Vol. 20, No. 4 - Ekonomski fakultet u Subotici

Transcription

Strategic Management
International Journal of Strategic Management and
Decision Support Systems in Strategic Management
www.ef.uns.ac.rs/sm
Publisher
University of Novi Sad, Faculty of Economics in Subotica
Segedinski put 9-11, 24000 Subotica, Serbia
Tel: +381 24 628 000
Fax: +381 546 486
http://www.ef.uns.ac.rs
For Publisher
Nenad Vunjak, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Editor-in-Chief
Jelica Trninić, University of Novi Sad, Faculty of Economics in Subotica, Serbia
National Editorial Board
Esad Ahmetagić, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Jelena Birovljev, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Jovica Đurković, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Nebojša Janićijević, University of Belgrade, Faculty of Economics Belgrade, Serbia
Tibor Kiš, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Božidar Leković, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Vesna Milićević, University of Belgrade, Faculty of Organizational Sciences, Serbia
Aleksandar Živković, University of Belgrade, Faculty of Economics, Serbia
International Editorial Board
Ilona Bažantova, Charles University in Prague, Faculty of Law, Czech Republic
André Boyer, University of Nice Sophia-Antipolis, France
Ivan Brezina, University of Economics in Bratislava, Faculty of Economic Informatics, Bratislava, Slovakia
Ferenc Farkas, University of Pécs, Faculty of Business and Economy, Hungary
Agnes Hofmeister, Corvinus University of Budapest, Faculty of Business Administration, Hungary
Pedro Isaias, Open University Lisbon, Portugal
Novak Kondić, University of Banja Luka, Faculty of Economics, Banja Luka, Bosnia and Herzegovina
Mensura Kudumović, University of Sarajevo, Faculty of Medicine, Bosnia and Herzegovina
Vujica Lazović, University of Montenegro, Faculty of Economics, Podgorica, Montenegro
Martin Lipičnik, University of Maribor, Faculty of Logistics Celje-Krško, Slovenia
Pawel Lula, Cracow University of Economics, Poland
Emilija Novak, West University of Timisoara, Timisoara, Romania
Elias Pimenidis, University of East London, England
Vladimir Polovinko, Omsk State University, Russia
Ludovic Ragni, University of Nice Sophia-Antipolis, France
Kosta Sotiroski, University „ST Kliment Ohridski“ Bitol, Faculty of Economics Prilep, Macedonia
Ioan Talpos, West University of Timisoara, Faculty of Economics, Romania
Assistant Editors
Marton Sakal, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Vuk Vuković, University of Novi Sad, Faculty of Economics in Subotica, Serbia
Lazar Raković, University of Novi Sad, Faculty of Economics in Subotica, Serbia
English translation
Željko Buljovčić
Zora Trninić
Institut za strane jezike ad Beograd
Proofreading
Prepress
Print
BIROGRAFIKA MB doo, Subotica, Serbia
Circulation
200
The Journal is published quarterly.
ISSN 1821-3448, UDC 005.21
Strategic Management is a quarterly journal addressing issues concerned with all aspects of strategic management. It is devoted to the improvement and further development of the theory and practice of strategic
management and it is designed to appeal to both practicing managers and academics. Specially, Journal publishes original refereed material in decision support systems in strategic management.
Thematic Fields

Mission and Philosophy of the Organization

Culture and Climate of the Organization

Effectiveness and Efficiency of the Organization

Structure and Form of the Organization

Strategic Analysis

Aims and Strategies

Process of Strategic Management

Characteristics of Strategic Management in the New Economy

Contemporary Ontological, Epistemological and Axiological Suppositions on the Organization and its
Environment

Analysis of the Organization and its Interaction with the Environment

Structure and Dynamics of the Organizational Environment

Uncertainty and Indistinctiveness of the Organizational Environment

Synchronic and Diachronic Analysis of the Organizational Environment

Analysis Techniques of the Organization

Business Processes, Learning and Development within the Context of Strategic Management

Evaluation and Measuring of the Potential and Realization of the Organization within the Context
of Strategic Management

Strategic Control in Contemporary Management

Information Technologies in Strategic Management

Business Intelligence and Strategic Management

Decision Support Systems and Artificial Intelligence in Strategic Management
All scientific articles submitted for publication in Journal are double-blind reviewed by at least two academics
appointed by the Editor's Board: one from the Editorial Board and one independent scientist of the language of
origin - English. Reviewers stay anonymous. Authors will timely receive written notification of acceptance, remarks, comments and evaluation of their articles.
www.ef.uns.ac.rs/sm
ISSN 1821-3448
UDC 005.21
2015, Vol. 20, No. 4
Contents
Gabriella Kuráth, Norbert Sipos
An Integrated Approach of the Graduate Career Tracking System at the University of Pécs
3-08
Dragan Đuranović, Daniela Nuševa
Translation of Intervention Elements Into Local Development Strategy
09-18
Oleg Roy
The State Regional Policy Under Conditions of Growing Global Risks
19-25
Ljubiša Vladušić, Nenad Lalić
Corporate Entrepreneurship as a Function of Organizational Transformation
26-33
Dominika Crnjac Milić, Martina Martinović, Vladimir Šimović
Stochastic Models Applicable in Consumer Relationship Management
34-45
Jasmina Dj. Novaković
Estimating Performances of Learned Knowledge for the RBF Network as an Artificial Intelligence Method
46-53
Olja Milovanov
Marketing and Sustainability: Identifying the Profile of Green Consumers
54-66
STRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 003-008
UDC 005.57:[331.5:378(439PEC)
Received: September 3, 2015
Accepted: October 12, 2015
An Integrated Approach of the Graduate
Career Tracking System at the University
of Pécs
Gabriella Kuráth
University of Pécs, Pécs, Hungary
Norbert Sipos
University of Pécs, Pécs, Hungary
Abstract
The Graduate Career Tracking System (GCTS) is an obligatory task of the Hungarian Higher Education Institutions (HEIs) in order to survey students and graduates. It aims to provide the HEI institutions with a useful
tool, on the one hand, for following the labor-market career paths of former students, which helps to understand the areas to develop, and on the other, for receiving feedback from current students on the quality of the
formation. The connection between the HEI and the labor market is essential, but the fact that the GCTS is
only a tool, not a scope, has to be considered. Therefore, it is a small part of a more integrated approach for
creating a student service system helping them to understand their needs, opportunities and necessary actions they need to take in order to become skilled, competent and flexible participants of the labormarket.
The University of Pécs has a 5-year-long history of the GCTS. This study will focus on the changes of the recent years, the expansion of the targeted groups, the creation of communication and developments of different
services, based on the results. It is important that the methodology should deeply be understood; thus, the
GCTS model will be discussed together with the interpretation of the single elements of the process. The implementation is the first step to create this system, but when stakeholders are concerned, communication is
the key factor because the final goal is to achieve a higher level of knowledge dissemination and create ‘Student’ and ‘Lecturer’ information packages in order to help students achieve their goals.
Keywords
Graduate Career Tracking System, student services development, data integration, University of Pécs.
1. The higher education service
improvement based on the GCTS
The Graduate Career Tracking System is an
obligatory task for every higher education (HE)
institution in Hungary. The establishment of the
necessary frameworks, the technical and professional support, the development of internal procedures, the actualization of regulations and the carrying out of surveys are all such elements that
stand for big challenges in constructing the system. The majority of the efforts made by the institutions are focusing on these tasks; however, beside its mandatory nature at the University of Pécs
(UP) since the early stage (2010), we have been
paying attention to producing useful outputs and
have always been seeking a possible innovation
and improvement. The submission of common
data to the central organization (Educatio Nonprofit LLC) does not mean the end of the tasks for
the given year, but rather the beginning of real
analyzing procedures, because the filtering, the
profession-based cleaning, the control and the
structuring of data are only the first steps in their
institutional utility. Only after this point are we
creating summarizing reports on and studies of
determinable tendencies regarding the current and
former UP students, where furthermore a basic
subdivision can be found alongside some general
criteria (the faculty, the end of the studies, the
gender and the course-type).
4
Gabriella Kuráth et al.
Due to our basic principle, our job rather consists of revealing those connections between the
variables capable of helping decision makers in
the development of the courses, the services and,
generally, the institution itself. We have to face
the reality according to which students no longer
seek the traditional sense of knowledge, but
rather, because of evermore intensive competition
emerging between the HE institutions, universities
and colleges are constrained to offer different services, something more to them that enables a better labor-market fit (Adler & Stocker, 2012; Department of Education and Skills, 2011; Kuráth &
Németh, 2011; Teichler, 2012). This surplus may
have different manifestations: more flexible timetable editing, individual time schedule opportunities, sport activities, the study-supporting infrastructure, dining facilities, extracurricular formation possibilities, talent management, career counselling, self-recognition-oriented and skills developing programs etc.
In this paper, we are focused on the solutions
based on the results of the GCTS and discuss the
developments facilitating a better and more efficient operation of the University of Pécs. The
study consists of two parts: in the first chapter, the
utility of the collected data is presented; the second chapter summarizes the developments based
on the GCTS data.
2. The utilities based on the GCTS
This chapter contains different utilization opportunities of the central and the own institutional
questions’ data of the Graduate Career Tracking
System implemented at the University of Pécs in
2010. We emphasize that the mandatory data
submission is the basic task; besides, we are looking for newer and newer tools and opportunities to
promote the development of institutional processes and, from a wider point of view, make
stakeholders acquainted with the best practice of
the University of Pécs.
2.1. Data-providing services
Each year, the UP timely conducts the mandatory
reporting for the Educatio Non-profit LLC (generally, at the national level, among the top three
fastest institutions). The GCTS institutional results are analyzed by the UP Rector’s Office and
the Marketing Office, while furthermore, the faculty-level subdivision is provided, too. The faculty experts receive their faculty-specific, weightadjusted representative data to be more deeply
analyzed by different factors at the faculty level
and – in the case of an adequate sample size – at
the course level as well. It happens that, at some
faculties, there is a wide variety of the courses
with a relatively low number of students, who
provide either a small or no answer ratio at all, for
which reason professionally and statistically significant conclusions cannot be drawn.
Faculties can utilize the results in several
ways:
1. After the central evaluation of the surveys,
the GCTS experts assigned by the dean of
each faculty receive the study and the raw
database. On this basis, the GCTS expert
prepares and harmonizes the faculty’s action plan with the management.
2. GCTS reports can be used in the accreditation procedure (which contains a designated part for the description of GCTS
data) and for the purpose of conducting
high-school enrollment activities.
3. As a good practice, we enable the use of
data for the purpose of participating in Scientific Students’ Associations (TDK), writing theses (bachelor’s, master’s and the undivided formation type) and doctoral dissertations.
4. The feedback received from students can
help develop faculties’ services and other
administrative units.
2.2. The Book of Proceedings, Research
Reports
Since 2010, we have been publishing ISSN assigned books annually, titled A Student Motivation Study at the University of Pécs and Graduate
Tracking at the University of Pécs, containing
summaries of online researches. The only exception was the year2013, when, instead of the regular Student Motivation Study, we joined the international Eurostudent research and replaced our
own survey by applying the standardized international questionnaire. Therefore, we did not publish a book, but rather a quick report on the website of the UP. In addition, the telephone interview
based on a research conducted in 2010 amongst
those who had graduated one to three years before
was published under the title: An Oral Interview
2010, and in 2013, we published the results of the
second telephone interview conducted amongst
the 2010-2012 graduates, under the title: Graduate
Career Tracking System Survey of Graduates in
2010, 2011 and 2012 – Graduate Tracking at the
University of Pécs. In 2013, we published a methodological summary, titled Institutional Graduate
Tracking – GCTS at the University of Pécs,
Handbook 2013, and in 2014, we finally started a
new series aimed at the utilization of the GCTS
results, titled Graduate Career Tracking System
Book of Proceedings 2014. In the latter, 19 researchers and lecturers were asked to write a
chapter with the goal of elaborating the GCTS
data from a different perspective.
The publications and the reports of the researches were sent to our partner organizations
and furthermore, they are freely accessible on the
following website:
http://pte.hu/tenyek_adatok/felmeresek.
2.3. Professional trainings, other forums
As a part of our communication and knowledgedissemination strategy, we regularly organize professional forums and workshops. Within this
framework, having started in 2011 and doing so
each year, we have been presenting results of researches and faculty action plans for professional
representatives of the faculties, the GCTS related
researchers, in particular the Educatio Non-profit
LLC representatives, the leaders of the Dean of
Students’ Office and the alumni responsibilities.
The following events have been organized:
▪ GCTS Professional Workshop 2010
(04/12/2011)
▪ GCTS Professional Workshop 2011
(10/17/2011)
▪ Student Satisfaction, Student Service Development at the UP (07/11/2011)
▪ GCTS Fresh Graduates at the Labor Market Workshop (25/10/2012)
▪ GCTS Institutional Development Opportunities Workshop (11/11/2013)
▪ Student Service Development Opportunities Based on the UP Graduate Tracking
Results – GCTS Workshop (27/11/2014)
2.4. Marketing information knowledgebase
Over the years, we have participated at several
conferences as either a speaker or a participant
and maintained intensive rapports with the Educatio Non-profit LLC and the GCTS responsibilities
of some major HE institutions and other HE researchers. As a result, we have developed a knowledgebase, the structure application of which promotes our work. Also, as a part of the established
knowledge dissemination, we have decided to
make it publicly available for all interested parties
to use it in their research. The knowledgebase is
accessible
on
the
following
website:
http://marketing.pte.hu/palyazatok/munkaeropiaci_munkacsoport/tudastar. The main selected
grouping criteria are as follows:
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Graduate Career Tracking System
Employability, labor-force demand
Practice
Career
Formation, formation area, profession or
formation-location specific
Formation, formation demand, supply, HE
degree
Questionnaire and interview samples
Questionnaire – Lecturers’ administration
staff query
Competencies
Methodology and research design patterns
With employers, about employers
University of Pécs applicants’ research, enrollment activities
Regional information
Statistics
Series, journals
Research centers, databases
Publications, bibliography
3. Student and Lecturer service
development
In the second chapter, we present the already implemented and the still-in-progress results and the
developing pathways created on the basis of the
GCTS surveys. We show the three practiceoriented tools that can improve student and lecturer services at the University.
3.1. The career pyramid
Based on the analyses of the recent four years of
the Graduate Career Tracking System survey, we
have elaborated a complex, multilevel and handful
career development program for the current and
former students, in collaboration with the OIG
Central Office of Student Services (KÖSZI), in
autumn 2013. The UP Career Pyramid (Figure 1)
model is a guideline for entering students who–
thanks to its recommendations –are able to obtain
information about the expectations of the labor
market, and furthermore – which is even more
important – about themselves, the main factors of
their personalities and the motivational driving
forces. The structure consists of 5 steps: selfknowledge, labor market, job orientation, competence improvement and career start. Each level is
5
6
in connection with the previous one, but of
course, it can be passed on if the student is already
good at it. The offer contains trainings, courses
and services such as career coaching, job orientation, graphology, business and psychological
counseling. A short description of the program
was given to every first-year UP student as a part
of their welcome package.
The UP Career Program aims for:
▪ increasing the satisfaction of students, their
loyalty to the institution
▪ promoting a successful labor market fit of
graduated students
▪ giving an institutional support to the current and graduated students for their better
and conscious career planning
Steps
3. Job
orientation
Plan!
Details
Personal goal setting, life career
planning. What are
your desires? What
partial objectives
guide to the final
ones? How do you
imagine the ideal job
position?
4. Competence
It is necessary that
improvement your current compeStrengthen
tencies should be
your
improved or new
competencies! ones should be
developed? If yes,
which are the most
useful ones for you
to achieve your
personal goals?
5. Career compe- I already know what
I want to do, what I
tencies
am good at, the last
Careerstart –
one step to the thing is to find a
workplace which
finish…
suits me and let
them see that I am
their best choice.
Recommended
program – autumn
2013
Life Coaching
Career Coaching
Course and Individual Counseling
Career Test
Job Searching
Training
Competence-Test
(UP Uniphone
Mobile Application)
Professional Publications, Reading
Corner in the Central Office of Student Services
Curriculum Vitae
Writing Counseling
Job Finding Counseling
Alumni Career Day
Work Placement
Services
Source: Kuráth, Kovács, HéránéTóth, & Sipos, 2013, p. 57
3.2. Career programs, career trainings
Figure 1 UP Career Pyramid
Source: Kuráth & Héráné Tóth, 2013
Table 1 contains the detailed description of the
career services and the program of the UP Career
Pyramid.
Table 1 A detailed description of the UP Career Pyramid
and the recommended programs
Steps
1. Selfknowledge
Look in the
mirror!
2. Labor market
Let’s have a
look on the
labor-market!
Details
Get to know yourself, your values,
motivation, current
and necessary
competencies,
strengths, boundaries, communication
style and selfmanaging capabilities!
Types of enterprises, professional
fields, earning categories, job contracts
etc.
Recommended
program – autumn
2013
Job-oriented Graphology Counseling
Psychological
Counseling
Find Yourself –Get
to the Others! Training
Professional Practice Counseling
Campus courses:
Career Planning
and Labor Market
Knowledge
Private Banking and
Finances
Based on the results of the GCTS student motivation study, almost a quarter of the students would
require an individual career planning service
and/or a career course. Since the concept of
coaching was unknown for the students of the UP,
but offers a possibility of one of the best and the
most intensively individualized personal development, we wanted to extend this already tried
and tested method in the private sector to the university services through the Alumni Academia.
In the spring of 2012, we launched the UP career-coaching service as a pilot test. In this period,
5 current and former students had an opportunity
to participate in the process, which means a 6occasion-meeting per participant. Due to the positive feedback, in the Career Day of April 2013,we
decided to promote the program, the further plans
and the career-coaching course, with the help of
the students of the pilot test. In addition to the
presentation, we offered a possibility of registering for a test coaching, and in the three parallel
sessions 8-8 students had an opportunity to participate at a 45-minute-long meeting.
Gabriella Kurááth et al.
An Inteegrated Approach off the Graduate Careeer Tracking System at
a the University of Pécs
P
Figure 2 U
UP Career-Coach
hing Course, the spring semesterr of 2014/15
S
Source:
The authorss
In
I the first semester
s
of tthe academic year
2013/14,the UP Career-Coach
C
ing Course sttarted
(as a freely avaiilable campuss credit) withh four
urers within the framework of the Allumni
lectu
Acaademia. The coourse was opeen to all our bachelor-, master- and current
c
studennts, as well as to
t the
mni membershhip. The 20 paarticiones with the alum
h
pantts throughout the semester received 13 hours
(reaalized, howeveer, in 5-day bloocks) of theorretical
knowledge; meannwhile, they m
met the coach in an
D to
indiividualized sesssion at least four times. Due
the positive feedbback and the evaluation, we
w decideed to announcee it (with smalll changes) agaain in
the autumn of the academic yeaar 2014/15.
The
T Career-C
Coaching Courrse has two major
m
objeectives: on thee one hand, in the theoreticaal lessonss, the course aims
a
at makinng students fam
miliar
with
h the coachinng method, the process, selfknowledge and motivational
m
oppportunities, differd
ent value systemss, the effectivee objective creeating
metthod, self-brannd and self-maarketing opporrtunities,, as well as with
w informatioon about the laborl
marrket opportunitties; on the otther hand, praactical
meeetings help im
mprove self-knoowledge, the capabilitty of recognizzing the most determining values
v
of their
t
lives; exxplore their sttrengths; elim
minate
their barriers; inccrease their ppersonal efficiency;
consciously prepaare for their fuuture and a succcessful labor-market fit. As the ressult of this coourse,
dents can learnn how to set vvaluable objecctives,
stud
how
w to create plaans effectivelyy, and finally,, how
to make and im
mplement deccisions. Indivvidual
coacching sessionns can deepeen theoreticall and
pracctical knowleddge together w
with the personalization
n of individuall needs and sttudents can exxperiencee the process of coaching, which drives them
to fiind the best fittting objectivees and career plan.
A
Fiinally, on 8thh May, 2014 and 25th April,
2015,we held againn test coachinng for the studdents
a the Career Day
D organizedd by
registtered on site at
KÖSZI.
3.3. The
T informattion knowled
dgebase for
students and lectturers
That labor markeet related GC
CTS informaation
b both studennts and lecturerrs is
couldd be utilized by
consiidered as a priority. In April 2015, we
launcched a commuunication camppaign, as a parrt of
whichh students annd lecturers reeceive designated
inform
mation about career opporrtunities, employers’ expectation,
e
exxpected salariees and job seekking
experriences of form
mer students.
Thhe campaign aims
a
for:
▪ sharing laboor-market andd GCTS-reseaarch
related inforrmation
▪ facilitating the
t labor-markket fit of studennts
▪ increasing sttudents’ loyaltty and satisfacction
▪ supporting lecturers in students’ caareer
planning
▪ strengtheninng the UP im
mage and the enrollment activity.
W prepared a poster with the QR code for
We
studeents to attract their attentionn to this argum
ment
and created the www.pte.hu/dp
w
prwebsite, whhere
v
they can have acceess to further information, varis
news and an indiviidually searchable
ous studies,
and formable
f
databbase – the Labbor-Market Knnowledgeebase. The dattabase contains the most impportant labor
l
market information baased on the GC
CTS
surveeys of the pastt 5 years, whicch allows userrs to
obtain informationn about their own
o
courses, with
w
h
of formeer students. We
W put togetheer a
the help
shortt presentation for
f lecturers, which
w
can be used
u
STRATE
EGIC MANAGEMENT, Vool. 20 (2015), No. 4, pp. 003-008
0
7
8
in lessons as a promoting material, and a 4-page
information material, demonstrating the most important figures and facts. In the campaign, the
UP’s stakeholders will be informed by direct email, and through the Alumni Newsletter and the
institutional UnivPécs newspaper.
Summary
The transformation of higher education, including
major changes in recent years, has had a great
impact on the life of every Hungarian HE institution as well as on the everyday operations of the
University of Pécs. Various actions to compensate
for negative trends, leading to different results,
can be identified; this study, however, focuses on
a special area.
The Graduate Career Tracking Studies conducted at the University of Pécs have helped develop the institution and improve efficiency from
the beginning. This consists of sharing our data
with the stakeholders of the institution, in order to
enable them to carry out a more in-depth analysis
at their level mainly as a faculty, and in some
cases as a course as well. In addition, we have
provided the mandatory data with the central Educatio Non-Profit LLC, and the databases are freely
accessible for the purpose of writing a thesis and a
dissertation. We have shared the knowledge accumulated over the years, published our information sources and every publication is open for the
user to have access to it on our institutional website.
In addition to the objective of the data services, we have also created our own development
pathways, encouraging and setting an example to
the other entities of the university and competitors
 Correspondence
Gabriella Kuráth
University of Pécs
Vasvári Pál utca 4, H-7622, Pécs, Hungary
E-mail: kurath.gabriella@pte.hu
for the possible application areas of the GCTS
data. Our most important projects are: the UP Career Pyramid, the Career-Coaching Course (with a
campus credit) and the Information Knowledgebase for Students and Lecturers.
We hope that the other organizational units of
the UP will establish similar programs, which will
lead to synergic effects generating a higher quality
in the student services at the UP. SM
References
Adler, J., & Stocker, M. (2012). Kompetencia alapú, output
orientált oktatás az ideális foglalkoztathatóság
érdekében. Budapest: Műhelytanulmány.
Department of Education and Skills . (2011). National
Strategy for Higher Education to 2030. Retrieved July
15, 2015, from HEA:
http://www.hea.ie/sites/default/files/national_strategy_fo
r_higher_education_2030.pdf
Kuráth, G., & HéránéTóth, A. (2013). PTE Karrierpiramis.
Retrieved July 15, 2015, from Karrier PTE Alumni:
http://alumni.pte.hu/hu/bemutatkozas/karrier-85
Kuráth, G., & Németh, P. (2011). A DPR
eredményeinekhasznosításaaz alumni
rendszereképítésekor a
PécsiTudományegyetempéldáján. In C. Obádovics,
Diplománinnenésdiplomántúl: DPR tanulmányok:
tudományoseredményekéselemzések a
diplomáspályakövetéstémakörében (pp. 183-191).
Gödöllő: SzentIstvánEgyetem.
Kuráth, G., Kovács, Á., HéránéTóth, A., & Sipos, N. (2013).
DiplomásPályakövetőRendszer - 2013-as
pályakövetésivizsgálat a PécsiTudományegyetemen.
Pécs: PécsiTudományegyetem.
Teichler, U. (2012). Challenges for Future Research on
Graduate "Employability". Paper presented at the plenary presentation at the 2nd DEHEMS International
Conference: "Employability of Graduates and Higher
Education Management Systems", Ljubljana.
UDC 005.21:005412]:339.13.025(1-24)
Received: April 5, 2015
Accepted: November 13, 2015
Translation of Intervention Elements Into
Local Development Strategy
Dragan Đuranović
University of Novi Sad, Faculty of Economics in Subotica, Subotica, Serbia
Daniela Nuševa
Abstract
Micro interventionism implies a set of activities of local public management and raising the economy of the
local market. Today’s economic theory and state decentralization allow selective intervention to protect new
and small markets, such as the local market. Without state intervention and a selective intervention of the local
public management, the economic activity would have ceased completely. For a well-designed management
or conduct, the state development plan must be designed at three levels: national, regional and local. That
way, a country produces strategic documents that give a guidance of the direction in which to build the future,
what the major industries are, the large infrastructure and areas of a national interest. Strategies brought by
the public management contain measures that can be treated as stabilizing or development. Data shown by
local communities are the basis for the application of multi-criteria methods in determining the rank of strategic
objectives and local communities, and the application of a factor analysis and group development. Factors or
strategic goals decisive for the application of interventionist measures are: the income of the local community
per capita, the employment rate and the economy, the unemployment rate, the gross domestic product per
capita, the share of employees in the total population and other indicators (factors) of economic growth, income from tourism etc. Based on observations of success factors, it is possible to rank the development of
local communities. Outputs, as a valuing factor of interventionism, are a good basis for their translation into
local development strategies.
Keywords
Interventionism, selective interventionism, local communities, performance indicators, local development
strategy.
Introduction
In terms of the global economic crisis, recessions
in developed market economies and the turbulent
market environment, both local and global, local
communities, or their management, have a different role. Thus, one can say that, today, the interventionism of public management is conditioned
by an enormous fall in the economic activities at
the state level, which is especially felt in less developed local communities. The prevention and
use of key resources of local communities is the
basis for a conditioned interventionist strategy of
public management, but essentially it is also one
of the key tasks of public management in the stabilization and development of local markets. Local communities take over tasks that belonged to
the Chamber of Commerce and emerge as entrepreneurs, negotiators and guarantors for economic
activities in their local markets. The administration should actively participate in policy making,
including the regulation of markets, and the stimulation of the private initiative. In order to avoid
passing defective and mutually contradictory policies and laws, better coordination at all levels is
necessary. Public administration should be on the
alert to provide quality services to investors and
companies, which requires modern administration: flexible and open for investment and business.
10
Dragan Đuranović et al.
1. Regulative measures of
interventionism
An interventionist economy is characterized by a
period of an intensive and direct operational interference of the state in economic courses. As a
crisis of a cyclic character takes on increasing
forms of occurrence, then the state intervention
itself takes on a systemic character. Uninterrupted
flows of reproduction depend on the behavior of
the public sector because the public sector of an
economy covers averagely about two-thirds of
production funds. Except for the fact that, in this
way, the public sector “covers” activities not attractive to a private initiative, the state may, on
this basis, earn revenues, and thus increase the socalled non-tax sources in the structure of public
revenues.
Regarding the structure of the regulatory
measures in the area of the fiscal policy, the following ones are of particular importance:
▪ the dispersive structure of taxes, largely
because of the many goals of taxation.
These goals can be classified into two
groups: a) economic (an impact on the factors of demand aggregate and investment
encouragement), b) redistribution (the redistribution of wealth),
▪ selective taxation for effects is divided into
three main aspects: a) the arrangement of a
tax burden in relation to economic conditions; b) the increased taxation of high incomes; c) a release and exemptions for low
incomes,
▪ potentiating the redistribution effects of financial activities,
▪ an expansion of the structure of public revenues, whereby the public loan is an indispensable instrument,
▪ the discouragement of savings of rentier
type,
▪ the relocation of classic public expenditures in the budget structure in favor of
economic expenses and social expenditures,
▪ the relativization of the golden rule of the
budget balance in terms that a budget deficit is a rule to compensate for insufficient
demand.
The standardization of the budget structure by
these measures also meant the introduction of the
economic or capital budget, which ensures the
funds in the name of interventions in the econo-
my. The interventionist measures that arise from
the budget also affect the fundamental budgetary
principles. Interventionism directly threatens the
principle of the unity of the budget structure
(Baby, 2013). The first case of the abandonment
of the principle of the unity of the budget was
recorded in Denmark in 1927.
The most important measures that affect the
establishment of an economic balance in the domain of monetary-credit policies are:
▪ an enhanced emission policy, which, by an
emission of cash in circulation, increases
the cash mass and thus directly increases
demand aggregate,
▪ a selective credit policy of interest rates,
whose effect influences changes in the
quantity of money in circulation, and the
scope and structure of investment,
▪ the promotion of an open market policy
(securities), in cooperation with the state,
in the money market and capital, in order to
influence the movement of interest rates
and rates of stocks, and other kinds of capital placement.
2. Mixing policy impact on the
creation of business environment
The active role of a developing country, after the
global financial crisis, is the basis of all the models of long-term development. The differences are
only in the areas of a state intervention, which
may be in the area of the improvement of available resources or more active in the allocation of
capital as a scarce factor of production in developing countries in the economic sectors of higher
technological development. Since a more passive
strategy is based on the theory of comparative
advantages in building the structure of the economy, it permanently leaves the less developed behind, so it seems that, in the post-crisis conditions,
it is still better to follow the strategy of an active
industrial policy in the developing world, which is
the opinion of many scholars, citing the foothold
in the examples of Japan, today’s Korea and Taiwan. We are not sure that our economy should
reach for this economic pattern. The comparative
advantages of the Serbian economy are the basis
of a new strategy development. This comparative
advantage is of a dispersive geographical character and, in most cases, is in the less developed
regions of Serbia. The concept of the socialist
industrialization of Serbia was not based on comparative advantages. Therefore, the part of the
transition process being implemented in the stage
of privatization is not successful because it is not
based on comparability, and consequently has lost
the features of attractiveness. That means that the
economic development does not imply basically
the restructuring of old economic organizations,
or the policy of unconditional privatization, but
the environmental restructuring of the economic
area of Serbia. At the level of the economic system, this includes:
▪ a stricter regulation and supervision of
markets, particularly financial and capital
markets,
▪ the ‘detycoonization’ of privatization, some
infrastructure and blue chips should remain
in the ownership of permanent residents,
▪ the national monitoring of the use of the
most important resources,
▪ social security, made independent by a stable public source of funding, rather than by
the occurrence on a volatile (prone to sudden changes) stock market,
▪ support to public institutions of education,
research and science,
▪ the strengthening of public financial support to institutions of culture, arts and
sport,
▪ the economic and the social infrastructures
in public ownership, supplemented by the
private ones, rather than vice versa.
The crisis role of the state is reinforced: as a
regulator, a supervisor and the creator of the market system and the implementer of the rule of law,
as a prerequisite, and as the provider of a supply
of some basic goods and services from areas of
the hard and soft infrastructure, while the forcible
ejection of the role of the state in the direction of
the privatization of anything and everything leads
to the dualization of a society into included and
excluded, referring to the involvement of local
small economies that have a comparative advantage, expressed in non-economic resources (Bode,
2004). The experience of a large number of local
communities shows that the bottleneck for making
decisions on successful strategic management
often lies in the speed of such decision making,
without implemented and applied scientific methods of decision making. We eyewitness that the
development in local communities is conducted
under the influence of different policies and scientific disciplines carried out as individuals’ competences. Therefore, the management of local development becomes more complex. The principles
underpinning local development planning are the
social inclusion of citizens and the sustainability
of the development of the local community. Social inclusion is defined as a process that allows
citizens who are at risk of poverty to be given
opportunities and resources they need for their full
participation in the economic, social and cultural
life, and to achieve prosperity and the living standards that are considered normal in the society
they live in. Social inclusion ensures a greater
participation of citizens in decisions that affect
their lives and the exercising of their basic rights.
Therefore, the state and local communities try to
create social cohesion, which includes the capability of a society to ensure the welfare for all of its
citizens. Cohesion is an ideal that a society seeks
by maintaining, improving and adapting itself to
changes occurring in the economic, the social and
the political spheres. The realization of this principle contributes to the unification of opportunities in the development and greater social justice
of a local community.
The principle of sustainability is based on the
idea that natural and human resources must be
renewable and balanced to last. The principle of
sustainability means the integrity of the most important economic, social and spatial aspects of a
local community. Economic requirements for a
dynamic development, a spatially effective and
efficient economy, and developed tourism and
services become a goal in the management of a
local community. A sustainable economy and a
healthy environment should yield the satisfactory
living of citizens in a healthy and prosperous environment that provides opportunities for all citizens. The ensuring of better social conditions,
economic, social and cultural rights for all citizens
is the major focus in the planning of strategic objectives in the management of a local community.
A local economic development plan serves as
an instrument for improving the economic capacity and competitiveness of local communities, or
for the creation and maintenance of competitive
jobs in the local economy – in order to ensure
citizens’ right to work and decent earnings. As the
importance of the competitiveness of locations to
attract professionals and companies grows with
the globalization, so does the importance of planning and using the key levers of local economic
development. Apart from this generally defined
function, local economic development planning
has a specific role, typical of countries and economies in transition: it should be used to direct,
facilitate and accelerate the restructuring of the
11
12
local economy. In practice, this boils down to the
organized facilitating and accelerating of opening
and developing new sectors and branches, usually
based on locally available resources. In a word,
the management is expected to possess a vision of
the development of the local community. The vision is realized by designing strategic development, through strategic development plans, in
which strategic goals are defined. Each strategic
goal is implemented through one or several
projects. Projects must include the structure of
financing, the implementation time, implementers
responsible for the achievement of the strategic
goals. Each strategic plan starts with a SWOT
analysis, which is a bridge between the current
situation, diagnosed by analyzing, and a desired
future state, designed by the plan. Thus, strategic
goals are the elements of strategic plans through
which the management of a local community
achieves the vision of the development of the local community, customary for every citizen. In
them, citizens experience the same rights and obligations with respect to the quality of life in their
local community. The local government leads to
such a condition through plans of strategic orientations, defined as strategic goals.
3. Communication strategy in service
of interventionism
Communication is a process that helps to spread
an organization’s strategic goals. It is a logistical
support of influencing factors to an organization,
which strongly influence the behavior of the organization in public. Every communication is,
regardless of the level at which it takes place, specific, because every public has different communication needs. Because of the need of an organization to leave the same impression on all of its
publics, and for the avoidance of a possibility of
sending different information to various publics,
the basic principles of communication are developed in communication strategies. A communication strategy contains a brief analysis of the situation, the starting position of a public institution,
and defines the objectives the institution wants to
achieve through communication with the public.
Experience in the field of communication strategy
shows that it is possible to divide its global objectives in the public and the state administration into
the following segments:
▪ systematic, continuous, timely and accurate
information to the public (through the me-
▪
▪
▪
▪
dia and/or other means) on the relevant activities of the institution,
the promotion of the general picture (image) of an institution and its reputation and
prestige among the citizenship,
the promotion of certain specific actions,
initiatives, services or products of the concerned institution,
the constant and systematic monitoring of
the public opinion (with a special reference
to relevant target groups), an obtained data
analysis and date use for planning future
moves and initiatives in the field of public
relations,
the continual and systematical monitoring
of the amount (quantity) and the quality of
the media space in print and electronic media.
If necessary, and depending on the situation,
the following messages are created:
1. Market competition raises the quality of
goods and services, increases a possibility
of selecting products and services, reduces
prices, encourages and motivates entrepreneurs to go into investments that create
conditions for new employment, competitiveness and long-term economic growth.
2. State aid is only useful if it encourages further development, if the state encourages or
participates where the market does not give
results (market failures), such as investment in research and development, environmental protection and the like, and if it
is equally accessible to all potential users.
Institutional communication is in the function
of increasing the transparency and responsibility
of authorities towards citizens, which implies a
two-way dialogue, i.e. the openness of the government towards the impact and the contribution
of the public to the government policy. The participation of citizens in the political life of the local
community and decisions made by the local public administration are an important aspect of democracy. It is a mechanism for the effective external monitoring of the government’s work, but
also a way of creating public policies close to citizens’ current needs. The participation of citizens
is considered a possible solution to the problem of
“democratic deficit”, which manifests itself in the
growing distrust of citizens towards governments,
the lower voter body turnout and an overall political apathy and pessimism towards established
democratic values, procedures and institutions. In
that sense, participation is especially suitable at
the local government level, as the decisionmaking process is relatively close to citizens, and
the implications of adopted decisions are quickly
felt within a local community.
To even reach the participation at the local
level, and in order for it to be meaningful and successful, it is necessary to meet several important
criteria, such as a stimulating legal framework, the
trust of citizens in the local government and the
existence of strong civil society. In addition, what
is necessary is the support by political actors for
participatory activities, a certain level of the
openness and transparency of public administration, as well as developed capacities of local governments to enable it to respond to the needs of
participatory processes. And finally, before participation could even be reached, it is essential that
citizens have access to relevant information on the
local government, political options and participatory mechanisms at their disposal, as well as the
overall activities within the concerned communities. Citizens’ awareness thus becomes an important motivational factor and a prerequisite of their
participation in the political life of the local community.
Bearing in mind the importance of the role of
information for the development of citizen participation, as well as an overall democracy development, the focus is put on the elements and the
processes responsible for informing citizens within local communities in Serbia. Special attention
is given to the key actors of these communication
processes – the media and local governments.
Local media are the primary source of information
about the work of local authorities, as well as the
political, cultural and other relevant events within
a local community. If they perform their function
properly, they are an important mechanism
through which citizens can participate in the public life of the community, articulating their interests and deliberating on the government’s performance.
4. Location interventionism
The strategy of a local community development is
a process through which actors within small and
large cities work together with partners from the
public, the private and the NGO sectors in order
to create favorable conditions for economic
growth and job creation. Through this process,
they establish and maintain a dynamic entrepreneurial culture and create a new community and
business prosperity in order to improve the quality
of life for all in the community. Location interventionism was launched during the 1970s because local governments realized they had very
mobile capital leaving their jurisdiction. This
meant that their economic bases and the bases for
employment could collapse. By actively examining their economic basics, understanding the obstacles on the way to growth and investment, they
sought to build their base for the economy and
employment. Today, the local area is facing an
increasing number of challenges than local areas
would have been faced with during the 1970s.
These challenges can be:
1. International. Globalization and increasing
economic and political competition for investment, financial assistance, business attraction and retention. It offers opportunities for local companies to develop new
markets and presents challenges coming
from international competitors entering local markets. Multinational manufacturing,
banking and service corporations located in
multiple locations are globally racing to
find cost-efficient areas for manufacturing
operations and operations of service management. Technologically advanced industries seek highly specialized skills and a
technology infrastructure. Local conditions
determine the advantage of the community
and thus its ability to attract and retain investment.
2. State. Macroeconomic and monetary policies affect local communities. State regulation, tax and other legal structures influence the shaping of the climate for domestic enterprises, which can either help or
hinder local economic development goals
(e.g. telecommunications deregulation, environmental standards and so on.). In a
word, governmental functions are decentralized and the private industry has become
free. This has local financial and economic
consequences. Local communities need to
be aware of the threats they impose, but also of the opportunities they provide.
3. Regional. Communities within and between regions are competing to attract external investment just as domestic ones.
There are many opportunities for communities to cooperate with one another in
order to help their economic development.
This will improve the competition of the
overall regional economy, while, at the
13
14
same time, their own economies will benefit. For instance, local governments or formal regional governments can intermediate
between national and individual local governments to play important roles in the development of local communities.
4. Municipal. Companies often choose to locate themselves in urban areas because of
the benefits of markets exchange, infrastructure, workforce supply relationships,
and communications with other firms. The
profit of the economic growth of urban
areas depends on the quality of urban management and policies that affect the availability or a lack of electricity, transport, water, sanitation, telecommunications and developed urban land. Other factors that affect the productivity of the labor in the local economy include housing, health and
education services, the availability of skills,
security,
opportunities
for
training/education and public transport. The
most important and the most effective initial activity of economic development that
municipalities can undertake is to improve
the processes and procedures that businesses have to undergo within the city administration. The overview of most local governments reveals a multitude of complex,
poorly-managed, expensive and unnecessary systems for company registration. By
reducing these, an area quickly begins to
improve its investment climate and becomes known as business-friendly.
5. Vulnerable populations. Communities and
businesses increasingly recognize that the
successfulness of a local community development requires an economic, natural and
social renewal. For this reason, strategies
and plans for local economic development
and regeneration need to interact with
strategies against poverty and also need to
involve disadvantaged and excluded
groups.
Throughout history, there have been various
forms of location interventionalism. Table 1 gives
a chronological overview of location instruments
of interventionism.
Table 1 A chronological overview of location instruments
of interventionism
Focus
Instruments
1960-1980
▪ Attracting mobile produc- ▪ Large grants, tax exemption investments from
tions, subsidized loans for
foreign local areas.
manufacturing investors.
▪ Attracting foreign direct
▪ Subsidized investments for
investments.
the firm infrastructure.
▪ Providing investment for ▪ Reduced production costs
the firm infrastructure
through techniques such as
(the public sector only)
recruitment of cheap labor.
1980-1990
▪ Maintaining and
▪ Direct payments to individuenhancing the existing
al business segments.
local businesses.
▪ Business incubators/work
▪ A continued emphasis on
spaces.
attracting investments,
▪ Advice and training for small
but usually more targeted
and medium-large enterto specific sectors or cerprises.
tain geographic areas
▪ Technical support.
(on the basis of the pub- ▪ Support for running busilic sector).
ness.
▪ Investments in the hard and
soft infrastructure.
Late 1990
▪ The whole business
▪ A comprehensive strategy
environments arranged
to provide a competitive loto be favorable.
cal business environment
▪ Investment in the “soft”
and stimulate the growth of
infrastructure (e.g. hulocal firms.
man resource develop▪ Networking between comment, regulatory rationamunities and mutual cooplization)
eration.
▪ Public/private partner▪ Assisting economically
ships.
linked business groups.
▪ The assessment of the
▪ Labor development. Offerprivate sector investment
ing support for life imfor the public good.
provement.
▪ Very targeted investment
attraction, the building of
the competitive advantage of local area (led by
public sector)
Source: Authors
5. Interventionist measures based on
the ranking of the economic
development of local communities
The ranking of municipalities may be conducted
on the basis of the following two scenarios:
I. The ranking of municipalities based on the
movement of the basic indicators of economic growth, which takes into account: a)
interventionism at the level of local authorities; b) incentive measures and c) tax benefits; republic interventionism, i.e. interventionist measures from the government,
which we have classified into: 1) incentive
measures of the republic government, 2)
tax benefits and 3) concessions.
II. The ranking of municipalities based on the
movement of the basic indicators of economic growth that do not take into account
the local and national interventionism.
Emergency local
government
measures
The starting matrix of the hierarchy of the criteria for ranking the indicators of economic
growth and municipalities is given in Table 2.
Basic indicators
Emergency local
government
measures
Emergency
republic
government
measures
Concessionism
GDP
Unemployment rate (UR)
Tourism revenue (RT)
Number of nights (NN)
Employees (EMP)
Average salaries (AS)
Incentive measures of
local government (IM)
Tax benefits of local
government (TB)
Incentive measures of
republic government (IM)
Tax benefits of republic
government (TB)
Granting concessions
(KON)
Source: Authors
Figure 1 Ranking at the first level of the hierarchical model
Source: Authors
The weight coefficients for analyzing the development criteria are accounted for in Table 3.
Level I
characteristics
Level II
characteristics II
The economic situation of a local
community
RANKING OF MUNICIPALITIES
Table 3 The development criteria
Basic
indicators
Level III
characteristics III
GDP (GDP)
Unemployment rate
(UR)
Tourism
revenue
(TR)
Number of
nights (NN)
Employees
(EMP)
State
Interventionism
The economic situation of a
local community
State
interventionism
RANKING OF MUNICIPALITIES
Table 2 The criteria for ranking the indicators of economic growth
Emergency republic government
measures
Concessionism
Average
salaries
(AS)
Incentive
measures
of the local
government
(IM LG)
Tax benefits of the
local government
(TB LG)
Incentive
measures
of the republic government
(IM RG)
Tax benefits of the
republic
government
(TB RG)
Granting
concessions (Concessions)
Source: Authors
Outputs can be obtained by the AHP method,
which is very effective and gives us general conclusions for the criteria’s functions that affect the
development of local communities (Veinovic &
Stojadinovic, 2010). It is characteristic that the
seal of development and the level of municipalities give the economic situation of a local community. Within the economic situation of municipalities, the significant indicators are: employment (EMP) with the GDP (GDP), average salaries (AS), incentive measures of the local government (IM LG) etc. In the group of state interventionism, the greatest impact have: incentive
measures of the republic government (IM RG),
only to be followed by concessions (CON) and
finally tax benefits of the republic government
(TB RG) Studies have shown that the economic
situation of a local community has the greatest
impact on the development of a municipality with
83.3%, while the state intervention affects it with
16.7%.
15
16
Table 4 The impact indicators of municipal development
FIRST LEVEL
wi
Normal.
RANKING
The economic situation of a
local community
0.833
1
State interventionism
0.167
Indicators
2
Source: Authors
Many studies done by applying the AHP method of ranking municipalities show that the
greatest impact on the development of municipalities have, firstly, the basic economic indicators,
accounting for 85.7%; secondly, general regulatory measures of the republic government (incentive
measures and tax benefits), accounting for 66.6%;
thirdly, concessions by which the government
influences the development of local communities,
accounting for 33.4%, and fourthly, intervention
measures of the local government (incentive
measures and tax benefits), accounting for 14.3%.
Table 5 The ranking of the factors influencing
development
Indicators
Basic indicators
Emergency measures of the local
government
Emergency measures of the republic government
Concessionism
wi
Normal.
0.857
RANKING
1
0.143
4
0.666
2
0.334
3
Table 6 The comparative review of rankings
Level
characteristic
Employees
(15 EMP)
GDP (11GDP)
Average salaries
(AS 16)
Incentive measures of local
authorities
(17 IM LA)
Incentive measures of the republic government
(19 IM RG)
Tourism revenue
(13 TR)
Granting
concessions
(21 concessions)
Number of nights
(14 NN)
Unemployment
rate (12 UR)
Tax benefits of
the republic
government
(20 TB RG)
Tax benefits of
the local government (18 TB LG)
wi
RANK
wi
RANK
0.284
1
0.398
1
0.189
2
0.265
2
0.12
3
0.169
3
0.106
4
-
-
0,095
5
-
-
0.07
6
0.057
4
0.055
7
0.035
8
0.049
5
0.016
9
0.023
6
0.016
10
-
-
0.013
11
-
Source: Authors
Source: Authors
The output software results lead us to conclude
that the employment rate of the population reflects
the highest indicator of the development of municipalities, accounting for 28.4%. The unemployment rate is the inversion of employment, so the
logical result is that this indicator is ranked the 9th.
This is confirmed by the fact that one of these
indicators can be excluded in future analyses. The
indicator ranked the 2nd, accounts for 18.9% of the
GDP, only to be followed by the 3rd-ranked incentive measures, accounting for 12.0%. The next
ranks according to influences belong to the incentive measures of the local government (17 IM
LG), accounting for 10.6%, which is followed by
incentive measures of the republic government
(19 IM RG), accounting for 10.6%. The last positions are taken by tax benefits of the republic government (20 TB RG), accounting for 1.6%, and
tax benefits of the local government (18 TB LG),
accounting for 1.3%.
The method of ranking the economic development of municipalities confirms that public
management has a role of stabilizers and promoters, the guarantor and the controller of the economic activity in terms of reduced functions of
the economy. That, actually, means that the effects of interventionism public management and
the measurable valuing of a stabilizing factor in
the implementation and development of strategies
of local communities, as an extent of their measured investment.
6. Translation of interventionism into
a development strategy
Market failures arise when the market fails to allocate resources according to their greatest effect.
Then, a state intervention that will, by wellprepared strategy measures, neutralize the effects
of such market failures and increase overall prosperity is considered to be justified (Harrison,
Saroj, & Kalanithy, 2011). In conducting interventionism, there are also failures such as:
▪ The inherent and acquired shortsightedness of a political process. Politicians are more interested in the success of
their short-term stabilization policy than a
long-term, industrial policy, the results of
which mature after their mandate after all.
▪ the making and control of state decisions.
The state reacts much more slowly to
changing external circumstances than private entrepreneurs do, and, when in a parliamentary procedure a decision is once
made, its execution is usually forwarded to
one of the state organizations. The Parliament rarely receives timely and essential
feedback on the activity of the made decision.
▪ Reliance on state aid. A narrow interest
group, concerned only about its interest,
may act in the state, using a variety of methods to keep state aid, and then it is expected by others in the same sector. By
modern state intervention in the 1990s,
there was a convergence of the structuralist
and the neoliberal thought, thus achieving
certain theoretical consensus.
The main contribution in translating elements
of interventionism into a development strategy of
local communities is the development of a system
methodology for the analysis and ranking of local
communities on the basis of economic indicators
of economic growth and interventionist measures
of the local and the republic governments. The
primary idea of this approach is to help practitioners and decision makers in their strategic planning
and decision making in the implementation of
new approaches in measuring the effectiveness of
various strategies in the development of local
communities. Interventionist measures provide an
increased assessment of the role of different policies and strategies of the development of local
communities. This actually opens up ideas for
further research, which will include public management in an integrated concept of interventionist measures in the function of development strategies, formed through a network and a subnetwork of the state public management.
The importance of interventionist measures
and their role is best viewed through:
▪ bases for the design and the planning of the
public managerial structure,
▪ a managerial network of public institutions
at the state level,
▪ a managerial subnetwork of public institutions at the local community level,
▪ a managerial subnetwork at the departmental level of public institutions of local
communities,
▪ interactions in managerial networks, subnetworks and the criteria of the economic
development of local communities,
▪ the methodology of the functioning of efficient public management,
▪ a methodology for the selection of the most
influential indicator of economic growth,
▪ an efficient hybrid ranking algorithm of the
development of local communities and regions.
Interventionism as a development strategy of
public management in ensuring the economic
growth of local communities is an interesting area
(Görener, 2012). Concepts of the application of
interventionism as a concept of development
leave us room to improve the operation of public
management and increase its efficiency and role
in ensuring the economic growth of local communities and the state. All this serves to increase
productivity at work, and thus improve the living
standard of the population at the local and the regional levels, as well as in the Republic of Serbia.
Conclusion
A new local self-government will be a synonym
for the responsible and pro-active management of
local development and local affairs, based on the
principles of the European Charter of Local SelfGovernment. Its strategic goal is the achievement
of substantial functional decentralization, which
allows and encourages a harmonious development
of local communities and a constant improvement
of the quality of life in a certain environment. The
politics of interventionism in local communities
affects the development of local communities and
changes their mutual ranking. For the Republic of
Serbia, which in the past two decades has been
recording contradictory and divergent trends in
the GDP growth, on the one hand, with a fall in
employment and the growth of imbalances in local communities, on the other, interventionist
measures have proved to be essential for maintaining the level of development in the underdeveloped parts of the country. In the following decade, the economic efficiency, social justice and
solidarity should be tightly linked not only at a
declarative level but also at the level of defining
and monitoring the achievement of the global obSTRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 009-018
17
18
jectives and milestones in shorter periods of time.
Based on the review of the theoretical basis of
public management, we see how different theories
provide different answers to the question on the
factors of regional growth, as well as the dynamics of regional disparities. The observed factors
and indicators of development emphasize the importance of the long-term growth factors such as:
employment, unemployment rate, gross domestic
products, and the like. However, the growth models do not provide unambiguous answers in terms
of the dynamics of local and regional disparities.
Serbia is faced with major regional and local differences at the levels of development and is highranking according to the level of regional disparities, which speaks about the importance of the
problem of unbalanced regional development. In
such a situation, deeper knowledge of the factors
of regional differences is of great importance, not
only for the economic profession, but also for the
holders of regional and local politics and all other
sectors having a significant impact on regional
and local development. SM
 Correspondence
Dragan Đuranović
Faculty of Economics in Subotica
Segedinski put 9-11, 24000, Subotica, Serbia
E-mail: gandra.dj@hotmail.com
References
Baby, S. (2013). AHP Modeling for Multicriteria DecisionMaking and to Optimise Strategies for Protecting
Coastal Landscape Resources. International Journal of
Innovation, Management and Technology, 4 (2), 218227.
Bode, E. (2004). The spatial pattern of localized R & D
spillovers: an empirical investigation for Germany.
Journal of Economic Geography, Oxford University
Press, 4 (1), 43-64.
Görener, A. (2012). Comparing AHP and ANP: An
Application of Strategic Decisions Making in a
Manufacturing Company. International Journal of
Business and Social Science, 3 (11), 194-208.
Harrison, M., Saroj, S., & Kalanithy, V. (2011). Multi-criteria
Decision Analysis: A Strategic Planning Tool for Water
Loss Management. Water Resources Management, 25
(14), 3947-3969.
Veinovic, M., & Stojadinovic, S. (2010). The Quantification
of the Results of E-government in Serbia and
Neighboring Countries. Singidunum revija, 6 (2), 82-91.
UDC 005.334:339(4:470+571)
Received: April 21, 2015
Accepted: October 12, 2015
The State Regional Policy Under
Conditions of Growing Global Risks
Oleg Roy
Omsk State University na F. M. Dostojevsky Omsk, Russian Federation
Abstract
The article discusses the evolution of the forms of the regional policy in Russia, aimed at the development of
the regional economy. It also examines the typology of global risks caused by the entry of some regions and
countries into interstate associations as well as analyzes the reasons of the low efficiency of institutions ensuring the inflow of foreign investments into the economy of the Russian regions. In addition, the article assesses
the threats caused by the crisis in Ukraine and offers the forms of economic cooperation between the European and the Russian regions.
Keywords
State regional policy, global risks, the European Union, Euroregion, region, special economic zones, free economic zones, territorial development zones, priority development territories.
Integration processes
In early 2015, the world once again entered a period of fierce global risks. The characteristic feature of this process is a dramatic expansion of
various types of threats most countries of the
world are being faced with. These threats may be
of an ecological, epidemiological or military nature, and it is extremely difficult to neutralize
them as it requires the consolidation of the efforts
of all participants taking part in this process. According to Ulrich Beck, the main methodological
difficulty in overcoming global risks is the phenomenon of “methodological nationalism” that
equates modern society to a society organized as a
territorially limited state (Beck, 2014). Such a
state is not ready to assimilate threats posed by
cross-border problems, the scale of which has
significantly increased in recent years.
Over the past decades, there have been important developments contributing to the formation of
powerful interstate formations. The latter have
formed a set of instruments of a coordinated interaction between the social and the economic systems of sovereign states.
Currently, there are 183 member countries in
the International Monetary Fund and 189 coun-
tries in the World Bank. The World Trade Organization (WTO), which plays the key role in international trade, gathers 130 member countries. The
highly respected International Labour Organization (ILO) has more than one hundred members at
present. In 2009, the ILO had 183 member countries. The aim of all these organizations is to integrate economic systems of different countries on
the basis of the consolidation of their interests and
establish institutions which will ensure this
process. When undergoing the process of integration, countries do not forfeit their independence
and receive strategic benefits and advantages from
such a consolidation. As the need arises, special
supranational institutions are established in order
to coordinate and regulate the corresponding
processes. In the modern world, there are several
alliances of gigantic states, which form a unified
system of interstate ties. The powerful supranational institutions coordinating their work not only
ensure benefits for the allied members but also
develop a common economic policy. The examples of such alliances include the World Trade
Organization, the British Commonwealth, the European Union, the North-American Free Trade
Agreement (NAFTA), the Organization for Eco-
20
Oleg Roy
nomic Co-operation and Development (OECD),
The Customs Union between Russia, Belarus and
Kazakhstan, and The Commonwealth of Independent States (CIS) (Roy & Adzic, 2013).
Due to their desire to integrate, the countries
have worked out specific forms of cooperation.
These include the co-operative bodies, aimed at
coordinating economic development; free trade
zones (which are distinct from joint-venture
zones); common markets of goods and services
(including transport, information services etc.);
common markets of financial capital and the
workforce; intergovernmental banks and other
intergovernmental structures in the real sector,
preferential areas, customs unions and economic
and monetary agreements. Implementing these
forms of co-operation, national state subdivisions
aspire to optimize trade relations, expand the
market for the sale of their goods, minimize the
level of their transaction costs and create conditions for attracting venture capital.
Political and economic risks
However, the integration policy of the states is
facing tangible global risks. These risks may be
divided into two groups. The first one represents
economic risks, and the second one – political
risks. Economic risks are based on the following
circumstances:
▪ A necessity of the coordination of a large
number of national standards and regulations, requirements for the implementation
of specific activities, quality criteria and so
on complicates their execution in a separate
national-territorial entity.
▪ A necessity of keeping a single currency
for countries with different levels of economic development causes an influx of additional costs for citizens and enterprises
located on the territory of less-developed
countries.
▪ The strengthening of the role of the supranational financial institutions suppresses
the internal reserves of the financial stability of the member countries of international
alliances.
▪ Obligations taken as a part of entering into
international alliances entail a tendency of
de-industrialization and a loss of traditional
forms of production.
▪ A necessity of finding compromising decisions between countries with different levels of economic development and political
culture leads to the vagueness and uncertainty of decisions, reduces their effectiveness and the aggravation of contradictions
between the parties to agreements.
Political risks are caused by the following circumstances:
▪ A tendency to form a multicultural and tolerant state causes a surge of a nationalist
sentiment at the level of local communities.
▪ The dependence of less-developed countries on the world leading ones implies the
conservation of the once established order.
▪ A decrease in trust towards international
institutions increases a possibility of the
occurrence of an interstate conflict.
▪ Bureaucracy in making decisions agreed
upon between the parties makes it possible
to negate their positive orientation.
▪ The consolidation of countries according to
the geographical and the cultural principles
goes along with the growth of crosscultural differences and contradictions between the unions of states.
A special role in overcoming global risks
should be assigned to the state regional policy,
which allows the limiting of the impact of “methodological nationalism” and the refocusing of
the purpose of the integration of unions not as
much on achieving a geopolitical influence as on
solving local social problems. The state’s regional
policy should be intended to provide a comprehensive and balanced development of autonomously developing areas within larger nationalstate formations. While developing its regions, the
state minimizes global risks, creates an environment necessary for sustainable development and
forms an adequate mechanism for a more effective integration of the country into international
alliances. By helping regions to be involved in the
processes of international cooperation, the state
enables them to attract foreign investments and
creates points of the growth of the regional economy in the region.
At the same time, global challenges hinder integration trends, forcing regions to rely on their
own strengths and minimize risky investments in
foreign assets. Regions begin to focus on creating
ties with other regions more than exercising their
right to sign international agreements. However,
they do not forget to benefit from their foreign
contacts. The whole history of the formation of
the state regional policy in Russia may be referred
Oleg Roy
to as the evidence of change in integration priorities against the national ones.
The evolution of the state regional
policy in Russia
In order to increase the role of the regions in the
development of their local income basis and cope
with the high centralization of power in Russia,
the government began to establish free economic
zones (FEZ) in the early1990s. The establishment
of FEZ was triggered off by the Law on International Economic Investments in the Russian Soviet Federative Socialist Republic, according to
which the free economic zones were established
in order to attract international capital, apply advanced scientific technologies and management
experience, as well as extend the export potential.
The free economic zones offered preferential conditions for international investors and enterprises
with foreign ownership. For instance, enterprises
with 75 million rubles of foreign investment were
registered with FEZ. The preferential regime assumed lower tax rates, which accounted for up to
50% for international investors, and lower payment rates for the use of land and other natural
resources. The law also said that investors were to
be granted the right to rent property for a long
period of time (up to 70 years) and to sublease it
(outside FEZ, this period was up to 50 years). According to the law, both import and export customs duties were minimized; the existing bordercrossing and visa regimes were simplified. Enterprises were granted the right to export and import
without a license, which was accordingly granted
to companies owned by foreign investors and
joint-stock companies, where the share of foreign
investment was more than 30%. Companies’ currency earnings from the export of their own products were at their disposal. After the adoption of
the law, the nineteen extraterritorial economic
entities were established only to later be followed
by the emergence of some more entities.
However, at the end of 1991 and at the beginning of 1992, the privileges previously set within
FEZs were not much used after the liberalization
of the entrepreneurial climate had become universal, and the regulations on foreign economic activities, having been adopted in the Russian Federation during this period, did not specify any
special treatment of the FEZ territories. The creation of the zones with considerable privileges was
recognized by the Russian government as unpromising. The government was concerned about the
enhancement of economic separatism and the de-
struction of the single economic space. The establishment of FEZ in Russia did not meet the expectations as the government did not have a clear
concept of the placement of FEZs and the arrangement of FEZs did not encourage an expected
increase in foreign investment inflows into the
economies of the regions. Thus, for the last five
years, the share of foreign investment in the structure of national investment has been 3%, 2.6%,
2.5%, 5% and 6%, respectively (Shmonov, 2010,
pp. 39-40).
One of the major directions of the country’s
regional policy was the policy aimed at the development of new and the maintenance of the old
natural deposits located in the largest Russian regions of Siberia and the Far East. Thus, the development of the Far East regions became the subject
of the Federal Law on Production Sharing
Agreements, adopted by the State Duma on December 6, 1995, and approved by the Federal
Council on December 19, 1995. The aim of the
law was to expand the country’s opportunities in
the use of subsoil and investment activities. The
law established the legal foundation of the relations arising in the process of the allocation of
Russian and foreign investments to the exploration, the prospecting and the extraction of minerals on the territory of the Russian Federation, as
well as on the continental shelf or/and within an
exclusive economic zone of the RF. The law stipulated a possibility of attracting large companies
to the development of deposits. These companies
had to be ready to invest money in the exploration
and the extraction of minerals on their own account in order to make a profit. Unlike the licensing mechanism, according to the Law on Subsurface, a production sharing agreement assumes an
agreement between the government and investors
regarded as the equal parties to a civil agreement.
Most taxes and payments are waved, and all investment costs are compensated by extracted raw
materials. The remaining profitable raw materials
are divided between the government and such
investors.
However, the quota on hydrocarbon reserves,
which the State Duma had allowed in order to
develop on terms of the production sharing
agreement, ran out, and Russian companies received neither the promised multi-million dollars
investments nor large orders. While implementing
the Sakhalin-1 agreement, the state authorities
allowed the users of mineral resources to submit
cost estimates and annual reports inclusive of exaggerated data, keep records in English and even
21
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Oleg Roy
conduct no audits at all. These agreements were
supposed to be concluded for the period of 25-50
years and they assumed that Russia would not
have any legal immunity as the disputed issues
could not be resolved in the courts of other countries in accordance with the Russian legislation.
Thus, the main difference between the production
sharing agreement and the license agreement was
that, in the case of a mistake or bureaucrats’ lucre,
it was impossible to rectify the error.
As the result, throughout the 1990s, the Russian government faced certain restrictions when it
took measures concerning privileges. The restrictions were caused by the lack of a comprehensive
regional policy would take into consideration the
advantages of all RF’s regions, irrespective of the
industry they were specialized in.
In 2005, the federal policy considering the free
economic zones was adjusted, which resulted in
the development of the common rules for the free
zones location. Whereas in the 1990s the decision
on setting up the free economic zones had been
made through the bilateral negotiations between
the federal center and the region, the new rules
assumed a procedure for a competitive selection
of the territory striving for the status of a free
zone. Since that time, Law №116-FL on Special
Economic Zones in the Russian Federation has
been in effect. The law stipulates THE four types
of special economic zones:
1) the industrial and the manufacturing special
economic
zones
(manufacturing,
processing and the realization of high-tech
production),
2) the technological-innovative special economic zones (under the innovation activity,
we understand the development and the
manufacturing of scientific and technological products, ensuring their commercial
application, including making, testing and
launching pilot products as well as the development of software, systems of data collection, processing and transmission, grid
systems and the provision of services of the
implementation and the maintenance of
such products and systems),
3) the touristic and recreational special economic zones,
4) the special economic port zones.
A special economic zone is a part of the Russian Federation territory with a special regime for
entrepreneurial business. The special economic
zones are set up in order to develop the manufacSTRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 019-025
turing industries, the high-tech industries, the production of new types of products and the development of the transport infrastructure, tourism and
health resorts.
However, no notable successes have been
achieved over the last 20 years of working with
the special economic zones. The most successful
zones amongst the 17 established special economic zones of Russia turned out to be the 6 industrial
zones, whereas the most problematic zones are the
touristic and the recreational ones. The special
economic port zones are not developed, either. It
may be connected with the fact that the regions do
not want to work on their promotion. One of the
attempts aimed at the creation of the institutional
conditions for the endogenous development of the
regions is reflected in the Law on the Territorial
Development Zones, passed in 2011. The territorial development zone is defined as “a part of
the region on which, in order to accelerate socioeconomic development, one creates favorable
conditions for investors by providing the state
support”. Currently, the territorial development
zones have been established in 20 regions. The
creation of administration is necessary for the
management of the territorial development zones.
However, the measures of the support of the residents of the state mentioned in this law were
much more modest than during the transformation
conducted in the early 1990s. A more radical way
to mobilize the regions to attract investors, announced in the Message of the President of the
Russian Federation, was the creation of the socalled “Priority Development Territories” on the
territory of the Far East. In accordance with the
Federal Law № 473-FZ, adopted on December
29, 2014,the setting up of preferential taxation,
the use of land, including special rental rates for
such use and the favorable conditions of the redemption of the territories, are contemplated for
the residents of these territories (Priority developed territories: the fourth attempt of Russian
Hong Kong, 2014). The law makes it easier to
connect residents to the network infrastructure,
simplifies the procedure of customs clearance
procedures and also gives a possibility of involving qualified foreign personnel (without regard to
the quotas and other restrictions) to work on the
priority development territories faster and in a
more preferable way. In contrast to the special
economic zones, the Priority Development Territories are not divided into types and are more
beneficial for the residents from the perspective of
granting tax exemptions. If special economic
Oleg Roy
zones are established according to the conditions
determined by the regional authorities, priority
development territories are then determined according to the conditions of a potential investor.
The prospects of economic
cooperation between European states
and Russia
Thus, the State’s efforts to involve the regions in
international projects are not becoming weaker.
As the result of it, large-scale projects, involving
the participation of foreign capital in such areas as
Sakhalin region, Krasnoyarsk region, Tatarstan,
Kaluga region and other ones have been implemented in the country over the last two decades.
However, not all real opportunities have been fully implemented. There are several reasons for the
low efficiency of the institutions ensuring an increase in the participation of the Russian regions
in the integration processes, the institutions that
should attract foreign investment for the development of local communities. They are as follows:
1. The uncertainty and the vagueness of the
regional policy carried out in the country. It
is manifested in the acute lack of investment resources for the majority of the Russian regions and in the absence of a body
responsible for stimulating their comprehensive development.
2. The geographical remoteness of a significant number of the Russian regions and adverse climatic conditions for the implementation of traditional business projects.
3. The poor quality of the state management,
combined with high corruption risks, which
can discourage potential investors.
4. The weak integration of Russia into the European economic system, the low level of
trust between Russian and European partners.
5. A high degree of the centralization of taking
economic and political decisions in Russia,
together with the lack of transparency in
the governmental support of large companies affiliated with the government.
6. The artificial monopolization of certain
manufacturing industries within the established state corporations, which is explained by a need for preserving the potential of the industries in terms of a financial
resources deficit.
Additionally, the global risks caused by the
contradictions between the major powers of the
world have contributed to the freezing of direct
relations between the Russian regions and foreign
countries. The crisis in Ukraine, a sharp decline in
oil prices and the EU sanctions have greatly limited the ability of the Russian regions to attract
foreign investment. Even before the crisis in 2014,
the share of direct foreign investment in the Russian economy had begun to gradually decline.
This made Russia’s political elite think about a
wide range of the import substitution of incoming
export products. During the period from 2005 to
2013, the volume of the import supplies increased
from 98,708 to 314,967mill. $ (which is more
than three times as much). This increased Russia’s
significant dependence on imported technologies.
Even the oil and gas industry, strategically important for the country, depends on foreign supplies
of mining equipment by 80%. On the export side,
70% of its volume accounts for the production of
the mineral resource group. If almost half of the
mineral resource group products are considered to
be produced in three to four Russian regions, we
will see that the export capacity of most Russian
regions remains quite limited.
Over the last fifteen years, the dynamics of
economic cooperation between European states
and Russia have had a positive change. In 2013,
the largest trade partners of Russia in the total
imports were China (16.9%) and Germany
(12.0%), while our largest export partner was the
Netherlands – 13.3%. The events of 2014 shifted
the vector of the foreign trade activity of the Russian regions towards Asian countries. Not only
did the gap in the economic ties provoked by the
sanctions cause direct economic losses to all parties, but also caused additional risks. The most
important of them for Europe are:
1. the loss of the promising Russian markets
for the products of European manufacturers,
2. the strengthening of the economic position
of the Arab States, which are able to replace some products manufactured by the
Russian companies and want to expand
their political influence on European countries,
3.thestrengthening of bureaucratic mechanisms
in moving commodity products to the Russian market and the malfunction of payment instruments;
4. the significant growth of transaction costs in
providing concluded contracts,
23
24
Oleg Roy
5.thereduction of Russian investments in the
economies of European states; in 2013,
Russian direct investments in foreign countries amounted to 19,931bln. $;it exceeded
the similar indicator of all other countries
taken together,
6. the significant outflow of Russian tourists,
whose share in some European resorts
reached 30%-40%.
The rapid outflow of capital from Russia,
caused by the depreciation of the national currency and excess government administration, a high
concentration of social commitments enacted in
the budgets of the regions have brought to the
surface the fact that about 90% of the Russian
regions have a budget deficit, whereas the 38 of
the regions have a deficit of more than 10%. Only
11% of the population lives in the wealthy regions. The other part of the population is concentrated in the subsidized and the depressive regions. Unfortunately, the mechanisms of the regional policy formed in Russia do not allow the
majority of the regions to independently solve the
problems they are faced with.
The sharp decline of imports to Russia in 2014
helped to revive the work of the regions in the
field of import substitution. It even caused a rise
in the industrial production of the country by
1.7%. However, industrial production decreased
in almost 1/3 of the regions. A sharp drop in foreign investment made the strongest impact on the
regions. One should underline that the strong regions suffer most from this situation as they took
large loans for the implementation of their ambitious projects. The excessive demand for durable
goods caused by the devaluation of the ruble allowed business to generate a significant profit by
the end of the year (Zubarevich, 2014). At the
same time, a decline in the population real income
in most regions of the country can lead to real
social problems in 2015.
The Constitution of the Russian Federation
considers the Russian regions as the quasi-state
formations endowed with the right to independently participate in the formation of mutually
beneficial trade cooperation with foreign countries. There are many examples that demonstrate
significant progress achieved through direct
agreements between the regional governments of
Russia and European countries. Inter-regional
cooperation between the neighboring countries in
the border regions is realized particularly actively.
Only five Russian regions border with the Euro-
pean Union. Despite the fact that, in terms of the
welfare and the development of the population,
they are inferior to the adjacent areas of the EU;
yet, there are still some opportunities to disclose
their real potential. The institutional basis for the
organization of interregional cooperation in the
EU turns out to be Euroregions created in the
framework of the European Framework Convention (and its Additional Protocols of 1995 and
1998) on Transfrontier Co-Operation between
Territorial Communities and Authorities. In accordance with these documents, Transfrontier and
any other frontier territorial communities and authorities are allowed to create bodies for crossborder and Transfrontier cooperation with or
without the legal status. Several Russian regions
are already the active participants of such associations (“Neman”, “Karelia” etc.) (Vardomsky,
2013). However, interregional cooperation between Russian and European regions is negligible
outside cross-border cooperation. The majority of
the international agreements concluded by Russia
at the regional level are signed with the Commonwealth of Independent States. Thus, in the
Omsk region, 17 out of 33 agreements are signed
with the Kazakhstan regions, the four agreements
are signed with the Uzbekistan regions and three
agreements are concluded with the regions of
Kyrgyzstan and Tajikistan. The Republic of Dagestan’s six agreements are signed with the regions of Azerbaijan, Georgia and Kazakhstan
(two agreements for each country, respectively).
The Ukrainian crisis shows gloomy prospects in
this situation. Hopefully, this situation is not satisfactory to anyone and the growth of global risks
should make Russian and European regions involved in the processes of economic cooperation
more actively.
To the present time, the following forms of
cooperation have been developed:
1. International production cooperation, accompanied by an exchange or a transfer of
technologies, and sometimes the creation
of a joint ownership.
2. Foreign loan obtaining.
3. The acquisition of foreign-based equipment,
on the basis of a leasing contract.
4. Attracting foreign capital in a business
form, by means of the creation of joint ventures with the various percentage of foreign
participation, including the sale of shares to
foreign investors.
5. The establishment of enterprises completely
owned by foreign capital.
Oleg Roy
6. Cooperation with foreign companies in the
development of production on the basis of
an agreement (contract), without creating a
legal entity.
7. Attracting foreign capital on the basis of
concessions or production-sharing agreements.
8. Participation in the development of free
(special) economic zones and priority development territories, aimed at more actively attracting foreign capital and labor to
a particular territory.
Almost each single above-mentioned form involves an active participation of the Russian regions in its development. The geographical remoteness of a region is not an obstacle to the implementation of these forms. Global risks require
the governments of European countries to take
into account joint national interests, dispose of
political stereotypes more quickly and establish
mutually beneficial cooperation. The crisis in relations between Russia and the European states
must be definitely overcome on the basis of mutual respect and respect for the rights of the parties. Russia has been and still remains a European
country interested in establishing good and productive relations with all its partners. SM
References
Beck, U. (2014). Life in global risk society - how to cope
with it: a cosmopolitan turn. Retrieved February 22, 2014
from http://www.gorby.ru/userfiles/lekciya_ulrih_beka.pdf
Priority developed territories: the fourth attempt of Russian
Hong Kong. (2014). Retrieved March 16, 2014 from
http://club-rf.ru/theme/327
Roy, O., & Adzic, S. (2013). State regional policy under
conditions of international integration: experience of Serbia
and Russia. Omsk: Omsk State University.
Shmonov, N. N. (2010). Historical study of the problems of
special economic zones' development. Kazan: KSUAC.
Vardomsky, L. (2013). Cross-border and transfrontier
cooperation in the programmes of EU and CIS cooperation.
Retrieved March 16, 2014 from
http://analyticsmz.ru/?p=706
Zubarevich, N. (2014). Regions have become dull drive
belts of the party. Retrieved March 16, 2014 from
http://slon.ru/calendar/event/1162927/
 Correspondence
Oleg Roy
Omsk State University na F. M. Dostojevsky
Prospect Mira 55a, 644077, Omsk, Russian Federation
E-mail: roi_omsk@mail.ru
25
UDC 005.71:334.726]:[005.961:005.914.3
Received: February 12, 2015
Accepted: September 11, 2015
Corporate Entrepreneurship as a
Function of Organizational
Transformation
Ljubiša Vladušić
Faculty of Economics East Sarajevo, East Sarajevo, Republic of Srpska, Bosnia and Herzegovina
Nenad Lalić
Faculty of Economics East Sarajevo, East Sarajevo, Republic of Srpska, Bosnia and Herzegovina
Abstract
Enterprises that are not exposed to numerous changes in their business, both external and internal, almost do
not exist. In order to survive, grow and develop, entrepreneurs and managers of companies must respond to
the given changes with changes. For that reason, this paper will explore how certain types of changes, generated by entrepreneurs through their entrepreneurial activity, and innovation, generated through the concept of
entrepreneurship, affect the organizational transformation of a company. During the lifetime of the majority of
companies that grow and develop, the number of hierarchical levels increases, complicating its structure,
which inevitably leads to a need for organizational transformations. In terms of major changes and a harsh
competitive struggle, new ideas and the ability to create and use innovation, surprises and a quick adaptation
become the factors that can bring a great success. It is, therefore, where the entrepreneurial spirit and the
behavior of managers are reaffirmed.
Keywords
Corporate entrepreneurship, organization, transformation, innovation.
Introduction
In order to ensure the long-term sustainability and
growth of enterprises, the entrepreneurial activity
involves a series of changes in a set of business
activities in order to create a more efficient organizational structure and configuration of business.
The transformation of the organizational structure
involves the creation of a new concept of organizing a company through the formation of smaller
synergistically acting organizational units. Also,
this kind of organization is able to control costs of
doing business more adequately, which directly
reflects on the profitability of the business. By
generating the entrepreneurial activity and innovation through divisions, better business effects are
achieved. Such a form of organization implies
more responsible management at the head of divisions. Therefore, in this paper, we will devote a
special emphasis on the laws introducing the con-
cept of corporate entrepreneurship, as well as the
benefits and possible specifics of the concept. The
given concept is gaining in importance, taking
into shape specifics of the business enterprises
affected by the economic and financial crisis.
Measures in the field of corporate entrepreneurship can assist in improving the performances of
business. In this paper, we analyze the importance
of the application of intrapreneurship in terms of
business performance, the steps of introducing the
concept of intrapreneurship, the examples of successful foreign experiences of local practice and
whether it is possible to achieve the growth of a
company? Based on the foregoing, we have defined the basic research problem: “Does applying
the concept of corporate entrepreneurship as a
form of the organizational transformation of enterprises achieve the growth of enterprises?” The
goal of this paper is to emphasize the characteristics of the concept of corporate entrepreneurship
Ljubiša Vladušić et al.
and opportunities to improve their business performance through growth based on its application.
Based on the previously mentioned, we set up the
basic research hypotheses of this study: “The application of the concept of corporate entrepreneurship positively affects the growth of a company.”
In the research part of the paper, the examples of
the successful application of the concept of intrapreneurship in foreign companies will be analyzed.
1. A literature review through the
past research
Enterprise managers in large companies have begun to realize the need for innovation and flexibility in order to improve business. One of the ways
to achieve it is certainly to unify the advantages of
small companies (creativity, flexibility, innovation...) with the market power and the financial
resources of large enterprises. This concept is now
known under the term corporate (internal) entrepreneurship. Significant research into the development of intrapreneurship can be found in studies of the Center for Entrepreneurial Leadership
Business School in Buffalo (Boone and Kurtz,
1996, p. 121). Corporate entrepreneurship is developing within large corporations with a focus on
an internal orientation, and therefore bears the
name of corporate (internal) entrepreneurship
(Vukmirović, 2012, p. 84). Corporate entrepreneurship is the process whereby companies seek
new ways of using, maintaining or retaining innovation and realizing profits in a way that their employees are expected to create an “enterprise”
within the company (the company in the company).
However, a company is not defined by law,
but rather operates as a separate unit. That concept
has been known for more than twenty years now,
and one of its earliest advocates was Gifford Pinchot in the 1980s. (Lajović, Vulić, Vulić, Nikolić
& Drobnjak, 2010, p. 26). The given concept is
especially being confirmed today because of the
fact that, in the conditions of great changes in the
market and technological progress, the quick
adaption of enterprises through corporate entrepreneurship becomes an imperative and the key
factor not only to a success but also to a survival.
For this purpose, in order to avoid bankruptcy and
achieve growth, companies are forced to re-affirm
the entrepreneurial function (Vukmirović, 2012,
p. 85). The essence and the objective of the concept of corporate entrepreneurship consist of seeking ways how to make an organization more ef-
fective and more efficient. The corporate model of
an entrepreneurial organization is characterized by
a divisional organizational structure (Vukmirović,
2012, p. 179).
The divisional form of the organizational
structure involves grouping workers who produce
similar products, working with similar customers
or working in the same field or processes. This
type of organizational structure is mainly being
implemented in large organizations that have
more and different tasks, use different technology,
have more products and services, perform in several different markets and meet needs of more
consumers. The divisional form of the organizational structure is a suitable form of structuring in
volatile economic conditions. The featuring organizational structure involves the creation of separate organizational units – divisions, which have a
high degree of autonomy and conduct their everyday business activities autonomously. Corporate
entrepreneurship implies the existence of several
divisions operating independently of each other as
separate profit centers that have their own respective reports of their financial results. Corporate
entrepreneurship involves a certain form of an
enterprise transformation. Corporate entrepreneurship involves a form of the entrepreneurial
activity since it represents:
▪ the emergence and the development of new
businesses within a company, i.e. an internal innovation and entrepreneurship,
▪ a transformation or the rebirth of an organization through the renovation and revitalization of the ideas that the old organization
was built on, i.e. a strategic transformation,
the rebirth and the renewal of the company,
▪ creating and defining new business ideas
through an analysis of a possibility of
knowing new opportunities in the market,
▪ an assessment of the merits of such a business idea in a new entrepreneurial organization,
▪ the implementation of new business ideas
and the management of such a business,
and
▪ an ongoing evaluation of potential new opportunities and the use of permanent and
new changes.
Modern business conditions, characterized by
the great dynamism, the complexity and the unpredictability of changes, require continual adjustment, flexibility and a great speed of reaction
from all economic subjects.
27
28
In addition to the flows of globalization in the
world economy, international competition has
been strengthened at all levels simultaneously
with an increase in the market segmentation,
creating business groups, a high degree of diversification and the creation of a special market niche.
In such conditions, the organizational transformation of enterprises contributes to the strengthening
of vital branches and economic entities with a
significant growth potential, which brings overall
social progress.
There are two basic types of changes, primarily from the perspective of the degree of change
(incremental-radical), the way of their formation
(planned-coerced) and the coverage (the whole
company-part of companies), and these are constant and intermittent changes (Janićijević, 2012,
p. 43). Unlike continuous changes characterized
by a lower intensity, partial and incremental, intermittent changes are big, radical and fast.
Changes occur in all parts of a company and at all
its levels. The width, the depth, the nature and the
design of changes depend on a need for change
and the attitude of entrepreneurs and managers of
the modalities of creating change. Respecting the
entrepreneurial and the strategic approaches,
which are strongly adhered to in this paper, and
aspirations that new modalities of change can contribute more to the growth and the development of
enterprises than the repetition of already used
modalities can, particular attention will be paid to
the introduction of intrapreneurship as a type of
organizational change. Also, special attention will
be paid to innovation, innovation activities and
the process of introducing innovations as new
positive changes encountered for the first time in
a company.
If in the process of organizational transformation the operational connection and the strategic
importance of new entrepreneurial ventures with
the existing business enterprises are analyzed, the
four possible models displayed below are found.
Scheme 1 The design of organization intrapreneurship in
companies
Source: Milisavljević, 1991, p. 29
When there is no operational connection, and
there is a strategic importance of new entrepreneurial ventures, it is suggested that we should go
to a separate business unit. The reason is that, although it is strategically important, it does not
require the use of the existing resources of a company. If there is an operational connection and
strategic importance, it is recommended that a
new venture should directly be integrated into the
existing business. The top management must control and integrate a new project into the existing
business. In the third case, when there is no strategic importance, but there is an operational connection, there is no need for integrating a new
business venture into the existing operations. A
new business operates as an entrepreneurial activity outside the company. Finally, in the last
case, if there is no operational connection and no
strategic importance, it is suggested that a full
separation and the creation of an independent enterprise should be applied, and in such an independent enterprise, the existing company may not
have any business relations with the newlycreated company.
2. The phases of the introduction of
corporate enterprises
One of the most sensitive issues within the concept of corporate entrepreneurship is the process
of introducing corporate entrepreneurship. It is
essential that each company should recognize the
right moment to enter the process of the organizational transformation of the company based on
this concept and activities to apply. There are numerous reasons that have contributed to losing the
entrepreneurial spirit in companies and to constituting barriers to the implementation of organizational transformation through the concept of corporate entrepreneurship, namely (Lajović et al.,
2010, p. 28):
1. The nature of large organizations – there
are five factors working against the development of an entrepreneurial culture, and
they are:
▪ Interpersonal relationships – Once an
entrepreneur loses contact with his/her
employees, it is difficult for him/her to
establish a satisfactory level of entrepreneurship in the organization.
▪ Too many levels of decision making –
if the organizational hierarchy creates a
need for obtaining permits, it is difficult
to obtain the same, which is particularly
discouraging for employees at the lower
levels of the organization, reduces innovation and the entrepreneurial activity.
▪ A need to control – The management
establishes the standards and the rules
that are primary in relation to entrepreneurial behavior.
▪ Corporate culture – The guiding principles of traditional corporate cultures
do not encourage creativity, flexibility,
taking one’s own initiatives, independence and risk taking, nor do they encourage the basic characteristics of entrepreneurs.
▪ The time dimension – Striving for
short-term cost reduction in order to
remain within the limits of the planned
projection of revenues and expenditures, which negatively affects the creative ability of the individual.
2. A need for short-term profits – They keep
the price of shares and attract investment.
That is why managers are oriented towards
making short-term strategies, rather than
long-term plans for investments, which is
in no interest of entrepreneurs, who have a
“habit” of losing money and feel a need to
attract capital without providing a guarantee for a success.
3. A lack of an entrepreneurial talent – In
big companies, entrepreneurs are often
viewed as individuals, rather than team
players, as people more interested in their
own projects, rather than corporate goals.
4. Most large companies use several ways to
reward creative workers – Neither material nor immaterial methods of rewarding
individuals recognize innovation. When the
implementation of innovation is in question, it often happens that the cost of a failure to do so is too large and the reward is
too small. So, rewards for a success are often inadequate – a smaller number of companies give prizes to their entrepreneurs,
who are at least similar to those realized by
the self-employed.
Taking into account the fact that organizational transformation through the concept of corporate
entrepreneurship based on the divisional organizational structure, below you may learn about the
basic criteria for creating divisions (Erić, 2000, p.
360):
▪ According to products or services where the welding division encompasses
one product or service that the organization
has implemented.
▪ According to consumers – where each division oriented towards a particular type of
the consumer or the candidate that the organization serves.
▪ According to the geographical principle
– where every division responsible for a
geographical area, the first one for the city,
the second one for the state, the third one
for the region, the fourth one in Europe and
the fifth one for the rest of the world.
▪ According to processes – where they
comprise a group of related tasks (proverbs
and activities that are part of the same production process) that create a value for the
owners.
3. The situation in and outlooks for EU
countries – trends of organizational
transformation
Entrepreneurship is characterized by innovation
and risk in today’s ever increasing dynamics and
complexity of the environment and requires adaptive forms of organization. While small businesses
are originally requested to comply, so far this requirement has imposed on large enterprises a considerable responsibility for their very different
internal organizations. In this sense, these companies are developing a new concept of organization, which, basically, is characterized by a high
degree of decentralization and an extensive network of control points. With this model of internal
organization, large companies tend to provide a
more complete realization of the idea of the entrepreneurial concept of parts of the company and all
employees in it. On this basis, a corporate model
of entrepreneurial organization should be developed, characterized by:
▪ a multidivisional segmentation,
▪ a divisional and inter-battalion innovative
and creative integration.
The following is an overview of the number of
innovative companies, as well as the types of innovation in Europe, through organizational transformation.
29
30
Table 1 A display of the number of organizational transformations based on innovation, as well as the types
of innovation in Europe (as of the end of 2014)
730,701
577,702
12,481
14,580
20,553
7,998
386,833
334,893
7,598
3,952
10,623
4,378
Organizational and
marketing
innovation
102,027
81,972
1,159
1,372
3,479
946,000
127,073
100,743
3,234
6,916
75,468
69,194
6,802
118,567
1,405
4,131
5,641
1,509
15,720
727,000
25,531
15,968
50,625
20,163
26,330
4,158
5,895
8,081
16,552
72,201
835,000
8,550
7,694
64,234
1,838
4,118
31,227
37,002
2,886
66,751
649,000
1,234
1,944
1,027
4,883
302,000
14,481
9,016
14,247
12,167
8,116
2,054
2,098
4,544
9,861
31,981
533,000
3,723
3,976
32,990
Total company
European Union (27 countries)
European Union (15 countries)
Belgium
Bulgaria
Czech Republic
Denmark
Germany (until 1990, the former
territory of the FRG)
Estonia
Ireland
Spain
France
Croatia
Italy
Cyprus
Latvia
Lithuania
Luxembourg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
Finland
Sweden
United Kingdom
Iceland
Norway
Serbia
Turkey
Innovative
enterprises
Product
innovation
Process
innovations
80,775
72,872
1,845
734,000
1,944
960,000
62,433
53,814
1,824
724,000
1,688
1,122
19,147
26,248
10,964
328,000
883,000
9,182
13,254
718,000
18,829
143,000
543,000
669,000
273,000
1,988
80,000
2,454
2,005
6,051
2,816
4,353
611,000
440,000
791,000
1,831
8,401
58,000
839,000
885,000
10,406
349,000
671,000
3,259
6,053
301,000
11,892
4,000
187,000
288,000
291,000
1,104
38,000
3,431
1,785
1,847
1,174
635,000
368,000
405,000
1,051
3,172
11,040
136,000
1,000
504,000
3,692
532,000
1,012
9,611
5,867
666,000
11,004
155,000
236,000
342,000
131,000
609,000
67,000
2,685
1,669
2,514
3,080
955,000
339,000
457,000
787,000
1,462
2,596
94,000
446,000
571,000
5,674
Source: European Commision, 2014
Based on the table above, we can gain an insight into the situation in the Republic of Serbia in
terms of the given criteria.
Unlike individual entrepreneurship, corporate
entrepreneurship works in conditions of limited
competition (the internal market) and a high degree of the division of ownership, entrepreneurial
and executive functions. In fact, large companies
(corporations) are not owned by an individual, but
rather by a number of shareholders, on whose behalf executive tasks are performed by professional
managers and by many employees. As the number
of these units within a single company is limited
and corporations in their mutual relations are not
of the same strength as those on the market, they
operate as individual entrepreneurs. Today, within
a company (corporation), very different forms of
organization are developed for the purpose of encouraging managers and employees to devote
themselves to the development of internal entrepreneurship.
Most contemporary authors see corporate entrepreneurship as the foregrounds of the impact on
the quality and the speed of the development of
the national economy. What is emphasized is its
specificity to act as a locomotive of the development of individual entrepreneurship. Transnational companies, distinguished by the highest dynamic internal growth, i.e. the growth based on innovation and starting a new business or the establishment of new business units within one single
corporation, are holders of corporate entrepreneurship. A stable environment, in which a company has existed, is transformed into a turbulent
environment requiring from enterprises to capably
carry out a fast action if they want to exist and
develop themselves. This means that new requirements not only in terms of the shape of its
organizational structure but also in terms of the
form are set before a company.
4. Results and discussion
The basic research on innovative activities in the
field of organizational transformation of enterprises in the Republic of Srpska was conducted by
the Institute of Statistics of the Republic of Srpska
and includes a sample of 2,105 enterprises. Of
these, 1,664 are small companies, 380 are medium-sized companies and 61 are large enterprises. The businesses are systematized according to
several criteria. The survey was conducted in the
period from 2010 to 2012. The following table
accounts for non-technological innovation
through organizational transformation in the Republic of Srpska in the period from 2010 to 2012.
ship in the GM. Divisions, as separate organizational units, were created on the basis of production specialization and were located between the
top management of the enterprises and the individual business functions. The featuring concept
was a combination of the elements of the decentralization of the functioning of each of such separate divisions and the elements of centralization in
the matters of interest for the entire organization,
namely, acquisition, sale, financing, research and
development and marketing. Below, we provide
you with a graphical representation of the concept
of corporative entrepreneurship through the divisional organizational structure for General Motors
(GM).
Table 3 The growth of the GM after the organizational
transformation of the enterprise on the basis of the
concepts of corporate entrepreneurship
Table 2 The non-technological innovation of enterprises in
the Republic of Srpska by the type of innovation and the
size of the enterprise, in the period from 2010 to 2012
Source: The Institute of Statistics of the Republic of Srpska, 2014
Based on the data in the above table, we can
see that the total of 83.3% of the companies were
designated as non-technological innovation in
relation to the total number of the innovative enterprises. Based on the research, we can see that
small companies dominate with 68.44% of the
total number of the non-technological innovative
enterprises. However, the highest percentage of
the innovation of the small businesses is in the
areas of innovations in organizational transformation and marketing in the 130 companies accounting for 38.9% in the total number of the nontechnologically innovative small enterprises.
The roots concept of corporative entrepreneurship in one of the world’s biggest companies today – the carmakers General Motors (GM). After
the great crisis, the company experienced tremendous growth and development after the arrival
of the head of the company, Alfred Pritchard
Sloan, in 1920. After the Board had adopted his
“Plan of Reorganization”, guidelines were set,
based on the concept of corporative entrepreneur-
Source: General Motors, 1932, p. 29
In Columns Two and Three of the above Table, there is a visible increase in the company’s
accomplished net sales and revenue from sales in
the years after 1920 until the Great Depression of
1929-1933, when there is an evidenced decrease
in the sales volume and the sales revenue. Given
those current trends, GM’s geographic dislocation
of the production facilities, corporate entrepreneurship through the battalion structure proves to
be an adequate solution to successful enterprise
management.
Conclusion
The modern process of the organizational transformation of an enterprise through the concept of
corporate entrepreneurship implies an entrepreSTRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 026-033
31
32
neurial activity directed towards the divisional
organizational structure. Organizational transformation within the concept of corporate entrepreneurship involves the introduction of the entrepreneurial principles of the organizational structure. An extremely large contribution to the development of the concept was made by Adizes, in
his famous book titled “Lifecycle Management
Companies”. For an entrepreneurial company in
the process of an organizational transformation, it
is extremely important that its organizational
structure should encourage creativity and the entrepreneurial spirit.
The specifics of the concept of corporate entrepreneurship as well as the legality of the introduction of the concept to a company have been
analyzed. We have tried to show what the situation in the European Union is in terms of organizational transformation based on innovation,
where we have come to a conclusion that the situation in the Republic of Serbia is improving in
terms of organizational transformation in companies. However, the results and the effects of these
transformations have not gained great importance.
That refers to the problem of a deeper analysis of
the needs, the type and the intensity of organizational transformation, especially through the concept of corporate entrepreneurship.
The paper placed a special emphasis on the
implementation phases of corporate entrepreneurship. At this point, it is important that we should
emphasize that each stage has its own peculiarities, especially from the perspective of activities
which the company conducts. Also, the time aspect of the introduction of the concept of corporate entrepreneurship depends on the lifecycle of
enterprises which the company is located in. Entrepreneurial managers, who need to focus on and
pay attention to certainly one of the most important steps – the implementation of a plan program
of corporate entrepreneurship – certainly treat it as
a very important issue. In this regard, there are
specific characteristics of individual countries
through the basic level of development and innovation, based on natural resources, new technologies and so forth. Also, there are specifics in individual companies. Herein, we have analyzed the
situation with respect to organizational transformation, based on the research done in the Republic of Srpska. The survey was conducted by the
Statistical Office of the Republic of Srpska. The
results have shown that the degree of organizational transformation is present the most in large
enterprises. Considering that the Republic of
Srpska’s economy consists of (over 99%) small
and medium enterprises, a conclusion can be
drawn that it is necessary that the concept of organizational transformation and adjustment in
small and medium-sized enterprises should be
introduced. In this regard, in small and mediumsized enterprises, there is a trend of a lot easier
generation of the entrepreneurial spirit.
Further in the paper, the foreign experience of
good practice and the example of the company of
General Motors (GM), which took advantage of
having introduced the concept of corporate entrepreneurship, as well as of having found itself capable of generating growth after its application,
have been subjected to an analysis. We also found
the examples of the application of the concept in
the companies DuPont, Deutsche Lufthansa AG,
Ford, IBM, Coca-Cola and others. All the abovelisted companies have achieved their growths
based on the introduction of the concept of corporate entrepreneurship. Growth is generated on the
basis of sales revenue or the market capitalization
(the share price on the Stock Exchange). Based on
the given analysis, we can confirm the research
hypothesis that the application of the concept of
corporate entrepreneurship positively affects the
growth of a company. It is also important that the
existence of a time gap between the implementation of the concept of corporate entrepreneurship
and the period in which growth is achieved should
be pointed out. Most often, this period ranges between 2to 3 to 5 years. Also, it is important that
the fact that in a number of enterprises some elements of corporate entrepreneurship have already
been implemented, but have not been synchronized yet, and/or certain elements have been lacking to complement a given concept, should be
pointed out, which can be such as to affect an improvement of their performance. The basic entrepreneurial principles for successful business
through the processes of the organizational transformation of enterprises, namely to be committed
to their firms, to share profits with their employees and associates, treat them as partners,
should on all business issues encourage them to
talk with their partners, show that they appreciate
everything their associates do for the company
and the job, celebrate their success, listen to everyone in the company, exceed the customer’s expectations, control their costs better than their
competitors do and be innovative. The problem of
the role of innovation in the organizational transformation of a company can be viewed through
the two approaches: the first approach includes
the innovation process of the organizational transformation of enterprises, while the second one
includes the sources of innovation, which should
result in a better performance, based on the organizational transformation of the enterprise. SM
General Motors. (1932). Twenty-fourth Annual Report of
General Motors Corporation. Retrieved April 12, 2015
from Penn Libraries:
http://www.library.upenn.edu/collections/lippincott/corpr
pts/gm/gm1932.pdf
References
Lajović, D., Vulić, V., Vulić, N., Nikolić, N., & Drobnjak, R.
(2010). Uvod u biznis. Podgorica: Ekonomski fakultet.
European Commision. (2014). Retrieved April 14, 2015
from eurostat: http://ec.europa.eu/eurostat
Milisavljević, M. (1991). Marketing strategija. Beograd:
Ekonomski fakultet.
The Institute of Statistics of the Republic of Srpska. (2014).
Retrieved April 14, 2015 from: http://www.rzs.rs.ba/
Vukmirović, N. (2012). Preduzetništvo u ekonomskoj teoriji i
praksi, inovativni sistemi kreiranja i efikasnijeg
korištenja resursa. Banja Luka: Ekonomski fakultet.
Boone, E. L., & Kurtz, L. D. (1996). Contemporary
Business. Fort Worth: The Dryden Press-Harcourt
Brace College Publishers.
Janićijević, N. (2012). Upravljanje organizacionim
promenama. Beograd: Ekonomski fakultet.
Erić, D. (2000). Uvod u menadžment. Beograd: Ekonomski
fakultet.
 Correspondence
Ljubiša Vladušić
Faculty of Economics East Sarajevo
Vuka Karadžića 30, 71126, East Sarajevo, Republic of Srpska, Bosnia and Herzegovina
E-mail: ljvladusic@gmail.com
33
UDC 303.733.3:005.346
Received: March 05, 2015
Stochastic Models Applicable in
Consumer Relationship Management
Dominika Crnjac Milić
Faculty of Electrical Engineering, J.J. Strossmayer University of Osijek, Croatia
Martina Martinović
Ralu logistika d.o.o., Zagreb, Croatia
Vladimir Šimović
University North, Koprivnica, Croatia
Abstract
An economic system is an inherently stochastic behavior that takes place depending on several variables.
Lately, great attention has been paid to formulas and algorithms of economic decision making. As a result,
many methods have been used to find optimal solutions. Under the influence of the stochastic factors of economic systems, decisions affecting the course routing system through feedback systems must also include
uncertainty. Considering the relationship between the presence of certainty and uncertainty in the observed
business system, making business decisions can be classified as making a decision: 1) in terms of certainty,
when all parameters in the environment are known, so the future is said to be determined, i.e. determined with
certainty, and 2) in terms of uncertainty, when making a decision depends on the realization of events whose
realization is uncertain. Decision making in a case of certainty is less interesting from the research perspective
because the past is only certain, and as a rule, the future is what is only decided on. The subject of this research paper is related to the modelling of the process of preparation and decision making under conditions
involving risks, i.e. in cases where uncertainty can be replaced with probabilities. Research attention has been
focused on an analysis of stochastic models with regard to well-explored deterministic models. The hypothesis
that led us through the preparation of this research paper is: The optimization of inventory in retail can be efficiently implemented by using stochastic optimization models stock, which was used with the available data
from analytical CRM systems. The reason for addressing this research issue is that, in economic practice, we
often encounter problems related to the functioning of stochastic processes. As a rule, these are the systems
that characterize the stochastic function of time and space, whose development is made according to the laws
of probability; in managing relationships with consumers, it has turned out to be the specific and key uncertain
factor in a business’s success.
Keywords
Stochastic processes, model, management, consumers, uncertainty.
Introduction
The quantification of complex economic relations
has enabled a more accurate approach and a complete scientific verification of many theoretical
economic problems and gave support to economic
theory and practice. To build such models, from
the first idea of its setting all the way to the end,
by implementing realizations and all possible solutions, we have come across a number of problems. One problem is to determine the behavior of
the system we want to approximate with the model.
In today’s business world, due to high competition, many organizations have realized the importance of being more concentrated on consumers and of the need to invest large amounts of time
and resources in order to collect and analyze data
for the purpose of establishing better relations
with consumers. To this end, the development of a
CRM (Customer Relationship Management) business strategy is focused on the user, which is a
Dominika Crnjac Milić et al.
way to keep all their customers in order to increase customer satisfaction, and developing longterm relationships. As a company’s strategy,
CRM sets all consumers in the center, trying to
recognize their wishes and needs, as well as to
understand their current behavior and predict future ones. Its purpose is to ensure the effective
and measurable attracting of new customers and
improve the loyalty and satisfaction of the existing ones. A CRM strategy is based on data collected with the help of information systems applied in retail chains, often containing the provider identification by credit card thanks to which,
data about consumer behavior and buying habits
are collected. Data by themselves are not enough,
and their interpretation is the key to the creation
of a basis for making business decisions.
Classical economic models based on functional dependency or the deterministic observation of
the real world, often lack effectiveness in the decision-making process offered by stochastic models, in which there is no determinism in a classical
sense, and the connection between phenomena is
defined with a certain confidence – by a stochastic
relationship. As part of this research work, an
analysis of a database will be carried out in this
paper, we will seek a possibility of creating a stochastic model that will be capable of providing
appropriate management information regarding
consumer behavior from available data, and consequently the optimization of inventory at retail
and the optimization of the consumer-serving system.
t , t   0,   is the random process
values
in
the
set
S  0,1, 2,3,... , 0  0, t has stationary
and independent increments, and for each s, t  0
is
P   s t   s  k  
 t 
k!
k
e  t ,   0, k  0,1, 2,...
It is easy to show that the mathematical expec-
tation is E  t   t . The correlation function
is R  t , s    min s, t   ts for s  t  0 .
2
Really,


R  t , s   E  t   s   E t  t    s  t   
 E  t2   E  t  E   s  t  
  2t 2  t  t   s  t   t   2ts 
  min s, t   2ts.
Similarly, we find that the covariance function
is K  s, t    min s, t . (Pavlić, 1993, p. 79)
It is not difficult to show these important properties of the Poisson process:
P  t t  t  0  1  t    t 
P  t t  t  1  t    t 
P  t t  t  k     t  , for each k  2 ,
wherein t  0 , and   t  are infinitely small
in
comparison
lim
  t 
t
to
the
size
of t ,
i.e.
 0.
 
number of some events in the interval 0,t , or
Model A: The Poisson process
the
son distribution P  t  . (Sarapa, 1992, p. 382)
The process  t should be understood as the
The analysis of the available stochastic models
applicable to the management of relations with
consumers will be carried out through a number
of models to gradually be developed.
with
i.e. the random variable  s  t   s has the Pois-
t  0
1. An analysis of stochastic models
applicable to the management of
relations with customers
Let
 * ,
the example of the number of customers entering
the selling place, and then  t t   t is the number of events, i.e. the number of new customers in


the time interval t , t .
The last feature says, if the length of the interval t  0 , as an assumption, then, it is likely
that there will be more than one event, i.e. customers, an infinitely small size compared to t .
Furthermore, the probability that an event is to
realize is an infinitely small size of the same order
as t , and the likelihood that there will be no
events, i.e. the customer, is close to the size
1   t . The foregoing originates from the nature of the process.
35
36
By developing the functions e
lor polynomial, we obtain:
e t  1  t 
 t 
 t 
2
2!

3
3!
 t
in the Tay-
P  t t  t  1
 t 

P  t t  t  n  
1
1!
0!
0
n
n!
e t  1  t    t  ,
,
,
e t   t  1  t    t      t 
n
Since p0  t   1  p1  t  ,
P   s t   s  k  
 t 
 1   t

 0
 .

 .
 .

then
e  t , k  0,1, 2,... ,
and  t is the Poisson process. (Kurepa, 1984, p.
104)
Let the interval  s, s  t  be divided into n
equal parts and let t 
t
. If n grows, t ben
comes a little bit, and can be applied to the properties (**), which rejects a possibility that, in the
small interval t , more than one event can be
realized. This means that in each part, the length
t can be 1 or 0 implementation of events. The
likelihood that, in the entire interval with the
length t  nt being the k realization of the
events is equal to
P   s t   s  k    kn   t  1  t 
k
nk
k
 t   t 
  nk     1  
n 
 n  
P   s t   s  k 
k!
k
e
 t
, k  0,1, 2,...,
(Vranić, 1970, p. 186)
From the above, it can be concluded that the
p0  t   p1  t   1 , which indicates that in the
interval there is no more than one of the arrivals,
... 

1- t  t ... 
.
. ... 

.
. ... 
.
. ... 
0
If  t is the Poisson process and the random
variable Tn is the length of the interval between
the realization of the  n 1 th and the n th event,
and if it is a random process representing the
number of the customers who entered the retail
outlet, let Tn be the time that elapses between the
entry of the  n 1 th and the n th customer. This
model will show that the time Tn has an exponential
distribution.
Really,
FT1  t   P T1  t   1  P  t1  t  . The event
T1  t means that the first event is not realized
until the moment t , i.e.  t  0 . Since it is
nk
(Pavlić, 1993, p. 65).
If the last expression is transformed and allow
that n   , then we obtain:
 t 

t
Model B: The exponential process
k
k!
stems
probability matrix is
suming that the test is satisfied (**) for the stochastic process  t with stationary independent
that  0  0 ,
it
p0  t   1  t , and the stochastic transition
length t , i.e.  s, s  t  , will be considered. As-
and
In addition to this, the
the subinterval, in which case p1  t   t .
The characteristics (*) and (**) can be shown
to be equivalent. For this purpose, the interval
increments
s
probability that in the subinterval t one of the
arrivals will occur is proportional to the length of
...  1  t    t  ,
e t  t 1  t    t    t    t 
 t 
for each n  2 .
 t 
 p  t   0 .
s 0
where
P  t t  t  0  
n
i.e.
P  t  0   P  t   0  0 
and FT1  t   1  e
 t
 t 

0
0!
e  t ,
, t  0 , means that T1 has
an exponential distribution. Let n  1 , then it is
FTn  t   P Tn  t   1  P Tn  t  



 1   P Tn  tTn 1  s  Tn1  s  ds 
0

 1  e  t  
0
Tn1
 s  ds  1  e t ,
t  0,
indicating that the Tn has an exponential distribution for each n  N .
It is not hard to see that in Model A the parameter  , representing the average number of the
generation of events, depending on the problem to
be treated, may be an application number of arrivals, or the like, which are related to the unit of
time. The parameter  can be considered as an
average rate of arrivals, i.e. the arrival, which is of
course outside the management’s decisions. In
addition to the rate of the arrivals, interesting
quantities are imposed, such as the time of servicing and the rate of departures, or servicing, which
can be influenced by the management’s decision.
In other words, it is possible to influence an increase in the likelihood of shortening the service
time. In many models, serving, serving time is a
random variable with an exponential distribution,
as shown in Model B. Moreover, this kind of distribution ensures that the process of the formation
process, along with the process of the disappearance of the maintenance of the property of the
Markov process. If  is the rate of extinction,
then the intensity of the circulation of appearances
and disappearances is measured as the ratio

.

The theory of the Markov processes based on a
mathematical methodology is very well developed
by Romanovski, Kolmogorov, Dobelin, Doob and
others. (Vranić, 1970, p. 123)
The stochastic process  t , t  T is the Markov process with a discrete set of states S , if for
any n 2,3,... and
arbitrary
t1  t2  ...  tn from T and
choice
for
all
x1 , x2 ,...xn  S , it is worth

 
P  tn  xn tn1  xn 1 ,..., xt1  x1  P  tn  xn tn1  xn 1
of
.
The previously written relation is the property
Markov’s that reads: if the “past”

 and the “present”  X  are
known, then the “future”  X  depends only on
t1
,  t2 ,..., X tn2
tn 1
tn
the “present”, rather than “the past”. The predefined systems are called stochastic systems
without memory. Each random process with independent increments is the process of Markov’s
and is fully determined by distributions of the
second order. Furthermore, let  t , t  T is a ran-
dom Markov process, previously defined, and let
S be a set of values of a random process. Since
the processes of Markov are the most commonly
used in the examination of economic systems, it is
natural that the process  t , t  T is seen as the
state
of
the
system
time t  T .
in
Let
S  s1 , s2 ,..., sm  be the picture of random
processes and si , i 1, 2,..., m is the status of
the system, the set T is a collection of moments at
which the system observes. In the case of
T  t0 , t1 ,..., tn ,... being a discrete set, there is
no loss of generality; if instead of it we observe
the set T  0,1, 2,..., n,... . The stochastic
process  n , n  N  0,1, 2,...n,... is
0
called

random series or chain. In the case of T  0,   ,
it is a random process with continuous time.
Markov random processes are particularly interesting for an economic research into transition
probabilities
pij  t0  t , t0   P  t t  s j t  si i, j  1, 2,..., m ,

0
0

i.e. the likelihood that the system will shift from
the state si at the moment t0 to the state s j at the
time t0  t . The Markov stochastic process is said
to be homogeneous if the transition probabilities
do not depend on the initial moment t0 , but rather
only
on
the
 t0  t   t0  t .
difference
of
the
variables
At first glance, this condition
resembles the condition of the weak stationary
condition, although it can be seen as weaker than
the other one. From the above-mentioned, it can
be concluded that the Markov process is homogeneous, but the uniform Markov process does not
have to be stationary.
In this research study, mainly homogeneous
Markov processes are interesting. Since complex
systems with stochastic and dynamic behaviors,
characteristic of many economic systems, can be
modelled by Markov chains, they will be the subject of interest in future considerations. Important
feature applications in the field of economics refer
to the Markov chains with discontinuous time.
2.1. The Markov chains
The Markov chain  n , n  N is the set of ran0
dom variables  0 , 1 ,...,  n ,... which is the set
37
38
of states S  s1 , s2 ,..., sm  final. The attribute of
the Markov is defined so that, for all natural numbers
k 0  k 1  . . .  k  n and all
si0 , si2 ,..., si , s j  S is valid

 
P  n  s j k0  si0 ,  k1  si1 ,...,  k  si  P  n  s j k  si

(Vranić, 1970, p. 122).
At the moment the n system  n can be in
one of the states si ,
with
the probability
P  n  si   pi  n  ,
where
i 1,2,..., m , n  N 0 and
the
probability
pi  n is called the probability state of the system
 n at the moment n . The foregoing can be written in the matrix form of
p  n    p1  n  p2  n  ... pn  n   , n  N 0 .
 p11  n  p12  n  ... p1m  n  


 p21  n  p22  n  ... p2 m  n  
P  n  
   pij  n  mm





 p  n p n
pmm  n  
m2
 m1
The distributions of the second order are determined by probabilities that state i.e. by the distributions of the first order and transition probabilities. Namely, since it is a random sequence, i.e.
each section is a discrete random variable, the
distribution of the second order is determined by
the laws of the distribution of the two-dimensional
cross-section  n and  k , where n, k  N 0 .
From the above, it follows:


P   n  s j ,  k  si   P  n  s j k  si P   k  si   pij  n  k  pi  k 
for all i, j 1, 2,..., m , n, k  N , n  k .
0
It may be noted that the joint distributions  n
If the fixed point in time is n , then the state of
the system  n is a discrete random variable with
the law of distribution
s2 ... sm 
 s1
n : 
.
 p1  n  p2  n  ... pm  n  
and  k are calculated by multiplying the probability of the transition with the probabilities of the
state. Similarly to the previously mentioned, it can
be seen that the allocation of a higher order is obtained by multiplying the corresponding probabilities of the transition with the probabilities of the
state. It is obvious that the homogeneous Markov
chain  n , n  N is fully determined
0
▪ by
The number of the types of the matrix
the
probabilities
of
the
pi  n  , i 1, 2,..., m , n  N and
state
0
p  0 , p 1 ,..., p  n  ,... represents the first order distribution chain  n , n  N .
0
▪ by the probabilities of tge transition
The transition probabilities pij  n are of great
importance in defining the Markov chain, where
i, j 1, 2,..., m , n  N 0 ,

 

pij  n   P  k  m  s j k  si  P  n  s j 0  si .
The probabilities pij  n are called transition
probabilities, from the state si to the state s j , in
the n steps, and are written in the form of the
square matrix of the order m  m and called the
transition matrices in the n step.
pij  n  , i, j 1, 2,..., m , n  N 0 .
The following statement is of great importance
for economic research. The statement: The homogeneous Markov chain  n , n  N
termined if the following is known:
0
 
▪ the transition matrix P  pij
is fully de-
m m
and
▪ the initial probabilities P   p1 p2 ... pn 
As evidence, the equations of Chapman–
Kolmogorov (Sarapa, 1992, p. 187) and Bayes’
theorem (Pavlić, 1993, p. 34) are used. The stochastic process is stationary if the following is
true:
p  pP , respectively
j 1, 2,..., m , it is lim pij  n   p*j , wherein
n 
m
pi   pr pri , i  1, 2,..., m .
the limit values p
r 1
pend on i, i 1,2,..., m . The probabilities p j ,
*
For the purposes of making stationary and
non-stationary clarifications, one example can be
mentioned. For breakfast each morning, the consumer buys the product 1 or the product 2. If one
morning he buys the product 2, the next morning
he will buy the product 2 or the product 1 with the
same probability; but, if one morning he buys the
product 1, then the next morning he will certainly
buy the product 2. The transition matrix should be
found and the stationarity of the stochastic process
should be examined if the initial likelihood is:
 2 1
1 1
 , b) p  
 , where
 3 3
2 2
a) p  
j 1, 2,..., m are referred to as the final probabilities and the same are interpreted as the probability of the system state in a distant future, i.e.
 s1 s2 ... sm 
. The matrix recording of
   * *
* 
 p1 p2 ... pm 
the final probability is p *   p1* p2* ... pm*  . (Sarapa, 1992, p. 188) It is useful to bear in mind the
following consequences of the previous arguments:
▪ Final probabilities can be calculated from
the
system
of
equations
s1 - the consumer buys the product 2,
m
p*j   pi* pij ,
s2 - the consumer buys the product 1.
1 1
p  pP, P   2 2  . It is known that


1 0 
1 1
 x 1  x    x 1  x   2 2  , the solution is
1 0 
2
x .
3
 2 1
a) If the initial probability p  
 stems
 3 3
p  n   pP  pP  P
n
n 1
matrix form p  p P and
1 1
 , the process is not statio2 2
 2 1
nary because 
 is the only one solu 3 3
tion of the equation p  pP .
b) For p  
Let for the Markov chain n0  N , where
0
i, j 1,2,..., m .
pij  n0   0 for
Then,
*
for
all
every
*
m
p
j 1
*
j
 1.
lim P n  P * , wherein P* is the matrix of
▪
n 
all the same species p * .
q   q1q2 ...qn  ,
▪ If
m
q
i 1
i
wherein qi  0 ,
 1 , then lim qP n  p* .
n 
▪ If p  0  p , then the Markov chain is
*
stationary,
i.e.
p  n  p* for
every
nN0.
 ...  pP  p ,
it implies that the process is stationary;
i.e.
j  1, 2,..., m or in the
i 1
In order to test stationarity, it is necessary that
the matrix equation be solved:
P  n0   0 ,
j 1, 2,..., m do not de-
*
j,
Note: It is not difficult to show that the Markov chain described in the previous example has
the final probability. Really, since the P  0 ,
the conditions of the previous statements are satisfied, and there are final probabilities
p *  p1* p2* , originating from the system of
2


1 *
p1  p2*
2
2
1
p1*  , p2*  .
3
3
equations p1* 
and p2* 
1 *
p1 ,
2
i.e.
39
40
2.2. The Markov processes and their
application
▪
By studying the Markov chains, the development
of the system  n , n  N at discrete moments is
discussed. Since it is beneficial for economic
practices, this paper monitors the Markov systems
0

during the continuous time interval 0, . The
mathematical models that describe such systems
are called the Markov processes  t , with the

continuous parameter t  0,   , where t is time.
Given the needs related to the CRM, a simpler
form of these processes will be discussed in this
study. For this purpose, it will be assumed that:
▪ the set of conditions S  s1 , s2 ,..., sm  is
the final set,
▪ the Markov process is homogeneous, i.e.
the transition probabilities are invariant in
the translation time.
Taking into account the previous assumptions,

we learn that: the process  t , t  0,   , is the
homogeneous Markov process if for every
and
every
0  t0  t1  ...  t  h
si0 , si1 ,..., si , s j  S the following is valid:


The probabilities P  t  si  are called probstates
and
are
tagged
with
pi  t  , i 1, 2,..., m or in the matrix form
P  t    pij  t  
m m
. By analogy to the Markov
chains, the following rules are come up to surface:
▪ the Markov process is fully determined
a) by
the
early
probabilities
p  0    p1  0  p2  0  ... pm  0   ,
b) by
the
transitional
P  t    pij  t  
▪
m m

probabilities
, t  0,   .
1, i  j
pij  0   
, i.e. P  0   , wherein
0,
i
j


 is the unit matrix.
every i, j 1, 2,..., m
m
pij  t  h    pik  t  pkj  t  or in the matrix
k 1
form P  t  h   P  t  P  h 
▪

every t , h 0,  and
for
every
m
j 1,2,..., m p j  t  h    pk  t  pkj  h  or
k 1
in the matrix form p  t  h   p  t  P  h 

if the existing t0  0,   is such that
▪
P  t0   0 i.e. pij  t0   0 for
i, j 1,2,..., m ,
then
every
for
every
j 1,2,..., m lim pij  t   p *j   0,1 ,
t 
m
p
j 1
*
j
 1.


The probabilities p *  p1* p2* ... pm* are called
the final probabilities. Assuming that the functions pij  t  are continuous in the interval  0,
be marked by
 P   h  s j  t  si   P   h t  s j   0  si  .
of

every t , h 0,  and
we can introduce new facts that will clearly describe the Markov process. For this purpose, it can
P  h  s j  t  si0 , t  si1 ,..., t  si 
abilities
the Chapman–Kolmogorov equations: for
ij , i, j 1, 2,..., m , the right
derivative at the point 0 of the function pij  t  ,
i.e.
ij 
dpij t
dt
t 0  lim
pij  0  t   pij  0 
   ij 
m m
t
t 0
or the matrix record:
, A  P  0  
dP  t 
dt
t  0 . (Ku-
repa, 1984, p. 193)
If ij  R (set of real numbers) for every
i, j 1,2,..., m , the Markov process is called
conservative. The features of the coefficient ij ,
i, j 1,2,..., m
▪ for
every i, j 1, 2,..., m ,
i  j for
small t  0 , when t  0 , the following is valid:
pij  t   ij t, pii  t   ii t  1 (*)
▪ for every i 1,2,..., m is
m

j 1
ij
 0 , i.e.
the sum of the elements of any type of the
matrix, A is equal to 0.
Model C: The process arrival and departure of consumers (customers)
Assuming a system in which the state of the
system  at the moment t is considered as the
number of consumers (customers), it follows that
the set of the states of the previous system is
S  0,1, 2,... . Let  t be the homogeneous
On the basis of the relation (*) stems
0
0
0

 0


0
 
 1  1  1 1

  0
2
 2   2
2


0
3
 3  3  
0







m
Based on the equation
k 1
the numbers n can be called the arrival
rates;
▪ if the system is in the state n at the moment t , the probability of the transition into the state n  1 at the moment t  t , for
small t  0 is approximately equal to
 n t ; the numbers  n can be called the
departure rates;
▪ if the system is in the state n at the moment t , the probability that it will stay in
the same state n at the moment t  t , for
small t  0 is approximately equal to
1   n  n  t ;
▪ all the other transition probabilities are approximately equal to 0, i.e. significantly
lower than the probability of the abovementioned, and they are infinitely small in
size in relation to t , where t  0 .
The above conditions can be written as:
p00  t   1  0 t
pnn  t   1   n  n  t ,
n  1, 2,...
pn ,n 1  t   n t ,
n  01, 2,...
pn ,n 1  t    n t ,
n  1, 2,...
*
k kj
 0 , or the
matrix records p*   0 , the system of the algebraic equations is obtained, namely:
0 p0*  1 p1*  0,
Markov process with the following characteristics:
▪ if the system is in the state n at the moment
t , the probability of the transition into the
state n  1 at the moment t  t , for small
t  0 is approximately equal to n t ;
p 
n1 pn*1   n  n  pn*  n1 pn*1  0,
za
n1,2,... ,
p0*  p1*  ...  1 ,
on the basis of which the final probabilities are
*
found. It is not hard to calculate all pn ,
n1,2,... by using p0* , which gives a recur  ...
*
*
sive formula pn  0 1 n 1 p0 , n1,2,... ,
12 ...n
and the term is included in the last equation of the
system, as follows:
 


p0*   1  0  0 1  ...   1 .
 1 1 2

If  n  0 , for n1,2,... that refers to the
process
of
the
pure
arrival,
if n  0 ,
n1,2,... , that refers to the process of the pure
departure. It may be noted that the previously analyzed Poisson process (model A) is the process of
the pure arrival, and that it is the Markov process,
where n    0 , n1,2,... , and the matrix
A is
   0

0  

 0
0 

 
 
0 

0 
.
 



If, in the arrival and the departure processes,
the consumer population of the system is limited
to the k consumers, the matrix A has the following form:
41
42
 0

 1
 0

 
 0

 0

0
0
0
0
1

0
 1  1
0
0
0
2
 2   2

0
0
2

0

0

0
0
0
0



  k 1

 k 1   k 1
0
k
0 

0 
0 

 
k 1 

  k 
and the final probabilities are still.
Model D: Systems serving consumers (buyers) and waiting queues (Crnjac Milić, Crnjac,
2008, pp. 185-198)
There are different stochastic processes that
can be used in serving the consumer (customer) in
retail stores. These are systems that perform certain services to consumers (customers) and by the
rule in the random time intervals. If, in the system, there is a vacancy for the performance of
services, the consumer (buyer) who has just arrived is immediately being served by its customers. Of course, when all slots are occupied, it
creates a queue (tail), which is waiting for a spot
in the next serving. Clients come by chance and
they are served immediately if, in the system,
there is a vacancy to serve, but line up if all slots
are occupied. After having been served, they leave
the system. There are many systems of serving
depending on:
▪ the processes describing the arrival
▪ the mechanisms of servicing
▪ the queue length;
a) 0 – the system with dismissal
b) K – the system with the finite waiting
queue
c) ∞ – the system with the infinite waiting
queue.
Below, a system with a single place to serve,
where the receivable is the Poisson process with
the assumption that the length of service activities
on the place to serve has an exponential distribution will be described.
If starting from the assumption that the receivable is the Poisson process, the essential facts are
as follows:
▪ The stochastic process (Saraoa, 1992, p.
284) Yt , representing the number of receivables (the number of new consumers)
in the interval  t , t  t  , t  0, t  0 ,
has the Poisson distribution (Pavlić, 1993,


p. 79) P  t  , i.e.
P Yt  k 
 t 

k!
k
e t , k  0,1, 2,... .
▪ On Model A, it can be seen that
P Yt  0   1  t ,
P Yt  1  t ,
P Yt  k   o  t   0, k  2, 3,... ,
which means that, for a short time interval, it
is very unlikely that there will be any new receivable, that the receivable will occur with a low
probability, and more than one will occur with a
negligible probability as compared to the previous
two cases.
▪ The time between successive arrivals of
customers (two successive receivables) has
the exponential distribution
    , as can
be seen in Model B. Thus,  is equal to
the expected (mean) value of the time between the arrivals of two successive consumers (two subsequent receivables), with
the  expected (mean) speed of the arrival
of claims, i.e. the expected (mean) number
of new claims in the unit of time.
1
It can be assumed that the length of the service
activities T (random variable) in place to serve
has the exponential distribution     . For a fur-
ther elaboration of the process, the following ones
are important facts (Embrechts, Klűppelberg, &
Mikosch, 2003, p. 155)
▪ If serving is not completed by the moment
t , and is likely that it will be completed by
the moment t  t , it is then calculated
as follows:
P  T  t  t T  t  
P  t  T  t  t 
P T  t 

e t  e  
 1  e  t  t ,
1  1  e   t 
  t t
▪ If serving is not completed by the moment
t , it is likely that it will be uncompleted to
moment t  t , which is calculated as
follows:
▪
P T  t  t T  t  


   t t 
P T  t  t , T  t  1  1  e

 e  t  1  t.
P T  t 
1  1  e  t 
▪ Since the random variable representing the
service time has the exponential distribution     , the expected (mean) value of
serving is equal to  1 , wherein the para-
meter  is equal to the expected (mean)
speed at the position serving for serving,
i.e. the expected (mean) number of served
customers in one place to be served in the
unit of time.

Let X t , t  0,  is
the
random
process,
S  0,1, 2,... . According to the above-
explained, we can infer the probability of the transition pij  t  .
p00  t   P  X t t  0 X t  0   1   t.
If i 1, 2,... , then
pi ,i 1  t   P  X t t  i  1 X t  i   t 1  t   t.
pi ,i  t   P  X t t  i X t  i   1  t 1  t   t 2  1       t.
If i 0,1, 2,... , then
pi,i1  t  P Xtt i 1 Xt i  1t t  t,
and if i, j 0,1,... , i  j  1, then
pi, j  t  P Xtt  j Xt i o t 0.
which is
pii  t   1       t ,
i  1, 2,... ,
pi ,i 1  t   t ,
i  0,1,... ,
pi ,i 1  t   t ,
i  1, 2,... ,
pi , j  t   o  t  ,
i, j  0,1, 2,... , i  j  1,
every i 1, 2,..., m , i  j, for
small
t  0 , (when t  0 ), it is worth
pij  t   ij t , pii  t   ii t  1 .
 pij  t 
, i j
pij  t   pij  0   t
,
ij 

t
 pii  t   1 , i  j

t
i  j , pii  t   ii t  1.

0
0

0
  


  
0

  
...
...
...
... 
... 

...  .

... 


It may be noted that this process is a process of
arrival
and
departure,
where
n  , n  , n 0,1,... .
(Pauše, 2003, p.
176) It follows that the existence of the finite
probability p * is conditional by convergence of
the geometric series:
k


 2
1   2  ...     .
 
k 0   

If
 1 (i.e. if    , which means that the

speed of the arrival of requisition is less than the
speed of the service), then the sum of the order is

, which is
 
p0*  1 
and t is not difficult to show that it is worth:
Really,
 
 

A 0

 0
 ...

equal
p00  t   1  t ,
i  j , pij  t   ij t ,
From the proven, we can generate the matrix
A
whose value at the time t is equal to the number
of receivables (consumers) in the system (i.e. the
sum of the receivables or consumers in the waiting queue and in place for the service).This means
that the set of states of the system X t is the set
for
from which
 * k
,p 
 k k
 
 1   , k  1, 2,... .
 
This means that if the system works long
hours, the probability that the system is idle is
equal to p0*  1 

, and there will be k  1 cus
tomers in the queue, plus one in place for serving
 
1   , k  1, 2,... .
 
If the system to serve has the k place to serve,
pk* 
k
k
and all other conditions are the same, as in the
previously described system, then the system is
abbreviated to M M k  and the matrix A has
the form
43
44
 
 

 0

A   ...
 0

 0
 ...


0
0 ...
0
  

0 ...
0
  2   ...
...
... ...
0
...
2
...
0
0
0 ... k 
0
...
0
...
0 ...
... ...
0
...
... 
... 
0
0
... 

...
...
...  ,

  k 
... 

  k  ... 
k
...
...
... 
0
0
0
0
which shows that, in this case, there is also a
system of arrival and departure, where
n   ,
n  0,1,... ,
 n  n ,
n  1, 2,..., k  ,
n  k  ,
n  k  1, k  2,... ,
it
k
i
k 1
i

.
k    k !
It is easy to calculate the final probability
n
 1
, n  0,1,..., k  ,
pn   
   An !
1
n

1
, n  k  1, k  2,... .
pn   
nk
   An ! k
 2
If the system to serve has the k place to serve,
and the n places in the waiting queue, and all
other conditions are the same as in the previously
described system, then the system is abbreviated
to M M k r . Matrix A is in the format
k  r  1 and has the form of:

0
0 ... 0
 





0 ... 0



 0
2
  2  ... 0

...
...
... ... ...
 ...
 0
0
0
0 ... k 

0
0
0 ... 0
 0
n  1, 2,..., k  ,
n  k  ,
n  k  1, k  2,..., k  r .
The final probabilities are still obtainable and
the following is obtained
wherein
n
If the queue converges, then it is a geometric
queue
1   
A      
i 0 i !   

 n  n ,
n
 1 
1     
1      ...     
 (the
 2!   
k !    i 1  k  

queue only converges if the
 1 ).
k
k
n  0,1,..., k  r ,
 1
, n  0,1,..., k ,
pn   
   Bn !
can be concluded that the existence of the finite probability depends on the convergence of the
series
2
n   ,
0 

0
0 
0
0 
,
...
... 
  k 
 

k  
k
0
which shows that, in this case, there is also a
system of arrival and departure, where

1
, n  k  1, k  2,..., k  r ,
pn   
nk
   Bk !k
i
k
1  1  
B     
k !  
i 0 i !   
k
i
  


.
i 1  k  
r
Conclusion
In order to better predict the behavior of consumers, the volumes and number of purchases, the
economic science resorts to mathematical methods. Today’s consumer research systems have
extensive features for monitoring data on the consumer, however, and after the complex processing
of these data, there is no assessment factor to be
applied to the data, which has been fully usable
and helpful. These considerations point to a broad
spectrum of quantitative methods applicable to the
analytical CRM subsystem. Therefore, the standard statistical methods of data processing, in particular those related to descriptive statistics, being
an integral part of the standard BI software applications, used in the analytical CRM, can and
should be complemented by the quantitative methods of data processing within the framework of
the analytical CRM system, especially those methods taking into account the stochastic processes
conducted in real economic processes. The models explored in this paper illustrate the possibilities of the application of the quantitative methods
to business decisions related to managing relationships with consumers, for which reason, then,
such models should be developed in modern analytical CRM systems. SM
References
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sustavu masovnog usluživanja. Poslovna logistika u
suvremenom menadžmentu (pp. 185-198). Osijek:
Ekonomski fakultet u Osijeku.
Embrechts, P., Klűppelberg, E., & Mikosch, T. (2003).
Modeling Extremal Events. Berlin, Heidelberg, New
York: Springer-Verlag.
Kurepa, S. (1984). Matematička analiza, funkcije jedne
varijable. Zagreb: Tehnička knjiga.
Pauše, Ž. (2003). Vjerojatnost - informacija, stohastički
procesi - pojmovi, metode, primjene. Zagreb: Školska
knjiga.
Pavlić, I. (1993). Statistička teorija i primjena. Zagreb:
Tehnička knjiga.
Sarapa, N. (1992). Teorija vjerojatnosti. Zagreb: Školska
knjiga.
Vranić, V. (1970). Vjerojatnosti i statistika. Zagreb: Tehnička
knjiga.
 Correspondence
Dominika Crnjac Milić
Faculty of Electrical Engineering
Kneza Trpimira 2B, 31000 Osijek, Croatia
E-mail: dominika.crnjac@etfos.hr
45
Received: May 20, 2015
UDC 004.8
007.52
Estimating Performances of Learned
Knowledge for the RBF Network as an
Artificial Intelligence Method
Belgrade Business School, Higher Education Institution for Applied Science, Belgrade, Serbia
Abstract
The main aim of this paper is to experimentally verify the impact of filter methods on the classification accuracy of the radial basis function (RBF) network. The goal of this research is also to present and compare different algorithmic approaches for constructing and evaluating systems that learn from experience in order to
make decisions and predictions, and minimize the expected number or proportion of mistakes. Fifteen real
data sets and three artificial data sets have been used to compare the results of classification accuracy with
the RBF network. We can conclude that it is possible to improve the system performance of inductive learning
rules in different problems, using the filter methods for reducing the dimensionality of data.
Keywords
Artificial intelligence, classification accuracy,feature selection, filter method, neural network, RBF.
Introduction
Machine learning is a field of artificial intelligence that deals with the construction of adaptive
computing systems that are able to improve their
performances by using information from experience. Machine learning is a discipline that studies the generalization, construction and analysis
of algorithms that have the ability to generalize.
However, as much as the applications of machine
learning are diverse, there are repetitive tasks.
Therefore, it is possible to talk about the types of
learning tasks that often occur. One of the most
common tasks of learning that occurs in practice
is classification. Classification is an important
recognition of object types, for example, whether
a particular tissue represents a malignant tissue or
not.
There is a wide range of classification algorithms available to us, each with their own
strengths and weaknesses. There is, however, no
learning algorithm which works best with all
problems of supervised learning. Machine learning involves a large number of algorithms such as:
artificial neural networks, genetic algorithms,
probabilistic models, rule induction, decision
trees, statistical and pattern recognition methods,
k-nearest neighbors, Naïve Bayes classifiers and a
discriminatory analysis.
In this paper, the radial basis function (RBF)
network is used. The RBF network offers a number of advantages, including requiring less formal
statistical training, the ability to implicitly detect a
complex nonlinear relationship between dependent and independent variables, the ability to
detect all possible interactions between predictor
variables and the availability of multiple algorithms for training. The main objective of this
paper is to show that it is possible to improve the
performance of the system for inductive learning
rules with the RBF network for classification
problems, using the filter methods and data dimensionality reduction techniques.
Various aspects of the feature selection have
been studied. A search is the key topic in the
study of a feature selection (Doak, 1992), such as
search starting points, search directions, and
search strategies. Another important aspect is how
to measure the goodness of a feature subset
(Doak, 1992). Algorithms for a feature selection
may be divided into filters (Fayyad & Irani, 1992;
Liu & Setiono, 1996), wrappers and embedded
approaches (Das, 2001). Filters methods evaluate
the quality of selected features, independently
from the classification algorithm; wrapper methods require the application of a classifier to evaluate this quality, whereas embedded methods
perform a feature selection during the learning of
optimal parameters. According to class information availability in data, there are supervised feature selection approaches as well as unsupervised
feature selection approaches.
The main aim of this paper is to experimentally verify the impact of filter methods on the classification accuracy of the RBF network. For this
purpose, the paper is structured in the following
way. In the first part of the paper, a model of the
RBF network is presented; in the second part, a
description of data sets is given. The third part of
the paper describes the methodology of experimental research. In the fourth part, we will try to
solve a problem by using the RBF network as a
supervised learning algorithm. To achieve greater
forecasting accuracy and make more appropriate
decision, the filter method for reducing the dimensionality of data is used. Also, in the fourth
section, the results of an experimental study that
have been collected during the survey are presented. In the last part of the paper, the obtained
results are discussed and directions for further
research are given.
1. The representation of the RBF
network model
The classification of neural networks has proved
to be a very good one only for more serious classification problems, where it is difficult or impossible to use the classical technique. Besides,
neural networks are well-suited to work in conditions of noise in data. From the point of view of a
layered mode of the organization of neurons in a
network, the network can be classified into a single-and a multi-layered one. The first layer is
called the input layer, the last is the output layer;
all other layers are called hidden layers. As a rule,
each layer receives inputs from the previous layer
and sends their outputs to the next layer.
From a structural point of view, depending on
the model used to build neural networks, neural
networks can be divided into static and dynamic
ones. In this paper, a static neural network is used.
The main characteristic of static neural networks
is that neurons are organized beforehand, so that
neurons are connected in a way with no form of
feedback. These networks cannot contain dynamic
members, making them structurally stable. Since
there are no dynamic members, the static response
of the neural network depends only on the current
state and the input values of the network parameters. Static neural networks are commonly used in
the identification process, process management,
and signal processing and pattern recognition. The
most common types of static neural networks are
the MLP and the RBF neural networks. The pseudo-code for RBF training (Basir, 2015) is shown
in Figure1.
trainRBF (in, out, width, MaxError, data) {
hidden = 0;
net = initRBFNetwork (in, out, hidden); // init network nodes
do {
//find the data vector that produces the largest error
i = findMaxNetworkError (data, net); / / i = indexof vector
/ / add neuron to the RBF layer at same point as the above
data vector
addRBFNeuron (net, width, data (i)); / / data (i) = center
point
/ / findthe overallnetworkerror
NetError = trainOutputWeights (net, data);
} while (NetError>MaxError);
}
Figure 1 The pseudo-code for RBF training
Source: Basir, 2015
2. The description of the data sets
Fifteen real data sets and three artificial data sets
have been used for tests, taken from the University of California, Irvine (UCI) repository of machine learning databases (Frank, Asuncion, 2010).
We used these data sets to compare the results of
classification accuracy with the RBF network.
These data sets are: breast cancer (bc),credit approval (ca), Statlog German credit data (cg), cardiography (ct), hepatitis (he), liver (li), lung cancer (lc), mammographic mass (mm), monk problems (monk1 (m1), monk2 (m2), monk3 (m3)),
mushrooms (mu), Parkinson (pa), Pima Indians
diabetes (pi), image segmentation (se), soybean
(so), Stat log heart (sh) and congressional voting
records (vo). Table 1accounts for the details for
the benchmark data sets that have been used from
the UCI repository of machine learning databases.
There are 18 data sets, out of which the 15 data sets are real, which means that they are obtained by collecting data from real, existing systems. The other three remaining data sets m1, m2
and m3 are artificial data sets, which means that
the data have not been collected from the real sys-
47
tem, but rather created by the researchers for research purposes. To obtain the reference data, real
and artificial data sets have been used to prove the
stated hypothesis.
Five data sets have more than 20 attributes, lc–
56, so–35, pa and ct–23 and mu–22 attributes. The
following data sets have the smallest number of
attributes: ma–5, li, m1, m2 and m3– 6 attributes.
We conclude that the observed data sets are data
sets with a very large number of attributes, as well
as those sets that have a small number of
attributes, which is good from the standpoint of
research. The observed data sets are balanced because there are data sets containing only categorical or only numerical attributes, as well as data
sets containing both categorical and numerical
attributes.
Table 1 Display data sets. “CV” means cross-validation
Total
Categorical
Numerical
Number of
classes
Training size
Test size
Reference
accuracy
Attributes
bc
9
9
0
2
286
CV
70.30
ca
15
9
6
2
690
CV
55.50
cg
20
13
7
2
1000
CV
50.10
ct
23
0
23
3
2126
CV
95.00
he
19
13
6
2
155
CV
78.10
58.10
Data set
48
li
6
0
6
2
345
CV
lc
56
0
56
3
32
CV
26.80
ma
5
0
5
2
961
CV
84.00
m1
6
6
0
2
124
308
50.00
m2
6
6
0
2
169
263
67.13
m3
6
6
0
2
122
310
52.78
mu
22
22
0
2
8124
CV
51.80
pa
23
0
23
2
195
CV
76.00
pi
8
0
8
2
768
CV
65.10
se
19
0
19
7
2310
CV
14.30
so
35
35
0
19
683
CV
13.47
sh
13
3
10
2
270
CV
55.00
vo
16
16
0
2
435
CV
61.40
Source: Author
Among the analyzed data sets, only two data
sets have a larger number of classes, se– 7 classes,
and so–19 classes. The reason for this is the fact
that in the majority of the problems of the classification, the existing instances are sorted into two,
possibly three classes, and rarely into a larger
number of classes.
Table 1 shows that the number of the instances
provided for training varies from a small number
of the collected instances, which is the case with
lc–only 32 instances, to the events that have a
much bigger number of the instances, for example
mu–8124 instances for training. In all real datasets, the10-fold cross-validation (CV) is used. The
researchers have created the artificial data sets
m1, m2 and m3, separating these data into two
groups: those that will serve to train and those that
will serve for testing, whereby a small number of
data are used for training (on average, around
25%). The last column of the table shows the reference accuracy for the real and the artificial data
sets.
3. The methodology of the
experimental research
The experiment was performed by using the
WEKA (Waikato Environment for Knowledge
Analysis) tools for data preparation and research,
developed at the University of Waikato in New
Zealand. When searching for the model that best
approximates the target function, it is necessary to
provide measures of quality models and learning.
In our experimental studies, different measures
can be used, depending on the problem; classification accuracy, as a measure of the quality of the
model, has been used.
To obtain a more reliable evaluation of learned
knowledge, cross-validation has been used, where
there is a full data set split into n approximately
equal subsets. In doing so, in each iteration, there
is an n-1 training subset; after the training, the
quality of learned knowledge is assessed in the
last remaining subset. The procedure described
above is repeated for all other subsets extracted as
the final quality score, obtained by taking the average score for each of the subsets. In our experimental study, the taken value of n is 10. Crossvalidation has been used in our experimental
study, because the procedure leads to a stable
quality evaluation. The advantage of this method
is that each of the n steps of cross validation using
a large amount of data in their training and all
available instances at one time have been used for
the purpose of testing.
In the experimental research, filter methods
have been used in order to reduce the dimensionality of the data. In our experiment, a solution
with the number of attributes that will be used
further in the study has been selected, which gives
the highest classification accuracy. The results
provide accuracy obtained as an average often
Jasmina Dj.
D Novaković
E
Estimating Performannces of Learned Knoowledge for the RBF Network as an Artificial Intelligence Method
repeetitions, eachh time withh 10-fold crossc
validation.
In
I our experim
mental researcch, the Paired t-test
has been used, whhere the level of significancce has
been
n set to a valuue of 0.05.The Paired t-testiss used
if th
here is a simultaneous deterrmination of classic
ficaation accuracyy for differentt data sets viaa two
metthods in orderr to determine whether the value
obtaained by diffeerent methods differs signifi
ficantly. The
T Paired t-teest is used to ttest the significcance
of the
t mean diffeerences pairs dd. according to
t the
follo
owing equatioon:
√
where
w
sd is a standard deviattion of the obttained
diffferences. If thee calculated vaalue of the parrameter t is greater thaan the tabular one (a criticaal value), the null hypoothesis is rejeccted and d is saaid to
be significantly different
d
from
m zero, or thaat the
p
is statistically significaant.
diffference in the pairs
The
T tables preesented below, the ones acccounting for classificattion accuracy, and the otherrs acnting for the time needed foor training dataa, use
coun
the signs “+” and “-” to indicatee either statistiically
bettter (+) or worse (-) results. The basic levvel of
sign
nificance of thhe classifier iis specified inn the
valu
ue of 0.05. In the tables of cclassification accuracy
y, the sign “+”” indicates a ssignificantly higher
h
valu
ue for classificcation accuracyy, whereas thee sign
“-” indicates a siggnificantly low
wer value for classic
ficaation accuracy..
The
T tables that contain thee data of the time
need
ded for traininng data, the “+
+” sign indicaates a
sign
nificantly lower value for the required time,
which means thatt it is a statisttically better result,
r
wheereas the “-” sign indicattes a significcantly
high
her value for the required ttime, which means
m
thatt it is a statistiically worse ooutcome. Conssidering that the time required for trraining data can be
nged, if diffeerent methodss for reducingg the
chan
dim
mensionality off the data are applied, it is good
thatt during the exxperiment a sm
maller value foor the
requ
uired training time can be obtained, beccause
then
n our algorithhm works fastter, which is especially important iff we have a prroblem in real time.
In
I our experim
mental researchh, whenever tw
wo or
morre algorithms are
a compared, the table of classic
ficaation accuracy and the table ffor the time neeeded
for training data are given. T
The comparison is
h that the secoond algorithm
m is an algorithhm in
such
which the pre-sellection attribuutes are perforrmed,
and the first algoorithm is the standard algorithm
hout the pre-sselection of atttributes. Wheen the
with
resultts for the timee required forr training dataa are
show
wn, they are expressed inn units of CPU
C
seconnds. The expeeriment was performed
p
on the
AMD
D Phenom (tm
m) 9650 Quard-Core Poceessor
2.31 GHz with 4GB
B of RAM.
f
Fiiltering methoods work inddependently from
the cllassification allgorithms. Thee attribute valuue is
estim
mated by analyyzing the geneeral characterisstics
of the data from thhe learning seet. These methhods
d
techniiques of the atttributes selecttion,
use different
becauuse there are several wayss of the heuristic
evaluuation of attribbutes. Filteringg methods aree dividedd into two maiin groups, deppending on whhether thee subsets of atttributes or inddividual attribbutes
are heuristically evvaluated.
t following filtering methhods
Inn this paper, the
for ranking
r
attribuutes, statisticaally and entroopybasedd, showing goood performannce in various domains are used: Innformation Gain (IG), Gain RaGR), Symmetrrical Uncertainnty (SU), Relief-F
tio (G
(RF),, One-R (OR
R) and Chi-Sqquared (CS). All
thesee methods rannk attributes for
f each data set.
Conssidering that thhe method of ranking attribbutes
rankss all the attribuutes in the ordder of their impportancee for the classsification prooblem, these methodss do not perfoorm an autom
matic reductionn in
the number
n
of the attributes. In order to realizze a
reducction in the number
n
of atttributes, there are
two possibilities:
p
( to use a thhreshold or (22) to
(1)
use an
a appropriatee number of attributes
a
for each
e
data set and each of
o the filteringg methods. In this
p
is ussed.
experrimental studyy, the second possibility
Figurre 2 The numbe
er of the attribute
es in the original data
d
set an
nd the optimal number of the attrib
butes obtained byy the
filter methods
Source: Author
Thhe number of the attributes in the originall data seet and the opttimal number of the attribbutes
obtained by the filtering
fi
methoods are shownn in
o of the 18 obFigurre 2. In the teen data sets out
serveed ones, exacttly one-half or
o more than oneo
half of the methoods reduce thhe number off the
STRATE
0
49
50
Jassmina Dj. Novakovićć
Estimating Performances of Learnned Knowledge for thhe RBF Network as an
a Artificial Intelligence Method
attriibutes to one-half. These daata sets are bcc, ca,
he, lc, ma, m3, mu,
m pi, sh annd vo. The greeatest
benefit of reducinng the dimensiionality of thee data
set belongs to lc,, with 56 attriibutes; the filttering
metthods have selected a ssmall numbeer of
attriibutes, even leess than one-ssixth, for eachh method
d, except the GR method. F
For the data set
s ca
obseerve that all filtering
f
methoods have provved to
be the
t most signifficant two attriibutes for the given
g
classsification prroblem, and that the other
attriibutes do nott affect the aachievement of
o the
greaater reliabilityy of the classiffication. For thhe he
dataaset, which oriiginally has 19 attributes, all
a the
filteering methodss show that tthere are six most
imp
portant attributtes for the studdied phenomennon.
For
F the artificcial data set m
m3, all the filttering
metthods show that there are onnly two signifficant
attriibutes for the given
g
classificcation problem
m. The
filteering methodss for the pi ddata set show
w that
therre are four attrributes important for the claassification problem, and
a in the casee of the vo datta set,
fivee attributes are important.
In
I the followinng experimenttal research, foor the
optiimal number of
o the selectedd attributes forr each
dataa set and eachh filtering methhod, the classsification
n accuracy of the
t RBF netwoork is checkedd. The
follo
owing text presents the results obtaineed. It
shou
uld be noted that
t
different sscales are show
wn in
the figures for thee absolute classsification accuuracy
o
to better determine thee differences existe
in order
ing among the ressults.
Table 2 The cla
assification accurracy of the RBF
allgorithm for the original
o
and the re
educed data setss
Source: Author
A
4. The
T
results
s of the exp
perimental
res
search
Thee classificationn accuracy of the RBF algorithm
can be observed in
i Table 2. In the three dataa sets
(ca, m1 and se),tthere are the results for at least
one of the filterinng methods thhat are statistiically
bettter than the base classifier. IIn one data sett (ca),
all the
t filtering methods
m
were statistically better
b
than
n the base classifiers.
Figures
F
3, 4 and
a 5 show tthe absolute differd
encee in the classsification accuuracy of the RBF
algo
orithm on the original dataa set and the RBF
algo
orithm with different
d
filterring methods.. The
applied method of
o filtering IG on almost onee-half
he data sets (88 sets) shows the same resuults as
of th
or better
b
results than the RBF
F algorithm on the
orig
ginal data set, whereas in onne data set, thhe result was statisticaally better. Inn two-thirds of
o the
dataa sets (12 sets)), the GR methhod shows the same
resu
ults as or betteer results than the RBF algorithm
on the
t original daata set, whereas on one datta set,
the result was stattistically betterr.
STRAT
TEGIC MANAGEMENT, Vol.
V 20 (2015), No. 4, pp.. 046-053
Figu
ure 3 The absolute classification
n accuracy RBF_
_IG
F and RBF_GR minus
m
RBF
minus RBF
Source: Author
Jasmina Dj.
D Novaković
E
Estimating Performannces of Learned Knoowledge for the RBF Network as an Artificial Intelligence Method
data set, the result was statisticaally better. In less
s
RF filterthan one-half of thee data sets (8 sets),the
m
showss the same reesults as or beetter
ing method
resultts than the RBF
R
algorithm
m on the origginal
data set, whereas inn the three datta sets, the ressults
were statistically better.
t
one-half of the data setts (7
Inn slightly less than
sets),,the OR filteriing method shhows the same or
betterr results than the
t RBF algorrithm on the orriginal data
d
set, and in
i one data seet, the result was
also statistically better.
b
The appplied methodd of
filteriing CS in lesss than one-hallf of the data sets
(7 setts) shows the same results as
a or better ressults
than the RBF algoorithm on the original data set,
and in one data sett, the result waas statistically betI three casess, the RBF classifier
c
togeether
ter. In
with the RF filterinng method hass led to statistiicalc
ly beetter results inn the observedd data sets, comparedd with the othher filtering methods
m
(nonee or
one case).
c
Fig
gure 4 The abso
olute classificatio
on accuracy RBF
F_SU
minus RB
BF and RBF_RF minus RBF
Source: Author
Ta
able 3 The stand
dard deviation for the classificatio
on
accura
acy of RBF with the
t original and the
t reduced data sets
A
Source: Author
Fig
gure 5 The abso
olute classificatio
on accuracy RBF
F_OR
minus RB
BF and RBF_CS minus RBF
Source: Author
In
I more thann one-half of the data setss (10
sets),the applied method
m
of filteering SU show
ws the
me results as or better resultts than the RB
BF alsam
goriithm on the original
o
data set, whereas inn one
d
for the classificaation
Thhe standard deviation
accurracy of RBF with
w the originaal and the reduuced
data sets
s by applyinng the filter methods
m
are shoown
in Taable 3. The Table
T
accountss for the fact that
standdard deviations generally doo not differ much
m
betweeen the standdard algorithm
m and the algoa
rithm
ms that use a reeduced data set. The least deeviaSTRATE
0
51
52
tion in the standard deviation is demonstrated by
the RF method, so that for particular data sets, the
standard deviation is less, but in some cases the
standard deviation is greater.
The time required for training data with the
RBF algorithm that uses the original and the reduced data sets is accounted for in Table 4. The
time required for training data with the RBF classifier for all original data sets is below 1.00
seconds, except for the two sets of data se and so,
where the required time is significantly longer.
The time required for training data with some of
the methods of filtering is longer, while for some
it is less than for the original data sets. In all data
sets, at least one method of filtering provides the
same or better results for the time required for
training compared to the original data sets.
Table 4 The time required for training data (in seconds)
with the RBF algorithm with the original and the reduced
data sets
Source: Author
The applied method of filtering IG in two data
sets shows worse results for the time required for
training data; and for four data sets, the results are
statistically better. The applied method of filtering
GR in none data sets shows worse results for the
time required for training data; and for three data
sets, the results are statistically better.
The applied method of filtering SU in only one
data set shows worse results for the time required
for training data; in three data sets, the results are
statistically better. The RF filtering method in all
data sets shows the same or worse results for the
time required for training data, and in almost all
datasets, the results are statistically worse. The RF
filtering method in all data sets shows the same
results as or worse results than the RBF algorithm
on the original data set for the time required for
training data, and in almost all data sets, the results are statistically worse.
The OR filtering method in almost all data sets
shows worse results than the RBF algorithm on
the original data set, and in most cases, these results are statistically worse. The applied method
of filtering CS in only one data set shows worse
results than the RBF algorithm on the original
dataset; in three data sets, the results are statistically better. Using the RBF classifier, the IG filtering method in four cases has led to statistically
better results for the time required for training on
the observed data sets, which is a better outcome
compared with the other filter methods.
The standard deviation for the time required
for training data with the RBF algorithm for the
original and the reduced data sets with the filter
methods is shown in Table 5. The Table accounts
for the fact that the standard deviations generally
do not differ a lot between the standard algorithm
and the algorithms that use a selection of
attributes, except for the data set so, where, with
the help of some methods, this value is significantly higher or significantly lower than in the
original data set. The maximum deviation of the
standard deviation shows the method SU for the
so data set.
Table 5 The standard deviation for the time required for
training data (in seconds) with the RBF algorithm for the
original and the reduced data sets
▪
▪
▪
the application of the previous selection of
attributes by using the filtering methods
with the RBF algorithm for classification
leads to a reduction in the negative effects
of the high dimensionality of data,
the previous selection of an attribute by the
method of filtering in some cases leads to a
significant reduction in time to build a
model,
applying the method of filtering in the system for inductive learning, it is possible in
some cases to significantly improve the accuracy of the existing learning methods.
In a further research, it would be interesting to
apply other techniques to solve the problem of the
dimensionality reduction in data, such as wrapper
methods and the extraction of attributes, and analyze and compare effects of their implementation.
These techniques could also improve the performance of classification learning algorithms. SM
References
Source: Author
Discussion of the results and future
research
According to the obtained results, a conclusion
can be drawn that it is possible to improve the
system performance of inductive learning rules in
different problems, using the filter methods for
reducing the dimensionality of data. To prove the
hypothesis, the filter methods for reducing the
dimensionality of data have been implemented
and empirically tested. The experimental results
reveal that the methods effectively applied contribute to the detection and elimination of irrelevant,
redundant data and noise in data. In many cases,
the filter methods select relevant attributes and
contribute to greater classification accuracy. In the
experimental study, the following has been demonstrated:
Basir, O. (2015). Neural networks. Retrieved June 22, 2015,
from University of Waterloo, UW Centre for Pattern
Analysis & Machine Intelligence:
http://pami.uwaterloo.ca/~basir/ECE457/week12.pdf
Das, S. (2001). Filters, wrappers and a boosting-based
hybrid for feature selection. Proceedings of the
Eighteenth International Conference on Machine
Learning (pp. 74-81). San Francisco: Morgan Kaufmann
Publishers.
Doak, J. (1992). An evaluation of feature selection methods
and their application to computer security. Davis:
University of California, Department of Computer
Science.
Fayyad, U. M., & Irani, K. B. (1992). The attribute selection
problem in decision tree generation. Proceedings of the
Ninth National Conference on Artificial Intelligence (pp.
104-110). Cambridge MA: AAAI Press/The MIT Press.
Frank, A., & Asuncion, A. (2010). UCI Machine learning
repository. Retrieved June 22, 2015, from University of
California, School of Information and Computer
Science: http://archive.ics.uci.edu/ml
Liu, H., & Setiono, R. (1996). A probabilistic approach to
feature selection - a filter solution. Proceedings of
International Conference on Machine Learning (ICML96) (pp. 319-327). San Francisco: Morgan Kaufmann
Publishers.
 Correspondence
Higher Education Institution for Applied Science,
Kraljice Marije 73, 11000, Belgrade, Serbia
E-mail: jnovakovic@sbb.rs
53
Received: September 8, 2015
Accepted: November 20, 2015
UDC 502.131.1
005
Marketing and Sustainability: Identifying
the Profile of Green Consumers
Olja Milovanov
Abstract
There is a growing number of consumers in the marketplace, who express positive attitudes towards green
products, corporate socially responsible practice and the concept of sustainability in general. However, these
attitudes do not always translate into an actual green consumption behavior. This phenomenon, also known
as “the attitude-behavior gap”, draws the attention of a large number of researchers, who have pointed out
that the investigation into the leading characteristics of green consumers (a segment that largely expresses a
pro-environmental behavior) is necessary in order to understand the drivers of green behavior and establish
the framework within which green consumers regularly operate. Addressing green consumer behavior also
allows companies to create a proper marketing approach and fulfill consumers’ green needs and desires, support the broadening of the base of the green market segment and the creating of durable patterns of sustainable consumption, which a bright future requires. Thus, the aim of this paper is to administrate the profile of
green consumers, based on a review of the available marketing literature and various globally conducted studies.
Keywords
Green consumer segment, green marketing, sustainable consumption, sustainable development.
Introduction
Five decades ago, Packard (1967) warned that the
“throw-away” culture was going to be the leading
cause of environmental, economic and social degradation. Today, the issue of sustainable development is increasingly present in every aspect of
human society and will doubtlessly shape future
progress as a whole. Warnings about natural
changes caused by the anthropogenic factor can
be found in a growing body of the scientific literature, indicating that the consumption of the modern civilization, as one of the main threats to the
environment, cannot be maintained at the current
level (European Environment Agency, 2005).
With more frequent pieces of evidence of such
claims, the debate on future directions for green
growth has been intensively conducted in the
global economic circles in the last few years, but
in the 21st century, the onus of developing sustainable consumption patterns is a matter of all
stakeholders – including regional and global
councils and institutions, governments, the busi-
ness and the community sectors, with an emphasis
on consumers (Longhurst, 2006) as judges who
decide what products and business policies will be
accepted on the market and what will be ignored.
Despite the alarming situation, the fact is that
people in many countries around the globe still
lack environmental consciousness and motivation
that would initiate them into acting environmentally responsibly and in accordance with the needs
of nature and their future survival (United Nations, 2015; Prothero, Dobscha, Freund, Kilbourne & Thogersen, 2011). On the other hand,
even when people are aware of the unsustainability of their purchase behavior, have positive attitude towards the conservation of nature or express
strong pro-environmental values, they still fail to
act in accordance with their statements (Thogersen, 2005) and strive to maintain a status quo.
Researchers call this phenomenon “the attitudebehavior gap” (Carrington, Neville & Whitwell,
2010), pointing out that it is very important to
understand behavioral motives and barriers of
each consumer, especially the green one, in order
Olja Milovanov
to know how to force them and other segments to
act in a sustainable manner. The green segment of
consumers consists of those who, while purchasing, are primarily driven by environmental factors, choose green products and support socially
responsible business practices. They tend as well
to create a sustainable lifestyle, showing respect
to the natural ambience and strongly condemn
those who fail to do so, in a form of consumer
activism. For some authors, the segment of young
consumers, who are open-minded and follow
trends, has the greatest chance to be molded according to the social consumption lifestyle, while
initiating and conducting directly and indirectly
future social changes (Sharma, & Rani, 2014;
Hume, 2010; Bentley, Fien & Neil, 2004). Accordingly, getting “under the skin” of the existing
and potential green consumers is seen as the main
catalyst for the construction of a sustainable
world.
The aim of this paper is to indicate a profile of
green consumers in the global marketplace. This
includes the identification of knowledge, attitudes,
perceptions, awareness, motives and barriers for
an environmentally friendly behavior, which is
presented in previous research studies in many
countries. Given the fact that consumers are the
focal point in business strategies of marketingoriented companies, a detailed analysis and the
understanding of the behavior of green consumers, as well as those who have a positive attitude
about green products (but for certain reasons do
not behave in an environmentally responsible
manner) is required. It will enable a win-win situation for consumers (society), companies and the
environment. Specifically, companies will be
enabled to build their reputation and success by
providing socially responsible products and services, consumers will obtain real “green” values
for their money, and the environment, by expanding the green market segment and practice among
all other market players, will be preserved. Finally, although making business green usually means
spending more money (Hussain, 1999), moving
sustainability “from social novelty to business
necessity” (Gaskin, 2013, p. 23), as well as creating shared values and ideology with consumers
(Sanker & Bhattacharya, 2001), will be crucial for
reaching a competitive advantage in the years
ahead.
1. Marketing, sustainability and
consumption
The marketing discipline is often accused of the
creation of unsustainable patterns of consumption
and a hedonistic lifestyle without limitations that
affect and damage the environment (Christensen,
Godskesen, Gram-Hassen, Quitzau & Ropke,
2007; Abela, 2006; O’Shaughnessy, &
O’Shaughnessy, 2002). That is why, nowadays,
the implementation of the principles of sustainable marketing is very important for the differentiation of and building a positive brand image of a
company and products in the marketplace. However, making a decision about starting a sustainable business is just the first step. Based on the
existing market practice, Ottoman et al. (2006)
warn that companies should be careful with their
sustainable business approach and try to avoid
“marketing myopia” or the “myopic focus” (p.
24). In other words, products should fulfil all
“green” criteria, but these criteria should not be
put over expectations and needs of consumers and
other important groups (partners, activists, regulators etc.). For that reason, understanding the core
postulates of sustainable development, sustainable
consumption, and especially the behavior and attitudes of green consumers is crucial for sustainable
strategies to make a success.
There is a consensus among researches in observing sustainable development as a synonymous
term for green growth and progress. The definition of sustainable development by the World
Commission on Environment and Development
(1987) is widely accepted in the literature, describing this term as the development that “meets
the needs of the present without compromising the
ability of future generations to meet their own
needs” (p. 41). It is based on the idea of economic
growth and social well-being with respect to environmental laws and limitations – the three pillars
of sustainability (Cato, 2009). The implementation of sustainable development includes five behavioral adoption stages – knowledge, influence,
conclusion, implementation and affirmation – and
shows that a shift towards a sustainable lifestyle is
a long and complex process that requires changes
in various behavioral patterns (Young, Hwang,
McDonald & Oates, 2010), especially in the
sphere of consumption.
Consumption is an indispensable part of meeting needs and desires of people (Campbell, 1987),
and as such, it is closely linked with human welfare and happiness (Huang & Rust, 2011; Kasser
& Ahuvia, 2002). Historically, the term “conSTRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 054-066
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Olja Milovanov
sume” did not always have a positive connotation
in society. In the period from the 13th to the late
18th century, it was related to the meanings such
as “to destroy, to use up, to waste and to exhaust”,
whereas in the early 19th century, it became a
symbol of “pleasure, enjoyment and freedom” or
a way of achieving “self-development, selfrealization and self-fulfilment” (McGregor, 2002,
p. 1). Today, it is deeply incorporated in the modern society and is positively perceived, although
consumption in its present form, according to the
concept of sustainability, has a destructive association. According to the above-mentioned definition of sustainable development, it is clear that the
central aspect of green growth is consumption
transformation towards a sustainable path (Spaargaren & Oosterveer, 2010; Stern, 2000). However, the main idea behind sustainability is not a
suppression of consumption. As Campbell (1987)
explained, “it is not consumption in general which
poses special problems of explanation, so much as
that particular pattern (of consumption) which is
characteristic of modern industrial (consumer)
societies” (p. 39). In fact, the main intention is the
creation of sustainable consumption patterns that
will be widely accepted as a new lifestyle of the
global society.
The term “sustainable consumption” is described as “the use of services and related products which respond to basic needs and bring a
better quality of life while minimising the use of
natural resources and toxic materials as well as
the emissions of waste and pollutants over the
life-cycle so as not to jeopardise the needs of future generations” (Norwegian Ministry for the
Environment, 1994). Referring to the demand side
(while sustainable development refers to the
supply side), it strives to provide prosperity for
both the present and future generations by neutralizing negative consumption effects of the present
consumption that treats to harm the Planet and
human existence (McGregor, 2002). Therefore, in
order to gain sustainably based consumption, it is
crucial that a balance between the finite natural
capacity, on the one hand, and needs of people
and the prosperity of civilization, on the other,
should be found. This can be achieved only with
radical changes in consumers’ attitudes, knowledge and final behavior that, taken together, are
named “societal software” or “all the non-material
values and norms, institutions and cultures that
govern our society in an informal way”; and in
“societal hardware” or “all the material basis of
society: the infrastructure, technology, products
and services, as well as regulatory and economic
frameworks that enable or constrain consumer
choice” (UNEP, 2010, p. 2). Similarly, Lorek &
Fuchs (2011) indicate two perspectives for the
implementation of sustainable consumption– the
weak sustainable consumption and the strong sustainable consumption approaches. The former
advocates technological innovations and encouraging consumers to take an active part in buying
green products while boycotting those with a negative impact on the environment. The latter is
more radical and proposes dramatic changes in
consumption levels and consumption patterns
aimed to reach an optimal sustainable state by the
introduction of social innovations. Finally, there is
general agreement in the literature that people
present the most significant catalysts in the transformation of current unsustainable consumption
patterns (Gardner & Stern, 2002), not only in a
role of the consumers, but as active citizens who
constantly act throughout social structures and
“change the logic of the dominant consumptionproduction systems” (Lorek & Fuchs, 2011, p. 5).
2. A green-consumer insight
Consumers are the central point in shifting the
current consumption model and building an environmentally sound behavior (Sitarz, 1994). Many
prerequisites must be accomplished and harmonized in that process. Possessing positive attitudes
towards sustainable consumption is the starting
point (Gumeni, Shalari & Mulla, 2015). However,
before all technical, infrastructural, legal or market criteria, motivating people to join the green
movement permanently is essential and requires
an internal stimulus, rather than an external one –
they must perceive their pro-environmental behavior as a “personal issue rather than as matter of
incentive” (van den Bergh, Griskevicius & Tybur,
2010, p. 11). Still, the existence of the gap between environmentally friendly attitudes and behavior, detected in many research studies and in
many cases in practice generally (Gumeni, et al.,
2015; Stengel 2009; Defra, 2007; Shaw, Newholm & Dickinson, 2006), indicates that the level
of the environmental dedication of consumers has
not been successfully achieved. Thus, detecting
the reasons for a “value-action”, “intentionbahavior”, “attitude-behavior” and a “word-deep
gap” (Carrington, et. al, 2010; Auger & Devinney,
2007; Belk, Devinney & Eckhardt, 2005; De
Pelsmacker, Driesen & Rayp, 2005) is invaluable.
The realization of this aim is possible by conducting a detailed analysis of the existing segment
Olja Milovanov
of green consumers that express a proenvironmental behavior, as well as those who
have developed awareness of the environmental
crisis and the negative impact of humans towards
it, but for some reason do not behave in a socially
responsible manner. Given the fact that the green
market segment in many countries is growing at
higher rates than the conventional segment is,
even in the period of an economic downturn –
from 2008 to 2011 (Gaskin, 2013; Yates, 2009;
Manget, Roche & Münnich, 2009), a likelihood
for establishing the relevant framework for the
understanding of the coherence between “cognitive and motivational factors and environmentally
conscious behavior” (Kim & Choi, 2005, p. 592)
is even higher.
2.1. Who are green consumers?
A general explanation of “green consumers” describes this segment as those who “prefer products
or services which do least damage to the environment as well as those who support forms of
social justice” (p. 21); and the epithet “green” is
widely used as the one equal with the terms “environmental”, “sustainable” and “ethical” (Young et
al., 2010). Also, the common thing for this group
of consumers is that, while purchasing, the perceived “greenness” of products and services is not
the only criterion – they also prefer business approaches that are environmentally beneficial
(Gaskin, 2013). However, an intrusion into deeper
motives of a behavior is usually very delicate,
because very often consumers find it hard to express the reasons for their choices and reactions,
which makes the profiling of green consumers
even harder. This fact has not discouraged research endeavors with respect to this topic yet,
and for the sake of providing valid evidence that
will be a stable base for future programs, business
strategies and the popularization of a sustainable
lifestyle in general, experts consider it is necessary to discover what drives green consumers to
behave environmentally responsibly.
In the literature on green marketing, researchers have used numerous variables in order to
detect the profile of green consumers, ranging
from simple socio-demographic to more complex
ones, such as motivation caused by a cognitive or
affective stimulus. In most studies, females have
been detected as a more environmentally conscious group, which has a stronger position towards environmental protection and tends to behave in that manner, undertaking activities such as
recycling or expressing “greener shopping habits”
more often than males (Khan & Trivedi, 2015;
Gumeni, et al., 2015; Diamantopoulos, Schlegelmilch, Sinkovics & Bohlen, 2003). Higher levels
of education are an important characteristic of
green consumers, too (Sharma & Rani, 2014; Deloitte, 2009). When it comes to observing the age
group and their preferences in terms of sustainable
consumption behavior, there is no consensus in
the academic circles. Some authors claim that the
older-age segment of consumers is more willing
to translate environmental awareness and concerns into a real action (Diamantopoulos et al.,
2003) than the segment of young ones. On the
other hand, some authors claim that the young
segment, especially the generation y, is inclined to
express positive attitudes towards the concept of
sustainability and green alternatives on the market
more and has a great potential to be the leading
group in the creation of a sustainably based civilization (Sharma & Rani, 2014; SolarCity, 2013;
Hume, 2010). Finally, some studies revealed the
relationship between income and ecological issues, pointing out that consumers with higher
well-being perceptions (usually consumers in developed countries) express stronger attitudes and
show a concern towards the environmental crisis
(Jacob, Joyic & Brinkerhoff, 2009; Brown &
Kasser, 2005; Franzen, 2003). This is the reason
why green consumers are less price-sensitive;
they usually justify higher prices for green products by quoting their higher quality (Manget et al.,
2009; Deloitte, 2009).
McGregor (2002) recalled an interesting description of the green consumer as the “citizen”
who is “a responsible consumer, a socially-aware
consumer, a consumer who thinks ahead and tempers his or her desires by social awareness, a consumer whose actions must be morally defensible
and who must occasionally be prepared to sacrifice personal pleasure to communal well-being”
(p. 5). In other words, if a consumer feels as an
important part of the community, rather than an
individual, invisible in a crowd of others, capable
of influencing market activities and making a difference, there is then a great potential that this
consumer will be more inclined to change something in his/her environment and become green.
This is supported by the thesis that collective behavior and action is the basis of green consumer
behavior and activism in a form of membership in
groups for the protection of nature or an active
participation in a protest during various political
events (Nassani, Khader, Moemen & Ali, 2013).
Finally, given the fact that perfect green consu-
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Olja Milovanov
merism requires a high level of self-discipline and
a desire for change, it offers a “pleasure to those
who get their satisfaction from an altruistic and
modest lifestyle” (Autio & Heinonen, 2004).
In terms of purchase behavior, as Deloitte
(2009) study showed, green consumers are a highly valuable target group who “buy more products
on each trip, visit the store more regularly, demonstrate more brand and retailer loyalty and are
not bargain hunters” (p. 2). However, according to
the same source, they are still learning how to
gain benefits from green products consummation,
and thus they need help before and during the
purchase. In this sense, the most commonly used
source of information is the Internet – niche websites/blogs, portal/news websites and especially
the social media, for those who consider themselves as “completely green” (Burst Media, 2011).
The list of 13 most credible consumer sources of
information for the purchase of green products by
Boston Consulting Group also includes independent consumer reports, scientific publications,
family members and friends, nongovernmental
organizations (NGOs) and public-interest groups,
while producers and retailers were ranked among
the last valuable sources (Manget et al., 2009).
Figure 1 The green consumer purchasing model
Source: Young et al., 2010, p. 28
Regardless of many joint characteristics that
can be derived about green consumers, each green
purchase process is unlike the previous one. It is
influenced by a set of factors that Young et al.
(2010, p. 28) presented in their study (Figure 1).
Accordingly, green-consumer behavior is the
function of the five factors that are highly interdependent. Each positive or negative purchase expeSTRATEGIC MANAGEMENT, Vol. 20 (2015), No. 4, pp. 054-066
rience is a relevant feedback for upgrading green
values and knowledge that will be decisive for
future choices. This model has great similarities
with Stern’s (2000, p. 417) causal variables: “attitudinal factors, contextual forces, personal capabilities, habits (routines)”, that he highlighted as
influences on consumer behavior.
An interesting review of sustainable consumer
behavior is also given by Janikowski (2000, p.
30), who brought up four imperatives for this type
of behavior:
1. the selection of green products and services
2. the minimization of the span of consumption
3. the maximization of the functionality and a
product lifecycle
4. the segregation and gathering of waste for
the recycling and reusing purpose.
There are various other sustainable activities
that witness the existence of green consumer behavior. Some of them are linked up to household
activities like switching off lights, recycling
(Burst Media, 2011; Tan & Lau, 2009; Barr &
Gilg, 2006), using rechargeable batteries, re-using
grocery store bags (Scarborough Research, 2010),
using less water, energy efficient appliances and
light bulbs (Manget et al., 2009). Not surprisingly,
some of most popular and prosperous programs
for environment protection are those which allow
consumers to save money (Manget et al., 2009).
Based on a survey of actual consumer behavior,
Defra (2007) proposed some aspects of green behavior in the area of transportation (walking or
cycling for journey, avoiding unnecessary flights,
buy more energy efficiency vehicles), household
(installing/improving insulation, closing the tap
while brushing the teeth) and products (buy local
or seasonal food, waste less food).
However, tracing the behavior of green consumers demands an active approach in revealing
primarily why the attitude-behavior gap to such an
extent is still present in the market, even among
those who declare themselves as green. Thus, it is
necessary to determine which real motives and
barriers for being “green” in modern age are.
2.2. Drivers of green consumer behavior
There are many contradictions on the green market. On the one hand, overall, consumers mostly
claim they are environmentally responsible and
green. On the other, they are often skeptical of
green massages, do not believe in environmental
Olja Milovanov
preferences and the quality of green products,
think that they are priced too high (Burst Media,
2011; Yates, 2009), or simple do not translate
favorable attitudes towards green products into
action (Hughner, McDonagh, Prothero, Shultz &
Stanton, 2007). What is essential for being green
and what barriers must be overcome?
▪ demographic categories;
▪ values, attitudes, preferences,
knowledge, habits;
1. PERSONALITY
DRIVERS
▪ a lifestyle, social identity, green
citizenship;
▪ ab opportunity for making a dif-
2. SITUATIONAL
DRIVERS
▪
▪
▪
▪
▪
▪
▪
3. PRODUCT
DRIVERS
▪
▪
▪
4. COMPANY
DRIVERS
▪
▪
ference;
previous purchase experience.
a cultural framework;
a financial status;
available time (for research and
decision making);
an opportunity for sustainable
engagement;
the environmental situation.
the brand volume, innovativeness, the quality, the price;
information access;
the availability and awareness of
green options.
the perceived greenness of a
company;
confidence in green claims;
socially responsible practices.
Figure 2 The four groups of green purchase drivers
Source: Author
Summarizing the findings on sustainable consumption in the marketing literature, green behavior drivers can be divided into four groups (Figure 2). A negative or weak influence of these criteria reduces a probability and creates barriers for
green purchase.
Personality drivers
Many years ago, in his Theory of Planned Behavior, Ajzen (1991) explained that personal values, moral norms, internal ethics, attitudes and
preferences drive purchase intentions. If they are
positively oriented towards sustainable issues, the
likelihood of directing purchase in the green direction is higher (Defra, 2007; Thogersen, 2001).
Demographic characteristics and habits are also
listed as important factors for being green (Young
et al., 2010), as well as knowledge and personal
beliefs in making a difference and influencing the
future, also called “consumer effectiveness” (Hil-
ler Connell & Kozar, 2014; Ellen, Wiener, &
Cobb-Walgren, 1991). A desire to build a social
identity and a lifestyle of the person who cares
about the environment has an indirect influence
on consumer activism and the purchase of green
products (Dono, Webb & Richardson, 2010; Defra, 2007). Similarly, a behavior motivated by
“environmental citizenship” is stronger than those
motivated by financial motives (Dobson, 2007),
while leaving a positive impression on an important social group or those with whom an individual identifies (the family, friends, colleagues etc.),
or following their example, can even be a vigorous vehicle for green engagement. Finally, the
experience gained after each purchase has an unavoidable impact on each above-mentioned driver
(Young et al., 2010).
Situational drivers
Culture is the ultimate determinant for defining what the term “development” covers. Through
structuring a “cultural identity, heritage, a public
policy, education, communication, the environment, a social cohesion” and various other fragments, it influences the functioning of the whole
society (UCLG, 2010). Subsequently, an easier
framework for green behavior is set and a greater
response will be gained from consumers in terms
of sustainable lifestyle engagement (Defra, 2007).
The deliberation of a higher price of green products, financial resources and time is also an important part of making green decisions (Young et
al., 2010). Eventually, many people associate an
environmental quality with the quality of their
personal lives reflected in well-being, satisfaction,
a healthier and safer world (Burst Media, 2011;
Dono et al., 2010; Frey, Luechinger & Stutzer,
2009; Manget et al., 2009; Defra, 2007).
Products drivers
According to Manget et al. (2009), consumers’
awareness of green products is the main driver of
sustainable behavior. Given the fact that green
products are mostly perceived as innovative, more
qualitative and of a higher price (Hutchins, 2015),
consumers often draw parallels between them and
luxury goods, making them for certain segments
more desirable (van den Bergh et al.,2010).
Strong brands are often more powerful in encouraging consumers towards green behavior, but the
availability of green brand options and providing
accurate information are essential in that process
(De Pelsmacker et al., 2005).
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Olja Milovanov
Company drivers
Since a lot of studies showed a lack in trust
and skepticism towards green claims, due to an
unethical approach of many companies, the government, public institutions and other market
players, it is very important that companies provide precise information about their products and
business practice each time they communicate
with customers, directly or indirectly (Yates,
2009; Defra, 2007). Importantly, according to the
Cone Communication Study (2012), “82% of consumers are more likely to purchase a product that
clearly demonstrates the results of a company’s
CSR initiatives than the one that doesn’t” (p. 4).
2.3. Green consumers segmentation
Not all green consumers behave in a “green”
manner to the same extent. Consequently, the
marketing literature recognizes several segmentations of consumers, observing their attitudes and
tendency to behave environmentally responsible.
The first one, by Autio & Heinonen (2004, p.
148), divides green consumers in three groups:
1. “Deep-green” – those who permanently
follow the “green moral code”, who are
highly aware of negative consumption manifestations, are not led by recklessness and
impulses in shopping, purchase “longlasting quality” products, tend to find
shopping alternatives and economize.
2. “Medium-green” – “deep-green” consumers who do not follow the green ideology
strictly and allow themselves “pleasureseeking habits”. They regularly recycle,
buy ecological products and look for shopping alternatives. The strength of the
“deep” and the “medium” green-consumer
orientations depends on age.
3. “Light-green” – the most frequent orientation of green consumerism. In their purchase decisions, they are mostly led by desires and less by protecting the environment.
The second, Defra’s (2007) “environmental
segmentation model” classifies consumers into
seven clusters. The leading criterion for the segmentation is a shared “set of attitudes and beliefs
(towards the environment, environmental issues
and behaviors)” (p. 8). According to their willingness and ability to act in a green manner, the clusters are described (by gradation) as:
1. “Positive greens” (18%) – the segment
with the firmest pro-environmental attitudes and beliefs; they do not question
anthropogenic environmental degradation,
have the most comprehensive knowledge
of environmental issues (compared to other
segments, although it can be enhanced),
strongly believe that an environmentally
friendly lifestyle is required and constantly
try to reduce their impact on nature by
changing their “bad” habits. That includes
recycling, saving energy and water, buying
ethical and local products and changing
travel behavior, although money is not
among their motivators in these actions.
Just the opposite, they are the most willing
segment in terms of paying higher price for
environmentally friendly products and the
avoidance of waste. Further, some of them
are members of an environmental organization in their community and are the firmest
advocates of green behavior. In terms of
demography, they belong to the middle-age
group (41-64), with a higher level of
household income, compared with all other
groups.
2. “Waste watchers” (12%) – This group
tends to help in the preservation of nature,
but their main motive lies in living in an
unpolluted natural ambience. In some cases, they express skepticism about environmental problems, but are mostly concerned
with obvious manifestations of nature crisis
(a loss of biodiversity). Their contribution
is reflected in activities such as those in the
previous group, but unlikely, they are not
willing to reduce the degree of travel (they
rather prefer low-emission vehicles). In
terms of demography, they belong to the
middle-age and older-age bias (41-64),
with a higher level of household income.
3. “Concerned consumers” (14%) – people
who express positive pro-environmental
beliefs, but are less convinced in the finiteness of natural resources, and have sympathetic attitudes towards climate change.
They engage themselves in the same activities as the previous two groups do, showing
even greener attitudes to travel, with the
average car dependence and the most
flights per year (comparing to all the other
segments). Being green fits to their selfidentity, so they “may like to think that
they are doing more than they are”. In
Olja Milovanov
terms of demography, they belong to the
age group of 30 and over.
4. “Sideline supporters” (14%) – the group
with weak pro-environmental views. They
believe in the environmental crisis, but rely
on the human ability to find an appropriate
solution. With respect to the low level of
knowledge in this field, “their green beliefs
have not translated to their behaviors” and
the attitude-action gap is mostly conspicuous in this case. Their behavior is full of
contradictions. For instance, they dislike
getting on the bus, have a high level of car
ownership and find changing habits hard,
but claim they would like to do more for
the environment; they would like to learn
more, but are not proactively-oriented towards gathering information etc. In terms
of demography, they belong to the all-age
segments.
5. “Cautious participants” (14%) – As opposed to the attitudes of the previous
groups, this segment believes in environmental problems, rather than in the ability
of civilization to solve them. They think
that efforts of one country are highly dependent on the efforts of others, so their action is useless unless others behave in the
same way. Their green activities are focused on those in the home and during a
travel, opining that those who damage the
environment by extensive travel should pay
for it. Being green is not a part of their selfidentity. In terms of demography, this cluster has a younger-than–average-age profile.
6. “Stalled starters” (10%) – Consumers in
this segment possess “confused environmental views”, with a significantly higher
share of those with negative attitudes towards climate change. They agree that resources are limited, but their main guiding
belief is that a crisis is too far away, which
prevents them from being green. Possessing the lowest knowledge of this area, they
fail to see people’s contribution in preventing natural degradation – so, this type of
behavior is of a low priority. They engage
only in recycling activities and observe
green behavior as “embarrassing” or as “an
alternative lifestyle”. In terms of demography, this group has “the lowest social profile of any group and the lowest levels of
income”.
7. “Honestly disengaged” (18%) – Those are
described by attributes such as “a lack of
interest and concern” and “skeptical”, because they do not think that their behavior
has a negative impact on the environment
and that people should make any changes
in their lives. They are satisfied with the
status quo and do nothing to help the environment. In terms of demography, they
span through all ages (under the age of 30,
they are over-represented).
Next, the Deloitte (2009, p. 7) Green Shopper
Study determined the five levels of green consumerism. First, “committed shoppers” (2%), the
minority who respect green criteria in purchase
whenever it is possible. Second, “proactive shoppers” (18%), or those who embed green criteria
into most of purchase decisions. Third, “influenced shoppers” (34%), those who consider sustainability as a secondary purchase criteria, and
green benefits are a “tie-breaker”. Fourth, “unsure
shoppers” (33%), those who behave neutrally towards sustainability considerations. Finally, the
fifth level of “unaware shoppers” (13%), who
either fail to possess knowledge of sustainable
concerns or reject it, but still sometimes purchase
green products, when the primary criteria in purchasing green match with the green one. Those
consumers are distributed across all demographic
categories.
Finally, the “Regeneration Consumer Study”
published by BBMG, GlobeScan and SustainAbility (2012), revealed the four sustainable customer
segments (Figure 3), as a result of the online surveys of six major international markets (Brazil,
China, Germany, India, United Kingdom and
United States). These four segments are briefly
attributed as: “highly committed Advocates
(14%); style and social status seeking Aspirationals (37%); price and performance-minded Practicals (34%) and less engaged Indifferents (16%)”
(p. 39).
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62
Olja Milovanov
Figure 3 The regeneration roadmap
Source: BBMG, GlobeScan and SustainAbility, 2012, p. 49
In more detail, Advocates, the smallest segment, are sustainable traditionals who think that
choosing environmental-friendly options is “the
right thing to do”, want to give an example to others how they should behave, but their purchase
behaviors are always based on facts and confidence in products and green company practice.
Aspirationals are “the persuadable middle,” looking for a balance between the price and sustainability-oriented purchase, wait for companies to
justify their reasons in order to be persuaded to
purchase green products. These two segments are
the most common in India and China (the two
largest developing markets). Practicals engage in
environmental-friendly behavior due to its popularity, proven product performance, good consumer reviews and motivating promotions, given
that they are not ready to pay higher prices for
these products, and they see environmental benefits as incidental rather than as the main value
proposition. Indifferents are skeptical, without a
sense of responsibility and willingness for green
purchase, looking for a price convenience during
purchase and buy green only when a trusted wordof-mouth source impacts them. These two segments are the most widespread in Germany, Brazil and the USA.
3. Managerial implications
Although in scientific circles and the marketplace
sustainability topics are intensively present, companies still fail to find an optimal approach in balancing between consumers, the environment and
their own goals. The green consumer segment is
still small in number, but in the future, it will certainly be one of the most promising market segments. This is for sure one of the main barriers for
the implementation of progressive green strategies
in companies’ policies, whereas it could also be
an excellent motivator for those who think about
long-term possibilities of improving their business
and making it a success. Given the instability of
the attitudes and behaviors of a large number of
green consumers, as well as the existence of those
claiming to be aware of environmental problems
but failing to change their behaviors by doing
nothing, managers should be committed to the
deep investigation into the segment of green consumers in terms of cognition, motivation and specific buying behaviors (which also includes activities before and after the act of purchase). After
gaining a detailed insight into their target market
characteristics, it is essential that an appropriate
sustainable business approach should be provided.
In that sense, with respect to the main constraints to green behavior (a lack of transparency
and information about products and the environmental aspects of consumption, a lack of confidence in green claims), companies should follow
3Cs: “clarity” – be concise, avoid complex terminology, provide an understandable example; “credibility” – avoid small (hidden) text massages,
provide a meaningful integration of a brand into
the environment, align habits and beliefs by
proved performance expectations; and “comparability – a meaningful comparison, the standardization and consolidation of standards” (Yates, 2009,
p. 4-5).Since “consumers reward results, not aspirations, companies must communicate corporate
social responsibility” (SolarCity, 2013, p. 5),
which means focusing efforts on rebuilding its
reputation and image on green marketing strategies that will provide a “strategic fit” between a
company and its products, authenticity and trust,
rather than convincing the consumer that he/she
should be green and buy environmentally friendly
products (Hutchins, 2015). The achievement of
this goal requires what Manget et al. (2009, p. 8)
call “the four Ps of green advantage”, or the best
way for a holistic, strategic engagement in sustainable business (Figure 4).
Olja Milovanov
Figure 4 The four Ps of green advantage
Source: Manget et al., 2009, p. 8
Companies should provide permanent education for consumers (even for those who are completely green) in order to build steady green values that will result in one’s everyday environmentally responsible behavior. In order to move them
towards action, consumers should understand:
1. how overconsumption contributes to natural degradation (in order to understand their
own consumption footprint) and what an
unsustainable future holds,
2. what their role in the preservation of the
environment is (change of behaviors, green
activism, spreading the practice of sustainable behavior among social groups to
which they belong, rewarding companies
that conduct socially responsible initiatives
and punishing/ignoring those who fail to do
so etc.),
3. how they can integrate sustainable consumption into their regular, everyday activities and lifestyle.
The last one is a valuable opportunity for
companies to gain consumer loyalty through providing green product/service options, reliable information, a constant creative interaction and consumer engagement. Given the fact that the youngage group is represented as the catalyst of change
in future consumption patterns, companies should
make a sustainable lifestyle “easy, cool and fashionable”, communicate the “personal benefit of
sustainable living” and make “a direct correlation
between life quality and environmentally responsible consumption patterns” (Hume, 2010, p. 4).
Finally, creating a desire for being green is an
inevitable condition for green consumerism.
Conclusion
There is no doubt that a concern for nature is
more pronounced among people and future business practices led by the principles of sustainability will be mandatory, rather than optional, for
each market participant.
According to SolarCity Inside EnergyStudy
(2013), 72% of consumers actively seek information and learn about sustainable company initiatives; 75% prefer products of those companies
who have established and implemented corporate
social responsibility in their business practices;
82% would be motivated to buy a product or a
service if that meant supporting companies’ efforts to be sustainable, whereas 55% of consumers
have already been actively seeking green products. Obviously, the green market segment is rising very fast and expects more from a company.
Green consumers are led by a strong value system, actively participate in activities of environmental significance in their community, seek information about green products and want transparent communication with companies. Importantly,
they do not hesitate to praise and glorify sustainable company practice, but are as well very harsh
in criticizing companies prone to “greenwashing”.
Thus, building marketing strategies based on readiness to deliver values based on: adequate green
product performance and benefits, the fulfillment
of given promises, the esteem of the integrity of
63
64
Olja Milovanov
green consumers and a constant contribution to
society through corporate social responsibility
will be decisive for a success in the green market
segment. Further, besides making an invaluable
contribution to the preservation of the natural habitat of the present and future generations of
people, companies have an opportunity to “grab a
market share via sustainable product offerings”
(SolarCity, 2013, p. 7) and permanently position
themselves in the mind of the consumer as someone who bases his/her own business on socially
and environmentally responsible values that ensure the well-being not only for the company, but
for the entire civilization as well.
On the other hand, it is also important to indicate that not all consumers are equally green. Given the fact that the attitude-behavior gap is widely
present among consumers, the segment of completely green consumers is a segment of great importance for the popularization of green behaviors. Developing appropriate business access to
these consumers is crucial for consumer engagement and loyalty, which is the basic requirement
for an active promotion of their (environmentally
friendly) products and, consequently, the adoption
of green patterns of consumption by other less
green segments, too. Finally, as Dobson (2007, p.
282) stated, “attitudes work at a deeper level than
behavior, but that behavior change” is what society really needs and where all environmental policies should be directed. SM
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 Correspondence
Olja Milovanov
Faculty of Economics in Subotica
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54
Jovo T. Tauzović
Preliminaries of Modern Systems Management Concepts
54
Jovo T. Tauzović
Preliminaries of Modern Systems Management Concepts
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which must be returned promptly.
Referencing Guide
The references should specify the source (such as book, journal article or a web page) in sufficient detail to enable the readers to identify and consult it. The references are placed at the end of the work,
with sources listed alphabetically (a) by authors’ surnames or (b) by the titles of the sources (if the author is unknown). Multiple entries by the same author(s) must be sequenced chronologically, starting
from the earliest, e.g.:
Ljubojević, T.K. (1998).
Ljubojević, T.K. (2000a).
Ljubojević, T.K. (2000b).
Ljubojević, T.K., & Dimitrijević, N.N. (1994).
Here is a list of the most common reference types:
A. PERIODICALS
Authors must be listed by their last names, followed by initials. Publication year must be written in parentheses, followed by a full stop. Title of the article must be in sentences case: only the first word and
proper nouns in the title are capitalized. The periodical title must be in title case, followed by the volume number, which is also italicized:
Author, A. A., Author, B. B., & Author, C. C. (Year). Title of article. Title of Periodical, volume
number(issue number), pages.
 Journal article, one author, paginated by issue
Journals paginated by issue begin with page 1 in every issue, so that the issue number is indicated in
parentheses after the volume. The parentheses and issue numbers are not italicized, e.g.
Tanasijević, V. (2007). A PHP project test-driven end to end. Management Information Systems, 5
(1), 26-35.
 Journal article, one author, paginated by volume
Journals paginated by volume begin with page 1 in issue 1, and continue page numbering in issue 2
where issue 1 ended, e.g.
Perić, O. (2006). Bridging the gap: Complex adaptive knowledge management. Strategic
Management, 14, 654-668.
 Journal article, two authors, paginated by issue
Strakić, F., & Mirković, D. (2006). The role of the user in the software development life cycle.
Management Information Systems, 4 (2), 60-72.
 Journal article, two authors, paginated by volume
Ljubojević, K., & Dimitrijević, M. (2007). Choosing your CRM strategy. Strategic Management, 15,
333-349.
 Journal article, three to six authors, paginated by issue
Jovanov, N., Boškov, T., & Strakić, F. (2007). Data warehouse architecture. Management
Information Systems, 5 (2), 41-49.
 Journal article, three to six authors, paginated by volume
Boškov, T., Ljubojević, K., & Tanasijević, V. (2005). A new approach to CRM. Strategic
Management, 13, 300-310.
 Journal article, more than six authors, paginated by issue
Ljubojević, K., Dimitrijević, M., Mirković, D., Tanasijević, V., Perić, O., Jovanov, N., et al.
(2005). Putting the user at the center of software testing activity. Management Information
Systems, 3 (1), 99-106.
 Journal article, more than six authors, paginated by volume
Strakić, F., Mirković, D., Boškov, T., Ljubojević, K., Tanasijević, V., Dimitrijević, M., et al.
(2003). Metadata in data warehouse. Strategic Management, 11, 122-132.
 Magazine article
Strakić, F. (2005, October 15). Remembering users with cookies. IT Review, 130, 20-21.
 Newsletter article with author
Dimitrijević, M. (2009, September). MySql server, writing library files. Computing News, 57, 10-12.
 Newsletter article without author
VBScript with active server pages. (2009, September). Computing News,57, 21-22.
B. BOOKS, BROCHURES, BOOK CHAPTERS, ENCYCLOPEDIA
ENTRIES, AND BOOK REVIEWS
Basic format for books
Author, A. A. (Year of publication). Title of work: Capital letter also for subtitle. Location: Publisher.
Note: “Location" always refers to the town/city, but you should also include the state/country if the
town/city could be mistaken for one in another country.
 Book, one author
Ljubojević, K. (2005). Prototyping the interface design. Subotica: Faculty of Economics.
 Book, one author, new edition
Dimitrijević, M. (2007). Customer relationship management (6th ed.). Subotica: Faculty of Economics.
 Book, two authors
Ljubojević, K., Dimitrijević, M. (2007). The enterprise knowledge portal and its architecture. Subotica:
Faculty of Economics.
 Book, three to six authors
Ljubojević, K., Dimitrijević, M., Mirković, D., Tanasijević, V., & Perić, O. (2006). Importance of
software testing. Subotica: Faculty of Economics.
 Book, more than six authors
Mirković, D., Tanasijević, V., Perić, O., Jovanov, N., Boškov, T., Strakić, F., et al. (2007). Supply
chain management. Subotica: Faculty of Economics.
 Book, no author or editor
Web user interface (10th ed.). (2003). Subotica: Faculty of Economics.
 Group, corporate, or government author
Statistical office of the Republic of Serbia. (1978). Statistical abstract of the Republic of Serbia. Belgrade: Ministry of community and social services.
 Edited book
Dimitrijević, M., & Tanasijević, V. (Eds.). (2004). Data warehouse architecture. Subotica: Faculty of
Economics.
 Chapter in an edited book
Boškov, T., & Strakić. F. (2008). Bridging the gap: Complex adaptive knowledge management.
In T. Boškov & V. Tanasijević (Eds.), The enterprise knowledge portal and its architecture (pp.
55-89). Subotica: Faculty of Economics.
 Encyclopedia entry
Mirković, D. (2006). History and the world of mathematicians. In The new mathematics encyclopedia
(Vol. 56, pp. 23-45). Subotica: Faculty of Economics.
C. UNPUBLISHED WORKS
 Paper presented at a meeting or a conference
Ljubojević, K., Tanasijević, V., Dimitrijević, M. (2003). Designing a web form without tables. Paper
presented at the annual meeting of the Serbian computer alliance, Beograd.
 Paper or manuscript
Boškov, T., Strakić, F., Ljubojević, K., Dimitrijević, M., & Perić, O. (2007. May). First steps in visual basic for applications. Unpublished paper, Faculty of Economics Subotica, Subotica.
 Doctoral dissertation
Strakić, F. (2000). Managing network services: Managing DNS servers. Unpublished doctoral dissertation, Faculty of Economics Subotica, Subotica.
 Master’s thesis
Dimitrijević, M. (2003). Structural modeling: Class and object diagrams. Unpublished master’s thesis,
Faculty of Economics Subotica, Subotica.
D. ELECTRONIC MEDIA
The same guidelines apply for online articles as for printed articles. All the information that the online
host makes available must be listed, including an issue number in parentheses:
Author, A. A., & Author, B. B. (Publication date). Title of article. Title of Online Periodical, volume
number(issue number if available). Retrieved from http://www.anyaddress.com/full/url/
 Article in an internet-only journal
Tanasijević, V. (2003, March). Putting the user at the center of software testing activity. Strategic
Management, 8 (4). Retrieved October 7, 2004, from www.ef.uns.ac.rs/sm2003
 Document from an organization
Faculty of Economics. (2008, March 5). A new approach to CRM. Retrieved July 25, 2008, from
http://www.ef.uns.ac.rs/papers/acrm.html
 Article from an online periodical with DOI assigned
Jovanov, N., & Boškov, T. A PHP project test-driven end to end. Management Information Systems,
2 (2), 45-54. doi: 10.1108/06070565717821898.
 Article from an online periodical without DOI assigned
Online journal articles without a DOI require a URL.
Author, A. A., & Author, B. B. (Publication date). Title of article. Title of Journal, volume number.
Retrieved from http://www.anyaddress.com/full/url/
Jovanov, N., & Boškov, T. A PHP project test-driven end to end. Management Information Systems,
2 (2), 45-54. Retrieved from http://www.ef.uns.ac.rs/mis/TestDriven.html.
REFERENCE QUOTATIONS IN THE TEXT
 Quotations
If a work is directly quoted from, then the author, year of publication and the page reference (preceded
by “p.”) must be included. The quotation is introduced with an introductory phrase including the author’s last name followed by publication date in parentheses.
According to Mirković (2001), “The use of data warehouses may be limited, especially if they
contain confidential data” (p. 201).
Mirković (2001), found that “the use of data warehouses may be limited” (p. 201). What unexpected impact does this have on the range of availability?
If the author is not named in the introductory phrase, the author's last name, publication year, and the
page number in parentheses must be placed at the end of the quotation, e.g.
He stated, “The use of data warehouses may be limited,” but he did not fully explain the possible impact (Mirković, 2001, p. 201).
 Summary or paraphrase
According to Mirković (1991), limitations on the use of databases can be external and softwarebased, or temporary and even discretion-based. (p.201)
Limitations on the use of databases can be external and software-based, or temporary and even
discretion-based (Mirković, 1991, p. 201).
 One author
Boškov (2005) compared the access range…
In an early study of access range (Boškov, 2005), it was found...
 When there are two authors, both names are always cited:
Another study (Mirković & Boškov, 2006) concluded that…
 If there are three to five authors, all authors must be cited the first time. For subsequent references, the first author’s name will cited, followed by “et al.”.
(Jovanov, Boškov, Perić, Boškov, & Strakić, 2004).
In subsequent citations, only the first author’s name is used, followed by “et al.” in the introductory
phrase or in parentheses:
According to Jovanov et al. (2004), further occurences of the phenomenon tend to receive a
much wider media coverage.
Further occurences of the phenomenon tend to receive a much wider media coverage (Jovanov
et al., 2004).
In “et al.", “et” is not followed by a full stop.
 Six or more authors
The first author’s last name followed by "et al." is used in the introductory phrase or in parentheses:
Yossarian et al. (2004) argued that…
… not relevant (Yossarian et al., 2001).
 Unknown author
If the work does not have an author, the source is cited by its title in the introductory phrase, or the
first 1-2 words are placed in the parentheses. Book and report titles must be italicized or underlined,
while titles of articles and chapters are placed in quotation marks:
A similar survey was conducted on a number of organizations employing database managers
("Limiting database access", 2005).
If work (such as a newspaper editorial) has no author, the first few words of the title are cited, followed by the year:
(“The Objectives of Access Delegation,” 2007)
Note: In the rare cases when the word "Anonymous" is used for the author, it is treated as the author's name (Anonymous, 2008). The name Anonymous must then be used as the author in the reference list.
 Organization as an Author
If the author is an organization or a government agency, the organization must be mentioned in the
introductory phrase or in the parenthetical citation the first time the source is cited:
According to the Statistical Office of the Republic of Serbia (1978), …
Also, the full name of corporate authors must be listed in the first reference, with an abbreviation in
brackets. The abbreviated name will then be used for subsequent references:
The overview is limited to towns with 10,000 inhabitants and up (Statistical Office of the Republic of Serbia [SORS], 1978).
The list does not include schools that were listed as closed down in the previous statistical overview (SORS, 1978).
 When citing more than one reference from the same author:
(Bezjak, 1999, 2002)
 When several used works by the same author were published in the same year, they must be
cited adding a, b, c, and so on, to the publication date:
(Griffith, 2002a, 2002b, 2004)
 Two or more works in the same parentheses
When two or more works are cited parenthetically, they must be cited in the same order as they appear
in the reference list, separated by a semicolon.
(Bezjak, 1999; Griffith, 2004)
 Two or more works by the same author in the same year
If two or more sources used in the submission were published by the same author in the same year, the
entries in the reference list must be ordered using lower-case letters (a, b, c…) with the year. Lowercase letters will also be used with the year in the in-text citation as well:
Survey results published in Theissen (2004a) show that…
 To credit an author for discovering a work, when you have not read the original:
Bergson’s research (as cited in Mirković & Boškov, 2006)…
Here, Mirković & Boškov (2006) will appear in the reference list, while Bergson will not.
 When citing more than one author, the authors must be listed alphabetically:
(Britten, 2001; Sturlasson, 2002; Wasserwandt, 1997)
 When there is no publication date:
(Hessenberg, n.d.)
 Page numbers must always be given for quotations:
(Mirković & Boškov, 2006, p.12)
Mirković & Boškov (2006, p. 12) propose the approach by which “the initial viewpoint…
 Referring to a specific part of a work:
(Theissen, 2004a, chap. 3)
(Keaton, 1997, pp. 85-94)
 Personal communications, including interviews, letters, memos, e-mails, and telephone
conversations, are cited as below. (These are not included in the reference list.)
(K. Ljubojević, personal communication, May 5, 2008).
FOOTNOTES AND ENDNOTES
A few footnotes may be necessary when elaborating on an issue raised in the text, adding something
that is in indirect connection, or providing supplementary technical information. Footnotes and endnotes are numbered with superscript Arabic numerals at the end of the sentence, like this.1 Endnotes
begin on a separate page, after the end of the text. However, Strategic Management journal does not
recommend the use of footnotes or endnotes.
COPYRIGHT AND USE AGREEMENT
Articles submitted to the Journal should be authentic and original contributions and should have never
been published before in full text, nor be under consideration for any other publication at the same
time. Authors submitting articles for publication warrant that the work is not an infringement of any
existing copyright and will indemnify the publisher against any breach of such warranty. For use of
dissemination and to ensure proper policing of use, papers and contributions become the legal copyright of the publisher unless otherwise agreed.
All contributors are required to sign the Transfer of Copyright Agreement before the article may be
published. The transfer of copyright encompasses the exclusive right to reproduce and circulate the
article, including photographic reproductions, reprints or any other similar reproductions and translation. If the copyright exists either for the entire article or any part of it, it is the contributor's responsibility to obtain permission to reproduce it from the copyright holder.
CIP - Каталогизација у публикацији
Библиотека Матице српске, Нови Сад
005.21
STRATEGIC managament : international journal of strategic managament and decision support
systems in strategic managament / editor-in-chief Jelica Trninić. - Vol. 14, no. 1 (2009) - . - Subotica:
University of Novi Sad, Faculty of Economics, 2009-. - 30 cm
Tromesečno. - Nastavak publikacije: Strategijski menadžment = ISSN 0354-8414
ISSN 1821-3448
COBISS.SR-ID 244849927
Rešenjem Ministarstva za informisanje Republike Srbije, časopis "Strategijski menadžment" upisan je u registar javnog informisanja pod brojem 2213, od 7. avgusta 1996. Rešenjem Ministarstva za nauku i tehnologiju
Republike Srbije br. 413-00-435/1/96-01 časopis je oslobođen opšteg poreza na promet proizvoda kao publikacija od posebnog interesa za nauku.

Vol. 20, No. 4 - Ekonomski fakultet u Subotici

Transcription

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