COMPANY DEVELOPMENT POTENTIAL AND PERFORMANCE

Brno, May 30 – 31, 2003 Business development and EC

Emil Vacík, Jiří Vacek, Jiří Skalický Department of Management, Innovations and Projects, Faculty of Economics, UWB

vacekj@kip.zcu.czhttp://www.kip.zcu.cz

DEVELOPMENT POTENTIAL

• U-SME Innovation: A model of a university – SME cooperation in innovations, 2001 http://www.kip.zcu.cz/USME

• Leonardo da Vinci programme – CZ, UK, F

DP COMPONENTS

• Strategy and planning;

• Marketing;

• Technological process;

• Quality, environment;

• Logistics (purchasing, distribution, outsourcing);

• Organization and human resources.

Innovation potential assessment

1,0

2,0

3,0

4,0Strategy

Marketing

Technology

Quality

Logistics

People

ABCDEF

C, AB, B, A Classes

• C - not ready to implement development activities

• AB - ready to changes necessary for improving performance, must consistently improve basic processes

• B - in principle prepared to undergo a certification process

• A highly competitive, high performers

FIELD RESEARCH

• Faculty of Management of Tomáš Baťa University in Zlín, 2-nd quarter 2002 – 13 - rubber and plastics;– 20 - machinery;– 12 – steel and steel product;– 5 – mechanical engineering..

• 5 companies from Pilsen region • 9 AB, 27 B, 14 A, none C

STATISTICAL ANALYSIS

• Marketing component achieved the lowest values

• Rubber and plastics has the lowest average value of IS and human resources component

• Steel industry is better than average in Marketing and Logistics, below average in Strategy and planning

Cluster analysis

Regression Analysis DP = - 0,0037

+ 0,1809 * Quality and environment

+ 0,1683 * Logistics

+ 0,1938 * Marketing

+ 0,1488 * IS and human resources

+ 0,1775 * Strategy and planning

+ 0,1305 * Production processes and technology

DP and Financial Performance

Correlation analysis:

• value of the development potential influences the financial performance of a company

• financial performance of a company positively influences the value of its development potential

Correlations

• On 95% reliability level between the following coefficients:– ROE and all forms of DP – ROE and ROS– ROE and ROCE– ROA and ROS– ROA and ROCE– ROS and ROCE

CONCLUSIONS

• DP factors can be influenced by the company owners and managers.

• DP has demonstrable effect on the financial performance and correlate with value creation.

• The relevancy of development potential components was demonstrated by statistical methods.

Marketing

• most sensitive factor

• its values in our sample were the lowest

• companies generally have lack of information about customers behaviour

• And this influences management decision making in critical situations involving high risk.

Production processes and technologies

• component achieves the highest values• for industries in our sample this component is

always important• provides the best one-component estimate of DP

and its correlation with ROE is the strongest• leading position in technology and high quality

products - attractive for top employees, satisfy their customers.

Strategy and planning

• significantly influences classification of companies according to their DP

• its explaining power is low

• dependence between the performance measurement and the strategy is rather weak.

Recommendations

• two-sided correlation between DP and financial performance supports efficient implementation of company goals and objectives

• DP together with selected financial indicators can be a valuable tool in evaluation of company owners ambitions and expectations

THANK YOU FOR YOUR ATTENTION