1503 Impact Factor 0.256 (ISI Journal Citation Reports 2010) Table of Contents

Intellectual property - Legal monopoly or subjects of Globalization of economic and financial flows free competition...... 93 in national economies ...... 212 Ilija Zindovic, Dragan Vujisic, Sinisa Varga Alen Cengic Pluralistic approach to research methods: A necessary Determination of the organization systems quality level.... 219 step towards interdisciplinary courses...... 100 Nedeljko Zivkovic, Danka Knezevic, Maja Krsmanovic, M. Abolghasemi, M. Ghahramani, A. Abbasian Ilija Djekic A Model for Student Knowledge Diagnosis through Life cycle cost elements of the architectural projects...... 227 Game Learning Environment...... 103 Milos Gasic, Milica Pejanovic, Tatjana Jurenic Kristijan Kuk, Petar Spalevic, Sinisa Ilic, Marko Caric, Technological innovations in the long-wave Zoran Trajcevski cycle theories...... 237 Development of distance learning, independent Slobodan Cvetanovic, Igor Mladenovic, Danijela Despotovic learning and modern education technology...... 111 The technological tools use in education: Turkish Erika Eleven, Dijana Karuovic, Biljana Radulovic, electric teacher’s candidates’ ideas...... 245 Snezana Jokic, Marjana Pardanjac Yelda Karatepe, Secil Varbak,Mehmet Yumurtacı Measuring Project and Quality aspects in Agile Tax payers continued use of an e-filing system: Software Development...... 122 A proposed model...... 249 Deepti Mishra, Eda Balcioglu, Alok Mishra T. Santhanamery, T. Ramayah The boards of directors in function of improvement of Multiple special event timetabling using goal the competitiveness of the Serbian companies...... 128 programming...... 259 Milica Radovic, Snezana Radukic Dragana Makajic-Nikolic, Milica Kostic - Stankovic, Information-communication and documentation flow Milica Slijepcevic within R&D function model...... 137 KM concept - basis of CRM concept and Dejan Ninkovic, Aleksandar Sedmak, Snezana Kirin, competitiveness of western Balkan...... 269 Ivan Rakonjac, Mirjana Misita Dejan Stojkovic, Dejan Djordjevic Tax policy of south-east Europe and the European Union Sequential algorithm and fuzzy logic to optimum as a function of economic development...... 147 control the ore gridding aggregates...... 279 Boris Siljkovic, Borislav Radevic, Bojan Jokic Carol Zoller, Predrag Dasic, Remus Dobra, Customer Relationship Management in Banking in Radoje Pantovic, Zvonko Damnjanovic the Context of Business Intelligence...... 154 Credit rating evaluation in the example of Vesna Aleksic Maric, Dragana Basic construction industry...... 285 Contribution to Intelligent System for Automatic Jasmina Cetkovic,Snezana Rutesic, Tomas Hanak, Management of Business Rules Development...... 163 Milos Knezevic, Boban Melovic Rade Stankic, Vladimir Milicevic, Marko Popovic, Evaluation of the Solvency of the Companies Zoran Savic Which Represent Serbian Market by the Use Multicriteria analysis, investment process and of BEX Model...... 294 optimization in the process of installation rubber Janko Cvijanovic, Sasa Muminovic, Vladan Pavlovic, panels at level crossings...... 169 Zvonko Sajfert, Jelena Lazic Predrag Atanaskovic, Ljiljana Milic Markovic, Zvonko Sajfert, . Algorithm approach of the implementation of Svetlana Nikolicic, Dragan Djordjevic, Vladimir Stojanovic investment building project with the analysis of Significance of Economic Value Added in Shareholder optimal choice of construction assignment ...... 305 Value Creation Process...... 180 Veis Serifi, Predrag Dasic, Srecko Curcic, Zoran Stojkovic Vladimir Zakic, Vunjak Nenad, Carisa Besic, Jelena Simic Endurance testing of web servers by simulation Customer satisfaction focused business strategy: An of DoS and DDoS attacks and stress testing on the exploratory study in Serbian economy...... 186 example of Famtic.com...... 309 Dragan Cockalo, Nenad Vunjak, Dejan Djordjevic, Radoje Cvejic, Vuk Pavlovic, Gordana Djokic Carisa Besic, Vesna Spasojevic Brkic Dynamics of prices in spot electricity markets: Strategic Planning in Banking...... 196 A microeconomic analysis...... 317 Nenad Vunjak, Vera Zelenovic, Jelena Birovljev, Amira Ademovic, Kasim Tatic Ivan Milenkovic Designing of a Diffusion Bonding Device by using The effective factors in amount of education, Solidworks 3-D Design Software...... 328 teacher’s record, and students’ knowledge in the Yılmaz Gur evaluation of mathematics...... 204 Application of fuzzy AHP method for choosing a F. Hosseinzadeh Lotfi, A. Shahvarani , F. Moradi technology within service company...... 332 Jasna Petkovic, Zoran Sevarac, Maja Levi Jaksic, Sanja Marinkovic Table of Contents Table of Contents

Information systems for supply chain management in automotive industry ...... 342 Zora Arsovski, Dragana Rejman Petrović, Slavko Arsovski, Aleksandar Pavlović Managing of departments and classes through e-learning in the state of emergency...... 354 Snezana Babic-Kekez, Slobodan Popov The predictors of business participation of managers in sport...... 361 Nebojsa Maksimovic, Zoran Milosevic, Radenko Matic, Damjan Jaksic Low-cost airlines traffic evolution in South-East Europe...... 369 Andrija Vidović, Tomislav Mihetec, Sanja Steiner Parameter determination of soil oscillation law in limestone...... 376 Suzana Lutovac, Slobodan Trajkovic, Orsolja Katona, Ljubinko Savic, Branko Lekovic Factors affecting cooperation in social dilemmas: Experimental evidence from one-shot prisoner’s dilemma...... 384 Marija Kuzmanovic, Milena Djurovic, Milan Martic Agrochemicals - factors restricting the quality of water..... 395 Drago Cvijanovic, Svetlana Roljevic, Natasa Kljajic Creative cultural tourism as a function of competitiveness of cities...... 404 Aleksandra Djukic, Milena Vukmirovic Measurement of crack displacement on residential structure due to blast- induced vibrations and daily changes of temperature and relative humidity...... 411 Milanka Negovanovic, Lazar Kricak, Ivan Jankovic, Dario Zekovic, Snezana Ignjatovic Analyisis of technical innovation high school students...... 417 Goran Petkovic „Information Systems and Environmental Sustainability: The major challenges“...... 423 Zlatko Lagumdzija, Elvedin Grabovica, Amila Pilav-Velic Geometric transformations of urban water contexts Key study: Four sequences of the urban water context in Sarajevo...... 431 Jasenka Cakaric Strategic Management and Crisis PR relationship...... 446 Nenad Peric, Milica Vasiljevic Blagojevic Instructions for the authors...... 452 technics technologies education management Using principal components analysis and clustering analysis to assess the similarity between conveyor belts

Milos Grujic1, Miriam Andrejiová2, Daniela Marasová3, Anna Pavlisková2, Vladimír Taraba4, Peter Grendel3 1 Faculty of Mining and Geology, University of Belgrade, Department for Mine Haulage and Hoisting, Serbia, 2 Faculty of Mechanical Engineering, Technical University of Košice, Department of Applied Mathematics and Informatics, Košice, Slovak Republic, 3 Faculty of Mining, Ecology, Process Control and Geotechnologies, Technical University of Košice, Logistics Institute of Industry and Transport, Košice, Slovak Republic, 4 Continental matador Rubber, Púchov, Slovak Republic.

Abstract Materials and methods The article deals with the evaluation param- Monitored conveyor belts and parameters eters of conveyor belts using multivariate statisti- The Quarry Včeláre in eastern Slovakia was cal methods. The first part analyzes selected pa- established in 1965 as part of Factory Metallurgy rameters (variables) of conveyor belts through the Ceramics, The East Slovakian Ironworks, Košice. method of principal components analysis (PCA). Currently it is part of Carmeuse Slovakia, s.r.o. The second part of the article uses cluster analysis Carmeuse is a leading global producer of lime, to group monitored conveyor belts into clusters high calcium limestone and dolomite stone dedi- with similar characteristics. cated to many different uses. Key words: parameters of the conveyor belt, The Quarry is situated on the northern slope principal components analysis, cluster analysis of Dolný Vrch and the nearest village Včeláre- Dvorníky is located about 2 km from the quarry Introduction (48°46'N latitudes and 20°15'E longitudes). Re- charge area reaches the state border with Hungary Within last year’s conveyers belong to the most in the south. Operating conditions of the fracture widespread means of transport in various indus- surface are normal, incident height varies from 0.5 tries. Thanks to that it developed quickly in de- meters to 2.5 meters, keeping the bulk of the mate- sign and can be found in a variety of operating rial strips are optimal. conditions, particularly in the continuous transport of materials. Advantages of belt conveyors, particularly with regard to performance, economy of operation and maintenance are still greater in comparison with any other means. Belt conveyors are mainly used to transport many different types of bulk materials. The conveyor can also be used to transport bulk piece of material after appropriate adjustment. The most important part of belt conveyor is the conveyor belt. Optimal use of the conveyor belt with regard to its performance, adequate care and timing of any service with using first class materials and tools have a decisive influence on work efficiency, reducing operating costs as well as on Figure 1. Quarry Včeláre I (Satellite map) being environmentally friendly.

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Multidimensional statistical methods Statistics file, in which more statistic attribute are observed at the same time, are known as multidimensional statistical method. Within basic methods of multidimensional statistics belongs e.g. method of principal components, cluster analysis, factor analysis, correspondence analysis and others.

Principal components analysis In many research task occurs that, the number of input variables is large enough to cause troubles with analysis and interpretation of results. For simplification it is sometimes better to observe, if Figure 2. Quarry Včeláre II attributes of observed objects cannot be substituted by smaller number of any other variables. For The Quarry Včeláre mines up to 2.5 million resolution of this problem we can apply principal tons per year of limestone and its supplies are at components analysis (PCA). least for another one hundred years. This plant Principal Component Analysis is one of the supplies limestone to produce cement clinker, lime basic multidimensional methods. The main goal sinter for blast furnaces, ingredients in the produc- is to reduce number of independent variables tion of pig iron, saturation limestone for the sugar by particular group of new variables known as and lime for construction purposes. components. New variables are independent and In the Quarry are over 30 belt conveyors, in- the first principal component corresponds to the cluding smaller portable, especially in the treat- greatest input variability. Each next component ment plant. We took into account only those con- reflects next largest remaining input variability veyor belts, which belt service life could be deter- of data (Jollifte, 2002; Stankovičová, 2007). PCA mined (Tab.1). can also be applied to detect outliers, which some- There are seven selected parameters (variables) times need to be eliminated from further analyses, that characterize the conveyor belts in the Quarry and it is a useful method of classification of ob- Včeláre: jects into clusters (Meloun, Militký 2005, 2006; –– Thickness T of the rubber layer of conveyor Stankovičová, 2007). belt (mm), –– Width W of conveyor belt (m), Cluster analysis –– Length L of conveyor belt (m), Main goal of Cluster analysis is to group the –– Speed S (m.s-1), monitored objects into certain similar, homo- –– Quantity of transport material per 1m2 geneous groups, known as clusters. Its graphic QT (t.hm-2), representation is a dendrogram. There is a dis- –– Life (months) and Input I (kW), tinction between hierarchical and non-hierarchi- –– Quantity of transported material per 1m2. cal methods according to the cluster formation mode (Meloun, Militký 2005, 2006; Hebák 2007;

Table 1. Index of conveyor belts Number of conveyor belt 1 2 3 4 5 6 7 8 9 No.301 No.302 No.304 No.306 No.307 No.309 No.310 No.312 No.322 Number of conveyor belts 10 11 12 13 14 15 16 17 18 No.381 No.382 No.383 No.401 No.402 No.403 No.404 No.405 No.507

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Řezanková et al., 2009). The most common hier- higher than 0.7 is interpreted as very strong cor- archical methods are the nearest neighbor method relation, the value from 0.5 to 0.7 is interpreted as (single linkage method), the furthest neighbor strong correlation; value from 0.3 to 0.5 is mild; and method (complete linkage method), average link- value which is less than 0.3 is trivial correlation. age method, centroid method, median method and It follows from the correlation matrix (Tab.4) Ward’s method. One of the most common non- that there is a very strong correlation between the hierarchical methods is the k-means clustering. vatiables Life L and Quantum of Transport QT (r=0.869), Life and Length (r=-0.799), Life and Statistical software Input (r=-0.793), and Input and Length (r=0.723). Multidimensional statistical methods are char- A strong correlation also exists between QT and acterized by an extremely laborious computation Length (r=-0.571), QT and Input (r=-0.569), process. Hence, computing machinery was used QT and Thickness (r=0.519) as well as between in the analysis. All results were obtained through Length a Thickness (r=-0.508). GNU R package. Its source code is freely available, and its current version can be downloaded directly at its home page http://www.r-project.org/.

Result and discussion There are seven variables that characterize the properties of the conveyor belts. Table 2 summarizes the basic statistical charakteristics of the conveyor belts parameters.

Principal Component Analysis It was primarily determined in the data analysis and evaluation whether there was any correlation between the input variables, i.e. if they were interdependent. Since the surveyed variables were measured in different units, a correlation matrix was used to identify the dependencies (Tab.3, Fig.3). Absolute value of correlation coefficient which is Figure 3. Correlation matrix

Table 2. Describe statistics of the conveyor belts parameters T W L S QT Life Input Mean 7.50 1.06 73.66 1.49 6.24 19.21 30.33 Min. Value 6.00 0.80 7.00 1.40 0.43 8.40 5.50 Max. Value 12.00 1.40 202.00 1.80 25.71 40.40 100.00 Standard deviation 1.50 0.20 64.45 0.14 7.43 10.44 26.24

Table 3. Correlation matrix Thickness Width Length Speed QT Life Input Thickness 1 Width 0,469 1 Length -0,508 -0,396 1 Speed 0,061 0,171 -0,040 1 QT 0,519 0,070 -0,571 -0,083 1 Life 0,499 0,163 -0,799 -0,134 0,869 1 Input -0,355 0,225 0,723 0,127 -0,569 -0,739 1

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Because of the relatively strong correlation The original data variability is equal to the sum between these pairs (Fig.3), PCA was applied to of the elements on the main diagonal of the cor- s2 l identify new, independent variables. The original relation matrix ( =7). Eigenvalues i are indicat- variables were replaced with new, independent ed in the first line (Tab.4). The second line shows ones, known as principal components. Eigenval- standard deviations of individual components. The ues were used to extract the principal components, share of individual components in the variance, cal- l s2 using Cattell’s scree plot (Fig.4). culated as ( i/ ) •100%, is indicated in the third line. Forth line presents cumulative proportion of variability (in %), based on which we can understand how many principal components we need to take in account instead of the original ones. There are several techniques how to determine an appropriate number of principal components. A commonly used criterion is the Kaiser-Guttman rule, according to which only those eigenvalues that are larger than 1 are incorporated in the model (Jollifte, 2002; Meloun, 2006). According to another rule, there should only be so many principle components that account for 70 to 90 percent of the total variance (Meloun, 2006; Stankovičová, 2007). It means that the first two principal compo- Figure 4. Cattell´s scree plot nents, which cumulatively account for more than 71.89 percent of the total data variance, were used The plot clearly indicates that the first principal to define the new variables. component (Comp.1) accounts for approximately Eigenvectors represent weights, which make 50.80 percent of the total data variance, the second combination of standardized variables possible. for 21.09 percent, the third for 12.63 percent, and Eigenvector coefficients, the so-called component the fourth one for 7.76 percent of the total variance score coefficient matrix for all principal compo- (Tab.4). The last three principal components ac- nents, are shown in Tab.5. count for approximately 7.72 percent of the total The component matrix indicates that the first variance (fifth 6.18 percent, sixth 0.83 percent, the component has strong loadings of Length, QT and last one 0.71 percent from full variability). Life. The second component is mainly composed

Table 4. Summary results of method PCA Comp.1 Comp.2 Comp.3 Comp.4 Comp.5 Comp.6 Comp.7 Eigenvalues 3.56 1.48 0.88 0.55 0.43 0.06 0.05 Standard deviation 1.89 1.22 0.94 0.74 0.66 0.24 0.22 Proportion of Variance (%) 50.80 21.09 12.63 7.76 6.18 0.83 0.71 Cumulative Proportion (%) 50.80 71.89 84.52 92.28 98.46 99.29 100 Table 5. Component matrixes (Eigenvectors coeffcients) Comp.1 Comp.2 Comp.3 Comp.4 Comp.5 Comp.6 Comp.7 Thickness (T) -0.365 -0.347 0.176 0.484 0.664 -0.012 -0.198 Width (W) -0.145 -0.707 0.360 -0.274 -0.213 -0.151 0.454 Length (L) 0.469 0.107 0.082 0.561 -0.003 -0.525 0.414 Speed (S) 0.036 -0.457 -0.876 0.110 -0.068 -0.076 0.004 Quantity of transport (QT) -0.447 0.118 -0.012 0.536 -0.476 0.431 0.295 Life (Life) -0.501 0.119 0.004 0.011 -0.343 -0.696 -0.363 Input (I) 0.417 -0.361 0.256 0.276 -0.406 0.159 -0.604

Volume 7 / Number 1 / 2012 7 technics technologies education management of the variables Width. The third component in- example one very significant cluster is formed cludes univocally only the variables Speed. The by conveyor belts No.301, No.507, No.302; next first two principal components can be written in one is formed by No.403, No.401, No.402 and the form No.404. Conveyor belts No.381 and No.405 appear to be strong outliers. C o p m.1= - 0.365 T - 0,145 W+ 0.4 69 L + + 0.036S -0.447 QT -0,501 L i f e+ 0.417 I Cluster analysis The cluster analysis was applied to sort and C o p m.2= − 0.34 7TWL − 0, 7 0 7 + 0.10 7 − group the conveyor belts with similar character- −0.457S + .0118 QT + 0.119 L i f e− 0.361 I istics. Hierarchical agglomerative methods (the nearest neighbour method, the furthest neighbour method, average linkage method, Ward’s method, median method and centroid method) were chosen subsequently. The Euclidean distance, being the most common technique, was used as the distance metric, and the two principle variables generated via PCA were selected as the input variables. The cophenetic correlation coefficient CC was used to verify the results and determine the best clustering method. The highest value of CC defines the best clustering method. The closer its value is to 1, the more appropriate the hierarchical agglomerative clustering method is for the analyzed data structure definition (Řezankova, 2009; Meloun, 2005). The results indicate that average- link clustering and the centroid method seem to be the most suitable clustering techniques (Tab.6).

Figure 5. Biplot

Fig.5 is a graphic representation (biplot) of the original variables in the coordinate system of one principle component in relation to another. For instance, it follows from the graph that there is an abundance of the variable Life and QT (confirmed by correlation coefficient r= 0.839). There is a high incidence of the variable Speed in the conveyor belts No.301, No.507 and No.302; and of the variable Thickness in the conveyor belts No.310, No.312. Strong position of parameter Life and QT are in conveyor belt with number 306. Biplot sorted the conveyor belts into several clusters according to a similar parameters. For Figure 6. Dendrogram – average linkage method Table 6. The cophenetic correlation coefficient CC Methods CC Methods CC Average linkage method 0.807 Single linkage method 0.784 Ward’s method 0.766 Complete linkage method 0.639 Centroid method 0.777 Median method 0.736

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The conveyor belts similarity dendrogram obtained through average linking clustering represents the ultimate cluster analysis result (Fig.6). One of the dimensions stands for the conveyor belts and the other for the distance between them. According to the dendrogram, conveyor belt No.381 and No. 405 differ a lot from the others. They can be considered distant objects that can affect clustering. In non-hierarchical method of clustering we used k-means method. The cluster formation algorithm works iteratively and always starts from a different initial arrangement, so the number of possible clusters is large. As criterion for determining the optimal number of clusters we chose Calinsky-Habarasz index (CHI). The Calinsky-Habarasz index (CHI), also Figure 7. Scatter plot (k- means method, 7 clusters) known as pseudo-F index, represents possibility how to define an optimum number of clusters. High CHI values indicate well separated clus- Conclussion ters. Therefore, the highest index value was being Belt transport is widely used for the transpor- searched for within the estimated interval of clus- tation of material. It is used to transport various ter quantities of three to eight. Seven was picked types of material and is exposed to a whole series as the optimum number of clusters (CHI7=42.07). of surrounding’s conditions, weather and environ- The results of non-hierarchical clustering are ment. Given all the facts is very difficult to take shown in a scatter plot, whose axes represent the into consideration all factors affecting the belt first two principal components, which account for transport. The most vulnerable part of belt trans- 96.29 percent of the total variance (Fig.7). port is a conveyor belt itself. The results of the hierarchical agglomerative Multidimensional statistical methods were ap- average linkage method and non-hierarchical k- plied in the survey of similarity of conveyor belts. means method are summarirized in Table 7. The The survey was oriented at monitoring of convey- results of both methods are similar. or belts parameters. The original dependent variables were replaced with two independent input variables. These were determined according to PCA and cumulatively accounted for almost 72 percent of the total data variance. Applying cluster analysis, conveyor belts were divided in few homogeneous groups, known as clusters. The results

Table 7. Results of clustering Average linkage method k-means method Cluster 1 306, 307, 322 Cluster 1 306, 307, 322 Cluster 2 301, 302, 304, 507 Cluster 2 301, 302, 507 Cluster 3 405 Cluster 3 405 Cluster 4 309, 310, 312, 382 Cluster 4 309, 310, 312, 382 Cluster 5 381 Cluster 5 304 Cluster 6 401, 402, 403, 404 Cluster 6 401, 402, 403, 404 Cluster 7 383 Cluster 7 381, 383

Volume 7 / Number 1 / 2012 9 technics technologies education management of the hierarchical agglomerative method of cen- Corresponding Author troid method pointed to the fact that conveyor belt Milos Grujic, No.381 and No.405 appear to be outliers. A simi- Faculty of Mining and Geology, University of Belgrade, lar result was obtained through the principal com- Department for Mine Haulage and Hoisting, ponent analysis and non-hierarchical agglomera- Belgrade, tive method of k-means. All results are obtained Serbia, by program R package. E-mail: [email protected]

Acknowledgement This paper was prepared with the support of grant project VEGA No.1/0543/10 and VEGA No.1/0864/10.

References 1. Everitt, B.S., Landau, S., Leese, M., (2001): Cluster Analysis. Wiley, London., 237 pp.

2. Fedorko, G., Molnar, V., Weiszer, M., Palla, P.(2010): Approches to the solution of belt transportation information system. Journal Transport and logistics, No 19/10, pp 41-46, Belgrade.

3. Grujić, M. (2008): General problems in the modernization of mine conveyance. Journal Transport and logistics, No 15/08, pp 1-7, Belgrade.

4. Hebák, P., (2007): Multidimensional statistical methods 3 (in Czech). Informatorium, Praha, 271 pp.

5. Jollife, I., (2001): Principal Component Analysis. Springer – Verlag, New York, 487 pp.

6. Marásová, D., Taraba, V., Grujić, M., Fedorko, G., Bindzár, P., Husáková, N., (2006): Belt transport (in Slovak). FBERG, Košice, 274 pp.

7. Meloun, M., Militký, J., (2005): Computer analysis of multidimensional data in the examples (in Czech). Academia, Praha, 982 pp.

8. Meloun, M., Militký, J., (2006): Compendium of statistical data processing (in Czech). Academia, Praha, 982 pp.

9. Pavlisková, A., (2008): Using mathematical models to determine the life of conveyor belts (in Slovak). PhD thesis, Košice, 93 pp.

10. Řezanková, H., et al., (2009): Clusters analysis of data (in Czech). PB, Praha, 218 pp.

11. Stankovičová, I., Vojtková M., 2007: Multivariate statistical methods with application (in Slovak). Iura Edition, Bratislava, 261 pp.

10 Volume 7 / Number 1 / 2012 technics technologies education management Project risk management in process of construction of hydrotechnical supply tunnel

Tamara Gvozdenovic1, Slavko Arsovski2, Dragan Rajkovic3, Zoran Milojevic4, Predrag Pravdic5 1 Hydro Power Plants on the Trebišnjica, Trebinje, Bosnia and Herzegovina, 2 Faculty of Mechanical Enginering, University of Kragujevac, Serbia, 3 Group Zastava Vehicle, Kragujevac, Serbia, 4 High Polytechnic School, Kragujevac, Serbia, 5 High Technical School, Trstenik, Serbia.

Abstract their essential business processes [1, 2]. Therefore, possibility to learn and assess risk in business envi- Project risk management in contemporary un- ronment, possibility to respond preventively as well certain conditions gains increasing importance. as their monitoring and directioning in desirable There is risk in all projects no matter how com- directions, represents the essence of risk manage- plex or great they are, and in all phases of their ment processes major factor while increasing qual- life cycle. There is great number of standards and ity in all business areas. There are great number of guides that refer to project risk management. Risk standards and guides that refer to project risk man- management in a project is a systematic process agement. Objective of this paper is to look for ap- of identifying, analyzing and responding to risk proach to organizations’ integration in which it can within the project. It includes maximizing the quickly respond and be effective at the same time. probability and consequences of positive events The key for integration is information technology, and minimizing the probability and consequences which integrates standards in project management, of adverse events to project objectives. and integrates concepts in project risk management Key words: project management, risk, risk to particular project that is being executed. For an management, standards for risk management. organization to respond quickly and be efficient in such environment featured by continuous changes 1. Introduction a scientific research is performed. Scientific objective of this paper is to ensure integration of existing In contemporary conditions of undertaking a methods and procedures with methods which result business project management has become disci- from this research in cosistent approach of increas- pline that is clearly distinguished and utilized as ing efficiency in project management by examining essential element for accomplishing better business standards of infrastructure and information tech- results. Scope of project management is directed nologies. to management of single processes, business under- takings or functions aiming to execute them more efficiently. In recent years project management as 2. Nature and structure of risk specialized branch of management theory, has ex- Risk is present in everyday living. Risk exists perienced intense development. Concept of project in all projects regardless of their type, size or com- risk management in contemporary conditions of lexity, and in all phases of their life cycle. Project intense changes gains increasing importance. Risk is undertaking which is done in future that is by management becomes component not only of busi- definition unknown and uncertain so the execution ness structures by undertaking daily business ac- and expected results of each project are uncertain. tivities, but it is also inevitable factor of efficiency When future events are referred to, risk is most incorporated in level of states’ development. Busi- often mentioned besides uncertainty. Risk implies ness organizations with objective to continuously something unexpected, i.e. event that is not previ- develop their business founded on approach of ously planned [3]. Project risk is confined to pos- planning, implement system of risk management in sibility of not achieving its objectives, to achieve

Volume 7 / Number 1 / 2012 11 technics technologies education management bad results, to loose financial means invested in Risk increases together with hazard and de- project and so on. Deviations from objectives are creases with safeguards. Good project manage- hardly acceptable in common case, and sometimes ment should be structured so that it identifies haz- completely unacceptible. ards and allows safeguards to develop to overcome According to [4] project risk is uncertain event them. If suitable safeguards are available, then the or circumstances which, if realized, can affect the risk can be reduced to an acceptable level. project positively or adversely. Each risk has its cause and, if realized, a consequence. Project risk 3. Guides and standards for project risk involves threats for project objectives, but also management probalilities that can improve project objectives. A cause for a risk is in uncertainty that certain events Project risk management is one of particular ap- will be realized, the uncertainty is a component of plication of risk management. Certain principles every project activity. Known risks are those that applied to project risk management are the same are already identified and analysed and it is pos- as those in other applications. However, in projects sible to determine action plan referring to the risks. where some specific issues exist referring to the It is not possible to manage unknown risks though way how the projects are organized and managed, some activity rules are possible to determine, based there are possibilities for common management on experience from previous projects. principles to be developed through more detailed instructions. During last decade of XX century a great wave of interest appeared for improving the ability to manage the uncertainties. It resulted in development of tools and its application, techniques, processes and methodologies qualified by the term risk management. There are a lot of number of standards and guides referring to project risk management. Some of them are according to [6]: –– Australian and New Zealand standard AS/ NZS 4360, Risk Management, –– Chapter 11 of American PMBOK deals Figure 1. Overall risk is a function of its compo- with risk management in a project, nents [5] –– APM’s Project Risk Analysis and Management (PRAM) Guide and According to [5] risk of an event has two pri- –– Britannic giude Management of Risk mary components: probability of an event to occur (M_O_R). and amount of impact if the event occurs (Figure 1) and can be represented in the following way: Australian and New Zealand standard AS/ NZS 4360 was first published in 1995 and re- Risk= f (Probability, Impact) vised in 1999. and 2004. It is a common standard in risk management easily applicable in project If any of the two increases, so risk does. In risk management. It is not restricted to projetcs, project management both probability and impact but also refers to risk in insurance, finances and must be taken into account. safety (security) as well as to project risk man- Another element of risk is its cause. This source agement. It functions well on all levels from indi- of threat is labelled as hazard. Certain hazards can vidual activities to complete business dealings; it be, to a large extent, overcome if they are known can especially be utilized on the basis of integrated and if safeguards are undertaken to overcome them. programme or solution of process of business risk Risk may be represented in the following way [5]: management in project’s plan. Chapter 11 of PMBOK refers to project risk Risk = f (Hazard, Safeguard) management. It is structured in form of input, pro-

12 Volume 7 / Number 1 / 2012 technics technologies education management cess and output. In this paper the approach to proj- plan activities in risk management for overall project risk management is based on this chapter. ect. It is very important for a planning process to PRAM guide is independent guide for project take into account that activities to be planned must risk management. It deliberately differs processes be in accordance with the risk and importance of of risk management from detailed techniques and project for organization. Risk management plan- methods which can be utilized during implement- ning process is essential for ensuring optimum way ing various phases in processes. It is written within risk management in relation to risk type and proj- in structure of project management and deals with ect importance for the organization. Risk manage- processes and responsibilities for process management planning is required to be done as soon as pos- ment. It ensures examples and techniques for indi- sible, already during project planning phase. vidual steps in the process. Risk identification implies determining which Guide for risk management, known as risks may affect the project and documenting M_O_R, is written for organizations in public sec- their characteristics. Participants in risk identifi- tor. Deals with all risks to success of organization cation process constitute, as far as it is possible, and includes guide to processes in risk management, the following: project team, risk management management structure, roles and responsibilities as team, experts from appropriate fields belonging well as check-lists that assist various process’ steps. to other organizational parts, users, managers of It elaborates application of risk management from other projects, stakeholders and outer experts. strategic level including corporate management sys- Risk identification process is iterative procedure tem, through programmes, projects and functioning. because during life cycle of the project new risks Aforementioned standards can be supplement- appear, which could not be determined in initiated by standard ISO 31000 Risk management – ing phase of the project. principles and instructions in implementation. ISO Qualitative risk analysis is process of impact as- 31000 is international standard having essentially sessment and probability of risk identification. This wider scope and primarily is focused on project process determines and sorts out risks according to risk management of an enterprise or organization. their possible impact on project objectives. Qualita- tive risk analysis is a way to determine importance 4. Project risk management of paying special attention to single risk, as well as preparing appropriate activity in case of risk realiza- To execute objectives of a project, risk events tion. Special weight to a risk can be given by time must be paid appropriate attention. Project risk man- conditionality of risk impact to project objectives. agement implies to identify all risks within a project, Qualitative risk analysis demands for probability to categorize them, to determine their importance and and risk consequences to be determined by utility to undertake measures for the risks to be removed of accepted methods and techniques for qualitative and/or alleviated. Essentially, all these activities are analysis. Trend of results derived by iterated quali- endeavored to decrease the possibility for realiza- tative analysis, can suggest necessity to intensify or tion of undesirable events and at the same time to decrease intensity of activity directed to hinder risk increase the possibilities for results to be realized [3]. realization. Utility of the analysis can help to cor- Major processes in project risk management are rect incorrect or inaccurate data which always exist [4]: risk management planning, risk identification, in each project plan. qualitative risk analysis, quantitative risk analysis, Quantitative risk analysis refers to impact risk response planning on realized risk threat and analysis of those risk events which by previous risk monitoring and control. The processes are in qualitative risk analysis were determined to have interaction to each other but they interact other probably the highest impact to project risk real- processes from other areas. Each mentioned pro- ization. Quantitative risk analysis is to realize nu- cess appears at least once in each project, while in merical probability analysis for realization of each practice they overlap and influence each other. identified risk and its impact on project objective. Risk management planning is the process of This process uses techniques named Monte Carlo making decision on the way how to approach and to simulation and decision tree analysis.

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Response planning to risk is process in which weight of their impact to costs, terms and project options are developed and activities determined quality. Data collected by the questionnaire were for accepting opportunities and reduction of threats processed by application of software packet Risky- for accomplishing project objectives. Eventual Project [9]. Software tool RiskyProject is based on response to risk is possible – planned activities PMI‘s standard ANSI/PMI 99-001-2004 and in- which will be realized only in case the risk really cludes two types of risks: global and local. occurs, and elaborate strategy for managing nega- Global risks are those that can have impact on tive (threats) and positive (probabilities) risks. The project as a whole and are not limited to particular process includes identification and assignement to activities or resources. For each global risk filled individuals and teams, responsibilities and tasks in columns are presented in Figure 2 [9]. for realization each of agreed responses. Efficien- cy of planned responses determines if the overall risk for the project will increase or decrease. Pro- cess of planning a response to realized risk threat must be adequate to gravity of risk threat, efficient in costs and well timed, so that it is successfull, realistic, within project’s scope, and in accordance Figure 2. Example of global risks to all stakeholders and managed by liable person. Monitoring and control over risks is a process In Figure 3 is presented an example of determin- of taking evidence on identified risks, monitoring local risks for activities „Main shutter in verti- ing the residual risks and identifying new risks, cal manhole“ using dialog Task Information [9]. with objective to ensure regular occurrance of risk planning and assess of their effectiveness referring to decreasing the risk. Risk monitoring and control of risk threats is continual process which occurs during life cycle of the project. Risk changes during project execution, new risks appear, while supposed risks dissappear. Risk control can also include process of choosing alternative strategies, implementing action plan in case of realization of risk threat, undertaking corrective actions or undertaking project planning from the beginning. Figure 3. Local risks 5. Research results In the area of East Herzegovina a research has been performed on identification of critical factors of construction projects efficiency [7] [8]. Ques- tionnaire was chosen as optimized way of research. Identification of the most influental risk events is necessary so that by planning response to critical risk event, by risk control and monitoring over realization of response to risk, their negative impact would reduce, and at the same time increase probabilities for project’s success. Questionnaire took place in first half of 2009. Questionnaire was delivered to seven organizations, and 35 examinees filled in the questionnaire. Examinees were offered 52 possible risk sources which they were to assign Figure 4. Parameters of Monte Carlo simulation

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Figure 4 represents parameters which gave the best results for Monte Carlo data simulation for risk calculation in project of constructing hydrotechnical supply tunnel Fatnicko polje – Akumu- lacija Bileca. Monte Carlo simulation obtains risk sources on the project costs, schedule and quality. Sensitivity analysis presents which variables may potentially have impact on major project parameters. Results of sensitivity analysis are shown in Figures 5, 6, 7, 8, while Figure 9 shows risk matrix [9]. Figure 8. Results of sensitivity analysis to all parameters of the project

Figure 5. Results of sensitivity analysis to project Figure 9. Risk matrix duration According to examinees’ estimation, the most critical risk factor to deadlines prolongations is hydrological conditions.This risk factor has been accounted for while constructing the tunnel, but not too seriously, for the floods lasted 190 days. The following risk factors are: inefficient (or nonexistent) system of risk management, unavailabil- Figure 6. Results of sensitivity analysis to project ity of required material resources, additional and costs extra works, delays in procurement of materials and equipment and unstable political environment. The examinees have identified five major risk factors for exceeding the costs (Figure 6): inefficient or nonexistent risk management system, unavailability of necessary material resources, delays in procurement of materials and equipment, additional and extra works and hydrological conditions. For reduced quality one of the major factors are: geotechnical conditions, low level of communication integration, bad coordination of all Figure 7. Results of sensitivity analysis to project participants, inefficient (or nonexistant) risk man- quality agement system, unstable political environment, hydrological conditions, bad insurance system and quality control and so on, Figure 7. If results of overall project risks list are looked at (Figure 8) and related risk matrixes (Figure 9) it can

Volume 7 / Number 1 / 2012 15 technics technologies education management be concluded that first three risk events represent factor is project management, and immediately af- critical risks for overall project efficiency, the next ter it natural risk source, relationships between proj- fifteen risks are significant risks, while risks 16, 17, ect’s participants and at the end political risk source. and 18 fall into tolerable (sustainable) risks. Critical risks have very high priority (in Figure 9 they are 6. Conclusion marked with red color) and it is necessary to apply immeditale strategies for project threats to the risks. For an organization to be sustainable and ef- For significant risks (marked yellow) early attention ficient in contemporary business conditions, it is is neecessary, while tolerable risks need regular at- necessary to apply concept of project manage- tention (marked green). The objective is for all these ment, as a new business philosophy. There is risk risks to transfer them into the field marked green. in all projects regardless of their type, size and During the research critical factors were ex- complexity, and in all phases of life cycle. Risk pected like the following: hydrological conditions, of an event has two primary components: prob- additional and extra works, unavailability of re- ability of certain event and the size of its impact quired material resources, delays in procurement if it occurs. Project risk management is one of the of materials and equipment, unstable political special application of risk management. There environment, geotechnical conditions and so on. are great number of standards and guides which The following strategies may be applied to these relate to project risk management. Some of them threats: to escape the risk, to transfer the risk, and are the following: Australian and New Zealand to mitigate the risk. Transferring the risk to third standards AS/NZS 4360, Chapter 11 of PMBOK, person (insurance guarantees,...) is the most fre- PRAM guide and M_O_R guide. Major processes quent strategy by which the investor responds to of project risk management are the following: risk threats (costs increase, prolongations of deadlines, management planning, risk identification, qualita- non-performance of the contract and reduced qual- tive risk analysis, quantitative risk analysis, risk ity). By this the other contractual party (contrac- response planning on realized threat and risk mon- tor, project engineer, and supervising engineer) itoring and control. accepts responsibility if a risky event occurs that On the basis of sensitivity analysis and risk ma- could have impact on project objectives. On the trix risk events are determined for the project of contrary to expectations, contractors who perform construction of hydrotechnical supply tunnel Fat- the contract do not have within their business sys- nicko polje- Akumulacija Bileca. The first three tems an elaborate system for risk management, or risky events represent critical risks for overall the existing system is not sufficiently efficient. In project efficiency, the following fifteen risks are this way they jeopardize their own efficiency in significant risks, while risks 16, 17 and 18 fall project execution. By this strategy of risk mitiga- into sustainable risks. Critical risks have very high tion probability is reduced and the impact to ac- priority and strategies for threats to project are re- ceptable threshold by undertaking activities dur- quired to be applied immediately. For significant ing early phase of the project. risks early attention is needed, while regular atten- Besides the expected responses to critical faction is necessary for sustainable risks. tors, examinees recognized the problem of low level of communication integration, bad coordina- 7. References tion of all participants, inefficient project risk management, insufficient experience of participants in 1. Badida et all., The Uncertainties of Environment's project and bad insurance system and quality con- Parameters Measurements as Tools of the Measure- ment Quality Improvement, International Journal for trol. A successful response to these risk sources Quality Research, Vol. 2, 2008, page 115-119, can be the approppriate appliaction of information technology, as well as additional education in area 2. Aleksic A., Jeremic B., Stefanovic M., Đapan M., of project management. Risk Management Process in Supply Chain, Inter- national Journal for Quality Research, Vol. 3, No.2, The most critical risk source is executing the year 2009, page 133-137. works. The next source of critical risk efficiency

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3. Gvozdenovic T., Miljanovic M., Moljevic S., Rajkovic D.: Risk in a Project, Quality – Journal for Quality Improvement, No.’s 7-8, Poslovna politika, Beograd, 2010.

4. Project Management Institute, A Guide to the Project Management Body of Knowledge - PMBOK Guide Third Edition, an American National Standard ANSI/ PMI 99-001-2004, Pennsylvania, USA 2004,

5. Kerzner H., Project Management – A System Ap- proach to Planning, Scheduling and ControlingOp- erations Management, John Wiley & Sons, 2003.

6. Zlatanović M., Matejević B., Perić D., Cost related comparison of optimum construction time via network planning methods TTEM, Vol 6, No 2, 2011.

7. Cooper D., Grey S., Raymond G., Walker P., Project Risk Management Guidelines – Managing Risk in Large Projects and Complex Procurements, John Wiley & Sons, England 2004.

8. Gvozdenovic T., Perovic M.: An approach to the quality improvement of a massive investment project by integrating ICT and QMS, International Journal for Quality Research, Center of Quality, Faculty of Mechanical Engineering University of Kragujevac, University of Montenegro, Vol 1, Year 2007, No 4, page 297-305,

9. Gvozdenovic T., Perovic M.: Investment project management through time applying neural networks, International Journal for Quality Research, Center of quality, Faculty of Mechanical Engineering, Uni- versity of Montenegro, University of Kragujevac, Vol 1, Year 2007, No 2, page 119 -124,

10. Gvozdenovic T., Research of Impact of Infrastruc- tural Standards in Quality and Information Tech- nologies on Project Management Efficiency, Doc- toral thesis, Kragujevac, 2009.

Corresponding author Tamara Gvozdenovic, Hydro Power Plants on the Trebišnjica, Trebinje, Bosnia and Herzegovina, E-mails: [email protected], [email protected], [email protected]

Volume 7 / Number 1 / 2012 17 technics technologies education management On the fire resistance of building elements protected by intumescent paints

Esad Hadziselimovic, Kenan Suruliz, Suada Sulejmanovic Faculty of Science, Department of Physics, University of Sarajevo, Sarajevo, Bosnia and Herzegovina

Abstract Intumescent substances provide flame retar- dancy properties by forming a carbonaceous layer In the fire protection, the intumescent paints are on the element. The paint undergoes the expansion used on the surface of the elements of building con- which also contain the cooling gases and finally struction as to give them a certain fire resistance. the char forms which limits the heat transfer to the When exposed to the fire they expand and form underlying material. a char on the surface of the element, protecting it The knowledge of the fire resistance of the ele- from the fire a certain period of time. It is necessary ment protected by an intumescent paint is impor- in the Fire Engineering to know more closely the tant. It is provided by the tests and usually it is fire resistance of the building elements protected by given by the producer of the element stating the the intumescent paints. In this paper we have taken result of fire tests. a simpler model to calculate the fire resistance of However, sometimes is necessary to know the the building elements protected by the intumescent fire resistance of the system more closely. paints through the temperature fields in the ele- In this paper we took a simple model in one di- ments, which consist of the char and the element. mension of a system consisting of the char and the A standard fire curve was applied to such a struc- steel substrate, which we heated by the standard ture. In this way we get the heating of the struc- fire curve. In this way we neglected the expansion ture and through it the time when it reach a defined phase of the intumescent paint and started with the temperature. The period of expansion of the paint system char-steel. The experiments show that the and forming of the char is relatively short and is not expansion phase is relatively short [1]. We were taken into account. It can be determined through the not interested in the chemical composition of the preliminary tests and was taken approximately as 5 intumescent paints and only with the thermal minutes. The properties of the char as density, ther- properties of the ensuing chars. Our chars have the mal conductivity and specific heat are taken from names char a to char e. the literature and the calculations are made with the The heat transfer calculations were performed two-dimensional numeric program TASEF for five with TASEF, the two-dimensional code for tem- different paints. The results are summarized in the perature analysis of structures exposed to fire[ 2]. heating curves of the structures from which the fire The transient two-dimensional heat transfer resistance can be determined. equation

Introduction ∂ ∂T ∂ ∂ T ∂ e (k )+ (k ) − + Q = 0, ...... (1) ∂ ∂ ∂ ∂ ∂ The use of the intumescent paints in fire protec- x x y y t tion is common as to provide an adequate fire resistance of a building element or some other element. with The elements are tested in the laboratories with an x,y – coordinates (m), intumecent paint applied to the surface. There are T – temperature (K or °C), also a number of theoretical models that treat the k – thermal conductivity (W/mK), system the paint plus the supporting element in- e – specific volumetric enthalpy (J/m3), cluding the process of the expansion of the paint t – time (s), and forming of the protective char layer [1,3,4]. Q – internally generated heat (W/m3),

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is solved by the finite element method. The culations we took two thickness of the chars, 10 heat flux at the boundaries is specified as mm and 7 mm.

=ε s 4 − 4 +β − γ q()() Tg T s Tg T s , ...... (2) 3. The chars and the results of the calculations

3.1 Char where Thermal properties of this char were taken ε – resultant emissivity (-), from [1] density r = 113 kg/m3 and the thermal σ – the Stefan – Boltzmnn constant (W/(m2K4), conductivity was k = 0.106 W/(mK) (constant), cp Tg – absolute surrounding gas temperature (K), = 2900 J/(kgK). The results of the calculations are Tg – absolute surrounding gas temperature (K), shown in the Figure 2. β – convective heat transfer coefficient (W/ m2K), γ – convective heat transfer power (-).

2. The model of the calculation We took the heat transfer coefficients for the exposed and unexposed side as they were in the code. The structure we calculated consisted of a 10 mm char and 4 cm steel, Figure 1. Figure 2. Heating of the structure with the char a The thermal properties of the chars we took from the mentioned papers. We also modified We also modified the specific heat of the char somewhat these properties and formed the hy- a and the results show that this has no much influ- pothetical materials as to see how those changes ence on the heating of the structure as shown on influence the fire resistance of the structure. The the )), Figure 3 (char a1 has cp = 4900 J/(kgK), and thermal properties of the chars in some calcula- char a2 cp = 1250 J/(kgK)). tions were taken as constant and in others they varied with temperature according to [3,4].

Figure 1. The structure of the calculation Figure 3. Influence of the specific heat change of the char The final thickness of the char can be different[1], ranging from 2 mm to 17 mm. For the cal- Table 1. Thermal characteristics of the chars Density r Specific heat c Thermal conductivity k Char p (kg/m3) J/(kg K) W/(mK) char a 113 2900 0.106 char b 365 1250 0.053 char c 550 1200 0.08 char d 682 1300 0.05 char e 167 2900 0.1

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3.2 The results for other chars References In the following table (Table 1.) are given the 1. C. Anderson et al, Journal of Fire SCIENCES, Vol thermal characteristics of the chars used in the cal- 6- Nov/Dec 1988 culations. The results of the calculations are shown in the 2. E. Sterner, U. Wickström, TASEF –Temperature Figures 4 and 5 for the char thickness of 10 mm Analysis of Structures Exposed to Fire, FIRE TECH- NOLOGY, SP REPORT 1990:05 and of 7 mm respectively. 3. J. Koo, Journal of Fire SCIENCES, Vol 15- May/ June 1997

4. S. Bourbigot et al, Journal of Fire Sciences 1999; 17; 42

Corresponding Author Esad Hadziselimovic, Faculty of Science, Department of Physics, Figure 4. Heating of the structure with different University of Sarajevo chars - thickness of the char 10 mm Sarajevo, Bosnia and Herzegovina, E-mail: [email protected]

Figure 5. Heating of the structure with different chars - thickness of the char 7 mm

Discussion The fire resistance of the structure is the time to reach the average temperature rise of 140 °C on the unexposed side, starting from an ambient temperature. The measurements of the thermal properties of the chars give the possibility to calculate the fire resistance of the building and other elements. From the heating diagrams this time can be easily determined. Of course, the specific structure shall be used in the calculation and tested to ascertain the fire resistance and the protection the intumescent paint provide. The thermal conductivity of the formed char is the main factor, as can be seen from the diagrams. Of course, one can change the composition of the intumescent paint as to get the best paint and to achieve the desired fire protection.

20 Volume 7 / Number 1 / 2012 technics technologies education management Determinants of Wiki Diffusion in the Greek Education System

Stavros Cotsakis , Vassili Loumos, Eleftherios Kayafas National Technical University of Athens (NTUA), Faculty of Electrical and Computer Engineering, Department of Communications, Electronics and Informatics, Athens, Greece.

Abstract friendly content with the result that present updated information vital to many institutions for the entire The present study investigates the determinants educational community and (Abreu, et al., 2010). of wiki diffusion in education. The model pre- Another important issue is that the construction of a sented in this work examines four facilitators and wiki based collaboration of users. one inhibitor of wiki diffusion among Greek high The “WikiWiki” formulated by Howard Cur- school students. The sample population of the re- ringham 1995 and aims to create a simple act of search was chosen randomly from three schools of government online data and collaboration (Ebner the Greek prefecture of Eastern Macedonia. Fac- 2006) that is easy for all users (Wang, 2004) and tor analysis and multiple linear regression analysis (Elrufaie, 2005). The ability for fast content up- were conducted to examine whether, and to what dating and easy data modification, along with the extent, wiki diffusion is affected by factors such as fact that the information becomes directly avail- relative advantage, compatibility, complexity, stu- able online are significant characteristics for any dent personal interests and professor motivation. educational cause (Leidner and Jarvenpaa, 1995). The analysis revealed that the most significant de- The present paper is studying the educational role terminant of wiki diffusion is the personal interest of the wikis and their impact on high-school level of the student for information search. On the other students. As Willemse at. Al., 2005 report in their hand, as supported by the literature, complexity research, their personality of the student affected was proved to be an inhibitor of wiki expansion in by their teachers and impacting knowledge be- education. Professor motivation, relative advan- comes more efficient (Silins and Mulford, 2004). tage and compatibility can also encourage wiki Wikis are the teachers’ modern educational tools diffusion, though in a smaller scale. not only because they combine the three “A” (any- Key words: Wiki diffusion, relative advantage, time, anywhere and anybody) (Ebner. 2006) but compatibility, complexity, student personal inter- also because they have three types of interaction ests, professor motivation, multiple linear regression as an important component of deep and effective learning (Preece et. Al., 2002). 1. Introduction It is known that cyberspace has lots of oppor- 2. Literature review tunities for learning and education and students Several studies show that the topic of wikis can perform a much wider search for information will continue to draw the attention of scientists which shows the beginning of a new era in educa- and professionals worldwide in the coming years, tion. The present study deals with wiki technology, mainly due to the fact that the future is open to a different method of exchanging information than innovative educational standards association, such the common web sites. The diversity and originality as wikis (Albors et.al, 2008) as technology grows of the wiki pages having to do mainly with the us- dramatically, and according to Majchrzak et al., er’s ability to change their contents only by using a (2006) wiki technology is sustainable. Challborn simple web browser and that can be used by a wide and Reimann (2005) after investigating specific range of users (Hester and Scott, 2008). Today, the wikis, as Seedwiki, Mediawiki and Wikki Tikki importance of wikis is magnified because of their Tavi, assumed that the obvious candidate of wi-

Volume 7 / Number 1 / 2012 21 technics technologies education management kis is distance learning. Raitman et al·, (2005), (2004). Moreover, as mentioned by Beatty et al. reviewed the various pathways in which students (2001), Majchrzak et al. (2006) and Grudin (1994) reflect events collaborations in an online learning the adoption of any innovative technology is posi- community. The findings showed students were tively associated to its relative advantage. Accord- excited should be remembered that the initiative ing to Fichman (2004), Fiol and O’Connor (2003) of wikis and felt easy and accessible and willing to and Swanson and Ramiller (2004), the decision to produce and expand their work on a specific topic. implement any technology is positively connected On the other hand, Ebner et al. (2006) conclud- to compatibility, an element which generally plays ed that when the debate on top levels of education a major role in innovation. students are not as receptive. Abreu et al. (2010) The third determinant used in our model is com- examined the acceptance of wikis by students of plexity. In the works of Roger (1995) and Moore a university community which provided a highly and Benbasat (1991) complexity is claimed to be technological environment. One of the conclu- negatively related with the adaptation of any in- sions reached was that, although the use of wikis novation theory. Dedrick and J. West (1994) and has become compulsory for students, one third R. Agarwal and J. Prasad (2004) also agree that of them used wikis for personal reasons, while when users assume that a technology is complex, two thirds of these used independently and is not they are less likely to implement it. Another deter- the case for teachers. Another conclusion of this minant of the model used in the present research is study was that users are keener in editing a wiki the personal interests of the students. The research in groups. The research also showed that students by Abrantes et al. (2006) results in significant facts consider the educational value of wikis to be the about learning performance. Wikis are used by ed- same or higher than other learning methods. ucators in order to intrigue the learners’ curiosity and boost the learning performance. As supported 3. Methodology by Abrantes et al. (2006) the motivation variable also correlates with learning outcomes. The aim of the present research is to study Finally, in the proposed model the last determi- the facilitators and inhibitors of wiki diffusion in nant affecting wiki diffusion is professor motiva- Greek students. In order to accomplish this task, tion. As Marks (2000) and Young et al. (2003) put four facilitators and one inhibitor were used and it, the level of learning perception is principally in- a conceptual model was constructed. This model fluenced by the students’ own interests, which is, is a synthesis of the models used by Hester and nevertheless, strongly correlated with the motiva- Scott, (2008) and Abrantes et al., (2007). A question set by educators. This research was conducted tionnaire was developed and distributed to high among Greek students attending the final class of school students in order to find which factors af- high school in the area of Eastern Macedonia of fect wiki diffusion. Before presenting the confir- Greece. Eastern Macedonia is comprised of two matory factor analysis, linear regression analysis prefectures (Drama and Kavala). From the capital and the results of the factors used are analyzed us- cities of these two prefectures three high schools ing past literature. were randomly chosen. The sample population The base for every technology implementa- of the research was 317 students. Questionnaires tion research is the model developed by Roger were distributed in the classrooms, during class- (1995), but to analyze the model proposed in the hours, achieving in this way a high response rate present study, it is important to present the Moore (93%) that is 295 valid questionnaires for the sta- and Benbasat (1991) model that was developed tistical analysis. in order to measure individual comprehension Factor analysis and linear regression analysis in accepting an information technology innova- were conducted to examine the factors that affect tion. Moore and Benbasat used relative advantage wiki diffusion. As illustrated in Figure 1, the mod- and compatibility, as two of the relevant factors. el examines the impact of each factor on wiki dif- The aforementioned factors, plus complexity, are fusion. Multiple regression analysis revealed the also taken into consideration in Fichman’s model beta values (β1, β2, β3, β4 and β5) for each of the five

22 Volume 7 / Number 1 / 2012 technics technologies education management factors depicted below. The greater the beta value to retrieve information (Hester and Scott, 2008). of a factor, the stronger the relationship between We assume that the simpler it is for students on wiki diffusion and this particular factor. Moreover, that level of the educational system to search in- the sign of betas (+/-) reveals whether there is a formation using wikis, the wider the expansion of positive or negative relationship among wiki dif- wikis will be. For that reason we hypothesize that fusion and the factors examined. H3: Complexity is an inhibitor of wiki diffusion. The fourth factor examined, is the students’ personal interest for information searching and gathering over the internet. We added this factor motivated by the study of Abrantes et al. (2007) as we expect it to have a strong impact on wiki diffusion. The hypothesis to be examined is

H4: Student personal interest is a determinant of wiki diffusion. Following the studies of Abrantes et al. (2007), Marks (2000) and Young et al. (2003) the level of learning perception is principally influenced by the students’ interest which is strongly correlated with the motivation provided by educators. There- fore, the last hypothesis becomes as

H5: Professor motivation for information searching over the internet leads to the diffusion of wikis. Figure 1. Conceptual Model

Thus are formed five cases to examine the de- 4. Results and Statistical analysis terminants of diffusion wiki in the Greek educa- 4.1 Factor analysis tional system. Following Hester and Scott (2008), The Kaiser-Meyer-Olkin measure tests whether the first hypothesis concerns the relative advan- the partial correlations among variables are small. tage that the student might obtain by searching On the other hand, Bartlett’s test of sphericity is information over the internet using various wikis. an indicator of the appropriateness of the factor Therefore, the first hypothesis is formulated as model used (Raftery, 1995). In the analysis of the H1: Relative advantage is a determinant of wiki present work, the results of both tests are consid- diffusion. ered to be acceptable, since the KMO measure is In the same sense, compatibility is the next 0,548 (higher that the 0.5 required for a satisfac- wiki diffusion driver that is examined. We assume tory factor analysis) and the significance level of that if wikis are compatible with the software sys- Bartlett’s Test of Sphericity is ,000 (less than the tems Greek student use (such as Office, Adobe 0.05 required to prove that the correlation matrix Acrobat, Flash and so on), the expansion of wikis is not an identical matrix, Raftery, 1995). Since the is facilitated. This driver was also used by Hester results of the aforementioned tests proved the suit- and Scott (2008) for their theoretical approach of ability of the sample for statistical analysis, confir- wiki technology diffusion. Therefore, the second matory factor analysis was conducted to examine hypothesis is formed as: the weights of the items used in the questionnaire. H2: Compatibility is a determinant of wiki dif- The extraction method used was principal compo- fusion. nent analysis and four components (factors) were Moreover, as mentioned before, our model also extracted with acceptable weights /values (over examines one inhibitor of wiki diffusion. Based on 0.5). The factors extracted were: the literature it is assumed that complexity is a factor that averts students from using wikis in order

Volume 7 / Number 1 / 2012 23 technics technologies education management

Table 1. Factors and Factor weights / values Student personal Professor Relative FACTOR Compatibility Complexity interests motivation Advantage Q1 0,781 Q2 0,900 Q3 0,792 Q4 0,561 Q5 0,924 Q6 0,881 Q7 0,794 Q8 0,957 Q9 0,861 Q10 0,827 Q11 0,960 Q12 0,738 Q13 0,879 Q14 0,969 Q15 0,824

The following tables summarize the reliabil- Factor 5 - Professor motivation ity tests for each one of the five factors extracted. Table 6. Reliability analysis factor 5 Cronbach’s alpha figures indicate acceptable reli- Cronbach’s Cronbach’s Alpha Based ability level for the five factors, since they are all N of Items Alpha on Standardized Items greater than 0,7 (Hutcheson and Sofroniou, 1999). 0,741 0,731 3 Factor 1 - Relative Advantage 4.2 Multiple linear regression Table 2. Reliability analysis factor 1 The five factors extracted from the factor anal- Cronbach’s Cronbach’s Alpha Based N of Items ysis were integrated into a multiple regression Alpha on Standardized Items model. The independent variables are Relative 0,831 0,863 3 Advantage (RA), Compatibility (C), Complexity Factor 2 - Compatibility (COM), Student Personal Interests (SPI) and Pro- Table 3. Reliability analysis factor 2 fessor Motivation (PM). In the following linear regression equation, let α represent the constant Cronbach’s Cronbach’s Alpha Based N of Items Alpha on Standardized Items value and ε represent the error in the calculation 0,781 0,802 3 that cannot be totally eliminated. The dependent variable is the first question in the questionnaire, Factor 3 - Complexity in which students are asked whether they are fa- Table 4. Reliability analysis factor 3 miliar with websites where the content can be cre- Cronbach’s Cronbach’s Alpha Based ated, modified and updated automatically by any N of Items Alpha on Standardized Items user via a web browser. Therefore, the linear re- 0,869 0,878 3 gression model has the following form:

Factor 4 - Student personal interests Wiki Diffusion = α + β1 (RA) + β2 (C) +

Table 5. Reliability analysis factor 4 + β3 (COM) + β4 (SPI) + β5 (PM) + ε . Cronbach’s Cronbach’s Alpha Based N of Items Alpha on Standardized Items In order to assess the effect of each variable on 0,781 0,782 3 wiki diffusion, the beta values of the model (corre-

24 Volume 7 / Number 1 / 2012 technics technologies education management lation coefficients) were examined. The next table Table 9. Collinearity statistics presents the model’s analysis of variance. The val- Factor Tolerance VIF ue F designates that the slopes β1, β2, β3 and β4 are Constant 1,000 1,000 non-zero and can be used for the analysis. More- Complexity 1,000 1,000 over, the sig. Value of 0,000 indicates the statisti- Relative advantage 1,000 1,000 cal significance of the test at the 1 per cent confi- Compatibility 1,000 1,000 dence level (Hutcheson and Sofroniou, 1999). Based on table 8, it can be inferred that from all the Student personal interest 1,000 1,000 variables examined in this study, ‘student personal Professor motivation 1,000 1,000 interest’ is the most significant facilitator of wiki diffusion, since it has the greatest beta value (0,640). In At this point, it is important to explain that consistence with the theory, complexity has proved our research is a case study, conducted on a small to be an inhibitor of wiki diffusion and, therefore, it fraction of participants in the Greek educational has a negative beta value. Professor motivation and system. The present study has produced and at- relative advantage are also important drivers of wiki tempted to analyze and interpret original findings diffusion. Compatibility has a low impact on the that can be of value in the field of wiki expansion overall model. Finally, the constant of the equation in education. (a) is 3,078. Therefore, the linear regression model presented above becomes as follows: 5. Conclusions and further research

Wiki Diffusion = 3,078 + 0,103 (RA) + -0,161(C) + The analysis performed in this work, demon- +0,068 (COM) + 0,640 (SPI) + 0,121 (PM) strated that the most significant determinant of wiki diffusion in Greek students is their personal Table 9 presents the co-linearity statistics (Tol- interest for information search. In addition, con- erance and Variance Inflation Factors). Tolerance firming existing theories, complexity was proved values fall at the [0-1] interval, an indicator that to be an inhibitor of wiki expansion in education. there is a linear relationship among the indepen- Professor motivation, relative advantage and com- dent variables. On the other hand, VIF values are patibility are also drivers of wiki diffusion, though also acceptable (VIF = 1/tolerance) since they their impact is of a smaller scale. The implications are less than 5, indicating that there is no co-lin- of this research are multiple for the educators. For earity between the four variables of the model example, we propose that emphasis should be giv- (Hutcheson and Sofroniou, 1999). en on encouraging students to use wikis in order

Table 7. ANOVA Model Sum of Squares df Mean Square F Sig. 1 Regression 136,742 5 27,348 22,172 0,000 Residual 356,465 289 1,233 Total 493,207 294 Table 8. Correlation coefficients Unstandardized Standardized Constructs Sig. Beta Std. Error Beta Constant 3,078 0,065 0,000 Complexity -0,161 0,065 -0,124 0,014 Relative advantage 0,103 0,065 0,080 0,112 Compatibility 0,068 0,065 0,052 0,296 Student personal interest 0,640 0,065 0,494 0,000 Professor motivation 0,121 0,065 0,094 0,062

Volume 7 / Number 1 / 2012 25 technics technologies education management to retrieve information for their assignments. The 4. Albors, J., Ramos J.C. and J.L. Hervas, (2008), students could benefit more from wiki technology “New learning network paradigms: Communities of if course assignments were more oriented towards objective, crowdsourcing, wikis and open source”, International Journal of Information Management, information finding and web-searching. Vol. 28, pp. 194-202 This research was conducted in a specific geographic area of Greece and was focused on 5. Leuf B. and W. Cunningham, (2001), “The Wiki Way: Quick Collaboration on the Web”, Laflin, PA: a small population sample of the Greek school Addison-Wesley. community. It is an original investigation of the determinants of wiki diffusion in Greek students 6. Wang C. and D. Turner, (2007) “Extending the Wiki of eastern Macedonia. Hopefully, this study will Paradigm for Use in the Classroom”, Proceedings of the International Conference on Information Technology trigger more profound research to illuminate the issue of wiki expansion and diffusion in educa- 7. Challborn C. and T. Reaimann (2005), “47.Wiki tion. Further research can be performed to exam- Products: A comparison”, International Review of Research in Open and Distance Learning, 6(2) Com- ine a larger geographic area covering Greece as a puting, 2004 whole or other wider areas. It would also be interesting to examine whether a similar study on 8. Leidner D. and S. Jarvenpaa, (1995), “The use of in- a different sample of students would produce the formation technology to enhance management school education: A theoretical view”, MIS Quarterly Vol. same results. Another idea is to conduct a research 19, pp. 265–291. on specific school subjects, to examine which subject is more suitable for assigning projects that 9. Elrufaie E., (2005) “A Wiki Paradigm for use in IT courses”, Proceedings of the International Confer- require the acquisition of web information using ence on Information Technology: Coding and Com- wiki technology. It would be extremely helpful puting (ITCC’05) to discover for which school subjects wiki usage produces the best results and assists the learning 10. Rogers E. M. and M. M. Allbritton, (1995), «Inter- active Communication Technologies in Business procedure. Organizations,» Journal of Business Communica- Finally, this study could be expanded to include tion, vol. 32, pp. 177-195, higher levels of the Greek educational system. A similar research could be conducted on a sample 11. Ebner, M., Zechner, J., and A. Holzinger, (2006), “Why is Wikipedia so Successful? Experiences in of students of Greek universities or technological Esatblishing the Principles in Higher Education”, educational institutes. Wiki technology can up- Proceedings of I-KNOW 06, 6th International Con- grade the educational systems and processes, not ference on Knowlegde Management, Graz, Austria, only in Greece but in every country, therefore, se- pp. 527-535, ISSN 0948-695x rious efforts should be undertaken by all interested 12. Hester A.J. and J.E. Scott (2008), “A Conceptual parties. Model of Wiki Technology Diffusion”, Proceedings of the 41st Hawaii International Conference on Sys- tem Sciences References 13. Dedrick J. and J. West, (2004), «An Exploratory 1. Majchrzak A., Wagner C. and D. Yates, (2006), Study into Open Source Platform Adoption,» in 37th “Corporate Wiki Users: Results of a Survey,” in Hawaii International Conference on System Sciences. WikiSym, Odense, Denmark, pp. 99-104. 14. Simin D, Milutinovic D, Brestovacki B, Simic S, 2. Abrantes J.L., Seabra C. and L.F. Lages (2006), Cigic T: Attitude of health science students towards “Pedagogical affect, student interest and learning interprofessional education. HealthMED 2010; 4:2, performance”, Journal of Business Research, 60, pp. 461-469. 960-964 15. Grudin J., (1994), «Groupware and Social Dynam- 3. Abreu P., Silva D.C., Mendes P. and V. Vinhas (2010), ics: Eight Challenges for Developers,» Communi- “Effect of the Usage of Wikis on an Educational cations of the ACM, vol. 37, pp. 92-105. Context”, Wiley Periodicals, Inc. Comput Appl Eng Educ; Published online in Wiley InterScience (www. 16. Preece J., Sharp H. and Y. Rogers (2002), “Interac- interscience.wiley.com); DOI 10.1002/cae.20434 tion Design: Beyond Human-Computer Interac- Received 28 July 2009; accepted 18 February 2010 tion”, New York, Wiley.

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17. Marks RB. (2000), “Determinants of student evalu- Corresponding Author ations of global measures of instructor and course Stavros Cotsakis, value”, 22(2), pp. 108–19. National Technical University of Athens (NTUA), Faculty of Electrical and Computer Engineering, 18. Agarwal R. and J. Prasad (1997), «The role of Department of Communications, innovation characteristics and perceived volun- Electronics and Informatics, tariness in the acceptance of information technolo- Athens, gies,» Decision Sciences, vol. 28. Greece, 19. Beatty R. C., Shim J. P., and M. C. Jones, (2001), E-mail: [email protected] «Factors influencing corporate web site adoption: a time-based assessment,» Information & Manage- ment, vol. 38, pp. 337-354. 20. Fichman R. G., (2004), «Going Beyond the Domi- nant Paradigm for Information Technology Re- search: Emerging Concepts and Methods,» Journal of the Association for Information Systems, vol. 5, pp. 314-355. 21. Raftery A. (1995), “Bayesian model selection in social research”, Marsden, 3rd edition: San Fran- cisco. 22. Raitmain R., Augar N., W. Zhou (2005), “Employ- ing Wikis for Online Collaboration in the E-Learn- ing Environment: Case Study”, Proceedings of the Third International Conference on Information Technology and Applications (ICITA’05) 23. Silins H and B. Mulford, (2004), “Schools as learning organizations — Effects on teacher leadership and student outcomes”, Sch Eff Sch Improv 15(3– 4): pp. 443–66. 24. Cunningham W. and B. Leuf (2001), “The Wiki Way. Quick Collaboration on the Web”, Reading, Mass.: Addison-Wesley 25. Willemse M, Lunenberg M and F. Korthage (2005), “Values in education: a challenge for teacher educators”. Teach Teach Educ 21: pp. 205–217. 26. Young M.R., Klemz B.R. and J.W. Murphy, (2003), “Enhancing learning outcomes: the effects of instructional technology, learning styles, instructional methods, and student behavior”, J Mark Educ, 25(2), pp. 130–142. 27. Hutcheson G. and N. Sofroniou (1999), The multivariate social scientist: introductory statistics using generalized linear models, Thousand Oaks, CA: Sage Publications.

Volume 7 / Number 1 / 2012 27 technics technologies education management Transition process and foreign direct investment flows in Serbia

Zorka Grandov1, Maja Djokic2, Verica Jovanovic3 1 Faculty for economics and engineering management, Novi Sad, FIMEK, Serbia, 2 Vocational college of propaganda and public relations, Belgrade, Serbia, 3 Pančevo, Serbia.

Abstract mechanism, before the new one was constructed, and elimination of companies that have no chance The recovery and strengthening of the Serbian in the market. The growth of poverty is the con- economy, the transition process, privatization, sequence of decrease of incomes, increase of in- market linking and integration in the EU certainly equality and the slow development of effective indicate the need to define the most appropriate mechanisms of social security. ways to respond to the challenges that these pro- In Serbia, a new private sector grows, but it does cesses bring along. In this sense, foreign direct in- not present such a driving force as it presented in vestment (FDI) are extremely important for Serbia some other countries in transition (in Poland, for because, unlike other modalities of capital inflows, example), where it quickly became the main car- investment packages brought by FDI include not rier of economic progress. The causes of this are, only capital but new technologies, management firstly, the fact that there was the private sector, and organization skills, foreign market access and which was a relatively developed even prior to the likewise. Therefore, they are essential not only in changes in October, while in most transition coun- terms of development needs of the economy, but tries it began from scratch and, therefore, quickly also in terms of growth and maintenance of the grew in the early stages. Secondly, an important competitive positions and performance. The pa- limiting factor for private sector development in per provides concrete measures to increase FDI Serbia was the banking system, which was not inflows. Attention should be focused on mainte- nearly able to monitor the financing needs (and the nance of political stability and improvement of old banking system, did not have that role, so there legal safety in order to improve the investment cli- was no financing of private companies). The main mate, in order to significantly increase the number source of investment money are still the com- of greenfield projects in the future which, among pany’s profit and owner’s assets, which prevents other positive characteristics, include the creation rapid development. And thirdly, there are other of new jobs and thus alleviate the growing unem- problems burdening the economy in Serbia and ployment problem. Possible intensification of the bring barriers to entry: complex administrative political crisis in Serbia would have a negative im- procedures, weak law enforcement and protection pact on FDI, and it would be difficult to talk about of contracts, i.e. low level of legal protection, of- the greenfield investments in this situation. ten uncooperative local authorities, problems with Key words: Foreign direct investment, com- the building and construction land and so on. petitiveness, transition, the Republic of Serbia.

1. Transition process in Serbia Introduction There are several reasons for the lack of pro- Transition of different countries differ in many duction decrease during the transition period in aspects, but they also have certain similarities of Serbia, that is for its growth. Firstly, Serbia did not which the two are most important: a substantial have a radical break in coordination mechanism reduction of production in the first years of transi- as the vast majority of countries in transition, i.e. tion and growth of poverty. Production decrease is it did not switch from central planning to a mar- largely due to the collapse of the old coordination ket system in 2000, as it had already been in the

28 Volume 7 / Number 1 / 2012 technics technologies education management market system, although deformed by the social- had a positive effect on the production: when some ist government and party, but it was still a mar- unnecessary regulations are eliminated, that is the ket system. Serbian economic institutions and the government intervention it is natural to have an in- people, accustomed to the market, were in 2000 crease of economic activity. Secondly, macroeco- much better prepared for the transition than other nomic stabilization also brought improvement of countries of Eastern Europe a decade earlier.1 business environment and enabled growth. Thirdly, Price liberalization, foreign trade and business a substantial inflow of external financial support activities, as a whole, at the end of 2000 and early (EUR 3.2 billion in the period October 2000 - end 2001 only eliminated many unnecessary regula- 2004) encouraged domestic production, although a tions, as well as broad formal and informal govern- considerable part went into imports. Fourthly, after ment administration of the ruling party, which even the victory of democratic forces the last sanctions against Serbia were removed, the financial ones, 1 Begović, B. et.al.: Četiri godine tranzicije u Srbiji, CLDS, which also had a positive effect on economic activ- Belgrade, 2005. ISBN 86-83557-33-2 2005. Table 1. The EBRD transition indicators for Serbia (period 1989-2009) Road Trade Large Water Railway SMEs.** companies production Competition Competition management Reform of the the of Reform infrastructure infrastructure banking sector banking privatizations* Electric energy energy Electric Infrastructural Infrastructural Privatization of of Privatization Restructuring of of Restructuring regulation policy regulation Price liberalization Price Telecommunications reforms (total result) (total reforms 1989 1,00 3,00 1,00 2,67 2,00 1,00 1,00 1,00 1,00 - 1,00 1,00 1,00 1990 1,00 3,00 1,00 3,67 2,00 1,00 1,00 1,00 1,00 - 1,00 1,00 1,00 1991 1,00 3,00 1,00 3,67 2,00 1,00 1,00 1,00 1,00 - 1,00 1,00 1,00 1992 1,00 3,00 1,00 3,67 2,00 1,00 1,00 1,33 1,00 - 2,00 1,67 1,00 1993 1,00 3,00 1,00 3,67 2,00 1,00 1,00 1,33 1,00 - 2,00 1,67 1,00 1994 1,00 3,00 1,00 2,67 1,00 1,00 1,00 1,33 1,00 - 2,00 1,67 1,67 1995 1,00 3,00 1,00 2,67 1,00 1,00 1,00 1,33 1,00 - 2,00 1,67 1,67 1996 1,00 3,00 1,00 2,67 1,00 1,00 1,00 1,33 1,00 - 2,00 1,67 1,67 1997 1,00 3,00 1,00 2,67 1,00 1,00 1,00 1,67 2,00 - 2,00 1,67 1,67 1998 1,00 3,00 1,00 2,33 1,00 1,00 1,00 1,67 2,00 - 2,00 1,67 1,67 1999 1,00 3,00 1,00 2,33 1,00 1,00 1,00 1,67 2,00 - 2,00 1,67 1,67 2000 1,00 3,00 1,00 2,33 1,00 1,00 1,00 2,00 2,00 - 2,00 2,00 2,00 2001 1,00 3,00 1,00 4,00 2,67 1,00 1,00 2,00 2,00 2,00 2,00 2,00 2,00 2002 2,00 3,00 2,00 4,00 3,00 1,00 2,33 2,00 2,00 2,33 2,00 2,33 2,00 2003 2,33 3,00 2,00 4,00 3,00 1,00 2,33 2,00 2,00 2,33 2,33 2,33 2,00 2004 2,33 3,33 2,00 4,00 3,00 1,00 2,33 2,00 2,00 2,33 2,33 2,33 2,00 2005 2,67 3,33 2,33 4,00 3,33 1,00 2,67 2,00 2,00 2,33 2,33 2,33 2,00 2006 2,67 3,67 2,33 4,00 3,33 1,67 2,67 2,00 2,33 2,33 2,33 2,67 1,67 2007 2,67 3,67 2,33 4,00 3,33 2,00 2,67 2,00 2,33 2,33 2,33 2,67 1,67 2008 2,67 3,67 2,33 4,00 3,67 2,00 3,00 2,33 2,67 2,33 2,33 2,67 1,67 2009 2,67 3,67 2,33 4,00 4,00 2,00 3,00 2,33 2,67 2,33 2,33 2,67 1,67 Source: EBRD (http://www.ebrd.com/country/sector/econo/stats/index.htm); September 2010. Note: * Ranking (4) indicates that when it comes to state-owned enterprises, more than 50% of equity is in private ownership, and the highest rank (4 +) indicates that more than 75% of capital is in private ownership. ** Ranking (4) shows that the privatization of small enterprises is complete, while the highest rank (4 +) indicates complete absence of state ownership in small businesses; performance of the enterprises at this level are typical for developed industrial countries.

Volume 7 / Number 1 / 2012 29 technics technologies education management ity. In other words, the beginning of real transition Within ten years of transition that took place did not bring the reasons for the decrease of produc- without Serbia great experiences were gathered in tion, but, rather, for its growth. many segments of transition that occurred in other Similarly, there was no strong reason for the countries: the experiences, for example, regarding increase in poverty. Firstly, as a consequence of macroeconomic policy, price liberalization policy growth of GDP, the incomes of the population and foreign trade, privatization and restructuring of were growing. Secondly, the increase in inequality the real sector, reforms of public services etc. These was not large, so that it could not affect the transfer experiences led to the accumulation of knowledge of more people to the poor. Thirdly, there used to about what some transitional policies and models be nominally well-developed social welfare sys- may bring, i.e. what the results of their application tem in Serbia, which was only poorly financed, so are. Also, a vast knowledge on the mechanisms that the debts to consumers were more than two years lead to such results was accumulated, as well as old (social welfare, child allowance, etc.). After which mechanisms lead to formulation and imple- normalization of the situation in the early 2001, mentation of transition policies, that is which pre- and with the assistance of donations, debts were conditions should be met in order to successfully settled and regular payment of current transfers implement a specific policy. In this regard, the delay was provided, which improved the situation of of Serbia was a chance to learn from the mistakes the poorest. Ensuring of regular payments of pen- of others, that is not to repeat the mistakes that oth- sions had a similar positive effect on the position ers have already made. Only the Slovak Republic, of the oldest citizens. Fourthly, a significant and among the countries of Central and Eastern Europe, already mentioned financial support of the world had such an advantage. increased the purchasing power of the population over the level of domestic resources and allowed 2. Performances of foreign direct invest- visible growth of consumption. Probably, the most ments in Serbia important advantage of Serbia was tardiness in the transition, caused by the political constella- Bearing in mind the necessity of strong growth tion and international situation during the 1990s. in production and export, the economic develop- Specifically, the transition in Serbia started only in ment of Serbia in the following period is virtually 2000 with the wave of political changes that took impossible without fresh capital. In this sense, place in October of that year. In other words, the foreign direct investments represent the optimal transition in Serbia started with ten years of delay. form of investment, because in addition to capi- Serbia's progress in the transition period was tal components there are management skills, new valorized, among others, by the EBRD. The tran- technology and many other related positive as- sition indicators point to the conclusion that the pects. It is therefore in the interest of Serbia to reforms were most successful in the liberalization make its policy and the dynamics of the open- of prices (since 2001 their score has been 4.00), ing independent from political turmoil and, most then the area of trade and privatization of small importantly, independent from the influence of enterprises (detailed data are presented in Table 1). lobbying groups, which have been holding back, The worst, on the other hand, were evaluated the to a lesser or greater extent, the process of liber- process of enterprise restructuring, large privatiza- alization. Acceleration of investment policy, to a tions and the general situation of infrastructure. large extent, is the only way out of the vicious In the field of transport infrastructure, the em- circle: the growth of wages over productivity - phasis was on the railroad network which is in the the growth of consumption and import - a de- worst condition (score 2.33), while the road net- crease of competitiveness of export – the slowing work is in somewhat better condition (2.67). For down and the fall of economic growth. Since, on comparison purposes only, Croatia had for these the other hand, the national savings will be for two areas of infrastructure identical values of the a longer period far below the investment needs, EBRD indicators in 1998 for the railroad and the here the direct investments appear as a variable 2002 and 2003 for road infrastructure. of strategic importance.

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The inflow of foreign direct investments in Ser- bia during the nineties was constantly below the level of USD 120 million annually, except in 1997 (740 million USD). The first significant amount of FDI, greater than 1 billion (net) was recorded in 2003. Then, there were oscillation again, until 2006 when the record inflow of USD 4.3 billion was recorded (Figure 1).

Figure 2. Input cumulative of the foreign direct investments in Serbia, 1997-2009 (in mill. USD) Source: UNCTAD: World Investment Report 2010, New York and Geneva, 2010., Annex

Figure 1. FDI in Serbia - a net inflow in the period 1997-2009 (in mill. USD) Source: NBS, the Department of Economic Analysis and Research Department, Balance of Payments Statistics Depar- tment, Balance of Payments 1997-2006, Balance of Payments in 2007, 2008 and 2009 (http://www.nbs.rs/export/internet/ Figure 3. Inflow of FDI in Serbia - top 15 coun- cirilica/80/platni_bilans.html) September 2010. tries, 2000-2008. (in cash - net, mill. USD) Source: NBS, Economic Analyses and Research Department, There was a sharp decline in FDI inflows to a Balance of Payments Statistics Department (http://www.nbs. level of 2.5, i.e. 2.7 billion in 2007 and 2008, and rs/) I/2010. a negative trend continued in 2009, with the FDI level of USD 1.9 billion. According to the data for the period January - July 2010, the inflow of FDI was USD 519.7 million net, which represents a significant decrease in comparison to the same period last year (USD 896.0 million.) 2. The input state of FDI in 2009 reached USD 20.6 billion (Figure 2). Expressed in relation to GDP, in 2008 the cumulative FDI was 32.7% of GDP3, an increase compared to 2002 (when the Figure 4. Inflow of FDI in Serbia - top 15 coun- share was at 10.7%) is more than evident. tries in 2009 (in cash - net, mill. USD) Source: NBS, Economic Analyses and Research Department, Among the top fifteen countries by origin of Balance of Payments Statistics Department (http://www.nbs. foreign direct investments placed in Serbia in the rs/); Sept. 2010 period between 2000 and 2008 (Figure 3), none was outside the European continent (USA ranks The top five countries for the period 2000-2008 as the sixteenth, with a total of USD 133 million). are: Austria, Greece, Norway, Germany and the Netherlands, and all with the amounts of FDI of 2 NBS: Balance of payment of the Republic of Serbia more than USD 1 billion (the largest amount of (I-VII) 2010 (http://www.nbs.rs/export/internet/cirilica/ FDI originating from Austria, a total of USD 2.6 80/platni_bilans.html); September 2010 billion). By far the largest outflow of foreign di- 3 Source: UNCTAD: World Investment Report 2009, New York and Geneva, 2009, Annex B. ISBN 978-92-1- rect investment was in the observed period in Bos- 112775-1 nia and Herzegovina (USD 901 mill.). Of all Eu-

Volume 7 / Number 1 / 2012 31 technics technologies education management ropean transition countries, Slovenia is ranked as the seventh (USD 655 mill.), Hungary as the tenth (USD 353 mill.), and Croatia as the twelfth (USD 296 mill.). In 2009 (Figure 4), the largest amount of FDI was placed from the Russian Federation (USD 535.3 million, net), followed by Austria and Holland, with USD 322.1 million and USD 242.5 million. The overview of foreign direct investment in the ECT is given in Table 2, as a summary for the period 2000-2006 (for this period there is no data for all countries from this group), as well Figure 5. Foreign investments in Serbia by busi- as for the last two years. ness segment in 2009 (share in%) In 2009, Slovenia, Slovakia and Croatia dominate Source: NBS, Economic Analyses and Research Department, (net inflows was USD 48.6 mill. USD 35.5 million Balance of Payments Statistics Department (http://www.nbs. rs/); Sept. 2010 and USD 27.5 million). Apart from the three above Note: includes commodity and cash flows mentioned countries in 2007 Montenegro appeared as a significant source country of FDI placed in Ser- The banking sector, with the intensification of bia, with significant USD 209.3 million. competition from a growing number of market Viewed by sectors, the highest amount of for- participants, proved to be extremely attractive to eign direct investments in Serbia has been placed foreign investors. The main reasons for the attrac- in the area of financial intermediation, followed tiveness of the Serbian banking market are in the by manufacturing, transport, storage and commu- fact that interest rates are extremely high, and that nication, real estate operations and wholesale and the official "perceived" business risk is very high, retail trade, etc.. and that the real risk of doing business is still con- In the transport sector, the largest amount of siderably lower. FDI (15.9% of total inward FDI in the period According to NBS data for 2009, Manufactur- 2004-2008) was placed in telecommunications. ing industry was dominant (with a share of 30.8% in total FDI (USD 768.7 mill. in absolute terms),

Table 2. Foreign direct investments in money in Serbia from the ECT - net, 2000-2009 (in thous. USD) 2000 – 2006* 2007 2008 2009 Czech Republic - 8.328 447 1.881 Hungary 290.955 31.494 31.030 23.424 Poland - 10.071 24.811 2.609 Slovakia 63.137 3.084 1.471 35.551 Slovenia 450.394 92.856 112.189 48.569 Estonia - 6.843 196 445 Latvia 49.385 3.535 739 1.381 Lithuania - 5.089 6.395 47 Bulgaria 65.097 46.916 21.884 2.219 Romania - 20.139 20.747 748 Albania - 108 -39.066 -6.310 Bosnia and -1.589 -838.608 -60.804 -550 Herzegovina Croatia 117.315 35.944 143.148 27.480 Montenegro 12.946 209.288 73.900 -5.599 FYR Macedonia - -47.981 -1.504 -1.449 Source: NBS, Economic Analyses and Research Department, Balance of Payments Statistics Department (http://www.nbs.rs/); Sept. 2010

32 Volume 7 / Number 1 / 2012 technics technologies education management followed by the section of Mining and quarrying to finance investment projects in the manufactur- (share amounted to 20.7%). All other sectors re- ing sector, services sector that may be the subject corded participation of below the level of 15%. of international trade, research and development. It is interesting to note that there is a significant The main requirement is that the minimum difference when comparing years 2009 and 2005, investment value is between one and five mil- when financial intermediation and wholesale and lion Euros, depending on the unemployment rate retail trade dominated, although the fact that the in the municipality in which the investments are share of individual sectors in the period between made and to open at least 50 new jobs 5. There are 2005 and 2009 is not disputable, although, they some disagreements among the domestic profes- varied significantly from year to year. sionals about this kind of public spending, in the sense that this kind of investment incentives is 3. Investment incentives and optimal sec- bad, because the state should encourage foreign tors for foreign investments investment by creating a better investment climate reducing public spending. The argument for this is To encourage new investments and reduce that the number of employees actually grows with high unemployment, Serbia (based on the Decree the success of business enterprises, and not gov- of the Government of Serbia, adopted in late June ernment subsidies, so that it would be more effi- 2007), granted its potential investors from 2,000 cient to cut taxes for companies that want to invest to 10,000 Euros per open new job position. In- in Serbia. There are also views that the govern- vestment projects in all sectors, except trade, tour- ment helps the foreign investors too much, even ism and agriculture, are eligible for the award of financially. The funds from that mentioned pro- grants from the National Investment Plan (NIP). gram were given, among others, to some famous Proposed investment projects are evaluated based international companies, which are considered not on nine criteria. Starting with the investor’s refer- to need an incentive to invest. An issue which also ences, it’s identity card and past indicators of suc- emerged in practice, is that the investor receives cess, then the share of domestic suppliers and the cash boost just in case it takes over the company. effects of investment on the productivity of other If it rents a hall from another company, as in the domestic companies in the same sector, as well as case of German Drexel Meyer6, which is intended the sustainability of the investment, i.e. length of with brownfield investment to rent a hall in Zren- business activities. janin, it could not count on that money. Whether the submitted project will receive the The question is what is the interest of the coun- significant support from the Government, depends try, since the fact that someone bought the plant is on how the proposed investment will encourage not a guarantee that it will not sell it in one year. the general development and the development of However, the big question is whether these com- the municipality, human resources, environmental panies would have chosen to invest in Serbia if protection and the scope of international services they were not offered these incentives. The posi- (for investment in the service sector). Projection of tion of the Government is that the incentives of the effects show that, after the implementation of this type in this transition phase are necessary, due projects, it would be realistic to expect the opening to the still poor investment climate and instability, of over 10,000 new jobs. 4 The funds are intended as well as the growing problem of unemployment. Even though their government covers a part of 4 In the first two application rounds 61 request came. The the costs of new investments, Serbia in the me- funds were approved for 13 companies, of which 8 were dium term gets a lot more - increasing employ- foreign and 5 domestic. 10.33 million Euros were set aside for investments worth 78.83 million Euros and 5122 new the opening of 2535 new work positions, and the total jobs were created . Contracts with 18 companies (nine of 5.22 million Euros from NIP were secured; Source: domestic and nine foreign companies) in the third round Ministry of Economy and Regional Development (http:// for the allocation of grants to investors were signed www.merr.gov.rs/), September 2009 in July 2007, enabling the investments worth 150.6 5 Source: SIEPA (http://www.siepa.sr.gov.rs); I/2010. million Euros in 16 municipalities in Serbia, as well as 6 Source: same.

Volume 7 / Number 1 / 2012 33 technics technologies education management ment and export, and the possibility for domestic • Auto-Parts (focusing on the companies- entrepreneurs to learn a lot from them. In addition, suppliers of new car factories and the undeniable fact is that foreign investors bring manufacturers of trucks and heavy vehicles). in Serbia more than necessary knowledge, tech- • Information and communication technologies nology, and new markets. There is much less dis- (products and services with the possibility agreement when the issue is not a specific finan- of making software, administrative and cial incentives, and the topic is attracting the in- business activities, initiatives that are based vestments that would bring a world famous brand, on the capabilities of universities and research which significantly contribute to new employment centers). and to bring new technology. In this regard, the • Pharmaceuticals, medical care, clinical criteria by which the investment could acquire the research and chemical industry. status of investments of special interest should • Agriculture and food industry (food and be precisely defined, world-famous brand would non-food agricultural products, with imply, for example, that a given company is on emphasis on organic products, products with the list of the largest and most successful compa- geographical origin and products obtained nies in the world; by a significant investment that by indigenous and traditional technologies significantly contributes new employment would of high quality, as well as the product of be considered an investment of over EUR 20 mil- conventional production and processing for lion which would employ 100 new workers or an mass consumption of high quality). investment in the areas that can undoubtedly be • Banking and Financial Services. characterized as high - tech. If the investor satis- • Engineering (specialized services, engineering, fied any of these conditions, he would acquire the building on the turnkey principle, etc.). right to extraordinary relief, such as: free alloca- • Wood industry (mainly production of wood tion of land (right of use), exemption from pay- furniture, which is based on craft skills). ment of the land development fee, providing in- • Tourism. frastructure to the land on which the investment of • Textile industry (short-term production special interest is located, etc. brand clothing and focus on certain markets). From the aspect of attracting foreign capital, the most important advantages of Serbia as an op- It should be noted that the specified sectors are timal investment location are: developing at the global level as well, and they 1. Central position in the South East Europe stand out particularly because they have, in do- (Corridor 10, the Danube) mestic circumstances, the potential to create sig- 2. Good access to markets through the process nificant numbers of new jobs. Projects in these of EU accession, regional free trade sectors may be able to connect local companies agreements and free trade agreements with and attracting foreign companies-suppliers, and Russia. services, then they have the potential to develop 3. Industrial and research tradition and industrial clusters, and besides that they can influ- experience in engineering and manufacturing ence the increase in export and affect the balanced jobs. regional development of Serbia. 4. Natural resources and production conditions in agriculture and forestry. 4. Measures for the improvement of the investment environment and the growth Foreign capital is certainly welcome in all sec- of FDI tors of the economy. However, the sectors in Ser- bia that could contribute the most with regard to The qualitative index of political risk is impor- the competitive advantage they have or may have: tant determinant of the income of FDI, especially • Public-private partnerships (energy, given the fact that Serbia has not been for a long telecommunications, infrastructure, time attractive to foreign investors. Elections, as metallurgy, mining and research). an important political factor, have a double effect.

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At first, they cause a slowdown in reforms, and legal protection, it is very important to establish reduced interest of administration for rapid mod- adequate legal protection of intellectual property ernization. Besides the direct impact, there is an- rights. Slowness and delay of proceedings is still other which is not direct, but it is also essential believed to be a great interruption, as well as igno- in the long run. Frequent elections reduce predict- rance or insufficient knowledge of certain areas. ability, and therefore the ability of the economy to Arbitration procedure is not well developed and develop business strategies and establish plans for the application of this form of dispute resolution business development. Therefore, long periods of should be further encouraged. Inability to obtain consecutive election cycles lead to general slow- the right to own the construction land also is one down in reforms and reduced the interest of poten- of the key obstacles for development of business tial new investors. climate for placing FDI. In this sense, it is neces- To create an attractive investment environ- sary to remove this obstacle and allow full comment, the relationship of Serbia with interna- petition in real estate trading and free pricing. The tional financial institutions (IMF, World Bank)is problem is evident when it comes to real estate ca- extremely important, that should result in growth dastre and land registry (very poor coverage of the of the rating of Serbia, which is very important in territory in the Land Registry), which resulted in terms of investment performance. a significantly limited function of powerful mort- The stability of the business environment and gage creditors in collateral lending. Administrative FDI will largely be affected by the process of EU procedures are still, in some areas, inexplicably integration. European integration agreements, complicated and difficult to understand for for- undoubtedly, enlarged the credibility of govern- eign investors, because they are primarily related ments in European countries in transition in terms to organizational failures. It is necessary to speed of commitment to reforms and focus on opening up the harmonization of the national legislation their economies. EU has contributed to shortening with EU regulations, in order to increase the legal the transitional period by abolishing tariffs and quo- security of business and investment. Of particular tas on imports of industrial products from Central importance is the regulation of property relations, European countries. Such regime is very attractive especially in relation to land and construction. to potential foreign investors who want free access Although innovative and modern laws are being to the markets of countries of the European Union. brought, their impact is limited by numerous reg- Agreements, spurred interest among European ulations, hidden in the bylaws. This issue is also manufacturers, especially those that are significant- related to improvement of administrative capacity ly reliant on imports of raw materials from third and quality of public administration. Foreign in- world countries, who have placed their finished vestors give particular importance to this issue as products to the EU market. The agreements further its resolution brings many positive effects - more motivated the moving of their production to one of predictability, more efficient administration, and Central European countries in transition. less potential for corruption. An important precondition for attracting FDI is The position that Serbia has skilled labor is at the creation of an adequate legal and institution- least debatable. After the enormous "brain drain" al environment in Serbia, as well as institutional in the nineties, Serbia remained largely free of regulation of capital markets, which is one of the experts who, by definition, are the "backbone" of most important drivers of economic growth and the recovery of the economy of a country. Lack development. Foreign investors specially take into of experienced professionals (managers, financial account the judicial system and legal security in experts, engineers) will be a growing obstacle in the country they intend to place capital. In the case the future, it is inevitable. of Serbia, progress in this area (according to the Reformation of the education system of Ser- World Bank and other international institutions) is bia and its harmonization with the needs of the still problematic, and therefore attention in the fu- economy. The market still lacks adequate profes- ture should concentrate on creating more effective sional capacity in terms of functionality and man- judicial system in Serbia. As a special segment of agement, in relation to formal education, experi-

Volume 7 / Number 1 / 2012 35 technics technologies education management ence and previous employments. Employment of Greenfield investments are a form of placing of labor and the number of qualified personnel are foreign capital, which should always be encouraged still at odds as there is no sufficient supply of labor in terms of the various privileges and exemptions, to cover the growing needs. In addition, a large and much simpler administrative procedures. Al- percentage of people with basic education is obvi- though, the experience of transition countries that ous, so additional education is necessary. Also, it joined the EU, greenfield investments started in a is important to attract Serbs of adequate expertise significant scale only in the last stage of transition, (those who work abroad and who have acquired after the privatization process. In Serbia the atten- key skills and knowledge of business in global tion should be focused on attracting this type of companies) to return to Serbia. Foreign companies FDI having in mind multiple positive effects. Prac- are happy to appoint them to the highest leader- tice from the region shows that greenfield invest- ship positions, instead of bringing in foreigners. ment affected economic growth in transition coun- Encouraging the development of applied sci- tries, because this form of investment had direct ence, through appropriate financial support and (increased employment, export, taxes paid to the more intensive connections with research institu- state), and indirectly influence on their economic tions from abroad. development. Because with the arrival of greenfield More balanced development demands the in- and subcontracting chains are created and small crease of the efficiency of local self-government and medium enterprises are developed. In addition in building regional infrastructure, which is im- to the prolonged and often corrupted way to get the portant for attracting the investors; permission for construction, Serbian for greenfield State of the infrastructure is a significant fac- investors, who employ almost completely local tor for the foreign investors that determines the workforce is no longer so cheap. Especially when attractiveness of a country, and even more, the at- it comes to workers with lower qualifications, be- tractiveness of the city or some other micro site. cause their wages are lower in Belarus, Bulgaria The fact that new sites are offered without ade- and Ukraine. As for the manager, Serbia is com- quate infrastructure, and even without zoning and petitive, but are the well educated are not flexible. cadastral records. For the elimination of such lacks Investors, therefore, prefer brownfield investment neither financial assets nor long periods of time - buying companies that went into bankruptcy, are necessary, but the improved administration at because in this case the procedures for future op- all levels. One of the arguments for the continua- erations are easier. In greenfield, the investor has tion of liberalization in the field of infrastructure to think whose is the property on which he plans (electricity, telecommunications, water supply to build, and with the purchase from the privatiza- and sewerage, roads and dams, railways, ports, tion he inherits the workers that are not qualified airports), is the fact that infrastructural bottleneck or there are too many. In addition, he has to deal situation are the brake on the overall rapid devel- with debts and outstanding matured receivables. It opment of transition countries. With the inflow of has often happened recently that the the investor is foreign capital into the infrastructure sector it is waiting for the company to go bankrupt, and then to possible to significantly reduce and even eliminate buy it and start the production. these bottleneck situations. When it comes to small and medium enter- FDI can have a negative impact on the trade prises, we should note a worrying fact that in the balance if the country does not achieve significant past the least amount of foreign capital was placed cooperation with domestic suppliers, which is in SMEs. It is therefore necessary to examine in the motivating and driving factor of the growth detail the possibilities of special incentives for this and development of local production. Regardless segment of the economy, with full legal security for of short-term benefits of such investments (more foreign investors and developed legal framework diverse offer on the market, recruitment of local for tax incentives, without doubts and ambiguities. staff), taking over of a part or even the entire mar- In order to encourage export-oriented FDI, it is ket, observed in the long run has a negative impact necessary to implement the new development in- on the domestic producers. struments. Establishment of industrial parks, other-

36 Volume 7 / Number 1 / 2012 technics technologies education management wise, is one of the most important ways to attract The Serbian Diaspora could become a much foreign direct investment. Industrial parks are sets larger investor than it is now. We should take into of companies concentrated in a specific territory, account the actions of some generation towards which share the same infrastructure. They were ini- the ethno-transfer. The generation that left the tially used only for productive activities, while they country for economic or political reasons, in the still combine manufacturing and services, and the greatest amount, is interested in profits, as well production is increasingly relying on high technol- as the fulfillment of moral rehabilitation through ogy. Technology parks differ from industrial parks by ethno-capital investments, and even to return in the activity of the company focused on techno- to their country of origin. The second generation, logical development and commercialization of sci- born in countries of immigration, homeland ties entific research. For technology parks the crucial with their parents' home country are significantly are intensive links with the companies, universities lower, while ethnic ties of the third-generation and research institutes. The purpose of industrial have almost completely disappeared. This is, parks is, in addition to provide physical space for therefore, time limited source of capital. the realization of foreign direct investment, and creating favorable conditions for the development Conclusion of specific regions. Production in industrial parks affect: employment growth of local populations, The strengthening of the Serbian economy, changing employment structure by education and growth of the industrial production, employment training (looking for staff of certain profile), attract- and export, and integration in the EU are the im- ing and supporting service industries, but also the peratives, and it is therefore necessary to find the use of local suppliers and logistics, which affects most appropriate modality to meet the challenges the economic development of the entire region. that these processes bring along. Free zones were created as a mean for creating a In domestic scientific and professional commu- conducive environment for business, especially for nity, in terms of the apparent shortage of investment companies seeking low-cost export base. The main funds, slowing down of the economic growth, wor- attraction of free zones are favorable customs treat- ryingly high trade deficit and high unemployment ment, certain tax incentives and simplified adminis- rates, the need for intensifying the inflow of foreign trative procedures. They include the identification, direct investment, especially export-oriented and determination and fencing of duty-free zones in greenfield projects, no one disputes any more. the country in which the exporting companies are The alternative to the inflow of foreign direct allowed to operate without the usual adherence to investments represent the credits that are expen- local laws regulating the payment of customs and sive and will be more expensive, and domestic other duties. Also, the companies are usually al- savings is insufficient to finance investments. lowed to base their business activities on foreign The question that is now current is how to currency and they are often not subject to common achieve in the shortest possible time, and with rules and obligations when it comes to labor laws, minimized negative effects of FDI. foreign exchange operations and other adminis- In this sense, in the last segment of the paper trative duties and regulations. Free zones operate are stated measures that may be of importance to most successful in the least developed economies, achieve this goal, which can be summarized in a few in which the usual laws and other regulations have key guidelines: the necessity to maintain political not yet been improved and modernized in order to and macroeconomic stability, intensify the reform meet the needs of investors. An excellent example of legal solutions primarily in the areas of owner- is Dubai. Principles of free zones have, in recent ship of construction land, more efficient courts, years, developed outside the original incentives increase the efficiency of administration, increase such as cheap labor, limited company taxation and labor market flexibility with the harmonization of reduced paperwork, and these areas are developed the education system with the current needs of the into large international trade and forwarding desti- national economy and intensify the development of nations. free zones, technological and industrial parks.

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References 19. http://www.imf.org/external/np/sec/pr/2000/pr0075. htm (I/2010.) 1. Aranđelović, Z., Petrović-Ranđelović, M.: "UTI- CAJ STRANIH DIREKTNIH INVESTICIJA NA 20. http://www.ebrd.com/country/sector/econo/stats/in- KVALITET OKRUŽENJA", Ekonomske teme br. 1-2, dex.htm (IX 2010.) http://databank.worldbank.org/ Niš, 2006, YU ISSN 0353-8648 ddp/home.do#ranking (IX 2010.) 2. Begović, B. et.al.: Četiri godine tranzicije u Srbiji, 21. http://www.doingbusiness.org/economyrankings/ CLDS, Belgrade, 2005. ISBN 86-83557-33-2 (I/2010.) 3. Grandov, Z.: "MEĐUNARODNA EKONOMIJA I GLOBALIZACIJA", BTO, Belgrade, 2009, ISBN 978-86-905115-3-2 Corresponding Author Zorka Grandov, 4. Grandov, Z.: "MEĐUNARODNI BIZNIS I TRGOVI- Faculty for economics and engineering management, NA", BTO, Belgrade, 2009, ISBN 978-86-905115-4-9 Novi Sad, FIMEK, 5. Grandov, Z., et.al.: "ZNAČAJ INVESTICINOG Serbia, OKRUŽENJA ZA PLASMAN STRANIH DIREKT- E-mail: [email protected] NIH INVESTICIJA", Pravo -teorija i praksa br. 7-8 /2010, YU ISSN 9352-3713 6. Ministry of Finance of the Republic of Serbia: Bilten javnih finansija za mesec januar 2010, Belgrade, February 2010, ISSN 1452-0028 7. Mitić, B.: “Priliv SDI u Srbiju iz zemalja EU i finan- sijska pomoć EU u procesu pristupanja“, Tržište- Novac-Kapital br. 4/2007, PKS, Belgrade, 2007, ISSN 0564-3619 8. Nikolić, G.: ”Karakteristike robne razmene Srbije sa zemljama EU: rezultati i očekivanja”, Trzište- novac-kapital 4-2007, PKS, Belgrade, 2007, ISSN 0564-3619 9. UNCTAD: World Investment Report 2009, New York and Geneva, 2009, Annex B. ISBN 978-92-1-112775- 1 10. UNCTAD: World Investment Report 2010, New York and Geneva, 2010, Annex ISBN 978-92-1- 112806-2 11. Vidas-Bubanja M.:"METODE I DETERMINANTE STRANIH DIREKTNIH INVESTICIJA", Institute of Economic Sciences, Belgrade, 1998, ISBN 86- 80315-41-9 12. http://www.belex.rs/trgovanje/ucesce_stranaca (IX 2010.) 13. http://www.seio.gov.rs/ (IX 2010.) 14. http://www.merr.gov.rs/ (IX 2010.) 15. http://www.siepa.sr.gov.rs (I/2010.) 16. http://www.nbs.rs/ (IX 2010.) 17. http://www.mfin.gov.rs/ (IX 2010.) 18. http://webrzs.stat.gov.rs/ (V 2010.)

38 Volume 7 / Number 1 / 2012 technics technologies education management Motives and identification of different types of fans with a team in Serbian soccer

Nebojsa Maksimovic1ABCDE, Radenko Matic1ABCDE, Zoran Milosevic1ABE, Damjan Jaksic1BC, Megan Shreffler2D, Stephen Ross2D 1 Faculty of Sport and Physical Education, University of Novi Sad, Serbia, 2 School of Kinesiology, University of Minnesota, United States of America. Authors’ Contribution A-Study Design, B-Data Collection, C-Statistical Analysis, D-Manuscript Preparation, E-Funds Collection

Abstract world’s most elite. Therefore, during national team competitions with other countries, attendance in the Low attendance rates at the national level soc- stadiums and sport halls are at capacity. By contrast, cer games in Serbia has resulted in unenviable the matches involving domestic teams within Ser- market place positions of the soccer clubs. The bian national leagues suffer from much lower levels current research analyzes the differences among of attendance. Supporters mainly, in great numbers, types of different fans among the top soccer clubs attend only the “more significant” matches, while in Serbia across the motivations for consumption attendance at the less important matches amount to in sport and a team identification. A sample of re- only a few hundred spectators. Recently, however, spondents (N=365) were divided by their commit- even for the matches deemed important and signifi- ment and loyalty to the club into three subsamples: cant, the stadiums are not completely being filled temporary, loyal and committed fans. The results with spectators. indicated that the level of motivation and identifi- Soccer in Serbia has the greatest number of fa- cation increases with the level of fan commitment cilities, clubs, leagues and athletes, as compared to and loyalty to the club. There were significant dif- other sports. However, Serbian spectators as conferences for committed fans in regards to indivi- sumers of soccer, spend small amounts of money dual motives and team identification as compared on trips to stadiums, attending sporting events, and to temporary and loyal fans, with loyal fans sho- overall consumption of sporting goods and servic- wing higher levels than temporary fans. Implica- es. There are many reasons for these low levels of tions based on these established distinctions sug- consumption including the constant departure of gest to sports marketers the necessity for making young talented players to major European clubs, adjustments in marketing strategies based on each small budgets and lack of major sponsors, small in- type of fan or target consumer group. vestments in infrastructure, staffing problems, inad- Key words: sports consumer behavior, specta- equate marketing and promotion, and poor results tor motives, football. in European competitions. Additionally, frequent incidents that suggest the increased the risk of be- Introduction ing at the stadium, along with security factors, dis- suade the public from attending live events. These Sport in Serbia has an important place within the issues lead many consumers to watch competitions social sphere of a large number of citizens, and their on television at home, rather than coming to the sta- knowledge of current sport events is very high. A dium to watch the event live. significant reason for this overall knowledge of All these factors contribute to the fact that Ser- sport is the great success and quality performance bian stadiums are only filled with the most attached of the Serbian national teams in a variety of team fans, while the overall number of loyal and casual sports (e.g., basketball, volleyball, water polo, fans have decreased. An important factor to con- handball, soccer). Additionally many Serbian indi- sider in the establishment of increased attendance vidual sport athletes in such sports as tennis and ka- for Serbian soccer clubs is the extensive research rate have reached levels to be considered among the on motivations for attendance for sport consumers.

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Motivations for Attendance such as entertainment, escapism and eustress lead to increased consumption and identification lev- The motives that induce sport consumption els with the team, and ultimately higher levels of through game attendance or media outlets have been spending in the sport (Wann, 1995). tested in a variety of different sports and a variety of The phenomenon of “group behavior” with re- different populations (Sloan, 1989; Trail, Anderson, spect to sports fans is of particular importance in & Fink, 2000; Trail & James, 2001; Funk & James, the study of consumer behavior. This can be attrib- 2001; Mahony, Nakazawa, Funk, James, & Glad- uted to the fact that viewers, or certain types of fans, den, 2002; Funk, Mahony, & Ridinger, 2002; James can be considered to be part of consumer reference & Ross, 2002; 2004). Due to the importance placed groups (Murreil & Dietz, 1992). Recognizing the on fan consumption, sport managers must under- differences in motivations among various groups of stand the motives of their individual customers consumers, some authors have dealt with the com- and market towards those specific motives in order parison of motivational profiles and the differences to increase consumption habits and overall sales. between supporters of different sports (McDon- Sport managers can identify and market to the mo- ald, Milne & Hong, 2002, Trail et al., 2003; Wann, tives of consumers based on the goals of their be- Grieve, Zapalac, & Pease, 2008). Accordingly, haviors (Heckhausen, 1989), and in order to grasp sport marketers often ask what do certain types of the significance of motives for sport consumption, fans expect from attending sport events, what moti- avariety of measurement tools have been created. vates fans to spend their time and money on a these For instance, Wann (1995) developed the Sports events, and how does an individuals attachment to Fan Motivation Scale (SFMS), consisting of eight a team influence behavior? motives, while Milne & McDonald (1999) suggested 12 factors in Motivations of the Sport Consumer (MSC) scale. More recently, Trail & James (2001) Team Identification created the Motivation Scale for Sport Consump- In order to fully understand how and why indi- tion, with nine motivational constructs. Instruments viduals identify with sport teams or organizations, examining motivational factors in countries outside it necessary to grasp the concepts of the notable of North America have also been created to address theories behind team identification: identification cultural differences in sport consumers (Matsuoka theory (Funk, Ridinger, & Mooreman, 2003; Ma- & Hujimoto, 2003; Won & Kitamura, 2007). Kim honey, 1995) and social identity theory (Madrigal, & Chalip (2004) emphasized the fact that although 1995; Trail, Anderson, & Fink, 2005). These theo- many different instruments have been utilized to ries have provided a significant theoretical back- measure motives, research consistently finds that ground for many of the instruments used to mea- the motives of fans are multidimensional, and con- sure team identification, such as Trail and James sumption habits are significantly predicted by these (2001) Team Identification Index (TII), which is motives. utilized within this study. Mahony (1995) defined Indeed, research on sport consumer motiva- team identification as “the degree to which a fan tions has improved the understanding of what defines him/herself by the same attribute that de- drives individuals to consume sport, and has pro- fines the sport team” (p. 12). Additionally, the so- vided greatly improved methods for attracting cial identity that a group of fans has in common spectators for marketers (Trail, Robinson, Dick, & with respect to their favorite sport team also pro- Gillentine, 2003; Trail, Fink, & Anderson, 2003; vides explanation for team identification (Kwon, Trail, Anderson, & Fink, 2005, Robinson & Trail, Trail & Lee, 2008). James & Trail (2008) suggest- 2005; Won i Kitamura, 2006; Gi-Young & Hardin, ed that the identity of fan can be either category- 2008, Fink & Parker, 2009; Damon, Seungmo, based or role based, illustrating the idea that both O’Neal, Greenwell, & James, 2009). Enjoying the social identity theory and identity theory should be drama that a sport possesses or the physical per- considered when discussing team identification. formance of athletes may be potential reasons for Turner (1982) indicated that within social iden- visiting stadiums (James & Ross, 2004). Motives tity theory, individuals have both a personal identity,

40 Volume 7 / Number 1 / 2012 technics technologies education management which includes specific attributes such as the abili- grade). Six trained survey administrators partici- ties and interests, and a social identity, which consists pated in the data collection, and were located in of significant group categories that can be based on different parts of the stadium prior to the start of demographic classifications, such as sex and race, or each match. The researchers distributed surveys organizational membership, such as religious, edu- to potential respondents in the one and a half cational, and social institutions. According to Mael hour period prior to the beginning of the soccer & Ashforth (1992), when a person identifies with an match. About 40% (N=143) of the respondents organization, he or she observes a “oneness with or attended the game for FC “Vojvodina”, and 60% belongingness to the organization(s) of which he or (N=222) respondents attended the game for FC she is a member” (p. 104). “Partizan”. These teams are two of the three larg- Identity theory, on the other hand, proposes that est and best organized soccer clubs in Serbia. the core of an identity is the categorization of the self As for the soccer club FC “Vojvodina”, specta- as an occupant of a role, and the incorporation, into tors were surveyed during the last two league the self, of the meanings and expectations associated matches in the Serbian soccer league competi- with that role and its performance (Burke & Tully, tion (2009/2010 season), while the survey for FC 1977). Additionally, McCall & Simmons (1978) “Partizan” was conducted during the last game. It said that identity theory includes all things that take should be noted that FC “Partizan” won the title on meaning in relation to the plans and activities of national champion of Serbia and qualified for of individuals. When an individual identifies with the UEFA Champions League. a group, he or she will develop levels of self-cate- The full sample was then divided into three gorization or identification in terms of membership segments for the purposes of analysis, and to ac- in particular groups or roles. Furthermore, identity complish the purpose of the research. Temporary theory also illustrates that an individual’s concept of fans (N=107) were defined as those fans who self is comprised of multiple role-identities that ex- visited the most interesting matches, Loyal fans plain past behaviors, while also providing direction (N=152) were defined as those individuals with for future behaviors (Ervin & Stryker, 2001). no fan passion, and Committed fans (N=106) The purpose of this research is to examine the were defined as those who act organized in giv- motivations, levels of team identification, and a ing their support to the team. This type of re- number of psychological and behavioral indicators spondent segmentation is similar to previous re- amongst the fans of top soccer clubs in Serbia. A search pertaining to the same constructs (Wann dearth of cross-cultural research exists in the sport & Brascombe, 1990, Sutton, McDonald, Milne, marketing area, and this study will add to the lit- & Cimperman, 1997; Trail & James, 2001; Trail, erature by replicating seminal research in a setting Fink, & Anderson, 2003; Trail, Robinson, Dick, outside of the North America. Any discipline must & Gillentine, 2003). rely on multiple research efforts to demonstrate that Of the total sample of respondents, the major- the same method results in the same conclusions to ity (81.2%) were males, with most of the respon- a research question after multiple attempts at sam- dents being of Serbian nationality (approximate- pling the same target population. With the enormous ly 85% of respondents). The other nationalities growth of sport worldwide and the rapid speed of represented in the sample were Montenegrinian globalization, the need to examine the applicabil- (5%), Hungarian (4%), and a small number of ity of previously validated research in other cultural Slovaks, Roma and Ruthenian. The average age contexts is becoming increasingly important. of respondents was 26.2 (± 10.96) for Temporary fans, 27.9 (± 11.44) for Loyal fans, and 26.6 (± Method 11.28) for Committed fans. When looking at the self-reported perception of financial status, one Sample and Procedure can see that the majority of respondents report The sample included 365 spectators at games satisfactorily living (see Table 1). for two Serbian soccer clubs in May 2009 (FC “Vojvodina”, Novi Sad and FC “Partizan”, Bel-

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Table 1. Demographic characteristics of all res- Event Scale (EEOS) contained three items, and pondents offered the same response options as the MSSC Frequency Percentage items. The Intentions for Sport Consumption Be- Gender havior Scale (ISCBS) contained 4 items, the Self- Male 276 81,2 Esteem Maintenance Behaviour Scale (SEMBS) Female 64 18,8 contained two 3-items subscales (BIRGing and 340 100 CORFing), while the Index of Affective State con- Nationality sisted of three 3-items scales (positive/negative Serbian 297 86.8 moods, and satisfaction). The Disconfirmation of Montenegrian 17 5.0 Expectancies Scale (DCES) included five items, Hungarian 15 4,4 and response options were based on a seven-point Slovaks, Roma and scale with 1 being “Much worse than I expected”, 13 3,8 Ruthenian and 7 being “Much better than I expected”. 342 100 Financial status of family Data Analysis Completely satisfactory 80 24 The primary statistical analysis used in this Satitisfactorily, but with study were the Kruskal-Wallis and Mann-Whit- rational consumption and 201 60,4 ney’s tests. The Kruskal-Wallis test is an exten- saving sion of the Mann-Whitney test, and is used when Hardly satisfactory, giving assessing multiple samples. These analyses are up everything that is not 43 12,9 also attractive as they are a nonparametric alterna- necessary tive to one-way analysis of variance, thus adding It does not, often depri- strength to the interpretation of the results. These 9 2,7 ving some basic needs tests examine the null hypothesis stating that the 333 100 samples do not significantly differ in mean rank for the chosen comparison variable. Because the Instrument Kruskal-Wallis test takes rank size into consider- The instrument used in this study emerged ation, it is more powerful and preferable when its from three previous studies related to motivations assumptions are met. Post-hoc tests were utilized for attending sport events (Trail & James, 2001; to examine specific comparisons when significant Trail, Robinson, Dick, & Gillentine, 2003; Trail, differences were found between segments. Fink, & Anderson, 2003). Specifically, the item scales used as a base for the instrument in this Results study were the Motivation Scale for Sport Con- sumption (MSSC) and Team Identification Index The results of the analysis for differences be- (TII). The MSSC contained 24 items (eight sub- tween the observed types of viewers in the terms scales with three items per subscale), and offered of motives and their identification with their team response options on a seven-point Likert scale, are shown in Tables 2 and 3. The results in Table with answers ranging from 1 (Strongly Disagree) 2, indicate that groups of fans differ in five of the to 7 (Strongly Agree). Based on previous literature eight investigated motives assessed (Achieve- and the stated purpose of the current study, eight ment, Aesthetics, Knowledge, Physical Skill and motives were examined: achievement, aesthetics, Social motives). drama, escape, knowledge, physical skill, social The results indicated that the Loyal fan seg- interaction, and family. ment felt their team’s victory as a personal sense Several psychological and behavioral indica- of achievement, and were proud of their team’s tors were also assessed in the instrument as a means successful performance. In this regard, the group to replicate previous research, and to expand the of tested items for the aesthetics motive showed level of understanding among the respondents in that the Loyal and Committed fan segments sig- the current study. The Outcome Expectancy for nificantly differed from the Temporary fan seg-

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Table 2. Differences between various types of fans for the Motivation scale for Sport Consumption (Man-Whitney test) Types of fans: MEAN RANK χ² 1 – Temporary, 2 – Loyal, 3 - Committed 1. 2. 3. Achievement I feel a personal sense of achievement when the team does well 135,9 174,31a 239,61a2a 55,1** I feel like I have won when the team wins 130,6 184,11a 230,51a2a 52,0** I feel proud when the team play well 142,0 185,61a 213,71a2a 36,3** Aesthetics I appreciate the beauty inherent in the game of soccer 146,6 188,01a 206,21a 23,2** I enjoy the natural beauty in the game of soccer 157,7 183,81b 204,11a 13,7** I enjoy the gracefulness associated with the game of soccer 131,3 202,51a 195,01a 34,7** Drama I enjoy the drama of close games 169,9 179,3 185,9 1,4 I prefer watching a close game rather than a one-sided game 181,9 181,3 174,2 0,4 I enjoy it when the outcome is not decided until the very end 194,7 173,6 170,6 3,7 Escape The game provides an escape for me from my day-to-day routine 165,0 176,3 191,81b 3,6 A game provides a distraction from my every day activities 149,1 169,8 215,61a2a 23,9** The game provides a diversion from „life’s little problems” for me 165,9 181,7 186,6 2,4 Knowledge I increase my knowledge about soccer at the game 149,7 176,71b 205,81a2b 16,0** I increase my understanding of soccer strategy by watching the game 146,3 182,31a 201,81a 16,4** I can learn about the technical aspects of soccer by watching the game 147,7 189,41a 193,41a 13,7** Physical skills The athletic skills of the players are something I appreciate 155,1 187,81a 190,11a 9,7** I enjoy watching a well-executed athletic performance 158,0 188,31a 188,51a 9,5** I enjoy a skillful performance by the team 148,1 186,91a 191,81a 15,8** Social I enjoy interacting with other spectators at the game 131,9 175,11a 220,51a2a 41,2** I enjoy talking with others at the game 151,3 174,9 201,21a2b 12,8** I enjoy socializing with people sitting near me at the game 148,8 173,2 208,81a2a 18,8** Family The game provides an opportunity for me to spend time with my family 176,9 180,5 173,5 0,3 The game provides an opportunity for me to spend time with my spouse 172,5 174,7 190,1 1,8 The game provides an opportunity for me to spend time with my children 168,7 179,0 182,7 1,1 * 0.05, ** <0,01 - Kruskal Wallis test 1, 2, 3 – subsamples, a < 0.01 , b < 0.05 - Man Whitney test ment. Specifically, the results showed that Loyal ed fans are more open to increase their knowledge and Committed fan segments enjoyed the beauty about the sport, the strategy, and the technical as- and grace of their supported team more than the pects. In regards to social motives, it is evident Temporary fans segment. At the same time, the that the sports stadium, especially for Committed physical ability motive shows that the most loyal fans, represents a desirable environment in which fans pay more attention to the physical fitness of they are located, and they are very motivated by athletes than their counterparts. Given that these the social interaction with other spectators, want- individuals were more motivated by aesthetics, ing to talk and be near others sitting nearby. and more frequently visited stadiums in larger The results reveal differences in 8 out of 9 sub- numbers, it would suggest that loyal and dedicat- scales of identification (see Table 3). The results

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Table 3. Differences between different groups of fans in identification with a team Types of fans: MEAN RANK χ² 1 – Temporary, 2 – Loyal, 3 – Committed 1. 2. 3. IDENTIFICATION WITH TEAM I consider myself to be a „real” fan of the soccer team 105,0 182,41a 251,51a2a 113,0** I would experience a loss if I had to stop being a fan of the team 118,0 171,91a 247,21a2a 88,4** Being a fan of soccer team is very important to me 113,9 173,81a 251,31a2a 100,6** EXPECTANCIES I expect the my team to play well today 121,2 190,11a 219,01a2a 64,9** I expect today’s game to be well played 135,8 185,01a 218,61a2a 43,3** I expect my team to win today 143,0 187,01a 206,91a2b 34,1** POSITIVE AFFECT I feel happy 143,8 165,31b 220,11a2a 34,3** I feel cheerful 140,5 170,51a 216,21a2a 31,8** I feel delighted 141,3 166,21b 222,01a2a 36,8** SATISFACTION I am satisfied 148,4 175,41b 200,51a2b 14,5** I am satisfied with the outcome 141,0 174,81a 202,81a2b 20,5** I am satisfied with the performance of the team 147,0 167,7 192,11a2b 11,2** BIRGing I would like to increase my association with this team 128,6 171,21a 226,51a2a 50,6** I would like to publicize my connection with this team 141,0 161,6 225,61a2a 41,4** I would like to tell others about my association with this team 127,2 163,11a 240,41a2a 70,0** FUTURE BEHAVIOUR I am more likely to attend future games 115,5 183,21a 229,41a2a 73,7** I am more likely to purchase the team’s merchandise 109,6 168,31a 243,51a2a 97,9** I am more likely to buy team clothing 107,7 174,51a 248,41a2a 104,8** I am more likely to support my team 130,3 182,01a 214,21a2a 54,0** EXPECTANCY DISCONFIRMATION The quality of the offensive performance of my team 158,6 175,6 202,41a2b 10,0** The quality of the defensive performance of my team 176,7 176,9 182,4 0,2 The overall quality of play 165,9 174,1 193,41b 4,2 The overall quality of play by both teams 172,5 171,0 184,8 1,2 The results of the game 167,3 178,6 190,9 2,9 NEGATIVE AFFECT I feel disappointed 185,8 156,61a 178,1 6,0* I feel upset 196,6 150,61a 177,22b 13,8** I feel irritated 183,8 155,31a 189,42a 8,7** CORFing# I do not want to support this team any longer 202,2 167,21a 157,81a 19,6** I do not wish to be a fan of this team after today’s performance 195,0 170,11a 166,61a 9,4** I would like to disconnect myself from this team 193,6 171,21a 164,71a 9,7** * 0.05, ** <0,01 - Kruskal Wallis test; 1, 2, 3 – subsamples, a < 0.01 , b < 0.05 - Man Whitney test # - variables with opposite metric orientation. also indicate a noticeable upward trend in identi- scale items, in all subscales (except for Disconfir- fication as the level of devotion and loyalty to the mation of Expectancies factor), there were signifi- fans team increases. When looking at individual cant differences in at least two items.

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Discussion and Implications club. Additionally, highly identified fans have a need to emphasize and increase their fan member- For sports marketers, the motives of fans, lev- ship over time (Wann, 1995; Fink, Trail, & An- els of team identification and behavioral intentions derson, 2002a; Fink, Trail, & Anderson, 2002b; are consistently the focus of researchers’ attention. King, 2004; Madrigal, 2006). Statistically signifi- The significance of these tests is reflected by the cant support in future research could be improved importance of detecting behavioral characteristics through the growing support of “more attached” of certain types of fans, that is, their willingness loyal and committed fans, which existed under to take action and purchase the products and ser- all items of the measured behavioral intentions. vices in the sport. This type of information signifi- Also, it can be concluded that these two groups of cantly simplifies the marketing planning function fans, Committed fans and Highly Committed fans, in sports organizations. experience all the defeats and setbacks as “their The results in Table 2, illustrate that the inves- own” failures. Loyal, and especially Committed, tigated groups of fans differ in items from five fans meet their achievement motivations through out of eight analyzed motives. Confirmed statisti- attending sporting events of their teams. More cally significant differences between the analyzed broadly, if we analyze the results from Table 3, it groups of supporters in the terms of individual can be observed that these individuals look on the motives for sport consumption, suggests that successes of their club as on their own successes, these motives can serve as a segmenting variable and that they consider identification with the team in determining the types of fans, as well as con- very important. Therefore, in terms of satisfaction sumer groups, which is argued by Hunt, Bristol & and expectations related to the team, these fans Bashaw (1999) and Trail et al ., (2003). express very positive attitudes. Explanation of the The improvement of knowledge with respect sport consumption behaviors of committed “con- to the sports that consumers intensively monitor, sumers” in relation with the achievement motive, provides committed the ability to “sharpen” their can be interpreted through the absorption of team senses and better enjoy the aesthetics and physical success, prestige and recognitions of the team as abilities of athletes. At the same time, the satisfac- beng characterized as their “own”. Gau, Gailliot, tion of social motives represents an important in- & Brady (2007) found that highly identified fans centive for consumers and marketers alike. In fact, showed higher levels of motivation, higher report- going to a game, for loyal and committed fans, rep- ed levels of service quality, and greater levels of resents a chance for a change in everyday activi- satisfaction than those characterized by lower lev- ties and escape from the daily monotony, allowing els of team identification. For those fans with low consumers the chance to actually enjoy the inter- or moderate levels of team identification, manag- action, conversation and socialization with other ers and marketers should strive to increase their people on the stadium. These differences were not identification (Kwon, Trail, & Lee, 2008). observed when it came to the use of the stadium, These results equate with numerous studies when attending soccer matches, or in the possibility that confirmed the relation of high connection of of spending time together with family members. By committed fans with team, players and coaches contrast, drama as a motive for attendance was not (Laverie & Arnett, 2002; Wann & Branscombe, distinctive for different types of fans. Consequently, 1993; Mahony, Madrigal, & Howard, 2000). Ef- it can be concluded that for each type of fan in the fective sports marketers inevitably emphasize this current study, drama is an equally important motive connection, and information about the differences for coming to the stadium. between temporary, loyal and committed fans al- The results of this study, as well as previous lows sport marketers to satisfy needs and desires studies, emphasize the importance of understand- (Funk & Pastore, 2000; Trail, Robinson, Dick, & ing the impact of team identification and percep- Gillentine, 2003; Robinson, Trail, Dick, Gillen- tions of fans in practice. Research has illustrated tine, 2005; Ross, 2007). that committed fans have a more emotional ex- It is very clear that the reason for the large perience and express their relationships with the number of unoccupied seats at the stadiums of the

Volume 7 / Number 1 / 2012 45 technics technologies education management current study sample clubs is because of the ab- Acknowledgment sence of any significant recent results in the Eu- This study was part of the scientific project ropean competitions. Accordingly, it can be noted ”Motives and Identification of Different Types of that a large number of fans do not want to identify Fans in Serbian Soccer“, launched by Unity for with teams who win only in the domestic competi- School Sports Activities and Olympic Education tions, while achieving poor results in the interna- of City of Novi Sad, and financed by the Ministry tional competitions. Due to this situation, it was of Youth and Sport Republic of Serbia (No. 450- noticeable during the research process that some 451-02-1640/2011-03/1, principal researcher: N. of the fans decided to cheer for the major Euro- Maksimovic). pean clubs in the quality national competitions in England, Spain or Italy. For example, the success of the Partizan basketball club, (which operates in References the same sport association as well as FC “Parti- 1. Burke, P. J., & Tully, J. C. (1977). The measurement zan”), suggests that good results in international of role identity. Social Forces. 55(4), 881-897. competitions contribute to increasing numbers of viewers in national competitions. 2. Damon, S. A., Seungmo, K., O'Neal, N., Greenwell, T. For this reason, the recommendations offered C., & James, J. D. (2009) The Relationship Between Spectator Motivations and Media and Merchandise by Hunt et al., (1999) and Kwon and Trail (2001), Consumption at a Professional Mixed Martial Arts for differently oriented marketing strategies to- Event. Sport Marketing Quarterly, 18(1), 199-209. ward different types of fans in soccer, should represent a strategic way to improve attendance at 3. Ervin, L. H., & Stryker, S. (2001). Theorizing the stadiums. Marketing campaigns, through directed relationship between self-esteem and identity. In T. J. Owens, S. Stryker & Goodman, N. (Eds.), Extending messages, should address different types of fans, self-esteem theory and research: Sociological and or special consumer groups. psychological currents (pp. 29-55). Cambridge: Uni- versity Press.

Limitations and Future Research 4. Fink, J. S., Parker, M. H. (2009). Spectator Motives: Why Do We Watch When Our Favorite Team Is Not As with any study, the limitations of the cur- Playing? Sport Marketing Quarterly, 18(1), 210-217 rent study must be acknowledged. One potential limitation of the current study is the time of data 5. Fink, J. S., Trail, G. T., & Anderson, D. F. (2002a). collection. Given that the data were collected at Environmental factors associated with spectator attendance and sport consumption behavior: Gender the end of the season when the fans of both teams and team differences. Sport Marketing Quarterly, were largely satisfied with the performance of their 11(1), 8-19. teams, it is likely that respondents were basking in the reflected glory of their teams (BIRGing). An- 6. Fink, J. S., Trail, G. T., & Anderson, D. F. (2002b). other potential limitation that may have effected An Examination of Team Identification: Which Mo- tives are Most Salient to its Existence? International the results in this study is the relationship between Sports Journal, 6(2), 195-207. motives and identification with the team. That is, there seems to be a disconnection between the 7. Funk, D. C., Mahony, D. F., & Ridinger, L. L (2002). level of expected service and the satisfaction of Characterizing consumer motivation as individual the experiences of spectators in the Serbian soccer. difference factors: Augmenting the Sport Interest Inventory (SII) to explain level of spectator support. However, the results of this study on the motives Sport Marketing Quarterly, 11(1), 33-44. of top soccer teams in Serbia fans could serve as a basis for future studies, as well as the creation 8. Funk, D. C., Pastore, D. (2000). Equating Attitudes to Al- of more differentiated typology of individual fan legiance: The Usefulness of Selected Attitudinal Informa- groups. tion in Segmenting Loyalty to Professional Sports Teams. Sport Marketing Quarterly, 9(4), 175-183.

9. Funk, D., & James, J. D. (2001). The psychological continuum model: A conceptual framework for under-

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standing an individual's psychological connection to 22. Kwon, H., & Trail, G. (2001). Sport fan motivation: sport. Sport Management Review, 4(2), 119-150. A comparison of American students and international students. Sport MarketingQuarterly, 10(3), 10. Funk, D.C., Ridinger, L.L. & Mooreman, A.M. 147-155. (2003). Understanding consumer support: Extending the Sport Interest Inventory (SII) to examine indi- 23. Laverie, D. A. & Arnett, D. B. (2002). Factors af- vidual differences among women’s professional sport fecting fan attendance: The influence of identity consumers. Sport Management Review, 6, 1-32. salience and satisfaction. Journal of Leisure Re- search, 32(2), 225-246. 11. Gau, L.S., Gailliot, M. T., Brady, M. (2007). A Model Examining Relationships among Team Identification, 24. Madrigal, R. (1995). Cognitive and affective de- Sport Spectators’ Motives, Perceived Service Quality, terminants of fan satisfaction with sporting event and Satisfaction. In J. D. James (Ed.) Sport Market- attendance. Journal of Leisure Research, 27, 205- ing Across the Spectrum: Research from Emerging, 227. Developing, and Established Scholars, Morgantown, WV: Fitness Information Technology, Inc. 25. Madrigal, R. (2006). Measuring the multidimensional nature of sporting event performance 12. Gi-Yong, K. & Hardin, R. (2008). Difference in consumption. Journal of Leisure Research, 38(3), Interrelationship between Spectators' Motives and 267-292. Behavioral Intentions Based on Emotional Attach- ment, Sport Marketing Quarterly, 17(1), 30-43. 26. Mael, F., & Ashforth, B. E. (1992). Alumni and their alma matter: A partial test of the reformulated 13. Heckhausen, H. (1989). Motivation und handeln model of organizational identification. Journal of [Motivation and action]. Berlin: Springer. Organizational Behavior, 13, 103-123.

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16. James, J. D., & Ridinger, L. L. (2002). Female and 28. Mahony, D. F., Nakazawa, M., Funk, D. C, James, male sport fans: A comparison of sport consump- J. D., & Gladden, J. M. (2002). Motivational faction motives. Journal of Sport Behavior, 25(3), 260. tors influencing the behaviour of J. League spectators. Sport Management Review, 5(1), 1-24. 17. James, J. D., & Ross, S. D. (2004). Comparing sport consumer motivations across multiple sports. 29. Mahony, D.F., Madrigal, R. and Howard, D.R. Sport Marketing Quarterly, 13(1), 17-25. (2000). Using the psychological commitment to team (PCT) scale to segment sport consumers 18. James, J. D., & Trail, G. T. (2008). Fan socializa- based on loyalty. Sport Marketing Quarterly, 9(1), tion. In Sport Consumer Behavior (pp. 54-75). Seat- 15-25 tle, WA: Sport Consumer Research Group Internet Publishing Co. 30. Matsuoka, H., & Hujimoto, J. (2003). A comparative analysis of motivation of spectating profes- 19. Kim, M.S., & Chalip, L. (2004). Why travel to the sional soccer and baseball. Proceedings of the 12th FIFA World Cup? Effects on motives, background, Annual Conference of Japanese Society of Sports interest and constraints. Tourism Management, 25, Industry, Tokyo, Japan, 66-67. 695-707. 31. McCall, G. J., & Simmons, J. L. (1978). Identities and 20. King, B. (2004), “What Makes Fans Tick?” Sports interactions. Social Forces. New York: Free Press. Business Journal, March, 25-34. 32. McDonald, M. A., Milne, G. R., & Hong, J. (2002). 21. Kwon, H. H., Trail, G. T., Lee, D. (2008). The Ef- Motivational factors for evaluating sport spectator fects of Vicarious Achievement and Team Identifica- and participant markets. Sport Marketing Quar- tion on BIRGing and CORFing. Sport Marketing terly, 11(2), 100-113. Quarterly, 17(4), 209-217.

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33. Milne, G.R., & McDonald, M.A. (1999). Sport mar- 46. Wann, D. L. (1995), “Preliminary Validation of the keting: Managing the exchange process. Sudbury, Sport Motivation Scale,” Journal of Sport and So- MA: Jones and Bartlett Publishers. cial Issues, 19(1), 377-97.

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48 Volume 7 / Number 1 / 2012 technics technologies education management Determination of graphic design qualitative criteria

Mario Tomisa1, Nikola Mrvac2, Marin Milkovic1 1 Polytechnic of Varazdin, Varazdin, Croatia, 2 Faculty of Graphic Arts, University of Zagreb, Zagreb, Croatia.

Abstract Graphic design is the translation of messages into a graphical meaning customized to each com- The focus of research activities in this work is munication channel. Graphic design (now more directed towards determination of qualitative cri- often communication design), implies a dialogue teria for the design of graphic products in the pro- between the message, the client, the designer, and cess of graphic communication, the formation of the audience. The world famous designer Mil- evaluation ranks for the quality of a graphic prod- ton Glaser said about graphic design: "To design uct design by consumers and experts in graphic means to communicate with all the means you design, and the correlation of these ranks using can control and govern” [31]. Prepress includes the Spearman’s correlation. For this research, 10 the transformation of graphic design into a form design tasks were formed; they were executed by suitable for printing regarding the type of printing. 64 participants of the Graphic Design course and Keywords in this stage of the graphic communica- evaluated by 5 graphic design experts and 64 con- tion process are vectors, pixels, grids, lineatures, sumers. The basic criteria for evaluating each of grid types (AM, FM, XM) [8, 9, 11], the transfor- the ten tasks were the relevance of the design of mation of the vector entries in the pixel display graphic products; originality of design; and execu- on the screen [3], the transformation of the pixel tion. As the evaluation process result (for all the display in the grid suitable for printing, PostScript tasks and criteria) two rankings were obtained: the [6], separations (spot, CMYK). The term print expert rank and the consumer rank. By correlating means reproduction of an original by the means these ranks by all criteria, it is confirmed that the of some of the printing techniques. Printing tech- proposed criteria for evaluation of the quality of niques are commonly divided into a high, flat, graphic products design are universal according deep, permeable, and digital printing. Another im- to the type of the evaluator, and that they contrib- portant division of printing is printing on sheets ute to the fuller evaluation of design quality of a and printing with rolls [12]. Keywords of the third graphic product. stage are duplication, reproduction, and objective Key words: qualitative criteria determination, reproduction [15], visual print evaluation [13, 16, graphic product design, graphic communication 17, 18], printing quality, quality control, printing processes, quality ranks correlation quality evaluation [19, 20]. The final stage in the graphic communication process is final process- 1. Introduction ing. The processes of final processing include all the necessary activities that make a completed and Graphic communication processes can be di- finalized product of a printed material. vided into those in which the process results end When the result of the graphic reproduction up printed on paper (or on another physical media process ends up on the screen as a web page or a such as ceramics, plastics, metal, etc.), and those multimedia application, the process can be divided in which the process results end up on the screen into two stages: 1) graphic design; and 2) multime- of a multimedia device (computer, tablet, mobile dia production. When creating complex websites, phone, etc.). the keywords related to graphic design are plan- When the result is printed on a physical sub- ning the website, creating the sitemap, defining the strate, the process can be divided in four stages: wireframe of the web site, and the website design. 1) graphic design; 2) prepress; 3) printing; and 4) Keywords related to the phase of production are final processing. development of a database, development or adapta-

Volume 7 / Number 1 / 2012 49 technics technologies education management tion of CMS, the creation of HTML and CSS web search will be conducted by forming the ranks after pages, Flash [4], virtual reality [10], filling in the completing the procedure of graphic product de- web pages with content, testing the web pages, and sign quality evaluation by consumers and experts setting up (uploading) the web pages. The scenario in graphic design, and subsequently by correlating for the development of multimedia application in- these ranks using the Spearman’s correlation. cludes identifying the aim (target group), determin- Chapter Two gives an overview of previous ing the content presentation mode, the selection of studies and analyses of the qualitative design the necessary technological equipment, the making criteria. Chapter Three defines and describes the of the applications draft, the collection of material research, and the criteria for the graphic product (images, audio, video, etc.), digitizing the collected design quality evaluation are determined. Chapter contents, material processing, the creation of the Four describes everything about the evaluation, detailed application plan, the selection of tools for while Chapter Five presents the research results. creating the application, integrating plans and mate- Chapter Six is a conclusion that describes the re- rials, testing the application, presenting the applica- search results and gives directions in which fur- tion to a client, brushing up the application, dupli- ther studies could continue. cating the application, updating the application, and defining the legal safety. In this study, the last two 2. Previous studies and qualitative criteria tasks will be from this area, and the works will be saved in .swf or .avi format. When grading works in the field of graphic de- In both cases, the first stage of graphic com- sign, it is important to establish clear qualitative cri- munication is graphic design. If the prepress, teria. However, in realistic environment, different printing and final processing or the multimedia criteria for the evaluation of graphic design often production are of the same quality (as they are in appear. The most common criteria used in ranking this study) then graphic products are differentiated the graphic design quality are aesthetic: proportion, precisely by the quality of graphic design. How- gradation, contrast, rhythm, repetition, symmetry, ever, the quality of the product graphic design simplicity, balance, unity, harmony [21]; visual or- cannot be measured in laboratory (instrumentally, ganization and composition, originality, ingenuity completely objectively) – like the printing quality and creativity, the appropriateness of solutions for – but is always the result of the observer’s evalu- the stated goals, aesthetic impression of the whole ation. Graphic design is often considered an artis- presentation; or originality, technical quality of the tic process which is very difficult to be rationally solution, typography quality, functionality, infor- analyzed and quantified [23]. In the market, the mative quality; interest quality, composition, coher- graphic product design quality evaluation is de- ence, aesthetic-functional component, the clarity of fined in a way that products are evaluated after the the message, etc. At certain universities [5], where final stage in the graphic communication process graphic design is taught, the criteria for design eval- (when the graphic product is finished and ready uation are spatial organization and the structure of for the market). However, when it comes to the elements, thoughtful use of colors, thoughtful use graphic product design evaluation before entering of typography, the aesthetic aspect of design, and the market, choosing the design among several of- creativity. World renowned Art Directors Club be- fered ones, or choosing the highest quality design lieves that the most important criterion of the graph- in a competition, then there is no finished product ic products modern design is how irresistible their on the market. In such cases, the graphic product design is [29]. According to the Besemer’s model design quality is then evaluated based on digital of evaluating the product creativity (CPSS), three proofs or smaller edition digitally printed, which main criteria (innovation, convenience and style) was done in this study. and several additional criteria can be distinguished. The aim of this paper is to define a minimum set When it comes to innovation, unexpectedness and of criteria for the evaluation of the graphic product originality are evaluated; when it comes to the con- design quality, and to examine the universality of venience, logical quality, practicality, value and these criteria by the type of an evaluator. The re- user-friendliness are evaluated; and concerning the

50 Volume 7 / Number 1 / 2012 technics technologies education management style, integrity, the quality of creation and elegance 3. Determination of criteria for the evalua- are evaluated [26]. Most of the major international tion of graphic products design quality competitions, designer festivals, or awards in the field of visual communication and graphic product For the purposes of the research, 10 design design, have their own criteria for evaluation. Thus, tasks were formed, which were then executed by the Red Dot jury evaluates design originality, emo- 64 participants of the Graphic Design course, and tional value, design quality, and efficiency [7]; at evaluated by 5 experts in graphic design and 64 the Epica Awards, the most important criteria are consumers. All the experts who participated in the the idea originality and the quality of its execution research have a minimum of five years experience [14]; whereas the Cannes Lions jury assesses (and in the field of graphic design and visual commu- defines their value in percentages) creativity (40%), nication. Consumers – the users of graphic design originality (20%), execution (20%), and consum- are college students of Multimedia, Design and er engagement (20%) [27]. D&AD Professional Application, with no work experience in the field, Awards evaluate how original and inspiring an idea but with particular interest in graphic design. is; what is the execution quality; and how relevant In accordance with the abovementioned, ten the design is when compared to context [28]. At the tasks were defined, grouped into two units, which Designboom competition, the evaluated criteria are were then executed within the lectures of the the originality and innovativeness of design, attrac- Graphic Design course. tiveness, communication relativity to the topic, and flexibility [30]. The less there is of those criteria and more pre- 3.1. Tasks connected with the book of stand- cisely they are defined, it is easier for the jury to ards judge the quality of the product graphic design and Tasks connected with the book of standards are to choose the best design works. It is important to as follows: understand the design process; moreover, it is of 1. To define and design a visual identity of a extreme importance to understand the design and multimedia youth club; know how to evaluate the graphic design quality 2. To design a poster for events in the club; [22]. In contrast to the quality evaluation of papers 3. To design a package of an imaginary energy in the field of liberal arts (artists who express them- drink with the club brand; selves and their vision of the world around them), 4. To create and design book covers for the works in the field of design should be possible to 10th anniversary of the club. be qualitatively evaluated since graphic design, in most cases, has its client and is intended for the These four tasks make a closed creative pro- market. Moreover, the evaluation results depend cess related to the youth club, which is designed on the physical, cultural and temporal context in for organizing various multimedia events such as which the evaluation is carried out [25]. concerts, exhibitions, forums, etc. Accordingly, By reviewing recent studies, in full, no mod- for the purpose of executing the task, it was nec- els were found, which would determine the mini- essary to develop the club's name, to define and mum set of criteria that enable the evaluation of describe the target group, to explore and describe the graphic product design quality in the process the competition, to define and describe the visual of graphic communication. Given the above, re- identity, and to create a book of standards. The search activities in this paper are aimed at deter- book of standards should include a logo; a more mining these criteria and examining to what extent detailed elaboration of the logo and of the trade- the criteria are universal in modern multimedia mark; the system of colors; typography; and ap- environment. The research will define the envi- plications in several examples: interior, exterior, ronment that will enable the formation of score bags, vehicles, business cards, letterheads, etc. In ranks for the graphic product design quality and the economic environment, these four tasks often required multimedia tools will be used. make a competition entry.

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3.2. Tasks connected with the exercises in the target group; whether the ideas are in accordance Graphic Design course with the task (according to the “Brand Triangle”: the product - the target group - the competition). Tasks connected with the exercises in the Regardless of whether the target group was speci- Graphic Design course are as follows: fied by the client or it was determined by the agency 1. To visualize the dynamics; (graphic designer), it is always necessary to include 2. To visualize positive and negative space; the users’ opinion with all design elements. For a 3. To show visual anarchy; successful graphic design and design process, it is 4. To lay out four pages of a magazine on the necessary to know and understand design features free-grid principle; that are important to users (target group) [24]. 5. To show kinetic typography; 6. To create introductory movie labels.

The second group is presented by the tasks associated with training in basic graphic design, where the target group and the competition were also supposed to be described. The concept of tasks was set so as to permit examination of the universality of criteria by the type of the evaluator (graphic design experts and consumers).

3.3. Evaluation criteria Figure 1. “Brand Triangle” (the relationship between the product, the target group, and the Before the evaluation procedure, the minimum competition) set of qualitative criteria was determined for the evaluation of the graphic product design quality. In The criterion of design originality includes an accordance with previously mentioned, and bear- evaluation of the extent to which the design is dif- ing in mind all the previous research and experi- ferent and specific, unexpected and innovative in ence [5, 7, 14, 21, 26, 27, 28, 29, 30], it is found that comparison to what already exists in the market the evaluation of the graphic product design qual- (again bearing in mind the “Brand Triangle” and ity must include relationships within the triangle: the target group). Originality and diversity allow a product (brand: the product or service) - a target quality differentiation in relation to competition, group - a competition. In determining the criteria, and drawing the attention of the target group from the starting point was the adapted “Brand Triangle” the competition. In evaluating this criterion, it was (Figure 1) [32]. One criterion must be defined in important to determine whether the designers, relation to the target group; the second in relation to during the designing process, had successfully an- the competition; and the third to the graphic prod- swered the following questions: uct design itself and its execution. Accordingly, the –– Who is a direct and who indirect competitor minimal set of qualitative criteria for the evaluation to the product? of the graphic product design was defined, which –– To what extent is the product different from includes all previously analyzed criteria: the competition? 1. the relevance of the graphic product design, –– How does the competition communicate? 2. the design originality, and –– Which important design element could be 3. execution. emphasized and at the same time be different from the competition? The criterion of the relevance of the graphic –– Are the messages stronger than the ones that product design implies an evaluation of how well the competition sends? the design is customized for the target group, or eli- –– Which unexpected elements could be used gibility of the topic from the point of view of the to reach the target group?

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The criterion execution includes the evaluation In order to facilitate the process of evaluating the of graphic solutions quality, the quality of illus- graphic product design quality as well as data pro- trations and recorded or selected photos and letter cessing for the research purposes, web application type, integrity and elegance, and technical finish- Eva was used. All the evaluators (experts and con- ing of the solution. Moreover, with this criterion, sumers) got user data (username and password) to the evaluators should take into account any possible access the application. If any of the participants did constraints (legal, social, executive, financial, etc.). not follow instructions, Eva system warned them and the administrator (the lead researcher). Each 4. Evaluation user had access only to the grades that he gave. The results in the application were generated by the All the ten tasks were evaluated by consumers activity of participants; they imply a higher degree and experts by all three criteria (relevance, original- of interaction, and the possibilities of its usage are ity and execution) with grades from 1 to 5 (Table 1), multiple [1]. All the evaluators had a time limit of so that the maximum grade for one task was a total fifteen days for evaluating the works, and estimated of 15 points. The first group of grades (total points time that each evaluator would need for the evalu- given by five experts) is the expert rank E, while ation and grade input into the Eva system was 12 the second group of grades (total points given by 64 hours, or less than one hour a day. consumers) is the consumer rank K. Table 1. Evaluation activities for each task 5. Research results Task Criteria number Relevance Originality Execution Collected grades of all the tasks are stored in the database of the web application. Based on the 1 1-5 1-5 1-5 sum of the grades given by all experts, rank E was 2 1-5 1-5 1-5 3 1-5 1-5 1-5 formed; based on the sum of the grades given by all ... 1-5 1-5 1-5 consumers rank K was formed. In this research, the 64 1-5 1-5 1-5 connection between the two test groups is important. All the works were ranked from positions 1 to Two limitations were introduced in this research 64, both for experts and consumers. The resulting when conducting the evaluation to ensure validity ranks were then compared so to explore the correla- of results. The first limitation consisted in a limited tion coefficient between the two ranks. As the most number of points. The total average number of points appropriate method for testing these two ranks, the per work had to be ≤ 10. Hereby, the standardiza- Spearman’s rank-order correlation was chosen; tion of criteria is ensured, and it helped avoiding that its result is the Spearman’s coefficient ρ [2]. The some of the evaluators would be too strict or too le- Spearman’s correlation coefficient ρ for two ranks nient. The other limitation was that each evaluator can be calculated by using the following formula: should select 10 - 20% of works that must be evalu- 2 2 ated with 12-15 points. This limitation ensures that ρ = 1 – [6 Σ D / N (N - 1)] both the best and the worst works stand out. These limitations are determined based on years of experi- where N is the number of the last ranked work, ence. All the participants in the research were famil- and D is the difference between the ranks. Corre- iar with these limitations (graphic design experts and lation coefficient is always between -1 (total dis- consumers) before the evaluation process began. agreement) and +1 (total agreement); in literature, In order to ensure and maintain a high degree of it is defined as follows: motivation and willingness of consumers to partici- –– up to 0.20 implies slight correlation; pate in the study – the consumers – the students of connection is almost inexistent; the Graphic Design course at the college of Multi- –– from 0.20 to 0.40 correlation is low; media, Design and Application, were awarded points connection is small; that influenced their final grade in Graphic Design. –– from 0.40 to 0.70 correlation is moderate; connection is important;

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–– from 0.70 to 0.90 correlation is high; connection is significant; –– over 0.90 correlation is very high; connection is very tight [2].

At the end of all activities related to the study and after the evaluation by using the Eva system, obtained results are given in Table 2. If we look at the correlation coefficients according to some of the criteria, we have the following situation: according to the criterion of relevance, the Spearman's correlation coefficient 1ρ for all 10 Graph 2. Dispersion in relation to the full corre- tasks is 0.85 (rank K1 and rank E1); according to the criterion of originality, the Spearman's correla- lation according to the criterion of originality tion coefficient 2ρ is 0.79 (rank K2 and rank E2); while according to the criterion of execution, the

Spearman’s correlation coefficient 3ρ is 0.69 (rank

K3 and rank E3). According to all the three criteria, the total Spearman’s correlation coefficient totρ between the ranks, according to the experts’ and consumers’ grades, is 0.78 (rank Ktot and rank Etot). The research results were visualized by using graphs (1, 2, 3 and 4). On the graphs, dispersion can be seen in relation to the full two-rank correlation (perfect matching, when the correlation coefficient is ρ = 1). Graph 3. Dispersion in relation to the full correlation according to the criterion of execution

Graph 1. Dispersion in relation to the full correlation according to the criterion of relevance Graph 4. Dispersion in relation to the full correlation according to all the three criteria together

Table 2. Spearman’s correlation coefficient for the three criteria separately and all of them together Spearman’s correlation coefficient ρ (according to the grades given by experts and consumers) for the three criteria separately and together

Relevance (ρ1) Originality (ρ2) Execution (ρ3) Total (ρtot) For all 10 tasks 0.85 0.79 0.69 0.78

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6. Discussion and conclusions ly used; it showed how to apply qualitative criteria for the evaluation of works in the modern multi- The aim of this research was to define the media environment. minimum set of criteria for the evaluation of the Qualitative criteria for the evaluation of graphic graphic products quality design and to examine product design, which were proposed in this paper, their universality and possibility of application in represent a good basis for implementing a series modern multimedia environment. Accordingly, of future studies that could examine the criteria in the criteria for the evaluation of the graphic prod- the case of several complex graphic products, or uct quality design were determined: the relevance the possibilities of using the three determined cri- of design, originality, and execution; the defined teria (relevance, originality, and execution) could relationship had a central role in the research be examined in the broader design and communi- (based on the formula “Brand Triangle”) between cation context. the product, the target group and the competition. The criteria were tested through ten tasks in the field of graphic design. The research result (after References the evaluation by consumers and by the experts) is 1. Mrvac N., Tomiša M., Milković M.: Developing a two ranks (consumers rank K and experts rank E); Modern Model of Higher Education, TTEM, Volume the Spearman’s correlation coefficient for these 5, Number 4, DRUNPP, 2010, pp. 700-709, two ranks, according to all the three criteria, is ρ tot 2. Mužić V.: Programirane osnove pedagoške statistike, = 0.78. It is found that correlation between these Školska knjiga, Zagreb, 1982, two ranks is high (ρ is more than 0.70) and the connection between the ranks is significant. More- 3. Tomiša M., Sabati Z.: Kvantifikacija odstupanja over, the Spearman’s correlation coefficients were slovnih znakova kod ekranskog prikaza // Tiskarstvo researched for each criterion. According to the 08 / Prof.dr.sc. Vilko Žiljak (ed.), 2008, first and second criteria (ρ1 = 0.85 and ρ2 = 0.79), 4. Premec M., Tomiša M., Matijević M.: Flash platfor- it is found that correlation between the ranks is ma u web dizajnu // Zbornik sažetaka - Conference high and the connection of the ranks is significant. Proceedings MATRIB 2010 / Schauperl, Zdravko; Šnajdar, Mateja (ed.), Zagreb, 2010, For the third criterion (ρ3 = 0.69), it is found that correlation between the ranks is on the borderline 5. Cairo A.: The World of Graphic Design, Principles between moderate and high, and the connection and Practices of Visual Information Presentation, between the ranks is important. University of North Carolina, www.albertocairo.com, After the research was conducted, it is conclud- 2011, (accessed on 20/05/2011), ed that there is a minimum set of criteria that can 6. Žiljak V., Pap K.: Postscript programiranje, FS enable a fuller evaluation of graphic product de- d.o.o., Zagreb, 1999, sign quality in the process of graphic communication. According to the defined set of three criteria 7. Red Dot Design Award, Evaluation criteria, exper- (relevance, originality and execution) for the eval- tise, en.red-dot.org, 2011, (accessed on 20/05/2011), uation of graphic product design quality, using the 8. Žiljak V., Pap K., Žiljak I.: Color Reproduction by Spearman’s correlation coefficient, there is high Individualized Half-tone Shapes // 28. International correlation between the rankings of the graphic Research Conference of IARIGAI, 2001, product design quality given by the experts and consumers, which suggests that qualitative crite- 9. Valdec D., Vusić D., Tomiša M.: XM Screening Tech- nology // Proceeding 11th International conference ria are largely universal according to the type of of printing, design and graphic communication Blaž the evaluator. Moreover, since the wider context is Baromić / Bolanča, Zdenka (ed.), 2007, pp. 145-148, taken into account (based on the adapted “Brand Triangle”), it shows that the selected qualitative 10. Tomiša M., Mulvaj K.: Panorame prividne stvar- criteria contribute to more complete evaluation of nosti kao segment multimedijske prezentacije grada Koprivnice. // Podravski zbornik. 24/25, 1999, pp. graphic products design quality. In the research, 215-223, Eva system (web 2.0 application) was successful-

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11. Pap K., Žiljak V.: Prijedlog novih definicija raster- 23. Wang R.W.Y, Hsu Ch.: Study of the Design Opera- skih ćelija u tisku s interpretacijom pomoću Math- tion of Graphic Simplification, The Design Journal, ematike // PrimMath, 2001, Vol.10, No. 6, 2007, pp. 54-73,

12. Bolanča S.: Glavne tehnike tiska / Marošević, Groz- 24. Georgiev G.V., Nagai Y., Taura T.: Method of De- dan (ur.), Acta graphica, Zagreb, 1997, sign Evaluation Focused on Relations of Meanings for a Successful Design, Proceedings of the Design 13. Mrvac N., Bolanča S., Zjakić I.: Influence of Pres- 2008, 10th International Design Conference Du- sure Error on Visual Evaluation of the Print Qual- brovnik, 2008, pp. 1149-1158, ity // DAAAM International Scientific Book 2003 / Katalinic, Branko (ed.), DAAAM International 25. Brown D.C.: Computational Artistic Creativity and Vienna,Vienna, 2003, pp. 415-422, its Evaluation, Proceedings of Dagstuhl Seminar 2009, Seminar 09291, 2009, 14. The Epica Awards, Criteria & Awards, www.epica- awards.com, 2011, (accessed on 20/05/2011), 26. Besemer S.P.: Creating Products in the Age of De- sign, Steelwater, OK: New Forums Press, 2006, 15. Brozović M.: Studij objektivne reprodukcije u tisku / doctoral dissertation, Faculty of Graphic Arts, 27. Cannes Lions, Awards, rules, design lions, judg- Zagreb, 2003, ing, www.canneslions.com, 2011, (accessed on 20/05/2011), 16. Matijević M., Mrvac N., Milković M., Vusić D.: Evaluation of Perception of Red Color Applied to 28. D&AD Awards, Professional Awards 2011, Rules Koffka Effect // DAAAM International Scientific and criteria, judging criteria, www.dandad.org, Book 2010 / Katalinic, Branko (ed.), Vienna : 2011, (accessed on 20/05/2011), DAAAM International, 2010, pp. 259-270, 29. ArtDirectorsClub Awards, information – judg- 17. Milković M., Mrvac N., Matijević M.: Evaluation of ing, www.adcawards.org, 2011, (accessed on the Chromatic Assimilation Effect Intensity in Munker- 20/05/2011), White Samples Made by Standard Methods of Render- ing. // Tehnički vjesnik (Technical Gazette): scientific 30. Designboom, green earth international graphic de- and professional journal of technical faculties of the sign competition, design criteria, www.designboom. University of Osijek. 17, 2010, 2, pp. 163-172, com, 2011, (accessed on 20/05/2011),

18. Milković M., Mrvac N., Bolanča S.: Evaluation of 31. Payer I.: Grafički dizajn, www.dizajn.hr, 2011, (ac- the Chromatic Induction Intensity on Munker-White cessed on 01/05/2011), Samples // DAAAM International Scientific Book 2008 / Katalinic, Branko (ur.), Vienna : DAAAM 32. Kapferer J.-N.: The New Strategic Brand Manage- International, 2008, pp. 485-498, ment, 4th ed., Kogan page, London, 2008, p. 336

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56 Volume 7 / Number 1 / 2012 technics technologies education management Model and Algorithm for Minimization Project Compression Cost under Fuzzy Environments

Xun Liu1, Zhuofu Wang1, Honglian Yin2 1 Institute of Engineering Management, Hohai University, China, 2 Shandong Water Polytechnic, Rizhao, Shandong, P.R. China.

Abstract stead of stochastic assumptions to determine activity times. On account of subjective factors cogni- Project compression as it relates to tradeoff zance and ambiguous language to convey meaning between time and cost is one of the main aspects and other factors are fuzzy, not suitable for using of project scheduling. In fuzzy environments, the the stochastic models to solve. An alternative way time-cost tradeoff problem is studied only consider to deal with imprecise data is to employ the concept the uncertainty of the activity time without taking of fuzziness, whereby the vague activity times can into account the uncertainty of the activity cost. be represented by fuzzy sets. The uncertainty of activity costs are often caused Fuzzy theory use the set and membership de- by subjective factors, price fluctuations and so on, gree to describe the fuzzy concept that cannot as a consequence of the cost per unit time of com- be defined, and solve real-world environment of pression is a fuzzy set. In this paper, a fuzzy linear uncertainty factors by the problems. Therefore, programming model for time-cost tradeoff is pro- some scholars such as Chanas and Kamburowski posed, in which this model is considered the activ- (1981), Nasution (1994), Chanas and Zielinski ity time and cost are also fuzzy numbers. And based (2001), Chen and Chang (2001), Soltani and Haji on this model, this paper presents solution program (2007), Yousefli et al. (2008) all assume the ac- which can save the fuzzy features for analyzing the tivity times are fuzzy numbers, based on program time-cost tradeoff problem under fuzzy environ- evaluation and review technique (PERT) or criti- ments. To validate the algorithm developed here, a cal path method (CPM) determine the correspond- numerical example will be presented. ing project duration. Chen (2007) proposed an ap- Key words: time-cost tradeoff; fuzzy sets; proach which is based on the extension principle project management; linear programming and linear programming formulation to critical path analysis for a project network with activity 1. Introduction times being fuzzy numbers, in that the membership function of the fuzzy total duration time is During the practical project implementation, constructed and the fuzzy critical paths are identi- the project often subject to some uncertain exter- fied at the same time, and definite the most critical nal factors, such as temporary cessation of activity path and the relative degree of criticality of paths caused by climate anomalies, project works varia- by applying the Yager ranking method. As well tion caused by construction circumstances chang- as, the tradeoff between time and cost has been es, the idle of construction machinery, etc. These addressed by a number of researches including uncertainties usually cause the delay of project Elmaghraby (1977, 2000) and Klastorin (2004). completion and the cost increases, so the quantita- Johnson and Schou (1990) consider the applica- tive research for the uncertainty of project is par- tion of simple heuristics to select tasks for com- ticularly important. The traditional methods which pression in a stochastic activity network. They describe the uncertainties are statistical distribution suggest three rules by which a project manager and stochastic analysis. Using these methods must might make compression decisions. They con- assume that the activity duration obey some spe- clude, which conceding that additional research is cific probability distribution, however, in real world necessary, their rules appear to be effective heu- applications some activity times must be forecasted ristics on the basis of small simulation study for subjectively; for example, the human judgment in- a single sample project. Wollmer (1985) applies

Volume 7 / Number 1 / 2012 57 technics technologies education management a stochastic programming approach to the time- 2. Scope of the study and hypotheses cost tradeoff problem where task durations follow Project compression as it relates to tradeoff be- discrete distributions and a limited set of compres- tween time and cost. Many projects may be “com- sion strategies exist. Leu, et al (2001) used genetic pressed”, or “crashed”, below their normal makes- algorithms and the sets under fuzzy environment pan by investing in additional. These resources for solving the problem of project time-cost trad- may be additional hours from existing project staff, eoff. Ghazanfari, et al (2009) developed the pos- additional labor resources, equipment yielding la- sibility of goal programming and fuzzy set theory bor efficiencies, etc. The additional resources con- for solving the project time-cost tradeoff prob- tributed to the project have the effect of reducing lem. Mon et al (1995) assumed that the activity the project makespan. Each task within a project time follows fuzzy triangular distribution or fuzzy activity network is a typically characterized by its normal distribution and combined the program duration, cost and its relationship to other activi- evaluation and review technique (PERT) to make ties within the network (predecessor and succes- a mathematical analysis of project time-cost trad- sors). The task durations and costs thus given are eoff. Arikan and Gungor (2001) proposed a model the “normal” duration and cost, representing the for project fuzzy time-cost tradeoff using fuzzy minimum cost and maximum duration for the task. goal programming, made the total project duration Additionally, for every compressible task, must be and the direct costs preference satisfaction for de- considered the minimum feasible duration, which cision maker converting the fuzzy numbers, then be referred to as the crash duration, and the cost at the original fuzzy multi-objective problem can be that duration, the crash cost. converted to the single objective problem which In the sections that follow, the paper only dis- meet the cost of total project duration and maxi- cussion the compression issues under consider mize the direct satisfaction, and then use a simple the direct cost caused by the overtime and the in- linear programming. However, the above studies creased supply of resources, as well as the time only considered the activity times are fuzzy numbers and did not consider the case of the activity period of activity and the compression compression costs are also fuzzy numbers. cost are all triangular fuzzy numbers. Therefore, Therefore, in order to more tally with the ac- giving the following basic assumptions. tual situation, this paper presents an approach 1. The total compression cost function includes based on the method proposed by Chen (2007), the increased supply of resources and the which takes into account the activity time and cost increased overtime and other direct costs, are fuzzy numbers. In this paper, the fuzzy proj- without considering the increase of indirect ect compression problem is briefly stated in fuzzy costs. LP form representation. Then a pair of parametric 2. The normal (max or uncompressed) duration, compression duration, project linear programs for calculating the α-cuts of the fuzzy total compression cost is formulated based completion time and the cost per unit time on Zadeh’s (1965) extension principle and dual- of compression of task are uncertain ity theory. Following this, a pair of second-level value, suitable to be represented by fuzzy linear programming is transformed into one-level numbers. nonlinear programming to calculate the total fuzzy 3. The logical relations between activities sets of different α cut. Consequently, the actual are certain and the activity-on-arc (AOA) lower bound total compression cost and the upper network expresses this relations. bound total compression cost can be obtained by 4. Each task can be performed between its calculation. Finally, the fuzzy membership func- minimum duration and its normal (max tion of total compression cost is built and the op- or uncompressed) duration; assume the timal lower bound and upper bound of each task compression cost is a linear function of task activity time is found. compression time does not consider the case of other non-linear relationship.

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3. Problem description must less than the earliest start time of node . Consider a project network con- The last constraint makes clear that the earliest sisting of a finite set of nodes (events) and a set start time of nodes must be less than or equal to the project completion time. of arcs with crisp activity times, which are determined by a function and at- 4. The proposed approach tached to the arcs. Denote as the time period of activity . and and are the same as The proposed approach is based on a combi- in the crisp case except that the compression costs nation of the concept of α-cut, Zadeh’s extension are approximately know and defined by function principle, two-level mathematical programming, and parametric programming. One approach to , where is the set of non- negative fuzzy numbers. Denote fuzzy number construct the membership function is to de- as the fuzzy compression cost per unit time of rive the α-cuts of . The α-cut of is defined as follows: activity , and its membership function is . Then, have C = c ∈ SC |µ ( c )³ α , ,( i j) ∈ A ( ij ) { ij( ij) cij ij } ...... (3) α   Note that is a crisp set rather than a fuzzy Cij= (c ij ,µ  ( c ij ))| c ij∈ S (C ij ) Cij , ,(i j)∈ A ...... (1) { } set. Using α-cuts, can be represented by differ- Where is the support of , which de- ent levels of confidence intervals. Therefore, the notes the universe set of the compression cost α-cuts of defined in (3) is a crisp interval that per unit time of activity . When the cost can be expressed in the following form: per unit time of compression , normal (max or    inf cij∈ S( C ij ) µ (), cij ³ α uncompressed) duration , compression dura- { Cij }  cij  ()C =   = (),()CCLU  ij α  ijα ij α  tion of task , and the project duration    sup cij∈ S( C ij ) µ () cij ³ α are fuzzy numbers, the fuzzy project compression { Cij }  cij  problem is of the following form: ...... (4)

n n   max ∑∑Cij t ij These intervals indicate where the values of  i=1 j = 1 lie at possibility α.  s.t. t ³ CT ij  ij  By the same rule, the α-cuts of  = £  Z  tij NT ij can be expressed in the following forms:  − £  Ti +t ij T j 0  £   L U  Tn T ( NTNTNTij ) = ( ij ) ,( ij )  α  α α  ...... (5)  T ,T , t³ 0,i = 1,..., n ; j = 1,..., n ;( i , j ) ∈ A  i j ij L U ...... (2) CTCTCT=  ,  ( ij )α ( ij )α ( ij )α ...... (6)  

The first two constraints indicate that as the LU =   (TTT)α ( )α,( ) α ...... (7) time period of activity , is not less than its   compression duration, and not exceed its normal (max or uncompressed) duration. The third con- On the basis of Zadeh’s extension principle, the straint indicates that the earliest start time of membership function is defined as node plus the time period of activity

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   This can be reformulated as a pair of two-level µ  (Cij )   Cij  mathematical programs which defined as Models    µ  NT   NT ij ( ij )  (11) and (12). sup min  z= Z(c,,, NT CT T) µ (Z ) =  Z µ (CTij )  CT ij      n n  µ T  max C t  T ( )    ∑∑ ij ij    i=1 j = 1  ∈+ ∈  Cij , NT ij , CT ij , T R ,( i , j) A  s. t . t³ CT   ij ij  £ min  tij NT ij ...... (8)   T +t −T £ 0   i ij j Where is defined in Model (2)   TT£   n  ³ = = ∈ and is the vector of cost per unit time of activity  Ti, T j ,tij 0, i 1,..., n ; j 1,..., n ;(i, j) A  L L U Zα =  compression, is the vector of activity normal s. t . ( Cij) £ C ij £ (C ij )  α α  (max or uncompressed) time, is the vector of  L U ( NTNTNTij ) £ij £ ( ij )  α α activity minimum time. If the α-cuts of at all α  L U values degenerate to the same point, then the total  CTCCT£ £  ( ij)α ij( ij )α compression costs needed to crash the project is a  crisp number; otherwise, it is a fuzzy number. Thus  TTTL £ £ U  α α its membership value can be constructed use its   ∀(i , j) ∈ A α-cut. In equation (8), is the minimum of ...... (11) . To deal with membership value, we need and at least one equal to It should be noted that at least one , , α such that to satisfy . or , must hit the boundary of their To find the membership function , is suffices α-cuts to satisfy , only in this way can to find the left shape function and the right shape the lower and upper bounds are below the corre- function of . This is equivalent to find the low- sponding possibility α . Exist simultane- er bound the upper bound the α-cut of ously, in order to sew up the largest feasible re- : gion for second-level in Models (11) and (12), the Models (11) and (12) must be satisfied the below L U  CCC£ £  two necessary and sufficient conditions:  ( ij)α ij( ij )α   L U  NTNTNT£ £ n n  ( ij )α ij( ij )α     max Cij t ij L  L U   ∑∑ ZZα = min (c , NT , CT , T )    i=1 j = 1 (CTCCTij) £ ij £ ( ij )  α α  max s. t . t³ CT L U ij ij  £ £    (TTT)α ( )α £     tij NT ij    ∀(i, j) ∈ A  TT +t − £ 0     i ij j   TT£ ...... (9)   n U  T,, Tt ³0, i = 1,..., n ; j= 1,..., n ; i, j∈ A Zα =   i j ij ( )  L U   L U (CCCij) £ ij £ ( ij ) s.t. CCC£ £  α α   ( ij)α ij( ij )α  L U   L U NTNTNT£ £  £ £  ( ij )α ij( ij )α  ( NTNTNTij ) ij( ij )    α α U L U L U ZZα = max (c , NT , CT , T )   (CTCCTij) £ ij £ ( ij ) (CTCCTij) £ ij £ ( ij )  α α   α α  L U   L U TTT£ £ TTTα £ £ α  ( )α ( )α    ∀(i, j) ∈ A   ∀(i , j) ∈ A   ...... (10) ...... (12)

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(1) The minimum duration less than the   n n  max ∑∑Cij t ij normal (max or uncompressed) for each task (i,j),   i=1 j = 1 max s. t . t³ CT that it to say , , meanwhile,   ij ij  £   tij NT ij  , ,  TT +t − £ 0   i ij j   TT£   n the necessary and sufficient condition must be con- ³ = = ∈   Ti, T j ,tij 0, i 1,..., n ; j 1,..., n ;(i, j) A  L U strained that . U s.t . C £CC £ = ( ij)α ij( ij )α Zα   L U NTNTNT£ £ (2) The project duration must be greater than or  ( ij )α ij( ij )α equal to the all activity minimum duration on the  L U  (CTCCTij) £ ij £ ( ij )  α α critical path, that is to say, L U  TTTα £ £ α  £ n n  CTNTij ij £ n n ()∑∑CTTij CP ...... (13)  j=1 i = 1  CTT£ ∑∑ ij  j=1 i = 1   ∀(i , j) ∈ A Meanwhile, ...... (16) , On the basis of the duality theorem, the primal the formal (13) can be rewritten as the follow- problem and its corresponding compressing cost ing formal (14): problem have the same objective value. Therefore,

n n to solve Model (15), we can formulate the com- U ( CTT) £ L ∑∑( ij)α CP α ...... (14) pressing cost problem of the second-level problem j=1 i = 1 to become a minimization problem that is consistent with the minimization problem of the first lev- Insert the formulas (13) and (14) into the Mod- el. Let , , , denote the corresponding to els (11) and (12) to get the new fuzzy mathemati- the constraint , , cal programs defined as formulas (15) and (16). of the second-level problem in Model (15).   n n Thus, Model (15) becomes (17).  max ∑∑Cij t ij   i=1 j = 1  L U min s. t . t³ CT On account of, (cij) £ c ij £ ( c ij ) ,   ij ij á  £   tij NT ij L U L U  (CTCCTij) £ ij £ ( ij ) , (NTij ) £ NTij £ ( NT ij ) and  + − £ á á  TTi tij j 0  L U   TT£ TTTá £ £ , ∀(i, j) ∈ A , at least one the value   n ³ = = ∈   Ti,T j ,tij 0, i 1,..., n ; j 1,... , n ;(i, j) A of , or , must hit the boundary of   L U L s.t . ( Cij) £ C ij £ ( Ci j ) their α-cuts to satisfy Selected the Zα =  α α  L U NTNTNT£ £ lower bound of , put the constraint condition  ( ij )α ij( ij )α  L U L U L U £ £ £ £  (CTCCTij) £ ij £ ( ij ) (CTCCTij) ij( ij ) , (NTij ) NTij( NT ij ) and  α α á á L U L U  TTTα £ £ α TTTá £ £ into the second-level. At this point,  £  CTNTij ij since both of the first level and the second level  n n perform the same minimization operation, Model £  ∑∑CTTij  j=1 i = 1 (17) can be rewritten as the following conven-   ∀(i , j) ∈ A tional one-level linear program defined as Model (18) ...... (15)

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n n n n   U U U  min ( NTij w ij+ CT ij v ij ) + uT ()TC= c NT− Z  ∑∑ α ∑∑( ij)α ij α ...... (20)   i=1 j = 1 i=1 j = 1   n  s.t . y ³ 0 ∑ 1 j n n   j=1 L L L  ()TC= c NT− Z  n n α ∑∑( ij)α ij α ...... (21)   i=1 j = 1 min  y1 j− y ki ³0, i = 2, … , n − 1  ∑ ∑  j=1 k = 1   n   −ykn + u ³ 0  ∑ n n  k =1   min NT w+ CT v + uT  y +w + v ³ c  ∑∑( ij ij ij ij )   ij ij ij ij  i=1 j = 1   n L  yij ³ 0, wij³ 0, v ij ³ 0, u³ 0 ( i, j)∈ A Zα =   s.. t y1 j ³ 0 L U ∑   j=1 s. t . ( Cij) £ C ij £ ( C ij )  α α  n n  L U  − ³ = … − £ £ ∑y1 j∑ y ki 0, i 2, , n 1  ( NTNTNTij ) ij( ij )  = =  α α j1 k 1 L U  n  £ £  (CTCCTij) ij( ij ) −y + u ³ 0  α α  ∑ kn k =1  TTTL £ £ U  α α L  + + ³ L  Zα =  yij wij v ij ()cij α CTNT£  ij ij  L U  n n NTNTNT£ £  ( ij )α ij( ij )α  £  ∑∑CTTij L U  j=1 i = 1  (CTCij) £ ij £ (CTij )   α α  ∀(i , j) ∈ A  L U TTTα £ £ α  ...... (17)  CTNTij£ ij  n n  £ (∑∑CTTij )CP To derive the upper bound of the objective value in  j=1 i = 1  ³ ³ ³ ³ ∈ Model (16), we can directly set to its upper bound  yij 0,wij 0,vij 0, u0 ( i , j) A , to find the maximum objective value. Selected ...... (18) the upper bound of , put the constraint conditions n n  U max ∑∑ (cij )α t ij  i=1 j = 1 s. t . t³ CT into the second-level. At this point, since both of  ij ij £ the first level and the second level perform the  tij NT ij  +− ³ same maximization operation, Model (16) can be  TTi tij j 0 rewritten as the following conventional one-level  T £ T  n linear program defined as Model (19). L U U  £ £ = ( NTNTNTij ) ij( ij ) The Model (18) and Model (19) are also linear Zα  α α  L U CTCCT£ £ programs, and thus they can be easily solved us-  ( ij)α ij( ij )α  ing the simple method, interior-point algorithms, L U  TTTα £ £ α or mathematical programming software package  CTNT£ (Taha, 2007). It should be noted that objective  ij ij  n n £ function value of the Model (18) and Model (19)  (∑∑CTTij )CP are not the lower bound and upper bound of the  j=1 i = 1  T ,T ,t ³ 0, i= 1,..., n ; j= 1,..., n ;∀(i, j) ∈ A total compressing cost. The actual lower bound  i j ij total compression cost and the upper bound ...... (19) total compression cost are given according to equations (20) and (21).

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5. Numerical example , To illustrate the validity of the proposed ap- and . proach, the following example by Lee etl (1990) In this case, the project duration are investigated whose corresponding network is is triangular fuzzy number, and then the lower and given in Fig.1. upper bounds of the α-cut of the project duration are +30, 28, respectively. The fuzzy numbers of cost per unit time of compression , normal (max or uncompressed) duration , compression duration of task and the lower and upper bounds of the α-cuts can be obtained easily and are summarized in Table 1. Figure 1. The network structure of the project The associated linear program is can be expression in formula (22). Take into account the cost per unit time of com- Next, according to Models (18) and (19), the pression , normal (max or uncompressed) dura- lower and upper bounds of at possibility lev- tion , compression duration of task , and el α, , can be solved as the following con- bers the project duration are triangular fuzzy num ventional one-level linear programs (23) and (24).

Table 1. The triangular fuzzy numbers of , and the lower and upper bounds of the α-cut Activity

a(1,2) (80,100,120) 20α+80 -20α+120 (13,14,15) α+13 -α+15 (4,6,6) 2α+4 6 b(1,3) (190,200,220) 10α+190 -20α+220 (10,12,13) 2α+10 -α+13 (7,8,9) α+7 -α+9 c(2,5) (90,100,130) 10α+90 -30α+130 (16,18,19) 2α+16 -α +19 (10,14,14) 4α+10 14 d(2,4) (160,200,210) 4α+160 -10α+210 (5,6,8) α+5 -2α+8 (3,4,5) α+3 -α+5 e(3,4) (180,200,210) 20α+180 -10α+210 (3,4,5) α+3 -α+5 (2,2,3) 2 -α+3 f(4,5) (80,100,110) 20α+80 -10α+110 (7,8,10) α+7 -2α+10 (4,6,7) 2α+4 -α+7 g(5,6) (90,100,120) 10α+90 -20α+120 (9,12,14) 3α+9 -2α+14 (6,8,8) 2α+6 8

Table 2. The lower and upper bounds of the α-cuts and the corresponding total compression cost Lower bound Upper bound

α Total crashing Total crashing cost cost

1.0 7400 9600 2200 7400 9600 2200 0.9 7284.2 9333.7 2049.5 7669.7 9889.6 2219.9 0.8 7168.8 9070.8 1902 7942.8 10182.4 2239.6 0.7 7053.8 8811.3 1757.5 8219.3 10478.4 2259.1 0.6 6939.2 8555.2 1616 8499.2 10777.6 2278.4 0.5 6825 8302.5 1477.5 8782.5 11080 2297.5 0.4 6711.2 8053.2 1342 9029.2 11385.6 2356.4 0.3 6597.8 7807.3 1209.5 9279.3 11694.4 2415.1 0.2 6484.8 7564.8 1080 9532.8 12006.4 2473.6 0.1 6372.2 7325.7 935.5 9785.2 12321.6 2536.4 0 6260 7090 830 10040 12640 2600

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A mathematical programming software pack- min NT12w 12+ NT 13 w 13 + NT 25 w 25 + NT 24 w 24 + NT 34 w 34  + + + + age Lingo, is used to solve the above linear pro-  NT45w 45 NT 56 w 56 +CT 12 v 12 CT 13 v 13 CT 25 v 25 grams. Table 2 lists the α-cuts of the total com-  + CTv +CT v+ CT v + CT v + uT  24 24 34 34 45 45 56 56 pression cost and table 3 lists the optimal time of s.t. y12+ y 13 ³ 0, y 25 + y 24 − y 12 ³ 0,  y −y ³0, y − y − y ³ 0, each activity at eleven distinct α values: 0, 0.1,…  34 13 45 24 34 0.9, and 1. The approximate membership function  y56− y 25 − y 45 ³0, − y56 + u ³ 0,  + + ³α + of the fuzzy total crashing cost is shown in Fig. 2.  y12 w 12 v 12 20 80,  y+ w + v ³10α + 190,  13 13 13  y25+ w 25 + v 25 ³10α + 90,  y+ w + v ³40α + 160,  24 24 24

 y34+ w 34 + v 34 ³20α + 180,   y45+ w 45 + v 45 ³20α + 80,  y+ w + v ³10α + 90,  56 56 56  α +13£ NT12 £ −α + 15,  α £ £ −α +  2 +10 NT13 13,  2α +16£ NT £ −α + 9,  25 α £ £ −α + L  +5 NT24 2 8, Zα =  α £ £ −α +  +3 NT34 5,  α +7£ NT £ − 2α + 10,  45 3α +9£ NT £ − 2α + 14, Figure 2. The approximate membership function  56  2α +4£ CT £ 6, of the fuzzy total crashing cost  12  α +7£ CT13 £ −α + 9,  4α +10£ CT £ 14, max ct+ ct  + ct  + ct  + ct  + ct  + ct   25 12 12 13 13 25 25 24 24 34 34 45 45 56 56   α +3£ CT24 £ −α + 5, s.t. t£ NT12 , t £ NT13 , t £ NT 25 , t £ NT 24 ,   12 13 25 24 £ £ −α +   2 CT34 3, t£ NT 34 t £ NT12 t £ NT 56   34 , 45 , 56 , 2α +4£ CT £ −α + 7,  45      t12 ³ CT12 , t13 ³ CT13 , t25 ³ CT25 , t24 ³ CT 24 ,  α £ £  2 +6 CT56 8,       Z =  t34 ³ CT34 , t45 ³ CT12 , t56 ³ CT 56 ,  28£ T £ − 2α + 30  T+ t − T £0, T + t − T £0, T + t − T £ 0,  CT£ NT ,CT £ NT ,  1122 2255 2244  12 12 13 13 £ £  T3344+ t − T £0, T 4455 + t − T £0, T 5566 + t − T £ 0,  CT25 NT 25 ,CT 24 NT 24 ,   £ CT£ NT ,CT £ NT ,  T6 28,  34 34 45 45   CT£ NT , Ti , T j , t ij ³ 0, (i , j)∈ A . 56 56    CT12+ CT 25 + CT 56 £ T, ...... (22)  y , w , v , u³ 0,( i , j) ∈ A  ij ij ij ...... (23)

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6. Conclusion max (− 20α + 120)t12 +( − 20α + 220)t13  + −α + + −α +  ( 30 130)t25 ( 10 210)t24 Several researchers have investigated the com-  + − 10α + 210t + − 10α + 110 t  ( ) 34 ( ) 45 pression analysis in the project network with fuzzy  +( − 20α + 120)t56 activity times and costs. Clearly, when the activ-  ity times and costs are fuzzy, the total compression s.t. t12£ NT 12 , t 13 £ NT 13 , t 25 £ NT 25 ,  £ £ cost and each activity time are also fuzzy. This pa-  t24 NT 24,t 34 NT 34 , per develops an approach to find the membership  t45£ NT 45 , t 56 £ NT 56 ,  function of the fuzzy total compression cost and the  t12³ CT 12 , t 13 ³ CT 13 , compressed times of each activity when the activity  t³ CT , t ³ CT ,  25 25 24 24 times and costs are fuzzy numbers. The underlying  t34³ CT 34 , t 45 ³ CT 45 ,  idea is based on linear programming formulation and t ³ CT ,  56 56 Zadeh’s extension principle to transform the fuzzy  T +t− T £ 0,  1 12 2 problem to a pair of parametric linear programs. T + t− T £ 0,  1 13 3 By enumerating different values of the possibility  T + t− T £ 0,  2 25 5 level α, the lower and upper bound of the α-cuts of − £  T2 + t 24 T 4 0, the fuzzy total compression cost is calculated to ap-  − £  T3 + t 34 T 4 0, proximate the membership function. A numerical  T4 + t 45− T 5 £ 0, example studied by related studies is solved for il-   T5 + t 56− T 6 £ 0, lustrating the validity of the proposed approach.  TT£ , In this paper, the fuzzy total compression cost  6

 α +13£ NT12 £ −α + 15, is expressed by a membership function that com-  α £ £ −α + pletely conserves the fuzziness of activity times  2 +10 NT13 13, U  and costs. Compared with other studies, the pro- Zα =  2α +16£ NT25 £ −α + 9,  α +5£ NT £ − 2α + 8, posed approach can obtain more reasonable solu-  24  α +3£ NT £ −α + 5, tions suitable for all cases ranging from the pes-  34 simistic case to the optimistic case, and so more α +7£ NT £ − 2α + 10,  45 information is provided for making project man-  3α +9£ NT £ − 2α + 14,  56 agement decisions.  2α +4£ CT12 £ 6,  α £ £ −α +  +7 CT13 9,  4α +10£ CT £ 14, References  25  α +3£ CT24 £ −α + 5, 1. Chanas, S. and Kamburowski, J. (1981). “The use of  fuzzy variables in PERT.” Fuzzy Sets and Systems, 2£ CT34 £ −α + 3,  48, 1241-1244.  2α +4£ CT45 £ −α + 7,  2α +6£ CT £ 8, 2. Nasution, S.H. (1994). “Fuzzy critical path method.”  56 IEEE Transactions on Systems, Man, and Cybernet-  28£ T £ − 2α + 30  ics, 24, 48-57.  CT12£ NT 12 , 3. Chanas, S. and Zielinski P. (2001). “Critical path  CT£ NT ,  13 13 analysis in the network with fuzzy activity times.”  CT25£ NT 25 , Fuzzy Sets and Systems, 122, 195-204.  £  CT24 NT24 , 4. Chen, S.M., and Chang, T.H. (2001). “Finding  CT£ NT , multiple possible critical paths using Fuzzy PERT.”  34 34 IEEE Transactions on Systems, Man, and Cybernet-  CT45£ NT 45 , ics, Part B, 31(6), 930-937.  CT£ NT ,  56 56 5. Soltani, A. and Haji, R. (2007). “A project schedul-  CT12+ CT 25 + CT 56 £ T,  ing method based on fuzzy theory.” Journal of Indus- T , T , t³ 0, ( i , j) ∈ A  i j ij trial and Systems Engineering, 1, 70-80...... (24) 6. Yousefli, A., Ghazanfari, M. Shahanaghi, K. and Heydari M. (2008). “A new heuristic model for fully

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Table 3. The optimal time of each activity at eleven distinct α values: 0, 0.1,… 0.9, and 1 α Upper bound 6 12 14 6 2 6 8 1.0 Lower bound 6 12 14 6 2 6 8 Upper bound 5.8 12.1 14.6 6.2 2.5 5.8 7.8 0.9 Lower bound 6 11.8 14 5.9 2.1 6.1 8 Upper bound 5.6 12.2 15.2 6.4 3 5.6 7.6 0.8 Lower bound 6 11.4 14 5.8 2.2 6.2 8 Upper bound 5.4 12.3 15.8 6.6 3.5 5.4 7.4 0.7 Lower bound 6 11.4 14 5.7 2.3 6.3 8 Upper bound 5.2 12.4 16.4 6.8 4 5.2 7.2 0.6 Lower bound 6 11.2 14 5.6 2.4 6.4 8 Upper bound 5 12.5 17 7 4.5 5 7 0.5 Lower bound 6 11 14 5.5 2.5 6.5 8 Upper bound 4.8 12.6 17.6 7.2 4.6 5.2 6.8 0.4 Lower bound 6 10.8 14 5.4 2.6 6.6 8 Upper bound 4.6 12.7 18.2 7.4 4.7 5.4 6.6 0.3 Lower bound 6 10.6 14 5.3 2.7 6.7 8 Upper bound 4.4 12.8 18.8 7.6 4.8 5.6 6.4 0.2 Lower bound 6 10.4 14 5.2 2.8 6.8 8 Upper bound 4.7 12.9 18.9 7.8 4.9 5.8 6.2 0.1 Lower bound 6 10.2 14 5.1 2.9 6.9 8 Upper bound 5 13 19 8 5 6 6 0 Lower bound 6 10 14 5 3 7 8

fuzzy project scheduling.” Journal of Uncertain Sys- 14. Ghananfari, M., Yousefli, A. Jabal Ameli, M.S, and tems, 2, 75-80. Bozorgi-Amiri. A. (2009). “A new approach to solve time-cost trade-off problem with fuzzy deci- 7. Chen, S.P. (2007). “Analysis of critical paths in a sion variables.” International Journal of Advanced project network with fuzzy activity times.” European Manufacturing Technology. 42, 408-414. Journal of Operational Research, 183, 442-459. 15. Mon, D.L., Cheng, C.H. and Lu, H.C. (1995). “Ap- 8. Elmaghraby,S.E. (1977). “Activity networks: proj- plication of fuzzy distributions on project manage- ect planning and control by network models.” John ment.” Fuzzy Sets and Systems, 73, 227-234. Wiley & Sons, Inc., New York, NY. 16. Arikan, F. and Gungor, Z. (2001). “An application 9. Elmaghraby,S.E. (2000). “On criticality and sensitiv- of fuzzy goal programming to a multi-objective ity in activity networks.” European Journal of Op- project network problem.” Fuzzy Sets and Systems, erational Research, Vol. 127, 220-238. 119, 49-58. 10. Klastorin, T.D. (2004). “Project management: tools 17. Zadeh, L.A. (1965). “Fuzzy sets.” Information and and trade-offs.” John Wiley & Sons, Inc., New York, Control, 8(3), 338-353. NY. 18. Taha, H. A. (2007). “Operations Research: an in- 11. Johnson, G.A and Schou, C.D. (1990). “Expediting troduction.” eighth ed., Pearson Prentice Hall. projects in PERT with stochastic time estimates”. Project Management Journal. 21(2), 29-34. 19. Lee, S.M., Moore L.J. and Taylor B.W. (1990). “Management Science.” Third ed., 47-58. 12. Wollmer, R.D. (1985). “Critical path planning under uncertainty.” Mathematical Programming Study. 25, 164-171. Corresponding Author 13. Leu, S.S., Chen, A.T. and Yang, C.H. (2001). “A Xun Liu, GA-based fuzzy optimal model for construction Institute of Engineering Management, time-cost trade-off.” International Journal Project Hohai University, Nanjing, Management, 19, 47-58. China, E-mail: [email protected]

66 Volume 7 / Number 1 / 2012 technics technologies education management Valuation of investment in processing plant for waste from ceramic brick and tile industry

Vladislav Zekic1, Jonjaua Ranogajec2, Miroslava Radeka3, Nedeljko Tica1, Zoran Backalic4, Dragan Milic1 1 University of Novi Sad, Faculty of Agriculture, Department of Agricultural Economics and Rural Sociology, Novi Sad, Vojvodina, Serbia, 2 University of Novi Sad, Technology Faculty, Novi Sad, Vojvodina, Serbia, 3 University of Novi Sad, Technical Science Faculty, Novi Sad, Vojvodina, Serbia, 4 AD Polet Novi Bečej, Vojvodina, Serbia.

Abstract functional, technical and financial dimensions. However, due to the necessity to respect the rule The production of ceramic bricks and tiles is of sustainability as an important criterion in the accompanied by the generation of about 5 % of last decades, the classical approach of evaluating waste materials developed during the firing pro- building materials has changed. cess. These waste materials have the potential to be The building industry is considered to be the crushed and used for the preparation of pozzolanic largest consumer of raw materials since the con- mortars which could have significant environmen- struction industry uses 60% of raw materials iso- tal benefits in terms of reducing the volume of ag- lated from the lithosphere [1]. Out of that amount, gregate extraction and content of cement. One of 24% of total extraction is used in the construction the emerging opportunities is the development of of objects. In Europe, 4.8 tons of mineral resourc- regional resource synergies where this waste ma- es per inhabitant are annually spent for building. terial, as a by-product, is re-used by mortar pro- On the other hand the solid waste material in ducers in the region. Employing this practice can building is generated because of several reasons: result in an improved utilization of these waste the demolition of structures [2], as a consequence materials, which would otherwise be discharged of structural deterioration, better economic gains to landfill and displacement, and in the reduced and natural disasters and war-inflicted damage. use of stone aggregate materials and cement. The In this way construction industry directly or indi- objective of this paper is to evaluate the economic rectly causes a significant part of annual ecologi- viability of this waste when used in the pozzola- cal damage and an appropriate utilisation of recy- nic mortars production. In addition, the research cled waste materials can significantly contribute provides the assessment of the ability to influence to sustainable development. The achievement of the national economic policy in respect to the ap- the stated aim is only possible if ecologically ac- plication of the observed waste. Overall results in- ceptable materials [3, 4] and ways of construction dicate a significant potential in their application. are found. One of the possible solutions is recy- Key-point for the economic viability of the waste cling and re-use of given materials, which directly recycling is the transportation cost, according to influences sustainable production and utilisation which the distance from the brick manufacturer to of renewable sources. The utilisation of waste the place of use should not exceed 100–150 km. In materials influences not only the decrease in en- the case-study, there are almost 10 brick factories vironmental pollution but also has impact on the within this radius. preservation of the resources of the society, since Key words: Ceramic brick solid waste, histor- it decreases the exploitation of raw materials and ic pozzolanic materials, economic evaluation provides substitutes for materials such as cement, whose production requires significant quantities Introduction of raw materials, energy and assets for production. Recycling of the brick production waste mate- The selection of building materials for specif- rial and converting it to aggregate is a highly ef- ic purposes is, as a rule, made on their basis of ficient and flexible way of transformation of waste

Volume 7 / Number 1 / 2012 67 technics technologies education management materials into building materials. In such a way, Material and method one of the basic problems of recycling centres is For the economic evaluation of the usage of solved, since the continual production of brick ground brick (dust and sand) for plasters prepa- products assures the supply of required materials ration the composition and thermal conductivity and solves the problem of the disposal of wastes. of ten plasters were analyzed. The composition of The analysed technology has numerous advan- plasters was obtained by mixing different combi- tages: (1) it decreases the exhaustion of natural nations of five binders and two types of sand. For resources, (2) it is energetically efficient since it the analysis the data were used for thermal con- decreases the expenditure of energy by substitut- ductivity of binder pastes of different composi- ing cement, (3) the recycling process is flexible, tion published in paper [6]. The volume of sand since the wastes can simply be stored and used for particles (river sand/crushed brick) and overall other purposes. water content in 1 m3 of compacted plasters were The usage of ground brick (dust and sand), calculated. Water absorption of crushed brick par- which is waste material in the brick/tile production, ticles, used as aggregate (10%) in plasters, was for making mortars for plastering during the reno- found to be higher than the river sand, and this is vation of cultural monuments is of manifold impor- compensated during the mix design. The thermal tance. Brick dust reduces the required amount of conductivity of plaster with specific content, Table hydraulic binders because of its pozzolanic proper- 1, has been calculated by the method defined and ties, while the coarse particles bricks can be used published by ACI Committee 122, [7], Table 5. as a substitution of natural sand. The products do Motion dynamics of the range of the brick pro- not lose much in terms of mechanical properties, duction waste materials was analysed by the change workability and plastering. At the same time the rate in the analysed period (2006-2010). Change thermal insulation of plasters is improved as well as rates were verified by the exponential function. The its compatibility with the existing materials regard- calculation of recycling expenses of the wastes of ing mechanical, physical and structural properties. brick industry starts with the calculation of investments in the processing facility designed for the Paper objective granulation of waste to achieve the desired grain The main goal of the research presented in this size. It was deduced based on the existing technical- paper is to illustrate the potentials and possibilities technological project. The calculation of expenses of the utilisation of brick industry for the production has been based on verifying the overall expenses of pozzolanic plasters. The wider framework of the [8]. The calculation of expenses of the material was research includes finding a model for establishing derived according to the current price of the brick sustainable development of construction industry wastes on the market. The amortisation was calcu- and the overall society through the recycling of the lated according to the estimated investments and wastes. The purpose of such a model is to enable assumed lifetime of particular assets. The salary appropriate decision making about the distribution expenses were calculated in accordance with the of resources to social organisations and enterprises average salary in the Republic of Serbia decreased in order to achieve optimal overall results in that in accordance with required qualification structure. manner. The analysis of the described problem has The expenses of the utilised energy were verified been deduced by the Feasibility study of facilities according to the expenditures and market prices. for the processing of wastes in accordance with the The expenses of the object and equipment main- previously applied methodology [5], whereby the tenance were calculated following the experiential described steps are implemented in the form of the regulations. The opportunistic expenses of financ- case study for the region of Serbia: (A) Production ing and utilizing the land were calculated according of the wastes has been assessed for the brick indus- to the usual interest rates for long-term loans in the try in Serbia, (B) Analysis of market requirements, Serbian market, while the insurance expenses were (C) Investments analysis, (D) Evaluation of recy- included in accordance with the premium rates of cling facility expenses. insurance companies.

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Results and discussion to 76,813 tons, the largest part of which (70.2%) refers to the wastes from bricks and blocks pro- Results duction. The described quantity of the wastes was The total production of the brick industry much higher in certain years of the observed pe- in Serbia in the last five years (2006-2010) has riod, and amounted to 100,000 tons per year. been3,267,589 tons on average [9]. The largest The described kind of wastes is very convenient part of this production (82.5%) refers to bricks for recycling and use for the reparation of cultural and blocks, while the smaller part refers to tiles heritage objects for several reasons: (1) it has a (17.5%). Regardless of the very expressed annual structure and composition compatible with exist- rate of decrease in production (-20.81%), signifi- ing materials, (2) it does not depend on periodical cant amounts of wastes are produced. The estimat- events such as road and bridge construction and ed amount of wastes on the annual level amounts unplanned events such as natural disasters, (3) it is

Table 1. Composition of mixtures for the preparation of 1 m3 of plasters Binder paste Water ratio Grinding Binder pa- Binder paste Water ratio hydrated for G.B. brick River sand Mixture ste cement brick dust* for R.S. *** lime (parts/ sand ** sand**** (parts/mass) (parts/mass) (parts/mass) (parts/mass) mass) (parts/mass) (parts/mass) Plaster 1 - 1.0 - 0,50 - 2,7 Plaster 2 - 1.0 - 0,55 2,3 - Plaster 3 1,0 1.4 - 0,78 - 2,7 Plaster 4 1,0 1.4 - 0,84 2,2 - Plaster 5 1,0 1.1 0,33 0,70 - 2,6 Plaster 6 1,0 1.1 0,33 0,77 2,2 - Plaster 7 1,0 0.8 0,67 0,68 - 2,5 Plaster 8 1,0 0.8 0,67 0,74 2,1 - Plaster 9 1,0 0.7 0,84 0,64 - 2,5 Plaster 10 1,0 0.7 0,84 0,70 2,2 - * diameter of particles <0.3 mm ** water/binder ratio plus ratio of water necessary for covering all the surfaces of the sand particles for 0.05 mm plus ratio of absorbed water thickness (grinding brick sand) *** water/binder ratio plus ratio of water necessary for covering all the surfaces of the sand particles for 0.05 mm thickness (river sand) ****diameter of particles 1-4 mm Table 2. Quantities of components (mass) required for the preparation of 1m3 of plaster Binder paste Binder paste Binder paste Grinding brick Water River sand Mixture hydrated lime cement brick dust* sand** (kg) (kg) (kg) (kg) (kg) (kg) Plaster 1 0 550 0 277 0 1467 Plaster 2 0 550 0 304 1244 0 Plaster 3 196 275 0 371 0 1267 Plaster 4 196 275 0 396 1015 0 Plaster 5 196 220 65 340 0 1249 Plaster 6 196 220 64 371 1058 0 Plaster 7 196 165 131 333 0 1240 Plaster 8 196 165 131 364 1050 0 Plaster 9 196 138 164 318 0 1268 Plaster 10 196 138 164 349 1074 0 * diameter of particles <0.3 mm ** diameter of particles 1-4 mm

Volume 7 / Number 1 / 2012 69 technics technologies education management available during the entire year and can be stored tions for assemblage of the equipment and disposal at low cost. On the other hand, the quantities of strips), equipment for electric control, precipitator this waste depend on the range of the increase and and investments in projecting and provision of per- overall economic development which determines mits and approvals are provided for. The present the level of construction materials, i.e. the level of research [11-12] points that the construction and construction and renewal. Based on the previously capacities of construction material recycling facili- stated bibliographical data and calculations, Table ties largely determine the capital expenses and pos- 1 presents the composition of ten kinds of plasters. sibilities for the provision of sufficient quantities of Based on the defined plaster compositions, wastes for processing. Thus, the cost-effectiveness the quantities of components required for making of the work of such a facility is mostly deduced to 1m3 of plaster are given in Table 2. the economics of the range of expenses and trans- The very process of grinding the brick and tile portation costs. Since there is no significant trans- wastes to the desired granulation is technologically portation distance in the observed case, the analysis simple. The calculation of expenses of grinding has of the cost-effectiveness of the work of the observed been derived from the standard facility comprising: facility is significantly simpler. (1) loader, (2) passer of burned wastes, (3) trans- The investment into the observed facility amounts porter for transportation to the crusher, (4) crusher, to 235,000 €. The capacity of the facility has been and (5) transporter for transport out of the facility. estimated on the basis of 80% of the nominal work Apart from that, investments for the burned wastes capacity so that the effect makes 13.5t/h the calcula- disposal site, required construction works (foundation of the total production range predicts working

Table 3. Assumptions for calculating recycling expenses Ordinal Components Assumptions number . Capacity 13.5 t/h, . Period of equipment exploitation 7 – 10 years, Basic . Period of objects exploitation 20 years, 1. parameters . Working year of 260 days . Work hours 8 hours per day . Fixed amount of operational expenses . Investment into equipment 190,000.00 € . Equipment . Investment into land and objects 35,000.00 € and objects . Without procurement of used equipment Expenses . Property is insured against usual risks 2. of the . Land surface 1 ha capital . Land expenses . Nominal rent 250 € per year . Opportunistic . Interest rate 8% expenses . Calculation of expenses of work materials is derived on the . Material basis of the current market price of brick industry wastes . Work . Work of the facility requires 3 employees with high school expenses qualification . Calculation of expenses for electric energy is derived in Operational 3. accordance with the nominal power of the facility and planned expenses work range, . Energy . Calculation of expenses for fuel is deduced according to the power of the working machine, specific fuel expenditure and planned utilisation range. . Expenses of the maintenance of the facility are calculated . Other following experiential regulations

70 Volume 7 / Number 1 / 2012 technics technologies education management in one shift and the working year of 260 days. The Discussion total annual capacity of the facility is 26,325 tons. The cost analysis for materials for the produc- Overall assumptions for the calculation of recycling tion of plaster indicates that the price of utilised expenses are given in the table below. material grows with the substitution of natural sand The calculation of total work expenses of the with brick sand. This can be seen if the follow- facility annually, i.e. of expenses per ton of ob- ing kinds of plasters are compared: plasters 1/2, tained brick dust is presented in Table 4. plasters 3/4, plasters 5/6, plasters 7/8, and plasters Based on the brick industry waste recycling 9/10. On the other hand, there is also a significant expenses, i.e. production of the brick dust, Table change in the coefficient of thermal conductivity. 4 and market prices of other raw materials for the If the change of expenses and change of thermal plaster production, the total price of the material conductivity are compared, the following results has been calculated. The quantities of materials are obtained, which are presented in Table 6. required for the production of 1m3 of plaster are It can be deduced from the given data that the in- given in Table 2. The total expenses of the materi- crease in the price of materials is higher than the deals are given in Table 5. Table 4. Calculation of brick dust/sand cost price Total annual expenses Portion Expenses per unit of capacity Ordinal number Expense category (€) (%) (€/t) 1. Material 493,071.43 85.55 18.73 2. Amortisation 22,750.00 3.95 0.86 3. Salaries 13,680.00 2.37 0.52 4. Energy 19,249.29 3.34 0.73 5. Maintenance 5,100.00 0.88 0.19 6. Financing expenses 18,800.00 3.26 0.71 7. Insurance 3,375.00 0.59 0.13 8. Land 350.00 0.06 0.01 Total 576,375.71 100.00 21.89 Table 5. Calculation of the cost price of analysed mixtures Mixture cost price Coefficient of plasters thermal conductivity Ordinal number Mixture (€/m3) (W·m-1·K-1) 1. Plaster 1 62.75 1.140 2. Plaster 2 87.48 0.739 3. Plaster 3 47.21 0.844 4. Plaster 4 67.26 0.599 5. Plaster 5 42.62 0.990 6. Plaster 6 63.62 0.633 7. Plaster 7 38.01 0.798 8. Plaster 8 58.88 0.625 9. Plaster 9 35.76 0.797 10. Plaster 10 57.09 0.642 Table 6. Comparison of the change of expenses and coefficient of the thermal conductivity for individual plasters Ordinal Change in the expenses Change in total Change of the coefficient of the Mixture number for the materials (%) expenses (%) plasters thermal conductivity (%) 1. Plasters 1/2 39.4 9.4 -35.2 2. Plasters 3/4 42.5 8.1 -29.0 3. Plasters 5/6 49.3 8.7 -36.1 4. Plasters 7/8 54.9 8.8 -21.7 5. Plasters 9/10 59.7 9.0 -19.4

Volume 7 / Number 1 / 2012 71 technics technologies education management crease of thermal conductivity. On the other hand, is lower than the change of the coefficient of it is necessary to take into consideration that the use thermal conductivity of the observed plasters. of plasters in their final form (built in the objects) also causes building expenses which are higher Recycling brick industry wastes should be in- than material expenses, and thus the expenses of cluded into the wider context of the sustainable the embedding amount to between 75 and 80% of resource and waste management with an appropri- total expenses (materials and embedding). If a com- ate understanding of the interaction between the parison of changes of total expenses is made, it is key elements of production, disposal sites, recy- possible to conclude that the increase of expenses is cling and transportation. A larger production and smaller than the improvement of thermo-insulating utilisation of the described materials can be done characteristics of the materials, Table 6. only if economic sustainability is proven besides The Required assessment of the observed tech- ecologic sustainability,. nology can only be made following the complete In order to decrease the risk of investing for in- investment analysis. Only in this way is it possible vestors, economic and political instruments must to reach the value of investments that the investor provide financial support for recycling centres in ad- can invest in the described facilities, i.e. recycling vance, as well as the regulation of the recycling mar- expenses that can be covered with the achieved ket as a whole. This can mainly be achieved through income. Methods of the investment analysis must the concordant application of standards when using be based on the market price of the product and recycled materials and financial support through the achieved income. Since there is still no wider mar- indirect influence of the taxes on disposal sites or ket utilisation of brick dust as a raw material in primary raw materials, as well as through the direct Serbia, it is not possible to give a complete invest- influence through subventions for recycling centres ment analysis. or recycled secondary raw materials.

Conclusion Acknowledgment The paper presents economic parameters of the This work was supported by the Ministry of utilisation of brick industry wastes as a substitute Science and Technological Development through for cement and natural sand. It has been identified the project III 45008. that the observed technology has its potentials and economic justification. Accordingly, the following References conclusions are made: –– The utilisation of brick wastes as substitute 1. Andrić, J. (1998) “Troškovi i kalkulacije u poljo- for cement and sand increases the expenses privrednoj proizvodnji”, Poljoprivredni fakultet – Ze- mun, Beograd. of utilised materials, –– The increase in expenses for materials is 2. Baras, J. (1991). Procesna industrija i zaštita životne sredine. II jugoslovensko savetovanje „Zaštita significantly lower in plasters, where cement životne sredine u procesnoj industriji“, Zbornik rais substituted with brick dust, dova, 30-45. –– The use of brick wastes as a substitution 3. Baras, J., Matekalo-Sverak, V., Povrenović, D. influences the decrease of the coefficient of (2003). Zaštita životne sredine i održivi razvoj. VII thermal conductivity of the observed plasters, savetovanje hemičara i tehnologa Republike Srpske, –– The increase of the prices of the material uvodno predavanje po pozivu, Glasnik hemičara i when substituting cement and sand is, as a tehnologa Republike Srpske, 44, 15-21. rule, higher than the change of the coefficient 4. Grupa autora: Eleborat o otvaranju novog pogona, of thermal conductivity of the observed Agroindustrijski kombinat Bačka Topola, Bačka To- plasters, pola 2007. –– The increase of expenses comprising 5. Marko, J., jovanović, M., tica, N. (1998) “Kalku- expenses for materials and embedding lacije u poljoprivredi”, Poljoprivredni fakultet, Novi Sad. expenses when substituting cement and sand

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6. Okanović Đorđe, Tica Nedeljko, Zekić Vladislav, Vu- koje Veljko, Milić Dragan; Profitability of investment in plant for processing animal waste; TECHNICS TECHNOLOGIES EDUCATION MANAGEMENT- TTEM; 2010; 2 ; ISSN: 1840-1503; 296 – 300. 7. Okanović, Đ., Ristić M, Delić, Stanislava (2008): Sporedni proizvodi poljoprivrede i prehrambene in- dustrije i kvalitet životne sredine, Kvalitet, 65-68 8. Ristić M, Okanović, Đ., Radusin T. (2008): Con- temporary approach to animal by-products disposal problems, Food processing, quality & safety, 35, 2, 81-92. 9. Strategija upravljanja otpadom za period 2010- 2019. godine, Vlada Republike Srbije, 2010. 10. Vučemilo Marija, Alenka Hadžiosmanović, Bara Vinković, Ružica Blažević (1996): Veterinarska sjelatnost u zaštiti okoliša. Zbornik Prvog veteri- narskog kongresa. Cavtat, 2.-5. listopada 1996., 119-126.

Corresponding Author Vladislav Zekic, Faculty of Agriculture Novi Sad, Serbia, E-mail: [email protected]

Volume 7 / Number 1 / 2012 73 technics technologies education management In The Development of Cyber culture: Internet Journalism and Attitudes of Adults by Education Level

Tuncay Sevindik Department of Department of Computer and Instructional Technology Education, University of Yildiz Technical, Davutpasa Campus, Esenler, Istanbul, Turkey

Abstract has marked the last twenty years. Internet based culture has taken the place of traditional culture The communication concept is the main reason structure nowadays. CyC concept is developing for the realization of cultural formation among in- its nationality and language structure in today’s dividuals. One of the most important change expe- world. If chat forms at the cyber world are ana- rienced in today’s world is cyber culture concept lyzed, it is remarkable that people generally use formed against the traditional culture concept in abbreviations. (AAMOF = As A Matter Of Fact? which literacy is one of the basic elements mak- AFK = Away From Keyboard, Hw re u? (how are ing up the cultural value. In this sense, newspaper you?), M8 = Mate, CU = See You etc.).1 While literacy is increasing the effect of literacy and is a CyC is creating a system of its citizenship related need that has been developed from internet litera- to language, it is gradually expanding its own cy in the process of cultural transformation. Thus, cultural values as well. Marriages over internet, the concept of internet journalism making up cy- cooperative bulk purchasing of products and get- ber culture is one of the key elements of digital ting cheaper products on internet, presence within literacy In this study, the significance of internet sharing by establishing groups can be stated as journalism in cyber culture was investigated and important examples of cultural structure forma- attitudes of adults were determined in terms of tion. Considering all of these examples, important their education level. changes are being seen in the attitudes of individu- Key words: Cyber culture, internet journalism, als. Traditional neighborhood visits are replaced newspaper, digital literacy, education level. by virtual visits, shopping and entertainment. In fact, this situation is contributing to the deteriora- Introduction tion of traditional values to a great extent and constituting new cultural movements. Until the early Internet emerged in the second half of the 20th 2000s, one of the most important corner stones century and it is the most important development of our lives and the cultural movement was the that changed the lives of human being. It was changes in newspaper literacy. In today’s world, discovered for defense industry in 1960s and it newspaper literacy has become a necessity at the showed a steady improvement until 1990s. After point of tracing the changes in the world and it the invention of World Wide Web (www) protocol leaves place to internet journalism (IT) serving in- by Tim Berners Lee, internet has reached a very stant access to news or more current information. different dimension. Firstly our lives have become Today people are obtaining the instant news by computer based and afterwards internet based due accessing the main pages of newspapers or con- to the gradual reduction in the price of personal necting to the IT and a program (Rich Site Sum- computers day by day and rapid advances in in- mary-RSS). Many RSS software’s are available ternet technology. Communication is the leading on internet. Online newspaper is a new approach factor in paving the way for these developments. brought about by CyC in the world. It grows to One of the most important change experi- a large extent every day. Digital literacy can not enced in today’s world Cyber culture (CyC) is, fully develop in individuals without the individu- was formed against the traditional culture and als having knowledge about CyC and IT because

74 Volume 7 / Number 1 / 2012 technics technologies education management digital literacy is an important criterion for devel- positive and negative effects. It is not possible for oping of IT and CyC. In this sense, the topic of the CyC based societies to be affected negatively can be research is “In the development of cyber culture: said to be important in digital divide. At this point, Internet journalism and attitudes of adults”. CyC digital literacy is taken a place in the digital divid- and IT are mentioned in the context of the main ing. It can be said that people having high degree topic of research. Literature about digital literacy for digital literacy are the leaders at the formation of is reviewed and universe of study, data collection CyC. The leaders of traditional culture society are, and data analysis are dealed with the methodology therefore, differs from those of CyC society. section. In the conclusion and discussion sections Digital divide refers to a variety of phenomena, after findings section about internet journalism such as the gap and inequality in accessing online and attitudes of adults by education level. information, the capacity and skills of informa- CyC is the culture that has emerged from the tion and communication technologies (ICT) use, use of computer networks for communication, the technical quality and width of the network, entertainment and business. It is also the study the governmental and social investment for online of various social CyC which is typically accom- infrastructure and education, the overall ability to plished through cultural criticism or a textual ap- translate and evaluate information, and the social proach to the material. Since the boundaries of diversity of users.3 Elad Segev and his friend pre- CyC are difficult to define, the term is used flex- sented a study for providing a view from a differ- ibly, and its application to specific circumstances ent angle on the digital divide, by looking at the can be controversial. It generally refers at least to most popular search queries in Google and Yahoo the cultures of virtual communities, but extends in various countries. A new methodology and met- to a wide range of cultural issues relating to "cy- rics is developed and employed to examine and ber-topics", e.g. cybernetics, and the perceived or assess the digital divide in information uses, look- predicted cyborgization of the human body and ing at the extent of political searches, their accu- human society itself. It can also embrace associ- racy and variety.4 ated intellectual and cultural movements, such as The popular CyC writings were generally de- cyborg theory and cyberpunk. The term often in- scriptive. Usually required to follow the term corporates an implicit anticipation of the future.2 internet with the parenthetical phrase the global The Oxford English Dictionary lists the earliest computer network system, these journalists had usage of the term "cyber culture" in 1963, when the unenviable task of introducing non-technical A.M. Hilton wrote, "In the era of cyber culture, all readers to the largely technical and pre-World the plows pull themselves and the fried chickens Wide Web version of cyberspace. The cyberspace fly right onto our plates. This CyC may be purely nation is in the house. With its mail, discussion an online culture or it may span both virtual and groups, bulletin boards and shareware, with its physical worlds. That is to say, that CyC is a cul- geography and its idiom, cyberspace simulates ture endemic to online communities; it is not just community, a community more dependent on the culture that results from computer use, but cul- imagination than most.5 To move digital informa- ture that is directly mediated by the computer. An- tion to allow on-screen formatting, photographs, other way to envision CyC is as the electronically- diagrams, moving video, sound, and text to appear enabled linkage of like-minded, but potentially side by side, all within the narrow constraints of geographically disparate (or physically disabled bandwidth, each of these things must be turned and hence less mobile) persons. CyC include into data packets and shipped piecemeal across the various human interactions mediated by computer network. The packets must be reconstructed at the networks such as Chat, Blogs, E-commerce, peer- destination and then translated back into things we to-peer networks, bulletin board systems, games, can work with on a computer screen.6 social networks, USENET etc. Call it cyberspace, the information superhigh- It can be seen that CyC is a reason for changing of way, the matrix, the net or virtual reality. CyC many concepts in traditional culture. The most im- adds a new dimension to the concept of society portant reason of this change is digital dividing with and society is a concept that it hasn’t a specific

Volume 7 / Number 1 / 2012 75 technics technologies education management algorithm. Building community is a fundamen- lization of pure information products has created tally different activity than writing computer code: new opportunities and changes in the information code does not write back and code does not re- goods markets.11 The increasing acceptance and us- spond strategically to one’s action.7 age of Internet and the decrease of the access’ costs, Generally, internet news consists of a front provide a new broad scope of economic activities page, article pages and topic pages. A page is a and business models. At another study made from two-dimensional surface containing text and im- Åsa Moberg and friends, the tablet e-paper news- ages that can be accessed by scrolling up and paper seems favorable also from an environmental down in a web browser window. Internet news point of view. The e-paper device has substantially usually organizes their pages in a hierarchical tree lower energy use during down-loading and reading structure, with the front page as the root and the compared with using a computer for reading news- topics and stories branching out from it.8 papers on the internet. Thus, it has been suggested Several studies were made about newspaper that the environmental impact can be lower than and internet journal reading. Studies indicate that for printed and internet-based newspapers. The dif- the reading time for internet journals is crucial.9, 10 ferences of flow charts between printed newspaper Aguila-Obra indicate that the advent of the digita- and IJ and it can be seen at Fig 1.12

Figure 1. Simplified flow charts of printed newspaper and internet journal

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Method graduate level individuals ( =1,5619) enjoy reading internet journals but primary-secondary level In this study, a questionnaire was developed for individuals ( =1,8714) and graduate level indi- determining the profile of digital literacy and at- viduals ( =1,7500) show an instable attitude about titudes for internet journalism by the authors. The this subject. In general, when looked at the means validity and reliability of the questionnaire were ( =1,6453), it is seen that individuals participat- made. According to this, Cronbha alpha value is ing this research show positive attitude for internet obtained as 0,8944. journal and they like to read internet journals. The Universe And Sample Of The Study When looked at Table 2, individuals generally The universe of the study is composed of 296 put forward their views as Internet Journalism is young adults (between 18-25 years) residing in the the fastest news source. However, a significant city center of Elazig. The sample is sufficient to difference occurred at the level of ,05 between represent the universe. In the study, 296 partici- primary-secondary level and graduate level indi- pants responded to the questionnaire. viduals. While primary-secondary level individuals ( =1,500) show an instable attitude about Data Collection and Analysis Internet Journalism is the fastest news source, The questionnaire for determining the profile graduate level individuals ( =1,1250) exhibit of digital literacy and attitudes for internet journal- positive and keen attitude about this subject. At ism by education level developed by the authors the same time, it is seen that undergraduate level is used at data collection. In the analysis of data, individuals ( =1,2524) exhibit positive attitude mean and ANOVA statistical techniques are used. about Internet Journalism is the fastest news. When variable of education level and variable of internet journalism allows me to access differ- Findings And Comments ent sources is compared, a significant difference is In terms of education level, variable of I like seen at the level of 0,05 between primary-second- to read internet journal is compared and a signifi- ary level and undergraduate-graduate levels indi- cant difference occurred at the level of 0,05 seen viduals seen at Table 3. Primary-secondary gradu- at Table 1. Considering means, these differences ate individuals show instable attitude ( =1,7000). are seen in the following way: In particular, under- Under graduate level ( =1,3286) and graduate Table 1. The results of variance analysis between education level and attitude variable of I like to read internet journal Sum of Squares Mean Square sd F P Between groups 5,215 2 2,608 3,595 ,029 Within groups 212,538 293 ,725 TOTAL 217,753 295 Table 2. The results of variance analysis between education level and attitude variable of Internet Jo- urnalism is the fastest news source Sum of Squares Mean Square sd F P Between groups 3,761 2 1,881 5,061 ,007 Within groups 108,874 293 ,372 TOTAL 112,635 295 Table 3. The results of variance analysis between education level and attitude variable of internet journalism allows me to access different sources Sum of Squares Mean Square sd F P Between groups 7,275 2 3,638 7,571 ,001 Within groups 140,779 293 ,480 TOTAL 148,054 295

Volume 7 / Number 1 / 2012 77 technics technologies education management level individuals ( =1,3750) exhibit a positive at- journalism cannot take the place of traditional jour- titude about internet journalism allows me to ac- nals, it is seen a significant difference at level 0,05. cess different sources. In particular, it is seen that It can be seen at Table 5. Significant difference oc- internet journalism is a good instrument allowing curred between individuals who have graduate level access to different sources ( =1,4189). ( =1,187) and individuals who have undergraduate When variable of education level and variable ( =1,723) and primary level ( =1,871). While indi- of it is easy to read news from internet is com- viduals who have education level think that internet pared, a significant difference is seen at level ,05 journalism can take the place of traditional journal, between individuals who has primary-secondary others show instable attitude about this subject. In level ( =1,642) and undergraduate ( =1,420) - fact, there seems generally to be a transition from graduate levels ( =1,250). It can be seen at Table traditional journal culture to internet journalism, in- 4. It is seen that individuals who has primary- dividuals who participated to this study live instabil- secondary level show instable attitude about ity ( =1,729) about this subject and it is seen that reading news on internet but individuals who they can’t discard the issue about the importance of has undergraduate and graduate level point out continuation of the traditional journal culture. positive attitude because of that it is easy to read As a result of variance analysis between edu- news from internet. In particular, if it is looked in cation level and attitude variable of Internet jour- terms of individuals participated this research, it nalism are more advantageous in other types of is seen a tendency that it is easy to read news on newspapers due to the archive property, it is seen a internet ( =1,466). significant difference at level 0,05. It can be seen As a result of variance analysis between educa- in Table 6. Significant difference is seen between tion level and attitude variable of I think that internet individuals who have primary level ( =1,628) and

Table 4. The results of variance analysis between education level and attitude variable of it is easy to read news from internet Sum of Squares Mean Square sd F P Between groups 3,310 2 1,655 3,313 ,038 Within groups 146,352 293 ,499 TOTAL 149,662 295 Table 5. The results of variance analysis between education level and attitude variable of I think that internet journalism cannot take the place of traditional journals (pressed journals) Sum of Squares Mean Square sd F P Between groups 6,117 2 3,059 4,811 ,009 Within groups 186,261 293 ,636 TOTAL 192,378 295 Table 6. The result of variance analysis between education level and attitude variable of Internet journalism is more advantageous in other types of newspapers due to the archive property Sum of Squares Mean Square sd F P Between groups 3,767 2 1,884 3,999 ,019 Within groups 138,017 293 ,471 TOTAL 141,784 295 Table 7. The result of variance analysis between education level and attitude variable of Internet journalism is economic Sum of Squares Mean Square sd F P Between groups 4,681 2 2,341 3,744 ,025 Within groups 183,180 293 ,625 TOTAL 187,861 295

78 Volume 7 / Number 1 / 2012 technics technologies education management individuals who have graduate level ( =1,125). dimension in this. Internet journalism is a mile- Individuals who have primary level show an in- stone of CyC and internet journal readers deeply stable attitude but individuals who have graduate read news more than traditional readers. It is seen level are seen in the direction of opinion about the that individuals browse the same news in differ- effectiveness of archive property of internet jour- ent ways. At our study, although individuals don’t nalism. Generally ( =1,473), it is seen that the in- make too much comparison among news, they try ternet journalism has an effective archive property. to reach various details relating to the same news As a result of variance analysis between educa- from different sources. In the same study made tion level and attitude variable of Internet journal- by De Leon, it is seen that internet journal read- ism is economic, a significant difference at level ing is performed by mouse clicks. Moreover, in- 0,05 is found. It can be seen at Table 7. Graduate ternet journalism exposes a new newspaper reader level individuals ( =1,187) show positive attitude profile. This profile’s characteristics can be listed about the cost of internet journalism but primary as follows: effective, active, arguing readers, who level individuals ( =1,771) show instable attitude like to examine the details of news from different about this subject. Considering the means, under sources and like to obtain later news from databases when they want. graduate level individuals ( =1,600) show nearly positive attitude about the cost of internet journalism but nevertheless they show instable attitude. Acknowledgement In general, participants of this study show positive Dr. Tuncay Sevindik graduated from Firat Uni- attitude about cost of internet journalism. versity, Technical Program. Later he obtained his master’s and Ph.D. in Curriculum Development. Discussion and Conclusion He has a 10-year teaching/instructor experience in the Education Faculty. He is presently an Ass. In terms of educational level, all of the partici- Prof.Dr. in the Department of Computer and In- pants of the study show positive attitude towards structional Technology Education, Education Fac- internet journalism and they like to read news on ulty, Yildiz Technical University. He is the author internet environment. As educational level in- of various chapters in two text books. Also, he creases, positive attitude levels about instant ac- has many published articles in computer science cess to news on internet increases. According to and education sciences. His academic interests are the participants responded the questionnaire, in- internet Journalism, Cyber Culture, smart class- ternet journalism is a useful tool for reaching dif- rooms, distance education and three-dimensional ferent sources. It can be said that reading newspa- animation in computer education. per on internet is becoming a trend due to its easi- Furthermore, three LDV projects about learn- ness. In fact, there seems generally to be a tran- ing in terms of EU have been carried out. sition from traditional journal culture to internet journalism. Participants of this study had concerns about this subject and expressed the importance of References the continuation of traditional journal culture. Par- 1. Elite J (2009). Understanding Internet Shorthand, ticipants also added that internet journalism has Abbreviations, Acronyms and Instant Message Jar- archive property and is economic. Internet jour- gon. Associated Content, March 30. http://www. nalism is an important concept in the development associated content.com/article/1598139/understand- of CyC and digital literacy as a part of CyC. Many ing_internet_shorthand_abbreviations.html (accessed July 8, 2010). studies have been performed about digital literacy so far. Digital literacy concept has been a boost- 2. http://en.wikipedia.org/wiki/Cyber culture (accessed er factor in development of CyC. In the studies July 6, 2010). related to internet journalism, De Leon indicates that reading news on internet is a need in cultural 3. Anderson R H, Bikson T K, Law S A and Mitchell B M (1995). Universal access to email: Feasability and transformation and digital literacy is an important societal implications. Santa Monica, CA: RAND.

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4. Segev E, Ahituv N (2010). Popular Searches in Google and Yahoo!: A “Digital Divide” in Informa- tion Uses?, The Information Society, 26: 17–37.

5. Bailey, C. (1996). Virtual skin: Articulating race in cyberspace. In M. Moser (Ed.), Immersed in technology: Art and virtual environments (pp. 29-50). Cambridge, MA: The MIT Press.

6. Glister P (1997). Digital Literacy. Wiley Computer Pub., New York.

7. Kollock P (1998). Design principles for online communities, Harvard Conference on the Internet and Society, 15(5): 58-60.

8. Holmqvist K, Holsanova J, Barthelson M, Lundqvist D (2003). Reading or Scanning? A Study of Newspa- per and Net Paper Reading The Mind’s Eye: Cogni- tive and Applied Aspects of Eye Movement Research, 657-670.

9. Hischier R, Reichart I (2001). Environmental impact: a comparison between print and electronic media. Proceedings of the 3rd. Ecopapertech Confer- ence. 397–406.

10. Yagita H, Tahara K, Genchi Y, Sagisaka M, Inaba A, Matsuno Y (2003). The evaluation of the amount

of CO2 emission concerned with information delivery-case studies for net-delivered type news paper. Paper presented at the SETAC/ISIE/Swiss discussion forum. Lausanne, 3–4 December.

11. Aguila-Obra A R, Melendez A P, Tarres C S (2007). Value creation and new intermediaries on Internet. An exploratory analysis of the online news industry and the web content aggregators, Int. J. of Informa- tion Management 27, 187–199.

12. Moberg Å, Johansson M, Finnveden G, Jonsson A (2010). Printed and tablet e-paper newspaper from an environmental perspective-A screening life cycle assessment, Environmental Impact Assessment Re- view 30, 177–191.

Corresponding Author Tuncay Sevindik, Department of Department of Computer and Instructional Technology Education, University of Yildiz Technical, Davutpasa Campus, Esenler, Istanbul, Turkey, E-mail: [email protected]

80 Volume 7 / Number 1 / 2012 technics technologies education management The Influence of the Primary Color Stimuli Selection on the Neon Color Spreading

Damir Vusic1, Marin Milkovic1, Nikola Mrvac2 1 Polytechnic of Varazdin, Varazdin, Croatia, 2 Faculty of Graphic Arts, University of Zagreb, Croatia.

Abstract between colors. More correct description of the color of the graphic reproduction would be that cer- The estimation of qualitative features of picture tain stimuli (dominant wavelength) under certain stimuli in graphics and cross-media reproduction defined viewing conditions are perceived as their systems is dependent on various geometrical and color [1]. When some simpler forms of sensory color characteristics of the stimulus. perception (single stimuli) associated with the color Specific combination of black color in con- are analyzed through the domain of the standard junction with the primary colors in additive and observer, then we can talk about colorimetry and subtractive synthesis, may lead to unwanted de- corresponding tristimuli information. Colorimetric viation in perception of color characteristics of the color models (CIE Yxy, CIE L*a*b*, CIE L*u*v*, presented stimulus, due to psychophysical visual etc.) define colors and their relations well, but only effect of neon color spreading. This is even more in the individual and defined conditions. When in pronounced on regular geometrical structures that situations of observing graphic reproductions to- we encounter in the Ehrenstein model. gether with the primary stimulus some of the other In this paper we investigate the influence of the variables caused by the ambient and the correlation primary color stimuli selection in creation of test between them are observed and analyzed (among samples which are formed as regular geometrical other things psychophysical visual effects), in order structures, i.e. the Ehrenstein model of intensity of to more accurately describe the human perception the neon color spreading effect. The results show of color, then we talk about the need to use different that the use of black surround color of the primary color models which describe the prevalence of col- stimuli causes a greater intensity of the neon color or (ZLAB, Nayatani, Guth, RLAB, CIECAM07,...) spreading effect, when compared with cases when [2, 3, 4]. The aforementioned models are able to a complementary surround color was used in the specify to a certain degree of accuracy certain psy- inserted segment of the primary stimuli. chophysical visual effects (primarily those of ambi- Key words: Neon color spreading, Ehrenstein ent-adaptation and surround) [5, 6]. model, color perception, inserted segment color, There is a significant number of psychophysical surround color visual effects whose manifestation has not been fully researched. One of them is certainly the effect of 1. Introduction neon color spreading that presents a more complex form of the color spreading effect. Psychophysical In everyday graphic communication, it is usual visual color spreading effect is the effect of the ap- that certain physical characteristics of stimuli de- parent mixing of colored stimuli with its surround. termined by spectrophotometric methods of mea- Graphic reproduction and all screening techniques surement are set as sufficient in assessing the qual- are based on it. Color spreading represents the itative characteristics of graphic reproductions. transformation of the simultaneous contrast effect However, only the physical characteristics of due to increment of the stimuli number in space or stimuli, such as dominant wavelength of visible the stimulus size reduction, provided the existence light spectrum or the physical object, do not specify of surround stimuli. The color spreading effect is how a man sees the spectral information (psycho- considered complete when the spatial clarity (the physical experience), or clarify the relationships width of the visual field) and the distance between

Volume 7 / Number 1 / 2012 81 technics technologies education management the observer and the surround of the stimulus are The aim of this study was to determine the im- such that there is a fusion of the stimuli and sur- pact that the selection of a primary stimuli color has rounds into a unified whole. The neon color spread- on the neon color spreading. Test samples were cre- ing effect represents a shift of color appearance by ated based on the Ehrenstein model, in which the creating a virtual extension of primary color stimuli effect of the surround color of the primary stimuli on a surround of graphic reproductions of the lattice on the intensity of manifestation of the neon color size of the inserted segment on the primary stimu- spreading effect was studied. Deviations in color lus, but also in the process of template design in cre- perception caused by manifestation of psycho- ating design solutions. physical visual effect of neon color spreading were The neon color spreading effect was analyzed shown through the calculation of colorimetric color under that name for the first time in the work of ∗ difference DE 94 – Euclidean distance between the Van Tuijl, H.F.J.M. who described the prevalence coordinates of the reference color (the physical effect in a situation where in a system of orthogonal value of the printing substrate surface) and the co- lattice lines - Ehrenstein model, specific sections or ordinates of the color of the reference field from the sections of lines are replaced with segments of dif- atlas of colors associated to the perceived apparent ferent colors [7]. The effect is manifested in the cre- color on the test sample (physical value of the refer- ation of virtual extension line color of the replaced ence field from the atlas of colors). segment of the primary stimulus to the surround of the test sample in the lattice size of the inserted segment. In further studies of the neon color spreading effect, the influences of other geometric elements within the test samples were examined [8]. It has been shown that the apparent spreading of the color of the same tone is like the tone of the inserted segment of the primary stimulus in black as the surround color of the primary stimulus. When using some other primary color of additive or subtractive Figure 1. The Ehrenstein model synthesis as the surround color of the primary stimulus, the color spreading is the combination of the 2. Experimental Part tone of the inserted segment color and the tone of the color complementary to the surround color of 2.1 Methodology the primary stimulus [9]. The intensity of neon col- or spreading effect in its dependence on the wave- Determination of the intensity of manifestation length and brightness contrast [9, 10], and the influ- of the neon color spreading is enabled by the appli- ence of the contrast between the primary stimulus cation of colorimetric and psychophysical studies. and the surround on the experience of the mutual Together they form methodology for determining position of the geometric structure elements of the the physical values of visual perception of colored stimulus have been researched [11]. stimuli due to manifestation of psychophysical visu- Previous researches of the neon color spread- al effects. The colorimetric part of the study presents ing effect have not given a complete picture of the a spectrophotometric measurement which was used impact of certain parameters within the processes with formed reference fields on the printed color at- of graphic reproduction on the intensity of the ef- las to determine the corresponding CIE L*a*b* val- fect. The intensity of the manifestation of the neon ues and colorimetric difference color values of each color spreading effect with respect to its known field in relation to the printing substrate [15]. Visual characteristics is determined by various param- evaluation was based on the use of simultaneous eters [12, 13, 14]: standard illuminants, colored binocular technique of harmonization through the stimuli characteristics, geometric characteristics visual discrimination of stimuli [16]. of stimuli, types of media in the reproduction sys- The experimental and selected variables (phys- tem of graphic product design. ical values) are designed on the basis of method of

82 Volume 7 / Number 1 / 2012 technics technologies education management constant stimuli. While conducting a visual eval- “black” is used in one case (Figure 2) and colors uation, the subjects had the task to separate and that are complementary to the color of the inserted join from the color atlas a test field of the atlas, segment of primary stimulus in the second case which is identical or most similar to values of the (Figure 3). The surround of the primary stimulus is observed manifestation of the neon color spread- “white” of the printing substrate, size A4. The size ing effect of the test sample tested. The magnitude of test samples was defined according to standard of the neon color spreading effect in dependence ambient conditions of observation (ISO 3664:2009 on the selection of primary color stimuli (surround standard, which specifies the observation condi- color and the color of the inserted segment), and tions for graphic technology and professional pho- depending on the type of standard illuminant will tography) at the viewing angle of 10o and the dis- be displayed graphically using the calculated colo- tance of subjects of 50 cm. ∗ Table 1. Color combinations of test samples rimetric color differences DE 94 . The colorimetric ∗ Tests Inserted segment Surround color difference DE 94 is calculated using the formula [17, 18]: samples color color 1 red black

2 2 2 2 green black  ∗ ∗  ∗  ∗ DL  DDCHab ab  3 blue black DE =  +  +    94 k S k S k S 4 cyan black LL  CC  HH   5 magenta black ...... (1) 6 yellow black 7 red cyan 8 green magenta kLCH= k = k =1 for reference conditions 9 blue yellow 10 cyan red ∗ ∗ SSLC=1; = 1 + 0,045CSab ; H = 1 + 0,015C ab 11 magenta green 12 yellow blue

where kL, kC and kH are parameters that are used to adjust the relative values of brightness, satura- When creating a test sample CMYK color tion and tone in conditions of observation, which space was used. As a file format vector (*.ai) are different from those defined by the CIE Com- format is used. The printing of test samples was mission [19]. Factors SL, SC and SH represent po- performed on calibrated digital printing machine – sitional function, whose role is to correct the per- “Epson StylusPro 7900 HDR” on the principle of ceptual non-uniformity of CIELAB color space. liquid toner cartridges (Epson UltraChrome HDR ink). Screening and printing were done by “GMG 2.2 Creating Test Samples and Color Atlas ColorProof” application using the absolute colorimetric ICC rendering method. The accuracy of re- In accordance with the proposed research meth- production of tristimuli color characteristics with odology twelve test samples were created (Table 1) the selected print resolution of 720x720 dpi is < by using Adobe Illustrator. The basis of test patterns 0.5 ∆E of the total color space. Multiple coated is the so called Ehrenstein model – the specific geo- printing paper for art printing – “GMG ProofMe- metric structure made of the orthogonal system of dia - Proof paper Gloss”, grammage 250 g/m2, lattice-set lines formed by overlapping of different high whiteness (expressed in CIE L*a*b* values: color combinations of the primary stimuli. Table 1 L* = 94.1, a* = -0.6 and b* = -0.3) was used as shows the combinations of selection of primary col- the printing substrate. Before printing, the printing or. The line color in each test sample is combined substrate itself was placed in the identical room with primary colors of additive (red, green, blue) conditioned in the time period of 48 hours to the and subtractive synthesis (cyan, magenta and yel- prescribed standard ambient conditions (the tem- low) like the inserted segment of the primary stim- perature of 23 oC and relative humidity of 55%). ulus. As a surround color of the primary stimulus

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luminants - daylight D65, cool white fluorescent illuminant CWF (F2) and artificial light A, at the viewing angle of 100. The accuracy of the device ∗ is DE 94 = 0.4 for the D50 illuminant and viewing angle of 20. With spectrophotometric measurements of reference fields of color atlases the corresponding colorimetric values expressed in CIE L∗ a ∗ b ∗ values are determined. Based on these val- ∗ ues the colorimetric color differences DE 94 were calculated – the deviation in relation to colorimet- Figure 2. Test samples by black surround ric values of unprinted printing substrate.

Figure 3. Test samples by complementary color surround

For the purpose of visual evaluation of the test samples using the constant stimuli method, six reference color atlases were created with the primary Figure 4. The color atlas colors of additive and subtractive synthesis by using Adobe Photoshop. The color atlases are based on the change of perceptual attributes of color within 2.4 Visual Evaluation the HSB color model in a way that the tone value Visual evaluation of the test samples was con- (H) and brightness (B) is constant, and reference ducted on a sample of 15 subjects (mixed female- fields are formed in steps of 1% of the value change male population, average age 21 years). Before the of color saturation (S), ranging from 0-30% of the evaluation process, the subjects successfully met saturation values (Figure 4). As a file format Raster the criteria of the Ishihara test (24 plates) for the (*. psd) file format is used in the Lab color space. At- detection of potential sight deficiencies. Figure 5 lases of colors are printed on identical substrates and shows the configuration of the visual field to con- in identical printing conditions like the test samples. duct the experiment in controlled standard ambient conditions in accordance with the guidelines of ISO 2.3 Instrumental Analysis 3664:2009 standard – viewing angle of 100, the distance of the subject of 50 cm, neutral matte gray In the printed color atlases, the corresponding ambient, dimmed area. For this purpose, the sta- CIE L*a*b* values of individual reference fields tionary cabin for the observation of the test patterns, were measured. The measurement was carried out “The Judge II-S” was used. In accordance with the with “GretagMacbeth Eye-One” reflective spec- preset experiment, the examined test samples and trophotometer, choosing three standard CIE il- the corresponding color atlases were evaluated un-

84 Volume 7 / Number 1 / 2012 technics technologies education management der three different standard CIE illuminants: D65 3. Results and Discussion (6500 0K) – “daylight”, CWF (4150 0K) – “cool- 0 Upon completion of the visual evaluation, white fluorescent illuminant”, and A (2856 K) – ∗ ∗ ∗ „artificial light, incandescent light bulb”. the colorimetric values (CIE L a b values) and the corresponding colorimetric color differences ∗ DE 94 were associated to the reference fields from the color atlas that were identified by the subjects as the equivalent to the manifested color spreading. The values are presented both numerically and by graphs. The obtained values show deviation in color perception caused by the manifestation of psychophysical neon color spreading effect. Ta- bles 1-2 show the colorimetric color differences ∗ Figure 5. Configuration of the viewing field DE 94 of "black" surround and of the complementary surround color. The colors of the inserted seg- The procedure of visual evaluation was per- ment were all primary colors of additive synthesis formed using the simultaneous binocular adjustment (RGB) and subtractive synthesis (CMY). technique – the color atlas and the test sample were The highest values of deviation in color percep- placed simultaneously in an integrated visual field, tion, i.e. the greatest intensity of neon color spread- side by side. Each subject had a task to separate the ∗ ing shown through the selected DE 94 “black” reference field in the color atlas which is of identical surround of the Ehrenstein model were measured or most similar value of the observed manifestation for the magenta of the inserted segment in most of of the neon color spreading effect of the examined the standard CIE illuminants. The lowest intensity test sample by using visual discrimination and ac- of neon color spreading was measured for the blue cording to their personal judgment (Figure 6). The of the inserted segment in the majority of standard duration of assessment of individual subjects was CIE illuminants. not restricted. The described method is the method of constant stimuli – the subjects were randomly presented with a set of stimuli with various preset fixed physical values. Physical stimuli values (reference fields in the color atlas) were selected in a manner that the entire potential threshold area of perception was covered. The minimum physical value of the Figure 7. Graphic display of the color differ- reference field is very slightly below the expected ences for black surround threshold of perception, and the highest is above the Standard CIE illuminant D65 shows the high- expected threshold of perception. est intensities of neon color spreading in most cases of “black” surround. The lowest intensities of neon color spreading were shown by standard CIE illuminant A in all cases of “black” surround. The highest values of deviation in color perception, i.e. the greatest intensity of neon color spread- ∗ ing was shown through DE 94 for the selected complementary color surround of the Ehrenstein model were measured for the magenta and yellow of the inserted segment in most of the standard CIE illuminants. The lowest intensity of neon color spread- Figure 6. Principle of visual evaluation by the ing was measured for the blue of the inserted seg- color atlas ment in all standard CIE illuminants.

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Table 1. Color differences for black surround

Table 2. Color differences for complementary color surround

The impact of different surround color was demonstrated– in most cases, “black” surround color induces a higher intensity of neon color spreading than a complementary surround color. With the „black” surround color, the highest intensity values of the investigated effect are for the Figure 8. Graphic display of the color differences D65 illuminant, and the lowest for the A illuminant. complementary color surround Moreover, it was found that the standard CIE illuminant D65 (preferred for use in graphic technol- Standard CIE illuminant shows the highest in- ogy standards) also causes the highest intensity of tensities of neon color spreading in most cases for manifestation of the neon color spreading effect. the complementary surround color. The lowest in- In most cases, with the complementary sur- tensities of neon color spreading were shown by round color, the highest values of the effect inten- the standard CIE illuminant D65 in most cases for sity were found for the A illuminant, and the low- the complementary color surround. est for the D65 illuminant. Given the above, while creating the design so- 4. Conclusion lutions in situations of using regular geometric structures (such as, for example the Ehrenstein Based on the presented research results, the model), where the neon color spreading effect conclusion can be drawn about the impact of pri- may appear, it is necessary to keep in mind that mary color stimuli on the intensity of the neon the intensity of the effect, which is basically an color spreading effect. undesired phenomenon that causes a shift in the The deviation in the perception of the color incidence of the chosen color stimuli, will be re- spreading of the inserted segment of the primary duced to a greater extent if we use structures with stimulus in the Ehrenstein model is higher with re- the complementary surround colors in relation to spect to the selection of a particular color of the in- the structures with the “black” surround color. serted segment of the primary stimulus than with The results of future studies of all the param- respect to the particular standard CIE illuminants, eters that influence the intensity of the effect in the regardless the selection of the surround color.

86 Volume 7 / Number 1 / 2012 technics technologies education management process of graphic reproduction will enable more 12. Oicherman, B.; Luo, M. R.; Rigg, B.; Robertson, A. optimal design and printing of graphic products in R. Adaptation and colour matching of display and the circumstances of the manifestation of the neon surface colours. // Color Research & Application. 34, 3(2009), str. 182–193 color spreading effect. 13. Choi, S. Y.; Luo, M. R.; Pointer, M. R.; Li, C.; Rhodes, P. A. Changes in colour appearance of a 5. References large display in various surround ambient conditions. // Color Research & Application. 35, 3(2010), 1. Milković, M.; Bolanča, S.; Mrvac, N.; Evaluation of str. 200–212 the Chromatic Induction Intensity on Munker-White Samples. // DAAAM International Scientific Book / 14. Hsieh, T. J.; Chen, I. P.; Colour appearance shifts uredio Branko Katalinić. Vienna: DAAAM Interna- in two different-sized viewing conditions. // Color tional, 2008. str. 485-498 Research & Application. 35, 5(2010), str.352–360 2. Wu, R. C.; Wardman, R. H. Proposed modification to 15. Malacara, D. Color Vision and Colorimetry: Theo- the CIECAM02 colour appearance model to include ry and Applications. Spie Press, Washington, 2002. the simultaneous contrast effects. // Color Research & Application. 32, 2(2007), str. 121–129 16. Norton, T. T.; Corliss, D. A.; Bailey, J. E. The Psychophysical Measurement of Visual Function. 3. Katayama, I.; Fairchild, M. D.; Quantitative evalu- Butterworth-Heinemann, Massachusetts, 2002. ation of perceived whiteness based on a color vision model. // Color Research & Application. 35, 6(2010), 17. Wyszecki, G.; Stiles W. S.; Color Science: Concepts str. 410–418 and Methods, Quantitative Data and Formulae. John Wiley & Sons, New York, 2000. 4. Fairchild, M. D. Color Appearance Models. John Wiley & Sons, Chichester, 2005. 18. Berns R. S. Billmeyer and Saltzman’s Principles of Color Technology. John Wiley & Sons, New York, 5. Matijević, M.; Mrvac, N.; Milković, M.; Vusić, D. 2000. Evaluation of Percepcion of Red Color Applied to Koffka Effect. // DAAAM International Scientific 19. CIE. Technical report: Industrial colour - differ- Book / uredio Branko Katalinić. Vienna: DAAAM ence evaluation. Central Bureau of the CIE, Vienna, International, 2010. str. 259-270 1995. 6. Milković, M.; Mrvac, N.; Matijević, M. Evalua- tion of the chromatic assimilation effect intensity in Munker-White samples made by standard methods of Corresponding Author rendering. // Tehnički vjesnik/Technical gazette. 17, Damir Vusic, 2(2010), str. 163-171 Polytechnic of Varazdin, Varazdin, 7. van Tuijl, H. F. J. M. A new visual illusion: neonlike Croatia, color spreading and complementary color induction E-mail: [email protected] between subjective contours. // Acta Psychologica. 39, (1975), str. 441-445 8. Sohmiya, S. Explanation for neon colour effect of chromatic configurations on the basis of perceptual ambiguity in form and colour. // Perceptual and Mo- tor Skills. 98, (2004), str. 272-290 9. Bressan, P.; Mingolla, E.; Spillmann, L.; Watanabe, T. Neon colour spreading: a review. // Perception. 26, (1997), str. 1353–1366 10. da Pos, O.; Bressan, P. Chromatic induction in neon colour spreading. // Vision Research. 43, 6(2003), str. 697-706. 11. Pinna, B.; Grossberg, S. The watercolor illusion and neon color spreading: A unified analysis of new cases and neural mechanisms. // Journal of the Op- tical Society of America. 22, (2005), str. 2207-2221

Volume 7 / Number 1 / 2012 87 technics technologies education management The CCI effect on system performance in Kappa-Mu fading channels

Mihajlo Stefanovic1, Sinisa Minic2, Sasa Nikolic1, Stefan R. Panic3, Milos Peric1, Dragan Radenkovic1, Milan Gligorijevic4 1 Faculty of Electronic Engineering, University of Nis, Nis, Serbia, 2 Faculty of Teacher Training, University of Pristina, Leposavic, Serbia, 3 Faculty of Natural Science and Mathematics, University of Priština, Kosovska Mitrovica, Serbia, 4 Ministry of Interiour, Republic of Serbia, Beograd, Serbia. Abstract Frequency reuse is necessary for increasing land–mobile radio systems spectrum efficiency Co-channel interference influence on the sys- [9]. However, it also causes appliance of co-chan- tem performances of wireless communication sys- nel interference which is usually more significant tem operating over kappa-mu fading channels is drawback than the front-end Gaussian noise. examined in this work. Closed-form expressions Co-channel interference is also subject to mul- are derived for bit error rates over some coherent tipath fading and is necessary to incorporate this and non-coherent frequency and phase- shift key- effect in assessing the performance of the commu- ing modulation schemes in interference limited nication system. In interference limited fading envi- system. Selection diversity reception effect on the ronment systems, signal-to-interference ratio (SIR) performance improvement for various values of based performance analysis is the most effective fading severity is also investigated. performance criterion, since SIR can be measured Key words:. κ-μ fading, CCI, SIR, space di- in real time both in base stations and in mobile sta- versity, ABER. tions using specific SIR estimators [10-11]. Average bit error probability is standard mea- 1. Introduction surement for determining wireless system performances over channel condition. Broad class of Multipath fading phenomena, a major source coherent, and non-coherent modulation schemes of performance drawback in a communication en- over kappa-mu channels are given in closed form vironment, remarkably affects wireless communi- expressions in [12]. of interference limited sys- cation systems performances [1-3]. It is modeled tems in the kappa-mu fading environment has not by several distributions including Weibull, Naka- so far been discussed in the literature. gami-m and Rice [4]. By considering two impor- An approach to the co-channel interference tant effects inherent to radio propagation, kappa- influence analysis on the average error probabil- mu fading model was recently proposed in [5] as ity of wireless systems operating over kappa-mu a fading model which describes the short-term fading channels will be presented in this work. signal variation in the presence of line-of-sight Infinite series expressions are provided for the av- (LOS) components. This distribution is more real- erage probability of error over some modulation istic than other special distributions, since its deri- schemes in interference limited system. The ef- vation is completely based on a non-homogeneous fect of selection diversity on the performance im- scattering environment. Also kappa-mu as general provement for various values of fading severity physical fading model which includes Rayleigh, and system parameters was also discussed. Rician, and Nakagami-m fading models as special cases [6- 7]. As its name implies, it is written in terms of two physical parameters, namely κ and μ. 2. System model The parameter μ is related to the multipath cluster- The desired signal envelope in a kappa-mu fading, whereas the parameter κ is the ratio between ing channel follows the probability density func- the total power of the dominant components and tion (pdf) given by [12] as: the total power of the scattered waves [8].

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µ +1 d µ (1+k) R2 ∞ ∞ p q p q µd d d  µ µk k Γ( p + µ + q + µ ) 2µ ( 1+ k) 2 R − d c d c d c d d Ωd Fl () t = ∑∑  kdµ d + k c µ c pR () R = µ −1 µ + e d d 1 p=0 q = 0 eΓ( p + µd ) p!! Γ( q + µc ) q 2 µ k +µ d d Ω 2 p d kd e d ... (1)  l(1 +k ) µ   d d   2  l + µ + + µ kd(1+ k d ) R  ( (1 kd) d S(1 kc) c )  × Iµ − 2µ  × d 1 d Ω p + µ  d  d  l(1 +k ) µ  × + µ − − µ + µ + d d 2F 1  pd ,1 qc ; p d 1;  2  (l(1 +kd) µ d + S(1 + kc) µ c )  where Ωd = E [R ], is the desired signal average power, I0 (x) is the zero-th order modified Bessel ...... (5) function of the first kind. Similarly the inter-channel interference envelope in a kappa-mu fading channel follows: 3. Average probability of error (ABER)

µc +1 2 In an interference-limited environment, the µ µc(1+k c ) r 2µ 1+ k2 r c − c( c ) Ωc average probability of bit error can be derived by p() r = µ −1 e r c µc +1 2 µ averaging the conditional error probability P over k e ck c Ω 2 e c c ... (2) the pdf of SIR:  2  kc(1+ k c ) r × I 2µ  _ l µc −1 c  Ωc  Pe = P( l) p() l d l   ∫ e l ...... (6) 0 with parameters defined in similar manner. Since we are discussing an interference-limited For a non-coherent frequency shift keying system, the effect of noise could be ignored. In (NCFSK) or a differential phase-shift keying this case it can be shown that the instantaneous (DPSK) system, the conditional probability of er- 2 2 ror for a given SIR, l , is given by P =1/2 exp (-αl), signal-to-interference ratio (SIR), l=R /r , has the e pdf [13]: with α=1 for binary PSK, and with α=1/2 for binary FSK. After substituting (4) into (6), by using ∞ ∞ [9] previous can be easily written as : 1 = ...... (3) pl () t∫∫ pR ()() r t pr r rdr 2 t 0 0 _ ∞ ∞ p q p q µd µ ck d k c Γ( p + µd + q + µc ) Pe = ∑∑  kdµ d + k c µ c k=0 l = 0  2e p !Γ( q + µ ) q ! After substituting (1) and (2) into (3), we derive: c  αS(1 + kc) µ c  ×ψ p + µd ;; − q − µc  l(1 +k ) µ ∞ ∞ p+µd −1 µ c +q 2 p +µd 2 q +µc p q  d d   lS µd µ ck d k c pl ()l = ∑∑  kdµ d + k c µ c ...... (7) p=0 q = 0  eΓ( p + µd ) p!! Γ( q + µc ) q µ + p µ +q (1+k) d ( 1 + k) c Γ ( p + µ + q + µ )  d c d c  where ψ (a,b,x) is the confluent hypergeomet- × +µ + +µ pd q c  ric function of the second kind [15]. (l(1 +kd) µ d + S(1 + kc) µ c )  For a coherent system, the conditional prob- ...... (4) ability of error may be expressed in terms of the confluent hypergeometric function [16] as: with S=Ωd/Ωc being the average-signal to average interference power ratio (SIR), which is useful 1 1  αl 1 3  in determining the co-channel reduction factor in Pe =e rfc ( αl ) = 1 − 2 1F 1 ;;−αl  systems with frequency reuse. 2 2  π 2 2  Following [13], the cumulative distribution ...... (8) function (cdf) of l can be obtained as:

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Similary as previous after substituting (4) into cated. In fading environments where the level of (8), we obtain: the inter-channel interference is sufficiently high as compared to the thermal noise (cellular sys- k 1 tems), SC selects the branch with the highest SIR. −α  Γ + + _ ∞ ∞ ∞ ( )   (2k 2 l 2) 1 α 2 k In multi-branch SC diversity system with uncor- Pe = − ∑∑∑ related branches, the pdf of the SIR at the output 2 π p=0 q = 0 k = 0 3    p!Γ( k + 1) k ! Γ( l + 1) l ! of the receiving structure is given by: 2 k p+ k q + k k k p q k µd µ c (1 +kd ) ( 1 + kc) k d k c S Γ( p + µd + q + µc ) N N × µ + µ kd d k c c Γ + µ Γ + µ p( t) = p( t) F( t) e p! ( qc ) ( pd ) q! l ∑ lj ∏ lk ...... (10) +µ p d j=1 k=1  l(1 +kd) µ d    k≠ j (l(1 +k) µ + S(1 + k ) µ ) ×  d d c c  with N denoting the number of branches. p + µd In Figures 1 - 2 space diversity reception effect  l(1 +kd) µ d  ×2F 1  p + µd ,1 − q − µc ; p + µ d + 1;  on the average error probability versus average  (l(1+k) µ + S(1 + k ) µ )   d d c c  SIR for binary DPSK and NCFSK in a kappa-mu ...... (9) fading environment for various values of system

parameters are presented. Balanced input SIR (S1

where (a)p is the Pochhammer symbol [15] and = S2 = S), system was observed. α was previously defined for required modulation Here we can observe obvious upgrading of sys- techniques. tem performances when diversity is present (case of two diversity branches). For example, when we

are considering same transmitted power (i.e. S = 5 dB), we can observe that for the case of dual diversity reception, average error probability significantly decreases. Similarly, considering the same average error probability value at the reception (i. e. 10-2), we can see that we receive gain in transmitted power of about 8 dB for the dual diversity case. Finally, we can conclude from the figures that for higher values of fading severity parameters κ and μ better performances are obtained (system performances deteriorates).

Figure 1. Average error probability versus average SIR for binary DPSK in kappa-mu fading environment for various values of system parameters

4. Selection diversity reception

Fading and co-channel effects mitigation could be obtained by usage of space diversity reception techniques. They are upgrading transmission reliability without increasing transmission power and bandwidth, while also increasing channel capacity. Based on complexity, there are several princi- Figure 2. Average error probability versus aver- pal types of space diversity reception and selec- age SIR for binary DPSK in kappa-mu fading en- tion combining (SC) is one of the least compli- vironment for various values of system parameters

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5. Conclusions ∞ ∞ p+µd −1 µ c +q 2 p +µd 2 q +µc p q  lS µd µ ck d k c pl ()l = Closed form expressions for the bit error rates ∑∑  kdµ d + k c µ c p=0 q = 0  eΓ( p + µd ) p!! Γ( q + µc ) q of interference-limited wireless communication µ + p µ +q (1+k) d ( 1 + k) c Γ ( p + µ + q + µ )  system over some modulation schemes were in- × d c d c  p+µ + q +µ vestigated in this paper. The desired signal as well (l(1 +k) µ + S(1 + k ) µ ) d c  as the interference were assumed to be subject d d c c  to kappa-mu fading. Since kappa-mu, as general ...... (A.4) physical fading model, includes Rayleigh, Rician, and Nakagami-m fading models as special cases this analysis has high level of generality. Effects A2. Appendix of SC diversity reception on system performance was discussed. Also, effects of various parameters CDF of output SIR could be derived from: such as fading severity and system parameters were also presented discussed. t = Fl ()() t∫ pl x dx ...... (A.5) A1. Appendix 0

Defining the instantaneous signal-to-interfer- by substituting (4) into (A.6), we obtain the fol- 2 2 ence ratio (SIR) as l=R /r , the pdf of SIR can be lowing expression: obtained as [13]:

µ +q2 p +µ 2 q +µ p q µd + p µc +q ∞ ∞ ∞ S c µd µc k k(1 + k) ( 1 + k ) 1 = d c d c d c pl ()()() t= p r t p r rdr ...... (A.1) Fl () t ∑∑ kµ + k µ ∫ R r d d c c Γ + µ 2 t 0 k=0 l = 0 e( pd ) p! t p+µd −1 Γ( p + µd + q + µc ) x +µ + +µ dx Γ(q + µ ) q! ∫ pd q c Substituting (1) and (2) in (A.1), with respect c 0 ( x(1+ kd) µ d + S(1 + kc) µ c ) to well-known series representation of modified Bessel function: ...... (A.6)

∞ v+2 k Previous integral can easily be solved, us- z I() z = ...... (A.2) ing the well-known definition of incomplete beta v ∑ v+2 k Γ + + k =0 2k ! ( v k 1) function:

m+1 results in: l m − p x a a n  m+1 m + 1 p =  Bz  ,; p −  ∞ ∞ ∞ ∫ n n b   n n  2p+ 2 q + 2 µ + 2 µ − 1 0 (a+ bx ) p() t= C r d c l ∑∑ 1 ∫ bln m +1 k=0 l = 0 0 = > > > < < z n ,a 0, b 0, n 0, 0 p  2 µd(1 + k d )   2 µc(1 + k c )  a+ b l n exp −r l exp  −r  dr  Ωd   Ωc  ...... (A.7) ...... (A.3) By using the famous relationship between in-

complete beta and 2F1 hypergeometric function: Let S = Ωd /Ωc denote the average SIR’s value.

Finally, by using well-known definition of a Gamma function (A.4) can be written as: z Bz (a,b) = F1 (a,1− b,1+ a, z) ...... (A.8) a

and after straightforward manipulations we obtain CDF in the form of (5)

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A3. Appendix 7. S. Panić, et. al. "Second order statistics of selection macro-diversity system operating over Gamma shad- Considering the cases of NCFSK and DPSK owed k-μ fading channels", EURASIP Journal on Wi- transmission system, the bit error rate for a given reless Communications and Networking, accepted SIR, l , can be calculated from: output SIR could be for publication on 02.05.2011 derived from (6). By substituting (4) into (AIII.1), 8. S. Cotton, W. Scanlon, J. Guy, “The distribution ap- we obtain the following expression: plied to the analysis of fading in body to body communication channels for fire and rescue personnel”,

µ + +µ +µ µd + p µc +q _ ∞ ∞ c q2 pd 2 q c p q IEEE Ant. and Wireless Prop. Lett., vol. 7, pp. 66-69, S µd µ ck d k c(1 + k d ) ( 1 + kc ) Γ ( p + µd + q + µc ) Pe = 2008. ∑∑ kdµ d + k c µ c k=0 l = 0 2eΓ( p + µd ) p!! Γ( q + µc ) q ∞ +µ − xp d 1 exp(− gx ) 9. W.C.Y. Lee, “Mobile communications engineering” +µ + +µ dx ∫ pd q c (Mc-Graw-Hill, 2001). 0 ( x(1+ kd) µ d + S(1 + kc) µ c ) ...... (A.9) 10. D. Austin, L. Stuber, “In-service signal quality estimation for TDMA cellular systems”, Sixth IEEE, PIMRC ’95 Toronto, ON, Canada. pp. 836–40 , Previous integral can easily be solved, by using (1995). [16]: 11. S. Panić, M. Stefanović, A. Mosić, "Performance ∞ analysis of selection combining diversity receiver − −v − p xq 1 exp(− px)( 1 + ax) dx = aq Γ( q ) Ψ ( q , q + 1 − v , ) over α-μ fading channels in the presence of CCI", ∫ a 0 IET Communications, Volume 3, Issue 11, pp. 1769- ...... (A.10) 1777, November 2009 12. M. Milisic, M. Hamza, M. Hadzialic, “BEP/SEP Acknowledgemnt and Outage Performance Analysis of L-Branch- Maximal-Ratio Combiner for κ-μ Fading”,Int.Jour. This work has been funded by the Serbian Min- of Digital Multimedia Broadcasting, Volume 2009, istry of Science under the project III 044006. Article ID 573404, pp 1-8. 13. G. K. Karagiannidis, "Performance Analysis of References SIR-Based Dual Selection Diversity over Correlat- ed Nakagami-m Fading Channels," IEEE Trans.on 1. J. Proakis, “Digital Communications”, 4th ed. New Vehicular Technology, vol. 52, no.5, pp. 1209-1216, York: McGraw-Hill, 2001. September 2003.

2. G. L. Stuber, “Mobile communications”, New York: 14. I. Gradshteyn, I, Ryzhik. (1980). Tables of Integrals, Kluwer, 2nd edn. 2003. Series, and products. Academic Press, New York,

3. M. Stefanovic, et. al, “Statistics of signal envelope in 15. http://mathworld.wolfram.com composite multipath fading/shadowing microcellular environment”, TTEM, vol.6, no.4, January 2011, pp. 1147-1151 Corresponding Author Mihajlo Stefanovic, 4. M. K. Simon, M. S. Alouini, “Digital Communica- Faculty of Electronic Engineering, tions Over Fading Channels”, New York: Wiley, 2nd University of Nis, edn. 2005. Nis, Serbia, 5. M. D. Yacoub, “The κ-μ distribution and the η-μ dis- E-mail: [email protected] tribution”, IEEE Ant. and Prop. Magazine, 2007, 49, (1), pp. 68-81.

6. J. C. S. Filho, M. D. Yacoub,” Highly accurate κ-μ approximation to sum of M independent non-identical Ricean variates”, Electronics Letters, 2005, 41, (6), pp. 338-339.

92 Volume 7 / Number 1 / 2012 technics technologies education management Intellectual property - Legal monopoly or subjects of free competition -

Ilija Zindovic1, Dragan Vujisic2, Sinisa Varga2 1 University of Bussiness Academi, Novi Sad, Serbia, 2 University of Kragujevac, Serbia.

Abstract or right to perform corporate (economic) activities and protection of competition as public right In this text the authors are trying to clarify in (law). Could we impose to the author of property what extent the rights of intellectual property, which enjoys legal monopoly the obligation of as legal monopoly and deprivation of exploita- giving over the rights and industrial property or tion because of the foregoing, affect negatively authorial rights, and if so what does the justifica- on competition. Legal exclusivity in employing tion for it consists of. In addition, in is evident that these rights protects the author, but also deadens the tehnological innovation generators long-therm competition which is opposite to purpose of anti- economic growth (1,153), while the findings giv- monopoly regulations’ goal. Both in theory and en thier role both in terms of meeting the living jurisprudence as well, more and more prevails the standards of people, and the impact on economic idea that the exclusivity in exertion of these rights structure, considered the most important resourses must give away the lead to realization of the com- of industrial property (2,38). petition rights in a certain market. Thereat, even Comparative-legal solutions indicate on cir- though the reason of all legal perceptions (com- cumstance that the rights of intellectual property prehensions) is the same in that regard, the criteria are excluded from usage of antimonopoly acts in executing this reason are after all different in but in general which means that exceptions are comparatively-legal systems. allowed and possible depending on public inter- Key words: intellectual property, legal monop- est protection based on enough previously deter- oly, competition, using of the right, misuse, mined criteria.

Introduction Intellectual property as legal monopoly There is no doubt that intellectual property is just one form of private property and as such Intellectual property is ... a set of set of intel- it enjoys absolute protection. Withal, generally lectual values, of human spirit prevailing in the speaking same that intellectual property enjoys economy (3, 19). But, the rights of intellectual privileged protection of employing-exploiting this property represent special form of legal monopoly. right. Therefore, character, extent and content of This right makes it possible for those who are en- intellectual property rights as per rule are regulated titled to it to exclusively use subject of protection/ in detail by special legal acts and are usually ex- patented invention, protected pattern and model, cluded from effect in usage of antimonopoly acts. authorial work etc./ and its’ corporate exploita- However, exclusivity which the author gets over tion. The purpose of giving these rights is to en- intellectual property also creates legal monopoly able to the inventor or the author to regain assets (for example, patented invention, protected sam- invested in research and development by usage ple or model, authorial work etc.) with regard to of monopoly position vested in legal way and to its’ productive exploiting that might have a nega- acquire an award for his innovation and creativ- tive impact on the competition. ity (4, 17). Thesis of correlation between techno- In such reference correlation the question that logical knowledge and corporate (economic) de- imposes here is whether we should give advantage velopment is completely accepted today both on to legitimate private law (intellectual property law) national and international plan(5,2).

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Today more and more present opinion is that est) is based on misusage. The problem appears the acts of industrial property limit open compe- when one legitimate private right such as intel- tition both in national and international borders. lectual property finds itself in collision with an- “The fact is that these two legal institutes are close other legitimate right and that is right to perform by their social-economic function, because they corporate (economic) activity in the light of open are both established with purpose to stimulate and competition, which is basically also the public provide technical and corporate (economic) prog- interest. Does the exclusivity in exertion of intel- ress as follows in national, regional and interna- lectual property rights must flinch then in front tional proportions”(6,9). In practice, the question of need for competition establishment on certain that arises is how to delimit field of their usage market. This problem has particular heaviness es- because as a matter of fact we have “one very in- specialy when static data indicate on fact that from teresting case of legal antimony, where there is overall number of new inventions and technical contradiction or incompatibility between two ob- solutions about 70% drops away on those which viously justified positively-legal principles (7,9). were developed in domain of research sector of Regarding the solution of this arguable ques- multinational companies and 30% on individuals, tion two basic approaches emerged. One of them institutes, faculties. is that the norms of industrial property rights guar- Monopoly in exploitation of intellectual prop- antee only existence of industrial property rights, erty rights can be manifested in two aspects: while exertion of these rights should be adjusted –– through conventional restriction (limitation), with regulations of open competition. This opin- and nion at first exsisted in theory of “Exhausting of –– rejection (refusal) of intellectual property Rigs“, with european theoreticians, finding that rights concession. the anchorage of the same is located in clauses of Roman contract because regulations of open com- Conventional restrictions are expressed through petition are dominating over legal acts of industrial territorial, time and realistic limitations. Thereat, property. Basically, the idea which was tended to while territorial and time limitations are mostly was that through this interpretation a better use of clear, realistic limitations on the other hand can be iventions was found so that european companies various. Because of that the licensor can set con- would become more competitive on the market ditions regarding the aspect of manufacturing and and could parry to american and japanese compa- putting into commerce or using subjects of con- nies. But, this opinion haven’t managed to become tract.All previously stated limitations similar as predominant. in systems of exclusive and selective distribution Our stand-point regarding this matter is that we might have economic excuse and all of that with cannot accept the opinion that there should be dif- a view to guarantee to the customers quality of ference between existence and exertion of indus- the product and to provide additional services, to trial property rights, because the question arises? ensure the return of funds invested in innovation What will remain of industrial property rights if and development of inventions etc. Proponents of the one that is entitled to them cannot perform it strict antimonopoly regulations usage with a view and would “that mean practical destruction of the to accomplish competition rights, consider intel- right itself as such. Consequently, it wouldn’t ex- lectual property just as one form of private prop- ist neither for the ones that are entitled to it nor for erty which, as such, can abide certain limitations the third-parties.” Our opinion is that the solution because of the general interest. This for example a of established problem should be looked for in the patent in function of technology transfer and tech- field of discrimination-misusage (abuse) of rights. nical knowledge furned info a commodity that State (government) intervention and appliance can be bought and sold on the market (7,13). On of antimonopoly norms must be in favor of real- the contrary of that representatives of intellectual ization of competition rights on market. General property rights protection state that by setting the interest prevails individual interest especially be- obligation of concession private property of one cause of the reason that the same (individual inter- person/intellectual property rights bearer/ is being

94 Volume 7 / Number 1 / 2012 technics technologies education management violated for the purpose of other person’s private tomers’ needs. Second, intellectual property right interest protection/who demands concession of is one of the forms of private property rights and rights. Therefore, by imposing the obligation of therefore basically enjoys the same position in re- concession, right bearer is not discouraged from lation to antimonopoly acts same as every other enjoyment in material fruitage of his intellectual form of property. But, even the intellectual prop- creativity as a view of extraprofit (8,198). In ac- erty right grants power to eliminating competition cordance with such conceptions, in countries with for certain product, the directives don’t signify that highly developed economy more and more pre- automatically all of the contracts, where the intel- vail legal solutions which repress exclusivity in lectual property right grants market monopoly, exertion of this right in favor of need for competi- are considered forbidden and come under attack tion establishment on certain market. Principle of of antimonopoly acts. Guidelines ordain that un- equal participation of countries in development in der forbidden contracts are considered: contracts international economic relations presents basical- of price fixation, contracts of offers limitation and ly realization of primary goal of NMEP (9,158). contarcts of market division between the member Without enabling to the previously stated to occur of same level of production-trading chain, and new scientific and technical inventions, that pro- also group boycots and establishment of resale cess would be hard to accomplish. prices. Previously stated must be seen in context of market structure in which contract execution 1. USA law may cause negative consequences. Guidelines differ three types of market: products market where American law in its’ own basis stands on one production and commerce are protected right, firm aspect that the intellectual property rights technology market, which consists of intellectual are excluded under the usage of antimonopoly property rights which are passed on and their close acts. Such aspect is based on a fact that the right substitutes, and inovation market. This means that of inventor and author to legal protection of their even in an analysis we must take into consider- inventions and works has its’ ground in American ation each and every significant element of market Constitution from the year 1787, by which is im- such as: degree of market concentration, height of posed that Congress, inter alia, is authorized also obstacles for entrance on the market of potential to “stimulate progress of science and useful arts, competitors, degree of demand flexibility for cer- providing to the authors and inventors for a certain tain product. Besides that, directives proportion- period of time exclusive right on their writings and ally determine market share, for the purpose of es- discoveries.”(10). But, we should differ these rights tablishing safety zone, finding that the collective that arise from the law itself and legal regulations market share with license contracts doesn’t exceed about patents from the rights that the bearer of intel- 20% on the observed product market lectual property rights acquire through private right As for the reference towards rejection of intel- contracts on which are applied general legal regu- lectual property rights concession, American le- lations which are different from regulations about gal theory doesn’t take negative attitude even in patents. In cases like that, the line of intellectual the case when the one that is entitled to it himself property rights exclusion under antimonopoly acts doesn’t exploit protection subject. It is his legiti- is shifted, although the practice, even so rich, was mate right. Judicial practice also followed that line. uneven and non-systemized. On account of unique This is the situation in case “SCM v. Xerox”( SCM regulation of that problem, USA Department of corp. v Herox Corp, 645 F 2d 1195 /2 d Cir 1981). Justice and Federal Trade Committee announced in SCM Company, in the lawsuit against Xerox Com- 1995. special Antimonopoly directives (guidelines) pany. The Court overruled prosecution request, for intellectual property licensing (11). finding that the prosecutor didn’t suffer damage on The directives start from two basic principles: the basis of lost profit because of the behavior of the both antimonopoly and intellectual property right patent holder and besides, regardless of compensa- have unique goal and that is stimulating innovation amount for conceded licenses, the purpose of tion and the best as possible satisfactory of cus- patent protection acts would be questioned.

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Judicial practice arbitrated in favor of legal ex- appear in contracts of technology transfer, and clusivity in usage of intellectual property rights these contracts, if they meet criteria, are excluded also in the “Berkey Photo” case. Subject of the from vanity. But, Committee has a right to suspend lawsuit consisted of problem- was the Kodak exclusion in relation to some contracts of technol- company obliged to inform their competitors- film ogy transfer. Condition is that such clauses pro- manufacturers about preparations for marketing duce consequence of prevention or violation of li- of their new product- pocket camera and adequate censed product competition or products which are film, so that the same products (of other compa- from the customer’s point of view by their charac- nies) would show up on the market at the same teristics, purpose and price mutually replaceable. time as their (Kodak’s) product. Court of law sus- According to the article 7 state 1 point 1 of the tained prosecutor’s request, but Court of Appeals Regulation such legal offence exists if the market overruled that decision and found that such behav- share of licensed product purchaser exceeds 40%. ior is competitive because even the monopolist is This indicates that the compilers of Regulations allowed to fight aggressively. adhered to this problem by solving the similar one Nevertheless, judicial practice allows possibil- from the american guidelines. ity of issuing compelling license because of the When the question is about rejection of intel- important public interests(for example in case of lectual property rights concession in EU law also patent disusing or insufficient patented product valid is the rule that it is legitimate right of the one production vital for people’s health). But, cases entitled to it. Exception is if there exists a misuse, like these are very rare in practice. and the same exists if the dominant company per- Also, judicial practice took a stand that it’s forms election of persons to whom it will assign possible to instruct issuing of compelling license the license in arbitrary way, that is, it performs dis- even in case of patent misusage. That’s the case crimination during the election of license gainers. when certain company gets all available patents EU law approves compelling license also in in order to obtain monopoly in certain area, and some other cases. While American law justifies that with a view to maintain such situation rejects with important public interests, meanwhile the EU concession of license for certain patent.Thus in law justifies it with doctrine of necessary resources. “General-Electric“ case, after it was established In this way if the product of intellectual property that this company momopoliated all of the patents presents resource necessary for performing of eco- for electric light bulbs production, the Court ob- nomic activity of other firms on the same or domi- ligated the company to concess patents for light nant market, owner of this right doesn’t have the bulbs and light bulbs spare parts to the public for right to deprive usage of the same. Thereat, term usage(U.S. v. General Elec, Co., 82 F. Supp. 753, “necessary resources” is interpreted very widely. D. N. J, 1949). In practice of this matter also important is the “Mogill” lawsuit which was concluded in 1995. 2. EU law after perennial duration( Verdict of Comission for competition: Mogil Tv Guide /ITP, BBC and RTE, EU Law in this domain in certain sense has L 78/43 OJ 1989-95).The dispute was in domain followed destiny of American law. Legal mo- of authorial rights “protection. Subject of the law- nopoly in intellectual property law is strictly suit consisted of television stations’ rejection to obeyed. When we’re talking about contract claus- give the information about schedules of broadcast- es, by using clause 103(ex 83) of the Conven- ing their program in purpose of their publishing tion, the Council announced special regulation nr. in TV guides. Both Committee and Court took a 240/96(12), which in terms of clause 103 (ex 81 stand that broadcasting TV program makes a com- state 3) regulated so-called section of exclusion pletely separated market than publications market related to technology transfer contracts. Similar as which includes information about broadcasting with other type of contracts, so-called black list schedule. Therefore, such behavior of TV stations was established-when we’re talking about forbid- doesn’t have an excuse because it keeps new prod- den clauses and white list-when allowed clauses ucts from showing up on the market, and besides

96 Volume 7 / Number 1 / 2012 technics technologies education management that TV companies didn’t publish similar guide ever, by protecting basically the exclusivity on in- themselves so that they could allude on protection tellectual property rights they haven’t resorted to of authorial right in that regard. Some analysts by compelling licence, but as more durable solution interpreting this verdict intoduce opinnion that in The Comission recomended abbreviation of legal this case it had to be started from interpretation deadlines of industrial property rights duration. whether the publication of TV program presented basic or side product of primary authorial rights. If 4. German law the TV companies don’t profess with publication of TV programes, then it is a side product of basic In accordance with attachment to principle of authorial right, which justifies coercively authorial precision and legal security, German law tried rights concession that are subordinate(13). to arrange this matter distinctly too. Guarantee of property rights is imposed by clause of article 3. Great Britain law 14. of the German Constitution in a way that allows legislator to determine content, but also the The thing typical for British law in this domain limitation of property rights (ar. 14, st. 1:“Prop- is completeness of legal acts that not only regulate erty right and right on inheritance are guaranteed. rights of the intellectual property bearer but also Content and limitations of these rights are regu- includes clauses which regulate limitation of that lated by law“). Thus by the Act against limitation right as well. Thus the clauses which limit free- of competition (in article 17 and 18), conditions dom of negotiation are found in Contract of patent in relation to contract content about licenses and license and Contract of licensed products market- contracts of other protected and unprotected intel- ing (selling) determined by the Patents Act from lectual services are regulated. Basically the ex- the year 1977. / Patents Act- 1977/ . By this Act clusivity in usage of that right is being protected institute of General controller for patents was es- and certain forms of contract clauses are explicitly tablished. His authorities were wide and his rights excluded from prohibition, as clauses that protect discretional, provided that this discretion is con- interests of intellectual creation bearer (owner). trolled by public interest (14,50). So, if the Com- If the relations between granter and purchaser of mittee for competition determines that, in regard license are regulated in another way by contract, to accomplishment of intellectual property rights which jumps out of legal norms, such contracts are /whether regarding product or procedure/ there is in principle considered as forbidden. However, the monopoly which acts or can act contrary to pub- Act left the door open here, giving possibility to lic order, then the General controller for patents the syndicate apparatus to be able to allow such is able to announce those contract clauses invalid special limitations if they unjustifiably don’t limit or /if the case is about rejection of patent bearer the freedom of purchaser’s economization and if to grant license under reasonable conditions/ he the extent of limitations doesn’t endanger signifi- is then able to ordain granting of compelling li- cantly competition on the market. cense. And even if the parties (clients), by directive, don’t agree over contract conditions, those 5. French law conditions then can be determined by the General controller himself. However, the Commission has The French law also acknowledged legal mo- rarely resorted to the forced solution. Thus, in the nopoly to the bearers of the intellectual property case of “Ford Spore Ports“ dispute The Comission right, which is a result as well of important property expressed opinnion /which was accepted/ that the establishment as immune and sacred right, which “Ford“ company by refusing to give away the li- can be limited only if that is in a specific way re- cence for spare parts production for their products, quired by public need which is determined by law. presents behavior that is contradictory to public This right is by its essence monopoly and is ob- interest, because it disables competition on the tained under special conditions imposed by law. market of spare parts, and which would contribute Such protection is justified because it backs up in- to bigger accomodation and lower prices. How- ventive and thereby the business initiative too.

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But, this right doesn’t automatically mean from their legal status, form of property or nation- absolutism in regard to exertion of the same. By ality, or otherwise state belonging (in further text exertion of this right competition itself must not also participants on market) as follows: be violated on the part of right bearer. Therefore, 3. …..bearers of intellectual property rights and French law finds that, if by exertion of this right others.” through contract, the competition is violated, From this formulation clearly arises that the sanctioning of the same can be taken under clauses norms of Antimonopoly law don’t exclude bearers which regulate prohibition of syndicate contracts of intellectual property rights from appliance, i.e. article L-420-1 Code de commerce, and sanction- if the legal monopoly of bearers of that right vio- ing according to article 420-2-I is performed when lates the competition, then the exclusivity in exer- the case is about rights misusage (for example un- tion of that right can be limited. By this formula- justified rejection of rights usage concession). tion every dilemma in correlation of connection between legal monopoly of intellectual property 6. Serbian law rights bearers and norms of Act of competition protection is dispensed. Until the separation of state union Serbia and Montenegro, in Serbia, in regard to competition Conclusion protection, Federal Antimonopoly Act from the year 1992. was used (Official paper of Federative In accordance with introduced contemplations Republic of Yugoslavia, nr. 29/96). Even though it is possible to conclude: this act didn’t strictly exclude the possibility of –– extent and content of intellectual property legal monopoly limitation of intellectual property rights are by rule precisely determined with right bearers, clauses of this act weren’t actually special clauses which exclude them from applied on bearers of intellectual property rights, appliance of antimonopoly acts, which means that the exclusivity in legitimacy of –– unjustified rejection of concession of intellectual property rights’ usage enjoyed both le- intellectual property rights exploitation gal and actual monopoly. because of the need for competition After the separation of Serbia and Montenegro establishment on certain market can lead to state union, Serbia then enacted in 2005 a new exclusivity loss in exertion of this right, law in domain of competition protection under the –– sanctioning of rejection of intellectual name Act of competition protection (15). Accord- property rights concession and exploitation ing to article 4, state 1, point 2, of this Act it was must be exerted exclusively in public interest imposed that its clauses were to be applied also on and on the basis of previously determined bearers of intellectual property rights, if the very criteria, same by their acts and deeds perform or might per- –– criteria which justify primacy of form violation of competition. antimonopoly acts over self-governed New Act of competition protection was an- arranged rights of intellectual property nounced on July the 14th year 2009 (16), and in a bearers must be clearly determined. lot of segments it introduced most modern solutions in competition protection domain. In regard Refererences to intellectual property rights previous solution which anticipated that the clauses of this Act are 1. Michael, R.,(1998), Knowledge Diplomacy: Global applied also on intellectual property rights bear- Competition and the Politics of International Prop- erty, Wasington. ers. Thus in article 3 state 1 point 3of this Act is regulated that: 2. Vandana S.,(2006), Protect or Plunder?-Understand- “Clauses of this Act are exerted on all legal ing Intelectual Property Rights, London. and physical entities which directly or indirectly, 3. Besarović V., (2005), Intellectual property, industrial all the time, occasionally or one time participate property and copyright, Belgrade. in commerce of merchandise, and services, apart

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4. Janjić, M.,(1962), Compelling license, Institute for comparative law, Belgrade.

5. Besarović, V.,(1974), Problem of technology transfer in developing countries, Yugoslovenian research, nr.158, Belgrade.

6. Besarović, V., Popović, S.(1975), National and international regulations influence on open competition of industrial property rights“, Yugoslovenian research, nr.158, Belgrade.

7. Žarkovic, B.,(2002), Intellectual Property, its significance and impact on the technical, cultural and economic development, Proceedings of the seminar "Protection of Industrial Property Rights in Yugosla- via”, Belgrade.

8. Marković-Bajalović D.,(2000) Corporations market capability and antimonopoly law, Official paper of FR of Yugoslavia, Belgrade.

9. Besarović, V.(1984) International codification in domain of technology transfer and transnational corporations,Yugoslovenian revue for international law,nr.3.Belgrade.

10. The Constitution of USA, ar. 1, section 8.

11. U.S. Department of Justice, Federal Trade Com- mission, Antitrust Guidelines for the Licencing of Intellectual Property, 6. 4. 1995.

12. COMMISSION REGULATION (240/96), OJ. 1996 L 31.

13. Ridyard, D,(1996), "Essential Facilities and the Obligation to Supply Competitors under UK and EC Competition Law", n. 8, European Competition Law Review", Raybould, D. M, Firth, A,(1991) Law of Monopolies, London .

14. OJ, L 79, 24.09.2005.

15. OJ, L 51, 14.07.2009.

Corresponding author: Ilija Zindovic, University of Bussiness Academi, Novi Sad, Serbia, E-mail: [email protected]

Volume 7 / Number 1 / 2012 99 technics technologies education management Pluralistic approach to research methods: A necessary step towards interdisciplinary courses M. Abolghasemi, M. Ghahramani, A. Abbasian Faculty of Education and Psychology, Shahid Beheshti University, Iran Abstract that social phenomena cannot be captured by ma- nipulating, measuring, or controlling variables. On Growing interest in interdisciplinary courses is the contrary, the quantitative research studies is apparent worldwide particularly in social sciences. centered on objectivity through enumeration, ag- This paper argues that development of interdisci- gregation, and causation (Reichardt & Rallis,1994). plinary courses requires a pluralistic approach to- They equate knowledge with measurement, cause wards research methods among academics in these and effect, and reductionism (AbuSabha, 2003). fields for mutual understanding and collaboration. The positivists regard the world as made up of It seems that a pluralistic rather than one-sided "observable, measurable facts” (Glesne & Peshkin, approach is vital for interdisciplinary courses to 1992, p. 6) although there is a remarkable contro- help both academics and students approach multi- versy over their assumption that social variables faceted phenomena of concern in these fields. Al- could be objectively identified and measured (p.7). though research methodology has long been taught Researchers subscribed to positivism tend to use as an integral part of university courses at both quantitative research including experimental meth- undergraduate and postgraduate levels in social ods to examine their hypotheses (Hoepfl, 1997), and sciences, however, the quantitative approach has presumably causal relationships between variables been predominant in these fields. Recently qualita- in question (Denzin and Lincoln, 1998). Quantita- tive research methods attracted a fresh attention of tive approach and statistical terminology have been academics, researchers and postgraduate students so predominant that research is usually known as a looking for alternative approaches to overcome synonym for quantitative study (Bogdan and Bik- shortcomings associated with quantitative research. len 1998, p. 4). As Winter (2000) properly argued Nevertheless, the structure and content of univer- quantitative research aims to fragment and delimit sity courses on research methodology in education, phenomena into measurable or common categories psychology and social science remained mainly un- that can be generalized to similar situations. But the touched, presumably due to entrenched traditional irritating question is whether or not the research in- quantitative approaches. This study was aimed at strument is able to capture the reality of what it is exploring factors impeding a pluralistic approach supposed to measure (Crocker and Algina, 1986). towards research methods. Data were collected us- By contrast, qualitative research generally re- ing a survey instrument administered to a sample fers to "any kind of research that produces find- of 148 graduate students of social science. Results ings not arrived at by means of statistical proce- indicated that negative attitude toward qualitative dures or other means of quantification" (Strauss approach and lack of relevant expertise among lec- and Corbin, 1990, p. 17). Instead, qualitative re- turers contributed most to such a problem. search using a naturalistic approach is aimed at Key words: Pluralistic research approach, in- exploring phenomena in real world settings with terdisciplinary courses, higher education no manipulation whatsoever (Patton, 2001). As Maxwell (1992) pointed out what differentiate A theoretical background quantitative from qualitative research is general- izability of findings. Generalization of findings is The qualitative-quantitative debate centers on not of interest at all to qualitative researchers seek- two essentially different philosophical perspec- ing context-bound understanding (Hoepfl, 1997). tives. Qualitative researchers make efforts to ob- A remarkable paradigm in qualitative research serve people in their natural settings. They argue is constructivism which assumes knowledge as

100 Volume 7 / Number 1 / 2012 technics technologies education management socially constructed. From the constructivist per- appropriate approach towards research methodol- spective, varying constructions of reality are pos- ogy. This study argued that a pluralistic approach sible. Therefore, it is necessary to use methods of is needed to develop interdisciplinary courses in data collection in order to acquire multifaceted order to bring together researchers of various per- realities. Triangulation is an appropriate way to spectives. From a pluralistic view all research ap- incorporate various methods of data collection proaches could be of value and can help shed light and analysis. Then triangulation is defined to be on the issue of concern from various perspectives. “a validity procedure where researchers search for convergence among multiple and different sourc- Method es of information to form themes or categories in a study” (Creswell & Miller, 2000, p. 126). This survey study was aimed at exploring views The tension between quantitative and qualita- of postgraduate studies towards research methods tive research may arise from the dichotomy of the with emphasis on qualitative approaches. A sam- two distinct yet arguably incompatible approaches ple of 148 postgraduate students studying manage- (Abusabha, 2003). The quantitative research stud- ment, business, educational administration, psy- ies are criticized for being superficial and lacking chology and political sciences participated in the validity. Similarly, the qualitative research studies study. A five-point Likert type survey instrument are undermined for being unrepresentative, im- developed by the researchers was administered to pressionistic, unreliable, and subjective (Fry et al., the sample. All items ranged from Strongly Agree 1981). Meanwhile, Madill and Cough (2008) argue to Strongly Disagree. Multiple regression analysis that the boundary between quantitative and qualita- was used to analyze the data collected. The effects tive inquiries is fading and therefore, communica- of various variables on students’ capability in using tion between these approaches could be facilitated, qualitative methods as the criterion variable were regarding each as an integral part of research studies. examined. As shown in Table (1) students’ interest Likewise, Bryman (2006) suggested that quantita- and lecturers’ mastery of the subject were positively tive and qualitative approaches could be integrated related to the students’ ability in using qualitative under an overarching framework. However, unlike methods whereas the lecturers’ interest were nega- many authors advocating the objectivity of quanti- tively related to the criterion variable. As shown in tative inquiry, Westerman (2006) argued that both Table (1) evaluation process had no significant ef- quantitative and qualitative research is interpretive fect on students’ ability and familiarity with qualita- alike and "both types of research are pursued by in- tive approaches. This indicates that while students vestigators who are themselves participants in the were in favour of qualitative approach lecturers are world of practices" (Westerman, 2006, p. 273). in doubt about qualitative approach as an integral Beach et al. (2001) suggest that a comprehen- part of research methodology. sive approach to research should be adopted while investigating complicated and multifaceted issues Conclusion since quantitative methods alone fail to explore the essence of intricate and subtle subjects. With regard to the position of qualitative ap- Growing interest in developing interdisciplin- proach within psychological studies, Madill and ary courses in recent years in Iran, requires an Gough (2008) stressed the potential permeability Table 1. Multiple regression analysis (n=148) Predictors B Std. Error Beta t Sig. Constant 732/1 625/0 - 773/2 006/0 Learning opportunities 107/0 87/0 099/0 225/1 223/0 Lecturers’ interest 334/0- 089/0 - 0.395 762/3- 000/0 Lecturers’ mastery 469/0 104/0 516/0 494/4 000/0 Evaluation process 095/0 095/0 102/0 997/0 331/0 Students’ interest 372/0 090/0 446/0 126/4 000/0

Volume 7 / Number 1 / 2012 101 technics technologies education management of the quantitative–qualitative boundary and iden- 4. Creswell, J. W. & Miller, D. L. (2000). Determining tify different ways of increasing communication validity in qualitative inquiry. Theory into Practice, between researchers subscribed to each perspec- 39(3), 124-131. tive. They further challenged the idea that various 5. Crocker, L., & Algina, J. (1986). Introduction to classical and modern test theory. Toronto: Holt, Rine- research paradigms are prima facie incommensu- Hart, and Winston, Inc. rate. In addition, they suggest that a continuum 6. Denzin, N. K., & Lincoln, Y. S. (1998) (Eds). Collect- of paradigm integration for research can be made ing and interpreting qualitative materials. Thousand possible by enhancing communication between Oaks: Sage Publication. researchers of various perspectives. 7. Glesne, C., & Peshkin, P. (1992). Becoming quali- Rossen and Oakland (2008) argued that gra- tative researches: An introduction. New York, NY: date students should be provided with adequate Longman. courses on research methodology to ensure that 8. Healy, M., & Perry, C. (2000). Comprehensive criteria to judge validity and reliability of qualitative the prospective psychologists are well prepared to research within the realism paradigm. Qualitative join research communities. In their study on 192 Market Research, 3(3), 118-126. American Psychological Association (APA)-ac- 9. Hoepfl, M. C. (1997). Choosing qualitative research: credited programs they found most doctoral-level A primer for technology education researchers. Jour- psychology programs require only introductory nal of Technology Education, 9(1), 47-63. courses on research methodology with no empha- 10. Madill, A. and Gough, B. (2008). Qualitative Re- sis on more advanced courses. In fact, advanced search and Its Place in Psychological Science. Psy- methods courses are offered by many programs as chological Methods, 13(3): 254-271. electives since fewer than 10% of program leaders 11. Maxwell, J. A. (1992). Understanding and validity in qualitative research. Harvard Educational Re- were in favor of additional courses. view, 62(3), 279-300 Generally speaking, it seems that research meth- 12. Patton, M. Q. (2002). Qualitative evaluation and ods are not adequately provided at advanced level research methods (3rd ed.). Thousand Oaks, CA: at universities. Meanwhile, quantitative methods Sage Publications, Inc. are prevailing in both introductory and advanced 13. Reichardt, C.S.; Rallis, S. F.(1994). The Qualita- courses alike. Results of the present study indicated tive-Quantitative Debate: New Perspectives (eds.). that Iranian postgraduate students were interested San Francisco, CA: Jossey-Bass. in learning more about qualitative research whereas 14. Rossen, E. and Oakland, T. (2008). Graduate the respective lecturers were not. Therefore, atten- preparation in research methods: the current status of APA-accredited professional programs in psy- tion paid to quantitative and qualitative approaches chology. Training and Education in Professional is disproportionate. To facilitate a balanced atten- Psychology, 2 (1): 42-49. tion to either approach requires a pluralistic ap- 15. Strauss, A., & Corbin, J. (1990). Basics of qualitative proach toward research methodology which in turn research: Grounded theory procedures and tech- facilitates communication between research com- niques. Newbury Park, CA: Sage Publications, Inc. munities involved in interdisciplinary fields. 16. Westerman, M. (2006) What counts as "good" quantitative research and what can we say about when to use quantitative and/or qualitative meth- References ods? New Ideas in Psychology, 24: 263-274. 17. Winter, G. (2000, March). A comparative discussion 1. AbuSabha, R. (2003) Qualitative vs quantita- of the notion of 'validity' in qualitative and quan- tive methods: Two opposites that make a perfect titative research. The Qualitative Report [On-line match. Journal of The American Dietetic Associa- serial], 4(3/4) Available: http://www.nova.edu/ssss/ tion,103(5):566-569. QR/QR4-3/winter.html 2. Beach, R., Muhlemann, A.P., Price, D.H.R., Pater- son, A. & Sharp, J.A. (2001) The role of qualitative Corresponding Author methods in production management research. Interna- M. Abolghasemi, tional Journal of Production Economics, 74: 201-212. Faculty of Education and Psychology, 3. Bogdan, R. C. & Biklen, S. K. (1998). Qualitative re- Shahid Beheshti University,

searchrd in education: An introduction to theory and meth- Iran, ods (3 ed.). Needham Heights, MA: Allyn & Bacon. E-mail: [email protected]

102 Volume 7 / Number 1 / 2012 technics technologies education management A Model for Student Knowledge Diagnosis through Game Learning Environment

Kristijan Kuk1, Petar Spalevic2, Sinisa Ilic2, Marko Caric3, Zoran Trajcevski4 1 Electrical Engineering and Computing Science College, Belgrade, Serbia, 2 Faculty of Technical Science, University of Priština, Serbia, 3 Faculty of Engineering Management and Economic, Novi Sad, Serbia, 4 EMO OHRID AD, Electrical Industry & Enginnering, Ohrid, Macedonia.

Abstract back in current level) depends on a good diagnosis of student knowledge in the game level. This This work presents a model for estimation of works presents the existing learning model as the student knowledge that can be used as a student initial one, which we have modified and adjusted model in game-based learning systems. The pro- for educational games. Since the initial model did posed student model describes the new formula not give satisfactory results, we presented a new for student knowledge evaluation. The use of neu- model with a system of educational games, which ro-fuzzy system rules for making decisions about is based on variable coefficients. the level of student knowledge gives us an easy Section 2 describes modern teaching systems, access when it comes to determining the current especially an educational game for learning a spe- level of student knowledge. Since the initial mod- cific science course; Section 3 presents some meth- el did not give satisfactory results, we presented a odology of the student model, realized through in- new model with a system of educational games, telligent tutoring systems (ITS) and game-based which is based on variable coefficients for input learning (GBL); Section 4 includes the use of edu- variables: correct answers, number of used Help cational game ArhiCOMP as a new teaching ap- and spent time. Here we illustrate data calibration proach, and the neuro-fuzzy reasoner (NFR) as the of coefficient improvements to the model, and we initial way of student knowledge evaluation in the report results on its accuracy. game; Section 5 describes the proposed student Key words: game-based learning, student model for game-based learning system; finally, model, educational game, estimation of student's Section 6 illustrates the experimental setting and knowledge results of the proposed student model recorded by students during playing the educational game 1. Introduction ArhiCOMP on the course Computer Architecture and Organization 1. In the education process with the use of today’s modern multimedia technologies and Internet a lot of teachers usually use interactive simulations for 2. Theoretical background student training and practice. However, since the 2.1. Game-based learning game environment is becoming more and more complex, educational games can be very useful in Game-based learning (GBL) refers to differ- providing by-ways leading to the teaching material ent kinds of software applications that use games concepts, which are difficult to acquire by tradi- for learning or educational purposes [1]. The in- tional methods. Educational games attract student’s terestingness and extensiveness have conditioned attention in a simple way. Research in this field research of the educational games applicability shows that this phenomenon is a result of an emo- models in the process of education especially for tional connection between a game and a student. those children who have lost interest in certain Measuring student knowledge in a particular school subjects. Although there are few empiri- game level is therefore very important. Further cal claims that electronic educational games can behavior of the educational game (next level or improve learning, it should be mentioned that this

Volume 7 / Number 1 / 2012 103 technics technologies education management occurs only in the case that interaction in the game more and more frequently in order to successfully is not led by teachers, or unless some other forms motivate students of the new Internet generation of instruction are included in the game. One of the [7]. Through this type of educational material to- main reasons for limitations of GBL is that the day’s teachers are trying to present teaching mate- knowledge needed for playing the game doesn’t rial to students in the simplest and most interesting have to be the same knowledge needed for learn- possible way [8]. A combination of dynamic simu- ing certain instructions [2]. Learning takes place lations and educational games on courses in phys- only in the case when a student actively makes ics for teaching the new generation of students is a connection between the game and the existing used by teachers of the Norwegian University of knowledge. The precise moment at which a stu- Science and Technology (NTNU). Bjarne Foss dent is going to build such a connection usually and Tor Eikaas present in their work [9] the main depends on the individual knowledge level and design and a series of online learning resources meta-cognitive skills [3] relevant for learning (in- based on dynamic simulations which give signifi- dividual explaining and individual observing). cance to the use of games on engineering courses The term educational game refers to a learn- in the future. To a great extent educational games ing system that realizes some or all components can be referred to as computer science disciplines. of the learning process (learning theory, gaining Authors [10] have implemented the educational skills and experience, estimation of knowledge game concept in the learning game for C# pro- level) in a game context. In the past several years gramming language. Their system is based on the the research in the field of educational games has common game engine architecture, but it is ex- suddenly developed in several scientific fields. tended for the use in educational games and con- The development of the game industry has also sists of two high-level subsystems: a game engine increased interest among researchers of education and a learning engine. technologies, and it therefore seems that electronic educational games are a new magic tool that will 2.2 Intelligent learning environment solve many problems in the field of learning with the help of computers. Today’s elementary and A student model is one of the fundamental com- secondary school pupils, as well as university stu- ponents of intelligent learning environment, and dents, belong to the generation born in the Internet much research has been devoted to creating student age. Modern psychologists, sociologists and peda- models for various types of computer based sup- gogues refer to it as the Net-generation (Net = the port [11]. There is increasing research in learning Internet). Research shows that the Net-generation student models from data [12,13,14,15], but most students more difficultly accept reading of a huge of this research has focused on student models for quantity of text [4,5], regardless of whether it is more traditional intelligent tutoring systems (ITS). a long task or a long instruction. They like to do The use of multimedia in education demands a thing, rather than only to think or speak about from a teacher to actively use some of pedagogi- the thing. Educational games are considered to cal software packages available on the Internet, as improve learning on the basis of a better learning well as to be familiar with tools and techniques method that meets the needs and habits of today's for creation and modeling of multimedia contents. Net-generation students. Providing this kind of The aim of modeling of all educational multime- support to learning is at the same time extremely dia materials is to make possible for students to important and represents an extreme challenge. better understand and remember a specific teach- Creation of special learning systems that contain ing unit. Adaptive hypermedia is an alternative to educational games represents a challenge since it the traditional "one-size-fits-all" approach in the demands a careful analysis of stimulating learning development of hypermedia systems. Adaptive and maintenance of positive motivation [6]. hypermedia systems build a model of the goals, Stimulated by the use of modern technologies, preferences and knowledge of each individual teachers in the field of natural and mathematical user [16], and use this model throughout the in- sciences use educational games and simulations teraction with the user, in order to adapt the hy-

104 Volume 7 / Number 1 / 2012 technics technologies education management pertext to the needs of that user. Most of the early choose a character that identified him/her in the research on adaptive educational hypermedia was game. In our proposed student model, there are inspired by the area of intelligent tutoring systems no predefined character players to be selected by [17,18,19] in an attempt to combine an intelligent students at the beginning of the game. Bayesian tutoring system (ITS) and educational hyperme- networks in our model served as a graphic mod- dia. The most important task of ITS was to support eling tool for presenting different levels in the a student in the process of problem solving. game. One of the most important characteristics of ITS The student knowledge level in an adaptive is the possibility of adjusting instructions to stu- hypermedia application [22] is measured using dents' needs. To acomplish this ITS must precisely the answers to the questions previously presented determine the current level of student knowledge. to the student. The decision whether a student has Estimation of student knowledge is most often solved the task presented in our proposed model carried out with the use of appropriate tests. The is made on the basis of a formula that, besides learning model estimation is called diagnosis be- correct answers, also includes two additional pa- cause it reveals hidden cognitive states of the ob- rameters (time and the number of used Help op- served behavior. The model creation through ob- tions). servation of the student behavior is a difficult task, In the ITS approach [23], user model content since it is based on accidental assumptions about variables are used for keeping records on user in- the student. ITS performance is improved with the teraction with the ITS and for adjusting the con- use of the fuzzy-logic technique, which enables tent presentation to the user profile. These learning procession of unprecise information such as stu- style variables are part of a BN for making conclu- dents' actions and description of human knowl- sions about the student. There is a list of variables edge and students' cognitive capabilities. for each topic: spent time, topic deepness level, According to the IMS-LIP specification, a stu- wrong answers and correct answers. The variables dent can be classified on the basis of predefined relevant for deciding on student knowledge in our rules. This kind of classification can be easily pre- educational game ArhiCOMP also include spent sented in the form of fuzzy-logic expressions. For time and right answers. However, the spent time example: in our approach does not represent total time spent for learning a teaching unit but considers the entire IF (TEST_RESULT IS LOW) THEN STUDENT_ time spent for solving a task with Help option and CLASS IS BAD without it. The idea of the NFR system, presented by Z. This rule says that if a student’s test result is Sevarac in his work [24], was the initial inspira- low, he will be classified as a bad student. The ex- tion for the model for student knowledge diagno- pression (TEST_RESULT IS LOW) is a premise, sis in our game-based learning system. The NRF and the expression STUDENT_CLASS IS BAD system is relatively simple, supports creation of is the consequence of the fuzzy rule. TEST_RE- high-level pedagogical strategies, and can be SULT and STUDENT_CLASS are linguistic vari- easily adapted to individual teacher’s preferenc- ables, and their corresponding values are LOW es. The NFR model for student classification is and BAD. based on test results and the time needed to complete the test. Modification of the NRF system 3. Related work parameters is made by adding a new parameter – help. Many authors [20,21] took part in the Bayes- ian networks (BN) in the first person role - play- 4. The ArhiCOMP game and initial model ing games - and through the use of guiding artificial agents, which showed that the agents could The possibility of visual representation of the help students and facilitate their interaction with task solving method for rehearsing material on the the model. In those games, each player could course Computer Architecture and Organization

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1 enabled their implementation in the form of an interesting game [25]. The teaching unit “Unary logical operations“ is aimed at teaching students (the first year at the Electrical Engineering and Computing Science College in Belgrade) about the way of performing logical operations at the level of registers in the computer system, through comparing the register binary contents before and after performing of the given operation. The content of the educational games was designed as a platform for learning through tasks whose solving Figure 2. The initial model based on NFR in was stimulated by the game content and directly ArhiCOMP facilitated acquisition of knowledge in the said subject. 4.1. Variables in model Variables in the fuzzy initial model are used as a primary model structure: 1. Input values: –– Task score [0.. n], –– Number of used Help [0..n], –– Spent time needed to complete the task [0..n].

2. Output values: Figure 1. The interface of ArhiCOM –– Status of student knowledge of the task: {Mastered or Unmastered}. As said in Section 2 of this work, modern learning systems use intelligent multimedia ap- 3. Fuzzy sets plications or educational games, and estimation of The input space is partitioned by the following student knowledge in these systems is thus much fuzzy sets: more complex. The complexity is reflected in the –– Task score: Bad, Medium, Good; fact that in such systems a student is observed –– Number of used Help has two states: Rare through his or her actions in the time domain. It and Often. “Rare” denotes rare use of the is very important to perform appropriate knowl- help window by a student, while “Often” edge estimation at the precise moment so that the denotes frequent use of the help window; system could continue to lead the student and the –– Spent time to complete the task, interpreted entire learning process properly. as speed: Slow and Fast. The learning model we used in this education game is based on the principle of operation of The rules for student classification taken from the neuro-fuzzy reasoner – NFR. Our model was the human teacher are shown in Table 1. supplemented with another input variable – Help, The presented NFR rules for classification of since in the educational game this component was students, modified and adjusted to our learning used to a great extent by students. The initial mod- system with educational games, haven’t given el based on the neuro-fuzzy reasoner, which we quite precise calculations. The rule by which a used in the educational game ArhiCOMP, is given student's knowledge is classified as „mastered“ in Figure 2. in the situation when the result of playing is medium, where the number of used Help windows is higher, and the time of playing is slow, proved

106 Volume 7 / Number 1 / 2012 technics technologies education management to be false in our case. Table 2 shows part of the parameters recorded during playing a game by 71 students. Table 1. Fuzzy rules for student classification Score Help Time Knowledge good rare fast mastered good rare slow mastered good often fast mastered good often slow mastered medium rare fast mastered medium rare slow mastered medium often fast unmastered Figure 3. The ratio of estimated values given by medium often slow unmastered the initial model and values obtained through a bad rare fast unmastered practical task bad rare slow unmastered bad often fast unmastered bad often slow unmastered 5. The model of variable coefficients Since the initial model had not given expected After the use of the education game, students results, we applied a new model for knowledge were given a practical task on a paper in order to level estimation which used coefficients as variable compare accuracy of the presented model. The values. The rule for determining the percentage of results of comparison of practical results and es- knowledge applies basic arithmetical operations timation of the knowledge level through the giv- to input parameters of the model. The significance en model were not satisfactory. The error which of the input values for final knowledge estimation occurred in the estimation equalled the value of is determined on the basis of empirical coefficient 52.11%, which can be seen in Figure 3. values, given by the teacher. The current knowledge level a student possesses after playing the education game is given with the following formula: Table 2. The parameters recorded during playing Student Score SET Help SET Time SET Estimation Practic Score 1 48 medium 0 rare 8 fast mastered 0 2 100 good 0 rare 11 fast mastered 100 3 48 medium 0 rare 11 fast mastered 0 4 52 medium 0 rare 12 fast mastered 100 5 48 medium 0 rare 14 fast mastered 0 6 100 good 2 rare 30 fast mastered 100 7 36 medium 2 rare 33 slow mastered 0 8 60 medium 0 rare 34 slow mastered 100 9 100 good 0 rare 36 slow mastered 100 10 100 good 0 rare 37 slow mastered 50 11 52 medium 0 rare 41 slow mastered 0 12 100 good 0 rare 42 slow mastered 100 13 100 good 0 rare 45 slow mastered 100 14 100 good 1 rare 50 slow mastered 100 15 40 medium 1 rare 50 slow mastered 100 16 100 good 0 rare 51 slow mastered 50 17 100 good 1 rare 56 slow mastered 0 18 60 medium 1 rare 56 slow mastered 100

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student’s knowledge is huge in the case when the number of correct answers during playing of the where a, h and t are coefficients next to the three game is also high. This coefficient has therefore main parts of the formula. The values the coeffi- been assigned the value 0.50. A lower value, but cients can have range from 0 to 1. The first part of also important in calculating the knowledge, for the formula has the most significant role in calculat- the coefficient with Help – h, is presented with the ing a student’s final knowledge level, since it uses value 0.30. The third part of the formula is of least the number of correct answers - Ai. The second significance in the calculation, and thus the coef- most important part for knowledge estimation is ficient next to it has the value of only 0.15. the second part of the formula, which represents the Table 3. Values of coefficients in our model number of used Help windows during playing the Coefficient Values game - Hi. This part of the formula has the nega- a 0.50 tive mark, since it decreases probability of the final h 0.30 knowledge level. The part of the formula with time t 0.15 has the least importance for knowledge calculation. When a student uses the Help window, the time Through repeated comparison of practical re- needed for giving an answer increases, which results and estimation of the knowledge level with sults in reduction of the student’s total knowledge. the new model we have come to very encouraging The basic terms that explain the principle of results. With the use of the new model we have logical operation functioning are reached by se- managed to reduce the error in estimating student lecting the Help window in the game. When a stu- knowledge level by 20%. The error that is now dent starts learning with the use of the game or made by the system has been reduced to 29.97% faces a difficulty during solving a task generated with the use of the above given formula with em- by the application, Help serves to accelerate find- pirical coefficient values. The ratio of the estimating the right solution. This means that formula- ed values and real results we obtained with the use tion of definitions and theorems within Help is the of this model can be seen in Figure 4. key moment in designing the entire application. The values ta and th in the part of the formula including time show the average time a student needs to give an answer when he or she uses the Help window, i.e. the time needed for giving an answer without using the Help window: –– time ta – average time needed for giving an answer without using the Help window –– time th – average time needed for giving an answer with the use of the Help window

In this model the rules are interpreted as: Figure 4. The ratio of estimated values given by IF (TIME < ta or th ) THEN (t>0) AND (PROB- the model of variable coefficients and the values ABILITY OF KNOWLEDGE IS GREATER) obtained through a practical task

On the basis of teachers’ experience, the val- 6. Experimental setting ues referring to significance of coefficients in the given formula are presented in Table 3. In order to get system using educational game As it can be seen from the table, the most impor- ArhiCOMP, we examined the sensitivity of the tant coefficient in calculating the entire knowledge proposed model. To exclude the possibility that of a student is the coefficient a. Influence of the the three given values represent ideal figures, we first part of the formula on calculation of the entire tried to use higher values (0.70 for coefficient

108 Volume 7 / Number 1 / 2012 technics technologies education management a, 0.50 for coefficient h and 0.30 for coefficient 7. Conclusion t). Higher values for a better precision coefficients As shown in this work, application of existing a and h, while higher value coefficient t does not student knowledge estimation models onto the sys- change the precision. These results indicate that tem using educational games is not adequate. There- we are unable to observe appropriate values for fore, in this work the authors turn to a new way of coefficient a, ranging from 0.50 to 0.75, and for measuring current student knowledge level with the coefficienth , ranging from 0.30 to 0.55. They also use of modification of input parameters that are ap- indicate that the model is generally more sensitive plied in the existing models as well. Modification to changes of coefficient t (from 0.15 to 0.30). of parameters is made by adding a new parameter Adjustment of the coefficient values in proposed – help. Adding the help domain to the system is in- formula 1 depends on the level of student knowl- evitable since in educational games Help serves to edge requested by the teacher. The estimation accelerate finding the right solution. whether a student has solved a task presented in the The presented model can be used as a basis game depends on the teacher’s experience and the for new components in the form of pedagogical task difficulty level. For the medium task difficulty agents that can be added to game-based learning level in ArhiCOMP (task SHIFT RIGHT/LEFT), to and intelligent learning environment. proceed to the next game level with more difficult tasks (ROTATE RIGHT/LEFT) a student has to solve 75% of the given task. If P(X) ≥75% the stu- Acknowledgements dent has solved the given task to a satisfying degree This paper is part of the research subproject 3 and he/she should be allowed to proceed to the next in Project No. III 47016, supported by the Minis- task. If this is not the case, the student is given the try of Science and Technological Development of same task but with a different text. the Republic of Serbia. An example of student knowledge estimation in relation to practical results obtained in medium difficulty level tests in educational game ArhiCOMP is References given with the following values: 0.68 for coefficient 1. Prensky M., ”Digital game-based learning”, Com- a, 0.47 for coefficient h, and 0.20 for coefficient t. puters in Entertainment (CIE), vol.1 n.1, 2003. The new set coefficient error in the assessment is reduced to only 15.57%. This model in which co- 2. Ke F., “Alternative goal structures for computer game-based learning”, International Journal of efficient values are adjusted depending on the task Computer-Supported Collaborative Learning, vol 3, difficulty is named the calibration model. pp. 429-445, 2008. 3. Papastergiou M., ”Are Computer Science and Infor- mation Technology still masculine fields? High school students' perceptions and career choices”, Computers & Education, v.51 n.2, pp. 594-608, September, 2008. 4. Barnes K., Raymond C. Marateo, S. Pixy F., “Teach- ing and Learning with the Net Generation”, Innovate Journal of Online Education vol 3(4), 2007. 5. Papastergiou M., ”Digital Game-Based Learning in high school Computer Science education: Impact on educational effectiveness and student motivatio”, Computers & Education, vol 52 (n.1), pp. 1-12, 2009. 6. Kuk K., Prokin D., Dimić G., Stanojević B, “Interac- Figure 5. Curves of the three models and practi- tive Tasks as a Supplement to Educational Material cal score in the Field of Programmable Logic Devices“ - KTU Litvania, ISSN 1392 – 1215 , 2010. Vol 2(98), T120, pp 63-66.

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7. Kuk K., Prokin D., Dimić G., Stanojević B., “ New Ap- 18. Mostow J. and Beck J., “Some useful tactics to proach in Realization of Laboratory Exercises in the modify, map and mine data from intelligent tutors”, Subject Programmable Logic Devices in the System Natural Language Engineering, v.12 n.2, p.195- for Electronic Learning – Moodle, Facta Univ. Ser.: 208, June, 2006. Elec. Energ., vol. 24, No. 3, April 2011, pp. 131-140. 19. Brusilovsky P., “Adaptive hypermedia, User Mod- 8. Van Eck R. and Dempsey J., “The Effect of Competi- eling and User Adapted Interaction”, Ten Year tion and Contextualized Advisement on the Transfer of Anniversary Issue (Alfred Kobsa, ed.), vol11(1/2), Mathematics Skills in a Computer-Based Instructional pp87-110. 2002. Simulation Game”, Educational Technology Research and Development, vol. 50, no. 3, pp. 23–41, 2002. 20. Stankov S., Rosić M., Žitko B., Grubišić A., “TEx- Sys model for building intelligent tutoring systems”, 9. Foss, B. A. and Eikaas, T. I., “Game play in engi- Computers & Education, Volume 51, Issue 3, pp. neering education - concept and experimental re- 1017-1036, November, 2008. sults”, International Journal of Engineering Educa- tion, vol 22 (5), 2006. 21. Pendharkar P.C., “The theory and experiments of designing cooperative intelligent systems”, Deci- 10. Shabalina O., Vorobkalov P., Kataev A., Tarasenko sion Support Systems, 43 (3), pp. 1014-1030, 2007. A., “Educational Games for Learning Program- ming Languages”, Third International Conference 22. M. Font J., Manrique D., Ríos J., “Evolutionary "Modern (e-) Learning" (MeL 2008), Varna, Bul- construction and adaptation of intelligent systems”, garia, June-July, 2008. Expert Systems with Applications, Volume 37, Issue 12, pp. 7711-7720, December, 2010. 11. Conati C. and Zhao X.: Building and evaluating an intelligent pedagogical agent to improve the effective- 23. Fang, W. and Blank G. D., “Student Modeling with ness of an educational game, Proceedings of the 9th Atomic Bayesian Networks”, Paper presented at the international conference on Intelligent user interfaces, 8th International Conference on Intelligent Tutor- Funchal, Madeira, Portugal, January 13-16, 2004. ing Systems, June 26, 30, Jhongli, Taiwan, 2006. 12. Isljamovic S., Petrovic N., Jeremic V.; Technology 24. Millán E., Loboda T., Luis Pérez-de-la-Cruz J., enhanced learning as a key component of increased “Bayesian networks for student model engineer- environmental awareness amongst students from ing”, Computers & Education, Elsevier Science the university of Belgrade, TTEM Vol. 6, No. 4, Ltd. vol 55, no 4, pp. 1663-1683. December, 2010. 2011. 25. Nancy Ju Gin-Fon, Bork A., “The implementation of 13. Desnica E., Letić D., Navalušić S., Concept of dis- an adaptive test on the computer”, In Proceedings of tance learning model in graphic communication the 5th IEEE International Conference on Advanced teaching at university level education, TTEM, Vol. Learning Technologies (ICALT), pp. 822-823. 2005. 5, No. 2, 2010. 26. Hugo G., Fred A., “Designing Intelligent Tutoring 14. Cinar N., Altun I., Dede C., Knowledge and atti- Systems: a Bayesian Approach”, 3rd International tudes of university students on health effects of en- Conference on Enterprise Information Systems, vironmental risk. HealthMED 2011, 5:1, 217-222. ICEIS'2001, 2001. 15. Licchelli O., Teresa M. Basile A., Di Mauro N., 27. Sevarac Z., “Neuro Fuzzy Reasoner for Student Mod- Esposito F., Semeraro G., Ferilli S., “Machine eling”, IEEE Computer Society, Washington, 2006. learning approaches for inducing student models”, 28. Kuk K., Prokin D., Dimić G., Spalević P., “Learn- Proceedings of the 17th international conference on ing Unary Logical Operations through the Modern Innovations in applied artificial intelligence, p.935- Interactive Educational Application - Arhicomp”, 944, Ottawa, Canada, May 17-20, 2004. 10th Anniversary International Scientific Confer- 16. Stathacopoulou R., Magoulas G. D., Grigoriadou ence, UNITECH'10. Gabrovo. Bulgaria. Vol. 3, pp. M., Samarakou M., “Neuro-fuzzy knowledge pro- 303-308. 2010. cessing in intelligent learning environments for improved student diagnosis”, Elsevier Science Inc. New York, 2005. Corresponding Author Kristijan Kuk, 17. Millán, E., Pérez-de-la-Cruz, J. L., “A Bayesian Electrical Engineering and Computing Science College, Diagnostic Algorithm for Student Modeling and its Belgrade, Evaluation”, User Modeling and User-Adapted In- Serbia, teraction, 12 (2-3), pp. 281-330., 2002. E-mail: [email protected]

110 Volume 7 / Number 1 / 2012 technics technologies education management Development of distance learning, independent learning and modern education technology

Erika Eleven, Dijana Karuovic, Biljana Radulovic, Snezana Jokic, Marjana Pardanjac Novi Sad University, Technical Faculty “Mihajlo Pupin”, Serbia

Abstract b) asks the necessary questions in order to get the right information, This paper points at the importance of educat- c) identifies different possible information ing young people for qualitative information usage sources. from the Internet. The review of abilities and skills incorporated in information literacy is presented, 2. Evaluates information critically and which helps in illustrating the role of independent competently: learning skills in this type of literacy. Independent a) determines correctness and relevance, learning skills, e-learning, distance learning as b) makes difference concerning facts, points of well as life-long learning are all based on informa- view and opinions, tion literacy. Electronic learning (e-learning) and c) identifies incorrect and confusing information, distance learning (UND) enable users to attend d) selects information according to the problem some of the offered educational courses that can or the question he/she has in mind. be found on web sites of educational institutions. The review of distance learning, a forerunner of 3. Uses information efficiently and creatively: web oriented learning, is presented as well. It is a) organizes information for practical usage, also described a development process of contem- b) uses information in critical thinking and porary educational technology which follows this problem solving, type of learning. Finally, the most important no- c) produces and transfers information in tions related to distance learning and modern inappropriate formats.“ [1] formation technologies are explained as well. Key words: information literacy, the Internet, The Internet has changed learning and teach- distance learning, modern information technology. ing practice especially at faculties and universities well equipped by new technologies. This fact is 1. Introduction most obvious in university transformation related to distance learning. They are trying to use benefits The notion of information literacy is essential of information and communication infrastructure for understanding the functioning of individuals in for their basic field of work with prospects con- information domain which is becoming available cerning quality improvement and reducing costs via the Internet. of teaching offered to students. “According to some opinions, the skill of information operating, which represents the essence of information literacy, should be developed continually 2. Learning supported by new technology during the educational process through contents and The Internet has introduced new terms for activities of different teaching subjects and themes” learning, learning via web, or online learning. On- (Fisher, 1995; Meyers, 1986; Plut and others, 2001). line learning is classified as a general term, related A student who is information literate has the to learning by the help of a computer and the Inter- following abilities and skills (Shrock, 2003): net. The levels of such learning are various, start- 1. Estimates information efficiently and ing from basic programs that include texts and the successfully: course graphics, exercises, tests and tests results. a) aware of the need for correct information, Some of them include animations, simulations,

Volume 7 / Number 1 / 2012 111 technics technologies education management audio and video sequences of discussion groups ment that supports the necessity for implementa- with peers and experts, online tutorial, links for tion of a modern way of distance learning. materials on the Internet or web as well as other Distance learning according to definition of educational resources (Urdan & Weggen, 2000). “United States Distance Learning Association” Together with online learning the term online (USDLA): education has also been made. Online education en- “Distance learning is assimilation of knowl- ables studying advanced education courses via the edge and skills through indirect methods of in- Internet. All course materials including documents, forming and education comprised by various tech- contacts with tutors and colleagues may be accessed nological and other types of distance learning.” [7] via personal computers and telecommunications. Some authors have defined distance learning Online education offers students freedom to from technological aspect: study virtually in any location and in tempo which “Distance learning is a system and a process could be adjusted to their own conditions, work of connecting users with distributed educational and families (Kearsley, 1999). resources. In order to understand the current po- Close terms to online learning are Web-based tentials of distance learning it is necessary to com- learning and technology-based learning. The use prehend that it represents much more than simple of terms e-learning and e-aided learning is appro- combination of innovative technologies for knowl- priate nowadays. There are different definitions of edge transfer. Before introducing information-com- such learning. The shortest definition was given municative technologies in education it is necessary by English Ministry of Education and Skills in to: accept individual differences, let more capable 2003: “If someone learns how to use information users with previously assimilated knowledge to and communication technology, he uses electronic make progress faster and understand that a machine learning” (DfES, 2003). can perform the task well only if a good program Electronic learning assumes learning in which is made. We may conclude that education must re- computer web is used for information distribution, spond to changes and become more efficient”. [5] interaction and improvement of the learning process. Here, different computer webs, such as LAN, 3. Computer aided learning WAN or the Internet can be used, as well as audio and video tapes, satellite broadcasting, interactive The Internet as a medium with electronic mail TV and CD-ROM and mobile network. Within the and hypertext navigation can offer students a learning based on new technologies it is important chance to actively participate in the learning pro- to mention resource-based learning, too. This term cess and communicate easily with other students. has become popular partially because it reflects Interaction and feedback information in educational new trends and progress and because it serves as a process of distance learning can have ill-effects and concept which covers the terms such as open learn- often the feeling of isolation that the students may ing, flexible learning, individual learning, computer have. Despite being separated in time and space, aided learning and project based learning. students must be encouraged to work as a group by Time and location independence, great volume developing those learning activities which improve of resources and dynamic contents nature have interaction and collaboration among partners. It is made the Internet a great potential for learning. important to structure pedagogical parameters in Students who acquire knowledge at universi- virtual surroundings in logical and methodological ties all over the world have already had certain way as well as to present the whole material clearly subjects which they study via the Internet, or on- and precisely (Harasim, 1993). line. Most employed people, as well as those who live far from universities enroll online courses or- 3.1. Technologies of Web-environment ganized by universities and colleges. [2] Because of fast development of technologies Learning is a process of acquiring knowledge, the accepted concept of adults’ education and per- developing skills, building views and attitudes in in- manent life-long learning represents one more ele- dividual interactive relationship between a student

112 Volume 7 / Number 1 / 2012 technics technologies education management and information and the environment. In Web-en- leaving textual messages on computer system. vironment communication among students as well The advantage in relation to mailing lists is as student/teacher/instructor communication can be in the fact that messages are archieved and performed easily no matter how far they are. Learn- discussion recorded. Computer conferences ing resources are also here and available technolo- are widely used to support learning. gies of Web-environment enable evaluation of stu- –– Internet Relay Chat, IRC – another Internet dents’ achievements. According to Centre for Aca- system which enables the users to have demic Practice, CAP University of Warwick, Great synchronized communication - “alive” – by Britain (www.warwick.ac.uk) the Internet learning using texts or a phone via the Internet. Software technologies may be grouped in three groups: on the server keeps data when the people from 1. Learning resources, the list, who are specified, get involved online. 2. Communication via computer and They can communicate individually (one-to- 3. Evaluation aided by computer. one) or at the conference. Some systems have an electronic whiteboard where a teacher can 1. Learning resources write information visible to all chat participants Can be simply distributed Word documents on - simulation of a classroom situation. the Web which students can download and print –– Videoconferences – By using this means or they can be PowerPoint presentations, digital small groups of people, geographically streaming videos or other interactive programs. distant, may discuss in real time and they can hear and see one another and also exchange 2. Communication via computer different information. can be performed by any means that individuals and groups use to communicate. The main Hybrid systems - combine the lists of performed technologies include: discussions, chat, and mailing lists enabling the –– Electronic mail (E-mail) – the most users to transfer easily from one to another group popular Internet service that is used for depending on discussion themes. exchanging messages. The users send and Communication via computers can be syn- receive messages by the help of programs chronized (exchanging messages in the real time) installed on their computers. A user can or a-synchronized (messages are attached at any send messages simultaneously on several time and the users read them and reply at the addresses and attach files. In this way online time which suits them; in other words, the users learning is made easier. do not have to be online at the same time as in –– Mailing lists – communication channels synchronized exchange). Electronic mail, mailing between groups (many-to-many).Individuals lists, computer conferences- all of them are a-syn- send messages to the mailing list and they chronized, while chat, phone via the Internet and receive copies of all messages which were video conferences belong to synchronized com- sent there. It can be used for discussions munication. All these types of a-synchronized and and training within the society for learning. synchronized communications via computers are However, too big groups can more disturb available in Web surroundings. The type of com- than help the learning process. munication depends on the type of discussion. All –– Usenet newsgroup – A special Internet system types have their strong and weak sides both con- which enables the users to read and participate cerning technical advantages for software and the in the work of global specialized newsgroups; type of interaction which they encourage. [2] the number of themes of newsgroups is enormous and discussion topics are going 3.2. Evaluation aided by computers from standard to completely bizarre ones. –– Computer conferences (discussion bodies, Evaluation cannot be performed without feed- lists of connected discussions) – it enables back information from the instructor or a sophisti- groups of people to discuss by reading and cated artificial intelligence which usually assumes

Volume 7 / Number 1 / 2012 113 technics technologies education management a kind of objective test delivered in the form of parts of information. Customers want navigation online quiz. Since the test is objective and the anon Web site which won’t cause confusion (Hall, swers available, the feedback information can be 1997). The more interaction there is on Web site automated. Students can get feedback information the easier students will understand the course con- including their test results. Such application of tents (Porter, 1997). Many authors agree that in- evaluation, aided by computer, for independent, teraction represents a significant component in the diagnostic evaluation can be performed fast and teaching program. It is a means for learning (Hall, it provides valuable feedback information about 1997). It is the key element of successful courses learning efficiency. [2] and students should use it efficiently in order to achieve the aims of learning and become satis- 4. Programs and courses fied with the achieved experience. Interactions in on-line learning are strengthened by specially Education, traditional or based on Web, in- designed tools for incorporating interaction in vir- volves the work of experts for organizing con- tual classroom, for suggestions concerning access tents, sequences of teaching activities, the struc- to learning in Web environment, identification and ture of tasks, a set of interactions and the process selection of specified activities which are serving of evaluation. (Harasim and others,1995). well in on-line surroundings. Every tool offers The course which is designed or adopted to specific opportunities and it has its requirements be delivered via Web is delivered to different which make it appropriate only for a certain pur- surroundings from a traditional classroom and pose (McCormack & Jones, 1998). because of that the designed process imposes respecting the following pedagogical steps, includ- 5. Types of academic programs ing the need for: –– changing the role of an instructor going Academic programs for on-line learning, ex- from a teacher to an assistant or a process cept those on virtual universities, are always re- guide, alized partially in traditional classrooms (face-to- –– leading students through non-linear, face). If 80% of the program contents are realized hypermedia surroundings which enables via Web, these programs are considered on-line making knowledge and meaning in a new programs (The Sloan Consortium, 2005). If the way, contents delivered via Web includes 30...79% of –– building feelings for class community the whole program then such programs are called and strengthening learning by building-in blended / hybrid programs; along with blended / collaborative elements, hybrid programs the name blended / hybrid learn- –– providing an academic integrity. ing is also used.

Virtual classroom is a medium which possesses Blended learning its unique characteristics contributing to selection Development of information and communica- of appropriate pedagogy (McCormack & Jones, tion technology has brought fast changes in edu- 1998). cation. The first experiences with these technolo- Another critical factor that can contribute to gies have revealed possibilities for better quality effective on-line learning is the Class Web Site. of learning, its efficiency, adaptability and prices. The Class Web Site provides an organizational It is obvious now that learning experiences will structure convenient for students’ engagement in evolve and become “blended” combinations of the work with course material and for team work traditional methods and learning methods based (Palloff & Pratt, 1999). Making materials for on technology (Singh & Reed, 2001). Web differs from making printed materials be- Blended learning represents one of leading trends cause Web has more senses (Porter, 1997).Web of current education; it is a combination of electron- project must be readable, informative and it must ic learning and traditional learning in a classroom have clear conceptual and intuitive lanes through and its aim is achieving maximum learning effec-

114 Volume 7 / Number 1 / 2012 technics technologies education management tiveness. Blended learning includes the best parts of ideas and experiences between students and teach- electronic and traditional learning in order to achieve ers’ communities. In developed countries there are flexible, price acceptable education and training that numerous formal and informal networks of stu- can be accessed by wide public both geographically dents and teachers, both on regional and national, distant and different concerning learning styles and and even on the international level. the level of education (Clark, 2003). Their purpose is storing, managing and distrib- The key for blended learning is a selection of uting learning materials to final users. Develop- the right combination of media which will lead to ment of qualitative learning materials assumes a optimum solution. Components of online media considerable time and money spent. Therefore, can be combined with components of offline me- it is very important that these materials are com- dia (traditional classroom). patible with different platforms for electronic Offline components of blended learning can learning, their versions and operational systems be classified in six groups: over which they have been created. For all these 1. Individual learning (at home, at work place); reasons a standard should be defined that will be 2. Learning with the help of tutor, instructor or accepted by producers of learning platforms and mentor; creators of learning materials. If this happens all 3. Classroom learning (lessons, laboratories, materials harmonized with this standard will work seminars); on standardized platforms for electronic learning. 4. Printed media (textbooks, practicum, journals); 6.1. LMS (Learning Management System) 5. Electronic media (audiocassettes, audio-CD, video tapes, CD-ROM, DVD); LMS is a system for managing learning. LMS 6. Radio-TV (TV, radio, interactive TV). are Web applications that work on servers and they can be accessed via web reader. Server is usu- Online components of blended learning can ally located in computer classroom but it can be also be classified in six groups: anywhere in the world. Teachers and students can 1. Online contents for learning (simple and access it, no matter where they are, through local interactive resources for learning); computer web or via the Internet connection. 2. Electronic tutor, instructor or mentor; LMS give teachers tools for creating web site, a 3. Online collaborative learning (e-mail, mail course and they give it a possibility for access con- lists, chatting, virtual classroom, audio-control, so only enrolled users can see it. Beside ac- ferences, video-conferences); cess control LMS possesses different tools which 4. Online knowledge management (data brow- may help the course to be more successful; they sing, making documents); enable simple leaving documents, performing dis- 5. Web (browsing machines, Web-sites, users cussion on the web, testing and polling users, col- groups); lecting and correcting tasks, recording grades. 6. Mobile learning (laptop, mobile phones). LMS have tools for simple contents publishing. Instead of using HTML editor and sending docu- At designing blended learning we should take ments by e-mail or FTP, web form is used in order care about planned learning achievements, stu- to keep and publish contents which are created on dents, their culture, available resources for learn- server. Many teachers publish complete materials, ing, electronic infrastructure, the extent and pos- notes and relevant articles so students could read sibilities of servicing the proposed solution. [2] them when necessary. The most important part of the learning process 6. Standards of distance learning is contents. Modules for learning must be creative so they could motivate and interest students for Electronic networks do not only offer access- learning. Presenting contents is performed by the ing to an enormous amount of information but help of audio and video method and with applica- they also enable valuable distribution of resources, tion of interactive feedback connection. A student

Volume 7 / Number 1 / 2012 115 technics technologies education management can access the module as many times as he needs shows that the use of web surroundings for anony- for fulfilling his aims. mous correction of tasks by student’s colleagues Majority of LMS has tools for monitoring stu- can strengthen his/her motivation and, in this way, dents’ access to the course and every web page improve success. (sometimes with measuring time which the stu- Web book gives students updated information dent has spent studying on some web page or an- about their course progress. In this way, a student swering the test questions). The analysis of stu- can see only his/her own marks. For a teacher, web dents’ behavior is important for the course success book represents a good way for keeping and moni- analysis, both its good and bad sides. toring students’ progress and the analysis of students While accessing the Internet instructors and and groups’ achievements according to themes. students can communicate in the following way: –– On-line forum and chat offer communication 6.2. LCMS (Learning Content Management possibilities outside the classroom. Fo- System) rum enables students to communicate asynchronously with all participants. Chat, LCMS is a system for managing educational con- as a way of synchronous communication tents. This system serves for creating, storing and makes possible fast contacts of different collecting personalized e-learning contents in the participants in the learning process who are form of digital educational units. It represents a com- physically distant. bination of functional CMS - Content Management –– Electronic mail (e-mail) is the simplest type System and Learning Management System (LMS). of communication. It is an asynchronous The difference between LMS and LCMS is type of communication, in other words, it in the fact that LMS automate administration of enables communication at any time. E-mail, events during educational process while LCMS in combination with local networks (intranet), enable the author of the course to create, store, is used for internal communication or for manage and publish the contents on the Web. wider communication on the Internet. The Recently, possibilities of LMS and LCMS are important thing is the fact that it represents a becoming more and more equal, therefore 70% of personal way of communication when mails the leading LMS offer an option for content man- are sending from one person to another, but agement while LCMS are increasingly including the same message can be forwarded to the functionality of monitoring of users and making whole group at the same time, for example, reports. from the teacher to all groups of students. –– Videoconferences represent synchronous 6.3. SCORM (Sharable Courseware Object communication and they must take place Reference Model) standard in real time. This way of communication and teaching requires a microphone and SCORM standard introduces the term of SCO cameras. Distant students follow their lessons (Sharable Content Object) which represents an via monitors and they can be involved in elementary Learning Object. SCO is an equiva- discussion with their instructor by the help of lent for a unit in e-course. SCO can be compiled microphones. of texts, pictures, video sequences or even of interactive contents such as flash or java applica- Web tests and surveys can be processed and tions (these smaller parts of SCO are called As- marked instantaneously. These are excellent tools set). SCO is described by metadata which enable which may give the students the results and addi- finding units according to different technical, and tional comments related to tests in a few seconds. pedagogical criteria. Every SCO should represent Moreover, they can evaluate the extent of course logical and complete unit which is not too large material understanding. and can be incorporated in e-course entity. Units Web task sending is a simple way for monitor- can contain lectures or tests with different types of ing and evaluating students’ work. The research solutions (one or multiple choice, additions, etc.).

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Learning materials are without any changes Moodle will operate on any computer which transferrable to different platforms for electronic can start PHP and which supports some of better learning (created e-materials for learning on some known data bases. compatible platform can be used on any other Moodle is a flexible and fast open source tool. platform no matter the producer). It has a support for two bases: MySQL and Post- LMS will, in practice, read the necessary greSQL. It also has a support for a great number SCORM package from the local storage (most of languages. Great popularity of this tool is based frequently relational base or simply data system), on a simple and fast installing, small requirements understand its content and then according to re- concerning computers on which it is performed quested organizations start individual SCO pack- and on simple integration in the existing systems. age parts. Every start-up SCO is forwarded to a This tool has quickly gained a great popularity student through local school network or global In- among teachers because of its pedagogical features ternet and then it is started-up locally in the brows- and adjustability to academic environment. Al- er on the student's computer [6]. though it has smaller possibilities than commercial tools it satisfies a great number of users who can 7. Software platforms for distance learning easily and fast become familiar with these tools. application WebCT is a programming tool used for distance learning or as an addition to classical courses and Most tools for distance learning (courseware) traditional education. It uses multimedia possibili- have a module for preparation, delivery and pro- ties that WebCT and Internet technologies enable. cessing tests online. If such courseware for deliver- WebCT is one of the best tools for e-learning. ing educational surroundings are used it is normal It is fairly intuitive for work and possesses a great to use its own tools for online tests, as well. There number of functions. It contains numerous addi- is no need to buy expensive tools for distance learn- tional tools for help in learning (links, audio, viding if they will not be used completely. If only on- eo, dictionary...) and a great number of tools for line tests are needed, then the selection of some sort communication as well. of open source (free) courseware with a developed The program enables a teacher to make certain module should be considered. The great advantage changes on the course at any time. These changes is that it may be adjusted to needs. The best known may or needn’t be visible to all students. The ac- platforms will be individually described here. cess to WebCT courses is authorized. Every atten- MOODLE is an acronym of Modular Object dant or a teacher has his/her user name and pass- Oriented Dynamic Learning Environment. It is a word for accessing WebCT. verb which describes the process of an easy pass One of rare tools which except WYSIWYS through a certain material, trying to work only (What You See Is What You Get) editor possesses when the student want to (or must), enjoying in an editor for formulae. Support for creation and the work that leads towards deeper creativity and evaluation of knowledge is excellent as well as knowledge.This verb describes best the origin and statistic review of achieved results. development of Moodle system as well as the way WebCT enables: the students and teachers may use to access to edu- –– enriching the course by multimedia elements cational process in distance learning. (sound, picture, Internet links, additional Moodle is available as software of the open code information...) (under GNU Public License). In fact, it means that –– evaluation of students’ knowledge by online Moodle is protected by copyright but it has some tests and tasks additional freedom. It is allowed to copy, use and –– self-estimation of knowledge change Moodle under the following condition – to –– creating index and a dictionary of important enable the others the accession to the open code; notions that appear in lessons original license or information about copyright will –– communication of students among not be changed or removed and that the same li- themselves and with a teacher via forums cense will be applied to any solution. (discussions) or chat.

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The advantage of WebCT-a is in the field of –– It contains the user model for storing mathematics because it has a qualitative program student’s characteristics, for easy input and change of mathematical formu- –– It is possible to adapt the parts of the system lae and a quizz that accepts mathematical func- on the grounds of information in the user tions and generates questions on account of them. model. aTutor is open source Learning Content Man- agement System (LCMS) designed for needs of Adaptability of AHyCo system is implemented adjustment and availability. Administrators can by adjustment of hyperlinks and by the help of simply install or upgrade aTutor in only few min- adaptable series of the learning contents. The sys- utes. Instructors can quickly collect teaching contem tries to limit students’ free movements as little tent, incorporate it in the package and distribute it as possible through the learning contents but it di- online or input already the existing one. Students rects and leads, in the same time, students towards learn in adaptable environment. knowledge acquisition. The first version of AHy- It is simple and intuitive tool which requires Co system has supported only interaction between minimum time for getting used to work. The main students and the learning contents by the help of advantages are compatibility with SCORM for- adaptable hypermedia and on-line tests. mat, speed, availability and easy installation and IBM Workplace Collaborative Services is pro- maintenance. fessionally business oriented LMS. It is coordinated There are lots of disadvantages and some of with all current norms for data exchange and it is de- them are: livered with progressive program of intuitive inter- –– The authors of materials cannot put face for input and arrangement of course contents. multimedia on the course pages; The courses can be organized in other programs –– Too general support for multimedia and which are adjusted to the norms as well. The very video conferences; content cannot be directly arranged by web interface. –– There are no private forums; Besides the great number of complete work re- –– Students cannot download their answers and ports and success of individual students it is pos- tasks or exchange data with other students; sible to make conclusions about business progress –– There are no students’ groups; qualitatively. This LMS could be additionally in- –– Knowledge tests do not offer enough dependently expanded by the use of available and possibilities. well documented API invitations and, in this way, it can be adjusted to more demanding users. Despite current disadvantages which will prob- This is one of rare LMS which have in-built ably be reduced in some future versions, aTutor is support for blended learning, in other words, a a decent open source courseware. Tools for test- combination of learning in the classroom and e- ing and correction are within the list of tools for learning. When deciding about the course organi- management. The main task of this courseware is zation it is possible to estimate, in advance, when creation of on-line tests and quizzes whose aim is the lessons will be organized in the classroom It is practicing and knowledge check. good because, in this way, a complete support for At Technical Faculty “Mihajlo Pupin” aTutor a classroom work is provided( classrooms can be has been studied in details and the user interface reserved and necessary teaching material – note- has been translated in Serbian [3]. book, projector prepared). AHyCo (Adaptive Hypermedia Courseware) Claroline originates from “Classroom on is an adaptable hypermedia LMS or a system for line”. Claroline system for learning management e-learning. AHyCo has basic characteristics of is a modern distance learning courseware that can adaptable systems: help in improving teching and the way of teach- –– it is based on hypermedia, ing. Claroline jis convenient and intuitive course- –– it contains domain models which describes ware which satisfies numerous criteria. the structure of knowledge within the Its great advantage is in the fact that it is Open learning field, Source software, it has GNU (General public li-

118 Volume 7 / Number 1 / 2012 technics technologies education management cence) which enables taking original code and its public portals. It does not have courseware for adjustment to own needs. It enables numerous or- content development but it relies on specialized ganizations all over the world (universities, schools, outer courseware. It enables: associations...) for creating and administrating –– introducing e-learning participants in the courses the space for collaboration via the Internet. system and organization through group The courseware is multi-platform one (it is written membership, in PHP language and it uses MySQL base), so it can –– implementation of SCORM compatible be installed on Windows, Macintosh Unix, Linux interactive or passive content, and other platforms; it is used in more than 80 coun- –– organization of attendants, content and tries all over the world in more than 30 languages. tutors according to classes, Progress of technologes caused developing the –– mutual communication, need for a new way of distance learning by using –– on-line teaching and testing, communiction and computer technologies. Claro- –– monitoring and statistic analysis of the work line was created by a group of teachers (profes- – individual, group and class, sors, language experts...) who respected pedagog- –– writing reports. ical principles and methods in order to organize and perform the teaching process by using WWW. Eledge is Learning Management System which The platform is very simple to use and it can provides courseware for creating on-line courses be mastered in a short time and used without and teaching materials. Eledge secures functional problems even without previous knowledge from equipment for creating distance learning course- computer field. The authors of Claroline wanted ware and instructions for web pages, including to enable teachers to master technological skills in students’ registration, quizzes, exams, homework, education and pedagogy and in that way become evaluation, uploading data and others. more creative and independent in implementing FirstClass is interesting because it is supported pedagogical principles. on all standard platforms, such as: Linux, Win- BlackBoard represents one of the best course- dows, Macintosh. wares for distance learning that has appeared on It is divided in components Server, Client, In- the market. It is very intuitive for using and can ternet Services, Voice Services i FirstClass Direc- be mastered quickly. It has an excellent support tory Services. It provides asynchronous and syn- for communication within the course and is one of chronous communication to users (mail, forums, rare courseware which supports chat and the use chat ) as well as the exchange of data via folders of "whiteboard" at the same time. . and common calendars. Its advantage is in that it A great progress of courseware has been no- supports voice mail and fax and it also has wide ticed especially concerning creation and evalua- options for accessing messages in mailbox - if tion, knowledge testing and monitoring the work voice mail is in question then it is possible to listen of students. to it via phones or mobiles. Blackboard has web page with 30 days long ILIAS is open source courseware which has experimental version in which, both students and been developed thanks to reference of Austrian teachers can see how it looks like. Ministry of Education. Although it is made by dotLRN is e-learning platform of commercial using PHP, along with additional libraries its pur- quality, developed on MIT and published under pose is to be performed only on Linux platform (it open source license. It contains a support for de- was tested on RedHat distribution). veloping web portal and an option for managing Kewl was made at "University of Western content on web and Internet is originally included. Cape" with the aim to research e-Learning. Later, eLearner is a system for managing e-learning Kewl was used and developed in teaching, too. environment. It belongs to generic group under Kewl has basic possibilities of majority of com- the name LMS. It is adjusted to SCORM stan- mercial tools with the same purpose. dard. Primary orientation is managing a complex A great advantage of this courseware is exten- e-learning environment of corporative type and sive documentation and the examples of complete

Volume 7 / Number 1 / 2012 119 technics technologies education management courses which can be simply incorporated in it. An According to test results, WebCT and Black- option concerning translation in other languages Board have satisfied the highest criteria. However, has been anticipated as well. during testing it seemed that they were not simple Manhattan Virtual Classroom is protected and logically connected for using, so they are not by password, web oriented system for e-learning recommended even to those who can work on which includes several different discussion groups, similar systems. They may be recommended only synchronous chat, sections in which teachers may to progressive users. publish materials, module for organization of on- According to researching factors aspect the fol- line tasks, module for marks, surveys, private lowing courseware are satisfying: aTutor, Black- messages among course students... Board, Moodle and WebCT. Taking all said into account, a lot of effort should be invested in this 8. Conclusion complex field if we want to speak about qualitative evaluation in distant environment. The Internet is a powerful means for engag- Two types of courseware are competing closely ing students’ cognitive activities. Individuals and for the best free of charge courseware - Claroline groups of students can cooperate in projects, they and Moodle. They are both simple and intuitive can express their interests, taking responsibility for using but Claroline is better according to the for collecting information and within this pro- number of criteria. cess they can all communicate with their peers During the analysis it was noticed that a great and with experts from all over the world. For a number of courseware, declared as courseware for teacher/ instructor the Internet opens an electron- e-education, had certain bad sides and they generic door towards resources for learning and practi- ally lacked a great number of possibilities. Some cal experiences that couldn’t be reached before. programs are difficult to install and are rather non- No matter in what extent the field of interest is intuitive. specialized there is always someone on the Inter- Prior to the courseware selection it is necessary net who can help in finding useful resources. Full visit web pages of the relevant courseware produc- potentials of the Internet as a means for learning er in order to get more details about courseware are still unknown but its capabilities are unlim- performances, supported standards, user support, ited. etc. The best advice is to try as many types of There is a great number of different course- courseware as possible and then, according to the ware and programs for distance learning on the objective, make decision about the most appropri- market. Their performances are various, some are ate courseware. commercial and some are free. Very important elements concerning the choice for using are sim- References plicity, smaller requirements related to hardware and software support, larger data bases, openness 1. Dusanka Lazarevic: Obrazovanje mladih za kori- in loading and regular communication. There scenje informacija sa interneta - oslonci u razvo- ju kritickog misljenja, Filozofski fakultet, Novi Sad, are numerous advantages of tests as instruments "Nastava i vaspitanje" br. 2, 2007. God for knowledge check within web authorized sys- 2. Dusan Kljakic: Internet u funkciji efikasnijeg ucenja, tems: independence related to the place and time Pedagoska akademija Sarajevo of testing, smaller costs for users, possibility for self-organizing concerning the time for testing, 3. D. Cvetkovic: Obrazovni racunarski softver tipa mul- timedije u funkciji unapređivanja razredne nastave, multimedia materials, an option for test repetition, doktorska disertacija, Tehnicki fakultet „Mihajlo Pu- instantaneous availability of test results. pin”, Zrenjanin, 2006. It is important to know the criteria before se- 4. D. Radosav: Obrazovni racunarski softver i autor- lecting the courseware. An attention should be ski sistemi, Tehnicki fakultet „Mihajlo Pupin”, Zren- paid to the fact whether it supports the standards janin, biblioteka udzbenici br.90, CIP 004.4(075.8); for data exchange and the features of the relevant 37.018.43:004(075.8); ISBDN 86-7472-032-0; CO- standards. BISS.SR-ID 2007500343; 2005.

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5. A. Savic: Metode razvoja i primena primena XML web servisa kao podrska tradicionalnom obrazo- vnom procesu, Doktorska disertacija, Tehnicki fakultet “Mihajlo Pupin”, Zrenjanin, 2006. 6. Karuovic D., Radosav D.: „Human computer interaction model in educational software”, TTEM Sara- jevo 2010, Published by DRUNPP, Sarajevo, Vol.5, No.1 2010. ISSN 1840-1503 pp 198-204 7. Glusac, D., Karuovic D., Tasic, I.: „Permanent theoretical and practical education of teachers technical and information profile“, TTEM Sarajevo 2010, Pub- lished by DRUNPP, Sarajevo, Vol.5, No.2 2010. ISSN 1840-1503 pp 397-402 8. Eleven Erika, Karuovic Dijana: “Comparative review and analyses of tools for distance learning”, 8th International Symposium on Intelligent Systems and Informatics - SISY 2010, september 10.-11. 2010. Su- botica, str 173-178, ISBN 978-1-4244-7395-3, IEEE Catalog Number: CFP1084C-CDR 9. Pardanjac М., Radosav D, Jokic S.: „Motivation of users – how important and what is its impact on distance learning” TTEM Sarajevo 2010, Published by DRUNPP, Sarajevo, Vol.5, No. 1 2010. ISSN 1840- 1503 pp 181-188 10. http://www.usdla.org (USDLA-United States Dis- tance Learning Association 11. http://www.carnet.hr/referalni/obrazovni/spzit/alati/ courseware 12. http://www.elerningeuropa.info 13. http://www.pedagog.rs 14. http://www.distancelearningnet.com 15. http://www.portalalfa.com 16. http://www.WebCT.com 17. http://www.claroline.net/pedagogical-principles-3. html

Corresponding author Erika Eleven, Technical Faculty “Mihajlo Pupin”, Zrenjanin, Serbia, E-mail: [email protected]

Volume 7 / Number 1 / 2012 121 technics technologies education management Measuring Project and Quality aspects in Agile Software Development

Deepti Mishra, Eda Balcioglu, Alok Mishra Department of Computer Engineering, Atilim University, Ankara, Turkey

Abstract Agile software development methods are different from traditional software development Constructivism is a cognitive theory that em- methods. Agile team’s goal is to continually pro- phasizes that learners construct new knowledge by duce stable, incrementally enhanced version of the rearranging and refining their existing knowledge. product at the end of each iteration that meets the Agile software development methods follows this customer's needs. An agile team works in short it- approach of learning as software is developed in erations and at the start of each new iteration, an short iterations and agile team incorporated all agile team incorporates all new knowledge gained new knowledge gained through feedbacks from in the preceeding iteration and adapts accordingly preceeding iterations. Agile software develop- [1]. If a team has learned something that is likely ment methods are different from traditional soft- to affect the accuracy or value of the plan, they ad- ware development methods and therefore, metrics just the plan [1]. So, agile software development proposed for projects using traditional software methods follow the theory of constructivisim. development methods are not fit to use in agile With increased popularity, more people are be- software development projects. In this paper, new ing drawn to agile methods, bringing with them metrics are proposed that can measure the prog- modes of evaluation incompatible with agile ress and quality of the product in agile software values and principles [3]. Metrics are essential development projects. The proposed metrics are to software engineering as they help in measur- also compared with existing agile metrics. ing quality, estimating required resources and Key words: Metrics, Agile Methods, Quality, cost, scheduling and controlling activities such as Progress, Software progress in the software development life cycle. Traditional metrics do not fit well with agile prac- 1. Introduction tices. In general, agile metrics emphasize on some useful characteristics such as, measuring software It is well known that, from the cognitive per- progress and quality, customer satisfaction, flex- spective, software development is a complex pro- ibility for changing in software, simplicity for the cess [2] and it is based strongly on the people that late changes in requirements. Two of the most im- carry it out [4]. Constructivism is a cognitive the- portant aspects of a software development project ory that examines the nature of learning processes that need to measured are progress and quality. We [4]. More specifically, the theory suggests that are required to keep track of the progress so as to new knowledge is constructed gradually, based on finish the project on time. Also, we are required the learner's existing mental structures [4]. Men- to make sure that the product we are developing tal structures are developed in steps, each elabo- is of acceptable quality. The main motivation of rating on preceding ones, although there may of this paper is to propose new metrics to measure course be regressions and blind alleys [4]. Leron the progress in agile software development project and Hazzan [7] refer to this process as "learning and quality of the product being developed. This by successive refinement". This use of successive paper is organized as follows: In the next sec- refinement is based on the assumption that succes- tion, related work is described. In section 3, new sive refinement is an especially effective way for metrics related with progress and quality are pro- the human mind, with its particular strengths and posed. These metrics are proposed specifically for limitations, to deal with complexity [4]. projects using agile methods. In section 4, some

122 Volume 7 / Number 1 / 2012 technics technologies education management well known agile metrics are described and com- in different forms using these methods. Using XP, pared with proposed metrics. Finally, the paper requirements are written in story cards where each concludes in section 5. story card describes a feature to be added in software. A feature is a characteristic or attribute of a 2. Literature Survey product for which work must be done to develop and deliver it [8]. It is what allows a product to be In recent years, agile software development advertised, marketed, and sold [8]. Requirements methods have become more popular. The princi- are written as backlog list items in Scrum, fea- ples of agile methods are different from traditional tures in FDD and ASD, and functions in DSDM. software development methods. Hazzan and Du- Product is developed in many iterations using ag- binsky [4] analyzed one of the agile method, ex- ile methods. Scrum uses word “sprint” in place of treme programming (XP), based on constructiv- “iteration” whereas ASD uses “adaptive cycles” in ism theory. They explained how the XP values of place of iteration. As the proposed metrics can be feedback and communication, as well as several used for any agile methods; for simplicity, we will of XP practices, support gradual construction of use the word feature and iteration. knowledge related to the development of software All feature are not equal in size so a relative size systems [4]. Hartmann and Dymond [3], pointed will be assigned to each feature. Similarly, every out features for good agile metric or diagnostic features may not have same importance. Some fea- which can be used while designing measurements tures must be implemented and are highly desirable for the agile process. They mentioned that a good in the software whereas others may not be of equal agile metric should affirms and reinforces lean and importance. So, a priority will be assigned to each agile principles; measures outcome, not output; feature. A range of numbers can be choosen to as- follows trends not numbers; belongs to a small set sign relative size and relative priority. For example, of metrics and diagnostics; easy to collect; reveals, a range of 1 to 10 can be used to assign relative size. rather than conceals its context and significant A feature assigned size 10 must be double the size variables; provides fuel for meaningful conversa- of a feature assigned value 5. Similarly, a range of 1 tion; provides feedback on a frequent and regular to 5 can be used to assign relative priority. A feature basis; may measures value (product) and process, with priority value 5 is highly desirable and must be encourages “good-enough” quality [3]. Langr [6] included in the software. A feature with priority val- formulated a set of principles for establishing and ue 1 may be included if time permits but software using metrics in an agile environment. The princi- can function properly even without it. These ranges ples are: do not produce metrics that no one wants are flexible and organizations can choose different , be honest about how management uses metrics, ranges to assign relative size and priority according do not use metrics to compare teams, take team to their needs. maturity into account when selecting metrics, en- It is very important to propose metrics that sure that metrics do not demoralize the team, a can measure progress and quality of the product single metric on its own has minimal use [6]. He at iteration level as well as release level. One of further suggested using metrics as a basis for dis- the main points of agile is that we should look at cussion, not as a final decision point and metrics concerns and challenges in each and every itera- should change over time [6]. tion [6]. The shortness of agile iterations allows us to introspect many, many times, correcting small 3. Proposed Metrics for Agile Software problems before they grow into larger ones [6]. Development Methods Progress in an iteration (in %) There are various agile methods such as Ex- n ∗ treme Programming (XP), Scrum, Feature Driven ∑S i pi i=1 ∗ Development (FDD), Dynamic Systems Develop- PI = N 100 ∗ ment Method (DSDM), Adaptive Software De- ∑S k pk velopment (ASD) etc. Requirements are written k =1

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Where, l ∗ n is the total number of feature that are already ∑S i pi i=1 ∗ implemented and tested so far in an iteration PR = T 100 th ∗ S is the relative size of i feature which is ∑ k i S pk already implemented and tested in an k =1 iteration Where, P is the relative priority of ith feature which i l is the total number of features that are is already implemented and tested in an already implemented and tested so far in iteration the iterations which are already finished or N is the total number of feature that are planned being in progress to be implemented in an iteration S is the relative size of ith feature which is already S is the relative size of kth feature which is i k implemented and tested in the iterations which planned to be implemented in an iteration are already finished or being in progress th Pk is the relative priority of k feature which th Pi is the relative priority of i feature which is planned to be implemented in an iteration is already implemented and tested in the iterations which are already finished or Exact Progress in an Iteration (in %) being in progress T is the total number of features that are p m a ∗ − ∗ + ∗ planned to be implemented in the release (in ∑S i pi ∑S j p j ∑S k pk i=1 j=1 k =1 all iterations) EPI = ∗100 p S is the relative size of kth feature which is ∗ k ∑S i pi planned to be implemented in the project = i 1 th Pk is the relative priority of k feature which is planned to be implemented in the project where, p is the total number of feature that are planned Feature Correction Rate in an iteration (in %) to be implemented in an iteration n th Si is the relative size of i feature that is planned ∗ * ∑S i pi Ei to be implemented in an iteration FCRI = i=1 ∗100 P is the relative priority of ith feature that is n N i ∗ * + ∗ ∑S i pi Ei ∑S k pk planned to be implemented in an iteration i=1 k =1 m is the number of features that are planned to be implemented in an iteration but passed to Where, the next iteration due to time constraints n is the total number of feature that are already th implemented and tested so far in an iteration Sj is the relative size of j feature that is passed th to the next iteration Si is the relative size of i feature which is th already implemented and tested in an iteration Pj is the relative priority of j feature that is th passed to the next iteration Pi is the relative priority of i feature which is a is the number of features that are not planned already implemented and tested in an iteration

to be implemented in an iteration but added Ei is the number of errors detected and later in an iteration due to some reasons e.g. corrected in the ith feature customer’s request N is the total number of feature that are not th yet tested (either planned to implemented or Sk is the relative size of k feature that is added in an iteration already developed but not tested yet) in an th iteration Pk is the relative priority of k feature that is th added in an iteration Sk is the relative size of k feature which is not yet tested in an iteration th Progress in the release (in %) Pk is the relative priority of k feature which is not yet tested in an iteration

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Feature Correction Rate in the release (in %) 4. Comparison of Proposed Metrics with Other Existing Metrics for Agile Soft- n ware Development Methods ∗ * ∑S i pi Ei i=1 ∗ FCRR = n N 100 Some existing metrics which can measure prog- ∗ * + ∗ ress are given in table 1. These metrics can be com- ∑S i pi Ei ∑S k pk i=1 k =1 pared with proposed metrics PI, EPI and PR. All three proposed metrics are calculted by assigning Where, a value to every feature. Value of a feature not only n is the total number of features that are depends on the priority but also on the size. Using already implemented and tested so far in the proposed metrics, progress can be measured at the iterations which are already finished or the iteration level (using PI or EPI) or at release lev- being in progress el (using PR). At the iteration level, progress can be S is the relative size of ith feature which is measured while a iteration is still going on (using i already implemented and tested in the PI), or after an iteration finished (using EPI). iterations which are already finished or Business value delivered metric can be used to being in progress measure the progress after an iteration finishes. It th Pi is the relative priority of i feature which can not measure the percentage of work finished is already implemented and tested in the while the iteration is still going on. Developers iterations which are already finished or can not determine the business value of features being in progress alone, they must take the help of business people.

Ei is the number of errors detected and Velocity metric can also be used to measure the corrected in the ith feature progress after an iteration finishes. Just like the N is the total number of feature that are not previous metric, it can not measure the percentage yet tested (either planned to implemented or of work finished while the iteration is still going already developed but not tested yet) in the on. Moreover, it only considers the size of the fea- release(in all iterations) ture as the measure of progress. It does not take in th Sk is the relative size of k feature which is not consideration the priority of the feature. So a fea- yet tested in the project ture with more size but lower priority will return th Pk is the relative priority of k feature which is higher value for this metric compared to a feature not yet tested in the release with small size but higher priority. User Stories carried over into next iteration represents the planned work in an iteration that could

Table 1. Some existing progress metrics for agile software development Name of the Metric Description It measures the value that is delivered at the end of each iteration. It is calculated by Business Value assigning value to every feature and then adding the values of every feature delivered at the Delivered [3] end of a particular iteration. Velocity is a measure of a team’s rate of progress [1]. It is calculated by summing the number of story points assigned to each user story that the team completed during an Velocity [3] iteration [1]. Story points are a unit of measure for expressing the overall size of a user story, feature or other piece of work [1]. User Stories carried It is the number of user stories planned for a particular iteration but could not be implemented over into next iteration and therefore passed to the next iteration. It has the adverse effect on progress. Running Tested RTF represents how many features are shipped in each iteration [6]. So, it can measure the Features [5] progress in a release. Each story is assigned a weight by the product owner and is either finished or not finished. Earned Business Value EBV is the sum of the weights of all finished stories.

Volume 7 / Number 1 / 2012 125 technics technologies education management not be finished and therefore carried to the next a feature with lower priority (or size) passing the iteration. This metric only considers the number acceptance test. of user stories without considering the size or pri- Unit tests per user story gives the quality of ority of those stories and therefore can not be an a particular user story. More the number of unit accurate measure. tests per user story, higher is the quality of the user Running Tested Features (RTF) just consid- story as it is tested more thoroughly. As such it ers the number of features shipped in an itera- does not provide the idea about the quality of the tion. Number of features alone can not provide whole product. the progress accuartely because size and priority Functional (Fitnesse) tests per user story gives of the features if not more but equally important the quality of a user story from customer’s per- to measure the progress. Two different iterations spective. Higher number of of functional tests per having five features each but of with different siz- user story give more confidence that the code im- es and priority will give the same value for prog- plementing the user story satisfactorily meets the ress using this metric. customer’s needs. Again, like the previous metric, Earned Business Value (EBV) assigns a busi- it does not provide the idea about the quality of the ness value to each story which depends on how whole product. important that story is for the product. In other Builds per iteration gives the idea about the words, it only considers the priority of a story to quality of the features already implemented in a assign a relative weight but not the relative size. build but it does not counts the number of features Some existing agile metrics which measure implemented in comparison to the total number quality of the product are given in table 2. These of feature planned. To get an idea of the overall metrics can be compared with proposed metrics quality, we require more information for example: FCRI, and FCRR. FCRI gives the percentage of quality achieved in an iteration is 60% because the features which passed the acceptance tests 60% of the features (considering the priority and compared to the total number of the features that size) have already passed the tests. are being planned to be implemented in an itera- Defects carried over to next iteration metric tion. It considers the size, priority and number of value represents the total number of defects irre- errors detected and corrected in a feature. A feature spective of whether these defects are in a single of higher importance/priority (or size) passing the feature or scattered around all features imple- acceptance tests contributes more towards (give mented in an iteration. This missing information more confidence in the) quality of the product than is equally important because a product having de-

Table 2. Some existing quality metrics for agile software development Name of the Metric Description Unit test checks the behavior of a single piece of code. Unit tests are written by the Unit tests per user story developers. Functional tests checks that a feature or group of features meet customer’s requirements Functional (Fitnesse) and achieve goals, such as performance. Normally functional tests are the responsibility tests per user story of the customer but it can be written by developers based on the stories of the customers. It is the number of builds done in an iteration. When a build is successfully made, it ensures that there are no defects remaining in the build and all the modules in the build Builds per iteration are working correctly together as a single unit. So, it ensures the quality of the features implemented in the build. Defects carried over to It is the number of defects that are carried over to the next iteration. More the number next iteration of defects carried over to next iteration, lower the quality of the product. RTF represents how many features are shipped in each iteration [6]. It is the ability to Running Tested Features continue shipping quality product to the customer [6]. The fact that the features are (RTF) [5] tested ensures some level of quality [6]. Unfortunately, a good RTF measurement is only as good as your last iteration [6].

126 Volume 7 / Number 1 / 2012 technics technologies education management fects in all implemented feature is of lower quality 6. Jeffries Ron (2004) “A Metric Leading to Agility”, compared to a product with just one faulty feature. available at http://xprogramming.com/xpmag/jatRts- Running Tested Features (RTF) just consid- Metric ers the number of features shipped in an iteration. 7. Langr Jeff (2007), “Principles for Agile Metrics”, Two different iterations having equal number of available at http://www.developer.com/tech/article. features but of with different sizes and priority will php/3715196/Principles-for-Agile-Metrics.htm give the same value for quality using this metric. 8. Leron, U. and Hazzan, O. (1997). Computers and applied constructivism. IFIP WG 3.1. Working 5. Conclusion Conference - Secondary School Mathematics in the World of Communication Technologies: Learning, Constructivism is a cognitive theory that sug- Teaching and the Curriculum, Grenoble, France, pp. gests that new knowledge is constructed gradu- 195-203. ally, based on the learner's existing mental struc- 9. Rawsthorne D., Calculating Earned Business Value tures and mental structures are developed in steps, for an AgileProject, available at www.danube.com/ each elaborating on preceding ones [4]. Agile soft- system/files/WP_Earned_Business_Value.pdf ware development methods support the gradual construction of knowledge related to the development of software systems and therefore, follows Corresponding Author Deepti Mishra, the theory of constructivism. New metrics are pro- Department of Computer Engineering, posed to measure the progress in agile software Atilim University, development project and quality of the product Ankara, being developed. The proposed metrics are also Turkey, compared with existing agile metrics to show that E-mail: [email protected] they better represent the progress and quality of agile software development projects.

References 1. Cohn M. (2005), “Agile estimating and planning”, Prentice Hall, ISBN: 978-0-13-147941-8.

2. Hamlet, D. and Maybee, J. (2001). The Engineering of Software, Addison Wesley.

3. Hartmann, D. and Dymond, R. (2006) “Appropriate Agile Measurement: Using Metrics and Diagnostics to Deliver Business Value” In Proceedings of the Con- ference on AGILE 2006 (July 23 - 28, 2006). AGILE. IEEE Computer Society, Washington, DC, 126-134.

4. Hazzan, O. and Dubinsky, Y. 2006. A cognitive perspective on software development methods: the case of extreme programming. In Proceedings of the 2006 international Workshop on Workshop on interdisciplinary Software Engineering Research (Shanghai, China, May 20 - 20, 2006). WISER '06. ACM, New York, NY, 53-56.

5. Čekerevac, Z. Anđelić, S. Dvorak, Z. Radović, D. Sajfert, D. (2011) The application of information and communication technology lessons in regards to multimedia presentations, Technologies Education Management, Vol. 6, No. 2, 2011.

Volume 7 / Number 1 / 2012 127 technics technologies education management The boards of directors in function of improvement of the competitiveness of the Serbian companies

Milica Radovic1, Snezana Radukic2 1 Faculty of Legal and Business Studies, Novi Sad, Serbia, 2 University of Nis, Faculty of Economics, Serbia.

Abstract 1. Introduction Corporate governance has necessarily been Corporate governance represents a common imposed as a need in changing and changed envi- expression for implementation of legislation and ronment of the world economy, in the creating of series of voluntary defined and adopted proce- wealth and providing the opportunities for higher dures that enable the profit making company to employment. Corporate governance refers to the improve efficiency of business and to attract the structures and processes of governance, directing financial means as well as the best staff. A good and control of business companies. It represents system of corporate governance contributes to the the set of relationships between managers, the sustainable economic growth, to strengthening of board of directors and the supervisory board, ma- business companies and to attracting of domestic jor and minority shareholders and other groups and foreign sources of capital and their protec- of interest, it defines the goals of business com- tion (Ristic,2004). It ensures the structure through panies, determines the means for attaining those which the goals of the company, the means for goals and monitors their execution and effective- attaining the goals and the ways of monitoring ness. the results are determined. A good corporate gov- In this paper the author provides the insight ernance should provide the management and the into the regulation of the corporate governance in boards with the incentives to attain the goals and Serbia, with a special reference to the role of the interests of the company and the shareholders. The board of directors as a key element in the structure presence of a good corporate governance in the of corporate governance. On the basis of the re- company helps it achieve the degree of confidence search (Radović, 2010) conducted in the Serbian necessary for proper functioning of the market companies during 2006-2008, the author endeav- economy. The result of such governance is lower ored to establish the state of corporate governance cost of capital, more efficient use of resources and in the corporations in Serbia, and especially the faster growth of the company. Legal, regulatory extent to which the board of directors realizes its and institutional environment influence on corpo- role in governance and to which it contributes to rate governance, but as well as the business ethics, good governance of companies and meeting the shared awareness of the interests of the environ- expectations of shareholders. This paper especial- ment and social interests also influence on a long- ly emphasizes good and bad sides of the boards of term reputation and the success of the corporation. directors and gives the recommendations for the For establishing the state of corporate gover- improvement of governance, with the aim of rais- nance in the business companies in Serbia, the ing competitiveness of Serbian companies and of empirical material is obtained through the survey. financing from the external sources under favor- The companies are selected according to the crite- able terms. ria: various activities and presence of small share- Key words: Company, competitiveness, cor- holders in the ownership structure. porate governance, the board of directors. The survey is focused on the specific relationships and issues related to governance, remuneration and transparency the board of directors with

128 Volume 7 / Number 1 / 2012 technics technologies education management the aim of analysis of the quality of the corporate the tasks of the board of directors and the man- governance in the business companies in Serbia. ager, and/or the executive directors. The questionnaire (Radovic,2010) for the The participants of the corporate governance in members of the board of directors contains 35 Serbia have accepted found boards of directors and questions. The questions are grouped into four they seek to be successful within the existing norms. sections, and they refer to: Placing the corporate governance at the center of –– the basic data on the business company, events and appearance of codes of good practice, –– the composition and operation of the board in conjunction with market conditions of economic of directors, activity, should contribute to increasing of the suc- –– remuneration and cess of the board of directors. According to John –– transparency and audit. Carver and Caroline Oliver, a significant shift requires a new model of governance, and not only the 2. The role of the boards of directors in the improvement of the existing model (Carver, 2002). system of corporate governance One of the problems that is put before the board of directors is also the issue of evaluating The board of directors manages the company the results of the work of the board of directors instead of the owner. The role of the board of di- and the executive directors. The members of the rectors is complex because of the shareholders board of directors, and/or its commission, should that can be minor, individual or large institutional- set the criteria for evaluating (to agree) in such a ized, that can have little or no power, that can have way that they will learn from the previous process. controlling stake owing to the number of shares, The goal of a strong board of directors is to make they vote by the representative with proxy, or a shift in governance in the interest of their owners they come to every annual assembly and actively and the company in general. High grade board of participate in assembly’s work. The board of di- directors sets and creates a powerful management rectors should meet the different interests of the that acts as best it could. shareholders, so for that reason its role is nowa- Although there are different customs, impor- days more important and more significant than it tant events, different organization and structural has ever been. complexity of the companies, nevertheless there The boards of directors have a key role in good are common features of governance bodies that company management. They are also important may be considered as a general model of corpo- for the role of the corporation in the society. A rate governance. The board of directors proceeds good governance is reflected in the rising expec- from the general purpose and nature of compe- tations that are put before the board of directors tence, and not from the structure and the processes in the form of advisory guidelines, principles, rec- in practice. Governance includes every aspect of ommendations, code of conduct, with statutes and business of the company, but it should be sepa- regulations of the government and its agencies, rated from the management. institutions as the stock market, Securities Com- Governance should be seen within the concept mission and others. The board of directors de- of ownership, it resolves the current issues and cides on the goals of the business company and its it imposes higher level of responsibility. It is de- purpose. It manages on behalf of the owners and manding and it awakes a passion for leadership, meets their expectations. The managers decide on but not only the leadership over the others but also the way of attaining the goals and on the choice of on behalf of others (Carver, 2002). The policy of the means. The board of directors defines which the board of directors should be seen as: means are not allowed (acceptable) because they –– steps below the property, and not the steps may harm the reputation of the business company. over management; If the policy of the board of directors is clearer, in- –– active, determined, independent link in the asmuch the management can use faster and skill- competence from the owner to the executor; fully its knowledge in attaining the agreed goals. –– commanding, and not advisory role; The problem is in setting the boundary between –– responsible control of the work of the manager;

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–– team activities, because the chairman is only 3. The board of directors in Serbian system the first among equals; of corporate governance –– transparent business of the company, both to Rules of governance and supervision over gov- the owners and the company. (Tipurić, 2008) ernance are regulated by Law on business companies and Code of corporate governance. The goal of The purpose and nature of the competence of regulation is, in the area of corporate governance, the board of directors require different approach to strike a balance between the power and the influ- to governance and management. These are difference of the bodies in the company, to create a per- ent roles that produce different added values, re- manent and consistent system of the control of the quire different skills and deal with different types work of the management and to protect the rights of of work. Governance may be difficult if these two investors, which enables the business company to roles are not clearly defined. Mixing of governance achieve business success in the long run. role and managerial role in practice we encounter The board of directors is responsible for gover- in giving the role to the chief executive officer and nance of the company in accordance with the rules the role of the chairman of the board. Both roles are and the general acts of the company. It has a fi- accountable to the board of directors, but they cover duciary duty to the company and all shareholders, different areas of competence, so they require dif- also including the minor. The board of directors ferent skills. The success of the chairman of board should tend that the company operates realizing of directors is assessed by the efficiency of gover- profits, and thereby protecting the interests of the nance, and the success of the chief executive officer shareholders, the employees, creditors, consumers is assessed by the efficiency of management. Even and public interest. The members of the board of if these two roles are performed by the same per- directors in this capacity should perform the tasks son, it is required that the roles be separated. conscientiously and should work in the best inter- The quality of corporate governance is reflect- est of the company. ed in greater transparency, less dependence on the The board of directors supervises and deter- management, in the change in the composition of mines the responsibility of the executive directors, the audit committee and in separating the role of as well as the other persons with significant au- the chairman of the board of directors from the thority in the company. The members of the board managing director. of directors have the duty of keeping secret and However, practice shows that the responsibility other confidential information. The board partici- of the board of directors (directors’ board) is rarely pates in defining the strategy of development and mentioned. Governance of the Enrom has shown it shall assess the degree and evaluate the types of the deficiencies in corporate governance. The prac- risk acceptable in achieving the stated objectives. tice of Enrom does not differ from others, often With the authorization of shareholders’ assembly, at the meetings of the boards of directors, a story the board of directors may take defensive mea- about mere fortunate circumstances may be heard. sures that will prevent or aggravate the takeover. The reactions to the case of Enrom more tell about Law allows at least three, and maximum of fif- corporate governance than it tells itself. Top man- teen members of the board of directors, and their agers and the audit committee have born the guilt, number should be odd. Number of members is de- and just minor remarks have been addressed to the termined by Articles of Association, where particu- board of directors. The board of directors controls larly the following is taken into account: a fast and the executive directors and elects the audit commit- effective decision making, different business and tee. If the responsibility is not only formal, then the life experiences of the members, as well as their failure of the executive managers, the audit com- knowledge from various fields important for the mittees and auditors is at the same time the failure governance and management of business company. of the board of directors. The boards of directors At least one member of the board of directors should are at the top of the ladder, but there is no corporate have knowledge and experience in finance manage- awareness, so the media and the public do not see ment and accounting in quoted business companies. them from the point of responsibility.

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The board of directors must have majority of of the committee should be: expertise and profes- non-executive members. Non-executive members sional experience in connection with the activity are persons that are not members of the board of business company, professional and moral in- of directors. The board of directors must have at tegrity, knowledge of the basic principles of busi- least two independent members. An independent ness ethics, company law and mangement. member is a person that does not have business or The committee for remunerations has the task family ties with the company or with the control- of: drawing up a proposal on the policy of remu- ling shareholder, nor do the members of his/her nerations to the members of the board of direc- close family have them, and which may, because tors, the executive board and auditors, establish- of the conflict of interests, influence on objective ing the criteria for remuneration and questioning and independent judgements in decision making. the appropriateness of the remuneration for each It is desirable that the board of directors appoints individual member of the board of directors, the the head of non-executive members, and he/she executive board and auditors. should always be available to the shareholders. The chairman of the board of directors should Code of corporate governance recommends to the not preside over the audit committee. The tasks of companies that the chairman of the board of direc- the audit committee are: drawing up a proposal for tors and the president of the executive board be appointment and dismissal of the members of the different persons, whereby greater independence supervisory board, giving opinion on the appoint- and objectivity in judgements when making busi- ment of the external auditor, giving opinion on the ness decisions would be enabled. contract with the external auditor, the examina- The board of directors reports shareholders’ tion of the application of accounting standards in assembly about its work, presenting reports about the preparation of financial statements, checking the number of sessions held and about attendance the accuracy of financial information before its of each member of the board of directors at the publishing, examination and monitoring the in- sessions. Every member of the board of directors dependence of the external auditor and checking has one vote. The decisions are made by majority the quality of the work of the supervisory body in vote, under condition that there is quorum. the company. The committee should have a timely To increase the efficiency of governance, the access to all information and should hold the ses- board of directors may form the expert commit- sions at least three times per year. tees. The committees represent advisory and aux- On the proposal of the committee for remu- iliary bodies of the board of directors, and their nerations, shareholders’ assembly accepts the decisions have the character of opinion, advice, proposal of remuneration policy in the company, suggestions, recommendations or proposals. The especially to the members of the board of direc- committee can not make decisions, it only per- tors and the executive board. This decision should forms the research, examination or study, and on be a component of the financial statements, and as the basis of this, the board of directors makes deci- a special item on the agenda at shareholders’ as- sions. The board of directors must form the nomi- sembly. The remuneration for the members of the nation committee and the committee for remu- board of directors and the executive board should nerations, and the recommendation is that it forms consist of fixed and variable part. The variable also the audit committee. (Code, Article 217) part should enable the connection of interests of The tasks of the nomination committee are: the members with long-term interests of the com- making proposals for the election of members of pany and its shareholders. The goal of publishing the board of directors and giving opinion on ev- the remunerations is to disable the concealment of ery proposed member, drawing up proposals and the certain aspects of remuneration to individual giving opinion on the members of the executive members, to limit its amount, as well as to pro- board and other activities in the field of personnel vide the shareholders with the basis for validity policies of the company. The members of the com- of received remuneration. A member of the board mittees should be independent and non-executive of directors is not considered independent if remembers. Basic criteria for selection of a member ceives the remuneration that depends on the busi-

Volume 7 / Number 1 / 2012 131 technics technologies education management ness results. Amount of remuneration will depend in coordination with the board of directors and that on the financial situation of the company, on the is in one third of the business companies, which in- economic environment and on the work results of dicates that there are possible problems in corpo- the very member and the board as a whole. rate governance, because neither the owners (nor The conflict of interests between a member of small shareholders) participate in the governance. the board of directors i.e. the executive board and The author’s opinion is that in the business compa- the company exist, when a member of the board, nies where there is no majority owner however, the or a member of his/her family has a personal inter- directors dominate, while board of directors has a est contrary to the interest of the company or is, secondary role and it is usually under the influence directly or indirectly, engaged in other economic of the director. The answers to the question testify subject of competitive activity. In case that there in favor of it: “To what extent does the board of di- is the conflict of interests, a member of the board rectors accept the proposals of the director?” of directors should act in the best interest of the In 78% of the business companies, the board of company, and not in own interest. directors always or often accepts the proposal of the director, which testifies to his/her influence on 4. The results of the research decision making within the business company. In contrast, only in 22% of the business companies The boards of directors of the surveyed busi- it is common practice that the board of directors ness companies have had six members on the av- decides on the proposal of its members. However, erage. The smallest board of directors has three the impression is alleviated by the fact that in one members, and the largest has 9 members. In the fifth of the business companies the proposal of the boards of directors in the sample there are only director is not always accepted, which testifies that 20% of female members. the director does not have an absolute control in the business companies. 4.1. Governance of the business company In Serbia, during the previous decades, the influence of political structures (party organiza- The surveyed business companies (Radovic, tions and powerful individuals) outside the busi- 2010) have assembly, the board of directors and ness company has been large and often dominant. the director, which is in accordance with Law on Therefore, it is interesting to see what the influ- business companies and other legislation, and ence is today when the privatization is at an end. with the tradition of governance of the business The answers to the question: “Has the politics companies in Serbia. 80% of the business com- (influential individuals, political parties, authori- panies have the supervisory board, in 77% of the ties etc.) in recent times influenced on the selection companies there is the executive board, while the of managers, business policy, privatization, orga- committees within the board of directors and the nizational forms of business company and invest- supervisory board exist in only 45% of the busi- ments?“, have confirmed that a direct influence of ness companies. the politics on the functioning of business compa- A classic question from the area of corporate nies is significantly reduced after the privatization. governance is: “Who dominates the business com- Political structures do not have the influence on the pany, in/or, who exercises the control over the busi- selection of managers, organizational structure and ness company (the owner, the board of directors, the choice of investments, in 33% the politics inter- the employees or the director)?”. It results from the feres in the current business policies, in 20% of the survey that the board of directors with the owner companies the politics has influenced on the priva- dominates the decision making in one half of the tization. Whereas in the past the election of practi- business companies, which is very good result cally every director was due to political approval, or from the point of the corporate governance theory. even the director was imposed by the political fac- A dominant influence of the owner in 20% of the tors; now the election of the director is proposed by business companies results from the ownership the board of directors, and shareholders’ assembly structure. The role of the director is important only accepts it. However, neither now the influence of

132 Volume 7 / Number 1 / 2012 technics technologies education management the politics is eliminated. These relatively low per- tion committees, and are adopted by shareholders centages, however, testify that non-economic fac- at shareholders’ assembly, which is natural in the tors still, although far less than before, influence on privatized business companies. On the basis of the business of the business companies. the research it follows that in practice, the Law is It is also evident that the influence of politics is obeyed in its entirety. very high before the privatization. Law on privati- In 22% of the business companies all mem- zation gives the state a right of initiative in the pro- bers of the board of directors are employed in that cess of privatization of every business company, company, whereas in 78% there are the employees so that the state authorities may influence on the outside the company. So, in most there are also process, both formally and informally (creating the external, so-called the independent members the lists of business companies for an accelerated of the board of directors. The independent mem- privatization etc.). bers are not in any formal way dependent on the management and may contribute to the work of 4.2. Action of the boards of directors the board with its independent attitude, whereas, on the other hand, they may be less interested in The board of directors is, as the representative the fate of the business company, just because they of the owners, in most of the modern world the have neither financial nor other interests in it. main body of governance of business companies. The meetings of boards of directors are held: Its primary responsibility is providing long-term over 15 times per year in 25% of the companies, profitability and supervision over the manage- from 10 to 15 times in 25% and less than 10 times ment. In most countries the board of directors is in 50% of the business companies. responsible for adoption of the business strategy So as the members of the board of directors and setting up, dismissal and remuneration of the could work successfully, it is certainly necessary management. In fact, its job is to protect the inter- that they dispose of information on the business ests of the company and its owners before all that company. However, the answers to the question can endager it, so thereby also the management. “Do the members of board of directors have unlim- The board of directors in the business compa- ited access to information and documents?“ have nies performs the tasks common to the boards of shown that it is not the case in 10% of the business directors. It regularly submits annual reports to the companies. The directors believe that there is busi- assembly, suggests distribution of profits, appoints ness information that the members of the board of and dismisses the general director, gives guidance directors should not know, which is unacceptable on the business policy and makes investement de- from the point of corporate governance. cisions. In all surveyed business companies the Of the members of the boards of directors that boards of directors perform tasks within its com- have answered the survey, 87% are not in the petence on the whole. boards of directors and the supervisory boards of One of the attempts of determining the position other companies, whereas only 13% participate in of the board of directors is questioning on whose the work of two more boards of directors or su- proposal it is chosen in the present composition. pervisory boards. These results show that there is We may assume that board of directors owes the no significant accumulation of functions, which loyalty to the proposer, and/or protects his/her in- would otherwise negativelly influence on the terests. To the question:“On whose proposal has quality of corporate governance. the board of directors been chosen?“ possible an- In 60% of the companies from which we have swers were: on the proposal of the director, share- got the answers, there is the rules that regulates the holders, the employees and the committee for work of the board of directors. Even 40% of the election and the nomination committee. members of the management claim that the rules In 77% of the business companies the pro- does not exist, which we may only accept in part. posers of the current members of the board of It remains unclear whether it really does not exist directors for candidates are shareholders, and in or perhaps this answer testifies to the insufficient 33% the members are proposed by the nomina- knowledge of the company by its own members.

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To the question “Are there documents that reg- quite different in Serbia. In 16% of the surveyed ulate the conflict of interests between the members business companies, the questions about the remu- of the board of directors, shareholders and the cor- neration have not been answered to, which indi- poration?“ 60% of the interviewees have answered cates the attitude of the employees that the data that such document exists, whereas 40% are of the on the way and amount of the remuneration for opinion that such situations are not regulated. the board of directors should not be transparent. The opposite situation is in the question “Are The interviewees were unpleasantly surprised by the issues related to the transactions with con- the questions about remuneration and they were nected persons regulated by the statute or the rules not ready to disclose specific data. Such attitude of procedure?“. Even 60% of the members of the testifies to the existence of founded remains of the boards of directors consider that this issue is not old system or of the insufficiency of knowledge in regulated, whereas 40% confirm that there is the the field of corporate governance. rules that regulates the transactions with connect- The criteria for remuneration in 75% of the ed persons. Since this problem has proved to be companies are defined by the contract, whereas key in developing the quality of corporate gover- they do not exist at all in 25% of the companies. nance, it is necessary to give attention to it in the Explicitly defined criteria in the statute, the rules developing the code of corporate governance. or some other document do not exist. It is obvious The members of the board of directors are that the amount of the earnings of the members of largely satisfied with the quality of communica- management is mainly defined by negotiations, in tion with the supervisory board (even 40%), com- accordance with specific terms. There are condi- pletely (25%), partially (25%), and 10% of the tions for significant improvement of transparency interviewees have not answered. Since 65% of in this area. the surveyed persons are satisfied with the coop- The most important criteria for remuneration eration from the point of the quality of corporate are: fulfillment of the plan, implementation of stra- governance, the question is whether there is an ad- tegic objectives and the success of business in the equate supervision and transparency of business field of which an individual member of the board toward the shareholders and the public. of directors is charged. Loyalty to the company The members of the board of directors have and the quality of reporting is of lower importance indicated in 50% of their answers that they are in the remuneration. completely satisfied with the legality of business, Special benefits in the remuneration are pres- profitability and company’s reputation. The other ent only in 30% of the companies and that is in the half of the interviewees is largely satisfied. If we form of a car for private use. In most companies start from the results of business of the individual (even 70%) there are not any forms of special bene- business companies, the question is whether it is fits, there is only fixed salary, which indicates to the the best possible result or it could be better. It re- possibility of introducing of new forms of stimula- mains an open question: whether the shareholders tion for the members of the board of directors. are satisfied as the members of the board of direc- In 70% of the business companies the remu- tors are, bearing in mind the decline in share price neration is paid fixedly, in cash, and in 30% of the in a significant number of the surveyed business companies the members of the board of directors companies, as well as the fact that, as a rule, the receive the remuneration in the form of fixed and dividend is not paid. variable part, in proportion 50%-50% or 70%- 30% in behalf of fixed part, where variable part is 4.3. Remuneration the members of the boards paid in cash. The means for increasing the motiva- of directors tion in corporate governance for the members of the board of directors may be, besides the fixed, Different techniques of remuneration of the also the variable remuneration. members of the boards of directors have the goal The measures to the remuneration of the mem- of encouraging the best possible work in the in- bers of the board of directors in the period 2006- terest of the company. However, the situation is 2008 were applied as follows: remuneration in

134 Volume 7 / Number 1 / 2012 technics technologies education management shares in 10% of the companies, the variable part flict of interests of the members of management of the earnings and profit sharing of the members in relation to the company or the shareholders, as of the board of directors in 20% of the companies, well as the transactions with connected persons. the connection of success with the variable remu- It may be concluded that there is space for the in- neration in 10% of the companies, and in 40% of troduction of the variable part of the remuneration the companies there are no developed criteria for in the business companies where the payment is additional remuneration. This confirms that the only in the form of fixed earnings, and/or that the system of remuneration of the members of the variable part of the remuneration can be increased board of directors is still undeveloped. In the peri- with the aim of better motivation of the members od from 2006 to 2008 only in 12% of the business of the board of directors in achieving business re- companies the members of the board of directors sults. The remunerations for the members of the got the credits. board of directors are not transparent. A cumulative remuneration to all members of The application of good practice of corporate the board of directors in two thirds of the business governance, the completion of the privatization, companies is transparent, and/or it is published at creating of code of corporate governance on the an annual shareholders’ assembly, whereas in 25% basis of own experience and strengthening the neither these data are published. The results of the rule of law will undoubtedly increase the success survey suggest in favor of the common opinion of the business companies. The standards of gov- burdened by the past that the data on the remuner- ernance include the expansion of the issue about ation are secret and that even shareholders them- complex relations with interested parties through selves must not know them, which is a significant everyday application and monitoring of these rela- obstacle to transparency. tions and the introduction of so-called the system for governance that would enable the corporation 5. Conclusion an everyday clear insight into the governance and mutual influence of the corporation and the soci- On the basis of the research it follows that in ety from the economic, social point and in terms the boards of directors there are 6 members on the of the environment. average, and 20% are women. All surveyed companies have the boards of directors, and only 45% References have the committees for special areas. The board of directors with the owner dominates the decision 1. Begović B, (et.al.), (2003). The improvement of cor- making in one half of the business companies, porate governance. Beograd: CLDS. which is a very good result from the point of the 2. Blair M. (1995). Ownership and Control, Rethinking corporate governance theory. In the business com- Corporate Governance for the Twenty-First Century. Washington: The Brookings Institution. panies that do not have the majority owner, the directors dominate, whereas the board of directors 3. Carver J (2004). Corporate boards that create value. has a secondary role and is usually under the influ- Jossey-Bass of John Wiley&Sons. ence of the directors. The influence of the politics 4. Lojpur A (2004). Corporate governance in theory on the privatized business companies is signifi- and practice. Podgorica: University of Podgorica, Faculty of Economics. cantly reduced in recent years and their director is elected on the proposal of the board of directors, 5. Monks R.A.G. and Minow N (2004). Corporate Gov- and is accepted by shareholders’ assembly. ernance. : Oxford: Blackwell Publishing. Analysis of the results among the members of 6. Mallin A. C (2004), Corporate governance, Oxford: the board of directors has shown that most busi- University Press. ness companies apply the legislation in the work 7. Principles of Corporate Governance (2004). OECD. of the board of directors, like the existence of the 8. Radovic M (2009), Global economic crisis and the rules and limitation in making of certain strategic Importance of Corporation Governance for Serbia. decisions, whereas the situations are insufficiently Challenges of the world economic crisis, University regulated in which there is or may exist the con- of Niš, Faculty of Economics, pp. 95-105.

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9. Radovic M (2010). Corporate governance - corporate experiences in Vojvodina. Novi Sad:USEE. 10. Ristic Z (2004). Corporate governance in EU and Serbia. Prizma. Beograd: Revicon d.o.o. pp. 12-22. 11. Stability Pact (2003). South East Europe Compact for Reform, Investment, Integrity and Growth – White Paper on Corporate 12. Governance in South East Europe– Prepared by the South East Corporate Governance Roundtable and the Corporate Affairs Division in Co-peration with the Investment Compact Team. OECD www. stabilitypact.org 13. Stainer A. and Sainer L (2002). Business Perfor- mance – a Stakeholder Approach, International Jo- urnal of Business Performance Management, No. 1. 14. Tipurić D (2008). Corporate governance.Zagreb: Sinergija. 15. Code of corporate governance. Official Gazette of the Republic of Serbia 1/2006. 16. Law on business companies. Official Gazette of the Republic of Serbia 125/04. 17. Belgrade Stock Exchange, www.belwx.co.rs 18. The Central Registry of Securities, www.crhov.rs 19. Securities Commission,. www.sec.gov.rs 20. The Business Registers Agency, www.apr.gov.rs

Corresponding author. Milica Radovic, Faculty of Legal and Business Studies, Novi Sad, Serbia, E-mail: [email protected]

136 Volume 7 / Number 1 / 2012 technics technologies education management Information-communication and documentation flow within R&D function model

Dejan Ninkovic1, Aleksandar Sedmak1, Snezana Kirin2, Ivan Rakonjac1, Mirjana Misita1 1 Faculty of Mechanical Engineering, University of Belgrade, Belgrade, Serbia, 2 NIS, Novi Sad, Serbia.

Abstract has to have defined vertical structure with the access up to highest strategic, decision-making levels. Nowdays, R&D function is being treated as This approach, with “descend” onto lower hierar- strategic one, in any given system. This fact de- chy levels, is known as “top-down” principle, [2]. termines method for its introduction into the system, through “top-down” principle. Since knowledge is not a category reserved for any particular 2. Introduction steps [2-4] strategic level, linkage of R&D with other system Methodology and steps of R&D function in- functions is of necessity, production and mainte- troduction into medium (150-250 employees) and nance functions being of increased interest. This, large enterprises is depicted in Fig. 1. R&D function, structuring has to be conducted in Potential analysis - Aim is to determine avail- the manner enabling its maximum efficiency. Part ability of human and technical resources, and defi- of that, structuring, process are introductory steps, nition of future development of the function. Main followed with proper documentation and infor- elements of the analysis are: multi-parameter mation-communication and documentation flow. structure of human resources, existence and way The function, itself, has been divided onto spe- of long- and short-term goals definition, existence cific constitutive parts-modules, depending of the of written procedures in connection to engage- specific tasks addressed by a group of activities, ments on the activities that, by definition, can be which, grouped in that fashion, constitute particu- construed as R&D, functionality of communica- lar module, as shown within this paper. Devised tion and decision making chains in the presence of and presented model is suitable for medium and the activities that, by definition, can be construed large companies. Connection to decision-making as R&D, ways and methodologies of documenta- process and risk management should also be taken tion keeping and access to that documentation, ex- into consideration upon reflection on the R&D istence of the laboratories and accreditation level, functionality. level of hardware and licensed software (and its Key words: R&D, function model, documen- inter-compatibility) availability. tation flow R&D functional model analysis – Organiza- tion, as well as the operating model, depends upon 1. Introduction function position and its primary role, and its interaction with other parts of the system in which Different researches [1, 2] have established that it operates and external surrounding. Main pa- R&D function represents strategic function of any rameters for analysis are: market orientation; pos- given system. By that, methodology of its intro- sibility of participation when calls for proposals duction and functioning is being determined: in- are being issued; reaction rate; quality of project troduction must be executed on the strategic level, teams. Basic models organization-wise are: but, since knowledge is not a category reserved for 1. Formal – Organizations which represent any particular strategic level, linkage of R&D with system, by itself, regardless of the fact other system functions is of necessity. In particu- weather they are part of the larger system, lar, production and maintenance functions are of are characterized by this structure type. increased interest. While that, R&D function, itself, Organizational model is oriented towards

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Figure 1. Block-diagram of methodology and steps of R&D function introduction

the market and profit with equal treatment 3. R&D function modules [2-4] of the rest of the system (if existent) and external clients. In that scenario, division In order to fulfill its goals, R&D function is strict, according to field of expertise, and must incorporate certain elements, which, when inter-department cooperation is established grouped in connection to specific part of the func- when multidisciplinary approach is required. tion, define segments/modules of the function, de- Certain elements, in terms of logistics, termined by proper documents (Figure 2). are common (ICT, legal and economic department, bookkeeping, and similar). 2. Functional – Within this model division onto departments still exists, but it is not so formal in nature, in the sense that elements of project teams exists, but engagement of the recourses from other parts of the system (implying matrix structure) and outsourcing is being facilitated with more ease 3. Mixed – part of the structure, above all, of the management personal, with extensive and proven experience, exists and is of formal nature, while other part of the structure, formed by particular project requirements is being formed through functional association and recourses engagement

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–– defines categories of projects, way of participation and financing models –– defines methods for function’s work quality assurance, through definition of the necessary structures, personal and their duties and responsibilities, engagement period, etc. –– defines decision-making procedure –– defines transparency of work –– defines way of evidence keeping

b) Work program – essentially important in the process of registration, and comprises of: –– Goals: main and particular ones –– Main directions for engagement, by the engagement areas –– Methodology

c) Recommendation on project cost realization – of economic nature, and defines: –– existence and position of separate Centre account Figure 2. Presentation of R&D function`s consti- –– existence of separate sub-account for every tutive elements-modules particular project and possibility of means inter-transfer Legal frame module – In order to facilitate –– method of supervision over direct and easier relationship with external surrounding, es- indirect project related costs pecially having in mind possibility of participa- –– method of work compensation for engaged tion when EU/international calls for proposals internal and outsourced personal are being issued, it is of advantage to have a legal –– relationship with other legal entities, “bearer” of the function within the system - im- engaged in the project realization plies to the systems which are not by definition/ legal status Scientific-Research (SR) or Research d) Recommendation on project cost realization (R) Organizations. Usual name for that kind of – of economic nature, and defines: entity is “Center”, while more accurate determi- –– existence and position of separate Centre nation depends upon the provisions of state’s law, account regulating the matter. It is necessary to define legal –– existence of separate sub-account for every foundation of such Centre, and those documents, particular project and possibility of means by their essence, represent legal acts. Typically, inter-transfer those documents are: –– method of supervision over direct and a) Regulations on the Centre work – basic indirect project related costs document, formed in accordance with –– method of work compensation for engaged appropriate law, hence generic name, and it: internal and outsourced personal –– determines goals and organization –– relationship with other legal entities, –– defines terms and area of work and engaged in the project realization engagement –– defines function “bearer” (Centre), its Selection and appointment of evaluators organization and goals module – Standard practice connected to R&D –– defines, in general terms, work program function implies existence of persons capable of competent evaluation of project proposals.

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Complete procedure of evaluators selection ○○ Data on natural persons involver in and appointing must defined by documents, such project realization are: ○○ Additional information (drawings, –– Guideline for selection and appointment of Figures and similar) evaluators – defines way of call publication, appearance of the form for application, Evaluation and proposals ranking module – criteria for received forms evaluation, Following the reception of project proposals, their method for data bases (of interested experts) evaluation and strategic orientation of the system formation, method of communication on compatibility must be conducted. Positive ones, relation Centre-interested experts must be ranked in accordance with appropriate –– Form for application – by its essence CV of parameters (technical, technological, economic, an interested person. Remark: one person time frame, impact, etc.). can be expert in more than one field – thus Evaluation – conducted by evaluators, which is more than one entry in data base may be being done and recorded following the next docu- applied/required. ments: –– Form of evaluation of application – by –– Guideline for evaluation, defining the its essence it is the application form with procedure, time frame and phases (for evaluation in accordance to prescribed complete and partial project proposals), criteria (scale). number of steps/stages, number of evaluators, possible interviews, terms upon which Project application module – Methodology evaluation is being considered as positive for knowledge and ideas practical implementation or negative one, as well as communication is different, but the most common one is through channels on relation Center-evaluator and project realization. It is to be expected that the larg- evaluator- submitter est number of project proposals will come out the –– Evaluation form 1, representing quantified ranks of employees, due to their daily connection evaluation, constituting of two segments: first with working environment, but will not be limited one represents the evaluation on technical to it. In order to rationalize time and resources aspect(s) of the proposal, and the second one utilization, standard practice, with accompanying of the budgeting aspect documents should be introduced: –– Evaluation form 2, representing evaluator’s –– Guideline for project application, defining, explanation on the given number of points, in general terms, the following basic and suggestions for proposal improvement, elements: which, functionality-wise, represents ○○ project application (engaged persons, evaluators remarks, along with the estimation method, documentation level) on interview usefulness. This form is ○○ project proposal evaluation (time-table, presented to the “Experts Council” in signet, number of stages, criteria under which and to the submitter in anonymous form project proposal is being considered to be positive or negative one, interview Project ranking is being done by “Experts possibility) Council” based on the number of points given ○○ monitoring and reporting by the evaluators, and, in need, on the conducted ○○ IPR multi-parameter analysis, constituting of addition- –– Project proposal form - descriptive, which al criterions for proposal evaluation: qualitative- contains information on: proposal must meet them, and, quantitative-with ○○ Name of the proposed project ponder value, and can be done for: ○○ Data on submitter of the project proposal –– Group of the same proposals ○○ Abstract of the proposal –– Group of similar proposals ○○ Description of the proposal –– Different proposals ○○ Data on proposed partners

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Monitoring and reporting module – In order 1. Project proposal submission and evaluation for Center and Experts Council to be informed on ○○ full project proposal the progress of the project, and to retain control ○○ partial project proposal over expenditure and engagement of the resourc- 2. Ranking and project proposals approval es, certain reports must be submitted to afore men- 3. Monitoring and reporting tioned parties, by head of the project: –– Budget report form Based on the all of the above said, one can only –– Kick-off meeting report, identifying, at the deduct that proper decision making process [5-7], beginning, immediate actions and goals along with good risk management capability is of –– Status report form, depicting rate of activities outmost importance [8, 9]. realization and goal reaching, in comparison to the projected one, with conclusions and 4. Conclusion course for further, short term, work –– Periodic report form, depicting rate of Based on the above stated, certain conclusions, activities realization and goal reaching, in in connection with the devised model itself, can be comparison to the projected, in defined time derived [2]: period. Comprehending, as well, overview –– Methodologically precise and clear forma- of the main project activities and priorities, tion path, facilitating strict documentation for the following period and information flow in any aspect and –– Finishing report form, comprised of the segment, and in any given time, of R&D recapitulation of conducted activities, main function formatting and operating. obstacles, along with the resume of the budget –– Clear definition of function basic elements Document R&D function procedure – binds (modules, segments), along with way of all of the modules in one entirety and defines all of their connection via appropriate documents, the function chain elements. Besides afore men- including hierarchy of those documents. tioned modules, which are, in general terms, regu- –– Flexibility is incorporated, thus enabling the lated by this document, while, in more detail regu- model to be adjusted to any particularity of lated by appropriate Guidelines, in it other aspects the system. are being regulated, as well: –– Model is widely usable, regardless of the –– types and categorization of project proposals, system’s primary field of engagement. and, thus, method for their approval –– Facilitates controlled development and –– formation of the project teams (including utilization of new materials and/or techno- the engagement of natural persons within or logies. outside the system, cooperation with other –– Enables optimal knowledge and IP mana- legal persons, definition of obligations, lia- gement. bilities, etc.) –– Enables connection to decision-making pro- –– changes during the realization of project cess [5-7] and risk management [7-9] activities –– IPR Devised and presented model [2] is suitable –– documentation storage for medium and large companies, which has been demonstrated by constitution of R&D function in Everything, afore presented, when modules are two enterprises [3-4], first being constituted of just properly combined, constitutes functional model over 250 employees [3], and the other having, at of R&D function, out of which proper documen- the time of model introduction, more than 10,000 tation channels, and flow, can be derived, as pre- employees [4]. Linkage of R&D with other sys- sented in Figures 3-6, [2]. tem functions have been taken into account, since Due to its complexity, in order to present it, that knowledge is not a category exclusively reserved information-documentation flow is being divided for any particular strategic level, or function. onto characteristic phases:

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Figure 3. Phase - Project proposal submission and evaluation, subcase partial proposal submission and evaluation, block-diagram of information-communication and documentation flow

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Figure 4. Phase - Project proposal submission and evaluation, subcase full proposal submission and evaluation, block-diagram of information-communication and documentation flow

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Figure 5. Phase - Ranking and project proposals approval, block-diagram of information-communication and documentation flow

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Figure 6. Phase – Monitoring and reporting, block-diagram of information-communication and documentation flow

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7. Ninkovic D.: “Utilization of decision-making algorithms within the area of renewable energy sources” – Proceedings of the SIMTERM 09, 14th Sympo- sium of the Society of Thermal Engineers of Serbia, printed form: abstract session V, pp 269, full text - in electronic form on disc, session V, 2009 8. Kirin, S., Grubic-Nesic, L. Cosic, I.: ‘Increas- ing a large petrochemical company efficiency by improvement of decision making process’, Chemical Industry 64(5), 465-472, DOI: 10.2298/ HEMIND100710048K, 2010 9. Kirin S.: Risk management within today’s industrial systems, (in Serbian), Ph.D Dissertation, Faculty of Technical Sciences, University of Novi Sad, Serbia, 1997

Corresponding Author Dejan Ninkovic, Faculty of Mechanical Engineering, University of Belgrade, Belgrade, Serbia, E-mail: [email protected]

Figure 7. Presentation of R&D function documents hierarchy

References 1. Stanojevic, P.: Influence of technical factors onto organizational structure of maintenance function, (in Serbian), Ph.D Dissertation, Faculty of Mechanical Engineering, University of Belgrade, Serbia, 1997 2. Ninkovic, D.: Optimization of the maintenance model from the utilization of new materials point of view, (in Serbian), Ph.D Dissertation, Faculty of Mechani- cal engineering, University of Belgrade, Serbia, 2009 3. N/RD-2009 project documentation 4. МN/R4-2006 project documentation 5. Ninkovic D.: “Optimization of decision-making process within manufacturing facilities”, Proceedings of SIE 2009, 4th International Symposium of Industrial Engineering, pp. 92-96, 2009 6. Ninkovic D.: “Utilization of decision-making algorithms in the production of equipment for heating, refrigerating and air-conditioning - global climate change-wise”, printed version (in Serbian) – Pro- ceedings of 40th Jubilee International Congress on Heating, Refrigerating and Air-Conditioning (KGH 09), pp. 280-289, 2009

146 Volume 7 / Number 1 / 2012 technics technologies education management Tax policy of south-east Europe and the European Union as a function of economic development

Boris Siljkovic1, Borislav Radevic2, Bojan Jokic1 1 Higher Economic School of professional studies Pec in Leposavic, Serbia, 2 Department for law – economic sciences, State University of Novi Pazar, Serbia,

Abstract After all, the work that lies before us is divided into four areas of research through: firstly, tax reform Between the tax policies of Southeast Europe in Serbia and the EU countries, secondly, issues of and the European Union there is considerable di- tax policy and operations of offshore companies in versity just in terms of economic development. Serbia and a third over the practical aspects of the This situation is actually a consequence of eco- administration of current tax policy in Serbia against nomic competitiveness production levels, em- the same in the European Union. And of course, the ployment rate, exports and imports, investments, conclusion is given a comprehensive overview of savings, etc. Predictions provided by economic the steps made so far in the area of tax policy with theory in terms of tax policy in this field differ on concrete proposals how to proceed. the examples of the work presented directions of tax policy not only in EU countries but also major countries of Southeastern Europe. As a general 1. Tax reforms in Serbia and the European assessment that would perform a characteristic Union countries of tax policy in Serbia in relation to the Member Fast implementation of tax reform in Serbia States of the Organization for Economic Coopera- will be an incentive for increased production, job tion and Development (OECD) is that the lowest creation, increased competitiveness of the domes- taxes on capital and profit, and most of the work tic economy and reduce of the black economy, and and consumption. Serbian State announces change also to protect the most vulnerable population. To of legislation in late year of 2010 will be in accor- implement such a reform is entering text under- dance with European regulations. standing and support of citizens, and good laws Key words: tax, policy, economic develop- and their effective implementation.1 Tax reform ment, consumption. should be comprehensive, which means that simultaneously with changes in tax rates, which will Introduction be taxed consumption rather than production, will reduce public expenditure. If we compare the ba- Tax policy of Southeast Europe and the Euro- sic tax rate in Serbia, they are relatively small: the pean Union and Serbia in particular has gone and income tax, profit tax, property tax, VAT. When it is going through the many challenges as a result the global recession is behind us, it will be nec- of various economic policies and the role of pub- essary to implement tax reform that will have a lic sector inside of them. Relevant indicators that positive effect on exports, savings, investments we obtained through the work clearly shows that and employment, reducing the relative burden of the most challenging, but also the most success- exports, employment and investment. ful ventures in the field of tax reform the previous On the other hand, it is necessary to discourage transition process of countries of Southeast Eu- consumption and imports by increasing their rela- rope and Serbia have been made on the model of European Union countries with the aim of stimu- 1 Djurovic-Todorovic, Jadranka, Djordjevic, Marina: Tax lating exports, employment and production which Reforms in South Eastern Europe, Business Policy, vol. should lead to a economical stability. 34, iss. 6, Belgrade, 2005., pages 25-27.

Volume 7 / Number 1 / 2012 147 technics technologies education management tive prices. One of the solutions offered by experts and Lithuania from 18 to 21 percent, Estonia from of the Fund for Development Economics by in- 18 to 20 percent, Greece with 19 to 21 percent. creasing the VAT from 18% to 22%, which would Also, economic theory suggests that taxation of bring Serbia in to “golden middle” comparing with consumption or less slows down economic devel- the countries in the region, with a rate lower than in opment by taxing capital and labor. Hence, recent Hungary (25 %) and Croatia (23%) but higher than studies suggest that the OECD is able to consider in Bulgaria (20%) and Romania (19%). In this way a revenue-neutral tax reform that would reduce the we can bring additional revenue of GDP from 2.5% taxation of labor and capital, and increased taxa- to be used for other conditions stimulating econom- tion of consumption. Thus, Germany 2007th The ic growth - job creation and reduce unemployment.2 increased tax rate from 16 to 19 percent, while re- Table 1. VAT rate in Croatia and some countries ducing levies on corporate performance. Hungary of European union in 2010 increased tax rate in 2009 from 20 to 25 percent in Country VAT (rate) order to enable the tax burden of employees sala- Hungary 25% ries. Similar draft tax reform were discussed in Bel- Croatia 23% gium, France, Holland, Croatia and others. It seems Greece 21% certain that we will in the coming period see the tax Lithuania 21% race to 25 - because EU rules allow a maximum Latvia 21% tax rate of 25 percent. By increasing the tax rate the Estonia 20% state will try to create conditions for the significant Bulgaria 20% tax relief to stimulate earnings regional competi- Romania 19% tiveness, employment and economic development. Germany 19% Scandinavian countries in early nineties, have ad- Source: Arsic, Milojko., Altiparmakov, Nikola., Randjelovic, opted economic realities of globalization and left Sasa., Bucic, Aleksandar., Vasiljevic, Dusan., Levitas, Tony.: their synthetic systems of income tax – moving to "Tax policy in Serbia – a view forward", FREN i USAID, Bel- so-called dual income tax system. grade, March, 2010. The essence of the dual system is that capital income taxation low tax rates, while income from The recent economic crisis has resulted in the work (primarily wages) tax the progressive rates. unenviable situation of the budgets of many states Many European countries have also introduced of the European Union, which had been forced to a de facto dual income tax system - Greece, Italy, increase taxes in order to avoid a crisis of public Austria, Hungary, Slovenia, Germany and others. finances.3 However, most countries have decided Some other European countries have gone a step not to raise taxes on profits or income, but the pri- further and introduced a low tax rate on capital in- mary measure was an increase in VAT rates: Latvia come and on income from labor - the so-called flat tax systems. In this group of countries are Slovakia, 2 Tax policy in Serbia – a view forward on the usefulness Romania, Czech Republic, Bulgaria and Macedo- of introducing a flat tax system in salaries, increase the VAT rate (more from 18% to 22% and lower from 8% nia. Clearly, then, that Europe is turning its back on to 12%) and the tax system as an essential element of the synthetic system of income tax, and that Serbia competitiveness. Discuss possible directions of tax reform the optimum solution for its income tax should seek is an essential and primary to the whole debate on the between the flat tax and a dual income citizens tax effectiveness of public sector and fiscal consolidation as a system. From European practice we can see another necessary conditions for long-term sustainable economic and social development of Serbia. Raicevic, Bozidar.: upcoming trend - increased taxation of consump- Tax reform in Serbia - what to do and when, Accounting, tion (higher tax rates, primarily) and the reduction vol.54, number 5-6, Belgrade, 2010., pages 152-158. of income tax and corporate citizens. 3 Controlling of growth money rate supply provides This tax trend as well is caused by economic glo- the expansive economic development, employment balization, but also with a high degree of regional growth, keeping inflation under control and protects the currency in the interbank market. Sabovic, Serif.: Bank and international competition. Specifically, income Management, Higher Economical School of Professional tax (earnings before all) significantly reduces the studies Pec in Leposavic, Leposavic, 2007., page 10. competitiveness of countries and hinders econom-

148 Volume 7 / Number 1 / 2012 technics technologies education management ic growth than is the case for taxing consumption has a very extensive set of tax relief system, which (VAT). Hence, many European countries are con- means low effective tax rate, considerably lower sidering draft reforms to the tax relief fund earning than the nominal tax rate, which only implies the higher rates of VAT. Germany and Hungary have conclusion that the tax system is very competi- already implemented such a tax reform. A similar tive compared to other countries. Although no ex- tax reform would be a very tempting option for Ser- act data, partial empirical analysis show that the bia, which years saw high rates of unemployment, branched set of tax benefits resulting in effective inflation and high foreign trade deficit.4 tax rates in Serbia than 5% - 6%.5 Serbia has a nominal rate of corporate income tax which is uniform and proportional, and is 10%. Tax relief for tax exist in other states, but not broad as in Serbia. Thus, in the Czech Republic, for certain categories of companies, there are tax exemption on profits for a period of 10 years. In Croatia, there is reduced income tax rate for companies in certain industries. Croatia and Estonia have the highest rates of income tax, (Croatia 20%, Esto- nia 24%) and Bulgaria 15%. In addition, Serbia Picture 1. Inflation in Serbia and Balkan region in 2010 4 EU member states can not disclaim sovereignty in the Source: SIEPA, Beograd, 2010. tax area. Or, while the Serbian government under the influence of the IMF and make Brussels a tax law that would limit the fiscal sovereignty of countries in Western Europe and the United States for centuries because of the tax led wars (or the fall of the government). For example, the Dutch provinces and the taxes have started a war with Spain; the famous law of tea has led to the American Revolution ("Boston Tea Party"). Also, the Swiss took the lead their war for independence because of government taxes and Margaret Thatcher was dropped when the 15 million Britons refused to pay taxes. Also, the main sources of Aki komuniter, such as the EC Treaty of Picture 2. Tax rates in 2010 in Serbia Rome, have only a few members of the taxes. Also, even Source: Serbia investment and export Promotion agency (SI- after almost 60 years since the establishment of the EU EPA), Beograd, 2010. has no uniform rate on income from corporate tax (only EU agreement on arbitration, which should eliminate the double taxation). The fact is that after almost 60 years 2. Problems of tax policy and operations since the establishment of the EC there is no single tax at of-shore companies in Serbia EU level in relation to personal income. Finally, there is neither a uniform rate of VAT at the EU level. Therefore, What characterizes the tax policy in Serbia in the EU, as it writes the famous expert for Aki komuniter relation to the Member States of the Organiza- prof. Miroslav N. Jovanovic: "Very little has been done tion for Economic Cooperation and Development in the field of taxation approach" because of political reasons, EU member states can agree on in this area. (OECD) is the lowest taxes on capital and profit, Specifically, EU countries jealously guard their taxes, and most of the work and consumption. In Serbia, and no European integration is not essentially failed in operates between 13 and 15 percent of companies this area for 60 years. This fact shows that the myth about whose headquarters are on "offshore" destinations a free European market and European supranational state and it is a significant amount of profit is taken out largely false. If not, then the prices of the same types and makes of cars should be the same in all EU countries. of the country and it’s not subject to tax. Mirovic, Dejan.: European law on tax procedure and administration, data and information downloaded 5 Momirovic, M. Dragan., Zdravkovic, Dragan.: Impact from website http://www.nspm.rs/ekonomska-politika/ of tax incentives to build competitiveness with special evropski-zakon-o-poresko..., Belgrade, available on emphasis on Serbia, Transion, Magazine, Zagreb, Vol. 17.12.2010. 11, No. 23-24, December 2009., pages 42-57.

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According to some estimates each year budgets It is interesting that if you look at the history of of countries in the world remain deprived of the tax havens, their existence dating back to imperial 255 billion dollars because of tax havens. Russian times in Europe. Today there are many tax havens wealthy during the nineties of the twentieth centu- in Europe. The British Empire has established a ry, estimated to be transferred to tax havens in the lot of tax havens in the islands such as the Carib- equity value of at least $ 500 billion. According to bean, Virgin, Cayman, Bermuda, Bahamas and so some information, almost two-thirds of all trans- on. These areas were closely associated with Lon- actions in New York’s financial market is done don. The very British capital is categorized as a tax with money from the offshore zone. It is clear that haven. Another important lever are United States. as long as there are taxes, will be attempting to Many people do not realize that there are many of avoid their payment. Previously, tax havens were the states in the USA that operate as tax havens: a black hole since it was known where the money Florida, Wyoming, Nevada, Delaware. Then there included, but not where it ends. Now these black are the US Virgin Islands and Marshall Islands. holes a little illuminated, thanks to the activities of So, a very powerful states benefit from the exis- the OECD, especially in the last three-four years. tence of tax havens, which is at the expense of the rest of the world. Now of particular concern to the East, African countries, then the Middle East, Sin- gapore and of course, Hong Kong, are developing activities of tax havens. Therefore, it is a global phenomenon that requires a global solution. Tax havens, we call them mysterious powers (secrecy jurisdictions), are one of the main features of the global economy, especially with the liberalization of financial markets and the globalization process in the last 30 years. This, in our opinion, have devastating consequences for developing countries, and developed, because it allows Picture 3. Structure of tax revenues in the Euro- the rich around the world to move their personal pean Union and Serbia wealth to exotic islands or large financial centers Source: SIEPA, Beograd, 2009. such as London, to avoid paying taxes. Mean- In all countries and in particular in Serbia, it while, tax havens have become a key business for has a very extensive underground economy, and multinational companies shift profits from coun- to 40 percent of GDP. The goal is that so called tries in which it achieved at the places where they "Gray" or "black" economy zone translates into do not have to pay tax on the income. If it deals "white", but it will not go quick or easy. In this with the changes of corporate income tax, we respect, Germany, with all the fences in a com- stress that the tax evasion worldwide problem and prehensive assessment, a percentage of the gray that it did not solve the country with far greater ca- economy is between 10 and 15 percent of GDP. pacity of Serbia, such as Canada and many other And that’s a lot of money - between 230 and 260 developed countries. The problem of poor charg- billion Euros. Affect only about ten percent of that ing tax in Serbia cannot be solved by changing tax amount, would be a great success for each head regulations, but only a more efficient application of tax administration and especially in Germany.6 of existing ones.

6 In all modern economies in terms of market economy, whether developed or developing countries, there is a phenomenon that we call the underground economy. It is actually illegal economy, which according to some research project 30% of the total economy. Simovic, Milos.: Monetary and public finance, Economical faculty, Pristina - Blace, 2000., page 331.

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Table 2. Overturn of companies in Serbia toward is to one day become part of the European fam- of-shore zones of the individual countries in 20107 ily, need to respect, among other matters, and that Country In milions of euros local authorities allow entry into the VAT system Switzerland 134,9 for every company that has an annual turnover of Cyprus 30,0 more than 5,000 euros. Under current law, in Ser- Nederland 20,0 bia are obliged to enter the VAT system, all those British Virgin islands 5,8 who have an annual turnover of four million di- Panama 5,7 nars (40,000 euros), while those with between two Luxemburg 2,5 and four million dinars may, but need not, be li- Lichtenstein 2,1 able to this type taxes. Source: Mihajlovic, Zoran.: Cyprus and Virgin Islands Table 3. The share of corporate income tax and shaking the Serbian economy, data and information down- property tax revenue in the budget of the Republic loaded from the website http://www.pravda.rs/2010/10/20/ of Serbia in 2010 kipar-i-devicanska-ostrva-drmaju.., Belgrade, available on 21.12.2010. Contribution to the budget of Type of the tax the Republic of Serbia in total revenues (in %) 3. Practical aspects of the current imple- Corporate 3,6% mentation of tax policy in Serbia against income tax the same in the European Union Property tax 1,4% Source: Stipilja, Todorovic., Nemanja.: Tax on extra profiteer, In all developed countries, revenue from prop- data and information available on the website http://www. erty taxes are more significant than in Serbia. We veeral.rs/vesti/ko-je-rekao-porez-na-ektraprofitere/..,Beograd, should change the law in order to double or triple available on 18.12.2010. the revenue on that basis within a few years. Even if we managed to increase by three times the funds Recently conducted analysis of the technical that we receive from property taxes, still does not mission of the International Monetary Fund shows get out of the average realized by European coun- that Serbia will suffer some damage if apply some tries. In Anglo-Saxon countries the property tax is of a directives of the European Union. The mis- more common than in continental Europe, but its sion recommends retention of cut-off levels of share in total tax revenue is higher than anywhere four million dinars, as the harmonization with the in this country. EU directives,8 which Serbia, if it EU directive led to the inclusion of too many small taxpayers in the VAT system and thus significant- 7 In late 2010 there were 1779 companies in Serbia ly increase the burden on tax administration, and owned and registered worldwide in the off-shore problems with false applications for tax refunds, areas or countries with favourable tax environment bringing the other hand, a little extra income. Oth- in relation to Serbia. Mihajlovic, Zoran.: Cyprus and erwise, the current half of year of 2010 in the sys- the Virgin Islands shaking the Serbian economy, data and information downloaded from the website http:// tem of value added tax payers only 109,200, or www.pravda.rs/2010/10/20/kipar-i-devicanska-ostrva- about 30,000 fewer than in 2003, when this tax drmaju.., Belgrade, available on 21.12.2010. form was introduced. 8 The majority of "the old" EU member states are characterized by relatively complex global system with a pronounced and progressive tax rates and "tax social withholding tax withheld and the payment of dividends programs". Unlike the US and Canada, the old EU and interest. In spite of all deployed, "optimization" member states have introduced more medullar elements - over 10% of taxpayers in all these countries are filled and non-taxable threshold to their PDG systems in order and submitted a tax return. Canada, USA and Australia to reduce the costs of administration and taxpayers. In are virtually the only countries that require all PIT payers the most of these countries, taxpayers who receive only to submit year-end tax return. Thus, for example, in 2001 income from regular employment (or minimal income 30 million people in Canada, as many as 21 million tax from other sources), are not obliged to submit annual tax returns filed. Altiparmatov, Nikola., Vesnic, Bojana.: returns. This is the case in countries like Britain, Germany, Reform of Personal Income Tax: think globally, act locally, Hungary, etc. In addition to the collection of withholding Quarterly Monitor, Magazine number 10, Belgrade, July - tax when paying wages, European practice is that the September 2007., page 87.

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One of the directives of the European Union in 2004 with the introduction of tax and income refers to the type of goods to which they can pay a tax of 19 percent, followed by Romania in 2005 lower rate of value added tax. Under this rule, the of 16 percent, to Bulgaria, Macedonia and Alba- EU, and to be respected by the states that have the nia in recent years introduced a flat tax systems of ambition to join the European Union, the Food and 10 percent. Montenegro has introduced a tax rate strategically important products can be predicted a of nine percent. Western media called the trend of lower rate of value added tax. Personal comput- reduction of corporate income tax and individual ers and components, the firewood, water, and the income tax in Eastern Europe - race to zero.10 first transfer of ownership of real estate should be taxed at the standard VAT rate of 18 percent, Conclusion rather than at a lower than eight percent, which is currently the case. However, from January 1st of On the way to the European Union thing that 2011 the computers will be taxed at a rate of 18 Serbia as a state has to do is tax reform along with percent. Recommendations of the Fund’s mission fiscal responsibility. Specifically, Serbia according is to, in this case, to comply with the EU directive. to the German best practice, and then the whole In comparison with other highly industrialized EU, as it is, and this great country had its own na- countries, for example in Switzerland, are quite tional tax and other regulations to adapt the EU low tax levies. Swiss tax system strongly reflects pre-accession years to do anything that would fa- its federal structure, with emphasis on direct taxes. cilitate the collection of state revenues and reduce Taxpayers are required to submit a statement of evasion of the tax, or black working. annual income and working capital to the compe- From experience so far it really was not easy tent cantonal authorities. According to European and it is not only aimed at regulatory reform and standards, the tax burden in Switzerland is con- the introduction of these legal provisions of the EU sidered moderate. This is helped by the Swiss fed- for us, the goal is the practical - work directly with eral regulation that allows healthy competition be- our tax experts. Educate them on the best way to tween the cantons, which are competing through collect, for example, VAT, excise duties or taxes on tax incentives to attract investors. Numerous bilat- income or profits of companies. All countries of the eral agreements to prevent double taxation. Total world, including Serbia, living on tax and are re- tax liability including the amount of social secu- quired to the revenue collection. Serbia for decades rity does not exceed 30% of GDP which is signifi- has had a highly developed informal economy in cantly lower than at the EU level. almost all the pores of economic life, which went The unique European Union market is charac- on one way or another, and to 40 percent of GDP. terized by high competition within the free flow With these practical steps in the area of tax policy of capital, people, goods and services. Member that we mentioned above affect only about ten per- States shall strive to create a more competitive cent would be a great success, especially in Serbia. economic environment and tax policy is a legiti- It is true though that in Serbia in late 2010 there mate and important tool for achieving this goal. are legitimate needs of the country and will be part Using tax policy to achieve competitive advantage is especially obvious at the beginning of the mil- those record high deficit (on average 5.5% of GDP). The lennium when the new EU members from Eastern only way to solve the problem of long-term operation European countries vied to attract foreign invest- of these funds is to implement a set of reforms in the pension and health insurance that have already been made ment from Western Europe. This would appear so in almost all countries of the region. Sestovic, Lazar.: called flat tax systems, which are characterized by Fiscal policy in Serbia in the first years of transition a unique (low) rate of corporate tax and income and upcoming challenges, Belgrade, Scientific and tax.9 Tax race in Eastern Europe began Slovakia Economic Association with the Academy of Economic Sciences and Economics, Belgrade, 2008., page 108. 10 Altiparmakov, Nikola.: The tax system within the scope 9 A large part of public spending in Serbia goes to of employment and economic growth: a blueprint for mandatory social security and without having their Serbia, Fund for the Advancement of Economics and incomes are not sufficient for their daily operation of USAID, Belgrade, March 2010., page 34.

152 Volume 7 / Number 1 / 2012 technics technologies education management of the budget to compensate the additional or in- 9. Mihajlovic, Zoran.:Cyprus and Virgin Islands creased taxation of certain products and services shakes the Serbian economy, data and information should be very careful because the fact is that the downloaded from the website http://www.pravda. rs/2010/10/20/kipar-i-devicanska-ostrva-drmaju.., maximum taxable personal consumption, which, Belgrade, available on 21.12.2010. along with social contributions, means that all pay. If we compare Serbia with OECD countries they 10. Simovic, Milos.: Monetary and public finance, Fac- have (at least) three times smaller proportion of ulty of Economics, Pristina-Blace, 2000. the gray economy. In terms of the gray economy, 11. Sabovic, Serif.: Bank management, Higher Eco- increase tax on us is still the most appropriate and nomic School of Professional studies Pec in Lep- most just solution. Because even people evading osavic, Leposavic, 2007. taxes and contributions (and there are many in Serbia) have to pay VAT when purchasing goods 12. Sestovic, Lazar.: Fiscal policy in Serbia in the first years of transition and upcoming challenges, Sci- or services. Whether we are right is not it? entific and Economic Association with the Academy of Economic Sciences and Economics, Belgrade, References 2008. 1. Altiparmatov, Nikola., Vesnic, Bojana.: Reform of 13. Stipilja, Todorovic., Nemanja.: Tax on extra profi- Personal Income Tax: think globally, act locally, teer, data and information available on the website Quarterly Monitor, Journal, No. 10, Belgrade, July- http://www.veeral.rs/vesti/ko-je-rekao-porez-na- September 2007. ektraprofitere/..,Beograd, available on 18.12.2010.

2. Arsic, Milojko.,Altiparmakov, Nikola., Randjelovic, Sasa., Bucic, Aleksandar., Vasiljevic, Dusan., Levitas, Corresponding Author Tony.: Tax policy in Serbia - a view forward, FREN, Boris Siljkovic, and USAID, Belgrade, March,2010. Higher Economic School of professional studies Pec in Leposavic, 3. Altiparmakov, Nikola.: The tax system within the Serbia, scope of employment and growth ekonomsog: draft E-mail: [email protected] for Serbia, Fund for the Advancement of Economics and USAID, Belgrade, March 2010.

4. Cvetkovic, Mirko, Macroeconomic stability and fiscal policy, institutional change as a determinant of economic development of Serbia, Faculty of Economics, Kragujevac, 2009.

5. Djurovic-Todorovic, Jadranka, Djordjevic, Marina.: Tax Reforms in South Eastern Europe, the policy, Vol. 34, iss. 6, Belgrade, 2005.

6. Lukovic, Stevan.: Creating an enabling tax system to attract foreign capital, foreign capital as a factor in the development of countries in transition, Faculty of Economics, Kragujevac, 2009.

7. Mirovic, Dejan.: European law on tax procedure and administration, data and information downloaded from the website http://www.nspm.rs/ekonomska- politika/evropski-zakon-o-poresko..., Belgrade, available on 17.12.2010.

8. Momirovic, M. Dragan., Zdravkovic, Dragan.: Im- pact of tax incentives to build competitiveness with special emphasis on Serbia, Transion Journal, Za- greb, Vol. 11, No. 23-24, December 2009.

Volume 7 / Number 1 / 2012 153 technics technologies education management Customer Relationship Management in Banking in the Context of Business Intelligence Vesna Aleksic Maric, Dragana Basic University of Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina

Abstract important to develop mechanisms for identifying needs of each client, going out to meet him an- In the world of banking, in which each client is ticipate their needs and customize a set of banking the largest value of the bank, it is important to devel- products and services, putting the client clearly op mechanisms for identifying needs of each client, understands that his satisfaction with the bank on make clients satisfied by anticipating their needs and first place. Achieving these goals should be one of customize a set of banking products and services, the biggest challenges the application of business putting the client clearly understands that his satis- intelligence in banking. faction with the bank on first place. Achieving these Business intelligence and its methods do not have goals should be one of the biggest challenges of the to focus exclusively and only on relations with cus- application of the concept Customer Relationship tomers, but in any case it is one of the most important Management and Business Intelligence in banking issues that this area must be addressed. Other areas which is covered in detail in this paper. where business intelligence can be of significant ben- Key Words: Customer Relationship Manage- efit is the prediction of cost, as well as finding ways ment, Business Intelligence, Market Segmentation, of reducing them [4]. Other areas of the forecasting Data Mining, Management of Personal Finances methods that can anticipate movements in exchange rates, rest/reduce interest rates by competitors, 1. Introduction WHAT IF analysis in the field of business planning etc. The basic infrastructure that is necessary to solve Banks around the world and many of their most these types of tasks is connected with application of serious competitors in recent years been faced with data warehouse, OLAP methods, methods of data increasing costs anda high degree of confidence of mining, GIS and systems based on rules. existing and potential customers, so for this rea- The strategic direction that creates a strategic son, increasingly turning to automation and instal- (top) management of the bank depends the design lation of modern electronic systems. Efficiency in of system of business intelligence, which must be the use of automation and other technological in- flexible enough to adapt to changing market con- novations involves a large volume of business and ditions, which is especially important when a bank increase customer base through geographic and operates in an unstable market environment. It is product diversification. important to note that the success of projects, the The main characteristics of banking is that it introduction of business intelligence in the bank mostly depends on the confidence of clients who does not depend on the amount of money invested have business relationships with the bank. Secur- in technology. Experience shows that it was the ing the trust and nurturing relationships with cli- banking fertile ground for innovative solutions in ents, except that the task of operating the bank, business intelligence, where large investments are should be a priority task in the application of busi- not necessary, but problems can be very effectiveness intelligence systems. Business intelligence ly dealt with nonstandard approaches and proce- systems should be viewed primarily as a tool for dures. This is especially true for problems that are identifying the needs and wishes of clients, and as solved using the method of data mining. For such a tool that allows you to customize products and an approach is necessary to be familiar with data services with respect to the beneficiary popula- mining methods and their characteristics, methods tion of the bank. In the world of banking, in which of data preprocessing, and certainly, the nature of each client is the largest value of the bank, it is banking business.

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2. Application areas of business intelligence aimed at specific client groups, are increasing the in banking degree of their loyalty? Do you set aside a certain population of users of products/services compared 2.1 Analysis of customer profile to other populations with respect to some feature? There are a whole range of issues on which The main characteristics that distinguish servi- the analysis of customer profile might provide ances from which the services are different from tan- swers. The art is not only to find the answers to gible products are their intangibility, inseparability these questions, but also to ask the right questions of production and consumption process, instabili- that affect the core of the problem. The analysis of ty, lack of storage, heterogeneity, ie the possibility profile clients in the banking industry often serves of providing a service in different ways and lack as a prelude to more complex analysis which pre- of ownership. These characteristics of the services pares the ground and look for interesting patterns the bank can turn to their advantage because it le- that will later be analyzed in detail. This type of aves plenty of space and opportunities to offer the analysis often serves as a test of the success of the same or similar services, the bank differentiates implementation procedures of data preprocessing, from competition. where is estimated a suitability of classification One of the major types of analysis that is used variables, the need for the extraction of new vari- for better understanding and meeting clients, cu- ables, the need to redesign data warehouse, if you stomers and the search for characteristic with res- are talking about an automated ETL processes. pect to the the product/service include analysis of One of possible solutions of standardization of customer profile. That way you can get informati- this kind of analysis is that data warehouses pro- on which is the basic profile of clients, the typical vide complete logistical support for standardized customer who uses a package of banking products. data for analysis and reporting, in which complex These types of analysis are containing elements of solutions can be derived in the form of ready made market segmentation. The implementation of the- software solutions. Analysis of customer profile is se basic forms of analysis is reduced to the appli- not specific only to banking, but can be applied cation of statistical methods of description. More in areas such as trade, insurance, pharmaceutical, sophisticated approach to this issue may in itself hospitality etc. involve the application of methods such as collaborative filtering, clustering, decision trees etc. It is difficult to draw a clear line where stop analy- 2.2 Market segmentation zing the profile of clients, because in them we can When it comes to segmentation of banking include more complex models such as Bayesian markets in the literature that comes from the West, networks, for example, estimate the probability commercial banking are classified in Wholesale response market segment for offer condition for Banking and Retail Banking. In our banking prac- the particular product/service. tice retained the traditional segmentation of retail Analyses customer profile helps bank in the ini- and corporate affairs. tial informing its customers, and should give basic Activities in the "Retail Banking" includes of- answers to questions like:What is the population fer different types of services, such as holding de- characteristics of satisfied customers, and why are posits and granting loans to nonbanking sector, they satisfied? What is the population characteri- providing financing of small importers and expor- stics of dissatisfied customers and why they are ters and lending to individuals, households, corpo- unhappy? What are the basic characteristics of the rations and small companies, as well as providing population of bank customers? Is there a certain other services for this market segment . The term degree of diversification and which, among the "retail banking" is not identified only with the re- population of clients with respect to type variables tail sector. age class, region, used products and the like? What Unlike the "retail banking", which operates is the population of loyal customers, and why are mainly with individuals and companies small and they loyal? Whether certain activities of the bank medium-sized, "Wholesale Banking" mainly inc-

Volume 7 / Number 1 / 2012 155 technics technologies education management ludes transactions with large corporations, banks which represents the overlap of parent banks with and other financial institutions and governments. operations compatible affairs of other financial in- Thus, " Wholesale Banking " is not only identified termediaries. For example, the switching charac- with a sector of the economy, which is given its teristic of the traditional activities of banks and in- own segment included in the above segmentation. surance, where banks have a location advantage However, market segmentation in banking and a database of clients and insurance company practice can be made to other, less important but personnel expertise and developed market. equally important criteria, such as the age of cu- Cross-selling can be defined as an increase in stomer, financial status (increasingly used), the sales activity in the population of existing clients loyalty of bank customers, the number and volu- and by selling those products and services that cu- me of transactions with the bank and the like. stomers do not use, and provider of them in certain Unlike traditional segmentation, which main- processes judged to be potentially feasible. There ly relied on the expert knowledge and a free asses- are lots of ways to achieve this goal within the sys- sment of experts, using the method of data mining tem of business intelligence in banking, and can can be formed very precise market segments. In be implemented using methods such as collabora- the banking business, as in every other area, seg- tive filtering, decision trees and clustering. mentation allows addressing specific target groups and focusing attention on a particular market seg- 2.4 Analysis of customer departures ment that meets certain characteristics. The usual method of segmentation is based on expert know- Significant threat to the banking business, par- ledge, which is reflected in a series of SQL qu- ticularly in terms of saturation of the market, is a eries with the aim of extracting all those clients departure of clients, or move clients into compe- who meet set criteria. Data mining allows extrac- titive bank. One of the main tasks of business in- tion rules for segmentation independently with re- telligence and early prediction of these trends, as spect to the target variable, which is a much more well as early diagnosis of their occurrence, and se- accurate than intuitive estimates [5]. arch for their causes [12]. The causes of attrition of clients may follow from dissatisfaction with local 2.3 Cross-selling banks; better conditions offered by the competition, go to another bank is conditioned by the em- General economic instability and the deteriora- ployer; negative trends in the market (unemploy- tion of economic performance in economies aro- ment, crisis, social and political uncertainty ...). und the world significantly change the characte- For example, during the Great Depression ristics of financial markets. Financial markets are 1929-1933. leads to the phenomenon of financial increasingly characterized by slow dynamics, po- disintermediation, which is a direct consequence verty and the continued fight of financial institu- of deregulation of modern financial markets. Fi- tions to maintain the loyalty of existing structu- nancial disintermediation represents a withdrawal re of customers and the new structure of activi- of funds, or funds from financial intermediaries in- ties, often outside the traditional activities. Finan- termediates, ie by the end-lenders (savings units) cial institutions which differed by type of activity and direct lending of its free cash to the final bor- they perform, realized that the area of their busi- rowers (investment units). Depositors are withdra- ness is no longer a barrier to new competitors. Un- wing their funds from savings accounts with lo- der these, a much stronger competitive pressures cal banks or savings - credit associations and buy- can lead to deterioration of the weaker companies ing bank certificates of deposit, commercial pa- to merge to larger companies that offer a wide ran- per, treasury bills government (Treasury Bills) and ge of different services. banker's acceptances from brokers who are money A direct consequence of the efforts of financial market instruments. This behavior of depositors of institutions to strengthen their competitive position banks was the direct result of the adoption of Re- in the "scorching and choosy" financial markets is gulations Q in the United States, which stipulates a phenomenon of convergence and cross-selling, limiting interest rates on deposits of commercial

156 Volume 7 / Number 1 / 2012 technics technologies education management banks, which in terms of growth rates in the mar- dance with his usual activities of this kind, and if ket once conditioned enormous outflow of clients not, should be alert to potential danger to. from commercial banks [6, pp. 177]. Rules that indicate potential fraud can extract Given that the bank each client valuable, it is and using decision trees, and incorporate them into necessary as soon as possible to discover the cau- systems of control transactions. A hypothetical sys- ses of attrition of customers, and to predict possi- tem based on rules that are extracted using the me- ble trends in dispersal order to prevent them. The- thod of data mining can be presented as follows: se trends can be observed by classical methods and If a client made a transaction of more than 50% data mining, and traditional market research that is of the total available limit of the estimated risk of reduced as the telephone survey using pre-prepa- potential fraud is 0.2. If a client made a series of red questionnaires on a representative sample. transactions in one day in a variety of retail outlets The methodological procedures when conduc- at intervals of less than 1 hour in an amount gre- ting the analysis departures (Churn) reduces to ater than 80% of the total available limit estima- the detection of the common characteristics of the ted potential risk of fraud is 0.7. If a client made samples outgoing population. Based on these cha- a bank transaction to the total amount of 100% of racteristics to look for potential causes and the- the total available credit card limit on the estima- reby not well restricted solely to the internal, but ted risk of potential fraud is 0.9. also to external data sources in order to obtain the Presentation of the rules may be the result of clear picture. In this way it can detect whether the applying data mining methods of sample data sho- reason for attrition of their own failure or impulse wing diagnosed scams. Based on this sample of from the market, for offering such favorable con- data mining methods, such as Bayseovih network ditions for purchase / use of a product / service. can find the rules and assess the likelihood with Further action after spotting the causes must focus respect to patterns of behavior. Such systems can on retaining existing clients at high risk of leaving, be of great benefit not only in banking but in insu- and which are identified on the basis of analysis of rance, where the quick and efficient way can seg- samples the exiting customers. ment potentially suspicious claims for compensation which meet certain criteria. 2.5 Disclosure of potential fraud Detection of fraud should not be viewed solely through the prism of one method, as is illustrated One of the areas where business intelligence in the example above. Systematically addressing can be extremely effective is detection of poten- these issues involves chaining a series of methods, tial fraud (Fraud Detection). Although the banking taking into account a number of factors, and sys- pay particular attention to the accuracy, reliability, tem upgrading in accordance with the spiral ap- accuracy and a high degree of operational securi- proach of system development. ty, there are cases of fraud, such as situations where a bank customer credit card stolen, and trying to 2.6 Managing personal finances make a transaction or series of transactions before the customer notices, and report the theft. Managing personal finance in the banking indu- Systems to detect fraud should be based on the stry include the creation of financial products and behavior of a person who has misappropriated cre- services tailored to individual clients and in accor- dit card to assess whether it is the alienated card. dance with their individual abilities, potential finan- These are the situations with regard to frequency cial risks and impulses from the environment and it of incidence is relatively rare, and it should take represents the backbone of the overall development care about this during traditional data analysis me- of the financial industry by 2010. year. thods, data mining. One possible solution model In its original form, the management of perso- to detect potential fraud could be implemented nal finance in the banking industry is concerned using the Bayesian networks. Network for exam- mainly private individuals as clients of the bank, ple would have the task to assess whether the cur- and population and housing, as well as small and rent activity of buying a particular client in accor- medium enterprises (taking into account - trans-

Volume 7 / Number 1 / 2012 157 technics technologies education management action and nontransaction, payment services, pro- commitment to the long-term basis focus on lin- tection against risks, including insurance poli- king existing customers to the bank over the ope- cies and activities with financial and credit deri- ning of the possibility of using a variety of servi- vatives, access to liquidity, and enabling the co- ces from a range of banks according to their re- nversion of assets in immediately available liqu- quirements and current and future financial status. id assets, credit, depending on the specific needs At the beginning of this century, due to the in- of clients, managing financial affairs and proper- crease of competition in the banking sector, banks ty of clients, selling insurance and savings plan re- have begun to turn to customers in terms of finan- lated pension). Personal finance department's acti- cing of their large enterprise and financial mana- vities are generally aimed at establishing trust re- gement of their finances in order to ensure their lationship with the client, protecting client assets, portfolio "residue" of potentially loyal customers. making decisions about managing and marketing On the other hand, personal finance departments its capital, maintaining the client's estate planning at banks often succeed to attract large sums of de- and providing that the ownership of the property is posit funds managing assets of its clients' most dif- transferred to those entitled by law belongs to the ferent companies, government institutions, funds, deadlines and regulations and to provide adequate charities and endowments, as well as individual commercial assistance in locating and manage- persons and families. From the standpoint of the ment of funds and legal assistance in creating the bank, the management of personal finances is at- most favorable conditions for pension insurance. tractive in the world of banking because of co- In recent times, by increasing competition in nviction to make a stable income that can elimina- the banking and non-banking sector has expanded te the volatility of revenues from other segments domain of personal finance management in ban- of the banking business, the efficiency of transac- king and some banking transactions with major tions and significant reduction in costs so the bank customers (corporations) and institutions (finan- can invest in sophisticated information systems to cial and nonfinancial, private and public), such as support the portfolio management clients' assets a larger volume and value in the area of accep- or securities. Some analysts even go further and ting deposits, payments (both domestic and inter- argue that the management of personal finances national), management of business accounts, cash provides high and stable income with low risk and management corporation in respect of the invest- modest capital expenditure [2]. ment enterprise, the various forms of asset mana- Managing personal finances in banks is al- gement, custody operations (Castody - custody, most impossible without a highly sophisticated in- care, supervision), agency services and collateral formation systems and business intelligence as a services in record keeping, and property insuran- computer decision support in a particular organi- ce, planning employee pension, social security be- zation because there are a lot of data and informa- nefits and the insurance policy, then various other tion, a variety of clients, diversity of services on advisory and financial services (provision of con- the one hand, and the requirement of comprehen- sultancy services to its business clients in terms of siveness of the survey, timeliness in decision ma- market opportunities at home and abroad), an in- king and the reliability and accuracy, on the other tegrated, structured and specifically tailored to the side. Developed techniques of business intelligen- specific needs of a particular client or transaction. ce such as Data Warehousing, Reporting, OLAP Thus, a key component of personal finance in technology, data mining, dashboards and other banking services are adapting to clients' needs, data based on existing information systems of anticipating customer needs, orientation towards banks can well manage personal finances of each long-term relationships with customers and cu- client of the bank regardless of the size and diver- stomer loyalty in the long run, fostering perso- sity of his portfolio in a very short time, responsi- nal contact and discretion. In contrast to the phi- bly and with extreme precision and effect [9]. Ho- losophy of traditional banks focus on expansion wever, the application of business intelligence to and growth through increasing the number of new manage personal finances in banks requires team- customers of banks, access to personal financial work, loyalty to the bank and clients by staff in

158 Volume 7 / Number 1 / 2012 technics technologies education management the team, thoroughness, gradual and confidentiali- them. Such activities are only possible if the bank ty, and that employees are not allowed in the team has arranged an information system that is timely share information about clients who provide servi- and meaningful information about their current and ces to manage personal finances between themse- potential clients so that at any moment may notice lves, with staff from other organizational units of that some of the services could be interesting to the the bank and the staff of other competing banks or clients [10, pp. 244]. There is no need to wait for bank financial institutions. customer to recognize that he needs some services, Application of techniques of business intelligen- he knows less banking services and opportunities ce in Banks in the management of personal finan- which banks in their production program provide. ces of clients will give the expected results only if The bank and its staff based on their experience and it complys with certain conditions such as high le- expertise can easily and quickly identify what the vel of expertise of employees and developed a mo- customer really needs, now and in the future. Such dern electronic distribution networks, timely upda- a comprehensive approach in creating, maintaining tes and a high degree of standardization of the da- and deepening represents a so-called philosophy of tabase client, and a high diversity of financial pro- Customer Relationship Management, CRM. [8, pp. ducts and services at any time adaptive customer 125]. In banking practice is more commonly used requirements and market conditions. Business in- term management of public relations. telligence in managing personal finances in banks The term PR (Public Relations, PR) to re- should significantly shorten the time in the process quire coordinated efforts to create a positive and of deciding on the portfolio of clients available with attractive image of the product in public aware- which to manage, improve the quality of the data- ness through the support of certain activities or base of clients, ensuring optimization of costs and programs, posting news of significant commer- financial and operational risks and facilitate the pro- cial and/or news media widely or achieve positive vision of large scale financial, advisory and other publicity for radio, television or elsewhere that is services to customers with the same resources. not paid, which helps the company's sales of products [1, pp. 12]. Public relations is not only the re- 3. Customer Relationship Management in lationship with external public relations, but also the banking industry in the context of with internal and are skilled and unobtrusive way Business Intelligence to promote the bank and its services, without au- thoritative hide of their weaknesses. The above-mentioned areas of application are According to the British Institute of Public Re- not only the scope of business intelligence in bank- lations (The Institute of Relations, IPR), "public ing. Generally speaking, all activities related to the announcement is planned and sustained effort to development of relationships with clients that re- establish and maintain goodwill and mutual un- fer to elements of business intelligence can be put derstanding between an organization and its target into context Customer Realtionship Management, public [11, pp.. 22]. CRM. For example, the market segmentation and "Public relations are a function of manage- analysis of customer departures, and cross-selling, ment, whose task is to establish and foster mutual- and analysis of potential fraud and managing per- ly beneficial relationships between organizations sonal finances can be brought together into a para- and various institutions that surround it, both of digm of CRM. which depend on the success or failure of the said In banking practice, the role of the bank's client organization." [7] has changed significantly since he is no longer a In these different approaches to the concept of mere user of banking services that he went in and public relations and expressed their different man- went out to the bank. Now it is necessary that the agement practices in banking practice, the ultimate bank with some certain access makes clients inter- reactive readiness to respond to emerging problems ested in banks activities, invite him to visit the bank and find solutions of crises, to the utmost readiness and to offer him a service or package of services that to be proactive PR activities are planned in advance are required and even he was not aware he needed and take measures to the crisis, it never comes.

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Public relations come out of the elements of ment. This step in the management needs to an- marketing communication mix and set aside as a swer the question "What is happening?" special category of communication. Differentiate Planning and programming. Information col- three important differences between public rela- lected during the first step, now are used for mak- tions and marketing [3, pp. 236]: ing the right decisions regarding the target public, a. Public Relations are the primary communi- communication strategies, tactics and goals. This cation tool, and marketing is including needs step answers the question: "Based on informa- assessment, service development, pricing tion we received about the situation, what should and distribution; change, do or say?". b. Public Relations is trying to influence on Taking action and communication. The third behavior, and marketing efforts to detect step involves the application of the plan of ac- specific behaviors; tion and communication in order to achieve spe- c. Public Relations does not define the organi- cific goals for each segment of the public, during zation's goals, while marketing is fully achieving program objective. The question that involved in defining the mission, target arises at this stage of the process as "Who should markets and services. do so and says, when, where and in what way?". Assessment (Evaluation) program. The last Key factors which influence the effectiveness step in this process includes an assessment of the and efficiency of promotional instruments of preparation, implementation and results of the banks and the selection of the optimal promotional program. While the program is implemented, it is mix are commonly available resources, product/ possible to make changes and adjustments based service characteristics of the target market, the on feedback if everything works and how it works. phases in the life cycle of products/services that Programs continue or drop out after receiving a promote or offer, the business policy of banking response to the following question: "How are we institutions. The key point of public relations as doing or what we were?" a communication category is complete openness Phase studies and measurements of the effects and truthfulness in communication, consistency of of the program. In the research phase and measur- message that sends to the public. ing the effects of public relations attention must Managing public relations, as well as commu- be focused on measuring the actual exposure of nication functions whose basic philosophy is that members of the audience, the measurement of per- the targets easier to achieve success with the sup- ception, audience, understanding, remembering port and understanding of the public than when the the content of published material by those whose public is opposed or indifferent, has the task of es- opinion we were interested in, the measurement of tablishing and maintaining good relations between real and financial effects of the program. the bank and its environment. These are numerous Each step is equally important as the others, activities that are aimed at achieving the desired but the whole process begins by gathering infor- impact on public opinion and attitudes, and cur- mation for problem diagnosis. Information and rent and potential clients of the bank, management understanding of information obtained in the first bodies, regulatory and supervisory institutions. step, motivate and lead the next steps in the pro- Accordingly, public relations, the banks must be cess. For monitoring and tracking the success of marked with reputation, perception, credibility, the program and assess its effects is essential in- mutual trust and mutual understanding based on a formation system development and application of true and comprehensive notification. the concept of managing relationships with cli- The most common steps in the process of man- ents, or the concept of business intelligence. aging public relations, according to some authors, Customer Relationship Management is basi- are following [7, pp. 313]: cally a broader concept and it includes elements Defining problems or opportunities. Testing such as Call Centers (Call Center). It is impor- and monitoring knowledge, opinions, attitudes tant to note that there is still no clear definition of and behaviors in the organization and the environ- CRM, but this system in the context of business

160 Volume 7 / Number 1 / 2012 technics technologies education management intelligence and banking, can be regarded as a spe- and procurement planning supplies and advertis- cialized subsystem of business intelligence. ing materials; evaluate how well commercial ac- System of business intelligence in banking tivities, human resource management, controlling, needs systematical approach in order to eventually macroeconomic research and analysis. achieve the goals. Such systems are built based on a spiral approach, which makes four basic steps: 4. Conclusion 1. Identification of problems; 2. Preprocessing of data, use data mining methods In terms of current developments in the ban- to uncover principles and development of a king market tickets have already been largely di- model; vided, and there is a strong competition among 3. The application of discovered principles and banks. The strategy of banks is mainly built on at- models of the test sample and tracting customers from other banks or retaining 4. The measurement results. existing customers. Listening for signals from the market and those who send existing customers can Only the core of a business intelligence can be crucial to business success. Business intelligen- make the data warehouse, data mining, GIS sys- ce helps to just listening to such signals. tems, and the extracted rules arose as a result of In future times, the success of banks will large- the synergy of these elements. Rules are generated ly depend upon the quality of a developed system by the elements that make up the core of external of business intelligence, which is primarily focu- and internal sources of the data bank. They are de- sed on the client. Such systems must be able to le- rived from data based on the application of spe- arn from the experiences from the past and promp- cialized subsystems, such as for example a system tly respond to specific market situations. with customer relationship management, or spe- Contrary to popular belief that the purchase of cialized subsystems/applications intended to sup- ready-made software solutions solve all the pro- port strategic and tactical management. blems in the field of business intelligence, espe- It is important to note that this designed business cially in the banking industry comes to the fore intelligence system is one of the possible concep- the creativity in the development of business intel- tual solutions. In practice, it may appear that cases ligence, which relies on the skill of analysts who such as data mining is the backbone or holder of finds a solution model for non-standard problems the business intelligence systems, because the exis- in this area. tence of a data warehouse is not an essential prereq- Of course, there are problems that can be so- uisite for data mining. Also, these elements either lved by using a commercially available product, alone or in combination with other elements, can do but given the complexity of the market as a re- the core business intelligence systems. Confidently sult of the balance of power in the banking sce- we can say that data mining contributes greatly ne, everything is going more and more to the fore to the transparency of this type of system. Essen- come to creative solutions to certain types of pro- tially speaking, the rules obtained by applying any blems. The advantage of this approach is the po- of these elements, form the foundation of business ssibility of rapid diagnosis of certain trends that intelligence systems. Extracted rules with regard may carry some potential business opportunities to the character can go into different sub-types of and potential dangers. The efficiency and speed of business intelligence, such as eg CRM or special- recognition of these trends will depend on the ef- ized subsystems/applications that are intended to ficiency of banks. Business intelligence systems support strategic and tactical management. and their quality is one of the main foundations on Systems for segmentation, analysis of custom- which banks need to build their business strategy. er departures, or cross-selling analysis of the pro- Such systems are of particular importance to those file can be integral elements of the CRM or stand- banks that have a national network of offices and alone systems, which depends on the importance who are planning a significant expansion of busi- of each of these systems for the bank. Specialized ness in the future. subsystems may relate to issues such as logistics

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References 1. Brkić, N., Upravljanje marketing komuniciranjem, Ekonomski fakultet u Sarajevu, Univerzitet u Saraje- vu, Sarajevo, 2003.

2. Clark, T., Dick, A., Hirtle, B., Stiroh, K. .J, Williams, R., Role of Retail banking in the U.S. banking industry, Business Publications, Decembar 2007.

3. Ćurčić, U. N., Marketing poslovne banke, FELJTON, Novi Sad, 1997.

4. Green K., Handerson, D., Business Intelligence & Enterprise Content Management, http://www.triple- tre.com, 12.07.2002.

5. Han, J., Kamber, M., Data Mining – Concepts and Techniques, Morgan Kaufmann Publishers, 2001.

6. Johnson J. H.,. Financial Institutions and Markets: A Global Perspektive, McGraw - Hill. Inc. USA, 1993.

7. Katlip, S. M., Senter, A. H., Brum, G. M. Uspešni odnosi s javnošću, JP Službeni glasnik, 2006.

8. Klasens, R., Marketing u finansijskim uslugama, Udruženje banka Srbije, Beograd. 2007.

9. Kolsky, E., Achieving Personalized Customer Servi- ce, http://www.zdnet.com/filters, 12.02.2002.

10. Kotler, P., Upravljanje marketingom – Analiza, planiranje, primjena i kontrola, Mate, Zagreb, 2001.

11. Stanić, M. R., Marketing i odnosi s javnošću, Comesgrafika, Banja Luka, 2006.

12. Tanler, R., The Evolution of Business Intelligence from What Was to What If, http://www.dmreview. com 07/2002.

Corresponding Author Vesna Aleksic Maric, University of Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina, E-mail: [email protected]

162 Volume 7 / Number 1 / 2012 technics technologies education management Contribution to Intelligent System for Automatic Management of Business Rules Development

Rade Stankic1, Vladimir Milicevic2, Marko Popovic3, Zoran Savic3 1 Faculty of Economics in Belgrade, Serbia, 2 High Technical School of Professional Studies in Kragujevac, Serbia, 3 Faculty of Menagement in Novi Sad, Serbia.

Abstract In economic science context, it is possible to put paper’s goal into business intelligence frame. The paper objective is contribution to infor- The market of businesss intelligence products and mation system development which is able to au- tools has been on the rise in the last few years and tomatically recognize, encode and implement shows a strong tendency for futher expansion in business rules into the core of the existing busi- the future [1]. ness application. The observed system is built as The ultimate goal, set for the authors of this pa- an intelligent hybrid system and as such includes per, is the description of a system capable of rec- different classes of intelligent subsystems. ognizing knowledge in a sample (domain), form- The first part of this paper deals with recogni- ing appropriate business rules and automatically tion of knowledge in the relevant sample, intro- implementing them into the existing application. duces neural network, as a means to search, and it The stated objective is realized by building a pro- also introduces methods and algorithms on which totype of the Chibby expert system which func- the search is based. Further on the paper, a new tions as follows: software component, a genetic algorithm, is pre- –– the neural network searches the relevant sented as an optimizer of search results. sample in order to find knowledge; The follow-up shows the remaining compo- –– the neural network creates an output which nents of the system: BRL and JAsCo Generators, contains an appropriate busines rule; as well as the component of the core application. –– the genetic algorithm – optimizer accepts the A separate part of the paper shows experiments neural network output, processes it, and if the task of which is to justify the choice of these all the conditions of eligibility are fulfilled, software components and then appropriate con- forwards it to the software component, BRL clusions are drawn. Generator, to encode it. Key words: information system, aspect orien- –– BRL Generator encodes the accepted busi- tation, neural network, genetic algorithm, business ness rule in a domain language (of high level); rules. –– Translator/JAsCo Generator component, built on the basis of the known mappings 1. Introduction [2], translates the high-level rules into rule objects, declared by the JAVA program code, One of the goals of the artificial intelligence and creates appropriate connections to the as a scientific discipline, is the development of core application, declared by the JAsCo JAVA intelligent systems which are, after their installa- programming language extension code; tion, capable of learning, updating and evolving –– For a certain event the execution of the core on their own. Practice shows that it is not possible application is interrupted, the current business to obtain a functional system of this kind by us- rule is automatically implemented, and the ing only one technology but it is an absolute ne- application is continued to be executed for cessity to combine several different information another event. technologies into a unique approach to system development, which will fully meet the given requirements.

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Chibby prototype is fully developed according to business rules aproach techniques described in paper [3].

2. Using neural network for disclosure of rules

Neural networks are tools that can be well used Figure 1. NN context diagram for searching, identification and prediction [4]. The only serious shortcoming of these systems is the inability to give clear explanations and it is, therefore, necessary to apply a different class of systems that will show the search results in a clear and understandable form. Table 1. displays classes of systems that are the subject of artificial intelligence study. As an extension to this division, aspect-oriented (JAsCo) expert systems are built which offer a significant improvement to previous generation of expert systems and the key step in realizing the desired information system for automatic rule-based knowledge management. Model of this kind will be used for giving explanation, i.e. for displaying results Figure 2. NN - decomposition of the neural network search. Neural network built in the Chibby system is The aim of intergrating a neural network into capable of recognizing all categories of business such a system is movement of expertise from man rules: to machine. Author Armstrong pointed out that –– limitations; Neural network allows data to speak for them- –– drivers of actions; selves. [6] –– derivations and calculations.

For the above given reasons, the network is able to recognize patterns of consumer behaviour and give corresponding predictions. The following figures represent the architecture of the neural network of the Chibby system. Context diagram (Figure 1.) presents a view of the neural network corresponding to its black box nature. Input and output can be clearly seen while the inside of the network itself is hidden. Decom- position and hierarchical presentation of the neu- Figure 3. NN - hierarchical presentation ral network shows processes and the structure of this component. (Figures 2 and 3 respectively). Table 1. Classes of inteligent systems [5] Technology Learning Flexibility Adaptability Clearness Detecting Neural network 5 5 5 1 4 Genetic algoritm 5 4 5 3 4 Expert Systems 1 1 1 5 1

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2.1. Automatic language identification rithm is used for its training. The aforementioned algorithm achieves the minimum error search. One of the techniques the Chibby system neu- Table 2. Reserved words of domain language ral network is based on is the identification of language from electronic text files. The following Reserved Words Set methods are incorporated in the technique: BR –– Method of reserved words; IF –– the Ziph’s Law. THEN AND OR The method of reserved words uses whole NOT words to recognize the language in which the text PROPS is written. It is possible to create a corresponding AS vocabulary for each language (manual or automat- USING ic). Counting words in the sample that are present WHERE in the vocabulary, determines if there is a match CONNECT between the sample and the corresponding vocab- BEFORE ulary. The language from which words are iden- AFTER tified represents te domain language. Each iden- INSTEAD tified word has its own level of difficulty. Iden- OF tifying words and determining the factors of the difficulty level is the very task of neural network . 2.2. Backpropagation Algorithm usage When building a system for automatic text recognition an appropriate structure of neural network The search begins from a set of assumptions and a set of reserved words of the corresponding and a set of IF-THEN rules and iteratively checks language are chosen. Words that don’t belong to if there are rules in the sample which support these the set of reserved words are called stop words and assumptions. In each step the search finds a rule their controlled elimination leads to purification of that in its THEN part contains an assumption from the sample. [7] the reasoning set. If it turns out that the IF part of For text classification, it is very important to the rule is correct then the assumption (THEN) is reduce the dimensionality of the sample, and this correct as well. If it isn’t possible to determine the is achieved by ejecting the stop words, i.e. words accuracy of the IF part then it is forwarded to the that are present in the sample but do not carry any assumption set. The same is applied recursively meaning. The neural network, when processes the until it finds the rule that in its THEN part contains sample, relies on the Ziph’s Law which states: The the required statements, which is initially defined frequency of a word in a language is inversley pro- as a goal. If not confirmed that the IF part of this portional to rank (difficulty) of the word. rule is true it is necessary to determine the accu- Table 2. provides an overview of a set of re- racy of the given statement-it is added to the as- served words of a language of high-level rules and sumption list and the chaining continues. their connections. The search through the given sample is based Neural network of the Chibby system is built of on the following definition, and the processing is an input, hidden and output layer of neurons and is shown in Figure 5: capable of solving complex, nonlinear problems. The known sigmoid function is used as the activa- sentence ::= noun phrase ::=

1 ϕ(x) = . verb phrase :: = < noun phrase > + −x article ::= the | a | an // if the 1 e domain represents the extended subset of the English language The above neural network is well known as a noun ::= user, basket, order, cash, multilayer preceptron and a Backpropagation Algo- card, …

Volume 7 / Number 1 / 2012 165 technics technologies education management adjective ::= bronze, silver, gold, // selection regular... NewGeneration = Reproduction (Popu- verb ::= logIn, logOut, buy, cancel, lation0); confirm … //overloads or parental copies NewGeneration = It should be noted that the network is capable OverLoad(NewGeneration); of evolving from learning with the teacher (do- //parental characterictics mutation main expert), through learning with support and NewGeneration = Mutation (NewGen- eration); several trainings to the stage in which it is able to Accepting (NewGeneration); learn and draw conclusions on its own. PopulationValuation (NewGeneration); } } Code 1. Genetic algorithm pseudo code

4. The Chibby System Architecture Prototype of the Chibby system contains the following components: neural network, Optimiz- er, BRL Generator, Translator/JAsCo Generator and core application, and Figure 6 shows its hierarchy.

Figure 4. Neuron

Figure 6. Chibby system hierarchy

The core application is a software component Figure 5. Search and sample processing that includes the control component, database and the knowledge base. The knowledge base stores the 3. Genetic algorithm - OPTIMIZER expertise in the form of business rules encapsulated in rule objects that have a high degree of indepen- The output from the neural network is poorly dence from the rest of the core application. Their understood and potentially already exists in the automatic integration into the application is enabled knowledge base. To optimize the output and to by faceted connections built using JAsCo aspect- eliminate repetition of data (rules) the Optimizer oriented extension of the JAVA language program. (originally called Optimizator) software compo- Figures 7 and 8 display a context diagram and nent is used. This genetic algorithm, as well as the the first stage of theChibby system decomposition other components of the Chibby system, is real- in which the above subsystems and their mutual ized with the JAVA language program code, and communication is clearly visible. its simplified pseudo code can be shown in the following manner:

{ //Chromosome population generation Population0; // Chromosome valuation Valuate(Population0); While (InteruptCondition) {//Parental Figure 7. Chibby system context diagram chromosome

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5. Experimets on Chibby System The following two experiments were performed in order to justify the choice of software components for automatic recognition, encoding and implementation of business rules. Similar experiments can be found in the work by Skocec [6].

Figure 9. Experiment 1.

2. Training network with genetic algorithm instead of Backpropagation algorithm (Figure 10) Parameters are population size 50, mutation probability of 7% and 50 most common stop words in the analyzed sample. Number of hidden Figure 8. Decomposition of Chibby system layer neurons is 10, accordind to previous experiment. A large number of iterations are required For testing purposes we use the following input so that this way of training the network could be data: compared to the training conducted by using Back- –– 20 electronic documents - questionnaires filled propagation algorithm. This is the reason why the out with desired system requirements based Backpropagation algorithm is used for training the on the conversation with the management; Chibby system neural network. –– 35 electronic documents – project documentation based on experience of the development team and the earlier work on similar projects.

The sample search by neural network is initiated in the following two experiments:

1. Impact of the number of neurons in the hidden layer on the quality of results (showed in Figure 9) The parameters of the experiment were: 50 common stop words of the domain language, in each epoch the training set was shown to the network 250 times. Testing was conducted for 3, 5, 6, 7, 9, 10 and 15 neurons in the hidden layer. It is noticeable that increasing the number of neurons in Figure 10. Experiment 2. the hidden layer to some extent reduces the mean square error over a training set. Further increase in It should be noticed that this kind of neural net- the number of neurons in the hidden layer does not work is integrated in fully operational information give better solution, but even worse, as seen in the system. Actual system is developed as support to case of neural network with 15 neurons in the hid- Chibby Markt e-market and represents original den layer. According to experiment, optimal neu- software solution. ral network contains 10 neurons in hidden layer.

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6. Test Sample Algorithm is used. Optimized search results are sent to the BRL Generator component which cre- Chibby prototype system is running and its neu- ates business rules and connections in the context ral network performs the search. It finds knowl- of the domain language (high-level). Translator/ edge in the relevant sample and passes it on to the JAsCo Generator component translates high-level Optimizer. This genetic algorithm processes the rules into rule objects, and connections into ap- accepted data and forwards it to the BRL Genera- propriate JAsCo connection aspects. Automated tor component to be encoded by language of high- translation rules into rule objects means that, after level rules. The above steps are shown in figure set up of the application, there is no need for ad- 11 report. ditional development team intervention.

References 1. Soldić - Aleksić J., Stankić R., Business Intelligence, International Encyclopedia of Statistical Science, Part 2, 188-189, Springer, New York, 2011.

2. Cibran M, A., Connecting High Level Business Rules: An Approach using AOP and MDA Engineer- ing, Vrije Universiteit Brussel, 2007.

3. Milićević V., Popović M., Savić Z., Business Rulem Approach as Basis of e-Bills System Development, TTEM Vol 6. 1/2011, 2011. Figure 11. Neural network search report and created rule 4. Milićević V., Upravljanje rizikom u poslovima osigu- ranja bazirano na DATA MINING-u i ekspertnim pravilima, SYMOPIS 2010, 2010. Translator/JAsCo Generator component accepts the above report as an input and creates an ob- 5. Soldić - Aleksić J., Inteligentni sistemi za poslovno ject of rules out of in the JAVA language program, odlučivanje, CID Ekonomkog fakulteta u Beogradu, which can be automatically built in the core appli- 2001. cation using appropriate JAsCo connection aspects. 6. Armstrong J.S., Principles of Forecasting A Hand- book for Researchers and Practitioners, Norwell, MA: Kluwer Academic Publishers, 2001. 7. Conclusion Based on the previously stated it can be con- 7. Skočec F., Automatko raspoznavanje prirodnih jezi- ka, Fakultet elektrotehnike i računarstva Sveučilišta cluded that future software development will be u Zagrebu, 2006. focused on systems whose operation does not require subsequent intervention of development teams. Such a system is capable of learning on its Corresponding Author own and the acquired knowledge helps it evolve. Rade Stankic, Faculty of Economics in Belgrade, As such it has to integrated several well-known Serbia, classes of information system such as: E-mail: [email protected] –– neural network for knowledge discovery; –– genetic algorithms for optimizing search results; –– expert systems for the integration of results and giving explanation

For the training of network which discovers used rules it is necessary that Backpropagation

168 Volume 7 / Number 1 / 2012 technics technologies education management Multicriteria analysis, investment process and optimization in the process of installation rubber panels at level crossings Predrag Atanaskovic1, Ljiljana Milic Markovic2, Zvonko Sajfert3, Svetlana Nikolicic1, Dragan Djordjevic2, Vladimir Stojanovic4 1 University of Novi Sad, Faculty of Technical Science, Serbia, 2 Traffic Institute CIP, Belgrade, Serbia, 3 University of Novi Sad, Technical Faculty “Mihajlo Pupin”, Zrenjanin, Serbia, 4 University „UNION“ of Belgrade, Serbia. Abstract accidents, often with great damage and casualties. RLC may be provided various types of mechani- Level crossings (railway level crossings - RLC) cal and electrical security, as well as the support- are the intersection places of the crossing railway ing road signs. The higher the security system in- lines and roads. As a place of crossing the two forms stalled in the RLC, the traffic safety on RLC is of transport (road and rail), are the places where raised to a higher level [1] [2] [3]. collision occurs a large number of traffic accidents, One of the criteria related to safety and the RLC often with great damage and casualties. One of the is a type of pavement (road construction-RC) which factors of safety on the RLC is a road construction is mounted in the RLC. In today’s conditions most which is mounted in the RLC. European orienta- of the level crossings in the pavement (RC) has a tion of the RLC pavement is- “rubber panels” (rub- built-in wooden sleepers (wood panles - WP) and ber panels-RP) that have an impact on traffic safety the concrete slab (concrete panels-CP). European and to show many times better performance than commitment to the pavement of choice is the instal- wooden sleepers and concrete slabs from the aspect lation of RLC “rubber panels” (rubber panels - RP). of durability as well as in terms of simple assembly RP as a type of pavement have an impact on traffic and disassembly in the event needs. safety and show many times better technical charac- This paper defines criteria for the optimiza- teristics of wooden sleepers and concrete slabs from tion (selection order of priority) that describe each the aspect of durability as well as in terms of simple RLC as well as the results of research the relative assembly and disassembly in case of need. weight of the defined criteria. This paper will also Number of RLC on one railway line is usually be shown to optimize the investment process re- large (or on the railway network), and direct the op- lated to the installation RP of the RLC. The paper erational regulations of each country. This work will will be explored in addition to the research criteria be carried out research that specifically relate to: and relative weight of criteria, is shown and mul- a. defining criteria that describe the RLC that ticriteria analysis that provides an opportunity for affect investment in order to replace existing optimization investment process. pavement with a WP or CP, RP, Key words: railway crossing, multicriteria b. defining the relative weight of selected analysis, relative weight criteria, optimization, criteria (RWC), rubber panels, investment process, case study c. application of multicriteria analysis (MC) in determining the order of priority in the 1. Introduction process of replacing the WP or CP with RP. Level crossings (railway level crossings - RLC) are the intersection places of the crossing railway 2. RP advantages over other types of pave- lines and roads. As a place of crossing the two ment with investment in installation forms of transport (road and rail), are the places RP advantages compared to traditional pave- where collision occurs a large number of traffic ment construction on RLC are the following:

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1. possible application of RP in all categories The following table shows the approximate in- of road and traffic load of all levels vestment costs of equip a RLC with RP (1m ac- 2. RP assembly and disassembly is easy and cess ramp + 1.44 m + 1 m pavement width access fast ramp): 3. shape and size of rubber panels are adapted Table 1 to the type and threshold type of slippers The investment value in EUR (heavy traffic load) and the type of rail equipment Number of rails on 4. tire tracks to absolute isolation, and thus RLC width width width good electrical resistance crossing 5 crossing 6 crossing 8 m m m 5. road vehicles crossing over without shock 1 6000 7200 9600 RP 2 8000 9500 12500 6. way of making RP increased the slip resistance of road vehicles The following figure shows the technical solu- 7. RP quality control (quality control tion of a level crossing with the RP. materials, checking dimensions, visual inspection and control functionalities), the correct method of installation and maintenance for long life 8. RP reduces noise and vibration from the vehicle.

Disadvantages of conventional pavement made The following photo shows one reconstructed of WP and CP on the RLC are the following: RLC with RP 1. Dismantling, erection and maintenance of these types of structures is a long, expensive and complicated 2. it is difficult to perform leveling WP and CP from the top edge of the rails 3. It is difficult to perform integration with tarmac or other road surface roads 4. Slip road vehicles in conditions of rain and snow on the road 5. The emergence of damage to vehicles due to the many crossings over the RLC due to poor leveling 6. The noise of vehicles when crossing over RLC 7. The reduced speed of vehicles crossing The above investment value can see clearly that over the RLC - causes queues on the the necessary investments for the regulation of a frequency of road vehicles crossing large RLC rubber panels, and that no state could at the same time to invest in the reconstruction of The investment value of RP equipment for all level crossings. This work will be shown how installation by the manufacturer, is available in to determine the order of the methodology and pri- the function of different kinds of built-in panels. orities of investment activity related to the instal- Some approximate prices (prices are for panel/m2 lation of rubber panels on the RLC (methodology without installation costs): can be applied to all railway network of a country, 1. Heavy traffic load - 1200 EUR / m the selected railway line, or on a defined number 2. Medium heavy traffic load - 1000 EUR / m of RLC). 3. Easy load - 900 EUR / m

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3. Optimization methodology for investment –– K4 max speed on the railway traffic on the section where the RLC is installed The methodology to be used in this work (pri- –– K5 number of accidents at the selected RLC ority of investment activity) is done in four steps in define period as follows: –– K6 tiangle visibility selected RLC in terms 1. The first step - it is necessary to create of road drivers a single larger database for all RLC that –– K7 investment activities potentially there is a need for installation of RP in the road. Namely, each crossing K1 frequency of rail traffic on the RLC. This must be described with the same criteria and criterion shows how many trains a day pass indicators, in order to implement and execute through the level crossing (volume of traffic). The the optimization of ranking priorities number of trains is in direct correlation with the 2. The second step - a choice and definition of category of railway tracks. Frequency of rail traffic criteria and indicators which will apply to on a road crossing shall consist of all categories of optimize all of the observed RLC. Selection trains: passenger trains (Np) + freight trains (Nf). criteria and indicators is the requirement that Calculated by the formula: Nt = in multicriteria analysis can be use to optimize period of 24 hours. Indicators for this criterion are the process. Selection criteria has a key role p11, p12 and p13. Weighted indicator values are in optimizing the investment process. shown in the table (2). 3. The third step - defining the relative weight K2 frequency of road traffic on the RLC. This of criteria and indicators using some of the criterion shows how many vehicles of all catego- recognized scientific methods. The relative ries pass through the level crossing per day (vol- weights of criteria and indicators, are the ume of traffic) Frequency of vehicles shall con- input value in the optimization process. To sist of all categories of vehicles: passenger cars explore the value of relative weight of criteria (Npc) + freight cars (Nfc) + bikes (Nb) + urban and indicators applied in this paper we used public transport vehicles (Nuv) + bus (Nbus) + research (expert opinion) and Delphy method. other vehicles (Nrest). Calculated by the formula: 4. The fourth step - application of multicriteria analysis to optimize the process, and getting = + + + + the ranking of priorities in the investment. + in a period of 24 hours. Indicators for this criteria are: p21, p22, p23 and p24. Weighted 4. Criteria and indicators for optimization indicator values are shown in the table (2). of investment K3 number of tracks observed on the RLC. Number of tracks is a criterion that shows how There are a number of criteria and sub-criteria over time the track crosses the road crossing. that can be considered to optimize the investment When the number of tracks is greater the aspect activity in this scientific field. of traffic safety, road crossing is more exposed to For this research, the selection criteria and their risks of accident events. Indicators for this criteria indicators (sub-criteria) is based on previous expe- are: p31, p32 and p33. Weighted indicator values riences related to traffic safety in road and railway are shown in the table (2). traffic in RLC. Selection criteria is also based on K4 max speed on the railway traffic on the data that can realistically be collected, in order to section where the RLC is installed. Number of create a unique database of RLC who are subject tracks is a criterion that shows how many tracks to investment activity. across the road traffic exceeds the RLC. What is For the purposes of this paper the following cri- the number of tracks is larger in terms of traffic teria is select: safety crossing more exposed to risks of accidents –– K1 frequency of rail traffic on the RLC events. Indicators for this criteria are: p41, p42 –– K2 frequency of road traffic on the RLC and p 43. Weighted indicator values are shown in –– K3 number of tracks observed on the RLC the table (2).

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K5 number of accidents at the selected RLC in of the indicators: P71, P72 and P73. Weighted indi- define period. This criterion shows how many ac- cator values are shown in the table (2). cidents happened on a given RLC in the observed Each individual criterion consists of a series of period. The greater the number of accidents on a sub-criteria that describe the criteria. In the process given RLC, the impact of this criterion is higher. of ranking the RLC, in order to obtain the list of pri- This criterion is a description of the indicators: orities, values of indicatros must have be displayed. P51, P52 and p53. Weighted indicator values are The following table (Table 2) shows the selected shown in the table(2). criteria (K1-K7) and their indicators with values: K6 visibility selected RLC in terms of road driv- Where the calculate is: ers. Visibility refers to the driver's visual capabili- Table 3 ties to detect motion of the train on the right and left Criteria Indicators Value C - the so-called triangle of visibility. Visibility can P11 P12 be prevented by buildings along the tracks, terrain K1 C1=K1xp11(p12,...p1n) - configuration, geometry of road infrastructure and P1n geometry of track infrastructure ... This criterion is a P21 P22 description of the indicators: P61 and p62. Weighted K2 C2=K2xp21(p22,...p2n) indicator values are shown in the table (2). - K7 investment activities. This criterion shows P2n - - the necessary investments in equipment RLC, with P31 the solutions related to RP. Investment activities are P32 Kn C2=K2xp31(p32,...p3n) in function of: the number of tracks, road width of - road, traffic types, ... This criterion is a description Pnn Table 2 CRITERIA INDICATORS p11 > 100 trains/day K1 frequency of rail traffic on the RLC. p12 50-100 trains/day p13 0-49 trains/day p21 > 200 cars/hour p22 150-200 cars/hour K2 frequency of road traffic on the RLC. p23 50-149 cars/hour p24 1-49 cars/hour p31 1 K3 number of tracks observed on the RLC p32 2 p33 >2 p41 >100 km/h K4 max speed on the railway on the section where is the RLC. p42 60-100 km/h p43 20 -59 km/h p51 0 K5 number of accidents at the selected RLC in define period p52 1 p53 >1 p61 yes K6 visibility selected RLC in terms of road drivers p62 no p71 >8m K7 investment activities p72 6-8m p73 4-5m

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5. Determination of relative weight defined In this paper, made Survey (anketa- question- criteria and indicators naire) and detailed instructions on the method and accuracy of filling, with the aim of evalua- To determine the relative weight of criteria and tion experts offered weight criteria and indicators. indicators was used as DELPHY METHOD rec- Number of experts: 20 experts (construction and ognized scientific methods in the field of opera- transportation professionals). The survey results tional and statistical research. DELPHY METH- are shown in the following table (table 5) OD was developed 50 years of the 19th century, i=1, 20 and was based on the need to evaluate a group of j=1, 7 military analysts, some activities related to tech- where is: nology defense systems. DELPHY METHOD recognized methods in the field of technical sci- = 1 ences, based on research opinions of competent Mean: experts in a given area and using the statistical analysis of data and selecting the corresponding Ksr = statistical distribution. The main advantages using DELPHY METH- Max: Ki value: OD are [1,2]: K = max 1. Interdisciplinary approach i

2. Anonymity of responses of experts Min: Ki value 3. Ability to adapt the questionnaire or survey K = min with lots of iterations i 4. Elimination of the influence of authority Standard deviation Si: 5. Elimination of group suggestions

Sdev= ; i=1,20 The person who conducts the process from application Delphy method referred to as the Coefficient of variation (Kνi): moderator, and it is responsible for the selection of experts who are elected to make the process K = i=1,20 of assessment criteria and indicators. Moderator νi

Survey compiles with the requirement that crite- Relativ weight of criteria (ωi): ria and indicators, experts join the numeric value. The importance of the condition that the sum total wi = of all values is 100. Number of participants in the survey (N experts) as a rule must be greater than The table above shows that the criterion K2 - N> = 20 in order to meet satisfactory reliability. the frequency of road traffic RLC has the high-

Table 4 est relative weight (wi=0.30), and the investment N/K K1 K2 - K7 TOTAL value criterion K7 activity has the lowest relative 1 11 12 - O17 100 weight (wi=0,06). 2 21 O22 - O27 100 In the same way and using the same method------ology (application Delphy method) we have to 19 O191 O192 - O197 100 20 O201 O202 - O207 100 determine the relative weight of indicators. Deter- mining the relative weight of indicators is needed in this process multicriteria analysis. Based on statistical analysis we calculate: The following table shows the relative weights a. the standard error of the TSR, of criteria and indicators as the relative weight of b. the arithmetic mean (Ksr) for normal the final value according to the survey, with whose distribution, values can be accessed multicriteria analysis and c. standard deviation (Sdev) and optimization (table 6). d. coefficient of variation (Kνi).

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Table 5 Ni/Kj K1 K2 K3 K4 K5 K6 K7 Total 1 5 30 25 5 20 10 5 100 2 5 40 10 10 20 10 5 100 3 25 25 15 0 15 10 10 100 4 15 15 5 10 25 25 5 100 5 20 20 10 15 10 10 15 100 6 30 30 10 10 20 0 0 100 7 5 60 5 5 5 15 5 100 8 5 45 5 5 25 10 5 100 9 4 15 15 15 20 30 1 100 10 5 40 10 5 25 15 0 100 11 10 30 10 10 30 5 5 100 12 5 40 10 10 20 10 5 100 13 25 25 15 0 15 15 5 100 14 5 30 20 15 15 10 5 100 15 20 20 5 10 20 20 5 100 16 15 25 5 10 20 20 5 100 17 10 20 10 10 20 15 15 100 18 10 40 25 5 5 5 10 100 19 10 20 10 10 10 30 10 100 20 20 20 5 10 20 20 5 100 Kisr 12,45 29,5 11,25 8,5 18 14,25 6,08 Kimax 30 60 25 15 30 30 15 Kimin 4 15 5 0 5 0 0 Sdev 8,2428597 11,5736 6,25658 4,32252 6,56947 7,9926 4,09717 K 67,944737 133,947 39,1447 18,6894 43,1579 63,8816 16,7868 ωi 0,12 0,30 0,11 0,09 0,18 0,14 0,06 1

Table 6 CRITERIA INDICATORS CRITERIA Ki (ωij) Pij pij (ωij) p11 0,5 K1 frequency of rail traffic on the RLC. 0,12 p12 0,3 p13 0,2 p21 0,5 p22 0,25 K2 frequency of road traffic on the RLC. 0,3 p23 0,15 p24 0,1 p31 0,1 K3 number of tracks observed on the RLC 0,11 p32 0,4 p33 0,5 p41 0,5 K4 max speed on the railway on the section where is the RLC. 0,09 p42 0,3 p43 0,2 p51 0,1 K5 number of accidents at the selected RLC in define period 0,18 p52 0,3 p53 0,6 p61 1 K6 visibility selected RLC in terms of road drivers 0,14 p62 0 p71 0,7 K7 investment activities 0,06 p72 0,2 p73 0,1

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6. Multi-criteria analysis n fi * − fij S j = ∑wi − (for p=1) i=1 fi * − f j In order to facilitate selection of the optimal as- f * − f i ij ∞ set, one of the methods is the multi-criteria analy- R j = maxwi − (for p= ) i − sis, as presented in this section. The research used fi * fi the multi-criteria method „VIKOR“ developed at where: the Faculty of Civil Engineering of the University n – criterion number in Belgrade [4]. wi – weight of the i-th criterion − The “VIKOR” method has been developed fi* = max fij ; fi = min fij ; i=1, n based on elements from compromise ranking. j j The model in this paper is further realized Sj – distance measure of R(F,1) from the ideal through the following activities: point for alternative j, 1. Alternatives are evaluated documented Rj - distance measure of R(F,¥) from the ideal in accordance with the adopted goals and point for alternative j. derived a list of criteria, ie. Each alternative Ranking according to measures Sj and Rj pro- Vj (j = 1, 2, ..., j) is assigned the value criteria vides two ranking lists of alternatives that signifi- Ki, (i = 1,2,..., n) over criterion functions fij (the value of the i-th criterion function for cantly different one from another. Measure S gives the j-th alternative). This value is in the form a ranking list where the best alternative is the one of the sum of numerical values of parameters obtaining minimal Sj, or the biggest group benefit that define each criterion. This form initial (advantage is given to satisfying majority of the criteria). Measure R gives the ranking list where matrix (Fij) model for the evaluation and decision making. the best one is the one where there is a minimal 2. Normalization of various criterion functions deviation from the ideal solution (so-called mini- fij, since all criteria are expressed in the same max decision making strategy), which implies that units measures. The method introduces a the better variant solution is must not be very bad transformation VIKOR sharing with a range according to some of the criteria fj.

of criterion functions Di. Alternative aj is better than ak if according 3. After the initial transformation matrix given to measure S the relation Sj

in a hierarchical sequence, are entered in the is determined in ranking lists s(aj) and r(aj). valuation model. Compromise programming where Sj and Rj are 5. The final activity of this model is a synthesis criteria functions now is applied in order to obtain of all the values of criterion function for each a grouped ranking list. In this double-criteria prob- alternative, and then compare them with each lem the ideal alternative has the following values other based on pre-established relationship. of criteria benefit: After comparison, the alternatives are ranked

in order to obtain the order - rankings. In S* = min S j j this activity values obtained matrix (Ni), (i R* = min R j = 1, 2, ... n). Received the order, ranking j alternatives, the final decision - the optimal The new ranking measure can be: (best) alternative. Q= v Q S +(1 − v ) Q R Starting from the constraint forms of the Lp j j j metrics, used in compromise programming, the following is obtained for the alternative aj: where:

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SSj − * QS j = − where DQ is the “advantage threshold” that is SS− * determined based on theoretical values of Q and RR− * the number of variant solutions j as: QR = j j RR− − *  1  − DQ = m i n 0, 25;  S = max S j j  j −1  − R = max R j j The value 0.25 limits the threshold for cases v – difficulty of the decision making strategy with a small number of alternatives. by majority of criteria. The first alternative in the compromise ranking list has “sufficiently” stabile position if it fulfils at

Alternative aj is better than ak, according to least one of the following conditions: multi-criteria, when ranked by Q, if Qj

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7. Investment case - example –– K5 number of accidents at the selected RLC in define period The provisional list of requirements for the in- –– K6 tiangle visibility selected RLC in terms stallation of the RP investors take into consider- of road drivers ation 10 level crossings. The investor in this case –– K7 investment activities is certainly state-owned enterprises (Railways, Ministry of infrastructure, the Ministry of Trans- On the basis of selected criteria and their weight port, ...). Provisional list of demands made on the relationship (calculated relative weight wi) made basis of a number of operational requirements the ranking level of level crossings (optimization need to raise traffic safety on the RLC. Investor of investment activity) in order of priority for the in this example, has a budget for investment in installation of RP with using method VIKOR. only 5 positions. Applying research in this paper, will be shown the possibility that the investor have possibility to makes the order of priority attached The results of examples using multicriteria to this investment activity and thus invest in the analysis for this case LC with the highest priorities. In other words, it Multicriteria ranking of 10 alternatives (an al- will be shown that the level crossings are investi- ternative - a preliminary list of requirements) us- gated criteria values of K1-K7 and indicator val- ing the 7 criteria (criteria observed K1-K7). ues for the given criteria are more important in List of 10 alternatives relation to a provisional list of requests. Output is A 1. LC 1 a sequence of crossings that will be invested and a A 2. LC 2 list of crossings that will be set up funds for RP in A 3. LC 3 a given iteration. A 4. LC 4 The following table (Table 7) shows the nu- A 5. LC 5 merous size of the input criteria of defined-K1-K7 A 6. LC 6 for each crossing: A 7. LC 7 Where are the K1-K7 criteria with certain val- A 8. LC 8 ues such as: A 9. LC 9 –– K1 frequency of rail traffic on the RLC A10. LC 10 –– K2 frequency of road traffic on the RLC –– K3 number of tracks observed on the RLC List of 7 Criteria –– K4 max speed on the railway traffic on the f 1. K1 section where the RLC is installed f 2. K2

Table 7 VALUE CRITERIA RLC K1 K2 K3 K4 K5 K6 K7 1 60 180 2 120 1 YES 9 2 60 175 2 120 1 YES 9 3 60 185 2 120 0 YES 9 4 45 120 2 80 0 YES 8 5 45 100 2 80 0 NO 8 6 45 120 2 80 1 NO 8 7 48 210 2 80 2 NO 8 8 62 220 2 80 2 YES 8 9 62 185 2 80 0 NO 8 10 80 220 1 80 0 YES 6

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f 3. K3 Rankings by (R.L.): QR (Minmax strategy) , Q f 4. K4 (Compromise strategy) and QS (Benefit strategy) f 5. K5 R.L.QR R.L.Q i Q(J) R.L.QS f 6. K6 A 7 0.118 A 7 0.000 A 7 0.279 f 7. K7 A 8 0.140 A 8 0.092 A 8 0.320 A10 0.180 A10 0.435 A 9 0.561 Index of extremization for each Ki A 3 0.201 A 9 0.467 A 1 0.578 1. 1. 1. 1. 1. 0. 1. A 9 0.201 A 1 0.492 A10 0.580 A 1 0.205 A 2 0.505 A 2 0.582

The values of the relative weight w (i) for each A 2 0.209 A 3 0.510 A 3 0.606

K(i) A 4 0.291 A 6 0.844 A 6 0.713 K1=0.12; A 5 0.300 A 5 0.875 A 5 0.745 K2=0.30; A 6 0.300 A 4 0.978 A 4 0.876 K3=0.11; K4=0.09; Final ranking list according to priorities K5=0.18; K6=0.14; 1. Level crossing 7 K7=0.06 2. Level crossing 8 3. Level crossing 10

Relativ weight ωi = 0.571 4. Level crossing 9 5. Level crossing 1

The values of criterion function: K1 K2 K3 K4 K5 K6 K7 A 1 18.000 45.000 0.800 60.000 0.300 1.000 6.300 A 2 18.000 43.750 0.800 60.000 0.300 1.000 6.300 A 3 18.000 46.250 0.800 60.000 0.100 1.000 6.300 A 4 9.000 18.000 0.800 24.000 0.100 1.000 1.600 A 5 9.000 15.000 0.800 24.000 0.100 0.000 1.600 A 6 9.000 15.000 0.800 24.000 0.300 0.000 1.600 A 7 9.600 105.000 0.800 24.000 1.200 0.000 1.600 A 8 31.000 110.000 0.800 24.000 1.200 1.000 1.600 A 9 31.000 46.250 0.800 24.000 0.100 0.000 1.600 A10 40.000 110.000 0.100 24.000 0.100 1.000 1.200 F* 40.000 110.000 0.800 60.000 1.200 0.000 6.300 F- 9.000 15.000 0.100 24.000 0.100 1.000 1.200 Rankings based on individual criteria: K1 K2 K3 K4 K5 K6 K7 A 1 4 6 1 1 3 5 1 A 2 5 7 2 2 4 6 2 A 3 6 4 3 3 6 7 3 A 4 8 8 4 4 7 8 4 A 5 9 9 5 5 8 1 5 A 6 10 10 6 6 5 2 6 A 7 7 3 7 7 1 3 7 A 8 2 1 8 8 2 9 8 A 9 3 5 9 9 9 4 9 A10 1 2 10 10 10 10 10

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6. Level crossing 2 References 7. Level crossing 3 1. Atanasković P. -“Strategija upravljanja investicijama 8. Level crossing 6 pri odabiru putnih prelaza za osiguranje na magis- 9. Level crossing 5 tralnim prugama – doktorska disertacija, Univerzitet 10. Level crossing 4 u Novom Sadu, Republika Srbija, 2007 godina,

2. Atanasković P. - "Selection of the optimum variant in According to the final ranking list, can be seen the general design process of railway junction", The that the crossing number 7 need the highest pri- 8th World Conference on transport research, Antwer- ority for intervention with RP, and follow him: pen, Belgium, (July, 1998) crossings numbered 8, 10.9 and 1 (the order of investment priorities). Showing ranked list (ref no 3. Atanaskovic P, Sajfert Z. -„Investment management and selection of the relevant parameters in order to 1-5) are in the group for which the investor has make decision on level crossing protection systems the money funds in this case. Crossings numbered “,IRSC 2006, Dublin, Ireland 2,3,6,5, and 4 were also ranked according to the priorities of investment, but the investor does 4. Opricović, S. and G.H. Tzeng, – Extended VIKOR not have money funds at a present time. This has method in comparison with outranking, European Journal of Operational Research 178, No.2, pp. 514- achieved the objective application of multicriteria 529, 2007. analysis that helped the investor to use scientific methods in a process of investment decision. 5. Markovic Lj., Atanaskovic P., Milic Lj, Sajfert D., Stanković, M. - Investment decision management: prediction of the cost and period of commercial 8. Conclusion building construction using artificial neural network, TTEM, vol 6, No 4, 2011. Optimization of complex systems is the process by which combine theoretical and experiential 6. Uputstvo 340 za isporuku, ugradnju i održavanje knowledge of experts. It is essential to consider the gumenih panela sistema Kraiburg za uređenje putnih prelaza u nivou na mreži JŽ, Službeni glasnik ZJŽ br. objectives, determine the limits, make the whole di- 4/2003, Beograd 2003. vision and the establishment of mutual interaction, determine resource requirements and ensure opti- 7. Studija definisanja prioriteta bezbednosti saobraćaja mum performance and system usage. This makes na putnim prelazima na teritoriji JŽTP Beograd, SI it necessary to perform the optimization criteria, CIP Beograd, 1991. which include all major components. Each alterna- 8. Pravilnik 322 o načinu ukrštanja železničke pruge i tive must be tested to determine whether it is ad- puta, ZJŽ, Beograd 2000. missible, or whether the corresponding parameter values satisfy the given constraints. 9. Tehnički uslovi 412 za obezbeđenje saobraćaja na The paper was presented arranged list of cri- putnim prelazima u nivou, ZJŽ, Beograd, 1997. teria and indicators used for the optimization of investment activity, or priority of investment in Corresponding Author equipment rubber panel on RLC. In the example Predrag Atanaskovic, shown that in cases where there are limited in- University of Novi Sad, vestment funds, investment optimization can be Faculty of Technical Science, Serbia, achieved by priority. E-mail: [email protected] List of criteria and indicators in this paper, is formulated on the basis of past experience in the field of investment [ 5 ] and traffic safety on the RLC and should not be understood as a permanent and fixed. There may be implementation and additional research in this area.

Volume 7 / Number 1 / 2012 179 technics technologies education management Significance of Economic Value Added in Shareholder Value Creation Process

Vladimir Zakic1, Vunjak Nenad2, Carisa Besic3, Jelena Simic1 1 Higher School of Professional Business Studies, Novi Sad, Serbia, 2 University of Novi Sad, Faculty of Economics Subotica, Subotica, Serbia, 3 University Alfa, FORKUP&FSOM, Novi Beograd, Serbia,

Abstract should be tied to management compensations. Al- though EVA is now primarily used in developed Purpose of this article is to determine role of countries, it is expected that in near future EVA Economic Value Added - EVA, as most recog- will be widely used in medium and large corpora- nized and applied modern performance financial measurement, in Shareholder Value Creation. tions in Balkan region. Shareholder value is created when the net return Key words: Shareholder Value, Economic Val- on assets held by the business exceeds the return ue Added, Performance measurement required by those who have contributed capital to the business. In other words, value is created 1. The Shareholder Value Revolution only when companies invest capital at returns that Shareholders have always been interested exceed the cost of that capital. Accepting value in stock returns, but significant changes have creation as the paramount corporate goal is only emerged in global markets in the last two de- a beginning. Managers and shareholders must decades. They started in United States, and more termine a way to reliably measure their progress lately spread to Europe, Asia and Latin America. in achieving it. While corporate managers are un- A confluence of factors and circumstances has led der constantly increasing pressure to achieve suc- managers to rethink their roles and those of their cess in creating value worldwide, they often lack companies, especially as regards value creation. the necessary measurement tools. Moreover, they The growing predominance of shareholder lack deep understanding of value creation process wealth culture is largely a consequence of several and they lack means to communicate and to per- major developments:1 suade investors that their money will be profitably –– The globalization and deregulation of employed. Traditional financial accounting and capital markets reporting has shown significant flows in terms of –– The end of capital and exchange controls value creation measurement. Management incen- –– Advances in information technology tive system, largely based on periodic accounting –– More liquid securities markets results, has often led to many problems, such as –– Improvements in capital market regulations underinvestment or, in some extreme cases, even –– Generational changes in attitudes toward accounting frauds. To overcome this problem, in savings and investment last two decades, financial theory and practice –– The expansion of institutional investment has put a lot of effort to create multiple models of financial measurement that could reliable reflect Decades ago, capital markets were highly seg- processes of value creation. Among them, one of mented and highly regulated. It resulted in limited the most popular and widely accepted is Econom- movement of capital resources and absence of ic Value Added. Determining the measurement strong pressure on corporate managers to achieve criteria and establishing guidelines for interpreting high performance. Even when companies under- the results is important in early stages of designing and implementing Economic Value Added. In the interest of aligning the goals of managers and 1 EVA and Value-Based Management: A Practical Guide to Implementation, Young David; O'Byrne Stephen, (2001): shareholders, applied shareholder value measures McGraw-Hill., p.7

180 Volume 7 / Number 1 / 2012 technics technologies education management performed, senior managers were rarely fired. In The ability to short stocks is important in an en- decades after the World War II, growth rates of 5 vironment where the landscape and competitive po- percent or higher were common in western coun- sitions are changing so fast. The rationale is clear:2 tries economy. –– first, demand for European equities is likely Significant changes began at the and of 1970s to continue to grow as the liquidity outlook and early 1980s: free-floating exchange rate in remains rather favorable, but the equity culture currency markets, OPEC oil crises, the end of is young and fragile, accentuating volatility; fixed brokerage commissions in United States, a –– second, the structural changes that are growing climate of deregulation, start of a mas- currently taking place in Europe are so critical sive worldwide wave of privatization and, finally, that they fundamentally modify the industrial strong development of high-tech technology. picture: in a nutshell, there are as many losers As result of these changes, new wave of think- as there are fresh opportunities for business; ing began to emerge. Traditionally, in post-war –– third, research is key to spread those decades people kept money in “their pockets” businesses which are strengthening their or saved in banks. Investment in stocks were for edge and those which are losing it. Shorting/ rich people of gamblers. Their children, however, selling has become as important as finding think differently. Aided by a seemingly endless good companies to buy. bull market and high return on stocks, millions of common people become shareholders. This trend Demand for European equities is expected to was accelerated by privatization campaigns in outstrip supply in the next few years. This would Great Britain and France. provide a powerful backdrop for European stocks. As a significant factor in shareholder value rev- Total demand, by some estimates, in the decade to olution, it is important to highlight the worldwide come could amount to $10 trillion versus only $5 explosion in mutual funds, unit trust and other trillion total supply. There are three main drivers: forms of institutional investment. These funds are ageing populations, low interest rates and legisla- run by professional managers who care only about tive changes including pension reform. The driv- performance and delivering the highest returns ers should all lead to an increase in savings and, possible to the people who hired them. The ascen- therefore, make equities an attractive investment dancy of shareholders in most developed countries vehicle. Most importantly, the largest contributor has led more and more managers to focus on value to equity demand is mutual fund flows, followed creation as the most important metric of corporate by pension funds and M&A (merger and acquisi- performance. tions) transactions paid in cash. The mutual fund The shareholder value revolution in Europe has flow boom started In 1997, and accelerated in now been going on for more than ten years. Share- 1999 as investors started to sell from their bond holders around the world have finally united. Both holdings. There is room for that to continue since institutional and individual investors have stood equities still account for only 50% of mutual fund up, pushing harder for European companies to de- assets in Europe (less than 40% in EMU), while liver the superior returns. Many European compa- they represent 80% in the UK and 60% in the US. nies started talking about shareholder value years The example of Germany is particularly il- ago, but only a few were keen to truly change. But lustrative. Since 1997 when the privatisation of most of them have been forced to focus on their Deutsche Telekom sparked the country’s first business position and on the returns they have wave of enthusiasm for stocks, traditionally risk- been producing. averse Germans have been turning away from It was not always a luxury but more a ques- fixed income investment and real estate. number tion of survival within a more competitive environment. It has been a very interesting period to 2 Shareholder value at risk in Europe? Time to double be invested in European equities, and is still very efforts for companies and investors, François Langlade- much the case. The focus on shareholder value has Demoyen, Buttonwood Capital Partners http://www.aima. helped some companies and exposed others. org/uploads/2001%5CJun%5C Buttonwood.pdf, p. 1-2.

Volume 7 / Number 1 / 2012 181 technics technologies education management of shareholders in the country has almost doubled In response, some traditionally “value-destroy- since 1996, now amounting to 22% of the popula- ing” companies have signalled to the market that tion. There are now three times as many Germans corporate culture has been changing. More pre- holding mutual funds as there were four years ago. cisely, they have increasingly indicated that they have set up performance benchmarks based on 2. Shareholder Value and EVA Return On Invested Capital (ROIC) or Economic Value Added (EVA) that represents the profit gen- The new competitive pressures on the Euro- erated once the cost of capital has been deducted. pean industry suggest that shareholder value is However, the implementation of compensation the best objective to keep companies growing in a schemes related to shareholder value is still in its profitable way. An increasing proportion of com- infancy, but it is slowly gaining ground: incentive panies are fully aware that the process of value plans are critical. Moreover, it is also clear that the destruction accelerates, if drastic decisions are not stock market is very much driven by EVA as well taken and implemented rapidly. as by free cash flow generation (Table 1, 2 and 3). Table 1. United Kingdom1

Table 2. Germany

1 Source – Table 1,2 and 3: Op. cit., p. 4-5

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Table 3. France

2.1. Basis of EVA concept decades, a number of factors (deregulation and integration of capital markets, more liquid securities EVA is considered to be a remarkably simple, markets, expansion of institutional investment, but powerful measure of performance. A corpora- advances in information technology) have signifi- tion employs capital in order to generate revenues cantly increased the mobility of capital. It forced and profits. Investors who provide that capital, corporations to compete not only in product mar- both creditors and shareholders, expect a fair re- kets but also in capital markets. turn on their investments. EVA goal is to measure Returning the cost of capital, or the return ex- the firm’s ability to generate profits in excess of pected by investors, became a key success factor. At the cost of the capital employed. EVA is calculated the same time, finance theory has evolved making as the difference between after-tax operating prof- the estimation of a cost of equity a more accessible its and the cost of capital invested by both debt- task. Taking advantage of these developments and holders and equity-holders: the growing demand for new ‘value-based’ management practices that could better align the interests of EVA = NOPAT – (Cost of Capital x Capital) managers with those of shareholders, the consulting firm Stern Stewart & Company, in the 1980’s and NOPAT – Net Operating Profit After Taxation 1990’s, revived the notion of residual income. Stern Capital – Investments by shareholders and Stewart developed this notion into a broader, EVA- debtholders based management control system, implemented at Cost of Capital – Weighted average of the after- dozens of large, publicly-traded companies includ- tax cost of debt and cost of equity ing AT&T, Coca-Cola, and Quaker Oats. 3 The appeal of EVA lies in its intuitive interpre- EVA concept is basically identical to the re- tation. A positive EVA suggests that the firm has sidual income theory (net income minus a charge generated profits in excess of the amount required for the cost of equity capital) developed by econo- to remunerate investors (at market rates) for the mists Alfred Marshall in the 1890’s. General Mo- tors implemented a residual income measure for performance evaluation and compensation in the 3 Understanding Economic Value Added, Desai Mihir; Fabrizio Ferri, (2006):, Harvard Business School, No 1920’s. It was already said that over the last two 9-206-016.

Volume 7 / Number 1 / 2012 183 technics technologies education management capital they have provided. In short, the firm has There are several major accounting adjustments paid its operating and capital costs, and created in EVA concept. For purpose of this paper, only additional wealth. Negative EVA, instead, sug- most significant will be mentioned.4 Under the ex- gests that the firm “devours resources” without isting accounting rules, not all economic assets and providing a commensurate return for their use. liabilities are recognized on the balance sheet. Cer- Net Present Value (NPV) rule in capital budget- tain long-term investments do not fit the accounting ing is similar with idea that value is created only definition of assets and are therefore reported as ex- when the return on capital is greater than the cost of penses. For example, accounting standards generally capital: accept any project with a positive NPV. In requires research and development (R&D) expendi- other words, investment should be made if the pres- tures to be expensed in the year incurred, rather than ent value of expected future cash inflows is greater being capitalized and amortized over the expected than the present value of future cash outflows com- useful life. While standard setters recognize the po- puted by discounting cash flows at the cost of capital. tential long-term benefits of investments in R&D, However, present value (PV) of EVAs from a concerns regarding the reliability of such benefits given project is mathematically equivalent to the have prevailed. From a performance evaluation and NPV of the project. It implies that maximization incentive perspective, however, such accounting of shareholder wealth is only guaranteed if the treatment may lead to significant underinvestment firm maximizes the present value of future EVA. in R&D as the cost of the investment is fully rec- Neither positive EVA nor an increase in EVA guar- ognized in the current period while the benefits will antees value creation as they can be achieved at show up only in later years. EVA proponents recom- the expense of future EVAs. mend the capitalization of R&D expenditures and all other expenditures with long-term benefits, with 2.2. Measurement Challenges in Implementing subsequent amortization over their expected useful EVA life. It results in a more accurate matching between costs and benefits. Limiting management’s ability to There are two primary measurement issues for ‘’fix numbers‘’ could be accomplished by eliminat- corporations in implementing EVA concept. First, ing accruals for bad debts and warranties. The ma- a firm’s accounting profits may have to be adjust- nipulations of such provisions, along with revenue ed to provide the economic measure of profit that recognitions, are considered to be most common EVA purports to capture. Second, EVA should be ways that managers manipulate profits. based, at some extent, on the market value of as- Over 150 potential adjustments has been iden- sets in place which may also require adjustments tified and used in practice. The complexity of the to a firm’s financial statements. required adjustments is sometimes viewed as a To correct some inadequacies of standard fi- weakness of EVA. EVA proponents recommend nancial reporting, providing reliable EVA figures using a maximum of 5 to 15 key adjustments, cho- requires certain accounting adjustments. The gen- sen based on their materiality, incentive effects eral aim is to correct perceived biases or distortion and ease of communication. that arises because: (1) deficiencies in Internation- For EVA to successfully align the interests of al Accounting Standards or Generally Accepted managers and owners, it is essential to tie a manag- Accounting Principles (USA) or (2) managers er’s compensation directly to EVA. The EVA bonus tend to “fix accounting numbers” plan tries to balance four objectives of management Accounting rules are often a compromise be- compensation: to align the interests of managers tween potentially conflicting objectives, such as and owners; to provide managers with enough in- providing economically relevant and timely incentives (leverage); to limit retention risk; and to formation while maintaining certain standards in terms of reliability and verifiability. As a result, the numbers reported in the financial statements 4 For a more extentive explanation of accounting adjustments see: EVA and Value-Based Management: may not be consistent with the EVA objective to A Practical Guide to Implementation, Young David; measure economic performance. O'Byrne Stephen, (2001): McGraw-Hill., p.205-263

184 Volume 7 / Number 1 / 2012 technics technologies education management limit shareholder costs associated with the compen- value drivers. Non-financial or qualitative mea- sation plan. EVA implementation is largely point- surements can not be used solely, and must be less exercise unless the company intends to tie EVA integrated in complex model along with financial to management compensations plans. measurements. The most famous complex measurement model is Balanced Scorecard – key per- 3. Conclusion – Development of Sharehold- formance measurements are identified from four er Value and EVA concept in Serbia and distinct perspectives: financial, customer, internal other countries in transition business process and learning and growth.

Shareholder value concept is relatively new term References in Serbian practice, and there are limited and scarce data on this topic. However, based on developed 1. Booth Laurence, (1998): What Drives Shareholder countries’ experience and analysis of unique risk Value?, Presented at the Federated Press “Creating Shareholder Value” conference, October 28, 1998 factors that exist in countries in transition, such as 2. Copeland Tom; Koller Tim; Murrin, Jack, (2000): Serbia, conclusion is that the implying shareholder Valuation: Measuring and Managing the Value of value concept could have great impact on Serbian Companies, third edition, McKinsey&Company Inc. corporations. Serbia and other countries in transi- 3. Desai Mihir; Fabrizio Ferri, (2006): Understanding tion need to efficiently regulate legal protection of Economic Value Added, Harvard Business School, No 9-206-016. minority shareholders and stock market. After that, 4. François Langlade-Demoyen, Buttonwood Capital corporations should consider possibility of initiating Partners, Shareholder value at risk in Europe? Time regular cash dividends, which will result in increas- to double efforts for companies and investors, http:// ing corporation’s business reputation. By doing so, www.aima.org/uploads/ 2001%5CJun%5C Button- successful corporations could easily raise additional wood.pdf, p. 1-2. 5. Johnson Roy, (2001): Shareholder Value – a Business funds by attracting minority shareholders, for the Experience, Butterworth – Heinemann publications. purpose of further growth and development. In that 6. Koller Tim, (1994): What is value-based manage- way, corporations could attract potentially unlimited ment?, The McKinsey Quaterly 1994 No 3. number of owners-shareholders, opposite to sole 7. Mäkeläinen Esa, (1998):Economic Value Added as a proprietorships and partnerships, and they have the management tool, Helsinki School of Economics and Business Administration, Department of Accounting unique ability to raise large amount of cash. and Finance, http://www.evanomics.com/evastudy.shtml However, there are some concerns that must be 8. McIntyre Edwars, (1999): Accounting Choices and expressed about EVA topic and its significance in EVA, Business Horizons, January-February 1999., value creation process. First, EVA is primarily ori- p.66-71. ented toward shareholder value creation. That means 9. Shareholder value added – a discussion paper for government business enterprises and state-owned that interest of other significant stakeholders, such enterprises and state-owned companies, (1999) De- as customers and employees, could be neglected. partment of Treasury and Finance, www.treasury.tas. However, long term success in EVA measure could gov.au/domino/dtf/dtf.nsf/ LookupFiles/SVAPaper. not be achieved if shareholders or top managers are PDF/$fileSVAPaper.PDF abusing other stakeholders. Accounting adjustments 10. Vitols Sigurt, (2003): Negotiated Shareholder Value: The German Version of an Anglo-American Practice, of EVA have important role in motivating manager http://skylla.wz-erlin.de/pdf/2003/ii03-25.pdf to make long-term decisions that are expected to 11. www.exinfm.com/pdffiles/value.pdf positively affect all stakeholders. 12. Young David; O'Byrne Stephen, (2001): EVA and Second, all financial indicators, traditional or Value-Based Management: A Practical Guide to modern, are historical in nature. We can assume Implementation, McGraw-Hill. that value of firm can be divided into two com- Corresponding Author ponents. (1) the current operations value; (2) the Vladimir Zakic, future growth value. The greater the proportion Higher School of Professional Business Studies, of total value that the future growth represents, Novi Sad, the greater the need for management to seek out Serbia, non-financial measurements that are related to key E-mail: [email protected]

Volume 7 / Number 1 / 2012 185 technics technologies education management Customer satisfaction focused business strategy: An exploratory study in Serbian economy

Dragan Cockalo1, Nenad Vunjak2, Dejan Djordjevic1, Carisa Besic3, Vesna Spasojevic Brkic4 1 University of Novi Sad, Technical faculty “Mihajlo Pupin” in Zrenjanin, Zrenjanin, Republic of Serbia, 2 University of Novi Sad, Faculty of Economics Subotica, Subotica, Republic of Serbia, 3 University Alfa, FORKUP&FSOM, Novi Beograd, Republic of Serbia, 4 Faculty of Mechanical Engineering in Belgrade, Belgrade, Republic of Serbia.

Abstract formance (or outcome) in relation to the person’s expectations.”; satisfaction level is a function of Conceptually, the objective of a wider analyses the difference between perceived performance in this paper are the key strategic objectives of a and expectation. company and achieving and understanding the op- In the contemporary global economy and high- timum level of customer satisfaction. Theoretically- ly competitive business environment, it might be based model for providing customers’ satisfaction fatal for a business organization to be non-custom- in the form of business strategy is harmonized with er oriented. In fact, only those customer-centered the following important concepts: quality manage- organizations that can deliver value to their cus- ment, business excellence and relationship market- tomers will survive in the modern business arena. ing. The research (survey) which was carried out in To “make” highly satisfied and loyal customers, companies and among the experts, on the territory organizations throughout the world are striving to of the Republic of Serbia, indicated justifiability of produce world class products and services of high this model and its structure. Totally 600 organiza- quality. For a long time, CS is considered to be the tions (all sizes; all ISO 9001 standard certified) and key success factor for every profit-oriented orga- about 100 experts (from the field of interest) were nization as it affects companies’ market share and included in the research – the call for participation customer retention. In addition, satisfied custom- accepted 84 companies and 37 experts. ers tend to be less influenced by competitors, less Key words: customer satisfaction, business price sensitive, and stay loyal longer [8]. strategy, quality management, business excellence, Many executives seem to trust their intuitive relationship marketing sense that high CS will eventually translate into higher loyalty and with it ultimately into improved 1. Introduction company performance [26]. Thus achieving high CS has become a central focus of corporate strat- The objective of an organisation should be egy for most firms [16]. However, “despite the achieving and understanding the optimum level claim that satisfaction ratings are linked to repur- of customers' satisfaction. This field represents chase behavior, few attempts can be found that a base of, at least, three strategic concepts: qual- relate satisfaction ratings to actual repurchase be- ity management (QM), total quality management havior” [21, p. 131]. That the validity of this as- (TQM) and business excellence (BE), as well as sumption is all but given is nicely illustrated by relationship marketing (RM), which is conceptu- Reichheld [29], who reports that while around 90% ally, the subject of a wider analyses of this paper. of industry customers report to be satisfied or even very satisfied, only between 30% and 40% actu- 1.1. Customer satisfaction as a strategic objective ally do repurchase. Apparently, current knowledge doesn’t fully explain the prevalence of satisfied Customer satisfaction (CS) can be defined in customers who defect and dissatisfied customers different ways. According to Kotler [19, p.40], who do not [2, 12]. One of the reasons is that the satisfaction is “the level of a person’s felt state re- relationship between satisfaction and retention is sulting from comparing a product’s perceived per- not a linear one, but moderated by several differ-

186 Volume 7 / Number 1 / 2012 technics technologies education management ent variables. Oliva, Oliver, and MacMillan [25, p. context. Many entrepreneurs do business by build- 84] stated that “the response function linking (…) ing and managing relationships without using the satisfaction to customer response may not operate term RM. RM, defined as marketing activities that as is frequently assumed because the complexity attract, develop, maintain, and enhance customer of the relationship may be underestimated”. relationships [3, 14], has changed the focus of a Leading companies make customer focus a key marketing orientation from attracting short-term, element of the company’s overall strategy to differ- discrete transactional customers to retaining long- entiate themselves from competitors. Satisfaction lasting, intimate customer relationships. As exist- becomes a primary theme for top management in ing literature suggests business can build customer communications with a broad range of stakehold- relationships by initiating one or several types of ers. Focusing on satisfying high-value customers “bonds”, including financial, social, and structural can be powerful part of the company fabric because [20, 27]. However, much should be learned about it is meaningful to a broad set of stakeholders in- the relationship between “bonds” initiated by a cluding employees, financial analysts, suppliers, company and customer perceptions and behavior. and other allies. Putting the customer first becomes Evans, J. and Laskin, R. [10] present a model part of the corporate positioning and differentiation of effective marketing process which, in some in the market. The lack of management in CS strat- way, shape everything said before in a coherent egies could be one of the many factors leading to an whole. The model is in a cyclic form with three enterprise’s downfall. To effectively draft CS strat- sub-processes: (1) inputs (understanding custo- egies, one must respect customer value and collect mer expectations, building service partnerships, customer demands and then compare the impor- empowering employees and TQM); (2) positive tance and performance (satisfaction) between the outputs (CS, customer loyalty, quality of produc- collected customers demands [24]. Concurrently, ts/services and increased profitability); (3) chec- customer demands are not stagnant and cannot be king phase (customer feedback and integration). manipulated by enterprises. Therefore enterprises The authors define RM as a “process by which a must periodically diagnose and filter these demands company builds a long-lasting relationship with to set reasonable strategies to insure the survival of possible and the existing customers in such a way CS activities [32]. that both sides (sellers and buyers) are focused For example Knox [18] used product/service on commonly defined objectives, which is in har- content and the ability to satisfy customer demands mony with previously mentioned definitions”. as the basis for CS strategies analysis. Barsky and Efficiently positioned RM will lead towards the Labagh [1] believed in analyzing CS strategies and following positive outputs: (1) high percentage that one must consider three factors: expectation of satisfied customers, (2) higher loyalty of custo- and past experiences, product and service performers, (3) customers' perception on products/ser- mance and the factors affecting actual perception. vices higher quality and (4) increasing profit of a seller company. RM is a continual process which 1.2. Concepts related to CS demands the following from companies: (1) continual communication with customers (provides Quality components, such as solving complains, correct definition of requirements) and (2) to inte- cooperation of company’s representatives with cus- grate RM process into strategic planning (enables tomers, availability of products and services, cost better resource management and anticipation of and price policy and activities related to making future customers' needs). Brookes and Little [5] contracts, have a great influence on customers’ sat- enhance the explanation of the effective market- isfaction [6, 31]. On the other hand, customers’ sat- ing process by saying that this concept is based on isfaction influences the company’s characteristics, data base management, interactive market com- such as spreading positive information about the munication and web marketing. company and its services and products [10]. The concept of “total quality” extends well be- The term "relationship marketing" (RM) was yond the marketing customer-perceived view of first introduced by Berry [3] in a services marketing quality [13] to include all key requirements that con-

Volume 7 / Number 1 / 2012 187 technics technologies education management tribute to customer-perceived quality and CS. Total indicators concerning this. In accordance with quality broadens prior notions of quality in that it in- the above, an acceptable concept or a model that cludes consideration of business processes for pro- would satisfy customer requirements by integrat- viding complete CS on the full range of product and ing QM, BE and RM seems the possible solution service needs. Essentially, the total quality concept in a transitional, Serbian context [4]. is a general philosophy of management [22]. The presented model starts from, at least, two BE presents a business strategy which demands key pre-conditions: from management complete commitment and ac- 1. In the given conditions the very incorporating ceptance of concept [17, 34]. The EFQM model of principles and criteria of BE, in other of BE is based on eight principles. The belonging words – input and output elements of RM in criteria are: leadership, policy and strategy, people defining policy, objectives and tasks in the – management of employees, partnership and reorganization (the sphere of planning quality sources, processes, customer results – CS, people in the future) shows strategic determination results – employees’ satisfaction, society results – of certified Serbian companies to satisfy the influence on society and key performance re- the requirements of customers and other sults [9]. All of them are the basis for self-evaluation stakeholders. whose purpose is to evaluate the “maturity phase” 2. Wide involvement of organizational and of the organization and to focus on the problems of management structure in the processes of further business improvement [7, 23, 30, 33]. expectations identification and monitoring, measuring and analyses would mean making 2. Methodology stronger bonds between current activities and strategic dicisions, where a satisfied The companies coming from transitional coun- customer is in focus. tries, like those from the West Balkans (Serbia is among them), have problems with quality of their Argumentation, even an indirect one, of these business and production productivity. Inherited in- pre-conditions would be enough to show justifi- efficient production system, as well as transitional ability and acceptance of the model which, in recession common for all countries in transition, the centre of the presented form (including sub- influence these companies and may be blamed for processes defined by the standard and supported their insufficient competitive capacity. The prob- –cyclic expanded- in the sphere of planning and lem is especially obvious in the companies domi- reconsidering quality in the future, exclusively nated by autochthonous private capital. The reason by strategically oriented concepts of BE and RM) for relatively small number of Serbian companies puts satisfaction of customers and other stakehold- that implemented quality system can be found in ers. In order to provide stable bonds between the difficult financial situation of domestic economy rings it is necessary to incorporate wider organiza- and the implementation of QMS asks for consid- tional and management structures especially in the erable business efforts on the side of companies. processes directly oriented towards the customers. What concerns most is the fact that almost all Target groups in the research are: big companies have already implemented QMS. –– companies (production and/or services) On the other hand, the majority of all companies which are certified according to the standards in Serbia are made from small and medium size of QM (ISO 9000 series) and which work and companies (SMEs). Taking into account all the have residence in Republic of Serbia; quality mentioned facts it is not surprising that the con- managers and/or marketing managers from cept of integrated management systems is mostly these companies, as a primary group, applied on Serbian market while the elements of –– experts, in the sphere of quality and/or BE serve more as theoretic-methodological base. marketing (with reference to the subject The concept of RM exists but only on the basic sphere, published works and/or cited), as level and in small number of companies (those in a control group. They were to confirm the foregn ownership). There are, however, no clear companies' attitudes; it was interesting to

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see whether considerable differences would panies (types of companies: 1 – micro and small, appear in the companies' answers and the 2 – medium and 3 – big, in the following tables, as answers of those who were dealing with this well), the data types which appeared in the survey matter from academic (university professors) caused the application of two different methods or some other standpoint (ex. consultants). of statistic analyses: Kruskal Wallis and One way It was not important whether they belonged ANOVA. ANOVA was also used in comparison of to primary research group, it was essential companies (total) and experts’ data. It was taken that they considered the problem from their that evaluation limit of reliability results, t.i, pro- individual, expert standpoint. bability which enabled claiming that the data were error consequences or random variations was p = Surveying available companies and experts was 0,05. This means that for p £ 0,05 exists statisti- primarily realized by e-mail survey. The reasons cally significant difference in results. It was de- for choosing this kind of survey are fast respond- termined that significant statistic exception in the ing and costs, which are lower than postal survey answers of companies and experts (in generally) or some other kind of interview; considering the didn't exist, therefore, there is no discussion on main characteristics and problems (the greatest this matter. respond, which goes from 20 to 30%, and sometimes does not go over 5%, so the sample is not 3. CS focused business strategy representative) [15, p. 57]. Data base of Serbian Chamber of Commerce (http://www.pks.rs) was In accordance to the previously said, modeling used during the selection of companies, so the sur- of the acceptable concept that would satisfy cu- vey included about 600 companies; at the moment stomers' requirements, integrate QM, BE and RM of creating the list there were about 600 companies seems possible and transitional solution. Therefo- in the base (at that point, more than half of QM re, the objective of the research was to create and certified organizations in the Republic of Serbia). present a qualitative theoretic model of a system At selecting the sample of experts it was used data for providing satisfaction of a company's (firm’s) base and conatcts in UASQ – United Association customers needs. This model assumes a process of Serbia for Quality (http://www.jusk.org), as in- approach, appropriate marketing research in the dependent and sufficiently representative body for beginning and corresponding evaluation in the end. Serbia. The survey included 100 experts. The model is created to enable easier managing of For the sake of the survey it was created a spe- these processes with the aim to achieve BE. Accep- cial questionnaire (taking care of methodology of tance and justifiability of this mixture of concepts the research); communication principle was: one and the model should be proved in the future. questionnaire – one company/expert. Totally 84 companies accepted the call to parti- 3.1. The model cipate in the research (between 4.5 and 5.5% out of all certified companies in Serbia according to ISO) Figure 1 presents a model in a form of cycle, and 37 experts from the subject sphere. It means in order to describe the model as business strategy that the response for companies was about 14% and which puts the focused modules (sub-processes) for experts 37%. It seems that a part of the problem in the environment of customers and other stake- which influenced such a small response, especially holders, whose objective is progress of the whole in companies, was caused by inertness and the lack organization. Such a business strategy is support- of interest while another reason has to be attribu- ed by BE and relationship. It can be the matter of ted to “technological factors”, taking care of IT (il) dispute which “ring” of support is “older” and/or literacy of the employees [28], as well as about the more important. The author of this paper thinks application of “antispam” programs on the servers that it is the matter of attitude, but their existence in companies. However, these are only allegations. or the need for it has been shown in this research. During checking phase of statistically relevant differences in the answers of different- size- com-

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ganization, 66 (85,7%) (out of 77 (91,7%) of the interviewed in companies, or 33 (91,7%) (out of 36 (97,3%)) experts gave the answers which are showed, comparably, in the Table 1. All the principles were evaluated as significant or particularly significant (the lowest grade was given to corporative social responsibility by the experts 3,39). Having been asked to evaluate significance paid, or the one which should be paid, to criteria of BE at defining policy, objectives and tasks in the organization, the interviewed (63 (85,1%) out of 74 (88,1%)) in companies, and experts (33 (91,7%) out of 36 (97,3%)) evaluated the criteria Figure 1. The model for providing satisfaction of and their application as significant (table 2). customer’s requirements as a business strategy Table 3, included the companies and experts' grades, shows how important it is to take care 3.2. Analyses of research results concerning about the criteria of BE by the leading manage- strategic components of the model ment in management review. Affirmative answer was given by 65 (83.3%) out of 78 (92.9%) com- Asked to evaluate the importance (in the re- panies and 33 (91.7%) out of 36 (97.3%) experts. search (survey) was used the Likert 5-point scale) Here, statistically significant difference was no- that should be paid to the principles of BE whi- ticed in the answers of the different-type compa- le defining policy, objectives and tasks in the or- nies (p=0,043<0.05) and the grades are showed Table 1. Comparative survey of average significance grade that should be paid to the principles of BE at defining policy, objectives and tasks in the organization PRINCIPLES Average grade of the Average grade of of BE interviewed in companies the experts Results Orientation 4,17 4,39 Customer Focus 4,42 4,61 Leadership 3,82 4,18 Management by Processes and Facts 3,80 4,06 People Development and Involvement 3,76 3,88 Continuous Learning, Innovation and Improvement 3,68 3,79 Partnership Development 3,94 3,94 Corporate Social Responsibility 3,58 3,39 Таble 2. Comparative survey of average significance grade which should be paid to the criteria of BE at defining policy, objectives and tasks in the organization CRITERIA Average grade of the interviewed in Average grade of the of BE companies experts Leadership 3,73 4,00 Policy and Strategy 3,87 4,24 People 3,68 4,21 Partnership and Resources 3,65 3,97 Processes 3,90 4,15 Customer Results 4,47 4,48 People Results 3,58 4,15 Society Results 3,52 3,70 Key Performance Results 4,23 4,27

190 Volume 7 / Number 1 / 2012 technics technologies education management separately. High average grade of significance, Considering the question which demands defi- paid to the criteria of BE, was noticed. In other nition of management and responsibility over pro- words, they were evaluated as significant and par- cesses, identification of expectations, monitoring, ticularly significant – the lowest grade was 3.50. measuring and analyses, a certain generalization It is interesting that a particular significance is paid can be noticed in the answers, given by experts, to the principles and criteria which are directly ori- when they are compared to those obtained in com- ented towards customers (the lowest average grade panies. No matter, we can find some similarities is 4.23); that shows readiness of the organizations to which are presented in the Table 6a for process devote themselves to their customers, as well as im- identification of expectations and Table 6b for portance which the experts give to this question. proces monitoring, measuring and analyses. Sta- Both companies and experts consider signifi- tistically significant difference in the answers of cant or satisfying input elements of RM concept, different types of companies is noticed consider- especially in the sphere of planning (table 4). ing the question about management/responsibility Comparative survey of the average grades over processes – identification of expectations (p which the interviewed used to evaluate the signi- = 0,005) and the answers are given separately. To- ficance of output elements of RM, especially in tally, 68 (80.9%) companies and 35 (94.6%) ex- the sphere of planning, is given in the table 5. It perts answered the question about the process of should be emphasized that all the elements were identification of expectations and the question re- evaluated as significant, both by companies (81 lated to the process of monitoring, measuring and (96,4%) answered the question) and by experts analyses 71 (84.5%) companies gave the answer. (35 (94,6%) of the interviewed). Таble 3. Comparative survey of the average significance grade paid, and which should be paid to the criteria of BE at management review CRITERIA Average grade of the interviewed in companies Average grade of of BE 1 2 3 the experts Leadership 3,67 3,54 3,73 4,00 Policy and Strategy 4,08 4,04 3,88 4,24 People 4,33 3,69 3,50 4,21 Partnership and Resources 4,17 3,69 3,62 3,97 Processes 4,17 3,73 4,04 4,15 Customer Results 4,67 4,42 4,23 4,48 People Results 3,92 3,81 3,50 4,15 Society Results 3,92 3,46 3,62 3,70 Key Performance Results 4,67 4,35 4,12 4,27 ANOVA significance test Group: companies Sum of Squares df Mean Square F Sig. Between Groups 0,727 2 0,363 3,584 0,043 Within Groups 2,434 24 0,101 Total 3,161 26 Тable 4. Comparative survey of the average significance grade of input elements in RM concept Average grade of the Average grade of the Input Elements of RM Concept interviewed in companies experts Understanding Customers Expectations 4,31 3,88 Building Service Partnerships 3,92 3,42 Empowering Employees 3,66 3,71 TQM 3,76 3,26

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Тable 5. Comparative survey of average significance grade of output elements in RM concept Average grades of the interviewed Average grades of Output Elements in RM Concept in companies experts Quality Product 4,64 4,06 CS 4,44 4,26 Customer Loyalty 4,04 4,09 Increased Profitability 4,19 3,91 Table 6a. Comparative review of management and responsibility over processes identification of expectations Process identification of expectations Given answers - companies Companies Experts 1 2 3 (a) Top manager and/or owner 1 (5,6%) 15 (14%) 6 (9,2%) 13 (17,6%) (b) Executive management - 10 (9,3%) 3 (4,6%) (c) Developement unit manager 1 (5,6%) 12 (11,2%) 4 (6,2%) 7 (9,5%) (d) Marketing unit manager 3 (16,7%) 4 (3,7%) 15 (23,2%) 25 (33,8%) (e) Trade/sale unit manager 5 (27,8%) 18 (16,8%) 14 (21,5%) 13 (17,6%) (f) Quality unit manager (or QMS manager) 3 (16,7%) 9 (8,4%) 9 (13,8%) 10 (13,5%) (g) Unit managers (generally) 3 (16,7%) 9 (8,4%) 6 (9,2%) - Staff in direct contact with services (h) customers or those directly involved in - 10 (9,3%) 6 (9,2%) 4 (5,4%) services realization. Kruskal Wallis Test Grouping Variable: companies Ranks companies N Mean Rank 1 15 15,33 2 15 30,77 frequency 3 15 22,90 Total 45 Test Statistics frequency Chi-Square 10,740 df 2 Asymp. Sig. 0,005 Table 6b. Comparative review of management and responsibility over processes monitoring, measuring and analyses Process monitoring, measuring and analyses Given answers - experts Companies Experts 12 (6,9%) 10 (12,7%) Top management and/or executive management (a) 10 (5,7%) 4 (2,3%) 7 (8,9%) Developement unit manager (b) 25 (14,3%) 24 (30,4%) Marketing unit manager (c) 41 (23,5%) 13 (16,5%) Trade/sale unit manager (d) 36 (20,6%) 21 (26,6%) Quality unit manager (or QMS manager) (e) 14 (8%) - - - 17 (9,7%) 2 (2,4%) Employees in sale network (f)

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It is interesting to notice the moving of respon- this aspect of the model, emphasizing the func- sibility (both companies and experts agree in this) tions of top manager and/or owner, marketing unit from marketing top manager, for the process identi- manager, quality unit manager and trade/sale unit fication of expectations, towards sale top manager, manager which are especially incorporated in the for the process of monitoring, measuring and anal- mentioned processes, while moving management yses. Especially expressed significance of organi- and responsibility over processes respectively can zational units (sectors) can be noticed: trade/sale, be noticed, going from marketing and top man- marketing, development sector and quality sector. agement towards sale top manager. As expected, special attention is paid to organizational units 4. Discussion (sectors) like trade/sale, marketing, development sector and quality sector and their management. There are certain problems concerning the ac- Finally, it can be noticed from the results' ceptance of BE and RM in Serbian economy and analyses and discussion that theoretic, strategic they have been briefly explained in the text. The business model for providing satisfaction of cu- consequences of these problems are the following: stomers' requirements proved to be acceptable and the concept of integrated management systems is justifiable for Serbian companies in relation to the mainly applied on Serbian market which base is context presented here. ISO 9000 series of standards while the elements of BE concept are mostly used as its theoretic- meth- 5. Conclusions odological base. However, it is obvious that strategic orientation towards satisfaction of customers The company’s objective should be achieving and other stakeholders’ requirements is present and understanding the optimum level of CS. The in certified domestic companies. Confirmation is important step in achieving CS is to make research directly got by accepting the incorporation of the of customers’ requirements in order to make good principles and criteria of BE (input and output ele- business decisions. The model of business strate- ments of RM) concerning defining policy, objec- gy for providing CS, presented in this work, is har- tives and tasks in the organization, in other words, monized with the requirements of ISO 9001:2000 in the sphere of planning quality in the future. Ac- series of standards, as well as with relevant pro- cording to the research results, the criteria of BE posals and criteria of BE, marketing requirements should also be incorporated in the reconsidering and specific characteristics and requirements of phase at the side of management (management re- Republic of Serbia’s economy. The presented qua- view). Taking all into account, it is not surprising lity model can be considered acceptable and ju- that considerable significance is paid to custom- stifiable which has been supported indirectly by ers’ satisfaction. Namely, a particular significance statistic indicators concerning planning and mana- is paid to the principles and criteria which are di- gement, in other words, by incorporating the prin- rectly oriented towards customers (the lowest av- ciples and criteria of BE and RM defined by the erage grade is 4.23); that shows readiness of the standard (ISO 9000). organizations to devote themselves to their cus- The model itself has not been applied in prac- tomers, as well as importance which the experts tice or tested but, in our opinion, its usage would give to this question. contribute to more complete and wider acceptance Wide incorporation of organizational and man- of the concept of BE and/or RM in the part of cer- agement structure, from top to executive manage- tified companies (standards ISO 9000 series) on ment, in other words, employees in direct contact the territory of the Republic of Serbia. In relation with customers, in processes of identification to some limits, we think that the model's validi- of expectations and monitoring, measuring and ty would be more complete if the research inclu- analyses, according to the model, means mak- ded a greater number of domestic companies, as ing stronger bonds between current activities and a sample, even better if this research could cross strategic decisions where a satisfied customer is in the borders of Serbian territory and transfer to the the focus. The analyzed results indirectly confirm countries of the West Balkans.

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Finally, the research presented here, bearing in 9. EFQM ed. (2002): EFQM - The Fundamental Con- mind the limitations mentioned has at least three cepts of Excellence, Brussels. implications: 10. Evans, J. & Laskin, R. (1994): The Relationship 1. The strategic orientation of companies Marketing Process: A Conceptualization and Appli- towards CS means that, in addition to cation, In: Industrial Marketing Management, No. 23, pp. 439-452. the concept of QMS in organisation and management processes, the concepts of 11. Evans, S. & Burns, A. D. (2007): An investigation of customer delight during product evaluation: marketing relations and BE should also be implications for the development of desirable prod- included. This above all in the planning and ucts, In: Proc. IMechE Vol. 221 Part B: J. Engi- verification phases, i.e. the management of neering Manufacture, pp. 1625-1640. key processes. 12. Ganesh, J., Arnold, M.J. & Reynolds, K.E. (2000, 2. Companies which are ISO 9000 certified July): Understanding the customer base of service generally accept the strategic model of providers: An examination of the differences be- providing CS; tween switchers and stayers. Journal of Marketing, 3. There are differences in the level of 64, 65−87. acceptance of the strategic model depending 13. Garvin, D. A. (1988): Managing Quality, The Free on size and organisational structure which Press, New York. are a direct consequence of these factors 14. Grönroos, C. (1994): From Marketing Mix to Re- lationship Marketing, In: Management Decision Volume 32 Number 2, pp. 4-20 References 15. Hanic, H. (1997): Istraživanja u marketingu [Mar- 1. Barsky, J.D. & Labagh, R. (1992): A strategy for keting Research]. Belgrade: Faculty of Economics. customer satisfaction, The Cornell HRA Quarterly, 16. Homburg, C., Koschate, N. & Hoyer, W.D. (2005): pp. 32-40. Do satisfied customers really pay more? A study of the 2. Bendapudi, N. & Berry, L.L. (1997): Customers' mo- relationship between customer satisfaction and will- tivations for maintaining relationships with service ingness to pay. Journal of Marketing, 69(2), 84−96. providers. Journal of Retailing, 71(3), 223−247. 17. Irani, Z., Baskese, A. & Love, P. E. D. (2004): Total 3. Berry, L.L. (1983): Relationship Marketing, in: Ber- quality management and corporate culture: con- ry, L.L., Shostack, G.L., Upah, G.D., Emerging Per- structs of organzational excellence, In: Technova- spectives of Services Marketing, American Marketing tion 24, pp. 643-650. Association, Chicago, IL, 25-8. 18. Knox, S. (1998): Loyalty-based segmentation and 4. Bešic, C., Đorđevic, D., & Cockalo, D. (2009): Mod- the customer development process, European Man- elling of the process for providing satisfaction of cus- agement Journal, Vol. 16 No. 6, pp. 729-37. tomer requirements. In: TTEM – Technics Technolo- 19. Kotler, P. (1994): Marketing Management: Analysis, gies Education Management, 4(2). pp. 144-158. planning, implementation, and control (8th edition). 5. Brookes, R. & Little, V. (1997): The New Marketing New Jersey: Prentice Hall International Editions. Paradigma – What does customer focus now mean? 20. Lin, N.P., Weng, J.C.M. & Hsieh, Y.C. (2003): Rela- In: Marketing and Reserch Today, Vol 25 No 2, ESO- tional bonds and customer’s trust and commitment MAR, Amsterdam. – a study on the moderating effects of web site us- 6. Conca et al. (2004): Development of a measure to age. Serv Ind J 2003;23(3):103– 24. assess quality management in certefied firms, In: 21. Mittal, V. & Kamakura, W.A. (2001): Satisfaction, European Journal of operational Research, 156, pp. repurchase intent, and repurchase behavior: Inves- 683-697. tigating the moderating effect of customer char- 7. Dale, B. G. & Ritchie, L. (2000): An analysis of self- acteristics. Journal of Marketing Research, 38(1), assessment practices using the business excellence 131−142. model, In: Proc Instn Mech Engrs - Part B, Vol 214. 22. Mohr-Jackson, I. (1998): Managing a Total Quality pp. 593-602. Orientation, In: Industrial Marketing Management 8. Dimitriades, A.S. (2006): Customer satisfaction, loy- 27, 109–125, pp. 109-125. alty and commitment in service organizations: some 23. Motwani, J. (2001): Critical factors and perfor- evidence from Greece, Management Research News, mance measures of TQM, In: The TQM Magazine, Vol. 29 No. 12, pp. 782-800. Vol. 13, No.4, pp. 292-300.

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24. Naumann, E., Jackson, D.W. Jr & Rosenbaum, M.S. (2001): How to implement a customer satisfaction program, Business Horizons, Vol. 44 No. 1, pp. 37-48. 25. Oliva, T.A., Oliver, R.L. & MacMillan, I.C. (1992): A catastrophe model for developing service satisfaction strategies. Journal ofMarketing, 56(3), 83−95. 26. Paulssen, M. & Mirk, M.M. (2007): Satisfaction and repurchase behavior in a business-to-business setting: Investigating the moderating effect of manufacturer, company and demographic characteristics, Industrial Marketing Management 36, pp. 983–997. 27. Peltier, J.W. & Westfall, J. (2000): Dissecting the HMO-benefits managers relationship: what to measure and why. Mark Health Serv 2000;20(2):4– 13. 28. Preradovic, K. (2008, December 6): Umesto obra- zovanja, uvozicemo IT strucnjake [Instead of education, we will import IT experts]. In: Novac. Belgrade: Ringier, 4-5. Retrieved from http://www.blic.rs 29. Reichheld, F.F. (1996): Learning from customer defections. Harvard Business Review, 74(2), 56−69. 30. Rusjan, B. (2005, May): Usefulness of the EFQM Excellence Model: Theoretical Explanation of Some Conceptual and Methodological Issues, In: Total Quality Management Vol. 16, No. 3, 363–380, pp. 363-380. 31. Saraph, J., Benson, G. & Schroeder, R. (1989): An instrument for measuring the critical factors of quality management, Decision Sciences, 20, pp. 810-829. 32. Te-King, C. & Chao-Ton, S. (2003): Using the QFD concept to resolve customer satisfaction strategy decisions, International Journal of Quality & Reli- ability Management ,Vol. 20 No. 3, pp. 345-359. 33. Teo, W. F. & Dale, B. G. (2007): Self-assessment: methods, management and process, In: Proc Instn Mech Engrs Vol 211 Part B, pp. 365-375. 34. Terziovski, M. & Samson, D. (1999): The link between total quality mangement prаctice and organizational performance, In: International Journal of Quality and Reliability Management, Vol. 16, No. 3, pp. 226-237.

Corresponding Author Dragan Cockalo, University of Novi Sad, Technical faculty “Mihajlo Pupin” in Zrenjanin, Zrenjanin, Republic of Serbia, E-mail: [email protected], [email protected]

Volume 7 / Number 1 / 2012 195 technics technologies education management Strategic Planning in Banking

Nenad Vunjak, Vera Zelenovic, Jelena Birovljev, Ivan Milenkovic The Faculty of Economics Subotica, Serbia,

Abstract sort to new ways of planning - strategic planning. Strategic planning is a management process de- Strategic planning is a systematic way of mak- velopment and maintenance of viability goals and ing key business decisions, determining the tac- means of organizing and its changing market op- tics and the implementation of actions that shape portunities (Kotler, 1999). The objective of strategic and direct the bank towards the future, following planning is the routing and forwarding operations its vision by defining the objectives and modali- and products of a certain company, so that they si- ties of action. Strategic planning is a basic prem- multaneously create satisfactory profits and growth. ise of survival of companies in the global market. The main problem that must address strategic plan- It includes guidance and redirection of existing ning is to enable companies to survive in the market, business in the context of achieving a satisfacto- regardless of the disorder in any of their jobs or line ry profit and growth. In fact, planning itself does of products. Strategic planning process refers to the not produce the results: it is a means, not the final three key assumptions (Kotler, 1999): goal. Objective of this study is to highlight the im- 1. the affairs of the company are due to be portant issues in the banking industry (Where are managed as a portfolio investment. It is we now? Where we want to go? How to do it?) in necessary to provide answers to key questions which strategic planning should give an answer. about the further development of the company: The purpose of this paper is to define a success- –– Which of the existing businesses retain and ful and applicable model of strategic planning, continue to build? that banks, regardless of the modalities of imple- –– What jobs has firm gradually abandoned? mentation provides a competitive advantage in the –– What jobs is firm definitely leaving? market, which is manifested by increasing profits and customer satisfaction. Using the methods of 2. To make an accurate assessment of future profit content analysis, we analyzed the successfully potential of each job. Future performance is method of German retail banking, who gave us impossible to predict just based on extrapolation the result of one of the possible models of strate- of past trends in business. It is necessary to gic planning applications in banking. The impor- take into account the turbulent motion in a tance of the German model is its efficiency in the globalized world market, and consider various market, as well as the possibilities of application scenarios of potential conditions in each of by other banking systems, which work to improve the markets represented. Various, seemingly their performance and quality of operations. unimportant factors can have an important role Key words: strategic planning, strategic man- in the future development of the company. agement, banking 3. Strategy - the third key assumption underlying the strategic planning. There is not one and 1. Introduction the ideal strategy. Depending on resources, goals, capabilities, position in the industry Strategic planning involves a specific form of and markets, each company chooses its own planning, which for the companies in the market strategy, according to the given circumstances. usually refers to the competitive activities. The key Companies all within the same sector, and with premise of survival in the market and customers sat- the same kind of work / production, will have isfaction is a strategic planning in banks. Traditional the same strategy for the markets. That is what way of planning could not ensure banks the survival distinguishes successful from unsuccessful, and growth on the market, so it was necessary to re- profitable from unprofitable.

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Strategic planning is periodically resetting posed to operational, are always facing the future, from mid-term to long-term strategic directions implementation includes a longer period, a wide and priorities. Process focuses on key issues and range of activities of the company are included specific initiatives needed to achieve long-term and they are usually shown in the general and ex- strategic goals. tremely simple terms. To think strategic means to look long term, always have before us the big pic- 2. Aim of the paper ture, including the company and the competitive environment, and reflect on how they fit together. The aim of this paper is to emphasize the fact Answers to these questions will be asked to pro- that without the plans and planning in banking is vide strategic management, which is a set of deci- not possible to organize any personnel or other re- sions and actions that are used to formulate and sources in the bank, which is primarily related to implement strategies that would enable the com- strategic planning. The plans allow manager’s fol- pany a competitive advantage in the environment, lowers, attaining goals, allowing them to observe for the sake of achieving company goals (Daft, where and when something is wrong. Inadequate 2006). Company goals are realized through the plans can affect on the whole future of the com- quality of strategic planning, obtaining answers to pany. A good manager knows that to achieve the the following questions: (Daft, 2006) goals, we need to respect the hierarchy that exists –– What changes and trends are occurring in between the plans: the competitive environment? –– Who are our customers? –– What products and services need to be offered? –– How to offer these products and services in the most efficient way?

The answers to these questions help managers find the best choice for positioning their company in the region, taking into account competing companies. Superior performance of the company are not a matter of luck, they are consequences of choices made by managers of companies! Top management uses strategic management to define the overall direction of development for company, called the grand strategy (grand strategy). Ac- cording to Daft, grand strategy is the general plan of the most important actions through which the company intends to achieve its long-term goals. Grand strategies include three general categories, The founder, board of directors or general manager as follows: (Daft, 2006) The main and middle managers –– The growth-which can be viewed as an Middle managers and first line managers internal aspect, when it involves developing Figure 1. Display of the hierarchy of plans in the new or improving existing products and organization services or to external aspect, which involves Source: Stoner, J., Management, Želnid, Belgrade, 1997, diversification, related to the development pp. 242 and enlargement of existing businesses or to entrance of companies into new business Strategic and operational plans are different in areas. three important elements. These are: time limits, –– Stability - sometimes is called break the size and detail coverage. Strategic plans, as op- strategy, which means that a company wants

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to maintain the existing achieved level or to future development. In the fierce competition be- slow its growth in a controlled manner. This tween financial institutions, those who choose the strategy is usually applied after a period of optimal strategies and action programs will win. turbulent growth in the market, when the Using strategic planning to market-oriented banks management company wants to stabilize the is particularly important in the context of constant work efficiency. transformation processes, both in the field of tech- –– Reduce - strategy is applied when a company nology, and in the domain of finances. The thing is undergoing a serious drop in business, with each bank faces in the process of strategic when you move or even liquidate the entire planning is strategic risk - possible wrong esti- business. Companies are then faced with the mate of strategic development of bank. rapid decline in demand for their products or The purpose of strategic planning in banks is to services, which forces managers to rapidly show the main directions of restructuring of bal- reduce costs, and therefore employees in the ance sheet and off-bank in order to increase profit- company. ability and reduce risk exposure of banks. Appro- priate balance changes are very closely associated 3. The Purpose of Research with changes in marketing in banking, management, human resources management, promotion The purpose of this research is to point out what of IT and Fig. Strategic planning in banks has the is the importance of strategic planning, through following stages: which management of the bank direct its opera- 1. Creating a vision tions towards achieving previously set goals. In 2. Choice of strategy addition to defining the strategic planning phases, 3. Elaboration of action programs the purpose of this research is to set an acceptable model of strategic planning in banks. If deregu- The assessment of the bank's vision starts from lation is more pronounced, and with it the com- the current position of banks in financial market petitive battle in the banking market, there is the analysis and positive and negative factors of the greater importance of planning. Process of plan- bank in relation to the competition. The next im- ning should give us the answers to the following portant moment in the strategic planning is the questions: current size of the bank, measured the height of 1. Where is the bank now? balance sheet assets and liabilities and capital of 2. Where do we want it to be? bank. Therefore, we can say that the strategic plan 3. How do I get there? of the bank is development and realization of the development vision of a bank, which involves the The answers to these questions gives us strate- selection of specific methods by which the vision gic planning, whose role is not just basic survival will be realized. in a highly competitive banking markets, but also to maximize its profits through the satisfaction of clients. The formal way of planning, which is connected to a stable environment in which managers take a couple of trends in recent years and by extrapolation of the trend, they plan size for the next period, it is not possible. Dynamic and turbulent environments introduced on stage strategic way of planning. Deregulation of financial system creates a greater choice of strategic options of individual banks in a competitive market. There- fore, each bank, based on its comparative benefits, Figure 2. Bank Development Strategy projects its development strategy in order to ac- Source: www.ekonomija.ac.me/files/1271746477.pdf curately comprehend the optimal direction of its

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Realization of bank development strategy is In order to achieve predefined objectives, it is being implemented through action programs, as necessary to start from the basic assumptions of shown in the figure below: successful planning in banking, when it comes to products and services that the bank sells on the financial market: –– Portfolio investment: which of the existing jobs deserve to be built, maintained, gradually or definitely left. –– Accurate estimates of future profit potential of each individual work.

Regardless of that strategic planning assumes Figure 3. Realization of Bank development strategy individually customized solution for each compa- Source: www.ekonomija.ac.me/files/1271746477.pdf ny-bank, a successful model of strategic planning involves the following steps (See Figure 4): Strategic management in the bank is defined as 1. Establishing guidelines and strategic direction, the process by which managers define the bank's it is necessary to obtain answers to key mission, the fundamental long-term goals and de- questions: velop a strategy to achieve these goals, and take all a. Who should be involved in the process? necessary actions to implement plans, which will b. What are our strategic objectives? help the realization of strategic goals. The main 2. Make external and internal analysis, which activities in strategic management are directed to: would give us the answers to the following –– Setting the strategy (defining the mission, questions: goals, strategies and policies) a. Who are our competitors? –– Control and Development Strategy (compa- b. How to do business in the market? rison of planned and actual size, for data c. Which current market trends have significant exchange and application of corrections) impact on (our) business? –– Implementation Strategy d. What do our customers need? e. How does the existing portfolio of products Strategic management in the bank can be and services of banks looks like? viewed from several different aspects: 3. Formulating corporate strategy, needed to –– Bank Capital Management achieve goals: –– Liquidity management of banks (the hardest a. What are the goals and how do we intend to part of management) achieve them –– Branch Management b. Create strategies 4. Creation and coordination of business strategies: The main task of management in banks, in con- a. What strategies need to be fulfilled in order junction with strategic planning, is to find a strategy to achieve corporate objectives? that achieves the basic objectives: (Zelenović, 2008) 5. Budget: –– Profit maximization increase value of the a. How to balance the budget and operational role of shareholders plans with corporate strategy? –– Increasing market share 6. How to communicate with the strategic plan?

Figure 4. Strategic Planning Model Source:www.des.calstate.edu/procesmodel.html

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Figure 5. Key steps in Strategic Planning Source: www.executiveboard.com-Owerview of the Planning process

a. How to make internal (within the bank) menting successful banks in their operations. The clarity planned, in order to get support and methodology applied in this study is content analy- impetus to carry out planned? sis method of working and professional materials of successful German banks. Figure 5 shows a detailed presentation of these key steps in strategic planning, with additional ex- 5. Research Results planation what each step means. Strategic planning process is presented for the 4. Research Methods two major representatives in the retail banking in Germany, a network-Sparkassen savings banks and The biggest challenge for strategic planning in credit unions network Volks-und Raiffeisenbanken. banking is how to most effectively apply in prac- In both of the financial networks, specially the Fed- tice the model defined by strategic planning. This is eral Association (SRL and DSGV) develops and co- even more so without good strategic planning is no ordinates a common strategy for all loan associations effective banking business, nor satisfied customers. and savings banks in all Germany. Strategies created The aim of research is to show all modalities in stra- in the center replace a series of planning activities tegic planning practice, and how much importance within the bank. For that reason, bank management and attention is committed to it by successful bank- has two main objectives to the strategic planning: ing institutions (example of German banking). It –– Adapting a common strategy on its also can be a model for other banking institutions to organization-bank; apply similar solutions in their business. The object –– Further development of strategic measures of research is the German retail banking, as well that would enable the bank to implement as current models of strategic planning, that imple- key financial indicators.

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Both of these networks have a large market marking activities during the financial year repre- share in German retail banking operations (1290 sent a relevant factor in planning. Benchmarking credit cooperatives and 463 savings banks), so we also serves as a tool for assessment for the strategy can conclude that an understanding of their strate- bank. Bigger banks have their regular consultants gic planning helps to understand the problems and who actively participate in all aspects of strategic challenges of the concept of strategic planning in planning, with the main task to analyze the existing the retail banking business in total. For description strategic direction, to recognize existing gaps and and analysis of the strategic planning process in to develop ideas for future development of a bank. the banks, it is important to understand all com- In this paper they are commonly used as strategic mon activities: tools, SWOT analysis and Porter five elements, to 1. Strategic analysis-analysis of an external analyze the situation and to identify blanks. For environment and assessment of bank's the internal analysis there are used all available capabilities; information and experiences of long time manag- 2. The strategy of finding-seeking strategic ers. It is very important for analyze to determine alternatives; the most important information and data, and to 3. Strategy assessment-evaluation of strategic avoid dealing with unimportant details-selection options; information. All this provides a solid basis for the internal analysis of strengths and weaknesses of Strategic planning should be taken into account banks to do it very successfully. As for the external in each bank as a separate organizational structure analysis, it can fall into a crisis, primarily due to factor, banks and other financial resources, which lack of human capacity resources. While, every- are very heterogeneous, from bank to bank. Since, thing about the traditional way of doing business the organizational basis for strategic planning is in the region is successfully identified, the general very heterogeneous; human resources are the ones impact of environmental changes often remains who largely determine the process of planning. undetected. In order to overcome this problem, Some banks are very small and can be compared the board of directors defines the formal process: with other small and medium companies. For that To assign a task analysis of external consul- reason, when it comes to strategic planning, there tants, this solution is often found in smaller banks; is not any professional expert in strategic planning Or the external analysis is assigned to market- of any specialized classroom for any type of activ- ing department, this solution is frequently found ity. That is why strategic planning is done by one in larger banks; or more persons, who do strategic planning once a year with their current job. When it comes to pro- 5.2 Strategy of finding fessional profiles in terms of university education, with credit unions and savings banks, it is lower Due the fact that the Federal Association is de- than other retail banks in Germany. That results in veloping a common strategy, the bank is looking lack of methodical knowledge of strategy, as well for strategic alternatives, focusing on their financial as models of strategic planning. aspects. Prognosis of financial results as a whole, In some cases, strategic planning directors con- and especially profits, and scenario planning tech- duct themselves as they gain relevant professional niques is the main instrument for strategic planning qualifications, while in other similar cases, stra- scenarios options. In the center of the planning sce- tegic planning is being purchased from external nario, there could be found two different aspects: consultants. A. Modeling business activities: like other companies and banks, which are dealing with 5.1 Strategic analysis forecasts of products and services sales. Banks estimate the extent and amount of capital-oriented Bank, in principle, takes two separate activi- products (personal loans, financing household ties in order to analyze the external environment deposits), as well as providing services (services and assess organizational abilities. Regular bench- insurance, credit cards).

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B. Modeling money, capital and market interest analysis are put the same marketing strategy, rates: interest rates for customers of products, ma- product line, and the segments of business. In turities of loans and deposits, and the relationship this way are discussed possible reasons for the between fixed and variable interest rates, all directly successful financial business. In short, we can affect the net income from bank rates. That is why say that the second approach focuses on the banks make very precise analysis of changes in inter- concept of banks as result of financial results. est rates, simulating possible scenarios, which pre- c. The third benchmarking approach can dict the changes of interest rates, and all the others. be described as a progressive adaptation Definition of scenarios of different business ac- of the second approach. The first step in tivities and scenarios of interest rates, are closely this approach is to identify existing gaps attached. Management team will only play those between their corporate strategy and scenarios, which are appropriate and possible. corporate strategy of the best bank. The Connecting scenarios is important for the realiza- second step requires comparing the different tion of the policy objectives, which can be moni- employment strategies. The third step is tored through the following activities: a version of a sensitivity analysis. Any –– Analyzing if the strategic goal can be differences in the different strategies will realized with the planned business activities, be analyzed and compared in terms of their and under certain interest rate scenarios; financial impact, as well as the effort it takes –– Forecast and analyze the effects of external to make those changes. It can be said that factors (changes in interest rates, changes the third approach to management provides in customer's requirements) for business accurate information about changes, which planning, and how to reverberate in the profits; in the corporative strategy result in growth –– Testing the ability of banks to generate a of profits. The advantage is, of course, in profit even in the case of the worst scenarios; discovering the interdependence of the –– Search for the best strategic alternatives changes and their financial impact. (development of new products and services); 6. Discussion In order to provide financial stability of a bank, as well as to verify what strategy brings what the Theoretical considerations for the model of amount of profit, as long as they comply with le- strategic planning in banks, coupled with practi- gal requirements in terms of risk management, cal solutions that exist in the developed German scenario planning is a key tool for successful busi- banking market, talk about the close connection ness in banks. between strategic planning and performance in banking. This correlation indicates the great im- 5.3 Strategy assessment portance of strategic planning to market competitiveness of banks. The findings obtained in Benchmarking is a key instrument for the as- this paper (relating to strategic planning model sessment of strategies in banks. Internal and ex- and method of implementation in the German re- ternal benchmarking is used in strategic planning tail banking) may be applicable and usable in all in banks. For a comparison we use information, banking systems, and only the definition of these organized by segments, which are determined by processes greatly facilitates their practical applica- the size of the balance active. Every bank uses the tion in banks. information that fits it the best. There are three different approaches: 7. Conclusion a. The first approach informs the management of banks, such as the financial management, Strategic planning involves a specific form about results of other banks of similar size. of planning which for the company-bank market b. Another approach analyzes the best usually refers to the competitive activities. The performing banks, where in the focus of key premise of survival in the market and custom-

202 Volume 7 / Number 1 / 2012 technics technologies education management er satisfaction is a strategic planning in banks. The 9. Vunjak, N., Ćurčić, U., Kovačević, Lj., Korporativno objective of strategic planning is to guide and redi- i investicinono bankarstvo, Ekonomski fakultet Sub- rect activities and products of certain companies, otica, 2008. so that they simultaneously create satisfactory 10. Vunjak, N., Ćurčić, U., Kovačević, Lj., Strategijski profits and growth. The formal way of planning, menadžment u bankarstvu, Ekonomski fakultet Sub- which is connected to a stable environment in otica, 2011. which managers take a couple of trends in recent 11. www.des.calstate.edu/procesmodel.html, (pristup years, and by extrapolation of the trend, they plan mart 2011). size for the next period, it is not possible anymore. 12. www.executiveboard.com-Owerview of the Plan- The significance of strategic planning of the bank ning process, (pristup mart 2011). is to review the main directions of restructuring of balance and off-balance sheet positions of bank in 13. Zelenovic, V., Marketing u bankarstvu, Copy Com- merce, Novi Sad 2008. order to increase profitability and reduce risk exposure of the bank. Appropriate balance changes 14. Zelenović, V., Davidović, M., Corporate Identity of are very closely associated with changes in mar- Banks in a Function of Market Competitiveness, Engineering Management and Competitiveness, keting in banking, management, human resources Zrenjanin, 2011. management, improving IT and so on. Strategic management of the bank can be 15. Zelenović, V., Davidović, M., Creating satisfied and viewed from several different aspects: bank capital loyal customers in banking sector, Contemporary Issues in Economics, Business and Management, management, liquidity management of bank (the Kragujevac, 2010. hardest part of management) and Branch Manage- ment of bank. The main task of management in banks, in conjunction with strategic planning, is Corresponding Author to find a strategy that achieves the basic goals: to Vera Zelenovic, maximize profits, increase the value of the role of The Faculty of Economics Subotica, shareholders and to increase market share. Serbia, E-mail: [email protected]

References 1. Adžić S., Reindustrijalizacija Srbije i strukturna politika, Ekonomija/Economics, 2011, Vol. 17, No 2, pp. 301-326 2. Adžić, S., Birovljev, J., Late Transition and Strategic Framework for Sustainable Development of Agro- food Industry, TTEM, No 4, Sarajevo, 2011. 3. Daft, L., R., The New era of Management, Thomson International Edition, 2006. 4. Graddy, D. B., Spencer, A. H., Managing Com- mercial Banks - Community, Regional and Global, Prentice-Hall, Englewood Cliffs, New Jersey, 2000. 5. Kotler, P., Upravljanje marketingom (prevod), Infor- mator, Zagreb 1999. 6. Recklies, O., Practice of strategic planning in Ger- man retail banks, Economics and Organization of Enterprise, 3 (686), pages: 39-46 7. Santoro, J., N., Bank Operation Management, Pro- bus Professional Publishing, Chicago, Illinois, 2002. 8. Stoner, J., Menadžment, Želnid, Beograd, 1997.

Volume 7 / Number 1 / 2012 203 technics technologies education management The effective factors in amount of education, teacher’s record, and students’ knowledge in the evaluation of mathematics

F. Hosseinzadeh Lotfi, A. Shahvarani , F. Moradi Department of Mathematics, Science and Research Branch, Islamic Azad University, Tehran, Iran

Abstract a method in which the fuzzy set theory and the item response theory are employed to evaluate the It is believed that the rate of achievement and learning performance of students. learning of university students is dependent on In this essay, the DEA method is used to evalu- environment, social and domestic factors. Their ate the university students' learning and achieve- marital status and jobs, etc. are also factors to be ment. considered. In this essay, there has been greater The evaluation will be shown based on stu- focus on other factors such as students' attempts, dents' learning and achievement. In other words, endeavors and knowledge, professors' knowledge different effective factors on students' learning and degrees, and how significantly these factors and achievement are evaluated. can affect student achievement. The question has been raised as to which of the mentioned items have had a greater effect on students' achieve- 2. Primary definition ments. For this evaluation, the DEA method has Since 1996, numerous studies have been done been used. concerning the DEA. One of the main objectives Key words: professors 'knowledge, professors' is to measure the efficiency of a Decision Mak- records, students 'knowledge, evaluation. ing Unit (DMU) by a scalar measure ranging between zeros (the worst) and one (the best). This 1. Introduction scalar value is a measured linear programming model. Specifically, the Charnels-Cooper-Rhodes In recent years, some researchers have focused (CCR) model deals with the ratio of multiple in- on the application of the fuzzy set theory to edu- puts and outputs in an attempt to gauge the relative cational grading systems. As regards the evalua- efficiency of the DMU concerned among all the tion of students' performance, various studies have DMUs. This fractional program is solved by trans- been carried out by scholars, among which one can forming it into an equivalent linear program using mention, Chang and Sun (1993), Biswas (1995), the Cooper-Rhodes transformation. We will deal Chen and Yang (1998), Chen and Lee (1999), Wu with n DMUs with the input and output matrices (2003), and Bai and Chen (2006a, 2007b). Bai and Chen (2006a) presented a method for and Y= ( respective- automatically constructing grade membership ly. We assume that the data set is positive, i.e. X>0 ϵ functions for student evaluation in fuzzy grading and Y>0The production possibility set P is defined systems. Biswas (1995) developed an approach as P= that uses fuzzy sets for student evaluation. Chang Where is a non negative vector in (we can and Sun (1993) proposed a method for fuzzy as- impose some constraints on , such as sessment of the learning performance of junior high school students. Cheng and Yang (1998) (the BCC model), y presented a method for using fuzzy sets in edu- the production possibility set.) cational grading systems. Chen and Lee (1999) We consider an expression for describing a cer- presented two methods for student evaluation us- tain DMU ( ) as ing fuzzy sets. And, finally, Wu (2003) presented

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This operation is called the SBM –projection. + ; Based on , we define the reference-set to x( 0,

y0) as follows: Definition : 2 (Reference-set). The set of indices corresponding to positive s is called the reference-set to (x , y ). 0 0 In the occurrence of multiple optimal solutions, the reference-set is not unique. We can choose any one of them for our purpose. Considering an optimal solution the corre- The problem given above is a nonlinear pro- sponding reference-set is as follows gramming. Then, becomes the following linear program in t, , and . Using we can express ( ) by

[LP] Minimize τ= t , . Subject to Since the SBM depends only on

The reference-set dependent values, is not affected by values attributed to other DMUs not in t the reference-set. In this sense, proposed in this paper is different from other efficiency measures which incorporate statistic over the whole data set. Definition :1 (SBM-efficient): A DMU (x0, y0) In this part hypotheses are explained: is SBM – efficiency if 1. Scores of mathematics 1 have a direct This condition is equivalent to =0 and relation with students' operation. =0, i.e., no input excesses and no output shortfalls 2. Professors' knowledge has a direct relation in any optimal solution. with students operation. 3. The record of professors' has a direct relation For an SBM inefficient DMU x( 0, y0), we have the expression: with students 'operation. 4. The scores of mathematics 2 have a direct relation with students' operation.

3. Data At first, three mathematics classes in any ar- The DMU ( ) can be improved and be- bitrary university are chosen. These three math- come efficient by deleting the input excess and ematics classes are completely different from augmenting the output shortfall as follows: each other. The professors of these classes have, respectively, a seven–year teaching record with an MS Degree, an eight-year teaching record with , a Ph. D degree and the last one, a thirteen-year ⃪ teaching record with an MS Degree. The scores of ⃪

Volume 7 / Number 1 / 2012 205 technics technologies education management these students in two semesters (math 1, math 2) input 1, the third contains input 2, the fourth one are considered. In the first semester in 2006 -2007, input 3, the fifth output, and the sixth one the ef- they passed their classes with the above-men- ficiency of students, and the seventh one, the stu- tioned professors and the other term was passed dents’ ranking, called R. In the 6th column of the with other professors. Their second semester was table (E), efficiency of students has been indicated also in 2006-2007. In this essay the first course, 0≤E≤ 1 .which is near to number 1, therefore ef- along with the scores is important and is called in- ficiency of students is better or which is near to put; in the second part; scores of these classes are number 0 , so it is lees. In seventh column of the important as output. table (R) students has been ranked. In the 8th col- By using the DEA, method and SBM model umn, (E1), efficiency of students' is considered by the rate of students' attempts and endeavors are the latest inputs such as professors' knowledge and evaluated. Therefore, the inputs of mentioned professors' situation, 0≤E1 ≤ 1 , If E1 is near to 1, model are the scores of mathematics 1, and the efficiency of students will be better and if E1 is record of their related professors along with their near to 0 , efficiency of students will be less. degrees and output in this model is the scores of In 9th column (E2), efficiency of students is mathematics 2. With regard to input and output, it considered by the latest inputs such as profes- can be estimated on each student's efficiency. sors' situation and students' knowledge such that Input 1= scores of mathematics 1. 0 ≤E2≤ 1, If E2 is near to 1, efficiency of students Input 2= degrees of professors or professors' will be better and if E2 is near to 0 , efficiency knowledge of students will be less. In 10th column (E3), ef- Input 3= records of professors or professor ficiency of students is considered by the latest in- 'situation puts such as professors' knowledge and students' Output= scores of mathematics 2. knowledge such that 0 ≤ E3≤ 1, If E3 is near to Professors, whose certificates are MS and 1, efficiency of students will be better and if E3 is PH.D and also their positions are assistant profes- near to 0, efficiency of students will be less. In the sors and next process, first, input 1 is eliminated, and then Lecturers. Community is shahre rey, Islamic SBM is used to calculate the related efficiency, Azad University. Sample is 3 classes. Data table which is shown in the eighth column called E1. is written below. In the first column on the left, Input 2 is then eliminated to calculate the efficien- there is the number of 81 students. In the second cy called E2. This is shown in the ninth column column on the left (input1), the scores of math- of Table. Finally, E3 is eliminated and is shown ematic 1 is from 0 to 20. In the third column on the in the tenth column. Should be searched between left (input 2), the professors' knowledge who have 6th efficiency column to each of 8th, 9th and 10th gotten MA certificate, their scores are 18 and some efficiency columns. There are various methods to of them who have gotten PH.D certificate, receive assign distances between two vectors. scores of 22. In the fourth column on the left (in- E-Ei = Zi i=1,2,3 put 3), domain of professors' situation is from zero The difference between Ei and E can be cal- to 30. In the fifth column on the left is (output), the culated,⃦ and then regarding the amount of Zi, the scores of mathematic2 for students whose score effectiveness of each input can be evaluated. On domain is from zero to 20. the other hand, if one of the Zi having the most amounts is shown that the related input has the 4. Analysis most effective the efficiency. The less Zi shows the less effects in the related input. In the first table, the scores of three classes in E-E1 = 3.201608 mathematics 1 from one university with the related professors on the basis of their records and E-E2 =4.300128 degrees are shown. In this table, there are 13 col- E-E3 =11.1316 ⃦ umns so that in the first column they are DMUs According to the formulas, it is seen that among (the same students), the second column contains the ⃦ three values Z1, Z2, Z3; Z3=11.1316 is the high-

206 Volume 7 / Number 1 / 2012 technics technologies education management est among these and Z1=3.201608 the least. It can be On the other hands, Students with efficiency said that the effective factors on students’ achieve- between 0.8 to 1 are those ones with high effi- ment and learning can be ranking, so that a profes- ciency. Showing with F5. Students with efficiency sors' situation is placed first and professors' knowl- between 0.6 to 0.8 are those ones with good effi- edge is the second rank. In the third level, the stu- ciency. Showing with F4. Students with efficiency dents' knowledge is effective in the second rankness; between 0.4 to 0.6 are those ones with average ef- in the third level, students' knowledge is effective. ficiency. Showing with F3. Students with efficiency between 0.2 to 0.4 are those ones with weak efficiency. Showing with F2 and finally Students with efficiency between 0 to 0.2 are those ones Figure 1. with bad efficiency showing with F1.

Table 1. Input, output, DMUs and E efficiency difference with each of E1, E2, AND E3 efficiency DMU Input1S Input2 Input3 Output E R E1 E2 E3 abs(e-e1) abs(e-e2) abs(e-e3) 1 19.50 18.00 7.00 14.50 0.71 F4 0.81 0.63 0.65 0.10 0.07 0.06 2 10.00 18.00 7.00 10.25 0.61 F4 0.57 0.58 0.60 0.04 0.03 0.01 3 15.75 18.00 13.00 11.50 0.49 F3 0.49 0.38 0.56 0.00 0.11 0.07 4 10.00 22.00 8.00 8.00 0.42 F3 0.38 0.42 0.42 0.04 0.00 0.00 5 13.00 22.00 8.00 19.50 0.94 F5 0.92 0.93 0.91 0.03 0.01 0.03 6 17.00 18.00 13.00 15.25 0.63 F4 0.65 0.48 0.72 0.02 0.15 0.09 7 10.00 18.00 13.00 16.00 0.80 F4 0.68 0.68 0.94 0.12 0.12 0.14 8 15.00 18.00 13.00 17.75 0.77 F4 0.76 0.60 0.88 0.01 0.17 0.11 9 10.00 22.00 8.00 5.50 0.29 F2 0.26 0.29 0.29 0.03 0.00 0.00 10 12.00 18.00 7.00 9.00 0.50 F3 0.50 0.47 0.49 0.00 0.03 0.01 11 10.00 18.00 13.00 8.50 0.42 F3 0.36 0.36 0.50 0.06 0.06 0.07 12 13.00 22.00 8.00 12.00 0.58 F3 0.56 0.56 0.56 0.02 0.02 0.02 13 12.50 18.00 13.00 13.00 0.60 F4 0.56 0.48 0.69 0.04 0.12 0.09 14 10.00 18.00 7.00 14.00 0.83 F5 0.78 0.79 0.82 0.05 0.04 0.01 15 14.00 18.00 13.00 16.50 0.73 F4 0.71 0.58 0.84 0.03 0.15 0.11 16 12.50 18.00 7.00 9.00 0.49 F3 0.50 0.46 0.48 0.01 0.03 0.01 17 12.00 18.00 7.00 9.00 0.50 F3 0.50 0.47 0.49 0.00 0.03 0.01 18 10.50 18.00 7.00 11.00 0.64 F4 0.61 0.61 0.63 0.03 0.03 0.01 19 17.00 18.00 13.00 18.00 0.82 F5 0.77 0.57 0.96 0.05 0.25 0.14 20 10.00 22.00 8.00 19.00 1.00 F5 0.89 1.00 1.00 0.11 0.00 0.00 21 11.50 18.00 7.00 10.00 0.56 F3 0.56 0.53 0.55 0.01 0.03 0.01 22 10.00 18.00 7.00 10.50 0.62 F4 0.58 0.59 0.61 0.04 0.03 0.01 23 10.00 18.00 7.00 10.50 0.62 F4 0.58 0.59 0.61 0.04 0.03 0.01 24 12.50 18.00 7.00 13.00 0.71 F4 0.72 0.66 0.70 0.01 0.05 0.01 25 10.00 18.00 7.00 12.00 0.71 F4 0.67 0.68 0.37 0.04 0.03 0.34 26 10.00 22.00 8.00 7.00 0.37 F2 0.33 0.37 0.84 0.04 0.00 0.48 27 14.00 18.00 7.00 16.50 0.87 F5 0.92 0.81 0.82 0.04 0.07 0.05 28 12.00 18.00 13.00 15.25 0.71 F4 0.65 0.58 0.65 0.06 0.13 0.07 29 12 18.00 7.00 12.00 0.67 F4 0.67 0.62 0.81 0.00 0.04 0.14 30 7.50 18.00 7.00 12.00 0.78 F4 0.67 0.78 0.37 0.11 0.00 0.41 31 10.00 22.00 8.00 7.00 0.37 F2 0.33 0.37 0.76 0.04 0.00 0.40 32 14.00 18.00 7.00 15.00 0.79 F4 0.83 0.73 0.50 0.04 0.06 0.29 33 16.50 18.00 7.00 10.50 0.53 F3 0.58 0.48 0.46 0.05 0.05 0.07 34 12.00 18.00 7.00 8.50 0.53 F3 0.47 0.44 0.77 0.06 0.09 0.24 35 10.00 18.00 7.00 13.25 0.78 F4 0.74 0.75 0.53 0.05 0.04 0.26

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36 10.00 18.00 7.00 9.00 0.53 F3 0.50 0.51 0.53 0.03 0.02 0.00 37 13.25 22.00 8.00 11.50 0.55 F3 0.54 0.53 0.51 0.01 0.02 0.04 38 7.00 22.00 8.00 8.00 0.48 F3 0.38 0.51 0.57 0.10 0.03 0.09 39 10.50 18.00 7.00 10.00 0.58 F3 0.56 0.55 0.58 0.03 0.03 0.00 40 10.00 18.00 7.00 10.00 0.59 F3 0.56 0.56 0.42 0.03 0.03 0.17 41 12.00 22.00 8.00 8.75 0.43 F3 0.41 0.42 0.55 0.02 0.01 0.12 42 11.50 18.00 7.00 10.00 0.56 F3 0.56 0.53 0.76 0.01 0.03 0.20 43 10.00 18.00 7.00 13.00 0.77 F4 0.72 0.73 0.43 0.05 0.03 0.34 44 12.50 22.00 8.00 9.00 0.44 F3 0.42 0.43 0.81 0.02 0.02 0.37 45 16.50 18.00 13.00 17.00 0.71 F4 0.73 0.55 0.52 0.01 0.17 0.19 46 7.00 18.00 7.00 7.50 0.50 F3 0.42 0.51 0.53 0.08 0.01 0.03 47 10.00 18.00 7.00 9.00 0.53 F3 0.50 0.51 0.69 0.03 0.02 0.16 48 10.00 18.00 7.00 11.75 0.69 F4 0.65 0.66 0.53 0.04 0.03 0.17 49 10.00 22.00 8.00 10.00 0.53 F3 0.47 0.53 0.72 0.06 0.00 0.19 50 16.50 18.00 7.00 15.00 0.76 F4 0.83 0.69 1.00 0.07 0.07 0.24 51 11.50 18.00 7.00 17.75 1.00 F5 0.99 1.00 0.65 0.01 0.00 0.35 52 11.50 18.00 7.00 11.75 0.66 F4 0.65 0.62 0.40 0.01 0.04 0.26 53 11.00 22.00 8.00 8.00 0.41 F3 0.38 0.40 0.72 0.03 0.01 0.31 54 11.50 18.00 7.00 13.00 0.73 F4 0.72 0.69 0.60 0.01 0.04 0.13 55 14.50 22.00 8.00 13.50 0.63 F4 0.63 0.60 0.62 0.00 0.03 0.01 56 6.25 22.00 8.00 9.00 0.57 F3 0.42 0.62 1.00 0.15 0.05 0.43 57 15.50 18.00 7.00 18.00 1.00 F5 1.00 1.00 0.74 0.00 0.00 0.26 58 18.00 18.00 13.00 16.00 0.65 F4 0.68 0.49 0.73 0.03 0.16 0.07 59 6.50 18.00 7.00 10.00 0.68 F4 0.56 0.71 0.57 0.13 0.02 0.11 60 10.50 18.00 7.00 10.00 0.58 F3 0.56 0.55 0.65 0.03 0.03 0.07 61 14.50 18.00 7.00 13.00 0.68 F4 0.72 0.63 0.61 0.04 0.05 0.08 62 11.50 18.00 13.00 11.00 0.52 F3 0.47 0.43 0.51 0.05 0.09 0.01 63 10.50 22.00 8.00 10.00 0.52 F3 0.47 0.51 0.71 0.05 0.00 0.20 64 14.00 18.00 7.00 14.00 0.74 F4 0.78 0.68 0.70 0.04 0.06 0.04 65 10.00 18.00 7.00 12.00 0.71 F4 0.67 0.68 0.97 0.04 0.03 0.26 66 16.50 18.00 13.00 18.00 0.83 F5 0.77 0.58 0.56 0.06 0.25 0.27 67 7.00 18.00 7.00 8.00 0.53 F3 0.44 0.54 0.70 0.09 0.01 0.17 68 10.00 18.00 7.00 12.00 0.71 F4 0.67 0.68 0.56 0.04 0.03 0.15 69 16.00 22.00 8.00 13.00 0.59 F3 0.61 0.56 0.46 0.02 0.03 0.13 70 18.00 18.00 13.00 10.00 0.41 F3 0.43 0.31 0.65 0.02 0.10 0.24 71 17.50 18.00 7.00 14.00 0.70 F4 0.78 0.63 0.43 0.08 0.07 0.27 72 12.50 18.00 7.00 8.00 0.44 F3 0.44 0.41 0.62 0.01 0.03 0.18 73 11.00 18.00 7.00 11.00 0.63 F4 0.61 0.59 0.69 0.02 0.04 0.06 74 12.50 18.00 7.00 13.00 0.71 F4 0.72 0.66 0.80 0.01 0.05 0.09 75 12.50 18.00 7.00 15.00 0.82 F5 0.83 0.77 0.61 0.01 0.06 0.21 76 17.00 18.00 7.00 13.00 0.65 F4 0.72 0.59 0.69 0.07 0.06 0.04 77 18.00 18.00 13.00 15.00 0.61 F4 0.64 0.46 0.73 0.03 0.15 0.12 78 13.00 18.00 7.00 14.00 0.76 F4 0.78 0.70 0.88 0.02 0.05 0.12 79 10.00 18.00 7.00 15.00 0.89 F5 0.83 0.85 0.72 0.05 0.04 0.17 80 16.50 18.00 7.00 15.00 0.76 F4 0.83 0.69 0.54 0.07 0.07 0.22 81 12.00 18.00 7.00 10.00 0.56 F3 0.56 0.52 0.54 0.00 0.04 0.01

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Table 2. Correlation between Variable 1 & 5. dents' operation. According to coefficient of correlation Pearson and Spierman. The hypothesis will be rejected due to sig.=0.01 and 0.01<0.05. It has been shown in table 3. In the third position, it is assumed that professors' situation or the record of professors' have a direct relation with students 'operation. According to coefficient of correlation Pearson and Spierman, due to sig.=0.749 and 0.749>0.05, therefore, it will be accepted. It has Table 3. Correlation between Variable 5 & 2. been shown in table 4. In the forth position, it is assumed that the scores of mathematics 2 have a direct relation with students' operation. Due to sig.=0.0001 and .0001<0.05, the hypothesis will be rejected. It has been shown in table 5. Accord- ing to the results of the achievement up, we are going to correct the outcomes in DEA. Firstly, the students' knowledge can be impressive on students' operation; secondly, professors' situation and thirdly professor's knowledge are effective on Table 4. Correlation between Variable 5 & 3. students' operation.

5. Conclusion In previous essays the students' learning and position were evaluated by Fuzzy method, while in this essay the students' achievements are evaluated by DEA method .The greatest effect on a student's efficiency and achievement from three im- Table 5. Correlation between Variable 5 & 4. portant items such as the record of professors, professors knowledge, and the student’s knowledge is shown. Regarding to the above-mentioned items, the most effective factors on a student`s efficiency and achievement can be Identified. Then, It can be said that the effective factors on students' achievement and learning can be ranking, so that students' knowledge is placed first and professors' situation is in the second rank. In the third level, the professor's records are Now, all of the mentioned hypotheses in the effective in the second rank; in the third level, Primary definition will be examined by coefficient professors' knowledge or record is effective. it is of correlation Pearson and Spierman. in the first suggested that effective factors on students' ef- position: it is assumed that scores of mathematic ficiency should be considered, and inefficiency, 1 have a direct relation with students` operation, should be remove their weaknesses until learning regarding Pierson and Spierman test. This hypoth- can be promoted. esis is acceptable, it is sig. =0.87 and 0.87>0.005. it has been shown in table 2. Therefore, it has not refused yet and acceptable. In the second position: it is assumed that professor's knowledge have a direct relation with stu-

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Corresponding Author F. Moradi, Department of Mathematics, Science and Research Branch, Islamic Azad University, Tehran, Iran, E-mail: [email protected]

Volume 7 / Number 1 / 2012 211 technics technologies education management Globalization of economic and financial flows in national economies

Alen Cengic Sarajevo, Bosnia and Herzegovina Abstract their strategy was to make the market liberal, allowing for greater freedom of economic thinking Subject of the paper is discovering the possi- and initiatives and to abolish the strict rules and bilities and mechanisms of action of economic and stipulations on market control. This abolishing was financial developments globalization in national primarily targeted to the customs declarations of in- economies. Focus of the attention is on measures dividual countries and their national protectionism. and instruments stimulating the economic growth, After seventies, the world economic market ground investments and savings within the national econo- was ready for “ball game scores”. mies. Special consideration is given to the function- However, this ball game could only be played al relations, globalization development aspects, eco- by experts. For those who were unable of doing it, nomic and financial developments. Analyzed in the this historical moment in their meager economic paper are the developmental aspects of globaliza- past and presence as well, was the „final whistle” tion, i.e. globalization contribution to the economic for even greater decline. Namely, the globalization and overall development of national economies. rules are by appearance the same for everyone, but Analyzed are the views of globalization advocates those who are not willing to cope with this chal- and opponents, as well as their recommendations lenge are inevitably sliding toward the bigger gap for generating and dynamic power giving to the eco- than the one in which they currently are. nomic development at national (state) levels. The The point is that transnational institutions and main result of the research is referred to defining the governments of developed countries have made the position and possibilities of national governments in globalization “meaningfull” in the way that they creation of market, politics, local economy protec- themselves can benefit from it at the expense of tion, strengthening of its competitive position with small ones, under the slogan of equality for all. In regard to correlation of forces at global market and this way, it is not only that nothing is done to help standpoints of dominant theoretic schools. the undeveloped countries, but they are deliberately Key words: Globalization, communication, pushed into even greater economic abyss. They are information technology given the only comfort in the possibility of low- wages work for the world globalists. Their labor is so 1. Introduction cheap that the western power-wielders find it profitable to „move“ the whole production, to pay com- As a consequence of major economic crisis pre- plete distribution costs, customs costs (if any) and ceding the Second World War, of the great tech- maximize their profit accordingly. Few rare individ- nological progress particularly in IT, the modern ual experts from these undeveloped countries are, as economy faces an already known but not manifest- a rule, almost always positioned to vacancies on the ed to such extent, phenomenon called globalization. West thus taking away the last hope for the develop- Its final intense break to the surface occurs in the ment of their own national economy. Meetings and eighties. It was preceded by neoliberalization, the conferences on the topic of gap reduction and wealth economic development commencing to emerge in reallocation are frequently held. They are organized late sixties and early seventies. Contrary to Keynes- by various nongovernmental organizations pledging, ianism and state intervention, its proponents argue among other things, for equality in the world. Such in favor of economic and political supervision in meetings, conferences and gatherings usually have which the rights of individuals represent the highest no intrinsic effect except to be media accompanied value, liberalism and free-thinking. Consequently, and supported by similar institutions.

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Above all, economic globalization indicates set- high tax rates. Although neoliberalism has a po- ting up and defining the rules of unique world mar- litical background, its ultimate manifestation is of ket with freedom to encourage communication and economic nature. There are exceptions such as the development. On the other hand, there is a stand- State of Chile, headed by the authoritarian regime point that large multinational companies make use during the military dictatorship, and having the of already acquired equity to hinder generating the neoliberal economy. Generally, the states founded competitors with whom they should have to share on neoliberal economic principle are the most pro- the market. Economic globalization is closely con- gressive states and they provide the highest profits nected with political globalization. Given that there and highest living standard for its population. is a world economic market, national governments Its general boom has been experienced upon face difficulties in establishing some economic the decline of Eastern Bloc and ending of the Cold market terms intended for protection of proprietary War. Reason for that is the possibility opened in domestic product and accordingly they can not this period for an undisturbed flow of capital, stimulate directly the domestic economy growth. goods and services between East and West. Neo- Another factor hindering the domestic economy liberalism and its victory over traditional economy stimulation is the presence of international mon- involving a big share of state made decisions, have etary institutions backed up by the fact that the de- opened the door widely to globalism. It is to be cision-making center gets transferred from national understood as an absolute freedom of economic governments to the international institutions. decisions and moves taking and adjusting of eco- Added to the above, mentioned in the Introduc- nomic entities to the world market demands. tion should also be the cultural globalization as the There are three basic concepts advocated by neo- web of different world cultures and customs. Flow liberalism’ followers, namely: peace as a prerequi- of goods, capital and people across national borders site for relationship between the states, democracy is also carrying along the flow of habits, customs as the best way of political life organizing and the and cultures. This process causes different reactions free market as essential tool for wealth generating1. in different people. On the one hand, such transfer Neoliberalism highlights the economic policy of culture might be considered positive because it in which the economic entities are actively and enriches and upgrades the existing one. On the oth- comparably involved in the economic flows bearer hand, it might be considered negative one as it is ing the individual responsibility for their progress representing the threat to existing rules and values. or economic slump respectively. The rules are not Finally, it should be emphasized that global- set up by anyone else than just the market itself ization is deeply incorporated in the everyday life with its basic supply and demand economic laws. on the world stage, economic as well as sociologi- This is why the neoliberals are calling for the state cal and cultural. Only those accepting it and let- “elimination” from economic flows and surrender ting things slide along its stream can prosper from of market to itself and to its own mechanisms of it, while those having misfortune to be born in rejection and acceptance of economic business ex- “wrong” part of planet must suffer the unsparing istence. In that way the business competence gets scourge of neoliberalism, deregularism and finally awarded, failure gets punished, and the free mar- of the economic phenomenon called globalization. ket independently “tailors” its rules of the game. As the transnational institutions and transnational 2. Neoliberalism and protectionism companies are currently strong to the extent of being able to construct independently the major eco- In general economic situation after the Second nomic issues, it could be well claimed that in back World War the world economy, in attempts to re- of the most political issues lies just economy. This turn to the principles of classical liberalism, got stuck in yet unknown economic framework called 1 Mencinger Jože, „Socijalno tržišna ili „čista“ tržišna neoliberalism. As known, neoliberalism is op- privreda, u: Stiglić E. Džozef, Protivrečnosti globalizacije, SMB-x, Beograd, 2004, str. 291; Preuzeto iz knjige posed to the state interference in the economy, is „Globalizacija makroekonomske politike, dr Žarko Ristić, opposed to protectionism, social rights of workers, dr.Dobrosav Radovanović, Beograd 2008 g.

Volume 7 / Number 1 / 2012 213 technics technologies education management entitles the neoliberalism’ followers to influence Some states have accepted it because they felt it the politics, to get incorporated in their rows and, was useful for the development of their economy, while doing that, not to render the accounts either while some of them have set the concept of neo- to citizens or to party options and to workers. liberalism on its feet. Regretfully, most of them „Individual freedom is necessary and it is the ul- accepted it because they had to. Globalization is timate social ideal. The state government is also nec- inevitable. Anti-globalists and the countries that essary, but it must be limited and decentralized. In- still rely on the socialistic order are aware that the terventionism is dangerous and it must be avoided“2. wheels of globalization will sooner or later run Neoliberalism consequently insists upon control them over. It is impossible to resist, one can only reduction in economic area aiming at as higher as join it with the least damage to the own economy. possible devaluation of the state authority and state Such growth of neoliberalism is based on its real, control and to withdraw the boundaries protecting true and deadly good quality approach, which is the domestic products. They are not willing to recog- the natural selection between the strong and weak nize the state sovereignty or integrity, nor the nation- ones. But even if it is not so, what options would al interest, but they modify and rearrange it into the have its opponents. What in the current world market interest which is given the imperative of their economic order may be offered as an alternative. expansion and capital reproduction. In addition, the According to current market offers and according proponents of neoliberalism are struggling for taking to estimates for the future, the only alternative to over the state authorities and their restructuring on globalization is turbo-globalization! Globalization the international, global level. National governments is superior to all previous economic models and constantly loose their authority at the national and is based on the great dominance of the neoliberal even at state level. They loose ther economic power model of economic and political life organizing. every day. Their impact is inversely proportional to „International order of 21st century opted for the strengthening of neo-liberal power. loyalty to liberalism, not only because every state But the world’s leading national governments in the market has seen a potential benefit, but be- directly influence the neo-liberalism. Some of cause there was no meaningful alternative“.3 them have practically created it. The role of the Besides deregulation, neoliberalism involves state is still strong, it has a very powerfull instru- the reduction of any collective authorization to the ments of coercion and collection of taxes and du- capital movement, not only to deregulation. Thus, ties, but still the multinational companies are cru- only the single movement through global capital cial economic factors in today’s business settings. flows constitutes an acceptable model. The essen- However, neoliberalism is inevitable and cur- tial model would actually not be to have neoliber- rently it represents the basic principles of econo- alism imposed, but to have it, through its operative my. As such, it is imposed to every pore of not only economic instruments, “poured” into society. That economic but also social and cultural lifestyle. means that the market mechanisms and changes Neoliberalism is the main driving force and the are shaping the society and that the economy itself basic foundation of globalization, simultaneously defines the method of social development. One ensuring the success of the exponential growth of of the advantages of neoliberalism also lies in the transnational corporations and supranational in- fact that all flows and tradings are carried out vol- stitutions. They ultimately affect the relationship untarily, without governmental or protectionistic between national economies. compulsion, where the market itself either puts Today, the economy of almost all countries in out of competition those that are economically the world contains the basic neo-liberal concept. unsuitable or gets them rewarded by market expansion and profit increase. Such neoliberalism is 2 Grubačić Andrej, „Neoliberalizam, korporatna globalizacija not located in any country and no national govern- i pedagogija“,u Zbornik: Knežević Miloš, Vreme ment has control over it. Because the essence of globalizacije, 2003, Dom kulture Studentski grad, Beograd, str 147; Preuzeto iz knjige „Globalizacija makroekonomske politike“,dr.Žarko Ristić, dr. Dobrosav Radovanović, 3 Mandelbaum Majkl, Ideje koje su osvojile svet, Filip Beograd, 2008 g. Fišnjić, Beograd,2004.

214 Volume 7 / Number 1 / 2012 technics technologies education management globalization is located in the heart of internation- social expenditures reduction and to their redis- al economy and international economic trends. tribution on behalf of corporations’ profit. Neo- Like a good football player who plays with a liberalism seeks to make full restriction of such newcomer, neoliberalism similarly comes into the expenditures, and not only them but the restriction market that is already prepared through the pro- includes the expenditures for protection of envi- cesses of privatization, deregulation and disloca- ronmental resources, not to mention aid to unde- tion of capital from the state treasury into the hands veloped countries because they would thus have of private business. As the competition makes also a double loss. The first loss would be the capital in this principle the basis for the world economy, itself which should be allocated for help to the this entails the abolition of national borders and undeveloped, and the other, more important one, faster and easier fluctuation of capital and goods would be the risk of development of undeveloped thus enabling the survival in the market. countries. This would raise the standard of these The economic dominant of neoliberalism is countries, wages, social status. In this way, after also represented by unimpeded flow of capital to certain time, globalization would disappear. all parts of the world. It is not only free of national Well-known globalist Friedman says “Lower barriers, but is also largely free of national controls. your expectations, because the increase of wages, For how and in which way to control the global protection of nature and health insurance are in- capital and in the end, who would be the arbitra- creasing the production cost and making the cor- tor. In this way, the capital circulates according to poration less competitive, and that is a threat to the the classical form until it finds the best location for economy. A state which in the name of superiority its fertilization. In other words, searching for the and equality takes from ones in order to give to cheapest labor and services, the cheapest raw ma- the others can not lead to progress. Sooner or later, terials, reproducing materials as well as the lowest and probably before anyone would have expected, social expenses and taxes. In finding resources of the inceasing oversized state would even destroy this kind the transnational corporations are greatly the prosperity that we owe to the free market, as supported by their flexibility and mobility, because well as human freedom, so eloquently expressed it is necessary to react quickly and to take the ad- in Declaration on Independence“5. vantages offered by the particular market at given Theorists of neoliberalism advocate the view time period. Such steps are also carrying out the that, among other things, Europe must consolidate high risks, but the more decentralized corporation its position globally. This is feasible in a way that is, the risk of investing in volatile markets is lower it comes to dissolution of today’s so called wel- and profit is higher. As an argument to it „Mandel- fare states along with their achievements in social baum noted that from 1950 to 1996 the volume of policy and economics. They further argue that the the world export increased by more than 16 times continued growth of unemployment can not be and that in the same period the total economic pro- solved by the state expansion and by its strength- duction increased by 6 times. In many countries, ening, but by a simple cut down of its powers. export of goods expressed as percentage of gross That would contribute to further strengthening of domestic product was much higher after the Cold transnational companies and to their better com- War than shortly before the First World War. Thus, petitivess on the global world market. for example, the percentage in 1913 for US was 3.7 Social neoliberalism position is based on claim- and in 1992 it reached 8.2; for France it was 8.2 and ing that in the future it can not come to the war and 22.9 resp.; for Germany it was 15.6 and 32.6 resp.; racial intolerance because the economy with its for Japan it was 2.4 and 12.4 resp. and for the world strong chains based on the interest, shall overcome it was 8.7 and 13.5 respectively“4. the political rivalries as well as the class and his- Another reason for persistence and efficacy torical, international and intersocial barriers. On the of neoliberalism is its permanent commitment to contrary, the societies will become increasingly in-

4 Globalizacija makroekonomske politike; dr Žarko Ristić, 5 Friedman Milton and Rose, Sloboda izbora,lični stav, dr. Dobrosav Radovanović; Studio MS, Beograd 2008 g. Global Book, Novi sad, 1996, str 24-25

Volume 7 / Number 1 / 2012 215 technics technologies education management terconnected and dependent on each other. All this of citizens and shopping centres instead of com- shall lead to prosperity, annul the boundaries thus munity, despite the fact that the seemingly perfect removing the potential sources of conflict. „World working principle of market generates the enor- peace through world trade“, a slogan that best ex- mous social and economic inequalities, increased presses the attempts of neoliberalism supporters for poverty of the poorest ones and the enormous en- world peace and democracy. Furthermore, in such a richment of rich ones, neoliberalism is inevitable. peaceful system the democracy is inevitable. A free It represents the rough reality that will for now market in its form must ultimately lead society into and probably for the next few decades remain un- a democratic state. This link and interdependence changed and dominant. It is so well incorporated of democracy, peace and free market are the basic into the society starting from the top of political concept of the social organization of neoliberalism. powers, through IMF and the World Bank, up to Accordingly, the advantage of neoliberal con- deregulation, globalism and economic hegemons cept is not only in freeing the market from national resembling giants, who like black holes swallow constrains, but also assurance of a more democratic everything they find on their road. Perhaps there and more peaceful society. The fact is, at least for is an additional reason due to which no urgent now, that the increase of world trade and upward change of the neoliberal regime can be expected, trend of the market, are declining the option of the and it is not because it is not really perfect but be- war outcome. This, however, did not reduce the cause it has no adequate economic alternative. amount and growth of military industry in the most globalized country in the world, the United States. 3. Impact of economic regions on national Anti-globalists and opponents of neoliberalism, economies increasing in number but consulted increasingly less, argue that it is incorrect to place economic In today’s globalized world, in addition to divi- standards in front of the social ones. Furthermore, sion on developed and developing countries and availability of only one factor that would regulate geographic regions, there is a regional or planetary economic and social rules of society would repre- division. Their actions affect the movement of to- sent too much power in the hands of an option. Ex- tal world national flows as well as the economic cesive power without any control of the society or strategies of individual countries. These regional some other institution could lead to the end of so- giants are the three economic zones. It is North ciety and to its self-destruction. Setting up the eco- America with Canada and Latin America, Europe- nomic aspect as dominant in relation to social one an Union and Pacific zone headed by Japan. Their which is established in the neoliberalism, represents actions and moves influence the whole world, the a kind of conservative attitude or, viewed through financial flows, devaluation of certain currencies, the prism of politics, an extreme right-wing nation- exchange rates, stock market and financial specu- alist fraction. In case of neoliberalism that would lations. In addition, they integrate societies and not be right-wing nationalist fraction, but right-wing economies of other countries that were separate globalist fraction that would equally or perhaps even previously, simultaneously dividing some eco- more remorselessly threaten the freedom and lifes of nomic regions in the world. The creation of pow- all their opponents. Criticism to neoliberalism rep- erful regional economies creates a quite new im- resents the argument that the free market and com- age of the world economic scene and influences petition are not that quite free. Placed on the foun- the redistribution of the world economic power. dations that suit those who are ready for the race, Lately there has been a shift in the constellation of and for those unprepared it represents an economic powers of these economic regions. Relative decline scourging in which they loose both the economic of America and its economic share and impact to the dignity and social status. It is getting reduced to the world market has contributed to a slight strengthen- forcible imposing of hierarchical relations between ing of the European bloc and the Pacific where Japan larger and smaller states and regions. stands out in particular. Japan’s financial and tech- However, dispite the fact that we can well say nological strength, their steady progress, together that neoliberalism creates retail consumers instead with the rise of China give promise of their rapid and

216 Volume 7 / Number 1 / 2012 technics technologies education management safe future prosperity, and therefore a big change in 4. Technological progress and information global economic market. China has recently become technology boom the largest exporter in the world. Does it mean that its In addition to the Great Depression, ending the economy is stronger? Or does it only mean that the Cold War, breaking the Eastern Bloc and linking Western globalists exploit China’s cheap labor force? western and eastern markets, an important affir- The Chinese produce mainly cheap textile goods that mation of globalization has contributed to techno- are not much sophisaticated. This means that they logical progress in which the most prominent is IT need huge amounts of produced goods in order to factor. Complete system of action, ranging from reach the title of largest exporter in the world. This electronic banking, capital flows, financial specu- indirectly means that all textile and related indus- lations, information services and numerous actions tries have no place for their production in Europe. related to economy would not be as feasible as it So European globalists shift the production to China, works today, without computer logistics available. make it the largest exporting power in the world and In addition to these types of information prog- they influence the production trends in their national ress, there is a visible shift forward in moderniza- economies. A major change in the Far East condition of equipment, machinery, tools. Everything that tioned both economic and civilization change, the reduces the demand for fresh manpower. Less than success of Chinese and Japanese civilization. A ma- a century ago, hardly anyone could imagine that the jor change in the ratio and volume of trade began to masses of peasants in the fields round the world will occur mid-80’s when Pacific zone including Japan be crammed into factories and that work of hundreds gained a slight advantage over the Atlantic zone and of them will be controlled by one person with help America. For only thirty years Asia Pacific has be- of sophisticated machine. Equally strange it would come the major center of the world capital accumu- be today to imagine that these workers from the fac- lation, one of the largest and most competitive shop- tories will disappear and that their workplaces shall ping regions, one of the two leading centers of in- be replaced by computer offices. formation revolution and technological innovations, With postindustrialism, particularly the IT rev- the most attractive destination for global investments olution, the central driving force of development estimated at over 420 billion dollars6. is also changing. Computer-information is in the Financial crises are frequent features of these center of the new technological civilization. What three regions and they often occur unpredictably. is done, manufactured, created, arranged by clas- The danger for the world and its national econ- sical machine is created, investigated, analized as omies lies in the possibility of dividing the three information by the computer machine and such blocks. However, it is frail with respect to certain obtained data are presented as a final product in structuralism and financial interconnection of these which the new values are not generated mainly regions. In any case, the inclusion of South-East by heavy physical work, but by new knowl- Asia, China, India and certainly Japan into the edge and innovation. This type of production is global network of economic interdependence has called„software economy“and it covers some changed the course of history and the dominance of economic sectors that have the fast growth, such the West, particularly the United States. Their mu- as microelectronics, biotechnology, telecommuni- tual economies are constantly struggling. They in- cations. These branches are not only the fastiest troduce protectionistic policies to protect domestic growing ones, but are significantly more profitable products as Japan, for example, produces cars that, than other industries, and for their implementation though including production, distribution and paid the resource knowledge is mostly used. customs costs, are cheaper in America than the U.S. Thanks to information technology the devel- domestically manufactured vehicles. On the other oping countries may also reduce the time of their hand, the unimpeded flow of capital is streaming technological progress and industrial development. in multiple greater extent than the respective trade. Invisible but powerful driving force of globalization is represented by a new class of “producers 6 „Globalizacija, dva lica sveta“, dr. Miroslav Pečujlić, of IT era”. By its nature it is cosmopolitan, the field Beograd 2002 g, str. 72

Volume 7 / Number 1 / 2012 217 technics technologies education management of its professional carrier expands endlessly, it be- ity. Instead of the society of justice and ethics, the comes cosmopolitan. Biotechnology engineers, world is transformed into one of chronic disbal- computer managers, economic analysts, software ances within just a few decades from creation of professionals are becoming demanded throughout neoliberal concept of economics. Neoliberalism is the West. In contrast to the unqualified workforce, the winning formula of economy. But in order to they are becoming the prosperous part of the new be morally justified, it must be accepted by all. If world without borders, and will remain so all un- judged by ethics, it is certainly bad. However, if til their education and invention are looked for by the ethic value is disregarded, the concept of neo- consumers of global supermarket7. liberalism has its complete justification. Finally, why so many social expenditures should be ac- 5. Conclusion cumulated on someone who is not making business, not creating, not acting on the market. These If the modern electronic communication consti- benefits which it enjoys in the market have to be tute the nervous system, then the globalizing econ- paid by someone. It is only seemingly that they are omy is the bloodstream of the world, its arteries and paid by the state. The state is only an instrument of capillaries leading to all the denser network of eco- payment, but the real payers are the taxpayers who nomic linkage, interdependence of all societies. At face troubles working with their transnational cor- the same time, it is more increasingly marked the porations and fight for their retaining in the mar- superiority of transnational and supranational eco- ket. Because if they fail, no one could guarantee nomic organizations over the national economies to them, neither the trade union nor the state, that and states. Technology and economics are making they will not close down and fall prey to another globalization the unstoppable stream, gaining the economic giant or maybe even to the state itself. form or the appearance of iron historical necessity8. In addition to constant criticism of globaliza- References tion, one can mention its positive side. Namely, neoliberalism as the precursor of globalization 1. Strawson, F. P., Entity and Identity and Other Essays, influences not only economic but also other con- Oxford: Claredon Press, 1997 ditions of global order. Peace for example in 21st 2. Kaufman, D., Sigelbaum, P., „Privatization and Cor- ruption in Tranzition Economies“, Journal of Inter- century, according to the opinion of globalists, is national Affairs, No 1/1997. secured. And not only peace but also democracy 3. Globalizacija makroekonomske politike; dr. Žarko and prosperity based on free market. Supporters of Ristić, dr. Dobrosav Radovanović; Beograd 2008 g. neoliberalism claim that the economic prosperity 4. Globalna ekonomija; dr. Danilo Marković, dr. Bog- does not give motive or need for the war. There is dan Ilić, dr. Žarko Ristić, Beograd 2008 g. only the need for market expansion and achieving 5. Globalizacija, dva lica sveta, dr. Miroslav Pečujlić, the greatest possible profit. Those who would pos- Beograd 2002 g. sibly have provoked it, are weak and undeveloped 6. Globalizacija razvoja, dr Mehmed Pojskić, Zenica coutries. On the other hand, developed countries 2009 g. have the interest to preserve their wealth. 7. Kuda vodi globalizacija, dr. Zoran Vidojević; Beo- Looking from social aspect, it is important to grad „Filip Višnjić“ Institut društvenih nauka, Beo- grad, 2005 g. point out that as disadvantage of globalization it 8. Ljudska prava na udaru globalizacije, dr. Ćazim appears to be the lack of ethics and moral values Sadiković, Centar za sigurnosne studije BiH, 2006 g. which are required by every society.The fulfill- 9. Globalizacija, WTO i EU, izazovi i kontraverze, dr. ment of such justice which neoliberal system is Izet Ibreljić, Ekonomski fakultet, Sarajevo 2008 g. lacking. The economic superiority, which is the basis of globalization, entails the social inferior- Corresponding Author Alen Cengic, 7 P. Kenedy,1993 g. Sarajevo, 8 “Globalizacija, dva lika sveta“, dr. Miroslav Pečujlić, Bosnia and Herzegovina, Beograd 2002 g, str 61 E-mail: [email protected]

218 Volume 7 / Number 1 / 2012 technics technologies education management Determination of the organization systems quality level

Nedeljko Zivkovic, Danka Knezevic, Maja Krsmanovic, Ilija Djekic 1 Quality Management Department, Faculty of Organizational Sciences, University of Belgrade, Serbia, 2 TD Consulting, Zemun, Serbia, 3 Faculty of Agriculture, University of Belgrade, Serbia.

Abstract quality, it is necessary to identify and define two groups of characteristics: This work presents one approach to guide or- –– The set of organization system characteristics; ganization systems towards a continuous meeting –– The needs (requirements and expectations) its stakeholders’ needs. The approach starts from related to the organization system characte- the stakeholders’ needs and ends with the evalu- ristics. ation of the extent to which these needs are met through a cycle of continuous organization system Each quality characteristic meets one or a num- improvement, based on the implementation of a ber of needs of a user of the entity the quality of general-type model for defining organization sys- which is discussed. The characteristic of the qual- tems quality. ity is a value that can be determined and moni- Key words: organization system quality, stake- tored in time and it belongs to the organization holder approach system itself. Thus, in order to define the organization system quality it is necessary that a set of Introduction characteristics, i.e., the values by which the organization system affects its stakeholders, should be Contrary to products and services, as most wide- determined. The other characteristic essentially ly present entities in the literature on quality, the or- shows the needs that can be stated as requests or ganization system is not adequately dealt with as ob- can remain unstated, however, this does not imply served from the quality aspect. One possible reason that the stakeholder does not anticipate them, so is that the organization system is one of most com- these needs can be defined as expected. The needs, plex entities whose quality can be discussed. As a therefore, cover the form of requirements and ex- complex and open system, the organization system pectations a stakeholder has as regards the entity is composed of a certain number of structural parts, and its quality characteristics, in this case, the or- where each such part produces certain products or ganization system. Pursuing the above presented services towards achieving mutual goals. This fact explanation, the organization systems quality can alone explains the complexity of the interaction be- be defined as: “The level to which the organiza- tween various outputs of individual processes of the tion system quality characteristics meet the needs organization system as well as their quality in the of its stakeholders as regards these characteris- overall functioning of the organization system. The tics.” (Zivkovic, 2001, 2008) quality of the organization system and its processes, Defining the organization system quality in the form of this or a similar concept, are anal- should provide an overall insight into the extent ysed in (Rodrigues, 2007; Milojevic, 1979; Mitro- to which the needs of all stakeholders important vic, 1996; Radovic, 2004; Zivkovic, 2001, 2008), for the organization system are met, through the where the issues were the quality organization, the characteristics of the organization system quality. quality level of organization process, the organiza- The approach to the organization system quality tion system quality, etc. definition and the results of its implementation Starting from the definition of quality provided should be useful to the management in diagnos- in the ISO 9000:2005 standard, and in order to ing the state of the organization system and in define and then identify the organization system further decision making towards organization sys-

Volume 7 / Number 1 / 2012 219 technics technologies education management tem quality improvement, i.e., increasing the sat- The general model for defining the organiza- isfaction of all the important organization system tion system quality level should include: the ex- stakeholders. pected, the designed, the achieved and the organization system quality in use. General organization system quality defin- The expected organization system quality con- ing model sists of the elements of the expected and required quality it defines starting from the organization It is assumed that a unique model that would system stakeholders’ needs. If there are a theo- be applicable to all the cases and manifest forms retically larger number of the organization system of organization systems without prior preparation stakeholders, it is possible to group the needs re- and adaptation is impossible to define. What is lated to the organization system under consider- possible to define is a general model to determine ation according to the basic organization system the organization system quality that would serve stakeholders. One manifest form of organization as a starting point in defining a concrete model to system stakeholders may have one or more needs determine the organization system quality, not in as regards the organization system; namely, one or order to determine the overall value of the qual- more elements of expected quality can be identi- ity level and its presentation on the quality scale, fied for this form of organization system. Each of but in order that the basis be created for the im- these elements of the expected quality within the provement of the level of all organization system same stakeholder group has its planned value, but stakeholders’ needs satisfaction and a possible a different importance, or weight as compared to comparison of these values with other representa- the other elements. Each element of the expected tive systems. This could allow for a continual defi- quality is defined by: nition and monitoring of the organization system –– A defined and clearly stated need of a quality as regards the organization system stake- stakeholder; holders’ needs, and it could also be compared to –– The value to be achieved; other organization systems. Therefore a general –– The importance as compared to the other model should be defined, one that should allow elements of the same stakeholder group. for the organization system to adapt its specific features and then to define its stakeholders’ satis- In order that the elements of the expected qual- faction and bring the results into correlation with ity be defined within a general model for defining the operational results the system can affect. The organization system quality it is necessary to: aim of such an application of the model is to intro- –– Identify a theoretical set of possible duce the management to the field of possible ac- organization system stakeholders; tivities and the possible directions of activities for –– Determine a theoretical set of organization the purpose of improving the organization system system stakeholders’ needs. stakeholders’ satisfaction. The general and the concrete models of defin- A proposition of a possible number of stake- ing the organization system quality level will be in holders is analysed in the works of (Freeman , correlation: 1984, Burton & Dunn, 1996; IIED, 2001; Brenner –– The general model is the starting point in & Cochran, 1991; Donaldson & Preston, 1995; Hill defining the concrete model for defining the & Jones, 1992; Clarkson, 1995; Buchholz, 1993). quality of various real organization systems; One categorization of stakeholders into different –– Through the concrete model of defining its significance groups of the organization system is quality, the real organization system may in presented in (Brnjas, 2000; Burton & Dunn, 1996; turn affect the improvement and supplement Ramírez, 2007; IIED, 2001). Analyzing the exist- the general model for defining the ing stakeholder groups presented in previous works organization system quality, that is, for the it is possible to identify the following stakeholder organization system quality improvement. groups as part of a general model for defining the organization system quality level as well as the ba-

220 Volume 7 / Number 1 / 2012 technics technologies education management sis for the stakeholder identification for a concrete The organization system quality in use is de- organization system: Owners (shareholders, groups fined for the defined elements of the expected and individuals), Management, Executives, Suppli- quality, in that their real values are ascertained. ers, Customers (buyers, users and/or consumers), The model provides that the level of needs satis- Banks, Sponsors, State institutions at various levels faction may be evaluated on a 1 to 5 scale for each (ministries, agencies, administrations, etc), Compe- of the elements of expected quality. The evalua- tition, Various activist groups, associations, parties tion mark is obtained through a questionnaire to (customer protection, organizationmen associa- collect data from the selected representative sam- tions, unions, etc.), Scientific and research institu- ple of each user group of the organization system tions, Social community. where: mark 1 means an absolute dissatisfaction The above quoted organization system stake- with the extent to which the respective stakeholder holder groups are part of the general model for de- need is met, while mark 5 means an absolute sat- fining the organization system quality in the section isfaction with the extent to which the respective of the expected quality elements. Upon the iden- stakeholder needs are met. tification of the stakeholders and the needs within The same needs, but with different meaning, each of these groups the initial general model for are possible to identify for different organization the organization system quality definition would system stakeholder groups. The needs of, for ex- consist of 12 stakeholder groups. In order that it be, ample, the state, the social community and non- e.g., made concrete for the case of a real organiza- governmental organizations may coincide in some tion system, it will be necessary that out of all the aspects, but they may differ in importance. It is for stakeholder groups quoted above those stakeholder this reason that no inventory of possible needs will groups should be selected into a concrete model be made within the model, since the same need that are realistic for the observed organization sys- may emerge in different stakeholder groups, how- tem whose quality level is to be defined. ever, with a different level of significance. In case After the initial stakeholder group identifica- of the real organization system the needs identi- tion, and in order to determine the expected orga- fied in the general model would be selected into nization system quality, it is necessary that their a concrete model by way of defining their signifi- needs be identified too. Different stakeholder cance, that is, by way of their categorization by groups have different needs as regards the orga- a selected representative sample from each of the nization system operations. On the basis of the stakeholder groups identified for a real organiza- varied needs quoted in different sources (Ander- tion system. Only those stakeholder groups iden- sen & Fagerhaug, 2007; Djordjevic, 1982; EU tified in the previous step of the concrete model Publications Office, 2001; AXON, 2006; Leap & development with their respective needs can be Loughry, 2004; Maslow, 1954; Nikolic, 1996; Ku- taken into account in the further implementation koleca, 1971; Pickle & Abrahamson, 1990; ILO, and development of the model. In addition to the 1998; GSK, 2003; OECD, 2004) it is possible to needs listed in the general model, for each identi- define a theoretical initial set of needs for different fied stakeholder group it is necessary that space organization system stakeholders. be left for improvement and extension of the Upon the identification of the needs within each model with the needs identified by the stakeholder of the groups, the initial general model in the orga- group’s representatives, on the example of the real nization system quality defining would be made up organization system. Each of the defined needs has from 62 elements of expected quality with defined not an equal importance within the same category needs. The general model, as it was already said, of stakeholders. Some needs are of higher priority would serve as a starting point in defining a concrete for a stakeholder than the others. It is important model whose number of elements of the expected to categorize the needs for the purpose of further quality may differ from that of the general model. allocation of activities within the organization sys- Implementing the general model on a real organiza- tem and the priorities for their execution. The more tion system makes it possible to even increase the important the need is, the higher priority it has to number of needs identified in the general model. be satisfied. This is not always the rule, however;

Volume 7 / Number 1 / 2012 221 technics technologies education management to get a real insight into priorities it is necessary to each stakeholder group, the analysis of collected assess the extent to which certain needs are met, responses is conducted, as well as a calculation of besides assessing their significance. Because, if a the mean values for each of the needs within the lower priority need is on a much lower satisfac- same stakeholder group and its respective needs. tion level compared to a more significant one, it is The designed organization system quality con- possible to direct the activities in the stakeholder sists of the designed quality elements that are de- satisfaction improvement by this very need, since fined in terms of the defined elements of expected the possibility of an overall improvement is com- quality. One element of the expected quality may paratively bigger. One method in the stakeholder be affected by the organization system’s one or needs categorization is presented in the research more elements of designed quality. The organiza- conducted by Siemens (Zhao, 2004). A similar tion system affects each element of the expected method in the case of defining the significance of quality with at least one element of the designed user needs is implemented within the QFD method quality. Each element of the designed quality is (Mazur, 1992). This analysis supports the need to determined by: set the weights for a certain need by the organiza- –– The name of the quality characteristic; tion system stakeholders. It is proposed that after –– The unit of measure that expresses its value; the general model is adapted on the real organiza- –– The planned value of the quality characte- tion system, the significance of each of the needs ristics. is valued by the stakeholder group representatives on a 1 to 5 scale. Each value represents: 1 – a mini- In order to define the elements of designed mal significance of the need defined by the general quality within the general model for defining the model that is appointed to a stakeholder group in a organization system quality it is necessary that a real organization system, and 5 – a maximum sig- theoretical set of possible characteristics of the or- nificance of the need defined by the general model ganization system quality be identified. that is appointed to the stakeholder group in the If the organization system affects its stakehold- real organization system. Some needs of different ers’ needs by its performance, these performances stakeholder groups are often opposed to one an- can be identified with the organization system qual- other. It is due to this fact that the problem of priority characteristics. The organization system perfor- ity appointment to certain needs of different stake- mances meet the criteria that should be part of one holder groups is made complex from the aspect of characteristic of quality, and they are as follows: the organization system. The organization system –– That it is a value on an entity, i.e., that it can is supposed to establish a balance among certain be measured, assessed, compared, etc. priorities of needs and achieve a sustainable sat- –– That it directly or indirectly affects the needs isfaction of all the stakeholder groups’ needs. To of an entity user. satisfy the needs of only one stakeholder group may inspire dissatisfaction among the others etc. This problem matter will be explained on an For example, if the profits are to be maximized example of the need for safe work environment. for the purpose of paying larger dividends to the The possible solutions will be proposed, and their organization system owners, it may have a nega- validity will be shown on other examples of the tive impact upon the extent to which the needs of elements of required quality of the general model the employees, such as the work conditions, the for the organization system quality definition. The wages, are satisfied. The stakeholder group repre- first step in ensuring a safe work environment is sentatives are given the questionnaires designed defining the possible impacts upon the safety of on the basis of the general model and the needs the employees. Then follows the identification of it defines. Each representative of the selected the risk and the strength of each of the possible sample of stakeholder group values and compares impacts upon the employee safety, and finally each of the needs within the group of needs and the measures to prevent or reduce the risk are de- assigns it a value according to the above explained signed. If the characteristics of the quality of each scale. On the basis of the results of the research on individual impact were analysed, and on condition

222 Volume 7 / Number 1 / 2012 technics technologies education management that even a simple organization system has a num- quality characteristics may relate to a number of ber of them (only the number of resources, pro- organization system stakeholders, a consequence cesses and outcomes where the impact upon the of overlapping of some needs of different orga- employee safety is possible are taken into consid- nization system stakeholders, but also of mutual eration), these would not prove to be adequate val- indirect preconditions of meeting the needs by the ues to monitor, because they are too many and in value of certain elements of the designed quality. case of some other needs, their number would rise On the basis of the research findings, the gen- to too many characteristics that would be difficult eral model for defining the organization system to observe in time. What is needed are one or a quality for other organization system stakeholder few synthesized values that comprise all the previ- groups and the identified elements of the expect- ously mentioned values and through which these ed quality will consist of 429 starting elements impacts can be monitored indirectly. These values, of the designed quality with defined names of as it was mentioned above, are the organization the quality characteristics. The general model, system performances, and in case of the need for as stated above, can serve as a starting point in a safe work environment they can be absolute val- defining a concrete model that may have, as ex- ues: the number of deaths as consequences of in- pected, a smaller number of designed quality juries at work; the number of injuries at work; the characteristics compared to the general model. number of days of absence due to sick leave; etc. The initial number of identified elements of the Or the case of more complex relative values, designed quality is expected to increase in the such as: the number of deaths as consequences implementation of the general model upon the of injuries at work / the total number of impacts; real organization system. the number of injuries at work / the total number The achieved organization system quality is of impacts; the number of days of absence due to determined upon the defined elements of the de- sick leave / the total number of sick leave days; signed quality, by verifying their real values. The relative values quoted provide a more If the above explained characteristics of each of complete and valid information compared to the the manifest quality elements of the organization absolute ones, since, for example, the number of system should be brought together into a unique injuries at work and their values depend on the to- graphic form that would allow for their relation- tal number of possible impacts where certain types ship to be observed, but within which the values of injuries may occur. All these performances obtained in the course of defining certain orga- should be expressed in terms of quality, cost and nization system quality elements can be entered, time determinants. The performances given are using the type of presentation similar to the QFD adequate values to monitor the satisfaction of one matrix, it can be presented as in Figure 1. Figure 1 need of a stakeholder group. Their values can be presents a graphic chart of the model for defining planned and monitored in time. They can further the organization system quality level with all the be decomposed into individual impacts, for exam- necessary elements that define it. ple, into injuries in certain processes, organization In the graphic presentation in Figure 1 certain units, injuries by certain work instruments, etc. On elements are defined in the following way: the basis of the given example of the needs for a –– Stakeholder 1 … t – The organization safe work environment we can conclude that these system stakeholders needs are satisfied through the characteristics of –– PoQ11, PoQ12 ... PoQtp – Needs (elements quality at certain points of impacts, values built of the expected quality) into the resources, processes or their outputs; how- –– A11, A12, ..., Atp – Significance of needs ever, their accomplishment is verified and moni- –– PoQij – The planned value of ij-elements tored via more complex values, the organization of the expected quality (elements of the system performances. As shown in the example, a expected quality) number of different quality characteristics can be –– UQij – The realized value of fulfillment of defined for one need as element of the expected ij-elements of the expected quality (elements quality. Similarly, it is evident that those certain of the quality in use)

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–– UQij Benchmark – The realized value of -1. On the other hand, in case the profit is, fulfillment of ij-elements of the expected for example, planned to reach the values quality for the case of a representative of $160 million, it is to be expected that organization system (elements of the quality these values will be increased, therefore the in use) direction will be designated as +1 –– PrQ1, PrQ2, ..., PrQk, ... PrQr – The names –– ABSij – Means the absolute significance of of the quality characteristics (elements of ij-th element of the expected quality the designed quality) –– INDEXij – The calculated value of the –– PrQ – The planned value of the k-th quality significance and the possibilities for the characteristics (elements of the designed improvement of the respective ij-th element quality) of the expected quality. –– OQ Benchmark – The realized value of the k-th quality characteristic for the case Some formerly presented parameters are calcu- of a representative organization system lated using the following equations: (elements of achieved quality) –– OQ – The realized value of the k-th quality Ak=(PrQk-OQk) × Dk ...... (1) characteristic (elements of achieved quality) –– A – The absolute error between the Rk=Ak ×100% / PrQk ...... (2) anticipated and realized value of the k-th quality characteristic ABSij= (PoQij-UQij) Aij ...... (3) –– R – The relative error between the anticipated and the realized value of the k-th (PoQij −UQij) ⋅ Aij INDEXij = ...... (4) quality characteristic p t –– D (Direction) – The values of -1 or +1, ∑ ∑(PoQij −UQij) ⋅ Aij j=1 i=1 depending on whether the lower or the upper limits of the anticipated values of the realized quality are defined by the planned The previous equations are part of formal, quality of the k-th quality characteristic. mathematics component of the model for defining If, for example, the anticipated number of the organization system quality. injuries equals 8, it is to be expected that the realized values gravitate towards 0, where in this case the D will be determined as

Figure 1. The graphic presentation of the model for defining the organization system quality

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Conclusion improvement of the procedure itself in the subsequent iterations of its implementation. Defining and improvement of the organization system quality is still an insufficiently explored and defined concept. This paper presents one ap- References proach to the organization system quality defining 1. Andersen, B. & Fagerhaug, T. (2007). Performance and improvement which is in accord with the most Measurment of Logistic Processes, Retrieved Febru- recent experiences in exploring considerably bet- ary 10 2008, from www.prestasjonsledelse.net/pub- ter known concepts of product and service qual- likasjoner/ Performance%20measurement%20of%20 logistics%20processes.pdf ity, in that it starts and ends up on the standpoint of the user of the entity observed. The advantage 2. AXON (2006). Transforming your Organization of this approach is that it respects the needs of all Management Systems, Retrieved October 20, 2007, the organization system stakeholders and uses the from http://www.axonglobal.com.au/index.html general model for quality defining to build the 3. Brenner, S. N., & Cochran, P. (1991). The stakehold- basis for a systemic direction of the management er theory of the firm: Implications for organization decisions towards a more effective organization and society theory and research. Paper presented at system management and meeting its stakehold- the annual meeting of the International Association for Organization and Society, Sundance, UT. ers’ needs. In the implementation of the described approach for the organization system quality im- 4. Brnjas, Z. (2000). Strategijski menadzment [Strategy provement and organization system quality moni- Management]. Belgrade, Serbia: Grmec. toring a good basis was formed to manage it, 5. Buchholz, R.A. (1993). Principles of environmental which will allow for the organization system to be management: The greening of organization. Engle- proactively guided towards meeting the ever in- wood Cliffs, NJ: Prentice Hall. creasing needs of its stakeholders. 6. Burton, B. K. & Dunn, C. P (1996). Stakeholder By the implementation of such an approach in Interests and Community Groups: A New View, Re- the organization system quality improvement a trieved August10, 2007, from http://www-rohan.sdsu. reliable basis is created for achieving a manyfold edu /faculty/dunnweb/pubs.iabs96.html advantage of organization systems: 7. Clarkson, M.B.E. (1995) A stakeholder framework –– It will be possible to diagnose the for analyzing and evaluating corporate social perfor- organization system quality as related to the mance. Academy of Management Review, 20(1), pp. organization system stakeholders’ needs; 92-117. –– It will create the basis for the organization 8. Donaldson, T. & Preston, L.E. (1995). The stake- system to be identified and prioritized, for holder theory of the corporation: Concepts, evi- the purpose of its quality improvement; dence, and implications. Academy of Management Review, 20(1), 65-91 –– It will open a possibility that the objectives of the organization system development 9. Djordjevic, D. (1982). Industrijska psihologija [In- be defined in relation to the historic or the dustrial psychology]. Gornji Milanovac, Serbia: competition indicators of its quality; Decje novine. –– It will create a basis for a more effective 10. EU Publications Office (2001). Promoting a Euro- work of organization systems in the sense pean framework for corporate social responsibility of meeting the needs of their stakeholders. Green Paper, Office for Official Publications of the European Communities, Luxembourg. It is true that the procedure described here has 11. Freeman, R. E. (1984). Strategic management: A certain weaknesses and limitations, which the au- stakeholder approach, Boston: Pitman publishing. thors themselves were well aware of during its 12. GSK (2003) Sustainability in Environment, Health implementation in the real organization systems. & Safety Report 2003, GSK GlaxoSmithKline, UK. The authors’ main idea in this work was to submit 13. Hill, C.W.L. & Jones, T.M. (1992). Stakeholder- this procedure to a critical review of the scientific agency theory, Journal of Management Studies, and expert public, thus earning new contents and 29(2), pp. 131-154.

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14. IIED (2001). Series number 2 - Stakeholder Power 30. Zhao, F. (2004). Siemens Organization Excellence Analysis Part 1, Institute for Environment and De- Model and Suistainable Development. Measuring velopment (IIED), London, UK. Organization Excellence, 8(2), pp. 55-64. 15. ILO (1998). ILO Declaration on Fundamental 31. Zivkovic, N. (2001). Upravljanje kvalitetom u serti- Principles and Rights at Work, ILO - The Interna- fikacionim telima [Quality management in certifica- tional Labur Organization, Geneva, Switzerland. tion bodies]. Unpublished master’s thesis, Univer- sity of Belgrade, 2001. 16. Kukoleca, S. (1971). Ekonomika preduzeca II [Economy of company II]. Belgrade, Serbia: Insti- 32. Zivkovic, N. (2008). Odredjivanje nivoa kvaliteta tut za ekonomska istrazivanja. organizacionih sistema [Determining the organizational systems quality level]. Unpublished doctoral 17. Bejić, J., Mišković A. (2008). The role of education- dissertation, University of Belgrade, 2008. al and scientific research function in sustainable regional development realization, Technics Technol- 33. Zivkovic N, Mijatovic I, Janicijevic I, Kudumovic ogies Education Management, Vol. 3, No. 1, 2008. M, (2010). The Role of Design and Development Process in Integration of Management Systems, 18. Mihic S., Okanovic I. (2011), A new approach to Technics technologies education management-ttem, mass customization to modern customer, Technics Volume: 5 Issue: 1 Pages: 88-99 Published: 2010 Technologies Education Management, Vol. 6, No. 3, 2011. 19. Leap, T. & Loughry, M. L. (2004). The stakeholder- Corresponding Author friendly firm, Organization Horizons 47(2), pp. 27-32. Nedeljko Zivkovic, Faculty of Organizational Science, 20. Maslow, A.H. (1954). Motivation and Responsibil- Belgrade, ity. New York: Harper and Row. Serbia, 21. Mazur, G. (1992). Basic of Quality Function De- E-mail: [email protected] ployment. Ann Arbor, MI: Japan Organization Con- sultants. 22. Milojevic, M. (1979). Poslovni sistem - struktura i pojavni oblici [Organization system - structure and forms]. Belgrade, Serbia: Naucna knjiga. 23. Mitrovic, Z. (1996). Osnove integralnog upravljanja kvalitetom proizvoda [Basics of product quality management]. Belgrade, Serbia: Kultura.. 24. Nikolic, M. (1996), Ekonomika preduzeca [Econ- omy of company II]. Belgrade, Serbia: Ekonomski fakultet. 25. OECD (2004). OECD Principles of Corporate Governance. OECD Publications Service, France. 26. Pickle, H. B. & Abrahamson, R. L. (1990). Small Organization Management, New York: Wiley. 27. Radovic, M. (2004). Osnovi organizacije proizvod- nje [Organization of production] Belgrade, Serbia: FON.. 28. Ramírez, R. (2007) Stakeholder analysis and conflict management. Retrieved December 14, 2007, Web site: http://www.iirr.org/PTD/Readings/Gen- eral/RAAKS/ Stakeholder%20analysis%20and%20 conflict%20management.htm 29. Rodrigues, C. A. (2007). The Quality Organization: A Conceptual Framework. Total Quality Manage- ment, 18(7), 697–713.

226 Volume 7 / Number 1 / 2012 technics technologies education management Life cycle cost elements of the architectural projects

Milos Gasic, Milica Pejanovic, Tatjana Jurenic Faculty of Architecture, Belgrade, Serbia

Abstract methodological issues. Even with these problems solved those costs are, however, only a portion of The interest of the architectural profession for the long-term costs associated with the ownership the cost analysis and the ties between design de- and operation of the facility during its life cycle. cisions and cost occurrence is above all focused In international theory more attention has lately on the initial costs. Life cycle costs, or the in-use been drawn to the life cycle analysis, especially in costs, are insufficiently analysed in theory and the aftermath of the energy crises. Energy costs their practical managing in real projects is made play an important role in long-term exploitation difficult by the vagueness and inconsistencies of costs, but they are only one of many factors to be the regulation. These are the reasons to propose a considered and understood if clever design deci- classification and systematisation of the life cycle sions are to be made. In Serbian national practice costs, as to the frequency, mode of occurrence, life cycle costs analysis is facing vague regula- and distribution. The aim is to identify and distinct tions, notably in terms of ownership on the public costs and the pattern of their breakdown and ap- and joint parts of the building, as well as the dis- pearance, in order to create bedrock to solve the tinction among the so called regular and invest- problems derived from the lack of relevant data ing maintenance. There is also a problem of the and information, and the impediments in the pro- cost distribution, that is, the way costs fall to the cess of analysis and forecasting. This would set stakeholders. The purpose of the following text is path to establish a link between architectural de- to propose a universal classification and system- sign decisions and life cycle costs. atisation of the lifecycle cost elements that could Key words: life cycle, costs, buildings, archi- work under various presupposed regulation con- tecture ditions. The ultimate goal would be to include value studies in architectural practice, for it is well Introduction known that the cost of changes rises dramatically as project phases advance. Knowing what needs Undoubtedly, projects in architecture are of in- to be analysed is the first step in reaching this end. vesting type and hence interlinked to the array of economic decisions made foremost by the client, but immensely influences by the acts of designer. Future costs elements: an overview Still, there is a problem in architectural practice The basic life cycle costs classification is to [6]: that this reality is not adequately recognised. Cost –– ownership costs, and and benefit analyses on projects are implicitly and –– the operation costs. willfully passed over to the realm of construction phase, thereby giving up the opportunity to be dealt Similarly to the classification of the initial costs with in the phases of programming and designing, on the direct and indirect costs, the basic life cycle when the improvement potentials are the greatest. cost groups are differentiated by the feature of Traditionally, designers are primarily interest- generating costs from the specific activities, or reed in accurate estimate and control of the initial gardless of the level or mode of facility use. The costs of the buildings. This estimate is made dif- operation costs derive from activities, and this is ficult by the deficiencies in previous cost data and a parallel to the direct costs. On the other hand, their low applicability, as well as the numerous ownership costs are not associated with any par-

Volume 7 / Number 1 / 2012 227 technics technologies education management ticular activities and they occur no matter how a Utility costs building is used or operated. This cost category includes services of the utility Another classification can be made by the companies which supply facility with water, elec- way costs occur, in which case three types can be tricity, heating, telecommunications, gas, etc, and recognised [4]: dispose of solid and liquid waste. Utility costs for –– regular costs, that are evenly distributed in the general function at the apartment building for time; rent (i.e. exterior and entrance hall lighting, eleva- –– cyclical costs, or periodic costs, that repeat tors, etc) should be distinguished from the utility in regular time spans, and; costs that are assignable to the rented space (flat) –– extraordinary costs, which can but don’t and hence charged directly from the end user. Util- need to occur, depending on the need. ity costs vary depending on location and time. A difference is also made if the costs are charged from The final classification of the costs could be made a private or a corporate user. Utility usage is mea- by their distribution, that is, on which stakeholder sured depending on elements – kWh of electricity, they fall. In this respect, costs are allocated on the cubic metres of water, gas, and the like. Some cost owner of the building, or the user-tenant. This distri- elements, like the waste disposal, are not measured, bution depends on the investment goal, the owner- but assigned a single fee. In order to make a mean- user agreement, and the contractual relations. ingful estimation of the utility consumption, and Some of the key cost elements that proceed hence costs on the project at hand, some assump- from the ownership and/or operation of the facil- tions must be adopted in regard of the average use, ity over years are as follows [1]: either per capita, or per time unit, number of users, –– utility costs, or floor area in time interval. –– maintenance costs, Estimates based on the floor area or number of –– administration costs, tenants for certain type of building may prove use- –– dept service, ful in creation of the expected costs framework, for –– taxation costs, programming purposes, or for feasibility analyses. –– repair and replacement costs, Yet, if design provisions deviate from the standard –– renovation, alteration, and addition costs, practice, or in example better energy efficiency in –– miscellaneous costs and expenses. designing is priority, it may be needed to develop a fuel or electricity consumption analysis. Operation costs contain everything that is nec- In analogy to the quantity based initial costs es- essary for proper functioning of the facility: main- timation techniques, there are methods with more tenance, heating, cooling, service repairs, etc, all elaborate level of detail, notably in cases of en- put together as the in-use expenses. The way these ergy saving requirements regarding lighting, local costs are named and classified often depends on hot water supply, heating, cooling and ventilation, the type of the building or the type of the renting etc. The application of these methods rely on the contract. Operation costs in life cycle analysis are information on the architectural function, methods usually shown as the amount per square metre of of construction and detailing, level of insulation, floor area in a year period. It is however possible available equipment and it’s efficiency, etc. The to express these costs by functional unit (work true dilemma for designer, however, lies in making station, hospital bed, etc), by gross floor area or important decisions in the schematic phase that car- building envelope area, in a similar way to the ini- ry massive implications on the energy efficiency. tial costs estimates based on different cost units. Designer should be well acquainted to the en- Figure 1 depicts in a simplified way the life ergy impacts from climate, construction methods, cycle costs, with an emphasis on the breakdown to building orientation, and mechanical equipment the regular costs evenly distributed in time, cyclical in the facility, in order to avoid obviously bad de- costs occurring in certain foreseeable time spans, cisions, using general knowledge in the intuitive and extraordinary costs which may but don’t have way. Furthermore, if the initial cost estimation to occur during the life cycle of a facility. should be based on the systems method, a possible

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Figure 1. Life cycle cost elements, simplified depiction element breakdown as to respective thermal con- to use the client’s archives, if it is a company or ductibility would result, and various implications institution that already owns and runs facilities. of the schematic design provisions could be com- Associations and government agencies that are pared by the approximation models. appointed for some types of buildings could also The main problem is the same as in initial costs keep records. The reliability of these data would estimations, and it is related to the reliability of be under some suspicion, since they are subject data, and the form of data which is never ready for to client’s intervention. Furthermore, the ways of use. All the data has to be recovered from much keeping record differ to the point that a question more detailed elements and systems calculations, arises as to the adequate and appropriate level of followed by evaluating their approximate average. maintenance. This also must be done in the schematic phase of There are several options in regard to the level project, when most of final decisions on the ma- of maintenance: [7] terials had not yet been made. However, even a –– maintenance on the level of starting value vague approximation reveals a good picture of and usability (in terms of generating income) the relative cost effects of some design decisions during a theoretically unlimited period of in the schematic phase. Some indicators, like the time; perimetre-area ratio, or the area-volume ratio, can –– raising the standard, adapting to the new be used as guidelines in the design process. technologies and anticipated quality requirements during time; and Maintenance costs –– maintaining the facility in acceptable This cost category consists of janitor servic- working condition until the end of the es, facility cleaning, windows cleaning, painting expected life cycle, allowing the quality walls and ceilings, maintaining walls and floors standard to decline over time. covers, cleaning fixed equipment, changing bulbs, monitoring and repairing mechanical services, etc. The array of dilemmas related to the mainte- Maintenance cost data are available in various nance considerations is well known. To start with, formats and from different sources. One option is there is a question whether to use more expensive

Volume 7 / Number 1 / 2012 229 technics technologies education management materials in expectation that their maintenance insurance companies keep records of the number would be cheaper. Further crossroad is at the ex- of burglaries or fires in different neighbourhoods pected replacement periods and the associated to help them determine risks and premiums. Final- cost. For instance, there is a problem if more in- ly, to determine the level of insurance is foremost sulation on the façade should be allowed to de- the matter of the owner’s policy. crease fuel consumption for heating, or would it At the end, there may be costs associated with have negative effects on the cooling costs that are the telecommunication systems in public spaces supposed to grow in future. of the facility, as well as the management offices, It should be noted that location maintenance that should be distinguished from the utility costs also falls into this category. That refers to the costs that fall on the building users. of outdoor cleaning, keeping lawns, gardening, lit- ter disposal, growing plants, etc. Debt service Administration costs The term “debt service” refers to the periodic The management costs for a building can vary payments required to pay back the mortgage loan a lot, depending on the function, users flow and for the construction or acquisition of a building. frequency, type of lease, need for advertising, the These payments are usually arranged to be con- difference if the owner operates the building indi- stant (the same amount each month), or could be vidually or engages the third party, etc. These costs subject to change, depending on the type of loan, can be represented by the floor area unit per year, and by a set of rules. Debt service payments most or by the functional unit (flat, hotel room, and the likely constitute a major part of the costs to be paid like) per year. There isn’t much evidence as to the in connection with the use of a building. The own- direct link between design issues and the admin- er is well advised to devote all possible effort to istration costs, except for the overall functionality obtaining favourable financing terms for a build- of the design solution. Legal and accounting costs ing project. However, there is very little that the could be stated within this category, or separately. architect can do specifically, beyond making sure The second subcategory includes the security that the design is generally sound, attractive, and cost that could for instance include operating and cost-effective, to help this effort. maintaining an electronic security system and/or employing a guard or a security firm. Those costs Taxation costs can also be stated as the amount per floor area unit Several kinds of taxes must be considered as per year. Even though some examples support the part of the cost of owning a building project. The existence of relationship between the design pro- main types discussed here are real estate taxes visions and the likelihood of the criminal activities (property taxes), taxes on services and rentals, in- in and around the facility, there is no clear tie become taxes on the income produced by the project tween the architectural design and the level of se- and capital gains taxes due on sale of the property. curity expenditures in future. Much of these con- Given the changeable nature of the taxation laws siderations depend on the location of the building. under economic and political influence, a special The insurance cost for a project depends on the care and caution regarding the factuality of as- nature and the function of the building, types of sumptions is needed when taxation costs are con- hazards that are covered, likelihood of the hazard- sidered. The generic tax types that we quote, how- ous event, and the level of competition among the ever, could be considered stabile and universal. insurance companies offering particular kind of Real estate taxes are local taxes based on the as- coverage. The hazard itself and the likelihood of sessed value of the property – location and build- occurrence, on the other hand, depend on the qual- ings. The tax is calculated by multiplying the tax ity of structure and materials employed, as well as rate by the assessed value. The tax rate is set by the the building location (i.e. distance from fire sta- government, local or central. There are periodical tions and fire hydrants. There are also maps show- anomalies when assessed values or the tax rates ing the expected frequency and level of floods, and differ from real market conditions, so that the real

230 Volume 7 / Number 1 / 2012 technics technologies education management estate is systematically undervalued, or vice versa, ing parts. Repair costs are always associated with which makes the reliability of the tax assumptions at least some replacement, and so are often listed difficult. Real estate taxes and insurance often are with replacement costs. grouped together as fixed expenses because they If a building must be replaced with a new facil- do not vary with occupancy and use. ity at the end of its useful life, and the costs for the Depending on the location of a property, there is new building must be generated with the income a local or state tax on rental or lease payments. If the from the old one, an annual replacement reserve rentals are calculated on a cost basis (rent required must be provided for, to be paid into a fund set to cover debt service, operation costs, developer aside for this purpose. The amount to be set aside profit, etc) these taxes must be considered as part is a matter of policy. At least, the amount for an of client’s costs and added to the rental payments. equity contribution for a new building of the same The rate at which income tax is calculated size should be considered. The tax laws may pro- does not depend directly on the profit generated vide rules for the annual depreciation allowance through the use of a specific project, but on the that can be deducted from the taxable income, but total income of the owner as individual taxpayer. it must be distinguished conceptually from what Also, tax rate can vary from year to year. There- an owner may wish to allocate to replacement re- fore, it is advisable to apply a comparative assess- serves. The same principle can be applied to the ment of the economic viability of building proj- replacement of major building components. Both ects based on “before tax” performance, as it is types of replacement are estimated as equal annual influenced by design decisions, even though the amounts, paid into an account that is expected to owner obviously is concerned with the final “after accumulate to the required amount for replace- tax” outcome [6]. ment when needed. The capital gains tax is paid only at the time of sale of the property, on the capital gain (that Renovation, alteration and addition costs is the difference between the acquisition cost of a To maintain a building’s ability to serve its pur- building and the sale price). The tax laws usually pose over time, it is necessary to do more than just distinguish between short-term (for a facility built maintenance, repair and replacement of unservice- for sale) and long-term capital gains. Old building able components. As needs and purposes change, can be excluded from the capital gains tax after the building must be adapted to these changes. a specified period of time, if it would be the first Renovations and alterations, redecoration, addi- capital gain obtained. The capital gains tax rate tion and expansion are all different forms of ad- also can depend on the taxpayer’s category, as de- aptation and reconstruction, and the cost of these termined by the law. measures must be included as regular elements of the cost of ownership. Repair and replacement costs Some of these costs should be anticipated to Experience allows us to estimate the average occur on a regular schedule, such as redecorating, time between repairs for different types of com- painting, and the like, and could be included under ponents, and the average cost of the repair. The the category of regular maintenance costs. More necessary repair funds usually are estimated as far reaching alterations and remodeling will be average annual costs that must be set aside in or- less predictable, occurring in connection with ma- der to enable payment for the needed repairs when jor tenant changes or adjustments to shifts in mar- they occur. ket conditions. If a regular fond for such expenses If a building component cannot be repaired, is included, they can be paid for as they occur it will have to be replaced. It may be difficult to without causing serious disruptions of cash flow. draw a clear line between items often covered Typically, the consideration of how such changes under maintenance, such as the continuous re- can be accommodated involves not only antici- placement of light bulbs, and the more infrequent pating possible patterns of required changes, but replacement of items such are broken windows, trade-off decisions between building features that worn-out carpets, HVAC systems, or whole build- cost less but are less conforming to changes, and

Volume 7 / Number 1 / 2012 231 technics technologies education management provisions that facilitate change but also tend to excess of relatively cheap buildings, the owner cost more. The choice between fixed and movable may ask the designer to shift the project toward a partition is the most common example to this. In high quality market, or vice versa. There lies the an office building, for example, flexible and more design solutions influence on this cost category. easily disassembling and reusable partition ele- Bad debt losses are referred to rents not paid, ments initially cost more, but if they are expected or paid late, for premises that actually are occu- to be repositioned relatively frequently, the higher pied, or those owed by tenants who have moved cost may pay for itself in a short time. Other ex- out without paying the last few months’ rent. amples of similar problems include the choice be- Contingency allowances. The reserve for un- tween different flooring materials (where both re- foreseen expenses, damages, legal bills, and the placement and maintenance costs play important like, should be included either as a figure per floor role), or the issue of designing a building and its area unit, or as a percentage of rental income. structural as well as other service systems to facili- Sale costs are the costs involved in selling tate future expansion that may or may not happen. property at the end of the project cycle, which Providing for expansion at first construction may consist either of the realtor fees, or the costs of the add cost to the initial project that would be wast- owner’s own efforts to sell the property (advertised if no such need ever occurs. Conversely, if the ing costs, time spent in showing the building to building is designed with no regard for possible prospective buyers, negotiations, and so on). Sales growth, later addition could be considerably more tax may be included here, or under general taxa- expensive than providing for expansion initially. tion costs category. Data for estimating cost of remodeling, altera- Demolition costs involve the cost of tearing tions, and additions are available from the same down the building if it must be removed, and of sources as for the initial building costs. The miss- hauling away the debris. ing component for this task is forecasting the probabilities of whether the anticipated changes Nonmonetary life cycle costs will be needed. Even if the economic impact of nonmonetary Miscellaneous costs and expenses costs is not directly visible, it is still justifiable to Vacancy losses. Vacancy refers to the amount incur monetary costs in order to avoid or reduce of rental space that is not occupied and rented at such intangible costs, just as it is reasonable to pay a given time, and which therefore does not pro- for nonmonetary benefits. Indirect economic con- duce rental income. Any change of tenant will sequences may become visible later, so the matter cause a vacancy for some time, as the space must of common sense is at least to identify these costs, be cleaned, painted, refurbished, and so on. Ex- perhaps making explicit what monetary cost dif- pressed as the average percentage rate, it will references would be involved in their avoidance or flect the overall attractiveness and competitiveness reduction. of the rental facility in the marketplace. Overall Of course, raising this question opens up a wide market conditions must be considered in estimat- field of concerns, ranging from architectural quali- ing vacancy losses. For example, in times of eco- ties and their relationship to user needs, to ques- nomic growth there is a problem of overbuilding tions of the wider environmental impact of a proj- in overly optimistic anticipation of increased de- ect. Increase in traffic, loss of trees and vegetation, mand in some areas, which results in exceeding loss of views or sun incidence at certain times of office or housing space. If the expected growth day for neighbouring properties, pollution, storm does not materialize, the temporary high vacancy water flooding areas downstream, and changes in rate (which is expected and normal in any large neighbourhood scale, character, and use patterns project during the startup phase) will last longer or property values, are only some of the possible and can contribute to the economic failure of an effects of this kind. otherwise well planned and sound project. To be- From the brief list of examples of the intangible come more competitive in a tight market with the costs of building projects, it also becomes clear

232 Volume 7 / Number 1 / 2012 technics technologies education management that one of the problems is with the distribution the major groups of cost elements on the archi- of such costs over the set of parties involved in tectural project. For instance, the exact pattern of a project or affected by it in some way. Although so called extraordinary costs cannot be known in the monetary costs discussed above are all borne advance, but it is sound to expect them to increase by the owner or tenant of the project (as well as in frequency and magnitude over time, as building the benefits are assumed to accrue to the owner), systems and elements wear out. many of the intangible costs are imposed upon The task of estimating future cost of operating neighbours or other members of society. buildings, or the combined initial and life cycle Benefit-cost analysis is one of the methods used costs will be called for at several points in the de- to translate noneconomic concerns into the com- livery process. In doing this, some recurring ques- mon framework of monetary measure. In some tions must be addressed. instances there are local fees on impact of the new The first problem will be to find out what cost development, which are meant to redirect the eco- amounts occur at what points of time. This is in nomic consequences of social impacts back to the part a problem of prediction as such, given the developer or owner. ways in which costs (as we know them from today’s data) vary over time – in example as a result Estimating life cycle costs as an integral of inflation, or of other conditions in the market, or part of the design process in the nature of the cost to be predicted. Another part of the problem is that of choosing As Figure 2 depicts, costs and benefits are a meaningful basis of comparing costs that occur spread over time and they occur in all the phases at different points in time, and of finding a single of an architectural project. Cash flow diagram is common measure for all these costs which can be of course not very meaningful unless presented used to compare several solutions that will have in present worth terms [2]. This schematic depic- different patterns of cost distribution over time. tion may however be helpful in summarising all At the end, we should be able to identify the least

Figure 2. Costs and benefits on a project – simplified cash flow diagram

Volume 7 / Number 1 / 2012 233 technics technologies education management costly and thus the preferred solution. There are and trade-off decisions at the early design stages several conventions to conduct this process, with where the impact would be the most significant. so called present worth method being the most The level of maintenance often is not deter- common approach. All initial and future costs mined so much on what should be done to keep over the life cycle of the building are individu- the property in top condition, but on what is bud- ally converted into their present value equivalents geted. Further, the maintenance budget could be and then added up. The resulting measure is the the result of flawed estimates as well as deliberate present worth life cycle cost for a project. Another policy decisions to keep maintenance cost down approach would be the equivalent uniform annual and profits up. This leads to a vicious cycle be- cost, by which all costs are individually converted cause the underestimated accounts end up as data into their equivalent uniform annual cost, and then that will be used for future estimates, and so on. added up to a total uniform annual cost. In some countries property taxes are assessed by The main issue for the owner, however, is usu- the outside looks of the building. This gives prop- ally in making decision whether to invest more erty owners a powerful motivation to defer exter- in a more expensive system, instead of the con- nal upkeep. The costs for such upkeep then do not ventional one, that is – whether an extra invest- need to be charged to tenants, and the resulting ment is justifiable. The value of an investment is low maintenance amounts become data basis for measured by the savings in long term costs. Those future feasibility estimates. savings are expressed by the saving-investment Considering the means which would be avail- ratio, which can be defined as difference between able to the architect to influence life cycle costs, life cycle costs of the systems A and B, divided we can conclude that the first vital step is simply by the difference between their respective initial that of becoming more aware of these costs and costs. Life cycle cost should be expressed in pres- their relationships to design decisions. The sec- ent worth terms. ond step, not less important, is actually to perform repeated estimates and analyses of such costs for Estimating methods and data for cost in use competing design solution alternatives throughout the planning process. This actually means that As with initial costs, the methods for establish- life cycle cost analysis, or examination of annual ing estimates of future costs differ essentially ac- expenses, should be introduced as an integral part cording to the types of units to which projected unit of the programming and design process. For this, prices are applied. The results are estimates that it is necessary that the analysis be adapted to the differ in their degree of specificity or detail. The various stages of the project and to the level of standard assumptions are that the greater the detail detail and reliability of data available at each stage is, the smaller is the range of possible error. For an – much like the estimating methods for initial cost. estimate of long term costs that is based on the floor area method, using the prices expressed as amount Open issues in life cycle costs analysis per square metre of total floor area, it would be reasonable to expect an estimate within around a 15% It is difficult to recognise and distinct various error margin [9]. A systems method estimate, bro- cost elements in a life cycle, in clear, unambigu- ken down by the building’s subsystems (but each of ous, and consistent manner. There are several ar- these expressed in terms of floor area, to describe eas of uncertainty as to how cost positions should their relative magnitude) should be somewhat more be classified and grouped together. For example, precise. Finally, a very detailed item-by-item esti- utility bills contain several items that have to do mate should reduce the error margin even more, all with energy use. Furthermore, there are conceptu- to the extent that the data used are reliable. al overlaps between maintenance and repair costs, Data for cost in use estimates are not nearly as especially if some of the work involved is done by readily available and reliable as those for new con- personnel combining managerial and maintenance struction, especially not in form that would allow responsibilities. This uncertainty makes it difficult the architect easily to make meaningful design to interpret historical data adequately.

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Another main concern is that of data availabil- The previously stated reasons also come in play, ity. Useful data often are not available at all, or at and finally there is again the cost data issue, that least not in the readily employable format. Even if are often not clear enough to be used in making available, it is often not at all clear what the data design decisions. figures mean. They must be seen in the context of inflation and cost of living trends, and interpreted Conclusion with regard to changing standards of quality of materials and finishes, appliances, level and qual- There are two major issues that we would at the ity of service, and pattern of use. Other problems end especially like to draw attention to. First, the include price escalation, seasonal fluctuations, as role of architects in relation to the economics of well as compilation, scrutiny, analysis, and inter- building is neglected and underestimated, both by pretation of statistical material of any kind. other participants in project and the architects them- All the problems mentioned above make it not selves. Buildings are expensive, and usually in- easy to develop clear-cut reliable and consistent volve the largest expenditures most people have to measures of building performance with respect to deal with during their lifetime. The initial cost of a costs-in-use. building, however, appears quite insignificant when compared with the costs incurred to operate and Forecasting life cycle costs maintain a building over its lifetime, which leads us to the second major issue. Architects not only need Because costs-in-use considerations for build- to regain their role in managing projects in design ing plans are concerned with the future, all the dif- phase, but to fully understand the far reaching con- ficulties regarding the interpretation of past data sequences of design decisions over time. are mirrored in the task of forecasting or predicting The fact remains that architectural design de- what the corresponding trends will be in the future. cisions have a significant impact on long-term It is hard enough to forecast the phenomena based economic costs of building, and that the architect solely on the natural laws. In contrast, almost all therefore must bear some responsibility to the cli- variables under scrutiny for future costs are less in- ent for those consequences. But the way in which fluenced by the immutable and consistent natural this responsibility is dealt with is quite different laws, and much more by the human intentions. from, for example, an engineer’s forecast regard- The influence of policy on future outcomes is ing the structural stability of the building, which shown clearly, for example, in decisions relating to is determined almost exclusively by objectively trade-offs between initial and long-term costs, or determinable natural phenomena, predicted and in the problem of allocating funds to maintenance, modeled by the expert who then can assume re- upkeep, and repair programs. These decisions are sponsibility for the decisions made. The client’s not only a response to inevitable deterioration pro- opinion does not enter into the engineer’s calcula- cesses, but invariably are already expressions of tion. The case is different with the decisions con- attitudes about a building and its life, about mu- cerning life cycle costs. Here, the architect must tual adaptation of the building to its users and vice engage in a discourse with the client and users, in versa, and about time, preferences, and priorities. which both the potential impact of the design de- Yet another difficulty lies in the lack of straight- cisions and role of the client’s own assumptions, forward, well defined, and usable knowledge about attitudes, policies and expectations are dealt with, the relationships between life cycle costs and ar- within the spectrum of possible changes in con- chitectural design decisions. This is not to say that text, which neither of them would be able to alter. such connections do not exist, but that their effect Finally, the first constructive steps in domestic is difficult to pinpoint with the desired accuracy, practice, regarding the process of embracing the both qualitatively and quantitatively [3]. This life cycle costing as one of design issues, would problem is in part due to the multitude of variables consist of establishing a systematic and stan- that interact in many ways, so that changes in out- dardised procedure of collecting and using data comes always can be explained by several factors. from the existing buildings. Bearing all the sus-

Volume 7 / Number 1 / 2012 235 technics technologies education management picions in mind when using data from the other Corresponding Author buildings, given the unique nature of all the ar- Milos Gasic, chitectural projects and the complexities of each Faculty of Architecture, Belgrade, context, analytical approach must be based on the Serbia, real information. It should, however, be added that E-mail: [email protected] most of the truly economic value decisions are included in good architectural design, with all of its traditional methods. Rightly understood, architectural value is the same as the economic value, but it is difficult to find modalities for the objective, mathematical and tabular expression of this idea.

References 1. Mann, T. (1992), Building Economics for Architects, New York: Van Nostrand Reinhold.

2. Langston, C. (1999), The Capital Cost Falacy, Rick Best & Gerard De Valence (ed.), Building in Value, Pre-design issues, London: Arnold and the Contribu- tors, pp.108-127.

3. Best, R., De Valence, G. (1999), Value in Building, Rick Best & Gerard De Valence (ed.), Building in Value, Pre-design issues, London: Arnold and the Contributors, pp.13-21.

4. Ardalan, A. (2000), Economic & Financial Analysis for Engineering & Project Management, Lancaster Pennsylvania: Technomic Publishing Company.

5. Grupa autora (1996), Menadžment (Handbook of Management), Petar Jovanović (ed.), Beograd: Fakultet organizacionih nauka.

6. Ashworth, A. (1999), Cost Studies of Buildings, Lon- don: Addison Wesley Longman Limited.

7. Kelly, J., Male, S., Graham, D. (2004), Value Man- agement of Construction Projects, Oxford: Blackwell Publishing.

8. Dell’ Isola, A. (1997), Value Engineering: Practical Applications for Design, Construction, Maintenance and Operation, Kingston: RS Means.

9. Ashworth, A. (2008), Pre-Contract Studies: Develop- ment Economics, Tendering and Estimating, Oxford: Blackwell Publishing.

10. SAVE International (Society of American Value Engineers), (2007), Value Standard and Body of Knowledge, The Value Society, http://www.value- eng.org/

236 Volume 7 / Number 1 / 2012 technics technologies education management Technological innovations in the long-wave cycle theories

Slobodan Cvetanovic1, Igor Mladenovic1, Danijela Despotovic2 1 Faculty of Economics Nis, Serbia, 2 Faculty of Economics Kragujevac, Serbia.

Abstract a cyclic nature is now widely accepted. The economic science, however, is still far from clarify- Since the twenties of the last century, when ing the nature of the key causes and types of these Kondratieff explained the idea of the existence wavy movements. When discussing cycles in the of long cycles, the interest in this phenomenon is economic theory, the notion generally refers to more and more widespread in the economic sci- medium-term business cycles, lasting for seven ence. Although the interest of macroeconomists to ten years. However, the economic dynamism for their explanation has been very different in is much more complicated in reality. In addition specific periods, it seems that the theoretical elab- to these cycles, there are even shorter waves of oration of long cycles always gained in topicality about three and a half years of duration. Neverthe- at the times of economic crisis manifestation. less, there is more to it. The available data impose The topic of long cycles represents one of the the conclusion confirming the existence of long most controversial macroeconomic problems. waves lasting for about 50 years in the capitalist Common feature of most theoretical approaches economy trends. This fact further complicates the is an attempt to provide an acceptable answer to problem of a theoretical explanation of the eco- the question related to the existence of alternating nomic dynamics of market economies. periods of relatively slow and accelerated growth, It should be emphasized that the phenomenon each lasting for two to three decades. of long waves need not be exclusively linked to the The key feature of a whole-century lasting gen- complex of technological innovations. A group of esis of the theory of long cycles is the standpoint authors explains the long waves by placing the em- according to which technological innovations repre- phasis on major structural changes in the economy, sent the most important cause of their manifestation. while another number of economic theorists explic- Recognizing this fact and taking into account the fact itly reject the concept of their existence. (see [1, pp. that, according to many authors, world economy to- 177-178]) This can be illustrated by mentioning day is at the end of the fifth and in the run-up to the Samuelson who referred to the long cycles as "sta- sixth long-wave cycle, the paper describes the long tistical absurdity", Kindleberger for whom the long- cycles caused by technological innovations. It also cycle phenomenon is "astrology", and Kuznets and analyzes a normal cyclic course that the economy is Leontief who expressed doubts about it. (see [2, p. following while increasing due to the positive tech- 256]) It therefore seems entirely correct to support nological momentum, as well as a developmental the thesis of Radmila Stojanović that long cycles trajectory starting from the moment when the same are "undoubtedly the most disputed, rejected and innovations begin to lose their impetus. again accepted economic category", so that the Key words: technological innovations, long- long-cycle theory itself "goes through cycles in its wave cycles, technological paradigms, technology own development". (see [3, p. 140]) platforms, nanotechnology

1. Kondratieff and Schumpeter about long Instead of Introduction cycles and causes of their manifestation The statement that the dynamics of economic In science, the first attempts of theoretical ex- life in a capitalist economy is not of a linear but of planation of the long waves are registered in the

Volume 7 / Number 1 / 2012 237 technics technologies education management research of "the Russian Marxist Parvus in the late balance. In order to achieve profit, entrepreneurs 19th century, and then in 1913, in the work of the opt for the implementation of new combinations. Dutch Marxist Van Gelderen. The concept of long New combinations, however, do not always in- cycles is also present in Aftalion, Kassel and sev- clude new employment and greater engagement of eral other economists who preceded Kondratieff. capital, but imply only different ways of their use. "(see [2, p. 252]) Innovations are, in Schumpeter's view, the most The notion of long cycles is usually attributed significant cause of long cycles. They lead to new specifically to the Russian economist Kondratieff, profits, new investment and economic prosperity. who published in a series of his works printed dur- With the technological maturity of products, inno- ing the twenties of the twentieth century a system- vation profits decrease, that is, the technological atic review of economic trends in the economically annuity, as a basic form of profit in economic con- most developed countries of that time. The present- ditions specific to periods of intense technological ed data clearly showed that the long cycles repre- advancement, is reduced. Therefore, new inven- sent an undeniable economic phenomenon and ir- tions or new products and new manufacturing pro- refutable reality of a long-term economic growth. cesses are necessary. Key role in these processes Alternating periods of slow and fast growth, each belongs to the entrepreneur. The entrepreneur's lasting for more than three decades, characterized activities are reflected primarily in the process of the economic dynamics of developed capitalist introducing innovations, i.e., in the commercial economies. The main factors generating long cy- valuation of new means of production, new mate- cles in the economy are the accumulation of free rials, production methods and forms of production cash equity and the technological development. and business management organization. The ful- Kondratieff was the first in the economic literature crum of this model is the attitude by which the in- to recognize in technological innovations the cen- novation induction takes place most intensively in tral cause of the occurrence of long waves. Hav- the phase of depression, leading to the emergence ing processed the statistical data on movements in of new production areas, whose impact on the prices, interest rates, wages, foreign trade and em- change in economic structure is most pronounced. ployment, the author singled out three major long This leads to the conclusion that Schumpeter, in cycles: the first lasting from 1780 to 1850; the sec- explaining cyclical movements, lays emphasis on ond from 1851 to 1890; and the third from 1891, the emergence of economy from the imbalanced which turned to a declining phase in 1920. situation. If this emergence does not happen, the Joseph Schumpeter, who had been acquainted economy goes into a deepening depression. with the work of Kondratieff in Germany before he Schumpeter's work appeared in the period of ex- moved to Harvard University in the United States, pressed changes in the character of market econo- accepted the idea of long cycles. Schumpeter used mies' functioning. By the emergence of economy this idea as the main theme of his work on busi- from a state of depression, the interest of economic ness cycles. (see [4]) His standpoint was that ev- theory in the problems of long-term economic ery new wave actually represented the application growth largely decreases. However, during the of a new group of technologies, with great impact seventies of the 20th century and the manifestation on the economy. In Schumpeter's analysis, every of crisis-driven disorders in leading market econo- revolution was grounded in revolutionary techno- mies, the interest for the problems of long waves logical innovations that, just as was the case with began to grow rapidly again. Namely, finding the the first industrial revolution, led to large gains ways to increase economic efficiency, which is in productivity, consumption and organization of associated with the exhaustion of possibilities of production activities. capital enlargement based on the known means and According to Schumpeter, an entrepreneur methods, induced by the crisis of Keynesian mod- who provides profitable business with his innova- els of economic life regulation, forced many econo- tive ability, but whose activities also provoke the mists to start wondering whether it were long-term expression of major or minor imbalances at the fluctuations that caused the derangement of world level of national economy, causes the state of im- economy in that period. A very important role in this

238 Volume 7 / Number 1 / 2012 technics technologies education management process belongs to the book "Stalemate in Technol- the formation and collapse of financial markets can ogy: Innovations Overcome the Depression" writ- signal the final phase of the dominant technologi- ten by the German author Gerhard Mensch. In it, in cal platform life cycle and the start of restructuring the spirit of orthodox neo-Schumpeterian tradition, the world economy on the basis of the succeeding the author associated cyclical movements with the sixth technological platform. Its creation and affir- creation of swarms (clusters) of innovations. Ac- mation will, according to Glazyev, design global cording to Mensch, swarming of innovations is the development over the next twenty or thirty years. result of market mechanism imperfections. Basic Formation of the structure of a new technology innovations that enable the creation of new manu- platform reproduction is a long process and it con- facturing processes, development of new products sists of two qualitatively different stages. In the and markets and increasing competition are, by first stage, its key factor appears in the conditions far, the most important. Economy overcomes the of the previous technology platform domination downward flow of the economic cycle that begins and, objectively, it limits the development of pro- with a crisis and lasts until the end of the depression duction based on the new technological platform. by creating basic innovations and developing many After the manufacturing capabilities of the outgo- new production activities. ing technology platform have been exhausted, the second stage begins by more and more evidently 2. One of the recent views of long-wave replacing the old with the new technology plat- cycles form, whose manifestation represents the beginning of a new long economic wave. In the recent literature, a very interesting study The process, which means a technology plat- of the importance of technological innovations form replacement, gives a certain advantage to for the cyclical movement of the world economy underdeveloped economies. The simple reason is found in the work of the Russian economist for this is that these social environments, due to Glazyev. Using the expression "technology plat- many structural problems, have not been able to form" to explain the technologies that dominate organize production grounded in the previous the economy in a certain period, Academician technology platform, but they can rely on already Glazyev states that its key feature is the inherent accumulated investment and technological experi- potential to transform each individual sector and ence of developed countries in shaping the repro- the economy as a whole (see [5]). This leads to ductive contours of a new technology platform. the conclusion that the category of a technological A shift of technology platforms includes certain paradigm can serve to identify the term "technol- changes in the social and institutional infrastructure ogy platform" for the most part. of the society. These changes facilitate large-scale The life cycle of technology platform, according introduction of new platform technologies and their to this author, takes about a hundred years. In this widest diffusion. Then, the stage of rapid new tech- connection, the period of its dominance in the eco- nology platform expansion begins. Accomplish- nomic development runs between 40 and 60 years. ments representing the new technology platform On the surface of economic events, this period is become the main factor of economic growth. At the manifested in the form of long business cycles, the same time, the embryo appears of the subsequent, periodicity of which was first described in detail by next technology platform that develops from the Kondratieff, according to Academician Glazyev. embryonic stage to its dominant phase of growth, Glazyev believes that, since the industrial revo- after which a technological revolution occurs. The lution in England to this day, there have been man- process of technology platform changing begins ifestations of five technology platforms, having parallel with the tendency of large falls in the prices replaced one another, including the dominant one of energy sources and raw material, caused by re- in today's economic conditions - the information duced needs of the "overripe" technology platform. technology platform. Since the effects of the fifth Depending on the phase of the dominating tech- technology platform have largely been exhausted nology platform life cycle, the driving forces of eco- and that the decline in prices of energy sources and nomic growth are changing. In the period of the new

Volume 7 / Number 1 / 2012 239 technics technologies education management technology platform appearance, the leading role West European countries and the United States. belongs to innovators, the subjects who captured Rail transport started developing more and more her first basic innovations. Owing to their activities, emphatically. However, the introduction of steam preconditions are created for the replacement of the engines bypassed the area of agriculture, which previous with the new platform. This happens af- is considered one of the main causes of relative ter a rise in energy prices, as well as an increase in lagging in this industry development. Large-scale the profitability of economic agents, which begin to factory production became the standard, while benefit rapidly from the new technology platform massive migration of agricultural population to achievements. In the upward stage of the technolo- urban areas conditioned the process of urbaniza- gy platform, production and employment also take tion with all its social consequences. an upturn. The descending phase characterizes by The third long cycle, based on the technologi- a reduced role of innovators, prevailing of routine cal innovations associated with the production activities of entrepreneurs in the production, that is, of electricity, chemical products and steel, lasted by expressed efforts to reach the goal by all possible from 1890-1940. In material terms, the affirma- imitations. This phase is characterized by different tion of the third cycle is inextricably linked with mutual roles of financial and industrial capital, or the electric motor, which was invented back in more precisely, by the dominance of financial over 1820, the internal combustion engine, made in industrial capital. 1885, and the diesel engine, constructed in 1892. In the phase of structural crisis, caused by the These technological innovations enabled electrifi- exhaustion of technology platforms, it is of pri- cation of production and households, development mary importance to capture the production of the of road transportation and aviation and qualitative new manufacturing technology core, which pro- changes in rail and sea transport. Power engineer- vides technological annuities in global relations. ing and electrical engineering, as well as various In such conditions, especially for countries in the fields of inorganic chemistry, developed actively. rise, the possibility of rapid development opens in On the market of energy sources, coal gave way the frame of new long-cycle potentials, owing to to crude oil and petroleum products. Steel became the modernization of the new technology platform the leading construction material. Electrification supporting branches. In this connection, there are of production enabled the implementation of sci- huge investment risks and difficulties of forecast- entific achievements. This accelerated the teching rapidly evolving technological areas, due to nological development. General and specialized its uncompleted contours and high uncertainty of education assumed massive proportions. future technological trajectories. In order to over- The fourth long cycle, which lasted from 1940- come them, it is important to define priority direc- 1990, brought about new technologies associated tions of the new technology platform. with electronics, automobiles, oil and air space. Car industry not only developed with lightning 3. Key technological innovations of six long speed but also exerted far-reaching impacts on the cycles economy. The mass use of cars induced large investments in infrastructure, while the introduction Technological innovations in the first long of Ford's mass production caused dramatic chang- cycle (1780-1840) were aimed at improving tech- es in working practices. Changes in electronics led niques of steel tempering by coal, which was pio- to the production of electrical products for con- neered by Abraham Darby, then at the application sumers, such as TV set and radio. The fourth long of steam, and above all, at the mechanization of cycle was indeed a period of mass market. textile industry, especially related to the mechani- The fifth long cycle has been dominating over cal processing of cotton in Lancashire. the period starting from the nineties of the last The second long cycle took place from 1840's century. Areas that constitute its core are comput- to 1890's. The coal-operated steam turbine ener science, telecommunications, laser equipment, abled a strong development of machine building, IT services. The key feature of technologies that ferrous metallurgy and coal industry in the leading symbolize the fifth long cycle is their intertwin-

240 Volume 7 / Number 1 / 2012 technics technologies education management ing character. Markets for these technologies are electronics have been supporting all three trans- characterized by the effects of positive feedback forming technologies of the fifth cycle. The idea of mechanisms and increasing returns as logical con- Jack Kilby, according to which transistors, instead sequences of the manifestation of these effects. of being interconnected and placed on a circuit Sources of increasing returns related to the use of board, can easily be produced from a single silicon these technologies are the effect of learning and part, led to the production of the first integrated the effect of networking (see [5]). circuit back in 1958. Integrated circuits were ini- Freeman and Louca described in detail the fifth tially extremely expensive and were used only for long cycle in their work (see [7]). They associat- special defense applications (as in the case of Min- ed the fifth wave, initiated in 1990, with the new uteman Missile Guidance System). The develop- transforming technologies, including computers, ment of the first microprocessor by Intel in 1971 telecommunications and the Internet, as well as was another decisive event (Figure 1). the development of biotechnology. These technologies have begun the transformation of various aspects of our everyday lives. According to Free- man and Louca, the "Dot.com bubble" that was created in the late nineties of the previous century, has many features of previous similar "bubbles" seen in other spheres, such as the railway mania of 1840 and the collapse of Wall Street in 1929. Like in the cases of previous long cycles, the origin of many transforming technologies of the fifth cycle should be sought in the discoveries and inventions that have occurred in the downward path of the preceding, fourth long cycle. The next Figure 1. Moore's Law – graphic technological revolution always appears within Source: Wikipedia, Moore's law (see [8]) the previous revolution, and depends mainly on the application of scientific research, regardless of Moore's law describes the long-term trend in whether it is the result of laboratory research and the history of the development of computer hard- development or the user-based innovation. Ac- ware. Under this law, which was first described by cordingly, each technology is changing due to re- the Intel co-founder Gordon Moore in his work cent discoveries that receive "an additional boost" back in 1965, the number of transistors that can be by the convergence of technologies. Advances in effectively placed on an integrated circuit doubles

Table 1 Period Description Key factor of economic development First Kondratieff Industrial Revolution: Factory production Cotton, iron, steam (1780-1840) of textiles Second Kondratieff The age of steam engines and railways Coal (1840-1890) Third Kondratieff The age of electrification and steel Steel (1890-1940) Fourth Kondratieff The age of mass production of automobiles Energy (especially oil) (1940-1990) and synthetic materials Fifth Kondratieff The age of information, communications Chips (micro-electronics) (1990-????) and computer networks Sixth Kondratieff The age of nano-engineering and Nanotechnology (20??-????) manufacturing Source: Modified - Jarunee W. (see [6, pp. 1349-1354])

Volume 7 / Number 1 / 2012 241 technics technologies education management approximately every two years. This law proved the real hardware with nanotechnology, but also by to be accurate during a period of almost 50 years. equally important returning of the hardware into its One of the key technologies of the fifth long- initial zero state after the cessation of use. wave cycle was definitely the computer technology, in which the development of integrated circuits enabled the creation and production of the first personal computers. Although they initially lacked power and flexibility, within the period of ten years, PC started to challenge the concept of the hitherto dominant strategy in the production of computers. Parallel with improving the performances of PCs by technology advances in the field of electronics, their number increased as well. The development of electronic engineering has also led to the development of telecommunications. The introduction of digital technology in the form Figure 2. Nanotechnology development scenarios of pulse code modulation, so-called PCM, has Source: Angela H. (see [9, pp. 9/34]) broadened the area of electronic applications. The development of optical fibers and the possibility of replacing software packages have transformed the capacity and versatility of computer systems. The sixth long cycle has been initiated by nanotechnology. Nanotechnology is claimed to represent a revolutionary approach in fundamental research - a shift of the scientific approach from a macro- centric to a nanocentric system. Nanoscale science and engineering deal with atoms and molecules and therefore require multidisciplinary knowledge. The US National Science Foundation's 2001 prediction of nanotechnology market assessed an increase to about US$ 1 trillion by 2015. Depending on the definition of nanotechnology and its contribution both to value added finished product and to the level of optimism, many authors have predicted the increase of this market in the range from US$ 150 Figure 3. Long-wave economic cycles billion in 2010 to 2.6 billion dollars in 2014. (see [9]) Figure 2 shows some of the predictions by dif- The revolutionary aspect of this platform is that ferent authors, which significantly differ from each the concept of destruction as an act of obtaining other, but share a common prediction of a sig- material goods is replaced by the concepts of con- nificant increase in the market of nanotechnology struction, reconstruction and deconstruction at the products that will experience its real rise in 2010. nano-level, which enables long-term sustainable Nanotechnology (Figure 3) is still in early stages balance of technology and the natural environment. of invention and innovation, but its aim is to set a new technological paradigm: software in → Hard- 4. Institutional changes in the light of long ware → software out, supported by the IT para- cycle manifestation digm. This is a case of the paradigm in which material goods are only manifestations of the software. A long cycle proves that technologies often go Material goods are produced by replicating a de- side by side with industrial changes. These institu- tailed software model of the desired hardware into tional changes include:

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–– Education and training is there to show and emphasize the fact that they –– Industrial relations are not the last technological changes, but only in –– Corporative structures a part of the series of many innovations. –– Management system Finally, the long cycle points out the influence –– Capital markets of transforming technologies on the economy and, –– Legislative framework. more broadly, on society. For example, railroads were not only a leading industrial sector when it Each of the six cycles shown in Table 1 has been came to investment and employment rates in the related to significant institutional changes. In the first Victorian booming of the 1850's and 1860's. They cycle, it was the introduction of factory production. also left a large impact on the costs of many in- This not only contributed to the implementation of dustrial sectors. The possibility of cheap trans- major technological innovations in textile produc- portation of coal drastically reduced the cost of tion, but also resulted in high productivity growth. energy for the whole economy. Similarly, in the The outcome was a reduction in prices, stimula- Internet age, developments in information tech- tion of demand and a big change in the structure of nology have dramatically lowered the price of in- consumption. In the second cycle, the institutional formation storing, processing and transferring. On change reflected in the promotion of shareholding the other hand, this led to an easy access to new companies that allowed much larger capital stocks knowledge and knowledge transfer. and demonstration of the initiatives of entrepreneurs. In the third cycle, it was the scientific man- 5. Spatial coordinates of the technological agement and the rise or foundation of large corpora- innovations that generate long cycles tions, while in the fourth it was a mass production and large, vertically integrated corporations. The When investigating the genesis of market econ- fifth cycle characterizes by numerous institutional omy, specific pattern of its functioning can be ob- transformations, the most marked of which being served. The works of Kondratieff and Schumpeter network structures aimed for organizations, alli- have helped in identifying the main stages of eco- ances and joint ventures. Currently, within the sixth nomic development. They have shown that techno- long cycle, research in the field of nanotechnology is logical and innovative development has a very wide of high priority in a number of countries. dimension; in fact, the advantage that individual The importance of before mentioned institu- country achieves in one cycle is not obligatory in the tional changes not only lies in their impact on the next one. The period of each cycle can be studied economy and social life of the nation, but it also with respect to the geographical origin of innovation. reflects in the way of their connection with tech- The leaders of the first wave were the United King- nological innovations. This shows that techno- dom, France and Belgium. The second wave brought logical innovations are not only self-sufficient, but new participants, the United States and Germany. that economic and social effects that they bring The third wave showed strengthening of the posi- along are significant as well. The power of long tions of the United States and Germany. In the fourth cycles actually lies in this fact, that is, in the ability wave, Japan and Sweden joined the race of innova- to link technological innovations to economic and tion and technology. In the fifth wave, Taiwan and social aspects of life. Technological innovations in South Korea have become important participants in the field of internal combustion engines in combi- the global economy (see [10]). By adopting the atti- nation with the principles of mass production not tude that there are indications of the sixth long wave, only created a new class of products in the form for the launching of which nanotechnology was of of cars, but also caused changing of the nature of decisive influence in the material respect, a great ri- work for millions of industrial workers. Freeman valry may be observed between the United States, on and Louca note that they allowed incomparably one side, and South Korea and Taiwan, on the other. greater personal mobility, which in turn caused The geographical distribution of innovations great development of infrastructure. However expresses regional, national and local variations dramatic these changes might be, the long cycle in different periods. The proof of this assertion

Volume 7 / Number 1 / 2012 243 technics technologies education management is the case of Northeast Asia. Although develop- chronized shift of such technological platform. It ing countries follow more or less similar path of is evident that a number of countries in the world industrialization, some have achieved significant have made a stride deeply into the fifth technology results especially with regard to the attitude of the platform, while a few countries are just about to private sector toward innovations and technologi- enter the sixth technology platform. Huge number cal development (such as Malaysia, Taiwan and of economies in the world functions at the level of Korea). Almost all developing countries start with the third technological platform. the export of primary products and continue in the Finally, it has to be pointed out that the phe- direction of industrialization through the applica- nomenon of long waves should not be exclusively tion of different economic policies in specific pe- linked to the complex of technological changes. A riods. Taking technological changes into account, group of authors explains the long waves by em- attention of entrepreneurs is primarily focused on phasizing major structural changes in the econo- the imitation of products in relatively unsophis- my, while a number of economic theorists explic- ticated industries. When a business environment itly reject the idea of their existence. starts to improve business activities after the initial accumulation of capital in key branches of in- References dustry, it is regarded as a move upward along the scale of industrialization. Such a change of trends 1. Cvetanović, S. 1997. Teorija privrednog razvoja, Za- in many countries requires certain activities of the vod za udžbenike i nastavna sredstva, Beograd. 2. Sekulović M. 1997. Kitanović D., Cvetanović S. governments, which is at first glance contrary to Makroekonomija, Zavod za udžbenike i nastavna the principles of private sector functioning. sredstva, Beograd. Although there are significant differences be- 3. Stojanović, R. 1989. Teorija privrednog razvoja u tween South American countries and the countries trećoj tehnološkoj revoluciji, drugo izdanje, Savre- of North Asia, the path of industrialization shows mena administracija, Beograd. 4. Schumpeter, J. 1939. Business Cycles: a Theoretical, certain similarities. In the realization of economic Historical and Statistical Analysis of the Capitalist transformation, shifting from simple technology Process, Vol. 2. McGraw-Hill, New York. sectors to processing sectors and heavy industries 5. Glazyev, S. 2009. The Global Economic Crisis as a is crucial for the success. This was achieved with Process of Technological Shifts, Problems of Eco- the additional development of industries that sub- nomic Transition, Volume 52, Number 5/ September. 6. Peric, A. 2011. ICT and the new generations of stitute imports and by the implementation of eco- professionals:are we on the threshold of a change? nomic policies that are export-oriented. The basic Technics Technologies Education Management, Vol. advantage of North Asian economies is that, after 6, No. 1, the initial phase of import substitution, they opened 7. Tanaskovic, T. Rudolf, R. Flasker, J. Sedmak, A. to international competition by concentrating on 2011. Inovations, RD Activities, Education of En- gineers and Catching-Up Process in Serbia. TTEM exports, as opposed to South American countries. Vol. 6, No. 4 8. Wonglimpiyarat, J. 2005. The nano-revolution of Conclusion Schumpeter’s Kondratieff cycle, Technovation 25. 9. Freeman, C. Louçã, F. 2001. As times goes by: From Although costs associated with winning and the Industrial Revolutions to the Information Revolu- tion, Oxford University Press. using the latest technologies are growing expo- 10. Wikipedia, http://en.wikipedia.org/wiki/Moore's_law nentially, the participation of the sixth technology 11. Hullmann, A. 2006. The economic development of platform in the structure of modern economy is nanotechnology - An indicators based analysis. insignificant. A quantum jump is expected after 12. Trott, P. 2002. Innovation Management and New the end of structural changes in the world leading Product Development, Prentice Hall. economies and their transition into the phase of Corresponding Author growth, which is anticipated for mid-next decade. Igor Mladenovic, It should be kept in mind that a unique tech- Faculty of Economics Nis, nology platform has never existed in all parts of Serbia, the world, and that it has never come to any syn- E-mail: [email protected]

244 Volume 7 / Number 1 / 2012 technics technologies education management The technological tools use in education: Turkish electric teacher’s candidates’ ideas

Yelda Karatepe1, Secil Varbak2,Mehmet Yumurtacı3 1 Marmara University, Technical Educatinal Faculty, Turkey, 2 Marmara University, Technical Educatinal Faculty, Turkey, 3 Afyon Kocatepe University, Technical Educatinal Faculty, Turkey.

Abstract cation, ne teachers will use technology for teaching science, like in “We teach as we are taught.” Our era is captive of technology that symbol- Sentence (Settlage J. et al., 2004). izes velocity and advancement. This incredible ad- Advanced technology brings big easiness to a vancement of technology affects our life standard lot of areas, from military to industry, from health positively. Views of candidates for being Electrical to education (Kara İ.et al, 2009). In spite of ad- Teacher who has an important part transferring of vancement of technology, successful learning can this advancement to humans are explored in this be performed without usage of technology; learn- study. Sample of this research consist of 99 students ing performance can be improved when technolo- of Electrical Education Department, Technical Ed- gy is used (Cruz A. P., 2009). For example, despite ucation Faculty of three different universities at dif- there is limitations at using classic techniques at ferent semesters, in other words 99 candidates for technical classrooms such as teacher spends most being Electrical Teacher. Frequency, percentage, t- of time at blackboard, teacher lacks communica- test and Anova statistical methods are used for data tion with students because of teacher lefts students analyze. Differences are seen about technological behind, students spend much time for write things tools usage according to working desire on own at boards, these limitations can be removed by us- education areas in future, age, their universities, se- ing tablet PC (Roxanne T.,2008). mester and mother education status variables. At the turn of the century, technology has per- Key words: Technological tools, education, Ano- meated public schools as it has the rest of society va statistical method, Electric Education Teachers. (Slowinski, J., 2000). Teachers are the main gate- keepers in allowing educational innovations to Introduction diffuse into the classrooms (Christanse, R.,2002). Therefore views of candidates for being Electric Technology in education encloses all tools, from Teacher who will be teacher at technical high blackboard to computer. However new technologies school in future about usage of technological tools must be added in education environment to make at- at education are investigated in this study. For this tractive these technologies and keep up with speedy purpose, a questionnaire applied to students at variation in technology. For thirty years, one of the Electrical Education Department, Technical Edu- most striking developments is speedy development cation Faculties of three different universities. Ob- of information technology (Rita O.O., 2010). So tained data from given answers to applied ques- training students is planned as have modern idea tionnaire is analyzed with SPSS statistic program. structure, active and participated, have high self- confidence by implicating students to education duration (Uğurlu N.B., 2008). Also technological new- Method ness in education reduces cost in spite of increment Data is collected from questionnaire applied in student number (Campbell J.A., 2000). to willing students in this research. Questions are Country can be raised to level that can follow asked students at Electrical Education Depart- technological advancement and can contribute to ment, Technical Education Faculties of three dif- this developments by bringing generation as hav- ferent universities. 99 of obtained questionnaire ing these features. With adding technology to edu- forms are approved to evaluation.

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Obtained answers are coded in Microsoft Of- Analyze fice Excel program and then are analyzed SPSS statistic programs data base. 90 (%90.9) of stu- T-test results dents are male, 9 (%9.1) of students are female. Table 1 shows T-test results according to stu- %15.2 (15) of students is at 17-19 age group, dents’ working desire on own education areas. %52.5 (52) of them is at 20-22 age group, %28.3 Students’ views about “Usage of technological (28) of them is at 23-25 age group, %3 (3) of tools in teaching-learning environment reduces them is at 26-28 age group, %1 (1) of them is duration for reaching to target and so reduce ed- at 29-31 age group. %19.2 (19) of students is at ucation cost without reduction of quality.” sen- I.-II. semesters, %31.3 (31) of them is at III.-IV. tence shows a meaningful difference according semesters, %29.3 (29) of them is at V.-VI. semes- to students’ working desire on own education ar- ters, %17.2 (17) of them is at VII.-VIII. semes- eas, t(97)=2.097, p<0.05. Views of students who ters, %3 (3) of them is at IX. and older semesters. don’t work on own education areas ( =2.8750) %1 (1) of students graduated from Anatolian are more positive on this issue than students who High School, %1 (1) of them graduated from want to work on own education areas ( =2.0769) Science High School, %39.4 (39) of them graduated from Industrial School, %30.3 (30) of them ANOVA results graduated from Technical High School, %28.3 Knowledge about aims of students for internet (28) of them Anatolian Industrial or Anatolian usage is obtained with “I mostly enter educational Technical High School. %80.8 (80) of students’ sites at internet usage.” sentence and ANOVA re- mothers graduated from primary school, %13.1 sults according to age groups are given at Table 2. (13) of their mothers graduated from secondary As shown from here, there is a meaningful differ- school, %1 (1) of their mother graduated from ence between aim of students for internet usage higher education, but %5.1 (5) of their mothers according to age groups, F(4, 94)= 2.748, p<0.05. doesn’t know reading-writing. %73.7 (73) of Table 3 shows ANOVA results according to uni- students’ fathers graduated from primary school, versities of students. Firstly, aims of students for %18.2 (18) of their fathers graduated from sec- internet usage is investigated with “I mostly enter ondary school, %7.1 (7) of their fathers gradu- educational sites at internet usage.” sentence and ated from higher education, but %1 (1) of their a meaningful difference is seen between aims of fathers doesn’t know reading-writing. 91.9% students for internet usage and their universities (91) of students wants to work on own educa- from given answers, F(2, 96)= 5.620, p<0.05. Sec- tion areas after graduation, but 8.1% (8) of them ondly, opinion of students about adding technologi- doesn’t want to work on own education areas af- cal tools into lesson environment is explored with ter graduation. “Only with adding technological tools into lesson environment, effective usage of all lesson duration can be provided.” sentence. A meaningful dif-

Table 1. T-test results according to working desire on own education areas in future Working desire on own N X S sd t p education areas Yes 91 2.0769 1.04595 97 -2.097 0.039 No 8 2.875 0.83452 9.053 -2.535 0.032 Table 2. ANOVA results according to student’ age groups

Source of Variance Sum of Squares sd Mean Square F p Between groups 9.85 4 2.463 Within groups 84.231 94 0.896 2.748 0.033 Total 94.081 98

246 Volume 7 / Number 1 / 2012 technics technologies education management ference is seen between students’ universities and Answers obtained from questionnaire are analyzed usage of technological tools in lesson environment according to demographic features of students with from obtained results, F(2, 96)= 3.467, p<0.05. using t-test and Anova statistical methods. Views of student about “In our era, very speedy Firstly, t-test is performed according to students’ development of information and technology cause working desire on own education areas and mean- to reduction of their actuality duration, so candi- ingful difference is found for “Usage of technologi- dates for being teacher must be trained as can keep cal tools in teaching-learning environment reduces up with technological changing and can contribute duration for reaching to target and so reduce educa- to this changing.” are asked and ANOVA results tion cost without reduction of quality.” sentence. according to students’ semesters are given in Ta- Then ANOVA analyze is performed accord- ble 4. A meaningful difference on students’ views ing to various demographic features of students. about this issue is seen according to their semes- Meaningful differences are obtained for “I mostly ters from this results, F(4, 94)= 2.962, p<0.05. enter educational sites at internet usage.” sentence ANOVA results according to mother education according to both students’ age groups and stu- status of students are shown in Table 5. Students’ dents’ university. Then a meaningful difference is views about “Real reason of decrement at usage of obtained for “In our era, very speedy development technological tools in classroom environment is that of information and technology cause to reduction their usage can’t be made as good and effective.” of their actuality duration, so candidates for be- sentence is asked and there is a meaningful differ- ing teacher must be trained as can keep up with ence according to mother education status of stu- technological changing and can contribute to this dents for obtained answers, F(3, 95)= 4.411, p<0.05. changing.” sentence according to students’ semesters. Lastly a meaningful difference is found for Conclusions “Real reason of decrement at usage of technological tools in classroom environment is that their us- In this study a questionnaire study is performed age can’t be made as good and effective.” sentence to investigate views of candidates for being Elec- according to mother education status of students. trical Teacher, in other words students at Electrical In addition to these results, frequency results are Education Department of Technical Education Fac- obtained for given answers. The most positive an- ulty, about usage of technological tools in education. swers are given for: Table 3. ANOVA results according to students’ universities Questions Source of Variance Sum of Squares sd Mean Square F p Between groups 9.861 2 4.931 1 Within groups 84.219 96 0.877 5.62 0.005 Total 94.081 98 Between groups 7.71 2 3.855 2 Within groups 106.734 96 1.112 3.467 0.035 Total 114.444 98 Table 4. ANOVA results according to students’ semesters Source of Variance Sum of Squares sd Mean Square F p Between groups 7.916 4 1.979 Within groups 62.811 94 0.668 2.962 0.024 Total 70.727 98 Table 5. ANOVA results according to mother education status of students Source of Variance Sum of Squares sd Mean Square F p Between groups 13.776 3 4.592 Within groups 98.911 95 1.041 4.411 0.006 Total 112.687 98

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“Technological tools (computer, camera, tv, etc.) The most negative answers are given for: are indispensable element for information span- “I believe that content of Computer Aided Ed- ning.” (%59.6 “I strongly agree”, %30.3 “I agree”) ucation lessons taken from us is sufficient level.” “Usage of technological tools in teaching-learn- (%37.4 “I disagree”) ing environment reduces duration for reaching to tar- “I prefer reading e-books to reading printed get and so reduce education cost without reduction of books.” (%53.5 “I disagree”) quality.” (%33.3 “I strongly agree”, %32.3 “I agree”) “Faculties must be guide by teaching reaching References method to information.” (%64.6 “I strongly agree”, %31.3 “I agree”) 1. Rita O.O., Effect of Academic Discipline on Technol- “In our era, very speedy development of infor- ogy Acceptance, 2010 International Conference on Education and Management Technology (ICEMT mation and technology cause to reduction of their 2010), 2010 IEEE, 617-621. actuality duration. So candidates for being teacher 2. UĞURLU N.B., A New Example for the Use of In- must be trained as can keep up with technologi- formation Technologies in Education: Geographic cal changing and can contribute to this changing.” Information Systems, Ankara University, Journal of (%63.6 “I strongly agree”, %27.3 “I agree”) Faculty of Educational Sciences, year: 2008, vol: 41, Positive answers are given for: no: 2, 81-95. “Technological tools supply interactive teach- 3. Campbell J.A., Using Internet technology to support flexible learning in business education, Information ing-learning duration with its every stage.” (%48.5 Technology and Management, vol.1, 2000, 351–362. “I agree”, %30.3 “I strongly agree”) 4. Settlage J., Odom A.L., Pedersen J.E., Uses of Tech- “Real reason of decrement at usage of techno- nology by Science Education Professors: Compari- logical tools in classroom environment is that their sons With Teachers’ Uses and the Current Versus usage can’t be made as good and effective.” (%36.4 Desired Technology Knowledge Gap, Contemporary “I agree”, %18.2 “I strongly agree”) Issues in Technology and Teacher Education, 4(3), “Technological tools increase quality of learn- 2004, 299-312. ing.” (%44.4 “I agree”, %27.3 “I strongly agree”) 5. Kara İ., Kahraman Ö., The Effect of Computer As- sisted Instruction on the Archievement of Students on “Technological tools increase teacher activity at the Instruction of Physics Topic of 7th Grade Science class.” (%30.3 “I agree”, %23.2 “I strongly agree”) Course at a Primary School, Journal of Applied Sci- “Technological tools increase student activity at ences, 8(6), 2008, 1067-1072. class.” (%37.4 “I agree”, %21.2 “I strongly agree”) 6. Cruz A. P., Task-Technology Fit and Performance in “Only with adding technological tools into les- Learning, International Conference on Information son environment, effective usage of all lesson dura- and Multimedia Technology, 2009, 82-85. tion can be provided.” (%39.4 “I agree”, %15.2 “I 7. Roxanne T., Lim K.Y., Nguyen H., Zappe S., and Litzinger T., Acceptance of Tablet PC Technology by strongly agree”) Engineering Faculty, 38th ASEE/IEEE Frontiers in “I’m reaching to technological developments re- Education Conference, ©2008 IEEE, October 22 – garding at my occupation with technological tools.” 25, 2008, Saratoga Springs, NY. (%47.5 “I agree”, %14.1 “I strongly agree”) 8. Slowinski, J. Becoming a Technologically Savvy Ad- Little positive answers are given for: ministrator, ERIC Digest, No 135, January 2000. “Technological tools have negative effects as (http://eric.uoregon.edu/pdf/digests/digest135.pdf ) much as positive effects in class environment.” 9. Christanse, R., Effects of technology integration (%38.4 “I partly agree”) education on the attitudes of teachers and students, Journal of research on Technology in Education, “I’m aware of technological developments re- 34(4), 2002, 411-434. garding with my occupation.” (%42.4 “I partly agree”) “I mostly enter educational sites at internet us- Corresponding author Yelda Karatepe age.” (%33.3 “I partly agree”) Marmara University, “I spend minimum daily mean one hour to use Technical Educational Faculty, Electric Education internet and computer with education aim.” (%34.3 Turkey, “I partly agree”) E-mail:[email protected]

248 Volume 7 / Number 1 / 2012 technics technologies education management Tax payers continued use of an e-filing system: A proposed model

T. Santhanamery1, T. Ramayah2 1 Faculty of Business Administration, Universiti Teknologi MARA Malaysia, Permatang Pauh, Penang, Malaysia, 2 School of Management, Universiti Sains Malaysia, Gelugor, Penang, Malaysia.

Abstract nating knowledge, strengthening social cohesion, generating earnings and finally ensuring that orga- E-Filing is one of the e-government online nizations and public bodies remain competitive in services introduced by Malaysian Government the global electronic market place (Hesson & Ah- in their attempt to accelerate the country’s entry Ahmeed, 2007). The main contributing factor for into Information Age. The number of e-filers has such emergence in ICT is the increasing popular- increased since its introduction in 2006, and sub- ity of Internet. The increasing number of Internet stantial amount of cost savings has been achieved users has actually led many private organizations with the increasing number of tax payers adopt- in utilizing Internet as a new way of conducting ing this system. However, an information system business, known as “e-commerce”. The speedy implementation can be considered a great success growth in the use of the Internet and the emer- when the adopters moved beyond the initial adop- gence of e-commerce has eventually increased the tion to a continued basis. Many existing studies on pressure on the government to administer to citi- individual adoption have focused on investigating zens needs via this new medium which is known the intention to use, while less attention is paid to as “e-government” (Vathanophas, Krittayaphong- the post adoption environment where individuals phun & Klomsiri, 2008). decides whether to continue or discontinue using a In the last 10 years, an ICT investment particu- technology. Trust was proposed as one of the major larly by governments in developing countries has challenges towards the implementation of e-gov- witnessed a dramatic increase. Most developing ernment services as a whole. Thus, this paper pro- countries are using ICT to modernize and increase posed to investigate the role of trust in encouraging internal efficiency as well as improve service de- the continued use of the e-filing system in Malaysia. livery. As a result, many developing countries have Key words: E-filing, Tax, trust, perceived risk, embarked on e-government or are in the process of satisfaction, confirmation, technology acceptance creating strategies (Bhatnagar, 2009) (See table 1). model, e-government, Malaysia Table 1.

Introduction In today’s highly competitive and global markets, businesses continue to make considerable investments in information system (IS) and com- E-Government Project Investment (Bhatnagar, 2009) puter technologies as means to increase productivity, maintain their competitiveness and provide According to Webopedia.com the term e-gov- their customers with better and faster service ernment or electronic government refers to any (Hasan & Ali, 2009). The advances in informa- government functions or processes that are car- tion and communication technologies (ICT) have ried out in digital form over the Internet. Local, raised new opportunities for the implementation state and federal governments essentially set up of novel applications and the provision of high central Web sites from which the public (both pri- quality services over global networks. The aim is vate citizens and businesses) can find public infor- to utilize this “information society area” for im- mation, download government forms and contact proving the quality of life for all citizens, dissemi- government representatives. A useful indicator to

Volume 7 / Number 1 / 2012 249 technics technologies education management determine the status of e-government in develop- be considered a great success when a significant ing countries is by comparing its e-government number of adopters moved beyond the initial readiness index with the other countries (Bhatna- adoption to a continued basis (Limayem, Hirt & gar, 2009). According to United Nations E- Gov- Cheung, 2007). ernment Readiness Survey (UNPAN) (2008), One of the major challenges faced by the govern- Singapore continues to lead the Southern Eastern ment in the implementation of this e-filing system, Asian region with the index of 0.7009 followed according to its Chief Executive Officer / Director by Malaysia (0.6063) and Thailand (0.5031). Ma- General (Dato Hasmah binti Abdullah, 2009), is laysia’s strategic shift into the information and building trust and confidence for e-filing system knowledge era offers the country and the world an among the taxpayers and the public (including tax attractive global multimedia environment where agents). In fact, Organization for Economic Co- the unique elements and attributes of information, operation and Development (OECD) (2008) has ideas, people, service and technology are able to also discover that one of the main challenges for fuse, grow and deliver a globally replicable chain increasing user take-up in the e-government ser- of innovative products, services and best practices vices is trust; both that citizens requirements will (Muhammad Rais & Nazariah, 2003). be met and also protecting their personal data, pri- Therefore, this study will look into one key as- vacy and security. It also highlighted that the more pect of e-government services offered by Malay- an e-government service is user-centric, the higher sian Government in 2006 which is a system to file will be the take-up of its services. During 2006- income tax electronically known as e-filing. Since 2007, the European Commission has funded a re- its introduction, e-filing has evolved each year in search project called Egovrtd2020 to investigate order to provide better services to the tax payers. the future needs of e-government research and to The number of submission via e-filing grew from develop future research themes based on the com- 184,378 (2006) to 704,383 (2007) to 1,185,655 parison of current research and long term future (2008) to 1,500,000 (2009) to 1,544,000 (up to needs. Thirteen e-government research themes 23rd May 2010) (Dato Dr. Mohd Sukor, 2010). were developed and experts from all around the This shows that nearly 24.2% from the total regis- world were invited to assess the research themes tered taxpayer (6,400,000) in Malaysia have filed based on the importance for future e-government their tax via e-filing up to 2010 (The STAR, 30th developments. The themes assessed by the experts April 2010). Among the factors that could have as the most important is firstly data privacy and contributed to this trend are convenience, faster personal identity and secondly, trust in e-govern- refund and cheaper cost. However, according to ment (Wimmer, 2007). In addition to it, Srur and Bhattacherjee (2001), while initial acceptance of Muthukumarasamy (2009) has emphasized that information system (IS) is very important toward trust has economic value to companies and it is realizing IS success but its eventual success de- used to win competitive advantage. Further, Dza- pend on its continued use rather than first-time use. zali, Sulaiman and Zolait (2009) emphasized that He also points out that continuance usage of an IS since trust was found to be one of the critical suc- at the individual level is the central to the survival cess factors towards the implementation of e-com- of many business to consumers electronic commerce, thus the implementation success of e-gov- merce firms. The effective subscriber base, market ernment system and services depends on the trust share and revenues of these firms depend on both factor too. Building of trust was found to be one the number of initial adopters and continued users. of the important factors in facilitating citizen’s e- Government cannot realize the potential benefits readiness, hence the more trust Internet users have of e-government unless people use them. towards the government, the more active they will Despite the development and diffusion of a va- use the public services (Shalini, 2009). riety of government services on the Internet, little As such, this paper will focus on exploring the research has been carried out focusing on factors effect of trust in the system in the context of con- affecting continued use (Chai, Herath, Park & tinued usage intention of e-filing system in Ma- Rao, 2008). Similarly, an IS implementation can laysia.

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Benefits of e-filing The next section summarizes the proposed relationships shown in Figure 1. The importance of Dato Hasmah binti Abdullah (2009), Chief Ex- these variables and the interaction among them is ecutive Officer / Director General of Inland Rev- critical to the overall e-government continuance enue, Inland Revenue Board Malaysia (IRBM) usage intention model. has highlighted various advantages that the e- filing system can provide for both the taxpayer and also to IRBM. Among them are time saving (reduce processing activities, available anytime, acknowledge receipt immediately and faster refund), cost effective (paperless, accurate tax calculation, easy and available, increase productivity (reduce paperwork, faster processing, speed up recovery) and secure (Public Key Infrastructure and digital signature). Eventually, with the increasing number of taxpayers adopting e-filing system, a substantial amount of cost savings have been achieved. According to Dato Hasmah (2009), up to 31st May 2009, a total cost of RM9, 162,845.92 have been saved via the e-filing submission of tax. The number has gradually increased since its introduction in 2005 (RM 192.68), 2006 (RM1, 302,590.40), 2007 (RM4, 876,564.64) and 2008 (RM8, 187,144.96). Such trends underlines the importance, relevance and timeliness of studying IS continuance as a topic of government interest (Bhattacherjee 2001). Figure 1. The Proposed Researched Model

Theoretical background Trust in the System The research model is shown in Figure 1. Past literatures have identified that a high level of trust in the system is an important factor for the Description and definition of the proposed successful adoption of the system, for example, variables in the model despite the active campaign by IRB of Malaysia to encourage the usage of e-filing system, the overall Many of the existing studies on individual adop- level of e-filing usage in the country is still low tion of information technology (IT) have focused which implies that the taxpayers have less trust in on investigating the intention to use or to adopt an the system (Ambali, 2009).This is supported by IT, while less attention is paid to the post adoption the study of Bee (2008), who suggest that IRB of environment where individuals decides whether to Malaysia must encourage more and more taxpay- continue or discontinue using an IT (Thong, Hong ers to use the e-filing system by providing incen- & Tam, 2006). Research on continuance intention tives and emphasizing that security and privacy is- is vital in today’s environment because besides sues are guaranteed, so once the taxpayers uses the its ability to guarantee a long term profitability of system they will develop the trust in the system an organization (Parthasarathy & Bhattacherjee, and this will increase their willingness to continue 1998) and reduces its operational cost by retaining using the system. the customer (Ndubisi, 2004), it is also important Likewise, trust in the system was found to be for the survival of many businesses to consumer one of the main contributing factors for the suc- electronic commerce firms (Bhattacherjee, 2001). cess of Octopus payment system in Hong Kong

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(Chau & Poon, 2003). This is backed by Abra- between a user-initiated request for service or ac- zhevich (2004), who found that customers will not tion and the reply to the request (Bailey & Pear- use a system which is found to be less trustworthy. son, 1983). Further Lim, Lee and Kurnia (2007) based on their findings suggest that without adequate security Perceived Risk features and a system that users trust, the adoption of electronic payment system will not be success- The concept of perceived risk was introduced ful. This is consistent with the findings by Kniberg to the marketing literature by Bauer (1960) (as (2002), who argued that trust is more important cited in Dowling & Staelin, 1994). Perceived risk than security. The study also revealed that users is taken into consideration when circumstances’ are willing to opt for an insecure payment system surrounding the potential purchase creates the of a trusted company compared to a secured pay- feelings of uncertainty, discomfort and anxiety ment system of an untrusted company. Therefore, (Dowling & Staelin, 1994). Perceived risk is de- in line with the above findings, it is surmised that: fined as “the expectation of losses associated with –– P1: There is a direct positive relationship purchase and acts as an inhibitor to purchasing be- between trust in the system and continued havior” (Peter & Ryan, 1976) and “the citizen’s usage intention subjective expectation of suffering a loss in pursuit of a desired outcome (Warkentin, Gefen, Pav- According to Papadopoulo, Nikolaidou and lou & Rose, 2002). Martakos (2010), trust in the system refers to the Seven dimensions of perceived risk has been perception of the operation of the system which identified; performance, time, social, financial, will display availability, fault tolerance and its se- physical, security/privacy and psychological (Ka- curity and correctness is guaranteed together with plan, Szybillo & Jacoby, 1974; Featherman & Pav- stability in system response time. Further they had lou, 2003). However, according to Featherman and listed a few dimensions that are related to the trust Pavlou (2003) the dimensions of perceived risk in the system such as correctness, availability, se- may vary based on the product or service evalua- curity, failure, accountability and response time. tions. As such, for the purpose of this paper, as e- These five dimensions are adopted in this study filing does not incur any threat to human life and as it is more relevant in the context of the e-filing the taxpayers do not any choices of merchants or tax payment system. Correctness is defined as the producers to choose, thus physical risk and psycho- assurance that the system works properly and pro- logical risk are not included. Security or Privacy duces correct output. Bailey and Pearson (1983) risk is defined as the potential loss of control over defined accuracy as the correctness of the output in- personal information, such as when information formation. Availability is defined as the assurance about you is used without your knowledge or per- that the system is up and running is fully functional mission (Featherman & Pavlou, 2003). In the case whenever needed and is protected from denial of of e-filing, taxpayers are concerned whether third service. On the other hand, Security is the assur- parties could access their personal tax information ance that the system is protected against intrusion without their knowledge or permission (Azmi & threats. Bailey and Pearson (1983) defined security Bee, 2010). Performance risk refers to the possi- as the safeguarding of data from misappropriation bility a system malfunctions or the system’s failure or unauthorized alteration or loss. Subsequently, to deliver the promised benefits. The risk factor that Failure is the assurance that the system is protected taxpayers’ perceived to have towards the system, against loss of user data in case of failure and Ac- which promise to complete their transaction se- countability is actions of an entity are traced (au- curely and to maintain the privacy of their personal diting) to allow for non-repudiation, intrusion de- information, will affect their voluntary adoption of tection and prevention and legal action. the e-filing system (Azmi & Bee, 2010). Lastly, Response Time means the system re- Financial risk defines as the potential for sponds to requests within a short and acceptable monetary loss due to transaction error (Lee, time period. It is also defined as the elapsed time 2009). In the case of e-filing, monetary loss could

252 Volume 7 / Number 1 / 2012 technics technologies education management be due to the incorrect keying-in information in Technology Acceptance Model (TAM) tax returns that may lead to the wrong calcula- According to TAM, attitude and acceptance tion of tax payable (Azmi & Kamarulzaman, behavior are jointly determined by perceived use- 2010). Time risk measures the amount of time fulness and perceived ease of use (Davis, Bagozzi lost in trying to learn how to use the e-filing sys- & Warshaw, 1989). PU is defined as “the degree tem. Adopters of the e-filing system many lose to which a person believes that using a particu- more time learning how to fill in return forms lar system would enhance his or her job perfor- online than submitting the form manually to the mance (Davis et al., 1989). Alternatively PEOU is tax authorities (Azmi & Kamarulzaman, 2010). defined as “the degree to which a person believes Finally, Social risk refers to the potential loss of that using a particular system would be free of ef- status in one’s social group as a result of adopting fort” (Davis et al., 1989). Attitude was defined as a product or services, looking foolish or untrendy “the degree of a person’s favorable or unfavorable (Featherman & Pavlou, 2003). evaluation or appraisal of the behavior in ques- Palvia (2009) viewed that trust is crucial in tion’’ (Ajzen, 1991). Ramayah, Rouibah, Gopi any long term business relationship and it is even and Rangel (2009) found that perceived useful- critical wherever risk, uncertainty and interde- ness and perceived ease of use are the most sig- pendence exist because it alleviates risks. In fact, nificant factors in determining the attitude of in- Mayer, Davis and Schoorman. (1995) noted that vestors towards intention to use Internet Stock the need for trust only exists when there are risky Trading in Malaysia. Similarly, strong relationship situations. Consumer’s trust in the web vendor is was found between attitude, perceived usefulness considered as an important antecedent for the con- and perceived ease of use in a study examining tinuation of exchange relationships, where such taxpayers’ attitude in using e-filing system in Ma- belief depends on the perceived risk with the web laysia (Ilias, Razak & Yasao’, 2009). Equivalent vendor by the consumers’ (Palvia, 2009). Thus result was found by Ilias, Suki and Yasao’(2008) in electronic commerce, trust is important when that suggested that attitude towards e-filing system there is a risk of negative outcomes especially can be changed based on the first time experience when financial transaction or personal information in handling the system which in turn is influenced is involved (Kini & Choobineh, 1998). by perceived usefulness and perceived ease of Past literatures have proven significant impact use. Likewise, perceived usefulness and perceived of perceived risk on online service use intention or ease of use was identified as the most significantly adoption. Lu, Cao and Yang (2010) investigated important determinants of attitude in user accep- the behavioral intention to use online services and tance of online tax filing and payment system in indicated that perceived risk significantly influ- Taiwan (Hung, Chang & Yu, 2006). Further, Ling, ence the consumers’ intention to use online bank- Obid and Meera (2005) also found that respon- ing services. Study on uptake of mobile banking dents have positive attitude towards using the e- services disclosed that risk has a significant nega- filing system and perceived that an e-filing system tive effect on intention to adopt (Lewis, Palmer & was useful and easy to use. Moll, 2010). Similarly, perceived risk was found Recent studies on continuance intention of a to have negative influence on behavioral intention particular technology have proved the significant to accept e-filing system in Malaysia (Azmi & relationship between attitude and continuance in- Bee, 2010). Thus based on the findings above, the tention. Lee (2010) found that attitude is significant following propositions are developed: predictor of users’ continuance intention toward e- –– P2: There is a direct negative relationship learning. Positive attitude towards using the online between trust in the system and perceived booking system was found to be the major reason risk for customers to continually purchase their airline –– P3: There is a direct negative relationship tickets online (Koppius, Speelman, Stulp, Verhoef between perceived risk and continued usage & Heck, 2005). Indeed, attitude was found to be a intention stronger influence on continuance intention com-

Volume 7 / Number 1 / 2012 253 technics technologies education management pared to other antecedents in shaping continued –– P9: There is a direct positive relationship ICT usage intention (Hsieh, Rai & Keil, 2008). The between trust in the system and attitude study also suggested that individuals who have usage experience, attitude will have a stronger impact Satisfaction on continuance intention. Previous researchers also have confirmed the Customer satisfaction has an important impact significant positive relationships between perceived towards IS continuance usage intention because usefulness and continuance usage intention. Bhat- user who are more satisfied with their experience tacherjee (2001) found that users’ continuance in- will have a higher level of continued use (Limay- tention of using a particular IS system is influenced em & Cheung, 2008). This is consistent with the by perceived usefulness. Moreover, Limayem and findings by Danaher and Rust (1996) who also Cheung (2008) confirmed based on their study reveals that when a customer is satisfied with a that perceived usefulness is a significant anteced- service, they will have a higher consequent usage. ent of continuance intention. Further, Cho, Cheng Lee (2010) based on the expectation-confirmation and Hung (2009) proposed an extended framework model predicted the user’s continuance intention to re-examine continued usage of technology and towards e-learning and found that satisfaction is discovers that perceived usefulness are one of the the strongest predictor of users’ continuance inten- significant factors that affect continued usage of tion. Subsequently, a study on e-learning continu- technology. Similarly, perceived usefulness was ance intention based on the extension of technol- also found to be positively related to continued use ogy acceptance model (TAM) also found that us- of self-service technology in the case of Internet ers’ continuance intention is mainly determined by Banking (Eriksson & Nilsson, 2007). satisfaction (Roca, Chiu & Martinez, 2006). Eventually, the role of trust was found to be ex- Further, Oliver (1980) viewed satisfaction as tremely important in the development of attitude the main influence for post purchase attitude and (Palvia, 2009). McCole, Ramsey and Williams repurchase intention. Hartwick and Bakri (1994), (2010) revealed that trust in a vendor, trust in the defines that attitude is actually the feeling of the Internet and trust in the third parties positively in- individual towards the system, they argues further fluence attitude towards online purchasing. This that when an individual view the system as im- finding is supported by Ha and Stoel (2009) who portant and relevant automatically they will have founds that attitude towards e-shopping is signifi- positive attitude towards the system which will cantly affected by trust based on their study on un- increase the job involvement and job satisfaction. derstanding consumers’ acceptance of e-shopping. Alike, Shankar, Smith and Rangaswamy (2003) Further, trust was found to have a significant im- studied on the customer satisfaction and loyalty pact on attitude towards adopting online banking in online and offline environments and found that (Al-Somali, Gholami & Clegg, 2009). Therefore satisfaction is assumed to influence the change in based on the explanation above, the below propo- attitude and customer loyalty. sitions are derived Alternatively, Bhattacherjee (2001), in under- –– P4: There is a direct positive relationship standing information system continuance reveals between perceived usefulness and attitude that users’ satisfaction is influenced by their con- –– P5: There is a direct positive relationship firmation of expectations from prior usage and per- between perceived ease of use and attitude ceived usefulness and perceived usefulness is influ- –– P6: There is a direct positive relationship enced by users’ confirmation level. The same result between perceived ease of use and perceived was reported by Limayem and Cheung (2008) in usefulness a study on Internet-based learning technologies –– P7: There is a direct positive relationship that confirmation and perceived usefulness has between attitude and continued usage intention significant impact on users’ satisfaction and also –– P8: There is a direct positive relationship significant impact of confirmation on perceived between perceived usefulness and continued usefulness. Devraj, Fan and Kohli (2002) also hold usage intention up to the relationship when they found that per-

254 Volume 7 / Number 1 / 2012 technics technologies education management ceived usefulness was the significant antecedents Discussion of customer satisfaction in electronic commerce. There has been an upward trend in the adoption Atchariyachanvanich, Okada and Sonehara (2006) of e-filing system among taxpayers in Malaysia. studied the reasons that keeps online customers re- Within 4 years of implementation, approximately purchasing through the Internet and finds that major 1.5 million tax payers had chosen to file their tax determinant of repurchase is satisfaction, however online. Among the factors that could have contrib- satisfaction in turn, is predicted by confirmation. uted to this trend are convenience, faster refund Therefore, based on the explanation above, the be- and cheaper cost. However, according to Bhat- low propositions are surmised tacherjee (2001), while initial acceptance of infor- –– P10: There is a direct positive relationship mation system (IS) is very important toward real- between satisfaction and continued usage izing IS success but its eventual success depend intention on its continued use rather than first-time use. He –– P11: There is a direct positive relationship also points out that continuance usage of an IS at between satisfaction and attitude the individual level is the central to the survival of –– P12: There is a direct positive relationship many business to consumers electronic commerce between perceived usefulness and satis- firms. The effective subscriber base, market share faction and revenues of these firms depend on both the –– P13: There is a direct positive relationship number of initial adopters and continued users. between confirmation and satisfaction Existing studies on individual adoption of in- –– P14: There is a direct positive relationship formation technology (IT) have focused on in- between confirmation and perceived useful- vestigating the intention to use or to adopt an IT, ness while less attention is paid to the post adoption environment where individuals decides whether to Research methodology continue or discontinue using an IT (Thong et al., To test these proposals, citizens will be sur- 2006). It is observed that in most cases after “ini- veyed to collect data using a set of questionnaire tial usage” of e-government services many users which will be distributed in two ways; electronic revert to traditional ways for acquiring informa- survey and self-administered survey. Electronic tion and services, therefore engaging and retain- survey questionnaires will be distributed with the ing citizens for “continued usage” are a challenge help of the Inland Revenue Board of Malaysia faced by most government agencies providing who have the data of taxpayers using e-filing sys- online public services (Teo, Srivastava & Jiang, tem. This method is chosen as it is convenient and 2009). Further, trust has been identified as an im- covers the targeted respondent more directly and portant enabler in e-commerce environment, how- in shortest time. Self-administered questionnaires ever not many studies have explored the effect of survey will be used upon those taxpayers who are trust from e-government perspectives (Srivastava easily reachable. & Teo, 2009). Eventually, trust has been posited The unit of analysis of this study will be indi- by various parties as one of the main challenges vidual salaried taxpayers who have used e-filing faced in the implementation of the e-filing system system to file their tax online at least once. Sala- or any other e-government services, thus it is a ried taxpayers were chosen for this study because pertinent area to be researched. this group of tax payers is the pioneering group Practically, this study will provide IRBM with who had used the e-filing system since its imple- the niche marketing strategies on building the tax- mentation in 2006 and also due to the fact that they payers trust for its e-filing system to be successful are the largest group of tax payers in Malaysia. further and to be continuously used. In the ab- This study will employ a sample of 1000 taxpay- sence of adequate trust in the e-filing system, taxing citizens in 4 different main cities in Malaysia payers may choose to revert to the manual way of such as Kula Lumpur, Selangor, Ipoh and Penang. submitting their income tax, which will actually lead to the failure of the system and incur heavy

Volume 7 / Number 1 / 2012 255 technics technologies education management financial loss to the government. Thus, empirical 11. Chai, S., Herath, T.C., Park, I., & Rao, H,R., 2008. research is essential to understand the role of trust Repeated Use of E-government Web Sites: A Satis- and other critical factors in facilitating this con- faction and Confidentiality Perspective. E-Govern- ment Research: Policy and Management, 158-182. tinuous usage intention. 12. Limayem, M., Hirt, S.G., & Cheung, C.M.K., 2007. References How Habit Limits the Predictive Power of Inten- tion: The Case of Information System Continuance. MIS Quarterly, 31(4): 705-737. 1. Hasan, B., & Ali, J.M., 2009. The Impact of Com- puter Self-Efficacy and System Complexity on Accep- 13. (Dato) Hasmah, A. e-Filing Pays., 2009. Avail- tance of Information Technologies. In Best Practices able at http://www.intanbk.intan.my/i-portal/nict/ and Conceptual Innovations in Information Resourc- nict/DAY1/SESSION3PARALLEL1(SESSION3A)/ es Management: Utilizing Technologies to Enable Dato_hasmah_e-filing_Pays.pdf. Retrieved from the Global Progressions, IGI Global: 264-275. web April 12, 2010. 2. Hesson, M., & Al-Ameed, H., 2007. Online Security 14. Organization for Economic Cooperation and Evaluation Process for New e-Services. Business Development (OECD). Public Governance., Process Management Journal, 13(2): 223-256. 2008. Available at http://www.oecd.org/datao- ecd/39/19/40556222.pdf. Retrieved from the web 3. Vathanophas, V., Krittayaphongphun, N., & Klom- April 14, 2010. siri, C., 2008. Technology Acceptance Toward e-Government Initiative in Royal Thai Navy. Trans- 15. Wimmer, M.A., 2007. Reflections on the forming Government: People, Process and Policy, 2 Egovrtd2020 Roadmap for E-Government Re- (4): 256-282. search. The Proceedings of the First International Conference on Theory and Practice of Electronic 4. Bhatnagar, S., 2009. Unlocking E-Government Po- Governance (ICEGOV’07):417-426. tential: Concepts, Cases and Practical Insights. 1st ed. SAGE Publications India Pvt Ltd. 16. Srur, B.L., & Muthukumarasamy, V., 2009. En- hancing Trust on e-Government: A Decision Fusion 5. Webopedia, Online Computer Dictionary for Com- Module. Proceeding of Third International Confer- puter and Internet., 2010. Definition of e-Gov- ence on Network and System Security: 164-169. ernment. Available at(http://www.webopedia.com/ TERM/E/e_government.html). Retrieved from the 17. Dzazali, S., Sulaiman, A., & Zolait, A.H., 2009. In- web August 10, 2010. formation Security Landscape and Maturity Level: Case Study of Malaysian Public Service (MPS) 6. United Nations E-Government Readiness Survey Organizations. Government Information Quarterly, (UNPAN), 2008. From E-Government to Connected 26(4) :584-593. Governance, Available at http://unpan1.un.org/intra- doc/groups/public/documents/un/unpan028607.pdf. 18. Shalini, R.T., 2009. Are Mauritians ready for e- Retrieved from the web April 12, 2010. Government Services?. Government Information Quarterly, 26 (3): 536-539. 7. Muhammad Rais, A.K., & Nazariah, M.K., 2003. E- Government in Malaysia. Pelanduk Publications (M) 19. Thong, J.Y.L., Hong, S.J., & Tam, K.Y., 2006. The Sdn Bhd. Effects of Post-Adoption Beliefs on the Expectation- Confirmation Model for Information Technology 8. (Dato) Dr. Mohd Shukor, H.M., 2010. Effectively Continuance. International Journal of Human Delivering Government Services at LHDN. Available Computer Studies, 64(9): 799-810. at http://www.ibm.com/smarterplanet/global/files/ us_en_us_government_dr_mohd_final_6-3-2010.pdf. 20. Parthasarathy, M., & Bhattacherjee, A., 1998. Un- Retrieved from the web June 3rd, 2010. derstanding Post-Adoption Behavior in the Context of Online Services. Information Systems Research, 9. The STAR. (30/4/2010). IRB expects to collect RM8.9 9(4): 362-379. bil in personal taxes. 2010. Available at http://the- star.com.my/news/story.asp?file=/2010/4/30/nation 21. Ndubisi, N.O., 2004. Understanding the Salience /20100430212939&sec=nation. Retrieved from the of Cultural Dimensions on Relationship Marketing, web June 5, 2010. It’s Underpinnings and Aftermaths. Cross Cultural Management, 11(3): 70-89. 10. Bhattacherjee, A., 2001. Understanding Informa- tion Systems Continuance: An Expectation-Confir- 22. Ambali, A.R., 2009. E-government Policy: Ground mation Model. MIS Quarterly, 25(3): 351-370. Issues in E-Filing System. European Journal of So- cial Sciences, 11(2): 249-266.

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48. Hung, S.Y., Chang, C.M., & Yu, T.J., 2006. Deter- 60. Roca, J.C., Chiu, C.M., & Martinez, F.J., 2006. minants of User Acceptance of the e-Government Understanding e-Learning Continuance Intention: Services: The Case of Online Tax Filing and Pay- An Extension of the Technology Acceptance Model. ment System. Government Information Quarterly, International Journal of Human-Computer Studies, 23(1): 97-122. 64(8): 683-696. 49. Ling, L.M., Obid, S.N.S., & Meera, A.K., 2005. 61. Oliver, R.L., 1980. A Cognitive Model of the Ante- Tax Practitioners and The Electronic Filing System: cedents and Consequences of Satisfaction Decisions. An Empirical Analysis. Academy of Accounting and Journal of Marketing Research, 17(4): 460-469. Financial Studies Journal, 9(1): 93-109. 62. Hartwick, J., & Barki, H., 1994. Explaining the 50. Lee, M.C., 2010. Explaining and Predicting Us- Role of User Participation in Information System ers’ Continuance Intention Toward e-Learning: An Use. Management Science, 40(4): 440-462. Extension of the Expectation-Confirmation Model. Computers & Education, 54(2): 506-516. 63. Shankar, V., Smith, A.K., & Rangaswamy, A., 2003. Customer Satisfaction and Loyalty in Online and 51. Koppius, O., Speelman, W., Stulp, O., Verhoef, B., Offline Environments. International Journal of Re- & Heck, E.V., 2005. Why are Customers Coming search in Marketing, 20(2): 153-175. Back to Buy Their Airline Tickets Online? Theoreti- cal Explanations and Empirical Evidence. Proceed- 64. Devraj, S., Fan, M., & Kohli, R., 2002. Antecedents ings of the Seventh International Conference on of B2C Channel Satisfaction and Preference: Vali- Electronic Commerce (ICEC): 319-326. dating e-Commerce Metrics. Information Systems Research, 13(3): 316-333. 52. Hsieh, J.J.P.A., Rai, A., & Keil, M., 2008. Under- standing Digital Inequality: Comparing Continued 65. Atchariyachanvanich, K., Okada, H., & Sonehara, Use Behavioral Models of the Socio-Economically N., 2006. What Keeps Online Customers Repur- Advantaged and Disadvantaged. MIS Quarterly, chasing through the Internet?. ACM SIGecom Ex- 32(1): 97-126. changes, 6(2): 47-57. 53. Limayem, M., & Cheung, C.M.K., 2008. Under- 66. Teo, T.S.H., Srivastava, S.C., & Jiang, L., 2009. standing Information System Continuance: The Trust and Electronic Government Success: An Em- Case of Internet-Based Learning Technologies. In- pirical Study. Journal of Management Information formation & Management, 45(4): 227-232. Systems, 25(3): 99-131. 54. Cho, V., Cheng, T.C.E., & Hung, H., 2009. Con- 67. Srivastava, S.C., & Teo, T.S.H., 2009. Citizen tinued Usage of Technology Versus Situational Fac- Trust Development for E-Government Adoption and tors: An Empirical Analysis. Journal of Engineer- Usage: Insights from Young Adults in Singapore. ing and Technology Management, 26(4): 264-284. Communications of the Association for Information Systems, 25(31): 359-378. 55. Eriksson, K., & Nilsson, D., 2007. Determinants of the Continued Use of Self-Service Technology: The Case of Internet Banking. Technovation, 27(4): 159-167. Corresponding Author T. Santhanamery 56. McCole, P., Ramsey, E., & Williams, J., 2010. Faculty of Business Administration, Trust Considerations on Attitudes Towards Online Universiti Teknologi MARA Malaysia, Purchasing: The Moderating Effect of Privacy and Permatang Pauh, Security Concerns. Journal of Business Research, Penang, 63(9-10): 1018-1024. Malaysia, E-mails: [email protected], 57. Ha, S., & Stoel, L., 2009. Consumer e-Shopping [email protected] Acceptance: Antecedents in a Technology Accep- tance Model. Journal of Business Research, 62(5): 565-571. 58. Al-Somali, S.A., Gholami, R., & Clegg, B., 2009. An Investigation into The Acceptance of Online Banking in Saudi Arabia. Technovation, 29(2): 130-141. 59. Danaher, P.J., & Rust, R.T., 1996. Indirect Finan- cial Benefits From Service Quality. Quality Man- agement Journal, 3(2): 63-75.

258 Volume 7 / Number 1 / 2012 technics technologies education management Multiple special event timetabling using goal programming

Dragana Makajic-Nikolic1, Milica Kostic - Stankovic1, Milica Slijepcevic2 1 University of Belgrade, Faculty of Organizational Sciences, Serbia, 2 Company “Dunav osiguranje”, Serbia. Abstract porate behavior: „ do what is best for the well being of society – act responsibly towards society“ [1]. This paper presents the methodology of plan- Organizing of special events is a significant ning the Multiple Special Event (MSE) – the es- and most frequently applied instrument in the tablishing of the precise time schedule (timeta- establishing relations with the community. In [2] bling) of special events having same goals, con- Event management is introduced as an interdisci- tent and anticipated effects but taking place at dif- plinary task field, addressed in the most diverse ferent locations. An original Goal Programming fields in practice. Authors of this article made rec- (GP) model of the decision-making procedure ommendations for application system and organi- related to Multiply Special Event organizing has zation-design in the form of a reference process been designed. Continuity and uniformity have model for event management. Special events are been taken as basic criteria. The proposed meth- short-term or long-term projects, single or in se- odology has been applied to the study of a socially ries (multiple special events), with a clearly speci- responsible campaign of Dunav Insurance Com- fied purpose and defined target public and they are pany-FIREFLY. Several scenarios with different organized for the main purpose of drawing the at- time periods have been simulated and compara- tention and win the favor of the target public for a tive analysis of the effects of the previous year’s specific product or service. [3]. campaign and the anticipated timetabling effects Elements of key importance for the planning of produced by optimization has been made. special events are: time, location, facilities, pro- Key words: Event Management, Goal Pro- gramme, administrative duties, presentation orga- gramming, Timetabling. nization and accompanying progammes for informal activities. The large number of factors which 1. Introduction should be taken into account when planning called for the development and introduction of special- Establishing good relations with local commu- ized methodologies for the planning and imple- nity is a very important element of the corporate mentation of specific campaigns. The methodol- and PR strategy. During the previous decade in ogy developed by the authors of this paper, refers Serbia a trend of increasing number of initiatives to the planning of a specific campaign of MSE. To of organizations in the area of social responsibil- a considerable extent, it is based on the fact that ity, adoption of „doing good deeds“ concept, as a the decision making process in an event manage- corporate social norm and the evident shifting from ment practice, in different phases, goes through giving, as an obligation, to giving as a competi- different levels of hierarchy: strategic, executive tive strategy was noticed. Till the 1990s in the last and operational, as well as on principles of cor- decade, decision on the selection of activities that porate social responsibility. Where the realization would promote the organization and win positive of an event is associated with a time period longer publicity, were based on the need to „do something than one term (hour, day etc.), which is the case in good in order to make a good impression“. During MSE, the timetabling problems emerges. the 1990s, a large number of organizations shifted In order to solve the issue of timetabling for the their focus to essentially differently motivated ac- implementation of a MSE, an original mathematic tivities of development of corporate identity, image model of weighted goal programming (GP) [4] has and reputation according to the new model of cor- been formulated and it is presented in this paper. In

Volume 7 / Number 1 / 2012 259 technics technologies education management the past, the timetabling problem has been already 2.1. Defining the scope of the MSE solved through goal programming. The GP models that can be used for the timetabling of college During the first phase a strategic decision is made and university courses have been described in [5] about the period and places where the MSE is to be and [6]. The problem of timetabling and balanc- carried out. This decision depends on the set corpo- ing sports competitions over multiple venues and rate goals that are to be achieved through this MSE modeling by means of GP has been described in and this is why in this phase company top manage- [7]. In [8] and [9] GP models of medical personnel ment has the biggest importance and influence. distribution have been developed, whereas in [10] When making a decision about the period in the personnel-timetabling problem is addressed by which SME is to be imple1mented, it should be means of GP but in the field of marketing visits in a taken into consideration that such period should planning period at equal intervals of time depend- be short enough in order to encompass the whole ing upon the business transaction with customers. group at roughly the same time, but long enough The authors in [11] present the goal programming to ensure duration and right effect of the MSE. In model for optimizing the timetable of production both cases a criterion is a communication effect of processes where the maximum contribution and the MSE, which is set as a request at the strategic minimal duration of the longest resource engage- decision making level of the company. ment is ensured. Due to the specific nature of the Based on the established period the set D can problem of MSE timetabling, considered in this be defined, which is the set of terms within MSE paper, the timetabling issue is formulated as a sys- period, i.e. the set of terms when the MSE can be tem of distinct representative [12, 13 and 14]. carried out. Number of places where the MSE is This paper is organized as follows. Chapter carried out depends on financial and organization- 2, following the introductory chapter, describes al resources of the company. When that decision methodology of planning the MSE while chapter is made, it is possible to create set of k places: 3 deals with the formulation of goal programming A={A1, A2, ..., Ak}. model. In chapter 4 is description of socially responsible multiple event FIREFLY. Chapter 5 con- 2.2. Coordination of MSE participants tains the methodology of planning the implementation campaign FIREFLY, with defining the scope In the second phase it is necessary to coordi- of the campaign, plan of coordination of campaign nate all MSE participants in a particular place, i.e. participants and suggestion for campaign timeta- define terms when all of them are available. This ble. The paper ends with final considerations and phase is in the sphere of operative planning, and points out avenues for future research. MSE participants in a particular place have the biggest influence on solution. Formally, coordination can be described in the 2. Methodology of MSE planning following way. The MSE is carried out in k places

Multiple special event (MSE) is set of individ- and there are mi (i=1, ..., k) participants in each of the ⊂ ual certain special events with same goals, content places. Set Dil, DDil (i=1, ..., n, l=1, ..., mi) has and anticipated effects, but taking place at different been assigned to each of these participants, which is times and venues. The methodology of planning the the set of terms when the participant is available. In implementation of MSE consists of three phases: order to implement one MSE in i-th place, it is nec-

1. Defining the scope of the MSE. essary to adjust all mi MSE participants, i.e. find set 2. Coordination of MSE participants. of terms when all of them are available. Formally, it 3. MSE timetable. mi is necessary to find set DD= . i  il l=1 Each phase is distinguished by a different na- The result of the second phase is set D , which ture of a problem that is being solved in it, and i decision makers which are solving the problem or is a set of terms when one occurrence of the MSE have influence on its solution. can be implemented in i-th place (i=1,...,k).

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2.3. MSE timetable The continuity condition may be expressed as: In the third phase it is necessary to create a spe- y− y ³ r, i , j = 1,..., k , i ≠ j ...... (2) cific timetable. The timetable should achieve two i j goals: continuity and uniformity of MSE implementation. Formal definition of the set goals will In order to model the continuity request as lin- be illustrated thereinafter. ear condition, it is necessary to introduce k( k − 1) auxiliary binary variables δ ,i , j= 1,..., k , i ≠ j : 2.3.1. MSE continuity ij

Continuity of MSE is reflected by the happen- 1 if r£ yi − y j £ m  δ =  , ing of individual events within the MSE in places ij − £ − £ − 0 if m yi y j r at approximately equal intervals in order to secure constant media coverage, that is, continued report- where m is a "big" constant, i.e. value that is ing. Let n be a number of elements of set D, that is, number of terms during which the MSE can be always greater than yi− y j . implemented, and r is a parameter which stands Now, the condition to implement MSE in each for a desired interval between two individual MSE place on a different term and at approximately occurrences. Continuity can be formally expressed equal intervals can be expressed by the following by the request for the interval between two events equation: taking place to be:

rm⋅−⋅−£−£⋅−⋅−δij (1 δij ) yymr i jδ ij (1 δij ), ij , = 1,..., kij , ≠ n −1   >   za n k ...... (1) r = k −1   i.e. the following limitations:  0 za n£ k    − − ⋅δ + ⋅ − δ £ = ≠ On the basis of (1) it can be concluded that in- yi y j m ij r (1ij ) 0,i , j 1,..., k , i j , dividual MSE will happen at intervals not lon- ...... (3) n −1 ger than the floor functions of , in case the k −1 yi− y j − r ⋅δ ij + m ⋅(1 − δij ) ³ 0,i , j = 1,..., k , i ≠ j ,. number of terms for implementation of MSE n is ...... (4) bigger than the number of places k ; and each term and on several locations at the same time when n Note 1: As the variable yi represents the term on is less than k . which one MSE will take place on the location i, it The first issue that should be resolved here is is possible to define the sequence of individual lo- determination of distinct term for each of k places, cations. Thus, for example, the condition: y3£ y 7 that is, determination of distinct elements of sets means that event taking place on location 7 must D , i=1,...,k. This issue, known as systems of dis- i not precede the event taking place on location no.3 tinct representatives [15, 16 and 17] is defined in Note 2: In the observed problem, parameter m various ways. In this paper, the SDR problem is has a real interpretation and represents the maxi- modified by the request the difference between mum time interval between two individual MSE. representatives, that is, the interval between two If timetabling is done for all n terms, the value individual MSE to be r , if possible. Such problem of parameter m is n −1. However, this param- is considered in [18]. eter allows the timetabling for shorter periods. If According to introduced notation, the following variable is introduced: m= q −1, q < n , then in the observed period of n terms and with corresponding values of parame- y - term on which one MSE takes place in the i ters r and p (see following sub chapter) the time- place i, yi∈ D i , i = 1,..., k . tabling for the period of q terms will be obtained.

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2.3.2. MSE uniformity continuity and uniformity. Achievement of these goals depends on the ratio between the number of Uniformity is expressed by the approximately terms for implementation of MSE n and the num- equal number of individual MSE taking place per ber of places k , as well as on the available terms term, if the initial parameters necessitate many in- in places (D , i=1,...,k). However, the MSE will be dividual MSE taking place per term. Let n be a i implemented even if it is not possible to completely number of elements of set D and p is a parameter attain the goals, that is, if it is not possible to meet which stands for a desired number of individual conditions (3-4) and (8). Therefore, the problem of events taking place per term. Uniformity can be defining timetable will be modeled by a mathemati- formally expressed by the request for the number cal model of weighted goal programming (WGP). of individual events per term to be: Additional parameters and relations have to be introduced before formulating the WGP timetable. k  ...... (5) p =   In modeling continuity and uniformity two types n  of variables have been introduced: whole num-

On the basis of expression (5) it can be conclud- bered yi representing date on which a single MSE ed that the number of individual events per term and will be implemented at the place i, and xis which per place will be maximum one in case the number determines whether the event happens at the place of terms for MSE implementation n is bigger than i at the time s or not. The relation connecting these the number of places k , that is, in maximum p two variables is: places when the number of terms for MSE implementation n is less than the number of places k . yi −∑ s ⋅ xis =0, i = 1,..., k ...... (9) In order to model the uniformity request, it s∈ D is necessary to introduce k⋅ n binary variables In the phase of coordination of MSE partici- x, i= 1,..., k , s ∈ D [19]: is pants, the set D is defined for each place and it i 1 if the MSE is implemented in town i on term s constitutes a set of terms when MSE can be imple- xis =   mented at i-th place (i=1,...,k). We introduce param- 0 othervise  = ∈ ...... (6) eter ais , i 1,..., k , s D in the following manner:

1 if the MSE can be implemented in town i on term s Uniformity condition can now be expressed in ais =   . 0 othervise the following way:   Now, the condition that an event within MSE takes place at each place only at a certain time ∑ xis =1, i = 1,..., k ...... (7) s∈ D when it is possible may be expressed as condition:

k a x=1, i = 1,..., k ...... (10) ∑ xis £ p, s ∈ D ...... (8) ∑ is is i=1 s∈ D Condition (7) provides that exactly one of the According to the previously introduced notation, events within the MSE takes place on each loca- defined objectives (3-4) and (8), conditions (7), (9) tion and then, in expression (8), the total number and (10), and the general WGP model, the following WGP timetable model has been formulated: of places in term s is limited to p .

k k k k = − − + + ++ + + 3. Formulation of GP model min z∑ ∑ wij d ij ∑ ∑ wij d ij ∑ v s d s i=1 j = 1, j ≠ i i=1 j = 1, j ≠ i s∈ D As previously described, two goals are to be s.t. achieved by the implementation schedule of MSE:

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+ which its special events program is determined, yi−−−⋅+⋅−−£ y j ( n 1)δij r (1 δij ) d ij 0, i , j = 1,..., k , i ≠ j , implemented and assessed. y−−⋅+−⋅−+³ y rδ ( n 1) (1δ )d− 0, i , j = 1,..., k , i ≠ j , In accordance with its socially responsible busi- i j ij ij ij k ness practice, Dunav Insurance Company has de- + − ∑ xis− d s + d s = p, s ∈ D cided to implement campaign called „FIREFLY“, i=1 based on MSE, intended for the first-grade pupils. The problem of children traffic safety, especially x=1, i = 1,..., k ∑ is of the youngest pupils, has been frequently men- s∈ D tioned, but still has not been completely solved. In order to promote solving of this ever burning issue ∑ ais x is =1, i = 1,..., k s∈ D and reduce the number of accidents, Dunav Insur- ance Company has decided, through a large-scale yi −∑ s ⋅ xis =0, i = 1,..., k s∈ D and extensive campaign FIREFLY, to distribute to elementary schools more than 80.000 fireflies-light ³ = yi 0, i 1,..., k devices for ensuring greater visibility on roads for all first-grade pupils in the territory of Serbia. By δ ∈{0,1},i , j = 1,..., k , i ≠ j ij donating these fireflies, Dunav Insurance Company has decided to contribute to the safety of the young- xis ∈{0,1}, i = 1,..., k , s ∈ D est and at the same time the most vulnerable traffic + − dij, d ij ³ 0, i , j = 1,..., k , i ≠ j participants. The first-grade pupils have turned out to be the most critical group, as they become inde- d+, d − ³ 0, s ∈ D s s pendent traffic participants for the first time when starting school. In this way, the Company wants to + In the objective, minimized is only ds - over- urge all other traffic participants to take more care achieving level of the goal (11), because it is allowed of observance of traffic regulations for their own (and desirable) the number of places where events safety. Indirectly, the campaign is directed to all pu- take place on the same term to be less than p . pils in elementary schools where this event is being organised. Conclusion can be made that the atten- 4. Description of socially responsible multi- tion of this project is drawn to: elementary school ple event FIREFLY pupils, their parents and wider society. The characteristic of this event, which is the ba- Dunav Insurance Company is a large, strong and sis of this paper, is a large number of participants in modern Serbian insurance company with a very the process that was carried out in 23 towns in Ser- long tradition and successful business practice. As bia. At the national level, apart from Dunav Insur- a state owned company, this insurance company is ance Company as an initiator and promoter of this also an important business entity and a prominent campaign, other participants are: representatives of domestic insurance brand. As such, Dunav Insur- the Ministry for Education and the Ministry of the ance Company is constantly working on improve- Interior of the Republic of Serbia, the Minister for ment of its environment, i.e. society, by planning Education, the General Manager of Dunav Insur- and implementing numerous special events within ance Company and the Chief of Traffic Police Ad- the field of socially responsible business practice. ministration. At the local level, participants were: According to [20] Corporate social responsibility Headmasters of host schools, Headmasters of re- is one of the management system standards which gional schools, representatives/chiefs of school ad- can be integrated into a single Integrated Manage- ministrations, Directors of Dunav Insurance Com- ment System (IMS). Socially responsible business pany branch offices, representatives of traffic -po practice in Dunav Insurance Company has been lice/ chiefs and first-grade pupils from host schools. adopted as a modern strategic business approach The event was also promoted through the mass and as such it significantly affects the selection of media. National and local media were constantly values it stands up for, as well as the manner in covering the campaign in all towns where it was

Volume 7 / Number 1 / 2012 263 technics technologies education management implemented. For the purpose of media coverage, In addition, the uniformity condition has been the following activities were carried out: disregarded, as the pause between the central event –– A special event of distribution of first batch in Belgrade and events taking place in other cities of fireflies was realised in Belgrade that, was considerably long, together with the uniform apart from inviting special guests (leaders scheduling of events in single towns. Thus, dis- of public opinion or well-known persons), tribution and media planning have been rendered included an organisation of media coverage; more difficult. –– Invitation to media was made and distributed Instead of a short implementation period and as well as announcement to media which concentrating of all events around a central event, was afterwards distributed together with the latter took place about one month ahead of the photographs from fireflies distribution event; other events. There has been no campaign’s media –– As regards fireflies distribution in other exposure from the second (mid- December) until towns in Serbia, coordination of all project the tenth week (mid-February) which contributed participants was done, invitation to media to the loss of continuity in terms of presence in was made and distributed, for each town. the media, i.e. in the promotion of the Company –– A letter had been previously made, that was itself but also of its socially responsible operations sent to all school administrations, based on taking into account that the campaign has been which the dates for fireflies distribution in planned independently of other PR campaigns the entire territory of Serbia were defined. of the Company. Such media planning, together with the “stretching” of the campaign itself, would Post-execution analysis make sense only if there were a time schedule for various PR campaigns and their media exposure. Firstly, fireflies were distributed to first-graders In its first week, FIREFLY campaign gained maxi- in Belgrade elementary schools, and afterwards mum media exposure, in terms of the number of the campaign was continued in the entire territory articles and broadcasts in printed and electronic of Serbia. Chart on figure 1. shows the implemen- media not only in Belgrade but also in regional tation schedule of the FIREFLY campaign carried and state-owned media. Consequently, the public out in towns over the period from December 16th was familiar with the campaign weeks before it 2009 to March 12th 2010. was carried out on actual locations. On one hand, under such conditions the efficient media planning is rendered difficult while on the other hand the FIREFLY campaign was announced in an effective manner in other cities. In this connection, low media exposure is justified, in terms of cutting down on expenses, as in the so called second part of the campaign, accent has been given to direct Figure 1. Schedule of special events within the communication with the local target public. FIREFLY campaign carried out in towns Potential effect of the campaign was that first- graders, for whom fireflies were intended, were Firstly, it is noticeable that the starting of the glad the most and they promised to wear them multiple special event SVITAC, should logically regularly and try to observe traffic rules in order coincide with the beginning of the school year, ac- to be safe in traffic. cording to defined goals. However, the campaign started more than three months later. Chart analy- 5. Methodology applied in SVITAC cam- sis clearly shows that the continuity condition with paign implementation respect to individual special events has not been met due to an unsuitable approach to the campaign By means of analysis of the process of defining organization. Such approach resulted in increased the dates for fireflies’ distribution in the entire ter- expenses and reduced efficiency of the campaign. ritory of Serbia, the authors of this paper came to

264 Volume 7 / Number 1 / 2012 technics technologies education management the conclusion that there is a need and a possibility ment representatives of Dunav Insurance Company to improve the FIREFLY campaign by optimizing it was concluded that participants of events should timetable. The optimization goal was to make plans not be changed. According to the plan, the partici- for the FIREFLY campaign in 2010, in contrast to pants in the forthcoming special event will be: rep- the inappropriate way in which it was carried out resentatives of the Ministry for Education and the in the previous year. The general goal was to make Ministry of the Interior of the Republic of Serbia, the central event coincide with the beginning of the the Minister for Education, the General Manager school year, due to the very nature of the special of Dunav Insurance Company and the Chief of event. A plan, entailing the basic continuity and Traffic Police Administration, Headmasters of host uniformity principle, needed to be drawn up for the schools, Headmasters of regional schools, represen- beginning of the school year 2010-2011. tatives/chiefs of school administrations, Directors of Dunav Insurance Company branch offices, rep- 5.1. Defining the scope of the campaign resentatives of traffic police/chiefs and first-grade pupils from host schools. In this phase, the number of towns in Serbia has As events must be accurately planned, the been identified together with the period in which availability of individual participants was taken as the multiple special events would take place. It was an important criterion. It turned out that all partici- decided, that distribution would be carried out in pants, except for the local Chief of Traffic Police 23 towns in Serbia (Belgrade was excluded from Administration, are always available. the model, as it was planned to be the venue of the As the availability of Chief of Traffic Police central event to be held on September 1st in several Administration in cities where the FIREFLY cam- Belgrade schools). September was chosen as the paign will be carried out represents a limiting fac- month when event will take place, i.e. the time pe- tor, all information in this respect has been gath- riod of 22 working days in the month ( according to ered (table 1). the model, distribution will be effected within a 21 Table 1. Availability of Chief of Traffic Police Ad- working day period, as the central event is planned ministration (CTPA) per cities st for September 1 , and the possibility of concurrent City CTPA availability event taking place in any other town is excluded). Valjevo On Fridays Three potential scenarios have been considered: Zajecar On Tuesdays and Wednesdays 1. Multiple event taking place in September Zrenjanin On Mondays – on each of the 22 working days (i.e. 21 Jagodina On Wednesdays and Thursdays working days considered in the model), Zvecan On Fridays 2. Multiple event taking place in the first half Kragujevac On Wednesdays of September, Krusevac On Wednesdays 3. Multiple event taking place in the second Nis On Mondays, Wednesdays and Fridays half of September. Novi Sad On Mondays and Tuesdays Pozarevac On Wednesdays and Thursdays Top management requested these three sce- Leskovac On Wednesdays, Thursdays and Fridays narios to be considered, in order for a decision to Kraljevo On Tuesdays, Thursdays and Fridays be made on the strategic level, and principal cri- K. Mitrovica All working days teria stated in the request were: cutting down on Novi Pazar On Mondays and Wednesdays expenses and harmonization with current commu- Kikinda On Wednesdays nication activities and other special events, in the Ranilug All working days context of media exposure. Pancevo On Tuesdays and Thursdays Sabac On Thursdays 5.2. Coordination of campaign participants Loznica All working days Cacak On Mondays, Wednesdays and Fridays After analysis of events from the previous peri- Sombor On Wednesdays od which was carried out together with top manage-

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5.3. Campaign timetable will depend on the communication strategy, i.e.: the identified primary target public group, avail- Input parameters of the presented mathemati- ability of media space, planned media coverage of cal model have been created based on information the actual event and of the optimization of multi- about cities, period when campaign will be carried ply event costs. out and availability of Chief of Traffic Police Ad- ministration. Optimization has been performed by GLPK software (GNU Linear Programming Kit) [21] which contains branch-and-cut algorithm for mixed integer programming problems solving. Dates on which multiple special events – distribution of fireflies in all cities- will take place have been set based on optimal solutions for all three Figure 2. Time schedule for Scenario 1 scenarios. (Table 2) Table 2. Dates on multiple special events Scenario 1 Scenario 2 Scenario 3 Valjevo 10. 09. 10. 09. 24. 09. Zajecar 7. 09. 7. 09. 28. 09. Zrenjanin 6. 09. 6. 09. 27. 09. Jagodina 9. 09. 2. 09. 30. 09. Figure 3. Time schedule for Scenario 2 and 3 Kragujevac 29. 09. 15. 09. 29. 09. Krusevac 15. 09. 15. 09. 22. 09. As concerns the first scenario, it has been pro- Vranje 21. 09. 10. 09. 21. 09. vided for one event to take place every work- Nis 24. 09. 6. 09. 20. 09. ing day per one location (except for September Novi Sad 7. 09. 7. 09. 27. 09. 7, when the event takes place during two days, Uzice 14. 09. 7. 09. 28. 09. which is simply due to the fact that there are more Pozarevac 16. 09. 9. 09. 16. 09. cities than working days for one). This schedule Leskovac 2. 09. 9. 09. 30. 09. of multiple special events facilitates media cover- Kraljevo 17. 09. 3. 09. 17. 09. age planning and the optimization of unique and/ K. Mitrovica 13. 09. 14. 09. 24. 09. or authentic human and technical resources mobi- Novi Pazar 20. 09. 13. 09. 20. 09. lized. The second and the third scenario constitute Kikinda 8. 09. 8. 09. 22. 09. a “compressed” version of the first scenario, which Ranilug 3. 09. 14. 09. 16. 09. allows for the reduction of the risk of “drawn out” Pancevo 30. 09. 2. 09. 21. 09. media coverage and over satiated target audience. Šabac 23. 09. 2. 09. 23. 09. The first and the second scenario have an advan- Loznica 28. 09. 13. 09. 23. 09. tage over the third one, from the aspect of linking Čacak 27. 09. 3. 09. 17. 09. the beginning of a multiple event with an already Sombor 22. 09. 8. 09. 29. 09. existing special event, organized on the national level and related to beginning of school year for Figure 2 shows the time schedule of the first first graders. In such a way the cost of planning scenario according to which FIREFLIES are dis- would be minimized as media coverage would be tributed throughout September. Figure 3 shows provided by the mere attending of the event which the time schedule for the second and third scenar- is of national importance. io i.e. timetable according to which FIREFLIES are distributed over the first (rhombs) and second (squares) half of September. 6. Conclusion All three scenarios satisfy both goals: continuity In this paper, a three-stage methodology of and uniformity in the campaign implementation. planning a MSE is described. It is envisaged the The selection of the scenario to be implemented scope of MSE to be determined on the strategic

266 Volume 7 / Number 1 / 2012 technics technologies education management level, coordination of participants in the MSE and References the timetable for MSE implementation to be cre- 1. Kotler P, Lee N, Corporate Social Responsibility: ated on the executive level. Doing the most Good for Your Company and Your The timetable problem encountered in the plan- Cause, 4th edition, John Wiley and Sons, Inc. Hobo- ning of MSE, is modeled by a mathematical model ken, New Jersey 2005. of targeted programming which minimizes devia- 2. Thomas O, Hermes B, Loos, Towards a Reference tion from goals: continuity and uniformity of MSE Process Model for Event Management, Lecture Notes implementation. The proposed approach has been in Computer Science, 2008, Volume 4928/2008, 443- illustrated by the example of a socially responsible 454, DOI: 10.1007/978-3-540-78238-4_45 campaign –FIREFLY 2010. On the basis of the cre- 3. Filipovic V, Kostic-Stankovic M, Public Relations, ated WGP model, various scenarios of the FIREFLY FON – Management, Beograd, 2008. (in Serbian) campaign can be simulated with respect to scope of 4. Schniederjans M. J, Goal programming methodology the campaign (number of towns and time period of and applications. Kluwer publishers, Boston, 1995. the whole campaign) as well as to additional conditions associated with time frames for specific towns 5. Badri M. A, Davis D. L, Davis D. F, Hollingsworth J, or the required sequence of events taking place in A multi-objective course scheduling model: combining faculty preferences for courses and times, Com- specific towns. A significant improvement with -re puters and Operations Research, Volume 25, Number spect to the last year’s achievements consisted in 4, pp. 303-316, 1998 linking the start of the event with a relevant national 6. Mirrazavi S. K, Mardle S. J, Tamiz M, A Two-Phase event as well as in the improvement of organiza- Multiple Objective Approach to University Timeta- tional and communication performance based on bling Utilising Optimisation and Evolutionary solu- continuity and uniformity criteria. tion methodologies, The Journal of the Operational The model determines the optimum timetable Research Society, Vol. 54, No. 11, pp. 1155-1166, for the given input data, but the prerequisite for 2003. successful MSE is preliminary qualitative deter- 7. Urban T. L, Russell R. A, Scheduling sports competi- mination of goals that cannot be possibly included tions on multiple venues, European Journal of Oper- into the model itself. Thus, apart from efficiency, ational Research Volume 148, Pages 302-311, 2003. effectiveness of the implemented MSE would be 8. Azaiez M. N, A 0-1 goal programming model for achieved. Particular effects reflect in: timeliness nurse scheduling, Computers&Operations Research of MSE that is, attaching of the MSE commence- 32, pp. 491-507, 2005. ment to particular social circumstances, then, the 9. Kwak N. K, Lee C, A Linear Goal Programming need to have the communication goals specified Model for Human Resource Allocation in a Health- for a particular town or region and the like. Care Organization, Journal of Medical Systems, Vol. In the further research the authors will experi- 21, No. 3, pp. 129-140, 1997. ment with various methods and methodologies for 10. Mathirajan M, Ramanathan R, A (0–1) goal pro- solving of the given model and explore possibility gramming model for scheduling the tour of a of application of the model to wider areas of pub- marketing executive, European Journal of Opera- lic relations and event management. tional Research Volume 179, pp. 554-566, 2007. 11. Kalpic D, Baranovic M, Mornar V, Case Study Acknowledgement Based on a Multi-Period Multi-Criteria Production Planning Model, European Journal of Operational This research was partially supported by the Research 87, pp. 658–669, 1995. Ministry of Science and Technological Devel- 12. Anderson I, Combinatorics of finite sets, Dover opment, Republic of Serbia, Project numbers: Publications Inc., Mineola, NY, 2002. Corrected TR35045. reprint of the 1989 edition. 13. Cameron P. J, The Encyclopedia of Design Theory: Systems of distinct representatives, 2003 http:// designtheory.org/library/encyc/topics/sdr.pdf

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14. Mann H. B, Ryse, H. J, Systems of distinct representatives, Amer. Math. Monthly vol. 60 (1953) pp. 397-401. 15. Anderson I, Combinatorics of finite sets, Dover Publications Inc., Mineola, NY, 2002. Corrected reprint of the 1989 edition. 16. Cameron P. J, The Encyclopedia of Design Theory: Systems of distinct representatives, 2003, http:// designtheory.org/library/encyc/topics/sdr.pdf 17. Fialaa J, Kratochvíla J, Proskurowskib A, Systems of distant representatives, Discrete Applied Math- ematics 145, pp 306 – 316, 2005. 18. Nemhauser G. L, Wolsey L. A, Integer and com- binatorial optimization, Wiley-Interscience, New York, NY, 1988. 19. Schniederjans M. J, Goal programming methodology and applications, Kluwer publishers, Boston, 1995. 20. Zivkovic N, Mijatovic I, Janicijevic I, Kudumovic M, The Role of Design and development Process in Integration of Management Systems, TTEM - Tech- nics Technologies Education Management, Vol. 5, Number 1, pp 88-99, 2010. 21. GNU Linear Programming Kit, http://www.gnu.org/ software/glpk

Corresponding Author Milica Kostic – Stankovic, University of Belgrade, The Faculty of Organizational Sciences, Belgrade, Serbia, E-mail: [email protected]

268 Volume 7 / Number 1 / 2012 technics technologies education management KM concept - basis of CRM concept and competitiveness of western Balkan

Dejan Stojkovic1, Dejan Djordjevic2 1 Railways of Republic of Srpska S.C. Doboj, Doboj, Bosnia and Herzegovina, 2 Technical faculty “Mihajlo Pupin” in Zrenjanin, Zrenjanin, Serbia.

Abstract 1. Introduction Modern companies, which operate on mar- We exist in the age of ever faster, dramatic, ket principles, became aware of the fact that the complex and unpredictable changes, which have knowledge, which is necessary to create and sus- various names: age of information, the age of tain competitive advantage inevitably has to in- third informatics revolution, new economy, digital clude knowledge that company has in its custom- economy, digital revolution, web economy, econ- ers, and in the potential ones as well. Therefore, omy of knowledge, information economy, society from this comes more frequently to signify the of knowledge, etc. importance of the role of the Knowledge Mana- Today, the knowledge becomes basic capital gement (KM) concept as the basis of the Custo- of a company but also the main initiator of its mer Relationship Management (CRM) concept. development. Competitiveness that was previ- The economy of Western Balkan countries for the ously built on possession of specific resources, number of years had problems with productivity. and low expenses, gave place to the competitive- That was the consequence of inadequate ways of ness based on possession of knowledge and on business operations, which was not established on effective management of knowledge. Therefore, the market principles. The results were unrealisti- modern organisations dedicate more and more of cally high prices of certain products that could not their resources (money, time, energy, informa- be successfully sold in the world market. Knowl- tion, etc.) to the education and constant training edge ability of the management becomes ever more of their employees. important in today’s digital (information, ...) econ- Brutal market conditions rules the modern omy. Creation and expansion of knowledge inside economy, and the knowledge becomes decisive modern company becomes decisive segment in factor for the survival and development of a com- achieving and maintaining its competitive advan- pany. It is certain that the ability of some organi- tage. Successful company in the age of knowledge sation to learn and to change itself, to learn faster is the one that learns, remembers and acts based than others and to convert the obtained knowledge on the available information and knowledge, in into action, represents the biggest advantage that it the best possible way. In order to make Western can possess. Land, capital, equipment, don't have Balkan countries competitive internationally, it is decisive role in the world market any longer. In- necessary to change their way of thinking and, in dividuals, companies and even whole nations are some time, to adopt modern world achievements more and more dependant on how they develop in the sphere of organizational management. One their abilities and apply their knowledge in order of the ways to significantly influence on creating to achieve set goals. The aim of the modern or- competitive advantage is the development of KM ganisation is to consider all business processes as concept (Knowledge Management). knowledge processes. This includes creation, ob- Key words: knowledge, knowledge manage- taining, preservation, distribution and application ment, customer relationship management, com- of knowledge as the phase of the knowledge man- petitive advantage. agement life cycle. In the rapidly changing and unpredictable environment in which companies seek the way to maintain and create competitive advantage, the

Volume 7 / Number 1 / 2012 269 technics technologies education management knowledge in the possession of the organisation 2. Competitiveness (in)capability of the com- becomes one of decisive factors in the market panies from Western Balkan countries struggle for domination, at the crossing point be- The economy of Western Balkan countries for tween the industrial to knowledge society. Already the number of years had problems with productiv- now, it is not enough to learn individually, instead ity [16]. That was the consequence of inadequate it is necessary to develop collective, organisation- ways of business operations, which was not estab- al learning and knowledge. lished on the market principles. The results were The knowledge of the company determines its unrealistically high prices of certain products that economic power and allows developing of other could not be successfully sold in the world mar- resources and increases efficiency of its applica- ket. Therefore, in order to be able to be competition. Modern business operation is taking place tive at the world business scene, companies from in the society that is based on knowledge, and is these countries had to lower the prices for export considered the latest and highest phase in its de- and local consumers through high prices of the velopment. same products compensated the difference arisen The knowledge is considered to be the strategic from bad productivity. The market was protected resource of the company, the source of compara- through unrealistically high customs fees and oth- tive advantage and business success. Therefore, er import limitations. management should achieve efficient process of When the transition process started, transfor- knowledge management because in the 21st cen- mation happened in the business sphere as well. tury economy it is considered to be the determin- Processes of privatisation, liberalisation, restruc- ing factor of sustainable competitiveness of busi- turing, institutionalisation and stabilisation have ness systems. started. The most important results of commenced Although knowledge management is relatively transition process in the sphere of economy are new area, practical results and increasing number establishing of market mechanism and change in of theoretical research show and prove both theo- property relations in the economy (from mostly retical and practical value. state owned to mostly privately owned). Through the practical application of the knowl- Competitive position of companies from West- edge management concept, companies try to cre- ern Balkans, except Slovenia, based on reputation ate new knowledge in order to speed up the proc- in the world market is extremely unfavourable ess of innovation and to secure competitive advan- because most of them did not undertake adequate tage in the market. business efforts in that direction. According to the The knowledge management does not repre- global index of competitiveness of the World Eco- sent completely defined concept, therefore it is the nomic Forum [based on: 14], Serbia was on 96th best to consider it in a wider context. In a nutshell, place by the end of 2010. out of total 139 countries knowledge management is the process through ranked in that index. Serbia dropped 3 places in which the company generates values of its intel- one year. Slovenia, Montenegro, Croatia, Macedo- lectual property based on the knowledge [13]. nia, Hungary, Romania and Bulgaria are ahead of The knowledge, which is neccessary to create Serbia, even including countries like Panama, Ka- and sustain competitive advantage inevitably has zakhstan, Rwanda, Honduras and Georgia. Only to include knowledge that company has in its cus- Bosnia and Herzegovina is below Serbia, from the tomers, and in the potential ones as well. There- regional countries, on 102nd place (Table 1). fore, from this comes more frequently to signify Obsolete technology, insignificant application the importance of the role of the KM concept as of information technologies, bad quality, unattrac- the basis of the CRM concept. tive packaging and high prices are main reasons Nowadays, dominated by uncompromising why the products from mentioned countries are market condition, knowledge management for the not competitive. The least competitive is process- advanced companies of the Western Balkan repre- ing industry, metal production and electronics, sent unavoidable concept in achievement of com- where no technological renewal occurred for petitive advantage.

270 Volume 7 / Number 1 / 2012 technics technologies education management many years. Businessmen consider that in order which allows that other three resources; labour, to increase competitiveness, it is necessary to in- capital and natural resources become productive. troduce customs and tax subsides, decrease state In the modern economy, the knowledge gets ap- excises as well as prices of electricity, gas and plied to the knowledge. fuel. It is necessary to increase the level of tech- The knowledge becomes decisive factor of the nical equipment. The average age of machines in production. Draker express his opinion that the Serbia is 30 years. Compared to the rest of the re- traditional resources – land (natural resources), gion, that is 12 years behind. The economy of Ser- labour and capital got secondary importance be- bia is technologically behind EU for 29.5 years. cause they could be easily obtained only if one This was determined on showcase sample of 154 possess knowledge [2]. small, medium and big companies in 6 industrial The knowledge will become strategic source of branches with similar production programmes [1]. power and wealth in the new society, and the ba- Comparison was made in textile, foodstuffs, phar- sic social group will be benefactors of knowledge, maceutical, machinery and chemical industries, as that is the persons who are able to put the knowl- well as the industry of construction material. Aus- edge in the function of doing business. Draker tria was taken as criterion because it has similar also calls them as labourers of knowledge. It is natural, social and population characteristics com- the society where “the responsibility for humans pared to Serbia. Companies from textile branch performance” is replaced with “the responsibility are the most behind (35 years), then the companies for the application of knowledge and performance from machinery industry (34.5 years). The least achieved thanks to that”. behind are pharmaceutical companies – 21 years. The key strategic resources of the company Table 1. Ranking of countries of Western Balkans are not any longer natural resources or capital, but according to competitiveness in 2010. [based on: 14] knowledge. The knowledge of the company de- Country Place termines its economical power and the ability to Slovenia 45 develop other resources and increase efficiency of Montenegro 49 their usage. Croatia 77 The term – knowledge, is wider, more complex Macedonia 79 and deeper than the term information or data, al- Serbia 96 though these three terms are often equated with Bosnia and Herzegovina 102 each other. The data is raw material that creates information. Those are numbers, text, pictures or World Bank, 7th time in a row, published the the combinations of abovementioned, but they are report titled Doing Business, whose goal is to rank not interconnected nor they have some meaning the countries based on the quality of business en- [18]. The information represents the data changed vironment. Unlike similar reports that rank regula- in such way that it has meaning, which is relevan- tions, Doing Business ranks business practice [10]. cy for business operation of the company. The According to World Bank data, market of Western theory of knowledge (epistemology – the science Balkans countries, except Macedonia and Slovenia, about cognition, theory of cognition, gnoseology) received bad marks (according to total index Bosnia was studied through the centuries, but there was and Herzegovina - 116th place, Croatia – 103rd place, no important move toward joint determinant. It Serbia – 88th place, Montenegro – 71st place, Slove- could be even said that the theory of knowledge, nia – 53rd place and Macedonia – 32nd place). for the use in business operation in the beginning of 21st century is in its infancy. Davenport and Prusak, define the knowledge in 3. Knowledge – key economical resource of the following way: “That is the mix of organisa- 21st century tional experiences, worth, information and com- In the information society the knowledge be- prehension that give frame of evaluation of new comes main resource of business operations, experiences and information. The knowledge is generated and applied to the one who knows. In

Volume 7 / Number 1 / 2012 271 technics technologies education management the company, the knowledge is often connected to There are three recognisable types of intellec- documents, routines, processes and ways of op- tual property or capital: eration, and norms” [18]. –– Human capital or abilities, which includes The concept of knowledge is multidimension- experience, skills and abilities of people, al. Usually the knowledge is divided to: explicit –– Structural or internal capital, which includes and quiet knowledge, or tacit. patents, trademarks and reserved rights, Explicit knowledge is by its nature formal and keeping of knowledge in the databases and clear. It consists of skills and facts that can be de- customers lists, and design and abilities of scribed and passed to others. That knowledge is informational systems, documented on the paper or electronically stored –– Market based or external capital, which in the databases. includes profitability and loyalty of Quiet – tacit knowledge is informal, implicit, customers, and the power of brands, licenses non-documented knowledge, which is hard to and franchises [5]. pass to someone else. This knowledge consists of skills, judgement and intuition that people pos- There is the tendency of increase of the intel- sess, and which can’t be explained and presented lectual property, that is, intellectual capital in the in a simple way. For example, those are skills nec- company’s value, or share value. Overview of the essary for swimming and driving. We know how elements of the intellectual capital can be seen in to do it, but it is hard to explain to someone else the following table. how we are doing it. CRM concept is directly focused towards its The intellectual capital consists of all the goal, and that is continuous and comprehensive im- knowledge in possession of employees in some provement towards the company customers. There- organisation. Unlike real or tangible assets, con- fore, from this comes the importance of the role of sisting of land, buildings, equipment, etc. the in- the CRM concept for creating segment of the mar- tellectual capital is non-tangible. It consists of the ket based or external intellectual capital, which in- knowledge of employees, that is, human resourc- cludes profitability and loyalty of customers. es. Intellectual capital often reaches 80 – 90% of The tendency to increase the value of the intel- the value of share, or the value of the company. lectual capital, that is, non-tangible assets in the The difference between the market and account- market value of well known world corporations st ing value from the financial statement is covered will continue in 21 century, with the strengthen- by intellectual capital or invisible assets. ing of the organisations as the “intelligent organi-

Table 2. Some elements of intellectual property [5] External structure Internal structure Abilities Peoples abilities Brands Intellectual property - Professional experience - Production brands - Patents - Levels of training and skills - Service brands - Reserved rights - Methods of training - Corporative brands - Trade marks and design rights - Management training Infrastructure Customers - Processes Learning abilities - Individual customers - IT systems and databases - Exchange of knowledge - Sales channels - Communication systems - Training groups - Distribution channels - Models of operations - Problem resolution activities - Financial structure Contracts Culture Management’ abilities - Contracts on franchising - Management philosophy - Entrepreneurship - Contracts on license - Certificates and awards - Leadership - Other contracts - Management structure - Growth data

272 Volume 7 / Number 1 / 2012 technics technologies education management sations”, “organisations based on knowledge”, or- Tiwana considers that knowledge management ganisations that learn, or learning organisations”, is a potential tool for achieving competitive advan- that is, the organisations based on “knowledge tage, in the time of reducing value limits, shorten- management”, where, as Draker said first, knowl- ing of the time for product development and imper- edge workers perform their jobs. manent customers, and only if a company is willing Nowadays, the attitude toward the product gets to listen to their customer rather than to speaks. Ex- changed on behalf of the demand, that is the cus- plicitly exposed, the company must learn to change tomer. Namely, customers are the decisive factors its behavior, but only towards the direction of the that dictate business operations conditions, so only knowledge it has about its customer [20]. the most quality products with added value have a Efficient utilization of company knowledge, chance for success at the market. Therefore, the which relate to its customers can be observed dur- companies of the Western Balkan face the need of ing application of CRM concept. The importance permanent creation of the new knowledge, mostly of the KM concept as the basis for the CRM con- through investing into their employees. Creation cept is recognizable in description of the CRM of the intellectual potential creates new competi- concept as the cyclic process. tive weapon of the advanced company. Customer relationship management is continu- Such environment, where material resource is ing process based on iterative, cyclic realisation getting less important and “intelligence” is selling of four identical activities, where every new cycle more and more, the knowledge becomes basic life represents annexing of previous one (Picture 1.) need. So, global, world market directs itself toward [17]. Possession of quality database about custom- demand, creation and storage of knowledge. The ers is in the base of the process, while informa- knowledge is not stored only in the documents or tion emerged from database analysis serves to the knowledge bases, but it increasingly becomes the purpose of adaptation of the ways of achieving part of organisational processes and organisational interaction with customers. Analysis of collected culture. At the same time the importance of knowl- experiences is done at the end of the cycle in order edge is directed toward business management, so to further adapt the activities. we can talk about knowledge management as the one of important business functions. In today’s modern business operations, there’s the developed awareness that the total knowledge in the company is much bigger than the one used in the same company’s processes. There’s interesting and well known statement from Lew Platt, former CEO of Hewlett Packard: If Hewlett Pack- ard only knew what Hewlett Packard know, we would be three times more profitable” [3].

4. Relationship of the KM towards CRM concept In recent years, companies have integrated their customer relationship management and knowl- Picture 1. CRM as cyclic process edge management efforts because they realize that concept of the knowledge management plays a CRM as cyclic process implies running of four fundamental role in success of the CRM concept. activities: Both concepts are directly focused on the same –– discovery of knowledge, goal, and that is continuous and comprehensive –– planing of market, improvement towards the company customers. –– interaction with customer, –– refinement and analysis.

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First and at the same time starting phase of Third phase of CRM process includes engag- CRM cycle represents analysis of historical infor- ing of the company into direct contact with (poten- mation about customers, at disposal to the com- tial) customers. Results of the marketing planning pany. The goal is to insure exact base for decision- phase are the guarantee that the communication making in the parts of the cycle that would follow. will be established on exact and relevant informa- Discovery of knowledge includes three activities, tion. Interaction with a customer will be achieved as follows: identification of customers, segmenta- through the number of various communication tion of customers and anticipation of customers’ channels, which includes Internet, contact centres, behaviour. communication through e-mail, offers through In order to be able to extract any kind of knowl- classic mail, direct contacts with sales staff and edge, it is necessary to possess quality and detailed agents in or outside sales space, etc. enough information about customers. Therefore, it The most important result of this phase, which is necessary for the companies to try to precisely applies to every cycle without exception, should record details from every interaction with a cus- be additional knowledge about behaviour of customer, regardless to the fact whether the contact tomers. First of all it is about places where they get was made at the classical sales place, ATM, Inter- in contact with the company, ways of realisation net, contact centre or some other place. Especially of transactions and technical solutions that cus- in the case of having intention to attract new customers use for communication. Implementation tomers, such data is possible to obtain from spe- of suitable solutions will allow that communica- cialised agencies, although ethical quality of such tion channels record all of that extremely valuable moves is rather questionable. Regardless to the information on they own, which represents the way of collection, the data is stored to one central- base for every endeavour for future adaptation to- ised storage database of the company. ward wishes and needs of customers. Analysis and Concrete application of gathered knowledge is perfecting represents final phase of the process. obvious in the phase of marketing activities plan- Permanent learning and collection of valuable ning. This, second phase of CRM process includes knowledge from every contact achieved between undertaking activities related to defining, in other the company and the customer will get its true words, adaptation of the offer, channels of distri- meaning only if all such information are used for bution, timetable of starting other necessary activ- the purpose of increasing the level of quality and ities, as well as other variables of processes of cus- thus improvement of customers relations. That is tomers relationship management, in accordance exactly the purpose of the analysis carried out at to needs, desires, preferences and habits of every the end of every CRM cycle. Analysed are exactly individual customer [17]. The need for adaptation all ways of interaction achieved between the com- of mentioned activities will require engagement pany and customers and the knowledge gained are of number of departments inside the company, used for the purpose of perfection of messages’ most of all of marketing and services planning content sent toward the customers, ways of com- departments. Indeed, activities to adapt to a cus- munications, timetable, place and ways of ap- tomer will have greater or smaller influence to all proaching, etc. The ultimate goal is very clear, and other departments inside the company. The phase that is to increase customers’ satisfaction in every of planning of marketing activities should as the future contact. result, produce strategic programmes, communi- Harmonized interpretation of authors who are cation with customers, precise definition of types dealing with issues of relationships between con- of campaigns that are intended to be started, clear cepts KM and CRM is that knowledge manage- plans of usage of various channels of services ment is the foundation of successful application of distribution, deciding about ways of treatment of the CRM concept. individual consumers, etc. In other words, final KM has significant applications to CRM in all result of this phase is complete plan of operations, three of its manifestations [7]: applicable while entering into direct contact with –– Knowledge management in customer - the company’s customers. interaction management

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The knowledge that firms require for their the firm. It considers and seeks to manage CIM initiatives addresses what it will take to (with the active participation of customers make sales, marketing and customer service themselves in most cases) how relation- more effective and efficient which are the ships and transaction experiences affect dominant aims of CIM. This means training customers, and how effects can be managed and enabling all contact persons and systems and marketed to mutual advantage. At this to access and use knowledge about custom- place, primarily is thinking about knowl- ers’ reasons for seeking particular goods and edge which utility can be directly advanced services, criteria for selecting which brands using successful knowledge management and providers to buy from, which channels to programme, which relates to motivations of seek or accept information from. Emphasis is customers. Therefore, for company is very on knowledge about customers in general, and important to has knowledge about: what in segments based on differential responses to kinds of impacts customers would like to CIM appeals and interactions. How all these enjoy from their relationships with firms; affect customer awareness, interest and con- what would cause customers to select one version to purchase behaviour is the chief type firm over another for such relationships; of knowledge needed in knowledge manage- and what would make customers commit to ment for CIM. When KM is well applied to these relationships. CIM, a firm can ensure it ‘gets the right information to the right customer at the right time 5. KM concept and competitive advantage and in the right form’, hence improving both of the companies of Western Balkans the effectiveness and efficiency of sales, marketing and customer service functions. Application of KM concept in practice, gener- –– Knowledge management in customer - ally, intends to achieve two goals: creation of new experience management knowledge in order to speed up innovations and What is needed first for CEM is a more secure competitive advantage in the market and, complete understanding of what customer the division of existing knowledge in the company segments and individual customers expect in order to increase its efficiency. and will welcome, versus what will promote The ability of the company to adopt new knowl- their dissatisfaction and defection when edge and to change itself, to learn faster than others facing transaction experiences. The second and to rapidly turn gathered knowledge into action, requirement is a thorough understanding of represents the biggest advantage that the company the relative value individuals and segments can possess. Modern companies nowadays differ represent to the firm both actually and po- among themselves according to what they know. tentially. This requires separating valued The productivity represents the most impor- customers who are profitable for the com- tant factor of competitiveness of modern busi- pany, from marginals who are not profitable. ness operations. The struggle for customers and Such knowledge can be used for adequately stable market share is essentially the struggle for customization, increase the frequency of increase of productivity of operations. The history customer purchase and creation value to of economy from the beginning of the industrial the company. Knowledge of their likes and revolution was marked with the need for improve- dislikes, their actual and probable interest in ment of labour productivity. other goods and services the firm offers is According to Draker, application of knowledge essential to both applications of knowledge on labour brought in explosive increase of produc- management concept in CEM. tivity [2]. Hundreds of years before, there was no –– Knowledge management in customer - increase of worker’s ability to create goods or to success management move goods. Machines created higher capacity but CSM focuses on continuing relationships the workers were not significantly more productive and the impacts on customers, as well as than they used to be in the time of ancient Greece.

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Education and knowledge are new factors in –– Knowledge management is built on all forms the competitiveness. Every individual must con- of business transformation, like Total Quality stantly improve oneself and one’s knowledge. The Management (TQM) and Business Process group of such individuals who constantly improve Reengineering (BPR); themselves and foster productivity of their knowl- –– The need for innovations leads to the edge makes whole organisation more productive. necessity for knowledge flow throughout the According to Riderstahl and Nordstrom, what organisation; makes the essence and origin of the competitive ad- –– Increased need for the data flow leads to the vantage; the knowledge, the quality and the people, necessity of data flow management; must become everyday issue for employees [11]. –– Systems based on knowledge, like “expert The transfer from the industrial economy to systems”, show what an organisation can do the knowledge economy marks several important with the knowledge; phases: information becomes important resource, –– Increased importance of the intellectual and information and communication technology property: value of the company is not in its become basic infrastructure. The development of physical property but in what the company such technologies the business operations get sig- knows; nificantly accelerated and the production and busi- –– When it pays attention to what we call ness cycle gets shorter. “learning organisation”, the organisation can Due to exceptional importance of the knowl- constantly develop its competences [15]. edge, management should achieve efficient KM process, because that process in the economy of The founder of Microsoft company, famous Bill 21st century is considered to be the determinant of Gates, deems that KM represents: “Management of sustainable competitiveness of the companies of the flow of information, obtaining of right informa- Western Balkan countries. tion to those who need it in order to be able to quickly The universal definition of KM doesn’t exist at react on it”. Then he points out that the knowledge the moment, in the same way, as there is no agree- management in fact does not relate to technology. ment about what knowledge management exactly Knowledge management starts with business goals includes. Therefore, it is the best to consider KM and processes, as well as with the awareness about in a wider context. In a nutshell, knowledge man- the need to share information. Related to that, KM agement is the process through which the compa- is the aim to achieve the goal, which is the increase ny generates the value of its intellectual property, of the intelligence of an institution, or the intelli- based on the knowledge [13]. gence quotient (IQ) of the company. Intelligence Mostly, the mentioned production of above- quotient of some organisation includes sharing of mentioned property implicitly includes sharing of both previous and current knowledge [4]. the knowledge between employees, organisational The question arises, why does the companies units and even between different companies if it is of Western Balkans need knowledge manage- in the best interest regarding the results and prac- ment today. It can be claimed with certainty that tice. It is important to notice that the definition of the basic factors that explain the need to study and KM does not tell anything about the technology. integrate knowledge management in the modern The technology alleviates application of knowledge business are [6]: management but in itself it doesn’t represent KM. –– Markets are evermore competitive and new Knowledge management (KM) is new and in- innovations show up ever faster; terdisciplinary business model, which focuses on –– Pressure of competition reduces the number the knowledge inside the organisation. It is well of employees, who preserve precious business established in many disciplines, including busi- knowledge; ness, economy, psychology and management of –– Value of the time dedicated to the experience information systems. Multidisciplinary approach and learning new knowledge is decreasing; of knowledge management is based on the follow- –– Early retirement and increased mobility of ing facts: employees causes loss of knowledge;

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–– The most of activities is based on information; knowledge,, it is possible to innovate the processes, –– Companies compete based on knowledge; products and services, and influence on strengthen- –– Products and services are increasingly ing of competitive advantage. Therefore, third rele- complicated, and include significant vant type of knowledge gets pointed out here – “the information component; knowledge that can be combined”. –– The need for constant learning is reality today. Comparative advantage can be achieved based on what the company knows, how it can use what Nowadays, when the supply significantly sur- it knows and how fast it can learn something new passes the demand, we face cruel market game, so from the environment. Therefore, nowadays it is competitive advantage is not in the big volume of especially emphasised that among other things, products but first of all in their quality. Apart from business performance mostly depends upon the basic raw materials, quality products have increas- abilities of the company to obtain (buy), codify ing level of knowledge built in. It is possible to and transfer the knowledge faster and more effi- underline several general points in the approach to cient than its competitors [8]. quality management and knowledge management. Starting from that, it is generally accepted that The density, or the rate between value and mass the sustainable comparative advantage of the 21st of the most successful consumer offers is changed century was achieved through the knowledge as well [12]. Material costs of an average car man- management [9]. Big, global companies become ufactured by General Motors equals to only 16% very sensitive when it is about the importance of of total costs. The similar situation is in the other knowledge for the efficiency and competitive- car factories. The software equals to one third of ness. The main reason for the efficient knowledge the total costs of the new Boeing 777. management is the attitude that the knowledge Knowledge management, or more precisely and its application are the means through which management of knowledge flows, can contribute the creativity can be presented, and innovations to increase of value and competitiveness, through achieved. Innovations became the main compo- the improvement its efficiency, connectivity and nent of organisational performances and competi- innovativeness [19]. tiveness, regardless whether it is commercial or Efficiency (in the usage) of knowledge shows non-commercial sector. up in careful codification and storage of existing knowledge in electronic databases, in order to be 6. Conclusions reused and thus reduce costs of business operations. That implies so called “knowledge available The customer in 21st century represents key upon a click”. factor that dictates the conditions of business op- Connection of knowledge with the best practice eration and asks only for the most quality prod- and ways of operations shows up in the knowl- ucts, therefore only the products with added value, edge management that circulates, that is, should those with new knowledge built in, achieve market be exchanged between business units, in order to success. In case they want to operate successfully, achieve synergy effects at the company’s level, the companies from Western Balkan countries and also benefits for every individual unit regard- must accept the fact that the knowledge necessary ing their operational performances and total busi- to create and sustain competitive advantage must ness successfulness. The “knowledge through the inevitably involve the knowledge that the compa- cooperation” would be used in the same way. ny owns about its customers, and also involve the Innovation of knowledge (of an individual, team potential ones. This requires that they give great or organisation) assume those essential competenc- importance to the KM concept as the basis for a es; improvisation, experimenting and creativity for quality application of the CRM concept. The com- the realisation of new and valuable ideas, solution panies from the Western Balkan countries must of problems and development of products/services. understand that the knowledge determines their Therefore with the new combination of already ex- economical power and the ability to develop other isting knowledge and/or development of the new resources and increase efficiency of their usage.

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The knowledge, which represents key eco- 8. Myers, P., S. (1996): Knowledge Management and nomical resource in the 21st century that ensures Organizational Design, Butterworth – Heinemann, competitive advantage of the company, must be Newton, MA managed in the adequate way. 9. Ogrean, C./Lucian, B. (2006): Knowledge Manage- Since the knowledge has dominant importance ment - a source of sustainable competitiveness in the for the operation of modern company, the knowl- knowledge based economy, MPRA Paper No. 1688, University of Sibiu edge management is unavoidable segment of modern management. The concept 10. Paunovic, M. (2009): Poslovanje u Srbiji, Fokus – of knowledge management is getting evermore quarterly report on institutional reforms, Centre for developed in both management theory and prac- Liberal-Democratic studies, Belgrade, p. 8-12. tice. The prospects of its further development are 11. Riderstrale, J./Nordstrom, K., A. (2004): Funky quite important. Business, Plato, Belgrade st 21 century as the age of knowledge, imposes 12. Riderstrale, J./Nordstrom, K., A. (2006): Karaoke unpredictable and complicated competitive en- kapitalizam: menadžment za čovečanstvo, Plato, vironment, in which survival, development and Belgrade success of a company, depends exclusively on its 13. Santosus, M./Surmacz, J. (2001): The ABCs of ability to adapt its operations “with the speed of Knowledge Management, www.cio.com/research/ thoughts”. The companies demand quality, inno- knowledge/edit/kmabcs.html vations and creativity as decisive component of 14. Schwab, K. (2010): The Global Competitiveness success. Modern companies of the Western Bal- Report 2010-2011, World Economic Forum, Gene- kan countries differ among themselves by what va, Switzerland they know. Thus, it shows the importance of the knowledge management as the concept of collec- 15. Skyrme, D., J. (1999): Knowledge Networking: Creating the Collaborative Enterprise, Butterworth tive knowledge with the aim to efficiently apply – Heinemann, Oxford, Woburn, MA knowledge in order to make faster and more quality decisions. 16. Stojkovic, D. (2010): CRM concept role in competitiveness capability of Western Balkan countries, TTEM Journal, Vol 5, No 3, 2010., Society for References development of teaching and business processes in new net environment in B&H, Sarajevo, p. 590-596. 1. Anon. (2009): Srbija prema EU tehnološki zaostaje tri decenije, Blic, Ringier, Belgrade, p. 11. 17. Stojkovic, D. (2008): Customer Relationship Mana- gement (CRM) – poslovna strategija, komponente, 2. Drucker, P. (1995): Postkapitalističko društvo, PS potrebe i proces, in: Technique, No. 4, AETI of Ser- Grmeč Privredni pregled, Belgrade bia, Belgrade, ISSN 0040-2176, p. 19-26. 3. Frappaolo, C. (2002): Knowledge management, 18. Sydanmaanlakka, P. (2002): An Intelligent Organi- Capstone Publishing, Oxford UK zation: Performance, Competence and Knowledge Management, Capstone, Oxford 4. Gates, B. (2001): Poslovanje brzinom misli: Korišće- nje digitalnog nervnog sistema, Prometej, Novi Sad 19. Tisen, R./Andriessen, D./Depre, F.,L. (2006): Divi- denda znanja, Adizes, Novi Sad 5. Hope, J./Hope, T. (1997): Competing in the Third Wave: the Ten key Management issues of the infor- 20. Tiwana, A. (2001): Essential Guide to Knowledge matioin age, Harvard Business School Press, Boston, Management, The: E-Business and CRM Aplicati- MA ons, NJ: Prentice-Hall, Upper Saddle River 6. Macintosh, A. (1995): Position Paper on Knowledge Asset Management, Artificial Intelligence Applicati- ons Institute, University of Edinburg, www.provider- Corresponding Author sedge.com Dejan Stojkovic, Railways of Republic of Srpska S.C. Doboj, 7. MacStravic, S. (2004): Knowledge Management and Bosnia and Herzegovina, CRM, Inside Knowledge Magazine, www.ikmaga- E-mail: [email protected] zine.com

278 Volume 7 / Number 1 / 2012 technics technologies education management Sequential algorithm and fuzzy logic to optimum control the ore gridding aggregates

Carol Zoller1, Predrag Dasic2, Remus Dobra1, Radoje Pantovic3, Zvonko Damnjanovic3 1 University of Petrosani, Electrical Department, Petrosani, Romania, 2 SaTCIP ltd., Vrnjacka Banja, Serbia, 3 University of Belgrade, Technical Faculty in Bor, Bor, Serbia.

Abstract we are developing one example of how this theory can be applied for optimum drive for copper ore Between the absorbed power and the ore fill of grinding and separation process, using high capac- the gridding aggregates there is an extremal connec- ity autogenously aggregates, in primary phase and tion. Using just some information as absorbed active ball mills in the second stage. The specific con- power, filling degree and recycled flow, can control sumption of energy of such equipment is about by discrete steps the feed flow rate in order to ob- 35kWh/t, but that can be decreased with 5% to tain maximum processing capacity. In consequence, 10% by introducing a control system. a sequential algorithm for processing information It’s impossible to decrease the consumption was developed for gridding aggregates. That was maintaining constant ore feed flow rate and wa- modeled on PC by using graphical software from ter-ore ratio, because of the continuous variation HP-VEE for simulation the optimum command of of the physical and mechanical properties (which the ore gridding aggregates. A fuzzy control was can be expressed by grinding ability). It is usual to analyzed and proposed also in the paper also. command the feed flow rate depending on the ab- Key words: gridding aggregates, productivity, sorbed power together with electrical energy mea- VEE Pro 6 software, fuzzy control. sured, but aggregates can be overloaded or under loaded because of the non-linear dependences be- 1. Introduction tween power and filling [2]. The Classical engineering approach to drive some process is essentially a qualitative and quan- 2. Modeling the algorithm titative one, based on more or less accurate math- Knowing that this dependence has an extremal ematical modeling. In such an approach wordings characteristic, a feed flow rate control system that as “medium temperature”, “low pressure”, and uses information concerning the electric power so, related to the characteristic variables of a con- absorbed by the driving motor together with infor- trolled process (CP), are hard to interpret from a mation about the load (filling) with ore, obtained quantitative point of view. This aspect is due to from the oil pressure transducer in the bearings or the fact that the classical automation handles with from an weight transducer [3]. variables/information which is processed with This solution is based on the following consid- well specified values. erations: The process control based on fuzzy set theory, 1. The grinding aggregates productivity is often called only fuzzy logic, or the fuzzy logic mainly determined by the quantity of material in control is more pragmatically from this point of the aggregate (by its filling degree). Between the view by the capability to take over and to use a productivity (y) and the material reserve (filling linguistic characterization of the quality of the degree – x) there is an extremal dependence (fig- controlled process and to adapt this characteriza- ure 1), which is expressed by: tion as function of the concrete conditions of the 2. process operation [1]. 2 y = y − k(x − x*) ...... (1) max The fuzzy set theory found numerous and diverse application domains, but in this presentation where:

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y – maximum productivity; max lowing this in few steps the process will reach the x* – ore reserve for which the productivity is maximum amplitude of productivity which corre- maximum; sponded to x*. k – constant, aggregate characteristic. 11. When y (t ) = y (t ) = y (t ) no correc- 1 i 1 i−1 1 i+1 - It is unanimously recognized that, between tions are necessary on the process feeding flow. the driving power and the productivity, there is the following dependence: the maximum productivity So, as long as x belongs to the domain for which is obtained at the maximum consumed power. y1< y1max, must command the increment of the load - It is justified to use process control methods x by increasing the feed rate x with Dx step. As based on power control as long as it is difficult to the point y1max moves continuously, it is necessary appreciate the grinding capacity and power infor- that the system follows permanently the above se- mation is more accessible. quences. In order to be sure that the variation of If y is the driving power and m the grinding 1 the power (y ) is caused by the load (x), the system ability (a high m meaning easy grinding), we as- 1 needs to use another information (y2), which is the sume that: pressure in the bearing, depending linearly on x. 3. y1 increases monotonously with y2 and m;

4. y1 decreases monotonously with the increment of the ore density r;

5. y2 (the pressure in the bearing) is linearly dependent on the reserve (x) and density (r) . The target control system to be solved is to maintain the aggregate load at the value x*, corresponding to the nominal power. As practically x* is not known because of the stochastic variation of the ore characteristics, in order to determine x*

(for which dy1/dx=0), the procedure follows gradual sequences as:

6. for a certain time moment t1, when x(t1) = x1

(immeasurable), the parameter y1(x1) is measured and stored in a memory location, M1; 7. a positive Dx step for feed rate x is added and commanded; 8. after a specific Dt time, at the time moment + D a) t2, the parameter y1 (x1 x) is measured and stored also in a memory location M2 : + D > D 9. if y1 (x1 x) y1 (x1 ), than x1+2 x is commanded, because M1 and M2 are identified on the ascendant area of productivity graphic; if + D < D y1 (x1 x) y1 (x1 )), x1- x is commanded because M1 and M2 are identified on the descendant area of productivity graphic; y1 (x1 − Dx) is read and memorized, and so on. 10. The command of the input feeding will continue with a positive increment step of the feeding

flow every time when y1 (ti ) > y1 (ti−1 ) and with a b) < Figure 1. Extremal dependence between the pro- negative increment step when y1 (ti ) y1 (ti−1 ) fol- ; ductivity and the filling degree

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Using just some information (absorbed active signal u (the fuzzy control signal); power, filling degree and re-circuited flow,y ( 3), The fuzzy control signal must be converted in we achieved the control by discrete steps of the to a crisp wording, with well-specified physical feed flow rate in a view to obtain maximum pro- nature, directly usable at the actuator level; this cessing capacity. Control and command algorithm operation is called defuzzification [5, 6]. is detailed described in [3] and [4]. 4.2. Treatment of fuzzy information 3. HP-VEE process simulation The terminology of linguistic variables (LVs) The above algorithm was developed also using and linguistic terms (LTs) corresponding to fuzzy a the graphical programming software, HP VEE sets is used in the linguistic characterization of the Pro6, for simulation, in the first stage, (figure 2) fuzzy sets (FSs) [7]. and for optimum control of the ore gridding aggre- So, resuming our example to the gridding aggregates, using a PC and data acquisition interfaces, gate, the linguistic variables (LV) introduced are: in the second stage. Pa-active power, Pr-bearings pressure and F- recycled flow, as physical variables. The correspond- 4. Fuzzy process control ing linguistic terms (LTs) for active power are: very low power-VLPa, low power- LPa, moderate pow- 4.1. Block diagram of principle of Fuzzy er- MPa, high power- HPa, very high power- VHPa; Control System, FCS and the block dia- The corresponding linguistic terms (LTs) for pres- gram of principle of Fuzzy Controllers, sure are: low pressure- LPr, moderate pressure- MPr, FC high pressure- HPr; The corresponding linguistic terms (LTs) for flow are: low flow -LF, moderate Figure 3a is the block diagram of an automatic flow -MF, high flow –HF. Definitely speaking, the control system based on fuzzy control system, FCS, following correspondences appear in the process of considered as single input with reference input (w) fuzzification of crisp information as part of automat- and a single output with respect to assessment out- ic process control: linguistic variables (LV)-as phys- put (y). The essential particular feature is that of ical variables and linguistic terms (LTs)-as fuzzy multiple interactions from the process to the con- descriptors corresponding to some sub-domains of troller by auxiliary variables, gathered in the vector values of the physical variables [8,9]. ' The membership function (MF) is used for this e1 = y that are direct or indirect inputs of the fuzzy a purpose. Different ways are used for representing controller. No matter the number of inputs of the membership functions, (parametric representa- FC, this one must have at least one input, denoted tions under the form of analytical functions, direct e = w − y by e1, corresponding to the control error . graphical representations by means of graphics, As a matter of principle, the operation of the discrete representations by singletons, in case of FC takes place in terms of the block diagram from fuzzy systems with finite number of discrete el- figure 3b and involves the following sequence of ements) [10,11]. For exemplifying the concept operations to be proceeded: of fuzzy set, FS, as graphics: figure 4a shoes the The crisp input information (the measured membership function of gridding absorbed active variables, the reference input, the control error) power, Pa; figure 4b shoes the membership func- is converted into a crisp fuzzy representation, this tion of the bearings pressure, Pr; figure 4c shoes operation is called the fuzzification of the crisp in- the membership function transition of the gridding formation; recycled flow, F [12,13] The fuzzified information is processed on the The examples shown in figure 4 a,b,c, point basis of a set of rules that have to be well stated out the way of triangular shape graphical defining for controlling the process. The principles (rules) membership function MF, with continuous basic for evaluation of this set of rules are called infer- set voltages [V] obtained from active power -Pa ence engine and result is the fuzzy form of control transducer, bearings pressure -Pr transducer and

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Figure 2. Graphical program for optimum control of the ore gridding aggregates

a) b) Figure 3. Block diagram of FCS and FC

282 Volume 7 / Number 1 / 2012 technics technologies education management recycled flow -F transducer, respectively [14]. variables are of singleton type and each LT has As example, it has to be outlined that the volt- associated an increment of the last crisp value age of 3.5V, on active power-Pa, transducer, gives of the control signal, that is added or subtracted from MF of Pa, figure 4a, the following sensation from the previous (the last) crisp value of the which is read from the graphics: control signal. 1. 25% -Very Low Power, VLPa; 2. 75%-Low Power, LPa; 3. 0%-Medium Power, MPa; 4. 0%-High Power, HPa; 5. 0%-Very High Power, VHPa.

By accepting in fuzzy description of gridding process the following 5 linguistic terms (LTs) for active power are: very low power-VLPa, low power- LPa, moderate power- MPa, high power- HPa, and very high power- VHPa, defined by the membership functions MF(S), having graphical form depicted in figure 4a, it can be observed that the crisp value y1=3.5V is characterized by the * 5-uple: y1 ={0.25, 0.75, 0, 0, 0}.

4.3. Fuzzy inferences of the gridding aggregate The fuzzy inference is the base of fuzzy information processing. Fuzzy inference consists in evaluation of a rule or of a rule set having the form: IF (antecedent), Then (consequent) where antecedent (premise) is observed feature(s) and consequent (conclusion) is the asserted feature. Both the observed feature and the asserted one can be expressed by descriptors concerning classical sets, or /and fuzzy sets [15,16]. Figure 4 a,b,c. Fuzzification of the gridding in- formations as membership functions MF(S) 4.4. Defuzzification of Fuzzy information of the gridding aggregate 5. Conclusion The defuzzification is defined as an operation For huge gridding aggregates working regime for obtaining a crisp value of output decision at nominal power and maximum grinding capac- based on result of fuzzy inference. Many defuzz- ity means to reduce specific electric energy con- ification methods are known, more frequently sumption. used in field of automatic control are based on Between absorbed active power and ore fill of maximum sample or value method, mean meth- aggregate there is external connection; we use this od, etc. information to command input flow. For optimum The incremental method was chosen because drive of ore gridding aggregates information ag- always for a given crisp value (set of crisp val- gregates information from bearings pressure and ues) of the input, one rule is fired; the linguis- recycled flow is considered. tic terms corresponding to the output linguistic

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Acknowledgement 11. Savic, Lj., Ristovic, I., Trajkovic, S., Savic, Lj.: Ex- perimental research and defining of the optimum bit This paper is part of project TR35034: The re- blade sharpening angle for drilling rocks and ores. search of modern non-conventional technologies Journal of Technics Technologies Education Man- application in manufacturing companies with the agement (TTEM), Vol. 5, no. 1 (2010), pp. 205-217. aim of increase efficiency of use, product qual- 12. Bobilloa, F.; Boub. F. & Stracciac, U.: On the fail- ity, reduce of costs and save energy and materials, ure of the finite model property in some Fuzzy De- funded by the Ministry of Education and Science scription Logics. Fuzzy Sets and Systems, Vol. 172, of Republic of Serbia. Issue 1 (2011), pp. 1-12. 13. Melina, P.; Mendozab, O. & Castilloa, O.: An im- References proved method for edge detection based on interval type-2 fuzzy logic. Expert Systems with Applica- 1. Mukaidono, M.: Fuzzy Logic for Beginners. World tions, Vol. 37, Issue 12 (2010), pp. 8527-8535. Scientific Publishing Co., 2001, pp. 105. 14. Moreno. G. & Pascuala, V.: A hybrid programming 2. A. J. Lynch, Mineral Crushing and Gridding Cir- scheme combining fuzzy-logic and functional- cuits: Their Simulation, Design and Control. Elsevier logicresources. Fuzzy Sets and Systems. Vol. 160, Scientific Ltd., 1979, pp. 354. Issue 10 (2009), pp 1402-1419.

3. Dan Visalon, Carol Zoller - Metodă pentru reglarea 15. Pedrycza, W. & Aliev, R.A.: Logic-oriented neural automată optimală a puterii agregatelor de măcinare networks for fuzzy neurocomputing. Neurocomput- autogenă a minereurilor complexe. Brevet de ing, Vol. 73, Issue 1-3 (2009), pp. 10-23. invenţie nr. RO 121061, 2006, OSIM Bucureşti. 16. Stouta, L.N.: A categorical semantics for fuzzy 4. C. Zoller, T. Niculescu, System command for feeding predicate logic. Fuzzy Sets and Systems, Vol. 161, rate depending on the absorbed power and on the Issue 3 (2010), pp 412-432. load with raw material of gridding aggregate. Annals of the University of Petroşani, Electrical Engineer- ing, Vol. 6 (XXXIII) 2004, pp. 117-122. Correspoding Autor 5. C. Zoller, V. Dan, HP-VEE simulation of an elec- Predrag Dasic, tromechanical vibration absorber. In: Proceedings SaTCIP Ltd., of 9th International Conference “Research and De- Vrnjacka Banja, velopment in Mechanical Industry – RaDMI 2009”, Serbia, Volume 1, Vrnjacka Banja, Serbia, 16-19. September E-mail: [email protected] 2009. Vrnjacka Banja: SaTCIP Ltd., 2009, pp. 647- 653.

6. A.M. Ibrahim, Fuzzy logic for Embedded Systems Applications. Elsevier Inc. 2004, pp. 293.

7. A. Muhammad, A. Bargiela, G. King, Fuzzy and evolutionary modeling of nonlinear control systems. Mathematical and Computer Modelling, Vol. 33, Is- sue 4 (2001), pp. 533-551.

8. N. Kasabov, T. Yamakawa, Preface. Fuzzy Sets and Systems, Vol. 82, Issue 2 (1996), pp. 133

9. Antonio Di Nola, Witold Pedrycz, Salvatore Sessa, When is fuzzy relation decomposable in two fuzzy sets. Fuzzy Sets and Systems, Vol. 16, Issue 1 (1985), pp. 87-90.

10. E. Czogaa, W. Pedrycz, Control problems in fuzzy systems. Fuzzy Sets and Systems, Vol. 7, Issue 3 (1982), pp. 257-273.

284 Volume 7 / Number 1 / 2012 technics technologies education management Credit rating evaluation in the example of construction industry

Jasmina Cetkovic1,Snezana Rutesic2, Tomas Hanak3, Milos Knezevic4, Boban Melovic5 1 Faculty of Economy in Podgorica, Montenegro, 2 Faculty of Civil Engineering in Podgorica, Montenegro, 3 Brno University of Technology, Faculty of Business and Management, Czech Republic, 4 Faculty of Civil Engineering in Podgorica, Montenegro, 5 Faculty of Economy in Podgorica, Montenegro.

Abstract of credit rating evaluation in process of evaluation of its creditworthiness, which represents ability of Modern theoretical and methodological frame- company to repay main debt increased by appropri- work of credit rating evaluation is based on wider ate amount of interest, in defined deadlines. Ger- economical-accounting concept of his interpreta- man business practice identifies these two terms, tion, in order to meet new requirements and needs while Anglo-Saxon business practice approaches of credit rating evaluation. Successful mix of quan- to credit rating evaluation wider, evaluating in the titative and qualitative evaluation of company is so- same time wide number of elements in aim to deter- lution which increases use value of evaluation and mine credit and material status of subject. makes it comprehensive. In this work is presented Analysis based on annual financial statement re- qualitative evaluation of company, i.e. credit rating sults with many indicators (dynamic and prognostic evaluation in wider sense, in the example of con- nature), while qualitative analysis should evaluate struction. Evaluation is given based on available prospects of company in forthcoming period, through researches and on level of known and generally ac- forecast of qualitative performances of company in cepted, scientific relevant opinions and conclusions, future period, such as: future market position, level without author’s ambition to enters in detailed anal- of inventiveness and innovation, internal and exter- ysis of every single parameter of evaluation. nal flexibility related to the changes, level of proac- Key words: liquidity, solvency, credit rating, tive behavior, attitudes related to ecological issues, credit rating evaluation, construction industry. dynamic of investment plans, quality of internal and external communication, attitude related to differ- Introductory remarks ent types of risk, attitude related to concept of social responsible business activities, company’s image in Closest conceptual definition of company the region, etc. Regarding this, we can conclude that credit rating includes evaluation of company’s as- evaluation of credit rating have evolved, from evalu- surance as debtor, i.e. evaluation of its solvency ation based strictly on quantitative financial-account- or evaluation of possibility to reach insolvency. ing indicators, to evaluation of credit rating which, Some authors define business failure of company besides quantitative indicators, includes numerous precisely as inability to pay liabilities on time [1]. qualitative indicators of business organization. Wider definition of credit rating includes eval- Since there still does not exist universal inter- uation of liquidity and credit rating of company, pretation of term credit rating, his evaluation is while in the widest sense evaluation of credit rat- performed by applying different methods. How- ing includes comprehensive evaluation of busi- ever, it is notable tendency and need to harmonize ness entity based on analysis of annual financial evaluation of credit rating with market conditions, statement (quantitative analysis) and complete which has its real base in fact that those condi- situation in company and its business environment tions are different from one market to another and (qualitative analysis). evaluation of credit rating should respect charac- Identification of credit rating with creditwor- teristics of actual market, which is different from thiness of company occurs because of importance traditional market in many ways.

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Regarding previously introduced, it is com- besides quantitative values, requires wider frame- pletely logical that theoretical and methodological work for research, that includes combination of framework of credit rating evaluation today is based social, economical and organizational managing on wider economic-accounting concept of his inter- factors, based on which we can only get complete pretation, in order to meet new needs. Therefore, information about credit rating and which may be this evaluation should perceive complete position used in order to forecast success of construction of company, through consideration of future busi- company in forthcoming period. ness processes and anticipating future chances and In the following text it is given review of main possibilities of organization, in aim to serve as effi- indicators of qualitative company evaluation and cient instrument of modern management in process qualitative evaluation of industry on example con- of managing and operating. struction company, i.e. construction industry. However, evaluation of credit rating in devel- Type of ownership of the company, as we al- oped market economies has great use value be- ready know, significantly determines processes cause on the evaluation of credit rating are based and relations in the company. Different types of many significant activities such as processes of ownership in the company impact on different risk ownership, organizational and financial transfor- level in business with them. Risk and all restric- mation, new investment programs, securities issu- tions which are result of ownership over company ance, public procurement, etc. assets are not favorable circumstance in credit rating evaluation. Also, legal form of organization of Credit rating evaluation in wider sense in the company affects on performing activities, as the example of construction industry well as on the way of managing. To legal form of organization which makes more space for inade- Credit rating evaluation in wider sense, i.e. quate management in the company, business part- qualitative evaluation of company implies, be- ners, creditors, investors approach with caution sides evaluation of company itself, evaluation of and increased discretion, which adversely affects business environment, considering intensive in- on bomitet evaluation. Some researches that have fluence of environment on activities of company. been performed in the world on this subject show Regarding this, credit rating evaluation in wider that structure of ownership significantly affects sense should contain qualitative evaluation of on corporate reputation [4]. Namely, in theory company and qualitative evaluation of industry to are widely accepted opinions that highly concen- which belongs specified company. trated ownership or high level of insider owner- Qualitative evaluation is based on evaluation of ship undermine corporate reputation. Lower level certain indicators which are not quantitative, but of ownership concentration, small differences in descriptive nature. Regarding this, on one side it is ownership between first and second owner and easier, and on the other it is more difficult process reasonable level of insider ownership are usually of credit rating evaluation in wider sense. signals which encourage corporative reputation. Traditional approach to credit rating evaluation of Maturity of the company represents significant company in civil engeneering is focused on ability of element in credit rating evaluation of the company. company to plan and implement projects [2], where There is no rule between age of company and credit parameters of success are treated as expenses, time rating of the company. Newly established company and quality [3]. Modern approaches to credit rating ussualy ‘carry’’ with beginners problems, which is avaluation in construction company are much wider, unfavorable circumstance in credit rating evalua- exactly in part related to qualitative indicators. tion. However, ‘’youth’’ of organization is not al- Basic goal of this research would be to review ways limiting circumstance, as well as ‘’maturity’’ influence of specific activities of company in con- of organization is not always affirmative circum- struction on analyisis of their credit rating. stance in credit rating evaluation. Generally, in pro- Hypohtesys on which the work based is: cess of credit rating evaluation it is more important

H1: Due to specific activities of construction to identify phase of life cycle in which company is companies, credit rating evaluation of company, situated now, than to determine its age.

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Ordinary private construction company passes Intensity, strength and reliability of business through four phases of life cycle [5]. First phase is connections are one of the important aspects in to- phase of embrionic development which is charac- tal credit rating evaluation. Theoretical approaches terized small volume of business, ownership which which promote integration and cooperation of all is not separated from management, low level of participants in industry are not new [8]. Considering profitability, bad anti-risk ability, and main goal is globalization of business, development of business to survive and move from that phase. In the phase network in modern business becomes more impor- of growth, private construction company mature tant. Vertical and horizontal forms of cooperation quickly, increase sale, expand their business and of organization, internet and strategic integration, develops very fast. Those construction companies trans-national and national business integration which occupy market first, expand space for its provide additional competitive advantage. Network later development. In mature phase private civil of computer-related companies in production of engineering companies have significantly larger one product (Value Added Community) is modern market share than in the previous phase, as result way of thinking and business in organizations. Or- of achieved highly performances. Most important ganization can affect on credit rating if it is included characteristic of recession phase is significant de- in these kind of integration, and it can lose possible crease of profit, which leads to expressed vulner- advantages if it stays out of these processes. ability of company on impact of different internal Largest part of construction industry in the and external factors. That situation can lead con- world aspires to improvement exactly through ac- struction company to bankruptcy or it can be chance cess in integration processes of construction and for new life through phase of innovation. design, thereby responsibility for finished job is Size of organization is also important element concentrated on one organization, although theo- of credit rating evaluation. However, with introduc- ry points on other side of the same process, and tion of modern methods of business this element that is potential problem of repetition in produc- becomes relativized, in sense that it is difficult to tion, which violets traditionally high creativity determine what is small and what large company and originality of production in construction [9]. is. Namely, there are companies which have only On the other side, modern construction has led to few employees, and achieve enormous amounts increased need for cooperation of experts in phas- of profit and/or possess extremely valuable assets, es of design and construction. Growing requests and inversely. This means that in process of com- related to production in construction have result- pany credit rating evaluation are taking into con- ed in need to work together. Study, done on the sideration different criteria of company size, in aim standard size business building in London shows to give objective evaluation of company. Thereby, that its construction was followed with enormous it is good to know whether smaller size companies number of drawings, over 17.000, which are prod- are included in certain business integration, because uct of different professions and specialties and they are gaining strenght, credibility and security for which are included in process of its design and business partners, banks, investors, etc. In process of construction. However, practice shows that real credit rating evaluation, trend of progress (growth) supply chain in construction industry, which in- of company size is positively evaluated during time. cludes designers, architects, contractors, equip- Unfortunately, volume of scientifically relevant ment suppliers, clients, has not integrated enough researches, regarding impact of organizational size towards realization of common goal [10]. Basic on organizational value in construction company, is and constant challenge in construction industry modest. Additional and aggravating circumstances is management of large number of participants in for determination and measurement of this influence process, which are essentially linked, but included are very different, actually non-unique measures of in the whole process in different time and on dif- organization size in theories of organization [6, 7]. ferent ways. Grouping of participants with cluster However, our oppinion is that some established ba- technology represents modern management phi- sic principles regarding size of organization can be losophy in construction, which appears at the end applied on construction company also. of XX century, and it can be one of the ways for

Volume 7 / Number 1 / 2012 287 technics technologies education management solving these and similar challenges by creating mainly unique production and purpose of product ‘’sub’’ organization and culture, which helps to re- dictates size, content, design and shape of product. move barriers for efficient and quality production. Because of the long period of production, actually However, implementation of cluster technology in construction, it is important timely and completely practice is still in development phase [11]. preparation of production process, comprehensive Organization and organizational structure are and efficient logical support and optimal organiza- important determinants of fast and adequate adap- tion of construction. Additional specificity of con- tation to market, as one of the imperative requests struction sector is large number of participants in in modern business, and therefore significant pa- process of construction, which have to be linked, or- rameter of qualitative evaluation of credit rating. ganized and coordinate during complete process of Rigid structures of organization are overcomed with production. Every process in construction industry modern business systems and circumstances where is special quality, regardless of the wider use of typi- business takes place. Extremely flexible structures fication and standardization. Product in construction have possibility of fast adjustment to requirements always requires continual modification, due to the of modern market, which is regular factor of com- need to be always special, which is additional and pany survival. Main characteristic of modern orga- constant request in relation to construction compa- nizational forms are dynamic, flexibility, collabora- ny. By combining specificity of construction prod- tion and reliance on information technology. uct with quality and price, it is provided, on typical Many authors agree that organization, actually way, market share of construction company. Besides organizational structure, cause of large number of constant insisting on the specificity of constructing typical problems in private construction companies. product, in sense of modification of existing prod- All scientific and professional analysis of organi- ucts, alongside in the company is carried out very zational problems in constructing companies in- important process for evaluation of credit rating, and dicates exceedance of centralized and mechanical that is research-development work in order to devel- organizational structures. With increasing volume op new products and other innovation in construc- of activity, constructing companies are realizing tion industry, especially in aim to improve methods from centralized, hierarchy with high structure and and technology of construction. Reasons for elimi- moves on structures which imply greater autonomy nation of product from production program in con- and responsibility of middle level in organization, struction industry are same as for any other prod- which directly improves efficiency and effective- uct: bad sale results, bad compliance with business ness of business. Classical standard management strategy of company, unfavorable market prospect, structures show their incompliance in terms of proj- decreasing of profitability, etc.[12]. ect-oriented construction company [5]. Quality and efficiency of information technol- Main activity of organization is important ele- ogy support has an impact on internal and exter- ment of evaluation of credit rating, which deter- nal users. Information technology have expedite mines purpose and mission of company’s existence. performance of every day activates in company, Different activities are characterized by different affected on structure of organizations, changed levels of market propulsive feature, different level way of offers and demands of products on mar- of profitability, actualities, etc. Various production ket, as well as way of business operating. In this and sales programs of companies represent chance/ time information make vital economic resource. challenge for company or real/potential barrier for Modern companies depend, beside of maintain- development. Characteristic of production, i.e. sales ing of competitiveness on market through offer of programs which are taken into account in evalua- different products and services and improving of tion of credit rating of company are modernity, spe- internal capacity, on quality of information sys- cialization, exclusivity, standardization, innovation, tems for managing of business process. According quality, competitiveness, etc. to certain studies companies which mostly use in- Construction activities, besides diversity and formation technology increase up to 3,8% yearly, complexity of production, is characterized by: long and the one which do not use it only around 0,4%. period of production, large number of participants, According to certain estimates total expenses for

288 Volume 7 / Number 1 / 2012 technics technologies education management information technology (hardware, software), in The modern trend of development of construc- developed countries, have overcome total expens- tion companies involves the participation and in- es which implied on other fixed assets. With this in vestment on foreign markets. Strategy for involve- mind, information technology is important factor ment of construction companies on foreign markets of qualitative evaluation of company. are different and the theory of investment of con- Application of information technology in construction companies is based on the fact that the struction is imperative of time in order to harmonize investment strategy depends on the target market, on time different needs of the many participants in so they adjust on the specifics of that market. Some projecting process and construction on one side, studies have shown that at the beginning of the 21st and users of built facilities on other side. Widely century, the most attractive markets were markets application of information technology in projecting of China, USA, Singapore, Yugoslavia, Germany, process and construction of facilities has become Poland and Russia [16]. The financial crisis has a condition of optimization of that process [13]. certainly slowed down significantly international- Numerous design and production process in con- ization of construction markets and some of gigan- struction are supported by information technology tic of construction industry lead to the collapse. An (CAD-CAM), and A-E-C (architecture-engineer- example is the Spanish “dinosaur” Martins-Fadesa ing-construction) processes are everyday practice who collapsed in 2008 with debt of 5,2 billion dol- in construction. It is the speed in the construction of lars and assets of 17,2 billion dollars and whose facilities significantly increased by robotization and collapse shook the Spanish banking system [17]. integration of CAD-CAM system. Regardless of the current crisis, it is recommended Technology of production is very important el- that construction companies explore investment ement in evaluation of credit rating of company. opportunities in foreign markets and by application The use of modern technologies of production of new approaches in marketing, human resources, affects on the level of competitive advantages of technology and development of unique projects company. Old or obsolete technologies lead to loss provide prestige in the market of construction ser- of market and decrease of profits, while successful vices with traditionally strong competition. Strate- innovation of products as a result of the new ap- gic alliances joint ventures and other forms of in- pliance of technology enables increase of profit. tegration are likely to be organizational models of Beside that, harmonization of structure of organi- investment in a foreign market in the future. zation and technology is necessary condition of The level of innovative tendencies of the com- high efficiency of use of modern technology. In pany is also an actual element of evaluation of evaluation of credit rating are analyzed all aspects credit rating of modern company, through assess- of influence of technology on business operations ment of innovative activity in company. This ele- of company, such as: level of costs, production ef- ment becomes more important considering that in- ficiency, ecological aspects, etc. novation is a very important factor in the survival In construction is characteristic process of com- of companies on modern market. The innovative bining of old technologies with modern production activity of companies is evaluated in the interval technologies [14]. The use of modern technologies from the point of an extremely high risk and un- in construction should lead to improving of quality certainty of innovative activity to the point where of construction, shortening of expenses, increasing the innovative activity is seen as a very important of productivity, improving of demands of security factor of success and opportunity for organization. of products and environmental protection [15]. Because of the specificity and uniqueness of Investment process also presents very important products in construction industry, it is to innovate element in evaluation of credit rating of company. constantly to be competitive and profitable. There- This process is perceived for evaluation of credit fore, the product in construction is treated as the most rating from different aspects while are very interest- important element of the marketing mix. Construc- ing information about types of investment, the level tion is and activity that, as a rule, is activity with a of investment performance, economic efficiency of high degree of innovation. What is the kind of prob- investment, markets in which to invest, etc. lem in construction is called the time lag between

Volume 7 / Number 1 / 2012 289 technics technologies education management innovation and its applications (so-called time lag). projects, transfer of knowledge from project to One of the ways to improve innovative activity in continuous business processes, monitoring if in- construction is coordination between all participants ternational best practices and new recruitment of in construction activities and the use of so-called graduates from the profession [23]. knowledge-anchoring mechanisms [18]. In con- Since competition is one of the most important struction there have been significant changes and factors of environment in context of impact on com- innovations through the use of information technol- pany, the evaluation of competition is very impor- ogy, expert systems, the application of Internet, new tant element of total evaluation of credit rating of materials and constructions, new computerized sup- company. Research of competition can be provide ported process, etc. On the other hand the fact that through research of demand (volume, structure, the production in construction is limited with many oscillation), characteristic of given product, prices, and different regulations are often treated as a barri- technology of production, global characteristic of ers to innovative activity in construction [19]. Also, product/service, recognition of the trademark/com- the request to react quickly to the tendering process pany, etc. Evaluation of credit rating can request and can also seem as barriers to innovation in the con- research of potential competition, i.e. competition struction industry [20]. However, large corporations which presents organization or products/services and government agencies as largest investors are in which are not currently available on market, but po- best position to lead and encourage changes in the tential are interested to entered on market. This only construction industry, focusing on innovation pro- implies on need to undertake an evaluation of long cesses, technology and behavior, through contractual term sustainable credit rating of company. provisions, incentives and selection of contractors. In As is known, 21st century is characterized by some variants clients require to be the only initiators advanced technology, liberalization of trading and of innovation activities in project-oriented organiza- integral market, which resulted in strong compe- tion such as the construction company, which is an- tition and internationalization of business, so the other issue that does not support the innovative ac- large numbers of constructors in construction in- tivities in construction [21], so there is small reason dustry were not exempt from this trend. On the one that constructor in construction industry invest in in- hand side, many construction companies have en- novation, except those which means optimization of tered into joint venture on international market of their process, which means that effects of economy construction services [24]. On the other hand, same volume and effects of involvement of organization companies which joined to that strategy to provide largely failed on that basis [22]. continuously growth and development, has to fight In this regard, there is understanding that in the with international competition on domestic market. construction industry you cannot rely on innova- Thus, construction business is currently between tion to cause radical changes, but on minor or ma- local and international practice of business. Also, jor modifications of inputs which construction use. due to the increasing of internationalization of con- Related to this it is explained about a kind of ad- struction market in construction industry starts to diction of construction industry on other industry increase of competition which increased intensity and about construction industry where dominate causes usually instability on market of construction providers, which indicates on relevant role of con- services. For example, actual expansion of construction industry as a users and not as a produc- structors from Chine, South America, South-East ers of innovation. On the other hand, the fact that Asia and Africa in last few years causes hard tur- the construction industry is services sector creates bulence and displacement of order on list of 10 in the need to assimilate and integrate knowledge world of strongest constructors in construction sec- through the specific organizational forms, increas- tor. Since absence or low competition can lead to ing the possibility of its involvement in innovative decreasing of efficiency and effectiveness of using activity. The research that was done in the 2004th of resource in construction industry, on one hand, in Australia on a sample of 1300 construction some of authors suggest on possibility of collapse industry, such as: investment in research and de- of construction market due to excessive competi- velopment, participation in partnerships and joint tion on it, on other hand [25].

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An additional element in evaluation of long strategy “low bid” very likely not be able to pro- term sustainable credit rating of company is strate- vide the contractor a competitive advantage in the gy of organization which presents long term plan- future. The balance of the interests of contractors, ning of action of organization in order to achieve clients and society as a whole, should be the basis planned goals in future period. Strategy as way of for generating the optimal competitive strategy of achieving of projected goals determines business modern construction company [27]. orientation and direction of activity of organiza- Corporate identity of company is very important tion in future period and by this way determines element of business of modern organization. By level of achievement and performance of organi- evaluation of credit rating of company corporate zation, which has significant influence on its credit identity is seen through analyses of large numbers rating. Incomplete, unclear strategy of acting and of aspects: individuality, politics of corporate iden- non realistic goals are certainly restrictive circum- tity, relations with social environment and image of stances for evaluation of credit rating of organi- organization. Individuality of company is specific of zation because of higher risk from unsuccessful company in relation on other companies and compe- business of organization in the future. tition. Politics of corporate identity is seen through Selection of the right competitive strategy to behavior of company with employees, all types of attract customers is the ambition of most con- communication of organization with environment tractors in the construction industry. The increas- (public relation, advertisement, behavior with ening demands of clients and number of criteria vironment, creation of trade mark, etc) and visual for selection of contractors (especially for public identity of organization (business documentation, works) encourage constructors that beside low collateral material, etc). Social environment implies cost strategy re-generate new competitive strate- on situation in politics, science, low, techniques and gies as a way of providing additional benefits to technology, thus effects on corporate identity of customers. In competitive strategy should certain- company. The image of company is committed by ly be incorporated construction company specific fact how others (customers, suppliers, competition, resources which create a competitive advantage business partners) sees us, so the stability and recog- so this generated strategy can give results. The nition of that image affirmative factor in evaluation theory already offered certain models of optimal of credit rating of company in a wide sense. offers which should help to constructors in defin- The understanding that reputation of company ing of appropriate contractors offer strategies [26]. can not be separated from ethics of business and Previous studies offer a large variety of competi- reliability [28] did not past even construction sector. tive strategies offers in the construction industry, Research which was made with construction com- such as: strategy of low offer (Low bid), strategy panies in USA shows that beside the construction of high technology (High tech), strategy of man- quality, quality of sub constructors, quality of em- aging of innovation (Management innovation), ployees and time of constructions, critical factors of strategy of joint venture (Joint venture), strategy success of construction companies are reputation, of partnership (Partnership), strategy of public re- relation with buyers and business moral [29]. How- lations (Public relation), a longer warranty period ever, construction industry as a whole has bad ethi- strategy Long term of warranty), strategy of tech- cal reputation and in public is opinion about con- nology transfer (Technology transfer), strategy of struction sector as a sector of often corruptions [30]. unique architectural design (Unique architectural Many studies of this topic on example of construc- design), risk sharing strategy (Risk sharing), so- tion sector implies on examples of non ethical be- cial responsibility strategy (Social responsibility), havior of companies in construction industry, while etc. At various internal and external circumstanc- wide by media are shown incidents in this sectors es these strategies lead to different results. Many very common. Namely, it is widespread believ- studies indicate that with increasing of demand ing that construction industry “suffers” from bad on the quality of construction, the increasing de- reputation by influence of unfair tender practice, mands on environmental and social performance manipulation in paying of obligations, corruption, requires the strengthening of the company, the non professional behavior, avoiding of low and

Volume 7 / Number 1 / 2012 291 technics technologies education management regulations, false information, inadequate relation rating information. Their knowledge creates pos- to environment, inadequate application of standard sibility for improving of communication quality in of security at work, etc. [31]. company, as well as communication of company Corporate culture as a system of values, beliefs, with environment. Today in conceiving of theo- norms and customs that define organizational behav- retical and methodological basis for evaluation of ior permeates all aspects of business, and because credit rating insists on acceptation of wide concept of this reason there is very interesting aspect of to- of evaluation of credit rating. tal evaluation of credit rating of company in a wide Although construction industry is subject to the sense. Temporarily organization and target connec- same economic regulations as other sectors, she is tion of more organizations (participants) which are very specific by their characteristics, which should on different level of organization and culture is very be taken into consideration in evaluation of credit important characteristic of activity of construction rating. Referring to these specifics and their influ- sector. Organizational culture of temporarily organi- ence on evaluation of credit rating of construction zations widely looked depend on strategy and con- industry was guiding idea of this document. tent of temporarily organizations, characteristic of projects, project managers and dominant of groups, References location, technology, basic activities, etc. Differences in cultures of construction companies which partici- 1. R. A. I. Frederikslust, ‘‘‘Predictability of Corporate pate in this temporarily organizations are evident and Failure’’, Martinus Nijhoff Social Sciences Division, Leiden, The Netherlands, 1978. they are result of activity of large number of factors 2. G. L. Abraham, ‘‘Critical success factors for the con- and circumstances [32]. Survival and success of or- struction industry’’, In: Moleenar, K R and Chinowsky, ganization in that case depends on their ability to im- P S (Ed.), Proceedings of Construction Research Con- pose their organizational culture to other participants, gress, March 19-21, Honolulu, Hawaii, 2003. or to adjust and change culture of other participants, 3. S. W. Hughes, D. D. Tippett, and W. K. Thomas, ‘‘Measuring project success in the construction in- and before all to learn from such relations. dustry’’, Engineering Management Journal, 16(3), Efficiency of company, certain research implies 31-37, 2004. that low level of efficiency in construction industry, 4. Delgado-García, Juan Bautista, De Quevedo-Pu- in some countries can be in relation with corporate ente, Esther, The Impact of Ownership Structure on culture of constructor [33], so the organizational Corporate Reputation: Evidence From Spain, , De La Fuente-Sabaté, Juan Manuel, Corporate Gover- culture is critical component in maintains of com- nance: An International Review; Nov2010, Vol. 18 petition of construction companies [34, 35]. We can Issue 6, p540-556, 17p. say that organizational culture is asset which should 5. Li Wen-hua, Tao Ping, Study on the organization be managed so it is adequate used in achieving of structure reforming of the private construction enter- organizational goals. Beside this, it has signifi- prises, China-USA Business Review, ISSN1537-1514, USA, Jun. 2007, Volume 6, No.6 (Serial No.48). cant influence on strategy of appearance, intensity, 6. Evers, F. T., Bohlen, J. M., Warren, R. D. (1976), The strength and reliability of business relations, ap- Relationships of Selected Size and Structure Indica- plication of information technology, as well as ap- tors in Economic Organizations, Administrative Sci- plication and development of new technology and ence Quarterly, 21(2): 326–342. methods. It is very important to emphasize that cer- 7. Price, J. L. (1997), Handbook of Organizational Measurement, International Journal of Manpower, tain research also, clearly shows that there is strong 18 (4/5/6): 305–558). influence of differences between organizational 8. Lawrence, P.R. and Lorsch, J.W. (1967), New man- cultures of partners on performance of joint invest- agement job: the integrator, Harvard Business Re- ment in construction industry [36]. view, (November– December), 142–51. 9. Winch, G.M. (2000), Institutional reform in British construction: partnering and private finance, Build- Conclusion ingm Research & Information, 28(1), 141–55.) 10. Al-Bizri, Salam, Gray, Colin, Management frame- Stabile and successful relation of companies work for technology clusters implementation, Con- with environment, and especially business rela- struction Management & Economics; Jul2010, Vol. tions with creditor are based on reliable credit 28 Issue 7, p771-782, 12p, 3 Diagrams, 1 Chart.

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11. Gray, C. (1999) Value for Money: Building the 27. Tan, Yongtao, Shen, Liyin Langston, Craig, Con- Buildings the UK Likes, Constructing Excellence, tractors’ Competition Strategies in Bidding: Hong London. Kong Study, Journal of Construction Engineer- 12. D. M. Lambert, J. U. Sterling: “Identifying and ing & Management; Oct2010, Vol. 136 Issue 10, Eliminating Weak Products”, Businnes, New York, p1069-1077, 9p, 9 Charts, 1 Graph. 1988., str. 3. 28. Fombrun, C.J. (2001), Corporate reputations as 13. Adeli, H.; Saleh, A.: Control, Optimization and economic assets, in Hitt, M.A., Freeman, R.E. and Smart Structures, High-Peformance Bridges and Harrison, J.S. (eds) The Blackwell Handbook of Buildings of Future, J. Wiley & Sons, Inc. 1999. Strategic Management, Blackwell Publishers, Ox- 14. Ngowi, A. B., A hybrid approach to house construc- ford, pp. 289–312. tion - a case study in Botswana, Building Research & 29. M. Hutchings, and J. Christofferson, Factors lead- Information; May97, Vol. 25 Issue 3, p142-147, 6p. ing to construction company success: perceptions 15. Pan, Wei; Gibb, Alistair G. F.; Dainty, Andrew R. of small-volume residential contractors, ASC Pro- J., Leading UK housebuilders’ utilization of offsite ceedings of the 37th Annual Conference, University construction methods; Building Research & Infor- of Denver, Colorado, 263-270, 2001. mation; Jan2008, Vol. 36 Issue 1, p56-67, 12p, 3 30. Krisen Moodley, Nigel Smith and Christopher Nigel Charts, 7 Graphs. Preece, Stakeholder matrix for ethical relationships 16. Ranko, B./Crosthwaite, D. (2001), The future of in- in the construction industry, Construction Manage- ternational construction: some results of 1992-1999 ment and Economics (June 2008) 26, 625–632. surveys, Building Research & Information, 29, 3, 31. Paul Bowen, Akintola Akintoye, Robert Pearl and 242-247. Peter J. Edwards, Ethical behaviour in the South 17. Gorboljskaya, U. (2008), Evropa ne rastet, in: Ve- African construction industry, Construction Man- domosti, 7, 1. agement and Economics (June 2007) 25, 631–648. 18. Drejer, Ina, Vinding, Anker Lund, Organisation, ‘an- 32. Ozorovskaja, Renata, Voordijk, Johannes, Wilder- choring’ of knowledge, and innovative activity in con- om, Celeste, Leadership and Cultures of Lithuanian struction, Construction Management & Economics; and Dutch Construction Firms, Journal of Con- Sep2006, Vol. 24 Issue 9, p921-931, 10p, 4 Charts struction Engineering & Management; Nov2007, 19. Slaughter, E.S. (1998), Models of construction in- Vol. 133 Issue 11, p900-911, 12p, 4 Charts. novation, Journal of Construction and Engineering 33. Zhang, S. Liu, Anita M., Organisational culture Management, 124(3), 226–31. profiles of construction enterprises in China, Con- 20. Barlow, J. (1999), From craft production to mass cus- struction Management & Economics; Aug2006, tomisation: innovation requirements for the UK house- Vol. 24 Issue 8, p817-828, 12p, 2 Diagrams, 3 building industry, Housing Studies, 14(1), 23–42. Charts, 1 Graph. 21. Briscoe, G.H., Dainty, A.R.J., Millett, S.J. and 34. Ozorhon, B., Arditi, D., Dikmen, I., & Birgonul, Neale, R.H. (2004), Client-led strategies for con- M.T. (2008), The role of organisational culture struction supply chain improvement, Construction in construction company alliances, International Management and Economics, 22(2), 93–201. Journal of Human Resources Development an Man- 22. Pries, F. and Janszen, F. (1995), Innovation in the agement, 8, 177–191. construction industry: the dominant role of environ- 35. Chen, W.T., & Chen, T.-T. (2007), Critical suc- ment, Construction Management and Economics, cess factors for construction partnering in Taiwan, 13(1), 43–51. International Journal of Project Management, 25, 23. Karen Manley, Steve McFallan and Stephen Kajew- 475–484. ski, Relationship between Construction Firm Strat- 36. Ozorhon, Beliz, Arditi, David, Dikmen, Irem, egies and Innovation Outcomes, Journal of Con- Birgonul, M. Talat, Implications of Culture in the struction Engineering & Management; Aug2009, Performance of International Construction Joint Vol. 135 Issue 8, p764-771, 8p, 2 Charts. Ventures, Journal of Construction Engineering & 24. Raftery, J., Pasadilla, B., Chiang, Y.H., Hui, E.C.M. Management; May2008, Vol. 134 Issue 5, p361- and Tang, B.S. (1998), Globalization and construction 370, 10p, 2 Diagrams, 1 Chart. industry development: implications of recent developments in the construction sectors in Asia, Construction Management and Economics, 16(6), 729–37. Corresponding Author 25. Akintoye, A. and Skitmore, M. (1991), Profitability Jasmina Cetkovic, of UK construction contractors, Construction Man- Faculty of Economy in Podgorica, agement and Economics, 9(4), 311–25. Montenegro, 26. Shen, L. Y., Drew, D. S., and Zhang, Z. H. (1999), E-mail: [email protected] Optimal bid model for price-time biparameter construction contracts, Journal of Construction Engi- neering & Management, 12(3), 204–209.

Volume 7 / Number 1 / 2012 293 technics technologies education management Evaluation of the Solvency of the Companies Which Represent Serbian Market by the Use of BEX Model

Janko Cvijanovic1, Sasa Muminovic2, Vladan Pavlovic1, Zvonko Sajfert3, Jelena Lazic4, 1 Megatrend University, Graduate School of Business Studies, Belgrade, Serbia, 2 Julon, d.d., Member of the Aquafil Group, Ljubljana, Slovenia, 3 Univerzity Novi Sad, Technical faculty „M. Pupin“, Zrenjanin, Serbia, 4 Economics institute, Belgrade, Serbia.

Abstract ri’s study is very well known (Meir Tamari, 1966), even more famous is Beaver’s study (William H. In this paper 65 Serbian companies were tested Beaver, 1967), and the most famous is Altman’s. by use of BEX model. Decision to use this model Ratio analysis, and especially prognostic models stems from the fact that it is about model developed based on it, were not seriously received by academ- in our surroundings, and capital markets in the sur- ic circles until the Altman’s study appeared. Altman roundings are much more similar to Serbian capi- himself mentions this in his study from 1968. How- tal market than it is the case with developed capital ever, high prognostic value of Altman’s Z score markets. BEX model categorises companies in six made this method extremely popular for bank- groups. Companies classified in the first group are ruptcy prediction, and ensured Altman’s significant considered world-class companies, while existence position in financial theory. Altman later adjusted of the companies classified in the sixth group is and improved this method with his associates for endangered. Testing results show that neither one different needs and users. (Edward Altman, 2000). listed Serbian company is considered world-class Adjusting of Altman’s model, i.e. development of company, while according to the results of BEX in- various prognostic models for bankruptcy predic- dex 14 companies are considered problematic. Ob- tion, based on ratio indicators of financial analysis tained results characterize Serbian capital market were done by Deakin (1972), Edminster (1972) as high risk and non-attractive. Nevertheless, BEX Blum (1974), Diamond (1976), Pinches and oth- model results should be taken for granted, having in ers (1975), Taffler (1977) and Chen and Shimerda mind numerous limits of this model. (1981) and others. (see papers by Michael Dugan, Key words: models for bankruptcy prediction, 1988, and Emanuel Aziz et al. 1988.) After Enron ratio analysis, Business Excellence models, BEX and Worldcom downfall, prediction of bankruptcy index, Belgrade Stock Exchange has once again become a subject of big interest. New adopted methodology of Basel II also testifies Introduction about popularity of predictive methods based on financial analysis. During last years numerous more Anticipation of a potential bankruptcy, i.e. sig- sophisticated models of bankruptcy prediction were nalization of potential business and financial dif- developed. Part of them is based on cash flow and ficulties has always been a subject of interest not fund flow concept; some others are based on techni- just to the investor, creditor and management, but cal analysis, while predictive models based on neu- also for business partners, employees, and even for ron networks are more and more popular during last the society. Therefore it also represents one of the years in academic circles. Neural networks have basic tasks of the financial analysts. Use of ratio been widely used (Tam and Kiang, 1992; Wilson analysis as analytic technique for bankruptcy prog- and Sharda, 1994; Back et al., 1996; Zhang et al., nosis originates from 1930s. Studies from that pe- 1999; Tan and Poh, 2002) in the last decade. All of riod showed that certain indicators can indicate that them claim a certain degree of success in terms of these companies are in front of bankruptcy. Tama- predictive accuracy. (Angela Yip, 2006)

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1. BEX Model BEX model “is used for distinction of good and bad companies in numerous masters papers and PhD 1.1. Explanation of the model dissertations as the sole valid criteria. Besides that, at many faculties, its use within management, ac- BEX model (Business Excellence Model) is a counting and finance is being studied.“ BEX index model based on balance indicators. It enables fast is calculated according to the following formula: and simple assessment of companies’ business excellence. Its authors emphasize many advantages BEX = 0,388 ex +0,579 ex +0,153 ex +0,316 ex , of BEX model in comparison to other similar 1 2 3 4 models, such as: with: –– BEX model and BEX index are made in ex – Earnings Before Interest and Taxes/ accordance with business conditions in 1 Total assets Croatian economy. Authors have been ex – Net Operating Profit /Equity Capital x studying data on companies between 2000 2 capital price and 2006; ex – Net Working Capital /Total assets –– BEX index doesn’t consider indicators of 3 ex – 5 (Net Profit +Depreciation + capital market, therefore it can be used to 4 Amortization) /Total Debt assess companies recently listed on capital market, or those who are not listed on the According to the above mentioned, solvency stock market at all. border measured by BEX index makes 1: –– BEX model enables evaluation of the solvency and prediction of success and BEX = 0.388 x 17,2% + 0,579 x 1,0 + 0,153 25% + failure, that makes it much better model + 0,316 x1 = 1,0 in comparison to the models directed to prediction of financial difficulties such as Altman’s, Ohlson’s or Argent’s model; 1.2. Analysis of model parameters –– BEX model contains one completely new indicator of company’s financial power, which 1.2.1. Earnings before interest and taxes/Total has never been used before in the world. assets - ex1 Economic rentability, i.e. income rate on total BEX model caused much attention in Croa- assets has been shown by EBIT and total assets ra- tia. According to (Belak, Aljinović-Barać, 2008b) Table 1. Ranging of stocks of the companies according to the values of BEX index Business excellence Business excellence Forecast for the future index (bex) rang Company has top results, and if management continues with higher than 6,01 world class improvements, top results can be expected in next 4 years. excellent candidate Company's business is excellent, and this can be expected for the next 4,01 - 6,00 for world class 3 years if management continues with improvements. Company's business is very good, this can be expected in next 2 years 2,01 - 4,00 very good if management continues with improvements. Company's business is good, but improvements can be expected only 1,01 - 2,00 good if changes are undertaken. Solvency is positive, but unsatisfying. It is necessary to start with 0,00 - 1,00 border area serious improvements. Existence is endangered. It is necessary to urgently reconstruct and Lower than 0,00 bad improve business, otherwise there is danger of bankruptcy (90% (negative) possibility). SOURCE: Belak, V. & Aljinović-Barać, Ž. (2008),p. 34.

Volume 7 / Number 1 / 2012 295 technics technologies education management tio. According to source model (Belak, Aljinović- company is losing its substance. Traditionally, it

Barać, 2007) border value ex1 makes 6,675%, is considered that company is losing its substance while in review model (Belak, Aljinović-Barać, if it operates with loss, but not if it doesn’t reach 2008a) border value makes 17,20%. requested income rate. This is extremely impor-

Generally, ex1 presents the most significant rent- tant at the prediction of bankruptcy, since com- ability indicator, since it shows earning capability pany which regularly pays its obligations is not of entity. It is about indicator which is necessarily threatened by bankruptcy. Of course, for long used in financial analysis. BEX model authors call term, company must reach adequate rentability. ex1 excellence indicator, and since model itself is However, in conditions of economic depression called Business Excellence Model, one can con- or recession it cannot be concluded that company clude that it is about the most significant indicator which doesn’t make certain income rate loses its in the model. Nevertheless, in BEX model, ex1 in- substance. However, the model’s authors have set dicator doesn't have big influence on final level of the minimum rate as non-risk rate of return. But it BEX index, since, according to model’s author, its is questionable whether this really measures „eco- basic purpose is stabilization of BEX model. Men- nomic profit“ since capital price is always higher tioned position is surprising since this indicator than the rate of return for non-risk investments. has the biggest ponder in Altmans reviewed model Nevertheless, reactions on ex2 indicators be- from 1977 and in the model for non-production come more serious after it was reviewed. While companies’ bankruptcy prediction. original indicator represents upgraded Return on Equity ratio, which takes income rate on non-risk investments, reviewed ex indicator represents in- 1.2.2. Net Operating Profit / Equity Capital x 2 capital price - ex dicator which doesn’t have theoretical basis, and 2 is unknown in the literature and business practice. According to model authors, indicators of val- One can measure income which dismisses Total ue creation, which in numerator has Net Operating assets, which is EBIT or Operating Profit and in- Profit, and in denominator product Equity Capi- come which dismisses Equity Capital, which is tal and income on relatively non-risk investments Profit, where depending on analysis need one can based on economic profit – profit which outreaches take profit before or after taxation. In literature, price of Equity Capital. Indicator should be higher and in economic life, indicator which shows how than one, what implicates creation of value above much net profit has been created by total assets is capital price, while indicator value lower than one also known. However, this indicator requests fur- shows that company is losing its substance. In ther decomposition, since is determined both by source model (Belak, Aljinović-Barać, 2007) nu- earning power of the company EBIT/Total assets, merator was Net Profit, and later it was replaced by Equity Capital / Total Debt Ratio and average by Net Operating Profit as to “prevent impact of interest rate on borrowed funds. Basis of reviewed different anomalies and extreme exceptional in- indicator ex2, measures amount of Net Operating comes and loss in financial reports on height of Profit and Equity Capital. Net Operating Profit BEX indexes“. According to authors themselves height is determined by earning capability of the when explaining original BEX model, it is about company (Total assets), and not by Equity Capi- absolutely new indicator never before used in the tal. Therefore, it is theoretically unfounded per- world. Original ex2 indicator should be rejoined ception of height of Net Operating Profit, which that for Equity Capital price it takes non-risk in- rejects the Equity Capital. Model authors men- come rate. Equity Capital price is always higher tion that they reviewed indicators x2 so to exclude than non-risk income rate. The second suggestion non-operating costs and incomes, and it would be should be made for the fact that same capital price acceptable. But, in comparison with the original, is used for assessment of the companies which reviewed ex2 indicator excludes calculated interest are exposed to different risks. Next suggestion on landed funds. Consequence of the mentioned is can be made for the fact that company which has that x2 is also being improved by fall of rentability indicator ex2 value lower than one, it means that if leverage is been raised, where interest rates are

296 Volume 7 / Number 1 / 2012 technics technologies education management not important. Inclusion of capital price in the for- the relative theoretical free money from activi- mula contributes to theoretical discrepancy since ties, which is the profit, increased for amortiza- Operating Profit didn’t make net assets equal to tion and depreciation and cover all the obligations Total assets, i.e. company. Theoretically, there is that money" (Belak, Aljinović-Barac, 2007) in the discrepancy in calculation of income tax for Op- model maximum value of this indicator is limit- erating Profit as well, instead of taking really de- ed to the 10. In Anglo- Saxon practice, a similar termined income tax. Model authors mention that indicator often used as a rapid test for assessing by reviewing of the model, “BEX model in its ba- solvency In fact, analysts believe the company sis is not changed, but the way of calculation of vulnerable if the solvency indicator of net liabil- certain indicators has been changed“.We cannot ities / EBITDA is close to 4 or more. The BEX agree with the mentioned attitude having in mind model, however, evaluates ex4 indicators based on significance of changes of 2x indicator. the premise that liability should be covered by a five-year free cash flow, which leads to expecta- 1.2.3. Working Capital / Total Assets - ex tions that business conditions remain unchanged 3 in the five-year period. So as opposed to indicators

Working Capital / Total Assets - ex3 liquidity that are frequently used in Anglo-Saxon practice, indicator shown by Working Capital and Total under which a solvency is considered endangered Assets ratio. It is about commonly used indicator if the four-year EBITDA does not cover liabilities, for company liquidity assessment. Model authors ex4 solvency considers solvency endangered if the (Belak, Aljinović-Barać, 2008a) emphasize that five-year income increased for amortization and this ratio should make 25% or more. “If indicator depreciation does not cover company liabilities. ex3 is 25% or higher it is good, but if it is lower or However, the indicators of net liabilities / EBITDA negative it is bad.“ Therefore, assessment of this and ex4 have significant differences. Specifically, parameter is based on the premise that Working ex4 takes both revenues and expenditures from Capital should make 25% of Total Assets value. the funding and revenues and expenditures caused It is generally accepted that optimal value of Net by emergency situations. It does not exclude the Working Capital is conditioned by specificities of income and expenditure caused by extraordinary the company itself, and especially of its sector. situations in ex4, is especially unexpected since

Working Capital analysis is based on the question: the ex2 is revised for that specific purpose. It is un- what should be financed by Working Capital? and clear why the profit increased for amortization and if financing of inventory is done by long-term depreciation is not connected to the provision if loans: does cash flow cover accrued liabilities? they wanted to approximate the theoretically free One also should have in mind that decrease of cash flow from all activities. Working Capital doesn’t mean deterioration of fi- However, the assumption that a five-year in- nancial position, and increase of Working Capital come increased for amortization and depreciation doesn’t only mean by improvement itself of finan- should cover the accrued liabilities of the firm is cial position. Therefore, the view that net working doubtful. This assumption is hardly viable in real capital should be 25% of total assets is theoreti- life. Another important problem iz the impact of cally unfounded. Surprisingly also paragraph by the crisis on financial reporting, accounting and models that ex3 indicator, as the only indicator of auditing (see Sabovic, Miletic, Sabovic 2010) and liquidity in the model should have a major impact also the problem of retail financial market (Besic, on the final index value of BEX; it is considered Savic, Sajfert, Nikolic 2010). Firstly, because it an indicator that should stabilize the model. does not only predict the impact of the life cycle and impact of business cycles on business of the 1.2.4. 5 x (Profit + Amortization + Deprecia- company, but also predicts the potential changes tion) / Total Debt - ex in the environment. Those have been very in- 4 tensive in recent years, particularly in transition

As the authors point out, ex4 indicator is an in- economies. In addition, it is not logical to expect dicator of financial strength, which is "based on that a five-year free cash flow covers a total liabil-

Volume 7 / Number 1 / 2012 297 technics technologies education management ity of the company, without taking into account model, this company is ranked as world class can- the organic composition of assets of companies, didate, who can expect similar results in the next their profitability and liquidity, which is largely three years. There is no stock on Belgrade Stock caused by their activities. Although the Z-score exchange which could be classified as world-class. was developed exclusively for manufacturing Very good range of business excellence includes companies and Altman himself noted the prob- 12 companies: Goša montaža ad, Velika Plana lem that the sample is not quite homogeneous in (3.740), Planinka ad, Kuršumlija (3.340), Messer terms of belonging to any industry, even in terms Tehnogas ad Belgrade (3.218), Coca-Cola HBC of companies’size. (Altman, 2000) BEX model, Serbia ad (3.208), Vino župa ad, Aleksandrovac however, evaluates companies from different sec- (2.966), Napred GP ad Beograd (2.955), Lasta ad tors but not from nonpofit organizations sectors Beograd (2.763), Jedinstvo Sevojno ad Sevojno (see more in Cvijanović, Besic, Sajfert, Grujcic, (2.448), Centroproizvod ad, Beograd (2.430), Bam- Lazic 2010) which is also very important part of bi Banat ad , Beograd (2,150), Alfa plam ad Vranje national economy. (2.148) and TE - TO ad Senta (2.135). BEX index value for those stocks means that one can expect 2. Values of BEX indexes for stocks which similar results in the next two years (2010 and 2011). represent Serbian capital market Observed by sectors (sectoral classification of BSE) top 13 companies are from the sector BEX index calculations for stocks that rep- of drinks manufacturing (3), food manufacturing resent the Serbian capital market are based on (3), construction (2), production of chemicals and data published in prospectuses on the website chemical products (1), road transport and pipeline of Belgrade Stock Exchange. All the stocks of transport (1) and specialized construction (1), pro- non-banking sector which were part of Belex15 duction of electrical equipment (1), and manufac- index during September 2010 and non-banking ture of non-metallic minerals (1). sector stocks that entered into the composition Stocks of 13 companies have BEX value index of Belexline indexes, including the shares of the 1.01 to 2.00. This value assumes that companies Oil Industry of Serbia, have been included in the do business well, but the improvement can be ex- calculation. By this way 65 stocks were chosen. pected only if action is undertaken. For stocks of "Srbolek ad", Belgrade, and "AG- The next 22 stocks of the companies listed in ROCOOP ad" Novi Sad, which are marked with Table 2 are in the border area between good and the tag "BP" (without prospectus). BEX index due poor performance (BEX index value between 0 to lack of data for 2009 was not calculated. For and 1.00). The remaining 14 shares of listed com- stocks of "Montinvest ad" Belgrade data for 2008 panies have a vulnerable existence according to and 2009 were obtained from the website of the results of BEX index, which was negative. Ac- Serbian Business Registeres Agency. cording to the makers of BEX model, restructur- To calculate the parameter ex2 cost of capital of ing and improvements are urgently needed, Oth- 9% was used. Non-risk interest rate of 9% was cal- erwise, bad business will continue, and according culated, based on expected annual inflation and the to definition of the model, there is risk of failure credit rating of Serbia. (Vladimir Vučkovic, 2010). (probability is over 90%). The same indicator for the calculation of net operat- Only 9 of 63 companies (14.28%) have indi- ing income was applied for income tax rate of 10%, cator of profitability ex1 higher than desirable which is currently in force in Serbia. The values of 17.2%, which, according to the authors of the indicators: market capitalization, EPS, P/E, P/B and model, shows very low profitability of companies ROE have been taken from the Internet site of the entering the index. This is partly a consequence of

Belgrade Stock Exchange, 13.09.2010, or represent the current crisis. Value of the ex2 – creation of the data from the annual balance for 2009. value higher than one has 25 companies (39.68%). Among the stocks listed in Table 2, Galenika In 38 companies there is problem that companies, Fitofarmacija ad Zemun stock has the highest BEX according to the authors of the model, lose their index - 4.798. This means, that according to BEX substance. The liquidity calculated by indicator

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Table 2. Rang according to assessment of business excellence 2009 Rb. Company Mark ex1 ex2 ex3 ex4 BEX 1 Galenika Fitofarmacija a.d. FITO 0,250 2,481 0,683 10,000 4,798 2 Goša montaža a.d., Velika Plana GMON 0,299 3,959 0,547 3,950 3,740 3 Planinka a.d., Kuršumlija PLNN 0,223 4,017 0,079 2,896 3,340 4 Messer Tehnogas a.d., Beograd TGAS 0,090 0,960 0,168 8,233 3,218 5 Coca Cola HBC-Srbija a.d. CCHS 0,201 3,092 0,091 4,196 3,208 6 Vino župa a.d., Aleksandrovac VINZ 0,178 4,651 0,240 0,529 2,966 7 Napred GP a.d., Beograd NPRD 0,195 4,175 0,014 1,456 2,955 8 Lasta a.d., Beograd LSTA 0,156 4,387 -0,269 0,645 2,763 9 Jedinstvo Sevojno a.d., Sevojno JESV 0,200 2,623 0,291 2,554 2,448 10 Centroproizvod a.d., Beograd CNTPB 0,219 2,422 0,424 2,778 2,430 11 Bambi Banat a.d., Beograd BMBI 0,095 3,190 0,190 0,750 2,150 12 Alfa plam a.d., Vranje ALFA 0,100 0,830 0,595 4,866 2,148 13 TE - TO a.d., Senta TETO 0,217 3,434 -0,057 0,226 2,135 14 Toza Marković a.d., Kikinda TMKI 0,097 3,094 0,031 0,174 1,889 15 Dimničar a.d., Beograd DMNR 0,124 1,710 0,251 2,132 1,751 16 Crvenka fabrika šećera a.d. CRFS 0,120 1,690 0,523 1,981 1,731 17 Mlekara a.d., Subotica MLSU 0,100 1,819 0,084 1,865 1,694 18 Imlek a.d., Beograd IMLK 0,104 1,956 0,080 1,147 1,548 19 Banini a.d., Kikinda BNNI 0,035 2,469 0,034 0,219 1,517 20 Putevi a.d., Užice PUUE 0,139 1,365 0,088 1,194 1,235 21 Jaffa fabrika biskvita a.d. JAFA 0,097 1,472 0,139 0,939 1,208 22 Voda Vrnjci a.d., Vrnjačka Banja VDAV 0,076 1,504 0,076 0,903 1,197 23 Soja protein a.d., Bečej SJPT 0,102 1,623 0,445 0,289 1,139 24 Vital a.d., Vrbas VITL 0,037 1,641 0,346 0,273 1,104 25 Iritel a.d., Beograd IRTL 0,108 1,138 0,309 0,936 1,044 26 Veterinarski zavod Subotica a.d. VZAS 0,076 1,041 0,283 1,152 1,040 27 Albus a.d., Novi Sad ALBS 0,053 1,222 -0,026 0,636 0,925 28 Metalac a.d., Gornji Milanovac MTLC 0,104 0,297 0,122 1,886 0,827 29 Dijamant a.d., Zrenjanin DJMN 0,092 1,084 0,048 0,396 0,796 30 Montinvest a.d., Beograd MOIN 0,078 0,601 0,257 1,049 0,749 31 Avala Ada a.d., Beograd AADA 0,074 0,770 0,057 0,755 0,722 32 Carnex a.d., Vrbas CRNX 0,044 0,437 0,268 1,207 0,692 33 Telefonija a.d., Beograd TLFN 0,064 0,992 0,012 0,169 0,654 34 Energoprojekt holding a.d. ENHL 0,079 0,607 0,154 0,419 0,538 35 Čoka duvanska industrija a.d. COKA 0,075 0,367 0,261 0,740 0,515 36 BAS a.d., Beograd BASB 0,007 0,532 -0,194 0,627 0,479 37 Impol Seval a.d., Sevojno IMPL 0,084 0,602 -0,081 0,287 0,459 38 Tipoplastika a.d., Gornji M. TIPO 0,023 0,325 0,260 0,667 0,448 39 Telefonkabl a.d., Beograd TLKB 0,048 0,162 0,451 0,794 0,432 40 Ruma fabrika kože a.d., Ruma RUMA 0,047 0,232 0,550 0,547 0,410 41 Pinki a.d., Zemun PNKZ 0,019 0,232 0,013 0,828 0,406 42 Sunce a.d., Sombor SNCE 0,046 0,242 0,348 0,541 0,382 43 Institut za ispitivanje mat. Bg. INMT 0,006 0,060 0,086 0,976 0,359 44 Kopaonik a.d., Beograd KOPB 0,028 0,138 0,188 0,522 0,284 45 Sloga a.d., Novi Pazar SLNP 0,037 0,123 0,153 0,538 0,279 46 Ratko Mitrović a.d., Beograd RMBG 0,071 0,051 0,111 0,607 0,266 47 Neoplanta a.d., Novi Sad NEOP 0,012 -0,127 0,146 0,768 0,196 48 Velefarm a.d., Beograd VLFR 0,015 0,710 -0,597 -0,568 0,146 49 Pupin Telecom a.d., Beograd PTLK 0,007 -0,308 0,053 0,360 -0,054 50 Simpo a.d., Vranje SMPO 0,032 -0,266 0,180 0,089 -0,086 51 Pobeda holding a.d., Petrovaradin POBH 0,048 -0,455 -0,076 0,527 -0,090 52 Progres a.d., Beograd PRGS 0,025 -0,494 0,083 0,366 -0,148 53 Informatika a.d., Beograd INFM 0,051 -0,538 0,263 0,248 -0,173 54 Tigar a.d., Pirot TIGR 0,071 -1,037 0,053 0,573 -0,383 55 Politika a.d., Beograd PLTK 0,006 -1,106 -0,170 0,062 -0,645 56 Utva silosi a.d., Kovin UTSI -0,005 -1,185 -0,014 -0,302 -0,786 57 NIIS - NIS a.d., Novi Sad NIIS -0,164 -0,723 -0,033 -1,116 -0,840 58 Sinter a.d., Užice SINT -0,065 -1,363 0,198 -0,878 -1,061 59 Energomontaža a.d., Beograd EGMN -0,066 -2,674 0,128 -0,838 -1,819 60 Bačka a.d., Sivac BCKA -0,146 -4,128 -0,254 -1,933 -3,096 61 BIP u restrukturiranju a.d. BIPB -0,331 -5,072 -0,413 -2,203 -3,824 62 Heba a.d., Bujanovac HEBA 0,013 -11,477 -0,243 0,295 -6,585 63 Ikarbus a.d., Beograd IKRB -0,319 -59,165 -0,623 -2,038 -35,119 64 Agrocoop a.d., Novi Sad AGRC n.p. n.p. n.p. n.p. n.p. 65 Srbolek a.d., Beograd SRBL n.p. n.p. n.p. n.p. n.p.

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Table 3. Value of BEX indexes for all stocks 2006-2009 Rb. Company Mark 2006 2007 2008 2009 1 Galenika Fitofarmacija a.d. FITO 4,264 4,192 4,474 4,798 2 Goša montaža a.d., Velika Plana GMON 0,829 1,810 1,472 3,740 3 Planinka a.d., Kuršumlija PLNN n.p. 2,331 2,273 3,340 4 Messer Tehnogas a.d., Beograd TGAS 3,571 3,845 3,744 3,218 5 Coca Cola HBC-Srbija a.d. CCHS 2,637 2,974 2,569 3,208 6 Vino župa a.d., Aleksandrovac VINZ 2,958 4,152 4,264 2,966 7 Napred GP a.d., Beograd NPRD 0,667 0,234 1,555 2,955 8 Lasta a.d., Beograd LSTA 1,307 2,399 2,312 2,763 9 Jedinstvo Sevojno a.d., Sevojno JESV 1,885 4,044 3,365 2,448 10 Centroproizvod a.d., Beograd CNTPB 0,981 1,332 1,794 2,430 11 Bambi Banat a.d., Beograd BMBI 1,174 0,904 1,085 2,150 12 Alfa plam a.d., Vranje ALFA n.p. 2,086 2,240 2,148 13 TE - TO a.d., Senta TETO 2,373 1,338 1,357 2,135 14 Toza Marković a.d., Kikinda TMKI 0,675 0,782 1,097 1,889 15 Dimničar a.d., Beograd DMNR n.p. 1,743 1,768 1,751 16 Crvenka fabrika šećera a.d. CRFS 2,658 2,691 2,363 1,731 17 Mlekara a.d., Subotica MLSU 1,411 1,989 2,017 1,694 18 Imlek a.d., Beograd IMLK 0,317 0,647 1,332 1,548 19 Banini a.d., Kikinda BNNI 2,461 1,092 0,778 1,517 20 Putevi a.d., Užice PUUE 1,059 0,838 1,314 1,235 21 Jaffa fabrika biskvita a.d. JAFA 1,399 0,680 0,678 1,208 22 Voda Vrnjci a.d., Vrnjačka Banja VDAV n.p. 1,000 0,454 1,197 23 Soja protein a.d., Bečej SJPT n.p. 1,461 1,822 1,139 24 Vital a.d., Vrbas VITL 2,811 0,304 1,848 1,104 25 Iritel a.d., Beograd IRTL 2,266 0,987 0,309 1,044 26 Veterinarski zavod Subotica a.d. VZAS 0,725 1,098 0,726 1,040 27 Albus a.d., Novi Sad ALBS 0,471 0,253 -0,338 0,925 28 Sve akcije bez NIS-a BELEX 0,576 0,680 0,910 0,879 29 Metalac a.d., Gornji Milanovac MTLC 0,335 0,571 0,591 0,827 30 Dijamant a.d., Zrenjanin DJMN 1,050 0,666 1,563 0,796 31 Montinvest a.d., Beograd MOIN 1,600 3,117 5,084 0,749 32 Avala Ada a.d., Beograd AADA 1,252 0,293 0,533 0,722 33 Carnex a.d., Vrbas CRNX 0,866 1,779 1,581 0,692 34 Telefonija a.d., Beograd TLFN 0,784 0,647 1,182 0,654 35 Energoprojekt holding a.d. ENHL 1,479 0,483 0,507 0,538 36 Čoka duvanska industrija a.d. COKA 0,173 0,409 0,680 0,515 37 BAS a.d., Beograd BASB 0,130 0,209 0,719 0,479 38 Impol Seval a.d., Sevojno IMPL n.p. 2,558 1,344 0,459 39 Tipoplastika a.d., TIPO -0,083 -0,134 0,387 0,448 40 Telefonkabl a.d., Beograd TLKB 0,857 0,698 -0,108 0,432 41 Sve akcije BELEX 0,576 0,608 0,728 0,411 42 Ruma fabrika kože a.d., Ruma RUMA 0,787 0,535 0,561 0,410 43 Pinki a.d., Zemun PNKZ 0,341 0,283 0,311 0,406 44 Sunce a.d., Sombor SNCE 0,694 0,269 0,469 0,382 45 Institut za ispitivanje mat. Bg INMT 0,234 0,250 0,431 0,359 46 Kopaonik a.d., Beograd KOPB 0,425 0,342 0,896 0,284 47 Sloga a.d., Novi Pazar SLNP 0,145 1,532 1,275 0,279 48 Ratko Mitrović a.d., Beograd RMBG -1,251 0,405 0,845 0,266 49 Neoplanta a.d., Novi Sad NEOP 1,161 0,353 0,133 0,196 50 Velefarm a.d., Beograd VLFR 0,429 0,542 1,152 0,146 51 Pupin Telecom a.d., Beograd PTLK n.p. 2,897 2,024 -0,054 52 Simpo a.d., Vranje SMPO -0,346 -0,574 -0,393 -0,086 53 Pobeda holding a.d., Petrovaradin POBH -1,092 -0,731 -0,115 -0,090 54 Progres a.d., Beograd PRGS -0,170 -0,126 -0,191 -0,148 55 Informatika a.d., Beograd INFM -0,570 -0,206 0,746 -0,173 56 Tigar a.d., Pirot TIGR 0,030 -0,247 -0,352 -0,383 57 Politika a.d., Beograd PLTK -0,021 -0,277 -1,008 -0,645 58 Utva silosi a.d., Kovin UTSI 1,682 0,710 0,725 -0,786 59 NIIS - NIS a.d., Novi Sad NIIS n.p. 0,493 0,401 -0,840 60 Sinter a.d., Užice SINT 0,133 0,325 0,418 -1,061 61 Energomontaža a.d., Beograd EGMN 2,338 1,143 0,230 -1,819 62 Bačka a.d., Sivac BCKA 0,787 -0,078 -0,289 -3,096 63 BIP u restrukturiranju a.d BIPB -4,062 -2,317 -1,349 -3,824 64 Heba a.d., Bujanovac HEBA -0,776 -0,011 -4,506 -6,585 65 Ikarbus a.d., Beograd IKRB -1,849 -4,766 1,624 -35,119 66 Srbolek a.d., Beograd SRBL 0,791 1,403 n.p. n.p. 67 Agrocoop a.d., Novi Sad AGRC -1,127 -0,962 -0,793 n.p.

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ex3 higher than the required 25% have 19 of 63 there wasn’t single company in this rank. It should (30.15%). Only one stock has maximum power of be mentioned that the comparability of the Serbian finance 10, measured as ex4 indicator. and Croatian economy by BEX model was sig- Serbian most liquid shares that are part of nificantly disrupted since BEX index for Croatian BELEX15 index are ranked at 4, 12, 18, 23, 26, 28 companies was calculated before the outbreak of and 34 place in Table 2, which indicates that there financial crisis, while the BEX index for Serbian is no correlation between the liquidity of shares companies was calculated for 2008 and 2009. In BEX index. this period, there appeared to be spill-over effects Observing the values of BEX index for all non- of the global economic and financial crisis on the banking sector stocks that are part of the Belex Serbian economy. It should also be noted that BEX index (except for a couple of stocks without a model assumes a stable currency exchange rate of prospectus and NIS), positive trend can be seen domicile, which is not the case in Serbia. - Table 6. It is interesting data on constant and One reason for the lack of high-ranked compa- significant growth of aggregate business profit in nies (world class and world class candidate accord- 000 RSD in that period and the movement of the ing to BEX index) among the above in the Serbian aggregate gross income, which suggests a huge capital market is the fact that during the past few problem of depreciation of domestic currency and years there has been consolidation of ownership and high interest rates, and increasing indebtedness of the withdrawal of stocks from the stock exchange, individual companies. creating a closed joint stock companies (Galenika, Looking at the data in Table. 3, which shows Sintelon, Hemofarm...). On the other hand some of the value of BEX index for listed stocks in the the big companies with majority state ownership four-year period: 2006-2009, it is evident that no did not go public. In addition, through the priva- stock was in category world’s class with BEX tization process an opportunity was missed to en- index values over 6.01. The highest value of the courage development and stock exchange (Vladan BEX index had Montinvest ad, Belgrade stock, Pavlović, Saša Muminović 2010). and it was 5.084 in 2008. Table 4. Values of BEX indexes for period 2006- Prognostic value, in terms of continuing op- 2009 erations in the coming years, was not correct for BELEX ex1 ex2 ex3 ex4 BEX several stocks. For example: Montinvest ad, Bel- 2006 0,064 0,458 0,142 0,838 0,576 grade, (in 2008 BEX index value was 5.084, what 2007 0,068 0,671 0,159 0,762 0,680 would have to mean three years of similar results, 2008 0,104 1,103 0,112 0,677 0,910 which did not happen) Vital ad, Vrbas (in 2006 2009 0,082 1,144 0,101 0,578 0,879 BEX index value was 2.811, which would necessarily mean three years of similar results and it did not happen). 3 Results analysis and concluding remarks It is interesting to look at the stocks whose BEX index is constantly growing in mentioned According to BEX model, companies are clas- four-year period: Centroproizvod ad, Beograd, sified into six categories, with companies from Toza Marković ad Kikinda, Imlek ad, Beograd, the first category assessed as a world class com- Metalac ad, Gornji Milanovac and Pobeda Hold- pany, expected to achieve great results in next four ing Co., Petrovaradin, which means constant im- years. In the sixth class of classified companies provement of performance of these companies there are those who are considered vulnerable. In It is interesting to compare data in Table 3 with the paper, 65 companies from the Serbian capital data on the Croatian capital market. In 2006 and market was tested based on BEX model. Accord- 2007 in the world class companies according to ing to the BEX models for 2009, no Serbian listed BEX index values four companies were listed:, company was eligible for classification in the first Konzum dd, Zagrebačka pivovara and Siemens. category, i.e. no company was considered a world Six companies were listed among the candidates class company. Only one company is considered for the world class company in 2007, while in 2006 a candidate for a world class player. The third cat-

Volume 7 / Number 1 / 2012 301 technics technologies education management egory contains 12 companies, and 13 in the fourth. which are equally reliable. Models that take into In fifth category, which includes companies whose account non-financial information are actually business is considered to be on the border between Business Excellence Model, while as the model good and bad, there were 22 companies. The re- for prediction of bankruptcy of non-financial in- maining 15 companies, according to the results of formation is used by Argenti’s model. BEX index, have endangered existence (accord- Unlike the model for prediction of bankruptcy ing to the model, probability of their bankruptcy is based on the balance sheet and stock indicators, the higher than 90%). Business Excellence (BE) models are based on nu- Unfavourable results, classify Serbian capital merous non-financial parameters. BE models were market as highly risky and unattractive. It is indis- developed in previous years, primarily by the TQM putable that the current crisis has great influence experts, while the models for prediction of bank- on the economy and capital markets, and thus it ruptcy based on rational analysis were largely de- also had influence on the research results. How- veloped by experts in the field of finance. The role ever, the results are not much better even when of the BE model is twofold, namely as a means of considering the value of BEX index for the previ- assessing what a company has, and what the results ous year. Justification can be partially found in the achieved for its main stakeholders, and as a means to fact that the stock market is not representative of explain and predict how the results will be achieved the Serbian economy, and that the real blue chip for stakeholders. (Flynn & Saladin, 2001, Kanji, companies are outside the stock exchange. 2002). (Nihal Jayamaha, Nigel Grigg and Robin The model results are reliable only if the model Mann, 2009) BE best known models are: Business itself is reliable. BEX testing models, however, are Excellence Model - EFQM, The Australian Busi- almost impossible. The model can be tested only at ness Excellence Framework (ABEF), the Baldrige the fifth group, which classifies companies whose Criteria for Performance Excellence (BCPE), and existence is endangered. The predictions of bank- the Singapore Quality Award Criteria (SQAC). BE ruptcy based on the BEX index for 2006, 2007 and models perceive the company through a number of 2008 in Serbia have been proved unsatisfactory. categories, mainly non-financial nature. For exam- However, it should be noted that BEX model is ple, Australian Business Excellence Model evalu- not the model for prediction of bankruptcy. It was ates companies based on the following parameters: developed with aim to evaluate the excellence of Leadership; Strategy and planning; Knowledge and companies and forecast their future business ac- information; People; Customer and market focus; tivities. The authors cite that “BEX model allows Innovation, quality and improvement;: Success and assessment of excellence, and predicts success sustainability; Strategic direction; Organizational and failure, making it a far better model than the culture; Leadership throughout the organization; models aimed at forecasting the financial difficul- Environmental and community contribution; Un- ties such as Altman, Ohlson or Argenti‘s model.” derstanding the business environment; The plan- However, predicting success with BEX index is ning process; Development and application of re- based on the assumption "if management contin- sources; Collection and interpretation of data and ues with the improvements" (Belak, Aljinović- information; Integration and use of knowledge in Barać, 2007) operations, while the medium and decision making; Creation and management of long term forecasting of stock prices is approxi- knowledge; Involvement and commitment; Ef- mated by: "the situation and trends of BEX index, fectiveness and development; Health, Safety and information on management activities to improve well-being; Knowledge of customers and markets; operational excellence and information on invest- Customer relationship management; Customer per- ment in the brand." 0However, if information on ception of value; Innovation process; Supplier and "activities of management to improve operational partner processes; Management and improvement excellence and information about investments in of processes; Quality of products and services; the brand" is at hand, perhaps BEX index is not Indicators of success; Indicators of sustainability) needed at all. Namely, classical ratio indicators (Nihal Jayamaha, Nigel Grigg and Robin Mann, on the basis of this information provide forecasts 2009)

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Business Excellence Model (BEX), developed decreasing. Thus, the rise and fall of indicators by Belak and Aljinović Barać, however, differs P/B can mean for investors both gains and losses, from other models of BE methodologically, and depending on the movement of stock prices. Be- is far more reminiscent of the models for predic- lak and Aljinović Barać state that one can expect a tion of bankruptcy. Even the authors of the model significant increase in the price of those shares that in (Belak, Aljinović-Barać, 2007) giving an over- have a high index of BEX, a low P/B and low P/E view of previous major studies on the develop- ratio, provided that there are no non-accounting ment of forecast models, only explain models for reasons which prevent this. Here we can note that prediction of bankruptcy, not the BE models. De- the yield (earning) (E) and the anticipated yield, tailed view of Altman’s model in the same article which determines the market value of shares (P) is not surprising since the structure of the model always affect "non-accounting reasons" if the bal- and Altman’s BEX model is largely similar. De- ance is realistic. If the "accounting reasons" affect spite the fact that these two models have com- the yield and the market value of shares, then the pletely different purpose, Altman’s model "has no balance is not realistic, and if we start from the claim in respect of the optimality of the resulting premise that balance is not realistic, we bring into discriminate function" (Altman, 2000), but deals question the very setting of BEX model, since the exclusively with the prediction of bankruptcy, model is based on the balance sheet indicators. while the BEX model evaluates company’s excel- It should be noted that the emerging capital mar- lence. Insufficient reliability of predictive meth- kets cannot be seen in the same way as developed, ods based on rational analysis, which excluded not only due to greater volatility and significant de- non-financial information encouraged Argenti to viations from normal distributions of returns, but formulate models of multiple administrative er- also because of certain figure of non-synchronous rors, in which non-financial information is given trading. (Nikola Radivojević, Jelena Lazić, Janko due weight. Argenti has identified the most fre- Cvijanović, 2009). All the studies show that the le- quent reasons for the collapse of companies across gality of the developed capital markets is not valid a range of books written by journalists (Mihajlo in the Serbian capital market. Namely the "level Travar, Janko Cvijanović, Jelena Lazić. 2009). of market liquidity is low and persistent in Serbia. Models for prediction of bankruptcy at the same Additionally, results confirm that time-varying time, indicate the creditworthiness of companies illiquidity and its volatility is highly unstable in to some extent,. But it should be noted that these this market." (Boško Živkovic, Jelena Minović, models do not pretend to assess the financial posi- 2010) For example, research (Radivojević et al. tion, therefore not even credit rating of the compa- 2009) points out the limitations of the application nies. Travar, Cvijanović and Lazić correctly point of modern portfolio theory in the Serbian capital out that Altman has not even monitored the Z Score market while (Muminović, Pavlović, 2007) points over time which is a conditio sine qua non for eval- the unreliability of the application of the CAPM uating the financial position of the company. model. After all, the research carried out in Croa- Although BEX index itself is not calculated tia, indicates that the correlation between changes on the basis of indicators from the capital market, in market prices of shares and actual business per- connection between the BEX indices and market formance in general is very low. (Branka Ramljak, indicators is discussed. The findings are non-con- Paško Anić-Antić, 2010) clusive. Thus, for example, at the Belgrade Stock Since the highest weight in the model are indi- Exchange companies with unsatisfactory results cators of profitability, the following view can be and with growing trend of market capitalization accepted: the model allows the extraction of high can be perceived. On the indicator P/B simulta- profile companies in principle and the company's neously influence both changes in market prices low level of business excellence. However, due to of stocks and changes in the carrying value of the numerous weaknesses of the model, the authors stocks, which allows many extreme cases, such believe that the prognostic value of the model is as for example the case where realized losses in- unsatisfactory. crease the P/B ratio, even when market value is

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Acknowledgement 11. Nihal, Jayamaha, Nigel Grigg and Robin Mann. 2009. “A study of the validity of three major busi- This issue forms part of the results of research ness excellence models in the Asia Pacific region”, on project 179001 “Organizational and information Total Quality Management & Business Excellence, support to the quality management system as a key Vol. 20, (11): 1213 – 1227 factor in improving the competitiveness of domes- 12. Pavlović, Vladan, Muminović Saša. 2010. „Značaj tic enterprises and ensuring their faster access to razvoja finansijskih tržišta za srpsku privredu“ EU and world markets” financed by the Ministry of Ekonomski Institut, Industrija 4/2010 education and science, Republic of Serbia. 13. Radivojević, Nikola, Jelena Lazić, Janko Cvijanović. 2009. Possible applications of contemporary portfolio theory on appear markets. Indus- References trija, vol. 37, br. 4: 1-13 1. Altman, Edward. 2000. Predicting Financial Distress 14. Ramljak, Branka, Anić-Antić, Paško. 2010. Korel- of Companies: Revisiting The Z-Score and ZETA acija tržišne cijene dionica i uspješnosti poslovanja Models ftp://iies.faces.ula.ve/Banca/Publicaciones_ poduzeća koja kotiraju na tržištu kapitala Repub- cientificas_sobre_Riesgo_Bancario/modelos%20 like Hrvatske: posljedice za proces odlučivanja. indices%20especiales/Indicador%20Zscores/Zs- Ekonomski pregled, 61 (11): 666-682 cores%20Revisado.pdf 15. Sabovic S., S. Miletic, S. Sabovic, (2010), The im- 2. Aziz, A., Emanuel, D., Lawson, G., Gerald, H., Bank- pact of crisis in financial reporting, accounting and ruptcy Prediction - An Investigation of Cash Flow auditoring, TTEM 3/2010, PP. 613-620 Based, Journal of Management Studies 25:5 Septem- ber 1988:419-437 16. Tamari, Meir. 1966. “Financial Ratios as a Means of Forecasting Bankruptcy, “ Management Interna- 3. Beaver, William H. 1967. “Financial Ratios as Pre- tional Review, 4: l5-21. dictors of Failure“ Accounting, Selected Studies, In- stitute of Professional Accounting January: 71-111 17. Travar, Mihajlo, Cvijanović, Janko, Jelena Lazić. 2009. Kapacitet za makroekonomske promene. Beo- 4. Belak, Vinko, Aljinović-Barać Željana. 2007: “Busi- grad: Ekonomski institut. ness excellence (BEX) indeks – za procjenu poslovne izvrsnosti tvrtki na tržištu kapitala u Republici Hrvat- 18. Vučković, Vladimir. 2010. Non-Risk Interest Rate skoj.” RRIF br.10:.15-26 and Business Finances in Serbia: Limitations and Possible Soluttions. Megatrend Review.vol 7(2): 5. Belak, Vinko, Aljinović-Barać, Željana. 2008a: Tajne 225-244 tržišta kapitala. Zagreb: Belak Excellens d.o.o. 19. Yip, Angela. 2006. Business Failure Prediction: A 6. Belak, Vinko, Aljinović-Barać, Željana. 2008b. BEX Case-Based Reasoning Approach, Review of Pacific indeks godinu dana poslije - Model koji oslikava Basin Financial Markets and Policies. Vol. 9, No. sadašnjost i budućnost, http://portal.wlw.hr/Up- 3: 492- 508 loads/1461/1/3/353/414/Bex.pdf 20. Živković, Boško Minović Jelena. 2010. Illiquidity of 7. Besic, C., M. Savic, Z. Sajfert, M. Nikolic, (2010), Frontier Financial Market: Case of Serbia, Pano- Overview of retail financial market in Vojvodina – economicus (3): 349-367 multivariate approach, TTEM 1/2010, pp. 131-138 8. Cvijanovic, J. M., C. Besic, Z. Sajfert, Z. Grujcic, J. Lazic, (2010), The efficiency of nonprofit organiza- Corresponding Author tions, TTEM 3/2010, PP. 579-589 Janko M. Cvijanovic, Megatrend University, 9. Dugan, Michael T., Christine V. Zavgren., Bank- Belgrade, ruptcy Prediction Research: A Valuable Instructional Serbia, Tool, Issues in Accounting Education, Spring 88, Vol. E-mail: [email protected] 3, Issue 1:48-64. 10. Muminović, Saša, Vladan, Pavlović. 2007. Calcula- tion of the beta coefficient for the stocks listed on Belgrade stock exchange, Računovodstvo, vol. 51, (7-8): 46-58

304 Volume 7 / Number 1 / 2012 technics technologies education management Algorithm approach of the implementation of investment building project with the analysis of optimal choice of construction assignment

Veis Serifi1, Predrag Dasic2, Srecko Curcic3, Zoran Stojkovic4 1 SaTCIP Ltd., Vrnjacka Banja, Serbia, 2 SaTCIP Ltd., Vrnjacka Banja, Serbia, 3 University of Kragujevac, Technical Faculty, Cacak, Serbia, 4 Megatrend University, Faculty of Management, Zajecar, Serbia.

Abstract 2. Simplified algorithm of the implementation of building project Contemporary design is characterized by the investment process approach with the previous Process appraoach to business with previous definition of process structure. Modern manufac- defining of general process structure of investment turing investment to be productive, rational and building is a characteristic of modern investment economical. Decisions about the choice of inves- designing. It is defined as a way of regulated pro- tors transfer of construction and selection of the cesses for the sake of efficient, effective and cost- best performers should be the aim of modern proj- effective designing and execution of construction ect management, just in time, with minimal con- works. struction costs and no lack of quality. This paper Main phases of designing are activity zones presents an algorithmic approach to the construc- and based on them appropriate process and infor- tion investment project with an analysis of optimal mation-technological protocol is formed with ap- choice of assignment construction. propriate methodologies and procedures of project Key words: investment building, algorithm, implementation. norms and standards, construction assignment The best examples are the papers [2, 3], which provides an overview of one model of production- 1. Introduction investment building, through the overview of context diagram (activity limits) of the functional Consideration of the scope of preparatory works model for development of production-investment and designing is performed after static and dynamic building, decomposition diagram (horizontal links planning. Good and timely performance of prepa- of activities), trees of activities (vertical links of ratory works are the basis for rapid and rational activity) of the process of information model of performance of major works. Local conditions can production-investment building, which has re- have a decisive impact on preparatory works, which placed a few hundred pages of legal and sublegal particularly depend on the amount of major works. acts. When designing this process, standard for Rough division of preparatory works is related functional modelling (Integation DEFinition) to the construction of temporary roads, production was used, implemented through BPWin (Bussines capacities for the needs of construction and acco- Process Windows) CASE tool [2-4]. Examples of modation capacities for workers. application of modern standards as IDEF method- Depending on location where the works are ology for business process improvement are pre- performed, out of the populated places (the big- sented in the works [5-12]. gest construction sites) or in populated places (the We have developed a simplified algorithm of smallest construction sites) and scope of major the implementation in investment building, which works, the preparatory works will also depend. consists of the following activities, in accordance Cost of preparatory works can even amount to with the new Law on Planning and Construction 35% of the value of major works [1]. (figure 1) [13-15]:

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–– Approval for construction, standards in investment building, we provide the –– Investor’s needs – concept, same level of knowledge transfer to all participants –– General project, in the process, in order to „prevent the transfer“ of –– Previous feasibility study, knowledge acquired from master to student. –– Design project, –– Feasibility study, 4. Assignment of the development of tech- –– Building permit, nical documentation and facility con- –– Major project, struction –– Detailed design, –– Handover of building, Sequence of steps for assignment of construc- –– Use and maintenance of facility. tion is realized through following phases: tender, offer, contract. Tender is bidding at the public auction that is submitted in specific form, under specific conditions and in specific period. Tender is public bidding that is submitted in specific form, under specific conditions and in predicted deadline, and the offer is characterized by the amount of goods or services, availability and price of resources, application of technologies and processes. When we wish to oblige the manufacturer, then we sign a contract in written form, where deadlines and projects are specified and the investor is obliged by the payment of the agreed price. Development of technical documentation and construction are assigned through public bidding or auction, direct negotiation of by engineering system. Figure 1. Possible algorithm of methodology and The investor decides on the manner of assign- procedure of project implementation in investing the development of technical documentation ment building and the construction of facility. After obtaining a right to construct, by any of 3. Necessity of optimal results the ways of assigning the construction, the contractor is entrusted with the construction of invest- To create a realistic image of the amount of re- ment facility. Figure 2 shows a diagram of consid- source necessary for the implementation of an in- ering the choice of investment contract. vestment project, it is necessary to apply appropri- Decision of the investor about the way of assign- ate standards and norms with the aim to determine ing the construction and choice of the most favour- the price of project implementation. able contractoris independent, he informs all par- How to reach optimal results? ticipants about his decision and signs the contract. Researchers in various fields have attempted Figure 3 shows the model of assigning and to answer the question asked through recording evaluation of offers and contracting from the as- and analysis of individual and group operations. It pect of investor and contractor, as well as mutual was started with optimal sequence of operations, connection of activities. optimal body position of the participants in the process, distribution of materials, tools and ma- 4.1. Assignment of facility construction chines, and to perform a process with the smallest through collection of offers consumption of energy of workers, machines and materials in the shortest period. Assignment of building of some specific ob- Optimal relations of production factors are de- jects is done by collecting written offers from the fined as a rule or „norm“. By developing norms and contractors, by the free choice of the investors:

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Figure 2. Diagram of considering the choice of investment contract [1, 13-15]

–– Roads, –– Bridges, –– Dams, –– Subways etc.

On the basis of the offers collected, the investor independently decides to which contractor he will assign the construction and he formulates the Act of acceptance of the offer and informs all the contractors from whom he had asked for the offers. The company to whom the construction is assigned, i.e. whose offer is accepted with the reasons for accepting, is specifically stated in this Act.

5. Conclusion The aim of this paper is for the textual part of predicted legal regulations to be shown graphical- Figure 3. Model of assigning and evaluation of ly in the form of the model, algorithm or scheme. construction through offer submission and con- Modern investment production should be produc- tracting from the aspect of orderer and contrac- tive, rational and cost-effective. Hundreds of writ- tor [1, 13-15] ten pages are replaced by a few graphs [2,3].

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Gurarantee of success is supported by mod- ics and Computer-Integrated Manufacturing, Vol. 24, ern production capacities, software support, good Issue 6 (2008), p. 755– 762. technical documentation, advanced technology 7. Ciurana, J., Garcia-Romeua, M.L., Ferrer, I. & Casadesus, S.M., A model for integrating process and equipment and well-developed project of con- planning and production planning and control in struction organization. Decreasing number of de- machining processes. Robotics and Computer- lays and disruptions are related to in advance ob- Integrated Manufacturing, Vol. 24, Issue 4 (2008), p. served and foreseen circumstances and conditions 532–544. under which the construction will develop and 8. Eldabi, T & Paul, R.J., Evaluation of tools for modeling manufacturing systems design with multiple finding adequate solutions for possible obstacles. levels of detail. International Journal of Flexible The fact that traditional construction is only re- Manufacturing Systems, Vol. 13, No. 2 (2001), p. lated to talent, skill and long-term experience of 163–176. individual is still implemented in practice. 9. Hernandez-Matias, J.C., Vizan, A., Perez-Garcia, J. & Contemporary project management does not Rios, J., An integrated modeling framework to support manufacturing system diagnosis for continuous im- imply the quantity of building, but building just in provement. Robotics and Computer-Integrated Manu- time with minimal costs of building and without facturing, Vol. 24, Issue 2 (2008), p. p. 187–199. deficiences in quality [4]. 10. Kikuchi, Y.; Hirao, M.: Activity and information modeling of comprehensive assessment for sustainable process design. Computer Aided Chemical Acknowledgement Engineering, Vol. 26 (2009), pp. 1123-1128. 11. Mahfouz, A.; Hassan, S.A. & Arisha, A.: Practi- This paper is part of project TR35034: The re- cal simulation application: Evaluation of process search of modern non-conventional technologies control parameters in twisted-pair cables manufac- application in manufacturing companies with the turing system. Simulation Modelling Practice and aim of increase efficiency of use, product qual- Theory, Vol. 18, Issue 5 (May 2010), pp. 471-482. 12. Qin, S.F., Harrison, R., West, A.A. & Wright, D.K., ity, reduce of costs and save energy and materials, Development of a novel simulation modeling system funded by the Ministry of Education and Science for distributed manufacturing, Computers in Indus- of Republic of Serbia. try, Vol. 54, Issue 1 (2004), p. 69–81. 13. Serifi, V.; Dasic, P. & Curcic, S.: One Algorithm of Implementation Process of the Investment building References Project. In: Proceedings of 10th International Con- ference ″Research and Development in Mechanical 1. Serifi, V.: Logisticka podrska u investicionoj gradnji Industry – RaDMI 2010″, Volume 2, Donji Mila- sa posebnim osvrtom na upravljanje cvrstim ko- novac, Serbia, 16-19. September 2010. Vrnjacka munalnim otpadom. Master thesis, 2010. Technical Banja: SaTCIP Ltd., 2009, pp. 927-932. Faculty Cacak. 14. Serifi, V.; Dasic, P. & Curcic, S.: Algorithm of the 2. Serifi, V.; Dasic, P.; Jecmenica, R. & Labovic, D.: Process of Decision-Making, Development and Functional and Information Modeling of Production Control of Technical Documentation in Investment Using IDEF Methods. Strojniski vestnik – Journal of Building. In: Proceedings of 10th International Con- Mechanical Engineering, Vol. 55, No. 2 (2009), pp. ference ″Research and Development in Mechanical 131-140. Industry – RaDMI 2010″, Volume 2, Donji Mila- 3. Dasic, P.; Serifi, V. & Dasic, J.: Primena IDEF stan- novac, Serbia, 16-19. September 2010. Vrnjacka darda za funkcionalno I informaciono modeliranje Banja: SaTCIP Ltd., 2009, pp. 933-939. procesa strucnog usavrsavanja u osnovnom i sredn- 15. Serifi, V.; Dasic, P.; Curcic, S. & Stojkovic, Z.: jem obrazovanju. Journal of Research and Develop- Algorithm Aproach of the implementation of ment in Mechanical Industry (JRaDMI), Vol. 1, no. 1 Production-Investment uilding Project. Journal of (2009), str. 7-20. Research and Development in Mechanical Industry 4. BPWin Methods Guide. Logic Works Inc., Princeton, (JRaDMI), Vol. 2, No. 2 (2010), pp. 81-96. New Jersey, 1997. -128 p. 5. Ang, C.L., Luo, M. & Gay, R.K.L., Development of a Knowledge-based manufacturing modeling system Corresponding Author: based on IDEF0 for the metal-cutting industry. Inter- Predrag Dasic, national Journal of Production Economics, Vol. 34, SaTCIP Ltd., Issue 3 (1994), p. 267 – 281. Vrnjacka Banja, 6. Chang, X., Sahin, A. & Terpenny, J., An ontology- Serbia, based support for product conceptual design. Robot- E-mail: [email protected]

308 Volume 7 / Number 1 / 2012 technics technologies education management Endurance testing of web servers by simulation of DoS and DDoS attacks and stress testing on the example of Famtic.com

Radoje Cvejic1, Vuk Pavlovic2, Gordana Djokic2 1 “Megatrend” University Belgrade, Serbia, 2 Faculty of Sciences, Novi Sad, Serbia.

Abstract ing the server’s stability. Stress test is conducted under usual working capacity to the point of server In order to provide security and efficient web flooding. This test can imply simulation of http re- server functioning, various mechanisms of protec- quests by hundreds or even thousands of users. In tion are used. Active protection measures are systems this way, web server performances are checked in such as IDS (Intrusion Detection System), whereas order that information about system’s behaviour un- precautionary measures include various techniques der the circumstance of flooding could be obtained. of endurance testing of web server. The aim of test- The whole process is performed in order that the ing server capacity by stress test is to draw a conclu- results i.e. server performances could be observed, sion on the system’s reaction to a large number of because the initial presupposition is that by know- users’ requests as well as to attacks like DoS (Denial ing system performance one is able to optimize the of Service) and DDoS (Distributed Denial of Ser- server as well as possible. The results obtained by vice). The paper displays basic concepts of attacks testing, such as the response time on a request, are like these, including the simulation of a DoS attack. compared to the results expected by the users, i.e. Several various means of conducting stress testing the longest waiting period on a requested response are also presented in the paper. Detailed case study that is acceptable to the users. Because of that, serv- of stress test on the example of web site famtic.com er optimization is crucially important to users. represents a specific solution which can be used for Nowadays, many applications which test en- testing web server endurance. durance of a server performance are being devel- Key words: DoS, DDoS, endurance testing of oped. Testing server endurance usually implies web server, stress test stress testing which is conducted for a better optimization of a system’s performance. The essence 1. Introduction of this paper is based on a stress test conducted on the concrete example, where further optimiza- It can be seen that protection mechanisms are tion of a web site is done according to the obtained not completely reliable, owing to which they are results. The first part of the paper explains basic effective only in some DoS and DDoS attacks. concepts related to DoS and DDoS attacks, as Since it is very difficult to defend from these at- well as the differences between malicious and un- tacks, it is important to take as many precaution- intentional DoS and DDoS attacks. The part about ary measures as possible that, among other things, stress testing is based on the similarities between also refer to testing web server endurance. It is DoS and DDoS attacks on one side, and standard necessary to make the simulation of DoS and stress test of web server on the other. Talking fur- DDoS attacks to test the server endurance against ther about testing web server endurance, following such attacks. Simulation of the attacks is a kind part of the paper displays simulation of DoS and of preventive testing that has the aim to check the DDoS attack as a form of stress test, and detailed system’s stability and reliability. case study on the example of web site famtic.com. Stress testing is used in order to intentionally At the end, major problems during stress testing flood a server with requests it is not able to process. are presented, as well as suggestions for a more Endurance testing of web server implies determin- adequate testing of web server endurance.

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2. DoS And DDoS Attacks The attacks are done by more of them. It can be done by hundreds or even thousands of computers 2.1. DoS attack in well organized attacks. [1] The methods of carrying out and organizing DoS - Denial of Service Attack - is an at- DDoS attacks may vary. The simplest method is an tempt to make a computer resource flooded and organized attack where a large number of attack- its aim is to prevent it from functioning properly. ers individually and at the same time carry out indi- The means to carry out a DoS attack may vary, vidual DoS attack on the same computer. The more but generally they imply an organized attack on advanced types of this method include various "tro- a web site, a service, or similar, in order to stop it jans" where infected computers at a predefined mo- function properly or at all.[1] The targets of DoS ment carry out individual DoS attacks. The "weak- attacks may be small websites and services, but ness" of such an attack is that the moment and the high-profile web servers of banks and sites such computer that is to be attacked are predefined in as Microsoft.com, Facebook.com and Twitter.com advance, as well as the impossibility of cancelling also can have problems with well-organized and the attack. The attacks with a more precise control carried out DoS attacks.[2][3][4] are mostly based on "zombie" principle, malware infected computers controlled by "puppet master" computer. This type of an attack is more complex; it can change the target, timing of the attack, and also has the ability to be cancelled. In comparison to standard DoS attack, DDoS attack is more difficult to carry out, but also represents a greater menace.

2.3. UNINTENTIONAL DoS Figure 1. DDoS attack description Unintentional DoS Attack - can occur when a web site undergoes effects similar to DoS attacks, Saturating a computer with external requests not due to a deliberate attack, but due to a sudden for communication is a frequent and simple meth- spike in popularity. Often, it happens when a pop- od of attacking. In such cases, computer cannot ular websites posts a link to the small websites, respond or is too slow in responding to legitimate which are less well-prepared for traffic, i.e. Large requests for a service to be available. The final ob- number of visits in a short period. jective of DoS attacks resetting the target comput- On the day of Michael Jackson’s death a large er because of the flood. Consuming the resources number of sites including Google and Twitter saw temporarily can cause large harm, but resetting the the search by keywords "Michael Jackson" as server in some cases requires a chain of other ac- DDoS attack.[5][6] tions that must be taken by the administrators. The sites with news are most frequently prone Denial of Service attacks are considered viola- to this type of "attack" also known as "Digg ef- tions of the IAB's Internet proper use policy, and fect". [7] The sites that "unintentionally break" the policies of most Internet Service Providers. In other web sites are Digg, Fark, StumbleUpon etc. some countries they are also considered violations Since most sites target a large number of visi- of the laws. tors and increasing popularity, DoS attacks of this type do not require special actions, but at- 2.2. DDoS tention should be paid to configuring anti-DoS protection properly, since it can deny potential DDoS - Distributed DoS Attack - is a type of "good" visitors. DoS attack in which flooding the target computer resource is not done by a single computer.

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3. Endurance testing of web server - stress Main reason to perform stress testing on a web testing server and site is to ensure that the web server or site should not stop working under DoS or DDoS Generally, stress testing is a type of testing that attacks, while, in the most usual sense, stress test has the aim to determine endurance of the whole can help to ensure that a web site continues to op- system or certain component of the system. It con- erate even if there are many visits. sists of a series of tests which are carried out under usual, normal circumstances in order to detect critical elements in the system. [8] The goal of stress 3.1. Simulation of DDoS attacks as a type of testing is drawing conclusions about the stability STRESS TEST of the system, which are obtained by overloading Since DDoS attacks are one of the greatest the system performance. threats for web servers to function properly, stress Stress test generally consists of a certain sce- testing generally includes tests that simulate this nario and algorithm. Testing is usually carried out type of attack. Impact of DDoS attacks on server under normal circumstances to which a specific is reflected both in bandwidth and the processing scenario, which implies extreme or risky require- abilities of servers. [1][9] Therefore, stress test is ments that lead to system flood, is applied. design to affect the previously mentioned server Stress test is performed most frequently, in order performance. to test web server endurance, and in this case the One of the characteristics of DDoS attacks is server is flooded by the simulation of excessive traf- sending excessive traffic that floods the HTTP fic, in order to test its stability and reliability. Web server, i.e. sending too many requests that the server testing is carried out by tests that simulate server is unable to process in pre-defined period. too many requests for a server in a particular period Thus, test is aimed at simulating excessive traffic. of time. In this way the degree of server endurance DDoS attack works with so called "infected com- in case of too many requests is determined, where puters" which, in case of stress testing, can rep- the higher degree of endurance suggests that there resent controlling collectors of information such is less possibility for a server to be flooded. as the number of unsuccessful load of pages and Excessive number of requests to the server is page elements, download speed et al. usually considered malicious attack, such as DoS One of the more general goals of DDoS simu- and DDoS attacks. Unintentional attacks are con- lation at a web server and site is to determine the sidered to be certain activities of users that have maximum number of visitors per day and requests the effects of DoS and DDoS attacks. Stress test- that a web site can support, as well as to determine ing includes simulation of such attacks to obtain the weaknesses of individual web pages. the results with the aim to optimize and customize the system to endure the attacks as well as possible. A detailed test also helps determine the time 3.2. Stress Testing of a Web Server Based on required for regular establishment of servers and Statistical Information (Virtual Users) sites performance after the attack, as well as to Tools for stress testing are largely based on cre- determine the necessary action to reduce the suf- ating many virtual users with different logs and fered losses. Thus, stress test is aimed at prevent- activities. One of such test can simulate thousands ing effect of attack and quick handling the damage of users who access the site in pre-defined period, caused by the attacks. where each of them, according to a predefined rule, By stress testing the system component that is chooses particular links. Important parameters are most sensitive to overload is found, and therefore the number of requests, the errors that arise, and re- it represents a guideline for further optimization sponse time of the page at some period. of the system. Also, it is important to determine According to statistical data conclusions are which part of the system is most exposed to the made about the shortcomings and weaknesses of attacks, and then to focus on improving perfor- websites and servers. Stress testing can be carried mance of that part. out within the perceived critical points, in order to

Volume 7 / Number 1 / 2012 311 technics technologies education management optimize and improve them. The essence of stress except that it can detect additional bugs we cannot testing according to statistical data is to notice typ- detect using standard single user testing such as er- ical user profiles and with their help determine the rors with SQL Transactions, can detect and prevent activities and requests of the users. Also, analysis errors related to poor optimization of certain pages of statistical data contributes to finding the parts of i.e. parts of code (Bottlenecks, i.e. small parts of the the system that are more exposed to requests than site and code that make everything else slower). the others, and testing of such parts is therefore In order to adapt a server to cope a large num- more important. ber of requests, test of web server endurance is performed. Server endurance testing gives the in- 3.3. Stress test as an indicator of Code Opti- sight in how many simultaneous requests server mization success is able to process. Because of this, simulation of a large number of simultaneous users is done. The Server overload can be brought because of greater the percentage of endurance, the less likely many reasons, due to the excessive number of re- the web server is to be flooded. quests, as well as to too many "difficult requests" When we have a clear picture of how a website (difficult to process). The problem of server flood- functions when it is flooded, we can access optimi- ing with requests may worsen inadequately op- zation more easily. Even when the site is visited by timized source code. Since the degree of server more visitors than expected, and a detailed stress endurance depends on the implementation of the test have been done, we have a clearer picture of original code, it is important that such code is op- what actions should be taken in order to reduce the timized in the best possible way. damage and enable quick recovery and functioning. The results of stress tests before and after code refactoring, allow us to see how successful code 4.2. Testing Environment optimization was. At the time of testing, Famtic.com was hosted 4. CASE STUDY STRESS TEST on the on VPS-u (Virtual Private Server). According to example of Famtic.com specification VPS should be 2 x Intel Xeon E5520 2.26GHz Quad-Core Processors, Kingston DDR3- The need for detailed stress test of Famtic.com 1066 RAM, where every client has 512MB RAM appeared due to the site congestion at peak hours, granted. OS is Windows Server 2008 with IIS 7. which is a consequence of rapid increase in the Test Server is Intel(R) Core(TM)2 Duo CPU number of visitors. With 50 to 100 concurrent us- E6750 @ 2.66GHz, 2666 MHz, 2 Core(s), 2 Logi- ers, an average period of page load was between 5 cal Processor(s) with 4GB RAM in Windows 7 and 35 seconds. The cause for this, except obvious 64bit with IIS 7. unoptimization of certain parts of the site, was a low-quality server. The goal of testing, in addition 4.3. Testcase Design to optimization, was to determine the quality of the server compared to the local server, where the The design of tests was made according to an- exact specifications and abilities were known. nual statistics of the number of visits. Groups of After optimization, the time it takes to load a Virtual Users that simulate typical behavior of us- page was reduced by an average of 15%, but it ers on web site were created. was concluded that optimization of code cannot make up poor performance of the server. 4.4. Statistics, monitoring and numbers

4.1. Testing Background Statistics of site Famtic.com is monitored with Google Analytics. Since the statistics works with In order to completely understand how a web JavaScript, the users who visit the site with java site will really work in the online version, a larger script turned off are not included in the statis- number users should be simulated. This type of test, tics. Since this is the annual average (10/2009 -

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10/2010), and since we need statistics for draw- Statistics of the overall number of visits on the ing general conclusions about users behavior, this site (such as the average number of users on a daily, will not affect the final results. Statistics are moni- monthly level, etc.) is irrelevant in this case. The statis- tored according to (GMT-07:00) Pacific Time, be- tics which talks about the users’ behavior and not about cause most visitors are from the USA ("Americas" the number of users was taken into consideration. 45.20%, Europe 40.89%, Asia 9.31%). –– Pages/Visit - The average number of pages 4.5. Virtual users visited by the user in every visit. –– Bounce Rate - The percentage of the users According to the annual statistics, 3 typical that visit only one page. (Bounce Rate = user profiles were made. Overall number of the users that visit only –– Virtual User A - (Person Page * 1) - "Bounce one page / Overall number of visits) Virtual User" - The user who visits only one –– Avg. Time On Site - The average time spent page. on the site. –– Virtual User B - (Person Page * 2 + Image –– New Visits - The percentage of new visitors. Page * 1) - "Typical User" - The user who visits two person pages and views one image. –– Virtual User C - (Person Page * 1 + Image Page * 9) - "Picture User" - The user who views images. –– Virtual User D - (Person Page * 1 + login process) - "Log In User" - The user who logs in. Login to Famtic is based on java script and AJAX technologies, so that a special page "logintest" is created on which simulation of logs directly from the code is performed, Figure 2. Monthly Page Views by Regions introducing log in i.e. log out methods.

Figure 3. Monthly Visits by Hours Figure 4. Virtual Users

General Stats. Virtual users randomly choose Person and Im- –– 2.93 Pages/Visit age pages of all prepared pages (10.000 Person –– 62.03% Bounce Rate Pages, 150.000 Picture Pages). Log In/Log Out is –– 00:01:10 Avg. Time On Site always done with the same user - "testuser". –– 93.75% New Visits According to the statistics, it can be seen that 62.03% of users visit only one page, so that it is Content Stats concluded that in 62% the algorithm simulates VU –– 42.75% Pageviews are Person Page Views A (one person page). VU B is chosen in 25% of –– 55.12% Pageviews are Image Page Views cases, VU C in 8%, and the remaining 5% is VU D. –– 2.13% Pageviews are other pages (Including Because of different size and number of files, Index) links, comprehensiveness of biography etc., it is

Volume 7 / Number 1 / 2012 313 technics technologies education management necessary to do a minimum of 1000 actions of Vir- of try / catch (which was an omission in the previ- tual Users in order to obtain a better average value. ous version) etc. Significant changes in the code itself could not be done. Image page had a better optimization, but functionality was partially changed (thumbs of pictures were left out), so that the most important part of optimization was actually performed at the level of functionality (leaving out the unnecessary items) and not at the level of code. Figure 5. Initial Page Loading Tests Optimization of the code in this case is difficult to present by using only measurements of 100 or 1000 In stress tests the fact that users behave differ- pages load. When initializing the site, web applica- ently on the site and perform testing for only one tion "pulls across" a large number of data and ini- type of action is often overlooked. Creating cus- tial "turning on of the site" may take several tenths tom test type according to the statistics of traffic of second until the first page is displayed. Global and user behavior on the site, leads to more accu- caching of site (i.e. of all persons and images) can rate results of the real usage of a web site. be turned off, but then you get weaker results of the With standard testing methods (with no user tests, because there are more SQL queries. profile) we get a clear picture of the slowest parts of Although the results of optimization attempts the site. With the help of testing with the profile of were successful, as can be seen on the results of users, we try to find a solution that will accelerate stress tests, the final results were not satisfactory the site maximum as it is possible (even a small ac- because a bad server and shared hosting affect more celeration of the most visited pages can be a greater to the performance than a good site optimization. gain of speed, than a far greater optimization of the page visited by a small number of users).

4.6. Initial Tests The need for optimizing the code (and for possible changes to the server) appeared when a large number of users noticed that sometimes it takes over 30 seconds to wait until the page loads. Figure 5 shows the results of 10 measurements within 60 min, with a break of 6 min after each Figure 6. Results Before and After Optimisation measurement. Several tests were conducted but they all had similar results. We were not able to draw a general conclu- 4.8. DoS and DDoS attack test sion based on these measurements, except that the Since a specific solution and the test on only one download speed drastically changes by the min- server are concerned, the obtained results cannot ute (the measured differences in 60 min were once be analyzed in order to draw conclusions about the over 600%). overall protection from DoS and DDoS attacks, as well as Stress testing itself. The test results are clear 4.7. Stress Test Results indicator of the server condition of Famtic.com is in, but this results cannot be used for the analysis of The results before and after code optimization different web servers and web sites. can be seen in Figure 6. Since the test was carried The aim of the simulation was to determine the out on a local test machine, all parallel users were maximum number of visitors per day that a web on only one computer. Optimization of person page site can support, as well as any major weaknesses is the result of a "more intelligent" usage of dates of certain pages under DoS attacks. Simulation of (i.e. parsing the date from string), avoiding the use DoS attacks is carried out only on a public server,

314 Volume 7 / Number 1 / 2012 technics technologies education management not on the local test server. Hosting company was min, the hosting company notified us about the not informed of the simulated DoS attacks. "excessive" spending of resources on shared host- It is important to point out that during the cre- ing, which "may" be the consequence of DoS at- ation of simulation, the structure and background tacks, faulty script or similar. functioning of the site was completely familiar with. The advantage of knowing the functioning 4.9. Future Work of a website was the ability to focus on familiar and expected vulnerabilities, while the flaw was When creating the concept of the test the list of non-creativity in writing DoS simulations, i.e. measured items also included: someone who really wants to perform a DoS at- Time in queue - The time that should pass be- tack, could have a different approach from the fore the download of a given file starts. simulated ones and cause greater damage. DNS lookup time - The time required for find- The simulation was done with four computing host IP address ers (Serbia, Serbia, Sweden, USA), which com- Connect time - The time required for establish- municated with web services, i.e. web service was ing connection with the server. issuing commands that "infected" computers per- Redirect time - The time lost due to redirecting formed. The control was done with the help of a (HTTP status code of 301, 302, 303 or 307). web site, where web service was also placed. Time to first byte - The time required for taking "Infected computers" used software written the first byte from the server. in. NET 3.5 SP1. Apart from the components for These are standard items encountered in the tests communication with web service, they only pos- like these. At the example of famtic.com the values sessed the code for downloading pages or images. of these items were not currently significant for im- WebClient client = new WebClient(); proving the performance of web site. In further im- string result = client.DownloadString("http:// plementations (especially at the moment of the server www.famtic.com"); change), this values will be taken into consideration. The essence of the code is in two lines. An in- Simulation of different browsers (Chrome, Fire- stance of the WebClient class is created, and then fox, Internet Explorer, Opera, Safari) and crawlers DownloadString method is introduced (String (GoogleBot, MSNBot, Yahoo! Slurp) was neglect- link) which downloads the HTML pages. By in- ed because optimization of HTML for all browsers serting this code into an infinite loop even inexpe- was same (specifically only IE 6.0 version differs rienced programmers can perform basic version of in a few lines of code at the dynamic level (html is DoS attack in three lines of code. rendered in a different way)). If we develop this test Simulation of Famtic DoS attacks was carried in a more open direction, which will include test- out in steps: ing other web sites, these opportunities will be paid –– Testing the home page without images - special attention to. HTML generation test. –– Testing the home page with images- a test 5. Conclusion of number of simultaneously loading pages –– Testing Person page without images Since the problem of attacks on web servers is (Harrison Ford) ever evident, certain precautionary measures have –– Testing Person page with images (Harrison to be taken. Since preventive mechanisms are of- Ford) ten not sufficiently effective, any kind of protection can be applied only in some cases of DoS and Except the number of completed cycles, all the DDoS attacks. Although the essence of DoS and "infected" computers also remembered the num- DDoS attacks may be simple, the greatest prob- ber of unsuccessful pages and images uploads, as lem with these attacks is that they are easier to run well as the speed required for download. than to fight against. In order to counter the attacks The test lasted 20 min. The site was unavail- successfully the system for attacks should be ad- able for over 15 minutes. Within a period of 180 equately optimized and prepared. The success of

Volume 7 / Number 1 / 2012 315 technics technologies education management the protection depends on the attack itself, i.e. on outpouring-of-searches-for-late-michael.html the way it is performed, so it is important to under- 6. Maggie Shiels, Web slows after Jackson's death, BBC stand the essence of one such attack, which can be News, June 26. 2009, Retrieved October 20. 2010. http://news.bbc.co.uk/2/ hi/technology/8120324.stm best achieved by simulating DoS or DDoS attacks. 7. "The Digg Effect v4", Social Keith, Retrieved October The aim of carrying out stress testing is to test 20. 2010, http://socialkeith.com/the-digg-effect-v4/ server endurance to attacks and request flood. The 8. G.A. Di Lucca, A.R. Fasolino, Testing Web-based ap- degree of server endurance should be regarded as an plications: The state of the art and future trends, Infor- important indicator during the taking of precaution- mation and Software Technology 48 (2006) 1172-1186 9. E. Gelenbe, G. Loucas, A self-aware approach to de- ary measures against malicious attacks. By testing nial of service defence,Computer Networks 51 (2007) endurance, the system performances under normal 1299-1314 conditions are also being verified, in order that the 10. Liu L, Chen B, Chen P, He K, Wu Y, Zhang Y, Zhou results according to which the server is further op- X, Yi D: An investigation study on occupational timized should be obtained. The test results indicate stress and quality of life among the Chinese insurance practitioners. HealthMED 2011;5:1,557-566. that actions should be taken to reduce damage caused 11. Zdanowicz, N., Lepiece, B., Tordeurs, D., Jacques, by the attacks. Another also important feature of test- D.,Janne, P., Reynaert C. (2010). Predictability of lev- ing web server endurance is that we are able to test elsof physical and mental health: a 6 months longitu- the stability of the server that directly affects users. dinal study. HealthMED. 4 (4) Supplement 1: 972-977 The aim of the stress tests carried out on the ex- 12. Gu Hsin Lai, Chia-Mei Chen, Bing-Chiang Jeng, Willams Chao, Ant-based IP traceback, Expert Sys- ample of famtic.com is determination of maximal tems with Applications 34 (2008) 3071-3080 number of visitors per day that the web site can 13. Li-Chiou Chen, Thomas A. Longstaff, Kathleen M. support, as well as finding major weaknesses of Carley, Characterization of defense mechanisms some pages during the attack. The test consisted of against distributed denial of service attacks, Com- simulation of DDoS attacks and request flood with puters & Security (2004) 23, 665e678 14. Peter Mell, Donald Marks, Mark McLarnon, A the help of virtual users. Test results are used for denial-of-service resistant intrusion detection archi- analyzing the shortcomings and code refactoring. tecture, Computer Networks 34 (2000) 641-658 This kind of a test is a specific solution related to 15. Dr Lech J. Janczewski, Handling Distributed Deni- a single server, so the obtained results cannot be used al-of-Service Attacks, Information Security Techni- to draw general conclusions about protection against cal Report, Vol 6, No. 3 (2001) 37-44 16. Fu-Yuan Lee, Shiuhpyng Shieh, Defending against DoS and DDoS attacks, but may represent guide- spoofed DDoS attacks with path fingerprint, Com- lines in testing web servers and websites endurance. puters & Security (2005) 24, 571e586 17. Benjamin Armbruster, J. Cole Smith, Kihong Park, A packet filter placement problem with application Refferences to defense against spoofed denial of service attacks, European Journal of Operational Research 176 1. C. Douligeris, A. Mitrokotsa, DDoS attacks and de- (2007) 1283-1292 fense mechanisms: classification and state-of-the-art, 18. Gabriel Macia-Fernandez, Rafael A. Rodriguez- Computer Networks 44 (2004) 643-666 Gomez, Jesus E. Diaz-Verdejo, Defense techniques 2. Ongoing denial-of-service attack, August 6, 2009, for low-rate DoS attacks against application serv- Twitter Status Blog, Retrieved October 20. 2010, ers, Computer Networks 54 (2010) 2711-2727 http://status.twitter.com/post/157191978/ongoing- 19. Feature: Denial of service: motivations and trends, denial-of-service-attack Simon Heron, internet security analyst, Network Box 3. Facebook Down. Twitter Down. Social Media Melt- 20. Reports: Denial-of-service: courting disaster, Gra- down, August 6, 2009, By Pete Cashmore, Mashable, ham Wheeler, CEQURUX Technologies Retieved October 20. 2010. http://mashable.com/ 21. Wayne B. Nelson, (2004), Accelerated Testing - Sta- 2009/08/06/facebook-down-3/ tistical Models, Test Plans, and Data Analysis, John 4. Wortham, Jenna; Kramer, Andrew E. (August 8, Wiley & Sons, New York, ISBN 0-471-69736-2 2009), "Professor Main Target of Assault on Twit- ter" New York Times, Retrieved October 20. 2010, http://www.nytimes.com/2009/08/08/technology/ Corresponding Author internet/08twitter.html?_r=2&hpw Radoje Cvejic, 5. Outpouring of searches for the late Michael Jackson, "Megatrend" University Belgrade, June 26, 2009, Official Google Blog, Retrieved Octo- Serbia, ber 20. 2010, http://googleblog.blogspot.com/2009/06/ E-mail: [email protected]

316 Volume 7 / Number 1 / 2012 technics technologies education management Dynamics of prices in spot electricity markets: A microeconomic analysis

Amira Ademovic1, Kasim Tatic2 1 JP Elektroprivreda BiH d.d., Sarajevo, Bosnia and Herzegovina, 2 School of Economics and Business, University in Sarajevo, Bosnia and Herzegovina.

Abstract prices1 are of the highest importance for proposing appropriate models for price forecasting. Electricity markets are similar to financial mar- There are several reasons why it is important kets and electricity prices have properties similar to analyze data from a spot electricity market. to the financial ones. However, there are distinct The functioning of an organized electricity mar- characteristics of electricity prices that are very ket is relevant for formation of referential prices different from financial markets. These character- and appropriate statistical models to be used for istics of spot electricity prices will be the main fo- the competition analysis and electricity price fore- cus of this paper. The existence of these character- casting. Moreover, appropriate models of price istics that have been observed in other electricity dynamics are also of importance because of the markets will be examined in the Nord Pool Spot specific nature of deregulated electricity markets, electricity market for the selected data set. which is similar to the functioning of financial Key words: price spikes spot, seasonality, markets. Specifically, options, futures and forward electricity markets, volatility. markets also exist in electricity market and serve as financial markets for price protection and risk 1. Introduction management. For example, in the case of the Nor- dic electricity market, Nord Pool Spot, the market Several approaches exist to electricity market members can protect buying and selling of elec- analysis, including application of general econom- tricity within the time span up to four years, using ic methods. However, to draw conclusions about derivatives which are continuously traded [L1]. properties and functioning of electricity markets, Although electricity markets are similar to fi- specific characteristics of electricity as “a mer- nancial markets, and electricity prices have prop- chandise“ which is traded, have to be taken into erties similar to financial ones, electricity prices account. Technical limitations and economic rules have distinct properties which significantly differ mutually intertwine in electricity markets, while from those in financial markets, primarily high the fact that electricity cannot be stored in large volatility and considerable seasonal variations quantities and in economically acceptable manner [L2]. These properties of electricity prices ap- has particular impact. The foregoing requires equi- pear reflect the fact that there is no simple way to librium of production and consumption (supply equalize jumps of supply and demand, given that and demand) at every moment. Relatively small the storage of electricity is complicated and exchanges in production or consumption may cause pensive. Furthermore, congestions on a transmis- signicificant changes in electricity prices within sion network may also result in jumps of electric- only a couple of hours. Therefore, the analysis of ity spot prices, evidently marking the periods be- electricity prices dynamic is of a great importance tween the congestion and normal circumstances. for decision-making in the electricity markets, In general, dynamics of electricity prices in lib- particularly because of the fact that methods for eralized electricity markets is characterized by the risk management and option pricing rely on de- following [L3]: veloping models which can assess the dynamics of electricity prices. Hence, the essential proper- 1 In this paper the term spot market implies an organised day-ahead ties of electricity markets and in particular the spot market, and spot prices imply prices of hourly products in an organised day-ahead market.

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1. seasonal changes (daily, weekly and yearly of (random) numbers. Time series analysis is also cycles), based on the assumption that the measurements 2. high volatility, are done in the equal time steps. Unlike financial 3. mean-reversion, data, this precondition is fully satisfied for the data 4. frequent price jumps. from electricity markets. The data on spot electricity prices and other variables (production, con- The foregoing properties of electricity spot sumption, availability of production units, etc.) on prices, so-called stylized facts of electricity prices, the electricity exchange are collected 24 hours a will be the main focus of this paper. The existence day, 365 days in a year. This offers a unique op- of these properties which have been observed portunity to fully use the statistical methods ac- also in other electricity markets will be examined cordingly [L2]. in the Nord Pool Spot electricity market2 for two selected data sets for the analyzed period from 1 2. Determination of prices in electricity January 2005 to 31 December 2007. One data set markets includes prices for the so-called peak hour, that is the hour in which electricity price reaches its In a deregulated electricity market, a price is maximum daily value. The other set refers to the defined as a ratio between supply and demand. In electricity prices for the so-called off-peak hour, the Nord Pool Spot electricity market, the elec- that is, an hour in which the electricity prices has a tricity price (Elspot) is formed on an hourly ba- minimum daily value. sis for the next 24 hours in a auction procedure Nord Pool Spot is the biggest electricity market where participants in the market submit their bids in Europe and one of the oldest electricity mar- for the electricity buying and selling. This markets in the world, and the first international market ket has some physical limitations in transmission in the world. In addition, Nord Pool Spot is also network, both between the member countries and famous for being one of the most advanced and within some countries. In cases when the demand most liberalized electricity markets in the world. for transmission capacities exceeds the available Moreover, today Nordic market serves as a model transmission capacities, Nordic electricity market for restructuring other electricity markets [L4]. is then divided into the so-called bidding areas Three markets are active in the Nord Pool Spot: (Elspot areas) [L1]. the market for physical delivery (the spot mar- Participants in the spot electricity market de- ket) for one day ahead Elspot, the balance market termine how much electricity they are willing to Elbas, for trading in a real time and the financial buy or sell at a price. For every hour of the next market Eltermin. day, the participants bids meet in the supply and This paper focuses on the spot electricity market demand curves. The supply curve is composed of Elspot. Spot price in the Nord Pool Spot electricity aggregate bids of participants for selling in terms market is a referential price for bilateral wholesale of price and quantity. Similarly, the demand curve market in the Nordic region, and it is also used as a is composed of aggregate bids of participants for reference for the prices which electricity distribut- buying, also in terms of price and quantity. Com- ers charge their final consumers. Apart from that, bination of price and quantity, that is where the price of electricity in the Nord Pool Spot serves curves of supply and demand exactly match, the as a referential price for financial contracts used market price is formed (so called market clearing in trading in the Nord Pool financial market [L1]. price, MCP) and quantity (market clearing vol- Since the so-called 'stylized facts' of electricity ume, MCV) [L5]. prices may be analyzed only utilizing some statis- Simply speaking, the market price (MCP) in tical tools, the paper will discuss some techniques the ideal case corresponds to the variable cost of used for the time series analysis that is sequences generation of the most expensive generation unit which needs to be engaged so as to satisfy the total demand. The variable cost of generation for this 2 We use prices from organized day-ahead electricity market Elspot (within Nord Pool Spot) where hourly products are traded by auction. unit is its present marginal cost that is the cost of

318 Volume 7 / Number 1 / 2012 technics technologies education management the increasing production for one additional unit. able to sell his generation. Therefore, all market When the electricity generation is engaged ac- participants act as 'price-takers' and all selling and cording to the merit order, that is from the genera- buying in the spot market is carried out at the mar- tion units with the lowest marginal cost up to the ket price (MCP). Consequently, that market price marginal cost of the latest needed generation unit, in the spot electricity market is a wholesale price. at every moment the supply and demand curves This price also serves as a referential price for the meet at the point of the lowest possible price, re- bilateral trade of electricity [L7]. sulting in the cost-effective allocation of production resources in the electricity market [L6]. 3. Price analysis in nord pool spot electricity market For the analysis of the Nordic electricity market, the data of hourly based system spot prices from the Nord Pool Spot market are used. The data for this research was obtained from the Nord Pool Spot, originally on an hourly base for the period of 16 years, starting from 4 May 1992, when the Nord Pool Spot commenced its work. In order to describe recent market behavior, time period from 1 January 2005 to 31 December 2007 was selected for the analysis. This paper focuses on Figure 1. Price determination principle in Nord the analysis of peak hour, that is an hour when the Pool Spot electricity market (Source: Swedish price is the highest, and the ‘off-peak' hour, that is Regulatory Agency) the hour when the price is the lowest. In this paper, in order to mark the different processes for 'peak' All participants in the market who submitted and ‘off-peak' hours in the electricity spot market, their bids for selling at a price equal or lower than two separate series of prices have been formed. In MCP will be able to sell their offered quantities of this way, two series of data from the original trade electricity at the market price (MCP), while those data on a 24-hour basis have been obtained. Both participants who submitted their bids for selling data series refer to the interval from Monday to at a price higher than MCP will not be able to sell Sunday. Each series contains 1.095 data. any quantity of electricity. As a result, all avail- Information about individual, specific hours able electricity generation is auctioned under the play a significant role in the electricity market, al- same terms and conditions and it is allocated the though this way of analysis may anticipate a loss of same economic value, regardless of the generation some information contained in the data with more technology. Similarly, all market participants who frequent trade interval. However, some companies submitted their bids for buying at prices equal use the electricity within a defined profile during a or higher than MCP will buy that quantity of the day, which differs from the standard contracts for electricity at the market price (MCP), while those the basic and peak loads. These companies may participants who submitted their bids for buying request the conclusion of contracts only for sev- below MCP will not buy any electricity. eral hours per day. For the purpose of evaluation In the market which is characterized by perfect of those contracts, the participants in the market competition, participants in selling are not incited have to evaluate the expectations and risks for cer- to submit their bids which do not correspond to tain hours, and thus they cannot rely only on the their marginal costs. Namely, the bids of individual analysis of average daily prices. This is also the participants have no significant effect on the equi- case with the risk management, formation of de- librium price. In a case that one of the participants rivatives' prices and contract structuring [L8]. submits the bid which exceeds his marginal costs, For the purpose of selection the 'peak' and 'off- he exposes himself to the risk that he would not be peak' hour, the analysis of hourly system spot

Volume 7 / Number 1 / 2012 319 technics technologies education management prices was carried out for the entire set of avail- standard deviation, most frequent value, variance, able daily hourly data on a 24-hour basis, starting skewness, kurtosis, coefficient of variation and from 4 May 1992 till 31 December 2007. For this Jarque-Berra statistics. time period the lowest average price is the price In the Nordic area, the highest electricity con- of the 4th hour in the morning, while the high- sumption is in winter periods, since the majority of est average price is the price of 9th hour in the households use electricity for heating. On the oth- morning. Moreover, the maximum recorded price er hand, summers are characterized by the lowest in the Nord Pool Spot electricity market for the consumption, because the usage of air conditioners entire analyzed sixteen-year long time period was is a rarity since summers are mild. In the analyzed the price in the 9th hour in the morning. This is time period (2005-2007), the highest spot price for a reason why the 9 hour a.m. was selected as the the peak hour (9h a.m.) was in January 2006 and 'peak' hour, while the 4 hour a.m. was selected as it reached 799,11 NOK/MWh on 23 January 2006. the 'off-peak' hour. The highest price for the off-peak hour (4h a.m.) The overview of statistical values for daily spot was also in 2006, recorded 602,62 NOK/ MWh, prices for the 'peak' and 'off-peak' hours for the se- and was surprisingly recorded in summer, on 26 lected time period from 1 January 2005 to 31 De- August 2006. The highest average monthly spot cember 2007 is shown in the Table 1. The follow- price in 2006 was recorded also in August. These ing statistical values have been calculated for both unusually high prices for summer were caused by data sets: mean, median, maximum, minimum, a very low level in the Nordic hydro accumulations

Figure 2. Nord Pool Spot system prices from 1 Jan 2005 to 31 Dec 2007. Left panel: ‘peak’ hour; Right panel: ‘off-peak’ hour Table 1. Overview of the statistical values of system13 prices for the ‘peak’ and ‘off-peak’ hours in Nord Pool Spot electricity market for the period from 1 January 2005 to 31 December 2007 'Peak' hr 'Off-peak' hr 'Peak' hr 'Off-peak' hr Mean (NOK/MWh) 304,0247 249,7492 Skewness 0,9414 0,6359 Median (NOK/MWh) 271,6300 225,7800 Kurtosis 3,9054 3,3390 Coefficient of Maximum (NOK/MWh) 799,1100 602,6200 0,3847 0,4189 variation Minimum (NOK/MWh) 36,7200 23,6800 Jarque-Berra 199,1450 79,0303 Standard deviation (NOK/ 116,9650 104,6122 Critical value 5,9350 5,9350 MWh) Most frequent value (NOK/ 257,7400 201,7800 JB p-value 0,0000 0,0000 MWh) Variance (NOK/MWh) 1,3681e+004 1,0944e+004

3 On calculation of the market price in Nord Pool Spot market, so-called system price is the first calculated price. This price is the uniform price for the entire region. In a case of congestion in the transmission network, so-called zone market prices are calculated.

320 Volume 7 / Number 1 / 2012 technics technologies education management at the same time when several nuclear reactors in p − p r = t+1 t ...... (1) Sweden were off for technical reasons [L9]. t p The lowest prices for the peak hour were in Au- t gust 2007, and the lowest was 6,72 NOK/MWh on While the logarithmic return is defined as the 19 August 2007. For the 'off-peak' hour, the lowest logarithm change of prices: prices were also recorded in August 2007, and the r = log p − log p lowest was 28,57 NOK/MWh on 17 August 2007. t t+1 t ...... (2) In general, the electricity situation was more favorable in 2007, which resulted in the reduction of For small changes of prices (up to few per- electricity prices [L10]. cents), the foregoing definitions are more or less For the peak hour, the standard deviation is equivalent. However, for the major changes of 116,96; the lowest price is 6,72 NOK/MWh, and prices, which is the case with the electricity spot the highest 799,11 NOK/MWh. For the off-peak prices, these discrepancies may be large. The ad- hour, the standard deviation is 104,61; the lowest vantage of consideration of logarithmic return lies price is 23,68 NOK/MWh, and the highest price in the fact that it actually constitutes an additive is 602,62 NOK/MWh. The coefficient of varia- stochastic variable. The simple return, on the other tion (the standard deviation divided by median) hand, does not have this feature [L2]. Having in measures the degree of variation of price in rela- mind the spike shape of price process, this paper tion to the median. For the peak -hour, the varia- will be exclusively focused on the logarithmic re- tion coefficient is 0,38, while for the off-peak turn of prices. The logarithmic return of prices for hour it is 0,42. the selected data set from the Nord Pool Spot elec- Distribution characteristics of the both series tricity market are shown in the Figure 3. indicate non-normal distribution. The asymmetry coefficient is 0,64 for the off-peak and 0,94 for the 3.1. Seasonal changes of electricity prices peak hour, which means that both series of spot electricity prices are positively curved, which yet In general, the seasonal movements of electric- indicates higher probability of a big increase rath- ity prices occur due to the need for the equilib- er than decrease of prices. The kurtosis coefficient rium of electricity supply and demand in the real for both series is also higher than 3 and it is 3,34 time, along with the set cyclical demand, which for the off-peak and 3,90 for the peak-hour hour, consequently leads to the cyclic nature of electric- which indicates the leptokuric distribution, that is ity prices [L6]. However, the seasonal component more elongated distribution in relation to the nor- of prices in the electricity exchange is much more mal distribution. distinctive than in other markets. Moreover, sever- For the purpose of testing of a null hypothesis al different seasonal movements can be observed that the distribution of prices is normal, Jarque- in the electricity prices, such as daily, weekly and Bera statistics and corresponding p-values are cal- yearly cycles [L11]. culated. These results are indicated in the Table The seasonal demand fluctuation, that is the 1, showing that all p-values are less than 0,001 of electricity consumption, mainly occur due to the significance level. This suggests that the null hy- changes of business activities level or climate con- pothesis may be rejected. It means that the spot ditions, such as temperature or number of daylight price for both hours cannot be well-approximated hours. On the other hand, on the supply side, that by the normal distribution. The analyzed data set is electricity generation, there may also be season- is given in the Figure2 showing system prices for al variations, like for example in the case of hydro the 'peak' and 'off-peak' hours in NOK/MWh. power plants, whose production significantly de- Given that the price processes of both data sets pends on the precipitation volume and snow melt- have the so-called 'spiky ' shape, the focus will not ing which varies from season to season. Therefore, be on the real price values, than on the value of the seasonal fluctuations in demand and supply reflect logarithmic return. We recall that the return is usu- on the seasonal behavior of electricity prices. Fur- ally defined as a relative change of prices: thermore, congestions of transmission network

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Figure 3. Nord Pool Spot log-returns of system prices from 1 January 2005 to 31 January 2007 Left panel: ‘peak’ hour; Right panel: ‘off-peak’ hour may also reflect on jumps of spot electricity prices, winter combined with a yearly hydrological cycle, by clear marking of periods between congestions it is hydro power plants accumulations are full in and normal circumstances, without congestion of spring and fall, leads to strong effect of seasonal transmission network. components in electricity spot prices [L4]. In the Figure 2 yearly fluctuations of prices (high prices in winter and low prices in summer) in the Nord Pool Spot electricity prices can be easily observed. Moreover, system prices of Nord Pool Spot are characterized by large fluctuations and so-called outliers. However, the general level of these series tends to be highly constant along with the possible mean reversion. In the Nordic region, the unique mixture of electricity sources combined with the weather conditions significantly affects the generation and Figure 4. Electricity generation in the Nordic re- consumption of electricity. The substantial share gion for the period 2005-2007 of hydro power plants which makes almost all Source: NordREG Norwegian and a half of Swedish generation capacities (Table 2) has a substantial impact on the Apart from yearly variations, weekly varia- level of electricity produced from other sources, tions are also significant, because of 'working day- which is the reason why precipitation volume is weekend' structure. Figure 5 indicates seasonal vital for the analysis of price dynamics. In addi- variations of a daily average spot price for three tion, the Nordic region has much colder winters weeks in randomly selected months (February and than any other part of Europe, which significantly August 2007). The difference is evident between affects the level of consumption, considering that the curves of prices for the two seasons, winter and a large number of households use electricity for summer. In winter period the prices are higher, be- heating. In other words, the increase in demand in cause the demand is much higher, since electricity Table 2. Installed generation capacities in the Nordic region (MW) (Source: NordREG) Denmark Finland Norway Sweden Nordic Region Nuclear plants - 2.651 - 9.074 11.725 Thermoelectric plants 9.899 11.137 890 8.005 29.931 Hydroelectric plants 9 3.031 29.043 16.209 48.292 Wind Power plants 3.124 81 380 780 4.365 Total capacity installed 13.032 16.900 30.313 34.068 94.313

322 Volume 7 / Number 1 / 2012 technics technologies education management is used to a great extent for heating and lighting. In Numerous natural phenomena have frequency- summer, however, the usage of air-conditioning is dependant variability. Apart from that, understand- fairly rare due to mild summers, which results in a ing of frequency dependence may give informa- significantly lower consumption and lower prices tion about fundamental physical mechanisms. The of electricity. It is also evident that both in winter spectral analysis and its main tool periodogram and summer the prices on working days are higher may be used purposefully in that regard [L2]. than for weekend, when most of business facilities On Figure 6 periodograms for logarithm re- are closed. turns of spot prices from the Nord Pool Spot for the analyzed 'peak' and 'off-peak' hours are given. For the 'peak' hour data, weekly fluctuations can be easily observed, due to the weekly fluctuation in demand in the Nordic region, reflecting the 'working day- weekend' structure. In general, this property is common for the highly intensive energy industries, which affects the dynamics of prices. In the Nordic region, a share of the intensive energy industry is relatively high, for this industry makes around 1/3 of the total electricity consumption [L9]. On the other hand, seasonal variations of hydroelectric plant accumulation levels are the Figure 5. Average daily system spot prices in main reason for yearly constancy of prices in the Nord Pool Spot for winter (5 February – 25 Feb- Nord Pool electricity market. ruary 2007) and summer (6 August – 26 August The 'peak' hour indicates a clear peak in the fre- 2007) periods quency ωk = 0,1428, which corresponds to 1/ωk = 7-day interval. Lower peaks, in the frequencies ωk = 0,2857 and ω = 0,4292, indicate the intervals of 3.1.1. Spectral analysis and periodogram k 7/2 = 3,5 and 7/3 = 2,33 days, respectively. Both Spectral or harmonic analysis is used for ex- peaks are the so-called harmonics (more than 7-day amination of cyclic data movement. The goal of frequency interval), suggesting the non-sinusoidal the analysis is to divide the time series with cyclic 7-day period. However, in the case of the 'off-peak' components into several basic sinusoid functions, hour, the periodogram is quite unclear, due to many of specific wave lengths. In essence, the wave mixed periods. The peaks are not so clear, which length is expressed in frequencies (number of cy- suggests that the yearly cycle is irregular. cles per a time unit), commonly marked with ω.

Figure 6. Assessment of spectral density of system spot prices (log-returns) in Nord Pool Spot for ‘peak’ hour (left) and ‘off-peak’ hour (right) for the observed period from 1 January 2005 to 31 De- cember 2007

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Doubtless, special attention should be given –– for the treasury records and notes – less than to the seasonal variations in the analysis of elec- 0,5% tricity market data. Indeed, a substantial seasonal –– for stock markets – moderate, around 1-1,5% variation is a stylized fact of the electricity price –– for goods like crude oil or natural gas – from and is common in most electricity markets. As it 1,5% to 4% is presented in this paper, seasonal variations are –– for electricity markets – prices show extreme also present in the prices for the 'peak' hour in the volatility, up to 50%. Nord Pool Spot electricity market. In finances and economy, (historic) volatility is 3.2. Volatility of prices in electricity markets used for measurement of fluctuations that is the risk which may be related to the holding of prop- Yet another 'stylized fact' for the spot electricity erty. Formally, it is defined as a standard deviation prices is their unusually high volatility, incompara- of returns: bly higher that in any other financial or other com- 1 modity markets. For hourly spot prices in electric- 2 2 s D t (t,T ) = [rD t (t) − rD t (t) ] ...... (3) ity markets it is not uncommon that the volatility T T on a yearly basis is higher than 1.000% for hourly In the above equation, ⋅ marks (example) products [L12]. Such a high volatility is mainly a T the average taken during the time of the variable result of outages of generation and transmission ca- T (around the time t). If T (or t) is not expressly pacities and the need for real time balancing in the given, it is assumed that the averages in the fore- electricity market because it is impossible to store going equation can be calculated by taking all electricity. Even temporarily, it is hard to correct the available data (average samples). Empirically, it imbalance between supply and demand in electric- can be often found that the average returns are ity markets in a short period of time. Consequently, rather low (as a result of the distribution of return dynamics of prices in the electricity markets are far which is close to the symmetrical one), so that more extreme than in other markets. 2 1/ 2 s D (t,T ) ≈ r D t (t) . Volatility of prices in electricity markets may t T be (at least) one order of magnitude higher than Using the equation (3), it is easy to calculate volatility for traditional and well-studied financial the time-dependable volatility σ (t,T). markets and markets of other goods. As an illus- Δt This paper analyses the properties of volatility tration, volatility (standard deviation of returns) of Nordic spot market for the time period from 1 measured on a daily scale (that is, for the daily January 2005 to 31 December 2007 for the 'peak' prices) in different markets are following [L2]: and 'off-peak' hours. Figure 7 indicates logarithm returns and 7-day volatility for the analyzed data

Figure 7. Nord Pool Spot prices (log-returns) and logarithm volatility averaged for 7 days for the time period from 1 January 2005-31 December 2007. Left panel: ‘peak’ hour (9h a.m.); Right panel: ‘off- peak’ hour (4h a.m.)

324 Volume 7 / Number 1 / 2012 technics technologies education management set. In the case of 'off-peak' hour, averaged 7-day characterized by sudden and generally unexpected volatility for the mentioned period is 10,8%, while extreme changes of spot prices. In a very short pe- in the case of 'peak' hour, the volatility is even more riod of time, price can suddenly go up and then fall extreme and reaches 17,5%. This level of volatility to the previous level. Although rapid increases of in the Nord Pool Spot market is rather high in com- prices are usually temporary, they make a great part parison with financial markets. Indeed, the high lev- of the total variations of spot prices [L3]. el of volatility is generally common property of de- In spite of their rarity, price spikes are spe- regulated electricity markets. However, Nord Pool cial motive for designing protection from sudden Spot market is in fact famous for this ‘low’ volatil- changes of electricity prices. Companies which are ity. It is considered that other liberalized electric- not ready to manage risks resulted from price jumps ity markets are considered to have higher volatility. can find themselves in a situation that their year- Mari (2006) [L13] calculated the volatility of prices ly income disappears within only hours. In other in the Nord Pool Spot for the basic load for the time words, price jumps are one of the most important period from 2 January 2001 to 30 September 2004 reasons for including discontinuous components in and concluded that the volatility in the Nord Pool realistic models of electricity price dynamics [L5]. Spot has the lowest value (10%), significantly low- Price jumps usually occur due to the sudden er than the calculated values in other analyzed elec- failures of generation capacities and /or failures on tricity markets (APX, EEX, Powernext i EXAA). transmission network, which leads to a dramatic On the other hand, the measured volatility level in increase of electricity prices in a very short period the Nord Pool Spot exchange is far above the vola- of time. However, price jumps periods are fairly tility of well-studied financial markets [L12]. short in general, and shortly after removal of the So-called volatility clustering, that is the time cause of failures (for example stormy weather), or period when the volatility is consistently higher after normal functioning of electric system is re- than in other periods, can be easily noticed from stored, prices go down to the normal level [L6]. Figure 7. Moreover, volatility clustering is yet an- Price spikes, nevertheless, are usually inter- other of well-studied stylized facts for electricity preted as a consequence of a sudden increase of markets. Figure 7 explicitly indicates that that this demand, thus when demand reaches the limit of is a truly common feature also for the analyzed available capacities, electricity prices show posi- Nord Pool Spot electricity market. As a rule, vola- tive spikes. In periods of low demand, electricity tility clustering, log-normal distribution and long- prices fall. Due to the operational costs or limited term correlations are distinct features of electricity generation units which cannot be adapted to a market volatility [L12]. For the Nordic market, the new demand level, negative price spikes may oc- cyclic dynamics of time-dependent volatility can cur. From modeling point of view, price jumps are be observed form Figure 7. Furthermore, volatil- unpredictable discontinuations in pricing process, ity shows dependence on the level of prices, and that is short time intervals where the price process that is strongly evident when the spot price is low. shows non -Markovian dynamics where the prices Figure 7 clearly indicates that the level of prices significantly rise or fall continuously [L3]. The depends of the volatility of the lowest spot price. typical explanation of this occurrence is a very For the higher prices, nevertheless, the volatility nonlinear supply /demand curve, combined with is a little or not at all dependent on the spot price. the lack of possibility to store electricity. Precisely, the fall of volatility does not exist for In the Nordic electricity market, the extreme the highest price levels (for the spikes). weather conditions during winter result in the sudden increase of electricity consumption, because 3.3. Sudden changes and electricity price jumps the most of the households use the electricity for heating. Apart from that, the extreme weather usu- Along with the significant seasonal variations ally leads to sudden failures of network or pro- and high volatility, electricity prices in spot markets duction capacities, which particularly in case of show not so frequent, but very sudden changes or dry hydrology conditions, results in sudden price jumps. Apparently, electricity market is specially jumps in the Nord Pool Spot exchange [L10].

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3.3.1. The real cause for price jumps reversion and frequent price jumps. Price jumps lead to so-called fat-tailed distribution of price re- The answer to the question what actually turns as well as extreme volatility of prices, which causes price jumps in the electricity markets is can be up to even two orders of magnitudes higher fairly unexpected. In fact, the real reason which than in other markets. Characteristics of seasonal causes the price jumps in the centricity market price dynamics, on the other hand, reflect in mean- lies in the bidding strategies of participants in the reverting nature (return to mean value) of spot electricity market [L2]. In fact, for the great ma- prices on a daily, weekly and yearly time scale, jority of market participants, electricity is the key but not on an hourly basis. commodity on which their final products depend. This paper gives an overview of some tools In order to maintain a reliable and safe electric- used for detection, quantifying and modeling spe- ity supply, some participants are willing to pay cific properties of electricity prices. These tools almost any price.. Therefore they regularly sub- are used to examine and prove the existence of the mit their bids within the maximum allowed price mentioned common properties of electricity prices range ('price cap'; currently 2.000 €/MWh in the in the Nord Pool Spot electricity market. Regard- Nord Pool Spot electricity market [L1]). In fact, in less of the fact that the Nord Pool Spot is one of the auction market with a uniformed price, MCP the most stable organized electricity markets, it price is what the buyer must pay for every unit, also demonstrates price instability (volatility) and regardless of his initial bid, as long as the bid is sudden price jumps. above or equal to spot price. Apart from this type Due to the foregoing, participants in electricity of strategy, the worst possible scenario is that a markets are constantly exposed to significant price buyer must pay such a high price for every of 24 risk. Thus analysis and understanding of the spe- hourly products. In general, there will always be cific characteristics of electricity prices is essential buyers who are ready to pay a significant amount, for selection of appropriate models for electricity in order to satisfy their electricity needs, and the price forecasting. suppliers who are aware of these strategies, and submit their bids accordingly, aiming at increasing their own profit. Consequently, these strategies of Acknowledgment bidding used by market participants result in the We take this opportunity to thank Nord Pool price jumps in electricity markets. Spot, especially Mr. Pontus Ripstrand and Ms. Tanja Pizón of Nord Pool Spot AB Sweden, for 4. Conclusions their generous help and providing the data for this paper. We are also thankful to Mr. Magnus Technical limitations and economic rules mu- Stephansson and Mr. Roger Kearsley of Svenska tually intertwine in electricity markets, while the Kraftnät, Mr. Daniel Andersson, Ms. Margareta fact that electricity cannot be stored in significant Bergström and Mr. Göran Ek of Energy Markets quantities and cost-effectively have particular in- Inspectorate for giving an ingenious insight during fluence. The foregoing requires the equilibrium of the study visit to Sweden. electricity generation and consumption (supply and demand) at every moment. Relatively small changes in electricity generation or consumption References may cause significant changes of electricity prices 1. The Elspot market - Nord Pool Spot. http://www.nor- within hours. Therefore, analysis of electricity dpoolspot.com/trading/The_Elspot_market. price dynamics is of a great importance for decision-making in liberalized electricity markets. 2. Weron, R., 2006. Modeling and Forecasting Electric- ity Loads and Prices: A Statistical Approach, Wiley. In general, dynamics of prices in electricity markets in liberalized electricity markets is charac- 3. Bunn, D.W., 2004. Modeling Prices in Competitive terized by the following: seasonal changes (daily, Electricity Markets 1st ed., Wiley. weekly and yearly cycles), high volatility, mean-

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4. Ademovic A., 2009. Modeling and Forecasting Pric- es in Wholesale Electricity Markets, Master Thesis, Yokohama National University, Japan.

5. Aggarwal, S.K., Saini, L.M. and Kumar, A., 2009. Electricity price forecasting in deregulated markets: A review and evaluation. International Journal of Electrical Power and Energy Systems, 31(1), 13-22.

6. Ademović A., 2011. Microeconomic aspects of price modeling and forecast in the electricity exchange in a deregulated market, Master Thesis, School of Eco- nomics in Sarajevo.

7. Price Formation and Competition in the Swedish Electricity Market. The Energy Markets Inspector- ate at the Swedish Energy Agancy. Non-authorized translation, 2006. http://www.energimarknadsinspe- ktionen.se.

8. Kudumovic M, Kudumovic A, Economic analysis of health. HealthMED, 2008. 2(2): p. 100-103.

9. Fleten, S. and Kristoffersen, T.K., 2007. Stochastic programming for optimizing bidding strategies of a Nordic hydropower producer. European Journal of Operational Research, 181(2), 916-928.

10. Nordic Market Report 2008. https://www.nordicen- ergyregulators.org/Publications.

11. Nord Pool Annual Report 2007. http://www.nord- pool.com/upload/Communications/Publications/ Annualreports/2007eng.pdf.

12. Byström, H.N.E., 2003. The hedging performance of electricity futures on the Nordic power exchange. Applied Economics, 35(1), 1.

13. Simonsen, I., 2005. Volatility of power markets. Physica A: Statistical Mechanics and its Applica- tions, 355(1), 10-20.

14. Mari, C., 2006. Regime-switching characterization of electricity prices dynamics. Physica A: Statistical and Theoretical Physics, 371(2), 552-564.

15. Liu X., Wang Z., Jin D., 2011. Risk Evaluation of Cost for Hydropower Construction under Risk Fixed Schedule Probability Using Monte Carlo Simulation Method, Technics Technologies Educa- tion Management, 6(2), 287-299.

Corresponding Author Amira Ademovic, JP Elektroprivreda BiH d.d., Sarajevo, Bosnia and Herzegovina, E-mail: [email protected]

Volume 7 / Number 1 / 2012 327 technics technologies education management Designing of a Diffusion Bonding Device by using Solidworks 3-D Design Software

Yılmaz Gur Mechanical Engineering Faculty, University of Balıkesir, Turkey

Abstract ods is not possible and the diffusion bonding can be used to bond these materials[2][3][4]. Lee and This article describes the designing of a solid- Huh simulated the super plastic-forming process of state diffusion bonding device using 3-D design diffusion bonding process using finite element anal- software named Solidworks. Designing of the ysis[5]. They developed a finite element code and geometry parametrically by the mentioned de- applied it to blow-forming processes. Orhan Khan sign software gives some flexibility to the design and Eroğlu showed that diffusion bonding of micro phase. Even tough there is a possibility to lengthen duplex stainless steel and Ti-6Al-4V alloy is possi- the design stage because of repetitions of geomet- ble[6]. Juan, Yaijang and Haijum studied diffusion rical modifications and computer aided analysis, bonding of Fe-28Al alloy with Cr18-Ni8 austen- on the other hand it will certainly shorten the prod- itic stainless steel under vacuum environment and uct lead time. investigated microstructure and reactive phases in Diffusion bonding device mainly consists of the joint[7]. Chen, Soh and Ke modelled molecular three base units; diffusion bonding unit, argon gas dynamics of Cu–Ag diffusion bonding and showed purification unit, and temperature and power con- that the thickness of the interfacial region depends trol unit. This article deals only with the designing on the pressure applied on them[8]. of the main diffusion bonding unit, which actual diffusion bonding realized, by Solidworks. Many details related to the design can be foreseen and any deficiency can be fixed during the design stage. Considering many processes and parameters in the design phase will make the system more user-friendly from the perspectives of time, cost and workforce. Key words: Diffusion bonding, Solidworks, 3-D design

1. Introduction Owczarski and Paulonis defined the diffusion bonding process as “Diffusion bonding is a solid-state welding process wherein coalescence of contacting surfaces is produced with minimum macroscopic deformation by diffusion-controlled Figure 1. Diffusion bonding device [9] process, which is induced by applying heat and pressure for a finite interval”[1]. Owczarski and Paulonis and Guo and Ridley Guo and Ridley and Aleman, Gueterrez and emphasized that in the recent years, bonding is Urcola mentioned that diffusion bonding has been applied to air craft, space and defence industries, used for bonding of all the materials whose chemi- and nuclear power stations, where high strength cal and metallurgical properties are not compatible welding is required[1][2]. Moreover, at gas filling because of the bonding of metals, alloys, ceramics, stations, freezers, and cooling stations, where alu- and composites using the classical welding meth- minium and copper pipe connections are required,

328 Volume 7 / Number 1 / 2012 technics technologies education management heat transfer and density factors are considered der. The pressure to be applied on the specimens during their assembly. If fixed connections are is provided by a lever with weights hanging from considered, it is better to make the diffusion bond- it, with the lever occupying the upper side of the ing under the vacuum environment. However, device. 99. 99% purified argon gas is delivered to initial investment necessary for this method is so the device from the lower side (see fig.1)[9]. high that it is not desirable. Despite the drawback In this study, a diffusion bonding device is mentioned above, diffusion bonding under protec- designed by Solidworks 3-D designing software tive argon gas environment is more suitable. This Solidworks Corp. [10]. The 3-D designing soft- article deals with the diffusion bonding device, ware has parametric designing features (see Fig. which realizes bonding process under protective 2). The device consists of the assembly of the fol- inert argon gas environment. lowing parts; 1. Top cover 2. piston bed 3. upper piston 4. specimen 5. lower piston 6. cylindrical 2. Diffusion bonding device body 7. heater holder 8. heater cover 9. heater 10. pressure lever base 11. bottom cover 12. pressure- Çelik studied on the diffusion bonding of Fe- lever seating part 13. lever bearing 14. pin 15. Cu material couple and designed and constructed pressure-lever pin 16. supporter 17. M15 washer a diffusion bonding device during her PhD study. 18. M15 bolt 19. M9 washer 20. M9 bolt 21. lever The diffusion bonding device basically consists of 22. M12 bolt 23. M12 bolt gas insertion part 24. two steel cylinders, one within the other. There ex- upper piston stopper 25. thermocouple connection ists a heating furnace, which is specially isolated part 26. pressure centralization part 27. lower pis- and made by Kanthal firm, in the internal cylin- ton stopper 28. lower piston bed (see fig. 3).

Figure 2. Assembly of the diffusion bonding device

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Figure 3. Transfer of the assembled parts of the diffusion bonding device onto a Solidworks technical drawing page and numbering when necessary. It is quite sufficient to insert multiple copy of the part. For instance, 8 pieces of M12 bolts are needed for the device and only one file is created for it and inserted to the assembly 8 times. Then, all those parts are joined together by defining mating relations between them. Thus, it is possible to see and control whether there is any collision between the parts and whether there is any deficiency in the system. That is, all the processes can be controlled and easily changed during the design stage. After 3-D assembly of the device is completed, it is fairly easy to transfer the assembly and parts Figure 4. Exploded view of the diffusion bonding into a technical drawing page and to get technical device drawing documents and cross-sections (see fig.3), wherever necessary, exploded views of the assem- Each part constituting the diffusion bonding bly (see fig. 4), bills of materials, and also high- device is designed separately and parametrically. quality textured presentation output of the device The designed parts are saved under different file and parts because of the capability of the Solid- names. Those parts are then inserted into the as- works design software. sembly page, and mating relations are defined. As seen in Table 1, bills of materials are cre- That is, bottom-up design method is used. ated automatically by Solidworks. That is, total If any part has to be used in the assembly more weight of the device, the amount and/or quantity than once, there is no need to draw it every time of the materials to be used, and eventually cost of

330 Volume 7 / Number 1 / 2012 technics technologies education management the device can be calculated during the designing Furthermore, when the diffusion bonding de- because the material of each part is defined at the vice is designed using the Solidworks design soft- design stage. ware, all the geometrical representations of the Table 1. Bills of Materials prepared by Solidworks device can be analyzed using analysis programs such as CosmosWorks, which is closely integrated with Solidworks program for static analysis applications, and CosmosFlow, which is a computational fluid flow analysis software to simulate heat distribution, fluid flow, etc.

References 1. Owczarski W.A, Paulonis D.F, “Applications of Dif- fusion Welding in USA”, Welding Journal, 1981, pp. 22-33. 2. Guo Z.X, Ridley N, “Modelling of Diffusion bondig of metals”, Mater. Sci. Technol., 1987, 3(11), pp. 945-953. 3. Aleman B, Guterrez I, Urcola J.J., “Interface micro- structures in diffusion bonding of titanium alloys to stainless and low alloy steels”, Mater. Sci. Technol- ogy, 1993, 9, 633. 4. Aleman B, Guterrez I, Urcola J.J, “The use of Kirk- endall effect for calculating intrinsic diffusion coefficients in a 316LTi6242 diffusion bonded couple”, Consequently, both design stage and detailing Scripta Mater. , 1997, 36, 5, pp. 509-515. and documentation processes can be completed in 5. Lee K.S, Huh H, “Simulation of super plastic form- a short time. Moreover, every stage of the design ing/diffusion bonding with finite-element analysis using the convective coordinate system”, J.Mats. Proc. processes is integrated with each other; any modi- Tech., 1999, 89-90, pp. 92-98. fication applied to any part or assembly, assembly 6. Orhan N, Khan T.I, Eroğlu M, “Diffusion bonding of or part, is separately updated. That is, if a part is a microduplex stainless steel to Ti-6Al-4V”, Scripta edited, the same part should not be edited manu- Materiala, 2001, 45, pp. 441-446. ally in the assembly because Solidworks updates it 7. Juan W, Yajiang L, Haijun M, “Study of diffusion automatically, which makes the design of the dif- bonding of Fe-28Al alloy with austenitic stainless fusion bonding device more flexible and the de- steel in vacuum”, 2005, Vacuum, 79, pp. 45-51. sign time is shortened. 8. Chen S.D., Soh A.K., Ke F.J., “Molecular Dynamics modeling of diffusion bonding”, Scripta Materiala, 2005, 52, pp. 1135-1140. 3. Conclusion 9. Çelik S, “Defining of diffusion bonding conditions of pure aluminium and copper under protective gas en- Designing of the diffusion bonding device using vironment”, PhD Thesis, Balikesir University, 1996. Solidworks program helps gain flexibility to the de- 10. Solidworks Corporation, “Solidworks User’s sign phase. Meanwhile, many details related to the Guide”, 2009. design can be anticipated and any deficiency can be fixed at the design stage. For instance, it can be examined if the parts work together by observing Corresponding Author whether they collide with each other using the col- Yılmaz Gur, Mechanical Engineering Faculty, lision detection feature of the program. Also, con- University of Balikesir, sidering many processes and parameters in the de- Çağış Campus, Balikesir, sign phase will make the system more user-friendly Turkey, from the perspectives of time, cost and workforce. E-mail: [email protected]

Volume 7 / Number 1 / 2012 331 technics technologies education management Application of fuzzy AHP method for choosing a technology within service company

Jasna Petkovic, Zoran Sevarac, Maja Levi Jaksic, Sanja Marinkovic University of Belgrade, Faculty of Organizational Sciences, Serbia

Abstract MIS-ING d.o.o., an architectural design studio, today employs six workers who are all Bachelors This paper describes the application of AHP and of Science in Architectural Engineering. All six of Fuzzy AHP methods within the service company them hold a license issued by the Serbian Chamber engaged in drawing architectural projects. AHP of Engineers, and they are held responsible for ev- method is of crucial importance for supporting the ery project in front of the Chamber. Every designer decision-making process in the field of technology is granted a special project. However, if the proj- management, especially when it comes to evalu- ect is of bigger quadrature, or the agreed deadline ation and selection of technological alternatives. is perhaps too short, several designers are assigned Fuzzy AHP method represents the elaboration of to one project. Studio’s core activity is projects' de- standard AHP method, and allows for taking into sign. In addition, it offers services of expert moni- consideration the imprecision and mistakes while toring over the construction process. The process of assessing criteria and alternatives. The result ob- project designing consists of the next few stages: tained by using the Fuzzy AHP method matches the deal making; invention of conceptual solution with result obtained from the standard AHP method. At the consent of the investor himself; production of the same time, it draws attention to some possibili- conceptual project based on conceptual solution; ties not apparent in case of standard AHP method. obtaining the 'construction permit' based on con- The real example supported by AHP methodology ceptual project; main project design; measuring and explicitly reveals the qualitative aspects present in estimate based on the main project. the field of technology management, technological In addition to project design, designing a 3D evaluation and selection, which could be formal- computer model is also an important process that ized and structured in a way that brings results in allows not only the investor, but the designer as the form of quantitative estimates. well, to get an insight into how the object will ac- Key words: methods of evaluation and tech- tually look like in the end. Back in the past, such nology selection, AHP method, Fuzzy AHP an insight was provided by model making, but the computer version is much faster, profitable, and 1. Introduction flexible. This process is important in early stages of project design. Smaller companies usually The real example supported by AHP methodol- prefer outsourcing for designing 3D models, but ogy explicitly reveals qualitative aspects present in MIS-ING rather opted for the in-house solution. the field of technology management, technological Therefore, one of the designers was trained for evaluation and selection, which could be formal- working with the software tools for 3D modeling. ized and structured in a way that brings results that The last stage of project design - measuring are basically quantitative estimates. This could be and estimate, that is, document preparation, could seen as a significant support in making decisions also be outsourced. MIS-ING rather chooses in- that concern the matters of strategic technology dependent document preparation in case of small management, especially in the field of technol- and medium-size objects, while the job is assigned ogy selection. [1] This paper presents a practical, to external employees in case of a big-size object. real example of the application of AHP and Fuzzy Moreover, the company hires mechanical, electri- AHP methods in the procedure of choosing new cal and civil engineers for project design since it technology due to an increase in business level doesn't employ them on a regular basis. Managing within MIS-ING Company.

332 Volume 7 / Number 1 / 2012 technics technologies education management director assesses that the outsourcing is more profit- knowledge and intuition into the decision-making able solution since these engineers are not needed process. AHP examines both quantitative and quali- on regular basis. The company is also known for tative data and combines them through decomposi- taking part in competitions. This activity differs tion of complex problems into the hierarchy-shaped from designing itself because the job is not agreed model. Every level of hierarchy consists of several yet – instead, the conceptual project is offered par- elements. Elements at the same level are mutually allel with the competition, and only one project will independent, but comparable. The structure pre- be accepted. This means that the time spent on proj- sumes that the elements of any level are influenced ect design would be considered lost if the project by the elements of the level immediately above. was refused. The process of 3D modeling is very The pairwise comparison of hierarchy elements important for competitions, the same as the chief (goals, criteria, and alternatives) is carried out in designer's/designers' experience, and reference for top-down direction. After the comparison follows participants in the form of previous projects. the synthesis of all assessments, and the weight co- The second chapter gives a basic demonstra- efficient of hierarchy elements is being determined tion of AHP method. The third chapter briefly de- in accordance with strictly defined mathematical scribes basic principles of fuzzy theory and fuzzy model. The sum of elements' weight coefficients at numbers that are being used in Fuzzy AHP meth- every level of hierarchy equals 1, which makes it od. The fourth chapter presents us with basic prin- possible for the decision-maker to rank all the el- ciples of fuzzy AHP method and the method of ements in horizontal and vertical sense. [4] AHP converting the problem statement from the form actually represents the implementation of a highly being used in the standard AHP method into the structured process of factor comparison based on form being used in the fuzzy AHP method. The hierarchy. The fundamental steps of AHP applica- fifth chapter gives a practical example of the ap- tion are as follows: problem structuring, data col- plication of AHP method, while the sixth chapter lection, assessing relative weights, determining gives an example of fuzzy AHP method for the problem solution. [5] same business case. Finely, the chapter number Hierarchically structured decision-making seven introduces us with the final study. model generally consists of the goal, criteria, several sub-criteria levels, and alternatives. Figure 1. 2. AHP method [6] shows the example of a hierarchy consisting of two criteria and three alternatives. The goal is to be AHP method (Analytical Hierarchy Process) is found at the top of hierarchy and it is not subject of crucial importance for supporting the decision- to comparison with other elements. The next level making process in the field of technology man- encompasses criteria that are being compared with agement, especially when it comes to evaluation each other, and also with regard to the goal that is and selection of technological alternatives. AHP's positioned directly above. The same procedure is baseline is the assessment of relative weights – then applied all the way down through hierarchy, importance of elements, i.e. attributes of a model until the last level undergoes the mutual compari- previously structured in the hierarchy form. [2] son of alternatives with respect to superior criteria AHP method is one of the best-known and most at the previous level. When N attribute of a certain commonly used method of multiple criteria deci- level is being compared, it takes N(N-1)/2 com- sion making over the past few years. It's popular- parisons. For model presented on the diagram, one ity is mostly thanks to the fact that it is very close needs to form a comparison matrix with respect to the method in which an individual intuitively to the global goal (of the following dimensions – solves complex problems by decomposing them 2x2), and two comparison matrices at the last level to more simple ones. The second reason is an (dimensions – 3x3), in relation to elements Crite- excellent quality software called Expert Choice, rion 1 and Criterion 2. which is also available in demo version. [3] This method allows the decision-maker to include his own subjective point of view, experience,

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the judgment consistency. For example, if element A1 was evaluated as demonstrated dominant by comparison with element A2, then the value 1/7 will be assigned to A2 by comparison with A1. The second half of the comparison matrix, i.e. the values under the diagonal are actually reciprocal values of grades above the diagonal. All values on given diagonal equal 1, since this is the result of comparing the element with itself. The next step is to determine the eigenvector of the comparison matrices. In order to get the matrix eigenvector, one first has to sum up all matrix el- Figure 1. Example of hierarchy in AHP model ements in every column respectively, and then to divide every matrix element with the sum obtained The basic input within AHP are the responses for the column where the element is located in the of decision-makers to a series of questions which first place. These values are then summed up by generally go like this: How important is the crite- rows. The sum of rows is normalized by dividing rion/alternative A1 by comparison with criterion/ the sum of each row with the number of rows. The alternative A2? The respondent here uses all avail- result of these calculations is the priority vector that able data – from the exact 'hard' to 'soft' – own represents the matrix eigenvector. assessments, experiences, or forecasts. Responses The ranking is carried out based on calculated to- are obtained in the verbal form, after which the tal weights of every element with respect to superior so-called 9-point scale – Saaty's rating scale [1] is levels, up to the highest one. In the end of this analy- being used for adequate quantitative expression of sis, global priorities are obtained by performing syn- the importance of criteria or alternatives, i.e. both thesis of all local priorities. Computing the weight the criteria and the alternatives. vectors of consecutive levels will lead us to composite normalized vector for the overall hierarchy. S = {1/9, 1/8, 1/7, 1/6, 1/5, 1/4, 1/3, 1/2, 1, 2, 3, The application of AHP methodology in de- 4, 5, 6, 7, 8, 9} cision-making process in the field of technology management could be seen as a) the application Following the comparison of elements, the regarding problems that could be structured in the pairwise comparison matrices are formed for each form of hierarchy, where the elements of the given level of hierarchy. If N elements are mutually level are independent, but at the same time compa- compared with respect to certain element at the rable with the elements belonging to the same level. level directly above it, then: while comparing ele- The structure starts with the assumption that the ment i with respect to element j, by using a 9-point elements of any given level are influenced by the scale, the numerical coefficient ija is being deter- elements of a level directly above; b) application mined and placed in adequate position within ma- by using Expert Choice software tool for support trix A. The reciprocal value of comparison results to decision-making, such as the well-known New- is then placed on aji position in order to preserve Tech system that refers to new technologies. [7] [8]

How important isA1in Importance Explanation comparison to A2? Equal importance 1 Two elements contribute equally to the objective Weak dominance 3 Experience or judgment slightly favor one element over another Strong dominance 5 Experience or judgment strongly favor one element over another Demonstrated dominance 7 Dominance of one element is demonstrated in practice Absolute dominance 9 Dominance is of the highest possible order Intermediate values 2, 4, 6, 8 Grades in between five basic grades

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3. Fuzzy theory and fuzzy numbers 0, x < l  (x − l) /( m − l), l £ x £ m µ(x / M ) = This chapter gives a brief survey of basic prin-  (u − x) /( u − m), m £ x £ u ciples of fuzzy theory that are necessary for under- 0, x > u standing of ideas presented in this paper. Fuzzy logic is a multi-valued logic where the truth-value of a statement could occupy the entire interval [0, 1] unlike the classic binary logic where there are only two logic values - 0 and 1 (false and true). Owing to its capability of expressing the 'approximate' logic value, fuzzy logic is being successfully applied for approximate reasoning [9]. Fuzzy logic defines basic logic operations by analogy with operations that exist in classical logic: and, or, negation and implication. We should Figure 2. Triangular fuzzy number note that there are several different definitions of these operations, but the selection depends of Operations on triangular fuzzy numbers which practical application. are of interest for this study are addition, multiplica- The main contribution of fuzzy set theory in tion and inversion, and they are defined as follows: context of decision support systems is its capability of representing vague data[10]. (l1,m1,u1)+(l2,m2,u2)=(l1+l2,m1+m2,u1+u2) Fuzzy theory introduces fuzzy sets, fuzzy (l1,m1,u1)·(l2,m2,u2)=(l1·l2,m1·m2,u1·u2) membership functions and fuzzy numbers. Fuzzy (l1,m1,u1)-1≈(1/u1,1/m1,1/l1) membership functions determines to what extent some item belongs to some fuzzy set. It allows 4. Fuzzy AHP method full membership, not membership at all, but also partial membership, in contrast to crisp sets which Fuzzy AHP method represents the elaboration allow only full membership or non-membership of a standard AHP method into fuzzy domain by at all. A fuzzy number is an approximation of a using fuzzy numbers for calculating instead of real real number r. Intuitively, it is a measure of how numbers [13]. The application of fuzzy numbers well M(x) “approximates” some real number r gives more flexibility to this method and allows [11] [12]. A fuzzy number M is a convex normal- for imprecision and mistakes while evaluating cri- ized fuzzy set, characterized by a given interval of teria and alternatives. The calculating procedure real numbers, each with a grade of membership remains unchanged, except the operations are now between 0 and 1. applied on fuzzy numbers. Different types of fuzzy numbers (like triangu- Based on the standard matrix of criteria compar- lar and trapezoidal) can be used depending of spe- ison within AHP method, fuzzy matrix of criteria cific application. Triangular fuzzy numbers (TFN) comparison is formed by setting the admissible de- are often used because of their computational sim- viation d, after which all real values within the ma- plicity. trix are replaced with fuzzy vales. Fuzzy values of TFNs are defined by three real numbers, ex- some real value r for deviation d equal (r-d, r, r+d). pressed as (l, m, u). The parameters l, m, and u, Table 1 a) Matrix of goal comparison with real respectively, indicate the smallest possible value, values the most promising value, and the largest possible c1 c2 c3 value that describe a fuzzy event [11]. A triangular c1 1 r12 r13 fuzzy number, M is shown in Figure 2. c2 1/r21 1 r23 Membership functions for fuzzy numbers are c3 1/r31 1/r32 1 described as:

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Table 1 b) Matrix of goal comparison with fuzzy values c1 c2 c3 c1 (1, 1, 1) (r12-d, r12, r12+d) (r13-d, r13, r13+d) c2 (1/(r21-d), 1/r21, 1/(r21+d)) (1, 1, 1) (r23-d, r23, r23+d) c3 (1/(r31-d), 1/r31, 1/(r31+d)) (1/(r32-d), 1/r32, 1/(r32+d)) (1, 1, 1) Table 2. Matrix of alternatives comparison with fuzzy values c1 a1 a2 a3 a1 (1, 1, 1) (r12-d, r12, r12+d) (r13-d, r13, r13+d) a2 (1/(r21-d), 1/r21, 1/(r21+d)) (1, 1, 1) (r23-d, r23, r23+d) a3 (1/(r31-d), 1/r31, 1/(r31+d)) (1/(r32-d), 1/r32, 1/(r32+d)) (1, 1, 1)

The same as in the case of standard AHP meth- In the end, we need to calculate the composite od, all values along the main diagonal equal 1, normalized vector the same way as in the case of while all values within the matrix are positive and standard AHP method, where the end vector also reciprocal with respect to the main diagonal. contains fuzzy values. Matrices of comparison between alternatives for Then we need to compare the obtained fuzzy each criterion are formed the same way. (Table 2) values in order to rank technological alternatives. The calculation of matrices is performed the Figure 3 shows the comparison between two same as in the case of standard AHP method, except fuzzy numbers. [9] for using adequate operations for fuzzy numbers. The calculation consists of the next few steps: [9] –– The sums of fuzzy numbers are calculated for columns

(sum for column j) Figure 3. Comparison of two fuzzy numbers M1

and M2 –– After that, all elements in one column of Formula used for calculating the truth value of the matrix are divided with the sum of that fuzzy comparison is as follows: column, which is obtained in the preceding step. In this way, we get the matrix containing the values of elements of the starting matrix divided with the sum of column –– The next step is to calculate the sums of The degree of possibility for a convex fuzzy fuzzy numbers for classes within the matrix number M to be greater than the number of k con- obtained in the previous step vex fuzzy numbers Mi (i = 1, 2,…, k) can be given by the use of the min operations [9]: (sum for class i) V(M ≥ M1, M2, …, Mk) = V[(M ≥ M1) and (M ≥ M2) and … and (M ≥ Mk)] = min V(M ≥ Mi), i = 1, 2, …, k. –– The medium values of classes are also calculated by dividing the sum per classes 5. Application of AHP method in a design (obtained in the previous step) with the studio number of columns In order to present the essence of this method, The same procedure is applied for the criteria the application of AHP method and calculation matrix and all matrices of comparison between al- method will first be represented trough real ex- ternatives. ample of technology selection in a design studio.

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Due to an increase in business level, MIS-ING Procurement of A0 printer and additional Company has decided to procure new technology. equipment for document making allows the pro- The selection was brought down to four possibili- duction of all necessary documentation, as well ties: Production of typisized blocks for CAD soft- as project printing within the company itself. This ware; Procurement of a software for automatized would increase the flexibility since the mistakes pre-measurements and pre-calculations; Procure- could be corrected immediately, without delay, ment of A0 printer and additional equipment for and it would also cut the costs of project design document making, and; Working in 'virtual offic- since the price of printing services is quite high. es' (work from home). Work in 'virtual offices', i.e. work from home, Production of typisized blocks would make it means that the company's designers would design possible to use previously made, standardized ob- projects at home, and possible cooperation on jects in the process of project design. This would bigger projects would be made possible by using significantly facilitate and accelerate the process information-communication technologies. The of project design. When it comes to this technol- advantages of such work are the reduced costs ogy, cash assets would not represent a direct cost, of working space, as well as greater flexibility of but the time consumed by workers. workers (working hours at will, etc.). Procurement of a software for automatized pre- After investigating the global goals of this com- measurements and pre-calculations would allow pany and its current condition, we have chosen the for the automatization of this part of the project following criteria for technology selection: intro- design process, which is assigned to external em- duction costs; compatibility with existing solu- ployees in case of big-size objects. This actually tions; influence on the flexibility of project design; slows down the entire process since new pre-cal- time needed for introduction; market demands. culations must be made for every change in the The tree of importance for practical example is project. However, making pre-measurements and represented on Figure 4. pre-calculations is a time-consuming job even in The determined group of adequate compari- the case of small-size projects. Therefore, the pro- son matrices for the example displayed on Figure curement of this technology would increase the ef- 4 is represented with the real model displayed in ficiency in this segment as well. Table 3.

Figure 4. AHP model

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Table 3. Real example of relative importance matrices  1 5 0.2 0 2 0.14    A1 0.20 1 0.50 1 0.20 A2   Criteria A3  5 2 1 3 0.33 Conclusions down A4   A5  0.5 1 0.33 1 0.13   7 5 3 8 1   1 9 9 1  B1   B2 0.11 1 1 0.11 A1:   The final order under criterion A1 is: B1–B4–B3–B2 B3 0.11 1 1 0.14 B4    1 9 7 1   1 1 5 2 B1   B2 1 1 2 3 A2:   The final order under criterion A2 is: B1–B2–B3–B4 B3 0.2 0 0.50 1 3 B4   0.50 0.33 0.33 1 1 0.33 0.50 1 B1   B2 3 1 1 3 A3:   The final order under criterion A3 is: B2–B3–B1–B4 B3 2 1 1 3 B4   1 0.33 0.33 1  1 5 2 1  B1   B2 0.2 0 1 1 0.33 A4:   The final order under criterion A4 is: B1–B4–B3–B2 B3 0.50 1 1 0.33 B4    1 3 3 1 

B1  1 2 0.33 2   B2 0.50 1 1 3 A5:   he final order under criterion A5 is: B3–B2–B1–B4 B  3 1 1 2 3   B4 0.50 0.33 0.50 1

In this example, the final values of alternative tech- The highest rank upon the completion of cal- nology weights could be represented the next way: culation by using AHP method is given to alternative for which the value of the importance number W B1 0 . 4 6 0 9  0 . 3 8 6 4  equals 0.3012. With respect to given comparison     W 0 . 0 5 1 2 0 . 3 2 4 2 B 2 =0 . 1 3 6 5 ×   +0 . 0 7 2 6 ×   + matrices, the final order of technological alterna- W 0 . 0 5 4 7  0 . 1 7 6 0  B3     tives is as follows: B3 > B1 > B2 > B4 WB 4 0 . 4 3 3 1  0 . 1 1 3 5  0 . 1 4 2 3  0 . 3 8 2 8      0 . 3 8 2 9 0 . 1 1 0 5 6. Application of fuzzy AHP method in a +0 . 2 1 8 3 ×   +0 . 0 6 2 0 ×   + 0 . 3 4 7 2  0 . 1 3 8 3  design studio     0 . 1 2 7 6  0 . 3 6 8 5  This chapter gives an example of the applica- 0 . 2 5 7 3   0 . 2 4 7 8      tion of fuzzy AHP method for the same business 0.2647 0.2441 +0 . 5 1 0 5 ×  =   case given in the preceding chapter. Table 4 dis- 0.3584   0.3012      plays the fuzzy matrix of criteria comparison. 0.1196   0.2071 

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Table 4. Fuzzy matrix of criteria comparison  (1,1,1) (4.5,5,5.5) (0.22,0.20,0.18) (1.5,2, 2.5) (0.15, 0.14, 0.13)  A1   A2 (0.22,0.20,0.18) (1,1,1) (0.66,0.50,0.4) (1,1,1) (0.22,0.20,0.18) A3  (4.5,5,5.5) (1.5,2,2.5) (1,1,1) (2.5,3,3.5) (0.4,0.33,0.28)    Criteria A4 (0.66,0.50,0.4) (1,1,1) (0.4,0.33,0.28) (1,1,1) (0.14,0.13,0.2) A5    (6.5,7,7.5) (4.5,5,5.5) (2.5,3,3.5) (7.5,8,8.5) (1,1,1) 

Fuzzy matrix of alternatives comparison under  0.05,0.06,0.05  0.03,0.02,0.02      criterion A1 0.01,0.01,0.01 0.02,0.02,0.01, =  +   +  0.01,0.01,0.01  0.01,0.01,0.01  (1,1,1) 9 9 (1,1,1)     B1    0.05,0.06,0.05  0.01,0.01,0.01  B2 0.11 (1,1,1) (1,1,1) 0.11 A1    0.03,0.02,0.02   0.02,0.02,0.01 B3       0.11 (1,1,1) (1,1,1) 0.14 0.07,0.08,0.09 0.02,0.01,0.01 B4   +  +   + (1,1,1) 9 7 (1,1,1)  0.06,0.07,0.07   0.01,0.01,0.01      0.03,0.02,0.02 0.02,0.02,0.01  (1,1,1)( 8.5,9,9.5) ( 8.5,9,9.5) (1,1,1)        (0.12, 0.11, 0.10) (1,1,1) (1,1,1)( 0.12, 0.11, 0.10)   0.11,0.12,0.10  0.24,0.24,0.20  (0.12, 0.11, 0.10) (1,1,1) (1,1,1)( 0.15, 0.14, 0.13)        0.13,0.13,0.10  0.25,0.25,0.22   (1,1,1)( 8.5,9,9.5) ( 6.5,7,7.5) (1,1,1)  + =    0.15,0.17,0.15  0.24,0.27,0.25       0.06,0.05,0.03  0.17,0.16, 0 . 1 2  Calculation of a composite vector W B1  0.45,0.46,0.47  Obtained fuzzy numbers are compared in a   W 0.05,0.04,0.04 way described in Chapter 4. B 2 = (0.13,0.14,0.12) ×   + W  0.05,0.05,0.04  B3   LU1− 2 WB 4  0.42,0.43,0.44  V( B 2³ B1 ) = = B1/ B 2 m− U − m − L  0.36,0.38,0.39  ( 2 2) ( 1 1 )   0.24− 0.22 0.02 0.29,0.32,0.33 = = = + (0.09,0.07,0.06) ×   + 0.6 6  0.18,0.17,0.15 (0.25− 0.22) −( 0.24 − 0.24) 0.03    0.13,0.11,0.09  LU1− 3  0 . 16,0.13,0.11 VB1/ B3 ( B3³ B1 ) = =   ( m3− U 3) −( m 1 − L 1 )  0.35,0.37,0.39  + 0.21,0.22,0.22 × + 0.2 4− 0.25 − 0.01  0.31,0.34,0.34  = = = − 0.05   (0.27− 0.25) −( 0.25 − 0.24) 0.02  0.14,0.12,0.10   0.35,0.38,0.39  −   LU1 4 0.29,0.32,0.33 V( B 4³ B1 ) = ⋅ + 0.07,0.06,0.04 ×   + B1/ B 4 (m− U) −( m − L )  0.15,0.13,0.11  4 4 1 1   0.2 4− 0.12 0.12  0.34,0.36,0.37  ⋅ = = 3.0 0 (0.16− 0.12) −( 0.2 4 − 0.2 4) 0.0 4  0.23,0.25,0.26    0.27,0.26,0.25 + 0.49,0.50,0.42 ×   → min.= -0.05  0 . 3 2, 0 . 3 5, 0 . 3 7     0.14,0.11,0.09 

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LU− LU− 2 3 ³ = 4 3 = V( B3³ B 2 ) = = VB 4 / B3 ( B3 B 4 ) B 2 / B3 ( m− U) −( m − L ) ( m3− U 3) −( m 2 − L 2 ) 3 3 4 4 0.17− 0.25 − 0.08 0.25− 0.25 = = = − 2.6 6 = = 0 ( 0.2 7− 0.25) −( 0.16 − 0.17) 0.03 ( 0.27− 0.25) −( 0.25 − 0.25 ) → min.= -2.66 LU− V( B 4³ B 2 ) = 2 4 = After comparison we get the next ranking of B 2 / B 4 m− U − m − L ( 4 4) ( 2 2 ) technological alternatives: 0.25− 0.12 0.13 = = = 3.25 ( 0.16− 0.12) −( 0.25 − 0.25) 0.0 4 B1 = - 0.05 B2 = 0 LU− B3 = 0 V B1³ B 2 = 2 1 = B 2 / B1 ( ) B4 = -2.66 (m1− U 1) −( m 2 − L 2 ) 0.25− 0.2 0 0.05 = = =1.25 B2 – B3 – B1 – B4 ( 0.24− 0.20) −( 0.25 − 0.25) 0.04 → min.= 0 or, since B3 = B2

LU− B3– B1 – B1 – B4 V( B1³ B3 ) = 3 1 = B3 / B1 (m− U) −( m − L ) 1 1 3 3 The result obtained by application of Fuzzy 0.2 4− 0.2 0 0.0 4 = = = 4 AHP method coincides with the result obtained by ( 0.24− 0.20) −( 0.27 − 0.24) 0.01 using the standard AHP method. Nevertheless, the fact that there are two solutions shows that FAHP takes into consideration the limit cases, impreci- LU3− 2 V( B 2³ B3 ) = = sion and possible errors during comparison and B3 / B 2 m− U − m − L ( 2 2) ( 3 3 ) evaluation of alternatives on behalf of experts. 0.2 4− 0.2 2 0.0 2 = = = 0 ( 0.25− 0.22) −( 0.27 − 0.24) 0. 7. Conclusion

LU− The model presented in this paper is an attempt V( B 4³ B3) = 3 4 = of reducing uncertainty in the decision-making B3 / B 4 − − − (m4 U 4) ( m 3 L 3 ) process in case of complex decision-making that 0.2 4− 0.12 0.12 refers to technology dynamics within the service = = =12 ( 0.16− 0.12) −( 0.2 7 − 0.2 4) 0.01 company. The introduction of measurable, quantified and comparable indicators for evaluation of → min.= 0 alternative technological options, bearing in mind both the external and internal factors relevant for LU− V( B1³ B 4 ) = 4 1 = future operating, represents a support to decision- B 4 / B1 − − − (m1 U 1) ( m 4 L 4 ) making for technology managers. The real ex- 0.17− 0.2 0 − 0.03 ample supported by AHP methodology explicitly = = = − 0.0 6 ( 0.2 4− 0.2 0) −( 0.16 − 0.17) 0.05 shows qualitative aspects present in the fields of technology management and technological evalu- LU− ation and selection, which could be formalized and V( B 2³ B 4 ) = 4 2 = B 4 / B 2 structured in a way that brings results which are (m2− U 2) −( m 4 − L 4 ) essentially quantitative estimates. The application 0.17− 0.2 2 − 0.05 = = = −1.25 of Fuzzy AHP method allows for additional treat- − − − ( 0.25 0.2 2) ( 0.16 0.17) 0.0 4 ment of imprecision and mistakes during the ex-

340 Volume 7 / Number 1 / 2012 technics technologies education management perts' estimates. This could represent an important support in making decisions that relate to questions of strategic technology management, especially in Corresponding Author the field of technology selection. Fuzzy model in Jasna Petkovic, Department for technology, innovation and develop- this paper is built on basis of AHP method, while ment management, the AHP method has also established on the basis Faculty of Organisational Sciences, of the expert scoring. Beograd, Serbia, E-mail: [email protected] References 1. Levi Jakšić, M., Marinković, S., Petković, J., Menadžment inovacija i tehnološkog razvoja, FON, Beograd, 2011.

2. Levi-Jakšić, M., Marinković, S., Obradović, J., Pro- ceedings of the International Conference: Global Business and Technology Association, Portugal, Lis- bon, 2005, pp 564 -571.

3. Udo, G.G., Using Analytic Hierarchy Process to Analyze the Information Technology Outsourcing Decision, Industrial Management & Data Systems (100/9), 2000, pp.421-429.

4. Noory, H., Managing the Dynamics of New Technol- ogy, Prentice Hall, New Jersey, 1990.

5. Stošić, B., Menadžment inovacija, Fakultet organizacionih nauka, Beograd, 2007.

6. Stošić, B., Marinković, S., Technological Innovations Decision Making Supported by AHP method: Pro- ceedings of the 23rd International Scientific Confer- ence on Organizational Science Development: Man- agement, Knowledge and EU, Portorož, Slovenia, 2004, pp 158-163.

7. http://www.hipre.hut.fi

8. Chang, D.Y., Extent Analysis and Synthetic Deci- sion, Optimization Techniques and Applications, World Scientific, Singapore, 1, 352, 1992.

9. Chang, D.Y., Applications of the extent analysis method on fuzzy AHP, European Journal of Opera- tional Research, 95, 649–655, 1996.

10. Dubois, D., Prade, H., Fuzzy sets and systems: theory and applicatons, New York: Academic Press, 1980.

11. Zadeh, L.A., Fuzzy logic and approximate reasoning, Springer Verlag, 1975.

12. Yi, Z., Zhuo-Fu, W., Xun, L., The Warning Model Based on AHP-Fuzzy for Engineering Transaction Costs, Journal TTEM-technics, technologies, education, management, vol. 6, no. 1, 2011, (pp.78-83).

Volume 7 / Number 1 / 2012 341 technics technologies education management Information systems for supply chain management in automotive industry

Zora Arsovski1, Dragana Rejman Petrović1, Slavko Arsovski2, Aleksandar Pavlović3 1 University of Kragujevac, Faculty of Economics, Serbia, 2 University of Kragujevac, Faculty of Mechanical Engineering, Serbia, 3 PSB Design, Serbia. Abstract methodology for supply chain management information system projecting in conditions of con- In the business world organizations cannot ex- straints of financial and human resources. Applica- pect the creation of successful production, process tion of the given methodology develops data bases or service advantages without the integration with and application software for supply chain manage- systems and supply chains in the Internet environment, whose key results are presented in this paper. ment. The development of global economy based on Key words: information system, supply chain Internet concept enables organizations application of management, automotive industry, cost/benefit new integration methods with their buyers, suppliers analysis. and partners. On these basis systems for supply chain management (SCM) are developed and applied. Research results in the automotive industry, 1. Introduction presented in this paper, refer to analysis and deter- Automotive industry, in globalization condi- mination of supply chain structure, organization tions, continually investing into development of management and stakeholders demands for infor- new concepts and methodologies for the purpose mation systems that should enable efficient sup- of satisfaction specific and sophisticated customer port to supply chain management processes. demands regarding price reduction and quality in- For the development of supply chain manage- crease of products, servicing and technical support, ment information systems, methods and tech- in-time delivery and others. In addition to customer niques for business system planning (BSP), busi- demands, increasing significance is given to state ness process management (BPM), Cost-benefit demands, local authority, employees and other approach (CBA), process oriented methods for stakeholders regarding sustainable development, structural complex system analysis (SSA-Struc- employment, environment protection, occupational tured System Analysis), object oriented methods health and safety etc. At the end of the 20th century for system analysis, Fast method for IS projects, is reviewed of existing models of complex product method for entity relation diagram (ERD), case management, different technologies and a large tools BPWIN and ERWIN and data base manage- number of participants in the final product realiza- ment systems (DBMS) were used. tion process. One of the solutions, still intensively Through application of methodology for infor- developed, in the supply chain (SC) concept. mation systems projecting a research and com- The supply chain includes the existence of net- plex analysis were performed of the supply chain work structure representing strategic association processes, a request model was developed, logi- of multiple organizations as suppliers, producers cal process model, data and function model, inter- and distributors of products to the market. Orga- face and network model, that, by the application nization becomes a part of network, uses network of software engineering model represent a basis resources and links to other organizations in the for the physical design of data bases and solution company’s network. Every supply chain partici- of application software for supply chain manage- pant brings into the chain own resources and ac- ment in Internet environment. tivities contributing to the creation of new value. The scientific contribution is present, above all, At the same time, development of information in the development and application of low cost communication technologies (ICT) enables the es-

342 Volume 7 / Number 1 / 2012 technics technologies education management tablishment of modern supply chains for a large egy formulation for supply chains. These are: (1) number of participants producing and delivering Product mix, (2) Innovation emphasis, (3) Market- different range of products from different geo- ing emphasis, (4) Distribution channels, (5) Pricing graphic destinations and these are: (1) Agile supply regime, (6) Promotion activities, (7) Service em- chains, with strong characteristics of fast innova- phasis, (8) Product/Sourcing approach, (9) Produc- tion and product commercialization [1], (2) Flex- tion, (10) Capacity consideration, (11) Fulfillment ible supply chains, with strong characteristics of approach, (12) Relation intensity, (13) Systems/ICT quick response to market demands, cost reduction support, (14) Resource allocation priorities, (15) and cycle time improvement [2], (3) Lean supply Strategic risk profiles. The paper considers strategic chains, with strong characteristics of continually dimensions referring to the system ICT support (13) process development from first level delivery to and link to other strategic dimensions, especially di- the finalist in risk conditions [3, 4], (4) Dynamic mensions stated under (8), (9), (10), (11) and (12). supply chains with strong emphasis of the human Keeping in mind aforementioned supply chain factor and incorporation of all stakeholders in the management elements, the authors had special at- process harmonization procedure in supply chains tention to the analysis of different approaches in from the aspect of time [5, 6]. complex organization structure management in con- Supply chain management includes activities ditions of unstable business environment through linked to resource acquisition, resource conver- application of ICT, supply chain management in sion as well as all logistics activities. This includes automotive industry internationally and the role and coordination and cooperation of partners in the level of ICT resources application in order to define supply chain that can be suppliers, intermediar- efficient methodological framework for supply chain ies, logistics providers and buyers. Supply chain design and software solution for supply chain key management integrates and harmonizes supply process support [14, 15, 16]. The paper presents the- and demand within one organization and between oretical and methodological aspect of supply chain all members of the supply chain. The philosophy management, design methodologies of supply chain of the supply chain management is that it, based management information system and key structure on responsibility of every business function, be- elements of developed application software. comes an integrator of main business functions Theoretical and methodological aspects of the within organization and among organizations. paper refer to: Supply chain management includes all operation- –– Definition of the base structure supply chain al logistics activities, production and coordinates, in automotive industry with a large number through informational support, with marketing, of participants in creating a product of high sales, product design and other business functions. complexity, Only with development and significant costs –– Development of requirements model decrease of ICT application based on Internet of company management according to technologies, information systems (IS) for supply information system for supply chain chain key process support are developed [7, 8], management process support, and such as e-supply chains or virtual supply chains –– Development of logic model of business [9, 10, 11, 12]. Basis for their development and ap- processes, data model, interface model, plication represent business processes on the level network model and model of process of each supplier referring to input and output from distribution and data in the network. production system, communication with environment and management processes. This area has Research and application part of the paper re- different software solutions demanding certain fers to: adjustments for every supplier in the domain of –– Application of methodology of design specificity of development and business process information system for supply process management, as well as execution limitations. support within supply chain management According to Gattorna [13] there are fifteen stra- in the Internet environment in automotive tegic dimensions considered in the process of strat- industry, and

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–– Development of application software for cal changes, increased demand for knowledge and management support in supply process innovation management and joining and grouping management in supply chains. of suppliers. Also, for the last ten years automotive industry The paper was structured thus that the second has faced a trend of consolidation, as on the OEM part describes the supply chain problem in auto- level, and on the supplier level. The analysis and motive industry with special emphasis on the anal- research show that the number of suppliers of Tier ysis of information-communication technologies 1 will decrease from 800 in 2001 to 35 in 2010, and e-SCM supply chains role. Third part pro- while the number of Tier 2 suppliers will drop vides methodology elements for design of infor- from 10.000 to 800 in the same period. A gradual mation systems for supply chain management, and transfer of design and development from OEM to fourth part presents key results and characteristic suppliers is noticeable, presenting a challenge on of developed application software for purchasing both sides. Actually, the complexity of design and process management in supply chains. In the last, car manufacture forces the OEM to transfer more fifth part, conclusions are given referring to ap- responsibility to Tier 1 suppliers. In the period plied methodology, results and performances of from 2000 till 2015 is it expected that the share developed application software for supply chain of added value within OEM will drop from 35% management in the automotive industry. to 25% while, on the other hand, the participation of suppliers in development, on average, will 2. Supply chains in automotive industry rise 70% [18]. This leads to a larger cooperation between OEM and suppliers to secure required Automotive industry not only affects economy, technical standard and quality. On the other hand, but also sustainable development and quality of life the suppliers must develop and produce systems throughout the world. It secures employment for that are much more complex than those produced millions of people, generates income of billions of so far, and at the same time face OEM request to dollars in the world and secures a basis for infinite lower costs. number of related services and supporting indus- The next trend is tied to new technologies pres- tries, or production of iron, steel, glass, rubber, plas- ent on all levels of car manufacture. Demand for tics, oil and gas, textile, paints and lacquers, elec- performance improvement, increased safety, less tronic devices etc. Automotive industry represents hazards in the environment lead to improvement the largest production area in the world. It uses in all fields. 15% of world’s production of steel, 40% of world’s If we keep in mind that an automobile has, on production of rubber, as well as 40% of world’s average, around 15.000 positions installed in it, production of oil [17]. Car manufacturers are one and that most of these positions are developed and of the largest companies in the world. These com- built by tens of thousands of component manufac- panies are often multinational, which means they turers in different regions of the world, and that have branches and production factories in different each of them sells its components to more than countries. They use parts manufactured in foreign one car manufacturer, it can be concluded that it is factories or assemble cars in different countries. a very complex supply chain. Automotive industry goes through turbulent chang- Automotive industry supply chain stretches es, primarily in the architecture of the supply chain, from suppliers of different tiers to car manufactur- market consolidation and technological changes. ers, the finalist. The suppliers can be divided into Response to changes can be summed in the fol- three tiers and these are: lowing trends appearing in the last couple of years: –– First tier suppliers – tier 1 – perform joining industry consolidation, gradual transfer of design of entire systems, like brake system, seats, and development from car manufacturers, finalists and supply OEM directly, (OEM-Original Equipment Manufacturer) to sup- –– Second tier suppliers – tier 2 – secure pliers, search for strategies that will increase or at modules and component parts for the first least maintain the level of productivity, technologi- tier suppliers, and

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–– Third tier suppliers – tier 3 – supply the chain The usual practice in automotive industry sup- with material, components and services like ply chain is that each chain is connected to the mechanical tools, metal molds, rubber and forecast. Vehicle manufacturers must harmonize plastic. the supply with the demands of the first in chain, material manufacturer, till the last one in chain, As it is the case with OEM, suppliers as well car buyer. Variation or the uncertainty of demands must adapt to demands, changes and trends ap- caused by the forecast process of each link in the pearing in the automotive industry. chain leads to the creation of “bullwhip” effect, OEMs become less and less involved in manu- that is, fluctuations in orders through the supply facture and assembly, transferring the responsibil- chain. In order to decrease the “bullwhip” effect ity for development, production and assembly of AIAG has started a project in 1996 called MAP important parts to their suppliers. The suppliers are (Manufacturing Assembly Pilot) introducing EDI faced with much more complex product demands into the supply chain. and must find ways to become more productive, in Together with traditional first tier suppliers order to meet the request of the finalist. This can supplying OEM with products, there is a growing be achieved through new, innovative processes, in- type of suppliers providing services, mostly deformation technologies, high level of automation of sign and engineering. Also, there is a new role of production equipment, flexible and highly capable suppliers. Namely, information technologies, es- workforce having knowledge and skills. pecially the Internet, enable organizations to elec- Communication analysis between the final- tronically mediate between suppliers in the supply ist and suppliers shows that OEM executes more chains. This new role of suppliers is in its early than 453.000 data exchanges on the product dur- stages, but significant modifications are expected ing one year with its suppliers. For this amount in the years to come. of information and its smooth flow through the The production of motor vehicles in Serbia is system a strong global network must exist. The more than 60 years old, and its peak was reached activities were directed towards mutual develop- in 1989. The production was around 250.000 ve- ment through Internet and Web. hicles on the territory of central Serbia, followed Recognizing all of this, automotive industry, led by appropriate production of automotive compo- by the Automotive Industry Action Group – AIAG, nents. The consequence of such situation was high created a mutual communication platform named demand for workforce, as well as development Automotive Network Exchange (ANX) in 1995. It of higher learning institutions with relevant study is a network infrastructure based on the Web that programs. The most significant partners in the au- will improve the communication between OEM tomotive industry were companies from Germany and very large network of their suppliers all over the and Italy. During the nineties, lack of investment world. ANX platform enables mutual connecting of together with the loss of foreign market stopped tens of thousands of organizations participating in further industrial development. Today, the manu- different manner in the value chain of automotive facturers are trying to modify the production, find industry. It is less complex and cheaper than own new business partners and develop new products. systems and much more reliable than the Internet. According to official statistic data of the Busi- It is confirmed that ANX platform connects ness Registry Agency, approximately around 160 1.000 first tier suppliers, 9.000 second and third tier companies from the area of automobile parts pro- suppliers and 40.000 of different organizations. In duction is registered in Serbia, most of them in pri- Germany, France, Spain and United Kingdom, a vate ownership (85%). Share of companies with similar platform is used called European Network domestic capital is close to 64%, and the share of Exchange (ENX). The plan is for it to enable con- foreign, direct investments in the automotive sec- necting of 15 car manufacturers, 450 engineering tor is around 34%. Besides the strategic investor companies, 700 first tier suppliers, 20.000 second FIAT, companies from Germany, Slovenia and and third tier suppliers, more than 30.000 shipping France appear as well. By volume, the companies companies and 56.000 distributors [19]. dealing in the automotive sector are mostly, large

Volume 7 / Number 1 / 2012 345 technics technologies education management companies (around 48%) while medium business 3. Design methodology of information sys- companies comprise 38%. Small business compa- tems for supply chain management nies take 13% out of the automotive industry. Sig- Business environment and technologies change nificant data is that approximately 75% of com- over time, so the organizations, for the fulfillment panies manufacturing for the automotive industry of planned business goals, require new information have quality management system according ISO systems or significant changes of existing systems. 9001 implemented, and merely 7% of compa- Development and implementation of integrated nies have quality management system according information systems presents a strategic option of to standard ISO/TS 16949 implemented. Such a every organization trying to improve its business low percentage depicts that most of the companies and continually develop and improve information have not reached very strict standards from the as- system. Today, survival on the market includes the pect of processes, products and systems requested company going hand in hand with changes, perfect- by car manufacturers. Also, a very small percent- ing its products and services, bringing innovation age of companies with certified quality manage- into business processes, improving organization and ment system according to standard ISO/TS 16949 permanently investing into its employees. Using is a result of the fact that a small number of com- this approach and constant care of all segments the panies is involved in part for the primary install- company can secure its position on the market and ment production, that is for the finalist, that is, that always be a few steps in front of the competition. they are finalist’s suppliers. Information system development includes all Figure 1 presents supply chains of analyzed activities connected to planning, analysis, design, company T 3.7 distributing its products to manu- implementation and functioning of information facturers OEM X and OEM Y. system in the organization as well as organizations It is obvious that the supply chains for indi- with business environment. It is a very complex, vidual projects are tangled and they comprise a long and continuous process. Based on analogy global chain network. The figure also shows to with other organizational and technical systems, which Tier in the supply chain each supplier bean information system development life cycle longs to. Time given in days or weeks presents (SDLC) is defined including these phases: plan- lead-time, necessary for the previous supply chain ning, analysis, design, implementation and infor- participant to produce materials from the moment mation system support. In different phases of the of order of the next chain participant, its buyer. information system development life cycle a num- It is also shown that moving from Tier 5 supplier ber of methodologies, methods, techniques, tools towards the OEM lead-time is drastically lowered. and principles is used. In the information system development process stakeholders requests were included and analyzed regarding new information system solution performance, price, implementation period, existing applications transferability and problem solving access through detailed study, defined demands for possible solutions, possible solutions were identified and best solution selection was executed [20, 21, 31]. A chosen solution is being developed, applied, monitored and evaluated in usage, and if necessary a “tune up” is performed. It is necessary Figure 1. Supply chain of company T 3.7 in the to determine phases and activities, as well as stan- automotive industry dards for consistent development and document development activities. It is important to evaluate the financial investment in the information system and estimate or reconsider information system

346 Volume 7 / Number 1 / 2012 technics technologies education management project from the aspect of costs, time and goals, as Final results from this phase are designed logic well as possibilities for further growth and infor- subsystems, key process maps, data classes–sys- mation system modification. tem documentation, internal and external reports, The characteristics of analyzed information responsibility and management requirements [4, systems in organizations-participants in different 14, 24]. supply chains present, mostly, already inherited Based on research and supply chain key pro- information systems with different concepts of cesses research and analysis and associative data architecture and key process inclusion degree matrix process/data class design, these logical in supply chains. subsystems were identified in supply chain man- According to [19, 22, 23, 24] information sys- agement: Combined Bundle Base, Consignment tems development phases for supply chain man- Inventory, EDIE Commerce, Enhanced Controls, agement in automotive industry can be presented Lean Manufacturing, Logistics, Pro/Plus with and described using "V diagram". main functions (Supplier Performance, Shipment The basis of this approach presents the FAST Performance, Supplier Shipping Schedules, Cus- methodology with relations between supply chains tomer Sequence Schedules, WIP Lot Trace, Con- included, system owners (Requests for collabora- tainer and Line Charges, Self-Billing), Release Man- tion), and system designers (Supply chain standards agement (Supplier Shipping Schedules, Customer for information systems). This approach especially Sequence Schedules, EDI, E-commerce and JIT), emphasizes the usage of system users, as the relation Supply Chain Planning, Tools& Embedded Data- between phases 1, 3, 4 and 8. The named approach base, and M2M Bar Code. is especially adjusted to SCM and for this paper For the demands of IS development in supply phases 1, 2 and 3 were analyzed and presented. chains management in automotive industry in Ser- Within phase 1 (A preliminary investigation bia, this paper used cost/benefit approach. Based of feasibility study) business and information sys- on cost/benefit analysis for different solutions of tems strategies and goals were identified of sup- information system in supply chain management a ply chain participants, in order to, through their solution with most favorable cost and benefit ratio specification and simulation, enable more alterna- is determined. In the analysis process, aspects of tive future information system solutions. Through risk, sustainability and resilience of alternative so- application of named methodology research was lutions is additionally reviewed. For the observed performed in the given company from the aspect company these alternative solutions of informa- of business and IS goals, global and stakeholder tion systems were reviewed: (1) Autonomous IS, demands, macro and micro organizational struc- (2) IS with a small exchange of information, (3) IS ture, management and decision making systems, with exchange of information using protocols, (4) processes existing in the organization, procedures e-Commerce, and (5) e-SCM. and specifications defining technology and meth- Information system life cycle costs include od of process and activity execution, authoriza- these categories: analysis costs, design costs, tion and responsibility, time, limitations, terms, implementation costs, software costs, hardware business and technical documentation, applicable costs, operation costs and maintenance costs. standards, reports generated for different manage- When it comes to benefits of the new information ment and decision making levels, internal and ex- system these are especially distingusihed: increase ternal communication, resources, etc. of sales, reduction of staff costs, increase of pro- Key outputs from information system planning ductivity and other untangible benefits. phase are mapped key processes, process inputs For different owner, system user and supply and outputs, process hierarchy and relations, as- chains demands, optimal information system so- sociative matrixes of type: (1) Processes/data lutions are different as well. classes, (2)Subsystems/management, (3) Process- Information system alternative solutions for es/locations, (4) Processes/organization units, (5) supply chain management within reviewed com- Processes/documentation, (6) Processes/standards panies in the supply chain are analyzed from the and (6) Processes/processes. aspect of planned expenses and benefits in the

Volume 7 / Number 1 / 2012 347 technics technologies education management life cycle period (2008 – 2012). In the course of For the reviewed company supply chain pro- it NPV (Net Present Value) method was used with cess decomposition was performed, where the discount rate of 5% and NPV was determined for segment referring to supply process is presented each alternative solution without risk factors. By on figure .2 additionaly adding risk factors, based on history Basic function of purchasing is supplying prod- data, NPVr values are produced that are smaller ucts and services to the organization with required compared to first NPV values. quality, upon acceptable price, at the right time Based on results received, for the optimal so- and in requested amount. lution of supply chain information system an al- There are companies existing on the supply mar- ternative solution number 3 was chosen – IS with ket offering different quality products and under exchange of information using protocols. Re- different arrangements, so the purchasing function viewed company in supply chain, belongs to third most thoroughly explore and evaluate alternatives group, so the information system solution can be for supplying the production process with materi- an example for target solutions for first and second als, components, parts and services. The informa- group companies. tion system for the purchasing function must in- In phase 2 (Study Phase) based on informa- clude solutions responding to: supplier availability, tion system from phase 1 logic subsystems design their concentration and negotiating position, qual- structure, a process of decomposition of logic ity level, substitute development tendencies, prices, systems to processes, events and activities is per- geographic location, transport expenses, supply formed, with their mutual joining with data flows terms, available arrangements etc. and data storages (inputs and outputs from sys- Supply process key parameters are: customer tem, subsystems, processes, events, activities and on time delivery calculation (On Time Dilivery- primitive functions). This phase uses IDEF stan- OTD), stock tunover coefficient Days( On Hand- dard, as well as combined utilization of process DOH), number of disputed deliveries compared to oriented methods (SSA), object oriented analysis a total number of deliveries (DMR per supplier). (OOA), logic data modeling method (ERD), logic Key expressions from phase 2 are: goals and process model development techniques (BPWIN) system limitations, process models and detailed and logic data model (ERWIN). process requirements, data models and detailed First step in process modeling is connecting data requests, network model and detailed net- data flows from phase 1 with supply chain par- work requests, forms and reports per requests and ticipants, decomposition of primary processes to management and decision making levels. Figure 3 lower level processes, all the way to elementary presents part of a decomposition diagram of sup- processes, such as simple business activities, ex- ply subsystem in supply chains of the automotive ecuted on the operational level. Each system can industry [26]. be decomposed to subsystems and elements. At the same time, each system is a part of a wider 4. Application software for supply chain system [25]. management in automotive industry During research of behavior, functioning, development, building and managing of systems it is Based on reference literature analysis from this mandatory to mind the hierarchy and process and area [27, 28, 29 30], as well as analysis of ERP activity order. (Enterprise Resource Planning) system of some System hierarchy can, among other methods, world's manufacturers (SAP, Baan, Oracle), it can be presented through decomposition diagram pre- be concluded that ERP systems structures are ap- senting the hierarchy of defined activities and en- plication collections. They are organized in func- ables functional decomposition. tional areas, called subsystems or modules. Natu- This method defines vertical connections be- rally, there are differences between some ERP tween processes, while the development of data systems regarding modules, which means that all flow diagram defines horizontal connections -be ERP systems do not have all functional areas, not tween same level processes. do they always include the same modules.

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Figure 2. Inputs and outputs in reviewed company

Figure 3. Decomposition diagram of subsystem supply process in supply chains

Also, modules can be of identical content, but Management), (SFA) Sales Force Automation, different denotation and vice versa, of the same (APS) Advanced Planning and Scheduling, (BI) name, but with completely different application Business Intelligence and e-Business. content. Considering the fact that the expanded For the reviewed company, within phase 3 a ERP system is focused on Internet oriented so- prototype information system was developed for lutions, and that the new technologies have ap- supply chain management. IS contains integrated peared, aforementioned, new modules are inte- requests specific for automotive industry based on grated into ERP systems, like SCM (Supply Chain MMOG/LE (Materials Managament Operations Management), CRM (Customer Relationship Guideline/Logistics Evaluation) standard and

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ISO-DIS 28000 standard (Specification for secu- –– Pro/Plus: A mixture of programs enabling rity management systems for the supply chain). additional update of existing functions of auto- A large number of suppliers in the automotive motive industry systems. System parts are: industry uses MMOG/LE standards for self-eval- Supplier Performance, Shipment Performance, uation with the purpose of materials and logistics Supplier Shipping Schedules, Customer Sequ- management improvement. Through the applica- ence Schedules, WIP Lot Trace, Container and tion of this standard in organizations in automo- Line Charges, Self Billing, tive industry the raw material stock was lowered –– Release Management: Module with up to 50%. solutions for Supplier Shipping Schedules, Also, better results were achieved concerning Customer Sequence Schedules and EDI external transport costs lowerage, non-current ma- Ecommerce, enabling Just In Time (JIT) terial stocks and administration etc. system of raw materials supply, In order for the departments and individuals –– Supply Chain Planning: Module enabling dis- in the companies to better understand key points tributive planning within connected factories, of self-evaluation process per MMOG/LE, a updating standard MRP II planning method, MMOG/LE process map was developed within –– Tools & Embedded Datebase: These modules QAD Inc. for the automotive industry (figure ).4 represent required program equipment Process maps represent interactive tools describ- (data base and tools) being the basis of ing the entire MMOG/LE process and MMOG/ the operative system and communication LE self-evaluation points, represented on the top program equipment, required for entire of the process map. system operation, and Based on methodologies for information sys- –– M2M Bar Code: Service module enabling tem projecting described in point 3 of this paper, the reception of intermediates, phase stock an integrated information system was developed monitoring, kanban lists printing, finished containing application modules for key processes products reception through kanban lists and in supply chain management supported by data printing labels for finished goods with bar bases in Web environment. code marking. These are the following modules: –– Combined Bundle Base: Basic module Using EDI procedures, based on buyer orders, containing all registered data on products sales plans and stock of the product, production from own production, materials and supplier’s plan is being formed automatically. Based on pro- products, process management programs, duction plan, bill of finished products and com- –– Consignment Inventory: Module used ponents, WIP stock and material/parts the system for recording stock on the consignment, calculates required amounts and values of mate- purchase and sales. Enables simple and rial/parts for supply. automated to great extent consignment When it comes to weekly plans in regular or- warehouse administration, dering the system calculates dates when materials/ –– EDIECommerce: Module for electronic busi- parts must be in the organization in order for the ness with suppliers and buyers, enabling ordered goods of the buyer to be delivered on time. exchange of electronic information between Information system [26] contains data on prod- this application and partner-buyer and supplier. ucts, assemblies, sub-assemblies and materials/parts –– Enhanced Controls: Module for additional organized through specification of products in three controls, levels, where materials/parts are level three, certain –– Lean Manufacturing: Module for lean produc- parts level two, and finished products level one. tion support, enabling calculation of kanban Considering the fact that one material can be amounts, leading kanban cards, supermarket used for the production of a large number of finished support and other necessary functions, products, within information system the functional –– Logistics Accounting: Module enabling connections are built joining the requirements for detailed transport costs monitoring, this material for all products containing it (figure ).5

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Figure 4. Process map for supply chain management

on this data a trend card for OTD presented on figure 7 is created.

Figure 6. Main parameters settings of material/ part supply Figure 5. Data structure on supplied materials

The information system registers data on optimal parameters, like lead-time, transport days, safety days, safety stock, working calendar and holidays of suppliers and buyers, ordering period, order packing minimal unit, yield percentage and similar, based on which an optimal order towards Figure 7. On time delivery (OTD) to buyer the supplier is calculated (figure ).6 On Time Delivery (OTD) calculation of buyer Information system contains application mod- deliveries is produced from the system by compar- ules securing data on current status of material/ ing buyer orders and deliveries executed. Based parts, WIP and finished goods stock on all loca-

Volume 7 / Number 1 / 2012 351 technics technologies education management tions (warehouses, production lines, finished goods all significant transactions, records, processes, stocks, complaint goods warehouses) as well as ma- monitoring and reports, terial amount in transport towards the organization. –– Improved communication and coordination The stock movement is monitored in real time, and between organizational units within the com- information for different levels of management and pany, data redundancy eliminated, accuracy decision making are formed for different periods increased, availability and sustainability of data (weeks, months, quarter). Based on this data it is –– Achieved unique view for all functions possible to determine deviation of stock compared and departments, increasing the visibility to goal set, after which, if necessary, measures are in cooperation and coordination between taken for the stock amount correction (figure ).8 departments within the company, –– Enabled accurate forecast in buyer planning and accordingly forecasting in own purchasing plans, –– Automatic order reception from buyers through EDI without possible errors during order takeover into the own system, –– Less time consumption and automatic Figure 8. Stock monitoring trend card – Days On creation and forwarding of orders to suppliers Hand (DOH) with optimal stock expenses and lowest possible risk for buyer, and 5. Conclusions –– Price calculation upon recent purchase prices. Based on research presented in this paper con- Through the implementation of application clusions can be made concerning the methodol- software, business performance was significantly ogy, characteristics of developed application soft- improved, especially: ware and achieved business performances after –– Increased product sale for 13%, supply software implementation. New methodological volume increase for 10% and lower transport approach to the development and application of costs for 2% in 2010 compared to 2009, information systems for supply chain manage- –– Stock index compared to pure sale profit ment in the automotive industry enables: dropped from 1,07 to average 0,85, –– Integration of different methods, techniques –– Weekly buyer order input from 1h/day and tools from software engineering area, reduced to buyer order check in the duration –– Decision on alternative information systems of 0,5 h/week, based on cost/benefit approach, –– Invoice and dispatch development and –– Respecting limitations tied to financial and control (for the same number of positions) human resources, reduced 10 times, and –– Inclusion of developed modules of ERP –– Different information for planning, system in the integrated information system, monitoring, control, managing and decision and making, for which it took hours to receive –– Possibilities of efficient changes and further earlier, are available in real time now. development in accordance with stakeholder and supply chain demands. References Developed application software has better per- 1. Christopher, M., Towill, D., An integrated model for formance because: the design of agile supply chains, International Jour- –– A unique data base is created available to all and nal of Physical Distribution & Logistics Manage- thus quick access is enabled for all transactional ment, Vol. 31, No. 4, pp. 235-246, 2001. information throughout the organization. Also, 2. Closs, D., J., Swink, M., Nair, A., The role of information connectivity in making flexible logistics pro- there is a possibility to improve data base of grams successful, International Journal of Physical

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Distribution & Logistics Management, Vol. 35, No. 17. Jaklic M., Cotis Svetina A., Zagorsek H., Specific Re- 4, pp. 258-277, 2005. sponse to Universal Pressures in the Industry-Com- 3. Binder, M., Clegg, B., Designing and managing col- paring European Automotive Clusters, EGOS, 2005 laborative enterprises in the automotive industry, 18. L. Cassivi, L.A. Lefbvre, G. Le Hen, “Supply Chain International Journal of Logistics: Research and Ap- Integration in the Automotive Industry: The Case of plications, Vol. 10, No. 2, pp. 135-152, 2007. ANX”, 8th International Conference on Manage- 4. Mollenkopf, D., Stolze, H., Tate, W., L., Ueltschy, ment of Technology, Elsecier Advanced Technology, Green, lean, and global supply chains, International Oxford, UK, Février, 2000. Journal of Physical Distribution & Logistics Man- 19. Arsovski Z., Arsovski S., Mirović Z., Stefanović agement, Vol. 40, No. 1/2, pp. 14-41, 2010. M., Simulation of Quality Goals: A Missing Link 5. Choe, J., Inter-organizational relationships and the Between Corporate Strategy And Business Process flow of information through value chains, Informa- Management, International Journal for Quality tion & Management, No. 45, pp. 444-450, 2008. Research, Vol. 3, No. 2, pp. 317-326, University of 6. Arshinder, Kanda., A., Deshmukh, S.G., Supply chain Montenegro and University of Kragujevac, 2009. coordination: Perspectives, empirical studies and 20. Arsovski Z., Arsovski S., Stefanović M., A New Ap- research directions, International Journal of Produc- proach to Managing Application Development From tion Economics, Vol. 115, pp. 316-335, 2008. Aspects of Quality, International Journal for Quality 7. Williamson, E., A., Harrison, D., K., Jordan, M., In- Research, Vol. 1, No. 3, pp. 171-180, University of formation systems development within supply chain Montenegro and University of Kragujevac, 2007. management, International Journal of Information 21. Jeston, J., Nelis, J., Business Process Management, Management, Vol. 24, pp. 375-385, 2004. Butterworth-Heineman, Elsevier, Amsterdam, 2008. 8. Lysons, K., Farrington, B., Purchasing and Supply 22. Avison, D., Fitzgerald, G., Information Systems Chain Management, Prentice Hall, New York, 2006. Development: Methodologies, techniques & tools, Haug, A., Pedersen, A., Arlbjorn, J., S., ERP system McGraw-Hill, London, 2002. strategies in parent-subsidiary supply chains, Inter- 23. Laudon, K., Laudon, J., Management Information national Journal of Physical Distribution & Logistics Systems: Managing the digital firm, Prentice Hall, Management, Vol. 40, No. 4, pp. 298-314, 2010. Upper Saddle River, New Jersey, 2004. 9. Bose, I., Pal, R., Ye, A., ERP and SCM systems integra- 24. Arsovski Z., Milanović I., Modeling Purchasing Pro- tion: The case of a valve manufacturer in China, Infor- cess From Quality Aspects, International Journal for mation & Management, Vol. 45, pp. 233-241, 2008. Quality Research, Vol. 2, No. 4, pp.265-276, Universi- 10. Iyer, K., N., S., Germain, R., Frankwick, G., L., Sup- ty of Montenegro and University of Kragujevac, 2008. ply chain B2B e-commerce and time-based delivery 25. Arsovski Z., Rejman Petrović D., Milanović I., Ranko- performance, International Journal of Physical vić V., Kalinić Z., Modeling supply chain processes Distribution & Logistics Management, Vol. 34, No. in automotive industry, 5th International Conference 8, pp. 645-661, 2004. ICQME 2010, University of Montenegro, 2010. 11. Iyer, K., N., S., Germain, R., Claycomb, C., B2B 26. Eskillson, H., Nystron, C., Windler, M., ERP Sys- e-commerce supply chain integration and perfor- tems Effects – A Comparison of Theory and Prac- mance: A contingency fit perspective on the role of tice, School of Economics and Commercial Law, environment, Information & Management, Vol. 46, Goteborg University, 2003. pp. 313-322, 2009. 27. Fiona Fui-Hoon Nah, Janet Lee-Shang Lau, Jinghua 12. Gattorna, J., Dynamic Supply Chains, FT Prentice Kuang, “Critical factors for successful implementa- Hall, Dorchester, 2010. tion of enterprise systems”, Vol 7 No.3, pp. 285-296 13. Barut, M., Faisst, W., Kanet, J., J., Measuring sup- Business Process Management Jurnal, 2001. ply chain coupling: an information system perspec- 28. ERP-Systems – Situation and future tive, European Journal of Purchasing & Supply Developments,http://www.ebz-beratungszentrum.de/ Management, Vol. 8, pp. 161-171, 2002. pps_seiten/sonstiges/erp_engl.htm ,(April 2007.). 14. Kobayashi, T., Tamaki, M., Komoda, N., Business 29. Sheikh, K.: Manufacturing Resource Planning process integration as a solution to the implementa- (MRP II): With Introduction to ERP, SCM and tion of supply chain management systems, Informa- CRM, McGraw Hill Profesional, New York, 2003. tion & Management, Vol. 40, pp. 769-780, 2002. 30. Blair, P., Input-Output Analysis, Cambridge Univer- 15. Parry, G., Graves, A., The importance of knowledge sity Press, 2009. management for ERP systems, International Jour- nal of Logistics: Research and Applications, Vol. Corresponding Author 11, No. 6, pp. 427-441, 2008. Zora Arsovski, 16. Suthikarnnarunai N., “Automotive Supply Chain University of Kragujevac, and Logistics Management”, International Multi Faculty of Economics, Kragujevac, Conference of Engineer and Computing Scientists, Serbia, Hong Kong, Vol. II, 2008. E-mail: [email protected]

Volume 7 / Number 1 / 2012 353 technics technologies education management Managing of departments and classes through e-learning in the state of emergency

Snezana Babic-Kekez¹, Slobodan Popov² ¹ University of Novi Sad , Technical Faculty “Mihajlo Pupin”, Zrenjanin, Serbia, ² Center for development and application of Science, Technology and Informatics, Novi Sad, Serbia.

Abstract need for developing and enhancing their capabilities to work in new conditions. This paper considers the problem of develop- Of particular importance is training and devel- ing teaching competencies for work in emergency opment of abilities of teachers and other education situations. It presents the Program of teacher train- staff to take on new roles. Experiences from the ing for the management of department and teach- practice of EU member states related to initial and ing distance learning. The program aims to train further training in various areas, are very different, teachers in emergency situations such as pandem- but there are common issues that all countries take ics or natural disasters, with the use of modern into account in finding adequate solutions in this media and technology to hold a certain amount of area. These are, for example, the questions of bal- classes by distance learning. ance between the general trainings and the trainings The specific objectives of the program are to for the subjects of teaching and pedagogy method- train teachers to respect the standards produced ology of training and preparation for participation teaching materials (electronic teaching unit, elec- in the planning of school development, educational tronic tests) and enable them to independently im- programs, use of information and communication plement the text, sound, photography, video, ani- technologies in teaching, and so on. In an effort to mation, and movie as standardized units (SCORM increase the professionalism of teachers and pro- packages) and to acquire knowledge needed to vide support and increase the quality of teachers, communicate electronically in an environment for countries, EU members have established a system distance learning. The results of evaluation semi- of defined competencies of teaching staff. Recog- nars suggest that it need differentiation of content nizing that the continuing professional develop- for module 2 and module 3 based on a previous ment of teachers is a key to success, in most EU knowledge of participants, because there is a sta- countries, it is required from teachers to have 20 to tistically significant difference in the assessment 100 hours of professional development per year. of participants on the independent use of knowl- Overcoming of traditional methods and forms edge in practice. of teaching is possible by introducing modern ap- Key words: classes management, distance proaches. New ways of working require a new learning, teacher competence. organization, material support, and training, training and motivation of teachers for such work. In 1. Introduction the pedagogical field, teachers as the makers of educational contents can assume the majority of We are witnesses of an age in which information roles and responsibilities. These roles demand technology is becoming a key factor in the overall having new skills that would help apply the previ- human and social existence and the one of the con- ously acquired experiences to new technologies. ditions of the entire educational system readiness [1] Modern approach in teaching, as a condition for the rapid transformation and adaptation to these of quality, assumes training of teachers. A teacher demands and changes, so the traditional form of who is actively involved in the development of his education in collecting the knowledge of individu- scientific discipline and continuously improving als and development of their abilities have a new his pedagogical skills for teaching of his subjects, meaning. In these processes, the role of teachers do and develops his technical and scientific compe- not lose their importance, on the contrary, there is a tence, is contributing to the quality of teaching.

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The criterion for determining the competence training directly implemented in terms of of teachers has systematic approach and one of out of school because, unfortunately, more the standards requires teachers to show flexibil- and more indications that a pandemic which ity and creativity in their work, or to adjust the will occur more often. actual learning process (often unexpected and –– To prepare as many teachers as we can unplanned) to the responses of students and char- in time, to work in emergency situations acteristics of the real context in which teaching because we encounter the fact that all chil- and learning is organized. The teacher should be dren in the near future have a computer at open to new ways, able to try out different ideas, home. looking for alternative solutions, and be able to approach problems in a creative and constructive Specific objectives of the program: way. A good teacher has a clear aim, but at the –– To train teachers to use the standards for same time is flexible enough to adapt to changes producing teaching materials (electronic in priorities, interests of students and other chang- teaching units, electronic tests ,...) and enable es in conditions and circumstances under which them to independently implement the text, he is working, At the same time the standards for sound, photography, video, animation, and the planning, programming and management of film as a part of the hole standard package teaching and learning requires teachers to create (SCORM packages) their own program that best reflects the charac- –– To acquire the knowledge required to teristics of groups of students with whom he is communicate electronically in an environ- working or the conditions under which they work, ment for distance learning. program objectives and contents and characteristics of the teaching context in which the program The target groups are educators, teachers and implemented. Developing a program is a skill that associates in educational institutions, primary involves: outcomes planning , content structuring, schools and secondary schools. choosing a strategy of teaching and learning (activities of students and teachers), the organization Activities of work in large and small groups, defining expectations and requirements of students, selection and Program activities are tailored to the level of preparation of materials and resources, selection previous skills where teachers have mastered the of methods of monitoring and evaluation. The study and professional development during their main requirement, in terms of managing a de- teaching practice. It applies a modular program partment of teaching and learning at a distance in with the following topics: emergency situations, is to develop and improve skills of teachers for good knowledge and use of Topic 1: Using a system for distance learning educational technology in terms of modern media, Become familiar with the basic elements of especially the Internet. work in one of the free system for distance learning (ATutor / Moodle), depending on the prefer- 2. The program of developing special skills of ences and needs. Become familiar with possible teachers to work in the state of emergency contents that are supported by the above systems for distance learning. Creating the course, adding The program objectives are: - That in an emer- users and content, selection and monitoring of ac- gency (pandemic, shortages of fuel, weather, etc.) tivities. Each participant is placed in the role of using modern media and modern technologies the author, and made materials will present to col- hold a certain amount of classes in order to reduce leagues. Administring and communication with as much as possible the loss in the implementation systems for distance learning. The organization of of the curriculum; materials, the division of students into groups and –– To enable teachers for the simple but specific group work. Practical work-workshops. effective programs for distance learning

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Topic 2: Making of content for use on systems to be users / authors / speakers but not the web for distance learning to the SCORM standard administrators. This means that the whole system Production of materials covering single teaching of administration is entrusted to the Informatics unit and meets the SCORM standards. Basics of Union of Vojvodina practicioners. Informatics SCORM standards are introductions with software Union of Vojvodina for the implementation of the which is used for the creation of electronic materi- training provided hosting for all students, which als for the teaching according to the SCORM stan- means that the improvement is realized in real en- dard. Processes are typical examples of courseware vironment, which means that participants would and authorware software. Tools for offline creation have workshops in the real environment. of materials for the online lessons. Uploading of the At the end of the second module / topic teachers lessons made to the system for distance learning. will be trained to use specialized tools for e-learn- Creating learning materials directly to the system ing that is naturally used in the teaching process for distance learning with respect to SCORM stan- on systems for distance learning and to develop dards. Practical work - workshops. learning units for their online lessons respecting the SCORM standard. Participants undergo all Topic 3: Making of the electronic tests steps from production of materials in specialized Introduction to the program of making the elec- tools (couseware, authorware) till uploading such tronic tests. Integration of multimedia contents in materials to the system implemented for distance the tests. Planning the tests, creating tests, the rules learning. Also, to use for the same purpose all the in the development of electronic tests, the integra- other tools of the system for distance learning. tion of multimedia, time intervals, integration of At the end of the third module / topic teachers the whole content and application of lessons. Soft- will be able to create electronic tests to be used in ware for the electronic quizzes and tests for use teaching system for distance learning. Participants in teaching system for distance learning. Practical undergo all steps from production tests in the spe- work - workshops. cialized tools till uploading tests to a system for This topic is based on the method of demon- distance learning. Participants used for the same stration and practical work on the computer. Work purpose also tools systems for distance learning. is based on approach one partcicipant one comput- After finishing this training, after taking participa- er. Groups are formed according to the levels of tion in all three topics of given program, teachers prior knowledge and where applicable for special will be trained to adequately use the system for school subjects to make the program more useful distance learning in emergency situations as an al- to needs of teaching practice. ternative for real classes. One topic needs 8 hours a day. A total of 24 The project envisages that the participants hours, three days. For the realization of the program choose based on his previous knowledge between Center published printed materials for each module, one of the following modules: Using a system of which will receive each program participant and the distance learning, content development for use on corresponding CD with necessary materials. systems for distance learning to SCORM standards, development of electronic tests. In the end The outcomes of the program the students have a practical test based on which they receive a certificate of performance. It is refer- At the end of the first module teachers will ing to creation of a mini project in accordance be trained to apply their knowledge in the form with the subject which participant is teaching and of plan implementation on the system for dis- the selected topic. All participants would complete tance learning. They will also have the necessary the anonymous evaluation sheet about the quality knowledge to administer user groups (groups of of professional development. students, grades) and to administer the work of Effects of the program are constantly moni- the entire system, from communication to online tored in direct contact with school principals and materials and setting up a backup. To emphasize teachers professional bodies. There is a possibility one important fact that the participants are trained of organizing the competition at the municipal or

356 Volume 7 / Number 1 / 2012 technics technologies education management higher levels to track developments in individual knowledge and acquired the certificate of formal and team work of students and their mentors on a and informal education. At the end of each semi- specific topic or topics selected independently. It nar, as a part of the evaluation, participants were is planned to enable participants to after this train- interviewed in order to self-level their knowledge ing, use free resorces for distance learning and in attained by individual subjects or modules. Evalu- that way the Informatics Union of Vojvodina, oration scale in the questionnaire, with each topic ganization responsible for the program realization, of the seminar, offered the answer "may I use ac- would have direct contact with students and feed- quired knowledge in practice independently" and back on the effects of the program. "knowledge can’t be used in practice independently". Statistical analysis of data, using the statistical Evaluation package SPSS V.19 established measures mean and correlation of variables: Training program for teachers to work in emer- Var1 Topic 1: Using a system of distance gency situations is realized through eight seminars learning - knowledge can be used in practice inde- covering a total of 436 teachers and associates. pendently. All the surveyed respondents Σ436 or Given that the program of activities is tailored to 100% estimated that their knowledge in this topic the level of previous skills where teachers have can be independently put into practice. mastered the study and professional develop- Var2 Topic 2: Development of content for use ment during their teaching practice, each seminar on systems for distance learning to the SCORM has balanced group of participants based on prior standard - knowledge can be used in practice inde-

Table 1. Spearman ‘s correlation coefficient of variables Correlations VAR00001 VAR00002 VAR00003 Correlation Coefficient 1.000 .952** .790* VAR00001 Sig. (2-tailed) . .000 .020 N 8 8 8 Correlation Coefficient .952** 1.000 .922** Spearman's rho VAR00002 Sig. (2-tailed) .000 . .001 N 8 8 8 Correlation Coefficient .790* .922** 1.000 VAR00003 Sig. (2-tailed) .020 .001 . N 8 8 8 **. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed). Table 2. Pearson correlation coefficient of variables Correlations VAR00001 VAR00002 VAR00003 Pearson Correlation 1 .921** .742* VAR00001 Sig. (2-tailed) .001 .035 N 8 8 8 Pearson Correlation .921** 1 .893** VAR00002 Sig. (2-tailed) .001 .003 N 8 8 8 Pearson Correlation .742* .893** 1 VAR00003 Sig. (2-tailed) .035 .003 N 8 8 8 **. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

Volume 7 / Number 1 / 2012 357 technics technologies education management pendently. Part of the respondents surveyed, 209 contents of Module 2 and Module 3 should be dif- of Σ436 or 47.936% is estimated that the acquired ferentiated with respect to the prior real knowledge knowledge in this topic can be independently put of participants which should be determined by ini- into practice. tial knowledge test. VAR3 Topic 3: Production of electronic test - Table 3. Means and standard deviation of VAR1 knowledge can be used in practice independently. and VAR2 Part of the surveyed respondents, 64 of Σ436 or VAR00001 * VAR00002 14.678% is estimated that the acquired knowledge VAR00001 in this topic can be independently put into practice. VAR00002 Mean N Std. Deviation Spearman 's correlation coefficient at the level 9.00 27.0000 1 . of significance 0.01 with 2 degrees of freedom in- 12.00 34.0000 1 . dicates a very high correlation of variables rang- 14.00 48.0000 1 . ing from .922 to .952. Level of significance of 19.00 43.0000 1 . 0:05 with 2 degrees of freedom, the correlation 22.00 56.0000 1 . coefficient of .790 variables is high. 31.00 75.0000 1 . Pearson correlation coefficient at the level of 37.00 62.0000 1 . significance 0.01 with 2 degrees of freedom indi- 65.00 91.0000 1 . cates a high correlation of variables ranging from Total 54.5000 8 21.25357 .893 to .921. Level of significance of 0.05 with 2 Table 4. Means and standard deviation of VAR1 degrees of freedom, the correlation coefficient of and VAR3 variables of .742 is high. VAR00001 * VAR00003 Correlation analysis indicates the range of val- VAR00001 ues from 0742 to .952, and that there is a high VAR00003 Mean N Std. Deviation degree of correlation estimates "knowledge can independently be used in practice" for certain is- 3.00 27.0000 1 . sues of teacher training programs to work in emer- 4.00 41.0000 2 9.89949 6.00 75.0000 1 . gency situations. We can conclude that the semi- 7.00 43.0000 1 . nar participants who are eligible to apply lessons 8.00 56.0000 1 . learned in the module 1 (Topic: Using a system for 17.00 62.0000 1 . distance learning), module 2 (Topic: Development 18.00 91.0000 1 . of content for use on systems for distance learning Total 54.5000 8 21.25357 to the SCORM standard) can independently apply their knowledge also in the module 3 (Topic: De- velopment of electronic tests), or that the content of programs for professional training for teachers to work in emergency situations is adapted to prior knowledge of one group of the participants. The analysis measures of the mean value of VAR1, VAR2 and the chart of VAR2 and VAR 3 in relation to the total (VAR1) indicates that there is a significant difference between the VAR3 nad the total number (VAR1). Arithmetic mean VAR1 =54.5000 and standard deviation δ = 21.2535721 is statistically significantly different from the mean  = 27,000 and standard deviation δ = 9.89949 of VAR3. We can conclude that standardization groups on the basis of certificate of formal and non-formal education is not enough because there are differ- Histogram 1: Measures of mean values of variables ences in prior knowledge of participants, so that the

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Model Summary and Parameter Estimates Dependent Variable:VAR00001 Model Summary Parameter Estimates Equation R Square F df1 df2 Sig. Constant b1 Linear .848 33.382 1 6 .001 26.664 1.065 The independent variable is VAR00002.

Model Summary and Parameter Estimates Dependent Variable:VAR00003 Model Summary Parameter Estimates Equation R Square F df1 df2 Sig. Constant b1 Linear .550 7.330 1 6 .035 -2.802 .205 The independent variable is VAR00001.

Chart 1. Relationship between VAR1 and VAR2 Chart 3. Relation var1, var2 and VAR3

Conclusion Program of professional development for teachers to work in emergency situations program provides training for teachers for the modular use of computers and the Internet, and creative relationship between the realization of the educational process and methodical approach to the performance of modern education in emergency situations. The program relies on the positive outcomes of previous work on updating and application of electronic technologies in teaching process. By applying these technologies enrich the quality of Chart 2. The relationship between VAR1 and VAR3 teaching and make it the possible to teach in difficult situations. Use of media and appropriately designed teaching materials, while respecting the standards, and raising the motivational aspect in the learning process, easier memorizing and ac-

Volume 7 / Number 1 / 2012 359 technics technologies education management quiring teaching material, even in terms of learning through distance learning systems during emergencies. Training program for teachers to work in emergency situations is realized through eight seminars covering a total of 436 teachers and associates. The results of evaluation of already held trainings, suggests that the differentiation of content module 2 and module 3 is necessary, according to the prior level of knowledge of participants, because there is a statistically significant difference in the assessment of participants on independent use of knowledge in practice. Great interest in this program stems from the fact that teachers see their future not only in personal advancement in the profession but also in the possibilities of using modern technology in the teaching process which are daily becoming more and more developed and erases the boundaries of the duration of the learning process. It creates opportunities for active participation in the local and global community and allows participants to continue, after the end of training, using the resources systems for distance learning, ensuring sustainability of the program.

References 1. Popov,S; Babić-Kekez, S. (2009): Tehničko i informatičko obrazovanje za 21.vek. U: Zbornik radova sa 1.međunarodnog naučno-stručnog skupa „IT e O“. 2.-3. oktobra 2009. godine,Banja Luka Str.24- 33. Paneuropski Aperion Univerzitet, Banja Luka, Republika Srpska.

2. Babic-Kekez, S. (2000): Counceling Information Ser- vice Subsystem in Elementary School. Working paper of Ninth International Scientific Conference "Infor- matics in education, quality and new information technologies", Zrenjanin, 20-21. March 2000.year.

3. Gojkov, G. (2008): Goals - competence of teachers and educators, Všov, Vrsac

Corresponding Author Snezana Babic-Kekez, University of Novi Sad, Technical Faculty “Mihajlo Pupin”, Zrenjanin, Serbia, E-mail: [email protected]

360 Volume 7 / Number 1 / 2012 technics technologies education management The predictors of business participation of managers in sport

Nebojsa Maksimovic, Zoran Milosevic, Radenko Matic, Damjan Jaksic Faculty of Sport and Physical Education, University of Novi Sad, Serbia

Abstract The properties of sports club are an important exogenic manifesting determinant of participation In this paper there are the results of empiri- of managers of non-sport organizations in sport. cal research of the factors that can include the First of all, the environment of the club – the system relationship of management of non-sport organi- of competition as well as its sports results (achieved zations with sports clubs. The main aim of this points, the position in the ranking list, reputation of research is focused on defining the structural athletes and teams, effective interest of media for model of factors that determine the participation the activities of the club) stimulate business partici- of managers in sport. The empirical research was pation of the manager in certain sports organization. realized in six football and six volleyball clubs The characteristics of the internal club environment belonging to the highest and medium competi- have an additional contribution for establishing and tion level in the Republic of Serbia and 56 re- developing the participation of managers in the spe- spondents in total were included in the survey. cific sports organization (competing potential of the These respondents are registered active members human resources, reproductive ability of the club of the management of these clubs and they have – creating top athletes from younger teams in the the properties of (senior and middle level) man- club, good and professional coaches, available in- agers of non-sport companies. According to the frastructure, free facilities that can be used for busi- results of the tests of this research, we may state ness purposes, promotional events organized by the that the structural model of relation between fac- club, well-developed profitable business activities toring and criteria variables in the present form of the club). can be used only partially as an instrument of di- The main manifestation of business participa- agnosis and forecast (prediction) of the participation of managers in sports is shown by the fact tion of managers in sport. whether their company finances effectively one Key words: management of non-sport organiza- or more sports organizations. The transfer of the tions, sport clubs, bussines participation, managers. funds between the company and club can have many manifesting and latent forms (direct place- Introduction ment of funds in the form of investments, purchase of the club, general or partial sponsorship, or in the Sport in the modern society draws an attention form of optimal business transactions, loans, rents of numerous interested people (stakeholders), es- and so on). This abstract financial fact reveals the pecially of the members of managerial structures process of more or less business rational manager in non-sport companies. The business interest is decision-making as delegates of the company they shown within the sponsorship leading to great belong to. The content of this process is timely changes in important aspects of sport (Coakley, determined multi-phase choice – first, there is a 2001; Horne, Tomlinson, & Whannel, 1999; Ro- choice of sport, then of a sports discipline, and fi- byn & Kathleen, 2000; Sam, Batty & Dean, 2005). nally, concrete sports organization as the real ob- Apart from this, mechanisms and behaviour of the ject of business participation. managers in non-sport companies in the process In the process of selection resulting in the busi- of establishing and maintaining their participation ness participation of the certain company in a sports in running the sports organizations have not been organization, the first phase (selecting a sport as one studied more extensively. of competing areas of activity and placement of

Volume 7 / Number 1 / 2012 361 technics technologies education management funds) means that the company enters the potential were discussed by Gouws (1997); Shilbury, Quick market of sport and sports sponsorship. The struc- & Westerbeek (1997); whereas the legal aspects of tural dimension of business environment includes sports entrepreneurship in the USA were dealt by the filters of probability for selecting a sport, that is O'Brieni & Overby (1997). to say, specific sports disciplines as objects of real- The basic theoretical model from which we set izing business interests of the company. The sec- our theoretical framework for examining the rela- ond phase of concrete sports organization involves tionship between companies and sports clubs was sports and cultural characteristics as well as the formulated by Keeves (1972) in order to explain attitudes of managers by which they express sub- the influence of home on the students’ success at jective concretization of business interests of their school. This model was tested by Cooley and Loh- companies and their own interests. After Copeland, nes (1976), and Joreskog and Sorbom (1982). By 1996; Hall, Rodgers & Barr, 1990; Stotlar, 2004; fitting the structural model into the data of Keeves, these subjective characteristics of managers can be they developed the improved models for analyz- understood as filters of individual decisions about ing. The modification of the model was achieved participation in one institutionally existing sport – by introducing additional latent variables. The in a given sports organization. similar model was also used by Langan-Fox, The idea of research into the participation of Code, Gray & Langfield-Smith (2002). managers in sport as a dynamic input-output The result based on all collected empirical in- process is taken from the model of participating formation is in Figure1. of population in sport based on the initial ides of Rodgers, which a group of researchers from Lou- ven used in their survey on the sports for all in the EU countries. Within this longitudinal research the managerial layer has not been analyzed separately (Klaeys, 1982). The participation of various socio-professional categories of the population having membership in the various sports was the objective of empirical research from sociological (Robyn, & Kathleen, 2000), and psychological aspect (Haslam, 2001). Within these research activities there can be found the data about certain categories of managers (im- Figure 1. Inicial empirical structural model of portant managing staff, patrons – the owners of predictors of participation of managers in sport – the companies and so on), especially about their the results of SEPATH analysis preferences towards certain sports disciplines. The recent international publication has con- The main aim of this research is focused on fined close attention to the problem of participation defining the structural model of factors that deter- of the managers of non-sport companies. Tomić mine the participation of managers in sport. (1995, 2007) in his study on the sports management discusses the participation of non-sport man- Method agers in sport (acting as holders of function). The sponsorship in sport was in the focus of attention The empirical research was realized in six foot- in Kinney & McDaniel, 1996; Ferrand & Pages, ball and six volleyball clubs belonging to the high- 1996; Amis, Pant & Slack, 1997; Dolphin, 2003; est and medium competition level in the Republic assessing the efficiency of managers in sport can of Serbia. 56 respondents in total were included be found in Fizel & D’Itri (1997), and (Raič, 1994; in the survey; these respondents are registered ac- Inglis, 1997) discussed the role of management tive members of the management of these clubs in amateur sports organizations. The problems and they have the properties of (senior and middle of sports management from the strategic aspects level) managers of non-sport companies.

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First, this model assumes that within one of which cannot be achieved in any other way (with two forms of participation of managers in sport a lower business effect). This dimension includes (usage, and business participation) lies the proper- variables that can vary in a shorter period of time ties of managers-respondents themselves, includ- and they represent dependent variables under the ing the properties of the company whose manage- influence of structural dimensions of entrepreneur ment they belong to, and they do not change for environment and sport culture of the managers. the long period of time so the subjects of manag- The dimension of the process – expresses mani- ing sports organization can rely on them only as festing effective relationship of the company and on the strategic factors with optimal or adverse sport, use of sports services and resources of certain effect. Second, we may assume that there are the sports organizations (by employees and managers characteristics of respondents that tend to change of the company), supporting sports organizations over a short period of time, and they reflect the (free transport services, funds, financial donations), changeable circumstances (situation) so the opera- business transactions of the companies and cer- tional management of sports organization can rely tain sports organizations (compensations, business on them (formulation of tactic ways for getting a contracts, renting business premises, joint venture manager to invest in sport). in additional activities of the sports organizations, The starting relation refers to the development advertising), sponsorship. This dimension sums up of participation of managers from usage to their the effect of the two previous dimensions so it has business form. The users’ participation in this mod- an emphasized influence on the business partici- el is manifesting dependent variable in relation with pation of managers in sport (managers here act as exogenic manifesting variable (or battery of vari- authorized agents of the company). The list of all ables) of sports culture of managers. This last vari- variables is given in Appendix 1. able includes sport needs and habits of respondents The determined relations of five dimensions of gained while being into sport before their taking a structural model do not include a more complex position of manager in that company. set of influence of exogenic and endogenic mani- The environment of the company is important festing variables. The analysis does not include a for establishing and development of business par- probable set of latent variables which have not un- ticipation of managers in sport. This environment dergone empirical research procedure (they have is defined by three dimensions – a set of manifest- not been considered in the formulated questions ing variables. The dimension of structure – which of the survey). In order to use this latent space in includes the characteristics of the company, its the structural model, we tested structural model by resources (employment, equipment), business using SEPATH procedure (Statistica, Version 9.0). potentials (funds, total income, accumulation), the position in the market (positioning, dynamic Results of business effects), its structure (the hierarchy of management), and especially socio-structural The main result obtained by empirical analysis characteristics of managers (sex, age, marital sta- (Figure 2) confirms that the following can be ex- tus, education). This dimension includes the vari- tracted from the collected empirical data: a) Three ables which do not change over a short period of dimensions of independent variables (exogenic time, so they act as determinants (the factors with manifesting dimensions): 1) Structural charac- timely predictable effects). teristics of respondents (including their sport cul- The dimension of relationship – expresses the ture), 2) The environment of the company, and 3) relationship between managing factors of the com- The environment of sports organization; b) Two pany and sport, current and future sport activities dimensions of intermediary independent variables taken by the staff of the company, including man- (manifesting endogenic dimensions): 1) The rela- agers (and members of their families), estimating tionship of managers towards sport, and 2) The ef- business interest of the company for particular fects of participation; c) The dimension of criteria sport and concrete sports organization, attempts variables: Form and Duration of the participation of the company to have interest through sport of managers in sport.

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Figure 2. The final empirical structural model of predictors of participation of managers in sport – the results of SEPATH analysis

The analysis shows that the dimension Club in this analysis that the dimension Effect is the key our model is of the highest importance for under- endogenic manifesting dimension in our structural standing the predictors of participation of manag- model of participation of managers in sport. The ers in sport. The established direct influence on the dimension Orientation has less expressed, parallel participation is negative (what can be interpreted as effect on the participation of managers in sport. follows: as the category of levels of competition for The next important result of our analysis of the club is increasing, the business participation of the structural model of participation of managers managers in clubs is decreasing). The dimension in sport refers to the existence of latent variables Club also has a negative influence on the dimension that influences unexplained variability of exogenic Effects (with the nominal increase of the competi- (DELTA) and endogenic (EPSILON) dimensions tion level – a real scale reflects a decrease of that of structural model. Besides, although the test does level – and then the level of financing decreases as not show a significant influence of latent distracting well as business projects of turnover, taking a loan agents-noise (ZETA) it can be noted that they are and so on). The dimension Club influences the di- also present with endogenic variables and variables mension Orientation of the manager. of criteria dimension of model. The tests of good- Besides direct influence on the participation of ness-of-fit (approximate abilities) for our starting managers in sport, the dimension Company has an empirical structural model point out to its limited intermediary influence through relationship with analytical properties. Judging from the results of the the dimension of Effects of the process, which ex- survey, excluding several residual variables from presses the level of financing and free (and other) the model can improve its research characteristics. forms of supporting the club by the company. The The attempts to improve approximate validity dimension Respondent-Manager with its structur- of the model have not given any expected results. al and sport and cultural properties has an influ- Judging from the indices of insufficient approxi- ence on the dimension Effects. We conclude from mation, our model does not fit the data of selected

364 Volume 7 / Number 1 / 2012 technics technologies education management variables since the values of these indices are be- From the above results of the research we can low 0.95 (McDonald’s non-centrist index, Popula- conclude that the key predictor of participation tion Gama index, Adjusted Population Gama in- of managers in sport – Club is its sport ranking dex). According to the chi-square test at the high shown by the level of competition and achieved level of reliability, we can conclude that there is de- competition results in a certain period of time (re- pendency of variables in the model. Bentler-Bone cent matches within the league). As this ranking indices measure a relative decrease of the discrep- is higher, intention of managers to have more sig- ancy function caused by transfer from Zero-model nificant influence in the club is higher. Therefore it – along with independence of all variables in the can be concluded that the status in the club can be model – to more complex models of dependency interpreted as the way of using business potential of variables, which reach the values in the range of the club as the means for achieving business from 0.398 to 0.551 which is far above the perfect aims of the company that managers represent. approximation (expressed by value 1). It can be said that Participation expressed by The constructed structured model of partici- the variable Status in sport can be treated as the pation of managers in sport requires further de- predictor for explaining the process of achiev- velopment and improvement of characteristics so ing business aims (interests) of the company that scientifically accepted properties should be ob- the managers represent. This statement initiates tained and they are necessary for prediction and searching for criteria dimension in the model forecast of managers’ behaviour in the managing formulated in a different way, which would in- processes and sponsoring the sports clubs. Bear- clude Effects of participation: both the effect on ing in mind the limited range of above-tested the sports club (its financing, logistic support for structural model, we can rely on their results as achieving sports and competition aims) and the ef- the starting point for extracting predictors of par- fects that represent business aims of the company ticipation of managers in sport. By monitoring for whose realization the influence on sport is statistically verified relations in the diagram of needed as well as business potential of the sports flow, we obtain the following structure as the ori- club. Theoretical and methodological redesign of entation of explaining the predictors of participa- the model of participation of managers in sport is tion and their effects. needed for accessing such research.

Figure 3. The predictors of participation and its effects

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The next important relation is shown by the Discussion and conclusion established influence of the variable Club on the Our research of participation of the managers variable that estimates Orientation of the man- in sport has emerged from the observation of the agers towards sport. We can notice that different acute practical problem of persuading businessmen aspects of the club’s reputation are necessary for and managers to cooperate with sports organiza- marketing orientation of the managers, and thus tions. Therefore, the results of this research should for attracting the sponsors and members of the be assessed from the practical point of view. club management. Also we can see that the level For the relations of variables, which the tests of competition and sports success of the club rep- confirm as statistically significant at the level of resents the predictor variable for forecasting entre- probability of 95%, we can conclude that they con- preneur orientation of the managers which express sist of elements of the system of indicators by which empirical variables of their tendency to finance it is possible to detect structural connections in the experts who make the sports success (coaches, model of participation of the managers in sport. doctors and physiotherapists). It is confirmed that there are theoretical assumed The third relation of importance for interpret- dimensions (battery of variables) in the model, but ing the participation of managers in sport has to the tests of goodness-of-fit do not provide the basis do with the influence of Company on Effects of for qualifying theoretical model of ‘well-approxi- participation. The market position and trend of mated’. According to the results of the tests of this growth in total income of the company the man- research, we may state that the structural model of agers represent are the variables which enable the relation between factoring and criteria variables in prediction of effects important for financial situa- the present form can be used only partially as an tion of the company. The additional variable Pro- instrument of diagnosis and forecast (prediction) of fession of the managers can be treated as the sup- the participation of managers in sport. port (according to the results of testing structural Our expectation that we will provide, according model) for predicting the contribution of manag- to the results of the empirical research, feedback ers for financing the club. on the mechanism that stimulates the managers of Finally, two variables from the dimension Man- companies to participate in our sport turns out to ager can be connected with intention and interest be justified. The performed exploration (general of managers for financing the club. The structural insight, sectioning the sample of sports clubs) dis- characteristic Marital and family status turns out covered and statistically tested the relations of key to be an important predictor of this managers’ dimensions – factors of participation of non-sport preference. Interpreting this relation requires the managers in sports clubs. We obtained systematic additional research (experience of a manager as insight into the structure of factors that determined a parent of adult or under-18 children regarding functioning the sports clubs. (Kinney & McDan- the sport should be taken into consideration). The iel, 1996; Dolphin, 2003; Stotlar, 2004) variable Estimation of the significance of taking The realized insight into business and manag- up a sport for establishing business contacts and ing structure of sports organizations (their man- getting business information makes a clear sense agement) provides systematically checked refer- within the interpretation of business participation ent framework for projecting strategy of appearing of managers in sport. In the sports environment, managing subjects in sport on the market of spon- managers make contacts and obtain information sors and in the offer of programme for investing that otherwise are not easily accessible. in sport. Having in mind methodologically limited range of this research – its explorative character that does not allow generalization – the given results can be used for pointing out to the framework in which, within acceptable span of probability, the support for projecting managing and, first of all, strategic actions in sport can be searched for.

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References 17. Kinney, L. & S. R. McDaniel (2004). American consumer attitudes toward corporate sponsorship of sport- 1. Amis, J. N. Pant and T. Slack (1997). Achieving a ing events. In: L.R. Kahle and C. Riley, Editors, Sports sustainable competitive advantage: A resource-based Marketing and the Psychology of Marketing Communi- view of sport sponsorship, Journal of Sport Manage- cation, Lawrence Erlbaum Associates, Mahwah, NJ. ment 11, pp. 80–96. 18. Klaeys, U. (1982). Le sport dans la societe Europ- 2. Coakley, J. (2001). Sport in society. New York: Mc- eenne. Strasbourg: Comite pour le developpement Graw-Hill. du sport. 3. Cooley, W. W., & Lohnes, P. R. (1976). Evaluation 19. McDaniel, S. R. (1996). Ambush marketing revis- research in education. New York: John Wiley. ited: an experimental study of perceived sponsorship effects on brand awareness, attitude toward the 4. Copeland, R. (1996). Understanding the sport spon- brand, and purchase intention", Journal of Promo- sorship process from a corporate perspective, Jour- tion Management, Vol. 3, 141-67. nal of Sport Management,10, 1, 32-48. 20. Langan-Fox, J., Code, S., Gray, R., Langfield- 5. Dolphin, R. (2003). Sponsorship: Perspectives on its Smith, K. (2002). Supporting Employee Participa- strategic role, Corporate communications: An Inter- tion: Attitudes and Perceptions in Trainees, Em- national Journal 8 (3), 173-186. ployees and Teams, Group Processes & Intergroup 6. Ferrand, A. and Pages, M. (1996). Image sponsor- Relations, Vol 5(1) 53–82. ing: A methodology to match event and sponsor, 21. O'Brieni, D., Overby, J. (1997). Legal Aspects of Journal of Sport Management 10, pp. 278–291. Sport Enterpreneurship. Fitness Information Tech- 7. Fizel, J. L. & M. D’Itri (1997). Managerial ef- nology. Morgantown, USA. ficiency, managerial succession and organizational 22. Raič, A. (1994). Osnove ekonomike fizičke kulture performance. Managerial and Decision Economics i sportskog menadžmenta. [Basics of Economics 18, pp. 295–308. of Physical Culture and Sports Management] Novi 8. Fizel, J. L i D'itri, M. (1996). Estimating Managerial Sad: Faculty of Sport and Physical Education. Efficiency: The Case of College Basketball Coaches, 23. Robyn, L. J., & Kathleen, M. A. (Eds.). (2000). So- Vol. 10, pp. 435-445. ciology of sport. White Plains, NY: Longman. 9. Gouws, J. (1997). Sport Management: Theory and 24. Sam, P. M., Batty, R. & Dean, R. G. K. (2005). A Practice, Knowledge Resources (Pty) Ltd, Randburg, Transaction Cost Approach to Sport Sponsorship, South Africa. Sport management review, 8, 1-17. 10. Hall, C., Rodgers, W. M. & Barr, K. A. (1990). The 25. Shilbury, D., Quick, S. & Westerbeek, H. (1997). use of imagery by athletes in selected sports, The Strategic Sport Marketing. Allen & Unvin, Australia. Sport psychologist, 4, 1-10. 26. Stokvis, R. (1989). The international and national 11. Haslam, S. A. (2001). Psychology in organisations: expansion of sports. In E. A.Wagner (Ed.), Sport in The social identity approach. London: Sage. Asia and Africa (pp. 13-24). New York: Greenwood. 12. Horne, J., Tomlinson, A., & Whannel, G. (1999). 27. Stotlar, K. D. (2004). Sponsorship Evaluation: Understanding sport. London: Spon. Moving from Theory to Practise, Sport Marketing 13. Inglis, S. (1997). Roles of the board in amateur Quarterly, 13, 61-64. sport organizations, Journal of Sport Management 28. Tomić, M., (1995). Menadžment u sportu. [Manage- 11, pp. 160–176. ment in Sport] Belgrade: Minetko. 14. Joreskog, K.G., Sorbom, D. (1982). Recent develop- 29. Tomić, M. (2007). Sportski menadžment. [Sports ments in structural equation modeling. Journal of Management] Belgrade: Data status. Marketing Research, 19, 404-416. 15. Keeves, J. P. (1972). Educational environment and student achievment. Melbourne: A.C.E.R. Corresponding author Radenko Matic, 16. Kinney, L. and McDaniel, L. (1996). Strategic im- Faculty of Sport and Physical Education, plications of attitude-toward-the-ad in leveraging University of Novi Sad, event sponsorships, Journal of Sport Management Serbia, 10, pp. 250–261. E-mail: [email protected]

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Appendix 1: List of variables Properties of the company Marketing orientation of sponsorship due to:

1. The seat of the company 2. Main objectives 3. Legal status of the company 4. Year of establishing a company 1. Competition results of the club 5. Total number of employees in the company 2. Number of viewers at the matches where the club 6. Market position of the company takes place 7. Trend of growth of the company 3. Loyalty and support of club fans 4. Reputation of fair play athletes and teams of the Properties of respondents – the position in club management, structural properties 5. Commitment of present and past players of the club 6. Reputation of the coach 1. Job 7. Reputation and influence of the club management 2. Position – the level of management 8. Supporting the club by local political structures 3. The main characteristic of the position – function 9. Supporting the club by higher sports structures of management 10. Supporting the club by international sports structure 4. Age 5. Marital and family status 6. Education The respondents’ view on sport Entrepreneur orientation of the sponsors

1. Currently active in sport 2. Active to the age of 21 3. Activities in the last three years 4. Satisfaction in the future 1. Training of the first squad of contestants 5. Status in sport 2. Purchasing the athletes 6. The forms of participation in sport – time spent 3. Work with younger selections of athletes 7. Index of growth of the amount of money spent on 4. Participation of the club in the competitions financing the 5. Building their own sports 8. Other forms of supporting the club 6. Maintaining and insurance of existing facilities 9. The criteria for selecting the club 7. Purchasing and maintaining machines and equipment The estimation of significance for taking up a sport 8. Paying professional coaches 9. Paying the doctors and physiotherapists 1. Contribution to health, condition 10. Paying professional managers and secretaries 2. Contribution to leisure, relaxation in the free time 11. Developing PR of the club 3. Development of character traits important for the 12. Developing the Marketing department of the club profession of managers 13. Organizing lottery 4. Material responsibilities 14. Club’s restaurant and cafe 5. Establishing the contact and getting important in- 15. Club’s company (goods and services) formation 6. Making business deals with the club 7. Good marketing deals Type – Span of sponsorship Identification of the club 1. Sponsorship over the total activities of the club 1. Type of the sports club:1) Football, 2) Volleyball 2. Sponsorship over particular activities of the club 2. The name of the club

368 Volume 7 / Number 1 / 2012 technics technologies education management Low-cost airlines traffic evolution in South- East Europe

Andrija Vidović, Tomislav Mihetec, Sanja Steiner Faculty of transport and traffic sciences, University of Zagreb, Croatia

Abstract product (GDP). Relationship of GDP to the criterion of traffic indicators is in range 1.5 to 2.5 Low-cost airlines take up an increasing share – which means that eg. 3 percent of GDP growth in the structure of the aviation market. Currently, suggests a possible growth of passenger traffic there are more than 40 low-cost airlines operat- (passenger kilometres) from 4.5 to 7.5 percent [4]. ing in Europe and they generate 38 percent of total passenger traffic and 23 percent of total Instrumen- tal Flight Rules (IFR) operations [1, 2, 3]. There 2. Low cost airlines operating model are contrary opinions about the future of low-cost Low cost airline is airline company that offer business model; from the scenario of survival of transportation services at lower prices in exchange two or three biggest low-cost airlines in Europe, to for the elimination of many services provided by the scenario of taking the role of primary operators traditional airlines. The concept originated from in most European short and medium haul routes. United States, after which in the early nineties of This paper elaborates business model of low- last century, spread through Europe and the rest of cost airlines and defines forecasting methods of the world. growth of air transport with the aim of forecast- To the great expansion of low-cost airlines fa- ing traffic share of low-cost airlines operations in vours their exceptional adaptability to the market. South-East Europe. Low-cost operators built their business model on Key words: low-cost airlines, forecasting, the permanent elimination of unprofitable lines South-East Europe, market share and introducing new ones. Characteristics of low-cost airline concept [5, 1. Introduction 6, 7]: –– focus on minimum costs and prices, and There is no unified definition of low-cost air- maximum efficiency line (LCA); moreover, there is no single term that –– commonly use secondary and regional refers to such companies because they often use airports terms such as low-fare airlines, low-cost carri- –– point-to-point network ers and no-frill airlines. However, there exists a –– single class in airplane unique understanding and public perception what –– direct services between regions LCA is because it comes mainly from the features –– short haul flights of utilized business model. Although the business –– no free in-flight service models of the individual airlines may vary, there –– single type of airplane in fleet are many common characteristics, that can gener- –– younger and environmentally friendly fleet ate overall picture what low cost business model is –– low operating costs. and what low cost airlines represent. Strategic planning of air transport development One of major difference between traditional is closely related with the development of avia- and low-cost airlines is choose of network route tion market forecasts that will ensure better allo- model. Low-cost airlines usually operate by point- cation of available resources. The forecasts must to-point network model and traditional airlines take to consideration two fundamental aspects of use hub and spoke network model. The choice of development: transport efficiency and economic network will have consequences for the physical growth which shows the level of gross domestic

Volume 7 / Number 1 / 2012 369 technics technologies education management expansion of the network. Figure 1 describes the passengers to another plane, which generates ad- function of hub and spoke and point-to-point net- ditional costs and reservation costs related to the work model. transfer of luggage [9]. In order to offer lower prices and remain profitable at the same time, European low-cost airlines must have a significantly lower unit cost than traditional operators. From above-mentioned features of the concept of low-cost airlines, it is clear in what way they manage to achieve that. Among the most important operational benefits by which LCA realize that much difference in cost compared to traditional companies are a greater density of seats (16 percent), greater utilization of aircraft (2 percent), low costs of flight and cabin staff (3 percent), usually a single model aircraft (a) in the fleet and the outsourcing of maintenance (2 percent). Additionally they have 12 percent lower costs associated with the production/service features (minimum station costs and outsourced handling, no free catering, less passenger services). Because they do not use the services of agencies and Global Distribution System and have reduced sales/reservation costs, the distribution costs are reduced by additional 9 percent. To perform the same or similar scopes of work LCA have fewer administrative staff and offices which reduces (b) operating costs by a further 3 percent. This ulti- Figure 1. (a) Point-to-point network mately results in a 49 percent lower cost per seat/ (b) Hub and spoke network [8] kilometres, compared to traditional operators [10].

Airport pairs in Figure 1 (b) (1-2, 3-4, 5-6) are 3. Forecasting methodology in air traffic connected through a hub (hub I). It takes six air routes that will create the six direct links to the Air transport growth, development and de- hub and fifteen indirect connections through the mand forecasting is intended to provide necessary hub to other airports. In point-to-point network, information’s to create the basis for developing theoretically, there are no indirect connections city and counties development plans that already through the hub. To connect all the airports in have an airport or have a need for the development point-to-point network, fifteen routes are needed of the new one. On the basis of traffic growth fore- - seven more than in the hub and spoke model. If, cast the development plans will define the space for example, we want to connect hub I to the hub needs and requirements that are required for the II, which would be connected with six airports, the airport infrastructure development. system of 78 airport pairs would be created. Dif- For example, obtaining all necessary permits ferent lines create a larger range of the network, and approvals for the construction of a new pas- picking up passengers at hubs and by that filling senger terminal at Zagreb airport lasted more than international and transcontinental flight that can ten years, since booking space was not conducted fly with lower costs and greater frequency. Impor- in the physical plan of the city Velika Gorica [4]. tant disadvantages of hub and spoke networks are An additional problem occurred with the nec- complex costs associated with the first network. essary space to build a second runway, which is These additional costs increases with a transfer of planned for the long term development. The situ-

370 Volume 7 / Number 1 / 2012 technics technologies education management ation that enabled the illegal construction of indi- period it is necessary to compare current data with vidual objects has occurred in space in which air- a forecast data and if necessary to carry out the port authorities should build a basic runway. necessary corrections. Airports represent complex infrastructure facili- The short-term forecasting method is a combi- ties that require high investments and hence it is nation of analyzing data from a number of other necessary to take account of the planning documen- forecasts which play a major role in modelling tation that should provide conditions for safe use of time series. The final traffic impacts must be airport facilities and provide long-term capacity in- adapted with the airport capacity. crease with the necessary supporting infrastructure. Short-term forecasting focuses on modelling of Airports represent important component of the time series movement of traffic on a monthly transport infrastructure, which is a catalyst for re- basis. The final result of short term forecasting is gional economic development while contributing the number of flights per pair of zones or regions in to better regional cooperation. one month: within Europe there are formed start- Infrastructure and transport facilities are in di- ing points for landing-zone (group of airports is rect dependence with the growth and development often smaller than the State); outside of Europe a of air transport in Europe and the changes that oc- large region are formed (group of countries). Four cur in the internal market. separate factors are used for forecasting to obtain Increasing the capacity of air traffic control and the final forecast (Figure 2): airports should be planned 15-25 years ahead. 1. The State-flow forecasting method is the Traffic growth requires increased capacity that historical method. This method has been must be sufficiently provided in advance to allow used for many years in the development sufficient time for a decision for the construction of short-term forecast. Forecasts are made or replacement of outdated technology, drafting individually for each country with the aim tender documentation, implementation of tender, model a separate forecasts for several major preparation of preliminary and detailed design and transport routes - domestic, over flights, etc., the construction of an airport. 2. Zone or region pairs forecasting method is The airlines are in a somewhat better position, based on modelling of time series (8,000 because the need to increase capacity in a short sets). time period can be satisfied by leased aircraft and 3. The schedule forecast method uses data cooperating companies. In order to anticipate fu- from the published flight plans for the ture need to increase the individual capacity or for coming months and compares planned flight introduction of new technologies, traffic growth plans with actual flight. forecasts are essential. 4. Initial years used in medium-term forecasts In civil aviation in the development of aviation are also used for modelling traffic in the market forecasts, predominantly are used qualitative future methods (expert assessment, research of the market, Delphi method), a projected time series method (ex- After short-term forecasting, the combined re- ponential, linear trend) and causal methods. sults of previous modelling are applied to airport For forecast to be more precise, it is necessary to capacity in a way to use the same methods used in develop the short, medium and long term forecasts. the medium to long term forecasting. Over-flights For a clearer understanding of the short, me- are calculated in a way to use data obtained from dium and long-term forecasting methodology, an the medium-term forecasts and yearly number of overview of forecasting methods is described in flights that were used in the medium-term fore- the following subchapters. casts.

3.1. Short-term forecasts Short-term forecasts are developed normally for a period of two years in advance. During this

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scenarios in which direction the air transport will develop in the long run. Typically, three to four scenarios are developed that depend on predeter- mined parameters. Long-term forecasts, as well as the medium- term forecasts give the view of the future flow of air traffic. This two abovementioned forecast methods are using models of economic and industrial sectors growth that are resulting in increase in air traffic between pairs of smaller airports and future traffic flows. When creating long-term forecasts the latest data obtained with the medium-term forecast are Figure 2. Summary of short/medium-term fore- included where the last year used in medium-term casting method [11] forecast is used as a base year for long-term forecast. This has a negative implication for the de- 3.2. Medium-term forecast velopment of long-term forecasts which does not include all events that could occur during the peri- Medium-term forecasts are made for the period od from the present until the last year of medium- of 7 to 10 years. term forecast. Medium-term forecasts take into account traf- Figure 3 describes an overview of long-term fic statistics, economic growth, development and forecasting model and a series of sub-models that impact of other transport modes, industrial pro- are used for passenger and freight traffic, military duction growth and cost growth, the capacity of transport, business aviation and airport pairs con- airports and air carriers that service the region or nectivity forecasting. Finally, all these data are in- the country, the number and impact of low-cost cluded in traffic growth forecasting. carriers, the development of network destinations, As passenger traffic has the highest percent- a load factor, fleet composition, demographic age in the number of IFR flights (about 85 percent changes, the impact of tourism, city pairs and the in 2010.) sub-model that analyzes the passenger frequency of flights between city pairs. traffic is described in detail. Passenger traffic long When making consideration of the dynamics of term forecast is focused on five main factors: transport activity it is necessary to take into account –– The global economy factor represents key traffic growth in neighbouring and competing air- events in the economic market that are ports or countries. For the medium-term forecast directly related to the air traffic demand. two to three scenarios are developed, that are de- –– Factors that characterize the passengers termined by the growth of pre-defined parameters. and their travel plans (changing patterns Medium-term forecast is a combination of short- in the traffic demand and choice of travel term and medium-term forecast modelling (Fig. 2). destinations). The data to be analyzed in short-term forecasts are –– Airline fares that cover the operating costs based on monitoring of recent trends in traffic. Me- of an airline (affect passenger decision on dium-term forecast except using data from short- which mode of transport to make the trip). term forecast includes a broader range of economic –– A large number of hub-and-spoke or point- and industrial development potential [12]. to-point networks can change the number of connections and flights arriving/departing 3.3. Long-term forecast from/to the origin/destination. –– The air traffic market structure describes Long-term forecasts are typically made for the size of aircraft that are used to meet the a period of 15 to 30 years but usually used for a traffic demand and to adjust the number of period of 20 years. They are based on possible flights.

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Modelling of freight and military traffic, busi- When comparing the traffic demand in 2010, in ness aviation and pairs of smaller airports are done EU 27 there has been 8,805,000 IFR movements by smaller and more sophisticated models based on while traffic demand in SEE region was around historical data that are sometimes correlated with 1,705,000 IFR movements. The 2010 highest trends in the economic market. Forecasting of the share in market segment in EU 27 was of tradi- takeoff and landing is limited with airport capacity. tional scheduled flights with 57.12 percent. The second highest market share segment with 22.83 percent was the low-cost segment.

Figure 3. Overview of long-term forecasting method [13]

4. Market share growth of low cost airlines Figure 4. EU27 air transport market segmenta- in South-east Europe tion 2010 [3] Air traffic in South-East Europe is growing rapidly from a low base, as a shadow of a series The figure 5 describes the market share traffic of armed conflicts and economic turbulences of evolution of IFR movements between 2005 and the past decades. Traffic growth in South-eastern 2010. It is obvious that the LCA market share is Europe can be described by two main character- increasing while market share of other airlines is istics. First characteristic is that the main drivers decreasing. of passenger traffic in the region are tourism and the migrant communities. Second characteristic is that much of passenger traffic between the EU and South Eastern Europe is land based. Air transport in the SEE is driven by GDP growth and exponential relationship between per capita income and tendency to fly [14]. The EUROCONTROL medium term report (which includes over-flight traffic) assumes an average annual 4 percent growth for the selected countries between 2010 and 2017, while base case scenario for EU 27 predicts 2.7 percent annually. Figure 5. IFR movement’s evolution 2005-2010 The main drivers for air transport demand in SEE region are tourists (mostly EU nationals) and large When making comparison between IFR move- migrant community (mostly based in EU). ments and passenger market share of low-cost

Volume 7 / Number 1 / 2012 373 technics technologies education management airlines and other airlines it is evident that the There is slight difference in the low-cost mar- passenger market share of low-cost airlines is in- ket share between EU 27 and SEE region. From the creasing with higher growth rate than the growth Table 1 it is apparent that the low cost IFR move- of low cost airlines IFR movements (Figure 6.). ments’ market share in 2010 is higher in countries This is because the average load factor of low cost of SEE region than in the EU27. Statistical data airlines in Europe is 80 percent, while the average used for this analysis regarding Serbia and Monte- load factor of traditional airlines is 70 percent negro is combined because the Serbian service provider is providing services in Montenegro airspace, and thus IFR movements are summarised together. Table 1. LCA Market share 2010 LCA Market share Country 2010 Bosnia & Herzegovina 26,33% Croatia 26,14% FYROM 26,54% Serbia and Montenegro 25,74% Slovenia 24,53% Figure 6. Passenger traffic evolution 2005-2010 EU27 22,83% There is significant difference in the number of In Europe low cost airlines market is represent- low cost airlines operating in the countries of SEE ing significant share in overall air transport market region. Croatia has the most representative num- share. Low cost airlines IFR flight movements’ ber of low cost airlines, as a result of their tourist market share in 2010 was presented with 23 percent orientation (Figure 8) [15]. while LCA passenger market share was around 38 percent [3]. Analyzing the market share in South- East Europe countries it has to be noted that each country has its own market share distribution. As an example, 2010 air traffic market share distribution in Croatia is presented in the Figure 7.

Figure 8. Number of low-cost airlines operating in SEE

The figure below sets out the yearly low cost airline traffic market share in SEE countries and in EU27. The average low cost airlines market share yearly growth between 2005 and 2010 in EU 27 has been around 1.8 percent, while in the SEE countries was around 3.4 percent.

Figure 7. Air transport market segmentation in Croatia [3]

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because of the stabilisation of the political and socio-economic situation in the region and because of the high tourist potential of the region. In next five to seven years low-cost airlines market share in South-east Europe will reach more then 1/3rd of the overall air transport market share.

References 1. http://www.etn.nl/lcosteur.htm, Access date 27.06.2011 2. York Aviation, European low fares airline association, Market share of low fares airlines in Europe, Figure 9. Low-cost airlines IFR movements traf- Final report, February 2011 fic share evolution 2005-2010 3. EUROCONTROL, Statfor, Interactive dashboard, Bruxelles, 2011 According to the EUROCONTROL med-term forecast the most significant growth rate of low- 4. Vince, D.: Razvoj zračnog prometa u funkciji razvoja ekonomskih odnosa Republike Hrvatske s ino- cost airlines market share in the SEE region will zemstvom, Znanstveni magistarski rad, Ekonomski be in Serbia and Montenegro and Croatia. Rea- fakultet, Zagreb, 2009 son for this forecast mainly lies in the Serbia and 5. Creaton, S.: Ryanair - The Full Story of the Controver- Montenegro opening procedures for joining EU sial Low-Cost Airline, Aurum Press Ltd., London, 2007 and Croatia joining EU in 2013 and because of the 6. Lawton, C. T.: Cleared for Take-Off - Structure and tourist orientation of all three countries. strategy in the low fare airline business, Ashgate Publishing Limited, Aldershot, 2004 7. Impact of Low Cost Airlines, Summary of Mercer Study, Mercer Management Consulting, 2002 8. Endres, G., Gething, M. J.: Aircraft Recognition Guide, HarperColinsPublishers, London, 2007 9. Vidović, A.: Model niskotarifne zrakoplovne operative u Hrvatskoj, Doktorska disertacija, Fakultet promet- nih znanosti, Zagreb, Republika Hrvatska, 2010 10. Doganis, R.: The airline business, Second edition, Routledge, New York, 2007 Figure 10. Low-cost airlines IFR movements’ 11. EUROCONTROL, Short-Term Forecast, Flight traffic share evolution 2010-2017 movements 2011-2012, May 2011 12. EUROCONTROL, Medium-Term Forecast, Flight movements 2011-2017, February 2011 5. Conclusion 13. EUROCONTROL, Long-Term Forecast, Flight Low-cost airlines are more and more repre- movements 2010-2030, 2010 sented in the European air transport market, tak- 14. Steiner, S., Mihetec, T., Božičević, A.: Prospects of ing every year bigger “piece of the cake” from Air Traffic Management in South Eastern Europe, traditional airlines market share. There is a differ- Promet. 22 (2010), 4; 293-302 ence on average of 10 percent in the market share 15. www.flylowcostairlines.org, Access date 15.07.2011 between passenger market share and IFR movement’s market share between low-cost airlines and Corresponding author Andrija Vidovic, traditional airlines, which is a result of low-cost Faculty of transport and traffic sciences, airlines higher load factor. University of Zagreb, The South-East Europe is experiencing higher Croatia, growth of low-cost airlines market share, mainly E-mail: [email protected]

Volume 7 / Number 1 / 2012 375 technics technologies education management Parameter determination of soil oscillation law in limestone

Suzana Lutovac1, Slobodan Trajkovic1, Orsolja Katona2, Ljubinko Savic3, Branko Lekovic1 1 University of Belgrade, Faculty of Mining and Geology, Serbia, 2 University of Szeged, Hungary, 3 Faculty of Technical science - Kosovska Mitrovica, Serbia.

Abstract In order both to evaluate and control the seismic effect of blasting, as well as to plan it, the de- This paper is focused to the analysis of the law termination of soil oscillation law is required, with on ground oscillation, suggested by Profesor M.A. the strike: mine field - facilities to be protected. Sadovski as wel as to the level of its applicabil- One of the most frequently used equations is the ity for blasting with commercial explosives for one by M.A Sadovski which defines the law of soil the requirements of mining and other economic oscillation velocity change depending on distance, activites. The applicability of this law, for blasting explosive quantity, conditions of blasting opera- with limited quantities of explosives (which is the tions, and geological characteristics of soil (Fokin case with all blastings carried out for economic V.A. et al 2008). purposes) has been analysed in examples of mass blasting carried out to exploit deposits. On that ocassion it was stated that the applica- 2. Theoretical foundations of parameter tion of the law on rock mass oscillation enables, in determination of soil oscillation law advance, determinition of ground oscillation rate To establish the correlation between the oscil- for each blasting, while the blasting, as concerns lation velocity and three basic parameters affect- the seismic impact, are put under control, rendering its size: the explosive quantity, properties of ing the possibility to plan in advance, the strenght rock material and the distance, there have been of the shock. developed several mathematical models in the Key words: explosion; rocks destruction; seis- world. One of most frequently used models, i.e. mic impact; law on ground oscillation. equations, is the equation of Sadovski defining the law on velocity alteration of soil oscillation 1. Introduction depending on the distance, the explosive quantity, and the way of blasting. The law defined in this The application of explosive energy is a signifi- way offers the possibility to determine the seismic cant branch of contemporary mining technology. effect of blasting towards a facility or a settlement, Growing presence of blasting technique in mining whereby the connection, between the velocity of results from the fact that a single blasting operation soil oscillation and consequences that can affect only, can replace the work of a large number of peo- facilities, is used. (Trajković S., Slimak Š., Luto- ple and machines in the period of several months. vac S., 2005). The equation of M.A Sadovski is The growth of production has conditioned the use given in the form: of high explosive amounts during blasting, which results in the improvement of technical-economic − v = K ⋅R n ...... (1) indicators on one side, and the increase of negative effects accompanying blasting operations on the other one. Negative effects of blasting include, be- Where there are: sides the seismic effect, the stress wave effect, the v - is velocity of soil oscillation, cm/s sound effect, flyrock, etc. Consequently, more and K - is a coefficient conditioned by soil char- more attention is paid to the study of these occur- acteristics and blasting conditions determined by rences tending to reduce them to acceptable limits. terrain surveying,

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n - exponent conditioned by characteristics of and blasting conditions. Thus calculated law ena- soil and blasting conditions, determined by field bles us to make a prognosis, in advance, of the os- measurements, cillation velocity for each blasting, namely to pre- R - reduced distance or deduced distance is a dict the degree of shock wave intensity caused by distance from the blast site to the monitoring site blasting. In this way, blasting is, as regards, seismic deduced to the amount of explosive. The term effect under control, which at the same time gives reduced distance is more frequently used, thus it opportunity not only to control shock waves but to will be used in this paper. plan them in advance as well.

r R = ...... (2) 3. Defining of statistical criteria 3 Q Defining of statistical criteria for the assessment Q - overall amount of explosive during blast- of the correlation equation reliability is calculated ing [kg]. on the basis of results obtained by examinations. Methods of mathematical statistics are used for There are two parameters (K) and (n) in the data processing, which depending on the kind of equation (1) which should be determined for a spe- data, the way of their interpretation and wishful cific blasting environment and with specific blasting accuracy and reliability enable defining of alterations conditions. The smallest square method is mainly and the behaviour law of monitored occurrences. used to obtain the parameters (K) and (n) which Some of basic statistic parameters to be used in represents a common model. The equation (1) uses this paper are (Ivanović B., 1973): logarithms and is reduced to the following form: - Arithmetic mean (x):

logv = logK − nlogR ...... (3) x + x + x + ... + x xi x = 1 2 3 N = ∑ ...... (6) N N By introducing of the replacement: v = y; K = a; R = x; n = b; the equation gets the following form: Where:

x1, x2...xN - are values of results of particular loga − blogx = logy ...... (4) examinations, N - is number of results, surveys, (samples). The normal equation system for finding parameters (a) and (b) in this case is (Simeunović D. - Variance (s2 ): 1985): 2 N N (xi − x) 1 2 s2 = ∑ = Σ 2 − − = xi x ...... (7) Nloga b∑logxi ∑logyi N N i=1 i=1 N N N − 2 = ⋅ (loga)∑logxi b∑(logxi ) ∑logxi logyi The positive square root of the variance is tak- i=1 i=1 i=1 en as the dispersion standard, i. e. : ...... (5) 2 Σ(x − x) 1 2 2 Where: s = i = Σx − x ...... (8) N N i N - is the number of carried out surveys.

On the basis of the calculated law by the formula which is called the standard deviation (σ). (1), we are able to construct an approximate curve correlating the obtained results depending on the explosive quantity, distance, the blasting environment,

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3.1 Criteria for testing of approximate curve 0,0 < ρ < 0,2 - none or highly poor correlation, mathematical form 0,2 < ρ < 0,4 - poor correlation, 0,4 < ρ < 0,7 - significant coorelation, To avoid subjective decisions while adopting 0,7 < ρ < 1,0 - strong or highly strong correlation. the curve mathematical form y = y(x), which will appriximate values obtained by research, the The same is valid for the absolute value of lin- linear correlation coefficient is used (Simonović ear correlation coefficient r. V., 1995). For the evaluation of the convenience degree of the selected curve, in mathematical statistics, µ Σ(x − x)⋅ (y − y) r = 11 = i i , ...... (9) in addition to the stated criterion, the criterion "3S" s ⋅ s 2 2 x y Σ − ⋅ Σ − is used (Vukadinović S.,1970). This criterion uses (xi x) (yi y) the squares of differences between data obtained by the experiment for y and data calculated by the Where there are i smallest square method of established dependency μ – covariance of x and y values 11 between x and y. If those differences are one after another ε , ε ... ε , then it is: Σ(x − x)⋅ (y − y) 1 1 2 N µ = i i = Σx ⋅ y − x ⋅ y ..... (9a) 11 N N i i ε2 + ε2 + ... + ε2 S = 1 2 N ...... (11) N σx – standard deviation for x value, σ – standard deviation for y value. y According to this criterion, for the evaluation of If the dependence between two values is curvi- convenience of the obtained functional correlation, linear, the curvilinear dependence correlation in- the following relations are valid: –– If it is |ε | > 3S, the obtained functional dex (ρ), is used, which is called the curvilinear cor- max relation coefficient by some authors (Simonović correlation is rejected as unfavourable, –– If it is |ε | < 3S, the functional correlation V.,1995). max is accepted as a good one.

2 2 Sy Σ(y − y(x )) r = − = − i i ...... (10) 1 2 1 2 4. Survey of mass blasting at “Drenovac” sy Σ − (yi y) open pit

2 1 2 4.1. General characteristics of “Drenovac” Sy = Σ(yi − yi (xi )) ...... (10a) N open pit This paper includes examinations carried out 2 1 2 sy = Σ(yi − y) ...... (10b) during mass blasting at the “Drenovac” open pit N in Mionica (Trajković S., Lutovac S., Katona O., 2009). The open pit “Drenovac” is of elevated Where there are : type situated almost at the very top of the hill of

yi – obtained data for y variable, the same name.

y(xi) – data obtained from theoretically found The limestone deposit covers the surface of 7,7 relation between the xi and yi, data ha. The altitude difference of the deposit is about s2 - variance for y data 70 m from the elevation 440-520. There is a dia- y i base - chert formation in the floor of limestone, 2 Sy - residium variance (Vukadinović S.,1970) approximately at the elevation of 438 m. The limestone is of fissure porosity as stated The assessment of correlation degree of two by mapping of both the terrain and test bore holes. variables is given in the following survey: The length of cores is from 30 to 40 cm. Joints are

378 Volume 7 / Number 1 / 2012 technics technologies education management mostly filled with calcite, and to a lesser extent they 4.3. Calculation of soil oscillation law are filled with limonite debris, namely limonite parameters dross. While drilling, circulation loss-water was insignificant, which points to low effective poros- Values of overall explosive quantity by blasting ity of limestone. (Q), distance from the blasting site to the place of Limestone is a firm petrified environment. It is observation (r), namely reduced distances (R) are tectonically undamaged thus it represents a unique presented in Table 2. monolithic mass. The present joints impact insig- The record of soil oscillation velocity for blast- nificantly on physico-mechanical characteristics. ing number 1- measuring point 3 is shown in Fig.1 The following values were obtained by the examination of physico-mechanical properties of the working environment:

- volume mass, kN/m³ 2,68 - porosity, % 0,7-1,5 - cohesion, MPa 0,25 - uniaxial strength - in dry state MPa 120-134 - in watersaturated state 83-129 - angle of internal friction,o 41.

4.2. Manner of blasting operations

Measurements of seismic shock waves at the Figure 1. Image of soil oscillation velocity for “Drenovac” open pit carried out during blasting blasting I-MM3 were conducted in order to exploit the deposit. Eight blasting operations were carried out. Calculated values of reduced distances(R), re- The amonex-1 28/200, amonex-1 60/1000, corded values of oscillation velocities by compo- amonex- 60/1000, ANFO-J in bags of 25 kg and nents (v), as well as resulting oscillation velocities ANFEX-PP 70/1500 were used as explosives. The by components (vres ) are presented in Table 3. explosive was activated in boreholes by nonel On the basis of results presented in Table 3, detonators, marked N-25/500 and K-42 connec- the soil oscillation law is calculated by the for- tors. Basic data related to the number of boreholes mula (1). (Nb), the overall explosive amount (Quk), the maxi- Calculated values for defining soil particle os- mal exsplosive amount by deceleration interval cillation law are presented in Table 4. The calcula- (Qi), overall borehole depth (Luk), and average ste- tion of curve is carried out for values of reduced mming length (Lpc), are presented in Table 1. distances from R = 17,1847 to R = 79,8390.

Table 1.

Blasting Nb Quk[kg] Qi[kg] Luk[m] Lpč[m] I 27 661,4 36,2 211,0 2,8 – 3,0 II 28 1.980,6 71,2 488,0 2,8 – 3,0 III 15 915,3 66,2 213,0 2,8 – 3,0 IV 16 745,0 47,0 175,0 3,0 – 3,2 V 40 1.895,0 60,5 453,0 3,0 – 3,2 VI 22 1.774,4 85,2 402,0 3,0 – 3,2 VII 43 1.988,6 54,2 518,0 3,0 – 3,2 VIII 20 600 32,0 273,0 3,0 – 3,5

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Table 2. Table 3. Blasting Measuring Oscillation velocities Resulting No r [m] Q [kg] R Reduced No Point (v) [cm/s] oscillation No distance 1 I MM – 2 383,87 661,4 44,0585 velocities (v ) (R) (v ) (v ) (v) res 2 I MM – 3 250,49 661,4 28,7499 v t l [cm/s] 3 I MM – 5 647,42 661,4 74,3073 1 44,0585 0,070 0,100 0,110 0,1643 4 II MM – 1 605,54 1980,6 48,2182 2 28,7499 0,260 0,470 0,540 0,7616 5 II MM – 2 334,15 1980,6 26,6078 3 74,3073 0,080 0,090 0,080 0,1446 6 II MM – 3 256,71 1980,6 28,4042 4 48,2182 0,060 0,060 0,070 0,1100 7 II MM – 6 527,05 1980,6 41,9681 5 26,6078 0,080 0,120 0,150 0,2081 8 III MM – 1 616,35 915,3 63,4804 6 28,4042 0,510 0,500 1,090 1,3031 9 III MM – 2 250,14 915,3 25,7629 7 41,9681 0,090 0,230 0,160 0,2943 10 III MM – 3 412,66 915,3 42,5015 8 63,4804 0,091 0,083 0,082 0,1482 11 III MM – 5 714,10 915,3 73,5481 9 25,7629 0,192 0,573 0,719 0,9392 12 III MM – 6 541,13 915,3 55,7332 10 42,5015 0,380 0,605 0,412 0,8247 13 III MM – 7 530,89 915,3 54,6785 11 73,5481 0,138 0,096 0,116 0,2045 14 IV MM – 1 723,77 745,0 79,8390 12 55,7332 0,170 0,241 0,177 0,3454 15 IV MM – 2 410,33 745,0 45,2635 13 54,6785 0,133 0,236 0,193 0,3326 16 IV MM – 3 223,89 745,0 24,6973 14 79,8390 0,060 0.080 0,070 0,1221 17 IV MM – 5 644,64 745,0 71,1102 15 45,2635 0,140 0,170 0,180 0,2844 18 IV MM – 7 426,38 745,0 47,0339 16 24,6973 0,310 0,420 0,540 0,7511 19 V MM – 1 737,38 1895,0 60,0667 17 71,1102 0,110 0,200 0,200 0,3035 20 V MM – 3 210,96 1895,0 17,1847 18 47,0339 0,200 0,230 0,210 0,3701 21 V MM – 7 422,53 1895,0 34,4192 19 60,0667 0,050 0,070 0,040 0,0948 22 VI MM – 3 231,44 1774,4 19,1171 20 17,1847 0,550 0,790 1,150 1,4996 23 VI MM – 5 650,53 1774,4 53,7341 21 34,4192 0,210 0,360 0,320 0,5254 24 VI MM – 6 640,06 1774,4 52,8693 22 19,1171 0,577 1,160 0,709 1,4768 25 VI MM – 7 425,36 1774,4 35,1350 23 53,7341 0,055 0,071 0,077 0,1165 26 VII MM – 3 333,13 1988,6 26,4910 24 52,8693 0,081 0,150 0,168 0,2393 27 VII MM – 6 530,48 1988,6 42,1845 25 35,1350 0,340 0,465 0,259 0,6316 28 VII MM – 7 415,31 1988,6 33,0260 26 26,4910 0,534 0,460 0,602 0,9268 29 VIII MM – 1 609,20 600,0 72,2286 27 42,1845 0,101 0,190 0,150 0,2623 30 VIII MM – 3 387,35 600,0 45,9254 28 33,0260 0,284 0,525 0,286 0,6618 31 VIII MM – 6 532,35 600,0 63,1171 29 72,2286 0,030 0,070 0,070 0,1034 32 VIII MM – 7 493,85 600,0 58,5524 30 45,9254 0,339 0,527 0,629 0,8878 31 63,1171 0,067 0,112 0,079 0,1607 On the basis of data in Table 4, by means of the 32 58,5524 0,072 0,157 0,156 0,2327 least squares theory, the parameters of the curve have been calculated enabling the determination Graphic survey of soil oscillation law is shown of soil oscillation equation in the form of: in Figure 2. On the basis of obtained equation (12) of the soil −1,6433 oscillation, it is possible to calculate values of soil v = 166,3916 ⋅R ...... (12) 1 oscillation velocity for corresponding reduced distances. whereby linear dependence between log v and In Table 5, there is presented the survey of re- log R has been obtained, expressed by the equa- duced distances (R), recorded oscillation velociti- tion (12), with the linear correlation coefficient (r) es (v ), calculated oscillation velocities (v ), as well amounting: r i as the difference between recorded and calculated r = -0,800. soil oscillation velocities (Lutovac S., 2010).

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Table 4. 2 svr = 0,1625 . 2 log Ri* No Ri log Ri (log Ri) vi log vi log vi 1 44,0585 1,6440 2,7028 0,1643 -0,7843 -1,2894 2 28,7499 1,4586 2,1276 0,7616 -0,1182 -0,1725 3 74,3073 1,8710 3,5008 0,1446 -0,8399 -1,5715 4 48,2182 1,6832 2,8332 0,1100 -0,9586 -1,6135 5 26,6078 1,4250 2,0307 0,2081 -0,6818 -0,9715 6 28,4042 1,4534 2,1123 1,3031 -0,1150 0,1671 7 41,9681 1,6229 2,6339 0,2943 -0,5312 -0,8622 8 63,4804 1,8026 3,2495 0,1482 -0,8298 -1,4959 9 25,7629 1,4110 1,9909 0,9392 -0,0272 -0,0384 10 42,5015 1,6284 2,6517 0,8247 -0,0837 -0,1363 11 73,5481 1,8666 3,4841 0,2045 -0,6898 -1,2877 12 55,7332 1,7461 3,0489 0,3454 -0,4635 -0,8093 13 54,6785 1,7378 3,0200 0,3326 -0,4781 -0,8308 14 79,8390 1,9022 3,6184 0,1221 -0,9134 -1,7375 15 45,2635 1,6557 2,7415 0,2844 -0,5460 -0,9041 16 24,6973 1,3926 1,9395 0,7511 -0,1243 -0,1731 17 71,1102 1,8519 3,4297 0,3035 -0,5179 -0,9591 18 47,0339 1,6724 2,7970 0,3701 -0,4316 -0,7219 19 60,0667 1,7786 3,1635 0,0948 -1,0229 -1,8193 20 17,1847 1,2351 1,5256 1,4996 -0,1760 0,2174 21 34,4192 1,5368 2,3618 0,5254 -0,2795 -0,4295 22 19,1171 1,2814 1,6420 1,4768 -0,1693 0,2170 Figure 2. Graphic survey of soil oscillation law 23 53,7341 1,7303 2,9938 0,1165 -0,9270 -1,6040 curve in OP Drenovac 24 52,8693 1,7232 2,9694 0,2393 -0,6210 -1,0701 25 35,1350 1,5457 2,3893 0,6316 -0,1996 -0,3085 The index of curveline dependence between re- 26 26,4910 1,4231 2,0252 0,9268 -0,0330 -0,0469 duced distance (R) and soil oscillation velocity (v) 27 42,1845 1,6252 2,6411 0,2623 -0,5812 -0,9445 on the basis of the formula (10) amounts: 28 33,0260 1,5189 2,3069 0,6618 -0,1792 -0,2722 29 72,2286 1,8587 3,4548 0,1034 -0,9853 -1,8314 r = 0,8380 . 30 45,9254 1,6621 2,7624 0,8878 -0,0517 -0,0859 31 63,1171 1,8001 3,2405 0,1607 -0,8166 -1,4699 On the basis of the index value of curveline 32 58,5524 1,7675 3,1242 0,2327 -0,6331 -1,1191 dependence (ρ), it can be stated that between two 52,3125 86,5130 -14,8891 -25,9744 variables, i.e. the reduced distance (R) and the soil oscillation velocity (v), there is highly tight cor- A statistical analysis was carried out on the ba- relation, given in the formula (12). sis of data presented in Table 5. To evaluate the degree of convenience and ac- The arithmetic mean of recorded values of soil curacy. Of the selected curve, in addition to the oscillation velocities, on the basis of the formula stated criterion, i.e. the index of curveline depen- (6) amounts: dence (ρ), the criterion "3S" has been taken into account as well. According to the obtained data in Table 5, vr = 0,4822 . maximal difference between recorded and calcu- The variance of recorded values of the soil os- lated soil oscillation velocities(εmax ) = max εi , cillation velocities, on the basis of the formula (7) amounts: amounts:

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Table 5. Reduced distance Recorded oscillation Calculated oscillation No vr – vi (R) velocity, (vr) [cm/s] velocity, (vi) [cm/s] 1 44,0585 0,1643 0,3307 -0,1664 2 28,7499 0,7616 0,6670 0,0946 3 74,3073 0,1446 0,1401 0,0045 4 48,2182 0,1100 0,2852 -0,1752 5 26,6078 0,2081 0,7576 -0,5495 6 28,4042 1,3031 0,6804 0,6227 7 41,9681 0,2943 0,3583 -0,0640 8 63,4804 0,1482 0,1815 -0,0333 9 25,7629 0,9392 0,7988 0,1404 10 42,5015 0,8247 0,3509 0,4738 11 73,5481 0,2045 0,1425 0,0620 12 55,7332 0,3454 0,2248 0,1206 13 54,6785 0,3326 0,2319 0,1007 14 79,8390 0,1221 0,1245 -0,0024 15 45,2635 0,2844 0,3164 -0,0320 16 24,6973 0,7511 0,8562 -0,1051 17 71,1102 0,3035 0,1506 0,1529 18 47,0339 0,3701 0,2971 0,0730 19 60,0667 0,0948 0,1987 -0,1039 20 17,1847 1,4996 1,5539 -0,0543 21 34,4192 0,5254 0,4963 0,0291 22 19,1171 1,4768 1,3043 0,1725 23 53,7341 0,1165 0,2387 -0,1222 24 52,8693 0,2393 0,2451 -0,0058 25 35,1350 0,6316 0,4798 0,1518 26 26,4910 0,9268 0,7631 0,1637 27 42,1845 0,2623 0,3552 -0,0929 28 33,0260 0,6618 0,5311 0,1307 29 72,2286 0,1034 0,1468 -0,0434 30 45,9254 0,8878 0,3089 0,5789 31 63,1171 0,1607 0,1832 -0,0225 32 58,5524 0,2327 0,2073 0,0254

εmax = 0,6227; 5. Conclusion Examinations dealt with in this paper comprise S = 0,2200; of the parameter determination of soil oscillation law on examples of mass blasting operations car- 3S = 0,6600. ried out during exploitation of the mineral raw material deposit in limestone in the Drenovac – As ε < 3S, the supposed functional correla- max Mionica open pit. tion is accepted as a good one. Soil oscillation law gives us the opportunity to determine the velocity of rock mass oscillation, i. e. the seismic effect of blasting of the strike: mine field - construction or mining facility, whereby, there is used the connection between the velocity

382 Volume 7 / Number 1 / 2012 technics technologies education management of rock mass oscillation and consequences which Corresponding Author can impact facilities both on the surface and un- Suzana Lutovac, derground during blasting. University of Belgrade, Faculty of Mining and Geology, On the basis of the obtained data, presented in Belgrade, this paper, it can be stated that the application of Serbia, soil oscillation law gives the opportunity to reduce E-mail: [email protected] negative effects of blasting while exploiting mineral raw materials, and thus to increase production efficiency and protect people and facilities in the vicinity of blast sites.

References 1. Fokin V.A., Tarasov G.E., Togunov M.B., Danilkin A.A., {itov Y.A. (2008): SOVER{RNSTVOVANIE TEHNOLOGII BUROVZRWVNWH RABOT NA PREDELQNOM KONTURE KARXEROV, Izdatel- wstvo KOLXSKIJ NAU^NWJ CENTAR Gornwj institut, Apatatw.

2. Trajković S., Slimak Š., Lutovac S., (2005): BLAST- ING TECHNIQUE AND SHOCK WAVES (in Ser- bian), Faculty of Mining and Geology, Belgrade.

3. Simeunović D., (1985): MATHEMATICS (in Ser- bian), Faculty of Mining and Geology, Mining De- partment, Belgrade.

4. Ivanović B., (1973): THEORETICAL STATISTICS (in Serbian), Naučna knjiga, Beograd.

5. Simonović V., (1995): INTRODUCTION INTO THE- ORY OF PROBABILITY AND MATHEMATICAL STATISTICS (in Serbian), TEKON - Tehnokonsalt- ing, Beograd.

6. Vukadinović S., (1970): ELEMENTS OF PROB- ABILITY CALCULATION AND MATHEMATICAL STATISTICS (in Serbian), Tehnika za umnožavanje Biroa za građevinarstvo, Belgrade.

7. Trajković S., Lutovac S., Katona O., (2009): STUDY OF SEISMIC AND AIR IMPACTS ON NEIGHBOU- RING FACILITIES AS CONSEQUENCE OF BLA- STING OPERATIONS IN DRENOVAC OP – MIO- NICA (in Serbian), Faculty of Mining and Geology, Belgrade.

8. Lutovac S., (2010). MODEL OF PARAMETER DE- TERMINATION OF ROCK MASS OSCILLATION DURING BLASTING (in Serbian), Doctor’s dissertation, Faculty of Mining and Geology, Belgrade.

9. Savić M., (2000): BLASTING OPERATION IN OPEN PITS (in Serbian), Monograph, Mining and Melting Plant ,Bor, Institute for Copper, Bor

Volume 7 / Number 1 / 2012 383 technics technologies education management Factors affecting cooperation in social dilemmas: Experimental evidence from one- shot prisoner’s dilemma

Marija Kuzmanovic, Milena Djurovic, Milan Martic University of Belgrade, Faculty of Organizational Sciences, Department for Operations Research and Statistics, Belgrade, Serbia

Abstract (a) the social payoff to each individual for defecting behaviour is higher than the payoff for cooperative This paper deals with the cooperative behav- behaviour, regardless of what other society mem- iour of participants in social dilemmas of one-shot bers do, yet (b) all individuals in the society receive Prisoner's dilemma type. The aim of the study was a lower payoff if all defect than if all cooperate to experimentally determine whether there is an (Dawes & Messick 2000). influence of participants' gender, faculty depart- Social dilemmas have attracted a great deal ment and social value orientation on the coopera- of interest in the social and behavioural sciences. tion rate in the games, and whether the influence Economists, biologists, psychologists, sociolo- of these factors on the cooperation rate remains gists, and political scientists alike are studying the same under the influence of various external the situations in which people are selfish or coop- stimuli. In accordance with the objectives of the erative in a social dilemma. The most influential study, five hypotheses were proposed. Testing theoretical approach is game theory (i.e., rational of hypotheses revealed that the gender, faculty choice theory) which assumes that individuals are department and social value orientation have no rational actors motivated to maximize their utili- significant influence on participants' behaviour, if ties. Utility is often narrowly defined in terms of there is an external stimulus. Changes in the behav- people’s material self-interest. Game theory thus iour of participants i.e. increase in the cooperation predicts a non-cooperative outcome in a social rate came after the influence of two stimuli: (1) dilemma. Although this is a useful starting prem- when the opponent was known in advance, and (2) ise there are many circumstances in which people when the structure of payoff matrix was changed. may deviate from individual rationality, demon- Although it was expected that the cooperation rate strating the limitations of economic game theory. would be higher if the participants are motivated On the other hand, psychological models of- by additional (bonus) credits on the exam, it was fer additional insights into social dilemmas by shown that this stimulus does not have enough questioning the game theory assumption that insignificant impact on the cooperation rate. dividuals pursue their narrow self-interest. Inter- Key words: Social dilemma, prisoner's dilem- dependence theory suggests that people transform ma, cooperation, game theory, social value orien- a given outcome matrix into an effective matrix tation. that is more consistent with their social dilemma preferences (Kelley & Thibaut 1978). Whether in- Introduction dividuals approach a social dilemma selfishly or cooperatively might depend upon whether they Social dilemmas arise when individuals must believe people are naturally greedy or cooperative. choose between actions that optimize their personal To study the logic of social dilemmas, stripped well being or the well being of the group; regardless of their real-world complexity, scientists have in- of what others do, individuals are better off follow- vented a variety of games (Kollock 1998). The ing their self-interest than acting in the collective most commonly studied social-dilemma games interest (Krueger & Acevado 2007). Formally, so- are two person games called prisoner’s dilemma cial dilemmas are characterized by two properties: games.

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Prisoners’ Dilemma payoff goes to the player who defects while the other cooperates (Temptation, T); (b) the lowest Puzzles with the structure of the prisoner's di- individual payoff goes to the player who cooper- lemma (PD) were found and explained by Merrill ates while the other defects (Sucker, S); (c) the Flood and Melvin Dresher in 1950, as part of the highest total payoff to the two players combined Rand Corporation's investigations into game theo- occurs if both cooperate (Reward, R); and (d) the ry, which has pursued because of possible applica- lowest total payoff occurs if they both defect (Pun- tions to global nuclear strategy. The title “prisoner's ishment, P). These four values and their relation- dilemma” and the version with prison sentences as ship are represented as a matrix in Table 1. payoffs are due to Albert Tucker, who wanted to Table 1. Payoff matrix for general 2 x 2 Priso- make Flood and Dresher's ideas more accessible to ners’ dilemma an audience of Stanford psychologists. The game in its original form can be described Player 2 as follows. Two suspects are arrested by the police. Cooperate Defect Cooperate R, R S, T The police have insufficient evidence for a con- Player 1 viction, and, having separated the prisoners, visit Defect T, S P, P each of them to offer the same deal. If one testifies for the prosecution against the other (defects) and To be defined as PD game, the following in- the other remains silent (cooperates), the defector equalities must hold: TRPS> > > and 2RTS> + goes free and the silent accomplice receives the . These rules were established by cognitive scien- full 20-year sentence. If both remain silent, both tist Douglas Hofstadter (1983) and form the for- prisoners are sentenced to only six months in jail mal canonical description of a typical PD game. for a minor charge. If each betrays the other, each The game is a social dilemma because the high- receives a five-year sentence. Each prisoner must est individual payoff to either player comes from choose to betray the other or to remain silent. Each defecting, but the highest total payoff to the two one is assured that the other would not know about combined comes from cooperating. If the other the betrayal before the end of the investigation. player defects, one gets more for defecting than How should the prisoners act? for cooperating; if the other cooperates, one still If we assume that each prisoner cares only about gets more for defecting than for cooperating; but minimizing his or her own time in jail, then the PD if both defect, each gets less than they would have forms a game in which two players may each ei- if both had cooperated. ther cooperate with or defect from (betray) the other player. In this game, as in most game theory, the Factors affecting cooperation in Prisoner’s only concern of each individual player is maximiz- Dilemma ing his or her own payoff, without any concern for the other player's payoff. The unique equilibrium The problem with the standard rational choice for this game is a Pareto-suboptimal solution, that prediction of mutual defection in PD is that empir- is, rational choice leads the two players to both de- ical investigations tend to find comparatively high fect, even though each player's individual reward rates of cooperation. Therefore researchers are would be greater if they both played cooperatively. typically interested in understanding the dynam- When played in the psychology lab, the game’s ics of cooperative choice. In particular, theorists stakes are changed from prison time to monetary are interested in the question of how to encour- rewards or losses. Each player can choose an ac- age greater rates of cooperation in people. They tion - cooperate for the common good or to defect examined the influence of various factors on co- from the common good. Neither player learns the operation rate, especially the influence of asym- other’s choice until both have responded, and the metric payoffs, strategy, gender, communication, payoff to each player depends on the combination anonymity, stake size, personality etc. of their two actions. The payoff matrix has the fol- Axelrod and Hamilton (1981) found that tit- lowing characteristics: (a) the highest individual for-tat strategy in repeated PDs effectively train

Volume 7 / Number 1 / 2012 385 technics technologies education management an opponent to play cooperatively. More recent- wants to maximize relative gain (i.e., the differ- ly, Cooper et al. (1996) report data from experience between own and other outcome). ments that show more cooperation in finitely re- Smeesters et al. (2003) measured both the na- peated PDs than in one-shot PD. Croson (1999) ture and the consistency of social value orienta- and Beckenkamp et al. (2007) compared players' tions, before participants played a simultaneous behaviour in a symmetric and an asymmetric PD PD game against an anonymous partner. They game. They experimentally confirmed that asym- found that all individuals behaved very selfishly metry significantly decreases cooperation rate. when they expected to play against a presumed Holt and Capra (2000) experimentally con- non-cooperative, mighty partner. However, when firmed that cooperation increase when incentives they thought they were playing against a coopera- to cooperate are greater. In addition, experimental tive, moral partner, all participants except high studies have shown that communication increases consistent pro-selfs behaved cooperatively. How the cooperation rate significantly (Sally 1995; Mi- pro-socials and pro-selfs differ specifically in ettinen & Suetens 2008), although from a theo- transforming a social dilemma game matrix in ac- retical point of view communication is cheap talk cordance with the ‘goal prescribes rationality prin- (Crawford 1998; Farrell & Rabin 1996). Dawes et ciple’ is nicely illustrated by the study of Simpson al. (1977) have shown that face-to-face communi- (2004). He found that pro-socials readily cooper- cation only has an additional effect on behaviour ate in a one-shot PD, while pro-selfs do not. if the subjects are allowed to discuss the game and the strategy they intend to play. If they only have Present study the chance to get to know each other, an effect on the cooperation rate is almost not present. Factors affecting cooperation are rarely stud- Bohnet and Frey (1999) extend the analysis of ied in the context of the one-shot PD game. Many face-to-face effects on cooperative behaviour and real-world interactions, however, are one-time find that merely "seeing" each other's face without events, so it is important to determine how those the possibility of communication, increases the factors apply to the one-shot PD. This study will cooperation rate. Furthermore, studies have shown examine the impact of several factors on coopera- that the effectiveness of communication differs by tion in the one-shot PD. the words that are used, for instance, when mak- The aim of the study is threefold. Firstly, to ex- ing a promise. Charness and Dufwenberg (2006) perimentally determine whether the participants are develop the idea that people keep promises be- cooperative in one-shot type social dilemmas, and cause of guilt aversion. Ortmann and Tichy (1999) to what extent, i.e. do they behave rationally, and to found that women cooperate significantly more what extent, as the Game theory predicts. Second, than men. They also found that the gender compo- whether behaviour of participants is influenced by sition of the subject pool has a significant impact the following factors, and in what way: gender, on cooperative behaviour. faculty department and participants’ SVO. Third, Recent studies argued that cooperative behav- whether the influence of these factors (especially iour in PD-type games might also be influenced SVO) at the cooperation rate remains the same if the by individual differences in consistency of social opponent is known in advance, if the values of pay- value orientations (Komorita & Parks 1995; Simp- offs are changed, or if the type of payoffs is changed. son 2004; Smeesters et al. 2003). Social value ori- Given the study objectives, the following hy- entation (SVO) refers to a person’s tendency to potheses are set: choose so as to maximize certain outcomes in an H1. Higher proportion of women comparing to interdependent situation (Messick & McClintock man will play the cooperative strategy in one-shot 1968; McClintock 1972). Using Van Lange’s PD. (1999) model, a pro-social individual desires to H2. Players with a cooperative (pro-social) simultaneously maximize joint gain and equality SVO should cooperate significantly more in one- in outcomes, an individualist is interested only in shot PD than players with an individualistic or maximizing own gain, and a pro-self individual competitive (pro-self) SVO.

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H3. Players will cooperate more often in the one- Experimental games shot PD if they know their opponent in advance. As mentioned above, four experimental games H4. Players are willing to play in the benefit of were run under laboratory conditions, one after the others if it does not affect their own payoffs. another. H5. Players will cooperate more in the one- Game G1: By choosing the red card in the first shot PD if there is a stronger motivation. game, the participants gave themselves three points, while choosing the black card did not change their Method own payoff, but the opponent would receive 7 points. After choosing the card and writing his/her Participants choice on the record sheet, each participant would The participants were 66 students (34 female, 32 be randomly paired with some other participant. male) from the Faculty of Organizational Sciences Game G2: The first game was repeated, but in Belgrade enrolled in an introductory Game theory under changed circumstances. Rules of the game and Operations research courses. Participation was and the amount of payoff remained the same, but in partial fulfilment of a courses requirement. Par- the pairs of players were determined in advance. ticipants were from different faculty departments, Before the participant would choose the card, the 33.3% of them from the management department instructor randomly paired numbers from 1 to 22 (MN), and 66.7% from the informational systems on the board, representing the tags of each partici- and technologies department (IS&T). pant. Communication and coordination of decisions were not allowed. Game G3: In this game the payoffs associated Procedure with red and black cards were changed, but the In order to test the hypothesis we conducted rules remained the same as in the first game. By four experimental games and perform the mea- choosing the black card, the participants would surement of social value orientation of partici- give to the opponent 10 points, while choosing pants. Three sessions were run under laboratory the red would be neutral, not giving points neither conditions with 22 participants per session, ap- to themselves nor the opponent. After choosing proximately. Each participant was placed at a the card and writing his/her choice on the record separate work station and was given a numbered sheet, each participant would be randomly paired record sheet. Number of the record sheet repre- with some other participant. sented a participant’s tag in the game. Participants Game G4: The first game was repeated, but the were told that they would participate in a number payoffs were representing the credits in the course. of unrelated experimental games. At the beginning By choosing the red card participants guaranteed of the experiment they have been asked to inscribe themselves the value of 3 credits, and choosing the their gender and department on the record sheet. black would give the opponent 7 credits. In this The instructions were read aloud and distrib- way, participants could win 0, 3, 7 or 10 credits, uted on papers. In each game the participants were depending not only on their own decision but de- to choose red or black card, where each of them cision of randomly chosen opponent. represented a certain value of payoffs. Each par- Games G1, G2 and G4, included in the experi- ticipant was told that his opponent will also be ment, were actually PD games, although this fact choosing between red and black cards. Any com- was not explicitly mentioned to the participants, munication between participants was prohibited. and there was no strict incentive to play equilibri- After each game, all participants recorded their um strategies. Payoff matrix for these three games own as well as their opponent’s decision and cor- is given in Table 2. The aim of these three experi- responding payoffs, on a record sheet. It was em- ments was to determine the cooperation rate in si- phasised that the goal of each game is to maximise multaneous one-shot PD when the opponent was their own payoff. Time for a decision was limited unknown (G1), when the opponent was known to 2 minutes per game. in advance but there was no possibility of com-

Volume 7 / Number 1 / 2012 387 technics technologies education management munication between participants (G2) and when by the subject to own and other's payoffs. These the game points were replaced by course credits, weights are used to estimate the direction of the influencing the final course score (G4). Also, the subject's value vector extending from the origin aim was to determine whether there are effects of (center point) of the own/other outcome plane. All participants' gender, faculty department and SVO vectors with angles between 67.5 and 22.5 degrees to the cooperation rate in these games. were classified as cooperative (pro-social); those Table 2. Payoff matrix for games G1, G2, and G4 between 22.5 and -22.5 degrees as individualis- Participant 2 tic; and those between -22.5 and -67.5 degrees as Cooperate (C) Defect (D) competitive (pro-self). See an Appendix B for a plane with these regions identified. Participant Cooperate (C) 7,7 0,10 The length of a value vector provides a mea- 1 Defect (D) 10,0 3,3 sure of the consistency of participants’ choices in Although at first glance seems like it, the game this linear choice model, with random choices re- G3 wasn’t PD game. That is, participant would be sulting in an expected vector length of zero. The in equilibrium no matter what card he/she chooses. maximum vector length is twice the radius of the Payoff matrix for this game is given in Table 3. The circle, so dividing the length by 100 (2x50) gives aim of this experiment was to determine the coop- a reliability index from 0 to 1. In order to prevent eration rate in the game in which decision about invalid classifications, participants were typically cooperation does not affect the size of self payoff. only classified if the consistency of their choices Table 3. Payoff matrix for game G3 was at least 60%. Participant 2 Cooperate (C) Defect (D) Results Participant Cooperate (C) 10,10 0,10 The main results of these experiments are de- 1 Defect (D) 10,0 0,0 scribed below. Of the 66 participants administered the SVO, 14 (22.6%) were classified as Coopera- tive (Pro-social), 39 (62.9%) as Individualist, and 9 Measurement of Social Value Orientation (14.5%) as Competitive (Pro-self). The remaining 4 participants were excluded from further analysis After participants made their choices in the because they had the consistency of choices less PDs, in the second part of experiment, participants’ than 60%. The observed mean reliability was 0.94 Social Value Orientation (SVO) was assessed by (SD = .10). The distribution of SVO did not differ a 24-item paper-and-pencil version of Liebrand’s neither by gender, χ2(2) = 5.116, p = .077, nor by RING measure (Liebrand & McClintock 1988). faculty department, χ2(2) = 3.587, p = .166. Participants made 24 choices between two own/ Table 4 provides the proportion of participants other outcome allocations (see Appendix A). Spe- choosing the cooperative action in each of four cific own/other outcomes are defined as points in games. The cooperation rate within the entire this two dimensional plane, with a center point at sample (total) is shown, but also within separate (50, 50) denoting $50 for self and $50 for other, groups of participants, segmented based on gen- and a radius of 50 units. der, the faculty department and SVO. Each pair consisted of two sampled own/other Table 4 shows that of all participants in the first outcome allocations. For example, participants game, only 7 cooperated (11%). Interestingly, no had to choose between either A: $93.00 for me, woman played cooperatively, as well as no student and $25.00 for other, or B: $98.00 for me and of management orientation (MN). None of the in- $37.00 for other. For each of the 24 pairs of out- dividualists also played the cooperative strategy, comes, subjects were instructed to choose the while 6 of 7 participants who cooperated, were of outcome distribution they most preferred. Adding pro-social orientation. We have examined the im- up the chosen amounts separately for self and for portance of gender, department and SVO on the other provides an estimate of the weights assigned number of cooperative choices in a Game 1, and

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Table 4. Proportion of participants choosing the cooperative action by the game Gender Department SVO Game Total Female Male MN IS&T Pro-Social Individualist Pro-Self G1 7 (11.3%) 0 (0%) 7 (25%) 0 (0%) 7 (17.5%) 6 (42.9%) 0 (0%) 1 (11.1%) G2 31 (50.0%) 16 (47.1%) 15 (53.6%) 12 (54.6%) 19 (47.5%) 10 (71.4%) 16 (41%) 5 (55. 6%) G3 38 (61.3%) 24 (70.6%) 14 (50%) 16 (72.7%) 22 (55%) 10 (71.4%) 23 (59%) 5 (55.6%) G4 30 (48.4%) 16 (47.1%) 14 (50%) 8 (36.4%) 22 (55%) 10 (71.4%) 16 (41%) 4 (44.4%) came to the conclusion that there was significant vance. 30 participants (48.4%) chose to be coop- interaction between the cooperation rate and generative, accepting the risk of losing their bonus der (χ2(1) = 9.582, p = .002), faculty department points on the exam, while 32 participants opted for (χ2(1) =4.34, p =.037), and SVO (χ2(2) = 18.893, a safer solution, by choosing the red card. 4 partic- p < .001). ipants were cooperative in games G1, G2 and G4, Unlike the first game, there was much larger while in G3 they were not. We have investigated number of participants playing cooperatively in the significance of gender, department and SVO the second one. Table 4 shows that half of them on the cooperation rate in Game 4 and the con- have been choosing the cooperative strategy. All clusion is that there was no significant association participants who played cooperatively in the first between the cooperation rate and gender (χ2(1) = game were cooperative in the second. Of the 55 .053, p = .818); faculty department (χ2(1) = 1.974, participants who were not cooperative in the first, p = .160), and SVO (χ2(2) = 3.878, p = .144). 24 participants, mostly women, have changed Considering that factors of gender, depart- their decision in the second game, choosing the ment and SVO showed no significant effect on cooperative strategy. We have investigated the sig- the cooperation rate in the games G2, G3 and nificance of gender, department and SVO, on the G4, and there was still significant differences in number of cooperative choices in this game and the number of cooperative choices in these three find out that there was no significant association games, we examined the influence of external between the cooperation rate and gender (χ2(1) = stimuli. To determine the significance of their in- .261, p = .610), faculty department (χ2(1) = .282, p fluence, we compared the number of cooperative = .596), and SVO (χ2(2) = 3.939, p = .140). choices in the first game (in which there were no 38 participants (61.3%) played cooperatively external stimuli) with the number of cooperative in the third game, meaning they were ready to choices in the second, third and fourth game. If bestow 10 points to the opponent, which did not the opponent is known in advance, the participant affect the value of their own payoffs. Although, may or may not trust him/her, and the stimulus unlike the previous two games, the percentage of proved to be significant for the cooperation rate female non-cooperative participants, as well as in the second, compared to the first game χ( 2(1) = those of management orientation, were signifi- 7.891, p =.005). The analysis showed that a stimu- cantly higher (about 70%), showing that nor the lus applied in the third game, change in the type first (gender) nor the second factor (faculty depart- of payoff, significantly affects the number of co- ment) were statistically significant factors of cooperative choices (χ2(1) = 4.984, p = .026). In this operation rate: the gender χ2(1) = 1.465, p = .226; way, participants showed that if their own payoff the faculty department χ2(1)= 1.179, p = .278. The can not be increased, they will increase the oppo- percentage of cooperative individualist was also nent’s. However, the motivation of participants in higher (59%) in this game comparing to previous, the form of bonus points in the exam did not show but the factor SVO also proved to be slightly sta- statistically enough significance on the coopera- tistically significant, χ2(2) =1.179, p = .555. tion rate (χ2(1) = 0.242, p = .632). The cooperation rate in the fourth game has not changed much in comparison to the second game, in which participants knew their opponent in ad-

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Discussion that individualists "are in dialogue with themselves", disregarding the others, so this is a very During the classes and the lessons of Game significant finding. What the individualists have in theory and Operations research, it was observed themselves is differently expressed under the in- that the students do not always behave rationally in fluence of stimulus. Pro-socials seem to focus on the Prisoner's dilemma games, as proposed by the how things could be better, pro-selfs focus on how game theory. Pair of strategies (defect, defect) is the things could be worse, and individualists examine point of Nash equilibrium. However, the optimal both perspectives. solution to a game is a pair of strategies (cooperate, Based on the previous analysis we have shown cooperate). Knowing the structure and rules of the that hypotheses 1 and 2 are valid only when there game, participants are often more willing to take is no external stimulus. risks and to cooperate more, which would be an We experimentally determine that women irrational choice from the perspective of the game (mainly from the management orientation) play theory. Motivated by this observation, and the very more cooperatively when they know against rich literature on the theoretical interpretations and whom they play. Moreover, we found that half of experimental analysis of the level of cooperation in participants with pro-self SVO cooperated when social dilemmas, we carried out this research. they knew their opponents. The greater certainty, In accordance with the study objectives, we the participants are more willing to cooperate. It tested the basic assumptions of the research topic. is therefore not surprising that half of all the par- To support the hypotheses, we analyzed the level ticipants have been giving generously 7 points to of participants’ cooperation in all four games. We known opponent, mainly driven by the assumption found that in the general case when no external that opponent will cooperate too ("receive what stimulus, women play as game theory suggests. you give"). Presented challenge in the second game This is because women are by nature more ration- proved to be a factor which significantly affect- al, convincible and at all times aware of what they ing the cooperation rate, and thus hypothesis 3 is can get, and what can lose. In order to trigger cer- confirmed. These findings are in contradiction with tain activities and direct them towards a defined findings of Dawes et al (1977), but in line with find- goal, women must be encouraged to do so. How- ings of Bohnet and Frey (1999) who also argue that ever, given that only in the first game gender signif- this stimulus increases the cooperation rate. icantly affects the level of cooperation, hypothe- Another important question is whether the in- sis 1 is rejected. This finding is not consistent with dividual tends to deny opponent the points, if so the ones obtained by Ortmann and Tichy (1999). does not affect its own number of points. In the As there were no cooperative women, there were game G3 as many as 24 participants were selfish, no cooperative participants for the management while four of them cooperated in all other games. orientation in the first game. We assume that the Were they thinking maybe about possible conse- awareness of efficient play, deployment and use quences of their own decisions on the outcome of resources as the basic concept of the manage- of the game or just did not want to give points to ment orientation, had a decisive influence on their the others? Interesting observation is that women choice of strategy. proved to be more generous. In addition, more Since SVO factor significantly affects the than half of all pro-self participants cooperated number of cooperative choices only in the first in the G3, which is not expected from the play- game, hypothesis 2 was also rejected. The only ers who want to maximize the difference between one participant with pro-self and almost all with their own and the opponent’s payoff. The change pro-social SVO cooperated in the game G1, but of the payoff structure in the G3 seems to have none of the participants with individualistic orien- affected the cooperation rate between the partici- tation. Results of the first game are in line with the pants thus confirming the hypothesis 4. results obtained by Simpson (2004). Contrary to In the study, particular focus was on the fourth the game G1, more than half of all individualists game, where participants were motivated with the were cooperative in the game G3. It can be argued bonus course credits which could be won by play-

390 Volume 7 / Number 1 / 2012 technics technologies education management ing the game. A smaller number of participants erate or not to cooperate, participants are inclined who cooperate in this game emphasize “the effect to irrationalization under the influence of certain of security” which shows that the fear of losing the factors. In other words, they are looking for well “guaranteed” 3 points is higher than the desire of designed arguments for their risky moves, leading obtaining the "risky" 7 points. The motive of secu- to irrational play, primarily for their own benefit. rity emerges as the dominant one, and more participants are inclined to rational strategy in this game, Acknowledgement i.e. choose not to cooperate. However, this stimulus proved to be statistically insignificant on the coop- This research was partially supported by the eration, so the hypothesis 5 had been rejected. Ministry of Science and Technological Develop- ment, Republic of Serbia, Project number III44007 Conclusion and TR33044.

Factors affecting cooperation are rarely stud- References ied in the context of the one-shot PD game. Many real-world interactions, however, are one-time 1. Axelrod, R., & Hamilton, W.D. (1981). The evolution events, so it is important to determine how those of cooperation. Science, 211(4489), 1390-1396. factors apply to the one-shot PD. In this study we 2. Beckenkamp, M., Hennig-Schmidt, H., & Maier- examine the impact of several factors on coopera- Rigaud, F. P. (2007). Cooperation in symmetric and tion in the one-shot PD. asymmetric prisoner‘s dilemma games, Preprints of We attempt to determine the extent to which the Max Planck Institute for Research on Collective participants behave cooperatively in one-shot PDs, Goods Bonn 2006/25. whether the cooperation rate is influenced by gen- 3. Bohnet, I., & Frey, B. S. (1999). The sound of silence der, faculty department and SVO of participants, in prisoner's dilemma and dictator games. Journal of and whether the impact of these factors remains Economic Behavior and Organization, 38(1), 43-57. the same if stimulus is changed. More precisely, 4. Charness, G., & Dufwenberg, M. (2006). Promises we analyzed the impact of three external stimuli and Partnership. Econometrica, 74(6), 1579-1601. on cooperation rate: when opponent known in advance, when the structure of the payoff matrix is 5. Cooper, R., DeJong, D. V., Forsythe, R., & Ross, T. changed, when the type of outcome in the payoffs W. (1996). Cooperation without reputation: Experi- matrix is changed. mental evidence from prisoner's dilemma games. Gaines and Economic Behavior, 12(2), 187-218. We confirmed that individuals behave differently in different situations. In the basic simulta- 6. Crawford, V. (1998). A survey on experiments on neous PD game, without the possibility of com- communication via cheap talk. Journal of Economic munication and agreement, participants deviate Theory, 78, 286-298. from the norms suggested by the game theory, and 7. Croson, R. T. A. (1999). The disjunction effect and cooperate more than would be expected. In line reason-based choice in games. Organizational Be- with earlier research, it was confirmed that partici- havior and Human Decision Processes, 80, 118-133. pants were willing to cooperate more if they knew the opponent in advance, especially females and 8. Dawes, R. M., McTavish, J., & Shaklee, H. (1977). Behavior, communication, and assumptions about the participants from the management department. other people's behavior in a commons dilemma situ- However, the number of cooperative players is ation. Journal of Personality and Social Psychology, reduced when the game payoffs were expressed 35(1), 1-11. through the course credits, possibly due to the participants' rationality. 9. Dawes, R., & Messick, M. (2000). Social dilemmas. International Journal of Psychology, 35(2), 111-116. Acting toward the benefit of others and self harm is morally unacceptable, however, unselfish actions 10. Farrell, J., & Rabin, M. (1996). Cheap Talk. Jour- are preferred in social dilemmas, in contrast to self- nal of Economic Perspectives, 10(3), 103-118. ish ones. Choosing between the decision to coop-

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11. Hofstadter, D. R. (1983). Metamagical themas: 24. Smeesters, D., Warlop, L., Van Avermaet, E., Computer tournaments of the Prisoner’s Dilemma Corneille, O., & Yzerbyt, V. (2003). Do not prime suggest how cooperation evolves. Scientific Ameri- hawks with doves: The interplay of construct acti- can, 248(5), 14-20. vation and consistency of social value orientation on cooperative behaviour. Journal of Personality 12. Holt, C. A., & Capra, M. (2000). Classroom games: and Social Psychology, 84(5), 972-987. A Prisoner's dilemma, The Journal of Economic Education. 31(3), 229-236. 25. Van Lange, P. A. M. (1999). The pursuit of joint outcomes and equality in outcomes: An integrative 13. Kelley, H. H., & Thibaut, J.W. (1978). Interpersonal model of social value orientation. Journal of Per- relations: A theory of interdependence, New York: sonality and Social Psychology, 77, 337-349. Wiley. 26. http://vlab.ethz.ch/svo/SVO_Slider/SVO_Slider_pa- 14. Kollock P. (1998). Social dilemmas: The anatomy per_based_measures.html. Last access date: of cooperation. Annual Review of Sociology, 24, 17/05/2011. 183-214.

15. Komorita, S. S., & Parks, C. D. (1995). Interper- Corresponding Author sonal relations: Mixed-motive interaction. Annual Marija Kuzmanovic, Review of Psychology, 46, 183–207. University of Belgrade, Faculty of Organizational 16. Krueger, J. I., & Acevedo, M. (2007). Perceptions of Sciences, self and other in the prisoner’s dilemma: Outcome Department for Operations Research and Statistics, bias and evidential reasoning. American Journal of Belgrade, Psychology, 120, 593-618. Serbia, E-mail: [email protected] 17. Liebrand, W. B. G., & McClintock, C. G. (1988). The ring measure of social values: A computerized procedure for assessing individual differences in information processing and social value orientation. European Journal of Personality, 2, 217-230.

18. McClintock, C. G. (1972). Social motivation: A set of propositions. Behavioral Science, 17, 438-454.

19. Messick, D. M., & McClintock, C. G. (1968). Mo- tivational bases of choice in experimental games. Journal of Experimental Social Psychology, 4, 1-25.

20. Miettinen, T., & Suetens, S. (2008). Communication and Guilt in a Prisoner's Dilemma. Journal of Con- flict Resolution, 52(6), 945-960.

21. Ortmann, A., & Tichy, L. K. (1999). Gender differences in the laboratory: evidence from prisoner’s dilemma games. Journal of Economic Behavior & Organization, 39, 327-339.

22. Sally, D. (1995). Conversation and cooperation in social dilemmas: A meta-analysis of experiments from 1958 to 1992. Rationality and Society, 7(1), 58-92.

23. Simpson, B. (2004). Social values, subjective transformations, and cooperation in social dilemmas. Social Psychology Quarterly, 67(4) 385-395.

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APPENDIX A

Figure A.1. Liebrand’s RING measure of Social Value Orientation (Source: http://vlab.ethz.ch/svo/SVO_Slider/SVO_Slider_paper_based_measures.html)

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APPENDIX B

Figure B.1: Own/Other outcome plane and four classes of social values orientations. Adapted from Liebrand and McClintock (1988)

394 Volume 7 / Number 1 / 2012 technics technologies education management Agrochemicals - factors restricting the quality of water

Drago Cvijanovic, Svetlana Roljevic, Natasa Kljajic Institute of Agricultural Economics in Belgrade, Republic of Serbia

Abstract Introduction The goal of this labour is systematize the re- The need for rational approach to the consump- search about the effects that modern agricultural tion of drinking water reserves becomes more and production has on water resources in the EU coun- more expressed globally because water is consid- tries and in the Republic of Serbia. Two param- ered to be strategic resource of the 21th century. eters were observed: nitrate level released during Besides land, water is the key resource of agricul- the process of agricultural production and the way tural production although at the same time agricul- it affects water quality. During the first part of the ture represents one of the biggest water polluters research data from relevant institutions, related to with nitrates. From the total quantity of nitrogen the levels of consumption of agrochemicals dur- that was found in water systems on the Earth, during the period of industrionalization of agricul- ing the last 30 years even 50-80% was released tural production in the EU countries as well as in from cultivated land. Since nitrogen compounds the Republic of Serbia, were gathered and system- are highly mobile, all the surplus that plants don't atized and key directives which regulate impacts of take goes to the surface water flows, or to the agriculture on water resources are also cited. Us- deeper land layers and that way reach underground ing the Reports of the European Comission about water. Basic indicators that point to the increased the Implementation of the Nitrates Directive from nitrogene compounds in the surroundings are acid the period 2000-2003. and 2004-2007, the authors reaction of soil solution (that impacts the content tried, presenting data tables, to point to certain and number of species in ecosystem), increasing results which were accomplished by implement- of the nitrate level in freshwater systems and its ing the directives that deal with water protection. eutrophication. As a result of large quantities of The conclusion was reached that between the two nutritional ingredients (nitrogen and phosphorus) reporting periods the nitrate level was reduced in in water flourishing happens which reduces water water which had below 10 mg NO3/l, but the share transparency. Except the reduction in water trans- of measuring spots was increased where nitrate parency, algae secret ingredients that are toxic to concentrations above 50 mg/l were detected in EU fish and humans, and microorganisms spend large 15. The second part of the work presents labora- quantities of oxygen to dissolve those ingredients tory analysis results of water sample taken from which causes dramatic consequences for the liv- agricultural area in the vicinity of Pančevo from ing world in water and ecosystem on the whole. 2010. The results show that although Pančevo be- Because the evident loss of water quality on the longs to the region of more intensive agricultural Earth at the beginning of the nineties of the 20th production in the Republic of Serbia, the concen- century more strict and complex Law Regulations trations of nitrates, nitrites and ammonium in the were put into effect regarding water protection and mentioned sample are far below the maximum al- sustainable use of water worldwide. The countries lowed concentrations issued by Books of Regula- members of the EU, with developed ecological tions. Changes in concentrations will be observed conscience and positive results in regulation im- during the following period. plementation in this field, have been distinguished Key words: Agriculture, nitrates, water, quality regarding successful passing and putting into effect Law Regulations which deal with water protection. The Republic of Serbia has to coordinate Law Regulations in the field of environmental

Volume 7 / Number 1 / 2012 395 technics technologies education management protection with the EU Law Regulations. More EU27 record slight fall in the consumption of ni- important factor is practical implementation of trogen fertilizers as well, in relation to the trends those regulations, especially if we keep in mind from the beginning of the nineties, but because that even the existing Law Regulations are not ac- of inefficient use of agrochemicals in developing tually completely implemented. countries consumption is still high and according to Eurostat data for 2008. consumption of nitrogen

Trends in nitrogen fertilizers consumption fertilizers was about 11 million of tonnes (Euro- and the effects of fertilizers on water qual- stat database), average consumption of nitrogen ity in the EU countries was 64 kg per unit of arable land measurement, whereas consumption rates vary from country to Introducing dwarfing genes (Rht1 and Rht2) country, and it depends on the type of crops. into wheat, agricultural production starts with a In the total consumption of mineral fertilizers new era, scientific and technological era. Creation in the EU27 countries, the share of nitrogen fertil- of new growing plant types required creation of izers was about 62 %. The highest rates of fertil- optimal conditions for their growth and devel- izer consumption per hectare of arable land were opment in order to achieve maximum harvest. It in the countries of Western Europe like the Neth- was primarily related to larger quantities of agro- erlands, Belgium, Denmark, Ireland, Great Brit- chemicals, especially nitrogen fertilizers which ain, North West and South Germany, as well as in directly affect harvest and that resulted in higher some areas in France and Italy. According to the consumption of nitrogen fertilizers in relation to FAO data it is expected that developed countries other nutrients. Only in the EU15 countries dur- will have increased the consumption of nitrogen ing the period from 1950-2000. the use of nitrogen fertilizers until 2030. at a rate from 0,7 to 1,3 % fertilizers was ten times greater - from 1 to 9-10 annually. million tonnes. At the same time, quantity of or- As a result of more restrictive policy related ganic fertilizers that are produced on animal farms to the number of head of cattle per unit of mea- was increased which resulted in significant in- surement, positive results were achieved related crease of nitrate concentration in water. After first to the reduction of nitrogen emissions coming alarming reports on high concentration of nitrates from farms. According to the Implementation of in the environment, the EU countries adopted the the Nitrates Directive Report related to the period first Drinking Water Directive in 1975, while dur- from 2000-2003. in relation to the period from ing the mid eighties set of new directives was ad- 1996-1999, the quantity of nitrogen released from opted which were in accordance with the advice farms was reduced from 9,4 to 9,1 million tonnes of the World Health Organization that concentra- regarding the EU27 countries, and from 7,9 to 7,6 tion of nitrates in water should not be higher than regarding the EU15 countries. It was recorded that 50 mg/l. Exactly during this period first positive intensity of pressure on the environment differs trends of reduced consumption of nitrogen fertiliz- from country to country. Zones with high pressure ers appeared. At the beginning of the nineties of the on the environment were recorded on the territory 20th century more strict Agricultural Production of the Netherlands, Belgium and France. East Eu- Law Regulation was adopted in the EU countries ropean Countries exert less pressure on the envi- (numerous legal forms, penalty measures) which, ronment considering that there is smaller number together with futuristic concept of environmental of cattle. policy, resulted in optimal consumption of agro- However, in spite of great effort, agriculture chemicals and reduction in the number of head of still represents a source of large quantities of ni- cattle per hectare of arable land, in other words trogen emitted into the environment. Except that in reduced pressure on major natural resources. directly releases large quantities of nitrates into According to the statistical data and reports, con- soil, it is considered that about 50% of total ni- sumption of nitrogen fertilizers in the EU15 coun- trogen emissions into surface streams come from tries after 2000. was stabilized and it was about agriculture. Table 1 presents share of certain nitro- 9 million tonnes. The countries - members of the gen sources in the environment.

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Table 1. Share of certain sources in total nitrogen concentration in the EU 15 countries in 2000. Biological Atmospheric Nitrogen Organic fertilizers Mineral Total Nitrogen fixation accumulation from farms fertilizers (1.000 t) (%) (%) (%) (%) Austria 3,4 19,1 45,4 32,1 349,4 Belgium 0,8 9,5 56,9 32,9 480,9 Denmark 3,4 8,2 40,5 47,9 569,3 Finland 2,3 3,7 29,9 64,1 272,9 France 3,0 9,6 34,4 52,9 4760,1 Germany 1,5 13,7 35,5 49,3 3627,3 Greece 1,2 4,8 37,3 56,7 541,4 Ireland 0,3 4,7 53,9 41,1 960,4 Italy 1,3 9,5 38,5 50,7 1805,9 Luxembourg 0,5 9,5 39,6 50,4 35,7 Netherlands 0,3 7,7 52,5 39,6 935,0 Portugal 3,1 4,6 50,6 41,7 270,3 Spain 4,3 7,3 37,6 55,7 2047,9 Sweden 3,4 3,8 37,8 55,0 373,9 Great Britain 1,6 9,3 42,4 46,8 2674,3 EU 15 2,2 9,5 39,5 48,9 19731,7 Source: Eutrophication and health, 2002

Nitrogen is being applied to land through nu- water condition for the period from 2000-2003. merous biological processes (biological nitrogen and from 2004-2007. in the EU15 countries. The fixation, atmospheric nitrogen accumulation), but data in Table 2 point out that water quality of sur- the increase of nitrogen concentration that we deal face waterflows which had less than 10 mg/l was with today comes primarily from human activ- improved between the two observed periods, but, ity. Table 1 shows share of certain sources in total on the other side, the share of measuring spots, nitrogen concentration in the EU15 countries in in which concentration was above 50 mg NO3/l, 2000.The data confirm the fact that major surplus was increased. According to the reports from the of nitrogen in the environment appears due to the period from 2004-2007, France achieved signifi- consumption of mineral fertilizers and inadequate cant positive results with gaging stations which storage or due to application of large quantities of recorded largest share of improvement in surface organic fertilizers produced on farms. As a con- water quality, whereas in Greece and Luxembourg sequence of land nitrification Nitrate Vulnerable gaging stations recorded largest share of reduc- Zones appear, from which nitrates drain into sur- tion in surface water quality. face and underground water and pollute the envi- Like mineral fertilizers, plant protection and ronment. Areas identified as Nitrate Vulnerable plant care products affect significantly the envi- Zones covered about 38% of total EU15 area in ronment where applied and, entering food chain, 2000, (1,2 million km3 of total 3,2 million km2). cause harmful effects on distant ecosystems as Based on the European Commission estima- well. Typical example of harmful effect of pesti- tion and according to the Implementation of the cides on ecosystem certainly is insecticide DDT, Nitrates Directive Report from the period from which belongs to the group of organochloric 2004-2007, this percentage was increased to 44,6 compounds with high affinity of accumulation in % of total EU15 territory. fatty tissue of all living creatures. Besides, DDT How much the above mentioned nitrates emis- directly causes mortality of large number of or- sion trends in agriculture affected water quality it ganisms in water, as well as the reduction in rate is shown in Table 2, where the results of two con- of reproduction in bird, so the use of DDT was secutive reports are shown, presenting the surface strictly prohibited. However, not all pesticides

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Table 2. Nitrates concentration in surface freshwater in the EU15 countries Period 2000. – 2003. year

Nitrates concentration ‹ 2 mg NO3/l 2-10 NO3/l 40-50 NO3/l › 50 NO3/l Gaging stations share 19 % 53 % 4 % 2,5 % Total number of gaging stations 22.000 Period 2004. – 2007. year

Period ‹ 2 mg NO3/l 2-10 NO3/l 40-50 NO3/l › 50 NO3/l Nitrates concentration 24 % 30 % 4 % 4 % Gaging stations share 22.000 Source: “Report from the Commission to the Council and the European Parlament On implementation of Council Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources for the period 2000-2003“ and “Report from the Commission to the Council and the European Parlament On implementation of Council Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources for the period 2004-2007“ were harmful as DDT. Risks that certain pesti- Portugal. Norway and Switzerland had the small- cides can be harmful primarily depend on active est pesticides production range per hectare of ar- substance chemical structure and its application, able land (Environmental statistics and accounts but it must be said that largest number of active in Europe). In order to restrict the sale of pesticide substances has harmful effects on wrong organ- products, legal acts were adopted for regulation isms. There was a research in Hungary, related to of the sale of plant protection products (Directive the effects of pesticides on the living organisms 91/414/EEC, 1993.). According to the data from in the Lake Balaton, where deltametrin was used 2003. in the EU15, 52% of total consumption of for eradication of mosquitoes. The results of the pesticides were fungicides, 34% were herbicides, research showed severe nervous system damage 4% were insecticides and 10% of total consump- at several species of fish in the lake (Csillik et al., tion of pesticides were other products used for 2000). Research in Germany confirms that short- care and protection of plants. term washing of insecticides because of abundant rainfall in the North of Germany resulted in the Key Water Protection Directives protecting loss of eight of eleven macroinvertebrate com- European Water from harmful agricultural munities which lived in the streams of agricultural effects area, as well as the reduction in population density in the remaining three communities (Schulz and Clean and healthy environment is essentially Liess, 1999). Information on environmental con- important for well-being of people. In that sense, tamination caused by pesticides is very restricted the EU countries create strict legal framework and inaccessible; therefore any sort of estimation, and undertake complex measures related to the expressed by real numbers, about actual effects improvement of water quality, land and air and on ecosystem would be unreal. Drinking Water reduced use of chemicals. Water Framework Di- Directive (Directive 80/778/EEC) presents maxi- rective (2000/60/EC) represents basic point for mum allowed values for the concentration of pes- the protection and improvement of quality of all ticides in water (Table 3). water resources. This Directive has a clear aim - Data about the level of pesticides consumption that "good condition" of water must be achieved per arable land unit of measurement are collected until 2015. and that water resources within Euro- based on "the field book" which should be written pean Community must be managed in a sustain- on every agricultural farm, but official statistics is able way. Basic assumptions of Water Framework based primarily on data related to the sale of these Directive are: necessity of transborder coopera- substances in a country. That way in 2006. the tion between countries and interested participants, largest sale was recorded in Belgium regarding the active participation in the process of management EU countries, then in Italy, in the Netherlands and and protection of water in all interested countries,

398 Volume 7 / Number 1 / 2012 technics technologies education management applying Polluter Pays principle, balance between ticides, to forbid application of pesticides from environmental needs and those that depend on it. the air and to develop training program for the ap- Very important step in solving the problem of plication of pesticides. The European Chemicals nitrates surplus in th eenvironment coming from Agency is focused on the steps of REACH legis- agriculture is Nitrates Directive (Directive 91/676/ lation implementation (Directive 1907/2006 EC) EEC) from 1991. which restricts the use of organ- and is responsible for the management of the pro- ic fertilizers on 170 kg/ha, in other words up to cess of registration, evaluation and restriction of 200 kg/ha during the first four years of implemen- substance durability permission within the EU27. tation of this program. After 1991. it was started with systematic monitoring of water quality on Consumption of mineral fertilizers and the territory of countries which adopted the Di- pesticides in the Republic of Serbia rective, comparing the results that gaging stations recorded during the period of four years, which All up to 2001, the consumption of mineral fertil- is presented in Table2. Drinking Water Directive izers in the Republic of Serbia has been sistematical- (Directive 80/778/EEC) sets maximum allowed ly tracked by the Republic Statistical Office, which concentration of nitrites, nitrates and pesticides in has given a good ground also for evaluation of pri- drinking water (Table 3). mary agricultural production influence on the envi- Table 3. Allowed concentration of chemical su- ronment. After 2001, the consumtion has not being bstances in drinking water followed, but only the production of mineral fertiliz- Reference Unit of ers within the industrial production of chemicals and value measurement chemical products. According to data provided by Nitrates 50 mg/l the Statistical Office ran until 2001. consumption of Nitrites 0,50 mg/l mineral fertilizers in Serbia is characterized by a de- Pesticides 1 0,10 2 μg/l clining trend, particularly after the 1992. With 1.44 Pesticidi total 3 0,50 μg/l million tons (1985.) consumption is reduced to ap- Source : Drinking water directive, Directive 80/778/EEC proximately 220,000 tons (2000.), showing the ten- Notes: 1 Only concentrations of those pesticides which are dency to gradually increase, to 300,000 tons (2003). 2 believed to be found on the sample are being determined Re- After 1992, oscillating of all types of mineral fertil- ference value is related to each pesticide individually. In the case of discovering the concentration of aldrin, dieldrin and izers consumption are noticed, as a consequence of heptahlor and heptahlor-epoxid reference value is 0,030 μg/l; the state's economic weakening and its productive 3 Total value of all individual pesticides discovered on the potentials, as well as insufficient economic power of sample. households to apply optimal amount of nutrients in crops. The largest share in total consumption during The Pesticides Framework Directive this period had nitrogen and mixed fertilizers, while (2009/128/EC) has an aim to promote alternative their dominance changed from year to year (Figure methods of management of harmful organisms in 2). The average consumption of nitrogen fertilizers crops, to grow certain plants between agricultural in the period 1985-1992 at the Republic of Serbia land and surface water (tampon zone) which will level, was amounted around 230 thousand tons an- prevent pesticides from draining, as well as all nually, while in the period 1992-2001 that amount other methods by which the risk of pesticides for had decreased on 60 thousand tons of nitrogen fer- human health and environment could be reduced. tilizers for totally arable land (5,058,000 ha). Over According to this Directive the use of pesticides is time, the threat to the environment and eutrophica- forbidden, or minimized in the areas where there tion of aquatic systems were reduced. According to is a risk of their draining into surface or under- the 2009 State Report of Environment in. the territo- ground water (vulnerable zones). The countries ry of Vojvodina has been identified as the most pol- members of the EU are obligated, according to luted area of the Republic of Serbia, because 25% this Directive, to develop National Action Plan in of the analyzed soil samples showed high content order to reduce risk from the use of pesticides, to of phosphorus, while 56% of the analyzed territory control the equipment for the application of pes- believed to be still in the process of acidification.

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These results were expected since the Vojvodina re- adequate handling. The level of ecosystem health gion has the biggest agricultural production in Ser- damage couldn't be determined based only on the bia, and therefore in the soil a large amounts of resi- quantity of used preparations, much more impor- dues mineral fertilizer and pesticides are presented. tant are chemical characteristics of the substances concerning the application of fertilizers, as well as using period in certain environment and the way of dissolving, but systematic observations of those parameters haven't been carried out.

Graph 1. Consumption of mineral fertilizers in the Republic of Serbia, in thousand of tonnes in period 1985-2001. Source: The Republic Bureau of Statistics Note: In 1999, 2000 and 2001. data related to Kosovo i Meto- hija are missing Graph 2. Production of more important products for plant protection in Republic of Serbia in pe- Data related to the consumption that are avail- riod 1990-2004. able are collected from balance of mineral fertilizers Source: The Republic Bureau of Statistics export and import in our country, based on which it was concluded that consumption of mineral fertil- According to the Graph 2 during the observed izers in the Republic of Serbia today is 36 kg of ac- period (1990-2004) share of insecticides in the pro- tive substance per hectare. This quantity of mineral duction was reduced, from 34% in 1990. to 18% fertilizers application is minor in relation to the use in 2004,while the production of herbicides grows of fertilizers in the European Union, but what still significantly from 23% of share in total production misses is better control of application of these sub- in 1990. to 47% in 2004. The share of fungicides stances into the natural environment in Serbia. in the domestic production is partially constant and Consumption of pesticides, as well as con- it is about 25% of total production. However, to- sumption of mineral fertilizers is constantly being tal production of plant protection products during reduced. So, the consumption in Yugoslavia dur- the observed period (1990-2004) was reduced to ing the period from 1951-1957. was about 20.000 60% and that trend was maintained in the follow- tonnes, and in 1979. about 70.000 tonnes. During ing period (during the period from 2004-2008. the the eighties, average consumption of pesticides production of pesticides was 17% reduced). Nowa- per hectare of agricultural area was about 5 kg of days, the production of pesticides and other prod- preparation or about 0,6 kg of active substance ucts for plant protection and care are produced in (about 2,8 kg/ha in the USA). Nowadays, 14 kg about ten domestic companies, including several of chemicals is being used per unit of arable land private entrepreneurs which offer solely formulated in Japan, 18 kg/ha in the Netherlands, 10 kg/ha products to the market. Total domestic capabili- in Hungary and 700 g/ha in Serbia. These statis- ties for the production of plant protection and care tical data point to the fact that the consumption products were estimated at about 60.000 tonnes in Serbia is not high, but the application is often annually (not counting capacities for the produc- inadequate and concentration is much higher than tion of copper sulphate and other plant protection 4 recommended in the instructions. Besides, it hap- products based on the copper compounds) . Based pens very often that pesticides are being spilled on the data of Plant Protection Department of the by accident on farms, sprinklers are being inad- Ministry of Agriculture, Forestry and Water Power equately washed when water used for washing Engineering in 2008, 6.288,61 tonnes of pesticides the sprinklers is spilled into surface flows or near in the form of finished products was imported, as fields, storage is inadequate and lots of other in- well as 2.148,689 tonnes of active substances and

400 Volume 7 / Number 1 / 2012 technics technologies education management concentrates, while the domestic consumption of from inadequate septic tanks. There are also sig- plant protection products is at the moment 13.000- nificant regional differences in water quality, there- 14.000 tonnes annualy. Simple calculation points to fore bacterial pollution of water is a characteristic the fact that we are using larger quantities of pesti- of Central Serbia because of untreated household cides than we produce and import, which leads us wastewater, while organic pollution caused by ag- to the conclusion that one part of total consump- ricultural drainage is a characteristic of Vojvodina. tion we buy on the black market. This way prod- Regarding water resources Pančevo is one of the ucts which are forbidden to use because of harmful richest municipalities in the Republic of Serbia, be- consequences come to our country (organochlorine cause the river Danube, the Tamiš, the Nadela and insecticides and triazine herbicides), but in The the Ponjavica run through the area. However, am- State of the Natural Environment Report in the Re- monia leaking, oil and oil derivatives spilling on in- public of Serbia for 2008. it was quoted that residue dustrial plants, releasing of untreated urban waste- of these substances doesn’t represent a high risk water and nutrients washing out from agricultural for the environment. Plant Protection Department land constantly pollute surface and ground water. of the Ministry of Agriculture, Forestry and Water Power Engineering don’t possess the data on the Working methods and material consumption of pesticides during the last few years. Records about retail sale of pesticides using fiscal The aim of this research was to determine how cash registers exist from April, 2006. harmful the effects of agricultural production and New Law on substances for plant nutrition and industrial plants are on the local water resources in lands improvement (“Official announcement of the wider area of the city. Within the cooperation the Republic of Serbia”, number 41/09) is in accor- between the Institute of Agricultural Economics dance with the European Parliament and Council and Institute PDS “Tamiš” sampling of water from Regulation on plant mineral nutrition 2003/2003/ the same localities for at least three consecutive EK from October, the13th 2003. and the European years was planned. Localities were chosen acciden- Parliament and Council Regulation on plant or- tally in order to determine whether the nitrates con- ganic nutrition using substances from plant and/ centration was being reduced, increased or stayed or animal origin 1774/2002 from October, the the same during the period of three consecutive 3rd 2002. The Law regulates registration, control, years. In order to eliminate transborder pollution turnover, import and application of plant protec- influence, bigger rivers that run through Pančevo tion products in Agriculture and Forestry, work of and carry nutrients from other states and cities were public interest related to plant protection products, not sampled, but samples were collected from lo- as well as other questions important for plant pro- cal water (Omoljački rit)and chosen accidentally. tection. Register of Plant Nutrition and Lands Im- Parameters that were observed in the samples are: provement Products and Registers of distributors ammonia concentration, nitrates concentration and and importers, as well as keeping files of plant nitrites concentration. The reason because we chose protection products turnover and application. these parameters is their mobility in water and the importance they have in regulation of life cycle on The water quality sampling and analysis re- the planet Earth. Chemical analysis of samples were port on the territory of the city of Pančevo done in laboratory of the Institute PDS “Tamiš”, applying standard methods. Surface water quality in Serbia is not satisfactory. Only few rivers in mountain regions of the Re- The results and discussion public of Serbia satisfy Class I and II requirements. The main sources of surface and groundwater pol- During the first year of the research, apply- lution are untreated waste water from industrial ing standard methods, laboratory analysis of wa- plants and untreated urban wastewater (only 4% of ter sample taken from Omoljački rit were being wastewater in Serbia is being treated), agricultural done. The results of the analysis were shown in drainage water, leaking landfills and wastewater the Table 3.

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Table 3. Results of water quality testing from the locality Omoljički rit in 2010. Tested characteristics Concentration Concentration Concentration Sample + Sample name NO ˉ NO ˉ NH mark 2 3 4 mg/l mg/l mg/l S RV S RV S RV max 1/1 Water -“Omoljički rit” max 10 max 0.05 n.v 68 m 0.001 0.65 (kao N) 0.29 1.0 (kao N) Note: S-sample, RV-reference value

According to laboratory results and in accor- we can confirm that the sample that was tested dance with Dangerous Substances Directives was correct and that local water resources were (“Official announcement of the Republic of Ser- not significantly degraded. bia”, number 31/82) the results related to ammonia According to the analyzed sample it could be ion, nitrites and nitrates belong to Class I and II. said that local water resources are not saturated with Maximum concentration of dangerous substances nitrogen compounds, although Pančevo is an area in water are expressed in mg/l for each class is- of more intensive agricultural production and the sued by certain regulations on water classification: industrial center of the Republic of Serbia. Howev- Table 4. Maximum concentration of dangerous er, there are documents that confirm that Pančevo, substances in water in Republic of Serbia together with Belgrade and Novi Sad are the big- Concentration (mg/l) gest polluters of the river Danube. That points to the Dangerous Number Class fact that implementation of more strict law regula- Substance tions are necessary and their practical application I i II III i IV also, which will lead toward sustainable use of local 1. Ammonia 0,1 0,5 and international water resources. 2. Ammonia ion 1,0 10,0 Signing the Agreement of cooperation and join- 3. Nitrates (like N) 10,0 15,0 ing the European Union for the Republic of Serbia 4. Nitrites (like N) 0,05 0,5 presents an obligation to harmonize our legisla- Dangerous Substances Directive, “Official announce- ture with the EU Regulations, and large number ment of the Republic of Serbia”, number 31/82 of these directives is related exactly to agriculture. It seems that the most difficult for coordination If we compare the results of the analysed pa- and implementation will be directives related to rameters (concentration of ammonia, nitrate and environmental protection from agricultural impact nitrite nitrogen) to the reference value for these because of unawareness and undeveloped infra- parameters issued by Drinking Water Directive structure regarding ecology, in other words sus- “Official Paper SRY”, number 42/98 and 44/99) Table 5. Maximum allowed concentration of non-organic substance in drinking water (mg/l) in Repu- blic of Serbia List IIIa Name and mark of chemical substance Maximum allowed concentration Ammonia 0,1*

Nitrates (NO3 ) 50.0 ** Nitrites (NO2 ) 0.03 *For water supplies up to 5.000 ES1 to 1 mg/l. **It is considered that water is correct in cases when 20% of measurements which are not consecutive during a year ammounts 0,1 mg/l, measurement frequency according to Directive Source: Drinking Water Directive, “Official Paper SRY”, number. 42/98 and 44/99 1Equivalent inhabitant (EI) is the consumption of water 150 liters per day;

402 Volume 7 / Number 1 / 2012 technics technologies education management tainable water resources management. It is highly WATER Project „Transnational integrated man- important to achieve the desired quality of all na- agement of water resources in agriculture for the tional water, therefore it is necessary to implement European water emergency control” European “Water Framework Directive” and “Ni- trates Directive” into national legislature, as well References as that agricultural producers follow the principle of “Good Agricultural Practice”. 1. Eurostat database http://appsso.eurostat.ec.europa. eu/nui/show.do, 2. Report from the Commission to the Council and the Conclusion European Parlament On implementation of Council Directive 91/676/EEC concerning the protection of According to the presented data it could be con- waters against pollution caused by nitrates from ag- cluded that the consequences that agricultural pro- ricultural sources for the period 2000-2003, duction in our country leaves behind on water re- 3. Report from the Commission to the Council and the European Parlament On implementation of Council sources are significantly less than those in economi- Directive 91/676/EEC concerning the protection of cally developed countries, which is confirmed by waters against pollution caused by nitrates from ag- actual measurements mentioned in this work. Data ricultural sources for the period 2004-2007, from the report of the results of Nitrate Directive 4. World Health Organization - Regional Office for Eu- apply show unquestionable efforts of the EU coun- rope (2002): “Eutrophication and health”, Office for Official Publications of the European Communities, tries to decrease further pollution of water resources Luxembourg, pp. 15, from agriculture influence, but the members though 5. Csillik, B.; Fazakas, J.; Nemcsók J. and Knyihár- face a serious problem of increased content of ni- Csillik, E., (2000): „Effect of the pesticide Deltame- trate in waters, in specific regions. Thanks to re- thrin on the Mauthner cells of Lake Balaton fish“, duced consumption of agro-chemicals in Serbia, Neurotoxicology, 21(3), 343–352. 6. Schulz, R. and Liess, M., (1999): „A field study of the a pressure against the environment is significantly effects of agriculturally derived insecticide input on smoother. Therefore the results of random sample stream macroinvertebrate dynamics“, Aquatic Toxi- analysis of water from the city of Pancevo terri- cology, 46, 155–176. tory, as very important industrial centre and a zone 7. Drinking water directive 80/778/EEC, with intensive agricultural production in the Re- 8. Eurostat (2010): „Environmental statistics and accounts in Europe“, Statistical books, Publications public of Serbia, have shown that the local water Office of the European Union, Belgium Chapter 8, resources are satisfying regarding the content of ni- pp. 243 trate compounds, which had been a subject of this 9. Directive 91/414/EEC, paper research. In order to manage water resources 10. Water Framework Directive 2000/60/EC, in sustainable way, it is very important to make 11. Directive 91/676/EEC, 12. The Pesticides Framework Directive 2009/128/EC, institutional and legal framework, which would 13. The Republic Bureau of Statistics, monitor the emission of harmful matters, deriving 14. http://www.shts.org.rs/srpska/agricultural.html , from agricultural production, which would further- 15. Law on substances for plant nutrition and lands im- more surely contribute to better condition, as local, provement (“Official announcement of the Republic of as well as international watercourses which flow Serbia”, number 41/09), 16. Dangerous Substances Directive, “Official an- through our country. nouncement of the Republic of Serbia”, number 31/82, Acknowledgement 17. Drinking Water Directive, "Official Paper SRY", number. 42/98 and 44/99 Paper work is part of the project research 46006 – “Sustainable agriculture and rural devel- Corresponding Author opment in function of Republic of Serbia strategic Drago Cvijanovic, goals achievement within the Danube region”, fi- Director of the Institute of Agricultural Economics nanced by the Ministry of science and technologi- Belgrade, cal development of Republic of Serbia, member Serbia, of researching team, period 2011-2014., and EU- E-mail: [email protected]

Volume 7 / Number 1 / 2012 403 technics technologies education management Creative cultural tourism as a function of competitiveness of cities

Aleksandra Djukic, Milena Vukmirovic Faculty of Architecture University of Belgrade, Belgrade, Serbia,

Abstract Theoreticians regard that "to keep the system balanced" requires the establishing of unity between The globalized and decentralized world we live these two phenomena. in is simultaneously the arena for the competition Dynamic processes influencing the change of of cities belonging to the global network. Striv- the known way of life and functioning of institu- ing to secure a better position on the international tions are a daily challenge of participating in the scene, responsible managements turn to entre- competition on the global market. In this "race" preneurial activities aimed at finding new forms successful strategies rely on technologically up- of competitive capitalism. Within a thus defined graded, interactive, integrative and sustainable context, tourism is an important sphere. In these means. States and cities strive to secure sustainabil- latest decades more and more attention is devoted ity of their economy by developing branches of the to cultural tourism and creative cultural tourism, economy within which they can remain competi- which are becoming an important sphere of global tive for prolonged periods of time and which are tourism. Reasons for this trend are evident in an compatible with principles and goals of sustainable economy based on knowledge and that which is development in all important segments and with the experienced, in the fact that tourism is a branch of development of information–communication tech- the economy with a huge potential, as well as in nologies. These technologies influence a change of sustainability of investments in culture and human the manner of communication and of doing busi- resources. Having in mind the hedonistic charac- ness. There is also the dilemma if the unification ter of a place as a product and tourism as an activ- of globalization and technologies will change the ity directed toward the acquisition of new experi- foundations of the human society to an extent that ences and events, this paper will analyze those el- threatens it, but quite certainly they are today the ements of the offer which contribute to increased strongest drivers of the economy. competitiveness of cities. The subjects of this pa- Developing countries recognize the good po- per are the social space of the city, local products, tential in tourism, as a branch of the economy mental space of the city, and material space of the which still has a future. The significance of tour- city. A special accent is placed on creative tourism ism is also reflected in the fact that most recre- and its role in the process of regional economic ational travel is from economically developed development of cities in Southeast Europe. countries toward those that are less developed. In Key words: Creative cultural tourism, City addition, the framework of the usual tourist offer competitiveness, Regional economic development catering to vacations is being expanded to offer other products and values, thus additionally in- 1. Introduction creasing expected income. Development of tourism can achieve higher The current period is characterized by the de- goals such as financing measures for technical pro- velopment of the world market with consequences tection of cultural resources, integrative protection reaching deep into culture, identity and lifestyles. of natural resources, revitalization and reconstruc- Globalization of economic operations is accom- tion of city quarters and settlements, support for panied by waves of cultural transformation, a development of other "products" – material and process called cultural globalization. As a coun- nonmaterial, creation of new jobs, education re- terbalance for globalization, there is localization lated to culture and natural values, etc.

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This paper will present the current global con- –– conforms to a specific "packaging of space" text reflected in the achieving of competitive ad- as a product, but constantly directed toward vantages for cities. It will focus on elucidating the the "production" of a local public resource role of creative cultural tourism in the process of with the goal of creating additional social regional economic development. It will also ana- development. lyze those elements of the city offer which contribute to its competitiveness, and belong to the In view of the complexity of a city as a product domain of creative cultural tourism. and its hedonistic characteristics, its dimensional frame can be viewed by breaking it down to the 2. City competitiveness social, cultural, mental and material space of the city. Each of the mentioned components of the The economy in a globalized world is an arena city as a product represents individual levels of the for competing cities and regions. Today, cities are overall experience and perception of a city. The drivers of social and cultural development, and social space of the city is the frame within which as such they have the power to stimulate them- experience is acquired by interactions with other selves, regions and states to grow and develop. To people, i.e. through social relationships. Cultural achieve a better position in a system determined city space encompasses cultural patterns and lo- by a network of global cities, they must be capable cal products. Mental city space encompasses sym- to strongly attract the best organizations, profes- bolic meanings and psychological characteristics sionals, experts and investors. Harvey (1) de- linked by visitors to a specific space. The material scribes this as transition from managerial toward space is determined by the physical frame, i.e. its entrepreneurial activates of cities, with the goal to construction elements, both natural, and created. find new forms of competitive capitalism. Under By their stay in a certain city, people form an such circumstances, marketing and its instruments interaction with the environment. As a result of are an important element of development strate- such a process, appears the aspiration to create gies serving to advertise and market potentials of city attributes/characteristics that are simultane- a city in the global economy. ously the constructive elements of its attraction. The subject of marketing of a site, as a field of In this manner, each of the separate levels of the urban marketing, are processes related to revital- overall experience and perception of the city con- ization of cities, regions and states. A city or some tains elements that can result in raising the level other form of territorial organization are treated of attraction of the place, thus strengthening its as a "product" aimed at constantly attracting new competitiveness. The area where the social, cul- jobs, tourists, etc., all with the goal of developing tural, mental and material space of the city overlap a certain community. Although this is a simplified result in a product representing creative cultural approach, one must not neglect the complexity of tourism, one of the leading domains of tourism as the city as a phenomenon. On the other hand, if the a branch of economy. city is regarded as an integral product, one should also keep in mind its hedonistic characteristics (2). 3. Creative cultural tourism This means that, by placing the city in the group of hedonistic products, it possesses a specific emo- Cultural tourism is an important field of global tional potential, i.e. the ability to offer satisfaction tourism and encompasses all travel that includes and excitement. Having in mind the characteris- experiences and events related to culture. Ac- tics of marketing as a discipline and of the city as a cording to Richards (3) cultural tourism signifies product, this unifies the understanding of the con- movement of people cased by cultural attractions cept of urban marketing and site marketing which: outside their usual place of residence, with the in- –– determines local goals and modes of their tention to gather new information and experiences realization, in order to satisfy own cultural needs. –– unifies basic developmental factors (attrac- Creative tourism is a developed form of cultural ting investors), and tourism implying participation, not only observa-

Volume 7 / Number 1 / 2012 405 technics technologies education management tion, demanding certain skills, contributing to the a different offer of jobs and vocations. The offer acquisition of new knowledge and enabling closer of cultural attractions is also increased; problems contacts with the local population. UNESCO de- of financing culture and the growingly important fines creative tourism as travel directed toward au- role of intangible culture, image and atmosphere thentic experience with active participation, discov- are becoming increasingly pronounced (6). ering, learning about art, heritage, or about special characteristics of a place. This secures a direct link 4. Creative cultural tourism as a driver of with those who live in a specific space and form regional economic development its specific culture of life. The last decades have witnessed the adoption of a series of charters and The significance of Cultural tourism in the declarations on cultural tourism. ICOMOS (Inter- economy of cities and regions in an era of "creative national Council on Monuments and Sites) adopted cities" is growing (7). As mentioned earlier, many the International Cultural Tourism Charter entitled theoreticians emphasize the importance of cultural "Managing Tourism at Places of Heritage Signifi- and creative tourism as a driver of economic de- cance" in 1999, establishing principles of dynamic velopment. Whitt (8) and Zukin (9) believe that interaction between tourism and cultural heritage. the development of a certain type of tourism can Tourism is recognized as a phenomenon with a be used to influence the forming a city's image. A growing effect on politics, economy, culture, edu- positive image leads to higher attractiveness and cation, ecology and esthetics. (4) In addition, the interest of large investors to invest. As a result of Brussels Declaration by artists and cultural profes- this development there are higher investments in sionals and entrepreneurs, was also adopted with shaping and equipping of public spaces, as well as the goal to affirm the role of IFACCA (The Inter- construction of representative buildings. national Federation of Arts Councils and Culture Culture is included in urban regeneration as a Agencies) as a dynamic global network exchang- means of stimulating physical regeneration, ani- ing knowledge, experience and enriching the world mating parts of a city and producing benefit for cultural heritage and pointing out the importance the economy and the society. It forms the basis for of creative cultural tourism (European Commis- regeneration strategies such as: sion, 2009). In 2002, UNESCO founded the Cre- –– "culture led regeneration", where culture is ative City Network, with the goal to promote and a driver of development; exchange positive experiences in the field of social, –– "cultural regeneration", where culture is a economic and cultural development of cities in part of the integral strategy; and developed and undeveloped countries. One of the –– "culture and regeneration", where these are goals of this network is support of developed coun- nonintegrated processes, and culture plays a tries to developing countries and underdeveloped supporting role. (10) countries. (5) The basic task of cultural/creative tourism is Various strategies are based on different meth- reflected as a contribution to the economic devel- odologies, but a similarity in the field of realized opment of the society while preserving its cultural results is recognized (11): values. The popularity of this segment of tour- –– iconic structures – culture becomes a "system ism, as a branch of the economy has considerably for producing symbols’’ (12), in this role grown in the last decade. Basic causes and mo- stimulating the construction of buildings – tives are noted in the growth of interest in culture; symbols of a city (museum in Bilbao, music increase of cultural capital; growth of the aged house in Porto, opera in Singapore, etc.); population in developed countries; "postmodern –– construction heritage as a "mine" - in any consumption" of tourism (short vacation, cultural period of decreased economic development diversity), and increased mobility. Simultaneously, of cities, as a consequence of decreased factors which stimulate development of this type building potential construction heritage is of offer are also present. Cultural tourism stands conserved, later becoming capital that can out as a market with constant growth, influencing stimulate development of the economy;

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–– mega events – many cities base their –– an offer different from globally set standards, economic progress and image upgrading on not harmonized with local conditions and organization of large international manifes- customs, tations (Olympic Games, World Fair, –– quality of the offer/experience. European Capital of Culture, etc.), –– thematic approach – certain cities are Authenticity is the basic resource of cultural making an effort to isolate a certain among tourism, and simultaneously also something that their characteristics as unique (New York – every community has in its history and culture, and "Cultural Capital of the World’’, Stockholm, is able to offer. Cities and regions competing on the Bruges, St. Petersburg, Amsterdam – "Venice global market are working to expand their offer and of the North", Miami, Los Angeles, Las are fighting to achieve quality and exclusivity. Hav- Vegas – "pleasure consuming" cities, etc.). ing in mind this situation, the cultural tourism offer of Serbia could be directed toward (15): As previously mentioned, cultural/creative –– organizing visits and tours of individual tourism has become an important factor of eco- sites with a cultural, historic, spiritual, nomic development. This is also confirmed by the geographical, sociological, ethnographic Spatial Plan of the Republic of Serbia 2020, which significance, etc.; lists the following as the basic goals of successful –– organizing and visits to manifestations and sustainable economic development: with a seasonal character, tradition, local –– raising competitiveness of cities in the customs, or that stand out from the offer in Republic of Serbia; the region by their specificity; –– decrease of regional inequalities and po- –– tours of natural resources (nature parks, sites verty; with endemic flora and fauna, etc.) –– stopping negative demographic trends; –– organization of narrative evenings dedicated –– identification of natural and cultural attrac- to local tradition; tions of Serbia (regional identity). (13) –– rural tourism with an offer of traditional and local products; Mentioned goals can be realized by imple- –– opening of ethnographic museums dis- menting strategies of urban-economic develop- playing objects, skills, and activities, ment through culture and tourism. Development characteristic for an area or historic period. of characteristics of a place can also be prompt- ed and nurtured by developing creative jobs that It is important to mention that manifestations, would support products and ideas. Many cities are customs, etc. sometimes need to be altered and in the process of establishing networks of creative adapted in a manner that will bring them closer to clusters/places which depend on creative produc- the audience, which is sometimes a precondition tion. Their creativity has the potential to become a for visitors to feel the special experience. This leads spectacle for tourists, a backdrop or the very focus to situations called the "gray zone", where the of- for tourist activities (14). fered product is not wholly authentic. In this case, In these processes special attention is devoted product quality becomes the main criterion. (16) to realization of "authenticity". Authenticity is the basis of the cultural tourism product and is indis- 4.1 Cultural corridors – a project pensable to make the offer of a place competitive on the global market. It is reflected in: The Council of Europe project – Cultural Cor- –– experience of a different way of life, ridors (Routes) of Europe (17) has been singled out –– experience of expression of a national as an example of horizontal coordination and imple- identity or identity of a certain community, mentation of a development strategy based on de- –– customs and tradition, insight into various veloping networks of cultural/creative places. The cultures, cultural-historic heritage, history project goal is mapping and linking of key events and identity), and individuals in the field of creative economy.

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Cultural Corridors of Europe are based on a set Project implementation started with the adop- of common values with the goal of raising aware- tion of the Varna Declaration (2005) at the meet- ness about the European cultural identity. The idea ing of the Southeast Europe Regional Forum. is based on identifying and locating historical in- Countries of Southeast Europe undertook to: fluences, exchange and development, that have –– contribute to the promotion of cultural shaped European culture. Corridors are instru- heritage and cultural corridors within the ments for preservation and upgrading of cultural region; and natural heritage and raising the quality of life. –– implement the Declaration using modern Routes are certified and thematically different. technologies and in cooperation with the By topics, 17 categories of corridors have been sin- EU Institute for Cultural Routes and other gled out, such as: Pilgrimage Routes (Figure/Graph expert institutions. 1), Historic and Legendary People of Europe, Celt- ic Routes, Parks and Gardens – Landscapes, Archi- All information relevant to this project and tecture of Military Fortifications, Heritage Routes individual sites and landmarks are published on of European Jews, Routes of the Olive Tree, Routes the Cultural Corridors of Southeast Europe web of Industrial Heritage, Phoenician Routes, Baroque portal. In addition to the above mentioned, the Routes, Silk Road, Festival Routes, etc. portal also contains a calendar of events that are A separate segment of this project is the sub- organized, and have the goal to acquaint visitors project Cultural Corridors of Southeast Europe. with history, tradition and local cultural charac- In view of the specificities in the form of territo- teristics. rial specificities in this region, nine thematic cor- In view of the fact that Roman archeological ridors have been singled out: Danube Corridor, sites in the territory of the Republic of Serbia stand Diagonal Route, East Transbalskan Corridor, out as an exceptional resource for developing cul- Sophia-Ohrid Road, Adriatic Corridor, Black Sea tural tourism at the international level, the Minis- Corridor, Marble and Aegean Sea Corridor, East try of Economy and Regional Development of the Transbalkan corridor. Republic of Serbia initiated the project Cultural

Figure/Graph 1. The Via Francigena (Pilgrim Routes), Cultural Corridors of Europe, http://www.seecorridors.eu/?w_p=22&w_l=2&w_c=19

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Figure/Graph 2. Viminacijum, http://www.e-turizam.com/images/stories/viminacijuma.jpg

Route or Roman Emperors. The project could be 5. Conclusion realized in cooperation with representatives from As drivers and pillars of social and cultural de- Bulgaria and Romania. velopment, cities stimulate themselves, regions and The Cultural Route or Roman Emperors en- states to grow and develop. To achieve a better po- compasses archeological sites and museums in sition within the system of the network of global Pozarevac, Veliko Gradiste, Golubac, Majdanpek, cities, cities are orienting toward entrepreneurial Kladovo, Negotin, Zajecar, Knjazevac, Svrljig activities with the goal to find new forms of com- and Nis. The goal of the project is to link these petitive capitalism. The concept of urban marketing cities into an entity as had existed when the Ro- and place marketing within these processes enables man Empire spread to the banks of the Danube. determination of local goals and manners of their (18) For the needs of the project a master plan was realization, unifies local factors of development and prepared with the idea to offer environments and corresponds to a specific "packaging of space" di- events that will present life as it was when the Ro- rected toward production of a local public resource man Empire spread to this region. in order to create additional social development. Each singled out site (Figure/Graph 2) should As a complex phenomenon and treated as a be equipped with parking and access, adequate hedonistic product, the city unifies components of road signs; the sculpting of busts of 17 roman its social, cultural, mental and material space. The emperors and the construction of an elevator to area where these components overlap represents Trajan's plaque, preparation of a special Roman creative cultural tourism, one of the leading do- menu, designing of souvenirs, construction of Ro- mains of tourism as a branch of the economy. man hostels, etc., are envisaged. Culture and innovation play an important role Projects based on a similar concept are also the in assisting regions to attract investments, creative European Wine Route, headed by the Tourist Or- talents and tourists. Paradoxically, in an era of ganization of Serbia and Danube Route, headed information-communication technologies which by the Ministry of Economy and Regional Devel- remove obstacles posed by distance and time, the opment of the Republic of Serbia, and encompass- "physical location" and the "socialization" factor ing the Upper and Lower basin of the Danube. remain decisive for economic progress and suc- The common denominator for the mentioned cess. Cities and regions compete to attract foreign projects is the need to be based on international direct investments and creative talents. To be suc- cooperation and a comprehensive development cessful, they must provide: a varied cultural offer, strategy implemented within a specific territory. quality of life and lifestyle. Creative cultural tourism has become an important factor for stimulating local and regional attractiveness.

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The positioning of cultural tourism as a basic 7. Landry C. THE CREATIVE CITY: A TOOLKIT FOR strategic idea within each individual development URBAN INNOVATORS, London: Earthscan, 2000 sector of the society at various levels of hierarchy 8. Whitt J.A. MOZART IN THE METROPOLIS: THE and space, can secure a qualitatively higher level ARTS OF GROWTH: TIES BETWEEN DEVELOP- of development, both individually and overall. MENT ORGANIZATIONS AND THE PERFORM- ING ARTS, Urban Affairs Quarterly, 26, 1987, 376- Culture, as a code of behavior, thinking and space, 393. which is inherited and constantly enriched, today 9. Zukin S. THE CULTURE OF CITIES, Oxford: certainly offers a competitive advantage, influenc- Blackwell, 1995 es the quality of life in that environment, and can help in finding answers to modern day challenges. 10. Evans G. MEASURE FOR MEASURE: EVALUT- ING THE EVIDENCE OF CULTURE’S CONTRI- Culture can be regarded as the fourth pillar of sus- BUTION TO REGENERATION, Urban Studies 42, tainability and, in addition to the economic, social 2004, 959- 983, http://usj.sagepub.com/cgi/content/ and environmental aspect, should form the basis abstract/42/5-6/959 of any urbanistic plan (19). 11. Richards G., Wilson J. THE CREATIVE TURN IN Projects Cultural Corridors (Routes) of Eu- REGENERATION: CREATIVE SPACES, SPEC- rope (Council of Europe), Cultural Corridors of TACLES AND TOURISM IN CITIES, u monografiji Southeast Europe (Council of Europe), Cultural Tourism, culture and regeneration, urednica Smith M., CAB International, 2007 Route or Roman Emperors (Ministry of Econo- my and Regional Development of the Republic 12. Zukin S. THE CULTURE OF CITIES, Oxford: of Serbia), European Wine Route and Danube Blackwell, 1995 Route, have been singled out as examples of 13. Prostorni plan Republike Srbije 2020 projects for raising attractiveness of cities and re- 14. Richards G., Wilson J. TOURISM, CREATIVITY gions. Mentioned projects have the goal to map AND DEVELOPMENT, London: Routledge, 2007 sites and link key events and individuals from 15. Đukić A., Tomić V. КREATIVNI KULTURNI TUR- the domain of creative economy. Corridors are a IZAM KAO MOGUĆI POKRETAČ RAZVOJA specific instrument for preserving and upgrading NASELJA, u međunarodnom tematskom zborniku cultural and natural heritage and raising the qual- radova: Regionalni razvoj, prostorno planiranje i strateško upravljanje, urednici: I. Marić i S.Milijić, ity of life on a specific territory. Beograd: IAUS, 2009 16. Laliberte M. AUTHENTICITY - WHAT DO THE References REALLY WANT, 2005, http://tourismintelligence. ca/tag/customer-experience 1. Harvey, David. THE CONDITION OF POSTMO- DERNITY: AN INQUIRY INTO THE ORIGINS OF 17. The European Cultural Routes, Council of Europe CULTURAL CHANGE. Oxford: Blackwell, 1989. and the European Institute of Cultural Routes, http://www.seecorridors.eu/?w_p=22&w_l=2 2. Govers, Robert, / Frank Go. PLACE BRANDING. GLOCAL, VIRTUAL AND PHYSICAL IDENTI- 18. Put kulture rimskih imperatora, Republic of TIES, CONSTRUCTED, IMAGINED AND EXPERI- Serbia, Ministry of Economy and Regional ENCED. Hampshire: Palgrave Macmillan, 2009. Develompent,http://www.turizam.merr.gov.rs/index. php/yu/component/content/article/10 3. Richards G. CULTURAL TOURISM IN EUROPE, Wallingford: CAB International, 1996 19. Landry C. THE CREATIVE CITY: A TOOLKIT FOR URBAN INNOVATORS, London: Earthscan, 4. Đukić A., Tomić V. ICT INSTRUMENTS AS POS- 2000 SIBLE SUPPORT FOR THE EQUAL DISTRIBU- TION OF POPULATION, in Hallin A. and Karrbom Gustavsson T. (ur.), Organizational Communication and Sustainable Development, Hershey: Information Corresponding Author Science Reference, 2009 Aleksandra Djukic, Faculty of Architecture, 5. UNESCO Creative Cities Network, 2002, http://por- University of Belgrade, tal.unesco.org/culture Belgrade, 6. Richards G., Wilson J. FROM CULTURAL TOUR- Serbia, ISM TO CREATIVE TOURISM, Arnhem: Atlas, 2008 E-mail: [email protected]

410 Volume 7 / Number 1 / 2012 technics technologies education management Measurement of crack displacement on residential structure due to blast- induced vibrations and daily changes of temperature and relative humidity

Milanka Negovanovic, Lazar Kricak, Ivan Jankovic, Dario Zekovic, Snezana Ignjatovic University of Belgrade, Faculty of Mining and Geology, Belgrade, Serbia

Abstract residential structures located in surrounding area. It is often claimed that the appearance of cracks The paper presents the measurement results of on nearby structures is the consequence of blast- crack displacement due to blast-induced vibra- ing and for that reason in some cases owners files a tions and daily changes in temperature and rela- lawsuit against the owners of the mine. Several au- tive humidity on the residential structure located thors reported that origin of cracks may be multiple at 950 m from the finale contour of open pit cop- [2,3,4]. Basically, cracks are found to be caused by per mine Veliki Krivelj Bor, Serbia. the following [5]: differential thermal expansion, The main goal was to determine crack reaction structural overloading, chemical changes in mortar, in single story brick structure with plaster facade bricks, plaster, and stucco, shrinkage and swelling that is typical type of residential constructions in of wood, fatigue and aging of wall coverings, dif- this area to vibration from blasting as dynamic ef- ferential foundation settlement. fects in relation to daily changes in inside and out- The peak particle velocity is the most common side temperature and relative humidity. measure for quantifying blast vibrations, as the ve- Cracks were observed in the period from ear- locity is approximately correlated to both building ly August to early November 2010. Along with damage and annoyance levels to people. Damage in crack monitoring, vibration monitoring instru- buildings can be classified into two types: 1) cos- ments were also placed in the house for continu- metic and 2) structural [6]. Cosmetic damage refers ously measurement of blast-induced vibrations. to the formation of minor hairline cracks on drywall The obtained results showed that the displacement surfaces while structural damage involves the more of both cracks due to daily variations of tempera- major cracking or failure of structural elements. The ture and relative humidity were several times larg- PPV needed to cause cosmetic building damage to er than the displacement due to vibrations from ordinary structures is prescribed by different well- blasting, although in this period the inside of the known standards. According to German standard house was not heated. DIN 4150–3.1999 [7] no cosmetic residential struc- Key words: crack displacement, measure- ture damage is expected when peak value of any of ment, blast-induced vibrations, temperature, rela- three components of particle velocity is in the range tive humidity of 5-15 mm/s at frequencies from 10 to 50 Hz. Advances in sensor technology and comput- 1. Introduction erized data acquisition now make it possible to address fears of vibration-induced crack- Blasting has been widely used in the open pit ing by directly measuring crack response [8]. mines as the main method of fragmentation in Crack response is measured in terms of crack hard-rock mining. Some blasting effects are de- displacement, i.e., change in crack width, rather sirable while others are not useful and might be than total crack width [9]. Therefore crack re- even dangerous for the environment [1]. One of sponse may be positive or negative since it is a unwanted effects of every blast is ground vibration measure of change rather than absolute width. which often cause many complains by owners of Residential structures, and thus their cracks,

Volume 7 / Number 1 / 2012 411 technics technologies education management are typically sensitive to changes in tempera- connected to crack displacement sensors via ca- ture and relative humidity [9]. The difference bles and of one device for transmission of collect- between environmental and vibration phenom- ed measurement data via e-mail as attachments ena is that the weather effect occurs slowly and as well as alarming via SMS or e-mail, Figure 1. without noise. It is therefore undetectable by Crack displacement sensors were mounted on home owners and construction neighbors [8]. the wall by screwing perpendicular to the long The blast-induced ground motion can be de- direction of the crack in the plane of the wall. tected and is accompanied by a noise that also alerts the home owner to the vibration [10].

2. Measurement methodology Crack displacements were being monitored continuously within the period from early Au- gust to early November 2010. Along with crack monitoring the outside and inside temperature and relative humidity were being also measured. Sam- pling intervals of temperature, relative humidity and crack displacement measurement were 1 min. During some blasting operations, the displacement of cracks was measured directly with a sampling interval of 1 s, with activated high-speed Figure 1. Applied system for measurement of crack monitoring where system recorded crack crack displacement displacement 100 times per second and every 1 s showed what the maximum and minimum values Data logger features: were within this interval. –– Data memory up to 64000 readings Along with crack displacement measurement, –– Measuring and storing rhythm (1 second to blast vibrations were also measured with two four 24 hours) freely adjustable via pc software channel vibration monitoring instruments [11] –– Measuring range of the crack sensor: 10 mm with measuring range ± 250 mm/s and frequency (+/- 5mm) range 2-250 Hz. The combination of these instru- –– Resolution of the crack sensor: 2.5µm ments enabled recording the ground vibrations as –– High-speed crack monitoring with up to 100 well as displacement of cracks due to daily tem- Hz can be activated perature/relative humidity changes and vibrations –– Measuring range of the air temperature from blasting. The distances from the instruments sensor: - 20°C to 70°C to blasting sites were determined using GPS sys- –– Measuring range of the humidity sensor: 0 tem. From August 18th 2010, all blast operations %rH to 100 %rH were being constantly monitored by only the sec- –– Resolution of both climate sensors: 0.1 °C ond vibration monitoring instrument. The val- / 0.1 %rH ues of peak particle velocities recorded within –– Measuring accuracy of the air temperature the whole observation period, were far less then sensor: <0.4 °C at 20 °C 5mm/s. Triggers on vibration monitoring instru- –– Measuring accuracy of the humidity sensor: ments were set on 0.5 mm/s. <3.0 %rH between 20 %rH and 80 %rH

2.1 Features of applied system for crack dis- Features of device for transmission and alarming: placement measurement –– Fully automated transmission of measurement data via e-mail System [12] applied for remote continuous –– Start time and data transmission frequency crack monitoring consisted of two data loggers freely configurable viapc software

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–– Two complete data logger systems plus Figure 3 shows the location of the sensor universal sensors can be connected mounted on the crack 1. –– Two inputs for e-mail and/or SMS alarm

2.2 House description and the location of instruments The house was located 950 m from the finale contour of open pit copper mine Veliki Krivelj, Bor, Serbia. The dimensions of its basis are 7.80 m x 17.50 m. Under half of the structure is the basement. Basement walls are made of rubble stone and lime mortar while its ceiling is made of timber beams with brick vaults between them. Ground floor walls are made of solid bricks and mortar and the ceiling is of plaster and laths. The facade Figure 3. Location of the sensor mounted on the of the house is plaster. The hipped roof structure is crack 1 wooden covered with tiles. The positions of crack displacement sensors and 3. Results of measurements vibration monitoring instruments are shown on the plan view of the house in Figure 2. One sensor was 3.1 Results of crack displacement measure- mounted on the crack under the window on wall ments due to blast-induced vibrations of dining room on the southwest side of the house (crack 1), while the second was on the crack on The measured values of peak particle velocities wall of the small room on the west side of the house for given charge weights per delay and distances (crack 2). The first vibration monitoring instrument during the blasts performed on August 4th, 6th and was placed below the pantry on the east side of the 7th in 2010 are shown in Table 1. house, while the second was placed on the floor of Figures 4, 5 and 6 show the measured maxi- the basement in the western part of the house. mum displacements of crack 1 and 2 caused by above blasting operations.

Figure 2. Plan view of the house showing loca- Figure 4. Measured maximum displacements of tions of the crack displacement sensors and vi- crack 1 and 2 due to the blast performed on Au- bration monitoring instruments gust 4th 2010 at 14:28 h

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Figure 6. Measured maximum displacements of crack 1 and 2 due to the blast performed on Au- Figure 5. Measured maximum displacements of gust 7th 2010 at 13:05 h crack 1 and 2 due to the blast performed on Au- gust 6th 2010 at 13:49 h 3.2 Results of crack displacement measurements due to daily changes of temperature and relative humidity During the whole observation period weather conditions varied with outside temperature and relative humidity ranging between -2.5 °C and 35.7° C and 31.9 to 88.3 % respectively. Average

Table 1. The measured values of peak particle velocities during the blasts performed on August 4th, 6th and 7th in 2010 Date and time Vibration monitoring Vibration monitoring Frequency of the blast instrument 1 instrument 2 (Hz) Charge weight 4.08. 14:28 h 330 330 per delay 6.08. 13:49 h 270 270 (kg) 7.08.13:05 h 330 330 4.08. 14:28 h 1415 1415 Distance 6.08. 13:49 h 1247 1248 r (m) 7.08.13:05 h 1425 1425 4.08.14:28 h < 0.5 < 0.5 - Vertical peak 6.08. 13:49 h < 0.5 < 0.5 - (mm/s) 7.08.13:05 h < 0.5 0.66 12.8 Longitudinal 4.08. 14:28 h < 0.5 < 0.5 - peak 6.08. 13:49 h < 0.5 < 0.5 - (mm/s) 7.08.13:05 h < 0.5 0.41 10.6 Transversal 4.08. 14:28 h < 0.5 < 0.5 - peak 6.08. 13:49 h < 0.5 < 0.5 - (mm/s) 7.08.13:05 h < 0.5 0.36 29.3

414 Volume 7 / Number 1 / 2012 technics technologies education management outside temperature was 16.7 °C while relative rectly influenced by direct solar heating and was humidity was 63.4 %. Within this period, the in- under the window, where the strains were greater. side of the house was not heated. Maximum shrinkage of crack 2 was recorded Figure 7 shows the record of maximum dis- from August 17th 2010 at 20:12 h to August 18th placement of both cracks from August 9th 2010 at 2010 at 04:48 h of 54 μm and the largest expan- 7:31 h to August 18th 2010 at 9:51 h. sion of crack 2 was from August 16th 2010 at 08:44 h to August 16th 2010 at 19:12 h of 45 μm. Within a certain time intervals of 12 days the highest expansion and shrinkage values of both cracks were considered. Then for these intervals, the initial and final values of outside temperature and relative humidity were analyzed. The graph in Figure 8 shows the maximum expansion and shrinkage values of both cracks within these intervals in relation to outside temperature and relative humidity changes.

Figure 7. Maximum displacements of crack 1 and 2 due to daily variations of inside and outside temperature and relative humidity from August 9th 2010 at 7:31 h to August 18th 2010 at 9:51 h

4. Disscusion According to the graph in Figure 4, maximum displacement of both cracks performed on August 4th 2010 at 14:28 h was 3 μm. Displacement of crack 1 due to blasting from August 6th 2010 was 2 μm, while of crack 2 was 3 μm as can be seen from Figure 5. Displacement of crack 1 and 2 from the Figure 8. Maximum expansion and shrinkage blast on August 7th 2010 was 3 μm, Figure 6. values of both cracks in relation to outside tem- As shown in Figure 7, cracks respond more to perature and relative humidity changes daily changes in temperature and relative humidity in relation to blasting. Positive values in the During the whole period of three months maxi- graphic show the shrinkage of crack while the mum shrinkage of crack 1 of 174 μm was recorded negative one crack expansion. Time axis is divid- from November 4th 2010 at 14:42 h to November ed into 1440 min or 24 h. 5th 2010 at 4:52 h and maximum expansion of 164 Maximum shrinkage of crack 1 was recorded μm was recorded from November 4th 2010 at 8:12 from August 14th 2010 at 15:28 h to August 15th h to November 4th 2010 at 14:22 h. Maximum 2010 at 05:32 h of 124 μm while its largest ex- shrinkage of crack 2 of 64 μm was recorded from pansion was from August 15th 2010 at 06:32 h to August 23rd 2010 at 20:13h to August 24th 2010 at August 15th 2010 at 15:30 h of 116 μm. 8:10 h while maximum expansion was from Au- According to graphic in Figure 7, crack 2 was gust 27th 2010 at 10:39 h to August 27th 2010 at less responsive to these changes than crack 1, 17:14 h of 77 μm. probably because it was more on the shade side of the house during the day, while crack 1 was di-

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5. Conclusion Structures, Journal of Performance of Constructed Facilities, Vol. 19, No. 3, Baltimore, MD, United Measurements showed that crack displace- States, 2005, pp. 222-228. ments caused by daily changes in temperature and 7. German Standards, Part 3 - Structural vibrations relative humidity were much larger than those due in building, effects on structures, DIN4150, Berlin, to blast induced vibrations. Changes in tempera- 1999. ture and relative humidity cause expansion and 8. Dowding, C.H., Micrometer crack response to vibra- shrinkage of wall materials which induces ex- tion and weather, International Society of Explosives treme strains in building materials. These strains Engineers, Cleveland, Ohio, USA, 2008, pp.4. are much larger in the heating season when the difference of outside and inside temperature and 9. Kosnik, D.E., Autonomous Crack Displacement Monitoring of a Residence Near a Quarry. pdf, Au- relative humidity is higher. tonomous Crack Displacement Publications, North- The influence of these “silent” effects may also western University, Evanston, IL, USA, 2009, pp.5. cause cracking although they can not be heard or 10. Dowding, C.H., Crack measurement: new approach felt. Sometimes building owners are not aware to addressing blasting complaints, Blasting Com- of their great influence and the appearance of plaints Old Problem New Approach. pdf, Autono- new cracks usually associate with blast-induced mous Crack Displacement Publications, Northwest- vibrations even when their values are far less ern University, Evanston, IL, USA, 1996, pp.10. than the prescribed levels. 11. ABEM Vibraloc, Sweeden. http://www.abem.se 12. http://www.scanntronik.de 6. Acknowledgements The authors are deeply indebted to Ministry of Science and Technological Development of the Corresponding Author Milanka Negovanovc, Republic of Serbia for support in performing these University of Belgrade, researches within the Project of Technological Faculty of Mining and Geology, Development TR17013. The obtained results will Serbia, be useful in further researches of the new Project E-mail: [email protected] TR33003.

References 1. Kričak, L., Blasting seismic, Blasting Center, Fac- ulty of Mining and Geology, Belgrade, Serbia, 2006, pp.51. 2. Building Research Station, Cracking in Buildings, Building Research Establishment Digest, Vol.75, BRS, Garston, England, 1977, pp.8. 3. Association of Casualty and Surety Companies, Blasting Claims, A guide to Adjusters, Association of Casualty and Surety Companies, 110 William Street, New York, 1956, NY 10038. 4. Thoenen, J. R., Windes, S. L., Seismic Effects of Quarry Blasting, U.S. Bureau of Mines Bulletin 442, Washington D.C., USA, 1942, pp.83. 5. Dowding, C.H., Construction Vibrations, Prentice Hall, Englewood Cliffs, NJ, USA, 1996, pp.182. 6. Gad, E .F., Wilson, J. L., Moore, A. J., Richards, A. B., Effects of Mine Blasting on Residential

416 Volume 7 / Number 1 / 2012 technics technologies education management Analyisis of technical innovation high school students

Goran Petkovic Boarding school for high school students “Angelina Kojic Gina”, Zrenjanin, Serbia

Abstract will be reduced to a number of reasons for the inability to process all of them in one research. One of the conditions of successful educational Educational institutions have an important role - educative process and development of each indi- and responsibility in preparing a young men to vidual of modern society is a technical culture with answer the demands and needs of modern devel- all its programs, both in primary and secondary opment. Education is one of the most important schools, which are an important source of knowl- factors influencing students' technical innovation. edge, skills and creativity. By defining the factors It is at the very top of the interest in technical, that determine the technical innovation of high technological and economically developed coun- school students, we get the determinant of which tries. Their access to education is viewed through way to go to raise the level of technical innova- the perception that the allocation of funds from the tion of the students who attend vocational schools. budget of a state investment in the future rather Technical knowledge and innovation should rise: than an expense, which for now, in Serbia, is not the level of technical education of students, oper- the case. The education here is seen as the isolated ability and functionality in using the technical and segment, a separate system of society, consump- technological achievements, to qualify them for tion, and not as an integral element in the function high quality, creative solving of technical prob- of economic, technological, cultural and other de- lems in everyday life and work. velopment, so that up until now, it has not been en- Key words: Factors, innovation, students, teach- tered in the order of development priorities, other ing content, development, technical education than declarative. Placing education at the center of social concern and interest would give faith and 1. Introduction hope that the human mind will be regarded and treated as a fundamental developmental resource. Technical and technological innovation, seen This paper will analyze the views and opinions in the last twenty years, have been developed at of directors of secondary vocational schools in dizzying speed. During this period, our education eight cities of the Republic of Serbia. system has increasingly lagged behind the technical and technological achievements of the advanced world and against the view that the future 2. Analysis of the surveys of Directors of a country depends also on the education system Frequency table that needs to produce technically innovative, creative and inventive young people. Question. number 1 In addition to these reasons that steered me in this direction, I was influenced to think and ques- Age tion what in youth started Nikola Tesla, Mihajlo Pupin and other world greats on finding technical The table shows the age of directors at schools in solutions and which factors had influenced them? Republic of Serbia, participants in the survey. Two To use these factors in the classroom, we need to: directors are in the age of 31 to 40 years, while the identify, define, evaluate and rank them. A very majority, 12 of them,are aged between 41 and 50 wide range of direct and indirect factors affecting years. Ten directors are between 51 and 60, who the technical innovation of students in this study participated in the survey. Four directors in schools where the surveys conducted are over 60.

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Table 1. The age of directors Frequency Percentage Valid percentage Cumulative percentage Valid from 31 to 40 years 2 7.1 7.1 7.1 from 41 to 50 years 12 42.9 42.9 50.0 from 51 to 60 years 10 35.7 35.7 85.7 over 60 4 14.3 14.3 100.0 Total 28 100.0 100.0 Table 2. Years of service Frequency Percentage Valid percentage Cumulative percentage Valid Up to 10 years 2 7.1 7.1 7.1 From 11 to 20 years 8 28.6 28.6 35.7 From 21 to 30 years 10 35.7 35.7 71.4 Over 31 years 8 28.6 28.6 100.0 Total 28 100.0 100.0 Table 3. Faculty Finished Frequency Percentage Valid percentage Cumulative percentage Valid Academy of Pedagogy 1 3.6 3.6 3.6 Faculty of Teacher Education 1 3.6 3.6 7.1 Faculty of Philosophy 9 32.1 32.1 39.3 Faculty of Physical Education 3 10.7 10.7 50.0 Mechanical Engineering 2 7.1 7.1 57.1 Faculty of Engineering 1 3.6 3.6 60.7 Faculty of Electrical Engineering 1 3.6 3.6 64.3 Faculty of Philology 1 3.6 3.6 67.9 No answer 3 10.7 10.7 78.6 TTC (Teacher Training College) 1 3.6 3.6 82.1 Faculty of Electronics 3 10.7 10.7 92.9 Technical Faculty 2 7.1 7.1 100.0 In total 28 100.0 100.0

Question number 2 cation, Electronic, Electrical, Teachers, Faculty of Engineering, Philology. Years of service

Two directors have up to 10 years of service Question number 4 in schools in Republic of Serbia. Eight of the 11 After graduation, have you had training directors have, up to 20 years of service and the schemes and acquired knowledge ? majority, 10 of them, have a length of service between 21 and 30 zears. With over 31 years of ser- After graduation, almost all of the direc- vice are eight directors, participants in the survey. tors (92.9%) had training schemes and acquired knowledge. Question number 3 University degree (name of the faculty, year end) Question number 5 Do you believe that the educational structure Almost 1 / 3 of surveyed school principals have of the teaching staff can contribute to innovation, completed a Faculty of Liberal Arts (32.1%), also inventiveness and creativity of students? with a degree from the Faculty of Physical Edu-

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Table 4. Professional Development of Directors Frequency Percentage Valid percentage Cumulative percentage Valid Yes 26 92.9 92.9 92.9 Occasionally 1 3.6 3.6 96.4 No 1 3.6 3.6 100.0 In total 28 100.0 100.0 Table 5. The educational structure of the teaching staff and innovation, inventiveness and creativity of students Frequency Percentage Valid percentage Cumulative percentage Valid Certainly will contribute 13 46.4 46.4 46.4 Yes, but not critical 14 50.0 50.0 96.4 Does not contribute 1 3.6 3.6 100.0 Total 28 100.0 100.0 Table 6. Training of teachers encourages innovation, inventiveness and creativity Frequency Percentage Valid percentage Cumulative percentage Valid Absolutely encourages 13 46.4 46.4 46.4 Encourages 15 53.6 53.6 100.0 Does not enhance 0 0 0 Total 28 100.0 100.0 Table 7. Enhancing training of teachers by school Frequency Percentage Valid percentage Cumulative percentage Valid Often sends 17 60.7 60.7 60.7 Periodically sends 10 35.7 35.7 96.4 Does not send 1 3.6 3.6 100.0 Total 28 100.0 100.0 Table 8. Position on the quality of our education system Frequency Percentage Valid percentage Cumulative percentage Valid High 2 7.1 7.1 7.1 Meets 15 53.6 53.6 60.7 Low 9 32.1 32.1 92.9 Very low 2 7.1 7.1 100.0 Total 28 100.0 100.0 Table 9. Equipment of cabinet Frequency Percentage Valid percentage Cumulative percentage Valid Fully-equipped 6 21.4 21.4 21.4 Averagely equipped 19 67.9 67.9 89.3 Not equipped 3 10.7 10.7 100.0 Total 28 100.0 100.0 Table 10. Expansion of library funds Frequency Percentage Valid percentage Cumulative percentage Valid Yes 24 85.7 85.7 85.7 No 4 14.3 14.3 100.0 Total 28 100.0 100.0

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Table 11. Does your school rewards: inventiveness, innovativeness and creativity in teaching. Frequency Percentage Valid percentage Cumulative percentage Valid Always 3 10.7 10.7 10.7 On special occasions 16 57.1 57.1 67.9 No rewards 9 32.1 32.1 100.0 Total 28 100.0 100.0 Table 12. Motives for the encouragement of: innovation, creativity and inventiveness Frequency Percentage Valid percentage Cumulative percentage Valid Intensive practical training 1 3.6 9.1 9.1 Adequate evaluation of work 5 17.9 45.5 54.5 Stimulating assessment of 1 3.6 9.1 63.6 students` and mentors ‘results Collegiums of professionals and 1 3.6 9.1 72.7 exchange of knowledge Professional competence of 1 3.6 9.1 81.8 teachers and extra work Extra-curricular activities, work 1 3.6 9.1 90.9 in sections Exchange of experience with 1 3.6 9.1 100.0 schools in the country and abroad Total 11 39.3 100.0 Missing data 17 60.7 Total 28 100.0 Table 13. Suggestions for improving inventive-innovative creativity in technical-technological area. Frequency Percentage Valid percentage Cumulative percentage Adequately rewarding Valid 1 3.6 25.0 25.0 performance Sharing knowledge and 1 3.6 25.0 50.0 experience with schools abroad Project design / development and 1 3.6 25.0 75.0 equipping of schools Creating a stronger education 1 3.6 25.0 100.0 system Total 4 14.3 100.0 Missing data 24 85.7 Total 28 100.0

Principals believe that the educational structure The opinion of the principals of schools in Ser- of the staff, of course, contributes to (46.4%) or at bia, participants of the survey, is that the training least may contribute (50%), innovation, to inven- encourages teachers absolutely (46.4%) and en- tiveness and creativity of students. courages (53.6%), innovation, inventiveness and creativity among both teachers, and students. Question number 6 Question number 7 Do you think that continuing professional development of teachers encourages innovation, Indicates whether your school sends teachers to inventiveness and creativity among both teachers professional development? and students?

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Most schools send their teachers on profession- Question number 12 al development: very common (60.7%), or at least If the motives are omitted, and you think are occasionally (35.7%), while only 3.6% of ques- important for the acquisition of modern knowl- tioned schools in Serbia does not. edge in technical and technological achievements to promote creativity, inventiveness and innova- Question number 8 tion of students, list them: What is your opinion on the quality of our education system in comparison with modern techni- This question was not answered by 60.7% of cal and technological developments? respondents. Of those directors who responded to this question, almost half thought that adequately Compared with modern technical and techno- should be valued the work in schools in Serbia. logical achievements, generally are satisfied with the quality of our educational system 53.6% of Question number 13 school principals in Serbia who participated in the If you want to tell something about education, survey, quality is considered low by 32.1% of the inventive-innovative creativity in technical-tech- principals, and very low 7.1%. nological area, do so in the following area:

Question number 9 This question was not answered by 85.7% of Features of your cabinet in a technical sense, respondents. Of those who responded, as well as you would rate like? gaps in the current system of education in Serbia see the lack of adequate work incentives, lack Well equipped cabinets in the technical aspect of knowledge and exchange experiences with of teaching have 21.4% of respondents, directors schools abroad, lack of projects, better equipment of schools in Serbia, 67.9% averagely equipped in schools and training teachers, which, overall, cabinets and under-equipped or unequipped cabi- would lead to the creation of stronger education nets for teaching 10.7%. system in Serbia.

Questions number 10 Conclusion Do you expand the library fund with modern After graduation, almost all of the directors literary contents of technique, informatics, etc ? (92.9%), had expert training and acquired knowledge. They believe that the educational structure Regularly are expanded library funds with con- of the staff, of course, contributes to (46.4%), or temporary literary contents in 85.7% of schools in at least may contribute to (50%), innovation, in- Serbia, while not expanding in the 14.3%. ventiveness and creativity of students. They also believe that professional development of teachers improves absolutely (46.4%) and improves Question number 11 (53.6%), innovation, inventiveness and creativity, Does your school awards: inventiveness, inno- both teachers, and students. vativeness and creativity in teaching? Most of the schools send their teachers to professional development very often (60.7%), or at Invention, innovation and creativity in teaching least occasionally (35.7%). Only 3.6 surveyed is always rewarded in only 10.7% of schools in schools in Serbia do not. Serbia, on special occasions in 57.1%, and is not Compared with modern technical and tech- rewarded in 32.1%. nological achievements, with the quality of our education system are generally satisfied 53.6% of surveyed school principals in Serbia, that quality

Volume 7 / Number 1 / 2012 421 technics technologies education management is considered low by 32.1% of the principals, and 5. Lambic, M. (2005): Engineering and Innovation, very low 7.1%. Technical Faculty "Mihajlo Pupin", Zrenjanin, Well equipped offices in the technical aspect 6. Maksic, S. (2006). Encouraging creativity in school. of teaching have 21.4% of respondents, 67.9% on Institute for Pedagogical Research,Belgrade average-equipped, under-equipped or unequipped cabinets for teaching 10.7% , that is the answer 7. Popov, S., Jukic, S. (2006) Pedagogy. Novi Sad: of surveyed school principals in Serbia. 85.7% of Center for Development of Science, Technology and Informatics schools in Serbia regularly expand library fund with contemporary literary content, while not 8. Petkovic, G. (2009).: Innovation in the management expanding 14.3%. Invention, innovation and cre- of human resources in the students' standard, Devel- ativity in teaching are always rewarded in only opment and Management, No.3, Banja Luka, Bosnia 10.7% of schools in Serbia, on special occasions and Herzegovina. in 57.1%, and is not rewarded in 32.1%. 9. Petkovic, G. (2009.): The structure of teaching con- When asked: "If the motives are omitted, and tent in the field of technology in secondary schools, you think are important for the acquisition of the scientific conference "Management, Innovation modern knowledge in technical and technologi- and Development", Vrnjacka Banja. cal achievements to promote creativity, inventive- 10. Petkovic, G. (2008.) Criteria for determining the in- ness and innovation of students, give them," did novativeness of high school students, an internation- not answer 60.7% of respondents. Of those direc- al scientific journal Development and Management, tors who responded to this question, almost half No.1-2, Banja Luka, Bosnia and Hercegovina, thought that the work in schools in Serbia should 11. Petkovic, G. (2010.): Reform of secondary voca- be adequately valued. tional education system in the Republic of Serbia, 1st "If you want to tell something about education, International scientific conference on economic and inventive-innovative creativity in technical-techno- regional development, E-Proceedings, Zrenjanin logical area , do so at the next area," also did not answer 85.7% of respondents. Of those who re- 12. Petkovic, G. (2010.): A guide to successful learning in secondary boarding schools, Proceedings of the sponded, as well as gaps in the current system of XIII Scientific Conference with international par- education in Serbia see the lack of adequate work ticipation "Educational research and educational incentives, lack of knowledge and exchange expe- practice", Institute for Educational Research, Col- riences with schools abroad, lack of projects, better lege of Professional Studies for teacher training, equipment of schools and training teachers, which Sremska Mitrovica, 2010. - In publishing! would lead to the creation of an overall stronger educational system in the Republic of Serbia. Corresponding Author Goran Petkovic Boarding school for high school students “Angelina References Kojic Gina”, 1. Avramovic, Z. (2003.): State and Education, Institute Zrenjanin, for Pedagogical Research, Belgrade Serbia, E-mail: [email protected] 2. Group of authors (1996.) Appendix to strategy of technological development, Technical Faculty "Mi- hajlo Pupin", Zrenjanin,

3. Juzbašić Kostic, B. (2005.): Statistical monitoring of education, selected indicators - Department of Statis- tics, Belgrade.

4. Lambic, M. (1992.) Technical Creativity and Educa- tion, Proceedings of the scientific symposium Poly- technic Education and Technology, Novi Sad,

422 Volume 7 / Number 1 / 2012 technics technologies education management „Information Systems and Environmental Sustainability: The major challenges“ Zlatko Lagumdzija, Elvedin Grabovica, Amila Pilav-Velic School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina

Abstract dustry’s competitiveness. Therefore, environmental sustainability imperative also represents an oppor- Considering that the IS academic community tunity to improve competitiveness in a win–win spent a lot in researching and defining different logic (Porter and van der Linde, 1995). Unfortu- aspects of IT/S, particularly in business context, nately, a numerous organizations identify envi- today, in the 21th century, when environmental ronmental sustainability as a cost, not a source of sustainability is one of the major humanity chal- competitive advantage. In achieving sustainable de- lenges, IS community can not afford luxury of in- velopment, IS and IT are an essential enabler. Due difference. Information systems represent strong- to IS, many organizations improve productivity, ly, but not properly understood and exploited in- reduce costs, and enhance profitability. Overmore, strument for environmental sustainability. They IS has a substantial role in reducing environmen- represent the valuable source of potential solutions tal contamination, developing technology-enabled for environmental issues. ISs are significantly in- solutions, and generating sustainable business op- fluential on establishing innovative environmental portunities. On the other side, recent data („Com- strategy and have a determining role in lowering municating Sustainability“, Sustainable Facility, environmental pollution, deploying technology- 2010) of U.S. Energy Information Adminstration enabled solutions, and creating sustainable busi- (EIA) show that IT systems and communications ness opportunities. This paper aims to indicate the equipment account for as much as 5%-10% of total major challenges of this relationship and adress energy consumption for the average U.S. building. the most prominent literature gaps. To develop a Therefore, IS and environemntal sustainability re- comprehensive conceptual framework that should lationship refers to the role of IS in environmen- be adressed by further IS research, we divided tal sustainability as both problem and solution. this research into two steps to: identify and collect Previous studies have mainly focused how ISs are adequate IS and environmental sustainability lit- designed, developed, used, diffused and retired. erature, and content analysis of gathered literature. Environmental practice and requirements for IS re- This research agenda based on three main catego- searchers did not represent considerable object of ries provides the instructions for a new discourse research. This resulted in many forms of waste; un- on IS for environmental sustainability. used resources, energy inefficiency, noise, friction, Key words: Environmental sustainability, In- and emissions. However, business and academic formation system, Information technology, Con- communities increasingly recognize sustainability tent Analysis as a considerable opportunity for their business to grow, compete and innovate. Most companies (re- 1. Introduction tailers and producers) recognize the increasingly important role of environmental sustainable ino- Environmental sustainability is one of the most vativness and own competitive capabilities. Since, important global challenges of the 21st century. IS has became an indispensable component of all The challenge is to incorporate sustainability as the business processes and activities, the IS community integration of social, environmental and economic should actively participate and contribute in inves- dimension, in the business context. Global pressure tigating this relation and concrete innovative solu- to increase resource efficiency, and the efforts to tions. IS scholarship should contribute to the body improve sustainability could become an important of knowledge about environmental sustainability source of innovation and an important asset for in- and encourage application of IS in environmental

Volume 7 / Number 1 / 2012 423 technics technologies education management sustainability leading to multiple improvements. In gardless of the journals᾽ primary orientation. Most line with this, the paper aims to contribute to the reviewed papers are mainly focused on macro as- research area of environemntal sustainability, pri- pect of relationship between Information systems marly sustainability and IS. For this purpose, we and environmental sustainability, particularly in the gathered and analyzed relevant literature and have organizational settings. This refers to establishing developed conceptual framework based on three environemntal policies and strategies. Considering dominant categories. The paper is organized as fol- that business is „the major driver of innovation and lows. First, the existing literature is discussed in or- the difussion of technologies“, the dominant num- der to develop the theoretical background and the ber of this type investigations is expected. In fact, conceptual framework for the study. Thereafter, we an increasing number of companies began to real- describe content analysis as the qualitative research ize that investing in sustainable development and methodology used in the study. We also present re- IS-enabled solutions are not a cost, but an invest- search results in this section. Next, we analyze and ment that is justified and does not include only en- discuss the findings of the research. Finally, we lay vironmental but also social and economic sustain- out our concluding remarks. ability. In the contrast to this general aspect, micro level of environmental sustainability is not suffi- 2. Literature Background ciently indicated in the literature. Micro processes that are a source of real and significant changes This study aims to investigate relationship be- such as the actions of individuals, education of em- tween Information systems and Environmental ployees about sustainability, their environmental sustainability. Therefore, papers were selected for awareness, development and implementation of review as required by the aims and research focus action plans that involve information and informa- of the study. In this way, high level of internal co- tion systems, types of information that are required, herency is achieved. appropriate use of information, design of informa- The discussion of environmental sustainability tion systems are often ignored and unexplored or and information systems was the decisive criterion unclear treated. This discrepancy between studies for the research papers that will be included in this that are macro and micro oriented is a key reason review. Unlike Melville’s (2010) paper which con- why we gathered and reviewed the papers that have ducted articles from five leading Information sys- primary focus on the concrete implementation of IS tems and operation reserach journals from the eight- related environmental actions plan and strategies. year period (2000-2007), literature review was not Thus 39 out of 51 papers were selected as esen- restricted to MIS journals (such as: Journal of MIS, tial theory background and broader unit of content MIS Quarterly, Information systems journal, etc). analysis, and even 23 (59%) papers are based on Significant numbers of articles were found in jour- micro processes of sustainable development and nals which do not have Information technology and 16 (41%) papers explored and analyzed relations systems as their primary domain. Some of them between IS and environmental sustainability in a are: Journal of Social Issues, Business and Society general context. Review, Strategic Management Journal, Business Strategy Environment, Journal of Business Ethics, 3. Methodology Academy of Management Review, Business Strate- gy and Environment, etc. Thus object of research is Most studies related to IT/S and environmen- explored and analyzed in the broader context with tal sustainability are conceptual and/or empirical. multifaced approach, rather then simple and unilat- Thus, a small number of papers have concrete and eral analysis of IS-related journals᾽papers and their strong theoretical background. This kind of litera- remarkable conclusions. This approach is parallel ture determines that this paper contains elements with Elliot᾽s paper (2011) which underlines trans- of exploratory and descriptive analysis. Consider- disciplinary nature of environemental phenomena. ing these facts, content analysis arised as the most Also, Jenkin et al. (2011) conducted a broad search aplicable method of data analysis. As qualitative for articles containing a Green IT/IS artifact, re- research method, content analysis is commonly

424 Volume 7 / Number 1 / 2012 technics technologies education management defined as “the intellectual process of categoriz- Considering that we collected a wide range of re- ing qualitative textual data into clusters of similar search papers of which several have explanatory entities, or conceptual categories, to identify con- and descriptive character and investigate environ- sistent patterns and relationships between variables mental issue in general (without some specific as- or themes” (Julien, 2008). Content analysis is ap- pect) the first stage of our research was detailed propriate considering that provides reducing data selection of papers that are essentially focused on and making sense of them—of deriving meaning. relationship IS and environmental sustainable de- This research method seeks to analyze published velopment. Each paper is presented with the topic information systematically, objectively and reliably and the approach adopted (Table 1.). (Guthrie and Parker, 1990). Content analysis has From this conceptual matrix, we can identify been commonly used in the literature to evaluate that the most reviewed papers are focused on envi- the extent of disclosure of various items (Hackston ronmental impacts of IT/S and this is expected and and Milne, 1996). Content analysis include gather- parallel with our research findings that the major- ing data and codifying qualitative and quantitative ity of studies examine and analyze environemntal information into previously defined categories in issue in a broader context. Furthermore, five of re- order to derive units as specific patterns for ana- viewed research papers investigate both environ- lyzing and reporting of results. To develop a com- mental impacts and innovation-related categories. prehensive conceptual framework that should be This mutual overlapping between categories is adressed by further IS research, we divided this also another reason for necessarily comprehensive research into two steps to: 1. identify and collect and multi-faced approach to environmental issue. adequate IS and environmental sustainability litera- However, we noted that there is disproportion- ture and 2. content analysis of gathered literature ately small number of the research papers related (unitization and coding). The initial intention was to to the System Development Life Cycle. Given the develop the most prominent categories from the ob- importance of the system development for the en- tained research papers. In this way, major challeng- vironmental strategy implementation, this study es of the relationship between Information systems underlines this research gap and aims to direct and and environmental sustainability will be detected. encourage the further research. Content analysis However, after papers gathering and literature re- of these papers resulted in developed concep- view, the obtained text was unitized and coded. tual framework consists of three main categories. Therefore, the next phase was the selection of a unit These categories are defined as Environmental im- of anlaysis - unitization of literature in smaller parts pacts of IT/S, Information systems-Inovativeness- based on “thoughts units”. Regarding basis of the Environmental sustainability triangle and Sustain- coding, in the literature a debate has arisen whether able information system development. use words, sentences or some parts of pages. The Analysis of the categories are shown in Table 2. most content analysis use sentences as the basis for coding and we preferred this approach. The ob- 5. Analysis and Discussion tained data were codified into various groups or categories based on selected criteria. Then, texts were 5.1. Environmental Impacts of the IT/S imported into Nvivo software, produced the coding scheme and conducted the coding process based on Environmental sustainability of IS refers to the the gathered literature. This type of category devel- role of IS in environmental sustainability as both opment assume that frequency determines the im- problem and solution. This two-way connection portance of the subject matter. between IS and environmental sustainability has been disccused by a number of IS authors. Most of them made a clear distinction between positive and 4. Research results negative impacts. Specifically, it is a classification As already indicated, the object of content anal- of impacts, depending on the nature of their influ- ysis is existing literature focused on IS and envi- ence on the environment. In this regard positive ronmental sustainability as primary research topic. impacts represent potential source of solutions for

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Table 1. Research papers review Category Research paper Environmental impacts Innovativness SDLC Atkisson and Hatcher, 2001. X Benitez-Amado et al., 2010. X Berger, 2007. X Bianchini and Rajamony, 2004. X Chen et al., 2006. X Chen et al., 2008. X Dangelico and Pujari, 2010. X DeSimone et al., 1997. X Dewet and Jones, 2001. X Dibrell et al., 2008. X Elliot, 2011. X X Gladwin et al., 1995. X Higgs et al., 2008. X Huang, 2009. X Ifinedo, 2007. X X Jain and Wullert, 2004. X Jenkin et al., 2011. X Mata et al., 1995. X McCalley, 2006. X Melville, 2010. X X Midden et al., 2007. X Ottman et al., 2006. X Perkins and Neumayer, 2008. X Rai et al., 2006. X Rikhardsson et al., 2002. X X Russo and Fouts, 1997. X Saha and Darnton, 2005. X Shaft et al., 1997. X Sharma and Vredenburg, 1998. X Shepherd et al., 2001. X X Tarafdar and Gordon, 2007. X Verhoef and Nijkampô, 2008. X Watson et al., 2010. X Wilson and Dowlatabadi, 2007. X Note: The content analysis was focused on these research papers that are primarly oriented on one of three categories. environmental issues. Among the positive impacts, ing human and companies’ awareness of environ- which are commonly called role of IS, as the most mental issues and IS role in shaping beliefs about prominent ones are: standardizing, monitoring, cap- the environment. The researchers have emphasized turing and utilizing data and metadata, technology- various impacts and accordingly defined relation- enabled and innovative solutions, improvements in ship between IS and environmental sustainability. supply chain and logistic, energy consumption ef- Thus, Melville (2010) pointed out that information ficiency, reporting purposes especially in encourag- systems research can make an important contri-

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Table 2. Conceptual framework The most common are: standardizing, monitoring, capturing and utilizing data and metadata, technology-enabled and innovative solutions, improvements in supply chain and logistic, energy Positive consumption efficiency, reporting purposes especially in encouraging human and companies’ awareness of environmental issues and IS role in Environmental shaping beliefs about the environment. impacts The three main categories: 1. Manufacturing (emissions of acids, metals, voltile organic compounds,...) that is often energy intensive and uselarge Negative amounts of water for cooling and raising. 2. Use of IT/S equipment (significant energy consumption) 3. Disposal waste Product innovation End product improvements Inovativness Process innovation IT/S applications, wastage minimizing e.g. Sustainable IS Incorporation of environmental Development requirements in SDLC stages bution to knowledge at the nexus of information, literature environmental impacts are usually con- organizations, and the natural environment; to the nected to environmental policies and sustainability development of innovative environmental strate- report. Namely, very small number of studies are gies; to the creation and evaluation of systems that based on concrete and quantifiable data. Therefore, break new ground in environmental responsibility; further research should be more practice-oriented and, ultimately, to the improvement of the natural and based on actual arrangements that will contrib- environment. Additionaly, Information systems ute to environmental improvements and sustainable may play an important role in shaping beliefs about development. the environment, whether moderating existing beliefs formed by organizations or society, or perhaps 5.2. Information systems - Inovativeness - mediating them. This is a significant role with re- Environmental sustainability triangle spect that the environmental issue involves human behavior and the broader social and organizational Recently, the relationship between IS, inova- context. Considering that environmental sustain- tiveness and environmental sustainability is one of ability is multi-stakeholder issue, reporting pur- the most intriguing and important issue among IS poses of IS are increasingly important. The lack of researchers. The most recent literature on the busi- information to enable and motivate economic and ness value of IT/S seems to have explained these behaviorally driven solutions is one of the prob- relationships through IT/S-enabled organizational lem that should be adressed by IS role in sustain- capabilities (Rai et al., 2006). In the context of link able development (Watson et al., 2010). When it among inovativeness and environmental sustain- comes to negative environmental impacts, then we ability, inovativeness is considered as capability to have categorized them into the three main groups: implement environmental strategies and practices, 1. Manufacturing (emissions of acids, metals, volt- and reduce and minimize environmental impacts. ile organic compounds,...) that is often energy in- This type of organizational capability is often en- tensive and use large amounts of water for cooling titled as „green management“ capability. Innova- and raising; 2. Use of IT/S equipment (significant tive companies which usually invest greater effort energy consumption) and 3. Disposal waste. In the in higher levels of reserach and development, it is

Volume 7 / Number 1 / 2012 427 technics technologies education management likely higher level of innovation in environmental waste reduction, implementing the Electronic Prod- field (Russo, Fouts, 1997). In addition, environmen- uct Environmental Assessment Tool (EPEAT), etc. tal strategies and their sucessful implementation Comprehensive environmental strategy should be depend on employees intiatives and participation. more proactive. Specifically, environmental sus- In the organization with culture that encourages tainability requires sincere and profound changes and supports inovativness, it is likely that employ- in business activities and processes, and it could be ees will generate new concepts, specific positive stated that includes Business Process Reingineer- changes, etc. Relationship between IT/S and inno- ing (BPR), since that means radical redesign of or- vativness and organizational performances are the ganizational business. That involves the “lean and focus of many authors. IT/S moderates many as- mean” way of doing business, but staying competi- pects of the process of bringing new problemsolv- tive. So, in order to prevent negative environmental ing ideas into use given that it determines the way impacts, environmental strategy should be included information is stored, transmitted, communicated, in IS development. Environmental requirements processed and acted upon, IT/S is an important but should be part of every stage of IS development. neglected means of facilitating the innovation pro- Thus, in the process of problem analyzing environ- cess (Dewett and Jones, 2001). IS is significantly mental requirements should be reviewed with all influential on establishing innovative environmen- other users requirements. In addition, design stage tal strategy and enhance its benefits. Creativity and could be improved in order to achieve sustainability development of new products and processes can be by selecting appropriate equipment with more en- encouraged by innovative IT applications. Among ergy efficiency, solutions that minimize and reduce innovation dimensions, the most notable are prod- the different types of waste such as hardware, space, uct innovation and process innovation. Green prod- equipment, etc. Namely, proper design should re- uct innovation has been recognized as one of the duce energy consumption (Bianchini et al, 2004). key factors to achieve growth, environmental sus- In line with this is Huang’s (2009) proposed revised tainability and a better quality of life (Dangelico SDLC, named Sustainable System Development et al., 2010). In business terms ‘green product’ or Lifecycle (SSDLC) which is based on traditional ‘environmental product’ are used commonly to SDLC expanded with sixth stage –disposal with the describe those that strive to protect or enhance the aim to increase transferability, reusability and re- natural environment by conserving energy and/or cyclability, and to reduce hazardous materials and resources and reducing or eliminating use of toxic the labor cost of disassembling and destroying the agents, pollution, and waste (Ottman et al., 2006). equipment. The incorporation of environmental re- Therefore, the future research should focus on the quirements in all five stages of SDLC opens new connection between IS, innovativeness and envi- possibilities in achieving environmental sustainabil- ronmental sustainability, considering that IS ac- ity. Environmental concerns need to be an integral celerates the innovativeness, indirectly through in- part of the development process from the begining, novative IT solutions and applications. Particularly, not an afterthought (Jain et al, 2002). Entering of the IS-related studies should be useful given that these requirements in the IS development process the structure and nature of this relationship is just implies a radical and effective change that means inherent issues that are the object of IS research. social, environmental and economic sustainability.

5.3. Sustainable Information Systems 6. Conclusion Development This paper investigates role of IS in achieving Most environmental strategies can be character- environmental sustainability. The intention was to ized as “firefighting” but not its prevention. Namely, develop the most prominent categories from the ob- given the complexity and transdisciplinary nature of tained research papers. In this way, major challeng- environmental issue, environmental strategy should es of the relationship between Information systems not be based only on pure reduction of energy con- and environmental sustainability are detected. The sumption, greenhouse gas emission reduction, IT environmental impacts of Information technology/

428 Volume 7 / Number 1 / 2012 technics technologies education management systems, Information systems-Inovativness-Envi- 11. Dangelico R.M., Pujari D. „Mainstreaming Green ronmental sustainability triangle and Sustainable Product Innovation: Why and How Companies In- Information Systems Development are recognized tegrate Environmental Sustainability“, Journal of Business ethics (95), 2010, 471-486. as the main categories. Therefore, this paper indi- 12. DeSimone, L. D., Popoff, F., and World Business cates the most prominent literature gaps, but also Council for Sustainable Development. 1997. „Eco- the most perspective and still insufficiently used Efficiency: The Business Link to Sustainable Devel- possibilities. Technologies, including or even, per- opment“, Cambridge, MA: MIT Press. haps, especially information technologies, represent 13. Dewett, T. And G.R. Jones „The Role of Informa- the source of potential solutions for environmental tion Technology in the Organization: A Review, problems. Hence, higher educational institutions, Model, and Assessment“, Journal of Management (7), 2001, 313-346. IS associations and respectful IS oriented journals 14. Dibrell C., Davis P.S., Craig J.B. „Fueling Innova- should use their significant position and influence tion through Information Technology in SMEs“, 2008, IS leaders and academics, but students to tackle this http://epublications.bond.edu.au/business_pubs/86 challenge and encourage research in this area. 15. Elliot S. „Transdisciplinary Perspectives on En- vironmental Sustainability: A Resource Base and framework for IT-enabled Business Transforma- References tion“, MIS Quarterly (35:1), 2011, 197-236. 1. Atkisson A., Hatcher R.L. „The Compass Index of Sus- 16. 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430 Volume 7 / Number 1 / 2012 technics technologies education management Geometric transformations of urban water contexts Key study: Four sequences of the urban water context in Sarajevo

Jasenka Cakaric University of Sarajevo, Faculty of Architecture, Sarajevo, Bosnia and Herzegovina

Abstract Introduction This research focuses on discussion about the Water presence in a certain space constitutes a phenomenon of geometric transformations of the fundamental generative factor for establishment urban water context in the manner in which they and existence of a city, but also for a transforma- should be discussed and applied by urban design tion of its morphological structure in time. The professionals. existence and changes are seen in the general im- The overall research strategy is based on the age of the city, at the borderline between organic creation of scientific-theoretical methods – means – natural and inorganic – man made surroundings, or rules for geometric transformations of the urban at the integration of water with the built and non- water context and quality control of their applica- built parts of the urban structure, and also in parts tion in practice. Regarding preparation of redesign- of the city where water is used artificially to im- ing of areas with water, urban designers’ ideas are prove the aesthetical appearance of the parts-se- based on the selection and application of the afore- quences of the city. The aforementioned premises mentioned scientific-theoretical methods with the make the basis of this research, which focuses on aim of creating functional and human-acceptable the phenomenon of geometric transformations in- water areas within the city. Four examples of urban duced by water influence on the urban context, in water contexts in Sarajevo have proved in practice the manner in which they should be discussed and that a careful selection and application of these the- applied by urban design professionals. The argu- oretical methods in geometric transformations can ments presented here refer to both aesthetic per- improve the functional and aesthetic-perceptual ceptual, as a general, and urban architectural, as quality of the spatial sequences near water. Urban the dominant component of the profession. designers are expected to show creative sensibility In order to better understand the whole research in selecting the appropriate rules, because their geo- conducted in this work we consider it important metric transformations of the urban water context to, right at the introduction of the elaboration, give are always subjected to evaluation by people who theoretical explanation of the key terms that will are actually the end-users of such projects. be used. The overall research findings constitute a con- By introducing the term of the urban water contribution to the theory of urban design, favoring text we want to point out the theoretical-practical the application of new scientific-theoretical meth- aspect of “reading” unity of water manifestation ods of urban-architectural planning and designing and urban-morphological space structures. In the of new city areas, and also redesigning of the ex- explanation of this term that essentially relates to isting urban water contexts. phenomena of the water integration in the urban- Key words: urban water context, urban trans- morphological structured system we start with the formation, means or rules of geometric transfor- statement that there is no difference between land mation, sequence. corpus and spatial segment of water existence. Therefore we hold on to the fact about the character of this specific space of biosphere and its un-

Volume 7 / Number 1 / 2012 431 technics technologies education management disputed determination that water and the land/city of the idea on transformation. The strategy inspired are inseparable. Duality in interpretation, hereby by the referenced parameters, with the review of excluded, provokes idea of one phenomena ad- theoretical elaboration of geometric transforma- vantage over the other. The essence is in observ- tions, also includes evaluation of the existing spa- ing urban structures integrated with water in the tial arrangement of water and elements of the urban way that the image-surface-plain-mirror of water is structure as a specificgeometric order, which could identical to morphological mirror of city’s / land’s either be adjusted to the surrounding by means of relief. Therefore, theoretical understanding of the non-radical interventions, or transformed into com- water integration into urban structures is possibly pletely new geometric display [1]. Both solutions sublimed through one unique thesis; urban water mean spatial redistribution of water elements and context implies phenomena of continuity of the elements of the urban structure by applying one water presence in the city. This means that water’s or more theoretical rules (introduction of those is permanency in urban context represents conditional the aim of this research) of the following geomet- phenomena of its continuous presence in build and ric transformations: Compression, Rotation, Insert non-build city parts, whose space expressions are and Transfer. By implementing the referenced rules, influenced by water’s direct and indirect activities. variations in spatial geometric relations between Transformation phenomena represents changes water and urban structure elements affect the final in (geometric) shapes, appearances, states and prop- human mental perception of the possibility of their erties. In the context of geometric transformations union, which is better if it allows a certain diversity of urban structures integrated with water we can of free natural or pre-determined directions of water talk of the existence of the two parallel dimensions within the sequences of the urban water context. In – water and land / city, with mutually conditioned both cases, an urban designer, by using previously existences. Being the main force of urban transfor- selected means or rules of geometric transforma- mations water inevitably “questions” settled social, tions, comes up with an articulated accumulation of economical and cultural usage of city spaces and “images” of the sequences of the urban water con- changes cultural landscapes creating new geo- text, with visible functional and aesthetic-perceptual metric shapes (parts-sequences) of urban tissue. objectives regarding the realization of the redesign. This way water transforms identity components Therefore, we feel entitled to claim that achieving of urban context, whose particular energies are be- a good-quality space, as a consequence of the real- ing mapped onto space, on inherited geometrical ization of ideas on geometric transformations of the shapes, without erasing them. Essentially the water urban water context, or their parts, depends on the phenomena creates unique fragmentations of the general sensibility of the urban designer, the same new geometrical transformations, picturing particu- as the lack of such sensibility can cause a complete lar act of “new written” urban water context, and in degradation. whole becomes a part of sensational experience and Given the above said, the objective of this redirect human observation. This is how the aims of search is to establish scientific-theoretical meth- geometric transformations of urban water contexts ods – means or rules of geometric transformations, determine aspirations within concrete city’s reality to present their procedures here and to formulate that is saturated by overlapping of real-physical and them as design methods which would be available inner-human with unbroken craving for clarity of to urban designers when selecting the techniques interventions that, besides new “images”, are be- for realization of human-acceptable ideas on trans- coming places of enjoyment [2]. formations of urban water contexts. This study Professionals, i.e. urban designers, have the key aims to indicate the possibility to apply in practice role in the process of creation of the ideas as to how the referenced scientific-theoretical methods. The to carry out geometric transformations of the urban overall findings of the conducted research provide water context. They consider water to be a basis for a possibility to read the phenomenon of geomet- every creative action, whereas the result is obtained ric transformations of urban water contexts with from a thorough analysis of an urban context in a scientific-theoretical methodology in a manner which water appears as a phenomenon - generator which can become useful in planning and design-

432 Volume 7 / Number 1 / 2012 technics technologies education management ing of new city units by means of redesign of the able spatial sequences with water. The following existing urban ensemble. text discusses the theoretical aspect of the four variants of the organizational principles of the wa- Methodological approach to design of ter element and urban structure recomposition [3]. geometric transformations of urban water Presented four methods (variants) are just one of contexts explained by means of a case study many possible theoretical approaches to redesign of urban water contexts. Theoretical level – means or rules of geometric Compression is one of the theoretical means or transformations rules of geometric transformations, by which in- Introduction of the scientific-theoretical meth- dividual elements, such as water and parts of the ods when approaching redesign of urban water urban structures, tend to become a whole, while re- contexts enables a creation of indicators that point ducing their precisely determined segments. How- out the perceptive-aesthetic “consequences” of the ever, these elements do not lose on the quality of influence of water phenomenon on the environ- synergetic “information” that they emit into the sur- ment. That is why it is important to theoretically rounding. Thence ensues that algorithmic connec- establish the methods of geometric transformation between certain parts of the water area and/or tions of urban water contexts as means of the im- elements of the urban structure, implies their mutual provement of human perception of the water and action which affects the positive human perception urban structures integration, following spatial con- of the transformed (sequences of) urban water consequences of the aesthetic, artistic and expected texts. Every geometric transformation carried out utilitarian importance of the conducted redesign. by the theoretical rule of Compression, is seen as a The essence of this theoretical “strategy” is in the rearrangement of images (parts) of the urban water fact that water, as already stated in the Introduc- context that man has already accepted. However, if tion, creates singular fragments of urban context it is properly reversible, that is, if human brain can transformations, that, when combined, become a positively accept such spatial recomposition, then part of sensational experience and direct percep- the Compression, which we selected to use in the tions of humans. That is how “the new reality” of design of ideas on geometric transformations, is (the parts of) the city with water becomes embroi- seen as a positive treatment in human mental ac- dered by overlapping of real-physical and inner- ceptance of the redesigned sequences of the urban human, through inventions creating new spaces water context (Figure 1). where the man wants to be in [2]. We believe that designing spaces near water that are pleasant to humans can be accomplished by applying of the theoretical methods of geometric transformations on the practical level. Appli- cation of the means or rules of geometric transformations of the urban water context implies a spatial recomposition of water elements and urban structure elements, which coexist, but each with their own variation of the principal idea. At the stage of redesign of the spatial sequences with water, urban designer's ideas are based on the selection of the theoretical organizational principle of the relevant spatial recomposition, in relation to which the aforementioned individual elements be- Figure 1. Schematic overview of means or rules come a unique system, with unique action plans. of geometric transformations: Compression The entire process of designing is based on urban of individual elements – water and parts of the designer's intuition, archetypes or habits, for the urban structure - for the purpose of creating a purpose of creating functional and human-accept- whole

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Rotation, which is another theoretical means or for water and urban surroundings to coexist after rule for geometric transformations, indicates that a the insertion of new volume, none of the elements certain points of urban structure elements have been (water, urban structure and inserted components rotated under the same angle, without any deforma- that connects the two) should not have a dominant tions around the rotation axis, which is water in role, which constitutes a pre-condition for humans this case. By means of this rule urban structure ele- to perceive their harmony with quality (Figure 3.). ments “move” along the direction of water movement. The movement is not actually real, but it is a human imagination and mental perception which can make us believe that urban water contexts are continuously changing, even though in reality they always remain at the same place. By using Rotation as a theoretical means or rule for designing ideas on geometric transformations, we can achieve a continuous change of static elements and improve human visual aesthetic perception of the urban water context sequences (Figure 2.).

Figure 3. Schematic overview of the theoretical method- means or rules of geometric transformations: Insert of new components to the existing urban water context

Transfer is a theoretical means or rule of geometric transformations by which the volume or action is transferred from one place to another. Within the context of a city sequence with water, volume Figure 2. Schematic overview of means or rules is every physical shape of the urban structure parts of geometric transformations: Rotation of urban next to or on the water, whereas action constitutes structure elements along the direction of water a space „manifestation“ of water, which appears movement as a constituent element of the referenced physical structure, determining its purpose. Transfer of Insert is a theoretical means or rule of geomet- volume and/or actions takes place when there is a ric transformations which helps an author of rede- desire for dynamism in human perception of water sign to add and to insert new initial components and elements of its urban surroundings. In that way into the urban water context sequence as a new it is possible to achieve diversity in human mental spatial element, which would enable functional perception of water, which may disappear in time and perceptual harmony of the water and urban due to human habits that they acquire regarding structure elements. Inserting a new geometric acceptance of sequences of the urban space with shape or component as a kind of new scene in a water. Opting for Transfer as a theoretical method movie implies adding additional space to the ex- - means of geometric transformation of the urban isting sequence of the urban water context. Unob- water context in the process of creating ideas on trusive arrangement of the new elements is essen- the redesign helps us achieve functional and aes- tial for humans to be able to properly perceive the thetic-perceptual quality of the city space with wa- harmony between the added volume and the exist- ter, which then motivates people to reside in such ing urban water context. This means that in order spaces (Figure 4).

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the river Miljacka has a key role in spatial organization of Sarajevo and it has determined its urban and spiritual identity. Namely, there had been 48 inhabited settlements by the Miljacka River before the agglomeration got its city character-the spatial frame and “power” to consolidate the line of separate settlements as the whole. Sarajevo arose here by Miljacka River, on its left bank, around dvor- saraj. Through the time, due to natural features of the ground and river presence, the city got its oblong longitude shape with two-sided developed banks just along Miljacka River. To minimize negative sides of such morphological shape, Figure 4. Schematic overview of the theoretical through the time, natural morphological amphi- method- means or rules of geometric transforma- theatres around have been included into primary tions: Transfer of volume and actions tissue of the city which made this dispersive action noticed today. During the long city existence The level of implementation – Key study on the river banks the only transformation of the The objective of the case study is to confirm the urban water context was conducted at the end of possibility of practical application of the theoreti- the 19th century by the Austro-Hungarian authori- cal methods – means or rules for spatial recompo- ties. That transformation included regulation of sition of water elements and urban structure when the Miljacka flow and creating quays on its banks designing ideas on geometric transformations of in the way that hasn’t changed so far. That is how the urban water context. Moreover, one particular small impetuous and capricious river strongly in- idea of redesign of the sequences of the urban wa- fluenced urban structure forming and gave the city ter context has been used here to show how urban its “image”. Finally, Miljacka River has inspired designers, by carefully selecting theoretical rules people to use its abundance, it has kept them on its for geometric transformations and implementing banks and it is today’s primary aesthetic percep- them in their redesign projects, can ultimately cre- tive element of urban promenade and the image of ate realistic and for humans perceptually-accept- the central part in Sarajevo. able spaces in the city with water. Aforementioned various influences of the The following text of this case study [4, 5] re- Miljacka River on the city and its inhabitants we fers to geometric transformation of four sequences consider the most significant urban and aesthetic of the urban water context in Sarajevo, at the loca- perceptive values of Sarajevo. So, they mustn’t tion ranging from Latinska ćuprija to the Skenderija be disturbed by radical interventions throughout Bridge. The key study of the area was made by the four sequences transformation of the urban wa- author in 2002, when the overviews of the existing ter context along mentioned location. By careful condition of the referenced area were created (Fig- selection of the theoretical methods in geometric ure 5). From that period on, and until the present day, recomposition of the water elements and urban certain changes have occurred: in Sequence A - the structure we consider important to emphasize the music pavilion and the Bakr Babina Mosque were beauty of the existing Miljacka flow without sever re-built, and the archaeological park was discovered artificial interventions that would take precedence next to the mosque; and, in Sequence D has begun over this phenomena. construction of a new bridge, following the install- Thus, the referenced area, used in this redesign ment of an architectural competition. Given the fact project (described by the case study), is located that the purpose of the case study is to confirm the in the central part of the city of Sarajevo. It has possibility of applying theoretical methods in prac- a rich cultural and historical legacy with distinct tice, we believe this note will be kindly accepted. values of the surroundings. Today, the right bank We chose this case study, primarily, because appearance of the Miljacka river, throughout all

Volume 7 / Number 1 / 2012 435 technics technologies education management four sequences, consists of a public road, narrow of the river was emphasized and the open public pedestrian corridor, flood walls, stone fence and a spaces and buildings, after they have been given continuous row of front facades of the buildings of new appearance and relevance, became mentally administrative and residential character and build- more appealing to people [6]. ings that belong to the city's authorities. Also, on The following text provides individual expla- the left bank of the river, going downstream from nations for every sequence regarding the selection the Latinska ćuprija bridge, we encounter open of means or rules of geometric transformations green space, connected further down with con- and consequences of their application in the urban tinuous facades and several buildings that require tissue of Sarajevo. demolition, whereas the entire space relevant here ends with a row of residential, residential- Sequence„A“ (from - to: Latinska ćuprija – administrative and buildings of the city's authori- the Ćumurija bridge) ties. There is wide pedestrian corridor along the left side of the river, excluding the part near the The Sequence A initiated the idea of landscap- Drvenija Bridge, and the flood walls are either ing the banks of the Miljacka River by planting a paved with stone or covered in grass (Figure 5.). row of trees. Landscaping the right bank could not Selection and application of the following be done by usual methods of tree planting along the theoretical methods - means or rules of geomet- river pedestrian zone due to its insufficient width. ric transformations: Compression, Rotation, Insert Therefore, the idea was to form a line of trees by and Transfer in practice, enabled functional and selecting proper theoretical means or rules of geo- visual aesthetic recomposition of the water ele- metric transformations – Insert and Compression. ments and urban structure. The principal idea on The Insert rule provides conditions for insertion of the redesign of the four sequences (besides the planter boxes with smaller-size trees, fixed at the individual interventions), which helped achieving river flood walls and oriented towards the water a continuity in the treatment and their perceptual in order not to disturb the pedestrians and traffic. harmony, was to landscape the right side of Mil- Trees planted in the above described manner con- jacka and to create walking areas with trees along firm the theoretical rule of Compression, showing the entire left bank. Such geometric transforma- harmony of the water and newly added elements tions of one part of the urban water context in Sa- – planter boxes with small-sized trees. rajevo did not disturb the ambient values and tradi- The width of the pedestrian path on the left side tion of cultural, historical and architectural legacy, of the Miljacka River is sufficient for realization of the visual aesthetic beauty and perceptive quality the landscaping idea, provided the Insert theoretical

Figure 5. Overview of the existing condition of the referenced area – four sequences of the urban water context in Sarajevo

436 Volume 7 / Number 1 / 2012 technics technologies education management rule is applied, that is, adding of new plants along the upper edge of the inclined grass wall of the river. The idea regarding the redesign of the At-mejdan Park proposes selection and application of all mentioned theoretical methods of geometric transformations – Insert, Rotation, Transfer and Com- pression. The Insert rule refers to insertion of new space – music pavilion (which stood here from 1911 until the World War II) into the central part of the park, which would comprise a café and terrace for small concerts [4]. Insert and Compression are intended to be used in the redesign of one part of the walking area with the line of trees, along the river. The Insert rule means construction of a transparent semi-elliptical structure, which would serve as a symbolic entrance to a new setting of the At-mejdan part, combining the old times with the contemporary ones. Along the very promenade, selection and application of the Compression theoretical rule, enables visual connection between the water and inclined grass wall of the river with planter boxes arranged in a cascade manner. The new scene of the park is made complete with the above mentioned ellipse – symbol of a hippodrome – representing a reminiscence of the tradition of horse races from early 20th century, after which the park was named in the first place [4]. The following theoretical rule for geometric transformations, Rotation, enables Figure 6. Layout of the Sequence A before perceptual rotation of the static form of the park by transformation (without the music pavilion, the inserting this symbol, whose dynamism is accentu- mosque and the archaeological park, witch were ated by breaks which create a continuous line of pe- built and discovered after the year 2002) Figure destrian promenades. The following theoretical rule 6a. Layout of the Sequence A following the selec- refers to the transfer of the roadway from the cen- tion and application of the theoretical means or tral zone of the park to its right side, which enables rules of geometric transformations of urban wa- preservation of the continuity of open green space ter contexts along the water (Figure 6 and Figure 6a, Figure 7, Figure 8).

Figure 7. and Figure 8. Three-dimensional computer simulation of the ideas on redesign of the space pertaining to the Sequence A

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We believe that selection of the theoretical methods- means or rules of geometric transformations: ods- means or rules of geometric transformations, Insert and Compression, the same way as this was and their application on the specific redesign proj- do ne in Sequence A (landscaping the flood walls ect of the space covered by the Sequence “A”, en- by planting small-sized trees into the planter box- abled creation of a new functional and aesthetically es), formation of the line of trees continues. Also, perceptive space in the city with water, which many the Insert rule enabled establishment of a harmony visitors find very appealing. Furthermore, the ex- regarding the front facades on the right bank by isting values and tradition of the cultural, historical inserting a new residential building. and natural legacy were remained intact, trying to Selection and application of all of the referenced preserve the spirit of the old times, but in the con- theoretical methods - means or rules of geometric text of the new era. By the integration of natural- transformations, more precisely, Insert, Transfer, the river and green vegetation and new- artificial Compression and Rotation, helped in achieving a elements, the set goal was accomplished: the func- continuous green promenade – with a line of trees tional context of the banks was improved by bet- and pedestrian communications, starting from the ter offer of described facilities to visitors and, more At-mejdan park. Near the school building, the Insert important, the visual aesthetic perceptive quality of theoretical rule secured the continuity of the walk- the part of Miljacka corridor was enhanced. Hav- ing zone by inserting a cantilevered pedestrian cor- ing reviewed the numeric indicators of water rep- ridor. Simultaneously, the aforementioned has the resentation and the presence of the urban structure Transfer theoretical rule applied as well, because the elements at the area referred to as Sequence “A”, edge of the bank was moved and the walking path before and after the application of the new means was pushed outward towards the river. In order to of geometric transformations, a conclusions arises keep the line of trees uninterrupted, at the bottom that space recomposition of the water elements and of the flood walls concrete „barrels“ with trees are urban structure elements did not fall outside the ini- placed, and the cantilevered expansion is perforated tially set action limits. Therefore, we have proved as to enable the trees „to get through“ those perfora- that it is possible to improve the functional and aes- tions and form a continuous line of trees. This idea thetic-perceptual quality of the referenced sequence is a reminiscence of the old Sarajevo tradition, dat- by using the established theoretical methods of geo- ed late 19th and early 20th century, when beer was metric transformations, but without changing its kept in large barrels, which would later on be trans- original contours (Table 1). formed into decorative elements – planter boxes [4]. By inserting the „barrels“ with trees at the bottom of Sequence „B“(from-to: the Ćumurija bridge – the Miljacka River wall and expanding the walking the Drvenija bridge) promenade over the river, we implemented the theoretical rule of Compression, which helped us achieve On the right bank of the Miljacka river, by the harmony between the new elements and the water. selection and application of the theoretical meth- Furthermore, by means of the Rotation rule percep-

Table 1. Numeric indicators of the relation of water and urban structure elements at the area referred to as Sequence A, before and after the application of the theoretical methods-means or rules of geometric transformations Existing condition Transformation proposal Difference Surface [m² and %] [m² and %] [m² and %] Water 4908 18,53 4645 17,54 – 263 – 0,99 Covered by buildings 7087 26,75 7462 28,17 + 375 + 1,42 Covered by roads 4423 16,70 3012 11,37 – 1411 – 5,33 Pedestrian zones 2189 8,26 2879 10,87 + 690 + 2,61 Grass plots 7787 29,40 8068 30,46 + 281 + 1,06 SEQUENCE „A“ SEQUENCE Planter boxes 97 0,37 425 1,61 + 328 + 1,24 Σ 26491m² 100% 26491m² 100% 26491m² 100%

438 Volume 7 / Number 1 / 2012 technics technologies education management tive dynamism of the entire form was achieved by In this Sequence, the same as in the previous one, making the perforations on the cantilever. The space selection and application of the theoretical means or in front of the residential villas and Synagogue, by rules for geometric transformations enabled creation means of the Insert theoretical rule, were added a of new functional and aesthetically and perceptually new beauty, which is from the pedestrian zone sepa- improved areas along the water. The existing ambi- rated by small fence and special line of trees (Figure ent values were preserved and overview of the cul- 9 and Figure 9a, Figure 10, Figure 11). tural legacy tradition was also made emphasizing, in the foreground, improved visual- aesthetic- perceptive quality of the part of the river Miljacka with its banks enriched by new artifact facilities for pedestrians. The table with numeric indicators which show the amount of water and urban structure elements proved that functional and visual-aesthetic interventions in the referenced area by means of geometric transformations did not distort the original contours of the Sequence “B” (Table 2).

Sequence „C“(from - to: the Ćumurija bridge - the Drvenija bridge) On the right bank of the Miljacka river, by means of the Insert and Compression theoretical rules, we continue with landscaping the flood walls, in the same manner as mentioned in the previous two Se- quences. The Insert rule is applied in terms of planter boxes with trees being fixed to the flood walls, whereas the Compression rule enabled achievement of the functional and aesthetic-perceptual harmony of the water and these embedded elements. The line of trees and walking zone, which starts at the At-mejdan Park, continues on the left bank of Figure 9. and Figure 9a. Layout of the Sequence” Miljacka, again by means of the Insert rule, that is, by B” before and following the redesign by applica- adding new plants along the edge of the stone fence. tion of the theoretical methods- means or rules Selection and application of the theoretical of geometric transformations of the urban water means or rules of geometric transformations, more context

Figure 10 and Figure 11. Three-dimensional computer simulation of Sequence “B” following the application of the theoretical methods- means or rules of geometric transformations of urban water contexts

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Table 2. Numeric indicators of the water presence and of the urban structure elements in the area referred to as Sequence “B”, before and after the geometric transformations Existing condition Transformation proposal Difference Surface [m² and %] [m² and %] [m² and %] Water 5175 26,75 5007 25,86 – 168 – 0,89 Covered by buildings 7411 38,30 8400 43,41 + 989 + 5,11 Covered by roads 4157 21,48 3066 15,85 – 1091 – 5,63 Pedestrian zones 729 3,77 1135 5,87 + 406 + 2,10 Grass plots 875 4,52 1027 5,31 + 152 + 0,79

SEQUENCE „B“ Planter boxes 0 0 168 0,87 + 168 + 0,87 Paved surface 1003 5,18 547 2,83 – 456 – 2,35 Σ 19350m² 100% 19350m² 100% 19350m² 100% precisely application of the Transfer rule, caused al-aesthetic composition of the fountain was created the change in the appearance of the street on the by means of the Rotation theoretical rule, whereby left bank of the river, near the Čobanija Bridge. The we achieved a symbolic and perceptive rotation of applied rule refers to removal of several existing the static element around the playful water activity buildings and construction of a new administrative- (Figure 12 and Figure 12a, Figure 13, Figure 14). residential block of buildings, and expansion of the parterre and transfer of the walking zone line – line of trees, to the internal courtyard of the buildings, by which a smaller continuous and open public space was obtained. On the remaining free surface of the Sequence we used the Insert rule to introduce a modern theatre – the Arena Stage, which is the space used for experimental arts. Implementation of the Compression rule is achieved by lowering the referenced structure by one storey, which is dug into the ground, which prevented it from disturbing the existing vertical line of the continuous line of front facades from the neighboring Sequences. Fur- thermore, there is an underground connection with the existing Academy of Fine Arts on the right bank of Miljacka, and their over-ground communication by means of the pedestrian bridge. Combination of all geometric transformation theoretical methods – Insert, Compression, Transfer and Rotation, contribute to the playfulness of the entire Sequence, in which we inserted a fountain on the very river, but only with a small arc of water because of the nearness of the river banks. Having embedded this decoration, we achieved a perceptive harmony between water and structures along the entire area of the Sequence C. Furthermore, the line of the open space in front of the Arena Stage was perceptively moved towards the right bank of Miljacka. In such Figure 12. and Figure 12a. Layout of the Se- manner, we inserted an approach square to the the- quence “C” before and after redesign performed ater, which, due to lack of space, cannot be construct- by means of the geometric transformation rules ed in any different way. Finally, the spatial and visu- in the urban water context

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Figure 13 and Figure 14. Three-dimensional computer simulation showing geometric transformations carried out on the territory of the Sequence “C” The same as in the previous two Sequences, of trees referred to in Sequence “A”. This does not the table showing numeric indicators of the rela- exclude the possibility of their connection with tion of water and urban structure elements, before the Vilsonovo šetalište further downstream and and after the implementation of the transforma- Bentbaša upstream, but these end points only con- tion theoretical rules, proved that all interven- stitute the boundaries of the area relevant for this tions have been carried out within the initially set case study. By using the geometric transforma- boundaries of the referenced space in Sequence tion theoretical rules in the redesign of this urban “C”. Functional and visual-aesthetic zones were water context, more precisely by using the Insert created along the water, preserving the values of and Compression rules in the same manner as in the existing surroundings and, possibly more than the previous three cases described above, we re- in previous sequences, by the described functional designed the right bank of the river by inserting aesthetic interventions in water, we emphasized planter boxes with trees and fixing them onto the visual perceptive quality and beauty of the river, flood walls, whereas the continuous walking zone and the importance of the Miljacka river as a de- – line of trees reaches its end on the left bank. Be- terminant of spiritual identity of the central part of sides the line of trees, the left bank has also been Sarajevo was underlined (Table 3). enriched with planter boxes with decorative trees, fixed in a cascade manner into the inclined grass Sequence „D“(from - to: the Čobanija bridge wall of the Miljacka river. Both of the mentioned – the Skenderija bridge) theoretical rules of geometric transformations have been applied here, by which we achieved Sequence “D” is the final point of the process perceptive harmony between the embedded ele- of continuous landscaping of the river flood walls ments and water. and formation of the pedestrian promenade – line Table 3. Numeric indicators of the water presence and of the urban structure elements at the area referred to as Sequence “C”, before and after the geometric transformations Existing condition Transformation proposal Difference Surface [m² and %] [m² and %] [m² and %] Water 6227 46,93 6154 46,38 – 73 – 0,55 Covered by buildings 2619 19,74 3143 23,69 + 524 + 3,95 Covered by roads 1980 14,92 1456 10,98 – 524 – 3,94 Pedestrian zones 632 4,76 956 7,21 + 324 + 2,45 Planter boxes 73 0,55 219 1,65 + 146 + 1,10 SEQUENCE „C“ Paved surface 1739 13,11 1342 10,12 – 397 – 2,99 Σ 13270m² 100% 13270m² 100% 13270m² 100%

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The biggest intervention in this area is con- retical rule, that is, by expanding the external lines struction of a bridge heading the Radićeva street, of the bridge we came up with two expansions for with appropriate selection and combined applica- pedestrians who are just crossing the bridge, with- tion of all theoretical methods of geometric trans- out spending any time at the square. The results formations – Insert, Compression, Rotation and of such expansion are two openings (one opening Transfer. The bridge is inserted here as an entrance at each bank), which lightened the heavy bridge to the Academy of Fine Arts. This intervention de- structure, but also established a metaphoric con- manded application of the Compression theoreti- nection: man-water-ground (Figure 15 and Figure cal method, which is seen in two ways: functional 15a, Figure16, Figure17). and visual-perceptive: a) connection between the The table of numeric indicators of the repre- bridge and open space and b) harmony of the wa- sentation of water and urban structure elements ter and embedded urban structure elements. The before and after the geometric transformations bridge design is imagined to serve as an amphithe- shows that the interventions conducted in the area ater, and it is covered by a semi-transparent mov- referred to as Sequence “D” did not cross the lines able roof-like projection. This roof is the result of of the initially set action limits. Therefore, spatial the selection and application of the Rotation theo- recomposition of the basic elements has been car- retical rule, because the possibility of opening and ried out: of water and part of the urban context, closing it (when required) emphasizes the percep- which did not disturb any of the existing values of tive dynamism of the massive static form of the the surroundings, and still resulted in the design bridge – square. By means of the Transfer theo- of a functional and visual aesthetic perception of

Figure 15. and Figure 15a. Sequence “D” – layout of the referenced area before and following the redesign by the application of the theoretical methods- means or rules of geometric transformations of urban water context

Figure 16. and Figure 17. Sequence “D” – three-dimensional computer simulation of the conducted geometric transformations (The bridge presented on this figures was our proposal for an open architectural competition.)

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Table 4. Sequence „D” – Numeric indicators showing the relation between the water amount and presence of urban structure elements before and after the geometric transformations Existing condition Transformation proposal Difference Surface [m² and %] [m² and %] [m² and %] Water 15569 61,84 14873 59,07 – 696 – 2,77 Covered by buildings 4206 16,71 5582 22,17 + 1376 + 5,46 Covered by roads 2101 8,35 1728 6,86 – 373 – 1,49 Pedestrian zones 1420 5,64 1047 4,16 – 373 – 1,48 Grass plots 1791 7,12 1327 5,27 – 464 – 1,85 SEQUENCE „D“ Planter boxes 92 0,37 622 2,47 + 530 + 2,10 Σ 25179m² 100% 25179m² 100% 25179m² 100% one part of the urban water context in Sarajevo. of urban water contexts. Based on the order of By that, the initial idea and the goal of the ap- the activities presented in such a manner, another plied geometric transformations have been car- strategy was created, that will be available to ur- ried out: the visual aesthetic perceptive expression ban designers in the process of design of transfor- of the part of the River Miljacka is significantly mation ideas. This strategy refers to the analysis emphasized and improved in quality. Added new of finalized programs of geometric transforma- artificial elements essentially improved functional tions of the urban water contexts and proposed context which is the use of the river and its banks relations of water and urban structure elements as that proves that our main aim is the benefit of a starting points in creation of scientific-theoretical human-visitor (Table 4). methods for the purpose of future transformation designs. In the first case, scientific-theoretical Research findings – Comments methodology frame constitutes a starting point of the program for realization of the ideas regard- A precondition for a successful implementation ing geometric transformation of the urban water of geometric transformations of urban water con- contexts, whereas in the second case it is its result texts and creation of new spaces appealing to man that matters. We believe that this final conclusion is based on the scientific and theoretic analyses on constitutes a significant scientific contribution to spatial relations between water and urban struc- this research. Our conclusion is that both strate- ture elements, and on the practical application of gies regarding geometric transformations of the those findings in realization of the redesign ideas. urban water contexts, regardless whether they are In this study, we created methods – means or rules a starting point or results of the scientific-theoret- of geometric transformations: Compression, Rota- ical analyses, lead to many program transformation, Insert and Transfer to be used as a basis for tions (sequences) of the urban water contexts and scientific-theoretical analyses of spatial relations slowly towards the constructed reality. of urban water context elements. Upon the con- The case study analysis established that urban ducted case study, which tested possible ways of designers, by carefully selecting theoretical meth- their practical application in the design project ods of geometric transformations and applying documentation, we concluded that it is possible to them in redesign projects can improve the overall define two strategies which urban designers can quality of the city areas near water. This conclu- use to create spaces near water that would be re- sion is based on the tables of numeric indicators alistically and perceptively appealing to man. We showing how much water is represented in rela- saw that the first strategy begins with theoretical tion to the urban structure elements before and research on spatial relations of water and urban after the application of the geometric transforma- structure elements in order to come up with ap- tion rules in all four Sequences of the urban wa- propriate directions for selection of the methods ter context. Based on this overall overview of the - means or rules of geometric transformations as indicators we can conclude that implementation of starting points in the future programs of redesign the theoretical methods in realization of redesign

Volume 7 / Number 1 / 2012 443 technics technologies education management ideas does not disturb the frames of the initially Conclusion set action limits. Thereby we proved that by us- Analysis of the existing arrangement of water ing these new methods of geometric transforma- and urban structure elements provides urban de- tions it is possible to improve the functional and signers with a possibility to make decisions on se- visual-perceptive quality of the areas along the lection and application of appropriate theoretical water without changing their existing contours methods - means or rules of geometric transfor- and values, and that it is possible to significantly mations for the purpose of creation of preliminary improve aesthetic component of (the part of) the and final design documentation for the redesign water corridor in the city core even without radical of urban water contexts. Therefore, the entire re- interventions in urban water context transforma- search strategy in this paper is based on formation tions. We can freely say that this is the only way of these methods and verification of the quality of to accentuate the undisturbed context of individual their application on specific locations in Sarajevo. sequences and preserve their own standards and Based on the analysis of the findings regarding ap- compositional values within a unit governed by plication of the means or rules of geometric trans- expediency and aesthetic-perceptual harmony of formations applied on the referenced example, it functionally consistent structural forms. There- has been concluded that the urban water sequenc- fore, we feel entitled to claim that four proposed es were affirmed as adequately redesigned in the examples are motivating and should be a solid sphere of positive human perceptions. Therefore, contribution for an open architectural competition an urban designer is expected to show a remark- in future, related to advance development of the able spiritual-creative sensibility when selecting central area of Sarajevo (Figure 18 and Table 5).

Figure 18. Layout of all four Sequences – redesign performed by means of the geometric transformation rules in the urban water context Table 5. Overall overview of numeric indicators of the representation of water and urban structure elements in all four sequences of the urban water context in Sarajevo before and after the application of the theoretical methods-means or rules of geometric transformations Existing condition Transformation proposal Difference Surface [m² and %] [m² and %] [m² and %] Water 31879 37,84 30679 36,40 – 1200 – 1,44 Covered by buildings 21323 25,30 24587 29,17 + 3264 + 3,87 Covered by roads 12661 15,02 9262 10,99 – 3399 – 4,03 Pedestrian zones 4970 5,90 6017 7,14 + 1047 + 1,24 Grass plots 10453 12,40 10422 12,37 – 31 – 0,03 water context Planter boxes 262 0,31 1434 1,70 + 1172 + 1,39 Paved surface 2742 3,26 1889 2,24 – 853 – 1,02 Four sequences of he urban Four Σ 84290m² 100% 84290m² 100% 84290m² 100%

444 Volume 7 / Number 1 / 2012 technics technologies education management adequate transformation rules, because he/she is Corresponding author a creator of the final outlook (sequences) of the Jasenka Cakaric, urban water context, where all functional and aes- University of Sarajevo, Faculty of Architecture, thetic-perceptual objectives of the redesign idea Bosnia and Herzegovina, become visible. E-mail: [email protected] The fact that there is no to many books which comprises both scientific and theoretical analysis of samples and consequences of the water-induced geometric transformations of (parts of) the city indicates that this research has a particular contribution to science. Therefore, we believe that the overall findings obtained upon the conducted research constitute a contribution to the theory of urban design regarding application of the new scientific methods in urban-architectural planning and quality of design of new city units, but also in the redesign of the existing urban water contexts.

References 1. Hamidović, M. (2000), Gramatika toposa Bosne, Muzej grada Zenice, Zenica 2. Merlau-Ponty, M. (1990), Fenomenologija percep- cije, Veselin Masleša–Svjetlost, Sarajevo 3. Tschumi, B. (2004), Arhitektura i disjunkcija, AGM, Zagreb 4. Prstojević, M. (1999), Zaboravljeno Sarajevo, Autor, Jukićeva 136, Sarajevo 5. Skarić, V. (1937), Sarajevo i njegova okolina od najstarijih vremena do austrougarske okupacije, Iz- danje opštine grada Sarajeva, Štamparija „Bosanska pošta“, Josip Bretler, Sarajevo 6. Elin, N. (2002), Postmoderni urbanizam, Orion art, Beograd 7. Rowe, C. (1996), As I was saying: Recollections and Miscellaneous Essays (Volume three: Urbanistics), Massachusetts Institute of Technology 8. Panić, V. (1999), Aksiologika ili Logička argumen- tacija vrednosti, Zavod za udžbenike i nastavna sredstva-Beograd, Belgrade 9. Low, S. M. (2006), Promišljanje grada. Studije iz nove urbane antropologije, Naklada Jesenski i Turk, Zagreb 10. Caune, J. (2001), Estetika komunikacije, Clio, Bel- grade 11. Cook, P. (2003), The City, Seen as a Garden of Ideas, Peter Cook and The Monacelli Press, Inc. New York

Volume 7 / Number 1 / 2012 445 technics technologies education management Strategic Management and Crisis PR relationship

Nenad Peric, Milica Vasiljevic Blagojevic Metropolitan University, Belgrade, Serbia

Abstract wider public, social and civic responsibility of an organization and evasion of potential crises into In period of last two decades PR have become consideration. Descriptions end with the word one of essential elements of every organization “sustained” – which suggests duration (potentially that is in deeper relationship of the basic organi- unlimited) of activities. zational and functional elements of every organization integrated within society are the public relations-PR. The scope of the work is the public 2. Crisis PR and its place in strategic man- relations role in strategic management and it is agement based on the idea that crisis PR is one of the most “Good news travels far, but bad news even important elements for resolving crisis in positive farther” – Serbian proverb manner. The work presents organisational models and implementation of crisis PR. The public rela- Crisis is a serious obstruction of regular functions system and well positioned crisis PR plat- tions which responsible persons cannot overcome form are requirements for normal functioning of alone, and its nature, scale or consequences make every socialy responsible organization. Building it a matter of public interest. up those two are therefore irreplacable. Every crisis, however large or dramatic it may Key words: crisis PR, strategic managemet, be, essentially has a small number of participants. audience, communications, medias As in every common drama, we have protagonists (responsible persons), antagonists (persons who 1. Introduction oppose them), then there are innocent victims of someone’s sin (consumers, citizens), absent gods There is a multitude of public relations defini- of crucial importance (higher justice, that is, pub- tions, and British Institute of Public Relations of- lic interest) and finally the choir – (today it is the fers one of the most accepted: “Public relations media). If we would observe every crisis in this represent a deliberate, planned, and sustained ef- manner, many elements would become clearer fort to establish and maintain mutual understand- and more predictable. ing between and organization and its public”. In “According to certain estimates, 90 per cent analysis of this definition, the first word – deliber- of crisis situations in organizations are caused by ate, implies that a goal exists – to influence and internal operation problems, instead of sudden direct the course of crisis, in case of communica- natural disasters. By means of research it is often tion in the time of crisis. The word “planning” fol- possible to discover crisis focal points before they lows – telling us that it is an organized activity, appear as headlines on newspaper covers or break- which requires research and analysis – by predicting television news. Crises are not always unex- ing, analysing and construing public opinion, atti- pected. On the contrary – research of the Institute tudes and issues which might influence, in a posi- for Crisis Management revealed that only 14% tive or a negative manner, business activities and of crises in business world worldwide are unex- plans of an organization, to cause crisis, as well pected. Remaining 86% are so-called low burning as through preparation of crisis plans. Counselling crises, which the organization is aware of, but it of management at all levels of the organization does nothing (or does not do enough) to resolve regarding decisions on policies, course of activi- the issue. The research also showed that manage- ties and communications, taking the influence on ment causes 78% of crises.” [7]

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Prediction and detection of potential crises are risk valuation, communication planning, response main tasks of crisis PR within strategic manage- mapping-out, implementation plan mapping- ment, and the manner in which media interpret out, staffing, budgeting, creation of a network of crises can significantly influence their course, “friendly” media, editors and journalists, procure- resolution or wider effects. ment planning, preparation of terms and determi- The aforesaid leads us to a conclusion that cri- nation of success criteria. sis PR should anticipate crises and prepare plans Basic function of crisis PR is pre-emptive plan- in case of crises which are expected in relation ning. The load centre of pre-emptive planning is to organization’s area of activities. Crisis plans on recognition of the cause of occurrence of ex- should include measures, list of behavioural direc- traordinary situations, instead of rectification of its tions for an organization and its key individuals consequences. Within pre-emptive planning (risk in a given situation. The better this is done, the planning) extraordinary-crisis situations are anal- greater the chances are to control such crisis in ysed and interpreted and scenarios of their devel- its early phase. Besides, existence of crisis plans opment are formed. Top management / Board of implies training individuals holding positions Directors is then informed of potential crises, and which may be connected to potential crises first. manners of organization’s response are elaborated. In most cases, this refers to the management of an organization, but also to performers of organiza- 2. Organization of crisis PR within strate- tion’s working processes themselves. Hence, im- gic management provement of crisis communication is becoming an unavoidable activity of every organization and A system, a crisis PR network should be ini- its strategic management, particularly if it is con- tially formed as a list of potential hazards, with the nected to the society to a large extent, that is, if following basic determinants: it has great social responsibility. When crisis oc- –– most probable ways of development of a curs, a need appears for a large quantity of dif- certain extraordinary situation, ferent information. Investors, buyers, suppliers, –– responsible persons from the organization employees, media and other stakeholders wish to are to be appointed in order to be accountable learn why such crisis has occurred, how will the for crisis resolution-management. system deal with such crisis situation and whether –– detailed description of a communication business activity would be successfully continued model applied by all employees, as well as after crisis situation is over. specific elements for responsible individuals Planning procedure in complex systems, in ac- and divisions in a given situation. cordance with actual influence of all kinds of hazards, includes: Considering the specificity of operation of cri- –– planning in normal conditions (strategic sis public relations systems, it is necessary to form planning), and the following pre-emptive public relations plans –– planning in extreme conditions (operative within the whole strategic management: planning). 1. a plan to be implemented in the stationary regime of management, Strategic planning defines pre-emptive activi- 2. a plan to be implemented in case of increased ties, and it is implemented primarily through ana- awareness situation, lytic and logistic processes (threat analysis, regu- 3. a plan as a starting version in a crisis lations, protection, maintenance, inspection, edu- situation; cation), and operative planning defines concrete activities in conditions of occurrence and devel- A plan to be implemented in the stationary re- opment of an extraordinary situation. gime is most commonly formed as a long-term A full planning process in the basis of crisis PR plan, or a programme which includes a package of represents a large number of processes: determi- measures and terms for implementation of tasks nation of crisis PR resources, risk identification, of persons or organizations responsible for their

Volume 7 / Number 1 / 2012 447 technics technologies education management implementation and necessary resources. Gener- and creation of new communication system, cre- ally, typical programmes are: ation of teams with special tasks. –– PR programme of creation and development Tasks of these teams are: of a system for monitoring and forecasting of –– identification of conditions, preparation occurrence and development of hazardous of description – “map” of risks, studying conditions in organization and society, as causes of extraordinary situation from the well as natural phenomena and points of view of organization, public and –– training programme for implementation of the media, pre-emptive measures. –– forecast of the course of extraordinary situation, development dynamics modelling Creation and implementation of such programmes and estimates of resources necessary for requires time, organizational and other investments. relations with the media, In conditions where resources are limited, it is neces- –– preparation and analysis of the development sary to select a group of basic ones from a group of obstruction strategy and consequences of programmes and to provide resources for their im- such extraordinary situation from public plementation. Basic programmes are created based relations and strategic management point of on most probable scenarios of crisis situation devel- view, opment. The goal of strategic PR is to define them –– planning and operative management of work and assist crisis PR to analyse them sufficiently well, organization of PR department or division, primarily from the communicative point of view. defining priority activities and responsible Pre-emptive strategic plan is implemented in persons, distribution of resources and an increased awareness situation and it should –– implementation of necessary measures represent implementation of already existing plan: (reporting to the public, contacts with the –– increased awareness plan and means for media, scheduling conferences, contacts implementation of necessary pre-emptive with relevant subjects and government measures and representatives etc.). –– plan for informing media and public. Crisis PR (within strategic management) is On grounds of these plans and information re- based on knowledge about crises in the context garding possible occurrence and most probable of contemporary political, economical, business, course of a certain extraordinary-crisis situation, safety and other risks, as well as on adoption of operative plans of measures in increased aware- competences of individuals and teams regarding ness regime are formed. Preparation of operative identification, analysis and evaluation of risks, plans, their compliance and coordination enable choice and application of appropriate strategies in limitation of the area influenced by hazard factors, the crisis risks related decision-making and man- and therefore consequences of a specific extraor- agement process. dinary situation. Before a decision is made regarding applica- Pre-emptive strategic plan for risk regime is tion of an appropriate model for dealing with formed on grounds of basic scenarios of crisis sit- crisis, most commonly so-called crisis manage- uation development and it contains a package of ment is introduced as a strategic element, which measures for mitigation or prevention its presumed does not necessarily imply a change of existing development. This plan represents a response to a management and engagement of a new one, but specific situation and is therefore subject to opera- establishing a specific environment within the or- tive corrections, depending on situation develop- ganization which needs swift and directed activity ment. Crisis plan practice is one of most important of all system levels. Crisis management (within tasks of crisis public relations. The plan defines strategic management) identifies a situation and strategic and operative measures. provides a diagnosis of the condition, analyses Strategic measures include: reorganization of wider characteristics of the organization and crisis public relations system, reorganization of existing itself first, and afterwards it undertakes measures

448 Volume 7 / Number 1 / 2012 technics technologies education management in order to deal with crisis or a strategy of changed –– general and current favouritism in the media activity. A situation in which management allows and their “levers” for the organization, for possible crisis influence and it has sufficient which is in most cases in correlation with time and ability to adapt is optimal. the following factor, Nevertheless, existing management is often –– general and current public opinion favou- changed due to its role in untimely identifica- ritism for the organization, tion of appearance and growth of crisis, due to its –– existence of similar organization’s crisis own mistakes made due to negligence and igno- situations which became known to public, rance, and often only because the public expects it –– existence of similar crisis situations in gene- (which does not mean that such step is justified). ral, and their resolutions-consequences for Sometimes it is difficult to expect that the same society (positive, negative, their severity management is able to find a solution in order to and long-term implications), exit crisis. Crisis signals, even weak ones, should –– other local and/or global factors relevant for not be ignored. If crisis has already started, and the said situation (often some elements or meanwhile no appropriate actions were taken, actions of strategic management that appear strategic management bears all responsibility. One less important, may represent a “needle on a of the main tasks of public relations, general as scale” of public opinion) well as crisis related is counselling of management. Therefore, pre-emptive role of public rela- In accordance with these factors and the struc- tions is very important, since many crises are con- ture of organization, directions of organization’s ditioned by changes in society, and at the level of responses to a crisis vary from offensive to defen- most organization it is PR that has most intensive sive application of crisis PR [7]: contacts with society, and is able to anticipate such –– Attack the accusing party. Opposing the changes and to deliver its analysis to the strategic party which claims that a crisis exists, by management. stating that its logic and provided facts are incorrect. 3. Application of crisis PR as a part of stra- –– Denial. Organization explains that no crisis tegic management exists. –– Excuse. Organization minimizes its respon- Response of crisis PR to a certain event (crisis) sibility for the crisis. Any intention to create may vary from offensive to defensive, within the damages is denied, and the organization scope of activities of organization’s strategic man- states that it had no control over the events agement. Directions of responses are different and which caused crisis. This strategy is should depend on several factors below: commonly used in case of natural disasters. –– nature and timing of crisis itself, as well as –– Justification. Crisis is minimized by stating its course, that no significant damage or injury exists. –– general preparedness of the organization Sometimes the victims are blamed. This and strategic management to respond to strategy is often applied in case of an acci- a crisis (existence of a crisis plan, public dent at work or in case of misuse of the relations expert, their availability if they are product, service or an idea. not existing within an organization etc.), –– Pleasing. An attempt is made to soothe the –– readiness of an organization to control interested public. The victims are indem- the course and consequences of a crisis, nified / compensated for the subject of the internally and externally: organization, staff dispute or a donation is made to a certain (ability of management to cope with crises) fund, non-governmental organization which and finances (ability to transfer operative/ is involved in crisis related issues. other funds for crisis resolution purposes or –– Corrective action. Measures are taken to existence of provisions for such crisis needs, repair damages made in the crisis and to funds for potential social responsibility etc.) prevent its repetition.

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–– Apology. Organizations accept responsibility Always disclose everything known to the pub- and ask for forgiveness. This often includes lic. Failure to disclose any relevant fact is very a combination of previous two actions. dangerous, since certain crisis, interesting to the media, will be interesting for research, and in There are many lists with advices what should case discoveries are made, media could publish be done, how should crisis PR communicate in the it in their own way, which is most commonly the time of crisis. We shall present some of them and opposite of organization’s interests. If this would analyse their application: occur, organization would be labelled as some- Check if crisis exist. A check should be per- one who hides information (that is, someone who formed in order to learn if an event actually oc- is partially or fully responsible). In certain cases, curred or if crisis actually exists. If crisis situation it is better for the organization to disclose certain was confirmed, public statements should be made information to the public later, but such strategy and necessary contacts with stakeholders as well, bears the said risk, even if it may be useful if stra- questions should be answered regarding why cer- tegic management has a good final idea, and cri- tain event occurred and what measures are taken sis PR could elegantly present such information (activation of crisis activity plan – demonstra- to the public. tion of preparedness), parts of crisis and strategic Organization should take active interest and management should be organized for information recognize concerns of people-public. In evalu- gathering, information should be prepared and ation of issues and recognition of factors which approval for their provision should be obtained, might cause anger and concerns, it is best to use detailed information are to be provided to the pub- informal discussions, polls, interviews and focus lic by means of selected networks and channels, groups. Expression “No comment” should not be information should be continuously gathered and used in any case – several researches discovered processed, public should be informed, the event is that approximately two thirds of public identifies to be summarized. use of this expression with existence of guilt. Public must come first. This means immedi- Organize a main information centre and ap- ate initiation of a dialogue with public, especially point a spokesman. They must gather or own all with its part which may influence the course of relevant data (events, participants, victims, dam- crisis. One should not wait for the public to take a ages, witnesses, officials, participation/level of negative position, that is, even more negative if it organization’s responsibility etc.) and constantly already made a stand or if an opponent attacks (for provide information to the media and the public. the second time). In order to enable trust to exist, it In crisis situations, it is necessary to consider the is essential to ensure timely contact with everyone fact that the act of withholding information itself who can be influenced by the organization or is becomes news. concerned for it. Besides, one must be aware that Forecasting and preparation for opposed/hos- crisis PR should address internal public first, and tile attitudes. In order to fulfil this condition, two- inform it about the crisis, its causes and character- way communication with relevant public groups istics-consequences, in order to achieve coherence is necessary, and key leaders in public opinion of the organization and avoid inconsistent actions should be included in such communication. In or- which could be initiated by the media contacting der to soothe the situation, the conflict resolution- the organization formally and informally. recognition of areas of agreement and disagree- Situation control. It is very important for a ment approach, with aim to reach joint interests of business system to show it is in control by com- organization and public. municating in crisis situations. Establishing con- Respecting needs of the media. Correct, timely trol is of key importance for correction of conse- information, response to media requests without quences, avoidance of panic and undesired reac- delay – in case of crisis, the spokesman and in- tions, and the most efficient way to achieve that formation centre need to be at disposal to the me- is to apply already adopted standards of crisis dia which most commonly have tight information public relations. transfer deadlines.

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Always tell the truth. Lies are utterly unpro- which moves from historical data towards esti- ductive in work with the media – if a rule applies mates, projections, forecasts and innovative plan- that one should be honest and completely truth- ning. Strategic and top management in crisis situ- oriented applies anywhere, then it applies to the ations request processed summarized data from statements for the media and press and to crisis different sources, one of which, if not the best one, public relations. The problem with the public is is data obtained from public relations. that there will always be someone who to deny the Aside from forecasting of crisis situations, statement, whether it is completely correct or not. preparation of crisis plans and trainings, one of the Reactions of always the critics (chronic critics), if main tasks of crisis PR is a sustained follow-up of they actually find something of interest, shall be popular media, alternative press, Internet forums merciless or at least malicious. Previous part of and websites, info-promotional materials of rele- this paper started with a proverb and it ends with vant non-governmental organizations and activist a similar idea: “Lies are short-lived.”- it is almost groups, along with maintaining positive relation- impossible to keep a secret from public and to ship with important editors and journalists which evade the truth. would, as needed, launch and represent certain messages and attitudes. Crisis PR should never 4. Conclusion forget the power of the media and media “leverage” since it is directly dependent on them. Main task of crisis public relations within strategic management is forecasting crises and coun- References selling of organization’s management regarding that issue, as well as preparing crisis plans in case 1. Blek, S., “ODNOSI SA JAVNOŠĆU”, CLIO, Beo- of crisis appearance. These plans should be realis- grad, 2003. tic, widely set for the area of activity of the whole 2. Seitel, F. “THE PRACTICE OF PUBLIC RELA- strategic management of the organization, and suf- TIONS”, 10th edition, Pearson Education, New Jer- ficiently detailed in all possible aspects of mutual sey, 2005. relations of crisis, society, media and the organization. Detail comprehension and evaluation of all 3. Shawn, M., “CIVIL SOCIETY AND MEDIA IN GLOBAL CRISES”, St Martin’s Press, London, factors which create the public opinion, especially 1996. the less “visible” ones, socially and psychologically more difficult to measure, are the greatest challenge 4. Theaker, A., “PUBLIC RELATIONS HANDBOOK for crisis PR. Therefore, crisis PR should have ex- (MEDIA PRACTICE)”, 2 edition, Rotlege, 2004. ceptional analytical abilities for the whole spectrum 5. Verčič, D. i dr., “ODNOSI S MEDIJIMA”, Medija of social changes and it should be fast and efficient centar i Pristop, Beograd, 2004. in analysis itself, but also in application if crisis occurs. A characteristic complementary to this one 6. Vilkoks, D. i drugi: “ODNOSI SA JAVNOŠĆU- is also resourcefulness, since beside existence of STRATEGIJE I TAKTIKE”, Centar za izdavačku de- latnost ekonomskog fakulteta u Beogradu, Beograd, plans; most crises have certain specificities which 2006. are not covered by them. Aside from anticipation, strategic management and crisis public relations should apply crisis sim- Corresponding Author ulations so that the participants may experience Nenad Peric, necessary steps, how the crisis team behaves and Metropolitan University, manages such crisis situations by means of public Belgrade, Serbia, relations. Managers need to apply strategic plan- E-mail: [email protected] ning and to address potential crisis situations, to define the problem, to have a team approach, etc. Management’s requests for information in crisis situations are prerequisite for decision making

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References Quoting references must be in a scale in which they are really used. Quoting most recent literature is recom-

452 Volume 7 / Number 1 / 2012