Dissertation

Title:

“Effects of ISO 9000 certification

on firms’ financial performance:

The Impact on Greek firms”

Student’s name:

Kypraios Nikolaos

Supervisor’s name:

Dr. Chatzoglou Prodromos

MSc in Finance and Financial Information Systems

2009

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Abstract

Purpose: The aim of this research is to shed light on the relationship between

ISO 9000 certification and its’ effects on overall financial

performance of the certified firm. The focus is on Greek companies.

The findings are based on the latest version of the ISO series

(2000), which is generally accepted as it has diminished most of the

disadvantages of the previous (1994) version.

Methods: This research is based on primary data. Firstly, a mailed

questionnaire was answered by the quality managers of the

certified firms. Furthermore, a second questionnaire was the key to

enhance the findings, by collecting some qualitative data. This was

achieved by conducting a case study analysis, in which the

managers and five employees of one listed company were

interviewed.

Results: ISO 9000 certification can increase the quality awareness and

improve all internal procedures. On the contrary, its impact on

market efficiency is not significant. However, it seems that operation

efficiency improvement can lead to an increase on sales revenue

and eventually improve the overall financial performance of the

company. Finally, the assumption that customers’ demand was the

main motivation for implementing a certification has been rejected.

Companies seek for quality due to internal motives.

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Acknowledgements I would like to thank my supervisor, Dr Prodromos Chatzoglou, for his

assistance and guidance throughout the whole academic year. This

dissertation has demonstrated some major difficulties, and without his

recommendations it would never be finished on time.

Finally, many thanks should be addressed to my family and my fiancée

for all their support and comprehension during the previous year.

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Table of contents_______________________________________________ Introduction ………………………………….…………..……....…………. 5

Chapter 1 (Literature review) ………………………………………….. 7

1.1 Quality Management Systems (QMS) ………………………….. 7

1.2 The ISO 9000 standard series ………………..………...………… 8

1.3 Literature review/theoretical background ……..……………………. 11

1.3.1 Reasons of implementation …………………………...……….. 11

1.3.2 Benefits of implementation ……………………………………… 14

1.3.3 Impact on financial performance ………………………………... 19

1.3.4 Doubts/disadvantages ………………………………………….. 22

1.3.5 The case of ISO 9000 in Greece ………………………………. 26

Chapter 2 (Research model) ………………………………..…………… 31

2.1 Design …………………………………………………………………... 31

2.2 Research model – Hypotheses ……………………………………….. 32

2.3 Research methodology ……………………………………………….. 35

Chapter 3 (Results and discussion) ………………….………………. 41

3.1 Data analysis – results …………………………………………… 41

3.1.1 Validity and reliability ……………………………………………. 41

3.1.2 Structural model fit ………………………………………………… 44

3.2 Further discussion ……………………………………………………... 49

Chapter 4 (Conclusions & Limitations) ………..…………………………. 54

4.1 Conclusions ……………………….…………………………………….. 54

4.2 Limitations – recommendations ……………………………………….. 55

References …………………………………………………………………... 56

Appendices …………………………...…..…………………………………… 64

A. Questionnaire ……..………………….………………………………….. 64

B. Interview questionnaire ………….…………………………………….. 68

C. Statistical analysis …………………………………………………….. 72

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Introduction

Nowadays, as competitiveness between firms increases rapidly and

customers’ demands are following the same direction, quality awareness

becomes a primary target for every manager. The quality standards must be

certified, somehow. With the wide use of the internet, and the information

running all over the world instantly, quality certifications needed to be

accepted without any doubts. The ISO 9000 series are aiming at that

particular target and they manage to achieve the expectations and deliver the

best results.

Up to now, the literature has explored different aspects about this topic.

To begin with, one must consider the reasons that make a firm decide to go

on with the certification procedures. These are similar in most cases.

However, the gained benefits from an ISO 9000 certification are questioned.

The benefits concerning the internal processes improvement are the most

common. On the contrary, overall financial improvement as a result from an

ISO certification is often arising many doubts. Although the benefits that

derive from the ISO implementation are the most explored topic globally, in

Greece such researches are limited.

Specifically in Greece, researches concerning ISO implementation

seem to be few. It is stated, though, that there is an overall improvement after

certification to firms’ revenues but it cannot be guaranteed that it will continue

on the long term (Gotzamani et al., 2006). Similarly with the rest of the world,

the main reasons for a firm to proceed with implementation are external

(customer pressure, new market areas opening, to name a few) as Lipovatz et

al., 1999, states. Problems also remain more or less the same: increased

paperwork, costs and employees complains (Lipovatz et al., 1999; Vouzas

and Gotzamani, 2005). Finally, according to a finding by Gotzamani et al

(2006), there is a possible difference between ISO 9000:1994 and ISO

9000:2000 certifications. The second one seems to be more effective to firm’s

performance.

Most of the literature focuses on the relationship between ISO 9000

certification and Total Quality Management (TQM). Furthermore, the previous

researches were made many years ago, thus they are referring to ISO

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9000:1994 and the samples are from all over the world. Given all that, this

research aims in shedding light on this issue, investigating its implementation

from Greek companies. Furthermore, in order to be more accurate and

specific, the main focus is on ISO 9000 series and not in Total Quality

Management. At this point it must be mentioned, that the sample, almost in its

total, was certified with the 2000 version of ISO series. Thus, it is of great

importance to compare these findings with previous researches.

This research is based on primary data. Therefore, the main method

that was used to complete this survey was the use of a questionnaire. Based

on previous researches from the literature, one questionnaire was formed

including 39 questions using the Likert scale, which was answered by people

from only 34 companies. The next step was to focus on one of these

companies and to conduct a case study analysis looking now for qualitative

data. Thus, a certified company was chosen. This choice had to fulfill some

conditions: this company is medium sized, listed in Athens stock exchange

and its managers are very concerned about quality matters. The interviews

were taken place in company’s offices, including a variety of people, begging

with the CFO, the quality manager, the sales manager and finally, employees

from different departments.

The dissertation consists of five chapters. In chapter 1, a thorough

literature review is being made, examining in depth every theoretical

background existing about this aspect globally as well as in Greece

specifically. In chapter 2, the research model is being analyzed. Three

aspects are being covered: the model design, the forming of the hypotheses

and the research methodology that has been conducted. Chapter 3 includes

the survey results and further discussion. The main analysis was conducted

with the SPSS version 16, statistical package. Chapter 4 specifies the

limitations of the research and the conclusions. Finally, in chapter 5,

appendices include both questionnaires that were used to complete this

survey: the one that was mailed to certified companies and the other that was

used to conduct the interviews.

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CHAPTER 1:

Literature Review

1.1 Quality Management Systems

The Quality Management Systems (QMS) are applicable to all

organizations, regardless of type, size and product / service provided, and can

be used by internal and external parties, including certification bodies /

suppliers, to assess the organization's ability to meet customer, regulatory

and organization's own requirements.

The application of a quality system emphasizes the importance of:

understanding and meeting requirements

obtaining results of process performance and effectiveness

continual improvement of processes based on objective monitoring /

measurement, and subsequently

the need to consider processes in terms of added value

To become more specific, the ISO (International Organization for

Standardization) 9000 series describes standards for a QMS addressing the

principles and processes surrounding the design, development and delivery of

a general product or service.

Recently, an interest to examine the impact of certification to these

firms has occurred. Specifically, there is a promise that after adopting these

programs, a firm can improve efficiency and profitability. This improvement

comes up as a result, no matter if a firm is listed or non-listed. Although many

companies proceed to the certification mostly because their customers

demand so, the upcoming positive results, force them to take one further step:

the implementation of Total Quality Management (TQM).

Sampaio et al. (2009) made a thorough research in literature,

concerning the ISO 9000 series: out of the total sample of almost 100 papers,

70 per cent turn out to be surveys, 17.5 per cent were analysis of financial

indicators, 7 per cent case studies and only 5.5 per cent other, such as

interviews, literature reviews and statistical data analysis.

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1.2 The ISO 9000 standard series

Nowadays, it is more than obvious, that more firms understand and

accept the importance of the quality management and therefore, they seek to

certify the quality of their products, services or processes. Brown et al. (1998),

mentions that the number of managers who point out to the tangible effects of

ISO 9000 series are growing rapidly. This growth over the years is

demonstrated in figure 1:

986

813889

995

1247 1240

1388

11051230

0

200

400

600

800

1000

1200

1400

2000 2001 2002 2003 2004 2005 2006 2007 2008

Standards published

Figure 1: The ISO standards published (source: ISO 2008 annual report)

What is the underlying purpose of ISO 9000? If one considers that

most activities in firms are consisted of repeated tasks, the certification

guarantees that these activities not only can be measured, but they can add

value to the product (or the service) as well (Stevenson and Barnes, 2001). Of

course, all these are referring to documentation, which ensures that whenever

the same activity takes place, it is performed similarly following the same

methods and procedures (McTeer and Dale, 1994). The ultimate achievement

of ISO 9000 is that the procedures and the standards are globally accepted by

customers and suppliers as well. It is a system that supervises all internal

procedures of a company in order to come up with the same result

continuously. Finally, as Sharma (2005) states, certification must be

established only by an independent ISO audit. The company must meet the

requirements at all times. Thus, ISO implementation and maintenance is a

non-stop process.

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The ISO 9000 documentation is based in eight quality management

principles (International Organization of Standardization, 2009):

1. Customer focus

2. Leadership

3. Involvement of people

4. Process approach

5. System approach to management

6. Continual improvement

7. Factual approach to decision making

8. Mutually beneficial supplier relationships

In order for a firm to achieve continuous improvement these eight

principles are vital as well as the use of the process approach shown in figure

2 below:

Figure 2: The ISO 9000 process approach (source: www.iso.org)

At this point, someone might wonder: what are these standards and

why do they really matter? Standards are the guarantee that some vital

characteristics of products or services (such as quality, environmental

friendliness, safety, reliability etc.) are meeting customers’ expectations

(International Organization of Standardization, 2009). The ISO 9000 and ISO

14000 families are ISO’s best known standards ever and they are accepted

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worldwide. For instance, ISO 9001:2000 and ISO 14001:2004 are

implemented by over a million firms in more than 175 countries. The 9000

series refer to “quality management” while the 14000 series to “environmental

management”.

Nowadays, the two series seem to overlap each other. The necessity

to become more environmental friendly applies to the latest 2008 version of

9001 series. Casadesus and Gimenez (2000) made a research including 288

Spanish firms. More than 75 per cent of them indicated that the newest

version of ISO 9000 should include environmental aspects. Companies are

not unconcerned about these matters. For that reason the 9001:2000 version

was embraced with more positive responses (Poksinska et al, 2002, McGuire

and Dilts, 2008) than the previous (9001:1994) one. The 2000 version

achieved more relevance to the service sector, the implementation

procedures became more flexible and thus easier, and finally more synergy

between quality management and environmental management (Terziovski et

al, 2003). In other words, as Bendell and Boulter (2004) indicate, it was given

more emphasis on process management.

However, at this point it must be noticed that, there are also other

findings which differ. ISO 1994 versions (all three of them 9001, 9002, and

9003) reported more benefits than the 2000 version (Dick et al, 2008). It must

be also mentioned that for all versions, a decrease has been occurred

recently.

The successful appearance of the 2000 version was followed recently

by the new 2008 version. In this new version, there are no new requirements,

which enhance the belief that the older version was proved almost perfect.

According to International Organization of Standardization, the 2008 version

aims in shedding light to the existing requirements and in improving the

synergy with the ISO 14001:2004 series.

Finally, before the 2000 version, there were three standards (Carr et

al, 1997, Stevenson and Barnes, 2001):

ISO 9001: refers to companies related with design, development,

production, installation and servicing.

ISO 9002: refers to production and installation (after the design

requirements are established).

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ISO 9003: refers to final inspection and testing.

As Sun and Cheng (2002) state, it was common that large firms

preceded to ISO 9001 implication, when SMEs (small and medium sized

enterprises) proceeded to ISO 9002. The reason behind this is that usually

there is no product design in SMEs, and thus 9002 series were sufficient.

After the year 2000 revision, all three types are merged into a single

document known as ISO 9001. Additionally, ISO 9004 is developed, referring

to performance improvement.

1.3 Theoretical background

1.3.1 Reasons for implementation / motives

Many surveys have been made during the past years concerning the

motives behind the ISO certification. It is common sense that managers and

firms’ employees are the most appropriate ones to shed light on this aspect.

Boiral (2003) made a survey and he arranged interviews with almost 50

managers and employees, outside their workplaces. There were three

categories found: the typical ones, the enthusiasts and the undecided. The

first category, almost 45 per cent, indicated external reasons, whilst the

second ones (almost 35 per cent), indicated the certification as a marketing

tool (internal reason). One thing is for certain: the motives behind the

implementation can be categorized into two main groups: internal and

external. All the motives found in literature are summarized in table 1.

According to Brown et al. (1998), the reasons differ between small and

large sized companies. Small companies are very concerned about time as

well as money spent for the implementation. These costs compared to their

revenues are not insignificant. Furthermore, there is no internal pressure from

their managers to follow quality standards. Thus, the main reason for

implementation is external and most common: customers’ demand (McTeer

and Dale, 1994, Carr et al, 1997, Terziovski et al, 1997, Brown et al, 1998,

Whithers and Ebrahimpour, 2000, Sun and Cheng, 2002, Boiral, 2003, Chow-

Chua et al, 2003, Stalhane, 2006). On the contrary, large companies proceed

to ISO or other quality management implementations as a result of internal

decisions in order to achieve other goals such as cost reductions (Sun and

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Cheng, 2002). In addition to those, McAdam and Canning (2001) also

concluded that implementation decision is strongly correlated to firm’s size.

Reasons for ISO implementation

Internal External

Seek for cost reductions (McTeer and

Dale, 1994, Casadesus and Gimenez,

2000, Sun and Cheng, 2002, Douglas et

al, 2003, Martinez-Costa et al, 2008)

Improve customer service (Casadesus

and Gimenez, 2000)

Improve efficiency (Curkovic and Pagell,

1999, Chow-Chua et al, 2003, Douglas et

al, 2003, Zaramdini, 2007)

Seek for quality improvement (Curkovic

and Pagell, 1999, Chow-Chua et al, 2003,

Zaramdini, 2007)

Company morale improvement (McTeer

and Dale, 1994)

Customers’ demand (McTeer and Dale,

1994, Carr et al, 1997, Terziovski et al,

1997, Brown et al, 1998, Whithers and

Ebrahimpour, 2000, Sun and Cheng,

2002, Boiral, 2003, Chow-Chua et al,

2003, Stalhane, 2006)

Be considered for tenders (Brown et al,

1998, Douglas et al, 2003)

Increase market share (Casadesus and

Gimenez, 2000, Douglas et al, 2003)

Gain marketing benefits (McTeer and

Dale, 1994, Whithers and Ebrahimpour,

2000, Douglas et al, 2003)

Advantage in international markets

(Curkovic and Pagell, 1999)

Anticipate future customer

requirements (Douglas et al, 2003)

Certified competitors (Chow-Chua et al,

2003)

Table 1: Reasons for implementation

Customers’ requirements, as a rationale, are not the motive that will

lead to benefits gains but certainly is the main reason for implementation.

Whithers and Ebrahimpour (2000) made a survey including some European

companies from different sectors. The findings are unquestionable: almost 75

per cent cited customers’ demand as a reason for implementation. All of them

cited this reason to be at the top four reasons. Firms are aiming in increasing

their sales and their market share, in order to balance their implementation

costs with more product sales and eventually increase profits. In practice it is

proved to be all wrong.

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The two categories of motives (internal and external) have an effect on

the success of the implementation and thus its benefits. Outside forces such

as customers’ demand are not related with success. In order for a firm to

receive all the benefits of the certification the motives have to be internal

(Brown et al, 1998, Singels et al, 2001, Martinez-Costa et al, 2008).

Furthermore, at this point one vital fact must be considered: employees are

the key to implementation process. Thus, all procedures must be made with

conscientiousness on their behalf, as their participation is not only during the

implementation but mainly after (Brown et al, 1998).

Douglas et al. (2003) indicate another main motive: ISO 9000

certification gives the opportunity to the firms to open to new markets or

obtain businesses they might not achieve otherwise. To begin with, as

Curkovic and Pagell (1999) state, with the certification an organization can

prove its quality awareness and thus, gain a competitive lead to the markets

globally. Furthermore, it should not be forgotten that nowadays with the power

of the internet and e-commerce, one may consider as a market the whole

world. Finally, with the number of certifications increasing and the acceptance

of ISO standards worldwide, it is often a necessary condition the certification

itself in order to make a business agreement, especially when it comes to

government business demands.

Many firms, after taking into consideration the cost aspect, proceed to

implementation phase aiming at cost reduction. They seek to improve their

production process efficiency, achieve marketing benefits and cost reductions

(McTeer and Dale, 1994, Casadesus and Gimenez, 2000, Douglas et al,

2003, Martinez-Costa et al, 2008). All firms seek for better financial results.

One main target is to improve productivity. Many people think that the

certification results may be intangible. On the contrary, ISO certification set

standards in production procedures and thus eliminates the possibility to

come up with inefficiencies as they become simpler and more accurate.

Whithers and Ebrahimpour (2000) found out that these expectations for

productivity improvement are actually one of the top two reasons for

implementation. The two thirds of the companies in their survey agreed to that

aspect.

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Despite of the main reasons that lead to an implementation decision,

there are some other reasons that are usually cited: Pressure from the

competition (Whithers and Ebrahimpour, 2000, Chow-Chua et al, 2003), good

management practice (Chow-Chua et al, 2003), and company morale

considerations (McTeer and Dale, 1994). With the continuously growing

number of certifications, many firms are forced to make an implementation by

the already certified competitors. Whithers and Ebrahimpour (2000) came up

with the finding that more than 50 per cent of the companies cited this as a

reason and the three quarters of them identified this as one of the top three

reasons. Actually, this is related to customers’ demand for quality certification.

So far, all the findings indicate a strongly positive relationship between

the motives of implementation and the benefits obtained. Those firms that

proceed to ISO implementation on their own will are more likely to achieve

improvement in their procedures and thus come up with benefits (Terziovski

et al, 2003). In simple words, the motives for implementation influence the

overall upcoming results.

1.3.2 Benefits of implementation

As mentioned before, there is a strong relationship between the

reasons of implementation and the benefits that an organization achieves. To

be more specific, it is found that firms reach maximum benefits if they

implement ISO 9000 internally motivated (Jones et al, 1997, Leung et al,

1999, Yahya and Goh, 2001, Casadesus and Karapetrovic, 2005, Poksinska

et al, 2006, Boiral and Roy, 2007, Sampaio et al, 2009). As Biazzo and

Bernardi (2003) state, when a firm is seeking for process and product

improvements, they manage to gain all these and even more benefits after the

certification. On the contrary, seeking only for marketing objectives or

maximization of profits, the results seem to be negative. Finally, it must be

also noticed that, benefits are supposed to derive not immediately but years

after the certification (Leung et al, 1999).

Furthermore, a firm has to realize that to proceed willingly to

implementation decision is not the only important factor. They have to

understand that this is a time, money and energy investment. According to

Curkovic and Pagell (1999), in order to minimize errors, a company has to find

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a way to measure the processes and the problems that occur. This

measurement becomes very easy with the use of ISO documentation, and

thus the path to performance improvement becomes wide open. In simple

terms, certified firms are focusing on quality even more than those who are

not certified or are not planning to do so (Carr et al, 1997).

At this point, it must be mentioned that many times the benefits are

slightly unclear. Furthermore, there are many people whose interpretations

differ or difficulties in proper measurement occur. Little research has been

made with certain financial measures being used, such as Return on Assets

(ROA) or even increase on the stock price (for the listed firms). Even with

these anomalies taken for granted, literature agrees that benefits can be split

into two categories: internal and external (Tsiotras and Gotzamandi, 1996,

Casadesus and Gimenez, 2000). In 2001, Casadesus et al, made a research

considering 502 certified firms in Spain. Over 65 per cent of the sample

achieved significant benefits both internal and external. In addition to that,

only 6 per cent showed lower benefits. In any case, there were no indications

of gaining no benefits at all. All the possible benefits of ISO 9000

implementation are summarized in table 2.

Probably the most common and yet important benefit that a firm can

gain after the implementation is quality awareness (McTeer and Dale, 1994,

Krause, 1996, Terziovski et al, 1997, Brown et al, 1998, Curkovic and Pagell,

1999, Whithers and Ebrahimpour, 2000, Stevenson and Barnes, 2001,

Zaramdini, 2007, Douglas et al, 2003, Terziovski et al, 2003, McGuire and

Dilts, 2008) and production efficiency (McTeer and Dale, 1994, Terziovski et

al, 1997, Brown et al, 1998, Casadesus and Gimenez, 2000, Stevenson and

Barnes, 2001, Biazzo and Bernardi, 2003, Boiral, 2003, Douglas et al, 2003,

Terziovski et al, 2003, McGuire and Dilts, 2008). If a firm follows the directions

from the ISO standards, it can reassess all the procedures that were made so

far and identify all the mistakes from the past. With the certification, new

processes are being made; the employees follow the same directions and all

these lead to only one focus: quality improvement. McTeer and Dale (1994),

came up with this exact conclusion: 5 out of 8 firms of their survey, after

achieving efficiency improvement, they manage to reduce costs. Furthermore,

their survey showed that for SMEs, ISO 9000 implementation is a remarkable

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aid, in order to improve in many ways, and eventually to grow bigger.

Whithers and Ebrahimpour (2000), taken sample from different European

companies, concluded with the same undeniable result: after the ISO 9000

certification, quality does actually improve.

Benefits of ISO implementation

Internal External

Quality awareness (McTeer and Dale, 1994, Krause, 1996,

Terziovski et al, 1997, Brown et al, 1998, Curkovic and

Pagell, 1999, Whithers and Ebrahimpour, 2000, Stevenson

and Barnes, 2001, Douglas et al, 2003, Terziovski et al,

2003, McGuire and Dilts, 2008)

Production efficiency (McTeer and Dale, 1994, Terziovski

et al, 1997, Brown et al, 1998, Casadesus and Gimenez,

2000, Stevenson and Barnes, 2001, Biazzo and Bernardi,

2003, Boiral, 2003, Douglas et al, 2003, Terziovski et al,

2003, McGuire and Dilts, 2008)

Increased productivity (Curkovic and Pagell, 1999,

Casadesus and Gimenez, 2000, Biazzo and Bernardi, 2003,

Terlaak and King, 2006, Douglas et al, 2003, McGuire and

Dilts, 2008)

Better documentation (McTeer and Dale, 1994, ,

Terziovski et al, 1997, Stevenson and Barnes, 2001,

Douglas et al, 2003)

Error rates reduction (Boiral, 2003, Terziovski et al, 2003)

Improved internal operations (Whithers and Ebrahimpour,

2000, Stevenson and Barnes, 2001, Douglas et al, 2003)

Easier training of new employees (McTeer and Dale,

1994)

Cost reduction (McTeer and Dale, 1994, Brown et al, 1998,

Terziovski et al, 2003)

Staff motivation (Brown et al, 1998, Terziovski et al, 2003)

Profitability (Stevenson and Barnes, 2001)

Improved response to

customer requirements

(Terziovski et al, 1997, Brown et

al, 1998, Casadesus et al, 2001,

Stevenson and Barnes, 2001,

Biazzo and Bernardi, 2003,

Boiral, 2003)

Market share (Brown et al,

1998, Terziovski et al, 2003,

McGuire and Dilts, 2008)

Overseas market access

(Brown et al, 1998)

Sales increased (McTeer and

Dale, 1994)

Marketing (Buttle, 2001)

Table 2: Benefits of implementation

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More internal benefits that arise instead of the external are error rates

reduction (Boiral, 2003, Terziovski et al, 2003). Analyzing this aspect, Brown

et al (1998) realized that a firm manages to achieve this with better internal

communication, and by showing order in procedures as well as discipline from

the employees. With ISO 9000, employees and managers have in their

inventory a powerful tool that helps them to assess quality with more specific

ways (Curkovic and Pagell (1999). This leads to adding value to the product

or the service provided. Moreover, many European firms identified better

communications and relations between the employees in a survey made by

Whithers and Ebrahimpour (2000).

One more aspect that arises internally is the matter of cost reduction.

By minimizing errors, one can assume that cost of products will decrease as

well. There are two – almost opposite – opinions found in literature. McTeer

and Dale (1994) found remarkable reduction in costs, but it must be

mentioned that their survey included only small companies. On the contrary,

there is little or none cost reduction, according to Brown et al (1998) after a

survey in small companies as well. Terziovski et al (2003), however, are

clearer about the non existence of cost reduction, as they contact a survey

including 400 companies.

McGuire and Dilts (2008) in their findings proved that while a firm gains

benefits internally, external metrics seem unchanged. Furthermore, it was

clearly shown that there was absolutely no noticeable effect on the share

price. Similarly, with many internal metrics raised and with the employees’

motivations after the certification, production volume seems to increase as

well (Terlaak and King, 2006). This aspect must be taken into account, in

order to interpret the opposite findings: external metrics can be improved also.

To begin with, Boiral (2003), stands in the middle. He argues that

quality and internal communication is improved as well as monitoring

procedures becomes easier and more accurate. The benefits, though, seem

to continue: Commercial advantages arise, and thus ISO certification,

becomes a remarkable marketing tool. McTeer and Dale (1994) found that 75

per cent of the companies examined verified the marketing possibilities

behind the implementation, even though there was no actual measurement

whatsoever.

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Another external benefit that firms seek to gain with the implementation

is an increase in market share. However, the findings concerning this aspect

are contradictory. Stevenson and Barnes (2001) state that, many companies

increased their profitability after the certification. The explanation is quite

simple: ISO 9000 adds credits to sellers as long as the quality is concerned.

Customers are aware of the fact that, certified companies are under external

and credible supervision. Therefore, it is certain that the company follows

quality standards that are globally accepted.

On the contrary, a remarkable number of firms are quite sceptical

about this matter (Brown et al, 1998, Terziovski et al, 2003, McGuire and

Dilts, 2008). Many of them notice it as a benefit but they are not ranking it

over the top. One may consider that it is very difficult to measure whether the

sales increase comes as a result of the ISO implementation or other factors

considering.

Finally, there is no doubt that ISO 9000 certification can lead to

improved response to customer requirements (Terziovski et al, 1997, Brown

et al, 1998, Casadesus et al, 2001, Stevenson and Barnes, 2001, Biazzo and

Bernardi, 2003, Boiral, 2003). It should not be forgotten that customers’

demand is the main reason for ISO implementation. Thus, after fulfilling this

demand, companies may expect for sales increase and maximization of

profits.

Many people consider ISO 9000 series to be beneficial only in

industrial sector. This is also proved by the enormous amount of literature that

is referred on industries. However, there are studies that indicate quite the

opposite. A recent study by Caro and Garcia (2009) demonstrated that

customers’ demands are also fulfilled after the certification in the service

sector as well. Furthermore, such firms achieved significant growth after the

implementation. Given that, Caro and Garcia (2009) strongly suggest that

insurance companies must also consider ISO 9000 as beneficial. In addition,

Singh et al (2006) performed a parallel survey including 149 firms from the

service sector and 160 firms from the industrial sector. No significant

differences were noticed. Firms from the service sector can also gain

improvement, especially in their internal procedures (McAdam and Canning,

2001).

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To sum up, ISO 9000 provides the motivation and the aid to a company

in order to improve quality performance. However, its benefits are becoming

more tangible if it is used as a step to TQM (Total Quality Management)

implementation (Sun, 2000). Similarly, Biazzo and Bernardi (2003) are

indicating that ISO 9000 must be used as the foundation for process

management and creating a culture of continuous improvement.

1.3.3 Impact on financial performance

Every finance book explains that the main goal of financial managers is

to maximize shareholders wealth. With this financial perspective, if one may

consider ISO 9000 implementation as an investment with the literal meaning,

comes up with the conclusion that it is a bad investment and it should not be

in the shareholders’ interest (Brealey et al, 2006). On the other hand, there

are many important aspects to be further analyzed and it is not just a simple

thing to interpret: production process, customer satisfaction, employee

motivation, marketing benefits that may assist to increase market share, and

sometimes impact on share price (Aarts and Bos, 2001, Buttle, 2001, Singels

et al, 2001).

Many studies demonstrate that there is no obvious link between ISO

certification and sales growth or overall performance (Dick, 2000, Heras et al,

2002, van der Wiele, 2005). However, it is expected that improvement on

internal procedures may affect the financial performance as well. On the other

hand, it is no secret that firms that already perform will seek for certification

anyway (van der Wiele, 2005).

Previously, it was mentioned that there is a strong correlation between

the motives behind the implementation decision and the financial

improvement on firms’ performance (Douglas et al, 2003). Furthermore, if a

firm’s main target is to use ISO 9000 as an advertisement, then the large

amount of paperwork will transform the implementation success into a total

failure (Sun, 2000). However, only a minimum portion of the literature did

actually shed light on tangible measures of a firm’s economic factors. Most

surveys are referring more to intangible factors such as production efficiency

etc. Nevertheless, a certified company can use some metrics to evaluate the

impact of ISO 9000 series on sales (by achieving higher revenues or by

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minimizing costs), on return on assets (ROA), on return on sales (ROS), on its

share price, and after all on its overall financial performance (Aarts and Bos,

2001, Boiral, 2003, Douglas et al, 2003, Sharma, 2005, Ferreira et al, 2008,

McGuire and Dilts, 2008).

Some may consider the fact that financial results are only reflecting a

firm’s business position (Curkovic et al, 2000). Moreover, Venkatraman and

Ramanujam (1986) state that the firm’s financial results are not enough to

measure performance and literature shows this confusion as well. Many

researchers are skeptical and they are taking under consideration primary and

secondary data as well. Best results arise when both of them are used

(Venkatraman and Ramanujam, 1986). In simple terms, on the one hand

there are managers’ and employees answers on surveys which are

subjective, while there are financial data for the company which are more

objective. However, things are more complicated. As Martinez-Costa et al

(2008) state, the first ones are questioned about their reliability, while the

second ones are reflecting the whole sector situation as well. For these

reasons, the best method that must be followed is to interpret company’s

results by taking into account both aspects. After all, even though some

factors are immeasurable (such as flexibility, quality, efficiency to name a

few), there are still some others that are quite tangible (production costs,

stock price etc) (Martinez-Costa et al, 2008).

To begin with, there are surveys that make a research on ISO 9000

series’ impact on sales and/or market share (Sun and Cheng, 2002,

Terziovski et al, 2003, Corbett et al, 2005, Sharma, 2005, Benner and Veloso,

2008). Sun and Cheng (2002) are drawing a line between ISO certification for

SMEs and large companies. As mentioned before, an SME proceeds to ISO

implementation as a result of customers’ pressure. Thus, after the

implementation they meet customers’ expectations and, as a result, their

sales may grow. This relationship is also suggested by the balanced-

scorecard framework (Sharma, 2005). Sharma (2005) suggests three

dimensions of financial performance: operating efficiency – measured with

profit margin -, growth in sales, and overall financial performance measured

by earnings per share. Furthermore, with the certification, they may penetrate

into new markets or make new deals (with government for example) that have

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ISO certification as main requirement. All these, may lead the firm to overall

performance improvement (Sun and Cheng, 2002). However, Sharma’s

(2005) findings are pointing that ISO 9000 series’ impact is more obvious on

profit margin than sales.

There are other surveys moving in the same direction. Firstly, operating

efficiency is derived by reduced costs that are achieved by making all

processes more accurate and with fewer mistakes (Terziovski et al, 2003,

Corbett et al, 2005). Furthermore, new markets penetration or an increase on

customers’ satisfaction is the reason for performance improvement (Corbett et

al, 2005, Benner and Veloso, 2008).

Corbett et al, 2005, made a survey in the United States, testing various

hypotheses such as: increase on ROA (return on assets) and ROS (return on

sales), lower cost of goods sold (COGS)/SALES ratio. Their findings led to the

conclusion that there were actually significant improvements in overall firms’

financial performance. However, it is once more mentioned that the way that

every firm is obtaining ISO series is strictly related to benefits that arise.

Proper motives for implementation lead to better performance and benefits

gaining (Corbett et al, 2005).

More recent studies conduct a financial performance measurement, by

investigating ISO 9000 series’ impact on firms’ stock price (Aarts and Bos,

2001, Boiral, 2003, Sharma, 2005, Benner and Veloso, 2008, Ferreira et al,

2008, McGuire and Dilts, 2008). McGuire and Dilts, (2008), used a sample of

204 small and large companies from different sectors, for the years 1999 to

2002. They took under consideration the possible different impacts of the two

ISO 9000 series: the 1994 version and the 2000 version. Their conclusion

was that there was no positive reaction to the stock market after the

announcement or after the implementation itself. However, as far as the

companies that implemented the ISO 9000:2000 series are concerned, they

showed an increase in their market value of equity.

. On the contrary, Ferreira et al (2008) with a sample of 631 firms from

the United States, came to a different conclusion: there is a difference

between small, medium and large sized firms. Large firms, after the ISO

implementation announcement, achieve higher returns in 1 to 3 next year’s

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horizon. Medium sized firms show no significant change for the same periods.

Small sized firms, though, showed negative returns.

One recent study is more encouraging. Benner and Veloso (2008)

without separating firms into categories, concluded that there may be a

positive reaction on firm’s share price, and eventually add wealth on

shareholders. In order to interpret this reaction, Benner and Veloso (2008),

assumed that investors’ belief is that ISO implementation will actually improve

firm’s overall financial performance and thus this belief affects their behavior.

On the contrary, Terziovski et al (1997) came up in Australia and New

Zealand, with negative results. Due to the difficulty of measuring the

performance, ISO 9000 implementation has none or little effect. Terziovski et

al (1997) came with this result including one more parameter in their study:

they not only considered ISO certification existence, but they also considered

the presence (or the absence in some cases) of TQM environment.

To sum up, Sun (2000) came up with the conclusion that the truth is

placed somewhere in the middle. One must dig deeper if he wants to interpret

the results with accuracy. Some metrics are unquestionable: ISO certified

companies are showing reduced errors and thus reduced production costs;

they minimize customer complaints and thus may boost sales. On the

contrary, there are no significant differences in the market position of the

firms. To put it in numbers, Douglas et al (2003) after a survey on over 100

UK ISO certified firms concluded that 75 per cent of the firms consider it to be

good value for money.

1.3.4 Doubts/Disadvantages

So far, it is occurred that literature in its whole, examines the benefits

of the ISO 9000 implementation that derive for a certified company. Still, there

is a minority who expresses its doubts or even its negative feelings

(Terziovski et al, 1997). Furthermore, Carr et al (1997), concluded that the

hypothesis of ISO certification equals to financial performance improvement

should be rejected. Nevertheless, even for the surveys with positive

conclusions, there are for certain some disadvantages, occasionally. The two

most common cited disadvantages of the ISO implementation are the large

amount of paperwork needed in order to certify quality after it (McTeer and

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Dale, 1994, Terziovski et al, 1997, Brown et al, 1998, Singels et al, 2001,

Douglas et al, 2003, Bendell and Boulter, 2004), and its cost (Terziovski et al,

1997, Stevenson and Barnes, 2001, Singels et al, 2001, Douglas et al, 2003,

Bendell and Boulter, 2004). Moreover, going down on the rank, some other

are also found. These are: time pressure (McTeer and Dale, 1994, Whithers

and Ebrahimpour, 2000), discourage of creative thinking on employees’ behalf

(Singels et al, 2001, Bendell and Boulter, 2004), lack of knowledge from the

consultants (McTeer and Dale, 1994), lack of benefits for late adopters

(Benner and Veloso, 2008).

The most common cited disadvantage of ISO implementation is its cost

(Terziovski et al, 1997, Stevenson and Barnes, 2001, Singels et al, 2001,

Douglas et al, 2003, Bendell and Boulter, 2004). Especially for small sized

companies, cost is always an issue. The cost of implementation is actually

difficult to measure with accuracy. According to Stevenson and Barnes

(2001), four main factors must be included: time needed for the procedures,

training of the staff that is equivalent to lost man-hours, the consultants’

payment, and the registration fee. The first two factors are more intangible

and thus impossible to measure. On the other hand, the latter two could be

more specific.

The matter of cost for a consultant is relevant. First of all, it is related to

the firm size. Furthermore, the complexity of the company is also an issue.

Managers’ and employees’ commitment is also vital, because in that case

there are fewer meetings and thus less money for the consultant. Typically, a

consultant may ask for 3,000 euros (for a common firm) up to 5,000 euros and

more if the company’s sector is a rather new area for the consultant. Usually,

the training is made with seminars. It is calculated that one day seminar to the

quality manager and the staff costs about 500 euros. Finally, the cost of the

registration fee and the cost of auditing are about 4,000 euros for a period of 3

years. That is, 1,500 euros the registration fee and up to 1,200 euros per year

of auditing. These prices are referring to the top consultant firms in the

market. It must be mentioned though, that these costs may differ as they are

influenced by firm’s size and its existing (or not) of a quality management. On

the contrary, considering all these, ISO 9000 might be related with future

payoffs of some kind, otherwise no one would proceed to such a decision

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(Stevenson and Barnes, 2001). Finally, McTeer and Dale, (1994), suggested

that the enlarged amount of documentation needed, might add extra cost to

the whole procedure.

Another most cited disadvantage of the ISO certification, always placed

at the top two, is the enormous amount of documentation needed for the

procedures not only during the implementation but mainly after it (McTeer and

Dale, 1994, Terziovski et al, 1997, Brown et al, 1998, Singels et al, 2001,

Douglas et al, 2003, Bendell and Boulter, 2004). Usually this factor is not an

issue for large companies which already follow quality management of some

kind. In small sized companies though, it is a deterrent matter. As Brown et al

(1998) state, a large portion of documentation is needed for the audits.

Furthermore, extra documentation is needed for keeping records in order to

stabilize the procedures and eliminate errors. For some employees, this

paperwork is usually time-consuming. In simple terms, ISO implementation is

considered a bureaucratic procedure for small sized companies which adds

costs and offers no benefits whatsoever (McTeer and Dale, 1994).

Even if a company takes cost and paperwork for granted, there are still

some other disappointments often mentioned in literature. To begin with, there

are some complaints about the consultants’ expertise (McTeer and Dale,

1994). Companies are forced to seek for consultants’ aid in order to achieve

future audit’s expectations. Unfortunately, firms from more complex sectors

find it difficult to employ a consultant with relevant experience (Stevenson and

Barnes, 2001). At this point, it must be noticed that this issue is almost solved

with the ISO 9000:2000 version, which focused (amongst others) more to

service sectors as well (Douglas et al, 2003). The same problem was cited as

ISO 9000 series used to be not specific but quite general (Terziovski et al,

1997, Douglas et al, 2003).

As mentioned before, the most important reason for the ISO

implementation, as far as small sized companies is concerned, is an external

one and more specifically this of customers’ demand. After the

implementation, certified firms are aiming in sales increase, bigger market

share and conducting new deals with organizations that demand ISO

certification as required factor. ISO certification is supposed to become the

powerful marketing tool to assist these goals. Given that, it is a major

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disappointment to realize that a non-certified firm can make contracts even

though quality certification is required (Brown et al, 1998).

A recent study demonstrated one other doubt that is actually

remarkable: late adopters are not benefited as early adopters did (Benner and

Veloso, 2008). Early adopters can use ISO certification as a marketing tool,

and become innovators on their sector. On the other hand, as years go by,

quality assurance has become common requirement and eventually it has lost

its marketing power.

According to Whithers and Ebrahimpour (2000), after the

implementation a company is supposed to follow some procedures, and thus

this system change can become also a problem. Many firms cited this as one

of the top three problems derived, and it maybe correlated to implementation

time that will expand in order for the employees to find their “new steps”. This

disadvantage is supposed to be eliminated after a while, as the procedures

become more systematic.

On the contrary, these systematic procedures create one unexpected

disadvantage. According to Singels et al (2001) and Bendell and Boulter

(2004), employees after the implementation are discouraged to achieve

creative thinking. With the whole process becoming more automated, they

have less to care about as fewer errors are arising. This limitation on

maneuvers is a reason for some employees to develop a negative opinion

about the ISO certification. Boiral (2003), in his survey, found that 20 per cent

of the employees disagree with the success and the benefits of certification.

They argue that if the result arises, it is supposed to be the consequence of

the certification and not their effort.

One final issue that must be taken into account is the time of

implementation. There are studies from literature that seem to be conflicting.

Casadesus and Karapetrovic (2005) conducted two surveys: one in 1998 and

another one, four years later, in 2002. Findings have indicated a decrease in

gaining benefits, as time went by. On the contrary, Jones et al (1997)

demonstrated the opposite results. Their hypothesis – that early adopters gain

more benefits than the later ones’ – has been rejected.

To sum up, ISO 9000 implementation has its disadvantages. Still, most

of them are strongly related with firm size. Most of these issues are referring

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to small sized companies. On the contrary, large sized companies are often

used to apply quality management of any kind, and most important, they

adopt ISO considering it as the first step to continuous improvement, followed

by total quality management (TQM).

1.3.5 The case of ISO 9000 in Greece

Greek firms hesitated, in the beginning at least, to implement quality

management systems. The numbers prove strongly this truth: only 30 firms in

1993, followed by a huge increase to 222 in 1995 (Lipovatz et al, 1999). As

mentioned before, ISO 9000 implementation is a difficult decision for a small

sized company to make, considering the costs and the paperwork demanded.

According to Lipovatz et al (1999), this is the explanation: at that time the

majority of Greek firms were small sized. Nevertheless, Greek companies

started to seek for quality improvement and increase of their competitiveness.

In 1998, quality awareness was triggered by the Greek Ministry of

Development, which declared that year as Quality Year.

Given all that and globally thinking, ISO 9000 certifications in Greece

must be considered a virgin area, at least until recently. This situation

elucidates two matters: the relatively small amount of surveys based in

Greece, and the reason of why there are more doubts in this country than

clear benefits, including the implementation processes. Most of the findings in

other countries are the same here, but there are still some other aspects that

differ.

Motives for implementation

The same motives that exist in any country exist in Greece as well.

There can be external or internal motives. As expected, mainly, the external

motivation (customers’ demand) is applied (Lipovatz et al, 1999). Greek firms

had to catch with both the domestic and the international standards. The first

focus was to become equal to the competition and penetrate in international

markets or increase their domestic portion. This pressure came on chemical

industries at first (Lipovatz et al, 1999).

Nowadays, the findings of recent studies are partly altered. As

Kostagiolas and Kitsiou (2008) state, possible customers’ demand in the

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future, scores high as a reason than current demand. In addition, internal

motives arise as well: improvement in internal procedures is now the main

target. Apart from opening doors to new markets, firms seek to improve

quality, communication between employees and show quality awareness in

general (Kostagiolas and Kitsiou, 2008).

Tsiotras and Gotzamani (1996) conducted one of the first surveys

focused on Greece. They found four motives which they tried to rank. Firstly,

there was the use of ISO 9000 certification as a marketing tool, in order to

increase the market share. Secondly, there was the need to respond to

external pressures from the customers and the market. The third motive

behind the implementation decision was to promote quality and its procedures

behind it, in order to expand internationally. The forth reason was considered

the most vital: to become efficient in production and, simply put, to improve

quality awareness.

Nowadays, firms altered their strategies, while motives’ rank position

altered as well. Gotzamani and Tsiotras (2002), state that quality awareness

and internal procedures improvement were placed as top reason for

implementation. On the contrary, external reasons such as customers’

demand and ISO certified competitors, seem to matter less. However,

although recent studies declare the quite opposite, motives did not differed

according the size of the company.

Benefits of implementation

Another reason of the late increase of ISO implementation cases in

Greece was the fact that many benefits of the implementation are not easily

measured. After the first years in which managers seemed skeptical, benefits

came up to the surface. In order to interpret them, one must recognize two

main categories: internal and external (Tsiotras and Gotzamani, 1996).

Furthermore, in Greece, as well as in every country globally, if the

motives for implementation decision are internally driven, then the benefits are

gained more easily and in large amounts. On the contrary, with externally

driven motives (e.g. customers’ pressure) the benefits seem fewer or none at

all (Gotzamani et al, 2006).

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To begin with, internal benefits are more intangible, but still more

important for a company. Product quality improvement, standardization of all

procedures and thus fewer errors, reduction of cost, better internal

communications, are unquestionably vital for overall performance

improvement of a company (Tsiotras and Gotzamani, 1996, Lipovatz et al,

1999, Gotzamani and Tsiotras, 2001, Gotzamani and Tsiotras, 2002, Vouzas

and Gotzamani, 2005, Gotzamani et al, 2006, Aggelogiannopoulos et al,

2007, Kostagiolas and Kitsiou, 2008). The “quality awareness” aspect is the

most important contribution for a company (Gotzamani et al, 2006).

Employees follow the same instructions for every procedure and thus, they

have no reason to force themselves to improvise in order to avoid errors.

Given that, procedures come to an end in less time and human resources can

focus to other, more important, matters such as innovation and research

(Tsiotras and Gotzamani, 1996). Increase in quality awareness on behalf of

the employees, increases productivity and eventually reduces costs. Tsiotras

and Gotzamani, (1996), indicate that this occurs as a result of rework

reduction. Therefore, benefits at this point may become measurable.

Furthermore, all the above, compose a reason of accidents reduction and less

employees get injured (Vouzas and Gotzamani, 2005).

Specific instructions in following standard procedures can create one

more benefit according to Lipovatz et al (1999). Training of new personnel

becomes easier and it can be achieved in less time. In that case, lost man-

hours are minimized. This used to be a major issue, especially because

Greece seemed to be placed in the bottom of quality knowledge level.

On the other hand, the external benefits seem to be more important to

managers. Despite that, Gotzamani and Tsiotras (2002) concluded that a

certified firm gains more internal than external benefits. Meet customers’

expectations, expand in domestic as well as in international markets and

marketing issues, are found almost in every study (Tsiotras and Gotzamani,

1996, Lipovatz et al, 1999, Gotzamani and Tsiotras, 2001, Gotzamani and

Tsiotras, 2002, Vouzas and Gotzamani, 2005, Gotzamani et al, 2006).

Tsiotras and Gotzamani (1996) after the clear segregation between internal

and external benefits, tried to analyze the latter. After the implementation,

customers seem more satisfied as their expectations are fulfilled. This

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develops a trust issue for the company’s products and attracts new

customers. Furthermore, suppliers can be evaluated more easily and

properly. All these create a competitive advantage for the certified firm.

Finally, if a company interpret all (or some) of these benefits, realizes

that quality actually matters and a new motive for continuous improvement is

generated (Aggelogiannopoulos et al, 2007). Especially after the ISO

9001:2000 improved version, firms are not only continue to seek for quality

but they move one step further: the TQM implementation (Vouzas and

Gotzamani, 2005).

Doubts/Disadvantages

Three main doubts are found in Greek firms’ case concerning ISO

9000 implementation: the increase of paperwork and bureaucracy (Lipovatz et

al, 1999, Vouzas and Gotzamani, 2005), the decrease in employees’

involvement in procedures (Lipovatz et al, 1999, Vouzas and Gotzamani,

2005), and inevitably costs (Tsiotras and Gotzamani, 1996,

Aggelogiannopoulos et al, 2007).

Increased bureaucracy seems to be the major thorn for companies

implementing ISO series worldwide and by itself is a deterrent factor. This

large amount of paperwork seems to create one further issue: negative

attitude on behalf of employees (Lipovatz et al, 1999). It must be mentioned

that, procedures even though they become standardized, they seem to

become more complex as well. This complexity created doubts among

employees and makes external aid from a consultant vital. According to

Lipovatz et al (1999) the penetration of the consultant in company’s internal

procedures may be important to managers but it seems to be problematic to

employees.

Cost, on the other hand, becomes a disadvantage only for small sized

firms (Tsiotras and Gotzamani, 1996). As mentioned before, in order to

calculate the total cost of implementation, a company must consider four

factors (Aggelogiannopoulos et al, 2007): consultant’s fee, employees’

training costs, lost man-hours, and registration fee.

One secondary doubt that is created is actually the fact that late ISO

adopters are no more benefited as early ones did (Lipovatz et al, 1999,

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Gotzamani and Tsiotras, 2001). Early certified firms can actually create a

competitive advantage. As soon as most competitors are certified as well, this

advantage no longer exists.

Finally, it is still under question, whether the ISO implementation

affects firm’s financial performance (Dimara et al, 2004, Tzelepis et al, 2006).

At a quick glance to financial measures, they may seem unaffected after the

certification. However, we must not forget that this issue is positively related to

the type of motives that led the company to the implementation. With the

proper (internal) motives, financial performance can show improvement as

well (Dimara et al, 2004). After all, implementation by itself is not enough for

continuous improvement.

According to Lipovatz et al, (1999), study, the majority of Greek firms

seems to be enthusiastic and tends to keep on the same root. One third of

these firms have plans for TQM, portion that comes up to 50 per cent when it

refers to multinational enterprises. The bottom line is that in the last years,

Greek companies seem to identify ISO 9000 as quality awareness factor and

not as a marketing tool. This is quite promising and they seem to focus on the

right direction.

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CHAPTER 2: Research Model

2.1 Methodology design

Almost two decades ago, ISO series as well as quality management

systems were unknown territory, especially in countries like Greece. However,

after the managers being skeptical in the 1990s, the entrance in the new

millennium forced a large number of companies of any size, to implement ISO

9000 series as a proof of their quality awareness. The growing number of

certifications was the sparkle to increase the number of the studies about this

subject and its implications in parallel.

Sampaio et al (2009), in their recent survey, conducted a review on

older studies concerning ISO implications on firm’s performance. An

enormous amount of papers in literature, up to 70 per cent, are surveys based

on primary data. These primary data derived mostly from questionnaires

mailed or personal interviews. These findings are considered doubtful by

many people as they are referring mostly to intangible matters, such as

production efficiency or quality awareness. On the contrary, a smaller portion,

up to 17.5 per cent of the studies, was analysis of financial indicators. They

were based on secondary data, like stock prices before and after the ISO

implementation announcement, return on assets (ROA), and sales growth.

These findings on their majority were standing in neutral position as far as the

impact of implication on overall financial performance (Dick, 2000, Heras et al,

2002, van der Wiele, 2005). The rest of the papers were either case studies

(up to 7 per cent) or literature reviews (5.5 per cent).

This dissertation follows the path of the majority. A formed

questionnaire is the instrument that allows the measure of the impact of ISO

implementation on Greek firms’ performance. The literature with only a few

exceptions, aggress that certified firms gain benefits. Thus, it had to be

examined whether these benefits are real and measurable in Greek industries

as well. Furthermore, another aspect that was examined is the difference

between the internal benefits and the external ones, with the latter to be less

or even not existing at all. One other aspect that was examined is the relation

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between the motives of certification and the benefits that a company can gain.

Once more, it was concluded that internal motives are those that lead to

benefits and not the external pressures from customers.

2.2 Research model – Hypotheses

As mentioned before, there is a strong relationship between motives

that lead to implementation and the benefits that derive from it (Biazzo and

Bernardi, 2003, Sampaio et al, 2009). Furthermore, many firms indicate

customers’ demand as main motivation, especially in small sized firms

(McTeer and Dale, 1994, Carr et al, 1997, Terziovski et al, 1997, Brown et al,

1998, Whithers and Ebrahimpour, 2000, Sun and Cheng, 2002, Boiral, 2003,

Chow-Chua et al, 2003, Stalhane, 2006). Given that, the first important factor

that must be investigated is the motivation aspect.

H1. There is a strong relationship between customer’s demand and

obtaining ISO 9000 certification by a firm (McTeer and Dale,

1994).

The benefits of implementation can be categorized into two main

groups: operation efficiency improvement and market efficiency improvement.

The first one is considered to be more intangible while the latter is tangible.

Most common benefits, and more ideal, are those on operation efficiency

(McTeer and Dale, 1994, Krause, 1996, Brown et al, 1998, Curkovic and

Pagell, 1999, Casadesus and Gimenez, 2000, Whithers and Ebrahimpour,

2000, Stevenson and Barnes, 2001, Biazzo and Bernardi, 2003, Boiral, 2003,

Douglas et al, 2003, Terziovski et al, 2003, McGuire and Dilts, 2008). This

improvement can be identified in many directions. Firms after the

implementation can create quality awareness (Terziovski et al. 2003; Sharma

2005), they can increase productivity by standardization of procedures and

minimization of errors (Chua et al. 2003; Terziovski et al. 2003; Sharma

2005), and given that, operations can be executed easier (Terziovski et al.

2003; Sharma 2005).

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H2. A firm can improve operation efficiency, and therefore, gain

intangible benefits:

H2a. ISO 9000 certification can create quality awareness (Terziovski

et al., 2003; Sharma, 2005).

H2b. ISO 9000 certification can increase productivity (Chua et al.,

2003; Terziovski et al., 2003; Sharma, 2005).

H2c. With ISO 9000 adoption, operations can be executed easier

(Terziovski et al., 2003; Sharma, 2005).

Similarly, benefits can be gained as market efficiency improvement.

With ISO certification as a powerful market tool, a company can demonstrate

its quality awareness. Customers are reassured that all products and services

are executed with the same certified procedures. Thus, ISO 9000 certification

can improve customer satisfaction (Casadesus and Gimenez 2000; Terziovski

et al. 2003; Sharma 2005), consequently can enlarge market share

(Casadesus and Gimenez 2000; Chua et al. 2003; Terziovski et al. 2003;

Sharma 2005) and eventually can increase sales revenue (Casadesus and

Gimenez 2000; Terziovski et al. 2003; Sharma 2005).

H3. A firm can achieve market efficiency improvement after ISO 9000

adoption:

H3a. ISO 9000 certification enlarges the market share of a company

(Casadesus and Gimenez, 2000; Chua et al., 2003; Terziovski et

al., 2003; Sharma, 2005).

H3b. ISO 9000 certification can improve customers’ satisfaction

(Casadesus and Gimenez, 2000; Terziovski et al., 2003; Sharma,

2005).

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H3c. ISO 9000 certification can increase sales revenue (Casadesus

and Gimenez, 2000; Terziovski et al., 2003; Sharma, 2005).

Finally, with these two metrics improved (operation efficiency and

market efficiency), a company can achieve an overall financial performance

improvement (Sun 2000; Sharma 2005; Veloso 2008).

H4. There is a positive relation between ISO certification and overall

financial performance (Sun, 2000; Sharma, 2005; Veloso, 2008).

All the above hypotheses are given with the following research model

shown in figure 3:

H2c

easier

operations

execution

H2b

increased

productivity

H3a H3cH3b

H2a

H1

ISO

adoption

customers demand

as main motivation

quality

awareness

customers

satisfaction

market

share

sales

revenue

Motivation

operation

efficiency

(intangible)

market

efficiency

(tangible)

overall

financial performance

improvement

H4

H4

Figure 3: Research model

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2.3 Research methodology

According to Rungtusanatham et al, (2003), the most common type of

survey methodology is the forming of a questionnaire. These types of surveys

have increased after the 1980s, especially those that refer to quality

management as an area of the operations management field. The formed

questionnaire was sent by e-mail to 423 companies which formed the sample.

The questionnaire, originally in English, had to be translated to Greek, in order

to apply with the needs of the survey, as it was concerning Greek firms. It was

e-mailed to the attention of the quality manager, if applicable. Otherwise,

anyone who was in charge of quality for the company should be appropriate

to answer. There were few cases, especially for small sized firms, where there

was no official quality manager, and thus the questionnaire was sent to the

managing director or another person who was appropriate to answer. With the

attachment file, the e-mail included a brief introduction explaining the content

and purpose of the questionnaire. Furthermore, in the beginning of the

questionnaire, there were instructions for its completion, and there were also

a clarification of the anonymity of the participants. Finally, it was also

mentioned that a copy of the results would be sent back to them as feedback,

in order to help them assess the ISO contribution to a firm’s performance. All

of them are presented in Appendix A.

In the begging of the research, certified companies in Greece had to be

found. After a thorough search, it was clear that no official database with all

certified companies existed. Given that, information had to come up from

some certification agencies. After a few meetings with an ISO consultant, six

large ISO consult firms seem to form almost the 100 per cent of the market.

These firms are: Greek Organization of Standardization (ELOT), Eurocert,

TUVRheinland, TUVHellas, DSQHellas and Bureauveritas. All six were mailed

and asked to provide information about which Greek firms are ISO 9000

certified. Unfortunately, no respond came back. Therefore, the only

information retrieved, came up from their web pages. Two of them, ELOT and

Bureauveritas did not provide any lists of certified companies in their web

pages. Therefore, only the other four, Eurocert, TUVRheinland, TUVHellas,

and DSQHellas offered this kind of information in the form of indicative, rather

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than complete, lists. All four of them are conducting certifications not only in

Greece but also in Balkans.

From the information retrieved from these web pages, a list of almost

1000 certified companied was formed. The next step was to search the

internet for the official page of every certified company, in order to obtain their

e-mail address or any other way of contact. This step was actually very time-

consuming and frustrating. Many companies, mostly small sized, have not

created an official web page until now. Others seem to lack of information in

the ways of contacting them. Out of the 1000 indicative certified firms, it was

managed to retrieve information and contacts for 423 firms. To be more

specific, 198 firms came from Eurocert, 91 firms came from TUVHellas, 28

firms came from TUVRheinland and 106 firms came from DQSHellas.

At this point two problems emerged: firstly, the lists of certified

companies were not divided into sectors and secondly, the number of

declared certified companies seemed to decrease enormously. Therefore, the

decision was inevitable: certified companies should be mailed and asked to

participate in the survey, without being grouped into sectors. In other words,

the sample of this research had to be totally random. It must be mentioned

though, that the greater portion of the mailed companies belongs to the

manufacturing sector and only a minority of them, to the service sector.

Finally, the total sample of 423 companies was e-mailed. Out of the

423 mailed questionnaires, only 34 of them responded. Fortunately, all

returned questionnaires were valid, and this is interpreted of a response rate

of 8 per cent. Unfortunately, it is apparent that Greek firms are not familiar in

questionnaire completion. Due to this companies’ culture on participation in

surveys, the response rate was obviously very low. On the contrary, it was

partly expected as for this kind of research, a response rate of 15 per cent is

very common (Singels et al, 2001). Firms, before answering any

questionnaire face a dilemma. On the one hand, they are being skeptical as

far as their anonymity. They fear that precious information about their

company will come out in the open. On the contrary, they seem to be no

longer interested in surveys that have been conducted almost daily, from all

over the world.

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Of the companies responded, only 4 were very small sized (up to 10

employees), 10 were small sized (10 to 50 employees), 14 were medium

sized (50 to 250 employees), and 6 could be classified as large companies

(over 250 employees).

Furthermore, a few meetings with Dr Stylianos Lamprakopoulos, an

ISO-consultant based in Athens, were arranged, to sum up more information,

especially from someone who is in the area for many years. His help was

crucial in many ways: in forming the questionnaire (validity test) and in

gathering information as well.

A good questionnaire must have three vital characteristics: reliability,

validity and be sharply-defined. Furthermore, it is usually appropriate to be

easy-to-fill, as many of them arrive to the firms daily. Given that, most of the

questions were closed-ended, with frequent use of Likert-scale, one to five

answers.

The structure of the questionnaire was created based on previous

researches found in published articles. It consists of 5 general questions plus

34 main items which cover 9 variables. The 34 questions were supposed to

cover all aspects of performance improvement both tangible and intangible.

Furthermore, there is one variable in order to examine the customers’ demand

as main motivation for implementation. Questions 5, 8, 9, 10, 12, 18 and 20

are from Carr et al (1997). Questions 1, 2, 3, 4, 7, 11, 14, 17, 21, 25, 26 are

from Martinez-Costa et al (2008). Questions 6, 16, 19, 22, 23, 24, 30, 31 are

from Powell (1995). Questions 13, 26, 27, 28, 29 are from Stahlane (2006),

and finally question 15 is from Terziovski et al (1997). Appendix A includes a

copy of the questionnaire.

The questionnaire consists of two sections. Section A, refers to general

information about the company and the respondent. There are five questions

about the number of firm’s employees, the sector of the firm, the percentage

of its sales domestically and internationally, the kind and the year of the

certification and finally the position of the respondent in the company.

Section B, consists of 34 questions to be answered in Likert-type scale

from 1 to 5. The first variable concerns ISO adoption and it is examined by

four questions (1 – not important up to 5 – much more important). The next 30

questions are referring to motivation of ISO adoption and operation and

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market efficiency measurement as well as the overall performance

improvement (1 – completely disagree, 5 – completely agree). The other 8

variables examined are the following:

- Motivation for ISO adoption. It is clearly stated by the literature that

customers’ demand is considered as the main motivation (McTeer and

Dale, 1994, Carr et al, 1997, Terziovski et al, 1997, Brown et al, 1998,

Whithers and Ebrahimpour, 2000, Sun and Cheng, 2002, Boiral, 2003,

Chow-Chua et al, 2003, Stalhane, 2006).

- Quality awareness (McTeer and Dale, 1994, Krause, 1996, Terziovski

et al, 1997, Brown et al, 1998, Curkovic and Pagell, 1999, Whithers

and Ebrahimpour, 2000, Stevenson and Barnes, 2001, Zaramdini,

2007, Douglas et al, 2003, Terziovski et al, 2003, McGuire and Dilts,

2008).

- Productivity (McTeer and Dale, 1994, Terziovski et al, 1997, Brown et

al, 1998, Casadesus and Gimenez, 2000, Stevenson and Barnes,

2001, Biazzo and Bernardi, 2003, Boiral, 2003, Douglas et al, 2003,

Terziovski et al, 2003, McGuire and Dilts, 2008).

- Operations execution (Whithers and Ebrahimpour, 2000, Stevenson

and Barnes, 2001, Douglas et al, 2003).

- Market share (Brown et al, 1998, Terziovski et al, 2003, McGuire and

Dilts, 2008).

- Customers’ satisfaction (Terziovski et al, 1997, Brown et al, 1998,

Casadesus et al, 2001, Stevenson and Barnes, 2001, Biazzo and

Bernardi, 2003, Boiral, 2003).

- Sales revenue (McTeer and Dale, 1994).

- Overall financial performance (Douglas et al, 2003).

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In order to assess the data retrieved and to test the hypotheses, the

software SPSS (Statistical Package for Social Sciences) version 16 was used

for descriptive statistical analysis. Furthermore, for the hypotheses testing,

AMOS software was used.

The low response rate of the questionnaire created a difficulty to come

up with solid conclusions. In order for the survey to be enhanced, a decision

of conducting interviews was taken.

To fulfill this purpose, a certified company from the food industry sector

(KREKA) was chosen. This company was not chosen randomly, but for

specific reasons. Firstly, it is a medium sized company with 103 employees

and with sales of 24.2 million euros in 2008. This is an important factor

because ISO certification cannot alter the financial results by itself, as it

seems to happen with small sized companies. Secondly, quality aspects

seem to be vital for the firm’s managers. KREKA as a part of its quality policy,

demonstrates many certifications: ISO 9001:2000, the system HACCP (since

2001), and ISO 22000:2005. All these guarantee the quality of the whole

production process and the safety of the products. Finally, the firm is listed in

Athens Stock Exchange since 1991. Therefore, firm’s managers have a clear

view in their company’s results, long before the ISO certification and they can

compare them with the recent results as an effect of the quality adoption.

The interviews took place in their head offices. Ten interviews were

conducted, including the CFO, the internal inspector, the quality manager, the

sales manager, the production financial manager and five employees from the

sales department as well as the supplies department. A structured

questionnaire was used consisted of two parts. The first part included

questions for the managers, while the second part consisted of questions for

the employees. Both two parts of the questionnaire are presented in Appendix

B.

This second questionnaire was also, based on the results of previous

researches and previous published articles. To be more specific, in section A,

questions 1 up to 8 were taken from Buttle (2001), questions 9 to 11 were

taken from Sharma (2005), question 12 from Benner and Veloso (2008) and

question 13 from Terlaak and King (2006). Finally, all 10 questions consisting

section B, were taken from Powell (1995).

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The interviews were aiming at two targets. Firstly, the interviewed

managers were asked to comment about the impact of the ISO certification on

overall firm’s financial performance. Secondly, the employees were asked to

comment about whether after the certification the processes became more

accurate, with fewer errors and thus, more easier to complete.

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CHAPTER 3: Results & Discussion

3.1 Data Analysis – Results

As mentioned before, the sample of this research was random and

thus, companies from all sectors were included. This means, that especially in

very small-sized companies a quality manager might not exist. However, out

of the total of 34 companies of the sample, in 18 of them the quality manager

was the one who answered the questionnaire (a rate of 52,9 per cent). In 5

more cases (14,7 per cent), a member of the quality department was the most

appropriate person to respond. In 4 more cases it was the general manager

who answered (11,8 per cent) while only in 2 cases it was the production

manager (5,9 per cent). Finally, in 5 cases, some other person was

responsible to answer (the manager of design department, the manager of

research and development department, the IT manager, the owner, and a

sales employee).

Considering the randomness of the sample, the dispersion of the

companies’ size was expected. There were all types of companies’ as far as

their sizes are concerned responding to the survey.

Focusing on the type of the certification, the findings were what it was

expected. Only one company was certified with the ISO 9002:1994 type, while

all the rest were certified with the ISO 9001:2000 standard. Additionally, the

year of the certification differs. 8,8 per cent of the companies were certified in

the year 2000, all of them renewing the previous 1994 version standard. Few

of them were certified in 2004 and 2005 (5,9 and 2,9 per cent, respectively).

Finally, the majority of 23,5 per cent was certified in 2006.

3.1.1 Validity and Reliability

The reliability of scales was evaluated using the Cronbach’s

alpha. Furthermore, for the factor analysis, the Kaiser-Meyer-Olkin (KMO)

measure and the Bartlett’s Test of Sphericity were used. According to Hair et

al (1995), these numbers can measure construct validity. In addition, the Total

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Variance Explained (TVE) score was used to measure the cumulative

percentage of the variance that is explained by all factors.

The mailed questionnaire consisted of 34 questions, which examined 9

aspects. Cronbach’s alpha, which measures the reliability of different

variables and the reliability of the factors, should be greater (or equal at least)

to 0.6, which is widely accepted as it indicates minimum chance of random

errors existence (Nunnally and Bernstein, 1994). The factor analysis

performed is demonstrated in Appendix C.

The 9 factors examined are: ISO adoption (A), customers’ demand (B),

quality awareness (C1), increased productivity (C2), operations execution

(C3), market share (D1), customers’ satisfaction (D2), sales revenue (D3),

and overall financial performance improvement (E). The Cronbach’s alpha for

each factor was respectively: (0.682), (0.571), (0.807), (0.880), (0.753),

(0.919), (0.584), (0.762), and (0.866). Only two factors are below 0,600:

Customers’ demand (B) and customers’ satisfaction (D2) are close to 0,600 at

(0,571) and (0,584) respectively. All the above results are demonstrated in

table 3 and prove their reliability.

Aspects Cronbach’s alpha

ISO adoption (A) 0.682

Customers’ demand (B) 0.571

Quality awareness (C1) 0.807

Productivity (C2) 0.880

Operations execution (C3) 0.753

Market share (D1) 0.919

Customers’ satisfaction (D2) 0.584

Sales revenue (D3) 0.762

Overall financial performance improvement (E) 0.866

Table 3: The consistency of all aspects due to their Cronbach’s alpha

Furthermore, as Hair et al (1995) indicates, KMO should be above the

0,500 threshold, while the TVE score above 0,500. As table 4 demonstrates,

all numbers are higher than the acceptable levels except for two factors: ISO

adoption (A) and motivation (B) with a KMO 0,500 which is normal since these

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factors are consisted of two variables only. In addition, the factor loadings are

in acceptable levels as well. It must be mentioned though, that 3 out of 34

aspects were dropped: these were A3, A4 and B1.

At this point, it must be stated that factor “quality awareness (C1)” had

to be split in two sub-factors: items C.1.1, C.1.2 and C.1.3 were separated

from items C.1.4 and C.1.5. This was due to the fact that item C.1.4 seem to

have no direct relation to C1 factor, while the two items (C.1.4 and C.1.5)

were related with each other.

1 2 3 4 5 Statistics Mean Std. Dev.

Loadings

ISO adoption

A1 A2 A3 A4

0,0 3,0 6,1 9,1

3,0 9,1 9,1

21,2

9,1 42,4 33,3 36,4

48,5 45,5 36,4 21,2

39,4 0,0

15,2 12,1

K.M.O.=0,500 Bartlett’s Sig=0,002 (TVE)=75,867 Cronbach’s (a)=0,682

4,24 3,30 3,45 3,06

0,751 0,770 1,063 1,144

0,871 0,871

dropped dropped

Motivation

B1 B2 B3

3,0 0,0

18,2

3,0 0,0

27,3

3,0 18,2 15,2

30,3 42,4 24,2

60,6 39,4 15,2

K.M.O.=0,500 Bartlett’s Sig=0,005 (TVE)=73,972 Cronbach’s (a)=0,571

4,42 4,21 2,91

0,936 0,740 1,378

dropped 0,860 0,860

Quality awareness

C.1.1 C.1.2 C.1.3

0,0 0,0 0,0

0,0 0,0 3,0

9,1 9,1 6,1

27,3 45,5 39,4

63,6 45,5 51,5

K.M.O.=0,690 Bartlett’s Sig=0,000 (TVE)=79,460 Cronbach’s (a)=0,807

4,55 4,36 4,39

0,666 0,653 0,747

0,861 0,808 0,819

C.1.4 C.1.5

0,0 0,0

3,0 3,1

12,1 37,5

69,7 43,8

15,2 15,6

Cronbach’s (a)=0,854 3,97 3,72

0,637 0,772

0,953 0,858

Productivity

C.2.1 C.2.2 C.2.3 C.2.4 C.2.5

0,0 2,9 0,0 0,0 3,0

11,8 8,8 8,8

11,8 9,1

20,6 55,9 52,9 52,9 57,6

61,8 23,5 26,5 29,4 27,3

5,8 8,8

11,8 5,9 3,0

K.M.O.=0,803 Bartlett’s Sig=0,000 (TVE)=68,066 Cronbach’s (a)=0,880

3,60 3,26 3,41 3,29 3,18

0,757 0,864 0,821 0,760 0,769

0,867 0,782 0,822 0,872 0,778

Operations execution

C.3.1 C.3.2 C.3.3 C.3.4

18,2 2,9 2,9 5,9

36,4 17,6 11,8 8,8

33,3 58,8 41,2 47,1

12,1 20,6 41,2 32,4

0,0 0,0 2,9 5,9

K.M.O.=0,611 Bartlett’s Sig=0,000 (TVE)=59,634 Cronbach’s (a)=0,753

2,39 2,97 3,29 3,24

0,933 0,717 0,836 0,923

0,659 0,821 0,915 0,663

Market share

D.1.1 D.1.2 D.1.3 D.1.4

5,9 5,9 5,9 0,0

8,8 11,8 17,6 12,1

41,2 47,7 44,1 36,4

38,2 32,4 29,4 33,3

5,9 2,9 2,9

18,2

K.M.O.=0,739 Bartlett’s Sig=0,000 (TVE)=80,606 Cronbach’s (a)=0,919

3,29 3,15 3,06 3,58

0,938 0,892 0,919 0,936

0,917 0,914 0,931 0,825

Customer’s satisfaction

D.2.1 D.2.2 D.2.3

0,0 0,0 2,9

2,9 5,9 8,8

17,6 38,2 38,2

61,8 44,1 41,2

17,6 11,8 8,8

K.M.O.=0,532 Bartlett’s Sig=0,004 (TVE)=56,248 Cronbach’s (a)=0,584

3,94 3,62 3,44

0,694 0,779 0,894

0,772 0,867 0,583

Sales revenue

D.3.1 D.3.2 D.3.3

0,0 0,0 3,1

9,1 18,2 12,5

24,2 42,4 46,9

51,5 33,3 34,4

15,2 6,1 3,1

K.M.O.=0,587 Bartlett’s Sig=0,000 (TVE)=68,957 Cronbach’s (a)=0,762

3,73 3,27 3,22

0,839 0,839 0,832

0,624 0,919 0,914

Overall financial

performance improvement

E1 E2 E3

9,1 9,1 0,0

24,2 30,3 9,1

42,4 27,3 36,4

24,2 33,3 42,4

0,0 0,0

12,1

K.M.O.=0,607 Bartlett’s Sig=0,000 (TVE)=78,867 Cronbach’s (a)=0,866

2,82 2,85 3,58

0,917 1,004 0,830

0,914 0,956 0,785

Table 4: Factor and reliability analysis

The statistical analysis shows that factor “ISO adoption” consists of

only two items, A1 and A2 with mean scores 4,24 and 3,30 respectively. As

mentioned before, the other two items had to be removed. Factor “motivation”,

finally, consisted from items B2 and B3, while B1 was removed. Factor’s

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“quality awareness” items were split in two: C.1.1, C.1.2 and C.1.3 items with

significantly high mean scores (4,55 – 4,36 – 4,39, respectively) and C.1.4

and C.1.5 items with lower mean scores (3,97 and 3,72). Factor “productivity”

consists of 5 items with mean scores between 3 and 4. Factor “operations

execution” consists of 4 items with the first two showing mean scores below 3

and the latter two with mean scores between 3 and 4. Factors “market share”

(constructed from 4 items), “customer’s satisfaction” (constructed from 3

items) and “sales revenue” (constructed from 3 items) are achieving mean

scores between 3 and 4. Finally, factor “overall financial performance

improvement” which is consisted from 3 items, demonstrates no significant

positive perception be the respondents, as the two out of three items’ mean

scores are lower than 3.

In order to interpret these results, it must be stated that the most

important factor seems to be the quality awareness, which is created after the

certification. Respondents’ answers proved that this is probably the most

important and common benefit of the implementation. On the contrary, issues

like easier operations execution or overall financial performance improvement

are showing no significant change.

One other aspect of major importance is the fact that customers’

demand as main motivation for ISO certification seem to be of minor

importance. Items B1 to B3 examine this actual aspect: the first two (B1 and

B2) with mean scores a lot higher than 4 demonstrate that companies

consider quality as of major importance, while item B3 with mean score of

2,91, enhances this conclusion (respondents were negative to the fact that

was customers’ pressure that forced them to seek quality certification).

Finally, most of the items with their mean scores slightly over 3,

indicate that beside quality awareness, companies are actually neutral about

the fact that many other aspects are remarkably improved.

3.1.2 Structural Model Fit

At this point, our model (figure 3) had to be tested, in order to accept or

reject the formed hypotheses. This procedure was made with the use of the

Structural Equation Modelling approach. For the evaluation, five measures

were interpreted: chi-square/degree of freedom (x2/df), goodness-of-fit index

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(GFI), comparative fit index (CFI), normed fit index (NFI), and root mean

square residual (RMR). For this reason, the AMOS software package was

used to come up with the results. All these are shown at figures 4, 5, and 6.

Firstly, operation efficiency factor measures are indicated in figure 4. It

is clearly shown that, increased productivity is strongly related to operation

efficiency (0,89) while the other two items, quality awareness (0,58) and

easier operations execution (0,48) are at acceptable levels.

However, considering the market efficiency factor as demonstrated in

figure 5, the findings are quite interesting. Market efficiency is relatively

related to market share (0,38), while customers’ satisfaction is also related to

market efficiency (0,52). On the contrary, there is no relation between sales

revenue and market efficiency.

Furthermore, as far as figure 6 is concerned, overall financial

performance seems related to all three factors measured. Especially, is

seems to be strongly related to sales increase (0,87) and to company’s

general performance (0,60), which is something to be quite normal.

Finally, in figure 7, the overall model is demonstrated. The findings are

also very interesting. Customers’ demand and main motivation are negatively

related (-0,26). This was actually expected. As demonstrated in table 4, and

after taking the questionnaire under consideration, the last two items of “ISO

adoption” factor have been dropped out. The first two items that have

remained, demonstrate that quality aspects were under priority for the

companies’ managers. Thus, customers’ demand was not an issue. On the

contrary, ISO adoption is slightly related to sales revenue (0,24).

The most important finding is the fact that there is no direct relation

between operation efficiency and overall financial performance improvement.

The only direct relation is between market efficiency and overall financial

performance. However, it seems to be an indirect relation between operation

efficiency and overall performance. To be more specific, increased

productivity has an indirect relation to overall performance through sales

revenue (0,62x0,41=0,25) and also, through market share (0,33x0,59=0,19).

Finally, an indirect relation exist also between easier operation execution and

overall performance through market share (0,47x0,59=0,28).

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Quality awareness and increased productivity are strongly related to

each other (0,67). Furthermore, increased productivity is strongly related to

sales revenue (0,62) and slightly related to market share (0,33). Another vital

finding is that there is no relation between customers’ satisfaction and overall

financial performance improvement. Thus, only market share and sales

revenue are related to overall financial performance improvement at (0,41)

and (0,59) respectively. This result is normal since we are measuring financial

performance and overall performance. Obviously, customer satisfaction has

an impact on market share and sales revenue.

Furthermore, table 5 demonstrates the statistics concerning structural

equation models. As Harrison and Rainer (1996) state, the acceptable levels

of the CMIN/DF score are below 5. Thus, the score of 1,568 concerning the

overall model is more than acceptable. Furthermore, the GFI score has to be

above 0,90 (Bollen and Long, 1993), while the CFI score has to be at the

same levels also (Smith and McMillian, 2001). Only, the overall model scores

GFI at 0,836 and CFI at 0,885, but they are still acceptable. Finally, RMR

scores must be below 0,1 (Bollen, 1989), thus all 3 numbers are acceptable.

To sum up, from the initial four hypotheses, hypothesis 1 (H1) referring

to customers’ demand as main motivation is rejected. This is due to the fact

that the majority of the companies were seeking for quality long before their

certification. Thus, external pressures were not significant, at least not

significant enough as the internal motives. Hypotheses 2 (H2), which

consisted from 3 parts is accepted. ISO 9000 can create quality awareness,

increase productivity and make operations easier to execute. Hypothesis 3

(H3) was partly accepted. ISO 9000 adoption can increase market share

(H3a) and improve customers’ satisfaction (H3b). However, the hypothesis

H3c, that ISO 9000 certification can increase sales revenue is rejected.

Finally, hypothesis 4 (H4) was partly accepted, as there is positive relation

between ISO certification and overall financial performance, but only if market

efficiency is concerned and not operation efficiency.

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,34

,89

,48

,58

,00

,23

,79

C1

C3

C2 C

ER1

ER4

ER3

ER2

Figure 4: Operation efficiency

,38

,52

,14

,27 ,00

D1

D2 D.

ER1

ER2

ER4

Figure 5: Market efficiency

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- 48 -

,72

,87

,60

,85

,00

,37

,77

E1

E3

E2 E

ER1

ER4

ER3

ER2

Figure 6: Financial performance

,00

,00

,00

,33

,43

,62

,24

,62

,33

,47

,41

,59

,07

-,26

AA

BB

C1

C2

C3

D3

D1

E

ER1

ER2

ER6

ER7

ER8

ER5

ER3

ER9

Figure 7: Overall performance improvement

_____________________________________________________________________

_________________________________________________________________

- 49 -

CMIN/DF GFI CFI RMR

Operation efficiency

2,572 ,938 ,917 ,092

Market efficiency

3,108 ,877 ,919 ,085

Financial performance

2,755 ,895 ,916 ,091

Overall financial performance improvement

1,568 ,836 ,885 ,073

Table 5: Structural equation models

3.2 Further Discussion

Although the response rate of the questionnaire was low, the findings

were confirmed and enhanced by the interviews. The collection of more

specific answers of the case study was very helpful.

To begin with, the main motivations for the firm to pursue ISO

certification were the same as those found in literature. As the CFO of the

company states:

Our company was seeking for certification in order to achieve five

main targets. Firstly, we were seeking for competitive advantage.

Secondly, we wanted to certify publicly our quality levels. Third was

the possible reputation that we would gain. Fourth, it was our need

for procedures improvement in sections such as supplies,

production, and sales. Finally, after all, we were expecting for our

sales to increase. It must be mentioned though, that these targets

are not ranked.

However, it is obvious that ISO certification alters some procedures

and thus, it creates some problems. These problems can be divided into two

categories: difficulties which are experienced during the implementation

process and difficulties which are experienced following the certification.

According to the quality manager of the company:

_____________________________________________________________________

_________________________________________________________________

- 50 -

Mostly, our difficulties were experienced during the implementation

process. Firstly, we had to understand how the new system works,

and comply with all the new procedures. In addition to that, the staff

training was an issue, which was partly solved with the outside help

from a consultant. On the contrary, whatever operational problems

that arose after the implementation, were easily solved.

As far as the benefits from the ISO certification are concerned, they

seem to be more intangible and they have an impact on internal procedures.

The CFO of the company clearly indicates:

The benefits derived from the implementation were almost equal to

our targets. Quality assurance was the most significant aspect.

Furthermore, company’s organizational issues were improved as

well. Our reputation increased also, and thus, an improvement on

the public image of the company was the inevitable.

At this point, it must be mentioned that probably the main target for

every company that proceeds with the ISO implementation is to increase

sales and improve overall financial performance. Therefore, even though

many benefits are achieved with the certification, managers seem to be

sceptical. As the CFO clearly states:

Although many benefits were achieved with the ISO certification,

and certification seems to meet expectations, we must admit that

we are satisfied only in an average degree.

Although the certification’s main impact is on organizational procedures,

there are still some disappointments concerning this aspect. The production

financial manager of the company makes specific claims:

On the one hand, we must agree that the level of satisfaction with

ISO 9000 series’ organizational impact have reached maximum

level. Certification offers significant help in organizational issues.

_____________________________________________________________________

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- 51 -

However, it does not contribute in product quality improvement.

Thus, the company moved on to other certifications such as ISO

22000:2005 and quality certification for AGROCERT.

Another aspect of great importance is cost. The total cost of the

implementation is not negligible, as it includes consultants’ fee, certification

fee and of course, lost man-hours. However, cost is an issue only for small-

sized companies. On the contrary, large-sized companies are more focused

on quality aspects as main philosophy and quality certifications seem to be

obligatory even though the impact on sales is minimum:

The time that was needed to recover the costs of certification was

not significant. Especially if someone will consider the benefits

(which are not financial but mostly in organizational level) then the

recovering time was almost near to zero (CFO).

As far as the impact on financial aspects of the company, after the

implementation, we must be accurate to state that there was no

improvement on firm’s financial efficiency (e.g. on its profit margin),

nor on firm’s sales growth. Furthermore, if someone studies the

financial numbers of the company, such as earnings per share, he

can conclude that there were no improvements on firm’s overall

financial performance (sales manager).

Many times, the benefits of the certification are being questionable

considering the time of implementation (early or late adopters) and the

existence of non-certified firms. The CFO of the company tried to shed light

on these two aspects:

I completely disagree with the opinion that ISO certification in our

sector benefit early adopters more than the late ones. The

company’s first certification was in 2000 which makes us early

adopters. However, at that time, customers were not aware of the

significance of such certifications, especially in Greece.

_____________________________________________________________________

_________________________________________________________________

- 52 -

Nowadays, certification can actually create a competitive

advantage instead of non-certified firms, but only if it is combined

with other systems’ certifications such as ISO 22000, ISO 14001,

and AGRO.

There seem to be two points of view on the ISO certification’s impact on

procedures. After examining the managers’ point of view, one must consider

the employees’ point of view as well. Procedures are being altered after the

implementation and paperwork seems to increase at undesirable levels.

Certification is supposed to solve many problems and make procedures

easier and with fewer mistakes. Is this real or is just a myth? Five employees

are trying to introduce their opinions:

ISO 9000 certification has slightly increased the employee

involvement in design and planning. Additionally, there was no

significant change in our autonomy in decision-making. One major

change was on offering a more active employee suggestion system

(employee A).

ISO certification made employee interaction with customers and

suppliers to increase in a very large level. We became more active

in those relationships (employee B).

After the implementation, cycle times in all our procedures were not

reduced significantly. This includes all departments and it refers to

new products, service development and overall product delivery

times as well (employee C).

One major change in our jobs after the implementation was for

certain the increase on paperwork. The ISO 9000 series demand

proof of all procedures and works, and this means more papers

and files to be delivered. However, this is an instrument to find

wasted time and costs in all internal processes and it is achieved

through internal revisions and re-examinations by the managers. In

simple terms, ISO 9000 is a program that might create methods to

measure and monitor quality, but to be more specific we must

_____________________________________________________________________

_________________________________________________________________

- 53 -

mention the contribution of the ISO 22000 on these aspects

(employee D).

One of the benefits of the ISO 9000 implementation is that it helped

the training of new employees more easily. An automated training

program is applied, and this reduces time and the effort in training

(employee E).

_____________________________________________________________________

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- 54 -

CHAPTER 4:

Conclusions & Limitations

4.1 Conclusions

ISO 9000 series is just an instrument for the company to be more

organized, although in large companies this is something that already exists in

managers’ culture. The main motivations are customers’ demand for small

sized companies, and internal seek for quality improvement for the large

firms. There are some difficulties during and after the implementation process,

and someone must count the costs of such procedures as well, but they are

considered to be of minor importance. However, the quantity and the quality

of the benefits are still questionable.

This study verifies that companies in Greece are motivated to improve

internal procedures and achieve quality awareness. Companies have met

expectations after the certification at a significant level. However, they admit

that most benefits are not financial, even though that was one of their main

targets.

The findings of this survey are important. The overall financial

performance improvement of a certified company is mostly related to its

market efficiency and not to operation efficiency. On the contrary, to achieve

this target there is a one-way road: a company after the implementation can

improve internal operations and this will lead to sales revenue improvement.

Many companies demonstrate improvement after the implementation.

However, this improvement is not necessary related to the certification. At this

point, one must not forget the human factor. Especially in large companies,

employees have to get used to the new procedures and adjust their needs to

the new functions. Thus, this is the key for the implementation success.

Certification can exist without the system functioning and, reversely, a

company can demonstrate quality awareness without the implementation.

Nowadays, quality aspects have to take under consideration some

other factors as well, such as environmental friendliness. Thus, other ISO

series have to involve in the whole process with the ISO 14000 series to be

the most vital.

_____________________________________________________________________

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- 55 -

4.2 Limitations – Recommendations

This study has some limitations. As it is based on primary data, the use

of a questionnaire is required. This is actually the main limitation. The

questionnaire has to be “user friendly” and this is why Likert scale type

questions are used. However, this reduces the richness of the information

captured. This obstacle has been partly by-passed with the case study

analysis that has been performed (using interviews). The use of the second

questionnaire enhanced this study with much more qualitative information and

shed light on “why?” questions as well.

In addition, although the respondents were reassured for their

anonymity, there is always the possibility that their answers might not be

accurate. This is the result of two factors. Firstly, they seem to be skeptical

about providing information concerning their firm, out in the public.

Furthermore, with the enormous amount of questionnaires arriving daily in

their office, time needed to answer them properly is always an issue.

Third, there are some doubts about the findings of the study.

Measuring the impact of ISO certification on a firm’s financial performance is

tricky. Many parameters, such as quality awareness and productivity seem to

be intangible and thus, are difficult to measure. Additionally, financial

measures as secondary data were not taken in mind.

Fourth, ISO 9000:2008 version was excluded from this study. The

effects of the ISO certification might occur after the period of two years at

least. Thus, it was inevitable to include firms which were certified until the year

2007.

Literature demonstrates that the ISO 9001:2000 series was a major

improvement to the previous version, which eliminated most of the problems.

However, the 9001:2008 version, with many environmental aspects included,

should be examined properly. Additionally, with environmental matters gaining

more and more importance and vitality, future research should emphasize in

ISO 14000 series.

Many researches are based on firms from manufacturing industry.

Recently, there has been a turn, on service sector and the findings seem to

be positive as well. Therefore, future researches should focus on this sector

also.

_____________________________________________________________________

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- 56 -

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APPENDIX A: QUESTIONNAIRE

SECTION A : GENERAL INFORMATION

1. Please, mark your position in the company at the moment:

o General Manager

o General Manager of Greece

o Quality Manager

o Production Manager

o Member of the production department

o Member of the quality department

o Other:

2. Please, specify the average number of employees:

3. Please specify the sector that your company belongs to:

4. What is the percentage of sales for each of the following markets?(as percentage of the total

sales)

Country Percentage

1. Greece

2. Other EU

3. Rest of the world

TOTAL 100%

5. Mark the certificate/s of quality assurance that your company has got and the year of

certification:

o ISO 9001:1994 Year:

o ISO 9002:1994 Year:

o ISO 9001:2000 Year:

o Other:

SECTION B

ISO adoption

For questions 6 – 9 please rate the importance of the following factors before (or during) the ISO

implementation: not much more

important important

6. The quality performance of the company before the implementation.

7. There were quality measures before the implementation.

8. The external help (e.g. consultants) during the implementation process.

9. The cost of implementation (time, money, work hours) as a factor for the

final decision.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

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Motivation for ISO adoption

For questions 10 – 39 please mark your level of agreement/disagreement in the following

statements: completely completely

disagree agree

10. The organization determines customers’ requirements and meets those

requirements no matter what it takes.

11. The company is using customers’ requirements as the basis for quality.

12. The decision of being registered by ISO 9000 may basically be caused be

external pressures (customers’ demand).

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Quality awareness

13. There is a long term commitment by top managers to a quality

management philosophy.

14. Quality principles are adopted and widely communicated throughout the

company.

15. The company emphasizes continuous improvement in operations.

16. Since the company obtained the ISO 9000 certification manufacturing

quality increased.

17. Quality performance in all areas is measured.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Productivity

18. The ISO certified process made us more creative, also in the long term

perspective.

19. The introduction of the ISO certification process has improved

employees satisfaction.

20. The productivity has consistently improved since the ISO

implementation.

21. Since the company obtained the ISO 9000 certification the employees

became more active and thus increased their involvement in design and

planning.

22. Since the company obtained the ISO 9000 certification the speed of the

deliveries increased.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

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Operations execution

23. There is less bureaucracy in the company since the implementation.

24. Since the company obtained the ISO 9000 certification employee

autonomy in decision-making increased.

25. There is less use of cross-department teams.

26. Since the company obtained the ISO 9000 certification, flexibility to

change production volume and inventories increased.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Market share

27. Over the 3 years after the ISO 9000 implementation, our financial

performance has exceeded our competitors’.

28. Over the 3 years after the ISO 9000 implementation, we have been more

profitable than our competitors.

29. Over the 3 years after the ISO 9000 implementation, our revenue growth

rate has exceeded our competitors’.

30. Since the company obtained the ISO 9000 certification market share

increased.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Customers’ satisfaction

31. Since the company obtained the ISO 9000 certification there is more

flexibility in our customer relationships.

32. Introducing an ISO certified process gave more satisfied customers after

one year.

33. Introducing an ISO certified process gave more satisfied customers but

only in the long term perspective.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

Sales revenue

34. Introducing an ISO certified process gave the company a better control

over the order situation.

35. Over the 3 years after the ISO 9000 implementation, we have been more

profitable than our competitors.

36. Over the 3 years after the ISO 9000 implementation, our revenue (sales)

growth has been outstanding.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

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Overall financial performance improvement

37. Over the 3 years after the ISO 9000 implementation, our financial

performance has been outstanding.

38. Over the 3 years after the ISO 9000 implementation, there has been a

significant increase in profits.

39. The ISO implementation had a positive effect on the company’s

performance.

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

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APPENDIX B: QUESTIONNAIRE FOR THE CONDUCTED INTERVIEWS

SECTION A : QUESTIONNAIRE ADDRESSED TO MANAGERS

1. What were the main motivations for the firm to pursue certification?

2. What difficulties were experienced during the certification?

3. What problems were experienced following the certification?

4. What benefits were experienced since the certification?

5. Does certification meets expectations?

6. What is the level of satisfaction with ISO 9000 series’ organizational impact?

7. How much time was needed to recover the costs of certification?

8. Which are the disappointments after the certification?

9. Does ISO 9000 certification improve firm’s financial efficiency (e.g. its profit

margin)?

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- 69 -

10. Does ISO 9000 certification improve firm’s growth (e.g. its sales growth)?

11. Does ISO 9000 certification improve firm’s overall financial performance? (e.g. its

earnings per share)?

12. Does ISO 9000 certification in your sector benefit early adopters more than the late

adopters?

13. Does ISO 9000 certification actually create a competitive advantage to the certified

firm instead of the non-certified?

_____________________________________________________________________

_________________________________________________________________

- 70 -

SECTION B : QUESTIONNAIRE ADDRESSED TO EMPLOYEES

1. Has ISO 9000 certification increased employee involvement in design and

planning?

2. Has ISO 9000 certification offered a more active employee suggestion system?

3. Has ISO 9000 certification increased employee autonomy in decision-making?

4. Has ISO 9000 certification increased employee interaction with customers and

suppliers?

5. Are ISO 9000 series a program that helped to reduce new product or service development cycle times?

6. Are ISO 9000 series a program that helped to reduce overall product delivery cycle

times?

7. Are ISO 9000 series a program that helped to reduce paperwork?

8. Are ISO 9000 series a program that helped to find wasted time and costs in all

internal processes?

9. Are ISO 9000 series a program that create methods to measure and monitor

quality?

_____________________________________________________________________

_________________________________________________________________

- 71 -

10. Are ISO 9000 series a program that helped to train new employees more easily?

_____________________________________________________________________

_________________________________________________________________

- 72 -

APPENDIX C – STATISTICAL ANALYSIS ISO adoption

FACTOR

/VARIABLES A1 A2 /MISSING LISTWISE /ANALYSIS A1 A2

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,500

Bartlett's Test of Sphericity

Approx. Chi-Square 9,500

df 1

Sig. ,002

Anti-image Matrices

A1 A2

Anti-image Covariance A1 ,732 -,379

A2 -,379 ,732

Anti-image Correlation A1 ,500(a) -,517

A2 -,517 ,500(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

A1 1,000 ,759

A2 1,000 ,759

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 1,517 75,867 75,867 1,517 75,867 75,867

2 ,483 24,133 100,000

Extraction Method: Principal Component Analysis. Component Matrix(a)

Component

1

A1 ,871

A2 ,871

Extraction Method: Principal Component Analysis. a 1 components extracted.

_____________________________________________________________________

_________________________________________________________________

- 73 -

RELIABILITY

/VARIABLES=A1 A2

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,682 2

_____________________________________________________________________

_________________________________________________________________

- 74 -

CUSTOMERS’ DEMAND (MOTIVATION)

FACTOR

/VARIABLES B3 B2 /MISSING LISTWISE /ANALYSIS B3 B2

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,500

Bartlett's Test of Sphericity

Approx. Chi-Square 7,966

df 1

Sig. ,005

Anti-image Matrices

B3 B2

Anti-image Covariance B3 ,770 -,369

B2 -,369 ,770

Anti-image Correlation B3 ,500(a) -,479

B2 -,479 ,500(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

B3 1,000 ,740

B2 1,000 ,740

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 1,479 73,972 73,972 1,479 73,972 73,972

2 ,521 26,028 100,000

Extraction Method: Principal Component Analysis. Component Matrix(a)

Component

1

B3 ,860

B2 ,860

Extraction Method: Principal Component Analysis. a 1 components extracted.

_____________________________________________________________________

_________________________________________________________________

- 75 -

RELIABILITY

/VARIABLES=B2 B3

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,571 2

_____________________________________________________________________

_________________________________________________________________

- 76 -

A. QUALITY AWARENESS FACTOR

/VARIABLES C.1.1 C.1.2 C.1.3 C.1.4 C.1.5 /MISSING LISTWISE /ANALYSIS

C.1.1 C.1.2 C.1.3 C.1.4 C.1.5

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,689

Bartlett's Test of Sphericity

Approx. Chi-Square 65,572

df 10

Sig. ,000

Anti-image Matrices

C.1.1 C.1.2 C.1.3 C.1.4 C.1.5

Anti-image Covariance C.1.1 ,487 -,152 -,225 ,053 -,082

C.1.2 -,152 ,528 -,117 ,092 -,137

C.1.3 -,225 -,117 ,574 -,054 ,010

C.1.4 ,053 ,092 -,054 ,393 -,256

C.1.5 -,082 -,137 ,010 -,256 ,298

Anti-image Correlation C.1.1 ,758(a) -,301 -,426 ,120 -,215

C.1.2 -,301 ,765(a) -,213 ,202 -,345

C.1.3 -,426 -,213 ,789(a) -,113 ,023

C.1.4 ,120 ,202 -,113 ,557(a) -,749

C.1.5 -,215 -,345 ,023 -,749 ,631(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

C.1.1 1,000 ,771

C.1.2 1,000 ,691

C.1.3 1,000 ,691

C.1.4 1,000 ,919

C.1.5 1,000 ,886

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2,900 57,991 57,991 2,900 57,991 57,991

2 1,058 21,167 79,158 1,058 21,167 79,158

3 ,500 10,004 89,162

4 ,361 7,225 96,387

5 ,181 3,613 100,000

Extraction Method: Principal Component Analysis.

_____________________________________________________________________

_________________________________________________________________

- 77 -

Component Matrix(a)

Component

1 2

C.1.1 ,788 -,386

C.1.2 ,769 -,317

C.1.3 ,746 -,367

C.1.4 ,659 ,696

C.1.5 ,834 ,435

Extraction Method: Principal Component Analysis. a 2 components extracted. Rotated Component Matrix(a)

Component

1 2

C.1.1 ,860 ,178

C.1.2 ,802 ,220

C.1.3 ,814 ,167

C.1.4 ,094 ,954

C.1.5 ,393 ,855

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 3 iterations. Component Transformation Matrix

Component 1 2

1 ,790 ,613

2 -,613 ,790

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. RELIABILITY

/VARIABLES=C.1.1 C.1.2 C.1.3 C.1.4 C.1.5

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 32 94,1

Excluded(a)

2 5,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,817 5

_____________________________________________________________________

_________________________________________________________________

- 78 -

RELIABILITY

/VARIABLES=C.1.1 C.1.2 C.1.3

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,807 3

RELIABILITY

/VARIABLES=C.1.4 C.1.5

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 32 94,1

Excluded(a)

2 5,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,854 2

_____________________________________________________________________

_________________________________________________________________

- 79 -

B. INCREASED PRODUCTIVITY FACTOR

/VARIABLES C.2.1 C.2.2 C.2.3 C.2.4 C.2.5 /MISSING LISTWISE /ANALYSIS

C.2.1 C.2.2 C.2.3 C.2.4 C.2.5

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,803

Bartlett's Test of Sphericity

Approx. Chi-Square 82,123

df 10

Sig. ,000

Anti-image Matrices

C.2.1 C.2.2 C.2.3 C.2.4 C.2.5

Anti-image Covariance C.2.1 ,353 -,150 ,030 -,152 -,132

C.2.2 -,150 ,452 -,207 -,034 ,098

C.2.3 ,030 -,207 ,439 -,091 -,134

C.2.4 -,152 -,034 -,091 ,366 -,110

C.2.5 -,132 ,098 -,134 -,110 ,484

Anti-image Correlation C.2.1 ,794(a) -,376 ,077 -,422 -,319

C.2.2 -,376 ,761(a) -,464 -,084 ,210

C.2.3 ,077 -,464 ,801(a) -,226 -,292

C.2.4 -,422 -,084 -,226 ,845(a) -,262

C.2.5 -,319 ,210 -,292 -,262 ,810(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

C.2.1 1,000 ,751

C.2.2 1,000 ,611

C.2.3 1,000 ,675

C.2.4 1,000 ,760

C.2.5 1,000 ,606

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 3,403 68,066 68,066 3,403 68,066 68,066

2 ,643 12,859 80,925

3 ,441 8,824 89,749

4 ,297 5,941 95,690

5 ,216 4,310 100,000

Extraction Method: Principal Component Analysis.

_____________________________________________________________________

_________________________________________________________________

- 80 -

Component Matrix(a)

Component

1

C.2.1 ,867

C.2.2 ,782

C.2.3 ,822

C.2.4 ,872

C.2.5 ,778

Extraction Method: Principal Component Analysis. a 1 components extracted.

RELIABILITY

/VARIABLES=C.2.1 C.2.2 C.2.3 C.2.4 C.2.5

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,880 5

_____________________________________________________________________

_________________________________________________________________

- 81 -

C. EASIER OPERATIONS EXECUTION FACTOR

/VARIABLES C.3.1 C.3.2 C.3.3 C.3.4 /MISSING LISTWISE /ANALYSIS C.3.1

C.3.2 C.3.3 C.3.4

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,611

Bartlett's Test of Sphericity

Approx. Chi-Square 43,768

df 6

Sig. ,000

Anti-image Matrices

C.3.1 C.3.2 C.3.3 C.3.4

Anti-image Covariance C.3.1 ,783 -,102 -,075 -,025

C.3.2 -,102 ,425 -,247 ,127

C.3.3 -,075 -,247 ,313 -,243

C.3.4 -,025 ,127 -,243 ,630

Anti-image Correlation C.3.1 ,886(a) -,177 -,151 -,036

C.3.2 -,177 ,591(a) -,677 ,246

C.3.3 -,151 -,677 ,574(a) -,549

C.3.4 -,036 ,246 -,549 ,564(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

C.3.1 1,000 ,434

C.3.2 1,000 ,674

C.3.3 1,000 ,838

C.3.4 1,000 ,440

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2,385 59,634 59,634 2,385 59,634 59,634

2 ,798 19,956 79,589

3 ,622 15,540 95,129

4 ,195 4,871 100,000

Extraction Method: Principal Component Analysis.

_____________________________________________________________________

_________________________________________________________________

- 82 -

Component Matrix(a)

Component

1

C.3.1 ,659

C.3.2 ,821

C.3.3 ,915

C.3.4 ,663

Extraction Method: Principal Component Analysis. a 1 components extracted. RELIABILITY

/VARIABLES=C.3.1 C.3.2 C.3.3 C.3.4

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,753 4

_____________________________________________________________________

_________________________________________________________________

- 83 -

A. MARKET SHARE FACTOR

/VARIABLES D.1.1 D.1.2 D.1.3 D.1.4 /MISSING LISTWISE /ANALYSIS D.1.1

D.1.2 D.1.3 D.1.4

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,739

Bartlett's Test of Sphericity

Approx. Chi-Square 101,401

df 6

Sig. ,000

Anti-image Matrices

D.1.1 D.1.2 D.1.3 D.1.4

Anti-image Covariance D.1.1 ,237 -,133 ,001 -,103

D.1.2 -,133 ,189 -,114 ,072

D.1.3 ,001 -,114 ,215 -,155

D.1.4 -,103 ,072 -,155 ,400

Anti-image Correlation D.1.1 ,776(a) -,628 ,005 -,333

D.1.2 -,628 ,691(a) -,567 ,261

D.1.3 ,005 -,567 ,752(a) -,530

D.1.4 -,333 ,261 -,530 ,743(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

D.1.1 1,000 ,840

D.1.2 1,000 ,836

D.1.3 1,000 ,867

D.1.4 1,000 ,681

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 3,224 80,606 80,606 3,224 80,606 80,606

2 ,451 11,273 91,879

3 ,221 5,518 97,397

4 ,104 2,603 100,000

Extraction Method: Principal Component Analysis.

_____________________________________________________________________

_________________________________________________________________

- 84 -

Component Matrix(a)

Component

1

D.1.1 ,917

D.1.2 ,914

D.1.3 ,931

D.1.4 ,825

Extraction Method: Principal Component Analysis. a 1 components extracted. RELIABILITY

/VARIABLES=D.1.1 D.1.2 D.1.3 D.1.4

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,919 4

_____________________________________________________________________

_________________________________________________________________

- 85 -

B. CUSTOMER SATISFACTION FACTOR

/VARIABLES D.2.1 D.2.2 D.2.3 /MISSING LISTWISE /ANALYSIS D.2.1 D.2.2 D.2.3

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,532

Bartlett's Test of Sphericity

Approx. Chi-Square 13,527

df 3

Sig. ,004

Anti-image Matrices

D.2.1 D.2.2 D.2.3

Anti-image Covariance D.2.1 ,731 -,351 ,033

D.2.2 -,351 ,661 -,238

D.2.3 ,033 -,238 ,885

Anti-image Correlation D.2.1 ,529(a) -,505 ,041

D.2.2 -,505 ,520(a) -,311

D.2.3 ,041 -,311 ,574(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

D.2.1 1,000 ,596

D.2.2 1,000 ,752

D.2.3 1,000 ,339

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 1,687 56,248 56,248 1,687 56,248 56,248

2 ,873 29,084 85,332

3 ,440 14,668 100,000

Extraction Method: Principal Component Analysis. Component Matrix(a)

Component

1

D.2.1 ,772

D.2.2 ,867

D.2.3 ,583

Extraction Method: Principal Component Analysis. a 1 components extracted.

_____________________________________________________________________

_________________________________________________________________

- 86 -

RELIABILITY

/VARIABLES=D.2.1 D.2.2 D.2.3

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 34 100,0

Excluded(a)

0 ,0

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,584 3

_____________________________________________________________________

_________________________________________________________________

- 87 -

C. SALES REVENUE FACTOR

/VARIABLES D.3.1 D.3.2 D.3.3 /MISSING LISTWISE /ANALYSIS D.3.1 D.3.2 D.3.3

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,587

Bartlett's Test of Sphericity

Approx. Chi-Square 37,295

df 3

Sig. ,000

Anti-image Matrices

D.3.1 D.3.2 D.3.3

Anti-image Covariance D.3.1 ,854 -,077 -,051

D.3.2 -,077 ,319 -,255

D.3.3 -,051 -,255 ,323

Anti-image Correlation D.3.1 ,895(a) -,147 -,098

D.3.2 -,147 ,555(a) -,794

D.3.3 -,098 -,794 ,556(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

D.3.1 1,000 ,389

D.3.2 1,000 ,844

D.3.3 1,000 ,835

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2,069 68,957 68,957 2,069 68,957 68,957

2 ,752 25,081 94,038

3 ,179 5,962 100,000

Extraction Method: Principal Component Analysis. Component Matrix(a)

Component

1

D.3.1 ,624

D.3.2 ,919

D.3.3 ,914

Extraction Method: Principal Component Analysis. a 1 components extracted.

_____________________________________________________________________

_________________________________________________________________

- 88 -

RELIABILITY

/VARIABLES=D.3.1 D.3.2 D.3.3

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 32 94,1

Excluded(a)

2 5,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,762 3

_____________________________________________________________________

_________________________________________________________________

- 89 -

OVERALL FINANCIAL PERFORMANCE IMPROVEMENT FACTOR

/VARIABLES E1 E2 E3 /MISSING LISTWISE /ANALYSIS E1 E2 E3

/PRINT INITIAL KMO AIC EXTRACTION

/CRITERIA MINEIGEN(1) ITERATE(25)

/EXTRACTION PC

/ROTATION NOROTATE

/METHOD=CORRELATION .

Factor Analysis KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. ,607

Bartlett's Test of Sphericity

Approx. Chi-Square 62,327

df 3

Sig. ,000

Anti-image Matrices

E1 E2 E3

Anti-image Covariance E1 ,211 -,161 ,048

E2 -,161 ,171 -,143

E3 ,048 -,143 ,588

Anti-image Correlation E1 ,588(a) -,845 ,138

E2 -,845 ,564(a) -,451

E3 ,138 -,451 ,748(a)

a Measures of Sampling Adequacy(MSA) Communalities

Initial Extraction

E1 1,000 ,835

E2 1,000 ,915

E3 1,000 ,616

Extraction Method: Principal Component Analysis. Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2,366 78,867 78,867 2,366 78,867 78,867

2 ,534 17,789 96,656

3 ,100 3,344 100,000

Extraction Method: Principal Component Analysis. Component Matrix(a)

Component

1

E1 ,914

E2 ,956

E3 ,785

Extraction Method: Principal Component Analysis. a 1 components extracted.

_____________________________________________________________________

_________________________________________________________________

- 90 -

RELIABILITY

/VARIABLES=E1 E2 E3

/SCALE('ALL VARIABLES') ALL/MODEL=ALPHA.

Reliability Scale: ALL VARIABLES Case Processing Summary

N %

Cases Valid 33 97,1

Excluded(a)

1 2,9

Total 34 100,0

a Listwise deletion based on all variables in the procedure. Reliability Statistics

Cronbach's Alpha N of Items

,866 3