Service Portfolio Structure & Firm Performance: A

Study on Selected Listed Hotels in Sri LankaPresented by:

N. Ludsana & R.NirujahDepartment of Accounting

Faculty of Management Studies and CommerceUniversity of Jaffna

heldon

21st November, 2014

at

International Student Conference in Business Faculty of Commerce and Management Studies

University of KelaniyaSri Lanka.

Outline of the Presentation

Introduction Statement of the Problem Research Question Objectives Literature Review Conceptualization Operationalization Hypothesis Development Research Methodology Data Analysis and Findings Hypothesis Testing Conclusion Recommendations

INTRODUCTION

• The service sector has become one of the extremely competitive powerful sectors in the world today.

• Service portfolio structure is the combination of various services that provide to meet required business outcomes at an appropriate level of investment.

• The hotels sector plays a vital role to attract the tourist from the foreign countries to the nation.

• In order to provide various services to the economic development hotel should concern various services such as accommodation, food, bar and other operating services.

STATEMENT OF THE PROBLEM• Portfolio, product portfolio, portfolio management

concepts has been tested in many occasions in developed markets & developing markets world widely. However only few studies were conducted on concept of service portfolio structure.

• The hotel sector is vital unit of service sector that provide various services to the economic development of the nation

• Therefore, the need for further research on the service portfolio structure has become very imperative in relation to hotel sector.

• Thus, this study is going to examine the service portfolio structure and firm performance of hotels sector of the Colombo Stock Exchange (CSE) Sri Lanka.

RESEARCH QUESTION

Specifically, this study was undertaken to explore the answers to the following research question:

• RQ 1- What extent the service portfolio structure impact on firm performance?

• RQ 2- What are the service portfolio structures for hotels of Sri Lanka?

• RQ 3- Are there any relationship between the service portfolio structure and firm performance?

OBJECTIVES

• The main objective of the study is to examine the impact of service portfolio structure on firm performance of listed hotels in Sri Lanka.

• To achieve above objective the following sub objectives have enclosed: To identify the service portfolio structure of hotels in

Sri Lanka To identify the relationship between the service

portfolio structure and firm performanceTo suggest hotel sector to maximize return through

service portfolio structure

REVIEW OF LITERATUREAuthor(s) Discussion(s)/ Finding(s)

Nobel Laureate Markowitz (1952)

Introduced the concept of portfolio, he proved that diversification of an investment portfolio is preferable to a homogenous portfolio based on the scope risk and return

Nayyar (1993) By service portfolio structure a firm can more effectively use its underutilized resources and capabilities and thereby advantage from scope economies

Nooteboom (1999) The portfolio of a firm can establish the benefits it gains in terms of enhanced innovation and financial performance

Vijayalakshimi and Padmaja (2013)

The more a firm's service portfolio is diversified, the more complex will be the management and coordination of these resources and, in turn, the higher the risk of inefficiencies. Past a certain level, diversification seems to source performance problems

Conceptual Model

INCOME FROM FOOD

·INCOME FROM ACCOMENDATION

·INCOME FROM OTHER SERVICE

SERVICE PORTFOLIO STRUCTURE

RETURN ON CAPITAL

EMPLOYED

FIRM

PER

FORM

ANCE

RETURN ON ASSETS

OperationalizationConcept Variables Indicators Measurement

Service portfoliostructure

Income from food Rupees earn from food

Derived from financial

statements as rupees

Income from accommodation

Rupees earn from accommodation

Other operating services

Rupees earn from Other operating services

Firm performanceReturn on Assets How profitable a

company is relative to its total assets

Net Income/ Total Assets

Return on Capital Employed

company's profitability with its capital employed

Operating Profit/ Capital Employed

HYPOTHESES• The following hypotheses are developed based on the

objectives and literature for the purpose of the study.

• H1: Service portfolio structure has an impact on firm performance.

• H2: Service portfolio structure and firm performance are significantly correlated.

METHODOLOGY

Scope: The scope of the study was listed hotels on Colombo Stock Exchange (CSE), Sri Lanka. Out of 40 companies of this sector, only fifteen Companies were selected as per the purposive sampling technique

Data source: This study was based on the secondary data.

Period of Study: The study covered five years time period from 2009 to 2013.

Cont…

Variablesi. Dependent Variable : firm performanceii. Independent Variable: service portfolio structure

Mode of analysis Descriptive statistics were used to describe and summarize

the behavior of the variables used in the study. In order to test the research hypotheses; the inferential tests used including the Correlation Analysis and regression analysis.

Data Analysis and Findings

N Minimum Maximum Mean Std. Dev

Income from Accommodation

15 3914675 1045512000 299842692 280609381

Income from Food 15 1767097 1102354 24547303 29870098

Income from other services

15 593017 121537 3805158 36287006

Return on Assets 15 -.11 .09 .0168 .04781

Return on capital Employed

15 -23.81 .13 -1.5654 6.15527

Table 1. Descriptive statistics

Income from Accommodati

on

Income from Food

Income from other

services

Model-1 ROA Pearson Correlation

-.660** -.762** -.632*

Sig. (2-tailed) .007 .001 .011

Model-2 ROCE Pearson Correlation

-.737** -.797** -.640*

Sig. (2-tailed) .002 .000 .010

Table 2.Pearson’s Correlation(r) Matrix

Model-1 ROA Model-2 ROCE

Multiple R 0.8130.813

R Square 0.660 .661

Adjusted R Square 0.568 .569

Standard Error 0.03143 4.04241

Table 3. Statistics of regression

Independent variable

Model 1: ROA Model 2: ROCE

Unstd. Coeff.

Β t Sig.

Unstd. Coeff.

β t Sig.

βStd.

errorβ

Std.error

constant.047 .013 3.714 0.003 2.843 1.626 1.748 0.

Income from Accommodation

1.197 .000 0.703 1.306 0.218 5.117 .000 0.233 0.4340.67

3

Income from Food

-1.746 .000 -1.091 -2.507 0.029 -1.701 .000 -0.825 -1.899 0.84

Income from other services

-6.120 .000 -0.465 -1.546 0.150 -4.653 .000 -0.274 -0.914 .380

Table 4. Coefficients

NO Hypotheses Tools Result

H1

Service portfolio structure has an impact on firm performance.

Regression Rejected

H2

Service portfolio structure and firm performance are significantly correlated.

Correlation Accepted

Table 5. Hypotheses testing

CONCLUSION• Negative relationship was observed between income from

accommodation, food and ROCE, ROA all of these relationships were to be significant at 0.01 levels.

• Likely income from other operating service and ROA, ROCE also negatively related but insignificant at 0.01 levels.

• Therefore, the overall result revealed that there were negative significant relationship between service portfolio structure and firm performance of Sri Lankan listed hotels. However, there are no significant impacts between variables.

• It may be inappropriate mix of portfolio structure. Furthermore, hotels performance indicates negative value in financial year of last 5 years. Therefore, firm must consider the structure of the portfolio to boost performance.

RECOMMENDATION• The following suggestions are recommended to increase the firm

performance based on service portfolio structure.

• Firms should consider more diversify their service portfolio with the profitable service to enhance the performance to survive in the competitive environment by enlarging its service portfolio structure a firm can more effectively use its underutilized resources and capabilities (Nayyar 1993).

• Firm must review their portfolio structure to find out the right mixture for the firm based on their capabilities because,The resource-based view argues that to be successful, firms must have the appropriate resources for service portfolio expansion (Sirmon et al. 2007).

• Managers paid their attension in resource allocation among the portfolio. Firm valuable resources must be managed efficiently through appropriate portfolio to boost firm performances (Barney, Arikan 2001; Dhaoui 2008; Sirmon et al. 2007).

Thank you for your time and

Co-operation