Volume 6 Number 31 8 August, 2012 ISSN - Academic Journals

Volume 6 Number 31 8 August, 2012
ISSN 1993-8233

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High school “Djura Jaksic”
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University of Greenwich
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School of Economics and Finance
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University of Kwa-Zulu Natal (UKZN)
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Mid Sweden University,
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African Journal of Business Management
International Journal of Medicine and Medical Sciences
Table of Contents: Volume 6 Number 31 8 August, 2012
Research Articles
ARTICLES
Relationship between board characteristics and firm performance:
Evidence from Tehran stock market 8994
Seyed Alireza Mousavi, Fatemeh Taghados and Mahnoosh Ghaedi
Earnings management behavior of the initial public offering (IPO) firms
during pre-IPO, IPO and post-IPO years: Evidence from the Casablanca
Stock Exchange 9005
Omar Farooq and Meryem Benali
Relation between effective organizational and managerial obstacles and
incentives on administrative-financial corruption in government
organizations in Iran 9015
Hossein Azimi, Mehdi Ajalli, Sayed Rahim Safavi Mirmahalleh and
Abdolhossein Rezvani
Intergroup conflict within a South African mining company 9028
Havenga Werner, Visagie Jan, Linde Herman and Gobind Jenni
A framework for assessing the riskiness of construction of a structural
experiment project under Sino-African laboratory environment 9040
Arnaud R. Agnantounkpatin and Lian Ying Zhang
Buyer-supplier relationships in the Brazilian automotive industry 9056
Rosangela Maria Vanalle and José Antonio Arantes Salles

Table of Contents: Volume 6 Number 31 8 August, 2012
ARTICLES
The “outsourcing”and management consulting in a dimensional systemic
model 9065
Nélson Santos Antonio and Renato Lopes da Costa
Programme design dimensions explored for a professional occupational
safety and health management qualification for Africa 9072
R. J. Steenkamp
Estimated state of health and stress among truck drivers with regard to
participating in recreational sport activities 9085
Maja Meško, Mateja Videmšek, Jože Štihec, Tomaž Šinigoj, Lea Šuc,
Damir Karpljuk and Jasna Lavrenčič
Utilisation of adequate internal controls in fast food small medium and
micro enterprises (SMMEs) operating in Cape Metropole 9092
Helené de Jongh, Waseem Martin, Andre van der Merwe, Justin denlinghuis,
Cindy Kleinbooi, Dylan Morris, Alliston Fortuin and Juan-Pierré Bruwer
Minimizing the risks of innovation in bottled water design: An application
of conjoint analysis and focus group 9096
Sérgio Dominique-Ferreira, Antonio Rial Boubeta and Jesús Varela Mallou
A multi-stage approach to enterprise resource planning system selection 9105
Hamid Reza Feili, Mohammad Mirkazemi Mood, Hossein Rahmany
Youshanlouei and Nima Sarabi
South African tour operators’ access to current consumer information 9118
M. Potgieter, J. W de Jager and C. H van Heerden

Table of Contents: Volume 6 Number 31 8 August, 2012
ARTICLES
Organizational diagnosis on the basis of customer’s aspects: Case study of
an Iranian company 9126
Vahid Reza Mirabi and Jalal Haghighat Monfared
Digital divide and inequality among digital natives: A South African
perspective 9140
D. H. Tustin, M. Goetz and A. Heydenrych Basson
Global warming mitigation promotes corporate entrepreneurship within
Woolworths’ supply chain 9151
M A. O. Dos Santos

African Journal of Business Management Vol.6 (31), pp. 8994-9004, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2211
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Relationship between board characteristics and firm
performance: Evidence from Tehran stock market
Seyed Alireza Mousavi 1 *, Fatemeh Taghados 2 and Mahnoosh Ghaedi 1
1 Department of Business Administration, Firoozabad Branch, Islamic Azad University, Firoozabad, Iran.
2 Department of Accounting, Marvdasht Branch, Islamic Azad University, Marvdasht, Iran.
Accepted 9 December, 2011
The major purpose of this paper was to identify and analyze the board size, board composition and firm
performance for firms listed at Tehran Stock Exchange (TSE) from 2004 to 2009. We used multiple
regressions to examine the board characteristics and firm performance. Board characteristic variables
includes board size, board composition for testing the hypotheses, required data, information collected
from the annual reports of the official bulletins of Tehran stock exchange, market information, stock
organization library and stock sites such as www.rdis.ir and www.irbourse.com. Based on a sample of
66 firms listed at Tehran stock exchange, during the period from 2004 to 2009, we found out that board
size and board compositions are positively associated with firm performance. The results suggested
that the impact of the board size on firm performance is more than the impact of the board composition
on firm performance. This research provided a good chance for examining the effect of board
characteristics regarding firm performance. Meanwhile, it took into consideration if quarter firm size
has any effect on firm performance or not.
Key words: Corporate governance, firm performance, board size, firm size.
INTRODUCTION
Today, corporative governance has, by no doubt, play an
important role in corporative success. Researches
showed that corporate governance is one of the key
elements in improving the performance of companies,
which oversee the relationship between shareholders,
board of directors, managers and other stakeholders
(Fama and Jensen, 2008). The board is the most
important and fundamental mechanism in corporative
governance. Board composition, plays an important role
in increasing controlling performance, and is an important
operative in explaining the capabilities of members in
completing duties and helping corporative performance
(Selman and Selman, 2009). Regarding their multifaceted
tasks, it seems plausible that boards may have impact on
firm performance and, if so, questions naturally arise as
to what types of board structures are optimal from the
perspective of maximizing stockholders wealth (Leventis
*Corresponding author. E-mail: Ali_Mosavi75@Yahoo.com.
et al., 2010). An important topic within the afore
mentioned research agenda is the potential influence of
board size on firm performance. While larger boards may
result in a wider pool of expertise and greater external
linkages, it may also lead to lower group cohesion and
greater levels of conflict (Connell and Cramer, 2010).
Contemporary guidelines on corporative governance
practice consistently emphasize the critically important
role of non-executive directors in mitigating manager–
shareholder conflicts (Hampel and Higgs, 2003).
The major purpose of this paper is to identify and
analyse the impact of the board size and board
composition on firm performance for firms listed at
Tehran Stock Exchange (TSE) from 2004 to 2009. In this
research, there are 6 assumptions. Hypotheses raised in
this study are to examine the relationship between the
variables of size and non-executive board with firm
performance; and to comparatively examine the size and
non-executive board of directors on company size and
firm performance.This research compares board size and
board composition with FINANCIAL Q and return on

assets (ROA). There is a significant relationship between
board size and board composition with FINANCIAL Q
and ROA. But there is no significant relationship between
board size and board composition with RET. Also, the
impact of board size on firm performance is more than
that of board composition on firm performance.
LITERATURE REVIEW AND RESEARCH
HYPOTHESES
The impact of board size on firm performance
The nature of the relationship between board size and
firm performance has come under increased scrutiny in
recent years. For example, Yermack (1996) investigated
the impact of board size on firm value for a sample of
large US industrial corporations between 1984 and 1991
and finds a positive relationship between firm value
(measured by Tobin s Q) and the number of directors.
Bermig and Bernd (2009) also showed that financial
measures, such as ROA and return on sales (ROS), are
positively related to board size (Dalton et al., 1999),
which draw (on the results) from a number of prior US
studies to indicate a positive relationship between board
size and firm performance. In a sense, these contrasting
findings suggest that there may be advantages as well as
disadvantages in larger boards. Therefore, we propose
the following hypothesis:
H1. There is a positive relationship between board size
and firm performance.
The impact of board composition on firm
performance
Extant work in the analytical agency tradition (Stiles and
Taylor, 2001) suggests that a higher proportion of outside
directors should be associated with stronger financial
performance. Regarding the importance attributed to the
role of independent non-executive directors in both
Hampel (1998) and Higgs (2003) reports, it is hardly
surprising that UK research points to an increasing
proportion of outside directors on corporative boards in
recent years (Pye, 2000). For example, Hermalin and
Weisbach (1991) concluded that there is no relationship
between the proportion of non-executive directors and
firm performance in US. Vafeas and Theodorou (1998)
and Dulewicz and Herbert (2004) report similar findings
for the UK. There are several studies about the
relationship between non-executive directors and the
company performance. Studies such as Zahra and
Pearce (1999); Pindado et al. (2005) and Oregan et al.
(2005), showed that the more the number of nonexecutive
board increases, the more firm performance
improves. Therefore, we propose the following
hypothesis:
Mousavi et al. 8995
H2. There is a positive relationship between board
composition and firm performance.
Board size in firms with different sizes
Prior research on the relationship between corporative
governance and firm size provides mixed evidence on
whether or not larger firms tend to have better corporative
governance structures (Drobetz et al., 2004; Ariff et al.,
2007). Meanwhile, there are strong reasons to suspect
that identical corporative governance practices and
structures do not work equally well for firms with different
sizes (Klapper and Love, 2003). For example, Holmstrom
and Kaplan (2003) argued that the costs of complying
with the Sarbanes–Oxley act of 2002 in the US are
proportionately greater for smaller firms. Chhaochharia
and Grinstein (2007), report that empirical evidence is
consistent with this view. Although the impact of firm size
on firm performance board structure association is
frequently ignored in empirical research, there are a
number of reasons why size may be an important
moderating variable. Because of their reduced scale and
complexity, smaller firms are less likely to have coalitions
of directors pursuing a diverse range of interests. In
particular, as Dalton et al. (1999) pointed out that, ‘‘it may
be that smaller firms do not have as many competing
coalitions as their larger counterparts. If so, stability and
cohesiveness among constituent groups may be higher
… and goal consistency stronger’’. However, it appears
worthwhile to add the caveat that these potential effects
may be attributable to smaller firms having smaller
boards rather than always being present in smaller firms
regardless of the size of the board (Dulewicz and
Herbert, 2004). Therefore, we propose the following
hypothesis:
H3. There are significant differences between board size
in firms with different sizes.
Board compositions in firms with different sizes
Recent work by de Andres et al. (2005) also fails to
establish a statistically significant association between
firm performance and board composition across a sample
of organisation for Economic Co-operation and
Development (OECD) countries. Other research (Klein,
1998) suggested that US boards may in fact have an
excessive proportion of non-executive directors.
Furthermore, many academics and commentators have
questioned the validity of the notion which suggests that
a board should comprise of at least 50% non-executives
(Dulewicz and Herbert, 2004). Nonetheless, empirical
work also reveals that firms with a higher proportion of

8996 Afr. J. Bus. Manage.
outside directors have a smaller likelihood of
experiencing financial distress (Elloumi and Gueyie,
2001). In addition, financially distressed firms with
independent boards have a lower incidence of bankruptcy
filings (Daily et al., 2003). Interestingly, it appears
that the US stock market responds positively to the
announcement of the appointment of non-exclusive
directors (Rosenstein and Wyatt, 1990). From a strategic
perspective, recent work by Yawson (2006) also
suggests that when facing performance declines, firms
with a higher proportion of outside directors are more
likely to sanction staff layoffs. Nonetheless, notwithstanding
these findings, there is a relative dearth of
empirical evidence pointing to a significant positive
association between firm performance and board
independence. Therefore, we propose the following
hypothesis:
H4. There are significant differences between board
compositions in firms with different sizes.
The difference in board size
Work by Finkelstein and Hambrick (1996) suggested that
directors are more likely to make impact on the strategic
direction of the organization in smaller firms. From this
perspective, larger boards may be less harmful compared
to smaller firms. It is well established that a firm’s
information environment is directly related to its size
(Collins et al., 1987; Ryan, 2005). For example, prior
work by O'Connell (1995) demonstrates that the information
environment is significantly weaker for smaller Irish
firms. Since larger firms typically operate in richer
information environments, these companies are generally
subjected to greater levels of scrutiny from media,
politicians and the general public. In contrast, because
smaller firms operate in far more limited information
environments, the monitoring role of the board may even
be more critical. Prior research shows that the monitoring
role of the board is an increasing function of board size
(Kiel and Nicholson, 2003). Therefore, we propose the
following hypothesis:
H5. The difference in board size is making a difference in
firm performance.
Firm size
The relationship between firm size and stock returns in
five Asian countries were examined (Grote and Gispere,
2002). These results suggested that there is a strong
relationship between firm size and stock returns in all
these countries. Basu (1997) also showed that there is a
significant relationship between firm size and stock
returns.
More specifically, Holder et al. (1998); Gul and Kealey
(1999); Koch and Shenoy (1999);Chang and Rhee (1990)
and Ho (2003) argued that large firms are likely to be
more mature and thus have easier access to capital
markets, and should be able to pay more dividends. This
indicates that large firms can afford to pay higher
dividends than smaller ones (Al-Najjar, 2009). Therefore,
we propose the following hypothesis:
H6. The difference in firm size is making a difference in
firm performance.
Variables definitions
In this paper, FINANCIAL Q, RET and ROA are
dependent variables; and BRDSIZE and NED are
independent variables. These variables are summarized
in Table 1.
RESEARCH METHODS
The correlation research method was used to determine the
relationship between board characteristics and firm Size with firm
performance multiple regressions; and ANOVA were applied in
testing the relationship between these variables.
We examine the relationships between these variables in a panel
multiple regression framework, and consider the empirical model
described as follows:
Performance measure = β0 + β1 BRDSIZEt + β2 NED% + εit
β = Regression coefficient
Performance measure = RET, ROA, FINANCIAL Q
RET = Stock returns
ROA = Return on Assets
FINANCIAL Q = financial market value
BRDSIZE = Board size
NED% = Non-executive directors
Dt = Size of the firm
εit = Residual error for firm i at year t
Sample selection
From 2004 to 2009, the sample was chosen from firms listed on
Tehran stock exchange (TSE), using the following criteria:
1) Firms were listed at TSE during year 2004 to 2009.
2) Data was available for all years under study.
3) Data should not change in the fiscal year for the study period.
The data used in the analysis was collected from the annual reports
of the official bulletins of Tehran Stock Exchange. The final sample
contains 66 firms.
Data analysis
The test of first and second hypothesis
Hypotheses testing results: A total optimum model was
used for predicting the performance measure. We

Table 1. Description of the variable.
Names of the Variable Proxy Calculation
Mousavi et al. 8997
BRDSIZE Board size The number of executive and non-executive directors on the board
NED% Non-executive directors The percentage of non-executive directors on the board
Financial Q Tobin’s Q
RET Stock returns
Sum of market capitalization plus long and short-term debt over the book
value of total assets
The one-year raw stock market return. The prices at the beginning and end of
the fiscal year are adjusted for dividends
ROA Return on assets Profit before interest and tax over total assets
SIZE Size of the firm Log of total sales
Table 2. Variables entered.
Model Variables entered Method
1 BRDSIZE Step wise
2 NED% Step wise
Table 3. Coefficients of model 2.
Model 6 VIF t
Standardized coefficients Unstandardized coefficients
Beta Std. error B
Constant -7.711 3.50 E+ 08 -2697111283.35 0.000
BRDSIZE 1.000 8.347 0.388 68217015 569380738.287 0.000
NED%
Constant -7.296 3.59 E + 08 -261945965.89 0.000
BRDSIZE 0.801 7.043 0.365 76209929 536740280.561 0.000
NED% 0.801 0.961 0.050 1.48 E + 08 141774780.575 0.037
entered variables into the model respectively. Two
models were defined and finally the last models (2)
including all variables were defined as an optimum model
for predicting the performance measure. As a result, the
regression model came as follows:
Tobin’s Q = β0 + β1 BRDSIZEt + β2 NED% + eit
Presenting total optimum model based on model 2 (Ttest):
Optimum model was model 2, which had a more
determinative coefficient (R square) than the previous
ones. In fact, all together, variables could present a more
precise prediction of firm Performance measure and in
this paper the optimum model was 2 one.
The optimal regression model was written as follows:
Financial Q = -26945965.89 + 536740280.561 Brdsize Et
+141774780.575 NED% + eit (1).
Sig.
As it is seen in optimum model, Brdsize was computed
with coefficient equal to 536740280.561.
Thus, there was a positive relationship between board
size and board composition with FINANCIAL Q. So these
two variables are the entered model, and they have the
same impact on FINANCIAL Q. Meanwhile, based on the
results in Table 3, (variance inflation factor (VIF)
coefficient related to the variables entered the final model
which indicated that no major change occurred in that
coefficient in relation to Figure 1, and there was no
collinearity between independent variables in the final
model.
Hypotheses testing
As a result, the regression model came as follows:
RET = β0 + β1 BRDSIZEt + β2 NED% + eit

8998 Afr. J. Bus. Manage.
Table 4. Variables entered.
Model Variables entered Method
1 BRDSIZE Step wise
Table 5. Variables removed.
Model Variables entered Method
1 NED% Step wise
Table 6. Coefficients of model 2.
Model 6 VIF t
Standardized coefficient Unstandardized coefficient
Beta Std. error B
Constant -8.824 26.090 -214.557 0.000
BRDSIZE 1.000 8.828 0.406 5.089 44.922 0.000
Table 7. Variables entered.
Model Variables entered Method
1 BRDSIZE Step Wise
2 NED% Step Wise
Table 8. Coefficients of model 2.
Model 2 VIF t
Standardized coefficient Unstandardized coefficient
Beta Std. error B
Constant -7.615 1.759 -1.329 0.000
BRDSIZE 1.000 7.907 0.370 0.343 2.712 0.000
NED%
Constant -7.219 1.806 -13.035 0.000
BRDSIZE 1.248 6.685 0.350 0.383 2.562 0.000
NED% 1.248 0.878 0.046 0.742 0.651 0.028
Presenting total optimum model based on model 2 (Ttest)
The optimal regression model was written as follows:
RET = -214.557+ 44.922Brdsize Et + eit (2)
As it is seen in optimum model, Brdsize was entered with
coefficient equal to -44.922. Thus, there was no
significant relationship between board size and board
composition, with stock returns.
So these two variables are not the entered model,
neither do they have the same impact on stock returns.
Sig.
Sig.
Meanwhile, based on the results of Table 6, VIF
coefficient related to the variables entered the final model
which indicated that no major change occurred in that
coefficient in relation to figure 1, and there was no
collinearity between independent variables in the final
model.
Hypotheses testing results
As a result, the regression model came as follows:
ROA = β0 + β1 BRDSIZEt + 4 β2 NED% + eit

Table 9. Test the homogeneity of variances.
Table 10. ANOVA.
Levene statistic df 1 df 2 Sig.
1.623 3 392 0.107
Parameter Sum of square df Mean square F Sig.
Between groups 3.051 3 1.017 6.423 0.000
Within groups 62.061 392 0.158 0
Total 65.111 395
Table 11. Test the Homogeneity of variances.
Table 12. ANOVA.
Levene statistic df 1 df 2 Sig.
2.097 3 392 0.096
Parameter Sum of square df Mean square F Sig.
Between groups 0.696 3 0.232 5.454 0.001
Within groups 16.681 392 0.043
Total 17.377 395
Presenting total optimum model based on model 2 (Ttest)
The optimal regression model was written as follows:
ROA = -13.035 + 2.562 BRDSIZEt + 0.651NED% + eit (3)
As it is seen in optimum model, NED% was entered with
coefficient equal to 0.651. Thus, there was a positive
relationship between board size and board composition
with NED%. This relationship is significant. So these two
variables are the entered model, and they have the same
impact on NED%. Meanwhile, based on the results of
Table 8, VIF coefficient related to the variables entered
the final model which indicated that no major change
occurred in that coefficient in relation with figure 1, and
there was no collinearity between independent variables
in the final model.
The test of third hypothesis
To test this hypothesis, homogeneous variance test and
ANOVA test was used. As shown in Table 9,
significance=0.107>0.05. Thus, results showed that the
Mousavi et al. 8999
variance between groups is homogeneous.
As shown in Table 10, significance=0.0000.05. Thus, results showed that the
variance between groups is homogeneous.
As shown in Table 12, Significance=0.0010.05. Thus, results showed that the
variance between groups is homogeneous.
As shown in Table 14, Significance=0.000

9000 Afr. J. Bus. Manage.
Table 13. Test the Homogeneity of variances.
Table 14. ANOVA.
Parameter Levene statistic df 1 df 2 Sig.
Financial Q 1.971 2 392 0.124
RET 1.460 2 393 0.125
ROA 1.047 2 393 0.108
Names of variable Parameter Sum of square df Mean square F Significance
Financial Q
RET
ROA
Table 16. ANOVA.
Between groups 3.13E+19 2 1.565E+19 56.341 0.000
Within groups 1.09E+20 393 2.778E+17
Total 1.04E+20 395
Between groups 151006.49 3 75503.246 46.030 0.000
Within groups 644639.51 392 1640.304
Total 795646.00 395
Between groups 667.742 3 333.736 46.346 0.000
Within groups 2829.964 392 7.201
Total 3497.436 395
Table 15. Test the Homogeneity of variances.
Parameter Levene statistic df 1 df 2 Significance
FINANCIAL Q 1.965 3 392 0.201
ROA 2.104 3 392 0.067
RET 1.928 3 392 0.086
Names of variable Parameter Sum of squares df Mean square F Significance
FINANCIAL Q
ROA
RET
making a difference in firm performance.
The test of sixth hypothesis
Between groups 1.70668E+19 3 5.689E+18 18.068 0.000
Within groups 1.23423E+20 392 3.149E+17
Total 1.40490E+20 395
Between groups 24.991 3 8.330 0.940 0.000
Within groups 3472.445 392 8.858
Total 3497.436 395
Between groups 20313.687 3 6771.229 3.423 0.000
Within groups 775332.32 392 1977.889
Total 795646.00 395
To test this hypothesis, homogeneous variance test and
ANOVA test was used. As shown in Table 15,
Significance>0.05. Thus, results showed that the
variance between groups is homogeneous.
As shown in Table 16, Significance=0.000

Conclusion
This paper provides an empirical examination of the
agency theory which gives an explanation of the firm
performance in Tehran Stock Exchange. To reach this
objective, we have used a sample of 66 firms listed at
Tehran Stock Exchange from 2004 to 2009 between
institutional ownership and dividend per share. The key
results are as follows:
First, board size exhibits a significant positive
association with firm performance (using ROA, RET and
FINANCIAL Q). Second, we find a positive and significant
association between firm performance and the percentage
of non-executives in the board using ROA, RET
and FINANCIAL Q). The results of the test of hypothesis
have shown that there are significant differences between
board size and board composition in companies of
different sizes. The difference in the board size and the
firm size is making a difference in the firm performance.
So the regression results show that there is a significant
relationship between board size and board composition
and FINANCIAL Q and ROA. However, there is no
significant relationship between board size and board
composition and stock returns. Also the impact of the
board size on firm performance is more than the impact
of the board composition.
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APPENDIX
Table 1. Model summary c
Model R R square Adjusted R square Standard error of the estimate Durbin-Watson
1 0.388 a 0.150 0.148 550453028.8
2 o.390 b 0.152 0.148 550506383.4 2.083
a. Predictors: (Constant), BRDSIZE; b. Predictors: (Constant), BRDSIZE, NED; c Dependent Variable: Financial Q.
Table 2. ANOVA c .
No Model
Sum of Squares df Mean Square F Sig.
Regression 2.11E+19 1 2.11E+19 69.666 0.000
1
a
Residual 1.19E+20 394 3.030E+17
Total 1.40 + 20 395
2
Regression 2.14E+19 2 1.069E+19 35.288 0.000 b
Residual 1.19E+20 393 3.031E+17
Total 1.40+20 295
a. Predictors: (constant), BRDSIZE; b. Predictors: (constant), BRDSIZE, NED; C. Dependent variable: Financial Q.
Table 3. Coefficients a
Model
1.
2.
Unstandardized
coefficient
Standardized
coefficient t Sig. Collinearity statistics
B Standard error Beta Tolerance VIF
(Constant) -2697111283.35 3.50E +08 -7.711 0.000
BRDSIZE 569380738.287 68217015 0.388 8.347 0.000 1.000 1.000
NED
(Constant) -2619459568.89 3.59E+08 -7.296 0.000
BRDSIZE 536740280.561 76209929 0.365 7.043 0.000 0.801 1.248
NED 141774780.575 1.48E+08 0.050 0.961 0.000 0.801 1.248
a. Dependent variable: Financial Q.
Table 4. Residual statistics a .
Parameter Minimum Maximum Mean Standard deviation N
Predicted value 64241832 1.28E+09 2.13E+08 232697839.8 396
Residual -1.26E +09 4.02E +09 0.0000 549110927.7 396
Std. predicted value -0.640 4.583 0.000 1.000 396
Std. Residual -2.294 7.309 0.000 0.997 396
a. Dependent variable:financial Q.

Table 5. Model summary b
Mousavi et al. 9003
Model R R square Adjusted R square Standard error of the estimate Durbin-Watson
1 0.406 a 0.165 0.163 41.060 1.778
a. Predictors: (constant), BRDSIZE; b. Dependent variable: RET.
Table 6. ANOVA b .
Model Sum of square Df Mean square F Significance
1. Regression 131395.99 1 131395.992 77.938 0.000 a
Residual 664250.01 394 1685.914
Total 795646.00 395
a. Predictors: (constant), BRDSIZE; b. Dependent variable: RET.
Table 7. Coefficient.
Model
Unstandardized
coefficient
standardized
coefficient t Sig.
Collinearity statistics
B Standard error Beta Tolerance VIF
1. (Constant) -214.557 26.090 -8.224 0.000
BRDSIZE 44.992 5.089 0.406 8.828 0.000 1.000 1.00
a. Dependent variable: RET.
Table 8. Excluded variables.
Model Beta ln t Significance Partial correlation
Collinearity statistics
Tolerance VIF Minimum tolerance
1 NED -0.012 a -0.237 0.813 0.012 0.801 1.248 0.801
a. Predictors in the Model: (Constant), BRDSIZE; b. Dependent variable: RET
Table 9. Residuals statistics a
Parameter Minimum Maximum Mean Standard deviation N
Predicted value 10.06 99.90 15.05 18.239 396
Residual -106.32 142.35 0.00 41.008 396
Std. predicted value -0.274 4.652 0.000 1.000 396
Std. residual -2.589 3.467 0.000 0.999 396
a. Dependent variable: RET
Table 10. Model summary c
Model R R square Adjusted R Square Standard error of the estimate Durbin-Watson
1 .0.370 a 0.137 0.135 2.76785
2 0.372 b 0.139 0.134 2.76865 1.994
a. Predictors: (constant), BRDSIZE; b. Predictors: (constant), BRDSIZE, NED; c. Dependable variable: ROA.

9004 Afr. J. Bus. Manage.
Table 11. ANOVA c .
Model Sum of square df Mean square F Significance
Regression 479.015 1 479.015 62.527 0.000
1.
a
Residual 3018.421 394 7.661
Total 3497.436 395
2.
Table 12. Coefficient.
Model
Regression 484.925 2 242.462 31.631 0.000 b
Residual 3012.511 393 7.665
Total 3497.436 395
a. Predictors: (constant), BRDSIZE; b. Predictors: (constant), BRDSIZE, NED; c. Dependable
variable: ROA
Unstandardized
coefficient
Standardized
coefficient t Sig.
Collinearity statistics
B Standard. error Beta Tolerance VIF
1 (Constant) -13.392 1.759 -7.615 0.000
BRDSIZE 2.712 0.343 0.370 7.907 0.000 1.000 1.000
NED
2 (Constant) -2619459568.89 3.59E+08 -7.219 0.000
BRDSIZE 536740280.561 76209929 0.365 6.685 0.000 0.801 1.248
NED 141774780.575 1.48E+08 0.050 0.878 0.028 0.801 1.248
a. Dependable variable: ROA.
Table 13. Residuals statistics a
Parameter Minimum Maximum Mean Standard deviation N
Predicted value -0.2231 5.5531 0.4717 1.10800 396
Residual -5.5531 41.5204 0.00 2.76163 396
Std. predicted value -0.627 4.586 0.000 1.000 396
Std. Residual -2.006 14 .997 0.000 0.997 396
a. Dependable variable: ROA.

African Journal of Business Management Vol.6 (31), pp. 9005-9014, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2413
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Earnings management behavior of the initial public
offering (IPO) firms during pre-IPO, IPO and post-IPO
years: Evidence from the Casablanca Stock Exchange
Omar Farooq 1 * and Meryem Benali 2
1 Department of Business and Management, Aalborg University, Aalborg, Denmark.
2 School of Business Administration, Al Akhawayn University, P. O. Box 104, Avenue Hassan II, Ifrane 53000, Morocco.
Accepted 8 November, 2011
This paper examines the pattern of earnings management around the initial public offering (IPO) year in
Morocco during the period between 2001 and 2007. Our results show that earnings management
reaches its maximum level during the year of an IPO followed by earnings management during the pre-
IPO years and the post-IPO years. We argue that the need for achieving the reputation as a profitable
firm induces management to managing earnings during the pre-IPO years. This need to manage
earnings is more emphatic during the year of an IPO because announcing earnings that are lesser than
the previous years would hurt the reputation of a firm in the eyes of potential investors/shareholder and
would reduce the offering proceeds. However, as firm enter the post-IPO years, lower requirements of
raising capital in immediate future along with greater scrutiny from stock market participant’s result in
lower incentives to manage earnings.
Key words: Earnings management, initial public offering, corporate governance, information disclosure,
emerging markets.
INTRODUCTION
Do firms disclose their information properly when they are
going for an IPO? Are incentives created to manipulate
different information during different stages of a firms’
life? Answers to these questions are very important and
have formed the basis for a vast amount of literature.
Extensive amount of prior literature documents with
varying degrees of earnings manipulation during the
three stages of a firms’ life, namely the pre-IPO, the IPO,
and the post-IPO years. Aharony et al. (2000), for
example, documents significant presence of earnings
management during the pre-IPO years. While, Teoh et al.
(1998) document that the U.S. firms significantly manage
their earnings during the IPO year. Similar behaviour of
earnings management is documented during the post-
IPO years (Kothari, 2001; Dechow and Schrand, 2004).
An important result that emerges from this stream of
*Corresponding author. E-mail: omar.farooq.awan@gmail.com.
Tel: +45 6134 1113.
literature is that the extent of earnings manipulation
during different stages of firms’ life depends on the extent
of incentives faced by management for manipulating
earnings.
This paper aims to document earnings management
behavior of firms that went for an IPO in Morocco during
the period between 2001 and 2007. Morocco is an
interesting case to study earnings management behavior
for a number of reasons. The Casablanca Stock
Exchange, the main stock exchange of the country, is
one of the fastest growing stock exchanges in the Middle
East and North Africa (MENA) region. Many observers
argue that one of the major causes for the growth is the
increased IPO activity in the Casablanca Stock
Exchange. Introduction of Maroc Telecom at the end of
2004 is considered by many as the single most important
triggering event that brought significant number of
investors to the market. Increased investor interest in the
market should result in more vigilant monitoring by
regulatory authorities. However, this was not the case in
Morocco. Belkahia (2005), for example, documents show

9006 Afr. J. Bus. Manage.
that Moroccan firms do not disclose information properly.
In another related study, Farooq and El Ouaabani (2008)
argue that lack of independence contributes to
ineffectiveness of the CDVM, the capital market regulator
in Morocco. In the absence of proper monitoring and
governance mechanisms, it is tempting for the firms,
especially those that plan to go public, to manipulate their
accounting statements. Criado-Jiménez et al. (2008), for
example, documents that the IPO firms attempt to hide
unfavorable information. Overstating their earnings may
allow them to raise excessive proceeds from the IPOs. In
this paper, we aim to investigate whether the firms going
for an IPO engage in earnings management or not in
Morocco. Any evidence of earnings management during
the year of an IPO should be taken as an indication that
the firms do not disclose their information properly. As a
result, investors may be buying the stocks that are
already overvalued.
Using the data on discretionary accruals and absolute
discretionary accruals, proxies for earnings management,
we show that earnings management reaches its highest
level during the IPO year, followed by slightly lower
earnings management during the pre-IPO years. Our
results are consistent with previous literature that
considers management’s desire to build firm’s reputation
as a profitable firm as one of the main reasons behind
gradual increase in earnings manipulation (DuCharme et
al., 2001). Better reputation helps firms to increase
offering proceeds. Larger offering proceeds enhance the
amount of fund available for investing and increase the
capital resources of firms. Our results also show
considerably lower earnings management during the
post-IPO years. We argue that there is a lesser need on
the part of management to engage in earnings
manipulation during the post-IPO years relative to the
pre-IPO and the IPO years (Aharony et al., 2000;
Mikkelson et al., 1997). In addition, greater scrutiny by
stock market agents also lowers the means available to
management to engage in earnings manipulation during
the post-IPO years. Our results have implications for
investors and regulatory authorities operating in Morocco.
We discovered that firms going for an IPO do not disclose
proper information to the investors, thus inducing
investors to make a trade on faulty information. We
recommend that regulatory authorities should be more
vigilant in monitoring the firms and investors should
scrutinize the information provided by firms more
rigorously.
MOTIVATION AND BACKGROUND
Prior literature characterizes emerging markets with weak
corporate governance mechanisms – both at the firmlevel
and at the country-level. Claessens and Fan (2002),
for example, document laxness of firm-level governance
mechanisms by identifying the presence of pyramids and
cross-shareholdings in firms headquartered in the
emerging markets. On a similar note, Pistor and Xu
(2003) highlight ineptness of country-level governance
mechanisms by documenting failure of enforcement
mechanisms in the emerging markets. Prior literature
suggests that presence of family control, weak enforcement
of investor protection laws, lax implementation of
anti-director rights and ineffectiveness of regulatory
authorities have contributed to relative poor governance
mechanisms in emerging markets.
This paper argues that ineffective governance
mechanisms have resulted in lower levels of information
disclosure in the emerging markets. Leuz et al. (2003),
for example, analyzed disclosure quality of publicly
traded firms in emerging markets and discovered that
managers and insiders do not disclose true information
about their firms. This paper argues that ineffective
governance mechanisms not only affect disclosure
quality of publicly traded firms but also induce private
firms to evade effective disclosure of their value. This
paper hypothesize that firms considering having an IPO
also disclose faulty information, usually overly optimistic
information, regarding their value. The reason for this is
to induce potential investors to buy their stocks in the
IPO. The premise that firms manipulate accounting
information to influence decision of potential shareholders
is central to a large body of literature in accounting and
finance. Teoh et al. (1998) and Roosenboom et al.
(2003), for example, document significant earnings
management by IPO firms.
This paper acknowledges the presence of earnings
management practices by firms considering having an
IPO, but argues that presence of different incentives
during the life cycle of a firm allows for different levels of
earnings manipulation. For example, we argue that
during the pre-IPO years, firms have the incentive to build
a reputation as a profitable entity. In order to do so,
managers are tempted to overstate accounting
information. Aharony et al. (2000) document that
accounts receivables of IPOs firms are abnormally high
during the pre-IPO years. We argue that overstatement of
accounting information is done with a hope to attract
potential investors and establish a base for the sales of
shares during the IPO. DuCharme et al. (2001) document
that higher pre-IPO discretionary accruals increase firm’s
initial value and its IPO proceeds. In addition, it is intuitive
to argue that it is relatively hard to estimate fundamental
value of private firms. Given that there are no shares
available for trade, the interest of stock market
participants in finding new information is minimal in these
firms. As a result, most investors have to rely on the
information disclosed in the financial statements to
estimate fundamental value of private firms. We argue
that, managers of those firms that are considering
acquisition an IPO are aware of this fact. Therefore, they
are tempted to overstate their accounting performance.
An important implication of the above stream of

Table 1. Descriptive statistics for IPOs.
Year No. of IPOs
2001 1
2002 0
2003 0
2004 1
2005 2
2006 10
2007 8
This table documents frequency of IPO activity
in the Casablanca Stock Exchange during our
sample period. Our sample period comprise of
the period between 2001 and 2007.
literature is that firms do engage in earnings manipulation
during the pre-IPO years, but this earnings manipulation
is not as much during the pre-IPO years as it is during the
IPO year. The reason for this is simple: Lesser earnings
than the previous years would hurt the reputation of a
firm in the eyes of potential investors/shareholder. As a
result, the incentive to overstate accounting information/
earnings is the most during the year of an IPO. Extensive
amount of literature documents firms manage their
earnings upwards at the time of IPOs. Teoh et al. (1998),
for example, document that the U.S. firms significantly
manage their earnings during the year of an IPO. They
show that firms generally use accruals to improve their
financial statements during the IPO year. Similar results
are reported by Roosenboom et al. (2003) for the Dutch
firms. This strand of literature suggests that the desire of
management to increase offering proceeds may be at the
heart of such an opportunistic behaviour. Increase in
offering proceeds not only enhances the amount of fund
available for investing but also increase the capital
resources of firms. In addition, this strand of literature
also argues that managers are under a considerable
pressure to reach the forecasts made in the period of
introduction in order to avoid the legal lawsuits by
discontented investors (Teoh et al., 1998; Roosenboom
et al., 2003). Therefore, managers may be induced to
manage earnings upward during the IPO year.
H1: Firms manage their earnings more during the IPO
year in comparison to the pre-IPO years.
This paper argues that there is less need on the part of
management to engage in earnings manipulation during
the post-IPO years relative to the pre-IPO and the IPO
years. Our arguments are consistent with Aharony et al.
(2000) who document that account receivables are lower
during the post-IPO years for the Chinese B-share firms
in comparison to account receivables during the pre-IPO
years. Ibbotson (1975) and Mikkelson et al. (1997) argue
that the post-IPO earnings declines are bound to happen
because of increased earnings management behavior
Farooq and Benali 9007
during the pre-IPO and the IPO years. This strand of
literature argues that “if firms seek to boost earnings
before selling stock, initial financial statements of the
recently public firm will contain unusually high positive
accruals… In this scenario high earnings cannot be
sustained, so earnings in the post-IPO years decline”
(Kothari, 2001; Dechow and Schrand, 2004; Ball and
Shivakumar, 2008). Therefore, we may expect firms to
have lower possibility of managing earnings in the years
immediately after the IPO year. In addition to the above
arguments, we believe that there is less need for raising
capital in immediate future after the IPO may also cause
lower earnings management during the post-IPO years.
This lesser need for immediate funds may induce
managers to put less effort on manipulating earnings.
Furthermore, one can argue that greater scrutiny by stock
market agents, such as financial analysts and investors,
also results in better disclosure and lower earnings
manipulation during the post-IPO years.
H2: Firms manage their earnings the least during the
post-IPO years in comparison to the pre-IPO years and
the IOP year.
DATA
For the purpose of examining earnings management behavior of
IPO firms, we identify all non-financial firms traded at the
Casablanca Stock Exchange during the period between 2001 and
2007. Our sample consists of 41 non-financial firms. We classify the
firms as those that went for IPO during the sample period and the
firms that went for IPO before that. This classification will also allow
us to compare earnings management behavior of IPO firms with
more established firms, that is firms which were listed before 2001.
IPO data
Our sample contains 22 non-financial firms that went for IPO at the
Casablanca Stock Exchange during the period between 2001 and
2007. Table 1 documents the frequency of IPO activity during each
year. Our results show high IPOs activity during the last two years
of our analysis period, that is, 10 IPOs in 2006 and 8 IPOs in 2007.
Our results show no IPO during 2002 and 2003.
Choice of earnings management variable
Prior studies use total accruals to detect earnings management.
Healy (1985), for example, uses total accruals as a measure of
earnings management, while De Angelo (1986) uses total accruals
of the previous period as a proxy for the next period’s earnings
management. Both Healy (1985) and De Angelo (1986) assume
that changes in non-discretionary accruals are equal to zero
between periods. Empirical tests prove that this assumption is far
from reality (Kaplan, 1985). Further studies, therefore, developed
models that distinguished between discretionary and nondiscretionary
component of accruals. Jones (1991) uses an
estimate of the discretionary component of total accruals as a
measure of earnings management. One of the limitations of Jones
model is the assumption that earnings are non-discretionary. The
modified Jones model was built to overcome this limitation. This

9008 Afr. J. Bus. Manage.
Table 2. Descriptive statistics of variables used to estimate discretionary accruals.
Pre-IPO IPO Post-IPO Post-IPO (Pre-2001)
CA t /A t-1 1.090 1.137 0.747 0.581
CL t /A t-1 0.683 0.581 0.520 0.350
Cash t /A t-1 0.198 0.153 0.059 0.047
STD t /A t-1 0.156 0.159 0.110 0.073
Dep t /A t-1 0.044 0.034 0.034 0.057
Rev t /A t-1 1.422 1.251 0.813 0.843
Rec t /A t-1 0.560 0.470 0.382 0.182
PPE t /A t-1 0.197 0.139 0.134 0.369
This table documents descriptive statistics (mean) of the variables in the modified Jones model for firms that
went for IPOs in the Casablanca Stock Exchange during the period between 2001 and 2007. The table also
reports similar statistics for firms that went for IPO before 2001. Definition of each variable is provided:
CA t /A t-1 = Current assets at year (t) divided by total assets of pervious year (t-1).
CL t /A t-1 = Current liabilities at year (t) divided by total assets of pervious year (t-1)
Cash t /A t-1 = Cash flows at year (t) divided by total assets of pervious year (t-1).
STD t /A t-1 = Short term debt at year (t) divided by total assets of pervious year (t-1).
Dep t /A t-1 = Depreciation at year (t) divided by total assets of pervious year (t-1).
Rev t /A t-1 = Total Revenues at year (t) divided by total assets of pervious year (t-1).
Rec t /A t-1 = Short term receivables at year (t) divided by total assets of pervious year (t-1).
PPE t /A t-1 = Property, plant and equipment at year (t) divided by total assets of pervious year (t-1).
paper uses the modified Jones model to come up with a proxy for
earnings management. See Appendix-A for the detailed
methodology to calculate earnings management variable.
The accounting data used in the modified Jones model is
retrieved from firms’ yearly financial statements. Firms’ yearly
financial statements are available on the Casablanca Stock
Exchange’s and the CDVM’s website. The accounting variables
used are: Current assets, current liabilities, short term debt, cash,
revenue, receivables, total assets, property plant and equipments
and depreciation. Table 2 documents the descriptive statistics for
each of these variables during the pre-IPO, IPO, and the post-IPO
years for our sample firms. The results show that the descriptive
statistics for the variables used to compute earnings management
are approximately the same magnitude during the pre-IPO and the
IPO year. However, they decrease sharply during the post-IPO
years due to or probably as a result of an increase in total assets of
the firm.
Table 3, Panel A and Panel B, document the descriptive statistics
of discretionary accruals and absolute discretionary accruals – our
proxies for earnings management – for our sample firms during the
pre-IPO, IPO, and the post-IPO years. Our results show that mean
and median earnings management are highest during the year of
an IPO followed by pre-IPO years and the post- IPO years. For
example, our results in Table 3, Panel A, show that mean
discretionary accruals in the year of an IPO are 0.449 followed by
the pre-IPO mean discretionary accruals of 0.321 and the post-IPO
mean discretionary accruals of 0.170. Similar results are observed
for median discretionary accruals. Our results indicate that
increased earnings management during the year of an IPO may be
as a result of firms’ desire to increase their offering proceeds.
Consistent with our expectations, our results also suggest that firms
manage their earnings more during the pre-IPO years relative to the
post-IPO years, probably to develop their reputation as profitable
firm during the pre-IPO years. The results for median discretionary
accruals are qualitatively the same as the results for mean
discretionary accruals. In addition, we also show that firms which
went for an IPO prior to 2001 have the least earnings management.
For example, our results in Table 3, Panel B, shows mean absolute
discretionary accruals of 0.164 for firms which went for an IPO prior
to 2001. These results indicate that firms which have been listed for
a long period are less prone to manage earnings. It may be
because older firms are more visible and thus attract more investors
and analyst attention. More visibility diminishes the chances of any
unscrupulous behavior by the management.
Procedure
The following section documents earning management behavior of
IPO firms during the pre-IPO, IPO, and the post-IPO years. For the
purpose of this paper, we will use two proxies for earnings
management: (1) Discretionary accruals and (2) Absolute
discretionary accruals. It is important to mention here that every firm
has its own motivation to either manage its earnings upward or
downward. For instance, firms seeking external funds tend to
manage their earnings upward, while firms seeking tax reduction or
government protection manage their earnings downward (Chao et
al., 2004). Opposing directions of earnings management may result
in canceling the effect of each other and therefore, may show zero
average earnings management in the sample (Krishnan, 2003). To
overcome this limitation, we use absolute values of discretionary
accruals along with discretionary accruals as a proxy for earnings
management.
RESULTS
Univariate analysis
Here, we document the difference between mean and

Table 3. Descriptive statistics for earnings management.
Panel A. Discretionary accruals
Mean Standard deviation Median No. of observations
Pre-IPO 0.321 0.616 0.236 53
IPO 0.449 0.528 0.365 22
Post-IPO 0.170 0.281 0.116 29
Post-IPO (Pre-2001) 0.039 0.269 0.017 121
Panel B. Absolute discretionary accruals
Mean Standard deviation Median No. of observations
Pre-IPO 0.474 0.505 0.276 53
IPO 0.495 0.482 0.365 22
Post-IPO 0.210 0.252 0.135 29
Post-IPO (Pre-2001) 0.164 0.216 0.089 121
Farooq and Benali 9009
The table documents descriptive statistics for earnings management in our sample. We document descriptive
statistics for earnings management during the pre-IPO, IPO, and the post-IPO years for firms that had IPOs during
the period between 2001 and 2007. The sample consists of non-financial firms listed at the Casablanca Stock
Exchange. The table also reports similar statistics for firms that went for IPO before 2001. We measure earnings
management by discretionary accruals and absolute discretionary accruals. Panel A documents statistics for
discretionary accruals, while Panel B documents similar statistics for absolute discretionary accruals.
median earnings management for our sample firms
during the pre-IPO, IPO, and the post-IPO years. Table 4
uses t-test to test the null hypothesis of no difference in
mean earnings management during the pre-IPO, IPO and
the post-IPO years. Evidence from Table 4, Panel A,
shows a significant difference in mean discretionary
accruals between the IPO and the post-IPO years. For
example, we show that discretionary accruals in the year
of an IPO are 0.278 basis points more than discretionary
accruals in the post-IPO years. Similar results are
reported for absolute discretionary accruals. For instance,
our results in Table 4, Panel B, document a significant
difference of 0.285 basis points between absolute
discretionary accruals in the year of an IPO and absolute
discretionary accruals in the post-IPO years. Table 4,
Panel B, also shows a significant difference of 0.264
basis points between absolute discretionary accruals in
the pre-IPO years and absolute discretionary accruals in
the post-IPO years. These results are consistent with our
hypothesis of highest earnings management in the year
of an IPO followed by earnings management in the pre-
IPO and the post-IPO years. As was expected, the
results in Table 4 also show the least earnings
management – both discretionary accruals and absolute
discretionary accruals – for firms that went for an IPO
prior to 2001. We argue that older firms have more
visibility and thus are less prone to earnings manipulation
by management.
Table 5 uses Mann-Whitney test to test the null
hypothesis of no difference in median earnings management
during the pre-IPO, IPO, and the post-IPO years.
Evidence from Table 5 confirm our previous findings that
earnings management during the year of an IPO and the
pre-IPO year earnings management is larger than
earnings management in the post-IPO years. For
example, our results in Table 5, Panel A, show that
discretionary accruals in the year of an IPO are 0.249
basis points more than discretionary accruals in the post-
IPO years, and discretionary accruals in the pre-IPO
years are 0.120 basis points more than discretionary
accruals in the post-IPO years. Our results for absolute
discretionary accruals are qualitatively the same. For
example, our results in Table 5, Panel B, show a
significant difference of 0.230 basis points between
absolute discretionary accruals in the year of an IPO and
absolute discretionary accruals in the post-IPO years.
These results are consistent with our arguments
regarding the highest level of earnings management in
the year of an IPO followed by earnings management in
the pre-IPO and the post-IPO years. In addition, as was
the case before, we also show the least earnings
management for firms that went for an IPO prior to 2001.
Multivariate analysis
We hypothesized earlier that firms manage their earnings
the most in the IPO year followed by the pre-IPO and the
post-IPO years. In order to test this hypothesis, we
estimate a regression with earnings management (EM)
as a dependent variable and three dummy variables
representing earnings management in the pre-IPO
(PREDUM), IPO (IPODUM), and the post-IPO
(POSTDUM) years as independent variable. It is
important to mention here that there will be no perfect
multocollinearity among dummy variables due to the

9010 Afr. J. Bus. Manage.
Table 4. Univariate analyses (parametric tests) for differences in mean earnings management: t-test.
Panel A: Difference in mean discretionary accruals: t-test
Pre-IPO IPO Post-IPO Post-IPO (Pre-2001)
Pre-IPO 0.000 (1.000)
IPO -0.128 (0.397) 0.000 (1.000)
Post-IPO 0.150 (0.216) 0.278 (0.018) 0.000 (1.000)
Post-IPO (Pre-2001) 0.281 (0.000) 0.409 (0.000) 0.130 (0.010) 0.000 (1.000)
Panel B: Difference in mean absolute discretionary accruals: t-test
Pre-IPO IPO Post-IPO Post-IPO (Pre-2001)
Pre-IPO 0.000 (1.000)
IPO -0.021 (0.867) 0.000 (1.000)
Post-IPO 0.264 (0.010) 0.285 (0.008) 0.000 (1.000)
Post-IPO (Pre-2001) 0.309 (0.000) 0.331 (0.000) 0.045 (0.164) 0.000 (1.000)
The table documents difference in mean earnings management for our sample. We document difference in mean
earnings management between the pre-IPO, IPO, and the post-IPO years. The sample consists of non-financial firms
that went for an IPO at the Casablanca Stock Exchange during the period between 2001 and 2007. We measure
earnings management by discretionary accruals and absolute discretionary accruals. Panel A documents statistics
for discretionary accruals, while Panel B documents similar statistics for absolute discretionary accruals. We use ttest
to test the hypothesis of no difference in earnings management between different classifications of our sample.
The p-values are given in the parenthesis. Coefficients that are significant at 10% are shown in bold.
Table 5. Univariate analyses (non-parametric tests) for earnings management: Mann-Whitney test.
Panel A. Difference in median discretionary accruals: Mann-Whitney test
Pre-IPO IPO Post-IPO Post-IPO (Pre-2001)
Pre-IPO 0.000 (1.000)
IPO -0.129 (0.625) 0.000 (1.000)
Post-IPO 0.120 (0.051) 0.249 (0.038) 0.000 (1.000)
Post-IPO (Pre-2001) 0.219 (0.000) 0.348 (0.000) 0.099 (0.007) 0.000 (1.000)
Panel B. Difference in median absolute discretionary accruals: Mann-Whitney test
Pre-IPO IPO Post-IPO Post-IPO (Pre-2001)
Pre-IPO 0.000 (1.000)
IPO -0.089 (0.568) 0.000 (1.000)
Post-IPO 0.141 (0.012) 0.230 (0.004) 0.000 (1.000)
Post-IPO (Pre-2001) 0.187 (0.000) 0.276 (0.000) 0.046 (0.289) 0.000 (1.000)
The table documents difference in median of earnings management for our sample. We document difference in
median earnings management between the pre-IPO, IPO, and the post-IPO years. The sample consists of nonfinancial
firms that went for an IPO at the Casablanca Stock Exchange during the period between 2001 and 2007.
We measure earnings management by discretionary accruals and absolute discretionary accruals. Panel A
documents statistics for discretionary accruals, while Panel B documents similar statistics for absolute discretionary
accruals. We use Mann-Whitney test to test the hypothesis of no difference in earnings management between
different classifications of our sample. The p-values are given in the parenthesis. Coefficients that are significant at
10% are shown in bold.
presence of firms that went for IPO prior to 2001. We also
include industry dummies (IDUM) and year dummies
(YDUM) in our regression equation. For the purpose of
completeness, we will report our results with and without
industry and year dummies. Our basic regression
equation takes the following form:
EM = α
+
∑
Yr
β
Yr
+ β ( PREDUM ) + β2
( IPODUM ) + β 3(
POSTDUM )
Ind
( YDUM ) + ∑ β ( IDUM ) + ε
1 (1)
Ind
There may be concerns that results obtained from above
regression analysis may be driven by some firm-specific

Farooq and Benali 9011
Table 6. Regression analysis for earnings management (discretionary accruals) and the pre-IPO, IPO, and the post-
IPO years.
Panel A. Regression coefficients – Discretionary accruals
Equation (1) Equation (2)
Pre-IPO 0.281*** 0.278*** 0.216*** 0.207***
IPO 0.409*** 0.332*** 0.352* 0.234*
Post-IPO 0.130 0.092 0.104 -0.002
Size -0.071 -0.024
Debt 0.007 0.011
Sales -0.059*** -0.165***
Growth -0.083** -0.088**
Industry Dummies No Yes No Yes
Year Dummies No Yes No Yes
No. of observations 225 225 222 222
R² 0.157 0.169 0.479 0.385
Adjusted-R² 0.146 0.114 0.463 0.331
F-value 9.13 3.970 45.34 7.490
Significance of F-value 0.000 0.000 0.000 0.000
Panel B. Difference between coefficients – Discretionary accruals
Equation (1) Equation (2)
IPO Vs. Pre-IPO 0.128 (0.863) 0.054 (0.697) 0.136 (0.515) 0.027 (0.835)
IPO Vs. Post-IPO 0.279 (0.010) 0.24 (0.056) 0.248 (0.051) 0.236(0.095)
Pre-IPO Vs. Post-IPO 0.151 (0.001) 0.186 (0.065) 0.112 (0.038) 0.205 (0.021)
The table documents OLS regression coefficients for Equations (1) and (2). The sample consists of non-financial firms that
went for an IPO at the Casablanca Stock Exchange during the period between 2001 and 2007. We measure earnings
management by discretionary accruals. Panel A documents OLS regression coefficients. Variables significant at 10% are
followed by *, variable significant at 5% by **, and variable significant at 1% by ***. Panel B documents difference between
regression coefficients. The p-values are given in the parenthesis. Coefficients that are significant at 10% are shown in bold.
characteristics. In order to address these concerns, we
modified Equation (1) by adding number of variables
representing different aspects of firm-specific
characteristics. For example, firm’s size can be
considered as a proxy for visibility of a firm. Smaller firms
have less visibility to analysts, investors, and regulating
authorities and thus have more opportunities to manage
their earnings. Kim et al. (2003) show that smaller firms
manage their earnings more than large firms. Therefore,
we add log of market value (SIZE) to capture the effect of
higher visibility on earnings management. In addition, we
also controlled for the effect that growth opportunities
may have on earnings management by adding growth in
firm’s total assets (GROWTH). Prior literature suggests
that managers of firms with growth opportunities tend to
have more discretion in terms of accounting choices
(Smith and Watts, 1992). Therefore, they may be
tempted to manage earnings (Skinner and Sloan, 2002).
Consistent with prior literature, we also controlled for
revenues and leverage of a firm (Magrath and Weld,
2002; Sercu et al., 2006). Sales revenues (REVENUE)
and total debt (LEVERAGE) were added in our
regression equation for this purpose. Our regression
takes the following form after addition of control variables:
= α + β1(
PREDUM ) + β2
( IPODUM ) + β 3 ( POSTDUM )
β 4 ( SIZE)
+ β5
( GROWTH ) + β 6 ( REVENUE)
+ β7
( LEVERAGE)
Yr
Ind
∑ β ( YDUM ) + ∑ β ( IDUM ) + ε
EM
+
+
Yr
Ind
The results of above equations are presented in Tables 6
and 7. Table 6 documents regression coefficients for
discretionary accruals and Table 7 documents similar
results for absolute discretionary accruals. Our results in
Table 6, Panel A, show that earnings management was
the highest in the IPO year followed by the earnings
management in the pre-IPO and the post-IPO years. For
example, our result from Equation (2), the most
comprehensive equation, shows that earnings management
in the IPO year is 0.234 basis points more than
earnings management in other years. Our results from
(2)

9012 Afr. J. Bus. Manage.
Table 7. Regression analysis for earnings management (absolute discretionary accruals) and the pre-IPO, IPO, and
the post-IPO years.
Panel A. Regression coefficients – Absolute discretionary accruals
Equation (1) Equation (2)
Pre-IPO 0.309*** 0.247*** 0.162** -0.132**
IPO 0.331** 0.261** 0.231* 0.189*
Post-IPO 0.045 -0.003 0.014 -0.024
Size -0.073** -0.046**
Debt 0.008** 0.011**
Sales -0.045** -0.100**
Growth 0.088*** 0.085***
Industry Dummies No Yes No Yes
Year Dummies No Yes No Yes
No. of observations 225 225 222 222
R² 0.227 0.227 0.512 0.512
Adjusted-R² 0.176 0.176 0.469 0.469
F-value 4.020 4.020 23.540 23.540
Significance of F-value 0.000 0.000 0.000 0.000
Panel B. Difference between coefficients – Absolute discretionary accruals
Equation (1) Equation (2)
IPO Vs. Pre-IPO 0.022 (0.863) 0.014 (0.907) 0.069 (0.515) 0.321 (0.583)
IPO Vs. Post-IPO 0.286 (0.010) 0.264 (0.021) 0.217 (0.051) 0.213 (0.060)
Pre-IPO Vs. Post-IPO 0.264 (0.002) 0.25 (0.002) 0.148 (0.038) -0.108 (0.040)
The table documents OLS regression coefficients for Equations (1) and (2). The sample consists of non-financial firms that
went for an IPO at the Casablanca Stock Exchange during the period between 2001 and 2007. We measure earnings
management by absolute discretionary accruals. Panel A documents OLS regression coefficients. Variables significant at
10% are followed by *, variable significant at 5% by **, and variable significant at 1% by ***. Panel B documents difference
between regression coefficients. The p-values are given in the parenthesis. Coefficients that are significant at 10% are
shown in bold.
the estimation of above regression equations also show
that the coefficient of IPODUM is the highest followed by
the coefficient of PREDUM and POSTDUM. It indicates
that extent of earnings management was the highest in
the IPO year followed by the earnings management in the
pre-IPO and the post-IPO years. Our results in Table 6,
Panel B, compliment our previous findings by showing a
significant difference between the coefficient of IPODUM
and POST DUM and the coefficients of PREDUM AND
POSTDUM.
The results reported in Table 7 are qualitatively the
same as results reported in Table 6. Our results confirm
our previous findings of the highest in the IPO year
followed by the earnings management in the pre-IPO and
the post-IPO years.
Conclusion
This paper examines the earnings management behavior
of Moroccan firms during the pre-IPO, IPO, and the post-
IPO years during the period between 2000 and 2007. Our
results show that Moroccan firms increase their earnings
management considerably during the year of an IPO. We
argue that higher earnings management during the IPO
year is driven by the desire of management to induce
investors to invest in their stocks. Our results also show
that earnings management is higher in the pre-IPO years
relative to the post-IPO years. It also shows the desire of
management to gradually signal investors that they are
profitable. These results are robust even after controlling
for several firm-specific characteristics.
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9014 Afr. J. Bus. Manage.
APPENDIX
Appendix-A: Construction of earnings management variable
We use modified Jones model to compute proxy for earnings management in this paper. The modified Jones calculates
total accruals as follows:
( CCA − CCL − CCash + CSTD − Dep )
t
t
t
t t
TA t =
(A)
A
t −1
Where TAt is total accruals, CCAt is change in current assets at t, CCLt is change in current liabilities, CCasht is change
in cash, CSTDt is change in short-term debt, Dept is depreciation, and At-1 is one period lagged total assets.
According to modified Jones model, the total accruals are comprised of two components: Discretionary and nondiscretionary
component of total accruals. The non-discretionary component or the inherent part of total accruals is not
influenced by any managerial decision. It represents the accruals that are affected by the changing economic conditions
of the firm. The non-discretionary component of accruals is estimated as follows:
=
⎛
⎜
⎝
1
⎞
⎟
⎠
( CREV − CREC ) β ( PPE )
NDAt β 1⎜
β 2
t
t 3
A ⎟ +
+
t−1
t
Where NDAt is non-discretionary accrual at t, CREVt is change in revenues at t, CRECt is change in net receivables at t,
and PPEt is property, plant and equipment (fixed assets at t). The values of β1, β2, and β3 are estimated by regressing
total accruals against the inverse of one period lagged total asset, PPE, and CREV. 1
⎛ 1 ⎞
TAt = β ⎜ + β ( CREVt
) + β ( PPEt
) + ε t
A ⎟
1
2
3
⎝ t−1
⎠
Discretionary accruals are accruals resulting from direct manipulation of estimates by managers. The discretionary
component of accruals (DA) is obtained by subtracting Equation (B) from Equation (A).
DA = TA − NDA
(C)
t
t
t
Discretionary accrual and absolute discretionary accrual are used as a measure of earnings management in this paper.
1 The inverse of one period lagged asset explains the non-discretionary accruals related to firm’s size. Change in revenues and account receivables are used as
explanatory variables because they control for any earning management technique using revenues. While, property, plant and equipment are used to explain the
portion of non-discretionary accruals related to depreciation expense.
(B)
(B’)

African Journal of Business Management Vol. 6(31), pp. 9015-9027, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2501
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Relation between effective organizational and
managerial obstacles and incentives on administrativefinancial
corruption in government organizations in Iran
Hossein Azimi 1 *, Mehdi Ajalli 2 , Sayed Rahim Safavi Mirmahalleh 2 and Abdolhossein Rezvani 3
1 Department of Management, University of Zanjan, Zanjan, Iran.
2 Department of Accounting, Islamic Azad University, Zanjan Branch, Iran.
3 Department of Accounting, Islamic Azad University, Parsabad Mogan Branch, Iran.
Accepted 18 January, 2012
The aim of this research was to define the relationship between effective organization and managerial
obstacles and incentives on administrative-financial corruption in government organizations in Iran.
Correlation method along with metrical approach was applied in this research. Reliability of the verified
questionnaire was confirmed according to the primary study with Cronbach alpha 0.9794 and validity of
the questionnaire was verified through content validity and factorial analysis. The sampling method is
of the judgment sampling type, so questionnaires were distributed among 934 relevant managers and
experts of existent government organizations in Isfahan and Zanjan provinces. Comparisons were done
among fifty sub-category questions of nineteen variables. The results obtained demonstrate that the
studied factors are higher than the total average both in their effectiveness and their preventiveness in
the appearance of corruption in 23 cases. These could be considered as determinant factors in the
appearance and prevention of corruption in government organizations. But in other issues, some cases
are considered as effective factors for only the appearance of corruption and some as preventive
factors against the occurrence of corruption, and some have lower degree of importance in comparison
with other factors in the study.
Key words: Administrative-financial corruption, government organizations, managerial and organizational
obstacles, incentives.
INTRODUCTION
Corruption refers to the dishonest or partial exercise in
official functions by public officials (Independent
Commission Against Corruption, 1998). Transparency
International (2003) defines corruption as the misuse of
public power for private benefit. Misuse involves applying
illegal and unethical standards. Some researchers define
corruption from a behavioral perspective as the abuse of
public power for private benefit (Park, 2003; van
Klaveren, 1989; Heidenheimer, 2002). While few analysts
would dispute the definition of corruption as the abuse of
*Corresponding author. E-mail: dr.hosseinazimi@gmail.com.
Tel: +98-9122584758.
public roles or resources for private benefit, there is little
agreement on the nature and causes of corruption
(Robinson, 2004). Some of the disagreements emanate
from the choice of the analytical module or framework
employed, since corruption can be analyzed through a
range of approaches drawn from different disciplines. In
other word, viewpoints of the clear-sighted are not similar
about administrative-financial corruption and there are
several theories with regard to it (Tsegaye, 2003). One
reason for such multiplicity is the multi-dimensional
observance of corruption subject by each of the
theoreticians in terms of economical, social, cultural,
political, judicial, managerial and psychological issues.
Economics, sociology, social psychology, criminology,
political science, and business ethics have made

9016 Afr. J. Bus. Manage.
important contributions to our understanding of the
phenomenon (Amundsen, 1999; Andving and Fjeldstad,
2001; Williams, 2000). Although, there are various
approaches to the definition of corruption, there is no
universal conceptualization (Andving and Fjeldstad,
2001). Nevertheless, out of the many definitions the
following common dimensions of corruption can be
derived:
1. Exchange: Corruption is based on the inter-action
between at least two partners (Ashforth and Anand,
2003; Heidenheimer, 2002), between a supplier/corrupter
and a recipient/corruptee, the person who induces or
initiates the corrupt exchange and the person who
accepts it (Van Duyne, 2001). It is an exchange of benefit
and reward that occurs voluntarily and takes place by
mutual agreement (Park, 2003).
2. Violation of norms: Corruption is an immoral behavior
(Brasz, 1970; Van Duyne, 2001) that includes; the
deviation from legal norms (Khan, 1996; Nye, 1967) or
from moral values (Brasz, 1970).
3. Abuse of power: Corrupt act or utilizing authority,
position, and/or knowledge entrusted to them for the sake
of their advantage (Ashforth and Anand, 2003;
Huntington, 1989; Khan, 1996; Nye, 1967; Pitt and
Abratt, 1986; Tanzi, 1995; Treisman, 2000; Van Duyne,
2001).
4. Secrecy: Corrupt actors form an intimate, close, and
hidden community in which they secretly agree on the
illegal aims and advantages of their exchange
relationship. Apart from situational constraints, the
possibility of continuing and expanding the corrupt
actions mainly depend on the unimpaired victims’ trust
(Van Duyne, 2001).
The mix up of these aspects leads to the following
definition of corruption: Corruption is any deviant
behavior which manifests itself in an abuse of a function
in politics, society, or economy in favor of another person
or institution. This abuse of a function occurs on one’s
own or the other’s initiative in order to achieve an
advantage for oneself or a third party. As a result, a
damage or disadvantage to politics, society, or economy
is expected or does actually appear. The corrupt actions
are kept secret in mutual, amicable agreement.
Most researchers have studied administrative-financial
corruption subject either in micro factors (especially
individual and psychological factors) or in macro factors
(especially extra-organizational factors including
economical, social, cultural, political factors).
Organizational and managerial factors have been
insignificant and much attention has not been paid to the
extensive and effective dimensions of its sub-categorical
factors. Therefore, the vacuum of management
researches is extremely perceptible in this regard, since
many organizational and managerial factors influence
appearance of administrative-financial corruption.
Some of these factors are:
(a) Factors related to management tasks [such as: (1)
programming, (2) organization, (3) mobilization of
resources and possibilities, (4) leadership and guidance,
and (5) supervision and control].
(b) Organizational factors [such as: (1) structural factors,
2) systems and methods, (3) administrative rules, (4)
organizational culture, (5) psychological factors, (6)
communications, (7) informatics and accountability, (8)
informal groups, (9) supervision and control bed, (10)
offences and rules of corruption, 11) external supervisory
centers of organization, (12) payment system, (13)
transparency, and (14) technology].
Unfortunately, managers of organizations do not have the
necessary scientific tools for recognizing and identifying
damages caused by administrative-financial corruption
and methods of dealing with this phenomenon because
of lack of basic studies about effective managerial and
organizational factors - of administrative-financial
corruption and the amount of effectiveness of each of the
preventive factors in the appearance of administrativefinancial
corruption. They are often faced with such
questions like which of the managerial and organizational
factors are effective against administrative-financial
corruption in government organizations? What solutions
and recommendations could be offered for managers'
awareness and application in order to prevent
administrative-financial corruption or strive against them
in government organizations? Is there a specific
relationship between each of the effective factors on
administrative-financial corruption and the corresponding
strategy with it? Is it possible to apply a factor in the
opposite point as an obstacle and preventive factor by
eliminating or improving it? Some researchers are
unaware of this issue and they reverse these factors after
performing a study when they find out the amount of
effectiveness of factors in the existence of administrativefinancial
corruption. They then will propose them as the
final strategy in recommendations section. This research
paper tries to show the relationship that exists between
obstacles and incentives of administrative-financial
corruption in government organizations with the aim of
recognizing each of the corresponding strategies and the
amount of effectiveness of managerial and organizational
factors. In this regard, the existent government
organizations in Isfahan and Zanjan provinces have been
studied and the results are included in this paper.
LITERATURE REVIEW
According to one of the theories, the act of corruption has
intellectual root like many actions of human beings. It
means that a person commits corruption when the
expected benefits are more than the intended action's,
expenses in his viewpoint. In this regard, administrative-

financial corruption is observed as an offence.
Committing the offence of corruption for the offender has
expenses and benefits, with the danger of offence
detection and punishment, included as probable
expenses in offender's pre-action calculations from the
viewpoint of this theory. Several individuals, organizational
and extra-organizational factors are effective in
supposed and intellectual estimations of the guilty
person. These provide the ground for his committing of
administrative-financial corruption.
There are several researches in this area. For example,
Seldadyo and Haan (2006) studied 70 cases of
performed researches on administrative-financial
corruption.
They considered some managerial and organizational
factors that play effective roles such as level of wages,
incomes' incongruence, difference in power, organizational
structure, control and supervisory factors, too much
bureaucracy, complicated and superfluous regulations,
and employees' level of responsibility in the appearance
of administrative-financial corruption. Also, Fokuoh
(2008) studied a range of published articles between
1967 and 2005, and has shown that whenever
discriminations, gaps and spaces between employees
and managers are increased, administrative-financial
corruption will be increased in the organization too. He
has demonstrated that the most important factor in the
appearance of administrative-financial corruption is
wages and salaries which is totally the economic factor,
because low wage is a factor which persuades the
individual to compensate deficiencies. While the second
factor that gives birth to administrative-financial
corruption is surplus power, too much confidence and
unsuitable control system.
With due attention to researches performed about
effective organizational and managerial factors on
administrative-financial corruption, we can say that each
of the researchers has considered this subject from a
special angle in order to observe specialization of
evidences. So, we have tried to view the studied factors
based on total summation of literature and theoretical
principles and background of performed researches for
comprehensibility of the current research. In this regard,
we can offer various classifications of these researches
for more evaluation of performed studies about research
areas which include:
1. Most of the studies performed in the field of
administrative-financial corruption are executed in the
form of macro and by considering extra-organizational
factors such as political, social, economic and cultural.
Finding roots of this subject in government organizations
has not been done in terms of managerial and
organizational factors in relation to the appearance of
administrative-financial corruption. In other words,
managerial and organizational factors have been
marginal, for example we can mention studies of Brown
(2005), Fokouh (2008) and Mevliyar (2008).
Azimi et al. 9017
2. In some of the researches in which organizational
factors adequately treated, one part of such factors has
been considered and thus, don not posses the essential
comprehensiveness.
For example we can refer to studies of Amunsen
(2000), Yaser (2005), Seldadyo and Haan (2006),
Kimuyu (2007), Scanlan (2008), Alatas and Cameron,yes
(2009) and Seleim (2009).
3. A limited number of studies could be executed suitably
with regards to studying effective organizational and
managerial factors on administrative-financial corruption.
However, a considerable attention has not been paid to
management tasks [such as: (1) weakness in
programming; (2) weakness in organizing; (3) weakness
in mobilization of possibilities and resources; (4)
weakness in leadership and guidance; (5) weakness in
supervision and control] in those researches.
With due regard to the studies performed and study of
results and methods of previous researches, we have
tried in this paper to design the strategic model of
effective organizational and managerial factors affecting
administrative-financial corruption in government
organizations after performing field studies , distributing,
collecting and analyzing questionnaires.
METHODOLOGY
Type and method of study
This research is of a functional and developmental type in which
correlative method with metrical kind has been used.
Statistical population of research
Statistical population of this research consists of chiefs, managers
and all relevant experts of administrative offences' topic in
government organizations in Isfahan and Zanjan provinces.
Because of unknown rate of population and Statistical Population of
Research is unlimited.
Sampling method and number of sample volume
Sampling method of this research is judgment sampling. This is as
a result of the unknown rate of standard deviation in Statistical
Population (S); it should be a Pretest to determine the rate of
standard deviation in Statistical Sampling (s). In this regard a pilot
study was carried out among 40 individuals. Cronbach's alpha
calculation method is used to calculate reliability coefficient of the
questionnaire that is equal to 0.9794. Reliability of the tool is
confirmed with due attention to the point that it is higher than 0.7
and variance or square standard deviation in Statistical Sampling
2
( s ) is achieved equal to 0.5756 (Figure 1).
We have used Kuchran sample volume in order to determine the
sample volume. With fractional error of estimation, d= 0.05 and
assurance level of 95 percent ( z a / 2 =1.96) number of the statistical
samples is achieved equal to 884.

9018 Afr. J. Bus. Manage.
2 2
( za
/ 2 ) . s
n = = 2
d
Tools of data collection
****** Method 2 (covariance matrix) will be used for this analysis ******
R E L I A B I L I T Y A N A L Y S I S - S C A L E (A L P H A)
N of Cases = 40.0
Item Variances Mean Minimum Maximum Range Max/Min Variance
1.1083 0.7154 1.4846 0.7692 2.0753 0 .5756
Reliability Coefficients 50 items
Alpha = 0.9794 Standardized item alpha = 0.9792
Figure 1. Sampling method.
Questionnaire (based on perceived corruption) and historical
sources are two major methods that were used in this research to
collect data. As we discovered, Reliability of the tool is confirmed
with due attention to the point that it is higher than 0.7. Also, validity
of the tool has been confirmed in terms of content and with due
regard to confirmation of professors and relevant experts and use
of theoretical principles and research literature in compiling the
questionnaire. Then it is shown that questions contained in the
questionnaire measure the intended variables of the plan by the
application of factorial analysis test.
Research questions
Research questions are as follows, with due attention to the main
purposes:
1. How much is the effect of each of the related factors (incentives)
to management tasks and organizational factors in appearing of
administrative-financial corruption in government organizations?
2. How much is the effect of each of the related strategies
(obstacles) to management of tasks and organizational factors in
preventing or striving against administrative-financial corruption in
government organizations?
3. Which relation exists between effective managerial and
organizational obstacles and incentives on administrative-financial
corruption in government organizations in Iran?
RESULTS
( 1.
96)
2
(. 05)
* . 5756
= 884
After distributing and collecting questionnaires, research
data was analyzed based on concepts of descriptive and
inferential statistics and by means of SPSS software. The
results are mentioned in the order of proposed questions:
In order to study the amount of the effect of each strategy
(obstacles) related to management tasks and
organizational factors for preventing or striving against
administrative-financial corruption in government
organizations and showing the relation between effective
factors on administrative-financial corruption (incentives)
and preventive strategies or confronting the appearance
of administrative-financial corruption in government
2
organizations (obstacles), first, all factors of the existent
subcategory in nineteen variables were considered.
Number of these factors amounts to fifty cases. Then we
used two main indexes (A) and (B) and their subcategory
indexes to analyze results.
Index (A): averages' difference from the whole
difference
Index (A-1): Average’s difference of the effectiveness of
factors in the appearance of corruption (average of each
of incentives) from average of effectiveness of all factors
in the appearance of corruption (average of effectiveness
of all factors in the appearance of corruption was equal to
68.8%).
Index (A-2): Average's difference of the factor's for
preventing the outbreak of corruption (average of each of
obstacles) from average of preventiveness of all factors
in the appearance of corruption (average of preventiveness
of all factors from the appearance of corruption
was equal to 74.5%).
Index (B): Ranking of each factor when compared with
other factors.
Index (B-1): Ranking of the factor's effectiveness in the
appearance of corruption in comparison with other
factors.
Index (B-2): Ranking of the factor's preventiveness
against the appearance of corruption in comparison with
other factors.
After applying index (A), we used index (B) and its
subcategories (B-1) and (B-2). Then we classified factors
in four states in index (A) for ranking and determining the
position of the evaluated factors in each of the states,
attention is focused on the effectiveness of the factor's
ranking in the appearance of corruption and prevention of
an outbreak of corruption. Each factor that has more
suitable ranking will be placed in a higher position and
ranking of those states.
After evaluating of differences in both indexes (A-1)
and (A-2), four states are created. Results of research
findings in response to this question are specified in four
states below with due attention to the aforementioned
detailed cases.

State 1: Positiveness of Indexes (A-1) and (A-2)
If both indexes (A-1) and (A-2) are positive, it shows that
the evaluated factor is higher than the total averages of
factors both in terms of being effective in the appearance
of corruption or prevention of the outbreak corruption.
These are important in the discussion about administrative-financial
corruption. In other words, we can
consider such factors as the determinant factors in the
outbreak and prevention of administrative-financial
corruption in government organizations. Among 50
questions of the subcategory of managerial and organizational
factors, there are 23 determinant and preventive
factors including: (1) Existence of grouping, factionalism
and banding in the organization; (2) basic relation,
executing of taste and non existence of meritocracy in
designating managers; (3) low working culture (working
conscience, dutifulness and feeling of responsibility); (4)
unsuitable manner of supervision in the organization in
terms of attention, duration and timeliness; 5) not
observing meritocracy in the manner of selection,
employment, execution and displacement of employees;
(6) insufficient income and benefits for improving life and
welfare situation; (7) discrimination in the paying of
income and benefits among the employees; (8)
unsuitability of offenders' punishment in terms of intensity,
timeliness, proportionality and decisiveness of
offences 9) multiplicity of rules and existing complications
and ambiguities in them; (10) interpretation by personal
opinion and executing of rules and regulations according
to taste by employees and managers; (11) the inability to
get response from employees and managers by people;
12) preference of individual interests and purposes to the
organization's interests and purposes; (13) existence of
discrimination and exceptionality for some employees
because of connection with power channels, 14) lack of
efficient public supervisory system (people, civil
institutions and media); (15) non observance of meritocracy
in encouraging, punishing and distribution of job
opportunities and promotion by managers; (16) existence
of bad and unsuitable rules in the organization; (17) low
moral and religious values (religious beliefs and
principles); (18) unsuitability of informatics bases in terms
of transparency, perfection, speed and accuracy; 19) too
much authority on managers and lack of powerful
supervisory mechanisms to control managers' behavior;
(20) lack of unawareness by clients regarding processes
and methods of performing services to them; (21) non
existence of suitable cooperation and information
exchange among supervisory organizations and centers;
(22) silence or ambiguity of law in specification and
prosecuting some of the cases of corruption and (23)
relinquishing or justifying illegal actions by managers and
not reporting offenders to relevant officials. In other
words, these factors are higher than the total averages of
factors both in terms of being effective against the
outbreak of corruption and prevention of corruption. And,
Azimi et al. 9019
we can consider such factors as determinant factors
against the outbreak and prevention of administrativefinancial
corruption in government organizations. Also by
modifying or improving them, we can expect to prevent
the outbreak of administrative-financial corruption or
confront it. These results are shown in Table 1.
State 2: Positivenes of index (A-1) and negativeness
of index (A-2)
If index (A-1) is positive and index (A-2) is negative, it
shows that the evaluated factor is effective against the
outbreak of administrative-financial corruption. However,
we cannot expect that the amount of the appearance of
administrative-financial corruption will be reduced
considerably by its improvement and modification.
Among fifty questions of the subcategory of managerial
and organizational factors, there are 18 effective factors
including: (1) Inefficient administrative structure and
establishment; (2) lack of proficiency and mastery of
employees and managers in the performance of assigned
tasks; (3) allocation of numerous responsibilities and
capacities to one individual; (4) pressure of instability and
security of tenures of employees and managers; 5)
disproportionality of job with the person who has it in
terms of specialty, level of education and other
conditions; (6) lack of transparency in the disclosure of
annual properties of managers and their family; (7) basic
relation and ambiguity of extra-organizational interactions
and relations of managers in the organizations; 8)
manner of treating corruption as a facilitative or
accelerating factor in the performance of an activity; 9)
unsuitability of organization and division of tasks and
responsibilities by managers; (10) ambiguity in
employees' job descriptions; (11) behavior of managers;
discrimination in the manner of confrontation and
behavior with employees; (12) relationship and familiarity
of clients with employees and managers; 13) lack of
compilation of long-term qualitative and written programs;
14) managers' weakness in decision making skills (with
out decision or being sensational); (15) unfair distribution
of information, rules and decisions of the organization
among employees and clients; (16) pressure of
employees' individual involvements and unpredicted
events in life; (17) avariciousness of managers and
dissatisfaction of them because of the need to enhance
living standards; (18) discrimination in the distribution of
devices and equipments among employees that are
placed in this area. In other words, these factors are
effective in terms of impressiveness in the appearance of
administrative-financial corruption. However, we do not
expect the amount of the appearance of administrativefinancial
corruption to reduce considerably by improving
and modifying them. For instance, inefficient
administrative structure and establishment is an effective
factor that causes the outbreak of administrative-financial

9020 Afr. J. Bus. Manage.
Table 1. Conjoint relationship between effective factors on administrative-financial corruption and preventive factors present in government organizations; State 1- Positiveness of Indexes
(A-1) and (A-2).
Priority
1
2
3
4
5
6
7
8
9
10
Effective factor in occurring of
corruption
Existence of grouping, factionalism and
banding in organization
Basic relation, executing of taste and
non existence of meritocracy in
designation of managers
Inadequacy of working culture (working
conscience, dutifulness and feeling of
responsibility
Unsuitability of manner of supervision
in the organization in terms of attention,
duration and timeliness
Not observing meritocracy in the
manner of selection, employment,
execution and displacement of
employees
Insufficiency of income and benefits for
improvement of life and welfare
situation
Discrimination in paying income and
benefits among the employees
Unsuitability of offenders' punishment
in terms of intensity, timeliness,
proportionality and decisiveness of
offences
Multiplicity of rules and existing
complications and ambiguities in them
Interpretation by personal opinion and
execution of rules and regulations
according to taste by employees and
managers
Average of effectiveness of
factor in occurring of corruption
Preventive average of factor
from occurring of corruption
77.5 80.5
78.5 80.3
76.5 82.5
76.8 80.3
76 80
76.5 79.5
76.8 76.5
75.5 77.8
74.5 79
73 79.3
Preventive factor in occurring of
corruption
Preventing grouping, factionalism and
banding in organization
Preventing basic relation, executing of
taste and non existence of meritocracy in
designation of managers
Reinforcing work culture (working
conscience, dutifulness and feeling of
responsibility
Precise, durable and timely supervision
and control in the organization
Paying attention to professional selection
and meritocracy in the manner of
employment, execution and displacement
of employees
sufficiency of income and benefits for
improving life and welfare situation of
employees and managers
Fairness and nonexistence of
discrimination in payment of income and
benefits among the employees
Severity, timeliness, proportionality and
decisiveness of offenders' punishment
Amending complications and ambiguities
in administrative rules and regulations
Correct and perfect execution of rules and
regulations by employees and managers

Table 1. Countd.
11
12
13
14
15
16
17
18
19
20
20
The inability to get response from
employees and managers by people
Preference of individual interests and
purpose to the organization's interests
and purposes
Existence of discrimination and
exceptionality for some employees
because of their connection with power
channels
Inactiveness of the public supervisory
system (people, civil institutions and
media)
non observance of meritocracy in
encouraging, punishing and distributing
of job opportunities and promotion by
managers
existence of bad and unsuitable rules in
the organization
inadequacy of moral and religious
values (religious beliefs and principles)
unsuitability of informatics bases in
terms of transparency, perfection,
speed and accuracy
too much authority on managers and
lack of powerful supervisory
mechanisms to control managers'
behavior
lack of unawareness by clients
regarding processes and methods of
performing services to them
lack of unawareness by clients
regarding processes and methods of
performing services to them
71 80
75 76.5
79.3 75
74.8 75.5
73.5 76.3
69.3 82
69.5 79.3
69.5 78
73.5 75.3
69.8 76.8
69.8 76.8
Azimi et al. 9021
Request for answers from employees and
managers by people
Establishment of compromise between
benefits and purpose of the organization
with employees' benefits and goals
Elimination of discriminations,
exceptionalities and equality of all
employees and managers against rules
activeness of the public supervisory
system (people, civil institutions and
media)
observing meritocracy in encouraging,
punishing and distributing job
opportunities and promotion by managers
Identifying and modifying bad and
unsuitable rules
Reinforcing moral and religious values
(religious beliefs and principles)
Improving the situation of informatics
bases in terms of transparency,
perfection, speed and accuracy
Coordinating and balancing the amount of
authority on managers and execution of
suitable control and supervision over their
behavior
Education and promotion of clients' level
of awareness of processes and methods
of performance
Education and promotion of clients' level
of awareness of processes and methods
of performance

9022 Afr. J. Bus. Manage.
Table 1. Contd.
21
22
23
non existence of suitable cooperation
and information exchange among
supervisory organizations and centers
silence or ambiguity of law in
specification and discovery of some of
the antitypes corruption
relinquishing or justification of illegal
actions by managers and non
introduction of offenders to relevant
officials
corruption but we cannot rely on the efficiency of
administrative structure and establishment to
prevent the outbreak of administrative-financial
corruption. These results are shown in Table 2.
State 3: Negativeness of index (A-1) and
positiveness of index (A-2)
If index (A-1) is negative and index (A-2) is
positive, it shows that preventiveness of the factor
is more important than effectiveness of it in the
outbreak of corruption. In other words, if that
factor is modified or improved, amount its
preventiveness will be more than effectiveness of
the factor's weakness in the appearance of
administrative-financial corruption. Among fifty
questions of the subcategory of managerial and
organizational factors, there are 4 preventive
factors including: 1) elimination of existing
deficiencies and vacuums in administrative rules
and regulations; 2) accumulation of organizations
and supervisory centers' results and data in an
independent organization; 3) reinforcing formal
communications' network in order to control
informal relations among employees and
70 76
70.3 75.5
69.5 76.5
managers; and 4) offering of services without
referring to one's presence which are placed in
this area. In other words, these factors are more
important in terms of preventing an outbreak of
administrative-financial corruption than been
effective in the appearance of administrativefinancial
corruption. For instance, elimination of
existing deficiencies and vacuums in
administrative rules and regulations is a more
powerful factor, but we can not expect that
defection and incomprehensibility of rules and
regulations could be as effective as in the
outbreak of administrative-financial corruption. It
means that the effectiveness of preventive
measures is more than the efficiency of the
factor's weakness in the existence of
administrative-financial corruption. These results
are shown in Table 3.
State 4: Negativity of indexes (A-1) and (A-2)
If both indexes (A-1) and (A-2) are negative, it
shows that the factor has less importance than
other evaluated factors. It is noteworthy that all
evaluated factors are considered among the
Close cooperation and suitable exchange
of information among supervisory
organizations and centers
Removing ambiguity or approving suitable
rules in order to make identification easier
in proving corruption cases
Non condemnation or justification of illegal
actions by managers and introduction of
offenders to relevant officials
effective factors. Due to the fact that average's
difference of each factor is calculated from the
total average of factors, some factors are lower
than the average naturally. So this case does not
show that the evaluated factor has no effect in the
appearance of administrative-financial corruption,
but it shows that the evaluated factor has less
importance and effectiveness in partial
comparison with other factors. Therefore, the
existent factors in this area are among the
effective factors, but are not regarded as
determinant with regard to other factors. Among
fifty questions of the subcategory of managerial
and organizational factors, there are 5 factors (not
so effective on corruption and not so preventive of
it) including: 1) Pressure of colleagues, managers
and clients' demands that are numeric or opposite
about a subject; 2) non usage of suitable data for
programming by managers; 3) lack of participation
of employees in making decisions and running the
organization's affairs; 4) clients and benefiting
individuals' abuse of technology to create
disturbance in computers or forgery in documents;
5) too many employees that are under one
manager's control and administration. In other
words, these factors are not placed at a suitable

Azimi et al. 9023
Table 2. Conjoint relation between effective factors on administrative-financial corruption and preventive factors from it in government organizations; State 2- Positiveness of index (A-1) and
negativeness of index (A-2).
Priority
1
2
3
4
5
6
7
8
9
10
Effective factor in occurring of
corruption
Inefficient administrative structure
and organization
Lack of proficiency and mastery of
employees and managers in
performing assigned tasks
Allocation of numerous
responsibilities and capacities to one
person
Pressure of instability and security of
tenure for employees and managers
Disproportionality of job with the
person who has it in terms of
specialty, level of education and other
conditions of holding
Lack of transparency in disclosure of
annual properties of managers and
their family
Basic relation and ambiguity of extraorganizational
interactions and
relations of managers in the
organizations
Manner of treating corruption as a
facilitative or accelerating factor in the
performance of an activity
Unsuitability of organization and
division of tasks and responsibilities
by managers
Ambiguity in employees' job
descriptions
Average of effectiveness of
factor in occurring of corruption
Preventiveness average of factor
from occurring of corruption
74.5 74
74.3 74
73 73
70.5 73.5
70 73.8
70.8 70.8
69.8 70
69.5 71.3
69.3 72
68.8 74.3
Preventive factor in occurring of
corruption
Efficient administrative structure and
organization
Education and promotion of proficiency
and mastery of employees and managers
in performing assigned tasks
Allocation of authority and suitable
distribution of posts and duties among
individuals
Tranquility of employees and managers
from security of tenure
Disproportionality of job with the person
who has it in terms of specialty, level of
education and other conditions of holding
Transparency in the disclosure of annual
properties of managers and their family
Transparence and criterion-based extraorganizational
interactions and relations
of managers in the organizations
Removal of manner of treatment of
corruption as a facilitative or accelerating
factor in the performance of an activity
Organization and division of tasks and
responsibilities by managers
Transparency in employees' job
descriptions

9024 Afr. J. Bus. Manage.
Table 2. Contd.
11
12
13
14
15
16
17
18
Execution of managers'
discrimination in the manner of
confrontation and behavior with
employees
Relations and familiarity of clients
with employees and managers
Non compilation of long-term
qualitative and written programs
Managers' weakness in decision
making skills (without decision or
being sensational),
Unfair distribution of information,
rules and decisions of the
organization among employees and
clients
Pressure of employees' individual
involvements and unforeseen events
in life
Avariciousness of managers and
dissatisfaction of them because of
emulation in order to enhance living
level
Discrimination in the distribution of
devices and equipments among
employees
position not in terms of being effective in the
appearance of administrative-financial corruption
and not in terms of preventing the outbreak of
corruption (with regard to other factors under
evaluation). It is important to note that this issue is
69 73
69.5 69
69.3 69.8
69 71.8
68.8 71.8
69.3 67.3
69 68
68.8 68.8
partial and is obtained in comparison with other
studied factors. For example, most often there is
opposition and multiplicity in demands of
colleagues, managers and clients about a subject
matter, so we cannot expect that an employee will
Managers' fair and indiscriminate
behavior with employees
Minimizing the effect of relations and
familiarity of clients with managers and
employees in offering of services
Compilation of long-term qualitative and
written programs
Educating and promoting managers'
decision making skills
Fair distribution of information, rules and
decisions of the organization among
employees and clients
Elimination of individual involvements or
reducing the psychological pressure of
unpredicted events
Reinforcing of contentment culture as the
biggest wealth and avoidance of
emulation and voracity
Fair distribution of devices and
equipments among employees
commit administrative-financial corruption just by
opposition and multiplicity of these demands. Also
in the case of legitimacy of colleagues, managers
and clients' while performing their duty, we cannot
vouch that an employee will not commit

Azimi et al. 9025
Table 3. Conjoint relation between effective factors on administrative-financial corruption and preventive factors from it in government organizations; State 3- Negativity of index (A-1) and
positivity of index (A-2).
Priority
1
2
3
4
Effective factor in occurring of
corruption
Deficiency and incomprehensibility of
rules and regulations
Non accumulation of results and data of
organizations and supervisory centers in
an independent organization
High informal relations among managers
and employees
High face to face relations among
employees and clients
administrative-financial corruption. Therefore,
these five factors are more lowly ranked than
other factors in terms of importance. These results
are shown in Table 4.
DISCUSSION
What has been given more affection in this
research is the relationship between effective
managerial and organizational obstacles and
incentives on administrative-financial corruption in
government organizations in Iran. This matter is
proposed as one of the innovation evidences of
the present research and is a new topic that
needs special attention in future researches.
The most important result obtained from this
research is that by eliminating or improving a
factor, it is not always possible to use it as an
Average of effectiveness of
factor in occurring of corruption
Preventiveness average of factor
from occurring of corruption
66.8 78
68 74.8
61.3 74.8
55.8 74.8
obstacle or incentive on the opposite point, due to
the fact that among 50 studied questions in the
research just 23 cases posses these conditions
and the other 27 do not posses these conditions.
They just posses conditions in terms of
incentiveness or just in terms of being obstacles
or in neither of them. Most researchers have been
unaware of this matter and the strategies offered
for improving conditions have partially no relation
with these factors or they propose it as a strategy
just by reversing the matter. Number of strategies
that are proportional to the studied factors which
are extracted from the heart of the research is
little. Also, it is shown in this research that study of
the relationship between effective managerial and
organizational obstacles and incentives on
administrative-financial corruption in government
organizations can lead to specification of
determinant and very effective factors in the
Preventive factor in occurring of
corruption
Removing existing deficiencies and
vacuums in administrative rules and
regulations
accumulation of results and data of
organizations and supervisory
centers in an independent
organization
Reinforcing formal communications'
network in order to control informal
relations among employees and
managers
offering of services without referring
in one's presence
appearance of administrative-financial corruption.
23 factors that have been represented as
determinant factors in this research are among
those factors which are proposed both as effective
factors that give rise to administrative-financial
corruption and as preventive factors against
corruption.
Totally, it appears that a suitable composition
has been done from the study of incentive and
obstacle factors in the occurrence of
administrative-financial corruption with due
attention to the performed innovations in this
research.
LIMITATIONS AND RECOMMENDATIONS
One of the existing limitations in the performance
of this research is that the clear-sighted,

9026 Afr. J. Bus. Manage.
Table 4. Conjoint relation between effective factors on administrative-financial corruption and preventive factors from it in government organizations. State 4- Negativeness of indexes
(A-1) and (A-2).
Priority
1
2
3
4
5
Effective factor in occurring of
corruption
Pressure of colleagues, managers and
clients' demands that are numeric or
opposite about a subject
Non use of suitable data for
programming by managers
Lack of participation of employees in
making decisions and running of the
organization's affairs
Clients and beneficiary individuals' abuse
of technology to create disturbance in
computers or forgery in documents
Too much number of employees that are
under one manager's control and
administration
managers and relevant experts did not want to
cooperate with the researcher in order to
complete questionnaires precisely in most cases.
The only way to complete questionnaires was to
receive a letter from the local government and
higher officials with emphasis for completion of
questionnaires as a task and duty (not optional).
In other words, respondents refused to complete
questionnaires when it was optional. So, it is
recommended to other researchers not to do
research independently and without support of a
high-ranking official in the field of administrativefinancial
corruption.
Given the point that all government organizations
in Isfahan and Zanjan provinces are studied
as statistical samples in this research, it is
recommended to execute it in other provinces in
Average of effectiveness of
factor in occurring of corruption
Preventiveness average of factor
from occurring of corruption
58.5 71.3
63.5 68.3
63.5 68.3
49.8 68.8
56.3 68
order to be able to generalize results to the whole
country.
It is also recommended to identify types and
evidences of administrative-financial corruption in
different organizations and compare these
evidences with effective factors in the appearance
of administrative-financial corruption to specify
whether a special relation exists between type
and evidences of administrative-financial corruption
with type of effective factors in its occurrence
or otherwise. In other words, it must be determined
what kind of strategies could be offered to
prevent or confront that evidence given the type of
evidence and amount of prevalence of each one
of them.
With due attention to the generality of questions
and the studied variables for all government
organizations in this research, it is recommended
to execute more profound studies in each
organization by considering those conditions and
circumstances.
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Adopting suitable strategies in order
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Suitable number of employees that
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African Journal of Business Management Vol. 6(31), pp. 9028-9039, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.322
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Intergroup conflict within a South African mining
company
Havenga Werner 1 *, Visagie Jan 1 , Linde Herman 1 and Gobind Jenni 2
1 School for Human Resource Sciences, North-West University, Potchefstroom Campus Potchefstroom South Africa.
2 Department of Industrial Psychology and People Management, University of Johannesburg, South Africa.
Accepted 4 May, 2012
The uncertainty that accompanies organizational change heightens prospects for intra-organizational
conflict. Notwithstanding this, the knowledge base on the sources (or causes) of organizational conflict
is underdeveloped – largely as a result of a low incidence of empirical research, and in particular in
South Africa. The current study explored the perceived sources of intergroup conflict in a South African
mining company. The aim of this research is to investigate intergroup conflict and to look into how
intergroup conflict influences employment relations throughout all levels of the organization. From a
probability population of 1000 in the twelve departments a random sample of 200 employees was
chosen to participate in the research. This number represents 20% of the total population. Intergroup
conflict was analysed and evaluated. Conclusions were drawn and recommendations made on the
occurrence of intergroup conflict based on the findings of the literature and empirical study. Data
frequencies, correlations and a correlation analysis were performed through the SPSS programme.
Key words: Conflict management, group dynamics, employment relations, intergroup relations, employment
relations wellness.
INTRODUCTION
Major change and continued turbulence in the social,
political, technological and economic environments at a
global level as well as locally in South Africa, are creating
an uncertain and complex environment in which
organizations have to operate. Fuelled predominantly by
rapid advances in the information and communications
technology (ICT) sector, globalism has become both a
cause and a consequence of sustained change (Van
Tonder, 2008), which, by all accounts, appear to be
increasing in magnitude and pace (Burnes, 2003;
Schabracq and Cooper, 2000; Vakola, Tsaousis and
Nikolaou, 2004; Van Tonder, 2007a, 2007b).
Conflict is an unavoidable aspect of organisational life.
Major trends such as constant change, employee
diversity, bigger teams, lesser face-to-face
communication and globalisation have made
organisational conflict inevitable (Kreitner and Kinicki,
2008).
Furthermore, Marx (1965), Dahrendorf (1965), Deutsch
*Corresponding author. E-mail: werner.havenga@nwu.ac.za.
and Coleman (2000) as well as Anstey (1999) all indicate
that poverty, power, social mobility, unemployment,
competition and class consciousness are potential
sources of conflict. It is clear that most of the researchers
of conflict have identified more or less the same causes
of conflict. As in war, groups in organisations can also be
in conflict with each other. In 1967, the Arab Israeli war
took place, and the battle for power was the main source
of conflict. In organisations, a battle for power is also
evident. Conflict occurs between groups and before these
conflicts can be resolved the cause must firstly be
identified (Forsyth, 2005). If managements want to
thoroughly understand conflict and handle it efficiently,
managers firstly need to understand the sources of
conflict (Nelson and Quick, 2006).
In this regard Holtzhausen (1994) has argued that
organizational conflict can be resolved if the causes are
identified and solutions are found which accommodate all
the parties involved. Indeed, attempting to deal with and /
or manage conflict successfully without identifying the
causes of such conflict is a lost cause (Havenga, 2004).
With conflict a pervasive phenomenon in organizations,
effective management that is, dealing with conflict in such

a way that it does not recur, is clearly needed. In this
regard the management of the origin (or sources)
appears to be key to the effective resolution of the
conflict. With regard to the causes of conflict it is useful to
note that the causes (sources) and “conditions” of conflict
can be linked and collectively regarded as prerequisites
for conflict (Jordaan, 1993: 25-45). Closer scrutiny of
relevant terminology reveals that several authors in fact
equate sources of conflict to prerequisites or causes of
conflict (Marx, 1965; Dahrendorf, 1976, 1990; Robbins,
2009).
Marx (1965) and Dahrendorf (1976) specifically emphasize
freehold (poverty rights), poverty, socialmobility,
absence of security, unemployment, competition and
class consciousness as causes of conflict. Some of these
sources were implicitly identified by the authors as
forming an integral part of the structure of society.
Scholars in the domains of sociology, industrial sociology,
behaviorism, and management science have since
incorporated these causes, in one way or another, in their
typologies of the causes of conflict (Ashley and
Orenstein, 1985; Lopreato and Hazelrigg, 1972; Deutsch
and Coleman, 2000; Ritzer, 1992; Turner, 1991). Most of
these scholars, however, approached conflict and its
causes from a macro economics and political perspective
and paid very little attention, if any, to conflict as
experienced at the level of the individual organization or
business, whether small, medium or large.
Increasing uncertainty and complexity in the operating
environment of organizations provide fertile ground for
the onset of conflict in the workplace (in the vernacular
conflict is typically viewed as a form of disagreement or
argument, or an incompatibility in the views, opinions,
principles and so forth of two or more individuals
(Dictionary Unit, 2002). Indeed, an increase in the
incidence of conflict is to be expected (De Dreu et al.,
2002). Given these considerations a strong case can be
argued for a heightened probability of conflict in both
public and private sector organizations in South Africa on
grounds of the influence of, among other, organizational
change, affirmative action programmes, competition for
scarce resources and regular changes in management.
In the South African context, however, limited empirical
information is available on local authorities’ and private
sector businesses’ awareness and understanding of
conflict, their perception of the causes or sources thereof,
and how conflict should be managed. In this regard
Holtzhausen (1994) has argued that organizational
conflict can be resolved if the causes are identified and
solutions are found which accommodate all the parties
involved. Indeed, attempting to deal with and / or manage
conflict successfully without identifying the causes of
such conflict is detrimental to organizational coherence
(Havenga, 2004).
Effective managers/leaders know when to stir 'positive-
conflict' for the benefit of the organization and when to
suppress negative-conflict. With conflict a pervasive
phenomenon in organizations, effective management that
Werner et al. 9029
is, dealing with negative-conflict in such a way that it
does not recur, is clearly needed. In this regard the
management of the origin (or sources) appears to be key
to the effective resolution of the conflict. This, in turn,
presupposes that managers have a clear understanding
of the many sources of conflict in organizational settings
(Nelson and Quick, 2001: 24).
One can clearly conclude that researchers such as
Belak (2008) and Brown (2004) share the common idea
that intergroup conflict must first be identified before it
can be solved. The difficult part is understanding how
intergroup conflict manifests and changes in the
organisation. If management can identify the sources of
the conflict and understand the conflict, solutions and
remedies for the problem can be found.
Such a study of intergroup conflict is very important for
the employment relationship. It is clear that intergroup
conflict can have dire consequences for the organisation.
Intergroup conflict’s sources, antecedents and consequences
must be identified in order to find a remedy to
resolve it. Management must understand intergroup
conflict in order to find positive outcomes. Robbins (2009)
argues that intergroup conflict occurs in most
organisations and dysfunctional conflict can severely
disrupt the operations of any organisation.
Brown (2004) argues that organisational life is
changing so drastically, and with this change, intergroup
conflict is becoming increasingly evident in organisations.
If this conflict manifests in dysfunctional intergroup
conflict the outcomes or consequences can be
disastrous, as mentioned earlier. Brown mentions that
intergroup conflict can also hamper healthy intergroup
and employment relations. Fiske (2002) indicates that
bias, including stereotyping, can create a breakdown of
healthy employment relations in the organisation.
Moreover et al. (2000) indicate that it is important for an
organisation to create and stimulate harmonious intergroup
and employment relations.
Robbins (2009), Kreitner and Kinicki (2008), Brown
(2004), Belak (2008) and Muzafer (1966) all indicate that
intergroup conflict exists in most organisations. From this
evidence and research, the assumption in this study is
that intergroup conflict exits in this company. If the
empirical study proves that intergroup conflict does not
exist, it will be an indication that this company has perfect
leadership, conflict resolution mechanisms and good
employee relations. For purposes of this study, it is
important to note that people who experience intergroup
conflict may not be of the same workgroup, but can have
the same intergroup conflict experience.
THE SOUTH AFRICAN MINING SECTOR
As the study was conducted in a mining-company it is
important to bring this sector into context. Mining in South
Africa has been the main driving force behind the history
and development of Africa’s most advanced and richest

9030 Afr. J. Bus. Manage.
economy. Factors like proposed nationalization, legislation,
environmental concerns, and illegal miners all
impact on the sustainability of these mines and the
security it provides to the workers.
The added stress of safety underground and relative
low wages could hold the potential to further lead to demotivation
and subsequent disengagement of the
workforce. Surface workers on South African mines earn
roughly R1 500 (US$200) per month, while underground
workers earn R3 000 (US$400) per month, figures which
have not changed much since 2005.
Due to these challenges unions like the National Union
of Mineworkers (NUM), which is the largest recognised
collective bargaining agent representing workers in the
Mining, plays a pivotal role in conflict and dispute
resolution in this sector. But an understanding of the
causes of conflict is necessary to effectively
institutionalize resolution tactics to ensure the continued
relationship between the various groups within this
industry (Department of Mining,
http://www.bullion.org.za/Publications/Facts and
Figures2006/F and F2006.pdf)
PROBLEM STATEMENT, AIM AND RESEARCH
QUESTIONS
From the fore-going the following problem statement is
identified: Dysfunctional intergroup conflict resulting from
certain sources impacts on the functioning of the mine in
such a manner that it can severely hamper sound
employment relationships.
The purpose of this paper is to approach the issue of
conflict, do an exploratory investigation into intergroup
conflict and to look into how intergroup conflict influences
sound employment relations within the organization.
The paper intends to answer the following research
questions:
1) What is intergroup conflict and how does it manifest in
the workplace, specifically in relation to the miningsector?
2) How do the respondents experience intergroup conflict
in their work-environment?
3) What are the sources and antecedents of intergroup
conflict?
4) Is there a correlation between the experience of
intergroup conflict and employment relations wellness?
These research questions can only lead to specific
answers referring to the selected organisation, and are
not necessarily generalisable. However, they can serve
as new stimuli in the discourse on the abovementioned
topics.
Significance of the study
The contribution of this paper is toward increasing the
clarity and interdisciplinary understanding of the origins of
conflict within this specific company, the experience of
employees towards this conflict, as well as the impact it
has on employment relations wellness. Recommendations
will also be provided for managing organisational
conflict,
INTERGROUP CONFLICT
Almost all theories that attempt to explain the sources or
causes of conflict and the way in which conflict is, or
should be managed, are supported by, or adjusted to,
empirical studies (Havenga, 2002). There are many
exponents of the conflict theory that had a significant
impact on the theory of conflict and the view of conflict.
Marx, Pareto, Dahrendorf, Weber, Davis, Comte and
Durkheim made the most exceptional contributions
towards the theory of conflict (Lopreato and Hazelrigg,
1972). The numerous social theories that emphasize
social conflict have roots in the thoughts of Karl Marx
(1818 to 1883), the great German theorist and political
activist. Karl Marx was the father of communism and he
was also the main exponent of the conflict theory (Marx,
1965).
Marx emphasised social struggle between classes and
divided the groups into the bourgeoisie (owners) and
proletariat (non-owners) (Havenga, 2004). The Marxist
conflict approach stresses materialist explanation of
history, a dialectical technique of analysis, a significant
attitude concerning existing social measures, and a
political agenda of revolution or, at least, reforming. Karl
Marx saw the ownership and control of the powers of
production as the most important social factors that
enable one to understand the dynamics of the modern
day societies (Visagie and Linde, 2006).
Dahrendorf (1965) states that the capitalist society lost
all importance and was replaced by the new industrial
society. Dahrendorf identifies a wide variety of groups in
conflict. Two important aspects of conflict can be
identified in his work.
1) The first main aspect is the importance of power and
that conflict is unavoidable. Dahrendorf stresses the
importance of power as well as the unavoidability of
conflict.
2) Secondly, emphasis is placed on the determinants of
active conflict and how it changes, manifests and
develops in groups with conflicting goals (Visagie and
Linde, 2006). Dahrendorf (1959: 165) notes that “the
structural origin of such conflicts must be sought in the
arrangement of social rules endowed with expectations of
domination or subjection”. The spread of power is the
central focal point of social structures in society. Power,
which is associated with a certain position, is the key
viewpoint of Dahrendorf (Wallace and Wolf, 1995).
Concerning the work of Marx and Dahrendorf it can be
said that they saw competition and power playing as

Figure 1. Theory of conflict behavior. (Source: Bartos and Wehr, 2002).
playing an important part in conflict. This can be directly
linked with the realistic conflict theory which will
subsequently be discussed. The realistic conflict theory
will serve as the theory basis of the literature part of this
study. Bartos and Wehr (2002) remark that it is important
in the theories of conflict to look at the processes which
lead to conflict, and also at certain conflict behaviours.
Bartos and Wehr share the same opinion as Dahrendorf,
Marx, Muzafer and Brown. All these researchers indicate
that resources, incompatible goals and hostility towards
other groups might lead to conflict and conflict
behaviours. Bartos and Wehr indicate that there are
several factors that will lead to a theory of conflict
behaviour (Figure 1).
Nelson and Quick (2006) state that intergroup conflict
occurs within trade unions, between two departments or
between an employer and the government. This situation
occurs when opposing groups are formed within a work
situation and are unable to come to an agreement such
as in organisations when different groups work in conflict
with each other.
It appears that Marx’s idea of conflict centers on the
macro-world and not on the micro-world of the
organisation. In analysing the conflict perspective and
theory of Marx, it is clear that there is conflict between
groups for different reasons. Marx identified private
ownership as being the origin of conflict. Private
ownership implies that two parties or classes are in
conflict with each other, namely the bourgeoisie and the
proletariats or the owners and non-owners. This can also
apply to the organisation. There is conflict between the
groups and one group may have more than the other,
which will lead to conflict or intergroup conflict (Havenga,
2004).
The number and range of potential sources of conflict
suggested by scholars are substantive, but most of these
were theoretical conceptualizations with rigorous
empirical research a rarity. The scientific legitimacy of
these claimed sources of conflict as well as the
categorization systems proposed; remain problematic in
the absence of empirical research. This is particularly
applicable to the South African environment where
Werner et al. 9031
empirical studies on the causes of organization-level
conflict are not in evidence.
Probably one of the most important descriptions for
intergroup conflict, the realistic group conflict theory
implies that intergroup conflict arises from incompatible
interests and goals between groups, with the incompatibility
encouraged by scarcity of resources (Levine and
Campbell, 2000).The realistic conflict theory views
conflict between groups as generated by an interdependent
competition for scarce resources (Hogg and
Abrams, 1998). This theory argues that conflict between
groups stems from competition for scarce resources,
including food, territory, wealth, power, natural resources
and energy. This theory and method regarding intergroup
relations assumes that conflict between groups is
coherently implying that groups have conflicting goals
and compete for scarce resources (Brewer, 1979; LeVine
and Campbell, 2000; Muzafer, 1966). The incompatibility
of goals can lead to prejudice, reliance on stereotypes,
bias and hostile behaviour among groups. This scarcity of
resources can also transpire within an organisation
(Galinsky, 2002).
When considering research beyond the South African
setting, it is observed that the cause of conflict
emphasized by scholars seldom pertinently addresses
the organization or business level. Earlier and more
recent accounts of these sources of conflict in many
instances address the subject at the macro-structural
rather than the micro- or business level, where these
sources are typically interpreted as prerequisites for
conflict to develop (Dahrendorf, 1976; Jordaan, 1993;
Marx, 1965; Mayer, 2001; Robbins, 2009; Stroh, 2002).
Those who do consider the causes of conflict at the
organizational level surfaced a multitude of potential
sources of conflict. Accordingly, such sources or causes
include differences in knowledge, beliefs or basic values;
competition for position, power or recognition; a need for
tension release; a drive for autonomy; personal dislikes;
and differing perceptions or attributes brought about by
the organizational structure, different role structures. Also
considered is the heterogeneity of the workforce,
environmental changes, differences in goals, diverse

9032 Afr. J. Bus. Manage.
economic interests, loyalties of groups, and value
discrepancies, which were all considered at various
stages as major causes of conflict in organizations
(Weider and Hatfield, 1995).
Havenga (2002) indicates that causes of conflict at the
level of the organization could also include resource
availability; affirmative action programs; the scope and
content of workload; the introduction of new management
techniques; and differences of a cultural and racial
nature. A typology that further categorizes sources of
conflict is offered by Nelson and Quick (2001) who
differentiate between structural factors (causes) that is,
those that develop from within the organization and
originate from the manner in which work is organized,
and secondly, personal factors, which emerge as a result
of individual differences among employees.
Although the potential sources of conflict seemingly
abound, the important role of communication as a
potential source of conflict appears to be understated.
With a few exceptions (Robbins, 2009; Vecchio, 2000)
communication is infrequently considered as a source of
conflict. The typologies utilized by these authors tend to
suggest that the various sources of conflict can be
classified into three categories namely communication
processes, structure, and individual behavioural factors.
However, despite the frequency with which causes
(sources) of conflict are nominated or suggested,
empirical support for the claimed validity of these causes
or typologies are substantively lacking, which suggests
that any and each categorization framework is as helpful
or unhelpful as the next.
The impact and consequences of unattended conflict in
the workplace on employees and the organization
generally (Dijkstra, 2006), would argue for immediate
attention to the resolution of the conflict rather than a
careful and systematic (and invariably more time-intensive)
approach to investigating the underlying causes of
conflict. There is little to indicate that organizations
actually attempt to establish the underlying causes of
institutional conflict. Rather, and in order to resolve
conflict, individuals or groups resort to conflict management
instruments without first determining what the
sources (causes) of conflict are - a key element in
developing appropriate conflict resolution strategies
(Havenga, 2004). Mayer (2001), for instance, argues that
if the causes of conflict are known and understood, a
conflict map can be developed, which could guide conflict
resolution processes. Understanding the different forces
that inform conflict behavior consequently empowers the
facilitator or manager with the opportunity to develop a
more selectively focused and nuanced approach for
dealing with the specific occurrence of conflict.
RESEARCH METHODOLOGY AND DESIGN
The preceding and somewhat reductionistic perspective on conflict
belies the complexity that has gradually crept into definitions of
conflict over time. These definitions invariably further differentiated
or accentuated different types of conflict for example intrapersonal,
interpersonal, intra- and intergroup conflict, and organisational
conflict (Rahim, 1986). Others have focused on the different
dimensions on which conflict is partially or completely described, for
example, the emotive and cognitive components of conflict
(Schmidt and Kochan, 1972), while others accentuate the act of
opposition, disagreement or argument (the action component) of
conflict as emphasized in the Oxford definition. It is understandable
that definitions will range from the inclusive to the exclusive and
would reflect discipline-specific foci and variation.
Several considerations, however, have a bearing on the manner
in which conflict is conceptualized and operationalised in this study.
The paucity of empirical research in the South African context
suggests an exploratory study which would constitute a first step
towards more refined and focused research on the sources of
organizational conflict. The current study consequently aims to
empirically explore the causes or sources of conflict as perceived
by employees of participating organizations.
Moreover, the adoption of a specific definition of conflict could
impose unnecessary constraints on the operationalisation of the
construct, especially if it is acknowledged that the average
employee is bound to have an internalized, yet rudimentary concept
of conflict – more in line with popular usage and definitions. Dijkstra
(2006: 104-105) for example has proposed that the distinction
between cognitive and affective conflict be abandoned on the
grounds of the strong correlations observed in two independent
studies (De Dreu and Weingart, 2003; Simons and Peterson, 2000)
and the virtual impossibility of precisely separating out cognitive
and affective dimensions in an assessment of workplace conflict.
For the purpose of this study and drawing on definitional
parameters utilized among other by Dijkstra (2006: 21), De Dreu et
al. (1999), Schmidt and Kochan (1972), and Wall and Callister
(1995), conflict is viewed as a dynamic process that commences
with a perception of incompatibility of opinions, beliefs, principles,
values, and perceptions between individuals and groups of varying
sizes.
Research approach
A quantitative approach is followed in this exploratory study. The
primary data is generated using a standardised instrument in a field
survey design. This instrument developed by Rahim (1986) and
known as the ROCII has been adjusted to suite the environmental
circumstances of this study. Results were presented by means of
descriptive group statistics and correlations.
Participants and sampling strategy
Practical considerations suggested a survey-based field study
design. This entailed the development and administration of an
experimental questionnaire that sampled employees’ perceptions
with regard to various causes (or sources) of organizational conflict
and, secondly, employees’ reported experience of the impact of
institutional conflict. The methodological parameters of the study
are briefly outlined in subsequent area. Stratified random sampling
was used to identify the research group. The head of Human
Resource (HR) of the mining organisation identified twelve
departments in the mining company. The departments included the
following: Human Resources, Mining, Geology, Environmental,
Production, Financial, Engineering, Communication, Information
Technology (IT), Construction, Seismic and Ventilation. From a
possible population of 1000 in the twelve departments, 200
employees were sampled by random-sampling technique to
participate in the research. This number represents 20% of the total
population. 108 questionnaires were received back, which
represents 54% of the selected research population. This is a

elatively good response, taking into consideration the nature of the
respondents’ work.
The HR manager indicated that some of the employees were
hesitant to answer the questionnaires because of the nature of the
conflict questionnaire, and some employees felt that their
reputations and jobs were at stake. Every possible step was taken
to ensure confidentiality and this was passed on to the
respondents.
Measuring instrument
The measuring instrument is a questionnaire that evaluates
intergroup conflict. The questionnaire consists of four sections.
Section A consists of the biographical information of the
respondents. Section B (factors contributing to conflict) consists of
10 questions, Section C (results of intergroup conflict) of 10
questions and Section D (employees own experience of intergroup
conflict) of seven questions. Most of these questions were used in
previous studies such as those of Cheung and Chuah (2002) and
Havenga (2004). The questions also correlate with the objectives of
the study.
Research procedure
With the assistance of an academic colleague in the strategic
management field, the ROC-II questionnaires were personally
distributed to the respondents. At the onset of distribution the
/managers of the different sectors in the mines were briefed
individually on the purpose, nature and expected duration for
completing the questionnaire. Confidentiality and anonymity were
also assured to participants. A period of two weeks was allowed for
completion of the questionnaires. Collection of the questionnaires
took place on the premises of the mine. Participants were then also
given the opportunity to clarify any problems experienced with the
questionnaire. A follow-up was done after an additional week to
collect outstanding questionnaires not completed within the set time
limit.
Statistical analysis
In this study, the statistical package for the social sciences (SPSS)
programme (SPSS Incorporation, 2005) was used in order to find
true, accurate, reliable and valid research results. The Cronbachalpha
coefficient, Phi coefficient, Cramer’s V coefficient, descriptive
statistics, correlations and frequency tables were used to retrieve
valid and reliable data and information. The data were processed
into percentages and frequency tables. The validity and reliability of
the questionnaire were evaluated by experts and compared with the
work of Havenga (2004) to measure the validity and reliability.
Reliability and validity
Reliability relates to the concept of a good quality research when
reliability is a concept to evaluate quality in quantitative study with a
“purpose of explaining”, while the quality concept in qualitative
study has the purpose of “generating understanding” (Stenbacka,
2001).
The difference in purposes of evaluating the quality of studies in
quantitative and quantitative research is one of the reasons why the
concept of reliability is irrelevant in qualitative research. Stenbacka
(2001) points out that “the concept of reliability is even misleading
Werner et al. 9033
in qualitative research. If a qualitative study is discussed with
reliability as a criterion, the consequence is rather that the study is
no good”. To ensure reliability in qualitative research, examination
of trustworthiness is crucial while establishing good quality studies
through reliability and validity in qualitative research (Patton, 2002).
The face-validity of this questionnaire has been evaluated by an
expert in industrial relations in the mining industry and verified as
reliable towards studying intergroup conflict in organisations. The
conflict questionnaires of Havenga (2004) and Cheung and Chuah
(2002) have been used as tools in developing this intergroup
conflict questionnaire. The Phi, Cramer’s V coefficients and Alpha
Cronbach coefficients have been used to establish reliability in this
study.
According to Patton (2002), the construct validity of a test is the
extent to which a test measures what it is supposed to measure.
When evaluating conflict, it is difficult to find a usable criterion
that can act as an independent and objective guideline (Havenga,
2004). Construct validity therefore is an alternative method that can
be used to come to know more about the inherent attributes that
explain the variance of the statements concerning the constructs of
the questionnaires. Therefore reliability and validity, if they are to be
relevant research concepts, particularly from a qualitative point of
view, have to be redefined as we have seen in order to reflect the
multiple ways of establishing truth (Patton, 2002).
INTERPRETATION OF RESULTS
Demographics of respondents
The 108 respondents consist of 74 (68.5%) male workers
and 34 (31.5%) female workers (Table 1). From the 108
respondents, 0.9% (1) is under the age of 20 and
38.9%are between 21 and 35 years of age. 28.7% are
between 36 and 45 years old and 31.5% are between 46
and 60 years of age. The largest group of respondents is
between 21 and 35 years of age. However, according to
the Statistical Consultation Service of the North West
University, the statistics were meaningful and valid, and
reliable conclusions could be drawn.
Causes of conflict
Section B of the questionnaire was designed to identify
which factors contribute to and create conflict.
Competitions, diversity, availability of resources, distribution
of resources and misuse of power have all been
identified as sources of intergroup conflict by means of
the literature study. It is important to evaluate whether
these sources exist in reality in an organisation. The
mining organisation is a very diverse organisation with a
diverse workforce. Thus testing these items will identify
whether these sources of intergroup conflict are evident
in the mining organisation.
The following are the ten constructs that have been
tested in the questionnaire:
B-1: Affirmative action programme;
B-2: Cultural differences;
B-3: Racial differences;
B-4: Implementation of new management techniques;

9034 Afr. J. Bus. Manage.
Table 1. Biographical information of the respondents.
Item Category N= 108 Percentage
Sex Male 74 68.5
Female 34 31.5
Qualification - Gr 10 5 4.6
Gr 11 6 5.6
Gr 12 52 48.1
Diploma 26 24.1
Degree 10 9.3
Post-grad 9 8.3
Tenure 1-4 years 24 22.2
4-10 y 24 22.2
11-15 y 15 13.9
16-20 y 8 7.4
21-25 y 21 19.4
26-30 y 9 8.3
+31 y 7 6.5
Age - 20 1 0.9
21-35 42 38.9
36-45 31 28.7
46-60 34 31.5
Language English 16 14.8
Afrikaans 35 32.4
Setswana 16 14.8
Sesotho 12 11.1
isiXhosa 17 15.7
isiZulu 12 11.1
Department HR 38 35.2
Mining 12 11.1
Geology 10 9.3
Environment 7 6.5
Production 2 1.9
Financial 10 9.3
English 11 10.2
Communication 2 1.9
IT 7 6.5
Construction 3 2.8
Seismic 4 3.7
Ventilation 2 1.9
B-5: Availability of resources
B-6: Competition between groups and departments;
B-7: Implementation of new technology
B-8: Extent and contents of work;
B-9: Uneven distribution of scarce resources;
B-10: Misuse of power by superiors and group leaders.
Table 2 demonstrates that skewness and kurtosis are
within +3.0 to -3.0 and + 7.0 to -7.0. Thus normality exits.
Interpretation on the results shows that Affirmative
action (B-1) plays a huge role in the workplace. More
than 51.9% of the respondents in the mining organisation
indicated that affirmative action is a source of conflict.
Affirmative action can create racial conflict. 50% of the
respondents indicate culture (B-2) as a source of conflict,
while 41.9% do not acknowledge it as being that. This is
an indication that there are mixed feelings about cultures.
However, cultural differences must be considered to be a
problem when half of the respondents see it as a source
of conflict.
More than 51.9% of the respondents answered yes and
43.4% answered no to racial differences (B-3) as a
source of conflict. Only 4.6% were unsure. More than half
of the respondents see race as a source of conflict, thus
implying that more than half do not work in racial
harmony and see race as a problem. 53.7% of the
respondents indicated that the implementation of new
management techniques (B-4) is a source of conflict.
Thus management is not implementing the new
techniques in the appropriate manner. Management must
evaluate existing techniques and look to alternative
management techniques.
The availability of resources (B-5) is very important for
any employee and workgroup to function efficiently
(Bartos and Wehr, 2002). Keeping this in mind, 51.9% of
the respondents indicated that availability of resources is
a problem in the organisation. This is an indication that
there is a lack of resources in the organisation Kreitner
and Kinicki (2008) insist that a lack of resources will lead
to intergroup conflict.
Muzafer (1966), Levine and Campbell (1972),
Hewstone and Brown (1986), Insko and Schopler (1998)
and Hewstone and Cairns (2001) indicate that
competition (B-6) is one of the main sources of intergroup
conflict. 38.9% of the respondents indicated that competition
is a source, while 47.2% indicated that it is not and
13.9% were unsure. Most of the respondents did not see
competition between departments or work groups as a
source of conflict but 38.9% is a large portion and this
proves that competition is a problem in organisations and
that management must aim at creating positive rather
than negative competition.
Thompson (2004) indicates that implementation of new
technology (B-7) plays a major role in organisations,
teamwork and group work. Thus it is important to
determine whether new technology plays a role in the
organisation and conflict. Only 34.4% of the respondents
indicated that the implementation of new technology is a
source of conflict, while 54.6% indicated no and 10%
were unsure. Thus the majority does not see this as a
source of conflict. 48.1% of the respondents indicated
that both the extent and contents of their work (B-8) are
sources of conflict. When goals and work are unclear, it
might lead to conflict.
Respondents were all clearly unsure about the
distribution of resources (B-9) in the organisation. 38% of

Table 2. Factors contributing to conflict in a large mining organization.
Werner et al. 9035
Variable N Mean Median Skewness Kurtosis Yes (%) No (%) Unsure (%)
B-1 108 1.65 1.00 0.685 -0.915 51.9 31.5 16.7
B-2 108 1.58 1.50 0.649 -0.551 50.0 41.7 8.3
B-3 108 1.53 1.00 0.595 -0.581 51.9 43.5 4.6
B-4 108 1.59 1.00 0.779 -0.645 53.7 33.3 13.0
B-5 108 1.61 1.00 0.723 -0.698 51.9 35.2 13.0
B-6 108 1.75 2.00 0.366 -0.840 38.9 47.2 13.9
B-7 108 1.77 2.00 0.236 -0.621 34.3 54.6 11.1
B-8 108 1.64 2.00 0.616 -0.728 48.1 39.8 12.0
B-9 108 1.83 2.00 0.288 -1.188 38.0 40.7 21.3
B-10 107 1.50 1.00 1.051 -0.226 61.1 25.9 12.1
the respondents indicated that they see this item as a
factor contributing to conflict. According to Marx (1965),
Muzafer (1966), Kreitner and Kinicki (2008), and Brown
(2002), the distribution of resources is a source of
conflict. This also applies to this organisation where
uneven distribution of resources clearly is a source of
conflict.
Misuse of power (B-10) by superiors and group leaders
is the last item in Section B. There is an indication that
power plays a major role in intergroup conflict and is a
major source of intergroup conflict. This is also evident in
this organisation. 61.1% of the respondents answered
yes, 25.9% no and 13% unsure. This is an indication that
superiors are in constant battle for power and that they
misuse power. This can pose a serious problem and
management must seek to eradicate this misuse of
power by certain group leaders and superiors.
The resulting consequences of intergroup conflict
If an employee experiences intergroup conflict it may
influence him/her in the form of stress, anger, alienation
and declining cooperation. This might in turn affect the
functioning of the group and intergroup relations
negatively (Allen, 1982; Hewstone and Brown, 1986;
Robbins, 1996; Hewstone and Cairns, 2001; Brown,
2004). Galinsky (2002) indicates various strategies which
the individual can implement in order to reduce or resolve
intergroup conflict and create better employment
relations. Thus it is important to identify what influence
intergroup conflict can have on the employees or
individual group member.
Section C consists of ten items. Items C-1 to C-8
directly implicate the influences of intergroup conflict on
the individual, while items C-9 to C-10 ask two important
questions which directly implicate the management of the
mining organisation.
C-1: Not possible to perform;
C-2: Become hostile towards colleagues;
C-3: Decline cooperation;
C-4: Develop stress;
C-5: Consider a job change;
C-6: Alienate myself from other staff members or group
members;
C-7: Develop physical health problems;
C-8: Productivity decreases;
C-9: Are you aware of any policy document or standard
procedures that address conflict handling and solution?
C-10: Would you be willing to take part in a training
programme in order to gain more knowledge on conflict
and on handling/managing it?
It is evident from Table 3 that skewness and kurtosis are
within +3.0 to -3.0 and + 7.0 to -7.0. Normality therefore
prevails.
More than 29.7% of the respondents answered yes,
53.7% answered no and 16.6% were unsure. This is an
indication that more than half of the respondents are still
able to perform (C-1) under the pressures of intergroup
conflict, while almost 30% answered yes. This
performance with conflict can indicate that conflict occurs
in organisation almost daily (Kreitner and Kinicki, 2008).
Only 23.1 answered yes and 12% were unsure on
question which tested the employee’s hostility towards
colleagues (C-2). The majority, 64.7%, indicated that they
do not become hostile towards colleagues.
Cooperation (C-3) is very important in intergroup
relations and if cooperation fails it will lead to full-blown
intergroup conflict (Muzafer, 1966; Tajfel, 1979; Tajfel
and Turner; 1983; Hewstone and Cairns, 2001; Brown,
2004; Kreitner and Kinicki, 2008; Nelson and Quick,
2006). 35.2% of the respondents answered yes, while
49.1% answered no. This is an indication that
cooperation can decline when conflict exists, while 49.1%
of the respondents still cooperate when they experience
inter-group conflict. A large percentage, 15.7% of the
respondents were unsure about the occurrence of
cooperation.
Conflict can be very stressful (C-4) and might influence
the employment relations wellness of the organisation.
Stress and intergroup relations go hand in hand
(Ratzburg, 1999). 61.1% of the respondents answered

9036 Afr. J. Bus. Manage.
Table 3. Influences of intergroup conflict on employees.
Variable N Mean Median Skewness Kurtosis Yes (%) No (%) Unsure (%)
C-1 108 1.87 2.00 0.157 -0.761 29.6 53.7 16.7
C-2 108 1.89 2.00 0.018 -0.103 23.1 64.8 12.0
C-3 108 1.81 2.00 0.275 -0.874 35.2 49.1 15.7
C-4 108 1.45 1.00 1.029 0.042 61.1 32.4 6.5
C-5 108 1.70 2.00 0.461 -0.816 42.6 44.4 13.0
C-6 107 1.84 2.00 0.162 -0.623 29.6 55.6 14.0
C-7 108 1.79 2.00 0.107 -0.401 30.6 60.2 9.3
C-8 108 1.67 2.00 0.507 -0.728 44.4 44.4 11.1
C-9 108 1.59 1.00 0.756 -0.620 52.8 35.2 12.0
C-10 108 1.29 1.00 1.988 2.645 79.6 12.0 8.3
yes. This is an indication that stress plays a major role in
the individual experience of intergroup conflict. Only
32.4% indicated that they do not experience stress and
6.5% were unsure.
Item 5 consisted of employees considering a job
change when experiencing conflict. 42.6% indicated yes,
44.4% no and 13% were unsure. This can be alarming for
the organisation and management. It must imply that
conflict is so severe at times that 42.2% of the
respondents considered a job change. The 13% that
were unsure might be in two minds – leave the job or get
on with it. When employees want to leave the organisation,
a quick solution must be implemented to reduce
the conflict and create better employment relations.
The construct applying to this question is alienation (C-
5). Karl Marx, in Havenga (2004), indicates that alienation
is an antecedent of conflict, and clearly can become a
problem in the workplace. 29.2% of the respondents
indicated that alienation takes place and that they
alienate themselves from co-workers and group
members. Twelve percent of the respondents were
unsure about alienation taking place. These employees
might start feeling alienated or are not sure whether they
are alienated. However, 55.8% of the respondents
answered no, indicating that they do not feel alienated.
Thus it can be seen as a positive, indicating that
alienation does not play such a huge role in the
organisation and group work.
Item 7 can be closely associated with employee
wellness. If the employees develop physical health
problems it will influence their ability to perform. Most of
the respondents (60.2%) indicated that they do not
develop physical health problems, which can be seen as
positive. However, 30.2% indicated that they do endure
physical health problems resulting from conflict. This can
be a problem, because from a population of 108
respondents 30.2% developed physical health problems.
Conflict can cause stress and the management must
introduce remedies to limit stress and create employee
wellness.
Item 8 included productivity. Productivity is very
important for the functioning of an organisation. No
organisation can be successful if the organisation,
employees and workgroups are not productive. 44.4%
respondents answered yes or no respectively and 11.1%
unsure. An even percentage of respondents indicated
that their own productivity decreases or does not decrease.
It is alarming to note that 44.4% of the employees
who suffer from conflict will display deteriorating
productivity. The organisation can lose a lot of time,
money and resources due to this. However, this also
shows that 44.4% of the respondents are still productive
when experiencing conflict or intergroup conflict.
In C-9, the following question was raised: Are you
aware of any policy document or standard procedures
that address conflict handling and solution? 52.8% of the
respondents indicated that they were aware of such a
policy, while 35.2% said no and 12% were unsure. This
adds up to 47.2% of the respondents that are not aware
or partially aware of a conflict handling policy. The
management must ensure that all employees are aware
of such a policy or procedure in order to deal with conflict
appropriately. Management must ensure that employees
are educated regarding conflict in the workplace.
Item 10 raised the following question: “Would you be
willing to take part in a training programme in order to
gain more knowledge on conflict and on handling/
managing it?” The majority of the respondents (79.8%)
indicated yes. This implies that there are no such training
programmes in place in the organisation and that there is
a high demand for conflict training programmes.
The respondents own experience of intergroup
conflict
Section D evaluates the employees‘ own experiences of
intergroup conflict with the results portrait in Tables 4 and
5. The following were the items in Section D:
D-1: To what degree (daily, weekly, monthly or yearly) do
you experience intergroup conflict in the workplace?

Table 4. The employees’ frequency-experience of intergroup conflict.
Variable N Daily (%) Weekly (%) Monthly (%) Yearly (%) Never (%)
D-1 108 52.3 22.2 15.7 9.3 0.0
Table 5. The employees’ own experience of intergroup conflict.
Variable N Yes (%) No (%) Unsure (%)
D-2 108 24.1 69.4 65
D-3 108 64.8 26.9 8.3
D-4 108 43.5 49.1 7.4
D-5 108 47.2 39.8 13.0
D-6 108 88.0 11.1 0.9
D-7 108 30.6 59.3 10.2
D-2: Do you see all conflict in the organisation as
negative?
D-3: Do you think conflict between groups/ or
departments affect productivity in the organisation in a
negative manner?
D-4: Do you think conflict can have positive outcomes for
the organisation?
D-5: Do you think it is important that groups and
departments function interdependently of each other?
D-6: Do you think cooperation between groups and
departments is necessary to achieve organisational
goals?
D-7: Do you think conflict between groups or departments
can be eliminated in the organisation?
D-8: Do you feel that intergroup conflict can be
eliminated?
D1 tests to what degree (Daily, weekly, monthly or yearly)
the employees experience intergroup conflict. The results
in Table 4 shows that most of the respondents of this
organisation (52.3%) experience intergroup conflict on a
daily basis, while 22.2% said on a weekly basis, 15.7%
on a monthly basis and 9.3% on a yearly basis. The
degree of conflict can fluctuate, especially between
departments, for reasons of cooperation and negotiations
(Hewstone and Brown, 1986; Nelson and Quick, 2001).
D2: As depicted in Table 5 569.4% of respondents
indicated that they do not see all conflict as negative,
while 21.1% indicated yes and 6.5% were unsure. This
can be seen as a positive, because the majority of the
respondents did not view all conflict as negative.D3: In
this mining organisation 64.8% of the respondents
indicated that intergroup conflict would affect productivity
negatively, 26.9% indicated no and 8.3% were unsure.
This means that most of the respondents see intergroup
conflict affecting productivity negatively.
D4: Item D5 evaluated positive outcomes of intergroup
conflict and 43.5% indicated yes, 49.1% no and 7.4%
were unsure. This means that 43.5% of the respondents
Werner et al. 9037
feel that intergroup conflict can have positive outcomes.
This is very important because positive conflict outcome
will create sound employment and intergroup relations.
D5: Interdependent functioning is one of the most
important aspects in intergroup relations and this is
evident in the response. More than 47% of the
respondents indicated yes, 39.8% no and 13% were
unsure. Most of the respondents indicated yes, which
stresses the importance of interdependency in intergroup
relations.
D6: Cooperation is vital to sound intergroup relations
(Muzafer, 1966). Eighty-eight percent of the respondents
indicated yes to cooperation in order to achieve
organisational goals, while only 11.1% indicated no and
0.9% was unsure. This highlights the importance of
cooperation in intergroup relations.
D7: In item D7, elimination of intergroup conflict was
evaluated and 30.6% of the respondents felt that
intergroup conflict can be eliminated, while 59.3% said no
and 10.2% were unsure. It is obvious that most of the
respondents accept the fact that intergroup conflict will
never be eliminated.
DISCUSSION
The empirical data was evaluated and discussed in this
chapter. Intergroup conflict is such a broad field of study
that much more intense research on intergroup conflict in
The most significant findings show that the 108
respondents consisted of 74 (68.5%) male workers and
34 (31.5%) female workers. Respondents with Afrikaans
as home language are the highest percentage respondents
with 32.4%. The English-speaking respondents
consist of 14.8%, while the other 53% are made up of the
African language groups. This is an indication that this
organisation’s workforce is culturally diverse. The
majority of male respondents (56.8%) see affirmative
action as a source of conflict and 80% of respondents

9038 Afr. J. Bus. Manage.
with grade 10 or lower see AA as a source of conflict.
75% (25) of Afrikaans respondents and 63% (11) of
English respondents indicated that affirmative action is a
source of conflict, while only 38% (57) of African
language respondents indicated that affirmative action is
a source of conflict. This is indicative of a huge difference
and the Afrikaans respondents see affirmative action as a
matter of great concern in the organisation. There is also
a considerable difference in the way the departments
experience affirmative action. The Phi is 0.621, which is
relatively high and may be attributed to the way in which
affirmative action is implemented and applied in the
various departments.
Competition between groups, which is a matter of great
concern in intergroup relations, is evident in this
organisation. 38.9% of respondents see competition as a
source of conflict, while in the mining department, 75%
(9) of the respondents, 100% (3) of construction and 82%
(9) of the engineering department respondents indicated
that competition is a source of conflict. The mining,
construction and engineering departments experience
much more competition between departments than the
other departments. Thirty-seven percent of respondents
with 1 to 4 years’ tenure indicated that the availability of
resources is a source of conflict, while 67% of
respondents with 1 to 4 years’ tenure indicated that there
is an uneven distribution of resources as a source of
conflict. This is very contrasting.
Misuse and abuse of power by superiors is the most
prominent source of conflict in the organisation. More
than 61.1% of the respondents indicated that abuse of
power is a source of conflict. Misuse of power by
superiors and tenure has a Phi of 0.363. Seventy-one
percent of respondents with 5 to 10 years’ tenure, 71%
with 11 to 15, 75% with 16 to 20, 62% with 21 to 25 and
88% with 31+ years’ tenure indicated that misuse of
power by superiors and group leaders is a source of
conflict, while only 42% of respondents with 1 to 4 years’
tenure indicated the same. Thus respondents with longer
than 5 years’ tenure experience a larger amount of power
abuses by superiors.
Another significant finding is that 79.8% of the
respondents indicated that they are willing to participate
in a training programme in order to gain more knowledge
on conflict and on handling/managing it; hence emphasizing
that there is a demand for such programmes and
that there might be a lack of conflict training in the
organisation. It was found that cooperation plays a major
role in intergroup conflict and intergroup relations.
Cooperation between groups or departments is vital to
performance in intergroup relations. Eighty-eight percent
of responses indicated this. It is also evident that in every
department and across all home language groups
cooperation between groups and departments is evident.
Another significant finding was that the higher the
qualification, the more the acknowledgment of
cooperation.
There is also an indication that the longer the tenure at the
organisation, the greater the importance of co-operation.
The afore-mentioned empirical findings relate to the
finding in the literature part of this study. Certain findings
correlate directly with findings in literature and support
the empirical findings.
CONCLUSION AND RECOMMENDATIONS
The findings of this exploratory study nonetheless provide
pointers and several productive avenues for continuing
research on the sources of conflict, which ultimately
should contribute to the emergence of more effective
conflict diagnosis and management strategies.
From the findings in the literature study it can be said
that a strong correlation exists between intergroup
conflict and employment relations wellness. It was also
found that healthy employment relations are necessary to
ensure healthy intergroup relations. Stress and burnout
play an important part in intergroup relations and
intergroup conflict. This is evident in the mining
organisation where 61.1% of the respondents indicated
that they feel stressed out when experiencing intergroup
conflict. Furthermore, 42.2% of employees consider a job
change and 30.2% of respondents experience physical
health problems when experiencing intergroup conflict. It
was found that cooperation is vital to creating healthy
intergroup relations. This is supported by the empirical
study according to which 88% of the employees of the
mining organisation indicated that cooperation is
necessary to achieve organisational goals. It was also
found that the longer an employees‘ tenures at the mining
organisation the stronger their appreciation for
cooperation.
In concluding the current study, albeit tentative, raised
awareness of the multifaceted nature of sources of
conflict and revealed both universal and idiosyncratic
content in the sources and effects of conflict. This
underscores the importance of maintaining a contextual
and systemic frame of mind when conceptualizing and
operationalizing sources of conflict and indeed when
contemplating the effective resolution of conflict in
organizational settings.
LIMITATIONS AND SCOPE FOR FUTURE RESEARCH
Notwithstanding the exploratory aims, the findings of the
current study should be interpreted with a measure of
caution. In the current study the range and nature of
sources of conflict and its manifestation have been
constrained by the theoretically-inductive approach
adopted by the researchers in conceptualising sources
and effects of workplace conflict. The results of the
principle components analysis suggest that more
potential sources of conflict exist than those reliably
extracted. Continuing research should consequently
concentrate on the theoretical elaboration and refinement

of the tentative measures employed in this study. This
should address both the range of potential sources of
conflict, and the item pool which operationalizes such
theoretically derived constructs. However, it would be
more productive and expedient to engage in in-depth
exploratory qualitative research to supplement the
prevailing understanding of theoretically-derived conflict
sources - as a precursor to elaborating and refining the
measurement instruments.
The current study furthermore indicates that reductionistic
conceptualisations of otherwise elaborate and
complex dynamic constructs such as sources of
organisational conflict, is a material threat.
The exploratory design utilised in the study, while
revealing in many respects, nonetheless imposed constraints
which precluded analyses and observations on
causality. Future research should also probe the extent to
which specific sources of conflict contribute to specific
response patterns (experienced impact of conflict), and
whether specific types of conflict (sources) may elicit
specific behavioural, emotional and psychological
responses. This points to a need also for more systemic
theories of conflict that not only reveal causality between
antecedent conditions, sources and experienced effects
of conflict, but adequately accounts for personal (for
example, psychological), institutional and broader contextual
factors that relate to the phenomenon of
workplace conflict.
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African Journal of Business Management Vol.6 (31), pp. 9040-9055, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.652
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
A framework for assessing the riskiness of
construction of a structural experiment project under
Sino-African laboratory environment
Arnaud R. Agnantounkpatin* and Lian Ying Zhang
School of Management and Economics, Tianjin University-China.
Accepted 16 July, 2012
Every construction project, whether small size (laboratory construction experiments) or big size (real
scale) project, needs a structured management framework. An experimental construction project in a
laboratory can present as much risks as a real scale construction project. And as bases for theory,
laboratory experiments should be carried with a careful management structure to insure the
correctness of the results; therefore, risk management is an important issue during laboratory
experiments. This paper investigates the state of art of laboratory experiments management through
literature by exploring the existing frameworks for quality and risks management in laboratory
environment. Then we evaluate and present the value of this concept by implementing the proposed
framework to assess the riskiness of a construction experiment project under international (Sino-
African) laboratory environment. The results show that, using the risk management framework during
the laboratory experiments improves the accuracy of the obtained results therefore increases the
reliability of the proposed theory. The riskiness of the case experiment project is calculated using
Analytic hierarchy process (AHP) assessment tool (Expert choice) and the result shows that this case
project is a low risk level project.
Key words: Framework, risk management, laboratory experiment management, international laboratory
environment, reliability.
INTRODUCTION
Much of the work in management science lives at the
boundary of analytical and behavioral disciplines.
Laboratory experiments are a major method used in the
construction industry and also in many other social
science fields (economics, psychology, sociology etc.).
There are three major purposes that laboratory
experiments serve: (1) to test and refine existing theory,
(2) to characterize new phenomena leading to new theory,
(3) to test new institutional designs (Roth, 1995a).
Laboratory studies complement other methods by
bridging the gap between analytical models and real
*Corresponding author. E-mail: ronaldenbj@yahoo.fr. Tel:
+8618602219741.
business problems. Analytical models are built to be
parsimonious and general. These models can be tested
using a variety of empirical methods, including surveys,
field studies, field experiments, or laboratory experiments.
All empirical methods involve a trade-off between the
internal and the external validity. Surveys and field
studies that use secondary data have high external
validity (they are close to the real settings being studied),
but may be low on internal validity because they often
suffer from being confounded, or not having all the data
that would ideally be required. This is because
researchers cannot directly manipulate the factors or
levels in the study, and have to accept the data that is
available to them. Therefore, the relative advantage of
laboratory experiments is control. Experiments can be
designed to fully manipulate all factors at all desired

levels, and to match the assumptions of the analytical
model being tested. So, laboratory experiments are high
on the internal validity, but because the environment is
often more artificial, they are lower on the external validity.
A good experiment is one that controls for the most
plausible alternative hypotheses that might explain the
data. It also allows the researcher to cleanly distinguish
among possible explanations.
Three factors make experimental work rigorous. The
first one is theoretical guidance. To interpret the results of
an experiment, researchers need to be able to compare
the data to theoretical benchmarks. Systematic deviations
from theory can provide insights into factors missing from
the analytical model, and guidance into how the model
can be improved. The second factor is induced valuation.
The third factor is careful control of institutional structure.
Strategic options and information available to participants
should match those assumed by the theoretical model.
The art of designing good experiments (as well as the art
of building good analytical models) is in creating simple
environments that capture the essence of the real
problem while abstracting away all unnecessary details.
Thus, the first step in doing experimental work is to start
with an interesting theory. What makes a theory
interesting is that; (1) it has empirical implications, and (2)
these implications are worth testing, meaning that they
capture a phenomenon that is sufficiently real and
interesting so that learning about it adds to our
knowledge of the real world. Laboratory experiments tend
to be relatively inexpensive compared for example, to
experiments conducted in natural or physical sciences.
Many research-oriented universities provide small grants
for data collection that is often sufficient for a study with a
reasonable sample size.
One of the questions often asked about laboratory
experiments is about whether their results can be carried
over into the real world. Smith (1982) addresses this
question with the concept of parallelism. But to insure that
the results of a laboratory experiment can be reliable and
used in the real world, it’s imperative to carry experiments
under a good management system. This article investi-
gates the state of art of laboratory experiments
management through literature by exploring the existing
frameworks for quality and risks management in
laboratory environment, then discusses the important of
risk management during laboratory experiments before
proposing a framework for laboratory construction
experiments projects risk management. We then evaluate
and present the value of this concept by implementing
the proposed framework in the management process of a
construction experiment project under international (Sino-
African) laboratory environment.
i. Why pay any attention to outcomes in an experiment?
ii. What more can possibly be learnt about project risk
management from laboratory that are not already learned
in the field?
Agnantounkpatin and Zhang 9041
The answers to these two questions give the importance
of the work in this paper.
The main objectives of the work in this paper are to: (1)
identify the sources or areas of risk and uncertainty and
their sub-areas during laboratory structures experiments
for Sino-African International Construction Projects, (2)
develop an assessment model for the effects of these
sources using Analytic hierarchy process (AHP) and (3)
test the proposed model with a case study.
Laboratory experiments management
Multiple research methods applied to the same question
give better results than a single method; experimental
research enables one to test the impact of specific
variables in repeated controlled settings, something that
is never available to a scholar studying field settings. One
gains external validity in doing field research and internal
validity in the laboratory. But when a researcher can use
both methods related to one theoretical set of questions,
the scientific community can have more confidence in the
results (Ostrom, 2006). The laboratory experiments
project management is based on normal management
system approach. This implies that identifying,
understanding and managing a system of interrelated
processes for a given objective improves the
organization’s effectiveness and efficiency. An effective
management system approach should be built on the
concept of continual improvement through a cycle of
planning, implementing, reviewing and improving the
processes and actions that an organization undertakes to
meet goals. This is known as the PDCA (Plan-Do-Check-
Act) principle:
- Plan: Planning, including identification of hazard and
risk and establishing goals,
- Do: Implementing, including training and operational
issues,
- Check: Checking, including monitoring and corrective
action,
- Act: Reviewing, including process innovation and acting
to make needed changes to the management system.
Many researchers working in a laboratory think of
laboratory experiments management as additional
burdensome work that is necessary only because it’s
required by regulatory. The College of American
Pathologists first introduced Q-PROBES to acquire
national laboratory performance data on selected quality
performance measurements (Howanitz, 1990). Therefore
it seems that a large segment of medical laboratory
community has yet to understand that quality must be
built into, not inspected into work processes to ensure

9042 Afr. J. Bus. Manage.
quality and patient safety (Food and Drug Administration
Department of Health and Human Services, 1987). Many
laboratories miss out by focusing on their destination
(that is, passing an accreditation inspection) instead of
more carefully mapping out and enjoying their journey
(management of day to day laboratory work). Risk
management concept in the health care industries
(laboratories) have matured and harmonized over the
years (Martin and Perez, 2008). There are still very few
considerations in the construction industry (laboratory
experiments projects), but the use of risk management is
now an expectation in all aspects of every business.
It should be possible to reduce or eliminate
unwarranted work at all risk levels but especially on low
risk areas, freeing critical resources to mitigate higher
risks (Samardelis and Cappucci, 2009). Thus, focusing
effort on laboratory experiments projects where theories
are born and therefore insure the accuracy of those
theories would help reducing risks in real scale projects.
The amount of involvements (materials, equipments,
human resources, etc.) in laboratory experiments projects
is far smaller than real scale project but the need for risk
management is as important because errors due to
failure in the experiments management can generate
incorrect results and have high impacts on the real scale
projects risk management. Therefore applying a good risk
management system to laboratory experiments project
can help improving the risk management of real
construction projects.
Risk assessment in laboratory experiments projects
A variety of hazards exist in the laboratory work
environment and the risks associated with these hazards
can be greatly reduced or eliminated if proper
precautions and practices are observed during the
laboratory experiments process. To manage these risks
and in response to a heightened concern for safety in the
workplace but mostly to the accuracy of the results of the
experiments, these risks need to be assessed and
managed properly. Like in real scale project risk
management, the first step and the most important part of
an experiment risk management is the risk assessment
(See Figure 1)”. Carrying out a risk assessment for an
experiment requires three simple steps:
1. Indentify the hazards and problems associated with the
materials, equipments and tasks,
2. Assess the risk of exposure to these hazards and
problems,
3. Control the risk by implementation of procedures and
precautions.
Applying the risk management approach to safety in the
laboratory means completing a risk assessment of any
research project or experiment before work begins. Every
time a new experiment is to be carried out, a risk
assessment must be performed and documented by the
researcher in consultation with the supervisor. A risk
assessment should identify potential hazards and
determine the actions or controls required to eliminate or
reduce any risks to the health of workers. Risk
assessment involves considering the following steps
when undertaking a research project:
1. Determine the purpose of the project, where, when and
how will the work be done, and will do the work (level of
knowledge, skills and expertise),
2. Identify the specimens and experiment process or
techniques,
3. Determine the potential risks and hazards involved by
gathering information about the materials and equipments
or tools to be used. Are there other possible hazards
associated with the project (electrical, etc),
4. Evaluate the level of risks. This evaluation is based on
the project members’ knowledge of the hazards involved
and what can go wrong,
5. Determine the actions and controls to be taken. This
may include precautions such as personal protective
equipments, specific handling procedures or any
particular disposal methods required,
6. Monitor and review. The whole process should be
monitored and reviewed to ensure that initial evaluation
and controls were effective. Re-evaluation of the risks
and control will be necessary with changes to the
specimens, processes and procedures.
METHODOLOGY
The framework for risk management during construction
experiments using AHP
Risk assessments begin with a well-defined problem description or
risk question. When the risk in question is well defined, an
appropriate risk management and the types of information needed
to address the risk question will be more readily identifiable. As an
aid to clearly defining the risk(s) for risk assessment purposes,
three fundamental questions are often helpful:
1. What might go wrong?
2. What is the likelihood (probability) it will go wrong?
3. What are the consequences (severity)?
These questions help develop a risk matrix which is a summary of
the different risks involved in any process. It considers the
consequences (Table 1) and the likelihood (Table 2), and a risk
score (Table 3) is calculated according to the risk matrix. AHP has
been applied in different fields (Arbel and Seidman, 1984; Zahedi,
1986; AI-Bahar, 1988; Bord and Feinberg, 1989; Mustafa, 1987;
Liberatore, 1987; Khorramshahgol et al., 1988). The AHP is used
here to rank the sources or areas of risk and uncertainty and their
sub-areas during laboratory structures experiments for Sino-African
International Construction Projects. It will provide a sample
methodology for risk assessment. The framework presented in this
paper was developed in the following steps:

R
I
S
K
C
O
M
M
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N
I
C
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T
I
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Table 1. Risk consequences rating.
INITIATE RISK
MANAGEMENT PROCESS
ASSESSMENT
CONTROL
Risk Identification
Risk Analysis
Risk Evaluation
Risk Reduction
Risk Acceptance
OUTPUT/RESULTS
Review Events
Figure 1. Typical risk management process.
Not
accepted
Not
accepted
Agnantounkpatin and Zhang 9043
Scale (1-9) Consequences Personal damage Cost increase ($) Time delay Environment
1-3 Insignificant No treatment needed < $ 1 K < 1 h Potential impact
3-5 Minor First Aid treatment $ 1 K - 5 K 1 h - 1 day On site impact
5-7 Moderate Medical treatment $ 5 K - $ 15 K 1 day - 1 week Off site impact
7-9 Major Extensive injury or death >$ 15 K > 1 week Community alarm
Table 2. Risk likelihood rating.
Table 3. Risk score classification.
Risk Class Percentage Description
A (very likely) 50-100 Will occur in most circumstances
B (likely) 25-50 Could occur at some time
C (less likely) 5-25 Could occur but only rarely
D (not likely) 0-5 May occur but probably never
Risk score class Definition Description
H High Very Likely to occur with major or moderate consequences
M Medium Likely or less likely to occur with moderate or minor consequences
L Low Less or not likely to occur with minor or insignificant consequences
R
i
s
k
m
a
n
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g
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t
t
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9044 Afr. J. Bus. Manage.
Step 1
A comprehensive literature review is performed to investigate the
common methods used risk assessment in construction projects.
Step 2
Surveys (questionnaires and onsite interviews) are also performed
in order to collect useful data from the construction practitioners
and experts in International construction Projects, more importantly
Sino-African ICPs but also from experts in laboratory experiment
management.
Step 3
Based on the information and data collected from steps 1 and 2, an
AHP risk model is developed. Firstly, the risks involved in laboratory
experiments projects are identified and classified according to their
sources. Then a hierarchy is developed before the performance of
the AHP analysis to obtain the risk level of the project. The survey
result is summarized in Table 4.
Survey sample
At the beginning of the research investigation, the survey overall
sample is presented as follows:
1. 100 experts were contacted to ask for their availability to
participate in the surveys,
2. 86 experts responded favorably to be interested and
questionnaires were sent to them,
3. At this stage, 72 responded to our research team but only 58
responses were valid (14 experts did not respond and 14
responses were judged to be invalid). The experts were considered
from different cultural background and nationalities (Chinese,
Africans, other foreign experts), different disciplines (engineers,
managers, architects, government officials, etc) and different
projects backgrounds (Sino-international projects, Afro-international
projects and Sino-African projects).
CASE STUDY: APPLICATION OF THE PROPOSED
FRAMEWORK TO CONSTRUCTION EXPERIMENT
PROJECT
Case project background
Introduction of the case experiment
Compared with reinforced concrete (RC) structure, steel
reinforced concrete (SRC) structure has characteristics of
high bearing capacity and good ductility, and so has been
applied in engineering widely (Busaell, 1995). However,
under action of strong earthquake, plastic hinge at beam
end may induce brittle fracture of welded joint between
beam and column and entry joint core, which may reduce
the seismic behavior of the SRC structure significantly
(Chou and Uang, 2002). In this case experiment, the
experimental investigation on seismic behavior of SRC
Table 4. Construction experiments identified risk factors and risk
sources.
No. Risks Sources
1 Earthquake
2
3
Fire
Weather
Acts of God
4 Flood
5 Damage to Equipments
6 Damage to Structures
7 Labor Injuries
Physical
8 Subcontractors financial defaults Financial
9 Pollution
10 Safety rules
11 Hostility with neighbors
12 Defective design
13 Design changes
14 Inappropriate specifications
15 Equipments failure
16 Different site conditions
17 Management skills
18 Safety
19 Languages
20 Religions
Environmental
and Political
Design
Job site
Cultural
21 Bad quality of specimens Quality
22 Technology transfer
23 Technology implementation
Technology
24 Availability of special equipments Resources
25 Delay in material supply
frame structure with dog-bone type reduced beam
section is systematically performed. A 1/3 scale model of
SRC frame with reduced beam sections is designed and
fabricated. From the similitude between the original frame
and the specimen, the specimen different members are
designed. This design includes a detailed calculation of
flexural strength, shear strength and internal forces of the
frame members, satisfying seismic. The results show that
the SRC frame structure with “dog-bone type” reduced
beam sections has good ductility, strong deformation
ability, high energy dissipation and bearing capacity, so
as to meet the requirement for the seismic behavior of
general ductile frame. Then the use of “dog-bone type”

Figure 2. Laboratory experiment project members.
reduced beam section improves the seismic capacity of
the SRC frame structure (Agnantounkpatin, 2007).
Experiment project members and roles
The case experiment is carried out by five engineers and
one general supervisor (Figure 2). The General
supervisor or Professor is considered as the Project
director in this case study and his responsibility is to
supervise and control the experiment project process at
every stage and take important decisions; the
Management Science PhD is responsible for the overall
management of the experiment process from the design
and construction stages to the final experiment phase. In
this case, he has the duty to make sure the risk model is
properly applied; the Structures engineering PhD is
responsible for the design of the experiment specimens
and models, he is responsible for handling all technical
issues during the management of the experiment process
and the M.S students (Engineering and Management)
assist the PhDs in their different tasks and mainly
supervise the subcontractor during the construction and
installation of the experiment specimens and make sure
they respect laboratory guidelines
Case experiment design basis
To perform a seismic design of a construction structure,
Agnantounkpatin and Zhang 9045
we must first calculate the seismic action, the structure’s
components seismic effect, and then the internal forces
and the deformation of the structure and components
under the seismic action including the bending moment,
the shear force, the axial force and the displacement. The
second step is to combine the seismic effect and the
other loads effects, check the structure and components
strength and deformation in order to satisfy the “no
damage under small earthquake, repairable under
moderate earthquake and no collapsing under strong
earthquake” design requirements (Isao and Hiroshi,
2004). This case experiment, satisfying the similarity
requirements between the real scale frame and the
experiment model, designs a 1/3 scale frame. Then, a
push over analysis is performed to calculate the
horizontal displacement of the whole frame and
simultaneously analyze the position of the plastic hinges
on the model frame. The SRC model frame design also
satisfies the “strong column-weak beam” and “strong”
seismic design requirements (Park, 1998).
Seismic performance experiment
A pushover analysis was performed in order to study the
elastoplasticity of the steel reinforced concrete (SRC)
frame as shown in the Figure 3a and the results of the
pushover analysis are presented in the Figure 3b. After
the design and pushover analysis was the seismic
experiment was carried out using the loading procedure,

9046 Afr. J. Bus. Manage.
Figure 3a. Location of the plastic hinges.
illustrated in the Figure 4. This experiment project is used
as a model for a real scale construction project. The
P
N1
N1
c c
N1
Figure 3b. Loading schematic of the SRC frame.
b
b
b
specimen design parameters and experiment results
(seismic performance) are used for the design of the real

P(kN) Δ (mm)
2Δy 4Δy 3Δ y
1Δy 1Δy 2Δ
Py
80
40
-40
-80
-Py
y
3Δ y
4Δ y
Load control
Displacement control
Figure 4. Loading procedure of the experiment.
scale buildings.
The AHP risk assessment model
looping
In this part, we apply the AHP to assess the risks of the
case experiment by using the following steps:
Identification of the project risks
We proceed to a classification of the various potential
sources of the probable risks for this case project. Ten
risk factors and 25 different risks (Table 4) that can affect
the level of risk for the case experiment are identified but
only the most significant risk factors are categorized to be
used for this case study. The proposed classification
scheme is composed of five risk categories:
Financial risks: This case study is a laboratory
experiment, therefore the project is not very complex and
there are few complications associated with involving
international equipment but it is still important to identify
the financial risks that could be faced in the project, as
the model can be used for real scale more complex
projects. The financial consideration is: Subcontractor
financial default; this can result in serious financial
problems and time delays for the experiment. This
experiment project hired a subcontractor for the
construction and the installation of the specimens. The
qualifications of the subcontractor should be reviewed
carefully. Negligence by the subcontractor could result in
delays and consequently higher costs.
Act of God risks: The experiment is carried out outdoors
to meet the natural conditions as the real scale building.
Therefore, the materials and equipments used and the
resulting structure are subject to loss or damage during
their transportation to the site and during construction
because of these types of risks:
Agnantounkpatin and Zhang 9047
Earthquakes: The location of the experiment site is in a
moderately active seismic region (reason why we are
conduction a seismic performance experiment). The
experiment team is aware of the possible impact of an
earthquake on the experiment (but not likely).
Water damage and floods: The experiment site is subject
to flooding.
Soil subsidence and collapse: The site is considered to
be vulnerable to subsidence and collapse.
Weather: Severe weather conditions can affect the
experiment process.
Cultural risks: The experiment team members have
different cultural backgrounds; decision making can suffer
of some cultural issues such as linguistic and religious
issues:
Languages: The laboratory experiment team is composed
by Chinese and African (French speakers) researchers,
therefore there is a difference of languages as the
Chinese engineers are fluent only in Chinese language
with some English speaking level. The African engineers
are French speakers but can also speak English, thus,
the official communication language for this project is
English. But as English is only a second language for the
two parts, this can create some issues during
communication and influences negatively on the project
execution.
Religion: Religion and religious beliefs are very
developed in the African culture. In African countries the
most important religions are Christianity and Islam.
Christians and Muslims have the culture of resting at
least one day per week for going to church or mosque,
but as the Chinese intend to work seven days a week,
this also is considered as an issue during the interaction
between Chinese and African workers.
Physical risks: Some physical related risks can affect
the process of the experiments:
Damage to equipments: The equipment to be used for
the experiment and other related tasks are exposed to
physical damage.
Damage to structure: The frame structure (experiment
specimens) can be damaged during its displacements or
installation.
Labor injuries: The experiments team members are likely
to exposed corporal injuries due to the interaction with
materials or equipments.
Design risks: Design risks are being considered also:
Defective design: Human factor such as errors in the

9048 Afr. J. Bus. Manage.
Figure 5. Proposed risks hierarchy for the case study.
design calculation can conduct to a defective design.
Design changes: Possible design changes due to
probable changes in the experiment objective can occur.
Inappropriate specification: Due to the fact that the
designers are Chinese and the project is being carried in
Africa, there could be some differences in design
requirements. The design team has to check the local
specifications to make sure the design satisfy them.
While the list of potential risks in every category is neither
complete nor exhaustive, it represents most of the typical
risks associated with this kind of experiment project.
Describing every possible risk is impractical; therefore we
focus our attention on the details of the general
categories of risks.
The risk assessment model
Hierarchical structuring of the project risks: Only the
five most relevant risks factors as introduced in the
precedent part are selected for consideration. These
factors are incorporated in levels 2 (factors) and 3 (subfactors)
of the hierarchy (Figure 5). Level 1 is the
representation of the research goal, the risk level of the
experiment project taking in consideration both the
likelihood and the consequences of the pre-identified
risks. Level 4 contains the alternatives (three possible
levels or intensities of the total risk of the case project).
Relative Weights of the various risks factors: The
importance of the factors and sub-factors and the
likelihood of the levels of risk are determined. Judgments
are elicited from the research team members and
laboratory experts. In order to obtain the relative
importance of the five factors of the second level, this
model uses Expert choice to conduct an assessment
based on the results of the investigations questionnaires
(Figures 6 to 11). The judgments of the experts are based
on the AHP rating scale (Table 5). The relative weights of
importance are calculated using Expert choice software.
Figures 6 to 11 show the relative importance of the risk
factors at every level of hierarchy and according to the
overall goal of the assessment but also according to each
risk source. Therefore, according to the overall riskiness
of the experiment, Figure 4 shows that the risk factor
earthquake (from the Act of God risk source) has the
highest score, while the design changes risk factor has
the lowest score. The risk levels assessment are shown
by Figures 12 to 17. Figure 17 shows that the “medium
risk level” has the highest score on the graph, meaning
that the case study project is a medium risk level project.
Conclusion
The model uses the Analytic hierarchy process (AHP) to
analyze the hierarchy of the identified risks within each
level and to determine the relative importance of the risks
sources/factors by establishing priority among the risk
sources, risk factors and risks level. The analysis was
important because all the elements in a specific level
might not have the same degree of significance with
respect to the goal. The hierarchy of risks is
systematically evaluated using the “Expert choice”
software and the results show that the case experiment
project is a “medium risk level” project. Future research
works focus on the SA-ICPs risk sources and risk factors

Figure 6. Relative Importance of risk sources and risk factors with respect to the overall riskiness of the project.
Figure 7. Relative importance of risk factors with respect to “Acts of God source”.
0.450
0.240
0.205
0.105
0.297
0.158
0.136
0.088
0.069
0.056
0.043
0.036
0.035
0.029
0.022
0.020
0.011
Agnantounkpatin and Zhang 9049

9050 Afr. J. Bus. Manage.
Figure 8. Relative importance of risk factors with respect to “Physical source”.
Figure 9. Relative importance of risk factors with respect to “Design source”.
0.493
0.311
0.196
0.540
0.297
0.163

Figure 10. Relative importance of risk factors with respect to “Cultural source”.
0.750
0.250
Figure 11. Relative Importance of risk factors with respect to “financial source”.
Agnantounkpatin and Zhang 9051

9052 Afr. J. Bus. Manage.
0.60
0.50
0.40
0.30
0.20
0.10
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Acts of God
Figure 12. Project risk level with respect to “Acts of God source”.
0.00
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Physical
Figure 13. Project risk level with respect to “Physical source”.
0.407
0.385
0.208
0.515
0.304
0.181

0.60
0.50
0.40
0.30
0.20
0.10
0.00
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Design
Figure 14. Project risk level with respect to “Design source”.
0.50
0.40
0.30
0.20
0.10
0.00
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Cultural
Figure 15. Project risk level with respect to “Cultural source”.
0.433
0.375
0.191
0.496
0.329
0.175
Agnantounkpatin and Zhang 9053

9054 Afr. J. Bus. Manage.
0.60
0.50
0.40
0.30
0.20
0.10
0.00
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Financial
Figure 16. Project risk level with respect to “Financial source”.
Figure 17. Project risk level with respect to “overall” risk sources.
0.540
0.297
0.163

anking according to the likelihood and severity of the
involved risks. Risk response and risk treatment with their
application to ongoing and future projects are the next
steps of this research.
REFERENCES
Agnantounkpatin AR (2007). Experiment on Seismic Behavior of Steel
Reinforced Concrete Frames with Reduced Beam Sections, MS.
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Arbel A, Seidman A (1984). Performance evaluation of flexible
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Bord JF, Feinberg A (1989). A two-phase method for technology
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Busaell R (1995). Composite structure. London and New York: the
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Chou CC, Uang CM (2002). Cyclic performance of a type of steel beam
to steel -encased reinforced concrete column moment connection. J.
Constructional Steel Res. 58(2):63-663.
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Isao N, Hiroshi K (2004). Seismic design of composite reinforced
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Mustafa MA (1987). Microcomputer-based expert support system for
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Park R (1998). Design and construction of structural concrete for
seismic resistance, challenges concrete. The Next Millennium,
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Roth AE (1995a). Bargaining Experiments, the Handbook of
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African Journal of Business Management Vol.6 (31), pp. 9056-9064, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.654
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Buyer-supplier relationships in the Brazilian automotive
industry
Rosangela Maria Vanalle* and José Antonio Arantes Salles
Industrial Engineering Post Graduation Program, Nove de Julho University, São Paulo, Brazil.
Accepted 10 May, 2012
New forms of relationship and transaction between companies participating in the same supply chain
have been applied to improve competitive conditions in the chain. The auto industry is a striking
example of an industry in which the relationships between companies have been deeply renewed,
motivated mainly by the influence of automakers in the primary suppliers, which in turn work with their
own suppliers; forming a competitive alliance. This article aims to study the relationship between
customer-supplier in the Brazilian automobile industrial park, to realize a relational typology, from case
studies. Technical visits were made in fourteen supplying companies to achieve informations about the
main structural features and the relationship between manufacturer and supplier in the Brazilian
automotive industry. Interviews were conducted with managerial level professionals of industrial areasproduction,
logistics and supplies, product and process development, purchasing and human
resources. The results showed that the relations depend on institutional characteristics of the supplier,
the complexity of the technology components, the productive capacity and the history of relations
between customer and supplier. It could be concluded that the relationship between customer and
supplier companies surveyed are in the closest of the characteristics of an associative model, with
contractual relations and long-term high interdependence, but the price is still used as the main
criterion for winning automakers’ selection of suppliers.
Key words: Customer-supplier relationships, auto industry, supply chain.
INTRODUCTION
Brazil’s automotive industry has been experiencing the
challenges of competition on a global scale and has
undergone major transformations since the early 1990s,
particularly after the adoption of a sectoral legislation
called the “New Automotive Regime”. Multinational
automakers already operating in the country and other
new ones, resumed their investments to establish new
plants and update existing ones, modernizing products
and manufacturing processes, implementing new forms
of management and production and work organization,
and establishing new standards of relationships with their
suppliers.
New forms of relationships and operations between
clients and suppliers have been practiced by companies
*Corresponding author. E-mail: rvanalle@uninove.br or
salles@uninove.br.
seeking improvements in their chains. The newer plants,
for instance, have been constructed based on a standard
of greater participation of external suppliers in the socalled
Industrial Condominiums and Modular
Consortiums. In this context, the management of clientsupplier
relationships has become a theme of increasing
strategic important for industrial companies seeking
higher performance and competitiveness.
The literature points to a shift from the traditional
competitive and short-term client-supplier relationship to
strategic partnerships of long-term collaboration. In other
words, companies are encouraged to abandon the
traditional buyer-seller relationship in favor of a more
stable and collaborative relationship with their suppliers.
Competitive pressures on automakers and the urgent
need to reduce costs and speed up the development of
new products led automakers to seek new forms of
relationships with their suppliers, involving: (1) the search
for suppliers with the lowest global cost, regardless of

their geographic or national location (global sourcing); (2)
greater supplier responsibility in the development of the
design of the items they supply (the automaker provides
the performance specifications and information about the
interface between the component in question and the rest
of the vehicle, leaving it up to the supplier to design the
product using his own technology; and (3) the supply of
systems, subsystems or modules rather than individual
components (first tier suppliers assume responsibility not
only for the assembly of these items but also for
managing the suppliers in the next tier of the production
chain) (Costa and Queiroz, 2000; Humphrey and
Salerno, 2000).
The changes that have been taking place in the
worldwide automotive industry have affected several
countries, particularly Brazil, which was one of the
countries that most received industrial units of
automakers, be it through the installation of new and
innovative plants or through the restructuring and
updating of existing ones.
Today, practically all the world’s major automakers
have manufacturing units in Brazil, besides companies
such as General Motors, Volkswagen, Ford and Fiat,
which have been established in the country for several
decades. Associated with this new wave of investments
was the entry of new companies in the auto parts sector,
though the installation of new plants to meet the demand
for the production of new vehicle models, as well as
through associations with or acquisitions of companies of
domestic capital. Thus, the sector became
internationalized and integrated to the productive chain
on a global scale. Along this process, a new division was
established in the work of designing and producing parts
and vehicles. Brazil is thus the object of experimentation
of organizational arrangements that give a new role to a
given type of auto parts company (the systemists), that is,
the role of heading the so-called “modularity”. All the new
automakers’ manufacturing units – and even a good
number of the old ones, which have been remodeled –
now use this concept to some extent (Salerno, 2002).
The new investments transformed the country into a
stage for innovative experiences in the implementation of
new approaches such as the industrial condominium and
the modular consortium. The industrial condominium is a
configuration in which a few suppliers selected by the
automaker establish their installations in the surroundings
and inside the automaker’s plant, delivering components
or complete subsets directly beside the assembly line on
a just-in-sequence basis. These suppliers do not
participate in the final assembly of the vehicle, which
remains the responsibility of the automaker. An example
of this configuration is the VW/Audi plant located in
Paraná. Other innovative cases are the Condominiums of
GM in Gravataí (RS) and of Ford in Camaçari (BA).
In the modular consortium model, which was
implemented in Brazil by Volkswagen at its truck and bus
chassis plant in Resende, the automaker is responsible
Vanalle and Salles 9057
for the plant and the final assembly line, which it
coordinates, and for the final testing of the vehicles. The
modulists assume the previous assembly of the module
under their responsibility and its subsequent assembly
directly on the automaker’s final assembly line.
These strategies usually imply the delegation of
responsibilities to suppliers, who assume design and
manufacturing functions, which in turn increases their
power within the supply chain (Carvalho, 2008). This
overall panorama contributes to a deepening of the study
of client-supplier relationships in the automotive industry.
This paper discusses client-supplier relationships in
Brazil’s automotive industry based on former studies in
the automotive sector, and using case studies to
ascertain the possible tendency for the formation of a
new relational typology among these actors.
Client-supplier relationships in the automotive sector
Since the 1980s, changes have been observed in the
relationships between automakers and their suppliers,
many of which have taken place under the influence of
common practices of the Japanese industry. Womack et
al. (1992) propose that the principles of lean
manufacturing should be applied to the organization as a
whole, creating a lean company in which integration
among clients and suppliers is very close. From this
perspective, the workings of the productive sector can be
seen as a network of transformation and displacement of
supplies from raw materials to delivery of the end product
to the client, forming productive chains.
For Prochnik (2002), chains are created by vertical
disintegration and technical and social specialization that
exist simultaneously with competitive pressures for
greater integration and coordination between activities.
This implies the need for greater articulation among the
agents belonging to the chain, that is, management of the
chain – supply chain management, or simply SCM.
According to Lung (2003), since the 1990s there has
been a new movement of strategic rationalization in the
worldwide automotive industry, centered on intercompany
relations and on the coordination of the activities of the
automotive system (automakers and suppliers).
Knowledge about and management of client-supplier
relations is a strategically important theme, since the
relationships of manufacturers with their suppliers
influence the price and quality of a vehicle’s components.
These relationships have been changing since the late
1980s as a result of the restructuring of this sector and
the dissemination of a set of management practices. Until
that time, what predominated was the renewal of annual
contracts, a large number of suppliers per component,
and competition among suppliers based almost
exclusively on price. Currently, there is evidence that
contracts have been extended to at least the duration of
the life of a model, that the number of suppliers per

9058 Afr. J. Bus. Manage.
component has been reduced, and that competence is
based fundamentally on quality, cost, engineering and
delivery time.
The automotive industry has been a paradigm for
issues relating to supply chain management, principally
after the emergence of lean manufacturing. Researchers
and academics have studied relationships between
automakers and suppliers starting from the experiences
of Toyota. The literature contains several versions of
models that differ from the traditional models and that
present many common aspects. The first characteristic is
that they incorporate relationships of long-term
partnership (of cooperation) between manufacturers and
suppliers, with a high level of intercompany interaction.
The second characteristic is the juxtaposition of the (new)
model of cooperation and the traditional practices of
confrontation in the automaker-supplier relationship in
western companies. This binary approach between the
new and the old requires challenging changes in the
management of relations with suppliers, but can be a
strong competitive advantage in the globalized world.
Recent researches have shown an evolution in the
relationship model between automakers and suppliers.
Ro et al. (2008) present a combination of module
supplier and systems integrator roles have been used in
the United States, based initially on the Japanese
supplier model. As these authors say the United State
Original Equipment Manufacturers (OEM) purchasing
strategy is still a hybrid of market control and relational
contracting. Barros and Arkader (2004) demonstrate that
automaker-supplier relationships in Brazil’s automotive
industry have evolved to characteristics of the
cooperative model, marked by long-term relationships
and greater mutual dependence, but that they coexist
with disputes about price and cost issues, creating
tensions in the relationship that may negatively affect the
results of the supply chain.
Alves et al. (2003) researching Brazil’s vehicle engine
supply chain found that the strategies of the companies in
the chain and the configuration of the chain (structure
and relationships) interact and govern the course of
changes that are or can be implemented in the
companies and in the chain itself. The relationship
between each pair of companies in the chain and the
forms of organization of Production adopted by these
companies are conditions by their strategies and by the
configuration of the chain. It was also observed that the
relations of the automaker under study with its direct
suppliers depended on the supplier’s institutional
characteristics, on the transaction (involving the
technological complexity of the component and its stage
of development), on the companies’ technological and
production capacities, and on the relationship and history
of relations between the automaker and the supplier.
Identifying suppliers as “partners” or “adversaries” has
been one of the more common ways of defining the
automaker-supplier relationship. However, allocating the
possible contractual relations at one of the two extremes
of the spectrum has led to reflections about the fact that
not all suppliers can be considered partners, be it due to
their business volume, the strategic importance of the
component supplied, or their technological capacity, etc.
Possibly, the automakers cannot maintain associative
relationships with all their suppliers due to limitations of
time, resources, capacity, etc. This situation has led to
the acceptance that not all relationships will be of
partnership, not all of them will be marked by an
atmosphere of confrontation, and that the existence of
intermediary positions between the two extremes should
be considered.
The typology of possible client-supplier relationships
can be represented as a continuum, ranging from a
relationship of adversaries to a situation of partners,
passing through a relationship of collaboration as a
function of the behavior of the two parties (Sánchez and
Pérez, 2004). Returning to this point, Sanchez and Perez
(2005) analyzed the evolution of the manufacturersupplier
relationships from both theoretical and empirical
perspectives, and concluded that empirical studies are
indicating the importance of the model of confrontation in
the manufacturer-supplier relationship and also show the
existence of a partnership framework in the relations of
manufacturers with their suppliers. They highlight the
concept of strategic segmentation suppliers, under which
manufacturers do not maintain the same relationship with
all its suppliers.
Dyer et al. (1998) propose the concept of strategic
supplier segmentation. They argue that many western
companies believe they should choose between the
associative and the confrontational model for all their
relationships with suppliers, when in fact a detailed
analysis of the practices of Japanese companies such as
Honda or Mitsubishi indicates that buyers segment
suppliers strategically into two groups, one with
associative relationships and the other with a long-lasting
form of confrontation. Fiat, for example, segments its
suppliers strategically based on three criteria: (1) the
degree of supplier participation in the new product
development process; (2) the strategic importance of the
component’s effect on the vehicle’s overall operation; and
(3) the duration of the component’s development delivery
term.
Bensaou (1999) proposes the following typology of
client-supplier relationships: strategic cooperation, market
change, captive client, and captive supplier. Strategic
cooperation corresponds to an associative-type
relationship and is used for components whose design,
fabrication and supply require strong technological and
engineering capacity. Examples of these components are
the vehicle’s suspension, steering, brake and air
conditioning systems. In contrast, market change
corresponds to components whose fabrication requires
no personalization and which are based on mature
technologies that require no special engineering capacity

y suppliers, for example, seat belts or rear view mirrors.
Both the design and the manufacturing process of these
components are highly standardized and are not subject
to changes or innovations. In this context, suppliers form
a highly competitive market in which they do not establish
relationships with any particular automaker but instead
supply to all or most of them, and can easily change
clients without incurring change-related costs. They do
not participate in the design of the components and
manufacture according to the client’s specifications. For
the clients, in turn, it is of fundamental interest to obtain
low prices and trust the suppliers’ technical capacity to
fulfill their contracts. They do not exchange information
with their suppliers except during the negotiation of
contracts, nor do they visit the suppliers’ facilities except
in the case of an exceptional problem.
The other forms of relationships; captive client and
captive supplier, correspond to situations in which the
automaker or the supplier make specific investments that
keep them connected to one another. The captive client
situation corresponds to components based on known
technologies but which need to be personalized for each
client, as in the case of the vehicle’s rear bumpers or
windows. The offer of these products is concentrated at a
few large companies that own the technology and hold
significant bargaining power over their clients.
Information exchange between automaker and supplier
is detailed and continuous in order to achieve the
personalization the products require, and the automaker
must shoulder a cost should he decide to change
suppliers. The captive supplier situation, in turn,
corresponds to highly complex components based on a
new technology developed and owned by the supplier, for
example, the vehicle’s front control panels. These
components require specific investments on the part of
the supplier to remain in the market, but because the
technology is not standard, the automakers change
suppliers when the technology evolves and innovations
appear, because these suppliers have very limited
bargaining power over the automakers. In this case, the
market is highly competitive, the suppliers are strongly
dependent on the automation sector, and the exchange
of information is less than that in the three other cases.
According to Volpato (2003), beyond the rationalization
of production or of component production processes, the
competitive environment of the automotive industry in
recent years has required rationalization of the mode of
interaction among the companies in the supply chain.
The author highlights the restructuring of supply chains
and particularly of part of the first tier suppliers, who have
assumed more strategic roles in the technological,
financial and organizational performance of the
automotive chains.
Franco (2007) carried out a survey of 114 Portuguese
companies to discover which of them had entered into
collaboration agreements, and to make an overall
characterization of this type of business instrument, in
Vanalle and Salles 9059
other words, to detect the type of cooperation. Based on
several variables and dimensions considered for the
study of the phenomenon of business cooperation, he
established a classification of the type of cooperation
process between companies, to wit, intentional,
improved, exploratory and strategic. For this author, the
types of cooperation process adopted by the Portuguese
companies (intentional, improvised, exploratory, and
strategic) are not unique and do not always present the
same patterns of behavior. In each case, those
responsible for companies and the promoters of business
cooperation should take into consideration other aspects
such as the combination of several characteristics of the
four identified processes.
Hald et al. (2008) use the theory of social changes and
its applicability to study the formation and development of
client-supplier relationships. They propose a conceptual
model of attraction between clients and suppliers. In this
model, attractiveness is divided into three areas: value,
trust, and dependence, that is, they discuss how
perceived value, trust and dependence affect the
dynamics of the relationship.
For Montoro (2005), the reasons for cooperation
between companies can be explained by economy of
scale, learning, cost and risk-sharing, resource complementation,
especially in technology transfer, access to
innovations and knowledge, penetration into new
markets, the joining of competencies, and political
factors. Competency at the international level and
technological progress are the principal motives that lead
companies to decide to participate in collaboration
agreements, that is, agreements based on the search for
efficiency and for strategic reasons. On the other hand,
cooperation agreements diminish the independence of
each organization and imply loss of autonomy and control
over strategic resources in the activities of the
participating organizations. Nevertheless, this new form
of organizing transactions called relationship long-term
bilateral (Izquerdo and Cillán, 2009) won prominence as
a relationship with long-term vocation, which is
governed mainly by relational rules and ethical principles
as a means of coordination and control that occurs
between interdependent companies.
Lee (2004) proposed some guidelines for achieving
short-term changes, link between strategies and products
and technologies, and incentives for improved
performance; identifying agility, adaptability alignment as
key components of a supply chain management.
The coordination of supply chains has therefore
become a strategic and highly complex activity since,
although certain worldwide tendencies are evident; global
platforms, outsourcing, global sourcing, follow sourcing,
industrial condominiums, concentrations, specialization
and internationalization of the auto parts sector,
hierarchization of component suppliers, etc., the sector’s
supply chains may present different characteristics
between countries and even in each country.

9060 Afr. J. Bus. Manage.
Table 1. Supplier participation in product development.
Responsibility Design Technology Quality Delivery
Supplier 4 7 0 1
Automaker 3 2 7 7
Mutual 7 5 7 6
Table 2. Supplier delivery systems.
Delivery system NO. of companies
Milk run 6
Stock at automaker 5
Delivery at the assembler line 2
Stock at the company 1
Stock shared 0
CASE STUDIES AND METHODOLOGICAL ASPECTS OF THIS
RESEARCH
The purpose of the empirical investigations was to describe the
situation found at these companies, taking as basis the body of
theoretical references developed here, thus obtaining information to
conduct a more comprehensive future research. This can be
considered a multi-cases study which sought to investigate
contemporary phenomena within their context in real life. Yin (2001)
states that this methodology is indicated for the current themes and
situations in which the researcher simply observes the facts, with an
attempt to understand and systematize them.
The techniques used here to obtain information were the
collection of secondary data at the companies and interviews, using
a questionnaire with closed questions and a semi-structured script
with open-ended questions [using as basis the methodology
developed by Mirada and Parra (2000)], to allow the interviewer the
freedom to develop each situation in the most suitable direction.
Visits were made to 14 first tier suppliers of automakers installed
in Brazil, in order to garner information about some structural
characteristics and about the relationships of these suppliers with
their automaker clients. During the visits, interviews were conducted
with middle or top management professionals in the areas of
manufacturing, logistics and supply, product and process
development, purchasing and human resources. At least three
interviews were performed in each company, to allow the crossing
of information. The data obtained were compared with secondary
data. Each interview lasted about an hour and a half.
All the 14 companies are first tier suppliers. They were chosen
based on the agreement to permit the visit, data access and
interview. The focus was to conduct an in-depth research to support
a survey in sequence. In synthesis, this is an essentially qualitative
research, with a relatively complex strategy for obtaining
information, based on multiple sources: analysis of secondary data,
in loco analysis, and interviews with professionals of these
companies, using structured questions and a semi structured script.
This is an interpretative approach, which aims to understand the
social world from the view point of the actors within in, based on a
triangulation among qualitative and quantitative data from different
sources. This way of conducting case research finds support in
Meredith and Fredriksson (2006) who emphasizes the importance
of iterating between theory and practice for theory development
within the field of operations management.
DATA PRESENTATION AND DISCUSSION
This topic covers some of the characteristics of the
companies involved, as well as the analysis of the
information obtained concerning their relationships with
the automakers. The companies analyzed here are first
tier suppliers of automakers operating in Brazil. They
have different sizes, employing from 50 to 11,500 people.
The fourteen companies supply a set of parts (modules,
subsets, systems), and six of them also supply individual
engine components. These sets of parts are used in the
engine, chassis or car body and in the interior of the
vehicle.
The interviewees were asked to state whether the
responsibility for the definition of the design, technology,
quality, and delivery system fell on the supplier, on the
automaker, or if it was shared. Table 1 presents this
information.
As expected, the quality system, which is traditionally
defined by the automakers’ own systems, does not admit
to being defined by the supplier. Practically, the same
holds true with regard to the components delivery
system, since the supplier’s master production schedule
must adhere strictly to the client’s orders, with JIT
deliveries. However, once the component’s delivery and
quality have been ensured, it is more up to the supplier to
decide about the suitable technology to meet these
demands at the contract price. On the other hand, the
definition of the design shows greater variability in the
level of participation in the various situations, that is, it
may be defined by the supplier, by the client, or by both.
These findings indicate that, in terms of product design
development, although it is still predominantly defined by
the client, there is a tendency for greater cooperation and
partnership between suppliers and automakers.
The study carried out at the supplier companies of the
automotive sector in Brazil revealed that six of the fourteen
companies surveyed use a form of transportation
that travels through the supplier’s facilities and delivers at
the automakers (milk run), while five keep stocks at the
automaker, two deliver directly to the automaker’s
assembly line, and one keeps a stock at the supplier’s
facilities, as indicated in Table 2.
Most of the companies make at least one delivery per
day, contributing significantly to minimize the automaker’s
investments in stock as indicated in Table 3. Most of the
companies place their orders using electronic data
interchange (EDI) systems as the communication system.
The suppliers that work with JIT deliveries receive
specifications almost instantly. Faster information
exchange between clients and suppliers enables the
former to respond more rapidly to demand variations.
One of the ways in which the automakers provide
support to suppliers is through visits and the exchange of

Table 3. Frequency of deliveries.
Frequency No. of companies
More than once a day 7
Once a day 2
Every two days 3
From two days to one week 1
Every two weeks 1
Longer delivery times 0
Table 4. Automakers’ visits to suppliers.
Frequency No. of companies
Never 1
Occasionally 3
Regularly 3
Routinely 7
Table 5. Type of information between automakers and suppliers.
Type of information No. of companies*
Quality control systems 9
Stock management and control 9
Logistics distribution system 8
Production capacity 8
Design capacity 6
Improvement of production systems 5
Economics data (billing, purchasing) 5
Technological information 5
R and D capacity 4
Tooling control systems 2
Cost structure 1
Employee training 1
*More than one answer per company is allowed.
information. Tables 4 and 5 describe the frequency of the
visits paid by automakers to suppliers and the content of
the communications that take place between suppliers
and clients.
It is noteworthy that only one company reported the
non-occurrence of visits from the automaker to its
facilities. Although visits to three of the suppliers are only
sporadic, it can be considered that, for the most part, that
is, ten out of fourteen, visits are habitual. This serves as
confirmation of the evolution from a traditional
competitive system of relationships with suppliers to a
more associative system.
Only one of the companies consulted reported that
there is no exchange of information with the automaker.
Vanalle and Salles 9061
This may be due to the low complexity of the product
supplied, and the fact that the company maintains a stock
of the product at its own manufacturing unit; so, its
production schedule is not synchronized with that of the
automaker. Thus, level of communication for the
exchange of information can be considered high, since
thirteen of the fourteen companies confirmed the mutual
information exchanges, mainly concerning aspects
related to quality control systems, stock management and
control systems, logistics distribution systems, and
production capacity. To achieve this degree of
communication requires a minimum level of trust between
the parties. This confirms the existence of collaboration
between the companies, with regular contacts between
clients and suppliers aimed at proposing, assisting and
facilitating improvements, including technical help with
employees at the supplier’s plant.
The large majority have a long-term or undefined
contractual relationship, confirming the predominance of
the partner relationship. When asked about their
perception of the type of relationship they had with the
automakers, the client-supplier relationship model was
defined as that of partners by nine companies and as
collaborators by five companies. However, thirteen of the
fourteen companies feel pressured by their clients’
needs.
These results are in concordance with the study of
Cerra et al. (2007), for who while automakers are
inserted into chains with different structural configurations
and adopt different patterns of relationships; their actions
in managing the supply chain are strategically aligned.
Thus, even occurring overlap between the chains
because of common suppliers, manufacturers can
effectively use them to increase their competitiveness.
This position is also supported by Pires and Sacomano
(2010). Cerra and Maia (2008) consider that the
differences in the strategies depend on the structure of
their supply chains and supply policies. The automakers
with greater number of smaller suppliers and limited
technological capacity should expend greater effort to
develop them and ensure their proper performance.
The analysis of the improvement programs reveals, as
expected, an expansion of the techniques of lean
manufacturing along the supply chain. The lean
manufacturing in the manufacturing companies and in the
ones that compose their nets of suppliers, demand new
and growing quality requirements, price, technical
capacity, etc. regarding the practices of purchases and
supply. There is a strong tendency towards outsourcing,
establishment of long term partnerships, reduction in the
number of suppliers and larger integration among the
several levels, promoting JIT delivery and forming parks
of suppliers and use of logistic operators with consequent
accentuated stock reduction.
The manufacturers exercise growing pressure on
primary suppliers in order to reduce costs, and these do
the same on secondary suppliers and so on. This

9062 Afr. J. Bus. Manage.
Table 6. Characteristics of the traditional and associative models, and findings of the cases under study.
Characteristics Traditional Associative Companies studied
Duration of the contract Short-term Long-term Long-term
Network of suppliers Many Few Reduction
Location of suppliers Distant Close Close
Selection criteria Price Quality delivery technology price Price quality delivery technology
Size of orders Large Small Small
Frequency of orders Low High High
Development of components Separate Joint Both
Quality inspections Automaker Supplier Both
Dynamic improvements Supplier Automaker helps Automaker helps
Rewards Disputed Shared Shared
Communications Formal sporadic Informal continuous Informal regular
pressure also occurs regarding other competitive
priorities such as time of delivery, flexibility as for the size
of the lot, quality, etc. Therefore, there is a constant
pressure in order to introduce innovations that provide
reduction of costs without trade-offs regarding the other
priorities, or at least with minimization. The need for
capital to finance this process is one of the reasons of the
current tendency of reduction of the number of suppliers,
mainly primary suppliers.
In the cases of larger suppliers, that in general assist
several assemblers, their strategies should be in general
compatible with their customers' demands, but their selfdetermination
power is considerably larger. In these
cases, the emphasis in quality or in flexibility, for
instance, depends more on how the companies perceive
the market and their competences in long/medium term
and, also, on how they incorporate the model of flexible
production.
The organization of the supply chains in the world auto
industry experience a heterogeneous reality, where
plants of several assemblers try to establish vertical
relationships (occasionally in consonance with global
strategies) more appropriate to the conditions of the
industries and of the local markets, and following
predominantly the principles of the lean manufacturing.
The assemblers, in the role of organizers of the supply
chains, have tried to compensate the retraction of the
profitability with the reduction and sharing of costs with
the other links of the automotive chain. This has taken to
the extension of the strategies of the assemblers for their
suppliers, in the search of a management strategically
aligned of the supply chain, although the current
conditions for that are still quite limited. Based on the
assumption that competition occurs among supply chains
and no longer among companies, the quest for closer
relationships among companies participating in the same
supply chain is justified.
Today, the new forms of relationships between
automakers and their suppliers have led to a
hierarchization of the auto parts supply structure, with a
significant reduction in the number of suppliers that
supply directly to automakers, supplying subsets in
modules or systems. The location of suppliers, or of
suppliers’ plants close to the automakers, has therefore
become more important. Although a company used to be
able to achieve a sustainable competitive advantage by
mastering several competencies, today the search for
innovations has led companies to become specialized
and an option for these companies to remain competitive
is their relationships with partners, which allows them to
combine their different competencies and complementary
resources of other companies. Cooperation can also
allow for access to new markets, the establishment of
expansion strategies to improve efficiency and
competitiveness, and ensure survival.
Conclusions
Generalizations cannot be made, but the findings of
these case studies on client-supplier relationships in
Brazil’s automotive industry demonstrate that the
companies under study have changed the way they
relate, distancing themselves from the traditional model
(market, buy and sell relationships) and moving toward a
model of a more collaborative and long-term nature.
It can be inferred that the relations at the companies
surveyed are closer to the characteristics of the associative
(cooperative) model, with long-term relationships
and greater mutual dependence, but that cost is still used
as the principal criterion when it comes time to select a
supplier.
A comparative synthesis of the findings obtained and
the theoretical body of reference is shown in Table 6,
which was built based on the set of characteristics of the
models of several authors developed by Hald et al.
(2008). In this synthesis, the findings are compared with
the traditional confrontation-based model and with the
associative model, based on a more intensive cooperation
between the companies.

The predominant ordination of the competitive
dimensions for Brazilian assemblers and for most of their
studied suppliers suggests that there are pressures in the
economical and technological atmosphere for the
reduction of costs and improvement of the quality. The
analysis of the improvement programs reveals, as
expected, an expansion of the techniques of lean
manufacturing along the supply chain. The lean
manufacturing in the manufacturing companies and in the
ones that compose their nets of suppliers, demand new
and growing quality requirements, price, technical
capacity, etc. regarding the practices of purchases and
supply. There is a strong tendency towards outsourcing,
establishment of long term partnerships, reduction in the
number of suppliers and larger integration among the
several levels, promoting JIT delivery and forming parks
of suppliers and use of logistic operators with consequent
accentuated stock reduction.
The manufacturers exercise growing pressure on
primary suppliers in order to reduce costs, and these do
the same on secondary suppliers and so on. This
pressure also occurs regarding other competitive
priorities such as time of delivery, flexibility as for the size
of the lot, quality, etc. Therefore, there is a constant
pressure in order to introduce innovations that provide
reduction of costs without trade-offs regarding the other
priorities, or at least with minimization. The need for
capital to finance this process is one of the reasons of the
current tendency of reduction of the number of suppliers,
mainly primary suppliers.
In the cases of larger suppliers, that in general assist
several assemblers, their strategies should be in general
compatible with their customers' demands, but their selfdetermination
power is considerably larger. In these
cases, the emphasis in quality or in flexibility, for
instance, depends more on how the companies perceive
the market and their competences in long/medium term
and, also, on how they incorporate the model of flexible
production.
These empirical findings follow along the same lines as
those found in studies in other countries, where contracts
can be extended throughout the life time of a model,
there is a reduction in the number of suppliers per
component, and competency is based essentially on cost
reduction, quality and the assurance of delivery times.
According to Liker and Thomas (2004) Toyota and Honda
developed successful relationships with North American
automotive industry suppliers, including exchanging best
practices, formal sharing of information, boosting suppliers'
technical skills and capabilities, and understanding
how suppliers work.
According to Sacomano and Truzzi (2009), the new
pattern of relationships makes creates new mechanisms
of control and behavior of suppliers in search of stable
relationships. The organizations operate in an environment
structured through productive and technological
entailment, established among the companies. Automakers
Vanalle and Salles 9063
take control and change the activities of other organizations
as a mechanism to minimize the vulnerability and
dependence.
The relationships studied here cannot be qualified as
strictly those of “partners” or “adversaries” due to the fact
that not all relationships will be of partners and neither
will they all maintain an atmosphere of confrontation. One
should therefore consider the existence of intermediary
positions between these two extremes. This relationship
will depend on the volume, the strategic importance and
complexity of the component, the technological capacity
and the design competence of the supplier, its productive
capacity, and the history of relationships between
customers and suppliers. It could be concluded that the
relationship between customers and the supplier
companies surveyed are close to the characteristics of an
associative model with contractual relationships and longterm
high interdependence although price is still used as
the main criterion for being successfully selected by
automakers.
The new pattern of relationships makes the automakers
to create new mechanisms of control and behavior of
suppliers in search of stable relationships. Automakers
take control and change the activities of other
organizations as a mechanism to minimize the
vulnerability and dependence. So this research points the
same directions as Liao et al. (2011) for who regional
growth of automotive expertise reflects Porter’s economic
cluster theory with information and technology shared
throughout the firm and its suppliers.
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Bookman.

African Journal of Business Management Vol. 6(31), pp. 9065-9071, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM10.1393
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
The “outsourcing” and management consulting in a
dimensional systemic model
Nélson Santos Antonio and Renato Lopes da Costa*
University Institute of Lisbon, Portugal.
Accepted 6 April, 2011
In an era of particularly intense competition, the consulting services are becoming an increasingly
important source of aid for strategic making and an important way to increase efficiency and quality in
the various business activities. Many managers consider the consulting services as an influential and
powerful tool for organizational change, bringing new life to the organization. The purpose of this
article is to study this situation. We will carry out a study in one of the biggest Portuguese private bank,
in order to show the real value of management consultancy when it combines, a broad view of
business, to study a set of skills closely linked to the relationship between service and market, and
when it is focusing on "core" competencies, resources and offers increasingly facilitating the well
being of the client, that is, showing how a company can foster creativity and dynamism in the activities
of companies when operated through the potentials of TIG (information technology management).
Key words: Outsourcing, development, operational efficiency, organizational change, coordination, control.
INTRODUCTION
The increasing pressure from markets, characterized by
intense competition and instability, leads organizations
and people to rethink their strategies in dealing with the
other parts. In this context, the organizations will be
guided to their core areas (core business), freeing
themselves from areas/activities which do not matter, the
dependence on external/outside supply sources
increases (Lopes da Costa, 2009).
The complexity and turbulence here described
(Canback, 1998) corroborates with no doubt Bruce
Henderson‟s thought (1979), the founder of BCG (Boston
Consulting Group). Bruce Henderson assumed that the
business world is a world of natural selection, where only
the strongers survive and the focus should be primarily
directed towards a good understanding of the
environment.
The organizations should be trough, in an economic,
political, organizational and individual perspective, where
the market and the clients are fundamentally the two
*Corresponding author. E-mail: renatojlc@gmail.com.
dominant focus in terms of social relations (Du Gay,
2005). Other issues such as portfolio, employment
contract, internal markets, outsourcing and organizational
change, are other important research topics around the
world (Barley and Kunda, 2004; Beer and Nohria, 2000).
According to Canback (1998), these and other
management fields are what constitutes the development
of strategic disciplines in organizations and have been
widely disseminated by the management consulting
sector. Canback also describes the consulting industry as
the path of success that must be embraced by
companies in the context of its strategic direction and its
professionals as true disseminators of the complex
phenomenon of enterprise evolution up to now.
Although the management consulting industry dates
back from the time of Frederick Taylor, Henry Gantt,
Arthur D. Little, Harrington Emerson and Edwin Booz,
that is, from the beginning of the 20 th century, all of them
with invaluable contributions to management science in
general and operational efficiency in particular (Canback,
1998). But it was only after the 1950s that the consulting
industry started to be more visible and influential (Stryker,
1954; Drucker, 1979; Greiner and Metzger, 1983;

9066 Afr. J. Bus. Manage.
Canback, 1999).
Since that time (1950), many companies have been
recognized and have contributed to the historical
conceptualization of the sector, albeit from the 1960's
began to recognize the real developments in this area.
The first strategy and strategic consulting concepts were
developed and implemented in 1963 by Boston
Consulting Group. As earlier said, BCG was founded by
Bruce Henderson, a former Arthur D. Little partner. From
this date a second generation of experts started to
contribute to what would be today, the consultant industry
as Bain and Company, Strategic Planning Associates,
Braxton Associates, Lek Partnership and Monitor
Company (Canback, 1998).
This remarkable transformation is illustrative of what
has become the industry. Since its inception, i.e, a
significant element in the current-dominant services
sector and in the actual knowledge of the economy, and
for this reason that the consultancy has appeared linked
to new forms of "smart" management knowledge in its
various forms (Fincham and Clark, 2002), being assigned
to the consultants the key role in terms of creation,
dissemination and transfer of new management ideas,
and, not only purely commercial ideas, but also all those
which are directly linked to the truth management
practices to be adopt.
But, analyzing this context in a retrospective way and
paraphrasing Porter (1980), between 1950 and mid-1980,
the main topic (concern) analyzed by the consultant
industry was (for the consultancy study was mainly
focused on) organizational development. The main
strategy‟s aim was to identify a particular problem and
then to solve it.
However, many of the absolute truths concerning how
to manage organizations today, are being increasingly
discussed and questioned. The increasingly complex
world we live in, where seemingly disparate events are
interrelated and technological developments are blurring
the boundaries between the sectors of economic activity,
requires a new way of thinking (António, 2006).
These and other concerns have also focused the
attention of the current literature on management
consultancy. According to Fincham and Clark (2002),
these paradoxes are the reasons why actual academic
researchers bring this issue to the study of management
consulting. According to the authors, the consulting
sector enables the management outsourcing and the
leverage effects of innovation given by the parallelism
between the consultancy affairs, the central management
structures and processes and the excellent management
of several new paradoxes by practitioners like; think longterm,
but to show immediate results; innovate without
losing efficiency; cooperate but also compete; work in
teams but being evaluated in individual terms; be flexible
without breaking the patterns; live with real increasingly
virtual; remain free, but is increasingly networked; seek
perfection in the midst of fast; be aggressive without
losing the emotion and respect for others; act quickly by
impulse, but with awareness and responsibility; being an
entrepreneur, but constantly changing and innovating.
But are these modern ways of seeing management
disseminated by consultants (Fincham and Clark, 2002)?
Are they mediators and generators and distributors of
new knowledge (Thrift, 2005)? Are their ideas reflected
and dominant in the knowledge management and
organizational learning (Sturdy, 2009)?
The case study carried out in one of the biggest
Portuguese private banks in monitoring and evaluation of
three different IT projects in the area of treatment of
values, conducted by consultants of a major consulting
company in Portugal tells us so. The critique normally
related to the consultants is to consider them as “rational”
people, whose emphasis is focused on cutting costs and
jobs to cope with immediate problems (O'Shea and
Madigan, 1998; Craig, 2005). This critique is widespread.
It is also evident, the consultants‟ attention in searching
for a set of products and services that meet in the future,
their "Shareholders" needs, normally through a careful
management and coordination of resources. This new
management brings a new life to the organization and to
the procedural chain of the company. The new
management proposed by the consultants advocates
normally, the outsourcing of some activities (the non key
activities). Doing so, the enterprises can reduce fixed
costs and the managers can concentrate their efforts in
what is determinant to create value.
The focus is placed on the contribution,
conceptualization and understanding of the nature of
consulting work (Fincham and Clark, 2002) and the real
value of consultants in the way that they show the same
value to their clients (Alvesson, 1993; Clark, 1995;
Starbuck, 1992).
This article aims to illustrate exactly these assumptions,
showing from several reports from senior bank managers
that the consultants may in fact, be powerful influencers
of organizational change (Sturdy and Wright, 2008). They
provide tailored technical knowledge base and behavioral
to help their customers and improve the organizational
practices of companies.
In fact, following the line of evolutionary study of
organizational strategy (from the moment of positioning)
based on building and defending competitive advantage
versus the moment of movement characterized by the
transience of the advantages and the importance of
innovation (António, 2006), particularly, in an era of
intense competition, the outsourcing earns in this
perspective, great preponderance in the new way to
manage the organizations, encompassing the
characteristics of the emerging networking company,
from consulting firms to incorporate new types of services
related to outsourcing, as reported by the interviewed
senior managers as the ideal response, an option that
allowed to reduce costs, improve quality and, more
importantly, to provide the capacity to release resources

to be focused on the business, that is, to focus on core
competencies.
In this case, the strategy is the result of combining
existing resources with activities and, taken together, to
generate specific skills that sustain competitive
advantages. The objective consists in creating value from
the market‟s point of view, what it is contradictory with the
opinion of Alvesson and Johansson (2001). According to
these authors, the consultants are not in possession of a
set of sustainable knowledge base to support their
business status and credibility. It is also against the
Chinese and Western Europe vision, whose professional
consulting are possessed of incredible power that in most
cases, come from nothing and is reflected in something
not accountable and whose visibility is nil (Micklethwait
and Wooldrige, 1996; O'Shea and Madigan, 1997).
METHODOLOGY
This research was based on an exploratory case study (Yin, 1994).
According to Yin, this kind of methodology is adequate to
understand complex social phenomenon. The case study research
was conducted in a prestigious Portuguese private bank. We
monitored and evaluated three different IT projects in the area of
treatment of values, which in light of domestic programs, had the
objective to carry out the transformation of certain operating
activities. These operating activities were considered obsolete
when analyzed from a perspective of organizational development.
This research was based on the non-participant observation
conducted by a team of three consultants and two senior managers
with internal interpolations where the author proved necessary in
the course of action, being the work also enriched by data collected
in documentary work, such as project documents and internal
reports.
The data obtained had the intention of gaining new inputs about
the contribution of consultants to the business strategy and
generate new ideas and theories in the construction of patterns and
comparisons between the business consulting and outsourcing,
which results in a theoretical framework combined with empirical
data based on the articulation of coherent equilibrium that should
be drawn between techno-economic, political-relational and
organizational systems for decision, results of a tailored and
integrated management.
THE RISE OF OUTSOURCING AND THE FOCUS OF
CAREFUL MANAGEMENT OF RESOURCES IN THE
FIELD OF MANAGEMENT CONSULTING
While the increasing pressure of markets has led
organizations and people to reconsider their strategies in
dealing with the other parties, the truth is that, this
relationship tends to be characterized by a strong
dichotomy. All the teaching given to us since an early
stage says: "I win because you lose". This axiom is the
source of most of the established relationships between
organizations and individuals, and is characterized by
being the type of win-lose (or lose-win depending on the
perspective).
However, this form of relationship has proved to be
António and Costa 9067
inefficient in many cases because this approach
degenerates into results of type lose-lose (that is, all
parties lose) on a long-term. In contrast, relations win-win
tries to expand the value, or the available resources, by
the concerned parties through integrated and cooperative
negotiation processes. Therefore, the involved parties
negotiate to determine the most equitable division of
value.
This logic of frontier creation value leads to the
business fronts tending to benefit medium and long-term
options whose routines activities may be sub-contracted,
adopting a logic of partnership (win-win game -
collaborative) whose border activities can come from
outside in order to make the work more efficiently
(distributive core whose focus is not on the operability of
activities) Figure 1.
The relationship network shown in Figure 1 is based on
the principle "Network Sourcing; Downstream Focus"
conducted by a consulting firm to develop their projects. It
is characterized by a low operability of the original
product and process control, a delegation of tasks to third
parties and economies of scale by the possibility of
lowering the operating costs of existing processes (Lars
and Gadd, 2008; Bergkvist, 2008). This supports the
argumentation of Kipping (2002), when it states that the
current rapid response of the consulting sector to the
periodic changes of the interests of clients should be
based on informatics based networks and expanded
business systems.
At this point, two questions can be made; does
outsourcing have potential strategic differentiation?
Which activities should be outsourced and which ones
should be kept within the company? As transmitted by
one of the consultants, the answer to these questions
should be based on the fact that the outsourcing should
be considered only in activities that involve a low
strategic importance or where third parties can develop
the same operations more efficiently, faster, and
fundamentally with lower costs. Moreover, another
consultant transcribed that, focusing on essential and
core skills, as well as a clear definition of the competitive
position of the company is even more important.
This strategic vision and this form of business management,
triggered by new economic and organizational
developments, redesigns a new form of management
mentioned by Arruñada and Vasquez (2006), the so
called „Contract Manufacturers‟. This form of outsourcing
pursues not only cost reduction but also a rapid response
to market by introducing new mechanisms, techniques,
procedures and technological flexibility. This allows
customers to focus on innovation and the activities that
are considered "core", thus enabling the combination of
skills in an intelligent way, providing not only increased
profitability, reduced risk and increased flexibility, but also
a substantial improvement of the response capability to
customer needs with the lowest cost.
Examples of this type of innovation, since the beginning

9068 Afr. J. Bus. Manage.
Figure 1. Characteristics of the chain (or network).
Sub-contracting and outsourcing established
principles: Concentration on core business, I&D as
a weapon of survival; bet in skills and capabilities;
crucial importance in the performance and flexibility
of procedures.
of the millennium had been illustrated by Werr and Styhre
(2002) when the authors mention that the consultants
should include long-term links between advisers and
clients or temporary outsourcing agreements in order to
radically improve an operation before they start whatever
with the client, because, neither the critical and
functionalist approach supports any kind of movement in
this direction, since both appear associated to the
bureaucratic ideals that block instead of supporting
innovation in the relationships between client-consultant,
which allows to analyze the consultancy on a basic
spectrum (Ehrenberg et al., 1994) to provide incremental
performance improvements.
Moreover, this approach is also question the
denomination of consultants as rationalizers, often
focused on cutting costs and jobs to cope with immediate
problems (O'Shea and Madigan, 1998; Craig, 2005),
because the main purpose of this measure is to focus the
company and its workers in the "core" activities in a
development perspective, outsourcing, minimizing or
eliminating activities where this is not prominent or that
others may actually do better and at much lower cost. In
this case, intangible assets are being created, such as
sharing of know-how and technological diversification,
while the cost of creating this asset will be borne only
once in the initial phase, because in the future, the
process will be supported by the introduction of new
introduced automatisms (Porter, 1986).
Besides the advantages mentioned, as reproduced by
the consultants, it also recognized the existence of other
hidden capital gains, or at least, not so evident, and these
derive mainly from the fact that they allow the relationship
and involvement with various organizations cultures,
experiences, management styles and different skills.
Among these advantages identified, the know-how that is
generated can be an important source of innovation and
change, the possibility of partners to do benchmarking
and make contact with some best practices, as well,
identify weaknesses from disclosure of its skills, and the
opportunity to be able to change some management
processes, this is because some partners often turn out
to be more demanding than their own end customers.
Thus, the present developments undertaken by
consultants in the projects analyzed have been
responding to foundations of McLarty and Robinson
(1998), when mentioning the consultants should provide
important knowledge for the client and do in order to
contribute as an added value, which represents in this
case that we are in presence of professional drivers of
change with completely objective advices in the
developing of their corporate customers. What finds in
fact is that, improving the management capacity became
a matter of survival for organizations and technologies
have redefined the concepts of time and space for a new
context and new contexts involving change, action, and
dynamism.
Organizations are to be viewed from this perspective in
an economic, political, organizational and individual optic
(Du Gay, 2005) and developments, such as outsourcing
and organizational imperative change continues to
dominate organizational research around the world
(Barley and Kunda, 2004; Beer and Nohria, 2000; Sturdy
and Wright, 2008).
Model management dimensional systemic
management consulting
In order to conceptualize all data hitherto analyzed, it is
necessary to build a conceptual framework that enables
connect the management model of outsourcing included
in the projects developed in this case study (IT projects),
the integrated system approach in the perspective of
design planning from the economic, political and
organizational dimensions and, identifying the different
roles of consultants (Ludgreen and Blom, 2009) in the
development of strategic work that is generated by the
different vertices of analysis of this model (Figure 2).
This model consists three axis (business, strategy and
structure) and three lines that allow better positioning the
problems of the organization (information, operations,
information technology management (ITM). The heart of
the model is the place of business support, which is
covered by the architecture shown in Figure 2, being the
strategic components, structural information, information
technology and operational management to investigate
the fields of activity in detail and definition of the best
strategy to adopt. In other words, this model has an
essential function of management that allows defining the
diversification strategy to develop without the manager

Information
Strategy
Parameter of
Organizational
Analysis
Parameter of
Relational Analysis
Consultant
“Chancellor”
Business
Consultant “Your
Eminence”
Consultant
“Butler” and
“Servant”
Figure 2. Tridimensional systemic management model of management consultancy.
being an expert in technology management.
Moreover, this approach induces an integrated
component system from the perspective of planning
conception through three dimensions - economic, policy
and organizational. A strategic decision is thus defined as
the articulation of coherent balance established between
technical-economic, political and organizational systems
decision, resulting from a tailored and integrated
management.
The technical-economic system embodies the means
of production of strategic planning, with systematic rigor
and detail, involving the macro and micro means, in other
words, the global sectoral and specific and yet the
systemic environment of the firm. What in the case of a
contractual outsourcing basis refers to an option to
reduce costs, improves quality and provides the ability to
free up resources so that they are focused on business,
focusing the company on core competencies.
The politico-relational component shows in turn, the
perspective of the strategic behavior of actors/systems, in
the presence of systemic environment, in this case,
Structure
Operations
António and Costa 9069
ITM
Parameter of
Technoeconomical
Analysis
making merge the network society, trough consulting
firms to incorporate in its customer´s companies new
types of services related to outsourcing contract basis.
At the other end of the system, it is important to also
consider the organizational system, which includes the
morphological, decision-making, bureaucratic, relational
and control systems in confront with systemic
environment, which assumes that in consulting works the
tasks of the clients may well be linked only to residual
activities of monitoring and control. Thus, these systems
provide a deeper insight and are complementary, and
should be understood and applied globally; otherwise, the
analysis is necessarily limited. Making guidelines and a
conceptual lecture of the model components and framing
the strategic-economic, operational (organizational) and
relational components it is easy to perceive that the
appropriate requirements of organizational development
must be fundamentally linked to the development of new
automation procedure based on information technologies
management, as a resource yet in a contractual basis
linked through outsourcing services in the implementation

9070 Afr. J. Bus. Manage.
of new methods to solve a set of structural problems.
The information here, enhanced by information
technologies and communication, assumes the role and
importance due in creating value, in a market where
knowledge of the customer, competitors, suppliers and
other economic managers, it becomes vital for the design
and implementing business strategies.
In this context, the business concept represented here
is closely related to the binomial between service/market,
incorporating in the midst a highly technological
component in a transversal character, seeking to offer
their customers (internal and external) a facilitator of
welfare, just as which represents the saving of time and
resources to companies by leveraging the ITM.
Illustrating the conceptual framework of the model and
the strategic-economic, operational (organizational) and
relational components is important to identify the different
roles of consultants in developing these activities,
including how they act, what kind of work they do, what
kind of interactions that sustain this work and with what
resources.
Converging then the identification of the different roles
of consultants from Lundgren and Martin (2009) in
relation to activities that constitute its strategic work in
terms of practices that develop - The consultant in the
role of "Chancellor", "Your Eminence", "Butler "and"
Servant "- the position of "Chancellor "is directly linked to
the parameter of relational analysis, which incorporates
the strategic component and knowledge (information
about the environment), which implies that much of their
time is spent in the most various types of interactions,
whether of a formal and/or informal character in order to
provide the construction of an information structure that
allows them to easily set a strategic direction and
influence managers and executives in strategic decisions
to develop. For its part, "Your Eminence" still has access
to some interactive nature of interventions with managers
and customers, the fact that are associated to an
organizational status unofficial limits them in this type of
intervention, what makes them sought more often to give
advice and develop ideas and actions that create value
added in terms of conception of a particular strategic
business structure who wants to be carried out by the
consultant "Chancellor". Therefore, the consultant's role
in this quadrant is directly connected to the parameter of
techno-economic analysis, incorporating the components
of structure, business and information technology, result
of the interactive work, but sometimes also procedural
who "forced" to develop.
At the opposite site of the figure, we have the position
of the "Servant", whose role is fundamentally more limited
or null in terms of activities that involve interactivity, being
in this conjuncture these consultants more related to a
procedural basis on their activities, being essentially
linked to knowing "do", not taking in the majority of time
any possibility to influence any decisions, which in the
figure is represented by the parameter of
organizational analysis and "operations."
Along the line of "Servant", the role of "Butler" is mostly
limited, although it can enjoy an official status as the first
does not hold. The activities of the "Butler" are typically
linked to the development, compilation and presentation
of information about a particular context that were tasked
to work, which the consulting approach is described as a
"Senior Servant," which allows some organizational
visibility and exposure status that the position of
"Servant" does not hold at all.
CONCLUSIONS AND DIRECTIONS FOR FUTURE
STUDIES
Paraphrasing Drucker (1979), the management
consultancy sector should not be viewed as a science,
nor as an art, but must always be something to consider
in scenarios of uncertainty and unpredictability face,
essentially to the revolution of information technology
experienced in this early twenty-first century, and
although, many authors do not have this view about this
phenomenon, a conclusion that can be drawn is that your
ability to solve problems, the techniques that they apply
and the role that they represent in the global economy
will not certainly falter and this industry will continue to be
the focus of study for many people, as a result, not only
of the annual growth of 20% that has been experienced
since 1980 (Canback, 1999), but also by the preference
for this career for most students, coming out every year
from universities and business schools and that makes
indubitably this sector a field of opportunities, foreseeing
that the consultancy industry continues to raise a topic
research for researchers for many long years.
So, this study had as main objective, to evidence the
importance of consulting sector in face to the current
needs of an organizational climate increasingly
demanding, is therefore necessary to present
theoretically a three-dimensional systemic model, that
makes possible to link management consultancy sector
to an strategic base developed with resource to the
outsourcing, illustrating a very simple reality, does not
exist a better way or reason to proceed to outsourcing,
and even exists, is guaranteed that will change with time,
with the pressures of business, politics and the
technology itself. In fact, the only thing we can agree on
is that outsourcing is an issue that deserves to be
considered given the potential it holds.
Here, the consultant's role may be crucial, providing
important knowledge for the client to contribute as an
asset in the amount of certain parameters that are
outside the skills and experience of organizations
(McLarty and Robinson, 1998), fitting perfectly in this
conception the perspective of a consultant as being
"hybrid" of Merton (1972) and Sturdy and Wright (2008),
should act as an external actor to the organization acting
as a internal agent of change, using both the functionalist

and critiques visions of consultants perspective (Werr
and Styhre, 2002).
Therefore concluded, that there is no doubt that
outsourcing is a virtual inevitability, whose role of
consultant may contribute to the formation of certain
identities, practices and ideas that can promote the
organizations in various ways (Sturdy and Wright, 2008)
and thus not likely that the interest of the organizations
regarding the "business process outsourcing decrease in
the near future, and this issue will surely continue to
touch the lives of many of the top managers,
professionals from information systems and the users
themselves that need to adjust to new people, cultures
and procedures. In this measure, the change must
always be seen as an opportunity and should already be
working in such a way as to avoid risks that are inherent.
The consultants should work here as real drivers of
change, with totally objective advice and a rigorous
notion of management in terms of the switchover plans to
incorporate for an efficient management of this paradigm,
which also refers to the fact of having to work as a
chameleon who needs to feel comfortable in many roles,
working out in advance, the exact role expected before
starting the project (McLarty and Robinson, 1998).
Finally, it should be noted that this research has served
a very objective purpose and incorporate findings of a
very specific context of a case study that cannot be
generalized (Eisenhart, 1989; Yin, 1994), being
necessary further investigations to conform the
exploration results, in order to strengthen and develop
new conceptual frameworks about the topics discussed.
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African Journal of Business Management Vol. 6 (31), pp.9072-9084, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.335
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Programme design dimensions explored for a
professional occupational safety and health
management qualification for Africa
R. J. Steenkamp
Business Management, University of South Africa (UNISA), South Africa. E-mail: steenrj@unisa.ac.za.
Accepted 2 August, 2012
Workplace injuries and illnesses cost companies huge amounts in wasteful and often preventable
expenses. Hazards can be eliminated and controlled through proper education in production and
operations management (POM) and occupational, safety and health (OSH), yet no South African higher
education institution provide this need. The complexity and multi-disciplinary nature of the OSH
profession is fundamental to the problem. The research report discusses the problem in terms of the
need, the large scope of the OSH function, contents (curricula) of a proposed OSH degree and
programme implementation realities. The problem was explored by means of a mixed method survey
including two questionnaire surveys. The results created a hypothesis for further investigation, but the
exploratory qualitative investigation clearly indicates the need for degrees in POM (with several OSH
based modules) and a similar qualification with specialisation in OSH. The comprehensive secondary
research survey supported the findings and only a few new developments were identified that will not
influence the OSH curricula significantly. Both questionnaire surveys confirmed the proposed OSH
qualification and the feedback from industry experts indicated the urgency for an OSH degree and
provided potential solutions to implementing such a qualification.
Key words: Workplace injuries, higher education, the occupational, safety and health (OSH) function,
production and operations management (POM) and occupational, safety and health (OSH) degrees, degree
qualification, programme implementation.
INTRODUCTION
Unsafe workplaces in manufacturing industries are on the
daily agenda of top management within their strategic
corporate social responsibility (CSR). In theory, a perfect
operation should have zero risks in terms of safety
hazards, bad hygiene or health risks. The POM function
of any manufacturer is responsible for transformation
processes which may cause different types and levels of
occupational risk. Safety and health does not start with a
professional OSH function because process design of
operations systems determines the nature of the
transformation processes and the manner how value is
added. POM is therefore the heart of any business and
this makes it the most important business function
(Krüger and Steenkamp, 2008: iii, 6). This is fundamental
to the philosophical debate that POM excellence will
eliminate the need for an OSH function. It could thus be
argued that a proper and comprehensive qualification in
POM should be established first and should precede a
qualification in OSH. The real world tells a different story
and both POM and OSH related qualifications were
explored.
Workplace injuries, illnesses and fatalities still occurs
world-wide causing immeasurable pain and suffering to
employees, their families as well as harm to the business
itself. OHS is therefore a multidiscipline involving the
social, mental and physical well-being of employees. It
endeavours to protect all employees, family members,
customers, suppliers, communities and other members of
the public affected by the workplace environment
(Barnett-Schuster, 2008: 1).
The role of POM is broadening in terms of safety,
health and environment (SHE) management. The
challenge to create and sustain a healthy and safe
workplace is increasing (Nieuwenhuizen, 2011: 154) and

there is a culture shift towards the human element,
philosophy of work and productivity within a sound OSH
culture. Goetsch (2011) is a leading authority in the OSH
field and a major part of his recent publications focuses
on the human element. The International Journal of
Occupational Safety and Ergonomics (IJOSE), for
example, only focused on the protection of the human in
the workplace and new approaches to measuring workrelated
well-being in a recent publication (IJOSE, 2011).
OSH should therefore consist of a multi-functional team
to address the complex and multifaceted challenges such
as explosives, stress, standards, noise, laws, radiation,
product safety, ergonomics, acquired immunodeficiency
syndrome (AIDS) and ethics to mention a few. The OSH
manager must have a team of expertise to address the
different types of risks. The team may also be referred to
as the SHE-team and may consist of several specialists
such as: an occupational physician, occupational health
nurse, health physicist, industrial hygienist, environmental
engineer and a safety engineer. An effective OSH
manager will have an effective OSH team that will form
the core of the OSH function. The roles of each specialist
will vary from industry to industry. The mining sector has
different challenges and engineers (for example, mine
ventilation engineers) can make a significant contribution
to safety and quality of work-life (QWL). The engineer
has more potential to affect safety in the workplace than
most other persons (Goetsch, 2005).
The need for a multi-disciplinary OSH qualification
POM managers are concerned with many functions of
which design (of process, work methods, layout and
product) is a major sub-function. They design
transformation systems for specific products while they
also design a healthy and safe working environment.
Slack et al. (2010: 251-252) highlights four primary OSH
dimensions of which each are separate sciences on its
own, namely ergonomics, working temperature,
illumination levels and noise. If POM managers can have
these challenges under control (by means of design
excellence and control), then they have eliminated major
hazards, potential risks and contributed significantly to
OSH. Earlier publications and conventional views of OSH
were more towards risk concepts, risk control, risk
assessment, risk perception, risk communication and
cost-benefit analysis (Fuller and Vassie, 2004) instead of
prevention of hazards through technology, improved
operations design and improved human behaviour.
OSH excellence should be a strategic priority in view of
the global World Health Organisation (WHO) statistics.
Business pressures of time to market, high productivity
targets and the competitive markets are factors working
against OSH, demanding professional OSH
management. The large need for trained and educated
professional safety and health practitioners is not only a
Steenkamp 9073
South African phenomenon. The International Labour
Organisation (ILO) revealed that, despite global efforts to
address OSH concerns, an estimated 2 million workrelated
fatalities and 330 million work-related accidents
still occur each year (ILO, 2009 :xi). Productivity is at
stake apart from the human suffering that results from
work-related injuries and deaths. The direct and indirect
costs at national and global levels are huge, taking into
account compensation, lost working time, interruption of
production, training and retraining, medical expenses and
social assistance. Culture precedes action and the South
African government should enforce efforts to address this
challenge once and for all. The mergers of South African
higher education institutions was not a success and
capacity decreased in most cases.
OSH education became a strategic priority and the
provision of OSH-related training must occur at all levels
in most industries as part of a national OSH system (ILO,
2009: 164). Basic management skills are lacking in the
manufacturing industry and the short learning
programmes (SLPs) are very limited to address the
scarce skills. The popular 12 month programme in safety
management offered by Unisa’s Centre for Business
management is sufficient for very basic entry-level OSH
representatives (Van Loggerenberg, 2011).
Industries have their own challenges and training
needs. Dust and noise may be some of the primary
hazards in mining. The Mine Health and Safety Council
(MHSC) (South Africa) has set targets for the mining
industry of no percentage loss of hearing (PLH) greater
than 10% by 2008 and no machinery emitting noise of
higher than 110 dBA by 2013. The targets are an attempt
to improve the prevention of noise-induced hearing loss
(NIHL) in the mining industry and are based on current
statistics that 67% (or 209 666 people) of South African
mineworkers are exposed to high noise levels of 85 to
105 dBA (TWA8h). Second-level noise control in terms of
hearing conservation excellence through education may
therefore be more important in the mining industries
(Vinck, 2011). Vinck also actively supports and is
involved with new models and standards to eliminate
NIHL of which quality personal protective equipment
(PPE) in terms of custom-made hearing protectors is an
example.
Professional OSH managers (or SHE managers) will
therefore need multiple competencies. They may vary
between leadership, ethics, organisational culture,
business management, operations management, quality
management, economics, engineering, ergonomics,
mathematics, physics, chemistry, biology, risk
management and project management, etc. The literature
study in the next area elaborates on these functions and
related skills needed.
One of the most important skills is the understanding of
industrial hygiene. This science is devoted to the control
of environmental factors in the work place that may cause
sickness, impaired health or discomfort. They address

9074 Afr. J. Bus. Manage.
toxic materials, work processes, ventilation systems,
good housekeeping and proper PPE. The science of air
quality demands highly trained professionals and the
same applies to noise control and hearing conservation
excellence. Regulations, laws, high standards or socalled
“best practices” do not necessarily work in
practice. It becomes clear that OSH managers must
succeed within a very complex than ever before dynamic
internal and external environment. The South African
Mine Health and Safety Act (Act No. 29 of 1996 [MHSA])
established legal obligations that include the “proper use
and care of PPE”. This is the theory, but in practice,
supervisors must monitor and insist on the proper use of
PPE (or face disciplinary action). The human ear is very
sensitive for any material such as earplugs regardless of
the modern more comfortable acrylic hypo-allergenic
materials used. This is a good example of conflict
between “proper use and care of PPE” and human
resistance to wear hearing protection devices (HPD’s).
Many workers, including supervisors, still prefer not to
wear HPDs.
NIHL statistics is alarming because noise is regarded
as the “silent disease” due to its insidious nature. To
manage noise and hearing conservation (second-level
noise control) is a science on its own demanding
sophisticated management skills to control (Vinck, 2011).
The World Health Organization (WHO, 2009) has
provided the following statistics related to the problem:
1. Noise can adversely affect a worker’s performance, for
example in reading, attentiveness, problem solving and
memory.
2. Prolonged or excessive exposure to noise, whether in
the community or at work, can cause permanent medical
conditions such as hypertension and heart disease.
It becomes clear that the OSH function has become more
complex than ever before with reference to OHSA (1993)
and MHSA (2008) and owing to advances in technology,
new legislation, the potential for costly litigation and a
proliferation of standards (Goetsch, 2005: 628). This
concludes the background to the problem and the next
areas will deal with a deeper insight and investigation to
the research problem in terms of secondary and primary
research data.
Research problem
Takala (2009) from the European Agency for Safety and
Health at Work hopes to formalize OSH education closer
to and within the classroom in a quest for risk education
in schools and other education institutions. Smit (2011)
was involved with multiple OSH curricula design projects
in South Africa but without the success to implement
such degree programs. The current (at the time of this
investigation) lack of a proper OSH qualification can be
regarded as the symptom of the problem. The need (or
its absence) for such a qualification and ability (or
inability) to offer such a program must be investigated to
determine the essence of the problem. Does the need
justify a degree qualification and if so why is no South
African higher education institution offering (at the time of
this investigation) such a program?
It does seem that the need for a proper OSH
qualification is very significant and obvious – this causes
increasing frustration and an outcry to government (or
sponsor) to intervene. The BTech in safety management
degree is being phased-out by most South African
universities and professionals have to equip themselves
abroad or by means of several local and international
SLPs of which most are limited in scope and of which
some are not recognized/accredited. Other OSH
managers rely on internal training (and mentorship) and
others are forced to compromise when they accept
positions without the necessary skills. This exploratory
investigation focused on the importance of OSH, the
need for proper OSH education, proposed POM and
OSH curriculums, program (degree qualification)
compositions and to examine the difficulties of rolling out
such a program.
RESEARCH METHODOLOGY
Mixed methods (with some epistemological differences from
different research paradigms) were used to increase the breadth
and depth of understanding and to address the research problem.
The researcher also selected this approach due to some
overemphasis on quantitative methods, although some are against
competing paradigms in qualitative research. Although, the
quantitative survey method took dominance over the other
qualitative methods, an attempt was made to apply triangulation
(measure and confirm the same aspect by different means). This
research was not only inductive (to test curriculums) but also
deductive to develop and enrich theory. Cooper and Endacott
(2007: 816) refer to generic qualitative research of which
phenomenology and action research is applicable in this study. The
phenomenon is explored in depth by also including several
participants (academics, consultants and OSH managers) in terms
of their “lived experiences”.
The research is exploratory and therefore did not commit to a
singular paradigmatic research practice nor did it attempt to
generalize results through external validity. The primary challenge
of this type of research study is to find “gatekeepers” of different
information sources and requires limited inference or conclusion
drawing (Cooper and Schindler, 2011: 18). A combination of
personal surveys, observations, questionnaire surveys, interviews
with experts and research reports have been studied. Qualified
occupational hygienists and lecturers (previous and currently
employed) at higher education institutions in the discipline were
consulted and meetings with a group of OSH officials from leading
industries provided more insights.
The main instruments (methods) used were based on a generic
exploratory design by observing and interviewing small samples, to
answer the “what” question of OSH qualifications, applying content
analysis and to increase insight. The quantitative research method
used was surveying larger samples. The following three specific
methods were utilized:
1. Although, literature plays a minor role in qualitative research,
recent thematic paper publications from industry OSH experts were

studied to describe the main priorities/themes to provide a
summative and international perspective. These papers are more
vocational (practical) than academic publications in peer reviewed
journals. This survey was done to obtain further insight to the need
for an OSH qualification, curriculum contents and standards based
on the core emphasis of the American Society of Safety Engineers
(ASSE). Different publications and papers presented at the ASSE
conference (2010) and ASSE conference (2011) on safety
education and training were used. The depth of the secondary
research could be improved by this means and by using more than
30 references.
2. Two preliminary (limited in scope) questionnaire surveys were
conducted to confirm the need for degrees and to obtain a curricula
overview. The first survey was among 51 POM managers regarding
the importance and content of a BCom degree in POM and the
second survey was among 292 respondents regarding a degree
qualification in OSH.
3. General industry feedback from OSH experts was by means of
observation, interviews and benchmarking.
The results are summarised and presented in the same sequence
(A, B and C) in the next area. Although the status of the research is
work-in-process, the preliminary results show some strong
indicators.
RESEARCH RESULTS
Secondary data addressing the research problem
The most recent sources of the specialists in the OSH
field could be used in terms of the publications and a
summative collective view of the proceedings published
by ASSE conference (2010) and ASSE conference
(2011). It offers a once-a-year conference event for
professionals and showcases more than 150 papers and
expositions over 300 exhibitors. The proceedings of
ASSE 2011 contained 178 papers presented at the
Society’s 100th Anniversary conference in Chicago. A
sample of the papers include: “Machine Safety: New and
Updated Consensus Standards…What you Need to
Know“; “Implications of ANSI/ASSE Z590.3: A Prevention
through Design Standard”; “Delivering the Safety
Message Across Cultures”; “How to Make Matrix
Methods of Risk Analysis More Effective and Accurate”;
“Fall Protection: Yesterday, Today and Tomorrow”;
“Safety on the Road: Risk-Based Management of Non-
Regulated Fleets”; “The Power of Safety Management
Systems”; “Using Fall Protection Procedures in the Real
World”; “Managing Contractors in a General Industry
Environment” and many more.
The broad scope of the OSH function justifies a
degree qualification
The broad scope of the OSH responsibilities
(ASSE/BCSP, 2007: 5-6) depends on the nature of the
industry, but most of them do at least the following:
management, training (communication), operational and
administrative functions:
General and safety management
Steenkamp 9075
Planning, organising and control activities intended to
achieve safety objectives in an organisation. Implement
administrative and technical controls that will eliminate or
reduce hazards. Judging the effectiveness of existing
safety and health related programs and activities.
Assessing safety and health risks associated with
equipment, materials, processes, facilities or abilities.
Assist staff to determine safety objectives and
programmes to achieve objectives. Integrate safety into
the culture of an organisation. Ensure that dangerous
chemicals and other products are procured, stored, and
disposed. Identify conditions or actions that may cause
injury, illness or property damage. Control hazards that
can lead to undesirable releases of harmful materials into
the air, water or soil. Ensure that mandatory safety and
health standards are met. Determine facts related to
accidents or incidents based on real evidence.
Training, consulting and effective communication
Provide employees and managers with the knowledge
and skills necessary to recognize hazards and perform
their jobs effectively. Coordinate and conduct training
based on specific training and educational needs.
Empower, mentor and advise staff on different levels to
be and become professional OSH officials. Training
includes a wide spectrum of aspects such as
communications pertaining to emergencies (fires,
accidents or other disasters), reducing fire hazards by
inspection, layout of facilities, process design, design of
fire detection and suppression systems. Communication
in OSH should focus on the issues the recipients need to
understand and it requires authoritative and trustworthy
sources. Effective OSH communication must be ongoing
and includes giving information, instruction, training and
supervision. All these dimensions of OSH communication
play a role in awareness, knowledge and understanding
in order to improve the health and safety of the work
environment (Bonehill, 2010: 23).
Operational activities
Understanding the operations system (the transformation
processes) causing hazards and risks. Improve
ergonomics, processes, layouts and the general
workplace based on an understanding of human
physiological and psychological characteristics, abilities
and limitations. Identifying and implementing design
features and procedures to protect facilities and the
businesses from harm.
Administrative
OSH managers have an important administration function

9076 Afr. J. Bus. Manage.
such as general record keeping and documentation of
quality management systems. The maintenance of OSH
information is crucial to meet government requirements,
as well as to provide data for problem solving and
decision making.
The six primary responsibilities of OSH management
Besides the broad scope of OSH responsibilities justifies
a proper OSH qualification. The six primary
responsibilities were taken from the ASSE and BCSP
career guide to the safety profession (ASSE/BCSP, 2000:
3-4) and they were also used/tested in one of the
questionnaire surveys (next area). The immense
responsibility of the OSH professional is hereby
confirmed and also highlighted by Fuller and Vassie
(2004) and Goetsch (2011):
Hazard assessment, anticipate hazardous conditions
and risk assessment
There are multiple types (and combinations) of hazards.
Some examples are: pressure hazards, electrical
hazards, vibration hazards, mechanical hazards, falling
hazards, lifting hazards, temperature hazards, noise
hazards, etc. Safety practitioners must be alert to the
possibility of the unplanned interaction of hazards and
energy exchange which could result in harm or damage.
The focus on hazard identification, hazard analysis and
risk assessment with the view to preventing harm or
damage is irrevocable part of the functions of safety
practitioners.
Assist in the development of prevention and safety
control measures
Based on the results of the risk assessment the safety
practitioners needs to advise line staff on the
development of risk mitigating practices and safety
control measures. This includes hazard prevention,
promoting safety and preparing for emergencies.
Consideration must be given to the best internationally
accepted practices that keep track with cutting edge
technology and procedures.
Assist with the implementation of safety control
measures
Once developed in accordance with the outcome of the
risk assessment line management have to implement the
risk mitigating and risk control measures. The
implementation of such control measures needs to be
planned and supervised by line management. The safety
practitioner has a very explicit guidance and monitoring
function during the implementation of controls.
Assist in evaluating success of control measures
Safety practitioners must play an active role in
determining the efficacy of existing and new safety
processes of work. It is the responsibility of the safety
practitioner to advise line managers on determining the
efficacy of safety risk control measures through an
effective auditing process.
Assist with analysis of safety incidents and
implementation of recommendations
Rigorous analysis of any incident forms the basis of
revealing and understanding flaws or deficiencies in
safety management control measures and programs.
Line management is responsible for analysing safety
incidents with the view to ascertain root causes. Root
cause analysis result in the implementation of
recommendations to prevent re-occurrences.
Maintaining the process of continual improvement
Continuous improvement in all respects, including the
management of change is an indispensible element of
ensuring and sustaining organisational viability. It is the
responsibility of line management to innovate and to
manage change on a consistent basis.
Primary OSH degree topics
The body of knowledge of the OSH function seems to be
relatively standard. A few hundred research papers were
presented at the recent ASSE conferences and the topics
did not provide many new insights. It also confirmed the
core modules included in the proposed OSH curricula
tested in the surveys (results of the two questionnaire
surveys). After analysing the proceedings and paper
abstracts (ASSE conference, 2010) and (ASSE
conference, 2011), the following seven topics (and
related topics) can be regarded as a collective summary
of the main themes:
Safety leadership and corporate sustainability
It is unimaginable to have excellent OSH leadership
without a strong safety culture based on certain
behaviours, norms and values. OSH excellence resides
in corporate leadership. Visible leadership in the
workplace is supported and the “Twenty Foot Rule”
is an example of a process-driven concept that allows
organizations to improve employee communications and
increase their participation in the success of an
organization. The principle of “Point of Action is inherent
to this where management efforts are most effective
when they focus at the point where the work is actually
done.

Key strategic issues influencing global workplace
safety and health
The key strategic issues are the Global Harmonization
Standard, ISO 26000 SR, ISO 31000 RM and chemicals
and hazardous materials management.
A zero-incident safety culture
Large companies have invested significantly in
developing work standards, processes and engineered
solutions to workplace conditions that protect employees.
Behaviour-based safety (BBS) concepts began engaging
employees across, as well as up and down, the
organization in improving awareness and resolving
observable workplace issues.
Improve human safety behaviour
With reference to BBS (Cooper, 2004) the interventions
to address the human dynamics of injury prevention have
improved dramatically since the early 1900s. Focus and
distraction are human factors that impact both
performance and the risk of error. Unlike observable
conditions, such as human behaviour, the conditions that
give rise to human error are largely unobservable and unmeasurable.
Addressing these factors requires the
application of psychological principles to the manger's
toolbox.
Continuous improvement of an effective OSH
management system
Most experts agree that an effective OSH program will be
based on the following four elements:
1. Leadership, management commitment and all
employee involvement,
2. Workplace analysis,
3. Hazard prevention and control,
4. Safety and health training of all employees to eliminate
or avoid hazards.
Risk management
Risk management needs to be embedded into every
aspect of core “modern” management. In the face of
ever-present uncertainty, risk management is
fundamentally about how well an organization can
consistently understand / manage associated threats.
The following new international standards were popular
topics: (1) ISO 31000, Risk Management- Principles and
guidelines on implementation; (2) ISO/IEC 31010, Risk
management- Risk assessment guidelines.
Combustible dust is an insidious hazard
Steenkamp 9077
Many manufacturing environments fraught with hazards
have slow but steady accumulation of fine “dust” particles
in often unseen areas such as ceilings. Machinery can
seem innocuous compared with more immediately
obvious dangers of bodily injury posed to workers.
Several factors contribute to the interplay of an explosion.
As a rule, these five elements interact in order for an
explosion to occur:
1. Combustible dust (fuel),
2. Ignition source (heat),
3. Oxygen (oxidizer),
4. Confinement of the dust cloud,
5. Dispersion of dust particles in sufficient quantity and
concentration.
OSH rerated qualifications offered in Australia
Some international OSH curricula benchmarks were
investigated. South Africa has a much stronger mining
industry (for example) than Australia and yet we do not
offer a formal OSH qualification for mining. The following
programs are available in Australia
(http://fastfound.com/study-in-australia/best-safetysciences-degrees)
and this is an indication of South
Africa’s tertiary education position in terms of an OSH
bachelor degree education. It also provides additional
benchmarks for curricula design purposes. The following
seven bachelor degrees are offered in Australia:
1. New South Wales: Bachelor of Environmental
and Occupational Health and Safety; Bachelor of
Occupational Health and Safety at University of
Wollongong,
2. Queensland: Bachelor of Occupational Health and
Safety, Central Queensland University; Bachelor of
Occupational Health and Safety Science at University of
Queensland,
3. Victoria: Monash University: Bachelor of Occupational
Therapy,
4. Western Australia: B.Sc. on Health, Safety and
Environment at Curtin University,
5. South Australia: OHS bachelor, University of South
Australia.
OSH related qualifications offered in the USA
The majority of the programs offered in the USA are
undergraduate Bachelor of Science (BS) programs.
However, by comparison there are 35 accredited Masters
of Science (MS) industrial hygiene programs and 6 BS
industrial hygiene programs and overall, 2800 accredited
programs (www.abet.org). The following universities in

9078 Afr. J. Bus. Manage.
Table 1. A BS in OSH curriculum.
Group A Group B
Fundamentals of OSH Risk management
Legal compliance Project management
Construction safety Leadership
Industrial ergonomics Training and development
Interactions of hazardous materials Accident investigation
Total SHE Fleet safety
Introduction to fire protection Hazardous material management
OSHA standards
Industrial hygiene
Toxicology
the USA can be used as benchmarks: Central Missouri
(Occupational Safety and Health, BS); Fairmont State
University, (Occupational Safety, BS); University of
Houston-Clear Lake (Environmental Science and Safety,
BS); Indiana University of Pennsylvania (Safety
Sciences, BS); Marshall University (Safety Technology
BS); Oakland University (Occupational Safety and
Health), and others.
The well-known international OSH curricula from the
Columbia Southern University were used as a detail
benchmark in this study. A large majority of South African
students will be working adults that would need to study
part-time. A distance learning (open distance learning)
Bachelor’s degree would be appropriate and the popular
offerings of the Distance Education and Training Council
(DETC) accredited Columbia Southern University was
used as a benchmark. Their Bachelor of Science in OSH
consists of 17 major modules (besides other general
modules required) listed in Table 1.
This syllabus can be regarded as sufficient for a
bachelor’s degree with the assumption that the entrylevel
general modules (not shown in the table) are
appropriate and the variety of electives (not listed in the
table) is sufficient. This example also shows the interdisciplinary
make-up of such a qualification.
OSH priorities according to the American regulatory
compliance requirements
The occupational safety and health administration
(OSHA) is the only entity created under the OSH Act
given the power of the law. The professional
development conference (ASSE, 2011) highlighted the
core dimensions of the regulatory compliance
requirements presented by (Fisher and Hudson, 2011) in
terms of OSHA regulations and compliance guidelines.
They covered important topics such as using common
sense and intelligence (making the comment that nobody
gets cited or fined for being more safe than the minimum
required by the law), the judicial branch, the legislative
branch, understanding OSHA, federal regulations,
understanding health standards, understanding safety
standards, distinguishing between performance and
specification standards, violation of the law and the
general duty clause) proper record-keeping and the
compliance process, the air contaminant standard,
hazard communication, hazardous waste operations,
emergencies response, environmental legislation,
regulations and standards. Regulatory compliance
requirements (and compliance to several safety
management system standards) were included in the
proposed OSH curricula discussed in the next area.
Questionnaire surveys
Results of survey one (1) - The need for a degree
qualification in POM
As mentioned in the introduction, the OSH function does
not cause hazards. It is a staff function and therefore
need to consult, provide advice and negotiate. The POM
function is responsible for manufacturing which implies
potential hazards. OSH management would not be
necessary without factories, mines and industries with
several types of operations systems. These systems
imply transformation processes designed and operated to
produce outputs from inputs. The dynamics of these
production processes cause risks and the presence of
risks will always be relative. The risks are a combination
of unsafe work conditions and unsafe acts committed by
fellow workers. In addition, modern competitive markets
of today demands agility, time to market, high
responsiveness and speediness. These pressures may
also increase safety risks as deadlines, peer pressure
and budget factors may lead to unsafe behaviour.
The University of South Africa (Unisa) has recently
approved a commerce degree (BCom) in “Supply chain
and operations management” with several OSH-related
modules. This is a good indication of the need for an
OSH degree and the qualification is certainly much

needed, but it will not address the need in OSH education
sufficiently. A brief summary of this new POM
qualification (to be introduced in 2014) is provided in
Table 2 and 51 respondents (Steenkamp, 2010) rated the
modules from first year level to third year level. The ten
OSH (and SHE) related modules are indicated in bold.
The survey confirmed the need for a POM degree and
the ten OSH-related modules scored high in importance.
All respondents indicated inclusion of safety management
on the second level, but they were doubtful (41.7%) of
making it an elective on the third level. This may be due
to the focus on the POM specialization.
Results of survey two (2) - To determine the need and
contents of an OSH degree
Van Loggerenberg (2011) recently obtained his MSOSH
degree in USA (Southern Columbia University) and he is
the programme leader of the 12-month safety
management certificate programme offered at the Centre
for Business management, Unisa. He was instrumental in
this survey among a wide spectrum of safety practitioners
and safety managers. They selected a set of OSH
competencies (with reference to most of the core OSH
functions (responsibilities) discussed in the previous area
on the literature study of OSH curriculum benchmarks)
and applied the inductive Delphi approach to determine
the core of a proposed OSH degree curriculum.
Safety responsibilities
The core responsibilities were taken from the ASSE and
BCSP career guide to the safety profession (2000: 3-4).
All (six) responsibilities were identified by an
overwhelming majority as integral to the function of the
safety practitioner/officer. The responsibility to anticipate,
identify, analyse and evaluate hazardous conditions was
rated the highest (93%) out of 292 respondents. The
other responsibilities with high ratings were:
1. Analyse incidents to identify deficiencies in SHEsystems
- 90%,
2. Advise in developing of control designs, methods,
procedures and programmes – 89%,
3. Measure, audit and evaluate effectiveness of controls
– 89%,
4. Measure, audit and evaluate effectiveness of controls
– 87%.
Primary modules to be considered in a proposed
bachelors OSH degree
Respondents had to rate a predetermined proposed list
of subjects in terms of their importance of inclusion in a
proposed OSH degree (for example, BCom OSH). From
Steenkamp 9079
Table 4, it follows that the subjects can be grouped into
four clusters with regard to importance. The most
important subjects were safety management, SHE
legislation and safety risk management, all three
considered “very important” (90.1, 89.8 and 88.9%
respectively) for inclusion. A summary is given in Table 3.
Respondents also listed the most important modules. A
summary of the most important topics are:
1. Incident analysis and analysis techniques (92.0%),
2. Hazard analysis, risk assessment and evaluation
(90.4%),
3. Safety systems (89.8%),
4. Developing SHE culture (89.8%),
5. Emergency preparedness (88.5%),
6. Task process safety (86.6%),
7. Behaviour based safety (86.6%),
8. Auditing (86.6%),
9. Safety training (85.4%).
Additional skills required
A relative large majority of the respondents (76.4%)
indicated that students should perform a mandatory three
month practical internship for vocational skills. The three
stakeholders that can benefit from OSH internships are
the students, employers and universities. Work integrated
learning (WIL) involves “periods of required work that
integrate with classroom study” (DoE 2007: 9) to
contribute to training of a professional standard.
General observations and feedback from industry
experts
Lotter (2011) CEO of Noise Clipper (Pty) Limited (winner
of the AHI business of the year award in 2004) had many
networking opportunities with members of the Mine
Ventilation Society (MVS) and OSH managers from the
entire South African manufacturing industry. Although the
mission of the company was to combat NIHL by means of
excellent hearing conservation (second level noise
control), many other needs such as education were
identified. Most of these OSH officials were in agreement
with the need for an OSH degree.
Badenhorst (2011) and his colleagues from Anglo
American Platinum investigate the educational options to
improve career paths for their OSH officials. Most OSH
managers will confirm the desperate need for a formal
OSH degree in South Africa. Regular contact (and formal
consultation) with OSH managers and discussions with
stakeholders at conferences (for example, the annual
NOSA Noshcon conference) confirms the urgency. The
managing director of NOSA (Hobday, 2011) supports the
development of a bachelor degree in OSH as an
articulation gateway and career path for their

9080 Afr. J. Bus. Manage.
Table 2. Comments on POM modules.
First level To include (%) Move to 2nd year (%) Move to 3rd year Omit (%)
Business management 1A (NQF 5) 100
Business management 1B (NQF 6) 92.3 7.7
Economics 1A (NQF 5) 92.3 7.7
Economics 1B (NQF 6) 76.9 7.7 15.4
Accounting, concepts, principles and procedures (NQF 5) 100
Accounting reporting (NQF 6) 92.3 7.7
Commercial law 1A (NQF 5) 69.2 7.7 23.1
Introduction to financial mathematics (NQF 5) 92.3 7.7
Elementary qualitative methods (NQF 5) 92.3 7.7
Second level Include Move to 1st year (%) Move to 3rd year (%) Omit (%)
General management 84.6 15.4
Production and operations management 84.6 15.4
Purchasing management 84.6 7.7 7.7
Method and work study 100
Quality management 100
Enterprise risk management 84.6 7.7 7.7
Ergonomics 84.6 7.7 7.7
Safety management 100
Third level Include Move to 1st year Move to 2nd year (%) Omit (%)
Strategic management 100
Strategy implementation 91.7 8.3
Production and operations management 92.3 7.7
Project management 100
Total quality management 92.3 7.7
Strategic sourcing 75 25
Environmental management 92.3 7.7
Possible electives for third level Include Make it man-datory (%) Move to 2nd year (%) Move to 1st year Omit (%)
Global business environment 78.6 21.4
Safety management 41.7 50 8.3
Method and work study 84.6 7.7 7.7
Strategic sourcing 91.7 8.3
Supply chain alignment 84.6 15.4
Supplier relationship management 69.2 15.4 7.7 7.7

Table 3. Important modules for an OSH degree.
Subject
No response
(%)
Irrelevant
(%)
Not so important
(%)
Important
(%)
Steenkamp 9081
Very important
(%)
Safety management 5.1 0.3 0.3 4.1 90.1
SHE legislation 5.1 0.6 0.3 4.1 89.8
Safety risk management 6.1 0.3 0.3 4.5 88.9
Environmental management 5.7 0.3 1.6 24.8 67.5
Occupational hygiene 6.4 0.3 2.5 24.2 66.6
Quality management 5.4 0.3 1.3 26.8 66.2
Ergonomics 6.4 0.3 3.8 27.4 62.1
Industrial and organisational psychology 5.7 0.6 4.1 34.1 55.4
Financial risk management 5.4 1.6 14.6 41.4 36.9
Organisational development 5.4 1.3 11.5 49.0 32.8
Management of produc-tion and operations 5.7 2.9 13.7 47.1 30.6
Business management 5.7 1.6 10.5 55.1 27.1
National. corporate and enterprise economics 7.0 11.1 38.5 33.8 9.6
Accountancy 5.7 15.3 40.4 29.0 9.6
Table 4. A proposed BCom OSH curriculum.
Group A (level 6) Group B (level 7 and electives)
Introduction to occupational safety management Safety management in world context
Introduction to occupational health management Safety auditing
Introduction to occupational hygiene management Electives to be decided. such as:
OSH law (level 6) OSH law (level 7)
Safety risk assessment Hearing conservation excellence
Managing safety in the workplace Dust control
Introduction to environmental management BBS (behaviour-based safety)
SHEQ system standards Process safety management
Safety incident analysis
Safety leadership and culture
undergraduate SLP offerings. The only debate will be
regarding the syllabi. The second potential issue is if
industry will support a degree offered by a non-public
university (a private higher education institution). This
option need to be investigated further because of the
limitations at the public universities (discussed later in
this area).
Smit (2011) is widely known as an industry expert in
OSH. He is actively involved as consultant and was
professor at several public universities. His brief feedback
on an OSH curriculum is that the outcomes of the
qualification should be in line with the following:
1. Anticipating, identifying, analysing and evaluating
hazardous conditions,
2. Advising in development of control designs, methods,
procedures and programs,
3. Advising in implementation and administration of safety
control programs,
4. Measuring, auditing and assessing the effectiveness of
safety management controls,
5. Analysing incidents to identify deficiencies in
occupational safety, health and environmental protection
management.
Smit (2011) provided his preferred OSH curriculum and
recommends that quality management, POM and project
management must be included in the business
management group and that hearing conservation
excellence be considered to be one of several electives.
A summary of his altered curriculum (excluding the firstyear
modules) is provided in Table 4.
Program roll-out through an accredited higher
education institution
After many years of teaching and learning experience at

9082 Afr. J. Bus. Manage.
tertiary institutions and discussions with academics it
became evident that the skills to teach such a
qualification may never reside in one single public
(subsidised) university. The capacity is simply too limited
and qualified OSH managers (SHE managers) do not
teach or consider such a career as financially viable. This
is the reason that only basic qualifications (eg. certificate
programmes) are offered in South Africa. The
conventional university Bachelor’s degree in OSH will
have to be found in unconventional ways.
Private higher education institutions (PHEIs) accredited
at the DOE seems to be a good alternative. They have
similar challenges (for example, no or limited subsidy)
and have limited permanent faculty (lecturing staff), but
they are much more flexible. There are many examples
of only a few will be discussed briefly. The Independent
Institute of Education (IIE) (one of the largest PHEIs) is
Johannesburg Stock Exchange (JSE) and offer a wide
variety of qualifications. Some smaller private
“universities” specialize in certain disciplines and OSH
may fit some of these institutions more than others. The
following are three examples of private higher education
institutions (PHEIs) (a college, an institute and a
foundation) that specialize:
1. Cranefield College is a PHEI specializing in project
management,
2. Da Vinci institute is known for innovation and
technology management,
3. Foundation for Professional Development (FPD) is
known for health and medical related training.
Should a large company (for example, a mine house)
want to extend their “training academy” capabilities and
credibility, it could consider a strategy to engage in a
partnership with a suitable PHEI to offer such an OSH
related offering (for example, BCom OSH degree). It will
be necessary to sponsor a few permanent employed
professors (senior lecturers) to ensure sustainability. The
results will be discussed in the same sequence A, B and
C.
A) Aspects highlighted from the secondary research
survey
Besides the background to the problem, the literature
provided confirmation and guidelines for the
questionnaire surveys including the following:
1. The large scope of broad OSH responsibilities (and the
six primary responsibilities) justifies a degree
qualification. They were also tested in one of the
questionnaire surveys.
2. Primary OSH degree topics could be verified and
tested in our questionnaire survey. Only a few new
developments were identified which may not influence an
OSH curricula.
3. The variety of programs available in Australia (as an
example) indicates South Africa’s position in terms of an
OSH bachelor degree education. The seven bachelor
degrees offered in Australia were listed. It also provides
additional benchmarks for detail curricula design
purposes.
4. The well-known international OSH curricula benchmark
from the Columbia Southern University was explored.
The distance learning (open distance learning) Bachelor
of Science degree offered by Columbia Southern
University was used as a benchmark, also in terms of its
17 major modules. This product is a good guideline for a
distance learning OSH degree.
5. The OSH priorities according to the American
regulatory compliance requirements, provided
confirmation of content to be included in an OSH
qualification.
B) From the questionnaire surveys the following
aspects were highlighted
1. The first survey confirmed the need for a POM degree
and the ten OSH-related modules scored high in
importance. All respondents indicated inclusion of safety
management on the second level, but they were doubtful
(41.7%) of making it an elective on the third level. It may
be indication that POM should be a separate degree with
a stronger emphasis on supply-chain management, than
OSH. The new BCom degree in “Supply-chain
management and operations management” will be
offered by Unisa which will address the fundamental
needs regarding OSH, but specialist OSH officials have a
large responsibility and industry is in desperate need of a
separate professional local OSH degree qualification.
2. The second survey confirmed that all six primary OSH
responsibilities must be integral to the function of the
safety practitioner/officer. The responsibility to anticipate,
identify, analyse and evaluate hazardous conditions was
rated the highest (93%). The most important subjects for
the proposed OSH qualification were safety
management, SHE legislation and safety risk
management, all three considered “very important” (90.1,
89.8 and 88.9%, respectively) for inclusion. A relative
large majority of the respondents (76.4%) indicated that
students should perform a mandatory three month
practical internship for vocational skills.
3. Although, the second survey showed that accounting
and economics subjects are not so popular for inclusion
in a degree, these subjects (and business management,
general management and strategic management) are
necessary requirements for safety professionals. A
survey of certified safety professionals (CSPs), Ferguson
(1994: 79-81) found that baccalaureate course work in
risk management and in areas associated with business,
such as total quality management (TQM) and the
financial aspects of safety was needed. The inclusion of
human behaviour related subjects such as personality in
work context, organisational psychology and

organisational development is in line with the role of the
safety professional as advisor, communicator, facilitator,
trainer and mentor of people. These skills are all also
fundamental to behaviour-based safety (BBS) and
supported by Swuste and Arnoldi (2003: 15-27).
C) From the general observations and personal
surveys from industry experts, the following can be
highlighted
The researcher and other consultants confirm the results
of the study based on face-to-face interaction with top
managers in the OSH field. Badenhorst (2011) and his
colleagues from Anglo American Platinum (and OSH
officials from Lonmin) investigates the educational
options to improve career paths for their staff. The
managing director of NOSA (Hobday, 2011) supports the
development of a bachelor degree in OSH as an
articulation gateway and career path for their
undergraduate speech-language pathology (SLP)
offerings. Smit (2011) is widely known as an industry
expert in OSH. He is actively involved as consultant and
was professor at several public universities. He confirmed
the results of the study and provided his summative
version of an OSH degree based on years of experience
in the academic and OSH field. Most of these industry
experts indicated that the qualification should not be
perceived as inadequate should it be offered by a PHEI –
especially if they can participate as education partners.
CONCLUSION AND RECOMMENDATIONS
Appropriately qualified POM and OSH practitioners will
be able to contribute to curbing the high level of
occupational incidents, injuries and fatalities. The offering
of a professional degree in OSH at a higher education
institute (or PHEI) would contribute substantially to
recognising the professional status of OSH managers.
OSH practitioners need to be recognised and treated as
a profession. They deserve the same respect and status
as the industrial medical doctor, occupational health
nurse, human resource manager, POM manager,
industrial engineer, hygienist, environmental manager
etc.
The exploratory study confirmed the research problem
and provided more insight in terms of the significant need
and contents for a formal OSH qualification (such as an
OSH bachelor degree). Although this study may be
regarded as exploratory (and work-in-process) it is
unthinkable to wait another decade for a proper OSH
degree qualification. More surveys will be done by the
researcher (for example, via the Mine Ventilation Society
of South Africa and during the presentation of this paper
at the annual Noshcon conference in September 2012),
but the details in terms of the need and the design of the
qualification should not change much. Further research is
Steenkamp 9083
needed to address the “how” and “who” research
questions – who will offer this qualification and how? The
viability of an OSH degree is clearly more dependent on
capacity and resources than on the complexity of the
curricula. In developing the curriculum for an OSH degree
is almost a given (as indicated in detail) and much less of
a challenge than to obtain an appropriate institution with
appropriate skills and capacity to offer the degree.
Takala (2009) emphasise the global need for OSH and
reports on a huge step backwards by taking a twin-track
approach to the safety of young workers through the
classroom and in the workplace. The field of OSH held a
prominent position in the European Community since
2002 and mainstreaming OSH into education, the
European Agency for Safety and Health at Work has
wide support. OSH is a rapidly developing area and they
also hope to formalize OSH education closer to and
within the classroom in a quest for risk education in
schools, colleges and universities. The South African
government should intervene to make OSH education a
reality.
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African Journal of Business Management Vol. 6(31), pp. 9085-9091, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2750
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Estimated state of health and stress among truck
drivers with regard to participating in recreational sport
activities
Maja Meško 1 *, Mateja Videmšek 2 , Jože Štihec 2 , Tomaž Šinigoj 3 , Lea Šuc 5 , Damir Karpljuk 2 and
Jasna Lavrenčič 4
1 Faculty of Management, University of Primorska, Cankarjeva 5, 6000 Koper, Slovenia.
2 Faculty of Sport, University of Ljubljana, Gortanova 22, 1000 Ljubljana, Slovenia.
3 Independet researcher Tovarniška cesta 15, 5270 Ajdovšcina, Slovenia.
4 Faculty of Organisation Studies in Novo mesto, Novi trg 5, 8000 Novo mesto, Slovenia.
5 Faculty of health sciences, University of Ljubljana, Poljanska cesta 26/a, 1000 Ljubljana, Slovenia.
Accepted 16 July, 2012
This study aimed at determining the frequency of truck drivers’ participation in recreational sport
activities, and to find out whether there is a relationship between their own estimated state of health
and stress with regard to participating in recreational sport activities. The study included 102
participants, professional truck drivers, of whom 92 (90%) were men and 10 (10%) women. The obtained
data were processed with the SPSS computer programme. Research has shown that only 13.7% of the
participants are engaged in a sports activity at least 2 or 3 times a week, 54% of the participants only
once a month or more often they are not at all engaged in sport activities. Their free time is too passive,
as supported by their smoking of cigarettes and drinking of alcohol. We also established a relationship
between the truck drivers’ own estimated state of health and stress, and their participation in
recreational sport activities. Professional truck drivers have difficulties arranging the schedule of
regular sport activities, in particular because their schedule is largely variable and not predetermined.
Employers and the designers of motorway rest areas can help them by arranging mini sports parks or
mini fitness areas. Healthy and mentally sharp and rested drivers will be able to transport goods safely
and quickly. In addition, they will be absent from work less due to sick leave and obtain forms of stress
relief.
Key words: Truck drivers, estimated state of health, estimated state of stress, sport activities.
INTRODUCTION
A professional driver is a person who operates a vehicle
in road traffic and is therefore the most important factor in
the transport sector. This area is stipulated in detail in the
Road Transport Act (ZPCP-2, Official Gazette of the
Republic of Slovenia, 2011), first published on 14
December 2006 in the Official Gazette of the Republic of
Slovenia, no. 131/2006. The Act lays down the conditions
and methods of performing the service of goods and
passenger transport in domestic and international road
*Corresponding author. E-mail: maja.mesko@gmail.com.
traffic as well as the bodies authorised to implement and
supervise implementation of this Act. Professional drivers
perform a specific activity involving the transport of
different types of goods or persons in a special working
environment and under special working conditions.
According to data from the Statistical Office of the
Republic of Slovenia (Statistical Office of the Republic of
Slovenia, Standard Classification of Occupations)
occupations are classified in nine main groups, further
divided into subgroups. In line with the Standard
Classification of Occupations, Group 8 includes all plant
and machine operators, whereas Subgroup 832 includes
the drivers of road vehicles. This article delves into the

9086 Afr. J. Bus. Manage.
practice of sport and examines the assessed state of
health and stress of people falling into subcategory 8324
which includes the drivers of trucks, heavy trucks, semitrailer
trucks and road tankers. In the rest of the text the
abbreviated version “truck driver” will be used to denote
both male and female professional drivers of a truck,
heavy truck, semi-trailer truck and road tanker.
This profession was selected on purpose because it
involves a group of people working in special conditions
and leading an uncommon lifestyle. Namely, a driver’s
large goods vehicle is at the same time their office,
kitchen, living room and bedroom. Truck drivers are thus
forced to work in a sedentary position and maintain a
specific, mostly unhealthy lifestyle as a consequence of
their working time and working conditions.
The effect of physical activity on estimations of the
experience of stress and of the state of health
Sport is an efficient way of coping with stress because
already the mere fact that one dedicates their leisure time
to a healthy physical activity is a source of enjoyment and
relaxation for them (Tušak and Berčič, 2003; Bertoncelj
and Kovač, 2009). Sport, especially endurance activities,
reduces general malaise and even depression by
stimulating the secretion of the hormones of happiness
such as catecholamines, norepinephrine, serotonin and
beta-endorphins. This results in a release of tension.
Activities aimed at developing endurance not only reduce
the level of stress hormones in the body but also calm the
central nervous system down, thus improving our mental
balance. The body produces more derivatives of
morphine, for example, endorphins, with an immediate
and long-lasting anti-depression effect. This not only
improves one’s mental state but also decreases feelings
of anxiety (Pišot and Završnik, 2004).
In all developed and also less-developed countries
people are becoming increasingly aware that regular
sport activity is crucial to boosting and maintaining health,
regardless of one’s age. Many countries and companies
invest heavily in prevention programmes aimed at
improving health which also include a sport activity (Pišot
and Završnik, 2002). Sila (2002) established a high
correlation between physically active adults and a high
estimation of the state of their health compared to those
physically less active or non-active. He also established a
high correlation between the frequency of sport activity
and greater care for one’s health. The results of studies
conducted in Slovenia show that it is mostly healthy
people who take up recreational sports. This applies to all
age groups, especially the elderly. The number of
physically active women is lower than that of men,
whereas the number of “sick” women is twice the number
of “sick” men (Fras, 2002). It can easily be assumed that
healthy people bring an economic “benefit” to their
country and the organisations they work for because their
productivity is higher, they take sick leave less often and
thus the costs of health insurance for the employees and
the elder population are reduced (Pišot and Završnik,
2002). Physical activity which improves health and health
per se are no longer in the interest of each individual
alone but also generate positive effects for society as a
whole. It is therefore vital for an employed person to fit a
regular sport activity into their working day (Bilban, 2004).
A regular sport activity is positively correlated with a
healthy lifestyle as it contributes substantially to the
maintenance, strengthening and protection of health
(Berčič, 2005) while also increasing productivity (Bilban,
2002). There is no need to engage in a very intensive
physical activity to see persuasive positive results –
moderate physical activity will do. An example of a
sufficient physical activity which as accessible to all age
groups in the population is regular fast walking (Fras,
2002) as a predominant way of human movement which
goes hand in hand with other activities associated with
the development of functional abilities. Aerobic physical
activity has favourable effects on everyone by activating
the muscles of the legs and arms, heart, lungs and joints
– almost the whole body. It is an activity which ends in
gasping for breath and heavy perspiration, while also
increasing the heart rate. To achieve a beneficial effect of
a regular aerobic activity the minimum frequency of the
activity must be three times a week for half an hour
(Karpljuk et al., 2002). Moreover, the intensity of the
activity must be sufficient, measured in terms of heart
beats per minute (Karpljuk et al., 2004). The positive
effects of the sport exercise last only while the practice of
sport is regular, and start diminishing immediately after
regular physical activity stops (Karpljuk et al., 2003).
Physical activity as an important factor of truck
drivers’ healthy lifestyles
A healthy way of living cannot do without a regular sport
activity which positively correlates with a healthy lifestyle
by contributing substantially to the maintenance,
strengthening and protection of health (Berčič, 2005), as
well as by increasing productivity (Bilban, 2002;
Bertoncelj et al., 2009; Pavlič et al., 2011). As discussed
by Berčič (2002), an active lifestyle contributes
considerably to the overall quality of life since, by
protecting the health of all age groups, a regular sport
activity is crucial to the promotion of health. Insufficient
sport activity constitutes an important risk factor of
developing different chronic diseases such as arthritis,
stroke, osteoporosis, high blood pressure, obesity,
diabetes (Sila, 2002; Fras, 2002; Završnik and Pišot,
2005; Blinc and Bresjanac, 2006; Sila, 2007) and many
psychological disorders such as stress, anxiety and
depression (Fox and Khattar, 2004; Fras et al., 2005),
which is why the need and motivation to shift from a
passive to an active lifestyle are even greater.

Researchers claim that these diseases could be largely
avoided if people included a suitably intensive, planned
and regular sport activity in their leisure time.
The lifestyle of professional truck drivers is unforgiving
due to their working hours, unenviable working conditions
and lack of possibilities to practice sports. It is difficult to
imagine that a professional truck driver is able to
adequately prepare in their leisure time for high-level
sports competitions. Drivers often say that, after several
hours of driving, they can hardly wait to sit down again.
Many large and small transport companies are closely
associated with sport, but not from the perspective
discussed in this article. Sport is one of the best ways to
boost publicity and improve a company’s visibility among
the public at large, which is why a financial investment in
sport is an efficient approach to advertising. The lists of
sport clubs and sporting events sponsored by the largest
Slovenian transport companies are relatively long. All of
these investments in competitive sport are highly
commendable, yet the companies often fail to recognise
the importance of their own employees’ sport activity.
The organisations which promote professional truck
drivers’ interests organise different competitions.
However, these are not sports competitions but driving
skill contests using different polygons where drivers strive
to overcome road obstacles within the shortest possible
time. Every year the Association of Drivers and
Mechanics of Slovenia organises a national professional
drivers’ working competition. Large manufacturers of
goods vehicles also organise national or even
international championships, putting to the forefront the
accuracy, safety and economy of driving, yet the main
emphasis is not on sports contents but on drivers
socialising with their colleagues. There are also
exceptions to the rule, mostly among the biggest
Slovenian transport companies; namely, Intereuropa
organised the first sporting and social event called
“Intereuropiada” already back in 1976. In 2005 these
sports games featured 20 teams, with more than 560
competitors. In 2002 the results of a survey conducted
among the participants showed that the employees were
satisfied (45%) and very satisfied (48%) with the games,
whereas only 2% of the total 98 respondents were
dissatisfied. The survey also showed that most (89%)
participants participated in the games to unwind and
socialise. They competed in beach volleyball, boules,
relay running, tug-of-war and games without frontiers
called a “Logistic Chain” (Kozlovič, 2002).
In winter they meet on ski slopes; the Winter Games of
the Viator and Vektor Group were attended by 300 skiers,
with more than 200 competing in the giant slalom
(Tomšič, 2008). In 2010, 108 skiers participated and 90
of them competed (Mak Uhan, 2010). The employees’
discontent with the current economic situation, increasing
workload and constant fear of losing their job are also
reflected in the level of their participation in sporting and
social events organised by trade union associations. The
financial crisis undoubtedly takes its share for this situation,
Mesko et al. 9087
which is why in the past few years many events of this
type were cancelled.
With regard to both examples mentioned before of a
good sports practice, it should be noted that the games
are attended by all employees and not only by
professional drivers, so it is difficult to determine the
exact share of professional truck drivers. Another
problem is that the games take place once a year,
whereas a beneficial effect of sport on health is only
achieved through a regular sport activity.
Our study aimed to establish how frequently truck
drivers engage in a sport activity and identify any
correlation between the estimated state of health and
estimates of the experience of work-related stress with
regard to their practicing of sport.
Research hypotheses
Based on the introduction, the subject, the problem and
the purpose of the study the following hypotheses were
formulated:
H1: There are statistically significant differences between
the estimations of truck drivers’ state of health and their
practice of sport.
H2: There are statistically significant differences between
the estimations of the work-related stress of truck drivers
and their practice of sport.
METHODS
Study subjects
The quantitative research was conducted using an undefinedpurpose
sample of professional truck drivers from different
Slovenian regions.
The study encompassed 102 (1.39% of the population)
professional drivers of whom 92 (90%) were male and 10 (10%)
female.
The subjects were divided into four age groups: 28 (27%) were
included in the group of “up to 30 years”, 35 (34%) “from 31 to 40
years”, 25 (25%) “from 41 to 50 years” and 14 (14%) in the group of
“aged 51 years and more”. The average weight of all subjects was
89.7 kg, that is, 76.2 kg for the women and 91.2 kg for the men.
The body mass index (BMI) was calculated and the average BMI
was 27.56, that is, 27.56 for men and 27.21 for women.
The BMI of 20.6% of the respondents was below 25 so they were
classified as normally fed people exposed to an average risk of
other clinical problems, whereas the remaining 81 (97.4%) were too
obese and were exposed to an increased or moderately increased
risk of other clinical problems. Three of them (2.9%) fell into the 2nd
degree obesity group, exposed to a very high risk.
Study instruments
The drivers filled out a survey questionnaire. Before the survey they
were informed of the purpose of the study and instructed on how to
complete the questionnaire. Owing to the specificity of the
profession the survey questionnaires were written in the Slovenian

9088 Afr. J. Bus. Manage.
Table 1. Study subjects’ ways of spending their leisure time.
Ways of spending leisure time
Frequency Percentage
Women Men Total Women Men Total
I sleep 6 28 34 60.0 30.4 33.3
I watch TV 8 50 58 80.0 54.3 56.9
I practice sport 2 25 27 20.0 27.2 26.5
I attend sporting events 0 11 11 0.0 12.0 10.8
I take part in cultural events 1 6 7 10.0 6.5 6.9
I spend time with my family 5 51 56 50.0 55.4 54.9
I socialise with my friends 8 54 62 80.0 58.7 60.8
I read 0 2 2 0.0 2.2 2.0
and Croatian languages. It was possible to complete the
questionnaire in electronic form. The survey questionnaire enquired
about the following:
1. Socio-demographic details (gender, age, body height and weight,
marital status, number of children, employment, length of service,
work experience)
2. Quality of life (working hours, satisfaction at work, working
conditions)
3. Physical/sport activity (way of spending leisure time, frequency of
engaging in sport, method of practicing a regular sport activity,
ability to walk without interruption, effect of the sport activity on the
sense of well-being at work)
4. State of health (self-assessment of the state of health, diseases,
frequency of exposure to stress, smoking, drinking alcohol, taking
painkillers, relationship between pain and the job, satisfaction with
body weight).
Procedure
The data were collected between 15 July and 21 December 2010
using field surveys and an online questionnaire. The subjects were
invited to complete the questionnaire either through a personal
approach or by an invitation published on a website. The subjects
participated in the survey on a voluntary basis and their responses
were analysed anonymously. Statistical processing was performed
using the statistical package for the social sciences (SPSS) 17.0
and Microsoft Office Excel 2003 software which was used for data
analysis and processing. The hypotheses were verified using the
Mann-Whitney U test and Wilcoxon Rank-Sum test.
RESULTS
Descriptive statistics
The study aimed to establish estimations of the state of
health and stress experienced by truck drivers with
regard to their sport activity and therefore our first goal
was to find out how the drivers spend their leisure time
given that they are required to work in a sedentary
position, in a very restricted space (Table 1).
The respondents were allowed to choose several
answers so the sum total of frequencies exceeds the
number of study subjects. Most subjects socialise with
friends in their leisure time, namely men chose this
answer 54 times (58.7% of all surveyed men) and women
8 times (80% of all surveyed women). The same share of
women watch TV in their leisure time (80% of all
surveyed women) and this activity was ranked third with
the men (54.3% of all surveyed men). With the men, the
second most frequent way of spending leisure time
(55.4% of all surveyed men) was spending time with the
family, which was reported by at least 50% of women (4th
place), whereas 60% of the women sleep during their
leisure time (3rd place).
The frequency of the following activities drops in
descending order: engaging in a sport activity (20 and
27.2% of the surveyed women and men, respectively),
attending sporting events (0 and 12% of the surveyed
women and men, respectively), taking part in cultural
events (10 and 6.5% of the surveyed women and men,
respectively) and reading (0 and 2.2% of the surveyed
women and men, respectively).
An important finding of the study is that only 13.7% of
the subjects practice sport at least twice a week which,
according to some criteria, is the minimum frequency of
an activity to consider it regular. More than one-half,
namely 54%, of the study subjects practice a sport only
once a month or never at all. The physically active
respondents were asked to specify the type of sport they
practice. Multiple answers were possible; the most
frequently practiced sport was football, followed by
basketball (Table 2).
Testing of hypotheses
The first hypothesis that there are statistically significant
differences between the drivers’ estimates of the state of
their health and their engaging in a physical activity was
tested using the Mann-Whitney U test. Hypothesis 1 can
be confirmed as Tables 3 and 4 show statistically
significant differences between the drivers’ estimated
state of health and their engaging in a physical activity
(P=0.005). The second hypothesis that there are
statistically significant differences between the drivers’
estimated work-related stress and their engaging in a
physical activity was also confirmed, as the Mann-
Whitney U test revealed statistically significant

Table 2. The study subjects’ frequencies of engaging in sport.
Frequency of sport Frequency Percentage Cumulative percentage
Every day 2 2.0 2.0
2 to 3 times a week 12 11.8 13.7
Once a week 21 20.6 34.3
2 to 3 times a month 11 10.8 45.1
Once a month 25 24.5 69.6
Never 31 30.4 100.0
Total 102 100.0
Table 3. Ranking of state of health with regard to sport activity.
State of health
Rank
Physical activity N RA RT
Yes 26 39.56 1028.50
No 76 55.59 4224.50
Total 102
N, number; RA, rank average; RT, rank total.
Table 4. Mann-Whitney test statistics.
Test statistics
State of health
Mann-Whitney U 677.500
Wilcoxon W 1028.500
Z -2.795
Asymp. Sig. (2-tailed) 0.005
GV: physical activity
Sig., statistical significance; Mann-Whitney U, Mann-Whitney U
statistics; Wilcoxon W, value of Wilcoxon statistics (Ws); Z,
standardised value; GV, grouping variable.
Table 5. Ranking of stress with regard to
physical activity.
Stress
Rank
Physical activity N RA RT
Yes 26 38.42 999.00
No 76 55.97 4254.00
Total 102
N, Number; RA, rank average; RT, rank total.
differences between the drivers’ assessments of workrelated
stress and their engaging in a physical activity
(Tables 5 and 6).
DISCUSSION
The present study revealed the alarming fact that some
Table 6. Mann-Whitney test statistics.
Test statistics
Mesko et al. 9089
Stress
Mann-Whitney U 648.000
Wilcoxon W 999.000
Z -2.987
Asymp. Sig. (2-tailed) 0.003
GV: physical activity
Sig., Statistical significance; Z, standardised value: GV,
grouping variable.
truck drivers never engage in any sports. Up to 30.4% of
the respondents chose this answer, with their number
increasing with the age group. This situation corroborates
findings of the latest studies involving the non-active
population in Slovenia which show that 37.9% of the
population was non-active and an additional 18.5%
minimally active, that is, 56.4% in total. The figures from
our research are even worse. After combining the last
two groups of truck drivers who engage in a sport activity
less than twice a month and could easily be considered
physically non-active, the overall percentage soared to
59%, thus exceeding the statistics for Slovenia by 2.6%
(Sila and Starc, 2007).
The physical/sport activity for health study conducted in
2004 found that 29.6% of adults (average age: 45.4
years) were regularly physically active, 29.4%
occasionally and 42% never. It was established that the
practicing of sport decreases with age, mainly in the
group of irregularly physically active people. Those who
regularly practice a sport remain faithful to physical
activity and lead an active lifestyle also at a late age. The
most frequently chosen sport activities include: walking
(59%), swimming (29%), cycling (26%), skiing (16%),
mountaineering (13%) and running (12%) (Pišot and
Završnik, 2004). As regards truck drivers, the first two
places were occupied by team sports such as football
(28%) and basketball (20%), followed by cycling (17%)
and running (16%). Walking ranked seventh (7%),
whereas swimming was mentioned as a recreational
activity by only 1% of the respondents.
Physically active truck drivers practice a sport for 5 h

9090 Afr. J. Bus. Manage.
and 15 min a week on average which, according to many
researchers’ criteria, is sufficient to maintain one’s health
and body vitality. The aforementioned research revealed
that nearly 44% of people engage in a sport activity
appropriately frequently and for an appropriately long
time. The total share of physically active male and female
Slovenians equals 62%, thus exceeding the respective
EU figure for 2004 by 26% (EC, The Citizens of the
European Union and Sport: Special Eurobarometer,
2011). Data on professional truck drivers are not that
comforting given that sufficiently active drivers account
for only 11.8%, which is extremely low compared to the
aforementioned 44%.
The aim of this study was to establish the correlation
between the truck drivers’ estimation of the state of their
health and their assessment of their exposure to stress
with regard to their participation in sport activities. We
proposed two hypotheses and confirmed them with a
statistical analysis of data.
Based on the analysis of the survey responses we
were able to confirm the first hypothesis that statistically
significant differences exist between the drivers’
estimated state of health and their engaging in a sport
activity.
The results which corroborate the first hypothesis show
a better state of health of those truck drivers who practice
sport at least once a week compared to those who never
engage in a physical activity. These differences are
mainly reflected in the truck drivers’ occupational
diseases such as low back pain, neck pain, fatigue and
headache; the latter two are also strongly associated with
a forced sedentary position and constant vibrations as
well as the required sharp mental acuity while driving in
road traffic. A comparison of the state of health of truck
drivers with that of other people (Mlinar, 2007) reveals
that almost one-third of the respondents provided a lower
assessment.
The second hypothesis was also confirmed because
there are statistically significant differences between the
estimated work-related stress of the truck drivers and
their practice of sport.
Of those who engage in a sport at least two to three
times a month there are none who claim that they
experience stress every day, yet of those drivers who are
exposed to everyday stress as much as 85.7% never
practice a sport. Our results agree with the findings that a
regular physical activity helps reduce feelings of anxiety
while also increasing one’s ability to cope more
effectively with the causes of anxiety and depression
because a physical activity significantly elevates mood
(Tomori, 2000; Burnik et al., 2003; Plante et al., 2001).
CONCLUSIONS AND PROPOSALS
We are convinced that a regular sport activity can enrich
the lives of truck drivers and help them cope with
everyday stress and maintain good health. A well-rested
truck driver in a good physical and mental shape will
deliver goods to their destination more easily and safely,
perhaps even faster.
From the point of view of a transport company, a
properly and regularly overhauled truck will do more
kilometres at lower costs and consume less fuel in the
long run. The same applies to professional truck drivers –
if they come to work healthy, mentally strong and well
rested, they will do their job better and take less sick
leave.
We hope that this contribution is used as informative
material by organisations promoting professional drivers’
rights as well as sports organisations so that they
develop exercise programmes with flexible timetables
tailored to professional drivers’ needs. Large transport
companies can hire sports premises on non-working days
and thus help improve their employees’ health as a result
of which their work absences due to illness will decrease
and they will be encouraged to spend their leisure time
actively.
We also wish to inspire various organisations
associating professional drivers (the Chamber of Crafts,
the Chamber of Commerce and Industry and the
Association of Drivers and Mechanics) to organise
meetings at which the drivers can socialise in the spirit of
sport by playing football, basketball or volleyball, by
cycling, hiking etc.
Professional truck drivers find it difficult to organise
their time and dedicate themselves to a regular sport
activity because of their flexible and mostly undefined
working time. Therefore, large transport companies could
arrange a mini fitness area on their premises where
drivers could unwind with the help of an exercise bike,
treadmill or basic fitness equipment. We also call on
design engineers to incorporate in large motorway rest
areas, where drivers take a daily or weekly rest and also
spend work-free days or days with limited traffic, some
facilities that allow drivers to safely and freely move and
engage in an activity beneficial to their health. A simple
well-kept jogging track along with some basic exercises
for flexibility, strength and endurance can greatly
contribute to drivers’ sense of well-being at motorway rest
areas. As a result, they would be well-rested and more
tolerant which would, in turn, contribute to greater road
safety.
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African Journal of Business Management Vol.6 (31), pp. 9092-9095, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.3101
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Utilisation of adequate internal controls in fast food
small medium and micro enterprises (SMMEs)
operating in Cape Metropole
Helené de Jongh, Waseem Martin, Andre van der Merwe, Justin Redenlinghuis,
Cindy Kleinbooi, Dylan Morris, Alliston Fortuin and Juan-Pierré Bruwer*
Faculty of Business, Cape Peninsula University of Technology, P. O. Box 625, Cape Town, 8000, South Africa.
Accepted 23 July, 2012
According to popular literature, South African small medium and micro enterprises (SMMEs), roughly
contribute towards 50% of the South African gross domestic product and an estimated 60% of the total
employment of the Country. In essence, these business entities are considered as the ‘heart’ to the
South African economy, but unfortunately the current survival rate of these SMMEs leaves much to be
desired. The current weak survival rate is believed to stem from both external- and internal economic
factors. Essentially, the authors of this paper formed the perception that the effect of these economic
factors can be limited if adequate internal control processes are put in place. Hence, the main objective
of this study was to determine the extent to which SMMEs make adequate use of internal controls. This
empirical research study was deemed as descriptive research, and fell within the ambit of the
positivistic research paradigm. Quantitative research techniques were utilised by administering
questionnaires to 30 SMMEs owners and/or managers whom actively operated within their businesses
in the fast food industry. Non-random sampling (purposive sampling) was made use of with the main
intention of obtaining rich data for the purpose of analyses. From the descriptive analyses, relevant
findings were made and relevant recommendations and conclusions were made.
Key words: Small medium and micro enterprises (SMMEs), internal control, risk management, small medium
and micro enterprises (SMMEs) survival.
INTRODUCTION
According to Berry et al. (2002), South African small
medium and micro enterprises (SMMEs) sector have
been actively promoted since 1996 to achieve objectives
which include that of economic growth, decreasing
unemployment and the alleviation of poverty. According
to the Small Business Act No. 102 of 1996 of South
Africa (1996), SMMEs are defined as separate and
distinct business entities, including co-operative
enterprises and non-governmental organisations,
managed by one owner or more which is predominantly
*Corresponding author. E-mail: juan1@telkomsa.net.
carried on in any sector or sub sector of the economy”.
Frontier (2012) opined that there are 34 main sectors in
the country which include: Aerospace and defence.
Aerospace and defence, Agriculture and agriprocessing,
Aquaculture and Mariculture, automobiles,
banking, boat building chemicals, clothing and textiles,
construction and materials, containers and packaging,
delivery services/logistics, development finance,
education, electronics, energy, engineering, environment
and waste, forestry and paper, healthcare and
pharmaceuticals,- information and communication (ICT),
technology, insurance, manufacturing, media, mining and
metals, oil and gas, personal and household goods,
Public sector entity, retail, sport, telecommunications,

Table 1. The COSO-framework (COSO, 2000).
Component Description
Control environment Assessing which current internal controls are in existence.
Risk assessment Determining critical risks to an organisation.
Control activities Testing the strength of critical internal control activities.
Information and communication Assessing all relevant communication lines.
Monitoring Evaluating how all issues, pertaining to internal controls, are followed up.
tourism and leisure, transportation, utilities and water.
To highlight the importance of SMMEs to the economy
of South Africa, reference is always made to how large
these entities’ contribution is in terms of the National
gross domestic product (GDP). According to Indexmundi
(2012), the estimated GDP of South Africa stood at a
mammoth $491.4 billion (R3.149 trillion) in 2004. Of this
total GDP, Rwigema and Venter (2004) believe that
SMMEs contributed 35% thereof, which translates to
$171.9 billion (R1.102 trillion).
According to Venter et al. (2003), SMMEs have a
dismal survival rate that range between 20 and 30%. The
aforementioned statement is supported by Rwigema and
Venter (2004) when expressing the view that an
estimated 80% of these entities fail within their first 5
years of existence. Prior research reveals that numerous
perceptions exist around plausible ‘causes’ of the weak
survival rate of these entities.
LITERATURE REVIEW
SMME barriers and the importance of internal
controls
Bruwer (2012) is of the opinion that macro economic
factors (factors that can not be controlled by SMMEs),
micro economic factors (factors that can be reasonably
controlled by SMMEs) and psychological factors (factors
that management of SMMEs can directly control) are to
blame for the current situation SMMEs they found
themselves in.
According to Grundling and Kaseke (2010), factors
which have an adverse impact on the overall well-being
of SMMEs include, among other, lack of management
skills, limited financing opportunities, limited access to
markets, relationships with customers, the lack of
appropriate technology, low production capacity, and
rules and regulations. Essentially, the adverse effects of
these afore-mentioned factors can be addressed (and
even prevented) by means of adequate internal control
processes.
Internal controls in SMMEs
According to the University of California (2012), internal
Jongh et al. 9093
controls are defined as a process designed to provide
reasonable assurance regarding the achievement of
objectives which include effectiveness and efficiency of
operations, reliability of financial reporting and compliance
with applicable laws and regulations.
The Institute of Internal Auditors (2011), further define
internal controls as “any action taken by management,
the board, and other parties to enhance risk management
and increase the likelihood that established objectives
and goals will be achieved”
Fundamentally, internal controls serve as a ‘tool of
reference’ to all stakeholders in a business. According
COSO (2000), there exist 5 major components of internal
controls, which are depicted in Table 1 for the sake of
clarity.
Internal controls can be classified as preventive (detect
risks before they occur), detective (detect risks as they
occur) and/or corrective (take corrective measures with
risks after they have taken place). Jackson and Stent
(2007) provide a non-exhaustive list of internal control
measures which include:
1. Staff competency,
2. Segregation of duties,
3. Isolation of responsibility,
4. Access and authorisation,
5. Comparisons
6. Reconciliations, and
7. Source document design.
According to a survey conducted by DTT (2007), 42% of
SMME owners acknowledged that internal control
measures needed to be assessed and improved within
their organisations. In the same survey, 75% of SMME
owners called for a drastic need for improved internal
control measures. These statistics, in essence, reveals
that SMME owners are aware of the need to constantly
review and improve internal controls as a measure,
however the extent to which owners of SMMEs make use
of internal control processes is another question.
RESEARCH DESIGN
According to Leedy and Ormrod (2001), this research study was
deemed as empirical research as an identified research problem (or
hypothesis) was tested by means of physically conducting research

9094 Afr. J. Bus. Manage.
Table 2. Perception of SMME owners and/or managers of
their business’ success.
Perception Percentage
Little successful 7
Average successful 33
Quite successful 33
Very successful 27
Table 3. The importance of internal controls in SMMEs.
Importance Usefulness (%)
No importance 3
Slight importance 3
Some importance 7
Great importance 23
Very great importance 63
Table 4. The importance of specific internal controls in
SMMEs.
Control Importance (%)
Stock control 96
Health and safety policies 95
Reconciliation of accounts 95
Cash counts 93
Business insurance policies 92
Qualified bookkeeper 88
Segregation duties 81
Table 5. How existing internal controls assist SMMEs to attain
better ‘success’.
How it helps Extent (%)
Reduction in risk exposure 86
Increase in productivity 85
Retaining of staff 85
Enhanced accuracy in bookkeeping 85
Limitations of cash variances 85
Reduction in cash wastage 84
Reduction in theft 82
Reduction in accident rates 82
Motivation of staff 80
in the social realm. This research study also fell within the ambit of
the positivistic research paradigm as the authors shared the
perception that reality is independent of human-life (Collis and
Hussey, 2009), Furthermore, according to Collis and Hussey
(2009), this research study was deemed as explanatory research,
as the main intention of the research was to explain a certain
phenomenon at hand.
A quantitative approach was adopted throughout this research as
the data collected was numerical in nature and were accordingly
analysed by means descriptive statistics. The authors of this paper
decided to conduct this research study in the retail sector, which is
very broad. To narrow down the sample coverage, it was decided
that the study would focus on fast food SMMEs, which operated in
the Cape Metropole. The SMMEs targeted also adhered to the
following delineation criteria:
1. SMMEs have 3 employees maximum.
2. SMMEs should have existed at least 1 year.
3. SMMEs owner and/or manager must be actively involved in
business operations.
The size of the population was unknown, however in an attempt to
glean insight, pertaining to the identified research problem, a
sample size of 30 SMMEs, operating in the fast food sub-sector,
within the Cape Metropole, was chosen.
The study required the authors to make use of non-probability
sampling, specifically that of purposive sampling, with the intention
to glean rich data for data analysis purposes. The data collection
tool used was that of a questionnaire which consisted mostly of
close-ended questions, and Likert-scale questions. All data
collected were analysed by means of descriptive statistics.
RESEARCH FINDINGS AND DISCUSSION
The data analysis revealed that 20% of respondents were
owners, 67% were owner-managers and 13% were
managers. On average, the relevant SMMEs have been
in existence for 12 years, with a maximum of 41 years as
opposed to a minimum of a 1 year. When respondents
were asked how successful they perceive their
businesses to be, the dispensation that arose is revealed
in Table 2.
When respondents were posed with the question of
how important internal controls were with regards to their
business survivability, 86% of respondents agreed that
internal controls were important to them. The sake of
completeness, a collaborative list of the relevant
responses are shown in Table 3.
Respondents were also asked which internal controls
they make use of the most (most important to them)
within their relevant businesses. The seven most
important internal controls are tabulated in Table 4.
The very last question respondents were asked was
how internal controls assisted their relevant businesses
to attain better ‘success’. The responses are shown in
Table 5.
RECOMMENDATIONS
From the foregoing, the analogy can be drawn that
SMMEs are mostly concerned with financial controls and
operational controls. Majority of these controls (which are
used) can majorly be classified ‘detective controls’, which
leads to the perception that management of SMMEs are
not necessarily concerned about ‘what if’ scenarios in
their relevant businesses.
The authors of this paper recommend that further

studies are done on SMMEs on how different risks, within
and around these organisations, are managed.
Conclusion
Based on the findings, it is evident that SMMEs do in fact
make use of internal control processes however the
processes used are merely ‘fundamental’ in nature. Albeit
the afore-mentioned, SMMEs do in fact make use of
internal controls to a great extent.
REFERENCES
Bruwer J (2012). The entrepreneurial mindset profile of South African
small medium and micro enterprises (SMMEs) in the Cape
Metropole. Afr. J. Bus. Manag. 6(15):5383-5388
Berry A, von Blottnitz M, Cassim R, Kesper A, Rajaratnam, B, Van
Seventer D. (2002). The economics of SMMEs in South Africa
[Online]. Available from http://www.tips.org.za/files/506.pdf.
COSO (2000). Struggling to incorporate the COSO recommendations
into your audit process? Here’s one audit shop’s winning strategy.
[Online]. Available from: http://www.coso.org/audit_shop.htm.
Jongh et al. 9095
Deloitte, Touche & Tohmatsu (DTT) (2007). In the Dark II: What many
boards and executives STILL don’t know about the health of their
businesses - a survey by Deloitte in co-operation with The Economist
Intelligence Unit. Deloitte Touch Tohmatsu Limited. New York: DTT
Global Office Creative Studio.
Frontier (2012). Sectors [Online]. Available
from:http://www.tradeinvestsa.co.za/pls/cms/ti_landing.sectors_dev?
p_sid=125.
Grundling I, Kaseke T (2010). FinScope South Africa Small Business
Survey. (2010). [Online], Available from: www.finscope.co.za.
Indexmundi (2012). South Africa GDP [Online]. Avaialble
from:http://www.indexmundi.com/south_africa/gdp_(purchasing_pow
er_parity).html.
Institute of Internal Auditors (2011): The Institute of Internal Auditors:
Standards and Guidelines, Governance, Risk Management and
Controls.
Leedy P, Ormond J (2001). Practical research. New Jersey: Merrill
Prentice Hall.
Rwigema H, Venter R (2004). Advanced Entrepreneurship. Cape Town:
Oxford University Press South Africa. 1996. Small Business Act No
102 of 1996, Pretoria Government Printer.
Venter D, Van Eeden S, Viviers S (2003). A Comparative Study of
Selected Problems Encountered by Small Businesses in the Nelson
Mandela, Cape Town and Egoli Metropoles. Manage. Dyn. 12(3):13
University of California (2012). Understanding Internal Controls [Online].
Available from: http://www.ucop.edu/ctlacct/under-ic.pdf.

African Journal of Business Management Vol.6 (31), pp. 9096-9104, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.299
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Minimizing the risks of innovation in bottled water
design: An application of conjoint analysis and focus
group
Sérgio Dominique-Ferreira 1 *, Antonio Rial Boubeta 2 and Jesús Varela Mallou 2
1 Polytechnic Institute of Cavado and Ave, School of Management, Campus do IPCA, Lugar do Aldão 4750-810,
Barcelos, Portugal.
2 University of Santiago de Compostela, Facultad de Psicología, Rúa Xosé María Suárez Núñez, 15782, Santiago de
Compostela, Spain.
Accepted 15 June, 2012
The rapid development of current markets justifies brands’ need to constantly and innovatively modify
their products in order to meet the needs and preferences of increasingly demanding consumers.
Advertising companies’ main objective for attaining leadership in their respective areas is to adjust
these changes to suit consumers’ preferences and necessities. In this context, a well-known company
that deals in bottled water considered modifying some elements of its current containers. To minimize
risk, a hall test was carried out on 100 consumers, in which the task of ascertaining consumer
preferences using real stimuli and subsequent application of the conjoint algorithm on the data
(quantitative research) was combined with personal interviews with consumers (qualitative research).
The integration of quantitative and qualitative derived data was useful to show that the intuition of the
people responsible for the brand or the creative aspect of advertising is not always accurate and can be
completely different from the preferences of the final consumers.
Key words: Conjoint analysis, market research, consumer behavior, predicting preferences, bottle design.
INTRODUCTION
The unceasing evolution of consumer preferences and
the constant innovation that characterizes the market
justifies the need for brands to be dynamic by continually
introducing new products (innovation). However, this
innovation must be in accordance with consumers’ needs
and preferences, and in this sense, any new change
should be strategically weighed and properly tested in the
market to not only prevent subsequent rejection by the
consumer but also make the most commercially
*Corresponding author. E-mail: sdominique@ipca.pt. Tel:
00351912406755. Fax: 00351253812281.
beneficial decision for the brand. For this, market
research offers a diverse range of resources that provide
useful information to aid decision making. When
explaining consumer behavior, preferences have been
gaining increasing importance compared to other
individual variables such as values, needs, personalities,
or cognitive styles. Therefore, it is very important to know
the structure and configuration of these preferences if
one is to explain and predict the behaviors and
consequences of trading options.
In this context, Aguas de Mondariz Fuente del Val S.A.
proposed changes in the current method of PET
packaging and is aware that leadership in the bottled
water market can also be influenced by such elements.

Specifically, the advertising agency considered it
important to change the color, label, and bottle cap of
their product and devised a proposal that could be tested
by conjoint analysis and a hall test. In reality, these are
the most relevant attributes of a bottle (Rocchi and
Stefani, 2005; Mueller et al., 2009; Ares and Deliza,
2010). However, we want to know which the preferred
attributes’ levels are.
THEORETICAL FRAMEWORK
Innovation
Innovation tends to be a priority for firms to increase
competitiveness and, ultimately, their profits. However,
innovation requires important resources (Van de Ven,
1986). In addition, innovation implies an increase of
uncertainty and risk (Eisenhardt and Martín, 2000).
In this context, product brands use a set of packaging
attributes (for example, colors, designs, shapes, etc.) in
order to adjust products to consumers’ needs and
preferences (Nancarrow et al., 1998).
This sense, packaging plays an important role in
attracting consumer attention influencing consumer
purchase decisions (McDaniel and Baker, 1977).
Therefore, every single element of a package has to be
combined in the right way in order to attract consumers to
a product of specific brand (McNeal and Ji, 2003). Some
of the most important elements of a product package are
shape and color (Hutching, 2003; Ampuero and Villa,
2006; Marshall et al., 2006). Therefore, the value of
packaging design and the use of packaging as a vehicle
for branding are growing (Rettie and Brewer, 2000). If we
consider that about 73% of purchase decisions are made
at the point of sale, packaging design is a crucial element
(Connolly and Davidson, 1996). According to Underwood
et al. (2001) and Silayoi and Speece (2004), consumers
tend to perceive products of low quality the one that are
presented with packages of low quality, so there is a
transfer process between both elements (the product and
the package).
However, there are not many works that identify the
ideal color of a water bottle, the ideal type of label and
the ideal color of the cap. This is the gap that this work
intends to cover.
Conjoint analysis
Conjoint analysis is a simple, powerful, and flexible
multivariate technique for evaluating and analyzing
consumer preferences regarding products or services
(Picón et al., 2006; Braña and Varela, 1996; Varela et al.,
2003). In this context, conjoint analysis is a methodology
that has its origins in psychology and marketing. The first
Dominique-Ferreira et al. 9097
reference to this method was made in Luce and Tukey
(1964), followed by Wilkie and Pessemier (1973), who
talked about using multi-attribute models to analyze and
understand consumer preferences (Varela and Braña,
1996; Picón et al., 2006; Ramírez, 2008). Additionally,
researchers’ interest in this methodology has been
growing in recent years, both in academia and business
(Chakraborty et al., 2002; Chen et al., 2010; Feltrinelli
and Molteni, 2004; Gates et al., 2000; Hatzinger and
Mazanec, 2007; Keen et al., 2002; Klenosky et al., 2001;
Montes et al., 2008; Picón et al., 2006; Ramirez, 2008;
Sethuraman et al., 2005; Vag, 2007).
Multi-attribute models explain the manner in which
consumers form their preferences. Preferences are
created by consumers’ perception, and the main goal of
conjoint analysis is to estimate the value of each
characteristic or attribute level that defines a product. It is
possible to use these values to gauge the characteristics
of consumer behavior. Additionally, compensatory
models (Fishbein and Ajzen, 1975) are linked to multiattribute
models, and the various attribute levels
compensate each other. Disparate products can be
preferred by consumers and have very similar global
utilities, because their different attribute levels can act
simultaneously in consumers’ minds and perceptions.
Therefore, conjoint analysis can be termed a mixed
methodology that combines the task of collecting
qualitative data and applying a quantitative data analysis.
In this sense, conjoint analysis becomes an ideal
instrument to gauge the preferences of the test subjects.
In the context of market research, conjoint analysis has
been used to test new products, innovations on existing
products, market segmentation, and the value of a brand,
and to determine pricing policies (Gustafsson et al.,
2000).
METHODOLOGY
Participants
The sample comprised 100 regular consumers of bottled water, of
which 45% were male and 55% female. Moreover, half the sample
lived in Santiago de Compostela and the other half in Vigo (Spain).
Those consumers were recruited in supermarkets. Similarly, the
sample was divided into two equal parts:
1) Regular clients of Mondariz.
2) Clients of other brands of bottled water.
Procedure
ACEMEU ®, a methodology that combines the experimental
procedures used in conjoint analysis with personal interviews was
used to conduct a hall test. This method is patented by the
Research Center of Consumer and User Psychology. Department
of the University of Santiago de Compostela (USC-PSICOM). In the
hall test, the subjects’ task was to be categorized, because of

9098 Afr. J. Bus. Manage.
Table 1. Attributes and levels considered in packaging
design.
Attributes Levels
Color
Label
Cap
Table 2. Stimuli used for sorting by preference.
Transparent
Light blue
Dark blue
Previous
New transparent
New opaque
Golden
Blue
Stimuli Color (3) Label (3) Cap (2)
1 Dark blue New opaque Golden
2 Transparent New opaque Golden
3 Dark blue Previous Golden
4 Transparent New opaque Blue
5 Light blue New opaque Golden
6 (Agency) Dark blue New transparent Blue
7 Light blue New transparent Golden
8 Light blue Previous Blue
9 Transparent Previous Golden
degree of preference and the bottles were presented to them (full
profile management with real stimuli). We attempted to simulate as
realistically as possible a common purchasing scenario, which in
this case was a supermarket line. In this way, respondents could
directly observe and handle the bottles.
To conduct personal interviews, we used a structured
questionnaire designed specifically for this study that contained
additional information provided indirectly by the conjoint analysis. In
this sense, consumer preferences were evaluated by sorting the
bottles, from the most preferred bottle to the least preferred bottle.
Bottles were presented following a balanced random order
(Johnson, 1987; Chrzan, 1994; Dominique-Ferreira et al., 2009).
Selection of attributes and attributes levels
The attributes or characteristics of the bottle that were considered
for this study were (a) color, (b) label, and (c) bottle cap. The
attribute levels are described in Table 1. Therefore, almost all
possible attributes of a bottle were considered, except shape.
Stimuli
From the 18 possible combinations (3 × 3 × 2 = 18), we used a
fractional factorial design to select nine to perform the experimental
task. Table 2 shows the stimuli that were used. Stimulus 6 shows
the agency proposal on which the test is to be conducted—a dark
blue bottle with a new transparent label and blue cap. Data were
analyzed using SPSS 15.0.
RESULTS
The results presented first refer to the application of the
conjoint analysis. Complementary results are provided by
the personal interview.
Conjoint analysis
Note that the model fit can be considered statistically
adequate (Kendall’s Tau = 0.817, sig. = 0.001).
The results as shown in Figure 1 indicate, that the color
of the bottle is the most important attribute (52.153%) for
gauging consumer preferences, followed by the label
(29.757%), and finally the cap (18.089%).
With regard to color, we can observe that light blue
is the most attractive option among the total sample,
judging by the great difference between the preference
for light blue and the preference for the other two options.

60
40
20
0
52.153
29.757
18.089
COLOR LABEL CAP
Figure 1. Attribute importance (%).
Figure 2. Partial utilities for attribute levels of color.
Both light blue and dark blue indicate global utility loss.
However, there are differences between their attributes.
While transparent goes almost unnoticed (U = -0.077),
dark blue generates a significant rejection (U = -0.517)
(Figure 2).
With regard to the label, the most favored one is the
new transparent one, although the previous one is also
deemed attractive. The new opaque label, however,
generates rejection and involves a great loss of overall
utility (Figure 3).
With regard to the cap, the blue one is preferred. The
golden cap appears less attractive in the final packaging
(Figure 4).
In this way, we can describe the ideal package by
taking into account the preferences of the total sample,
that is, a light blue bottle with a transparent label and blue
cap.
The ideal package, as we can glean from the conjoint
analysis, comprises two of the three baseline
characteristics proposed by the advertising agency: the
Dominique-Ferreira et al. 9099
Figure 3. Partial utilities for attribute levels of label.
Figure 4. Partial utilities for attribute levels of cap.
transparent label and the blue cap but not the dark blue
for the color of the bottle. While proposing dark blue
generates immense reluctance, proposing light blue
implies greater utility gain, which makes the latter
alternative a more attractive option.
As discussed before, through these partial utilities, we
can determine the global utilities of any stimulus although
this was not taken into account in the experimental task.
Thus, the higher the overall utility of a particular stimulus
is, the more attractive it will be to consumers. This
simulation and segmentation allows us to determine the
degree of preference of all packages for the different
segments analyzed.
First, we calculated the overall utility for all 18
packages from the most preferred option to the least
preferred one. From these global utilities, we estimated
the gain or loss when changing a particular stimulus as a
proportion of the maximum loss of utility (PMU), that is,
the difference between the overall utility of the ideal
stimulus (the most preferred) and the anti-ideal (least
preferred) one. We called this index the variation
attributed to the change (VAC), whose mathematical

9100 Afr. J. Bus. Manage.
Table 3. VAC global utilities and VAC (relative to previous bottle) for all packaging.
Bottle Color (3) Label (3) Cap (2) Global unity VAC (%)
1 Light blue New transparent Blue 6.083 +34.57 Ideal bottle
2 Light blue Previous Blue 6.017 +31.47
3 Light blue New transparent Golden 5.697 +16.43
4 Light blue Previous Golden 5.631 +13.33
5 Light blue New opaque Blue 5.450 +4.83
6 Transparent New transparent Blue 5.413 +3.10
7 Transparent Previous Blue 5.347 --- Previous bottle
8 Light blue New opaque Golden 5.064 -13.29
9 Transparent New transparent Golden 5.027 -15.03
10 Dark blue New transparent Blue 4.973 -17.56 Agency proposal
11 Transparent Previous Golden 4.961 -18.13
12 Dark blue Previous Blue 4.907 -20.66
13 Transparent New opaque Blue 4.780 -26.63
14 Dark blue New transparent Golden 4.587 -35.69
15 Dark blue Previous Golden 4.520 -38.84
16 Transparent New opaque Golden 4.394 -44.76
17 Dark blue New opaque Blue 4.340 -47.29
18 Dark blue New opaque Golden 3.954 -65.42
expression would be:
VAC =
( U − U )
A
B × 100
PMU
We calculated the VAC for all stimuli by referring to the
current pack. Table 3 summarizes our results.
The previous pack (U = 5.347) is ranked 7 out of 18,
indicating that there are only 6 alternatives involving a
gain in attractiveness as compared to 11 involving a loss
in attractiveness. On the other hand, opting for the
package proposed by the agency (U = 4.973) leads to a
loss of preference of approximately 17% from the
previous bottle. Instead, opting for a light blue bottle, new
transparent label, and blue cap (ideal U = 6.083) implies
a gain of 34.57% of attractiveness as compared with the
previous pack.
In this way, we checked whether the results obtained
for the total sample were retained for the different
segments considered. To do this, we used the VAC index
to calculate the global utilities of the strategic bottles
(ideal, previous, and agency proposal) and determined
how it influenced the preferences of each segment when
switching from one option to another.
As shown in Table 4, the package proposed by the
agency indicates a loss of preference for the previous
pack in most segments, especially for Mondariz
consumers and those over 50 years old. However, there
are segments in which the proposal is deemed more
attractive than the previous pack. The people in these
segments are primarily users of other brands, primary or
high school educated, and aged 25 to 35 years.
Conversely, if we opt for the ideal package instead of
the previous one, we gain preference in all segments,
especially for users of other brands and residents in
Santiago de Compostela. Only for the over-50-years-old
segment would this change mean a small loss of
preference (around 5%).
The ideal package, compared with the agency proposal,
shows a gain in preference for all segments analyzed,
especially among consumers aged between 36 and 49
years and residents in Santiago de Compostela.
Personal interview
We asked what criterion was used by the subjects to
categorize the bottles from most to least preferred. The
results are shown in Figure 5.
When the first mention and the total mentions are taken
into account, the main responses are for color, followed
by label, and finally cap. These results confirm the
relative importance estimated by the conjoint analysis.
Also noteworthy is the greater preference for light blue,
which confirms the results obtained in the quantitative
analysis. This preference was also observed when
participants were directly asked about their choice of
color (Figure 6).
Finally, we determined the spontaneous associations
that were generated for the dark and light blue colors
(Figures 7 and 8). As shown in Figure 7, dark blue
generally evokes negative associations such as cleaning
products or murky water. By contrast, light blue usually

Table 4. Global utilities of previous, ideal, and agency-proposed packages and VAC indexes for the different segments.
Gender
Town
Level of
education
Age group
Client
U Previous
bottle
U Agency
proposal
U Ideal
bottle
VAC Previousagency
(%)
Dominique-Ferreira et al. 9101
VAC Previousideal
(%)
VAC Agencyideal
(%)
Man 5.185 4.873 5.696 -22.46 36.78 59.25
woman 5.479 5.005 6.401 -14.6 31.8 46.4
Santiago 4.84 4.646 5.916 -10.8 60.01 70.83
Vigo 5.854 5.3 6.42 -17.32 17.7 35.03
Primary 4.7 5.299 5.366 23.49 26.12 2.62
High school 5.227 5.524 6.584 10.72 48.98 38.26
Higher education 5.506 4.672 5.973 -38.34 21.47 59.81
25-35 5.407 6.032 6.365 21.97 33.68 11.7
36-49 5.202 4.488 6 -35.59 39.78 75.37
50 or more 5.861 4.417 5.722 -56.18 -5.41 50.77
Mondariz 6.026 4.733 6.159 -45.27 4.65 49.92
Other brands 4.667 5.213 6.006 30.13 73.89 43.76
Whole bottle
Golden cap
Blue cap
Cap
Golden label
Previous label
Opaque label
Label
Color (from darkest to lightest)
Color (from lightest to darkest)
Color
3.8
5.1
4.5
2
8.3
6.1
4.5
2
1.3
2.6
2
3.8
2
18.6
15.2
9
10.1
23.1
20.5
25.3
30.3
0 10 20 30 40
Total mentions First mention
Figure 5. Criterion used in sorting (percentage of first mention and total
mentions).
evokes positive associations such as freshness, purity, or
spring water.
DISCUSSION AND CONCLUSION
The current competitiveness that characterizes today’s
markets justifies the need for constant renewal and
innovation on the part of business firms. However,
change does not always guarantee success; therefore, it
is necessary to use strategies that facilitate decision
making so that firms can meet the needs and preferences
of increasingly demanding consumers. In this sense,
conjoint analysis is a very useful methodology for

9102 Afr. J. Bus. Manage.
Figure 6. Preferred color (expressed preference).
Dislike
Like
Pool water
Perfume
Sea
Sky
Modern water or quality
Ink pen
Distrust
Spring water, clean
Hot water
Any product less water
Soda or soft drink
Solán de Cabras (a brand of mineral water)
Cloudy water
Freshness and purity
Cleaning products
1
1
1
2
2
2
4
4
4
5
5
7
Figure 7. Spontaneous associations generated by dark blue.
explaining consumer preferences, which are a clear
precedent for determining brands’ conduct regarding
commercial choices.
The bottled water industry is no stranger to this
situation; hence, Aguas de Mondariz Fuente del Val, S.A.
determines the changes to its bottles on the basis of its
awareness that characteristics such as the color of the
bottle and the cap or the design of the label can influence
market leadership.
10
15
16
17
30
0 10 20 30 40
To analyze the preferences of consumers of bottled
water in Galicia and test the new package proposed by
the advertising agency, we carried out a research that
combined the use of conjoint analysis with personal
interviews (ACEMEU® Methodology). The sample
consisted of 100 subjects, 50% of which were distributed
between Santiago de Compostela and Vigo and were
regular consumers of Mondariz and other brands of
bottled water. The obtained results show some

Modernity
Ink pen
Perfume
Distrust
Cleaning products
Any product less water
Transparency
Dislike
I like it
Cloudy water
Pool water
Sea
Inviting
Refreshing
Spring water
Freshness and purity
1
2
3
3
4
4
4
4
5
5
6
9
13
13
0 10 20 30 40 50
Figure 8. Spontaneous associations generated by light blue.
interesting conclusions at different levels.
First, the color of the bottle is the most important
attribute for consumers when they choose a bottle of
water; on this criterion lies just over half the weight of the
election (52.153%). The label is the next most important
attribute, with an importance of 29.757%. Finally, the cap
is the feature to which consumers give least importance
(18.089%).
The estimate of utilities allows us to define the ideal
packaging for consumers, which in this case is a light
blue bottle with a transparent label and blue cap. This
packaging matches the agency’s proposal in two out of
the three characteristics: the label and the cap but not the
color of the bottle. The analysis suggests that one should
opt for a lighter blue than that proposed by the agency.
The simulation analysis that we carried out by
segments allowed us to ascertain whether this ideal
package was the more attractive option for consumers as
compared to the previous package and the agencyproposed
one, regardless of gender, age, educational
qualification, city of residence, or brand.
The qualitative data from the interview corroborate the
estimates of the conjoint analysis, both in terms of the
31
Dominique-Ferreira et al. 9103
importance of the attributes and the most preferred
attribute levels, especially with regard to color.
In conclusion, we state that while there was a trend
toward preference for color in the mineral water industry,
the results advise caution; we recommend introducing a
moderate change in this direction: opting for a lighter blue
than the color initially proposed by the agency.
This way, the results are similar to those obtained in
other works (Rocchi and Stefani, 2005; Mueller et al.,
2009; Ares and Deliza, 2010).
47
LIMITATIONS AND FUTURE RESEARCH
We must bear in mind that we considered only three
defining elements of the package (the color of the bottle,
label, and cap). Despite having confirmed their
importance in explaining preferences, we recommend
introducing new elements such as shape or material of
the bottle in future studies.
This study aimed to highlight the usefulness of a
flexible and powerful methodology—the conjoint
analysis—in market research by highlighting some of its

9104 Afr. J. Bus. Manage.
many practical applications such as the packaging test.
ACKNOWLEDGEMENT
We wish to thank Aguas de Mondariz Fuente del Val,
S.A. for making the publication of our results possible.
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African Journal of Business Management Vol. 6(31), pp. 9105-9117, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.1556
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research paper
A multi-stage approach to enterprise resource
planning system selection
Hamid Reza Feili 1 , Mohammad Mirkazemi Mood 2 *, Hossein Rahmany Youshanlouei 3 and
Nima Sarabi 2
1 School of Industrial Engineering, Al-Zahra University, Tehran, Iran.
2 Industrial Management, University of Tehran, Iran.
3 Young Research Club, Salmas Branch, Islamic Azad University, Salmas, Iran.
Accepted 31 October, 2011
The increasing importance of integrated software systems for organizations has made the
implementation of enterprise resource planning (ERP) system one of the main priorities of managers.
One of the most important and albeit most challenging phases of enterprise resource planning system
implementation is the one in which managers have to select a suitable software system that meets the
needs and requirements of the organization in an accepted way. Thus, the present paper proposed a
four-step approach to the issue. This approach included problem definition as well as identification and
classification of decision criteria in order to use a hybrid multiple-criteria decision making method to
select the most appropriate alternative for the organization. The most important advantage of this
approach was its assortment of the criteria, exploration of the inner dependences among them and
finally, the selection of the most appropriate alternative by using a method that combines decision
making trial and evaluation laboratory (DEMATEL) and the analytic network process (ANP) methods.
Besides this, a case study of ERP system selection process was carried out in a company active in the
petrochemical industry, to demonstrate the applicability of the proposed approach.
Key words: Enterprise resource planning (ERP), MCDM, exploratory factor analysis (EFA), decision making trial
and evaluation laboratory (DEMATEL), analytic network process (ANP).
INTRODUCTION
The unprecedented growth of information and
communication technology (ICT) in recent decades has
had dramatic effects on various aspects of the
performance of organizations. It follows these changes
that the working environment of the organizations has
become more sophisticated and business pressure has
increased dramatically (Turban et al., 2006). Therefore,
there has been a significantly growing need for different
systems that can connect different parts of the
organizations efficiently and facilitate the flow of
information among them (Kumar et al., 2002). Using such
integrated software systems as enterprise resource
*Corresponding author. E-mail: md.mirkazemi@gmail.com. Tel:
00989121505371.
planning (ERP) to respond to such changes and
organizational issues in larger organizations was
developed in the early 1990s. These systems provide
managers with an opportunity to make their decisions
based on appropriate information regardless of time and
place (Chun et al., 2005). These systems have
automated such basic functions of the organizations as
production, human resources, finance and supply chain
management. Relying on such systems, the
organizations will have easy access to reliable
information, so as to remove duplications and to reduce
inventory levels. The systems have added, among other
things, the followings to the competitive advantages of
the organization: Acceleration of business processes,
improvement of quality and supply chain management,
and competitiveness of the organization as well as better
performance and lower costs (Davenport, 1998; Razmi et

9106 Afr. J. Bus. Manage.
al., 2009). ERP systems, however, are among the most
difficult investment projects, this is mostly due to high
costs and reception, and complexity risks (Yusuf et al.,
2004). Moreover, Karsak and Ozogul (2009) in this study,
revealed that despite spending too much on such
systems, there are numerous examples of failure in ERP
implementation. Furthermore, it is obvious that the
selection of information technology systems, including
enterprise resource planning systems, is in fact, a
multiple-criteria decision making issue (Wei and Wang,
2004). Multiple-criteria decision making theory is an
appropriate method for solving problems that involve
many different and sometimes conflicting factors and
parameters. Thus, the present paper seeks to propose a
hybrid approach; one that partakes of multiple-criteria
decision making methods to help managers select a
suitable ERP system. This approach, which, as a method
of decision making is believed to have many advantages,
is a combination of ANP (analytic network process) and
DEMATEL (decision making trial and evaluation
laboratory) methods. The reason for the superiority of this
approach lies in the features and advantages of each of
the ANP and DEMATEL methods. The ANP method,
unlike many of the classical decision making methods,
does not hold the criteria to be independent factors
(Saaty, 1996). In fact, the ANP method, with its
comprehensive framework, encompasses the network of
all interactions and relationships among different levels of
decision making (Saaty, 2004).
DEMATEL is also a method that aggregates shared
group knowledge and analyzes the internal relations of
system factors. This structure, which is a prerequisite of
the modeling phase of ANP method, is then illustrated as
a causal diagram by the DEMATEL method. The most
important characteristic of DEMATEL method in the field
of MCDM, is its ability to build relationships and
structures among factors (Gabus and Fontela, 1972).
DEMATEL’s asset, which in this field is even superior to
ANP method, and its applicability in being used as a wise
method to handle the inner dependences within a set of
criteria (Wu, 2008a). This characteristic can play a
significant role in the selection of ERP, where choosing
the appropriate alternative involves the evaluation of
different criteria in relation to one another. The
combination of these methods has been used in different
fields and for different purposes and its advantages have
been emphasized by many researchers. For example,
Wu (2008a), who tried to use the combination of ANP
and DEMATEL methods for the evaluation and selection
of knowledge management strategies, believed that using
DEMATEL alongside with ANP is an indispensable way
of knowing the inner relations of criteria. He has also
suggested that, this hybrid approach, alongside with
Zero-One Goal programming can be used for the
selection of IT projects (Wu, 2008b). Tseng (2011) used
the ANP and DEMATEL methods as well as Fuzzy Set
theory to assess knowledge management in the
environment of the organization in conditions of
uncertainty. He used the combination of these two
methods to create a hierarchical structure that could
illustrate the internal relations of the criteria. Moreover,
Lee et al. (2011) used a combination of ANP and
DEMATEL methods to analyze the decision factors used
in investments. This combination makes it possible for
the managers and researchers to concretize and quantify
decisions factors which, then, can be ranked
hierarchically.
The present paper tries to combine these two methods
and use the final hybrid approach for ERP system
selection that will be in the form of a four-stage approach.
This approach includes four stages of problem definition,
identification of criteria, evaluation of criteria, and final
selection. This approach will be described in detail in the
subsequent parts of this paper. In the following parts of
the paper, we, first, will conduct a literature review in the
field of ERP; we’ll also go through previous researches to
find out how the ERP system had previously been
selected, and then different stages of our proposed
approach will be explained. At the end, to clarify how the
approach works as well as to provide practical proof for
the applicability of the proposed approach, a case study
of ERP system selection will be presented to show how
and ERP system was selected for a petrochemical
company.
LITERATURE REVIEW
Enterprise resource planning (ERP) selection
Enterprise resource planning system (ERP) can be
defined as an integrated software with different
components or modules that are used for planning,
production, sales, marketing, distribution, accounting,
human resources management, project management,
inventory management, maintenance and services
management, transportation management and electronic
commerce (Soffee et al., 2003). According to Davenport
(1998), ERP is a commercial software package aimed at
the integration of information, and information flow
between all parts of the organization including finance,
accounting, human resources, supply chain, and
customer management. Also, Karsak and Ozogul (2009)
considered the ERP packages as configured information
systems that bring integration to all information and
information-based processes within and among functional
areas of an organization. According to O’Leary (2000),
the objective of ERP implementation is to facilitate
planning, production and timely response to customers in
an integrated environment. Hallikainen et al. (2006) also
believed that the use of this software brings about the
effectiveness and improvement of the process of
business productivity, financial functions, human
resources, operations, logistics, and sales. However, in

the literature of ERP much emphasis has been put on the
importance of selecting a suitable ERP system for the
organizations. Many studies were conducted in this
regard that were looking for an approach that would
provide researchers with ways to select an ERP system,
suitable for the organization. For example, Burgues et al.
(2000) have proposed a method of ERP selection
through features of the system and the conversion of
user needs to system requirements. What they did was
based on their previous collaborations with medium-sized
organizations that were looking for software packages.
Stefanou (2001), abundantly stressing the importance of
suitable ERP selection, offers a conceptual framework for
the evaluation of the ERP software. Stefanou believed
that ERP evaluation and selection had to include
strategic and operational criteria. In other studies carried
out by Tunc and Burgoon (2005), different sections of the
organization have outlined their respective ERP
expectations and criteria that were considered specific to
that department. Wei et al. (2005) suggested a sevenstep
selection procedure. The steps that had to be paved
for the selection of a suitable ERP system included team
formation, identification of the desired characteristics of
the ERP system and the final selection through the AHP
method. In another study, the presented model by
Verville et al. (2007) explicates the process of providing
and purchasing the ERP software in six steps that include
planning, information search, initial selection, evaluation
of the options, selection and finally, negotiation.
Different decision-making techniques have been used
for information systems, especially ERP selection, in
previous studies. Many of these studies have partaken of
such methods as scoring, mathematical optimization as
well as multiple-criteria decision making techniques to
select an appropriate system (Wei and Wang, 2004).
Among the mathematical methods, we can refer to DEA
(data envelopment analysis). Fisher et al. (2004), for
example, used this method to analyze and compare the
performance of ERP packages. Their evaluation,
however, was based on the information provided by the
sellers. Bernroider and Stix (2006), tried to use a
combination of utility ranking and DEA to overcome the
limitations of DEA in software selection. Methods of
mathematical programming are still among other ways to
select information systems including ERP. However,
these methods are quantitative and therefore, pose
limitations on the consideration of different criteria and
can only focus on some financial indicators such as,
costs and profitability.
Santhanam and Kyparisis (1996) proposed a nonlinear
programming model to optimize resource allocation and
factors interaction in which the interdependency of criteria
in the information system selection process is assessed.
In order to overcome this weakness, some studies have
tried to combine these methods with other methods; for
example, Lee and Kim (2001) combined ANP and Zero-
One Goal Programming to select Information system
Feili et al. 9107
projects. However, constraints resulting from the use of
mathematical programming still exist. Similarly, Karsak
and Ozogul (2009), proposed an ERP system selection
model based on such approaches as quality function
deployment (QFD), Fuzzy linear Regression and Zero-
One Goal Programming. Their proposed approach used
the ability of QFD method in focusing on customer needs
and its extension to ERP system selection. Benefits of
the proposed Decision Framework can be a conjoined
consideration of user requirements and ERP system
specifications, their interrelations, and interactions among
the specifications of the ERP system.
Wei and Wang (2004), using Multiple Attribute Decision
Making (MADM), proposed a new conceptual framework
for appropriate ERP selection. In this regard, several
studies have focused on the Analytic Hierarchy Process
(AHP) as one of the methods of multiple-criteria decision
making. For example, to evaluate ERP systems,
Teltumbde (2000) offered an approach based on AHP
and the Nominal Group Technique. Also, Wei et al.
(2005) suggested a comprehensive framework for
appropriate ERP system selection which was based on
AHP-based decision analysis process. Cebeci (2009),
however, offered a Decision Support System (DSS),
integrated with strategic management, through the
Balanced Scorecard (BSC). In this study, the proposed
ERP packages and vendors are compared through Fuzzy
AHP methods. One of the main advantages of this
method is its relative ease for the inclusion of multiple
criteria. It was also easy to understand; and the method
could use both quantitative and qualitative data. Using
fuzzy logic and fuzzy calculations to select appropriate
ERP systems can also be seen in the study of Wei and
Wang (2004). Yazgan et al. (2009) also proposed an
ERP software selection process, using artificial neural
networks based on ANP. The approach is highly
beneficial and has many advantages in that it considers
both intangible and tangible factors, converts Qualitative
values to quantitative ones, determines the criteria
priorities through the criteria, and encourages all
stakeholder, partners and all decision makers to join the
decision making process.
Having reviewed previous researches, it can be
concluded that mathematical methods, due to their
specific accuracy, have interested the researchers more
than the other methods of ERP system selection: For
example (Fisher et al., 2004, Lee and Kim, 2001).
However, using other methods, such as artificial
intelligence, has also increased (Wei and Wang 2004,
Yazgan et al., 2009). It is, nevertheless, obvious that in
most researches a combination of methods has been
used; it's mainly because of the complexity of the issue
and multi-step process of selecting a suitable ERP
system that a single method may not have acceptable
applicability. Having reviewed the Literature, authors of
this paper found out that there is no one single research
that specifically examines the relationships between

9108 Afr. J. Bus. Manage.
decision criteria for ERP system selection and the effect
of these criteria on one another. Although, it should be
noted that some studies have not ignored the existence
of these relationships (Lee and Kim, 2001; Yazgan et al.,
2009; Lin et al., 2011).
Enterprise resource planning (ERP) selection criteria
Many studies in the literature of ERP have tried to identify
the criteria that organizations had to take into
consideration when they planned to select a suitable ERP
system. But many of these studies never proposed a
method as to how to select the appropriate option based
on these criteria (Baki and Cakar, 2005; Nikolaos et al.,
2005; Bernroider and koch, 2001). In some of these
studies, the authors, instead of identifying suitable criteria
of ERP selection according to purpose of the study, that
was the selection of a supplier, have enumerated the
criteria to select a supplier of ERP (Unal and Guner,
2009). Table 1 illustrates a number of studies in the field
of ERP selection as well as their identified criteria.
THE PROPOSED APPROACH
Determining the best ERP software, the one that fits the
organization’s needs and criteria is the first step in the long and
arduous process of ERP implementation. ERP system selection,
however, is an inherently difficult and vital decision-making issue for
the managers. Such as other decision-making issues, ERP system
selection requires many steps to be taken so that an appropriate
system turns out to be the ultimate alternative. Having this in mind,
the present paper seeks to propose an integrated approach for the
selection of an appropriate ERP system. Figure 1, succinctly
illustrates the steps of this approach. Figure 2 presents suggested
techniques and methods that can be used in every single one of the
steps.
Problem definition
In order to prevent any waste of valuable organizational resources
in ERP implementation and most importantly, to keep the
organization against the possible risks of ERP system
implementation, it is required that managers make sure they have
chosen an appropriate ERP software package before proceeding to
do anything else (Davenport, 1998). Not only can an inappropriate
choice have a negative influence on the successful implementation
of the system, but will also have its negative impact on the
organization’s performance; consequently, this inappropriate choice
leads to failed projects or weak systems that are in total
inconsistency with organizational goals (Cebeci, 2009). The
proposed approach of this paper can be useful for those managers
who want to implement an ERP system and have defined the
problem of their organizations like this paper. In order to more
clearly define and express the issue, we must capitalize on the
position of the issue in the context of ERP life cycle. Figure 3 clearly
shows that the framework has six phases and four dimensions.
Phases show different stages of the life cycle of ERP systems in
organizations, while dimensions represent different perspectives
based on which we can analyze each phase. The intended Phase
in this paper is labeled as the "acquisition" phase in Figure 3; it is
also called "Selection" in the literature. This phase includes
selecting the best system that complies with the requirements of the
organization and requires a minimum of localization. The dimension
desired by this paper is the "Product" dimension (Esteves and
Pastor, 1999). However, having defined the problem, managers
need to form a cross-functional team who can select an appropriate
ERP system based on the defined problem and needs of the
organization. This team could be a combination of the managers of
various units such as IT, finance, production, human resources, etc.
as well as information technology and academic experts. It is
important to select the team members carefully as it should include
all stakeholders and partners who benefit from ERP implementation
(Bernroider and Koch, 2001).
Identification of decision criteria
In order to identify the most important of the decision criteria, the
present paper has identified and has suggested three sources.
These three sources include review of academic literature and
previous researches, case studies and the experiences of similar
organizations, as well as the opinions of experts and selection team
members. The data from Table 1 shows the results of previous
researches and how it can be effectively used. The second source,
as mentioned before, is to find out about the experiences of similar
organizations in the form of Case studies. What is meant by case
study is the combination of such data collection methods as
archives, interviews, questionnaires and observations. The
collected evidence can be in the form of qualitative, quantitative or
both (Eisenhardt, 1989). For this purpose, should the organization
have access to information, they can, as a case study, identify
important criteria through the experiences of similar organizations.
Similar organizations are those that have some similarities in terms
of industry, size, and geographical location. This helps the
organization to use the experiences of other organizations which
are never published academically. The third source for the
identification of criteria, which can also act as a screening filter for
the previous two sources, is to use the opinions of experts and
team members. The reason why their opinions are welcome is the
fact that the current organization may have totally different needs
and goals from the ones enumerated in previous researches.
Having identified the criteria, they can introduce an exploratory
factor analysis that helps the team members come to greater
understanding and classification of the identified criteria when they
want to evaluate them in the next step.
Evaluation of decision criteria
The decision criteria are evaluated to determine their importance
and interrelations. It is necessary to evaluate these criteria and
measure their impacts on one another. It should be noted that in
any act of decision making, especially in complex issues, one
cannot take these criteria as independent and one should not
ignore their impacts on each another. The DEMATEL method is
specifically designed to solve such complex issues. DEMATEL is a
structural modeling method that partakes of a directed graph, that
is, a causal diagram, to show the causal and mutually dependent
relationships as well as influential impact of the factors. DEMATEL
divides all the elements into two groups, that is, cause and effect
group. It helps researchers to understand the structural relationship
between the elements better and provide ways to resolve complex
system problems (Herrera et al., 2000). The method used in this
paper is the one suggested by Gabus and Fontela (1972) that was
intended for implementing DEMATEL. The first step in this method
is the formation of a direct relationship matrix of A = [aij], using the
experts' opinions; Where, A is an n X n nonnegative matrix, and aij
represents the direct effect of i factor over j factor. The second step
should be the normalization of the primary direct relationship matrix.

Table 1. The identified ERP selection criteria in different studies.
Criteria Case study Authors
Functionality of the system, systems reliability, fit with parent/allied organization systems, available business
best practices in the system, Cross module integration, system using latest technology, vendor reputation,
availability of regular upgrades, compatibility with other systems, vendor’s support/service infrastructure, ease
in customizing the system, lower costs of ownership, better fit with company’s business processes.
Project factors (total cost, implementation time, risks, benefits, implementation methodology).
Software system factors (local environmental requirement- user friendliness, reliability, quality, expansion and
upgrade, functional fit, flexibility).
Vendor factors (r and d technology, credential and reputation, financial condition, consulting service, service
maintenance, and vendor size).
Functionality, technical criteria, cost, service and support, vision, system reliability, compatibility with other
systems, ease of customization, market position of the vendor, domain knowledge of suppliers, references of
the vendor, cross-module integration, implementation time.
Implementation time, having complete functionality (module completion, function, fitness, security), having userfriendly
interface and operations (ease of operation, ease of learning), having excellent system flexibility
(upgrade ability, ease of integration, ease of in-house
Development), having high system reliability (stability, recovery ability),vendor factors (financial condition, scale
of vendor, market share- R and D capability, technical support capability, implementation ability, warranties,
consultant service, training service, service speed)
Software system factors (fitting the erp system to vision, required infrastructure, network architecture and
security, module completeness, standardization, user friendliness, ease of integration with external systems,
ease of in-house development and upgrading, use of newest capabilities of information technology, automatic
backup of information, shorter processing times, maintainability).
Vendor factors (supporting and consulting services, experience and knowledge of our business area,
implementation ability, financial conditions, erp market share, scale of vendor, research and development,
prices of products and services).
Project factors (total time of project, total cost of project, total cost of project, warranties and delay penalties).
Supplier factors (functionality, implementation approach, support, costs, organizational credibility, experience,
flexibility, customer focused, future strategy).
Total cost of ownership, functional fit of the system, user friendliness, flexibility, vendor’s reputation, vendor’s
total revenues, service and support quality.
Investment factors (total cost, implementation)
System characteristics (functionality, ease in customizing the system (flexibility), systems reliability, user
friendliness, r and d capability, better fit with company’s business processes, ability for upgrade in house,
compatibility with other systems)
Vendor criteria (after sales service (consultancy services), vendor reputation, terms and period of guarantee)
Feili et al. 9109
Canadian organizations Kumar et al. (2002)
An electronics company in Taiwan
Turkish manufacturing companies
Wei and Wang
(2004)
Baki and Cakar
(2005)
An electronics company in Taiwan Wei et al. (2005)
Small manufacturing enterprises
(SMEs)
The clothing industry
A Turkish automotive parts
manufacturer
Ziaee et al. (2006)
Unal and Guner
(2009)
Karsak and Zogul
(2009)
The textile industry Cebeci (2009)

9110 Afr. J. Bus. Manage.
Problem Definition
� Need for ERP implementation
� Being in selection Phase
� Forming the Selection Team
Identification of Criteria
� Literature Review
� The Experts’ and Team Members’ opinions
� The experiences of similar organizations
Evaluation of Criteria
� Determining the inner-dependence of the criteria
� Determining the most critical criteria
� Clustering of the Criteria
Selection
� pairwise comparisons by the Experts
� Ranking the alternatives
� Choosing the best alternative
Figure 1. The proposed approach.
Normalized direct relationship matrix is obtained from Equation 1.
D �
max
1
�
n
j�1
1�i�n
a
ij
A
In the third step, using Equation 2, we'll calculate the whole
relationship matrix of T. The (tij) array represents the indirect effects
of i factor over j factor.
T � D(
I � D)
�1
Step four includes the calculation of the sum of all the rows and
columns of T matrix. ri and cj are obtained from Equations 3 and 4,
respectively. The sum of the rows, that is, i, indicated as ri, includes
all the direct and indirect impacts of i factor over all the other
factors. Therefore, we can call ri the degree (or amount) of
influential impact mostly because cj, too, summarizes both direct
and indirect effects that the j factor has received from all the other
factors.
r
i
c
j
�
�
� t ij
1 � j � n
(3) 3
�
t
ij
1 � j � n
(4) 4
Therefore, when i=j, ri + cj represents all the effects created and
received by the i factor. This means that ri + ci is both the impact of i
on the entire operating system and the impact of all other factors of
the operating system on i. Therefore, we can conclude that the ri+cj
(1)
(2)
index can represent the importance of the i factor in the whole
system. On the other hand, ri-cj represents the net effect of i on the
system. When ri-cj is a positive number, i factor is certainly a cause
that has influenced the system whereas if the result is a negative
number, i factor is certainly an effect that has been influenced by
other factors. Step 5 includes the formation of the causal diagram
based on ri+cj and ri-cj.
Selection
The method used in this paper to select the most appropriate option
is ANP. The ANP method, with a comprehensive framework,
encompasses all interactions and relationships between different
levels of decision making which, it is believed, form a network
structure (Saaty, 1996). The ANP method uses a supermatrix when
it tries to show all the interactions and dependencies among
different levels of interaction as well as when it tries to determine
the relative importance of the criteria and to prioritize alternatives of
decision making problems. In fact, a supermatrix is a partitioned
matrix in which each part of the matrix shows the relationship
between two nodes (levels of decision making). All the relationships
and interactions among decision making factors are evaluated in
the matrix and in the form of pairwise comparisons. However, when
we want to enter the calculated pairwise comparisons in the
supermatrix, the sum of all columns usually exceeds 1 in which
case, it is called an unweighted supermatrix. Multiplying the weight
of each cluster by their corresponding elements, we can obtain the
weighted matrix.
In the end, in order to obtain the final weight of problem
alternatives as well as decision making and problem solving criteria,
the limit supermatrix should be calculated (Gencer and Gurpinar,
2007). Using ANP method in the process of ERP selection had
previously been used by Yazgan et al. (2009) and Lin et al. (2011).
Figure 4 illustrates the proposed model of this paper in which ANP
method is used to solve the problem. Clusters represent levels of
decision making; direct lines or arcs show the interactions between
levels of decision-making. The direction of the arcs specifies the
dependency and loops also show the internal dependency between
the elements of each cluster (Saaty, 1996).
CASE STUDY
In this part of the paper, we provide a case study to prove
applicability of the proposed approach. Accordingly,
different steps of ERP system implementation, carried out
in the studied organization, will be explicated.
Problem definition: Due to the increasing competitive
environment in the petrochemical industry and the need
to gain competitive advantage in this industry, the
aforementioned company decided to launch a problem
investigation to identify, and plan to gain competitive
advantage. One output of the investigation was that the
system of the company was as fragmented as an island,
also that they had slow response to environmental
changes and that analyzing company information was
hard to do. Also due to the lack of integrated information
systems, the organization had gone astray from one of
their goals that was, indeed, agility. The managers of the
organization concluded that they needed to implement an
ERP system. Their reasons for such a decision was to
integrate their business activities, information flow among

Phases
Problem
Definition
Figure 2. The proposed techniques.
Adoption
Decision
Identifying
Criteria
Acquisition
Figure 3. ERP life cycle (Esteves and Pastor, 1999).
all parts of the organization including Finance, human
resources, supply chain and communicating with needy
customers. The company is looking for an appropriate
ERP system based on their studies on the adoption
phase of the ERP life cycle. Having reviewed the
proposed approach of the authors of this paper, a
committee consisting of senior managers and IT experts
of the organization approved it as a suitable method for
the selection of the most appropriate ERP system;
consequently, and team consisting of the writers of this
paper and the members of the committee was formed.
Identification of the criteria: To identify the criteria
needed to select a suitable ERP system, a two-phase
EFA
Evaluating
Criteria
Change Management
Implementation
People
Process
Product
Use and
Maintenance
DEMATEL
Selecting
Evolution
Feili et al. 9111
ANP
Retirement
study was conducted. The first phase includes reviewing
past literature and research, the use of experts' opinions
and team members, and partaking of useful information
provided by 5 organizations that had successfully
administered ERP implementation. The selected five
case studies are from different industries including (steel,
copper industry, turbine building, pharmaceutical, and oil)
and their ERP implementation projects were administered
through 2005 to 2010. The data was collected according
to the method proposed by Eisenhardt (1989) and
included a compilation of documentation review,
questionnaire, in-depth interviews and observations.
Thirty nine criteria were identified during the
administration of this stage. The identified data need to

9112 Afr. J. Bus. Manage.
Figure 4. The proposed ANP model.
be grouped in narrowed down categories so that the
evaluation of the criteria as well as pairwise comparisons
are possible to be carried out. It is also useful for the
evaluation of the internal relationships among these
criteria. The second phase of the study was carried out
through factorial analysis, using the experts' and IT
specialists’ opinions. Partaking of factor analysis and
varimax rotation, all thirty nine factors were summarized
into seven. These factors constituted 73.979% of the
whole variance. Table 2 illustrates thirty nine sub-criteria
as well as the 7 main ones. The seven main criteria
include: General Features (C1), implementation costs
(C2), Price (C3), vendor (C4), Software capabilities (C5),
implementation and project management (C6), and
Software Quality (C7).
Evaluation of the decision criteria: DEMATEL method
is used to evaluate the criteria and recognize their
interrelations. The criteria are then divided into two
divisions of Cause Group and Effect Group. This division
can be used in the ANP method's Clustering phase. The
direct influence matrix will be obtained in the first step of
this phase, using the experts’ opinions. To sum up the
opinions, we partook of the arithmetic mean (Wu, 2008a).
The results are shown in Table 3. The normalized direct
influence Matrix will be calculated with Formula 1 in the
second step. Then in the third step, the total influence
matrix will be calculated by Equation 2. Table 4
summarizes the values of the total matrix.
In the fourth step, using Formulas 3 and 4, we
determine the amount that each factor is influenced or
influencing by partaking of Ri+Cj and Ri-Cj. The causal
diagram will be drawn then in the fifth step and based on
the calculated values for Ri+Cj and Ri-Cj. Figure 1 shows
that, general features (C1), implementation costs (C2),
price (C3) and implementation and project management
(C6) are Effect Group Criteria and vendor (C4), software
capabilities (C5), and software quality (C7) constitute the
Cause Group factors that affect the other criteria.
"General Features," among all, is closer to the Ri-Cj axis
and is more neutral than other ones. Although, it is an
effect group criterion, its rate of being influenced is lesser
than the other three effect group criteria. Price, among
the effect group criteria, and "vendor," among the cause
group criteria are the most critical of them all. Software
quality comes second. Vendor is the most influencing of
the criteria on all the others, and implementation and
project management is the most influenced. Figure 5
shows the causal diagram.
Selection of the most appropriate alternative: The
final alternative, at this stage, is then identified through
the ANP method and based on the proposed model
shown in Figure 4. The organization's alternatives for
purchase were three ERP systems that were best-selling
and reputed in the market. They were then labeled as A,
B and C. Based on the outputs of the previous phase, the
criteria are then divided into cause and effect clusters.
The members of the team are asked to launch a pairwise
comparison. These pairwise comparisons are based on
the Saaty’s nine-point scale ranging from 1 (equal) to 9
(extreme). The spectrum reveals 1 as equal and 9 as
extreme. To sum up the opinions of team members, we
used the geometrical mean (Wu, 2008a). Moreover, all
the prioritizing calculations were done with "Super
Decisions" software. Tables 5 and 6, shows unweighted
and limit supermatrixes, respectively. Finally, the final
weight of each option was determined. As is obvious in
Figure 6, which is the output of "Super Decisions''
software, option "B" is allocated with the maximum weight
and is consequently selected as the organization's final
choice.

Table 2. Criteria Matrix after Rotation (Source: The study’s findings).
Feili et al. 9113
Factors Criteria C1 C2 C3 C4 C5 C6 C7
General features (c1)
Implementation costs (c2)
Price (C3)
Vendor (C4)
Software capabilities (C5)
Implementation and Project Management (C6)
Flexibility 0.73
Maintenance 0.573
Hardware 0.682
Consultation costs
0.665
Infrastructure costs 0.497
Implementation time 0.441
The degree of Localization
0.472
Vendor estimates 0.509
Having full operations 0.690
Having complete modules 0.767
Seller’s fame
0.59
Technical and Financial abilities of the vendor 0.622
Experience and Skills of the key persons assigned to the
project
0.758
Timely support services 0.57
Experience of the vendor 0.611
Market share 0.556
Learning ability
0.423
Efficiency 0.331
Appropriateness of the modules 0.784
User friendliness 0.488
Open source 0.579
Open system interface 0.513
Comprehensive performance 0.745
Future Promotion and Update 0.689
Localization abilities 0.486
Online Documentation and Subject area help 0.795
Implementation methodology
0.763
Project Control program 0.725
Project management 0.708

9114 Afr. J. Bus. Manage.
Table 2. Continued.
Software quality (c7) Testability 0.722
Performance level 0.653
Accessibility 0.641
Performance 0.802
Learning abilities 0.725
Efficiency 0.624
Memorization ability 0.632
Error avoidance 0.775
Dealing with errors 0.74
Integration ability 0.731
Security 0.73
Rotation Sums of Squared loadings
DISCUSSION AND CONCLUSION
Considering the importance and defining role of
ERP systems in today's organizations, we tried, in
this paper, to focus, as closely as possible, on the
important aspects of their selection as well as
determining and evaluating their criteria. As seen
in the literature review, most of the models that
Total
7.735 3.477 3.363 2.634 2.587 2.262 1.616
% of Variance 24.172 10.866 10.508 8.231 8.084 7.068 5.049
Cumulative % 24.172 35.038 45.54 53.77 61.86 68.93 73.97
Table 3. The direct-influence Matrix.
Criteria C1 C2 C3 C4 C5 C6 C7
C1 0 0 2 1 1 0 1
C2 1 0 2 2 1 1 1
C3 1 2 0 2 2 2 2
C4 1 2 3 0 2 3 3
C5 2 1 3 1 0 2 3
C6 0 3 1 1 2 0 0
C7 1 2 3 2 2 2 0
had previously been proposed for this kind of
decision were one-dimensional, in that they have
only tried to provide an approach to solve the ERP
system selection problem whereas, given the
importance of the issue, none had tried to
combine its two different aspects, that is,
evaluation of the criteria and final Selection. The
advantage of this approach, in addition to
simplicity and applicability, was its ability to
simultaneously answer the two questions that
managers had for the ERP implementation in their
organizations: The first one, the question of what
criteria affect ERP system selection and should be
taken into account; and second, what is an
appropriate system. The present paper,
accordingly, tried, in the form of a case study, to

1.500
1.00
0.50
0
-0.50
-1.00
-1.50
Table 4. The total influence Matrix.
Criteria C1 C2 C3 C4 C5 C6 C7
C1 0.0997 0.1641 0.3362 0.2115 0.2260 0.1705 0.2320
C2 0.2086 0.2416 0.4319 0.3409 0.3015 0.3098 0.3029
C3 0.2538 0.4460 0.4038 0.4065 0.4334 0.4429 0.4305
C4 0.2947 0.5280 0.6756 0.3496 0.5093 0.5753 0.5536
C5 0.3238 0.4031 0.6069 0.3664 0.3277 0.4554 0.5017
C6 0.1301 0.3932 0.3278 0.2508 0.3216 0.2042 0.2069
C7 0.2697 0.4739 0.6166 0.4319 0.4605 0.4706 0.3324
R-C
2.0
Figure 5. The causal diagram.
propose an approach that would include identification of
criteria, their classification into homogeneous groups,
their evaluation as cause and effect criteria and finally,
the ultimate selection of the most appropriate alternative.
In the first step, the managers had to determine the ERP
life cycle stage they were in. Then, if they were in the
Selection phase, they could pursue the proposed
approach of the paper by forming a group. Solutions for
the identification of the criteria were proposed in the
second phase. Although, the identified criteria were
derived from the case study, given their
comprehensiveness as being gathered from literature
review, experts' opinions and previous researches and
similar experiences of other organizations, they could be
used in similar studies as well.
In addition to identifying the criteria, one of the main
advantages of using the proposed approach is that, it
combines the ANP-DEMATEL methods. In fact, the
DEMATEL method helped the writers come to a good
C5
C4
C1 4.0 6.0
C6
C2
C7
C3
Feili et al. 9115
R+C
understanding of inner dependences among the criteria.
Having identified and classified the criteria into seven
main groups in the third step by using the DEMATEL
method, we concluded that the criteria of vendor,
software quality and software features were the cause
group criteria that could influence the other ones, that is
price, implementation cost, public profile and
implementation and project management. Choosing the
vendor criteria as the most influential of all can justify
those studies that confirmed the priority of Supplier
selection or Software vendor over Product Selection. The
results of the case study suggested that the selection of
an appropriate supplier or vendor can influence all the
other criteria of appropriate ERP system selection.
Software quality and Software Features can also affect
the performance of an ERP system. Therefore, they can
also affect other criteria and can be a defining element in
the higher price of one alternative in comparison to
another. Clustering the Criteria by the DEMATEL method

9116 Afr. J. Bus. Manage.
Table 5. The unweighted supermatrix.
Cluster node labels
Goal Criteria Criteria
Selection Vendor (C4) Capability (C5) Quality (C7) General (C1) Cost (C2) Price (C3) Project (C6)
Goal Selection 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Criteria
Criteria
Vendor (C4) 0.7567 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Capability (C5) 0.1891 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Quality (C7) 0.0540 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
General (C1) 0.0412 0.0433 0.0434 0.0546 0.2500 0.0000 0.0000 0.0000
Cost (C2) 0.1366 0.1331 0.1272 0.1469 0.2500 0.0000 0.0000 0.0000
Price (C3) 0.6252 0.6054 0.5798 0.6237 0.2500 0.0000 0.0000 0.0000
Project (C6) 0.1967 0.2180 0.2494 0.1745 0.2500 0.0000 0.0000 0.0000
Table 6. The limit supermatrix.
Cluster node labels
Goal Criteria Criteria
Selection Vendor (C4) Capability (C5) Quality (C7) General (C1) Cost (C2) Price (C3) Project (C6)
Goal Selection 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Criteria
Criteria
Vendor (C4) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Capability (C5) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Quality (C7) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
General (C1) 0.0546 0.0546 0.0546 0.0546 0.0546 0.0000 0.0000 0.0000
Cost (C2) 0.0546 0.0546 0.0546 0.0546 0.0546 0.0000 0.0000 0.0000
Price (C3) 0.0546 0.0546 0.0546 0.0546 0.0546 0.0000 0.0000 0.0000
Project (C6) 0.0546 0.0546 0.0546 0.0546 0.0546 0.0000 0.0000 0.0000
Figure 6. The weight of each alternative in the normal, ideal
and raw conditions.

was also helpful in creating a feedback model to solve in
ANP. Using ANP in the last step of this approach gave us
the opportunity to consider the dependencies of the
criteria as well as the interactions among all the levels of
decision making, calculated in the previous steps, by
forming a network structure for the final selection. One of
the drawbacks of the proposed approach could be the
fact that ANP method ranks the options through
weighting them and therefore cannot provide an
optimized result.
Mathematical Optimization techniques could be helpful
in the final selection phase; techniques like goal
programming. However, it should be noted that their
limitations in using qualitative criteria was a hindrance for
their use as they proved contrary to the applicable
approach of the paper. Despite the comprehensiveness
of the criteria, they may differ for different organizations.
Some criteria maybe completely irrelevant for some
organizations and in some other cases, some other
criteria may be added to the repertoire of the ones
enumerated in this paper. Moreover, given that much of
the selection process in the proposed approach depends
on pairwise comparisons, and that these pairwise
comparisons could provide actual results when using
linguistic variables instead of numerical data in scales of
evaluation, Future researches could be looking for
implementation of this method in a fuzzy environment.
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African Journal of Business Management Vol.6 (31), pp. 9118-9125, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2857
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
South African tour operators’ access to current
consumer information
M. Potgieter*, J. W. de Jager and C. H. van Heerden
Department of Tourism Management, Tshwane University of Technology, Private Bag X680, Pretoria, 0001,
South Africa.
Accepted 3 January, 2012
The purpose of this study was to investigate the consumer-related information to which tour operators
in South Africa have access. Data were obtained using a self-administered computer-aided
questionnaire. This questionnaire was forwarded to 1000 tour operators, viewed by 360 tour operators,
and a response rate of 42.45% was achieved. The results indicate that 68.4% strongly agree that their
information systems are adequate while a mere 34.9% agree that their information systems provide
them with consumer-related information. From this, it is evident that tour operators will not be in a
position to satisfy the dynamic needs and wants of today’s tourists unless there is access to a
comprehensive information system.
Key words: Tour operators, consumers, information systems, access, South Africa.
INTRODUCTION
A continual escalation in tourism figures recorded for
South Africa has led to increased business opportunities
for tour operators. Tour operators can become a
formidable, influential force (Cavlek, 2002) and profit from
this trend if they are knowledgeable about the changing
needs of their consumers, because knowledge will
“enhance their awareness of customer needs” (Huang
and Hsu, 2009).
The key to success, according to Buhalis and Law
(2008), “lies in the quick identification of consumer needs
and in reaching potential clients with comprehensive,
personalised and up-to-date products and services that
satisfy those needs”.
The dynamic nature of the local and global tourism,
business, and marketing environments directly influence
tour operations and consumers, who are faced with
constant change. Added to this is the challenge of
applying “internal knowledge chain activities to gain
external knowledge that will enhance…competitiveness”
*Corresponding author. E-mail: potgieterm@tut.ac.za. Tel:
(+27)012 382 5564. Fax: (+27)012 382 4611.
(Tseng, 2009). Information systems should enable
management to access information and knowledge. If
tour operators‟ information systems do not provide such
access, then the information systems should be updated.
Tseng (2009) categorically states that “knowledge is a
key element for survival” in todays marketplace.
Regardless of the overload of consumer-related
information, it is not known whether tour operators in
South Africa do in fact have access to this information
and/or whether their information systems should be
updated to make information available as a tool for
management decision-making. As tour operating and the
relevant information systems are vast topics that cannot
be covered comprehensively in a single study or paper,
this paper sets out to provide insight into the following
only:
i. To gain a better understanding of tour operators in
South Africa in terms of four demographic descriptors:
the type of tour operation they provide; the number of
years they have been in existence; the size of their tour
operations; and lastly, whether they have an information
system.
ii. To determine the access tour operators have to

consumer-related information.
iii. To identify the consumer-related information needs of
tour operators and their willingness to update their
information systems.
This paper starts with a review of the applicable
background, followed by an explanation of the research
methodology as well as a presentation of the findings. A
discussion of the results follows, which leads to
concluding remarks.
BACKGROUND
Tour operators should endeavour to ensure that their
business operations are not only flexible but also
adaptive, because, “if they do not they will not survive”
(Skyrme, 2000) today‟s intense global competitive
business and marketing environments. The market
(external) environment a tour operator needs to deal with
comprises of variables such as competitors, consumers,
intermediaries, publics, and suppliers (Wilson and
Gilligan, 2005; Cant et al., 2006; Kotler et al., 2006). All of
these variables influence a tour operator‟s ability to
provide value and ensure customer satisfaction (Kotler
and Armstrong, 2004; Kotler et al., 2006). Tourism is a
combination of the following sectors: accommodation;
transportation; attractions; travel organisers [including
tour operators]; and destination organisations (Bennett,
2000; Middleton and Clark, 2001; Middleton et al., 2009).
As a tourist‟s perceptions and experiences are based on
the collective entity of these variables, information on
these variables is thus paramount.
Consumers are the basis of a tour operator‟s existence,
therefore, a tour operator will survive in business as long
as the consumers‟ wants and needs are satisfied. A
detailed examination of the marketing environment forms
an integral part of the situation analysis, market analysis,
and the feasibility analysis processes, because detailed
information needs to be collected concerning past,
current, and potential consumers (Morrison, 2010). A
number of years ago, it was said that information
technology (IT) would enable enterprises, including tour
operators, “to engage its customers in interactive
communication” (Wells et al., 1999). These authors
continue to state that enterprises will be “more successful
if they concentrate on obtaining and maintaining a share
of each customer rather than a share of the entire
market.” Tour operators should at all times keep the
following in mind: “sellers can be viewed as those who
are selective about which consumer profile they choose
to target, whereas consumers are selective about which
products or services they purchase” (Van Scheers and
Cant, 2007). However, Khoo et al. (2002) advocate that a
closer link between product re-innovation and consumer
involvement should be established. With this in mind,
they have developed a prototype customer-oriented
Potgieter et al. 9119
information system (COIS) for product concept
development. Consumer contact and relationship building
alone are insufficient, according to Bove (2003), who
explains that consumers should be seen as co-producers
through participation. A later development has been indepth
tourism that is “a new travelling pattern which
combines thematic experience and personal knowledge”
(Chen et al., 2009).
Marketing is all about consumers, therefore, consumers
should be the primary focus of any tour operation –
finding them; satisfying them; and also, keeping them
(Morgan 1996; George 2001, 2008). Tour operators
should regularly assess and reassess their operations to
determine what their consumers really want and their
levels of satisfaction, and then base their new tourism
offerings on these findings. This is why it is imperative
that tour operators take consumer behaviour and all its
influencing factors (cultural, social, personal, and
psychological) into consideration. Added to this is the
recommendation by Bassey et al. (2011) who state that
the evolution of a proactive, dedicated and dynamic
customer service system which is based on the needs,
interests and preferences of customers is needed and
that this should be based on “the best standards and
tools to attain set corporate goals.” This involves
disseminating consumer-related information to nonmarketing
managers and departments so that they also
can incorporate this vital information into their
knowledgebase, thereby understanding and being able to
respond to the complex nature of the consumer
(Korhonen-Sande, 2010). Tour operators will then be
able to aim for customer loyalty as the source of their
profitability and not customer satisfaction (Khokhar et al.,
2011). An information system then has the potential to
become an indispensable management tool.
It was professed at the turn of the twentieth century that
the new approach in marketing would be relationship
marketing (Czinkota et al., 2000), embodying a change
from conquest marketing to consumer retention. Paulin
(2003) explains that value can be created by “linking the
customer and the organization through the building and
managing of relationship networks.” Customer
relationship management (CRM) can ensure competitive
differentiation. Lin and Lee (2004) propose objectoriented
analysis methods for the development of a
customer-relationship management information system
(CRMIS) and a customer-knowledge management information
system (CKMIS) (Lin, 2007). Coussement and
Van den Poel (2008) have produced a model according
to which tour operators can target their customer
retention campaigns through a decision support system
for churn prediction (predicting which customers are most
likely to leave and targeting them with incentives).
Furthermore, priorities should be assigned to the
allocation of those resources that will provide a compe-
titive advantage through stronger relationships with fewer

9120 Afr. J. Bus. Manage.
consumers. Gök (2009) supports a new and more
consumer-oriented approach to account portfolio
analysis. In this consumers are sorted into groups and
relevant strategies are developed for every group. Tour
operators make many, or in some instances, all of their
offerings available to the market via intermediaries. Bull
(2010) opines that surprisingly little research has been
done on how organisations use CRM systems to manage
relationships with their consumers who make use of
business intermediaries such as travel agencies. This
most likely also applies to tour operations. A tour operator
should be able to identify those intermediaries that do not
make a positive contribution towards building a
relationship with consumers. It is then advisable to rather
terminate relations with such intermediaries.
Computer technology has changed and is still changing
the way marketers/tour operators regard their consumers,
consequently, this technology is taking the lead in the
transition from mass marketing to database marketing.
Wood (2001) indicates that small- and medium-sized
tourism enterprises “make use of informal marketing
information systems which mainly concentrate on internal
and immediate operating environment data.” Further
research reveals that “50% of small and medium size
enterprises (SMEs) have some sort of web page, but very
few actually take full advantage of the internet” (Buhalis,
2003). However, Migiro and Ocholla (2005) report that
SMEs in the Durban area, South Africa, are more
concerned with adopting IT to improve internal efficiency.
Furthermore, tour operators specifically use IT for taking
orders online. Computerisation and automation should
enable a tour operator to gather and use information to
form closer relationships with individual consumers. The
acquisition and processing of information will enable a
tour operator to customise appeals to and offerings for
consumers – the epitome of the marketing concept.
Customisation, according to Khoo et al. (2002), is
“transforming customer information into specific product
design.” This is where interactive marketing, combined
with an effective customer information system, enters the
playing field. The focus shifts to remembering what the
consumer has said – so that tour operators can
“personalize communications and customize product
offerings” (Zahay and Peltier, 2007). The ideal is that the
customer database is linked to and feeds into an
information system.
It is imperative that tour operators are knowledgeable
about their current and potential consumers and this call
for a wealth of information. Not only should information
be accumulated but it should be converted into
knowledge to support and guide decision-makers.
Information should also enable a tour operator to
evaluate its operational performance and to identify
“useful benchmarks for efficiency improvement” (Wu and
Song, 2011). Buhalis (1998) advocates that information is
“the lifeblood of tourism”; therefore, a strategic approach
to the utilization of knowledge through technology should
be adopted. Added to this is the rapid revolutionary
change taking place in the domain of information and
communications technology (ICT), and its impact on all
aspects of the value chain of a tourist. Modern-day
marketing is encapsulated in the provision of genuine
consumer value. The smartphone market in South Africa
is set to grow from 16 to 50% by 2015 but the “travel
industry does not have the luxury of pointing to
technological challenges at the consumer front” although,
“research confirmed the growing appetite for fullyfunctional
mobile services and highlighted some of the
trends expected” (Zach, 2011). Smartphones, as part of
ICT, can enable not only tour operators but most
businesses involved in tourism to deliver value-added
services. However, South African tour operators have not
yet fully enjoyed the increased profitability associated
with technological advancement and this can be a result
of non-adoption, partial adoption or inappropriate
adoption of the improved technologies” (Nzomoi et al.,
2007). It is therefore essential that tour operators firstly
“determine the level of readiness for change prior to the
introduction of new IT/IS implementation by measuring its
internal capabilities” and this could be done according to
the proposed maturity model of Salleh et al. (2011), and
this could also apply to tour operators on a national basis
in South Africa.
Tour operators are caught up in a relentless process of
procuring information, whether formally or informally.
However, managers still tend to skim information instead
of “taking a longer-term planned approach (strategically)
to develop and improve customer information utilization”
(Rollins et al., 2011). The process of awareness of what
is happening in the marketplace can only be supported
by a systematic and scientific formal procedure namely
an information system. Such a system will facilitate the
procurement of regular and planned information, analyse
it and disseminate it to designated decision-makers
(Zach, 2011).
RESEARCH METHODOLOGY
This is an empirical nomothetic descriptive study conducted in
South Africa and it is based on the positivist philosophy. The
purpose was to determine whether tour operators have access to
consumer-related information. A quantitative survey was conducted
and the research population included all tour operations in South
Africa. The predetermined parameters were that 1) each sample
unit had to be a South Africa tour operation and 2) each had to
have some form of computerised information system during the
course of the survey. An information system for this purpose could
be any form of computerised data collection, ranging from an
informal activity to formally acknowledged information systems. A
population frame was assembled through acquiring names and
contact information from various published and electronic sources.
As there was no certainty that the list include all tour operations in
South Africa, nor could it be confirmed that all those listed were
operational at the time of the survey, a non-probability convenience

sampling method was employed.
The online web-based research tool used was QuestionPro.com
and the research instrument was a web-based self-administered
structured electronic questionnaire. QuestionPro.com‟s licence
agreement restricts the sample size to 1 000 successfully delivered
e-mail invitations. In certain instances, an invitation could not be
delivered electronically because of incorrect or terminated e-mail
addresses. These were replaced with others from the sample frame
until 1 000 had been delivered successfully. Two scheduled
reminder e-mails were sent to sample members who did not
respond to the original invitation or to the first reminder.
Each sample unit was sent a personal e-mail explaining the
purpose of the study and an invitation to participate (data collection)
by clicking on a hyperlink imbedded in the e-mail, that in turn
activates the questionnaire. Once the questionnaire has been
activated, ethical issues are firstly addressed and respondents have
to supply their informed consent (this is compulsory validation
questions) before gaining access to the actual questionnaire. The
questionnaire consists of interacting branches where the question
sequence is determined by respondents‟ responses. The actual
questionnaire commences with obtaining information regarding
those descriptors selected for gaining a better understanding of the
tour operators in South Africa. This section ends with a question on
whether each respondent has an information system. Those who
indicate that they do not have such a system are branched to the
„Thank You‟ page, seeing that they will not be able to respond to
the questions in the remaining sections of the questionnaire.
Various closed and open-ended questions, rating scales, and Likert
scale questions with responses ranging from „strongly agree‟ to
„strongly disagree‟ and „extremely important‟ to „extremely
unimportant‟ are used to obtain the required information. The webbased
research tool automatically captures responses to closedended
questions into a database while responses to open-ended
questions were nominally enumerated.
Sponsored prizes that were used to increase the response rate
were obtained from: Rovos Rail, Wilderness Safaris, Bill Harrop‟s
Original Balloon Safaris, 1time Airline, Imperial Car Rental, and also
Springbok Atlas. Questions were of such a nature that the prizes
could not influence the outcome of the results.
RESULTS
The sample size comprised 1 000 successfully delivered
e-mail invitations. The questionnaire was viewed by 360
respondents and 42.45% were submitted. It should be
noted that the number of responses per question varied,
because the only validation question was related to
voluntary consent and not all the respondents responded
to all the questions.
Descriptive statistics were recorded for every variable
in order to understand the data and to be able to achieve
the stated objectives. A cross analysis was performed on
linked and test variables to determine how they
compared. A uni-variate descriptive analysis was
performed on all the original variables to obtain
frequencies, percentages, cumulative frequencies, and
also cumulative percentages. The following inferential
statistics were used: cross-tabulations and chi-square
based measures of association (if, in some cases,
expected values of less than 5 in a cell occurred the
Exact p-values were calculated); MANOVA and ANOVA
Potgieter et al. 9121
(to assess the relationship between two or more
dependent variables and classification variables), and
also practical statistical significant tests and the Tukey‟s
Studentized Range (HSD) test (to determine which
means differed from one other).
Participant description
All the responses of tour operators who started the
questionnaire were recorded to obtain the participant
description. Each tour operator was asked whether
he/she had a computerised information system in use.
The results indicate that 59.6% of the tour operators who
responded do have such a system. Furthermore, the
majority of them work for small tour operations (61.4%
with up to five staff members); they focus on the
international incoming market (69.9%); and 31.05% have
been in business for up to five years with 31.05%
between six and ten years, as indicated in Table 1.
Further statistical analysis was performed. The results
are indicated in Table 2.
The statistics do not indicate any statistically significant
differences between the different types of tour operations,
the number of years each tour operation has been in
existence, or the size of the tour operation and the
likelihood of having or not having an information system.
It is recommended that the reasons for tour operators
having or not having information systems should be
explored in follow-up studies.
Tour operators who indicated that they had no
information system were then branched out and the data
are presented thus based on the responses obtained
from those who indicated that they had information
systems.
Access to consumer-related information
Tour operators were requested to indicate the internal
information sources they utilize as a component of their
information systems by responding either „Yes‟ of „No‟ to
a list of sources. The results are indicated in Table 3. The
table indicates that tour operators do make use of internal
records and databases, and also information provided by
customers as internal sources of information. Further
statistical analysis indicates that there are no statistically
significant differences between the size of a tour
operation and the type of tour operation, as determinants
of the internal information sources used by tour
operators.
Tour operators rated market-related environment
information on customers, suppliers, and competitors as
„extremely important‟ and „important‟ (80.0%). Further
statistical tests do not reveal any statistically significant
differences between the size of the tour operation, the

9122 Afr. J. Bus. Manage.
Table 1. Research participant‟s description.
Descriptor n % Mean Standard deviation Variance
Information system 1.40 0.49 0.24
Yes 131 59.6
No 89 40.4
Size of tour operation 1.56 0.78 0.60
Small (up to 5 staff) 135 61.4
Medium (6 – 10 staff) 46 20.9
Large (11 and more) 39 17.7
Type of tour operation 2.16 0.65 0.43
Domestic 21 9.6
Incoming 153 69.9
Outgoing 34 15.5
Other 11 5.0
Years operational 2.26 1.10 1.20
Up to 5 68 31.0
6 – 10 years 68 31.0
11 – 15 years 41 18.8
16 years and more 42 19.2
Table 2. Cross comparison for tour operators who do have an
information system.
Descriptor Chi square P-Value Exact test
Type of our operation 2.7058 0.4392 0.4392
Years in existence 5.4092 0.1442 0.1457
Size of tour operation 2.8409 0.2416 0.2411
Table 3. Internal information sources (%).
Source
Statistics
n Yes No Don’t know
Internal records and 99 94.29 4.76 0.95
databases
Reservations and sales
records
94 91.26 6.80 1.94
Information provided by
customers
99 94.29 4.76 0.95
Marketing research 89 87.25 12.75 0.00
Other sources not listed 30 33.33 44.44 22.22
type of tour operation and the number of years tour
operators have been in existence as determinants of the
importance tour operators place on information
concerning the market environment (ANOVA and
Figure 1. Information provided on consumers (%).
Hotelling-Lawley Trace test p-values are all >0.05). Tour
operators indicate that their information systems provide
them with consumer-related information, based on the
responses received on a specific statement and the
options ranged from „strongly agree‟ to „strongly
disagree‟. The results obtained are illustrated in Figure 1.
Based on the results obtained, tour operators indicate
that they have access to customer-related information:
„strongly agree‟ (17.5%) and „agree‟ (34.9%). However, it
is alarming that 47.6% collectively are neutral and tend
towards opposite views. This could spell disaster for
tourism because consumer-related information is of the
utmost importance, especially since today‟s tourists
prefer to be co-producers of their experiences.
Further statistics do not reveal any statistically

Table 4. Reasons for/against an innovated information
system (%).
Reason %
For adoption
Saving time and money 29
Easy access with quality information 39
Added business 32
Competitor information
Against adoption
Would not add value to business 71
Security and confidentiality 29
significant differences between the size of tour
operations, type of tour operations, or the number of
years in existence as determinants of the consumerrelated
information tour operators have access to,
because all p-values are >0.05. These results are
confirmed by the p-values of the Kruskal-Wallis Test
results, as well as by the Hotelling-Lawley Trace test
(size - p=0.2434; type - p=0.8308; years - p=0.7712).
Information needs and willingness to adapt
Tour operators were requested to express their perceived
information needs in an open-ended question and the
responses were grouped according to the structure of the
components of the marketing environment (the internal or
micro-, the market-, and the macro marketing
environments). Tour operators indicate that the sequence
of information needed is as follows: market environmentrelated
information (40%). Here, information on
consumers is cited frequently and includes trends,
statistics, contact information, markets of origin,
consumer preferences, spending patterns, and the
profiles of consumers. This is followed by competitorrelated
information; and lastly, supplier-related
information.
Tour operators were requested to indicate if they would
support change in information systems. The model
proposed is an information system that operates
nationally from a central location. This information system
is one example and it is derived from the TourMIS system
and the Illinois Tourism Network (ITN). The results
obtained indicate that 80% of the tour operators who
responded to this question would support such a
comprehensive information system. Tour operators were
then requested to provide the reasons for and/or against
supporting such an information system and the results
obtained are indicated in Table 4.
Tour operators would support a comprehensive
information system that operates nationally from a central
Potgieter et al. 9123
location, because such a system would be easy to
access (39%) and it is likely to contain quality, up-todated
and cost-effective information. Such a system is
also viewed by tour operators as beneficial as it could
lead to new/increased business opportunities and
markets (32%), as well as a co-operative tourism industry
throughout South Africa while enabling global connectivity.
The least frequent reason cited for tour operators
supporting such a system is based on time and money
(29%). The reasons put forward by tour operators who
indicated that they would not support such
informationsystem, are that such an information system
would not add value to their current business (71%). This
is followed by the threat posed to the security and the
confidentiality of their records and information (29%).
DISCUSSION
South African tour operators have the potential to be a
formidable force in the tourism industry and they will be
able to ensure business success, if they are
knowledgeable about their consumers. This knowledge
can be supplied by an information system that serves as
a tool in management decision-making. Based on the
results presented, it is uncertain whether the current
information systems of tour operators do in fact provide
them with sufficient consumer-related information or
whether these systems are able to process this
information into easily accessible format. Establishing a
national information system is crucial because if the
current state of affairs is allowed to continue South
African tour operators may be excluded from exploring
potentially viable opportunities in the tourism market, not
only domestically, but also globally. It is imperative that
tour operators prioritise proper access to up-to-date
consumer-related information as an investment (a
business asset that is strategically managed), and to
incorporate this into their business planning seeing that
the introduction of new offerings is influenced by
conducting environmental scanning.
Out of all the tour operators who participated in this
study, 40.6% of them indicated that they have no form or
type of information system, although they are part of
today‟s business and global environment, known as the
information era. Most of the tour operators in South Africa
operate in small businesses (with up to 5 staff members).
This could account for the fact that there are still so many
tour operators who do not have any form or type of
information system. Van Scheers and Radipere (2007)
conducted a research and found that nearly 29% of small
business owners in the Pretoria are “constantly involved
in marketing. The rest of the respondents never or hardly
ever market their business, or do not know what
marketing is.” Could it be a case of tour operators in
South Africa do not have the finances to invest in either
technology (capital) or know-how (human resources)?

9124 Afr. J. Bus. Manage.
But, can they afford not to invest? It would be interesting
to see how many of these tour operators are still in
business in five years‟ time. Added to this is the fact that
almost 70% of the tour operators have to deal with
international tourists, who in all probability are at worst
acquainted with and at best, utilize technology
themselves.
No statistically significant differences can be detected
between the different tour operation descriptors, and
whether or not, they do or do not have an information
system. From this, it can be inferred that access to a
comprehensive information system will be beneficial to all
tour operators, irrespective of its type, size, or the
number of years it has been in existence.
The subsequent discussion is based on only the
responses received from tour operators who indicate that
they do have some form or type of information system. It
is of concern that 47.6% of these tour operators indicate
that their information systems do not provide them with
consumer-related information. A significantly high
percentage indicates that they use spreadsheets as their
main type of software in their tour operations. This type of
software provides tour operators with the identity of
consumers, but it cannot transform simple records into
meaningful information and knowledge. There is thus an
urgent need for IT training in the tour operating
environment, which in all probability applies to the entire
tourism industry in South Africa.
No statistically significant differences can be detected
between the different tour operation descriptors, and
whether or not their information systems provide them
with consumer-related information they could use for
management decision-making purposes. From this, it can
be inferred that access to a comprehensive information
system will be beneficial to all tour operators, irrespective
of their type, size, or the number of years they have been
in existence.
It is not surprising that the information needs tour
operators express relates to the market environment
within which they operate, because the information they
are able to obtain from their information systems is
hopelessly inadequate. This focus of this paper is on
consumer-related information; therefore, it does not
include an analysis of the other variables in the market
environment. It is coincidental that tour operators list
market-environment-related information as their most
critical information need. The type of information listed as
critical centres on consumer-related information that an
information system will be able to provide. This confirms
that access to a dedicated information system is of the
utmost importance, because consumer reservation and
transaction records are not inadequate because
information and knowledge needed for management
decision-making should be available.
The information needs of tour operators are in line with
their need for access to a comprehensive information
system. A specific model of an information system has
been proposed for use by tour operators, because IT
innovation in itself is a vast topic and can include almost
anything. Both TourMIS and ITN are public-private
partnership systems. These are interconnected and
integrated information systems in which all role-players
(members) contribute by capturing their data online. The
data are then collectively processed and members can
acquire requested information. This infers that such an
information system will be adopted by role-players in the
South African tourism industry because it would enable
them to obtain information in a user-friendly format. This
is in strong contrast to the meagre records tour operators
currently have on their personal computers. The tour
operators‟ biggest concern, that such a system will not
add value to their current businesses, can be turned into
a major benefit once the value of such a system is fully
understood.
Conclusion
Tourism and information technology are dynamic in
nature, therefore, tour operators ought to have the
necessary information systems in place that will
continually enable them to align business practices with
developments and trends in the market. One of the
prerequisites for conducting successful modern day
tourism business is to have technology that is compatible
with that utilized by the target market. This is especially
relevant if tour operators wish to establish a two-way flow
of information to build relationships and to establish
loyalty among their consumers. This does not even
include the establishment of databases for direct
marketing purposes. Undertaking information system
research and introducing innovation will be beneficial to
the tourism industry. Access to consumer-related
information could also contribute towards establishing
South Africa as a preferred destination in the global
tourism market.
Conclusions drawn in this paper in all probability have
relevance to travel agencies, as well as other sectors of
tourism. Research is imperative because access to
meaningful information systems is of the utmost
importance. However, multi-disciplinary involvement,
such as input by system engineers and IT specialists,
would be needed to enable tour operators to understand
and place the consumer in their target markets.
Ritchie and Ritchie (2002) have proposed guidelines for
the establishment of a comprehensive, state/provincial
destination marketing information system (DMIS) for the
tourism industry in Alberta, Canada. A similar information
system would be beneficial for tourism in South Africa.
South African tour operators, on their own, will in all
probability, not be able to raise the capital needed to
acquire, develop, and then to maintain sophisticated

information systems therefore, concerted effort should be
made because access to a comprehensive information
system is imperative. As South African tour operators are
amenable to innovative ideas, it is recommended that this
issue should be widely discussed. Multi-level cooperation
and partnerships between all minor and major
stakeholders (public and private) in the tourism industry
need to be forged so that tourism as a collective
economic sector will be able to deliver memorable
tourism experiences. This should be extended to
incorporate the member countries of the Southern African
Developing Community (SADC), as well as potential
international investors.
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African Journal of Business Management Vol. 6(31), pp. 9126-9139, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM10.1305
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Organizational diagnosis on the basis of customer’s
aspects: Case study of an Iranian company
Vahid Reza Mirabi* and Jalal Haghighat Monfared
Department of Management, Central Tehran Branch, Islamic Azad University (IAU), Tehran, Iran.
Accepted 15 March, 2011
The present research is for identifying, analyzing, and interpreting the solution of making the
performance of an Iranian company in relation with the customer in two frameworks of qualitative and
quantitative aspects. In the quantitative part not only the basis of marketing mix at management is used
for testing six hypothesis about customer’s opinions performance results of the company and using
questionnaire tools after evaluating reliability and validity of the results, but also the opinions of all
customers (representatives and companies) about the performance of the company in the form of
gathered mentioned hypothesis and using regression techniques for testing the hypothesis is provided.
The findings confirmed that there is a meaningful relation between customer’s opinion with price and
quality of products’ company. At the next step, by using focal groups and quality analyzing the context,
the expert group of the mentioned company with the presence of selected managements and some
experts, staffs, and sales representatives, the organizational diagnosis procedure is done with the
quality aspect. Therefore, first, the evidences that show the existence of diagnosis at the effectiveness,
efficiency, productivity, innovation, flexibility, and quality fields that cause the present performance of
the company at the marketing mix of price and production (goods) are identified and main problems of
company is recognized upon it. Then the reasons of mentioned problem are analyzed in the separation
of achieved evidences in the internal fields of Radiator Iran Company, and by listing the most important
results of mentioned problem, the environmental threatening that causes intensification at this problem
is also identified and interpreted. At the continuation, instead of each identifies weak points at internal
fields of the company, some solutions for removing weak points and in conclusion resolving the
diagnosis of the company recommended, that by its implementation at the investigated organization
can be useful for the improvement of its performance in the view of customer.
Key words: Results of performance, customer’s aspects, regression analysis, marketing mix, organizational
diagnosis.
INTRODUCTION
Organizations, like human being, may suffer from various
diseases and show their symptoms. These kinds of
diseases at the organization, are often transfer by people
that deciding the most important opinions of the organization.
On the other hand, the production of a system
and its surrounding has reciprocal influence on each
other. These influences are preceded up to the condition
that may the organization faced with risk. It is clear that
*Corresponding author. E-mail: vrmirabi@yahoo.com. Tel.:
00989121440389. Fax: 00982166940203.
treatment of the disease at an organization is more
successful that its root identified at the early steps of the
disease (Manzini, 2007). Organizational diagnosis is an
investigation process of organizational performance,
department, group, and/or profession for discovering the
sources of problems and improvable levels. Diagnosis is
a process of understanding the manner of present
performance of the organization, and provides necessary
information for changing programs planning. Diagnosing
helps the organization to determine the items that should
be focused on them; the manner of gathering and
analyzing the data are determined and shows that how
organizational individuals could cooperate with each

other for improving operational steps caused by
diagnosis (Comingez, 2003). There are approaches for
recognizing and removing such dilemma. These
approaches help to realize the nature of problems and
inform the managers with knowledge and necessary
recognition for effective proceeding. Management
literature is full of designed process for helping managers
for precise environmental investigation and finding the
related truth.
The most common process that designed at the
organizational development discussion is strategic
planning, organizational development, management development,
and organizational changes. In this field,
management development consists of several
approaches as performance evaluation. (Comingez,
2003) Organizational diagnosis or organizational
pathology, is one of the intermediate approaches that
accounts for organizational development context and is
the expand form of activity for discovering the truth and
prerequisite of organizational efforts. Since the purpose
of organizational diagnosis is dealing with comprehensive
and great systems such as companies, therefore, it
includes the expanded domain of organizational
development and for this reason; basically it is a kind of
interference.
This approach as an important factor of organizational
developing and facilitation for correct, suitable proceeding
and designated as a help for eliminating the ambiguity
point of management (Higinz, 2001).
LITERATURE REVIEW
As a total sum of research literature and methodology at
organizational diagnosis and reviewing relevant
approaches and based on the done studies about
literature and research background, the following models
are compared with the provided research model by the
researcher, in the comparative manner:
Andrew Manzini’s model (Manzini, 2007) Joseph
Prokopenko’s model (Comingez, 2003) Organizational
Superiority Recognition or CED (EFQM Model, 2000) the
recommended EFQM model by Industrial Management
Institute (Mehraban, 2003) BSC model (Kotler, 2007) Six
Sigma model (Armestrong, 2001) Iran Industrial
Renovating Company’s model (Gathered report of
Industrial management Institute (IMI), 2004).
As can be seen from Table 1, all of the mentioned
models are based on the logic of gap analyses and
systematic attitude of the organization and emphasized
on them.
As can be seen from Table 2, all the mentioned models
are following the scientific process of problem solving.
As can be seen from Table 3, all the mentioned models
are free from the terms they used, and the specific points
that provided in each model of this process, have the
same whole steps for implementation of organizational
diagnosis.
Mirabi and Monfared 9127
Except EFQM and Iran Industrial Renovating Company
models, all the rest cover limited models or fields and/or
basically they did not point out to this matter that which
fields should cover the results of the performance (Table
4). The researcher’s model as concentrated on just the
beneficiary customer, it did not cover the performance
results fields that related to the other beneficiaries (Stake
holders). It is illustrated that among the mentioned
models, EFQM and Iran Industrial Renovating Company
model have the most detailed coverage of internal fields
of organization (Abdol, 2003). And also as the model that
presented by the researcher have three attended groups
of processes, main, technical and managing support
(Table 5), therefore, the Iran Industrial Renovating
Company model is accordance to this model and the field
of processes is covered directly and other internal fields
of the mentioned model covered indirectly at the
analytical framework of the processes (Table 6).
It is considered that among the mentioned models,
EFQM and Iran Industrial Renovating Company model
have the most referred point to the marketing mix and the
researcher’s provided model is the most completed one.
The whole theoretical framework that dominates in this
research is presented in Figure 1.
Theoretical framework and analytical model of
research
According to the subject of this research, the independent
and dependent variables are defined as follow:
1. Dependent variable: the customer’s opinion about the
results of the company performance.
2. Independent variable: the effective factors of
customer’s opinion about the results of company
performance as follows:
i. Price of product;
ii. Quality of the product;
iii. Delivery of the product;
iv. The behavior of the personnel of the company with the
customer;
v. Company communication with the customer;
vi. After sale services.
The relation of marketing mix and independent variables
are shown in Table 7. The theoretical framework of the
present research is based on the combination of
diagnosis Iran Industrial Renovating Company model and
4P Marketing mix model that are briefly, expressed here:
Whatever the customer understand from the results of
Radiator Iran Company performance and evaluate it,
refers to the factors that are important for the customer
and has main effect on his/her company performance
evaluation (Miles and Shoulin,2009). Marketing science
and marketing management influence these factors as
marketing mix (popular as marketing 4P) and generally it
is classified in four classes.

9128 Afr. J. Bus. Manage.
Table 1. Commonality of gap analysis process.
The commonality of models on the basis of gap analysis process and systematic attitude of the organizational diagnos
Gap analysis process
Identifying and analyzing the present
condition
Diagnosis model of Iran
renovating
Industrial company
6 Sigma BSC EFQM
(CED)Organizational
superiority
recognition
Joseph
Prohopenko
Andrew
Manzini
Researcher’s
model
�� �� �� �� �� �� �� ��
Interpreting the suitable condition �� �� �� �� �� �� �� ��
Providing solution for moving from the
present condition toward appropriate
condition
�� �� �� �� �� �� �� ��
Attending to the environment and authorities �� �� �� �� �� �� �� ��
Attending to the results of performance of the
organization in goods product or services
Attending to the abilities of the organization
for goods production and services
Attending to interactions between
environment and internal organization
Table 2. Commonality of process of problems solving.
The commonality of the models on the basis of attending to scientific process of problems solving
Process of problems solving
�� �� �� �� �� �� �� ��
�� �� �� �� �� �� �� ��
�� �� �� �� �� �� �� ��
Diagnosis model of Iran
renovating
Industrial company
6Sigma BSC EFQM
(CED) Organizational
superiority
recognition
Joseph
Prohopenko
Environmental analysis (territory) � � � � � � �
Determining the issues � � � � � � �
Problems recognition � � � � � � �
Theorization � � � � � � �
Providing Different solution � � � � � � �
Selecting effective solutions � � � � � � �
Implementation of selected solutions � � � � � � �
Controlling and feedback of the results of solutions
implementation
� � � � � � �
Andrew
Manzini

Table 3. The commonality of steps of an Organizational diagnosis.
The commonality of models based on the whole steps of an Organizational diagnosis project:
Steps of an organizational diagnosis
Diagnosis model of Iran
renovating
Industrial company
6 Sigma BSC EFQM
Mirabi and Monfared 9129
(CED)Organizational
superiority
recognition
Joseph
Prohopenko
Programming and organizing the diagnosis plan � � � � � � �
Data collecting and classification process of diagnosis � � � � � � �
Analyzing and interpreting � � � � � � �
Feedback, implementation, programming, and
evaluation � � � � � � �
Table 4. Commonality of Performance areas.
Performance areas
Researcher’s model
Andrew
Manzini
The commonality of the models in terms of determining the fields that should be attended from the
results of the performance of the organization aspect
Diagnosis model
of Iran renovating
Industrial
Company
Sigma Six
The results of performance as for the beneficed customer Implicit - Direct Direct - - - Direct
The results of performance as for the beneficed personnel Implicit - - Direct - - - -
The results of key performance as for the beneficed
stockholder
Implicit - Direct Direct - - - -
The results of performance as for society Implicit - - Direct - - - -
In terms of Efficiency Direct - - Implicit Direct - - Direct
In terms of Effectiveness Direct Direct - Implicit - - - Direct
In terms of Productivity Direct - - Implicit - - - Direct
In terms of Profitability Direct - Direct Implicit - - - -
In terms of innovation and development Direct - - Implicit Direct - - Direct
In terms of flexibility Direct - - Implicit Direct - - Direct
In terms of quality and customer’s satisfaction Direct - Direct Implicit - - - Direct
In terms of the quality of work life Direct - - Implicit - - -
In terms of social responsibilities Direct - - Implicit - - -
BSC
EFQM
(CED)Organizatio
nal superiority
recognition
Joseph
Prohopenko
Andrew Manzini
Researcher’s
model

9130 Afr. J. Bus. Manage.
Table 5. Models in term of enablers areas.
The commonality models in terms of determining the fields that should be attended at the internal organization (the
Enablers):
Enablers areas
Diagnosis model of
Iran renovating
industrial company
six sigma
BSC
EFQM
(CED)Organizational
superiority
recognition
Strategic planning and
implementation, policy and
leading �� - �� �� - �� �� Indirect
Process (main, technical and
managing support) �� - �� �� - - �� ��
Organizing and organizational
structure �� - - - �� - �� Indirect
Systems and procedures
(Human, financial, IT,
marketing, supplying, etc.) �� - - - �� �� - Indirect
Operational and leadership
atmosphere �� - - �� - �� �� Indirect
Production technology,
operation, and competitive
advantages �� * - - �� �� �� Indirect
Personnel in charge of
institute, production, and
attitude �� - �� �� �� �� �� Indirect
Cooperation and resources - - - �� - - - -
Table 6. commonality of direct focus on marketing 4p.
The commonality of the models in terms of direct focus on marketing mix:
Marketing
4ps
Diagnosis model of
Iran renovating
Industrial Company
Products Directly -
Sigma 6
BSC
In the extent of
the customer’s
satisfaction
EFQM
Directly
(CED)Organizationa
l Superiority
Recognition
In the extent of
customer’s
satisfaction
Joseph Prohopenko
Indirectly
Andrew Manzini
Joseph Prohopenko
In the extent of
customer’s
satisfaction
Andrew Manzini
Researcher’s model
Directly
Price Directly - Directly Indirectly Directly
Promotion Indirectly - Indirectly - Directly
Place Indirectly - Indirectly - Directly
Marketing mixture of Radiator Iran Company is the
result of different results of organizational performance
that generally classified in 9 fields as follows (Robins,
2001):
i. Effectiveness;
ii. Efficiency;
iii. Productivity;
iv. Profitability;
Researcher’s model

Figure 1. Research framework.
v. Innovation;
vi. Flexibility;
vii. Product quality;
viii. Work life quality;
ix. Social responsibilities.
Mirabi and Monfared 9131
In this research communicating between marketing mix
and results company performance fields of Radiator Iran
Company, except profitability, work life quality, and social
responsibilities fields that respectfully refers to benefited
stockholders, staff, and society all the other 6 fields are

9132 Afr. J. Bus. Manage.
Table 7. Marketing mix and independent variable.
Marketing mixtures Independent variable in this research
Product Product quality
After sales services
Product price Product price
Product distribution Product delivery
Expansion and advertisement The behavior of the personnel with the customer
After sale services
undertaken. The diagnosis that observed at the
performance results of fields, are effects and the cause of
them are in their existence weak points at internal fields
of the company (Baker, 1999). In the Iran Industrial
Renovating Company model the internal fields of the
organization divided to 6 fields for investigating the
causes of this diagnosis:
i. Mission, vision, goals, strategies, and policies field;
ii. Process field;
iii. Organizing and Organizational structure field;
iv. Establishments and approaches field;
v. Operational atmosphere field;
vi. Technology field.
The mentioned 6 fields can be divided in to 3 groups of
main, operational support, and Managing support
processes in terms of process attitude toward the
organization.
The analytic provided model shows the communication
between the factors of this research.
At the first step, for answering the main question of the
research (what are the diagnosis of company
performance results in terms of customer?) and the first
secondary question of the research (How do the
customer evaluate the Radiator Iran Company
performance results?) the following model shown in
Figure 2 is used.
And at the second step, the model shown in Figure 3 is
used for answering the secondary question of the
research.
Research questions
It is obvious that any economical agency for ensuring its
activities survival and continuity needs earning incomes
and the profits of the activities. Therefore, the
beneficiated customer has an executive status, because
the customer providing incomes by buying the products
of the company. Thus, one of the beginning troubles of
companies such as Radiator Iran is that the customer
satisfied by performance of the company against the
benefited customer, therefore this matter is nor proved
precisely, for this reason, the initial questions of this
survey are expanded as following research questions:
The main research question:
1. What are the main Problems of the company’s
performance in the customer aspect?
The secondary questions of the research:
1. How the customers evaluate the results of the
performance of the Radiator Iran Company?
2. What is the qualitative relation between the resulted
achieved by investigating the customer’s evaluation and
the real results of performance of the company?
3. What are the reasons that cause problem emerged at
the results of the performance of the company?
4. What are the solutions that Radiator Iran Company
should select and implement for the improvement of the
results of the performance against the customers?
This project has two important aspects and a specific
status that shows its necessity of implementation at
Radiator Iran Company. The first aspect is specified to
the importance of the present research in terms of
theories. It is common that while investigating the
condition and performance of many economical agencies
in the field of market and customer, the designated
approaches in the field of marketing and sales such as
estimation of customer’s satisfaction (that focuses on
the customers understanding of products and services
that are received from the organization), market research
(that focuses on recognition and interpretation of
features, needs, and current potential requests at
different section of Markets), marketing (that focuses on
the ways of balancing the organization with its potential
customers, how to introduce the products and services,
and the favorable way of bargaining for attracting the
customers and contracting with the buyers) and etc. is
used (Hiz, 2003). In the other words, the organizational
diagnosis approach is used in this research that it is
based on systematic attitude, generally, and scientific
solving problems, specifically, and by particular attention
to the status of beneficiaries at the organization,
benefited customer is attended particularly and
concerning with the diagnosis results of performance of

the organization in terms of the beneficiaries (Stake
holders). the company’s performance and be loyal to
buying from this company. Since the initial attitude of the
present study plan is started by the feeling of the
researcher that he/she has about the current problems of
protecting and improving the results of Although the
structured and methodological usage of organizational
diagnosis approach is relatively a new and modern
approach in Iranian organizations and it is just dated to
the early 2001, however, it provide systematic and
relatively comprehensive views to the owners and
arrangers of the organizations, and via the relevant
domination of method and approach of implementation of
organizational diagnosis, they can get more comprehensive
understanding about communication between
the environment and the inner part of the organization
according to the benefited status, in one hand, and
relations between different aspects of the results of the
performance of the organization by making able the
different inner sections of the organization, in other hand.
The other aspect is referred to the importance of the
status of Radiator Iran Company. Moreover, the daily
increasing troubles of the profit-making organizations,
generally, and Radiator Iran, specifically, about protecting
and improving the level of its performance instead of
organizational different beneficiaries expectations, rooted
in the gradually increasing competition at market and
closeness and increase of quality and quantity of supply
to the domestic market demands. There have been five
development plans before the Iranian Islamic revolution.
The first two programs were based on agricultural
development. The Industrial development was mentioned
for the first time in the third development plan and was
based on territorial revisions and land owners capital
transfer, so the first nuclei's of industrial investment would
be created .The above mentioned capitalists were not
familiar with industrial management terminology, so the
industrial management organization and the industrial
development bank were created in order to help the
financial resources and back up the capital creating
bases. The need of creating a powerful and universal
organization was taken into attention in the third plan in
order to develop the industries and accelerate the
industrialization of the country. IDRO was created in such
circumstances in June 1967 with the approval of the
economical council. IDRO’s values contain:
1. Emphasizing on organization's role being in line with
the national interest.
2. Developing organizational knowledge and
competencies focusing on creative productivity approach
3. Developing professional code of ethics focusing on
organization participation approach in all business
aspect.
4. Considering justice and meritocracy principles suitable
to dignity of the Man Managing the work environment for
creation of good morale, motivation and mutual respect
among colleagues.
Mirabi and Monfared 9133
Iran Industrial Renovating Company is dependent to Iran
Industrial Developing and Renovating Organization
(IDRO) from late (2004) and designated a project named
“Organizational Diagnosis” and attended a considerable
subsidy about %80, and from that date up to now it
experienced various industrial units of the country,
despite of weak points of executive approach that was
used and the manner of execution by the consultants
(The documentation introduced for diagnosis model of
Iran Industrial Renovation Company in 2005). General
principles of Iran industrial renovation company's model
is:
1. Renovation of industries should be done by the
companies, not by government.
2. Customer satisfaction and their ability of
competitiveness will be as the main condition of success.
3. Governmental support and incentives, although limited,
can ensure faster implementation of policies, reform and
modernization of companies.
Research objectives
The main purpose of this project is identifying and finding
the roots of the possible obstacles in protecting and
improvement of the results of the Radiator Iran company
performance instead of benefited customer, in both
aspects of customer’s understanding criteria and
indicated real performance criteria of the company, in
order to show the in charges that for protecting and
improving our performance against the customer, which
proceedings should be prior in our work. The secondary
purposes that are explored and interpreted in the main
purpose of framework of the present research are as
follow. In other words, the researcher is looking for
fulfilling the following purposes:
1. Redefinition of Radiator Iran Company is working as a
social system that works with its surrounding environment
and should answer different beneficiaries such as its
customers.
2. Dividing the company in two fields: field of results of
performance and internal field.
3. Dividing the field of results of company performance in
terms of different beneficiaries by focusing on benefited
customer.
4. Identifying evidences of the existence of diagnosis
(problems) at results of company performance in terms of
benefited customer.
5. Summing up the evidences for the existence of
diagnosis and identifying the main diagnosis at the
results of company performance in terms of the benefited
customer.
6. Investigating reasons of diagnosis emerge and
identifying its roots at internal fields of the company.

9134 Afr. J. Bus. Manage.
Figure 2. Relation between dependent and independent variables.
Figure 3. Relationship between costumer assessment and performance results.
7. Providing effective solution for removing and
decreasing the diagnosis at internal fields of the company
and therefore removing and decreasing the diagnosis of
the results of company performance in terms of the
customer.
Research hypotheses
H1: Price factor for the company performance results is
effective in the view of the customer.
H2: Product quality factor is effective at company

performance results.
H3: Product delivery is effective for the company
performance results.
H4: The staff behavior with customer factor that is
effective for company performance results.
H5: The company communication with customer is
effective for company performance results in the view of
the customer.
H6: After sale services factor is effective at company
performance results in terms of the customer.
METHODOLOGY
This research is performed in four entire and executive steps as
mentioned in Table 8.
RESULTS AND ANALYSES
The present research is designated up on two basis of
quality and quantity phases that in phase 1, quantity
phase, that consists of main part of the research, by
using questioners’ tool, are facing toward the customer
society of the Radiator Iran Company production evaluate
their points of view according to company performances
(Hair and Anderson, 2007). Six hypotheses are used for
this work. These hypotheses are originated from
marketing mix.
At the quantity step, after ensuring from the reliability
and consistency of the questioner, they proceeds to
collecting retained information in the view of the
customer, specifically about the performance of the
company against them. Then by using regression of
testing they put the results of data collecting in the
research hypotheses framework, and it was determined
that among different factors that were selected from the
customers as effective variable, price and quality
variables has more meaningful significant.
Analyzing the hypotheses of the research after one way
variation testing and regression analysis are showed as
follow:
1. Price variable has meaningful relation with the
company performance results of the customer. The
intensiveness of the relation (β co efficiency) for this
variable is 0/485. It is shown that other variables are
controlled.
2. Quality variable has meaningful relation with the
company performance results of the customer. The
intensiveness of the relation (β co efficiency) for this
variable is 0/318. It is shown that other variables are
controlled.
3. Time delivery does not have meaningful relation with
the company performance results of the customer. But,
by this the intensiveness of the relation is 0/078.
4. The behavior of the staff does not have meaningful
relation with the company performance results of the
Mirabi and Monfared 9135
customer. The intensiveness of the relation for this
variable is 0/002.
5. Communication variable does not have meaningful
relation with the company performance results of the
customer. The intensiveness of the relation with this
company performance result in the view of the customer
is 0.120.
6. Service hypotheses do not have meaningful relation
with the company performance results of the customer.
But, by this the intensiveness of the relation is 0.182.
Therefore among these six defined independent variable
at the model, just price and quality of the product have
meaningful relation with depended variable, that is, the
company performance results in the view of customer,
and other four variables, time of deliver, staff’s behavior,
communication and after sale services does not have
sufficient meaningful relations with independent variable.
After analyzing the multi-variable of regression and
analyzing the results and determining regression co
efficiency (β) and meaningful levels, it is the turn of
“decorating the model”; as decorating the intended model
according to received the statistical results and
eliminating the endurable model path. Statistical and
recommended criterion for eliminating inefficient ways,
often insists on significant lever; but “if the analyzes are
based on a very big samples, the co efficiency of small
paths is maybe meaningful statistical, this is the problem
that emerges while the statistical criteria are meaningful
(Kerlinjer and Padhazer, 2006: 432). At the present
analysis of this thesis, there was 69 populations that is
not too much, and cannot seriously affects on the
synthetically meaningful relations. Thus, our criteria to
decorating model, was statistical criteria (the level of
meaningfulness). The analyzed model, after sale
services, communication, staff’s behavior, and time
delivery variables that are not meaningful, finally they are
eliminated and the model of this research that is
illustrated in Figure 5.
At the decorated model, price variable that its β= 0/48
and Sig= 0/000 is higher than other variables. The quality
variable has β=0/318 and Sig= 0/010. In this respect,
regression performance is as follow for the decorated
model:
Performance results in the view of customer = (0/485)
Price + (0/318) Quality+ e
This regression performance declares that by increasing
one unit of price variable, the performance results
variable has standard deviation of 0/485 is changed. This
change was positive, and in other words, increasing at
price variable causes increase at the performance of the
results, and by one unit increase of quality variable, the
standard deviation of the performance of results is
increased for 0/318. Another point is the amount of R 2 . At
the first model (along with 6 independent) the amount of
R 2 is estimated 0/75 that indicates 75% of the variation

9136 Afr. J. Bus. Manage.
Table 8. Steps of performing the research.
The entire introduction of executive approaches of research steps
Step Purpose
First
Second
Third
Fourth
-Answering to this question of
the research that how do the
customers evaluate the
Radiator Iran Company
performance results?
Answering the second
question of the research: the
achieved results from
customer evaluation
investigation of first question,
which kind of quality relation
with the company truth
performance results?
Answering the third question
of the research: what are the
reasons for the emerge of
diagnosis at company
performance results?
Answering the fourth question
of the research: what are the
solution of Radiator Iran
Company for improving the
performance results in terms
of the customer, selecting
and its implementation?
of performance results in the view of customer by
6 independent variables. For the residual variable
of decorated model (Final model) that consists of
The investigated type of
communication
Customer’s evaluation of Radiator
Iran Company performance results
with marketing mixtures of this
company
The relation between the marketing
mix of Radiator Iran Company and
the existing diagnosis in the sixth
field of performance results against
the benefited customer
The relation between identified
diagnosis in the six fields of
Radiator Iran Company
performance results with the
existing weak points at operational
supportive and staff supportive
process of the company and
environmental threatening domain
at the company
The relationship between the main
identified reasons and effective
environmental threatening of them
with solutions that causes decline or
removing of them.
Conclusion
Proving, rejecting, and
priority of six
hypotheses of the
research
Identifying the existing
diagnosis at
effectiveness, efficiency,
productivity, innovation,
flexibility, and quality
fields
Identifying the weak
point of emerge of the
diagnosis and the role of
environmental
threatening at causing
or accelerating them
Identifying the solutions
that Radiator Iran
Company should use for
declining or removing
diagnosis of itself.
Tools for data
collecting
Questionnaire
Focal group
and quality
content
analysis
Focal group
and quality
content
analysis
Focal group
and quality
content
analysis
independent variables of price and quality, the
amount of R 2 is equal to 0/70%, which shows that
these two variables determine 70% of operational
Reliability
assessment
of the tools
Nominal
validity
-
The consistency
assessment of
the tools
cronbach alpha
-
- - -
- -
Hypotheses
testing
Multiple
linear
regression
performance that is considerable according to the
number of independent variables (Saee, 2003).
By completing quantitative analysis and
-
-

Figure 5. Regression coefficient.
ensuring about the meaning relation between price and
quality according to customer’s opinion factors about
company performance results, the first question of the
research is answered, in fact. Then it is the turn of
answering questions two to four of the research as below
that is an introduction for the complementary phase of
this research, that is, using focal groups and quality of
content analysis:
1. What is the qualitative relation of the results achieved
from investigating the customer’s evaluation of the first
question, with the real company performance results?
2. What are the reasons for causing diagnosis of
company performance results?
3. What are the solutions that Radiator Iran Company
should select and implement for improving the
performance results against the customer?
For answering the above questions, and based on
theoretical basis that provided in chapter two of the
research, the company proceeding the establishment of
intellectual group with the presence of senior managements,
intermediate managements, experts and some
company sales representatives, and proceeding qualitative
analysis of evidence for the presence of diagnosis,
the main diagnosis (problem) of the company about the
relation between two price and quality factors,
investigating the causes of this diagnosis, the effective
internal fields on them, the accelerating environmental
threatening, and finally required solutions for removing
the weak points and diagnosis (Vas, 2007).
The sum of required results could be as follow:
1. Main diagnosis of the Radiator Iran Company about
the relation of two factors of price and quality is in front of
it, and can be the cause of declining the customer’s
opinion about company performance results;
2. The main diagnosis: market share of Radiator Iran
Company in the case of the continuity of combination of
the current price-quality is faced with relative declining
risk.
The group documented to for getting the agreement
about the mentioned diagnosis to the following evidences
that these evidence are explanted based on the group
opinion of the mentioned group:
1. The evidence based on price factor:
Mirabi and Monfared 9137
i. The competitors became the pioneer of providing the
same product with the even lower price at the market.
ii. The cost of goods production is increasing.
iii. The proportion of human cost to radiator sales cost at
the company is higher than the private sector
competitors.
iv. The estimated price of the company for the new
required radiators of the cars that has low production rate
is not economical.
v. The company is resisting against the acceptance of
low volume order of the radiators
vi. Keeping the level of competition prices of the company
is associated with relative decreasing of the production
quality.
2. The evidences referred to quality factor:
i. Reaching the determined goals of the company about
quality of the production has the relative declining
procedure.
ii. The statistics of quality of production failures on the
production line has an increasing trend.
iii. The company does not have the required innovation
for improving the quality level of their radiators.
iv. The flexibility of the company at goods production with
appropriate quality level is low from the expectation of the
automobile and spare pieces markets.
v. The production quality of the company has a relative
declining procedure.
Therefore for each above evidence, the group discusses
and investigates the surrounding causes and finally
introduces the most important causes as follows:
1. The company is still influenced by its previous sole
and unrivaled status in this market.
2. The company does not have enough attention to the
Chinese competitors threatening for the internal markets.
3. The proportion of buying production institutes is more
than the increase of products sales price.
4. The operators of the company are not working with
sufficient attitudes and are not satisfied with their income
level.
5. The company does not have any program and serious

9138 Afr. J. Bus. Manage.
and reliable budget in the field of diversity, development
and quality of production.
6. The company could cover its production capacity with
the mass orders; therefore, it does not interest in
delivering low volume production ordering.
7. In the past, the company for declining the costs of
production and removing the retained loss used less
materials and human per hours for production.
8. The company did not interpret its production strategy
by relying on market studies in the effective manner.
9. The quality of production material is proceeding in the
declining procedure.
Thus, the environmental threatening that causes
acceleration at the weak points of the company in the
intelligent group is summed up and introduced as below
(Porter, 2007):
1. Relief of the company that it belongs to Saipa Group
and the obligation of automobile makers of this group for
buying from this company.
2. Lack of documentary statistics and information and
clear action of the suppliers and the demanders of market
3. Continuity of two digit inflation at the material and parts
providing market.
4. Continuous increasing of living costs of the workers
5. Lack of determined and reliable program at the
automobile manufacturing companies and automobile
importing markets.
CONCLUSION AND RECOMMENDATIONS
The most important solutions that Radiator Iran Company
should put in its instruction seriously, in order to act
according to the present weak points and removing the
diagnosis in their ability is as following:
1. Performing environmental reliable studies: the Radiator
Iran Company in order to have realistic and accurate
images of far and close environmental changes and also
supplying and demanding procedure in its goods market,
could not rely just on diverse and unreliable information
and others quotations, but it is necessary that by obeying
the scientific principals studying the environments of
different layers and their manner of influence on the
performance of the company. Also the reliable quality and
quantity investigation of competitors, customers’
performances and the relations domains at demand and
supplying at the market, is accounted as the prerequisite
of decision making based on market data.
2. Reviewing the strategic program of the company: the
reviewing strategic program of Radiator Iran Company
should be based on accurate an just in time information
from the environment and inner part of the organization,
and designated as the scientific principals at strategic
management field. The cooperation of all managers and
also selected experts and staff from different layers of the
organization is very important and vital at codifying the
program; the implementation commitment will be low
(Kaplan and Norton, 2005).
3. Performing source finding studies: as the company
needs identification and potential and active customer’s
evaluation in the field of marketing and sales, in the field
of providing and funding it should permanently identify
and evaluate its potential and active sources, and
therefore improve its power of bargaining and capability
of using better opportunities for its providing and
supplement. Doing environmental studies in the field of
business, in fact, is the structured performance and
gathered implementation of identifying and analyzing the
provider of materials and required pieces of the company.
4. Improvement of business field performance at
declining the buying costs: productive management of
funding and supplying costs, are not only has important
role at increasing the productivity of the company, and is
nor limited to buying materials and pieces, but also the
volume and number of buying the goods, official costs,
bank and insurance, transportation, release and so on,
besides the net cost of buying goods or pieces should be
under its management. Therefore, the set of these
proceedings needs comprehensive approach in the field
of business with insist on buying costs management.
5. Reviewing of attitude system, salaries and wedge of
the company: human resource is the only structure and
elements of the company that has two manners, that is, it
is accounted as production factor and it is designated as
the benefited authority of the organization. The reason is
referred to the subject of organic and intelligent system
nature this element. Human resource is not only,
separately is a structure and element of the organization,
it is also an important factor in the quality and quantity
aspects of other elements of the organization.
6. Defining and implementing the technological
development plans and quality of production: the world
automobile making industrial, according to the
technological development and affected by the domain
competition in this industry, is looking for funding
(providing) and spending expensive costs for researching
and developing in different dimension of the products.
Iranian automobile making companies are sometimes by
removing the old cars, assembling new generation of
them in the country (Kilger, 2004).
7. The gradual establishment of TQM: any organization
such as Radiator Iran Company should determine specific
view for its development and continuous improvement of its
performance quality under the entire framework and
measures, evaluates, and analyses its improvement rate.
Moving toward the high position with emphasizing on the
comprehensive quality management view at Radiator Iran
Company it can be an introduction for convergence of all
proceedings, programs and projects that company needs
them for improving its quality performance at all corners
of the company.
8. Market research and evaluating the long-term demand
procedure for increasing the capacity: Automobile making

industry of Iran is looking for increasing its production
capacity in the recent decades and with this respect it
reaches to several successes. Increasing production
Automobile making procedure of Iran was not fixed
during this period and it faced with many rises and falls.
9. Capacity measuring and programming the improvement
of production capacities: the results from market
research and long-term programming for increasing
capacity at Radiator Iran Company should support and
operate with providing implementing and short-time
supporting programs.
10. Quality costing: quality and cost at industrial units has
close connection with each other. Whether the quality
and standardized of designing and material and goods
production increases, the cost of production will
automatically increase. Reciprocally, one of the easiest
and while hardest methods of declining the cost of
produced goods and good supplying, is decreasing the
quality of designing, materials, and production process.
On the other hand, the quality of each product should
appropriate and match with the expectation and demands
of market. The set of these proceedings should be set at
the instruction in organized and scientifically principals at
Radiator Iran Company.
11. The Six Sigma Project: Using statistical quality
controlling approaches in precious investigation and
performance defects can causes more knowledge,
awareness, and information about the present condition
of the company. Using structured methods is useful for
recognizing and analyzing the present condition and
implementing correcting actions, preventing and project
for improving the performance of the company.
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African Journal of Business Management Vol.6(31), pp. 9140-9150, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2228
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Digital divide and inequality among digital natives: A
South African perspective
D. H. Tustin 1 , M. Goetz 2 * and A. Heydenrych Basson 3
1 Professor in Marketing Research and the Executive Research Director of the Bureau of Market Research, University of
South Africa, P. O. Box 392, Pretoria, 0003, South Africa.
2 Senior Research Coordinator at the Bureau of Market Research, University of South Africa.
3 Research Psychologist at the Youth Research Unit of the Bureau of Market Research, University of South Africa.
Accepted 9 July, 2012
This article explored the extent of digital divide and inequality among digital natives in Gauteng, South
Africa. More explicitly, social and economic forms of digital divide and inequality were investigated. The
article presents innovative research in South Africa that builds on past international research on digital
divide. Whereas previous research on digital divide mainly uses a one-dimensional focus on Internet
access only, this research on digital inequality reflects on the quality and quantity of Internet usage.
The research poses challenges to improve digital literacy in South Africa and is aimed at narrowing the
economic and social disparity evident among especially Gauteng millennials. This initial research on
digital inequality not only stimulates intellectual discourse on the topic matter but also serves to
encourage digital natives to take full advantage of all resources on the internet as ideal communication
medium to improve their well-being.
Key words: Digital divide, digital inequality, digital natives, digital literacy, digital wisdom, Internet literacy,
social media skills.
INTRODUCTION
According to Internet World Stats (2011a), internet usage
in South Africa increased from 2.4 million in 2000 to 6.8
million in 2010. The most recently updated Facebook
user figures published by Internet World Stats (2011b)
show that South Africa has approximately 3.8 million
Facebook users in 2011. The latter figure translates into
a Facebook penetration of 7.8% for South Africa in 2011.
Against this background it is clear that many South
African households, especially those with children,
nowadays have access to the Internet. However, some
households still lack internet access that denies,
especially adolescents, the opportunity of exploiting the
full potential of the internet. This implies the need for
improved internet literacy that will help to defeat digital
inequalities that prevail and will place the majority of
*Corresponding author. E-mail: goetzm@unisa.ac.za. Tel: (012)
429-3329. Fax: (012) 429-3170.
adolescents on the same level when it comes to internet
usage. Equal access to and more productive usage of the
internet among digital natives are destined to have a
positive impact on future careers, knowledge levels and
political, economic and social involvement. The latter
view is echoed by Hoffman and Novak (1998; 1999), The
Benton Foundation (1998), Strover (1999) and Bucy
(2000), as cited in Neckerman (2004) who indicated that
internet usage differs among individuals and that those
with higher internet access, also have greater access to
education, income and other resources that help people
to advance. It is also important to note that the growing
prevalence of the internet has sparked a new era of
intellectual discourse about access and inequalities, the
nature and quality of use, family life and social
relationships and the balance between online risks and
opportunities. More specifically, this article focuses on
internet access and the diffusion of diverse ways in which
people use this new technology and how it is embedded
within and socially shapes the practices of everyday life.

Aim and focus
This article provides new and substantial findings on
ways in which young people (the internet generation) in
South Africa access and utilise the internet. Within this
context, the article primarily explores digital divide and
inequality among millennials in Gauteng with specific
emphasis on:
1. The existence of statistically significant gender digital
divide/inequality among digital natives of Gauteng.
2. The existence of statistically significant cultural digital
divide/inequality among digital natives of Gauteng.
3. The existence of statistically significant economic
digital divide/inequality among digital natives of Gauteng.
In exploring the above, the article aims to address the
following key issues:
1. Internet diffusion and adoption/usage behaviour
among digital natives in Gauteng.
A focus on Internet diffusion and usage is best
motivated by the citation from Liu and Sun (2006) that ‘a
country’s economic development serves as a good
predictor of access to the internet since it provides a
country with the enhanced ability to afford internet
access’. However, within this context, it is also
acknowledged that not only economic but also social and
political developments play a critical role in driving the
development of the internet’s penetration within an
economy. Furthermore, the issue of access to the global
network is relevant and is based on a growing belief
among many observers, that the internet represents a
momentous shaping force of modern society in almost all
aspects, ranging from education to politics (Gonzalez,
2005). Alexander in Gonzales (2005) also states that the
possibility of empowering people by providing them
access to the internet is seen as a positive step that must
be encouraged. Moreover, the assumption that the
internet is an excellent feature for society as a whole
carries the inevitable consequence that those who lack
access will be at a disadvantage compared to those able
to connect to the Web. The latter is based on the idea
that information has become the commodity of the future
and those without access to it will be relegated to
poverty.
2. Digital divide among digital natives in Gauteng
Investigating this area requires a focus on the following
critical question:
a. Is there a digital (Internet usage) divide between
gender, cultural and economic youth groups in Gauteng?
3. Digital inequality among digital natives in Gauteng
Critical questions relating to this focus area include the
following:
a. How Internet literate are young people and which
Tustin et al. 9141
skills and competencies that constitute Internet literacy
are children and young people developing?
b. Are there differences and inequalities in internet
literacy by gender, cultural and economic groups?
c. How do factors such as gender, cultural and economic
status shape inequality in internet use?
d. Does digital wisdom differ between gender, cultural
and economic youth groups?
The above-mentioned focus areas bear specific
relevance to the understanding of the ability of digital
natives with formal access to the Internet to use this
medium to enhance their access to valuable information
resources. In particular the research focuses on how
easily digital natives go online, how skilled they are at
finding information, how effectively they can draw on
social support and how productively they use the Internet
to enhance their social and economic life. The growing
prominence of the Internet poses a set of particular
challenges to its users, requiring the rapid development
and continual updating of a range of skills and
competencies of which the nature and distribution is
largely unknown in South Africa at present. Closing this
information gap is part of the objective of this research
article.
Defining key concepts
The key concepts that bear relevance to the research
topic are summarised below.
Digital natives
A condensed and cohesive definition deduced from
previous works by Prensky (2001a), Nimon (2007),
Helsper and Enyon (2010) and Hockly (2011), describes
digital natives (also referred to as the net generation, the
Google generation or the millennials) as those individuals
born in the late 1980s (Generation Y or often referred to
as the first generation digital natives) and after 1990
(millennials or often referred to as second generation
digital natives) and brought up in the digital world. Digital
natives are always surrounded by or interact with new
technologies and are referred to as ‘digital natives’ as
they are all ‘native speakers’ of the digital language of
computers, video games and the internet’ (Prensky
2001b).
Besides being classified by age, digital natives are also
typically characterised by high exposure and use
(experience) of information communication technology
such as the internet and cellphones. In fact, digital
natives are inclined to use technology for communication
and as part of their social life (that is playing video
games; send and receive emails and instant messages
and talk on digital cellphones).

9142 Afr. J. Bus. Manage.
ICT/digital/Internet literacy
New literacies refer to new forms of literacy made
possible via digital technology developments. The new
literacies are often conceptualised in different ways and a
whole range of terms is used by researchers when
referring to new literacies. These include internet
literacies, digital literacies, information literacy, ICT
literacy and computer literacy. Mostly, these concepts are
used interchangeably with ICT generally taken as the
umbrella term that attempts to describe a new set of
literacies that have emerged as a result of a broader shift
to an information society and the accompanying
technologies embedded in that shift. In this context,
internet literacy is described as the ‘proficiency to use
computers and technology to communicate in an
information society at school or the workplace’. Closely
related to the latter, the Educational Testing Service
(ETS) in the USA defines information and communication
technology literacy as ‘the ability to use digital
technologies to function in a knowledge society’ (ETS,
2011). ICT literacy is often defined as a singular,
standardised set of competencies with computers or
technologies. Turning the attention to internet literacy, it
is firstly necessary to acknowledge that this medium is a
major part of the media mix and an important component
of media literacy, especially for young people.
Livingstone and Bober (2005) and Livingstone et al.
(2005) broadly define internet literacy as ‘the ability to
access, understand and create communications in a
variety of forms’. Across all domains internet literacy is
increasingly important and its absence may contribute to
social exclusion and inequality.
Commonly recognised examples of new literacies
include practices such as instant messaging, participating
in online social networking spaces, creating and sharing
music videos, photoshopping images and photo sharing,
online shopping, emailing and online chatting, conducting
and collating online searches. For purposes of the article,
a total of 19 internet literacies have been measured. The
outcomes of these findings are discussed in the analysis
section.
Internet and social media skills
According to James (2011), internet skills cannot be
defined in some absolute sense because they will differ
from one context to another. James and Azari, (2008),
indicates that internet skills also differ by country. Against
this background, the definition of internet skills is limited
to include those capabilities required to perform a specific
task. It is evident from past research that a lack of skills is
the most commonly cited reason for non usage of the
internet (Schmidt and Stork, 2008) and often results in
digital divide.
Besides investigating internet skills, the article also
explores a selection of social media skills to investigate
digital divide in the use of social media (networked digital
media such as Facebook, MySpace, You Tube and
Twitter). This approach supports the notion of expanding
digital skills or information literacies to include social
media literacies. In this regard, social media skills enable
the youth to, among other things, socialise, learn and
play. Consequently, the article investigates youth
participation in pre-selected activities such as uploading
of photos, posting of videos and downloading of
ringtones, wallpaper and software. It is these skills that
create a digital culture that embraces their way of living.
However, there are probably certain skills gaps, as will be
outlined in the analysis section.
Digital wisdom
This article elaborates on the term digital wisdom as the
research population (digital natives in Gauteng)
investigated in the article has grown up in an era of digital
technology. Prensky (2009a) defined digital wisdom as
wisdom (i) arising from the use of technology to access
cognitive power beyond an individual’s innate capacity (ii)
in the prudent use of technology to enhance individuals’
capabilities. In this context, the definition of wisdom may
be expanded as the ability to find practical, creative,
contextually appropriate and emotionally satisfying
solutions to complicated human problems. Prensky
argues that a digitally unenhanced person, however,
wise, will not be able to access the tools of wisdom that
will be available to even the least wise digitally enhanced
human. Aspects that play an important role in
determining the wisdom of individuals’ decisions and
judgements include, among others, the following:
a. How and how frequently are information technology
resources used by emerging digitally enhanced
individuals?
b. How does the emerging digitally enhanced individual
filter through information resources/tools to find what is
required?
c. How does technology aid individuals?
In summary, homo sapiens digital accepts digital enhancement
as an integral fact of human existence and
he/she is digitally wise both in the considered way he/she
accesses the power of digital enhancement to
complement innate abilities and in the way in which
he/she uses the enhancements to facilitate wider
decision making.
Internet diffusion
Diffusion of technology is defined by Pohjola (2003) as
the process by which new technology spreads across its

potential market over time. Different economic agents,
with different preferences and abilities, are likely to adopt
the new technology at different times and to use it at
different levels. The internet has indisputably become a
new and versatile mass media instrument and is the
fastest diffusing Information and Communication
Technology (ICT) innovation since 1990 (Dholakia et al.,
2003). Within this context, diffusion of an innovation, such
as the internet, is defined as the ‘macro process
concerned with the spread of the innovation from its
source to the public’. Simply defined, internet diffusion
refers to the spread of the internet among entities such
as households, individuals or firms. These entities are
considered connected to the internet if they have the
capacity of communicating with each other via the
physical structure of the internet. Consequently, internet
diffusion relates to the rate to which entities adopt and
use the internet. With ICT becoming more prevalent in
the daily lives of many individuals, an investigation into
the adoption and usage of emerging technologies such
as the internet is substantiated. Despite the fact that the
penetration rate of ICT has increased, there still seems to
be social and economic disparities across a cohort of
young people.
Digital divide and inequality
In the widest context, digital divide refers to the inequality
of access to the internet (Castells, 2001; Gunkel, 2003).
The definition of digital divide is usefully enhanced by
Norris (2001) who distinguishes between the following
three types of digital divide:
a. Global divide: The diversions of internet access
between industrialised and developing societies.
b. Social divide: The gap between information rich and
poor in a nation.
c. Democratic divide: Difference between those who do
and do not use the panoply of digital resources to
engage, mobilise and participate in public life.
Digital divide has also been defined in a much broader
sense and has been described as the space in society
that exists between those who know how to and can
completely use information communication technologies
to their advantage and those who do not. This broader
definition of digital divide initially referred to ‘the gap
between those who have and do not have access to
technology (that is, internet or cellphone access) and
related services’. Over time, this definition has been
broadened by adding ‘the user must have the ability to
use the available resources properly’ (Chauhan and
Murthy, 2006). Against this background it could be
argued that, if an individual has all the latest technology
and information but does not know how and where to use
it, it will lead to digital divide.
Until recently, most international research has focused
Tustin et al. 9143
on inequality in access. Although acknowledging the
importance of such research being likely to reinforce
inequality in opportunities for economic mobility and
social participation, more thorough research on digital
inequality has recently started to feature more
prominently internationally. Similar research approaches
largely remain unexplored in a South African context.
This article serves to fill this information gap. More
specifically, the article favours the narrow definition of
digital divide by exploring social and democratic digital
divide as defined by Norris (2001).
Digital competence
ICT skills, technology skills, information technology skills,
21 st century skills, information literacy, digital literacy and
digital skills are all terms that have been used to describe
skills and competencies in using digital technologies.
Against this background, recent research conducted by
Ilomäki et al. (2011) for European Schoolnet (EUN
Partnership AISBL) states that digital competence in
particular is an evolving concept and consists of (i)
technical skills to use digital technologies, (ii) abilities to
use digital technologies in a meaningful way for working,
studying and for everyday life in general in various
activities, (iii) abilities to critically evaluate the digital
technologies and (iv) motivation to participate in the
digital culture. However, these authors acknowledge that
digital competence in research is not yet a standardised
concept but rather regarded as a core competence in
policy-related aspects. Thus, the term is used
interchangeably with the ICT/digital skills defined
elsewhere in the article. This broad definition aligns well
with the European Commission’s definition of digital
competence (Punie and Cabrera, 2006) as involving the
confident and critical use of Information Society
Technology for work, leisure and communication. In their
view, digital competence is grounded in basic skills in
ICT, such as the use of computers to access, store,
produce, present and exchange information, and to
communicate in collaborative networks via the internet.
METHODOLOGY
To explore digital divide and inequality among digital natives in
Gauteng, a quantitative study was conducted among 1050 young
people between the ages of 12 and 21 years (grade 8 to 12)
enrolled at secondary schools across the Gauteng province in
South Africa. Gauteng’s selection is ascribed to the fact that this
province is home to 9.5 million people, or 3 million households
(Udjo, 2009), constitutes approximately a third of South Africa’s
income earners (34.4%) and is responsible for about a third of
national household consumption expenditure (Masemola et al.,
2010). Besides the relatively higher population numbers and
income, the central location and presence of major internet service
providers in Gauteng and the fact that the majority of internet users
are concentrated in major cities such as Johannesburg and
Tshwane in particular, largely motivated the selection of this area to

9144 Afr. J. Bus. Manage.
Economic
Culture
Gender
Total
Middle/lower income
High/middle income income
Total
Designated
Nondesignated
Total
Female
Male
Figure 1. Internet diffusion among selected youth cohorts.
investigate digital divide and inequality. Consequently, Gauteng
represents a lucrative market for information communication
technology where relatively more of the youth are presumably
accessing and utilising internet services. However, Gauteng
households do not live in an information utopia yet, and many
households still lack access to the internet. This discrepancy largely
motivated the research on digital divide (internet access) among
digital natives in Gauteng. However, more importantly, the
assumption that relatively more youth potentially access and
actively use the internet in Gauteng, finally motivated a more
detailed investigation on digital inequality among selected
socioeconomic groups. The latter segmented approach was
adopted by the study to also acknowledge the diversity of
Gauteng’s population comprising of low, middle and high income
households and various cultural groups.
The research universe for the study comprised learners, enrolled
from grade 8 to 12 (age 12 to 21) distributed across the entire
Gauteng region. The focus on the adolescent market is motivated
from an economic, consumer and marketing perspective whereby it
is acknowledged that the Millennium Generation (or Generation Y)
has emerged as a highly informed and knowledgeable entity with
increasingly more economic spending power and purchase
influence abilities. Also, from a media communication and
psychological perspective, the importance of new media usage
among adolescents and how this contributes to formative
behaviour, and personal and interpersonal relationship development
has been recognised across industry.
A total of 15 schools located across 14 different districts of
Gauteng were included in the sample. The composition of schools
included an equal representation of ex-model C and ex-DET
schools across Gauteng. This segmented sampling approach was
favoured to ensure the inclusion of different socioeconomic classes
where ex-model C schools largely represented middle to high
income communities and ex-DET schools lower to middle income
communities. Furthermore, the research population constituted
representation from different cultural groups. For convenience,
these groups have been classified as designated (Black, Coloured
and Asian) and nondesignated (White) groups.
Research instrument
24.4
Aligned with the objectives outlined above, the research instrument
was designed to determine:
29.2
0 10 20 30 40 50 60 70
36.1
39.8
39.8
39.8
45.3
56.8
61.7
a. Personal access to the internet including Internet access via
cellphones.
b. Personal usage and ownership of cellphones.
c. Involvement in internet activities (that is, searching for
information, playing games, gambling, dating, instant messaging,
receiving/sending emails, publishing on blog sites, chatting, online
shopping, social network sites, researching information, online
radio/television, online reading).
d. Involvement in activities on social network sites (Facebook,
MySpace, You Tube, Twitter, etc). For purposes of the article, these
activities were limited to uploading photos, posting videos and
downloading ringtones, wallpaper, software, etc.
These research topics serve to investigate internet diffusion, digital
divide and inequality as well as digital skills/competencies among
digital natives in Gauteng. The research findings are discussed in
more detail in the research analysis section below.
Data collection and fieldwork
The research design used a self-administrated survey approach
whereby a paper-based questionnaire was distributed among 1 050
grade 8 to 12 learners from the sampled schools. Learners self
completed the questionnaires under close guidance of fieldwork
managers and teachers. This process was preceded by various
ethical and logistical arrangements. Firstly, to ensure that the study
among ‘children’ was executed in line with the SAMRA Code of
Conduct (based on the ICC/ESOMAR International Code of
Marketing and Social Research (ICC/ESOMAR 2008)), permission
was obtained from the Department of Education (DoE) and school
principals to conduct research at selected schools.
Following this process, each school principal was telephonically
informed about the intention of including his/her school. Once the
invitation to participate was accepted, the most convenient time to
conduct research during school hours was established. Once the
survey questionnaires were completed, the batched questionnaires
were collected for data editing, coding, capturing and storing
purposes.
RESEARCH ANALYSIS
Figure 1 provides an overview of the selected
demographic groups in terms of internet diffusion among
grade 8 to 12 learners in Gauteng. In this context it is
important to note that diffusion only displays access to
the internet by Gauteng youths during the week
preceding the survey. This approach was used to reflect
on most frequent usage of the internet.
Figure 1 shows that the internet has penetrated
approximately 40% of the Gauteng youth market who are
regular users of the internet. As mentioned, it is important
to note that Figure 1 only displays internet access by
learners in the week preceding the survey. From this
finding, it is clear that only one in four youngsters can
indeed qualify as true digital natives in terms of the
prominence that Internet, in particular, has in their lives.
Although, this figure reflects relatively low Internet
penetration levels, it does not account for the number of
learners with less frequent access to the internet. In fact,
a closer analysis of the survey data shows that Internet
access figures increase to 53.3 and 69.3% of learners

100
90
80
70
60
50
40
30
20
10
0
Weekly Monthly Annually
Figure 2. Internet diffusion by incidence of use.
who accessed the internet on a monthly or annual (during
the past 12 months but not during the past month
preceding the survey) basis. This confirms much higher
internet diffusion than reflected in Figure 1. The actual
diffusion rate of the internet and regularity of use of any
internet activity, are more accurately displayed in Figure
2. The overall trends reflected in Figure 2, alongside the
fact that almost all of the 1 050 survey participants
indicated that they have access to and use of a
cellphone, probably suffice to classify the Gauteng youth
market as ‘truly’ being digital natives. Against this
background it seems that the internet has successfully
penetrated approximately 70% of Gauteng households
with adolescents. Furthermore, the survey showed that
just over half the learners access the internet via their
cellphones. Between 60 and 65% of the males (59.2%)
and learners from the nondesignated (64.3%) and high
income (65.5%) groups, access the internet via their
cellphones. In turn, between 35 and 45% of females
(44.4%) and learners from the designated (43.1%) and
low income (36.6%) households access the internet via
their cellphones. Reflecting on personal usage of
cellphones in general, the survey results revealed that at
least 90% of learners personally own and use cellphones
on a weekly basis, regardless of gender, culture or
income group. This generally displays equality of
cellphone ownership and usage for the three demographic
cohorts. As will be indicated in the discussion to
follow, a different trend is notable with regard to internet
usage, with notable distinctions still evident from a cohort
analysis perspective.
When analysing Figures 1 and 2 in tandem, it seems
Male
Female
Designated
Nondesignated
Low income
High income
Total
Tustin et al. 9145
that internet diffusion is more pertinent among non
designated and higher socioeconomic groups. It is clear
from the analysis that males and the youth from non
designated and high income groups show a greater
propensity to adopt ICT media such as the internet. This
showcases that these demographic factors strongly
influence the adoption of internet services. This finding is
particularly pertinent for market planners and policy
makers who wish to understand and quantify the impact
of these factors on digital divide across household types.
To measure the type of activities by selected
demographic group, Table 1 displays the type of internet
activities in which the Gauteng youth engage. Table 1
also serves to reflect on the digital skills/competencies of
digital natives in Gauteng.
Firstly, it is important to note from Table 1 that young
people are more likely to use the internet for entertainment
and social networking. This finding also
corresponds with some of the findings emerging in the
UK recently published by Helsper and Enyon (2010).
Furthermore, Table 1 displays the internet content
accessed by the youth, with the following activities
topping the list:
a. Search for information
b. Download content, for example, music, wallpaper,
ringtones, etc
c. Facebook
d. Play games
e. Research/obtain information for school assignments
Furthermore, Table 1 also presents an overview of the
diversity and breadth of use of Internet content and

9146 Afr. J. Bus. Manage.
Table 1. Internet activities by youth cohort.
Internet activity
Gender group (%) Cultural group (%) Income group (%)
Male Female Nondesignated Designated Middle/high Low/middle
Search for information 63.8 55.4 79.3 48.9 76.4 42.8 55.4
Download content for example, music, wallpaper, ringtones etc 49.1 35.0 49.1 36.5 51.7 30.5 38.2
Facebook 40.6 39.7 61.3 29.9 58.9 23.5 37.9
Play games 46.0 29.1 39.0 34.3 39.5 33.4 34.3
Research/obtain information for school assignments 37.7 35.5 42.7 33.0 43.4 28.9 33.8
Chat 37.9 28.3 39.3 29.1 38.6 26.5 30.5
Receive/send e-mail 27.9 23.8 41.2 18.0 36.8 15.7 24.2
Research/obtain for myself (random surfing) 22.2 18.6 24.7 17.4 24.8 15.3 18.7
Read newspaper/magazine online 14.4 18.1 13.4 18.1 15.7 17.5 15.8
Instant messaging 17.1 13.4 24.1 10.5 21.9 9.0 14.2
Dating 17.4 10.4 7.9 16.1 10.1 16.1 12.6
Read/access current news on-line 14.2 12.4 12.5 13.4 13.2 12.6 12.2
Listen to the radio online 11.7 10.9 9.5 12.3 9.1 13.2 10.7
MySpace 11.0 10.4 10.1 11.1 12.6 9.4 10.3
Watch television online 11.7 8.0 7.6 10.2 8.7 10.1 8.9
Directory services 8.8 6.0 7.6 6.9 8.1 6.1 6.7
Publish opinion on blog sites 7.1 5.9 4.9 7.0 7.4 5.2 5.9
Shop online 7.3 5.5 6.1 6.1 7.9 4.5 5.7
Gambling 3.7 1.7 3.7 2.0 3.1 2.0 2.4
simultaneously displays the number of digital
activities that indicate digital nativeness and
competencies. The information clearly displays a
high number of different activities that youngsters
engage in and confirms that the internet is largely
integrated into the everyday life of most learners.
Table 1 not only examines the type of individuals
(people) that are most likely to demonstrate digital
native characteristics, but also reflects on the
extent of ‘digital wisdom’ levels (digital competencies)
among the Gauteng youth, which also
contributes to their personal development. This
view is supported by Johnson (2005) who argues
that new technologies associated with contemporary
popular culture (from Internet to video
games) are increasing individuals’ capa-bilities in
a wide variety of cognitive tasks. As Johnson
(2005) puts it: ‘Today’s popular culture may not be
showing us the righteous path, but it makes us
smarter’. Engaging with different content presents
individuals an ideal opportunity to access
information or alternative perspectives that simultaneously
improve humans’ capacity to judge
situations, evaluate outcomes, make practical
decisions wisely and to share information across
time and distance. The availability of digital tools
Total
has clearly advanced and will continue to advance
individuals’ quest for knowledge and development
of true digital wisdom. In fact, in judging the actual
usage figures of some of the digital content
displayed in Table 1, digital natives in Gauteng
could probably best be described as ‘digitally
clever’ and not truly digitally wise. In this regard,
online shopping and blogging activities are rather
narrow in use and have not yet been extensively
investigated and evaluated to translate these tools
into wisdom enhancers. It is also clear from Table
1 that males, and non designated and higher
income groups engage.

Table 2. Chi-square analysis of digital competencies and skills by selected demographics.
Cohort
Gender
Culture
Economic
Internet
access
Information
search
Playing
games
Internet skills Social media skills
Download
content
Facebook
School
assignments
Uploading
photos
Post
videos
Tustin et al. 9147
Downloads on social
network sites
Male (%) 45.3 63.8 46.0 49.1 41.6 37.7 45.2 37.9 41.6
Female (%) 36.1 55.4 29.1 35.0 40.9 35.5 41.9 28.6 32.5
Total (%) 39.8 58.7 36.0 40.8 41.2 36.1 43.2 32.4 36.2
Sig: p-value
(Pearson chi-square)
0.004* 0.008* 0.000* 0.000* 0.826 0.488 0.291 0.002* 0.003*
Nondesignated (%) 61.7 79.3 39.0 49.1 61.9 42.7 61.9 44.8 49.4
Designated (%) 29.2 48.9 34.3 36.5 31.2 33.0 34.2 26.3 29.6
Total (%) 39.8 58.7 36.0 40.8 41.2 36.1 43.2 32.4 36.2
Sig: p-value
(Pearson chi-square)
0.000* 0.000* 0.143 0.000* 0.000* 0.003* 0.000* 0.000* 0.000*
Low to middle income (%) 24.4 42.8 33.4 30.5 25.1 28.9 30.3 22.9 26.7
Middle to high income (%) 56.8 76.4 39.5 51.7 59.5 43.4 58.1 43.0 46.5
Total (%) 39.8 58.7 36.0 40.8 41.2 36.1 43.3 32.4 32.4
Sig: p-value
(Pearson chi-square)
0.000* 0.000* 0.042* 0.000* 0.000* 0.000* 0.000* 0.000* 0.000*
*Significant at the level p

9148 Afr. J. Bus. Manage.
Consequently, digital inequality is evident across the
selected youth cohorts, which accentuates the digital
diversity that exists among the youth market and largely
corresponds with previous work published by Bala and
Goyal (1998) and Munshi (2004). These authors argue
that information flows are weaker in heterogeneous
populations, thus, preventing individuals from learning
about their neighbours’ experiences regarding the use of
new technology. The Gauteng study shows a clear
statistically significant digital divide within the cultural and
economic youth cohorts. This suggests a bigger gap
between Internet users and nonusers within these groups
when compared with the gender cohorts.
In terms of internet skills, statistically significant differences
are notable for all skills types listed in Table 2,
except Facebook and using the Internet for school
assignments (not statistically significant for the gender
cohort) and playing games (not statistically significant for
the cultural cohort). This suggests that, in most cases,
gender, culture and income are major determinants of the
development of Internet skills. This is also evident from
the analysis on social skills where the proportion of the
youth that uploads photos, posts videos or downloads
content from social network sites, shows statistically
significant differences for each selected cohort. The only
exception to the rule relates to uploading of photos by
gender group. In this regard, no statistically significant
differences are notable between males (45.2%) and
females (41.9%) who upload photos on social network
sites. Overall, it seems that children in high income and
non designated groups have more advanced internet and
social media skills. This suggests that income and culture
are both differentiating variables in the development of
digital competencies and skills. The exception to the rule
includes the development of gaming skills where gender
seems to be a more prominent differentiator than culture
and income. In this regard, approximately 46.0% of boys
play games as opposed to only 29.1% of girls.
INTERNATIONAL COMPARISONS
The findings emerging from the Gauteng study among 1
050 youths, resembles findings published in the UK, USA
and even Germany, to cite but a few examples. A
previous UK study among children and young people
(Livingstone and Bober, 2004; 2005) revealed the
following trends:
a. sizable socioeconomic differences for access to the
Internet with 88% of middle class and only 61% of
working class children having access to the Internet from
home
b. weekly usage rates of 43% of children accessing the
Internet with not many children and young people taking
up the full potential of the Internet
c. age, gender and social grade differences whereby
girls, older and middle-class teens visit a much broader
range of Internet sites.
The UK study points out a new divide that is opening
up between those to whom the internet is an increasingly
rich, diverse, engaging and stimulating resource, and for
those to whom it remains a narrow, unengaging, if
occasional useful, resource of rather less significance.
Finally, the UK study also emphasises the importance of
internet literacy. Increasing internet skills are vital since it
seems that children’s and young people’s level of online
skills has a direct influence on the breadth of online
opportunities and risks experienced.
A further set of figures is found in the USA where most
relevant studies on internet access have taken place and
published in Gonzáles (2005). USA figures also show a
marked difference in access to the internet between
racial and social groups. For example, while 46% of
Whites had access to the internet, only 23.5% of Blacks
and 23.6% of Hispanics were online in 2000. USA figures
also indicate marked contrast in access to the information
network along income lines. For example, 86% of
households earning $75 000 USD and above per annum
had internet access compared to only 12.7% of
households earning less than $15 000 USD. These
figures suggest that internet access is directly proportional
to economic wealth. This finding corresponds with
the Gauteng study, which does not explore the actual
reasons for digital divide beyond gender, culture and
economic status. Interesting to note from the USA study
is that digital divide is ascribed to factors other than
simply income. Cost of software and hardware,
connection cost and actual access to telecommunication
infrastructure are other reasons that explain digital divide.
Some of these factors may also explain the reason why
approximately 30% of Gauteng youths have no access to
the Internet. Finally, Wei and Hindman (2011) show that
while most Americans nowadays have access to the
internet, those with a higher economic status (as defined
by education level, income and some other factors) get
far more out of the internet because they use it for
information, while those on the lower end of the
socioeconomic ladder are more likely to use the internet
purely for entertainment.
Finally, previous studies in Germany (Korupp and
Szydlik, 2005) present empirical evidence on gender,
ethnic and regional differences for computer and internet
use. In this regard the research revealed that (i) women
are less likely to use the internet than males, (ii) ethnic
background is negatively connected to the private use of
the internet (digital divide between West Germans and
Turkish minority due to racial inequalities) and (iii) huge
regional differences in internet use prevail between East
and West Germany due to economic inequality.
FUTURE RESEARCH OPPORTUNITIES
The research undoubtedly adds to the understanding of
the purpose for which young people are using new

technologies and how digitally wise they are. However,
the research fails to measure youths’ skills in dealing with
and critically assessing information. This limitation calls
for further research in this regard. Other key properties
for future research on young people’s uses of new
technology, could include a focus on, among others, (i)
causes and consequences of Internet exclusion, (ii)
future developments in online literacy, (iii) the nature and
quality of new social networks in online communication
and (iv) the extent and nature of harm associated with
online risks.
Finally, it should be noted that this article only explores
internet digital divide. As mobile communication also
plays an integral part in many South African households,
it is recommended that future research also be narrowed
down to a focus on mobile digital divide among the youth
in South Africa.
Conclusions
From the article it is clear that gender, cultural and
economic groups adequately define digital nativeness. It
appears that males, and youths from non designated and
higher income households tend to access the Internet
more frequently and are digitally wiser than young
females and those from designated and lower income
households. The research supports previous research
that demonstrates that there are significant differences
within cohorts of young people in terms of their use of
new technologies, preferences and skills. This research
expands on existing research and shows gender, cultural
and economic distinctions within cohorts of young people
in South Africa. This distinction is important to understand
when the intention is to build equal knowledge levels in
homes where clear digital inequality prevails. Clearly, the
analysis presented in the article demonstrates the
importance of cohort analysis, which showed that youth
from non designated and higher income households are
more likely to feel confident in their ICT skills and use of
the Internet for social and learning development. This
finding does not imply that gender is discarded as an
important variable and cannot simply be ignored in the
debate on digital divide in South Africa.
Although, this article propagates the development of
digital competencies and skills in order to create more
opportunities to impact on personal development, greater
Internet access also potentially increases risks to young
people through exposure to, for example, problematic or
undesirable content (that is, online violence and
pornography). This suggests dedicated educational and
other interventions to increase young people’s level of
online skills and particularly, online safety skills.
The article showed that internet access remains
stratified and that for, especially popular and social usage
of the internet, some children are being excluded. Too
little is known at present of the social, educational and
other consequences of exclusion. This articulates the
Tustin et al. 9149
importance of continuing research on inequalities and
digital divide related to young people’s Internet use. In
this regard initiatives are required to improve equality in
the range and breadth of online opportunities. However,
closing digital divide will involve more than simply placing
computers in locations for easy access (that is homes
and schools). How to use the information effectively and
efficiently probably poses greater skills development
challenges that should be addressed via, for example, a
public education campaign. Such skills improvement
should ideally look beyond technical and information
searching skills but also encompass a critical awareness
of the quality, purpose and reliability of websites.
Focusing on Internet literacy will undoubtedly help to
eliminate digital inequalities and will put the majority of
the youth on the same level when it comes to internet
use. This will support the goal of becoming a knowledgebased
economy, take advantage of the innovative nature
of information communication technology and assist in
diffusing access to ICTs in order to reap the benefits of
knowledge sharing and entrepreneurship incubation.
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African Journal of Business Management Vol.6 (31), pp. 9151-9160, 8 August, 2012
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM12.638
ISSN 1993-8233 ©2012 Academic Journals
Full Length Research Paper
Global warming mitigation promotes corporate
entrepreneurship within Woolworths’ supply chain
M A. O. Dos Santos
University of Johannesburg, K Block, Office Red 7, Bunting Rd Campus, Auckland Park, Johannesburg, South Africa.
E-mail: mariads@uj.ac.za. Tel: 011 559 1278. Fax: 011 5591477.
Accepted 25 May, 2012
This study demonstrates how Woolworths, a South African retail chain promotes corporate
entrepreneurship within its supply chain as it implements sustainable marketing strategies. A
qualitative case study approach, restricted to a single retail chain, was used and the data analysed was
derived from their public documents. A content analysis using a thematic approach that incorporated
product life cycle model variables was used to code the data. The results demonstrate that retailers can
promote entrepreneurial activity within supply chains as they implement sustainable marketing
strategies.
Key words: Retailing, environmentally sustainable marketing practices, corporate entrepreneurship, supply
chain.
INTRODUCTION
The implementation of environmentally sustainable
marketing strategies by retail chains such as Woolworths
can facilitate and promote corporate entrepreneurship
within their supply chains and this is the primary aim of
this study. Retail chains are able to encourage this
entrepreneurship due to their corporate retail power
(Jones et al., 2005: 34) and the benefits that accrue to
supply chain members as a result of this collaboration.
The benefits gained by supply chain members through
collaboration include; reducing the risk associated with
the entrepreneurial activity since Woolworths offers a
profitable and reliable market for the suppliers’ products;
the development of first mover advantage by members of
the supply chain who wish to benefit from the retailer’s
sustainable business practices and who want to promote
their more sustainable products to other customers. For
example Woolworths’ trolley and basket manufacturer
supplies Woolworths with new trolleys and baskets that
contain recycled plastic derived from this retailer’s
obsolete trolleys and baskets. This supplier markets
these more environmentally sustainable products to other
retailers who are interested in improving their sustainability
profile. In 2008, this project had recycled 161 tons
of obsolete plastic (Press release, 15 th January 2008).
Global warming, its mitigation and sustainable
marketing in retailing
Using sustainable marketing strategies in a retailing
context is becoming increasingly significant as the
negative effects of global warming receive increased
attention from the interested stakeholders around the
world. Linder (2006: 103) states that international
environmental groups and a few Western governments
have invested considerable resources in informing the
public about the risks associated with global warming and
climate change. These social marketing campaigns
focused on the individual’s contribution to this
phenomenon and their responsibility in assisting in its
mitigation. This, in the context of derived demand, which
states that demand in business markets is ultimately
determined by consumers, supports this approach. The
results of these campaigns indicate that public
awareness of global warming issues has increased and
there is some willingness on the part of consumers to

9152 Afr. J. Bus. Manage.
adopt some of the proposed mitigation measures.
A poll conducted in the United States and quoted by
Cordero et al. (2006: 865) indicated that 83% of
Americans agree that humans are at least partially
responsible for the recent warming of the planet.
Whitmarsh (2009: 406) states that respondents in the
UK cited more human causes for global warming than
natural causes. Dressler and Parson (2007: 75 to 76)
state that although the warming of the planet prior to
1950 can be explained by human activity and a variety of
natural causes; the magnitude of the warming, its timing
and distribution since then can mostly be explained by
the increasing concentrations anthropogenic greenhouse
gases in the earth’s lower atmosphere.
Spence (2005: 18 to 19) and Lorenzoni and Hulme
(2009: 383) state that most scientists worldwide are now
certain that human activities on this planet are altering
the global climate while Heath and Gifford (2006: 49)
suggest that there are still pockets of uncertainty among
scientists as to whether global warming is actually
occurring. From a South African perspective, the South
African government states:
“The science is very clear - there is no “silver bullet” -
climate change is a huge global challenge which will take
a combination of the full range of available interventions,
technologies, policies and behaviour changes to resolve
the climate problem”
“South Africa, being a responsible global citizen and in
line with its obligations under article 4.1 of the United
Nations Framework Convention on Climate Change
acknowledges its responsibility to undertake national
action that will contribute to the global effort to reduce
greenhouse gas emissions” (Office of the Presidency, 6 th
December 2009)
Increased public awareness about global warming is
focusing the relevant stakeholders’ attention on issues
relating to the natural environment since this
phenomenon has major impact human societies and the
planet’s ecosystems. Wüstenhagen et al. (2008: 1) state
that the threat of uncontrolled changes in the atmosphere
has led to renewed interest in environmental
sustainability. Retailers can assist consumers in adopting
more environmentally sustainable lifestyles through the
provision of environmentally friendly products and
services to their customers. This is the strategy that
Woolworths uses.
Although global warming and a focus on the natural
environment may be perceived as a business threat, this
need not be the case. According to Woolworths’ 2009
annual report, sustainability report, its sustainable practices
provide it with opportunities to save costs, improve
operational efficiencies, differentiate itself from its
competitors, enhance its brand image, and simultaneously
reduce its impact on the natural environment
(Annual report, 2009: 2 and 17).
Davies (2008: 10) states that although cost savings can
be achieved by reducing greenhouse gas emissions and
waste, a more effective strategy is one where businesses
seek opportunities to have a greater positive impact on
the environment. This study demonstrates how Woolworths
reduces its impact on the natural environment by
promoting corporate entrepreneurship through collaborative
innovation within its supply chain as well as
improving the supply chain’s efficiencies, minimising
wastage and recycling.
An international retailer that has seen the benefits of
taking a more environmentally sustainable approach to
business is Wal-Mart. Gibbs (2009: 55) states that Wal-
Mart is focusing on providing organic products to its
customers, recycling energy and encouraging the growth
of local food schemes. Davies (2008: 11) states that Wal-
Mart executives “soon realised how their company and its
suppliers could achieve big returns from small changes in
their packaging” By partnering with suppliers on no fewer
than 300 kid connection toys, Wal-Mart was able to save
3425 tons of corrugated material, 1358 barrels of oil,
5190 trees, 727 shipping containers and US$3,5 million.
Sustainable marketing for the purposes of this study is
defined as:
“The process of planning, implementing, and controlling
the development, pricing, promotion, and distribution of
products in a manner that satisfies the following three
criteria: (1) customer needs are met, (2) organisational
goals are attained, and (3) the process is compatible with
ecosystems” (Fuller, 1999: 4).
Sustainable marketing strategies enable businesses to
win by ensuring their profitability, the customers win in
that their needs are satisfied and the environment wins
since businesses’ negative impact on the environment is
minimised (Fuller, 1999: 11). Schaefer (2005: 46)
suggests that sustainable marketing systems need to be
flexible, decentralised and open to learning from
environmental cues such as the emerging evidence of
impending raw material shortages, observable environmental
degradation in relation to forest cover, soil fertility,
air and water quality as well as global environmental
changes that include global warming and the subsequent
climate change.
Kärnä et al. (2002: 35) use the term environmental
marketing to describe the process of gaining profit from
identifying and providing for the need and wants of
consumers while recognising and minimising business
impacts on the environment. According to Kärnä et al.
(2002: 35) the primary principle behind environmental
marketing is the integration of company activities in a way
that the company, the consumer and the environment
benefits.
In order to identify the sustainable environmental
issues that need to be addressed, a business needs to

examine its activities in relation to the following three
main issues:
1. What it takes from the environment in relation to
resources that it removes or destroys in the ecosystem
for example the fauna, flora, water and minerals (Fuller,
1999: 1 to 2). To counter balance these effects, the
business needs to find more efficient and effective
methods of utilising and restoring what it removes and
destroys (Ryan, 2003: 262).
2. What it makes refers to the firm’s product and service
offerings in the market (Fuller, 1999: 2). In this instance,
the issues that need to be considered include ecoefficient
product design and reductions in material flow. In
addition, sustainable marketing strategies that encourage
consumers to change their preference for material
intensive products need to be developed (Ryan, 2003:
263).
3. What it wastes takes cognisance of the amount of
garbage and waste that is generated, the pollution that
occurs throughout the taking, making and consuming
process as well as the natural environment’s destruction
as a consequence of waste disposal and pollution (Fuller,
1999: 2). To reduce the amount of waste generated by
the business, sustainable marketing strategies that
increase process efficiency, reduce wastage and facilitate
the adoption of biologically inspired production models
within the whole supply chain need to be developed
(Ryan, 2003: 262 and 263).
To facilitate a comprehensive identification of the supply
chain’s activities involved in taking, making and wasting
and their impact on the natural environment, the whole
supply chain needs to work together, since limiting the
analysis to a single stage or business may provide a
distorted view of what is happening (Fuller, 1999: 52).
Take for example, retailers who in many instances do not
manufacture any product but resell manufactured
products to their market. It could be said that these
retailers are not responsible for the waste and pollution
associated with what they sell. However this is not in fact
true, because by providing a market for the product, the
purchaser and subsequent reseller is responsible for its
existence. If there was no market, there would be no
product. Similarly, retail chains such as Woolworths, do
contribute negatively to the natural environment since
they operate and do business both locally and
internationally. Any business activity that involves the use
of fossil fuels, the removal of natural resources from the
environment and the production of waste does have a
negative impact on the natural eco-system and does
contribute to global warming.
A diagnostic tool that can be used to identify all
relevant ecological variables involved in the taking,
making and wasting within the supply chain is the product
system life cycle model (Fuller, 1999: 50). Ryan (2003:
258 to 259) states that life cycle assessments of
Santos 9153
suppliers facilitate the identification of weak links that
“import” environmental problems for retailers. According
to Ryan, Business to Business partnerships or value
chain strategies that utilise green alliances support
enviropreneurship which is defined as:
“The formulation and implementation of ecologically
beneficial corporate policies that protect market position
while creating revenue for the participants” (Ryan, 2003:
259).
Pesonen (2001: 45) states that enhancing the
environmental performance of products requires life cycle
thinking which stimulates and encourages co-operation
within the supply chain. According to Pesonen (2001: 46)
the main contractor (Woolworths) in an industrial value
chain very often puts pressure on other members to
improve their products’ environmental performance.
Pesonen (2001: 46) then goes on to say that the
requirements for environmental performance are also
forcing businesses to increasingly focus on what is
happening upstream in terms of the impact of raw
materials and components on the natural environment.
From an entrepreneurial perspective, the implementtation
of sustainable marketing strategies by Woolworths
encourages entrepreneurship within its supply chain. In
this instance, suppliers are encouraged to innovate by
developing more sustainable products and processes in
their businesses, while devoting the necessary resources
and taking the appropriate risks in order to achieve this.
Their reward at the end of the day is a profitable and
sustainable market for their products in a target market
that is perceived as growing in South Africa. Dixon and
Clifford (2007: 327) suggest that one of the ways an
entrepreneur can remain economically viable and yet
pursue an environmentally sustainable approach to their
business is to develop close interdependent relationships
with corporate organisations that want to enhance their
corporate social responsibility profile. In this particular
study, Woolworths needs the assistance of its supply
chain to implement more holistic sustainable marketing
strategies, because it does not manufacture what it sells
nor does it source its products directly from the natural
environment.
It is the supply chain that is mostly responsible for
much of the taking, making and wasting that occurs in the
different stages of the products’ system life cycle.
Woolworths works with its suppliers because it has found
that it cannot solve environmental problems on its own
(Annual Report, 2010: 36) and it works with business
partners, non-governmental organisations (NGOs) and
their own customers in order to achieve their
sustainability objectives (Sustainability Report, 2008: 14).
As members of Woolworths’ supply chain innovate to
become more sustainable, they stimulate corporate
entrepreneurship which according to Ribeiro-Soriano and
Urbano (2009: 422) involves internal innovation or

9154 Afr. J. Bus. Manage.
venturing, and the transformation of organisations
through the renewal of key ideas on which they are built.
Brizek and Khan (2008: 229) suggest that corporate
entrepreneurship includes two conceptually distinct and
separate ideas namely strategic renewal (which refers to
efforts to revitalise, renew and transform a business’
strategy and structure) and new venture creation within
an existing business. According to these researchers,
strategic renewal usually involves innovation and
creativity.
Entrepreneurship is seen by the South African
government as a means of stimulating the economy,
achieving a more equitable income distribution and
reducing unemployment levels in the country (Pretorius
and Wlodarczyk, 2007: 504). One of the problems facing
the South African government is the fact that despite its
huge investment in entrepreneurial support and training,
there has been little appreciable impact on the small,
medium and micro enterprise (SMME) sector and South
Africa is still seen as not being very entrepreneurially
active particularly amongst its peers (Pretorius and
Wlodarczyk, 2007: 504).
According to statistics provided by Pretorius and
Wlodarczyk (2007: 504), it was estimated in 2004 that the
average entrepreneurial activity in South Africa was 5.4%
compared to 21% for other developing countries. This
article’s aim is to demonstrate how Woolworths, a South
African retailer, encourages corporate entrepreneurship
within its supply chain as it implements its sustainable
marketing practices.
Sustainable marketing is becoming increasingly
significant as the adverse effects global warming receive
increased mass media attention and consumers and
governments are increasingly concerned about the
impact of these two environmental variables on human
populations and ecosystems.
Grant (2008: 25) substantiates this statement by saying
that “climate change is characterised by extreme scale
and urgency” while Moroke (2009: 3) states that people
have woken up to the fact that irresponsible private and
public consumption is not a good thing for anyone. He
further states that there is an emerging trend in the
marketplace where people believe that what is good for
the pocket needs to be good for the planet.
According to the Woolworths Annual Report (2010: 34),
consumer research by this retailer has demonstrated that
consumers are more aware of its sustainable marketing
practices and they show high levels of support for this
retailer’s initiatives. In addition, this report states that
customers increasingly want to understand where
products come from and they want to be certain that
these products are sourced ethically and without harm to
the environment.
Problem statement
Global warming is a macro-environmental variable that is
receiving increased attention as its negative impact on
societies is felt. For example in Bolivia and Peru, peasant
farmers are moving from rural to urban areas as
changing weather patterns and reduced precipitation
make it difficult for them to survive as farmers (Nature
Inc., 2009). As these people migrate to cities, their
infrastructure comes under increasing pressure to meet
the growing population’s needs. The costs associated
with this are not only high in social and local monetary
terms but they are internationally high in the agricultural
sector as the genetic pool for potatoes and corn
continues to diminish (Nature Inc., 2009). As international
stakeholders become aware and witness the effects of
global warming, pressure on businesses to become more
environmentally sustainable will continue to be exerted,
since they are perceived as major contributors to
environmental degradation.
As the product system life cycle suggests, every
business operating in a product’s life cycle contributes in
some way to its environmental impact. In order to
improve a product’s environmental performance, all
participating businesses in the supply chain need to cooperate
(Pesonen, 2001: 45) and they need to innovate
and become more entrepreneurial in order to develop
more effective ways of addressing sustainable marketing
issues raised by concerned stakeholders. This case
study demonstrates practically how Woolworths promotes
corporate entrepreneurship as it seeks to continuously
improve on its sustainable marketing performance.
Objectives
The primary objective of this study is to demonstrate that
Woolworths’ sustainable marketing strategies in South
African promote corporate entrepreneurship. The
secondary objectives for this study include:
1. Commenting on the importance of entrepreneurship in
a South African context in order to lay the foundation for
this study.
2. Proposing that the global warming phenomenon is
making stakeholders more aware of the negative impact
of human activity on the natural environment.
3. Discussing sustainable marketing and the product
system life cycle to demonstrate how it can be used to
identify areas within Woolworths’ supply chain that have
a negative impact on the natural environment.
4. Demonstrating the link between sustainable marketing
and entrepreneurial activity in a South African retailing
context.
5. Describing and linking the sustainable marketing
practices of Woolworths to the promotion corporate
entrepreneurship within its supply chain.
RESEARCH METHODOLOGY
An exploratory, qualitative case study approach was used in order

Table 1. Retailer’s financial statistics, market share and number of stores.
Year
Turnover (billions
of Rand)
Profit before tax
(billions of Rand)
Market share
clothing
Market share food
Santos 9155
Total number
of stores
2008 21.8 1.6 15.3 9.2 385
2009 19.3 1.1 14.5 8.5 410
2010 20.9 1.5 15.3 8.3 419
2011 22.6 2.3 15.4
Source: Sustainability report, Good Business Journey 2011.
to provide insights and to practically demonstrate how Woolworths
promotes corporate entrepreneurship through its implementation of
sustainable marketing strategies. Woolworths was chosen for this
study due to the fact that it operates Australia, New Zealand, South
Africa and some selected countries in the Middle East (Annual
Report, 2009), and it is well known in South Africa for its
multipronged, innovative approach to profitable sustainable
marketing practices (Table 1). As Table 1 demonstrates,
Woolworths’ turnover, profit before tax, and it s food market share
declined in 2009 due to the worldwide recession which had an
impact on businesses in South Africa.
Woolworths was able to recover in 2011 due to strategies it
implemented in 2009 and 2010 to counteract the negative impact of
the recession on its turnover, profit before tax and market share.
Although, Woolworths sustained losses in its financial and market
indicators it continued to expand its retail outlets in the country from
2008 to 2011 (Table 1).
The methodology utilised in this study includes a review of
current academic and popular literature on entrepreneurship and
sustainable marketing, as well as an examination of the content of
Woolworths (2008, 2009, 2010 and 2011) annual and sustainability
reports as well as their press releases. In addition, comments made
in the local and international mass media on global warming were
also noted during 2008, 2009, 2010 and 2011. This methodology
was used because it has been used in previous studies in a
business context (Wright, 2011: 361 to 382).
Content analysis (Krippendorff, 2004; Krippendorff and Bock,
2009; Tengblad and Ohlsson, 2010: 657) was selected for this
study because it was found that these documents contained a
wealth of information that could benefit academics and practitioners
who were interested in the variety of entrepreneurial outcomes that
could be achieved when sustainable marketing strategies are
implemented by Woolworths, a major South African retailer. The
examples chosen for this case study do not reflect all the
entrepreneurial activities that have been developed by Woolworths’
supply chain in response to their sustainable marketing strategies
and their subsequent implementation. Instead they reflect the
diversity of entrepreneurial activity found in this retailer’s
documents.
Content Analysis for the purposes of this study is defined as “a
research method that detects, records and analyses the presence
of specified words or concepts in a sample of forms of
communication” (Sproule, 2008: 115). In addition, personal e-mail
communications with the Manager: The Good Business Journey at
Woolworths’ head office was carried out when clarity regarding
certain issues in the study was needed. The Good Business
Journey mentioned in Woolworths’ documents refers to a
comprehensive 5 year plan launched in 2007 that is designed to
help society and the planet. This plan incorporates a series of
targets and commitments that are designed to achieve the
On average for the year
out-performed the market
by 4%*
450
following: accelerate transformation within Woolworths (which in a
South African context refers to bringing the demographic profile
Woolworths’ employees in line with the demographic profile of the
South African population); drive social development by helping to
alleviate poverty; enhance.
Woolworths’ environmental focus and address global warming
and climate change issues (Press release, 1st June 2008). Each
year, Woolworths’ performance is measured relative to their 2012
targets (Annual Report, 2010: 15).
In order to identify the different sustainable marketing practices
that Woolworths has implemented, a content analysis of this
retailer’s public communications was done using a thematic
approach. The relevant content of this retailer’s documentation was
initially categorised as representing corporate entrepreneurship.
This content was then coded using the upstream, midstream and
downstream sector categories of the product life cycle. These
codes were used to identify the different entrepreneurial suppliers
within the Woolworths’ supply chain that had implemented
sustainable marketing strategies. The three product life cycle
sectors used in this study are described as follows:
1. The upstream: consists of the raw material and materialcomponent
channel networks that incorporate all the associated
manufacturers and industrial distributors that operate in this sector.
2. The mid-stream sector: includes Woolworths and all relevant
manufacturers and wholesalers who supply it.
3. The downstream sector: is the consumer target market and is
concerned with identifying the customer’s needs and wants in order
to design, develop and market products that satisfy the customer’s
requirements.
4. Concurrent operations in all sectors (waste, pollution and reverse
waste channel networks): Every sector in the product system life
cycle produces waste and pollutes the environment. Most of the
waste that is produced by each sector tends to either end up in
landfills or it is disposed in rivers, streams or the sea.
The reason why this sector is considered in the product system life
cycle is to reduce or reuse these wastes in order to manufacture
products that can be utilised by businesses or society (Fuller: 1999:
55). A Woolworths example that demonstrates this principle is the
biodiesel mix that is used in the Woolworths fleet and is discussed
in the upstream sector (Annual Sustainability Report, 2008: 41).
Fuller (1999: 50) states that the product system life cycle is a
useful tool for the identification of all businesses, processes and
resultant wastes that are involved in the supply chain; from the
sourcing of raw materials needed to develop the product, right
through to the actual consumption and disposal of that product by
the customer. (It should however be noted that data provided in the
annual reports, press and media releases only reflect those areas
in the product system life cycle that have and are currently being

9156 Afr. J. Bus. Manage.
addressed by Woolworths and do not reflect the total system).
As this study is based on Woolworths’ sustainable business
practices and there is no manufacturing activity in the conventional
sense of the term, this retailer is perceived as being both directly
and indirectly involved in the taking, making and wasting. This is
due to the fact that it uses resources that are ultimately derived
from the natural environment to satisfy its customer’s needs by
existing, producing food in its in-store café areas, and by
purchasing products from its supply chain which it makes available
to its target market.
RESULTS AND DISCUSSION
Woolworths uses a multipronged approach to its
implementation of sustainable marketing strategies. The
different sustainable marketing strategies that impact on
their supply chain’s entrepreneurial activity are discussed
subsequently using the appropriate product system life
cycle sectors mentioned by Fuller (1999: 50). For the
purposes of this study, it is stated that entrepreneurship
is seen as developing and investing resources in
something new, risk taking, and reaping the rewards for
doing so (Hisrich et al., 2008: 8) while corporate
entrepreneurship is seen as internal innovation or
venturing, and the transformation of organisations
through renewal of key ideas on which they are built
(Ribeiro-Soriano and Urbano, 2009: 422).
Corporate entrepreneurship within the upstream
sector (raw materials channels networks)
The businesses that operate in the upstream sector act
as suppliers to the midstream sector discussed in below.
Woolworths has a strong influence in this sector since it
directly and indirectly provides a market for this sector’s
products and it acts as its channel captain. In order to
implement its sustainable marketing strategies,
Woolworths needs the assistance of all its supply chain
members including its upstream sector. This is statement
is substantiated in Woolworths’ annual report (2010: 34)
which states that:
“Experience has shown that most sustainability
challenges cannot be solved by one company acting
alone, and that support from suppliers and specialist nonprofit
organisations has been essential to the
implementation of sustainable business practices.”
Corporate entrepreneurship in this sector is found within
the farming industry that supplies Woolworths with either
conventionally or organically grown fresh produce such
as fruit, vegetables, and meat. Fresh produce farmers
that supply Woolworths’ organic produce do not use
artificial chemicals such as herbicides and pesticides in
their farming and they have to comply with strict organic
standards (Press release, 8 th February 2008). These
organic products are independently certified to reassure
Woolworths’ customers that their purchases are truly
organic (Press release, 1 st February 2008).
Organic farming benefits the environment by preventing
potentially harmful chemicals such as herbicides and
pesticides from being used and released into the
country’s water supplies (Press release, 8 th February
2008). Woolworths also works with conventional farmers
to assist them in incorporating biological farming
practices on their farms.
Biological farming uses compost and organic fertilisers
instead of the conventional inorganic fertilizers that are
commonly found on conventional farms. This practice
allows farmers to eliminate the use of these potentially
harmful water pollutants from entering the ecosystem
while simultaneously improving the natural fertility of the
soil. In addition, biological farming methods help to
ensure that the customer gets safe produce that is not
contaminated with harmful chemicals such as pesticides,
herbicides and artificial growth enhancers (Press release,
8 th February 2008, Press release, 3 rd November 2009).
According to a statement made in Woolworth’s annual
report (2010: 34), consumer research has shown that
“customers increasingly want to understand where their
products come from, and to be certain that these are
sourced ethically and without harm to the environment.”
In relation to its environmental focus, Woolworths
supports activities that aim to protect South Africa’s
biodiversity and accelerate water, soil, and environmental
conservation. Suppliers who are willing to innovate and
improve their performance in relation to their environmental
impact are supported by Woolworths through
access to a profitable market and reduced risk due to the
suppliers’ association with an established, well
recognised, profitable retailer. Other benefits that accrue
to suppliers include improved processes and enhanced
efficiencies, innovation and a publicly enhanced social
responsibility image, through the Eco- efficiency award
that recognises suppliers who adopt environmentally
sound farming methods (Press release, 29 th September
2008).
According to Woolworths’ public documentation, it has
so far achieved the following in relation to its sustainable
marketing practices:
1. It sources wood which is either recycled or is
independently certified as coming from approved
sustainable sources (Sustainability report, 2008: 7). This
is important in the context of deforestation as mentioned
by Schaefer (2005: 46).
2. Woolworths only sells fish that is independently
certified as coming from sustainable sources
(Sustainability report, 2008: 7). According to a press
release dated 1 st of March 2009, consumers are
becoming more aware of the need to preserve seafood
and they want to make sure that the seafood that they
buy is responsibly and sustainably sourced.
Independent certification is important is this retailer’s
sustainable marketing strategy as it assures consumers

that the products being sold come from truly sustainable
sources. Peattie and Crane (2006: 358) state that many
companies “have become cautious about launching
environmentally based communications campaigns for
fear of being accused of “green washing”.
1. Woolworths works with experts to reduce
wildlife/human conflicts, for example reducing hive raiding
by honey badgers (Sustainability report, 2008: 8) and
introducing predator friendly meats by working with
conservation and farmer groups to avoid the destruction
of natural predators wandering into private farms
(Sustainability report, 2008: 8). This retailer also
facilitates predator friendly farming by offering farmers
workshops that introduce them to this concept and to
Woolworth’s published guidelines titled “Predators on
Livestock Farms: A Practical Manual for Non-Lethal,
Holistic, Ecologically Acceptable Management” (Press
release, 29 th September 2008). In addition, Woolworths
also assists with the introduction of Anatolian Sheepdogs
to livestock farms in order to reduce predator attacks on
both sheep and goats (Sustainability Report, 2008: 8).
2. Woolworths partners with its textile supply chain as
well as governmental and non-governmental
organisations to develop a comprehensive business
model for organic cotton farming in South Africa
(Sustainability report, 2008: 31). It achieves this by
encouraging conventional cotton farmers and farmers
from disadvantaged communities to become organic
cotton producers by providing them with a profitable and
enduring market for their output. In 2008, Woolworths as
the world’s this largest consumer of this product imported
all its organic cotton (Press release 3 rd January, 2008).
By 2009, this retail chain was able to offer its customers a
range of South African grown and manufactured 100%
organic cotton t-shirts in its women’s and menswear
range (Annual Report, 2009: 37).
3. This retailer acknowledges and rewards suppliers who
actively pursue more sustainable marketing strategies in
order to “entrench the principles of sustainable development
in its supply chain.” This retail chain offers an eco
efficiency award to suppliers who have shown significant
progress in (1) reducing their use of natural resources
namely water, energy or raw materials through improved
production methods, (2) decreasing the amount of
pollution in their effluents and (3) developing a
programme that identifies, manages and monitors the
business’ impact on the natural environment (Press
release, 1 st July 2008).
The General Manager of the 2007 winner of the ecoefficiency
award stated that “We are pleased to be
associated with a retailer that supports an environmentally
sustainable enterprise,” while one of the panel
judges stated that Woolworths “was enhancing the value
of their product through their commitment to the
environment.” (Press release, 1 st July, 2008).
Santos 9157
Corporate entrepreneurship within the midstream
sector (finished product channel networks)
Fuller (1999: 52) states that this sector in the product
system life cycle is in the unique position to influence
waste outcomes and eco-costs in all the other sectors
since it interprets the target market’s needs and develops
the appropriate marketing mix to satisfy these needs.
This is particularly true in the Woolworths case since it
encourages the implementation of sustainable marketing
strategies throughout its whole supply chain.
Woolworths participates in corporate entrepreneurship
in this sector by firstly, recognising that global warming
and climate change is an issue requiring urgent and
extensive action on the part of all stakeholders. Secondly,
it recognises that global warming and climate change
poses both risk and opportunities for the business and
thirdly, it participates in global warming mitigation by
setting itself a greenhouse gas emission reduction target
of 30% relative to its April 2007 emissions. The operational
savings achieved in this exercise is reinvested in
exploring additional sustainable business alternatives
(Annual Sustainability Report, 2008: 40).
In order to achieve the foregoing target, Woolworths is
doing the following:
1. It recycles used cooking oil from its in-store cafés to
generate a 5% bio-diesel mix that is used in their Cape
and Gauteng fleet. This activity results in a saving of
1500 tons of CO2 per annum. This retailer also works with
engine manufacturers to design engines that can take a
20% bio-diesel mix (Annual Sustainability Report, 2008:
41).
2. Woolworths introduces new technologies in its food
stores which in 2008 reduced its electrical consumption
by 30% (Annual Sustainability Report, 2008: 41). For
example, in 2009 this retailer piloted a new refrigeration
system which uses carbon dioxide, a naturally occurring
molecule which is a weaker greenhouse gas than the
conventional fluorohydrocarbons, as a refrigerant. This
system also uses less electricity than conventional
systems and it does not contribute to the depletion of the
ozone layer. This new refrigeration system is to be the
standard in all new store installations (Press release, 1 st
November, 2009).
Reducing the amount of electricity that is used by
Woolworths is particularly significant in South Africa since
most of the electricity that is generated comes from the
burning of fossil fuels. These fuels release huge volumes
of carbon dioxide, ash and sulphur into the atmosphere
annually and are responsible for the greenhouse gas
effect associated with global warming (Bond et al., 2007:
11). Similarly the burning of fossil fuels for transportation
purposes also contributes to the accumulation
greenhouse gases in the earth’s lower atmosphere.
Consequently any business that reduces the amount of
electricity and fuel that it consumes is saving both money

9158 Afr. J. Bus. Manage.
and contributing to a mitigation of the greenhouse gas
effect. In order to become more efficient in terms of its
distribution function, Woolworths has increased the
number of distributable units per kilometre travelled and
per litre of diesel consumed (Annual Sustainability
Report, 2008: 41).
3. Woolworths has also built and designed an energy
efficient distribution centre which produced savings of
9370 kilometres of delivery related travel per week
(Annual Sustainability Report, 2008: 41). This centre
located in the Midrand in South Africa, is designed so that
it is able to store and use recycled, grey and rain water.
This is significant in South Africa since this is a dry
country, with an average rainfall of less than 500mm per
annum. Other features that are incorporated in this
distribution centre include the use of evaporative cooling
technologies that enable Woolworths to reduce the
amount of electricity consumed; elevated flood lights that
reduce the amount of luminaries required; and recycled
heat from the refrigeration plant that is distributed to the
under floor heating system.
Corporate entrepreneurship within downstream
sector (consumer target market)
This sector can be regarded as the marketplace and is
concerned with identifying the customer’s needs and
wants in order design, develop and market products that
satisfy the customer’s requirements. An area of particular
significance in this process is product design since this
will determine what the supply chain takes, makes and
wastes. In developing sustainable marketing strategies,
the supply chain needs to be entrepreneurial in order to
discover ways of limiting its impact on the environment.
According to a press release dated the 20 th of October
2009, Woolworths’ customers are concerned about the
well being of the planet and they want to recycle their
waste. To facilitate the recycling process for its
customers, Woolworths has formed a partnership with a
major national petroleum company and major packaging
manufacturer and recycler. The petroleum company in
this partnership provides the recycling facilities at its local
service stations, the major packaging company collects
the recycled packaging material from these stations and it
installs the recycling facilities with the assistance of this
retailer.
The results of a trial conducted at eight petrol stations
in the greater Cape Town area revealed that consumers
actively participated in this exercise and the volumes of
recycled packaging material increased dramatically soon
after the trial commenced. It is anticipated that in the
future, these eight collection sites will give rise to 140
tons of recycled material per annum. According to a
press release dated 24 th of May 2010, a further 50
collection sites will be installed nationally at the petroleum
company’s petrol stations over the next six months.
Consumers in the Western Cape have indicated that they
want to recycle and they are looking for convenient
recycling solutions (Press release, 24 th May, 2010).
Corporate entrepreneurship within concurrent
operations in all sectors (waste, pollution and
reverse waste channel network)
All the sectors in the product system life cycle produce
waste and pollution as a result of their activities. The aim
of this particular aspect of each sector is to reduce the
amount of waste and pollution produced, either by
improving the efficiency of all the operations involved in
each of the sectors; reducing the amount of waste
produced through better design and management; or by
mitigating the pollution and waste by finding a value or
input for this material. For example the cooking oil
previously mentioned is this article is regarded as a
waste product in the food production process but it is
used to manufacture biodiesel that is consumed by
Woolworths’ fleet of trucks. A similar example that has
already been identified in this article is that of recycling
the plastic of obsolete trolleys’ and shopping baskets in
the manufacture of new trolleys and shopping baskets for
Woolworths.
Like Wal-Mart, Woolworths is also focusing its attention
on reducing the amount of packaging associated with its
products and it incorporates recycled material in
packaging. For example in 2009 this retailer saved over
320 tons of packaging in 1400 food lines (Sustainability
Report, 2009: 42) and it had incorporated recycled
packaging material in these same lines. In 2008, the
sleeves of its readymade meals, dips, and other food
products contained 80% recycled paper content
(Sustainability Report, 2008: 36). By providing suppliers
of recycled packaging with a market for its products, this
retailer encourages further investment and research into
innovative ways of utilising recycled packaging material.
Recycling packaging material plays an important role in
protecting the environment since less trees are removed
from forests, less energy is required to produce
packaging materials with recycled content, less landfill
space is utilised and less pollutants enter the planet’s
ecosystems.
MANAGERIAL IMPLICATIONS
The marketing function in business is concerned with
interpreting the target customer’s needs, developing
product concepts in response to those needs and making
them available to the customer through the strategic
application of the marketing mix. Marketing decisions
that are centred on the marketing mix determine the
resources that are taken from the natural environment
and utilised to make and market those products to the

target market. The marketing decisions that are made
also determine the resources/energy that is used and the
waste that is generated and is responsible for the
ecosystem’s degradation and pollution (Fuller, 1999:3).
The challenges that businesses therefore face is to
develop product systems that imitate biological systems
in that they enable eco-systems to be sustainable and/or
they produce waste that is either an input for other
production processes such as recycled packaging or they
are biodegradable for example the corn starch window in
Woolworths’ sandwich pack is compostable and comes
from independently certified sustainable sources
(Sustainability Report, 2008: 36).
In order to monitor and control what the business takes,
makes and wastes in relation to the environment, it needs
to examine all the processes within its supply chain. This
analysis will enable the business to come up with
strategies that will allow it to reduce or eliminate its
negative impact on the environment while meeting its
target market’s needs and still making a profit. A strategy
that Woolworths utilises to become environmentally more
sustainable is the promotion of corporate
entrepreneurship within its supply chain. As was
previously stated, supply chain members who collaborate
and innovate in response to Woolworths’ sustainable
marketing efforts accrue certain benefits such as a
profitable market for their products, reduce risk
associated with the innovation, first mover advantage and
the potential to offer sustainable products to other
customers.
An interesting by-product of Woolworths’ sustainable
marketing practices, as mentioned previously in this
study include cost savings which are invested in new,
improved sustainable marketing options, improved
operational efficiencies, brand differentiation and an
enhanced brand image amongst its stakeholders. This
finding in the context of sustainability and global warming
is interesting since it demonstrates that as businesses
implement more sustainable marketing strategies, they
and their supply chain members to benefit positively from
this activity.
LIMITATIONS OF THE STUDY
This case study focuses on only one of the major South
African retailers and it is based primarily on what is stated
in its 2008, 2009, 2010 and 2011 annual reports and
media portfolio releases. These two data sources were
found to be comprehensive and detailed enough to give a
good indication of what this retail chain has and is doing
in terms of its sustainable marketing activities. There was
personal e-mail communications with this retailer’s
Manager: The Good Business Journey but only when
there was an issue that needed to be clarified. The public
documents provided by this retailer are detailed, explicit
and easily understood.
Santos 9159
RECOMMENDATIONS FOR FUTURE RESEARCH
This study seeks to demonstrate how one of the four
major retailers in South Africa promotes corporate
entrepreneurship within its supply chain by implementing
sustainable marketing strategies. As this retailer appears
to be channel leader, it is able to influence and motivate
members of its supply chain to develop more sustainable
business practices. Further possible research in this area
could be to examine the different relationships and
networks that have developed within the supply chain to
facilitate corporate entrepreneurial development in
relation to sustainable marketing practices. Future
research in this area could also include other industries
within the South African context.
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