THE JOSIP JURAJ STROSSMAYER UNIVERSITY OF OSIJEK

,
FACULTY OF ECONOMICS IN OSIJEK  CROATIA
HOCHSCHULE PFORZHEIM UNIVERSITY
_____________________________________________________________
INTERDISCIPLINARY MANAGEMENT RESEARCH VI
INTERDISZIPLINÄRE MANAGEMENTFORSCHUNG VI

Osijek 2010.

Published by:
Josip Juraj Strossmayer University in Osijek, Faculty of Economics in Osijek, Croatia
Postgraduate Studies “Management”
Hochschule Pforzheim University
For the Publisher:
Rudi Kurz, Ph.D., Dean, Germany
Željko Turkalj, Ph.D., Dean, Croatia
Editors:
Dražen Barković, Ph.D., Faculty of Economics in Osijek, Croatia
Karl – Heinz Dernoscheg, Ph.D., International Business School Styria, Austria
Maja Lamza - Maronić, Ph.D., Faculty of Economics in Osijek, Croatia
Branko Matić, Ph.D., Faculty of Economics in Osijek, Croatia
Norbert Pap, Ph.D., University of Pecs, Hungary
Bodo Runzheimer, Ph.D., Pforzheim University, Business School, Germany
Dirk Wentzel, Ph.D., Hochschule Pforzheim University, Germany
Review Committee:
Luka Crnković, Ph.D., Faculty of Economics in Osijek, Croatia
Olga Dečman – Dobrnjič, Ph.D., Boarding School Ivan Cankar, Ljubljana, Slovenia
Ivan Ferenčak, Ph.D., Faculty of Economics in Osijek, Croatia
Reiner Gildeggen, Ph.D., Hochschule Pforzheim University, Germany
Nino Grau, Ph.D., University of Applied Sciences, Fachhochschule Giesen-Friedberg,
Germany
Slavo Kukić, Ph.D., University of Mostar, Faculty of Economics, Bosnia and
Herzegovina
Hartmut Loffl er, Ph.D., Pforzheim University, Business School, Germany
Béla Orosdy, Ph.D., University of Pécs, Faculty of Business and Economics, Hungary
Ivan Pavlović, Ph.D., University of Mostar, Faculty of Economics, Bosnia and
Herzegovina
Jusuf Šehanović, Ph.D., Juraj Dobrila University of Pula, Croatia
Technical editors:
Jerko Glavaš, Ph.D. candidate, Faculty of Economics in Osijek, Croatia
Hrvoje Serdarušić, Ph.D. candidate, Faculty of Economics in Osijek, Croatia
Language Editing and Proofreading:
Ljerka Radoš, Faculty of Economics in Osijek, Croatia
The publishing of this book was approved by the Senate
of Josip Juraj Strossmayer University of Osijek
CIP zapis dostupan u računalnom katalogu Gradske i
sveučilišne knjižnice Osijek pod brojem
ISSN 1847-0408
ISBN 978-953-253-079-7
Indexed in: RePEc, EconPapers

Program committee:
Mate Babić, Ph.D., University of Zagreb, Faculty of Economics in Zagreb, Croatia
Heinrich Badura, Ph.D., President, The European Academy for Life Research, Integration
and Civil Society, Austria
Firouz Gahvari, Ph.D., University of Illinois at Urbana-Campaign, Department of
Economics, USA
Gunther Gottlieb, Ph.D., University of Augsburg, Germany
Rupert Huth, Ph.D., Pforzheim University, Business School, Germany
Zoran Jašić, Ph.D., Ambassador of the Republic of Croatia to the Republic of Austria
Zlatko Kramarić, Ph.D., Ambassador of the Republic of Croatia to the Republic of
Kosovo
Rudi Kurz, Ph.D., Pforzheim University, Business School, Germany
Željko Turkalj, Ph.D., Faculty of Economics in Osijek, Croatia
Mladen Vedriš, Ph.D., University of Zagreb, Faculty of Law, Croatia

CONTENTS
VORWORT ......................................................................................................................... 11
FOREWORD ...................................................................................................................... 12
Management
Urban Bacher, Kathrin Wolf
AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS ...........................15
Berislav Bolfek, Biljana Lončarić
BUSINESS PERFORMANCE MANAGEMENT USING MODEL FOR PROFIT
OPTIMIZATION .................................................................................................................28
Sanja Bošnjak
HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI
CONTINUOUS EDUCATION AND MOTIVATION OF EMPLOYEES AS
A BASIS OF SUCCESS ..........................................................................................................37
Martina Briš
TRANSSHIPMENT MODEL IN THE FUNCTION OF COST
MINIMIZATION IN A LOGISTICS SYSTEM ....................................................................48
Iris Broman
STRUCTURE AND OPERATIONAL MANAGEMENT IN
LABORATORY ANIMAL PRACTICE ................................................................................60
Gordana Dukić, Goran Andrijanić
ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT
ASPECTS, WORK CONDITIONS AND COMMITMENT
AMONG CROATIAN MANAGERS ....................................................................................70
Erika Grau, Nino Grau
PROJEKTMANAGEMENTNORMEN IN INTERNATIONALEN PROJEKTEN .......86
Đuro Horvat, Nataša Trojak
MARKETING IN CONTEMPORARY ENVIRONMENT  TRADITIONAL
VS. VALUEADDED MARKETING ..................................................................................95
Zoran Jeremić
ADVANTAGES OF ISTRIA REGARDING GOLF AS PART
OF TOURIST PRODUCT ..................................................................................................111
Marijan Karić, Maša Slabinac, Ivan Kristek
KNOWLEDGE IN THE FUNCTION OF ENTERPRISE MANAGEMENT ..................122
Maja Lamza-Maronić, Jerko Glavaš, Igor Mavrin
CULTURAL MANAGEMENT IN THE REPUBLIC OF
CROATIA  POSSIBILITIES OF DEVELOPMENT ........................................................133
Maršanić Robert, Pupavac Drago
APPLICABILITY OF INFORMATION TECHNOLOGIES IN PARKING
AREA CAPACITY OPTIMIZATION .................................................................................143

Mane Medić, Mario Banožić, Mladen Pancić
BRANDING IMPACT ON THE ECONOMIC DEVELOPMENT OF CITIES AND
COUNTIES - EXAMPLE BRANDING CITY OF ILOK ...................................................152
Murali Murti
THE LUXURY PHENOMENON  THE GLOBALIZATION OF VARIETY................162
Stipan Penavin, Dubravka Pekanov Starčević, Martina Harc
CRISIS AS AN OPPORTUNITY FOR OPTIMIZING COMPANIES’
COST MANAGEMENT SYSTEMS .................................................................................177
Mate Perišić, Neven Šerić
THE EVALUATION MODEL OF THE SUSTAINABLE
RECEPTIVE CAPACITY IN TOURISTIC LIGHTHOUSE BUIILDINGS ......................186
Ticijan Peruško, Robert Zenzerović
CORPORATE LOAN MANAGEMENT MODEL
AS THE INSTRUMENT OF BANKS’ PRODUCT OPTIMIZATION .............................194
Svetlana Petrović
GLOBALIZATION OF THE CROATIAN OIL INDUSTRY ............................................210
Ljubo Đula
MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS) ...222
Milan Puvača, Dinko Roso
GOOGLE TOOLS IMPLEMENTATION INTO THE
PROMOTION OF WEB SOLUTIONS ............................................................................236
Nikola Rovis
PRIORITIZED ACTIONS FOR MARKETING IMPROVEMENT:
A TOOL FOR SMALL BUSINESS MARKETING PROGRAMMES ..............................244
Zlatko Šehanović, Giorgio Cadum, Igor Šehanović
STRATEGY FOR THE DESTINATIONAL EMARKETING & SALES ........................255
Željko Turkalj, Ivana Fosić, Davor Dujak
MOTIVATIONAL COMPENSATION  A FACTOR IN STAFF
TURNOVER IN RETAIL ORGANIZATIONS ................................................................264
Ulrich Vossebein
PERSONALENTWICKLUNG UND
ORGANISATIONSENTWICKLUNG IM PROJEKTMANAGEMENT ........................275
Ivica Zdrilić
THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON
THE BUSINESS RESULTS OF BIG CROATIAN COMPANIES ......................................286
Andrew Lynch
OPERATIONAL DECISIONMAKING: DIFFERENCES IN
PRIMARY AND SECONDARY PERCEPTION ...............................................................297
Josip Mesarić, Antun Šundalić
MANAGEMENT OF MANAGEMENT OF MANAGEMENT...
AND HOW TO DEVELOP MANAGEMENT CURRICULUM .....................................305

Nihada Mujić
THE ROLE OF COMPLEXITY, UNCERTAINTY AND IRREVERSIBILITY
IN SOCIAL SCIENCES AND MODELS ..........................................................................320
Microeconomics, Macroeconomics and Monetary Economics
Octavian Jula
PUBLIC POLICIES AND ECONOMIC CRISES ............................................................335
Igor Živko, Zdenko Klepić, Nikola Papac
TRANSPARENCY OF FINANCIAL REPORTING AS INTERNAL
MECHANISM OF CORPORATE GOVERNANCE IN BANKS IN B&H ......................350
International Economics
Besim Culahovic, Eldin Mehic, Emir Agic
FOREIGN DIRECT INVESTMENT LOCATION AND INSTITUTIONAL
DEVELOPMENT IN IN THE MANUFACTURING SECTOR IN
SOUTH EAST EUROPEAN COUNTRIES .......................................................................365
Hartmut Löffler
BESCHÄFTIGUNGSPROBLEME DEUTSCHLANDS IM ZEICHEN DER
AKTUELLEN INTERNATIONALEN WIRTSCHAFTS UND
FINANZMARKTKRISE .....................................................................................................381
Alexander Moheit, Dirk Wentzel
FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF
EASTERN EUROPEAN EU MEMBERS AND GREECE: CHALLENGES
FOR THE STABILITY OF THE EURO ............................................................................406
Josip Romić
INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING
FOREIGN DIRECT INVESTMENTS: THE CROATIAN EXPERIENCE .......................445
Mladen Vedriš
ECONOMIC RECOVERY: POSSIBLE SOLUTIONS WITHIN
A NATIONAL ECONOMY ................................................................................................456
Financial Economics
Zuzana Gallová, Daniel Stavárek
MODELING OF CAUSAL RELATIONSHIPS BETWEEN FOREIGN DIRECT
INVESTEMENT, EXPORT AND ECONOMIC GROWTH FOR SLOVENIA.............489
Branko Matić, Hrvoje Serdarušić, Maja Vretenar
MANAGING NONINTEREST INCOME AS PART OF
BANK BUSINESS STRATEGY ..........................................................................................499
Izabela Pruchnicka-Grabias
SOVEREIGN WEALTH FUNDS  THE ACTIVITY AND ITS
CONSEQUENCES FOR THE GLOBAL ECONOMY ....................................................510
Jasmina Selimović
ACTUARIAL ESTIMATION OF TECHNICAL PROVISIONS’
ADEQUACY IN LIFE INSURANCE COMPANIES ..........................................................523

Dominika Crnjac Milić
POISSON PROCESSES AND COMPOUND POISSON PROCESSES IN INSURANCE
MANAGEMENT .............................................................................................................. 534
Public Economics
Flavius Rovinaru, Mihaela Rovinaru, Liviu Deceanu
ELECTORAL CYCLES IN ROMANIA. CASE STUDY: THE INFLUENCES ON
EMPLOYMENT INDUCED BY MACROECONOMIC GOVERNMENTAL
ECONOMIC POLICIES ....................................................................................................545
Boris Sabatti
INSTITUTIONAL SUPPORT SYSTEM IN ISTRIAN COUNTY AS A
FACTOR OF REGIONAL DEVELOPMENT MANAGEMENT ....................................556
Ivana Barković
ECONOMIC FREEDOM AS PRECONDITION FOR ECONOMIC
PROSPERITY: CROATIAN EXPERIENCE ......................................................................566
Boris Crnković, Željko Požega, Ivo Mijoč
ANALYSIS OF CROATIAN PRIVATIZATION FUND PORTFOLIO ...........................580
Davor Ćutić
MINISTRY OF DEFENSE BUDGET IN THE CONDITIONS OF RECESSION ..........591
Slobodan Stojanović, Ivan Penava
MUNICIPAL BONDS AS A SOURCE OF REVENUES FOR BUDGETS OF LOCAL
GOVERNMENTS IN CROATIA........................................................................................608
Health, Education and Welfare
Mario Bajto, Igor Alfirević
APPLICATION OF “DOUBLE PYRAMID OF THE LEADERSHIP”
AND “QUALITY CIRCLES” IN HEALTH CARE FACILITIES......................................621
Legčević Jelena
DETERMINANTS OF SERVICE QUALITY IN HIGHER EDUCATION....................631
Zoran Pandža
LIFELONG LEARNING IN CROATIA:CHALLENGES AND PERSPECTIVES.............648
Josip Župarić
CROATIA, KNOWLEDGE SOCIETY AND PERSPECTIVE
OF STATE EMPLOYEES ....................................................................................................662
Kata Ivić
KNOWLEDGE ECONOMY – CHANGE MANAGEMENT
IN HIGHER EDUCATION................................................................................................674
Law and Economics
Renata Perić, Emina Konjić, Nikola Mijatović
TAX EXEMPTION AND TAX RELIEF IN PROFIT TAX SYSTEM
OF THE REPUBLIC OF CROATIA ..................................................................................687
Oliver Radolović
HOTEL GUEST’S PRIVACY PROTECTION IN TOURISM BUSINESS LAW ............699

Vjekoslav Puljko
NEW SOLUTIONS OF THE EUROPEAN PRIVATE INTERNATIONAL
LAW IN THE FIELD OF INSURANCE CONTRACTS ..................................................709
Business Administration and Business Economics • Marketing • Accounting
Comiati Raluca, Plaias Ioan
THE IMPACT OF CONSUMERS ATTITUDE TOWARD
ADVERTISING ON PRODUCT ATTITUDE ................................................................ 727
Dario Dunković, Đurđica Jurić, Tereza Nikolić
MARKETING ASPECTS IN STRATEGIC MANAGEMENT ACCOUNTING ............. 739
Dinko Jukić, Božica Dunković
BRANDSPHERE: EXPECTED VALUE VS COGNITION VALUE ............................... 751
Marcel C Pop, Lacramioara Radomir, Andreea I. Maniu,
Monica M. Zaharie, Andrei M. Scridon
STRENGTHENING BANK MARKET PRESENCE BY MONITORING
CLIENTS’ SATISFACTION WITH DISTRIBUTION CHANNELS ............................ 764
Thomas Cleff, Lena Fischer, Nadine Walter
THE PROVINCIALISM OF GLOBAL BRANDS AN EMPIRICAL ANALYSIS OF
BRAND EQUITY DIFFERENCES IN MEXICO AND GERMANY ............................ 776
Kasim Tatić, Merima Činjarević
RELATIONSHIP BETWEEN ENVIRONMENTAL CONCERN AND GREEN
PURCHASING BEHAVIOR .............................................................................................. 801
Boris Marjanović, Klaudio Tominović
ORGANIZATIONAL STRUCTURE IN THE FUNCTION OF CREATION
OF ADDED VALUE .......................................................................................................... 811
Bodo Runzheimer
INTERNATIONALIZATION OF GERMAN ACCOUNTING  DO FAIRVALUE
VALUATIONS LEAD TO A HIGHER QUALITY FINANCIAL REPORTING? .......... 820
Markus Häfele
DIE ABSCHLUSSPRÜFUNG DEUTSCHER UNTERNEHMEN IM
ZEICHEN DER WIRTSCHAFTSKRISE .......................................................................... 843
Ishak Mešić
INTENSIVE PROCESSES OF RETAIL INTERNATIONALIZATION ........................... 856
Zdenko Segetlija
INFORMATION TECHNOLOGY IN THE STRATEGY
OF A RETAIL COMPANY ................................................................................................ 866
Saša Vujić, Slobodan Vujić
MANAGERS’ MOTIVES FOR TRANSFORMATION OF NON-PROFIT
ORGANIZATION INTO A FOR-PROFIT ORGANIZATION ON THE
EXAMPLE OF MICROCREDIT ORGANIZATION ....................................................... 877
Laszlo Sitanyi
HUNGARY AND THE NEIGHBOURING COUNTRIES’ INNOVATION POSITION
BASED ON EUROPEAN DATA....................................................................................... 887

Liana Stanca, Cristina Felea, Ioana Pop, Chiş Sebastian,
Horea Greblă, Lacurezeanu Ramona, Buchmann Robert
MATHEMATICAL MODEL OF OPTIMIZING DECISION MAKING FOR
WORK FORCE INTEGRATION IN THE KNOWLEDGE SOCIETY ......................... 928
Economic Development, Technological Change, and Growth
Sanela Ravlić, Ivana Zelenko
PROJECTS FOR PRE-ACCESSION EU FUNDS AS A
CONTRIBUTION TO THE DEVELOPMENT OF CROATIAN ...................................941
Dražen Barković
CHALLENGES OF INTERDISCIPLINARY RESEARCH ..............................................951
Urban, Rural and Regional Economics
Vladimir Cini, Nataša Drvenkar
EUROPEAN UNION TRIPLE HELIX MODEL OF “THE NEW INDUSTRY“ ..........963
Đula Borozan, Anita Frajman-Jakšić
REGIONAL ECONOMIC DISPARITIES AND CIVIL SOCIETY:
EVIDENCE FROM CROATIA ...........................................................................................976
Goran Marijanović, Dražen Ćućić, Gabrijela Žalac
ROLE OF DEVELOPMENT AGENCIES IN THE REGIONAL DEVELOPMENT OF
THE REPUBLIC OF CROATIA .........................................................................................990
Bernadett Gálosi-Kovács, Norbert Pap, Zsuzsanna M. Császár, Péter Reményi
ENVIRONMENTAL DEVELOPMENT PROBLEMS IN THE MOST
DISADVANTAGEOUS HUNGARIAN MICROREGIONS .......................................1001

Vorwort
Es ist uns ein Vergnügen, das Konferenzband „Interdisziplinäre Managementforschung
VI/ Interdisciplinary Management Research VI“ vorstellen zu können. Ein Buch aus
dieser Reihe ist zum ersten Mal 2005 erschienen, als Resultat der Zusammenarbeit
zwischen der Wirtschaftsfakultät in Osijek, Kroatien und der Hochschule Pforzheim,
Deutschland, und insbesondere durch das Magisterstudium des Management. Die
Zusammenarbeit der zwei genannten Partnerinstitutionen ist unter anderem durch
jährliche wissenschaftliche Symposien gekennzeichnet, auf welchen interessante
Themen aus verschiedenen Bereichen der Wirtschaft und des Managements
vorgestellt und folglich in einem Band veröffentlicht werden. Jedes Jahr ziehen die
wissenschaftlichen Symposien Akadamiker anderer kroatischer, sowie ausländischer
Universitäten, einschließlich Ungarn, Polen, Rumänien, Slovenien, Montenegro,
Bosnien und Herzegovina und Serbien an, die ihren wissenschaftlichen und
profesionellen Beitrag zur Diskussion über zeitgenössische Fragen aus dem Bereich
des Managements leisten. Die Aktualität der behandelten Fragen, der internationale
Charakter im Hinblick auf Themen und Autoren, die höchsten Standards der
Forschungsmethodologie sowie die Kontinuität dieser Konferenzreihe wurden auch
von der internationalen akademischen Gemeinde erkannt, weswegen sie auch in
internationalen Datenbanken, wie Thomson ISI, RePEc, EconPapers und Socionet,
zu finden ist.
Die neueste Ausgabe von „Interdisziplinäre Managementforschung VI/
Interdisciplinary Management Research VI“ umfasst 74 Arbeiten geschrieben von
139 Autoren. Der Erfolg früherer Ausgaben ging über die Grenzen der Länder hinaus,
deren Autoren schon traditionell Teil der Reihe waren und zog neue Autoren aus
Irland, Indien und Czechien. Jedes der Autoren leistete einen bedeutenden Beitrag
zu diesem fachübergreifenden Managementforum.
Als Herausgeber dieses Bandes hoffen wir, dass diese Reihe auch weiterhin
Akademiker und Profesionelle dazu bewegen wird, in Forschung und Beruf die
höchsten Standards zu beanspruchen, und dass es weiterhin als Ansporn zu weiteren
Formen von Zusammenarbeit unter Teilnehmern dieses Projektes dienen wird.

Prof. Dr. Dražen Barković
Prof. Dr. Bodo Runzheimer

Foreword

It is our pleasure to introduce the book “Interdisziplinäre Managementforschung VI/
Interdisciplinary Management Research VI” to you. The first volume appeared in 2005
as a result of co-operation between the Faculty of Economics in Osijek (Croatia) and
Pforzheim University (Germany), particularly through the postgraduate programme
“Management”. The co-operation between these partnering institutions has been
nurtured, amongst else, through annual scientific colloquiums at which interesting
topics in various fields of economics and management have been presented and later
published in the proceedings. Over the years, the scientific colloquiums have drawn
the attention of academic scholars from other Croatian universities, as well as from
other countries including Hungary, Poland, Romania, Slovenia, Montenegro, Bosnia
and Herzegovina and Serbia, each making a contribution in academic and professional
discussion about contemporary management issues. Actuality and importance of the
issues discussed, the international character of the book in terms of authors and
topics, the highest standards of research methodology and continuity in publishing
have been recognized by the international academic community, resulting in the
book now being indexed in world-known data bases such as Thomson ISI, RePEc,
EconPapers, and Socionet.
The latest edition, i.e. “Interdisziplinäre Managementforschung VI/ Interdisciplinary
Management Research VI” encompasses 74 papers written by 121 authors. The success
of former editions has echoed beyond the traditionally participative countries and
authors and now includes new authors from Ireland, India and the Czech Republic,
each providing a valuable contribution to this interdisciplinary management forum.
As editors we hope that this book will continue to encourage academic scholars
and professionals to pursue excellence in their work and research, and to provide an
incentive for developing various forms of co-operation among all involved in this
project.

Prof. Dr. Dražen Barković
Prof. Dr. Bodo Runzheimer

MANAGEMENT

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

15

AUTOMATISIERTE KONTOABFRAGEN
UND BANKGEHEIMNIS
Prof. Dr. Urban Bacher und Kathrin Wolf, Hochschule Pforzheim
urban.bacher@hs-pforzheim.de

Abstract

German credit institutions have the duty of banking confidentiality, i.e. they
are obliged not to divulge their clients’ credit and financial circumstances and to
deny queries in general. Banking confidentiality is not specifically regulated by law,
but the prevalent view is that banking confidentiality is deducible from the general
banking contract. The exceptions to this disclosure ban are allowed only if there is
a legal requirement, or with the account holder’s consent. Automatic queries into
master file data of a bank account are a breach of banking confidentiality. In this
way banking confidentiality in Germany is being further weakened and systematically eroded.
JEL classification: G21, H83, M41,
Keywords: banking confidentiality, automatic account queries, information
technologies
1. PROBLEMSTELLUNG

Betrachtet man die umfangreichen Beschränkungen1, die das Bankgeheimnis in
den letzten Jahren mit Blick auf die Terrorabwehr gerade nach den Anschlägen in
den USA vom 11. September 2001 und in Madrid vom 11. März 2004 der Verhinderung von Geldwäsche und der Fiskaldelikte erfahren hat, so erhält man leicht
den Eindruck, dass das Bankgeheimnis unweigerlich dem Untergang preisgegeben
wird (Eckle, 2007: 5ff). Komplettiert wird diese Entwicklung durch das jüngste
Urteil des Bundesfinanzhofes in München, welcher entschied, dass künftig Banken
1

Gesetz zur Bekämpfung des Terrorismus (09.01.2002), Gesetz zur Verbesserung der Bekämpfung
der Geldwäsche und der Bekämpfung der Finanzierung des Terrorismus (08.08.2002), Viertes Finanzmarktförderungsgesetz (21.06.2002).

16

Urban Bacher • Kathrin Wolf

die Kontodaten ihrer Kunden auch dann an die Finanzämter weiterleiten dürfen,
wenn es an einem strafrechtlichen Verdacht der Steuerhinterziehung mangelt.
Die finanziellen Verhältnisse der Bürger sind gegenwärtig so transparent wie nie
zuvor. Gepaart mit der Tatsache, dass Bankdaten heutzutage weit mehr die persönlichen Lebensumstände des Kontoinhabers widerspiegeln als noch vor einigen
Jahren, stellt dies eine äußerst problematische Entwicklung dar.2 Fraglich ist, ob
die automatisierten Kontoabfragen wirklich notwendig sind, um die angestrebten
Ziele zu erreichen oder ob es sich nicht vielmehr um einen Vorwand handelt, die
Daten der Bankkunden auszuspionieren.
2. DURCHBRECHUNG DES BANKGEHEIMNISSES MITTELS
AUTOMATISCHER KONTOABFRAGE
2.1 Die Gesetzesinitiativen in 2003 und 2005

Den Grundstein für die automatisierten Kontoabfragen legte die Legislative mit dem am 1. April 2003 in Kraft getretenen § 24c KWG. Dieser wurde
als Teil des „Gesetzes zur weiteren Fortentwicklung des Finanzplatzes Deutschland (Viertes Finanzmarktförderungsgesetz)“ eingeführt (Langweg & Tischbein, 2002: 59f ). Darauf aufbauend können seit 2005 diese Daten nun nach
§§ 93, 93b AO auch von den Finanzbehörden abgefragt werden, wenn dies zur
Festsetzung bzw. Erhebung von Steuern dient. Nach § 93 VIII AO haben viele
andere Stellen der Sozialleistungsträger Zugriff auf die Kontodaten, soweit dies zur
Überprüfung des Vorliegens der Anspruchsvoraussetzungen erforderlich ist. Aufgrund der spärlichen Medienberichterstattung von vielen Bürgern unerkannt, hat
der Gesetzgeber somit in Folge der Terroranschläge ein regelrechtes Netz an staatlichen Kontoabfragemöglichkeiten geschaffen.
2.2 Das Bankgeheimnis in Deutschland

Das deutsche Bankgeheimnis verpflichtet deutsche Kreditinstitute, Stillschweigen über die Kredit- und Vermögensverhältnisse ihrer Kunden zu wahren und
Auskünfte generell zu verweigern (Bacher, 2009: 50). Das Bankgeheimnis ist gesetzlich nicht gesondert geregelt, nach der herrschenden Meinung ergibt sich das

2

Vgl. ZKA, Stellungnahme des Zentralen Kreditausschusses vom 24.02.2005, S. 7.

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

17

Bankgeheimnis aus dem allgemeinen Bankvertag.3 Ausnahmen der Offenbarung
sind nur per Gesetz4 oder durch Vereinbarung mit dem Kontoinhaber zulässig
(Bacher, 2009: 50-51). Eine automatische Einsicht in die Stammdaten eines Bankkontos ist ein Eingriff in das Bankgeheimnis. Damit wird das Bankgeheimnis in
Deutschland weiter geschwächt und systematisch ausgehöhlt.
2.3 DER AUTOMATISIERTE ABRUF VON KONTODATEN GEMÄSS § 24C KWG

Gemäß § 24c Abs. 1 S. 1 KWG sind sämtliche Kreditinstitute verpflichtet, eine
Datei zu führen, die zum automatisierten Abruf von Kontoinformationen geeignet
ist. In dieser Abrufdatei sind folgende Inhalte einzustellen:
- Konto- bzw. Depotnummer
- Name des Kontoinhabers bzw. Verfügungsberechtigten
- Geburtsdatum des Kontoinhabers bzw. Verfügungsberechtigten
- Tag der Errichtung des Depots bzw. des Kontos
- Auflösungstag des Kontos bzw. Depots
- Name und Anschrift des wirtschaftlich Berechtigten gemäß § 8 Abs. 1
GWG.
Die Rechtfertigung zur Erfassung aller 500 Millionen in Deutschland geführten Konten ergibt sich daraus, dass erfahrungsgemäß jedes Konto zur Geldwäsche
geeignet ist, unabhängig davon, wer Kontoinhaber oder Verfügungsberechtigter
ist.5
Nach den Vorschriften des § 24c Abs. 1 S. 5 und 6 KWG haben die Kreditinstitute zu gewährleisten, dass die BaFin jederzeit Daten aus der Datei in einem
automatisierten Verfahren abrufen kann. Dabei muss durch technische und organisatorische Maßnahmen sichergestellt werden, dass die Abrufe den Kreditinstituten
und somit auch den Kunden, deren Daten abgerufen werden, nicht zur Kenntnis
gelangen.
Zum Abruf berechtigt ist die BaFin, soweit dies zur Erfüllung ihrer Aufgaben
im Hinblick auf die Bekämpfung von unerlaubt betriebenen Bankgeschäften oder
3
4
5

Nebenpflicht in Verbindung mit Nr. 2 der AGB-Banken.
Z. B. § 33 ErbStG, §§ 13 ff, 44 KWG, § 161a StPO.
Vgl. BR-Drs. 936/01 neu vom 14. November 2001, S. 344 ff. Kritisch hierzu Zubrod, WM
2003,1217.

18

Urban Bacher • Kathrin Wolf

Finanzdienstleistungen sowie zur Abwehr eines Missbrauches der Banken durch
Geldwäsche oder sonstige betrügerische Handlungen dient.6 Zudem muss die
BaFin anderen Behörden wie z.B. Gerichten und inländischen Strafverfolgungsbehörden Auskunft aus den Dateien erteilen.
2.4 DER KONTENABRUF FÜR ZWECKE DES BESTEUERUNGSVERFAHRENS

Im Rahmen des Gesetzes zur Förderung der Steuerehrlichkeit vom 23.12.2003
wurde ein neuer § 93b in die Abgabenordung eingeführt, welcher besagt, dass
Kreditinstitute die nach § 24c KWG zu führende Daten auch für Abrufe nach
§ 93 Abs. 7 und 8 AO zur Verfügung stellen müssen (Maag, 2007: 24). Jüngst
wurden die Regelungen durch die Unternehmenssteuerreform 2008 geändert und
somit die vom Bundesverfassungsgericht geforderten Anpassungen umgesetzt.7
§ 93 Abs. 7 AO bestimmt dabei, dass Finanzbehörden die Daten abrufen können,
wenn dies zur Festsetzung bzw. Erhebung von Steuern dienlich ist. Ergänzend dazu
regelt § 93 Abs. 8 AO, dass auch andere Behörden auf die Daten zugreifen dürfen,
soweit dies zur Überprüfung der Anspruchsvoraussetzungen erforderlich ist. Gemeint sind hier eine Vielzahl von Sozialleistungsträgern.
Dabei gelten dieselben Regelungen für die Kontenabfragen wie für die BaFin.8
Das hierzu erforderliche automatisierte Abrufverfahren soll voll umfänglich dem
von der BaFin für die Zwecke des § 24c KWG entwickelten Verfahren entsprechen.9 Gemäß § 93 Abs. 9 AO sind die Betroffenen auf die Möglichkeit des Kontenabrufs hinzuweisen. Die Verantwortung der Zulässigkeit des Datenabrufes und
der damit verbundenen Datenübermittlung liegt jeweils bei der ersuchenden Behörde.10 Nach der Durchführung ist der Betroffene über das Ergebnis der Abfrage
in Kenntnis zu setzen. In § 93 Abs. 9 S. 3 AO ist jedoch explizit geregelt, dass dieser Hinweis bzw. die Benachrichtigung unter gegebenen Umständen unterbleiben
kann, wenn dies die Ermittlungen gefährdet.
6

BT-Drs. 14/8017, S. 122.
Im Beschluss vom 13.06.2007 äußerte das BVerfG verfassungsrechtliche Bedenken gegenüber § 93
Abs. 7 und 8 AO. § 93 Abs. 8 AO genüge nicht der Normenklarheit. § 93 Abs. 7 AO verstoße
gegen den Verhältnismäßigkeitsgrundsatz zudem mangele es an einer gesetzlichen Auskunfts- und
Benachrichtigungspflicht gegenüber den Betroffenen; vgl. hierzu unten 2.4.2.
8
Vgl. § 93b Abs. 4 AO.
9
Vgl. BR-Drucks. 542/03, S.20.
10
Vgl. § 93b Abs. 3 AO.
7

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

19

Ziel der Regelung ist es, den Druck auf die bislang Steuerunehrlichen zu erhöhen, um somit die Besteuerungsgerechtigkeit zu verbessern.11
2.5 RECHTLICHE BEWERTUNG DER REGELUNGEN

Bereits mit der Einführung des § 24c KWG im Zuge des Vierten Finanzmarktförderungsgesetzes12 wurden kritische Stimmen laut, die die Verfassungsmäßigkeit
der Regelung des automatisierten Kontoabrufes anzweifelten (Samson & Langrock,
2005: 18).
2.5.1 Ursprungsargument „Terrorbekämpfung“

Das Kontoabrufverfahren ist im Jahr 2003 mit der Begründung zur Bekämpfung des Terrorismus eingeführt worden. Die Kontrollmaßnahme steht im unmittelbarem Zusammenhang mit den Terroranschlägen vom 11. Sept. 2001 und dient
der Bekämpfung der organisierten Kriminalität, der Geldwäsche sowie der illegalen Schattenwirtschaft. Die geschaffene Regelung eröffnet jedoch Polizei-, Steuerund Sozialbehörden und der Staatsanwaltschaft die Nutzung des Abrufsystems zur
Bekämpfung jeder Form von Kriminalität und dies sogar mit einer niedrigeren
Schwelle für den Abruf als die BaFin.13 Sehr bedenklich ist es, dass § 24c Abs. 3 S.
1 Nr. 2 KWG keine Beschränkung auf wenige besonders schwere oder thematisch
eingrenzbare Straftaten vornimmt.14 Zudem findet kein Richtervorbehalt oder eine
andere unabhängige Prüfung der Verhältnismäßigkeit statt.
2.5.2 Das Grundrecht auf informationelle Selbstbestimmung

Im Mittelpunkt der Diskussion zum Datenschutz steht das so genannte Volkszählungsurteil des Bundesverfassungsgerichts vom 15.12.1983.15 Spätestens seit
dem Vorhaben der Volkszählung und dem dazu ergangenen Urteil ist auch allge11

Vgl. BR-Drucks. 542/03, S. 8 und 18.
Vgl. BGBl. I (2002) Nr. 39, S. 2010, 2053 ff.
13
§ 24c Abs. 2 KWG setzt als Anlass des Datenabrufs der BaFin eine besondere Eilbedürftigkeit
voraus. Die Formulierung drückt aus, dass es sich hierbei um keinen Regelfall, sondern um eine
Ausnahme in dringlichen Fällen handelt. In § 24 c Abs. 3 KWG (BaFin Abruf für fremde Zwecke)
ist von einzelnen Daten nicht mehr die Rede, auch bedarf es keiner besonderen Eilbedürftigkeit.
14
Vgl. dazu bereits die Kritik des Bundesrats in der Stellungnahme zum Gesetzentwurf der Bundesregierung vom 18.01.2002, BT-Drucks. 14/8017, Anlage 2, Nr. 54, S. 168.
15
Vgl. BVerfGE 65, 1 ff.
12

20

Urban Bacher • Kathrin Wolf

mein das Problembewusstsein, dass unter den Bedingungen moderner Technologien jede Erhebung und Verarbeitung personenbezogener Daten mit besonderen
Gefahren für das Persönlichkeitsrecht des Betroffenen verbunden ist, erwacht. Das
Gericht befasste sich zwar in erster Linie mit der beabsichtigten Volkszählung, es
machte jedoch in den Urteilsgründen über den Streitgegenstand hinaus wichtige
grundsätzliche Aussagen zur Interpretation des Grundrechts auf die freie Entfaltung der Persönlichkeit und entwickelte das individuelle „Recht auf informationelle Selbstbestimmung“.16 Damit hat das Bundesverfassungsgericht den Datenschutzbelangen Grundrechtscharakter und damit Verfassungsrelevanz verliehen.
Das Persönlichkeitsrecht17 ist ein zentrales Rechtsgut unserer Rechtsordnung
mit Verfassungsrang. Bereits 1969 entschied das Bundesverfassungsgericht, dass
es mit der Menschenwürde unvereinbar ist, wenn der Mensch zwangsweise „in
seiner ganzen Persönlichkeit vollständig registriert und katalogisiert wird“ und so
zum bloßen Objekt staatlichen Handelns degradiert wird.18 Im Volkzählungsurteil
wurde das allgemeine Persönlichkeitsrecht im Hinblick auf die modernen Informationstechnologien wie folgt definiert:19
„Das Persönlichkeitsrecht umfasst das Recht des einzelnen grundsätzlich selbst zu
entscheiden, wann und innerhalb welcher Grenzen persönliche Lebenssachverhalte offenbart werden. Diese Befugnis bedarf unter den Bedingungen der EDV in besonderem Maße des Schutzes, da diese Systeme ein vollständiges Persönlichkeitsabbild
des einzelnen erlauben, ohne dass der Betroffene dessen Richtigkeit und Verwendung
zureichend kontrollieren kann. Wer nicht mit hinreichender Sicherheit überschauen
kann, welche ihn betreffenden Informationen in bestimmten Bereichen seiner sozialen
Umwelt bekannt sind, und wer das Wissen möglicher Kommunikationspartner nicht
einigermaßen abzuschätzen vermag, kann in seiner Freiheit, aus eigener Selbstbestimmung zu planen oder zu entscheiden, wesentlich gehemmt werden. Mit dem Recht
auf informationelle Selbstbestimmung wären eine Gesellschaftsordnung und eine diese
ermöglichende Rechtsordnung nicht vereinbar, in der Bürger nicht mehr wissen können,
wer was wann und bei welcher Gelegenheit über sie weiß.

16

Vgl. BVerfGE 65, 1.
Abgeleitet aus Art. 2 Abs. 1 i.V.m. Art. 1 GG: Auffang- oder Muttergrundrecht im Sinne einer allumfassende Handlungsfreiheit „Jeder kann tun und lassen was er will“, vgl. auch BVerfGE 6, 32.
18
Vgl. BVerfGE 27,6.
19
Auszug aus BVerfGE 65, 1, 42 ff und 46.
17

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

21

Hieraus folgt: Die freie Entfaltung der Persönlichkeit setzt unter den modernen Bedingungen der Datenverarbeitung den Schutz des Einzelnen gegen unbegrenzte Erhebung, Speicherung, Verwendung und Weitergabe seiner persönlicher Daten voraus. Das
Grundrecht gewährleistet insoweit die Befugnis des Einzelnen, grundsätzlich selbst über
die Preisgabe und Verwendung seiner Daten zu bestimmen („informationelle Selbstbestimmung“). Dabei kann nicht allein auf die Art der Aufgaben abgestellt werden. Entscheidend sind ihre Nutzbarkeit und Verwendungsmöglichkeiten. Ein an sich belangloses Datum kann durch die Verknüpfbarkeit einen neuen Stellenwert erhalten, insoweit
gibt es unter den Bedingungen der EDV kein „belangloses“ Datum mehr.“
Das Bundesverfassungsgericht gewährleistet das Recht auf informationelle Selbstbestimmung jedoch nicht schrankenlos.20 Der Einzelne hat kein Recht auf eine
absolute uneingeschränkte Herrschaft über seine Daten, da er und seine Daten ein
Abbild der sozialen Realität darstellen, das nicht ausschließlich dem Betroffenen
zugeordnet werden kann. Der Grundgesetzgeber hat das Spannungsverhältnis zwischen Individuum und Gemeinschaft im Sinne der Gemeinschaftsgebundenheit der
Person entschieden.21
Die Verwendung der Daten muss auf den im Voraus gesetzlich festgelegten Zweck
begrenzt werden. Dabei müssen klar definierte Verarbeitungsvoraussetzungen geschaffen werden, die sicherstellen, dass der einzelne nicht zum bloßen Verarbeitungs- und Informationsobjekt wird.22
Besondere Anforderungen sind an die Belehrung des Betroffenen zu stellen, da
nur ein informierter Bürger seine Rechte wahrnehmen kann. Ein Bürger kann die
Offenbarung persönlicher Lebenssachverhalte nur dann ausreichend übersehen,
wenn er weiß, wann, wo und bei welcher Gelegenheit über ihn Daten gesammelt
und verarbeitet werden. Jeder Zweifel hierüber schränkt in unzulässiger Art und
Weise Einzel- und Kollektivrechte ein. Die Unsicherheit, nicht zu wissen, was andere über einen wissen, kann dazu führen, sich anders zu verhalten als man eigentlich will. Gerade das soll aber vermieden werden.

20
21
22

Vgl. BVerfGE 65, 43 ff.
Vgl. BVerfGE 65, 1, 44 mit Verweis auf BVerfGE 4,7,15; 8, 274, 329 m. w. N.
Vgl. BVerfGE 65, 1, 48.

Urban Bacher • Kathrin Wolf

22

2.5.3 Das Kontenabrufurteil des Bundesverfassungsgerichts von 2003

§ 24c KWG ist auf die Terroranschläge am 11. September 2001 auf das World
Trade Center zurückzuführen. Der Staat soll dadurch Konten abrufen können,
sobald ein Verdacht auf Geldwäsche besteht sowie um den Terrorismus zu bekämpfen. Konkret soll der Staat die Möglichkeit haben, Kontenstrukturen und Geldbewegungen von Terrororganisationen einzusehen, um die Sicherheit der Welt
zu gewährleisten. Der Kontoabruf wurde in den Folgejahren zur Förderung der
Steuerehrlichkeit und zur Verhinderung von Missbrauch von Sozialleistungen ausgebaut. Mehrere Kläger, darunter eine Volksbank, legten Verfassungsbeschwerde
ein. Im Ergebnis war die Neuregelung verfassungskonform.23 Lediglich bei den
Kontenabrufen der „anderen Behörden“ gemäß § 93 Abs. 8 AO musste der Gesetzgeber nachbessern.
Das Bundesverfassungsgericht hat in seinem Urteil vom 13.06.2007 folgendes
festgestellt:24
- § 93 Abs. 8 AO verletzt das Recht auf informationelle Selbstbestimmung.
Dagegen genügen die weiteren mit den Verfassungsbeschwerden angegriffenen
Normen den verfassungsrechtlichen Anforderungen für Eingriffe in dieses
Grundrecht (Rz 83).
- Die angegriffenen Vorschriften ermächtigen zu Eingriffen in das Recht auf
informationelle Selbstbestimmung. ... Es gibt dem Einzelnen die Befugnis,
grundsätzlich selbst über die Preisgabe und Verwendung seiner personenbezogenen Daten zu bestimmen. Das Recht auf informationelle Selbstbestimmung
ergänzt besonders geregelte Garantien der Privatheit, insbesondere das Postund Fernmeldegeheimnis und den Schutz der räumlichen Privatsphäre des
Wohnungsinhabers (Rz 84).
- Die in den angegriffenen Normen geregelte Datenabrufe greifen in das Recht
auf informationelle Selbstbestimmung ein (Rz 89).
- Diese Normen haben zum Ziel, vor allem Strafverfolgungs-, Finanz- und Sozialbehörden Kenntnis über das Bestehen von Konten und Depots, die der
Betroffene bei inländischen Kreditinstituten unterhält, und Informationen
über Stammdaten zu verschaffen. Einblicke in die Kontoinhalte und Kontobewegungen erlauben die Informationen über Kontostammdaten nicht. Stellt
23
24

Vgl. BVerfG, 1 BvR 1550/03 vom 13.06.2007.
Auszüge aus BVerfG, 1 BvR 1550/03 vom 13.06.2007.

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

23

sich heraus, dass der Betroffene über bislang unbekannte Konten und Depots
verfügt, kann die jeweils handelnde Behörde gegebenenfalls auf der Grundlage
anderer Ermächtigungsnormen Informationen über deren Inhalt erheben (Rz
90).
- Dem für Normen zur Ermächtigung von Grundrechtseingriffen maßgebenden
Gebot der Normenklarheit und Bestimmtheit wird die Befugnis aus § 93 Abs.
8 zur Erhebung von Kontostammdaten in sozialrechtlichen Angelegenheiten
nicht gerecht. Demgegenüber genügen § 24c Abs. 3 KWG und § 93 Abs. 7
AO diesem Gebot (Rz 93).
- Die in § 24c Abs. 3 KWG und § 93 Abs. 7 AO enthaltenen Eingriffsermächtigungen genügen auch dem Grundsatz der Verhältnismäßigkeit (Rz 115).
- Die zu prüfenden Normen dienen Gemeinwohlbelangen von erheblicher Bedeutung (Rz 126).
- Die angegriffenen Normen ermächtigen zu Eingriffen in das Grundrecht auf
informationelle Selbstbestimmung, die nicht außer Verhältnis zu den verfolgten Gemeinwohlbelangen stehen (Rz 130).
- Aus dem Gehalt der Informationen, die nach den angegriffenen Normen abgerufen werden können - den bloßen Kontostammdaten -, ergeben sich keine
Anhaltspunkte für eine gesteigerte Intensität des Grundrechtseingriffs durch
einen solchen Abruf (Rz 135)
- Aus dem Ergebnis des Abrufs der Kontostammdaten lässt sich je nach der
Kontoführungspraxis der Kreditinstitute gegebenenfalls ersehen, um welche
Art eines Kontos es sich handelt. Es ist allerdings in keinem Fall erkennbar,
ob der Kontostand positiv oder negativ ist. Daher sind allenfalls Vermutungen
über den Vermögensstand des Betroffenen möglich. Zur Aufklärung des Sachverhalts bedarf es weiterer Ermittlungsmaßnahmen. Für sie müssen Ermächtigungsgrundlagen bestehen, die einer selbstständigen verfassungsrechtlichen
Rechtfertigung bedürfen, wobei sich deren Anforderungen nach der meist
deutlich erhöhten Intensität des Grundrechtseingriffs durch solche weiteren
Ermittlungsmaßnahmen richten (Rz 137).
2.5.4 Eine erste kritische Bewertung

Kontoabfragen sind unzweifelhaft wichtig, um Terroristen, Sozial- und Steuerbetrügern auf die Schliche zu kommen, aber sie müssen überprüfbar sein. Jeder
Bürger muss die Möglichkeit haben, zu erfahren, wer was über ihn weiß. Ungewiss

24

Urban Bacher • Kathrin Wolf

bleibt zudem bis heute, ob die Ziele mit der „Kontenschnüffelei“ überhaupt erreicht wurden bzw. werden. Der Staat kann derzeit keine bedeutenden Fälle vorweisen, bei denen das Abfragesystem zu einer erfolgreichen Vereitelung einer Straftat
geführt hat.
Kritisch ist in diesem Zusammenhang auch, dass die Kreditinstitute gemäß
§ 24c Abs. 1 KWG alle erdenklichen Maßnahmen treffen müssen, damit niemand
von dem Datenabruf Kenntnis erlangt (Samson & Langrock, 2005: 21). Dieses
Transparenzgebot ist schon nach Art. 19 Abs. 4 GG - dem Grundrecht auf effektiven Rechtsschutz - geboten. Ein berechtigter Grund zur Geheimhaltung des
Datenabrufes ist nur in einem engen Korridor geboten. So ist z. B. im Falle der Terrorismusbekämpfung ein höheres Geheimhaltungsinteresse legitim. In der Praxis
unterbleibt jedoch trotz explizit gesetzlich verankerter Informationspflicht auch in
anderen Fällen die Auskunft gegenüber den Betroffenen. Eigenen Angaben zufolge
weiß das Finanzministerium in vielen Fällen des Datenabrufs gemäß § 93 Abs. 7
und 8 AO nicht, ob die Kontoinhaber tatsächlich über einen Abruf informiert
wurden (Seith, 2007). Damit ist eine Kontrollmöglichkeit, ob die Voraussetzungen
für einen Datenabruf gegeben waren und damit verbunden auch ein Rechtsschutz
gegen den unerlaubten Abruf von Daten, nicht mehr gewährleistet. Dies unterscheidet die Regelung gravierend von den Vorschriften der Strafprozessordnung,
denn dort ist gemäß § 101 StPO nach einer Telefonüberwachung bzw. § 110d
StPO im Anschluss an das Betreten einer Wohnung durch verdeckte Ermittler der
betroffene Bürger zu unterrichten.25
Auch sollten mit Einführung der Abgeltungssteuer in 2008 Kontoabfragen nur
noch die Ausnahmen sein, da der Hauptgrund für die Abfragen, die Verifizierung
der Angaben des Steuerpflichtigen, durch diese entfallen ist (Maag, 2007: 121).
In der Praxis zeigt sich hingegen ein anderes Bild: In den letzten Jahren hat die
Zahl der Abfragen stetig zugenommen26 und dies, obwohl laut Entscheidung des
Bundesverfassungsgericht Kontoabfragen nicht als Routineinstrument, sondern als
„letztes Mittel“ angesehen werden sollen (Seith, 2007). Einen nicht unwesentlichen
Teil zu diesem Trend trägt sicher die Heimlichkeit des Abrufverfahrens bei, welches
25
26

Vgl. ZKA, Stellungnahme des Zentralen Kreditausschusses vom 24.02.2005, S. 31.
Im 1. Halbjahr 2009 betrug die Zahl der Abfragen durch die Behörden 57.000. Zum Vergleich im
Jahr 2008 bearbeitet die BaFin 83.938 Anfragen davon entfielen 277 auf die BaFin selbst, der Rest
verteilt sich laut BaFin-Jahresbericht auf Anfragen der Finanz-, Polizei- und Zollbehörden sowie auf
Anfragen vieler Staatsanwaltschaften.

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

25

dazu verleitet, die Ermittlungshürden in der Praxis nicht allzu hoch anzusetzen
(Maag, 2007: 168ff; Samson & Langrock, 2005: 27). Es besteht die begründete
Sorge, dass die Finanzverwaltung ihr Ermessen im Bezug auf § 93 Abs. 7 AO nicht
verfassungskonform ausübt. Zudem scheinen die Behörden mit den Abfragen überfordert zu sein. In einer Stichprobe bei den Finanzämtern offenbarte sich, dass die
Abfragen in neun von zehn Fällen Mängel aufwiesen.27 Nicht abstreiten lässt sich,
dass die Kontenabrufe ein wirksames Instrument der Finanzbehörde im Kampf
gegen Steuersünder darstellen, die Angemessenheit des Verfahrens bleibt indessen
zweifelhaft.
Banken fühlen sich durch die Einführung des Abrufsystems generell und durch die damit in Zusammenhang stehenden Kosten hintergangen. Sie selbst haben
keinen unmittelbaren Nutzen, müssen jedoch das Kontrollsystem einführen und
bereithalten. Mehr noch: Kreditinstitute werden durch derartige Systeme immer
mehr zum Gehilfen der Staatsanwaltschaft und des Überwachungsstaats.
3. ZUSAMMENFASSUNG MIT EINEM ERSTEN BEGRENZENDEN
LÖSUNGSANSATZ

Im Jahr 1949 ging man in Deutschland noch davon aus, dass jede erdenkliche Maßnahme, die das Vertrauensverhältnis zwischen Kunde und Bank gefährden
könnte, den Geldumlauf sowie den Kapitalmarkt empfindlich stört.28 Man war
daher gewillt, solche Störungen zu vermeiden. Heute stellt sich die Lage verändert dar, zahlreiche Regelungen höhlen das Bankgeheimnis immer weiter aus. Von
dem Recht auf informationelle Selbstbestimmung kann in vielen Fällen keine Rede
mehr sein. Fraglich ist auch, ob die fehlende Transparenz allein mit der Begründung der Terrorabwehr gerechtfertigt werden kann.
Die Kreditinstitute wirken bei der Bekämpfung des Terrorismus und der Schwerstkriminalität seit Jahren aktiv mit.29 Ebenso befürworten die Verantwortlichen
alle Maßnahmen, die angemessen und erforderlich sind, die Bedrohung zu minimieren. Die heute existierenden Regelungen gehen jedoch in ihrem Umfang
und in ihrer Ausgestaltung zu weit. Die Verhältnismäßigkeit der Eingriffe in die
Privatsphäre der Bürger bleibt nicht gewahrt. Strengere Regelungen und schärfere
27
28
29

Vgl. O. V., Genossenschaftsblatt für Rheinland und Westfalen, 4/2007, S. 3 ff.
Vgl. Bankenerlass vom 02.08.1949.
Vgl. ZKA, Stellungnahme des Zentralen Kreditausschusses vom 24.02.2005, S. 6.

26

Urban Bacher • Kathrin Wolf

Kontrollen für den Datenabruf beispielsweise durch eine präventive, unabhängige
Kontrollinstanz wären wünschenswert (Eckle, 2007: 7). Eine ebenfalls in der Literatur vielfach diskutierte Lösung, um den Datenmissbrauch zu verhindern, wäre sicherlich, die Zustimmungserfordernis einer höheren Kontrollinstanz. Um die Zahl
der Abfragen auf ein gesundes Maß zu reduzieren, wären zudem Einzelabfragen als
Alternative zum automatisierten Abruf in begründeten Fällen denkbar.
LITERATURVERZEICHNIS

1. Bacher, Urban (2009), Bankmanagement kompakt, 2. Auflage, Konstanz.
2. BAFin, Jahresbericht 2008 der Bundesanstalt für Finanzdienstleistungen,
URL:http: //www. bafin.de/cln_108/nn_722564/SharedDocs/Downloads/, abgerufen am 24.08.2009.
3. Eckle, Markus (2007) Das Bankgeheimnis und die Richtlinie 2003/48/EG des
Rates vom 3. Juni 2003 im Bereich der Besteuerung der Zinserträge, Medien
Verlag Köhler, Stuttgart
4. Langweg, Peter & Tischbein, Heinz-Jürgen (2002) Der automatisierte Abruf
von Kontoinformationen nach § 24c KWG, in: Bankinformation 10/2002, S.
59-61.
5. Maag, Bernhard (2008) Der verfassungsrechtliche Schutz des Bankgeheimnisses,
Verlag Dr. Kovač, Hamburg
6. O. Verfasser (2007): Was bleibt vom Bankgeheimnis? In: Genossenschaftsblatt
für Reinland und Westfalen 4/2007, pp. 3- 5.
7. Samson, Erich & Langrock, Marc (2005) Der gläserne Bankkunde? Automatisierter Abruf von Kontoinformationen und Grundrecht auf informationelle
Selbstbestimmung, Band 1/3, Carl Heymanns Verlag, München
8. Seith, Anne (2007) Umstrittene Kontoabrufe- „Die, die bibbern müssen, die
wollen wir ja kriegen“, In: Spiegel Online, 12.07.2007, URL: http://www.spiegel.de/wirtschaft/ 0,1518,494102.html, abgerufen am 18.09.2009.
9. ZKA - Zentraler Kreditausschuss (Hrsg.) (2005): Stellungnahme zu den Verfassungsbeschwerden und zu dem Antrag auf einstweiligen Rechtsschutz gegen
das Verfahren des automatisierten Abruf von Kontoinformationen gemäß
§ 24 c Kreditwesengesetz und §§ 93 Abs. 7 und 8, 93 b Abgabenordnung.

AUTOMATISIERTE KONTOABFRAGEN UND BANKGEHEIMNIS

27

10. Zubrod (2003) Automatisierter Abruf von Kontoinformationen nach § 24c
KWG - Rechtliche Voraussetzungen und Grenzen, in Wertpapiermitteilungen
WM, pp. 1210-1217.

Berislav Bolfek • Biljana Lončarić

28

BUSINESS PERFORMANCE MANAGEMENT USING
MODEL FOR PROFIT OPTIMIZATION
Berislav Bolfek, Biljana Lončarić
University of Applied Sciences of Slavonski Brod, Croatia

1

ABSTRACT

Performance management is an imperative for the management because their
success in managing a company depends on achieved results. Therefore, it is very
important that the management can always and at any moment affect business
results, i.e. profit movement. Ordinarily, business results or profit monitoring does
not seem to be a problem for the management, while taking various corrective actions directed at increasing profit is not that simple and this is a real problem for
the management. The question that arises is what activities and what total number
of these activities should be undertaken to achieve the planned level of profit.
As one of the possible ways for solving this problem is to develop a Model for
profit optimization, which should assist the management in performance managing. Model for profit optimization consists of two procedures for the optimization
of profit based on the method of linear programming. This model finds the optimal
relationship between the income from the sale of various products and services, so
it is possible to determine exactly which incomes should be increased and in what
measure it should be done. In this way the management gets a new opportunity to
take corrective actions in time to achieve the goals of the business policy in terms
of making profit.
JEL clasiffication: C61, L25,
Keywords: management, profits, linear programming

1. INTRODUCTION

In today’s dynamic environment, it is necessary to manage the business results,
so that the company could be operated successfully and could make a profit, which
presents the measure of the success of individual companies at the market. Among

BUSINESS PERFORMANCE MANAGEMENT USING MODEL FOR PROFIT OPTIMIZATION

29

many responsible tasks of a company management, the business results management has one of the most important roles. A profit is a measure of the success of
individual companies, and therefore it is the most important category in relation
to other financial indicators. Therefore, all companies regardless of their size must
prepare “Income Statement”, as a financial report, prescribed by the statutory accounting, whose purpose is to calculate the gain (or loss) precisely, for the period
of one year (12 months).
“The business results are not expected, they are managed. Today the terms accepted in economic terminology are: cost management, financial management,
inventory management, production management, sales management, personnel
management, management accounting, quality management and other types of
management. For effective business results management, it is important that clearly
defined goals exist and that there is possibility to measure them.. Negative deviations from the goals refer to the necessity of taking action for their correction, or for
making new business decisions that set new goals.” (Avelini-Holjevac; 1998, 6)
The high quality business results management involves careful planning of all
segments of business, as well as designing and monitoring of key indicators which
reflect the actual situation (meaning how the company actually operates), and, at
the end, analyzing the reasons and the sources of deviations between desires and
reality, plans and results.
Bigger companies set up monitoring and compare realized profit with planned
profit, and this activity does not present a problem for the management of the company. However, in the case that there is an unwanted deviation from planned profit
what presents a bigger problem for the management, a corrective action in order to
achieve the planned profit should be taken.
Therefore, one of the ways to solve the mentioned problem is to establish the
model for profit optimization, developed and set up on the basis of linear programming methods.
2. MODEL FOR PROFIT OPTIMIZATION

Once comparison of the realized profit with the planned profit has been done,
there is the possibility that the realized profit is lower than the planned profit, and
that the deviation is bigger than allowed. This discrepancy leads the management to
the situation where there is a need to take specific measures and activities immediately, in order to increase profit as well as to achieve the planned level of profit.

30

Berislav Bolfek • Biljana Lončarić

This situation can be solved in a way to increase revenues additionally, or to
increase the existing volume of production and sales which will at the end result
in increased profit. However, parallelly with the increase in revenues, there is the
expenditures increasing, noting that the value of revenues increasing may not be
the same as one on the expenditure side. The above shows that the expenditures
do not have to grow as quickly as the revenues, but they can grow slower, or faster.
Therefore, an effort has to be made to raise more these revenue that are followed by
slower growth on the side of the expenditures.
Therefore, there is a need to make a selection of products and services that realize maximum profits and to organize their production and sales in order to reach
planned profit by increasing total revenues. This means that the optimal relationship between the incomes from the sale of various products and services should
be found, meaning that it is necessary to determine which revenues should be
increased and how much.
In this case it is necessary to implement the process of profit optimization, and
one of the ways to do it is by using the method of linear programming, which is
described in the literature and can be used for this purpose. That is why the method
of linear programming presents the basis on which the model for profit optimization has been positioned and developed.
Model for profit optimization just mentioned has been set up in a way so that
the optimization of the model proceeds in two mutually connected activities. In
the first activity the maximum profit, using the resources currently available for
production, is being calculated, while in another activity we must calculate the
maximum profit realized by using additional resources for production.
2.1. The procedure for the optimization of the profit I

The first activity in the Model for profit optimization is procedure for obtaining the optimal profit and through which the maximum profit, on the basis of all
resources currently available for the production, is calculated.
The aim is to determine the exact quantity of the types of products or services
which have to be produced and sold, with known profit realized on the particular
product or service, in order to achieve maximum total profit in the current year.
Available data for this purpose are in the planned calculations and work orders calculations indicating the profit amount in a particular product or service.

31

BUSINESS PERFORMANCE MANAGEMENT USING MODEL FOR PROFIT OPTIMIZATION

The above objective function which should be maximized can be written in the
mathematical form in this way:
OP = P 1 x 1 + P 2 x 2 + ... + P nx n →max

(1)

with following explanation:
OP – profit optimization at the annual level
P – profit realized by selling the specific product or the specific service (product
groups or service groups)
x – amount of the products or the services (product groups or service groups)
n – number (code) of the specific product or the specific service (product groups
or service groups)
The restrictive factors that appear in maximizing profits as available manufacturing capacities have to be taken into consideration. That is why there are following
limitations in the model: availability of machine capacities, availability of work
(human) capacities, possibilities to sell on the market, so far agreed sales and production, and availability of raw materials for production.
The first limiting factor is the total available machine capacities for the production of all products or services on annual basis, and can be expressed as follows:
mc 1x 1 + mc 2x 2 + ... + mc nx n ≤ MC

(2)

with following explanation:
mc – machine capacity needed to create a single product or service expressed in
machine hours
x – amount of the products or the services (product groups or service groups)
n – number (code) of the product or the service (product groups or service
groups)
MC – total machine capacity available for production of all products or services
on annual basis, expressed in machine hours
Another limiting factor is the total available working (human) capacity for production of all products or services on annual basis and can be expressed as follows:
hc 1x 1 + hc 2x 2 + ... + hc nx n ≤ HC

(3)

Berislav Bolfek • Biljana Lončarić

32

with following explanation:
hc – working (human) capacity that is needed to create a single product or service, expressed in standard hours
x – amount of products or services (product groups or service groups)
n – number (code) of the product or the service (product groups or service
groups)
HC – the total work (human) capacity available for production of all products or
services on annual basis, expressed in standard hours
The third limiting factor is the market, which means that there is a limited possibility of sales for each product or service, and the maximum amount of market
sales for each product or service has to be determined. This limit can be written as
follows:
x1 ≥ S1
x2 ≥ S2

(4)

x3≥ S3
with following explanation:
S – maximum annual sales of products or services expressed in units of measure
x – amount of products or services (product groups or service groups)
n – number (code) of the product or the service (product groups or service
groups)
The fourth limiting factor is the existing, already concluded contracts and customer orders for certain products and services, or contracted production (sales) for
the current year. Above limit can be written as follows:
x1 ≥ A1
x2 ≥ A2

(5)

x3≥ A3
with following explanation:
A – agreed and realized sales (there are contracts and purchase orders, as well as the
invoices for goods sold) of products and services for the current year, expressed
in units of measure (pieces, kg, m, m2, m3, etc.).

BUSINESS PERFORMANCE MANAGEMENT USING MODEL FOR PROFIT OPTIMIZATION

33

x – amount of products or services (product groups or service groups)
n – number (code) of the product or service (product groups or service groups)
The fifth limiting factor is the overall availability of raw materials (materials for
production) at the annual level which should be sufficient for the production of all
products, and can be expressed as follows:
r 1x 1 + r 2x 2 + ... + r nx n ≤ R

(6)

where:
r – raw materials (materials for production) needed to create one product expressed in the unit of measure
x – amount of products or services (product groups or service groups)
n – number (code) of the product or the service (product groups or service
groups)
R – total raw materials (materials for production) available for the production of
all products at the annual level, expressed in units of measure (pieces, kg, m,
m2, m3, etc.).
At the end we have to specify restrictions in regard to the non-negativity:
x 1 ≥0, x 2 ≥ 0, ..., x n≥ O
After finishing the procedure for profit optimization, as a result we get the exact amount of certain products or services that should be produced or sold in the
current year, in order to achieve maximized profits by taking into account all of
mentioned limiting factors.
After the procedure for the optimization of profit has been finished, we can
determine whether the optimized profit is lower than the planned profit. If the
optimized profit is bigger or equal to the planned profit the obtained results can
be applied. If the optimized profit is lower than the planned profit, the analysis
of deviations for optimized profit should be done. Through this analysis it can be
determined whether deviation is greater than allowed. If the deviation of the optimized profit is lower or equal to permitted deviation, current operations could be
continued. However, in the case that the deviation of optimized profit is higher
than permitted, it is necessary to carry out the process for profit optimizing II.

Berislav Bolfek • Biljana Lončarić

34
2.2. The procedure for optimizing profit II

The procedure for optimizing profit II presents the second activity for profit
optimization by which maximum profit can be calculated, in a way that, besides
the existing resources of production, additional resources for production are conducted, too.
Assuming that the result got by getting optimized profit (according to the previous terms from 1 to 6) is not satisfactory, and optimized profit is still lower than
planned, this means that revenues should be increased further. Namely, in such
cases in order to increase revenues, it can be arranged to install additional shifts
(second, third), and additional work in non-working days (on Saturday, on Sunday,
during public holiday), under condition that there is a possibility for selling in the
market additional quantities of products and services.
Therefore it is necessary to modify the existing objective function in the sense
of the introduction of additional work expressed in hours, with the dilemma of (an
unknown) how much extra work (hours) with a known cost we have to invest, in
order to achieve maximized profits.
The objective function modified in this way can be also written in the mathematical form in this way:
OP2 = P 1 x 1 + P 2 x 2 + ... + P nx n - PMy - PSz→max

(7)

with following explanation:
OP 2 – Optimization of profit at the annual level
P – profit realized by selling specific product or service (product groups or service
groups)
x – amount of products or services (product groups or service groups)
n – number (code) of the product or the service (product groups or service
groups)
PM – price per additional machine hour
PS – price per additional standard (human) hour
y – the total number of additional machine hours
z – the total number of additional standard hours

BUSINESS PERFORMANCE MANAGEMENT USING MODEL FOR PROFIT OPTIMIZATION

35

Five of the existing restrictions that are listed in the previous expressions of (1)
to (6) should be updated, only in the terms: (2) as the first limit, and (3) as the
second limitation, while the other limitations do not change but remain the same.
Thus, all restrictions by the modified objective function can be written as follows:
1st

OP = P 1 x 1 + P 2 x 2 + ... + P nx n → max +y

2nd mc 1x 1 + mc 2x 2 + ... + mc nx n ≤ MC + z
3rd

x1 ≥ S1
x2 ≥ S2
x3≥ S3

4th

x1 ≥ A1
x2 ≥ A2
x3≥ A 3

5th r 1x 1 + r 2x 2 + ... + r nx n ≤ R
By maintaining the same restrictions in regard to the non-negativity:
x 1 ≥0, x 2 ≥ 0, ..., x n≥ O
The result of the repeated process of profit optimization, with the modified objective function, is to get the total number of extra hours as the basis for increasing
production, in order to achieve the maximum profit for the current year. Namely,
in this way we get the exact number of extra machine hours and standard hours for
each product or service, so increasing of the hours is not being implemented for all
products and services linearly, but the optimum relationship between all products
and services has been determined.

36

Berislav Bolfek • Biljana Lončarić

3. CONCLUSION

Business results management, in addition to financial management, production
management, marketing management and human resources management, is one of
the most important tasks facing management. To manage the business results, it is
necessary to track from month to month moving of profit as well as the eventual
loss during the whole business year.
However, for successful management it is not enough to monitor only realized profits, and to compare it with the planned profit values. The management is
expected to react quickly and decisively to the unwanted situation of profit deviations, in sense of taking corrective actions to achieve planned or expected profits.
Exactly for this purpose The Model for profit optimization has been developed.
Basis of the model is linear programming method that calculates the maximum
profit that can be achieved in the current year with available and additional resources. Therefore, in the model there is the possibility to modify objective functions, in
order to introduct additional resources.
The basic advantage for the management that Model for profit optimization
provides is the possibility of taking timely corrective actions, in order to achieve
the goals of business policy, as well as to realize principles of business results which
should not be expected, but managed.
LITERATURE

1. Avelini-Holjevac, I. (1998). Kontroling: upravljanje poslovnim rezultatom, Hoteljerski fakultet Opatija, ISBN 953-6198-15-0, Opatija
2. Barković, D. (2001). Operacijska istraživanja, Ekonomski fakultet Osijek, ISBN
953-6073-51-X, Osijek
3. Bronson, R.-Nadimuthu,G. (1997). Operations research, McGraw – Hill, ISBN
0-07-008020-8, New York
4. Chadwick, L. (2000). Osnove upravljačkog računovodstva, Mate d.o.o., ISBN
953-6070-63-4, Zagreb
5. Schroeder, R. (1999). Upravljanje proizvodnjom, Mate d.o.o., ISBN
953-6070-37-5, Zagreb

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

37

HUMAN RESOURCE MANAGEMENT
OF THE CITY OF VINKOVCI
CONTINUOUS EDUCATION AND MOTIVATION
OF EMPLOYEES AS A BASIS OF SUCCESS
Sanja Bošnjak,dipl.oec/B.Sc.Econ.
Vukovar-Srijem County
City of Vinkovci
Department for finance

Abstract

The importance and the purpose of local governments is to satisfy and fulfill the
general social needs of their citizens.
In order to complete this ‘mission’ any local government is supposed to employ capable and competent professionals who would do their jobs efficiently and
conscientiously.
Another very important point that any local government should be based on
is trust between public services and the citizens. The trust is Condicio sine qua non
when we talk about communication. It can be noticed that there is a great communication gap between citizens and local government as well as higher levels of
government, which is filled with distrust and lack of comprehension.
In such a distrustful climate there is no way efficient way of dealing with the
problems. Therefore, one of the primary tasks of any local government is to regain
the trust of its citizens! The first contacts citizens have with the local government are
its employees. They are very important part of the system.
Although it’s been fifteen years since local governments were established, not
much has been done in the sphere of human resources, which also reflects the
quality of work of public sector. Therefore it is necessary to analyze current state of
human resources of local government, start to motivate employees and ensure their
continuous education. Such kind of actions in the local government units should
be a reflection of their sense of obligation towards the sources of their financing:
citizens, voters, clients and taxpayers.
JEL clasiffication: J33, O15

38

Sanja Bošnjak

Key words: human resources, motivation, local government, employees, education, skills, City of Vinkovci
1. INTRODUCTION

For many years people, their needs and wishes have been neglected in organizations. By realizing that people are the initiators of each organization, big companies
followed by other organizations started working on systematic education, specializations and motivation of the employees. The purpose of that was to provide welltrained and well-motivated employees in order to make and develop a company of
great quality which would remain competitive with other companies.
In the time of constant changes in technology as well as the increase of the
complexity of jobs and need for further education and acquiring skills it becomes
an imperative to create the learning organization. Human resources management
is a complex system which enables the company to follow, shape and fully use the
present human resources with minimal expense. Continuous education and the
creative application of the newly acquired knowledge in solving the present and
the future problems as well as the motivation of the employees, is the philosophy
hardly known and applied within a local government. This very situation is one
of the main causes of the indolent, inefficient organization resulting in irrational
spending of the budget which then disables the accomplishments of its main goal:
to create strong, financially independent local governments which successfully meet
the public needs of their citizens. Having in mind that the City of Vinkovci is not
an exception, I conducted a research to get an insight into the present situation and
possibly suggest some measures for the improvement.
2. MOTIVATION

In the last decade, apart from economic and demographic changes, which influenced the cities as local government units, there are also changes in the way
economy operates. Competition among cities, regions and local governments that
cover certain areas is getting bigger and bigger. The cities are becoming more
important in the political, economical and social sense. They are engaged in the
foreign as well as domestic politics, they form alliances; compete with other cities
in Croatia as well as in the EU. The cities are trying to increase their role of managing, guiding, and controlling of economic and territorial processes in the scope
of their activities in order to strengthen their economic basis and decrease the
government budget dependence. The city budget should be concentrated on at-

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

39

tracting new investments, business organizations and entrepreneurs and it should
rely on employed people who would find some kind of interest to stay in town
instead of going elsewhere. In order to successfully carry out all of these tasks
a local government unit should improve human resource utilization. It should
be oriented towards making of such an administration that would qualitatively
and quantitatively meet the needs of its citizens and have long-term objectives
of insuring better life in the local community. To achieve better efficiency of the
employees they need to be motivated.
Motivation is the activation of goal-oriented behavior. Motivation can be intrinsic or extrinsic. The term is generally used for humans but, theoretically, it can
also be used to describe the causes for animal behavior as well. This article refers
to human motivation. According to various theories, motivation may be rooted in
the basic need to minimize physical pain and maximize pleasure, or it may include
specific needs such as eating and resting, or a desired object, hobby, goal, state of
being, ideal, or it may be attributed to less-apparent reasons such as altruism, selfishness, morality, or avoiding mortality. Conceptually, motivation should not be
confused with either volition or optimism. (http://en.wikipedia.org/wiki/Motivation Seligman, Martin E.P. (1990). Learned Optimism. New York: Alfred A. Knopf,
Inc.. p. 101. ISBN 0-394-57915-1)
Motivating is one of the basic function of management. Moreover manager
function refers to the management, control or business management of people
employed in the company. It is about encouraging people to pay interest primary to
company objective i.e. users, staff satisfaction and general life satisfaction, although
the last one typically leads to higher image and company quality. System of motivation is extremely complicate process and it should performed by all leaders. In this
process everything must be followed, and always available for advice and auditing.
(Marušić; 1995, p 36)
The indicator of how big an issue motivation is there are many research papers
and theories that deal with motivation: Maslowljev’s, Aderfer’s, Herzberger’s, McClelland’s, Atkinson’s, Miner’s and many others. (Certo; 2008, p 382-388)
This great interest in the problem of motivation basically has three reasons: improvement of labor productivity, efficiency and creativity, improvement of quality
of working hours spent in the organizations, strengthening of competitive ability
and business efficiency of the organization. (Bahtjarević Šiber; 1999, p 555)
Different authors mention different factors of motivation: a challenging job, a
possibility of success, responsibility, professional growth, promotion, recognition,

40

Sanja Bošnjak

salary, working conditions, job security, interpersonal relations, possibility of education, stimulation for the job good done, awards.
The same factors do not apply to each and every employee. Each employee
has his/her own individual expectations and perception of the situation. Different people have different needs, wishes and desires and therefore act differently in
the same situation. In order to secure the implementation of the right motivation
model and approach one has to know the individual characteristics and expectations of the employee.
Numerous research done lately show that the organizational climate within the business system influences the working motivation of the employees and
their contentment. Indirectly it also affects the labor productivity and business
performance.
3. THE OVERVIEV OF THE SITUATION IN A LOCAL GOVERNMENT – City of
Vinkovci

Every day we are more aware that the companies that realized that human resources they dispose of are one of the major factors of their existence and activity
are more successful than the companies which management deny or underestimate
the value of the people, their knowledge and motivation to work. We all know
that the last decade had been marked by severe changes within the local government in the Republic of Croatia. The law regulated economic, social and political
changes, the decentralization of the financing of the local governments in attempt
to awaken their economy and stimulate financial independence as well as provide
the optimal realization and rational spending of the budget, whereas the needs of
its citizens would be met. We come to a completely new way of thinking and clear
demand: city must start acting like an entrepreneur. Clearly, that is not always possible. The purpose of local government is meeting public needs of their citizens and
these often are not compatible to the entrepreneur’s way of thinking. Nevertheless,
the local government should rationally dispose of their assets, should have clearly
defined investment programs into communal, housing, social and other sectors of
public needs, as well as control over their property like a good owner. (Vitezić et al;
2004, p 140). The accomplishments of these goals are not possible without people,
their specific skills, knowledge and their creativity.

41

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

3.1. Some Issuse Of Human Resources In The City Of Vinkovci

Analysis of situation in the City of Vinkovci opened the some issues.
3.1.1. Politics Into Human Resources Management

One of the basic issues is: How to avoid intrusion of politics into human resources management? The politics itself or the elected political leadership is very
often the cause of the significant problems in organization. Choosing some of the
staff according to their political line, with no concern to their competence and
expertness to accomplish certain kind of work seems to be a very serious problem.
The question is how to reconcile the political demands and the need for absolutely
independent and expert administration.
The only solutions seems to be the severe separation of the political functions
from the expert service and professional employees, as well as maturation of the
political structures and their conscience that political management demands expert
staff, systematic education and following of their work. All above said imposes the
need for human resource planning process (Noe et al; 2000, p 146).
3.1.2. Individual Motivation

The next question is individual motivation. The most important task of management is to motivate other people. (Denny; 2000, p 7). The climate of the organization within the business system has great impact on motivation of the employees
and therefore their success in work. Follows the overview of employees by years of
service in City of Vinkovci.

Table 1: The overview of employees by years of service in City of Vinkovci
Years of service
< 5 years
5-10 years
10-15 years
15-20 years
20-25 years
> 25 years
TOTAL
Source: Autor

Number of employees
11
5
5
18
9
33
81

42

Sanja Bošnjak

From the table is evident that 51.85% of employees are more than 20 years of
service. Most of them hardly catch up with the changes. Beside that they need encouragement and support. Young employees refresh are working environment, and
trying be support older employees.
The next question that arises is how to motivate people to work, how to, with
limited financial resources, convince them to work the best way they can to show
their creativity, to coexist with their company but also how to convince their chiefs
that people are not expendable goods. It should be emphasized that the needs and
wishes of each and everyone are real and important, that employees have their
personal lives outside the company which should be respected and that they have
problems which one needs to be considerate about.
It is true that everyone disposes of certain potentials; they just have to notice
them and keep developing them. It is necessary to make a thorough analysis of
the disposable staff in order to ascertain knowledge, abilities and skills we already
dispose of and also to create programs for qualifications and further education
which certain working place demands. Therefore, the expense of the systematic
qualification and education will seem to be irrelevant in comparison to the achieved
results.
The communication between the management and the employees is here of
great importance. The goals are the initiators of all the actions, so it is important
to notice the significance of the motivation as the initiator of these actions and the
self development.
3.1.3. Structure Of Human Resource Of The City Of Vinkovci

To achieve the maximum in human resource management the experts believe
that each organization should have a special department or organizing unit which
would, according the certain methodology, supply, analyze and keep information
about employees.
This can be achieved by suggesting the managers certain solutions to the employee’s problems and measures to improve the work of the organization. As most
of the local governments in the Republic of Croatia neither the City of Vinkovci
has any special organizing unit or department for human resource management.
The necessary office work, or collecting and managing legally prescribed evidence
is done by the service inside the Mayor’s office.

43

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

The City of Vinovci is the local government with 81 employees within 7 organization units-departments and 12 local committees and city districts.
The City of Vinkovci provides for following public needs: its provides conditions for development of economy, social services, municipal and other services of
significance for the city; urbanism, architecture and protection of environment;
living quality care, municipal services in the city area; children care, education,
public health, social welfare, culture, sports.
Follows the qualification structure employees in City of Vinkovci:

Table 2: Qualification structure of employees of the City of Vinkovci
Qualification
University qualification
Two-year past-secondary school qualification
Secondary school qualification
Unskilled worker
TOTAL

Number of employees Women
32
15
6
3
38
26
5
2
81
46

Man
17
3
12
3
35

Source: Autor

Graph 1: Qualification structure of employees of the City of Vinkovci
Qualification structure
in the City of Vinkovci

University qualification

6%
40%

Tw o-year past-secondary school
qualification
Secondary school qualification
Unskilled w orker

47%
7%

Source: Autor

It is evident from the given information that in systematization of the city work
force prevail the employees with secondary school qualification prevail. The number of employees with university qualification is not dissatisfying but it should
be taken into consideration that here are also the electoral or political functions
implied, to be more precise, the mayor’s deputies. The overview of the existing

44

Sanja Bošnjak

condition in the City of Vinkovci has brought further problems to the surface: mild
dissatisfaction of the employees with the financial compensation for their work;
poor communication within and between certain departments; insufficient team
work; insufficient sense of responsibility of the individuals for their work; lack of
trust between the manager and the employees. The rights and the obligations of
the City of Vinkovci as an employer to the employees of the local government are
regulated not only by legal regulations, but also by Wage and salary rulebook for
employees of the City of Vinkovci.
Currently there are no regulations in the City of Vinkovci which ensures conditions for applying material and non-material motivational compensation. As I have
already mentioned, systematic education of the employees and evaluation of their
work have not been conducted yet, but we can notice some progress in the period
from 2006 to 2009 in investing in people, their knowledge and skills. Here are a
few examples of that. The city of Vinkovci was completely computerized during
2005 and 2009 and in that period it was necessary to further educate the employees. But first step is here. City of Vinkovci has defined the rules for evaluating employees, on the 3rd of March 2010 (is valid from the 31st March 2010).
Furthermore, by involving the City of Vinkovci into the project managed by
The Urban Institute the WCA (The Web Connected Application) Intranet-Internet
system for the local government were implemented. WCA system was created with
the purpose of quicker and more functional internal communication, information
exchange and to accomplish saving in time and office materials. By introducing
this kind of communication it became necessary to further educate the employees
in using computer applications. All employees were adequately educated to communicate through WCA system. This system is still not accepted within office communication of the City of Vinkovci nevertheless it is to be expected in future.
The employees of the City of Vinkovci who expressed desire for further education within postgraduate college are given financial aid. This is important because
this education is connected to development of the local government, financial
management and protection of environment. Except the above mentioned, the
employees can attend seminars and use business journals.
4. FURTHER STEPS

As it was mentioned, it is clear there is a tendency in the City of Vinkovci to
follow and develop knowledge and skills of the employees. This process is still at

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

45

the beginning. It has already been stated that there is not any special organizational
unit to provide for all human resources of the City of Vinkovci. Because of that,
chiefs of departments or managers are important. The insight in every department
has shown a very different approach in manager’s work. While some managers follow situation within department to the full scale, the other behave indifferently
showing lack of creativity, managing skills and desire to communicate and learn. It
is important to emphasize that only a motivated manager can motivate the employees. He can create a good working atmosphere not only by financial compensation
but also by his behavior and communication with employees. Unfortunately, even
then some staff will fail to complete their tasks with quality, to work in a team or
to continue their education. (Robbins; 1992, p 60)
Tax payers money is under constant public supervision and one should be very
careful while estimating the feedback between its spending and expected results.
Working in local government firstly stresses the factors of motivation like security, respect, accomplishment, but can hardly satisfy human need for high financial compensation for the work. Respecting above mentioned and having in mind
legal and economic limitations of local government, I believe that it is possible to
improve the motivation of the employees of the City of Vinkovci by leading in
or applying following: having insight in personnel situations within every single
department; submitting manager’s reports to the City Government with insight
of work within the department and proposal to stimulate or “punish” employees;
continuous education through professional courses, seminars and literature, paid
tuitions, ensuring free days for preparing exams; stimulating creativity, job satisfaction and self-actualization; equal division of work; developing trust between managers and employees; agreeable working environment and team building. The cities
(local government units) can hire professionals and consultants to implement their
objectives but for a long-term solution the spirit of administration and its inner
system should be changed. Therefore, an introduction of management and human
resources management into local government units is essential. It is important to
say that in order to succeed in implementing of this objective each individual has
to change his/her way of thinking and acting. The bosses and the employees are
in this case equal. The bosses have to set an example decisively and firmly and the
employees should follow. Otherwise, there would be no long-term results and the
trust of the citizens would be gambled away.

46

Sanja Bošnjak

5. CONCLUSION

The research has shown that the word motivation is one of the six most common
words used in company’s records. Unfortunately, many people use it but not always understand it. I present only a small part of the human resource management
research. Systematic education and application of motivation techniques in local
government are at the beginning. The City of Vinkovci is not an exception.
The fact is that the City of Vinkovci disposes of significant human potential,
with great ability to successfully perform their tasks. At the same time, it needs
to continually invest in personnel’s knowledge and skills, developing creativity,
responsibility and belonging to the organization. The knowledge of motivation
techniques is here invaluable. The situation of human resource in City of Vinkovci
is not alarming but there is many possibilities to progress it. In my opinion the
City of Vinkovci has made significant progress. In the future we must continue
working on the developing employee’s knowledge and skills in order to develop
the organization itself. Such kind of actions in the local government units should
be a reflection of their sense of obligation towards the sources of their financing:
citizens, voters, clients and taxpayers.

BIBLIOGRAPHY

1. Bahtjarević Šiber, F. (1999). Management ljudskih potencijala, Golden marketing, ISBN 953-6168-77-4, Zagreb
2. Certo, S.C. & Trevis Certo, S. (2008). Moderni menadžment, 10. izdanje,
MATE, ISBN 938-953-246062-9, Zagreb
3. Denny, R. (2000). Motivirani za uspjeh, M.E.P. Consult, ISBN 953-6807-02-5,
Zagreb
4. Marušić, S. (1995). Upravljanje i razvoj ljudskih potencijala, 2 izdanje, Ekonomski institute Zagreb, ISBN 953-6030-00-4, Zagreb
5. Noe, R.A., Holenback, J.R., Gerhat, B. & Wright, P.M. (2000). Menadžment
ljudskih potencijala, treće izdanje, MATE, ISBN 953-246-012-8, Zagreb
6. Robbins, S.P. (1996) Bitni elementi organizacijskog ponašanja, treće izdanje,
MATE, ISBN 953-6070-30-8, Zagreb

HUMAN RESOURCE MANAGEMENT OF THE CITY OF VINKOVCI

47

7. Vitezić, N. (2004). Balanced Performance measurement of the Public Sector,
Zbornik radova sa Economic decentralization and Local Govertment, p 139-155,
ISBN 953-6148-39-0, Ekonomski fakultete Rijeka, Rijeka
8. http://en.wikipedia.org/wiki/Motivation Seligman, Martin E.P. (1990). Learned
Optimism. New York: Alfred A. Knopf, Inc.. p. 101. ISBN 0-394-57915-1

48

Martina Briš

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST
MINIMIZATION IN A LOGISTICS SYSTEM
Martina Briš
Teaching Assistant
Faculty of Economics in Osijek
Croatia

ABSTRACT

Transportation is the most important subsystem of logistics in terms of value.
Transportation costs account for the largest portion of costs in a logistics system.
The paper will examine the usage of a transshipment model with the purpose of
minimizing the costs in a logistics system. Transshipment model is a multi-phase
transport problem in which the flow of material – raw materials and services is
interrupted in at least one point between the origin and the destination. The whole
stock passes through intermediate points of reloading before the goods reach their
final destination.
By using methods of mathematical and computer modelling it was attempted
to find out how many intermediate points should be introduced into the system,
and whether their capacity should be limited. The purpose is to optimize the plan
which should ensure that total transportation and warehousing costs are brought to
a minimum, thus minimizing overall costs in the logistics system.
JEL clasiffication: C61, L25, R41
Keywords: Transportation Model, Transshipment Model, optimization, logistics, costs
1. Introduction

The concept of logistics has an important role in economic literature. There are
a number of different definitions for this concept, depending on one’s worldview,
for example:

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

49

Logistics is the science that studies how to move items between origins and
destinations (usually from production to consumption) in cost effective ways. (Daganzo, 1996, 1)
Logistics can also be understood as a system that includes transportation, as well
as other activities such as inventory control, handling and sorting. Cost-effectiveness is a priority in logistics that can be achieved with careful coordination of all
activities.
In tracing the path of an item from production to consumption, it must be
(Daganzo, 1996, 19):
• carried (handled) from the production area to a storage area,
• held in this area with other items, where they wait for a transportation
vehicle,
• loaded into a transportation vehicle,
• transported to the destination, and
• unloaded, handled, and held for consumption at the destination.
These operations incur costs related to motion (i.e., overcoming distance) and
cost related to «holding» (i.e., overcoming time). Motion costs are classified as either handling costs or transportation costs and holding costs include «rent» costs
and «waiting» costs.
Various methods of optimization are used in order to minimize costs in a logistics system. They can be applied in different logistical problems such as:
a) ONE-TO-ONE PROBLEMS: problems with only one origin and one
destination;
b) ONE-TO-MANY PROBLEMS: problems with one origin and many destinations (or vice versa), assuming that each item travels in only one vehicle
- in this situation one can differentiate between problems without transshipment on one hand and problems that allow for transshipments at intermediate terminals on the other;
c) MANY-TO-MANY PROBLEMS: problems with any number of origins and
destinations, assuming that each item travels in only one vehicle
- in this situation there is also a difference between problems without transshipment and those including multi-terminal systems with one transshipment or multiple transshipment.

50

Martina Briš

In this paper, the logistical problem MANY-TO-MANY with one transshipment was considered using a transshipment model in order to find a rational and
optimal solution for the logistics system.
2. TRANSSHIPMENT MODEL

The transshipment problem is a transportation problem in which each origin
and destination can act as an intermediate point through which goods can be temporarily received and then transshipped to other points or to the final destination.
(Gass, 1969, 232)
A transshipment model is a multi-phase transportation problem in which the
flow of goods (such as raw materials) and services between the source and the origin is interrupted in at least one point. The product is not sent directly from the
supplier (origin) to the point of demand; rather, it is first transported to a transshipment point, and from there to the point of demand (destination). (Barković;
2002, 144)
In this model two questions must be answered with a view of minimizing the
costs:
• how to transport the goods from the origin to the transshipment point;
• how to transport the goods from the transshipment point to the destination
(Figure 1).

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

51

Figure 1: Product flow from origin to destination
TRANSSHIPMENT
POINTS

ORIGINS

A1

B1

S1

a1

b1

s1
SECOND PHASE OF
TRANSPORTATION

FIRST PHASE OF
TRANSPORTATION

A2

B2

S2

a2

b2

s2

Am

DESTINATIONS

Bn

Sr

am

b

s

Source: Pašagić; 2003, 161

Transshipment model can be formulated as the following linear programming
problem (Pašagić, 2003, 162-163):
m

min T =

r

∑∑ c
i =1 k =1

r

∑x
k =1

kjk
j

m

∑x

ik
ik

i =1
r

∑x
k =1

ikik

r

n

r

n

k =1

j =1

x + ∑∑ cjkkj xkj + ∑ ck ∑ xjkkj

ik ik
ik

k =1 j =1

= b j , j = 1, 2, …, n

(1)

(2)

n

= ∑ xjkkj

(3)

≤ ai , i = 1, 2, …, m

(4)

j =1

xikik ≥ 0, i = 1, 2, …, m; k = 1, 2, …, r

(5)

52

Martina Briš

xjkkj ≥ 0, k = 1, 2, …, r; j = 1, 2, …, n

(6)

In the mathematical formulation (1) – (6) above the following symbols are used:
i - the symbol for origins Ai with available quantities on offer ai ( i = 1, 2, …,
m); k - the symbol for transshipment point S k with quantities sk (k = 1, 2, …,
r); j - the symbol for destinations B j with demands b j (j = 1, 2, …, n); xik - the
quantity being transported from the origin Ai to the transshipment point S k ; xkj
- the quantity being transported from the transshipment point S k to the destination B j ; cik - transportation costs per unit of goods from the origin Ai to the
transshipment point S k ; ckj - transportation costs per unit from the transshipment
point S k to the destination B j and ck - warehousing costs per unit of goods at the
transshipment point S k .
The function of goal includes transportation costs from the origin to the transshipment point, transportation costs from the transshipment point to the destination and warehousing costs at the transshipment point, and according to (1) it has
to be minimized. The demand of all destinations will be satisfied thanks to the
restriction (2). Restriction (3) means that the quantity of goods delivered to each
transshipment point is equal to the quantity of goods transported from that transshipment point to the destination. Restriction (4) means that the quantity of goods
transported from each origin to all the transshipment points cannot exceed that
origin’s capacity. Restrictions (5) and (6) require non-negativity of decision-making
variables.
In a transshipment model it is possible to introduce another limitation which
ensures that the quantity of goods delivered to each transshipment point does not
exceed the capacity of a particular transshipment point:
m

∑x

ik
ik

≤ sk , k = 1, 2, …, r

(7)

i =1

A method for solving this type of transportation problems was proposed by
Russian mathematician V. A. Maš, however, somewhat earlier an analogous idea
was presented by American mathematician A. Orden. The Orden – Maš method
reduces the transshipment problem to a classic transportation problem thanks to a
special design of the transportation table (Pašagić, 2003, 163).

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

53

3. IMPLEMENTING A TRANSSHIPMENT MODEL

The problem of transshipment will be illustrated on an example (Figure 2)
which encompasses three origins, i.e. three factories and three retailers, i.e. points
of demand. Each origin has a certain maximum capacity of goods, i.e. the quantity
of stock in the three factories, represented by the nodes 1, 2 and 3 which are 500,
450 and 400 units, respectively. Each point of demand requires a certain quantity
of those goods, i.e. the demand at three retailers is represented by the nodes 7, 8
and 9 which are 350, 350 and 650 units, respectively.
Between origin nodes and destination nodes there are some nodes over which
the goods are sent to other immediate nodes or to the destination. In this case there
are arcs (actually directed from the origin towards the destination) with associated
(Barković, 2002, 50):
• upper restrictions (or capacity) of the quantity of goods that can flow through
the arc,
• unit costs for goods sent through the arc.
The following is under consideration:
• introduction of two / three distribution centres,
• whether the distribution centres should be without capacity limitation or if
they should be limited to e.g. 550 units.
The main requirement is to find a solution in which destinations will be supplied from the origin at a minimal cost.

54

Martina Briš

Figure 2: An example of a transshipment model

Source: Adapted by the author according to: http://www.fpp.edu/~dtuljak/UPRAVLJANJE%20
ZALOG/vaja%204%20-%20%20DVOFAZNI%20TRANSPORTNI%20PROBLEM.pdf

x
If we use ij to determine the quantity being sent from node i to node j then
the linear program of this problem is presented as shown in Table 1.
Table 1: Formulation of transshipment problem through linear problem
x14 x15 x16 x24 x25 x26 x34 x35 x36 x47 x48 x49 x57 x58 x59 x67 x68 x69
Čvor 1

2

3

3

1

1

1

Čvor 2

5

4

1

1

1

Čvor 5
Čvor 6

3

7

6

6

4

2

1

3

6

8

1

min

= 450
1

-1

5

= 500

Čvor 3
Čvor 4

3

-1
-1

Čvor 7
Čvor 8
Čvor 9
Source: Author’s calculations

1

-1
-1

-1

1

= 400
1

1

1

-1
-1

1

1

1

-1

1
-1

-1
-1

1

-1
-1

-1

1

0

=

0

=

0

= - 350
-1

-1

=

= - 350
-1

= - 650

55

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

Each restriction in the formulation above is associated to one node. Restriction
equations represent maintenance of flow into and out of node, and total sum of
flow inputs equals the total sum of flow outputs. In the table it can be observed that
each variable xij has one +1 in row i , and -1 in column j . This particular structure
is typical for the problems posed by transshipment model. (Barković, 2002, 146)
The transshipment model from Table 1 can be turned into a transportation
model by means of the Orden – Maš method in which the transportation table is
compiled in a special way. (Table 2).

Table 2: Transportation table

1

2

3

4

5

6

4

5

6

7

8

9

1350

1350

1350

350

350

650

2

3

3

M

M

M

x14

x15

x16

x17

x18

x19

5

4

1

M

M

M

x24

x25

x26

x27

x28

x29

3

5

3

M

M

M

x34

x35

X36

x37

x38

x39

0

M

M

7

6

6

x44

x45

X46

x47

x48

x49

M

0

M

4

2

1

x54

x55

X56

x57

x58

x59

M

M

0

3

6

8

x64

x65

X66

x67

x68

x69

500

450

400

1350

1350

1350

Source: Author’s calculations

In Table 2 not all the fields have a realistic rationale. Direct connections between
origins and destinations are not permissible. Such connections are always executed
through transshipment points. Furthermore, transportation between transshipment points makes no sense. All these fields were filled with a large number of M,
which ensures that these do not become basic fields.

56

Martina Briš

The fields at the crossing of rows and columns, which correspond to the same
transshipment point, are used to fill up the unused capacity at transshipment points.
Such fields in the table make up the so-called fictitious diagonal.
Transportation costs cik are entered into fields that are situated at the crossing
of origin lines and those of transshipment points, and the sum of warehousing costs
and costs of transportation from the transshipment point to destination ( ck + ckj
) is entered into fields that are situated at the crossing of lines for transshipment
points and destination lines.
By using one of the available computer programs (POM for Windows / WinQSB) an optimal solution is obtained (Figure 3 and Figure 4):

Figure 3: Optimal solution to a problem obtained by means of the computer program WinQSB

Source: Author’s computation

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

57

Figure 4: Optimal solution to a problem in the case of unlimited capacity of distribution centres

Source: Author’s design

In the next step, the possibility of limiting the capacity of distribution centres to
550 units was examined, and the result is shown in Figure 5:

Figure 5: Optimal solution to a problem in the case of limited capacity of distribution centres

Source: Author’s design

58

Martina Briš

The obtained results indicate that it is sufficient to introduce two distribution
centres, node 5 and node 6. In that case, total transportation costs from origin to
destination would amount to 6650 NJ (Figure 3 and Figure 4). If the capacities
of the distribution centre were limited to 550 units, total costs of transportation
would then amount to 7550 NJ (Figure 5). Therefore, it can be concluded that
capacity limiting is an unnecessary operation.
According to the optimal solution (Figure 3 and Figure 4), distribution node 5
should receive 500 units from the factory in node 1, 100 units from the factory in
node 2, and 400 units from the factory in node 3. Out of 1000 units that would
arrive to node 5, 350 units are shipped to supplement the demand by the retailer in
node 8, whereas 650 units are delivered to supplement the demand by the retailer
in node 9. Distribution node 6 should accept 350 units from the factory in node
2, and the whole quantity would be shipped to satisfy the demand by the node 7
retailer.
4. CONCLUSION

Transshipment problem can be viewed as a generalized transportation problem.
A situation is conceivable in which each origin can ship to all other origins as well
as to all destinations. Vice versa, a destination can ship goods to all other destinations and all origins. In this research transshipment problem was applied to the
logistics problem MANY-TO-MANY with one transshipment.
The goal was to describe rational structures for logistics systems and for their
operation, as well as to show how they can be determined. Decisions were required
regarding two problems: whether to introduce two or three distribution centres and
whether to limit their capacity to 550 units. The intention of any of these operations was to minimize total costs.
According to the optimal solution, it is concluded that it suffices to introduce
two distribution centres, and in this case, total costs of transportation from origin
to destination are 6650 NJ.
It is also observable that a transshipment model and its application can provide
a cost-saving solution for a logistics system.

TRANSSHIPMENT MODEL IN THE FUNCTION OF COST MINIMIZATION IN A LOGISTICS SYSTEM

59

5. REFERENCES
Books

1. Barković, D. (2002) Operacijska istraživanja, Ekonomski fakultet u Osijeku,
ISBN 953-6073-51-X, Osijek
2. Daganzo, C. F. (1996) Logistics Systems Analysis, Second Revised ana Enlarged
Edition, Springer, ISBN 3-540-60639-4, Berlin
3. Gass, S. J. (1969) Linear Programming, Methods and Applications, Mc Graw –
Hill Book Company, New York, London
4. Pašagić, H. (2003) Matematičke metode u prometu, Fakultet prometnih znanosti, ISBN 953-6790-81-5, Zagreb
Papers published in conference proceedings

1.Barković, D. (2002) Velike mreže – Potpora u distribucijskom planiranju,
Zbornik radova sa II. znanstvenog kolokvija «Poslovna logistika u suvremenom
menadžmentu», Segetlija Z. & Lamza – Maronić, M. (ur.), str. 49 – 64, ISBN
953-6073-72-2 (knj. 1), Poreč, 2002, Ekonomski fakultet u Osijeku, Osijek
Internet

1. http://www.fpp.edu/~dtuljak/UPRAVLJANJE%20ZALOG/vaja%20
4%20-%20%20DVOFAZNI%20TRANSPORTNI%20PROBLEM.pdf
(17.02.2010.)

60

Iris Broman

STRUCTURE AND OPERATIONAL MANAGEMENT IN
LABORATORY ANIMAL PRACTICE
mr.spec. Iris Broman, dr.vet.med.

ABSTRACT

Biomedical research projects involve a large number of human resource profiles,
multiple processes and structures, regardless that they seem to be run by individuals at first.
All research components are connected to each other and under the influence of
all participants. In case that the head researcher doesn’t govern the management of
this process, it will reflect to it in a negative way: procurement and the paperwork
concerning animals and supplies will not be available the right way; the research
results will become unreliable and the whole agenda will be put to the ice.
Croatia finds herself today facing a line of accreditations and certifications in order to adjust herself to EU membership, both institution and people. Organisation,
as a scientific branch, studies guidelines, advices and legislation provided by leading
scientific experts worldwide, in order to implement and modify them according to
her needs, in order to create stronger profile and capacity of human resources for
the global labour market.
JEL clasiffication: I11
Key words: Biomedical research, management, structure, European Union
membership

INTRODUCTION

The work with laboratory animals had, up until now, very little approach by the
standpoints of operative management, organization, social sciences methodology
and finance, while it was rather strictly held within biomedical sciences.

STRUCTURE AND OPERATIONAL MANAGEMENT IN LABORATORY ANIMAL PRACTICE

61

As Croatia is facing today lines of accreditation and certification, in order to
adjust itself to EU requirements, the guidelines and directives demand additional
approaches by their own nature, as , for, instance, the one described in this work.
The object of this research is management and activity organisation in work
with laboratory animals in Croatia.
Ministry of science took over the task to assembly numerous types and species of
animals into one register. In the meanwhile, with no approach to such a register, we
will consider as object of research just those animals that are prepared by Vivariums
in Croatia for the biomedical research.
Methodology of research for this work is very modest, so that, besides experimental method, we’ll use comparative, normative and analytical method. As to
have a better overview no the issue, we divided the structure under headlines of
organization, management, research teams, finances, legislation and professional
regulation.
ORGANIZATION

The organization lather should be put up clearly during the planning process. It
will modify through time, according to the momentary operative demands. However, a good organizational skeleton will, at the certain time, when the work overload becomes so intense, that it turns out impossible for the leader, as a one person,
to have an overview, never the less to lead all the organizational aspect related to the
project, present a hallmark for the concept maintenance. Therefore, it is necessary
to post an optimal organization that will fulfil the demands of domestic market and
an efficient adjustment to the EU standards. Organizational form, set up in that
manner, will create niches for management application, enabling this profession to
offer its production capacities to the world market.
„The aims of organization can be perceived as:
• general and special
• simple and combined
• temporary and permanent
The general ones present structuring the certain organizational state for the certain time frame. The special ones present efficient solving of certain organizational
problems. “ (Turkalj; 2008, 10)

62

Iris Broman

Organizational structure in work with laboratory animals can be observed completely globally, at the regional or state level, or micro level, institution or laboratory, whose activities and results provide a reflection of primary concepts, with
expression of all its faults and virtues. This approach enables the maximal use of
virtues.
The organizational hallmark that influenced today’s approach in work with the
laboratory animals and made it as uniformed as possible, is the scientific request
that every experiment, done anywhere in the world, has to be reproducible.
When the European Council declared its requests regarding the work with laboratory animals, built according to American and European guidelines, that was
also accepted by many countries and was implemented in their legislative systems,
the request for reproducibility of experiments made the organizational structure,
regarding the issue, specific and uniform.
The animal, or the animal model, has to live in the exact same environment
as it would live anywhere in the world, that also means that the human resources
that participate in this line of work, have to have approximately the same level of
knowledge, approach and do exactly the same things.
This organizational equality provides the whole line of advantages, amongst
which we can underline the general information approachability, but also the fact
that it’s tying down creativeness and autonomy of new organizational, managerial
and research approaches.
Work with laboratory animals in Croatia seems to be of special social interest
and is, therefore submitted to control of lines of Ministries. So, for instance, Ministry of Agriculture regulates the zoo hygienic measures, transport, ethical aspect
and the whole lot of other issues concerning the welfare and care for the animal as
a subject.
Ministry of Science encourages and funds activities, programs, counselling, science Congresses, gatherings and the palette of activities of organizational unites,
that do research work on animal models. Additionally, there are organized societies that deal and discuss different aspects of scopes of work with the laboratory
animals.
One successful leader, head of facility, researcher or manager uses the positive
forces within the organization and anticipates, limits and redirects the potentially
hazardous ones, horizontally and vertically. In order to do so, the manager has to

STRUCTURE AND OPERATIONAL MANAGEMENT IN LABORATORY ANIMAL PRACTICE

63

understand the structure (organization) and the process itself (management) and
their relevance while conducting the research. Organization draws us the ladder of
responsibility, while management describes their operability.
MANAGEMENT

„Management is an activity within the organization that enables efficiency free
of dispersion and forcing the resources.
Efficiency and effectiveness achievement: efficiency of a certain organization can
be measured by responsible precision (correctives) how certain processes develop,
meaning, for ex. do they produce by the lowest unit expenses (efficiency) followed
by its ability to do the right thing – to choose the right goals and methods and how
to achieve them(effectiveness).“ (Barković; 2009, 14)
Administrative aspects, quality control (meaning precision and accuracy) and
quality surveillance (meaning retrospectives and follow up’s) form the structure axis
that enable the further operativeness.
„Managerial skill is an executive process of gaining the organizational goals with
people, other organizational resources and through them“ (Certo & Certo; 2008,
16)
If the process seems to flow with a sense of ease that means it has a high quality professional management. That feeling of easiness also depends on the good
organization and well think – trough operative part, that serves to the manager to
swiftly “tune” sudden negative impacts, that might happen in the process, regardless if somebody gets ill, there are legal changes, difficulties in logistics, or, simply,
unexpected global changes.
Prognostics, as a method, or a simple creative anticipation together with a valid
information flow, can save the entire project from closing, or redirect it in another
direction, that has a capacity to compensate the losses. The duty allocation helps in
forming the organization and operative part, as well as in their disburdening. One
person can be delegated for placing orders and keeping the log on procurement,
not only for one but for a group of teams. That task will be assigned to people who
have suitable education and are involved in the operational part of the project in the
manner that they can follow, combine and foresee the requirements. As one person
gets delegated and accepted the duty, he/she becomes competence responsible.

64

Iris Broman

As for resource allocation, there are two familiar ways.
„The first way is establishment of necessary coordination, cooperation and in
relation, resource allocation presents, largely or not, a forcing. We are talking about
centralized resource allocation-socialistic economy.
The other way, the other economy, mediates its activities throughout voluntary
cooperation.
We are talking about decentralized resource allocation – capitalistic economy –
market method. “(Ferenčak; 2003, 6)
Duty allocation, according to competence, and the level of responsibility, requires respect of the term „procedural discipline“, by all the participants. Everybody needs to know what they are supposed to do and when to do it. All participants have to respect legal regulations; they will come up in the benchmarks of
different activities.
It is quite clear that the previously arranged fixed processes prevent a line of
mistakes and lower the frustration level. Task delegating pulls a need for joint decisions and simultaneous work on different tasks. That all seems to produce masses of
unnecessary paper and that the administrative part pushes over the limit. However,
on the end of the day, those same documents will keep up the coordination, lead to
higher efficiency and prevent many mistakes.
TEAM DYNAMICS

Properly set up organization in work with laboratory animals and a good management should enable a large majority of interest teams that will constantly advance the professional and academic activity.
The index of complexity is a factor that drives the need for management. Every
change in operability and structure changes creates a base of a chain reaction of
which the participants may or may not be aware. On those occasions certain segments are suddenly no longer required, at least not in the form as planned. Then
the reorganizing has to be swift and clearly presented, because the time limit will
cause pression that will reflect both to human resources and results.
Also, the amount of work can be piled up due to wrong assessments or unexpected back holds and that is the time for the quality management to show itself.

STRUCTURE AND OPERATIONAL MANAGEMENT IN LABORATORY ANIMAL PRACTICE

65

The rapid expansion of base of knowledge, new ideas, equipment and creativity
are characteristics of scientific research that have their dynamic fluctuation going
on at the Universities, institutes and other sources of academic forces.
Traditionally, those institutions have a „mingling“scientific profile, a large number of small projects, swift changes in the types of projects and a fast exchange of
human resources.
Biomedical researches need a very demanding management.
Classic research is often characterized by individual research, that doesn’t change
their characteristic for a longer period of time. Hierarchy is defined in precision,
decision making is lifted to the highest level, (therefore the communication gets
vertical), the operative part is well defined and therefore, often, if we want to know
something concerning a certain segment, we’ll speak to the same person.
As opposed to that model, biomedical research is done in teams. Employees
work together, coordinate tasks, and often have collateral or communicative duties.
Team work presents a complex integrative mechanism. Postulates often require additional verbal communication. Authorities are often delegated within the group
and are not necessarily the same people for different projects for the same group in
different project types.
Science is coordinated with other duties the academic community is involved
with. The jobs that researcher do perform as the base job can serve as a positive
platform for research.
According to recent researches, all the teams go through same behaviouristic
phases. They are encouraged by emotional states of all participants. Each new member is confronted by the same questions: can he/she actually perform the task, what
is his/hers exact role in the entire process, who are his delegated and who are the actual authorities, who presents the competition and what are their characteristics.
That is the phase when the subject turns mainly to the main authority that he
recognises as a manager of the process.
In order to shorten that phase, manager should introduce the subject with the
structure and operability in the informative and transparent way. If the subject
gets to be closer acquainted wit the co-workers, the level of possible frictions gets
reduced.

66

Iris Broman

The next phase is competition, conflict of authority with the manager or with
other team members. In that phase the subject uses his previous knowledge and
experiences, builds his own niche, place under the sun and expresses the need for
affiliation.
Manager should encourage discussions that must include problem solving propositions. The subject has to prove himself, so the discussion has to include explanations of personal attitudes.
After that, a team starts to get coherent. Starts to measure itself. It measures itself
against the manager (in some joint attitude) and/or in relation to another group.
They observe similarities and differences, followed by comparing their results
compared to other teams.
„Communication skills present an area where a lot of people face a lot of difficulties. Some people have a problem to speak to strangers, some don’t find silence
as a particularly pleasant thing and some simply find it stupid to discuss irrelevant
topics“(Lamza-Maronić & Glavaš; 2008, 13)
Manager should describe the joint problem from different angles and request a
feed-back for problem solving. It is also time to delegate and re-delegate.
The final phase is productivity. We have all proved ourselves, we are aware of our
approximate capabilities and that effected finding our own niche on the task and
within the team.
Manager follows the coordination quality and defines new goals.
It is suggested that teams, that are formed to do scientific projects done on laboratory animals and are approaching development or realization of a certain project,
accept these suggestions.
In the academic environment, researchers are used to high level of freedom, as
for the research topics and aims, as well to the scientific approach. Teams should
not only discuss common goals, but also the style and manner how something is
done. The right timing in coordination can depend on the style of one person.
Last but not least, changes and prompt analysis in non commercial research institutions depend on finances. Changes on that field lead to operative changes that
involve surveillance and planning.

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67

EXPENDITURE IN SCIENTIFIC RESEARCH

„One of the central questions of contemporary societies, as well as our state,
is a question how to organize scientific research activities, or how to incorporate
it within activities of other professions, namely commerce and how to procure its
finances. Science development, application of research findings, integration of science to commerce and other professional aspects of social structure, introduction of
modern technologies into work processes present a benchmark to production, well
being, work liberation and progress of the modern society.
In order to express its social function, scientific research, amongst other, requires
adequate financing.
Throughout that aspect, scientific research should not be observed as a common public trade. In our country, scientific work has a special public interest, but
a problem is that the majority of scientific employees reside at the universities or
institutes whose scientific activity is, partially or in total, financed by means collected through taxes, or some other instrument of public income.
Interest in scientific research is also present from the aspect of solving some existential problem that concerns human survival in general (finding new sources of
energy) “(Srb & Čulo; 2005, 73)
Changes in national budget allocation lead to the result that the academic research is conducted on the basis of long-term plans with a time assessment of many
years. In 1980’s large reforms in structuring the scientific research took place on
many Universities. More than ever before, the survival of research teams depends
on research finances that, on the other hand, depend on their output, scientific and
qualitative.
Research projects are designed in the manner that their failure is nearly impossible. These changes have a feed-back. Planning and rigidness are opposed to flexibility and creativeness of new ideas and find themselves in disposition concerning
otherwise useful accidental findings and results. This situation is non-stable. There
will always be a pressure on research organizations that will continuously be forced
to adjust organization, methodology and management of research.
REGULATIONS

Ethical committees are formed in many countries and should be in all of those
that conduct research. Their purpose is to define necessities and justification on

68

Iris Broman

animal experiments. As well as the assessments of how much the animal suffers.
Protocols on animal experimentation have to be presented and authorized by such
committees in advance.
The project manager has to be aware of relevancy of the same legislation and
have in account all the ethical aspects while planning the experiment.
There is a world wide trend in increasing those demands and it embraces all the
people who are in any way connected to the work with laboratory animals on any
given level.
CONCLUSION

All above leads to the conclusion that in Croatia hasn’t been achieved the necessary organization in management of laboratory animals. Organization we have
today oppresses creativity and autonomy of new organizational, managerial and
research potentials.
Management, as an activity, has to enable maximal efficiency of each organizational form, with no dispersion and forcing the resources, so the space in the
promotion of work with laboratory animals is large. That space is observed by
professional management, the thoroughly thought through operational activities,
legislative changes, logistics and the long line of accreditations and certifications
that lead to lining up to the EU guidelines. Each professional development is relied
upon multiple science research teams, so the approach of Vivarium should be the
same.
Team forming in the work with laboratory animals demands a multidisciplinary
managerial approach. Management is facing the task of forming multiple team profiles and other participants. Scientific research and its financing are eternal topics of
contemporary states. Our approach is that the scientific research work should not
be understood as a common public expense, because good organization, management and their teams bring profit and income, not expenditure.
Legislation in work with laboratory animals is set-up in Croatia, but this regulations need refinement, follow up of new organizational forms, cooperation with
EU regulations, so, that it total, legislation and professional regulations become a
rolling stone of the development in the work with laboratory animals.

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69

LITERATURE

1. Barković, Dražen; „Menadžersko odlučivanje“, Ekonomski fakultet u Osijeku,
2009
2. Certo, Samuel C, Certo, Trevis S; „Moderni management“ 10 izdanje, naslov
originala„Modern management“, 10th edition, 2008
3. Ferenčak, Ivan; „Počela ekonomike“, Ekonomski fakultet u Osijeku, 2003
4. Lamza-Maronić, Maja, Glavaš, Jerko; „Poslovno komuniciranje“, Ekonomski
fakultet u Osijeku, 2008
5. Turkalj, Željko; „Osnove organizacije“ praktikum, Ekonomski fakultet u Osijeku,
2008
6. Srb, Vladimir, Čulo, Ivica „Javno financiranje i monetarna ekonomija“,
Veleučilište u Požegi, 2005

Gordana Dukić • Goran Andrijanić

70

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT
ASPECTS, WORK CONDITIONS AND COMMITMENT AMONG
CROATIAN MANAGERS1
Gordana Dukić1, Goran Andrijanić2
1
Assistant Professor, Josip Juraj Strossmayer University of Osijek,
Faculty of Philosophy, Department of Information Sciences, Osijek, Croatia
2
Ph.D. Student, Josip Juraj Strossmayer University of Osijek,
Faculty of Economics, Osijek, Croatia

ABSTRACT

Company performance depends to a great extent on managers who, in the usual
understanding of their role, perform the functions of planning, organizing, staffing, leading and controlling. Different factors of economic and social character
have an impact on all employees, and, by the same token, on managers. These issues should be permanently analyzed at the company level, which is primarily the
task of human resource management. However, to outline the general profile of
managers these attitudes should be examined at a higher level, which was the purpose of the present research. The main intention was to determine how Croatian
managers perceive certain aspects of their own employment, work conditions and
commitment, as well as to verify the significance of differences with regard to the
chosen characteristics. The research was conducted on a sample of managers based
in the four counties of Eastern Croatia. The collected data were analyzed by means
of adequate statistical methods. The results enable the managers, regardless of their
own answers to particular questions, to gain a clear insight into their position in the
business world, and to use their knowledge, experience and skills more effectively
in fulfilling their tasks.
JEL clasiffication: O15, E24
Keywords: Managers’ perception, economic and social factors, profile of managers, human resource management, statistical methods
1

The paper has been written in the scope of the project “Regional University” (Project code: 0100101427-0837)

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

71

1. INTRODUCTION

With the introduction of different kinds of ownership and transition to market
economy, numerous issues arose in the early 1990s in Croatian economic theory
and practice, with particular emphasis on management. Over the past two decades
management has been developing in the Republic of Croatia in rather peculiar circumstances. The war, privatization, the inherited inefficiency of the economic system, loss of markets and frequent interference of political structures into economic
processes are just a few of the problems characteristic of that period. The deep crisis
that the world economy is currently going through has forced Croatian managers
to face new challenges.
Although a range of factors can exert an impact on any enterprise, the greatest
responsibility for its functioning lies definitely with its managers. It can therefore
be concluded that overall company performance depends crucially on their expertise and competences. Especially important is the manager’s capability to predict
and solve the problems and to set the company on the right course, seizing the opportunities at the right time, and noticing the threats within the enterprise and in
its environment at an early stage.
Planning, organizing, staffing, leading and controlling are the basic management
functions. In keeping with this concept of management, the most important activities would be the following: planning of goals and tasks, defining the organizational
structure required to achieve those goals, choosing the right personnel, leading
people and processes, and control of task fulfilment. What comes to the foreground
in performing these functions are the manager’s characteristics. As any person, a
manager is defined by a specific combination of personal, i.e. emotional and psychological, as well as physical characteristics. They are formed under the influence
of several factors. The two most important ones are hereditary and social aspects.
A good manager will have at least some of these desirable qualities: creativity, intelligence, persistence, diligence, energy and drive, boldness, enthusiasm, optimism,
initiative, firm character, honesty, openness, empathy, being well-balanced, objectiveness, confidence and ambition. The knowledge and skills required for a managerial job are acquired through formal and informal education as well as through
actual work in practice. A manager’s quality is reflected in the performance of the
company, i.e. the organization he/she manages. However, performance indicators
are not the only measure of that manager’s success. When evaluating a manager’s
performance, there are other things that should also be taken into account, such as

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Gordana Dukić • Goran Andrijanić

the atmosphere created by this manager, how satisfied his/her subordinates are, and
the impact of his/her decisions on the natural environment.
It has been pointed out above that managers are affected by different social factors, many of which are economic in character. Determining such factors, eliminating the negative and emphasizing the positive effects of managers’ activities will
certainly enhance their efficiency and effectiveness. Considering the importance
of these issues, such analyses should be permanently conducted in each enterprise,
i.e. organization, which is primarily the task of the human resource management
function. The activities performed by this function are, in the widest sense, planning personnel needs, recruiting people, giving them appropriate assignment, leading and motivating employees, protection and promotion. However, drawing a
general manager profile goes beyond the human resource management function
and requires a comprehensive insight into their attitudes regarding different economic and social issues at a higher level. This was actually the aim of this research.
Through attitude analysis we intended to establish how Croatian managers perceive
certain aspects of their employment, work conditions and own commitment, and
to verify whether there are any statistically significant differences with reference to
the chosen characteristics in this context.
The results of the research enable managers to get a clearer picture of their position in the business world once they consider how they have graded particular
questions. Furthermore, the results indicate the factors which cause managers to
feel dissatisfied, and which thus have an impact on their commitment to work.
Finally, this type of analysis can help managers to more effectively direct their competences, skills and experience at achieving the set tasks.
2. PREVIOUS RESEARCH

Manager perceptions on various aspects of work and life have already been the
subject of numerous, differently designed, studies, some of which will be briefly
presented below.
Wu and Minor (1997) were evaluated similarities and differences between female managers of different nationalities (Taiwan, Japan, and the United States).
They concluded that American, Japanese, and Taiwanese female managers had significantly different perceptions concerning roles, personal traits, lifestyles, and leadership behaviour. According to their research, American female managers tended to
be more independent, more aggressive, more social, and more practical. Contrary

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

73

to this, Japanese female managers tended to be more dependent, less aggressive and
more work-oriented, and Taiwanese female managers tended to be more conservative, with a traditional family and gender role orientation. Wu and Minor also
found that while there were differences in the relative importance of work as compared to other roles (such as their role in the family), none of the three groups felt
that their work role was the most important.
In his research paper, Maniam (2007) provides some knowledge on how managers as adult learners view their career success as a subjective element in the form of
intrinsic learning outcome.
Lyness and Judiesch (2008), using self ratings, peer ratings, and supervisor ratings of 9627 managers in 33 countries, examined within-source and multisource
relationships with multilevel analyses. They generally found that managers who
were rated higher in work–life balance were rated higher in career advancement
potential than were managers who were rated lower in work–life balance.
Hyvönen, Feldt, Salmela-Aro, Kinnunen, and Mäkikangas (2009) in their study
approached young managers’ occupational well-being through their workrelated
goal pursuit. The main aim of their research was to identify content categories of
personal work goals and investigate their associations with background factors, goal
appraisals, burnout, and work engagement. Their study has shown that the contents of young managers’ work-related goals can contribute to the understanding of
individual differences in occupational well-being.
The goal of the research by Mihelčić and Karlovčan (2008) was to draw a profile
of a typical Croatian manager and then to compare the obtained results by manager segments in terms of their area of work, gender, age, education level, etc. The
research was conducted in two sections by means of on-line anonymous questionnaires. The first section was based on responses by 214 managers, encompassing
their work dimension (the hours worked, income, how satisfied they were with
their career development and job itself, how much professional training they get
and how they cope with different managerial situations). The obtained responses
were compared along the following criteria: a manager’s position, total years of
service, number of subordinates, gender, age, marital status and level of education.
The second section of the research, conducted on a sample of 455 respondents,
was focused on private life of Croatian managers (satisfaction with their private
life, leisure time, family relationships, housing and their own car). This section also

74

Gordana Dukić • Goran Andrijanić

included questions on the ways managers run their private finances. Although quite
comprehensive, this research was almost exclusively limited to frequency analysis.
Dukić (2009) in her paper explored the differences in attitudes between Croatian managers and non-managing employees regarding different aspects of material and non-material character. With this purpose, a sample was gathered of 360
respondents from the area of Osijek-Baranja County. The research has shown that
different aspects of employment and work-related issues received higher average
grades from managers than from other employees. The only exception was the assessment of the amount of own leisure time. Statistical significance of differences
was confirmed for 13 research variables. Using factor analysis three factors were determined: factor of job satisfaction, factor of satisfaction with income and wealth,
and factor of satisfaction with own leisure time.
3. Methods and sample description

Our research conducted by means of a written survey aimed to investigate how
certain aspects of employment, work conditions and own commitment were perceived by managers. There were 290 participants in the survey, all located in the
four counties of Eastern Croatia. The aim of the research and the instructions how
to fill in the questionnaire were given to each respondent in a face-to-face conversation. The gathered data were first entered into a Microsoft Excel table, and then
processed by means of statistical packages SPSS and Statistica.
The collected data were analyzed by means of adequate statistical methods.
Descriptive statistics methods were used in order to describe the sample and the
defined variables. From the standpoint of inferential statistics, some groups as determined for the analysis purposes were not large enough. Since preliminary tests of
the hypothesis on normal distribution of the sample mostly failed to confirm this
assumption, it was necessary to examine the statistical significance of differences by
means of two non-parametric tests, the Kruskal-Wallis and the Mann-Whitney test.
In our analysis, the differences considered to be statistically significant are those
that were confirmed at the level p<0.05.
Among 290 mangers included in the survey there were 168 men (57.93%) and
122 women (42.07%). Their average age was 40.94 years, with standard deviation
of 9.92 years. The youngest manager in the sample was 21, and the oldest was 65
years of age, whereas the median value was 41 years. The respondents were divided

75

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

into three age groups for the analysis purposes. Table 1 shows the distribution of
respondents by gender and age group.

Table 1. Distribution of respondents by gender and age group
Age group (year)
21-35
36-50
51-65
Total

Gender
Male
58
(20.00%)
71
(24.48%)
39
(13.45%)
168
(57.93%)

Female
38
(13.10%)
72
(24.83%)
12
(4.14%)
122
(42.07%)

Total
96
(33.10%)
143
(49.31%)
51
(17.59%)
290
(100.00%)

Managers between 36 and 50 years of age accounted for the largest portion of
the sample. In this group the number of male and female managers was about the
same. Female managers had the weakest representation in the oldest group.

Table 2. Distribution of respondents by gender and education level
Education
level
Secondary school
Two-year college
University degree
Total

Gender
Male
68
(23.45%)
43
(14.83%)
57
(19.66%)
168
(57.93%)

Female
54
(18.62%)
23
(7.93%)
45
(15.52%)
122
(42.07%)

Total
122
(42.07%)
66
(22.76%)
102
(35.17%)
290
(100.00%)

The largest number of managers had a secondary education. Female managers with two-year college education were underrepresented in the sample, whereas
their share in the first and third education group was about equal to that of male
respondents.

Gordana Dukić • Goran Andrijanić

76

Table 3. Distribution of respondents by gender and management level
Management level
Lower management
Middle management
Top management
Total

Gender
Male
87
(30.00%)
56
(19.31%)
25
(8.62%)
168
(57.93%)

Female
61
(21.03%)
48
(16.55%)
13
(4.48%)
122
(42.07%)

Total
148
(51.03%)
104
(35.86%)
38
(13.10%)
290
(100.00%)

The largest number of respondents in our sample belonged to the ranks of lower
management, and the smallest number belonged to top management. When comparing men and women, the smallest proportion of women can be found in top
management.

Table 4. Distribution of respondents by education and management level
Management level
Lower management
Middle management
Top management
Total

Education level
Secondary school
85
(29.31%)
30
(10.34%)
7
(2.41%)
122
(42.07%)

Two-year college
36
(12.41%)
24
(8.28%)
6
(2.07%)
66
(22.76%)

University degree
27
(9.31%)
50
(17.24%)
25
(8.62%)
102
(35.17%)

Total
148
(51.03%)
104
(35.86%)
38
(13.10%)
290
(100.00%)

Respondents with secondary education were the majority in lower management,
while they had the lowest proportion in top management. The largest number of
respondents with two-year college education also belonged to lower management,
but they participated more significantly in middle management, if we take account
of their proportion in the sample. In top management, as well as in middle management the greatest number of managers had a university education.

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

77

4. ANALYSIS RESULTS

In order to determine the ways Croatian managers perceive certain aspects
of their employment, work conditions and own commitment, and to check the
statistical significance of differences regarding the chosen features, there were 14
variables defined for the research:
● Assessment of earned income (V1);
● Assessment of current job (V2);
● Assessment of job security (V3);
● Assessment of working conditions (V4);
● Assessment of work space quality (V5);
● Assessment of technical equipment of working space (V6);
● Assessment of interpersonal relationships at work (V7);
● Assessment of relationship with superiors, if any (V8);
● Assessment of relationship with subordinates (V9);
● Assessment of professional training possibilities (V10);
● Assessment of encouragement to continue formal education in the company
or institution where managers are employed (V11);
● Assessment of possibilities for advancement at work (V12);
● Assessment of own commitment at work (V13);
● Assessment of the amount of own leisure time (V14).
The attitudes of the respondent were measured on the Likert scale comprising 5
grades, ranging from 1 as the lowest to 5 as the highest grade.
Managers assessed with the largest average grade their own commitment to work
(V13). In addition, the average grade of 4 or larger was given by respondents to the
following variables: assessment of relationship with subordinates (V9), assessment
of technical facilities in work space (V6), and assessment of the current job (V2).
The lowest grade was given to the encouragement to continue formal education
that they receive in the company or institution where they are employed (V11). A
relatively low average grade was further calculated for the variables defined as assessment of the available leisure time (V14) and assessment of work advancement
possibilities (V12).

Gordana Dukić • Goran Andrijanić

78

Table 5. Basic descriptive statistics
Variable
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
V14

Mean

Median

3.552
4.000
3.759
3.920
3.948
4.052
3.872
3.891
4.098
3.404
2.945
3.161
4.352
3.131

4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
3.000
3.000
4.000
3.000

Descriptive statistics
Interquartile
Standard
range
deviation
1.000
0.876
1.000
0.856
2.000
0.986
2.000
0.900
2.000
1.006
1.000
0.916
2.000
0.869
2.000
0.936
1.000
0.675
1.000
1.073
2.000
1.221
2.000
1.171
1.000
0.655
2.000
1.165

Variation
coefficient
24.661
21.412
26.240
22.951
25.468
22.595
22.443
24.042
16.461
31.512
41.438
37.038
15.060
37.209

Skewness
-0.361
-0.799
-0.503
-0.735
-0.780
-0.811
-0.419
-0.759
-0.466
-0.451
0.056
-0.184
-0.812
-0.086

For most of the variables, the median had the value 4. It was only for the three
variables assessed with lowest average grades that the median value was 3. On the
basis of the calculated variation coefficients it can be concluded that the dispersion
in most of the analyzed distributions is quite high. The lowest dispersion of data is
observed in the variable defined as the estimate of own work commitment (V13).
According to skewness, it is only for variable V11 that distribution is positively
skewed.

79

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

Table 6. Basic descriptive statistics and results of the Mann-Whitney test
Gender
Variable
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
V14

Mann-Whitney test

Male
Mean
3.530
3.982
3.774
3.862
3.875
4.065
3.845
3.838
4.126
3.373
2.913
3.145
4.339
3.030

Female
Median
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
3.000
3.000
3.000
4.000
3.000

Mean
3.582
4.025
3.738
4.000
4.049
4.033
3.910
3.957
4.059
3.446
2.991
3.183
4.369
3.270

Median
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
3.000
3.000
4.000
3.000

Z

p

-0.625
-0.523
-0.312
-1.432
-1.365
-0.113
-0.660
-0.848
-0.727
-0.933
-0.565
-0.213
-0.664
-1.810

0.532
0.601
0.755
0.152
0.172
0.910
0.509
0.397
0.467
0.351
0.572
0.832
0.507
0.070

In most cases higher average grades were calculated for female managers. However, according to the Mann-Whitney test, at the level p < 0.05 no differences in
attitudes between male and female managers were statistically significant.

Table 7. Basic descriptive statistics and results of the Kruskal-Wallis test
Variable
V1
V2
V3
V4
V5
V6
V7
V8
V9

21-35
Mean
Median
3.583
4.000
4.073
4.000
3.833
4.000
4.042
4.000
4.073
4.000
4.240
5.000
4.073
4.000
4.024
4.000
4.106
4.000

Age group (year)
36-50
Mean
Median
3.615
4.000
4.021
4.000
3.818
4.000
3.915
4.000
3.944
4.000
3.993
4.000
3.790
4.000
3.915
4.000
4.114
4.000

Kruskal-Wallis test
51-65
Mean
Median
3.314
3.000
3.804
4.000
3.451
3.000
3.706
4.000
3.725
4.000
3.863
4.000
3.725
4.000
3.568
4.000
4.039
4.000

H

p

5.977
3.053
7.105
6.570
4.571
10.391
8.355
5.545
0.724

0.050
0.217
0.029
0.037
0.102
0.006
0.015
0.063
0.696

Gordana Dukić • Goran Andrijanić

80

V10
V11
V12
V13
V14

3.579
2.957
3.379
4.385
3.219

4.000
3.000
3.000
4.000
3.000

3.333
3.000
3.100
4.357
3.134

3.000
3.000
3.000
4.000
3.000

3.275
2.771
2.922
4.275
2.961

3.000
3.000
3.000
4.000
3.000

4.213
1.237
5.889
1.226
1.515

0.122
0.539
0.053
0.542
0.469

The results of the Kruskal-Wallis test indicate that there is at least one age group
which differs significantly from others in terms of perceptions regarding job security (V3), working conditions (V4), technical equipment of working space (V6), and
interpersonal relationship at work (V7). In all these cases, the lowest average grades
were given by respondents from the oldest age group. In order to establish between
which groups there are statistically significant differences in the above stated grades,
it was necessary to conduct the Mann-Whitney test for these cases.

Table 8. Results of the Mann-Whitney test
Variable
V3
V4
V6
V7

Mann-Whitney
test
Z
p
Z
p
Z
p
Z
p

21-35
36-50
-0.164
0.869
-1.505
0.132
-2.742
0.006
-2.534
0.011

Compared age groups (year)
21-35
51-65
-2.197
0.028
-2.504
0.012
-2.692
0.007
-2.331
0.020

36-50
51-65
-2.654
0.008
-1.500
0.134
-0.943
0.346
-0.675
0.500

According to the Mann-Whitney test, managers from the youngest and the
middle age group perceive differently technical equipment of working space (V6)
and interpersonal relationship at work (V7). Furthermore, the results show that
all the differences between managers from the youngest and the oldest age group
are statistically significant. Managers belonging to the middle and the oldest age
groups had different perceptions regarding job security (V3).

81

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

Table 9. Basic descriptive statistics and results of the Kruskal-Wallis test
Variable
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
V14

Secondary school
Mean
Median
3.492
4.000
3.877
4.000
3.574
4.000
3.876
4.000
4.057
4.000
4.025
4.000
3.926
4.000
3.883
4.000
4.178
4.000
3.342
3.500
2.982
3.000
3.271
3.000
4.410
4.000
3.033
3.000

Education level
Two-year college
Mean
Median
3.621
4.000
4.045
4.000
3.848
4.000
3.924
4.000
3.924
4.000
4.121
4.000
3.833
4.000
3.881
4.000
3.969
4.000
3.394
3.500
2.952
3.000
3.015
3.000
4.318
4.000
3.106
3.000

Kruskal-Wallis test
University degree
Mean
Median
3.578
4.000
4.118
4.000
3.922
4.000
3.971
4.000
3.833
4.000
4.039
4.000
3.833
4.000
3.906
4.000
4.088
4.000
3.485
4.000
2.900
3.000
3.127
3.000
4.304
4.000
3.267
3.000

H

p

1.209
5.292
7.258
0.536
3.686
0.586
1.247
0.311
5.083
0.803
0.233
1.822
1.735
2.284

0.546
0.071
0.027
0.765
0.158
0.746
0.536
0.856
0.079
0.669
0.890
0.402
0.420
0.319

The results of the Kruskal-Wallis test showed that there is at least one education
level group that differs significantly from others in terms of perceptions regarding
job security (V3). According to the Mann-Whitney test, managers with secondary
school and managers with university degree had different perceptions regarding job
security (Z = -2.523, p = 0.011). Differences between the other compared education
level groups had not been statistically significant.

Gordana Dukić • Goran Andrijanić

82

Table 10. Basic descriptive statistics and results of the Kruskal-Wallis test
Variable
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
V14

Lower management
Mean
Median
3.399
3.000
3.899
4.000
3.615
4.000
3.757
4.000
3.932
4.000
3.986
4.000
3.824
4.000
3.794
4.000
4.049
4.000
3.274
3.000
2.878
3.000
2.986
3.000
4.284
4.000
3.074
3.000

Management level
Middle management
Mean
Median
3.673
4.000
3.990
4.000
3.798
4.000
4.010
4.000
3.913
4.000
4.077
4.000
3.875
4.000
3.902
4.000
4.106
4.000
3.452
4.000
3.010
3.000
3.272
3.000
4.327
4.000
3.231
3.000

Kruskal-Wallis test
Top management
Mean
Median
3.816
4.000
4.421
5.000
4.211
4.000
4.316
4.000
4.105
4.000
4.237
4.000
4.053
4.000
4.267
5.000
4.263
4.000
3.784
4.000
3.029
3.000
3.526
4.000
4.684
5.000
3.081
3.000

H

p

9.861
14.564
12.053
14.260
0.741
1.667
1.821
8.459
3.015
6.332
1.038
9.150
11.763
0.944

0.007
0.001
0.002
0.001
0.690
0.434
0.402
0.015
0.221
0.042
0.595
0.010
0.003
0.624

Among the analyzed characteristics, management level was the one that mostly
discriminated managers in terms of variables defined in this research. According to
the Kruskal-Wallis test, there is at least one group of managers that was, regarding
the management level they belong to, significantly different from the others when
assessing their earned income (V1), current job (V2), job security (V3), working conditions (V4), relationship with superiors, if any (V8), professional training
possibilities (V10), possibilities for advancement at work (V12), and own work
commitment (V13). In all these cases the highest average grades were calculated on
the basis of top mangers’ responses. On average, the lowest grades were given by
respondents who belonged to lower management.

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

83

Table 11. Results of the Mann-Whitney test
Variable
V1
V2
V3
V4
V8
V10
V12
V13

Mann-Whitney
test
Z
p
Z
p
Z
p
Z
p
Z
p
Z
p
Z
p
Z
p

Compared management level groups
Lower management Lower management Middle management
Middle management
Top management
Top management
-2.249
-2.711
-1.206
0.025
0.007
0.228
-0.770
-3.701
-3.262
0.441
0.000
0.001
-1.488
-3.353
-2.436
0.137
0.001
0.015
-2.430
-3.390
-1.847
0.015
0.001
0.065
-0.639
-2.700
-2.690
0.523
0.007
0.007
-1.156
-2.425
-1.685
0.248
0.015
0.092
-2.027
-2.575
-1.682
0.043
0.010
0.092
-0.188
-3.251
-3.198
0.851
0.001
0.001

The results of the Mann-Whitney test showed that lower and top managers differ in all the analyzed cases. Statistical significance was confirmed for differences
between lower and middle managers regarding variables defined as assessment of
earned income (V1), assessment of working conditions (V4), and assessment of
work advancement possibilities (V12). Middle and top managers were different
significantly in their perceptions of current job (V2), job security (V3), relationship
with superiors, if any (V8), and own work commitment (V13).
5. CONCLUSIONS

This paper has presented the results of the research whose main aim was to
establish the ways that Croatian managers perceive certain aspects of their employment, work conditions and own commitment. In addition, within the statistical
analysis, and using the Mann-Whitney test and the Kruskal-Wallis test, we examined the significance of differences in managerial attitudes regarding their gender,
membership in a defined age group, level of education and management level. The

84

Gordana Dukić • Goran Andrijanić

research was conducted on a sample consisting of respondents located in the four
counties in Eastern Croatia. Male respondents accounted for the larger portion
of the sample. The largest proportion of managers who participated in the survey
belonged to the middle age group. Managers with secondary school education and
employed in lower management accounted for the largest share in the sample.
Managers evaluated with higher average grades their own work commitment,
relationship with subordinates, technical equipment of working space and satisfaction with the current job, whereas the lowest grades were given to the encouragement to continue formal education, available leisure time and work advancement
possibilities. Within the analysis, it was established that there were no questions
where managers’ assessments would show statistically significant differences in terms
of their gender. Significant differences in managers’ perceptions were confirmed
regarding certain age groups for the following cases: assessment of job security,
assessment of working conditions, assessment of technical equipment of working
space, and assessment of interpersonal relations at work. In case of education level,
managers with secondary school and managers with university degree had different
perceptions regarding job security. Managers were mostly discriminated in terms of
the management level that they belonged to. For this feature, statistically significant
differences were confirmed for 8 analyzed variables. Earned income, current job,
employment security, working conditions, relationship with superiors, professional
training possibilities, work advancement possibilities, and own work commitment
were given highest grades by top managers, whereas these features received lowest
grades by respondents who belonged to lower management.
REFERENCES

1. Dukić, G., (2009), Analysis of Differences in Attitudes Between Managers and
Non-Managing Employees, in: Barković, D., Dernoscheg, K.-H., Lamza-Maronić,
M., Matić, B., Pap, N., Runzheimer, B., Wentzel, D. (eds.), Interdisciplinary Management Research V, Josip Juraj Strossmayer University in Osijek - Faculty of Economics in Osijek / Hochschule Pforzheim University, Osijek, 329-339.
2. Gordon, G.G., (1989), Relationships of Personal Needs to Managers’ Perceptions
of Compensation, Journal of Business and Psychology, Vol. 4, No. 1, 15-26.
3. Hyvönen, K., Feldt, T., Salmela-Aro, K., Kinnunen, U., Mäkikangas, A., (2009),
Young Managers’ Drive to Thrive: A Personal Work Goal Approach to Burnout and
Work Engagement, Journal of Vocational Behavior, Vol. 75, Issue 2, 183–196.

ANALYSIS OF PERCEPTION OF CERTAIN EMPLOYMENT ASPECTS, WORK CONDITIONS...

85

4. Lyness, K.S., Judiesch, M.K., (2008), Can a Manager Have a Life and a Career?
International and Multisource Perspectives on Work-Life Balance and Career Advancement Potential, Journal of Applied Psychology, Vol. 93, No. 4, 789-805.
5. Maniam, V.A., (2007), Measuring Career Success as an Intrinsic Learning Outcome, International Conference on Teaching and Learning (ICTL 2007), Putrajaya (Malaysia), November 15-16, 2007, Conference Proceedings, http://ictl.
intimal.edu.my/ictl2007/ proceeding/Full_Paper/3A-05-Paper%2042%20(Malaysia).doc
6. Mathis, R., Jackson, J., (2008), Human Resource Management, Twelfth Edition, Thomson South-Western, Mason.
7. Mihelčić, S., Karlovčan, S., (2008), Profil hrvatskog menadžera, Istraživanje
časopisa Poslovni savjetnik i konzultantske kuće Proago, Centar za management
i savjetovanje d.o.o., Zagreb.
8. Rothwell, W.J., Kazanas, H.C., (2003), Planning and Managing Human Resources: Strategic Planning for Human Resources Management, Second Edition,
HRD Press, Inc., Amherst.
9. Sikavica, P., Bahtijarević-Šiber, F., (2004), Menadžment - Teorija menadžmenta
i veliko empirijsko istraživanje u Hrvatskoj, Masmedia, Zagreb.
10. Weihrich, H., Koontz, H., (1994), Menedžment, Deseto izdanje, prijevod,
Mate d.o.o., Zagreb.
11. Worrall, L., Cooper, C.L., (1998), Managers’ Perceptions of Their Organisation: An Application of Correspondence Analysis, University of Wolverhampton, Wolverhampton Business School, Management Research Centre, Telford.
12. Wu, W.-Y., Minor, M.S., (1997), Role Perceptions, Personal Traits, Lifestyles
and Leadership: An Empirical Study of American, Japanese, and Taiwanese
Female Managers, International Business Review, Vol. 6, No. 1, 19-34.
13. Yun, S., Takeuchi, R., Liu, W., (2007), Employee Self-Enhancement Motives
and Job Performance Behaviors: Investigating the Moderating Effects of Employee Role Ambiguity and Managerial Perceptions of Employee Commitment, Journal of Applied Psychology, Vol. 92, No. 3, 745–756.

Erika Grau • Nino Grau

86

PROJEKTMANAGEMENTNORMEN IN
INTERNATIONALEN PROJEKTEN
Bedeutung, aktueller Stand und zukünftige Entwicklungen

Erika Grau1, Nino Grau2
GrauConsult GmbH,Germany
2
Fachhochschule Gießen-Friedberg, IPMA - International Project
Management Association, Germany
1

ABSTRACT

The importance of project management as a special organisational form for
temporary endeavours and in particular for international collaborations increases
steadily. Cooperation in international projects can be improved by the use of existing PM Standards. It is therefore important to be familiar with the national and
international project management Standards in order to employ them optimally.
JEL clasiffication: O22, H43
Keywords: Project Management, national and international Standards, ISO 10
006, DIN 69 000, ISO 21 5000, PRINCE2, ICB 3.0, PMBOK
1. BEDEUTUNG DER PROJEKTMANAGEMENTNORMEN IN INTERNATION
ALEN PROJEKTEN

Die Globalisierung der Geschäftsbeziehungen führt dazu, dass die Erwartungshaltung der Kunden ein bisher kaum vorstellbares Niveau erreicht hat in Bezug
auf das Angebot der Sach- und Dienstleistungen. Alles soll schnell und billig angeboten werden, wie nie zuvor. Dies wird durch internationale Arbeitsteilung und
Anwendung komplexer Methoden und Technikern (inklusive Informations- und
Kommunikationstechnologie) für die Koordination der verteilten Arbeit erreicht.
Die sich immer schneller ändernden Erwartungen der Kunden bedingen aber auch
eine starke Zunahme der Arbeit in temporären Organisationsstrukturen insbesondere sowohl im nationalen als auch im internationalen Projekten (Grau/Vossebein,

PROJEKTMANAGEMENTNORMEN IN INTERNATIONALEN PROJEKTEN

87

2010). Viele Dinge, die in einer gewachsenen, permanenten Organisation implizit
den Mitarbeitern bekannt sind, müssen bei (insbesondere internationaler) Zusammenarbeit in Vereinbarungen, LOI (Letter of Intent), MoU (Memorandum of Understanding), beziehungsweise in umfangreichen Verträgen geregelt werden.
Als Folge permanent steigender Anzahl internationaler Projekte werden die
Projektmanager immer öfter mit der Situation konfrontiert, dass sie vertragliche
Vereinbarungen in einem für sie fremden Umfeld schließen müssen. Schwierigkeiten ergeben sich daraus, dass ein (schriftlicher) Vertrag in verschiedenen Kulturen unterschiedliche Bedeutung haben kann. In dem westlichen, vom römischen
Recht beeinflussten Kulturkreis geht man davon aus, dass der Vertrag das Ende der
Vertragsverhandlungen darstellt, alle wesentlichen Willenserklärungen beinhaltet
und folglich von beiden Vertragsparteien exakt erfüllt werden muss (Pacta sunt
servanda!). In einigen anderen Kulturkreisen (zum Beispiel China oder arabische
Welt) sind die persönlichen Beziehungen der Akteure viel wichtiger als der Vertrag
zwischen zwei Institutionen. Auch wenn beide Vertragsparteien dieselbe Vorstellung von der Verbindlichkeit des Vertrages haben, kann es zu Missverständnissen
kommen, wenn sie aus unterschiedlichen Rechtssystemen kommen (zum Beispiel
kontinentaleuropäisches, systematisch abstraktes Recht versus anglo-amerikanisches Case Law). Vollends ratlos ist zum Beispiel der deutsche Projektmanager, wenn
sein Auftraggeber im Vertrag eine bestimmte ihm bis dahin unbekannte Norm
(ISO, FIDIC, etc.) zum verbindlichen Bestandteil des Vertrages erklärt. Andererseits freut sich jeder Projektmanager, wenn er auf ihm bekannte Normen und
Standards zurückgreifen kann, um die Verträge nicht ausufern zu lassen.
Für den Projektmanager beziehungsweise für andere am Projekt beteiligte Personen ist es also sehr wichtig, unterschiedliche Normen zu kennen und zu wissen,
in welchen Situationen welche dieser Normen zur Anwendung kommen sollen.
Man muss die Projektleiter dafür sensibilisieren, welche Fallen sie bei den Internationalen Projektverträgen erwarten. Sie müssen ein Gefühl dafür haben, welche
Arten von Verträgen es im internationalen Raum gibt, in wieweit diese gewissen
Standards unterliegen beziehungsweise inwieweit sie durch die Vertragsfreiheit zu
gestalten sind. Dadurch soll der Projektleiter davor bewahrt werden, aus Unwissen
für ihn nachteilige Regelungen aus ihm unbekannten Standards zu akzeptieren.
Andererseits bekommt er ein Gefühl dafür, inwieweit die bestehenden Standards
die Vertragsgestaltung erleichtern und ihm bei entsprechenden Kenntnissen eine
große Hilfe sein können.

88

Erika Grau • Nino Grau

2. AKTUELLER STAND DER PROJEKTMANAGEMENTNORMEN IN INTERNA
TIONALEN PROJEKTEN
2.1. Herkunft der Normen

Es gibt eine Menge von Standards, die sehr unterschiedlichen Ursprungs haben.
Für sehr unterschiedliche Anwendungsgebiete werden also auch unterschiedliche
Normen sinnvoll anzuwenden sein (s. Abb. 1).

Abb. 1.: Unterschiedliche Normen für Projektmanagement
2.1.1.Offizielle Projektmanagementnormen

Wenn man anfängt, sich mit Normen zu befassen, denkt man oft an die so
genannten offiziellen Normen, die von einem offiziellen Gremium für Normierung
herausgegeben wurden. Dies sind auf internationaler Ebene in der Regel die Normen der ISO (International Standards Organisation). Auf nationaler Ebene ist
es das nationale Gremium, das auch Mitglied der ISO ist (zum Beispiel DIN Deutsches Institut für Normung, ANSI - American National Standards Institute,
BSI – British Standards Institute, usw.). In bestimmten Bereichen spielen auch die
europäischen Normen (EN) eine wichtige Rolle.

PROJEKTMANAGEMENTNORMEN IN INTERNATIONALEN PROJEKTEN

89

Diese offiziellen Normen haben aber in der Regel einen empfehlenden Charakter. Verbindlich werden sie erst, wenn sie entweder durch ein Gesetz vorgeschrieben oder von den Vertragsparteien in das Vertragswerk aufgenommen werden.
Ihr Vorteil liegt allerdings in der großen Verbreitung der ISO Normen (weltweit)
aber auch der teilweise weltweiten Verbreitung wichtiger nationaler Normen aus
Nationen, die durch ihre wirtschaftliche Leistungsfähigkeit einen großen Markt
erreichen.
2.1.2. Faktische Projektmanagementnormen

Vielfach entstehen in professionellen Gesellschaftern Informationen, die sich
zu einem anerkannten Wissenskanon (Body of Knowledge) verdichten. Solche
Ansammlungen von Wissen werden nicht selten in Form von Büchern der Community der Projektmanager zur Verfügung gestellt. Beispiele für solche Normen
sind:
ICB 3.0 - International Competence Baseline der IPMA, beziehungsweise die
davon abgeleiteten nationalen Normen (NCB) (ICB, NCB sind registered trademark of IPMA)
PMBOK - Project Management Body of Knowledge des PMI (Project Management Institute) (PMBOK is registered trademark of PMI)
PRINCE2 - PRojects IN Controlled Environments (registered trademark of
OGC - Office of Government Commerce)
Die ersten beiden oben genannten Normen sind von den Fachgesellschaften
entwickelt worden und werden von ihnen verbreitet und auch wirtschaftlich verwertet. PRINCE2 ist im Auftrag des OGC in Zusammenarbeit mit der britischen Projektmanagementgesellschaft (apm – Association for Project Management)
entstanden und wird heute von einer selbstständigen Organisation (apmg – apm
Group) weiter entwickelt und vertrieben.
2.1.3. Spezielle Standards

Für unterschiedliche Branchen werden aber auch eigene Standards entwickelt
wie zum Beispiel:

Bau und gegebenenfalls Anlagebau

HOAI - Honorarordnungen für Architekten und Ingenieure,

Erika Grau • Nino Grau

90

VOB - Vergabe- und Vertragsordnung für Bauleistungen (früher: Verdingungsordnung für Bauleistungen) Teil A (DIN 1960:2006-05) und
Teil B (DIN 1961:2006-10)

FIDIC - Fédération Internationale des Ingénieurs Conseils (International Federation of Consulting Engineers)

IT
(zum Beispiel V-Modell, SCRUM, …)

Automotive
(zum Beispiel VDA 4.3, …)

Hier sorgen in der Regel große Nachfrager (zum Beispiel Automobilhersteller
gegen über ihren Lieferanten) für die Übernahme der Normen durch eine große
Anzahl von Unternehmen unterschiedlichster Größenordnung.
2.1.4. Reifegrad-Modelle

Reifegradmodelle beziehen sich in Analogie zu Reifegradmodell für Gesamtunternehmen in der Regel nicht auf das einzelne Projekt, sondern auf das gesamte
System des Projektmanagements in einem Unternehmen (zum Beispiel PM-Delta
der GPM (Deutsche Gesellschaft für Projektmanagement e. V., oder OPM3 des
PMI)). Hier gibt es allerdings auch Ausnahmen wie zum Beispiel das System für die
Bewertung von herausragenden Projekten (Project Excellence Modell) der GPM.
2.2. Zielrichtung der Norm

Eine sinnvolle Klassifizierung dieser Normen orientierte sich auch an der Frage,
welcher Teil des Wissensgebietes Projektmanagement normiert werden soll und wie
diese Norm benutzt werden kann.
Ein wesentliches Arbeitsgebiet ist das Erstellen von Glossaren. Ein Beispiel
dafür ist die DIN 69901:2009-01 (bestehen aus fünf Normblättern) Teil 5: Begriffe, die ungefähr 150 Fachbegriffe aus dem Gebiet Projektmanagement definiert.
Die Benutzung (beziehungsweise Einbindung durch Verweis) in Verträge erspart
sicherlich die Kosten, die durch einfache Missverständnisse auf der sprachlichen
Ebene entstehen könnten.

91

PROJEKTMANAGEMENTNORMEN IN INTERNATIONALEN PROJEKTEN

Ein weiteres Anwendungsgebiet ist die Normierung der Methodik. Ein gutes
Beispiel dafür ist die die 69.900:2009, in der die Methode der Netzplantechnik
genau beschrieben ist.
In der letzten Zeit hat die Ausrichtung der Normen an den im Projekt vorkommenden Teilprozessen zugenommen. Ein gutes Beispiel dafür ist die neue (2009
veröffentlichte DIN 69 900 ff. Das Interessante an dieser Norm ist, dass die einzelnen Teilprozesse nicht nur beschrieben wurden sondern auch als „unbedingt
notwendige“ oder “zusätzlich hilfreich“ eingeordnet worden. Dies ermöglicht es,
die Norm für kleinere oder weniger komplexe Projekte in einer „abgespeckten“
Form anzuwenden (s. Abb. 2). Dieses Vorgehen nimmt diejenigen den Wind aus
den Segeln, die sich gerne der Anwendung von Normen mit dem Argument entziehen, dass die Normen durch ihre Bürokratie für kleinere Projekte zu viel Ballast
verursachen.
Projektmanagement-Prozesse (PM-Prozesse) nach DIN 69 901-2 : 2009 (Mindeststandard)
Initialisierung

Definition

1. Ablauf &
Termine

Planung

Steuerung

Abschluss

S.1.2
Termine
steuern

P.1.2
Terminplan
erstellen

S.2.1
Änderungen
steuern

2. Änderungen

S.3.1
Information,
Kommunikation,
Berichtswesen,
Dokumentation
steuern

3. Information,
Dokumentation,
Kommunikation

mögliche
Rekursionen

4. Kosten &
Finanzen
5. Organisation
6. Qualität

7. Ressourcen

8. Risiko

S.7.1
Ressourcen
steuern

P.7.1
Ressourcenplan
erstellen

D.8.3
Machbarkeit
bewerten

9. Projektstruktur

P.8.1
Risiken
analysieren

P.8.2
Gegenmaßnahmen
zu Risiken planen

S.8.1
Risiken
steuern

P.9.1
Projektstrukturplan
erstellen

10. Verträge &
Nachforderungen
11. Ziele

D.11.1
Ziele
definieren

Abb. 2: Mindeststandard der Project Managementprozesse nach DIN 69.901-2

S.11.1
Zielerreichung
steuern

A.6.1
Projekterfahrungen
sichern

Erika Grau • Nino Grau

92

Eine weitere Zielrichtung ist es, standardisierte Projektmanagement Musterverträge anzubieten. Diese Verträge können in seltenen Fällen sogar unverändert
übernommen werden. Üblicherweise werden sie individualisiert, das heißt geringfügig geändert die Gegebenheiten des Projektes angepasst. Hier ist es besonders
wichtig, die Systematik dieser internationalen Verträge zu verstehen, um den richtigen auszuwählen. Hilfreich dabei ist es, das internationale Vertragswerk mit den
bekannten nationalen Rechtsvorschriften zu vergleichen (zum Beispiel aus FIDIC
die einzelnen Bücher (Silver Book/Red Book/Yellow Book mit VOB/A/B etc.)
Grundsätzlich ist es bei der Überlegung, einen oder mehrere Standards anzuwenden, wichtig, folgende Kriterien zu beachten:

Der Standard soll in der Region und bei den Kunden oder anderen Geschäftspartnern relativ weit verbreitet sein.

Der Standard soll möglichst viele Projektmanagement-Elemente abdecken.
Die aufwändige Arbeit, einen paarweisen Vergleich von Projektmanagement
ist anders vorzunehmen wird von einer internationalen Organisation übernommen. Diese Organisation (GAPPS - Global Alliance for Project Performance Standards) führt solche Vergleiche mit Einverständnis der für den
jeweiligen Standard zuständigen Organisation. Wenn die jeweiligen Organisationen (zum Beispiel IPMA für ICB und apmg fürPRINCE2) zustimmen,
werden die Ergebnisse öffentlich zugänglich gemacht.

Für den Standard soll es genügend Möglichkeiten geben, di den e eigenen
Mitarbeitern und gegebenenfalls den anderen am Projekt beteiligten Parteien
genügend Training zukommen lassen zu können. Damit wird gewährleistet,
dass der vorgeschriebene Standard wirklich auch benutzt wird.

Es ist vorteilhaft, wenn nach dem auch Zertifizierungen für das Personal
durchgeführt werden. Damit ist gewährleistet, einen Nachweis über das im
Training gelernte zu bekommen. Wenn die Zertifizierungen relativ weit verbreitet sind, ergibt sich die Möglichkeit, bei personellen Engpässen relativ
zügig entsprechend geschultes Personal auf dem Arbeitsmarkt zu finden.

Sowohl beim Training als auch bei der Zertifizierung sollte man darauf achten,
ob nur reines Wissen vermittelt wird (das womöglich durch einfache multiple scheues Prüfungen am Computer überprüft wird) oder ob es sich um die Entwicklung
der Kompetenzen des Personals handelt, wie dies zum Beispiel bei dem 4-LevelSystem der IPMA der Fall ist.

PROJEKTMANAGEMENTNORMEN IN INTERNATIONALEN PROJEKTEN

93

3. ZUKÜNFTIGE ENTWICKLUNGEN DER PROJECT MANAGEMENTNORMEN

Abgesehen von den o. g. zurzeit soll Verfügung stehenden Normen, die immer weiter entwickelt werden, ist zur zeit die Entwicklung der ersteren ISO Norm
speziell für das Projektmanagement, nämlich der ISO 21.500 durch das ISO PC
236 die wohl bedeutendste Aktivität im Bereich der Projektmanagementnormen.
Es wird erwartet, dass diese Norm, an der seit ungefähr vier Jahren gearbeitet wird,
in 2012 veröffentlicht wird.
Da zur zeit die ISO 21.500 im Großen und Ganzen festgelegt ist, ist es für
interessierte Kreise schon jetzt erkennbar, welche wichtige Gebiete bei dieser ersten Norm nicht berücksichtigt wurden. Deswegen wird seit ungefähr einem Jahr
die Diskussion darüber geführt, welche Elemente demnächst auf der ISO Ebene
behandelt werden sollen. Viele dieser Diskussionen laufen in Richtung der Erweiterung des Focus „Projektmanagement“ in Richtung Programm- und Portfoliomanagement. Weitere mögliche Bereiche sind „Kompetenzen“, „Risikomanagement“,
„Earned Value Analysis“, „Metriken für die Messung des Projekterfolgs“, um nur
einige zu nennen.
Abschließend bleibt es festzustellen, dass die Aktivitäten auf dem Feld der Project
Managementnormen in den nächsten Jahren deutlich verstärkt werden. Es bleibt
zu hoffen, dass es gelingen wird, die Normen zur Verbesserung der (insbesondere
International) Zusammenarbeit zu nutzen und nicht als Instrument zur Abwehr
der ungeliebten Konkurrenz auf den eigenen Märkten.
4. LITERATURVERZEICHNIS

1. DIN (Hrsg.):
2. DIN 69900 Projektmanagement – Netzplantechnik – Beschreibungen und
Begriffe
3. DIN 69901-1 Projektmanagement – Projektmanagementsysteme – Teil 1:
Grundlagen
4. DIN 69901-2 Projektmanagement – Projektmanagementsysteme – Teil 2: Prozesse, Prozessmodell
5. DIN 69901-3 Projektmanagement – Projektmanagementsysteme – Teil 3:
Methoden

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Erika Grau • Nino Grau

6. DIN 69901-4 Projektmanagement – Projektmanagementsysteme – Teil 4: Daten, Datenmodell
7. DIN 69901-5 Projektmanagement – Projektmanagementsysteme – Teil 5:
Begriffe
8. Grau, N. & Vossebein, U.(2010): eigener Karrierepfad im Projektmanagement,
Projektmanagement aktuell, 3/2010 (im Druck)
9. IPMA International Project Management Association (2006)(Hrsg.): ICB IPMA
Competence Baseline Version 3.0, Nijkerk, 2006
10. PMI Project Management Institute (2004)(Hrsg.) Guide to the Project Management Body of Knowledge. Upper Darby: Project Management Institute

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95

MARKETING IN CONTEMPORARY ENVIRONMENT 
TRADITIONAL Vs. VALUEADDED MARKETING
dr.sc. Đuro Horvat
mr.sc. Nataša Trojak

Abstract

Contemporary business environment, characterized mainly by many, frequent
and strong changes, creates new challenges that companies must face. Marketing,
one of business functions that is among those most exposed to the market, is therefore forced to conduct changes in its own concept. Because of this reason, marketing
is today shifting from the sales concept, often identified with sales or promotion,
to a function that is creating and positioning added value for personal and business
consumption. This shift is being accomplished through actual marketing trends,
first of all through client orientation and consumer behavior, cooperation with
consumers in marketing strategy creation, customer relationship management, focusing on immaterial resources and creativity. Value-Added Marketing is no longer
tactical element; it has moved to strategic position and its task is to ensure longterm survivor and success for the company. It is based on the premise that if one
wants to achieve certain market share, he has to offer products superior to those
currently available. This value maximization is capitalized by creating more product
attractiveness and satisfaction for the consumer, that will in the end result with better market penetration and consumer preference and also lead to prominent rates
of repeated or multiple repeated purchases.
JEL clasiffication: D4, M31, M37
Key words: contemporary environment, Traditional Marketing, Value-Added
Marketing, contemporary marketing trends

Đuro Horvat • Nataša Trojak

96
EVOLUTION OF MARKETING

In terms of evolution, marketing has inherited a sales concept that has always
included remainders of the production concept,1 so the marketing concept is often
equalized with sales or promotion or economic publicity, which is not correct and
which indicates that its conceptual approach is actually not fully comprehended.
Among many definitions of marketing in which its fundamental determinants are
attempted to be placed, it is enlightening to state the one accepted by AMA (American Marketing Association)2: Marketing is the process of planning and executing
the pricing, promotion and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals. Therefore, marketing is
not merely sales or promotion – it is much more than that. Meler3 defines the
fundamental objective of marketing as efficient and profitable satisfying of consumer needs, while Grbac4 claims the task of marketing is to create and stimulate
to purchase what the consumers need and want.
Work on coordination between the business resources and consumer needs and
desires ensures more successful business and higher profits for business entities,
which is ultimately their objective. In other words, marketing is the process of creating and exchanging values between business and other entities and their consumers who are in the center of marketing interest because a business entity may only
achieve its objectives if it satisfies consumer needs. The purpose of business is not
attempting to sell what an enterprise is able to produce, but to sell what someone
wants to buy. We distinguish between three approaches or business entities’ market
focuses in marketing theory:5
1. Focus on consumers, which implies the identification of their desires and
their fulfillment by using a set of activities to achieve the objectives;
2. Coordination and integration of a business entity so that all segments of the
human resources (managers and employees) have the same objective: shortterm and long-term satisfaction of consumers; and
1
2
3

4
5

Meler, M. (1999) Marketing, Ekonomski fakultet Sveučilišta u Osijeku, Osijek, p 12
AMA Board Approves New Marketing Definitions, Marketing News, 1 March 1985, p 1
According to Meler, M. (2003) Neprofitni marketing, Ekonomski fakultet Sveučilišta u Osijeku,
Osijek, p 48
Grbac, B. (2006) Identitet marketinga, Ekonomski fakultet Sveučilišta u Rijeci, Rijeka, p 11
Adapted according to Nickels, W.G. (1987) Understanding Business, Times Mirror / Mosby College
Publishing, St. Louis, p 179

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3. Focus on profit, which implies finding of products and services enabling a
business entity to generate profit and survive and expand in the direction of a
higher degree of customer satisfaction, which requires redesign of the objectives ensuring a good market share.
In the business practice of a business entity, it is the successful marketing and
business strategies that optimally reconcile the focus on consumers (because unconditional acceptance of this concept may result in production of goods and services that are extremely attractive to consumers, but their production and sales are
expensive and they do not yield profit and profit is the basic purpose of existence
of a business entity) and focus on profit (because a focus on profit without ongoing
monitoring of the market, consumers and competition threatens the survival of a
business entity in the medium and long term). Each of the marketing strategies
still has the consumer in its core and a successful marketing strategy both in the
development of a product and its communication is the one that best understands
how consumers make their decisions to select products. Contemporary marketing
perceives the consumer not only as the end user of a service, but as a key factor that
is in the center of formation of a marketing strategy.
CONTEMPORARY MARKETING TRENDS

Contemporary marketing strategies are based on the knowledge of the target
market and its segments. Attention should primarily be paid to the motivation and
deciding methods of consumers, which largely affects their buying behavior.
In this respect, it is particularly important to know consumer behavior, which
includes a set of different forms and ways of human behavior when purchasing
products or services and includes all their manifest reactions in the buying process,
as well as the after-sales processes including valuation of the product and/or service
bought at the time of consumption and satisfaction with the after-sales service,
which is an influential factor with respect to the repeated purchase. Consumer
behavior is an interdisciplinary area using knowledge in the areas of psychology,
economics, sociology and marketing. This is a discipline having its sources in conscious and subconscious determinants of human personality, as well as the factors
of each human behavior. It also involves different socio-cultural factors in the environment where consumers live and work, as well as different personal characteristics of consumers.

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Đuro Horvat • Nataša Trojak

Consumer research implies research into the fundamental determinants of the
target group of potential consumers on the target market. Within his consumer
behavior model, Kotler6 presents seven most important consumer research issues,
or the so-called 7 Os of the market:
● Who constitutes the market?
(Occupants);
● What does the market buy?
(Objects);
● Why does the market buy?
(Objectives);
● Who participates in buying?
(Organizations);
● How does the market buy?
(Operations);
● When does the market buy?
(Occasions); and
● Where does the market buy?
(Outlets).
There are many consumer behavior factor classifications in literature and the
most frequently used one, under different names, is the original classification of the
same author who presents and systematically elaborates the main fours groups of
factors affecting consumer behavior, namely:7
● Psychological (motivation, perception, learning, beliefs and attitudes)
● Cultural (culture, subculture, social class system)
● Social (reference groups, family, roles and status)
● Personal (age and life-cycle stage, occupation, economic circumstances, lifestyle, personality and self concept).
As consumer behavior is determined by these and many other characteristics,
there is no possibility of a simple and automatic interpretation of consumer behavior. In addition, we should take into account the situation factors (factors relating to a specific situation, specific time and space, completely independent of the
characteristics of the consumers, objects and services being bought). They have the
greatest impact on behavior at the point of sale, which is why distributors are particularly keen to study the impact of these factors on the buying process.
Despite all patterns in the behavior of consumer and different strategies to satisfy
their needs, it is possible to build demand for a product by using motivational sugges6

7

See Kotler, Ph. (2001) Upravljanje marketingom – Analiza, planiranje, primjena i kontrola, Mate,
Zagreb, p 202-203
According to Kotler, Ph., et.al. (2006) Osnove marketinga, Mate, Zagreb, p 255-270

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99

tions and providing positive improvements. In a broader sense, innovation is the use
of a new idea or process providing the consumer with new benefits or added value.
The contemporary marketing tendency is to be as close as possible to the consumer. It does not stop at merely knowing the consumers, but insists on their
involvement in the strategy creation process. The basic objective of these activities
is to enable bridging of the gap between the seller and consumers in the process
exchange function (Chart 1).

CHART 1: Functions to bridge gaps
MARKETING
MANAGER

A. Exchange Function
B. Logistic Functions
C. Support Functions

CUSTOMER AND
CONSUMER

Within the phenomenal forms of marketing, some authors divide conceptual
marketing directions into:8
● Passive marketing (a result of the production concept, characterized by its
predominant focus on the product);
● Operating marketing (a result of increased competitiveness, characterized by
focus on the function); and
● Active marketing (a result of technological progress, and market saturation
and globalization, characterized by focus on the consumers and a central and
strategic position of the marketing function).
The common way of thinking among business entities in the past, as well as today to a certain extent, relies on the increase of sales and market share, which often
results in neglect of the existing and prospective customers.
The present marketing theory widely debates Customer Relationship Management (CRM) developed from Relationship Marketing. Namely, the present-day
consumer is under the influence of new technologies, communication channels,
new products and services and is, in addition to the normal human needs, increasingly bombarded with, and often chooses artificially created needs via different

8

See more in Vranešević, T. (2000) Upravljanje zadovoljstvom klijenata, Golden marketing,
Zagreb, p 34-37

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Đuro Horvat • Nataša Trojak

online activities. We refer to such consumers as hybrid consumers and they have
the following characteristics:9
● 68 percent search the Internet and shop in outlets;
● 54 percent search the outlets and shop online;
● 47 percent search the catalogs and shop online; and
● 38 search the Internet and shop by telephone.
The foregoing leads to the conclusion that, in the present knowledge economy,
intangible resources are becoming crucial for profitable business. Knowledge is the
basic element in establishment of global competitiveness. Marketing analyses enable creation of applicable knowledge and all employees must ne involved in this
process. We should keep in mind that knowledge is a specific resource and knowledge management is expressed as a managerial tool based on special principles.
Furthermore, marketing processes must provide information on consumer needs
because it is the basic prerequisite for making the decision, the implementation of
which shall enable business entities to achieve their planned strategic objectives.
The new market relations in the form of new economy are largely based on intangible resources. The market transformation has caused redesigning of business
functions, including marketing. The present-day marketing processes are primarily
focused on the image and brands. Brand identity is a result of a strategic marketing
approach. The foundation of the total market identity includes brand market positioning i.e. recognizability of a product or service. This is achieved by marketing
communication, promotion, sales strategy, logo, design, product or service name
and other marketing tools. A significant role in this is played by the tangible performance, primarily the quality of a product or service.10 Marketing communication used to be simple, so consumers were bombarded with promotional messages,
while present-day marketing managers establish a two-way communication and
systematically collect consumer attitudes and opinions that they use when redesigning existing and launching new products or services.
An open organizational structure is exceptionally useful for communication
and improvement of consumer relations. This is a significant shift in development
compared to traditional marketing that aimed to impose, or better yet, dictate consumption. Marketing is being transformed into a business function that is becom9

Wind, Y., et.al. (2002) Convergence Marketing – Strategies for Reaching the New Hybrid Consumer, Prentice Hall, Upper Saddle River, p XIII
10
Upshaw, B.L. (1995) Building Brand Identity, John Wiley & Sons, New York, p 24

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ing proactive, primarily aiming to detect problems on the market and eliminate
them as soon as possible for the purpose of satisfying consumer needs. It actually
aims to create new added value for the consumers and provide them with full value
for their money.
Creativity is becoming a central element of marketing processes, culminating by
sales of new products, discovering new markets and using new technological solutions.
The marketing transformation is accompanied with radical structural modifications:
the new marketing requires transformation of the organizational structure and the
business processes are becoming transparent and are implemented in a radically new
manner. The processes are managed by cross-functional teams. Such new approach
generates new added value with less expenses, and the use of practical knowledge. The
marketing transformation would not be possible without new information technology and the Internet. New principles are being postulated, enabling profit creation
in a new way. At the same time, new organizational relations are being developed,
stimulating cross-functional cooperation with mutual trust of all employees.
MARKETING BASED ON VALUE

The classic marketing concept implies a comprehensive process of planning and
implementation of activities for the purpose of satisfying consumer needs, desires
and expectations, with achievement of the business entity’s objectives at the same
time. As a business philosophy, marketing management has evolved from passive
and operating marketing to active marketing in which it plays a strategic role in an
entity’s business: this is the business philosophy of long-term survival and success
of a business entity.
Market-focused strategic planning is a management process of developing and
maintaining relations between the organizational objectives, sources and skills and
changing market opportunities. The objectives of strategic planning are to design
and redesign the business of an entity or its products and services in the way that
it achieves its planned profit and growth.11 Once again, the marketing manager has
become the most important functional associate in the strategic planning process,
having a central role in the definition of the business vision and mission, analyzing
of the environment, competitive and business situations, and in the development
of objectives and strategy. Planning is an integral part of the marketing process
11

Kotler, Ph. (2001) Idem, p 63

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Đuro Horvat • Nataša Trojak

where business entities deliver a value to the market and generate certain profit.
Strategic management implies management used to avoid numerous threats from
the environment and at the same time take all opportunities.12
Furthermore, strategic management includes reviewing of specific long-term activities for the purpose of achieving future tasks, objectives and success. As a business
entity’s environment changes on a daily basis, strategic marketing must be sufficiently
flexible. Marketing planning implies a complex process requiring a systematic approach to identify and analyze external factors and their coordination with the possibilities or potentials of a business entity. Strategic marketing must offer the answers
to the questions of which markets and segments we want to compete in, with which
products and/or services, and what will be our basic competitive advantage.13 The
marketing strategy process ensures a structured activity by which we are able to conceive the marketing strategy for a product, service or business.14
Conception of strategies must provide access to the plan for achievement of the
competitive market objective and reviewing of their contributions for achievement
of a business entity’s objectives. Launching a new product on a saturated market
is very difficult. USDA estimates that in the food industry segment alone two out
of three products launched on the market fail. And only one out of five started
businesses manages to survive for five years. According to Nilson,15 the minimum
estimated number of new food products launched every year in Western Europe
and America is 12,000, so if we look at the projects that were never launched, the
estimated failure rate is 70%, and if we consider that behind each project is at least
one year of preparation, we can conclude that around 8,400 years are lost or wasted
in the food sector alone. No one is motivated by failure and a high level of success
performs miracles for marketing experts’ evaluations and Nilson himself points out
that the future role of marketing should be in continuous improvement of notable
relative value for money of the products manufactured by a business entity.
Marketing managers achieve this by focusing on maximizing the value i.e. on
Value-Added Marketing (VAM). It is based on a clear, but often unrecognized fact:
12
13

14
15

Vranešević, T., et.al. (2004) Upravljanje strateškim marketingom, Accent, Zagreb, p 27
Gilligan, C. & Wilson, M.S.R.: Strategic Marketing Planning, Butterworth Henemann, 2003, p
53
Vranešević, T., et.al. (2004) Idem, p 31
Nilson, T.H.: Value-Added Marketing: Marketing Management for Superior Results, McGraw-Hill
Book Company Europe, Berkshire, 1992, p 41

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103

if we want to obtain the desired market share, we must offer products superior to
those already available. Superior in any segment that will make your product or
service more valuable to the customer than a competing product or service. If a
business entity adopts the value-added marketing strategy, it will become more
prosperous because it will create greater value in the attractiveness of and satisfaction with its products, which will result in better market penetration and consumer
preference and, more importantly, ensure superior rates of repeated or multiple
purchases. Value-added marketing provides a new dimension, shifting marketing
from the area of searching for empty market niches to a strategy for improvement
of perception of the existing products and launching new ones only when it is certain that significant benefit can be achieved. The value-added marketing process is
presented in Chart 11.16

CHART 11: Value-Added Marketing Process
MAXIMIZATION VALUES

EXPECTED VALUE FOR MONEY

ABOVE-AVERAGE SATISFACTION

PRODUCT ATTRACTIVENESS

REPEATED PURCHASE RATE

PENETRATION OF NEW SEGMENTS

HIGHER SALES/PROFIT
16

Adapted according to Vranešević, T. et.al. (2004) Idem, p 43.

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Đuro Horvat • Nataša Trojak

To provide a better explanation of the value-added marketing concept, Nilson
presented explanations of some key words in connection with this:17
● Continuity – Managers are required to be continuously alert because one of
the common reasons of a drop in demand is neglecting of changes to consumer habits and attitudes and continuous innovations, adaptations and improvements, which are key factors of products and brand that are successful
in the long term;
● Improvement – Starting from the maxim that everything can always be done
better, improvement is the fundamental axiom of value-added marketing;
● Noticeability – Product noticeability must be as high as possible as it is the
central factor of a consumer’s purchase decision;
● Relativity – Noticeable value is a subjective fact; for long-term success, marketing managers must adopt the customer’s or consumer’s way of looking at
product value;
● Value – It is important to have a detailed view of how a consumer evaluates
product benefits as it is impossible to improve something now known or not
well defined;
● Money – Noticeable relative value is observed and assessed in the context of
how much it costs to obtain a product;
● Product – Kada je riječ o proizvodu, zapravo se to uvijek odnosi i na usluge;
te
● Value Maximization – Value maximization within the relevant cost parameters must be a daily objective.

17

Adapted according to Nilson, T.H. (1992) Idem, p 43-46  

MARKETING IN CONTEMPORARY ENVIRONMENT  TRADITIONAL Vs. VALUE...

105

Figure 1: Added-Value Strategies

high

System Development

Solution
Innovation

low

Added value through grouping

Value Space

Core

Target Expansion

low

high

Adding value by segmentation and adaptation

The use of value-added marketing will make any product range of a business entity more competitive. A focus on achieving above-average satisfaction and higher
attractiveness through value maximization will result in increased noticeable value
for money. There are at least three possible strategies that may provide the necessary
differentiation of the core business, as presented in Figure 1.18
–CORE: This is the starting point where consumers do not notice a
difference between a business entity and its competitors because what is offered
is not sufficiently adapted to the specific needs of individual consumers or segments and has no grouped added value.

QUADRANT

18

Kashani, K. (2006) Fighting Commoditization – Strategies for Creating Novel Customer Values,
IMD, No. 137, p 1-4. http://proquest.umi.com/pqdweb?index=0&did=1167508431&SrchMod
e=1&sid=2&Fmt=6&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=11685903
47&clientId=42821, Access (11-01-2007)

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Đuro Horvat • Nataša Trojak

– TARGET EXPANSION: This represents a strategy tending to add value
by expansion of a business entity’s core to better satisfy its special needs; dual
tactics are available: offer sub-adapted products to some consumers and better
adapted target products to other consumers.
QUADRANT

QUADRANT – SYSTEM DEVELOPMENT: Business entities in this quadrant develop a
product-service package offering synergic benefits of the system and the added
value for the consumer arises from integration of system elements, so the total
value exceeds the sum of its components.
QUADRANT – SOLUTION/INNOVATION: Business entities in this quadrant offer a set
of packaged products and services targeting a specific segment or the individual
consumer, and offer products and solutions for its consumers’ specific problems
by combining products with focused services such as technical advice, training,
consultancy and the like, which requires innovations in creation of value, but
also promises high profits.

Therefore, the success of a marketing strategy based on value is always measured by customer satisfaction, the market share site and sales volume. The added
value and the strength of differentiation of each strategy are in the attempt to shift
business outside the traditional definition of products and services. Such strategies
enable a business entity to offer its consumers new benefits increasing its success
through higher productivity, lower costs and improvement of the competitive position on the market.
VALUE CREATION STRATEGIES

The famous American management theoretician and practitioner once said
(quote) that acquiring and retaining consumers is the business of all businesses so,
accordingly, all business strategies could be divided into offensive and defensive
strategies, which can be presented in a chart (Chart 2).
Offensive strategies imply attraction of new consumers or poaching of competition’s consumers, while defensive strategies imply retention of the existing consumers and achieving a high level of the loyalty.

MARKETING IN CONTEMPORARY ENVIRONMENT  TRADITIONAL Vs. VALUE...

107

Chart 2: Two Types of Business Strategies
BUSINESS STRATEGY

OFFENSIVE
(acquiring new consumers)

market enlargement

battle for market
share

DEFENSIVE
(retaining the existing consumers)

building barriers

increase in repeated
purchases

Source: Fornell, C. (1992) A National Customer Satisfaction: The Swedish Experience, Journal
of Marketing, Vol. 56, p 6-21

However, we can determine based on the foregoing that traditional marketing
pays more attention to acquiring new consumers than retaining the existing ones,
which means it prefers offensive strategies. Regardless of the fact that (according
to supporters of this opinion) it is impossible to retain someone unless you acquire
them first, we should take into account the following facts:19
● In most business activities, only a minor part of the revenues is generated by
new consumers, and a major part by the existing ones;
● Most companies focus most of their marketing resources on acquisition of
new consumers, rather than retaining the existing ones; and
● Consumer loyalty (which is raised by defensive strategies) is a crucial success
factor, especially when large competition is present and the market is growing
slowly.

19

According to Vranešević, T.: Idem, p 70

Đuro Horvat • Nataša Trojak

108

Presentation 20: Focus on the Market Share and Customer Satisfaction
DETERMINANTS

MARKET SHARE
On saturated markets with low
1. TYPICAL USE
growth rates
2. STRATEGY TYPES
Offensive
3. FOCUS
On the competition
4. PERFORMANCE MEASURES Relative market share
5. BEHAVIOR TARGET
Consumer acquisition

CUSTOMER SATISFACTION
On saturated markets with low growth
rates
Defensive
On customers and consumers
Repeated purchase rate
Higher customer and consumer loyalty

Recently, an increasing number of business entities have recognized and accepted the fact that retention of the existing consumers is much more profitable
and attraction of new ones. This is why customer retention and customer loyalty
is more and more often in the center of their interest and they often incorporate
them in their missions.
The classic marketing approach deals with the use of both concepts under the
same market circumstances (small growth rate and market saturation), which impedes the growth of a company if it is positioned on a more propulsive-growing
and unsaturated market, which is also the reason why foreign companies have invaded the Croatian market.20 Accordingly, Fornell21 provides a tabular presentation
of the differences between a focus on the market model and focus on customer
satisfaction (Presentation 20) in the context of five determinants (characteristics of
a market on which a focus in typically used in present circumstances, strategy type,
performance measures and target behavior).
CONCLUSION

Like any other business element, marketing must be adapted to the characteristics of the environment. A very complex and dynamic environment affects marketing in a particularly intensive manner and its work results are reflected in a developed market position and the market share achieved. It is for adaptation to new
characteristics of the environment that marketing was force to evolve its concept.
Once the focus on production was no longer able to provide adequate results, mar20
21

Idem, p 72
Adapted according to Fornell, C. (1992) A National Customer Satisfaction: The Swedish Experience, Journal of Marketing, Vol. 56, p 6-21

MARKETING IN CONTEMPORARY ENVIRONMENT  TRADITIONAL Vs. VALUE...

109

keting turned to the most significant success factor – the consumer. The center of
its interest is not only the consumer structure on the market, but also their behavior
and especially needs. Marketing is no longer just a means of selling products and/
or services on the market, but a philosophy present in all segments and all business
levels. However, customer satisfaction can only be achieved when the customers are
offered a certain value. This is why management is focused on maximizing the value
of the offer and such marketing philosophy represents Value-Added Marketing.
Although the foundations of added-value marketing is formulated very simply –
offering products superior to those already on the market – the achievement of this
objective is by no means simple. Achieving above-average satisfaction among consumers who are in contact with a huge number of products, brands, promotional
messaged and options requires a clear strategic orientation and creation of strategies
creating values that will attract new consumers or maximize the satisfaction of the
existing ones.
REFERENCES:

1. AMA Board Approves New Marketing Definitions (1985) Marketing News, 1
March
2. Fornell, C. (1992) A National Customer Satisfaction: The Swedish Experience,
Journal of Marketing, Vol. 56
3. Gilligan, C. & Wilson, M.S.R.: Strategic Marketing Planning, Butterworth
Henemann, 2003, p 53
4. Grbac, B. (2006) Identitet marketinga, Ekonomski fakultet Sveučilišta u Rijeci,
Rijeka
5. Kashani, K. (2006) Fighting Commoditization – Strategies for Creating
Novel Customer Values, IMD, No. 137, dostupno na: http://proquest.umi.
com/pqdweb?index=0&did=1167508431&SrchMode=1&sid=2&Fmt=6
&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1168
590347&clientId=42821, Access (11-01-2007)
6. Kotler, Ph. (2001) Upravljanje marketingom – Analiza, planiranje, primjena i
kontrola, Mate, Zagreb
7. Kotler, Ph., et.al. (2006) Osnove marketinga, Mate, Zagreb
8. Meler, M. (1999) Marketing, Ekonomski fakultet Sveučilišta u Osijeku, Osijek

110

Đuro Horvat • Nataša Trojak

9. Meler, M. (2003) Neprofitni marketing, Ekonomski fakultet Sveučilišta u
Osijeku, Osijek
10. Nickels, W.G. (1987) Understanding Business, Times Mirror / Mosby College
Publishing, St. Louis, p 179
11. Nilson, T.H. (1992) Value-Added Marketing: Marketing Management for Superior Results, McGraw-Hill Book Company Europe, Berkshire, 1992, p 41
12. Upshaw, B.L. (1995) Building Brand Identity, John Wiley & Sons, New York
13. Vranešević, T. (2000) Upravljanje zadovoljstvom klijenata, Golden marketing,
Zagreb
14. Vranešević, T., et.al. (2004) Upravljanje strateškim marketingom, Accent,
Zagreb
15. Wind, Y. , et.al. (2002) Convergence Marketing – Strategies for Reaching the
New Hybrid Consumer, Prentice Hall, Upper Saddle River

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111

ADVANTAGES OF ISTRIA REGARDING GOLF AS PART OF
TOURIST PRODUCT
Zoran Jeremić1
1
Visoka poslovna škola Višnjan
Croatia

ABSTRACT

A long-term tourism development in Istria has to be based on comparative and
other advantages which stem from available resources. The integration of golf in
tourism development has to be considered according to the comparative advantages, since travels triggered off by golf encompass a large part of the emissive tourism
markets and are growing constantly. It is especially the case with wealthier consumers because Istria can not compete on the world tourist market without offering
them golf courses as the part of the tourist product. For better understanding of
tourism development in Istria and emphasizing golf as an important element in the
improvement of the Istrian tourist product, a further analysis of golf development
in the surrounding will be necessary. This research is referring to the golf development in Slovenia and Italian provinces in the vicinity, in order to compare them
and use them for developing golf as Istrian tourism product.
JEL clasiffication: L83
Key words: tourism, destination, advantages, tourist product

1. INTRODUCTION

Tourism represents a very dynamical and progressive activity with constant
changes and new client demands. In order for a destination to be competitive in the
world tourism market it is necessary to constantly adjust and fulfil its tourism product. In order to understand and define the tourist product better, it is necessary to
state a destination’s comparative advantages and its derived offer which role is very
important in the tourist product creation. Golf and tourism travels motivated by

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Zoran Jeremić

golf grow continually and represent one of the trends in world tourism. The most
developed tourist countries have recognized these trends and possibilities – golf has
become an integral and indispensable part of their tourism product. By introducing golf, the overall quality of the tourist product has been enhanced because a
complete golf offer encompasses the best parts of other forms of the tourism offer.
This kind of concept should be recognized in Istria, the most prominent and most
developed tourist destination of Croatia. Istria has ideal conditions for golf development and its integration into the offer. It could become a prestigious golfer’s destination. Special advantages are the mild climate which enables golf playing during
the whole year as well as the proximity of the emissive markets. Another advantage
is that there are no golfer destinations in the vicinity. This research is based on golf
development in the competitive tourism countries in order to compare them and
put them in context of the development of golf in Istrian tourism.
2. GOLF AS A PART OF A TOURIST PRODUCT OF THE DESTINATION

It is necessary to define elements of golf, in order to understand its importance
and compatibility as a part of the tourist destination offer.
2.1. Elements of a destination’s tourist offer

Tourist product is a set of available resources, services and convenience for tourists
to use to meet their needs in a certain time and on a certain area (Kobašić&Senečić;
1989, 91). It is also the case with the destination tourist product which represents
an integrated set of all the elements of a tourist destination offer. A tourist destination product represents a sociocultural, economical, natural and ecological unity in
regard to tourist preferences (Magaš; 2003, 28). The core of a destination’s tourist
product is made out of a suitable combination of tourist resources. In accordance
with the general resource definition, a definition of a tourist resource can be derived
– all means that could be useful to the tourism of a certain area (Kušen; 2002, 16).
Tourist resources are divided into tourist attractions and other direct and indirect
resources. Basic tourists resources are represented by tourist attractions which are
the main reasons tourists visit a destination. Other direct tourist resources are represented by the overall tourist infrastructure of a destination which ensures guests
a pleasant stay and different activities. Other indirect resources represent actions
of local population and state and are made out of the environment situation, geographical position and availability, communal infrastructure and political situation.

ADVANTAGES OF ISTRIA REGARDING GOLF AS PART OF TOURIST PRODUCT

113

These resources represent an important part in creating the tourist offer. They are
important also for the tourists` perception of a destination. These resources need to
be arranged, equipped and marked since the users notice it and treat it as an integral part of the product (Križman, 2008, 153). In order to understand and define
the tourist offer better, it is necessary to state a destination’s comparative advantages
and its derived offer which role is very important in the tourist product creation.
Comparative advantages of natural values of a destination are: climate, landscape,
beaches, ecological areas etc. while the derived offer is made out of various infrastructural and superstructural elements (Magaš; 2003,52). It is necessary to take
into consideration the comparative advantages of a certain area and the possibility
of developing various segments of a tourist product of the tourist destination. The
long-term development has to be based on comparative advantages which stem
from available resources (natural and acquired), on interdependence and functionality of relations between individual activities and on the need to ensure better life
conditions to all residents in a tourist destination (Blažević; 2007.; 218).
2.2. Golf compatibility with the destination’s tourist product

Golf represents one of the most developed and mass commercial sports of today.
All golf market analyses show that golf has become an indispensable and necessary
part of a destination’s tourist product, not only in Europe but all over the world.
Tourism development practice in the world shows that countries which do not have
golf courses in their offer can not seriously compete on the world tourist market
in the segment of richer consumers (Bartoluci&Čavlek; 2007,154). The tourist
product of a destination has to be seen, developed and created in this view, if its
goal is to compete on the demanding world tourist market. In order to view the
situation on the world golfer market better, several characteristic markers are used.
Their purpose is to view the dimensions of the spatial and population location of
golfer markets. The markers are: golf availability, i.e. the number of inhabitants of
a country per one golf course, the extent of the golfer population, i.e. the share of
golfers in a country’s population, the number of golfers on a golf course. From the
view of economical science and analysis, the most important information is the size
and structure of the world golfer market shown in US $. It is shown in the following table:

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Table 1: Size and structure of the world tourist market
INDICATOR

WORLD

USA

EUROPE

Number of golf courses

31.500

15.990 (51%)

6.546 (21%)

Number of golf players

70 mil.

29 mil (41%)

8 mil (11%)

Number of inhabitants per a golf course

-

19.000

74.850

Golfer share in the total number of inhabitants (%)

-

9,6%

1,6%

2.222

1.813

1.222

$90 billion

$55 billion

$10 billion

Number of golfers per a golf course
Market value

Source: www.nfg.org, www.ega-golf.ch, (11.04.2008.)

The table shows there are 31.500 golf courses in the world and that around 70
million people practice golf. These figures represent a great potential in the tourist
sense. The most important information is that market value for a year amounts to
90 billion dollars. The most developed part of the world for golf are the US (51%
of the world golf courses, 41% of the players and market value 55 billion $). From
the point of view of this research, the situation in Europe is particularly interesting.
It is considered that Istria will be visited by European golfers. Europe owns around
6.500 golf courses – 21% of the total golf courses in the world. It is also important
to state that a large number of these golf courses are found in the north where they
are closed, due to the climate, during cold winter months. A large number of the
total of 8 million (11% of the world golfer population) is forced to travel during
winter in order to play golf. Annual golf income in Europe amounts to 10 billion
dollars which represents important information for golf development as a part of
the tourist product.
3. ISTRIAN ADVANTAGES FOR GOLF DEVELOPMENT

For better analysis and comparison, it is necessary to show the current situation
in relation to golf courses in the competitive Mediterranean countries. All important tourist countries on the Mediterranean as well as Italian regions in the vicinity
of Istria have been taken into consideration. Comparative and other advantages of
Istria for golf development have been pointed out.

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115

3.1. Situation on a wider area – Mediterranean

As we already stated, basic tourist resources are tourist attractions which attract
tourists to visit a certain destination. In this case, the attractions are the golf courses
which represent the main reasons why people visit a destination. The main strength
of a destination are attraction complexes which have two functions – attract guests
and fulfil their expectations (Senečić&Grgona; 2006; 141). Many Mediterranean
countries recognized their development chance in golf as a part of the tourist product. The development of golf in Spain began in the 1960s, and the most popular
golfer region is Costa del Sol with 51 golf courses.1 France has several golfer regions (Normandy, Biarritz, Paris) but the region around Cannes where the best
golf courses are found is far more known. In Portugal the Algarve region has 38
of the total 89 courses2 . During the 1980s the Portugal government systematically helped in creating the Algarve golf region in order to improve the usage
of accommodation outside the main season, prolong the main season and bring
richer guests. Turkey has built 17 golf courses on the same principle. They are
concentrated mostly in the tourist region Belek in the province Antalya.3 In this
way, with the help of the government a new European golf destination was consciously formed which managed to profile itself on the European market of tourist golf travels. Italy with its 258 golf courses 4 represents a significant European
destination for golf vacation. The following table shows the number of golf courses
in the Mediterranean countries:

Table 2: Number of golf courses in the Mediterranean countries.
COUNTRY
France
Spain
Italy
Austria
Portugal
Turkey

1

2
3
4

NUMBER OF THE GOLF COURSES 2009
559
332
258
149
89
17

Source of data: http://www. bookyourgolf.net/Spain_Golf_Courses/Costa%20del%20Sol.htm (
20.02.1010.)
Source of dana: http://www.algarvegolf.net/index2.htm ( 15.02.2010.)
Source of dana: http://www.golfturkey.com/golf_courses ( 01.02.2010.)
Source of dana: http://www.ega-golf.ch ( 11.01.2010)

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Zoran Jeremić

Egypt
Slovenia
Tunis
Cyprus
Greece
Croatia

13
11
10
9
6
4

Source: www.ega-golf.ch ( 01.01.2009.)

On the basis of this information, the conclusion is that all important Mediterranean countries where tourism represents a significant economic branch have or are
building their own golf courses. Their purpose is the modernization of the tourist
product offer as well as improving the quality of the tourists coming there on their
vacation. Besides, it is widely known golfers travel in pairs or groups so the extent
and importance of this segment is additionally emphasized. It can be concluded
that tourism and golf as world trends are in constant growth and compatible. Both
golf and tourism have mutual interest fields. In that view, both Croatia and Istria
have a lot to do.
3.2. Golf situation in the vicinity of Istria

For analysis of the golf offer situation, we have taken the situation in Slovenia
and Italian regions Friuli and Veneto.
Golf in Slovenia

As in many other countries, Slovenia has realized possibilities and opportunities
golf development offers. Slovenia has always been an interesting tourist country
with built tourist accommodation, but tourism has always been of a seasonal character – oriented on the winter season. During 1990s investments in golf have started “sponsored” by local and state government. Along with the existing golf courses
in Mokrice, Bled and Lipice, other golf courses have been built. Slovenia now has
11 golf courses. 5 Two golf courses have been partially financed by the European
Union foundation and there are golf courses Otočec and Diners Golf Club near
Ljubljana. There are also some other additional golf practice courses and a base for
further golf development – around 9.000 golfers. It has to be stated that these golf
courses have been built mainly for local inhabitants, not to attract foreign tourists.
5

Source of data: http:// golfportal.info/gzs/zveza (01.03.2010.)

ADVANTAGES OF ISTRIA REGARDING GOLF AS PART OF TOURIST PRODUCT

117

The cold climate does not allow playing golf during the whole year and it is one of
the flaws of Slovenian golf.
This fact can be used to develop golf in Istria since the Slovenian emissive market is very interesting to us due to the number of golfers and proximity. So, many
golfers from Slovenia would come and visit the courses in Istria.
Golf in northern Italian regions Friuli and Veneto

There are more than 250 golf courses in Italy which primary purpose was to
meet the needs of local inhabitants, not the attraction of foreign tourists and development of golf regions.
During 1990s situation gradually changed to he benefit of golf tourists, but
there are no regions like for example Costa del Sol, Algarve or Antalya in Italy.
Similar situation is found in the northern Italian regions Friuli ad Veneto. The
number and location of golf courses is shown in the following pictures:

Picture 1: Number and location of golf courses in the Veneto region

Source: Montanaro, N. (2009). Golf in Italia 2009, Federazione Italiana Golf,
Rim,str.22

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Zoran Jeremić

Picture 2: Number and location of golf courses in the Friuli region

Source: Montanaro, N. (2009). Golf in Italia 2009, Federazione Italiana Golf, Rim,str.22

Pictures show that both regions dispose in a sufficient number of golf contents. There are not just Championship courses here but also courses for practising
found as parts of agritoursims. Since golf courses were built for the needs of local
inhabitants, the greatest number of golf courses can be found in the vicinity of
larger towns, such as: Triest, Udine, Venice etc. These courses function as classical
city courses – based on club membership. In recent times, golf courses for tourist
purposes have been built – in Lignano, Jesolo, Caorle – mostly financed by tourist
visits. Both regions are relatively well developed golf regions with rather long golfer
and tourist tradition and a solid local golfer base. However, they are not formed
into a unique destination product and none of these regions managed to become a
golfer region in the European frame. This is the advantage of Istria – we can create
it to become a well known golfer region.
3.3. Comparative and other advantages of Istria for development of golf as a
part of the tourist product

Istria has all predispositions for golf development and forming itself as a well
known golfer region (Jeremić, 2008, 551). The mild climate enables golf playing
throughout the whole year, it has ecologically healthy nature and sea and the relief that suits modelling and golf course design. Golf course design is becoming a
difficult and demanding work (Wiren, 1990, 7). A great advantage is the vicinity
of large emissive markets and the fact that there are no golfer destinations in the
region. The following table shows the relation between the number of guests and

ADVANTAGES OF ISTRIA REGARDING GOLF AS PART OF TOURIST PRODUCT

119

overnight stay and the number of golfers according to emissive countries in the
vicinity:

Table 3: Relation between the number of guests and overnight stay and the number of golfers according to
visiting countries (Istria, 2009)
COUNTRY
GERMANY
SLOVENIA
ITALY
AUSTRIA
NETHERLAND
CZECH
RUSSIA
DENMARK
GREAT BRITAIN
FRANCE
SWITZERLAND
SWEDEN
BELGIUM
IRELAND

NUMBER OF THE
VISITORS
603.093
412.762
474.775
350.968
150.964
98.560
53.928
40.209
43.024
56.036
35.116
32.667
25.356
2.316

NUMBER OF THE
OVERNIGHTS
5.371.594
2.470.583
2.305.636
2.057.315
1.665.352
639.827
554.670
350.564
307.616
265.758
217.824
214.349
199.151
12.778

% OF THE TOTAL FULL ADDITION NUMBER OF THE
OF THE VISITORS
GOLFERS
28,19
552.388
12,97
9.000
12,1
95.430
10,8
104.072
8,74
330.000
3,36
35.369
2,91
5.150
1,84
145.310
1,61
1.218.288
1,39
378 275
1,14
72.626
1,12
532.944
1,05
47.134
0,07
289.120

Source : European Golf Association, Eurostat, 2009. godine i TZ IŽ statistic, 07.01.2010.

The table shows that the most important emissive markets for Istria own a large
golfer potential. It can also be concluded that this kind of tourist market would
come to Istria too if it were a golfer destination. It has to be considered that Istria
represents a typical car-destination – it is well connected with Europe so that golfers can reach this destination quite easily, even outside the main season. Besides,
a large number of golf courses in the emissive countries are closed during winter
months. Istria has ideal conditions for golf playing throughout the whole year and
this represents an additional argument for the importance of golf in the Istrian
tourist product development.

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CONCLUSION:

All important Mediterranean countries where tourism represents a significant
part of the economy already have or are building their own golfer regions. Their
purpose is to modernize the tourist offer and the uplift of the quality of tourists.
On the tourist market, the best known golf regions are Costa del Sol in Spain,
Algarve in Portugal and in recent times Antalya in Turkey. In our vicinity, in Slovenia, golf courses were mostly built to meet the needs of local inhabitants, not to
attract tourist. Besides, the cold climate does not suit playing golf throughout the
whole year. This fact could be very useful in golf development in Istria. Northern
Italian regions Friuli and Veneto are developed regions in terms of golf with a long
golfer and tourist tradition and a solid local golfer basis. But none of these regions
managed to become a widely known golfer region. This is seen as a great advantage of Istria – it could become a golfer destination known on the entire European
continent. The long-term tourism development in Istria has to be based on comparative advantages which stem from available resources. It especially refers to the
mild climate which enables golf playing throughout the whole year, the vicinity of
emissive markets and the fact that there are no widely known golfer regions in the
vicinity. It can also be concluded that this kind of tourist market would come to
Istria too if it were a golfer destination. It has to be considered that Istria represents
a typical car-destination – it is well connected with Europe so that golfers can reach
this destination quite easily, even outside the main season. Istria has all predispositions to develop golf and turn itself into a widely known golf region. This is why
it is necessary to insert golf as an integral part into the process of restructuring and
repositioning of the Istrian tourist product.
REFERENCES:

1. Bartoluci, M.;Čavlek, N.( 2007). Turizam i sport, Školska knjiga, ISBN
978-953-0-30342-3, Zagreb
2. Blažević, B.(2007). Turizam u gospodarskom sustavu, Fakultet za turistički i
hotelski menadžment, ISBN 978-853-6198-96-2, Opatija
3. Jeremić, Z.(2007). Relevant characteristics of golf integration into the development of the tourist destination Istria, Zbornik radova sa Interdiscplinary Management Research IV, Barković, D. & Runzheimer, B. (ur), str. 542-553, ISBN
978-953-253-044-5, Poreč, 01-03. lipanj 2007, Ekonomski fakultet u Osijeku
& Hochschule Pforzheim University of Applied Sciences, Osijek

ADVANTAGES OF ISTRIA REGARDING GOLF AS PART OF TOURIST PRODUCT

121

4. Kobešić,A.,Senečić,J.(1989). Marketing u turizmu,Školska knjiga, ISBN
86-03-99499-4, Zagreb
5. Križman,P.D.(2008). Marketing turističke destinacije, Mikrorad, ISBN
978-953-7498-12-2, Zagreb
6.Kušen,E.(2002). Turistička atrakcijska osnova, Institut za turizam, ISBN
953-6145-08-1, Zagreb
7. Magaš, D.(2003). Management turističke organizacije i destinacije, Adamić,
ISBN 953-6198-39-8, Rijeka
8. Montanaro, N. (2009). Golf in Italia 2009, Federazione Italiana Golf, Rim
9. Senečić,J. & Grgona,J.(2006). Marketing menadžment u turizmu, Mikrorad,
ISBN 953-6286-74-2, Zagreb
10. Wiren, G. (1990).Professional golf academy teaching manual, PGA of America, 90-600007, Palm Beach
11. http://www.nfg.org (11.04.2008.)
12. http://www.ega-golf.ch (11.04.2008.)
13. http://www.bookyourgolf.net/Spain_Golf_Courses/Costa( 20.02.1010.)
14. http://www.algarvegolf.net/index2.htm( 15.02.2010.)
15. http://www.golfturkey.com/golf_courses( 01.02.2010.)
16. http://www.golfinitaly.no ( 11.01.2010)
17. http:// golfportal.info/gzs/zveza (01.03.2010.)

Marijan Karić • Maša Slabinac • Ivan Kristek

122

KNOWLEDGE IN THE FUNCTION OF ENTERPRISE
MANAGEMENT
Marijan Karić
Faculty of Economics in Osijek
Maša Slabinac
University of applied sciences Lavoslav Ružička in Vukovar
Ivan Kristek
Faculty of Economics in Osijek

Abstract

Modern information and communication technology systems have accelerated
processes of providing knowledge and enabled its organized utilization for the purposes of managing a firm. The quality of enterprise management has been significantly increased by the development of different techniques of organizational learning. Experiences so far have shown that the implementation of these techniques can
help organizations in pursuing two types of organizational learning: adaptive and
generative. While adaptive learning supports continuous improvement of existing
knowledge organized management, generative learning supports the development
of learning culture and the creation of general climate in organization that favours
development of new knowledge and new models of thinking. This paper presents
the results of empirical research on the experience acquired in the implementation of information for the purpose of improvements in organizational learning
based on a sample of small and medium-sized enterprises in the counties of Eastern
Slavonia.
JEL clasiffication: D83, L53
Key words: sources of knowledge, knowledge management, organizational
learning, adaptive and generative learning, learning culture, ABC method

KNOWLEDGE IN THE FUNCTION OF ENTERPRISE MANAGEMENT

123

INTRODUCTION

Achievements of modern technological development are being transferred from
developed world to the countries of transition and put in the function of their economic development. Development of global economy demands even bigger managerial knowledge and capacity of entrepreneurs and big investments in implementation of new technologies and modernisation of production systems. Technological innovations make product’s life cycles shorter while satisfying consumer’s needs
becomes even heavier task to entrepreneurs. Such a significant business changes
have a huge impact on management system of the enterprise.
The purpose of this paper is to present the benefits of organised approach to
knowledge acquisition and utilisation and in implementation of different technologies as learning tools in business organisations. The survey method was used for
acquiring data, information, attitudes and opinions on subject of the research.
A total of 160 questionnaires were sent to the 25 best performing small and
medium-sized enterprises (measured by total turnover and gross profit in 2008)
in four counties of Eastern Slavonia: Osijek-Baranja, Vukovar-Sirmium, PožegaSlavonia and Slavonski Brod-Posavina. The research is based on 68 replied questionnaires (42,5% of total questionnaires sent). The size of surveyed enterprises
(measured by number of employees) has ranged from only 2 to 387. 39,7% of
enterprises in the sample were involved in service sector, 35,3% in manufacturing
while 25% in trade. Regarding the legal form of organisation, researched sample
has comprised 86% of private limited companies, 11% of public limited companies and 3% of craft businesses. 50% of respondents (each representing single
enterprise) included in survey are department managers as well as firm managers in
47% of examined enterprises, while the remaining 3% did not declare their position within an enterprise.
IMPORTANCE OF KNOWLEDGE FOR AN ENTERPRISE

Knowledge available to enterprises comprises their understanding of consumer’s
needs and business environment as well as knowledge, skills and experiences of
their employees. The way enterprise acquires, distributes and utilises knowledge determines its capacity for successful development. Knowledge is not only important
for huge companies, but it can and must be utilized even by the smallest entrepreneurs and craftsmen.

124

Marijan Karić • Maša Slabinac • Ivan Kristek

Understanding the role of knowledge in enterprise is of special importance for
growing enterprises. In reference to that, entrepreneurs must, above all, understand
the basic sources of knowledge available to the enterprise, best modes of information gathering and its utilisation and ways of creating a knowledge strategy for
particular enterprise.
Knowledge utilisation within enterprise is not necessarily associated with creative process of thinking up the new products and services or their new method of
sale. It is far much simpler and to the large degree already available in each enterprise. For instance, firm’s managers already have certain understanding of products
and services customers demand and of quantities they are willing to buy and to pay
for. Each entrepreneur is challenged in finding an adequate way to make knowledge
available and to exploit it effectively.
On a daily basis, enterprises use a certain forms of knowledge. As a prerequisite
for establishing a business, it is necessary to conduct market research and define a
need for firm’s products and services. Entrepreneur will not start a business if he/she
finds out there is no need for products/services he/she intends to sell. Entrepreneur
can use acquired market knowledge in order to connect certain customers to specific types of products and service. Or, he/she can transfer knowledge to customers
providing them directions for usage or consulting services.
Employees of firm have certain knowledge, experiences, training or, just simple,
ways of doing things that enterprise uses as a resource. Having personnel that has
knowledge can be of invaluable importance for gaining distinction among competitors. Manager’s knowledge on what consumers want, as well as knowledge of
employees, can be considered as knowledge base in enterprise. The right way of its
utilisation can contribute to more effective enterprise management, reduction of
business risk and effective usage of opportunities. All of this enables competitive
knowledge advantage to enterprise.
BASIC SOURCES OF KNOWLEDGE

Among many sources of knowledge available to enterprise, as the most important, we researched (Basic...: 2009): customer knowledge (needs of buyers and their
opinions about the enterprise), attitudes of employees and suppliers (their impressions on performance of the enterprise), market knowledge (tracking records on developments within sector and acquiring knowledge on competitors’ performance),
business environment (developments in politics, economy, technology, society and

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environment), professional associations and trade bodies (academic publications,
government publications, reports from research bodies, business and technical
magazines), business exhibitions and conferences (acquiring information and exchange of different knowledge for firms engaged in specific business sector), product research and development (information for creation of entirely new products),
organisational memory (in order not to lose knowledge and experiences built up
over the years of existence of the enterprise), Internet (knowledge from wide range
of different fields that refers to general development in certain market, economy
and technology).

Table 1: Importance of basic sources of knowledge in enterprise

Employees
Market
Internet
Business environment
Suppliers
Customers
Organisational memory
Product research and development
Conferences
Professional associations
Business exhibitions

No. of
respondents

Lowest
score

Highest
score

Arithmetic
mean

Standard
deviation

68
68
68
68
68
68
67
67
68
68
68

3
2
1
3
1
1
2
1
1
1
1

5
5
5
5
5
5
5
5
5
5
5

4,46
4,32
4,15
4,10
4,06
4,04
3,96
3,45
3,13
2,59
2,57

0,742
0,800
0,966
0,694
0,991
1,043
0,928
1,271
1,078
1,175
1,250

Source: calculations of the authors based on conducted research

Successful acquisition of knowledge and its effective utilisation requires, above
all, personnel familiar with the whole business process. It is necessarily to create
specific knowledge culture and to insure that employees recognise the importance
of knowledge. The research also confirmed that employees are recognized as the
most important source of knowledge in the enterprise (table 1).
Knowledge culture

Changes toward building up a knowledge culture in enterprise could begin with
entitlement of knowledge manager. It is a person responsible for monitoring the

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126

ways at which enterprise provides, utilises and exchanges its knowledge. Wherever
it is possible this person should be one of high rank managers. This way knowledge
manager has a power to introduce any necessary key change and to emphasize the
importance of knowledge for the enterprise. Practice shows that knowledge manager is often slighted, which is also confirmed by research results – only 22% of examined enterprises had person entitled for acquiring and exchange of knowledge.
It is needed to build such culture in enterprise in which knowledge has central
value. The research shows that most entrepreneurs are aware of the importance of
knowledge appreciation – 58% of surveyed enterprises agreed on having built up
the culture in which knowledge has central value. One way for achieving this could
be introduction of financial and non financial incentives for personnel that succeeds
to bring new products and services to market or to suggest new ways of delivering
better service to customer. Besides, protection of each intellectual property (author’s
right, designer’s rights, and patents) enterprise posses should be ensured. Due to
this, competitors will not be able to copy knowledge of the enterprise and extra
profit could be gained through knowledge licensing. Also, there is a need to take
measures for maintaining important knowledge within enterprise. Employment
policy has an important role in this. For instance, personnel could be bind by confidentiality agreement, while employment contract could disable employees to leave
or work for one of direct competitors. In spite of the fact that 58% of surveyed
enterprises stated to have built up knowledge culture in the enterprise, the analyses
of empirical results as shown in table 2 indicate a scarce utilization of described
measures for establishing the knowledge culture.

Table 2: Establishment of knowledge culture in enterprise
Are there any incentives for personnel in
the enterprise

Is protection of intellectual property
implemented

Is confidentiality agreement
implemented

Is there limitation for
employees to leave or
work for competitors

YES

42,60%

26,50%

44,10%

33,80%

NO

57,40%

73,50%

55,90%

66,20%

Source: calculations of the authors based on conducted research

Management of the enterprise must find an effective ways of distributing knowledge within the enterprise. It is important to avoid situations where knowledge and
skills are in possession of only one person. It is needed to consider the best ways of
distributing new ideas and information among personnel. Usually, there are already

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regular meetings where employees get brief directions and invitation to mutually
exchange ideas and their best practice of doing business.
Special forms of knowledge sharing can be used, too. The organization must
reward individuals for supplying information to others. “The workplace has become increasingly competitive, and many times, workers feel as though they would
jeopardize their job security by sharing their tacit knowledge” (Anderson: s.a., 2).
It is possible to organise innovation workshops or brainstorming sessions where
freedom and initiative for thinking of improvements in enterprise is given to personnel. Also, knowledge bank with useful information and directions on how to
perform important tasks could be formed. This knowledge bank could be written.
But, for the purpose of easier access it would be better to use modern technology,
such as intranet. It can be used for fast distribution of knowledge among personnel
and as an initiative in giving new ideas or suggestions.
Table 3 shows the frequency of utilisation of the previously mentioned forms of
knowledge development, distribution and sharing as ranked by respondents using
1 (not implemented at all) - 5 (fully implemented) scale. The analysis showed insufficient exploitation of available forms and methods.

Table 3: Frequency of utilisation of the forms of knowledge development, distribution and sharing

Useful information and directions

No. of
respondents
68

Lowest
score
1

Highest
score
5

Arithmetic
mean
3,50

Standard
deviation
0,985

How to perform important tasks

68

1

5

3,22

1,104

Knowledge bank as intranet

67

1

5

2,90

1,437

Brainstorming sessions

67

1

5

2,69

1,416

Written knowledge bank

68

1

5

2,19

1,149

Innovation workshops

68

1

5

2,07

1,124

Source: calculations of the authors based on conducted research

KNOWLEDGE UTILIZATION

Knowledge is a source of power not only to managers of the firm but also to
all employees having specific capacities and important skills. We list some important outcomes of knowledge utilisation included in the research (Exploiting...: 2009):
improvement of goods and services that enterprise sales, as well as their selling

Marijan Karić • Maša Slabinac • Ivan Kristek

128

methods, increased customer satisfaction (better understanding of their requirements, through feedback from selling personnel), increased quality of suppliers
(better awareness of management about what customers want), improved employees’ effectiveness and increased working productivity, better recruitment and staffing policies (more effective utilisation of knowledge about customers’ demands
and adequate personnel to serve them), ability to sell knowledge of the personnel
(advisory or consulting services).
Table 4 shows the most appreciated purposes of knowledge utilization as ranked
by surveyed enterprises using 1 (unimportant) - 5 (very important) scale.

Table 4: Outcomes of knowledge utilisation in enterprise
No. of
respondents
68

Lowest
score
1

Highest
score
5

Arithmetic
mean
4,46

Standard
deviation
0,762

Improvement of goods and services

68

3

5

4,41

0,696

Improved employees’ effectiveness

68

3

5

4,38

0,670

Increased quality of suppliers

68

1

5

3,90

1,039

Ability to sell knowledge

68

1

5

3,88

1,030

Better recruitment and staffing policies

68

1

5

3,87

1,021

Increased customer satisfaction

Source: calculations of the authors based on conducted research

Knowledge acquiring and management requires usage of an adequate technology. We mention the most known technology types for knowledge management
(Using...: 2009): databases (for example, a database of customers), data warehouse
(in case of larger number of business units within enterprise or online sale), data
mining(data sorted to determine hidden patterns, for instance, the most popular
products), reporting and querying tools (creation of reports and their interpretation, for instance, the share of total sales achieved per employee), business intelligence portals (websites that interconnect all sorts of potentially useful information),
Internet and search engines, intranet (internal PC’s network), extranet (connection of two or more intranets), customer relationship management (all forms of
interaction of the enterprise with its customers), call-centre systems (servicing a
large number of buyers if firm sells by telephone), website log-file analyses (helps
enterprise to analyse frequency of customer’s utilisation of website of the enter-

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KNOWLEDGE IN THE FUNCTION OF ENTERPRISE MANAGEMENT

prise), systems to analyse and file (comprise customer letters, all types of suggestions, emails and call-centres responses).
As shown in table 5, respondents graded knowledge management technologies
using 1 (not implemented at all) - 5 (fully implemented) scale. The surveyed enterprises stated higher percentage points (approximately 50%) in use of Internet and
search engines as well as of databases and data warehouse.

Table 5: The technology types for knowledge management in enterprise

Internet and search engines

No. of
respondents
63

Lowest
score
2

Highest
score
5

Arithmetic
mean
4,30

Standard
deviation
0,796

Databases

66

1

5

3,71

1,333

Data warehouse

65

1

5

3,40

1,356

Reporting and querying tools

66

1

5

3,06

1,357

Business intelligence portals

65

1

5

2,97

1,287

Intranet

62

1

5

2,94

1,436

Data mining

65

1

5

2,88

1,431

Systems to analyse and file

64

1

5

2,53

1,380

Extranet

60

1

5

2,45

1,383

Website log-file analysis

64

1

5

2,39

1,399

Customer relationship management (CRM)

65

1

5

2,29

1,355

Call- centre systems

64

1

5

2,06

1,194

Source: calculations of the authors based on conducted research

ORGANIZATIONAL LEARNING

There are many definitions of organisational learning that range from creation
of new knowledge, through creation of knowledge system, to changes in organisational practice. It is also defined for different levels within organisation and it can
be discussed in terms of learning hierarchy that ranges from individual to group
levels and finally to the organisation in whole (Driver: 2001, 1-3). This paper defines organisational learning as creation of new knowledge that leads to changes in
performance on individual and group level as well as on organisation as a whole.

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Marijan Karić • Maša Slabinac • Ivan Kristek

Organisational learning can be defined for two very different types of learning:
(1) gradual, routine and adaptive (flexible) and (2) radical, fractal and generative
(creative) learning (Senge: 1990, 14). Both types of learning are discussed as critical for effective organisational performance. Based on this view, enterprises should
be capable for adaptive learning, oriented to change management, as well as for
creative learning, oriented to creativity that results from shared efforts of organisation’s members. They should be capable in creation of new adaptive, as well as
creative knowledge for changes in performance at individual, group and organisation level.
Organisational learning is considered to have become a critical instrument for
sustainable organisational performance in today’s continuously changing competitive environment and 60,3% of respondents in the research agreed on this statement. It has also become question of huge interest for practioneers in organisations who believe that becoming a learning organisation is a key to success of their
enterprises.
Adaptive (flexible) learning has been researched at individual as well as at collective, organisational level. At individual level, adaptive learning refers to routine
activities of problem solving where assumptions are accepted without their prior
questioning and as such is more about utilisation of existing knowledge than about
development of the new one. At organisational level, adaptive learning mostly relates to knowledge enrichment, its formalisation, exchange and utilisation that have
already been developed earlier in the organisation. In fact, adaptive learning at level
of an individual and of an organisation must deal with utilisation and management
of existing knowledge.
When it comes to acquiring knowledge for better manager’s preparation of
decision making, different methods are used. For example, activity based costing
method (so called ABC method), helps managers in preparing decision by making
costs of each activity clearly visible so that non value added activities can be easily
detected or that decisions on prices can be more precisely made due to information that are usually not so visible in other cost allocation systems. In fact, ABC is
a knowledge management tool that can help organisation at its every level to better understand current financial reality and to better response to current financial
requirements. Although the benefits of ABC methods are evident, the research
results are fully disappointing since every forth enterprise (or only 25% of surveyed

KNOWLEDGE IN THE FUNCTION OF ENTERPRISE MANAGEMENT

131

enterprises) is familiar with this method while only 16,2% uses it for management
of existing knowledge and the creation of the new one.
Today, there are different managerial tools for preparing decisions and for changing the way managers think about organisation and value creation. Such tools are
suitable for encouragement of creative learning in organisation. ABC is not only
used as a managerial tool for knowledge about costs, but as a process that gives an
opportunity to individual and group decision makers to challenge their assumptions about allocation of resources and value creation within an enterprise (Driver:
2001, 8-9).
CONCLUSION

The purpose of this paper is to examine the role of knowledge in enterprise and
to point out the contributions of information and communication technology in
creation of managerial tools that are in function of adaptive and creative learning
in enterprise. Such technologies support adaptive learning in organisations helping the management of business information and improvement of total knowledge
at all levels of the enterprise. Also, they encourage creative learning through the
development of social climate and culture in which existing assumptions about
organisational processes and performance can be questioned. Many scholars and
managers agree that creative learning gives the best opportunities and represents the
biggest hope for enterprises in 21st century.
Linking ideas within information–communication technology and organisational learning enables development of special tools for creation of new knowledge
that leads to changes in performance at individual, group and organisation level.
Changes in performance can be gradual with utilisation of more important business information for more effective decision making or radical with changes of
strategically direction of business based on new understanding of way organisation creates value for its customers. The empirical research conducted on a sample
of small and medium-sized enterprises in the counties of Eastern Slavonia shows
that organisational learning is in its initial phase of development and that changes
toward increased exploitation of team work and invention of even more effective
forms of organisation of the enterprise are needed.

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LITERATURE

1. Anderson, A.A. (s.a.), Building A Knowledge Culture, Available at: http://www.
robbinsgioia.com/library/whitepapers/KnowledgeMgmt.pdf.
2. Basic sources of knowledge, Importance of knowledge management to a growing business, Business Link, United Kingdom, Available at: http://www.businesslink.gov.uk/bdotg/action/detail?r.s=sc&r.l1=1073858796&r.lc=en&r.
l3=1074003272&r.l2=1074299781&r.i=1073792240&type=RESOURCES&i
temId=1073792244&r.t=RESOURCES, Accessed: (14-12-2009).
3. Driver, M. (2001). Activity-based costing: a tool for adaptive and generative organizational learning, The Learning Organization, Volume 8, Number 3.
4. Exploiting your knowledge, Importance of knowledge management to a growing business, Business Link, United Kingdom, Available at: http://www.businesslink.gov.uk/bdotg/action/detail?r.s=sc&r.l1=1073858796&r.lc=en&r.
l3=1074003272&r.l2=1074299781&r.i=1073792244&type=RESOURCES&i
temId=1073792240&r.t=RESOURCES, Accessed: (14-12-2009).
5. Senge, P.M. (1990). The Fifth Discipline: The Art and Practice of the Learning
Organization, Doubleday, New York.
6. Using information technology to gain and manage knowledge, Importance of
knowledge management to a growing business, Business Link, United Kingdom, Available at http://www.businesslink.gov.uk/bdotg/action/detail?r.s=sc&r.
l1=1073858796&r.lc=en&r.l3=1074003272&r.l2=1074299781&r.i=10737
92240&type=RESOURCES&itemId=1073792239&r.t=RESOURCES, Accessed: (14-12-2009).

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CULTURAL MANAGEMENT IN THE REPUBLIC OF CROATIA 
POSSIBILITIES OF DEVELOPMENT
Professor Maja Lamza-Maronić, Ph.D.
Jerko Glavaš, Ph.D. student
Igor Mavrin, Ph.D. student

SUMMARY

At the beginning of the 21st century modern societies have turned to creative industries as a key factor of their development. Culture (cultural) management as an
element of the “new economy” is most prominent in the specific sector of creative
industries. Creative industries encompass a variety of activities and thus include a
wide range of professions. What they have in common is that they bring together
creativity and specialized knowledge, specific skills and information technologies.
At present, being dominant on the information market and the digital content
market is the most profitable area of human activity. In an indirect way, it also provides increasing opportunities to create the conditions for political and economic
domination.
This paper aims to discuss to what extent public policies of European countries
are harmonized and whether there is a coherent framework for promoting the values of the information society. Furthermore, we will look into the cultural policy
of the Republic of Croatia and determine how much creative industries have been
included in the priorities of this key strategic document for the country’s cultural
development.
JEL clasiffication: Z1
Keywords: creative industries, cultural management, cultural policy of the Republic of Croatia, public sector, cultural identity

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Maja Lamza-Maronić • Jerko Glavaš • Igor Mavrin

1. INTRODUCTION

The goal of creative industries is to build the synergy of conceptual and practical
creative arts with creative industries in the context of information – communication technologies, i.e. their new media technologies.
The process is occurring (and continuing) within the new knowledge economy,
which can be and is used by citizens – consumers.
2. CREATIVE INDUSTRIES AND CULTURAL MANAGEMENT

There is no single definition of the term creative industry. This is hardly surprising due to the fact that this subject matter has been studied only for a shorter
period of time, although some creative industries have an exceptionally long history. John Hartley states that the idea of creative industries “...seeks to describe
conceptual and practical convergence of the creative arts (individual talent) with
cultural industries (mass scale) in the context of new media technologies (...) within
a new knowledge economy, for the use of newly interactive citizen – consumers”.
(Hartley; 2007:11) Some individuals describe creative industries as “...a spectrum
of economic activities that relate to creation and exploitation of knowledge and
information.” (The Economy of Culture in Europe; 2006:49) Some authors use
the terms creative economy, i.e. cultural industries to describe creative industries.
Creative industries can also be defined as human activities that by incorporating
specific skills, creativity, knowledge and technology generate products and services,
i.e. contents aimed at providing information, education and entertainment, and
indirectly generate employment and financial capital.
3. CREATIVE INDUSTRIES, CULTURAL INDUSTRIES AND EXPERIENCE ECONOMY

The concept creative industries first appeared in the early 1990s of the previous century, and has been most intensively used in the United Kingdom, where
it is defined as “...those industries which have their origin in individual creativity,
skill and talent and which have a potential for wealth and job creation through the
generation and exploitation of intellectual property”. (The Economy of Culture in
Europe; 2006:47) The approach to creative industries in this case is economic.
The French approach is economic-statistics and the term cultural industries is
used, which are defined as “...a set of economic activities that ally conception, creation, and production functions to more industrial functions of manufacturing and

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135

commercialising at large scale, through the use of material supports or communication technologies”. (The Economy of Culture in Europe; 2006:47)
In the Nordic countries, the experience economy is the term that is used, where
“...the value of physical products only constitutes a fraction of the price”. (The
Economy of Culture in Europe; 2006:48).
4. CULTURAL AND CREATIVE SECTOR

The study on the economy of culture in Europe proposes the existence of four circles into which the elements from cultural and creative sectors can be delineated:
1. Core arts – visual arts (crafts, paintings, sculpture, photography), performing
arts (theatre, dance, circus, festivals), heritage (museums, libraries, archaeological sites, archives);
2. Cultural industries – film and video, television and radio, video games, music
(recorded music market, live music performances, revenues of collecting societies in the music sector), books and press (book publishing, magazine and
press publishing);
3. Creative industries and activities – design (fashion design, graphic design,
interior design, product design), architecture, advertising;
4. Related industries (PC manufacturers, MP3 player manufacturers, mobile
industry, etc...). (The Economy of Culture in Europe; 2006:3)
5. THE SEGMENTATION MODEL OF THE CULTURAL AND CREATIVE SECTORS

The activities from the cultural and creative sectors can be classified according to
two criteria: individual vs. mass production and market approach vs. protectionist
approach. The activities divided by the above mentioned criteria can be demonstrated by the following model:

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Maja Lamza-Maronić • Jerko Glavaš • Igor Mavrin

Picture 1: The segmentation model of the cultural and creative sectors

Source: Authors

6. CREATIVE INDUSTRIES IN A WORLD CONTEXT

There are some estimates at the world level that show how in 1991 creative
industries “...generated $ 2.2 billion revenue, which accounted for 7.5 per cent of
the global gross national product”. (Flew; 2007: 501). The largest individual share
of the creative sector is that of the USA, where in 2001 the creative industries “...
accounted for 7.75 per cent of the gross national product, 5.9 per cent of national
employment and $ 88.97 billion in export”. (Flew; 2007: 501) As for Great Britain, creative industries “...generate revenues of around £ 112.5 billion and employ
some 1.3 million people (...) exports contribute around £ 10.3 billion”. (Creative
Industries Mapping Document; 2001: 10) At present, Croatia does not have detailed and unified statistics for creative industries. Nevertheless, the financing of
culture is still based on the budget, where “...according to the 1999 estimates, the
Ministry of Culture accounts for 30%, towns account for 30%, the City of Zagreb

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137

24%, counties 5% and municipalities account for 3%”. (Strategija kulturnog razvitka; 2003: 47)
7. THE CONTEXT OF CREATIVE INDUSTRY IN THE CULTURAL POLICY
OF THE REPUBLIC OF CROATIA

Croatian cultural policy as a national report was adopted in 1998, and it neither
mentions nor defines creative industries. The Ministry of Culture singled out five
main priorities in Croatia with a view to defining the strategies of cultural development: The preservation of cultural heritage (...); The revival of national image
and identity, including festivals, as well as promotion and presentation of history.
(...); The integration of the above mentioned (the revival of cultural heritage and
the revival of national image and identity; author’s comment) with Croatian tourism offer (...); further computerization of cultural institutions and activities (...);
Stimulating coordination and expert collaboration at all levels of government (...).
(Hrvatska kulturna politika; 1998: 16)
Lately, redefined priorities of the Government of the Republic of Croatia are
being emphasized. They include: greater investment in and decentralisation of the
cultural infrastructure; continuous promotion of cultural life and creativity in order to ensure that cultural programmes and activities are available to every citizen
to the greatest possible extent; strengthening international cultural cooperation,
with special emphasis on the European cultural programmes, particularly those
that support the mobility of artists and cultural professionals; reform of the system
of financing and investment in the arts and culture including the introduction of
low interest rates for loans to revitalise certain branches of culture including publishing and librarianship; review of existing measures which support the status of
the artist in order to guarantee stability of his / her work and ensure adequate social
security protection; investment and support for cultural tourism projects in order
to ensure sustainable cultural and economic development; reform of legislation and
policies, primarily electronic media, book, film, audiovisual and performing arts
policies, as well as investment in developing statistics and indicators; support for a
functioning network of cultural centres, libraries and other local cultural establishments. (Main cultural policy issues and priorities; http://www.culturalpolicies.net/
web/croatia.php?aid=41; accessed on 12 January 2010) The strategy of cultural
development of the Republic of Croatia (2003) advocates the cultural cooperation
with Europe, which should result in numerous benefits: supporting and promoting
the “social contract“ with the citizens of Europe and its nations as communities

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founded on tolerance, diversity, creative values and civil society; starting the wider
process of educating human resources along with narrow education for competitive market, including the cultural rights of women, youth, minorities and other
marginalised groups; the process of creative employment via cultural industries
and “cultural districts” in towns; the system of preservation of communication and
expression specific qualities and identity patterns of small countries which are faced
with economic and cultural globalisation, i.e. industrial and media corporations
from large countries. (Strategija kulturnog razvitka; 2003: 34-35)
The goals, i.e. the priorities of cultural strategy should be continuously adapted
to the trends of the 21st century. The fact that the priorities of cultural policy were
created at the time of the first years of democracy and war, i.e. post-war events in
Croatia has to be taken into account. Moreover, it is necessary to add the following
priorities of the Croatian national cultural policy to the already existing ones:
- supporting and developing the sector of creative industries (theatre, film, music and other creative work, museum and gallery activities) as initiators of
economic development; - supporting cultural entrepreneurship, i.e. generating profitability in the cultural and creative sector; - harmonizing with the
European cultural policies and utilising European integration processes for the
promotion of Croatian culture; using the positive elements of globalisation
(the possibility of transcultural integration and spread of ideas and products
of national culture on the global stage), and avoiding the negative aspects of
globalisation (the danger of losing one’s own identity).
8. CREATIVE WORKER AS A PILLAR OF CREATIVE INDUSTRIES

The age of the new economy based on creative sector (both in production and in
consumption) also requires a new kind of employee, i.e. creative worker. This group
“…includes a vast multi-national workforce of talented people applying their individual creativity in design, production, performance and writing”. (Hartley; 2007:
49) There is a broad range of professions that appear in particular segments of
creative sectors. In the film sector there are actors, but also stunt doubles, directors,
screenplay writers, stage artists, lighting technicians and many other professions.
On the other hand, the heritage protection sector includes a completely different
kind of creative workers – archaeologists, curators, museum counsellors, coordinators, experts in galleries and other professions. In the world, and increasingly in
Croatia, one can talk about creative workers as freelance employees without perma-

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139

nent contracts, whose occasional employment is project-based. Although full-time
employment is still dominant, “...other ways of work are becoming sustainable
alternatives, such as permanent employment as freelance experts, part-time portfolio careers and sole proprietors”. (Howkins; 2003: 185-186) Creative workers have
very little “bargaining power, beyond the laws of supply and demand, operating
as self-employed satellite suppliers of professional or technical services”. (Hartley;
2007: 50) We can present workers and consumers in the old and new economies
in the following way:

Table 3: Workers and consumers in the old and new economies
Issues

“Old” economy

“New” economy

Tastes
Skills
Educational needs
Workplace relations
Nature of employment

Stable
Job-specific skills
One-off craft training or degree
Adversarial
Stable

Changing rapidly
Broad skills and adaptability
Lifelong learning
Collaborative
Increasingly contract/project-based

Source: adapted from Flew; 2007:505

9. Creative industries in the public sector in the Republic of Croatia

Nevertheless, creative employment exists both in the public sector and as well
as in private enterprise. As a rule, the following basic creative activities are included
in the domain of the public sector in Croatia: performing arts (theatre, dance) and
heritage preservation (museums, libraries, archaeological sites, archives and related
activities). The analysis of the number of employees in creative industries in the
public sector for four Croatian regional centres – Zagreb, Split, Rijeka and Osijek –
is presented below. The data on employees are taken from the Internet site Poslovna
Hrvatska (www.poslovna.hr) in the period from 21 January until 30 January, while
the results of this research have been calculated by authors. The data include the
period from 2004 until 2008. 13 museums, 2 libraries, 1 archive, 7 theatres and
1 dancing ensemble from Zagreb were included in the analysis. 6 museums, 2 libraries, 1 archive and 3 theatres from Split were analyzed. In Osijek, 2 museums,
1 library, 1 archive, 2 heritage institutions (Agencija za obnovu osječke Tvrđe and
Gradske galerije Osijek – The Agency for the Restoration of Osijek Tvrđa and
Town Galleries Osijek) were analyzed.

Maja Lamza-Maronić • Jerko Glavaš • Igor Mavrin

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Table: The employment overview in creative industries of the public sector
ZAGREB

Heritage preservation

Performing arts

TOTAL

2004

1.034

1.107

2.141

2005

1.065

1.102

2.167

2006

1.067

1.097

2.164

2007

1.260

1.117

2.377

2008

1.288

1.123

2.411

SPLIT

Heritage preservation

Performing arts

TOTAL

2004

204

304

508

2005

207

303

510

2006

212

303

515

2007

217

302

519

2008

223

307

530

RIJEKA

Heritage preservation

Performing arts

TOTAL

2004

136

297

433

2005

138

303

441

2006

141

298

439

2007

148

307

455

2008

150

321

471

OSIJEK

Heritage preservation

Performing arts

TOTAL

2004

102

242

344

2005

102

246

348

2006

104

250

354

2007

108

252

360

2008

117

251

368

Source: authors’ calculations

The previous data allows us to deduce the following conclusions:
- Zagreb and its employment in the creative part of the public sector, as the centre of Croatian cultural life, surpasses the total number of creative employment
of the three remaining regional centres (Split, Rijeka and Osijek);

CULTURAL MANAGEMENT IN THE REPUBLIC OF CROATIA  POSSIBILITIES...

141

- a significant increase in creative employment in the public sector was recorded
in Zagreb in 2004 – 2008 period, while this growth is slower in other towns;
- employment in the public sector of creative industries is mostly based on performing arts, mainly in theatres (Split, Rijeka and Osijek); except in Zagreb,
where employment in heritage preservation and employment in performing
arts is mostly the same;
- creative employment in the public sector is proportionally distributed according to the size, i.e. the number of inhabitants in 4 regional centres.
CONCLUSION

Creative industries as a concept of employment in cultural, i.e. creative sector
are gaining in importance in European countries. The turnover in these types of industries is constantly increasing, whether it is in film, music, stage arts or some other activities. The European cultural policies themselves (EU member states’ policies
and those of other countries) do not ignore economic contribution that creative
industries make to a country’s employment and GDP. Croatian cultural activities
are still mainly connected to the budget, but harmonisation with EU standards in
the pre-accession process will result in the development of creative industry sectors.
In the meantime, it is necessary to moderately increase creative employment in the
public sector, as well as support creative employment in the private sector by means
of grants on state and local level. Only by investing and supporting can Croatia
keep up with the countries of North America and the European Union, when it
comes to the new economy founded on creative industries.
REFERENCES
Books

1. Howkins, John: Kreativna ekonomija: kako ljudi zarađuju na idejama; Zagreb,
Binoza Press, 2003; ISBN 953-6920-09-3
2. Lamza-Maronić, Maja, Glavaš, Jerko: Poslovno komuniciranje; Osijek, Studio
HS internet, Ekonomski fakultet u Osijeku, 2008; ISBN 978-953-253-053-7

142

Maja Lamza-Maronić • Jerko Glavaš • Igor Mavrin

Proceedings

1. Lamza-Maronić, M., Glavaš, J., Mavrin, I. (2009) Potentials of Osijek as a
Centre of Cultural Tourism, Interdisciplinary Management Research, Osijek, Faculty of Economics in Osijek, Croatia, vol. 5, ISSN 1847-0408, ISBN
978-953-253-061-2, pages 711-721
2. Lamza-Maronić, M., Glavaš, J., Bošnjak, S. (2008) Contribution to the development of the urban management model, Interdisciplinary Management Research,
Osijek, Faculty of Economics in Osijek, Croatia, vol. 4, ISBN 978-953-253-044-5,
pages 526-542
3. Matic, B. & Serdarusic, H. (2009) Financing Regional Development Through
Development Banks, Interdisciplinary Management Research, Faculty of Economics in Osijek, Croatia, vol. 5, pages 749-759
4. Matic, B. & Serdarusic, H. (2008) Models of Including Financially Inactive
Population into the Financial System, Interdisciplinary Management Research,
Faculty of Economics in Osijek, Croatia, vol. 4, pages 296-309
Researches and documents

1. The Economy of Culture in Europe; Study prepared for the European Commission; 2006.
2. Creative Industries Mapping Document; 2001; (available at: http://www.culture.
gov.uk/reference_library/publications/4632.aspx/; accessed on 1 February 2010)
3. Hrvatska u 21. stoljeću: Strategija kulturnog razvitka; Zagreb, Ministarstvo kulture RH, 2003; ISBN 953-6240-23-8
Internet

1. www.poslovna.hr (accessed on: 21- 30 January 2010)
2. www.culturalpolicies.net (12 January 2010)
3. http://www.connectcp.org/profiles/profile.php?profileid=22 (12 January 2010)

APPLICABILITY OF INFORMATION TECHNOLOGIES IN PARKING AREA CAPACITY OPTIMIZATION

143

APPLICABILITY OF INFORMATION TECHNOLOGIES IN
PARKING AREA CAPACITY OPTIMIZATION
Maršanić Robert, Phd
Rijeka Promet d.d.
Pupavac Drago, Phd
Polytehnic of Rijeka

ABSTRACT

Parking area is a complex system consisting of adequate system components and
of their inter-dependence; it is therefore necessary prior to analysing and planning
of parking capacities to define the model of parking. The main goal of this paper
is analyze the role and prove the applicability of information technologies in the
function of design optimal parking area capacity. The working hypothesis is set:
Applying the information technologies in optimization of parking area capacity
the optimal number of servers (ramps) and the required capacity (number of parking spaces) in closed parking areas can be defined. Scientific methods applied in
confirming this hypothesis are based on waiting-line models and information modelling method. The use of information technologies in optimization parking area
capacity will be presented on an example of the “Delta” parking area in the City
of Rijeka. A particular merit of the model is its universal applicability because the
presented methodology can be applied to any other closed parking area, i.e. parking
area with ramps in current or future, changed conditions.
JEL clasiffication: C61
Key words: information technologies, parking area capacity, optimization, waiting-line models
1. INTRODUCTION

The research problem of importance for this work stems from the fact that the
demand for parking services is not constant. Changeability and dynamism of the
demand for parking services are the main problem in determining the required size

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Maršanić Robert • Pupavac Drago

of parking facilities. The lines at the entrance to the parking lot, especially in peak
periods, a daily occurrence. Accordingly, this paper will try to answer the following
questions: What is the demand for parking services, according to which should be
to design the optimal capacity of the parking lot?, Acceptable percentage of under
capacity of the parking area?, How to provide service to park at a time of increased
demand?. To find answers to these questions and prove set hypothesis using Excel
spreadsheets to construct a realistic model of the theory of queues, which will support an open single-channel and multichannel queuing model.
2. RELEVANT CHARACTERISTICS PARKING AREA AS AN OPEN
SINGLECHANNEL OR MULTICHANNEL QUEUING SYSTEM

According to the classification system of queues, queues all systems are based on
the number of servicing channels are divided into two groups, as follows: Single
and multi-channel systems. According to the number of potential clients, all queuing systems are also divided into two groups, namely: open and closed systems of
queues. The common feature of all these models is that their clients Poisson input
flow stream, and that their output stream of clients and serving time is exponentially distributed.
Typical symbols of the model are (Barković et al.;1986,213):
λ - mean number of arrivals per time period
µ - mean number of people or items served per time period
S – number of service facilities
P0 – Probability of 0 units in the system (that is, the service unite is idle)
Pn – probability of n units in the system
Wq – average time a unit spends waiting in the queue
Ws – average time a units spends in the system (waiting time plus service time)
Lq – average number of units waiting in the queue
Ls – average number of units (customers) in the system (waiting and being
served)
If the λ < µ, individual values of the waiting line in single-channel system can be
calculated from the following formulas (Heizer & Render; 2004, 715):
λ
λ
Wq =
Ls =
µ-λ
µ(µ-λ)

APPLICABILITY OF INFORMATION TECHNOLOGIES IN PARKING AREA CAPACITY OPTIMIZATION

Ws =

1

ρ=

µ-λ
Lq =

λ2

λ
µ
λ

P0 = 1 -

µ(µ-λ)

145

µ

Some values of the waiting line in multi-channel system can be calculated from
the following formulas:

P0 =

1 
M 1 1  n 
 
n 0 n! 

zaM   

( /  ) M 

Po 
2 

( M 1)!( M  )

Ls =

Ws =

 1   M M 



 M !   M  

( /  ) M
1 Ls
Po  
2 

( M 1)!( M  )

Lq = Ls -  

1

Wq = Ws -  

Lq 

If the number of inbound ramps to the parking area one, than we talking about
the single-channel system, otherwise we are talking about multi-channel system.
When the parking area fills up, entry ramps automatically prevent new vehicles
from entering into the parking area, i.e. the drivers trying to enter are signalled
that the parking area is complete and this initiates the creation of a line of vehicles
trying to enter into the parking area. Parking area represents a queuing system
with the following structure: customers are vehicles forming (or not) a waiting line
(depending on the current situation) in order to be served (parked) in a parking
section and after the service has been completed (certain length of parking time),

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Maršanić Robert • Pupavac Drago

they exit the system. Parking system servicing is defined as an open system of queues because with him the intensity of input flow does not depend on the state system, ie the number of users in the system, because the source populations located
outside the system and users of the city roads (outside the park) come in observed
the system queues.
3. STATISTICAL DATA

Table 1 shows the number of vehicles arrived into the “Delta” parking area in
2009.

Table 1: Number of vehicles arrived into the “Delta” parking area in 2009 by days and months

APPLICABILITY OF INFORMATION TECHNOLOGIES IN PARKING AREA CAPACITY OPTIMIZATION

147

Note: Number “0” denotes holidays, i.e. days (Sunday and national holidays) when parking fee
was not charged or months with less than 31 days.
Source: Statistical data of the “Delta” database

The number of spaces in the waiting line: total length of space appointed to the
waiting of the vehicles in order to be able to enter into the parking area is 80 m; if
the average length of a vehicle in the waiting line is 5 m, it follows that the maximum of 16 automobiles can be present on the reserved space in one moment, i.e.
m = 16. Therefore, the observed servicing process is classified as a queuing problem
with finite number of vehicles in the waiting line, M/M/S/16. Every next vehicle
(17th one) in the waiting line will be cancelled from the waiting line because the
line of vehicles would otherwise continue on the roads intended for the circulation
of motor vehicles.
The intensity of the vehicles’ arrival flow: the calculation will use the average
number of vehicles arriving daily into the parking area in 2005; λ = 1,569 vehicles
per day (with 14-hour working time and 293 days a year because the rest of the
days are holidays and the parking fee is not charged) or the average of 112 vehicles/
hour, i.e. 302 vehicles/hour in peak hours and maximum load of the parking area.
Intensity of servicing: the intensity of servicing (µ) is obtained in the calculation
as a reciprocal value of the average servicing time ( t usl = arithmetic mean of the
servicing time); if the servicing time represents the time necessary for the driver
(parking area customer) to stop its vehicle in front of the entry terminal, to take
the parking ticket and to enter into the parking area and it amounts to an average
of 15 s, then t usl = 15 s = 0.0041666 hours (Maršanić,2008,356), and the intensity
of servicing
µ = 1/ t usl = 240 vehicles/hour.
4. COMPUTER SUPPORTED WAITING LINE MODEL

The most common case of queuing problems involves the single-channel, or
single-server, waiting line. In this situation, arrivals from a single line to be serviced
by a single station. In the table 2 set a model for problem solving using Excel
spreadsheets.

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Maršanić Robert • Pupavac Drago

Table 2: Using Excel for Queing M/M/1 model

All data obtained for the average number of vehicles that are serviced during the
day, indicating that it is sufficient only one ramp that is capable serviced all vehicles
arrived. Probability that there is no vehicle in the queuing system is 53.33% that is
in line only one vehicle is 78.22% that is in line two vehicles 89.83% (...).
Now it is evident that the peak hours, comes more vehicles per unit of time in
respect of their serving with only one entrance ramp. Based on the definition of
basic parameters in the parking lot, “Delta” as a system servicing a limited length
of the queue (M/M/S/16) gets to be ρ = λ / µ = 302/240 = 1.25833. Accordingly,
the question whether increasing the number of input ramp increases/decrease the
value of indicators parking system? In order to get an answer to this question in the
table 3 set a multi-channel model.

APPLICABILITY OF INFORMATION TECHNOLOGIES IN PARKING AREA CAPACITY OPTIMIZATION

149

Table 3: Using Excel for Queing M/M/S model

Based on data from the table 3 it is clear that a system with 2 inputs and peak
load ρ is less than one, and thus satisfies the basic condition that the user (vehicle)
to be serviced before or after. This is not the case in a system with only one entrance
ramp. The probability that a vehicle in a system with two inputs to be immediately Served in peak periods amounts to 22.76%. On the basis of this it is easy to
conclude that with only one entrance ramp significantly deteriorates the quality of
servicing the vehicle with the possibility of failure in the system, while the values
for the cases when placed at the entrance gate two input significantly increases the
quality of servicing. It therefore follows that the two entrance ramps optimal number given the intensity of arrivals of vehicles in the parking and servicing their time
entering the vehicle.

Maršanić Robert • Pupavac Drago

150
5. DESIGN CAPACITY OF PARKING AREA

Capacity is the “throughput”, or the number of units a facility can hold, receive,
store, or produce in a period of time. The capacity determines if demand will be
met or if facilities will be idle.
The parking area capacity is expressed in the number of parking spaces, i.e. the
number of vehicles which use the parking service. The optimal number of entering
points, i.e. ramps, according to experts in garage facilities and closed parking areas
construction, amounts to one entering point per 250 parking spaces. This is the
statistical parking area capacity. The dynamical parking area capacity is calculated
by also taking into account the number of vehicles entering into the parking area
in a day, then the average parking time length and the total working time of the
parking area using the formula 

PM 

t
T

where:

ΣPM – total number of required parking spaces,
λ – average number of vehicles per day,
t – average parking time (hours),
T – total working time of the parking area per day (hours).
If we take into consideration the fact that there is an average of 1,569 vehicles
arriving daily into the “Delta” parking area and that the average length of parking is
2 hours and the opening hours are 14 a day, the formula shows us that the required
number of parking spaces is 224. Based on the obtained results and taking into
account the fact that according to experts dealing with the construction of buildings and garage parking is sufficient closed one entrance to 250 parking spaces, the
question of the validity of the formula. In support of these claims go and the fact
that the actual number of parking spaces in the parking lot is 458. The answer to
these questions should be sought in the fact that more than 40% of the parking
lot occupied permanent subscribers (tenants and companies), and this is the real
reason why the peak periods produce large columns stand at the door.

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151

6. CONCLUSION

In this paper is demonstrate that by applying the information technologies the
optimal number of servers (ramps) and the required capacity (number of parking
spaces) in closed parking areas can be defined. After all, the verification of the set
out model of planning of optimal capacity of parking area capacity upon the actual
“Delta” parking area in the City of Rijeka has shown the indisputable applicability
of the results of a scientific research to actual parking area capacities. Transition of
the parking lot with one of two entrance ramps to shorten the queue leading to a
small number of cancellation in the system and effective utilization of capacity
parking lot. A particular merit of the model is its universal applicability because the
presented methodology can be applied to any other closed parking area, i.e. parking
area with ramps in current or future, changed conditions.
LITERATURE

1. Barković, D. et al.: (1986). Odlučivanje u marketingu, Informator, ISBN 86301-0047-8, Zagreb.
2. Heizer, J., Render, B. (2004). Operations Management, seventh edition, Pearson
Prentice Hall, ISBN 0-13-120974-4, New Jersey.
3. Maršanić, R. (2008). Parkiranje u turističkim destinacijma, IQ Plus, d.o.o.,
ISBN 978-953-95705-1-2, Kastav.

Mane Medić • Mario Banožić • Mladen Pancić

152

BRANDING IMPACT ON THE ECONOMIC
DEVELOPMENT OF CITIES AND COUNTIES - EXAMPLE
BRANDING CITY OF ILOK
Mane Medić, Ph.D.
Faculty of Economics
Mario Banožić, M.Sc.
Vukovar-Sirmium County
Mladen Pancić, Teaching Assistant
Faculty of Economics

Abstract

In the time of globalization, countries, regions and cities which want to take
position on the tourist market or to attract investors are faced with increasing competition. Often different counties and cities offer similar investment opportunities,
the same living standard, cultural and gastronomic offer. Therefore we can assume
that the brand value and branding quality is based on increasing level of recognition and destinations value in the eyes of its target groups.
Since the City of Ilok, as well as the whole Vukovar-Sirmium County passed
consequences of war and transition in its economic structure, it is possible to identify a number of development problems (unemployment, decline in living standard
and deficit in cities’ and county’s budgets). All mentioned led to the decreased
attractiveness and worse image of Vukovar-Sirmium County and City of Ilok. In
this sense the concept of branding offers long-term sustainable solutions through
differentiation based on rational - tangible and emotional - intangible factors where
the image of county cities takes a very important place. In this article a long-term
development vision and destination branding of the City of Ilok based on the
traffic, natural, historical, demographic and social competitiveness factors, will be
proposed. Factors of attractiveness of the City of Ilok, selected through research
and analysis of its perceptions by target groups of consumers, will set up following
differentiation points: location, nature, river port, cultural heritage, gastronomic

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153

and enological offer, knowledge and lifestyle. Based on these points, this article
will propose the positioning of the City of Ilok according to selected target segments of consumers and will built identity elements and brand promises. All above
mentioned can assure the realization of many advantages offered by the concept
of branding Ilok: better image and differentiation, creation of a unique identity,
increased attractiveness and recognition of the City. The parallel implementation
of other development strategies will result with the creation of added value, increased employment rate, increased income, increased number of investors, better
infrastructure and education, strengthened overall economy and finally improved
living standard of the local population.
JEL clasiffication: M31, M37
Keywords: competitiveness of the region, place marketing, brand, destination
branding, City of Ilok

1. INTRODUCTION

City of Ilok is recognized like historic wine town in economic developed and
environmentally clean environment. Good traffic connections, infrastructure, competitive economy and developed tourist offer based on the rich cultural, historical
and natural heritage. Today, City of Ilok revives after homeland war and deportation citizens of Ilok, and also it is open for change and hearty to welcome all its
guests. Many visitors compared Ilok with Opatija because of his natural beauty,
and also with Dubrovnik because of preserved medieval fortress and the wealth of
cultural monuments.
2. DEFINING THE TERMS OF BRAND AND BRANDING

When we are talking about the brand, generally we don’t think about the whole
issues that occur in just one word. The classic definition of brand by the American
Association for the marketing, but also by Kotler (Kotler; 2006, 549) and Bennett
(Bennett, 1995th, 85), is presenting a name, term, sign, symbol or design, or their
combination, which aims is to identification of goods or services of one or a group
of producers and their differentiation from competitors’ goods and services.
We can expand classical definition of brand by modern concepts about the fundamental system, visual, verbal and written characteristics in order to identify and

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Mane Medić • Mario Banožić • Mladen Pancić

distinction product and service of one seller or one offerer from other. But the
brand goes beyond what we can see, hear or feel, so in this context we are observe
it like a phenomenon that behaves like a living organism, because its definition
don’t only analyze the concept of products, names, symbols, or any physical – contemplation characteristics. Well, the brand presents companies quality, the way of
business and communication within the company and interaction with the market.
However, the interaction witch the brand stimulates a series of emotional, rational,
cultural and sociological images which associate on producers. During the shopping consumers don’t buy only a product, such as once thought, they also buy its
emotional meaning and substitutes for its unsatisfied needs. According to Pavlek
(Pavlek; 2008, 92-94), brand became valuable companies property and estimated it
is represented an average of about 50% of the balance sheet structure of companies
in developed countries.
The customers generally require a value in combination of functional and psychological benefits and feature which implicit through functional product features
and psychological characteristics of the brand. (Vranesevic; 2007, 12)
3. THE ROLE OF BRAND AND BRANDING IN THE LOCAL
DEVELOPMENT OF CITIES

Every place has its original history and heritage that will affect on his image.
When we talking about city identity, that means that situation in which creates
assumption in the environment and inside of own organization and based on these
assumption creates expected perception how the subject want to be seen and accepted by actual and potential consumers.
The identity of the city is active role you can affect on it, while the image is passive process of marketing communications, and you can’t affect on it. Image is the
perception of consumers and / or users of certain products, institutions, brands,
business or person who may or may not be in harmony with reality or actuality
(AMA, American Marketing Association, 2007). Also same agencies give definition
of marketing place like the branches of marketing, which aim is to affect on target
groups that could later develop a positive relationship with the products and services
that are related with specific places. The basic settings of marketing place are marketing theory, branding, rural and / or urban development, local economic development, and such like that it uses multiple objectives such as building a positive image

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155

of place, attracting business investment, tourists and visitors, various institutions,
events, etc. (Rainisto; 2003, 28).
The identity of the city can also be seen as a set of characteristics of place that
different it from others. It is obviously that identity will always be a consequence of
some planned activities, marketing or those that belong in domain of urban planning and city management.
When the city achieves the appropriate level of the desired identity, then the
task of marketing place is that the desired identity forward to potential customers
/ users in a way that it is explained and understood as eligible image that they will
develop to the place. Marketing of places must be the way how the appropriate
identity will be located in the cognitive sphere of consumer / users. Therefore,
marketing of place must be integrated in all forms of economic development as a
natural element of the development.
Branding of place can’t be restricted only on the name of place, logo or symbols,
but it means a positive association with people, hospitality, climate, geographical
location, history, heritage, architectural organization, etc. All these elements are
part of the overall identity of place. They can’t be seen clearly, but they are result of
complex processes and phenomena that are created through a long period of time.
4. STARTING POINT FOR CREATING A BRAND CITY OF ILOK

Places are complex products since consumers perceive them through the many
services and experiences that aren’t under control of local government, but the
number of participants (stakeholders). Cities with different interests represent a
unique experience for each costumer.
The advantages of concept for creating brand can be used if are respected the
following principles of branding place (Hanson; 2004, 218):

Real estimate the place - to develop the brand on an authentic basis, mining, the
internal (within the consumer places), implement and external research (consumers outside the city), the perception of attractiveness factors and image
of place, and make comparisons with competitors. This research shouldn’t be
older than 3 years.

Develop a vision for the future – think the brand of place will look for 1o years
or even one generation ahead.

Mane Medić • Mario Banožić • Mladen Pancić

156

Define attractive, unique brand position, which can be the communications
basis of different brand experiences.

Provide full support to the leaders, political unity and continuity, which are prerequisites for creating a successful long-term brand of place.

Should affect those who are affected: media, travel writers, celebrities, local businesses and others, and at least so far to reduce the possible negative effects.

Successful brand of place should be: based on truth, reflect the aspirations for
future; present the spirit and personality of the place, be relevant and differentiate for target consumers, convincing, inherent and sustainable (City of Hamilton;
2002., 2)
Common phenomenon is that cities which have experienced collapse of old
industries didn’t develop parallel new industries and new basis of recognition. In
these situations, the necessity of regeneration of the city is indisputable, and also
imposes the need for brand creating. However, question is when should start with
creating a brand in a city which has lost its old role, and there is still nothing as
great as would be replaced, or whether move to create a brand before the implementation of regeneration of the city or after it. Sarah Jarvis recommend starting
branding parallel with regeneration and so that (Jarvis; 2005, 27):

identifies what makes the city proper;

specialize leading project that will be the initiator and sign to others;

the accent from the beginning that creating brand is long-term project, as well
as the regeneration of the city.

5. SITUATION ANALYSIS CITY OF ILOK

For the purposes of this paper was implemented a SWOT analysis (Table 1) and
status presentation linked with the elements of identity. This research wasn’t based
on the samples and because of that its purpose is to analyze situation in Ilok such as
status paradigm of marking city as a tourist destination in this part of Croatia.
Example of SWOT analysis present the analysis of elements that directly or indirectly influence on creation of identity, and in that context they are assumption
for image creating and building brands of Ilok. At the same time, SWOT analysis
shows us positioning of Ilok in the context of tourist destinations

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Table 1. SWOT analysis city of Ilok

Source: Made by authors (based on our own observations)

The above SWOT matrix city of Ilok and strategic goals of development it is
clear that Ilok can apply more marketing strategies:
• Marketing of Attraction - The most prominent approach since Ilok developed
or prepared for the realization of many cultural and natural attractions (Old
Ilok cellars, The Odescalchi Castle, Tourist resort Principovac, Ilok walls, the
church Saint John of Capistrano, Danube coastline settlement).

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Mane Medić • Mario Banožić • Mladen Pancić

• Marketing of Infrastructure – includes rich architecture and symbols of the
city, and a number of infrastructural projects.
• Marketing of People - many famous historical persons ( Julije i Ante Benesis,
Saint John of Capistrano, Mladen Barbaric, Ivan Rengjeo, Livio Odescalchi)
who are source of many stories that can attract visitors and an inspiration for
the citizens. But a key part of the strategy of marketing of people is citizens
who are the most numerous and most effective carriers of brand, on condition that accept the offered concept of city branding as a part of their own
identity.
• Marketing of Image - the current image of city of Ilok is, in accordance with
the SWOT matrix and acceptance in media, slightly positive and on that way
suggests a low recognition level of city. A number of started and planned projects are in collaboration with the Institute for Tourism Zagreb and the German Society for Technical Cooperation (GTZ) with the aim of strengthening
the attractiveness and infrastructure city of Ilok such as a good foundation
for starting a new project, creating and strengthening the brand image of the
city.
The “brand benefit pyramid” is useful instrument in process of creating identity
and positioning of the city, which also used for formatting a brand promises.

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159

Figure 1. Brand benefit pyramid city of Ilok

Source: Made by authors (based on our own observations)

The promise of brand formed through by acronym “TRS”: traminac, romantika,
sreća. Any of these words symbolize a group of reality based on the brand value city
of Ilok:
• Traminac - Traminer from Ilok is leading wine between Europe’s traminers.
He was served at the coronation of Queen Elizabeth II and before that it was
listed among the wines that are served on the British Court. His harmony and
elegance represent him as a very pleasant aperitif.
• Romantika – romantic, adventurous, fantastic, incredible, wonderful, fairy
tale, imaginative, sensitive, scenic, charming, pleasant, beautiful, medieval,
perfect, ideological, unreal, alien. All those emotions that visitor experiences
in city of Ilok (Klaić; 2004, 189).
• Sreća - happiness lasting, positive emotional condition which includes the calm
satisfaction with their lives, but also actively satisfaction and achievement.

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Mane Medić • Mario Banožić • Mladen Pancić

Acronym “TRS” in Croatian also symbolizes the vine: eating grapes, grapes for
juice, wine and sherry. Its fruits particularly its wine, most of them perceives it like
a symbol of joy. Desire for pleasure motivates a man in all, but also she is source of
frustration when we can’t find a way to her.
6. CONCLUSION

The marketing of place strategy implementation must be implemented at all
levels, from the tourist board, right to local population. Through theoretical view
and the status presentation shows that the city of Ilok has built some elements of
identity.
However, according to theoretical preferences the identity isn’t constructed in
entirety, and therefore is a problem of creating a real image at target groups and
the local population. When the city’s identity becomes strong and specific, we can
expect the formation of positive image at target groups. Therefore, it is difficult to
talk about strong brands, as a factor of a successful positioning in the market. In
order to achieve an appropriate level of identity construction it is necessary joint
operations of tourist stakeholders, organizations, and institution who planes strategies for city of Ilok, on which based a proper and healthy development in general.
This process must include local populations and the manufacturing sector, because they are all stakeholders in the development and economic advancement of
its community. Neither of the action don’t act independently, regardless if they are
profit or non-profit character, or public or private sector, they supplement and supporting each other.
Image and identity are very important factors in construction of strong and
recognizable brand name of the city, because it is very important to focus on the
theoretical study of the importance of place image and identity, as well as its practical application in practice in order to build competitive offer to domestic and
international market.
7. REFERENCES

1. AMA American Marketing Asociation (2007), „Dictionary“, available at: http://
www.marketingpower.com/mg-dictionary-view1438. accessed: (10-01-2010)
2. Antić, T. & Antić, V. & Pancić, M (2007). Brand Valuation, available at: http://
ideas.repec.org/a/osi/journl/v4y2008p199-214.html accessed:(09-03-2009)

BRANDING IMPACT ON THE ECONOMIC DEVELOPMENT OF CITIES ...

161

3. Bennett, P.D. (1995). Dictionary of marketing terms, McGraw-Hill, ISBN 9780844235981, Chicago
4. City of Hamilton: Branding Program Information Package, October, 2002.,
available at:http://www.city.hamilton.on.ca/newsroom/archives/2002Releases/
pdf/branding_information_package_2002-pdf, accessed: (10-01-.2010).
5. Hanson, S.: 18 Tips for a Winning Destination Brand, available at: http://www.
destinationbranding.com/articles/18Tips.pdf, accessed: (14- 03-2010)
6. Jarvis, S.: Rebranding as a Tool for Regeneration, Locum Destination Review,
London, Issue 17., 2005., available at:http://www.locumconsulting.com/pdf/
LDR17-FO-Rebranding.pdf accessed (11-03-2010)
7. Klaić B (2004), Riječnik stranih riječi, Nakladni zavod Matice Hrvatske, Zagreb,
ISBN: 978-953-0-40935-4, Zagreb .
8. Kotler, Ph. (2006). Osnove marketinga, Mate, ISBN 953-246-023-3, Zagreb
9. Pavlek, Z. (2008). Branding, M.E.P. Consult, ISBN 978-953-6807-37-6,
Zagreb
10. Rainisto, S. K., Success factors of place marketing: a study of place marketing
practices in Northern Europe and the United States, Helsinki University of
Tehnology, 2003.ISBN 951-22-6684-9, Espoo
11. Vranešević, T. (2007). Upravljanje markama (Brand management), Accent,
ISBN 978-953-99762-4-6, Zagreb

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Murali Murti

THE LUXURY PHENOMENON  THE GLOBALIZATION
OF VARIETY
Murali Murti, Professor of Management,
PES Institute of Technology, Bangalore, India

ABSTRACT:

Our contemporary understanding of globalization is an increasing interlinking
and interdependence of national economies within a global economy. This view of
globalization has become associated with large corporations driven by their own
immediate self-interests. This process is seen as leading to an increasingly homogenous global culture. This can be described as the globalization of uniformity.
The globalization of uniformity is most often identified with the phenomenon
of outsourcing, and the rise of the truly global corporation. Many of the arguments
against globalization arise out of fear engendered by this process; a fear that such
globalization of uniformity may lead to a loss of cultural identity and national
sovereignty.
Bu there is another, less widely studied, aspect to globalization. Improved communication, access to information, and lowering / elimination of barriers to trade,
can also lead to greater entrepreneurship and innovation. Globalization in this perspective can lead to specific local competencies taking deeper root and finding opportunities to flower not just in their local markets, but across the world. This can
be referred to as the globalization of variety, which, to some extent, can reverse
the outsourcing process and strengthen local cultures.
One example of the globalization of variety is the luxury industry, which is
today composed of companies which started out mainly as small family-owned
businesses and social enterprises barely fifty years ago. Significantly, the luxury
industry is largely Europe-driven, and now has an important role to play in the
continued evolution of European culture, identity and ethos. Research has shown
that changing the definitions of luxury has the potential to transform attitudes
towards wealth. This is critical to the future global economy.

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163

This paper studies the luxury industry as a microcosm of the globalization of
variety. Based on the analysis of the luxury industry, the paper proposes a taxonomy
within which different industry sectors can be studied from the two different globalization perspectives, and which can be used for making policy recommendations
to catalyze the evolution of new competencies within a local economy, and drive
these systematically to take advantage of the process of globalization of variety.
JEL clasiffication: F01
Keywords: globalization, industry, taxonomy

INTRODUCTION

Fifty years after international trade became a significant feature of the global
economy – after a gap of half a century of wars and tumultuous socio-political
change across the world – the debate on globalization has shifted in focus. From
whether globalization is indeed a fact and therefore how societies, corporations
and individuals need to adapt, the questions are now linked to the benefits and the
costs of globalization. Particularly after the 2008 global financial crisis, the debate
has increased in urgency. As a measure of this, it is instructive that even think tanks
that work with the Conservative Party in the UK have described our current society
as “an oligarchical market state that monopolises power and wealth,... that effectively
disempowers everybody else”. (Blond, 2008)
In this debate, there is little opposition to the obvious benefits of globalization.
People everywhere now have access to a variety of products and services that provide improvements in daily living unimaginable even a generation ago. Many of the
classic predictions of trade theory have been vindicated, from Finland becoming a
global centre for mobile phone technology research, to the domination today enjoyed by the Japanese automobile industry, to India as a global source for software
services, and most dramatically, China emerging as a global economic superpower
on the basis of her manufacturing prowess.
On the other hand, the drawbacks of globalization have also drawn increasing
attention from the academic community. At a fundamental level, a view has been
put forward that globalization merits study as a branch of International Relations
rather than management (Guedes & Faria, 2007), thus asserting the political sensitivity of globalization as an issue. It is admitted, even by its most diehard propo-

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nents, that while there is a commendable acceptance of the need for free trade and
liberal economic policies, globalization has not led to the free movement of labour.
(Tandon, 2008). While “kaleidoscopic comparative advantage” (Bhagwati, 1998),
implying fierce competition at a global level between large firms, is a distinctive
feature of a globalised world, it is still unclear what the gains from such outcomes
are (Tandon, 2008).
The need for institutional changes as a way to mitigate the downsides of globalization has been the conclusion of many researchers (Bhagwati, 1998). Allied with
this is the need to redefine corporate governance in a global context, to eliminate
inter-country loopholes (Guedes & Faria, 2007). The ideas of sustainability and corporate social responsibility have also gained traction as alternatives to the ill-effects
of globalization.
The focus of this paper is rather different. It views globalization from neither an
economic free trade framework, nor from the perspective of management theory.
It postulates that globalization develops in two paradigms – the globalization of
uniformity, which is characterized by an increasing degree of similarity and homogeneity amongst organizations globally in term of their processes and ethos, and the
globalization of variety, which is characterized by competencies evolving through
entrepreneurship at grassroots levels in different countries, growing in scale ultimately to create distinct comparative advantages at the country level. The global
luxury industry is used as the basis for examining the relevance of this view.
THE GLOBALIZATION OF UNIFORMITY

The most visible aspect of the globalization process has been the rise of the
multinational corporation. From 1960 to 2008, the number of companies which
can be classified as MNCs has risen almost tenfold. The percentage of international
trade attributable to MNCs is now significantly higher than it was fifty years ago.
The most positive feature of this growth is the internationalization of the MNC.
From domination fifty years ago, the percentage of US corporations has dropped
to barely 30%. Increasingly, companies from the Newly Industrialized Country
category (China, India, Brazil) have established themselves as successful MNCs
(Hill & Jain, 2007).
A significant reason for the success and proliferation of MNCs has been the
productivity increases made possible by deployment of complex information tech-

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nology (IT) systems. IT systems have enabled corporations to develop distinctive
competencies to help them outperform smaller rivals. Allied with the deployment
of IT systems has been a more scientific approach to the design of business processes within organizations.
However, this has taken place within a period of consolidation in the international IT industry. Thus, over the past thirty years, organizations have moved
towards the adoption of a few well-established international standards. Thus, Microsoft Windows has become the default desktop OS for most of the employees of
today’s corporations. Similarly, Oracle databases form the core of the majority of
financial systems, and SAP software the major basis of supply chain processes. Such
adoption of standards has led to increasing similarities in the business processes of
organizations.
Consequent to this increasing standardization of business processes has come
an increasing similarity in employee roles, and therefore of organization culture
and attitudes. To an increasing extent, working in one MNC is no longer very different
from working in others. This is one aspect of what can be called the globalization of
uniformity.
A second consequence of IT has been its effect on communications, and with it
the effects on marketing. Rapid access to information across the globe for everyone
now makes it possible for corporations to migrate to a global strategy – viewing the
world as a single market with only marginal country differences – to a much larger
degree. This effect is most pronounced in the financial markets, and to a great extent also in the markets for high technology products.
Consequently, consumers everywhere now have the opportunity to choose from
an increasingly standardized and narrow basket of brands – whether for colas, automobiles or cell phones. This is a second aspect of the globalization of uniformity.
There are several indices, which have been evolved over the years, for the measurement of the extent of globalization in a particular country. The KOF index
has gained widespread acceptance and is used in this paper for the analysis of data
(ETH Zurich, 2009).
THE GLOBALIZATION OF VARIETY

Globalization was not only expected to usher in a new era of free trade. It was
also expected that the process would act as a catalyst for entrepreneurship develop-

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ment. It was expected that this would in turn make available to the global consumer an increasingly diverse set of products and services to choose from, leading
hopefully to an increase in the quality of life. This expectation has been borne out
to some extent by the pace of development of so many countries, as also by the
small, but increasing number of products and services innovated outside the developed world. This phenomenon may be termed “the globalization of variety”.
The role of entrepreneurship in economic development and growth is an area
that has been studied and understood perhaps less fully than other aspects. The
Schumpeter thesis (Schumpeter, 1942), that entrepreneurship gets gradually subsumed as a routine activity by large corporations, has never been fully validated
and does not explain the continual entrepreneurial dynamism shown in advanced
economies since the 1980s. Furthermore, in a globalizing world, the entrepreneur is
“located at the intersection of several key fault lines of the modern age” (Dahm, 2006).
Therefore, it is perhaps even more necessary today to assess, and evolve a model for,
the role of entrepreneurship in economic development, and more important, in
sustaining economic vitality and innovation.
Vinig and Kluijver (2007), studied the impact of globalization on entrepreneurship, and found no statistical correlation between the level of globalization in
a country, as measured by KOF index, and the level of entrepreneurship in that
country, as measured by Global Entrepreneurship Monitor (GEM) data. Surprisingly, and perhaps disturbingly, they found a negative effect of globalization on
entrepreneurship in low GDP countries.
However, this study did not distinguish between the two types of entrepreneurship now commonly accepted, viz. Traditional Entrepreneurship Activity (TEA)
and Social Entrepreneurship Activity (SEA). This has been attempted in this
paper.
GLOBALIZATION AND ENTREPRENEURSHIP: ANALYSIS OF DATA

For the purposes of this paper, the year 2009 has been chosen as the basis for
analysis. Data has been obtained from two sources:
1. For estimates of globalization, the KOF index has been used
2. For estimates of entrepreneurial activity, data from the Global Entrepreneurship
Monitor (GEM) 2009 report has been used.

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This paper follows the categorization of economies into Factor Driven Economies, Efficiency Driven Economies and Innovation Driven Economies, as defined
in the GEM report.
Following the GEM report methodologies, Social Entrepreneurship Activity
(SEA) has been subdivided into the following categories for analysis:
1. SEA that has Not For Profit (NFP) objectives
2. SEA that has Hybrid objectives, i.e. a combination of not-for –profit and forprofit objectives
3. SEA that has only For Profit (FP) objectives
4. Since the division between SEA and TEA is sometimes blurred, a fourth category
of “TEA+SEA” has also been included.
5. Finally, a summary analysis has been performed for pure TEA activity as well.
Data from a total of 43 countries has been used for the analysis. For each country, data for each of the above 5 categories of SEA and TEA were correlated against
the globalization index KOF for that country. Thus, the data set consisted of 258
distinct data items.
The list of countries referenced for analysis is given in Table 1.

Table 1: List of Referenced Countries by Economy Type
Factor Driven Economies

Efficiency Driven Economies

Innovation Driven Economies

Algeria

Argentina

Belgium

Jamaica

Bosnia & Herzegovina

Finland

Lebanon

Brazil

France

Saudi Arabia

Chile

Germany

Uganda

China

Greece

Venezuela

Colombia

Iceland

Croatia

Israel

Dominican Republic

Italy

Ecuador

Korea

Hungary

Netherlands

Iran

Norway

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Murali Murti

Jordan

Slovenia

Latvia

Spain

Malaysia

Switzerland

Panama

United Kingdom

Peru

United Arab Emirates

Romania

United States

Russia
South Africa
Uruguay

The hypothesis which has been tested is as follows:
“Globalization leads to an increased level of entrepreneurship activity in a
country”
This hypothesis has been tested by calculation of the Pearson coefficient of correlation “r” between the Globalization Index (KOF) for a particular country, and
the Entrepreneurship Index as given for each category of SEA or TEA for that
country in the GEM report.
The results are given below in Table 2

Table 2: Pearson’s Coefficient of Correlation “r” between Globalization Index and Entrpreneurship Index, 2009
S.N

Category

Average
KOF

Not For
Profit SEA

Hybrid
SEA

For Profit
SEA

TEA +
SEA

TEA

1

Factor Driven Economies

61.69

0.7619

-0.1909

-0.4436

-0.1176

-0.4924

2

Efficiency Driven Economies

67.58

0.0545

0.1289

-0.5923

-0.3169

-0.4302

3

Innovation Driven Economies

80.26

-0.372

0.5203

0.2023

-0.3682

-0.2338

This analysis clearly brings out the following for the year 2009:
1. Traditional Entrepreneurship Activity (TEA) declined significantly in 2009
for all three categories of economies in spite of globalization.
2. The “blurred” category (TEA+SEA) also declined significantly during 2009
for all three categories of economies

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3. Factor Driven Economies, with the lowest average level of globalization at
61.89, showed growth in Social Entrepreneurship Activity (SEA) with NotFor-Profit objectives.
4. Efficiency Driven Economies, with an average level of globalization at 67.58,
showed a slight increase in SEA that had Hybrid objectives, i.e. a combination of profit and not-for-profit objectives.
5. Innovation Driven Economies, with the highest average level of globalization
at 80.26, showed significant growth in SEA that had Hybrid objectives, and
also some growth in SEA that had For-Profit objectives.
This leads to the following remarkable conclusions:
1. Lower levels of globalization, as found in factor driven economies, appear to
be associated with low levels of entrepreneurship activity during a downturn,
but associated also with significant levels of non-profit activity during the
same time. Thus, there does not seem to be evidence of small groups of people coming together to find economic solutions during a downturn. Instead
the formation of social enterprises appears to be based more on the need to
extend help and support to less fortunate segments of society.
2. Medium levels of globalization, as found in efficiency driven economies, are
associated with an overall decline in entrepreneurship during a global downturn, but there is some evidence of small groups attempting to “self-help”
themselves to find economic solutions during a downturn.
3. High levels of globalization, as found in Innovation Driven Economies, are
correlated with a clear pattern of small groups of people coming together to
use available people skills as a path to finding economic solutions during a
downturn.
This allows us to postulate the following two questions:
1. Can Social Entrepreneurship be a suitable vehicle for increasing the levels of
Globalization of Variety?
2. Can Social Entrepreneurship be a suitable vehicle for building up countrylevel comparative advantages in an increasingly globalized world?
We will now examine these questions using the Luxury Industry as the
framework.

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THE LUXURY INDUSTRY

At first glance, the luxury industry does not appear to be the ideal example to
choose while discussing social entrepreneurship, or the benefits of globalization in
general. It is associated with only the very rich and very exclusive. It is also usually
associated with the highly developed countries of the Western world. It tends, finally, to be associated with decadence rather than vitality. Nevertheless, any analysis
(Kapferer & Bastien, 2009) of the luxury industry – and of the luxury phenomenon – provides useful insights.
First, luxury is a universal phenomenon:
1. Luxury as a concept has been with us consistently since the dawn of time.
Even the most ancient of societies evidenced luxury in the form of ornaments, attire, etc
2. Luxury exits because of intrinsic characteristics of human beings – which are
common regardless of society and state. There is no country or society where
the idea of luxury has disappeared. All human beings exhibit the same characteristic of “aspiring to a dream”.
3. Luxury has a been a reason for trade throughout history – the silks of China, spices of India and other Oriental exotica were powerful reasons for the
growth in mercantile trade after the Dark Ages
4. Luxury has always been associated with craftsmanship, and thus the development of exceptional skills within a society. In this respect, luxury has always
represented national comparative advantage at an incipient stage, in the form
of exceptionally skilled tradesmen.
5. Luxury has flowered when communities as a whole have encouraged it. In
such environments of encouragement, luxury capabilities have evolved into
entrepreneurial ventures.
Second, in today’s world, the luxury industry is primarily European in origin:
1. The majority of today’s best known global luxury brands are companies that
are headquartered in France, Italy, Germany, the UK, Netherlands, Switzerland, etc.
2. Most of today’s best known brands – whether Ferrari, Louis Vuitton, Cartier,
Chanel, and others – were small, family-owned businesses barely fifty years
ago.

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3. The strategies which have been evolved to grow these small companies into
global brands are completely different from the mass marketing strategies
developed in the US and which today dominate the corporate world.
Third, globalization has enabled the luxury industry to make the transition from
craftsmanship to mass production:
1. The appeal of a luxury product or service is that it is “one of a kind”, or at the
very least, “one of the very few”. Hence its association with craftsmanship and
highly personalized customer service.
2. Today’s luxury brands seek to make available this “experience” on a global
scale, through innovative marketing, advertising, and delivery infrastructure.
3. The strategic management of today’s global luxury brands is very similar to
that of any other product. Concepts such as outsourcing, supply chain efficiencies and the like are now commonplace in this industry. This is now the
major criticism directed against the luxury industry – that the industry is in
fact deceiving customers into thinking that they are receiving a highly personalized product or service, when in fact the opposite may be true (Thomas,
2007).
Whatever may be the criticisms and their validity, the luxury industry does represent an unusual phenomenon:
1. It is based on craftsmanship capabilities that evolved in even very small societies, and which found social recognition.
2. These personalized skills then became the basis for setting up small companies
– a process which we would today describe as social entrepreneurship with a
for-profit motive.
3. These social enterprises were enabled by globalization to make the transition
to conventional commercial enterprises and become part of nationally important large industries.
Let us illustrate these conclusions with two examples.
1. The Italian fashion industry, based around Milan, is today a multi-billion
Euro powerhouse, accepted as one of the three leading global centres for fashion. Yet fifty years ago, there was no Italian fashion industry to speak of.
What did exist was an exceptionally skilled workforce distributed in villages

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and towns across Italy, serving individual customers in bespoke mode, as a
cottage industry. With the Marshall Plan came new factories, which were
willing to employ skilled artisans. This led to a new industry, but not one that
aped the design houses of Paris and London, but rather one that was rooted
in Italian traditions. This fledgling industry also quickly developed the necessary marketing skills, and was able to capitalize on the love affair for all things
Italian – from espresso coffee to leather goods to actors and actresses – that
swept America in the post-war years. (White, 2000)
2. The Indian spa industry, with over 2000 spas located in 25-30 major centres,
generates over $400 million annually, and has carved itself a small, but growing, niche in the global $60 billion spa economy. Many of these spas also
offer products and services based on India’s indigenous Ayurvedic medical
traditions, a sector which has received encouragement through Government
policy. The sector is poised to grow at a CAGR of 22% over the next ten
years, one of the highest in the world. The “wellness” experience offered by
these spas is quintessentially and immersively Indian, designed around Indian
history, astrology and values, and dedicated to indigenous culture, myths,
materials and designs (Sharma, 2010).
The luxury industry, therefore, offers some interesting insights:
1. Social entrepreneurship, rooted as it is in the capabilities of people, is uniquely suited to building up comparative advantages based on people skills that
can effectively differentiate a country, or a region.
2. Social enterprises are capable of making the transition from survival to commercial success through systematic evolution of business models, to the extent of achieving global status.
3. Governments can proactively enable this process with the right policy
initiatives.
TAXONOMY FOR POLICY MAKERS

With this background, we would like to propose a taxonomy for policy makers,
to enable the process of catalyzing the globalization of variety through social entrepreneurship. For this purpose, we define the following:

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1. Initiatives Level 1 (L1): Policy initiatives, including funding, with the objective of creating social enterprises that have a not-for-profit objective.
2. Initiatives Level 2 (L2): Policy initiatives, including funding, with the objective of creating social enterprises that have a hybrid objective, i.e. both profit
and not-for-profit.
3. Initiatives Level 3 (L3): Policy initiatives, including funding, with the objective of creating social enterprises that have a for-profit objective.
4. Initiatives Level 4 (L4): Policy initiatives, including funding, with the objective of creating traditional enterprises that have, obviously, only a for-profit
objective.
Our fundamental proposition is that, within a country, every economic sector
can be viewed as either (a) a factor-driven sector, or (b) an efficiency driven sector,
or (c) an innovation driven sector. For each type of sector, there should be different policy prescriptions. The final objective should be to move a social enterprise from
a non-for-profit model to a for-profit model, and then encourage it to evolve to a fully
commercial entrepreneurial business paradigm.
This is summarized in the following table.

Table 3: A Policy Taxonomy
Sector Type
Factor Driven Economic Sectors

SEA
Not for Profit

SEA
Hybrid

SEA
For Profit

L1

TEA
L4

Efficiency Driven Economic Sectors

L2

Innovation Driven Economic Sectors

L2

L4
L3

L4

This taxonomy aligns exactly to the analysis of the effects of globalization on
entrepreneurship, and therefore would carry a relatively higher probability of
success.
LIMITATIONS OF THIS PAPER AND FUTURE DIRECTIONS FOR RESEARCH

No research is ever complete in itself, so the following are the major limitations
of this paper:

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Murali Murti

1. The correlation between globalization and entrepreneurship has been tested
for only one year, 2009.
2. The luxury industry has been described, but not rigorously analyzed, in terms
of the GEM classifications.
These lead to the following possible directions for future research:
1. Correlation analysis of the rate of increase of globalization with the rate of
increase in entrepreneurship, rather than the absolute values.
2. Analysis of sample countries to determine whether the categorization of different sectors into factor-driven, efficiency driven and innovation-driven is
indeed valid at a single country level.
3. Analysis of a selected sample of social enterprises to determine whether the
proposed transition (as shown in the L1→L2→L3 arrows above) is feasible.
CONCLUSIONS:

Every viewpoint carries within it an implicit system of values, and the propositions put forth in this paper are no exception. Perhaps the most important of these
values, at least to this author, is the belief that every country and community of
people carries within itself the seeds of a special characteristic and special quality.
These characteristics manifest themselves in cultural practices and values. It is the
assertion of this author that such cultural attributes can be leveraged to provide a
better life for people. Every country, in this author’s view, has the intrinsic capability to distill and refine its cultural attributes to create products and services, possibly of luxury, that can capture the imaginations of people worldwide.
A second value arising out of this paper is the benefits of the globalization of
variety. As contrasted with the globalization of uniformity, the globalization of variety empowers people, and through entrepreneurial action, leads to true improvements in the quality of life, not only for a particular community, but for people
everywhere.
In this respect, the author can do no better than to conclude, with a quote from
Jagdish Bhagwati, one of the doyens of free trade: “And, so, free traders must now
walk hand in hand with the civil society groups seeking the social agendas. It is not as
difficult a task as the first shock of discovering each other seemed to suggest. In fact, it is
the task for the first decade of the next millennium.”

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REFERENCES:
Books

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978-0061330087
4. Thomas, Dana (2007). Deluxe: How Luxury Lost Its Lustre, ISBN-13: 9781594201295
5. White, Nicola (2000). Reconstructing Italian Fashion: America and the development of the Italian fashion industry, ISBN-13: 978-1859733417
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2. Tandon, R (2008). “The Globalization Syndrome of a New Millennium: A Holistic Analysis from a Non-Western World View”. CJES Research Papers, No.
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3. Vinig, T., Kluijver, J. de (2007). “Does Globalization Impact Entrepreneurship?

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4. Comparative Study of Country Level Indicators,” University of Amsterdam,
Netherlands . Sprouts: Working Papers on Information Systems, 7(8). http://
sprouts.aisnet.org/7-8 (accessed March 2010)
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1. Blond P. (2008). “The True Tory Progressives”. www.guardian.co.uk/
commentisfree/2008/may/30/davidcameron.welfare
(accessed March 2010)
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(accessed March 2010)
Websites

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(accessed march 2010)
2. Global Entrepreneurship Monitor (2009) www.gemconsortium.org
(accessed March 2010)

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CRISIS AS AN OPPORTUNITY FOR OPTIMIZING
COMPANIES’ COST MANAGEMENT SYSTEMS
Stipan Penavin, Faculty of Economics in Osijek
Dubravka Pekanov Starčević, Faculty of Economics in Osijek
Martina Harc, Electrodus d.o.o. Osijek

ABSTRACT

Typically rules that relation to available resources, especially financial always
conditions companies’ business success. In practice, it is evident that companies
that have a more rational approach to their resources achieve better business results.
However, there are situations where this need particularly manifests as scarcity of
resources multiplies. It is a crisis. Crisis is a situation characterized by business
disturbances. Its effects reflect primarily in the deterioration of companies’ market
position, mostly through the reduction of sales volume or decrease in sales price. In
both cases, it affects the decrease in business results. As in these conditions access
to external financing resources is somewhat difficult, the company has to orient
to its internal reserves. They are located primarily in the more rational approach
to costs, which basically means that companies have to develop an adequate cost
management system. Through cost management, the relationship between sales
and production prices can be balanced, especially in crisis. In this case, the ability
to impact business results through cost management becomes a company resource.
Although in all business conditions there are strong reasons for developing this cost
approach, crisis represents an additional motive for its implementation. Effects of
cost management will be conditioned by model that is applied. Therefore, alternative models of cost management represent the basis for its effectiveness. Although
in the crisis it is much easier to develop sensitivity to cost management as an instrument for mitigating its effect, this approach needs to have a permanent character.
JEL clasiffication: D24
Key words: cost management, crisis, business results, production price, sales
price

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Stipan Penavin • Dubravka Pekanov Starčević • Martina Harc

1. INTRODUCTION

Many factors, especially costs, determine companies’ business success. The cost
significance is great even in stable business conditions, and it especially comes to
the fore in unstable ones. In the narrow sense costs affect the business results, and
in broader, they determine the degree of competitiveness of each company, as well
as its market position. This fact is reason enough to build a special approach to
costs primarily through managing them. Cost management means full cost control and direction in those business segments that will ensure maximum business
effects. It is essential that this practice is carried out permanently in the process of
doing business, especially in crisis. The crisis is a situation characterized by business disturbances at the macro-level, where it affects the functioning of the entire
economic system, and at the micro level, where it affects companies as elements of
that economic system. In such circumstances, the availability of resources within
the enterprise reduces to a minimum, making the business potential significantly
reduced. That results in an increase in cost of products and services on one hand,
and in a reduction of competitiveness on the other. This complex condition, caused
by the crisis, provides an additional incentive for management to find all possible
internal reserves of the company, which will enable normal functioning. There is
no doubt that cost management opens significant opportunities to achieve a higher
degree of rationality in the use of already scarce resources, allowing the company
to survive competition. The fact is that cost management can significantly reduce
the effects of the crisis in the functioning of individual enterprises. However, it
would be entirely wrong approach to study the justification of cost management
only in terms of crisis. It should be an integral part of business practice in all conditions, both in stable and unstable, and in this regard, it should have a permanent
character.
2. EFFECTS OF CRISIS ON COMPANIES

The effects of the crisis on business come to the fore in many forms. They mainly manifest through two aspects, market and financial. In the first case, they usually lead to a sales reduction because of reduction in demand for most products,
especially for small and medium enterprises. Other problems follow. Due to the
reduced sales companies achieve worse financial results. Because of that, they cannot cover even the current business needs and opportunities for expanded reproduction significantly reduce. Since in such conditions internal sources of financing
operations and investments are not sufficient, companies orient to external sources.

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CRISIS AS AN OPPORTUNITY FOR OPTIMIZING COMPANIES’ COST MANAGEMENT SYSTEMS

However, because of the high cost of capital and absence of adequate collaterals,
most companies have problems in accessing to financial sources. This situation
generates insolvency, which means that one company cannot collect their claims,
and at the same time, it cannot meet its obligations to suppliers. Because of that,
company cannot buy necessary raw materials for further production and business.
Result is decrease in competitiveness and deterioration of market position. In the
case of a longer duration of the crisis, that takes permanent form. The effects of
these phenomena on the companies in the Republic of Croatia, as a direct consequence of the crisis can be seen in the following table.

Table 1: Overview of business condition indicators in the Republic of Croatia
Indicator

The average interest rate on loans contracted without a
currency clause
The average interest rate on loans contracted with a currency clause
Gross profit
Number of insolvent companies
Due reported orders for payment (000 kn)

IX. 2007.

IX. 2009.

Index

9.33

11.6

124.33

6.35

8.1

127.56

32,226
24,992
14,316,302

21,822
26,196
20,748,604

67.72
104.82
144.93

Source: Financial Agency, Croatian National Bank

Impact of the crisis is much wider than shown on the indicators at the micro
and macro level. Between these two levels, there is a strong interaction. Disorder of
certain macro-economic conditions reflects in the business, which then poor results
reflect on further movement of macroeconomic indicators.
3. THE IMPACT OF COST MANAGEMENT ON CRISIS EFFECTS IN BUSINESS

It is evident that the effects of the crisis reflect in the disturbances in business.
Certainly that for the management of each company this situation is unacceptable
and in the conditions of the crisis it must activate all available resources, which
in these circumstances are unfortunately limited. Cost management, as a special
management technique, is a very powerful business policy instrument, which can
be used to reduce the negative effects of the crisis. The impact of cost management
to the effects of the crisis results from the nature of this business function. That is,
cost management in the narrow sense can be considered as a system of methods and

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techniques in the process of identifying opportunities for eliminating unnecessary
costs (Peršić, M; 2006.)
Key term in this case is the cost and primarily the cost that is not necessary for
conducting business processes. From this, it follows that the cost management is
permanent examination of justification for individual costs and their level. If it is
determined that there are costs that are not fully justified or that are unjustifiably
high, they should be eliminated or at least reduced to a minimum. This sensitivity to the costs justifiableness and their level must exist in all business conditions,
both stable and unstable. In the latter case, it must be even more developed as
the business in crisis conditions is burdened with phenomena that diminish its
effects. In a broader sense, cost management should create assumptions for establishing optimum relation between the resources involved in business processes
and business results achieved. In other words, this means that it is necessary, often
with scant resources, to achieve better business results. This need comes to the fore
particularly in conditions of crisis because the resources limitation is then at the
maximum. Technology of cost management consists of a series of activities that allow management to keep track of costs, estimate the effects of costs on the business
results, and directing costs in that direction in which they will be able to ensure
the realization of the previously mentioned optimal conditions. Activities in the
process of cost management are:
a. Planning (budgeting) costs, as a form of their definition in the coming period.
Cost planning is a management attempt to pre-define their objectives in cost
movement in response to circumstances that may occur in the future. This
is particularly important if the company expects certain negative effects that
may occur because of the crisis. In this case, management through the plan
has pre-defined business policy that allows neutralization of the negative effects that may arise.
b. Cost movement control, as a function of monitoring implementation of defined plans. In the case of any deviation from the plan, especially in a negative
sense, the management will intervene to reduce possible negative effects. This
will be achieved either through an attempt to influence the circumstances
that have changed, or if they cannot be influenced, through the adjustment
of the cost plan to new circumstances.
c. Cost rationalization, which means any management intervention in reducing
the cost movement, especially if costs have a tendency to grow unjustifiably.

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Management action in this regard will be in the supply market and within
the business process.
d. Overhead allocation is perhaps the most significant activity in cost management. It defines the unit product cost, which directly affects the degree of
competitiveness of the company and its market position. It has already been
pointed out that a direct consequence of crisis is reducing the business volume. This causes reduction in direct costs and increase in overhead in the
structure of total costs. The problem in overhead allocation is great in all
conditions, and specifically in unstable conditions. If the overhead are not
realistically allocated to certain products, there is a danger that the unit cost
of some products will be unjustifiably increased, while the unit cost of other
products would be lower, although should really be higher. In the first case
level of competitiveness of such products will be disturbed, which will significantly reduce sales, and in the second, the competitiveness of the product will
exist but unit cost will not be real because it did not include all costs. In both
cases, the company will achieve negative financial results.
The purpose of these activities, carried out in the process of cost management, is
primarily to achieve unit cost of products and services that will be in a function of
increasing the company competitiveness and achieving better market position. In
the implementation of these activities, especially the latter, the company can use a
number of adequate models.
4. MODEL SELECTION IN A FUNCTION OF COST MANAGEMENT OPTIMIZATION

Cost management models must support the production of products that will
meet the customer requirements at the lowest possible cost for the company. In addition, these models should help to reduce production costs of existing products in
a way that eliminates waste. Traditional cost management models do not perform
the specified function or operate in an extremely competitive environment. To
achieve and maintain cost leadership while maintaining a satisfactory level of quality of their products, companies must use contemporary cost management models
such as Activity Based Costing, Target Costing or Total Quality Management.
4.1. Activity Based Costing (ABC model)

ABC model allocates product direct costs to products in the same way as traditional models. The difference occurs in the allocation of indirect costs to products

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Stipan Penavin • Dubravka Pekanov Starčević • Martina Harc

of which the amount per unit of output is determined by applying specific criteria.
Unit cost of products or services established by the ABC model differs greatly from
the same cost calculated by the traditional models if the company produces complex products, products to customer requirements and if it operates in a complex
environment. The specificity of ABC model in comparison to traditional models of
cost management is the fact that the term activity replaces cost centers in traditional models, while the cost drivers in the ABC model replace overhead rates used in
traditional cost management models. ABC model looks at the costs through organizational activities, unlike traditional models that observe the same costs through
organizational departments (cost centers). The essence of this approach is to show
that almost all costs are variable. „The basic concept of determining the unit cost
with ABC model states that the product cost equals the sum of the costs of raw materials used in production and costs of all activities used in production (Shields &
Young; 1989).“ (Gunasekaran et al.; 1999, 387). The essence of ABC model is the
assumption that products do not condition the use of resources in the company.
On the contrary, activities that take place in the company use resources, and those
activities condition the use of resources and therefore the costs.
According to Beheshti, H.M. (Beheshti, 2004, 382), a company can create and
maintain a competitive advantage by using the ABC management so as to: a. identify key activities, b determine the industry value chain for key activities, c. identify
cost drivers for each useful activity in the value chain, d. find ways to control the
cost drivers in a better way than competitors and aspire reducing costs of activities
and e. to find ways to increase the value of activities in the value chain. A large
number of case studies showed that the ABC model delivers significant benefits for
determining the sales price of products / services, in determining the production
mix, determining the profitability of individual customers, as well as improving
business processes. The company that offers a lower sales price than competitors
for similar and / or the same product, becomes more competitive. The need for accurate cost determination is necessary in the circumstances of the crisis.
4.2. Target Costing

Target costing is the result of an extremely competitive environment in which
customers punish any attempt to increase product prices. Management accounting aims to motivate behavior in accordance with market demands in a way to
determine market acceptable cost that must be realized if the company wishes to

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be profitable in a competitive market. Target costing application starts by specifying an acceptable market price for the product / service. When you subtract desired profit from an acceptable sales price, the result is the target cost that must be
achieved if the company wants to survive at the market. Target costing is a simple
approach to reduce the company cost. However, significant difference compared to
other models of cost management is the fact that the process of lowering costs takes
place in preproduction phase of the product life cycle, i.e. at the stage of planning
and product development. „The basic feature of this cost accounting technique
is a significant market orientation and a broad and integrative approach to the
key factors of the business. The basic simplified model of determining the target
cost of a new product bases on the planning and creation of products that will
satisfy the customer demands, determining the target cost of the product, comparing the target and the standard cost of product, and on redesign product process
if the target costs exceed the standard costs. Using the technique of target costs
can help in identifying market demands and creating products according to these
requirements. In that way this method of calculating the cost largely contributes to
strengthening the competitiveness in contemporary business conditions“. (Potnik
Galić & Galić; 2008, 17)
4.3. Total Quality Management

Total Quality Management is a technique through which management develops
policies and practices to ensure that companies products and services meet consumer expectations. This approach includes increased product functionality, reliability, durability and serviceability. Cost management is used for analyzing cost
consequences of different products designs and for measuring and reporting on various aspects of quality. (Blocher et al.; 2002, 14). It means identifying and reducing
the costs associated with quality. The company that introduces the cost of quality
benefits from a detailed analysis of its processes; it determines which activities add
no value and thus becomes aware of waste that is generated in the company. Therefore, it gets the ability to eliminate activities without value added and to increase
the efficiency and effectiveness of its operations. Costs in the domain of the cost of
quality include the repetition of certain procedures, tests, guarantees and similar
procedures related to the defect of the process or product. One of the reasons why
the measurement of cost of quality is certainly justified is the fact that prevention
is cheaper than fixing errors. The introduction of Total Quality Management in the
company can increase the costs of prevention and evaluation in order to reduce the

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Stipan Penavin • Dubravka Pekanov Starčević • Martina Harc

cost of errors. Cost of quality is not always easy to recognize. In its identifying can
help Activity Based Costing, as it makes some of the costs more visible.
5. COST MANAGEMENT AS A PERMENENT FORM OF BUSINESS POLICY

While cost management is a powerful instrument of business policy in crisis
situations, it would be wrong to depart from the approach when transition to stable
business conditions occurs. This fact is indisputable, but the question is whether
the role of cost management is same in the crisis and in a stable business conditions. Changing circumstances, exit from crisis to stable business conditions, will
certainly change the role of cost management as an instrument of business policy.
While in the crisis cost management priority role is preserving a borderline level
of competitiveness and market position, in stable conditions, it must create conditions to increase the level of competitiveness and improve market position of the
company. When in this regard some satisfactory level is achieved, through the cost
management it can be permanently maintained. In addition, changes in business
conditions, from the crisis to the stable, set new limits in terms of degree of optimization between resources involved and business results. While in the first case that
means preserving the level of business efficiency at least at the level of break-even,
in a stable business conditions aim is to ensure an adequate safety margin, which
means to increase the level of business success. All the previously stated leads to the
conclusion that despite the change in the role of cost management, moving from
one business circumstance to another, its position within the business policy does
not actually change. It should remain permanently integrated in a system of business policy instruments, and in that sense used in all business circumstances. It is
therefore reasonably to conclude that the cost management has a permanent, not
temporary character.
6. CONCLUSION

One of the key reasons for business success of every company is its market position. Stability of this position comes from the degree of competitiveness of company products, which is conditioned with cost of its products or services. Costs are
the primary factor that determines the unit cost/production price, and hence the
degree of competitiveness. Therefore, the cost management creates presumptions
for managing market position of each company. Since the market state is subject to
fluctuations, whose range is moving from crisis to stable, the role of cost manage-

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185

ment in the business policy is extremely important, especially in crisis conditions.
What will be the contribution of cost management to market position of individual
company will depend primarily on the choice of models that it will use. Traditional
cost management models cannot fully meet all the needs in this regard, especially
in crisis conditions, and because of that a number of contemporary models whose
application gives more effective results were developed. However, the introduction
of individual models in the process of cost management will have lower effects than
the parallel application of multiple models, given that their combination gives a
greater cost visibility and opportunities to improve the overall management system.
It is important however to point out that, when exit from the crisis conditions occurs, cost management does not lose its meaning, which is why it has no temporary,
but permanent character.
References:

1. Beheshti, H.M. (2004) Gaining and sustaining competitive advantage with
activity based cost management system. Industrial Management & Data Systems, 104 (5)
2. Blocher, E.J., Chen, K.H. and Lin, T.W. (2002) Cost management: A strategic
emphasis. USA: McGraw-Hill Irwin
3. Gunasekaran, A., Marri, H.B. and Grieve, R.J. (1999) Justification and implementation of activity based costing in small and medium-sized enterprises.
Logistics Information Management, 12 (5)
4. Peršić, M.; Upravljanje troškovima”njemačka metodologija”, XLI Simpozij: Financijsko restrukturiranje profitnog i neprofitnog sektora u hrvatskoj, Zagreb-Pula, 2006.
5. Potnik Galić, K. i Galić Z. (2008) Određivanje ciljnih troškova u procesu razvoja novog proizvoda. Računovodstvo, revizija i financije, 2008 (10)

Mate Perišić • Neven Šerić

186

THE EVALUATION MODEL OF THE SUSTAINABLE RECEPTIVE
CAPACITY IN TOURISTIC LIGHTHOUSE BUIILDINGS
Mate Perišić1, Neven Šerić2
1
Plovput d.o.o. Split, Croatia
2
University of Split, Faculty of Economics Split, Croatia

ABSTRACT

The analysis of the sensitivity of the touristic micro location, in the context of
receptive capacity, is a criterion, which determines the efficiency of the destination commercialisation for the long-term. The performance management of tourist
destinations means achieving a sustainable level of spending on resources while
retaining underlying competitiveness. In the development the project Stone Lights,
this is an evaluation of the tourist value of Adriatic lighthouses. The authors of the
project aim to determine the exact approach to the sustainable capacity within a
controlled expenditure in the selected locations. Commercialization and the presumed legality of the project are confirmed in practice.
Experience is designed to model a pragmatic evaluation of the receptive capacity of the tourist destinations. The contemporary tourist practices often define
the receptive capacity and access to the destination, primarily from the aspect of
established competitive advantages. Format models with the aspect of destination
management and allowable receptive capacity, means the purpose of customized
marketing information systems, and known development opportunities of the specific tourist destinations.
The tourist evaluation of the Adriatic lighthouses, and the fundamental variables
of the selected models, ecological sensitivity of the site, receptive capacity, hygienic
disposal of waste water, ambient attraction of the destination, and the sensitivity of
the each lightouse considering the number of max number of people staying there,
needs to be determined.
JEL clasiffication: Q01, Q56
Keywords: lighthouses, analysis, sensitivity, destination, capacities.

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1. INTRODUCTION

The state – owned Croatian lighthouse authority Plovput Ltd. is the legal follower of the Office for Maritime safety in the Austro-hungarian empire that started lighthouse construction in the Adriatic. Due to the exceptional natural, cultural
and historical value of the lighthouse buildings, managing this prescious Croatian
heritage incorporates multidisciplinary approach, where the evaluation model of
the sustainable receptive capacity in touristic lighthouse buildings contributes significantly.1 After the first commercial phase of the project Stone lights – touristic use
of Croatian lighthouses, they were worldwide immediately recognised as a particular
destination.2 Thanks to the all new approach of touristic lighthouse management,
and nature friendly solutions in power and water supply and disposal, the Stone
lights project was awarded a prize from the Ministry of environment in the category
Tourism and environment in 2001. Lighthouses in the Croatian Adriatic were soon
recognised as a global trade mark in tourism.3
Evironmental sensitivity in the context of receptive building capacity is a problem that Stone lights project had to tackle with from the very beginning of the
project concept.4 Establishing criteria of the sustainable receptive capacity for each
touristic lighthouse is the crucial step in long-term touristic use of these exceptional
lighthouse buildings. The success in their management means that each and every
one of them has to be evaluated separately. To do so is a challenge which Plovput
decided to deal with on a multidisciplinary level and in continuous cooperation
with the scientists from the Facutly of economics in Split.
While developing the project Stone lights – touristic use of Croatian lighthouses,
precise and sustainable receptive capacity was established in order to monitor the
degradation of natural resources on these attractive locations. In the commercial
course of the project the assumed theories were proved in every day use.
The preparation of the 2nd project phase meant that the experience gathered was
summed up in a practical model used in evaluation of every single new lighthouse
to be potentially used as a tourist destination. The model, presented in this document, is based on the evaluation of the particular characteristics of every microlocation and indoor lighthouse space at hand.
Nowadays, destination’s receptive capacity is determined primarily thru assesed
advantages over competition.5 In this particular case, regarding accomodation in
lighthouses, this approch would not be compatible efficient and profitable longterm destination use.6

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Mate Perišić • Neven Šerić

Shaping destination management model from the aspect of the sustainable receptive capacity includes adequate informational system of marketing, and knowledge of the exact location – lighthouse building.
The implementation of the evaluation model we here present, in the context of
the sustainable receptive capacity, icludes good knowledge of market orientation of
the clients that visit these antique sites. Keeping this in mind, the evaluation model
of the sustainable receptive capacity in sustainable receptive capacity is based on
10-year-old observations and experience.
Long term succesful management of touristic lighthouses also depends on monitoring of the consequences of location degradation and pollution levels as well as
all other consequences.
Hower, it remains fairly difficult to determine how successful the management
of these attractive and valuable locations is.7 To be abolutely successful, the project
would have to take into consideration the usage of all resources of the location.
That makes synthetic analysis even more difficult, and more dependant on special
research of the effects tourist have on lighthouse evironment. This document presents exactly these special observations and researches.
2. THE EVALUATION MODEL OF THE SUSTAINABLE RECEPTIVE CAPACITY IN
TOURISTIC LIGHTHOUSE BUIILDINGS
2.1. Determinatives in model variable selection

In the former years of commercial project Stone lights interactions were determined, meaning that continuous monitoring and analysis of the change in these
interactions of the location’s receptive capacity and intensity are necessary.8 These
experiences were the basis for testing the possible determinatives in variable selection of the future model of the sustainable receptive capapcity on one single lighthouse. By analyzing the factors, which, in a given time frame, can permanently
define the receptive capacity of every single lighthouse building, we can obtain
many useful data.9 By carefuly selecting these the following determinatives for the
model variable at hand were assessed:
1. The efficiency of waste water disposal on a lighthouse
2. The visitors’ impressions recorded in high season
3. The size of natural beaches in that area

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189

4. Costs, complexity and capacity of fresh water storages on a lighthouse
5. Cultural and historical artefacts in that microlocation
6. The diversity of marine life both above and under sea surface near lighthouse
7. The indoor space capacity of a lighthouse
These determinatives were partially evaluated while selecting the variables that
might represent the model structure. The implementation means we have to understand the market orientation of the lighthouse clients. In this analysis, we focused
on the practical needs which had to be satisfied by offering the proper service in
lighthouse accomodation. Speedy and stressful lifestyle and long working hours
affect everyone’s life seriously. Relaxation in lighthouse seclusion is the therapy that,
in the 10-year long course of the Stone lights project, proved to be the proper answer
to such a lifestyle.
To offer as little similarity wih everyday life as possible, and yet to provide comfortable stay was our motto. Perhaps the main reason for choosing a lighthouse as
a tourist destination is its seclusion.10 In that context the conservative approach to
receptive capacity evaluation is proporional to higher pricing and therefore to larger
profit as well.
2.2. The model and its variables

The defined research problem determined the choice of scientific methods used
to shape the evaluation model. The research methods at hand were chosen in order
to fully comprehend the significance of the sustainable receptive capacity evaluation regarding the microlocation sensitivity. The methodology is applied in order
to clearly derive the determinatives for the efficien tuse of the described model of
destination management with special ambience value. 11 The research was in part
conducted as a desk research, and in part as a field research, by visiting the touristic
lighthouses and by interwieving the tourists that took accomodation in them.
Except for general research methods – analysis and synthesis, induction and
deduction, description, explication and comparison, other methods were also used
– case-study method and functional analysis method. Although the environment
of every touristic lighthouse is regarded as unique, we have tried to focus on comparative and measurable characteristics of all destinations in the context of the
assumed standard, resulting in the evaluation of the sustainable receptive capacity.
The factors used in this method are based on the environmental value to be com-

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Mate Perišić • Neven Šerić

mercially used, water tank capacity, the capacity of the waste water disposal system,
main supply capacity (220V) supported by alternative energy sources, marine life
sensitivity, etc…
Taking all that into condsideration, and by analyzing the gathered information
as the key variable in the evaluation of the sustainable receptive capacity of lighthouse buildings, we defined:
1. Location’s ecological sensitivity – dynamic receptive capacity
2. Fresh water supply options
3. Waste water diposal options
4. Location’s ambience value
5. Location’s value regarding possibilities for tourist activities
6. Ecological sensitivity regarding the quantity of dwelling persons
Ad1) The ecological sensitivity of the location is determined from the number
of the human dwellers on the lighthouse and its surroundings and the possible
negative effect their presence could represent. Grade 1 defines that no negative effects (no sensitivity) occur by using the full lighthouse capacity, and grade 5 means
that the risk of negative effects that occur by using the full lighthouse capacity is
high (high sensitivity).
Ad 2) The fresh water supply is determined from the fact whether the lighthouse
is connected to the main pipeline, the annual precipitation quantitiy that fills the
water tank, water tank capacity, possibility of water resupply by ships or vehicles.
Grade 5 means that the lighthouse is connected to the main pipeline, and grad 1
means that the water tank is small (no possibility of improvement due to ground
configuration) and that the annual precipitation quantitiy is exceeded by tourist
demand, thus water supply costs are very high.
Ad 3) Waste water diposal depends on the way waste waters are disposed of.
Grade 5 means that the lighthgouse is on land and connected to the sewage system.
Grade 1 means that disposal pits (on small islands) are limited (no possibility of
improvement due to gound configuration) in size, and that artifical biolgical waste
containers are also limited in size. Waste waters are never led directly to the sea.
Ad 4) Location’s ambience value means tthat there is a presence of natural resources in abundance both above and under the sea surface, natural beaches, archeological sites, endemic life forms, etc…Grade 5 means there is an abundance of
these resources, and grade 1 means they are scarce.

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191

Ad 5) Location’s value regarding possibilities for tourist activities defines the
entire location’s potential for tourist activities such as hiking, bathing, vehicle approach etc…
Grade 5 means there are different sorts of such possibilities, grade 1 means such
possibilities are very limited (restricted access to sea, no vehicle approach, etc…).
The model is based on partial evaluation of these variables and management
potenial of a touristic lighthouse in the context of probable effect on that microlocation. The model incorporates the continuous monitoring of natural resources in the
context of redefining the receptive capacities of lighthouses that are already being
used for toutistic purposes. The model also incorporates an adequate marketing
system and already determined devolpment possibilities of a lighthouse as a tourist
destination.
3. CONCLUSION

The complex commercial project Stone lights – touristic use of Croatian lighthouses, is much more than a display of natural resources such as lighthouse buildings
governed by Plovput – Croatian lighthouse authority. The complexity of the project implementation is best shown in the acquired ecological standards that form
the basis for the model of sustainable receptive capacity of the lighthouse buildings
used for touristic purposes.
The practical evaluation of competetive advantages of a microlocation in the
context of the permitted receptive capacitiy in developed economies is considered a
must for efficient long term commercial use.12 Regarded strategically, such evaluation represents a guarantee for preservation of natural resources on a level recquired
to enable long term commercial use.
The interactive monitoring of this level means that the necessity for quick and
decisive reaction, in case these natural resources are compromised, is tackled in an
easier way. The evaluation model presented in this document is successfully applied
in the 2nd phase of the Stone lights project. It is the basis for strategic business decisions and for the reports made for Croatian government and Ministry of Maritime
affairs. The model can also be used for practical measures in case the monitored
lighthouse’s environment is compromised. This approach recqiures institutional
management of touristic lighthouse buildings.

192

Mate Perišić • Neven Šerić

The model we describe has established itself as an efficient basis for relevant
pricing policy.13 This quality pricing enabled additional profit in those microlocations where criteria we described were upheld. Within the function of status
monitoring it was necessary to establish one additional base for planing, cooordination and activity control in order to functionaly manage such a tourist destination.
The systematic approach in destination management in the context of the evaluated receptive capacity in sensitive environment is an advanced feature in market
definitions.14 Finally, when the evaluation model of a tourist destination is clear in
all its forms – dependent and independent variables, the researcher is at the very
beginning. Further research steps assume that the model is tested in everyday life,
meaning that the model can potentially be used in other cases for other destinations of specific ambience value. Actually, one of the model goals is to encourage
special research on attractive lighthouse locations that have the potential to become
touristic lighthouses as well.
And finally, the hypothesis that an adequate evaluation model of the sustainable
receptive capacity of a tourist destination with special ambience value is confirmed
as it permits additional profit for already established accomodation price.
LITERATURA

1. Čorak, S.; Marušić, Z.; i suradnici: TOMAS – Ljeto 2007., Institut za turizam,
Ministarstvo turizma RH, Zagreb, 2008.
2. Doyle, P., Marketing Management and Strategy, 3rd edition, Pearson Education
Ltd., London 2002.
3. Hooley, G.J., Saunders, J.A., Piercy, N.F., Marketing Strategy and Competitive
Positioning,3th Ed, Prentice Hall, Harlow 2004.
4. Luković, T., Šerić, N., Modeling of the marketing strategy on tourism destination
with a special ambience value, The International Tourism Research Conference
“Sustainable Tourism Development” 25-27 November Stockholm 2008, Conference proceedings
5. Perišić, M., Talijančić, J., Šerić., N., Identity of national heritage in function of
specialised tourist offer of Croatia, 3rd Critical Tourism Studies Conference Connecting Academies of Hope, Zadar 21-24 June 2009, Conference proceedings

THE EVALUATION MODEL OF THE SUSTAINABLE RECEPTIVE CAPACITY IN TOURISTIC...

193

6. Perišić, M., Andrijanić, G., Župarić, J., Sanacija svjetioničarskih zgrada i njihovo
valoriziranje kroz komercijalne djelatnosti, naobjavljeno koautorsko istraživanje,
Plovput Split 2009.
7. Perišić, M., Svjetionici u turističkoj ponudi kao specifična destinacija, Interdisciplinary management research V, Poreč 8.-10. May 2009.
8. Peter, J.P., Donnelly, J.H., Marketing Management: Knowledge and Skills, 7th Ed,
Irwin, Burr Ridge 2004.
9. Šerić, N., Kamena svjetla, priče i legende o jadranskim svjetionicima, o mjestima
na kojima su izgrađeni i o njihovom podmorju, Marjan Tisak d.o.o. Split, travanj
2004.
10. Šerić, N., Kriteriji procjene efikasnosti složenih investicijskih projekata, EF Split –
Plovput Split, 2001., neobjavljena istraživačka studija
11. Šerić, N., Realizacija II Faze složenog investicijskog projekta Kamena Svjetla – sanacija i revitalizacija svjetioničarskih zgrada bez ljudske posade, članak objavljen
u stručnom časopisu za tehniku zaštite okoliša, Gospodarstvo i Okoliš, ožujak
2008., godina XVI, broj 90
12. Šerić, N., Global Marketing in preservation of natural resources in specialised segments of Tourism in Croatia, First european yacht tourism congress, Megagraf ,
Split 2002.
13. Šerić, N., Disposal of waste water in ecologically sensitive environment of lighthouses, članak objavljen u zborniku radova ELMAR – međunarodni simpozij,
Zadar lipanj, 2002.
14. Šižgorić, V., Perišić, M., Šerić, N., Marketing i upravljanje okolišem, stručni rad
objavljen u časopisu za tehniku zaštite okoliša, Gospodarstvo i Okoliš, studeni
2009., godina XVII, broj 100
15. Vlada Republike Hrvatske, Državna Uprava za zaštitu prirode i okoliša, Izvješće
o stanju okoliša u Republici Hrvatskoj, Državna Uprava za zaštitu prirode i
okoliša Zagreb 1998.
16. Zakon o zaštiti prirode, Hrvatski sabor, Zagreb, 27. svibnja 2005.

Ticijan Peruško • Robert Zenzerović

194

CORPORATE LOAN MANAGEMENT MODEL AS THE
INSTRUMENT OF BANKS’ PRODUCT OPTIMIZATION
Ticijan PERUŠKO, PhD
Juraj Dobrila University of Pula
Robert ZENZEROVIĆ, PhD
Juraj Dobrila University of Pula

In terms of dynamic market circumstances in the Croatian banking market,
the success of the banking business depends, among other things, on the selection
of appropriate banking products and their optimal combination. Adequate planning and managing the supply of banking products is one of the most important
preconditions for its success. In this sense, the need for performing the appropriate
researches focused on the formation of new management methods that will, with
already existing instruments, enable the adoption of more appropriate business
decisions and, as a consequence, better managing of banking business is logically
imposed.
Accounting information shows the movement in business operations in past
periods and is the basis for further activities planning, as well as analysis of business
objectives and results achieved. In this sense, models for managing the assortment
of banking products should be based on that reliable information in order to assure
that planning and management took place on realistic basis.
Supply of banks’ loans to corporate sector is significant for the economic development of the country as a whole. Availability and acceptability of such loans
by the users, affects a number of macroeconomic variables particularly including
increase in production, employment and exports as the most important sub goals
focused to the achievement of the main goal - increase in the welfare of Croatian
population.
The aim of the conducted research is comprised in formation of the model that
provides appropriate information to management for planning and conducting the
corporate sector loans. Statistical and mathematical methods were employed on the

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

195

accounting data as the main research methods focused toward the model estimation. The model derived can be used as a decision support tool that supplement the
management information system database with information unavoidable in process
of managing the loans inside the group of corporate sector loans. In addition, this
model provides the information regarding the potential for further development of
this very important segment of banks loans. Practical application of the research
performed is shown in the operations of one big bank in the Republic of Croatia.
JEL clasiffication: C61, G21
Keywords: economic development, banking, corporate sector loan management
model, banking assortment

1. INTRODUCTION

National banking markets in developing countries are increasingly internationalized by entry of multinational banking groups that are, by purchasing existing
banks or establishing their subsidiaries, introducing new knowledge and experience as well as investing additional funds shaping in this way the modern trends of
banking sector development. Modern banking market is mainly characterized by
increasing competition and the impact of central bank with pronounced multiplication of banking products and services.
Increasing competition is forcing the banks to introduce and sell more competitive products and services. This leads to a multiplication of banking products
and services and to the strengthening of competition, not only in the area of classical banking products and services, but also in the area of products and services
supplied by other financial institutions involved in banking market. Along with
the growing competition, the market is characterized with banks consolidation
through mergers and acquisitions with other banks, but also by connection with
the insurance companies and brokerage firms as well as the establishment of leasing
companies, investment funds and factoring companies. In this way banks are actually incorporating a sale of wide range of banking and nonbanking products that is
further improved by the implementation of new information and communication
technologies that are directly impacting cost reduction and rising the potential of
new products and services creation.

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Ticijan Peruško • Robert Zenzerović

Appropriate assessment of market requirements and supply of adequate, typically innovative, banking products and/or services are prerequisites of successful
banking business. In this sense, the need for flexibility in introducing and managing the banking products is imposed; the shorter the time between recognition of
the market needs or trends and the banking products creation as well as their acceptance by the bank as an organization, the greater are the possibilities for success.
Aforementioned is particularly highlighted in the segment of managing the active
banking products i.e. loans that directly affect the banks’ revenue and profitability
in general. Given the importance of corporate loans for profitability of individual
banks, but also the overall economic development of the country, the researchers
designed the model for corporate loan management whose structure and application is shown below.
The aim of the model is contained in the insurance of information base for decision making on the sale of certain banking loan or credit products for the corporate
sector that will result in maximizing bank’s revenues. Various scientific methods
were used in the process of model formation. Description, analysis and synthesis
methods were applied in determining the correlation of movement in revenues
per loan product and sales volume as a starting point for the quantification of that
relationship and optimization of loan assortment which is achieved by applying
mathematical and statistical methods among which are emphasized the regression
methods and nonlinear programming.
2. DESIGNINIG THE CORPORATE LOAN MANAGEMENT MODEL

Existing supply of credit banking products to corporate sector should be seen
in terms of achieved financial results that enable their mutual comparison from a
financial point of view, from the standpoint of the share of revenue from certain
corporate loan products in the total revenues from sales of these credit products,
and their movement through a certain period. Forecasting revenue growth for particular credit product in relation to the planned increase in volume of sales of the
same credit product involves an analysis of historical revenues patterns in relation
to the volume of sales of credit products, i.e. the amount of loans approved.
The statistical method of regression analysis was used in establishing the relations between credit products revenues and their volumes of sales. The research
included a double logarithmic regression model, which has a further standard form
(Sosic, 2006, p. 427):

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

Ŷ = axb

197

(1)

Where,
Ŷ – represents revenues per corporate sector credit products (dependent variable),
x – represents the amount of loans approved to corporate sector (independent
variable),
a – represents constant and
b – is regression coefficient.
In double logarithmic regression model independent variable x consist of the
size of loans given to corporate sector, while the dependent variable y refers to the
revenues per corporate sector credit products. Usage of regression analysis resulted
in determination of corresponding relation which represents the starting point for
the projection of trends in corporate credit product’s revenues depending on the
planned increases in the amount of this loans approved. Representative ability of
the regression model is determined by the coefficient of determination, while the
average deviation of empirical value of dependent variable from the regression value
of dependent variable is determined by standard deviation or standard error.
The above calculations allow the prediction with which corporate sector credit
products the bank can achieve the highest revenue and, accordingly, shape business strategy with corporate sector that will result in stronger sales of those credit
products that generate the highest revenues. Assuming the constant expenditures
on the basis of the funds involved, intensification of the sale of these products will
ultimately result in increased profits.
Appropriate management of banking assets, particularly of loan or credit products, includes maximization of total revenues from their sales what appear as the
result of maximization of revenues from individual credit product in the group
concerned. Under conditions of scarce financial resources, satisfying the demand
for corporate sector credit products includes making appropriate decisions on
funds’ allocation to those credit products which, along with given costs of raising
funding sources, result in the highest revenues, and thereby indirectly in the highest profits.
The mathematical programming procedure was applied for this purpose. It is
the procedure that deals with the optimization problem in which the optimizer
is faced with certain restrictions. Restrictions in the banking business, in terms of
corporate sector credit products, relates to market restrictions that include limited

198

Ticijan Peruško • Robert Zenzerović

demand for loans as well as limited funds that are available for sale in form of the
credit products.
Corporate loan management model, as the optimization model, consist of the
double logarithmic regression models, which predict the movement of revenue
from each credit product in the future depending on the planned sale of that credit
product, and the results found in the process of non-linear programming.
Nonlinear programming is applied in the process of loan assortment optimization because the interrelationship of revenues and sales volume of corporate sector
credit products is nonlinear what is shown by selected regression model too.
Nonlinear programming which maximizes the function has the following general form (Chiang, 1994, p. 716):
Maximize
according to conditions

and

π = ƒ (x1, x2, ….., xn)
g1 (x1, x2, ….., xn) ≤ r1
g2 (x1, x2, ….., xn) ≤ r2
………………………...
gm (x1, x2, ….., xn) ≤ rm
Xj ≥ 0
(j= 1,2,…, n)

(2)

Or in abbreviated form
Maximize
π = ƒ (x)
(j= 1,2,…, n)
according to conditions
gi (x) ≤ rm
(3)
and
X≥ 0
Scientifically based optimization model provides very useful information base
for making decision about intensifying the sale of certain corporate sector credit
products that will result in maximizing the total revenues according to the following conditions:
● Maximum sale of credit products is estimated based on the market conditions
and represents the upper limit constraints;
● Bank has total available funds, which are smaller than the market demand and
they should be sold to the customer in the form of credit products that will
maximize the revenues;
● Initial state of the loans portfolio is the lower limit constraint.

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

199

Among the prominent advantages of the model is the fact that it is applicable
to small groups of credit products, and it will provide management with valuable
information when planning and designing the various scenarios in managing the
corporate sector credit products.
3. CORPORATE LOAN MANAGEMENT MODEL APPLICATION

In order to present the usefulness and wide possibilities of its use, the corporate
loan management model was tested on the example of one large bank that is operating in the Croatian banking market. It is important to note that the corporate
sector in the banking business is considered in a broader context and include, along
with private sector, state authorities’ units and nonprofit organizations. Bank’s accounting information relates to the movements of volumes of sales and revenues
per corporate sector credit products for the period from 2003 till 2007. Table 1
shows the total amount of credit products sold by individual type, while table 2
includes the sales revenues of the same products.

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200

Table 1. Total corporate sector credit products sold from 31.12.2003. until 31.12.2007.
Type of product

Total products sale in kunas
31.12. 2003.

31.12.2004.

31.12.2005.

31.12.2006.

31.12.2007.

1.044.098.108

1.225.121.103

1.344.139.258

1.359.775.029

1.139.471.529

Short term loans

20.410.073

42.312.439

46.423.011

47.481.048

54.586.234

Long term loans

1.023.688.035

1.182.808.664

1.297.716.247

1.312.293.982

1.084.885.296

OTHER COMPANIES

6.658.212.917

6.728.168.014

7.381.796.574

7.483.961.400

7.619.849.597

Short term loans

1.487.800.923

1.280.336.395

1.404.718.609

1.422.151.161

1.343.661.011

Long term loans

5.038.649.091

5.324.837.770

5.842.135.500

5.923.136.293

6.144.253.154

Credit lines

131.762.903

122.993.849

134.942.465

138.673.946

131.935.432

NONBANKING FINANCIAL INSTITUTIONS

181.501.168

246.670.350

270.633.900

298.391.228

115.306.007

Short term loans

173.573.096

240.891.525

264.293.672

291.421.783

111.080.863

Long term loans

7.318.605

4.988.745

5.473.392

5.462.585

4.200.728

609.466

790.081

866.835

1.506.861

24.415

STATE AUTHORITIES

892.117.295

1.421.862.022

1.559.993.178

1.815.981.906

1.819.865.840

Short term loans

288.810.162

656.523.116

720.303.072

941.401.837

956.551.247

Long term loans

603.307.133

765.338.906

839.690.106

874.580.068

863.314.593

NONPROFIT
ORGANIZATIONS

19.522.060

23.304.975

25.678.724

27.286.710

27.095.346

Short term loans

3.141.799

2.444.302

2.681.761

2.644.779

967.862

Long term loans

16.027.557

20.458.430

22.555.642

24.195.233

25.728.011

352.704

402.243

441.320

446.697

399.472

PUBLIC COMPANIES

Credit lines

Credit lines

Source: Bank’s internal financial statements

201

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

Table 2. Revenues from corporate sector credit products from 31.12.2003. until 31.12.2007.
Type of product
PUBLIC COMPANIES

2003.
61.617.681

Revenues in kunas
2004.
2005.
2006.
68.947.350
74.178.005
76.348.440

2007.
64.062.377

Short term loans

916.651

1.912.649

2.120.584

2.124.094

2.626.960

Long term loans

60.701.030

67.034.701

72.057.421

74.224.346

61.435.417

407.320.496

428.267.311

462.705.189

470.280.995

478.526.242

Short term loans

96.678.244

89.595.461

94.014.887

94.168.667

92.449.473

Long term loans

300.500.974

329.322.305

358.467.912

365.729.182

375.982.587

10.141.278

9.349.545

10.222.390

10.383.146

10.094.183

NONBANKING FINANCIAL
INSTITUTIONS

7.046.868

9.767.501

10.186.144

10.847.306

5.344.252

Short term loans

6.519.554

9.340.324

9.750.290

10.372.906

5.031.621

Long term loans

487.512

340.888

380.329

378.574

310.634

39.803

86.288

55.525

95.827

1.998

STATE AUTHORITIES

42.643.406

59.136.540

64.837.043

78.779.647

78.693.144

Short term loans

16.253.341

27.560.515

29.750.713

41.712.864

41.991.869

Long term loans

26.390.065

31.576.025

35.086.330

37.066.783

36.701.275

1.333.577

1.437.233

1.603.185

1.696.396

1.731.420

Short term loans

289.626

210.419

221.113

222.902

100.296

Long term loans

1.010.376

1.190.628

1.342.584

1.433.309

1.594.561

33.576

36.186

39.487

40.186

36.563

OTHER COMPANIES

Credit lines

Credit lines

NONPROFIT ORGANIZATIONS

Credit lines

Source: Bank’s internal financial statements

The corporate loan management model formation involves two basic stages. In
the first phase the double logarithmic regression models for each type of banking
credit products are calculated along with appropriate parameters. Double logarithmic regression models are used to estimate the increase in revenues according to the
increase in sales volume for each credit product.
Applying double logarithmic regression models to bank’s corporate sector credit
products resulted in calculation of the values shown in Table 3. The level of significance of regression model applied is 1%, which means that the obtained double

Ticijan Peruško • Robert Zenzerović

202

logarithmic regression models are statistically significant. The models’ coefficients
of determination range from 0.9306 to 0.9946, which means that from 93.06% to
99.46% of relations, are explained by a double logarithmic regression model.

Table 3 Double logarithmic regression models for corporate sector credit products in the analyzed bank
Regression
models

r2

Adjusted R
square

p

Standard
error

Short term loans to public
companies
Long term loans to public
companies
Short term loans to other
companies
Long term loans to other
companies

y = 0,0232x1,0388

0,9960

0,99462073

0,00010

0,012884649

y = 2,3076x0,8227

0,9734

0,96447263

0,00186

0,007438407

y = 3454,1x0,4848

0,9840

0,97861622

0,00086

0,001777381

y = 0,0058x1,1046

0,9831

0,97752111

0,00093

0,005958762

Credit lines to other companies

y = 0,5637x0,8928

0,9480

0,93069940

0,00510

0,004663742

Short term loans to nonbanking
financial institutions
Long term loans to nonbanking
financial institutions
Credit lines to nonbanking financial institutions
Short term loans to state
authorities
Long term loans to state
authorities
Short term loans to nonprofit
organizations
Long term loans to nonprofit
organizations
Credit lines to nonprofit
organizations

y = 2,3682x0,785

0,9834

0,97789390

0,00091

0,020081689

y = 0,9342x0,8324

0,9878

0,98370744

0,00057

0,009345778

y = 0,1195x0,9642

0,9798

0,97312803

0,00122

0,113857909

y = 3,6613x0,7836

0,9699

0,95986605

0,00223

0,033817472

y = 0,2538x0,9125

0,9851

0,98017438

0,00077

0,008670541

y = 0,9188x0,8405

0,9817

0,97554780

0,00105

0,027103737

y = 0,1846x0,9338

0,9687

0,95830749

0,00236

0,015583176

y = 2,1535x0,7552

0,9800

0,97338706

0,00120

0,00514197

Type of product

Source: Authors’ calculations according to data from tables 1 and 2

In the second stage, according to the constraints of market demand for any corporate sector credit product, the nonlinear programming process is used in order

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

203

to generate information about distribution of funds in form of credit products that
maximize total revenue of the corporate loan group. The constraints mentioned
earlier would be taken into account. The upper limit constraint includes the maximum sale for each credit product. This assessment on the maximum sale is made by
bank’s management according to the market conditions. The following restrictions
apply to the fact that the bank has total funds that are less than the total market
demand and that it should sell credit products to customers in a manner to achieve
maximum revenue. The lower limit constraint in the process of optimization relates
to the balance of the portfolio as at 31.12.2007. The above restrictions and associated regression models are shown in Table 4.

Ticijan Peruško • Robert Zenzerović

204

Table 4 State of loan products, revenues and corresponding double logarithmic regression models of
corporate sector credit portfolio for the bank analyzed and upper limit market constraint

No.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

Type of product

Short term loans to public
companies
Long term loans to public
companies
Short term loans to other
companies
Long term loans to other
companies
Credit lines to other
companies
Short term loans to nonbanking financial institutions
Long term loans to nonbanking financial institutions
Credit lines to nonbanking
financial institutions
Short term loans to state
authorities
Long term loans to state
authorities
Short term loans to nonprofit
organizations
Long term loans to nonprofit
organizations
Credit lines to nonprofit
organizations
Total

Source: Tables 1, 2 and 3

State of the
loans portfolio
on 31.12.2007.
in kunas

Revenues
in 2007 in
kunas

X

Y

Regression
models

Maximum
increase in the
volume of sale
– loans amount
(market limitation) in kunas
Z

54.586.234

2.626.960

y = 0,0232x1,0388

65.044.857

1.084.885.296

61.435.417

y = 2,3076x0,8227

1.250.350.885

1.343.661.011

92.449.473

y = 3454,1x0,4848

1.779.576.264

6.144.253.154

375.982.587

y = 0,0058x1,1046

6.574.350.874

131.935.432

10.094.183

y = 0,5637x0,8928

197.903.148

111.080.863

5.031.621

y = 2,3682x0,785

172.183.505

4.200.728

310.634

y = 0,9342x0,8324

4.578.794

24.415

1.998

y = 0,1195x0,9642

43.948

956.551.247

41.991.869

y = 3,6613x0,7836

1.386.999.308

863.314.593

36.701.275

y = 0,2538x0,9125

1.093.314.593

967.862

100.296

y = 0,9188x0,8405

1.016.256

25.728.011

1.594.561

y = 0,1846x0,9338

28.300.812

399.472

36.563

y = 2,1535x0,7552

479.102

10.721.588.319

628.357.436

12.554.142.346

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

205

The model application is shown in the example of one large bank that plans
to invest available funds of 778,411,681.00 kunas. The funds will be invested in
the form of corporate sector credit products. In this case, the total credit products
portfolio of the bank would increase to 11.5 million kunas. Terms of nonlinear
programming are as follows:
Maximize:
According to constraints:
Upper limit constraint:

total revenues (Y14)

Lower limit constraint:

X1:X13 ≥ initial balance of credit products portfolio as at 31.12.2007.

X1:X13 ≤ Z1:Z13

(4)

and
X14 (total balance of credit products portfolio) = 11.500.000 kn.
Where:
X – balance of the portfolio by type of corporate sector credit products;
Z – market constraint by type of corporate sector credit products.

Ticijan Peruško • Robert Zenzerović

206

Table 5 Planned portfolios and planned revenues values for corporate sector credit products according to the
model applied

Type of product

State of
the loans
portfolio on
31.12.2007. in
kunas

Planned
portfolio in
kunas

Revenues
in 2007 in
kunas

Planned
revenues in
kunas

Short term loans to public companies

54.586.234

65.044.857

2.626.960

3.032.869

Long term loans to public companies

1.084.885.296

1.250.350.885

61.435.417

70.353.981

Short term loans to other companies

1.343.661.011

1.343.661.011

92.449.473

92.449.473

Long term loans to other companies

6.144.253.154

6.574.350.874

375.982.587

405.721.744

131.935.432

197.903.148

10.094.183

14.391.995

111.080.863

111.080.863

5.031.621

5.031.621

4.200.728

4.578.794

310.634

327.227

24.415

43.948

1.998

3.582

Short term loans to state authorities

956.551.247

956.551.247

41.991.869

41.991.869

Long term loans to state authorities

863.314.593

966.638.202

36.701.275

40.137.006

Short term loans to nonprofit organizations

967.862

1.016.256

100.296

102.827

Long term loans to nonprofit organizations

25.728.011

28.300.812

1.594.561

1.677.728

399.472

479.102

36.563

41.976

10.721.588.319

11.500.000.000

628.357.436

675.263.898

Credit lines to other companies
Short term loans to nonbanking financial
institutions
Long term loans to nonbanking financial
institutions
Credit lines to nonbanking financial
institutions

Credit lines to nonprofit organizations
Total

Source: Authors’ calculations according to data from table 4

Obtained values shown in the planned portfolio indicate the planned values
that should be achieved in the sale of credit products in order to earn maximum
revenues from the total corporate sector credit products portfolio. Table 5 shows
that three credit banking products remain unchanged, which means that management does not emphasize their placement, while the sale of other products would
be intensified by taking appropriate management activities in order to reach the

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207

planned values outlined in the planned portfolio. Furthermore, the table 5 shows
planned revenues for each type of credit product, which allows consideration and
comparison of the status of previous revenues and the planned revenues in relation
to the state of so far realized values by the type of loan and planned balances of
portfolio by type of loan.
Comparing the relative share of loans by type and realized revenues analyst can
get the information on the proportion of each type of loan in the total portfolio
and the share of revenue by types of loan, what, in further step, allows comparison
with the proportions of the planned size of the loans and revenues.
By calculating percentage increase in the planned value of loans in relation to
the realized values of the loans and the planned percentage increase in revenues in
relation to the realized values of revenues, one can analyze the planned increase in
revenues compared to the planned increase in the loans. On the basis of all mentioned, the bank’s management receives a series of new information that enable
him to successfully manage and control the assortment of corporate sector credit
products.
3. CONCLUSION

Corporate loan management model represents the scientifically based developed
managerial instrument that can create high quality basis for planning and managing the assortment of corporate sector credit products in order to optimize the supply of banking products. In order to plan the placement of funds in form of credit
products for corporate sector, presented model provides information for disposing
the planned funds on credit products that are expected to achieve the greatest revenues up to the upper limit of market constraint. In further steps the funds could
be allocated to those products that achieve lower expected revenues and so on until
the whole amount available is not disposed.
By using this model decision maker could get insight into the need to increase
the portfolio of each credit product in order to achieve the maximum total revenues from the corporate sector credit products. The obtained information allows
a comparison between the planned increase in credit products’ sales and expected
revenues from credit products.
According to this, the analysis of the planned income and planned funds engaged in credit products can be made in order to group the products according to

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Ticijan Peruško • Robert Zenzerović

their performance and to improve and optimize the assortment of banking products to corporate sector.
Future research of presented model can be focused on the analysis of bank’s
credit products by currency, as well as a detailed elaboration within each group of
banking credit products for the corporate sector.
REFERENCES:

1. Ahmed, A. S., Takedab, C., Shawn, T., (1999) Bank loan loss provisions: a reexamination of capital management, earnings management and signalling effects,
Journal of Accounting and Economics, 28, 1., 1-25.
2. Chiang, A. C., (1994) Osnovne metode matematičke ekonomije, treće izdanje,
Mate, Zagreb.
3. Chorafas, N. D., (1991) Obiettivo profitto-dal controllo dei costi al pricing
nell’impresa banca, Edibank-Iceb srl., Milano.
4. Cobb, I., Helliar, C., Innes, J., (1995) Management accounting change in a bank
Management Accounting Research, 6,2., 155-175.
5. Cox, D., Cox, M., (2006) The Mathematic of Banking and Finance, John Wiley
& Sons Ltd, Chichester.
6. Hefernan, S., (2005) Modern banking, John Wiley & Sons Ltd, Chichester.
7. Helliar, C., Cobb, I., Innes, J., (2002) A longitudinal case study of profitability
reporting in a bank, The British Accounting Review, 34, 1., 27-53.
8. Lapin, L. L., (1987) Statistic for Modern Business Decision, Fourth Edition,
HBJ, Orlando.
9. Matthews, K., Thomposon, J., (2005) The Economics of Banking, John Wiley
& Sons Ltd, Chichester.
10. Naughton, T., Chan, L.S., (1998) Strategic dimensions of correspondent banking, International Journal of Bank Marketing, 16, 4., 153-160.
11. Nellis, J. G., McCaffery, K. M., Hutchinson, R.W., (2000) Strategic challenges
for the European banking industry in the new millennium, International Journal of Bank Marketing, 18, 2., 53-64.

CORPORATE LOAN MANAGEMENT MODEL AS THE INSTRUMENT OF...

209

12. Ramesh, K., Revsine, L., (2000) The effects of regulatory and contracting costs
on banks’ choice of accounting method for other postretirement employee benefits, Journal of Accounting and Economics, 30, 2., 159-186.
13. Sinkey, J. F., (2001) Commercial Bank Financial Management in The Financial-services Industry, Sixth Edition, Prentice-Hall, New Jersey.
14. Šošić, I., (2006) Primjenjena statistika, drugo izmjenjeno izdanje, Školska knjiga, Zagreb.

210

Svetlana Petrović

GLOBALIZATION OF THE CROATIAN OIL INDUSTRY
Svetlana Petrović, univ. spec. oecc.

ABSTRACT

Over the past years oil companies from Central European countries have gone
through a difficult market transformation process. They are mainly privatized, have
mostly reconstructed and modernised their production and market capacities and
have reorganised their businesses. By entering into mutual alliances, they try to defend the position in their respective domestic markets from take-overs from the east
and west alike, and through strategic alliances such companies also strengthen their
own competitive position in neighbouring markets in South Eastern and Eastern
Europe.
By its character and far-reaching consequences privatization of INA has been
one of major strategic decisions of the Croatian society. This has been the most
important decision since the incorporation of INA. Final success of this process
depends on global trends in the energy market, success of transition processes in
Croatia and neighbouring countries. Croatia could not have avoided cooperation
with the closest neighbours with which we share physical and territorial continuity.
INA has adopted a strategy characteristic for small size integrated companies and
must follow global trends; it has got a strategic partner and continues with technological development.
INA privatization concept has been defined to meet criteria imposed by the
globalization process, or its European derivative – market liberalization.
JEL clasiffication: L24, L71
Keywords: globalization, privatization, market liberalization, INA, MOL.
1. INTRODUCTION

Modern world can be viewed as a world of capitalism, characterised by market unification, but at the same time different from society to society depending

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on cultural particularities. However, the power of market and economic interests
gradually makes cultural patterns and life values uniform across the world.
Global is the most frequently used word when referring to the capitalism of the
last quarter of the twentieth century. Global capitalism is present in the form of
globalization promoted through the ideology of neoliberalism as something which
has no alternative in the modern world. Opinions about globalization vary, but
they all agree on one point – it is a world process with economic and political interests of the most powerful countries in its centre.
According to many contemporary authors globalization is:
• Spread of modern technologies, industrial production and all types of communication around the world,
• Global networked economy, worldwide economic integration,
• The process of growing interdependence and connectedness of the worldwide
economic activity
Globalization strengthens and develops multinational corporations having a
role of a kind of invisible government which replaces the functions of national
states. Modern global companies have developed and adjusted to political and other changes. Despite differences and changes in political systems, which have culminated in the modern system of political democracy, globalization and unification
motives have persisted. The globalization process brings about the transfer of profit
and resources for development, or wealth redistribution.
Corporation, as a form for organizing economic activity and market dispersion
of capital has facilitated minimization of the investor’s initial risk of investment,
and has provided pre-conditions for the capital to take on its global market, financial, and development and technological role. The corporation has enabled merging
private ownership of capital which provides initial capital for starting a business,
and social control of private and public ownership. Corporation has provided a
frame for private entrepreneurship to develop its initiative and innovation, ensuring at the same time relatively tight control of the lawful state over the corporation
along with respect for public interest.
Oil corporations have traditionally fostered global approach, systematic business organization and pre-set corporative behaviour, as a regular form of business
strategy and policy. In the era of electronics, computers and Internet, they have had
to adapt to faster decision making and business decision implementation.

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Multinational companies are real creators of globalization. Oil companies have
been among the first ones to become multinational in terms of their business operations and manner of organization. The reason for such change was the fact that
energy, or oil sources did not coincide with the places of major consumption of
oil products. First modern corporations were established and started their development in the second half of the 19th century. The first corporation with typical
features of a systematic organization was an oil company- Standard Oil. Nowadays,
a century and a half after the first oil companies were established, the group of
leading integrated oil corporations has again been revived. Today this group of
top major oil companies comprises: Exxon Mobil, Shell, BP, and Chevron Texaco.
Many countries have based the strength of their economies on the businesses of
multinational companies. This applies to super forces such as the USA or Japan,
and also to medium sized and small countries such as Switzerland and Denmark.
Developing countries, Taiwan, South Korea, Malaysia and others have accelerated
their development with the help of multinational companies opening the access to
technological knowledge, organization and world market accessibility, because a
national government’s capability is often not enough to ensure access to technologies, raw materials, energy and market sources.
The key goal of multinational corporations is maximization of global profit. The
central strategy of global corporations is creation of the world economic climate
which will ensure stability, growth and high profits for such a company.
Due to the fact that the areas of oil and oil derivatives consumption mostly
did not coincide with the main areas of production, since the beginning of the
20th century oil companies have overcome border restrictions and have grown into
companies with global profiles. This was the time of the foundation of major oil
companies, establishment of global structures, acquisition of market shares and the
setting of new performance criteria.
The fact is that fossil fuels (oil, gas, coal) cover 80% of the world primary energy
demand. According to projections, until 2050 the world population will reach 11
billion, and, today already, more than two billion people do not have access to
modern forms of energy. Recent estimates show that until 2030 primary energy
demand will increase by 55%. The highest increase – by as much as 80% is expected in the so called BRIC countries comprising Brazil, Russia, India and China.

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Oil products consumption will continue to grow particularly due to the rise in
the number of vehicles, from 900 million today to over two billion, mostly in Asian
countries. Until 2030 global natural gas demand will increase by 43%.
Considering the above, general tendencies in the field of energy security are
clear: diversification of supply routes and energy sources, greater security of pipeline oil and gas transportation and securing of sea straits for ensuring safe transport
of oil and LPG.
All indicators show that in the first half of our century oil and gas will keep
their top energy role involving all economic, development, military, strategic, and
security consequences which will be more adverse for those having scarcer energy
sources, or those not ready for urgent changes in their national strategic plans of
this world’s dominant industry.
General features of the world oil and gas market are: sharp increase in oil and gas
demand, price growth, increasingly difficult access to oil and gas exploration licenses, growing costs of hydrocarbon reserve replacement, lack of refinery capacity.
In the globalized economy, oil industry is at the forefront in business rationalization processes which enable survival in the marketplace. Opening of markets,
including also energy ones, facilitates faster growth, and the growth then enables
cost reduction by leveraging the economy of scale. Small size companies from small
countries adjust to these basic rules of the global market or gradually lose their
positions.
2. GLOBALIZATION AND INA D.D. AS ECONOMIC ENTITY

Croatia is a crude oil and natural gas importer, but considering its own reserves,
is to a lesser extent dependant on the import of these raw materials than the other
South Eastern European countries. Croatia belongs to small European countries,
and it is logical that in global terms INA Oil Company is among comparatively
smaller oil companies. A particularity of INA’s business strategy is that its market
had previously been tied to the area of the former Yugoslavia, then for ten years it
was primarily operating on the domestic market, and is now under changed circumstances re-entering the markets of neighbouring countries, which once comprised its domestic market.
Business strategy of a small oil company must follow global trends, particularly
in the technology development. Otherwise, such companies lag behind, lose export

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capability, and later domestic market share, and sooner or later fall prey to takeovers, as larger and stronger neighbours eventually acquire such company that lags
behind, acquiring primarily its market.
INA-Industrija nafte d.d. is the largest and the most important Croatian enterprise. INA d.d. ‘s participation in the overall Croatia’s energy production is 65%,
and, therefore, the company is rightly billed as the backbone of the Croatia’s energy system. INA d.d. does business with a number of international oil and gas
companies, participates in oil and gas exploration operations, provides services in
exploration and development, participates in the refinery upgrade, and finally sells
a rang of more than 700 own products. INA’s business strategy is characterised
by the careful adjustment to the influences of the global oil market, entering the
globalized oil market through international oil and gas exploration and production
projects, and defence of the leading role in the refining and sales of oil products on
the domestic market.
Core activities of the company are oil and gas exploration and production in
Croatia and abroad, refining and wholesale and retail sale with 433 sales points in
Croatia and 49 in the region.
For a number of years INA d.d. has been the top Croatian company in terms
of total generated income, and export. INA d.d. parent company and INA Group
employ a total of 10,290 and 16,114 people respectively.
The basis of INA d.d. business operation1 is a focused oil and gas exploration
and production portfolio, refineries which are strategically positioned in attractive
markets, first-rate retail network, good financial results, an experienced strategic
partner – MOL.

1

Idem

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215

Table 1 Financial results of INA Group for 2007/2008

Source: INA, www.ina.hr (Accessed 01.03.2010.)

Domestic and Russian gas cover 60% and 40% of Croatia’s gas consumption
respectively. In addition to other consumers, around 600 households use natural
gas. INA refineries process and refine around 700 thousand tons of domestic oil,
which covers approximately 20% of the demand, the rest is imported oil.
INA d.d. competitors are large petrochemical companies which are present in
the entire South Eastern Europe including MOL, OMV, Lukoil and Hellenic petroleum. Regional players – INA, d.d. Group, NIS and Petrol generally hold major
position in refining and sales in the domestic market, and to a lesser extent in
foreign markets. Major international oil players do not have significant position in
the said region.

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Svetlana Petrović

Table 2 Financial results of regional companies for the first three quarters of 2009

Source: Data taken from financial statements of the companies

3. STRATEGIC INAMOL PARTNERSHIP AND FUTURE COMMITMENT

At the beginning of 1990s most Central European countries had national oil
companies which were state-owned. During the wave of the oil industry privatization and reconstruction which was taking place in the circumstances characterised
by low oil prices in the middle and at the end of 1990s, most Central European oil
and gas companies were privatized until the beginning of the 21st century. Companies privatized until 2002 include: Austrian OMV, Polish Orlen, Czech Unipetrol,
Slovakian Slovnaft, Hungarian MOL and Slovenian Petrol. Each of the mentioned
companies is the leader in its respective domestic market, although other companies
also operate on each of these markets. Thus, each of the Central European countries
can be said to have a relatively privatised and regulated oil products market. 2
Therefore, in its production structure, INA is the most similar to an integrated
oil company, with strong upstream segment, oil refineries producing a range of oil

2

Central and Eastern European Refining and Petrochemical 5th Annual Roundtable- Proceedings,
World Refining Association –INA- Industrija nafte, Zagreb, 1-2 October 2002.

GLOBALIZATION OF THE CROATIAN OIL INDUSTRY

217

products and lubricants, and the petrol station network. According to its size and
the scope of operations it is a medium sized integrated oil company.
Main route for supplying oil to most Central European countries is import
from Russia, except for Austria, Slovenia and Croatia, which all meet their import
needs on the Mediterranean market with oil mostly coming from the Middle East
(Dekanić et. al., 2003, 470).
Oil companies from Central and East European countries are spreading their influence, either by participation in the privatization process in neighbouring countries or by entering into formal or non-formal strategic alliances. This shows further
determinants and energy market privatization. In such a privatization governments
typically retain a significant ownership with the so called golden share, by which
they ensure decisive influence of the government in preventing full take over of
the national oil company and avoid a loss of identity. In addition, the companies
carry out business restructuring accompanied by cost reduction, business quality
improvement and technology development, particularly in the refining segment.
Central European oil companies announce their penetration into the markets of
South Eastern and Eastern European countries (Bosnia and Herzegovina, Serbia,
Montenegro, Ukraine, Bulgaria). By strategic partnership and alliances the companies try to defend their respective domestic market from the expansion of major
players from the east and west alike. In the wave of economic development they
have managed to basically reconstruct their businesses and prepare for further expansion which is expected in the future.
Central European region does not have any significant energy reserves, or potential resources, and oil companies are primarily focused on refining and marketing. INA is a company which has strong capacity in oil and gas production, and is
increasingly oriented towards exploration in other parts of the world.
INA was 100% owned by the Republic of Croatia which proposed the model
of privatization with strategic partnership. The privatization rules included the obligation of the partner regarding acceptance of INA business strategy, instead of
any voluntary and unannounced business decisions of the strategic partner after
the purchase of shares. The strategic partner had to accept allocation of funds to
investment projects of vital importance for development of INA. The main precondition for carrying out privatization was determination of INA’s asset value. For
this purpose at the beginning of 2001 a consulting consortium was retained for the
value assessment and privatization model recommendation. During June 2001 in

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Svetlana Petrović

Croatian mass media it was published that according to the foreign consultants’
assessment the value of INA increased by hundreds of millions of USD in the period between 2000 and 2002. The reasons for such value increase were favourable
country’ credibility with effects on risk and interest reduction, rise in oil prices,
elimination of oil products price disparity and successful business restructuring,
and cost reduction along with income growth. INA entered the year of privatization with such favourable results. INA share capital was divided into 10,000,000
ordinary shares (nominal value of one share was HRK 900.00).
When on 10 July 2003 public offers were opened at the Ministry of the Economy it was a surprise: for 25 per cent plus 1 share stake OMV and MOL offered
420 million and as much as 505 million dollars respectively. Moreover, they both
stated that they accept the so called Social Clause stipulating that in the following
three years there will be no firing in INA, and furthermore that they accept the
survival of both INA refineries and strategic plan of development envisaging a billion dollar investment in the development of core businesses of INA. By acquiring
25% plus one share MOL became INA’s strategic partner, and INA become a part
of an integrated regional partnership in the oil and gas industry, which consists
of MOL, INA, Slovnaft and TVK. October 2008 was deadline of MOL’s public
offering to take over INA. By the payment of cash to shareholders and transfer of
shares deposited during the public offering MOL has increased its ownership stake
to 47.16%.
MOL-INA strategic partnership has a unique position in the Central European
oil market, with leading market shares in Croatia, Hungary, Slovakia, but also in
Bosnia and Herzegovina and the Czech Republic, and is strategically positioned
for further development in the entire Central Europe. MOL, INA and Slovnaft
aggregately have refining capacity of 450,000 bbl / day and more than 1,200 petrol
stations in nine countries.
MOL helps INA with advice from a company which has undergone transformation from a state owned company into an effective, market oriented and competitive company. Coordination of market activities, exchange of know-how, and
implementation of joint projects will help INA and MOL Group’s potential growth
in the region.

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219

3.1. Joint projects:

• Support to the Refinery Modernization Programme
Strategic partners have launched an extensive project for modernization of INA’s
Sisak and Rijeka refineries. This 900 million dollar worth development project will
facilitate implementation of the state-of-the-art technology according to standards
applied in the Slovnaft and MOL refineries. After the Sisak and Rijeka refineries
modernization, the quality of products will conform to the highest European standards. This project, which should ensure INA’s place among the technically most
advanced refiners in the region, comprises refinery capacity expansion and reaching
EURO V quality standard. MOL’s experiences gained through the modernization
of own refineries are a valuable contribution to INA in implementation of the programme for the modernization of its two refineries.
• Development of the regional retail network
Mutual acceptance of fuel payment cards which can be used on INA and MOL
petrol stations. The partners have designed a marketing strategy for the entire South
Eastern Europe region which includes the overview of the regional retail status.
• Integrated SAP system
In 2007 INA stabilised the SAP system and improved process and organizational pre-conditions for more quality SAP support, also relying on MOL’s previous
experience regarding the implementation of an integrated SAP system.
By the SAP system implementation INA, d.d. has become stronger and more
successful in terms of knowledge and capabilities. In the last four years it has significantly increased its goodwill, and has become more competitive and more competent for the fight with other regional players.
• Other areas of cooperation
INA and MOL are jointly considering possibilities for future cooperation in
international projects in the field of oil and gas exploration. Cooperation of the
two companies has lead to the joining of human and financial resources which then
results in improved effectiveness. In exploration and production activities MOL
supports the use of INA’s expertise accumulated on domestic and international
upstream projects.

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Svetlana Petrović

4. CONCLUSION

In the volatile oil market, in tough competition with oil giants which are still the
leaders of global industrialization, and in the climate of general geopolitical insecurity, small and medium sized oil companies must implement carefully considered
business strategy. Under such circumstances effectiveness, constant struggle to cut
costs and careful choice of strategic partnerships and regional market appearance
become survival imperative.
By its character and far-reaching consequences privatization of INA has been
one of major strategic decisions of the Croatian society. This has been the most
important decision since the incorporation of INA. Final success of this process
depends on global trends in the energy market, success of transition processes in
Croatia and neighbouring countries. Croatia could not have avoided cooperation
with the closest neighbours with which we share physical and territorial continuity,
and possibility for strategic alliances, strategic partnerships and consequently the
possibility of the model of joint business operation at an economic optimum in the
globalised environment in which the economy of scale has revised some historical
paradigms about the importance of national borders. The so called liberalization
process is not a breeze, but a hurricane of quick changes which in countries in transition hits the entire energy market (Dekanić et al., 2003, 494).
INA has adopted a strategy characteristic for small size integrated companies
and must follow global trends; it has got a strategic partner and continues with
technological development. Otherwise, such companies lose their export capability
and then also domestic market share, and sooner or later they fall prey in takeovers, because a larger and more competent neighbour sooner or later acquires a
company which lags behind, taking over primarily its market.
Over the past years oil companies from Central European countries have gone
through a difficult market transformation process. They are mainly privatized, have
mostly reconstructed and modernised their production and market capacities and
have reorganised their businesses. By entering into mutual alliances, they try to defend the position in their respective domestic markets from take-overs from the east
and west alike, and through strategic alliances such companies also strengthen their
own competitive position in neighbouring markets in South Eastern and Eastern
Europe. INA privatization concept has been defined to meet criteria imposed by
the globalization process, or its European derivative – market liberalisation. How-

GLOBALIZATION OF THE CROATIAN OIL INDUSTRY

221

ever, how to fully use such processes to the benefit of the company and the country
is still an open issue.
Privatization of energy companies is closely connected with the energy market
deregulation. Energy market deregulation and privatization of energy companies
represent two segments of a unitary energy market regulation system which had
carefully been developed in the European Union for many years now. Its acceptance and integration in the national economy, is perhaps the most sensitive part of
the transition process and preparation for joining the European Union.

REFERENCES:

1. Dekanić, I.; Karasalihović, D.; Kolundžić, S. (2003), Stoljeće nafte - veza između
nafte novca i moći koja je promijenila svijet, Zagreb, Naklada Zadro
2. Mommer, B. (2000), The governance of Enternational oil, the changing roles of
the Gama, Oxfor Institute for Energy studies.
3. Fawcett, Brian (2005), Gdje je McLuhan pogriješio u vezi s globalnim selom i
što nije predvidio, “Europski glasnik”, God. 10 (2005.), br. 10, str. 159-170.
4. Hill, C.W.L. (2003), Global Business Today, New York, McGraw Hill/Irwin
5. Puljiz, V. (1998) Globalizacija i socijalna država, Zagreb, Revija za socijalnu
politiku.

222

Ljubo Đula

MODELLING OF AN NAUTICAL
TOURIST PORTS BUSINESS SYSTEM (NTBS)
Ljubo Đula, dipl.ing.

ABSTRACT

Simulation modelling of a nautical and tourist port NTBS (Nautical Tourist
Business System) in relation to investments in sports objects will result in an increase of the quality of the total offer and an increase of competitive forces of the
observed system. The system of nautical and tourist ports NTBS has all the characteristics of a complex organisation and business system, for which dynamic modelling efficient methods of simulation techniques have to be used.
In this paper, the NTBS will be determined through a global model of integral
nautical and tourist service (from berthing service as a basic service to all other additional services). The subsystem of investments in new capacities, like sports and
additional capacities will be determined by exogenous variable VINK – value of
investments in new capacities.
JEL clasiffication: L83
Keywords: Simulation modelling, business system of nautical and tourist
ports, investments in sports objects, competitive advantages,, sports and recreation
market.
SYSTEM DYNAMICS QUALITY SIMULATION MODELS OF A NAUTICAL TOURIST
BUSINESS SYSTEM

The subsystem of investment in sports objects of a business system of a nautical and tourist port must have the characteristics of intelligent behaviour, which
implies the following characteristics of managing behaviour: “If the capacity of
NTBS is full and if in the last several years the income per guest has not increased,
it is necessary, in the next mid-term period, to invest in new facilities which will
improve the quality of the total services of NTBS.

MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

223

In this case it is planned to build at least 4 outdoor and two indoor tennis courts,
one beach volleyball court and one swimming pool of 50m2, including facilities like
dressing rooms, sauna, showers, massage and medical assistance, etc.). In case there
is a decline of interest in the main NTBS services, berthing, then it is necessary to
stop the construction of new capacities. This implies that the started objects will be
finished, while the others will be built after the demand increases again. Also, if the
state of the cash-flow account of NTBS is not positive or there are not sufficient
means to cover the investment, it is necessary to ensure the mid-term and long term
loans in order to complete the investment.”
In order to determine the global system dynamics simulation model of NTBS,
it is necessary to determine the following relevant subsystems: subsystem of berthing capacity (the main nautical and tourist service); subsystem of servicing vessels; subsystem of capacities of additional services (trade and catering); information
subsystem; subsystem of the state of cash-flow; subsystem of credits for performed
services; subsystem of debts; subsystem of income; subsystem of marketing and
sales; subsystem of long term and short term loans; subsystem of engagement of
total capacities; subsystem of the new sport capacities and their facilities.
Simulation of NTBS begins on the first day of April of the observed business
year (TIME=120 days). The first season finishes at the beginning of October of
the same year (TIME=300 days). The next period of off-season business begins
in October of the same year (TIME=300 days) and lasts to the beginning of the
new season (TIME=485 days). The new tourist season begins on the 485th day
(TIME=485 day) and lasts to October of the next business year (TIME=665
days). New off-season business begins on the 665th day and ends on the 850th day
(TIME=850 days).
Investing into new capacities begins on the 380th day (TIME=380) and lasts
on average 180 days, which means that it ends on the 560th day of business, and
the first positive effects of the investment (variable KPNI), or increase of the total
income (UP), total operating costs (UTP), generator of the vessel arrivals (GDP)
and average realised revenues per vessel per day (POPPD) stars in time TIME=406
days.

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MENTAL, VERBAL AND STRUCTURAL SYSTEM-DYNAMICS SIMULATION MODEL
OF NTBS BUSINESS SYSTEM
In accordance with system dynamics simulation quality methodology, it is possible to
present the mental and verbal model of LNT in the following way: “If the variable generator of the
vessel arrival GDP increases, the number of vessel registration a day BPPD will also increase, which
shows a positive (+) cause-effect connection UPV”, i.e., as abbreviated:

GDP(+)(+)BPPD.
«If the number of vessel registration a day BPPD increases, the total number of
registered vessels UBPP will also increase, which shows a positive (+) cause-effect
connection UPV», i.e., as abbreviated: BPPD(+) (+)UBPP.
If the total number of registered vessels UBPP increases, the number of vessel checkouts a day BOPD will also increase, which shows a positive (+) UPV.”, i.e., as abbreviated: UBPP(+) (+)BOPD.
"If the number of vessel checkouts a day BOPD increases, the total number of
registered vessels UBPP will decrease, which shows a negative (-) UPV”, i.e., as abbreviated: BOPD(+) (-) UBPP.
"If the average staying time of vessels PVZP increases, then the number of vessel
checkouts a day BOPD decreases, which shows a negative (-) UPV”, i.e., as abbreviated: PVZP(+)(-) BOPD.
(-) FBL1: The variables UBPP and BOPD create the so called negative (-) retroactive circle, or self-governing (-) KPD1”, i.e., as abbreviated: UBPP(+)  (+)
BOPD(+)(-) UBPP.
"If the number of vessel checkouts a day BOPD increases, the total value of the
issued invoices UVIR will also increase, which shows a positive (+) cause-effect connection UPV”, i.e., as abbreviated: BOPD(+)(+)UVIR.
"If the average time of stay of vessels PVZP increases, the number of vessel checkouts
a day BOPD will be decreased, which shows a negative (-) UPV, i.e., as abbreviated:
PVZP(+) (-)BOPD.
"If the average realised revenue per vessel per day POPPD increases, the value of the
issued invoices a day VIRD will also increase, which shows a positive (+) UPV, i.e.,
as abbreviated: POPPD(+)(+)VIRD.

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MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

"If the value of the issued invoices a day VIRD increases, the total value of the
issued invoices UVIR will also increase, which shows a positive (+) cause-effect connection UPV”, i.e., as abbreviated: VIRD(+)(+)UVIR.
"If the total value of the issued invoices UVIR increases, the value of the collected
debts a day VNPD will also increase, which shows a positive (+) cause-effect connection UPV: UVIR(+)  (+)VNPD.
“If the average time of collecting debts PVNP increases, the value of collected debts
a day VNPD will decrease, which shows a negative
(-) cause - effect connection UPV”. PVNP(+)
(-) VNPD..
"If the value of collected debts a day VNPD increases, the total value of issued
invoices UVIR will decrease, which shows the negative (-) UPV.” VNPD(+)(-)
UVIR.
The remaining FBL are shown in short form as follows:
(-) FBL2: The variables VNPD and UVIR create the so called negative (-) retroactive circle, or self-governing (-) FBL2”, i.e., as abbreviated:
UVIR(+)VNPD(+)(-)UVIR.
(-) FBL3: The variables SUSZR and VISZRD create the so called negative (-)
retroactive circle, or self-governing (-) FBL3”,, SUSZRD(+)VISZRD(+)(-)
SUSZRD.
(-) FBL4: The variables VUD and VIOPD create the so called negative (-) retroactive circle, or self - governing FBL4”, VUD(+)  VIOPD(+)(-)VUD.
The value of investment into new capacities – VINK will be determined:
VINK.KL=DELAY3(PULSE(500000,1,380,1000),180)+DELAY3
(2000000, 1, 400, 1000),180)

(PULSE

Remark: The first item of the equation VINK.KL (500,000 EUR) denotes the
total investment of the marina during the construction period of 180 days (its own

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financial means and bank loan as the outer finances); the other item of the equation
denotes the possible investment in total of 2 million US$ of the foreign partner
investors, and it will not have a negative effect (increase of costs) to financial state
of the giro account, but the new investor will ensure the return on investment by
an agreed share in the profit.
The investment effect will reflect for the first time in the realisation of the increased revenues in the following season.
Positive effects of the investment will reflect in the variable KPNI coefficient of
the increase of new investments:
KPNI.K=TABHL(KPNIT,VINK.KL,500,^2500,500)
KPNIT=1,1.2,1.5,1.8,1.9

The variable KPNI denotes an increase of revenues in the future period (after
completing the investment and the beginning of work of the completed new capacities). The symbol KPNIT denotes the tabular amplitudes of a relative factor of
increase of new investments to the growth of total revenues, costs, average costs per
vessel and the generator of vessel arriving.
The state of the total assets in the giro account – SUSZR, will be determined:
SUSZR.K=SUSZR.J+DT(VUSZRD.JK-^ VISZRD.JK),
Remark: If the state of the total assets in the giro account is higher than zero,
then the marina is solvent, and if it is zero or less than zero, then it is financially
insolvent and in order to be capable to pay its liabilities it has to ensure cash assets
on the basis of loans (mid-term or short term loans).
SYSTEM DYNAMICS STRUCTURAL FLOW DIAGRAM OF THE NTBS

In accordance to the completed mental and verbal simulation model of investing into sports and other objects in the NTBS business system, it is possible to
determine the system dynamics simulation flow diagram of NTBS.

MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

+

GDP
vessel arrival
generator

UBPP
total number of registered
vessels

_

+

VUSZRD
value of paid
assets to the
transfer account a
day

SUSZR
total assets on the
transfer account

VIRD
the value of
issued invoices
a day

_

(-) FBL1
BOPD
number of vessel
checkouts a day

BPPD
number of vessel
registrations a day

PVZP
average time of
the stay of the
vessels

+

+

+

UTP +
total operating
costs

+
_

_

VDOPD
the value of liabilities a
day

+
VISZRD
the value of the paid
assets from a transfer
account a day

_

(-) FBL2

+

VNPD
the value of
collected debts a
day

VUD
the value of total
liabilities
UOPD
average realised
revenue of the
marina a day

(-) FBL4

+

VIOPD
the value of paid
liabilities a day

UVIR
total value of issued
invoices a day

PTPD
average costs
per vessel a day

(-) FBL3

+

POPPD
average realised
revenue per
vessel a day

+

+

+

+

_
INCOME

+

+
_

PVNP
average time of
collecting debts

+

_

PVIOP
average time of
paid liabilities

Figure 1: System Dynamics structural model of NTBS
THE RESULTS OF SIMULATIONS OF 0/1-SCENARIO OF NTBS RELATING TO
INVESTING INTO NEW SPORTS OBJECTS

Graphic results of the simulation following variables:
SUSZR= state of total assets of the cash flow;
UVIR= total value of issued invoices;
UBPP= total number of registered vessels
UOPD= average realised revenue of the marina per day;
UTP – Total operating costs
INCOME – Income of NTBS (euro /year)
VUD – The value of total liabilities
VINK – The value of investments into new capacities
BOPD – Number of vessel checkouts a day
VIRD – The value of issued invoices a day
VUSZRD – The value of paid assets to the cash flow day

227

228

Ljubo Đula

UBPP
B
O
P
D

B
P
P
D

GDP

PVZP
UBV

UVIR

UTP
V
I
R
D

PTPD

V
N
P
D
PVNP

POPPD

DOHODAK
SUSZR

V
D
O
P
D

U
O
P
D

V
U
S
Z
R
D

V
I
S
Z
R
D

VUD
D3

V
I
O
P
D

VINK
PULSE

PVIOP

180

KPNI

Figure 2: SD Structural flow diagram of the NTBS
The following figures show the state of the variable depending on the input variable GDB (generator of vessel arrival). For scenario 0 input variable is: GDP.K=STEP(100,100), a scenario 1 input variable is GDP.K=STEP
(100,100)*PULSE(8,1,120,2)*(2-NOISE()).
Comments

Analysing the obtained graphic results of the simulation of 0 scenarios it is
possible to notice that performance dynamics of variables is in accordance with
economic regularity of the

Figure 3: Graphic presentation of the simulation of 0 scenario – variables SUSZR, UVIR and UBPP

229

MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

Figure 4: Graphic presentation of the of 0 scenario - variables UOPD, INCOME and UTP

100.e3
280.
210.e3

SUSZR.ANTELI1X(-200.e3,100.e3)
UBPP.ANTELI1X(0.,280.)

ANTELI1a

UVIR.ANTELI1X(0.,210.e3)

25.e3
210.
157.5e3
-50.e3
140.
105.e3
-125.e3
70.
52.5e3
-200.e3
0. 120 160 200 240 280 320 360 400 440 480 520 560 600 640 680 720 760
0.
TIME

100.e3
280.
210.e3

SUSZR.ANTELI1X(-200.e3,100.e3)
UBPP.ANTELI1X(0.,280.)

ANTELI1a

820

UVIR.ANTELI1X(0.,210.e3)

25.e3
210.
157.5e3
-50.e3
140.
105.e3
-125.e3
70.
52.5e3
-200.e3
0. 120 160 200 240 280 320 360 400 440 480 520 560 600 640 680 720 760
0.
TIME

820

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Ljubo Đula

Figure 5: Graphic presentation of the of 0 scenario – variables BOPD, VIRD, VPD, VUSZRD, VDOPD and VINK

Figure 6: Graphic presentation of the simulation of 1 scenario – variables SUSZR, UVIR and UBPP

Figure 7: Graphic presentation of the of 1 scenario - variables UOPD, INCOME and UTP

MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

231

Figure 8: Graphic presentation of the of 1 scenario – variables BOPD, VIRD, VNPD, VUSZRD, VDOPD and VINK
NTBS as a unit within its surroundings.

The total number of registered vessels – UBPP, will in the first tourist season
realise a maximum of 285 vessels, while in the following season, due to the gradual
finishing of the investments into new capacities, or sport and other objects, the
interest of the nautical tourists will increase, which will result in the increase of the
total number of vessels, and thus the highest number of registered vessels, in total of
292 a day TIME=530. The characteristic of the number of vessels is stochastic.
The total realised income per day – UOPD, in the first tourist season will reach
it’s maximum of about 641 EUR per day, while in the following tourist season, due
to greater offer of sports facilities, the income of 6,749 EUR a day (TIME=555
day) will be realised.
In the first tourist season, or the period of TIME=120 day to TIME=304 day,
the income of the marina has a negative value (loss) with the greatest loss of 0.33
EUR a day TIME= 240, after which it becomes positive on the day TIME=304 to
the new tourist season on the day TIME=486, and reaches its highest amount of
78,860 EUR a day on the day TIME=392. In the period of the following tourist
season TIME=486, the income is negative, and it has the highest loss in the amount
of -2,000 EUR a day on the day TIME=530. This loss will gradually decrease, and
it will become positive again on the day TIME=542, and by the end of the second
tourist season will remain positive, reaching its maximum value of 309,500 EUR a
day on the day TIME=790.
In the first tourist season the total operating costs UTP are in their highest
amount of 5,100 EUR a day on the day TIME=184, and have stochastic character.
In the first off-season period UTP from the day TIME=302to the day TIME=485

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they have their constant off-season value of 100 EUR a day, and cover all operating
costs of the marina out of the season. In the second tourist season which starts on
the day TIME=485, the costs grow to their maximum of 4,279 EUR on the day
TIME= 492. In the second off-season period the costs have again the value of 100
EUR a day.
The state of the total assets in the giro SUSZR in the first part of the tourist
season to the day TIME=195 have a negative value, with the maximum shortage of
cash money of –2,902 EUR on the day TIME=156. Thus, from the day TIME=170
SUSZR becomes positive, realising the highest amount of assets of 86,050 EUR on
the day TIME=364 and retaining that value for several days. Before the beginning
of the new, second season on the day TIME=417 SUSSZR again becomes negative,
because of new investments, and reaches its maximum of 2,118E3 EUR on the day
TIME=519, after which it becomes positive again on the day TIME=631 the end
of the simulation period.
The work was given second scenario in which we increase the number of vessels
in the marina. The results of simulations are shown in pictures 6, 7, and 8. With the
increase of vessels in a marine, the value of observed variables will increase.
The total realised income a day – UOPD, in the first tourist season will reach
its maximum of about 758 EUR a day, and by the end of the second tourist season
will remain positive, reaching its maximum value of 22,520 EUR.
The income of the marina has a negative value in beginning of scenario 1 (from
TIME=120 to TIME=226), after that has positive values to end of scenario 1 and
reaches its highest amount of 1,271E3 EUR a day on the day TIME=810.
In the first and second tourist season the total operating costs UTP has stochastic character, and first tourist season the total operating costs UTP are in their
highest amount of 86,580 EUR a day. The second tourist season’s highest amount
of 183,600 EUR a day.
The state of the total assets in the giro SUSZR in the first part of the tourist
season to the day TIME=158 have a negative value, with the maximum shortage of
cash money of –20,790 EUR a day. After that it has positive value to end of the first
tourist season. In the second tourist season SUSZR has a negative value.
On the basis of the comments of the results of NTBS, and in view of the two
observed tourist seasons and the considerable investment with the aim of improving business as a whole, it may be concluded that the observed NTBS business

MODELLING OF AN NAUTICAL TOURIST PORTS BUSINESS SYSTEM (NTBS)

233

system for such a scenario 0 and scenario 1 of the observed development period is
stable and it gives positive financial results (revenues, income, solvency etc.) and
total positive results in the observed period.
CONCLUSIONS

On the basis of the system dynamics research of the performance of the complex
business system NTBS, with the aid of a fast digital computer on which the performance simulation was done, it is possible to bring forward a number of relevant
conclusions:
1. A direct application of system dynamics simulation complex models in the
field of scientific research of performance of nonlinear management systems has
full rationalization, because it ensures to the model constructor an extremely suitable software medium which may be determined as intelligent models of the second generation, if the first generation refers to present expert systems.
2. System dynamics and its efficiency of intelligent modelling of a business system may be considered as a logic order of development of intelligent systems in the
field of applying research of dynamics of cybernetic business systems.
3. System dynamics uses special methodology and special software packages, the
most outstanding being: DYNAMO; Powersim, Stella, Vensim, and iThink.
4. System dynamics is especially convenient for the study of performance dynamics of business systems in which a great number of non-linear retroactive circles
operate, or for systems where at operating the system the use of manager’s intuition
alone fails.
5. A special importance and quality of applying system dynamics in education,
training, designing and exploitation of complex business management systems may
be considered in acquiring new knowledge which classic management methods
cannot offer.
On the basis of the above presentation, the authors of this paper recommend
the implementation of system dynamics methodology tool into all fields of human
activities with the aim of understanding various complex systems, in which the
experiment cannot be performed in real life without jeopardizing their existence,
growth and development.

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The possible scientific contribution of this paper is primarily in authorised determining of general multiple simulation models which allow for acquiring new
knowledge about dynamic performance of real nautical and tourist business systems, but also sports organisation systems. Also, in order to follow successfully the
development of modern sports industry, the students of kinesiology need knowledge and skills in various areas, especially economy, management and marketing.
By using the proposed tools and system dynamics simulation methodology, the
students will acquire knew knowledge about performance dynamics of complex
organisation systems in the field of tourism, sports and recreation.
REFERENCES

1. Coyle, G. R. 1996. “System Dynamics Modelling”, Chapman & Hall,
London.
2. Čerić, V., Varga, M. and Birolla, Hugo, 1998. “Poslovno računarstvo”, Znak,
Zagreb.
3. Dulčić, A. 2003. „Nautički turizam i upravljanjem lukom nautičkog turizma,
Sveučilište u Splitu”, Split.
4. Dulčić, A. 2001. „Upravljanjem razvojem Turizma”, Mate, Zagreb.
5. Munitić, A. 1989. „ Kompjuterska simulacija uz pomoć sistemske dinamike,
Brodosplit, Split.
6. Pidd, M. 1997.: “Computer Simulation in Management Science”, Wiley, New
York.
7. Čerić, V. 1993.: Simulacijsko modeliranje, Školska knjiga, Zagreb.
8. Waren, K. 2002. “Competitive Strategy Dynamics”, John Wiley &
Sons,Chichester, Englaand.
9. Pidd, M. 1997. “Computer Simulation in Management Science”, Wiley, New
York.
10. Richardson, G.P. 1986 „Problems with causal – loop diagrams“, Sistem Dynnamics Review 2:158-170.
11. Garcia, J.M. 2006 „ Theory and practical exercises of system dynamics“, First
edition in English March.

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235

12. Barlas, Y. 1996. „Formal aspects of model validity and validation in system
dynamics, System Dynamics Reviea, Vol, 12, No.3, 183-210.
13. Coyle, R.G. 1977. „Management system dynamics“, John Wiley, New York.
14. Randers, J. 1980. „Elements of the system dynamics method“, MA Productivity Press,
15. Sterman, J. D. 1985. Deterministic chaos in an experimental economic system“, Jurnal of Economic Behavior and Organization 12.
16. Forrester J.W., 1984. „ Urban Dynamics“, MIT, Cambridge, Massachusetts,
and London, England,
17. Seventh printing, Copyright 1969 by MIT Forrester J.W. 1980.“ Principles of
Systems“, MIT
18. Press Cambridge, Massachusetts, and London, England, Second Preliminary
Edition, Ninth
19. Printing, Copyright 1968 by Jay W. Forrester Lyneis, M., James 1982. “Corporate Planning and
20. Policy Design: A System Dynamics Approach”, MIT Press Cambridge,
Massachusetts.
21. Waren, K. 2002. “Competitive Strategy Dynamics”, John Wiley & Sons,
Chichester, England.

Milan Puvača • Dinko Roso

236

GOOGLE TOOLS IMPLEMENTATION INTO
THE PROMOTION OF WEB SOLUTIONS
Milan Puvača1, Dinko Roso2
1
Ofir d.o.o. Croatia
2
Jet Osijek d.o.o., Croatia

ABSTRACT

The Internet expansion around the world, of which Croatia is also a part, results
in increased electronic business. The business world increasingly realizes that the
traditional method of trading and doing business is becoming obsolete and that
a different, virtual era has started. Specialized portals and web shops are being
opened daily, diversifying the offer and thus attracting buyers. Since the Internet
is an ideal medium for the concept of perfect competition, almost identical solutions with the same products or services quickly appear. There are continuous efforts to find ways of reaching consumers by means of “new” media. Web solutions
i.e. product promotion are shaped and improved by full adjustment to users after
researching their habits.
Google is a corporation which develops software solutions to satisfy both the
end user and the service provider. They update their available tools on a daily basis.
Lack of training in these tools is the key factor of their insufficient utilization. The
research presented here is focused on advantages, that is, in what way their usage
will enhance the promotion of a company’s web solution, thus achieving competitive advantage in today’s business, which takes place online.
JEL clasiffication: M15, M31
Keywords: Internet, promotion, Google
Introduction

At the time of economic fluctuations and aggravated business circumstances,
budgets for marketing and market research are being reduced on a monthly basis.
Never before was the market saturated with products and information to such

GOOGLE TOOLS IMPLEMENTATION INTO THE PROMOTION OF WEB SOLUTIONS

237

an extent. It seems that the only competitive advantage is the price-related one.
However, what happens when we approach the bottom margin of profitability? We
simply have to turn to something that will make our business more competitive,
without touching the financial aspect. We choose new promotional and marketing
techniques that are available to us. Of course, having the technology and using it
in the right way are two different things. Research has shown that more than a year
ago in Great Britain there were more than 42 million Internet buyers. However,
50.1% Internet buyers who selected something for purchase never went through
with it – ordered and paid (http://www.coremetrics.com/downloads/coremetricsbenchmark-industry-report-2009-03-us.pdf, March 10, 2010). The segment which
certainly leaves space for improvement is related to the information that Internet
shopping satisfaction increased by only 0.36% (IMRG Industry Report, 2009).
If the strategic decision has been made that the development of our company
should be based on a web shop, then the last percentage is something on which our
development team must intensively work.
Research and development

By selecting the research tools we also determine the direction of an organization’s progress in accordance with the obtained results. We have previously decided
that we will use all the available Google tools on the virtual market. Less than five
years ago Google launched the service for running and overview of visits to a website. The system was developed by Urchin Software Corporation which was taken
over by Google. Created over years of development, Google Analytics with its advanced statistical and analytical data can be, without any doubt, beneficial to our
business.
The research that we conducted was based on a new program code that we integrated on the test station. The expected results: user’s resolution, average time spent
on the site, existence of a relation between the number of visits to the web page
and the change of its appearance, the way of finding the page, etc., will assist us in
developing a better web solution.
By the research shown in Figure 1 it was determined that changing the appearance of the home page attracted additional users. Almost 48.09% users in the observed period reached our website through search engines. Therefore a conclusion
is made that we should focus on the best possible placement within search results
of search engines. Optimization of the page itself should be done with emphasis

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Milan Puvača • Dinko Roso

on Firefox and Internet Explorer search engines, since they account for 86.12%
of the market of our potential users. The era of web pages adjusted to dial-up or
ISDN modems has ended, because 56.45% of users now use broadband access to
the Internet. Visual attractiveness and a good layout of the page content should be
adjusted to 1024x768 resolution (17“ monitor).

Figure 1. Interpreted results of Google Analytics service

Source: Authors

GOOGLE TOOLS IMPLEMENTATION INTO THE PROMOTION OF WEB SOLUTIONS

239

EFFICIENCY AND UTILIZED POTENTIAL

Following the research-based development of a website, it is important to use
the tool that will utilize the maximum potential. The tool with which we wish to
achieve the maximum efficiency in attracting visitors and converting them into
buyers is Google Website Optimizer. Its complex algorithms have the possibility of
testing two different versions of a website. By means of this, A/B testing, we wish
to determine which version of our website is more adjusted and more acceptable to
the user. The assumption is that we want to analyze every part on the page, using an
advanced function of testing multiple variables and elements – multivariate testing.
In this way the position of modules and their emphasis (photos, headlines, phrases,
etc.) will be optimized.
The goal is to achieve higher level of converting visitors into buyers. The process
is called conversion rate, and according to research, it is about 0.25% (http://www.
conversionrate.net/55-google-website-optimizer-tips).
The calculation formula is as follows:
P (conversion rate) = (number of buyers / number of visitors) *100

Figure 2. Retail companies / services by conversion rate (2009)

Source: http://www.marketingcharts.com/direct/top-10-online-retailers-by-conversion-rateapril-2009-9322/ (March 10, 2010)

240

Milan Puvača • Dinko Roso

By using the tool, we do not use our financial and marketing resources. We only
use time resources by examining the opportunities offered to us. The marketing
advantage of offering our services in this way is the least possible mistake in estimating positioning and determining elements of our website. After conducting the
experiment we will determine that better results are achieved by each simpler visual
solution. The tool will sum up, quantify and present the data which we will then
use to avoid additional expenses for redesigning the entire solution.
After launching a website, the tools will continue to measure users’ reaction to
certain changes.
IMPLEMENTATION AND PROMOTION

The highest expense generated so far is time and human resources. The task of
the next tools is placement of our website and its promotion. In our marketing and
research work so far we had to determine, i.e. segment the market on which we
would like to focus. If the website were to be left on the broad spectrum of offer,
it would face too much competition of other suppliers. In earlier times this way of
thinking, programming and placing a website was possible with a relative success.
Situation is different nowadays. Specialization of offer and reduced number of key
words is our largest advantage. Further narrowing the focus of our e-business leads
us to the desired target group.
Determining the environment and user segmentation makes further course of
action much easier. Google search service is based on the Page Rank technology
which uses a complex algorithm code in the process of ranking websites according to their relevancy. The process is preceded by comparing the importance of
the content and the user’s query, followed by interpretation of results. The whole
system excludes any human work, which contributes to the objectivity of search.
Hypertext matching analysis is also a parallel process that is used to refine results for
the user, considering the web pages with similar content. Understanding the way
in which they act and the complexity of the above mentioned technologies is the
foundation on which to create a company’s e-promotion strategy. Successful positioning depends to a great extent on the content, which must confirm and follow
the defined key words. From the empirical point of view, the business should be
defined by up to 10 words. What is advisable is a smaller number for the purpose
of optimization of the search itself, but also in view of the complexity of algorithms
for content indexing.

GOOGLE TOOLS IMPLEMENTATION INTO THE PROMOTION OF WEB SOLUTIONS

241

Figure 3. Simplified account of the Google indexing algorithm

Source: Authors

An important element of Google’s indexing robots is also the time required for
the first indexing of a website. Since people are not always familiar with the program code itself or with the manner of robot functioning, there are frequent attempts to find ways to use the potential offered by them as efficiently as possible.
Behind many search engines there is still a lot of human work and people, while
Google uses a fully automated search system. Clear definition of terms and words in
line with the product a company offers, website optimization and taking indexing
out of unimportant elements and sub-pages certainly raises its ranking in search
query results of search engines.

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Continuous adjustments must be made by means of search algorithm evolution
and all tools must be simultaneously used to achieve the best possible efficiency of
web content optimization that will guarantee desired results.
CONCLUSION

The only market which is not slowed down by recession or influenced by external factors and which does not know working hours is the Internet. In expansion of
ever better, more efficient and more effective websites, it is becoming increasingly
difficult to compete with programming and design companies, especially the Western ones. However, even if we do outperform the design of a website itself, this does
not provide any guarantees for commercial success of our business. How to reach
the buyer and approach him or her with an offer is the question that has replaced
all previous questions. It has been proved in the paper how important preliminary
Internet research is, telling us about users’ habits and characteristics. The results are
used to build web elements, which will be, after optimization and testing of users
through Google Web Optimizer, joined in a single unit. Every new update will be
submitted to the same procedure. Such method of work opens the possibility for
the growth of visitor-to-buyer-conversion. Radical changes of a website can result
in increased visitor numbers by 30-40%, which can be used to keep the visitor
longer and promote our e-business.
The research of the way a company is conducting its Internet business as well
as the Internet promotion can be observed almost in real time through the Google
Analytics service. By using the same program a negative trend among users can be
observed, followed by immediate remedial measures. Free tools are used for many
improvements, without spending any resources. Average, but also advanced users
are not very familiar with all these processes. This statement can be supported by
the growing number of specialized companies whose sole activity is optimization of
websites and their ranking on search engines. Among these it is even more difficult
to find a certified Google partner, both locally and in the wider region.
Popularization and interest for this business area is growing on a monthly basis,
because economic operators increasingly realize the power of placement on search
engines and the speed of finding their website. However, what is still worrying is
an extremely poor conversion rate (visitor-to-buyer) at the global level, which is
low, compared to the level of e-business. Considering the increasing information
awareness and promotion of available tools, our opinion is that this is a temporary

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situation. In a long-term aspect, this will generate more efficient and more adjusted
websites that will find their buyers.
REFERENCES

1. Ružić, D.: e-Marketing, Faculty of Economics in Osijek, Osijek, 2003
2. Srića, V.; Spremić, M.: Informacijskom tehnologijom do poslovnog uspjeha,
Sinergija d.o.o. Zagreb, 2000
3. Informatički časopis “BUG” (IT magazine), 01/2008 and 11/2007
4. http://www.readwriteweb.com/archives/2008_web_predictions.php,
(04.02.2010)
5. http://www.pcchip.hr/vijesti/Internet/google-i-yahoo-najpopularniji-onlinebrandovi, (20.02.2010)
6. http://www.nacional.hr/articles/view/37140, (02.02.2010)
7. http://www.httpool.hr/page.asp?newsid=193&areaid=4, (24.12.2010)
8. +http://futuria.hr/Internet-marketing-usluge/Internet-branding/, (03.03.2010)
9. http://www.ekolibri.hr/hr/Logotip.htm, (05.03.2010)
10. Wining with AdWords, Google, 2009
11. Make your website work, Google, 2009
12. http://www.conversionrate.net/55-google-website-optimizer-tips (10.03.2010)
13. http://www.seochat.com/c/a/Choosing-Keywords-Help/Increase-Your-AdSense-Revenue-Through-Keyword-Research/ (10.03.2010)
14. http://1-internetmarketing.net/tags/google-bot-algorithms/ (10.03.2010)
15. http://www.google.com/intl/hr/webmasters/docs/faq.html (10.03.2010)
16. https://www.google.com/analytics/settings/ (05.03.2010)
17. http://websiteoptimizer.blogspot.com/ (08.03.2010)
18. http://www.wired.com/magazine/2010/02/ff_google_algorithm/all/1
(03.03.2010)

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PRIORITIZED ACTIONS FOR MARKETING IMPROVEMENT:
A TOOL FOR SMALL BUSINESS MARKETING PROGRAMMES
Nikola Rovis

Abstract

Purpose of this paper is to offer a pragmatic tool for management and marketing practitioners in small businesses. The name of the tool is Prioritized Action for
Marketing Improvements (PAMI). This work gives an overview of marketing and
strategy processes in small businesses and a brief description of Dibb and Simkin
buying proforma tool. The PAMI tool builds on successfully conducted market
segmentation and specification or implicit knowledge on targeted market segments
and market positioning. The tool is designed to help practitioners devise an actionable marketing plan. It provides a clear, intuitive and straight forward way to cross
the gap between a higher level planning activity and specific operation planning
activity in small business.
JEL clasiffication: M31, M37
Key Words: Small business, Marketing management, Marketing planning,
Management tools; Marketing programmes
INTRODUCTION

Business strategy or competitive strategy serves as a mean to define how the
business is to compete in the marketplace, and marketing process is a vital part of
transforming a higher-level strategy into operational reality (cf. Grant, 2008; Angwin et al, 2008). Marketing process includes analysis of external conditions and
internal capabilities, creation of adequate marketing strategy, development of marketing programmes and designing the implementation and control mechanisms
(cf. Dibb et all, 2006). Although there is a great amount of different methods and
tools in the field of marketing strategy and marketing planning, there is a general
agreement that companies should use strategic thinking and have some kind of
marketing process in place, regardless of their industry or their size.

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Although small businesses are proclaimed as very important part of the local
and global economy, the great majority of business strategy and marketing planning literature is focused on large businesses. For illustration purposes, the author
has done a quick database research using ProQuest database on the number of
published articles in scholarly journals regarding strategy and marketing in March
2010. There was more than 97.000 published scholarly journal articles regarding
strategy, but less than 0,1% of that number is targeted to small business. Similarly,
there was more than 78.000 journal articles regarding marketing, but only around
2% of them focus on small business.
The overarching goal of every business is to maximize wealth of its owners.
However, small businesses have different needs regarding strategy definition and
marketing planning than large businesses. The sophisticated tools and techniques
are in most cases not available to small businesses (Van Auken and Ireland, 1980).
Planning activities in small businesses in general often tends to be squeezed out of
management focus due to the pressures of operational activities. Van Auken and
Ireland (1980) state some additional barriers to effective small business planning
as lack of time, fear of the unknown, scarcity of information, lack of quantitative
ability and change in external circumstances, but also state their belief that the
most important impediment is lack of management ability to properly start and
continue planning activities over time. They further state the list of factors small
businesses should avoid in order to keep their planning process effective and efficient, which all fall in categories of avoiding unnecessary complexity, detailing and
formalization.
Carson and Cromie (1989) state that due to predominating influence of general
manager, who is often the owner and supplier of capital, and due to small businesses managerial and structural traits, marketing planning in small businesses should
be uniquely adapted to them. Small businesses often lack managerial and marketing skills, lack and misuse time, and are unable to employ experts (Tate et al., 1975
in Carson and Cromis, 1989). While large businesses focus on achieving efficient
coordination of specialists, small business managers need to be “general specialists”
whose focus is on pragmatic use of problem solving techniques (Schouhammer and
Kuriloff, 1979 in Carson and Cromis, 1989).
Therefore, for effective conduction of marketing process in small business, tools
are needed that are clear, intuitive, not time consuming nor too formalized, and
most of all, practical. In this paper a brief overview of Dibb and Simkin Buying

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proforma (Dibb and Simkin, 1996) will be provided. Continuing on Dibb and
Simkin Buying Proforma, a tool for developing actionable marketing programmes
for small businesses will be described, along with the seven stage process for tool
usage.
THE BUYING PROFORMA

Buying proforma is a marketing practitioners’ tool initially created by Dibb and
Simkin to help in marketing planning process by outlining the buying process in
a way to help managers develop a deep understanding of their customers and their
buying process (Dibb et al, 1998). The buying proforma describes the customer,
the customer buying process and the influencing factors on the customer buying
process. Customer is described by defining the profile characteristics, needs and the
buying centre which is mostly used in business-to-business scenarios (Engel et al.,
2006; Hutt and Speh, 2006 in Simkin, 2008). Customer buying process is described
as a series of steps from becoming aware of the need, to purchasing and post-purchasing evaluation of the good or service. The influencing factors of the buying process are all causes that can influence the buying process in any of the process stages.
The proforma also visually depicts the relationship between each influencing factor
and the stage in the buying process. The buying proforma is intended to be used
within a specific market segment, and it is not possible to use one buying proforma
for describing customers belonging to different market segments. An example of the
buying proforma is shown in Figure 1.

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247

Figure 1 – The Dibb and Simkin buying proforma – example

Source: Simkin, 2008

Simkin (2008) describes the use of buying proforma in market segmentation
process as a part of a broader strategising process which must include a thorough
examination of external conditions and drivers as well as internal capabilities. Simkin argues that many market segmentation efforts fall short of their potential because of legacy segmentation which is very difficult to change in a radical way, and
so proposes the use of the buying proforma as an ‘evolutionary’ solution for market
segmentation, focusing on customer purchasing behaviour rather than business
sector or product groupings, and doing so in an iterative and non-threatening way
for managers. Therefore, buying proforma is intended to serve two purposes: to
help practitioners in conducting market segmentation and, as initially conceived,
to help in marketing process.
The buying proforma has some limitations in several areas that are important to
small business practitioners. Although it is intuitive and simple, the relationship between influencing factors and the buying process can be hard to understand in cases
when there is a greater number of influencing factors in buying process, resulting in

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cluttered visual representation in forms or arrows. Further, there is no indicator of
relative importance of each of the steps in the buying process, neither an indicator
of relative importance of the influencing factors on the buying process.
The entire model is mostly descriptive and it serves well its intended purpose as
a help in developing marketing plan and as a tool for evolutionary market segmentation. However, if we want to move to the next stage in small business, which is to
develop an actionable marketing plan, the above limitations of the model come to
play. Small businesses need a model that can help them to create a plan of actions
to improve their business.
PAMI  PRIORITIZED ACTIONS FOR MARKETING IMPROVEMENT

This paper introduces Prioritized Actions for Marketing Improvement (PAMI),
a tool designed to be of practical use for small businesses marketing and management practitioners. The purpose of PAMI is to offer a solution for managers which
will use the Dibb and Simkin buying proforma as well as all the outputs from
the strategising process as inputs into the process, and will produce the actionable
marketing plan for a small business as a result. As already stated, the strategising
process for small businesses should be clear, intuitive, not time consuming nor
too formalized, and most of all, practical. The entire strategising process for small
businesses is not in the scope of this paper. This paper focuses on bridging the final
results of strategising process to actionable marketing plan. An example of PAMI
tool is shown in Figure 2.

Figure 2 – PAMI tool – example
Marketing budget available

1 00.000

Upgrade company
web

Search engines
optimisation

Advertise

parform personal
marketing

Produce marketing
materials

Gain publicity,
success stories

Organize events,
users education

ACTION ITEMS

RELATIVE
IMPORTANCE
THE CUSTOMER BUYING PROCES
TOTALS
1 . Need Awareness
50%
4
3
3
8
3
21
2. Development od customer's specification
30%
6
3
4
8
3
6
30
3. Finding Products / Suppliers
1 0%
3
2
7
6
4
22
4. Evaluating and choosing products / suppliers
1 0%
2
3
2
7
Pondered importance (scale)
1 00%
4,1
2,6
2,9
7,4
3,0
0,4
2,0
22
Pondered importance (share)
1 8%
1 2%
1 3%
33%
1 3%
2%
9% 1 00%
Initial budget allocation 1 8.304 1 1 .607 1 2.946 33.036 1 3.393 1 .786 8.929 1 00.000
Final budget allocation 1 0.000 1 0.000 28.000 42.000 1 0.000
0
0 1 00.000

Source: Author’s illustration

PRIORITIZED ACTIONS FOR MARKETING IMPROVEMENT: A TOOL...

249

THE REQUIRED SEVEN STAGES FOR USING PAMI

Prerequisite for using PAMI is that strategizing and marketing planning process
must be accomplished, including market segmentation if needed. The Buying proforma has to be developed for all targeted market segments, since the buying proforma is the very starting point. However, not the entire strategising process needs
to be formally defined in form of a written document, but it is important that all
of the participants of the process have awareness and knowledge of the business
strategic position and the future direction. PAMI has to be used separately for every
market segment. The seven stages of the process are:
1. Gather the team
The involved team should have cross-functional participants from general management, marketing, sales and customer related operations. It has to be assured that
all internal knowledge and power structures be involved, to use that knowledge
in the process but also to ease the implementation later. In small businesses many
functions can be combined in several, sometimes even only one person, so the team
could be pretty narrow.
2. Define the relative importance of each step of the buying process
By completing the buying proforma, the team has described the buying process
for every market segment. Now a relative importance indicator for every step of
the buying process has to be assigned. This indicator shows how important for the
company performance is to influence each specific stage of the buying process. For
example, if a company is in a relatively new market with small numbers of competitors and customers are not even aware of the goods or services in the company’s
offer or the competition, probably the most important stage to influence would be
to make customers aware of their needs. On the other hand, if the company is selling a commodity product for which there is a clear need for on the market and the
competitors are known, the greater relative importance would probably be placed
in the later stages of the buying process. A percentage point between 0% and 100%
has to be assigned to every stage of the buying process in such a way that they summarize to 100%, since this is an indicator of relative importance on the success of
the buying process. Location in PAMI table for entering thin values is shown with
the indicator of the stage number in Figure 3 (also shown for stages 3, 4 and 5).

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3. Define the action items
The buying proforma lists the influencing factors that have influence over one
of more of the buying process stages. Influencing factors are descriptive, and we
need to take them into account and produce a list of action items that influence
the influencing factors which will then influence one or more stages of the buying
process. For example, if we detected in buying proforma that one of the influencing
factors is the company salesperson’s direct communication with potential clients,
than possible action items could be: hire another sales person, educate our sales
force for better sales skills etc. Or, if the influencing factor is ranking on the Internet search engines, then possible action items could be: optimize company web site
for search engines. The list of action items have to be developed after considering
each of the influencing factors. Some action items can influence more than one
influencing factors, and some influencing factors might not have any action items
related to them. This list of action can contain all elements of the marketing mix.
In order to keep PAMI simple, the marketing mix elements are left implicit under
the term ‘action items’.

Figure 3 – PAMI tool with indicators of location for entering data respective to stages

Source: Author’s illustration

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251

4. Define contribution importance of action items for each step of the buying process
Every action item listed should have some influence on one or more stages of
the buying process. For every action item allocating contribution importance for
its influence on each step in the buying process is needed. It is important to use a
predefined scale with clear meaning. This paper suggest the scale to be from 0 to
10, where value influence of 0 means that the action item does not influence the
stage of the process (and need not be shown in the PAMI table), value of 1 means
that the action item influences the stage of the process in a barely noticeable way,
and value of 10 means that the action item influences the stage of the process in a
way that could be described as a breakthrough improvement.
5. Enter budget and do the calculations
The available budget has to be entered in the PAMI table. The budget entered
does not need to be a strictly formal budget since many small businesses are not
budget-based – it can be a managers’ estimate of how much funds is the company
willing and able to invest into marketing for the upcoming period. All the calculations need to be performed. If spreadsheet software is used, all the calculations can
be performed automatically. The following values are to be calculated per every
action item: action item pondered importance (on scale), action item pondered importance (share), and initial budget allocation. In this way, the calculations reflect
the overall importance of every action item to the entire buying process.
6. Analyze the results
Analyse the proposed results. Action item pondered importance shows the values on the scale from 0 to 10, which indicates the absolute pondered importance
of each action item on the entire buying process, where the meaning of values on
the scale are identical as described in stage 4. Respectively, action item pondered
importance is a percentage value that shows the relative share of impact on the
entire buying process in relation to all proposed action items. It is a relative indicator showing what percentage of influence is to be achieved by realising this action
item in relationship to the influence that would be achieved if all action items
are achieved. Finally, analyse the proposed budget allocation. These values are derived by multiplying the marketing budget available with the pondered importance
(share) of each action item. It serves as an indicator of the budget that would be
available to specific action items if the budget was to be allocated in relation to the
pondered importance of every action item. This should be seen just as a help in de-

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fining the real budget for action items. Also, from the ‘Totals’ column it is possible
to see the proposed total influence of action items to each stage of the buying process. If some of the stages are neglected, some more action items could be thought
of for that specific stage.
7. Consider other factors and devise the final actionable marketing plan
When deciding on the real action items that are to be conducted and the real
budget to be allocated for each specific action item, it has to be remembered that
PAMI has several shortcomings. You have to consider at least the following, which
is not contained within the tabular representation:
● Some action items can be done only completely or not done at all, while initial

market allocation might have allocated only a part of the budget needed. For
such items a decision has to be made whether they be planned in total or not
at all. For example, when producing marketing brochures, producing 60% of
it would not make any business sense and would not yield any value.
action items might per se not be of significant value, as would show
within the tabular representation. However, they might be an important prerequisite for some other activities, which is not represented in the table.

● Some

● Some

action items might require other non-financial resources (for example,
some scarce employee time). If we do not have available enough of these resources, it would make no sense allocating only financial resources.

● There

might be synergies between different target market segments if business
has more than one segment. This tool is designed to help choose priorities and
allocate funds within one market segment. This is one of the reasons why this
tool is designed for small businesses – they tend to have smaller amount of
market segments so this tool can be of help.

Other factors might come to play which may or may not be company specific.
PAMI is, just like other management tools, not a substitute for thinking – rather,
it is a tool designed to help in thinking, analysing and decision making. After giving thought to all these considerations, the actionable marketing plan with budget
allocation can be produced.

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253

CONCLUSION

Small businesses are pragmatically concerned with increasing sales and decreasing costs. Marketing is about the former. By conducting the strategic process and
using the Dibb and Simkin buying proforma, managers get and show a thorough
understanding of the buying process of their target market segments. Ideally, in
order to increase sales, all the stages of the buying process need to be influenced. To
do so, action items are listed. However, the resources are scarce, so managers must
choose which action items to perform and how much of the available resources
would have to be allocated to each action item. PAMI is a management tool for
small businesses designed to help in this thinking, analyzing and decision making.
PAMI is used in seven pragmatic and intuitive steps, starting with team gathering, proceeding to defining relative importance of each buying process stage, defining the action items and their impact to each buying stage, entering available budget and performing calculations, and finishing with analyzing the proposed results,
bringing into play some qualitative issues and producing the actionable marketing
plan with allocated budget.
PAMI makes sure that decision maker has a clear indicator of value of each proposed action item to specific stages of target segment buying process as well as the
buying process as a whole, and therefore serves as input to the thinking, analyzing
and decision-making process for small businesses.
BIBLIOGRAPHY

1. Angwin, D et al (2008), The Strategy Pathfinder, Blackwell Publishing, Oxford
2. Carson, D. and Cromie, S. (1989), Marketing Planning in Small Enterprises:
AModel and Some Empirical Evidence, Journal of Marketing Management, 5,
No.1, 33-49
3. Dibb, S. and Simkin, L. (1996). The Market Segmentation Workbook: Target
Marketing for Marketing Managers, Thomson, London
4. Dibb, S., Simkin, L. and Bradley, L. (1998), The Marketing Planning Workbook, Thomson, London
5. Dibb, S, Simkin, L., Pride, W., Ferrell, O. (2006), Marketing Concepts and
Strategies, Houghton Miffin Company, USA

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6. Engel, J.F., Blackwell, R.D. and Miniard, P.W. (2006), Consumer Behaviour,
West, Fort Worth, TX.
7. Grant, R (2008), Contemporary Strategy Analysis, sixth edition, Blackwell Publishing, Oxford
8. Hutt, M.D. and Speh, T.W. (2006), Business Marketing Management: Strategic View of Industrial and Organisational Markets, South Western, Cincinnati,
OH.
9. Schouhammer, H. and Kuriloff, A. (1979), Entrepreneurship and Small Business Management, New York, John Wiley.
10. Simkin, L. (2008). Achieving market segmentation from B2B sectorisation,
Journal of Business & Industrial Marketing, vol. 23, issue: 7, pages 464-474,
ISSN: 0885-8624; Emerald Group Publishing Limited
11. Tate, C. E., Megginson, L. C, Scott, C, R. and Trueblood, L. R. (1975), Successful Small Business Management, Dallas, Texas, Business Publications.
12. Van Auken, P.M., & Ireland, R.D. 1980. An input-output approach to practical small business planning. Journal of Small Business Management, 18(1):
44-50.

STRATEGY FOR THE DESTINATIONAL EMARKETING & SALES

255

STRATEGY FOR THE DESTINATIONAL
EMARKETING & SALES
Zlatko Šehanović
Ekonomski fakultet Osijek
Giorgio Cadum
Ekonomski fakultet Osijek
Igor Šehanović
Ekonomski fakultet Osijek

SUMMARY

Every tourist destination should make and implement a destination’s marketing
and sales strategy. A very important part of destination’s sales and marketing strategy is the e-marketing and sales strategy. The cooperation of specialized regional development agencies, regional tourist board, local (city and county) tourist boards,
hoteliers, tourist agencies, conservators, entertainment and cultural program developers, private accommodation owners and others involved in creation of destination’s overall offer, is essential for strategy creation and implementation. This paper
gives an overview showing one of many possible paths for creation of destination’s
e-marketing and sales based on Istrian region example.
JEL clasiffication: L81
Key words: strategy, SWOT analysis, benchmarking analysis, on line presence,
interactive marketing communication

1. INTRODUCTION

Strategy for destinational marketing & sales and possibilities from informational
technology are merged into a single destinational strategy for e-marketing & sales.
When developing destinational e-marketing & sales strategy one starts from the existing situation, needs and profitability of developing all segments of the destinational
e-marketing & sales. In addition to strategy of destinational e-marketing one has
to take into consideration interests of all interested parties involved in the strategy.

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Zlatko Šehanović • Giorgio Cadum • Igor Šehanović

Positioning is the act of shaping the offer and the image so that they take a crucial
and outlined competitive position in the conscience of the target market (Kotler,
2001. page. 295.). Strategic decisions attached to development of destinational emarketing & sales attempt to narrow down the wide area of possible application of
the e-marketing & sales strategy. Thus every destination as main strategic decisions
selects its areas of development actions for e-marketing and sales based on its own
success criteria. Strategic decisions also relate to the target market, positioning and
differentiation by cluster and micro destination, CRM, etc. Strategy of e-marketing
is the combination of marketing and possibilities stemming from the informational
technology to accomplish set goals. It is designed so that it takes advantage of informational technology possibilities that the specific business offers in order to accomplish set goals (Strauss, El-ansary, Frost, 2003. str.24.). Therefore, e-marketing
strategy is the basic document for e-marketing activities realization. Defined as the set
of current and planned goals, resource usage and interaction of the company with the
market, competition and other society factors, it answers the three basic questions:
What (goals); Where (what service and what market are the strategy focus); and How
(what resources and activities will accomplish the market success).
2. SWOT ANALYSIS

SWOT analysis lists internal strengths and weaknesses as well as outside threats
and opportunities. The goal of the SWOT analysis is not only listing weaknesses,
strengths, opportunities and threats related to the analyzed problem but moreover
comparison of information on internal strengths and weaknesses with information
on outside opportunities and threats resulting in a specified proposal for shaping
of a clear marketing strategy. Fast development of internet has intensified online
trading and market has globalized for all types of products and services slowly creating a virtual or electronic market (Buhalis, Dimitrios, page 38.). As a result of
new market development before marketing experts were placed new opportunities
and challenges. In order to succeed in the new electronic environment marketing
experts in tourism must adapt marketing and sales to the new electronic market.
Strategy creation in general and so the strategy of destinational e-marketing &
sales very often starts with a SWOT analysis. In order to create proposals related to
destinational strategy for e-marketing & sales first we must know the strengths and
weaknesses of the existing destinational e-marketing and sales as well as obtaining
information about opportunities and threats from the existing environment. Strategy of marketing relations can be simply explained in a sense that it is more efficient

STRATEGY FOR THE DESTINATIONAL EMARKETING & SALES

257

to invest in creating long-term relationships with clients rather than relying in a few
disconnected one-time exchanges. Nevertheless, in practice, the implementation of
such marketing strategy is not simple (Zinkhan, George, 2002, str. 83.). For this
purpose it is best to start the SWOT analysis of destinational internet pages (region
and city). Following table provides an example of such analysis:

Table 1. SWOT analysis of destinational internet pages
Strengths

Weaknesses

*CMS system is good and has possibilities for further
development
*Quality information database
*Quality information update system
*Registered and accepted recognizable domain

* Number of visits to regional web pages is small
* Domains of regional web pages have not been systematically promoted
* Portal content is insufficient based on quality and
quantity
* Regional visual identity is not present on the web pages

Opportunities

Threats

* Quality destinational web pages also build a Destination brand
* Quality destinational web page serves as a good
base for selling all parts of the tourist offer
* Quality destination web page is a good base for joint
promotion of the tourist destination as an outcome
of cooperation between private and public sector

* No content and no activity in selling by destinational
portals creates assumptions for development of uncontrolled private portals that take a more significant place
online creating chaotic and for the tourist offer - the
most expensive marketing and sales.

Source: personal analysis & usage of www Tourist Boards (see bibliography), 2009.

After making a SWOT analysis it is necessary to set the goals of the destinational
e-marketing and sales strategy. Goals have to be set so that they provide answers
to the questions, what needs to be done, when and how much. For example goals
of the destinational sales and e-marketing strategy can be: strategy of destinational
e-marketing and sales should provide as much as possible destinational experience
in all its important segments and therefore improve the destinational brand building, different marketing activities should achieve the level of internet page visits
to about 30.000 visits per day, making different portals with possibility of selling

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Zlatko Šehanović • Giorgio Cadum • Igor Šehanović

all (accommodation, tourist, cultural.....) tourist content, making a wide information database as a support for the CRM, regularly update information about the
destination.
3. BENCHMARKING ANALYSIS

Benchmarking analysis encompasses best practice concept in the area of destinational web page development. Benchmarking is a sophisticated method of discovering areas that will be upgraded - from simple, such as sending orders and product
development, to more complex, such as ensuring quality, customer satisfaction and
managing resources (Schwartz, 1998, page 51.) With this purpose in mind it is
necessary to select a larger number of destinational web pages in different destinations worldwide (Italy, Tuscany, Provance, Rome, Spain, Greece, France, Portugal
and others). Analysis has to include elements such as web page map, main chapter
listings, entry pages, destination description, accommodation display, hospitality,
cultural and other content within the destination, organization of destinational
activities, accommodation reservation, transport organization, other searches, multimedia, CRM and more. Based on the previously listed elements a most acceptable
solution is selected and as such it serves as a base for development formulation of
the destinational e-marketing and sales strategy. As an example a sample of the
existing status of destinational web pages was analyzed, results were commented
based on the existing situation and expert opinion and best use concept recommendation in this area was made. Research included the web pages for destinations:
Spain, Costa del Sol, Malaysia, Ireland, Dubai, Greece, Wien and Portugal.
4. BENCHMARKING ANALYSIS CONCLUSIONS

Comparison of eight tourist board web pages (Spain, Costa del Sol, Malaysia,
Ireland, Dubai, Greece, Portugal, and Wien) and analysis of the obtained information resulted in Spain being the best example of a tourist destinational web page.
Spain’s web page is attributed with ideal ratio of content amount and information required for a potential destination visitor. There are many possibilities that
include efficient search of all information types (clusters based on different parameters, accommodation, transport, etc.). Efficient trip plan organization and obtaining many practical information for the user is easy. Simple use and navigation of
the web pages makes them very user friendly. Possibilities for easy communication
for all additional contents and questions exist and all are crowned by a superb and

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very clear visual design. In addition, web pages of Ireland, Malaysia and Portugal
stand out as successful examples of destination internet presentation although they
fall behind Spain in many specific (above explained) segments.
5. TARGET MARKET

Within the context of e-marketing and sales target markets are characterized
by language type segmentation. Therefore content on destinational web pages has
to be offered in Croatian, Italian, English, German, Czech and other languages.
The existence of variables within the targeted markets have to be respected while
developing destinational web pages like the different age structure of internet users that relates to the intensity, capabilities and habits of internet users. Internet
has become the dominant informational tourism marketing channel. It is twice as
popular as any other information source. Searching information by using internet
while selecting the next destination strongly affects the decision making process.
Stunning 48% of tourists uses web as primary information source, 20% friend recommendations, 10% special offers, and only 9% classical tourist agencies (Country
Brand Index 2005, page 7.).
Internet role in marketing is as follows:
● reaching the market (internet makes it possible to reach more guests than by
using classical channels);
● presenting the offer (information is available 24 hours a day);
● selling content (transaction is simpler for the end user and for the provider);
● keeping the existing customers (CRM possibilities are larger and more cost
effective at the same time)
● building brand image (internet application presents a competitive
advantage).
Let us examine the Istrian example. Regional web pages should, for example,
have a cluster classification or areal division within the region. Clusters are differentiated based on the tourist offer, geographical characteristics, cultural and historical
localities, etc. Additional division within the cluster is required and based on micro
destinations such as cities and/or tourist towns. Previously mentioned is important
because of the differences within a larger area such as tourist regions, and the same
conditions the need for cluster recognition and positioning of clusters and micro
destinations on the tourist market. Managing consumer or customer relations is an

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obligation part of today’s e-marketing and sales. Basis for CRM is the existence of:
customer database, web pages that are adaptable to the different aspects of customer demands and e-mail. CRM serves as a tool for establishing guest contact, offer
presentation, guest stimulation to choose a specific destination and creation of destination loyalty. In conclusion, for a qualitative approach to strategic e-marketing
and sales one has to define the system parts within its business sphere and this can
be: offering accommodation, food, beverages..., local tourist boards, destinational
tourist board, destinational info center, companies that deal with destinational
strategy, business partners (tourist agencies for example), media, guests.
6. STRATEGIC DECISIONS FOR DESTINATIONAL MARKETING AND SALES

Possibilities for applying e-marketing are very wide thus the task of every decision making strategy on appropriate activities for the business whose processes are
being analyzed. Strategic decisions for e-marketing of Istria contains Target Market,
Positioning and Differentiation, Customer Relations Management CRM, Business
Model, Levels of E-marketing Representation, Organizational Structure and Decisions on the Marketing Channel Modification, Target market decision making is
equally important for both marketing and e-marketing strategies. During segmentation precise variables are applied in order to define segments while at the same
time influencing the e-marketing activities. Selected positioning determines the
structure and content on the web pages that will, for example, be presented on a
cluster level. By e-marketing activities and specially while structuring web pages, it
is important to involve a micro destinational presentation.CRM in the electronic
environment is a crucial element of e-marketing that includes integrated marketing databases, web page personalization, e-mail personalization and other processes
aimed at CRM goals realization with respect to lowering operational expenses. Internet business model are company methods intended to realize long-term profits
by using internet. (Affuah, Tucci, 2003, page 7.) The goal of this approach is to
unify the entire offer for a destination on the web pages (with all relevant information about the offer) but also to differentiate those who support e-marketing activities with higher amounts of invested resources. Using brand additionally motivates
the providers to fulfill of high quality standards that in return achieve higher levels
of quality for the entire destination. Web pages, as the central place for e-marketing
activities represent the biggest challenge for the e-marketing strategy. It is important to define relationship of the involved forces and set accountability for activity
coordination. E-marketing application For Istria introduces a new channel of sales

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and distribution. Nevertheless it is crucial to decide to what level the possibilities of
the electronic distribution channel will be exploited.
7. MODELS FOR EMARKETING STRATEGY CREATION

Integration of e-marketing strategy into marketing strategy presents a challenge for numerous organizations especially because those two strategies are created
separately and without joint coordination. However, the growing importance of
internet and its influence on doing business demand an integration of strategies.
Strategy integration and activities coming from it also cause a necessity of high level
cooperation between the Tourist Board, local Tourist Boards, Offer Components
(hotel business, private accommodation, and activity organization) and outside
partners. Model for creation of e-marketing is the essence of methodological frame
for e-marketing strategy creation. As such it is based on the theory contributions
of authors in the area of e-marketing and it is adapted to destination specific situation. First step is to conclude that the strategy of e-marketing is part of the destinational marketing strategy. Marketing strategy is under direct influence of goals and
strategy of the destination, making internal elements that affect the e-marketing
strategy. On the other hand external influencing factors are the SWOT analysis for
needs of the e-marketing and completed benchmarking analysis. Integration of emarketing strategy into marketing strategy presents a challenge for numerous organizations because those tow strategies are often created separately and without joint
coordination. Moreover, the ever growing importance of internet and its direct
effect on the business condition strategy integration. Marketing strategy as a factor
of internal influence defines the three functional elements: Market Segmentation,
Targeting and Positioning.
8. RESEARCH RESUTLTS

8.1. Future demands modifications of marketing channel sales in a way that web
pages of a country and a reservation system of main offer components (i.e. hotel
chains) or in order to set up a uniqe online reservation system on a destinational
leve.
8.2. Proper e-marketing strategy creates a foundation for realzation of e-marketing
activities.
8.3. Strategy application is a logical next step that will result in fulfillment of
planned business goals. In order to manage this sequence efficiently it is important

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Zlatko Šehanović • Giorgio Cadum • Igor Šehanović

to define a step by step (detailed) activity plan with instructions for their realization. These instructions include organization of resources utilization with aim to
meet strategic goals.
8.4. Since internet has to be available 24 hours per day, 7 days a week, destinations
have to direct significant marketing efforts in creation of contemporary and wholesome presence online that offers not only detailed destinational information but
also communicates a unique experiene.
8.5. Internet as a channel offers the possibility of strenhtening the relationship with
consumers before the visit
9. RESEARCH METHODOLOGY

During research we used the methods of analysis, description and comparison
of web pages for domestic and international destinations as well as using various
literature sources. In addition, observation method was used for international visits
to tourist destinations.
10. CONCLUSION

All parts of the tourist offer system have to be present within the strategy of
destinational e-marketing and sales. These parts create a new destinational marketing and sales channel causing a sense of product recognition and trust for guests.
Different approaches in presentation of the regional parts of the tourist offer are
possible on the web pages. The approach on a more simple level may be financed
from the sojourn tax budget. A complex level can be financed from the previously mentioned source and with additional funds from budgets of the local tourist
boards, accommodation owners, hotel companies, etc. In order to manage effectively a complex system of destinational e-marketing and sales it is necessary to
establish a clear organizational structure. Various solutions for organization and
management of destinational web pages exist. However in its essence there should
be a head coordinator (editor) of destinational web pages who at all times has access and the ability to coordinate information, offer and news. Speed of modern
media allows us not only to get the right information at the right time but also to
immediately forward it to our guests or share it with potential visitors. In conclusion, a successful strategy for the destinational e-marketing & sales creation process
has to involve all regional key players in order to maximize the existing resources

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and bring the best possible economic growth to the destination focused on the long
term positive effects.
BIBLIOGRAPHY

1. Affuah, A., Tucci (2003). Internet Business Models & Strategies, McGraw-Hill,
2. Buhalis, Dimitrios (2003). eTourism, Prentice Hall, Harlow,
3. Country Brand Index (2005). FutureBrand
4. Zinkhan, M., George (2002). „Relationship Marketing: Theory and Implementation“, Journal of Market-Focused Management, Vol. 5, str. 83.
5. Schwartz, K. D. (1998). benchmarking for dollars, Datamation br. 2.
6. Strauss, J., El-Ansary, A. (2003). Frost, R.: E-marketing, Prentice Hall.
7. http://www.spain.info, ( 10.3.2010 )
8. http://www.visitacostadelsol.com, ( 10.3.2010. )
9. http://www.tourism.gov.my, ( 10.3.2010. )
10. http://www.discoverireland.com, (10.3.2010.)
11 .http://www.dubaitourism.ae, (10.3.2010.)
12. http://www.gnto.gr, (10.3.2010.)
13. http://www.vienna.info, (10.3.2010.)
14. http://www.visitportugal.com, (10.3.2010.)

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264

MOTIVATIONAL COMPENSATION  A FACTOR IN STAFF
TURNOVER IN RETAIL ORGANIZATIONS
Željko Turkalj, Professor
Ivana Fosić, Assistant
Davor Dujak, Assistant
Faculty of Economics in Osijek

ABSTRACT

The most important factor in any organization is its employees. Due to rapid
changes in global business, employees are facing increasingly complex requirements.
If misunderstandings and indifference towards the importance and impact of motivation prevail in an organization, this will inevitably create tension in the work
environment; employees will become unmotivated, and therefore less efficient. All
this will lead to lower quality of products and services, reducing the organization
profitability, but also to undesirable staff turnover. Within retail trade especially
high staff turnover is recorded, and the growth trend can only increase costs for
retail organizations. Employers must become aware of the positive correlation between employee satisfaction and profitability in retailing, where it is important to
match well-organized business with adequate financial support for employees.
This paper explains motivational compensation that reflects financial (direct and
indirect) and non-financial motives for work, with special emphasis on its influence
on staff turnover within retail organizations. We also want to investigate the presence and level of motivational compensation within retail organizations in Eastern
Croatia as compared to other activities. Furthermore, we will look into the extent
of staff turnover in retailing, as well as its main reasons.
JEL clasiffication: L81, J33
Keywords: motivational compensation, retail trade, staff turnover, staff turnover cost.

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1. INTRODUCTION

Employees are the key factor in any organization. Change of jobs within a company or somebody leaving the company can sometimes have beneficial effects on
its operations, but if this happens very frequently we speak of high staff turnover,
which is something most companies try to avoid. If an organization shows lack of
understanding or disregard for the importance and impact of motivation, tensions
can arise, employees become unmotivated, and thus less efficient, which can all lead
to lower quality of products and/or services, lower company profitability, but also
higher staff turnover. These trends are particularly noticeable in retailing, one of the
crucial economic branches. In further text we will explain motivational compensation that reflects financial (direct and indirect) and non-financial motives for work,
with special emphasis on its influence on staff turnover within retail organizations.
We will also explore motivational compensation within retail companies in Eastern
Croatia in comparison with companies in other industries, as a key factor of staff
turnover level in retailing.
The research aims to investigate two hypotheses.
H1: High staff turnover has no positive effects on business.
H2: There is a negative correlation between motivational compensation rates
and staff turnover.
The first hypothesis (H1) will be examined on the basis of secondary data, and
the second one (H2) on the basis of primary research.
2. MOTIVATIONAL COMPENSATION

Employee rewards can lead to better performance and employee satisfaction:
When the staff views them as fair, when they are related to efficiency, and chosen
according to an individual’s needs (Robbins, 1992: p. 250). For an employer to
decide how to distribute rewards to their staff, work performance has to be assessed.
The intention of performance assessment is to measure how much has an employee
contributed to achieving the assigned goal within a certain time period. Performance assessments provide relevant information to company management in order
to make decisions on important issues such as promotions, transfers or termination
of employment for their staff. After performance assessment the management can
decide on rewards that are aimed at keeping the staff highly motivated. In deter-

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266

mining awards, one has to take into consideration an employee’s dedication, years
of service, skills, difficulty of tasks and ability to take decisions independently.
Consequently, the emphasis should be on motivational compensation that reflects both financial (direct and indirect) and non-financial motives for work, i.e.
rewards, as shown in Figure 1.

Figure 1. Motivational compensation
Internal and external environment
Motivation compensation
Non-financial

Financial

Directly
Salary
Honorarium
Travel
Expenses
Representation

Indirectly
Social taxes:
Retirement foundation
Social assurance
Traineeship
Assurance:
Life, health
Holidays:
Vacations, short holidays, off period, tenement loan

Job
Interesting tasks
Challenge
Responsibility
Self approvement
Traineeship
Promotion
Achievement
Contacts

Working environment
Company policy
Management
Assistans
Status
Working environment
Adjustable working
time
Shorter working week
Work distribution
Food
Work at home

Source: according to Marušić, S.(2001). Upravljanje ljudskim potencijalima, Adeco, Zagreb, p. 267

“Material, i.e. financial compensation comprises different forms of motivation
aimed at securing and improving employees’ material status and financial compensations for the work done.”
(http://www.poslovniforum.hr/management/motivacijske_tehnike.asp) Material
compensations are the basis of the motivation system.

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267

Figure 1 shows that financial compensations can be divided into two basic
groups:
1. Direct financial, i.e. money gains for the employee (income, fees, travel expenses and expense account).
2. Indirect financial gains that raise employees’ material standards, received as a
result of becoming an employee in this organization and unrelated to performance. These include: social benefits (pension fund, social security), education, insurance (life, health), days off (annual leave, short leaves, sick leaves)
and housing loans.
Viewing the classification of material compensation from the standpoint of the
company, it can be seen that material rewards are related to the organizational level,
and are distributed according to organizational programs or policies, as well as success in goal attainment.
(http://www.poslovniforum.hr/management/motivacijske_tehnike.asp)
The purpose of non-material or non-financial compensations is to provide incentives for work that meet a range of employee needs. As shown in Figure 1, these
compensations can also be divided into two groups.
The first group includes interesting tasks, challenge, responsibility, self-realization, training, advancement, achievement and contacts. The second group is
comprised of company policies, leadership, co-workers, status, working conditions,
flexitime, shorter work week, division of work tasks, office canteen and work from
home.
Numerous non-material strategies have been developed in organizations, such
as job design, management style, worker participation, management by objectives,
flexitime, recognition and feedback, organizational culture, training opportunities
and career development etc., which, together with material strategies, make up a
complex motivation system.
(http://www.poslovniforum.hr/management/motivacijske_tehnike.asp)

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3. STAFF TURNOVER IN RETAIL ORGANIZATIONS
3.1. Retailing – its place and role in modern supply chain

Retailing is a division of commerce as an economic activity1. Retail, retail trade,
or retailing are terms frequently used in English as synonyms. According to Levy &
Weitz, retailing2 is “the set of business activities that adds value to the products and services sold to consumer for their personal or family use” (Levy&Weitz, 2009: p. 6), and
consequently a retailer is „a business that sells products and/or services to consumers for
their personal or family use“ (Levy & Weitz, 2009: p. 7). It is this direct contact with
the final consumer that distinguishes retailers from any other supply chain participant3. The mediator role, i.e. being the organization that can most swiftly gauge the
mood and changes in consumer behaviour (insight into demand by final consumers
of products and services is the most valuable information in the supply chain) gives
retailers great power when dealing with producers or service provides. Considering
its position in the supply chain and the daily fresh information it receives, retail trade
aims to not only manage, but also to partly or completely create the supply and the
demand sides of the supply chain. On the supply side, retail operators choose the
channels through which they will buy the goods, and on the demand side they choose
the channels (mostly according to customers’ demands) through which they will sell
and distribute products and services to final consumers. By connecting diverse and
frequently numerous supply chains they “weave” their supply nets. It is thus justified
to speak of Retail Supply Chain Management, i.e. Retail Supply Chain Net (see more
Ayers et al, 2008).
3.2. The problem of staff turnover in retailing

When speaking of motivation, it should be pointed out that this issue is more
commonly a problem at lower operational levels. Whereas middle and top management positions are filled by people chosen for their competence and motivation
to show it, people who get adequate compensation for their work, in the shop
itself problems arise more often than not. Unfortunately, salaries for shop assistants
1

2

3

For a modern definition of commerce see Segetlija, Z. (2006). Trgovinsko poslovanje, Ekonomski
fakultet u Osijeku, Osijek, p. 21
The English retail is derived frm the French word retailleir for ‘cut off a piece’ or ‘break down to
smaller pieces’, according to Levy & Weitz, 2009, p. 8
Although other participants can partly sell products and/or services to final consumers for their
personal or family use, retailing is the only one that does this as a basic and main activity.

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269

and other shop workers are not only lowest in retail companies, but are frequently
among the lowest in overall economy. According to a research by the web portal
MojPosao.hr, the average salary in retailing in Croatia is as much as 25.8% lower
that the overall average salary in the country4. Keeping in mind that these are
average values, we have to remember that salaries for shop workers are lower by
additional 40%.
The significance of this problem is immense. A number of studies has shown
that shop workers are generally very dissatisfied which causes nor only a decreasing
profitability in retailing (Keiningham et al, 2006.), but also a high staff turnover.
According to ACNielsen, annual staff turnover in an average shop can exceed 100
% (ACNielsen, 2006: p. 168), whereas Microsoft claims that it can be as high as
170% in a single year5. Consulting Group (an American consultancy company)
has stated that annual staff turnover in American retailing used to be under 70%,
whereas today the number can go as high as 300% in the case of employees in direct contact with customers, i.e. non-managerial staff working in shops (according
to Holman/Sheldon/Buzek, 2005).
There are numerous reasons for such a huge labour drain from the shops:
● Unsatisfactory remuneration – economy sector with very low salaries,
● Extended working hours with very little leisure time,
● Physically strenuous work,
● Continuous additional training required,
● Stress due to direct contact with customers,
● A great number of temporary workers or those who are not serious about their
job, etc.
Apart from employees being dissatisfied, high staff turnover also causes great
concern for employers – predominantly large retail chains. The annual cost of retailing staff turnover in Australia amounts to 379 million dollars, whereas a study
by Coca-Cola states that in the year 2000 an average supermarket had costs related

4

5

http://www.ured-ravnopravnost.hr/slike/File/MojPosao-Rezultati_Istrazivanja_o_visini_
placa_2008-2009.pdf (10 Dec. 2010)
http://www.microsoft.com/industry/retail/businessvalue/workforcemanagementarticle.mspx
Dec. 2007)

(10

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Željko Turkalj • Ivana Fosić • Davor Dujak

to turnover in the amount of 198,177 dollars6. In addition to huge costs, there is
also a question of time and effort lost or wasted. New forms of retail activities such
as category management require employees to go through additional training and
develop new competences. For example, it will take some time to train the staff how
to implement and maintain planograms, how to fill shelves regularly and, generally, how to keep their shop in a condition envisaged by e.g. category managers. If a
shop is not laid out nicely, the sales results will be far from expected. Furthermore,
in shops with tens of thousands SKUs7, numerous operations are carried out related
to logistics, sales promotion, record-keeping and control, as well as the process of
buying and selling. The requirements posed to shop assistants and other shop workers are growing daily. Frequent changes and new employees make it more difficult
to meet all these requirements, which is automatically reflected on sales results. All
these indicators confirm the first hypothesis (H1) that high staff turnover will have
adverse effects on business.
4. CASE STUDY  USING MOTIVATIONAL COMPENSATION IN RETAILING

We have established above that retailing is a peculiar economic sector in that
its staff turnover is among the highest, and its employees’ salaries are among the
lowest in the whole economy. We carried out some additional research to find out
the extent of motivational compensation in the examined retailer, and compared
it with employees in some other economic sectors. We included in the research
employees at all hierarchical levels in four economic entities: a retailer (organization
A) and three non-retailing organizations (manufacturing industry, publicly-owned
utility company, and higher education institution). To facilitate the comparison,
we took the average results of the latter three and marked them as organization B.
The research was carried out by means of a questionnaire, and employees received
them personally. The questionnaire items were measured by closed-ended responses
with predefined modality features. We will single out the results that are relevant
for the topic of the paper.

6

7

Report into finding and keeping good people in the retail sector, A report by the Australian Retailers Association, the Federal Department of Employment and Workplace Relations Work and Family Unit, and the Equal Opportunity for Women in the Workplace Agency.
http://www.eeo.gov.au/Information_Centres/resource_centre/eowa_publications/Balancing_the_
Till/Balancing_the_Till.pdf of 27 December 2007
Stock Keeping Units

MOTIVATIONAL COMPENSATION  A FACTOR IN STAFF TURNOVER IN RETAIL...

271

We will focus here on the results related to financial and non-financial compensations. Regarding financial compensations, we asked employees in a retail chain
whether they were satisfied with the fairness of rewards, i.e. salaries, as related to
work performance. Graph 1 clearly shows that the majority of employees in the organization A (36.2%) believe that rewards were not distributed fairly in relation to
work performance, whereas the results for employees of the examined organization
B are opposite, with almost 30.7% employees stating that the salaries were fair and
proportionate to work performance.

Graph 1. Fair distribution of rewards (salaries) related to work performance

Source: authors’ own research

In the area of non-financial compensations, the most interesting responses referred to education and training programmes within the organization.
In terms of employee training, the analysis yielded very poor results. Looking
at the below stated forms of additional training (Graph 2), the largest percentage
of employees who have never taken part in any such programmes are found in the
group of in-house training (57%). The percentage of those who have never taken
part in a professional conference is 43.3% ; there are 69.8% of those who have never attended a seminar at the local university, 56% of those who have never attended
a specific training course, and 93% of those who have not had access to education

272

Željko Turkalj • Ivana Fosić • Davor Dujak

programmes abroad. Despite all this, the majority of employees study the literature
related to their work on their own (34.1%).

Graph 2. Education and training programmes within the organization

Source: authors’ own research

The retail organization, which exhibited by far the highest staff turnover among
the four economic entities included in our research, had employees who were receiving extremely low non-financial compensations. This then confirmed the second hypothesis (H2).
5. CONCLUSION

What are retailers to do? Organizations need to become more aware of correlations between employee satisfaction (expressed also as lower staff turnover) and
profitability. In retailing it is important to coordinate sound business organization
with adequate financial compensation for employees. In addition, shop workers
need to understand the principles of modern retailing in order to be more successful in their work, and thus more satisfied. This is where non-financial motivational
compensations become prominent.

MOTIVATIONAL COMPENSATION  A FACTOR IN STAFF TURNOVER IN RETAIL...

273

Ad additional way for retailers to tackle the problem of high staff turnover is to
introduce new technologies which can reduce staffing needs. Some of the technologies currently tested by retailers are Radio Frequency Identification, Smart Shelf
Pads, Personal Shopping Assistant, Self-Checkouts, Smart Scales, etc8. The introduction of such technologies almost always implies ethical dilemmas arising from
substituting people with different software and hardware. One line of thinking
argues that new technologies are introduced under pretence of enhancing shopping
experience, while they are primarily a means to cut the costs for the organizations
that have embraced them.
REFERENCES

1. ACNielsen, with Karolefski,J., Heller, A.(2006). Consumer-centric category
management : how to increase profits by managing categories based on consumer needs, John Wiley & Sons, Inc., Hoboken, New Jersey, ISBN:978-0471-70359-4
2. Ayers, J.B., Odegaard, M.A.(2008) Retail Supply Chain Management, Auerbach
Publications, Taylor & Francis Group, ISBN: 978-0-8493-9052-4
3. Holman, L., Sheldon, J., Buzek, G. (2005): The Future of Workforce Management, IHL Consulting Group, Franklin, SAD, http://www.microsoft.com/industry/retail/businessvalue/workforcemanagementarticle.mspx (10 December
2007)
4. http://www.future-store.org/ (10 January 2010)
5. http://www.poslovniforum.hr/management/motivacijske_tehnike.asp, (5 January 2010)
6. http://www.ured-ravnopravnost.hr/slike/File/MojPosao
Istrazivanja_o_visini_placa_2008-2009.pdf (10 January 2010)

Rezultati_

7. Keiningham, T.L., Aksoy, L., Daly, R.M., Perier, K., Solom, A.: Reexamining
the link between employee satisfaction and store performance in a retail environment, International Journal of Service Industry Management, Vol. 7, No. 1,
2006, pp 51 – 57, ISSN: 0956-4233

8

see more at http://www.future-store.org/ (10 January 2010)

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Željko Turkalj • Ivana Fosić • Davor Dujak

8. Levy, M., Weitz, B.A. (2009): Retailing Management, Seventh Edition, McGrawHill / Irwin Inc., ISBN: 978-0-07-128424-0
9. Marušić, S.(2001).Upravljanje ljudskim potencijalima, Adeco, Zagreb, ISBN:
953-97228-4-5
10. Report into finding and keeping good people in the retail sector, A report by
the Australian Retailers Association, the federal Department of Employment
and Workplace Relations Work and Family Unit, and the Equal Opportunity
for Women in the Workplace Agency prema http://www.eeo.gov.au/Information_Centres/resource_centre/eowa_publications/Balancing_the_Till/Balancing_the_Till.pdf (27 December 2007)
11. Robbins, S. P.(1992). Bitni elementi organizacijskog ponašanja, Mate, Zagreb,
ISBN: 953-6070-30-8
12. Segetlija, Z. (2006). Trgovinsko poslovanje, Ekonomski fakultet u Osijeku,
Osijek, ISBN: 953-253-005-3

PERSONALENTWICKLUNG UND ORGANISATIONSENTWICKLUNG IM PROJEKTMANAGEMENT

275

PERSONALENTWICKLUNG UND
ORGANISATIONSENTWICKLUNG IM
PROJEKTMANAGEMENT
Prof. Dr. Ulrich Vossebein

ABSTRACT

The study indicates that the professionalization of the project management further progresses. An important step has been carried out by the opening of academic
continuing education possibilities in the project management for an independent
career development in the project management. Clearly also became that all together the subject Project management is put up in comparison to 2004/05 broader.. The study also gives many advices to a sensible personnel development and
makes clear that an organisation development must be offered in many enterprises.
Good and successful project managers will decide in the longer term to follow on
the project management career only if they see here similar perspectives like in the
line career or the professional career.
JEL clasiffication: O15, O16, O22
Keywords: Project Management, Organisation Development
1. EINLEITUNG

Die zunehmende Bedeutung des Projektmanagements wird seit vielen Jahren
immer wieder durch Untersuchungen und Befragungen von Unternehmen nachhaltig bestätigt. Dies bedeutet, dass in immer mehr Unternehmen die Arbeit in
Projekten als normal angesehen wird und man erwartet, dass die Mitarbeiter in der
Lage sind, Projekte zielorientiert und effizient durchzuführen. Aufgrund dessen,
das erst in den letzten Jahren Projektmanagement als Basismodul in vielen Studiengängen integriert ist, ergibt sich ein großer Weiterbildungsbedarf, um jederzeit
die notwendigen Kompetenzen in den einzelnen Projekten zur Verfügung stellen
zu können. In dem nachfolgenden Beitrag werden, nach einer kurzen Diskussion

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wichtiger Teilbereiche der Themenstellung, die Ergebnisse aus der 2. Gehaltsstudie
im deutschsprachigen Raum für den Bereich Projektmanagement vorgestellt.
2. DER 3. KARRIEREPFAD

Diese Wandlung der Arbeitsweise bedingt Zweierlei: Auf der einen Seite müssen
individuelle Wissenslücken im Bereich Projektmanagement ausgeglichen werden.
Hierzu gibt es eine Vielzahl von Institutionen, die dies auf unterschiedlichem
Niveau anbieten. Auf der anderen Seite müssen in den Unternehmen aber auch die
Strukturen geschaffen werden, dass sich eine erfolgreiche Arbeit in Projekten auch
für die Projektmitglieder auszahlt. In diesem zweiten Bereich ergeben sich in den
meisten Unternehmen noch erhebliche Defizite. Themen wie Personalentwicklung,
Karriereplanung und Aufstiegsmöglichkeiten im Rahmen des Projektmanagements
werden zwar schon auf vielen Veranstaltungen diskutiert, sind aber in der Regel
noch nicht in den Unternehmen implementiert.
Hierarchieebene

Linienlaufbahn

Projektlaufbahn

Fachlaufbahn

Abbildung 1: Projekt-, Linien- und Fachlaufbahn (Grau, Vossebein 2006)
Abbildung 1 spiegelt die typische Situation in vielen Unternehmen wider. Projektmitglieder werden aus der Linien- bzw. Fachorganisation für Projekte zeitlich
begrenzt freigestellt, kehren aber nach Abschluss des Projekts wieder in ihren alten
Organisationsbereich zurück, indem es dann zu einer Karriereentwicklung kommen kann.
3. GEZIELTE WEITERBILDUNGSMASSNAHMEN

Für eine kontinuierliche Weiterentwicklung und Schulung der Projektmitglieder ist zu beachten, dass die notwendigen Kompetenzen natürlich von der Funktion im Rahmen von Projekten abhängig sind. In Abbildung ist 2 sind die verschie-

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denen Kompetenzbereiche in Abhängigkeit von der Ebene im Projektmanagement
kurz skizziert.

PM-Grundlagen

Führung

Projektstrukturierung

AblaufTerminplanung

Projektleiter

General Management

Risikomanagement
Finanzmittelmanagement
Kostenmanagement

Senior-Projektleiter

Projektdirektor

Abbildung 2: Zielgruppenspezifische Weiterbildungsinhalte im Projektmanagement (Grau, Vossebein 2006)
Aufgrund des hohen Internationalisierungsgrades im Rahmend er Projektarbeit
sowie der sehr heterogenen Vorkenntnisse, müssen hohe Ansprüche an eine Weiterbildung gestellt werden. Hierzu dienen einerseits die Reputation der Anbieter, zum
Beispiel eine anerkannte staatliche oder private Hochschule, bzw. die Akkreditierung durch international anerkannte Agenturen. Andererseits ist es aber auch
notwendig, dass aufgezeigt wird, wie die Qualität und Aktualität der Maßnahme
kontinuierlich verbessert und an die Bedürfnisse der Zielgruppe angepasst wird.
Eine Möglichkeit der Qualitätssicherung von Weiterbildungsmaßnahmen ist in
Abbildung 3 im Überblick dargestellt.
SelfAssessment
Ausführliche
Information
der Teilnehmer

Vorkurse
Einzeltraining

Evaluation
der Dozenten /
Rahmenbedingungen

Alumniarbeit
Zeit

Start der
Weiterbildung

Wissenschaftliche
Begleitforschung

Diskussion mit
Unternehmen

Ende der
Weiterbildung

Abbildung 3: Qualitätssicherung bei Weiterbildungsangeboten (Grau, Vossebein 2006)

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4. ZWEITE GEHALTSSTUDIE IM PROJEKTMANAGEMENT

Nach 2004/05 wurde 2009 eine zweite Gehaltsstudie im deutschsprachigen
Raum durchgeführt, um einen valideren Einblick in die Projektorganisation sowie
das Gehaltsgefüge der Projektmanager zu erhalten. Darüber hinaus sollten neue
Erkenntnisse in Bezug auf die Aufstiegsmöglichkeiten im Projektmanagement gewonnen werden. Die Studie wurde im Auftrag der Deutschen Gesellschaft für Projektmanagement e.V. durchgeführt. Teile der nachfolgenden Ergebnisse sind auch
in der projektmanagement aktuell 3/2010 (Grau, Vossebein 2010)veröffentlicht.
Insgesamt umfasst konnten 680 Fragebögen in der Auswertung berücksichtigt werden, was eine deutliche Steigerung gegenüber den 213 Teilnehmern aus
dem Jahr 2004/05 bedeutet. Im Unterschied zu 2004/05 wurde keine schriftliche
sondern eine online-Befragung durchgeführt.
4.1. Projektmanagement umfasst alle Bereiche

Die Studie belegt, dass Projektmanagement nicht mehr nur etwas für Ingenieure
ist, sondern dass in sehr vielen Funktionsbereichen und Branchen Projekte durchgeführt werden (vgl. Abbildung 4). Auch die Verteilung der Studienabschlüsse
belegt, dass die Ingenieurlastigkeit, 2004/05 hatten 48,1 % der Befragten einen
Studienabschluss im Ingenieurbereich, der Vergangenheit angehört. Neben dem
starken anstieg der Wirtschaftswissenschaftler und Mathematiker/Informatiker
treten jetzt auch Gesellschafts- und Sozialwissenschaftler signifikant in der Stichprobe auf.
Ein Blick auf die Arbeitszeiten, die in Projekten verbracht werden, belegt eindrucksvoll die Aussage, dass die Projektarbeit für viele Befragten die Hauptarbeitsform ist. 30,4 % der Befragten arbeiten ausschließlich in Projekten, weitere 37,3 %
zwischen 76 und 99 % ihrer Arbeitszeit. 2004/05 lagen die entsprechenden Werte
noch bei 21,1 % bzw. 31,5 %.

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Fachrichtung im Studium:
- Ingenieurwesen:
29,9 %
- Mathematik/Informatik:
15,4 %
- Wirtschaftswissenschaften:
21,0 %
- Gesellschafts- und Sozialwiss.:
4,0 %
- Naturwissenschaften:
5,6 %
- Rechtswissenschaften:
0,6 %

Branchenverteilung:
- Consulting, Training, Coaching:
- Projektsteuerung:
- Automotive:
- Anlagenbau:
- Bau:
- Software:
- Telekommunikation:

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24,4 %
13,2 %
11,3 %
9,3 %
4,7 %
22,5 %
12,6 %

Projektmanagement

Funktion im Unternehmen:
- IT-Beratung/Konzeption:
- Ingenieur Projektabwicklung:
- Softwareentwicklung:
- Forschung und Entwicklung:
- Qualitätswesen:
- Personal:
- Logistik/Materialwirtschaft:
- Media/PR:
- Vertrieb:

26,0 %
21,8 %
8,8 %
10,3 %
17,9 %
6,0 %
5,3 %
3,9 %
8,4 %

Arbeitszeit in Projekten:
- Bis 35 %:
6,8 %
- 36 – 75 %:
25,5 %
- 76 – 99 %:
37,3 %
- 100%:
30,4 %

Abbildung 4: Einsatzbereiche von Projektmanagement
4.2. Klassische Weiterbildung im Projektmanagement

Betrachtet man zunächst die klassische – nicht akademische – Weiterbildung,
ist es sinnvoll, die einzelnen Gebiete nach dem GPM-Canon einzuteilen. In Abbildung 5 wird jeweils angezeigt, wie viel Prozent der Befragten schon einmal an
einer entsprechenden Weiterbildungsmaßnahme teilgenommen haben. Die Werte
in den Klammern geben das Ergebnis aus 2004/05 wider, so dass ein Vergleich
zwischen den beiden Zeitpunkten möglich ist.
Auffällig ist zunächst, dass in allen Bereichen die Beteiligungsquote rückläufig
ist. Dies dürfte u.a. darauf zurückzuführen sein, dass seit einigen Jahren in immer
mehr Studiengängen ein Modul Projektmanagement fester Bestanteil des Curriculums ist, so dass die Grundlagen des Projektmanagements bereits in der Hochschule
vermittelt werden. Spitzenreiter der Weiterbildungsinhalte ist weiterhin „Projektmanagement“ mit 77,8 % gegenüber 88,3 % Teilnahme 2004/05. Auffällig ist
auch, dass im Bereich Sozialkompetenz 3 der 4 Angebote eine Teilnahmequote von
über 50 % haben. Hier scheinen noch Defizite auf breiter Front zu bestehen, die
durch die Weiterbildung kompensiert werden sollen.

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Tabelle 1: Verteilung der Weiterbildungsaktivitäten im Projektmanagement
Grundlagenkompetenz
General Management
Projektmanagement
Stakeholder und P-Umfeld
Normen und Richtlinien
Sonstiges

in Prozent
24,1 % (28,6 %)
77,8 % (88,3 %)
28,4 % (31,9 %)
19,6 % (23,9 %)
3,4 % (6,1%)

Methodenkompetenz
Projektstrukturierung
Ablauf- Terminplanung
Kostenmanagement
Finanzmittelmanagement
Sonstige

in Prozent
62,5 % (70,4 %)
56,5 % (62,9 %)
42,6 % (52,6 %)
20,7 % (28,6 %)
1,6 % (4,2 %)

Soziale Kompetenz
Gruppen, Team
Konfliktmanagement
Motivation
Führung
Sonstiges

in Prozent
54,6 % (62,0 %)
50,7 % (59,2 %)
39,6 % (49,3 %)
52,4 % (60,1 %)
2,5 % (5,2 %)

Organisationskompetenz
Qualitätsmanagement
Vertragsmanagement
Konfigurations-, Änderungsmanagement
Risikomanagement
EVD im PM
Sonstiges

in Prozent
41,3 % (43,2 %)
26,9 % (41,3 %)
31,3 % (36,3 %)
42,8 % (47,4 %)
42,4 % (49,3 %)
1,2 % (3,8 %)

Hervorzuheben ist weiterhin, dass sich die Gesamtausbildungsdauer von 45,71
Tage 2004/05 auf aktuell 50,5 Tage erhöht hat. Dies ist als weiterer Beleg dafür
zu werten, dass das Thema Projektmanagement an Bedeutung gewinnt und die
Projektmanager eine tiefgehendes Fachwissen als Grundlage für ihre Aufgaben als
notwendig erachten.
Die notwendige Aktualität des PM-Wissens wird dadurch unterstrichen, dass
immerhin 3 von 4 Befragten im letzten Jahr an einer Weiterbildungsmaßnahme
teilgenommen haben. Für jeden 2.-ten trifft dies für die letzten 6 Monate zu. Insgesamt hat die Grundqualifikation sowie die kontinuierliche Weiterqualifikation
im Bereich Projektmanagement einen sehr hohen Stellenwert, wie aus den bereits
aufgezeigten Ergebnissen deutlich wird.
4.3. Die Akademisierung des Projektmanagements nimmt zu

Die größte Veränderung bzgl. der Weiterqualifikation ergab sich im akademischen Bereich. Gab es 2004/05 noch keine Teilnehmer mit einem Diplom im Projektmanagement, so lag der Anteil 2009 immerhin schon bei 7,5 % und war damit
die häufigste Form einer Weiterqualifikation im akademischen Bereich (vgl. Tabelle
2). Obwohl die Möglichkeiten, im Projektmanagement einen Diplom-Abschluss
zu erreichen, noch recht jung sind, zeigen die Ergebnisse, dass dies eine interessante

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Qualifizierungsmöglichkeit im Projektmanagement ist. Dass dieser Abschluss sich
auch in Bezug auf die Aufstiegschancen im Projektmanagement sehr vorteilhaft ist,
wird später noch aufgezeigt.

Tabelle 2: Akademische Zusatzausbildung
Zweites Studium
Aufbaustudium
Diplom-Projektmanager
MBA
Promotion

Absolute Werte
50
28
51
19
28

In Prozent
7,4
4,1
7,5
2,8
4,1

4.4. Verdienstmöglichkeiten im Projektmanagement

Ein ganz wesentlicher Punkt im Zusammenhang mit der Karriereentwicklung
ist die Höhe des Gehalts. Wie viel kann im Projektmanagement verdient werden,
welche Abweichungen gibt es dort, was ist ein hohes, was ein niedriges Gehalt?
Eine Antwort auf diese Fragen gibt Tabelle 3, in der die wichtigsten Kennzahlen
in den beiden Erhebungszeiträumen dargestellt sind. Die Angaben beziehen sich
hierbei auf das Grundgehalt.

Tabelle 3: Verteilung des Grundgehalts
Durchschnittliches Jahresbruttogehalt
Häufigster genannter Wert (Modus)
25 % - Wert
50 % - Wert
75 % - Wert
Standardabweichung

2009
67.664
60.000
49.000
63.000
78.000
27.385

2004/05
69.663
60.000
52.515
64.800
81.400
29.719

Beim ersten Blick auf Tabelle 3 fällt auf, dass das Durchschnittsgehalt gesunken
ist. Eine erste Erklärung hierzu ist in Tabelle 4 zu finden. Der Anteil der Teilnehmer, die die beiden höchsten Projektmanagementebenen erreicht haben, liegt mit
insgesamt 26,9 % deutlich unter dem Wert aus 2004/05 (37,1 %).

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Tabelle 4: Erreichte Projektmanagementebene
in Prozent
2009
5,7
21,2
26,6
7,2
3,4
3,4
32,5

1. Ebene (z. B. Projektdirektor)
2. Ebene (z. B. Seniorprojektleiter)
3. Ebene (z. B. Projektleiter)
4. Ebene (z.B. Teilprojektleiter)
5. Ebene (z. B. Assistent im Projektmanagement)
Sonstiges (z.B. Projektcoach)
Keine Angabe

in Prozent
2004/05
9,9
27,2
25,4
8,0
3,3
4,7
21,5

Tabelle 5: Berufserfahrung auf der aktuellen PM-Ebene bzw. im PM insgesamt
in Jahren
bis 2
3 bis 5
6 bis 10
11 bis 15
über 15

in Prozent
aktuelle PM-Ebene
21,7
37,1
30,8
6,2
4,2

in Prozent PM insgesamt
12,5
22,6
39,3
14,0
11,6

Dieses Ergebnis korrespondiert auch mit dem Rückgang der bereits im Projektmanagement verbrachten Berufsjahre. Beispielsweise lag der Wert für mindestens
10 Berufsjahre im Projektmanagement 2004/05 noch bei 43.6 %, wohingegen
2009 nur noch 25,6 % der Teilnehmer zu dieser Gruppe gehörten. Die aktuelle
Verteilung ist in Tabelle 5 dargestellt, wobei zwischen den Berufsjahren auf der
letzten Projektmanagementebene und den gesamten Berufsjahren am Projektmanagement unterschieden wird.
4.5 Die wöchentliche Arbeitszeit

Neben der Gehaltsfrage stellt sich auch die Frage, wie viele Stunden in der
Woche gearbeitet werden muss, um sein Gehalt zu bekommen. Hierbei ergeben
sich erfahrungsgemäß zwischen der tariflich vereinbarten und der tatsächlichen Arbeitszeit deutliche Unterschiede. In Tabelle 6 sind die entsprechenden Werte für
die aktuelle Umfrage dargestellt.

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Tabelle 6: Vereinbarte und tatsächliche Wochenarbeitszeit
Vereinbarte Wochenarbeitszeit
39,80
40,00
40,00
4,045

Mittelwert
Median
Modus
Standardabweichung

Tatsächliche Wochenarbeitszeit
47,21
45,00
45,00
8,355

Der einfache Blick auf Tabelle 6 macht deutlich, dass im Durchschnitt die
tatsächliche Arbeitszeit pro Woche um 7,42 über der tariflich vereinbarten Regelung liegt. Die häufigste Abweichung liegt bei 5 Stunden.
Da die meisten Teilnehmer nicht ausschließlich in Projekten arbeiten, wird in
Tabelle 7 aufgezeigt, wie viel Prozent der gesamten Arbeitszeit in Projekten verbracht wird, wobei die Analyse für jede Projektmanagementebene separat durchgeführt wurde (zu den Ebenen siehe auch Tabelle 4).

Tabelle 7: Arbeitszeit in Projekten
Bis 50 %
51 % - 79 %
80 % - 99 %
100%
Insgesamt

1. Ebene
1
12
17
9
39

2. Ebene
3
28
55
52
138

3. Ebene
9
45
75
47
176

4. Ebene
2
6
15
22
45

5. Ebene
2
5
6
6
19

sonstiges
4
5
7
7
23

Die Zahlen belegen, dass auf allen Ebenen nur wenig Beteiligte unter 50 %
in Projekten arbeiten. Erstaunlich ist aber auch, dass von den Projektdirektoren
(Ebene 1) doch ein recht hoher Prozentsatz weniger als 80 % in Projekte eingebunden sind, so dass an 1 bis 2,5 Tagen pro Woche für Tätigkeiten außerhalb
von Projekten durchgeführt werden. Prozentual der größte Anteil mit einer 100
% Einbindung in Projekte ergibt sich bei den Teilprojektleitern (Ebene 4), gefolgt
von den Senior-Projektleitern (Ebene 2), wobei hier auch ein sehr hoher Anteil
zumindest 80 % der Arbeitszeit in Projekten arbeitet.

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4.6 Vorteile durch das Diplom im Projektmanagement

Eine sehr interessante Frage ergab sich aus der Tatsache, dass 2009 zum ersten Mal Teilnehmer auftraten, die ein Diplom in Projektmanagement im Rahmen
eines Weiterbildungsstudienangebots erworben haben. Was bringt dieser Akademische Abschluss? Ist dies ein Weg, um schneller im Projektmanagement Karriere
machen zu können?
Die Ergebnisse der Studie belegen eindeutig, dass sich durch ein Diplom in
Projektmanagement ein schnellerer Aufstieg im Projektmanagement möglich ist.
Dies bezieht sich hierbei explizit auf die Projektmanagementkarriere, da sich ein
Projektmanagement-Diplom nicht auf die Position außerhalb des Projektbereichs
auswirkt.
In Abbildung 5 sind die Zusammenhänge in Form eines Kausaldiagramms anschaulich dargestellt.

Abbildung 5: Das Projektmanagement-Diplom als Karrierebeschleuniger

PM-Erfahrung
insgesamt

eher gering
DiplomProjektmanager

Position im
Unternehmen

+

Projektmanagement-Ebene

Berufserfahrung in einer
bestimmten Position im
Unternehmen

In Abbildung 5 wird deutlich, dass die Vorteile des Diplom-Projektmanagers –
wie beschrieben - nur im Projektmanagement zum Tragen kommen. Bezüglich der
Position im Unternehmen außerhalb der Projekte lässt sich kein Zusammenhang
zum Diplom-Projektmanager nachweisen. Diese Erkenntnis zeigt, dass die Akademisierung des Projektmanagements zu einem schnelleren Aufstieg führen kann,
was wiederum die Diskussion zum Thema Karrierepfad im Projektmanagement
positiv beflügeln wird.

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4.7. Regressionsanalytischer Ansatz zur Bestimmung des Bruttogehalts

Die Quantifizierung der Einflussfaktoren auf die Gehaltshöhe wurde mit Hilfe
einer multiplen Regression durchgeführt. Das Ergebnis ist nachfolgend aufgeführt,
wobei der Erklärungsanteil analog zur Studie aus 2004/05 bei rund 40 % lag. Es
alles sich somit nur die „Grundfaktoren“ bestimmen, wohingegen zur Erklärung
der restlichen 60 % sehr stark in die Segmentierung eingestiegen werden müsste,
für die das Datenmaterial nicht ausreichend groß ist.
Jahresbruttogehalt = 38.311,17 – 3.126,511 * Projekt-Ebene
+ 39,147 * Gesamtausbildungsdauer im PM
+ 314,080 * Durchschnittliche Arbeitszeit pro Woche
+ 2353,734 * Berufserfahrung im PM insgesamt
5. SCHLUSSBETRACHTUNG

Die Studie zeigt auf, dass die Professionalisierung des Projektmanagements
weiter voranschreitet. Durch die Eröffnung akademischer Weiterbildungsmöglichkeiten im Projektmanagement ist ein wichtiger Schritt für eine eigenständige Karriereentwicklung im Projektmanagement vollzogen worden. Deutlich wurde auch,
dass insgesamt das Thema Projektmanagement im Vergleich zu 2004/05 breiter
aufgestellt ist. Dies belegen die Verteilungen auf die Branchen und die Funktionen
im Unternehmen genauso wie die vielfältigen Studienabschlüsse und die Erhöhung der Arbeitszeit in Projekten. Die Studie gibt auch viele Hinweise auf eine
sinnvolle Personalentwicklung und macht deutlich, dass eine Organisationsentwicklung in vielen Unternehmen dringend geboten ist. Gute und erfolgreiche
Projektleiter werden sich nur längerfristig für die Projektmanagementlaufbahn entscheiden, wenn sie hier ähnliche Perspektiven sehen wie in der Linien- oder der
Fachlaufbahn.
Quellen:

1. Grau, Nino, Vossebein, Ulrich: New Educational Requirements in Project Management Specific target groups – International Commensurbility – Innovative,
Vortrag IPMA World Congress 15. – 17. 10. 2006 – Shanghai
2. Grau Nino, Vossebein, Ulrich: Eigener Karrierepfad im Projektmanagement,
projektmanagement aktuell, 3/2010 (im Druck)

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Ivica Zdrilić

THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON THE
BUSINESS RESULTS OF BIG CROATIAN COMPANIES
Ivica Zdrilić
Adriatic Security d.o.o., Croatia,

ABSTRACT

Companies in the modern environment which constantly changes competitiveness, have to devote significant time and resources, financial and human, as well
as the energy to measure their own performance in achieving the preset strategic
goals.
Although the methods of managing business have significantly changed over
the past few decades, the approaches to measuring and handling results of business
activities have remained unadapted to new circumstances.
However, it is not enough only to introduce new theoretical knowledge form
the field of organisation and management but it is also necessary to find a way how
to measure the introduced changes. Nowadays, the feedback is the key to success,
because it gives the concrete information about the success of introducing news
into a company as well as the information about performances of a company on
the whole. That is why today great attention is given to the methodologies which
try to evaluate the performance of a company.
The results of the conducted research show that companies with a low level of
performance in the research from the year 2000 went bankrupt or shut down during the following two four-year-cycles (2001-2008).
The results of the empirical research have shown a significant correlation between the performances investigated in 2000 and the financial results in the perod
until 2008.
JEL clasiffication: L15, P17
Keywords: Total Quality Management, TQM, MBNQA, Performance management, Croatian companies, large retailers and wholesalers

THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON THE BUSINESS RESULTS OF BIG...

287

1. INTRODUCTION

In the past, the success of companies was assessed on the basis of long-term and
other assets reported in the accounting balance sheet. During most of the twentieth century, the traditional management and control systems were applied in an
environment of mature products and stable technology. At that time, almost all
accounting procedures that exist today were in use.
Measuring the success of the organisation or the process shows whether what
has been done is good or not, it shows whether it is necessary to take some action or
not, and gives the guidelines which actions should be taken (Wealleanus, 2001, pp.
3). These claims gain a special significance if we know that business performance
influences the behaviour, both of managers and employees of an organisation (Lin,
2007, pp. 1069).
Bearing all the above mentioned in mind, it becomes clear that the evaluation
of performance is the primary wheel to the success of each company. Without
measuring the organisation it is not possible to determine the deviation of the
current state from the one aimed at, or to detect bad parts of the organisation in
order to implement measures for its improvement.
A famous sentence reads: „Kada nešto ne mjerite, onda to ne možete ni znati. Ako
nešto ne znate, onda time ne možete upravljati. Kada ne možete upravljati, tada ste
prepušteni na milost i nemilost.“1 (Oslić, 2008, pp. 160)
2. PRINCIPLES OF TQM THROUGH MBNQA

The American Quality Award is based on the principles of Total Quality Management, the methodology which takes continuous improvement as its basic value.
How can the term Total Quality Management be defined? Total Quality Management is the philosophy of commitment and loyalty of the whole organisation to
constant improvement in all areas. The results of application are Delight Customers,
Empowered Employees, Higher Revenue and Lower Costs (Figure 1).

1

Eng. :”When you do not measure something, then you cannot know it. If you do not know something, then you cannot manage it. If you cannot manage, then you are left at mercy.”

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Ivica Zdrilić

Figure 1: Results of TQM-a

Source: (Juran, M.J., 1999, 14.5.)
The world’s most important award for quality - MBNQA offers the methodology
how to measure the success of the implementation of Total Quality Management in
a company, i.e. it gives feedback how successful the implementation of Total Quality Management is, and provides information on company’s performances.
Malcolm Baldrige National Quality Award was established in 1988, and
founded in 1987. It was named after Malcolm Baldrige, the American Minister of
Trade in the period from 1981 to 1987. He improved the efficiency and effectiveness of the U.S. government.
The award is given each year for three categories of companies: manufacturing
companies, service companies and small companies. MBNQA is divided into seven
categories which represent a comprehensive framework for quality management
(Table 1). No standard approach is required in order to obtain MBNQA. Each
company is free to choose its own, specific techniques and approaches, within the
overall objectives and the criteria described above. The winners so far are very different. The power of MBNQA lies in the fact that it does not require any special
principles, but allows the flexibility to each individual company in the definition of
“good quality management.

289

THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON THE BUSINESS RESULTS OF BIG...

Figure 2: Criteria for Performance Excellence — Item Listing, 2000.
1 Leadership
1.1 Senior Leadership
1.2 Governance and Societal Responsibilities
2 Strategic Planning
2.1 Strategy Development
2.2 Strategy Deployment
3 Customer Focus
3.1 Customer Engagement
3.2 Voice of the Customer
4 Measurement, Analysis, and Knowledge Management
4.1 Measurement, Analysis, and Improvement of Organisational Performance
4.2 Management of Information, Knowledge, and Information Technology
5 Workforce Focus
5.1 Workforce Engagement
5.2 Workforce Environment
6 Process Management
6.1 Work Systems
6.2 Work Processes
7 Results
7.1 Product Outcomes
7.2 Customer-Focused Outcomes
7.3 Financial and Market Outcomes
7.4 Workforce-Focused Outcomes
7.5 Process Effectiveness Outcomes
7.6 Leadership Outcomes
TOTAL POINTS

120
70
50
85
40
45
85
40
45
90
45
45
85
45
40
85
35
50
450
100
70
70
70
70
70
1.000

Source: (Brown, 2008, pp.72-73)

Leadership, Strategic Planning, and Customer and Market Focus represent the
leadership triad. These categories are placed together to emphasize the importance
of thr leadership focus on strategy and customers. Human Resource Management,
Process Management, and Business Results represent the results triad. Employees of a
company and its supplier partners accomplish the work of the organisation through
its key processes that yield the business results. All company actions point towards
business results – a composite of customer, financial, and nonfinancial performance
results, including human resource results and public responsibility. Information and

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Ivica Zdrilić

Analysis is critical to effective management and fact-based system for improving
company’s performance and competitiveness. Information and Analysis serve as the
foundation for the performance management system. (Figure 2)

Figure 3: Baldrige Criteria for Performance Excellence Framework: A Systems Perspective

(Source: Brown, 2008., pp.48)

The implementation of TQM requires loyalty, discipline and the constant effort
of all employees, taking into account that TQM involves (and depends on) everyone. Each activity should be performed correctly and directed toward the common
goal. Therefore, TQM can be considered as a system, which enables an enterprise to
improve all the work processes systematically and continuously, as well as product
(and service) quality and the quality of life. It assures avoiding useless efforts and
resource waste by assisting employees to reach the designated goals within the allocated time and budget.
CORE VALUES

• visionary leadership
• customer-driven excellence
• organisational and personal learning

THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON THE BUSINESS RESULTS OF BIG...

291

• valuing workforce members and partners
• agility
• focus on the future
• managing for innovation
• management by fact
• societal responsibility
• focus on results and creating value
• systems perspective
The main purpose of new systems of measuring company’s success, i.e. business
excellence, are innovation, learning, and consequent improvement in accordance
with the objectives and orientation of the organisation. These major changes in the
measuring systems can be viewed as guidelines for establishing criteria.
Persistent implementation of selected models of excellence such as the MBNQA
provides the company with systematic introduction of TQM, and the possibility of
permanent comparison with the best. Besides serving for the competition for the
American award for quality, MBNQA becomes the real view of the situation in the
company and the processes that desperately need changes and improvement.
What happens in Croatian companies? What are their results in the implementation of continuous improvement? These and other questions are the subject of
this research that aims at answering what their competitive ability is like.
3. RESEARCH METHODOLOGY
3.1. Research form 2000. – questionnaire

The research concentrated on the large enterprises, which were expected to possess the satisfactory potential for the TQM implementation. The sample consisted
of 52 selected large retailers and wholesalers (in 14 of 20 Croatian counties), with
more than 250 employees.
The data were collected by means of a questionnaire, mailed to the top managers
(or presidents of the management boards) of the companies included in the sample.
The questionnaire, consisting of 29 items, was designed in order to obtain information about eleven core values of TQM (visionary leadership, customer-driven
excellence, organisational and personal learning, valuing workforce members and

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partners, agility, focus on the future, managing for innovation, management by
fact, societal responsibility, focus on results and creating value, systems perspective). For most questions multiple answers were provided, although some questionnaire items allowed the respondents to formulate the answers as they saw fit.
The multiple-answer questions were directed toward establishing facts (regarding
organisation, its performance, etc.), while the mangers’ perceptions were measured
by the multiple-answer questions in the form of a standardised Likert’s scale, which
is theoretically regarded as an optimal solution in constructing such a questionnaire
(Zelenika, 1998, pp.371).
Out of 52 questionnaires mailed, 17 were returned, i.e. the return rate is 32,69%.
Therefore, we believe that the obtained results may be considered representative.
The secondary data sources include the Croatian chamber of commerce’s data
on individual company performance in 1998., as well as the Croatian agency for
payments’ data on industry performance in 1998. and first three quarters of 1999.
The data collected were processed with the Microsoft Excel 2007 and the statistical
analysis software for social sciences (SPSS v.15.0).
3.2. Investigation of the financial results for the period 2001-2008

Financial results, RDiG, balance, secondary sources of CCC, Trade Croatia.
The results were analyzed on the basis of standard reports. In order to confirm the
results of applying the TQM principles in business, an analysis of financial results
of business for the period of 8 years after the survey questionnaire and company’s
assessment was made. The actual financial results of business are grouped according to various indicators of business and are ranked. When ranking companies the
results of the last five annual reports on business were considered (2004-2008).

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THE INFLUENCE OF APPLYING THE TQM PRINCIPLE ON THE BUSINESS RESULTS OF BIG...

4. RESEARCH RESULTS

Based on responses from the survey questionnaire in 2000 and grouping the
answers, the following results were obtained:

FFigure
igure 4: Performance
Per
errfo
form
rman
ance
an
ce ooff Cr
Croa
Croatian
oatititian
oa
an bbig
ig ttrade
rade
ra
de ccompanies
ompa
om
pani
pa
nies
ni
es iinn 20
2000
00

Source: Survey results (N=17)

The results show that 9 out of 17 companies have the performance lower than
400 points which is considered a poor score, while only 2 of 17 companies are over
500 points.
Following the financial results of the investigated companies through the next
period of 8 years, it was shown that 10 of 17 companies went bankrupt or were
closed.

Table 1: Performance of Croatian big trade companies in 2000 and number of bankruptcy until end of 2008.
Points
0
101
201
301
401
501
601

-

100
200
300
400
500
600
700

Performance
2000.
0
1
2
6
6
2
0

Bankruptcy

%

0
1
2
4
3
0
0

100,0%
100,0%
66,7%
50,0%
0,0%
-

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Ivica Zdrilić

701
801
901

Total

800
900
1000

0
0
0
17

0
0
0
10

58,8%

Source: Survey results (N=17)

From the above table it is obvious that there is a very significant negative correlation (R =- 0.9525) between the performances of companies in 2000 and what
happened in the next eight years, i.e. that companies which achieved a lower value
of the performance in 2000 failed to survive on the market in the next period. Individual results of companies are the following:

Figure 5: Financial Performance of large trade companies and their relationship to the performances in 2000.

Source: Survey results (N=17)

The results show that companies with low performances in 2000 disappeared
from the market (bankruptcy or extinction), while companies which had the best
performances managed to survive. Significant progress was made only by two companies, while in the new measurements three companies are located in the “dangerous zone”. It is important to note that the results of research are related to the
period when the global financial crisis was not present, so it had no impact on the
results of the research.

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295

Figure 6: Linear correlation between performance in 2000 and financial results 2001-2008.
Regression Statistics
Multiple R
0,567858599
R Square
0,322463389
Adjusted R Square 0,277294281
Standard Error
92,1 0372459
Observations
17

Regression
Residual
Total

Intercept
X Variable 1

df
1
15
16

ANOVA
SS
MS
F
Significance F
60561 ,04 60561 ,04 7,1 39025 0,01 741 2023
1 27246,4 8483,096
1 87807,5

Coefficients Standard Error
t Stat
P-value
331 ,9656046
28,47296635 1 1 ,65897506 6,40387E-09
0,222759981
0,083371 52 2,671 895401 0,01 741 2023

Source: Survey results (N=17)

The value of Pearson coefficient of linear correlation is R=0,568. As significance
is 0,017 and is less than 0,050, the conclusion can be made that the obtained Pearson coefficient of linear correlation is significant, i.e. there is a statistically significant
connection between performance in 2000 and financial performance 2001-2008.
5. CONCLUSION

The presented results of research show that the use of TQM methodology as a
means of improving the organisation and measuring performances can help in assessing the overall performances of a company.
Measuring performances of a company can detect faults within the company,
which may lead to negative business results.
The conducted research showed that there is awareness about the key values of
TQM and they are not respected. The research showed that such companies went
bankrupt within next 8 years.

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By applying improvement methods like TQM, the companies will get new wind
in its sails and a better position on the market. However, there is still large space
for progress.
6. REFERENCES

1. Buble, M. & Zdrilić; I. & Alfirević, N (2001): Possibilities for application of
Total Quality Management in improving organization of large trade enterprises in
transition: The case of Croatia”, 4th International Conference “Enterprise in Transition” / Goić, S. (ed.), pp.43-45, Split-Hvar, 24-26. June 2001, Ekonomski
fakultet Split
2. Brown, M. (2008). Baldrige Award Winning Quality. London, New York: Productiviti Press - Taylor & Frabcis Group
3. Lin, C. K. (2007). The mediate effect of learning and knowledge on organisational performance. International Journal of Management, 107, str. 1066-1083.
4. Oakland, S.J. (2003). Total Quality Management, Oxford: ButterworthHeinemann.
5. Oslić, I. (2008). Kvaliteta i poslovna izvrsnost. Zagreb: M.E.P. Consult.
6. Wealleanus, D. (2001). The organisational measurement manual. Hampshire:
Gower Publishing Ltd.
7. Zelenika, R. (1998). Metodologija i tehnologija izrade znanstvenog i stručnog djela,
Rijeka: Faculty of Economics Rijeka.
8. Ziegenbein, K. (2008). Kontroling, Zagreb: RRiF plus.

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297

OPERATIONAL DECISIONMAKING: DIFFERENCES
IN PRIMARY AND SECONDARY PERCEPTION
Andrew Lynch,
University of Limerick, Ireland

ABSTRACT

This paper outlines the differences in perception between the person making an
operational decision within an SME (Primary) and someone who is knowledgeable
of the decision being made, but not directly involved in the process (Secondary).
An empirical rating mechanism is used to ascertain a participant’s attitude to a specific set of operational decisions. Over 130 interviews were carried out in 25 SMEs.
The Primary and Secondary responders were assessed and the differences in decision rating outlined and discussed. The difference in attitude to a decision within
an SME is not a new topic in literature. Nicholson and Cannon [2000], discuss the
differences in how CFO’s and MD’s view top team dynamics, where differences are
elucidated in interviews between the different groups. In this paper the differences
in perception are based on a decision taxonomy methodology, which allows for the
empirical rating of one operational decision over another. The delta in perception
can thus be deduced and plotted graphically for analysis and discussion.
JEL clasiffication: D7, D81
Keywords: Operational, Decision-making, Perception

INTRODUCTION

Classification, particularly in a scientific sense, deals with the description of
an entity and applies observed characteristics to a taxonomy key, thus placing the
entity into its natural ‘home’ or category. For the purposes of this paper the enterprise in question is a Small to Medium Enterprise (SME) as defined by the European Union [EU Commission, 2003]. Within an SME, many decisions must be
made. Some occur regularly, some less frequently; many involve multi-disciplinary

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Andrew Lynch

skills, while more still are made in the ‘normal’ function of the role in question.
All of these decisions, however, need to be made. Within a functional enterprise,
the ability to make decisions, frames the success or otherwise of the company.
An operational decision within an SME can take many guises. Take for instance
the case of the following two decisions: the decision to make or buy a particular
component within a manufacturing process and the decision to paint walkway
lines on the factory floor. The make-buy decision would appear to most people to
be more ‘important’. If you manufacture a component that could be bought for
less than your own manufacturing costs, then failure to do so, would run the risk
of inefficiency, and cost you customers and possibly your business. Alternatively,
in the spirit of the Chinese butterfly proverb, an argument could be made for the
‘importance’ of the latter decision. While walkway lines on the factory floor may
not initially seem critical, their absence may result in an accident, which if serious
enough could result in the temporary closure of the factory, the same subsequent
loss of customers, and ultimately of the business itself. Clearly this logic could in
theory be applied to all decisions and any proposed methodology must overcome
this aspect of decisions analysis.
The effectiveness of information systems, formal or otherwise, is difficult to
evaluate in an independent manner. It would be quite problematic to qualify a
statement that a particular decision has been made ‘easier’ by virtue of the introduction of a new methodology or information delivery technique. While colloquial
evidence may suggest this is indeed the case, an empirical evaluation eludes the
modern practitioner. There is still no method of classifying a decision in an empirical manner. Such a classification would allow an enterprise to assess the number of
‘difficult’ decisions, specific to the enterprise in question. The more of these an organisation has, the more difficult the operation will be to manage. The value of this
aspect of the research lies in the provision of a tool, which can be used to evaluate
the effectiveness of a management improvement plan (e.g. an ERP implementation). The number of ‘difficult’ decisions would now be measurable and a reduction
or delta can be ascertained on behalf of the organisation after a DSS implementation program.
It is also noted at this point that a decision does not exist in a vacuum. Interactions are required to qualify a decision. decision to jump out of an aeroplane
could be taken as an illustrative example. The decision itself is different in classification terms from decision about what breakfast cereal to have before one gets
into the plane. A rather simple classification system would separate these decisions

OPERATIONAL DECISIONMAKING: DIFFERENCES IN PRIMARY AND SECONDARY...

299

instinctively and the taxonomy process could proceed. There are, however, other
considerations outside the essence of the decision itself. Now consider the input
or effect a decision-maker can have on these two selected decisions. The decision
to jump out of an aeroplane is different for an experienced parachutist and a firsttimer. By the same token, the cereal selection decision would be made one way by a
dyslexic who is allergic to nuts and another way by a linguist who is not. So in the
classification process we must allow not only for the essence of the decision itself,
but also for the effect of the decision-maker who is interacting with said decision.
There is, however, another consideration: the environment in which the decision
and decision-maker find themselves.To extend the analogy of the parachutist, the
decision to jump from a plane at 20,000 feet and the decision to jump from one
that was sitting on the runway are to markedly different!
…..…………
Decision

Decision-Maker

………………………………..
Decision-Environment

Dynamic Decision

Dig. 1.0. Elements of a decision

This proposed methodology mirrors the basic concept of biological classification, in that a sufficient number of factors are evaluated in order that separation or
classification can be carried out.

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Andrew Lynch

Decision

3 Main Elements

Factors

Rating Levels

Level Chosen
Decision

Decision under Review

Decision-Maker

Decision-Environment

Dig. 2.0. Relationship between Decision Elements and Factor Levels

Consider two decisions. One decision which is made by an operator, in the ordinary process of the job, without the need for input from anyone else, under no time
pressure, or urgency, requiring no past experience, where there is a limited number
of options and where the outcomes are well known to the decision-maker. This can
now be empirically separated from a very different decision - one which is made by
the Managing Director, requiring adaptive novel thinking, and input from senior
management or from a board, which is made under a time constraint, with urgent
connotations, and where the outcomes to different options are not known by the
decision-maker(s) at the decision point. While one would expect such decisions
to be readily separated, the considerable grey area between them is also within the
classification granularity. This methodology allows such classification to be empirically assessed, with weightings allocated on the different levels within the factors
outlined.
In the case of the decision itself, twelve factors were relevant for the decision
evaluation process: Organisation level, Nature, Format, Time, Urgency, Frequency,
Learnt experience, Support decisions, Accumulation, Number of Options, Type
and Outcome Profile. In the case of the decision maker, the seven factors were:
the Number of Reports, Portfolio Profile, Experience, Attitude to Risk, Exposure
to DDS, Impact on Decision-maker, and finally Risk to Decision-Maker due to
Inaction.

OPERATIONAL DECISIONMAKING: DIFFERENCES IN PRIMARY AND SECONDARY...

301

For the decision environment the factors included were: Impact on the Company, Risk to the Company, Decision Measurement, Visibility within Company,
Sector, Company Change Profile, Political Environs and Scorecard Applicability
METHODOLOGY

A series of operational decisions associated with a number of SME departments
were assessed. The departments in question were (in no particular order); Production, Quality, Sales & Marketing, Purchasing and Accounts. Three decisions were
chosen for each department to allow the rating system to rank the individual decisions within each of these areas. A survey was constructed which addressed the
three main elements of a decision: the decision itself, the decision maker and the
decision environment and the factors associated with each. The primary decision
maker was asked to consider a particular decision. A number of statements were
read, which reflected various levels within a factor for that decision. The participant
indicated the statement, which in his/her opinion reflected the most accurate representation for that factor. The process was repeated for a secondary participant who
was not directly responsible for making the decision. The results were collated with
the other primary and secondary participants’ findings and a median calculated for
each factor. The resultant median for each of the factors was then summed to give
an overall rating for that particular decision, for each of the two groups (primary
and secondary).
The survey was loaded onto a web-based survey support system (Survey Monkey®) to which access was restricted by password control. Over 130 individual surveys were carried out across key decision makers in 25 different SMEs. While the
survey was facilitated, it had a defined key and support document to explain the
decision under review and the factors being considered. The results were either put
directly into the web-based program or recorded by the analyst to be plugged into
the system at a later date. A number of observations are made at this point. In the
first iteration of the survey, the decisions under review were not sufficiently defined.
When asked to consider the decision on the level of stock, for example, respondents
would query the level of importance of the material itself (e.g. stationary or a key
component). While the initial selection of the departmental decisions was based
on their perceived range of complexity (easy – complex), more work was clearly
required to define the actual decision being considered. In the example taken, the
final version read – Decision on the month-to-month stock levels of a high usage,

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Andrew Lynch

low value component. The participants themselves were chosen to reflect the decision-making responsibility within the department in question. A given participant
was restricted to answering for two departments, in order to reduce bias within the
overall results. Each participant identified a level he/she thought most reflective for
each of the factors identified in the survey. The responses for all participants within
a factor were isolated and a median found. The resultant median totals were then
summed and an overall rating level for a particular decision was calculated. The
decision ratings were then plotted, for both the primary and secondary decision
makers and the differences observed.
RESULTS:
Differences in Decision Making Perception
120
110
100
90
80

Primary
Secondary

70
60
50

Advert Layout

Part Ship

Stock Take Time

Test Criteria

Stock Levels

Determine Lot Size

Debt Collection - how

Contract Review

Pass/Fail Criteria

Product Failed - what next?

Criteria for Profit

Assessing Marketing Data

Choose Vendor

Make/Buy New Product

30

Decide Market Targets

40

Fig 3.0. Differences in decision-making perception, between primary and secondary decision makers.

OPERATIONAL DECISIONMAKING: DIFFERENCES IN PRIMARY AND SECONDARY...

303

DISCUSSION:

Fifteen decisions across 5 departments of an SME were assessed under this research. The primary decision maker in each case indicated the best-fit statement
for each of the decisions in their area. The same decisions were then assessed by a
person knowledgeable in the decision, but not primarily responsible for making
it (the secondary respondent). The mean average for each was then plotted, to assess the differences in perception by both these stakeholders. This is represented in
figure 3.0.
The secondary respondents considered 9 of the decisions reviewed ‘easier’ then
indicated by the primary decision maker. One decision (Part ship) was considered
the same by both parties, while, the balance of 5 were considered more difficult by
the latter grouping. Notably in the secondary respondents, the test criteria and the
contract review and the debt collection were considered considerably more difficult
than that perceived by the person responsible for making the decision itself.
CONCLUSION:

Decision making in the SME is a wide a varied activity. Decisions are often
made with incomplete information and under pressures of both time and risk. The
perception of a decision will vary depending on the relationship one has with the
decision being undertaken. Generally a decision maker will perceive a decision to
be more difficult or important, than a person who is not directly making the same
decision. A wider study across more operational decisions would yield more accurate results in future research studies.
ACKNOWLEDGEMENT:

The information obtained as part of this paper was pursued in order to fulfil
the requirements of an EU framework 6 project. This project is entitled Enterprise
Performance Optimisation for Small and Medium Enterprises (EPOSME) and its
purpose is to pursue research for the benefit of SMEs.
REFERENCES:

1. Cannon, N. and Cannon, D. (2000). “Two views from the bridge: how CFOs
and SME leaders perceive top team dynamics.” European Management Journal
18(4): 367-376.

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2. European Union (2003), Commission Recommendation, Concerning the definition of Micro, Small and Medium-sized Enterprises, Official Journal of the
European Union, notified under document number C (2003) 1422.

MANAGEMENT OF MANAGEMENT OF MANAGEMENT... AND HOW TO DEVELOP ...

305

MANAGEMENT OF MANAGEMENT OF MANAGEMENT...
AND HOW TO DEVELOP MANAGEMENT CURRICULUM
Josip Mesarić
Faculty of Economics in Osijek
Antun Šundalić
Faculty of Economics in Osijek

ABSTRACT

Some schools of management and institutions with long-standing experience in
managerial education have recently started questioning and changing approaches
and contents of their curricula, prompted by intensified globalisation processes
and the necessity for integrating and specialising managerial knowledge on the one
hand as well as disastrous results of managerial practice. Booming of schools of
management in the world, as well as in the Republic of Croatia was the reason for
investigating management curricula on some world class school of management
as well as those in Republic of Croatia. Creation of management curriculum was
proposed by using of ontology.
JEL clasiffication: I20
Key words: management, curriculum, ontology
INTRODUCTION

Schools of management in the world, as well as in the Republic of Croatia, are
booming. They are being developed on several levels: vocational studies, undergraduate, graduate and postgraduate studies and life-long education. Education is
received in terms of “pure” studies of management (schools and study programmes)
and, especially in the Republic of Croatia, within study programmes of business
economics as separate courses of study (management), as courses of study of management disciplines (managerial economics, management, or managerial courses
of study of other disciplines within the studies of business economics and other
studies).

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Josip Mesarić • Antun Šundalić

Some schools of management and institutions with long-standing experience
in managerial education (Yale School of Management, MIT Sloan School of Management, Academy of Management, Institute of Management Science, Academy
of Service Management etc.) have recently started questioning and changing approaches and contents of their curricula, prompted by intensified globalisation processes and the necessity for integrating and specialising managerial knowledge on
the one hand as well as disastrous results of managerial practice with far-reaching
social implications on the other hand. The question is if socially unacceptable behaviour of managers that has brought us to the “gloomy vision of economy” is the
result or the implication of inappropriate managerial education and if higher education institutions where managers are educated are responsible for this situation.
Several scholars have recently voiced their concerns about the current state of
management research and pedagogy (Pfeffer, J., Fong, C.T.;2002,78-85), (Mintzberg, H., Gosling, J.;2002,64-76), (Donaldson, L.;2002,96-106 ).
Ghosal (Ghoshal;2005,76) pointed: “In the main, their arguments have focused
on the lack of impact of management research on management practice and the lack
of effectiveness of management education for business performance students”.
On the other hand, Ghoshal (Ghoshal;2005,76) raises a different concern. He argues “that academic research related to the conduct of business and management has
had some very significant and negative influences on the practice of management”
More specifically, he suggests “that by propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral
responsibility”.
Ghoshal explains his arguments in the following way:
a) the development process of schools of management and their attempts to
adopt the “scientific” models, which Hayek described as “pretence of knowledge”, underlining that management “theories” are based on partialization of
analysis, the exclusion of any role for human intentionality or choice, and the
use of sharp assumption and deductive reasoning.” The result of pretence of
knowledge is the fact that most managerial knowledge is of paradigmatic
b) Ideology-based gloomy vision – described by Milton Friedman as (neo) liberalism which is grounded in a set of pessimistic assumptions about both
individuals and institutions whose primary purpose is solving “negative prob-

MANAGEMENT OF MANAGEMENT OF MANAGEMENT... AND HOW TO DEVELOP ...

307

lems”. The result of this ideology is that managers more frequently rely on
adapting and solving problems and not on creating new values.
c) Combined together, (a) and (b) has led management research increasingly
in direction of making excessive truth-claims based on partial analysis and
unbalanced assumptions. Since the theories influence practice, and managers
adopt theorists’ worldview, the consequence is :
d) Negative assumptions became real through the process of double
hermeneutics.
This double hermeneutics has lead to both diverse interpretations of “management theories” in practice and different interpretations of validity of underlying
theories in “scientific management” within academic circles.
The leading schools of management, with their good intentions but also with
deeply rooted pretence-of-knowledge philosophy, have introduced the scholarship
of discovery, decreasing the importance of other kinds of scholarships (scholarship of practice, scholarship of integration (synthesis) and scholarship of teaching
- pedagogy). The majority of other schools, who are followers (especially in the
economies that did not have a tradition in managerial education) have become
(bad) interpreters of acquired paradigms1.
On the other hand, “obsessed as they are with “real world” and sceptical as most
of them are of all theories, managers are no exception to the intellectual slavery of
“practical men”.” (Keynes;1953,309), cited by (Ghoshal;2005,75). Knowledge,
mostly paradigmatic and not deeply analytic (cause-and-effect type of knowledge),
have given “practical managers” an occasional footing when looking for practical
solutions or, on the contrary, when justifying failures.
Torch bearers of academic management will readily ask questions if the catastrophic results in practice are to be blamed on the managers educated through
managerial studies or if they are the work of some other, self-proclaimed managers
with no, insufficient or partial academic management background.
1

When creating curricula of our study programmes, based on the ideas of the Bologna declaration, we were
given instructions to include at least five European or world known universities that have a list of courses
offered in our curricula. Since management in our economy was still in its puberty at that time, one could
ask whether the creators of management curricula (or, more precisely, of syllabuses as lists of courses!) in
higher education institutions had the opportunity, the possibility and most of all knowledge, experience
and ability to evaluate the validity of contents that were “the argument” to initiate study programmes,
courses of study and courses, whose image we have offered as a model for development.

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Josip Mesarić • Antun Šundalić

The hierarchical nature of management and unclear borders between levels,
from the operational, tactical, strategic (in more or less complex business systems),
to governance which is a transformational kind of management over another kind
of “object of management” as well as frequent role changes, leave failure “suspects”,
including those with academic management background, with little room for
hiding.
What are the domains of knowledge that a manager (general type of manager)
should possess and what kinds of knowledge are offered today in academic management education? The answer to this question does not seem complicated when it
comes to relatively narrow areas of human practice and academic education. Nevertheless, management is a broad term by nature and its complexity is increased due
to unclear borders it shares with other social and natural sciences.
The aim of this paper is to define the curriculum of general management by
analyzing the syllabuses of management studies (“body of knowledge”), and the
purpose would be knowledge sharing, its continuous usage, upgrading and updating by developing management ontology.
MANAGEMENT STUDY PROGRAMMES IN THE REPUBLIC OF CROATIA

The overview of registered study programmes that cover management of all
kinds and are provided at different levels (vocational, undergraduate, graduate,
postgraduate, doctoral) can be found at MOZVAG, web portal of Information
system of Agency of science and higher education of Ministry of education, science
and sports of Republic of Croatia. According to the data from the cited source, the
number of study programmes of different kinds of management is 61.
Those programmes that include in its name Management and that are taught
as courses of study within business economics at undergraduate and graduate levels have been chosen to be analysed as management curricula. The following are
included:
The course of study Management within the study of Business Economics in
Dubrovnik (undergraduate)
The course of study Management within the study of Business Economics at the
Faculty of Economics in Osijek (undergraduate and graduate studies)

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The course of study Management within the study of Business Economics in
Pula (undergraduate and graduate studies)
The course of study Management within the study of Business Economics in
Zadar (undergraduate and graduate studies)
The course of study Management within the study of Business Economics in
Zagreb (undergraduate and graduate studies)
The similarities of management programmes in Croatia lie in the relatively high
number of courses providing supportive managerial knowledge (common fundamental courses). All undergraduate studies have the ‘managerial’ course entitled
Management, and in five cases there is also Human Resources Management. Other
(core and elective) courses differ from one programme to the other, encompassing a
range of methodological disciplines of management, managerial business functions,
types of business systems and levels of management. Graduate studies continue the
“specializations” commenced at undergraduate level. In this context, the prospective manager can gain a desirable framework of managerial knowledge, but these
competencies are fragmented in uncoordinated islands of knowledge which are difficult to integrate. In addition, graduates are not provided with the competence to
carry out such integration (Mesarić; 2007,218)) The key competence of a manager
raised on fragmented managerial knowledge is adaptability rather than creativity
and leadership. Together with the accompanying pedagogy, the latter concepts are
at the heart of curriculum “reengineering” described in the introduction.
General management curricula in the Republic of Croatia have yet to show
results. One may wonder about the reasons for the doubts expressed here if verification is still ahead of us. Given that in creating our syllabuses (not curricula) there
was frequently indiscriminate acceptance of role models which are now undergoing
changes, it is justified to propose an overhaul of management curricula, as well as of
other curricula belonging to business economics studies.
WHAT IS A CURRICULUM AND HOW IS IT DEVELOPED?

In a broad sense, a curriculum can be understood as a course of (trans)formative
experience that can include experiences gathered in formal education as well as
directed and undirected and take place outside of school (Whitson, J.A.;2006). In
formal education or schooling (cf. education), a curriculum is simply understood as

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a set of courses, course work, and content offered at a school or university. According to, (Smith M. K.;1996,2000) the current curriculum theories can be seen:
● as a body of knowledge (syllabus) to be transmitted
● as an attempt to achieve certain ends in students – product
● as process
● as praxis
An approach to curriculum theory and practice which focuses on syllabus is
only really concerned with content. Curriculum is a body of knowledge - content
and/or subjects. Education in this sense is the process by which these are transmitted or ‘delivered’ to students by the most effective methods that can be devised
(Blenkin et al;1992,23).
A curriculum should be productive in a sense of achieving set objectives. In this
case, there have to be criteria for measuring “productivity”, and the outcomes are
usually broken down into smaller units. The issues that exist in this approach is
who sets the goals, if they can be anticipated during the implementation period and
who, what and by what criteria is being measured when it comes to the productivity of knowledge that is transferred.
To see curriculum as a particular type of process means to observe a multitude
of elements in the constant interaction of teachers (that have “an ability to think
critically, in-action, an understanding of their role and the expectations others have
of them, and a proposal for action which sets out essential principles and features of
the educational encounter. With all positive aspects of this approach, certain issues
arise and they deal with the quality of a teacher and classroom pedagogy.
In the curriculum as praxis approach, curriculum itself develops through the
dynamic interaction of action and reflection. That is, the curriculum is not simply
a set of plans to be implemented, but rather is constituted through an active process
in which planning, acting and evaluating are all reciprocally related and integrated
into the process” (Grundy;1987,115). At its centre is praxis: informed, committed
action. When creating a curriculum of a certain discipline, the first step is usually
the formulation of desired/required body of knowledge. Curriculum analyses are
conducted by confronting course contents and underlying pedagogy with the suggested body of knowledge.

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AN APPROACH TO CREATING MANAGEMENT CURRICULUM

The creation of a curriculum in an increasing number of schools of management
is based on:
- basic functions of management (planning, organizing, leading, coordinating,
controlling, staffing, motivating)
- formation of business policy
- implementations of policies and strategies
- multidivisional management hierarchy
- general and specific knowledge of certain areas
- methodological foundations and related pedagogy etc.
At the same time, these curricula are expanding into more and more areas and
encompassing a higher number of implementation categories.
The body of knowledge of general management (seen as a number of courses
in a syllabus) has increased in this way and offers a number of possibilities for its
utilization in a chosen context.
Generally speaking, new approaches to revising management curricula are being
carried out in some of the following contexts:
- linear growth of acquired management paradigms into new areas of management without changes in philosophical and sociological context of management (expanding the horizons into an increasing number of “whats”)
- placing managers into central organizational context - (manager in the position of a competitor, organizer of funds sourcing, investor, innovator, state and
society connector, employee, “operation engine” of global macro economy,
customer and negotiator (Yale School of Management; New management curriculum) in which the answer to the questions “who” and “how” have to be
found, in the new socio-economic context after which managerial skills are
implemented into specific areas. The approach from integration towards specialisations (at first a small number of orientational disciplines, followed by
integrated management perspectives and specialisation)
- expanding the acquired management paradigms to new theories and new
methodological concepts from different management disciplines (a high number of more or less relevant disciplines, and only after this follows the integration and/or specialisation)
In the following text we shall propose curriculum development by means of
management ontology. Through class and attribute hierarchies and their instances

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ontologies make it possible for concepts to be simultaneously fragmented and integrated, which will provide for better understanding of the complex management
domain.
DEVELOPMENT OF A CURRICULUM BY USING ONTOLOGY

There are a number of related works and curricula that have been developed
by using ontologies. To mention only a few: (Kincheloe;2003,47-64), (Yu-Liang
Chi;2009, 136-140), (Dicheva et al;2005), (Ronchetti, Sant;2007), (Lovrenčić,
Čubrilo; 2007,35-41) (Milam;2003), (Song; 2005). The development of ontology is a complex task that demands the knowledge of classes and relations within a
specific domain. The development of ontologies is currently facilitated by the use of
software solutions which enable a relatively fast development and evaluation of an
ontology (ontological editors, in which classes, attributes and relations are defined,
questions are raised and graphic solutions of project ontologies are created). The
problem with the development of ontologies is that they are never fully developed.
Moreover, before even starting an ontology development, the ontology creators
have to define objectives and ask questions that the ontology should provide answers for.
In computer science and information science, ontology is a formal representation of the knowledge by a set of concepts within a domain and the relationships between those concepts. It is used to reason about the properties of that
domain, and may be used to describe the domain. In theory connected to the
information science, an ontology is a “formal, explicit specification of a shared
conceptualisation”. (Gruber; 1993,1). „An ontology provides a shared vocabulary,
which can be used to model a domain — that is, the type of objects and/or concepts that exist, and their properties and relations” (http://en.wikipedia.org/wiki/
Ontology_(computer_science))
Common components of ontologies include:
• Individuals: instances or objects (the basic or “ground level” objects)
• Classes: sets, collections, concepts, classes in programming, types of objects,
or kinds of things.
• Attributes: aspects, properties, features, characteristics, or parameters that objects (and classes) can have
• Relations: ways in which classes and individuals can be related to one
another

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• Function terms: complex structures formed from certain relations that can be
used in place of an individual term in a statement
• Restrictions: formally stated descriptions of what must be true in order for
some assertion to be accepted as input
• Rules: statements in the form of an if-then (antecedent-consequent) sentence
that describe the logical inferences that can be drawn from an assertion in a
particular form
• Axioms: assertions (including rules) in a logical form that together comprise
the overall theory that the ontology describes in its domain of application.
• Events: the changing of attributes or relations
If an ontological domain is precisely defined, concepts, classes, attributes and relations are created by means of ontological tools. On the other hand, if a domain, as
in the case of general management, is broadly defined, one has to understand how
such domain relates to the so-called upper ontologies. SUMO ontology (Suggested
Upper Merged Ontology) is the upper ontology that was used to investigate concepts on which usable domain ontologies can be developed. Each research domain
has its own unique thesaurus which represents a basis for the creation of an ontology. Some available thesauruses (economics-related thesauruses) and ontologies developed from them can partly be used to develop a management thesaurus and ontology based on it. (Management Thesaurus, http://libraryds.grenoble- em.com/
en/services_missions/Pages/Thesaurus_ Management.aspx) , and (Thesaurus of
Economic, Social and Cultural Rights, http://shr.aaas.org/thesaurus/) STW Thesaurus for Economics, http://zbw.eu/stw/versions/latest/about)
WHAT IS MANAGEMENT AND WHAT ARE THE FUNDAMENTAL CONCEPTS OF
MANAGEMENT EDUCATION?

Beginning with the management practice and management curricula, the following meanings of the noun management can be noticed:
- The practice of management
- A study discipline
- Organisational structure in a firm, among a group of people
- A university course
- A university course of study (programme)
- Methodology...

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By placing management in the context of upper ontology (in this case SUMO
ontology), management belongs to the following classes (Figure 1):

Figure 1. Management as a part of SUMO ontology classes

DEVELOPMENT OF THE DOMAIN ONTOLOGY OF MANAGEMENT

The purpose of creating domain ontology (Noy, McGuinness; 2001,1) might
be:
• To share common understanding of the structure of information among people or software agents
• To enable reuse of domain knowledge

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• To make domain assumptions explicit
• To separate domain knowledge from the operational knowledge
• To analyze domain knowledge
Also according to (Ontology, http://edutechwiki.unige.ch/en/
Ontology#Limitations):
• To enable a machine to use the knowledge in some application.
• To enable multiple machines to share their knowledge.
• To help yourself understand some area of knowledge better.
• To help other people understand some area of knowledge.
• To help people reach a consensus in their understanding of some area of
knowledge.
For the time being, the purpose of creating a simple management ontology that
is planned to be developed is to determine where and what kind of management
is taught at institutions of higher education in Croatia, what is comprised in the
syllabuses of those study programmes, which narrower domains they belong to and
which pedagogy they are based on.
A part of the initial ontology developed in Protege ontological editor is shown
in Figure 2.

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Josip Mesarić • Antun Šundalić

Figure 2. Part of initial ontology of management developed in Protege ontology editor

Ontology, like other methods and concepts used in curriculum development
has “inherent biases derived from their respective domains, cultures, purposes and
the environment in which their entities exist.”(Shirky;2005)
CONCLUSION

Management as a scientific and practical discipline is being continuously developed, resulting in good solutions or solutions with acceptable or unacceptable
consequences. The confrontation of management theory and practice, which are
interconnected, implicating mutual changes in their spiral of development, shows
that results on both sides can have unexpected consequences.
Similarly to other social sciences, management is self-fulfilling, which means
that new (as a rule paradigmatic) “theories” change the existing practice and vice
versa, i.e. some at a given moment accepted solutions of good practice become the
basis for creating new theories. The changes in academic management education
have been caused by the insights from management disciplines, management practice, other social sciences, as well as by requirements for institutions of higher education to take responsibility for consequences at all levels of management practice.
The leading universities with a long tradition in academic management education subject their curricula to changes with the aim of a more precise management

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positioning within the given socioeconomic context. Similar projects should be
undertaken by the institutions of higher education that provide academic management education in the Republic of Croatia, where management education and
management practice do not have a deeply rooted tradition. Deviant behaviour
and catastrophic results in management practice that have caused a “gloomy vision
of economy” should be the reason for management academics to face the facts and
take an active role in the necessary changes by immediately questioning current
management curricula and the related pedagogy.
REFERENCES

1. Blenkin, G. M., Kelly, V.A., Change and the Curricula, Paul Chapman, London,
(1992), ISBN 1 85396 154 X
2. Dexter, H., Davies, I, (2009) An Ontology-Based Curriculum Knowledgebase
for Managing Complexity and Change, , Ninth IEEE International Conference
on Advanced Learning Technologies, Riga, July 15-17, 2009, pp.136-140 ISBN
978-0-7695-2916-5
3. Dicheva, D. et al, (2005) Ontological Web Portal for Educational Ontologies,
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7. Gruber T, (1993) Toward Principles for the Design of Ontologies Used for
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Report KSL 93-04, Knowledge Systems Laboratory, Stanford University
8. Huazhu Song et al, (2005) Constructing an Ontology for Web-based Learning
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9. Dostupno na: http://www.win.tue.nl/SW-EL/2005/ swel05- kcap05/proceedings/Poster-3-Huazhu.pdf
10. http://en.wikipedia.org/wiki/Ontology_(computer_science) (09.03.2010)
11. Kincheloe, J.L., (2003) Critical ontology: Visions of selfhood and curriculum
JCT: Journal of Curriculum Theorizing. 19, 1, pp. 47-64., ISSN: 1942-2563
12. Lovrenčić, S., Čubrilo, M., (2007) Ontologies in the Higher Education Domain, Proceedings of the 18th International Conference on Information and
Intelligent Systems / Aurer, Boris ; Bača, Miroslav (ed). - Varaždin : Fakultet
organizacije i informatike Varaždin , 35-41 (ISBN: 978-953-6071-30-2).
13. Management Thesaurus, http://libraryds.grenoble- em.com/en/services_missions/Pages/Thesaurus_ Management.aspx
14. Mesarić, J. Integracija znanja u obrazovanju, presented on XIV International
Scientific Conference Society and Technology, Zadar, June 28-30 th 2007.
Published in INFORMATOLOGIA, 40, 2007, 3 pp 216-222, UDK 007:
659.3:37, ISSN 1330-0067
15. Milam, J. (2003) Ontologies in Higher Education, Inxight, 2003, p. 2. HigherEd.org, Inc. Raspoloživo na: http://highered.org/docs/milamontology.
pdf (02.03.2010.)
16. Mintzberg, H., Gosling, J. (2002) Education Managers Beyond Borders, Academy of Management Learning & Education, 64-76, 1(1) ISSN: 1537-260X
17. MOZVAG - http://mozvag.srce.hr/preglednik/pregled/brzo/traziNaziv?naziv=
menad%C5%BEment (10.03.2010)
18. Noy, F.N., McGuinness, D. (2001) ``Ontology Development 101: A Guide to
Creating Your First Ontology’’. Stanford Knowledge Systems Laboratory Technical Report KSL-01-05 and Stanford Medical Informatics Technical Report
SMI-2001-0880, March 2001.
19. Ontology, http://edutechwiki.unige.ch/en/Ontology#Limitations)
(02.02.2010)
20. Pfeffer, J., Fong, C.T. (2002) The end of business schools? Less success then
meet the eye, Academy of Management Learning & Education, 79, 78-95,
1(1) ISSN: 1537-260X

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21. Ronchetti, M., Sant, J. (2007) Curriculum Management and Review: an
ontology-based solution, April 2007, Technical Report # DIT-07-021,
Raspoloživo na: http://eprints.biblio.unitn.it/archive/00001195/01/dtr-07021.pdf (11.03.2010)
22. Shirky, C. (2005) Ontology is overrated: Categories, Links and Tabs, 2005,
Dostupno na: http://www.shirky.com/writings/ontology_overrated.html
(14.03.2010)
23. Smith, M. K. (1996, 2000) Curriculum theory and practice the encyclopaedia
of informal education,
24. Dostupno na: www.infed.org/biblio/b-curric.htm., the current curriculum
25. Thesaurus of Economic, Social and Cultural Rights, http://shr.aaas.org/thesaurus/) STW Thesaurus for Economics, http://zbw.eu/stw/versions/latest/about
26. Ghoshal, S., (2005) Bad Management Theories Are Destroying Good Management Practices, Academy of Management Learning & Education, (4), 1, pp
75-91, ISSN: 1537260X
27. Whitson J.A. (2006), Schematic view of Curriculum in/out of school, and directed / undirected, Dostupno na: http://en.wikipedia.org/wiki/File:Curriculum_
Concept.svg
28. Yale School of Management Curriculum. Dostupno na: http://mba.yale.edu/
MBA/curriculum/index.shtml,
29. Yu-Liang Chi, (2009) Ontology-based curriculum content sequencing system
with semantic rules, Expert Systems with Applications: An International Journal, ISSN:0957-4174

320

Nihada Mujić

THE ROLE OF COMPLEXITY, UNCERTAINTY AND
IRREVERSIBILITY IN SOCIAL SCIENCES AND MODELS
Nihada Mujić
Faculty of Law in Osijek

Abstract

Complexity, uncertainty and irreversibility are notions generated in natural sciences, where they have induced a change of scientific models, in spite of initial
misunderstandings and rejections. Considering that complexity, uncertainty and
irreversibility are characteristic for business activities and life in modern society,
this paper, while using the insights of natural sciences, attempts to (re)construct
their role in social sciences, especially economics and economic models. It is difficult to properly quantify these indicators, a fact which often led to explanations
that treated them as anomalies, while they were excluded from scientific models.
It is therefore not surprising that answers given to economic questions often did
not contain these variables and were consequently often paradoxical. Complexity,
uncertainty and irreversibility are indicators suitable for the information age, and
were not utilized in the terminology and models of the industrial age and classical
science. By generalizing and connecting contemporary insights of natural sciences
with systems theory and chaos theory1 it is easier to answer questions asked within
social sciences, and especially economics.
JEL clasiffication:C61
Key words: complexity, uncertainty, irreversibility, purposes, science, models

1

One of the main postulates of chaos theory is: simple systems generate complex behavior. Complex
systems are sources of simple behavioral patterns. Most importantly, the laws of complexity contain
universality, disregarding the building elements of the system. Glick, J. “Kaos.” Zagreb: Izvori, 1996,
p.308.

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INTRODUCTION

Changes in science were always grounded in natural sciences. Due to greater
possibilities of experimentation in natural systems (although it often seems that
living in social systems means living in experimental conditions) and due to higher
verifiability of the results, the scientific paradigms of natural sciences were modified and became paradigms of other scientific disciplines. For example: Newton’s
model of the universe based on absolute space and time, elementary solid particles,
strictly causal natural phenomena and on the ideal of objective description of the
world was for a long time generally accepted as the model of the entire scientific
world. Similarly, numerous economic models, based on classical science, gave unexpected and even paradoxical answers to questions posed. The more practitioners
and researchers tried to explain the situation, the sharper became the paradoxes.
Using tightly structured models and strict determinism, social sciences more or
less successfully resolved the problems of the industrial age. When, however, those
same causal models attempt to answer the problems of the information age, the
same paradoxical situation is created as the one the physicists found themselves in
while trying to describe the atomic physics in terms of classical physics. This paper
does not claim to teach about the scientific paradigm changes in natural sciences,
but to demonstrate openness to the introduction of some of those concepts to
social sciences even before the paradoxical responses coerce us into it. So when F.
Capra states: «...we cannot decompose the world into independently existing smallest units. As we penetrate into matter, nature does not show us any isolated ‘basic
building blocks’, but rather appears as a complicated web of relations between the
various parts of the whole. These relations always include the observer in an essential way. The human observer constitutes the final link in the chain of observational
processes, and the properties of any atomic object can only be understood in terms
of the object’s interaction with the observer. This means that the classical ideal of
an objective description of nature is no longer valid”,2 it is difficult to believe that
he is explaining the principles of quantum physics, and not those of economics.
Therefore, if we want to learn to ask the right questions and get the right, and not
paradoxical, answers, we must, just as natural sciences do, pay more attention to
the notions of uncertainty, complexity, irreversibility, even when it is difficult to
quantify and use them in scientific models.

2

Capra, F. “The Tao of Physics.” Fontana/Collins, 1976, pp.371.

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Nihada Mujić

COMPLEXITY AND UNCERTAINTY  FROM STREAMLINE FLOW TO TURBULENCE

Even small differences in some of the key action factors3 can induce sudden
and important changes in the system behavior, which in the process changes from
predictable through random to chaotic.
Due to their openness and dynamics, social and especially economic systems are
susceptible to accelerated movement from the streamline (laminar) to chaotic flow.
When the flow is laminar, small disturbances disperse on their own. But after the
turbulence, as chaotic disorder in all measurements (small vortices within bigger
ones), sets in, the disturbances grow to catastrophic dimensions. Turbulent movement, i.e. processes, is inconstant and random. In an economic system they create
resistance and spend its resources. In order to understand a turbulence one should,
first of all, understand complexity and change. Complexity is understood as the
numerosity and diversity of the factors relevant for making business decisions, as
well as for the numerosity and diversity of the connections between the factors. It is
important to notice the existence of the internal and external complexity. Internal
complexity is conditioned by the development and diversification process within
an organization, while the external complexity is induced by social, economic, legal
and political changes in the environment. Simultaneously with the increase in complexity rises the change dynamics of certain processes (the number and the speed of
changes is increasing). Turbulence thereby brings fast and numerous changes and
the growth of the internal and external complexity together.
In his book Strategic Management4 Ansoff has identified following factors that
contribute to the emergence of turbulences: decreased predictability of change, which
is reflected in ever shorter time spans that are available for strategic reaction; level
of novelty of change, as the measurement of immutability of existing organizational
potentials that an enterprise can keep while taking control of the change, and increase in the frequency of change which indicates that we have to expect an increasing
number of changes within ever shorter intervals.

3

4

Sensitivity to initial conditions lies in the core of the chaos theory, while the unpredictability of the
chaotic systems represents one of the biggest restrictions in scientific thought, which we inherited
from the twentieth century.
Ansoff, H.I.. “Strategic Management.” London 1979. pp.50, as cited in: Osmanagić Bedenik, N.:
“Potencijali poduzeća.” Zagreb, 1993, p.34.

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Liessmann5 presented a good explanation of the influence of the environment
(external complexity) on the development of turbulences using the following
scale:
- First level of turbulence exists in a cyclically repetitive environment,
- Second level occurs in an expanding environment,
- Third level in the environment of constant change
- Fourth level in the environment of sudden change
- Fifth level of turbulence is associated with an unpredictable environment.
In the circumstances of Croatian economy the first two levels are improbable.
Third, fourth and fifth levels are characteristic for our time and although it generates fear in many, turbulence is not always negative.
During the transition from turbulence to chaos autonomous use of random
processes occurs, which results in saltatory development and a state of higher complexity. Such processes, recognized in nature, led to the development of the indeterministic theory of purposeful evolution, i.e. the theory of self-organization.
According to this theory, the Second Law of Thermodynamics6 is of importance
only in the thermodynamics of closed systems. To open systems, such as all social
systems, and thereby economic systems, followed by a high level of interaction with
the environment, apply the laws of thermodynamics of real systems, therefore those
who in science seek a general understanding of the habits of nature would be better
served with the laws of chaos than the Second Law.
According to contemporary scientific interpretations, chaos that occasionally
occurs in the behavior of complex dynamic systems, such as social systems, is fractal
in its nature.
“The word fractal came to stand for a way of describing, calculating and thinking about shapes that are irregular and fragmented, jagged and broken up - shapes
from the crystalline curves of snowflakes to the discontinuous dust of galaxies. A
5

6

Liessmann, K.K “Strategisches Controlling als Aufgabe des Managements.” Handbuch Controlling.
Stuttgart: Poeschel, 1990, p.305-308.
According to the Second Law of Thermodynamics, everything is inclined towards chaos. Every
transition of energy from one form to the other loses something in the form of heat. Entropy in the
universe increases constantly, just as in any other hypothetical isolated system.

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Nihada Mujić

fractal curve implies an organizing structure that lies hidden among the hideous
complication of such shapes.”7
The fractal character of chaos manifests itself as a trait of trajectories in phase
space to shift from regular or periodic trajectories to stochastic ones and vice
versa.
This causes the modern systematic thinking to reverse into its opposite. System
behavior is unpredictable, and in more complex systems even chaotic. In the chaos
that was generated this way we find stochastic attractors, points of stationary state,
some sort of attraction force that brings regularity to chaos, while the recognition
of these regularities can take the system to a higher-order state.
This is the reason why contemporary social and economic organizations (especially in Japan) cause “random” fluctuations, which through mutations (of the
existing organization) leads to saltatory development and higher-order state. The
creation of turbulence gives rise to entropy, which in turn brings forth the construction of information where there was none and thus the knowledge of the
system is augmented.
Turbulent flows (processes) impose an intensive exchange of matter, energy and
information on every level and in all directions. Some of these connections can be
fatal, while others mean new quality, and even self-organization.
In the recent theory of organization of social systems, self-organization is revealed as continuous self-regeneration, new birth of organization8 (on the higher
level; author’s comment). Dee Hock9 brought attention to the harmonic combination of order and chaos by his “chaordic” (CHAos + ORDer) organization.
Unpredictability which is associated with turbulent and chaotic processes is
typical only of human systems, therefore the necessary transfer of relevance from
idolatry of the mechanic world order (industrial revolution) to the human model
of action (postindustrial and information society) is unavoidable. Thus the selfcreating ability of the people who represent the pillars of an organization becomes
the fundamental criterion, as well as resource, of the overcoming of the complexity
and uncertainty of the turbulent and even chaotic surroundings.
7
8
9

Glick, J. “Kaos.” Zagreb: Izvori,1996, p.123.
Jušić, B. “Sustavsko mišljenje”, vol 3(3), 1994.
Dee W. Hock. “Birth of the Chaordic Age.” San Francisco: Berrett Koehler, 1999.

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GROWTH OF UNCERTAINTY FROM CLASSICAL ORGANIZATION THEORY TO
MODERN VIEWS

From the antropological point of view, uncertainty represents the main characteristic of human existence. From the decision-making point of view, uncertainty
could be seen as any situation in which there exists more than one form of behaviour, whereas a decision represents a choice between these possibilities. As J.
Monod stated: „Human destiny and human goal are not written anywhere, and it
depends solely on a human being what he or she will choose. A man always brings
uncertainty into his or her choices...“.
In Croatia information uncertainty is very interesting regarding the relationship
between a company-system and its relevant economic, legal and political environment. We cannot count on relationship between a situation of certainty, in which
the future of an environment is unambiguously determined, whereas a system can
be determined and can act towards it unambiguously (certainty equals 1) and optimally. There is a growing number of situations where the future is ambiguously
determined and can be seen through two categories:
- Risk – when the ambiguity is known and likelihood is predictable, that is, it
can be measuerd (likelihood is bigger than 0 and it summs up to 1).
- Uncertainty – when the ambiguity is of an uknown likelihood and it brings
unsecurity and hazard. In situations of certainty an ability to judge relevant
factors is needed for decision-making, wheras in situations of uncertainty
evaluating outcomes and modalities occurs as a specific content of a decisionmaking process. Furthermore, decisions have a „routinized nature“ in certain
instances and are chosen from a „programme“ that is at disposal, and which
has been, for a huge part, already incorporated into the structure of a system.
Uncertainty demands, on the other hand, making new decisions based on specific evaluations of multiple directions of acting and their possible outcomes.
Rational system behaviour demands a possiblity of behaviour forecasting and
evaluating – of a situation, action and effect. That is why in risky situations one
tends to anticipate and evaluate the likelihood of occurance of possible outcomes
and their utility. When uncertain situations occur, exploring the future might be a
strategy to employ, which decreases areas of uncertainty, as a result of which, uncertainty is transformed into likelihood and hazard into risk.

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There is a need to be reminded that even Taylor and Fayol put an emphasis in
the classic organization theory on an important, from today’s point of view even
overly emphesized, role of structures and functions in overcoming uncertainties.
According to them, a structure and functions can eliminate every uncertainty and
a need for a free judgement.
Later on, March and Simon, in theory of social systems and theory on adaptable
and rational organizations, pointed to a crucial role of an organization structure in
absorbing uncertainties.
The fraim for decision-making, according to this model, consists of an organizational structure, which, with its characteristics, either complicates or facilitates
decision-making process, which regulates uncertainty.
The process of decision-making means, above all, use of standard operative procedures, which (are already determined by structure) almost automatically lead to a
decision. As a result of it, one tries to incorporate into these procedures everything,
which alleviates doubts and conflicts. The procedures can represent a result of a
decision- making process, when bigger issues are not concerned.
However, a system is becoming more and more a part of a complex and extremley uncertain environment, which influences its choices and vice versa. The
environment is considered to be that part of the surroundings, which determines
requests for a system (i.e. a company) with regard to achieving its goals and with
which it has to comply with. Finally, in order to fulfill dimensions of openess and
dynamics as preconditions of its survival, the system meets one of the needs of its
environment with its purposes. Vice versa, structuring parts of the environment
will depend on abilities of the system to meet its environment’s needs (and on the
way it monopolizes those abilities), which are relevant or potentially relavant to
defining and achieving goals of the system.
In order for a system to succeed, it is not enough to know the certainty level of
an incoming information from the environment, but one should also know certainty of effect of decision makers‘ activities – a system.

327

THE ROLE OF COMPLEXITY, UNCERTAINTY AND IRREVERSIBILITY IN SOCIAL...

To more fully understand the system behaviour with a regard to the level of the
environment’s certainty10, it is good to check some of the dimensions which determine such a behavior.

Table 1: System behavior regarding the level of the environment’s certainty
SYSTEM

PROBABILITY

ENVIRONMENT
CERTAINTY

RISK

UNCERTAINTY

Ambiguous situation with Ambiguous situation with an un
Unambiguous situation, known likelihood S1-Sn known likelihood S1-Sn
certain S1
0<w<1
w=1
∑w=1
w=?

ANALYTICAL METHODS Deterministic
PREDICTABILITY
Forecast

Stochastic
Forecast

RESEARCH

Past (trend)

Past (regression analysis)

PLANNING

Programming

Programming

SOLUTION

One optimum

One optimum

Heuristic
Projection
Future
(decreasing uncertainty, scenarios)
Strategy, strategic games, scenarios and simulations
More conditioned suboptimal
solutions

Methods that are to be used while making decision in the given three situations
of the environment’s (un)certainty depend on time (how early new phenomena are
anticipated) and range of information and their significance for the analysis and
perceiving of changes.
In accordance with it, data collecting systems for early warning have been developed throughout many areas, which are also known as radar or alarm systems.
Predicting in risk and security conditions was based on knowing the past and
present, which was enough for creating forecasts and extrapolation of the future.
10

According to: Masse, P. Le plan ou l anti-hasard, Gallimard, p.188-200, the table has been modified
because of this article

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Nihada Mujić

Nowadays, forecasts lose its importance since the relation between achieved and
planned results is mostly inadequate.
For forecasting, stable objects of observation are required, as well as linear time,
which makes it inapplicable in conditions of great complexity and rapid changes.
We do not live in times when in the focus of our attention were immobile phenomena. Our primary interests are not stabile situations and perseverance anymore, but
rather development, crises and instability. We do wish to research both phenomena
that remain constant and phenomena that change, evolution of growth, genesis
and mutation of the norms of social conduct.
Real life as well as science shows a creative role of irreversibility nowadays, which
enables processes of spontaneous organization. We live again in the world of coincidence where reversibility11and determinism are just rare cases, whereas irreversibility
and indeterminism are becoming the rule. The notion of classic science that treats
irreversibility as an illusion or as a result of a superficial description is in conflict with
the new concept, according to which irreversibility is a source of order, creator of
organization. Irreversible processes cease to be just approximation of reversible processes, and the growth of entropy is not synonymous to losses any longer, but it also
represents a spontaneous evolution of the system.
Uncertain future cannot be anticipated based on the past and present, but
only by exploiting uncertain future by creating scenarios of the environment in
the range from optimistic to pessimistic, and by simulating possible behavior of a
system. Forecasting is giving way to projecting or even anticipating, which is why
there are no more unambiguous goals or unambiguous and optimal solutions. In
an environment where only a change and complexity are certain to happen, strategic management is becoming more important. We do not talk about or use “or …
or” strategies, but rather “and … and” strategies, which describes a dynamic play
of the system with its environment. Within the play of order and chaos, decisionmaking is not associated with long-term plans and conservative strategies, but with
a pure feeling of utility and healthy principles, with a help of which a number of
11

Irreversible (lat. irreversibly): irrevocable, unalterable, unrepeatable, can happen just in one direction, one-sided
Economic processes are irrevocable in time; it is impossible to go back to the time when one was
preparing or making a decision by trying to “fix” the wrong one. Once a decision has been made,
resources have been used, which may cause durable consequences to the system and the environment, and so changing preconditions for the future.

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329

individual and short-term goals (which are understood and which lead to the desired goal) are created.
MODELS, THEIR BOUNDARIES AND USE IN NEW CONDITIONS

Decision-making in new conditions is opposite of static decision-making in an
orthodox economy. Neither of classic methods of projection is satisfactory. When
control services compare ex post results with the anticipated ones, disappointments
appear frequently. People involved with statistics, economy or social accountants
have been trying to hand in compatible reports, which could be capable to, at least,
partially determine the direction of actions. To put it more precisely, projections
with changeable objects should possess a certain level of coherence, but all the
phenomena they try to show, occur in irreversible time, and for none of them there
have been any tested dynamic regularities, or likelihood coefficients that could be
used. Linear projections do not include fluctuations. Exponential projections depend on the choice of exponents and have the same disadvantage. Logistic projection is based on a notion of a long evolution as a known fact. For a long time the
only “cure” for unsatisfactory projections were “audits” that were performed in
continuously shorter intervals. The term “projection” has lost its meaning in that
way, so a good anticipation may even be better than a classic projection.
Hence, many questions arise frequently, such as if the new decision-making will
have problems with quantifications, mathematizations or, more broadly, quantitative analysis; if it points out to difficulties that economics deals with since it is preoccupied with narrow theories and market analyses, and detached from historical
dynamism or human resources. Are formalizations and mathematizaitions, applied
to economics, not on the way to qualitative progress, accepting neglected variables
and relations, some of which are a part of new idea of development?
In any case, it can be said, that the less irreversible time, complexity and uncertainty are taken into account, the harder it is to integrate into one model all the
variables which may affect the functioning of a system or to choose, without any
arbitration, the variables whose effect is crucial. It does not mean that we must give
up that model, but rather that we must work on their operationalization.

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Analogy and an inspiration for that could be the model of a constructive-dispersive structure, simplified by I. Prigogine12 and the Brussels school’s theory.
The main idea of that school is an evolution that may lead into metastabile
forms of things and energy, farther from the positions of balance. Under the condition of neglecting plain verbal transpositions, it may show a way to researchers
of physical, biological and information entropy-negentropy and to learning about
their consequences in the economical and social systems. Such formulations are
completely different from mechanical balance and inert objects; they are used in
order to reproduce nets of goals and active systems at different levels in a more suitable way.
The latest models do not refer solely to units (individuals brought to simplified
sequences of comparative statistics), but they also use instruments, with which one
can achieve a combination of units and sectors (matrix), their interconnections
(transient matrix) with asymmetries being included (diagonal matrix), and placing
(according to one’s needs) matrices of successive data into vector spaces where they
are being deformed.
CONCLUSION

By changing the object and methods of research, modern science is leaving the
illusion of its exterritoriality and the notion of itself as an integral part of the culture in which it develops. Metamorphosis of science means inevitable search of
models of fitting scientific work into the society, in order to make science more
or less useful, and not deaf to the needs and demands of the society. Science is
becoming an object of buy-and-sell agreements and a tool of global competition,
and exactly that science, which will know to ask the right questions, and so it will
get the right answers, is the science which can understand and change the world.
In social sciences, changes of paradigms occur more slowly than in natural sciences
(which have a greater possibility of performing experiments, and results of which
are more susceptible to control).
However, noone prevents social sciences to include the notions and insights of
natural sciences in a more creative way, e.g. when such occurrences happen that on
asked questions, only paradox answers are repeatedly received.

12

Prigogine, I., Stengers I. “Novi savez”, Zagreb: Globus, 1982.

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331

Physicists also received paradox answers when they tried to ask questions from
atomic physics with a language of a classic physics13. Since questions and answers
are related to systems, insights of natural sciences can be very easily transformed
into social sciences – especially economics. We may even be able to better understand unexpected answers that life offers in the areas of the employment, stock
exchange, energetics, ecology, industry, public sector, law and politics if we could
understand and take into account the role of complexity, uncertainty, irreversibility
of the world we live in. Although such phenomena are hard to quantify, we should
not give up and we should insist on putting them into models, but we should also
work on their operationalization.
There are no perfect systems for measuring and by gaining new insights, some
parameters will be neglected, some new will be used, and as more complex they get,
the greater is their importance for us. The goal of the model is, and it should be forgotten, to explain and not to simplify a condition, and what is the most important
(the most truthful), will in time become the most simple.
The orientation of economic (but also social) systems directed towards achieving
certain goals appears as an attractor, the focal point, which enables absorption and
reduction of complexity and uncertainty.
BIBLIOGRAPHY

1. Ansoff, H.I. “Strategic Management.” London 1979. pp.50
2. Brigham E. F., Pappas J.L. “Managerial Economics”, Dryden Press, 1995
3. Capra, F. “The Tao of Physics” Fontana/Collins, 1976, pp.371.
4. Dee W. Hock. “Birth of the Chaordic Age.” San Francisco: Berrett Koehler,
1999.
5. Glick, J. “Kaos.” Zagreb: Izvori, 1996, p.123. p.308.
6. Handbuch Controlling. Stuttgart: Poeschel, 1990, p.305-308.
7. Jušić, B. “Sustavsko mišljenje”, vol 3(3), 1994.
8. Neville L. “The Strategic Planning Workbook”, Kogan Page, London 2002

13

Only when they could understand the structure of the atomic physics, were they able to ask questions with a language of atomic phycics, and then they received the answers.

332

Nihada Mujić

9. Osmanagić Bedenik, N.: “Potencijali poduzeća.” Zagreb, 1993, p.34.
10. Prigogine, I., Stengers I. “Novi savez”, Zagreb: Globus, 1982.
11. Salvatore, D. “Ekonomija za menadžere”, Mato, ZG, 1998

MICROECONOMICS,
MACROECONOMICS
AND

MONETARY
ECONOMICS

PUBLIC POLICIES AND ECONOMIC CRISES

335

PUBLIC POLICIES AND ECONOMIC CRISES
Octavian JULA, PhD
Faculty of Economics and Business Administration
Babes Bolyai University
Cluj Napoca, ROMANIA

ABSTRACT

The paper will analyze in which way and what is the overall impact of the public
policies can and should be applied governments or local responsibilities in order to
fight against macroeconomic disequilibrium’s.
From all the major three economic policies, pubic spending policy, fiscal policy
and monetary policy, each has a special role and has a sudden or a longer time in
which results should appear.
Only one single public policy cannot correct market private failures. We cannot
find one economic model that can be applied in economics in order to avoid or
to surpass economic crises. A mixture of all public policies can be the solution for
national economies and a classical liberal view at international level.
Should financial policy become a goal of the public policy makers? Or by using
public spending policy governments should achieve a lower rate of unemployment?
The crises in financial systems that have occurred have demonstrated the linkage
between financial stability and the health of the economy. We must say that the forces which shape public policies in periods of economic crisis tend to be different in
character from the major determinants of policy-making in periods of prosperity.
So that we must analize if between the causes of economic and financial crisis
are also some causes from the public sector economy and if it is possible to make
the dissapear or at least to be fewer.
We must ensure that all the data’s will be influenced by the level of how much
an emergent economy id depending on trade with developed countries.

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Octavian Jula

If at national level public policies can modify the economic environment a free
trade phenomenon cand be the solution for decreasing disparities and lowering
posibilities of wide economic crisis.
JEL classification: G01, H30
Key words: public policy, economic and financial crisis
1. PUBLIC POLICIES  A MUST TO ENSURE FREE MARKET ENVIRONMENT?

Each time that a market failure occurs, a question appears at the horizon: should
the government intervene or not? Like Will Rogers says: the business of the government is to keep out of business – that is unless the business needs government help.
This seems to be a quotation that was brought into the light by both economist
and politicians, which means the most important actors in this business and policy
maker environment. Even some presidents like Herbert Hover understood that it
is a must that not only government should keep out but also and maybe most important is that business should keep out of the government. Even so maybe some
times the government intervention in the economy will produce much more harm
than the market failure itself. Why is that?
One of the causes of market failure is maybe that perfect competition serves only
as a benchmark for the real economics and does not stand for a real situation.
There are a set of criticisms to be expressed when we use the perfect competition
situation as a benchmark.
In these cases we can speak about the Nirvana criticism, the second best criticism
and the normative criticism (Colander; 2004, 409). When we consider a market
failure we speak about those situations in which the market strives in the direction
in which the individual decision do not lead to a social desirable outcome. We can
consider that this may be the time when a government intervention is needed.
A government action on the market does not have a known result. It is possible that the specific action to improve or not the desirability of the market. If we
can speak about market failures why should not speak about government failures.
Which is worse the governmental or the market failure?
Of course all the time we can have either positive or negative externalities of
the markets. It is impossible to state from the first moment which is the case.
Sometimes actions of the government or situations from the market can lead in the

PUBLIC POLICIES AND ECONOMIC CRISES

337

first moments to a positive externality and then, maybe years after, to a negative
externality. Some would argue that the some inventions had positive externalities,
and we can say here that maybe this is the case of the personal computer, but in
the same manner the computer produces in latest year’s dependency which can and
should be considered as a negative externality.
Is it a situation for government intervention? We think not.
So what should be the solution? It is possible that not only a solution to be the
answer but maybe a mix of them. We can propose here in the beginning: direct
regulation, incentive policies and/or voluntary solutions. The best way maybe to
solve them depends on the type of the elasticity and for sure depends on the type
of industry.
2. ECONOMIC OR FINANCIAL CRISIS?

What are we facing today, an economic or a financial global crisis? Reply should
be: none or both. If in the beginning we “achieved” a financial crisis based on a
deregulation of the financial markets, now when governments are moving towards
a higher degree of financial market regulation the world is moving towards an economic crisis.
If the policy makers will consider that regulating the market will be a solution
for the financial world they might be right, but in the same moment regulating too
much the markets can drive the world economy into a period of stagnant economy
overall.
According to the Commission’s analysis, unless policies take up the new challenges, potential GDP in the EU could fall to a permanently lower trajectory, due
to several factors. First, protracted spells of unemployment in the workforce tend to
lead to a permanent loss of skills. Second, the stock of equipment and infrastructure
will decrease and become obsolete due to lower investment. Third, innovation may
be hampered as spending on research and development is one of the first outlays
that businesses cut back on during a recession. Member States have implemented
a range of measures to provide temporary support to labour markets, boost investment in public infrastructure and support companies. To ensure that the recovery
takes hold and to maintain the EU’s growth potential in the long-run, the focus
must increasingly shift from short-term demand management to supply-side structural measures. Failing to do so could impede the restructuring process or create

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harmful distortions to the Internal Market. Moreover, while clearly necessary, the
bold fiscal stimulus comes at a cost. On the current course, public debt in the euro
area is projected to reach 100% of GDP by 2014. (Economic Crisis In Europe:
Causes, Consequences and Responses, 2009)
3. MARKET FAILURE OF THE FINANCIAL SYSTEM

Even emergent countries, even countries without a well developed stock market
felt sooner or later a crash.

Even if the financial market of a country is big or small, even if it is a complicated market or not, complexity of transactions and complexity of conditions on
the stock market occurs and that complexity usually it is the cause for financial
turmoil. It is the case of the investment in assets, or in the modern securities.
Sometimes not even those which are trading with those modern and special tools
are not understanding completely what they are trading effectively.
The complexities of the assets underlying investment securities, and of the means
of originating those assets, can lead to a failure of lending standards and unanticipated defaults. Consider first the complexities of the underlying assets, which can
include mortgage loans and a wide range of other financial assets.
The complexities of modern investment securities can lead to a failure of investing standards and financial-market practices for several reasons: these complexities
impair disclosure; they obscure the ability of market participants to see and judge
consequences; and they make financial markets more susceptible to financial contagion and also more susceptible to fraud.
Complexity can deprive investors and other market participants of the understanding needed for markets to operate effectively. Even if all information about
a complex structure is disclosed, complexity increases the amount of information
that must be analyzed in order to value the investment with a degree of certainty.
This additional analysis entails higher cost.
Complexity can add great efficiency and depth to financial markets, but it also
can cause a multitude of market failures. These failures, however, fall into three
broad categories: (A) failures, such as impaired disclosure, caused by information
uncertainty; (B) failures, such as financial contagion and the inability to predict
consequences, caused by nonlinearity and tight coupling; and (C) failures, such as

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339

moral hazard, servicer paralysis, and fraud, caused by conflicts and other forms of
―misalignment (Schwarz, 2009, 26).
3.1. Western European Economies

Although the crisis originated in the US, the impact is heavier in Europe partially due to the larger size of the fiscal stimulus plans as well as the speed of reaction
in the US. According to the OECD Economic Outlook revised forecasts of September, US GDP will contract by 2.8% in 2009, whereas Euro area (12 countries)
is expected to contract by 3.9% and UK by 4.7% (Onaran, O, 2009)
The eurozone officially sunk into technical recession in Q2 and Q3 2008, as two
of its biggest economies, Germany and Italy, shrank for two consecutive quarters.
Sweden and Ireland have also slipped into ‘technical recession’ in 2008 and Spain
and the UK are expected to enter technical recession in the last quarter of 2008;
Western European trade is mostly conducted within the region with 80.0% of
exports destined to European countries in 2007. 7.6% of exports were destined to
North America and Australasia, which are also facing downturns; Some economies
are highly dependant on exports. In 2007, exports as a share of GDP amounted
to 61.3% in the Netherlands, 40.0% in Germany, and 37.2% in Sweden. France,
Italy, Spain and the UK were far less dependant on exports, which contributed less
than a quarter of their GDP.
The financial system breakdown in Western Europe caught the governments
from France, Germany, Spain and other major countries from EU not so well prepared. Different measures were taken: the bank of England reduced the reference
interest rate from 5.0% in September 2008 to 2.0% in November 2008; Germany
indicated that it will focus on investments in industry and infrastructure, and similar cuts were made by the European Central Bank and Sweden’s central bank. It
seems that not even the most developed and important countries in western Europe
did not have a unique and common policy to face crisis.
3.2. Eastern European Economies

“The consequences of the world economic crisis will burden this region more
than the rest of the world in coming years,” declared the chief economist of the
EBRD, Erik Berglöf, speaking on the fringes of a conference held by the Austrian
Central Bank in Vienna in November 2009.

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The International Monetary Fund has also issued a number of blunt warnings
about developments in eastern Europe. The Austrian Standard quotes IMF economist Christoph Rosenberg, who declares that the recent recovery of financial markets in the region is almost exclusively due to the increased appetite for risk on the
part of investors and has little to do with any improvements in the real economy.
(Salzmann, M, Deepening Economic Crisis in Eastern Europe, 2009)
So that we can speak not about a financial, not even an economic crisis in Eastern Europe, but we can say that it is a come back to the roots. The economies of
Eastern Europe grew a lot in the last years and for sure that growing economy doest
not stand as a result for increasing productivity of increasing exports, but maybe it
is the result of the foreign direct investment coming from more and more appeal to
risks for western European investors.
Maybe the crisis in Eastern Europe could have been lighter if the FDI were
increasing with the same rate as productivity. But what happened was that the national economies increased more on the consumption basis then on the production
one. An economic increase based only on consumption is now playing the last role
in today’s economics.
Now it is time for public policies to enter the stage and solve the issue. Only
the work of national banks will not solve the economic crisis on their own. A set
of public spending policies is needed. Maybe one master plan for infrastructure
and production is needed in Eastern Economies. Structural changes should follow
and these structural changes should rely on the products with a real comparative
advantage and increasing productivity where it is possible.
What the Eastern Europe should do? For sure should rely on western’s experience and try to catch up as fast as it is possible the gap between them and the western countries. If in the previous years some fiscal changes were made to make the
business environment more appeal to foreign investors now it is time for evaluations and stability. Foreign direct investments will not represent at least for the next
couple of years and start-up for the engine of the economy so maybe the emergent
eastern countries should rely more on their own forces and not on imports of technology and capital.

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PUBLIC POLICIES AND ECONOMIC CRISES

3.3. Divergent or convergent measures between east and west?

Both economies from eastern and western countries tried on their own way to
reply to the financial crisis, but unfortunately all the measures taken by the policy
makers led to economic crisis. Solutions proposed by the national’s governments
were quite different between east and west and also between countries.
If some countries took the solution of cutting down expenses and to decrease
public expenditure (like Germany, France, Italy and Romania) other took the measures of lowering taxes and aiming for a higher consumption and in the end a
higher production (the case of Bulgaria and Poland).
Different measures for different structures of the economies. It is a struggle if
a national economy depends too much on foreign trade (the countries mentioned
in the first group) and it appear that during this economic and financial crisis,
economies not so dependent of other economies, such as in the case of Bulgaria and
Poland, are dealing a lot better than the previous group.
So that what will be the reply to the question to be divergent or convergent to a
common situation and maybe to a common policy? Well the answer will be in the
end that countries will adapt and adjust to that model that will drive them out of
the economic crisis in the beginning and from the financial crisis in the end. If it is
already a given that the economic crisis spread from west to east maybe this can be
as in the case of a volcano. It will end from the point that all started but will leave
great traces into national economies.

Table 1. Unemployment rate
%

2003

2004

2005

2006

2007

2008

2009

Bulgaria

18

14.3

12.7

11.5

9.6

7.7

6.3

Croatia

21.7

19.5

13.8

18

17.2

11.8

13.7

Romania

8.3

7.2

6.3

5.9

6.1

4.1

4.4

Poland

18.1

20

19.5

18.2

14.9

12.8

9.8

Germany

9.8

10.5

10.6

11.7

7.1

9

7.8

Italy

9.1

8.6

8.6

7.7

7

6.2

6.8

France

9.1

9.7

10.1

9.9

8.7

7.9

7.4

Uk

5.2

5

4.8

4.7

2.9

5.3

5.6

Sounce: CIA World Factbook

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Octavian Jula

As it appears from the tabel above the economies did not show signs of economic crisis from the start, the unemployment rate was still decreasing in both
eastern and western countris. Only some financial data were showing signs of macroeconomic disequilibrium.
If we analize the GDP per capita in eastern and western Europe we will see the
drecreasing data even from 2007 when the unemployment rate was decreasing and
maybe when the GDP per capita in Europe will stop decreasing the unemployment
rate will end the increase. It is possible and quite likely to happen that the unemployment rate to have a gap of one or even two years considering the start of the
financial crisis in th end of 2007.

Table 2. GDP based on purchasing-power-parity (PPP) per capita per capita
%

2003

2004

2005

2006

2007

2008

2009

Bulgaria

7.88

10.01

10.05

10.35

12.41

6.20

-4.56

Croatia

7.24

6.42

7.41

8.20

8.58

4.55

-3.76

Romania

7.91

12.16

7.53

11.83

9.62

9.77

-6.71

Poland

6.17

8.17

6.86

9.76

9.90

7.12

2.58

Germany

1.92

4.09

4.07

6.70

5.58

3.53

-3.71

Italy

2.11

3.84

2.54

4.71

3.68

0.30

-4.38

Uk

4.61

5.57

4.62

5.59

4.82

2.38

-3.28

Sounce: CIA World Factbook

As we mention above there are some case countries like Poland in which even if
the GDP per capita decreased it still have a positive value and it seems that here the
financial and economic crisis will not occur. But it is possible that like in the case of
the gap of the unemployment rate that one entire country to have a gap from the
rest of EU’27 to experience that crisis.
The financial crisis has hit the various Member States to a different degree. Ireland, the Baltic countries, Hungary and Germany are likely to post contractions
this year well exceeding the EU average of -4%. By contrast, Bulgaria, Poland,
Greece, Cyprus and Malta seem to be much less affected than the average.
Countries where export demand has been strong and/or which have registered
current account surpluses are more exposed to the sharp contraction of world trade
(e.g. Germany, the Netherlands, and Austria). Countries which have been running

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343

large surpluses are also more likely to be exposed to adverse balance sheet effects
of corrections in international financial asset markets. Conversely, countries which
have been running large current account deficits may face a risk of reversals of capital flows. Some Member States in Central and Eastern Europe are in this category.
In some of these cases, the sudden stops in foreign financing forced governments
to make a call on balance of payment assistance from the EU, IMF and the World
Bank.
Countries which house large financial centers, such as the United Kingdom, Ireland and Luxembourg, are obviously exposed to financial turbulence. Conversely,
countries which are the home base of cross-border banking activities in emerging
economies in Central and Eastern Europe are also likely to be more strongly affected. The exposure for European banks to emerging market risk is fairly concentrated in a few countries.
Some of the countries took more financial measures than economic ones. Both
Romania and Bulgaria had increased the importance of financial and fiscal policy
and did not give such a great attention to economic measures. Both of them experienced high rates of increasing GDP on the basis of foreign direct investment,
but when the investors experienced economic problems even with those financial
measures, the crisis spread rapidly.
Poland on the other hand took some economic structural reforms that changed
the country, and, also with a very big market, approximately 38.500.000 inhabitants, managed to create a national economy not so dependent of the foreign trade
and foreign direct investors. Maybe the overall increase in the last 10 years was not
so important in Poland in comparison with the rest of the eastern European countries but maybe was it is stronger and more reliable.
4. GOVERNMENTAL SOLUTION OR GOVERNMENTAL FAILURE?

As we have seen so far considering the financial system approximately all the
governmental measures were to fail. So unfortunately we must say that we are in
the situation of a governmental failure greater than the market failure. What was
the story? Some financial institutions had a series of problems coming from their
actions on the free market. The response of the market was that the actions that
those financial institutions had were that of a bankruptcy. How the governments
responded? Unfortunately with a failure, and a bigger one. Instead of leaving the
market mechanisms to solve the problems, even a bankruptcy can be a solution

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sometimes, the governments nationalized the problems. So governments brought a
problem from the private market into the national economic systems.
Why the government did not had success till so far in solving at least the financial problem? There are several answers to this question.
First of all is that the governments do not have enough information on that
specific matter. The policy makers should know at least the size of the problem. But
because this system is one in which the financial innovation is something that is
in fashion so to say today. Why is this lack of knowledge in this field? It is certain
now that the number and speed of innovations exceeds the possibility of law makers to respond so quickly to the changes in the market. The financial market turmoil prompted central banks to have much more frequent and detailed discussions
about market developments and the technical aspects of their market operations,
both bilaterally and collectively. Such enhanced cooperation took place both at the
Governors level and at the expert’s level. The Bank for International Settlements
served as a forum in this respect. Communication across central banks intensified
as the turbulent episode evolved over time.
Central banks also acted in concert on some occasions. Although coordinated
action had been considered already in August 2007, the first such action took place
later in the year, amid heightened market tensions arising from year-end funding
pressures. The central banks of five currency areas (BoC, ECB, SNB, Fed and BoE)
jointly announced on 12 December 2007 a number of coordinated measures to
provide term funding. Two other central banks – the BoJ and the Riksbank – joined the announcement to indicate their support. A key element was the establishment of swap lines between the Federal Reserve, on the one hand, and the ECB and
the SNB, on the other. This allowed the two central banks in continental Europe to
conduct US dollar auctions during European trading hours to help alleviate time
zone frictions and to complement the Federal Reserve’s TAF auctions [Committee
on the Global Financial System (CGFS) (2008)]

345

PUBLIC POLICIES AND ECONOMIC CRISES

Table 3. Special measures taken during the financial crisis
EA

JP

CH

GB

US

RO

Exceptional fine-tuning (frequency, conditions)

Y

Y

Y

Y

Y

Y

Exceptional long-term open market operations

Y

Y

Y

Y

Y

Y

Front-loading of reserves in maintenance period

Y

Y

Change in reserve requirements/targets

Y

Change in the standing lending facility

Y
Y

Broadening of eligible collateral

Y

Y

Y

Broadening of counterparties

Y

Y

Introducing or increasing securities lending

Y

Y

EA = euro area; JP = Japan; CH = Switzerland; GB = United Kingdom; US = United States; RO
= Romania; Y = yes; blank = no
Source: National Banks and Committee on the Global Financial System Papers.

In we consider only one of the above measures; it is obvious that the 2007 till
today financial crisis was predictable.
For instance if we take into account only the reserve requirement into the last
40 years we will observe a huge decrease.

Table 4. Change in reserve requirements
1968

1978

1988

1998

2008

Great Britain

20.5

15.9

5.0

3.1

0

Germany

19.0

19.3

17.2

11.9

2

United States of America

12.3

10.1

8.5

10.3

10

Maybe we can express a link between change in the reserve requirements and the
unemployment rate. If the national bank increases the reserve requirement, than
the supply of money will decrease and business will enter into a period of low financial liquidity. This possibility together with the decrease of the consumption of
population can lead, not immediately, to a decrease of the total demand for goods
and services. If in the first moments the companies can find solutions using the toll
of foreign trade, the export to be more specific, meanwhile the financial turmoil
is spreading and companies will react in decreasing production on the developed
markets at first and then on emergent countries. This is why emergent economies

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will experience first an economic decrease and only after that a financial one. If in
the case of developed market economies the first problem seems to be the financial
one, in the emergent countries the negative experience will occur in the economy as
a whole and only after that will be more and more obvious in the financial sector.
What is the outcome of the analysis of those measures? Well we see that in the
areas in which we had more and more problems the regulations proposed are more
and more strict.
Second of all, the government nature is a bureaucratic one and does not allow
smooth changes on the way to market intervention. We should say that the government intervention will change the market on the long run and not as it is requested
today to have solutions on a short run, so that the market failure to be eliminated.
Not in the end a government does not have all the time the incentive to solve
the problem entirely. Let’s consider that the financial system is one of the most
globalize systems nowadays. Why a national government to have the incentive to
solve the problem of a multinational company, even if it is a financial one? Maybe
the answer to this question should be the boomerang effect on national economies
of the international financial institutions.
All around those problems can not be understood and known by only one bureaucratic government and for sure the action of a single government will not have
desired and requested result.
The answer of the financial system came from the international financial institutions. For some countries the answer was late, for other was wrong and for some
others inappropriate. Here we can consider the experience of Greece, Hungary (not
needing anymore the help of international financial institutions) and maybe (hopefully not) the case of the other eastern economies.
5. CONCLUSION AND PROPOSALS

Financial systems may experience problems that may give rise from two distinct
developments that can each make it more difficult for central banks to keep the
relevant interest rates near their policy rate targets: first, there may be unpredictable shifts in the aggregate demand for reserves; second, there may be occasions on
which a central bank needs to extend large amounts of credit but at the same time
keep the net aggregate supply of reserves consistent with its policy rate target.

PUBLIC POLICIES AND ECONOMIC CRISES

347

Another improtant problem is that of communication. Misinformation and misinterpretation of central bank actions are more likely and costly in times of stress.
What should the central banks do? First of all to try al least to increase communication with the market participants and media. Sometimes changes in economic environment are more or less turbulent in according with the capacity of the governor
or the board of governors to communicate with the economic environment.
Maybe it is more important to communicate, to explain problems and measures than to act without promoting and explaining the impact of central banks
actions.
Also in these cases the explanations not only of the economic and financial
solutions proposed are to be explained but also some economic outcomes can be
explained and than maybe when those economic outcomes occur the market will
not be so to say „suprised”.
As an example the measures taken by the NBR (National Bank of Romania), even
if they seemed more strict than other measures taken by other national banks.
The expectation that central banks will act to attenuate market malfunctioning
may create moral hazard by weakening market participants’ incentives to manage
liquidity prudently. So that maybe central bank’s intervention should be or not be
public? In certain cases, if we consider that all the time the financial system will
have a „super-bank” to manage all the problems, the banks and other financial or
non-financial institutions will deal more happy and without any burden on to the
financial market. This is not what the market should do. They must be aware of all
the risks and to manage liquidity wisely and not so wide-handed.
All of that can not represent but financial solutions, but maybe much more important are those economic solutions. If the cause of this financial-economic crisis
seems to be the failure of the financial markets we think that the solution is more
an economic one then financial. It will be in the hands of national governments
to change the markets and hopefully not using only financial tools but also other
economic policies like the public spending policy and the fiscal policy.
The public spending policy should create jobs for those sectors that shrank or
in the worse case scenario to try to change on medium and long term the structure
of the economy. A good thing that usually economic crisis are bringing is increasing interest for savings and decreasing appeal for consumption (maybe the best

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example here is USA in 2007 with a savings rate of no more than 1% and nowadays
a saving rate of 7% average for 2009).
The question that will arise is whether the governments will have enough money
to finance this new public spending policy. We can propose here two solutions:
one to leave the problem of the inflation on the second plan or to try to cut other
expenses not so compulsory for the national economies. Inflation can be avoided,
but this means that policy makers will have to agree categories of expenses to be
cut down. One solution for the countries in EU will be for instance the decreasing
expenses for the officials and commissions of EU. This can be a very boiling point
because it has to be decided exactly by the beneficiary of those expenses. It is a
though point but let’s imagine that this crisis will be due in a reasonable time of 3-5
years or the worse case scenario to have a come-back of the economy in the same
manner and time as the big crisis from 1929-1933. Hopefully the policy makers
will take into account the public benefit and not an individual or even a national
one, otherwise they will create once again an new market failure, this time not only
a financial one but more complex a general economic market failure of the capitalist market system.
REFERENCES

1. Colander (2004), Economics, ISBN 0-07-254902-5, New York
2. Allen F., D. Gale (2007), Understanding Financial Crises, ISBN-13:
9780199251414, Oxford University Press
3. Allen, Franklin and Gale, Douglas M., An Introduction to Financial Crises (August 14, 2007). Wharton Financial Institutions Center Working Paper No. 0720. Available at SSRN:http://ssrn.com/abstract=1008311
4. Babus, Ana, Carletti, Elena and Allen, Franklin, Financial Crises: Theory and Evidence (June 8, 2009). Available at SSRN: http://ssrn.com/abstract=1422715
5. Gorton H., L. Huang (2004), “Liquidity, Efficiency and Bank Bailouts”,
American Economic Review 94, 455-483, http://fic.wharton.upenn.edu/fic/
papers/02/0233.pdf (05.01.2010)
6. Gonzalez-Paramo, Jose Manuel (2009), Financial market failures and public policies - a central banker’s perspective on the global financial crisis, http://www.
bis.org/review/r090210e.pdf (05.03.2010)

PUBLIC POLICIES AND ECONOMIC CRISES

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7. Trichet, J.C. (2008), International Interdependencies and Monetary Policy:
A Policy Maker’s view, Speech at the Fifth ECB Central Banking Conference,
Frankfurt am Main, http://www.ecb.int/press/key/date/2008/html/sp081114.
en.html(28.02.2010)
8. Committee on the Global Financial System (CGFS) (2008), Central bank operations in response to the financial turmoil, CGFS Publications No. 31, http://
www.bis.org/review/r090210e.pdf (05.01.2010)
9. Site:http://thinkexist.com/quotation/it_is_just_as_important_that_business_keep_out_of/195403.html (25.02.2010)
10. http://www.indexmundi.com/ (28.02.2010)
11. Economic Crisis In Europe: Causes, Consequences and Responses http://
ec.europa.eu/economy_finance/publications/publication15887_en.pdf
(25.02.2010)
12. Onaran, O. (2009), Global crisis and global reaction in Western and Eastern
European Union, http://www.internationalviewpoint.org/spip.php?article1797
(28.02.2010)
13. Salzmann, M, Deepening Economic Crisis in Eastern Europe, (2009) http://
www.wsws.org/articles/2009/nov2009/euro-n24.shtml (05.03.2010)
14. Schwarz, LS, Regulating complexity in financial markets, http://papers.ssrn.
com/sol3/papers.cfm?abstract_id=1240863 (15.02.2010)

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Igor Živko • Zdenko Klepić • Nikola Papac

TRANSPARENCY OF FINANCIAL REPORTING AS
INTERNAL MECHANISM OF CORPORATE GOVERNANCE IN
BANKS IN B&H
Igor Živko1, Zdenko Klepić2, Nikola Papac3

ABSTRACT

Corporate governance is a group of relations between owners, stockholders and
other groups of interest or influence. Actually it is a group of relations between
different participants of the corporation business who work on determining then
direction and successfulness of the corporation.
Corporate governance is shown through several different mechanisms that enable the management to govern the corporation for the welfare of one or more
interested parties. The management is represented as the agent that runs the corporation for the welfare of different principals. Adequate and transparent reporting
is one of the most significant internal mechanisms of corporate governance and is
very important for the existing and future investors on the market of capital because it is a picture of behavior and work of the management of the corporation.
Through the presentation of previously made financial statements the banks
provide information about themselves and their business running to investors,
creditors, analysts and other interested parties, i.e. they make their business running transparent. Transparency in financial reporting means insuring the simplicity
and easiness of access to information, their accuracy, quality, timing, presentation
in clear and simple terms, and all that provides control over debtors and owners
discipline, market evaluation of the bank, control of risks, responsibility of managers and bank directors.

1
2
3

Ph.D. Igor Živko, Faculty of Economics, University of Mostar
Ph.D. Zdenko Klepić, Faculty of Economics, University of Mostar
B.sc. Nikola Papac, Faculty of Economics, University of Mostar

TRANSPARENCY OF FINANCIAL REPORTING AS INTERNAL MECHANISM...

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The goal of this work is to analyze the use of Internet with the purpose of
financial statements and improvement of transparency of financial statements of
banks in Bosnia and Herzegovina. Transparency in banking industry is the crucial
element of supervising process and efficient market discipline, but it is also one
of crucial internal mechanisms of corporate governance. Special attentions will bi
given to congruency of presented information and the directions of third column
of Basel II. with the purpose of ensuring market discipline and EU Directive of
Transparency.
JEL classification: G21, M4
Key words: corporate governance, transparency, internal mechanisms of corporate governance, financial statements, Basel II, EU Directive of Transparency
1. INTRODUCTION

In the broadest meaning, corporate governance is a relation between a manager (administration) and investors who invested capital in the corporation. If we
observe this in a narrower meaning, corporate governance is the system, which
ensures to the owner (investor) that the supreme management, named and set in
order to achieve aims of the organization, would accomplish the main accepted obligation, which is making additional capital value for the owners. The setting of the
corporate governance should provide all material data concerned with corporation
including financial situation, work results, ownership and managing the association in time and precisely.
Transparency in bank industry is an important feature in supervision process
and in making efficient market discipline. We can talk about market discipline only
when market participants have total access to timely and precise information which
enables them to join bank’s activity and to measure risk in bank’s activities and
bank financial situation, its risk profile and the managing risk system. Public announcement and supervision information have to promote safety and reliability of
bank’s system as well as protect the consumer. Transparency in the states of central
and southern east Europe has special place because banks are in instant structural
changes in financial department: financial innovations, growing complexity of the
business transactions, financial conglomerates, rising consumers’ requests, banking internationalization, exposing to risks. Only the existent and improvements of
transparency only can help to prevent financial crisis.

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Igor Živko • Zdenko Klepić • Nikola Papac

Many companies use Internet today as instrument for business and communications, from online goods orders and services to information assurance for investors, creditors and other interested users. Banks can use the Internet to ensure
financial information about their business via corporative web site. Internet can
be used to publish the financial performances, financial issues (capital, solvency
and liquidity), and exposure to risks, accounting principles, as well as information
about corporate bank governance in public.
2. THE TERM OF CORPORATE GOVERNANCE

The term of corporate governance is pretty wide open and there are a lot of
approaches, which can help to define it. Corporate governance is linked to corporations in which the ownership is separated from governance and thereby we can
define it:
According to OECD definition (Organization for Economic Cooperation and
Development) corporate governance includes…set of the relations between management, administration, stockholders and the rest interested groups. Corporate
governance also represents the structure inside which the goals of the business are
determined as well as funds for achieving those goals and monitoring its business
transactions. Good corporate governance should offer proper encouragement for
the administration and management in order to achieve goals, which are of great
interest for business and stockholders…˝4
˝Corporate governance is relation between different participants while determining direction and efficacy of the corporation. The main participants of this process are the owners of the corporations, management and supervisory committee.
The rest of the participants are employees, buyers, suppliers, creditors and wider
social community˝5
According to Cadbury: corporate governance is managing and controlling of
the corporation.˝6

4

5

6

Organization for Economic Co-Operation And Development: OECD Principles of Corporate Governance, OECD Publications, Pairs, 2004., p. 12., accepted from: www.oecd.org/
dataoecd/32/18/31557724.pdf, 20/08/2008
Monks, R. A. G. & Minow, N.: Corporate governance, 3rd Edition, Blackwell Publishing, 2003,
p.12.
Dunlop, A.: Corporate Governance and Control, Kogan Page Publisher, 1998, p.3.

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353

To develop effective corporate governance we have to cover three fields: (1)
control of the management – where board directors are controlling choice and
verifying actions of the headmasters; (2) Reporting the stockholders – revision and
including in making important decisions of the owners, and (3) monitoring and
valuation of the long – term strategies and business activities valuation.7
3. MECHANISMS OF THE CORPORATE GOVERNANCE

Corporate governance manifests throughout many different mechanisms, which
enables for management to administrate corporation for welfare of one or more
interested parties. Management manifests as agent administrating corporation for
different principals’ welfare (stockholders and stakeholders).
There is a variety of different mechanisms which ensure corporate governance’s
efficiency, as great stockholders, creditors, internal control and supervision systems,
external and autonomous auditors, and off course legal sets inside which a corporation operates.
All these mechanisms are put into two main groups: internal and external.8
Outer (external) mechanisms include: legal set (frame), market influence and
competition and minority owner’s interest’s protection. Internal mechanisms in
the most cases are: directors committee, motivation politics of the management,
ownership concentration, relations with stakeholders and transparency in current
financial actions and reporting.
3.1. Transparency as corporate governance mechanism

The fifth internal mechanism is transparency in financial and current business,
and it is about adequate and transparent disclosure of relevant information about
the business (disclosure – routine notion or term).
Adequate and transparent disclosure is very important for existing and future
investors on the capital market, because it brings picture about corporation management behavior and actions. This issue is elaborated in V. OECD’s corporate
governance principle (Data disclosure and transparency).

7

8

Nezirić, D.: Korporativno upravljanje – pokretač razvoja tržišne ekonomije, Poduzetnička ekonomija, Volume IX, 12/2005. p. 238-354., accepted from: http//:www.ebscohost.com/, May 2008
Tipurić, D.: nadzorni odbor i korporativno upravljanje, Sinergija, Zagreb 2006, p. 56

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Igor Živko • Zdenko Klepić • Nikola Papac

From V. OECD’s corporate governance principle we can conclude that the corporate governance frame should enable timely and precisely to disclosure all issues
important for corporation, including financial situation, results, ownership, and
corporate governance.9
This principle requests public disclosure, at least once a year, but some countries
request periodical disclosure on semi – annual or quarter ground, or even more
frequent, if some important events, with influence on corporation are taking place.
Corporations often undertake voluntary to disclosure data, which goes even further
from minimal requests, and it matches to market requests and needs.
Stockholders and potential investors request for delivery of the sure, comparable, and detailed enough information in order to judge relations within the administration and to make decisions about value, ownership, and votes by virtues of
stocks. Insufficient or inexplicit information can endanger market’s functionality;
can raise capital’s costs and can lead to unsatisfactory resources distribution.
3.2. Institutional set for financial report transparency in Federation of Bosnia and
Herzegovina

The most regulations from the corporate governance in Bosnia and Herzegovina
are defined by entity lows. At the state level, at accounting domain and accounting regulations there is a state Low about accounting and audit of Bosnia and
Herzegovina10, which fortifies standards for accounting and audit implementation
in Bosnia and Herzegovina. Nevertheless, beside afore-mentioned low at the state
level there are entity lows and these are: The low about accounting and audit in
Federation of Bosnia and Herzegovina11 and The low about accounting and revision in Serb Republic.12

9

Organization for Economic Co-Operation And Development: OECD Principles of Corporate Governance, OECD Publications, Pairs, 2004., p. 2.
10
Low about accounting and audit of Bosnia and Herzegovina, Official Gazette of Bosnia and Herzegovina, Number 42/04
11
Low about accounting and audit of Federation of Bosnia and Herzegovina, Official Gazette of the
Federation of Bosnia and Herzegovina, Number 32/05
12
Low about accounting and audit of Republic of Srpska, Official Gazette of Republic of Srpska,
Number 67/05

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International accounting standards, i.e. International Financial Report Standards are grounds to create native accounting regulations, which onwards regulate
all actions concerned with creating financial reports.
Commissions for securities (stocks) in both entities have different obligations
for annual reporting. Joint – stock company in both entities are obliged to prepare
annual financial reports and reviser reports or supervisory board’s reports for revision. (Federation of Bosnia and Herzegovina) or supervisory and authority board
(Republic of Srpska), which are to be presented to main stock’s congress and to be
available for stockholders.
Annual financial reports must be the revision and consolidation issue, they are
to be delivered to specialized agency FIP in Federation of Bosnia and Herzegovina
and AFIP in Serb Republic. Regulations in Serb Republic bind joint – stock companies whose stocks belong to at least one hundred stockholders or at least to one
PIF (Privatization investing found) to disclosure annual summary financial reports,
as well as to publish the report about the most important events and activities in
daily newspapers. Joint – stock companies with marketable securities (practically all
of them) also have to deliver annual reports about business activities to their Commission for securities and to stock market including summary financial reports,
revision report as well as report about the latest activities and future plans.
The low about securities in both entities are obliged by joint – stock companies
to prepare semi – annual reports about activities in business. They contain the main
financial data, which were not the revision issue. Investment funds in Federation
of Bosnia and Herzegovina are bind to prepare quarterly reports while other jointstock companies in Bosnia and Herzegovina are not. Apart from few, reports are
simple. Less than a half of joint – stock companies in both entities disclose reports
or deliver them to their Commission for securities or stock market.
3.3. Transparency and bank financial reporting

The market can be efficient only on the grounds of proper, useful and timely
available information. Actually, in bank business activities it is necessary to provide
information clarity from financial reports, to make the way they are published
more simple as well as to enable debtors and owners discipline supervision, bank
market valuation and to provide manager’s responsibility.

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Igor Živko • Zdenko Klepić • Nikola Papac

This is possible to achieve with implementation of accounting standards and
behavior standards. Banks within European Union whose securities are used for
trade on financial market have been obliged to implement International Accounting Standards and thus raise publicity access to information with regard to possibilities offered by national accounting standards. However, European banks rating
on American stock markets must implement International Financial Report Standards, because with their implementation they achieve similar level of transparency
as U.S. GAAP standards.
Financial reports composed according to standards must give precise and fair
view on property, obligations, financial position and benefit or waste on consolatory level.
Transparency, efficiency and integrating financial market would contribute in
achieving unique community market and would contribute to its faster growth, as
well as would contribute to opening new workplaces, better allocation of capital as
the result of costs reduction. Transparency provides that investor feels safety and
it allows more simple performances and bank property valuations, but for other
participants at financial market too. Actually transparency must achieve two goals:
investor’s protection (creditors, depositories) and to enable market efficacy. Transparency represents some way of the bank’s self – regulation.
4. BANKS TRANSPARENCY IN BOSNIA AND HERZEGOVINA

Bank management in Bosnia and Herzegovina according to existing lows about
accounting is responsible to enable financial reports prepared for each year according to International Financial Report Standards which give truthful and fair value
for the period given. Annual banks report includes:
● Responsibility for financial reports
● Autonomous reviser’s report
● Balance sheet
● Success balance
● Report about cash flew
● Report about changes in share capital
● Notes about financial reports

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In 2006 we studied thirty three banks in bank system of Bosnia and Herzegovina, and we fortified those twenty eight banks has an Internet site, or eighty five
percent, while five among banks has not internet connection or it is in reconstruction. At this eighty five percent of banks web pages offer financial information, but
timely publications vary. From this pattern seventy six percent of banks have financial reports published on the Internet i.e. they have developed Internet financial
reporting. Annual financial reports have been published on the Internet.
In 2007 we studied 32 banks in Bosnia and Herzegovina. All of them, i.e. 100%
had internet page and all of them had financial reports available, but the way reports were published and the way they were shaped vary, these two segments were
not standardized. There are corporative reports from wide ones, which are standardized for banks’ centrals to those with contracted financial reports with copy of
the reversionary judgment. It could be said; the ways of reporting were not standardized. Just five banks had reports about business actions in 5-year period, which
was ordered by EU directive about transparency.
In 2008 all banks had Internet pages, but till the time this work was done (1st
of March 2009) neither of them had reports published.
However we have to consider interest of some banks for minor or more indigent transparency for many reasons: time assurance institute, precise and detailed
accounting system, resources for reporting function, reports composed according
to international standards and revised by external reviser, and for all this costs are
high, especially for smaller banks.13
In order to advance transparency and to reach higher transparency level necessary for business action in globalized financial world we need to adjust national
legislative and practice to the guidelines of EU Directive transparency the third
Basel post.
5. TRANSPARENCY DIRECTIVE

Where bank transparency is concerned, primarily monitoring the area in euro
integrations context and approaching to euro zone countries Transparency Directive
2001/34/EC i 2004/109/EC could not be avoided. Directive purpose is transparency request harmonization, i.e. establishing request for public reporting current

13

European Parliament and Council, (2001): Directive 2001/34/EC, p.2

358

Igor Živko • Zdenko Klepić • Nikola Papac

and periodical information for the entities whose stocks are traded on the EU markets. Transparency Directive regulates the deadlines for publishing certain types of
publications, and its implementation has started since the end of 2006 in national
euro zone lows, whereas for implementation twenty-four months are needed.
The main Transparency Directive features are:14
● Common deadlines for publishing – four months after the reporting period is over –annual financial report and two months for temporary financial
reports.
● Annual reports must contain: revised financial reports, manager’s report
● Publications must be available for publicity at least for five years
● Semi – annual financial report, according to International Accounting Standards 34 must contain added manager’s report
● Temporary managers’ reports (process review and business performances reviews and position as well as main risk factors description and incertitude
to which management is confronted) for eminent action in first and third
quarter
● Obligation to publish reports on the Internet
● Ad hoc reporting harmonization
In order to carry away obstacles and to introduce effective new transparency
requests in community special control of national competent bodies is needed for
directive to enable timely available information. Financial market participants are
obliged to translate all current and periodic information in all languages spoken in
countries members in whom their actions are traded.
6. BANK TRANSPARENCY AND MARKET DISCIPLINE

Market discipline, as the third post of the New Basel standard has its purpose
to put together requests which have become banks’ issues in the first post (minimal
capital adequacy) and those from second post (supervisory control over banks).
This Basel’s standard post determines big influence of national supervisor over bank
in order to work with effectiveness, fiducially, and with certain amount of safety.
Guided by this, the Basel committee for bank supervision made number of re-

14

European Parliament and Council: Directive 2004/109/EC, 2004, p.40-49

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359

quests to enable market participants to have access to key information about bank’s
actions.
Establishing market discipline it is attempted to enable for every single participant on the market to dispose equally with information about bank, which enables
better and easier decisions making. That’s the reason why Basel II puts upon adoption of informing public politicks as a need which is to be adopted by the administration of every bank, and with in it is defined information mould and volume
which will be available for publicity and frequency of their publishing.15
6.1. Financial performances

Market participants and supervisors need information about bank’s financial
performances. Particularly important is to publish information:
● Bank’s profitability and profit variability to make easier judgment about potential change in financial position and possibilities of deposit and commitments repayment, cash flow
● Incomes and costs reviews in order to fortify wage quality, to fortify reasons
for bank profitability changes, netto interest margin, relation between costs
and interests
● Financial contribution review of different bank’s activities and geographical
areas on financial performances
● Managers’ reports about events which effected current and would effect future
financial bank performances
6.2. Financial position

Information about bank financial position is important to predict bank’s abilities in identifying obligations and financial obligations. Information are published
about:
● property mould and amount, obligations, capital including both maturity
structure and repayment plan useful for liquidity valuation, bank solvent and
financial power
● fees and provision by losses and the way they are formed, ability to manage the
losses is represented through this
15

Basel Committee on Bank Supervision: Enhancing Bank Transparency, September 1998, p.18

360

Igor Živko • Zdenko Klepić • Nikola Papac

active and passive structures in off – balanced record
● regulatory capital and stockholder’s capital in order to get information about
bank’s ability to absorb future potential profits and their future growing
● property mould and amount concerned with collaterals

6.3. Strategies and practices in risk governance

The public needs to have ensured information about strategies and practices
governance and risk control. Information’s, which needed to be published, are:
management risk psychology, politics and methodology; risk resources; method of
governance and controlling the risks; using derivates in risk governance.
6.4. Exposure to risk

Market participants and supervisors are to be delivered qualitative and quantitative information about: exposure to risk including governance strategy and efficacy
governance strategy; risk profile i.e. risks in balance positions and off – balanced
record at the current moment as well as bank’s appetite for taking over the risks;
credit risk, market risk, interest risk, exchange rate and liquidity risk;
Information published in a due time would guide to a better market discipline.
7. CONCLUSION

Market works well when identifies financial institution in risk, in, otherwise
healthy financial system – as black sheep among white sheep. That’s the reason why
it’s the key thing developing and advancing transparency in superficial financial systems as financial systems in countries of the southern east Europe. As long as there
are information about financial condition in business activities the stocks price and
conditions for getting onto debt will maintain bank risk. In order to avoid problems in business actions and bank crisis we must close ˝informatics’ gap˝ as well as
to give information to market participants both to identify financial performances
and positions and to identify financial institution risk profile.
For transparent system in providing financial reports and corporate governance
improving it is necessarily to follow the accounting and revision mode in a persistent ways, to introduce standard shape for annual report, to strengthen directly
information publishing via central records, adjust the Low about securities as well
as other lows.

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Also, we have to endure in publishing information about important indirect
ownership according to EU transparency directive, we have to improve approach
to the information about companies, including online court register and web
portals, integrated interface which should cover Sarajevo’s stock market as well as
Banja Luka’s stock market and to introduce ˝a window˝ for informing about the
companies.
Higher reporting transparency contributes to a higher corporate governance
quality, strengthen confidence among investors, developing financial market, better identification of different institutions and managing financial crises, all these
are extremely important elements in social – economics conditions of Bosnia and
Herzegovina for long – term stability and development.
REFERENCES

1. Basel Committee on Bank Supervision: Enhancing Bank Transparency, September 1998
2. Dunlop, A.: Corporate Governance and Control, Kogan Page Publisher, 1998
3. European Parliament and Council, (2001): Directive 2001/34/EC
4. European Parliament and Council, (2004): Directive 2004/109/EC
5. European Parliament and Council: Directive 2004/109/EC, 2004
6. Laws and regulations about banks, accounting and audit in Bosnia and
Herzegovina
7. Monks, R. A. G. & Minow, N.: Corporate governance, 3rd Edition, Blackwell
Publishing, 2003
8. Nezirić, D.: Korporativno upravljanje – pokretač razvoja tržišne ekonomije,
Poduzetnička ekonomija, Volume IX, 12/2005. p. 238-354., accepted from:
http//:www.ebscohost.com/, May 2008
9. Organization for Economic Co-Operation and Development: OECD Principles
of Corporate Governance, OECD Publication, Paris, 2004
10. Tipurić, D.: nadzorni odbor i korporativno upravljanje, Sinergija, Zagreb
2006

INTERNATIONAL
ECONOMICS

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365

FOREIGN DIRECT INVESTMENT LOCATION AND
INSTITUTIONAL DEVELOPMENT IN IN THE MANUFACTURING
SECTOR IN SOUTH EAST EUROPEAN COUNTRIES
Besim Culahovic, PhD
Eldin Mehic, MSc
Emir Agic, MSc
School of Economics and Business,
Sarajevo, Bosnia and Herzegovina

ABSTRACT

This paper investigates the importance of factor endowment vis-à-vis institutions development in explaining the locational choice of foreign investors in manufacturing sector in SEE countries. Using panel dataset for the period 1999 to 2006
we constructed an econometric model that was used to estimate the determinants
of FDI on sectoral level. The determinants were grouped into control variables and
institutionally related variables. The selection of control variables was motivated by
existing research on FDI, and our results are consistent with the empirical evidence
on the key determinants of FDI reported in the literature. Our analysis indicates
that the overall quality of the institutions attracts FDI in manufacturing sector in
SEE region. Besides, we identified individual determinants by disaggregating to
subsets of institutional development. In this context, the results indicate that a few
institutional changes enhanced FDI receipts to manufacturing sector: development
of privatisation process, liberalization of foreign exchange and trade, development
of competition policy and development of infrastructure reform. On the other
hand, enterprise restructuring, domestic price liberalization and development of
the banking sector do not seem to be a significant motive for FDI in our study,
probably because the described institutional changes do not present a significant
obstacle to foreign investors.
JEL classification: O16, R58
Key words: foreign direct investment, location determinants, South East European countries, manufacturing sector, panel data

366

Besim Čulahović • Eldin Mehić • Emir Agić

1. INTRODUCTION

Foreign direct investment inflow in transition countries triggered numerous debates and studies on FDI determinants in these states. The use of different explanatory variables in FDI determinant studies is due to the fact that FDI is a complex
economic category dependent on numerous factors, the comparative significance
of which can change in accordance with the economic environment development
over time; a change in a recipient country’s economy may also bring about a change
in FDI determinants (UNCTAD; 1998). Although traditional determinants do
not disappear due to globalization, their significance diminishes, while determinants such as institutional development and structural reforms gain in significance.
In this context, the paper is aimed at analyzing the influence of various dimensions
of the institutional framework on FDI.
The extensive research into the nature and determinants of FDI in transition
economies has paid little attention to the study of FDI determinants in SEE countries, primarily due to a lack of comparable data. In over 45 empirical studies we
reviewed, only four cover some of the South East Europe (SEE)1 countries, while
only two include all countries of the region (Demekas et al; 2005, Kersan-Škabić &
Orlić; 2007). Besides, there is an observable lack of research into FDI determinants
on the sectoral level, which is interesting since FDI is related to industry rather
than to countries (Buigues-u and Jacquemin, 1994), and since FDI concentration
in individual sectors in the transition countries can affect the direction and speed of
the economy restructuring process as foreign investors can bring in a set of tangible
and intangible benefits essential for the development of market economy in these
countries (Resmini, 2000).
For these reasons, the paper attempts to fill the gap in the current debate on the
relationship between the institutional infrastructure development and FDI in SEE
countries on the sectoral level, in the period 1999-2006. Our central hypothesis
is that countries with more developed institutions for market economy also have
a greater FDI stock in the manufacturing industry. The paper is organized as follows. Section 2 discusses the theoretical context of FDI determinants from the
host economies’ perspective. Section 3 provides empirical issues, while Section 4
discusses variables and methodology used in the paper. Section 5 offers the panel
regression results while Section 6 discusses conclusions.
1

Countries of South East Europe: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, Serbia and Montenegro

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367

2. THEORETICAL FRAMEWORK

In his attempt to answer the question as to why, how and when FDI will occur,
Dunning merged different FDI theories into the so-called OLI theory. The eclectic
theory postulates that three conditions are essential for a FDI. The first condition is
that the firm must have a net ownership advantage over the other firms serving the
foreign market. This ownership advantage may be a product or process differentiation ability, a monopoly power, a better resource capacity or usage, or an exclusive,
favored access to product markets etc. The second condition requires that the firm
prefer internalizing its ownership advantages rather than externalizing them. This
means that the firm possessing ownership advantages must deem producing abroad
more profitable than selling or leasing its activities to foreign firms. A firm might
prefer internalizing its ownership advantages in order to protect the quality of its
products, to control supplies and conditions of sales of inputs, to control market
outlets. Finally, the firm enjoying an ownership advantage and an internalization
incentive will produce abroad only if there are abroad location advantages such as
cheaper labor, higher labor productivity, market access etc. (see Dunning and Buckley, 1977; Dunning 1988). The ownership, location, and internalization (OLI) advantages are not static. They may change over time. Location determinants are the
only group of determinants that the host country governments can directly affect.
Dunning identified four types of investment activities by multinationals: market
seeking, resource seeking, efficiency seeking and/or strategic asset seeking ones. In
accordance with Dunning’s approach, FDI determinants will depend on the type
of undertaken activities, and each of the listed types corresponds with a specific set
of OLI benefits.
Dunning (2005) also included factors related to institutions and institutional
infrastructure in the existing eclectic paradigm, consequent to the impact of globalization and aims of the New Paradigm Development (NPD). He identified three
generic groups of factors that can influence FDI inflow: frameworks of policies and
strategies for FDI, economic determinants and business exemptions. As classified,
the institutionally related determinants are spread over each of the three groups. The
group of FDI-related policies and strategies includes policies for market functioning and structure, bilateral agreements on FDI, privatization, industrial policies,
etc. The economic determinants group was expanded with the availability, quality
and cost of skilled labour, membership in regional integration agreements, market
institutions’ quality, quality of managerial and other creative resources, physical

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Besim Čulahović • Eldin Mehić • Emir Agić

infrastructure, etc., while the business exemption group includes investment incentives and promotion, legislation quality and intellectual property protection,
good institutional infrastructure and support (banking, accounting jobs, and other
services), social capital, regional clusters and networking.
The above framework of FDI gives guidance in identifying the set of economic
and institutional variables to be tested as determinants of investment locations,
which is discussed in detail in the next section.
3. EMPIRICAL ISSUES

There is a number of empirical studies on FDI determinants that are mostly
distinguished by the choice of explanatory variables, applied methodology and the
sample of countries included in the research. Our review of empirical literature focuses on the most significant papers researching the link between FDI and selection
of explanatory, including institutionally related variables in transition countries.
In the transition economy context, legal framework was radically changing in
order to create a new set of formal institutions in the 1990s. Most studies indicate
that institutional development is a significant location advantage in international
business. According to the World Bank (1996), the change of ownership in transition countries is probably the most significant institutional change. Lansbury, Pain
and Smidkova (1996) found that the share of private sector has a positive effect
on FDI inflow in the sample of Central European countries. Besides, Holland and
Pain (1998) and Bevan and Estrin (2000) found that the level of privatisation is
closely tied with the increase in FDI inflows in CEECs.
Transition from planned to market economy also required the establishment of
institutions for unimpeded exchange of goods and services. In this context, research
shows that liberalization of home markets, openness and competition policy development have a favourable impact on FDI inflow (Blattner, 2002, Cieslik and Ryan,
2004). Connection between host country political instability and FDI inflows was
also discussed in literature on FDI determinants. Smarzynska (2002) and Bevan
et al. (2000) found that poor protection of property rights has a negative impact
on FDI inflows. Pournarakis and Varsakelis (2002) also studied the connection
between institutional factors and FDI using panel-data set for 19 CEEC countries
in the period 1997-2000 and found that civil and political rights and corruption
are crucial in explaining FDI inflows in the observed transition economies. Kinoshita and Campos (2003) used a sample of 25 transition economies in the period

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369

1990-1998 to study location determinants classified into three categories: country
specific advantages, institutions and agglomeration economies. Their main conclusion is that institutions and agglomeration economies have a higher impact on
FDI inflows than other economic variables. Bevan et al. (2004) found that several
specific formal institutions influence FDI: private ownership of business, banking
sector reform, foreign exchange and trade liberalization, and legal development.
Conversely, domestic price liberalization, non-bank financial sector development
and competition policy do not enhance FDI.
4. MODELLING AND DATA

The empirical framework employed in the analysis involves the use of a single
equation model for testing the relationship between FDI and institutional infrastructure. The model regresses the FDI data on a measure of institutional development, and a set of control variables. The dependent variable in the paper is FDI
stock per capita2, NACE 1-digit in the manufacturing sector for each observed
SEE country in the period 1999-2006. Due to the lack of data for SEE countries,
we took a particular effort to attempt to create a relevant database of FDI in the
manufacturing sector of the observed countries, which can serve the goals of this
analysis. Most FDI data were taken from the Vienna Institute for International
Economic Studies (WIIW) database. Data that were missing for certain years were
added based on the author’s calculations and estimates founded on the data collected from various sources.3
4.1.Independent variables
4.1.1. Institutional infrastructure

The concept of locational advantages captures properties of host locations that
make them attractive to potential foreign direct investors (Dunning; 1958, 1998).
2

3

There are several advantages in working on FDI stocks rather than flows. First, foreign investors
decide on the worldwide allocation of output, hence on capital stocks. Second, stocks account for
foreign direct investment being financed through local capital markets, hence it is a better measure
of capital ownership (Devereux and Griffith, 2002). Finally, stocks are much less volatile than flows
which are sometimes dependent on one or two large takeovers, especially in relatively small countries
(Quere et al, 2005).
National Bank of Romania, National Bank of Serbia, Foreign Investment Promotion Agency Bosnia
and Herzegovina

370

Besim Čulahović • Eldin Mehić • Emir Agić

Initial studies related to FDI determinants mostly focused on factor endowments,
particularly on labour cost and productivity as local advantages. In recent years,
multinational enterprises increasingly focus on ‘‘created assets’’ (Narula & Dunning, 2000) including knowledge-based assets, infrastructure and institutions of
the host economy. Legal, political and administrative systems tend to be the internationally immobile framework whose costs determine in international attractiveness of a location. Institutions affect the capacity of firms to interact and therefore
affect the relative transaction and coordination costs of production and innovation’
(Mudambi & Navarra; 2002: p. 636). Thus, institutional environment can be a
significant location determinant in attracting FDI. In this paper, institutional development was measured based on a series of indicators of the transition process
progress constructed by EBRD. Indices can take values from 1 to 4+, whereby a
higher index denotes getting closer to norms of developed market economies.
The construct measurements of the independent variable first used the confirmatory analysis with the following indicators: Large scale privatisation, Small scale
privatisation, Enterprise restructuring, Price liberalisation, Trade & forex system,
Competition policy, Banking reform & interest rate liberalisation, Securities markets & non-bank financial institutions, Overall infrastructure reform and Telecommunications, in order to verify their relevance for the analysis and to obtain meaningful factors measuring the levels of institutional transformation. All variables
loaded on the one factor, hereafter referred to as FACINST, with an eigenvalue of
7,013 and which explained 70,133%of variance. Besides the FACINST variable,
which is a proxy variable for institutional development, the selected4 EBRD indicators were used in order to find out which particular institutions influence FDI
(Table 1).

4

Index of small scale privatisation (SSP) was not used because it has small within standard deviations, which suggests that coefficient for SSP may not be as well identified as the others (Baum;
2006, 223).

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FOREIGN DIRECT INVESTMENT LOCATION AND INSTITUTIONAL DEVELOPMENT IN IN THE...

Table 1: Construct and variables definition
Construct

Regulation

Variable definition
Large scale privatisation index (LSP)
Enterprise restructuring index (ER)
Index of price liberalisation (PL)
Index of trade & forex system liberalization (TFS)
Index of competition policy (CP)

Financial infrastructure

Index of banking reform & interest rate liberalisation (BR)

+

Infrastructure

Index of overall infrastructure reform (OIR)

+

Privatization and enterprise reform
Liberalization

Predicted effect
+
+
+
+
+

In some cases, there is some collinearity5 between the indicators of institutional
development, largely because progress in various elements of the transition process
often occur simultaneously, if unevenly, in particular countries. For this reason,
we test hypothesis by estimating a series of equations, one for each institutional
development index.
In order to ensure that we are able to obtain unbiased econometric estimates,
our analysis controls for a number of factors that the existing literature has identified as important determinants of FDI. The influence of institutional development
on FDI stocks, our analysis controls for a number of factors that the existing literature has identified as important determinants of FDI. A set of control variables are
intended to capture those structural characteristics of the host economy that may
attract FDI.
4.1.2. Market size

Most empirical studies on FDI in transition countries suggest that most enterprises in these countries invest in order to find new markets for their products,
regardless of the industry the investment is made in (Lankes and Venables; 1996).
A larger market offers a few potential benefits for the investing firm. First, a larger
market represents a greater number of potential customers, which may lead to profit growth. Higher profits may also be due to the fact that a larger market facilitates
potential economies of large-scale production and fixed cost reduction. Besides, a
larger market allows more ways of new product placement, although it depends
both on the overall market size and on the dynamics of the market (Resmini; 2000).
Our model includes GDP per capita which is a proxy for the purchasing power of
5

Correlations matrix is not presented due to space limitations

372

Besim Čulahović • Eldin Mehić • Emir Agić

local consumers (local demand) and market size. We expect a positive sign for this
variable: countries with higher purchasing power of their consumers are expected
to attract more foreign investors.
4.1.3. Input cost

Besides the size and dynamics of the market and access to the host market, the
prevailing factors for attracting FDI certainly include the cost and quality of input
factors (Neuhaus, 2005). According to the neoclassical theory of determinants, an
FDI enterprise can undertake a foreign investment because of the advantage, i.e.
lower manufacturing cost in the host economy including the cost of labour, energy
and raw materials. The analysis considers wages, as an independent variable, as a
proxy variable for input cost. We calculate unit labor costs as the ratio of the annual
average wage in each economy to GDP per capita in each economy. In this way, our
measure of unit labor cost is effectively a unitless ratio (Bevan et al; 2004).
4.1.4. Macroeconomic stability

Successful implementation of economic reforms in transition countries is a
good sign to potential investors, since stable macroeconomic performance implies
a lower risk for investment. In this context, price stability is a good indicator for
host governments’ macroeconomic management. The sustainability of moderate
or low inflation tells investors how successful the host government is and thus the
prospect of further growth. Thus, the lower the average inflation rate is in the host
country, the more foreign investment will be attracted to the country (Kinoshita
and Campos; 2002). The paper therefore approximates macroeconomic stability
with the inflation rate. We expect the higher inflation to have a negative effect on
FDI inflows in the manufacturing sector, i.e. the coefficient to be negative.
4.1.5. Openness

Liberalization of trade could be closely related to FDI, because it could make the
country more attractive for foreign investors. Trade and FDI can be either substitutes or complements, and consequently barriers to trade can have two conflicting
influences on FDI. In the context of vertical FDI, trade openness facilitates imports
of intermediate goods for production and allows exports of final products after the
production, which is a common case in the manufacturing industry of the observed
transition countries. Conversely, if FDI is horizontal, which means that they are a
direct substitute for trade, FDI inflows are likely to decrease with the liberalization

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373

of host economy’s trade regimen. The paper used the shares of imports and exports
in the observed countries’ GDO as the degree of openness. The expected sign of the
coefficient with this variable is positive (depends on FDI form).
Data used for independent variables are mainly those from the United Nations
Economic Commission for Europe Statistical Division Database, compiled from
national and international (CIS, EUROSTAT, IMF, OECD) official sources, World
Development Indicators (WDI) database and Vienna Institute for International Economic Studies (WIIW). Despite the fact that there are different sources for independent variables, the goal was to use data only from a couple of sources in order to
avoid problems due to different ways of defining variables and the way of data collection, at least in terms of independent variables. Data for independent variables
that were missing in the listed database were complemented by data published by
National Statistical Offices of the sample countries.
The model we estimated to depict the determinants FDI is as follows:
FDIit = βα + i + β1GDPpci(t-1) + β2WAGEi(t-1) + β3OPENESSi(t-1) + β4INFLATIONi(t-1)
+ β5INSTITUTIONALi(t-1) + eit
where INSTITUTIONAL refers to the institutional related variables FACINST,
LSP, ER, PL, TFS, CP, BR and OIR.
We used a panel data set covering seven South East transition economies6 between 1999 and 2006. Data were not available for all the seven countries for all the
years, and the dataset is therefore “unbalanced”. Since a change in any independent
variable may take some time to affect FDI, we lag all independent variables by one
year except for variables CP and BR7. Since the all variables are expressed in logs,
the estimated coefficients should be interpreted as elasticities.
Given the longitudinal nature of the dataset, we begin by estimating equation
(1) with country fixed effects model (FEM)8. Use of pooled data in econometric
6

Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, Serbia and
Montenegro

7

Variable CP was not used in (current) period t because it has small within standard deviations,
which suggests that coefficient for CP. There is some collinearity between GDPpc and variable
BR in (current) period t. Besides, the independent variables were lagged to account for possible endogeneity issues - measuring the impact of institutions on FDI encounters the classical
problem of reverse causality.

8

Results for FEM model is not presented due to space limitations

374

Besim Čulahović • Eldin Mehić • Emir Agić

analyses frequently leads to certain complications (Hicks; 1994, 171-72). First,
errors tend to be no independent from a period to the next. In other terms, they
might be serially correlated, such that errors in country i at time t are correlated
with errors in country i at time t+1. Second, the errors tend to be correlated across
nations. They might be contemporaneously correlated, such that errors in country
i at time t are correlated with errors in country j at time t. Third, errors tend to be
heteroschesdastic, such that they may have differing variances across ranges or sub
sets of nations. And fourth, errors may contain both temporal and cross-sectional
components reflecting cross-sectional effects and temporal effects. In other words,
even if we start with data that were homoschedastic and not auto-correlated, we
risk producing a regression with observed heteroschestastic and auto-correlated errors. This is because heteroschedasticy and auto-correlation we observe is a function
also of model misspecification. It is for this reason that we applied tests for checking
the presence of heteroschedasticity and auto-correlation. First, a modified Wald test
for groupwise heteroskedasticity in fixed effect regression model reveals the presence of heteroscedasticity which, while leaving coefficient estimates unbiased, can
significantly influence standard errors and therefore affect hypothesis testing. There
are a number of statistical techniques that can address this problem (e.g. weighted
least squares), but their applicability and implementation are less clear in a panel
context (Podesta; 2000).
In addition to heteroscedasticity, the estimates using FEM model are also affected by serial correlation. In particular, a Wooldridge test for autocorrelation in panel
data rejects the null hypothesis of no first order serial correlation. The consequences
of autocorrelation are similar to heteroscedasticity, but the problems caused by
the latter are usually more severe. OLS coefficient estimates remain consistent and
unbiased in the presence of autocorrelation, but they are no longer best linear unbiased estimators (BLUE) or asymptotically efficient. Furthermore, autocorrelation
causes standard errors to be biased.

Consequent to the previously described problems, both Parks-Kmenta method
and Beck and Katz‘s (1995) proposal are alternatives. They represent two different
approaches to tackle the complications of serial correlation, contemporaneous correlation and heteroscedasticity. Beck and Katz show that the overconfidence in the
standard errors makes the Parks-Kmenta method unusable unless where there are
more time points than there are cross-section units. In other words, they recommend using Parks only when T is very large relative to N, which is not the case
in this paper (T is almost identical to N). Nevertheless, Beck and Katz (Beck and

375

FOREIGN DIRECT INVESTMENT LOCATION AND INSTITUTIONAL DEVELOPMENT IN IN THE...

Katz; 1995) showed that these approaches significantly underestimate the variability of the estimated coefficients, especially if the sample size is small. In this study,
we followed the suggestions of Beck and Katz and estimated OLS with panelcorrected standard errors (PCSEs) using Prais-Winsten to take into account the
AR(1) process.
5. PANEL REGRESSION RESULTS

In Table 2 we report the results separately for each of the observed measures of
institutional related variables combined with the same set of control variables.

Table 2: Panel regression results
GDP_pc
(t-1)
Wage (t-1)
Openness
(t-1)
Inflation
(t-1)
FAC1
(t-1)
LSP (t-1)

Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

Model 7

1.179***
(0.282)
-0,764
(0,477)
0,912**
(0,436)
-0,009
(0,027)
0,769***
(0,191)

1,454***
(0,333)
-0,566
(0,520)
1,072**
(0,529)
-0,037
(0,028)

1,669***
(0,327)
-0,398
(0,572)
1,560***
(0,494)
-0,028
(0,031)

1,700***
(0,314)
-0,358
(0,593)
1,591***
(0,440)
-0,028
(0,031)

1,534***
(0,252)
-0,387
(0,536)
1,209**
(0,561)
-0,017
(0,029)

1.551***
(0.296)
-0,501
(0,516)
1,446***
(0,515)
-0,038
(0,031)

1,619***
(0,396)
-0,376
(0,554)
1,568***
(0,499)
-0,028
(0,029)

1,554*
(0,835)

ER (t-1)

0,111
(0,902)

PL (t-1)

-0,377
(1,639)

TFS (t-1)

2,360***
(0,950)

CP (t)

0,612*
(0,367)

BR (t)

0,343
(1,464)

0,94
0,000

0,94
0,000

0,95
0,000

0,94
0,000

0,94
0,000

0,94
0,000

0,95
0,00

1,061*
(0,568)
0,95
0,00

42

42

42

42

42

42

42

42

OIR (t-1)
R-sq
Prob>chi2
N

Model 8
1,507***
(0,281)
-0,240
(0,485)
1,272***
(0,305)
-0,015
(0,029)

Source: Authors’ calculations

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Besim Čulahović • Eldin Mehić • Emir Agić

Note: Robust standard errors in parentheses. Asterisks indicate variables whose coefficients are
significant at the 10%(*), 5%(**), and 1% (***) level, respectively. All regressions include a constant and country dummies (not reported in the table).
There is no precise counterpart to R2 in the generalised regression model. The R2 from the
transformed model is purely descriptive (see Greene 1999:467).

Turning first to the results for the control variables, we note that, in all models,
the variables display the correct sign and that coefficients cannot change significantly. This shows us the stability of the model. FDI is positively related to GDPpc
and is always statistically significant at the 1% level. Therefore, larger markets,
which recorded faster economic growth, offered better opportunities for manufacturing industries to make use of their ownership advantages, which in turn led to
a greater FDI inflow into this sector. Surprisingly, wages are insignificant although
they have the expected sign in all the models. A possible explanation for the obtained results can be found in the use of average wages in the analysis, rather than
the wages in the manufacturing industry, since such data are not available for all the
observed countries. Inflation as an approximation variable of macroeconomic reforms success has also the expected negative relationship with FDI flows, although
it is not statistically significant. This should not undermine the importance of price
stabilization in the transition period. It is perceived that stabilisation programmes
were successful so that inflation is no longer seen as a possible impediment to FDI
inflow. Rather, as the price stabilization is typically introduced in the initial stage of
transition and external liberalization in the latter stage, investors may distinguish
the winner of economic reform by looking at the outcome of external liberalization. Openness is a variable always being highly significant and exerting a positive
influence on the FDI in the manufacturing sector in SEE countries. The positive
effect of openness is in contrast to the arguments that FDI inflows are a substitute
for trade. A positive estimated coefficient for this variable can be interpreted as evidence that FDI is used to serve other markets and not only the market of the host
country. Consequently, it can be concluded that FDI in the manufacturing sector
in the SEE countries is vertically oriented.
We can now consider the results for the institution-related variables. The most
important result in model 1 is that the establishment of institutions for market
economy significantly increases FDI inflows in manufacturing sector in SEE region. The result is highly statistically significant having in mind the relatively short
period of observation. In the context of obtained results, the relationship between
institutional development and FDI can be viewed as a channel through which in-

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377

stitutions promote the growth of productivity. Developed institutions and progress
in transition can have a positive influence on development through promotion of
investment.
Models 2 and 3 present results of the influence of privatization and enterprise
reform. Large-scale privatization has a positive sign and the coefficient is statistically significant. Enterprise restructuring, however, does not have significant implications for FDI since the observed region mostly witnessed weak enforcement
of bankruptcy legislation and little action taken to strengthen competition and
corporate governance.
In models 4 and 5 we find partial evidence that liberalization has a significant
effect on FDI. Progress in domestic price liberalization does not have a significant
effect on FDI stock, but foreign exchange and trade liberalization do; indeed, the
coefficient is statistically significant. Thus, a liberal trade regime can stimulate investment because it allows for specialisation and larger-scale production, which
are of the greatest importance in small countries. Today FDI is often motivated
more by productivity enhancing opportunities than by the need to access local
markets, which explains why multinationals delocalise the labour-intensive part
of their production chain to transition economies. Local businesses in transition
economies may benefit from this development, in that some functions of the value
chain may be contracted out to domestic suppliers. Trade can interact with FDI to
increase the competitiveness of domestic enterprises’ exports through knowledge
and technology transfer.
The development of competition policy has a significant impact on FDI receipts
but only at the 10% level. Although the competition policy in the region is still in
the early stage of development, the obtained result may indicate the tendency by
certain foreign investors to invest in protected or regulated markets to gain market
power (see Bevan et al.; 2004).
Banking reform and interest rate liberalization do not have a significant effect
on FDI in the manufacturing sector of the observed region (model 7). Such a result
is expected, due to the significant lending to private enterprises and significant
presence of private banks, particularly in the period after 2000. Therefore, foreign
investors do not seem to consider the effectiveness of the banking sector as an obstacle to investment.

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Although endowments of physical infrastructure are still relatively weak, results
in Model 8 indicate that investors pay attention to this category as well, since the
OIR variable is significant at 10% level. The infrastructure sector is undergoing a
process of restructuring through the establishment of sector regulators, privatisation
of state enterprises and opening of domestic markets to competition. Physical infrastructure is therefore becoming less of a constraint for foreign direct investors.
6. CONCLUSION

Our analysis presented in this paper indicates that general measure of institutional development, proxied by the FACINST variable, is statistically significant
and confirms that the overall quality of the institutions attracts FDI in manufacturing sector in SEE region. The impact of institutional progress on FDI confirms that
traditional variables cannot fully explain FDI in SEE region, and that institutionally related variables should be attached a particular significance in future research.
Besides, we identified individual determinants by disaggregating to subsets of institutional development. In this context, results indicate that a few institutional
changes enhanced FDI receipts to manufacturing sector: privatisation process, liberalization of foreign exchange and trade, development of competition policy and
development of infrastructure reform. On the other hand, enterprise restructuring,
domestic price liberalization and development of the banking sector do not seem to
be a significant motive for FDI in our research, probably since the described institutional changes are not a significant obstacle to foreign investors’ investing activities. The weak influence of domestic price liberalization and the insignificant effect
of the development of competition policy on FDI may point to the conclusion that
certain foreign investors invest in this region in order to achieve extra profit, and
that policy makers should consider the possibility of conflicting interests of foreign
business and institutional development.
LITERATURE:

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4. Bevan, A. & Estrin, S. (2000). The determinants of foreign direct investment in
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BESCHÄFTIGUNGSPROBLEME DEUTSCHLANDS IM
ZEICHEN DER AKTUELLEN INTERNATIONALEN
WIRTSCHAFTS UND FINANZMARKTKRISE
Professor Dr. Hartmut Löffler
Pforzheim University, Germany

ABSTRACT

Continuing high unemployment is a big economic and socio-political challenge
in Germany, as well as in many other countries. The problems with employment
have been intensified with the current economic and financial crisis. When the goal
of full employment is unattainable, there are numerous negative consequences.
Closer examination reveals that the globalisation dispute is frequently used to push
particular interests. Politicians are trying to shift the responsibility for problems
elsewhere. Internal problems and lack of capacity to act are blamed on anonymous
globalised markets. The globalisation dispute is used by employers to divert trade
union policy and the national government policy to a more entrepreneur-friendly
course. The aim is to achieve political action as adjustment to economic pressures
of the world market, or alternatively, in the protectionist direction.
JEL clasiffication: G01
Keywords: unemployment, economic crisis, financial crisis, goal of full employment, labour market analysis
1 PROBLEMSTELLUNG

Die dauerhaft hohe Arbeitslosigkeit ist eine große wirtschafts- und gesellschaftspolitische Herausforderung in Deutschland und in vielen anderen Staaten.
Das Beschäftigungsproblem hat sich durch die aktuelle Wirtschafts- und Finanzkrise noch verschärft. Wird das Ziel Vollbeschäftigung verfehlt, dann hat dies zahlreiche negative Auswirkungen.

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• Gesellschaftliche Aspekte: Gefährdung des sozialen Friedens und der politischen Stabilität;
• Gesamtwirtschaftliche Aspekte: ökonomische Effizienzverluste durch Unterauslastung des Produktionsfaktors Arbeit und geringeren materiellen Wohlstand; geringere Steuereinahmen des Staates und höhere Sozialausgaben;
• Persönliche Aspekte: geringere materielle Freiheit, mangelnde soziale Anerkennung und weitere psychologische Konsequenzen.
Das Vollbeschäftigungsziel ist dann erreicht, wenn alle arbeitsfähigen und zugleich arbeitswilligen Personen entsprechend ihrer Neigung und ihrer Qualifikation
zu bestmöglichen Arbeitsbedingungen und einem entsprechenden Entgelt beschäftigt sind.
Der deutsche Arbeitsmarkt hat sich in den Jahren 2002 bis 2006 positiv entwickelt. Die Erwerbstätigenzahl stieg und die Zahl der Arbeitslosen ging zurück.
Neben der günstigen Konjunkturentwicklung haben die Arbeitsmarktreformen der
Jahre 2002 und 2004 und die moderate Tariflohnpolitik zu dieser Entwicklung
beigetragen. Die konjunkturelle Arbeitslosigkeit konnte durch die wirtschaftliche
Dynamik beseitigt werden und auch die nicht-konjunkturbedingte Arbeitslosigkeit
hat sich verringert. Gleichwohl hat sich die wirtschaftliche Situation nicht bei allen
Personengruppen verbessert.
Seit dem Jahr 2008 hat sich die wirtschaftliche Lage in Deutschland grundlegend
verändert: Der konjunkturelle Abschwung 2007/2008 hat sich in der zweiten Jahreshälfte 2008 durch die Finanz- und Immobilienkrise dramatisch verschärft. Der
weltweite Einbruch der Konjunktur belastete die deutsche Wirtschaft in starkem
Maße, weil Deutschland mit einer Exportquote von 40 % von weltwirtschaftlichen
Entwicklungen besonders betroffen ist. Die Exporte sind im Jahresdurchschnitt
2009 gegenüber dem Vorjahr um 14,2 % zurückgegangen. Das reale Bruttoinlandsprodukt schrumpfte im Jahr 2009 um 5% gegenüber dem Vorjahr (Forschungsinstitute, Gemeinschaftsdiagnose Frühjahr 2010).
Die Erwerbstätigkeit hat 2009 im Jahresdurchschnitt nur wenig abgenommen,
und zwar um 14 000 Personen auf 40,265 Millionen Personen. Die Anzahl der
Arbeitslosen stieg jahresdurchschnittlich um 155 000 auf 3,423 Mill. (2009).
Die Arbeitslosenquote (Arbeitslose in % aller zivilen Erwerbspersonen) erhöhte
sich im Jahr 2009 von 7,5 % auf 7,9 % (Forschungsinstitute Frühjahr 2010).

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Dass es trotz des massiven Produktionseinbruchs geringe Beschäftigungsverluste
gab, ist wie folgt zu begründen: Abbau von Überstunden und Arbeitszeitkonten;
flexiblere Arbeitszeitgestaltungen; Ausweitung von Kurzarbeit: jahresdurchschnittlich 2009 in Höhe von 1,11 Mill. Kurzarbeiter gegenüber 101 540 im Jahr 2008,
Halten von qualifizierten Mitarbeitern und hohe Transaktionskosten bei Entlassungen und Einstellungen.
Die weltweite konjunkturelle Abkühlung und die realwirtschaftlichen Folgen
der internationalen Finanzmarktkrise stellen aktuell große Herausforderungen an
die deutsche Wirtschaftspolitik dar.
Konkret geht es heute um folgende wirtschaftspolitischen Aufgaben:
Kurzfristig ist das erreichte Beschäftigungsniveau bei einem konjunkturellen
Einbruch möglichst zu halten bzw. die konjunkturelle Arbeitslosigkeit nicht stark
anwachsen zu lassen. Ferner müssen die massiven staatlichen Eingriffe und Stützungsprogramme in der Realwirtschaft und im Finanzsektor rechtzeitig wieder auf
ein normales Maß zurückgeführt werden. Es handelt sich hierbei um eine Gratwanderung, denn einerseits ist die Konjunkturlage noch fragil, anderseits ist aus
ordnungspolitischer Sicht und nicht zuletzt auch wegen der hohen Staatsverschuldung eine Exit-Strategie erforderlich.
Mittel- bis langfristig ist ein späterer Beschäftigungsaufbau zu fördern, bei
welchem auch die Problemgruppen auf dem Arbeitsmarkt partizipieren können.
2. Charakterisierung des deutschen Arbeitsmarktes

Zur Problemanalyse sollen einige ausgewählte Fakten zum deutschen Arbeitsmarkt dienen.
Seit Gründung der Bundesrepublik Deutschland hat der Arbeitsmarkt drei Phasen durchlaufen. In der Wiederaufbauphase der fünfziger Jahre des letzten Jahrhunderts konnte die anfänglich hohe Arbeitslosigkeit sukzessive abgebaut werden.
Im Zeitraum von 1960 bis eine Vollbeschäftigungsphase. Im Jahr 1974 begann die
Phase der Massenarbeitslosigkeit, welche sich in zur ersten Ölkrise 1973 war in
Westdeutschland Stufen immer mehr erhöhte. Der Anstieg des Sockels an Arbeitslosigkeit belegt, dass die Arbeitslosigkeit weniger konjunkturell, sondern vielmehr
strukturell bzw. wachstumsdefizitär bedingt ist. Die Arbeitsmarktentwicklung war
im Jahr 2009 trotz weltweiter Konjunkturabschwächung, der Krise auf den internationalen Finanzmärkten und dem starken Wachstumseinbruch relativ moderat.

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Bei der registrierten Arbeitslosigkeit wird jedoch die Unterbeschäftigung nicht
komplett erfasst. So ermittelte der Sachverständigenrat zur Begutachtung der
gesamtwirtschaftlichen Entwicklung für das Jahr 2009 eine verdeckte Arbeitslosigkeit von rund 1,5 Mill. Menschen. Geschätzt werden alle arbeitslosen Personen, die
aufgrund arbeitsmarktpolitischer Instrumente oder sonstiger staatlicher Leistungen
nicht registriert sind. Rechnet man die offene und die verdeckte Arbeitslosigkeit
zusammen, dann waren 2009 fast 5 Mill. Menschen arbeitslos. Dies entspricht
einer Arbeitslosenquote von 12 %.
Eine detaillierte Arbeitsmarktanalyse ergibt für Deutschland folgendes Bild:
Unter regionalen Aspekten gibt es ein Süd- Nord- Gefälle sowie ein Gefälle
zwischen den alten und den neuen Bundesländern. Die jahresdurchschnittliche
Arbeitslosenquote lag 2009 in Ostdeutschland bei 13 %, in Westdeutschland bei
6,9 % (Bundesdurchschnitt 8,2 %).
Im Jahr 2009 wirkte sich die Wirtschaftskrise vor allem in den wirtschaftlich
stärkeren Regionen aus: In Westdeutschland stieg die Arbeitslosigkeit jahresdurchschnittlich um 176 000 auf 2,32 Mill. Menschen, während sie sich in Ostdeutschland um 20 000 auf 1,103 Mill. verringerte. Von allen Bundesländern stieg
die Arbeitslosigkeit 2009 in Baden-Württemberg (+ 24 %) und in Bayern (+ 16 %)
am meisten.
Der jahresdurchschnittliche Anstieg der Arbeitslosen betrifft allein Männer. Die
Arbeitslosigkeit der Männer stieg im Jahresdurchschnitt um 200 000 auf 1,868
Mill., während die Arbeitslosigkeit der Frauen um 44 000 auf 1,556 Mill. gesunken ist. Nach dem Kriterium Geschlecht wurden Arbeitslosenquoten, bezogen auf
alle zivilen Erwerbspersonen, im Jahresdurchschnitt des Jahres 2009 für Frauen von
7,9 % und für Männer von 8,4 % ermittelt. Männer sind häufiger als Frauen in
Branchen beschäftigt, die von der Wirtschaftskrise besonders betroffen sind.
Differenziert man die Arbeitslosen nach dem Kriterium Alter, dann ist festzustellen, dass im Jahr 2009 die Zunahme der Arbeitslosigkeit in der Altersgruppe der
15- bis 25-Jährigen mit 11 % relativ am stärkten war. Ihre Zahl stieg um 37 000 auf
377 000 und ihre Arbeitslosenquote um 0,7 Prozentpunkte auf 7,8 %. Die Quote
der Jüngeren liegt aber gleichwohl unter der Gesamtarbeitslosenquote von 8,2 %.
Für die älteren Menschen von 50 bis 65 Jahren stieg die Arbeitslosigkeit um 6 %
oder 55 000 auf 916 000. Maßgeblich für deren Anstieg ist auch das Auslaufen von
Vorruhestandsregelungen zum Ende 2007.

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In der Entwicklung nach der Staatsangehörigkeit gibt es im Jahr 2009 keine
Unterschiede. Generell sind Ausländer von der Arbeitslosigkeit stärker betroffen
als Deutsche. Ihre Arbeitslosenquote war im Jahresdurchschnitt 2009 mit 16,6 %
mehr als doppelt so hoch wie die der Deutschen mit 7,5 %.
Betrachtet man das Kriterium Qualifikation der Arbeitslosen, dann nimmt das
Beschäftigungsrisiko mit zunehmendem Ausbildungsniveau ab. Im Jahr 2009 hatte
43 % der Arbeitslosen keine, 51 % eine betriebliche oder schulische und 5 % eine
akademische Ausbildung. Nach den letzten Berechungen des Instituts für Arbeitsmarkt- und Berufsforschung aus dem Jahr 2005 lag die Arbeitslosenquote der
Ungelernten bei 26 %, bei Personen mit abgeschlossener Berufsausbildung bei 9,7
% und bei Akademikern bei 4,1 %. Diese Relationen dürften auch für die letzten
Jahre zutreffen.
Ein wichtiges Kriterium für die Chancen des Wiedereinstiegs in ein Beschäftigungsverhältnis ist neben der Qualifikation die Dauer der Arbeitslosigkeit. Deshalb
ist es besonders problematisch, dass der Anteil der Langzeitarbeitslosen an allen
Arbeitslosen bei rund 30% liegt. Als Langzeitarbeitslose gelten Personen, die länger
als ein Jahr arbeitslos gemeldet sind.
Der deutsche Arbeitsmarkt ist schließlich durch eine sog. Mismatch-Arbeitslosigkeit gekennzeichnet. Das Arbeitsangebot entspricht vor allem bezüglich der
Qualifikation nicht der Nachfrage nach Arbeitskräften. Trotz hoher Arbeitslosigkeit besteht ein gravierender Mangel an qualifizierten Mitarbeitern, insbesondere
an Akademikern.
3. KONJUNKTURELLE UND STRUKTURELLE ARBEITSLOSIGKEIT
3.1 Konjunkturelle Arbeitslosigkeit

Die wirtschaftliche Entwicklung in marktwirtschaftlichen Systemen ist durch
Unstetigkeiten und zyklische Schwankungen geprägt, die wiederum unterschiedliche Arten von Arbeitslosigkeit zur Folge haben. So kommt es durch natürliche
bzw. vom Menschen geschaffene Faktoren in bestimmten Branchen (Land- und
Forstwirtschaft, Fremdenverkehr/Tourismus, Bausektor, Feiertage) zu jahreszeitlichen Produktionsschwankungen (Saisonzyklen) und damit zu saisonaler Arbeitslosigkeit. Konjunkturzyklen sind ein gesamtwirtschaftliches Phänomen, es sind
also viele Branchen einer Volkswirtschaft betroffen. Das gesamtwirtschaftliche Angebot und die gesamtwirtschaftliche Nachfrage stimmen kurzfristig nicht überein.

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So kann es beispielsweise zu einem konjunkturellen Abschwung kommen, da Unternehmen bereits im Aufschwung ihre (induzierten) Investitionen reduzieren, weil
die Nachfragezuwächse abnehmen. Die Ursachen für Konjunkturschwankungen
können auch im Ausland liegen. Durch die Globalisierung der Güter- und Finanzmärkte entstehen Interdependenzen, welche Konjunkturübertragungen zur
Folge haben. Indikatoren für die Konjunkturschwankungen sind entweder die
Veränderungsraten des realen Bruttoinlandsprodukts oder der Auslastungsgrad des
Produktionspotenzials im Zeitablauf. Konjunkturelle Arbeitslosigkeit entsteht durch mangelnde gesamtwirtschaftliche Nachfrage in der Abschwungphase und in
der Rezessionsphase. Der Tiefpunkt der schwersten weltwirtschaftlichen Rezession
seit dem 2. Weltkrieg lag im Herbst 2009. Die Lage auf den Weltfinanzmärkten
hat sich etwas entspannt, die Stimmungsindikatoren zeigen nach oben, die Auftragseingänge und die Produktion sind gestiegen und der Welthandel hat bereits im
Sommer 2009 eine deutliche Zunahme zu verzeichnen.
Für das Jahr 2010 wird mit einer Zuwachsrate der Exporte von 7,1 % gerechnet. Für das reale Bruttoinlandsprodukt wird im Jahr 2010 eine Zuwachsrate von
1,5% prognostiziert (Gemeinschaftsprognose der Forschungsinstitute Frühjahr
2010; 14. 04. 2010).
Im Ländervergleich ist kein klarer Zusammenhang zwischen der Stärke des
Produktionseinbruchs und dem Ausmaß des Anstiegs der Arbeitslosigkeit festzustellen. Der Anstieg der Arbeitslosigkeit in Japan und Deutschland war relativ gering, obwohl der Produktionseinbruch jeweils besonders ausgeprägt war. Der Anstieg der Arbeitslosigkeit war hingegen in den USA (5 %-Punkte) und in Spanien
(10 %-Punkte) besonders hoch.
Da der Arbeitsmarkt jedoch mit Zeitverzögerungen (time lags) auf die Produktionsentwicklung reagiert, haben der konjunkturelle Einbruch und die realwirtschaftlichen Folgen der Finanzmarktkrise erst in diesem und in den kommenden Jahren Auswirkungen auf das Beschäftigungsniveau. Gründe für die time lags
auf dem Arbeitsmarkt sind: Institutionelle Rahmenbedingungen (Kündigungsschutz) und Transaktionskosten (Kosten bei der Entlassung und Einstellung von
Mitarbeitern). Unternehmen sind auch bemüht, ihre Stammbelegschaft wegen der
erfolgten Humankapitalbildung (betriebsinternes Wissen der Mitarbeiter, Kosten
für Fort- und Weiterbildung) möglichst im Unternehmen zu halten. Aus diesen
Gründen reagieren sie auf Beschäftigungsschwankungen mit Überstunden und mit
Kurzarbeit.

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Nach der Prognose des Sachverständigenrates zur Begutachtung der gesamtwirtschaftlichen Entwicklung vom Herbst 2009 wurde für das Jahr 2010 eine
Arbeitslosenquote von 9,4 % erwartet. Die wirtschaftliche Entwicklung nahm
jedoch einen wesentlich günstigeren Verlauf. Die Forschungsinstitute rechnen in
ihrem Frühjahrsgutachten 2010 für das Jahr 2010 mit einer Arbeitslosenquote von
7,8% im Vergleich zu 7,9 % im Jahr 2009.
3.2 Wirtschaftlicher Strukturwandel und strukturelle Arbeitslosigkeit

Sektoraler, regionaler und faktoraler Strukturwandel sind ständige Prozesse.
Verursacht wird der sektorale Wandel, also die Veränderung der Bedeutung einzelner Wirtschaftssektoren und Branchen, durch eine Vielzahl von Determinanten
von der Angebotseite und/oder von der Nachfrageseite her.
Auf der Angebotsseite verändern sich die Faktorausstattungen und die Faktorpreisrelationen. Es kann zu Engpässen im Faktorangebot kommen. So können
heute in manchen Bereichen der Wirtschaft die Produktionsmöglichkeiten mangels qualifizierter Arbeitskräfte nicht ausgeschöpft werden (Fachkräftemangel).
Eine weit verbreitete These ist auch, dass in Deutschland Innovationen nicht umgesetzt werden können, weil es an Krediten bzw. an Risikokapital fehlen würde.
Eine weitere Ursache für strukturelle Anpassungsprobleme liegt in der Unstetigkeit
des technischen Fortschritts. Innovationsschübe lösen massive Strukturwandlungen
aus. Insbesondere Basisinnovationen verbreiten sich in vielen Geschäftsfeldern und
initiieren eine neue Wirtschaftsdynamik (Kondratieff-Zyklen). Im Vordergrund
der heutigen Diskussion stehen die Erhöhung der Wettbewerbsintensität auf den
internationalen Märkten im Gefolge der Regionalisierungs- und Globalisierungsprozesse und durch neue Anbieter (aufstrebende Länder). Hinzu kommen veränderte nationale und internationale Rahmenbedingungen (z.B. EU-Erweiterungen,
Freihandelszonen).
Der Strukturwandel wird auch von Nachfragestrukturveränderungen aufgrund
von Einkommens-, Preis- und Präferenzänderungen verursacht. Mit steigendem
Einkommen verändert sich die Struktur der Nachfrage nach Gütern und Dienstleistungen. Zunächst verlagerte sich die Nachfrage von der Deckung des Bedarfs
an Nahrungsmitteln zu standardisierten Massenproduktionsgütern und schließlich
zu einem höherwertigen Bedarf von Industriegütern. In einer weiteren Stufe wendete sich die Nachfrage den gehobenen Produkten der Dienstleistungsbereiche zu.
Bei Grundbedürfnissen kommt es zu Marktsättigungen. Die Konsumgüternach-

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frage verschiebt sich zu gehobenem Bedarf und insbesondere zu Freizeitbedarf. Der
Strukturwandel in der Konsumgüternachfrage hat entsprechende Änderungen in
der Investitionsgüternachfrage zur Folge, denn diese ist weitgehend eine abgeleitete
Nachfrage. Bei der originären Nachfrage nach Investitionsgütern, also bei Produktund Prozessinnovationen, spielen Standortüberlegungen und der internationale
Wettbewerb eine entscheidende Rolle. Folgen der Angebots- und Nachfragestrukturveränderungen sind eine ständige Reallokation von Ressourcen sowie eine unterschiedliche Beschäftigungs- und Wachstumsdynamik einzelner Sektoren und
Wirtschaftszweige.
Der empirisch bestätigte Trend der Beschäftigtenentwicklung in der sektoralen Makrostruktur nach dem Clark-Fourastie´-Modell, einer Verlagerung vom
primären Sektor (Landwirtschaft) und vom sekundären Sektor (warenproduzierendes Gewerbe) zum tertiären Sektor (Dienstleistungen), lässt sich mit dem Zusammenwirken von Nachfrageverschiebungen und Produktivitätseffekten erklären.
Da die Einkommenselastizität der Nachfrage nach Dienstleistungen größer ist als
diejenige nach Industriegütern, werden im Wachstumsprozess immer mehr Dienstleistungen und relativ immer weniger Industriegüter nachgefragt. Als Folge der
Produktionsstrukturveränderungen ergeben sich Änderungen in der Beschäftigtenstruktur. Die Hypothese von Produktivitätsveränderungen sagt aus, dass der Produktivitätsfortschritt im industriellen Sektor höher ist als im Servicesektor, weil bei der
industriellen Produktion mehr Möglichkeiten zur Kapitalintensivierung und zum
Einsatz von neuen Technologien bestehen. Insofern kann die Industrieproduktion
bei einem gleichzeitigen Rückgang der Beschäftigung gesteigert werden.
Betrachtet man die Beschäftigtenentwicklung in den drei Makrosektoren, dann
kam es in den Volkswirtschaften zu einem Abbau der Beschäftigung im primären
und auch im sekundären Sektor. Gleichzeitig wurden im Dienstleistungssektor Arbeitsplätze geschaffen. Die dauerhaft hohe Arbeitslosigkeit in Deutschland
seit Mitte der siebziger Jahre ist nicht nur durch den sektoralen Strukturwandel
und das Produktivitätswachstum (technologischer Wandel) verursacht, sondern
vielmehr durch ein vergrößertes Arbeitsangebot (verändertes Erwerbsverhalten der
Frauen) zu erklären. Der sektorale Strukturwandel wirkt sich auch auf die Qualifikationsanforderungen an die Mitarbeiter (faktoraler Strukturwandel) und auf
die Regionen (regionaler Strukturwandel) aus und hat Mismatch-Arbeitslosigkeit
zu Folge. Die Strukturwandelschwäche von Westdeutschland in der Beschäftigung deutet einerseits auf arbeitsmarktbedingte Anpassungsprobleme und andererseits auf eine relativ geringe Bedeutung von Branchen mit großem Wachs-

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tumspotenzial hin. Die Strukturprobleme Ostdeutschlands ergaben sich aus dem
Systemtransformationsprozess.
Aus diesem Befund lassen sich für Deutschland folgende Schlussfolgerungen
ziehen:
Erstens müssen die eher kurz- bis mittelfristigen Anpassungsprobleme, die vielfach konstatierten Reformstaus, beseitigt werden.
Zweitens sind Maßnahmen bzw. Anreize erforderlich, damit der deutsche Strukturwandel stärker in Richtung solcher Wirtschaftsbereiche verläuft, die mit großem
Wachstumspotenzial verbunden sind (Innovationsoffensive). Mögliche Zukunftsbereiche sind u.a. die Umwelttechnik, Biotechnologie, Energietechnik und nach
wie vor die Informations- und Kommunikationstechnologie. Das tragende Prinzip der industriellen Revolution bestand in der optimalen Zerlegung komplexer
in weniger komplexe Arbeitsvorgänge, in der Arbeitsteilung. Ein grundlegendes
Prinzip heute ist ferner die Wissensteilung. Wir stehen heute erst am Beginn einer
Entwicklung, in welcher das sog. intangible Kapital (Wissen, Talent, intellektuelles
Potenzial, Netzwerke, Marke) eine neue Plattform für erfolgreiche Unternehmen
bildet.
Drittens ist der Aufholprozess in Ostdeutschland durch verbesserte Angebotsbedingungen zu beschleunigen.
3.3. Strukturwandel auf dem Weltmarkt: Globalisierungsprozess

Der Beschäftigungsstand wird sowohl von der Lohnpolitik und den institutionellen Rahmenbedingungen auf dem Arbeitsmarkt als auch wesentlich von der
Wachstumsdynamik einer Volkswirtschaft geprägt. Zwischen der Wachstumsdynamik als wirtschaftlichem Kernprozess und den strukturellen Veränderungen
in den Wirtschaftssektoren bestehen interdependente Beziehungen. Strukturelle
Disproportionalitäten und Ungleichgewichte sind sowohl Ursache als auch Folge
der Wachstumsdynamik. Insofern kann man zwischen zwei Kausalitätsrichtungen unterscheiden: Der Strukturwandel induziert Wirtschaftswachstum und das
Wirtschaftswachstum hat einen Strukturwandel zur Folge.
Insofern können ein zu geringes Wirtschaftswachstum und die damit verbundenen Beschäftigungsprobleme auf einen verzögerten Strukturwandel zurückgeführt werden. Veränderte Nachfrage- und Produktionsstrukturen wirken sich
auf das Beschäftigungssystem aus und es kommt dann in einer Volkswirtschaft zu

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strukturellen Anpassungsproblemen und zu struktureller bzw. wachstumsdefizitärer Arbeitslosigkeit, wenn es nicht gelingt, sich auf die ständig verändernden Marktund Rahmenbedingungen einzustellen. Der gesellschaftliche, technologische und
(welt)wirtschaftliche Wandel hat vor allem mit dem Industrialisierungsprozess
eingesetzt, er beschleunigt sich aber in jüngster Zeit durch den Globalisierungsprozess. Bei einer Analyse der deutschen Arbeitsmarktprobleme ist es wegen der
engen weltwirtschaftlichen Verflechtung der deutschen Wirtschaft angezeigt, den
Globalisierungsprozess näher zu betrachten.
Die internationale Verflechtung war vor 1914 ausgeprägter als nach 1945, damals
allerdings zwischen einer relativ geringen Anzahl von Ländern. Nach einer Phase
des Wiederaufbaus bis 1960 und einem Zeitraum der Internationalisierung bis etwa
1980 entstanden in den achtziger Jahren neue Mechaniken in der internationalen
Arbeitsteilung, die mit dem Begriff Globalisierung umschrieben werden. Der Begriff wurde in der Marketing-Literatur für die Globalisierung von Marken (Weltmarktprodukte) eingeführt. Inzwischen umschreibt man mit diesem Begriff den
Vorgang einer sich beschleunigenden internationalen wirtschaftlichen Verflechtung
bzw. Marktintegration. Manche verbinden mit dem Globalisierungsprozess Ängste
und Sorgen. Globalisierungsgegner in Nicht-Regierungs-Organisationen (NGOs)
sehen in dem historischen Prozess einer weltweit zunehmenden wirtschaftlichen
und gesellschaftlichen Interdependenz mehr Nachteile als Vorteile. Globalisierung
wird als Ursache für eine Vielzahl von Problemen gesehen. Mit Aktionen und Demonstrationen anlässlich internationaler Konferenzen (IWF, Weltbank, G7 bzw. G8)
machen ATTAC und andere Gruppierungen auf sich aufmerksam. Diese Bewegungen für einen neuen Protektionismus bzw. gezügelten Globalisierungsprozess
gehen von folgenden Thesen aus: Die staatliche Wirtschaftspolitik sei ohnmächtig
gegenüber den global players und den Weltmärkten. Die Demokratie würde von
den Interessen des Kapitals ausgehöhlt. Der gesellschaftliche Zusammenhang ginge verloren und die Nationalstaaten könnten in eine Vielzahl von Liliput-Staaten
zerfallen. Auch wenn man den einzelnen Szenarien kritisch gegenüber steht, so
zeigt doch die aktuelle Finanzmarktkrise, dass internationale Rahmenbedingungen
und Regelungen, einschließlich deren Durchsetzung, zur „Zügelung“ des Globalisierungsprozesses dringend angezeigt sind.
Wie kann der Globalisierungsprozess aus ökonomischer Sicht charakterisiert
werden?

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Zunächst kam es um 1980 zu einer ersten Globalisierungswelle in der Triade (Nordamerika, Japan, Europa), welche zusätzlich durch das Aufkommen von
Hochtechnologie geprägt war.
Der Beginn der zweiten Globalisierungswelle ist mit den neunziger Jahren anzusetzen. Es kommt insofern zu einer Verbreiterung und Vertiefung der internationalen Wettbewerbsarena, als alle Industrieländer (OECD-Staaten) und aufstrebende
Länder von diesem Prozess erfasst werden und auch die Dienstleistungsmärkte
zunehmend globaler werden. Waren 1990 etwa 20 bis 25% der Wertschöpfung
Weltmarktprodukte, so dürften diese im Jahr 2015 etwa 60 bis 70% des WeltBruttoinlandsprodukts ausmachen.
Die hoch entwickelten Triade-Länder (USA, Japan, Westeuropa) als kapitalund humankapitalreiche Länder haben internationale Wettbewerbsvorteile bei
Produktionsverfahren und Produkten höherwertiger Technologie. Sie sind in hohem Maße Träger von Prozess- und Produktinnovationen und konzentrieren sich
auf die Produktion von sog. Schumpeter-Gütern. Bildlich spricht man hier von
einem „Wettbewerb von oben“. Die Wettbewerbsintensität zwischen den traditionellen Industrieländern hat sich in jüngster Zeit verschärft.
Aufstrebende Länder nutzen ihre komparativen Kostenvorteile (niedrigere Arbeitskosten) und die Verfügbarkeit von Rohstoffen und von Arbeitskräften (Ricardo-Güter, Heckscher-Ohlin-Güter) und zwingen die Länder mit höherem Lohnniveau zu strukturellen Anpassungen. Von den aufstrebenden Ländern, welche humankapitalintensive Güter anbieten, geht der „Wettbewerb von unten“ aus.
Ein Indiz für den Globalisierungsprozess ist, dass das Wachstum des Welthandels
wesentlich schneller steigt als die Weltproduktion. Dabei kommt dem intra-industriellen Handel ein großer Stellenwert zu. Der globale Wettbewerb findet nicht mehr
nur in einem reinen Güteraustausch statt. Der Anteil der Dienstleistungsexporte am
Welthandel steigt. Durch die Informations- und Kommunikations-Technologie ist
technisches Wissen zu einem international mobilen Produktionsfaktor geworden.
Es ergeben sich neue Formen der internationalen Vernetzung der Produktion durch
neue Kommunikations- und Transporttechnologien. Die räumliche Trennung von
Forschung, Entwicklung und Produktion ist bei den neuen Schumpeter-Gütern
(hoher Kapitaleinsatz bei Forschung, Entwicklung und Produktion, hohes Know
how der Mitarbeiter) möglich geworden. Die Industrieländer können bei dieser
Güterkategorie nur mit einer differenzierteren Produktpalette konkurrenzfähig
bleiben. Bei nicht mobilen Schumpeter-Gütern ist der Wettbewerbsdruck geringer,

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da hier die Trennung von Forschung, Entwicklung und Produktion weniger leicht möglich ist. Die internationale Arbeitsteilung drückt sich zunehmend auch in
einem Produktionsverbund zwischen Hoch- und Niedriglohnländern aus.
Der deutsche Welthandelsanteil konnte in den letzten 30 Jahren mit durchschnittlich 9 bis 10 % gehalten werden. Deutschland war von 2003 bis 2008 im
Warenhandel Exportweltmeister. Im Jahr 2008 exportierte die deutsche Wirtschaft
bei einem Welthandel von 15 800 Mrd. US-$ Waren im Wert von 1 470 Mrd.
US-$. China lag mit einem Warenexport von 1 430 Mrd. US-$ auf Platz zwei
(WTO). Im Jahr 2009 ist China Exportweltmeister geworden sein. Fasst man den
Waren- und Dienstleistungshandel zusammen, dann war Deutschland in den letzten Jahren hinter den USA Vizeweltmeister.
Gründe für die internationale Wettbewerbsfähigkeit der deutschen Firmen sind
vor allem die Produktqualität, der Kundenservice und die Liefertreue. Außerdem
entwickelten sich die Lohnstückkosten relativ günstig. Durch eine Erhöhung des
Importgehalts der Exportgüter, also den Einkauf von Vorleistungen im Ausland,
konnte die deutsche Wirtschaft ihre Position halten. Hans Werner Sinn spricht
in einer kritischen Wertung von einer „Basarökonomie“. Dieses Bild ist überzogen, zumal nach Angaben des Statistischen Bundesamts immer noch etwa 60%
der Wertschöpfung unserer Exportgüter in Deutschland hergestellt werden. Die
Reduzierung des inländischen Wertschöpfungsanteils führte zu einem positiven
Mengeneffekt und wirkte sich somit fördernd auf den Beschäftigungsgrad aus.
Zusammenfassend kann der Globalisierungsprozess somit durch folgende Merkmale gekennzeichnet werden:
• Weltweite Beschaffungs- und Absatzmärkte für die Unternehmen.
• Länderübergreifende Produktionsprozesse.
• Internationale Informations- und Kommunikationsnetze.
• Entstehung von „Global Players“ durch Unternehmenszusammenschlüsse
und geschäftliche Allianzen.
• Enge Verflechtung internationaler Finanzmärkte.
• Internationaler Wettbewerb um die Produktionsfaktoren Arbeit und Kapital.
Treibende Kräfte sind insbesondere fünf Parameteränderungen:

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(1) Ein schneller Technologiewandel, insbesondere in der Informationsund Kommunikationstechnologie und der Trend zu wissensbasierten
Geschäften.
(2) Die Deregulierung von Märkten und Industrien, z.B. die Liberalisierung
der Telekommunikations-, Strom- und Verkehrsmärkte. Sinkende Kosten
der Informationssammlung, der Informationsverarbeitung und der Informationsvermittlung sowie verringerte Transportkosten.
(3) Abbau von tarifären und nicht-tarifären Handelshemmnissen durch GATT/
WTO und geringere Mobilitätshemmnisse.
(4) Das Wachstum der aufstrebender Länder und die Öffnung ihrer Märkte.
(5) Die Globalisierung der internationalen Finanzmärkte.
Als Folgen des Globalisierungsprozesses sind vor allem anzuführen:
• Durch die Intensivierung der internationalen Arbeits- und Wissensteilung entstehen internationale Handelsgewinne; es können Massenproduktionsvorteile
(economies of scale) und günstige Importmöglichkeiten genutzt werden. Wir
stehen heute erst am Beginn einer Entwicklung, in welcher intangibles Kapital (Wissen, Talent, intellektuelles Potenzial, Netzwerke, Marke) eine neue
Plattform für erfolgreiche Unternehmen bildet.
• Produkte, Produktinnovationen und der technische Fortschritt verbreiten sich
international schneller. Humankapital entwertet sich schneller und Wissensvorsprünge können schneller aufgeholt werden.
• Produktionsprozesse werden in einzelne Komponenten zerlegt, so dass der
Handel mit Vorprodukten gegenüber dem Handel mit Fertigprodukten an
Bedeutung gewinnt.
• Horizontale und vertikale internationale Direktinvestitionen sind Ursache
bzw. Folge verstärkter Kapitalverflechtungen.
• Der Wettbewerb auf Güter- und Dienstleistungsmärkten wird intensiver.
• Die ausgeprägte Interdependenz der Wirtschaftsprozesse erhöht die Störanfälligkeit in der Weltwirtschaft. Nationale Fehlentwicklungen bzw. Krisen
können sich leichter und schneller auf andere Volkswirtschaften übertragen.
Es handelt ich hierbei vor allem um Dominoeffekte bei Währungs- und Fi-

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nanzkrisen (systemische Risiken), um Inflationsimport, Import von Arbeitslosigkeit und um Konjunkturübertragungen.
Vielfach werden die Arbeitsmarktprobleme in Deutschland als negative Folgen
des Globalisierungsprozesses angesehen. Wie sind diese Einschätzungen zu bewerten? Von der Globalisierung gehen Arbeitsmarktwirkungen über zwei Kanäle
aus.
1.Kanal: Inländische Arbeitskräfte könnten durch Migration unter einen Wettbewerbsdruck geraten. So wird vielfach die These vertreten, dass der Globalisierungsprozess die Migration erhöhen würde und dass dadurch ein Druck auf die Löhne
der einheimischen Arbeitnehmer entstehen würde. Zuwanderungen würden das Arbeitskräfteangebot erhöhen und die Lohn-Zins-Relationen auf den Faktormärkten
verändern. Außerdem würden einheimische Arbeitskräfte aus dem Arbeitsmarkt in
die Erwerbslosigkeit gedrängt. Mögliche Verdrängungseffekte durch Zuwanderungen können nicht ausgeschlossen werden, aber im Kern ist die Immigration nicht
die Ursache der Arbeitslosigkeit, sondern sie ist die Folge mangelnder beruflicher
und räumlicher Mobilität und Flexibilität der einheimischen Arbeitskräfte. Zudem
sorgt heute die nationalstaatliche Wirtschaftspolitik durch Einwanderungskontrollen dafür, dass die Arbeitsmärkte der einzelnen Volkswirtschaften segmentiert bleiben. Die Arbeitsmärkte sind also weitgehend abgeschottet. Selbst auf liberalisierten
gemeinsamen Arbeitsmärkten, wie z.B. in der EU, finden die Wanderungsbewegungen in einem verhältnismäßig geringen Umfang statt. Von den Wirtschaftsfreiheiten des EU-Binnenmarktes wird die Freizügigkeit der Arbeitskräfte am geringsten realisiert. Die EU-Personenfreizügigkeit wurde von weniger als 1,5 % der
EU-Bevölkerung wahrgenommen. Auch die zu erwartenden Migrationen von den
neuen mittel- und osteuropäischen Mitgliedsländern in die EU 15 verteilen sich
über einen längeren Zeitraum und dürften quantitativ in einem relativ geringen
Umfang bleiben. Schließlich ist zu bedenken, dass durch neue Kommunikationsund Transporttechnologien die Transaktionskosten im internationalen Handel von
Gütern und Dienstleistungen heute so niedrig geworden sind, dass Migrationen
im Gegensatz zu früher aus wirtschaftlichen Gründen unattraktiv geworden sind.
Es ist wirtschaftlich effizienter, die Arbeitsplätze und damit das Kapital in Form
von Direktinvestitionen zu den Menschen zu bringen, anstatt die Arbeitskräfte zu
den Produktionsstandorten zu holen. Dies trifft insbesondere für standardisierte
Produktionen und für weniger qualifizierte Arbeitskräfte zu. Damit ist bereits der
2. Kanal von Arbeitsmarkteffekten angesprochen.

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2. Kanal: Es handelt sich hierbei um den Druck auf die Wettbewerbspositionen
segmentierter, nationaler Arbeitsmärkte „von außen“. Da sich durch den Globalisierungsprozess die Entscheidungen über Produktionsstandorte völlig neu stellen,
konkurrieren die Arbeitskräfte trotz getrennter Arbeitsmärkte weltweit miteinander. Aus dieser Sicht hat sich die Verfügbarkeit weniger qualifizierter, kostengünstiger Arbeitskräfte besonders stark erhöht. Auf der anderen Seite ist die Nachfrage nach qualifizierten Spezialisten und Führungskräften weltweit angestiegen.
Bei steigender Nachfrage erhöhen sich für diese Gruppe die Löhne und es kommt
weltweit zu einer größeren Lohnspreizung zwischen den Einkommen der High
Potentials und den Löhnen der weniger qualifizierten Arbeitskräfte. Von den Fachund Führungskräften wird eine steigende Mobilität erwartet (global citizens). Als
neue Migrationsform hat sich die innerbetriebliche Mobilität von Führungskräften
in multinationalen Unternehmen herausgebildet. Sie sind Business Migrants, die
aber im Regelfall nicht umziehen. Sie pendeln zwischen ihrem Wohnort und ihren
projektbezogenen Einsätzen.
Zusammenfassend ist festzuhalten, dass der international verschärfte Wettbewerb zu einem Druck auf die Reallöhne für einfache Arbeit führt. Der Faktor Arbeit
ist räumlich weit weniger mobil als der Faktor Kapitel. Insofern sind und bleiben
die Arbeitsmärkte segmentiert. Gleichwohl verengt der globale Wettbewerb über
den Wettbewerbsdruck „von außen“ die Verteilungsspielräume.
Die hohen Außenhandelsüberschüsse der deutschen Wirtschaft stehen im Widerspruch zu der These, dass unsere Arbeitsmarktprobleme von der Globalisierung
verursacht seien. Für die Arbeitsmarktmisere Deutschlands sind also vorwiegend
interne Ursachen verantwortlich, eine mangelnde Strukturan-passungsflexibiliät.
Für die hohe strukturelle Arbeitslosigkeit sind vielfältige Ursachenkomplexe verantwortlich, einerseits sind es weltwirtschaftliche Gründe, andererseits sind es
„hausgemachte“ Ursachen, insbesondere Rigiditäten des Arbeitsmarktes, der Reformbedarf in den Sozialleistungssystemen, im Bereich der Bildung und beim
Steuersystem. Die Strukturproblematik der deutschen Wirtschaft im Gefolge des
Globalisierungsprozesses hat zwei Dimensionen.
Die Probleme durch den „Wettbewerb von unten“ bewirkten die sog. Kostenkrise. Bei der Kostenkrise handelt es sich darum, dass sich die Wettbewerbsposition
der deutschen Wirtschaft in den traditionellen Industriefeldern Maschinenbau,
Automobilindustrie, Elektrotechnik und Chemie teilweise verschlechtert hat. Technologisch ist Deutschland in diesen Geschäftsfeldern nach wie vor führend. Die

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Wettbewerbsstärke basiert auf einer Clusterbildung, welche durch das Zusammenwirken von Firmen-Know How und Standortqualität entsteht (M. E. Porter). Um
die Hersteller von Automobilen gruppieren sich Zulieferer, Werkzeugmaschinenbauer und die elektrotechnische Industrie. Um den exportorientierten Maschinenbau bildeten sich Ringe von Zulieferern und Abnehmerindustrien. Diese miteinander verbundenen Cluster im Automobilbau, im Maschinenbau und in der elektrotechnischen Industrie waren bis Ende der siebziger Jahre das Erfolgsrezept für
eine überlegene internationale Wettbewerbsposition. Durch neue Wettbewerber
auf dem Weltmarkt kam es zu einem Kostendruck, der zu einer Verringerung der
internationalen Wettbewerbsfähigkeit führte. Im Vergleich zu den neuen Wettbewerbern, die mit ähnlicher Technologie produzieren, hatte die deutsche Wirtschaft
mit Kostentreibern wie hohe Arbeitskosten (Lohn- und Lohnnebenkosten), Lohnnivellierungen, niedrige Arbeitszeiten, Inflexibilität der Arbeitszeiten, niedrige und
inflexible Betriebsnutzungszeiten, Energie - und Kommunikationskosten, Steuerbelastungen und staatliche Überregulierungen zu tun. Die Anpassungsprobleme,
die sich aus dem „Wettbewerb von oben“ ergeben, wurden als Technologie- bzw.
Innovationskrise bezeichnet. Mit dem Begriff Technologiekrise soll ausgedrückt
werden, dass Deutschland insbesondere im Vergleich zu den USA und zu Japan
in der Hochtechnologie unter Druck geraten ist. So sei es beim Übergang von
den Technologien des 19. Jahrhunderts (Mechanik, Elektrotechnik) zur Hochtechnologie des 21. Jahrhunderts (Informationstechnik, Biotechnik, neue Werkstoffe,
Energietechnik, Luft- und Raumfahrttechnik, Umwelttechnik) zu Anpassungsschwierigkeiten gekommen. Gerade in den großen Wachstumsindustrien, die zum
Teil Schlüsseltechnologien sind, wie z.B. die Informationstechnik, sei Deutschland
zum Teil nicht mehr vertreten bzw. im Rückzug begriffen (B. Nussbaum; K. Seitz).
Demgegenüber ist aber festzustellen, dass Deutschland in der letzten Dekade aufgeholt hat. In manchen Feldern, z.B. in der Umwelttechnik, ist Deutschland an der
Spitze der technologischen Entwicklung.
Als Ergebnis kann festgehalten werden: Die deutsche Wirtschaft geriet in ihren
traditionellen Industriefeldern immer mehr unter einen Kosten- und Wettbewerbsdruck und im Hochtechnologiebereich hat sich der Konkurrenzdruck verschärft.
In beiden Fällen konnte die deutsche Wirtschaft ihre Position stärken. Insofern
wird Deutschland bei einer guten Konstitution auch die aktuelle Wirtschaftskrise
meistern können. Diese Einschätzung wird durch eine Befragung von 1 100 europäischen Managern zur Wettbewerbsfähigkeit der Länder im Jahr 2009 bestätigt:
Knapp die Hälfte der Befragten bewerteten die Wettbewerbsfähigkeit Deutschlands

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mit „sehr gut“ oder „gut“. In der Durchschnittsbewertung lag Deutschland hinter
China auf Platz 2, vor der Schweiz, Japan, USA, Frankreich, Großbritannien und
Italien.
4. ALTERNATIVE STABILISIERUNGSPOLITISCHE STRATEGIEN ZUR LÖSUNG
DER BESCHÄFTIGUNGSPROBLEME

Die Schärfe und Tiefe der gesamtwirtschaftlichen Störungen als Folge der internationalen Wirtschafts- und Finanzkrise hat die Diskussion um das strategische
Vorgehen der staatlichen Wirtschaftspolitik wieder neu belebt. Einerseits sehen die
Keynesianer in kurzfristigen Konjunkturprogrammen zur Belebung der Nachfrage
den adäquaten Lösungsansatz. Andererseits warnen die Neoklassiker bzw. Angebotstheoretiker angesichts der Unsicherheiten über die weitere wirtschaftliche Entwicklung vor zu viel „Aktionismus“ und vor Fehlsteuerungen.
Die Keynesianer sehen in der gesamtwirtschaftlichen Nachfrage den wichtigsten
Bestimmungsgrund für die Beschäftigung und den Auslastungsgrad der Produktionskapazitäten. Die theoretische Ausgangposition ist wie folgt zu kennzeichnen:
• Die gesamtwirtschaftliche Nachfrage (privater Konsum, private Investitionen,
Staatsnachfrage und Auslandsnachfrage) bestimmt das gesamtwirtschaftliche
Angebot auf den Güter- und Dienstleistungsmärkten und dieses den Beschäftigungsgrad einer Volkswirtschaft.
• Insbesondere wegen der Lohn- und Preisstarrheiten nach unten koordiniert
der Marktmechanismus zwar Angebot und Nachfrage auf den Güter- und
Dienstleistungsmärkten, aber nicht in jedem Falle bei Vollbeschäftigung
(„Marktpessimismus“).
• Im privaten Wirtschaftssektor sind endogene Störfaktoren (z.B. Multiplikator- und Akzeleratorprozesse) wirksam, welche eine unstetige
Wirtschaftsentwicklung in Form von Konjunkturschwankungen herbeiführen („Instabilitätsthese).
Aufgrund dieser Hypothesen sehen die Keynesianer einen ständigen
wirtschaftspolitischen Handlungsbedarf des Staates. Sie empfehlen eine kurzfristige, antizyklische, diskretionäre (fallweise) Nachfragesteuerung. Die auf den ersten Blick einleuchtende Konzeption ist insbesondere in ihrer Umsetzung sehr
problematisch: Nachfragepolitik ist nur wirksam, wenn auch die Ursachen gesamtwirtschaftlicher Spannungen auf der Nachfrageseite liegen. Nachfragepolitik

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versagt bei strukturellen Fehlentwicklungen und bei Störungen, die von der Angebotsseite her kommen. Diagnose- und Prognoseprobleme, Koordinationsprobleme
bei den wirtschaftspolitischen Entscheidungsträgern und Schwerfälligkeiten im
Entscheidungsprozess sind für Fehlsteuerungen und für time lags verantwortlich.
Da die quantitativen Wirkungen der Instrumente nicht genau bekannt sind, entstehen Dosierungsprobleme.
Die Effizienz der Nachfragesteuerung wird durch Antizipation der Stop- and
Go-Maßnahmen seitens der Wirtschaftssubjekte verringert, es kann sogar zu Zyklusverstärkungen kommen. Wie die Erfahrung zeigt, führt die Nachfragesteuerung,
da zumeist im Boom nicht gespart wird, zu einer Erhöhung der Staatsverschuldung. Schließlich hat antizyklisch gedachte Nachfragesteuerung vor allem der time
lags wegen eher prozyklisch gewirkt.
Die Forderungen nach Konsumgutscheinen und einzelne Elemente der Konjunkturprogramme der Regierung ( z.B. Abwrackprämie von 2500 € für mindestens 9 Jahre alte Autos; einmaliger Bonus für ein Kind von 100 €) entsprechen
der Nachfragesteuerungskonzeption. Die Effizienz dieser Maßnahmen ist sehr umstritten, da sie nicht nachhaltig sind und lediglich ein „Strohfeuereffekt“ entfacht
werden dürfte. Angesichts der weltweiten Absatzkrise auf dem Automobilmarkt erscheint die Abwrackprämie für Altautos angezeigt. Gerade Baden-Württemberg ist
ein Zentrum der deutschen Automobilindustrie, in welchem rund ein Drittel der
Beschäftigten in dieser Branche tätig sind. Im Jahr 2007 waren in 245 baden- württembergischen Unternehmen knapp 235 000 Mitarbeiter beschäftigt. Gleichwohl
ist diese branchenbezogene Maßnahme aus ordnungspolitischen und ökologischen
Gründen nicht unproblematisch. Kritiker sehen in dieser Maßnahme deshalb einen industriepolitisch motivierten Aktionismus.
Die Forderungen nach höheren Löhnen, durch welche mehr Kaufkraft, mehr
Konsumgüternachfrage, mehr Produktion und damit mehr Beschäftigung erreicht
werden soll, ist kontraproduktiv, weil dadurch die Kosten steigen und die Wettbewerbsfähigkeit eingeschränkt werden würde. Wenn der Staat die Steuern senkt und
dafür ein höheres Budgetdefizit in Kauf nimmt, dann wird sich das Konsumverhalten nicht oder nur sehr wenig ändern. Die Steuerzahler rechnen wegen der Staatsverschuldung mit künftigen Steuererhöhungen. Insofern trifft die These, wonach
sich Steuersenkungen durch ein dadurch ausgelöstes höheres Wirtschaftswachstum
zum großen Teil selbst finanzieren, nicht zu. Steuersenkungen sind nur dann zu
befürworten, wenn als „Gegenfinanzierung“ Ausgabenkürzungen erfolgen. Im Ko-

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alitionsvertrag (26. 10. 2009) werden steuerliche Entlastungen von 24 Mrd. € versprochen, ohne auf die Finanzierung einzugehen. Wegen des erheblichen Anstiegs
der Staatsverschuldung und von Finanzierungssalden im Jahr 2009 in Höhe von
-72 Mrd. € (3 % des BIP) und im Jahr 2010 in Höhe von -125 Mrd. € ( 5,1 % des
BIP) steigt die Schuldenstandsquote (Anteil des Bestands von Staatsschulden am
BIP) von 71,8 % (2009) auf 75,3% (2010). Staatsverschuldung bedeutet eine Lastenverschiebung auf spätere Generationen, verringert die Handlungsspielräume des
Staates und hat ein geringeres Wirtschaftswachstum sowie negative Beschäftigungseffekte zu Folge. Insofern ist eine Haushaltskonsolidierung, auch aus rechtlichen
Gründen (Schuldenbremse; Art 109, Abs.3 GG), dringend angezeigt. (Jahresgutachten des Sachverständigenrates zur Begutachtung der gesamtwirtschaftlichen
Entwicklung 2009/2010).
Erfolgversprechender sind die Senkung der Lohnnebenkosten und zusätzliche
Ausgaben des Staates in die Infrastruktur, in Bildung und in Forschung. Derartige staatliche Ausgabenprogramme wirken aber eher mittelfristig und entsprechen
damit einer Wachstumsstrategie, wie sie von den Neoklassikern vertreten wird.
Die Angebotstheoretiker (Neoklassiker) gehen von folgenden theoretischen
Grundpositionen aus:
• Das gesamtwirtschaftliche Angebot bestimmt die gesamtwirtschaftliche
Nachfrage.
• Sind die Märkte funktionsfähig, dann tendiert die wirtschaftliche Entwicklung zu einem Gleichgewicht bei Vollbeschäftigung („Marktoptimismus“).
• Der private Sektor ist von sich aus stabil. („Stabilitätsthese“). Unvollkommene Informationen können allerdings zu Fehlentscheidungen führen, die
dann wegen der Interdependenz der Märkte gesamtwirtschaftliche Instabilitäten zur Folge haben (Theorie der rationalen Erwartungen).
Die Angebotspolitik setzt stärker auf die Marktkräfte, die durch veränderte
Rahmenbedingungen freigesetzt werden sollen. Die Marktkräfte finden dann selbst
den Wachstumspfad. Das Ziel der angebotsorientierten Wirtschaftspolitik besteht
nicht darin, die jeweilige aktuelle Fehlentwicklung zu bekämpfen. Ziel ist ein mittelfristig gewollter Zustand, welcher mit einer Verstetigungsstrategie angesteuert
werden soll. Dabei geht es darum, an marktwirtschaftlichen Spielregeln ausgerichtet, die wirtschaftlichen Erwartungen zu stabilisieren und Vertrauen in die Zukunft
zu schaffen.

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Die Struktur- und Beschäftigungsprobleme in Deutschland sind letztlich nur
mit einer Wachstumsstrategie zu lösen. Da die Ursachen der aktuellen Beschäftigungs- und Strukturprobleme vorwiegend auf der Angebotsseite liegen, ist auch hier
anzusetzen. Gleichzeitig sollte die Nachfrageseite nicht vernachlässigt werden und
auf hohem Niveau stabilisiert werden. Angesichts der massiven Wirtschaftskrise
war eine (einmalige) keynesianische Nachfragesteuerung angezeigt.
5. WACHSTUMSPOLITIK UND ARBEITSMARKTPOLITIK ZUM ABBAU DER
ARBEITSLOSIGKEIT
5.1. Wachstums- und strukturpolitische Maßnahmen

Neben den allgemeinen makroökonomischen Rahmenbedingungen, wie Geldwertstabilität, Arbeitsmarktflexibilität und Offenheit einer Volkswirtschaft, sind
Humankapital, privates und öffentliches Sachkapital sowie die Forschungs- und
Entwicklungstätigkeit zentrale Wachstumsdeterminanten.
Der Beitrag der Europäischen Zentralbank besteht aktuell darin, dass bei niedrigen Inflationsraten die Zinsen niedrig gehalten werden, um dem negativen Nachfrageschock kurzfristig zu begegnen und um die Ertragslage der Bankensystems zu
verbessern.
Die staatliche Wirtschaftspolitik sollte den eingeschlagenen Reform- und Konsolidierungskurs weiter verfolgen. Durch die internationale Wirtschafts- und Finanzkrise, von der weltweit alle deutschen Absatzmärkte betroffen sind, ist bei der
Auslandsnachfrage aktuell mit relativ geringen belebenden Impulsen zu rechnen.
Insofern wird die weitere Konjunkturentwicklung wesentlich von der Binnennachfrage bestimmt. Die niedrige Inflationsrate dürfte sich positiv auf die private Konsumgüternachfrage auswirken. Negativ auf das Konsumverhalten wirkt sich allerdings die ansteigende Arbeitslosigkeit aus. Nach Einschätzung der Forschungsinstitute wird der private Konsum im Jahr 2010 um 0,4% sinken. Die Binnennachfrage
sollte nicht über weitere antizyklische, kurzfristige Konjunkturprogramme angeregt
werden, sondern über nachhaltige mittelfristige Maßnahmen gestärkt werden. In
diesem Sinne spricht der Sachverständigenrat auch von einer konjunkturgerechten
Wachstumspolitik. Konkret sollte der Staat folgende wachstumspolitischen Maßnahmen ergreifen:
(1) Eine gut ausgebaute Infrastruktur ist eine wesentliche Voraussetzung für die
Wachstumsdynamik und das Beschäftigungsniveau einer Volkswirtschaft. Deshalb

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sollte der Staat, seine Investitionen im Bereich Infrastruktur (Verkehrsinfrastruktur, öffentliche Gebäude, z.B. Schulen, Hochschulen etc.) deutlich erhöhen. In
diese Richtung zielen einige Maßnahmen des Konjunkturprogramms II. Die Finanzierung von staatlichen Investitionen kann nach der goldenen Regel der Finanzpolitik über eine Kreditaufnahme (deficit spending) erfolgen. Der Bedarf an
Infrastrukturinvestitionen ist insbesondere auch deshalb besonders hoch, weil die
öffentlichen Haushalte seit dem Jahr 2003 aus der Substanz gelebt haben. Wegen der Konsolidierungsbemühungen der Staatshaushalte lagen seitdem die Abschreibungen über den Nettoinvestitionen, der staatliche Kapitelstock hat sich
reduziert.
(2) Die Wachstumsdynamik sollte mit höheren Ausgaben für Bildung und Ausbildung sowie mit staatlicher Förderung von Forschung und Entwicklung angeregt
werden. Dadurch wird die kreative und technologische Leistungsfähigkeit verbessert. Der F&E- Standort sollte durch eine Forcierung der Grundlagenforschung
und eine intensivere Unterstützung von Existenzgründungen von technologieorientierten Unternehmen vorangebracht werden.
(3) Die drei Stufen einer Steuerreform, bei der zwar nicht alle getroffenen
Regelungen überzeugen, waren wichtige Schritte zur Stärkung der internationalen
Wettbewerbsfähigkeit und zu einer höheren Standortattraktivität Deutschlands.
Bezüglich der Unternehmensteuern besteht noch Reformbedarf, denn Deutschland
ist immer noch ein Hochsteuerland. Eine Unternehmensteuerreform steht aktuell
auf der politischen Agenda. Die Investitionsgüternachfrage kann ferner über eine
generelle Einführung der degressiven Abschreibung für bewegliche Wirtschaftsgüter des Anlagevermögens angeregt werden.
(4) Ein weiterer Reformbedarf besteht nach wie vor bei den Sozialleistungs-systemen. Der umfassende Sozialstaat bedingt hohe Sozialversicherungsbeiträge und
treibt einen Keil zwischen Bruttolöhnen und Nettolöhnen. Die hohen Lohnnebenkosten verringern Standortattraktivität und führen zu Produktionsverlagerungen
ins Ausland. Die hohen Sozialleistungsabgaben in Verbindung mit einer als hoch
empfundenen Steuerbelastung sind die wesentlichsten Gründe für die Schattenwirtschaft, in welcher ca. 16% des Bruttoinlandsprodukts erwirtschaftet werden.
Eine nachhaltige Sozialpolitik sollte künftig die Finanzierung der sozialen Sicherungssysteme stärker vom Arbeitsmarkt abkoppeln (z.B. Aufbau einer kapitalgedeckten Rente; Bürgerpauschale im Gesundheitswesen) und insbesondere auch für
Effizienzsteigerungen in der Leistungserbringung sorgen.

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(5) Als ordnungspolitische Maßnahme zur Steigerung der Standortattraktivität
ist ein Bürokratieabbau dringend angezeigt. Unnötige bürokratische Regelungen
verursachen Kosten und schränken unternehmerisches Handeln ein.
5.2. Arbeitsmarktpolitik

Die Arbeitsmarktpolitik hat aus heutiger Sicht drei Aufgaben zu erfüllen:
(1)Sie hat einen Beitrag zu leisten, dass der Beschäftigungsabbau durch die aktuelle Wirtschafts- und Finanzkrise begrenzt bleibt. Hilfreich ist hier neben einer
moderaten Lohnpolitik die Verlängerung der Bezugszeiten bei Kurzarbeit.
(2)Die Arbeitsmarktpolitik muss ferner Sorge dafür tragen, dass die Beschäftigungschancen gleichmäßiger verteilt werden. Die Problemgruppen auf dem
deutschen Arbeitsmarkt sind vor allem gering qualifizierte Menschen und Langzeitarbeitslose. Die Flexibilität auf dem Arbeitsmarkt wurde durch eine zunehmende
Ausdifferenzierung in Kernbelegschaften und in Randbelegschaften mit atypischen
Beschäftigungsverhältnissen „erkauft“. Solche atypischen Beschäftigungsverhältnisse sind befristete und geringfügige Beschäftigungsverhältnisse und außerdem
Arbeitsverhältnisse, die in Teilzeit ausgeübt werden oder bei denen es sich um
Leiharbeitsverhältnisse handelt. Fast ein Drittel aller abhängig Beschäftigten sind
in atypischen Beschäftigungsverhältnissen. Die Chancen für atypisch Beschäftigte
werden dadurch erhöht, wenn eine Liberalisierung der Normalarbeitsverhältnisse
erfolgt. Einstellungsbarrieren können durch einen flexibleren Kündigungsschutz
abgebaut werden. So wird vom Sachverständigenrat vorgeschlagen, dass betriebsbedingte Kündigungen zulässig sein sollen, wenn vorher im Arbeitsvertrag
verbindliche Abfindungsregelungen getroffen worden sind. Da rund drei Viertel
der Langzeitarbeitslosen und der arbeitlosen Geringqualifizierten Arbeitslosengeld
II beziehen, ist dieses bereits ein Kombilohn als Mindesteinkommenssicherung.
Durch eine Verbesserung der Hinzuverdienstmöglichkeiten bei einer gewissen
Mindestarbeitszeit wird es attraktiver, das Arbeitsangebot zu erhöhen. Dieser Effekt
wird dadurch verstärkt, dass der Regelsatz gesenkt wird, um Nichtarbeiten weniger
attraktiv zu machen. In eine ähnliche Richtung zielen weitere Modelle wie beispielsweise die „aktivierende Sozialhilfe“ oder „negative Einkommensteuern“. Statt für
diese Personengruppen Lohnersatzleistungen zu zahlen, sollen Lohnergänzungsleistungen gewährt werden. Staatlich verordnete, flächendeckende Mindestlöhne sind
eher kontraproduktiv. Wenn mehr Arbeitsplätze im Niedriglohnbereich geschaffen
werden sollen, dann ist eine stärkere Lohnspreizung erforderlich. Für diejenigen

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Personen, die mit geringen Löhnen kein sozialverträgliches Einkommen erzielen
können, sollte der Staat Lohnergänzungsleistungen gewähren.
(3)Der Abstimmungsmechanismus auf dem Arbeitsmarkt muss verbessert
werden. In Deutschland ist die Tarifautonomie grundgesetzlich geschützt (GG Art.
9, Abs. 3). Insofern kann der Staat nicht unmittelbar in die Lohnbildung eingreifen.
Es gibt auch gute Argumente für einen kollektiven Lohnbildungsprozess. Werden
die Interessen der Arbeitnehmer durch Gewerkschaften vertreten, dann wird ihre
Verhandlungsmacht gestärkt. Für Unternehmen entfallen Transaktionskosten,
welche bei individuellen Lohnverhandlungen entstehen. Es wird auch die These
vertreten, dass bei kollektiven Lohnverhandlungen gesamtwirtschaftliche Folgen
der Abschlüsse in Form von Beschäftigungseffekten und Auswirkungen auf das Preisniveau Beachtung finden. Es gibt aber auch eine Vielzahl von Gegenargumenten,
mit denen eine stärkere Dezentralisierung der Lohnbildungsprozesse begründet
wird. So können bei Lohnverhandlungen auf Unternehmensebene betriebsspezifische Aspekte (Produktivität, Ertragslage, Wettbewerbssituation) Berücksichtigung
finden. Bei einer Abwägung der Vor- und Nachteile kollektiver Lohnverhandlungen
spricht vieles für die Beibehaltung von Flächentarifverträgen. Allerdings wird mehr
Flexibilität in den Arbeitsverträgen gefordert. Dieser Forderung wird bereits mit
Öffnungsklauseln entsprochen: Abweichungen vom Flächentarifvertrag; variable
Lohnkomponenten mit Gewinnbeteiligung; Einsteigertarifverträge für Arbeitslose;
Abkommen, bei denen die Arbeitplatzsicherheit berücksichtigt wird. Gesetzliche
Änderungen im Interesse einer flexibleren Lohnfindung sind insbesondere eine explizite Berücksichtigung der Arbeitsplatzsicherheit beim Günstigkeitsprinzip und
die Aufhebung der Sperrwirkung für nicht tarifgebundene Unternehmen.
6. INTERNATIONALE WIRTSCHAFTSPOLITIK

Der Globalisierungsprozess ist heute bereits so weit fortgeschritten, dass er unumkehrbar ist. Trotz aller Risiken, die mit der Globalisierung verbunden sind, ist
den Forderungen nach einer Abschottung Deutschlands oder Europas und nach
Kontrollen der Außenwirtschaftsbeziehungen eine Absage zu erteilen. Deutschland
konnte aus der internationalen Arbeitsteilung bislang großen Nutzen ziehen. Der
Wohlstand wurde und wird nicht zuletzt über den internationalen freien Handel
gesteigert. Eine Intensivierung der internationalen Arbeitsteilung bringt Wohlstandseffekte. Bereits 1776 hat Adam Smith in seinem Buch über den Reichtum der
Nationen ein Bekenntnis zum Freihandel abgegeben. David Ricardo hat mit seiner

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Theorie der komparativen Kostenvorteile den Nachweis geführt, dass Freihandel
den Wohlstand aller beteiligten Volkswirtschaften erhöht. Die neue Außenhandelstheorie (u.a. Paul Krugman) stellt auch Hypothesen bereit, mit denen man nicht
nur die interindustrielle, sondern auch die intraindustrielle internationale Arbeitsteilung auf unvollkommenen Märken erklären kann.
In einem forcierten Strukturwandel gibt es Gewinner und Verlierer, aber es
ist kein Null-Summen-Spiel. Bei interindustrieller Arbeitsteilung können ganze
Branchen mangels internationaler Wettbewerbsfähigkeit „wegbrechen“. Bei der
heute vorherrschenden intraindustriellen Arbeitsteilung trifft dies u.U. für einzelne
Firmen, nicht aber für ganze Branchen zu.
Eine wesentliche Aufgabe der staatlichen Wirtschaftspolitik besteht in der Mitgestaltung des internationalen Ordnungsrahmens für den Globalisierungsprozess.
Damit sich der globale Wettbewerb nicht „ungezügelt“ entwickelt, ist Global Government erforderlich. Dabei geht es insbesondere um Sozial- und Umweltstandards,
Regelungen einer internationalen Wettbewerbspolitik und um eine internationale
Finanzarchitektur zur künftigen Vermeidung von Währungs- und Finanzkrisen.
7. SCHLUSSBEMERKUNGEN

Die Globalisierungsdebatte wird bei näherer Betrachtung vielfach zur Durchsetzung von Interessen benutzt. Politiker verlagern die Verantwortung für Probleme
nach außen. Interne Probleme und der Mangel an eigener Handlungsfähigkeit
werden den anonymen globalisierten Märkten angelastet. Von der Arbeitgeberseite
wird die Globalisierungsdebatte dazu benutzt, die Gewerkschaftspolitik und die nationalstaatliche Politik auf einen unternehmerfreundlichen Kurs zu zwingen. Es soll
politisches Handeln als Anpassung an die ökonomischen Weltmarktzwänge oder
aber in Richtung Protektion erreicht werden. Demgegenüber ist zu konstatieren,
dass es nach wie vor nationalstaatliche Handlungsspielräume gibt und dass Protektionismus grundsätzlich abzulehnen ist. Protektionistische Maßnahmen, welche
mit dem infant-industry-argument begründet sind, können aus ökonomischer Sicht als Ausnahme gerechtfertigt sein. Die Wettbewerbsfähigkeit Deutschlands ist
auf Dauer nur zu erhalten, wenn sich die deutsche Wirtschaft der internationalen
Konkurrenz stellt. Insofern muss Globalisierung als Chance begriffen werden. Den
weltwirtschaftlichen Herausforderungen ist offensiv zu begegnen. Auch die aktuelle Wirtschafts- und Finanzkrise kann nicht mit nationalstaatlichen Alleingängen
erfolgreich gelöst werden. Ihre Lösung verlangt neben den beschriebenen binnen-

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wirtschaftlichen wachstums- und arbeitsmarktpolitischen Maßnahmen ein international koordiniertes Vorgehen der Zentralnotenbanken und der Regierungen
weltweit und auf EU-Ebene. Politik, Wirtschaft und Gesellschaft müssen sich diesen Herausforderungen stellen. Bei der insgesamt guten Konstitution der deutschen
Wirtschaft können diese auch gemeistert werden.
LITERATUR

1. Bundesagentur für Arbeit; http://www.Statistik.Arbeitsagentur.de/statistik
2. Wirtschaftsforschungsinstitute, Gemeinschaftsdiagnose Frühjahr 2010 (14. 04.
2010); http://www.cesifo.de
3. Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung,
Jahresgutachten 2009/2010; http://www.Sachverstaendigenrat-Wirtschaft.de
4. Welthandelsorganisation, WTO World Trade 2008; Press release 554.

Alexander Moheit • Dirk Wentzel

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FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE
OF EASTERN EUROPEAN EU MEMBERS AND GREECE:
CHALLENGES FOR THE STABILITY OF THE EURO
Alexander Moheit, Dirk Wentzel
Hochschule Pforzheim University

ABSTRACT

The financial crisis of 2008 is unprecedented and has led to a completely new
situation in the monetary and financial integration of the EU. Some member states
of the EU are threatened by bankruptcy which could also risk the achievements of
monetary integration and the strong stability performance of the Euro from the last
ten years. The exchange rate of the Euro came under stress because the markets are
nervously observing how the “Greek tragedy” can be solved without damaging the
credibility of the Euro.
JEL clasiffication: G01
Keywords: Financial Crisis, Stability, Exchange Rate
THE AFTERMATH OF THE FINANCIAL CRISIS 2008:
INTRODUCTORY REMARKS

Since the financial crisis of 2008, the convergence analysis of the Eastern European EU members has to be regarded from a different perspective. The surprising
success of Slovenia and Slovakia who have achieved to gain membership in the
Euro zone through a strong and credible stability policy is not likely to happen
again with the other Eastern European EU members. But also the existing “old”
members of the Euro zone are under enormous pressure: Next year, a deficit procedure will be started against all 16 Euro states. And Greece and Italy might face a
serious test of their ability to regain financial stability. The financial markets surely
mistrust the ability of Greece to succeed on this matter which can be easily seen in

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the high interest rates for Greek long term government bonds that are almost twice
as high as the interest rates for German bonds (see Beck and Wentzel 2010).
Nevertheless, the financial crisis has not stopped the existence or changed the
wording of the European Treaties. Even though the financial and economic situation of 2010 is completely different from 1999 when the first round of Euro states
were selected, the new EU members in the East are obliged to adopt the Euro. So the
efforts to achieve the financial preconditions to introduce the Euro cannot be interrupted. The “opting out clause”, which held for Britain, Sweden, and Denmark, is
not available for the new members. This is surely a double-standard, but the matter
of the fact is that the Eastern European governments have signed voluntarily their
commitment to the acquis communautaire and therefore to the introduction of the
Euro. From an economic perspective, a very interesting dilemma occurs: All member states have to adopt the Euro in order to fulfill their legal obligations, but they
are only accepted in “the Club” if they match the criteria. Therefore the strategic
exit option for a country who might not want to adopt the Euro is failing on the
criteria on purpose. This is the strategy of Poland and the Czech Republic right now
who refuse to participate in the European Monetary System II.
The research question of this paper is if any of the new members is ready to follow Slovenia and Slovakia, who were the first of the new members to introduce the
Euro. Nevertheless, the final judgment if a country is performing strong enough or
not is never easy: The intensive debate in May 2008 between the European Commission and the European Central Bank regarding Slovakia joining the Euro zone
is a clear expression of this controversial. The European Commission was strongly
supporting Slovakia – mainly for political reasons, while the ECB was expressing
serious concerns about the sustainability of the Slovakian stability path. The final
result of this debate is obvious.
Experts with the best empirical data and knowledge available come to completely different conclusions concerning the stability performance. Nevertheless,
there are more and more concerns about the quality of empirical data since the case
of Greece has demonstrated that some countries even work with faked data to convince the European institutions about their stability performance. Recently, rumors
occurred that also Bulgaria did not provide accurate date. But which European or
international institution could force Euro zone members to fulfill their obligations
and provide realistic and fair data? When the Western Europeans started their way
towards the Euro in the early 90th, there was a credible threat that non-performing

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countries were not accepted. This resulted in a lot of pressure on national governments to cut spending and to achieve more solid and balanced budgets. However,
with the introduction of the Euro, this political sanction had disappeared and the
Stability and Growth Pact has never gained any credible authority that violations of
the treaties would be punished (see Wentzel 2005).
In this paper, the efforts of the new member states on their way to fulfill the obligations from the European Treaty will be analyzed. In addition to that, this paper
will also analyze the case of Greece who might be the first country to be expelled
from the Euro zone after continuous and deliberate violations of the financial rules.
The presented analysis deals with the empirical facts, but considers also additional
factors from the political and institutional environment. Therefore is follows a two
pillar strategy of analysis, combining both empirical and institutional arguments.
1. PERFORMANCE OF ESTONIA
1.1. Convergence criteria

With regards to the government budgetary position Estonia enjoyed a surplus
of 1.1 percent per year since 2000, which has been used to reduce the public debt
(European Commission 2006: 15). Elder forecasts underlined a rising surplus of the
revenues to 1.3 percent of GDP, which strengthens the confidence in the Estonian
budget balance (Eeste Pank, Bank of Estonia 2008: 8). However, the strong impact
of the financial crisis has turned the annual balance from a surplus into a deficit
in 2008 and will turn back into a surplus at the earliest in 2011: The official statistics from Estonia predict a surplus of 0,1% in 2011. In contrast to the Estonian
published data, the European commission forecast assume a deficit by 3,9% in
2010 instead of 1,0 % (European Commission 2009: 209), which would exceed the
criterion on annual deficit.

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Figure 1: Budgetary developments 2005-2011, Estonia (% of GDP).
2005

2006

2007

2008

2009

2010

2011 Forecast*

Annual government
deficit to GDP

-2,3

- 3,4

- 2,7

1,9

1,7

1,0

-0,1

Gross government
debt to GDP

4,4

4,2

3,5

3,7

3,7

3,5

3,0

Source: European Commission 2007: 228; European Commission 2009: 210.

The exchange rate stability has performed well: Before the assessment to ERM
II, the Estonian Kroon had been anchored to the Deutsche Mark (DM). The Estonian Kroon started transition from a socialist currency of the Soviet era in 1990, at
that time a very challenging institutional arrangement (see Wentzel 1995). Since
June 2004, the Estonian Kroon is part of European Exchange Rate Mechanism
and could maintain a constant currency board within the mechanism with direct
transmissions of monetary impulses coming from the Euro area (European Commission 2006: 64). Recently, the Estonian Kroon appreciated by 3 percent, which “was
mainly facilitated by the stronger growth of consumer prices compared to that in
the partner countries, which is why growth in the real exchange rate of the Kroon
accelerated to 4–5% in the second half-year” (Eeste Pank, Bank of Estonia 2008: 8).
Estonia has high foreign exchange reserves covering 115 percent of monetary base
and short-term interest rates fulfill the convergence criteria too (European Commission 2006: 64). There are no pressures on the exchange rate right now. “As a
result of Estonia’s low level of government indebtedness no benchmark long-term
government bond or comparable security is available to assess the durability of
convergence as reflected in long-term interest rates” (European Commission 2006:
16). The indicator is predicated on key figures from bank loans and non-financial
businesses (European Commission 2006: 16). Recent developments, especially since
2004 fulfill convergence criteria of long-term interest rates and there is no indication of any worsening.
As a result of initially external price shocks, higher indirect taxes, increasing
wage costs and a strong demand growth from 2004 to 2007, Estonia suffered relatively high inflation rates, which remain above the reference value. The Estonian
CPI increased approximately up to 10 percent in December 2007. However due
to the strong reforms Estonia needed to run to cope the financial crisis and the
lack of FDIs, higher unemployment rate and lower public spending the inflation

Alexander Moheit • Dirk Wentzel

410

rate dropped strongly and turned in 2009 for some months into a deflation. Over
2009 it remained round about 1,6%, which fulfills criterion on price stability and
currently there is no sign of a soon strong increase since Estonia still suffers a hard
recession.

Figure 2: Rise in food prices in Estonia compared to the corresponding month of the previous year

Source: Eeste Pank, Bank of Estonia 2008: 11

Figure 3:

HICP

Estonia

and

Source: http://www.ecb.int/stats/prices/hicp/html/inflation.en.html

Euro

area

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

411

1.2 Current economic situation and recent structure reforms

In terms of the economic structure Estonia is relatively well performed: The
average hours of work per week are with 40,7 above the EU average (Statistisches
Bundesamt 2009: 37.), effective age of retirement is by 65 years (Eurostat 2007: 3),
which is both above the legal age and the EU average with 59,5 years. However the
ancillary labour costs are with 37% too high (Statistisches Bundesamt 2009: 37.)
and Estonia suffers still corruption, even if its position in the corruption perceptions index is with 27 the lowest among the new members (Transparency International 2009: 6.). The public spending on health care and pensions are below the
EU average
1.3 Additional factors

Domestic investments and the productivity growth are based on increased foreign savings in Estonia. The Euro is already accepted as investment currency and the
integration of the Estonian economy with the EU is remarkable strong (European
Commission 2006: 16). However, the Estonian economy will have to satisfy large
financial needs due to a decline in private savings since 2002 and the large external
deficit (Financial Times 2008), which widened from -5,6 in 2001 up to -13,1 in
2006 (European Commission 2006: 15). The external deficit is financed by FDI inflows and intra-group bank lending. However, that will not be sufficient to prevent
future financing problems of the external balance (European Commission 2006: 69).
“With the external debt stock having grown […] to above 80% in Estonia in 2005,
debt service – let alone the redemption of debt – it might take a considerable toll
on future consumption and investment. For a vigorous convergence scenario it will
be essential to ensure that the high current account deficit reflects sound private
investment rather than conspicuous consumption” (Deutsche Bank Research 2006:
1). In 2007, the trade balance deficit decreased slightly: “The underlying reason for
this was the increased outflow of investment income, calculated on an accrual basis.
Income on investment in Estonia was about 45% larger than in 2006 also in the
last months of 2007” (Eeste Pank, Bank of Estonia 2008: 7).
Moreover according to a survey from the European commission, Estonia is
among the best prepared countries for the future demographic change, which will
have positive impacts on public debt (Tagesanzeiger: 14.10.2009).

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1.4 Conclusion

To sum up, Estonia currently fulfills all required convergence criteria. “The common feature in recent economic forecasts has been that the adjustment of domestic
demand growth will be smooth and that current account deficit is not expected to
decline rapidly once economic growth slows” (Eeste Pank, Bank of Estonia 2008:
18). The inflation rates will remain low, however there is the danger of a rising
external deficit. The prospect does not indicate changing. However, public deficit
is a prerequisite to join the Euro zone that is definitely not negotiable (see Wentzel
2005). This leads to the conclusion that Estonia will not fulfill criteria in the short
term and is therefore not yet qualified to join to Euro area. Cutting down deficit
will be the central challenge for Estonia on their way into the monetary union.
However, Estonia remains one of the best performing countries among the Eastern
European member states and will be one of the first to join the Euro area considering the empirical and institutional basis.
2 PERFORMANCE OF LATVIA
2.1 Convergence criteria

By 2006 the general government balance of Latvia realized a surplus of 0.2 percent of GDP due to higher tax revenues than expected in previous government’s
drafts. Forecasts of the European Commission predicted smaller but positive balances of annual government deficit, which has happened just until 2007 – before
the crisis impacted the Latvian economy. The status of Latvian’s gross government
debt fulfilled required criteria during the recent years by 12 percent in 2005 and
will be reduced up to 10 percent in 2008 (European Commission 2006: 19). However this did not happen: The gross debt to GDP was by 19,4% in 2008 and 32,4%
in 2009. The financial crisis hit Latvia very strongly and caused both higher public
deficit and debt. Therefore, Latvia does not fulfill anymore convergence criterion
concerning deficit and in the future on debt as well, if the Latvian economy will
not recovery.
After a moderately depreciation against the Euro, Latvian Lats became part of
ERM II in May 2005 and has successfully maintained its currency within the corridor of one percent around the Euro central rate (European Commission 2006: 89).
The lack of severe tensions and the satisfying developments in short-term interest
rates and foreign exchange reserves, lead to a fulfilment of criteria on the required

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

413

exchange rate stability (European Commission 2006: 90). The Lats is “growing into
the system”. The long-term interest rate (LTIR) within Latvian economy has been
around 3.9 percent and did never approach to the upper bound of 6.2 percent of
the required convergence criteria (European Commission 2006: 90), so the average
LTIR has always remained below the reference value. Furthermore, Latvia enjoys
confidence from investors reflected by the moderate spreads to the Euro area (European Commission 2006: 91).
Inflation is continually high with 6.7 percent in 2006 and is also expected to
remain high (European Commission 2006: 19). The sudden rise from 2.9 percent
in 2003 up to 6.2 percent in 2004 and the persistence of high inflation rates reflected initially external price shocks, higher administered prices, indirect taxes and
increasing capacity constraints (European Commission 2006: 84). However Latvia
enjoyed a strong drop of inflation rates in 2009 as consequence of the hard structural reforms Latvia has taken, e.g. salary reduction by 15% for employees in public
sector and the VAT was increased from 5% to 21%, forced by the IMF (International Tax Review: 2008). In average the inflation rate still exceeds the criterion on
price stability with 3,3% in 2009.

Figure 4: ECB: Inflation and the euro

Source: http://www.ecb.int/stats/prices/hicp/html/inflation.en.htm

In the past there have been more demand-side factors and upwards pressures
stemming from labor costs (European Commission 2006: 18). Moreover, excise taxes
and pro-cyclical fiscal policies lead to the conclusion that the inflation was not
considered as a primary problem by Latvian government. However the current

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unemployment rate of 23%, which is also caused due to lay offs on the public sector (Auswärtiges Amt. Lettland - Wirtschaft: 2010), will lower pressure on inflation
rate in the future.
The prices are still decreasing and Latvia will suffer a deflation in 2010 if the
economy will not recovery. Both the strong volatility of the prices and the dependency of FDIs, which determine the power of the economy and the way of inflation, lead to the conclusion that Latvia is not yet qualified to fulfill the criterion on
price stability.
2.2 Current economic situation and recent structure reforms

In terms of the economic structure also Latvia is relatively well performed due
to strong reforms in 2009: The average hours of work per week are with 40,6
above the EU average (Statistisches Bundesamt 2009: 37.), effective age of retirement is by 61,6 years (Eurostat 2007: 3), which is both above the legal age and
the EU average with 59,5 years, and the ancillary labour costs are with 28% pretty
low (Statistisches Bundesamt 2009: 37.) . However Latvia suffers still corruption:
its position in the corruption perceptions index is with 56 in the middle among
the new members (Transparency International 2009: 6.). The public spending on
health care and pensions are below the EU average
2.3 Additional factors

The integration of Latvian economy with the EU is strong and the Euro is currently used as an investment currency which would relieve the adoption of this currency. Foreign savings, especially from Euro area countries, intensified investments
and productivity growth (European Commission 2006: 91). However, Latvia suffers
a large external deficit (Financial Times 2008), which has widened from -7.6 in
2001 to -16.4 in 2006 (European Commission 2006: 95) and is mainly financed by
FDI inflows and intra-group bank lending (European Commission 2006: 94).
2.4 Conclusion

Latvia does not fulfill all required convergence criteria. The inflation rate is definitely too high and due to the strong dependency with foreign trade the inflation
will turn into deflation in 2010. Monetary stability is the main precondition for
the membership in the Euro area and definitely not negotiable. The budgetary

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

415

aspects are also inappropriate. Both the large deficit, as well as the prospective
strong financing needs exclude Latvia from participating in the Euro area in the
near future.
However, the Euro is becoming a parallel currency in Latvia in regular life which
leaves the country – like its Baltic neighbors – in a difficult situation. Even though
the Euro cannot be adopted officially in the near future, it is part of the Latvian
economy in many ways. It can be concluded that the role of the Euro as a parallel currency in the Baltic states is another example of Greshams’s law (see Wentzel
1995). There might be a crowding out of the Lats by the Euro, which will be a real
challenge for the monetary policy of the national central bank and, later on, also
for the ECB.
Latvia may be able to introduce the Euro in the midterm in case the economy
will recover and support the strong institutional reforms and also if Latvia will be
able to take their inflation rates under control. Latvia enjoys high credibility among
foreign investors since it started hard reforms early and was able to realize them
quickly.
3 LITHUANIA
3.1 Convergence criteria

The performance of Lithuania regarding the government deficit and debt is
quite positive (European Commission 2007: 251). “Lithuania’s general government
deficit will hover around 1.4% of GDP from 2008 onwards. The government’s
longer-term target of a cyclically balanced budget seems reachable in the light of
the envisaged improvement in tax collection and the proven political ability to restrain expenditure” (Deutsche Bank Research 2006: 4). The gross government debt
is currently by around 18 percent and is expected to decrease in 2011. However
forecasts from the European commission predict annual deficits by 8% and a gross
debt by 32% in 2011 (European Commission 2009: 231). The forecasts are based on
different expectations regarding GDP growth and social spending.

Alexander Moheit • Dirk Wentzel

416

Figure 5: Budgetary developments 2005-2011, Lithuania (% of GDP).
2005

2006

2007

2008

2009

2010

2011
Forecast*

Annual government deficit
to GDP

0,5

0,5

1,2

2,9

2,1

1,0

0,00

Gross government debt to GDP

18,6

18,2

17,0

15,3

16,9

18,1

17,1

Source: European Commission 2007: 228; European Commission 2009: 210.

The budget for 2007, approved in December 2006, did not contain significant
tax changes and confirmed the confidence external observer have gained in the
budget policy of Lithuanian government (European Commission 2007: 251). Government target was to balance budget in 2009. However, social expenditures were
increasing, but among it, the planned higher subsidies to farmers are co-financed
by the European Union, so does not burden government balance in full (European
Commission 2007: 251). However the financial crisis hit the Lithuanian economy
very strongly and the country was close to be bankrupt. The GDP was sinking by
18% in 2009 (Auswärtiges Amt. Lithauen - Wirtschaft: 2010.) The hard reforms
taken in 2009, e.g. increasing the VAT from 19 to 21% (Worldwide Tax 2009) and
further necessary fiscal consolidation and structural reforms who are intended to be
implemented (New Europe 2009), supported and will support the economy and it
is expected to find the way back to recovery in 2010 or 2011.
Lithuania fulfills criteria concerning exchange rate stability, but has to be monitored in next years. Lithuanian Litas has participated in ERM II since 28 June
2004 and ever since the Litas has remained stable (European Central Bank 2006:
23). Lithuania has got a large deficit in balance of payment, which is covered only
half by net inflows of FDI (European Central Bank 2006: 23). However, Lithuania
is one of the emerging countries which normally realize such kind of development:
“In fast-growing catching-up countries like Estonia and Lithuania a current account deficit is considered to be normal, reflecting the fact that domestic savings
are too small to finance investments” (Deutsche Bank Research 2006: 9).

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FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

Figure 6: External debt in % to GDP and Real credit growth 2000 to 2005 (Source: Deutsche Bank Research.
Estonia, Lithuania, Slovenia: Poised to adopt the euro (2005): 9)
The performance of long-term interest rates reflects the credibility of Lithuania’s
convergence process: The spread of long-term government bond yields declined
from 55 basis points to 25 and the average LTIR is at 3.7 percent, below the reference value of 5.9 percent (European Central Bank (2006): 24). The long-term interest rates declined since 2001 and the spread between Lithuanian LTIR and euro
area LTIR narrows, which is indicative of “market confidence in general economic
and fiscal developments in Lithuania” (European Central Bank 2006: 24).
Year
HICP

2003
-1,1

2004
1,2

2005
2,7

2006
3,8

2007
5,8

2008
7,4

2009
-0,6

Figure 7: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)
The inflation rate has been volatile and increased until 2008. In contrast to
the value reference of 2.6 percent in 2006, the Lithuanian inflation is higher than
the average of the countries (European Central Bank 2006: 20) that adopted the
Euro and there remained several risks for inflation; especially higher fuel prices for
transport and increased prices for food in general (European Central Bank 2006:
21). Moreover, European Commission forecasts predict perspective risk factors for
inflation in the longer term as a result of strong domestic demand, energy price
increases and increases in indirect taxes (European Central Bank 2006: 21). Since

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the Lithuanian economy was hit by the economic crisis and suffered a large downturn in their GDP and several salary cuts, layoffs and tax increases, the danger for
high inflation rates has lost its basis and in fact in 2009 Lithuania has experienced
a deflation. However along with its Baltic neighbor Estonia, Lithuanian economy
is too dependent on foreign trade and FDIs and take the risk that the inflation rate
will increase sharply once the economy recover.
3.2 Current economic situation and recent structure reforms

After the strong reforms taken in 2009 the economic structure is better than in
many other Eastern European countries: The average hours of work per week are
with 40,3 above the EU average (Statistisches Bundesamt 2009: 37.), effective age
of retirement is by 63,4 years (Eurostat 2007: 3), which is both above the legal age
and the EU average with 59,5 years. Just the ancillary labour costs are with 41%
high (Statistisches Bundesamt 2009: 37.) . Lithuania has to cope the problem with
corruption, where the country has the position 52 in the corruption perceptions
index in the middle among the new members (Transparency International 2009:
6.). The public spending on health care and pensions are below the EU average.
3.3 Additional factors

Lithuania underlines the willingness to adopt Euro by ensuring a tight fiscal
policy which supports fiscal consolidation and the credibility of the currency board
arrangement (European Central Bank 2006: 24). In addition to this, Lithuania enjoys market confidence in general economic and fiscal developments (Convergence
report 2006: 24). However, the large deficit in balance of payment (Financial Times
2008) is covered only half by net inflows of FDI which indicates weaknesses regarding Lithuania’s price competitiveness (European Central Bank 2006: 24). The
medium and long-term convergence to the Euro is threatened by the high current
account deficits.
3.4 Conclusion

With regards to the discussion in and about Greece, Lithuania pointed out that
it is possible to realize strong reforms in a little time to prevent serious problems.
Government debt increases in 2007 and 2008, but will maintain below the required limit of 60%. Exchange rate is stable since Lithuania is part of ERM II and
long-term interest rates declined as a result of a market confidence in economic and

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

419

fiscal developments. Even the inflation rate is below the required reference value
and due to several downward pressures it is expected to further remain stabile in
future. Lithuania is in some areas well performing with a strong commitment of
its government to reach objectives of convergence criteria, but is yet not able to
adopt Euro. However, if the country achieves to reduce public deficit and the GDP
growth will increase, it might get into an entry position soon.
Furthermore, it has to be mentioned that Lithuania is in a similar situation to
the Baltic neighbors. The Euro is already part of the economic daily life and the
gap between the official currency and the unofficial exchange is getting smaller.
Credibility from the Lithuanian economy comes mainly from a solid budget policy
over several years and from successful privatization. The challenge, as in the case of
Estonia, is the reduction of the new deficit. However, that should be a manageable
task.
4 POLAND
4.1 Background

Poland was the “top student” at the beginning of the transition in 1990 (see
Wentzel 1995; Weber 1995). The legendary reforms of Leszek Balcerowic (the socalled “shock-therapy”) converted the country quickly from a centrally planned and
administered system into a market economy and became a milestone of economic
policy in general. Poland and the other “Visegrad contries” (Czech Republic, Slovakia, Hungary) tried everything to become members of the European Union as soon
as possible and finally achieved full membership in 2004.
Nevertheless, since the access to the EU in 2004, the Polish enthusiasm to intensify the European integration has disappeared. In 2006, Poland fulfilles only
two of the four required convergence criteria, namely the price stability and the
long-term-interest rates. Moreover, the Polish government under Lech Kacinski,
questioned the European Central bank’s independence (OCDE 2006: 4) and asked
for a more “democratic approach” in monetary policy, which means nothing else
than giving the government control over money supply. The recent developments
in deficit and debt, as well as the exchange rate performance are far away from the
value references agreed in the convergence criteria.
However, the new Polish Prime Minister Donald Tusk, elected in 2007, has implemented a change concerning the attitude of the Polish government to public

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debt, independence of the national Central Bank, political relations to other EUmembers, and EU institutions in Brussels. Poland now accepts its obligations from
the acquis communautaire and the contract with the EU that clearly states that the
country is obliged to adopt the Euro and therefore has to work hard to fulfill the
convergence criteria as soon as possible.
4.2 Convergence criteria

Up to 2008 Poland fulfilled the criterion concerning price stability, but this can’t
be taken for granted and has to be observed strictly in future. The inflation rate in
2009 was by 3.4%, which exceeded the requirements on price stability. After high
inflation rates in the early 1990s, Polish inflation decreased sharply, but so far has
been volatile (European Commission 2006: 24). Fluctuations in prices after EU accession, as well as a lack of willingness on the part of the previous Polish governments, both the post-communist party Sojusz Lewicy Demokratycznej (SLD) that
governed up to 2005 and the national-conservative Prawo i Sprawiedliwość (PIS),
to stabilize the prices lead to this volatile development of Polish inflation. The new
Prime Minister Donald Tusk announced changes in public expenditures: In particular he is committed to limit social spending. However, there is evidence of a slight
pick-up in inflation in 2007 and 2008 attributed to improved economic conditions
and higher indirect taxes, drafted by the Polish government (European Commission
2006: 127). “The first half of 2007 saw an acceleration of economic activity driven
by booming domestic demand. Growing labor shortages have fuelled strong wage
increases. The pick-up in unit labor costs and record-high capacity utilization rates
has darkened the inflation outlook” (OECD 2007d: 1). To sum up, part of the inflationary pressure is “home made”, whilst another part (energy prices, food) stem
from the development of the world economy. Poland was the only country with a
slight plus in GDP growth and therefore didn’t experience a sharp fall of inflation
rates as the other Eastern European countries did.

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FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

Figure 8: Poland: Government budget balance and debt. (Source: European Commission 2006: 24)

2005

2006

2007

2008

2009

2010

2011
Forecast*

Annual government deficit
to GDP

4,3

3,8

2,0

2,7

2,5

2,3

-1,9

Gross government debt to
GDP

47,1

47,6

44.9

45,9

45,8

45,5

44,8

Figure 9: Budgetary developments 2005-2011, Poland (% of GDP). (Source: European Commission 2007:
228; European Commission 2009: 243.).
Poland is not part of ERM II. “The Zloty exchange rate has fluctuated widely
over the past few years” (European Commission 2006: 25). However, the 3-monthspread narrowed since 2004. Moreover, Polish currency seems to be undervalued:
“A large majority of factors suggest continued undervaluation of the CEE-4 currencies. This was confirmed by numerous sensitivity tests. Even though the productivity gap between the EU-15 and the new members is large, it is apparently
not as large as implied by the current exchange rates. The CEE currencies’ initial
undervaluation is more persistent than assumed by many people” (Deutsche Bank
Research 2005: 6). Nonetheless, to fulfill criterion on exchange rate stability, Poland

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have to be part of ERM II for at least two years. Poland does not fulfil this required
criterion.
Since 2005, the long-term interest rates did never exceed the reference value of
6.5 percent and the long-term spreads narrowed, which both accomplish required
criteria. LTIR fluctuated due to shifts in the inflation forecasts and the ambiguous
attitude regarding its monetary policy, but it did not impact its good performance
(European Commission 2006: 25).
4.2 Current economic situation and recent structure reforms

Poland enjoys a very good position in terms of its economic structure with
regards to other EU members: The average hours of work per week are with 40,4
above the EU average (Statistisches Bundesamt 2009: 37.), effective age of retirement is by 61,4 years (Eurostat 2007: 3), which is both above the legal age and
the EU average with 59,5 years. Just the ancillary labour costs are with 25% high
(Statistisches Bundesamt 2009: 37.) . Corruption is still a big problem, where Poland has the position 49 in the corruption perceptions index, which is also in the
middle among the new members (Transparency International 2009: 6.). The public
spending on health care are below the EU average, however the spending for pensions is with 11,4% above and needs to be changed.
4.3 Additional factors

The integration of Polish economy with the EU is strong, with increasing exports, rising trade and FDI relations especially with its neighbouring countries
(European Commission 2006: 125). Political uncertainties, caused by the previous
government, did not influence negatively the volume of capital inflows. Planned
restrictions of Central Bank’s independence, as announced by the former Kacinski
administration, don’t seem to be pursued any longer by the new government. However the new Prime Minister Donald Tusk is charged to dispel all doubts concerning
political uncertainties which clouded the investment climate and monetary framework in the past. Moreover, the new government has to cope with the dependence
of FDI on ensuring a favorable investment climate and the decreasing net inward
foreign direct investments since late 1990s (European Commission 2006: 25).
A survey from the European commission made in 2009 revealed that Poland
is among the second best prepared countries for the future demographic change,

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423

which will have positive impacts on public debt (Tagesanzeiger: 14.10.2009), however contains also space for structural reforms.
4.4 Conclusion

Poland does not fulfill the required convergence criteria. The deficit is rising so
that the short and medium term expectations are pessimistic. The fluctuation of the
Zloty as well as the persisting political uncertainties does not lead to a change on
Poland’s status as a “Member State with derogation” (European Commission 2006:
25). Poland is yet not able to participate on the Euro area and it will probably take
quite a while until the country can improve its performance.
The credibility test “par excellence” is the budget and the general attitude of the
administration towards cooperation on the European level. If the highest representatives of the country are suggesting printing money to solve budgetary problems
like the former administration did, inflationary expectations will remain high. In
addition, since Poland is a large country, the ECB and the European Commission
won’t accept and should not accept any compromises for new members.
5 THE CZECH REPUBLIC
5.1 Convergence criteria

Czech inflation is volatile but however remained under the reference value in
2009 (European Commission 2006: 46). Previously, the weak labor market demand
prevented an increase in wage inflation. Recently, the Czech economy observed
a moderate increase of inflation rates due to the EU accession, higher administered prices (European Commission 2006: 46) and “as in other countries, developments in food and oil markets have also been increasing consumer prices” (OECD
2008: 3). Czech inflation rate has picked-up modestly in 2007 and 2008, which
was primarily based on improved economic conditions and higher purchase taxes.
Future developments of Czech exchange rate as well as the Czech tax policy was
supposed to determine inflation rate in the medium term (European Commission
2006: 13), because “exchange rate movements strongly influence Czech consumer
prices” (OECD 2008: 3). However, the financial crisis caused a huge drop to 0,36%
in 2009 and is expected to remain low. The Czech Republic currently fulfills the
criterion on price stability.

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Figure 10: Contributions to inflation. Year-on-year percentage change (Source: OECD (2007a)).
Concerning public deficit and debt the Czech Republic is under the reference
value of annual government deficit to GDP by 3.0 percent in 2009, and within
the frame permitted by convergence criteria on gross government debt to GDP by
27,9 percent in 2009 (European Commission 2007: 220). The Czech government
increased social expenditures after 2000 which were not backed up with additional
tax revenues: This gap has led to higher annual deficits. Only the stronger economic
growth in recent years has prevented severe fiscal problems. However, the mediumterm prospect does not indicate improvements. Additional social and educational
expenditures have been drafted in budget for 2007 (European Commission 2006:
50). Moreover the additional spending in social measures will increase the deficit
up to 4,9% and the gross debt to 37,9% according to a forecast from the European
Commission. The forecasts for both made by the Czech Republic assume lower
values based on higher GDP growth rates for 2010 and 2011.
2005

2006

2007

2008

2009

2010

2011
Forecast*

Annual government deficit
to GDP

3,5

2,7

1,0

1,2

1,6

1,5

1,2

Gross government debt to
GDP

30,4

29,4

28,9

28,8

27,9

26,8

25,5

Figure 11: Budgetary developments 2005-2011, Czech Republik (% of GDP). (Source: European Commission
2007: 228; European Commission 2009: 203.).

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

425

The Czech Republic does not fulfill the exchange rate criterion therefore did yet
not join ERM II (European Commission 2006: 14). Constant upward revaluation of
the Czech Koruna and low inflation of recent years both have been reflected in the
development of short-term interest rates (European Commission 2006: 52). However, the average long-term interest rate did never exceed the reference value since
accession to the EU, which underlines successful disinflation. The Czech Republic fulfils convergence criterion on long-term interest rates (European Commission
2006: 52).
5.2 Current economic situation and recent structure reforms

The Czech Republic shows a differentiated picture in terms of the economic
structure: On the one side the average hours of work per week are with 41,2 hours
above the EU average (Statistisches Bundesamt 2009: 37.), effective age of retirement is by 62 years (Eurostat 2007: 3), which is both above the legal age and the
EU average with 59,5 years, and the spending in health care is in the middle among
the EU countries. However the ancillary labour costs are with 38% high (Statistisches Bundesamt 2009: 37.). Corruption is still a big problem, where the Czech
Republic has the position 52 in the corruption perceptions index (Transparency
International 2009: 6.) and the public spending for pensions is relatively high with
7,3%.
5.3 Additional factors

“The improved economic performance is being driven by export oriented manufacturing reflecting further deepening of the economy’s involvement in international production chains” (OECD 2008: 3). The Czech economy enjoys a high
degree of their foreign ownership of financial intermediaries and realizes large trade
and FDI relations with other EU members. The higher inflow of net FDI leads to
positive financial account of 8 percent (European Commission 2006: 14). However,
portfolio investments flows remained volatile (European Commission 2006: 56) and
due to the delay of privatization proceedings in the 1990s, the Czech Republic has
a “less developed financial sector in comparison with EU-15” (European Commission 2006: 53). The intensity of financial intermediation is smaller than those of
other similar EU countries (European Commission 2006: 53). The equity market is
comparatively small with only 39 listed shares on the Prague Stock Exchange (European Commission 2006: 53).

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5.4 Conclusion

By 2010 the Czech Republic fulfilled three of the four required convergence
criteria, but not the exchange rate stability. The budget deficit is still a major concern and will worsen, if the economy will not find back to the way of recovery.
The Czech Republic suffers under the consequences of the delay in privatization
proceedings in the 1990s, the financial sector is small and was also hit strongly
by the Financial crisis. Considering the performance of the economy, the Czech
Republic has made good progress and with regards to the good empirical data and
the remaining problem with the exchange rate there is the assumption that a soon
accession is politically not desired.
6 HUNGARY
6.1 Convergence criteria

Hungary was always a special case even during the time of Soviet occupation
and the centrally administered economy. At the beginning of transition in 1990,
experts expected the country to be the fastest and most successful on their way to
become a competitive market economy. Nevertheless, the development of Hungary, especially the stability performance, has been unsatisfactory and disappointing
for many specialists.
The Hungarian inflation rate has been, and still remains, volatile: Originally
from a high level it declined to 4 percent in 2003, then has picked-up since 2004
attributed to higher prices in energy and food. It declined and has picked-up again
in 2006 as a result of higher indirect taxes (European Commission 2006: 97). Several
measures implemented in 2006, such as higher administered prices and indirect
taxes, as well as health and education reforms has increased inflation rate in 2007
(European Commission 2006: 20). A smooth conversion to a low rate is not likely
right now. Even after the strong impact of the financial crisis the inflation rate remained high with 5,6% in 2009.

427

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

Year

2003

2004

2005

2006

2007

2008

2009

HICP

4,7

6,8

3,5

4,0

7,9

7,5

5,6

Figure 12: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)
With a gross government debt to GDP by 72,5 percent in 2009 Hungary is far
away from the references value and there is no sign for substantive change (European Commission 2007: 255). “The 2006 deficit, at 9.2% of GDP, indeed marked
another peak in Hungary’s strong electoral spending cycle. The government’s goals
imply breaking out of this” (OECD 2007c: 3). Since 2001, the Hungarian government pursuit year after year an expansive fiscal policy which leads to large increases
in public expenditures, especially public wages and social transfers (European Commission 2006: 20), in contrast to investors’ expectations, that the objective to adopt
the single European Currency would commit Hungarian government to satisfy
convergence criteria (Národná Banka Slovenska 2005: 9). These expenditures should
have been reduced corresponding to tax cuts, but did not (European Commission
2006: 21). In spite of an immense privatization, the Hungarian government did
not prevent debt and deficit increases (European Commission 2006: 102). However
the emergency credit given by the IMF and the structural reforms Hungary has
started until the election of the new conservative government in 2010, Hungary
could lower the annual deficit under 3,0 % and seems to be on a good way to recovery. Further reforms are still needed, since European Commission forecasts predict
a gross debt by 82,9% of the GDP in 2011.
With regards to exchange rate stability, Hungarian Forint is not participating
on ERM II, which automatically excludes Hungary from being part of the Euro
area for at least next two years (European Commission 2006: 21). Likewise, the
long-term interest rates have never been under 6.2 percent, quite the contrary the
average LTIR is at 7.1 percent (European Commission 2006: 104). Moreover, yield
spreads vis-a-vis Euro widened since 2006 and investors do increasingly avoid Hungary due to extended fiscal adjustments (European Commission 2006: 21).

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Figure 13: Hungary: Government budget balance and debt. (Source: European Commission 2006: 21)

Figure 14: Hungary: General government deficit, History and Goals in % of GDP (Source: OECD 2007c: 3).

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

429

6.2 Current economic situation and recent structure reforms

Hungary suffers large structural problems due to a lack of needed reforms. Hungarian population wants to enjoy Western European lifestyle which is not backed
up with an according productivity. On the one side the average hours of work per
week are with 40,5 hours above the EU average (Statistisches Bundesamt 2009:
37.). However the effective age of retirement is by 58 years (Eurostat 2007: 3),
and therefore under both the legal age and the EU average with 59,5 years. The
spending in health care is in relatively high. The ancillary labour costs are with 42%
above the EU average of 36% (Statistisches Bundesamt 2009: 37.) . Corruption is
still a big problem (Transparency International 2009: 6.) and the public spending
for pensions is relatively high with 8,5%. In the last year Hungary has increased
their VAT from 20% to 25%, cancelled the subsidies for public transport, energy
cost and health care and reduced both the number of employees and the salary in
the public sector.
6.3 Additional factors

The integration of Hungarian economy with the EU is remarkable, with a high
degree of foreign ownership of financial intermediaries (European Commission
2006: 21). Hungarian’s account deficit decreased due to smaller deficits in goods
and services. However, the development of the Hungarian economy in recent years
remains disappointing. Hungary suffers a large deficit in public savings, less portfolio inflows and receives negative publicity regarding the foreign investor’s assessment of Hungarian economic fundamentals (European Commission 2006: 108).
A survey from the European commission made in 2009 revealed that Hungary
is along with Poland among the second best prepared countries for the future demographic change, which will have positive impacts on public debt (Tagesanzeiger:
14.10.2009), however contains also space for structural reforms.
6.4 Conclusion

“The biggest test of the consolidation program will be from 2009 onwards,
when structural reform is supposed to deliver more of the deficit reduction, but
when also pressures for new spending measures are likely to mount due to elections in 2010” (OECD 2007c: 3). By 2007 Hungary was not in a position to claim
fulfillment of the convergence criteria. The inflation rate is too high to accomplish
required criteria and remains volatile. Both government deficit and debt are exces-

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sive, and Hungary is not participating in ERM II and the long-term interest rates
moved above reference value. Not even the medium-term prospective does reveal
any signs for a soon accession of Hungary to Euro area. The biggest problem is the
fundamental lack of long term commitment of the Hungarian government to reach
the objectives of convergence criteria.
7 BULGARIA
7.1 Convergence criteria

The inflation rates keep increasing since 2004 but dropped strongly in 2009
to 1,7%. However the inflation is very volatile and can pick up every time again.
Currently Bulgaria fulfills criterion on price stability, however the data from the
past reveals that Bulgaria is strongly dependent on foreign investments and good
economical circumstances. The danger is that the inflation rates will re-pick up
after the economy has recovered and threaten the price stability.

Figure 15: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)
The annual surplus remains stabile by 3,0% and the gross debt is low by 15,2%.
However just with regards to the last 3 years’ data the exact fulfillment leads to
the suspicion, that the figures are well-calculated to fulfill the criterion on public
deficit. Recently there are incidents that official data are wrong and lower than

431

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

in reality – a situation as Greece has experienced (FAZ, 13 April 2010, page 18
„Mogelnder Musterschüler“).

Annual government deficit
to GDP
Gross government debt to
GDP

2005

2006

2007

2008

2009

2010

2011
Forecast*

-1,9

-3,0

-0,1

-3,0

-3,0

-3,0

-3,0

29,2

22,7

18,2

15,4

15,4

15,3

15,2

Figure 16: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)
In terms of the exchange rate stability Bulgaria does not participate on ERM II
and therefore does not fulfill the required criterion. The long term interest rate is
below the reference value and fulfills criterion.
7.2 Current economic situation and recent structure reforms

Bulgaria’s economic structure can compete with neighbor countries: The average hours of work per week are with 41,7 hours above the EU average (Statistisches
Bundesamt 2009: 37.). The effective age of retirement is by 62,4 years (Eurostat
2007: 3), and therefore over both the legal age and the EU average with 59,5 years.
The spending in health care is in relatively low with 4,3% and the ancillary labour
costs are with 25% under the EU average of 36% (Statistisches Bundesamt 2009:
37.) . However corruption is still a big problem (Transparency International 2009:
6.): Bulgaria has the position 71 and is on top along with Romania and Greece
among the EU members. The public spending for pensions is relatively high with
9%. In 2008 Bulgaria introduced a flat tax by 10% (SLC Europe: 2008). Anti crisis
package consists generally of higher public expenditures (higher pensions, higher
subsidies etc) (Auswärtiges Amt. Bulgarien - Wirtschaft: 2010.).
7.3 Additional factors

The integration of Bulgarian economy with the EU has progressed and the stability performance is not bad. Bulgaria is economically catching up very fast, however institutional reforms are still weak and the central bank independence not fully
achieved.

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Moreover according to a survey from the European commission, Bulgaria is
among the best prepared countries for the future demographic change, which will
have positive impacts on public debt (Tagesanzeiger: 14.10.2009).
7.4 Conclusion

Deficit and debt are very low, the inflation low, but volatile. Bulgaria lacks of
stronger structural reforms and the higher social spending can increase deficit. An
accession to the Euro area will be at the earliest in 5-8 years.
8 ROMANIA
8.1 Convergence criteria

The original high inflation declined to 4% in 2007. However in spite of the impact of the financial crisis the inflation rate remains high and along with Hungary
now one of the countries with the highest inflation rate.

Figure: 17. ECB: Inflation and the euro. Source: http://www.ecb.int/stats/prices/hicp/html/inflation.en.htm
The annual deficit continuously exceeded the required criteria. The 2011 forecast with a deficit by -2,9% seems to be too optimistic. The forecast from the
European Commission predict an annual deficit by -5,6% in 2011. However the
gross debt is with 22% far away from the convergence limit of 60% and therefore
fulfills that criterion.

433

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

Annual government deficit
to GDP
Gross government debt to
GDP

2005

2006

2007

2008

2009

2010

2011
Forecast*

1,4

2,2

2,5

5,4

5,1

4,1

-2,9

15,8

12,4

12,7

13,6

18,0

20,8

22,0

Figure 18: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)
In terms of the exchange rate stability Romania does not participate on ERM II
and therefore does not fulfill the required criterion. Concerning long-term interest
the value of Romania was in the last three years always around 7,1 % and therefore
above the reference value. Romania does not fulfil the long-term interest criterion
8.2 Current economic situation and recent structure reforms

Along with Bulgaria the economy of Romania can compete with its neighbor
countries: The average hours of work per week are with 41,7 hours above the EU
average (Statistisches Bundesamt 2009: 37.). The effective age of retirement is by
64,7 years (Eurostat 2007: 3), and therefore over both the legal age and the EU
average with 59,5 years. The spending in health care is in relatively low with 3,9%,
spending in pension with 6% as well and the ancillary labour costs are with 34%
under the EU average of 36% (Statistisches Bundesamt 2009: 37).
However corruption is still a big problem (Transparency International 2009:
6.): Romania has the position 71 and is on top along with Bulgaria and Greece
among the EU members. Romania has a low pressure on public finances with regards to high retirement age and working hours and comparatively low spending
on pensions and healthcare. The IMF gave Romania a credit over 13 billion Euro,
related to macroeconomic conditions, such as reduction of salaries for employees
in public services, which are supposed to be realized in 2010.
8.3 Additional factors

The European „enthusiasm“ in Romania is extraordinary and the economic
catch-up process is very strong. Until the year 2008 the private consumption was
very strong, however decreased with the financial crisis. On the other side the fiscal
consolidation is still a major concern for Romania and institutional reforms and
anti-corruption measures are a real
challenge.

Alexander Moheit • Dirk Wentzel

434
8.4 Conclusion

Almost on all levels Romania needs to improve. Stronger structural reforms are
pending. However the first will be realized in 2010 and the European enthusiasm
will help to introduce stronger reforms. Accession to Euro seems to be possible at
the earliest in the long-term (8 years).
9 Greece
9.1 Convergence criteria

Greece suffered under continuously high inflation since accession to the Euro
area. A strong decrease happened in 2009 due to recession, but picked up again at
the end of 2009. The inflation is currently by 3.9% (March 2010). However the
inflation increased again due to higher taxes. The impact of the sharp recession and
the consequences of the reform program in order to get support from the EU are
hard to predict.
Year

2003

2004

2005

2006

2007

2008

2009

HICP

4,1

2,7

2,9

3,3

2,6

4,4

1,3

Figure 19: Measures of inflation and related indicators. (Source: Eurostat - Tables, Graphs and Maps Interface
(TGM) table 2010.)

Figure 20: ECB: Inflation and the euro. Source: http://www.ecb.int/stats/prices/hicp/html/inflation.en.htm

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

435

Greece admitted in November 2009 to have hided public debt over years: Real
debt by 113% of GDP in 2009 and deficit for 2009 was revised (from 3.7%) to
12.5% of GDP (European Commission, 2010: 3). Greece needs to refinance debt
in 2010 – interest rates went up to 7,5% in April 2010. Up to now, it remains unclear which institution might organize and supervise the help for Greece and their
reform efforts. The analysis clearly shows that Greece does not fulfill the criterion
on gross debt and public deficit.
Concerning long-term interest the value of Greece is currently by 6.24% (March
2010), from 5.87 in March 2009 and 4.42 in March 2008 (ECB: Long-term interest rate statistics for EU Member States, 2010.). With regards to the current situation it is expected to increase, so that Greece does not fulfill the long-term interest
criterion.
9.2 Current economic situation and recent structure reforms

Greece suffers large structural problems and is worst than almost all Eastern Europe countries who want to join the Euro area: The average hours of work per week
are with 39,9 hours under the EU average (Statistisches Bundesamt 2009: 37.). The
effective age of retirement is by 62.4 years (Eurostat 2007: 3), and therefore over
both the legal age and the EU average with 59.5 years. The spending in health care
is in the middle of all countries with 5,1%, however the spending in pension with
11,5% as well as the ancillary labor costs with 36% (Statistisches Bundesamt 2009:
37.) really needs reforms and to be lowered. The payment reduction in pensions is
one of the goals of the current government to cope fiscal the problems. Corruption
is still a big problem (Transparency International 2009: 6.): Greece has the position
71 and is on top along with Bulgaria and Romania among the EU members.
The VAT has been increased to 21% (since 15th Mar 2010), tax as well for
higher incomes and even for the Greek church, cancellation of tax reduction for
certain sectors have been done (taxi drivers, layers, doctors, sportsmen) and stronger controls of tax declarations will be effectuated (Der Standard: 14. April 2010.).
The Greek government plans to reduce debt on GDP from currently 12,7% to
8,7% (European Commission 2010: 3).Still this year the government planned to
increase the age of retirement, salary cuts for employees in public sector, reduce
pensions, layoffs in public sector and further measures

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9.3 Additional factors

The Greek economy is highly integrated with the EU, the trade and FDI relations with other EU are extensive and Greece has a high degree of foreign ownership of financial intermediaries. Moreover strong shipping and tourism can help
Greek economy to balance negative effects.
However Greece suffers inelastic public spending: The Greek economy based
largely on the public sector (40% of GDP) (European Commission, 2010: 3).and a
sudden increase in taxes and cuts in salaries will affect economy very hard.
9.4 Conclusion

Greece proves to be the most problematic case of all EU members. They got
access to the EU on the basis on faked data, they maintained that unfavorable
practice and right now they are on the edge of bankruptcy. The fact that they are
already member of the Euro area makes things even more difficult. In the case of
bankruptcy, the prolongation of Euro membership would surely not be a good solution. But neither favorable is the option to reintroduce the old currency Drachme
because it is hard to imagine how the Greek central bank could avoid the total collapse of the exchange rate against the Euro.
Financial markets clearly demonstrate the main problem of Greece: the lack of
credibility and the enormous structural problems. Economically it should not be
part of Euro zone and needs to run reforms. The next six to twelve months will
decide about Greece‘s future in Euro the zone.
10 GENERAL CONCLUSIONS

Analyzing the data from current research and the official European institutions,
it seems clear that a fast integration of the Eastern European members into the common currency area is not likely and not recommendable. But it is also not convincing at all to keep Greece in the Euro zone since they perform much worse compared
to other Eastern European members, like the Baltic States, e.g. These states, despite
all their differences, might be eligible in the near future because they perform quite
well in the most important area of testing; the attitude towards public debt. They
have developed some kind of a “stability culture” and they are cooperating very well
with their European neighbors and the European institutions.

FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

437

Eastern European member states are economically very differently prepared for
the future and can be divided into three groups: The first group consists of the
Baltic countries Estonia, Latvia and Lithuania who have been hit stronger than the
other countries by the financial crisis, but also who organized and implemented
credible institutional reforms and have a better basis for the next years once the
world economy recovers again. These countries have a strong commitment to the
Euro, which is mainly based on their experience in the Soviet Union and their deep
wish to be more integrated with Western Europe. Moreover, they have recognized
and enjoyed in the past years the advantages of liberalizations in the economy. Both
facts have led to the situation that their governments were able to suggest hard reforms within one year to face the crisis and are better prepared for the future than
anybody else in Europe.
The second group consists of Poland and the Czech Republic. They have a longer tradition of reforms but were not able to run all necessary changes due to political obstacles. The economies are in fact currently best prepared to adopt the Euro,
however with regards to some missing reforms there are threats for the midterm.
In both countries the advantages of Western Europe are recognized, however they
see both also the advantages of an own currency and also have a modest critical
position to be subordinated under an EU regime. Liberty and national pride is
very important and in fact the commitment towards the United States of America
seemed in past stronger than to Western Europe after the long history and suffering
in the socialist block. Since their gross debt is not yet too high, they have no clear
advantage of adopting the Euro to lower their interest rates and maybe devaluate
their currencies in case it is favorable.
The members of the third group are Hungary, Romania and Bulgaria. Romania
and Bulgaria have a totally different level of economical prosperity with regards
to Hungary, however they share one common challenge: They all still need to run
deep structural reforms and are not able to adopt the Euro even in the midterm.
Hungary will have the chance to start reforms this year with a new government.
Romania and Bulgaria have got warnings from the European Union to face their
problems with corruption. The commitment to adopt the Euro is very high in both
Romania and Bulgaria, however in Hungary there are strong powers who have a
very critical position towards the European Union and are willing to blame the EU
for internal economical problems. Just deep reforms with a soon recovery of their
economies will be able to overcome that obstacle.

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Ironically, the financial crisis has led the countries somehow towards a better
position to adopt the Euro: The crisis hit many countries so strong that a simple
“business as usual” wasn’t able to continue. Baltic tigers passed all other countries in
terms of realized reforms so that they will be best prepared in the midterm. Poland
and the Czech Republic will need to establish reforms and they can hold the financial crisis responsible for that instead of always blaming the convergence criteria for
home-made problems. This will help to find support in the population, since the
adoption of the Euro and the corresponding regulatory framework is a free choice,
however the financial crisis and their consequences are not free to choose.
Hungary was running strong reforms in the last 12 months and the crisis gave
the last political shot to a government which already lost confidence after scandals
back in 2006. The strong political swing could help the country to easily introduce
further reforms, but the right-wing parties have a very critical position towards
the EU which raises new concerns. Romania and Bulgaria already have a strong
commitment, but they need to further intensify their efforts in the more difficult
economical environment.
Furthermore, it has to be acknowledged that the Euro became a parallel currency in all these countries and it will be quite interesting to observe if Gresham’s
law will also hold for these countries, and the stronger currency will push the national currencies aside without an official acceptance of the Euro. In Romania or
Bulgaria, for example, the Euro is already some kind of official currency and used
(and preferred) all over the country, even though these countries are far away from
starting official negotiations about an access to the Euro area.
The ECB might run into a very interesting application of Gresham’s law in the
near future: They have to admit that the Visegrad states might not be strong enough
to adopt the Euro – but at the same time the Euro is spontaneously taken over by
the economy.
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FINANCIAL CRISIS 2008 AND THE STABILITY PERFORMANCE OF EASTERN EUROPEAN...

439

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Eeste Pank, Bank of Estonia (2008): Economic Forecast for 2008 – 2010.
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Europa-Kontakt, MISSOC, Observatoire social européen: Rentenalter und
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DEFICIT AND DEBT STATISTICS. Page 3.
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GREEK/EN/COM_2010_REPORT_GREEK-EN.PDF Date: 16/4/2010.v
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ec.europa.eu/economy_finance/publications/publication15390_en.pdf
Eurostat 2007:The transition of women and men from work to retirement

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Abbreviations:
CEE-4
Central and Eastern European EU members: Poland, Hungary,
Slovakia and the Czech Republic
CZK
Czech koruna
EUR
euro
EEK
Estonian kroon
ERM II
European Exchange Rate Mechanism II
FDI
Foreign direct investment
Forint
Hungarian currency
GDP
Gross domestic product
HUR
Hungarian forint
LTIR
Long-term interest rates
LVL
Latvian lats
PLN
Polish zloty
SKK
Slovak koruna
List of tables and charts:
Figure 1
Figure 2:
Figure 3:
Figure 4:
Figure 5:

Estonia: Budgetary developments 2005-2010, Estonia (% of
GDP).
Estonia: Rise in food prices in Estonia compared to the corresponding month of the previous year
Latvia: Growth of gross domestic product in the Baltic countries.
Lithuania: External debt in % to GDP and Real credit growth
2000 to 2005.
Lithuania: Measures of inflation and related indicators.

444

Figure 6:
Figure 7:
Figure 8:
Figure 9:
Figure 10:
Figure 11:
Figure 12:

Alexander Moheit • Dirk Wentzel

Poland: Government budget balance and debt.
Czech Republic: Contributions to inflation. Year-on-year percentage change.
Slovakia: HICP inflation.
Slovakia: Components of inflation.
Hungary: Components of inflation.
Hungary: Government budget balance and debt.
Hungary: General government deficit, History and Goals in % of
GDP.

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING FOREIGN DIRECT INVESTMENTS:...

445

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING
FOREIGN DIRECT INVESTMENTS: THE CROATIAN EXPERIENCE
Josip Romić, univ.spec.oec.

ABSTRACT

National strategies across the world often emphasise the role of foreign direct
investments (FDI) as one of means necessary to increase the overall national competitiveness. The benefits that FDI generates are traditionally recognized not only
through acquiring capital but also through patents, knowledge, know-how, efficient
technologies, management skills and the like. Croatia has continuously placed FDI
on the top of the development agenda hoping that their inflow would help raise
employment, exports and productivity. According to the EU statistics, Croatia is
ranked rather high among ‘transition’ economies, even in comparison with those
that have recently become full members of the EU. However, its impact on the
national economy, especially employment, exports and productivity is much less
evident than that in other Central and Eastern European countries.
The purpose of this paper is to theoretically and practically discuss the role
and importance of investment incentives offered by the national policy-makers in
order to attract certain FDI projects. The paper will provide a theoretical overview
of various approaches to investment incentives. Using the Croatian experience,
the paper will provide an analysis of FDI inflows in Croatia in terms of numbers,
investment climate and environment as well as it will delineate reasons, i.e. barriers
which prevent Croatia to be more attractive to foreign investors. Particular attention will be given to investment incentive policies promoting FDI in Croatia.
JEL classification: F21, O24
Key words: foreign direct investments, incentives, Law on Incentives, Croatia
1. INTRODUCTION

Foreign direct investments (FDI) start to intensively appear in theoretical and
empirical studies after the World War II. The regulation of the International Monetary Fund has provided the development of trade and international finances. All

446

Josip Romić

forms of financing have been recorded, from a classic debenture to foreign direct
investments. There has been a great growth of international financial course during
1980s and 1990s. The reason can be seen in the development of theory and institutional investors in the USA, the growth of networked world financial markets and
globalisation, liberalisation of the financial markets.
The purpose of this paper is to theoretically and practically discuss the role and
importance of investment incentives offered by the national policy-makers in order
to attract certain FDI projects. After introductory remarkds, the section 2 provides
a brief overview of the effects of the DDI for the national economy. The definition
of the incentive policies, their role and effects on attracting DSI are discussed in the
section 3. The section 4 analysis the FDI in Croatia: statistics, dynamics, structure,
investing countries as well as legal and institutional framework that deals with FDI.
The paper finishes with concluding remark in section 5 briefly summarizing the key
findings of the paper.
2. THE EFFECT OF FOREIGN DIRECT INVESTMENTS

Due to globalization, FDI have a prominent role in the implementation of
national competitiveness (e.g. Moran, Graham & Blomström, 2005, Borozan &
Barković, 2004). Foreign direct investment recepient countries are usually motivated by the social benefit of the FDI, which is seen through the application of
various technologies, knowledge and management skills as well as their effect on
the rest of economy. FDI has a positive effect on the foreign trade, the growth,
employment and investments into domestic economies. It can improve the quality
of man power and human capital through training of new technologies and the
processes of production.
According to the International Monetary Fund definition, foreign direct investments can be explained as a situation when a certain non-resident investor comes
into possession of 10% or more of resident´s proprietary stock where foreign investor has a majority interest in reaching decisions concerning company management,
althought he hasn´t got majority proprietary stock in the company (Ridgeway,
2004).
Foreign direct investments are different from other forms of investments due to
its permanent interest for the target company, active involvement of foreign investitors and reaching decisions regarding company management. Foreign direct investments can be divided into two cathegories (Babić, Pufnik and Stučka, 2001: 25):

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING FOREIGN DIRECT INVESTMENTS:...

447

(i) greenfieled investments: foreign direct investments which create new production
property and (ii) brownfield investment: (mergers/acquistions investments or take
over investments), the purchase of pre-existing plants and companies as well as taking control over them in order to improve management efficiency
In order to attract foreign direct investments, investors have to be provided with
an environment in which they will be able to conduct their business profitably
and without unnecessary risk. The present guiding principles originate from the
OEDC Committee on International and Multinational Enterprise’s 2001-2002
review of incentives-based competition for FDI (OECD, 2002). The conditions
sought by foreign enterprises are equivalent to those that constitute a healthy business environment because foreign investors are responsive to the changes in business environment.
3. THE ROLE AND EFFECT OF INVESTMENT INCENTIVES TO ATTRACT
CERTAIN FDI PROJECTS

Foreign direct investments have greater role in the growth of the developing
countries. Thereby, it can be concluded that it is getting harder to attract foreign
investors and that governments of the developing countries face a hard task of improving elementary economic conditions but they also have to devise other incentives to attract foreign investors into their own country. The policies of attracting
foreign investors are motivated by targeted efforts at improving host countries´
environment. Some countries employ low corporate tax rates in order to attract
foreign investors. The aim of policies for attracting FDI is to provide the investors
with the environment in which they will be able to conduct their business profitably, and some of the important factors considered by investory as they decide on
investment location are (OECD, 2003):
• a predictable and non-diskriminatory regulatory environment and an absence
of undue administrative impediments to business
• a stable macroeconomic environment, including access to engaging in international trade
• sufficient and accessible resources, including the presence of relevant infrastructure and human capital
In order to meet investors´ expectations and to ensure healthy working environment without greater economic changes, the next steps are necessary (OECD,
2003) :

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Josip Romić

• safeguarding public sector transparency, including an impartial system of
courts and law
• ensuring that rules and their implementation rest on the principle of non-discrimination between foreign and domestic enterprises and are in accordance
with international law
• providing the right of free transfer related to an investment and protecting
against arbitrary expropriation
• putting in place adequate frameworks for a healthy competitive environment
in the domestic business sector
• removing obstacles to international trade
• redress those aspects of the tax system that constitute barriers to FDI
• ensuring that public spending is adequate and relevant
Tax incentives, financial subsidies and regulatory exemptions which aim is to attract foreign investors are no substitute for pursuing the appropriate general policy
measures. Those incentives may serve either as a supplement to an already attractive
environment for the investment or as a compensation for proven market imperfections. Additional incentives usually consist of relieving of certain fiscal taxes for a
defined period of time. The governments usually make various demands related to
incentives realisation in order to attract the positive effects of foreign direct investments. Some of these conditions are: setting the minimal amount of investment,
transfer of technology, employment and likewise. The importance and the appropriatness of the FDI incentive strategies should be examined in certain periods
of time. The transparency and the responsibility of the government at all levels
increases the success of these incentives.
Numerous authors have been dealing with theoretical and practical discussion
of FDI incentives (e.g. Blomström 2002, Blomström & Kokko, 2003, Gergely,
2003, Barković, 2002).
FDI incentives can be defined as measures designed to influence the size, location or industry of the FDI investment project by affecting its relative cost or by
altering the risks attached to it through inducements that are not available to domestic investors. Two cathegories of measures meet this definition:
• rule-based approaches that rely on certain norms, discrimination (according
to nationality) of investors to be stipulated by law

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING FOREIGN DIRECT INVESTMENTS:...

449

• specific approaches that tailor incentives to individual foreign investors.1
The rule-based approach represents a relatively straightforward selective application of investment subsidies. On the other hand, specific approaches produce a
multitude of different incentives, including fiscal derogations, grants and soft loans,
free land, job training, employment and infrastructure subsidies, product enhancement, R&D support, ad hoc exemptions and derogations from regulations.
FDI incentives are divided into three categories: (i) regulatory, (ii) financial and
(iii) fiscal incentives, all of which are financed by the authorities in the host area.
Regulatory incentives are policies of attracting foreign enterprises by means of offering them derogations from national or sub national rules and regulation. While
authorities may in principle choose to derogate from any regulatory practice, the
responsibility in reality is on easing the environmental, social and labor-market
related requirements placed on investors. Financial incentives refer to financial
assets to companies for financing foreign direct investments. They are motivated
by three considerations. First, a host area may be perceived as being disadvantaged
relative to comparable sites elsewhere, e.g. because of the stage development in
that area. In this case authorities assist investors by means of policy of leveling
the playing field which is construed as a help in infrastructure subsidies (providing physical infrastructure or communication tailored to meet the needs of the
investors) and job training subsidies (the education of working force). Second, the
costs that enterprises incur when relocating, or establishing new subsidiaries at a
distance from previous sites, may hold them back from choosing the most suitable
locations. Because of this, host authorities offer a subsidy toward meeting the relocation costs by means of: relocation and expatriation support (authorities may offer
grants to help meet enterprises’ additional capital spending and concrete relocation
costs); administrative assistance (it includes preferential treatment by regulatory
authorities whereby administrative impediments – such as for example the speed
of obtaining permissions – are eased) and temporary wage subsidies (the start-up
phase can be supported through the temporary coverage of part of the new corporate unit’s wage bill). Third, a policy of targeted incentives is used as a supplement
with the first two incentives by means of: credits to investors (authorities grant
soft loans or interest subsidies to foreign enterprises for the specific purpose of an
investment project; alternatively, they may ease investors financing costs by issuing
loan guarantees); real estate (selling land or buildings to foreign investors at below
1

See more detailed explication on FDI incentives in Blomström & Kokko, 2003.

450

Josip Romić

market values) and cost participation (helping investors cover their start-up costs,
help in marketing and developing costs). Fiscal incentives are most commonly
used by the governments of the developing countries in order to motivate foreign
investors to invest into their country. These are some of the numerous FDI fiscal
incentives. First, reduced direct corporate taxation. These measures aimed at easing
the corporate tax burden are used to attract foreign direct investors. Those measures
include: reduced rates of corporate income tax (creating investment environment
by lowering of corporate tax rates), tax holidays (“newly-established firms”are not
required to pay corporate income tax for a specified time period) and special taxprivileged zones (the creation of areas with low rates of corporate taxation amount
to fiscal FDI incentives in the cases where foreign-owned enterprises enjoy privileged access to operate in such zones). Second, incentives for capital formation.
Lower taxation to corporate investment used as a method of attracting FDI and
providing them with incentives to invest. The examples include: special investment
allowances (firms are provided with faster write-offs for qualifying capital costs by
means of accelerated depreciation or enhanced deductions), investment tax credits
(such tax credits are earned as a percentage of qualifying expenditures and offset
against taxes otherwise payable) and reinvested profits (offering deductions or tax
credits against profits that are reinvested in the host economy). Third, reduced impediments to cross-border operation. Companies are attracted to locations where
the fiscal system imposes minimal costs on the crossborder transfer of funds, goods
and services and manpower. Some of the incentives on offer are: withholding tax
(reduced rates of withholding tax on foreign-owned enterprises remittances to their
home countries), taxation of foreign trade (reduced import taxes and customs duties) and taxation of employees (lower personal income tax or social security reductions for expatriate executives and employees). Fourth, other tax reductions. The
selective lowering of any tax rate affecting the enterprise sector may be used to
attract foreign enterprises.
4. FOREIGN DEIRECT INTVESTMENTS IN CROATIA
4.1. Brief analysis of FDI in Croatia

Globalization in world economy today brings great structural changes which
have a strong effect on small economies like Croatian. So, it is important to turn every change into benefit and progress. Croatian economy has to be open in order to
stimulate domestic growth and development. Here, foreign direct investments play

451

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING FOREIGN DIRECT INVESTMENTS:...

a great role. In the short-run, Croatia, with the help of foreign direct investments,
can acquire new knowledge regarding business in market enterprises, the organization and management of business units. Foreign investments lead to knowledge
of business in market system as well as contribute the rise of competition (for
example, telecommunications and banking) which ensures more effective business
of domestic companies as well as the introduction of new technologies and better
restructuring of the domestic economy.
The analysis of direct investments is an important issue because foreign investments have a significant role in attracting further investments. Between 1993 and
third quarter of 2009, FDI accumulated to 23,6 milliard EUR (table 1). In this
amount, 13.7 milliard EUR refers to equity investments (around 58% of the total
FDI amount), 6 milliard EUR refers to other investments (26%) and 3.9 milliard
EUR (16%) of a retained profit. The greatest inflow of exchange reserves in the
form of equity investments happenned in 2007, in the amount of 2.2 milliard
EUR by the financial mediation (banking). In 2009, foreign direct investments
according to first three quartals amount to approximately 1,7 milliard EUR (about
7,2% of the total FDI) which represents the growth in 786,2 million EUR2 in
comparison with the first six months. The greatest contribution to the foreign
investment growth came from the growth of investments in wholesale and
commerce mediation. From the first quarter with only 12,8 million, it raised
to 707,5 million EUR and financial mediation, apart from insurance and pension funds (banking) in the amount of 677,5 million EUR3.

Table 1. Foreign direct investments in the Republic of Croatia (in mil EUR)

1993
1994
1995
1996
1997
1998
1999
2

3

Equity investments
Claims
Liabilities
0,0
101,0
0,0
92,8
0,0
79,1
0,0
382,1
0,0
325,0
0,0
581,1
0,0
1.208,6

Reinvested
earnings**
n/a
n/a
n/a
n/a
35,9
63,9
43,4

Other capital
Claims
Liabilities
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-7,1
126,4
-12,8
217,6
-0,2
111,1

Total
101,0
92,8
79,1
382,1
480,2
849,7
1.362,9

Source of data: http://www.vecernji.hr/biznis/izravna-inozemna-ulaganja-kraju-treceg-tromjesecja1-7-milijardi-eura-clanak-78207 (28-02-2010)
Source of data: http://www.liderpress.hr/Default.aspx?sid=93802 (29-02-2010)

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Josip Romić

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009Q1,Q2,Q3

0,0
0,0
0,0
0,0
-0,2
0,0
-0,1
0,0
0,0
0,0

750,6
910,8
718,3
762,0
319,9
793,0
1.743,5
2.202,4
2.173,9
559,7

86,8
187,9
160,9
587,9
291,7
570,5
717,5
483,3
508,5
147,7

0,7
0,2
-0,3
-1,5
-17,8
0,0
16,6
-2,7
-26,3
-4,3

302,5
368,7
259,0
414,0
356,0
104,4
287,3
987,2
1.534,1
996,1

1.140,6
1.467,5
1.137,9
1.762,4
949,6
1.467,9
2.764,8
3.670,2
4.190,2
1.699,2

TOTAL

-0,3

13.703,9

3.886,0

-55,6

6.064,2

23.598,1

Source: Croatian Central Bank, http://www.hnb.hr/statistika/hstatistika.htm (13.02.2010)

By investigating the foreign direct investments structure, 559, 7 million EUR
referred to equity investments. At the level of whole 2009, FDI will certainly be less
than in 2008 due to fear from risky markets. This year, with the recovery of the euro
zone economy, the growth of foreign investor’s interest for Croatia can be expected.
The size of interest will depend on structural reform pursuit as well as incentives
policies and overall improvement of investment environment. The structure of equity investments in Croatian economy relates to several activities: 46, 5% of overall
investment relates to financial mediation except from insurance and pension funds
(banking), wholesale and mediation. The other direct investments refer to chemical
production (6,8%), the production of coke, oil derivatives and nuclear fuel (6,1%),
post-office and telecommunications (5,4%), real estate business (5,2%), retail sale
(4,5%), oil and natural gas extraction (3,7%), the production of other nonmaterial
mineral products (3,7%), hotels and restaurants (2,6%) and the rest of activities
(15%). In the period from the first foreign capital influx to the third quarter of
2009, the greatest foreign investments in Croatia came from EU countries. Austria
invested the most with 6,3 milliard EUR or 27% of all foreign direct investments,
the Netherlands with 4,1 millard EUR or 17% of all foreign direct investments
and Germany with 2,7 milliard EUR or 11% of all foreign direct investments. By
investigating transitional countries, the most foreign direct investments came from
Hungary with 2,1 milliard EUR or 9% of all foreign direct investments and Slovenia with 1 million Eur or 4% of all foreign direct investments (Croatian Central
Bank, 2010). Most of foreign investments was in financial mediation (banking),
wholesale and telecommunications, while in the previous year came to the growth

INVESTMENT INCENTIVE POLICIES TOWARD ATTRACTING FOREIGN DIRECT INVESTMENTS:...

453

of investment in wholesale and commerce mediation. Picture 2 presents graphic
display of foreign direct investments from 1993 to the third quarter of 2009 and
the relation of Croatia with the transitional countries in 2008. It can be seen there
that Poland attracted the most foreign investments for 2008 with the amount of
11 milliard EUR. Croatia is shoulder to shoulder with Hungary with 4,1 milliard
EUR of foreign direct investments for Croatia and 4,5 milliard EUR for Hungary.
Slovenia was the worst with 1,2 milliard EUR.
4.2. Legal and institutional framework for FDI in Croatia

Promotion of foreign direct investments in Croatia is arranged by the Law on
Incentives that entered into force in July 2000 (National Gazette, no. 73/2000). It
refers to investment incentives of domestic and foreign, legal and natural persons
with the aim od reaching economical growth and stronger competitiveness.
Incentive measures in Croatia are related to fiscal incentives and consist of tax
and custom privileges and they are defined by the law on incentive investments.
foreign direct investments are encouraged into economic activities if that is the
way to ensure ecologicaly accepted activity and one or more of the stated goals: the
introduction of new technology, new production procedures, higher employment
and employee training, modernisation and improvement of business, the development of production with the higher degree of processing, the rise of export and
economic activities in the parts of Croatia where the economic growth and employment are under state average, the development of new ways of services, energy
savings, improving information technology, cooperation with financial institutions
outside country, the adaptation of Croatian economy to European standards (Bilas,
2006). Incentive measures represent sale or giving to use of real estates or other
infrastructure objects under commercial or favoured conditions for the opening of
new workplaces and as a help in specialized training or prequalification.
The Agency for Promotion Trade and Investments (abbreviation in Croatia: APIU)
was founded in 2003. Its most important task is to help investors in realization of
investment projects, offering measures for the improvement of investment environment and presentation of Croatia abroad as an attractive investment location, the
creation of positive investment environment, unifying resource data that are used
by investors, the organization of investors visits to potential investing locations,
realization of investment projects and providing with postinvestment services, recommendation of improving legal regulations to stimulate further investments and

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Josip Romić

to support Croatian exporters (APIU, 2010). The results of the Agency’s work are
noticed during 2006. In the first six months, Trade and Investment Promotion
Agency assisted in initiation of nine investment projects which overall value exceeds 260 million EUR.
5. CONCLUDING REMARKS

Croatia is a small country in comparison with other European countries which
imposed itself as one of the stronger and more developed market economies in the
south east Europe. It has got a medium consumer strength according to GDP per
capita, stable rate of GDP growth, low inflation rate, stable exchange rate and a
high rate or unemployment. In order to increase the level of competition, global
trends and strategies of attracting FDI should be followed. Croatia is in the fourth
place among transitional countries according to attracted foreign capital per capita.
But, a disturbing fact is that two thirds of foreign capital is invested into banking,
telecommunication and trade. There are little greenfield investments and production investments and in this part, Croatia is one of the weakest among transitional
countries. And this is of key importance for economic growth. In order to attract
foreign direct investments, it is necessary to use our advantages (natural resources)
and to fortify additional incentives along with already used. Beside those issues,
some other long-term chronic issues have to be solved because they create negative climate. Those issues are: high degree of ineffectiveness and corruption, slow
administration, slow export growth, rising deficit of extra budgetary funds as well
as high foreign debt.
LITERATURE

1. APIU, Agencija za promicanje izvoza i ulaganja (2010), available at http://www.
apiu.hr/hr/Home.aspx?PageID=89 (13.02.2010.)
2. Babić, A., Pufnik, A., Stučka, T. (2001), Teorija i stvarnost inozemnih izravnih
ulaganja u svijetu i u tranzicijskim zemljama s posebnim osvrtom na Hrvatsku,
Hrvatska narodna banka, listopad.
3. Barković, I.: The Red Tape Analysis of the Barriers to Foreign Direct Investment in Croatia, International Conference «Transition in Central and Eastern
Europe – Challenges of 21st Century», Conference Proceedings, University of
Sarajevo, Faculty of Economics Sarajevo, Sarajevo, Bosnia and Herzegovina, October 17-18, 2002, pp. 41-47

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4. Borozan, Đ., Barković, I.: The impact of EU enlargement on FDI in the nonaccession CEEC: the case of Croatia, International Conference „European
Integration: Local and Global Consequences“, Faculty of Business and Economics MUAF Brno, Brno, Czech Republic, 15 – 19 September 2004, ISBN
80-7157-826-6, pp. 1-15.
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Incentives, http://ideas.repec.org/p/nbr/nberwo/9489.html (12.02.2010.)
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D.C., ISBN paper 0-88132-381-0
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Meeting of the National Contact Points, OECD, Paris, http://www.oecd.org/
dataoecd/24/4/1956371.pdf (13.02.2010.)
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2000.

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ECONOMIC RECOVERY: POSSIBLE SOLUTIONS WITHIN A
NATIONAL ECONOMY
Prof.dr. Mladen Vedriš
Professor at the Chair for Economic Policy
of the Law School of the University of Zagreb

ABSTRACT:

The current major economic crisis, the deepest economic disturbance since the
Great Depression of 1929-1933, with a powerful financial upheaval in the capital
markets in the United States. In 2008, it quickly expanded into the other parts of
the world, especially in Europe and the Far East, and became a global phenomenon.
Moreover, it is no longer a financial crisis, but a crisis in the real economic sector.
In this context, the Republic of Croatia has been relatively successful in bridging
the first phase (the financial crisis, 2008). The depth of the economic upheaval has
been felt in the real sector (2009-2010), especially in the negative rates of economic
growth and a drastic decline in employment, in particular in the construction sector, in the food processing industry, and to some extent in commerce.
The goal and purpose of this work is to point to new, qualitative possibilities and
solutions for stimulating economic growth by encouraging investment in essential
areas: energy efficiency, transportation and complex infrastructure, agriculture and
irrigation, and the tourist industry. The designated new and complex solutions
provide the opportunity and a real basis for a national economy to enter again into
the zone of positive growth rates and to engage financial capital for investment on
three bases: national potential, the structural funds of the European Union, and the
business interests and capital of private investors.
JEL clasiffication: D41, F12
Key words: economic crisis, global and national aspects, economic recovery,
preparation and project development, new investments, new areas of investment,
synergy of sources of investment, EU structural funds.

ECONOMIC RECOVERY: POSSIBLE SOLUTIONS WITHIN A NATIONAL ECONOMY

457

INTRODUCTION

The global economic crisis that began in 2008 created new realities almost overnight. These included a fall in consumption, reservation in making investment
decisions, and a preference for security over anticipated earnings. Viewed overall,
a drastic decline in economic activity ensured after a long period of conjuncture of
global proportions. Along with certain common organized actions (EU, OECD,
G-20) for the purpose of establishing new common frameworks of behavior and
the creation of control mechanisms on one hand, and the establishment of a system for stimulating economic growth on the other hand, programs for stemming
the economic crisis and for economic recovery were devised and implemented by
individual countries – from the largest and the strongest (the United States, Great
Britain, Germany and France) to the transition countries (Hungary, the Baltic
countries).
The Republic of Croatia has succeeded in halting further development of the
economic crisis of 2008, but in 2009 and 2010 it has been confronted with a crisis
in the real economic sector. Responses must be found, prepared and achieved immediately and in an organized manner.
In this context, the following areas are continually emphasized: energy, energy
efficiency, integrated transportation and logistics, agriculture and irrigation, and
the tourist industry, where there is a possibility to situate, prepare and achieve
projects whose realization will make important contribution to long-term positive
rates of growth in GDP, increased employment, and the creation of new goods and
services oriented to exports. With Croatia’s impending entry into the European
Union (EU), these imperatives seem even more apparent and unquestioned.
1. THE GLOBAL ECONOMIC CRISIS  BEGINNING AND CAUSES
1.1. Postwar Growth and Development

With the end of the Second World War a period of economic and general recovery began, first in the United States and then in Europe. Rapidly and efficiently,
the dramatically increased military production potential was shifted to peaceful
purposes, which means construction of civilian facilities, the delivery of investment equipment, and the production of goods intended for broad consumption.
On one side were the requirements related to the reconstruction of a devastated
Europe, on the other side of the ocean there was strong pressure for a rapid growth

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in the standard of living. That process also began in old Europe at the beginning of
the 1960s, initially associated with the European Common Market. In the United
States the creation of anew social framework began, which may be characterized
(doctrinarily) as democratic capitalism (Reich, R.B., 2008., pp. 46-47). 1 The key
features of this American model are mutually supplemented in a coherent and
complementary system that joins economics and politics. “The major American
corporations planned and achieved the production of large quantities of goods,
achieving a significant economy of scale while also reducing production costs per
unit. Explicitly and implicitly coordinating their activities with other giants in the
same industry, they set prices that were rather high in order to generate significant
profits. A portion of those profits were re-invested in new plant and equipment.
The other portion was earmarked for compensation of senior and mid-level management, depending on their position in the organization. A portion also went
to employees who had been organized into unions throughout the industry… In
return, the organized unions avoided strikes that could endanger an unhindered
production of considerable scale…” Continuing, Reich (2008) explains that regulatory agencies set prices for communal services, roads, telephones, and aviation
routing to certain destinations through monopolies (even though these could be
offered to the general public under the same conditions and without monopolies).
Legislators devoted special attention to the needs of local communities, while the
federal government set high marginal tax rates for the wealthiest individuals and
companies. Although the declared purpose was defined differently, a considerable
portion of tax-generated resources went to national defense during the era of confrontation with the Soviet Union.
This spontaneously established system of democratic capitalism to a great extent
corresponded with the phenomenon and appearance of the welfare state that began
to be formed in the economically developed continental part of Europe during
the same time period. On both sides of the Atlantic in a period of two decades
this model was distinguished by extremely high economic and social performance.
Changes began at the end of the 1970s, inspired first because of the energy crisis,
followed by continued inflationary pressures, and then – stagflation. Then – the
beginning of a new epoch, theoretical and then practical, in the form of a new
concept of economic policy – the neoliberalism of Ronald Reagan and Margaret
1

Reich, R.B.: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life, 2007,
pp. 46-47.

ECONOMIC RECOVERY: POSSIBLE SOLUTIONS WITHIN A NATIONAL ECONOMY

459

Thatcher – that powerfully stimulated the “animal spirits of capitalism”. The genie
was let out of the bottle, the general economic scene globalized with the sudden and
powerful entry of the Asian tigers, with the strong, rapidly growing economies of
the Far East. The level of their overall competitiveness in production and the export
of these processes was another cause of relentless acceleration. With the fall of the
Berlin Wall in 1989, the level of global political confrontation and the possibility
of an eruption of military conflict declined considerably, while at the same time the
possibilities for investment, finance, the international exchange of goods, i.e. the
totality of further economic expansion jumped and quickly grew. The concept of
democratic capitalism and the welfare state gave way to a new concept, with a variety of names but in doctrinal terms with the same content: global capitalism, super
capitalism, and neoliberalism.
1.2. The beginning of the current crisis and categorical determination of economical upheaval

After the deep changes in the character of capitalism as a system, both by its
value orientation and, consequently, also its effectiveness in managing to maintain
the internal balance of society amid accelerated economic growth, a new set of
circumstances appeared that engendered a series of spontaneous events. Finally,
an open crisis appeared whose dimensions have already surpassed all conjunctural
declines recorded in the last half century and whose depth and duration are still
not discernible.
The world today is passing through an economic crisis whose depth is being
measured against the Great Depression of 1929/1933. The possible parallels do
not stop here. Just as the causes of the Great Depression were cited as a direct consequence of the liberal economic concept, capitalism that happens, today’s crisis is
closely tied to the reliance on a model of neoliberalism that experienced first a theoretical conception and then its practical application at the beginning of the 1980s,
powerfully supported in practice by a model of behavior applied by the leading
economic powers of the time, the United States and Great Britain.

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2. Activities of international institutions and organizations and important
referent national economies
2.1. Results stimulated by the activities of international institutions and organizations

The developed countries of the world, and then very soon the broad circle
of countries directly affected by the economic crisis, or as a consequence of its
pandemic expansion, began strong and institutionally synchronized action (EU,
OECD, G-20, etc.) to halt the economic downturn and then to initiate activities
to prevent its spread and deepening (duration, rates of growth). The quality of the
indicators (illustration) as a part of these efforts is apparent in the size of the financial packages in individual countries.

Table 1. Absolute amount of financial stimulus packages 2008-10, mln USD
US
Germany
Japan
Canada
Spain
Australia
Korea
United Kingdom
France
Netherlands
Sweden

804 070
107 789
99 992
61 551
56 754
45 673
42 667
38 003
18 568
13 367
13 109

Denmark
Finland
Belgium
Czech Republic
New Zealand
Poland
Austria
Switzerland
Luxembourg
Portugal
Slovakia

8 668
8 575
8 016
6 500
5 404
5 145
4 600
2 486
1 968
1 963
35

Source:/www.oecd.org/document/22/0,3343,en_2649_34269_42913302_1_1_1_37417,00.
html

In summary, it is estimated that the governments of the G-20 countries provided
fiscal packages in a total value of 2% of their GDP