ISO 9000 Adoption In Service Firms In China: An Analysis

Purpose

            The ISO 9000 series of quality standards were first published in 1987. The initial quality standard was christened ISO 9000:1987. The intent of the organization was to frame rules for quality of products and services with special reference to trade between two organizations or countries. The standards have evolved over time (Nally, 2016).

Purpose

The purpose of the study is to investigate the adoption of ISO 9000 by organizations in China. The information has been collected from service industries in China in 2008. 

The report hypothesis

• Adoption of ISO certification improves the revenue of the industry
• Adoption of ISO certification improves the operating profit of the industry

Format and methodology

            In order to investigate the information collected by Chinese National Bureau of statistics previous literature is studied. Previous information on the benefits of adoption of ISO certification is used as a secondary resource. The primary data collected by China is initially investigated through the use of descriptive statistics. Further investigation into the data uses inferential statistics. MS Excel is used for the statistical analysis.

Literature review

            ISO 9000 are a series of standards intended to improve the quality management of organizations. The standards provide a guideline to organizations to improve the quality and service of its products. Research done by Chatzoglou, Chatzoudes, & Kipraios (2015), suggests that the improvement in quality of products and services has a direct relation to the financial performance of an organization.

            Zhu, Cordeiro, & Sarkis (2013) studied the adoption of ISO 9000 standards in China. They found that implementation of the standard was a consequence of both national as well as international pressure. They found that factors like sales, environmental regulation and industrial practices lead to the adoption of the standard. 

Wang & Sarkis (2013), in their article “Investigating the relationship of sustainable supply chain management with corporate financial performance” investigated the relation of financial performance and supply chain activities of firms. They investigated financial performance of 500 companies from USA from information in Bloomberg. The researchers found that implementation of ISO 9000 has a positive relation with financial performance of the organizations.  

Adoption of ISO 9000 certification may lead to an increase in the number of contracts with both domestic and international players (Javorcik & Sawada, 2018). Moreover, the performance of the firm may also increase due to the continuous improvement feature of ISO 9000. In addition, due to increase in the number of contacts of the organization the firm gets increased business links. The increased business links puts pressure of the organization to improve the quality of products and services.

Report Hypothesis

Sari (2016) in their article “Analysis of financial performance ISO 9000 certified company” investigated the financial performance of firms in Indonesia before and after adoption of ISO 9000 standards. They obtained the information of the performance through the annual reports in Indonesian Stock Exchange. The organizations in the study had acquired ISO 9000 between 2003 to 2006.  Figure 1 presents the results of the analysis of sales growth before and after acquisition of the standard. From the results it was interpreted that there is no difference in sales growth with or without adoption of the ISO 9000 standard.

Kusumah & Fabianto (2018) in their article “The differences in the financial performance of manufacturing companies in Indonesia before and after ISO 9000 implementation” reviewed the benefits of ISO 9000. Figure 2 presents the results of financial performance of selected Indonesian organizations. They found that there was significant increase in the profitability of organizations after the adoption of ISO 9000.

Fatima (2014), studied the impact of adoption of ISO 9000 on firms in Pakistan. The researcher divided organizations into small, medium and large firms. The year of adoption of ISO 9000 was taken as 1995. Thus The researcher found that there was significant difference in the financial performance of large and medium firms with the adoption of ISO 9000. Contrary to large and medium firms the sales performance of the small firms did not show any difference post adoption of ISO 9000 standard. Moreover, the researcher also found that the profit of large and medium firms showed significant difference with the adoption of the standard. In addition, small firms did not show improvement in financial performance after adoption of ISO 9000 standard.

The impact of adoption of ISO 9000 quality tools on the financial performance in firms in Siberia was investigated empirically  (Spasojevic Brkic, Djurdjevic, Dondur, Klarin, & Tomic, 2013). The researchers found that sales revenue of organizations are significantly related to financial performance of organizations.

The motivation to implementation of ISO quality standards was studied by Roy, Boiral, & Paillé (2013). To investigate the impact data was collected from 254 Canadian SMEs. From figure 4 it is found that financial performance of organizations which implemented ISO 9000 was better than those which did not adopt the standard.

Bevilacqua, Emanuele Ciarapica, Giacchetta, & Marchetti  (2013) studied the perception towards the adoption of ISO 9000 in seven firms. They found that adoption of the quality standard provided the organization with competitive advantage. Moreover, the main cause for adoption of the standard was the requirement of customers and also the image of the organization. 

Format and Methodology

Methodology description and justification of existing data-set

In order to investigate the effect of adoption of ISO 9000 series of quality standards numerical information was gained from the statistical bureau. Since numerical information was accessed thus quantitative analysis was found to be an ideal method of analysing the data. Descriptive as well as inferential statistics was used to analyse the data. Independent sample t-test and one-way ANOVA was used for inferential statistics.            

Hypotheses:

• Adoption of ISO certification improves the sales of the industry
• Adoption of ISO certification improves the profit of the industry

Analyses and findings

            Chinese National Bureau of statistics collected information on 5717 industries. The information collected by the organization pertains to different types of organization.

Table 1: Count of number of Industries

Certification	Total
Not Certified	5257
Certified	460
Grand Total	5717

There are 5257 industries which have not adopted ISO 9000 certification. Only 460 industries have ISO 9000 Certification.

Table 2: Descriptive statistics of Revenue of the industries

	Data
Certification	Average	Standard Deviation	Minimum	Maximum
Not Certified	10133	29617	1000	869176
certification	29592	55357	1000	629516
Grand Total	11699	32874	1000	869176

The average (standard deviation) revenue of non-certified industries is 10133 (29617). Further, the minimum and maximum revenue of non-certified industries is 1000 and 869176 respectively. In addition, the average (standard deviation) revenue of certified industries is 29592 (55357). Moreover, minimum and maximum revenue of certified industries is 1000 and 629516 respectively.

Independent sample t-test is used to investigate the hypothesis Adoption of ISO certification improves the sales of the industry

Table 3: Independent sample t-test for revenue

	Non-certified	Certified
Mean	10133	29592
Variance	877172200	3064389056
Observations	5257	460
Pooled Variance	1052838436
Hypothesized Mean Difference	0
df	5715
t Stat	-12.334
P(T<=t) one-tail	0.000
t Critical one-tail	1.645
P(T<=t) two-tail	0.000
t Critical two-tail	1.960

From the above analysis it is found that there are statistically significant differences in sales of certified and non-certified industries, p-value < 0.000 at a = 0.05.  The average sales of certified industries (29592) is higher than non-certified industries (10133).

Table 4: Descriptive Statistics for revenue of Certified industries

Industry	Average	Standard Deviation
Storage and Transportation	45134	51602
Telecommunication	43589	37553
Computer Service	31095	58543
Software	35024	75428
Business Service	36279	71001
Research and Development	41581	63144
Specialized technology services	23416	38736
Technology exchange and promotion	8250	8197
Grand Total	29592	55357

Table 4 presents descriptive statistics for revenue of certified industries. Analysis of the above table shows that the average revenue of “Storage and transportation” industries is the highest. Contrary to this the average revenue of “Technology exchange and promotion” industry is the lowest. 

One-way ANOVA is used to investigate the revenue of certified industries.

Table 5: one-way ANOVA for revenue of certified industries

Source of Variation	SS	df	MS	F	P-value	F crit
Between Groups	2.83E+10	7	4.04E+09	1.323882	0.237	2.029835
Within Groups	1.38E+12	452	3.05E+09
Total	1.41E+12	459

Table 5 presents the results of one-way ANOVA for revenue of certified industries. From the above table it is found that at a = 0.05 there is statistically no significant difference between the revenue of different industries, F(7,452) = 1.32, p-value = 0.237. 

Descriptive statistics is used to study the profit of different industries.

Table 6: Descriptive Statistics for profit between industry types

	Data
Certification	Average	Standard Deviation
Not-Certified	1865	6911
Certified	4385	9237
Grand Total	2068	7158

 From table 6 it is found that the average (standard deviation) profit of ISO 9000 non-certified industries is 1865 (6911). Similarly, the average (standard deviation) profit of ISO 9000 certified industries is 4385 (9237).

Literature Review

            Further we study the hypothesis that the profit earned by certified industries is different than non-certified industries.

Table 7: Independent Sample t-test for profit

	Not-Certified	Certified
Mean	1865	4385
Variance	47765712	85322831
Observations	5257	460
Pooled Variance	50782111
Hypothesized Mean Difference	0
df	5715
t Stat	-7.271
P(T<=t) one-tail	0.000
t Critical one-tail	1.645
P(T<=t) two-tail	0.000
t Critical two-tail	1.960

From table 7 it is found that there is statistically significant difference between certified industries and non-certified industries, p-value < 0.000 at a = 0.05 level of significance.

            Further we study the profit of ISO 9000 certified industries. 

Table 8: Descriptive Statistics for profit of industries

Industry	Statistics
Average	Standard Deviation	Minimum	Maximum
Storage and Transportation	2533	5481	34	59573
Telecommunication	5817	24756	62	296176
Computer Service	1594	5029	21	64608
Software	2890	6242	22	60697
Business Service	1810	4913	17	120056
Research and Development	2346	5335	39	51138
Specialised technology Service	1773	6666	18	159452
Technology exchange and promotion	1959	8164	20	122800
Grand Total	2068	7158	17	296176

From table 8 it can be envisioned that the average profit of Telecommunication industries having ISO 9000 certification in the year 2008 is the highest. Further we find that the average profit of Computer Service Industry having ISO 9000 certification in the year 2008 is the lowest. Thus we further study the average profit of ISO 9000 certified industries. One-way ANOVA is used to study the fact that the average profit of ISO 9000 certified industries are equal.

Table 9: one-way ANOVA for profit of ISO 9000 certified industries

Source of Variation	SS	df	MS	F	P-value	F crit
Between Groups	9.81E+08	7	1.4E+08	1.659	0.117	2.030
Within Groups	3.82E+10	452	84474087
Total	3.92E+10	459

            Table 9 presents the analysis of average profit of ISO 9000 certified industries. From the analysis it is found that there are statistically no significant differences in the average profit of ISO 9000 certified industries, F(7,452) = 1.659, p-value = 0.117 at a = 0.05 level of significance

Discussion and managerial advises

            The analysis of the information pertains to data collected by the bureau in 2008. From the analysis it is found that there ISO 9000 certified organizations had a significantly higher sales and profit volume than those which did not adopt the quality standard. Further it is also found that there are no significant differences in sales and profit between different industries which have adopted the quality standard. Thus it can be advised that organizations in China should adopt the quality standard in order to gain financially. Organizations irrespective of the industry type should implement the quality standard.

Limitations and directions for future research

The present analysis is based on information collected in 2008. Thus the analysis of the data is from a static data. Thus the benefit of adoption of ISO 9000 on revenue cannot be suitably argued. A better analysis would involve investigating longitudinal data. Longitudinal data would aid in understanding whether there is an increase in revenue over more than 1 year. Thus the hypothesis that adoption of ISO 9000 aids in revenue of an industry can be better proved.

The revenue and profit of an industry is not dependent on just adoption of ISO 9000 but on other factors also. All such factors which have influence on revenue and profit should be investigated.

Conclusion

            From previous studies it was found that organization which have adopted ISO 9000 quality standard have had a better financial performance. From our present study also we find that organization in China which have adopted ISO 9000 have gained financially (sales and profit). Moreover, it is found from the study that organizations irrespective of industry type have had an improvement in financial performance.

Reference

Bevilacqua, M., Emanuele Ciarapica, F., Giacchetta, G., & Marchetti, B. (2013). An empirical study of ISO 9000 on the supply chain of a company leader in the heating sector. International Journal of Quality & Reliability Management, 30(8), 897-916.

Cai, S., & Jun, M. (2018). A qualitative study of the internalization of ISO 9000 standards: The linkages among firms’ motivations, internalization processes, and performance. International Journal of Production Economics, 196, 248-260.

Chatzoglou, P., Chatzoudes, D., & Kipraios, N. (2015). The impact of ISO 9000 certification on firms’ financial performance. International Journal of Operations & Production Management, 35(1), 145-174.

Fatima, N. (2014). Impact of ISO 9000 on business performance in Pakistan: Implications for quality in developing countries. Quality Management Journal, 21(1), 16-24.

Javorcik, B., & Sawada, N. (2018). The ISO 9000 certification: Little pain, big gain? European Economic Review, 105, 103-114.

Kusumah, L., & Fabianto, Y. (2018). The differences in the financial performance of manufacturing companies in Indonesia before and after ISO 9000 implementation. Total Quality Management & Business Excellence, 29(7-8), 941-957.

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Spasojevic Brkic, V., Djurdjevic, T., Dondur, N., Klarin, M., & Tomic, B. (2013). An empirical examination of the impact of quality tools application on business performance: Evidence from Serbia. Total Quality Management & Business Excellence, 24(5-6), 607-618.

Wang, Z., & Sarkis, J. (2013). Investigating the relationship of sustainable supply chain management with corporate financial performance. International Journal of Productivity and Performance Management, 62(8), 871-888.

Zhu, Q., Cordeiro, J., & Sarkis, J. (2013). Institutional pressures, dynamic capabilities and environmental management systems: Investigating the ISO 9000–Environmental management system implementation linkage. Journal of environmental management, 114, 232-242.