Relationships among ISO 9001, Competitive Dimensions and Profitability by Han - Essay Example

whether obtaining ISO 9001 certificate and the registration process efforts impact or benefit competitiveness and profitability need to be critically analyzed. The aim of the present paper is to summarize the article written by Han, Sim, and Ebrahimpour (222) for the International Journal of Services and Operations Management, titled “Relationships among ISO 9001, competitive dimensions and profitability” to understand and bring light on this perspective.

1. Summary of the article

The main purpose of Han, Sim, and Ebrahimpour's (222) article is “to better understand the relationships among ISO 9001 certification, competitive dimensions, and profitability by focusing on two major industries in the USA”. The research was conducted using a survey questionnaire.

2.1 Background and Hypothesis

The authors introduced their article by stressing the ISO 9001 certification importance and its impact on the improvement of quality. They also stated that significant discipline is needed in ISO 9001 implementation and its principles ensure that output consistency can be improved by procedures that are well planned and documented, resulting in achieving the goals of quality improvement and reduction of cost easily. Productive inefficiencies can be reduced using the ISO 9001 as a managerial tool and can result in benefiting the business if improvement strategy continuously used (Han, Sim and Ebrahimpour 222). 

Organizations can achieve superior financial performance by applying the best practices of world-class manufacturing and as it emphasizes achieving four dimensions of competition: quality, flexibility, cost, and dependability culminating in competitive advantage (Hayes and Wheelwright 375). However, as customers’ needs are dynamic so is the world-class manufacturing company’s operations strategy. Thus authors have conducted empirical research to also understand the present relationship between registration efforts of ISO 9001 and the firm’s profitability and its four competitive dimensions.

After conducting a thorough past literature review Han, Sim, and Ebrahimpour (224) tested nine hypotheses that are illustrated using the below figure

The nine hypotheses tested in this research are listed below

“H1 ISO 9001 registration efforts have a positive effect on quality.

H2 ISO 9001 registration efforts have a positive effect on cost reduction.

H3 ISO 9001 registration efforts have a positive effect on flexibility.

H4 ISO 9001 registration efforts have a positive effect on dependability.

H5 ISO 9000 registration efforts have a positive effect on profitability

H6 Quality has a positive effect on profitability

H7 Cost reduction has a positive effect on profitability

H8 Flexibility has a positive effect on profitability” (Han, Sim and Ebrahimpour 225-226)

Figure 1: Theoretical model – Relationships among ISO 9001, Competitive dimensions and profitability (Han, Sim, and Ebrahimpour (227)

2. Research Design and Methodology

The research was conducted using a questionnaire and a sample was selected with due process for the survey. The questionnaire was developed based on a literature review and later reviewed for content validation by external judges. The survey was tested for “clarity, relevance, and technical accuracy” by the collaborative program in Massachusetts, and all facets of the survey were commented upon (Han, Sim, and Ebrahimpour, 227).  2130 manufacturing firms were surveyed with ISO 9001 registration with 2800 and 3600 standard industrial classifications, working in the USA. The response rate was 23 percent out of this total survey, 441 were found valid and used, out of which 295 were from the electronics industry and 119 from the chemical industry (Han, Sim and Ebrahimpour 227). Cronbach’s alpha was used to assess reliability and 0.70 was the minimum accepted value of alpha (Nunnally 212). The statistical tools used for the study were Structural equation modeling (SEM), Comparative fit Index (CFI), Tucker and Lewis Index (TLI) and the root mean square error of approximation (RMSEA) (Han, Sim and Ebrahimpour 227).

3. Research Results

The results of the research are consistent and complement the findings of previously conducted studies, that there exists a positive and direct relationship between ISO 9001 and four dimensions of organization competitiveness however ISO 9001 does not bear a direct and positive relation with profitability (Han, Sim and Ebrahimpour 229). Yet competitiveness achieved through ISO 9001 certification enhances a firm’s profitability, the results are illustrated below given the table.

Table 1: Results of the hypotheses test (Han, Sim and Ebrahimpour 229)

4. Conclusion

In the area of operations management and quality Han, Sim, and Ebrahimpour's (225-226) article findings provided crucial information with extensive implications to researchers and managers that ISO 9001 registration and competitive dimensions are positively correlated in a manufacturing organization. However authors also stress that ISO 9001 certification alone does not guarantee competitiveness or profitability but enhances it and through its adoption organizational competitiveness can be achieved, ultimately resulting in profitability. Apart from that, these results are confined to two industries only and might not hold true for other industries as well, but this study can be useful and similar research in other industries can strengthen it and give new insight (Han, Sim, and Ebrahimpour 232).