Determinants of Adopting ISO 9000 and Its Impact on Financial Performance

This report discusses the determinants of adopting ISO 9000 and its impact on the financial performance of companies. It includes an introduction to ISO 9000, report objectives, research questions, literature review, methodology, results, discussion and managerial advice, and research limitations. The report concludes that certified companies have better financial performance than uncertified companies and advises managers to register their companies with ISO 9000 for better financial performance.

Contents covered
• What is ISO
• Introduction
• Literature review
• Methodology
• Results
• Discussion and managerial advice
• Research limitations

Purpose for the report
• The main purpose for this report was to develop understanding of the
determinants of adopting ISO 9000 and the impacts of adopting it on
the financial performance on the companies.

What is ISO 9000
• This is the quality management system developed to assist
organizations to meet the customers and stakeholders’ needs when
meeting the regulatory and statutory requirements in relation to the
product services.
• ISO is an acronym for International Standards for Organizations

Introduction
• ISO 9000 was developed and introduced in the year 1987
• Since its introduction over 1 million of firms have registered with ISO
9000 in over 187 countries.
• It outlines the management strategies for quality management of the
firms
• The management outlines were directed towards meeting the
customers’ desires through improving the quality of products.
• Can be applied by any organization irrespective of the size of the firm
and not specific for any organization

Report objectives
• The two specific objectives met by the report were;
1. To evaluate the effects of adopting ISO 9000 in the financial
performance of the service firms
2. To evaluate the importance of certification of the firms with ISO
9000 on their management

Research questions
• Questions answered in the report included;
1. What are the effects of adopting ISO 9000 in the financial
performance of the service firms?
2. What are the importance of the certification of the firms with ISO
9000 on their management?

Literature review
• Literatures show that financial performance of the firms had improved
since their certification with ISO 9000
• ISO 9000 component effects are related to the achievements of the
firm’s financial benefits
• Indirect methods through conceptual formwork are applied for
measuring the financial performance
• Majority of the ISO 9000 welfares are external in nature instead of
internal
• Adoption of ISO 9000 by the companies should be for development
purposes for maximum profits

Methodology
• Census method was used by the National Bureau Statistics of China to
collect data from the service firm population
• Target population
• Data collection technique
• Data analysis

Target population
• The population covered by the census was 5717 companies
• Both certified and uncertified companies with ISO 9000 were
censured
• Census covered a period from 2004 to 2008

Data collection techniques
• Data were collected from the firms through the use of questionnaires
• Questionnaires were structured with both open and closed ended
questions which resulted to qualitative and quantitative data

Data analysis
• Collected data was entered in excel organized and transferred into SPSS for
data analysis
• Quantitative data analysis methods were applied such as descriptive
statistics i.e. mean and standard deviation to visualize the data properties
• Inferential statistics used in the report were Pearson’s correlation to check
for the correlation between selected attributes and multivariate regressions
analysis was used to check for the effects of the independent variables such
as (Kstate, Kother, ROS, ROA, FDIpercent and agefirm) on the dependent
variable Kpaid in understanding the firm’s financial performance and to
draw conclusion from the model outcome.

Results and findings
• Descriptive analysis included the cross tabulation between the
certification of the companies against the year
• Inferential statistics to draw conclusion from the census data.

Descriptive statistics
• From cross tabulation the number of certified companies were
represented by 8% which corresponded to a total of 460 companies.
• Uncertified companies were represented by 92% corresponding to a
total of 5257 companies.
• The mean profit for certified companies was greater than that of the
uncertified companies i.e. (6911.27 and 1865.26) respectively.

Inferential analysis
The inferential analysis conducted in this research report were;
• Correlation
• Multivariate linear regression analysis

Correlation
The hypothesis tested in the correlation inferential analysis were;
Hypothesis one
• H0: There is no correlation between sales of the companies and the profits of the
companies
• H1: There is correlation between sales of the companies and the profits of the
companies
• Hypothesis two
• H0: There is no correlation between total assets of the company and the companies’
total capital
• H1: There is correlation between total assets of the company and the companies’ total
capital

Hypothesis one
• H0: There is no correlation between sales of the companies and the
profits of the companies
• H1: There is correlation between sales of the companies and the
profits of the companies
• From the correlation hypothesis tested, sales of the companies and
the profits recorded were positively correlated with the Pearson's
correlation coefficient of (r-=0.762). The null hypothesis was rejected
thus not supported and conclusion made that there was correlation
between sales of the companies and the profits made by the
companies.

Hypothesis two
• H0: There is no correlation between total assets of the company and
the companies’ total capital
• H1: There is correlation between total assets of the company and the
companies’ total capital
• The correlation test between the total assets of the service firms and
the firms’ total capital had relatively strong positive correlation as
confirmed by Pearson’s correlation coefficient of (r=0.686). In that
regard, the null hypothesis was rejected thus not supported and
conclusion made that there was correlation between total assets of
the companies and the companies total capital.

Multivariate linear regression
analysis
• The outcome variable tested was total capital (kpaid) and the
predictor variables were six in total
• The developed model took the form of the following equation;
And the built model was;

Discussion and managerial advises
• The number of companies being registered by ISO 9000 increased from
2004 to 2006
• Profits recorded by certified companies were more compared to those
earned by the uncertified companies.
• From the results, the management board were advised to register their
companies with ISO 9000 for better financial performance if not registered.
• Managers were as well advised to put more efforts on strategies and
activities that will increase the amount of sales for profit maximization due
to strong positive correlation shown from the report results by sales and
profits

Research Limitations
• The report did not outline the steps that were supposed to be
undertaken by the companies that had not been registered with ISO
9000 and therefore the future research should be focused on this
area to help the firms willing to join ISO 9000 for financial benefits
since this was not outlined in this report.
• Future research should address the effects of certification of the firms
with updated versions of ISO 9000 since this report only discussed the
effects of age of certification of the firms with ISO 9000 and tested for
its effects on the total capital in the model built.