ISSN 1847-0408

FACULTY OF ECONOMICS IN OSIJEK
POSTGRADUATE STUDY MANAGEMENT
JOSIP JURAJ STROSSMAYER UNIVERSITY OF OSIJEK
HOCHSCHULE PFORZHEIM UNIVERSITY

IMR 2018
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
INTERDISZIPLINÄRE MANAGEMENTFORSCHUNG XIV
THE JOSIP JURAJ STROSSMAYER UNIVERSITY OF OSIJEK
FACULTY OF ECONOMICS IN OSIJEK - CROATIA
HOCHSCHULE PFORZHEIM UNIVERSITY
_____________________________________________________________

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
INTERDISZIPLINÄRE MANAGEMENTFORSCHUNG XIV

Under the auspices of the President of the
Republic of Croatia

Opatija, 2018
Published by:
Josip Juraj Strossmayer University of Osijek, Faculty of Economics in Osijek Croatia,
Postgraduate Doctoral Study Program in Management
Hochschule Pforzheim University
Croatian Academy of Sciences and Arts

For the Publisher:
Thomas Cleff, Ph.D., Dean, Germany
Boris Crnković, Ph.D., Dean, Croatia

Editors:
Dražen Barković, Ph.D., Faculty of Economics in Osijek,
Boris Crnković, Ph.D., Faculty of Economics in Osijek,
Karl – Heinz Dernoscheg, Ph.D., International Business School Styria, Austria,
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

Technical editor:
Jerko Glavaš, Ph.D., Editor, Faculty of Economics in Osijek, Croatia
Aleksandar Erceg, Ph.D., Editor, Faculty of Economics in Osijek, Croatia

Design:
Krešimir Rezo, graf.ing.
Krešendo, Osijek

Print:
Studio HS internet d.o.o. Osijek

ISSN 1847-0408
Previous proceedings are indexed in: Web of Science, EBSCOhost, RePEc, EconPapers,
Socionet
Program Committee:
Željko Turkalj, Ph.D., Faculty of Economics in Osijek, chair
academician Vlasta Piližota,
academician Brano Markić,
Zoran Jašić, Ph.D., Former Ambassador of the Republic of Croatia to the Republic of Austria,
Gordana Deranja, Croatian Employers’ Association,
Luka Burilović, Croatian Chamber of Economy,
Ljubo Jurčić, Ph.D., Croatian Economic Association,
Mladen Vedriš, Ph.D., Faculty of Law, University of Zagreb
Ivan Miloloža, Ph.D., Faculty of dental medicine and health,
Vedrana Jelušić Kašić, EBRD
Thomas Cleff, Ph.D., Pforzheim University, Germany

Organizational Committee:
Jerko Glavaš, Ph.D., Chair
Ivana Barković Bojanić, Ph.D., deputy chair
Antun Biloš, Ph.D.
Davorin Turkalj, Ph.D.
Martina Briš Alić, Ph.D.
Nataša Drvenkar, Ph.D.
Ivan Kristek, Ph.D.
Aleksandar Erceg, Ph.D.
Ivan Kelić, Ph.D.
Martina Harc, Ph.D.
Jelena Legčević, Ph.D.
Katica Križanović, univ.spec.oec.
Tin Horvatin, mag.oec.
Jelena Franjković, Ph.D. student
Dina Liović, Ph.D. student
Ana Pap, Ph.D. student
Ana Trusić, Ph.D. student
Ivana Unukić, Ph.D. student
Zvonimir Savić, Croatian Chamber of Economy
CONTENTS

VORWORT........................................................................................................................... XV
FOREWORD........................................................................................................................ XVI

Management
Dino Bruža and Andreja Rudančić
INFLUENCE OF INFORMATION-COMMUNICATION TRENDS
ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY..................................3
Nemanja Milanović, Lena Đorđević and Nela Milošević
IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING
COURSE: AN EXAMPLE OF BUDGETING AND SCENARIO ANALYSIS.... 23
Željka Kadlec, Josip Hetrih and Mladena Bedeković
ATTRACTING INVESTMENTS IN THE ENTREPRENEURIAL ZONES
OF SMALL TOWNS BY CREATING PRECONDITIONS FOR THE
DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES...............................44
Zlatko Barilović
EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT
COMPETENCIES IN PROJECT MANAGEMENT GRADUATES.........................64
Ivana Šandrk Nukić and Blanka Gigić Karl
IMPORTANCE OF STRATEGIC PLANNING IN CULTURE:
THE CASE OF MUSICAL EVENTS..................................................................................80
Kristina Brščić, Tina Šugar and Drago Ružić
TOURISTS’ PERCEPTIONS OF DESTINATION – EMPIRICAL STUDY
OF DESTINATION POREČ................................................................................................97
Igor Pureta and Tanja Pureta
THE ROLEs OF LEADERSHIP STYLES AND ENTREPRENEURIAL
ORIENTATION IN DISTINGUISHING MORE FROM LESS
UCCESSFUL ORGANIZATIONS................................................................................... 112
Branimir Dukić, Goranka Majić and Stojanka Dukić
STRUCTURAL MODEL OF THE FORMS OF BUSINESS
ORGANIZATION IN THE REPUBLIC OF CROATIA.......................................... 131
Aleksandar Erceg and Vice Gulam
IMPORTANCE OF ALIGNMENT OF ORGANIZATION’S STRATEGY
AND PROJECT MANAGEMENT................................................................................. 155
Martina Briš Alić, Martina Harc and Dino Vida
PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER
LEVELS OF HEALTHCARE............................................................................................ 172
Dijana Kozina, Vedrana Vukadinović and Marko Tadić
THE IMPORTANCE OF MANAGEMENT AND COST
ESTIMATION IN MANAGERIAL DECISION MAKING...................................... 184

V
Dina Đelmo Smajlović
AN ANALYSIS OF THE STATE OF ATTITUDES OF THE
LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT
IN THE CITY OF RIJEKA.................................................................................................. 208
Dejan Balić, Kristijan Šimičić and Vinko Samardžić
STRATEGIC POTENTIAL OF THE OSIJEK ZOO FOR CONTINENTAL
TOURISM OF THE REPUBLIC OF CROATIA........................................................... 228
Nataša Rupčić and Domagoj Švegar
DETERMINANTS OF CONFLICT MANAGEMENT BEHAVIOR:
DOES THE CHOICE OF MAJOR AND STUDY PROGRESS
PLAY A ROLE?....................................................................................................................... 244
Emina Bačevina, Zrinka Malešević and Domagoj Pavić
EUROPEAN SOCIAL FUND IN THE REPUBLIC OF CROATIA,
GOOD GOVERNANCE - RESULTS ACHIEVED AND PLANS AHEAD......... 264
Ante Orlović
POLICE MANAGEMENT– POLICE OFFICERS’ PERCEPTION OF THE
STATUS (QUALITATIVE LEVEL) OF FUNDAMENTAL FUNCTIONS OF
MANAGEMENT IN THE POLICE ORGANIZATION........................................... 286
Waldemar Osmólski, Adam Koliński and Davor Dujak
METHODOLOGY OF IMPLEMENTING E-FREIGHT SOLUTIONS
IN TERMS OF INFORMATION FLOW EFFICIENCY............................................ 306
Ivana Nobilo, Ivan Herak and Dejan Laninović
THE MARKETING ORGANISATIONAL STRUCTURES TOWARDS
THINK-FEEL-DO MODEL.............................................................................................. 326
Bahtijar Berisha and Ivan Kristek
THE DEMAND FOR AUDIT SERVICES FROM NON-GOVERNMENT
ORGANIZATIONS: EVIDENCES FROM THE KOSOVO.................................... 340
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Edvard Badurina
KNOWLEDGE ACQUISITION FROM DATA IN BUSINESS
INTELLIGENCE MODELS AS A SOURCE OF COMPETITIVE
ADVANTAGE
O+C14F COMPANIES........................................................................................................ 353
Anna Borucka
FORECASTING OF FIRE RISK WITH REGARD TO READINESS
OF RESCUE AND FIRE-FIGHTING VEHICLES...................................................... 373
Martina Bienefeld, Zrinka Stanić and Helena Štimac
THE IMPORTANCE OF ESTABLISHING HUMAN RESOURCE
OFFICES IN CROATIAN HEALTHCARE INSTITUTIONS –
A KEY TO THEIR SUBSISTENCE................................................................................ 396
Zdenko Prohaska, Bojana Olgić Draženović and Ivan Uroda
VALUATION OF ZERO COUPON BONDS IN EXCEL........................................ 409

VI
Zorislav Kalazić, Damir Butković and Andreja Hašćek
FROM CAMERA OBSCURA TO IPHONE: WHAT IS THE
FUTURE OF DIGITAL STOCK PHOTO INDUSTRY?........................................... 420
Mario Dadić, Ante Bačić and Iva Mihanović
THE ROLE OF MOTIVATION IN HUMAN
RESOURCES MANAGEMENT....................................................................................... 440
Maja Šimunić, Ljubica Pilepić Stifanich and Marina Perišić Prodan
THE LEVEL OF HOTEL RESERVATION SYNCHRONIZATION
PROCESSES USING INFORMATION TECHNOLOGY TOOLS........................ 451
Ivan Miloloža, Aleksandar Včev and Damir Šebo
MARKET SUCCESS OF CROATIAN ENTERPRISES:
IMPACT OF LEADERSHIP STYLES............................................................................. 471
Joško Dvornik, Vice Mihanović and Ante Mihanović
MARITIME POTENTIALS OF THE REPUBLIC OF
CROATIA WITH THE PARTICULAR EMPHASIS ON THE
CITY OF SPLIT..................................................................................................................... 493
Ivan Miškulin, Boris Crnković and Maja Miškulin
TYPES OF LEADERSHIP IN MANAGEMENT BOARDS OF
UNIVERSITY CONSTITUENT UNITS AND THEIR IMPACT ON
KNOWLEDGE MANAGEMENT................................................................................... 504
Ante Belamarić, Goran Ledinščak and Željko Holik
FINANCIAL BENCHMARKING OF CROATIAN OFFSET
PRINTING INDUSTRY..................................................................................................... 523
Željko Vojinović, Sanja Živković and Dragan Vojinović
THE CONCEPT OF INTEGRATED MARKETING
COMMUNICATIONS OF FINANCIAL INSTITUTIONS OF
BOSNIA AND HERZEGOVINA IN THE FUNCTION OF
MANAGING RELATIONS WITH CONSUMERS.................................................... 544

General Economics

Damir Ribić and Nikolina Pleša Puljić
EDUCATION AS A FACTOR OF SUCCESS IN AGRICULTURAL
PRODUCTION OF TOBACCO....................................................................................... 563
Ljubo Jurčić and Anita Čeh Časni
GOVERNMENT SPENDING BEHAVIOUR: HOW BIG PUBLIC
SECTOR DO WE REALLY NEED?................................................................................. 579

VII
Microeconomics, Macroeconomics and Monetary Economics

Faruk Hadžić and Dino Hadžialić
NEW ECONOMIC POLICY – MACROECONOMIC REFORMS
FOR ACCELERATED ECONOMIC GROWTH OF BOSNIA
AND HERZEGOVINA....................................................................................................... 595
Ružica Lončarić, Tihana Sudarić and Jadranka Deže
CONSUMER ENTNOCENTRISM ON GLOBAL FOOD MARKET................... 618
Zvonimir Savić
ARCHITECTURE OF INSTITUTIONAL FRAMEWORK FOR EU
COHESION (REGIONAL) POLICY IMPLEMENTATION IN SLOVENIA,
HUNGARY AND SLOVAKIA - ROLE MODELS FOR CROATIA?...................... 636
Amir Fejzić and Jasmina Osmanković
UNEMPLOYMENT DYNAMICS: THE CASE OF THE
SEE5 COUNTRIES............................................................................................................... 662

International Economics

Dražen Holmik
ECONOMIC DIPLOMACY IN THE TIME OF GLOBALIZATION.................... 685
Magdalena Klopott
HOW BREAKING THE INTEGRITY OF THE COLD CHAIN MAY
CONTRIBUTE TO GLOBAL WARMING?................................................................. 703

Financial Economics
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Branko Matić, Maja Vretenar Cobović and Mirko Cobović
HARMONIZATION OF THE CROATIAN PENSION SYSTEM WITH
A EUROPEAN SOCIAL MODEL - PERSPECTIVES AND CHALLENGES...... 725
Izabela Pruchnicka-Grabias
STOCK MARKETS REACTIONS TO NEGATIVE DECISIONS OF
STANDARD & POOR’S RATING AGENCY - EIGHT CASE STUDIES......... 743
Ivana Bestvina Bukvić, Marija Šain and Maja Haršanji
PROJECT FINANCING OF CULTURAL AND CREATIVE INDUSTRIES
IN CROATIA - ANALYSIS OF THE CREATIVE EUROPE PROGRAMME
(2014-2020) RESULTS......................................................................................................... 763
Mustafe Hasani, Sakip Imeri, Ramadan Kryeziu
“DOING BUSINES” WB REPORT AND IMPACT ON FDI IN
BALCAN COUNTRIES WITH FOCUS IN KOSOVO............................................. 782

VIII
Marina Stanić Šulentić, Tin Horvatin and Milan Stanić
COMPARATIVE FINANCIAL ANALYSIS OF RAILWAY WORKSHOP........... 796
Markus Hafele and Sarah Katharina Stiegeler
DIE BEHANDLUNG VON KONZERNUMLAGEN –
PROBLEME IN DER PRAXIS........................................................................................... 806

Public Economics

Mladen Vedriš, Nataša Drvenkar and Damir Butković
PUBLIC PROCUREMET STRATEGY – POLICY REMARKS AND
CHALLENGES FOR THE REPUBLIC OF CROATIA.............................................. 823
Velma Pijalović and Lejla Lazović-Pita
SHOULD EXCISE DUTIES ON SOFT DRINKS IN BOSNIA AND
HERZEGOVINA BE INCREASED?.............................................................................. 842

Health, Education and Welfare

Tena Čačić
CONCEPT OF EDUCATIONAL INSTITUTIONS AS SUSTAINABLE
ORGANIZATIONS............................................................................................................. 867
Suzana Obrovac Lipar
THE ECHOES OF GLOBALIZATION AT THE UNIVERSITIES IN
CROATIA: THE ANALYSIS OF WEB SITES AND TRENDS IN THE
STUDENT EXCHANGE.................................................................................................. 881
Tihana Škojo and Renata Jukić
THE LEADS’ OF ART ENSEMBLES PERCEPTION OF NECESSARY
COMPETENCES.................................................................................................................. 897
Ivana Barković Bojanić, Dajana Džeba and Mate Perišić
SILVER ECONOMY AND AGING POPULATION: MYTHS,
REALITIES AND BUSINESS OPPORTUNITIES................................................... 912
Agneza Aleksijević
PUBLIC PERCEPTION OF PRIMARY HEALTH CARE QUALITY
IN THE REPUBLIC OF CROATIA................................................................................ 927
Sanja Španja and Sara Pejaković
EDUCATION FOR HANDLING CONFLICT IN THE ORGANIZATION..... 953
Mirko Pešić, Sanja Pešić and Marija Baban Bulat
FREE MOVEMENT OF WORKERS: THE CASE OF HEALTH
CARE WORKERS MIGRATING WITHIN THE EU................................................ 969

IX
Law and Economics

Emina Jerković
REDUCING THE TAX COMPLIANCE GAP BY IMPROVING
TAX ADMINISTRATION................................................................................................. 983
Nenad Rančić, Winona Wenning and Ozren Pilipović
ECONOMIC ANALYSIS OF ECJ JUDGEMENT IN JOINED
CASES C-503/13 & C-504/13: PRODUCT RECALLS REGARDING
MEDICAL DEVICES.........................................................................................................1001
Vesna Škare Ožbolt and Igor Bojanić
THE EFFICIENCY OF THE CRIMINAL PROCEDURE AND
POSSIBILITIES OF ITS IMPROVEMENT..............................................................1018
Dubravka Klasiček
DIGITAL INHERITANCE..............................................................................................1050
Pavao Gagro, Duško Ljuština and Ante Baran
DATA MANAGEMENT AND KNOWLEDGE MANAGEMENT
IN NOTARY PUBLIC SERVICE..................................................................................... 1069

Business Administration and Bussines Economics

Jose Vargas-Hernández
INTERCULTURAL BUSINESS MANAGEMENT DEVELOPMENT A
ND EDUCATION PROGRAMS IN BUSINESS SCHOOLS..............................1099
Urban Bacher and Torsten Winkler
AMAZON – GESCHÄFTSMODELL UND SWOT-ANALYSE........................... 1130
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Marketing

Gabrijela Žalac, Ana Odak and Mario Banožić
CROATIAN VIEWS ON THE FUTURE OF COHESION
POLICY POST 2020........................................................................................................... 1147
Dejan Tubić, Rikard Bakan and Juralj Randelj
THE MARKETING ACTIVITIES AND BARRIERS OF THE
AGROTOURISM ECONOMIES OF CONTINENTAL REGION OF
THE REPUBLIC OF CROATIA: TFF OWNERS PERCEPTION......................1162
Dominik Paparić, Jesenka Ricl and Dražen Ćućić
THE ISLAND OF RAB-TOURISM POSITIONING AND
DESTINATION BRANDING......................................................................................... 1175

X
Thomas Cleff, Laura Marie Hansmann and Nadine Walter
The Quantified Self – A Theoretical Framework and
Empirical Study on Marketing Opportunities within
the Self-Tracking Environment..............................................................1198
Željko Turkalj, Tihomir Vranešević and Tajana Marušić
SOCIAL MEDIA AND IT`S IMPACT ON CLASSICAL MARKETING
CHANNELS OF COMMUNICATON......................................................................... 1225
Žarko Stilin, Jasen Mesić and Ivan Ružić
THE INFLUENCE OF E-MARKETING ON VOTERS.......................................... 1244
Lidija Nujić, Tonina Palić and Martina Herak
THE IMPACT OF SOCIAL MEDIA INFLUENCERS ON
TOURISM INDUSTRY..................................................................................................... 1258
Ivana Lacković and Eugen Ferenček
THE ROLE OF DIGITAL MARKETING AND MARKETING
AGENCIES IN MODERN BUSINESS......................................................................... 1276
Zlatko Rešetar, Zdravko Tolušić and Nikolina Pavičić Rešetar
IMPACT OF CONSUMER PREFERENCES ON PRODUCT
AND PRODUCT................................................................................................................. 1290
Kenan Mahmutović
IMPACT OF E-MARKETING ORIENTATION ON MARKETING
PERFORMANCE: CASE OF EUROPEAN REAL ESTATE
BROKERAGE INDUSTRY............................................................................................... 1308

Accounting

Bodo Runzheimer
DER NEUE STANDARD IFRS 16 DER EUROPÄISCHEN UNION
ZUR LEASINGBILANZIRUNG.................................................................................... 1337
Ivo Mijoč, Marija Ileš and Biljana Brocić
THE ROLE OF INTERNAL AUDIT IN INCREASING QUALITY OF
BUSINESS OPERATIONS OF INSURANCE COMPANIES................................ 1358
Ivana Dražić Lutilsky, Dina Liović and Matej Marković
THROUGHPUT ACCOUNTING: PROFIT-FOCUSED COST
ACCOUNTING METHOD............................................................................................. 1382
Dubravka Pekanov Starčević, Ana Zrnić and Emil Mihalina
ENVIRONMENTAL ACCOUNTING IN CROATIA:
A REVIEW OF CORPORATE REPORTING PRACTICES................................... 1396

XI
Economic Development, Technological Change, and Growth

Radul Milutinović, Slađana Benković and Biljana Stošić
THE REVIEW OF EXTERNAL SOURCES OF
INNOVATION FINANCING......................................................................................... 1413
Ivana Sataić
THE ROLE OF EUROPE 2020 STRATEGY IN CROATIAN ECONOMY
AND THE ECONOMY OF THE EUROPEAN UNION........................................ 1432
Josip Jukić, Dražen Barković and Ivona Blažević
ANALYSIS OF THE IMPACT OF SHORTENING / EXTENDING OF
PROJECT DURATION ON TOTAL COSTS............................................................. 1447
Ivana Varičak and Silvija Vitner Marković
THE ROLE OF SECTORAL SPECIALIZATION IN THE CREATION
OF SMART TOURISM DESTINATION..................................................................... 1460
Višnja Bartolović and Danijela Vinković
ACTIVE LABOR MARKET POLICIES - FINDINGS FROM
BROD-POSAVINA COUNTY........................................................................................ 1472
Zrinka Starešinić and Mia Duška Franić
STRUCTURAL AND INVESTMENT FUNDS AND THEIR IMPACT
ON THE DEVELOPMENT OF THE REPUBLIC OF CROATIA........................ 1489
Jerko Glavaš, Tibor Santo and Biljana Tuševski
BUSINESS PROCESS MANAGEMENT AS A PRECONDITION OF
PRINTING INDUSTRY DEVELOPMENT............................................................... 1504
Ivan Ambroš, Josip Faletar and Domagoj Kurtović
CASCADE USE OF WOOD: CASE STUDY OF SPAČVA...................................... 1515
Michał Kuzia
NEW URBAN MOBILITY MODEL IN SHARING
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

ECONOMY CONTEXT................................................................................................... 1526
Sofija Adžić and Branka Mihailović
SMALL COUNTRIES` ECONOMY EFFICIENCY -
LESSONS AND POSSIBILITIES................................................................................... 1545
Zlatko Zelenika and Drago Pupavac
MATHEMATICAL MODELLING OF THE DEVELOPMENT
FACTORS IN THE PORT OF RIJEKA......................................................................... 1558

Urban, Rural, and Regional Economics

Katarina Marošević
REGIONAL IMBALANCE OF THE REPUBLIC OF CROATIA
THROUGH A DEMOGRAPHIC FRAMEWORK: STATE AND TRENDS..... 1571

XII
Branislav Peleš, Nedeljko Knežević and Krešimir Starčević
THE IMPACT OF TOURISM ON RETAIL TRADE IN FOODSTUFFS
MAINLY, IN THE REPUBLIC OF CROATIA, COMPARED FOR THE
PERIOD 2010-2016.............................................................................................................1586
Radmila Tatarin, Ana Gavran and Ivana Deže
THE CURRENT POSITION OF FAMILY FARMS IN CROATIA-
ORGANIC VS. CONVENTIONAL PRODUCTION............................................... 1600
Karolina Gwarda
SELECTIVE MUNICIPAL WASTE COLLECTION AS PART OF
THE ZERO WASTE CITY CONCEPT.......................................................................1616
Anamarija Delić and Dora Perić
INFLUENCE OF BUSINESS ECOSYSTEM ON RURAL
TOURISM DEVELOPMENT.......................................................................................... 1636
Davorin Turkalj, Antun Biloš and Ivan Bogović
IMPLICATIONS OF COASTAL CROATIA TOURIST ATTRIBUTES ON
THE DEVELOPMENT POTENTIAL OF CONTINENTAL CROATIA........... 1652
Ivan Kelić, Sofia Turjak and Ivana Unukić
GLOBAL AGRICULTURAL ENVIRONMENT AND CROATIAN
AGRICULTURAL CHALLENGES – CAN BRANDING HELP?.......................... 1667
Mirela Kljajić-Dervić, Šemsudin Dervić and Selma Gutlić
MOTIVATION AND SATISFACTION OF EMPLOYEES:
A CASE OF BOSNIA AND HERZEGOVINA PUBLIC SECTOR........................ 1681

Miscellaneous Categories

Dražen Vitez, Marko Prpić and Marin Pucar
POLICE MANAGEMENT FOR COMMUNITY POLICING:
CASE OF CROATIA...........................................................................................................1701
Mladen Jurišić, Ivan Plaščak, Sanela Ravlić
APPLICATION OF GEOGRAPHIC INFORMATION SYSTEMS (GIS)
AND MULTI-CRITERIA DECISION ANALYSIS (MCDA) IN THE
NATURAL RESOURCES MANAGEMENT...............................................................1705
Ulrich Föhl, Carina Siefert:
A TYPOLOGY OF CONSUMER BRAND RELATIONSHIPS..............................1722
Wolfgang Gohout:
MARKMALSREDUNDANZ AM BEISPIEL EINER
UHRENMARKEN-BEWERTUNG...............................................................................1738

XIII
Vorwort

Es ist uns ein Vergnügen, das Konferenzband “Interdisciplinary Management Re-
search XIV/ Interdisziplinäre Managementforschung XIV” 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 Magisterstudi-
um des Management. Die Zusammenarbeit der zwei genannten Partnerinstitutio-
nen 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. Je-
des Jahr ziehen die wissenschaftlichen Symposien Akadamiker anderer kroatischer,
sowie ausländischer Universitäten, einschließlich Australien, Deutschland, Ungarn,
Polen, Rumänien, Slovenien, Montenegro, Bosnien und Herzegovina, Serbien, In-
dien, Irland, Czechien, Israel, Italien, Sudafrica, Belgien, Schweiz, USA, Slowakei,
Dänemark, Mazedonien, Mexico, Zypern und Großbritannien an, die ihren wissen-
schaftlichen 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 Konferenz-
reihe wurden auch von der internationalen akademischen Gemeinde erkannt, wes-
wegen sie auch in internationalen Datenbanken, wie Web of Science, Thomson ISI,
RePEc, EconPapers und Socionet, zu finden ist.

Die neueste Ausgabe von “Interdisciplinary Management Research XIV/ Interdis-
ziplinäre Managementforschung XIV” umfasst 95 Arbeiten geschrieben von 217
Autoren. Der Erfolg früherer Ausgaben ging über die Grenzen der Länder hinaus,
deren Autoren schon traditionell Teil der Reihe waren. Jedes der Autoren leistete
einen bedeutenden Beitrag zu diesem fachübergreifenden Managementforum.

Als Herausgeber dieses Bandes hoffen wir, dass diese Reihe auch weiterhin Akade-
miker 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.

Dražen Barković, professor emeritus
Prof. Dr. Bodo Runzheimer

XV
Foreword

It is our pleasure to introduce the book “Interdisciplinary Management Research
XIV/ Interdisziplinäre Managementforschung XIV” to you. The first volume ap-
peared 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 partner-
ing institutions has been nurtured, amongst else, through annual scientific colloqui-
ums 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 Australia, Germany, Hungary,
Poland, Romania, Slovenia, Montenegro, Bosnia and Herzegovina, Serbia, India,
Ireland, Czech Republic, Israel, Italy, South Africa, Belgium, Switzerland, USA,
Slovakia, Denmark, Macedonia, Mexico, Cyprus and the United Kingdom each
making a contribution in academic and professional discussion about contemporary
management issues. Actuality and importance of the issues discussed, the interna-
tional 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 in-
ternational academic community, resulting in the book now being indexed in world-
known data bases such as Web of Science, Thomson ISI, RePEc, EconPapers, and
Socionet.

The latest edition, i.e. ““Interdisciplinary Management Research XIV/ Inter-
disziplinäre Managementforschung XIV” encompasses 95 papers written by 217
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

authors. The success of former editions has echoed beyond the traditionally partici-
pative countries and authors.

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.

Dražen Barković, professor emeritus
Prof. Dr. Bodo Runzheimer

XVI
Management
INFLUENCE OF INFORMATION
COMMUNICATION TRENDS ON
BUSINESS COMMUNICATION IN
HOTEL INDUSTRY

Dino BRUŽA, mag.oec., Ph.D. student
Faculty of Economics in Osijek
E-mail: dino.bruza@efos.hr

Andreja RUDANČIĆ, Ph.D. assistant professor
Libertas International University
E-mail: arudancic@hotmail.com

Abstract
Hotel management needs to follow world trends, in order to be capable of meet-
ing all the challenges that appear on a global scale and to be ready for adjust-
ments and permanent investments. For a hotel system, to be integrated into the
global market, there must be an informational and communicational system
that will successfully link all elements, absorb all data, filter out useful informa-
tion and deliver them to hotel management at the right time. Today’s busi-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ness is based on such networks where information is key to success. The hotel
industry is the most relevant basis for the growth and development of tourism,
due to the complexity and volume of business. Therefore, it is very important
to monitor, harmonize and implement contemporary industry hotel standards,
which can be compared with the success of a business. In order to achieve it, it
is important to keep the track of where, how much and when to invest. Hotel
management must be capable of being up to date with all the changes in the
tourism market. The indicator, that is significant in this information and com-
munication system, is the quality of business communication, especially among
the hotel staff. The purpose of this paper is to point out the current level of
business communication quality in the hotel system, without which the transfer
of information would not have a value, and it would be useless. The aim of
the research is to recognize the level of influence of informational and com-

3
municational trends on the level of development and quality of business com-
munication of hotel employees. By analyzing the level and quality of business
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

communication, it will be presented how the information-communication tools
are represented and what is the influence on the interaction of all involved in
the hotel organization.
Key words: business communication, information and communication trends,
ICT, hotel management, hotel industry.
JEL Classification: M41

1. INTRODUCTION
The foundation of good business cooperation is based on successful com-
munication, which is of crucial importance for the efficiency of the enterprise
organization. Adversely, poor communication, which promotes interpersonal
conflicts, creates problems for the positive business climate of the company,
whether it is internal or external. This is precisely the point of business psy-
chology or psychology of work, whose role is also the role and significance of
psychology in business communication. Communication is nothing but the
process of transferring information, i.e. exchange of information and data from
sender to recipient. It is important to emphasize that there must be feedback
in the process, that is, that the recipient becomes the sender, and the original
sender becomes the recipient, thus creating a communication system. The ba-
sic types of communication are divided into two-way and one-way, oral and
written, verbal and non-verbal. The basic communication model is divided into
several elements. The first element is the sender, or the person who directs the
information and sends the message to the recipient or the receptor. Then, there
is the message itself, which includes the entire system of symbols that convey
the meaning of the information that the sender places on the communication
channel. This system consists of a series of pronounced words, written words
and sentences or simply displayed. Then, it comes to the recipient, or the re-
ceptor, the person to whom the message was sent. The last link of the basic
communication model is a return link. In expert terminology, it is referred to as
the original English word “feedback”. It plays a major role, as it serves to check
the success of a sent message or information, but it also means transmitting a
new message and changing the status of the original participants in the entire
system, so the receptor becomes the sender or emitter while the original sender

4
becomes a receptor. In this section, it is important to note that a message sent
as feedback, or a kind of feedback, does not represent what the sender sent at
the beginning of the communication process, but what the receptor received
or understood by the receipt of that message. Described elements can also be
graphically displayed, and for the purpose of this paper and research, a descrip-
tion of communication interaction in the hotel company is shown in figure 1.

Figure 1. Information system in a hotel company

Source: Z. Cerović: Hotel management, FTHM, Opatija, 2003., p. 716

2. THEORETICAL BACKGROUND OF BUSINESS
COMMUNICATION

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
.. Definition of business communication
The conversation involves the process of sending a message, and receiving a
message effectively in a direct contact. It is not just content that the interlocu-
tors pronounce, but it also includes the relationship with others involved in the
conversation, as well as the relation of the sender according to the content of
the message he sends. It can be concluded that the conversation encompasses
multiple levels, and the importance of business communication is that the use
of clear, all-comprehensible and supposed words is required. In business com-
munication, short, clear and timely information should be sent. The sent mes-
sage often gives the recipient the knowledge of whether the emitter is honest or
conceals its rightful face and emotions. Of course, everyone is aiming to give a
positive impression to the interlocutors at the beginning of the business com-

5
munication. In this regard, the importance of the role of a psychologist in vari-
ous companies is understood. Business psychologists specifically observe the
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

body language, the expression and colour of the face, tone and colour of voice,
various movements and other behaviours that reveal the real situation in which
the interlocutor is located. Therefore, in order for business communication to
be successful and even more to be successfully completed, it is necessary to con-
sider all of these aspects and elements and implement them in the analysis of
business communication. But the ultimate outcome of business communication
interaction is not always successful, and the main reasons are identified in two
causes. Communication is a complex process whose success, despite the best in-
tention of the participant, is not always guaranteed: the sent and received mes-
sages are never identical; the form and content of the message depend on the
skill of the sender and the recipient (Fox, 2001, p. 15). Sent and received mes-
sages are never identical, which in fact reflects that the significance and impor-
tance attached by the interlocutors are not always the same, which is why there
is a misunderstanding in communication and problems in the communication
channel. In addition, the form and content of the message largely depend on
the skill of the sender, which transforms his message into the communication
symbols, but also the skill of receiving that message, and interpreting all com-
munication symbols. The role and significance of psychology in business com-
munication are visible in the way of understanding of communication, based on
and achievable by various means. From the aspect of resources all communica-
tions can be divided into (Cerović, 2003, p. 717):
- verbal communication
- nonverbal communication
- written, visual communication.
Verbal communications are characterised by the fact that in this type of
communication the main and only meaning is a word, which can indicate a
number, a character or set of letters, and a combination of words, consisting
of a sent message or information. It covers many forms, such as face-to-face
conversation, group interviews, and telephone conversations, broadcast mes-
sages via television, radio, or voice. Non-verbal communication represents the
process of transmitting the message without words, and it actually appears as
the incidental effect of verbal and written communications. At the same time,
it represents a two-way transmission of messages, comprising the behaviour

6
of the interlocutor’s body, mimicry, views, gesturing, touching, dressing, outer
circumstance, and spatial behaviour, where it is important to know that a cer-
tain inter-party intimacy zone is defined between 0.80 and 1 meter distance
between the interlocutors. Written or visual communication is the transmission
of information in a written word, which includes written and graphic messages,
sentences, text, tables, pictures and sentences.

.. Impact of business psychology on manager
communication in a hotel system
Communication management is far more complex, so it needs to be specifi-
cally explained. Namely, it covers all forms of interpersonal communication, all
types of communication, and various ways and styles of communication man-
agement in the enterprise, whose activities and outcomes are accompanied by
business psychology. These outcomes can manifest positively, but also include
a number of problems, as the enterprise is a complex human reality. There are
also conflicts that appear in all their forms, with certain dynamism, triggered by
a cause, with certain consequences. The essential feature of this is intrapersonal
communication, which is considered as strategic knowledge of contemporary
management. Intrapersonal communication is a contemporary scientific disci-
pline dealing with the problem of interpersonal communication (Brajša, 1993,
p. 22). Intra-personal communication is just a part of that discipline, and it
includes sending, receiving, and responding to messages through direct face-to-
face contact. It can be planned and unplanned, intentional and accidental, both

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
aware and unconscious. Regarding the type of communication in managerial
communicology, it is divided according to the principle of the basic division of
communication types, but it is further classified as professional or non-commu-
nicative communication, that is the result of knowledge, degree of education,
competence and acquired skills of communicating between the employees and
hence can be studied and as a part of human resource management. Cause-
effect factors can help in understanding a certain relationship, and in resolving
all potential issues it in the future. A successful manager is successful only if
he knows how to manage others, and especially himself. Most managers lack
business psychology education, and the business owner expects the manager
to be successful in communicating with employees, knowing how to motivate
employees to teamwork, to successfully resolve the conflict or quarrel, and to
recognise the motivational factors of employees. The manager should first of all

7
be aware of his technical skills, and then be capable of working with employees,
and to apply acquired knowledge to the development program of the company
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

he is employed in. During the research and conceptualising of content for de-
termining the subject of this work, one thought has been recorded, which is as
follows (Rijavec, 1994, p. 7): “Do not start thinking about people when they
become a problem.”

3. INFORMATIONCOMMUNICATION
TECHNOLOGY ICT AS A TOOL OF BUSINESS
COMMUNICATION
.. Definition of information management
In order for the information to arrive from the sender to the recipient, it
is necessary to collect and process the data in a timely and valid manner, after
storing it in the form of information and passing it in the right way to the end
user. This process of collecting, processing and delivering information today is
elaborated through the information system. Information has existed since the
beginning of mankind, but in modern business, it is more important than ever.
That is precisely why there are different perspectives, hence more definitions
of the term information, depending on which context is mentioned. The word
information comes from the Latin word for information, which means inform-
ing (Galičić, Šimunić, 2006, p. 14). The purpose of information management
is precisely to provide timely and accurate information for a specific end-user,
and minimising costs. This can recognise the value of information as a very
important resource, whose use in business increases value, reduces the risk of
decision making and directly affects the business’s own economy. If the manage-
ment information is able to identify and process user data and transform them
into useful information and then forward them to the right recipients, this will
make the strategic decisions made more effective to better align goals. This same
information may, to a lesser or greater extent, affect a certain direction of execu-
tion of particular tasks, so it is essential to carry out cyclic analysis and checks
and to collect feedback that will serve as useful data for analysis, processing
and thus provide new information with added value. As was mentioned earlier,
information is one of the major resources in decision-making, and with technol-
ogy, knowledge and man, it should be considered on both sides. By its existence

8
and implementation in the business of the company, it is directed towards the
enterprise and beyond the company. When looking at the impact of company
orientation, it needs to be integrated at all levels, networked with all depart-
ments and have the freedom of flow of internal information. At the same time, if
the focus is on the influence of direction outside the enterprise, it should involve
collecting data and information from the entire market, i.e. from competitors
on the one hand and from customers on the other, and moreover, as well as the
information that indirectly affects the market. Today’s management of the hotel
industry has its own distinctiveness, which can be distanced from the general
approach of management’s understanding, and this is in support of the next
definition. Hotel management is a system of processes of creating, directing
and harmonising all factors, affecting the status of hotel services, and in which
individuals efficiently realise the predetermined objectives of hotel business
(Cerović, 2010, p. 82). Management information has evolved and improved in
the course of business development, especially in the hotel industry, which con-
tributed greatly to the collecting, processing and distribution of information
from and to the right place at the right time. Information is the most important
managerial resource (Cerović, 2010, p. 786). As the data represent a set of facts
about a particular occurrence, their transformation into information is the area
of information management. It is well known that there is a large number of
data on the market. Therefore, the role of the information management is to ob-
tain these data and to filter them, in order to obtain valid information that will
be used for further business. Today, there are business intelligence models that
support this part to maximise the use of all the data, obtained and thus become

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
useful in the form of information. These key data become key information at
the moment when the manager assigns a certain value, so they can predict future
market trends. The use of information technology intensifies communication,
reduces costs and supplies, improves procurement and marketing through IT
infrastructure, enables real-time information management, and encourages the
development of new activities (Stipanović, 2006, p. 205). The purpose of infor-
mation management is precise to provide timely and accurate information for a
specific end-user, minimising costs. This can recognise the value of information
as a very important resource, whose use in business increases value, reduces the
risk of decision making and directly affect the business’s own economy. For a
successful implementation of the IT support system, it is important to meet
several basic requirements. Technology investments in information systems are
an indicator of the success of adapting the hotel industry to the challenges of

9
modern demand. For a rational application and development of information
technology in hotel businesses, several preconditions need to be met (Galičić,
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

Šimunić, 2006, p. 98):
- To perceive the need for application of information technology.
- Plan the construction and development of the business system as a whole.
- Standardise equipment, documentation and methods of using information
technology.
- Organise the process of managing and managing the conditions of applica-
tion of information technology.
Of course, besides the mentioned types of systems, information manage-
ment in the hotel industry also includes other systems that collect and process
data, store and distribute information. These are all information systems that
are directed to the guest, and today they use the abbreviation CRM (Customer
Relations Management). The guest is the centre of interest and business, so it’s
important to invest in that cause. Management information must monitor the
wishes and needs of guests, both potential and existing. Based on their prefer-
ences, wishes, travel motives, and the perception of the experiences they expect
on their journey, they will create a kind of offer that will be put on the tourism
market. They must groom loyalty and relationship with every guest. Addition-
ally, gathering data from competitors and potential guests on the market can
also create new trends in tourist offerings, which will surely be different. To
achieve this, the information that is being gained by analysing and processing
a huge amount of data is important. In addition to CRM, there is also TQM,
or Total Quality Management. It is well known that it is fully market-oriented,
driven by a tourist. These two systems are increasingly associated with the con-
temporary concept known as IQM - Integral Quality Management, i.e. Integral
Quality Management. Management information has its own specifics, and they
are conditioned by multiple elements. Specificity of tourism activities, such as
simultaneous delivery and consumption of services, has contributed to the ne-
cessity investment in new technological innovations. In addition, the tourist of-
fer, in particular in the hotel industry, is homogeneous, static and non-elastic,
which means that it can be difficult to adapt in the short term to sudden chang-
es in the tourism and global markets. There is important timely information
that would have the effect of reducing the level of surprise or anticipating future
trends and information that is being influenced in response to the contempo-

10
rary challenges. In addition, the specificity is also in the way of communicating
with the market, which is changing faster and more frequently. By implement-
ing information management in the hotel industry’s business, competitiveness
is achieved. A large number of information and data is collected, which can be
processed and exploited in the best possible way with the help of up-to-date IT
decision support systems. This is also supported by Bakarić (2010) research,
who states that “modern information systems and web portals include all rel-
evant information updated on time” and that “the next step in creating a tourist
destination is networking various tourist, services, manufacturing, cultural and
historical tourism sources through information technology and information
systems” (Bakarić, 2010, p. 32).

.. Relation between business communication,
marketing and ICT
ICT-abbreviated in English for Information and Communication Tech-
nology is of paramount importance for any major contemporary company. By
designing and implementing a technology development strategy, as part of its
operating strategies, the company has a strong influence on business communi-
cation in the field of marketing. Marketing is nothing but business communica-
tion with the market. This is where marketing activities play a major role and
they need to be conducted in the right place at the right time (Bruža, Lugarić,
2017, p. 126). The segmentation strategy of the company easily finds its market
niche and is more easily oriented to the target segment. By positioning strat-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
egy, the company actually positions its product assortment into consumer’s
heads. In this strategy, it is imperative to understand the wishes and needs of
the consumer, which is not an easy task. When a manager cannot identify the
internal psychological phenomena occurring in consumers then a psychologist
intervenes. This is in favour of the fact that experienced psychologists work in
American companies in the marketing department. Additionally, there is a mar-
keting mix strategy, based on analysis of the current state of affairs, determina-
tion of goals and control of strategic results especially for each part of that mix,
specifically for promotion, distribution channels, product and price. Promotion
is even deeper, with so many special studies in the promotional sphere, which
are already mentioned in the field of business psychology in tourism and hos-
pitality. Therefore, so many subspecialties have developed: propaganda, pub-
licity, promotional sales, personal sales, public relations and patronage. Tour-

11
ism spending is a kind of process that begins before the act of buying a tourist
product. When a potential consumer decides to purchase a particular product,
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

that product has to fulfil all his needs and wishes. So, in the first stage of the
process, an enterprise can influence on a potential guest, by taking care of busi-
ness communication, so one part of the job will be focused on modifying the
existing product range, and in the same time using all the available information
and communication technology, in order to offer everything that a guest needs.
When a consumer develops his awareness of desire and need, he decides to en-
ter the market, whether it is a service or a commodity, and he starts searching for
the satisfaction of his inner wishes. There is a need to differentiate the degree of
consumer engagement on the market. There are consumers with a high level of
involvement that will explore all the information that is available on that mar-
ket. Then there are those with a low level of involvement, which means they are
not exploring at all, showing little interest in what they are buying and receiving
the only information from the first bidder. Regardless of which market segment
it is and what level of consumer it is, it is important to discern consumer atti-
tudes. Attitude is a relevant segment when profiling tourists since it plays a part
in marketing research and practices (Bruža, Lugarić, 2017, p. 126). Attitudes
are adaptive abstractions or generalisations of the functioning of the environ-
ment, which are expressed as predispositions for the assessment of an object,
concept, or symbol (Foxall, et al., 2007, p. 103). According to this definition, it
can be said that a consumer acquires an attitude based on the perception of the
environment and also represents a set of symbols that help in the organisation
of psychological and physical activities. The concept of consumer attitudes is
essentially related to the likes or dislikes in relation to the product, whether
it is a commodity or a service. These attitudes are important for marketing, as
they predetermine consumer intentions and behaviour toward marketing while
providing certain information that a marketing expert or a psychologist uses in
marketing strategy. Attitudes are also important to managers because of their
expected impact on behaviour, as attitudes are just used to segment the market,
develop new products, and predict their success, market power rating, or the
failure of a product placed on the market. This results in the importance of
successful communication and use of technology because no manager can find
the true desires and needs of consumers in the market if they do not use mod-
ern communications technology and quickly access key information. The fact is
that psychologists are employed in marketing departments in North America
because it is the segment where the knowledge of the reaction in business com-

12
munication and connection with the market is more important than financial
analysis. It should be emphasised that neither business psychology nor finan-
cial management can actually function without one another when it comes to
the tourist market. If the company does not look after its employees, business
partners, suppliers, and potential consumers, then it cannot be expected to ex-
perience success because it will turn the market away precisely on the basis of
psychological manipulation. To achieve this, information technology has to be
implemented, which will facilitate and speed up communication, both inside
and outside the hotel system.

4. RESEARCH RESULTS AND ANALYSIS
In order to explore the attitudes and opinions of employees in the hotel in-
dustry, a primary research was conducted. The aim was to investigate the impact
of information and communication trends on business communication in the
hotel industry. The influence of information-communication trends on busi-
ness communication is an independent variable. Also, the secondary goal was to
find out the extent to which ICT affects the quality of business communication
and how well employees in the hotel industry are aware of the interdependence
of trends in communication and information transfer at their hotel. For the
purpose of a primary research, the following hypothesis was set:
H: Information and communication trends have a significant impact on busi-
ness communication in the hotel industry.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
To test this hypothesis, empirical research was carried out using a survey
methodology, whose results were processed by statistical and descriptive meth-
ods. The survey was distributed by email to employees in the hotel industry. For
the purposes of this research, a sample of 80 respondents was taken, from five
hotels in Split. Three of them are five stars hotels, and two of them are four stars
hotels. These five hotels work through all year, all of them have high standards,
and all together have 815 rooms. Considering those criteria, it was the safest
way to reach a certain number of the employees, to fill the survey. A total of 80
respondents were interviewed, namely 38.75% female and 61.25% male. Most
of the respondents were 28-38 years old (32.5%), followed by a group of 38-48
years (30%) and 48-58 years (21.3%). Regarding the status of the respondents
at the hotel, 75% are in full-time employment, while only 16.2% are in perma-
nent seasonal status. Out of the remaining 8.8%, 5% have a student contract

13
and 3.8% are employed on part-time basis in their hotel. Most of the respon-
dents live with their partner: 48.8% of them. 22.5% live with their parents, 15%
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

live in a community with the whole family, and 13.8% of respondents live alone.
When looking at household size, 36.3% of respondents live with 2 to 3 members,
31.3% with 3 members and more, 18.8% with one member and 13.8% are single.
Looking at their household income, the biggest number of households is in the
income group 7,000-8,500, 40% of them, followed by households with 8,500-
10,000 kuna and over 10,000 kuna, 21,3% and 11,2 % are in the income group
of 5,500-7,000 kuna. 6.3% have revenues of less than 5.500 kunas. Of the total
number of respondents, 67.5% live in a city with 100,000 inhabitants and more,
25% in the city are in the size of 50 to 100,000 inhabitants, 5% in towns with
less than 50,000 inhabitants, and only 2, 5% live in the village. Looking at the
level of education, 45.5% of them have high qualifications, 37.9% have secondary
education (high school degree) and 16.7% have a postgraduate specialist degree.
Based on the collected data, an analysis was carried out, resulting in interest-
ing results, which are in favour of the stated hypothesis, which will be outlined
below. The respondents were offered a total of 16 questions with the offered
answers, and at the end of the survey was a set of questions with short answers
of yes or no. 62.5% of respondents said they preferred the official email as a
business communication tool, while the lowest preference was for the use of a
private email for business communication purposes - only 6.3%. The most com-
mon form of business communication is directly or face to face, which depends
on the workplace and position in the hotel. But in this survey, 71.3% said that
they commonly communicate directly or face to face, while 7.5% of the others
communicate via private email. In regards to the use of official email, as a means
of business communication, 66.3% of them report it. 53.8% of the respondents
argued that without direct contact face to face they would not be able to com-
municate, while the least-used are written messages on the paper, 2.5%. Table 1
below shows the percentages of respondents’ responses in three questions, with
8 offered responses, with the possibility of choosing more answers in each ques-
tion. The preferred and most common business communication in the hotel is
done directly, face to face, while the hotel’s business needs the official email. The
least used and preferred are written messages on paper and private email. How
much the information and communication technology trends have influenced
the change of preferences and ways of business communication is visible.

14
Table 1. Frequency of Business Communication Attributes
Necessary
Frequently Preferred to
Atribute for business
used (%) use (%)
communication (%)
Private email 7,5 6,3 6,3
Official or public email (shared email used by
66,3 62,5 56,3
two and / or more employees at the hotel)
text and / or voice messages via cell phone 22,5 23,8 28,7
social network (chat, video calling, combined) 42,5 40 42,5
call (phone, cell phone) 53,8 50 46,3
directly face to face (live or via video link) 71,3 60 53,8
written messages on paper 8,8 7,5 2,5
mixed (depending on the time, place, mode,
51,2 38,8 32,5
type and content of business communication)
Source: Authors’ analysis according to research

As the respondents were able to choose more answers, 2/3 of total respon-
dents, most frequently selected official email and face to face for all three ques-
tions. The third group of attributes chosen by the frequency are social networks
and mixed (depending on the time, place, mode, type and content of business
communication). There is a visible progress in the usage of modern technology
for information transfer. In the way of means of business communication, ICT
has the most impact on official email and social networks. 57.5% of the respon-
dents indicated that information and communication trends mostly affect the
usage of official email as a means of business communication, which confirms
the percentage of responding.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Graph 1. Official or public email (shared email used by two and/or more em-
ployees) in %

Source: Authors’ analysis according to research

15
Out of the total number of respondents, 56.3% selected social networks as
the second most common attribute that is subject to information and commu-
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

nication trends. It has the least impact on written messages, which is under-
standable. Graph 2 shows the degree of selection of social network attributes
for business communication purposes.

Graph 2. Social network (chat, video calling, combined) in %

Source: Authors’ analysis according to research

It is still the most important personal contact, that is, employees in hotel
systems still mostly communicate via business directly by face to face. For each
asked question, this attribute was chosen by more than 50% of the respondents,
and the third graph shows the relationship with the frequency of usage, the pref-
erence for business communication in this way and by importance in general.

Graph 3. Directly face to face (live or via video link) in %

Source: Authors’ analysis according to research

16
For analysing the intensity of usage of some means of business communica-
tion, the answers are weak intensity (1-3 hours), average intensity (half-time)
and intense intensity (full-time). The same attributes are offered as in the pre-
vious questions. In general, SMS and MMS on mobile and smart phones are
used with the least intensity as a mode of business communication. With the
strongest intensity, most of the respondents selected official email, which they
use for most of their working hours. Upon completion of the analysis of the
responses, it was concluded that more than 75% of respondents use most com-
monly official emails, which they prefer and most often use this for the purpose
of business communication. The least of usage are written messages on paper.
What is interesting in this part of the survey is the fact that 42.5% of respon-
dents use social networks when communicating in the hotel where they work.
40% prefer such business communication, and 42.5% think social networks are
necessary for business communication at the hotel. It also contributes to the
tested hypothesis. It may be expected that in the forthcoming researches this
percentage will be significantly higher, assuming that information and commu-
nication technology continues to develop and that trends are also present in
these areas.
Part of the questions is related to the quality of business communication, in-
fluenced by information and communication trends. To the question how satis-
fied are they with the quality of business communication in their hotel, thinking
about information and communication performance, 55% of respondents said
they were satisfied, 27.5% were very satisfied, but 13.7% were neither satisfied
nor dissatisfied. 3.7% of respondents are not satisfied with the quality of busi-
ness communication in their hotel. Furthermore, 46.3% of respondents stated INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
that business communication in their hotel was of high quality, meaning that
most information was received and sent in a time. 27.5% of respondents agree
that it is of the highest quality, while 20% think that the level of business com-
munication is average. 6.3% are dissatisfied with the quality level. Of the total
number, 58.2% of respondents said that most of the information received was
true and 31.6% of respondents believe to all received information and consider
them true. Still, 10.1% thinks that half of the information received is untruth-
ful. This is an indication that employees in hotel systems are somehow sceptical
and the truth of information is affected by trends in information and communi-
cation technology. The next question was about knowing the types and ways of
business communication at the hotel, to which 44.3% of respondents said they

17
knew all kinds and trends, but used only certain types of business communica-
tion. 22.8% state that they do not know all trends and types of business com-
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

munication, but of those who know, 20.3% know all trends and all types of use,
and 12.7% do not know all the trends or use all kinds of business communica-
tion they use in their hotel. Looking at the overall impression of knowledge of
information and communication trends, 42.5% know most trends, 21.3% know
half of the trends, 20% are fully aware of all trends, 15% do not know enough
trends, and 1.2% of respondents do not know what the trends are.
Also, there was a question of what type of communication is more suscepti-
ble to changes and impacts on ICT trends, i.e. in which percentage respondents
think that ICT trends in their hotel have the most influence, given the type of
communication. 52.5% of respondents think that both oral and written com-
munications are equally subject to the influence of ICT. 27.5% think that ICT
has more to do with writing communication, while 20% believe that oral com-
munication is more susceptible to changes in ICT. Further, in this part of the
survey are analyzed elements that are important of maintaining quality busi-
ness communication. The possibility of multiple responses was given. 61.3%
of respondents stated that it is important for them to get all information about
the products and services their enterprise offers to guests. For 48.8% of respon-
dents is also important the implementation and development of information
and communication technology at the hotel, while the least important element
to maintain quality communication is knowing general information from all
departments, which is confirmed by 33.8% of respondents.

18
Graph 4. Importance of receiving information regarding the type of information

Source: Authors’ analysis according to research

At the end of the survey, there was a set of questions, with short answers to
yes or no, regarding the correlations of information and communication trends
and business communication. Given the readership of the hotel bulletin, 34.2%
read most of the year, 21.1% of respondents read each bulletin, and 22.4% read
some newsletters. 13.2% of them do not read newsletters at all, which is also
an indication of how closely they are attending events in their hotel. The re-
maining 9.2% read very few bulletins throughout the year. With regard to com-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
munication media, respondents gave a grade of satisfaction with the quality of
business communication. Most of the respondents are the most satisfied with
the website of the hotel, and are very satisfied with the form and customised
settings in email, with the hotel blog largely indifferent, while dissatisfied with
mobile applications. In the final part, there was also a set of short questions,
with short answers to yes or no. The vast majority of respondents, 55 out of 80,
confirmed that their superior is competent in knowing and tracking all the in-
formation and communication trends in the hotel. The largest number of nega-
tive responses was noted on whether employees were given a commendation
in promoting information and communication trends in their hotel, with 46
responding negatively. It is concluded that there is still no developed remunera-
tion system in the hotel systems and the promotion of education in the domain
of information and communication technology as a tool for successful business

19
communication. An equal number of positive and negative answers related to
the question of whether people have talked to someone in the last half of the
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

year about learning and using modern information and communication trends
to improve business communication at the hotel.
The above-mentioned indicators and results imply the conclusion that busi-
ness communication systems subjects to information-communication trends,
i.e. ICT significantly affects the quality of business communication. Employees
are not fully educated about new trends, nor are their superiors. But there is
intent of expanding knowledge in this area to achieve better quality lf business
communication, creating a positive business image of their hotel. As a main
conclusion, it is a positive fact that almost half of the respondents want to re-
ceive accurate and timely information on the implementation and development
of information and communication technology in the hotel they work, as can be
seen in the previous graph.

5. CONCLUSION
Communicating is felt by the attitudes and relationships of the interlocutors
and it causes various consequences, which can be manifested positively or nega-
tively. Business psychology specifically observes the movement of the body, the
expression and colour of the face, tone and colour of voice, various movements
and other behaviours that reveal the real situation in which the interlocutor is
located. Management communication is far more complex, so it needs to be
specifically explained. Namely, it obtains all forms and types of communication,
and various ways and styles of communication management in the enterprise,
whose activities and outcomes are accompanied by business psychology. A man-
ager in the hotel system should first of all be aware of his technical skills, then
be capable of working with employees, and apply the acquired knowledge to
the development program of the company in which he is employed in. Busi-
ness psychology has the task of seeing all phenomena, defining and classifying
them, carrying out professional analysis, which can explain how hotel work-
ers can solve, reduce or completely eliminate all communication interference in
business communication in the future. As it is well known that tourism con-
sumption begins before the act of buying a tourism product, it is important
to have a quality information system. It serves as support to hotel marketers,
as well as to all hotel workers who will have access to important information

20
through it, and efficiently navigate all the needs and provide hotel guests with
everything they expect and want. As the tourism market develops following
globalisation trends, especially in the area of information and communication
technology, it is important to systematically develop a culture of business com-
munication among hotel workers. Today’s trends in this regard show that guests
dictate what kind of communication they want. In addition, it is necessary to
nurture the development of communication culture and the improvement of
communication levels among employees. For the purpose of this paper, research
was conducted among employees in hotel companies. The aim was to deter-
mine the level of influence of information-communication trends on the level
of business communication, with the aim of pointing to the importance of the
quality of business communication quality of employees in the hotel system,
without which the information system would not have any sense. The main hy-
pothesis of research is that information and communication trends have a sig-
nificant impact on the business communication. According to the results of the
research, the conclusion is that information and s trends and technologies have
a significant influence on the manner and quality of business communication.
Without the quality of business communication, it is impossible to implement
new trends. This is pointed out by the results, obtained by examining which
type, means and medium of business communication are most commonly used,
which are preferred, and which are necessary for communication in a modern
business world. It is also evident that there is still not a serious awareness of the
need of expanding the knowledge in ICT. This represents the bearer of success-
ful and high-quality business communication, since most respondents have not

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
been given a commendation for promoting trends in this area, during their time
working at the hotel.

21
REFERENCES
Bakarić, T. (2010). Information system in tourist offices as a tool for better coordination
Dino Bruža  Andreja Rudančić: INFLUENCE OF INFORMATION-COMMUNICATION TRENDS ON BUSINESS COMMUNICATION IN HOTEL INDUSTRY

between public and private sector. 7th International Scientific Conference, Management in the
Function of increasign the Tourism Consumption. Perić, J. (ur.). Opatija, Croatia. 7 October
2010, p. 23-35
Brajša, P. (1993). Management Communication, Discussion, Problems and Conflicts in the
Enterprise, Society for the Development of Information Literacy, ISBN 953-636-3011,
Zagreb
Bruža, D., Lugarić, A. (2017). Special city programs in the function of growth and develop-
ment of tourism and hospitality offer, Interdiscplinary Management Research XIII, Barković,
D. & Runzheimer, B. (ur), str. 121-137, ISSN 1847-0408, Opatija, 19-21. May 2017, Eko-
nomski fakultet u Osijeku & Hochschule Pforzheim University of Applied Sciences, Osijek.
19 May 2017, p. 121-138
Cerović, Z. (2003). Hotel management, Faculty of Tourism and Hotel Management in
Opatija, ISBN 953-619-8347, Rijeka
Cerović, Z. (2010). Hotel management, 2nd edited edition, Faculty of Tourism and Hospi-
tality Management in Opatija, ISBN 978-953-6198-76-4, Rijeka
Vujić, V. (2005). Human Capital Management, 2nd Edition, Faculty of Tourism and Hospi-
tality Management in Opatija, ISBN 953-6198-44-4, Rijeka
Fox, R. (2001). Business communication, Croatian University Fee, ISBN 953-169-055-3,
Zagreb
Foxall, G.R., et. al. (2007). Marketing Psychology in Marketing, Naklada Slap, ISBN 953-
191-330-7, Zagreb
Galičić, V., Šimunić, M. (2006). Information Systems and Electronic Business in Tourism
and Hospitality, Faculty of Tourism and Hospitality Management in Opatija, ISBN 953-
6198-57-6, Rijeka
Nierenberg, J., Ross, I.S. (2005). The secrets of successful bargaining, an effective strategy
for improving your negotiating abilities, Školska knjiga, ISBN 978-953-0-60822-1, Zagreb
Rijavec, M. (1995). A Successful Manager, Everyday Management Methods, MEP Consult,
ISBN 953-96029-0-4, Zagreb
Stipanović, C. (2006). Concept and development strategy in tourism, Faculty of Tourism
and Hospitality Management in Optija, ISBN 953-6198-90-8, Rijeka

22
IMPLEMENTING SPREADSHEETS
IN MANAGEMENT ACCOUNTING
COURSE: AN EXAMPLE OF
BUDGETING AND SCENARIO
ANALYSIS

Nemanja MILANOVIĆ, M.A.
Faculty of Organisational Sciences, University of Belgrade
E-mail: nemanja.milanovic@fon.bg.ac.rs

Lena ĐORĐEVIĆ, PH. D.
Faculty of Organisational Sciences, University of Belgrade
E-mail: lena.djordjevic@fon.bg.ac.rs

Nela MILOŠEVIĆ, M.A.
Faculty of Organisational Sciences, University of Belgrade
E-mail: nela.milosevic@fon.bg.ac.rs

Abstract

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
In the last few decades, there has been an ongoing discussion among research-
ers and practitioners about the growing need for universities to comprehen-
sively introduce information technology in management accounting education.
The extant literature provides evidence of the prevalent use of spreadsheets
in capturing, analysing and interpreting data in management accounting.
Even more, spreadsheets have become an important tool for simulation and
decision making. To be prepared to respond to evolving requirements of em-
ployers and accounting profession in general, students should be enabled to
develop a range of specific analytical and IT skills and competencies. This pa-
per provides some guidelines and recommendations for spreadsheet modelling
implementation, aimed to facilitate knowledge acquiring. The application of
spreadsheets in management accounting course is presented through the case
studies of cash budget creation and capital budgeting. Additionally, basic steps

23
of What-if analyses and Scenario Manager technique are described. Evidence
gathered and literature analysis suggests that implementation of spreadsheets
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

and spreadsheet modelling in this course provides students with more com-
prehensive insight into real-world, problem-solving and applicative business
environment.
Key words: management accounting education, spreadsheet modelling, sce-
nario analysis
JEL Classification: M41, M49

1. INTRODUCTION
In the last few decades, the accounting profession has received the immense
attention from both scholars and practitioners in the field. Nowadays, because
of technological progress and globalization, the world economy decreased the
information costs and increased the competition among different market play-
ers (Kavanagh & Drennan, 2008). Consequently, the Pathways Commission
(2012) pointed out a need for education improvement in line with the present-
day environment and growing demands on accounting professionals. Necessary
competencies of accounting professionals include quantitative methods, ana-
lytical thinking and problem solving. Technology competencies comprise high-
level skills in the development and use of spreadsheet models (Lawson et al.,
2014).
In today’s business environment, spreadsheets (e.g. Excel) are widely applied
standard calculation engine. Leong and Cheong (2008) point out that spread-
sheets have a very important role in business modelling, analysis, and decision
support. As a result, educators and students in the field of accounting today
are faced with the pressure of employers seeking a various range of skills and
competencies of new accounting graduates. Kavanagh and Drennan (2008)
examined perceptions and expectations of two major stakeholders: accounting
students and employers. Their research showed that students know what em-
ployers expect from them: good way of communication, analytical skills, team-
work orientation, as well as business awareness and real-world problem-solving
skills. In order to reconcile expectations of students and the requirements of
employers, universities should develop accounting programs that prioritize and
deliver additional skills and attributes to their students. Additionally, leading ac-
counting associations and standard setters (American Accounting Association

24
– AAA, the Association to Advance Collegiate Schools of Business – AACSB,
the American Institute of Certified Public Accountants – AICPA) invites uni-
versities to incorporate different accounting technologies used in practice into
accounting curricula in order to enhance students’ skills necessary when they
enter the accounting profession (Willis, 2016). There are many contentions
that technology is one of the prime drivers of an education paradigm change
(Polly et al. 2010). Although technology facilitates learning and teaching, there
is still an ongoing debate on the key factors of effective technology application
in education. However, there is the broad body of evidence that technology can
positively affect education efficiency when the right conditions are met (Honey,
Culp & Carrigg, 2000).
Spraakman et al. (2015) pointed out that “the role of the management ac-
countant has shifted from capturing and recording transactions to analyzing
business issues”. Nowadays, preparing financial ledgers and comprehensive re-
ports are almost impossible without information technology and spreadsheet
solutions. Spreadsheets are a very important tool for planning, budgeting, fore-
casting as well as decision-making processes (Bradbard et al, 2014). Other top-
ics within accounting those could benefit from spreadsheet solutions are “target
costing, economic order quantity, profit planning, cost–volume–profit relation-
ships, linear programming, audit sampling, and standard costing” (Togo, 2004).
Since 1979 and introduction of VisiCalc, the spreadsheet has been used
in capturing, analyzing and presenting data in accounting (Moussalli, 2005).
France (2010) investigated practices within management accounting job adver-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
tisements and found that nearly 60% of advertisements insisted on knowledge
of MS Excel. In addition, Madahar (2011) proved that 77% of the interviewed
Cardiff School of Management graduates rated spreadsheets as “very impor-
tant” and “critical” in their positions. A growing stream of literature suggests
MS Excel as most common spreadsheet software in accounting education
(Hyvönen, Järvinen & Pellinen, 2006; Ringelstein, 2009; Ramachandran Rack-
liffe & Ragland, 2016; Frownfelter-Lohrke, 2017), contributing to students’
technological competencies and understanding of accounting concepts (Con-
very & Swaney, 2012). Nevertheless, Convery and Swaney (2012) suggest that
introduction of spreadsheet tools into accounting education courses is rational
and justified when the benefits to students learning to overshadow the cost of
implementation. Management sciences, particularly those related to finance, get
a new perspective thanks to different spreadsheets that can be used as a support

25
in the process of making decisions (Moncarz & O’Brien, 1988; Powell & Baker,
2004; Howcroft, 2006; Sentence, 2008).
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Although education institutions use MS Office, the application of practical
tools is generally missing from MS textbooks (Markham & Palocsay, 2006).
Ramachandran Rackliffe and Ragland surveyed 245 faculty members at over
100 accounting programs, finding that MS Excel is incorporated in account-
ing classes in the majority of examined programs. Nevertheless, this study also
shows that faculties find their students not fully proficient in Excel, preparing
the stage for accounting course redesign to improve students’ technological and
analytical performance (Spiceland, Spiceland & Schaeffer, 2015). However, it
must be noted that although spreadsheet software such as MS Excel represents
a powerful analytical tool, before entering accounting profession, students still
lack programming experience critical for creation, application, and utilization of
spreadsheet models (Frownfelter- Lohrke, 2017).
The rationale for conducting this research lies in the disproportionate
presence of theoretical knowledge and practical implementation of IT-based
accounting solutions in accounting courses’ curriculum. The paper tries to
promote and explain the application of the Excel Scenarios tool within Man-
agement Accounting course. More precisely, it is based on a cash budget and
capital budgeting example in MS Excel and their explanation through the ver-
bal, graphical and mathematical model. The course’s lecturers noticed that stu-
dents are familiar with features of sensitivity analysis in terms of general theory
knowledge, but usually, they do not have an opportunity to test and apply that
knowledge in solving real-world business cases using a spreadsheet or similar
IT tools. The authors presented the processes of creating cash budget and sce-
nario analysis using MS Excel tools based on two examples from Mayes (2012),
as well as capital budgeting and profitability index calculations.
This paper is organized as follows. Section 2 provides guidelines for incor-
porating spreadsheet modelling in management accounting course and thor-
oughly explains the application of these models for the purposes of cash budget
creation and capital budgeting. Section 3 is reserved for concluding remarks.

26
2. INCORPORATING SPREADSHEET
MODELLING IN MANAGEMENT ACCOUNTING
COURSE  GUIDELINES
Some of the main issues of incorporating spreadsheet modelling in educa-
tion consider domain knowledge and implementation guidelines. Authors of
the paper argue domain planning and spreadsheet implementation based on
the cash budget and capital budgeting case studies. Often spreadsheet users,
especially novices, start spreadsheet modelling directly in a spreadsheet without
verbal, graphical and mathematical model or any plan. Consequently, relevant
facts underlying the problem can be missed out. Even more, for a student who
lacks sufficient understanding of the subject matter, it could easily become the
bane. If student misinterprets or is unable to interpret the problem assigned,
even if it is developed, his spreadsheet model will be certainly erroneous. In
order to overcome this problem, modelling should start with a verbal model.
The verbal model includes a verbal description of the model elements and their
relations. Next step of problem understanding is a graphical model (flow dia-
gram, block diagram, influence diagram etc.). Drawing diagram or picture of
the transaction should make easier recognition of all facts relevant for problem
modelling. A graphical model is followed by a mathematical model, represent-
ing transformation rules of elements by mathematical relations. Finally, based
on mathematical formulas students should create spreadsheet formulas. Even
more, in the beginning, it is desirable for students to solve the assigned problem
as homework, using only pencil and paper, and in that manner prepare them-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
selves for the described spreadsheet model creation steps.
Another important question of implementation is spreadsheet model design.
The flawless design is a crucial prerequisite for updating and continuous usage
of spreadsheet over time. The most fundamental design implies a separation
of input, calculation and output sections of a spreadsheet. Input data should
be separated from formulas due to the risk of inadvertent deletion of formula
instead of data. Formulas should use cell references above or left from the cur-
rent cell in order to reduce the risk of a circular reference and improve flows
visibility. Hard coding should be avoided. Constants included in a formula are
hidden and lead to error if input data are changed. Additionally, the simulation
process is more difficult. The layout of the input section should be presented in
a consistent manner that enables easy data entry. Output section layout should

27
provide visibility and understanding of model results. Some authors suggest
cascade design, where input, calculation and output sections do not appear in
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the same row or column. In this way adding or deletion of a row or a column
in one section does not affect other sections. Furthermore, students should pay
attention to absolute and relative references and order of arguments in func-
tions. Creation of functions can be facilitated by using of Insert function block
with described functions and their arguments. Data Validation and Conditional
Formatting techniques, also, have potential to reduce the possibility of error.
Described steps and guidelines represent just a small portion of recommen-
dations and rules related to spreadsheet modelling. However, usually, students
are not familiar with them. Furthermore, they are considered difficult to ap-
ply. In order to facilitate spreadsheet best practice adoption, students should
be given a step-by-step checklist for a model creation or a template for solving
the problem. The completed template, that demonstrates good spreadsheet de-
sign, can be used for exercise. Changing of inputs and observing of resulting
outputs should enable students to understand the logic behind visible spread-
sheet model elements. Another exercise for students includes deconstruction
of a final spreadsheet solution, in accordance with the model creation checklist.
After analysis of inputs, calculation (algorithm) and output sections, conclu-
sion or business decision should be made as a result of this analysis. Next level
of spreadsheet modelling exercises includes a blank template, where students
should insert the correct formula to solve the problem. This exercise is aimed at
practicing of rules about absolute and relative cell references, hard coding in a
formula and functions, Insert Function block etc. The simple testing procedure
includes a comparison of a spreadsheet model output with independently calcu-
lated results (for example, test data from a textbook). If students enter numbers
form textbook example in the model and outputs matching, that will provide
positive feedback about spreadsheet accuracy. When the model is finished stu-
dents can perform simulation in order to compare different strategies and make
a decision.

.. Case Study : Cash Budget Spreadsheet Modelling
It must be noted that cash budget is one of the most valuable budgets in the
master budget (Hansen & Mowen, 2006). In order to know when to borrow
cash and to repay the loans, the manager should know cash inflows and out-

28
flows on the regular basis. Available cash takes into account the beginning cash
balance and all collections made during the period. The primary source of cash
in any type of business is related to sales activities, where companies use past ex-
perience to define the percentage of credit sales. The cash disbursement part of
cash budget lists all planed cash outflows for the period. It is worth mentioning
that depreciation is never included as a cash disbursement. Companies strive
to keep the lowest amount of cash on hand, but minimum cash balance allows
them to make unplanned purchases or to solve unexpected financing hurdles.
On the other hand, in case of cash surpluses, there is an opportunity for repay-
ing loans or making some investments. The lack of cash will force a company to
consider borrowing the necessary amount. The last line in every cash budget is
the ending cash balance.
The example presented below has specific learning objectives, enabling stu-
dents to:
1. Make a well-designed cash budget in Excel based on the business situation;
2. Calculate an expected ending cash balance and see whether there is a need
for a short-term loan;
3. Use What-if analyses and the Scenario Manager to make a decision about
the month when capital investment should be made;
4. Know how to make a scenario summary of a cash budget.
The example used for this study is based on the one presented in Chapter
3 in Mayes (2012), dealing with the creation of a cash budget at “Mark&Co”, a
small manufacturer of barbecue grills. In order to create the proper spreadsheet,
the first step is to understand the verbal model. The firm’s employees have the INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
following set of assumptions and expectations which will be valuable for the
cash budgeting process.
• Real and assumed sales for October are presented in Table 1.
• 40% of sales clients pay in cash. Remaining 60% of sales are described
as follows, 75% is collected in the next month and 25% is collected two
months after the purchase has been made.
• Costs for raw materials inventory are 50% of the sales which will be made
in following month (e.g., July costs are 50% of expected August sales).
60% of costs are realized in the month after the purchase has been made,
and the rest is paid next month.

29
• Wages are assumed to be 20% of expected sales.
• Monthly costs of leases for equipment are $20,000.
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• Interest payments of $40,000 on long-term debt should be made in June
and September.
• A $30,000 dividend will be covered in June.
• Tax prepayments of $15,000 will be realized in June and September.
• $200,000 is planed to be paid in July for a capital investment, but manage-
ment is flexible; they have not decided on a date.
• Mark&Co must keep minimum $15,000 in terms of cash because of
the arrangement with the bank. The ending cash balance for May was
$20,000.

Table 1. Mark&Co’s actual and expected sales for 2012
  Apr. May June July Aug. Sep. Oct.
Sales 250,000 300,000 330,000 350,000 250,000 150,000 100,000

A simple diagram of factors which influence ending cash balance is shown
in Figure 1.
Figure 1. Ending cash balance influence factors

The broad body of management accounting literature suggests that ending
cash balance calculation can be represented by the mathematical formula (1):
ECB=BCB+TC-TD=UCB+CB (1)

30
where ECB stands for Ending cash balance, BCB for Beginning cash balance,
TC for Total collection, TD for Total disbursements, UCB for Unadjusted cash
balance and CB for Current borrowing.
Before scenarios development, it is necessary to create the best possible tem-
plate for cash budgets in Excel spreadsheet. Creating a cash budget template
enables students to learn how to use general functions, how to organise their
plan in order to get better results, and to understand how different variables
impact future decisions. An unstructured template may lead to the wrong direc-
tion and unexpected results. The case presented in this study takes into account
collections and payments as inputs, and the expected ending cash balance at
the end of each month as the first output. Additionally, it considers short-term
loan obligations. Step-by-step checklist or instructions for template (Figure 1)
creation can be given as follows:
• Input section
- The starting point for a cash budget is the sales forecast which is usually
received from the marketing department. For most firms, at least a por-
tion of sales is made on credit. In the presented example, 45% (= 0.60
× 0.75) of total sales, regardless the month when it happened, will be
collected during next month, and 15% (= 0.60 × 0.25) will be collected
in next two months.
- The row Collections presents all collections from the sales made in cash
or within instalments. Collections from the sales made in the previous
month are indicated in row First instalment, while row named the Sec-
ond instalment indicates collections on sales made two months earlier. INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

- The next input refers to the payments made for inventory purchases.
The attention on credit purchases must be paid because they are not
cash outflows. Treatment of purchases and payments is based on the
same logic as collections.
- The last section of inputs does not require building complex relation-
ships between the cells besides entering remaining labels and numbers
which represent disbursements.
• Calculation section
- After completion of the input section, the problem solving proceeds
with calculating how much cash to borrow using IF formula in Excel.

31
That calculation can be defined as follows (2): “If the unadjusted cash
balance is less than the minimum, then an amount equal to minimum
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cash – unadjusted cash will be borrowed. Otherwise, current borrow-
ing is zero.”

UCB, UCB  min RCB*
CB= (2)
0, otherwise
*
required cash balance
- This section is focused on paying back the short-term loan. In August,
the firm expects a large unadjusted cash balance which could be used
for paying loan obligations. For this purpose, MIN function is used in
order to calculate the required ending cash balance at the end of each
month.
- The section additionally contains all elements necessary for output
calculation.
- Part of model entitled Changing cells refers to the position intended for
simulation of values for investing.
• Output section
- The last section of the cash budget is the final result and consists of
the anticipated ending cash balance at the end of each time period
(month). This is very important part because a manager will make a
decision about a short-term loan. A mathematical model shows the
formula required for determination of the firm’s ending cash balance.
After the introduction of basic features of the template to the students, the
next step is What-if and Scenario analysis. These tools should enable students
to understand consequences of different decisions. In our example, Mark&Co
management is flexible about the capital investment of $200,000. The simu-
lation should be used in order to determine the best period for making the
investment.

32
Figure 2. Cash budget worksheet template

Scenario analysis allows students to try different things by simple varying
of the month in which the capital expenditure is planned. This tool provides a
history of several scenarios in the spreadsheet with the opportunity to display
them whenever it is needed. When inputs of the scenario are defined, students
should just choose a scenario from the list and predefined numbers will appear
into the selected part of the spreadsheet. The model will be changed automati- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

cally. Scenario manager dialog box (Figure 3) shows four scenarios which man-
agers should use in order to make this capital investment decision. Step-by-
step checklist or instructions for What-if and Scenario analysis can be given as
follows:
- To find this tool, go to the “Data tab”.
- In “Data Tools” group there is the “What-If Analysis” button and within it
“Scenario Manager”.
- When the dialog box is displayed, scenarios should be developed.
- For the beginning, choose the “Add button”.

33
- In the next dialog box write “Expenditure in June” for the “Scenario name”.
- The “Changing cells” will have different numbers for each scenario.
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

- Because in the first scenario the expenditure should be made in June, enter
200.000 in the first box and 0 in all other cells.
- After creating scenarios, the “Scenario Manager” dialog box will appear
(see Figure 3).
- In order to present a particular scenario, one should just choose it from the
list and press the “Show button”.
- It’s important to have in mind that Excel always shows the last selected
scenario.

Figure 3. Scenario manager dialog box

The most important benefit of the “Scenario Manager” is its ability to show
the results of all possible scenarios. This procedure has the following steps:
1. Go to the “Scenario Manager” and click on the “Summary button”. It is
important to use “Result cells”, which is a cell (or several cells) that shows
the end result of each scenario.

34
2. Press “OK button” and a spreadsheet will create a new worksheet that
summarizes the scenario results. The report is generated immediately and
can be found in a sheet named “Scenario Summary” (see Figure 4).

Figure 4. Scenario summary for cash budget

The most important limitation of scenario analysis is related to excluding
the probability of occurrence of different scenarios. It is possible to overcome
this limitation by using simulation analysis. Simulation assigns probability dis-
tributions to key parameters of the model. Cash budgeting in Excel teaches
students how to make structured plans, how to differentiate cash inflows and
cash outflows and control all budget information. Moreover, a well-organized
budget this case study provides significantly improves students’ skills in employ-
ing financial analysis in decision making process. In addition, this case study has
shown that scenario analysis is a valuable tool for instructors in terms of teach-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ing and grading students.

.. Case Study : Capital Budgeting Spreadsheet Modelling
The term budget refers to a plan for tracking all inputs and outputs during
a particular period. Capital implies long term assets used in a company. There-
fore, capital budgeting is “the whole process of analysing projects and deciding
which ones to include in the capital budget” (Brigham & Houston, 2012). Due
to its complexity and requirement for experienced and responsible managers
able to make strategic decisions, the capital budget can be differentiated as one
of the most important budgets in a company. Considering that strategic de-
cisions deal with the development of new products, services, or markets, it is
expected to last minimum 5-10 years, requiring a 5-10-year sales forecast. If the

35
value of capital investment is too high, it will increase depreciation costs. On
the other hand, if there are not enough investments, the competitors will have
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

the upper hand and the company risks losing not only position on the market
but also customers’ satisfaction. Effective capital budgeting is crucial for making
a quality investment in a new asset at the right time. Usually, it is very hard to
choose the best possible investment, as large amounts of money are not avail-
able automatically and, finally, every decision should be supported by strong
arguments.
The crucial thing for comparing investments is to understand cost classifica-
tion. There is a big difference between relevant and irrelevant costs within man-
agement accounting literature. Relevant costs are future costs that will make a
difference in a decision. Moreover, those costs will differ among alternatives.
Irrelevant costs are historical, sunk costs, that already exist and that would not
change the investment outcome. The purpose of the case study 2 explained in
this paper is to fulfil learning objectives presented in the diagram below:

Figure 5. Learning objectives for students

The verbal model of this case study is based on Chapter 11 in Mayes (2012)
and is given as follows: The Ecco Shoe Company discusses the purchase of an
automated machine to change a one which is manually operated. The five years
old machine that is replaced originally had an expected life of 10 years. It is
depreciated using the straight-line method from $50,000 down to $0 and now
has the price of $25,000. It needs one person to operate the machine and his
salary is $19,000 per year.
Annual maintenance and defects costs for the old machine are $8,000 and
$6,000, respectively. The new machine has a price of $95,000 and an expected
salvage value of $15,000 and it is expected to be used for five years. Shipping
and installation expenses are $5,000. The new machine will be more efficient,

36
investment in net working capital would increase by a total of $3,000. The com-
pany expects that annual maintenance costs for the new machine will be $3,000
and defects cost will be $1,000. Before taking into account this project, the com-
pany runs an analysis of current facilities to define whether other changes will
be required by the putting new machine into operation. The cost of the analysis
was $5,000 and it showed that current facilities could support this new ma-
chine without any modifications. In order to buy the new machine, the compa-
ny would have to take $30,000 debt with 10% of interest rate. This will increase
interest expense for $3,000 on the annual base. The required rate of return for
this project is 12% and the company’s marginal tax rate is 30%. Furthermore,
management has required that in maximum three years the investment should
be paid back. The most important question in this case study is: Is this project
acceptable? A simple diagram of factors which influence profitability index, a
method for ranking projects, is shown in Figure 6.

Figure 6. Factors of influence on profitability index

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Step-by-step checklist or instructions for template creation (Figure 7) and
problem solving can be given as follows:
• Input section
- Constant input: list all relevant constant input data from the Ecco Shoe
problem.
- Calculated input: find out the book value of the current machine. The
book value is calculated as the difference between the depreciable base
and the accumulated depreciation. The difference column presents the
the new machine savings. The formulas are the simple difference be-
tween the current machine’s and the new machine’s costs. Excel has

37
built-in five functions for calculating depreciation: straight-line (SLN),
double-declining balance (DDB), fixed-declining balance (DB), the
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

sum of the years’ digits (SYD), and variable-declining balance (VDB).
Ecco Shoe uses the straight-line method for analysis purposes. There-
fore, the following function is used: SLN (Cost, Salvage, Life), where
Cost is the depreciable base of the asset, Salvage is the estimated sal-
vage value, and Life is the number of years over which the asset is to be
depreciated. In order to understand the example, students should use
Insert function block with described functions. It is worth mentioning
that straight-line depreciation distributes depreciation equally during
the expected useful life of the machine.

Figure 7. Insert function block and arguments for SLN function

38
• Calculation section
- Having in mind all inputs, we can continue with cash flow in order to
evaluate the potential investment. The initial outflow consists of the
new machine’s price, the shipping and installation costs, and the salvage
value of the old machine and all sales taxes.
- Further on, we can calculate the annual after-tax cash flows for the
project.
- The depreciation tax benefit stands for the savings in taxes because of
the extra depreciation expense. Additionally, depreciation is a non-cash
expense, so the effects of increasing depreciation are decreased taxes
and increased cash flow.
- The terminal cash flow is defined through non-operating cash flows
that will happen in the final period of the project. Usually, there will
also be operating cash flows that come during this period, but for the
simplification, in this example, these flows are defined as the final pe-
riod after-tax cash flows. The terminal cash flow will consist of the
expected salvage value of the new machine, taxes associated with the
sale, recovery of any investments in net working capital, and potentially
some shut-down costs.
Output section
- Once when annual after-tax operating cash flows is prepared, profit-
ability index method can be applied to make a decision about a par-
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ticular investment.
- There are five key methods that can be used in order to decide whether
or not the project should be accepted: (1) payback period, (2) discount-
ed payback period, (3) net present value (NPV), (4) internal rate of re-
turn (IRR), and (5) profitability index. In this example, we are focused
on profitability index and its usage.
- The profitability index (PI) provides a measure of the dollar benefit per
dollar of cost. An alternative name for this ratio is a benefit-cost ratio.
This ratio consists of the present value of future net cash flows and the
initial cash outflow. It can be expressed through mathematical formula
(3) such as:

39
(3)
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

where PI stands for profitability index, CF for cash flow and ICO for initial
cash outflow. If the PI is greater than or equal to 1, the project should be ac-
cepted because the benefits are higher or, at least, equal to the costs. Otherwise,
the project should be rejected. In order visualize output value of PI students
should use Conditional formatting technique in accordance with the described
rule. In our case study profitability index is 1.4396, indicating that the project is
acceptable. Profitability index considers the time value of money and takes into
account the entire life span of the particular asset. Nevertheless, it is very hard
to define proper discount rate which could be considered as the main limitation
of this ratio.

Figure 8: Capital budget template

Through the capital budgeting case study, students learn how to analyse in-
vestments and come to better decisions following particular criteria. It improves
students’ knowledge and abilities and prepares them for the real-world prob-
lems. In addition, students have a guidance and support from instructors which

40
leads to more independent work and opportunities to learn faster, not only
the subject matter but also tools and functions in Excel. Nowadays, business
is becoming a very dynamic field which fosters changes and improvements in
education. Usage of spreadsheets in class provides students with active learning
experiences which will motivate them to give their best and make a difference
in the job market.

3. CONCLUSION
This paper presents spreadsheet assignment projects, which can be imple-
mented in reasonable class time and provide students with the basics of spread-
sheet usage in the field of management accounting. Furthermore, the paper pro-
vides a step-by-step checklist for spreadsheet models creation and a template
for problem solving. The template and the checklist are aimed at improvement
of spreadsheet best practice adoption. By the time students complete described
assignments, they will have acquired knowledge in management accounting and
improved their basic spreadsheet skills.
Spreadsheets could be considered as an added value in financial manage-
ment and accounting, not only for practitioners but also for students. Usually,
students find that scenario analysis is simple and understandable, but at the
same time challenging because they need to know how to use data, interpret
conclusions and come up with different decisions. Moreover, they should know
what inputs and outputs are necessary for the analysis, as well as how to de-
sign understandable and logical worksheets. In addition, most students from
business schools will have numerous opportunities to consider different asset INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

investments through their careers. It is valuable to know the available methods,
how and when to choose the most appropriate one and how to make the opti-
mal decision. The authors of the paper strongly believe that using spreadsheets
in Management Accounting courses will improve curricula and enhance stu-
dents’ knowledge.
This investigation presents some limitations that should be considered. First,
it presents simplified examples of how cash and capital budgeting can be taught
using spreadsheets. Second, results are not confirmed and tested on students. In
the future, the work will be extended through testing of exercises on students.
Finally, future studies should be focused more on research conducted on good
examples from other Management Accounting courses, which are organized at

41
well-developed universities. The previous educational experience is encouraged
to bring more insight into how faculties should enhance their curricula with
Nemanja Milanović  Lena Đorđević  Nela Milošević: IMPLEMENTING SPREADSHEETS IN MANAGEMENT ACCOUNTING COURSE: AN EXAMPLE ...

well-organized spreadsheet examples in the field of financial management. Ac-
counting specialists use spreadsheet knowledge in everyday life, so it becomes
an essential skill in business. Implementing spreadsheets in subject materials is
the way how students can develop their knowledge and skills before entering
the profession.

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Brigham, E. F., & Houston, J. F. (2012). Fundamentals of financial management. Cengage
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of Superior Log Cabins. Inc. Issues in Accounting Education, 27(1), 141–156. doi:10.2308/
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Hansen, D. R., & Mowen, M. M. (2006). Management accounting: the cornerstone for business
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Lawson, R. A., Blocher, E. J., Brewer, P. C., Cokins, G., Sorensen, J. E., Stout, D. E., … Wout-
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Madahar, M. (2011). Spreadsheet use for strategic decision-making: An analysis of spreadsheet
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jaccedu.2016.05.002

43
ATTRACTING INVESTMENT IN
THE ENTREPRENEURIAL ZONES
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

OF SMALL CITIES BY CREATING
PRECONDITIONS FOR THE
DEVELOPMENT OF SMALL AND
MEDIUMSIZED ENTERPRISES

Željka KADLEC, univ.spec.oec.
Ph.D. candidate, Postgraduate Doctoral Studies
zeljka.tai@gmail.com

Josip HETRIH, Profesional Specialist of Economics
Student of College for Management in Tourism and
Informatics in Virovitica
josip.hetrih@hotmail.com

Mladena BEDEKOVIĆ, univ.spec.occ.
Ph.D. candidate, Postgraduate Doctoral Studies
mladena.bedekovic@vsmti.hr

Abstract
The primary goal of this paper is to explain interdependency of small and
medium enterprises (SMEs) and the importance of creating an investment-
friendly environment for the development of small towns. The paper describes
the types of investment with the focus on direct foreign investment and its im-
portance for the development of small towns as well as the development of
the Croatian economy in general. The entrepreneurial infrastructure, which
includes entrepreneurial zones and supporting institutions, plays a significant
role in the development of small towns and the improvement of the investment
climate. A large number of factors, location being the most important, helps
investors make a decision in which city to invest. This paper describes ways

44
of improving the investment climate by combining these different factors. The
connectedness and quality of coordination between the national and local level
is important for creating the conditions in which SMEs can further develop
in small towns, which is the reason why the incentives and measures that help
attract investment have been described in the paper. Strategy is a document
that provides guidelines for the longterm progress of cities so the analysis of
the investment environment as well as advice for its improvement have been
made on the basis of the strategic documents of Slatina and Ivanec. This paper
helps understand the definition of small towns and gives basic guidelines for
the development of a stimulating environment for the development of SMEs,
which affects the economic and social growth of small towns and their local
communities.
Key words: small and medium enterprises, investment, small towns, entrepre-
neurial infrastructure
JEL Classification: D25, L26

1. INTRODUCTION
Small and medium-sized enterprises (SMEs) act as a main generator of de-
velopment in almost every economy of the world. The focus of the economic
policy of the European Union, as well as of the Republic of Croatia is the devel-
opment of SME sectors. Small Croatian cities are often faced with the problem
of poor traffic connection and poor economic development. Good entrepre-
neurial infrastructure is therefore extremely important for creating precondi-
tions for the development of SMEs. Since SMEs can easily adapt to changes INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
and since they are the main generator of new employments and economic devel-
opment, small cities base their strategies precisely on that sector.
The main issue of this work is directed towards the development of mea-
sures and incentives of small cities towards SMEs, with a goal of creating pre-
conditions for the development of SME sectors and attracting investment, with
the focus on direct foreign investment. The approach to this work is focused on
the development of a stimulating investment environment which is based on
“soft” measures that do not pose a great financial weight for the budget since
they come from small cities. Furthermore, the work is also focused on the well-
established coordination in all levels, from national to local, which is important
for utilizing the opportunities offered by national, as well as European funds.

45
This work is thematically divided into three main parts, the first one of which
refers to the definition and classification of investments, entrepreneurial infra-
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

structure and successful cases of creating preconditions for the development
of SMEs. The second part is focused on the Factors affecting the Investment
Climate and investment Attraction. The final part of the work presents a com-
parison of the investment environments of two cities, Slatina and Ivanec, that
are significantly similar in terms of their demographic features, size and natural
potential. The comparison was based on the analysis of measures and incentives
that the two cities employ to attract investment in their entrepreneurial zones,
along with a review of the successfulness of their measures.

2. INVESTMENT, ENTERPRISE
INFRASTRUCTURE AND SUCCESSFUL
EXAMPLES OF CREATING THE
PRECONDITIONS FOR THE DEVELOPMENT
OF SMALL AND MEDIUMSIZED ENTERPRISES
Investments play an important role in the business of every enterprise and
city, but their contribution to the development of Croatia is even greater when
complemented by foreign investment. According to the Ministry of Economy
(2014:7), “direct foreign investment encompasses all investment into domestic
enterprises (residents) where the foreign investor (non-resident) gains 10 or
more per cent of property over ordinary stocks of the enterprise (incorporated
or unincorporated), or an equal amount of voting rights”1. By creating the pre-
conditions for the development of SMEs in entrepreneurial zones, small cities
are able to attract such investments, but it is of a great importance to establish
a set of measures and a communication strategy in order for foreign investors
to select precisely the entrepreneurial zone of that city for their investment.
Buretin and Belčić (2013) state that foreign investment has an impact on the
increase of liquidity and balance sheet, but they also note that this impact is

1
Ministry of Economy (2014). https://www.google.hr/url?sa=t&rct=j&q=&esrc=s&sour
ce=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjg2OOg4JXVAhWPSxoKHR8UBX
cQFggrMAE&url=http%3A%2F%2Fwww.mingo.hr%2Fpublic%2Fdocuments%2FSTR
ATEGIJA%2520POTICANJA%2520INVESTICIJA%2520U%2520RH%2520ZA%2
520RAZDOBLJE%25202014-2020.docx&usg=AFQjCNF20Sj49KyJhvwzfaCa58Ckb
zx_Fg (Aug 10 2017)

46
short-term. A long-term and medium-term impact can mostly be seen in terms
of innovativeness, competitiveness and the restructuring of the economy.
According to the definition of the Ministry of Economy (2014)2 greenfield
investment usually presents direct foreign investments and these can be the
establishment of new companies, investment in the establishment of mixed-
ownership companies or the opening of a new branch. According to its charac-
teristics, this investment is characterized by the management of the company by
the investor who gains control over the company and actively implements this
control. A poor intensity of greenfield investment is attributed to the lack of a
strategic frame, as well as the lack of measures and policies for a good stimu-
lation of such investments. Greenfield investment is the most desired invest-
ment due to its characteristics since it creates new production facilities, working
places and is the best driving force of the development of economy, most often
with the help of the capital that comes from foreign investors. Small cities have
certain advantages over big cities due to the great amount of the space available
in their entrepreneurial zones. In most cases, the zones of small cities are free
and can be subject to greenfield investment since big cities have expanded due to
their growth, and they lack the space available for the investment. The responsi-
bility of small cities is to influence the improvement of the investment climate in
cooperation with the country and national, as well as European non-refundable
funds, but also to influence the act of attracting greenfield investment, which is
export-oriented and which stimulates the economic growth, with the help of
concrete measures in their own strategic documents.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
According to Paliaga and Strunja (2011) brownfield investment presents the
act of buying the existing production capacities or enterprise shares, i.e. the act
of co-opting. It is important to mention that the term brownfiled is relatively
new and that it has been fairly present in Europe and America in the last two
decades. Buretin and Belčić (2013) state that the act of co-opting the compa-
ny and/or the act of joining with the companies of a multinational character
present the most frequent method of investment. According to the Ministry

2
Ministry of Economy (2014). https://www.google.hr/url?sa=t&rct=j&q=&esrc=s&sour
ce=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjg2OOg4JXVAhWPSxoKHR8UBX
cQFggrMAE&url=http%3A%2F%2Fwww.mingo.hr%2Fpublic%2Fdocuments%2FSTR
ATEGIJA%2520POTICANJA%2520INVESTICIJA%2520U%2520RH%2520ZA%2
520RAZDOBLJE%25202014-2020.docx&usg=AFQjCNF20Sj49KyJhvwzfaCa58Ckb
zx_Fg (Aug 10 2017)

47
of Economy (2014)3, direct foreign investment is mostly directed towards the
brownfield investment due to the insufficient elaboration of incentives and mea-
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

sures. One of the measures of the Act on Strategic Investment for the Republic
of Croatia until 2020 for achieving a positive effect of such investment is a plan
for the realization of brownfield investment through putting state property into
function. Croatia has an abundance of tourist, industrial but especially military
facilities that have a potential to be placed into function for carrying out an
economic activity. The stimulation of such investment will have an impact on
the revitalization of the infrastructure of settlements and towns, but also on the
protection of extremely valuable spaces that were not in function of carrying out
economic activities. According to CNB data4, the total amount of direct foreign
investment in Croatia was 26.465,1 Million Euros, 4.053,8 Million of which
was attracted in 2008, followed by a decrease in the intensity of investment,
which was best seen in 2010 when only 370,0 Million Euros were attracted.
The lowest overall intensity of both types of investment was seen in 2013 due
to the world economy crisis, while the greatest individual decrease of brownfield
investment was recorded in 2010 and the greatest individual decrease of green-
field investment in 2012.
The focus of this work is to give a review for attracting (foreign) investment
in entrepreneurial zones by ensuring the preconditions for the development of
SMEs. Since this work compares the cities of Ivanec and Slatina, what the au-
thors consider relevant is the research of one of the world’s most renowned
business magazines – the Financial Times – under the name of “Cities and Re-
gions of The Future 2016/2017”, which categorizes cities into five categories ac-
cording to the number of inhabitants (Major cities, large cities, mid-sized cities,
small cities and micro cities)5. According to the mentioned categorization, the
cities of Ivanec and Slatina belong to the category of micro cities. The Act on
Regional Development of the Republic of Croatia6 categorizes the cities into
3
Ministry of Economy (2014) https://www.google.hr/url?sa=t&rct=j&q=&esrc=s&sourc
e=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjg2OOg4JXVAhWPSxoKHR8UBX
cQFggrMAE&url=http%3A%2F%2Fwww.mingo.hr%2Fpublic%2Fdocuments%2FSTR
ATEGIJA%2520POTICANJA%2520INVESTICIJA%2520U%2520RH%2520ZA%2
520RAZDOBLJE%25202014-2020.docx&usg=AFQjCNF20Sj49KyJhvwzfaCa58Ckb
zx_Fg (Auf 10 2017)
4
https://www.hnb.hr/statistika/statisticki-podaci (Sep 7 2017)
5
FDI Magazine (2016). http://www.ivanec.hr/download/1947 (Sep 1 2017)
6
https://www.zakon.hr/z/239/Zakon-o-regionalnom-razvoju-Republike-Hrvatske (Sep 9
2017)

48
two categories – larger urban areas and smaller urban areas. Larger urban areas
are described as cities with more than 35,000 inhabitants and smaller urban
areas are cities with more than 10,000 inhabitants in their centers, which have
less than 35,000 inhabitants and/or which are the center of a county.
The Act on Promoting Entrepreneurial Infrastructure7 defines the entrepre-
neurial infrastructure in a wider sense, which implies the totality of undertak-
ing the entrepreneurial activities which are the result of developmental concepts
of local or regional self-government units or the Republic of Croatia. In a nar-
row sense, it implies the entrepreneurial infrastructure as a system of entre-
preneurial zones and entrepreneurial support institutions of the Republic of
Croatia. Funda (2011) defines the entrepreneurial infrastructure as a regulated
space whose main aim and function it is to aid small enterprises in the phase of
development and formation. The role of the entrepreneurial infrastructure is to
provide prompt information which enable a faster growth and development of
small enterprises. According to the Ministry of Entrepreneurship and Crafts8,
the term entrepreneurial support institution implies development agencies (lo-
cal and regional), business incubators, technology parks and entrepreneurial
centers. According to Glojnarić (2017:26), “the essence of entrepreneurial sup-
port institutions is to offer support to entrepreneurs in all phases of the devel-
opment of the enterprise, and the greatest part of services that these institutions
offer to entrepreneurs encompasses educations on topics of their interest in the
field that this institution covers.” Oberman Peterka, Delić, Perić (2016) also
classify the institutions in charge of decision-making in the sector of SMEs
as entrepreneurial infrastructure and they emphasize the Government of the
Republic of Croatia, the Ministry of Economy, Entrepreneurship and Crafts, INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
HBOR, HAMAG-BICRO, HUP, HGK, HOK and CEPOR as most signifi-
cant institutions. Establishing the infrastructure in terms of entrepreneurial
zones and support institutions in cities shows their focus on sustainable devel-
opment and their readiness to ensure the preconditions for the development of
SMEs and the attraction of new investment.
When it comes to successful examples of attracting investment in entrepre-
neurial zones by creating the preconditions for the development of SMEs, we
can certainly take into consideration the example of the borough Antunovac.
7
http://narodne-novine.nn.hr/clanci/sluzbeni/2013_07_93_2072.html ( Jun 12 2017)
8
Ministry of Entrepreneurship and Crafts (2013): http://www.europski-fondovi.eu/sites/
default/files/dokumenti/Strategy-HR-Final.pdf (Aug 10 2017)

49
According to Slijepčević (2016), the year 2013 saw the establishment of the
Agency for sustainable development of borough Antunovac, which in a very
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

short period of time implemented a series of projects that attracted investment
in the entrepreneurial zones. The entrepreneurial zone of this borough was thus
filled by more than 66% and it started to expand. The example9 refers to the
construction of a business incubator and an accelerator – the project that was
approved by the Ministry of Economy, Entrepreneurship and Crafts. The estab-
lishment of this incubator and accelerator will ensure the provision of innova-
tive services to SMEs. It can be claimed that this incubator and accelerator pres-
ent a great example from practice since they create preconditions for the open-
ing of more than 150 new working places in its highly- technologically equipped
space. When taking entrepreneurial zones into consideration, it is important to
mention the industrial zone Bakar located in Kukuljanovo, which is, according
to Glojnarić (2016) one of the most successful industrial zones in Croatia. Its
excellent equipment is what distinguishes it from other entrepreneurial zones,
which earned the industrial zone Bakar the “title” of the most equipped zone in
Croatia. There are as many as 150 companies in this zone, 23% of which are
of commercial activity, 26% of production activity and 51% of service activ-
ity, while the total number of the persons employed reaches over 3500 people.
Another successful example of creating an enticing investment area – Velika
Gorica – was described by Fijačko (2017). This zone offers reliefs such as the
reduction of utility charges and contributions and they also have an investment
companion to help the investors, which they assert to be a ubiquitous model of
help for the investors. The final example of successful entrepreneurial zones is
the EZ10 “Podi” near Šibenik. According to Glojnarić (2016), this zone is one
of the most promising zones of Croatia. Its advantages are its proximity to the
highway, railroad and port. Another reason for considering the EZ “Podi” the
most promising zone is the strong support of the local community which pro-
vides the support for the investors by means of helping them to secure permis-
sions and the relief of utility contributions for production activities.
What is important to assert is the fact that the key factor in all the men-
tioned examples of good practice, where the investment environment has been
extremely beneficial, is the support of the local self-government. Most of the

9
http://www.opcina-antunovac.hr/opcini-antunovac-dodjeljena-odluka-za-izgradnju-po-
duzetnickog-inkubatora-i-akceleratora-u-osjecko-baranjskoj-zupaniji/ (Sep 1 2017)
10
EZ – entrepreneurial zone

50
activity in the business of local and regional development agencies and other
support institutions is carried out in cooperation with the local self-govern-
ment. The incentives and measures for attracting the investment outlined in
the Strategy of investment incentive are the most significant factors for a suc-
cessful business and occupancy of entrepreneurial zones, whose formulation
is again dependent on the local self-government as the main stakeholder. Ex-
cellent cooperation and coordination with entrepreneurial support institutions
and a good management of entrepreneurial infrastructure present a successful
formula for the growth of small cities.

3. FACTORS AFFECTING THE INVESTMENT
CLIMATE AND INVESTMENT ATTRACTION
Due to the particularity and diversity of the locations of self-government
units, there is no unique formula for creating a favorable investment climate or
for attracting the investment. The creation of a favorable investment environ-
ment can be achieved through good cooperation of self-government units with
other bodies of national government, ministries and other self-government
units. “Investment environment as a factor of foreign investment is a set of in-
dicators of the economic and market power of a country, the development of
its natural and human resources, the development of its infrastructure, as well
as its political stability, which affects the country’s credit risk, and its legislative
openness and the effort of the government agencies to advance the direct foreign
investment” (Paliaga and Strunje, 2011:45). According to the Ministry of Econ-
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
omy11, the significance of investment in the Republic of Croatia is manifested
in its geostrategic position. Glojnarić (2016) agrees with this view and suggests
that the investors will prefer the entrepreneurial zones with a better geostrate-
gic position (e.g. the proximity of a larger city), an equipped infrastructure, as
well as the zones with a good traffic connection and traffic infrastructure. The
investors also take the availability of the working force into consideration, as

11
Ministry of Economy (2014). https://www.google.hr/url?sa=t&rct=j&q=&esrc=s&sour
ce=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjg2OOg4JXVAhWPSxoKHR8UBX
cQFggrMAE&url=http%3A%2F%2Fwww.mingo.hr%2Fpublic%2Fdocuments%2FSTR
ATEGIJA%2520POTICANJA%2520INVESTICIJA%2520U%2520RH%2520ZA%2
520RAZDOBLJE%25202014-2020.docx&usg=AFQjCNF20Sj49KyJhvwzfaCa58Ckb
zx_Fg (Aug 10 2017)

51
well as the proximity of institutions of higher education, but also the local self-
government that acts proactively when it comes to attracting the investment.
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

Location is certainly one of the main factors that have an influence on the
investment decision. According to Paliaga and Strunje (2011), a broad range of
criteria are taken into consideration when it comes to investment decisions in
terms of location. These factors include the ratio of price and quality of work-
ing force, transport expenses, custom duties and the measures fro inciting the
investment. The investors expect that the location or infrastructure that they
invest into possesses all the concepts required for business in one location with
an affordable price. This can be achieved by a range of measures and stimuli
that imply, e.g. affordable marketing prices, as well as affordable rent, account-
ing, educations and alike, either for beginner entrepreneurs in an incubator or
for developed entrepreneurs in an accelerator or a technological park. The en-
trepreneurs inside one entrepreneurial zone can thus strengthen their offer by
means of a joint market performance and the reduction of expenses (Glojnarić,
2016). According to Investment Promotion and Development of Investment
Climate Act12, the attraction of investment is influenced by the advancement
of the investment environment which implies pre-investment, investment and
post-investment activities that influence the successfulness and the deadline of
the investment.
The Proposal of the Strategy of investment incentive in the Republic of
Croatia for the period from 2014 until 202013 defined four areas of priority for
inciting the investment: the advancement of the investment environment, the
promotion of the Republic of Croatia as an attractive investment destination,
targeted attraction of the investment and the support with the realization of
investment projects. What is crucial for this work is the targeted attraction of
the investment, more precisely the measures of production and implementation
of the Plan for attracting greenfield investment in the assisted areas of the Re-
public of Croatia. This measure is of a great importance for the city of Slatina
which is located within the assisted area, although we also have to mention

12
http://narodne-novine.nn.hr/clanci/sluzbeni/2012_10_111_2391.html ( Jun 12 2017)
13
Ministry of Economy (2014). https://www.google.hr/url?sa=t&rct=j&q=&esrc=s&sour
ce=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjg2OOg4JXVAhWPSxoKHR8UBX
cQFggrMAE&url=http%3A%2F%2Fwww.mingo.hr%2Fpublic%2Fdocuments%2FSTR
ATEGIJA%2520POTICANJA%2520INVESTICIJA%2520U%2520RH%2520ZA%2
520RAZDOBLJE%25202014-2020.docx&usg=AFQjCNF20Sj49KyJhvwzfaCa58Ckb
zx_Fg (Aug 10 2017)

52
that the city of Slatina belonged to the group II of self-government units until
12/31/2017, with the development rate between 50% and 75% of the average
in the Republic of Croatia14. Since 01/01/2018, the city of Slatina belongs to
the group IV of self-government units and it finds itself in the first quarter of
units ranked below the average according to its index value15. The proposal of
the Strategy cites that the attraction of new investment in the assisted areas
is of a great significance since it encourages recovery and economic develop-
ment, while export-oriented sectors are being emphasized as targeted sectors.
The measure is directed towards connecting the investors and self-government
units, which will be realized by adjusting the activities to the developmental
strategies of the county. The focus of this measure is put on defining the po-
tential investors, informing them about the advantages of investing into the as-
sisted areas and, finally, on the realization of campaigns with the goal of con-
necting the representatives of self-government units with national and foreign
investors. In order for all goals outlined in these strategic documents to be put
into practice, what is important is the cooperation of all stakeholders that were
identified in these documents with various ministries as starting points. The
Ministry of Economy, Entrepreneurship and Crafts is undoubtedly one of the
crucial stakeholders for the realization of the strategy of investment incentive.

4. COMPARISON OF INVESTMENT
ENVIRONMENTS OF CITIES OF IVANEC AND
SLATINA
By comparing the investment environment of two cities with roughly iden- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
tical number of inhabitants and numerous similarities in their characteristics
– the city of Ivanec and the city of Slatina – the authors will define the invest-
ment environment and its potentials. Slatina is located in Virovitica-Podravina
county and it consists of 15 settlements16. “This area is bounded by the river
Drava in the north, and by the ridges of Papuk and Krndija mountains in the
south. Slatina has a role of the central settlement of the region according to

14
https://narodne-novine.nn.hr/clanci/sluzbeni/2013_12_158_3313.html ( Jan 20 2018)
15
https://narodne-novine.nn.hr/clanci/sluzbeni/full/2017_12_132_3022.html ( Jan 20
2018)
16
http://www.slatina.hr (Sep 1 2017)

53
many characteristics.”17. Ivanec is located in Varaždin county and it comprises
of 29 settlements18. “The city of Ivanec is located in the north-western part of
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

Croatia in Varaždin county. It stretches along the upper flow of the river Bed-
nja. It lays 20 km away from the Slovenian border, 28 km away from the in-
ternational border crossing Macelj and 60 km away from the border crossing
Goričan which is located on the border between Croatia and Hungary19. Table
1 illustrates the comparison of basic information on the cities of Slatina and
Ivanec, which are significantly similar in the number of inhabitants, the area and
population density.

Table 1. Comparative view of basic information on cities of Slatina and Ivanec
Slatina Ivanec
Area 156 km2 94.7 km2
Number of inhabitants 13,686 13,758
Population density 82 st/km2 145.28 st/km2
Source: adjusted according to the official web page of the city of Slatina http://www.slatina.
hr (Sep1 2017) and the city of Ivanec http://www.ivanec.hr/download/1256 (Sep 1 2017)

Forest potentials and agricultural lands are the most significant natural re-
sources that are of interest to entrepreneurs. According to the data from 2003,
Ivanec has a total of 3,846.81 ha of agricultural lands available, 1,991.47 ha
of which is utilized for agricultural production (51.77%). Agricultural parcels
make up an average of 0.16 ha20. Slatina has a total of 6,090.94 ha of agricultural
lands, 92.04% of which is used for agricultural production. The remaining part
of uncultivated land is made up of meadows, pastures, vineyards and orchards21.
The area of Ivanec has 4,061 ha of forest potentials, 84% of which is private
property and 16% of state property22. The city of Slatina has a slightly larger
forest area of 5,769.91 ha and the owner structure is reversed, with 94.78% of

17
City of Slatina (2016). http://www.slatina.hr/wp-content/uploads/2016/11/Strategija-
razvoja-Grada-Slatine.pdf (Sep 1 2017)
18
http://www.ivanec.hr/ (Sep 1 2017)
19
City of Ivanec (2014). http://www.ivanec.hr/download/1256 (Sep 1 2017).
20
City of Ivanec http://www.ivanec.hr/download/1256 (Sep 1 2017).
21
City of Slatina (2016). http://www.slatina.hr/wp-content/uploads/2016/11/Strategija-
razvoja-Grada-Slatine.pdf (Sep 1 2017).
22
City of Ivanec (2014). http://www.ivanec.hr/download/1256 (Sep 1 2017).

54
state-owned forests and 0.24% of privately-owned forests. The remaining por-
tion of 4.98% is of unknown ownership23.
Location factors were already mentioned as some of the most significant
factors considering the investment decision, so it is of a great importance to
describe the infrastructure, traffic connection and other factors that influence
the attractiveness of this city for investors. According to the data of local de-
velopment strategy24, Ivanec has a dense road network due to the city’s dense
population. According to the data, the road infrastructure does not meet the
needs of the economy, which makes the city’s attraction weaker when it comes
to attracting investment. The need of the construction of a two-lane expressway
is emphasized as a solution for that problem. When it comes to the railroad
infrastructure, there is a single-section railroad passing through Ivanec with
trains operation in the direction of Ivanec (7 times a day) and in the direction
of Varaždin (8 times a day). According to the data from 2012, the railroad in-
frastructure, more precisely the transport of goods, was used by 7 companies.
When it comes to information and communication infrastructure, it is impor-
tant to emphasize that Ivanec has introduced a broadband infrastructure in all
its settlements, which is of a great significance to business subjects and which
put Ivanec one step forward when compared to a great number of cities. Con-
sidering the traffic infrastructure in the city of Slatina, there is one bypass and
one mini-bypass which helped to move all cargo traffic away from the city cen-
ter and increased the security and quality of life in the city. The bypass passes
through several entrepreneurial zones, which had a significant impact on the en-
trepreneurial activity of the city. However, the distance of Slatina and the whole
Virovitica-Podravina county from two-lane expressways and highways presents INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
a great problem in terms of traffic connection. The solution of this problem is
attempted through the construction of Podravina’s two-lane expressway that
will connect Slatina to Osijek and Zagreb, which is the strategic project of the
city of Slatina until 2020. When it comes to railroad infrastructure, Slatina
also has a single-section railroad. Telecommunication, i.e. low-speed Internet is
another problem of Slatina. The problem of telecommunication infrastructure
will be solved through the project of introducing a broadband infrastructure,
which is in progress at the time. Air traffic is another problem due to the great

23
City of Slatina (2016). http://www.slatina.hr/wp-content/uploads/2016/11/Strategija-
razvoja-Grada-Slatine.pdf (Sep 1 2017).
24
City of Ivanec (2014) http://www.ivanec.hr/download/1256 (Sep 1 2017)

55
distance of airports. The nearest airport – the one in Osijek – is located 96 km
away from Slatina, while the Zagreb airport stands at 186 km distance from
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

Slatina. The nearest international airport is located near Pecs at the distance of
75 km from Slatina. According to the data from the official Internet page of the
city of Ivanec25, there is a much smaller distance to nearest airports – 22 km to
the Varaždin airport and 81 km to the Zagreb airport.
Considering the entrepreneurial infrastructure, the cities of Ivanec and Sla-
tina have both entrepreneurial zones, as well as entrepreneurial support institu-
tions. Ivanec has established two entrepreneurial zones, while Slatina has seven
entrepreneurial zones. Each zone is fully equipped when it comes to infrastruc-
ture. When it comes to entrepreneurial support institutions, Ivanec has estab-
lished a Project office and Slatina has established a City development agency.
Slatina also started the project of building a business incubator which will have
a great contribution to the development of small and medium-sized enterprises.
The unemployment rate of these cities differs significantly. Ivanec has the
unemployment rate of 6.84%, which is considerably below the Croatian average,
while the year of 2015 in Slatina saw the unemployment rate as high as 31.9%,
which is much above the Croatian average. Human resources, more precisely
the incompatibility of education with the needs of the market, are described as
one of the problems of development in strategic documents of both cities. Both
cities try to solve this problem by means of public open universities which offer
retraining in accordance with the needs of local entrepreneurs26.
Slatina and Ivanec created the measures for inciting the development of
small and medium-sized entrepreneurship and the measures for inciting the
investment in entrepreneurial zones which will serve for the purpose of com-
parison of the successfulness of certain measures in creating a favorable invest-
ment climate. For the analysis of measures and incentives, the authors of this
work used the data that is publicly available on the Internet pages and official
documents of both cities: Strategy for the development of the City of Slatina
for the period from 2014 until 202027; Strategy for the development of the City

25
http://www.ivanec.hr/ (Sep 1 2017)
26
City of Slatina (2016). http://www.slatina.hr/wp-content/uploads/2016/11/Strategija-
razvoja-Grada-Slatine.pdf (Sep 1 2017) and City of Ivanec (2014). http://www.ivanec.hr/
download/1256 (Sep 1 2017)
27
City of Slatina (2016). http://www.slatina.hr/wp-content/uploads/2016/11/Strategija-
razvoja-Grada-Slatine.pdf (Sep 1 2017)

56
of Ivanec for the period from 2014 until 202028; official web pages of the City of
Slatina29; official web page of the City of Ivanec30. The analysis of the data that
answer the question of why the potential investor should decide to invest in one
of these cities, Slatina has a fairly little amount of data available, while Ivanec
has a great number of specific information that can serve each investor. When
Slatina is taken into consideration, it can be seen that there are no information
in form of brochures available (there are several brochures that originate from
more than 4 years ago) and no information on entrepreneurial zones and alike.
There are several documents of public calls for the purchase of the land in en-
trepreneurial zones at the price of 4 and 5 Euros per square meter. The City of
Ivanec has a great amount of information that are of interest to investors such
as property prices, conditions of construction, privileges and reliefs available, as
well as the emphasized advantages of investment in their entrepreneurial zones.
The home page already shows a column for investors, where the potential inves-
tors can find all the information – from the entrepreneurial infrastructure to
various guides regarding the construction, as well as the base of business enti-
ties, prices, fees, expenses, etc.
Ivanec is without doubt one of the best examples from practice when com-
paring the transparency, openness and proactivity of self-government units in
the availability of information and “soft” measures for inciting the investment.
In the case of Ivanec, the entrepreneur can be informed about all the conditions
that are important for the start of the investment even before the first meet-
ing with the representatives of self-government units. Such approach not only
attracts the potential investors but also shortens the time that is required for
both sides to be informed about the investment possibilities. The availability of INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
information decreases the number of the meetings needed and shortens their
duration since both side have already been informed about all details that are
important for the investment. This led us to conclude that the representatives
of self-government units and their support institutions in Slatina still need to
invest a lot in order to take a step forward in the direction Ivanec has made.
What is needed is the change in the approach and a greater openness to poten-
tial investors who often lack the time for a great number of business meetings
or writing official e-mails and letters. Especially this approach is important for

28
City of Ivanec (2014). http://www.ivanec.hr/download/1256 (Sep 1 2017)
29
http://www.slatina.hr (Sep 1 2017)
30
http://www.ivanec.hr/ (Sep 1 2017)

57
attracting the direct foreign investment, since the investors who do not come
from Croatia find it fairly hard to find the data which are important for their de-
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

cision about the investment. Table 2 shows the comparison of a series of direct
measures and incentives for the investors that invest in the two cities.

Table 2. Comparative view of measures and incentives for attracting the invest-
ment on the example of Slatina and Ivanec
Slatina Ivanec
Exemption from tax payment (partly)  
Exemption from paying the fee for connection to communal infrastructure for  
wastewater and rainwater drainage and the fee for connection to communal
infrastructure for gas supply
Exemption from paying the conversion of land for obtaining a building permit  
Lower price of communally equipped land  
Land purchase service with the settlement of property-legal relations  
Communally equipped land  
Subsidy of 2 – 3 % of interest in entrepreneurial credits  
Professional help and cooperation in the development and realization of the  
investment
Aid for investors in connecting to local and regional institutions, business advisors  
and communal and infrastructural companies
Source: adjusted according to City of Slatina: http://www.slatina.hr (Sep 1 2017) and Of-
ficial web page of the City of Ivanec http://www.ivanec.hr (Sep 1 2017)

Slatina has not regulated the exemptions from paying the conversion of land
for obtaining a building permit, the land purchase service, the settlement of
property-legal relations or subsidies for credits. Communal exemptions, de-
crease of land price and the settlement of property-legal relations can be high-
lighted as some of the most significant measures. One positive measure that
needs to be introduced is the help of the local self-government in obtaining the
permits and documentation for potential investors, which makes the new in-
vestment much easier and incites the attraction of new investments. In addition
to the measures shown in table 3, we must not omit the priorities and measures
for inciting the development of SMEs and a more favorable investment environ-
ment which are stated in the strategic documents of both towns.
The strategy for the development of the City of Ivanec highlights the fol-
lowing priorities and measures for the development of SMEs and the invest-

58
ment environment: Priority 1.2. Identification of economic and developmental
potentials and removal of administrative obstacles, which is connected to the
Measure 1.1.1. Investment in key sectors and activities. Another priority that
directly influences the development of SMEs is the Priority 1.2. Increasing the
competitiveness of small and medium-sized entrepreneurships. It encompasses
three measures – the Measure 1.2.1. Establishing the infrastructure content
according to economy needs, Measure 1.2.2. Promotion of economic zones
and Measure 1.2.3. Encouraging the implementation and development of high
(contemporary) technologies, innovation and knowledge in entrepreneurship31.
The strategy for the development of the City of Slatina includes the follow-
ing priorities of measures that are important for the development of SMEs and
the investment environment: Development Priority 1.2. Consolidation of the
economic successfulness of entrepreneurs, which includes the Measure 1.2.1.
Development of small and medium-sized entrepreneurships and the Measure
1.2.2. Consolidation of the administrative and financial environment for the
development of entrepreneurship. Another development priority that is of a
great importance for the improvement of the investment environment is the
Development priority 1.2. Attracting investment based on contemporary tech-
nologies, which includes the Measure 1.3.1 Intensifying the use of renewable
sources of energy and ecologically efficient technologies and the Measure 1.3.2.
Encouraging the investment of private entrepreneurs in activities that abound
with knowledge and technologies. What is also significant for this topic in addi-
tion to previously mentioned priorities and measures in the strategy for the de-
velopment of the City of Slatina are the priorities connected to the development
of traffic connection, as well as the business and communal infrastructures, but INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
also the priority of availability and the implementation of a broad-band Inter-
net access.
Finally, it can be concluded that the cities of Ivanec and Slatina have a failry
similar size, number of inhabitants, natural resources, traffic connection and
entrepreneurial infrastructure. Their strategic documents until 2020 mention
similar priorities and measures planned to incite the development of small and
medium-sized enterprises and the investment environment. The key discrep-
ancy between these two cities can be seen in the proactivity of the local self-
government and the implementation of the strategy for development. As it was

31
City of Ivanec (2014). http://www.ivanec.hr/download/1256 (Sep 1 2017)

59
already mentioned in this work, the creation of the strategic documentation is
only the start of changes and it has to be followed by the activities and projects
Željka Kadlec  Josip Hetrih  Mladena Bedeković: ATTRACTING INVESTMENT IN THE ENTREPRENEURIAL ZONES OF SMALL CITIES BY CREATING...

that will lead to the accomplishment of the planned ideas. When capital proj-
ects are contrasted, it can be concluded that Slatina has made a step forward in
terms of the entrepreneurial infrastructure since it has a greater number and
area of entrepreneurial zones and a business incubator whose adaptation proj-
ect already started. Moreover, when it comes to traffic and communal infra-
structure, Slatina has bypasses that influenced the provision of favorable con-
ditions for entrepreneurial activities and its zones are fully equipped, as is the
case with the City of Ivanec. The greatest discrepancy between these two cities
is a series of measures that the authors of this work named “soft” measures –
the approach to potential investors through openness, information availability,
transparency and proactivity of the local self-government. On the grounds of
this, the City of Ivanec is certainly one of the most outstanding examples of
European small cities that insured almost all preconditions for the growth and
development of SMEs, as well as for the attraction of direct foreign investment.
The evidence of that is the Financial Time research “Cities and Regions of The
Future 2016/2017 that put Ivanec in the first place on the scale of small (micro)
cities in Europe.

5. CONCLUSION
The greatest challenge that small cities face is ensuring the preconditions for
the development of the economy and the increase in the employment rate in
their entrepreneurial zones since a great number of entrepreneurial zones is still
insufficiently filled. The definition of the key terms such as small and medium-
sized enterprises, investment and small cities led to the comprehension of their
mutual connection and their significance for the development of the economy
of small cities, but also the economy of the Republic of Croatia generally. All
the great economies of the world base their development policies on small and
medium-sized enterprises, which are remarkably adaptive to changes and which
are a generator of new employments. The task of small cities is to develop their
strategies for attracting investment which they will implement successfully in
coordination with and with the support of the regional and national levels.
Based on initial definitions and assumptions of this work, the authors have
indicated the most attractive measures and incentives for inciting the invest-

60
ment environment in the entrepreneurial zones of small cities through the
analysis of successful examples from practice. Furthermore, they also defined
main preconditions that need to be fulfilled by small cities when it comes to
the equipment of the infrastructure and privileges for small and medium-sized
enterprises. By comparing the investment environments of the two cities, the
authors have defined the measures and incentives that have the greatest impact
on the recognition of small towns among investors.
The first step towards the development of an enticing investment environ-
ment in the entrepreneurial zones of small cities is creating a good strategy for
the development of the city. When planning an investment, small and medi-
um-sized entrepreneurs expect good entrepreneurial infrastructure in terms of
entrepreneurial zones and especially in terms of entrepreneurial support insti-
tutions which can facilitate their business, especially in early stages of develop-
ment. By the help of business incubators, beginner entrepreneurs are offered a
great number of privileges and services that influence their quick growth and
facilitate their business, which in the end influences the development of the
small city. A good cooperation of small cities with the regional and local levels
facilitates the access to non-refundable resources both for entrepreneurs, as well
as for small cities, which benefits the development of self-government units and
SMEs, but in the end the development of the Republic of Croatia as well. It can
be concluded that successful small towns differ from less successful ones mostly
in terms of the proactivity of the representatives of self-government units, as
well as in terms of “soft” measures that are the best attracting factor for foreign
investors since the investors are offered all the information needed for making
their decisions about the investment. This work provides examples of the cit- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ies that were successful in attracting direct foreign investment which offers the
possibility of improving the approach in terms of the methods for inciting the
investment and thus provides a positive turning point in the development of
small cities.

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INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

63
EMPLOYER PERCEPTION OF THE
DEVELOPMENT OF PROJECT
COMPETENCES IN PROJECT
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

MANAGEMENT GRADUATES

Zlatko BARILOVIĆ, Ph.D., Senior Lecturer
University of Applied Sciences Baltazar Zaprešić
E-mail: zlatko.barilovic@bak.hr

Abstract
In today’s modern market the growth and development of any organisation are
based on continuous project execution. For the successful execution of a project,
it is essential to develop specific project competences in individuals participat-
ing at any stage of the project. Even though it is possible to develop project com-
petences in a number of different ways, it is the higher education system, i.e.
specialist study programmes focusing on the area of project management that
should have the key role in this. Currently, the number of such higher education
programmes in the Republic of Croatia is still insufficient but has an upward
trend. The aim of this paper is to establish how much importance employers
generally attach to individual elements of project competences and explore to
what extent these competences are developed in project management graduates
they are hiring. The research was conducted using a purposive and convenience
sample of 30 organisations hiring project management graduates. Research
results suggest a generally high level of significance that project competences
have for such employers. The expected level of knowledge corresponds to the
estimated level of the students’ competence, while the expected level of experi-
ence is statistically much higher compared to the students’ estimated level of
competence. The results of this research can be used primarily as guidelines for
further development of the given study programme and its alignment with the
current needs of the labour market in the Republic of Croatia. Furthermore,
this research may also serve as the basis for any future research in this field.
Key words: project, project management, project competences, higher educa-
tion, labour market
JEL Classification: : J21, M51

64
1. INTRODUCTION
In today’s business world, organisations daily face challenges such as rapid
and constant change, competitiveness, globalization, global strategic crises etc.
Under the conditions imposed by the modern business operation, they have to
find new solutions every day in order to maintan and increase their competiti-
veness, which is the basis of any organization’s success or failure (Porter, 2009;
Hauc, 2007; Thompson et al. 2008). Organizations that strive to outperform
their competitors in their field of activity need to come up with measures to
achieve it on a daily basis.
These measures have to be related to quality, minimum costs, minimum du-
ration, maximum or sufficient output (Hauc, 2007:12). It is necessary to re-
spond to changes that need to be taken into account (if they represent a threat)
or need to be made use of (if they represent an opportunity) by some non-
standard activities or processes (i.e. by something that is not done very often or
continuously), and these are projects (Vrečko, 2007; Hauc, 2007; Uhlir 2011;
Vrečko & Barilović, 2009). It is fair to say that successful business operation of
any organization in today’s modern market needs to be based on efficiently and
successfully executed projects.
One of the key elements of a project’s success should be competent individu-
als who run projects or participate in them in any role. Even though the need
for competent individuals to participate in projects has long been recognized,
in the Republic of Croatia there is still an insufficient number of educational
institutions (particularly in higher education) that offer specialized study pro-
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
grammes that might contribute to the development of such competences. In the
Republic of Croatia, the first study programme at tertiary level that is supposed
to develop project competences was launched in 2005 at the University of Ap-
plied Sciences Baltazar Zaprešić This programme is Project Management - a
specialist professional graduate study programme. The aim of this paper was
to find out how much importance employers generally attach to the level of
development of individual elements of project competences in their employees
and to explore how they perceive the level of development of such competences
in Project Management graduates they hire. Research results should help get
a better insight into specific project competences required by employers in the
Republic of Croatia who hire project management graduates. This might, in
turn, help create educational programmes that would match the current needs

65
of the labour market and would provide specific guidelines for further develop-
ment of the study programme referred to in this paper.
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

2. PROJECT COMPETENCES
There is an increasing number of authors who are concerned with the im-
portance of developed project competences in individuals who work on proj-
ects. Despite the large number of such authors (e.g. Crawford, 2005; Chen et
al., 2008; Clarke, 2010; Buganza et al., 2013; Ahsan et al., 2013; Barilović et
al., 2014; Jalocha et al., 2014; Stretton & Crawford, 2014; Takey & Carvalho,
2015; Nijhuis et al., 2015; Vlahov et al., 2016; Miterev et al., 2016; Ekrot et
al., 2016), it is essential to highlight that the importance of such competences
is also emphasized by all the leading world organizations involved in project
management. They include, for example, the following: International Project
Management Association (IPMA, 2018), Project Management Institute (PMI,
2018), Association for Project Management, UK (APM, 2018), Australian In-
stitute of Project Management (AIPM, 2018), Project Management Associa-
tion of Japan (PMAJ, 2018).
All the listed organisations, either directly or indirectly, describe through
their documents and/or standards the most important areas, i.e. competences
that individuals who participate in projects in any way should have. In this pa-
per, we are going to focus primarily on project competences according to Inter-
national Project Management Association (IPMA), i.e. its document entitled
IPMA ICB 3.0 (2006). According to this document and IPMA requirements,
international certification of project managers is currently being conducted.
Certification is carried out by the Croatian member of IPMA, Croatian As-
sociation for Project Management (CAPM, 2018).
IPMA ICB 3.0 integrates all elements essential to the field of project man-
agement into the so-called “Eye of Competences”, which consists of three key
areas with a total of 46 associated elements (Table 1). These areas are the fol-
lowing (IPMA, 2006:9): Technical competence range – describe the fundamental
project management competence elements. This range covers the project man-
agement content, sometimes referred to as the solid elements. The ICB contains
20 technical competence elements. Behavioural competence range – describe the
personal project management competence elements. This range covers the proj-
ect manager’s attitudes and skills. The ICB contains 15 behavioural competence

66
elements. Contextual competence range – describe the project management com-
petence elements related to the context of the project. This range covers the
project manager’s competence in managing relations with the line management
organisation and the ability to function in a project focused organisation. The
ICB contains 11 contextual competence elements.

Table 1. IPMA ICB 3.0 elements put into three key competence areas
Technical competences Behavioural competences Contextual competences
1. Project management success 1. Leadership 1. Project orientation
2. Stakeholders 2. Engagement & motivation 2. Programme orientation
3. Project requirements & 3. Self-control 3. Portfolio orientation
objectives
4. Risk & opportunity 4. Assertiveness 4. Project programme &
portfolio implementation
5. Quality 5. Relaxation 5. Permanent organisation
6. Project organisation 6. Openness 6. Business
7. Teamwork 7. Creativity 7. Systems, products &
technology
8. Problem resolution 8. Result orientation 8. Personnel management
9. Project structures 9. Efficiency 9. Health, security, safety &
environment
10. Scope & deliverables 10. Consultation 10. Finance
11. Time & project phases 11. Negotiation 11. Legal
12. Resources 12. Conflict & crisis
13. Cost & finance 13. Reliability
14. Procurement & contract 14. Values appreciation INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
15. Changes 15. Ethics
16. Control & reports
17. Information & documentation
18. Communication
19. Start-up
20. Close-out
Source: IPMA ICB – International Competence Baseline Version 3.0 (2006)

Research for this paper was conducted in accordance with the previously
presented IPMA model. The aim of the research was to establish the key ele-
ments of project competences that are generally required by Croatian employers

67
and to find out the extent to which, according to employer perception, these are
developed in Project Management graduates.
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

3. METHODOLOGY
In order to achieve the main aim of the research, the one-off survey was
conducted on a purposive and convenient sample of 30 organizations that hire
Project Management graduates. To facilitate subsequent processing of the re-
sponses, all questionnaires were created using a Google Forms online tool for
creating and conducting surveys, which allows online access to the questionnaire.
The sample (Table 2) included only those organizations where the gradu-
ates’ jobs matched their qualifications (degree in project management) to make
the obtained results as objective as possible. Such a sample was chosen as it is
expected that such organizations are most of the time more project-oriented
and are thus more realistic in assessing the need for specific elements of proj-
ect competences in their business. Also, they are more objective in assessing
the level of development of specific elements of project competences in their
employees (Project Management graduates) as opposed to those organizations
where those graduates are engaged mostly in continuous activities rather than
in projects.

Table 2. Description of the organization sample (employers of Project Man-
agement graduates
Characteristics of the sample made of employers of Project Management graduates (N = 30)
DESCRIPTION N %
Company/enterprise 17 57
Public institution 4 13
Association 4 13
Type of organization
Public administration 2 7
Other 2 7
Regional self-management – county 1 3
Top management 15 50
Middle management 9 30
Function of the respondent
Head of the project office 3 10
Project manager 3 10

68
Fully or predominantly owned by Croatian private 9 53
individuals
Ownershio of organization
Fully or predominantly owned by foreign private 7 41
(enterprises only N=17)
individuals
Fully or predominantly owned by the state 1 6
up to 10 12 40
10 – 49 1 3
Number of employees
50 – 249 5 17
250 and more 12 40
2 – 5 years 5 17
6 – 10 years 4 13
Age of organization
11 – 15 years 4 13
16 and more years 17 57
Finance and insurance 6 20
Education 4 14
Professional, scientific and technical activities 4 13
ICT 4 13
Other services 4 13
Area of activity
Wholesale and retail, repair of motor vehicles and 3 10
motorcycles
Art, entertainment, and recreation 2 7
Agriculture, forestry, and fishery 2 7
Construction 1 3

4. RESULTS AND DISCUSSION
After having described the sample and provided general information about
the organizations that hire project management students, we will bring the re- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

sults of the primary research related to establishing the general importance of
specific elements of project competences for the employers who participated in
the survey (N=30). Also, results regarding the perception of employers as to
the level of development of competences in their employees who completed the
Project Management study programme will be presented (in accordance with
the adapted IPMA system of project competences1).
Assessment of the general importance of specific elements of project com-
petences will be observed in terms of the importance of knowledge and experi-

1
In order to make sure that the employers have full understanding of the competence ele-
ments, they were additionally described for the purposes of the research.

69
ence, while the assessment of the level of development of specific competences
in the graduates will be expressed only through an overall “competence” grade.
The questionnaire was created in such a way due to the fact that employers
sometimes find it difficult to assess the experience aspect realistically (particu-
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

larly in cases when the employee has worked in the organization for a short
period of time).
The results of the part of the survey that investigated the elements of tech-
nical competences (Table 3), with the total mean grade for the knowledge of
all the related elements of M=4.21 and for the experience of those elements
of M=4.50, suggest that employers find technical project competences in PM
graduates highly important. At the same time, they assess the overall compe-
tence (in terms of technical competences) of PM graduates who work for them
with the mean grade of M=4.17 (Table3). Employers also attach a high level of
importance to elements of behavioural competences (Table 4) having assessed
the knowledge aspect with an overall mean grade of M=4.12 and the experience
aspect with M=4.54. In this category, employers assessed the competence of
PM graduates with a mean grade of M=4.16 (Table 4). Also, the results indi-
cate a high level of importance of contextual competences, which were assessed
with a grade of M=4.19 for knowledge and M=4.47 for experience (Table 5).
In terms of elements of contextual competences, the competence of employees
was assessed with a mean grade of M=3.99 (Table 5).

70
Table 3 General importance of individual elements of technical competences
and employer perception of the competence of Project Management
students
Employee
Knowledge Experience
competence
Std. Std. Std.
Technical competences N mean mean mean
dev. dev. dev.
1.01. Ambition to achieve project management
30 4.20 0.66 4.53 0.68 4.33 0.61
success
1.02. Identification of project’s stakeholders 30 4,17 0.53 4.40 0.56 4.23 0.68
1.03. Project requirements and objectives
30 4.30 0.70 4.50 0.63 4.33 0.71
management
1.04. Identification and management of project risks
30 4.30 0.70 4.60 0.56 4.23 0.73
and opportunities
1.05. Project quality management 30 4.20 0.61 4.67 0.48 4.13 0.73
1.06. Definition and maintenance of project
30 4.03 0.76 4.53 0.63 4.17 0.87
organisation
1.07. Project team management and leadership 30 4.47 0.63 4.73 0.45 4.27 0.83
1.08. Definition of tasks and problem resolution on
30 4.20 0.66 4.60 0.56 4.33 0.71
the project
1.09. Co-ordination of various project structures 30 3.97 0.67 4.37 0.61 4.03 0.72
1.10. Definition of project scope and deliverables 30 4.27 0.58 4.50 0.73 4.30 0.65
1.11. Definition of project time and phases 30 4.13 0.73 4.43 0.68 4.17 0.79
1.12. Planning. identification and resource allocation
30 4.23 0.63 4.57 0.57 4.17 0.65
on the project
1.13. Project cost and finance management 30 4.30 0.79 4.57 0.68 4.07 0.78
1.14. Identification and definition of procurement
30 4.20 0.89 4.37 0.76 3.73 1.05
and project contract management
1.15. Project change monitoring and management 30 4.17 0.83 4.43 0.68 3.97 1.03

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
1.16. Establishment of the reporting system and
30 4.23 0.77 4.47 0.57 4.07 0.87
project control
1.17. Information and project documentation
30 4.17 0.83 4.17 0.87 4.10 0.92
management
1.18. Ensuring effective communication on the
30 4.30 0.70 4.60 0.50 4.33 0.76
project
1.19. Project start-up 30 4.23 0.68 4.50 0.51 4.17 0.75
1.20. Project close-out 30 4.17 0.53 4.50 0.51 4.17 0.83
Average value 4.21 4.50 4.17

71
Table 4 General importance of individual elements of behavioural competences
and employer perception of the competence of Project Management students
Employee
Knowledge Experience
competence
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

Std. Std. Std.
Behavioural competences N mean mean mean
dev. dev. dev.
2.01. Leadership (providing direction
and motivating others in their task 30 4.20 0.76 4.67 0.55 4.13 0.82
performance)
2.02. Engagement and motivation of
30 4.27 0.69 4.77 0.43 4.20 0.89
project participants
2.03. Self-control (coping with daily tasks.
30 4.03 0.81 4.67 0.55 4.07 0.74
requirements and stress)
2.04. Assertiveness (ability to state one’s
30 4.07 0.69 4.50 0.63 4.13 0.73
views persuasively and authoritatively)
2.05. Relaxation (ability to relieve tensions
30 3.93 0.98 4.43 0.63 3.80 0.76
in difficult situations)
2.06. Openness (ability to make others
30 3.97 1.00 4.50 0.68 4.23 0.94
feel they are welcome to the project)
2.07. Creativity (ability to act in an original
30 3.97 0.96 4.43 0.63 4.17 0.79
and imaginative way)
2.08. Results orientation (focusing the
30 4.07 0.83 4.47 0.73 4.27 0.83
team’s attention on key objectives)
2.09. Efficiency (ability to use time and
30 4.20 0.81 4.63 0.49 4.40 0.77
resources cost-effectively)
2.10. Consultation (ability to reason.
present solid arguments and listen to the 30 4.13 0.86 4.43 0.63 4.10 0.71
other point of view)
2.11. Negotiation (ability to resolve
30 4.33 0.84 4.63 0.67 4.00 0.83
disagreements related to the project)
2.12. Conflicts and crises (ability to
30 4.20 0.71 4.53 0.57 3.90 0.80
resolve conflicts and crises successfully)
2.13. Reliability (ability to deliver what you
have said you will to the time and quality 30 4.27 0.78 4.63 0.72 4.37 0.81
agreed within the project specification)
2.14. Values appreciation (ability to
perceive the intrinsic qualities of other
30 4.03 0.76 4.47 0.68 4.27 0.87
people and understand their points of
view)
2.15. Ethics (morally acceptable conduct
30 4.13 0.73 4.33 0.71 4.33 0.88
of every individual)
Average value 4.12 4.54 4.16

72
Table 5 General importance of individual elements of contextual competences
and employer perception of the competence of Project Management students
Employee
Knowledge Experience
competence
Std. Std. Std.
Contextual competences N mean mean mean
dev. dev. dev.
3.01. Project orientation (ability to
conceive and manage a project 30 4.27 0.69 4.50 0.57 4.07 0.83
successfully in different situations)
3.02. Programme orientation (ability to
30 4.27 0.64 4.57 0.50 3.93 1.05
run a set of related projects successfully)
3.03. Portfolio orientation (ability to
manage projects and programmes 30 4.27 0.64 4.40 0.62 3.87 1.04
successfully within the organisation)
3.04. Successful management of the
implementation of major improvements
30 4.33 0.71 4.63 0.49 3.87 1.11
in the project. programme and portfolio
management
3.05. Management of the connections
between permanent and project parts of 30 4.13 0.68 4.57 0.50 3.87 1.04
the organisation
3.06. Directing the development
of project management process in 30 4.23 0.63 4.37 0.56 3.80 1.03
accordance with business requirements
3.07. Successful project management
related to the application or development
30 4.20 0.66 4.43 0.63 4.00 1.02
of the system. product and/or
technology management
3.08. Project related human resources
30 4.13 0.90 4.60 0.72 4.17 0.99
management

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
3.09. Directing the development
of organisational standards related
30 4.07 0.91 4.10 0.84 3.63 1.00
to health. insurance. security and
environment
3.10. Establishing connections
between the project environment
30 4.13 0.82 4.47 0.68 3.77 0.97
and organisational. financial and legal
environment
3.11. Aligning the project and business
30 4.20 0.81 4.40 0.56 3.73 1.01
operation with legal processes
Average value 4.19 4.47 3,99

73
Elements of technical competences that employers find most developed in
PM graduates (assessing them with highest mean grades) include ambition to
achieve project management success (M=4.33), project requirements and ob-
jectives management (M=4.33), definition of tasks and problem resolution on
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

the project (M=4.33) and ensuring effective communication on the project
(M=4.33). Elements of technical competences for which PM graduates have
received the lowest grades include identification and definition of procure-
ment and project contract management (M=3.73), project change monitoring
and management (M=3.97) and co-ordination of various project structures
(M=4.03) (Table 3).
Elements of behavioural competences that employers find most developed
in PM graduates (assessing them with highest mean grades) include efficiency
(ability to use time and resources cost-effectively) (M=4.40), reliability (ability
to deliver what you have said you will to the time and quality agreed within the
project specification) (M=4.37) and ethics (morally acceptable conduct of ev-
ery individual) (M=4.33). Elements of behavioural competences for which PM
graduates have received the lowest grades include relaxation (ability to relieve
tensions in difficult situations) (M=3.80), conflicts and crises (ability to resolve
conflicts and crises successfully) (M=3.90) negotiation (ability to resolve dis-
agreements related to the project) (M=4.00) (Table 4).
Elements of contextual competences that employers find most developed in
PM graduates (assessing them with highest mean grades) include project re-
lated human resources management (M=4.17), project orientation (ability to
conceive and manage a project successfully in different situations) (M=4.07)
and successful project management related to the application or development of
system, product and/or technology management (M=4.00). Elements of con-
textual competences for which PM graduates have received the lowest grades
include directing the development of organisational standards related to health,
insurance, security and environment (M=3.63), aligning the project and busi-
ness operation with legal processes (M=3.73) and establishing connections be-
tween the project environment and organisational, financial and legal environ-
ment (M=3.77) (Table 5).
By applying the one-way analysis of variance (Table 6) we checked whether
the assessments of the general importance of knowledge and experience by spe-
cific elements of project competences differ from the PM graduates’ competence.

74
As can be seen in Table 6, the statistically significant difference in the as-
sessment of knowledge, experience, and competence has been confirmed for
elements of technical competences (F=3840.75; df=29; p<0.01). Post hoc test-
ing applying the Bonferroni test confirmed a statistically significantly higher
result in the assessment of required experience compared to knowledge (Bon-
ferroni=0.29; p<0.05) and the assessment of competence (Bonferroni=0.34;
p<0.05) in technical competences. A statistically significant difference was also
found in the assessment of knowledge, experience and competence for the ele-
ments of behavioural competences (F=3732.74; df=29; p<0.01). Post hoc test-
ing applying the Bonferroni test confirmed a statistically significantly higher
result in the assessment of required experience compared to knowledge (Bon-
ferroni=0.42; p<0.05) and the assessment of competence (Bonferrroni=0,38;
p<0,05) in behavioural competences. A statistically significant difference was
also found in the assessment of knowledge, experience and competence for the
elements of contextual competences (F=3628.82; df=29; p<0.01). Post hoc
testing applying the Bonferroni test confirmed a statistically significantly higher
result in the assessment of required experience compared to knowledge (Bon-
ferroni=0.28;<0.01) and the assessment of competence (Bonferrroni=0.48;
p<0.01) in contextual competences.
As a general conclusion, we may suggest that the expected level of knowl-
edge, as assessed by the employers, matches the assessed level of PM graduates’
competence (no statistically significant difference has been confirmed). How-
ever, the expected level of experience, as assessed by the employers, was sta-
tistically significantly higher compared to the assessed levels of PM graduates’
competence. This is why the Project Management study programme should (for INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
further development and competitiveness of PM graduates in the labour mar-
ket) include more activities that would provide students with more practical
experience.

75
Table 6 Statistical significance of the assessment of the general importance of
knowledge and experience according to specific elements of project competenc-
es and the assessment of the competence of employees who have completed the
Project Management study programme
Zlatko Barilović: EMPLOYER PERCEPTION OF THE DEVELOPMENT OF PROJECT COMPETENCES IN PROJECT MANAGEMENT GRADUATES

Degrees of Statistical
N MEAN Std. dev. F-ratio
freedom significance
Technical competences
Knowledge (general) 30 4.21 .52
Experience (general) 30 4.50 .39
Competence 30 4.17 .60 3840.75 29 .00**
(employee)
Behavioural competences
Knowledge (general) 30 4.12 .61
Experience (general) 30 4.54 .38
3732.74 29 .00**
Competence
30 4.16 .58
(employee)
Contextual competences
Knowledge (general) 30 4.19 .55
Experience (general) 30 4.47 .40
3628.82 29 .00***
Competence
30 3.99 .75
(employee)

5. CONCLUSION
The success of any organization in today’s dynamic business environment
undoubtedly depends on the successful and efficient execution of projects. One
of the main prerequisites for successful execution of projects are certainly indi-
viduals who need to have project competences developed to a certain degree in
addition to their expertise in their field. This is true of all employees, regardless
of how often they participate in projects (as members of project teams), and
particularly if they assume the role of project managers.
The importance of project competences in more developed countries of the
world has long been recognized, special emphasis being placed on them by the

**
Statistical significance at a risk which is less than 1% (p<0,01)
**
Statistical significance at a risk which is less than 1% (p<0,01)
***
Statistical significance at a risk which is less than 1% (p<0,01)

76
leading project management organizations in the world. Following such global
trends, the Republic of Croatia will also have to start taking account of the de-
velopment of such competences throughout the educational system, particularly
when it comes to higher education. The research conducted for the purposes of
this paper suggests that Croatian employers, too, consider project competences
to be essential regardless of which specific elements of the three areas of compe-
tences (technical, behavioural or contextual) are involved.
Unfortunately, for the time being, the Republic of Croatia lacks specialized
higher education study programmes that develop this type of competences.
The results of the survey have confirmed that graduates of one such specialized
study programme (in this case the referred to specialist graduate professional
study programme in Project Management at the University of Applied Sciences
Baltazar Zaprešić) have been welcomed by their employers, who have assessed
their project competences as very well developed. The results of the survey also
indicate that students of Project Management have an excellent theoretical ba-
sis (knowledge assessment), while there is certainly plenty of room for improve-
ment in terms of their practical application of competences acquired during
their studies. This certainly suggests that study programmes need to expose
students to as much work on specific projects as possible, which is quite pos-
sible to achieve through establishing better connections between employers and
students even in the course of their studies.
The results of this survey can certainly serve not only as guidelines for fur-
ther development of the given study programme in the field of project manage-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ment, but they can also help design additional educational programmes (formal
and informal) in the field of project management in the Republic of Croatia.
It is, by all means, recommended that such or similar surveys be conducted in
the coming period in order to continuously monitor the current needs of the
labour market (especially those related to project-based business), so that the
educational system can constantly adjust and respond to contemporary needs
of the labour market.

77
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INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

79
IMPORTANCE OF STRATEGIC
PLANNING IN CULTURE: THE CASE
OF MUSIC EVENTS

Ivana ŠANDRK NUKIĆ, PhD, Assisstant Professor
J.J.Strossmayer University of Osijek,
Faculty of Civil Engineering Osijek
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

E-mail: isandrknukic@gfos.hr

Blanka GIGIĆ KARL, M.A.
J.J. Strossmayer University of Osijek,
Academy of Arts Osijek
E-mail: blanka.gigic@gmail.com

Abstract
Strategic planning has always been a historically important activity. In ancient
times, strategic planning was primarily a task taught of and accomplished by
military leaders. In modern times, more or less same principles apply for stra-
tegic planning done by managers in business context. It is always about thor-
ough environment analysis followed by goals setting, that would transfer the
organization from the current state of existence to the willing one in the future.
As such, strategic planning enables growth and development through gaining
competitive advantage. Recent literature provides insight into use of strategic
planning principles in managing culture events, too. However, the findings are
still scarce so with the wish to build on that body of knowledge, authors of this
paper formulated their initial research question as: What are the benefits of
strategic planning of culture events, primarily musical events. For the purpose
of theoretical framework we have done a relevant literature review. In the em-
pirical part of the paper we considered all major musical events in the city of
Osijek and have finally chosen „Osijek’s musical wednesday“ as a representative
event for our case study and SWOT analysis. As with many other case studies,
our findings have a limitied ability of generalization so future studies might re-
search a bigger sample of events. However, our findings could help both scholars

80
to gain the new perspective on the topic as well as practicioners running these
events, to be more efficient in ther work.
Key words: strategic planning, music events, SWOT
JEL Classification: O21

1. INTRODUCTION
.. Concept and historical development of strategy
Strategos is a word that originates from ancient Greece, and in translation
means a person with a high military rank, who leads the military in military
exhortations. Due to this, until mid-18th century, the word strategy referred to
the skill of organizing and conducting wars (Vrgoč; 2017).
Many of the factors have influenced the development and role of the strategy
throughout history, so in the 20th century, the word strategy is beginning to
be applied in the business context, too. In the 1960s, the strategic plan repre-
sented a business idea and a corporate identity. According to Skubik (1959),
everyday use of the word strategy refers to a kind of overall plan that a military
commander, football team or a corporation can apply when executing a specific
program. It also means dealing with something that can not be foreseen.
During 1970s the strategic plan underwent an analysis of market advan-
tages, while 1980s witnessed implementation of strategy and introduction of a
holistic approach to strategic planning. The stand of the 1980s illustrates G.C.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Singer (Božičević; 2000): the mission gives a framework, the aims define goals
within the mission, which, when realized, move the organization to fulfill the
mission, and the strategies are based on the plan of action in achieving the goals.
Singer further emphasizes that the strategy addresses the long-term goals and
paths of their realization affecting the system as a whole.
In the 1990s, attention was paid to strategic leadership and reengineering,
data collection on recurrent and missing activities, and their mutual compari-
sons with the organization’s policy and strategy. By entering the 21st century,
strategies are perceived as the necessary methods used to achieve the set goals
(Božičević; 2000).

81
.. Culture policies
Culture policy integrates government actions, laws and programs that regu-
late and support (financially and otherwise) activities related to the culture and
creative sectors, such as music industry. It entails a large, heterogeneous set of
individuals and organizations engaged in the creation, presentation, distribu-
tion, and preservation of heritage, entertainment activities and/or culture prod-
ucts (Wyszomirski; 2002).
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

Culture institutions, organizations, businesses and culture manifestations
create their own business policies that manage their work. A set of such indi-
vidual culture policies comprehensively denote the culture policy of a country.
When these policies are compared to each other, the similarities are noticed,
and thus concrete universal models of culture policy are formulated..
A liberal model of culture policy (Stojković & Milojević; 2018) gives a cru-
cial significance to the culture goods market. The main role undertakes the in-
dustry that generates standardized culture products intended to the majority,
mass media audiences. In such a model of culture politicy, private funds for the
development of elite forms in art (opera, theaters, and the like) play a crucial
role. The state has the role of encouraging the private sector and civil society
to invest in culture and to see their interest in it. Diffusion of culture goods is
protected by the influence of the state, which must not jeopardize its identity.
Contrary model of culture policy is a parastate model (Stojković & Milojević;
2018), in which the state gives its responsibility to the expert culture council,
autonomous in creating the culture policy. An example of such model are Unit-
ed Kingdom and Ireland where expert culture councils try to reduce and miti-
gate the impact of the art market and at the same time support the development
of culture institutions and local community projects. The goal of local commu-
nities is to encourage a wider audience to participate in culture life. Somewhat
differently, Germany has decentralized its culture policy and has delegated state
responsibility to cultural affairs in each region, so autonomous culture policies
have emerged that differ one from each other.
The model of culture policy in which the state has dominance and control
of the entire culture area is called the state bureaucratic enlightenment model
(Stojković & Milojević; 2018). Such a model was characteristic for the socijalist
countries and partly for the social democratic countries of the West. Today, this
model has remained in the countries as an autocratic model of state leadership,

82
and culture events are directed towards establishing a traditional ethnic culture
system.
France has developed a model of culture policy focused on image and pres-
tige in the world. Through culture programs, events and big projects they give
importance to culture tourism. Such a way of thinking achieved that their cul-
ture policy affects not only the neighboring countries, but also the culture policy
of the European Union as a whole. This model has been called a state prestige-
enlightenment model (Stojković & Milojević; 2018).
Despite of the nation or a particular model, governments’ culture policy ini-
tiatives generally have two aims: supporting excellence in the arts and broaden-
ing access to the arts by citizens. These aims are often trade-offs, as any increase
in emphasis on one policy objective typically has an adverse effect on the other
goal. We find that an important argument for necessity of strategic planning in
arts domain (Throsby; 2010).

2. STRATEGIC PLANNING OF MUSIC EVENTS 
THEORETICAL FRAMEWORK
This paper focuses on the strategic plans of music events that are neither
institutions nor legal entities, but have their form, vision, mission and goals in
culture activity and environment.
In the near past, the activity of culture manifestations, especially the music
ones, was not strategically organized, but was organized in an ad hoc mannor,
resulting in short-term or one-off effects of a particular event. Planning alone INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
does not produce results but is a means of achieving the ultimate goals.
In order to achieve results, a plan has to be implemented, because a well-
designed plan will increase the likelihood that planned activities will lead to
the desired effect. The plan establishes priorities and enhances the teamwork
process in achieving them. Therefore, setting up a plan can be seen through
three crucial questions: where are we now; where do we want to be and how to
get there? (Shulz Vugrin & Forčić; 2010). Additionally, while in the short-term
not achieving the goals can be tolerated, emphasis must be on their long-term
achievement, as it is the only way for reaching synergy (Stacey; 1997)

83
In this paper we assume that the long-term systematic plan i.e. strategic ori-
entation of music events is needed.
The first reason for such a presumption is to achieve economic stability.
Namely, systematic planning and realization of the planned bring about con-
tinuity and create habits of the audience, which provides the musical events’
organizers the opportunity to collect more significant financial resources. Addi-
tionally, the planned activities of continuous music events are given the epithet
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

of the festival or “season”, which becomes an integral part of the identity of the
culture scene. This raises their reputation from the aspect of financiers, both
public and private. Taken together, all of this provides a better financial posi-
tion, enabling the organizers to evaluate available opportunities and choose the
best alternative (Narayanan & Nando; 2007).
Another reason is to achieve the highest quality program. The quality of
the program and the established scene is important for the artists because it
increases the value of their personal references, which makes it easier to engage
the most prominent artists. Consequently, in the long run, i.e. from the strategic
perspective, organizers are in the position to more easily engage better quality
musicians.
Last but not least, the importance of strategic planning also stems from
avoiding the collision of culture events, in terms of reducing the likelihood of
simultaneous events holding, which would result in public dispersion.

.. Vision, mission and goals: strategic intent
To create a culture manifestation in the right way, it is necessary to create
some preconditions. In the first place, one should have a clear vision of the role
of culture manifestation in its environment (locally or regionally). Vision can be
defined as an organizational view of the desired future (Shulz Vugrin & Forčić;
2010), where it is essential to be clear and concise as well as inspirational and
motivating. Vision describes the future one wants to achieve and provides direc-
tion for determining the goals of the event. Most importantly, the vision has a
pragmatic rather than an abstract character, which ensures that the long-term
idea moves into action.
Once the vision of a certain culture event is determined, the question arises
as to what its mission is. The mission goes in the direction of presenting the

84
event as it wants to be, why it exists at all, what it serves and how it intends to
achieve a defined vision. The mission is characteristic of every event, especially
if a particular manifestation is performed for a long time continuously.
After Stevena Langley’s definition (Dragičević Šešić & Stojković; 2013, 73-
74) mission of culture institutions integrates 4 basic goals:
1. „The fundamental philosophy of a culture event should be outlined in one
concise sentence or a short section.
2. Mission must be unique and recognizable.
3. Mission should be exciting and inspirational to the public.
4. Mission must demonstrate the fundamental aims of the event so that its
success and progress is measurable. „
After defining the mission of a culture manifestation, the desired goals are
set as more concrete statements about what wants to be achieved by the pro-
gram of the culture manifestation in the next three to five years. Of course, the
goals should focus on the most important effects, improvements and results
that are by their nature measurable.
The great interdependence of vision, mission and goals is one of the basic
characteristics of their interrelationships. This connection is the reason that re-
cently some authors observe the vision, mission and goals as a whole and refer
to it as to “strategic intent”. Hamel and Prahalad have used the term first (after
Buble; 2005) and defined it as a “heart” of the strategy, as a possible and an
animing dream for the future.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
The strategy itself can be understood as the starting point of all activities
whose design is a process that should be learned and not a result of intuition or
talent (Vrdoljak Raguž et al.; 2013)

.. Strategy of Cultural Development of the City of Osijek
The strategy of the culture events of the city of Osijek, among them the mu-
sic events which are the primary focus of this paper, is set out in the document
called Strategy of Cultural Development of the City of Osijek 2014.-2020.
(2015). This Strategy stems from a document of even wider coverage concern-
ing the overall city development, called Strategy of Osijek from the Industrial
to the Intelligent City 2014-2020 (Strategija razvoja grada Osijeka od industri-

85
jskog do inteligentnog grada 2014 – 2020.). That strategy defines vision of the
city as follows: “The City of Osijek is a desirable place to work, live and enjoy a
landscaped green city where citizens can meet their educational, cultural, social
and sports needs” (Strategija razvoja grada Osijeka od industrijskog do inteli-
gentnog grada 2014 – 2020., 32). Strategy of Cultural Development of the City
of Osijek 2014.-2020. (p. 21) specifies that vision from a cultural point of view
and says: “Citizens of all ages create identity as artists and culture workers, or
as an interested audience ... Osijek is a safe and comfortable city to the extent
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

of man, which also enables the realization of different, even very brave artistic,
intellectual and entrepreneurial potential “.
The mission that is intended to achieve such a vision states: “As far as culture
is concerned, the City of Osijek is responsible for the constant efforts and ad-
vancement of cultural-artistic creativity not only because of its citizens whose
culture is a part of urban content and not just because of the necessity of con-
tinuity in relation to binding cultural-historical heritage. The mission of the
City of Osijek is to develop and implement the cultural policy of promoting art,
creativity, innovation, artistic education and ensuring conditions for the devel-
opment of creative industries and public communications. It is also the task of
editing and suspending the cultural heritage and providing for its sustainable
use. The City of Osijek will encourage the networking and development of col-
laborative cultural relations between different social and cultural participants so
that culture becomes a significant developmental power of Osijek.” (Strategija
kulturnog razvitka, p. 22)

3. RESEARCH METHODOLOGY
After analyzing the relevant literature, for the empirical part of this case
study all the established music events of the city of Osijek were chosen: the
memorial “Franjo Krežma”, the memorial “Darko Lukić” and the concert cycle
“Osijek’s musical wednesday”. All these manifestations have the task of refining
the environment, developing the public, creating jobs related to culture and ul-
timately increasing the GDP.
The memorial “Franjo Krežma” has a representative, international character.
Performances are done by young talented violinists and the memorial has been
held biennally since 1968 in honor of the world famous violinist Franjo Krežmi.
The memorial includes multi-day program and has a national significance in the

86
promotion of Croatian cultural heritage. It Gathers top-class violinists from
high school age to graduated artists. The concept of the memorial consists of
three concert nights through which audience have the opportunity to hear the
best students from Croatia and abroad as well as one or two featured young
violinists in the final evening.
Memorial “Darko Lukic” has been held since 1977 in a memory of the great
pianist Darko Lukić. It gathers young talents from all over Croatia and Europe,
and brings a music-quality weekend with top artists. As the previous one, this
memorial works through three concert nights, too.
Both memorials are held every other year and are permanently sponsored by
the City of Osijek. Although all mentioned music events have an international
component and are important cultural manifestations, the third one, „Osijek’s
musical wednesday“, significantly differs from the memorials because it is the
concert cycle which functions continuously throughout the year, for the last six
years. Therefore, it was selected for a more detailed analysis in the remainder of
this paper.
Method of SWOT analysis was selected for a more detailed study of the
music event „Osijek’s musical wednesday“. With respect to the aims of this pa-
per, SWOT analysis is considered a suitable method of situational analysis of
cultural manifestations, because based on its results it is possible to generate
strategic guidelines of those manifestations.
SWOT analysis combines internal and external environmental analysis. In-
ternal analysis detects the strengths and weaknesses of the music manifestation
at the present moment, while opportunities and threats relate to external fac- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
tors that affect the manifestation and which can not be treated in the short term
but should be exploited or removed. Experienced managers say that internal
strengths and weaknesses change slowly while external opportunities change
rapidly and threats typically remain (Antolović; 2009)
Previous studies identified by Dragojević and Dragičević Šešić (2008) sug-
gest that the internal analysis starts from different strengths and weaknesses,
such as the program, its quality, information and financial resources, the quality
of the organizational process, and the like, while external analysis suggests look-
ing at areas relevant to the music event and its operation, such as:
1. European frameworks of international cultural cooperation

87
2. Regional and local cultural policy
3. The state and degree of development of the area of art and culture in
which it operates
4. State of the cultural market (cultural consumption trends, cultural mod-
els, audiences)
5. Functioning and development of the media system
In order to avoid subjectivity as the most common disadvantage of this method,
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

in the course of this case study the SWOT analysis has been conducted through a
series of individual interviews with the organizers and initiators of „Osijek’s musi-
cal wednesday“. Therefore its results and the proposed strategic guidelines suggest
the consensus of all relevant stakeholders in the Osijek music scene.

4. SWOT ANALYSIS OF „OSIJEK’S MUSICAL
WEDNESDAY“
Given that „Osijek’s musical wednesday“ is currently the only the concert
cycle not only in the city but in the region, authors of this paper find it impor-
tant to give it a special attention in the strategic sense of planning its work and
existence.
„Osijek’s musical wednesday“ has its mission, vision and goals in order to
acomplish the best possible interaction with its end-users – the audience. How-
ever, it still does not have defined strategic guidelines. This is a gap that should
be additionally researched and formulated.
Vision of „Osijek’s musical wednesday“ is to organize a cycle of concerts that
will be performed continuously and to provide the local community with musi-
cal quality on an artistic and social level. The program itself is not a purpose but
only a channel towards the public, hence the mission of this event points to the
development of the music culture of the audience as well as to the development
of cultural tourism. Strategic goals are in function of the realization of the mis-
sion and can be expressed through four basic categories:
1. Concerted programs should be versatile for audiences of different age
groups.
2. Particular attention should be given to the younger audience as well as
young talented musicians.

88
3. the concert activity should be expanded to other places in the region (co-
operation with the County).
4. Through the cycle of concerts, efforts should be made to foster the devel-
opment of continental cultural tourism in cooperation with tourist com-
munities of the City and the County.

Table 1. SWOT analysis of „Osijek’s musical wednesday“
WEAKNESSES STRENGTH
• Problem of an adequate concert hall • The only concert cycle in Slavonia
• Insufficient representation in the media • A quality and versatile art program
• Absence of own financial sustainability • Quality co-operation with partners
• Dependence on financing from the City and the • Free concerts
Ministry of Culture • Cooperation with musicians from abroad
• Lack of autonomy • Continuous concerts throughout the year
• The recognizable brand of Osijek
OPPORTUNITIES THREATS
• Widening of concert activity in the region • Economically unstable situation in the country
• Realization of cooperation at the international level • Undefined cultural policy
• Strengthening cooperation with state institutions in • Undeveloped habit of tracking cultural events
culture • Poor local sponsorship
• Possibility of financing from European programs • Threat of stopping the concert cycle
• Development continental cultural tourism
Source: authors’ research

.. Weaknesses INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Concert cycle „Osijek’s musical wednesday“ is encountered with the problem
of space, as there is no concert hall in Osijek. Therefore concerts are held in dif-
ferent locations that are not always adequate for the concert performance or for
the reception of numerous audience. Cultural infrastructure in terms of public
facilities is one of the crucial problems regarding development of the culture
sector as a whole. Without the available public capacities there is no high qual-
ity of life in the city (Dragojević & Žiljak; 2008).
„Osijek’s musical wednesday“ as a manifestation does not have strong enough
and developed marketing orientation in terms of continuous marketing efforts
that would be present throughout the media. The students of culture at the

89
J.J.Strossmayer University of Osijek conducted several interviews and surveys
which have revealed how well the citizens of Osijek were acquainted with the
existence of the concert cycle „Osijek’s musical wednesday“. That research was
carried out on the occasion of the artistic-cultural Colloquium on the 5th an-
niversary of the concert cycle „Osijek’s musical wednesday“. Its results showed
that citizens were not well informed about the existence of this music event but
at the same time showed interest in future concerts.
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

Problems also appear regarding financing the cycle. Namely, „Osijek’s musi-
cal wednesday“ does not exist as a legal entity, so there is no possibility of direct
and autonomous funding through the Structural Funds of the European Union
so the cycle currently depends on financing from the local budget of the City,
the budget of the Ministry of Culture and several local sources of funding.

.. Strenghts
„Osijek’s musical wednesday“ is the only concert cycle in Slavonia and offers
a quality and diverse art program. It shows persistence and consistency of the
concept of work and continuity in concerts. Every year 14-16 concerts are held,
which are free for the audience.
Persistence in the development of artistic standards and criteria in the field
of music culture, largely based on a positive attitude towards cooperation with
new associates and partners.
A recognizable image of „Osijek’s musical wednesday“ as a positive factor
in public, social and cultural life of the city. However, this local component has
been transformed into international through collaboration with musicians from
abroad. Since 2012, there have been 180 musicians from 12 countries (Ukraine,
Australia, Japan, Russia, Azerbaijan, Israel, USA, Serbia, Slovenia, Bosnia and
Herzegovina, Czech Republic and Hungary). International cooperation is of
utmost importance culturally, touristically and financially.

.. Opportunities
By leveraging on their own strengths, opportunities are actually the basis for
defining strategic guidelines or opportunities that can be utilized in the future.

90
Certainly, there is the possibility of expanding activities, ie holding concerts
in other town of the Osijek-Baranja County and in the region. This opportunity
is achievable through even more intense cooperation at national and interna-
tional level.
Strengthening cooperation with state institutions in culture could result in
more intensive financial support from the Ministry of Culture. At the same
time, it is an opportunity to improve the financial position and find ways to use
sources of funding from various European programs.
The development of cultural tourism is of equal importance for „Osijek’s
musical wednesday“ as well as for the realization of the mission statement of
the city of Osijek.

.. Threats
Among other, the unstable economic situation in the country causes the un-
defined cultural policy. There is an underdeveloped culture of following cultural
events.
A small number of sponsors at the local level supports cultural activities. In
the absence of financial resources that would continuously fund the concerts it
is possible to stop the concert cycle for good.
Strategic guidelines must go in the direction of avoiding such threats.

5. SUGGESTIONS OF STRATEGIC GUIDELINES INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
FOR MUSIC MANIFESTATION „OSIJEK’S
MUSICAL WEDNESDAY“
Based upon SWOT analysis of the „Osijek’s musical wednesday“, one can
formulate several strategic propositions that could bring long-term benefits to
this and other similar musical manifestations.
First of all, diversification of resources is proposed, as a strategy of orienta-
tion to more sources of funding. This increases the sense of self-reliance, self-re-
sponsibility and a better understanding of the environment and its needs. This
strategy increases organizational dynamics for a longer period of time. Accord-
ing to this strategy, the financing of „Osijek’s musical wednesday“ will not rely

91
solely on the local and central budget, but solutions could be sought through
various programs within the European Union, such as Creative Europe.
Creative Europe is such a program whose aim is to support the cultural and
audiovisual sector. It provides financial and logistical support to the optimal
development of the cultural and creative sector. As such, creative Europe is pri-
marily interested in providing support to initiatives that have a real impact on
the music sector, initiatives that promote new skills within the cultural sector
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

itself, and initiatives that promote international co-operation within the sector.
Consequently, the Creative European Program for the period 2014-2020 was
created, a document that facilitates access to finance for the realization of proj-
ects and cultural events (European Comission).
As a second strategic guideline, a public development strategy is proposed,
which is based on a long-term, systematic engagement regardless of whether
it focuses on non-public animation, the development of a young audience, or
retaining the existing audience with a new cultural program. Organizers of
„Osijek’s musical wednesday“ are already trying to offer a more attractive and
popular program for all types of public in every new season, and such a public
development strategy should be continued in the future.
The strategy of education and transfer of knowledge is the third recommen-
dation, as it supports the development of the reputation and market position
of the music event. Given that the „Osijek’s musical wednesday“ is backed by
the Academy of Arts in Osijek, it would be possible to promote the artistic
and educational value of this event through the Association of European Con-
servatoires (AEC). The primary goal of AEC is music education and it brings
together more than 300 different cultural institutions in 55 countries. However,
as this goal is being pursued through the strengthening of communication be-
tween the music-educational institutions and the cultural-creative industry, this
is certainly a good course of long-term development for events such as „Osijek’s
musical wednesday“ (Association of European Conservatoires).
Given the SWOT analysis results, a decentralization of action is recom-
mended as another strategic guideline. It implies expanding activities to other
areas. „Osijek’s musical wednesday“ performs its concert program only in the
city of Osijek at the moment. In respect of its continuity and artistic quality, the
desire and the need to have concerts elsewhere in the Osijek Baranya county
emerged. This would enable the wider audience to attend the organized con-

92
certs. In this way, this music event would be popularized, especially if decen-
tralization would be followed by intensified marketing activities. In addition,
decentralization contributes to the realization of other goals, too, especially the
strenghtening of cultural tourism.
As far as cultural tourism is concerned, the activities that unite the areas of
tourism and culture in fact present an inter-sectoral connection. Such inter-
disciplinary activities normally generate a significant developmental impulse.
Therefore, inter-sectoral linkage strategy is also recommended. Possibly, this
could be carried out through the cooperation of „Osijek’s musical wednesday“
and the Tourist Bord.
„Osijek’s musical wednesday“ became the brand of the city of Osijek in the
area of music culture. The concerts are very well attended, and even the lack of
a specialized concert venue generated the added value: since concerts are held
at different locations in the city, certain spaces that have not been intended and
initially used for concert purposes are being popularized. Therefore, final rec-
ommendation regarding strategic guidelines is certainly the strategy of develop-
ing recognizability and public visibility.

6. CONCLUSION
Musical events are a valuable part of the cultural offer, meaning much to the
public, to the performing musicians, but also to all the inhabitants of a city and
region, as their purpose is to gather talented artists and thus promote the city

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
as a center of culture.
Speaking of Osijek’s cultural scene, which is not abundant with a large num-
ber of musical events, the need to engage as many people (artists, cultural work-
ers, audience) of all age groups as possible on the joint creation of the cultural
identity of the city should be emphasized.
This ambitious task can be realized starting from existing music events
whose quality justifies their development and upgrading, but only with long-
term strategic planning. The strategic planning process implies the necessity of
defining the development direction and the implementation of activities whose
performance can be measured and adjusted accordingly.
The task of management in culture is, in addition to organizational and
promotional activities, to emphasize the advantages that the city itself has if it

93
participates in certain manifestations, if it sponsors them and enables cultural
events. This tasks is important because the influence of culture on the economy
is evident, while funds for such events are often hardly available or their raising
is uncertain. Given that the effect of a one-time event is small, and a long-term
periodic recurrence needs a stable financial structure, it is necessary to specify
the financial structure and ensure partnerships for each project.
Although support from local government structures is a valuable resource,
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

new trends in managing events in culture are more similar to project manage-
ment postulates. In the context of funding, this means providing the financial
resources necessary for the realization of the project / manifestation for each
project separately, arguing the justification for using the funds for the very pur-
pose. At the same time, relying on the budget as the sole source of funding is no
longer sustainable, but with the demonstration of the justification of the event,
financial support should be sought on various sides such as international, state
or EU funds, private companies, various agencies, crowd-founding and the like.
Even performing additional activities, such as renting public space, can serve as
a source of funding for individual projects.
Of course, even though in real life the management of music events is mostly
limited to ensuring financial sustainability, it should not be forgotten that music
manifestations nevertheless belong to the world of art whose value is not only
financial but, above all, spiritual. Art and music enrich everyday life by pointing
us to others, to beauty, to nobility. That is why it is essential for our society to
ensure music events where young virtuosos show their talents, and the audience
rightly expects quality programs.
The results of the case study of „Osijek’s musical wednesday“ conducted by
SWOT analysis and presented in this paper suggest that achieving simultane-
ous financial and artistic prosperity of music manifestations are the main ben-
efits of strategic planning of such events, and in the same time the response to
the initial research question of this study.

94
LITERATURE
Antolović, J. (2009). Menadžment u kulturi, Hadrian, ISBN: 978-953-55288-2-1, Zagreb
Association of European Conservatoires, https://www.aec-music.eu/
Pristup: (27.03.2018.)
Božičević, J. (2000.) Strategija i taktika, Glasnik Akademije tehničkih znanosti 7,
Dostupno na: http://www.hatz.hr/hrv/glasnik/0154.htm
Pristup (30.03.2018.)
Buble, M. & Cingula, M. & Dujanić, M. (2005). Strateški menadžment, Sinergija
nakladništvo, ISBN: 953-6895-23-4, Zagreb
Dragojević, S. & Dragičević Šešić, M (2008). Menadžment umjetnosti u turbulentnim vre-
menima, Naklada Jesenski i Turk, ISBN: 978-953-222-282-1, Zagreb
Dragojević, S. & Žiljak, T. (2008).  Organizacijski razvoj i strateško planiranje u kulturi,
Pučko otvoreno učilište Zagreb, ISBN: 978-953-254-013-0, Zagreb
Dragićević Šešić, M. & Stojković, B. (2013). Kultura: menadžment, animacija, marketing,
Kulturno informativni centar, ISBN: ISBN 978-953-7356-40-8, Zagreb
European Comission, https://ec.europa.eu/programmes/creative-europe/news/20170602-
music-moves-europe-8-selected-start-ups-midem-2017_en
Pristup: (27.03.2018.)
Narayanan, M.P. & Nando, V.K. (2007). Financije za strateško odlučivanje, Mate, ISBN:
978-953-246-022-3, Zagreb
Schulz Vugrin, Z. & Forčić, G. (2010). Strateško planiranje: put ka održivosti neprofitnih
organizacija, Udruga za razvoj civilnog društva SMART, ISBN: 978-953-7447-10-6,
Rijeka
Stacey, R. D. (1997). Strateški menadžment i organizacijska dinamika, Mate, ISBN: 978-
953-6070-35-9 Zagreb
Stojković, B. & Milojević, A. (2018) Uvodno predavanje u kulturnu politiku; http://prob-
ni.fpn.bg.ac.rs/studije-ii-i-iii-stepena/master-studije/master-akademske-studije-
kulturologije-master-teorije-kulture-i-studija-roda/kulturna-politika/

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Strategija kulturnog razvitka grada Osijeka 2014-2020, (2014). Službeni glasnik Grada
Osijeka 13a,
Dostupno na: https://www.osijek.hr/wp-content/uploads/2017/04/Strategija-kul-
turnog-razvitka-Grada-Osijeka-2014.-2020..docx
Pristup: (14.02.2018.)
Strategija razvoja grada Osijeka: od industrijskog do inteligentnog grada 2014-2020. (2015)
Službeni glasnik Grada Osijeka 2,
Dostupno na: https://www.osijek.hr/wp-content/uploads/2017/07/57-konacni-
prijedlog-strategije-akt-1.pdf
Pristup (28.03.2018.)
Throsby, D. (2010) The Economics of Cultural Policy. Cambridge University Press, 2010.
p. 59-63
Dostupno na: http://assets.cambridge.org/97805218/68259/frontmatter/9780521868259_
frontmatter.pdf
Pristup (10.3.2018)

95
Vrdoljak Raguž, I. & Jelenc, L. & Podrug, N. (2013). Izvor konkurentne prednosti u XXI
.stoljeću, Sveučilište u Dubrovniku, ISBN: 978-953-7153-26-7, Dubrovnik
Vrgoč, D. (2017). Strategos – vojskovođa, general, strateg, Strategos 1, str. 121-124, ISSN:
2459-8771,
Dostupno na: https://strategos.morh.hr/wp-content/uploads/2017/03/Dalibor-
Vrgoc-Jezicni-savjetnik.pdf
Pristup: (30.03.2018.)
Wyszomirski, M. (2002). Arts and Culture. In: The State of Nonprofit America. Lester M.
Salamon (ed.). Washington D.C.: Brookings University Press
Ivana Šandrk Nukić  Blanka Gigić Karl: IMPORTANCE OF STRATEGIC PLANNING IN CULTURE: THE CASE OF MUSIC EVENTS

96
TOURISTS’ PERCEPTIONS OF
DESTINATIONS  EMPIRICAL
STUDY OF DESTINATION POREČ

Kristina BRŠČIĆ, Ph. D.
Institute of Agriculture and Tourism/Department of Tourism
E-mail: kristina@iptpo.hr

Tina ŠUGAR, M. Eng. Agr.
Institute of Agriculture and Tourism/Department of Tourism
E-mail: tina@iptpo.hr

Drago RUŽIĆ, Ph. D.
University of Osijek Josip Juraj Strossmayer/
Faculty of Economics in Osijek/ Department of Marketing
E-mail: ruzic@efos.hr

Abstract
Tourism is a very important industry in Croatia and globally, and as is indi-
cated in the WTTC report for 2017, travel and tourism is a key sector for
economic development and job creation throughout the world. Tourist destina- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
tions are invited to take account of the social, cultural, economic and environ-
mental challenges as important aspects of sustainable tourism development. In
order to measure the impact of tourism activity in relation to sustainability, the
European Commission has developed a “European Tourism Indicators Sys-
tem” (ETIS), as a management and information tool and monitoring system.
The aim of the paper was to evaluate how tourists’ perceptions of a destina-
tion are used as a management tool for the planning of sustainable tourism at
the destination level. The instrument of the research was a survey developed
according to the Visitor survey suggested by ETIS (2016), with additional
questions regarding the satisfaction level of different aspects of destinations.
The survey was carried out on the beaches in the City of Poreč, from July until

97
September 2017. The surveys were offered to the respondents in the English,
German, Italian, Russian, Slovenian and Croatian languages and in total 510
questionnaires were collected from beach users from 27 countries. The research
was performed within the Interreg Mediterranean MITOMED+ project and
the results can be useful as an information tool for future planning of sustain-
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

able tourism in the destination.
Key words: destination management, Istria County, tourists’ perceptions,
tourists’ satisfaction, Poreč
JEL Classification: L83, Z39

1. INTRODUCTION
Tourism in Croatia is the main fast growing industry and in 2017 achieved
the highest results of tourist arrivals and overnights. The direct contribution of
travel and tourism to GDP in 2017 is one of the highest in Europe. Given the
above, it is extremely important to develop sustainable tourism in the future
to protect the resources, to ensure the well-being of the local population and a
high level of tourist satisfaction with the destination.
On the official website of the Ministry of Tourism is mentioned, referring to
the Croatian information system for tourism e-Visitor, that from January to the
end of December in 2017 there were 18.5 million tourist arrivals and 102 mil-
lion tourist overnight stays and that most of the overnight stays were realised
in Istria County (28 million overnight stays). The largest number of overnight
stays were made by tourists from Germany (20.7 million overnights), Slovenia
(10.1 million overnights) and Austria (7.6 million overnight stays). According
to the number of overnight stays the top destinations in Croatia are Dubrovnik,
Rovinj, Poreč, Medulin, and Umag.
Since 2017 was the International Year of Sustainable Tourism for Develop-
ment sustainability in tourism has been in focus and especially issues related
to fast-growing tourism destinations around the world. WTTC (2018) points
out that according to the number of international visitors compared to the local
population, which is one of the indicators of the impact tourism may have on the
destination, Croatia was in the second place in 2016 (3.3 to 1). In the first place
is Iceland (5.1 to 1) and in the third place is Montenegro (2.6 to 1) (WTTC,
2018). According to the indicator of tourism intensity, the most popular tour-

98
ist destinations in the Mediterranean in 2016 were Malta, Croatia, and Cyprus
(EUROSTAT, 2016). It is known that as tourist arrivals grow, destinations can
be faced with social and environmental problems. Also, these can damage tour-
ist satisfaction, which is not in the interests of the destination. Tourist satisfac-
tion is recognized as one of the main indicators in the destination management
and overall satisfaction with the destination is one of the suggested indicators
by the European Commission in the indicators list “European Tourism Indica-
tors System for sustainable management of destination” (ETIS).

2. METHODOLOGY
The aim of the research was to contribute to the measurement of social indi-
cators relating to tourist perceptions of the destination Poreč in order to facili-
tate the management of the destination in the direction of sustainable tourism.
Considering the satisfaction with the destination and preferences of tourists,
the data can be also used as a tool to improve certain aspects of the destination
for the upcoming seasons. Due to the available information at regional and na-
tional levels, they are of little help in planning future activity in a tourism des-
tination. Empirical research will help to test the usefulness of the indicators of
tourist satisfaction at the local level in the planning of the tourism destination.
The research was carried out within the project Interreg Mediterranean MI-
TOMED+ (Models of Integrated Tourism in the MEDiterranean Plus) and
the main objective of the project is to enhance sustainability and responsibility
in Maritime and Coastal tourism.
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
As secondary data the official data of tourist arrivals and overnight stays in
the period from 2007 to 2017 for destination Poreč was used, which is pub-
lished on the website of the Istrian County Tourist Board. The data from the e-
Visitor information system we requested directly via e-mail and we used official
data from Eurostat and the Ministry of Tourism.
The survey was created according to the questionnaire “Visitor survey”, sug-
gested by the “European Tourism Indicators System” (2016). The survey was
conducted on the beaches in the City of Poreč by interviewers (students) who
were properly educated and controlled in the field. The surveys were offered to
the respondents in the English, German, Italian, Russian, Slovenian and Cro-
atian languages. The survey was carried out from July until September 2017

99
and, in total, 510 questionnaires were collected from tourists on the beach. The
questions were the closed-ended type with the possibility to mark one or more
answers. The questions were related to general information about their journey
and the main reasons and purpose of their visit to the destination. To assess the
satisfaction of certain aspects of the destination and overall satisfaction with the
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

destination, a 5- point Likert scale was used where grade 1 signified completely
dissatisfied, and grade 5 signified completely satisfied with the aspects. The data
were analyzed using SPSS (22) and the results were presented with descrip-
tive statistics and Principal Component Analysis (PCA) in order to explain the
difference in the level of satisfaction according to the different attributes of the
destination.

. LITERATURE REVIEW
The World Tourism Organisation UNWTO defined sustainable tourism
as: “Tourism that takes full account of its current and future economic, social
and environmental impacts, addressing the needs of visitors, the industry, the
environment and host communities” (UNWTO, 2005). As such, sustainable
tourism is highlighted to be the best way for the long-term sustainability and
preservation of natural and human resources (Bramwell & Lane, 1993). In the
last 30 years, there have been researchers dealing with the topic of sustainable
tourism (Zolfani et al., 2015) and lots of them emphasized the importance of
using sustainable tourism indicators as a tool for sustainable tourism (Miller,
2001; Tanguay et al., 2011). The reason for this is to have an evidence base
on which it can make informed decisions about the future management of the
destination. Also, by using the indicators, everybody in this set of information
is informed about the need for sustainable tourism and indirectly its influence
on the behavior towards issues of sustainable tourism. It is known that the tour-
ism industry needs to encourage positive changes in tourist behavior towards
sustainable and responsible tourism through education and the use of different
tools and strategies (Budeanu, 2007). Also, different stakeholders in the tour-
ism sector could influence tourist behavior towards sustainable tourism (Bram-
well et al., 2008).
In the paper was analyzed tourist perceptions and satisfaction as a social
indicator and as a tool in helping the destination with managing sustainable
tourism. There is extensive literature about consumer satisfaction and tourist

100
satisfaction and there are many different approaches to examining satisfaction
in tourism; for instance: “satisfied with…; pleased with…; delighted about …;
quality of the stay was…; positive to return in the future…; enjoyed myself;
feel good about…; the choice to attend was a wise one; made the correct deci-
sion; exactly what I needed;…” (Dolincar et al., 2013). In practice stakeholders
in tourism use the different tools for measurement of satisfaction levels. For
instance, some web platforms offer the possibilities to tourists to evaluate their
stay in the accommodation and destination by leaving their comments to the fu-
ture tourist and to rate their stay. Generally, tourism satisfaction as an indicator
is used very often and in many different situations. It is well known that tourism
satisfaction is important for destinations as well as consumer satisfaction as a
business goal because it is assumed that satisfied customers would buy more.
Different elements in the destinations can be involved in the formulation of
tourist satisfaction and, since attribute satisfaction affects destination loyalty,
directly and indirectly, its measurements and improvement are critical to des-
tination managers (Chia & Qub, 2008). It is evident that tourist satisfaction is
important and Buhalis (2000) emphasized that “delight visitors by maximizing
their satisfaction” needs to be in the strategic management and marketing objec-
tives of destinations.

. TOURISM IN POREČ
The city of Poreč is one of the most popular destinations in Istria County
and one of the strongest tourist centers in Croatia. Poreč is situated on the west
coast of the Istrian Peninsula. The urban area of Poreč extends over 139 km2 INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
of surface and has 16,696 inhabitants. The main economic branch is tourism,
considering that Poreč has the widest range of tourist offers for different target
groups of tourists. Due to its favourable natural and cultural tourist attractions
which include geographic position, the number of beaches and the indented
coastline, the favourable climate, number of cultural and historic monuments
and cultural events, good gastronomic offer, hospitality of hosts and the large
number of accommodation capacities, makes Poreč one of the most chosen and
visited tourist destinations in Istria County.
According to the official data of the Croatian information system for tour-
ism e-Visitor, the average duration of tourist stays in Poreč, in 2017, was 6 days.
The number of nights in commercial and non-commercial accommodation for

101
2017 was 3,392,400 (3,199,276 in commercial accommodation and 193,124
in non-commercial accommodation) and the number of tourist arrivals was
567,062. The occupancy rate for commercial accommodation in Poreč, for the
year 2017, was 31%, and the highest occupancy rates were in August (94.4%),
July (90.3%) and June (61.3%) which is expected considering the peak of the
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

summer season.
The largest number of overnight stays were made by tourists from Germany
(1,012,900), Austria (546,155), Slovenia (315,351), Italy (269,613), United
Kingdom (171,847), Netherlands (141,583), Russia (139,794) and Croatia
(124,687).
The number of tourist arrivals in the destination Poreč increased from the
year 2007 until 2017 and in 2017 it registered 567,062 arrivals. As the number
of tourist arrivals increases, there is also an increase in the number of overnight
stays at the destination. In the year 2017, it registered 3,392,400 tourist over-
night stays in destination Poreč, which is an increase of 718,439 overnights,
compared to the year 2007. (Figure 1.)

Figure 1. Tourist arrivals and overnights in Poreč from 2007 until 2017

Source: Official tourist portal of Istria [available at http://www.istra.hr/hr/pr/statistika/
arhiv, accessed March 28, 2018]

102
5. RESULTS
.. CHARACTERISTICS OF THE SAMPLE
In the survey, most respondents came from Germany (31.76%) followed
by respondents from Croatia (13. 92%), Italy (13.33%), Austria (12.55%) and
others as mentioned in table 1. In total, the opinions of respondents from 27
countries were collected.

Table 1. Country of origin of the respondents (n=510)
Country Share (%) Number
Germany 31.76 162
Croatia 13.92 71
Italy 13.33 68
Austria 12.55 64
Great Britain 4.71 24
Slovenia 4.31 22
Russia 2.94 15
Netherlands 2.35 12
Poland 2.35 12
Serbia 1.76 9
Switzerland 1.76 9
Czech Republic 1.57 8
Hungary 1.18 6
Sweden 0.78 4
Norway 0.59 3
Bosnia and Herzegovina 0.59 3 INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
France 0.59 3
Romania 0.39 2
Ukraine 0.39 2
Australia 0.39 2
Other 1.78 9
Source: Field research from July to September 2017.

In the sample were more women (56.19%) than men (43.81%). The sample
had representatives from all age groups and most of the respondents were from
the group of 25 - 54 years old (51.29%). According to the type of residence,
most of the respondents were tourists (82.05%) and most of them stayed in
private accommodation (43.84%) and hotels (37.15%) (Table 2.).

103
Table 2. Characteristics of respondents
Gender (n=509) Share (%) Number
female 56.19 286
male 43.81 223
Age group (507)
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

15-24 23.08 117
25-34 21.50 109
35-44 14.60 74
45-54 15.19 77
55-64 17.55 89
> 65 8.09 41
Type of residence (507)
local resident 7.10 36
house/apartment owner 7.10 36
tourist 82.05 416
weekend visitor 0.99 5
excursion visitor 2.76 14
Type of accommodation (n=463)
hotel 37.15 172
private accommodation 43.84 203
camp 1.51 7
private house/apartment 15.12 70
sea tourism harbor/marina 0.65 3
hostel 1.73 8

Source: Field research from July to September 2017.

.. TRANSPORT TO THE DESTINATION
Most tourist and visitors visit Poreč by car and it is known that the whole
of Istria is a so-called car destination. This was confirmed by the results of the
field study. Distances from the respondents’ home to the destination were on
average 783.91km (SD=994.6, mode were 500, median 600). On the question
about the means of transportation to the destination, most of the respondents
answered that they were coming to the destination by car (personal, friends or
company) (74.46%), then bus (12.57%), airplane (9.63%) and other means of
transport were mentioned in very small shares.1
1
It was possible to choose one or more of the answers offered

104
.. WAYS OF OBTAINING INFORMATION ABOUT THE
DESTINATION
On the question about how they found out about the destination most of the
respondents answered that they had previously visited the destination (48.71%);
the second most mentioned answer was from friends or family (35.79%) and in
the third place was the Internet (29.22%). Other offered answers were tour-
ist brochures/flyers (4.37%), newspapers/magazines (3.18%), social network
(2.39%) and tourist information centers (1.39%). On the question about the
purpose of their visit to the destination, 90.98% of the respondents answered
that the purpose of their visit was a holiday, free time and recreation. Other
answers were: visiting friends and family (7.06%), shopping (4.9%), health
and medical care (1.57%), education and training (1.18%) or something else
(5.10%).

.. TOURIST PERCEPTIONS AND SATISFACTION WITH
THE DESTINATION
As was previously mentioned Poreč is one of the most popular destinations
in Istria County and in Croatia. Poreč is mainly a “sun and sea” destination but
we wanted to know what the main features are for which respondents had cho-
sen to visit the destination. To get an answer to this question the respondents
were offered features and they could choose to select one or more answers (Ta-
ble 3).

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

105
Table 3. The main features for which respondents had chosen to visit the des-
tination (n=509)1
Value Share (%) Number
Beach 67.19 342
Clean sea 60.71 309
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

Nature 52.46 267
Peace and quiet 33.99 173
The hospitality of the host 24.95 127
Accommodation quality 22.99 117
Accessibility 20.43 104
Cultural richness 15.52 79
Destination popularity 14.54 74
Entertainment and recreation 12.97 66
Something else 8.84 45
Sport 8.45 43
Special event 1.96 10
Source: Field research, from July to September 2017.

As can be seen from table 3, the main features for visiting the destination
were the beach, clean sea, nature and peace and quietly followed by the hospital-
ity of the host, accommodation quality and accessibility.

Table 4. Tourist satisfaction with the destination
Aggregate
Relative frequency (%)
score (out of 5)
Features
totally completely
unsatisfied neutral satisfied average SD
unsatisfied satisfied
Overall satisfaction with
0.40 1.81 6.05 52.82 38.91 4.28 0.69
the destination
Destination cleanliness 0.20 3.60 7.60 48.40 40.20 4.25 0.76
Local cuisine 0.41 3.86 9.96 46.95 38.82 4.20 0.80
Accommodation quality 1.83 3.66 11.59 45.53 37.40 4.13 0.89
Tourist attractions 0.22 3.01 19.14 47.53 30.11 4.04 0.79
Information availability at
0.86 4.53 18.32 49.78 26.51 3.97 0.84
the destination
Reasonable prices 0.82 10.27 23.41 41.89 23.61 3.77 0.95
Sports activities 0.65 3.67 28.08 41.90 25.70 3.88 0.85
Cultural events 1.07 2.15 33.48 46.78 16.52 3.76 0.79
Nightlife 2.16 5.39 30.17 39.01 23.28 3.76 0.94
Facilities for children or
1.17 3.76 34.04 39.91 21.13 3.76 0.87
the elderly
Source: Field research, from July to September 2017.

106
From table 4 it can be seen that on average all the scores are very high and
that overall satisfaction with the destination has the best score compared to
the other features of the destination. The second best scores of the destination
are destination cleanliness, local cuisine and accommodation quality. The worst
scores, but also in the range of satisfied, were facilities for children or the elderly,
nightlife and cultural events.
In order to further explore the dimensions of tourism satisfaction, PCA was
conducted with 11 variables considering the different level of tourist satisfac-
tion in the destination. From the calculation was excluded the variable “Infor-
mation available at the destination” because the obtained results showed that it
could not be explained by the obtained components. In the final factorial design
10 variables were included (Table 5).
Two components (KMO=0.894, Bartlett’s Test χ2 sig. 0.000, satisfactory
reliabilities, Cronbach alpha >0.877) emerged with eigenvalues greater than 1,
satisfactorily explaining 60.25% of total variance.

Table 5. Principal Component Analysis (PCA) results, tourist satisfaction
with the destination
Pattern Matrix
Value Component
1 2
Sports activities .903
Facilities for children or the elderly .776
Tourist attractions .722
Nightlife .715
Cultural events .701 INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Destination cleanliness .834
Local cuisine .807
Overall satisfaction with the destination .786
Accommodation quality .752
Reasonable prices .626
Factor statistics
Eigenvalue 4.853 1.171
Variance % 48.531 11.713
Cumulative variance % 48.531 60.245
Cronbach alpha .826 .816
Mean 3.8394 4.1285
Extraction Method: Principal Component Analysis.
Rotation Method: Promax with Kaiser Normalisation.
a. Rotation converged in 3 iterations

107
From the results, it is possible to see that the PCA has shown that the tour-
ist satisfaction with the destination can be explained through two components.
The first component, which can be described as a destination offering, has the
following elements: sports activities, facilities for children or the elderly, tour-
ist attractions, nightlife and cultural events. The second component can be de-
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

scribed as destination quality and consists of the elements: destination cleanli-
ness, local cuisine, overall satisfaction with the destination, quality of accommo-
dation and reasonable prices. In the case of Poreč destination on average, quality
is rated with a higher score than the offer.

.. TOURIST PERCEPTIONS OF DESTINATION
SUSTAINABILITY
On the question “Does the destination invest enough in initiatives focused
on sustainability?” respondents have answered positively in 77.5%. In the sam-
ple, 6.83% (34) respondents traveled with a person with disabilities or with
limited mobility. Respondents were asked to evaluate if the destination takes
into account the special needs of tourists and visitors with disabilities or limited
mobility in different areas of activity - accommodation, public transport, tourist
attractions etc. In total, 128 respondents answered this question and the aver-
age score was neutral 3.06 (SD=1.04).
Although there were mostly positive answers to the question about the des-
tination initiatives directed to sustainability, it can be concluded that Poreč as a
tourism destination can do more in meeting the needs of people with disabilities.

6. CONCLUSION
In the presented research most respondents came from Germany, Croa-
tia, Italy, Austria, Great Britain and Slovenia. A large number of respondents
had already visited the destination or had been informed about the destina-
tion through their friends / family or the Internet and most of the respondents
stayed at the destination for several days. This is very good for the research
because tourists already knew the destination. The most common way to travel
to Poreč destination is by car and car is the most often used method of trans-
portation at the destination. The destination was chosen by tourists as their va-
cation destination mostly due to the following features: beach, clean sea, nature

108
and landscape, peace and quiet. Most respondents noticed initiatives focused
on sustainability at the destination and it can be assumed that they approved of
them. One of the indicators of that was overall satisfaction with the destination
which is the best-rated attribute from all the offered attributes to rate tourist
satisfaction.
The question is if destinations used only the overall satisfaction level as an
indicator, then maybe they will not have enough information for the improve-
ments in the future planning of the destination. Empirical research has shown
that the respondents in Poreč destinations rated their overall satisfaction with
the highest grades. This was to be expected but all other elements of the desti-
nation were, in principle, evaluated with lower grades. It can be concluded that
for destination planning it is useful to divide questions about satisfaction into
different questions regarding different strategic objectives of the destination. In
that case, this indicator is very useful. Also, it is important to measure tourism
satisfaction at the destination level because, if it is used at regional and national
levels, then the results are dispersed and in these cases for destinations, tourist
satisfaction as an indicator is a less useful tool for future planning.
By conducting the PCA it is evident that offered attributes for measuring
tourist satisfaction with the destination can be explained through two com-
ponents. The first component, “destination offer”, has the following elements:
sports activities, facilities for children or the elderly, tourist attractions, night-
life and cultural events. The second component, “destination quality”, consists
of the elements: destination cleanliness, local cuisine, overall satisfaction with

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
the destination, quality of accommodation and reasonable prices. The results
are interesting and can be used in future research in developing questionnaires
for measuring tourist satisfaction taking into account these two components.
Measurement of tourist satisfaction as a social indicator in the measurement of
sustainable tourism in the destination is very important. As an indicator overall
satisfaction with the destination does not give enough information to the des-
tination management at the local level, so it could be suggested to measure an
additional two attributes like satisfaction with the offer and/or the quality of
the offered facilities in the destination.
Considering the yearly increasing number of arrivals and overnight stays in
the destination Poreč and the growing share of tourism in the GDP in Croatia,
sustainable tourism should be a long-term goal in the concept of development

109
of the destination. As the results show, tourists are generally satisfied with the
destination Poreč and, in order to obtain a high level of tourist satisfaction in the
future, destinations have to take care of the social, cultural, economic and envi-
ronmental challenges as important aspects of sustainable tourism development.
Kristina Brščić Tina Šugar Drago Ružić: TOURISTS’ PERCEPTIONS OF DESTINATIONS – EMPIRICAL STUDY OF DESTINATION POREČ

FUNDING
The research was carried out as part of the project Interreg Mediterranean
“Models of Integrated Tourism in the MEDiterranean Plus” - MITOMED+.

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cessed March 28, 2018]
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111
THE ROLES OF LEADERSHIP
STYLES AND ENTREPRENEURIAL
ORIENTATION IN
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

DISTINGUISHING MORE FROM
LESS UCCESSFUL ORGANIZATIONS

Igor PURETA, Ph. D. Student
Grawe Hrvatska d. d.
E-mail: igor.pureta@grawe.hr

Tanja PURETA, Ph. D. Student
Ramiro d.o.o.
E-mail: tanja.pureta@ramiro.hr

Abstract

Competitive advantage has an extremely important place in strategic thinking
both within the organization and the country. The international competitive-
ness of a country is a reflection of the ability of the organizations within it to
achieve success both on the national and international markets. The latest scien-
tific researches attribute organizational performance and consequently competi-
tive advantage to its leaders and their ability to optimally use available resources.
Sources have shown that leaders facing the ongoing globalization market chal-
lenges through their behaviour can improve the organization’s performance. Ef-
fective leaders enable it by increasing the level of entrepreneurial orientation of
the organization (nurturing its proactive, innovative and risk-taking character-
istics) through the interrelationships among its workers as well as their commit-
ment, confidence and motivation for greater work quality. All these favourable
effects are primarily enabled by transformational leadership style, first described
by Burns (1978), and elaborated in detail by Bass (1985a), whose implemen-
tation is dominantly advocated in modern organizations. This paper explores
which leadership characteristics can be used to improve the organization’s per-
formance, and whether less successful organizations can be distinguished from
the ones that are more successful. The results of this study show that there are

112
specific characteristics that the organization should nurture if it wants to be suc-
cessful and that less successful organizations can be distinguished from the ones
that are more successful according to leadership style they use.
Key words: competitive advantage, entrepreneurship orientation, organiza-
tional performance, leadership style
JEL Classification: L26, L29

INTRODUCTION
In the contemporary, increasingly more open and integrated global econo-
my, competitiveness is central to economic strategies, of both developed and
developing countries. Competitiveness based on innovations, relation of price
and performances, reduced product returns and creative destruction of existing
competencies characterises the intensive and dynamic markets of today (San-
tora et al., 1999, Venkataraman, 1997).
The OECD (2011) defines competitiveness as a measure of the country’s
ability to, under market conditions, produce goods and services that pass the
test of the international market, while maintaining and increasing the long-
term real income of the population. On the other hand, Krugman (1996) ad-
vocates an extreme view that the concept of competitiveness is not applicable to
the countries, but only to the enterprises.
In terms of the enterprise, the market share is most often used as an indica-
tor of competitiveness at a particular point of time or its change over time. Oth-
er significant indicators include profitability, sales trends on the domestic and INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
international markets and the ability of the enterprise for a long-term sustain-
ability and development under the conditions of growing global competition.
Leko-Šimić (1999) states that the international competitiveness of a country
is also a reflection of the ability of its economic entities to successfully engage
in the above-mentioned global processes. Therefore, we can say that in creat-
ing a productive and competitive economy, public and private sectors are inter-
connected. The country is in charge of establishing a good fiscal and monetary
policy, an efficient legal system and stable democratic institutions necessary for
a successful economy. At the microeconomic level of the economy (Bezić, 2008,
p. 31), wealth arises from the quality of the microeconomic business environ-
ment and operational practices and strategies at the enterprise level. Although

113
the public and private sectors differ in their basic roles, they are interconnected
in creating a productive and competitive business. Therefore, competitiveness is
a multidimensional phenomenon - necessarily present at the level of the enter-
prise, sector and country as a whole.
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

Competitiveness is a variable category and a challenge for organisations so
they have to, in order to achieve or retain competitive advantage, continuous-
ly improve their activities on the market and constantly create new business
rules (Carpenter and Sanders, 2007). As Galbraith et al. (2002) claim, there is
a strong link between the leadership and the company’s competitive advantage.
Spillane (2005) also claims that the competitive advantage and the leadership
are related, stating that the organisation has the ability to achieve whatever it
thinks is possible provided it knows which way to go to achieve it.
The question is why some organisations at any of the aforementioned levels,
despite the similar resources available to them or surrounding environment, are
more successful than the other organisations in using these resources. Accord-
ing to the latest findings, this advantage is attributed to the leadership of the
organisation and its ability to make better use of the resources available to them
than other organisations, gaining thus a competitive advantage.

THE IMPORTANCE OF LEADERSHIP FOR THE
ORGANISATION’S SUCCESS
The key sources of an organisation’s strength that enable people to design
and implement effective processes and thus achieve organisational success are
leadership styles, organisational culture, skills and abilities and motivation are
(Keller, 2006). Leadership is both a scientific discipline and practical skill re-
lated to the ability of individuals or organisations to lead or direct other indi-
viduals or organisations (Northouse, 2010).
The leader performs a number of important functions in the organisation
they manage. They create a vision, set group values and norms, serve as a role
and identification model, coordinate work, control internal relationships among
group members, plan task execution, mediate internal disagreements and man-
age conflicts, give praises, encourage, but also point to mistakes and poor quality
of work, present their group to others, etc. The hidden power of the leader is in
controlling their own and other people’s emotions. Great leaders are the ones

114
who are able to inspire us with their ideas, i.e. the ones who are able to, thanks
to their attractive vision, lead us to the right direction, awaken in us passion and
other powerful constructive emotions such as love, optimism, and hope as well
as direct the entire group’s energy towards achieving a common goal.
Leaders can positively inspire organisational creativity and entrepreneurial
orientation, which are prerequisites for achieving desired results. When mem-
bers of the organisation feel secure, or when they are approached with confi-
dence, the leader has the ability to stimulate their best characteristics and mo-
tivation for the devoted accomplishment of goals (Schein, 1993). Accordingly,
many authors argue that successful managers should know how to recognise
and efficiently take into account three interdependent activities that need to be
continually reviewed for the organisation to succeed (Veljić, 2011). These are:
• determining the direction of the organisation,
• designing the organisation and
• encouraging culture dedicated to excellence and ethically correct behaviour.
The interdependence of these three activities is obvious. Most failures in
today’s organisations can be attributed to the fact that the aforementioned three
activities are not viewed equally. Successful leaders will probably create such an
organisational culture that will enable rapid adaptation of the organisation to
its ever-changing environment. Such a culture requires individuals in the organ-
isation to be innovative, i.e. to constantly look for ways to improve their work as
well as positive trends from the outside. (Romero, 2012).

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Well-developed leadership competencies are a prerequisite for a successful
work of organisations in today’s competitive market. The decisions of modern
managers have long-term consequences indeed, so every organisation seeks to ex-
pand and improve the competences of its leaders to enable them to make better
quality decisions. Profit and non-profit organisations, governmental and non-gov-
ernmental agencies, as well as educational institutions must deal with the complex
situations on a daily basis. They can only do so if they create effective internal
communication, emphasise a shared vision, dedication to achieving a common
goal and awareness of the importance and necessity of accepting the necessary
organisational changes. According to Ralean (2003), organisations of the 21st
century are based on knowledge and require each member of the organisation to
share their experience and knowledge with others for the organisation to achieve
success. Leadership requires all employees to reconsider their shared beliefs and

115
create those which will enable a unique way of organisation’s functioning based on
creativity, innovation and a whole new set of abilities (Meredith, 2011).
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

LEADERSHIP STYLES
Leadership style consists of a series of aligned activities and procedures that
make a specific, distinctive way to lead a group. Different leaders implement dif-
ferent leadership styles in line with their personality, education, but also nature,
i.e. tasks characteristics of the group they lead, so each of them has their own,
dominant leadership style. Additionally, the most successful leaders use a wide
range of leadership styles as needed, depending on the characteristics of the
specific situation and the competence level of the people they manage.
In the mid-seventies of the last century, it was noticed that many organisa-
tions have no response to the problems arising from the implementation of rad-
ical changes that should have been achieved in the short term. It was shown that
the implementation of such changes has only been successfully carried out in
organisations under the leadership of highly capable leaders. Leaders are change
agents. Their success is measured by the way they strategically implement vision
and mission.
Based on these findings, a whole series of research has been conducted with
the aim to determine which leadership styles exist and how they affect the be-
haviour of people in the organisation and consequently organisational effect.
Taking into account all the leadership styles known so far, Bass and Avolio
(1999) united them into a unique model of Full Range Leadership Develop-
ment. In it, based on the results of the research, they describe each of them in
details, in terms of characteristics used to influence people and the ability to
achieve the desired organisational effect.
In that model, the most significant ability to achieve positive influence on
people and organisational impact have transformational leadership styles.
Transformational leaders have a vision which they personally live, the ability
to inspire followers to constantly outdo themselves, i.e. they can encourage en-
trepreneurial orientation in them. In addition, they understand the need for
change, expansion, or complete transformation of organisational factors, in or-
der to lead the organisation towards a vision that others may sometimes not
even be able to imagine.

116
The transformational leadership style is related to the way a leader connects
to the members of his team, creating a relationship that increases the level of
motivation and morality both in the leader and team members. The leader takes
care of the needs and motivations of the team members and tries to help them
achieve their goals. The transformational leader has the ability to stimulate self-
actualisation, i.e., motivate the reporting members of the group to help them
to achieve more than what is expected of them. To achieve the desired goal,
transformational leaders constantly use their personal vision and energy. This
leadership style is represented by the following scales (Avolio and Bass, 2004):
• Idealised impact - attributed
• Idealised influence - behaviour
• Inspirational motivation
• Intellectual stimulation
• Individualised care
Leaders who apply transformational leadership styles to the employees in the
organisation act in a way which encourages them to achieve full potential and
more than what is expected of them. Thus, they become motivated to overcome
their own interests for the good of their organisation, because they understand
that the welfare of the organisation is also a prerequisite for their long-term
benefit. By applying this approach to leadership, an atmosphere of cooperation
is created in the organisations. This is extremely desirable because in such a way
the organisation, through engaging employees in all major activities, achieves its
maximum efficiency.
Burns (1978), in addition to the transformational form of leadership be- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

haviour, also points out the transactional form, which found its place in the
Full Range Leadership Development model. Transactional leadership style is
based on a set of different leadership theories, which focus on the interchange
between leaders and reports. Transactional leadership is reflected in tasks of a
leader who decides what the reports should do so that the goals of the organisa-
tion could be achieved and in the allocation of these tasks to the reports and,
encouragement and motivation of the reports to reach the goals set.
By paraphrasing Burnes (1978), Bass (1985a, 1985b) described transaction-
al leaders as the ones who:

117
• recognise what the subordinates want to get from their work and leaders
ensure they get it if they deserve it with respect to their efficiency
• exchange rewards and promises of rewards for the appropriate levels of
effort
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

• respond to the wishes and needs of the reports as long as they complete
their tasks.
The final revision of the Full Range Leadership Development model (Bass
and Avolio, 2004) speaks of two transactional styles that also make its scale:
• Conditional rewarding
• Active management by exceptions
Passive/avoidant leadership style, according to the latest revision of the Full
Range Leadership Development model (Avolio and Bass, 2004), was intro-
duced as the third leadership style, which is the most passive out of all in the
model. According to the definition (Avolio and Bass, 2004), transformational
styles are more active and more efficient than transactional, and transactional
are more active than passive/avoidant leadership style. In the model of the full
range of leadership passive/avoidant management represents the so-called non-
leadership factor and consists of a scale:
• Passive leadership by exceptions and
• Laissez-faire, or the complete absence of leadership
In modern organisations, it is certainly better to use transformational than
transactional leadership, because as described previously, transformational lead-
ership results in higher efficiency (Bass and Avolio, 1994). Transactional leader-
ship results in expected outcomes and the outcomes of transformational lead-
ership exceed the expected outcomes. The leader who uses transactional lead-
ership in modern organisations can only slightly encourage people to achieve
organisational goals because their engagement will depend on the reward they
have been promised to get if they achieve their goals. The transformational
leader has the ability to encourage people to understand that the biggest reward
lays in the constant pursuit of achieving goals which are meaningful for all em-
ployees and which accomplish a mission in which everyone wants to participate.
With such an attitude, employees are eager to accept any changes because they
understand that they need to constantly adapt to new market demands to con-
stantly achieve the desired results.

118
This leadership style matches contemporary working groups that want to be
motivated and empowered for success in times of uncertainty. Transformational
leadership is a process that changes people and includes continuous work on
emotions, values, ethics, norms and long-term goals, as well as an assessment
of the reports’ motives to meet their specific needs and to treat them as the
unique human beings, what they are indeed. Transformational leadership is a
process that describes the very essence of charismatic and visionary leadership
(Northouse, 2010).
Effective leadership is seen as a source of development of governance and sus-
tainable competitive advantage for improving organisational performance (Avo-
lio, 1999; Lado et al., 1992; Rowe, 2001). Zhu et al. (2005) indicate that visionary
leadership will result in a high level of connectivity, commitment, confidence, mo-
tivation, and thus in the performance in changing organisational environments.
Buble (2010) argues that effective leadership of a growing company requires pos-
session of skills such as self-awareness, teamwork, the ability to motivate others,
empower and delegate, stimulate communication, and lead and manage positive
changes. Each of these skills requires a combination of theory and practical action,
as well as a well-designed action plan that helps the organisation react quickly but
thoughtfully in the environment of rapid growth and uncertainty.
Mehra et al. (2006) argue that it is necessary to focus on improving leader-
ship effectiveness in situations when organisations are looking for ways to be
better than others. Team leaders are believed to play a key role in shaping collec-
tive norms, assisting with dealing with the environment and coordinating col-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
lective action. This perspective provides a valuable insight into the relationship
between team leadership and performance (Guzzo and Dickson, 1996). Some
studies have explored the strategic leadership role and how to use it to improve
organisational performance ( Judge et al., 2002, Judge and Piccolo, 2004, Meyer
and Hepard, 2000, Yukl, 2002).

ENTREPRENEURIAL ORIENTATION AS A WAY OF
ACHIEVING ORGANISATIONAL PERFORMANCE
According to Lumpkin and Dess (1996) entrepreneurial orientation is an
integral part of the concept of strategic selection and refers to the intentions and
actions of key decision-makers in a dynamic process. Entrepreneurial orienta-
tion is a process that is related to the methods, practices and styles of business

119
decision-making. It promotes entrepreneurial initiatives through all levels of
management in formulating and implementing entrepreneurial strategies. So,
it is not a creation or something that top management can impose. Instead, it
represents the strategic attitude of all levels of management.
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

Bearing in mind its importance for the enterprise’s efficiency (McGrath et
al., 2000) entrepreneurial orientation is an important measure of how an enter-
prise is organised. Entrepreneurial orientation can explain, to a certain extent,
management processes that enable some enterprises to overcome the competi-
tion because it facilitates activity based on detecting early signs of market op-
portunities and threats and creation of effective responses to them (Lumpkin
and Dess, 1996).
According to Lumpkin and Dess (1996), entrepreneurial orientation is a
phenomenon related to processes and activities related to the design and im-
plementation of new business and includes five basic components: innovation,
proactivity, tendency to take risk, autonomy and competitive aggressiveness.
Innovation refers to the innovative activities of enterprises that include the de-
velopment of new and improvement of existing products and services and new
production methods and procedures (Antoncic and Hisrich, 2003). Proactive-
ness refers to the readiness and orientation of strategic management to take the
initiative, i.e. the willingness of the enterprise to be the market leader in key
areas of business, such as the introduction of new products or services, manu-
facturing technologies and administrative techniques (Morris et al., 2008). En-
trepreneurial orientation is a tendency of the company to act autonomously
and innovatively, to take risks and to take proactive initiatives towards potential
market opportunities (Lumpkin and Dess, 1996). Autonomy is the ability and
desire to seek for market opportunities independently, and it refers to actions
undertaken by individuals and teams with the aim of achieving a new business
concept, idea or vision (Lyon et al., 2000). Competitive aggression is the enter-
prise’s tendency to compete with its competitors, i.e. the willingness of man-
agement to assume the leading role in the market and the dominant attitude
towards the competitors.
Although entrepreneurial orientation is most often referred to as the char-
acteristic of an enterprise rather than of an individual, Frese (2009) argues that
entrepreneurial orientation should be viewed as a psychological construct. In
almost all entrepreneurial orientation research, only one person from the mana-

120
gerial structure fills out questionnaires or conducts an interview with the re-
searchers, which results in the research being reduced to the managerial percep-
tion of business operations. It is obvious that some quantitative parameters are
not examined in such a way, but organisational culture or business climate, all of
which are common variables of organisational psychology (Tonković Grabovac
and Morić Milovanović, 2015). The interest for this construct is undoubtedly
supported by the findings that there is a positive relationship between entrepre-
neurial orientation and business performance (Wiklund and Shepherd, 2003).
Engelen et al. (2012) have conducted research on 760 small and medium-
sized enterprises in six countries, and they concluded that there is a strong link
between entrepreneurial orientation and the organisation’s performance. In ad-
dition, they found that four transformational styles of management significantly
influence entrepreneurial orientation: the idealised influence - attributed and
behaviour, inspirational motivation and individualised care, regardless of the
country in which the organisation operates.
They also found that this effect is greater if the highest level of managers
behaves constantly in a transformational way, which contributes to cascading
or so-called domino effect of transferring the transformational leadership style
(or a new system for making meaning in the organisation) from the higher to
the lower managerial levels and consequent expansion of the transformational
organisational culture (Kunhert, 1994, and Bass et al., 1987). A large number
of examples of cascading transmission of transformational leadership have been
recorded in various organisational environments. The consistent logic behind

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
this effect is that managers at the lower levels have the feeling of taking control
and they feel capable of implementing efficient management techniques with
their associates and colleagues. Such action provides higher management with
more excellent opportunities to plan future activities, as they do not have to
spend time-solving routine problems related to tasks of the reports.
With the phenomenon of entrepreneurial orientation, researchers have
agreed that all the above-mentioned characteristics can be presented under three
stable dimensions: innovation, proactivity and willingness to take a risk. These
dimensions are also the basis for drafting an entrepreneurial orientation ques-
tionnaire (Wiklund, 1999). However, as already mentioned, it is not enough
that management alone is entrepreneurial oriented. Instead, for an organisation
to succeed, it is necessary that all of the employees have such orientation. In

121
Croatia, the problem of entrepreneurial orientation is that the employees are
much more focused on achieving their own vision of their business role and
dedicated accomplishment of their own goals than to align with their colleagues
about the common vision and goals (Pureta and Pureta, 2017). This necessarily
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

leads to poorer results of the organisation, because the individual efforts of the
employees in their joint work are mutually weakened, rather than multiplying
their strength through a synergistic effect.
In today’s uncertain and turbulent environment, organisations need to be-
have in an entrepreneurial fashion if they want to survive on the market. In-
creasingly faster development of new technologies and increasingly shorter pro-
duction cycles force organisations to innovate to develop new ideas, products
and processes and readiness to take certain risks because that is the only way
for them to cope with the changes mentioned before. Also, increasingly larger
competition (domestic and foreign) highlights the need for proactive market
performance. The literature clearly states that increase of competition, rapid
technological changes, growing globalisation and various other dynamic forces
have a strong impact on increasing the importance of entrepreneurial orienta-
tion (Morić Milovanović, 2012).

RESEARCH
This research aimed to determine if more and less successful organisations
in Croatia differ in terms of leadership style and entrepreneurial orientation.
The hypothesis that more successful organisations have better represented
transformational leadership styles and more developed all three dimensions of
entrepreneurial orientation than those of less successful was set in accordance
with the aforementioned previous research. If this hypothesis proves to be right,
it will be another relevant proof of the importance of developing transforma-
tional leadership styles and entrepreneurial orientation in organisations so that
they and the whole Croatian economy could become more competitive.
A whole set of measuring instruments has been drafted to measure the per-
formance of an organisation, as it is an important indicator of the quality of
work of an organisation. For this paper, the Organisational Performance Ques-
tionnaire was drafted, based on the results of Dess et al. (1984) and (1997),
who found that it was possible to use performance measures based on the per-
ception of the managers. Namely, according to the results of the research, it

122
was found that subjective performance measures correlated considerably with
the objective ones, thus confirming their validity and reliability in this context
(Dess and Robinson 1984, Venkatraman and Ramanujam 1987). For example,
Chandler and Hanks (1993) claimed that estimates of business owners or ex-
ecutives (such as earnings, business volume, and sales growth) highly correlate
with real data.
This measuring instrument of subjective assessment of organisational per-
formance is designed so that the results obtained by its application could be
compared to organisations with different industrial characteristics. It comprises
of three elements that describe the performance of an organisation in relation
to competitors in the same activity. These are growth indicators, financial indi-
cators and indicators of overall business operation. The instrument consists of
a total of 9 items researching the organisational performance of the enterprise.
Respondents are asked to compare the behaviour of their organisation with the
behaviour of other organisations of similar activity over the past three years in
the following categories:
Growth indicators
• Sales growth
• Growth of the number of employees
• Market share growth
• Financing growth from own resources
Financial Indicators

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
• Profit before taxation
• Liquidity
• Ratio of profit and sales (income)
Indicators of overall business operations
• Overall performance/success
• Enterprise’s image
Respondents asses the comparison of the behaviour of their organisation
compared to others based on a 7-point scale, from the “significantly worse than
the competition” response indicated by number 1, to the “significantly better
than the competition” response indicated by number 7.

123
The entrepreneurial orientation questionnaire is based on the above-men-
tioned research and comprises of three dimensions - proactivity, innovation
and risk-taking, each of which is described with three items. The respondents
are asked to compare the behaviour of their organisation with the behaviour
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

of other similar organisations over the past three years, given the following
statements:
Proactivity
• In each situation, it tries to take the initiative (e.g. in relation to competi-
tors, in projects, while working with others, etc.)
• It launches activities that competitors then follow
• It is often first to launch new products, services, processes, administrative
techniques, etc.
Innovation
• It actively introduces improvements and innovations into its business
operation
• It encourages employees to develop ideas to improve business operation
• It dramatically changes or introduces new products and/or services
Risk-taking
• It encourages employees to introduce new ideas and to take controlled
risks
• It is very prone to high-risk projects
• Usually, it takes a firm, aggressive attitude to achieve its goals and elimi-
nate competition
These statements are evaluated in a 5-level scale, from the “I do not agree”
response, which is marked by number 1, to the “I completely agree” response,
which is marked by number 5.
In addition to these two instruments, MLQ-5X (Avolio and Bass, 2004),
a newer version of the questionnaire, was used which was based on the Bass’
Full Leadership Range model. It consists of nine scales, five of which refer to
transformational leadership style, two to transactional leadership style, and two
to passive/avoidant leadership style.
The questionnaire consists of 45 items. Each component of the manage-
ment is represented by 4 items, while the other items are intended for measur-

124
ing organisational efficiency (satisfaction, effectiveness and motivation, or extra
effort). All items are assessed through a Likert’s 5-range scale, which reflects
self-assessment of the frequency of individual behaviour ranging from 0 (not at
all) to 4 (often).
The data was collected in June 2017 using the method of an online survey,
and respondents are invited to participate via e-mail. The sample was suitable.
The participants first got the instruction in which the research goal was de-
scribed and it was emphasized that the survey was voluntary and anonymous,
that there was no time limit or time limit for completing the questionnaire. In
the instruction, the participants were also asked to respond to the questions
as honestly as possible. Data were collected from 866 persons, and after the
incomplete responses and the responses of those who were not in managerial
positions were excluded, the final sample was obtained. It was made up of per-
sons in managerial positions in Croatian organisations (N=761). The study
involved 273 female and 483 male participants. Table 1 contains descriptive
data on participants.

N %
Age
Under 25 2 0.30
25-34 112 14.70
35-44 317 41.70
45-54 270 35.50
55-64 54 7.10
65 or above 6 0.80

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Education
High school 58 7.60
Bachelor 118 15.50
Master 380 49.90
Postgraduate 204 26.80
Not answered 1 0.10
Position in organisation
Junior Supervisor 45 5.90
Middle Supervisor 135 17.70
Senior Supervisor 181 23.80
C-Level 400 52.60

Table 1: Descriptive Data on Participants in Research (N=761)

125
RESULTS
In order to determine the difference between more and less successful organ-
isations, they are divided according to the obtained results on the scale of the
organisational efficiency. Those with arithmetic mean lower than the average
Igor Pureta • Tanja Pureta: THE ROLES OF LEADERSHIP STYLES AND ENTREPRENEURIAL ORIENTATION IN DISTINGUISHING MORE FROM ...

are classified as less successful, and those with arithmetic mean higher than the
average are ranked as more successful. Multivariate analysis of variance was sub-
sequently performed, which showed that more and less successful organisations
differ statistically significantly with respect to the prevailing leadership styles, as
well as the general development of all three factors of entrepreneurial orienta-
tion (Wilks’ λ = 0.80; F (12.748) = 15.41; p<0.01).
Thereafter, a discriminatory analysis was carried out, in which a signifi-
cant function was obtained (Function 1 – Wilks’ λ= 0.80; Chi-square (12)
= 166.39; p<0.01) that makes a clear distinction between these two groups
of organisations. Table 2 shows the matrix of the structure of the function
obtained.
Function 1
Proactivity 0.94
Inovation 0.77
Risk-taking 0.77
Inspirational motivation 0.77
Idealized Impact (Attributed) 0.77
Conditional reward 0.77
Intellectual stimulation 0.77
Individualized concern 0.31
Idealised Impact (behaviour) 3.00
Active management by exceptions 0.22
Laissez-faire -0.21
Passive control by exceptions 0.01

Table 2: Visualisation of the Matrix of the Structure after Conducted Canoni-
cal Discrimination Analysis (N=761)

The results shown in Table 2 show that the function obtained is most satu-
rated by factors proactivity, innovation and risk-taking as dimensions of entrepre-
neurial orientation and then inspirational motivation, idealised influence (attribut-
ed), intellectual stimulation, individualised care and idealised influence (behaviour)

126
as the dimensions of transformational leadership style. This means that the
combination of transformational leadership styles and entrepreneurial orienta-
tion is an important factor in the success of the Croatian organisations as well.
In addition to these transformational leadership styles, it can be seen that more
successful organisations use one transactional style more, which is a conditional
rewarding system, which is also mentioned in the literature as a factor of success
if combined with the transformational leadership styles, which is also the case
here. This function is the least characterised, in relation to all of the above-men-
tioned factors, by another transactional leadership style, which is active man-
agement by exceptions. This is also logical because it is an active form of work-
ing with people, but it is the least effective among all the aforementioned. In the
overview of the matrix of the structure of the obtained discriminating factor it
can be seen that passive management by exception is not related to the function
obtained. Also, the laissez-faire leadership style, which represents complete ab-
sence of management, is in a negative relationship with the obtained function,
meaning that it is a more common characteristic of the less successful organisa-
tions. Such a result suggests that any management of people is more efficient
than lack of management, which can only cause a negative business result.
As it can be seen in Table 3, on the basis of subsequent classification of or-
ganisations more or less successful in accordance with this discriminatory func-
tion, 74.3% of successful organisations, or 65.8% of those less successful, were
accurately identified, further confirming its strength and validity.
Anticipated belonging to the group
Less successful More successful
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
organisations organisations
Real belonging to the group n % n %
Less successful organisations 235 65,8 122 34,2
More successful organisations 104 25,7 300 74,3

Table 3: Display of Enterprise’s Ranking Regarding its Effectiveness through
Discriminatory Functions (N=761)

CONCLUSION
The results of this research show that there is a statistically significant dif-
ference between more and less successful organisations, given their dominant
leadership styles and development of all dimensions of entrepreneurial orienta-

127
tion. This leads to a firm recommendation that any organisation that wants to
succeed must necessarily understand the concept of entrepreneurial orientation
and make a systematic plan to develop and maintain it. It is also important to
consider the importance of the development of all transformational leadership
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styles as agents of entrepreneurial orientation development, with particular em-
phasis on inspirational motivation and idealised attributed influence. On them
the strongest transformational potential lays as confirmed by this survey as well,
i.e. for which a statistically significant association with all entrepreneurial orien-
tation scales and generally all performance parameters were found.
This research has established what organisations need to systematically de-
velop to gain and maintain a competitive advantage. In the long run, according
to the above-mentioned research, such a strategy should lead to a greater com-
petitiveness of the entire national economy.

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Prentice-Hall

130
STRUCTURAL MODEL OF THE
BUSINESS ORGANISATION FORMS
IN THE REPUBLIC OF CROATIA

Branimir DUKIĆ, Ph. D, prof.
Economics Faculty in Osijek
E-mail: bdukic@efos.hr

Goranka MAJIĆ, univ.spec.oec
Kruna 2011 d.o.o
E-mail: goranka.majic@gmail.com

Stojanka DUKIĆ, Ph. D. Asistent professor
duxMission Ltd. Osijek
E-mail: dumissiox-n@os.t-com.hr

Abstract
According to positive legal regulations, the Republic of Croatia does not allow
any unregistered business activities. However, when it comes to legal grounds
referring to types of business entities, it becomes clear that there is a broad regu-
latory frame for business activities in Croatia. That variety, however, becomes INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
an issue when defining business forms and business models which can further
complicate any result of scientific research as well as the official statistics. For
example, the term company has become frequently used in journalism and re-
search, when it has not been made clear neither what the business model is nor
has it been specified what business activities the term itself covers. Furthermore,
various research results often use the terms micro, small, medium and large
business entities, which is, according to the positive legal regulations, accurate
only for some business entities, i.e. only for some types of business entities in
the Republic of Croatia. Finally, research results often display the total sum of
business activities in Croatia, without considering non-profit organisations or
public and non-business organisations. In order to solve this confusion, a clear

131
system of terms for the forms of business organisation following ontological
principles should be determined. The structural model of the business organisa-
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

tion forms in the Republic of Croatia is the result of that research.
Key words: social reproduction system, regulatory frame, companies, crafts,
non-profit organisations
JEL Classification: L16, L22

1. INTRODUCTION
The Republic of Croatia is a relatively young state that gained its indepen-
dence less than 20 years ago and during that process it has gone through a dif-
ficult homeland war and a complex transition from a socialist autarchic social
order to an open market capitalist society. Apart from the war and the transi-
tion, the economic circumstances in the Republic of Croatia are burdened by
a number of issues, among those that should be noted are the high dynamism
and instability of the relatively underdeveloped social reproduction system that
has difficulties coping with global competition and even more difficulties with
the influence of global economic and political circumstances. There is a general
assessment that the economy of the Republic of Croatia is in an almost perma-
nent state of crisis, and that there are great disparities in the system of social re-
production, which are even at risk of an economic collapse of the system. Some
of the major issues stem from unstable and inconsistent regulatory frames that
lead to the problem of adjustment and understanding of the framework for
the functioning of the social reproduction system. Given such conditions, both
natural persons and legal entities that wish to operate in the Republic of Croatia
have an extremely hard time to navigate, understand and adjust to the regu-
latory framework, and when taking into account the inertia of the system of
red tape that implements the same regulatory framework, it becomes clear why
both foreign and domestic natural persons and legal entities show little interest
in doing business in the Republic of Croatia. It is clear that, in the long-term,
the model for the functioning of the social reproduction system in the Republic
of Croatia will have to be modified in terms of simplification and stabilisation in
order to avoid the economic collapse scenario, but until then, specifically for the
purposes of professional and scientific circles, it is necessary to form a consistent
ontological model of a social reproduction system from the massive regulatory
framework that will unambiguously define the underlying structure and pro-

132
cesses in the social reproduction system. In that sense, it is first necessary to
research and determine the structural model of a social reproduction system,
i.e. to define which business organisations forms are present in the Republic of
Croatia, and what sort of mutual relationship they have, as well as their position
and impact on the totality of social circumstances in the Republic of Croatia.
In accordance with the stated need for initial efforts that science should
make in terms of defining the structural model of the social reproduction sys-
tem, research on regulatory and practical business organisations forms in the
social reproduction system of the Republic of Croatia was conducted and the
results of the conducted research offered a structural model of a standardised
vocabulary of terms for structural organisational business forms in the Republic
of Croatia. The purpose of the model is to eliminate the inconsistency in un-
derstanding the structure of the system of social reproduction in the Republic
of Croatia. Specifically, due to inconsistent definitions of the terms referring
to the structure of the social reproduction system in the Republic of Croatia,
the comparability and therefore the validity of all research results, both at the
professional and the scientific level, are questionable. An example of this is the
concept of an enterprise that is in regular use both in professional and scientific
circles. Specifically, it is a concept that has no consistent meaning, therefore, dif-
ferent authors use it from different perspectives, so that the research involving
the concept of enterprise as the entity for which the information was collected
is incomparable or inconsistent. One of the possible interpretations of the term
enterprise is to identify this concept with the legal personality of a company.
Furthermore, any business entity or natural person oriented towards achiev-
ing a positive operating result, either in the form of profit or revenue, may be INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
observed as an enterprise. Among the more important interpretations of the
concept of enterprise is the one which views the concept of enterprise from the
perspective of the root of that word, i.e. enterprise can be seen as a result of
entrepreneurial activity because the word enterprise is at the root of the word
“entreprendre/entrepreneur”. However, when looking at the concept of enter-
prise through the prism of entrepreneurship, the focus is usually on business
entities concentrated on earning a profit or an income, while at the same time
neglecting the fact that entrepreneurship is also present in the non-profit part
of the social reproduction system, where the primary motive for doing business
is not achieving a positive business result but the production of socially benefi-
cial effects. There are more examples such as these and they indicate the pres-

133
ence of an anomaly in the form of inconsistency in the definition of the basic
structural terms related to the social reproduction process in the Republic of
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

Croatia, which all brings into question the relevance of the research results both
in the professional and the scientific sphere of activity. By solving this problem,
that is, by unambiguously defining the fundamental structural elements of the
social reproduction system, the explained inconsistencies would be eliminated
and the conditions for further construction of a stable and consistent business
model in the Republic of Croatia would be created.

2. RESEARCH METHODOLOGY
The thesis, which defines the nullity of the research results if the initial pa-
rameters are incorrectly defined or defined with insufficient precision, is axiom-
atically acceptable. It is precisely this issue that the professional and scientific
circles whose focus of study is the system of social reproduction in the Re-
public of Croatia have to deal with. The inconsistency in defining the initial
parameters of the structural model of the social reproduction system in the
Republic of Croatia is mostly a consequence of the dynamic and turbulent his-
tory through which the Republic of Croatia has gone through over the past
twenty years as well as of complex, massive, inconsistent and unclear regulatory
frameworks defining the structure of the social reproduction system of the Re-
public of Croatia. To avoid a complete collapse of the economic system of the
Republic of Croatia, the entire regulatory framework will certainly be changed
in the foreseeable future, but until these changes take effect, at the ontological
level it is necessary to define the structure of the social reproduction system of
the Republic of Croatia in a relevant and consistent manner. In accordance with
the above-mentioned issue, the aim of this research was to explore and define a
structural model of the business organisation forms in the Republic of Croatia.
The results of the research are presented in this paper. For the purpose of de-
fining the structural model of the business organization forms in the Republic
of Croatia, the regulatory framework of business organisation in the Republic
of Croatia was explored, and the pragmatic forms as well as their properties,
which are accepted by the business practice in the Republic of Croatia, were ex-
amined. In the course of the research, a considerable number of scientific meth-
ods was used, among which the following should be highlighted: the method
of deduction, the method of analysis and synthesis, the method of causal in-

134
ference, the method of abstraction, the method of classification, the method
of specialization, the method of composition, the method of abrogation, the
method of analogy, the historical method as well as the method of descriptive
inference. The results of the research are presented as a model of the business
organisation form in the Republic of Croatia based on ontological principles.

.. Research results
In 2011, the Prohibition and Prevention of Unregistered Activities Act
(Zakon o zabrani i sprječavanju obavljanja neregistrirane djelatnosti, Narodne
novine 61/11) was adopted in the Republic of Croatia, defining what is meant
by the term “performing unregistered activity”, as well as the exemptions to this
act. Pursuant to Art. 5 of the aforementioned Act, the performance of unregis-
tered activities means: (Zakon o zabrani i sprječavanju obavljanja neregistrirane
djelatnosti, 2011)
• when a legal entity performs an activity, which is not registered in a court
registry or in any other appropriate registry,
• when a legal entity does not possess legally required documents attesting
to the fulfilment of the conditions for performing the registered activity,
• when a natural person performs an activity that has not been registered
with the competent authority or filed with the tax authorities,
• when a natural person does not possess legally required acts attesting to
the fulfilment of the conditions for performing the registered activity,

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
• when a legal entity or natural person performs an activity in spite of a ban
on performing the activity.
The same Article of the Act defines the exceptions, so that the performance
of unregistered activity does not mean: (Zakon o zabrani i sprječavanju obavl-
janja neregistrirane djelatnosti, 2011)
• performing other activities that serve the activity registered in the court
or other appropriate registry of the competent authority, if they are per-
formed to a lesser extent or are usually performed along with the regis-
tered activity.

135
• occasionally performing activities for which it is under a special act not
obligatory to register the activity with the competent authority and report
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

to the tax authorities.
• working for own needs and family aid, friendly help and neighbourly assis-
tance, if the work is performed without payment or other material benefit
and if the work is not performed on a regular basis.
• performing the necessary work to prevent accidents or remove conse-
quences of natural or other disasters and volunteering in accordance with
special regulation.
The business activity system in the Republic of Croatia, as in every other
regulated social community, consists of business activities in the sphere of eco-
nomic and non-economic activities. The differentiation between the economic
and non-economic activities, i.e. the differentiation between the economic and
non-economic subsystem of the social reproduction system is, in principle, a
differentiation between the fundamental motives of business activity. The eco-
nomic as well as the non-economic subsystems, by market relations, consist of
interconnected business systems that have their own subjectivity in the form
of a name or a title in the function of social reproduction, and accordingly, eco-
nomic and non-economic subsystems consist of registered and active business
entities. Specifically, all business systems, just like biological systems, share a
common struggle for survival, and therefore, the struggle for survival should be
considered the fundamental goal of every business system. In order for a busi-
ness system or business entity to survive it is necessary to meet the objectives
derived from the basic business objectives, and these are: (Dukić, 2012, 114)
• growth
• efficiency/effectiveness and
• flexibility
While growth and flexibility are objectives commonly derived for both eco-
nomic and non-economic entities, they are primarily different with regard to
efficiency or effectiveness. For economic entities to survive, they need positive
market valorisation of their business activities, and it is manifested as a posi-
tive difference between the receipts earned by realising business effects on the
market and the invested expenditures in business activities. The positive dif-
ferences in the Republic of Croatia appear in the form of profit or income, but
colloquially this can be discussed as positive business results. Business entities

136
that operate with a positive business result are, as a rule, efficient. By contrast,
non-economic entities survive by virtue of their effectiveness, or positive so-
cially beneficial effects for which the efficient part of the community is willing to
give up part of their positive results in order for business entities that generate
positive socially beneficial effects to survive. Therefore, while economic entities
that are part of the economic subsystem are oriented towards creating a positive
business result, business entities in the non-economic subsystem are oriented
towards meeting social needs. However, these days it is not easy to differentiate
business entities according to this criterion, as more and more business enti-
ties are oriented towards creating socially beneficial effects, while an increasing
number of non-economic entities are oriented towards doing business with a
positive business result. The reason for this lies in the change of fundamental
business paradigms in the second half of the twentieth century, when the sphere
of the economy less often strives to maximize positive business results, but is
rather focused on the long-term optimal business result with socially respon-
sible operations being in the function of sustainable development. On the other
hand, non-economic entities are expected to have greater autonomy and more
rational conduct, which among other things, implies participation in business
activities that lead to positive business results. If we wanted to differentiate the
business entities on a symbolic level in the economy and outside the economy,
then the principle division might look like the one in Figure 1.
Figure 1 Symbolic division of the social reproduction space in regulated busi-
ness conditions

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

137
The driving force of business activities in a healthy social reproduction sys-
tem is entrepreneurship. According to Kružić: “Entrepreneurship is the ability
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

to initiate certain actions, to take action aimed at achieving the desired goal,
while at the same time presuming readiness to counteract the obstacles, includ-
ing readiness for uncertain outcomes and risk.” (Kružić, 2007, 168) According
to Drucker, the essence of entrepreneurship is contained in: “the creation of a
new organisation capable of profitable business and the possibility of self-sus-
tainability”. (Kružić, 2007, 172) Therefore, entrepreneurship in the full sense of
the word implies the establishment of one’s own business entity as well as the
business operation of that business entity in such a way as to ensure its survival
through doing business. The motives for entrepreneurial behaviour in people
are most commonly linked, on the one hand, to the need to ensure their own
survival with minimal loss of freedom and, on the other hand, the need for so-
cial valorisation, i.e. the need for power. However, what also should not be over-
looked is the psychological profile of the entrepreneur who carries his entre-
preneurial “talent” with him and draws it from differentiated views of business
compared to people who do not have entrepreneurial drive. Even though entre-
preneurship is commonly associated with the existence of an entrepreneurial
idea as the primary driver of entrepreneurial activity, it should be borne in mind
that the motive for earning a profit which would not only secure survival of the
entrepreneur, but also provide him with power and social valorisation, to say the
least, is not negligible. An entrepreneur may or may not be a manager, therefore,
an entrepreneur may or may not manage his own entrepreneurial venture. In
many cases, entrepreneurship is linked to a differentiated approach to growing
capital, where it is emphasized that the entrepreneur is a person willing to invest
capital, instead of into safe capital growing systems such as interest in a bank or
a foundation, in a more risky, but in case of a return more lucrative, investment
in business ventures that return an adequate profit on the invested capital, i.e. in
the Republic of Croatia, an appropriate profit or income. But such an approach
and view of entrepreneurship ignores the fact that entrepreneurship is present
outside the economic subsystem of the social reproduction system that does
not secure a return on capital investment. Accordingly, entrepreneurship must
primarily be viewed as a tendency of people to embark on business ventures and
thus participate as an active factor of the economic subsystem in particular, but
also outside the economic subsystem of the social reproduction system. Figure
2 shows the relationship between entrepreneurship and management.

138
Figure 2 The relationship between entrepreneurship and management

An individual can generally participate in four ways in the business process,
or in the process of social reproduction, which is shown in Figure 3, and entre-
preneurship is only one of the forms of participation in the social reproduction
process. Therefore, when it comes to a general understanding of business in the
Republic of Croatia, particularly in the domain of the economic subsystem, it is
questionable whether it is correct to use the term “enterprise”.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

139
Figure 3 Ways for the individual to participate in the social reproduction system
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

Source: Sall, D. (n.d.) Am I Investing in a Business or a Job?, http://www.financialsumo.
com/am-i-investing-in-a-business-or-a-job/ (1.3.2018)

The term enterprise, both in professional and scientific circles, as well as
among the population of the Republic of Croatia, is used as a general term for
a registered business entity operating in the sphere of economic activities. As
the term “enterprise” has no statutory bearing in the Republic of Croatia, i.e. it
is not a strictly defined term, the universality of its meaning is often questioned.
Colloquially, in the broader circle of users, the term enterprise is associated with
entrepreneurship because of the root of the word enterprise that comes from
the word entreprendre. What certainly had an impact on the use of this con-
cept was the Enterprises Act (Zakon o poduzećima,Službeni list SFRJ 77/88,
40/89, 46/90 and 61/90), which was adopted by the former Yugoslav State of
which the Republic of Croatia was part until 1991, and which was in force from
1988 until 1 January 1995 when the Companies Act came into force (Zakon
o trgovačkim društvima,Narodne novine 111/93). Specifically, the Enterprises
Act (Zakon o poduzećima) was taken over by the Republic of Croatia in 1991
by adopting the Act on Taking Over Federal Acts in the Field of Organisa-
tion and Operation of Economic Entities Applicable to the Republic of Croatia

140
as Republican Acts (Narodne novine 53/91). Due to the general similarity of
the regulatory frameworks that defined the concept of an enterprise and later a
company, there is also the view that enterprises may be called companies.
The issue of non-uniform understanding of the concept of enterprise is not a
trivial issue because its use, especially in professional and scientific circles, leads
to inconsistencies in understanding the subject matter of research, and thus
to incomparable and incorrect research results. The problem is that, without a
concrete definition of the concept of enterprise, the term is used even in official
statistics research in the Republic of Croatia. For this reason, it is of utmost
importance that the experts and scientists are decisively determined towards
the contents and the official terminology when it comes to organising business
activities in the Republic of Croatia.
As far as the economic subsystem and the non-economic subsystem of the
social reproduction system are concerned, the basic legal organisational forms
of business organisation are the following: (Pejić, n.d.)
1. Companies: Simple Limited Liability Company (j.d.o.o.), Limited Liabil-
ity Company (d.o.o.), Joint Stock Company (d.d.), Limited Partnership
(k.d.)
2. Crafts and Liberal Professions
3. Cooperatives, Partnerships, Family Farms (OPG), Associations, Institu-
tions, Trusts, Foundations
It should be noted that this division of companies is somewhat different
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
from the current one because it is made according to the earlier provisions of
the Companies Act. A contemporary division will be presented in further con-
siderations. It should also be noted that these are not the only business entities
involved in doing business that are defined by the process of social reproduc-
tion. The division of business entities into those which are profit-oriented, as
well as income-oriented or mainly do business within the framework of eco-
nomic activities, and those which mainly do business in the domain outside
economic activities, reflect the division into types of accounting. Taking into
account the positive legal regulations in the Republic of Croatia, there are four
types of accounting or four accounting systems: (Belak, 2006,3)
1. accounting for entrepreneurs
2. accounting for non-profit organisations (fund accounting)

141
3. state budget and budget beneficiaries accounting
4. accounting for crafts and liberal professions
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

The regulatory framework for such an accounting division currently consists
of:
1. Accounting Act (Zakon o računovodstvu, Narodne novine, br. 78/15,
134/15, 120/16)
2. Financial Business and Accounting of Non-Profit Organisations
Act (Zakon o financijskom poslovanju i računovodstvu neprofitnih
organizacija,Narodne novine 121/14)
3. Article 100, paragraph 1 of the Budget Act (Članka 100.svka 1. Zakona
o proračunu, Narodne novine 87/08 and 136/12) based on which the
State Budget Accounting and Accounting Plan Rulebook was adopted
(Pravilnik o proračunskom računovodstvu i računskom planu, Narodne
novine 124/14, 115/15, 87/16 and 3/18)
4. Income Tax Act (Zakon o porezu na dohodak, Narodne novine 115/16)
and the Income Tax Rulebook (Pravilnik o porezu na dohodak, Narodne
novine 1/2017)
In the sphere of economic activities, the Companies Act (Zakon o trgovačkim
društvima, Narodne novine 111/93, 34/99, 121/99, 52/00, 118/03, 107/07,
146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15) defines business
entities in the Republic of Croatia as legal entities, and their registration is in
the domain of Commercial Courts by entering a company into a court registry.
In Part 1 Title 1 Section 1, the Act itself differentiates: (Zakon o trgovčkim
društvima, n.d.)
• Traders as legal entities or natural persons independently performing an
economic activity in order to obtain profit by producing or selling goods
and services on the market. Traders include persons who perform liberal
professions whose activities are regulated by special regulations if it is de-
termined in those regulations. Traders do not include individual farmers.
• Companies as legal persons whose establishment and organization are
defined by the Companies Act. A company is established for the purpose
of performing an economic activity or any other activity. Also, pursuant

142
to this Act, a company is a trader, regardless of whether it is engaged in
economic or other activities.
• Sole proprietors as natural persons who independently perform economic
activities in accordance with the regulation of crafts and is registered in
the court registry as a sole proprietor. Specifically, a natural person doing
business pursuant to the crafts regulations may apply to be entered in the
court registry as a sole proprietor if their annual income exceeds HRK 2
million and is obligated to request that entry if their annual income ex-
ceeds HRK 15 million.
The focus of the Companies Act are companies whose forms are: (Zakon o
trgovačkim društvima, n.d.)
• General partnership
• Limited partnership
• Joint Stock Company
• Limited Liability Company and
• Economic Interest Association
Furthermore, pursuant to the Companies Act, a general partnership, a lim-
ited partnership and an economic interest association are partnerships, while a
joint-stock company and a limited liability company are share-capital compa-
nies. The basic motive for establishing and operating capital companies is to
grow the invested capital through the achievement of positive business results
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
in the form of profit.
Apart from the Companies Act, in the sphere of economic activities there
is also independent business performed by natural persons whose activities
are registered pursuant to the Crafts Act (Zakon o obrtu, Narodne novine
143/2013), and are registered with the competent state administration offices
in the counties according to local affiliation, i.e. crafts from the area of the City
of Zagreb are registered at the competent office of the City of Zagreb. Pursuant
to the Crafts Act, crafts can have the following forms: (Zakon o obrtu, 2013)
1. liberal crafts for which a qualification or master’s examination is not re-
quired as a condition

143
2. associated crafts for which an examination of professional qualification
is required, associated crafts for which secondary school education is re-
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

quired, and associated crafts for which a master craftsman’s examination
is required.
3. privileged crafts which the craftsman may only perform based on a priv-
ilege or permit issued by the competent ministry or another authority
whose competency is prescribed by a special regulation depending on the
activity.
A special group includes traditional and artistic crafts that require special
knowledge of craftsmanship skills and know-how in performing their activities.
The Crafts Act provides for the possibility of registering seasonal crafts busi-
ness and activities within the scope of a household industry and the scope of a
subsidiary occupation (Part 3). The basic motive of a natural person for doing
business is to earn income, i.e. be self-employed.
Apart from craftsmen in the Republic of Croatia, pursuant to positive legal
regulations, there is a greater number of possible forms of self-employment, i.e.
organisation and business of natural persons. A group of income jobs that are
performed in accordance with separate acts are liberal professions. Liberal pro-
fessions include: (Oporezivanje djelatnosti slobodnih zanimanja, n.d.)
1. self-employed activity of health professionals, veterinarians, attorneys, no-
taries, auditors, engineers, architects, tax consultants, bankruptcy manag-
ers, interpreters, translators, tourist workers, and other similar activities,
2. self-employed activity of scientists, writers, inventors and other similar
activities,
3. self-employed lecturing activity, educational activity and other similar
activities,
4. self-employed activity of journalists, artists and athletes.
In the Republic of Croatia, along with liberal professions, and pursuant to
positive legal regulations, agriculture and forestry are business activities equal to
crafts. Thus, the Family Farm Act (Zakon o obiteljskom poljoprivrednom gos-
podarstvu, Narodne novine 29/18) establishes the conditions for performing
the economic activity of agriculture and its related ancillary activities performed
on a family farm. The Family Farm Act defines natural persons as holders who,
in the organizational form of a family farm, perform the economic activity of

144
agriculture and its related ancillary activities in the territory of the Republic of
Croatia.
Among the previously mentioned forms of organisation and doing business
predominantly in the subsystem of economic activities, where the business of
legal and natural persons is clearly differentiated, and where the derived objec-
tive of business operations is to ensure business efficiency by achieving positive
business results in terms of profit or income, there are great similarities but also
great differences. Table 1 shows a comparison of the properties of crafts and
companies.

Table 1 Comparison of crafts and companies in the Republic of Croatia
CRAFT (R-2) COMPANY
Share capital: None HRK 20,000.00
Cost of establishment: approx. HRK 1,000.00 approx. HRK 6,000.00
Time necessary to open/establish: max. 15 days max. 40 days
Place of registration: Competent state administration office Commercial Court
in the County or the City
Liability: Against all assets Up to the amount of the share capital
Accounting: Simple accounting Double-entry accounting in
accordance with the Accounting Act
(Official Gazette 78/15, 134/15,
120/16)
Membership of chambers: Croatian Chamber of Trades and Croatian Chamber of Commerce
Crafts
Activities: All authorised activities subject All authorised activities
to the possession of the relevant

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
professional qualifications for qualified
crafts and/or privileges for privileged
crafts
Tax rates: Progressive 24% and 36% 20%
(depending on income)
Employees: No restrictions No restrictions
Payment of value added tax: After the invoice is paid After the invoice is issued
Sale of products and services Receipt is recognised once the Recognised as income when the
amount is collected delivery is made or the invoice sent
Received advance Recognised as receipt following Recognised as income when the
collection delivery is made or the invoice sent
Accruals and deferred income Recognised as receipt in the accruals Payments are recognised pro rata for
period regardless in which future the period in which the income was
period they appear generated

145
Expenditures-liabilities (costs) Recognised as expenditures at the Recognised as costs at the moment
moment of payment of sale of products, performance of
service, and use of reserves
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

Advances Recognised as expenditures at the Recognised as expenditures only
moment of payment when the products are delivered or
service performed and the invoice is
received
Prepayments and accrued Recognised as expenditure at the Recognised as costs pro rata to
income–expenditures of a future time of payment regardless that they the part for the period in which they
period relate to future periods appear
Payments of employees Recognised as expenditure at the Recognised as cost of the accounting
time of payment period
Reserves Recognised as expenditure when they Recognised as cost when they are
are paid to the supplier regardless realised–in the sold product or
when they will be used or sold commercial products
Long-term reservations No impact, because there are no Recognised as liabilities:
payments for repairs within the warranty period,
severance pay under the Labour
Act (Zakon o radu, Narodne novine
93/14, 127/17), costs arising from
ongoing court disputes, renewal and
rehabilitation of natural resources
Chamber contributions - lump-sum payments and - 1st category of enterprises
- in the percentage of 0.40% of HRK 42.00 monthly
income or profit - 2nd category of enterprises
HRK 1,083.00 monthly
- 3rd category of enterprises
HRK 3,973.00 monthly
Forest ecosystem services Exempt from payment 0.0265 % of income
remuneration
Membership of tourist Based on place and activity Based on place and activity
communities
Direct monument annuity Paid in an annual amount set in a Paid in an annual amount set in a
ruling by the municipality or town in ruling by the municipality or town in
an annual amount. From HRK 3.00 to an annual amount. From HRK 3.00 to
10.00 per sq.m. of useful business 10.00 per sq.m. of useful business
area. area.
Source: Adjusted from http://poslovni-plan.hr/trgovacka-drustva/, (10 Sep 2016) and
http://www.isplate.info/obracun-place-novi-izracun.aspx; (24 Nov 2016)

As evident from Table  1, companies keep accounting books according to
the principle of double-entry accounting and pursuant to the Accounting Act,
while crafts and related forms of businesses keep their books according to the
principle of simple accounting and pursuant to the Income Tax Act and the
Ordinance on Income Tax. As opposed to economic operators that are most-
ly engaged in the economic subsystem of the social reproduction system and

146
maintain their business books according to the enterprise accounting principles,
i.e. the accounting of crafts and liberal professions, economic operators from the
non-economic subsystem maintain their business books according to the prin-
ciples of accounting for non-profit organisations that are defined in the Act on
the Financial Operation and Accounting for Non-Profit Organisations (Zakon
o financijskom poslovanju i računovodstvu neprofitnih organizacija, Narodne
novine  121/14). Pursuant to Article  2 of this Act, the following economic
operators are included in the group of non-profit organisations: (Zakon o fi-
nancijskom poslovanju i računovodstvu neprofitnih organizacija, n.d.)
1. domestic and foreign associations and their federations, trust funds,
foundations, institutions, art organisations, chambers, trade unions, as-
sociations of employers, and all other legal entities whose main goal of
establishment and activity is not to acquire profit and whose non-profit
nature follows from special legislation
2. political parties
3. religious communities
4. units of local and regional self-government and other budgetary users
5. institutions founded by natural persons and other legal entities
As evident from the list above, and as derived from the Act on the Financial
Operation and Accounting of Non-Profit Organisations, the implementation
of this act depends on the source of financing of a non-profit organisation. Ac-
cordingly, we should differentiate between the following:
- non-profit organisations mostly funded from the state budget, and INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

- non-profit organisations mostly funded from extra-budgetary sources.
Accounting of the first group of non-profit organisations, pursuant to Ar-
ticle 100, paragraph 1 of the Budget Act (Narodne novine 87/08 and 136/12),
is defined in the Ordinance on Budgetary Accounting and the Accounting Plan
(Narodne novine 124/14, 115/15, 87/16 and 3/18). The Ordinance Estab-
lishing Budgetary and Extra-Budgetary Users of the State Budget and Bud-
getary and Extra-Budgetary Users of the Budgets of Local and Regional Self-
Government and Concerning the Keeping of the Register of Budgetary Users
of Budgetary and Extra-Budgetary Users (Narodne novine 128/2009) defines
which organisations are regarded as the users of budgetary funds, i.e. whose

147
businesses are funded from the state budget and whose from the budget of local
government and self-government. Article 4 of the aforementioned Ordinance
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

defines the following budgetary users (Pravilnik o utvrđivanju proračunskih i
izvanproračunskih korisnika, 2009)
a) Budgetary users of the state budget are users:
1. founded by the Republic of Croatia, and
2. generating income from the state budget and/or further to public
authorisations, acts and other legislation, where such income ac-
counts for 50 percent of total income or more, and
3. the users included in the Register defined in the Ordinance.
b) Budgetary users of the budgets of local and regional self-government
are users:
1. founded by the unit of local and regional self-government, and
2. those whose source of income is the budget of local and regional
self-government in an amount of 50 percent or more, as well as
3. the users included in the Register defined in the Ordinance.
The same Ordinance defines extra-budgetary users of the state budget and
extra-budgetary users of the budget of local and regional self-government:
(Pravilnik o utvrđivanju proračunskih i izvanproračunskih korisnika, 2009)
1. users in which the Republic of Croatia and/or the unit of local and re-
gional self-government has a decisive impact on management,
2. users having as one of their sources of financing either contributions and/
or ear-marked income, and
3. users who are included in the Register defined in the Ordinance.

The accounting for the second group of non-profit organisations is defined in
the Ordinance on Non-profit Accounting and the Accounting Plan (Narodne
novine 1/2015). This Ordinance is derived from Article 9, paragraph 6 of the
Act on the Financial Operation and Accounting for Non-Profit Organisations.
It can be concluded, albeit indirectly, that all non-profit organisations that do
not use budgetary funds, and are included in Article 2 of the Act on the Finan-
cial Operation and Accounting for Non-profit Organisations, keep their busi-

148
ness books in accordance with the Ordinance on Non-Profit Accounting and
the Accounting Plan.
It is a common feature of economic operators from the non-economic sub-
system within the social reproduction system, regardless of the group to which
they belong, that they are oriented towards effectiveness as the derived goal of
their business, i.e. towards satisfying a certain set of social needs of the popu-
lation. We should point out that there is no clear distinction, in terms of the
form of organisation, whether a non-economic operator belongs to the group
of budgetary or non-budgetary economic operators, but that this depends on
their business organisation. For example, certain art associations are funded in
full from the state budget, while others are funded from non-budgetary sources.
This situation creates a confusing situation and leads to possible corruption in
the system of state finances, and this is one of the issues making it impossible to
create a clear ontological differentiation between the forms of extra-economic
organisation of business in the Republic of Croatia.
The classification into two major groups of economic operators that enables
business and, consequently, the social reproduction process does not exhaust
all forms of business organisation possible in the Republic of Croatia. The next
instance in the structure of business organisation in the social reproduction
system in the Republic of Croatia are the co-operatives that are established and
that operate pursuant to the Co-operatives Act (Zakon o zadrugama, Narodne
novine 34/11, 125/13, 76/14). The co-operatives are established and they op-
erate as “a voluntary, open, independent, and autonomous company that is ad-

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ministered by its members who realise, improve and protect their individual and
joint economic, social, educational, cultural and other needs and interests and
implement the goals of the co-operative through their work and other activities
or through the use of its services, based on togetherness and mutual assistance.
A member of the co-operative is a person who directly participates in the work
of the co-operative, does business via the co-operative or uses its services, or
participates in the realisation of goals of the co-operative in another manner.”
(Što je zadruga i kako je osnovati?, n.d.). Although in terms of co-operatives
it is necessary to ensure efficiency, i.e. to realise positive business outcomes for
the co-operative to survive, by their very nature the co-operatives are primar-
ily oriented towards effectiveness, i.e. the protection and meeting of the needs
and interests of its members that are not primarily oriented towards profit, i.e.
income. Accordingly, we can cite as follows: “It is evident from the definition of

149
the co-operative and its member that co-operatives and members actually form
a single economic entity that rests precisely on the work of its members. The
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

purpose of co-operatives is to realise and promote the economic interests of
its members, and not to acquire profit, which is the case with the share-capital
companies. Share-capital companies maximise the operating result, while co-
operatives maximise the results of each of its members.” (Što je zadruga i kako
je osnovati?, n.d.). Therefore, co-operatives can be classified into the category of
mixed, i.e. hybrid economic operators.
In addition to the above-mentioned forms of establishment and activity of
economic operators defined by the Legislative Framework of the Republic of
Croatia, it is necessary to add the form of association and activity of natural
persons defined in the Civil Obligations Act (Zakon o obveznim odnosima,
Narodne novine 35/05, 41/08, 125/11, 78/15, 29/18), which does not have
legal capacity. It is a partnership, defined in Article 637 of the Civil Obligations
Act as a community of persons and products without legal capacity, where the
relationship between the partners is defined by a partnership agreement. In
that agreement, partners undertake to combine their work and/or assets to
achieve their common goal. The common goal is defined in Article 650 of the
Civil Obligations Act, which is profit. Naturally, depending on the extent to
which partners are successful, other than profit, partnerships can also generate
loss. That is why Article 650 states as follows: (Zakon o obveznim odnosima,
2015)
• Profit is that part of the assets of a partnership that remains after the value
of the stake in the partnership, joint debts, and expenses are deducted.
• Loss occurs when the assets of a partnership fall below the value of the
stake.
In view of the defined goal of the partnership, this type of association and ac-
tivity of natural persons should be observed as part of the economic subsystem
of the social reproduction system. Accordingly, partnerships agree to realise the
goal of efficiency, i.e. to create personal gain for persons who are stakeholders in
the partnership agreement.
Further to the previous analyses, we can define a structural model of the so-
cial reproduction system in the Republic of Croatia based on ontological prin-
ciples. This model is shown in Figure 4.

150
Figure 4 Structural model of business organisation in the social reproduction
system in the Republic of Croatia

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

151
3. CONCLUSION
If we listen to the persons participating in business activities in the Republic
Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

of Croatia, we soon realise that one of the most significant issues is the one re-
ferring to enormous, complex, and incomplete legislation that blocks entrepre-
neurship and opens the door to corruption and intensive meddling of political
elites in the social reproduction process. The research conducted, which focused
on the structure of business organisation in the social reproduction system,
confirmed the aforementioned position taken by pragmatic practicing business
circles. The defined model shows all the complexity of legislative frameworks
that define the forms and content of business activities in the Republic of Croa-
tia as well as the inconsistencies that prevent consistent and unambiguous clas-
sification of all forms of organisation of economic operators into appropriate
classes and grades. If the intention is to generate an affirmative climate for ef-
ficient business of economic operators in the social reproduction system in the
Republic of Croatia, it is necessary to proceed with the overall scientific analy-
sis and reorganisation of the legislative frameworks for business organisation.
In that sense, inter alia, it is necessary to scientifically define an ontologically
consistent and unambiguous model for regulating the system of social repro-
duction that could serve as the basis for re-engineering legislative frameworks
connected with business practices in the Republic of Croatia.
In such conditions, the business practice would not employ generic names,
such as “enterprise” or “firm”, whose ambiguity further complicates the under-
standing of what is already a complex and inconsistent system of legislative
business organisation in the Republic of Croatia. Instead of generic terms, un-
til clear legislative frameworks for new organisation of the social reproduction
system in the Republic of Croatia are defined, it is necessary to differentiate
between economic business systems and non-economic and mixed, i.e. hybrid
business systems. Within the economic subsystem of the social reproduction
system, we should primarily differentiate the legal from the natural forms of
business organisation, and within the legal forms of business organisation we
should differentiate between the share-capital companies and other organisa-
tional forms. In that sense, share-capital companies could be called enterprises
because, in pragmatic terms, such companies are most frequently identified
with this generic term. In the domain of non-economic business, it will be ex-
tremely important to make a clear distinction between economic operators that

152
are financed from state and local budgetary funds and those systems funded
from extra-budgetary sources.
The results of this research have, on the one hand, defined the platform for
further attempts at modelling the structure and processes in the social repro-
duction system and, on the other, showed that it is necessary to undertake sig-
nificant actions to define the social reproduction system in a simpler and bet-
ter fashion. In that sense, a large number of issues was raised that should be
resolved through interdisciplinary efforts of social sciences in the period ahead.

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Osijeku, Osijek
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na-uprava.hr/HR_publikacije/Prirucnici_brosure/173%20zanimanja%20za%20
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Kružić, D. (2007): Poduzetništvo i ekonomski rast: restrukturiranje uloge poduzetništva u
globalnoj ekonomiji , Ekonomska misao i praksa , God XVI, No. 2, Zagreb.
Pejić, M. (n.d.) Pravni oblici poduzetništva , http://www.ekonos.hr/porezi/pravni-oblici-
poduzetnistva-i-dio/ [15.2.2018]
Pravilnik o utvrđivanju proračunskih i izvanproračunskih korisnika državnog proračuna i
proračunskih I izvanproračunskih korisnika proračuna jedinica lokalne i područne (re-
gionalne) samouprave te o načinu vođenja registra proračunskih korisnika proračunskih
i izvanproračunskih korisnika (2009), Narodne novine, https://narodne-novine.
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
nn.hr/clanci/sluzbeni/2009_10_128_3152.html [25.3. 2018]
Što je zadruga i kako je osnovati?, n.d.), Hrvatski centar za zadružno poduzetništvo, http://
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kon.hr, https://www.zakon.hr/z/746/Zakon-o-financijskom-poslovanju-i-
ra%C4%8Dunovodstvu-neprofitnih-organizacija [25.5.2017]
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ni/2013_12_143_3065.html [11.5.2017]
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Branimir Dukić  Goranka Majić  Stojanka Dukić: STRUCTURAL MODEL OF THE BUSINESS ORGANISATION FORMS IN THE REPUBLIC OF CROATIA

Pravilnik o neprofitnom računovodstvu i računskom planu (Narodne novine 1/2015)
Pravilnik o porezu na dohodak (Narodne novine 1/2017)
Pravilnik o proračunskom računovodstvu i računskom planu (Narodne novine 124/14,
115/15, 87/16 i 3/18)
Pravilnikom su o utvrđivanju proračunskih i izvanproračunskih korisnika državnog
proračuna i proračunskih i izvanproračunskih korisnika proračuna jedinica lokalne
i područne(regionalne) samouprave te o načinu vođenja proračunskih korisnika
proračunskih i izvanproračunskih korisnika (Narodne novine 128/2009)
Zakon o financijskom poslovanju i računovodstvu neprofitnih organizacija (Narodne no-
vine 121/14)
Zakon o obiteljsko poljoprivrednom gospodarstvu (Narodne novine 29/18)
Zakon o obveznim odnosima (Narodne novine 35/05, 41/08, 125/11, 78/15, 29/18)
Zakon o poduzećima (Službeni list SFRJ 77/88, 40/89, 46/90 i 61/90)
Zakon o porezu na dohodak (Narodne novine 115/16)
Zakon o računovodstvu (Narodne novine 78/15, 134/15, 120/16)
Zakon o radu (Narodne novine 93/14, 127/17)
Zakon o trgovačkim društvima (Narodne novine 111/93)
Zakon o zabrani i sprječavanju obavljanja neregistrirane djelatnosti (Narodne novine 61/11)
Zakon o zadrugama (Narodne novine 34/11, 125/13, 76/14)
Zakon o peuzimanju saveznih zakona iz područja organizacije i poslovanja gospodarskih
subjekata koji se primjenjuju kao republički zakoni (Narodne novine 53/91)
Zakon o proračunu (Narodne novine 87/08 i 136/12)
Zakon o obrtu (Narodne novine 143/2013)

154
IMPORTANCE OF ALIGNMENT
OF STRATEGY AND PROJECT
MANAGEMENT

Aleksandar ERCEG, Ph. D., Assistant Professor
J. J. Strossmayer University of Osijek,
Faculty of Economics in Osijek
E-mail: aleksandar.erceg@efos.hr

Vice GULAM, Ph. D. Candidate
Ustanova upravljanje sportskim objektima, Zagreb
E-mail: Vice.Gulam@sportskiobjekti.hr

Abstract
Traditional project management starts from the assumption that each pro-
posed project is in line with the organization’s strategic goals and contributes
in a certain way to the achievement of the goals and positive results of the
organization. However, some projects entirely support the organization’s stra-
tegic goals, some support only in some parts, and some do not support them at
all. The problem arises when the organization’s strategic goals are not clearly
expressed or measurable or because a certain number of managers do not un-
derstand them or do not understand them in the correct way. INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Thus, it is necessary to establish a strong connection between clearly set business
strategy and correctly chosen projects and that the relationship is continuously
strengthened and maintained during project implementation. Tis is enabling
to achieve optimal results in the realization of each project and optimal results
on the organization level as well. This is representing a new approach to the
development of the project management - strategic project management. Its
task is to assure the alignment of the realization of strategical organizations’
goals and implementation of organizations’ projects.
This paper is presenting basic elements of this new approach in project man-
agement which connects organizations strategy and implementation of a set of
projects. Authors will show the link between strategic goals and project man-

155
agement on the example of the Zagrebački holding. Finally, we will present the
research results and propose further research to understand the importance of
alignment project management with fulfilling organization’s strategy.
Key words: strategy, project management, alignment, Zagrebački holding.
JEL Classification: M10, M19

1. STRATEGIC MANAGEMENT 
Management as a process is a very complex term, consisting of five main
functions: planning, organization, human resources management, management,
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

and control. Every organization should also have a strategy as a part of those
functions.
Strategic management creates an overall view which directs decisions, ac-
tions, and people in the organization. The goal itself (Kadec, 2013) of the stra-
tegic management is to determine missions and goals, without neglecting means
necessary for success.
Sikavica et. al. (2008) said that strategic management can be defined as the
art of guiding or managing the development of a company, i.e. several manage-
rial decisions and actions that determine long-term business performances of
an organization.
According to Buble (2009) strategy is a term that was studied by different
authors throughout the history, and the most common term could be that it
comes from the word strategus, an ancient Greek term describing a person with
a high ranking.
All this together according to Buble (2009) brings several essential charac-
teristics of strategy:
- that strategic management is a consistent process, which means it has con-
tinuity, even though some activities are more and some less in focus
- manager’s engagement in the strategic management must come in a series
of stages which begin with the analysis of the environment, setting the or-
ganization direction, forming and implementing the strategies, concluding
with control and evaluation
- managers bring many decisions and take a whole range of actions that help
them in reaching the goals they have set

156
- strategic management must enable the company to organize and prepare
so that it can respond to challenges of a dynamic, complex and unpredict-
able environment, any given moment
- strategic management is iterative, which means it begins with the first
stage and ends with the last and continues in these cycles.
Although the definition of the strategic management seems simple, static
and clear at first sight, the real integration of the strategic management is com-
plicated, complex and dynamic, which is confirmed by following tasks per-
formed by strategic managers.
According to Thompson et. al., (2006) it is a process of bringing decisions
and performing activities through which it is endeavored to coordinate abilities
and possibilities of a company with the circumstances of the environment and
thus gain advantage i.e. a better result.
In this process managers should identify their internal and external strategic
factors (elements) which are crucial for the business, because they determine
internal and external environment whose interaction shapes the business envi-
ronment. A good knowledge of this environment and successful management of
all the important factors can result in a more successful business.
Managers can in most cases influence the forming of internal factors and
business environment, however they usually are not able to influence the exter-
nal factors and environment. However, by planning, following and analysing,
managers can timely observe different business risks and threats, thus by good

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
decisions prevent or at least alleviate negative events and trends. Timely observ-
ing and quick responding increase chances of survival and greater successfulness.
The environment includes internal, close business and general environment.
Analyzing business environment of a company (Buble, 2005: 34-36) uses fol-
lowing methods: scanning of the business environment, analysis of the competi-
tion, analysis of those interested in the company or stakeholder analysis, as well
as PEST and SWOT analysis.
The key features of the internal environment of a company are its strengths
and weaknesses, which can be described through different material and non-
material resources, such as different assets owned by a company, the level of
technological-technical equipment, liquidity, indebtedness, tradition, quality,
human resources and knowledge etc. On the other side, business environment

157
usually includes suppliers, creditors, buyers, shareholders, employees, competi-
tors etc, while the general environment includes geographical, demographic,
cultural, infrastructural, political, economical legal and all other frameworks.
Through the analysis of the environment the managers should determine (plan)
and conduct the strategy through which they intend to complete the set goals.
Strategic planning is quintessential for the defining and successful comple-
tion of the strategy. A strategy is a long-term plan for better use of their own
resources, unlike the tactics which are primarily focused on conducting the
strategy. Just like any other plan, strategy is a decision, and completing every
decision is susceptible to the risk of not completing it. Those managers who
choose a strategy should have necessary knowledge and skills, so that the risk is
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

brought down to a minimum.
In large companies highly positioned managers are engaged in strategic man-
agement, while middle- and lower-ranking managers are usually in charge of op-
erational or tactical tasks. In smaller companies all activities mentioned above are
conducted by a small number of persons, or even only one manager. The task of
making and conducting the strategy of a company is the core of managing a busi-
ness enterprise and victory on the market. The strategy of a company is a game
plan which the board uses for business growth, gaining market positioning, at-
tracting customers and pleasing them, successful competition, leading operations
and gaining organization goals. The essence of strategy is making moves to build
and strengthenlong-term competition advance over the competitors, which then
becomes a competition entrance ticket for a superior profitability.
A strategy of a certain company evolves and changes it with time, in the first
place because of proactive and purposeful actions on behalf of the company
manager, and due to reactions to unexpected events and new market conditions.
Next to the concept of strategy is a concept of a business model. Through a
business model of a company, the board presents how and why will the offer of a
product and competitive approach generate income and have related cost structure
which will give attractive profit and return of the investment. Kuratko (2017: 280)
defined a business model as a description of how a venture will create and deliver
value, while Osterwalder and Pigneur (2010: 14) conclude that the business model
describes the rationale of how an organization creates, delivers, and captures value.
To put it simply, the business model exposes economic logic for gaining money in
certain business, with regards to the actual strategy of the company.

158
The winning strategy is in tune with the circumstances of the external situ-
ation and the internal resource powers and computing skills of the company,
builds competitive advance and enhances the effectiveness.
The making and conducting of a strategy are basic managerial functions.
Victory or defeat on the market depends directly upon the quality of a company
strategy and in the skill of conducting it, i.e. the ability of management to react
timely and correctly any given moment.

2. PROJECT MANAGEMENT
The largest number of activities in a company is performed within the frame-
work of projects, so the success of a company depends upon the success of each
individual project or a program.
According to Omazić and Baljkas (2005: 52), regardless of a situation, a
project is something which has its defined beginning and end, given goals that
should be achieved, a budget that shouldn’t be exceeded and quality that should
be satisfied. Successful project is the one that meets all expectations of a client
or a principal, i.e. the one that met all the criteria (Reveal, 2014):
1. completed on time
2. goals met
3. quality achieved
4. budget not exceeded

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
According to Radujković et. al. (2012.) managing a project is applying knowl-
edge, skills, tools and techniques to project activities, to satisfy project goals. Every
project marks a new beginning, in every phase of the project all aspects are ap-
plied – knowledge, skills, methods, tools and techniques, however it is also very
important that every next project includes skills acquired on the previous projects.
According to Buble (2010) a life cycle is a kind of framework for managing
a project. It consists of five phases:
1. Initiation of a project
2. Planning a project
3. Performing a project
4. Supervision and controlling of a project
5. Closing a project

159
Kerzner (2009) state on the phase of initiation a project, apart from the
evaluation of a project, one must define volume and goals planned, tasks to be
done to reach the goal, realistic time frame, means, risks, limitations and obsta-
cles which can influence the success of a project. Internal and external interested
sides are identified, who will be actively involved in the project. Initial financial
means are being alloted and a project manager is being assigned.
Buble (2010) said that planning includes detailed planning of the volume
of the project, detailed defining of goals of the project, planning of all neces-
sary activities and defining of their schedule. This phase also includes prepara-
tion of the complete documentation necessary for performing the project. All
necessary work and tasks are assigned to certain team members who have to
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

execute them in a certain framework, using available resources and tools. Plan-
ning improves understanding of goals and tasks of the project, and increases the
effectiveness taking into consideration distribution of work. Planning considers
volume, time, costs, resources, quality and risks of the project.
Through the phase of performing the project all planned activities are being
performed. Specific resources necessary for performing tasks are being defined,
as well as their schedule and coordination according to planned activities. The
expected time frame of a certain activity is being defined, with the exactly de-
fined beginning and the end. During the performance it is necessary to control
whether everything goes according to the plan, so that all possible irregularities
can be corrected, all specifications of the project are satisfied, and the project
finished on time and with planned costs.
Supervision and controlling continuously measures and follows a progress
of the project, which enables the project team a constant insight into the state of
the project. Deviations from the plan are being identified and corrective activi-
ties are being suggested. As previously mentioned, the most part is conducted
in the performing phase.
Closing phase means formal acceptance of the project and closing of all ac-
tivities. Throughout the phase of closing the project, the whole project is being
evaluated as well, so that the evaluation becomes the source of information and
knowledge for the upcoming projects.
Every project marks a new beginning, in every phase of the project the total-
ity of knowledge, skills, methods, tools and techniques is being applied, but it
is also very important that on every new project one applies knowledge gained

160
throughout the previous project. Phases of managing a project follow one after
another, except for the process of supervision and control which happen along
with all other phases.
The project begins with creating an idea about its performance and defining
goals, as well as with beginning of the performance planning. During planning
strategies of performance are being analysed, calculations are being drawn, as
well as researches and checks, risks are being estimated, analyses prepared, and
grounds are being made for a successful implementation.
In this phase goals are being determined and set, through which activities
are simultaneously connected, which will bring to achieving goals. Depend-
ing upon the complexity of the project, activities are being divided into special
tasks, which are then distributed to team members. Such a procedure in com-
posing a project and planning the performance also enables timely planning of a
necessary team of experts and other team members of certain profiles who will
enable a successful implementation of every single task and phase. After the dis-
tribution to individuals and teams, timing of tasks and phases is being planned.
There is a difference between strategic and tactic planning, however both
should receive necessary attention. To put it simply, strategic planning will set
higher and lower goals, while tactic planning will bring methods for its fruition,
and do its best to neutralize any possible risks, through special measures.
It is an unwritten rule that those who will take part on the project should
also be actively included in the process of its planning. The next rule of an ef-
ficient planning is that there should always be readiness to change these plans.
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
During the process of planning a project it is always advisable to reverse in every
step and thus control the compatibility of all planned resources and necessary
time to fulfill every one of these tasks.
It is necessary to manage the project from several segments; the most im-
portant ones are: managing time of performing a project, managing costs of a
project, managing quality of a project, managing human resources, managing
communication on a project and managing risks of a project.
Starting a project in organizations or in surroundings without any formal
procedures or frameworks for handling a project can often go unnoticed. Ab-
sence of certain documents in the later phases can cause problems, ranging from
non-existing dana on done and planned costs to spending resources on feasible
projects or those who serve no purpose to an organization.

161
3. PROJECT STRATEGY ALIGNMENT
Mankins and Steel (2005) found in their research that 63% of companies
realize the potential value of their strategies while Johnson (2004) conclude
than 2/3 of corporate strategies were never implemented. While the process of
strategy implementation was neglected in research in relation to strategy for-
mulation (Moriss and Jamieson, 2005), its importance can be seen in the fact
that is it more difficult to implement strategy than to formulate it (Hrebiniak,
2006). The idea of alignment is not new in literature and there are more than
several studies which examined alignment idea. (Table xx) Fonvielle and Law-
rence (2001) state the alignment is a crucial effort for the success of the orga-
nization. For them, alignment is an agreement between all three strategy levels
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

(functional, business and corporate) in relation to means and goals.
Table 1. Alignment studies
Field Researchers
Tasks, policies and practices alignment Kathuria and Davis, 2001
The relationship between alignment and performance Papke-Shields and Malhotra, 2001
Functional strategies (R&D, production, human
resources and information technology) alignment with Srivannaboon, 2006
the business strategy
Source: customized according to Srivannaboon, 2006

This is a situation where project portfolio management is needed. The stra-
tegic importance of project management worldwide is being increasingly rec-
ognized especially in corporate world. On the reason for this increase is strong
confidence of corporate managers that alignment between project management
and corporate strategy can significantly increase the accomplishment of compa-
nies’ goals, strategies, and performance. Srivannaboon (2006) state that project
management should be also in alignment with business strategy since it is very
similar to functional strategies. Project portfolios and project are significant
strategic weapons since they are an essential structure block in executing the
proposed strategy (Dietrich and Lehtonen, 2005). Milošević and Srivanna-
boon (2007) examined current research on the alignment of project manage-
ment and business strategy and found that still, the literature is vague. (Table 2)

162
Table 2 Alignment of project management with business strategies
Field Researchers
The link between business strategy with project
Hartman, 2000
management and project selection
Ensuring strategic alignment of business strategy and
Turner & Simister, 2000
project management
Choice of business strategy which drives project
Cooper et. al., 1998
portfolio management
Project portfolio management which aligns the project
Cooper et. al., 1998
with the business strategy
Managing rough-cut resource capacity Harris & McKay, 1996
Project balancing with business strategy Archer & Ghasemzadeh, 1999
Source: customized according to Milošević and Srivannaboon, 2007

According to Shenhar et. al., (2007) there is a major challenge in the process
of alignment of project management and business strategy - a missing link and
according to authors, this is a project strategy (Figure 1).
Figure 1. Missing link

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Source: Shenhar et. al., 2007: 63

Shenhr et. al. (2007) state that carefully defining and evaluating project ac-
complishment is a significant strategic management concept that can help in
aligning the project efforts with the organizations’ short- and long-term goals.
Due to the increasingly rapid changes and growing global competition com-
panies need to be quick in responding to be more competitive on the market.
Thus, projects should be perceived as strategic weapons that were created to
maintain and increase competitiveness. Authors also state that project man-
agers need to become a strategic leader by taking accountability for business
results of projects. With this project are becoming driving force for new di-

163
rections of strategy. Aubry et. al. (2007) found several models for alignment
between strategy and projects but there is no in-dept studies of the corporate
strategy implementation down to the project management level throughout the
project execution. Project portfolio management literature encourages choos-
ing and ranking projects in accordance with the companies’ strategy (Marinsuo
and Lehtonen, 2007). Approach to project portfolio selection should be ad-
justed to the organization’s environment characteristics and strategy (Englund
and Graham, 1999; Stawicki and Müller, 2007). This was confirmed by Müller
et. al. (2008) who found a positive correlation between portfolio project selec-
tions and company’s strategy. Meskendahl (2010) examined the effect of stra-
tegic orientation on business success and its correlation with project portfolio
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

structuring and success. According to Killen et. al (2008), the strategic method
could result in the improved alignment of projects and business strategy. An-
sari, Shakeri and Raddadi (2014) proposed framework and processes for proj-
ect strategy alignment which is based on a model created by Srivannaboon and
Milošević (2006). (Figure 2)
Figure 2. A theoretical framework for aligning project management with busi-
ness strategy

Source: Milošević and Srivannaboon, 2007: 50

According to the framework business strategy, competitive characteristics
determine the emphasis and the content of the project management essentials.

164
For establishing and maintaining alignment of business strategy and project
management elements, Milošević and Srivannaboon (2007: 50) proposed that
companies use strategic planning and project portfolio management at the strategic
level to interpret their business strategy in the context of project management. In
addition to the framework, Ansari, Shakeri and Raddadi (2014: 4) identified
five main processes of the framework: i) strategy formulation, which manages the
development of a sound strategy; ii) strategy implementation, which provides the
subprocesses needed to achieve organizational goals, including in the areas of op-
erations and logistics; iii) project portfolio management, which provides the sound
composition of projects; iv) project management, which deals with the completion
of operations needed to achieve goals; and v) alignment evaluation between project
management and organizational strategies. (Figure 3)
Figure 3. Framework main processes

Source: Ansari, Shakeri and Raddadi, 2014: 3

It is important for organizations to focus aligning their business strategy
and project to create successful direction for both projects and strategy. This
alignment is challenging due to the business strategy goals are not clear or well-
communicated between the business strategy and the project management or
consistent with the project management actions. One of the major tasks of
effective project management process is to understand the alignment. To un-
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
derstand the alignment, large projects need to be executed within formulated
strategy’s implementation and with the involvement of project managers and
not only managers at high management levels.

4. PROJECT S STRATEGY ALIGNEMENT IN CASE
OF ZAGREB HOLDING
The key function of Zagreb Holding is providing communal services, estab-
lishing and maintaining city infrastructure in Zagreb City. The main principles
in providing those services are effectiveness and eligibility of costs.
Zagreb Holding is facing direct business challenges under the influence in
surrounding as long-term challenges of business upgrading of all its members,

165
according to the demands of the competition business, with stimulating techno-
logical advancement and raising general quality of its services.
In market circumstances of a strong competition, globalization, technologi-
cal innovations and quick social changes, a successful company must have a clear
vision and goals of development, defined development programs and projects
to perform these goals, as well as indicators of performance od these set goals
through which it will follow the efficiency of program and project activities. For
the strategic development and projects that Zagreb Holding is planning to per-
form it is necessary that they are synchronized with the superior strategic docu-
ments of the Republic of Croatia, especially concerning the fact that Zagreb
Holding is counting on the financial aid at least partially from the EU funds.
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

Membership of the Republic of Croatia in the EU gives Zagreb Holding a
possibility of co-funding of development projects from structural and invest-
ment EU funds (ESI funds). Following the given priority areas of funding de-
velopment projects for the Republic of Croatia in the period until 2020, Zagreb
Holding has recognized the necessity to create a Strategy of development of
Zagreb Holding 2015-2020. This strategy ensures a framework for prepara-
tion and performance of development projects with the possibility of their co-
funding from the European funds.
This strategy will serve as a framework for a future development and a base
for preparation and suggestion of development projects. Within the framework
of the project, following steps have been taken:
1. Analysis of development problems and assessment of situation in all key
areas of Zagreb Holding business, with the special accent on limitations
and possibilities for efficient management and business, as well as on
strenghtening of human resources.
2. Suggestion of vision, strategic goals and priorities of development in the
period 2015-2020.
3. Suggestion of measures and project activities which lead to achieving pri-
orities, as well as adequate development goals of the Strategy of develop-
ment of Zagreb Holding 2014-2020.
4. Creating an Action plan with the purpose of operationalization and per-
forming the Strategy of development of Zagreb Holding 2015-2020.

166
In the making of Strategy, in all tasks and activities, all representatives of
relevant stakeholders have been taking part, so the performing of the project
enabled raising competence of officers in Zagreb Holding for the strategic plan-
ning of development.
Zagreb Holding is currently preparing for the application of more than 20
projects for financing through grants of EU funds. Internal educations and
trainings for employees are being put into action, and about a hundred of them
have completed it.
Apart from that, a Team for managing the projects financed by grants of
EU has been formed, consisting of 15 employees who oversee development and
projects in their subsidiaries. Their task is to follow EU policies on waste man-
agement, environment protection, sustainable development, traffic and suggest
projects in tune with the national and EU directions and experiences.
Projects started for candidating for EU funds include areas of traffic infra-
structure, water supply and drainage, gas supply, light distribution network,
waste management, ecology and energetic efficiency. Zagreb Holding in the
project Zagreb on the Sava river takes part as one of the partners, and currently
there is a phase of adjustment of a spacial plan documentation.
Along with the large infrastructure projects, Zagreb Holding is also active
on following projects:
• promotion of environmentally friendly driving in communal companies
and reaching the level of responsible behavior of the communal companies

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
in use of fuel when using their own vehicles – the aim is to save up to 5%
fuel and education of drivers
• education of users/citizens on reasonable usage of energy (natural gas,
waste management) – the aim of the project is a more efficient energy
management to approach the directions of the EU 20/20/20 by 2020
• the initiative of the project of preservation of buildings has been set in mo-
tion – restoration of residences/buildings run by GSKG (city residential
company)
Zagreb Holding takes part in the competition Intelligente Energy Europe
2012, as well, as the partner in two projects (Greenpool – energetic efficiency
and reduction of wasting energy in closed swimming pools; Bin2Grid – in-

167
crease of parts of renewable sources of energy using biological waste). Further-
more, it takes part in 3 EU projects as the partner on the projects:
• Project Clean Fleets – project from the program CIP IEE 2011, together
with 12 more partners from 9 countries. The program is based on the
„Clean Vehicles Directive“. The goal of the project is to help public trans-
port companies in choosing the ecologically friendliest and energetically
most efficient vehicles (criteria being energetic consumption of a vehicle
and CO2 emission and other harmful gases). Subsidiaries ZET (public
transport company) and Čistoća (waste management company) are active.
The European Commission has granted 20 000 Euro to Zagreb Holding,
through the mentioned project. According to the development strategy
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

of Zagreb Holding 2015-2020, this is one of the operational projects of
Zagreb Holding, i.e. subsidiaries ZET and Čistoća in the period from
2017 to 2020.
• Project UrbanBioGas or CIty Waste for production of biogas and using
bio-methane for including in the gas supply network and traffic in the
urban areas – project from the program CIP IEE. Next to Holding, 5
partners from 5 countries are taking part in it. The aim of the project is
to collect bio-waste in urban settings with the aim of using biogas. Za-
greb Holding gained 85 000 Euro on this project, which is in tune with
the Strategy of development of Zagreb Holding 2015-2020, although the
beginning of the project was one of the strategic plans of the precedent
Strategy of development for the period from 2010 to 2015.
• An ongoing project related to clean traffic in Zagreb City, under the name
Civitas Elan. The project started in 2008, gone through 3 five-year strate-
gies of development of Zagreb City and Zagreb Holding, and is finally
coming to an end. The aim of the project is the improvement of the quality
of life through promotion and inducing sustainable, clean and energetical-
ly efficient ways of taking part in the traffic. Zagreb Holding, subsidiaries
ZET and Čistoća, together with the City are active on the project, along
with 4 other cities: Ljubljana, Gent, Porto and Brno. ZET took part on
the project by purchasing energetically effective and less noisy trams and
by purchasing buses that use bio-diesel or natural gas as fuel. Čistoća took
part by purchasing waste transport vehicles and cleaning vehicles that use
bio-diesel as fuel. The result is already satisfying, shown through parame-

168
ters – 5% air pollution reduction and 3-5 decibels noise reduction. Zagreb
Holding received about 1,200 000 Euro on this project.
The key driver of ongoing transformation is adapting strategy to active proj-
ects and to create a more flexible and efficient system that will be long-term
sustainable and competitive. The key risk of each project is the evaluation of
the project’s efficiency, its success or failure, which implies whether the target
will be achieved or whether it will be in line with the predefined strategy. In
Zagreb Holding is in the process of fulfilling the goals set out in the Develop-
ment Strategy 2015-2020. Currentle the most successful parts of the strategy
are ones connected to the corporate sustainability strategy (socially responsible
business and social, economic and ecological aspect) participatory management
(cooperation with users and citizens, co-operation with the local community)
and environmental protection (improvement of environmental parameters of
existing products and provision of services, introduction of new green business
technologies). By the end of 2020, most of the Strategy project will be launched,
which will be completed in the period of the Strategy for the Development of
the Zagreb 2020-2025, which is already being prepared.

5. CONCLUSION
Development of project management as a special management discipline
brings new concepts of managing, among which strategic project management
has a special role. The essence of strategic project management is balancing be-
tween the development strategy of a company and correct choice of projects. It
is necessary to establish a strong relationship between the clearly set business INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

strategy and correctly chosen projects – only through constant maintaining of
this relationship there can be a successful closure of a project.
Connection between project management and strategy manageement is
done within project strategy alignment. This alignment is challenging due to
the business strategy goals are not clear or well-communicated between the
business strategy and the project management or consistent with the project
management actions. To understand the alignment, large projects need to be ex-
ecuted within formulated strategy’s implementation and with the involvement
of project managers and not only managers at high management levels.

169
Zagreb Holding is a good example of a successful balancing, where clear
development strategy of a company and correct choice of projects following the
strategy gets results which improve the quality of life of Zagreb inhabitants. For
further development of the City of Zagreb and Zagreb Holding it is necessary
to continuously ensure new projects and perform all the projects set out by the
Development Strategy of Zagreb Holding in the period from 2015 to 2020.
For understanding the need for project strategy alignment, we propose fur-
ther research in Zagreb Holding to continue following influence of project ex-
ecution on fulfillment of strategy in Zagreb and the alignment is being done.
Aleksandar Erceg Vice Gulam: IMPORTANCE OF ALIGNMENT OF STRATEGY AND PROJECT MANAGEMENT

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171
PATIENT’S WILLINGNESS TO CO
FINANCE HIGHER LEVELS OF
HEALTHCARE

Martina BRIŠ ALIĆ, Ph. D.
J.J. Strossmayer University of Osijek,
Faculty of Economics in Osijek, Republic of Croatia
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

E-mail: mbris@efos.hr

Martina HARC, Ph. D.
Croatian Academy of Sciences and Arts,
Institute for Scientific and Artistic Work in Osijek
E-mail: harcm@hazu.hr

Dino VIDA, Ph. D. Student
General County Hospital Našice, Republic of Croatia
E-mail: dino.vida@gmail.com

Abstract
The existing financing system of the healthcare of the Republic of Croatia poses
challenges to all stakeholders involved in the process of treatment. Modern
medicine develops daily and offers new, better, more efficient and less unpleas-
ant procedures for diagnosis and treatment. The development also influences
on increased costs of healthcare. Healthcare providers at the primary, second-
ary and tertiary levels are scarcely paying and thus generate financial losses in
the health sector. Public health financing in the Republic of Croatia is imple-
mented according to the Bismarck model based on the principles of solidar-
ity and reciprocity and is collected through compulsory contributions to health
insurance paid to the Croatian Health Insurance Fund. Partial co-financing is
collected through a complementary health insurance system. It is anticipated
that the current gap between the available financial resources and the cost of
health services will continue to increase in the future. In order to reduce the
existing gap, one of the possible solutions is voluntary co-financing of higher-

172
level of healthcare within the patient’s own resources. The aim of this paper is to
investigate whether patients treated at the Našice County General Hospital are
willing and interested to co-finance an additional - a higher level of healthcare
than the one available from existing health insurance. The study was conducted
on an example of 206 patients treated at the Našice County General Hospital
during January and February 2018. Survey questionnaires were set for 206
patients. According to the financial situation in the micro-region that gravitates
to hospitals, the level of services provided by the hospital, the habits of patients
(consumers), age etc., expected results of the research point at unconcerned co-
financing of treatment by most of the patients.
Key words: healthcare, public health, financing of healthcare, treatment
JEL Classification: I13, I18

1. INTRODUCTION
Over the last few decades, the overall health status of people around the
world has significantly improved. On average, people live longer than ever be-
fore, regardless of their income level. According to World Health Organization,
the life expectancy at birth (LEAB) has increased for 20% in last few decades,
precisely, 71.4 years was the average life expectancy at birth of the global popu-
lation in 2015. In Croatia 81. 2 years was the average life expectancy at birth
of the female population in 2015 and 74.7 of the male population. Further,
the global population aged 60 years could expect to live another 20 years on
average in 2015. According to Fujii (2017) in high-income countries, the life
expectancy at birth has increased from about 70 years in 1970 to around 80 INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
in 2010. During the same period, low-income countries and middle-income
countries have achieved an even larger increase in the life expectancy at birth
(see more at World Health Statistics 2017, WHO life expectancy). Similarly,
the under-five mortality rate has dropped substantially. This improvement is
particularly apparent in low income and middle-income countries. The author
emphasizes few (plausible) reasons for this remarkable improvement. First, the
advancement of medicine has enabled the prevention and treatment of diseases
that were previously not possible. Second, higher standards of living have also
contributed to the improvement in health, people can get more and better food
and clean and safe drinking water. According to Pritchett and Summers (1996),
richer people tend to be healthier and live longer on average. Moreover, richer

173
people and people in richer countries also tend to enjoy better public health and
sanitation and receive a better education, which in turn help people to avoid
contracting preventable diseases and live a healthier life overall. Undoubtedly,
according to the World Health Organization (WHO), there are considerable
variations in health across individuals and countries even at a similar level of
income.
Healthcare is financed through different sources. Most typically are pub-
lic health insurance and private health insurance. Both sources have different
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

strengths and weaknesses. Emery (2010) explained differences between public
health insurance from private health insurance. According to the author, public
health care finance has two features that differ from private health insurance.
First, while the prices and levels of insurance benefits of private contracts can
differ according to individuals’ income and risk of needing health care services,
public health insurance provides a single level of coverage for everyone. Second,
the price of that single level of coverage through the tax system varies accord-
ing to individual income and health care needs. Further, one-size-fits-all public
coverage means, that some individuals will find the level of public health insur-
ance more generous than they need, while others will find it insufficient to meet
their needs or wants and, if offered the opportunity, might choose to purchase
additional insurance coverage through a private insurer. Moreover, how much
coverage they might want would depend on the price of supplemental private
insurance and on the level of public coverage. According to World Health Orga-
nization, public health expenditure is an important source because it can poten-
tially improve the health of millions of people, who are prevented from receiving
health care by the obligation to pay directly at the moment of need. Finally, pri-
vate health expenditure includes out-of-pocket expenditure and private health
insurance. Out-of-pocket expenditure refers to consumers (patients) who have
an incentive to pay health-care expenses out of pocket only when the private
marginal cost of health care is no greater than the private marginal benefit. Pri-
vate health insurance refers to consumers (patients) individuals who are able to
share the risk of unexpected medical costs and allow them to receive expensively
but rarely needed life-saving health-care services when they are necessary (Fujii,
2017).
In Croatia, increasing costs of healthcare that healthcare providers at the pri-
mary, secondary and tertiary levels are scarcely paying generates financial losses
in the health sector. It is anticipated that the current gap between the available

174
financial resources and the cost of health services will continue to increase in the
future. In order to reduce the existing gap, one of the possible solutions is volun-
tary co-financing higher-level of healthcare within the patient’s own resources.
With this model patients will be offered to co-finance better, more efficient and
less unpleasant procedures for diagnosis and treatment and, of course, more
expensive service. By patients co-financing healthcare, the health care providers
would be able to reduce or even completely avoid negative financial performance
at the end of the business year. This paper analyzes whether patients treated at
the Našice County General Hospital are willing and interested to co-finance
an additional - a higher level of healthcare than the one available from existing
public health insurance.
After the introduction, Section 2 provides a brief overview of the related
literature and stresses the importance of public and private health insurance. In
Section 3 we present the data and introduce the methodology adopted. Section
4 displays results. Finally, the concluding remarks are presented in Section 5.

2. LITERATURE OVERVIEW
Health insurance refers to insurance against financial loss caused by illness,
body injury and birth or death of the insured person. Individuals with health in-
surance are provided with social security against uncertainty if an insured event
occurs. Healthcare is a fundamental component of European welfare state. Al-
though the EU Member States regulate this area differently, all regulations have
a common feature of pursuing the universal access to healthcare, which is based
on the principle of solidarity (Nikolić, 2015). According to Kirillova (2016), the INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

level of national health care development is an indicator of the quality of living
of the population. Further, the health of citizens, possibilities of its support
and strengthening are very important for the economic growth of a country.
As healthcare has the social character the state must guaranty granting of basic
medical services free of charge and the possibilities to get alternative paid medi-
cal services. In addition to that, the 2030 Agenda for Sustainable Development
provides an opportunity to build better systems for health – by strengthening
health systems in order to achieve universal health coverage (UHC), and by
recognizing that health depends upon productivity in other key sectors such as
agriculture, education, employment, energy, the environment and the economy.
In order to achieve the Sustainable Development Goals, WHO is promoting

175
six main lines of actions. Achieving universal health coverage lies at the cen-
ter of Sustainable Development Goals. According to WHO, making progress
towards UHC is an ongoing process for every country aiming to ensure that
all people receive the health services they need without experiencing financial
hardship (World Health Statistics 2017, Monitoring health for the SDGs).
The main models of a healthcare, based on the source of their funding are
usually defined by four models: the Beveridge model, the Bismarck model,
the National Health Care Insurance and the Out of Pocket model. Beveridge
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

model, called after William Beveridge, is a healthcare model financed through
the budget by tax collection, first implemented after World War II in Great
Britain and named National Health Service (NHS). In this model, healthcare
budgets compete with other spending priorities. The countries using this model
are the UK, Italy, Spain, Sweden, Denmark, Norway and Finland (Lameire,
Joffe, & Wiedemann, 1999.) The Bismarck “mixed” model is financed mainly
from social / compulsory insurance fund and collects funds from fees and is
usual in countries like Germany, France, Austria, Switzerland, Benelux, and Ja-
pan This model results with a mix of private and public healthcare insurance
providers and allows more flexible consumption of healthcare. Wallace (2013.)
states that Bismarck’s model uses the insurance system and is usually funded
by employers and employees through wage cuts. Unlike the American form of
insurance, the profit is not the main goal of Bismarck’s health model. Wallace
(2013.) describes The National Health Insurance model with elements of both
the Beveridge and Bismarck models. It uses private-sector providers, but pay-
ment comes from a government-run insurance program that all citizens fund
through a premium or tax. These universal insurance programs tend to be less
expensive and have lower administrative costs than American-style for-profit
insurance plans. National Health Insurance plans also control costs by limiting
the medical services they pay for and/or requiring patients wait to be treated.
The classic National Health Insurance system can be found in Canada. World
Health Organization (2018.) defines Out-of-pocket payments (OOPs) as di-
rect payments made by individuals to health care providers at the time of service
use. This excludes any prepayment for health services, for example in the form
of taxes or specific insurance premiums or contributions and, where possible,
net of any reimbursements to the individual who made the payments.
Croatia Healthcare system, according to Zrinščak (2007.) is mostly financed
(around 80%) from contribution paid by the insured, which is putting Croa-

176
tia in a group of countries belonging to the Bismarck model. The contribution
rate is calculated on the salary and is 15%. The same rate was at the beginning
of the 1990s, back then it was shared between workers and employers. In the
later years, there is a rise in the rate (for example, 18% in 1998), and then its
declining (declaratively because of the need to reduce labor costs) and the re-
distribution of contributions (where contributions for pension insurance are
calculated from wages and contributions for health and employment on wages).
Also, since 2002, contributions are no longer collected by the Croatian Health
Insurance Fund (HZZO), but they are collected through the state budget and
then are passed on to the HZZO, which partly changes the original charac-
ter of the autonomous social security system. In May 2012, the contribution
rate for health insurance was down to 13%, and in 2014 the rate was increased
and returned to the previous 15% rate. On the first day of 2015, the Croatian
Health Insurance Institute has emerged from the State Treasury and the funds
are collected independently. This way allows better management of healthcare
resources in the Republic of Croatia. According to Smolić (2014.) less than a
20% of the total Health spending in Croatia comes from private sources, and
the share of public financing Healthcare is one of the largest in Europe. Despite
a challenging economic context and major fiscal pressures on health expendi-
ture, Croatia has kept publicly funded health services accessible to its popula-
tion. Although health expenditure per capita is among the lowest in Europe, the
share of public expenditure is comparable to the EU average and the benefits
package is broad, including most health services. According to European Com-
mission, Croatia has pursued a number of important health reforms in recent

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
years, aimed at improving the effectiveness and efficiency of its health system.
Building on and implementing these reforms could help to further improve the
performance of its health system (European Commission, State of Health in
the EU, Croatia Country Health Profile 2017). In Slovenia, the healthcare sys-
tem is financed through two sources, public and private funds. The largest pub-
lic share, around 75%, represents social or compulsory health insurance. Private
financing is mostly represented by voluntary health insurance (around 50% of
private funds), of which complementary health insurance represents more than
90% (Nikolić, 2015).
Kirillova (2016) analyzed the development of the national healthcare sys-
tem after the introduction of market reforms in Russia. Before 1991, there was
no paid medical service in Russia. According to author, the necessity to reform

177
health care system has several reasons: increasing the quality of medical servic-
es, a substantial gap in the incomes of people, high cost of technological medi-
cal care, the increase of the life expectancy at birth, the need for healthier life
and breaking up the monopoly of the state system of health care. The research
indicated the necessity to increase the volume of money for the development of
healthcare on the higher level. The lack of the state financial resources should
be compensated through the mechanisms of attraction the additional financial
resources aimed at the development of paid medical services and widening the
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

range of medical services. Finally, the author concluded that widening the range
of paid services could be viewed as a strategy to improve the efficiency of health
care. Paid medical services could become a premise to increase medical services
quality through increasing the income of the medical personnel in order to create
an effective health care system. Fujii (2017) analyzed whether and how different
sources of health spending affect health outcomes. Although, health spending
affect and poor and rich countries, because neither of them can not afford to
waste health resources and efficient provision of health-care service, is critical
for both rich and poor countries. The author found that health expenditure on
average tends to have a higher health-promoting effect when it comes from a
private source than when it comes from a public source. Results indicate that
taking advantage of private sources of health expenditure is important. Further,
the author also found that the differential health impacts of private and public
health expenditure depend on the quality of the government because main re-
sults are driven by the presence of countries with ineffective governments. With
a restricted sample of a set of countries with effective governments, the author
found no evidence that private sources have a higher health-promoting effect
than public sources. Therefore, results indicated that a larger involvement of
private sector in health is desirable particularly in countries with an ineffective
government.
Finally, Bassani et al. (2018) analyzed healthcare crowdfunding as one of
the alternative sources of raising money by using websites to raise money from
donors to pay for medical care or related expenses. Authors also analyzed the
success of healthcare crowdfunding platforms (as measured by the number of
successfully funded healthcare projects) in relation to the state-level health ex-
penditure of countries where these platforms are based. Crowdfunding is an
open call on the Internet for the provision of financial resources in the form
of donations, a future product, service, or some other reward, or exchange

178
for shares or debt securities of a company. There are, therefore, three types of
crowdfunding: donation-, reward-, and investment-based crowdfunding. Au-
thors revealed several figures. The United States counts the highest number
of successfully funded projects in healthcare. Up to October 2017, 76 medical
crowdfunding platforms have operated worldwide and raised over $132 million
13,633 health projects with the domination of donation-based crowdfunding
focused only on healthcare projects. Further, the number of successfully funded
health projects is higher in those platforms based in countries where financial
resources allocated to health are high, but at the same time where the pub-
lic health coverage is lower, suggesting a substitution effect between medical
crowdfunding and public health insurance.

3. DATA AND METHODOLOGY
The study was conducted on an example of 206 patients treated at the
Našice County General Hospital during January and February 2018. Survey
questionnaires were set for 206 patients. For the purpose of our analysis, we
used SurveyGizmo tool.

4. EMPIRICAL RESEARCH AND RESULTS
In order to evaluate whether 206 patients are willing to pay for particular
medical service or an earlier appointment for a medical service in Našice Coun-
ty General Hospital, patients are questioned through survey questionnaires.
Further, patients who answered positively are additionally questioned to de- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
termine whether medical service (among offered) are they willing to pay extra.
Before any necessity for extra paying service, patients are questioned to evaluate
the quality range of offered medical service at the County General Hospital in
Našice.
Among the interviewees, as Figure 1 presents, there are no big differences in
a number of interviewed patients in each of the age group, around forty in each.

179
Figure 1. Age groups among interviewed patients
AGE Frequency Percent Valid Percent Cumulative Percent
<= 35 42 20,4 20,4 20,4
36 - 51 44 21,4 21,4 41,7
52 - 58 38 18,4 18,4 60,2
59 - 68 42 20,4 20,4 80,6
69+ 40 19,4 19,4 100,0
Total 206 100,0 100,0  
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

Source: Authors’ Survey

Further, 39,3% of interviewed patients were male, while 60,7% were female,
the average age of 52, where 67 % of them were married, while 15% were un-
married and 11,2% of theme were widowed persons. Furthermore, among in-
terviewed patients, 44,7 were employed, while 19,4% were unemployed and
35% were pensioners.
From Figure 2 is visible that 50 employed patients are willing to pay for par-
ticular medical service or an earlier appointment for a medical service in Našice
County General Hospital, while 42 of them are not. It is interesting to note that
majority of pensioners are not willing to pay extra money for particular medical
service or an earlier appointment for a medical service. Finally, 47% of patients
are willing to pay an extra money for particular medical service or an earlier ap-
pointment for a medical service, while 53% are not.

Figure 2. Patient’s willingness to pay medical service or an earlier appointment

Note: Q11: Are you willing to pay for particular medical service or an earlier appointment
for a medical service in Našice County General Hospital?
Source: Authors’ Survey

180
Figure 3. Rating the willingness to co-finance specific services

Note: Q12. If you are willing to pay for particular medical service or an earlier appoint-
ment for a medical service in Našice County General Hospital, which medical service are
you willing to pay and in which intensity? (1-completely not ready to pay, 2- not ready to
pay, 3- neither ready nor willing to pay, 4- willing to pay, 5- completely prepared to pay, I can
not evaluate)
Source: Authors’ Survey

Those patients who answered positively on the prior question are asked to
answer, which particular medical service among offered are willing to pay, and in
which intensity. Most of the examined patients are not at all willing to extra pay
for any treatment in either of offered medical service, meaning that another (not
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
offered) medical service would be more interesting for extra payment. Treat-
ment and examination at specialist are willing to pay 26% of patients, although
not completely prepared to pay. Minor surgery is willing to pay 28% of patients
but not also completely prepared to pay. The most of patients (17,7%) are com-
pletely prepared to pay for anesthesia for some procedures beyond the current
funding system, which is expected as the anesthesia reduces the inconvenience
of the procedure and for endoscopic examination (16%). Before any necessity
for paying an extra money for an extra medical service, patients are questioned
to evaluate the satisfaction with the service provided at the General County
Hospital in Našice. Figure 4 shows that 120 of 206 patients are fully satisfied
with the expertise of medical personnel, and 118 of patients expressed full sat-
isfaction with medical service. A minority expressed complete dissatisfaction.

181
Figure 4. Patient’s satisfaction with the services provided in the General county
hospital Našice
Martina Briš Alić Martina Harc Dino Vida: PATIENT’S WILLINGNESS TO CO-FINANCE HIGHER LEVELS OF HEALTHCARE

Note Q16: Provided medical service at Našice General Hospital, please rate 1-5, where the
grade 1 indicates complete dissatisfaction, and the grade 5 is full satisfaction (1 completely
dissatisfied, 2- partial dissatisfaction, 3- neither satisfaction nor dissatisfaction, 4- partial
satisfaction, 5- full satisfaction – 5)
Source: Authors’ Survey

5. CONCLUSION
According to the conducted survey, most interviewed patients are not inter-
ested in additional service charges. Within more detailed analysis of the survey
responses, we can conclude that reasons are primarily in patient’s satisfaction
with the services provided in the General county hospital Našice and weak finan-
cial status among the interviewees. However, it is clearly visible that a part of the
patients (46.9%) are willing to invest their own financial resources to get a better
service or earlier term in the process of diagnosis and treatment. If qualitative
pricing and value-for-money healthcare systems would be provided, additional
funding would be provided to improve the financial image of the business and
open the way for a possible increase in the quality of services. Most patients are
willing to pay anesthesia for some of the procedures beyond the current fund-
ing system, which is expected as the anesthesia reduces the inconvenience of the
procedure. Specialist examination and treatment do not record higher willing-
ness rates, hence we can conclude that the waiting lists are in acceptable waiting
timeframes. Also, special diet and special health care recorded lower rating.
This form of financing brings some risks that can potentially be achieved:
extending the waiting list for those who are not willing to co-finance, reducing
investment into a basic medical service package as well as increasing the gap in

182
the quality of the public health sector relative to the co-financed form. Prior to
the introduction of the mentioned model, further research is needed as well as
the definition of the price level of certain medical services.

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Lameire, N., Joffe, P., & Wiedemann, M. (1999). Healthcare systems—an international re-
view: an overview. Nephrology Dialysis Transplantation, 14(suppl_6), 3-9.
World Health Organization (2018.) Health financing for universal coverage. available at:
http://www.who.int/health_financing/topics/financial-protection/out-of-pocket-
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den_disease/life_tables/en/ (March 2018)
Zrinščak, S. (2007). Zdravstvena politika Hrvatske. U vrtlogu reformi i suvremenih
društvenih izazova. Revija za socijalnu politiku, 14(2), 193-220.
Smolić, Š. (2014). Razvojni potencijali i izazovi za javno zdravstvo u Hrvatskoj. EFZG Oc-
casional Publications (Department of Macroeconomics), 1, 289-306.
Pritchett, L., and L.H. Summers (1996) `Wealthier is healthier.’ Journal of Human Re-
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2018)
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THE IMPORTANCE OF
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

MANAGEMENT AND COST
ESTIMATION IN MANAGERIAL
DECISION MAKING

Dijana KOZINA, Ph. D. Candidate
J.J. Strossmayer University of Osijek
E-mail: dijana.kozina@zagreb.hr

Vedrana VUKADINOVIĆ, Ph. D. Candidate
J.J. Strossmayer University of Osijek
E-mail: z.vedrana88@gmail.com

Marko TADIĆ, Ph. D. Candidate
J.J. Strossmayer University of Osijek
E-mail: matadic@gmail.com

Abstract
The topic that’s been chosen is one of the top of the reasons that some people
in management business are successful or unsuccessful. It’s about the power of
the acknowledgement, education and, of course, the experience. Cost analysis
and its estimation, is major role in making managerial decisions and is closely
related to the price of the products themselves. The costs are trivial to manage
to achieve long-term benefits from the expense they have incurred to achieve the
manager’s business at a lowest cost without long-term negative consequences on
the business result and competitive position. Most commonly, companies are
faced with a combination of different cost management models, which will be
discussed in final paper.
Key words: cost management, strategy, planning, managing, upgrading, pro-
fessional satisfaction
JEL Classification: M10, M20

184
1. INTRODUCTIONCOSTS
Modern companies are operating in very complicated conditions. Due to
major global business changes, they meet the demands for high profitability,
environmentally friendly products and higher quality, as well as the pleasure
of all business participants. Because of the large global changes, the companies
are based on efficient use, knowledge, information and managerial skills for the
purpose of gaining profit and creating new value (Rupčić, 2016,2)
It is very important to follow the justification of the costs incurred during
the performance of the management assignments. For the beginning, it is neces-
sary to consider that the costs cannot be completely eliminated, but should be
learned to manage them, using models and methods to optimize costs. Making
all decisions, first and foremost, using various methods of managing and al-
locating costs. For a successful business, companies need to spend their human
resources and others, while paying attention to the costs to gain profitability.
Costs allow a realistic assessment of the company’s performance. Costs repre-
sent resource of consumption for product development. As everyone can spend
and make the money, we look at it as a central economic category, which is an
important factor in managerial decisions. The demands of business processes
that cause the costs are reflection of the overall intent, goals and relationships
in running the business in the company. Costs should always be controlled as it
cannot be avoided but can be successfully managed. In order to make cost esti-
mates and analyses as efficient as possible, it is necessary to focus at the area of
resource cost management. The company should focus on cost control in order

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
to know the underlying conditions in which costs appear, how much they can
and how they can be efficiently managed (Kolar, Koletnik, 2005, 46). Managers
persist to achieve an optimization in efficiency and effective cost management.
In each company, costs are always linked to the portfolio of products and servic-
es, including clients and the responsibilities within the company or managers.
Development of economic science resulted in the division of costs.
The most common criteria for cost sharing are (Belak, 1995, 146):
1. Natural costing:
• Long - term property expenses
• Non - material expenses
• Service Costs

185
2. Distribution of costs by production site (Belak,1995,148):
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

• Costs of production: current expenses such as materials and supplies di-
rectly related to the project, indirect costs
• non - production costs: Administrative expenses, selling expenses
2.1. Cost allocation to bearers (Trcović, 2012, 60)
• Direct costs of products and services
• Indirect cost of products and services
3. Division of costs according to business dynamics (Belak 1995, 154):
• Fixed costs
• Variable costs
• Combination of costs (fixed and variable)
• Discretionary costs
4. Costs from the point of view of the others in comparison and prediction
(Belak,1995,159)
• Standard costs
• Planned costs
• Actual costs
• Average Costs
• Marginal Costs
5. Costs from the point of view of managerial decisions (Belak,1995,164)
• Eligible and unjustified costs
• Remaining and inevitable costs
• Transaction costs
• Opportunity costs
• Competitiveness costs
• Internal cost - cutting costs
6. Costs in regard to the calculation scope (Belak,1995,162)
• Absorbed costs
• Preapsulated costs
• Neutralized or undercapsed costs

186
.. Labour costs
Work is the ability of a man to produce the useful value. For completed work
a worker receives a salary and it represents the labour cost for the employer.
The labour cost is the most important element of assessment and management
according to the elements of the work process. To perform any economic activ-
ity it’s necessary to wear the three fundamental elements of the work process:
labour, objects of labour and means of work.
These items are consumed and their value is the cost of production.
Their wear can be expressed in neutral or money - based indicators (financial
indicators).
A neutral indicator is the consumption that represents the physical expres-
sion of the wear of individual elements (hours of machine operation, quantity
of consumed materials, etc.) The financial statements of the individual work
process elements are the costs. They are also referred to as natural costs because
they appear in each product.
Labour costs are of huge affection to total costs and their size changes due to
the influence of: pay rates, employee qualification structure, labour productivity
and others. The salary level is a fundamental factor of labour costs.
Huge role in the function of the economy has the factor - labour. The divi-
sion into natural types of costs are considered fundamental division of the costs
to which belongs and the cost of work on which will be written in the remain-
der of this paper. Labour costs include compensation of employees (including

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
salaries in cash and in- kind wages, social security contributions), the cost of
vocational training and other expenses (such as employment costs, expenses for
work clothes and taxes on employment, that are considered operating costs net
of received subsidies). These components of labour costs and their elements are
defined by Regulation 1737/2005 of 21.st of October 2005.
From the point of view of labour cost accounting and accounting coverage
labour costs are divided into two groups: (Gulin et al. 2011, 86-87)
1. The first group are the costs of production work - it comprises salaries
and allowances and other payments and benefits to workers who work in pro-
duction departments or related to the production function in a business entity.
In the purpose of monitoring costs, costs of production work are divided
into:

187
• Direct labour costs (direct variable production costs) - can be directly
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

associated with cost bearers. Only that works up is directly related to the
production of the product
• Indirect labour costs (indirect production costs) – can take on the char-
acteristics of the fixed and variable costs. They are deployed through ac-
counting methods to cost carriers but cannot be directly linked to them.
These include tasks of workers who do not work on the production line
itself but in the manufacturing departments of the subject.
2.The second group includes the costs of non - productive labour - there
are salaries and allowances and other benefits that the employer provides to
employees who are not working in the production departments of the business
entity. They decline over the expense of the period and are included in the ex-
penditures in the period in which they were incurred.
Following figure gives clear picture of how labour costs are structured.
Figure 1. Components of labour costs

Source: Eurostat
(http://ec.europa.eu/eurostat/statistics-explained/index.php/Wages_and_labour_costs/hr
(15.03.2018.)

In figure 2. statistical results say as follows:
The average labour cost per hour in the EU-28 group amounted to EUR
25.40 in 2016 and EUR 29.80 in the euro area (EA-19). However, behind this
average there are significant differences between EU member states because la-

188
bour costs per hour range from EUR 4.40 in Bulgaria to EUR 42.00 in Den-
mark. The average was even higher in (50.20 EUR) in Norway.
Labour costs consist of salaries and wage costs, such as social contributions
of employers. The share of expenditures on salaries in total labour costs was
2016 in the EU-28 group of 23% and in the euro area by 26.0%. The share
of costs accruing on wages has also varied considerably among EU member
states. The highest share of wage billing was recorded in France (33.2%), Swe-
den (32.5%), Belgium (27.5%), Lithuania (27.8%) and Italy (27.4%, with the
lowest share recorded in Malta (6.6%), Luxembourg (13.4%), Ireland (13.8%),
Denmark (13.9%) and Croatia (14.9%).(Eurostat,2018)
Figure 2. An estimated hourly labour costs, 2016 (EUR)

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Source: Eurostat
http://ec.europa.eu/eurostat/statistics-explained/index.php/Wages_and_labour_costs/hr
(15.03.2018.)

“The Euro-Plus Pact(EPP), adopted in March 2011, is based on the Open
Method of Coordination (OMC)between the 17 Eurozone members and six
other countries (Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania).

189
Aiming at better economic policy coordination, it focuses on competitiveness,
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

employment and financial sustainability, including a structured discussion on
tax policy issues. It is a new initiative that has been layered onto the existing
EU institutional framework. The EPP specifies objectives that primarily fall
in areas that are under the competence of the Member States including wage
monitoring, labour market reforms, tax reforms, pensions, health care and so-
cial benefits, fiscal rules and banking regulations. In labour market policy, some
objectives touch upon core labour market issues, including decentralising wage-
setting agreements as well as revising wage indexation mechanisms (Barnard,
2012). The EPP penetrates into sensitive national welfare state issues, speci-
fying objectives to a high degree. It is integrated into the European Semester,
where Member States should report on progress made towards the main aims:
surveillance is medium through analysis of progress made to issues that are cen-
tral in the EPP, alongside the assessment of progress made in other processes.
The EPP is voluntary, using the OMC, and surveillance as well as enforcement
is therefore as low as it is for Europe 2020. While each Member State has the
discretion to select their own national measures to achieve the common goals,
and to decide how far-reaching reforms should be, national commitments
should be integrated in the National Reform Programme (NRPs) that are cen-
tral for Europe 2020 and Stability or Convergence Programmes in the frame-
work of the Stability and Growth Pact (SGP). The Commission then assesses
implementation by Member States of ‘EPP commitments’ together with the
assessment of other country specific recommendation (CSRs.) Compared with
the new institutional architecture around the Economic and Monetary Union (
EMU) and even Europe 2020 with its headline targets and flagship initiatives,
the EPP objectives are not likely to make headway via an OMC process, since
they require domestic political commitment.”( de la Porte,Heins, 2015,14).

190
Graph 1. Public expenditure on labour market policies, by type of action
(source: DG EMPL)
% of GDP

Source: http://ec.europa.eu/eurostat/tgm/graph.do?tab=graph&plugin=1&language=en
&pcode=tps00076&toolbox=type (23.03.2018.)

Expenditure on labour market policies (LMP) is limited to public interven-
tions which are explicitly targeted at groups of persons with difficulties in the
labour market: the unemployed, the employed at risk of involuntary job loss
and inactive persons who would like to enter the labour market. Total expen-
diture is broken down into LMP services , which covers the costs of the public
employment service (PES) together with any other publicly funded services for
jobseekers; LMP measures, which covers activation measures for the unem-
ployed and other target groups including the categories of training, job rotation
and job sharing, employment incentives, supported employment and rehabili-
tation, direct job creation, and start-up incentives; and LMP supports , which
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
covers out-of-work income maintenance and support (mostly unemployment
benefits) and early retirement benefits.(Eurostat,2018)

.. Cost management
“Cost management is a special way of managing and running a business that
is the most important in achieving organizational goals, and it provides cost of
an optimization “. (Cingula, Klačmer, 2003,20)
The concept of cost management is the realization of some management
objectives based on optimum cost engagement.
Activities of cost management are (Belak, 1995, 130):

191
• forecasting, planning, budgeting and cost control;
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

• analysis that show the behaviour of the cost, depending on the changing
circumstances in which they were incurred;
• analysis of the cause deviations from the predicted values;
• keeping costs within acceptable limits;
• providing information to managers so that they can choose between alter-
natives in order to achieve optimal economic results
It is also of worth to mention the cost accounting that provides the most
important information for cost management to be successful. Namely, cost ac-
counting provides information needed to manage costs using cost - accounting
methods.
There are numerous of models, or different procedures and methods that
management companies provide information necessary for making different de-
cisions for cost optimization based on fact (Factual approach to decision mak-
ing) (Hele, 2003, 36-40):
• methods of traditional management of production costs
• the model of cost management based on processes
• the model of cost management based on activity
• the model of target costs
• activity - based budgeting
• the achievement balance model
• “Kaizen” costs,
• value analysis
• cost-control model of quality
In managing costs, each model can be used separately, but also in combina-
tion with two or more models.
It should be noted that the cost management should not be seen only from
the traditional approach, share costs only on fixed and variable, and ignore other
costs such as the costs of the activities and products that they have generated.
Such a method could lead to completely misguided routing and allocating costs.
To ultimately reach managers positive outcomes, or succeed in positively
and successfully manage their costs, they need to know the existing overall cost

192
structure of the enterprise in order to know which management models should
be applied. It should be emphasized that the goal of the manager is to optimize
costs (maximizing volume high quality effects to minimize total costs).

2. RESEARCH OF COST OF WORK IN
NKD NATIONAL CLASSIFICATION OF
ACTIVITIES2007 GROUP 08.1QUARRYING OF
STONE, SAND AND CLAY IN CROATIA
This research paper focuses on determining business entities in the group
08.1 – Quarrying of stone, sand and clay in Croatia, their importance in Croa-
tian economy and influence of cost of work on their cost structure. Out of HRK
655 billion revenue, which entrepreneurs which do business pursuant to NKD
2007 classification realized in 2016, share of the total mining and quarrying
amounts to HRK 3 billion, i.e. 0.45%. The entire group 08 realized revenue in
2016 in the amount of HRK 1 billion. These figures clearly show that it is not
a relevant area for Croatian economy, but it is ideal for monitoring cost of work
and its replacement by machine work.
Group 08.1 – Quarrying of stone, sand and clay pursuant to NKD 2007
Pursuant to NKD 2007, group 08.1 – Quarrying of stone, sand and clay
includes (source: URL: https://e-obrt.minpo.hr/dokumenti/nkd2007_s_ob-
jasnjenjima.pdf as at 8 March, 2018)

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
08.11 Quarrying of decorative stone and construction stone, limestone,
plaster, chalk and schist
This class includes:
– quarrying, scabbling and sawing of decorative and construction stone like
marble, granite, sandstone, etc.
– crushing of decorative and construction stone
– quarrying and crushing of limestone
– quarrying of plaster and anhydrite
– quarrying of chalk and non-limed dolomite
This class excludes:
– quarrying of minerals for chemicals and fertilizers

193
– production of burned dolomite
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

– stone cutting, shaping and scabbling outside a quarry
08.12 Activity of gravel pits and sand pits; quarrying of clay and hydro-
silicate clay
This class includes:
– excavating of industrial sand, sand for construction and gravel
– gravel crushing
– sand excavating
– clay, fireclay and hydrosilicate clay excavating
This class excludes:
– excavating of bitumenized sand
It is clearly an industry which is engaged in exploitation of mineral resources
on surface excavations, which includes more or less complex primarily mechani-
cal raw material processing in order to get final product for the market. „Mineral
resources include all organic and neo-organic mineral raw materials which can
be found in solid, liquid or gaseous state in their primary deposits, pits, smelt-
ing slags or natural resolutions” (Mining Act, Article 4). All mineral resources
are owned by the Republic of Croatia. In general, this industry is mostly stipu-
lated by the Mining Act and Concessions Act, as well as by-laws. In order to
create conditions for stabile and regular exploitation of mineral resources on a
specific location, all prior activities have to be carried out, which takes several
years – prior activities and studies, research permit, research work which have
to prove or contest grounds for exploitation, and afterwards obtaining all neces-
sary permits for forming exploitation field and obtaining concession for exploi-
tation (resolving property-law relations, capability proof, environmental impact
studies, mining project, location permit, etc.). Upon obtaining everything that
is necessary, preliminary works start so that exploitation of the target raw mate-
rial could start (e.g. with stone exploitation preliminary works include removing
and disposing of top soil and waste-rock). After all these activities have been
completed and equipment purchased and mounted, all working processes are
defined and work cost can be monitored as something stable and time compa-
rable. Next to legal and time barrier, capital barrier (high cost of initial invest-
ment for starting a business) make this industry considerable risky and not so
attractive for new entrepreneurs. It is necessary to point out that main product

194
consumers are primarily a construction industry, which uses these products
from exploitation as a final product, but also agricultural and chemical industry,
which mostly use products from exploitation as a reproductive material for fur-
ther processing or production of final products with increasing value.

.. Research methodology
Main data resource for this research was a tool SmartVision of the Bisnode
company, which is „a unique macroeconomic tool for monitoring a situation in
Croatian economy”. In fact, this tool uses data which all entrepreneurs in the
Republic of Croatia are legally bound to submit to the Financial Agency on an-
nual basis in the scope of annual financial report. Last available data are from
2016.
With the help of this tool authors chose the group 08.1, and as criteria (fil-
ters) defined the following:
- To present all business entities with a revenue exceeding HRK 10.000,00
in 2016
- To present all business entities with 1 or more employees (because work
costs cannot be analysed if a company doesn’t have any employees)
Companies filtered in such a way represent 97% of income of the group 08.1,
and they certainly make a representative sample for drawing any conclusions.
Table no. 1 shows all these companies given in 2016 and ordered per income
criteria (from the companies with the highest income to companies with lowest
income). Also, we conclude from table no. 1 that selected companies together INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
in 2016 employed 1539 employees, and realized a net profit in the amount of
HRK 76,6 million (profit margin of 7.85%), created new values HRK 274 mil-
lion and paid average monthly gross salary in the amount of HRK 5.777,02, i.e.
average net salary in the amount of HR 4.263,24.

195
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196
Table 1. List of all companies from the group 08.1 per set criteria (in HRK)
197
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

Source: database research: https://www.bisnode.hr/proizvodi/bisnode-smart-vision/
(08.03.2018.)

Research methods which were used here for data processing are comparison
and monitoring.

.. Hypotheses
Main hypotheses which were controlled by this research are the following:
a) Share of the annual gross work cost in respect of annual income is less
than 15% of income
b) Average annual net salary is lower than average net salary in Croatia for
2016
c) The lowest income level per employee which ensures profit in business
operations is HRK 100.000,00 HRK annually or more
d) Entrepreneurs from controlled group with more than 30 employees are
certainly profitable
These hypotheses are tested further in the paper and certain conclusions
were drawn.

198
3. RESEARCH RESULTS
In this chapter research results for each hypothesis will be presented.

.. Share of the annual gross work cost in respect of
annual income is less than  of income
Set hypothesis says that to realize income in the amount of HRK 1, it is
necessary to invest HRK 0.15 or less into work cost for realizing this income.
Namely, due to technological improvement, less work is required, i.e. work cost
is more and more replaced by machine work, and share of work cost has been
decreasing for decades, but this is not the subject of this paper.
Based on given data for sample, annual work cost can easily be calculated for
each employer by multiplying average monthly gross salary and number of em-
ployees, and multiplying that number with 12 months in a year. As a final and
key indicator for this hypothesis, serves the ratio between annual cost of gross
salary and total annual income. Table no. 2 shows all these indicators calculated
for sample.

Table 2. Share of annual cost of salary in incomes for 08.1

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Source: database research https://www.bisnode.hr/proizvodi/bisnode-smart-vision/
(08.03.2018.)

199
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200
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Based on this analysis, it can be concluded that the hypothesis is confirmed.
Namely, all entrepreneurs from the sample had in 2016 total work cost in
the amount of HRK 127,5 million, and share of work cost in the total in-
come was 13.05%. Moreover, it can be noticed that entrepreneurs with higher
income from the upper half of the Table no. 2 have generally lower share of
work cost in the total income than entrepreneurs from the lower half of the
Table, due to better organization and equipment which enables them to realize
more income with the same or less cost.

201
.. Average annual net salary is lower than average net
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

salary in Croatia for 
Based on data provided by Croatian Bureau of Statistics (OG 21/2017,
document number 506, dated 10 March, 2017), average gross salary in legal
entities in the Republic of Croatia in 2016 amounted to HRK 7.752,00, and
average net salary in legal entities in the Republic of Croatia amounted to HRK
5.685,00.
Based on data on chosen sample which were previously described in chapter
2.2, and in which we indicated that entrepreneurs from the sample paid out
average monthly gross salary in the amount of HRK 5.777,02, i.e. average net
salary in the amount of HRK 4.263,24, we have come to the conclusion that
average paid gross salary in entrepreneurs in the sample is by 34% lower
than the state average, and that average net salary is by 33% lower than the
state average.
There is a significant difference, and it is clearly an industry without high
personal income. If annual salary cost of analysed entrepreneurs would be in-
creased by 34%, it would reduce their profit by HRK 42,1 million and average
profit margin would be 3.5%, which would not make this industry very profit-
able (taking into consideration risks and initially necessary significant capital
investments) and probably inactive for entrepreneurs.

.. The lowest income level per employee which ensures
profit in business operations is HRK ., HRK or
more.
To check these hypothesis, it was necessary to calculate income per employ-
ee and profit per employee. Table no.3 shows that and controlled entrepreneurs
are ordered per profit per employee (from the highest to the lowest).

202
Table 3. View of controlled entrepreneurs per profit per employee

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

Source: database research: https://www.bisnode.hr/proizvodi/bisnode-smart-vision/
(08.03.2018.)

203
The Table shows that a profitable entrepreneur with the smallest income per
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

employee realized income in the amount of HRK 54.681 per employee, and
other six entrepreneurs were profitable and had income per employee less than
HRK 100.000,00. This means that the hypothesis was not confirmed.
Furthermore, the Table shows that there is no some general or proportional
rule (e.g. several entrepreneurs with over 1 million incomes per employee oper-
ated with a loss), which is understandable since there are many other factors
(and costs) which have influence on profitability of a company, besides work
costs. By analysing profitable entrepreneurs, their average income per employee
amounts to HRK 533.792,00, and average income per employee amounts to
HRK 78.988,00 (profit margin of 14.8%) which shows that profitable entre-
preneurs realize significantly higher profit margin than risk free interest rate in
Croatia.

. Entrepreneurs from controlled group with more than
 employees are certainly profitable
Main basis for this hypothesis is that entrepreneurs with greater number
of employees evidently know what they are doing, they are properly organized
and equipped and that they use other resources efficiently. By sorting controlled
entrepreneurs per criteria of number of employees, it is immediately evident
that the hypothesis is not correct. Out of 17 entrepreneurs with 30 or more
employees, two entrepreneurs were not profitable. Therefore, we can conclude
that greater number of employees gives bigger chance for profitability of the
company, but it is not the rule. As it was mentioned in previous chapters, other
factor has also an influence on profitability of a company, therefore those other
factors have decided for these two companies.

4. CONCLUSION
Costs are normal consequence of producing effects. In situations when costs
are seriously approaching realised profits, the company management begins to
resort to various methods of cost reduction.
Cost management has a tremendous impact on managerial decision - mak-
ing. In order to be productive and deliver successful management decision, it is
necessary to be minutely coped as well as informed with the existing structure

204
of the organization’s total costs. Cost estimation and management is possible
to realise with different methods. Of course, an accent should be based on cost
optimization. Costs are supposed not to be eliminated, but therefore to be op-
timised. The best combination of costs will enable the highest quality and the
highest production at the lowest possible cost. When the manager draws a line
at last, the most important is the business outcome, that is considered as an ob-
jective benchmark for the company’s success is the relationship between mana-
gerial decision – making.
Planning - adequately structured system - paying attention to the costs
are of the greatest importance to success for each manager. Cost managing of
work is perhaps the most demanding task for entrepreneurs because it influenc-
es to many factors (legal, social, location, traditional, etc.) and one of the must
constantly seek balance between these factors even on a daily basis. Successfully
balanced system definitely assures successful entrepreneurial venture.
Although the costs of labour in some industries are below 15% of revenue
(where the studies have shown for group 08.1 - Extraction of stone, sand and
clay). The fact is, without workers and human capital there is no income, nor
any other costs. Human capital is the starting point for every entrepreneurial
venture, but also for its completion. Likewise, labour costs are the first cost of
every venture, but also its last expense before liquidation.
No matter the fact, how technology intensively changes, production process-
es faster than ever and it is certain that, in the next few decades, it will/would
be possible to eliminate human labour from the cost structure of a branch. Of
INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
course, there will always be possibility for this scenario, but maybe it never hap-
pens. The things are quite clear. The area of research was taken to extract stone,
sand and clay in Croatia, because an average person would say that it was a safe
work-intensive activity, and actually the share of labour costs according to the
latest available data for 2016 “only” 13.05%. Certainly, 30 years ago, the share of
work was closer to 50%, but the time for technology development would not
be repeated. One thing is for sure, an entrepreneur must be more closely moni-
tored and respond to market changes because without that “tomorrow” can do
business with loss and it is well known that a profitable company is “easy” to
make a loser, but it is difficult for a loser to make a successful firm.

205
REFERENCES
Dijana Kozina Vedrana Vukadinović Marko Tadić: THE IMPORTANCE OF MANAGEMENT AND COST ESTIMATION IN MANAGERIAL DECISION MAKING

Books:
Belak, V. (1995): Menadžersko računovodstvo, RRiF, Zagreb
Cingula, M. ,Klačmer M.(2003):Pregled nekih metoda i postupaka upravljanja troškovima,
RRiF, Broj 8, Zagreb
Drljača, M.(2003)Karakteristike troškova kvalitete, Kvaliteta, , Infomart, Zagreb
Gulin, D., Janković, S., Dražić Lutilsky, I., Perčević, H., Peršić, M., Vašiček, V. (2011):
Upravljačko računovodstvo, HZRFD, Zagreb
Hele, J.(2003) :The eight Quality Management Principles – a practical approach, ISO Man-
agement System, Vol. 3, No. 2, Geneva, Switzerland
Kolar, I., Koletnik, F. (2005): Dugoročno upravljanje troškovima poduzeća, RRiF, Vol. 9,
Zagreb
Markovski, S. (1983): Troškovi u poslovnom odlučivanju, Informator, Zagreb
Potnik Galić, K., (2015): Primjena modela ciljnih troškova u analizi upravljanja troškovima,
RRiF, Vol. 7, Zagreb
Rupčić,N.(2016):Upravljačka ekonomija-teorija i praksa,Ekonomski fakultet,Sveučilište u
Rijeci
Trcović, E. (2012): Primjena dodatne kalkulacije u proizvodnji, RRiF, Vol. 7, Zagreb
Živković S., Vrkljan D. (2002.): Površinska eksploatacija mineralnih sirovina, Rudarsko-
geološko-naftni falultet Zagreb

Scientific articles:
Barnard, C. (2012) The financial crisis and the euro plus pact: A labour lawyer’s perspective.
Industrial Law Journal 41(1): 98–114.
de la Porte, C., & Heins, E. (2015). A new era of European Integration? Governance of La-
bour market and social policy since the Sovereign debt crisis. Comparative European
Politics, 13(1), 8-28. DOI: 10.1057/cep.2014.39

Laws:
Zakon o rudarstvu, članak 4., NN 75/2009 iz 30.06.2009.
Objava Državnog zavoda za statistiku, NN 21/2017, broj dokumenta 506, iz 10.03.2017.

Internet site:
https://e-obrt.minpo.hr/dokumenti/nkd2007_s_objasnjenjima.pdf.(08.03.2018.)
https://www.bisnode.hr/proizvodi/bisnode-smart-vision/ (08.03.2018.)

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Eurostat: http://ec.europa.eu/eurostat/statisticsexplained/index.php/Wages_and_la-
bour_costs/hr#Dodatni_podaci_Eurostata)(15.03.2018.)
http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Estimated_hourly_la-
bour_costs,_2016_(EUR)_YB17.png) (15.03.2018.)
http://ec.europa.eu/eurostat/statistics-explained/index.php/Wages_and_labour_costs/
hr (15.03.2018.)
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=tps00076&toolbox=type(23.03.2018.)

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

207
AN ANALYSIS OF THE STATE
OF ATTITUDES OF THE LOCAL
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

COMMUNITY TOWARDS TOURISM
DEVELOPMENT IN THE CITY OF
RIJEKA

Dina ĐELMO SMAJLOVIĆ, mag.oec.
PhD Student, Faculty of Economics in Osijek
Email: ddelmosmajl@gmail.com

Abstract
Starting from the hypothesis that tourism is an economic activity, but also a
way of life in a city, the city of Rijeka, thanks to its historical and cultural sights,
architecture of industrial heritage, recognisable cultural and sports events, can
be grouped among cities that develop urban tourism. In addition to cultural
and historical heritage, Rijeka prides itself on its rich industrial heritage that
needs to be valorised, preserved, transformed, and incorporated in the tourist
offer of the city. Nowadays, this destination is at a specific developmental turn-
ing point and its inhabitants are aware of the opportunities that high-quality
and planned tourism development might bring. Apart from meeting the needs
of tourists, tourism development must at the same time meet ever more com-
plex needs of the domicile population and have a positive impact on the quality
of their lives. Furthermore, in the planning of tourism development in a desti-
nation, it has become common practice to determine the attitudes of the local
population towards its development. Where tourism is not supported, popu-
lation’s resistance to such investments is to be expected. On the other hand,
hospitable hosts are one of the key factors in the forming of overall satisfaction
with the visit, by which they indirectly contribute to word-of-mouth advertising
and encourage revisiting. In view of the above, this paper presents the research
conducted by a survey on the attitudes of the local community regarding tour-
ism development in the city of Rijeka. This analysis of the conducted research
provides an opportunity to discover the strongest positive and negative impacts
of the level of tourism development on the quality of life in the destination of
Rijeka.

208
Key words: tourism, tourism development, tourism policy, city of Rijeka
JEL Classification: Z32, Z38

1. INTRODUCTION
Rijeka has been positioning itself as a city of events and a recognisable desti-
nation of urban tourism. Urban tourism has been gaining significance, because
cities benefit from tourism both economically and socially; it helps preserve cul-
ture and contributes to raising people’s awareness of the need for environmental
protection. Namely, urban tourism is anything that makes the experience beau-
tiful and the stay in the city pleasant. Except for typical tourist infrastructure
such as hotel accommodation, complementary offer or transport, urban tourism
also consists of many interrelated details such as, for example, cleanliness of
the city, decorated facades, marked cultural sights, quality brochures, traditional
cuisine, and enjoyable public spaces. Rijeka is a port, an industrial city, but its
specific combination of the sea and the hills stretching from the Učka mountain
over the hills of Gorski Kotar to the Velebit makes Rijeka one of the most in-
teresting tourist destinations in the world. To the west of the city is the Opatija
Riviera, the oldest and the most elite tourist region of this part of the Adriatic,
and Gorski Kotar nearby provides Rijeka top-quality fresh mountain water and
air. In the vicinity of Rijeka is Platak, the favorite destination of skiers from Ri-
jeka during the winter months. Rijeka is also very close to the Kvarner islands,
Krk, connected with land by a bridge, as well as Cres, Lošinj, and Rab. Rijeka is
very well-connected with the islands and cities along the Adriatic coastline; it
has a bus station, a railway station, and the Rijeka Airport located on the island INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
of Krk. Rijeka is on its way to create a recognisable tourist product due to its
historical and cultural sights, architecture of industrial heritage, recognisable
cultural and sports events. To achieve improvement, current facilities and events
should also include the offer of the entire Rijeka area so that all resources – eco-
nomic, cultural, social – could be economically valorised and have an impact on
the improvement of quality of life in all segments of the city.

209
2. CHARACTERISTICS OF RIJEKA AS A
DESTINATION
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

Rijeka is the administrative centre of the Primorje-Gorski Kotar County.
Back in the 19th century, the city developed into one of the largest Central
European ports and a large industrial centre, conditioned by its favourable geo-
graphic position as well as depth of the sea in the bay. Rijeka, a city and port
in the Bay of Rijeka, is located on the north part of the coastline of the Bay of
Kvarner, deeply embedded in the mainland. Due to its connections with the
hinterland, modern port devices and strong maritime and trade tradition, it is
fair to say that Rijeka has developed into the largest port in Croatia. It is a city
with a specific combination of the sea and the hills stretching from the Učka
mountain over the hills of Gorski Kotar to the Velebit. On the west of Rijeka
is the Opatija Riviera, the oldest Croatian tourist region, while the Crikvenica-
Vinodol Riviera is on the other side. The most preserved part of the country,
Gorski Kotar, provides Rijeka with top-quality potable water and clean air. In
the vicinity of Rijeka is Platak, the favorite destination of skiers from Rijeka
during the winter months. Rijeka is also very close to the Kvarner islands, Krk,
connected with land by a bridge, as well as Cres, Lošinj, and Rab. Rijeka is very
well-connected with the islands and cities along the Adriatic coastline; it has
a bus station, a railway station, and the Rijeka Airport on the island of Krk.
With its interesting cultural life, historical and cultural heritage, its position and
Mediterranean flair, the City of Rijeka definitely complements the rich tourist
offer of the entire Kvarner Riviera. Proof of its rich history are numerous mon-
uments, churches, squares, and other cultural heritage. The Rijeka coastline of-
fers a variety of sports events such as regattas, spear-fishing, swimming, water-
polo, while the surrounding hills and mountains offer the possibility of hiking,
hunting, and excursions. Although Rijeka has not developed beach and leisure
tourism due to its strong industrial history, it is fair to say that it has been po-
sitioning itself as an urban tourism destination. Cultural, historical and indus-
trial heritage are the reason of successful development of this form of tourism.
The main problem is lack of accommodation facilities. However, this problem
can be solved by reconstructing the old and constructing new accommodation
facilities. Except for its cultural and historical heritage, the City of Rijeka is
also marked by exceptionally valuable and unique industrial heritage. Lately,
there have been attempts to present the industrial heritage in a new way; it has
become an important element of the city’s tourist offer. Due to its favourable

210
Mediterranean climate, growing inclusion of the local population, their kind-
ness and hospitality, more and more tourists have recognised Rijeka’s potential
as a future tourist destination (Dujmović, 2014, p.133).
The arrivals and overnights in the City of Rijeka have been continuously
increasing. Numerous events taking place in the city all year round, better trans-
port connections, reconstruction of current accommodation facilities and in-
crease in accommodation quality, as well as opening of new accommodation
facilities, especially in private accommodation, have surely contributed to this
trend. An important factor is also Rijeka’s re-orientation towards urban tour-
ism. Development of accommodation facilities in the City of Rijeka is the basis
for achievement of positive tourist results year after year. In 2016, the City of
Rijeka had 2.680 average available beds. In comparison with 2013, when there
were 2.141 average available beds, the increase is 25,18%. (https://www.rijeka.
hr/ accessed on 15/03/2018).

Table 1. Overview of the number of beds according to structure for the City of
Rijeka in the period 2013-2016
No. CATEGORY 2013 2014 2015 2016
1. HOTELS 554 554 554 554
2. HOSTELS 448 429 424 467
3. PRIVATE ACCOMMODATION 411 573 739 1263
4. CAMP 350 350 350 -
5. GUESTHOUSES 370 378 392 396
6. STUDENT COMPLEX - 116 - -

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
TOTAL 2141 2400 2459 2680
Source: Rijeka Tourist Board data (information on tourism indicators in the City of Rijeka
and investment of the City of Rijeka in the development of the tourist destination
from 2013 to 2016)

In 2016, four hotels opened with 554 beds, two guesthouses with 396 beds,
16 hotels with average 467 beds and private accommodation with 325 accom-
modation facilities and 1263 beds. In the past four years, stable progress has
been made in increasing the number of beds, and there is noticeable continua-
tion of trends of structural changes in accommodation facilities. The largest in-
crease in the number of beds was recorded in the category of private accommo-
dation, which grew over 3 times in the observed period in relation to the base
year 2013. Private accommodation also holds the largest share of 47,13% and

211
has become a predominant type of tourist accommodation in the City of Ri-
jeka. Hotels hold the share of 20,67% in the total number of beds, followed by
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

hostels with 17,43% of the share, while guesthouses kept their share of 14,78%.
The performance of each tourist destination is monitored primarily through
realised tourist arrivals and overnight stays. These are the indicators represent-
ing a combination of factors such as current tourist offer and accommodation
infrastructure, and it is an important indicator of current trends followed by
domestic and foreign visitors. The achieved annual results in the City of Rijeka
indicate growth trends and exceptional resilience of tourism as an economic
activity.
The number of overnights is closely related to the number of arrivals of do-
mestic and foreign tourists and also shows a positive multi-annual growth trend
for the City of Rijeka.

Table 2. Overview of the realised arrivals of domestic and foreign visitors for
the period 2013-2016
ARRIVALS INDEX
YEAR
Foreign Domestic Total Foreign Domestic Total
2013 58646 17653 76299 111 106 108
2014 69541 21176 90717 118 120 119
2015 82288 23768 106056 118 112 123
2016 90233 24514 114747 110 103 121
Source: Rijeka Tourist Board data (information on tourism indicators in the City of Rijeka
and investment of the City of Rijeka in the development of the tourist destination
from 2013 to 2016)

Every year in the observed period, foreign tourists realised an increased num-
ber of overnights in relation to the previous year. Annual percentage growth in
foreign tourists’ overnights ranged from 10% to 26%. An identical trend is evi-
dent in case of domestic tourists whose number of overnights increased from
33.521 in 2013 for as much as 56,90% to 52.595 realised overnights in 2016.
The cumulative result of positive trends indicates that the growth rate of the
total realised number of overnights in Rijeka area was at very high 21,58% per
year in 2016, which clearly indicates increased attractiveness of the city as a
tourist destination. The total number of overnights increased from 146.177 to
260.558 overnights (78,24%).

212
.. Advantages of tourism development in Rijeka
The idea of connecting mountain and sea tourism of the Kvarner and its hin-
terland appeared already in 1960. A study had been made according to which
the plan was to connect the Kvarner Riviera, Grobnik Field, Platak, Snježnik,
that would connect the region of Gerova through Lazac (Matejčić, 2007, p.33).
The plan was also to connect the Risnjak National Park through this project,
and this concept was called “Planimor”, derived from “Platak-Rijeka-More”
(Cro. more = sea) or Platak_Risnjak-More or “Platak-Lazac-Risnjak-More”
with other possible combinations. (Tumara & at.al.; 2000, p.335-345). The
world-famous Carnival of Rijeka attracts many visitors to Rijeka. It is one of the
five most famous carnivals in the world, attracting growing number of domestic
and foreign tourists every year. Rijeka has lately been developing congress tour-
ism with the accompanying offer. Congress tourism is a specific form of tourism
in which the main travel motive is not vacation, but participation of individuals
in different kinds of conferences. Although congress tourism travels are in the
domain of business travels that are often obligatory and conditioned by a work-
place, a task or a project, all tourist countries gladly group these travellers among
tourists, adding revenues from congress tourism to total tourism revenues. By
developing urban tourism, the City of Rijeka aims to improve the city’s tour-
ist offer, encourage development of a variety of tourist products and services,
increase employment and prolong the tourist season, by which also improve
the development of congress tourism. Except for congress tourism, Rijeka has
also positioned itself as a cruise destination (Lukežić, 2005, p. 131). By build-
ing and arranging the Rijeka’s passenger terminal, Rijeka placed itself on the
map of cruising destinations; the first cruise ships arrived at the port in 2011. INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Another advantage is also the traditional “Fiumanka Regatta” taking place in
the Kvarner Bay on the occasion of celebration of the patron saint of the city,
St. Vitus. The regatta has become a sort of a brand over the years, the so-called
„sea and sailing holiday “. Rijeka is also famous for its races at the Grobnik Field.
Growing number of racers, tourists from Europe and all around the world visit
the “Grobnik Automotodrome”, at which trainings, tests or special events take
place on a daily basis. This destination is marked by its rich cultural and histori-
cal heritage, different architecture, religion, sports, culture, and urban lifestyle.
While its cultural and historical heritage has not been adequately presented nor
valorised through tourism, the City of Rijeka presents its industrial heritage
in a very valuable and unique manner (Lukežić, 2009, p.86). The first Rijeka

213
industries, such as the Torpedo factory, paper factory, and sugar factory are only
some of them. There have been attempts lately to present industrial heritage
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in a new way; it has become a significant element of the city’s tourist offer. In
the period of deindustrialisation of cities, the tertiary sector has grown, entre-
preneurship has become stronger, and cities have entered a new development
cycle of significantly different characteristics than typically industrial. In this
transition phase, a strong shift towards tourism cannot be expected, because
of the barriers – objective factors, i.e. lack of tourism supra-structure, but also
subjective factors, i.e. lack of awareness of the population that tourism may be
important for economic and social development of the city.

.. SWOT analysis of the City of Rijeka
As one of qualitative methods, SWOT analysis indicates key strengths,
weaknesses, opportunities and threats based on strategic review. Managers need
to identify the main opportunities for their company or destination. The pur-
pose of this analysis is to force the management to predict important events that
might have an impact on the company. Strengths and weaknesses do not include
all the characteristics of the company or destination analysed, but only those
strengths and weaknesses that have the most important impact on their perfor-
mance. Strengths and weaknesses are measured in relation to the competition.
The analysis can be used in the assessment of adequacy of spatial and market
preconditions for tourism development in the area or adequacy and state of the
current offer in relation to demand, as well as specific marketing research, etc.
It should be noted that it is a subjective assessment of ratings of the elements
of the analysis, without utilising the necessary analytical and methodological
instruments.

214
Table 3. SWOT analysis of the City of Rijeka
STRENGTHS (+) WEAKNESSES (-)
Rich cultural and historical heritage Lack of accommodation facilities and low quality of the
Offer of traditional events existing ones
Quality gastronomy Lack of parking spaces
Authenticity of the city Arranged beaches and promenades
Geo-traffic position, accessible by land, sea, air Insufficient promotion
Preserved tradition, historical heritage Lack of amenities that would increase consumption
Variety of offer Destination management
Unique event locations
Good transport connections
Industrial heritage
Climate
Human resources
Hospitality
Attractive natural resources

OPPORTUNITIES (++) THREATS (--)
Prolongation of the tourist season Competition of the neighbouring destinations
Investment in accommodation facilities Recession
Promotion of local cultural identity Bad weather
Creation of a competitive tourist offer Environmental issues
Conversion of industrial heritage buildings
Improvement of existing products
Sustainable development
Possibility of congress tourism development
Source: Author’s proposal INTERDISCIPLINARY MANAGEMENT RESEARCH XIV

The above SWOT analysis of the City of Rijeka identifies strengths and
weaknesses of the current state of the City of Rijeka, i.e. its current business
activities and management. It also presents opportunities and threats that could
occur in future business activities of the city. Urban tourism has become a very
significant motive of arrival to a certain destination in the modern tourist offer.
Research have confirmed that various events attract mass arrivals of tourists,
which has motivated tourist destinations to organise growing number of fes-
tivals, mega-spectacles, sports events, especially those related to tradition, local
customs and culture. The existence of tourism resources and attractions is no
longer sufficient; they should be linked with recognisable storytelling events,
i.e. something that will attract attention and raise expectations and make this

215
cultural, entertaining, sports, or another event a priority in their travel itiner-
ary. The City of Rijeka offers such events. It can be concluded that the City
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

of Rijeka organises profitable events such as “Rijeka Summer Nights”, “Rijeka
Carnival”, “St. Vitus’ Days”, etc., not only for the organisers, but also inhabitants
of Rijeka. Rijeka offers events that attract a great number of visitors from other
parts of Croatia and this also has an impact on booking private accommodation
during various events. Private accommodation is a very broad term that im-
plies all the possibilities for accommodation of guests from target markets who
are looking for social interaction with the local population. This target group
seeks authentic environment that offers more possibilities for contact with lo-
cal population during the vacation. This target market needs, through various
types of accommodation (rooms, apartments, vacation houses, etc.), an offer of
local customs and active inclusion; they should have the opportunity to learn
about lifestyle specificities, especially with local cuisine and gastronomy. Also,
numerous events in Rijeka are a synonym for recognisable and unique tradi-
tional offer. One of the strengths of the City of Rijeka is quality gastronomy
that includes home-made and traditional delicacies and dishes. Because of all
advantages of the City of Rijeka, disadvantages, i.e. weaknesses are negligible,
but should nevertheless be considered. Naturally, due to increased number of
people, each event creates a problem of waste and waste management. They
also cause traffic jams and lack of parking spaces. One of the weaknesses is
also insufficient number of promotional materials such as various brochures in
tourist centres. Also, greater investment is needed in the promotion of “Rijeka
Summer Nights” and “St. Vitus’ Days” as the most renowned events in the city
of Rijeka, in the entire country and in the foreign market, so they could also
become popular outside of Rijeka and the Primorje-Gorski Kotar County. One
of the limitations in the organisation of events that cannot be influenced is bad
weather. This is very important because events in Rijeka are mostly open-air,
on the one hand due to lack of auditoriums and other spaces, but on the other
hand, because of authentic open-air environment in which each event creates a
unique experience. Since advantages are more significant than disadvantages, it
is concluded that the events are very profitable in the city of Rijeka, not only in
financial terms, but also in terms of meeting the needs of guests and more atten-
tion should be devoted to events in the future. It can be concluded that the City
of Rijeka has the most strengths, that it is an interesting location with a qual-
ity offer, such as various events and festivals. The analysis has also shown that
the City of Rijeka has numerous opportunities that should be used to extend

216
the offer and make it available year-round, to increase booking of accommoda-
tion facilities and develop new forms of the offer such as congress tourism and
improve the existing services. The main weaknesses of the City of Rijeka are
reflected in shortage and low quality of accommodation facilities and lack of
parking spaces, especially during events. Threats that cannot be influenced are
recession and bad weather that is often a problem during the summer months
when open-air ambience events are organised. Environmental issues that could
happen could be for instance problems with LNG-terminal Krk gas hub for
Central and South-eastern Europe.

3 ATTITUDES OF THE LOCAL POPULATION
TOWARDS TOURISM DEVELOPMENT IN
RIJEKA  RESEARCH RESULTS
In the planning of tourism development in a destination, it has become
common practice to determine the attitudes of the local population towards its
development. Where tourism is not supported, population’s resistance to such
investments is to be expected. On the other hand, hospitable hosts are one of
the key factors in the forming of overall satisfaction with the visit, by which they
indirectly contribute to word-of-mouth advertising and encourage revisiting.
The primary purpose of this paper is to include local population and analyse
their attitudes towards tourism development of Rijeka. This analysis provides
the opportunity to detect positive and negative impacts of the level of tourist
development on the quality of life that are most pronounced in the destina-
tion of Rijeka. For the purpose of this paper, a survey was conducted of the INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
local population of the city of Rijeka in the period from 1 to 25 March 2018.
Full data processing and analysis were conducted on the sample of 100 respon-
dents who have anonymously wanted to participate in the survey. The main
objective of the research was obtaining reliable and latest basic information on
the attitudes of local population towards elements of the offer in the tourist
destination and impacts of tourism. The obtained research results will help es-
tablish the characteristics of the tourist offer in the destination of Rijeka and
continuous monitoring of trends in a longer period of time. The basic instru-
ment of data collection in the research were questionnaires. The first part of the
questionnaire includes questions specific for satisfaction of the population with
the elements of the offer in the tourist destination, while the second part of the

217
questionnaire is related to the assessment of the mentioned impacts of tourism.
The personal interview method was mostly used in the collection of data. Since
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

starting points are based on real issues and modern trends, the results of this
research should provide users a theoretical background, but also relevant practi-
cal answers, which will ensure higher level of effectiveness in tourism activities.
The results of this research should also encourage tourism policy makers to im-
prove the organisation of tourism in the city of Rijeka as well as create the best
destination image possible. Attitudes of the local population can surely change
the current image of Rijeka as a tourist destination, i.e. help in the creation of a
recognisable offer and to stand out on the highly competitive market.

Table 4. Age of the interviewed population
Age (%)
16* – 25 25
26 – 35 27
36 – 45 19
46 – 55 15
56 – 65 14
66 and more 0
TOTAL 100
Source: Data analysis according to filled-in questionnaires, * randomly selected popilation

Age is very important because of different reactions and perception of dif-
ferent tourism phenomenon’s by different segments. The analysis established
that most respondents are aged 26-35 (27%), followed by 16-25 (25%), 36-45
(19%), 46-55 (15%), 56-65 (14%), and the population over 66 (0%). The struc-
ture shows that the questionnaire was filled in by younger population (52%
of the population younger than 35 was interviewed), which can deviate the
real image of satisfaction of the population with elements of the tourist offer.
Younger population prefers different forms of fun and experiences, while older
population is focused on a more peaceful way of coexistence with tourists. Re-
garding the gender of survey respondents, there were somewhat more women
among the respondents (56%) than men (44%).In all completed questionnaires
were not found population at age 66 which tells researchers that were not inter-
ested in anonymous research.

218
Chart 1. Occupations of the interviewed population



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(P
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R DFWLYLWLHHV

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 3HHQVLRQHU KRX
XVHZLIH
6WWXGHQW SXSLO

Source: Data processing according to filled-in questionnaires

The analysis has shown that only 6% of the population is directly employed
in tourism, while 56% is employed in other activities. The rest of the inter-
viewed population are students and pupils (17%), the unemployed (16%), and
pensioners and housewives (5%). The data show that only 62% are working-age
population, while 38% are students, the unemployed and pensioners. The oc-
cupation analysis is important, because people in different occupations have a
different understanding of tourism phenomenon.

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
Furthermore, the majority of the interviewed population graduated from
a college or university (54%), followed by secondary school graduates (43%).
The population who have completed primary school or with basic qualification
participated with 1%, while 2% of the population are highly educated masters
and PhD holders. Education structure should be examined because different
profiles of the population have different attitudes towards tourism. Knowledge
and human resources are one of imperative competitive advantages of this tour-
ist destination that should be encouraged and systematically improved. For
successful tourism development, qualitative trends in tourism management are
a necessity. The interviewed population defined the responsibility of tourism
management in the destination and assessed the performance of the tourist
board in the destination. The population believes that the tourist board is the

219
most responsible for the quality of tourism management (56%), followed by
state administration (23%), commercial management (15%), and other (6%).
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

The results indicate relatively small significance of commercial management
that should be the main generator of changes and agent of development of the
tourist destination, in this case the City of Rijeka. Since the population deems
the tourist board the most responsible for destination development, their atti-
tude on the performance of the tourist board should be analysed. Thus, 45% of
the population assessed the insufficient work of tourist board Rijeka, 43% posi-
tive, and 12% negative, which means that tourist board of Rijeka doesn’t do to
much effort to improve development destination of Rijeka. It can be concluded
that there is a thin line between positive and negative attitude of the population
on tourist board performance in the City of Rijeka. Interaction of local manu-
facturers and caterers in the creation of a quality offer for tourists is important
for destination development. In each tourist destination, including Rijeka, tra-
ditional products should be included in the tourist offer and make it unique.
Traditional, local elements should be used to surpass the standard offer and
achieve a competitive advantage. The population (51%) believes that traditional
products are insufficiently included in the tourist offer and that they should be
more promoted, thinking that traditional products might be more emphasized
as part of the offer in destination’s offer, while 30% of the population believes
that the products are sufficiently included, and 19% deem this unsatisfactory.
The example of insufficient use of traditional products is lack of original souve-
nirs and offer of quality wines, which the population mentioned in the remarks.
The population has a similar opinion in terms of satisfaction with the tourist
offer that is also used by local population. 45% of the population deems that
they have been insufficiently included, followed by sufficiently included (29%),
and unsatisfactory (26%). The conclusion can be derived that there should be
more promenades, cycling routes, and sports facilities that can be used both by
the local population and tourists. Also, the survey has shown that industry has a
negative impact on tourism development in Rijeka. The population agrees that
the destination has been partially threatened by industrial development (39%),
37% of the population gave a positive answer, while 24% think that tourism is
not threatened by industrial development. Except for industry, saturation of
space i.e. excessive building on the coast is also a problem in the destination.
More than half of the respondents, 55% of the population, thinks that the City
of Rijeka is not threatened by excessive building. 31% of the population thinks
that the destination is partially threatened, while 14% thinks that the destina-

220
tion is threatened by the construction of apartments and flats, which is not
in line with the general image and perception of this problem in the public.
Whether due to industry or some other negative factors that the destination
is trying to improve, as much as 57% of the population thinks that Rijeka has
not exceeded its carrying capacity during the summer months, while 17% of the
population believe the contrary. 26% of the population think that the destina-
tion is partially overcrowded with tourists during the summer months, which
affects the quality of their stay. The population is unsatisfied with dissemina-
tion of information and inclusion in decision-making in tourism. Since they are
an important factor in tourism activities, they have to be the imperative factor
in decision-making. Destination development must be based on the synergy of
the tourist destination and local population. As much as 66% of the popula-
tion believe they need to be informed and included in decision-making, 33%
believe that they should be partially included, and only 1% believe the contrary.
Local population has a positive attitude towards tourism development and the
destination (70%), negative attitude (29%), and neutral attitude (1%). It can be
concluded that, except for positive attitude towards tourism development in Ri-
jeka, a large part of the population has no opinion on tourism development, i.e.
has a neutral attitude. The population should be included in public activities in
the function of tourism, be informed and included in the making of important
decisions in tourism to form a positive attitude in the future, without negative
and neutral attitudes.
Survey of the local population indicated strengths and weaknesses of the
tourist offer of Rijeka. The population provided their opinion by marking 1 as
the worst to 7 as the best the following elements: space, resources and the envi- INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
ronment, facilities, destination organisation, recognisability, safety and informa-
tion level, population, and employees.

221
Table 5. Satisfaction of the population with elements of the tourist offer of the
City of Rijeka
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

10 elements of the tourist offer with which 10 elements of the tourist offer with which the
the population are satisfied the most population are satisfied the least
1. Beautiful landscape 6.10 1. Parking spaces 3.14
2. Climate 5.55 2. Crowded beaches 3.14
3. Historical and cultural heritage 5.21 3. Health tourism facilities 3.41
4. Local gastronomy 5.08 4. Price-quality ratio 3.79
5. Cleanliness of the sea 5.04 5. Foreign language skills of employees in tourism 3.80
6. Arrangement of the destination 4.96 6. Souvenirs 3.82
7. Preserved environment 4.94 7. Facilities for children 3.86
8. Events 4.90 8. Conferences and congresses 3.88
9. Shops 4.87 9. Tourist signalisation in the destination 4.02
10. Kindness of employees in tourism 4.77 10. Arrangement and cleanliness of beaches 4.04
Source: Data processing according to filled-in questionnaires

The table shows 10 elements of the tourist offer of the City of Rijeka with
which the population are satisfied the most and 10 elements with which the
population are satisfied the least. The table shows that the population are most
satisfied with the beautiful landscape, climate, and historical and cultural heri-
tage. The population are very unsatisfied with parking spaces and crowded
beaches; these two elements were rated lowest, i.e. identically, but health tour-
ism facilities were also rated lowest. It can be concluded that the elements rated
highest by local population should be pointed out and that their potentials
should be recognised, while the elements rated lowest should be improved and
great efforts should be made to correct these weaknesses. Destination devel-
opment should be based on the synergy of the tourist destination, all tourist
suppliers, and local population. Furthermore, tourism significantly changes the
life of the local population, whether in a positive way, by improving the quality
of life in the destination, or negative, by negative impacts on the quality of life
of the population. The total assessment of the local population of the level of
tourism development consists of 30 indicators. These criteria can be classified
into positive and negative impacts.
Theses of the a positive impact of tourism on the quality of life of the lo-
cal population are: current tourism development has significantly improved
the population’s standard, local population should be included in the adoption
of tourism development plans, tourism development has increased the level of
kindness of the population, benefits from tourism exceed the accompanying

222
negative aspects, tourism development has increased the construction and qual-
ity of recreational facilities also available to the local population, tourism has a
positive impact on the arrangement of roads and parking spaces, tourism has
encouraged investment in infrastructure, tourism development has improved
the appearance and arrangement of the destination, the population are satis-
fied with the manner of planning of tourism development of the destination,
the interest of tourists has encouraged revitalisation of customs and traditional
activities of the local population, tourism influences changes in the behaviour of
the population, tourism helps preserve cultural identity and heritage, tourism
significantly changes traditional culture of the population and system of val-
ues, encounters with tourists promote intercultural exchange, by creating jobs
and generating income, tourism has an impact on the improvement of social
welfare of the population, the population changes occupations and becomes
more oriented to tourism-related occupations, tourism has already significantly
improved the state of economy in the destination, the population has been ad-
equately informed of the possibilities of entrepreneurial activities in tourism.
Theses of a negative impact of tourism on the quality of life of the local
population are: the population’s safety has been jeopardised by tourism devel-
opment, increase in tourist traffic will cause traffic jams, growing number of
tourists will cause animosities between the local population and tourists, con-
tacts between the population and tourists are a potential health hazard, tourism
will encourage increase in taxes and other levies, tourism has an impact on the
rise of organised crime, tourism significantly increases traffic problems in the
destination, the destination records significant increase in noise, tourism has
caused more waste on the streets, Few inhabitants enjoy economic benefits from INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
tourism.

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Table 6. The population’s assessment of the level of tourism development and
its impact on quality of life
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

POSITIVE IMPACTS OF TOURISM ON QUALITY OF LIFE
Arithmetic
Assessment
mean
Current tourism development has significantly improved the population’s standard. 4.65
Local population should be included in adoption of tourism development plans. 5.33
Tourism development has improved the level of kindness of the population. 4.78
Benefits from tourism exceed the accompanying negative aspects. 4.54
Tourism development has increased construction and quality of recreational facilities also available
4.72
to the population.
Tourism affects arrangement of roads and parking spaces. 4.89
Tourism has encouraged investment in infrastructure. 5.04
Tourism development has improved the appearance and arrangement of the destination. 5.64
The population is satisfied with the manner of planning of tourism development of the destination. 4.20
Interest of tourists has encouraged revitalisation of customs and traditional activities of the local
5.71
population.
Cultural events have been improved due to tourism. 5.21
Tourism significantly changes traditional culture of the population and system of values. 3.62
Encounters with tourists promote intercultural exchange. 4.68
By creating jobs and generating income, tourism affects the growth of social welfare of the
4.98
population.
The population changes occupations and becomes more oriented on tourism-related occupations. 4.38
Tourism has significantly improved the economy of the destination. 4.51
The population has been adequately informed on the possibilities of entrepreneurial activities in
3.66
tourism.
NEGATIVE IMPACTS OF TOURISM ON QUALITY OF LIFE
Tourism development had jeopardised safety of the population. 2.95
Increase in tourist transport will result in crowds at significant facilities. 4.43
Growing number of tourists will cause animosities between the local population and tourists. 2.65
Prices grow due to tourism development, which causes a negative reaction of the population. 4.17
Contacts between tourists and the population are a potential health hazard. 2.48
Tourism will encourage increase in taxes and other levies 3.96
Tourism has an impact on the rise of organised crime. 3.73
Tourism significantly increases traffic problems in the destination. 4.99
The destination records a significant increase in noise. 4.28
Tourism has caused more waste on the streets. 3.63
Few inhabitants enjoy economic benefits from tourism. 3.96
Source: Data processing according to filled-in questionnaires

224
A majority of the local population agrees the most with the following positive
impact of tourism development on quality of their life: interest of tourists has
encouraged revitalisation of customs and traditional activities of the local popu-
lation (5.71), tourism development has improved the appearance and arrange-
ment of the destination (5.64), local population should be included in adop-
tion of tourism development plans (5.33). The following were assessed worst
elements: the population has been adequately informed of the possibilities of
entrepreneurial activities in tourism (3.66), the population is satisfied with the
manner of planning of tourism development of the destination (4.20), the pop-
ulation changes occupations, and becomes more oriented on tourism-related
occupations (4.38). The local population agrees the most with the following
theses on the negative impact of tourism on quality of life of the local popula-
tion: tourism significantly increases traffic problems in the destination (4.99),
increase in tourist traffic will result in crowds at significant facilities (4.43), the
destination has recorded a significant increase in noise (4.28). The population
agrees the least with the following negative elements: contacts of tourists and
the population are a potential health hazard (2.48), growing number of tourists
will cause animosities between the local population and tourists (2.65), tourism
development has jeopardised the population’s safety (2.95). Local population
differently assessed the level of tourism development and its impact on quality
of life in the tourist destination of Rijeka. The analysis provides the opportunity
to identify which positive and negative impacts of the level of tourism develop-
ment on quality of life are most pronounced in the tourist destination of Rijeka.
The population’s assessments on the level of tourist development and its impact

INTERDISCIPLINARY MANAGEMENT RESEARCH XIV
on quality of life enables analysis of the current state of the level of impact of
tourism development on quality of life of the local population in the observed
destination, and the starting point for tourism development aiming to point out
the positive impacts and limit the negative impacts of tourism on quality of life
of the local population. The local population must be included in and informed
about making of important decisions in tourism in the observed destination. It
is important to manage changes in the tourist market, consider strong competi-
tion and point out the positive impacts of tourism development on quality of
life of the local population and avoid the negative impacts.

225
4. CONCLUSION
Through tourism development, the City of Rijeka has established recogni-
Dina Đelmo Smajlović: AN ANALYSIS OF THE STATE OF ATTITUDES OF THE LOCAL COMMUNITY TOWARDS TOURISM DEVELOPMENT IN THE CITY...

sability of the tourist destination, transformed into a recognisable destination
of unique experiences and events created as a combination of urban rhythm,
culture, and tradition. Tourism development in the City of Rijeka includes de-
velopment of all its segments such as sports tourism, religious tourism, and
cultural tourism. Taking into account rapid change of tourist trends, new de-
mands of modern tourists and opening of new tourist markets, it is necessary
to continuously monitor the existing facilities and complement all activities re-
lated to culture, sports, entertainment, and catering that make the tourist offer
of the city with new facilities. In the planning of tourism development in the
destination, it has become common practice to determine the attitudes of the
local population towards its development. The indicator shows the level of sat-
isfaction of the local population that is directly or indirectly affected by tourism
development. In this research, the local population positively assessed tourism
development in the City of Rijeka. The population have provided their opinion
on the performance of the tou