ISO 9000 and ISO 14000 Capstone Project

Excerpt from Capstone Project :

09

30.42

Foreign Sales (a)

63

2.69

2.98

0.00

8.43

Size (b)

63

5.50

1.81

0 97

10.03

Table 3

Non-ISO Companies

Variable

N

Mean

SD

Min

Performance

63

2.15

2.52

-8.84

10.59

Profit

63

1.40

10.37

-29.81

15.22

Foreign Sales (a)

63

2.01

3.04

0.00

9.90

Size (b)

63

3.92

1.42

0.94

6.85

Note:

* p < .001

** p < .0001

a =

square root of foreign sales as a percentage of total sales.

b

Natural logarithm of total assets ($ millions).

A direct comparison of the performance indicators for the ISO-companies vs. The non-ISO companies is provided in Figure 1 below.

Figure 1. Comparison of ISO 9000 registered companies and non-ISO 9000 registered companies

Source: Based on data in Simmons and White 330

The results of this data analysis showed that there was a significant difference in the dependent variables for profitability (F = 15.11, P < .0001), but nonsignificant differences for performance (F = .007, P < .93) and foreign sales (F = .51, P < .47) in the ISO and non-ISO companies. The data analysis also showed that ISO registered companies experienced higher average profitability compared to their counterparts in their respective industries that were not registered; however, the data analysis also showed that ISO companies did not experience higher operational performance and foreign sales compared to their non-ISO counterparts (Simmons and White 330). Finally, an ANOVA found a significant size differential between the two groups of companies (F = 29.60, p < .0001), with non-ISO companies being smaller on average than their ISO-registered counterparts in the sample measured (Simmons and White 330). These researchers were quick to point out, though, that there were some limitations to this analytical approach that transcended the ability of their method to accurately model. In this regard, Simmons and White concluded that, "There may be other systematic differences between registered and nonregistered firms that significantly impact these relationships. For example, if companies that are more involved in quality programs in general are more likely to be ISO 9000 registered, then any observed relationships may be due to the general emphasis on quality rather than ISO registration" (Simmons and White 330).

ISO 14000

The International Organization for Standardization reports that the ISO 14000 family is concerned with different aspects of environmental management. The first two ISO 14000 standards, ISO 14001:2004 and ISO 14004:2004, are focused on environmental management systems (EMS) (ISO 14000 essentials 1). According to Hormozi, "An EMS is a system by which managers identify and address environmental problems. An EMS includes several steps: assessing problems, establishing goals, measuring progress, training workers, auditing performance, rewarding or penalizing behavior, and verifying through third party review" (33). Proponents maintain that organizations that have an effective EMS in place are better able manage, measure, and improve the environmental aspects of their operations through efficient compliance with both mandatory and voluntary environmental requirements (Hormozi 33). The ISO 14001:2004 standard set forth the requirements for an EMS and the ISO 14004:2004 standard provides general guidance for EMS. The remaining ISO 14000 standards and guidelines in the family are focused on various aspects of environmental-related practices, such as labeling requirements, performance evaluation, life cycle analysis, communication and auditing (ISO 14000 essentials 1-2). According to Murray, Kelly and Ganzi, "This series of standards is being established by consensus across a broad consortium of governments, businesses, and standardization organizations throughout the world. It is slated to be the first set of standards ever established in consultation with the global manufacturing community" (4). In addition, ISO 14000 is intended to harmonize organization's environmental management systems with their ISO 9000 quality management system (Simmons and White 1999).

The current work structure of the ISO 14000's TC 207 is divided into seven elements as follows:

1. Environmental management systems (EMS);

2. Environmental auditing (EA);

3. Environmental labeling (EL);

4. Environmental performance evaluation (EPE);

5. Life cycle assessment (LCA);

6. Terms and definitions (T&D); and,

7. Environmental aspects in product standards (EAPS) (Hormozi 33).

Basically, there are two platforms to the ISO 14000 series that are regarded as being essential, with the first relating to management and the second relating to products as illustrated in Figure 2 below.

Figure 2. ISO 14000 Series Management Platform

Source: Hormozi 33

The environmental management systems standards established by the ISO 14000 series are designed in such a way that they are applicable and therefore useful for almost any type of industrial producer (Hormozi 33). The ISO 14000 standards are concerned with the following main categories of environmental management processes: (1) establishment of an environmental policy, (2) environmental planning, (3) policy implementation and operation, (4) monitoring and corrective action programs, and (5) management review (Murray et al. 5). The standards also provide a basic framework that industrial producers can use to improve their environmental performance by establishing environmental goals, implementing a plan for achieving such goals, as well as monitoring the effectiveness and requisite corrective actions (Murray et al. 5). Like the ISO 9000 standards, though, registration and compliance with the ISO 14000 is not an inexpensive undertaking, but is slightly less expensive: "This certification is done at facility level. Currently, such certification is estimated to cost about $20,000 per facility" (Prakash 12-13).

An analysis of 96 Taiwanese listed firms in four major manufacturing categories that obtained ISO 14000 certification during the period from 1997 to 1999 was conducted by Lee, Hu and Ko using the data envelopment analysis (DEA) and Wilcoxon signed-rank test. These analytical methods were used to assess the effect of ISO registration and compliance on these organizations' managerial efficiency and financial performance. The results of this study showed that ISO 14000 can be an effective strategy for manufacturing firms to improve their managerial efficiencies and maintain competitiveness. Furthermore, companies can achieve the benefits of IS0 14000 registration and compliance at any point, but the sooner the better (Lee et al. 37).

The operating efficiency and financial performance indices (including profit margin, growth rate of sales volume, sales volume per employee, ROE, and EPS) before and after ISO 14000 certification showed that the sample firms on average have a significant improvement after ISO 14000 certification as well as a significant increase in sales volume per employee after ISO 14000 certification; however, these researchers also found that the sample firm group experienced a significantly lower profit margin and growth rate of sales volume after certification (Lee et al. 3).

Likewise, a study by Nga found that a growing number of companies have jumped on the ISO 14000 bandwagon for many of the same reasons cited for ISO 9000 compliance, including a competitive advantage by virtue of reduced operational costs, the widespread recognition of the ISO standards as well as the public relations that can accrue to environmentally responsible companies. In this regard, Nga points out that, "Extant literature has documented the perception that ISO 14000 certification leads to increased competitive advantage, pre-emption of regulations, increased financial performance, enhanced reputation and reduction of cost of business" (422). The results of the analysis conducted by Nga confirmed that ISO 14000 certification increases the average return of equity; however, such certification was not shown to be significantly related to improved sales and capitalization. The results of the Nga study indicate that there may be a good case for ISO 14000 certification with respect to return on equity, at least in the medium term (Nga 422).

Conclusion

The research showed that ISO 9000 and 14000 relate to quality assurance and environmental issues, respectively, and both of these standards hold special significance for companies competing in the automobile and truck tire manufacturing industry. The research also showed that these are not the only internationally recognized standards available, but they are more widely accepted, particularly among European firms with their adoption being mandatory for some companies. Some authorities suggest that adoption of these ISO standards confers improved perception of companies without adding much to the management mix otherwise, while others emphasize that if implemented and administered properly, these standards can assist companies achieve a competitive advantage through improved performance and profitability. In the final analysis, any company that enhances its focus on quality and environmentally responsible practices will likely gain some degree of competitive advantage, including companies competing in the tire manufacturing industry.

Works Cited

Barnes, Frank C. "ISO 9000 Myth and Reality: A Reasonable Approach to ISO 9000." SAM

Advanced Management Journal 63.2 (1998): 23+. Questia. Web. 22 Feb. 2011.

Bennett, Charlie. 2010. "ISO 9000 Quality Standard Clause 8: Measurement, Analysis and Improvement." Focus Magazine. [online] available: http://focus.ergon.com/iso-9000-

quality-standard-clause-8-measurement-analysis-and-improvement-22010.

Carree, Martin a., and a. Roy Thurik. "The Life Cycle of the U.S. Tire Industry." Southern

Economic Journal 67.2 (2000): 254. Questia. Web. 22 Feb. 2011.

Carver, Robert P. "Toxic Tax Assessments: the AD Valorem Taxation of Contaminated

Property."…

Online Sources Used in Document:

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