Critical Factors for Implementation of ISO 9000 in Chinese Firms

Critical factors for Implementation of ISO 9000 in
Cinese firms
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Executive Summary
Major findings
Exploartion of 5717 Chinese SMEs in the sample revealed presence of 460 ISO
complaint firms. Average revenue and profit of ISO companies were significantly higher
compared to non-ISO Chinese firms. Unusually, average ROS and ROA of non-ISO firms
were significantly higher compared to the ISO-certified firms. There was significantly
positive correlations between age of the firms and ROA, ROS. Also, a significant relation
between industry type and ISO adoption status was noted. Business and Specialized
technology services were dominant in presence in the present sample. Also, “Specialized
technology services” (N = 219, P = 18.3%), “Software” business (N = 76, P = 19.5%), and
“’Research and development” industry (N = 33, P = 14.9%) were the top three ISO
complaint industries.
Major recommendations
The ISO complaint Chinese firms requires efficient utilization of facilities and assets
to increase ROS and ROA. The government should emphasis of ISO adoption for Business
and Specialized technology services. Example of “Specialized technology services” and
“Software” business sectors should be publicized. Emphasis should be given on increasing
revenue and profit by adopting ISO 9000 standard for the Chinese SMEs.
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Table of Contents
Executive Summary...................................................................................................................2
Major findings........................................................................................................................2
Major recommendations.........................................................................................................2
Introduction................................................................................................................................5
Background.............................................................................................................................5
Purpose...................................................................................................................................5
Objective of the Study............................................................................................................5
Report Structure......................................................................................................................6
Literature Review.......................................................................................................................6
Postulates/ Hypotheses of the Study.......................................................................................7
Methodology..............................................................................................................................8
Sample Physiognomies...........................................................................................................8
Independnet and Dependnet Variables...................................................................................8
Approach of the Study............................................................................................................9
Analysis and Findings................................................................................................................9
Descriptive Study...................................................................................................................9
Inferential Evaluation...........................................................................................................10
Revenue & Profit Comparison..........................................................................................10
ROS and ROA Comparison..............................................................................................10
Correlation between age of the firm and Revenue, Sales.................................................11
ROS significantly varied by Industry type.......................................................................11
Relation between Industry Category and ISO Status........................................................11
Discussion................................................................................................................................12
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Limitation.................................................................................................................................13
References................................................................................................................................14
Appendices...............................................................................................................................17
Descriptive Statistics............................................................................................................17
Frequency of ISO and non-ISO firms..................................................................................17
Percentage distribution of firms by industry type................................................................18
Percentage distribution of ISO firms by industry type.........................................................18
Histogram: Revenue (Sales): Non-ISO................................................................................19
Histogram: Revenue (Sales): ISO........................................................................................19
Histogram:Profit: Non-ISO..................................................................................................20
Histogram:Profit: ISO..........................................................................................................20
Histogram:ROS: Non-ISO....................................................................................................21
Histogram:ROS: ISO............................................................................................................21
Histogram:ROA: Non-ISO...................................................................................................22
Histogram:ROA: ISO...........................................................................................................22
T-Test: Revenue/ Sales by Certification Status....................................................................23
T-Test: Profit by Certification Status...................................................................................23
T-Test: ROS by Certification Status.....................................................................................23
T-Test: ROA by Certification Status....................................................................................24
Pearson’s correlation: Age of firms, Revenue, Profit...........................................................24
ANOVA: ROS by industry type...........................................................................................25
Cross Tabulation with Chi-Square.......................................................................................29
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Introduction
Background
The ISO 9000 standard was first introduced by different organizations around the
world. The managers are mostly worried about implementation and effect on the employees.
The effect of the ISO standard on quality and product management is quite debatable. But
very few understand the significance behind the need of ISO 9000 standard by the
companies. Profit figures for ISO complaint firms are comparatively higher, age of the firms
realtes positively with ROS and ROA. Comparison between ISO and non-ISO firms has
become inevitable in the period of technological adavancement and six-sigma era.
Purpose
ISO 9000 has become important for production as well as service companies. Plenty
of issues came up due to the effect of the ISO 9000 standard. If certification enhances sales?
Will profit increase? The return on the asset as well as sales will improve or not? Such topics
were examined by assessing data from 5717 Chinese companies, among them 5257
companies were certified with ISO 9000 from 2004 and 2008.
Objective of the Study
The research has mentioned the importance of ISO 9000 standard for explaining why
it can help in increasing sales and profit. For doing that, experts assessed the capability of
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ISO 9000 from various angles. The good and bad effects of ISO certification on sales, profit,
ROA, and ROS have been checked.
Report Structure
Report focuses on background literature for the foundation building. In methodology,
scholars have detailed the perspective of the research. Results of data analysis have been
discussed in detail with descriptive results. The report has managerial advice and ends with
probabilities of exploration.
Literature Review
Prajogo (2011) mentioned the requirement of internalization while checking the ISO
9000 standard since it is the method of including confidential information into the
organization, and interpreting it into knowledge (Boiral, 2011). Lobo, Samaranayake, &
Subramanian, (2019) understood that, proposed QMS by ISO 9000 is usable for information
coding which promotes data storage and knowledge transfer. The past findings depict that the
company's need for real application of standards and not simply certification (Kim, Kumar,
& Kumar, 2011). Authentication is a symbolic behavior that is different from the application
of authentic policies. As the earlier studies mentioned that companies can apply the
management systems, and different certified companies can cross standard requirements
(Psomas, Pantouvakis, & Kafetzopoulos, 2013).
Factual research to confirm the ISO certification effect is not ultimate. A lot of
researchers believe that ISO certification throws a huge impact on the operations of the
company (Starke, Eunni, Manoel Martins Dias Fouto, & Felisoni de Angelo, 2012). A
positive connection between ISO certification as well as the business performance of research
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is not necessarily important. Usually, it is thought that the performance of the companies
upgraded after the introduction of ISO 9000 certification (Asif, Joost de Bruijn, Fisscher, &
Searcy, 2010). However, the factual evidence that is connected to business results and ISO
certification does not necessarily give positive results. Few studies found evidence confirms
that the company's market value, performance, and ISO certification are connected (Tamayo-
Torres, Gutierrez-Gutierrez, & Ruiz-Moreno, 2014). The financial performance of the
Spanish companies was seen to develop positively after ISO certification (Boiral, 2011).
After accepting the economic changes and Open Door policy 1978, China turned out
to be significant in the world economy. China's internationalization made quite a deep
impression, and the economy of China faced a lot of changes in the past three decades. The
economic changes of 1978 brought exponential economic growth as well as industrialization
(Singh, Garg, & Deshmukh, 2009). The growth of GDP growth in China rises rapidly to
brand it the world's fastest-growing economy. China's service sector is essential for the global
economy (Cao, & Prakash, 2011). Different service companies are looking forward to
internal management within the current market competition, and application is considered as
management standards (Du, Yin, & Zhang, 2016). ISO 9000 standards can be applied to
industry, private, public, and service organizations.
This study doesn’t show the effect of ISO 9000 on profit, return on assets, return on
sales, etc. Comparative exploration was done for both ISO as well as non-ISO firms, and the
Chinese companies were primarily taken into consideration. Five undermentioned hypotheses
have been done with descriptive and derivable analysis.
Postulates/ Hypotheses of the Study
i. ISO certified Chinese firms were earning significantly higher average revenue and
profit compared to that of the non-ISO firms.
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ii. ISO certified Chinese firms had significantly higher average ROS and ROA compared
to that of the non-ISO firms.
iii. Age of the firm and Revenue, Sales have significant association.
iv. Average ROS significantly varied for industry types.
v. Industry category was related to ISO implementation status.
Methodology
Sample Physiognomies
About 5717 Chinese service companies were chosen from the 2008 database
published by the National Bureau Statistics of China. A detailed economic census was
prepared where listed companies, ISO and non-ISO companies were chosen. Companies with
460 ISO certification got certified during 2004 and 2008. All the 5715 companies are the part
of “Computer Service”, “Storage and Transportation”, “Business Services”, “Specialized
Technology Services”, etc.
Employee strength, "employees holding degrees", diploma, school, junior high
school, and bachelor degree shows the staff strength along with employee qualifications.
Variables such as sales figures, equity, total asset, etc are significant. "Government provided
capitals", globally, and from different other sources depicts companies' capital source. Things
like the age of the company, return on assets and sales are noted.
Independnet and Dependnet Variables
Scholars barred the scope of this article to analyze the effect of ISO on profit, return
on assets, and sales of the company were made following the hypothesis. ISO status is an
ordinal variable. Companies sales, return on sales, and assets are continuous variable.
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