Deli Depot BUACC5931 Assignment 2, Semester 2, 2017 Adoption of ISO9000 and its Relationship with other Factors in China’s Service Industry The ISO 9000 series of quality management systems standard...

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Answered Same DayOct 05, 2021BUACC5931

Answer To: Deli Depot BUACC5931 Assignment 2, Semester 2, 2017 Adoption of ISO9000 and its Relationship with...

Shakeel answered on Oct 10 2021
154 Votes
Executive summary
ISO 9000 standard has positive impact on company’s performance and it has been proved in several empirical studies. In this paper, the Chinese companies are studied between 2004 and 2008 and found that those companies who have adopted ISO 9000 standards have significantly higher revenue and profit than companies who haven’t. However, overseas investment or government’s investment has no such significant relation with ISO certification of companies. Even, no significant difference in the investment patterns to both Certified and Non-certified companies. Education level of employees also doesn’t matter for Certified companies although it is important for Non-certified companies in getting the higher profitability positio
n to the business. Overall, it is concluded that ISO 9000 standards helps the business to improve its revenue and profit and company should adopt it.
Introduction
ISO 9000 is a set of internally accepted standards on quality management and quality assurance that company needs to apply on its business structure and operation activities to deliver quality products and services to its customers. “It provides a time-tested framework to help companies establish and follow a systematic approach for managing organizational processes for rendering consistent quality (Keen, 2020).” The ISO 9000 can be applied to any company or any size and value. It is not restricted to any specific Industry or sector. There are several motivational factors that affect the adoption of ISO 900 standards. Few of them are innovation and compatibility, competitive pressure, and environmental uncertainty, management’s system, formalization in business activities and organizational size (Hashem & Tann, 2007). Once, an organization adopts the ISO 9000 standards, its successful implementation poses big challenge to the company. Behaviour towards customers, Culture of organization, Satisfaction to employees, processes and procedures of operational activities and their measurement and monitoring are some of the major factors that affect the implementation effectiveness of ISO 9000 standards (Dharmasiri, 2010). In this paper, the Adoption of ISO9000 and its Relationship with other Factors in China’s Service Industry is studied. The objective of the study is as follows –
· To examine the relationship between ISO 9000 certification and company’s revenue and profit.
· To examine the relationship between ISO 9000 certification and overseas Investment
· To examine the investment pattern by overseas, government or others to both Certified and Non-certified companies.
Literature review
In past, several empirical studies have been conducted on adoption on ISO 9000 standards and its relationship with several factors – both company specific and external factors. Georgiev (2015) studied the motivation factors for the adoption of ISO 9000 standards in Eastern Europe and claimed that ‘Process improvement’ and ‘Product quality improvement’ are two major internal factors and the level of competitiveness and company’s image are two major external factors that prompts the company to adopt the ISO 900 standard. He also found a positive relationship between the motivation for and benefits of ISO 9000 certification. Vikas et al (2015) argues that Organizational culture, Top management commitment, Adequate financial resources, strategic planning, Customer satisfaction focus are some of the factors that compel the business to implement the ISO 900 Standards.
Yeung & Mok (2005) studied the impacts of implementing ISOs on the competitiveness of manufacturing industry in China and found that ISO 9000 Standards have both positive and negative effect on the competitiveness of the firm. In short term, companies experience negative impact of ISO 9000 Standards but in long run, the impact turns to be positive. Magd & Nabulsi (2012) studied the 100 firms in the UAE who have acquired the ISO 9000 certification and found the promotional reason as one of the most important driver for ISO 9000 implications. Strong believe in system/process approach and improving internal efficiency and fulfilling customers’ requirements are other major factors. Chen, Wu & Zhai (2019) investigated 89,024 companies from Chinese service Industry and studied the effect of ISO 9000 certification on the firm’s sales and profitability. He found the ISO 9000 certification does help to increase the total amount of sales, but it decreases the productivity and profitability of these certified service firms. Corbett et al (2005) tracked the financial performance from 1987 to 1997 of all publicly traded ISO 9000 certified manufacturing firms in the United States and found that the certified firms do display strongly significant abnormal performance. However, Heras et al (2002) found no significant improvement in the sales and profitability after ISO 9000 accreditation of companies in Spain. The impact of adoption of ISO 9000 on labour productively has also been extensively studied and most of the studied found a strong positive relationship between ISO 9000 accreditation and labour productivity (Parauraman, 2002 and Kynak, 2003). Grajek (2004) studied the relationship between ISO 9000 Standards and International trade and found that ISO 9000 certified firms do more trade and Investment with each other than uncertified firms. Similar study is also conducted by Clougherty & Grajek (2008) and found that ISO 9000 standards have ‘positively pull FDI’ and ‘positively push trade’ effect in developing nations.
Methodology
To proceed with study, more than 5,717 companies are selected between years 2004 and 2008 from eight different Industries mainly – Storage and transportation, Telecommunication, Computer service, Software, Business services, Research and Development, Specialized technology services and Technology exchange and promotion. Among the total selected companies, few got certified and few didn’t get certified. Further, several other variables related to size and age of company, number of employees and their qualification, Sales, profit and return figures from their Income statement, Investment and capital structure data of business from their Balance sheet are gathered. Then, different statistical tools like Correleation Matrix, Chi Square test, t-test, ANOVA and regression are used.
Data Analysis and Interpretation
Descriptive Statistics
In our analysis, around 5,717 Chinese companies from eight different Industries - Storage and transportation, Telecommunication, Computer service, Software, Business services, Research and Development, Specialized technology services and Technology exchange and promotion are analysed in which few are ISO 9000 certified and rest are not for the period 2004 – 2008. Among the total 5,717 companies, 460 companies are ISO 9000 certified while rest of 5,257 companies are not certified.
Industry wise distribution of companies – both certified and not certified are given in table 1 below –
Table 1: Industry wise company distribution
    Industry
    Certified
    Non- Certified
    Storage and Transportation
    14
    378
    Telecommunication
    4
    180
    Computer Services
    30
    335
    Software
    76
    314
    Business Services
    72
    2650
    Research and Development
    33
    189
    Specialized Technology Services
    219
    981
    Technology Exchange and Promotion
    12
    230
Those companies which are certified, the highest numbers of companies are from ‘Specialized...
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