Journal of Marketing Development and Competitivenessm.€¦ · The Journal of Marketing Development...

Journal of Marketing Development and Competitiveness

North American Business Press Atlanta – Seattle – South Florida - Toronto

Journal of Marketing Development and Competitiveness

Dr. Michael Berry, Editor Dr. David Smith, Editor-In-Chief

NABP EDITORIAL ADVISORY BOARD

Dr. Andy Bertsch - MINOT STATE UNIVERSITY Dr. Jacob Bikker - UTRECHT UNIVERSITY, NETHERLANDS Dr. Bill Bommer - CALIFORNIA STATE UNIVERSITY, FRESNO Dr. Michael Bond - UNIVERSITY OF ARIZONA Dr. Charles Butler - COLORADO STATE UNIVERSITY Dr. Jon Carrick - STETSON UNIVERSITY Dr. Mondher Cherif - REIMS, FRANCE Dr. Daniel Condon - DOMINICAN UNIVERSITY, CHICAGO Dr. Bahram Dadgostar - LAKEHEAD UNIVERSITY, CANADA Dr. Deborah Erdos-Knapp - KENT STATE UNIVERSITY Dr. Bruce Forster - UNIVERSITY OF NEBRASKA, KEARNEY Dr. Nancy Furlow - MARYMOUNT UNIVERSITY Dr. Mark Gershon - TEMPLE UNIVERSITY Dr. Philippe Gregoire - UNIVERSITY OF LAVAL, CANADA Dr. Donald Grunewald - IONA COLLEGE Dr. Samanthala Hettihewa - UNIVERSITY OF BALLARAT, AUSTRALIA Dr. Russell Kashian - UNIVERSITY OF WISCONSIN, WHITEWATER Dr. Jeffrey Kennedy - PALM BEACH ATLANTIC UNIVERSITY Dr. Jerry Knutson - AG EDWARDS Dr. Dean Koutramanis - UNIVERSITY OF TAMPA Dr. Malek Lashgari - UNIVERSITY OF HARTFORD Dr. Priscilla Liang - CALIFORNIA STATE UNIVERSITY, CHANNEL ISLANDS Dr. Tony Matias - MATIAS AND ASSOCIATES Dr. Patti Meglich - UNIVERSITY OF NEBRASKA, OMAHA Dr. Robert Metts - UNIVERSITY OF NEVADA, RENO Dr. Adil Mouhammed - UNIVERSITY OF ILLINOIS, SPRINGFIELD Dr. Roy Pearson - COLLEGE OF WILLIAM AND MARY Dr. Sergiy Rakhmayil - RYERSON UNIVERSITY, CANADA Dr. Robert Scherer - CLEVELAND STATE UNIVERSITY Dr. Ira Sohn - MONTCLAIR STATE UNIVERSITY Dr. Reginal Sheppard - UNIVERSITY OF NEW BRUNSWICK, CANADA Dr. Carlos Spaht - LOUISIANA STATE UNIVERSITY, SHREVEPORT Dr. Ken Thorpe - EMORY UNIVERSITY Dr. Robert Tian - MEDIALLE COLLEGE Dr. Calin Valsan - BISHOP'S UNIVERSITY, CANADA Dr. Anne Walsh - LA SALLE UNIVERSITY Dr. Thomas Verney - SHIPPENSBURG STATE UNIVERSITY Dr. Christopher Wright - UNIVERSITY OF ADELAIDE, AUSTRALIA

Volume 7(1) ISSN 2155-2843 Authors have granted copyright consent to allow that copies of their article may be made for personal or internal use. This does not extend to other kinds of copying, such as copying for general distribution, for advertising or promotional purposes, for creating new collective works, or for resale. Any consent for republication, other than noted, must be granted through the publisher:

North American Business Press, Inc. Atlanta - Seattle – South Florida - Toronto ©Journal of Marketing Development and Competitiveness 2013 For submission, subscription or copyright information, contact the editor at: [email protected] Subscription Price: US$ 330/yr Our journals are indexed by UMI-Proquest-ABI Inform, EBSCOhost, GoogleScholar, and listed with Cabell's Directory, Ulrich's Listing of Periodicals, Bowkers Publishing Resources, the Library of Congress, the National Library of Canada. Our journals have been accepted through precedent as scholarly research outlets by the following business school accrediting bodies: AACSB, ACBSP, & IACBE.

This Issue

Adoption of Social Media by Fast-Growing Companies: Innovation Among the Inc. 500 ................ 11 Nora Ganim Barnes, Stephanie Jacobsen This study examines familiarity, usage, and attitudes towards social media among the fastest growing small businesses in the US as represented by the Inc. 500. The results show that these innovators are increasingly making use of social media tools to communicate with their customers, partners and vendors. The latest data in a 4-year longitudinal study shows changes in which tools are used and how marketing managers view the role of social media in their strategic plans. Business Model Mapping: A New Tool to Encourage Entrepreneurial Activity and Accelerate New Venture Creation ..................................................................................... 18 John Leschke This paper describes business modeling—a simple, yet powerful, approach to model and evaluate alternative business opportunities. A compelling argument can be made that employing this approach can accelerate the concept development and assessment process and increase the quality of business propositions carried forward to the business planning stage. Moreover, business modeling is broadly applicable, being relevant to entrepreneurs, investors, business advisors and non-profit organizations, as well as existing firms considering new lines of business. The Challenges of Obtaining a Competitive Advantage for Processed Material Suppliers: A Conceptual Study ................................................................................................ 27 Harash J. Sachdev, Cipto Y. Joegiono Processed raw materials suppliers face challenges to improve their razor thin margins and survive in a market place, where their buyers are pushing them to the edge by placing constant cost reduction demands and threats of replacement with substitution products. Using the steel, aluminum, and composite material industries as examples, this paper integrates the mental models of Quality Functional Deployment, Industry Five Forces, and Resource Based View to analyze these three processed materials and provide implications for such suppliers. Investigating National Football League (NFL) Fan Loyalty ................................................................. 42 Craig A. Martin The present study attempts to determine if a consumer’s consumption motivation and customer commitment influence the loyalty the consumer exhibits toward his or her favorite National Football League (NFL) Team. The present study utilizes survey responses from 302 NFL fans. A path model analysis using Amos 17 was performed to assess the hypothesized relationships. The results indicate that increasing an NFL fan’s social motivation to consume increases the fan’s customer commitment, and increasing an NFL fan’s customer commitment increases the fan’s attitudinal loyalty. Additionally, the results indicate that an NFL fan’s customer commitment influences his or her behavioral loyalty.

The Challenge of Online Privacy to Global Marketers ......................................................................... 54 Héctor R. Lozada, Susan O’Sullivan-Gavin, Gary H. Kritz, Alma Mintu-Wimsatt Over the past year the debate on the challenges that online privacy pose to global marketers has intensified. As a result, there is a push in the U.S. and the European Union to protect consumer online privacy and this push is being countered by a move by online advertisers and marketers to self-regulate. In this article, the authors outline tactics that marketers pursue that have come under serious scrutiny over the past two years. Also addressed are legal and voluntary measures that are being considered, and recent infractions that are cause for concern. The article concludes by addressing areas that remain unclear regarding privacy protection and consumer trust. An Examination of How Entrepreneurs in Hong Kong Perceive Personal Success Through Business Activities ....................................................................................................... 63 Perry Ho, Lisa Barnes Hong Kong is a world leader in developing its economy and entrepreneurs have a unique status. This research evaluates various components of the perception of success of these entrepreneurs and draws conclusions that will benefit the educators, the legislators as well as the new entrants wishing to become entrepreneurs. Leadership in the East has connotations of deep respect for all sections of the society and based on Confucian principles of kindness and contributions quite different from that of the West. The Hong Kong entrepreneur succeeds when they are able to blend the best qualities of the East and the West. Social Media – A Moving Target ............................................................................................................. 73 Linda Jane Coleman, Kathryn Chandler, Jian Gu Today’s customers are engaging with brands at many different levels-from traditional storefronts and call centers to the Internet and social media. Currently, social media is a top priority in thought and action for many businesses. Thriving companies are incorporating social media into their marketing strategies to meet business objectives. This exploratory review of the literature provides an overview of social media’s history, user demographics, and present use in the business world. Reducing Channel Conflict ...................................................................................................................... 78 M. Kelly Cunningham Conflict is common throughout the distribution channel of marketing. It exists among manufacturers, distributors and retailers. Much of the conflict is created among the members but it is also exacerbated by conflict that exists among those selling to the channel. Specifically, this includes key functional groups such as sales, marketing and supply chain. The lack of communication, trust and confidence within these key groups make it even more difficult to work with the external channel of distribution and creates even more conflict. This paper will address this conflict and develop a series of solutions to improve the buyer/seller relationship.

Using One-Minute Video Résumés as a Screening Tool for Sales Applicants ..................................... 84 Katie J. Kemp, L. Michelle Bobbitt, Michelle Bednarz Beauchamp, Elizabeth Ann Peyton This paper introduces video résumés as sales applicants’ initial introduction to recruiters and sales managers. Results of two studies reveal that recruiters who viewed one-minute video résumés prior to meeting sales applicants had more favorable perceptions of video résumés than those who did not view video résumés. One-minute video résumés were more effective in conveying the candidate’s communication skills, energy level, and potential benefit to the company. Respondents consider video résumés a time saving tool and would be more likely to open the traditional résumé and to contact a candidate for an interview if impressed by the video résumé. Which Employees’ Values Matter Most in the Creation of Employer Branding? ............................. 93 Mukesh Biswas, Damodar Suar The study explores if there are any statistically significant employees’ values that affects the employer branding, and if any, which affects the most. Based on the grounded theory, this study critically assesses multiple cases of employees’ values of branding process in a manufacturing company. The five aspects of personal values of employees were surveyed on a sample of 413 employees, of which 244 were current employees of the surveyed company and 169 were potential employees that applied to the company. Results revealed that employees’ social, interest, developmental and economic values, in order of priority, are affecting the employer brand. Training Service Market in China: A Comparative Case Study ........................................................ 103 Li Wei Along with China’s reform and opening, various sectors of Chinese society have witnessed tremendous developments, as reflected in the evolvement of the educational training market. However, it is clear to see that the success of similar cases depends largely on the cultural and spiritual elements of the businesses. Successful organizations largely benefit from a positive and respectable corporate culture initiated and strictly followed by their founders. There is a hope for China’s future educational training market to benefit from a combination of a positive and respectable culture with a well-established organizational structure inherited from the traditions.

GUIDELINES FOR SUBMISSION

Journal of Marketing Development and Competitiveness (JMDC)

Domain Statement The Journal of Marketing Development and Competitiveness is a double blind peer reviewed journal that publishes thought-provoking, in-depth articles that cover the marketing arena and the interface between marketing and firm competitiveness. Articles in JMDC bridge the gap between theory and application. The journal is widely circulated with a diverse readership that includes practitioners and academics, profit and nonprofit organizations, and government institutions. Although the focus is on traditional marketing mix topics, it also draws on other disciplines including entrepreneurship, management, economics, and finance as well as any marketing issue in an international context. JMDC is committed to publishing a broad spectrum of conceptual and empirical articles that make a new theoretical and/or substantive contribution to the field. The target acceptance bounds of JMDC run between 13% and 19%. All articles go through a double blind review process, and acceptance decisions are made within forty-five days of submission. Authors of unaccepted papers are free to submit their papers to another journal. Submission Format Articles should be submitted following the American Psychological Association format. Articles should not be more than 30 double-spaced, typed pages in length including all figures, graphs, references, and appendices. Submit two hard copies of manuscript along with a disk typed in MS-Word. Make main sections and subsections easily identifiable by inserting appropriate headings and sub-headings. Type all first-level headings flush with the left margin, bold and capitalized. Second-level headings are also typed flush with the left margin but should only be bold. Third-level headings, if any, should also be flush with the left margin and italicized. Include a title page with manuscript which includes the full names, affiliations, address, phone, fax, and e-mail addresses of all authors and identifies one person as the Primary Contact. Put the submission date on the bottom of the title page. On a separate sheet, include the title and an abstract of 100 words or less. Do not include authors’ names on this sheet. A final page, “About the Authors,” should include a brief biographical sketch of 100 words or less on each author. Include current place of employment and degrees held. References must be written in APA style. It is the responsibility of the author(s) to ensure that the paper is thoroughly and accurately reviewed for spelling, grammar and referencing.

Review Procedure Authors will receive an acknowledgement by e-mail including a reference number shortly after receipt of the manuscript. All manuscripts within the general domain of the journal will be sent for at least two reviews, using a double blind format, from members of our Editorial Board or their designated reviewers. In the majority of cases, authors will be notified within 45 days of the result of the review. If reviewers recommend changes, authors will receive a copy of the reviews and a timetable for submitting revisions. Papers and disks will not be returned to authors. Accepted Manuscripts When a manuscript is accepted for publication, author(s) must provide format-ready copy of the manuscripts including all graphs, charts, and tables. Specific formatting instructions will be provided to accepted authors along with copyright information. Each author will receive two copies of the issue in which his or her article is published without charge. All articles printed by JMDC are copyrighted by the Journal. Permission requests for reprints should be addressed to the Editor. Questions and submissions should be addressed to:

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Adoption of Social Media by Fast-Growing Companies: Innovation Among the Inc. 500

Nora Ganim Barnes

University of Massachusetts Dartmouth

Stephanie Jacobsen University of Massachusetts Dartmouth

This study examines familiarity, usage, and attitudes towards social media among the fastest growing small businesses in the US as represented by the Inc. 500. The results show that these innovators are increasingly making use of social media tools to communicate with their customers, partners and vendors. The latest data in a 4-year longitudinal study shows changes in which tools are used and how marketing managers view the role of social media in their strategic plans. INTRODUCTION

Rogers’ theory of diffusion states that the level of perceived “newness” of a trend or product

determines the reaction to it. If the idea seems new to the individual, it is an “innovation” (Rogers, 1960). Since Rogers’ Diffusion of Innovation was released, many other diffusion and adoption of innovation theories have been developed. Just as Rogers’ original theory was based on the individual, others focused on organizational adoption. According to Damanpour and Gopalakrishnan (1998), the adoption of an innovation means improved effectiveness or performance of the adopting organization, emphasizing that the environment has a great influence on the decision-making process of the adoption of an innovation. Ozanne and Churchill (1971) argue that the organizational adoption process is a decision process that eventually leads through the purchase to the implementation of an innovation. With respect to organizational adoption, two main stages may be distinguished: initiation and implementation. The adoption decision occurs between the initiation and the implementation stage (e.g., Zaltman et al.,1973).

Rogers later expanded his theory in 1995 and presented us with 4 additional adoption/diffusion theories, adding a macro-level focus to now include institution and systematic change initiatives (Carr, 1999). Perceived Attributes theory discusses the 5 attributes upon which an innovation is judged: trialability, observability, relative advantage, complexity, and compatibility. The Inc 500 have chosen to utilize specific social media tools based on these attributes.

Many view technology as challenging, and overly complex to first learn and comprehend. This is why IT departments came into existence. Social media is a form of communication whose sole purpose is to provide open communication between individuals, companies, consumers and everyone in between. Therefore, it has to be easy to use and the set-up or creation of a blog, facebook page or twitter account has remained straightforward and fast.

Journal of Marketing Development and Competitiveness vol. 7(1) 2013 11

The trialability of an innovation refers to a user’s ability to “try it out” (Rogers). In regards to social media, organizations can experiment with these tools without allotting a significant amount of time, money, or staff to this purpose. The necessary hardware is already available (computers, internet etc.) and many companies are incorporating the management of these tools into the job description of their marketing or public relations employees.

The compatibility of these new tools has shown to be a strong determinant in its adoption. It can be easily added to an organizations existing marketing strategies. Due to the fact that staff and equipment are already in place to handle these tools, social media is compatible with any workplace regardless of location, size or purpose. Social media also offers companies a relative advantage. Various studies have found that the perceived relative advantage of an innovation, defined as the degree to which an innovation is perceived as being better than the idea it supersedes (Rogers, 1983, p. 213), is one of the best predictors of the rate of adoption of innovations (see Tornatzky and Klein, 1982; Rogers, 1983; Onkvisit and Shaw, 1989; Robinson, 1990). Using these new communications tools allows organizations to reach their audience faster and more frequently than ever before. The dialog that is created is more honest and open, leading to more relevant feedback.

After attempting to first utilize these tools, many companies have added social media to their branding package, and yet, since the Internet emerged as a viable medium, how these organizations can effectively earn money from these communication tools has remained prominent (Picard). This is where observability becomes important. These companies are able to monitor outcomes. They do this by interpreting the number of fans or followers they have, or the numbers of hits and comments they receive. The level of interaction and the number of people interacting with you, through your social media channels is not only easy to measure, but also a strong indicator of success.

This study proves, for the first time that the Inc 500 are no longer adopting, but adapting. These companies are taking advantage of new tools not by increasing general usage, but by making more calculated decisions. They are now able to see success in using specific tools, and no purpose in others. Innovation research has shown that there can be a “reinvention” (Larson & Argarwalla-Rogers, 1977) of innovations during implementation. The end user can now modify the innovation in order to actually satisfy an organizations current need (Rice & Rogers 1980). While this may be risky, and is not guaranteed to be successful, the Inc. 500 have reinvented the way they use social media, and the data shows that they are more satisfied and confident in their utilization of these tools now than ever before (Lewis & Seibold). METHODOLOGY

The University of Massachusetts Center for Marketing Research has conducted a series of surveys on

the usage of Internet tools by fast-growing US corporations reported in the Inc. 500 rankings (Barnes and Lescault 2011). The Inc. magazine compiles these rankings annually and independently.

The sample covers four years, namely 2006, 2007, 2009 and 2010, making this a valuable and rare study on the trends in corporate adoption of these new technologies. (Most graphs contain only the last two years of data for visual clarity, but all past data is referenced in the text.).

The marketing executives at the Inc. 500 companies were interviewed by phone using a structured questionnaire. The response rates fluctuated between 24 percent and 42 percent across years, with a mean of 32%. The survey was run shortly after the publication of the list. The sampling error over the four years of data collection ranges from five percent to seven percent.

In 2010, changes in the industry composition of the Inc. 500 were reflected in our sample and impacted our statistics in ways we did not anticipate. An increase in companies providing Government Services (a result of some of the Obama initiatives) and those in the Financial Services Industry on the 2010 list has affected the overall statistic on adoption of social media for the Inc. 500, as these companies are less likely to use social media tools.

12 Journal of Marketing Development and Competitiveness vol. 7(1) 2013

The 171 companies who responded to the latest iteration in 2010 were asked the same detailed questions concerning their usage and measurement of social media that were asked of the Inc. 500 in earlier years with minor exceptions. The original 2007 questions probed the familiarity of respondents with six prominent social media tools (blogging, podcasting, online video, social networking, message boards and wikis). Changes over the years include dropping wikis (used more as a collaboration tool than a communications/engagement tool) and changing the social networking category into more specific platforms including Twitter, Facebook, MySpace, LinkedIn and Foursquare.

In addition to questions about current usage, the responding marketing executives were asked about their intention to adopt the social media technologies they were not currently using and about their perceived level of success with tools they were using now. The research question concerning the importance of social media to each responding company’s marketing strategy was also repeated in this year in order to gain important trend data. FINDINGS

Respondents were asked to rank their familiarity with each technology from "very familiar" to "very

unfamiliar." The social media that has been most familiar to the Inc. 500 in all previous studies is social networking. This trend continues with Twitter and Facebook leading as the tools marketing executives are most familiar with. It is interesting to note that platforms that are relatively new have already garnered significant attention. The bottom line is that the Inc. 500 continues to learn about social media at a very quick pace (see graph 1).

GRAPH 1 FAMILIARITY WITH SOCIAL MEDIA TOOLS

While familiarity is generally related to adoption, there are platforms where that does not apply. Forty-four percent of executives surveyed are familiar with MySpace, but only 6% report using it. This pattern continues with 19% being familiar with Foursquare but only 5% using it and podcasting with 36% familiar but 16% using the tool.

The addition of Twitter (considered by respondents as both a micro blogging site and a social networking site) in the latest study shows that 59% of the Inc. 500 are using this tool for their business (71% are familiar with it). Overall, 83% of the Inc. 500 report using at least one of the social media tools studied in 2010. (See graph 2).

2009, Blogging, 67%

2009, Message/Bulletin Boards, 38%

2009, Online Video, 43%

2009, Podcasting, 37%

2009, Twitter, 62%

2010, Blogging, 61%

2010, Message/Bulletin Boards, 43%



2010, Facebook, 87%

2010, Twitter, 71%

2010, MySpace, 44%

2010, Foursquare, 19%

How familiar are you with the following social media? (% Very Familiar)

2009 2010


GRAPH 2 SOCIAL MEDIA TOOLS CURRENTLY IN USE

The companies in the Inc. 500 continue to use corporate blogging more than the companies on the Fortune 500 list. From 2009 to 2010 blogging increased 1% among the Fortune 500 to 23%, while the Inc. 500 increased their adoption of blogging by 5% (to 50%). Blogging is now considered a mature tool in the social media arena. We might expect slower growth than that which we documented in 2007 or 2008. The Fortune 500 however, has never embraced this tool to the extent the Inc. 500 did. Blogging may have topped out in the Fortune 500, while the 5% increase in adoption among the Inc. 500 appears to show a continued interest in adopting this tool. (See graph 3)

GRAPH 3 GROWTH IN BLOGGING

When the 2010 Inc. 500 was asked if they plan to adopt any of the social media technologies that they are not currently using, they affirmed their intent to continue immersing themselves in these tools. In virtually every instance where the tool has been examined over time, responses are fairly consistent. Since 2007, approximately 40-44% percent of those without corporate blogs intended to have one. Twenty-seven percent who did not have a business presence on Twitter in 2009, planned to move into that space. Even though the use of online video appears to have dropped slightly, the intent to adopt appears strong. Only MySpace garnered very little interest for these companies.

2009, Blogging, 45%

2009, Message/ Bulletin Boards, 28%



2009, Facebook, 61%

2009, Twitter, 52%

2009, Do Not Use Any, 9%

2010, Blogging, 50%

2010, Message/ Bulletin Boards, 33%



2010, Facebook, 71%

2010, Twitter, 59%

2010, MySpace, 6% 2010, Foursquare, 5%

2010, Do Not Use Any, 18%

Which of the following types of social media does your company currently use?

2009 2010

Series1, Inc. 500, 45%

Series1, Fortune 500, 22%

Series2, Inc. 500, 50%

Series2, Fortune 500, 23%

Growth in Blogging Among Inc.500 vs Fortune 500 2009-2010


When asked if the use of social media has been successful for their business, the overwhelming response is that it has. Last year Twitter users reported an 82% success rate while every other tool studied also enjoyed high success levels. The lowest success rate in 2009 was reported with Facebook. Fifty-four percent characterized their use of Facebook as successful. This year, that jumped to 84%. Perceptions of success with Twitter remained virtually the same as last year. Most interesting is that only 5% of businesses are now using Foursquare and 6% use MySpace but of those using these tools, 36% say MySpace is successful for them and a whopping 75% see Foursquare as a successful tool.

Not only is this widespread adoption being driven by strong familiarity but also from the recognized critical role of social media to a company's future success in today’s online world. When queried on the importance of social media, 26% of respondents in 2007 felt that social media was "very important" to their business and marketing strategy. That figure rose to 44% in approximately one year. It remained virtually the same in 2009, but jumped to 56% in 2010. It is clear that these fast-growing companies considers the use of social media to be a central part of their strategic plan (see graph 4).

GRAPH 4 IMPORTANCE OF TOOLS

Last year was the first time in this series of studies on the Inc. 500 that executives were asked if their company uses social media tools to communicate with other companies like vendors, suppliers or partners. They did report using social networking along with blogging to communicate with vendors and partners. This year, thirty-one percent report using Facebook for B2B communications. Twitter is now being used by 27% (up from 26% in 2009) for this purpose. It is interesting to note that 1 in 3 consider Facebook and 1 in 4 of these companies consider Twitter appropriate vehicles for B2B communications. This could signal an important change in the popular conception of both platforms and how they are being used. Blogging appears to be growing as a means of communication with vendors, suppliers and partners. In 2009, 18% used blogs for this purpose, while 22% are using them now. IMPLICATIONS AND CONCLUSION Social Networking Continues to Lead the Way

The platform most familiar to the 2010 Inc. 500 is Facebook with 87% of respondents claiming to be “very familiar” with it. Another noteworthy statistic is the 71% percent (up from 62% in 2009) of respondents stating they were “very familiar” with Twitter, the relatively new micro blogging and social

2009, Very Important, 43%

2009, Somewhat Important, 36%

2009, Somewhat Unimportant, 17%

2009, Very Unimportant, 4% 2009, No Response,

1%

2010, Very Important, 56%

2010, Somewhat Important, 30%

2010, Somewhat Unimportant, 9%

2010, Very Unimportant, 4% 2010, No Response,

1%

How important do you think these kinds of social media technologies are for your business/marketing strategy?

2009 2010


networking site. Forty-four percent say Facebook is the single most effective social networking platform they use. Blogging Remains an Important Tool for the Inc. 500

Fifty percent of the 2010 Inc. 500 has a corporate blog, up from 45% in 2009 and 39% in 2008. Beyond the actual adoption of this tool, there is clear evidence that companies are using blogs effectively. There is a strong propensity to engage consumers through accepting and replying to comments and providing a vehicle for subscriptions. Thirty-four percent have developed policies to govern blogging by their employees. (Approximately 20% of the Fortune 500 has such policies.) New Communications Tools are Changing the Way Successful Businesses Operate

Forty-three percent of the 2009 Inc. 500 reported social media was “very important” to their business/marketing strategy. That number jumps to 56% in 2010. In addition, 57% report using search engines and social networking sites to recruit and evaluate potential employees (also an increase from 2009). Social media is not only used for communication between business and consumers, but for communicating with vendors and partners as well. Social Media Adoption Varies among the Inc. 500 Industries

Despite the fact that 83% of the 2010 Inc. 500 use at least one of the social media tools studied, adoption is skewed by industry. Government Services companies make up 12% of the 2010 Inc. 500, but 27% of those who do not use social media tools. Energy companies comprise 3% of the 2010 Inc. 500 but 17% of the non-users. Financial Services companies follow the same pattern holding 5% of the Inc. 500 slots, but 10% of the companies who have not yet adopted social media.

The data shows that the Inc 500 are utilizing all new communications tools to help their business to continue to grow and thrive in this tumultuous economic climate. They have adopted these new innovations based on Rogers’ 5 attributes. Thanks to the trialability, compatibility and lack of complexity of social media, the Inc 500. have been able to embrace these new tools, and have developed their own channels to share information with their customers and with other businesses. In the end they have been able to reinvent the way they use technology and the internet in order to provide clear and open lines of communication. By observing and monitoring the way consumers and other organizations were interacting with them through their blogs or social networking sites, these companies were able to see that there truly is a relative advantage, and that though success is not solely based on their social media usage, being able to confidently share your story with your stakeholders is a priceless asset for companies. It works for these organizations in particular, because they have the ability to think differently, and let the tools work for them. REFERENCES Barnes, Nora Ganim (2010), “The 2010 Inc. 500 Update: Most Blog, Friend and Tweet But Some Industries Still Shun Social Media,” University of Massachusetts Dartmouth Center for Marketing Research, (available at http://www.umassd.edu/cmr/studiesresearch/blogstudy3.cfmr). Carr, V. H., Jr. (1999). Technology adoption and diffusion. The Learning Center for Interactive Technology. Retrieved June 21, 2001, from http://www.au.af.mil/au/awc/awcgate/innovation/adoptiondiffusion.htm F. Damanpour & S. Gopalakrishnan, "Theories of Organizational Structure and Innovation Adoption: The Role of Environmental Change," Journal of Engineering and Technology Management, Vol. 15, 1998, 1-24.


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Larsen, J.K., & Agarwalla-Rogers, R. (1977). Re-innovation of innovative ideas: Modified? Adopted? None of the Above? Evaluation, 4:136-140. Lewis, Laurie K., & David R. Seibold (1993). Innovation modification during intraorganizational adoption. Academy of Management Review, 18(2), 322-354. Onkvisit, Sak & John J. Shaw. (1989) Product Life Cycles and Product Management. 162 Pages. Ozanne, Urban B. & Gilbert A. Churchill, Jr. “Five Dimensions of the Industrial Adoption Process.” Journal of Marketing Research, Vol. 8, No. 3 (Aug., 1971), pp. 322-328. Picard, Robert G. (2009). Blogs, Tweets, Social Media and the News Business. Nieman Reports. Boston: Free Press. Rice, R.E., & Rogers, E.M. (1980) Reinvention in the innovation Process. Knowledge Creation Diffusion Innovation, 1:499-514. Robinson, William T. (1990). Product Innovation and Start-up Business Market Share Performance. Management Science. Vol. 36, No. 10, Focussed Issue on the State of the Art in Theory and Method in Strategy Research, pp. 1279-1289. Rogers, Everett M. (1962). Diffusion of Innovation. New York: Free Press Tornatzky, Louis G. & Katherine J. Klein. (1982). Characteristics and Innovation Adoption Implementation: A Meta-Analysis of Findings. IEEE Transactions on Engineering Management, Vol EM-29, No. 1. Zaltman, G., Duncan, R., & Holbek, J. Innovations and Organizations. J. Wiley & Sons. New York, Ny. 1973.


Business Model Mapping: A New Tool to Encourage Entrepreneurial Activity and Accelerate New Venture Creation

John Leschke

University of Wisconsin-Stevens Point

This paper describes business modeling—a simple, yet powerful, approach to model and evaluate alternative business opportunities. A compelling argument can be made that employing this approach can accelerate the concept development and assessment process and increase the quality of business propositions carried forward to the business planning stage. Moreover, business modeling is broadly applicable, being relevant to entrepreneurs, investors, business advisors and non-profit organizations, as well as existing firms considering new lines of business. INTRODUCTION

“You don’t have a business, unless you have a business plan!” How many times have we heard (or said) this statement? Preparing a business plan seems to have taken on the aura of a “rite of passage” along the path to launching a new venture. But what does an aspiring entrepreneur still exploring the world of possibilities do? Does it make sense to invest the time and effort to develop a business plan for every option? Of course, not; nor does it make sense to make an educated guess which direction to pursue without a thorough examination of the alternatives and their implications. There must be something in between. For those caught in this dilemma, an answer can be found in Business Modeling—a process of documenting the key assumptions of a particular business approach across a broad set of strategic and tactical components. The resulting Business Model1 should be sufficient to compare and contrast competing opportunities and make a determination as to which alternative is best to carry forward to the Business Planning stage. With a little practice, a number of very comprehensive Business Models can be developed over the course of several hours, instead of the several weeks or months required to develop a detailed Business Plan. Formal Business Modeling methods are relatively new. This paper introduces Business Model Mapping. This method allows even novice entrepreneurs to quickly grasp the wide range of business opportunities and, within a very short period of time, assess a number of them to determine which (if any) is worthy of further development. Despite its simplicity, however, it is equally appropriate for experienced entrepreneurs, seasoned investors, and existing firms considering new lines of business.


BUSINESS MODELING The purpose of a business model is to describe efficiently, yet comprehensively, “the rationale of how an organization creates, delivers and captures value (Osterwalder, 2010).” It is not intended to capture all the detail and depth expected in a business plan, but it should be sufficient to communicate a fairly clear vision of how an idea might be translated into a business and the implications thereof. That is, it would be sufficient to compare, contrast and critique competing approaches (e.g., an on-line retailer versus a physical retail storefront) and clearly highlight their differences. Business modeling is a relatively new concept, only being formalized in the past few years. Based on his 2004 doctoral thesis, Osterwalder developed the Business Model Canvas business modeling methodology around 2008 and published a practitioners’ guide in 2010. Prior to Osterwalder’s Canvas concept, business models tended to be assigned to general categories and designated by a simple catchphrase (e.g., bricks and clicks, on-line content provider, low-cost producer, razor and blades, etc.). The Business Model Canvas framework exchanges these aggregate terms and defines a business model in terms of the nine “building blocks” listed in Figure 1.

FIGURE 1 THE 9 BUSINESS MODELING BUILDING BLOCKS (Osterwalder, 2010)

Business Model Canvas

Building Blocks Description

Value Propositions the goods and services offered and their distinguishing advantage Key Activities the most important activities in executing the value proposition Key Resources the resources necessary to create value for the customer Partner Network relationships considered essential to accomplishing the value proposition Customer Segments the specific target market(s) intended to be served Channels the proposed channels of distribution Customer Relationship the type of relationship the firm wants with its customers Cost Structure characteristics of the cost and expense structure Revenue Streams the way the firm will make money, how it is paid, and pricing

Based on his field research of the business development process in a number of organizations, Osterwalder concluded that these nine dimensions encompass the business decisions to sufficiently describe how a firm might approach a business opportunity, hence, providing a framework for developing, documenting and evaluating alternative approaches. Osterwalder suggests using the Canvas as a practical, hands-on tool to foster understanding, creativity, discussion, and analysis; for example, enlarging the Canvas to a wall-sized poster (depicted in Figure 2) to be annotated by teams of people with sticky notes or markers. In practice, it is not unrealistic for a small group of experienced people to outline multiple business models in a very short period of time. Consider the situation of commercializing a new invention; it is not difficult to imagine a small team documenting multiple business models (e.g., licensing, partnering, outsourcing, in-house production, wholesaling, retailing or selling the intellectual property outright) in the matter of a few hours. In this way, a firm can efficiently answer the questions: “How can we …?” and “What if we …?” and build a solid foundation upon which a thorough evaluation process can begin.


FIGURE 2 BUSINESS MODEL CANVAS BUSINESS MODELING FRAMEWORK

THE BUSINESS MODEL MAP The need for a Canvas-like framework arose while teaching an introductory entrepreneurship course for students with little prior business knowledge. Students from all disciplines—communications, health and wellness, interior design, the fine and performing arts, as well as business—were encouraged to enroll. The traditional “business plan” framework was inappropriate for this audience; their limited background required something equally comprehensive, but simple, high level and easy to construct. It was also important that the new framework integrated the pre-business planning activities of idea generation and concept development, as well as the aspect of “the entrepreneur as an individual.” After several iterations, an independently conceived model incorporating Osterwalder’s work emerged. 16 Components The Business Model Map introduced in this paper extends Osterwalder’s work, adding some new building blocks and dividing others into more distinct parts. The Map identifies sixteen “components” of a Business Model. Entirely new components include Entrepreneurial Fit, Role/Position in the Value Chain and Intellectual Property while others like Operating Activities and Marketing Activities represent a more precise delineation among Osterwalder’s Key Activities. Figure 2 shows how the Business Model Map components correspond to the Business Model Canvas building blocks.


FIGURE 3 COMPARISON OF MAP COMPONENTS TO CANVAS BUILDING BLOCKS

Business Model Map Components Business Model Canvas Building Blocks

(Osterwalder, 2010) 1. Value Proposition

a. Essential Means b. Essential Need

Value Proposition

2. Entrepreneurial Fit a. Current Position b. Personal/Technical/Strategic Fit c. Exit Alternatives

3. Role/Position in the Value Chain 4. Target Market/Customer Customer Segments 5. Products/Services Value Proposition 6. Channels of Distribution Channels 7. Revenue Streams Revenue Streams 8. Costs and Expenses Cost Structure 9. Operating Activities Key Activities 10. Key Suppliers and Partners Partner Network 11. Resources and Assets Key Resources 12. Intellectual Property 13. Marketing Activities Key Activities 14. Customer Relationships Customer Relationship 15. Product Alternatives 16. Industry/Economic Environment

The added components call on the modeler to consider a more complete set of issues. Entrepreneurial Fit demands reflection on the entrepreneur’s personal strengths and limitations, ambitions and goals, personal values and lifestyle objectives. Since the process of building a business is both a personal as well as a professional journey, it is critical that “the entrepreneur as an individual” be included in the assessment. Similarly, if the model is intended to expand an existing business, it is important to consider the firm’s prior history, current strategy, and competencies. Describing the Role/Position in the Value Chain is important for perspective. By noting where the value proposition falls within the overall value chain, the modeler can not only define better the value added, products and services, channels, target market and other components, but also see where this particular opportunity fits into the larger scheme of value creation. Perhaps this higher-level perspective may lead to identifying a new alternative at a different value-adding stage. For example, an entrepreneur initially intent on opening a retail coffee shop might consider the alternatives of being a wholesaler, roaster, franchisee, or importer, any of which may, in fact, be more profitable, lower risk, or a better entrepreneurial fit. Intellectual Property is important to consider if there are substantial intangible assets currently in place or required for the model to be successful. Explicitly noting a wealth or dearth of intellectual property complements the assessment of Fit. It can also suggest examining alternative business models such as licensing, consulting or selling property rights. Adding Product Alternatives and Industry/Economic Environment components to the Map fill out the analysis by incorporating four major elements of business strategy: product substitutes, rivals, other threats, and dynamics in the external environment.


A graphical representation of the Business Model Map is shown in Figure 4. A table with working definitions and question prompts for each of the sixteen components is included as an Appendix.

FIGURE 4 BUSINESS MODEL MAP (GRAPHICAL FORMAT)

Like the Business Model Canvas, this Map can be enlarged and printed out for an entrepreneur or

business development team to mark up or apply notes. Alternatively, the sixteen components can be presented in a table format. The tabular format is very effective for summarizing the results in an efficient and compact way, as demonstrated in the following example. An Illustrative Example: Business Model Mapping for a Coffee Shop The corner coffee shop is a very familiar business context and serves as an appropriate example to illustrate the Business Model Mapping tool. The process begins by capturing the essential idea – a coffee shop—then annotating the Map with short bullet points describing key assumptions, intentions or implications for each component. There is no prescribed sequence to business modeling—it is a non-linear, iterative process; however, working through the components in the general order presented in Figure 5 has a logical flow and most likely speeds the process. In this case, the entrepreneur has identified two approaches for entering the coffee business: a small café and an outdoor kiosk.

Role/Position in the Value Chain

Personal/Entrepreneurial/Technical/Strategic Fit

Key Suppliers and Partnerships

Resources and Assets

Operating Activities Marketing Activities Customer Relationships

Intellectual Property

Pro

Product Alternatives

Industry/Economic Environment

Exit Alternatives Current Position

Essential Means

Essential Need/Want/

Desire

Value

Proposition Target Customer

Cost and Expenses

Revenue Streams Products and Services

Channels of Distribution


FIGURE 5 BUSINESS MODELS MAPS: COFFEE CAFÉ VS. KIOSK (TABULAR FORMAT)

Business Model Mapping Components

Café Kiosk

1. Value Proposition a. Essential Means b. Essential Need

• A café offering fine coffees and espresso-based drinks in a warm welcoming atmosphere

• A kiosk offering fast and convenient hot coffee and espresso drinks for people on the go

2. Entrepreneurial Fit a. Starting Position b. Personal/Technical/

Strategic Fit c. Exit Alternatives

• No prior restaurant experience • Changing careers • Enjoys meeting people • Enjoy the business then sell in a few

years

• No prior restaurant experience • Changing careers • Enjoys meeting people • Enjoy the business then sell in a few

years 3. Role/Position in the

Value Chain • Final production step and direct

delivery to customer • Final production step and direct

delivery to customer 4. Target

Market/Customer • People seeking a place to enjoy a

conversation and a cup of coffee • Professionals on the go, on break,

between meetings or on an errand 5. Products/Services • Coffee, tea, espresso, smoothies,

pastries, bulk coffee, iced drinks, t-shirts and coffee-related gifts

• Hot coffee and espresso drinks, to go snacks, soft drinks and water

6. Channels of Distribution

• Café in upscale business district, shopping district or neighborhood

• Kiosk in high traffic location

7. Revenue Streams • Sales of products • Premium pricing • Cash, credit and loyalty cards

• Sale of drinks • Competitive/affordable pricing • Cash and prepaid punch cards

8. Costs and Expenses • Coffee and food, milk, staff, utilities, lease, laundry, insurance, high fixed costs, high margin

• Coffee and food, milk, outdoor space rental, wages, low fixed and variable costs, high margin

9. Operating Activities • Drink preparation, table service, cleaning, maintenance, scheduling, purchasing, stocking inventory and merchandise, opening and closing

• Drink prep, transportation, setup, teardown, cleaning, maintenance, purchasing and stocking kiosk, seasonal prep and shutdown

10. Key Suppliers and Partners

• Landlord, coffee supplier, other vendors, health department, neighboring businesses

• Coffee supplier, kiosk vendor, equipment maintenance firm, licensing and permitting agencies

11. Resources and Assets • Personal Savings, furniture, fixtures and equipment, inventory

• Significant external funding

• Kiosk and brewing equipment • Personal savings (small amount of

external funding) 12. Intellectual Property • Brand, name and trademark, logo,

knowledge of coffee, location, specialty drinks, menu, atmosphere, décor, barista skills

• Location, coffee making, barista skills, customer service skills, specialty drinks

13. Marketing Activities • Signage, print media, website, promotions, events, advertising, sponsorships, coupons

• Signage, word of mouth, coupons, social media promotions

14. Customer Relationships

• Personal, loyal, face to face, professional, yet friendly, repeat customers, sense of affinity to café

• Personal, friendly, face to face, repeat customers

15. Product Alternatives • Home brewing, nearby cafes, non-coffee beverages

• Home brewing, office break rooms, nearby cafes, soft drinks

16. Industry/Economic Environment

• Coffee culture, limited disposable income

• Coffee as a pick-me-up, faster pace of life


This example illustrates the relatively low level of detail and specificity necessary to effectively capture the key characteristics of each approach. The implications of each business approach are clear and the differences are made apparent. In just a short time (constructing this example took 45 minutes), an entrepreneur can comprehensively capture the implications of pursuing a business opportunity in a particular way and make a more than reasonably informed assessment of its potential risk and reward. Other Applications The same process can be applied by established firms. Business Model Maps can be prepared to evaluate introducing a new product or line, entering a new market or adding another channel. Mapping could be used to examine the implications of entering a business at different stages of the value chain (i.e., manufacturer or seller). It can also be used to deconstruct an existing business into its component business models and help management to see more clearly and exploit synergies and economies between new or existing opportunities. This notion—that a firm can be conceptualized as multiple overlays of various business models—is particularly useful to the new entrepreneur looking ahead to developing a business plan. Having a set of alternative approaches to entering a market, the entrepreneur is capable of creating a plan in which the enterprise grows over time by incrementally laying on additional models. This approach makes business planning more flexible (and realistic) in the sense that the implementation plan can be presented in terms of incrementally introducing business model segments and achieving certain milestones, rather than a continuous and prescribed implementation of a single aggregated business model. This contingency approach allows the plan to be implemented as events transpire and opportunities present themselves without necessarily needing to prepare a new business plan. The same benefits apply to other participants in the business development process. Investors, lenders and economic development agencies can better advise clients and assess risk. SUMMARY Business Modeling and its accompanying Business Model Map can be a powerful tool in developing and evaluating business opportunities before a formal business plan is prepared. The methodology is broadly applicable—for new ventures or established business, for non-profit and for-profit organizations, for incremental adjustments to business strategy or major departures into new markets. Business Model Mapping can rapidly document and evaluate a large number of opportunities making it vital to firms in fast-moving markets or high-technology environments. Every participant has the opportunity to present their ideas, share them with others, and feel satisfied that it has received a fair hearing. After all maps are completed, leadership can begin the process of sifting through alternatives, setting priorities, laying out implementation stages and determining resource requirements over a realistic planning horizon. Coupled with the resources and new programs promoting and supporting entrepreneurs and entrepreneurship, Business Modeling, in general, and Business Model Mapping, in particular, have the potential to speed development and shorten the time between conception and launch. Business Modeling is not a substitute for business planning—training and education in business planning is still necessary—but Business Modeling should also be part of an entrepreneur’s education. For example, Small Business Development Centers supported by the SBA, schools of business and other providers could include Business Modeling in their course offerings, even making it a pre-requisite to Business Planning. ENDNOTE

1. “Business model” in this paper is distinguished from a “revenue model.” A business model is comprehensive, encompassing all major facets of a firm, whereas, a revenue model is focused more narrowly on how the firm makes money (e.g., sale of merchandise, subscriptions, fees, advertising, etc.).


REFERENCES Osterwalder, A. (2004) “The Business Model Ontology - A Proposition in a Design Science Approach” Unpublished PhD Thesis, University of Lausanne, Lausanne, CH. Osterwalder, A. (2008) “The Business Model Canvas” (www document) http://www.nonlinearthinking.typepad.com (accessed October 29, 2011). Osterwalder, A. & Pigneur, Y., et al., Business Model Generation: A Handbook for Visionaries, Game Changers and Challengers, Wiley, 2010.

APPENDIX BUSINESS MODEL MAPPING COMPONENT DESCRIPTIONS

Business Model

Mapping Components Component Descriptions 1. Value Proposition

a. Essential Means b. Essential Need

• What is the nature of the value provided for which the customer is willing to pay? o What are essential characteristics of the means or method employed? o What are the defining needs, wants or desires being met?

2. Entrepreneurial Fit a. Starting Position b. Personal/Technical/

Strategic Fit c. Exit Alternatives

• What is current situation? • Fit with the entrepreneur’s or existing business’s…

o Ambitions and goals? Attributes and competences? Management expertise? Technical and managerial experience?

• What are the exit and harvest options? 3. Role/Position in the

Value Chain • What is the value adding activity?

o Extraction? Processing? Fabrication? Transportation? Wholesale? Retail? 4. Target

Market/Customer • Who is the target customer or market?

o Demographics? Needs? Wants? Desires? Sources of pain? • What is the customer’s buying behavior?

o Order-winning criteria? Order-qualifying criteria? 5. Products/Services • What products and/or services are offered?

o Differentiating characteristics? Mix? Functions and features? • What research and design infrastructure is required?

6. Channels of Distribution

• What are the channels for distributing the product or service? o Retail? Wholesale? Distributors? Online Storefronts?

7. Revenue Streams • How will the business make money (revenue model)? • How is the product priced? • How is the transaction executed?

8. Costs and Expenses • What are the major cost and expense components? o What categories are unique to this model? Require close management?

9. Operating Activities • What operating activities are critical to this business model? o Product design? Logistics? Production? Transaction processing? o Quality? Flexibility? Cost? Speed?

10. Key Suppliers and Partners

• Who are the key suppliers and upstream partners? o Joint ventures? Contractual relationships? Vendors? Networks?

11. Resources and Assets • What resources or assets are critical to implementing the business model? o Plant and equipment? Human capital? Infrastructure?

12. Intellectual Property • What intellectual property is essential to the business model? o Distinctive competencies? Patents? Trade Secrets?

• How much additional research and development is required? o Critical milestones? Resources required? Timeframe?


http://www.nonlinearthinking.typepad.com/�

13. Marketing Activities • How are the products and/or services to be marketed? o Product Features and Attributes? Pricing, Placement and Positioning?

• Selling methods and strategy? o Advertising and Promotion? Media? Branding?

14. Customer Relationships • What kind of relationship between the customer and the company is desired? 15. Product Alternatives • What alternatives exist to address the customers’ needs, problems or desires? 16. Industry/Economic

Environment • What are the relevant industry, market, technological, and cultural trends? • What broad economic trends or factors are relevant?


The Challenges of Obtaining a Competitive Advantage for Processed Material Suppliers: A Conceptual Study

Harash J. Sachdev

Eastern Michigan University

Cipto Y. Joegiono Eastern Michigan University

Processed raw materials suppliers face challenges to improve their razor thin margins and survive in a market place, where their buyers are pushing them to the edge by placing constant cost reduction demands and threats of replacement with substitution products. Using the steel, aluminum, and composite material industries as examples, this paper integrates the mental models of Quality Functional Deployment, Industry Five Forces, and Resource Based View to analyze these three processed materials and provide implications for such suppliers. INTRODUCTION

As global competitive pressures continue, manufacturers deploy different resources to play each other in the competitive arena. These resources may be tangible (e.g., machines, technology, materials, and processes) or intangible such as Total Quality Management (e.g., knowledge management/human capital, leadership, customer focus, employee focus, service quality). However, as firms focus their attention on intangible resources, they should not ignore the tangible ones, especially for manufacturers that constantly seek ways of shaving costs and obtaining superior material performance to resolve their needs (e.g., Hshu, Chen, and Jen, 2008). Nowhere is this heat felt more than in the procurement area, which is a manufacturer’s major resource cost and needs to be closely monitored to meet its needs.

Procurement analysts have noted that an important factor to ward off competition is the proper selection of processed materials (e.g., steel, Aluminum, and composite materials) since the majority of the cost savings and rectifiable errors are made in the early stages of a product’s manufacturing process. Snippets such as GM has found ways to replace Aluminum and steel with Magnesium and has also created innovative welding technology that will increase Aluminum usage corroborate this statement (Detroit Free Press, 2012). Thus processed materials suppliers need to find new ways of overcoming the uncertainty factors affecting production and consumption functions of such tangible resources. These factors include logistics and risk management, availability of the processed materials, pricing, and exchange rates. Consequently, in such markets, the buyers of processed materials are constantly in search for substitute materials since they want to maximize control of their supply side while going into negotiations with their next set of buyers in the supply chain.

Along the same school of thought, exchange theory analysts note that buyers (e.g., procurement managers, R&D specialists of processed materials) face cognitive dissonance and other transaction cost


inefficiencies of long-term contracts with suppliers while operating in such uncertain procurement markets and need flexible strategies to optimize supply chain performance. For buyers, this dissonance surfaces in the form of whether or not they obtained the correct price for the duration of the contract and hedged their bets moving forward, considering that equally good processed materials may be available globally. Will competitors outsmart them during the course of these buyers’ contract obligation? Based on the procurement literature, material substitution is a major flexible strategy in being market-oriented, curtailing price wars, and offsetting uncertainty factors.

As buyers constantly seek ways to substitute processed materials, the burden rests on their suppliers to revisit their competitive and customer market-oriented models and find ways to remain competent (e.g., Kohli and Jawrowski 1990). Despite such warnings limited research studies are available on how such suppliers may retain their competitive advantage. In the procurement area, quality and customer satisfaction are two important time-based competitive drivers, and studies are incomplete without incorporating the attributes of these drivers. The purchasing literature is also replete with opinions of how managing ones supply base begins with the raw material and is the starting point of quality assurance programs. Quality and customer satisfaction are always paramount to supply chain success in terms of time-based competition, market expansion, and cost savings (Carter and Narasimhan, 1994). Developing and implementing a conceptual model for processed materials suppliers will lower these suppliers’ switching costs, given their already razor thin margins and reduce their buyers’ material substitution behavior. The outcome of such approaches will not only improve on-going exchange relationships but also help suppliers obtain a sustainable competitive advantage.

The more commonly used mental model to explain such competitive phenomenon is Porter’s (1980) Five Forces, which may be used to analyze the industry structure (e.g. competitive intelligence) affecting the processed material suppliers. This model, however, is incomplete in addressing buyer-seller exchange costs since it is external focused. Therefore, researchers have suggested augmenting this model with complimentary internal-focused mental models in order to productively study the supply and demand of such processed raw materials. For example, Molina, Pino, and Rodriguez (2004) argue that the Resource Based View (RBV) should be combined with Porter’s Model because it ties the organization’s internal resources to strategic decisions. Suppliers may implement this suggestion by producing their processed material capably to suit the contextual situations required by buyers.

Closely tied and related to RBV is the Total Quality Management perspective since competition is incomplete without understanding how organizations improve quality in meeting customer needs (Idris, 2011; Chin and Sofian 2011). Within the Total Quality Management domain, Quality Functional Deployment (QFD) is a viable quality management tool to understand procurement since it is buyer-focused. QFD transforms the buyer’s needs and wants into technical properties required for the different stages of a product’s developmental process. In addition, QFD is employee-focused since it utilizes a cross functional approach to problem solving (Cauchick-Miguel, 2005). By capturing and disseminating information using cross functional approaches a supplier may complete the cycle of being market-orientated (Kohli and Jawrowski, 1990).

The aim of this paper is to contribute to an organization’s knowledge by analyzing the attributes of QFD, Five Forces, and RBV models as applicable to the properties of processed materials. How the three mental models may add value to a supplier’s strategic decisions will be an additional competitive resource for them. By integrating the QFD, Five Forces, and RBV mental models (Figure 1) we address how a supplier of processed material may become value-orientated through customer and competitor orientation. After utilizing these three approaches, these suppliers may more productively apply one or more of the generic strategies such as cost, differentiation, and focus to improve the competitive edge of their processed materials.


FIGURE 1 MENTAL MODEL

Since these three mental models are interdependent, there is no precise starting point. In this paper we commence with the QFD approach because it translates buyers’ needs into technical properties required from processed materials and reminds suppliers to be market oriented. Porter’s Five Forces compliments the QFD approach by providing guidelines on how a supplier may conduct an environmental analysis to infer the impact on its industry and formulate its defensive and offensive strategy, accordingly. The RBV approach assists in the selection and capable use of processed materials, keeping customers’ needs in mind. The paper unfolds as follows: Initially, a brief discussion of three processed materials, steel, Aluminum, and composites ensues. These three materials were selected for this study because they are close substitutes for each other, used for diverse industry applications, and users of these materials are consistently seeking innovative ways of sustaining a competitive edge. Next, we discuss each model, namely, QFD, Porter’s Five Forces, and RBV and how they may be integrated into a conceptual framework for processed materials. Finally, we propose ways these suppliers may apply the information obtained from this conceptual model. PROCESSED MATERIALS

Steel and aluminum have been the choice of processed materials for several industrial applications for centuries. Composite materials, such as fiberglass, are considered newer materials and are becoming popular in many industries. It shares the common material science properties such as tensile strength, etc., with steel and Aluminum. Therefore, the consumption of composite material has been gradually increasing over the years. We focus on these processed material suppliers because they function in heterogeneous, dynamic, and diverse markets (e.g., Aerospace Manufacturing, 2010; Akoijam, 2012), and may benefit from RBV, five forces and QFD mental models. The major reasons for their inclusion are:

• They are consumed in diverse industries such as transportation (autos, air, railroad, trucks, pipeline, and ocean vessels), construction equipment, and several consumer goods (e.g. appliances).

• They are considered commodities and have managerial control (cost and risk/return) implications. • Any product differentiation is short-lived, and material science properties of these materials need

continuous improvement to match the dynamic shifts in their consumption patterns. • To be fruitful, they need the economies of scale in all areas of production and consumption and

require to be manufactured with consistent quality. • They have been used as substitutes for each other in diverse industries. • They have a direct bearing on the economy of several countries (e.g., Grunert et al., 2005).

Resource Based View Identify Resources Innovate Resources

Five Forces Capture Environment Trends

Identify Threats

QDF Identify Customer Value

Translate into Technical Value


Steel Steel is an alloy that is produced by combining iron ore with low percentages of carbon and other

metals such as manganese, nickel, chromium, tungsten, depending on the properties required. Its consumption in manufacturing process outdates Aluminum and composite materials. However, the supply and demand of steel in the United States has undergone dynamic changes over the decades. Since 1950s the high demand for steel encouraged suppliers to ignore potential competition as a few enjoyed the benefits of being the only providers. Following the Product Life Cycle principle such markets evolved and stabilized over time. Supplier clout gave way to buyer dominance as buyers searched for ways to improve material science properties, reduce costs, and improve bargaining abilities over suppliers (e.g., Stubben, 2012).

The main material science properties of steel are its high tensile strength, which results in safer structures, less maintenance, and slower aging of structure. Its properties include high electric and thermal conductivities, low corrosion, easy to fabricate, and moderate life cycle cost. All of these benefits still make steel the major processed material in many industry applications. Aluminum

Aluminum is extracted from the compound bauxite, which is the most abundant raw material. Its final form is light and durable. It may be combined with small portions of other elements (not necessarily similar to steel) such as zinc, magnesium, copper, etc., to produce different forms of alloys. Aluminum excels in properties such as low density and corrosion resistance properties. Aluminum offers many benefits to manufacturers and designers, including high tensile strength, less comparable weight, high electric and thermal conductivity, and is easy to fabricate and repair. On the downside, Aluminum is more expensive to a manufacturer (tooling cost) than steel. It, however, has a low product life cycle cost because of its low weight and long lasting life, which translates into low fuel consumption and cost to the final user (Kelkar, Roth, and Clark, 2001). Thus cost drivers that are considered a hindrance to the suppliers are considered a benefit to the final user. The consumption for Aluminum has been growing over the decade at the expense of price competition from suppliers, which benefits the buyers. The different cost structures and ownership costs at the supplier and buyer levels indicate that Aluminum can replace steel as a prime material but can also be being replaced by other materials (Berezowsky, 2011). Composite Material

Composite material is made by combining two or more complimentary materials to achieve better material properties than the material it is trying to substitute. One portion of the composite material serves as a “matrix,” and the other acts as reinforcement in the form of fibers embedded in the matrix. Matrix materials can be epoxy, bismaleimide, or polyimide, to name a few. The reinforcing materials can be glass fiber, boron fiber, carbon fiber, or other more exotic mixtures. Although there are a variety of composite materials, the focus of this study is on composites (e.g., fiberglass, natural fiber composites, and carbon fiber) that are being used as substitutes for Aluminum and steel. The advantages of these composite materials are that they offer similar or better properties in the areas of high tensile strength with less corresponding weight, corrosion-resistance, and biodegradability. In addition, foreign competition is limited due to the high ratio of composite material’s shipping cost as a percentage of its value. Lastly, the buy to fly ratio (ratio of the weight of purchased to finished material for aircraft production) is low as compared to the substitute metals. However, the wasted material is not easily recyclable unlike other metals, which is a disadvantage. A second disadvantage of composite materials is the difficulty to inspect flaws once the product is manufactured. A third disadvantage is that it is difficult to repair portions of its piece (e.g., for dents) once manufactured, and the entire piece needs to be replaced. In addition, composite materials are relatively new and need more testing to establish their long-term performance. Furthermore, they absorb moisture when cured and are expensive to manufacturer (labor intensive and complex manufacturing process). Despites disadvantages, its superior advantage of tensile strength for its weight provides a serious challenge to Aluminum and steel.


METHODOLOGY

ABI database and web-based research was conducted to gather trade and research articles pertaining to the material science properties required from consumers of processed steel, aluminum, and composite materials. In addition, customer behavior information from internal company websites (airlines and automobiles) was obtained. Additional literature was selected if they discussed one or more of the models (Five Forces, RBV, and QFD) with respective to tangible resources. In addition, an article was selected if it addressed:

• the advantages and disadvantages of these materials • the needs and wants covered by these materials • the technical difficulties in production and ease of replaceability • the competitiveness of these materials • the demand and supply of these materials • the environmental issues (heterogeneity, diversity, dynamism) affecting the usage of such

materials • the constructs of one or more of the mental models discussed in this study

QUALITY FUNCTIONAL DEPLOYMENT

The QFD and market-orientation literature are closely in terms of the need for an organization to gather and disseminate information pertaining to customer needs. The house of quality is the design tool for QFD that provides a conceptual map for fulfilling the QFD methodology by utilizing a cross functional planning and communication approach (Hauser and Clausing, 1988). For example, using this approach the suppliers’ marketing and R&D personnel would be jointly involved in analyzing customer, competitor, and inter-functional organizational information to enhance the corresponding technical properties of their processed materials. QFD Analysis

The items listed in the first column of Table 1 are the processed material attributes (customer needs and benefits). Based on the literature review (e.g., Bader, 2001; stronwell.com, 2012; Read 1995) and the authors’ judgment, the attributes desired from the processed materials discussed in this study are high strength, corrosion-resistance, durability, light-weight, good conductor of heat and electricity, availability, and reasonable cost. These material science properties are essential when buyers of processed materials produce a new design. The technical design parameters that correspond with these attributes (2nd, 3rd, and 4th columns) may be summarized as follows:

• Types of Raw Material Used: Various raw materials are combined to produce the processed material that contributes to the final material science characteristics such as tensile strength, durability, etc.

• Weight of Raw Materials: The amount of each raw material used to form the processed material also determines some of the characteristics of the final product.

• Types of Alloy: Steel, aluminum, and composite materials are graded and contain industrial standardized codes for differentiation purposes. These grades are based on the different features and quality of the processed materials. Grading is important since several basic metals may be used in formation of processed materials. Grading becomes necessary to identify the levels of impurities of the basic metals extracted from earth’s crust and local government regulations among other things.

• Density: This is a function of how closely the ingredients are packed in the final processed material (e.g. powdered or crystallized form), which affects the processed material’s strength and durability.


These technical design parameters will have a moderate to strong correlation between themselves (Appendix B) since these parameters are an integral form of the final processed material. Each cell of Table 1 represents the degree of correlation between the customer requirements (needs) and the technical design parameters to resolve these needs. High correlation means a superior match. The goal of using QFD is to have an excellent match between all the material science attributes and the summation of the technical design parameters. An ideal balance would be if one technical parameter (e.g., type of raw materials used) could provide a perfect fit for all the material science attributes desired by the customer.

TABLE 1 CORRELATION BETWEEN CUSTOMER REQUIREMENTS AND TECHNICAL

DESIGN PARAMETERS

∆ = Strong Correlation ○ = Some Correlation

Raw Material used

Weight of Raw Materials

Types of Alloy/grade Density

Steel

Al

Com

posite Steel

Al C

omposite

Steel

Al

Com

posite Steel

Al

Com

posite

High Strength ∆ ∆ ∆ ○ ∆ ∆ ∆ ○ ○ Corrosion Resistant

○ ∆ ○ ∆ ∆ ○

Durability ∆ ∆ ∆ ○ ○ ∆ ○ ∆ ∆ Reasonable Cost ○ ○ ○ ○ ○ ∆ ∆ ∆ ∆ ○ ○ ○ Light Weight ○ ∆ ∆ ∆ ∆ ∆ ○ ∆ ○ Conducts Heat/Electricity

∆ ∆ ∆ ∆ ○ ○ ∆ ∆

Availability ○ ○ ○ ○ ∆

Table 1 should be read as follows: the type of raw materials used in the composite material may resolve the high strength, corrosion resistant, durability, and conductor of heat and electricity attributes desired by the customer (strong correlation). However, this technical parameter does not properly address the light-weight, reasonable cost, and availability needs. In order to cover the entire list of attributes, the composite suppliers will need to introduce other technical parameters into their composite materials. Through the weight of raw materials these suppliers may fulfill the light-weight and reasonable cost requirements. In addition, the type of alloy/grade may resolve the availability issue. The four technical design parameters of composites cover all the attributes listed in the Table 1. For steel, the type of alloy has a strong correlation with all attributes except availability and type of raw material used resolves the availability issue. For aluminum, the type of alloy addresses the requirements of six of the eight attributes, and density correlates with three attributes. PORTER’S FIVE FORCES MODEL

Porter’s (1980) five forces describe factors that shape an industry (Figure 2). These factors are as follows:

• the competitive rivalry within the industry under consideration


• the threats of new entrants • the threats from substitute products • the bargaining power of the buyers • the bargaining power of the supplier

Furthermore, several business competitive concepts such as economies of scale, capital requirements,

marketing mix, cost advantage (e.g., location, switching, and leverage), exit barriers (e.g., specialized assets), degree of competition (e.g., number of competing firms), buyer dominance, and supplier dominance are analyzed using the five forces. Based on the analysis one may determine the degree of opportunity and/or threat facing a firm operating within the industry under consideration. In summary, the firm conducts a situational analysis using competitive intelligence and extrapolates the information to provide a strategic direction for the firm.

FIGURE 2 PORTER’S MODEL

Steel and Aluminum Industry

From a strategic perspective, the aluminum industry traces the footsteps of the steel industry in the five forces area (e.g., Ungureanu, Das, and Jawahir, 2007; equitymaster.com. 2009). Thus the steel and aluminum industry are discussed together. Bargaining Power of Buyers

• Due to the increased competition in the steel and aluminum industry, the buyers’ power has risen over the years.

• Purchase price as a percentage of buyer’s cost is high. • Buyers are few, concentrated, purchase in large quantities, and have the power to drive prices

downwards. • Buyers are as knowledgeable as the suppliers. Some buyers have also backward integrated to

learn the business before spinning it off.

Potential New Competitors (New Potential Competitors

Threat)

Competitor’s Rivalry (Rivalry – Competition

between Current Organization)

Customers (Bargain Ability of Customers)

Suppliers (Bargain Ability

of Suppliers)

Substitute (Substitute

Materials Threat)


• Switching cost is low for steel buyers since they buy in large quantities and can work the economies of scale in their favor.

• Supplier’s product differentiation is a short-term solution since it may be imitated unless patented.

• Large-scale buyers conduct their own R&D in developing and using these materials. Bargaining Power of Suppliers

• There are only a limited number of major suppliers of raw materials. • The basic raw materials (iron ore or bauxite) are available in abundance although scattered

throughout the world. Steel suppliers may have a disadvantage in this area because of one its main ingredients, coking coal, is in short supply and gives the raw material supplier an upper hand.

• Most of the raw materials for aluminum and steel are imported from other countries. • Although there are a few global large raw material suppliers, they cannot create high switching

costs for the aluminum and steel mills. • The probability of forward integration by raw materials suppliers is minimal because of the

knowledge and technical competencies needed in the buyers’ line of business. Threats of New Entrants

• The threat of new entrants in the steel and aluminum industries is low because of high transaction cost (e.g., assets, first mover’s advantage, location, experience curve, access to raw materials, logistics).

• Although the basic raw materials are readily available, entrants need pre-conceived economies of scale model, high capital investments, and finances to endure the long time periods needed to break-even.

• Processed materials suppliers operating within these industries need to achieve economies of scale in all functional areas such as manufacturing, purchasing, R&D, marketing (e.g., price, distribution, sales force, and service network).

• As stated previously, there is a lack of product differentiation in this industry. • Exit barrier is high since entrants need specialized assets and ability to overcome the high

transaction cost in conducting business, whose value is essentially lost if they make an exit. Internal Rivalry

• The degree of internal rivalry in the steel and Aluminum industries is intense. • There are a few major players. • The demand curve for steel and aluminum is elastic. • Price wars are common. • There is little room for product differentiation other than through different grades of raw

materials, the type of alloy, the percentage weight of each raw material, the density of raw material, and the finished grade of material.

• All marketing tactics may be imitated over time. • Joint ventures within and across their supply chains may help suppliers in the steel and aluminum

industries achieve economies of scale. Substitution

Suppliers are creating new alloys to overcome the material property weaknesses of Aluminum and steel. Buyers, on the other hand, are interplaying with their organization’s fixed and variable cost behaviors to resolve their downstream buyers’ needs. For example in the dealings with small orders, organizations may create a variable cost business model; for large orders, a fixed cost model approach


may be utilized. Newer materials such as composites are gaining acceptance as suppliers are seeking new ways (e.g., competitive cost behaviors) to obtain a piece of this high demand market. Composite Materials Bargaining Power of Buyers

• Composite materials are increasingly being tailored for new uses and have myriad buyers unlike steel and aluminum. Because of their diversity in use no one buyer can influence the price of composite materials.

• Being relatively new and the ability for suppliers to find new uses creates inconsistent demand and supply that dynamically affects the price of composite materials. Therefore, buyers need to plan their purchases.

Bargaining Power of Suppliers

• The number of raw material suppliers for composite materials has increased over the years, which causes the bargaining power of suppliers to decrease. In other words, no one supplier has the power to influence the pricing of raw materials for manufacturing composites.

Threats of New Entrants

• Threat level is considered medium since high levels of R&D expertise is required to build the different material science properties into these materials.

• Machinery and tooling capital cost are high for entrants. • The number of new foreign competition from India and China is high for existing composite

materials; however, this may be offset by the high shipping cost. Internal Rivalry

• Because of the high R&D expenses, expertise, and patent laws very few firms can mimic the process.

• Products may easily be differentiated and improved, which may curtail price wars but increase competition.

• Demand is expected to increase in the near future, which may cause rivalry among existing firms in this industry to decrease.

Substitution

Composite materials are considered a new technology in the market place, need lengthy government approval time, and do not have the historical performance measures such as data for safety and durability. Thus manufacturers need to closely monitor the material’s adoption and diffusion cycle. The current substitution threat may be mediocre. Summary from Porter’s Model

Based on the current trends, composite materials are gaining wide acceptance in industrial markets and gradually replacing steel and aluminum by matching or providing enhanced material science properties that are better addressing the diverse market needs. They are better able to compete on differentiation strategies than the other two by being newer in the market, finding new users, and can be manufactured near the customer’s facilities; however, the product life cycle cost in use is high because composite materials need special gadgets for regular safety failure inspection and repair. The steel and aluminum suppliers may need to be innovative as they struggle with their defensive strategies to compete with composite materials. These suppliers may need to study the customer market closely, identify patterns for short term gains, and find competitive methods to prolong their innovations.


RESOURCE BASED VIEW

While selecting a processed material, suppliers need to study its suitability for local market conditions and sustainability issues in addition to its metallurgical properties (keymetals.com, 2011). The Resource Based View (RBV) may be a valuable framework for material selection. RBV proponents treat an organization as a bundle of resources (Fig 3). The more such resources are valuable, rare, immobile, and non-substitutable the more the firm's strategic competitive advantage. These resource categories include assets, capabilities, knowledge, and organization processes that give an organization an identity in the market place (Barney, 1991). They are further classified into physical, human, and organization capital resources. Physical capital consists of technology, plant, location, and material and an organization’s control over them. Human capital includes the knowledge, training, experience, and skills of the employees. Organization capital encompasses the internal organizational management structure and process. RBV proponents assert that an organization creates a sustainable competitive advantage by using their resources capably. These resources are the organization’s fundamental core competencies for formulating strategies, building relationships, and obtaining superior performance. Adewole (2005) suggests that the type of resources an organization focuses on should be contextual. For example, the author found the competent use of information technology resource to be valuable within the clothing industry in sustaining a competitive advantage.

FIGURE 3

RESOURCE-BASED VIEW

Suppliers can maintain their market power through a continuous stream of innovations that attenuate the forces of competition. In the processed material industry, innovations cannot be copied easily because of the patent laws and costs. Through innovation these suppliers may gain a temporary quasi-monopoly position that enables them to extract rent from their buyers. On the down side, however, competitors can erode these above-normal rents through substitution materials (Rubera, Gaia, and Kirca, 2012). Therefore, suppliers need to consistently seek ways of possessing value-oriented capabilities and focus on creating value-oriented outcomes (Beverland, 2012).

Since processed material is an important competitive resource, suppliers need to investigate how their competitors and buyers are formulating strategies by using the capabilities of such materials. From a time-based competition perspective, these suppliers should continuously innovative to maximize the possibility that their processed materials are rare, valuable, non-imitable, and non-substitutable at any given point in time. In addition, suppliers need to constantly study ways of enhancing and sustaining the properties of their processed materials along with finding new ways of using complimentary materials to form alloys. The RBV framework not only guides suppliers in the selection of a material but also on how to improve market penetration and product development strategies by capably using their physical, human, and organization capital. For example, does the processed material supplier have the necessary R&D and /or marketing capability to enhance its material properties to build and sustain its customers? Does the supplier have the logistics capabilities to be effective and efficient during the delivery and storage of such materials?

Resource Categories

• Physical • Human • Organization

Areas

• Assets • Capabilities • Knowledge • Process

Competitive Advantage Degree

• Valuable • Rare • Immobile • Non-substitutable


In the case of steel, Table 1, the type of alloy/grade has a strong correlation with all the material science needs of the customer except for availability. Thus the RBV proponents would suggest using this alloy/grade technical design parameter (material’s capability) to create a competitive advantage for steel suppliers. In addition, other organizational resources such as inventory management techniques and marketing capabilities (e.g., relational exchange) may add value to the processed material for steel. For aluminum, the suppliers R& D department has room to play its density card against steel. Although aluminum’s production cost is high, it translates into a low operating product life cycle cost for the buyer. Thus aluminum suppliers’ marketing department may need to use their customer service capability when implementing long-term exchanges with their buyers. In the case of composite material the raw material has a high variable production cost and wastage. Although these composite suppliers may use the advantages of operating in a variable cost industry, the goal should be to reduce wastage and cost. DISCUSSION

The purpose of the paper is to address the frustrations faced by processed materials suppliers because their margins are being controlled by their buyers. These buyers are trying to reduce their purchasing cost through substitute materials. What may these suppliers do to curtail their razor thin margins and productively utilize the capabilities of their processed materials along with their other organizational capabilities to maintain a competitive edge in the market place?

Although in low-tech industries (e.g. processed materials) innovation is slow, these suppliers can sustain their innovation for longer periods of time than suppliers operating in high-tech industries, where innovation is short-lived (Rubera and Kirca, 2012). On the down side, although the innovation may not be imitated (e.g., patent laws) it may be substituted through other innovative processed materials. Thus the goal of such suppliers should be to squeeze the last drop from their innovative by deploying defensive and offensive strategies using other organizational resources and capabilities.

In this study we suggest that by using QFD, Porter’s Five Forces, and RBV, processed suppliers may accomplish their goal of continuously maintaining their competitive edge. In Appendix A, we have summarized the key competitive issues facing three processed materials suppliers: steel, aluminum, and composites. Competitive methods such as innovation, service, leverage, and channel selection identified by Porter (1980) and tested by Dess and Davis (1984) is used in strategy formulation. From a material standpoint, it seems differentiation strategy through technical design parameters such as the type of raw material and/or the grade of the material is the best way of competing. However processed material suppliers are faced with intense competition from within the industry and substitution from without the industry. Thus, other organizational capabilities such as marketing and supply chain may be used to reduce uncertainties and enhance the relational side of the business. Furthermore, R&D and product engineering capabilities may enhance product quality and assist suppliers in achieving a competitive advantage. These activities may be accomplished through strong inter-functional coordination between R&D and marketing (Porter, 1980).

Steel suppliers, for example, may use the weight advantage of steel to focus on customers that need the stability from their compact-sized products such cars. These suppliers’ marketing department may need to develop a key account executive team in collaboration with logistics and manufacturing specialists to ensure the availability of this material. Emergency procurement may be systematically introduced into the system to hedge against uncertainties. Marketing and R&D specialists may jointly monitor QFD charts pertaining to their customers and design superior alloys or raw materials. Aluminum suppliers may follow almost similar strategies except that they may focus on their material density as a differentiating tool and the buyers’ total cost ownership efficiencies.

Although composite material suppliers have more power than their buyers (being a relative new area), no one supplier is powerful in all the types of composite materials. These suppliers need strong engineering and sales teams to guarantee and increase buyers’ faith in their materials against fatigue and failure. They may also need a strong dealer network that can provide complimentary composite materials


to any one buyer (consolidation principle). By using the services of distributors they can use customer service, price bundling, and the variable cost nature of their industry to their advantage. REFERENCES Adewole, Adebisi (2005). Developing a strategic framework for efficient and effective optimisation of information in the supply chains of the UK clothing manufacture industry. Supply Chain Management: An International Journal, 10(5), 357-366. Aerospace manufacturing (2010). Airframe obsolescence: Fit to fly. Retrieved from www.aero-mag.com (July), 12-13. Akoijam, Sunildro, L. S. (2012). Scope and potential of Indian aluminum industry: An indepth analysis. European Journal of Business and Management, 4(3), 32-41. Bader, M. G. (2000). Polymer composites in 2000: structure, performance, cost, and compromise. Journal of Microscopy, 201(2), 110-121. Barney, Jay B. (1991). Firms resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. Berezowsky, Taras (2011). Can US aluminum demand continue rising? Retrieved from http://agmetalmer.com, Dec, 5, 2011. Beverland, Michael B. (2012). Unpacking value creation and delivery: Orientation, capabilities, practices, and outcomes. Industrial Marketing Management, 41, 8-10. Carter, Joseph, R. and Narasimhan, Ram (1994). The role of purchasing and materials management in total quality management and customer satisfaction. International Journal of Purchasing and Materials Management, 30(3), 3-13. Cauchick-Miguel, Paulo A. (2005). Evidence of QFD best practices for product development; A multiple case study. The International Journal of Quality & Reliability Management, 22(1), 72-82. Chin, Khor, S. and Sofian, Saudah (2011). The Impact of human capital and total quality management on corporate performance: A review. Interdisciplinary Journal of Contemporary Research in Business, 3(3), 1091-1100. Dess, Gregory, G. and Davis, Peter, S. (1984). Porter’s (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal, 27(3), 467-488. Detroit Free Press (2012). GM researchers have a way to use magnesium in place of steel, aluminum, www. freep.com, (October 24). Equitymaster.com (2009), Aluminum: Through the lens of Michael Porter. Retrieved from www.equitymaster.com, (March 26). Grunert, Klaus, G., Jeppesen, Lisbeth, F., Jespersen, Kristina, R., Sonne, Anne-Mette, Hansen, Kåre, Trondsen, Torbjǿrn, and Young, James, A. (2005). Market orientation of value chains: A conceptual


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APPENDIX A KEY COMPETITIVE ISSUES

Steel Al Composite Porter’s Model Buyer has power

High internal rivalry High substitution threat Power for Coking Coal suppliers

Buyer has power High internal rivalry High substitution threat

Composite supplier maintains power

Processed Material Properties

Slower aging; easy of fabrication and molding to different shapes

Low cost of basic raw materials; more expensive to manufacturer; can be molded to various shapes; ease of fabrication and repair; low operating product life cycle cost to the buyer

Difficult to repair and identify structure flaws; fly to buy ratio is high

QFD Type of Alloy/grade Type of raw materials used

Type of alloy/grade Density

Type of material used Type of Grade/Alloy

RBV Need to sustain innovation to recover cost High leveraged industry Need other capable resources to sustain the material competency

Need to sustain innovation to recover cost High leveraged industry Need other capable resources to sustain the material competency

High VC industry; Material competence still the primary focus

Strategy Innovation life should be prolonged until another innovation is in the horizon Develop and maintain relational exchange and efficient customer service with key accounts Made to Stock practices to match the Economies of scale needed Maintain high inventory levels to serve key accounts Manage inventory risk by tying it with distribution strategy to explore small and diverse markets (e.g. geographic dispersed; minor modification to product) Explore needs where processed material weight is to be confined in a small space (e.g. compact cars)

Innovation life should be prolonged until another innovation is in the horizon Develop and maintain relational exchange and efficient customer service with key accounts Made to Stock practices to match the Economies of scale needed Maintain high inventory levels to serve key accounts Manage inventory risk by tying it with distribution strategy to explore small and diverse markets (e.g. geographic dispersed; minor modification to product) Use product density as a differentiation strategy to prolong product life.

Improve production operation efficiencies to reduce Fly to Buy Ratio Sell in industries where processed material uncertainties (demand fluctuations) is high Practice niche marketing strategy; market specialty products Market to geo-segments where raw material availability for manufacturing steel or aluminum is problematic


APPENDIX B TYPE OF RAW MATERIAL AND WEIGHT OF THE RAW MATERIAL

Correlation: Very Strong Reason: Part of the weight of the processed material depends on the type of raw materials used. For example, steel is made from iron ore, coking coal, and lime stone. Although the basic raw materials contribute to the total weight of steel, during the production process, the basic raw materials undergo thermodynamic property changes and may individually loose or gain weight.

Type of raw material and types of alloy Correlation: Strong Reason: Although the type of raw materials and alloy are related, the percentages of the raw material that constitute the alloy can be different.

Type of raw material and density Correlation: Very Strong Reason: The final processed material depends on the raw materials used to manufacture it. However, it is important to understand how well these raw materials are packed to create the differences in final form of the product (e.g., crystalized versus powered form). Although strongly correlated, processed materials that use the same raw materials may have different densities.

Weight of raw material and types of alloy Correlation: Weak Reason: Different raw materials may have identical weight, but the final alloy is dependent on the type of raw material used to produce it. However, two similar alloys must have identical weights of the different raw materials used to produce it. In this instance, there is a very strong correlation.

Weight of raw material and density Correlation: Moderate Reason: Just as density is strongly correlated to the type of raw material, it is also correlated to the weight of raw materials. In general, heavier materials have higher density values than lighter ones. Thus, these two characteristics are moderately correlated. However, density affects the space occupied by the material. For example, a ton of iron ore and ton of charcoal may have the same weight but will occupy different amount of space.

Types of alloy and density Correlation: Very Strong Reason: As discussed above, different types of alloy have different density. Density of an alloy changes when additional elements of the periodic table are added to the manufacturing process. In addition, similar types of alloy may have different technical properties and different density because of the metallurgical process undertaken during production (e.g. annealing, case hardening, and depth of case hardening).


Investigating National Football League (NFL) Fan Loyalty

Craig A. Martin Western Kentucky University

The present study attempts to determine if a consumer’s consumption motivation and customer commitment influence the loyalty the consumer exhibits toward his or her favorite National Football League (NFL) Team. The present study utilizes survey responses from 302 NFL fans. A path model analysis using Amos 17 was performed to assess the hypothesized relationships. The results indicate that increasing an NFL fan’s social motivation to consume increases the fan’s customer commitment, and increasing an NFL fan’s customer commitment increases the fan’s attitudinal loyalty. Additionally, the results indicate that an NFL fan’s customer commitment influences his or her behavioral loyalty. INTRODUCTION

Sports marketing research is often concentrated in the areas of sponsorships or economic impacts. Sponsorship research is valuable in terms of its ability to provide organizations much needed guidance in determining which sponsorships provide optimal return on an investment (Cornwell, Pruitt, & Clark, 2005). Economic impact assessments are also worthwhile as they allow governments or municipalities greater insight into the possible utilization of sports-related monetary infusions (Solberg & Preuss, 2007). However, neither sponsorship research nor sports-driven economic impact studies investigate the attitudes and behaviors of the individual consumers involved in the consumption of the service of sports. Recent estimates of consumer spending on sports or sports-related products are eye-catching. The sports business industry in the United States is annually a $200+ billion operation. In terms of feasible comparison, the sports business industry in the United States is significantly larger than many other entertainment service industries, including the motion picture industry. Each year, sports spectators spend billions of dollars to cover the costs of tickets, concessions, parking, on-site merchandise sales, travel to and from sporting events, and internet purchases of officially licensed league or team apparel, in addition to a variety of other sports related spending initiatives (Adams, 2008).

In the United States, one sport has emerged as the leader in terms of popularity and interest. The National Football League (NFL) has grown in recent years to be the favorite sport of more sports fans in the United States than any other sport (Hall, 2010). The NFL has grown as its exposure on television has increased. In 2012, NFL games are televised on CBS, Fox, NBC, ESPN, and the NFL Network, and DirecTV offers NFL fans the opportunity to watch all Sunday afternoon regional games by subscribing to that service through the satellite television provider. Additionally, and probably the strongest indication of the popularity of the NFL, the February, 2012, NFL Super Bowl set a record as the most watched television program in history, pulling in an estimated 111.3 million viewers (McCarthy, 2012). And although NFL games are available through a variety of media outlets, attendance at NFL games remains unbelievably high. For the 2011 NFL season, 26 of the 32 NFL teams filled 90% or more of their stadium


seating capacity for home games. Of these 26, nine teams were at 100% or higher (with some teams selling standing-room only tickets that put attendance figures above actual stadium seat capacity numbers), and another twelve teams averaged between 95.0 and 99.9% (http://espn.go.com/nfl/ attendance/_/sort/homePct).

Sports-driven consumer spending has increased dramatically in recent years (Euromonitor International, 2011). As a result, owners of sports teams and managers of sports organizations need better understanding of the consumption habits of sports consumers. Many questions remain unanswered for sports organizations seeking to gain greater insight into the perceptions, motivations, and attitudes that shape sports consumers and help determine their consumption preferences. Additionally, as the sports industry continues to introduce new physical goods and services (teams, apparel, equipment, concessions, parking options, etc…), it becomes increasingly clear that the identification and understanding of loyal customers is of vital importance for any sports-related provider.

For a number of years, marketing research focused on the critical aspect of satisfying customers. Significant time and effort has been spent identifying the factors that lead to satisfied consumers (Morgan & Hunt, 1994). Recently, however, research has found that obtaining and maintaining loyal customers is, in all probability, more important than the overall satisfaction of customers (Agustin & Singh, 2005). Moreover, Reichheld and Teal (1996) have shown that even small increases in loyalty can produce rather large improvements in overall profitability. As such, uncovering the factors that create loyal customers is of utmost importance for organizations.

Although the concept of loyalty has been extensively studied, developing a universally-accepted definition of it in marketing has been elusive. One of the most popular conceptualizations of loyalty is credited to Oliver (1997), who believed that two distinct forms of loyalty exist. The first, behavioral loyalty, represents specific purchases by consumers. The second, attitudinal loyalty, revolves around a mental commitment toward the brand and the consumer’s expected commitment to purchasing. Chiou and Droge (2006) used Oliver’s (1997) cognitive-affective-conative loyalty framework to study the antecedents of loyalty. The authors utilized this framework to identify specific consumer beliefs and attitudes that were deemed important in developing customer loyalty. Two factors, consumer satisfaction and trust, were found to be important predictors of loyalty. However, the majority of research focusing on the antecedents of loyalty often ignores the consumer’s motivation for purchasing. Based on the aforementioned loyalty framework, it can be noted that the consumer’s motivation to consume is likely to have an important influence on the loyalty exhibited by customers. Finally, Oliver’s loyalty framework (1997) also underscores the role of involvement as an antecedent of loyalty. As sports purchases are often driven by highly involved consumers, it is important to understand how this involvement or commitment relates to loyalty and consumption motivation. Therefore, the present research study investigates the relationships between an NFL fan’s consumption motivation, customer commitment, and consumer loyalty. LITERATURE REVIEW Consumption Motivation

Consumer socialization is the process by which young people develop consumer-related skills, knowledge, and attitudes (Moschis & Churchill, 1978; Ward, 1974, 1980). More simply defined, consumer socialization is the process of learning how to be a consumer. Consumer socialization research identifies a variety of influential sources often identified as socialization agents that impact consumers from a very young age. These influences help each consumer develop his or her attitudes, motivations, and behaviors as consumers. Additionally, research has shown that socialization agents may, but do not have to be, individuals (Clark, Bush & Martin, 2003).

The consumer socialization literature has identified a consumer's motivation to consume as a critical influence in the development of consumption-related skills, attitudes, and behaviors (John, 1999). Conceptually, a consumer’s consumption motivation can fall into two distinct categories. The first, objective motivations to consume, reflect a consumer's desire to purchase products based on economic,


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functional, or objective reasons (Moschis, 1978). Thus, consumers objectively motivated often focus on a product’s economic benefits, frequently seeking better value through shopping comparisons (Moschis, 1981). The second type of consumption motivation, social, recognizes that consumer often place a significant level of importance on the perceptions and feelings of others in the marketplace. Social motivations to consume are frequently driven by conspicuous consumption and a consumer’s desire for self-expression in consumption-related decisions (Moschis, 1981). More recent research has identified a positive relationship between social motivation to consume and many of the variables related to materialism (Fitzmaurice & Comegys, 2006).

In the world of sports, consumer motivation has been examined frequently based on a specific league or sport. The majority of these studies examine attendance motivations for consumers at sporting events, such as Australian football (Hoye & Lilis, 2008; Neale & Funk, 2006), or college basketball (Ridinger & Funk, 2006). Customer Commitment

As consumption motivation often drives a consumer to adopt specific attitudes and behave in certain manners, it is important to understand how this motivation is related to customer commitment. In marketing, commitment, along with trust, has been established as one of the most critical foundations for organizations seeking to establish long-term relationships with customers. Morgan and Hunt (1994) defined commitment between a customer and an organization as “an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it; that is, the committed party believes the relationship is worth working on to ensure that it endures indefinitely” (p. 23). The central theme of the Morgan and Hunt (1994) conceptualization of customer commitment is that without this type of emotional involvement, relationships between organizations and customers never reach full potential. As a foundation in the buyer-seller relationship, customer commitment is critical for both parties seeking to build long-lasting consumption relationships.

Customer commitment is often influenced by organizational behaviors in a consumption-driven environment. Tax, Brown, and Chandrashekaran (1998) found that as a consumer’s dissatisfaction with complaint handling increased, customer commitment decreased. Research has also shown that a service customer’s commitment is often driven by varying levels of financial, structural, or social connections with the service brand (Hsieh, Chiu, & Chiang, 2005). Research focusing on customer commitment has established that it can also be a significant predictor of consumer behaviors and attitudes. Customers who possess a strong sense of commitment to an organization are more likely to remain customers of that organization (Morgan & Hunt, 1994). Additionally, customer commitment has been shown to exhibit a significant influence on a consumer’s desire to switch service providers (Bansal, Irving, & Taylor, 2004). As such, a lack of commitment is seen as an important variable that could influence consumers to make specific purchases related to product brands. Loyalty

One of the most studied, yet most difficult to define variables in marketing is the concept of customer loyalty. Oliver (1997, 1999) has put forth considerable effort in an attempt to create a universally-accepted conceptualization of customer loyalty. Most researchers in marketing today accept that customer loyalty can occur both in attitudinal and behavioral forms. Attitudinal loyalty suggests that customers are loyal to a specific product when they possess favorable or positive beliefs toward that product (Agustin & Singh, 2005). Although attitudinal loyalty suggests that customers have favorable perceptions of products, it is only an indication of a consumer’s mental connotations and does not encompass the act of actual product purchase. Therefore, the second form of customer loyalty, behavioral loyalty, is critical to the conceptualization of loyalty as it defines loyalty as a customer’s inclination to purchase a product based on a precedent of past purchases (Russell & Kamakura, 1994). Finally, it is important to note that recent marketing research studies are focusing on customer loyalty, not brand loyalty. This conceptualization is based on loyalty characteristics present in customers as opposed to characteristics attributed to brands (Zhang, Dixit, & Friedmann, 2010).


HYPOTHESES

Both objective and social motivations to consume have been shown to have distinct influences in the consumer socialization literature. As objective motivations to consume have been shown to be positively related to consumption-based communication in families, and negatively related to exposure to television (Moschis & Churchill, 1978), objective motivations to consume are often considered positive influences in the decision-making processes of consumers. Conversely, social motivations to consume are often associated with materialistic views and conspicuous consumption, leading many to assume that socially-motivated consumers are negatively influenced by these motivations (John, 1999).

However, the influence of specific motivations to consume on the customer commitment of NFL fans might actually contradict the positive-negative trend seen in past studies. Recent research has shown that sports fans often exhibit extreme social connections with their favorite sports teams (Heere & James, 2007). The behaviors and actions of sports fans are often heavily influenced by the need for social recognition and socialization through a specific team (Dionisio, Leal, & Moutinho, 2008; Funk & James, 2006). Previous studies suggest that being a committed fan of a specific sports team is comparable to joining a religion, complete with rituals, sacred behaviors and affiliations (Percy & Taylor, 1997). Real and Mechikoff (1992) suggested that for the most deeply involved sports fans, the sport and/or a specific team actually become a form of self-identification. Devoted sports fans become ritualistic consumers, dedicated to the social status that this type of conspicuous consumption brings to their life. Hunt, Bristol, and Bashaw (1999) have proposed that sports fans can be divided into strata. The three highest levels of sports-involved fans, devoted, fanatical, and dysfunctional, all exhibit differing levels of social desirability through sports, suggesting that these sports fans consistently adapt to fit into the social norms associated with their favorite team or sport.

In the present study, the socially-driven sports fan is likely to be more significantly influenced by social surroundings than by any monetary or financially-driven motivation. Specifically, NFL fans desiring to be accepted by their fellow sports fans are not likely to be driven to consume by financial or quality considerations, and are more likely to be socially-motivated to consume. Committed NFL fans will want to participate in the consumption experiences that provide them with the opportunity to display their involvement as fans. These activities include purchasing memorabilia, apparel, and tickets to games of their favorite teams. Objectively motivated consumers would often be hesitant to make these types of purchases, unless a true benefit-over-cost relationship existed. Additionally, early conceptualizations of customer commitment suggested that social-based market transactions, as opposed to those driven by economic motivations, were commonly associated with committed customers (Cook & Emerson, 1978). As customer commitment in the present study is an emotionally-driven concept, it is likely that the customer commitment of the NFL fans in the present study will be negatively influenced by objective motivations to consume and positively influenced by social motivations to consume. Hence:

Hypothesis 1: The greater the objective motivation to consume of an NFL fan, the less the customer commitment of an NFL fan to his or her favorite team. Hypothesis 2: The greater the social motivation to consume of an NFL fan, the greater the customer commitment of an NFL fan to his or her favorite team.

Customer commitment is also likely to drive the loyalty sports fans feel and show toward their

favorite team. Berry and Parasuraman (1991) propose that commitment, from both the organization and the customer, forms the basis of any consumption relationship. Without customer commitment, organizations run the risk of establishing repeat purchases from customers that are primarily based on the customer’s lack of effort to find suitable substitutes, or a lack of acceptable substitutes in that product category. As Morgan and Hunt (1994) suggest, commitment from customers is vital for organizations seeking to claim valuable monetary outcomes from customers. Customer attitudinal loyalty and purchase loyalty are likely two of the most sought after outcomes for all organizations.


Multiple research studies have shown that customer commitment is likely to have a significant and positive impact on customer loyalty perceptions and actions. Initially, Fullerton (2003) found that when customers possess shared values and identification with an organization, customer loyalty to that organization is positively impacted. As established earlier, sports fans often identify socially with their favorite teams, indicating shared values and a significant level of commitment. Results from a separate study investigating independent customer samples from restaurants and department stores indicate that committed customers are expected to both continue purchasing from the same retailer, and increase the amount of overall purchases made (Lacey, 2007). Additionally, research has shown that in a sports setting, consumer satisfaction from committed consumers is a strong predictor of consumer attitudinal loyalty (Bodet & Bernache-Assollant, 2011). The implications from this study suggest that customer commitment is critical in establishing repurchase intentions of customers.

Three very recent studies have found strong bonds between customer commitment and loyalty measures. Jones, Fox, Taylor, and Fabrigar (2010) found that service customers who possess affective commitment toward their service provider exhibit strong loyalty-based responses to that service provider. As affective commitment is described as the psychological commitment one feels for an organization based on favorable perceptions of that organization, it is likely that this commitment is ever-present in the relationship between NFL fans and their favorite teams. Previous research analyzing soccer fans indicates that fans are committed to their teams, even through the positives and negatives associated with wins and losses. The results suggest that these committed fans are “bound” to their teams (Koenigstorfer, Groeppel-Klein, & Schmitt, 2010). Finally, it has been shown that soccer fans who express pride in their team are more likely to exhibit customer commitment and loyalty toward that team. Pride is also expected to lead to increased consumption behaviors for these fans (Decrop & Derbaix, 2010). Hence:

Hypothesis 3: The greater the customer commitment of an NFL fan to his or her favorite team, the greater the attitudinal loyalty of an NFL fan to his or her favorite team. Hypothesis 4: The greater the customer commitment of an NFL fan to his or her favorite team, the greater the behavioral loyalty of an NFL fan to his or her favorite team.

Finally, it is expected that the attitudinal loyalty of NFL fans is likely to have a positive impact on the

behavioral loyalty of these fans. Fans with positive perceptions of their favorite team often choose to remain psychologically loyal to that team, developing a social attachment with that team and its players. This attachment will likely become evident in the behaviors of fans, culminating in purchase behaviors that indicate behavioral loyalty. Park, MacInnis, Priester, Eisingerich, and Iacobucci (2010) have found that consumers who feel ‘attached’ to a certain brand feel a deep loyalty to that brand. Brand attachments explain a deep, almost devotional relationship with brands that consumers have when they basically fall in love with specific brands. Consumers will actually become emotional, both in positive and negative forms, based on the implications associated with their beloved brands. Sports fans often possess a very similar attachment to their favorite teams. Recent research found that the self-esteem responses of baseball fans positively predicted their purchase intentions, identified as conative loyalty (Harrolle, Trail, Rodriguez, & Jordan, 2010). And, as Park et al. (2010) found that brand-attached consumers at the highest level are more likely to spend their own money to express their devotion to their brand, it is expected that fans of the NFL will exhibit the same relationship when making purchase decisions involving their favorite team. Hence:

Hypothesis 5: The greater the attitudinal loyalty of an NFL fan to his or her favorite team, the greater the behavioral loyalty of an NFL fan to his or her favorite team.


METHOD Measures

Consumption motivation was assessed using a 9-item scale developed by Moschis (1978). Five items of that scale assess objective consumption motivation, and four items of that scale assess social consumption motivation. Customer commitment was assessed using a revised 4-item scale from Morgan and Hunt (1994). Attitudinal loyalty was assessed using a revised 3-item scale originally used by Muncy (1983) and Selin, Howard, Udd, and Cable (1988). One item from the attitudinal loyalty scale was a negative indicator of attitudinal loyalty and was reversed-coded before final analysis. For each of the aforementioned measurement scales, responses were measured on a 5-point Likert-type scale, ranging from 1 (strongly disagree) to 5 (strongly agree). Reliability analyses on these scale items exhibited acceptable Cronbach’s (1951) alpha scores (objective consumption motivation = 0.821, social consumption motivation = 0.873, customer commitment = 0.934 , attitudinal loyalty = 0.883). Each of the aforementioned scales was summed before final analysis.

Finally, behavioral loyalty was assessed using a single question taken from Pritchard, Havitz, and Howard (1999) and revised to fit the current study. The question asked respondents to identify the amount of money they had spent over the past 12 months on products directly related to their favorite NFL team. Sample and Data Collection

Students from three separate upper-level marketing courses at a Midwestern university were asked to find and distribute questionnaires to individuals who were fans of the NFL. Each student received training on how to identify potential respondents and how to administer the questionnaire. Students were responsible for gathering completed questionnaires and returning them. Each student was asked to find one NFL fan in each of five separate age designations (21-30, 31-40, 41-50, 51-60, and 61+).

Eighty-one separate students were given five questionnaires each and asked to distribute the questionnaires to NFL fans in specific age groups, representing a total of 405 potentially distributed questionnaires. These questionnaires contained the aforementioned measurement scales and demographic questions. Completed questionnaires were received from 302 NFL fans, a 74.6% response rate. Table 1 provides descriptive statistics for the sample. RESULTS

To assess the overall relationships between the variables, a path model analysis using Amos 17 was performed (Arbuckle, 2008). Results from this analysis are presented in Table 2. Using the maximum likelihood method of estimation, the overall fit indices for the model appear satisfactory, indicating an acceptable fit of the model to the data. [x2 (4) = 8.669, p = 0.070, NFI = 0.97, RFI = 0.88, IFI = 0.98, TLI = 0.93, CFI = 0.98]

As shown in Table 2, four of the five hypothesized relationships are supported, two at the p = 0.00 significance level, one at the p < 0.01 level, and one at the p < 0.05 level. Hypotheses 1 was not supported. Although the relationship between an NFL fan’s objective motivation to consume and his or her customer commitment was negative, as predicted, the relationship was not significant. Hypotheses two and three were supported, as an NFL fan’s social motivation to consume positively and significantly predicted his or her customer commitment, and an NFL fan’s customer commitment positively and significantly predicted his or her attitudinal loyalty. Both of these relationships were significant at p = .000. Additionally, the results indicate that an NFL fan’s customer commitment positively and significantly influences his or her behavioral loyalty (p < .01), providing support for hypothesis 4. Finally, as expected, an NFL fan’s attitudinal loyalty positively and significantly influences his or her behavioral loyalty (p < .05), lending support for hypothesis 5.


TABLE 1 RESPONDENT CHARACTERISTICS

Characteristic Frequency Characteristic Frequency Race Marital Status African-American 45 Single 91 Caucasian 232 Married 153 Hispanic 5 Divorced 42 Asian 2 Other 9 Bi-Racial 5 Missing 7 Other 3 Missing 10 Income Level $ 0 - 25,000 59 Age $ 25,001 - 50,000 76 21-30 67 $ 50,001 - 75,000 92 31-40 62 $ 75,001 - 100,000 51 41-50 63 $100,001+ 23 51-60 56 Missing 1 61+ 54 Gender Female 77 Male 221 Missing 4

TABLE 2 PARAMETER ESTIMATES FOR PREDICTION PATHS

Hypothesis Prediction Paths

( ) Standardized

Regression Weights

p

H1 Objective Consumption Motivation

Customer Commitment

-0.043 0.456

H2 Social Consumption Motivation

Customer Commitment

0.228 0.000

H3 Customer Commitment

Attitudinal Loyalty 0.681 0.000

H4 Customer Commitment

Behavioral Loyalty

0.196 0.008

H5 Attitudinal Loyalty Behavioral Loyalty

0.174 0.019

Variance explained: Cust. Commitment = .049; Att. Loyalty = .464; Beh. Loyalty = .115


DISCUSSION

In terms of practical implications for NFL franchises, one thing is clear: committed customers are loyal customers. The results of the present study clearly indicate that NFL fans who feel a strong sense of commitment to their favorite team are very likely to express sincere attitudinal devotion to that team, and more importantly for the NFL franchise, spend their money on the merchandise and game experiences of their favorite team. Consequently, the key for NFL organizations is identifying the fans who are most committed, and placing a greater focus on both providing those customers with opportunities that reinforce that commitment, and giving those customers opportunities to make purchases. NFL organizations can make a concerted effort to do so by focusing on game day experiences. All NFL teams are guaranteed eight home games during each regular NFL season. This provides each organization with the opportunity to reach its most committed fans only eight times when these experiences include a regular season home game. As regular season home games are likely the consumption outings with the highest attendance of committed fans, these game-day experiences represent the best opportunity for NFL organizations to provide elite shopping experiences for fans.

All NFL organizations have team stores within their stadiums. These stores are dedicated to providing fans with the greatest total amount of team-related merchandise. However, one commonly observed problem exists with these team stores on game days. In 2011, the average attendance at an NFL game was 64,698 (http://static.nfl.com). A common occurrence from this vast number of attendees is severe over-crowding in team stores, specifically during the hours before and after games. This likely leads many committed fans to either avoid the team store environment completely, or commit fewer minutes to the team store shopping experience. Having committed fans forgo shopping experiences during a visit to an NFL game represents a sizable lost opportunity for the organization. Committing greater amounts of space to the team store, or providing multiple committed areas for team merchandise, even if underused at other times during the year, would give organizations a much better opportunity to satisfy the buying desires of its most committed customers.

A second implication suggests that socially motivated NFL customers are more likely to be committed customers. This might not be a surprise to devoted sports fans in any sport, but it is a critical piece of information that NFL organizations can utilize for their benefit. Socially motivated consumers make purchase decisions based on the social ramifications that they perceive are related to their purchases, and will purchase products that are expected to have positive social implications. NFL organizations do not need to search for their socially driven customers. Many of these shoppers show up for every NFL home game involving their favorite team. Some arrive hours before the start of games to participate in the ritual of tailgating, the experience of socializing in a party-type atmosphere in the parking lots and common areas surrounding football stadiums. This also becomes the socially motivated customer’s opportunity to compare his or her merchandise with other committed fans of the same team. These tailgating experiences provide NFL organizations with the greatest opportunity to reach their most committed fans. In fact, recent research suggests that those fans most committed to tailgating exhibit the greatest involvement, social interaction, and self-identity with their favorite football teams (Drenten, Peters, Leigh, & Hollenbeck, 2009). It would make logical sense that NFL organizations would use these experiences as opportunities to expose committed fans to the newest items in team merchandise. As these committed NFL fans commonly serve as the opinion leaders for a large following of dedicated NFL fans, investing time and effort into understanding and serving these customers, even to the point of offering free samples or giveaways, would provide NFL organizations with occasions to strengthen their ties with their most committed customers. CONCLUSION

The most logical continuance from the present study is to answer the question of “what leads to customer commitment?” Although social motivation to consume is seen as a significant predictor in the present study, it is not the only variable that leads NFL fans to exhibit commitment to their favorite NFL


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The Challenge of Online Privacy to Global Marketers

Héctor R. Lozada Seton Hall University

Susan O’Sullivan-Gavin

Rider University

Gary H. Kritz Seton Hall University

Alma Mintu-Wimsatt

Texas A & M University-Commerce

Over the past year the debate on the challenges that online privacy pose to global marketers has intensified. As a result, there is a push in the U.S. and the European Union to protect consumer online privacy and this push is being countered by a move by online advertisers and marketers to self-regulate. In this article, the authors outline tactics that marketers pursue that have come under serious scrutiny over the past two years. Also addressed are legal and voluntary measures that are being considered, and recent infractions that are cause for concern. The article concludes by addressing areas that remain unclear regarding privacy protection and consumer trust. INTRODUCTION

As of March 2012, twenty countries, including China, the United States and Russia, account for 75

percent of world Internet users, while the remaining 25 percent of Internet use is shared by 226 countries (Internet World Statistics, 2012). Fifty eight countries (16 percent of the world’s population) have Internet penetration rates of fifty percent or more of their population, and when added they account for about 72 percent of world Internet users (Internet World Statistics, 2012a). With only about 40 percent of its population having access to the Internet, China still represents the largest world user, followed by the United States.

The Internet has enabled us to change and expand the way we communicate with one another, doing away with some geographical and time barriers. More importantly, it has changed the way we access information and expand our knowledge. Through the Internet, businesses can sell and communicate with customers. The Internet also allows businesses to identify and learn about their customer base. In summary, the Internet has had a definite impact on the way consumers and business organizations relate to one another, globally.

With acceptance, though, comes a decrease in skepticism. Consumers may assume that the same laws or societal rules that protect privacy in the physical world apply to the digital world as well. Contrary to


this assumption, the Internet remains largely unregulated and the policies governing it underdeveloped (Privacy Rights Clearinghouse, 2012). Laws concerning online privacy are still being developed. The U.S. Supreme Court largely has taken a hands-off approach to regulating the Internet and online privacy in favor of free speech. However, the federal government is increasingly interested in regulating the Internet, for example through child pornography and gambling laws (Hunter, Lozada, & Mayo 2010).

Presently there is impetus for the creation of government regulation in the U.S. and abroad as business organizations operating in a global environment rely more heavily on the Internet and on new media for initiating, facilitating and maintaining contacts with customers. Our goal here is to continue the discussion on online privacy, with a focus on highlighting some of the issues that have intensified over the past couple of years.

ONLINE PRIVACY: HOW INFORMATION ABOUT CUSTOMERS FLOW SOMEWHAT FREELY TO MARKETERS

Lohr (2010) asserts that while individuals would not consider giving a stranger their social security

number or their email address, they often dole out all kinds of personal information on the Internet that allows such identifying data to be deduced. Internet users provide information to others at almost every step of an online session. Frequently, this information is like a puzzle that needs to be connected before the user’s picture is revealed (Privacy Rights Clearinghouse, 2012). The following Internet activities reveal user information: signing up for Internet service, e-mail and list-serves, browsing the Internet, instant messages and social networks (interactive use), personal Web sites and blogs, managing your financial accounts and online bill payments. Users often do not realize that information they provide to one person or company may not make sense unless it is combined with information they provide to another person or company.

E-mail

One of the most basic and frequently engaged online activities involves using e-mail. When a person corresponds through e-mail, they obviously realize that they are giving information to the recipient. What the initiator of the message may not realize is that he/she might also be giving information to any number of people, including their employer, the government, their e-mail provider, and anybody that the recipient passes the message to. In the U.S., the federal Electronic Communications Privacy Act (ECPA) makes it unlawful under certain circumstances for someone to read or disclose the contents of an electronic communication (US Department of Justice, 2010). The ECPA, however, contains many exceptions. For example, the ECPA makes a distinction between messages in transit and those stored on computers, with stored messages generally given less protection than those intercepted during transmission. Additionally, if the e-mail system is owned by an employer, the employer may inspect the contents of employee e-mail on the system, and is therefore not private.

Web Browsing and Cookies

From our standpoint as marketers, perhaps the most relevant consumer online activity is Web browsing. When users visit different Web sites, many of the sites deposit data about their visit on their hard drive. Cookies, as they are known, are pieces of information sent by a Web server to a user's browser. They may include information such as login or registration identification, user preferences, and online shopping cart information. The browser saves the information, and sends it back to the Web server whenever the browser returns to the Web site. For marketers, cookies are extremely useful since they allow the Web server to customize the display it sends to the user, or it may keep track of the different pages within the site that the user accesses. Take as an example a registration card for a product that a customer fills out online. The customer generally provides name and address, which is then stored in a cookie. The marketer then uses cookies to make special offers to returning users and to track the results of their advertising. Some users may be well aware of these so-called first-party cookies. What they may not know is that there are some cookies (third-party cookies) that communicate data about the user to an


advertising clearinghouse which in turn shares that data with other online marketers. Additionally, users may not be aware that many websites have begun to utilize a new type of cookie called a flash cookie that is more persistent than a regular cookie (Privacy Clearing House, 2012). Flash cookies may carry on despite user efforts to delete all cookies. Among the companies using flash cookies are MySpace, ABC, ESPN, Hulu, MTV, NBC Universal, Disney, and Warner Brothers. Between July and September 2010 least five class-action lawsuits were filed in California accusing these media companies and technology companies like Specific Media and Quantcast of surreptitiously using flash cookies. According to Vega (2010), the lawsuits contend that the companies collected information on the Web sites that users accessed and from the videos they watched, even though the users had set their Web browser privacy settings to reject cookies that could track them. Scott A. Kamber, a privacy and technology lawyer with KamberLaw who is involved with some of the cases states that these cases are about the right of a computer user to dictate the terms by which their personal information is harvested and shared (in Vega, 2010). These cases are still pending at the time of this writing.

Web Bugs

Many Web sites use Web bugs to track who is viewing their pages. A Web bug (also known as a tracking bug, pixel tag, Web beacon, or clear gif) is a graphic in a Web site or a graphic-enabled e-mail message (Privacy Rights Clearinghouse, 2012). The Web bug can confirm when the message or Web page is viewed and record the IP address of the viewer. Regrettably, users have little control over the data collection by Web bugs on most sites. Furthermore, Web bugs placed by third-parties are not governed by a website’s privacy policy.

Direct Marketing

Consumers may notice that online newspapers and other businesses have boxes asking if the website can save their account information for future transactions. Unbeknown to most, though, whether it asks for permission to save a person’s information or not, that information is being stored and used by the marketing department. In this context, direct marketing is a sales pitch targeted to a person based on prior consumer choices (Privacy Rights Clearinghouse, 2012). This is how Amazon.com may recommend books that are similar to others that have been purchased by a customer, or how Google’s e-mail service, Gmail, places relevant advertisements next to e-mail by scanning incoming e-mails.

Behavioral Marketing or Targeting

Behavioral marketing or targeting refers to the practice of collecting and compiling a record of individuals' online activities, interests, preferences, and/or communications over time. Companies engaged in behavioral targeting routinely monitor individuals, the searches they make, the Web pages they visit, the content they view, their interactions on social networking sites, the content of their emails, and the products and services they purchase. Further, when consumers are using mobile devices, even their physical location may be tracked. This data may be compiled, analyzed, and combined with information from offline sources to create even more detailed profiles.

Marketers can then use this information to serve advertisements to a consumer based on his or her behavioral record. Ads may be displayed based upon an individual's web-browsing behavior, such as the pages they have accessed or the searches they have made. Advertisers believe that this may help them deliver their online advertisements to the users who are most likely to be influenced by them. Behavioral information can be used on its own or in conjunction with other forms of targeting based on factors like geography or demographics. Marketers have developed an array of sophisticated data collection and profiling tools which monitor and analyze our online activity. Typically, behavioral targeting will place a cookie on the user’s computer. The cookie might link the user to categories based on the content of the pages they visit. The cookie can then be used to show people ads that are relevant to their interests, regardless of the sites they are visiting. Google, Microsoft, and Yahoo all engage in some form of behavioral targeting.


Vega and Kopytoff (2010) assert that behavioral targeting as a tool has grown enormously over the past decade. As an example, they cite an analysis of ad agency data by The Interactive Advertising Bureau that found that in 2009, 80 percent or more of digital advertising campaigns incorporated behavioral targeting in some way (Vega & Kopytoff, 2010). Moreover, PricewaterhouseCoopers claims that online advertising revenue, including contextual and behavioral ads, was $12.1 billion for the first half of 2010, an 11.3 percent increase over the same period last year. Google representatives say they expect display ads to become a $50 billion market by 2015 (Vega & Kopytoff 2010).

CHALLENGES OF ONLINE PRIVACY TO GLOBAL MARKETERS Online Privacy Laws

According to Miyazaki (2008), a major concern with online privacy involves how cookies are placed on the Internet user’s hard drive by a third party not directly visited by the online consumer. These “third-party cookies” are often sanctioned by the visited Web site to build consumer profiles by the third party organization for targeted marketing purposes (Lavin, 2006; Raghu, Rao, & Whinston, 2001). Third-party cookies have been a concern of the FTC since 2000. The FTC examined Web sites and found that 57% of sites in a random-sample group (N=335) and 78% of the busiest U.S. sites (N = 91 of the 100 busiest sites) allowed cookie placement by third parties. Another concern is the covert usage of these cookies. The placement of third-party cookies is often facilitated by the use of “clear GIFs” that are only one pixel by one pixel in size, which essentially makes them invisible to the consumer (Hoofnagle, 2005; Martin, Wu, & Alsaid, 2003; Miyazaki, 2008). The FTC (2000) described cookies as a “nonobvious” means of information collection and their undisclosed use as a clear violation of the notice aspect of fair information practices.

To some advertising and media experts, explaining the technology behind the ads might not be a worthwhile means of allaying the fears of consumers who worry about being tracked or who simply fear that someone they share a computer with will see what items they have browsed (Helft & Vega, 2010).

Despite all of the above, there have not been many studies that have examined consumers’ willingness to provide personal information and whether or not they are aware of how the information is being used and collected in an online context since around the year 2000. Sheehan and Hoy (2000) suggested that consumers’ concerns about privacy are much less when they are familiar with the company asking for the information (an issue of exchange), the type of information being asked for, and whether or not the individual has a relationship with the company. Phelps, Nowak, and Ferrell (2000) indicate that consumers are least willing to provide financial and personal identifier information. They also say that consumers should be provided with at least some control or input into the subsequent dissemination of personal information. But although the FTC’s past goal in 1999 and 2000 was to encourage industry self-regulation, the FTC also stated that further improvement was required to protect the privacy of online consumers effectively. That has not happened. The online technology of company information gathering software has increased dramatically in the last twelve years, and the concerns of the government and the consumer have reached epic levels. Fueling these concerns were information leaks and scandals along with the development and popularity of social media networks and websites that blurred the lines of privacy.

Considering how much information we entrust to the Internet every day, it is hard to believe there is no general law to protect people’s privacy online. Companies harvest data about people as they surf the Net, assemble it into detailed profiles and sell it to advertisers or others without ever asking permission. In March, 2011, President Obama called for legislation in response to the growing global movement to protect consumers’ privacy information online. Microsoft said it supports a broad-based privacy law and, for the time being, introduced a version of its Explorer browser that allows surfers to block some tools advertisers use to track consumers’ activities online. By April 2011, Senators John McCain and John Kerry introduced a privacy bill entitled “The Commercial Privacy Bill of Rights” (Kerry, 2011). Lee (2011), it was a legislative move that was designed to centralize various privacy efforts already under way from industry trade groups, government regulators and the Obama administration. To Senator Kerry


(2011a), the Commercial Privacy Bill of Rights will establish a baseline code of conduct for how personally identifiable information and information that can uniquely identify an individual or networked device are used, stored, and distributed. The main intent of this legislation would be to increase consumer trust in the market and to protect people from unscrupulous actors in the market by creating a set of basic rights to which all Americans are entitled” (Kerry, 2011a).

New Jersey became in 2008 the first court in the nation to rule that people have an expectation of privacy when online (Hester, 2008). When ruling in state cases, this new ruling will take precedent of the much weaker Supreme Court decisions stating there is no privacy on the internet (Hester, 2008). This ruling was handed down in a case involving federal officials seeking a user’s private information during the investigation of a crime involving her computer. The seven-member court ruled that federal officials do have a right to a user’s information when investigating a crime but they must follow legal procedures, securing a grand jury warrant first. Grayson Barber, a Trenton-based lawyer arguing for privacy groups explained that “people use the internet much like the phone making personal and sometimes sensitive transactions they don’t believe police will be able to access” (Hester, 2008). The court’s ruling, “We now hold that citizens have a reasonable expectation of privacy protected by Article I ... of the New Jersey Constitution, in the subscriber information they provide to Internet service providers -- just as New Jersey citizens have a privacy interest in their bank records stored by banks and telephone billing records kept by phone companies” (Hester, 2008) seems to lend itself to a broader interpretation. New Jersey’s ruling means that the court interprets New Jersey’s constitution to say that ordinary state citizens have a fundamental expectation of privacy when online.

In the European Union, the Data Protection Act of 1998 (DPA) implemented a European Directive to introduce privacy rights into domestic law. In April 2011, EU justice commissioner, Viviane Reding, announced plans to modernize data protection laws to increase the burden on those handling personal information (Butterworth & Bowcott, 2011). Commissioner Reding’s proposal is of “privacy by default,” therefore outlawing the current practice of requiring users of social networking and other sites to opt for privacy (opt out of data collection). A “privacy by default” rule would require explicit consent for private information such as email addresses, retained for one reason, to be used for another, and would prevent the collection of irrelevant data through software applications. Ms. Reding also wants services aimed at EU users to be bound by the EU's data protection laws regardless of their location (Butterworth & Bowcott, 2011).

Self-Regulation: Opt Out of Behavioral Targeting

The Commercial Privacy Bill of Rights (Kerry, 2011) would require collectors of information to provide clear notice to individuals on the collection practices and the purpose for such collection. Furthermore, the collector must provide the ability for an individual to opt out of any information collection that is unauthorized by the Act and provide affirmative consent (opt in) for the collection of sensitive personally identifiable information. Respecting companies existing relationships with customers and the ability to develop a relationship with a potential customers, the bill would require robust and clear notice to an individual of his or her ability to opt-out of the collection of information for the purpose of transferring it to third parties for behavioral advertising. It would also require collectors to provide individuals either the ability to access and correct their information, or to request cessation of its use and distribution.

The Network Advertising Initiative (NAI) is a cooperative of online marketing and analytics companies committed to building consumer awareness and establishing responsible business and data management practices and standards (NAI, 2010). As increasingly sophisticated online advertising technologies evolve, consumer concerns about their impact on online privacy mount. The NAI is prepared to meet these concerns with both effective industry self-regulation and sensible protections for online consumers. The NAI Opt-out Tool was developed in conjunction with our members for the express purpose of allowing consumers to "opt out" of the behavioral advertising delivered by their member companies.


Recent Violations to Consumers’ Online Privacy Even Apple, who boasts superior security in its products, was susceptible to an attack via one of its

Internet service provider, re-emphasizing concerns over privacy. When it introduced the iPad in late April, 2010, the company did not contemplate that by early June, 2010, they would be dealing with a hacking incident in which prominent users of its new iPad 3G, including military and government officials as well as media personalities and celebrities, had their e-mail addresses hacked by a group that shared its findings with online publication Valleywag to point out security flaws in AT&T's Web servers (Choney, 2010).

On November 3, 2010 Facebook announced new features that will allow local merchants and retailers to offer coupons and specials through its mobile application to U.S. users (for now) who check in to their place on Facebook (Fougner, 2010). This is quite interesting, given that a few weeks prior, Facebook acknowledged that some applications on its site had improperly shared identifying information about users and, in some cases, their friends, with advertisers and Web tracking companies (Helft, 2010). The company vowed to fix the problem and be more vigilant, although they also played down the importance of this leak. Please note that two days prior to Facebook’s announcement introducing deals, Twitter started dropping advertisements into individual users’ streams (Lee, 2010). These paid advertisements appear in a user’s Twitter stream regardless of whether they follow that advertiser or search for anything on Twitter.

In September 2011, European regulators pressed Google, to change the way it collects data on cellphone locations worldwide (O’Brien, 2011). In this regard, European regulators appear to be baffled by the tracking of consumer Internet surfing habits by technology companies, advertisers, Internet service providers and Web businesses that focus on consumers on the basis of online behavior. Since 2009 there is a law in Europe that regulates software cookies, but presently there is a move towards allowing the online advertising industry to self-regulate their cookies. However, regulators representing E.U. member states backed by consumers’ rights groups have recoiled at the voluntary arrangement, arguing that it does not adequately protect individuals from involuntarily permitting marketers to collect personal data (O’Brien, 2011).

On July 31, 2012, the Commission Nationale de l'Informatique et des Libertés (CNIL), the French privacy protection agency, asked Google to examine private information that cars taking pictures for its Street View service collected, after Google acknowledged that it had retained some of the information despite promising to delete it (Pfanner, 2012). A week earlier, the Information Commissioner’s Office of Britain made the same request. Google maintains that it never intended to collect the data, and that it was the result of mistakes by an engineer working on the Street View program. The company had promised to destroy the information but acknowledged it had not actually deleted all of it (Pfanner, 2012).

On August 9, 2012, as we were completing this article, the Federal Trade Commission fined Google $22.5 million to settle charges that it had bypassed privacy settings in Apple’s Safari browser to be able to track users of the browser and show them advertisements, in violation of an earlier privacy settlement with the agency (Miller, 2012). Google once again claimed that its actions had been unintentional and were the result of change in Safari of which Google was unaware. Once they were made aware of it, Google claimed that it stopped tracking Safari users and showing them personalized ads. According to Miller (2012), several analysts have questioned the commission’s power to effectively police tech companies, which have repeatedly settled privacy violations with the commission. The consensus is that federal regulators do not have enough financing or the legal authority to sufficiently monitor and punish tech companies for privacy violations. Sadly, the same can be said of international counterparts.

CLOSING REMARKS

International trade has undergone a wholesale revolution because of the growth in the use of the

Internet by both sellers and buyers. The growing use of search engines to navigate the Internet, the evolution of smartphones that allow individuals access to the Internet wherever they are (via browsers or third-party apps), and the success of social media sites like Facebook.com have afforded us some major


opportunities for businesses, but these do not come without major challenges. Social media gives people today the sense of community and closeness. Unfortunately with new social media, an argument can be made that a person’s privacy can start to diminish. The Internet is one of the best tools in which marketers track customer buying behavior patterns for a company. Unfortunately this can sometimes affect people’s privacy. According to Lohr (2010a) Congress and the Federal Trade Commission are mulling tighter restrictions on online data collection, disclosure and use. A group of privacy groups sent their principles for controlling data collection and use, in a letter sent to members of Congress on Monday, April 26, 2010. The groups include the Center for Digital Democracy, the Consumer Federation of America, the Electronic Frontier Foundation, the United States Public Interest Research Group and the World Privacy Forum. Their suggested steps include limiting the ability of web sites and ad networks to use behavioral data to 24 hours after it is collected, and requiring consumers’ permission — an opt-in approach — to hold such data beyond 24 hours (Lohr 2010a). In addition these privacy advocacy groups say that people should be aware and informed about who is tracking their web browsing patterns and that individuals should have the option to remove their personal data from the tracker’s database.

Among all the uncertainties that we face, we know for sure that marketing and international trade are now intricately connected to the Internet. Because of this, the issue of online of privacy will continue to be a concern and source of skepticism for consumers and a challenge to global marketers. For consumers, their apprehension is enhanced by confusion regarding what companies and/or governments may and may not do with the information that they gather from customers via web-based transactions. A related issue is whether private information should be kept online indefinitely. From a government’s perspective, as more of our economic activity becomes web-based or web-oriented, a country’s economy becomes more susceptible to cyberterrorism attacks that ripple into the global economy. Should regulations need to be set now to protect online privacy or should we allow marketers to self-regulate?

Presently, there are no uniform international laws to deal with violations to online privacy. Thus, we are confronted with the dilemma of having no one specifically monitoring for potential violations to consumers’ rights to privacy online. Last, it is becoming critical to ascertain the effectiveness of opt out options and their impact on alleviating consumer skepticism.

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An Examination of How Entrepreneurs in Hong Kong Perceive Personal Success Through Business Activities

Perry Ho

Newcastle University, Australia

Lisa Barnes Newcastle University, Australia

Hong Kong is a world leader in developing its economy and entrepreneurs have a unique status. This research evaluates various components of the perception of success of these entrepreneurs and draws conclusions that will benefit the educators, the legislators as well as the new entrants wishing to become entrepreneurs. Leadership in the East has connotations of deep respect for all sections of the society and based on Confucian principles of kindness and contributions quite different from that of the West. The Hong Kong entrepreneur succeeds when they are able to blend the best qualities of the East and the West. BACKGROUND

No scholarly definition is available for an entrepreneur except by way of the description of personal traits or characteristics of an individual (Schaper et al 2011). The academics have, therefore, resorted to explaining the traits as a state of mind (Bird 1988, 1992), mindset that has a strategic orientation for decision making in a specific style, method and practice (Wiklund & Shepherd 2003) and risk takers who are also fiercely independent (McGrath & MacMillan 2000). According to Bandura (1991), an entrepreneur is capable of making difficult choices towards his goals, with exceptional determination even in hardships. However, one of the most comprehensive explanations was provided by Littunen (2000) who stated that an entrepreneur is a person whose chief and distinctive abilities are to take risks, to have knowledge of market functions and manufacturing know-how, to have marketing and management skills, and finally, to possess the ability to co-operate with others.

It is worthwhile to explore the various definitions of entrepreneurship found in literature. Authors such as Miller and Collier (2010) have attempted to give a comprehensive picture of the meaning of entrepreneurship in the modern world. One of the most insightful definitions has been that by Bhide who viewed it as “recognizing an opportunity to create something new” (2000). However, we must remind ourselves of the warning given by Drucker: “not every new business is entrepreneurial or represents entrepreneurship” (1985). He goes on to distinguish between small business management and entrepreneurship and between entrepreneurship as a personality trait and as a behavior. In their book Bringing Your Business to Life, Cornwall and Naughton apply the virtues of prudence, justice, courage and temperance to entrepreneurship highlighting the significance of values in entrepreneurship (2008). In general, an entrepreneur may be viewed as a person who is willing to take risk while responding to opportunities and thereby boosting the economy in his own way.


THE ENTREPRENEURIAL ENVIRONMENT IN HONG KONG

Hong Kong’s economic and political history has been primarily determined by its geographical location (Schenk 2001) and it forms a natural geographic port for the Guangdong province in Southeast China. Hong Kong’s commercial origins were as an entry port for China’s regional and global trade; a role that it still continues to play. In over a hundred and fifty years its importance has also grown as a financial centre in the East. The per capita of Hong Kong has a Gross Domestic Product (GDP) that is higher than the economies of four large European nations, namely the UK, France, Germany and Italy (CIA 2010). According to the Companies Registry (2010), there are over 800,000 companies registered in Hong Kong. Of these, small and medium enterprises (SMEs) account for over 98 per cent, providing 60 per cent of total private employment (Schenk 2001). This speaks volumes for the special status of Hong Kong as a world class financial hub, a centre for entrepot trading, a cost effective manufacturing centre and, currently, as a leading service centre in South East Asia. These facts are significant in making Hong Kong the obvious choice as a study in entrepreneurship. PERSONAL SUCCESS

Entrepreneurship normally connects with personal traits; consequently, personal success is often looked upon as the hallmark of successful entrepreneurship. Although it is largely true that personal attributes determine one’s success as an entrepreneur, it is difficult to define success. This is what constitutes the research problem in the present study.

The concept of success is subjective. People perceive success in many different ways and it is difficult to capture all its meanings. The Oxford Dictionary defines success as the “achievement of a desired end, or of fame, wealth or social position” (1994:1526). Another dictionary defines success as the “achievement of something that you have been trying to do . . . of a high position in a particular field,” (Collins 1999:1100). While there are many ways of looking at success, this study of successful entrepreneurs will focus on one aspect of it: personal success in business. In particular, it is important to know the individual objectives behind personal success and how entrepreneurs achieve it in the management of their own businesses. RESEARCH OBJECTIVE AND QUESTIONS

It is a fact that SMEs contribute handsomely to the GDP of a country and also provide substantial employment. This is true even in developed countries. It has been seen that in UK almost 99% of the total enterprises comprise of SMEs (BIS 2010) and employing well over 50% of the labor force (Luetkenhorst 2004). In the US too it has been documented that small business constitutes 99% of all business and employs just over 50% of the non-farm sector workforce (Office of Advocacy of the U.S. Small Business Administration 2005). Even Hong Kong has 98% of all businesses registered as SME (ACCA 2010). The situation is more or less the same all over the world. This then leads us the research question:

Research Question: How do Hong Kong entrepreneurs perceive personal success in their business activities?

RESEARCH METHODOLOGY

This study aims to discover how Hong Kong entrepreneurs perceive personal success in business and how they achieved success based on their individual experiences. It fits well into the interpretive paradigm and a case study research method is most suitable for this effort (Lincoln & Guba 2000; Gephart 1999). As the research problem is mainly about “how” and “why”, a qualitative case study methodology can yield richer details of data not available through other research methodologies such as a survey (Eisenhardt 1989; Yin 1992). Moreover, a case study is especially appropriate for studying the


trends or conditions in a rapidly changing real-life situation where the place, period, people and process affect the trend or condition and vice versa and when multiple sources of data are used (Yin 1993) as is the case in the current study.

This study investigates entrepreneurs’ perceptions of personal success and how they achieve it. Consequently, the research focuses on seven entrepreneurs operating businesses for 10 years or more and that employ fewer than 100 employees. This is the definition of an SME in Hong Kong. In order to answer the research question of “How do Hong Kong entrepreneurs perceive personal success in their business activities?” seven questions were asked.

TABLE 1

INTERVIEW QUESTIONS

RQ1 How do Hong Kong entrepreneurs perceive personal success in their business activities?

Q1 “Why are you in the business field that you are in now (e.g. finance, trading, training, etc)?

Q2 How do you measure success and can you share with me an example? Q3 In what ways do you consider yourself successful and what motivates you to

achieve the results you now enjoy? Q4 Can you give a one-sentence definition of personal success in business? Q5 What is your mission in life? Q6 What do you value most in your journey towards personal success through

business activities? Q7 Can you describe in greater detail one experience you feel most rewarding?

RESEARCH FINDINGS

Of the seven people interviewed, five were men and two were women. The following table summarizes the seven interviewees’ industries and gender:

TABLE 2

SUMMARY OF INTERVIEWEES SHOWING INDUSTRIES AND GENDER

Entrepreneur Industry Male/Female A Insurance Male B Brain Based Training Female C Dental group practice Male D Venture Capital Investment Male E Travel Agency Female F Garment Export Male G Construction Company Male


ENTREPRENEUR “A”

TABLE 3 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “A”

Q1 I met a mentor in my industry. Q2 By how many people become successful with me. Q3 I am proud of what I do and I do not like to be bossed around. Q4 Achieving my desire and dream by improving myself daily. Q5 I am financially independent. I create successful leaders by doing things I enjoy most. I

want others’ approval, respect and admiration. Q6 I value the respect I gain from others and my ability to help others to succeed. Q7 I was able to mentor a struggling individual and help her become a successful leader in

my industry. ENTREPRENEUR “B”

TABLE 4 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “B”

Q1 I followed my instinct. Q2 I am recognized in my field and have repeating customers willing to pay premium price

for my service. I feel accomplished and fulfilling about my life. Q3 I have a very healthy mindset and intellectual. I make good judgment and do what I am

capable of doing in helping others. Q4 You become successful when you fulfill your calling or mission in life. Q5 The mission of my business is to help and to teach people to broaden their minds to

think not only for themselves, to know about themselves and their ability and to make this world a better place.

Q6 I value learning as I get real happiness by increasing my knowledge and it motivates me. I also value the power to receive, trust and follow inspiration.

Q7 My whole journey of discovering how the whole brain works and solves problem and bringing out the best in other people by helping them to learn about themselves, their own ability and potential.


ENTREPRENEUR “C”

TABLE 5 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “C”

Q1 It is a professional field that helps many people and makes good money. Q2 How well I do in my business, marriage, children, friendship, contributing to the society,

financial stability and reputation. Q3 Desire to be among the champions, to make a difference, to be recognition pull me. Fear

of financial insecurity pushes me. Q4 Personal business success means financial security with a reservoir of USD 2 million. Q5 Make a difference by innovation, discovery and research within ten years. Enjoy the

next thirty or forty years of life and have fun with people I really like and feel close to. Q6 A sense of pride by maintaining a very high quality of work. I have made mistakes but

not serious ones that have damaged people. Q7 I invented a new useful technique and I was recognized by my peers.

ENTREPRENEUR “D”

TABLE 6 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “D”

Q1 I am a natural risk taker who enjoys doing business in large scale. Q2 By measuring how well the mission was accomplished. I have a sense of achievement for

being a key player in my industry. Q3 My sense of responsibility, trustworthiness, a sense of pride rather than money, the

satisfaction from achieving and completing a project successfully motivates me. Work is relaxing; doing nothing is very boring.

Q4 It is a continuing process of upgrading myself in terms of knowledge, achievement and accomplishment, and be a forerunner in my chosen area.

Q5 Honor my parents, be a good friend and a responsible parent to raise my children to make contribution to the society.

Q6 I value the process of achieving my mission the most. Q7 It was when I made a swift move to restructure a business venture and turn losses into

profit by taking calculated risk.


ENTREPRENEUR “E”

TABLE 7 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “E”

Q1 It is part of a family business I inherited from my parents. Q2 My sense of satisfaction in helping others. When I see the development and growth of my

staff, I feel very satisfied. I feel rewarded when my staff show their gratitude. Q3 I rely only on word of mouth and return business. My business survives in very difficult

economic times; I own my own office; my apartment and my business is an established and respected operation in my industry and I can to help people.

Q4 I am the best that I can be and I help others with my best effort. Q5 I enjoy helping others and I like to learn continuously in life through studies, experiences

and dealing with other people. Q6 Being able to help other people, to gain personal experiences and to have confidence in

my ability. Q7 I helped a client to escape from a political crisis without any reward. I used my connection

and company resources to help and saved the family from danger. ENTREPRENEUR “F”

TABLE 8 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “F”

Q1 When I changed career and joined the family business. Q2 I measure success by seeing how far I am with the goals I want to achieve and the level of

satisfaction of my customers. Q3 Results and satisfaction of achieving fast annual sales grew from 10 million to 120 million

in 15 years. My persistence in achieving the expectation of my customer through problem solving motivates me.

Q4 Success is a journey and it is an ongoing process that has no end. Q5 I value family life and want my children to be happy and well taught. Being in business

gives me personal satisfaction and it is also a means to provide for my family. Q6 I am satisfied when I see the business grows, the customers are happy and my staff enjoy

their work. Q7 A major US client was disappointed by our competitor who could not deliver a big and

complicated order and gave the order to us. I worked closely with my staff, suppliers and client to overcome many obstacles The result turned out great and it was a very satisfying experience.


ENTREPRENEUR “G”

TABLE 9 RESEARCH QUESTION ONE INTERVIEW QUESTIONS ENTREPRENEUR “G”

Q1 I am continuing my family business. My father has a great influence on me in choosing

this field. Q2 I do self-evaluation on a regular basis and measure performance against my personal

mission statement. Q3 I am humble, passionate and dedicated, respect others, enjoy my work, learn

continuously and know how to handle adversity. My mission statement motivates me. Q4 Achieve the intended with enjoyment and treat life as a learning experience. Q5 Personal – outstanding speaker, Tai Chi master, author

Family – respectable father, wife’s soul mate, honor my parents, good brother Career – a respectable company, change the industry, develop an unique business management philosophy Spiritual – person of integrity, follow the will of God, establish a charity to rescue forgotten Chinese children

Q6 I enjoy my work and learn in the process. Q7 Experience the growth of the company in the past two decades in many folds. When I

am able to identify the objective, define the problem and lead others to achieve the results together.

CONCLUSIONS

Research Question: How do Hong Kong entrepreneurs perceive personal success in their business activities? The survey revealed that personal success is generally perceived as high acceptance of service or product, personal gratification and the sense of pride in helpful and considerate leadership. These factors are overwhelmingly demonstrated in the findings of the interviews. Each of these characteristics will be examined in light of recent literature. HIGH ACCEPTANCE OF SERVICE OR PRODUCT

There is a complex interaction between opportunities and group resources that determines entrepreneurial activity. There are two dimensions which the entrepreneur needs to negotiate in order to establish a viable business and the opportunity structures including market conditions, access to ownership, job market condition, and legal frameworks on the one side, and social networks and cultural traditions on the other side. The Hong Kong entrepreneurs use opportunities but within the ambit of their resource as well as capability. They are usually willing to take up challenges but are not doing so blindly. High product or service acceptance in terms of sales/revenue and the ultimate impact on the bottom line are a good measure of success of an entrepreneur. PERSONAL GRATIFICATION

This is an important benchmark as a leader often becomes arrogant. It must be remembered at all times that success is a result of organizational effort, even in the case of individual professions. The greatest importance is having the right infrastructure. This means that even the lowliest of staff like janitors and drivers have to perform their tasks well in order that the entire machinery of the organization works smoothly and provides optimum performance. Arrogance has no role in success and it is the


humility of the leader that builds great teams. Humility is vital for success in Hong Kong for another reason too. This society is based on Confucian teachings that are based on deep respect for others especially if they are weak or in subordination. Humility will, therefore, make the entrepreneur liked and respected in society. SENSE OF PRIDE AND LEADERSHIP

The decision to become an entrepreneur means to take the road of uncertainty, ambiguity, innovation and real risk. Entrepreneurship is an activity that includes the discovery, evaluation and exploitation of opportunity to create future goods and services.

Entrepreneurial success is different for the entrepreneur himself, his immediate family, the social and ethnic network, local administration, the legislators and administrators of immigration policy, society at different levels (global, national, state and local) or for a specific industry or economic sector. The measures for evaluating entrepreneurial success and providing industrial benchmarks are different depending on the perspective taken.

In answering the first research questions then of “How do Hong Kong entrepreneurs perceive personal success in their business activities” – this research concludes that personal success is generally perceived as high acceptance of service or product, personal gratification and the sense of pride in helpful and considerate leadership.

Perception of success (RQ1) • High acceptance of service or product • Personal Gratification • Sense of Pride and Leadership

RECOMMENDATIONS

The concept of leadership immediately invokes individual traits and their influence upon followers and subordinates. But organizations have usually been seen as a pyramid where the control of its destiny is in a few hands that naturally reside at the top. In this top-down hierarchy the leader plays the vital role in setting the pace and order of work and decisions are delegated from top to bottom.

Entrepreneurship is leader-driven; hence the institutional theory of leadership could be examined in this context for formulating a more organized approach to building organizations. It is, therefore, recommended that in the interest of making their work easier and more productive, a larger in-depth survey that is well funded should be carried out with the specific intention to explore how entrepreneurship can be institutionalized. There is merit in these recommendations as in other countries companies like Swatch [Switzerland] and Semco [Brazil] have literally become huge companies from pretty humble beginnings, riding on new method of institutionalizing leadership. Such a study will offer Hong Kong entrepreneurs a new way of thinking and possibly open new doorways for them to achieve new heights in leadership. The Hong Kong entrepreneur is unique in the world and has a few vital lessons for all potential entrepreneurs all around the world. REFERENCES ACCA (2010), Association of Chartered Certified Accountants, The Economic Environment and the SME, viewed 29 July 2010, <http://www.accaglobal.com/pdfs/smallbusiness/EESME.doc> Bandura, A. (1982), Self-efficacy mechanism in human agency, American Psychologist, vol. 37, no. 2, pp. 122-147.


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Littunen, H. (2000), ‘Entrepreneurship and the characteristics of the entrepreneurial personality’, International Journal of Entrepreneurial Behavior & Research, vol. 6, no. 6, pp. 295-309. Luetkenhorst, W. (2004), ‘Corporate Social Responsibility and the Development Agenda: The case for actively involving small and medium enterprises’, Intereconomics, May/Jun 2004, 39, 3, p. 157. McGrath, R.and MacMillan, I. (2000), The Entrepreneurial Mindset, Boston, Massachusetts: Harvard Business School Press. Miller, R., and Collier, E. (2010), ‘Redefining Entrepreneurship: A Virtues and Values Perspective’, Journal of Leadership, Accountability and Ethics, vol. 8 (2) 2010, pp. 89. Oxford Advanced Learner’s English-Chinese Dictionary (Fourth Edition), (1994), Oxford University Press. Schaper, M., Volery, T., Weber, P. & Lewis, K. (2011), Entrepreneurship and Small Business (3rd Asia-Pacific ed.), John Wiley & Sons Australia, Ltd., pp. 4-5. Schaper, M., Volery,T., Weber, P., and Lewis, K., (2011) “Entrepreneurship and Small Business” 3rd Asia Pacific Edition, Wiley. Schenk, C.R. (2001), Hong Kong as an International Financial Centre: Emergence and Development, 1945-65, London: Routledge. US Census Bureau (2000) “1997 Economic Census: Summary Statistics for United States 1997 NAICS Basis” Census Bureau, viewed 19 May 2006, <http://www.census.gov/epcd/ec97/us> US Small Business Administration (2000) “US Data 88-99” Small Business Administration, viewed 19 May 2006, <http://www.sba.gov/advo/stats> Wiklund, J. & Shepherd, D. (2003), ‘Knowledge-based resources, entrepreneurial orientation, and the performance of small and medium-sized businesses’, Strategic Management Journal, vol. 24, no. 13, pp. 1307-1314. Yin, R. (2003), Case Study Research: Design and Methods (3rd edition), Sage Publications, Chapter 3.


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Social Media – A Moving Target

Linda Jane Coleman Salem State University

Kathryn Chandler Bayridge Hospital

Jian Gu

Salem State University

Today’s customers are engaging with brands at many different levels-from traditional storefronts and call centers to the Internet and social media. Currently, social media is a top priority in thought and action for many businesses. Thriving companies are incorporating social media into their marketing strategies to meet business objectives. This exploratory review of the literature provides an overview of social media’s history, user demographics, and present use in the business world. SOCIAL MEDIA-A MOVING TARGET

Social media is a rapidly developing, innovative, and revered field to pursue in the ever changing

world of marketing and technology. Within the past few years, social media’s development and use has exploded at institutional, societal, and interpersonal levels. Social media has moved to the top of many businesses’ agendas and is utilized in diverse aspects of organizations. According to Carlos Dominguez, senior vice president of Cisco’s COB & CEO office, successful businesses are adapting quickly to these changes while others are consequently being left behind (Hernandez 2010; Qualman 2009).

The advent of social media can be linked to the Internet’s transformation from a Web 1.0 to a Web 2.0 system of digital communication. This transformation facilitated collaborative communication and laid the groundwork for the development of social media and user generated content (Kaplan and Haenlein 2010). While the internet was originally designed to permit the exchange of information and facilitate conversing among users, it has changed in crucial ways. From one sided input to multiuser conversation threads, social media is furthering the levels of communication for all (Qualman 2009).

WHAT IS SOCIAL MEDIA

Conceptualizing social media begins with looking at its origin, the Internet, otherwise referred to as

the World Wide Web. The inception of the internet has transformed the modern world. Presently, many people use the web for a variety of reasons and services that were previously accessed from separate, often non-digital, such as information research, employment, partner seeking, watching television, or political participation (Gil de Zuniga, Puig-I-Abril and Rojas 2009; Gil de Zuniga et al. 2010; Valenzuela,


Park, and Kee 2009). Three-quarters of American adults and 93% of American teenagers report having been online in their lifetime. Most of these users report the desire for communication as the most compelling reason for using the internet (Jones and Fox 2009). Internet usage is influenced by individuals’ purpose, personality, and social demographics. The internet respectively offers an array of options for each person’s use. DEMOGRAPHICS OF SOCIAL MEDIA USERS

Young age is the most consistent finding across studies that explore the social demographics of social

media users. Social media use is not equally distributed across age groups and frequency of use and timer spent online tends to decrease with age (Chou et al., 2009; Han, 2008; Kontoz et al., 2010). Early studies that looked at the characteristics of social media users found that the majority of user tended to be highly educated, affluent, young, white men. This has changed some as social media use has significantly increased. However, Han (2009) reports that users still tend to be young, more highly educated, and affluent although the gender gap is closing. Kontoz et al. (2010) found that those who use social networking sites the most tended to report lower education and income levels. In regards to racial and ethnic demographics among social media users, Kontoz et al. (2010) found that while disparities exist across racial and ethnic groups in terms of internet access, they found none in terms of social networking use.

COMMUNICATION AND BUSINESS

The diversity of social media spans the social, recreational, and professional spheres. LinkedIn is one

such professional site where profiles resemble resumes and managers, co-workers, and customers alike create a far reaching yet accessible web of business connections (Bushey 2010). Blogs provide a place for authorship which is organized by date and are semi-permanent. Sharing options spread support, ideas, product interests or dislikes, and may be much faster and spread much further than traditional word-of- mouth communication (Kontoz 2010).

Socialized media has taken the internet from its earlier days of simple communication among users to direct engagement in real time conversations (Solis 2010). Companies are transforming the ways they develop and market products, their means of communicating with customers, and even how they obtain new customers and potential employees. The social media movement is demanding companies to listen more as well as respond. Companies should adopt new tactics to include social media into their day-to-day interaction with the end consumers. There are possibilities for companies to send these people a personalized email asking for feedback about how the company could better meet their needs (Jones and Fox 2009).

Ultimately, the use of social media has facilitated a revolutionary change in regards to who is an influential marketer. Historically, word-of-mouth (WOM) has been considered a naturally occurring event among consumers which bears the strongest influence on their buying decisions (Brooks 1957; Ditcher 1966). According to research conducted in 2008, marketers spent over 1.54 billion dollars on WOMM enterprises and this is projected to rise to 3 billion by 2013 (PQ Media 2009). The Internet furthers WOM’s accessibility and visibility among an ever increasing population of consumers, businesses, and marketers. While social media serves to broaden WOMM opportunities, WOMM is no longer solely created by businesses, it is becoming more consumer generated (Kozinets et al. 2010).

Whereas American consumers have historically relied on purchase recommendations from friends and family, a 2010 study by Cone Inc. found that four out of five consumers now go online to verify these recommendations. This change reflects consumers’ mistrust of traditional media and marketing sources as well as increase in online activity. While marketers attempted to influence consumers by creating WOMM among their friends and family and presently through social media campaigns, the Cone study warns that this is not enough as consumer online verification is the new norm (Cone 2010).


GLOBALLY Social media is unique in its cross cultural reaching and utilization. The increase in global

communication signifies many opportunities and challenges for businesses, marketing, and consumers. A 2009 survey by the Nielsen Company reported that the average global consumer spent more than five and a half hours a day on social networking sites like Twitter and Facebook, marking an 82% increase from the prior year’s survey. At the time of this survey, Facebook ranked as the top social networking site in the world nearing 400 million users (The Nielson Company 2010). Qualman points out that if Facebook users comprised a country it would be among the world’s third largest, ranking between India and the United States (2010). The United States ranks as the world’s highest in terms of time spent online per person and is closely followed by Japan, Brazil, the United Kingdom, and Germany (The Nielson Company 2010).

WITHIN THE ORGANIZATION

While social media tools are utilized, promoted, and encouraged in businesses, many business owners

and managers ban the use of sites like Facebook, YouTube, and SecondLife among employees. One study found that 90% of surveyed business owners banned the use of Facebook for the cited concern of decreased productivity. While a valid concern, there are ways employees could use social media to a businesses’ advantage. Proper and regulated use could lead to increased interdepartmental communication and collaboration, may promote employees’ work and contributions in a new way, and further employees’ opportunities to contribute to business dialogues (Hernandez 2010). Opportunity for all employees’ participation can also provide a virtual face of the company to other businesses and consumers (Kaplan and Haenlein 2010).

BUSINESS-2-BUSINESS

A 2009 report surveying business-to-business (B2B) sales professionals and their use of social media

showed that only a small portion of these sales people used social media tools like Twitter or Facebook. Some believe that there are more opportunities for business-to-consumer marketing to benefit from social media use than B2B marketing. Further, social media is reported to currently be more of a trend in marketing, not sales. This is partly due to the importance of vendor-buyer relations which are not currently accessible via social media and are often not desired to be. However, with a strategic approach, this is an area that could be developed to benefit the B2B domain (Lager 2009). Some companies do report a use of social media sties like Hoover. Two issues which have prompted an increase in more B2B companies looking into social media technologies are customer service and crisis management (Buscall 2010).

MANAGERIAL IMPLICATIONS

In this increasingly technological era, it is recommended that businesses develop a well-defined social

media strategy and set doable and measureable goals (Buscall 2010; Safko and Brake 2009). Safko and Brake (2009) suggest that this strategy be mapped out in twelve month terms and implemented through a six step process. First, develop a realistic and flexible 12 month social media plan. Then, “engage” your employees - it is important that all users learn how to use social media tools and become comfortable with their use. Find out what is important and of interest to your customers and business prospects. Find them online and get closer to them through on-line interactions. As part of this social media plan, it is important to think like a business executive as well as a publisher. Decide what information will be used in your social media plan, how the company is represented by it, and how will it better serve your customers. Next, create a social media community within your business and encourage user generated content. Finally, develop a way to measure what is sought through social media engagement. If the plan is to see


how social media affects sales, find out the best way to measure this and track it. Surveys can be sent to customers with options asking for feedback. This can assist in determining if the target market is being reached and if they feel served (Safko and Brake 2009).

Other social media strategists highlight the importance of selecting what content will be purported in regards to the customer niche they are trying to reach. Visual content can further a site, create a new look, and also requires strategic selection. Testimonials are another beneficial aspect companies can place on their site. These serve to promote and involve their customers’ opinions while simultaneously advertising for the company (Bushey 2010).

CONCLUSION

The fairly recent advent of social media has witnessed rapidly increasing customer engagement,

online presence, and use but has not seen a comparable adaptation at the business level. Many companies are seeing the potential value of using social media as reported by companies who already employ such measures. On the organizational level it is important to remember that there are many options beyond the public social networking sites. Social media has transformed consumers’ communication and yields opportunities to broadcast their opinions at levels that traditional WOM cannot reach. Business and marketers are now less in control about what is said about them and who can view it.

REFERENCES Barnes, Nora Ganim (2010), “How Do The Most Successful Companies Use Social Media?,” Marketing Research, 22 (1), 8-13. Brooks, Robert C. Jr. (1957), “Word-of-Mouth’ Advertising in Selling New Products,” The Journal of Marketing, 22 (2), 154-61. Buscall, Jon (2010), “What If You Don’t Get Social Media?,” Jontus Media, (accessed August 17, 2010), [available at http://jontusmedia.com/if-dont-get-social-media/]. --------- (2010), “What Social Media Tells Your Customers About You?,” Jontus Media, (accessed August 30, 2010), [available at http://jontusmedia.com/social-media-tells-your-customers-about/]. Bushey, Claire (2010), “All a Twitter: Experts and IREM Members Discuss The Opportunities and Pitfalls of Social Media Networking,” Journal of Property Management, 75 (1), 24-7. Chou, Wen-ying Sylvia; Hunt, Yvonne M; Beckjord, Ellen Burke; Morse, Richard P; and Hesse, Bradford W. (2009), “Social Media Use In The United States: Implications For Health Communication”, Journal of Medical Internet Research, 11 (4), e48. Cone Inc. (2010) “Consumers Look Online To Verify Purchase Recommendations, Even From Their Most Trusted Sources,” Cone Online Influence Trend Tracker, (accessed August 1, 2010), [available at http://www.coneinc.com/stuff/contentmgr/files/0/57cbc4124b1ea562f11290ad6dda9277/files/2010_online_influence_trend_tracker_factsheet_final.pdf]. Ditcher, Ernest (1966), “How Word-Of-Mouth Advertising Works,” Harvard Business Review, 44 (6), 147-66. Gil de Zuniga, Homero, Eulalia Puig-I-Abril and Hernando Rojas (2009), “Weblogs, Traditional Sources Online, And Political Participation: An Assessment Of How The Internet Is Changing The Political Environment”, New Media Society, 11 (4), 553-74.


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Reducing Channel Conflict

M. Kelly Cunningham Elmhurst College

Conflict is common throughout the distribution channel of marketing. It exists among manufacturers, distributors and retailers. Much of the conflict is created among the members but it is also exacerbated by conflict that exists among those selling to the channel. Specifically, this includes key functional groups such as sales, marketing and supply chain. The lack of communication, trust and confidence within these key groups make it even more difficult to work with the external channel of distribution and creates even more conflict. This paper will address this conflict and develop a series of solutions to improve the buyer/seller relationship. INTRODUCTION

Supply chain management is a strategy that continues to be in focus due to its importance throughout the distribution channel. A McKinsey quarterly study (2011) believed that enhanced supply chain integration could contribute an additional 1.2% growth in GDP. Much of the supply chain focus has been driven by customers like Walmart as companies put dedicated resources toward the world’s largest retailer. Proctor and Gamble was one of the first manufacturers to create a Customer Business Team whose sole responsibility was Walmart. This was discussed in detail by Grean and Shaw (1988) in a paper that highlighted the importance of channel partnership and the sharing of information technology to create efficient supply chain systems. Before this partnership was formed, revenue between the two was $375 million. In fiscal 2010, Proctor and Gamble had sales of $12.6 billion to Walmart - almost 16% of the company’s overall sales (Wohl, 2011). To enhance the partnership the two even went as far as developing a joint mission statement stating: “The business team mission is to achieve the long term business objectives of both parties by building a total system partnership that leads our prospective companies and industries to better serve our mutual customer, the consumer.” (Grean & Shaw, 1988). With this renewed focus among distribution channel members, and with a desire to reduce costs and increase efficiency, “channel conflict” has become a challenge for members and a potential stumbling block toward maximizing revenues and building partnerships. This paper will explore the distribution channel and identify the key causes of channel conflict and discuss solutions to reduce this conflict thus allowing for better business results. The Distribution Channel

Throughout this paper I will utilize a standard distribution channel. This will include some type of intermediary (will be classified as a distributor throughout the paper) to act as a middle person between the manufacturer and retailer. This channel can be called channel 3 distribution and is a mechanism to deliver goods to the consumer. (Armstrong & Kotler, 2005). These two also discuss the key functions


involved with an intermediary which include handling, promotion, negotiation, placing orders, arranging financing, taking risks and facilitating physical possession, payment and title. Figure 1 depicts this channel which would normally include high purchase frequency and small purchase value.

FIGURE 1 CHANNEL 3 DISTRIBUTION

Figure 1 can be classified as the most basic and most popular channel to get product from the manufacturer to the consumer. However, the model does omit the internet which in its early stages of growth caused tremendous amounts of channel conflict. Lisa Bannon of the Wall Street Journal (2000) discussed how Mattel made a decision to sell Barbies ® online. Retailers responded by questioning how they could be partners when they are now competing for sales. Mattel attempted to reduce conflict by pricing the items higher and limiting online sales. Lee, Lee and Larsen (2003) discussed this internet conflict and saw the benefit to manufacturers to communicate to consumers directly and the benefit of gathering valuable information. However, they also noted the “emotional antagonism” that was creating friction between manufacturers and retailers. Some retailers threatened to remove products off the shelf as a form of retaliation. To deal with this internet conflict, a strategy was developed whereby manufacturers assess their overall concern for themselves and their intermediary. Examples were given of manufacturers directing consumers to pick up products at retail brick and mortar locations or creating difficult products to sell through different channels. The overall objective was to reduce possible channel conflict. In 2012, the internet has become a widely accepted and necessary means to sell direct to the consumer. Conflicts may still arise but is often accepted because of its importance to the end user. Forrester Research Inc. predicts online retail sales to represent 8% of all retail sales in the U.S. by 2014 and represent a total near $250 billion (Shonfeld, 2010). Today, it is best to examine channel conflict from two perspectives. The first is external channel conflict, which will deal with the traditional channel model (Figure i). The second will be internal conflict, which will look specifically at the manufacturer and key functional groups that exist at a company and their role in creating channel conflict. External Conflict

Maybe it sounds simple; manufacture a product, sell it to a distributor, pass it along to a retailer and allow a consumer to purchase it. However, the opportunities to create conflict throughout the process are immense. Hostility is created by all parties, thus the need for conflict resolution becomes a necessity. Susan Foreman (Spring, 2006) discussed channel conflict as a source of creativity and innovation as well as something that could be destructive and harmful to channel relationships. She identified various causes of conflict whether they are channels competing for the same territory or customers buying in cooperative groups. To expand on this, Figure 2 breaks down potential conflict that is created by various strategies, tactics and decisions made by each party. The items included would have high tendency to elevate conflict and create a poor working relationship.

To expand on Figure 2 could give further clarity to the amount of conflict that could be present. Manufacturers are often accused of creating too many new products which may fail over a short period of time. In Rob Adams book “If you Build it will they Come?” he indicated more than 65% of new products launched by established companies fail. Distributors get upset with this because they create warehouse space to store the product and retailers get upset if a product gets put on the shelf and does not sell. Retailers are often accused of promoting their private label at the expense of a national brand or poorly placing a manufacturer’s product in a less than ideal shelf position thus creating conflict. Distributors often are caught in the middle dealing with invoice issues, damaged goods or, at times, late deliveries, adding to confrontational situations. Further study of these potential conflicts was done by Nadeau

Distributor Manufacturer Retailer Consumer


(2001). He identified three major causes of channel conflict to be incompatible goals, poorly defined roles and responsibilities, and having no conflict resolution in place. Part of his research revealed that only 17% of distributors indicated that they had common goals with the manufacturers that they represented in the market place.

FIGURE 2 EXTERNAL CHANNEL CONFLICT SCENARIOS

Manufacturer Wholesaler (Distributer) Retailer -Too many new products -Late Deliveries -Private label -Too many price changes -Large Mark-ups -Price disparities -Selling Direct store delivered -Damaged goods -Poor shelf placement -New products that fail -Improper invoicing -Discontinuing items -Shortage of products -Product diverting -Non-promotion -Poor packaging -Invoice deductions -No in store support -Pushing or loading product -Poor category -Special packs management -Poor channel support

Before identifying solutions to channel conflict it would be beneficial to look up the channel to the manufacturer and see what can be done on their part to improve the overall relationship. This will be referred to as internal channel conflict and will look specifically at three key corporate functional groups of the manufacturer, including marketing, sales and supply chain. Within a company, these three key groups play prominent roles in channel success. Marketing creates products, sales sell them to the channel and supply chain properly ships them to their destination. Looking at the three functional groups, one finds that there are unique perceptions throughout that can often add to a poor working relationship. (Thomas, Mitchell, & DelRossa, 2007-08) conducted a global sales perceptions report. Here they surveyed over 2,700 buyers across six countries to see how the buyer-seller relationship was viewed. The conclusion was that buyers have a poor perception of sale people, have high expectations that are not being met and do not see the formulation of a true business partnership. Some of the comments included unwillingness to listen, not taking no for an answer, lack of product knowledge, being pushy and deceptive. These perceptions are real and can actually permeate throughout an organization as well.

From a marketing side, strong perceptions also exist. The working relationship between sales and marketing was researched by Kotler, Rackham and Krishnaswamy (2006). They identified two main sources of friction between the two as being economic and cultural. The economic friction centers on the competitive battle to get a fair share of the overall company budget. The one function that receives a higher portion could exert more power over the other. Another point made is how the dollars are spent. Sales might view the marketing dollars to generate more brand awareness as wasteful where marketing might view the sales trade dollars used to incent retailers as useless and not a factor to build brand equity. The second conflict between the two was labeled as cultural. Marketing is often viewed as happening behind the desk, whereas sales is viewed as practiced in the field building relationships. Both are important but to the two functions, theirs is seen as most vital to a company’s success.

One last area to look at is an often overlooked function: supply chain. This is a group that needs to work closely with sales and marketing; it is a group that comes in contact with these functions as well as the entire distribution channel. McCarter, Fawcett and Magnan (2005) discussed the challenge of the supply chain function. They discussed the importance of supply chain education and training as a key to providing employees with vision and understanding as to why supply chain management is needed. To improve the relationship within a company, they used the term “collaborative company intervention” as a way to integrate supply chain throughout a company and give others a better understanding of how it works and the importance to a company.


In addition to perceptions that are present throughout an organization, other factors exist that could lead to internal conflict. Figure 3 list these factors.

FIGURE 3 INTERNAL CHANNEL CONFLICT SCENARIOS

Sales Marketing Supply Chain -Misrepresent products -Operate in silos -Inflexible -Discount too much -Too many new items -Poor understanding of sales -Incentive driven -poor understanding of sales and marketing Conflict Resolution

As part of the research, I interviewed various individuals that worked in the distribution channel. In developing resolution ideas it is best to view the issues both externally and internally. External Channel Resolution

John Donohue is the Director of Trade Development for the Regal Division of Wirtz Beverage of Illinois. Wirtz Beverage is a major distributor and an intermediary to major manufacturers and major retailers. He supports Nadeau’s thoughts by saying that communication with suppliers in formulating business planning meetings, aligning pricing strategy and creating monthly, quarterly and annual business plans as a key. Alongside these tasks, having clear goals and expectations and, most importantly, a clear understanding of the metrics being used are key to avoiding and resolving conflict. This last point is critical. Members in the channel all have different metrics used as part of their incentive plan. Incentives could be based on profit, tonnage, fill rates, out of stocks, forecast accuracy and store traffic, just to name a few. Members understanding this could be a critical step in conflict resolution. Delivering product to retailers with accuracy and in a timely manner is essential. He indicated that knowing your retailer and having sales representatives develop strong business relationships with each store will go a long way in smoothing out potential issues. Internal Channel Resolution

Much less research has been done within a manufacturer’s functional groups and their tendency to create conflict. Here is where much of the channel conflict begins-and where some of it could be resolved. Kellogg’s is a Fortune 500 company with $12.4 billion in revenues (Yahoo). With many new product entries into the market each year, having a working distribution channel is a necessity. Wilson Ray is Director of Sales Operations for Kellogg’s specialty channels. He has experience across sales, operations and supply chain. His first thought is for manufacturers to establish cross- functional teams. These teams would consist of sales, marketing and supply chain, among others, to provide early input into the product development cycle. Each functional group has a sound understanding of the distribution channel, so up front communication could prevent further channel conflicts. Another thought, which was also suggested with external conflict, centers around performance metrics. Many times different functional groups are evaluated and incented across different criteria, thus creating major internal conflicts. If one functional group is going toward one goal (volume) and another is going toward a different one (profit) and still another has their own incentive (fill rate), major conflict can be dispersed throughout the corporation thus inhibiting solid business results. A common incentive plan tied to specific customers with aligned metrics could create better harmony internally and externally.

Kraft Foods adopted a Customer Business Team strategy in 1995, when Kraft and General Foods came together. Here a dedicated team is assigned to its largest customers with the objective of giving full focus to customer needs. Fina Klco is Senior Manager Customer Supply Chain and Logistics for Kraft. Her expertise is on the supply chain side of the business and sees a need for cross-functional training as a means to reduce internal conflict. If people in sales, marketing and supply chain do short cross- functional


assignments they would develop a better understanding of the functional group and be able to be more versed in the overall delivery to a distributor and retailer. She also reiterated the need for common metrics across all functions to align goals and objectives. The need for common and understandable performance metrics appears to be a must throughout the channel. One other point made was the value of conducting “ride alongs”. This is when someone in the supply chain organization will spend a day with a salesperson, giving them a sense of what the sales job is all about. This could help in the overall communication and understanding between the two functional groups. CONCLUSION Implications for Distribution Channels and Education

This paper made a distinction by observing the channel both externally and internally. All of the parties can play a role in reducing channel conflict and improving business results. There were common elements present throughout the distribution channel that could play a large role in creating conflict. Figure 4 is a summary of various strategies to implement both internally and externally.

FIGURE 4 CONFLICT RESOLUTION STRATEGIES

Strategies for Success

One good exercise to conduct in a marketing class was suggested by Wanda Fujimoto at Central Washington University. She titled it “Who’s to Blame? A Channel Conflict Exercise.” Here she breaks the class into three groups to understand the possible causes and consequences of channel conflict. The three groups include manufacturers, distributors and retailers. Students are asked to list complaints directed toward other channel members. This is an effective exercise that I have used in my classroom; however I have expanded this to include sales, marketing and supply chain. This creates good discussion and great dialogue. Ask for the same complaints and one could see from the class a chalkboard full of potential conflict issues with the internal channel. The last part is for the whole group to discuss how to resolve it. Much of what was presented in this paper will be easily addressed in the classroom. REFERENCES Adams, R. (2010). If You Build It They Will Come: Three Steps to test and Validate Any Market Opportunity. New York: Wiley Publishing.

Internal -Better Communication -Cross Functional teams -Overall respect for each function -Common incentive plan -Cross functional training and development

External

-Better Communication

-Business planning process -Clear goals and expectations -Understanding of performance metrics -Defined roles and responsibilities


Armstrong, G., Kotler, P. (2004). Marketing: An Introduction. 7th Edition, Prentice Hall Publishing. Bannon, L (2000, November 17). By Selling Barbie Online, Mattel May Upset Many Retailers. Wall Street Journal, p. B1. Foreman, S. (2006). Power Conflict and Control in Distribution Channels. Henley Manager Update, 17, (3), 11-18. Fujimoto, W. (2003). Who’s to Blame? A Channel Conflict Exercise. Great Ideas for Teaching Marketing, Southwestern Learning. Grean, M., Shaw, M. (1998). Supply Chain Integration Through Information Sharing: Channel Partnership Between Wal-Mart and Proctor and Gamble. Retrieved from http://citebm.business.illinois.edu/it_cases/Graen-Shaw-PG.pdf Hunt, D., Manyika, J, & Remes, J. (2011). Why U.S. Productivity can Grow Without Killing Jobs. McKinsey Global Institute. Kellogg Company (2012). Kellogg’s Income Statement. Yahoo! Finance. Retrieved from http://finance.yahoo.com/q/is?s=k Kotler, P., Rackham, N., & Krishnaswamy, S. (2006). Ending the War between Sales and Marketing. Harvard Business Review, 84, (7/8), 68-78. Lee, Y., Lee, Z., & Larsen, K. (2003). Coping with Internet Channel Conflict. Communication of the ACM, 46, (7), 137-142. McCarter, M., Fawcett, S., & Magnan, G. (2005). The effect of people on the Supply Chain world: some overblown issues. Human Systems Management, 24, (3), 199. Nadeau, R., (2001). Avoiding channel conflict. Retrieved from http://progressivedistributor.com/progressive/archives/Distribution%20mgmt/AvoidingChannel Conflict.htm. Shonfeld, E. (2010) Forrester Forecast: Online Retail Sales will grow to $250 Billion by 2014. Tech Crunch. Retreived from http://techcrunch.com/2010/03/08/forrester-forecast-online-retail-sales-will-grow-to-250-billion-by-2014/ Thomas, B., Mitchell, S., & Del Rossa, J, (2007-08). Sales: Strategic Partnership or Necessary Evil? 2007-2008 Global Sales Perceptions Report, Development Dimension International Wohl, J. (2011). P & G Unhappy with Wal-Mart Entertainment Union. Reuters. Retreived from http://www.reuters.com/article/2011/01/28/us-media-walmart-idUSTRE70R0CZ20110128


http://progressivedistributor.com/progressive/archives/Distribution%20mgmt/AvoidingChannel�

Using One-Minute Video Résumés as a Screening Tool for Sales Applicants

Katie J. Kemp Middle Tennessee State University

L. Michelle Bobbitt

Middle Tennessee State University

Michelle Bednarz Beauchamp Middle Tennessee State University

Elizabeth Ann Peyton

Middle Tennessee State University

This paper introduces video résumés as sales applicants’ initial introduction to recruiters and sales managers. Results of two studies reveal that recruiters who viewed one-minute video résumés prior to meeting sales applicants had more favorable perceptions of video résumés than those who did not view video résumés. One-minute video résumés were more effective in conveying the candidate’s communication skills, energy level, and potential benefit to the company. Respondents consider video résumés a time saving tool and would be more likely to open the traditional résumé and to contact a candidate for an interview if impressed by the video résumé. INTRODUCTION

New college graduates seeking sales-related positions are faced with the challenge of differentiating themselves from other applicants. For those graduates who say, “If I could just get the interview, I know I could get the job,” a brief video introduction, accompanying a traditional résumé, may provide the opportunity to showcase skills and traits relevant to a sales position that are difficult to communicate on paper alone. At the other end of the spectrum, recruiters and sales managers are bombarded by e-mailed résumés on a daily basis, and the drive to look at yet another résumé often wanes. The recruiters’ challenge is to find tools that increase efficiency in the applicant screening process.

The purpose of this research is to examine sales recruiters’ perceptions of video résumés. Two exploratory studies were conducted. The first study focused on identifying general perceptions of video résumés among recruiters. One-minute video résumés were employed as brief introductions in the second study in an effort to assess sales recruiters’ reactions to that specific type of video résumé as a screening tool.


RELEVANT LITERATURE

Recruiters are frequently looking for sales talent to either grow an organization or to replace salespeople lost due to turnover. In a recent study with over 2,000 participating sales organizations, respondents were asked about their hiring plans for 2011; 78 percent reported that they would add salespeople, and nearly half of those planned to grow their sales forces by more than 10 percent (Dickie, 2011). According to a ten-year (1996 to 2006) study of sales organizations, “the turnover rate (including voluntary and involuntary departures) among 3,700 U.S. publicly traded companies across 19 industries was 39.6 percent,” with even the top organizations reporting an 11 percent turnover rate (Hrehocik, 2007, p.24). Significant amounts of time and money are spent recruiting and interviewing potential candidates for sales positions. The expenses associated with posting recruitment ads, hiring recruitment firms, reviewing résumés, interviewing candidates, and paying candidates’ travel expenses all equate to a large investment in the hiring process, not to mention the sales revenues likely lost while filling a position.

Newly hired sales representatives require time and training to become productive. The American Society for Training and Development (ASTD) reported that “U.S. businesses spend approximately $15 billion per year on sales training” (Salopek, 2009, p.71). Approximately 55 percent of sales organizations spend an average of $1,500 to $5,000 on training per salesperson (Accenture, 2011). Some companies spend significantly more; for example, Federated Insurance invests approximately $100,000 in training new sales representatives over the first year of employment (N. Hayati, personal communication, September 5, 2012). The amount of time required for a new salesperson to generate revenue levels similar to an experienced representative varies, but one study indicated that less than 40 percent of new hires have ramp-up times under six months (Dickie, 2011). With all the costs associated with recruiting, hiring, and onboarding new sales representatives, increasing efficiency and accuracy in the recruitment and selection process is invaluable.

Several studies have revealed that sales managers consistently rank enthusiasm, ambition, organization, ability to persuade, and verbal skills as the most valuable to a successful salesperson (Churchill, Ford, Walker, Johnston, & Tanner, 2000). In evaluating competencies, recruiters observe candidates’ personal characteristics such as confidence and the ability to deliver a compelling presentation in a clear and concise manner (Graham-Leviss, 2012). In a 2002 survey conducted by Moody, Stewart, and Bolt-Lee, recruiters ranked communication skills, both written and oral, as the most important quality of new candidates entering a business related field. Recruiters also highly ranked interpersonal/social skills as necessary for successful businesspeople. These qualities are vital for sales representatives as they are often a customer’s only line of communication with the company.

Most businesspeople embrace technology as an effective means of communicating, but younger generations are much more comfortable than previous generations with the facets of information sharing that result from technological advances. Younger generations also tend to reveal much more of themselves in a public fashion than their predecessors. Facebook reports now having over 900 million users, and Twitter and smart phones allow individuals to continuously update “followers” or “friends” with personal information about their lives. The YouTube Generation is clearly comfortable with the concept of streaming and starring in viral videos in a way that earlier generations simply are not (Hewlett, Sherbin, & Sumberg, 2009).

Given the technological intelligence possessed by younger generations, one should find little surprise in the emerging trend of cyberfolios and video résumés in the job application process. Graphic designers, photographers, and artists realize the positive effect a carefully selected portfolio can offer when applying for a new position. In 1998, Clayton College and State University in Georgia had its Information Systems students develop “cyberportfolios” (i.e., multimedia résumés) in order to distinguish themselves to potential employers by showcasing their design skills (Siegmann, 1998). Furthermore, the National Institute for the Deaf at the Rochester Institute of Technology used video résumés to develop the communication skills of its students and to attempt to secure jobs for them (Kelly & O’Brien, 1992).

The idea of presenting oneself digitally is not new, and it can be quite beneficial in certain career paths as a means to gain a competitive edge. One study revealed that 76 percent of those recruiters not


offered portfolios by applicants believe these portfolios would be useful (Moody, Stewart, & Bolt-Lee, 2002). In open-ended responses about why the recruiters felt these demonstrations of talent might be useful, several pointed out the usefulness in showcasing a candidate’s presentation skills in making a hiring decision.

The concept of a video résumé may take on several connotations. The traditional view is a lengthy (five minutes or more) monologue describing the applicant’s traits and past performance. Some have used humor in the video résumé with antics such as Aleksey Vayner’s notorious YouTube video résumé in which he demonstrated weightlifting and karate chopping in applying for a position on Wall Street (Cullen, 2007). Recruiters offer mixed reviews with the main issues being the time it takes to view a video résumé (referring to five-minute versions) and legal concerns (Sullivan, 2007). On the positive side, a 2007 Vault.com survey of employers revealed that 89 percent would watch a video résumé though only 17 percent had ever been offered one (Yaptangco, 2007).

Several online recruiting firms have emerged and are offering applicants the opportunity to develop a 30 or 60 second video introduction to sell themselves to potential employers. YellowDogRecruiting.com is an example of an online recruiting firm for the hospitality industry that allows job candidates to post video introductions. According to Berta (2010), this recruiting site posts more than 100 candidate videos and received 3,000 hits from potential employers in one month. Berta (2010) also cited a 2007 survey conducted by HireMeNow.com, an online job forum, which found that over 80 percent of respondents in charge of hiring are willing to consider video introductions in the candidate selection process. The president of HireMeNow.com company, Allen Bornstein, states that candidates are finally able to display their “enthusiasm, energy, and attitude” in a way prohibited by paper résumés (“Cover Letters,” 2008). A brief introductory video résumé can and should be seen as a natural complement to portfolio materials and used in conjunction with a traditional paper résumé. As Generation Y moves into recruiting and hiring positions, their comfort level with technology could potentially increase the acceptance of video introductions. CREATING AND USING VIDEO RÉSUMÉS

The one-minute video résumés used in this research were created by a video production company specializing in both TV advertisements and professional video résumés of varying lengths. Videos are assigned a URL and can only be accessed through the company’s server. When a recruiter clicks on the URL, the screen contains three components – a viewing pane for the video with the applicant’s picture, a bulleted list of highlights from the applicant’s résumé, and a button for opening a print version of the résumé document. The total charge for the video production and the use of the server is $150 per person until the résumé is updated.

Using the production company’s resources, two scenarios for contact between the recruiter and the applicant may occur. First, recruiters who visit the production company’s website will find several categories of job applicants (e.g., sales, management, nursing, banking, and advertising). After choosing a category, the recruiter may select videos from the applicants posted. Recruiters may contact desirable applicants, but only through email which is routed through the production company as the applicant’s name and contact information are omitted for confidentiality. Should the applicant want to communicate with the recruiter, s/he may reply to the recruiter’s email and provide direct contact information at that time.

A second route for utilizing the one-minute video résumé involves the applicant contacting a recruiter via email, providing the URL for their video résumé, and requesting a viewing of the video and printed résumé. This route is the subject of the current study.

In preparation for videotaping, students prepared a one-minute script highlighting accomplishments, relevant attributes, and professional aspirations. The subject matter was intended to complement the paper résumé rather than just re-state its contents. Students were instructed to rehearse the script; however, a teleprompter was provided during taping. They also received coaching from the staff and were offered as many as five “takes” to provide editing possibilities for the production company. Professional dress was


required, and each job seeker sat or stood in front of a choice of a white or black screen. Students were onsite for approximately 30 minutes, and the edited version was available for distribution within 24 hours. METHOD Samples

Two exploratory studies were conducted to gauge recruiters’ level of approval of video résumés in today’s hiring environment. The first study employed a convenience sample consisting of sales recruiters at a national sales competition for college students (otherwise referred to as the NSC sample). These sales recruiters were asked to complete a questionnaire regarding their general perceptions of video résumés. A total of 23 participants completed the questionnaire with approximately 82.6 percent (19 recruiters) representing business-to-business sales organizations. The majority of respondents (91.3 percent, 21 recruiters) represented large organizations with over 1,000 employees, and 87 percent (20 recruiters) worked for organizations with a separate human resources department.

Participants in the second study included recruiters scheduled to attend an on-campus sales and marketing career fair (otherwise referred to as the CF sample). The objective of the second study was to measure recruiters’ perceptions of the one-minute video introduction as a specific type of video résumé. Prior to the career fair, a brief email was sent to recruiters to review one-minute videos prepared by ten students enrolled in an Advanced Selling course and attending the career fair. This email included the URL for the video résumé (imbedded in the text for easy, one-click access) and an attached paper résumé. The video résumé, in this case, was intended as a “hook” to entice the recruiter to take a quick look with the hope that the result will be a more careful consideration of the paper résumé and increased interest in the student’s application. Recruiters who received the video résumés were asked to complete a questionnaire at the career fair. A total of 32 recruiters who viewed the one-minute video résumés responded. Approximately 40.6 percent of respondents (13 recruiters) were in business-to-business sales, while approximately 22 percent (7 recruiters) were in sales in the insurance and financial sectors. This sample was more evenly represented by small (i.e., less than 250 employees) and large organizations (i.e., greater than 1,000 employees) at 37.5 and 43.8 percent respectively. Approximately 68.8 percent (22 recruiters) worked for organizations with a human resources department. Measures

A questionnaire was created and distributed to respondents in both the NSC sample and the CF sample. The questionnaire contained nine scale items designed to measure recruiters’ perceptions of using video résumés as a recruiting tool (see Table 1). Upon receiving the questionnaire, recruiters in both samples were asked to indicate their level of agreement or disagreement with each item. All items were measured using a five-point, Likert scale ranging from “strongly disagree” to “strongly agree.”

A principal components analysis (PCA) was conducted to investigate the underlying structure of the items. Table 2 identifies the two underlying dimensions revealed by the PCA along with the supporting results. The first dimension, labeled “VR Usefulness,” consists of three items that suggest how useful the video résumé is to the recruiter. The second dimension, labeled “VR Comparison,” consists of three items that compare the traditional print résumé to the video résumé. Coefficient alphas for both scales exceed the 0.80 benchmark (Nunnally & Bernstein, 1994). The scale items are consistent in capturing the VR Usefulness and VR Comparison dimensions. RESULTS Impressions of Video Résumés

An independent samples t-test was used to determine if there were differences among the two groups of recruiters (i.e., NSC and CF) on these two dimensions. Significant differences were found among the


TABLE 1 QUESTIONNAIRE ITEMS*

1. Video résumés are a useful screening tool for sales recruiting. 2. Video résumés save time in recruiting. 3. I am very likely to open a video résumé when I receive it. 4. I believe I can get an accurate first impression of a sales candidate by viewing a one-minute video

résumé. 5. Video résumés are more useful than printed résumés in assessing a sales candidate. 6. If I am impressed with the candidate’s video résumé, I am very likely to open the traditional

résumé file. 7. If I am impressed with the candidate’s video résumé, I am very likely to contact him/her for an

interview. 8. I prefer to screen video résumés rather than screen printed résumés. 9. I am more likely to open a video résumé than a traditional résumé file.

*All items measured using a five-point Likert scale ranging from Strongly Disagree to Strongly Agree.

TABLE 2 PCA RESULTS

Survey Items* (n=54)

Alpha

Components Descriptive Statistics 1 2 Mean Std.

Dev. Item-to-total Correlation

VR Usefulness 0.83 Video résumés are a useful screening tool for sales recruiting.

0.81 4.11 0.88 0.71

I am very likely to open a video résumé when I receive it.

0.89 4.31 0.86 0.77

I believe I can get an accurate first impression of a sales candidate by viewing a 1 minute video résumé.

0.76 3.78 0.90 0.57

VR Comparison 0.84 Video résumés are more useful than printed résumés in assessing a sales candidate.

0.84 3.57 1.00 0.62

I prefer to screen video résumés rather than screen printed résumés.

0.87 3.31 1.02 0.85

I am more likely to open a video résumé than a traditional résumé file.

0.79 3.54 1.09 0.67

Variance Extracted=75.78% Varimax Rotation

*Measured using a five-point Likert scale ranging from Strongly Disagree to Strongly Agree groups on both the VR Usefulness (t-value=3.06, p=.003; CFX =4.31, NSCX =3.72) and the VR

Comparison (t-value=2.41, p=.020; CFX =3.72, NSCX =3.14) dimensions. For both dimensions, career-


fair recruiters who viewed the one-minute video introduction résumé had more favorable perceptions of video résumés.

The remaining three survey items were also tested for statistical significance between the two groups. The career fair sample indicated they would be more likely to open a traditional résumé file if they were impressed with the candidate’s video résumé (t-value=2.82, p=.008; CFX =4.75, NSCX =4.21). In fact, 89.1 percent of all recruiters agreed or strongly agreed with this statement. Statistical significance was not found for the remaining two items on the survey (i.e., whether video résumés save time in recruiting and whether an impressive video résumé would make a recruiter more likely to contact the candidate); however, both groups of respondents see value in video résumés. Specifically, 89.1 percent of all respondents are more likely to contact a candidate for an interview if impressed by the video résumé. Video résumés were also perceived as a time saver since 63.6 percent of all respondents strongly agree or agree with the statement, “Video résumés save time in recruiting.” Overall, the results suggest that those who viewed the one-minute video résumé before completing the questionnaire (i.e., the CF sample) had more favorable beliefs regarding video résumés than those who simply answered the questionnaire based on their knowledge of video résumés (i.e., the NSC sample). Video Résumés as an Effective Recruiting Tool

In addition to measuring their overall beliefs regarding video résumés, the career fair recruiters who viewed the one-minute video résumés were also asked to identify the degree to which they believed video résumés would be an effective tool in communicating a candidate’s energy level, oral communication skills, personality traits, accomplishments, and their potential benefit to the company. The items were measured on a five-point scale ranging from “very ineffective” to “very effective.” One-minute video résumés were perceived as most effective in communicating a candidate’s oral communication skills ( X=4.31), energy level ( X =4.22), and potential benefit to the company ( X =3.84). Since recruiters view enthusiasm and verbal communication as important qualities in new hires for sales positions, the one-minute video résumé can be a useful tool in conveying such desired qualities. ADVANTAGES AND DISADVANTAGES OF THE ONE-MINUTE VIDEO RÉSUMÉ

The sales recruitment and selection process is quite challenging as the resulting hiring decision impacts company revenues and reputation as well as the customer’s experience with the company. Any method for saving time and improving the odds of a good hire should be considered. The one-minute video résumé appears to be especially appropriate for sales recruiting as presentation skills, impact, and personality are employed daily in job execution. While it is no substitute for the more traditional paper résumé, reference checks, and formal face-to-face interviews, it is a viable complement to those methods as a screening tool.

Sorting through stacks of résumés can be a tedious, imprecise process while searching for a sales applicant worthy of the time and expense associated with a face-to-face interview. It is difficult, if not impossible, for words in a paper résumé to communicate an individual’s personality and ability to have an impactful conversation with a prospective customer. An individual may look great on paper and be invited to interview only to find a prohibitive lack of presentation and social skills required for success in the position. Using one-minute video résumés as an initial screening tool could save time and serve as a cost effective screening method for the recruiter while getting a new hire into the field serving customers sooner.

Recruiters attend career fairs because they like “one-stop shopping” for applicants. In a survey of 401 human resource managers, Stewart and Anderson (1998) concluded that businesses prefer to hire through “on-campus interviewing and career days/fairs.” However, the reason for this preference was reported to be the ease of meeting multiple qualified candidates “face to face.” Additionally, the ability to prescreen candidates was viewed by respondents as a critical factor in choosing which campuses to visit. The one-minute video résumé may serve as a viable alternative when career fair attendance is not possible. As


used in this study, the one-minute video résumé served as an initial “peek” at an applicant. Employers made notes about certain students they wanted to meet at the career fair; they appreciated the extra screening step and knew something about the applicant prior to the face-to-face introduction at the event.

From the student’s perspective, the one-minute video résumé offers differentiation from, and perhaps a competitive advantage over, other applicants. Taking the initiative to produce a video résumé can be impressive to sales recruiters who may look for bold self-starters. Many applicants send their paper résumé attached to an email, but the novelty and tempting nature of the one-minute video’s URL may spawn curiosity and result in the recruiter’s observation of relevant attributes to the job that may have been unnoticed in a paper résumé, assuming it was reviewed. The professionally-produced video résumé may be a reasonable investment in improving an opportunity to get one’s foot in the door.

While there are many advantages associated with video résumés from both the perspective of recruiters and job applicants, there are also potential disadvantages. Many employers may be hesitant to view the video résumé due to legal liability issues. The legal concern most often identified is the fear that having viewed a video résumé in the hiring process, an eliminated candidate might use the viewing as the basis for an employment discrimination claim. At present, however, no such claims are known to have actually been filed.

Federal laws, such as the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act, Title VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment Act, are designed to protect applicants from various forms of employment discrimination. The issue of the legality of video résumés has been addressed by the Equal Employment Opportunity Commission (EEOC) in an informal discussion letter written by a staff member in the Office of Legal Counsel for the EEOC (Miaskoff, 2010). According to the letter, “EEO laws do not expressly prohibit the use of specific technologies or methods of selecting employees, and therefore do not prohibit the use of video résumés.” Employers can protect themselves by setting and adhering to specific screening criteria such as the following: creating a job description that specifically lists relevant traits; evaluating objective criteria first in the screening process; maintaining consistency in the evaluation process of all candidates; maintaining accurate records of the evaluation process; avoiding a requirement that a video résumé be submitted as part of the application process; and requiring several people to view the videos in accordance with the job requirements.

For some students, videotaping is a challenge due to the widespread fear of any type of public speaking. This fear can have a negative impact on the job applicant and job performance, especially in the area of professional sales. As a result, the recruiter may note some stage fright in the videotaped résumé and deem a candidate as unsuitable. Coaching may help, but ultimately, the student must take it upon him/herself to find ways to overcome the issue. LIMITATIONS AND FUTURE RESEARCH

Due to the exploratory nature of this research, there are inherent limitations and many opportunities for future research. Convenience samples were deemed acceptable for this study in order to gain general insights into how sales recruiters view video résumés; however, the study needs to be conducted with a larger sample. Further research is also warranted for measuring the effectiveness of video résumés as there are likely other dimensions not accounted for in this study.

While the results suggest that the recruiters who viewed the one-minute video résumés had more favorable perceptions and regarded them as useful screening tools to accompany paper résumés, further investigation could explore whether their use actually saves time or is only viewed as an additional step in the recruitment process. It would also be interesting to examine whether recruiters perceive video résumés as an accurate reflection of the candidate’s qualities.

Future studies might also consider the potential for various types of bias in the hiring process resulting from viewing the applicant in a video résumé. These biases might include gender bias, bias arising from an applicant’s weight, and bias based on the applicant’s physical attractiveness. Finally,


research could also be conducted in fields other than sales to determine if recruiters in other industries view video résumés as effective tools in the recruitment process. REFERENCES Accenture. (2011). Sales Performance Optimization Study. Retrieved from http://www.accenture.com/ SiteCollectionDocuments/PDF/Accenture-Optimizing-Sales-Effectiveness-to-Achieve-High Performance-2011.pdf Berta, D. (2010, October 4). Job Seekers Look to Get a Leg Up With Video Introductions. Nation’s Restaurant News, 44, 70. Retrieved from http://yellowdogrecruiting.com/nrn-article/ Churchill, G.A., Ford, N.M., Walker, O.C., Johnston, M.W., & Tanner, G.F. (2000). Sales Force Management (6th ed.). Boston, MA: McGraw-Hill. Cullen, L.T. (2007, February 22). It’s a Wrap. You’re Hired. Time, 169 (10), 51. Dickie, J. (2011, March). Hiring Reps? Get Them a Digital Research Assistant. Customer Relationship Management, 6. Retrieved from http://www.destinationCRM.com Diverse Issues in Higher Education (2008, February 20). Cover Letters That Talk. 25 (1), 11. Graham-Leviss, K. (2012). A Targeted Hiring Methodology Can Hit the Bull’s-Eye in Recruiting Sales Professionals. Retrieved from http://www.wileyonlinelibrary.com Hewlett, S.A., Sherbin, L., & Sumberg, K. (2009, July-August). How Gen Y and Boomers Will Reshape Your Agenda. Harvard Business Review, 87, 71-76. Hrehocik, M. (2007, October). Finding, Keeping and Grooming the Best Sales Force. Sales and Marketing Management, 22-27. Kelly, J.F. & O’Brien, E.H. (1992, December). Using Video Résumés to Teach Deaf College Students Job Search Skills and Improve Their Communication, American Annals of the Deaf, 137 (5), 404-410. Miaskoff, C.R. (2010, September 21). ADA, GINA, Title VII & ADEA: Video Résumés. Informal Discussion Letter. Retrieved from http://www.eeoc.gov/eeoc/foia/letters/2010/ada_gina_titlevii_ video_resumes.html Moody, J., Stewart, B., & Bolt-Lee, C. (2002, March). Showcasing the Skilled Business Graduate: Expanding the Tool Kit. Business Communication Quarterly, 65 (1), 21-36. Nunnally, J.C. & Bernstein, I.H. (1994). Psychometric Theory. New York: McGraw-Hill. Salopek, J.J. (2009, May). The Power of the Pyramid. T + D, 63 (5), 70-75. Siegmann, B. (1998, February). Cyberportfolios: A New Tool for Job Seekers. Technical Horizons in Education, 25 (7), 58. Stewart, K. & Anderson, C. (1998). Recruiting Business Majors: Have Company Hiring Practices Changed. Services Marketing Quarterly, 17 (1), 119-128.


Sullivan, J. (2007, October 22). “Résumés: Paper, Please. Workforce Management, 86, 50. Yaptangco, C., (2007, March 27). Vault Releases First Ever Video Résumé Survey. SmartBrief. Retrieved from http://www.smartbrief.com


Which Employees’ Values Matter Most in the Creation of Employer Branding?

Mukesh Biswas

Indian Institute of Technology, Kharagpur

Damodar Suar Indian Institute of Technology, Kharagpur

The study explores if there are any statistically significant employees’ values that affects the employer branding, and if any, which affects the most. Based on the grounded theory, this study critically assesses multiple cases of employees’ values of branding process in a manufacturing company. The five aspects of personal values of employees were surveyed on a sample of 413 employees, of which 244 were current employees of the surveyed company and 169 were potential employees that applied to the company. Results revealed that employees’ social, interest, developmental and economic values, in order of priority, are affecting the employer brand. INTRODUCTION

Employer branding (EB) is one phenomenon considered as a source of competitive advantage by organizations in tackling the current employment scenario for the last two decades (Corporate Leadership Council, 1999; Conference Board, 2001, Moroko and Uncles, 2005). Various factors have affected the employment scenario: globalization, pressure for speed and innovation, widespread privatization, mergers and acquisitions, technology advancement, organization restructuring, and war for acquisition of talents. These factors have signaled employers to review their employee relation strategies in terms of attraction, motivation, and retention of talents that will help them to be successful (Zivnuska, Ketchen, and Snow, 2001). The success of any organization depends not only on the attraction of talents to the organization but also in retention of the existing ones. Moreover, it is important as the employment environment is dynamic and changing rapidly. The demand for talents has increased more rapidly than the available supply. Talent attraction and retention has, therefore, become a hard hitting issue for many organizations and they are forced to consider their options like never before. Consequently, organizations endeavour to be the ‘employer of choice’ (Sutherland, Torricelli, and Karg, 2002). This notion of employer of choice is the notion of EB (Tuzuner and Yuksel, 2009).

In 1996, Ambler and Barrow have coined the term EB. They have defined EB in term of ‘benefits’, calling it as a package of economic (e.g. reward and remuneration), functional (e.g. training, skills and other job related activities for development), and psychological (e.g. identity, recognition, and belonging) benefits provided by employment, and identified with the employing organization. EB represents a set of distinctive associations made by employees (actual or potential employees) with the corporate name (Davies, 2008). Sullivan defined EB as “a targeted, long-term strategy to manage the awareness and


perceptions of employees, potential employees, and related stakeholders with regards to a particular firm” (Sullivan, 2004). The concept unites a broad spectrum of existing thought relating to the way in which potential and current employees interact with a company’s brand and, in particular, the company’s brand image as an employer (Ambler & Barrow, 1996; Ewing et al, 2002; Lievens & Highhouse, 2003; Backhaus & Tikoo, 2004). It is true that EB concept has been derived from marketing, but has become one of the important tasks of human resource professionals, especially in recruitment (Cable and Turban, 2001; Capowski, 1997; Maurer, Howe and Lee, 1992). Therefore, businesses must apply brand-management and marketing thinking to the employment experience by understanding, managing and valuing employees with the same care used in consumer marketing practices. Thus, EB is nothing but a HR strategy borrowed from marketing to attract and retain talents. As a matter of fact, for many organizations, EB has become a critical management tool, as the emergence of China, India and Brazil as economic powers and aging work forces in the U.S., European Union and Japan have increased the competition for skilled workers. More recently, the current economic slowdown, and the pressure to cut costs and increase productivity, has made the need to get the best people in the right jobs even more crucial.

Values are beliefs about personally or socially preferred motives of conduct or end-states of existence (Rokeach, 1973). Oxford dictionary define values as “one’s principles or standards, one’s judgment of what is valuable or important in life”. They determine the behaviour or action of an individual in a society (Thornbury, 2003). They affect one’s decisions, judgements and attitudes. Values tell people what is good, beneficial, important, useful, beautiful, desirable, appropriate, etc. Literature on person-organization fit indicates that employees compare the employer brand image they have to their needs, personalities, and values. Employees are more likely to be attracted to an organization when the match between their values and the values of the organization is maximized (Schneider, 1987; Cable and Judge, 1996; Judge and Cable, 1997). Evidence is there that employees are being recruited not just based on their intellect and functional knowledge but also because of the extent to which their values align with the brand (Kunde, 2000). But, the supply of talent is limited. Hence, not only getting talented employees is difficult but retaining the existing ones with conflicting values. So, if an organization follows the reverse and understands the current trends of employees’ values, then the problem of attraction and retention of talent can be solved to a greater extent. RESEARCH OBJECTIVE

Although a lot of research is being carried out in EB lately, few studies have paid little attention to the specific components that determine employees’ values and their affect on EB as a whole. Therefore, this study focused on the auditing of employees’ values with the branding process as values associated with employees are the prime drivers of employer’s success. In this study, employees represent both current and prospective, ranging from talent pool to campuses, recruitment agencies and employees within the company. Given the key role of the value audit step, it should incorporate important stakeholder beliefs about the characteristics of a branded employer. Hence, the objective of this study is to examine the relative importance of different aspects of EB addressing values of different groups of individuals ranging from the talent pool of prospective employees and current employees. Briefly, the objective is to examine the effect of employees’ values on EB.

This study extends the approach of Berthon, Ewing and Hah (2005), in which dimensions were captivated for attracting talents towards an organization. The following model is proposed in align with dimensions of Berthon (Figure I). Employees’ values are of five types: (1) interest value, (2) social value, (3) economic value, (4) developmental value, and (5) application value. These five types of values become the antecedents of EB in the context of employees’ values as depicted in the research model (see Figure 1). The five constructs are in the line of the definition of EB by Ambler and Barrow. Several adaptations were made to these scales to suit the context. Details of the five constructs and the five paths depicting interrelationships among the constructs are explored and hypotheses follow.


Interest Value The degree to which an employee is attracted to an employer that provides an exciting and

challenging work environment, has novel work practices, and makes use of its employees’ creativity to produce high-quality, innovative products and services. Thus the hypothesis follows:

H1: The more the company satisfies the interest value of its stakeholders, the higher will be its employer brand

Social Value

The degree to which an individual is attracted to an employer that provides a working environment that is fun, happy, and provides a supportive team atmosphere. Thus the hypothesis follows:

H2: The more the company satisfies the social value of its stakeholders, the higher will be its employer brand

Economic Value

The degree to which an individual is attracted to an employer that provides above average salary, an attractive overall compensation package, and job security and promotion opportunities. Thus the hypothesis follows:

H3: The more the company satisfies the economic value of its stakeholders, the higher will be its employer brand

Developmental Value

The degree to which an individual is attracted to an employer that provides recognition, self-worth, and confidence coupled with career-enhancing experiences and a base for future employability. Thus the hypothesis follows:

H4: The more the company satisfies the development value of its stakeholders, the higher will be its employer brand

Application Value

The degree to which an individual is attracted to an employer that provides an opportunity for the employee to apply what they have learned and to teach others, in an environment that is both customer orientated and humanitarian. Thus the hypothesis follows:

H5: The more the company satisfies the application value of its stakeholders, the higher will be its employer brand


FIGURE 1 CONCEPTUAL FRAMEWORK OF RESEARCH MODEL

Note: WEN = Work environment, WPR = Work practices, CRE = Creativity, SAL = Salary, COM = Compensation, SEC = Job security, PRO = Promotion, REC = Recognition, WOR = Self-worth, CON = Confidence, CAR = Career, ENV = Environment, CUL = Culture, ATM = Atmosphere, APP = Application, LEA = Learn METHODOLOGY

The study was undertaken in a leading auto-ancillary manufacturing industry. The study is relevant to the industry because it belongs to one of the largest manufacturing group in India and is facing stiff competition from its competitors. The research methodology followed in this study will be discussed under the following headings: Research Approach

The quantitative and qualitative research method is appropriate for the study as the objective of the study is to generate information on how different employees (current and prospective) relate values in regard to employer branding. Which value scores over another? The main underlying objective with the investigation is to deliver data, combined with theory that opens a door to an understanding for how values affect employer branding of a company. So, a quantitative investigation is necessary. This study is carried out based on the Grounded theory (Glaser and Strauss 1967, Strauss and Corbin 1994), in focus with the convergence to a model through the interplay between data collection and analysis. Sample

The survey sample includes two types of employees: (1) company employees, and (2) potential employees. Company employees are the current employees of the company. Potential employees are the final year students of technical colleges where the company goes for campus recruitment and applicants who seek job to the company through various recruitment agencies associated with the company.

Probability sampling technique is used as the technique enabled to collect data in which unit has a known, non-zero and equal chance of being included in the sample. Furthermore, this procedure allows for assessment of the amount of sampling error and the extent to which the sample is representative of the

Interest

Social value

Economic

Developmental

Application

Employer


population. Initially, the sampling frame was organised by identifying the employees, technical colleges and consultants through the company record. Once identification was over, the sample for the study was drawn.

The research constructs were operationalised and pilot tested before the actual self-administered survey. The self-administered questionnaire used mainly five-item Likert scales to measure all the hypothesised constructs. Over a period of about four months, a total of 500 questionnaires were distributed and collected. A response rate of 83 per cent was achieved, which resulted in N = 413 valid and usable responses. Out of 413 responses, 244 were from company employees and 169 from potential employees (156 from students and 13 from consultants). All the 244 employees of the company were on record (98% men, 2% women; mean age 28.4 years, SD = 6.8 years). Given that the value dimensions might differ across higher management, the author have concentrated on the lower management employees, which constitute the talents that are difficult to retain. The 156 student (82% men, 18% women, mean age 21.1 years, SD = 1.2 years) samples consisted final year students of four technical colleges, where the author went along with HR team of the company for campus recruitment. Here, the response rate was 100% as the questionnaires were distributed just after the written examination and collected the same after 30 minutes. The advantage was that the participants had to fill the questionnaire. The 13 consultant sample consisted consultants which provided talents to the company. Modelling

Models linking employees’ values to the outcome employer branding were constructed and tested using structural equation modelling. Separate models were built for each target variable (interest value, social value, economic value, developmental value and application value). The dimensions were assumed to predict the construct. Covariances were measured among dimensions to eliminate any halo effect. RESEARCH FINDINGS

Scale reliability analysis produced overall reasonable and acceptable cronbach alpha scores for all of the hypothesised constructs. The cronbach (1951) alphas indicating internal consistencies came to 0.703, 0.726, 0.620, 0.799 and 0.754 for interest value, social value, economic value, development value and application value constructs respectively. It is found that all constructs except economic value construct are in the acceptable or better range, close to 0.70 which is generally considered acceptable for reliabilities. The economic value construct is less than the desirable result as the economic value of an individual changes with time. So the scale may give different responses at different time. Table 1 present the means, standard deviations and inter-correlations of the independent and dependent variables. The significant relationships with the dependent variable employer branding are: social value (0.719**), interest value (0.693**), economic value (0.498**), development value (0.475**), application value (0.315**) and all five are statistically highly significant (p<0.01). Thus, the correlation matrix suggests that there is support for all the five hypotheses: H1, H2, H3, H4 and H5. In addition, the hypotheses were tested by using a one-way analysis of variance (one-way ANOVA), presented in table 2.

The results in table 3 and figures 2 and 3 shows that social value factors closely followed by interest value dominate employees decision of choosing an organization: the top listing features of an employer are all about relationships and feeling respected. 85% of respondents reported that having a good relationship with colleagues was important to them; while 82% said that having a good relation with their boss was important. After having a good relationship with their colleagues and supports, respondents want to have fun working environment in the workplace which came 3rd in the priority. Economic values were also important: receiving an attractive overall compensation package was rated highly for importance by 77% of respondents in their choice of employer. But it came in 6th in the list of priorities. Lowest in the branding ratings was the application value. Just 33% reported that being able to apply what they had learned at college was important to them in the consideration of their current employer. Working for a ‘humanitarian’ organization was unimportant to 35% of respondents. Only 56% respondents would like to teach others. The things that people rate highly in an employer brand are social factors:


TABLE 1 CORRELATION MATRIX BETWEEN INDEPENDENT AND DEPENDENT VARIABLES

Independent variables Dependent variable: EmpBr

Mean SD IntV SocV EcoV DevV AppV EmpBr

IntV 15.32 3.48 1.000

SocV 15.34 3.42 0.042 1.000

EcoV 15.08 3.17 -0.063 0.312** 1.000

DevV 15.39 2.93 -0.058 0.151** -0.022 1.000

AppV 12.44 3.77 0.036 -0.035 -0.052 -0.088 1.000

EmpBr 73.59 13.76

0.693**

0.719**

0.498**

0.475**

0.315** 1.000

**Correlation is significant at the 0.01 level (2-tailed). relationships at work, the prospect of enjoying work, supportive colleagues and work as a boost to self-esteem. Employers need to design their employer brand toward these messages. The priority should be focussed in the descending order: social value, interest value, development value, economic value and application value. The fourth position of economic value also supports an important saying, “Money is not everything in life”. The money factor is not so important for an individual to choose a job. Rather he/she first looks at the working culture and environment in a company. The more an individual find himself being accepted by a company, its employees and leaders, the more he/she gets attracted to the company. So, there is very less chance of him/her to quit the company for more salary.

TABLE 2 ONE-WAY ANOVA

FIGURE 2 NO. OF FAVOURABLE RESPONSES TO DIFFERENT VALUES PER 413 RESPONSES

Predictor Variables

Interest Value Social Value Economic Value

Developmental Value

Application Value

df 412 412 412 412 412 F 2219.270 3199.559 1664.235 3100.223 111.698 Sign. 0.001 0.001 0.001 0.001 0.001

326 329 277

311

198

0 50

100 150 200 250 300 350

IntV SocV EcoV DevV AppV No.

of r

espo

nses

per

41

3 re

spon

ses

Values


FIGURE 3 FAVOURABLE RESPONSES TO DIFFERENT VALUES IN PERCENTAGE

TABLE 3 EMPLOYER BRANDING RESPONSES

Employer branding Very

unimportant to me

Very

important to me

Mean Score (out of 5)

1. Having a good relationship with your colleagues 8 12 44 252 97 4.01

2. Having a good relationship with your superiors 8 12 56 241 96 3.96

3. Feeling more self-confident as a result of working for the company 8 12 57 244 92 3.95

4. A fun working environment 8 12 57 228 104 3.95 5. Working for an organization that both values and makes use of my creativity 12 21 44 240 96 3.95

6. Good balance between private and work 8 12 61 248 84 3.9 7. Working for an organization that produces high quality goods or services 12 12 69 232 88 3.86

8. An attractive overall compensation package 8 16 70 223 96 3.84

9. An above average basic salary 8 12 72 224 80 3.81 10. Working in an exciting environment 8 8 53 244 100 3.71 11. Working for an organization that I felt I could belong to 12 19 62 250 70 3.69

12. Feeling good about yourself as a result of working for the organization 12 16 88 216 81 3.67

13. Supporting and encouraging colleagues 8 20 84 236 65 3.65 14. Working for an innovative employer with novel work practices and forward thinking

8 16 86 240 63 3.64

15. A good reference for your future carrier 12 16 101 224 60 3.63 16. Working for an organization that is customer orientated 16 20 102 207 72 3.59

17. Good promotion opportunities within the organization 16 20 101 208 68 3.58

79%

80% 67%

75% 48% IntV

SocV

EcoV

DevV

AppV


18. Working for an organization that would provide me with job security 16 24 102 195 76 3.56

19. A springboard for future employment 13 32 100 228 40 3.51 20. Opportunity to teach others what I have learned 16 84 81 200 32 3.26

21. Working for an organization would give me hands on inter-departmental experience 20 80 90 187 36 3.22

22. Working for a humanitarian organization – one that gives back to society

32 124 113 124 20 2.77

23. Opportunity to apply what I learned at college 56 128 93 116 20 2.62

24. Recognition/appreciation from management 8 12 56 241 96 3.98

25. Gaining career-enhancing experience 8 8 53 244 100 3.71 CONCLUSION

As in marketing, brands seek to be chosen by customers. So the branding is an activity that is aimed at increasing the probability of being chosen by customers. The same lies with the concept of employer branding. In order to reach this goal, an employer must understand what its employees seek for. This study presents the employer branding concept from the perspectives of employees’ values. The research findings support the hypotheses that employer branding can be affected by four employees’ values, namely, social value, interest value, developmental value and economic value. The hypotheses were tested by using simple regression in spss. The result of application value is not surprising as employees do not actually give much credit to the application part of job. They believe that what they learn in their college and what they do in a company is very different. So the application value has of not much significance on the employer brand. Whereas the social value must be taken care with utmost importance since it is highly related to the employer brand process. Management of an organization needs to be mindful of the impact that employees’ values have on the branding of the employer. As brand essence of an organization must reflect with its employees, HRM practices must involve understanding employees’ values. Management should work on portraying in the brand the same values that the organization’s employees hold to be dear, then it will maximise the opportunity of retaining talents. This research area is relevant to both HR and marketing managers, and also academics alike because attracting and retaining talented employees require investing more resources in employment related branding strategies.

The study has several limitations. First, self-administered survey method was used to conduct the study which is not the most reliable and accurate one always. The author did it as it was the most feasible method available. Future research should use personal interviews because they are more likely to produce more accurate and reliable responses; and a nation-wide sample would ensure a more representative sample, which includes all types of organizations. Second, employees of only one organization were examined here, and one should be cautious about generalizing the results to other sectors. Third, the study was performed in one region with unique culture, and its findings might be pertinent only to this particular culture. Therefore, this study must be replicated numerous times in different regions or cultures before firm conclusions can be made.

Despite these limitations, the findings of this study demonstrate the importance of employees’ values on employer branding.


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Training Service Market in China: A Comparative Case Study

Li Wei Central University of Finance and Economics

Along with China’s reform and opening, various sectors of Chinese society have witnessed tremendous developments, as reflected in the evolvement of the educational training market. However, it is clear to see that the success of similar cases depends largely on the cultural and spiritual elements of the businesses. Successful organizations largely benefit from a positive and respectable corporate culture initiated and strictly followed by their founders. There is a hope for China’s future educational training market to benefit from a combination of a positive and respectable culture with a well-established organizational structure inherited from the traditions. BRIEF INTRODUCTION ON CHINA’S TRAINING SERVICE MARKET Scale of China’s Training Service Market

The emergence of the non-degree training services in China started in the 1990s and such businesses began to flourish in 2004 after the central government issued the “Private Education Promotion Law Implementation Regulations”. Its total market value has maintained an average double-digit growth over the past years. International Data Group (China) estimated that China’ private spending on education totaled RMB 560.8 billion in 2008. China’s education and training industry reports show that education and training market value exceeded RMB 680 billion in 2009 and that it could reach RMB 960 billion in 2012 (representing a CAGR of 12%), equivalent to the total land transfer sales volume in China 2008 (Cao, 2013). Training Service Providers

Driven by strong market demand, China’s private training institutions have mushroomed across China. Currently China has nearly 120,000 such institutions. From a national perspective, the majority of the high quality training service providers clustered in Beijing, Shanghai, Guangzhou, Xi’an, Chongqing, Chengdu and Wuhan, all with high concentrations of colleges and universities. Beijing has about 2,500 such institutions with relatively big size, Shanghai, 2,200 and Guangzhou 1,800. For training service institutions with relatively healthy operations, their profit margins are generally above 30%, and could reach as much as 70%. However, generally speaking, China’s training service market has demonstrated characteristics of “big market small workshops”. Looking at Shanghai for example, training companies with annual profit exceeding RMB 1 million accounts for 60% of the total and those with annual profit exceeding RMB 10 million accounts for only 2.1% of the total. Currently no Chinese training service provider has market share of 1% (Wen, 2013).


Businesses of Training Service Providers Based on customers’ age group, we could classify China’s private training service industry into four

sub-segments; early childhood education, primary and secondary school tutoring, training for overseas studies and vocational education. In addition, based on the ways that the training services are delivered, we could also identify face-to-face training and long-distance training, i.e. offline and online training, as two distinct types of services. Based on the training contents, we could classify the industry into professional trainings for special skills, foreign languages, IT and accounting, management training, financial training and exams-oriented training. All of these content type classifications have very broad market but foreign language training and IT training are the two key pillars that support China’s training service industry. Ranking of the Training Service Providers

Ranking of China’s listed training service companies based on market capitalization. So far, of the 13 Chinese training service institutions listed in overseas capital markets, 11 of them are listed in the United States. The date and location of each IPO is listed below (Wu, 2013):

TABLE 1 CHINESE TRAINING SERVICE INSTITUTIONS LISTED IN OVERSEAS

CAPITAL MARKETS

We can see that all the elite players are listed in the capital markets in the US and they represent the key training service companies with strength and niche market. Their ranking based on market capitalization is listed as below:

Training Service Institutions Time Location

1 Oriental Century 2006-6-1 Singapore Stock Exchange.

2 New Oriental 2006-9-7 New York Stock Exchange.

3 ChinaCast Education 2007 NASDAQ

4 Noah Education Holding 2007-10-19 New York Stock Exchange.

5 ChinaEdu 2007-11-11 NASDAQ

6 China Education Alliance 2008-1-29 NASDAQ

7 China Distance Education Holdings 2008-7-21 New York Stock Exchange.

8 China Education Alliance 2010-1 New York Stock Exchange.

9 Ambow 2010-8-5 New York Stock Exchange.

10 Global Education Group 2010-10-8 NASDAQ.

11 TAL 2010-10-20 New York Stock Exchange.

12 Xueda 2010-11-2 New York Stock Exchange.

13 Modern Education 2011-7-4 Hong Kong Stock Exchange.


TABLE 2 STOCK PERFORMANCE OF THE US-LISTED CHINESE TRAINING SERVICE COMPANIES

Note: based on three-month average trading volume Merit-Based Ranking of China’s Business School

As most training services for senior management are provided by business schools, we use the ranking of China’s business schools as a measurement to evaluate China’s training service sophistications. The list below is ranking of the most valuable business schools in 2010 (the four benchmarks are post-MBA salary increase rate, work experience (years), annual salary before MBA (RMB 10,000), first-year annual salary after MBA (RMB 10,000)) (Ruan and Zhou, 2010).

TABLE 3 LIST OF THE MOST VALUABLE BUSINESS SCHOOLS IN 2010

Post-MBA

Salary Increase Rate

Work Experience

(years)

Annual Salary before MBA

(RMB 10,000)

First-year Annual Salary after MBA

(RMB 10,000)). China Europe International Business School

114.9% 7.3 11.9 25.6

Guanghua School of Management, Peking University

108.0% 5.2 6.1 12.7

Tsinghua University School of Economics and Management

89.2% 6.3 7.7 14.5

MBA Centre, Lingnan(University) College, Sun Yat-sen University

83.4% 6.1 7.0 12.7

Beijing International MBA at Peking University, BiMBA

81.7% 7.5 13.6 24.7

School of Management, Fudan University 77.8% 7.3 8.8 15.7

School of Business, Renmin University of China

77.8% 5.5 5.1 9.1

Antai College of Economics & Management, Shanghai Jiao Tong University

77.6% 6.4 8.7 15.5

Business School of Nankai University 77.0% 6.4 5.1 9.0

Business School of Sichuan University 76.6% 8.3 4.8 8.4

Stock Code Company Name 2012.12.31 2011.12.30 Issue Price

Increase/ Decrease

Trading Volume (10,000)

Market Capitalization (RMB 100million) PE Ratio

EDU New Oriental 19.43 24.05 3.75 -19.21% 278.00 30.77 22.33 XRS TAL 9.60 9.97 10.00 -3.71% 11.26 7.44 24.62 XUE Xueda 2.45 3.49 9.50 -29.80% 5.54 1.64 245.00 AMBO Ambow 2.25 7.10 10.00 -68.31% 4.03 1.63 22.50 ATAL ATA 6.97 7.50 9.50 -7.07% 2.98 1.60 26.81

DL China Distance Education Holdings

3.95 2.17 7.00 82.03% 1.90 1.34 16.19

CEDU ChinaEdu, 5.81 5.78 10.00 0.52% 1.56 1.04 22.18 NED Noah Education Holding 2.30 2.15 14.00 6.98% 2.78 0.8668 N/A CAST.OTC ChinaCast 0.09 6.12 6.05 -98.53% 21.80 0.0441 0.29

CEAI.OTC China Education Alliance

0.42 0.61 5.50 -31.15% 0.0439 N/A


Based on the two sets of rankings above, we can easily see that New Oriental is the clear leader among the listed training service providers in China and that its market capitalization is more than the rest of the listed companies combined. China Europe International Business School is the No.1 business schools in China, and it also ranked as the best business school in China in 2011 and 2012 by Forbes. Why are these two training services providers ranked highest? The author believes that organizational culture and spirit is a key determinant COMPARISONS OF CHINA’S TRAINING SERVICE PROVIDERS

In this section, the author uses case studies to illustrate the cultural and spiritual aspects of China’s most successful, less successful and promising training service providers. In a country’s training service market, the service providers are the only active factors that determine the present and future of the market. Successful Service Providers

The author chose New Oriental and CEIBS as the examples of China’s most successful training service providers. New Oriental represents China’s best private training service provider, while CEIBS represents the most successful Sino-foreign joint venture training organization in China. New Oriental

“New Oriental” was established in 1993, and by the end of 2012, had established 664 branch campuses and training centers across 48 cities in North America and China excluding Beijing and Shanghai. The school has provided tens of millions of student trainings and in 2011 the number of registrations exceeded 2.4 million. As early as 1999 when New Oriental received only 800,000 students annually, more than 30,000 students achieved TOEFL scores of over 610 and tens of thousands of students scoring the GRE test at 2,000 or higher. A large number of New Oriental students got higher test scores on the international scale. For every TOEFL test, as many as several dozen of the school’s students earned perfect scores of 677. Among the students going to the US for MBA studies from China, more than half of them have been from the GMAT class at New Oriental; and in various universities in the US and Canada, more than half of the Chinese students are New Oriental alumni.

Culture: The core element contributing to New Oriental’s success is the New Oriental culture, the core component of which resides in the New Oriental spirit. Describing this corporate ethic, founder and chairman Yu Minhong said, “it’s about being committed to excellence, challenging the extremes, breeding hopes in desperations and pursuing achievements out of arduous efforts.” Over the past two decades, Yu Minhong took the lead in putting into practice of what he said. In 2008, Yu Minhong wrote an article for the school’s 15th anniversary called “time passing as a song” in which he elaborated on the creation and sustenance of the New Oriental spirit:

“All the students coming to New Oriental are able to personally feel the existence of a ‘spirit’. They come to New Oriental in the hope of meeting the requirements of some English tests or enhancing their language proficiency, but as long as they step into the classrooms, they would be greeted by a passion, a drive to excel and an attitude to love what you live. Over the past development over almost 20 years, New Oriental has successfully integrated two key elements into its way of teaching: humorous language and encouraging inspirational education. It is safe to say that these two elements distinguish New Oriental from others. It is particularly true for the inspirational education which has been a tradition of New Oriental for more than a decade. Many students came to New Oriental frustrated but and upon listening to the professors’ lectures, were enlightened to find that life could be much more exciting than it had been and more importantly that glory can be achieved through persistent hard work.


Making failures succeed and make winners even more successful has become the core of the New Oriental spirit. We have always stressed such a belief: never giving up and surrendering to failure in face of difficulties, challenges and unsuccessful attempts is the sole gateway to success. Such an educational philosophy stems from my own experience. I made three attempts in the college entrance examination before being admitted by Beijing University, took a one-year sick leave after being infected by tuberculosis, and sought to establish New Oriental with prolonged hard work following unsuccessful attempts to go abroad over three years upon graduation from Beijing University. It was those rounds after rounds of fighting against failures and illnesses that made me stronger and instilled in me a firm belief that I can make a space for myself in this universe. So I told my story to my students and whenever they heard my encouraging experience and a visible path to success through hard efforts, I could see their faces lighting up and their eyes burning with anticipation for the future.”

Model: It’s safe to say that what made New Oriental a success is not its distinct business model but its unique educational model. The New Oriental spirit has been fully reflected in its way of teaching. Yu Minhong further commented in its “time passing as a song” that “in the gradually established process of teaching, I intentionally divided the inspirational education into three parts. The first part is about the account of my own story to success and encouraging students through telling my own experience. The second part is interweaving others’ success experience or other interesting stories in our classrooms. A few anecdotal examples told in our classrooms include the story of a lion and an antelope, the story of an eagle and a snail and the story of a wolf and a deer, and those stories became popular even outside of our classrooms. Our account about the story of an eagle and a snail is as follows: ‘there are only two kinds of animals are able to climb to the top of a pyramid: one is an eagle and the other one is a snail. The eagle has strong wings that can fly it to the Pyramid Peak while the snail can only climb up little by little towards the top. It only takes an instant for the eagle to reach the top while much longer for the snail to reach the same point. It might be a life-long effort with likelihood being repeated attempts from the very beginning after falling down from the mid-way, but as long as the snail reaches the top, the height that it gets to and the world it sees would be the same from what the eagle gets. Not everyone of us can be the eagle, but each of us can have the snail’s spirit, as we can persistently climb to the climax of our life and eventually one day we will be able to look from the very top overlooking a stunning view to appreciate the beautiful world. Languages like this serve as a fuel flowing into the engines of the students and repeatedly stimulate a drive inside them to move ahead.

The third part of the teaching philosophy is to touch students with real practices. I once had infected serious infection in my tonsils that led to a high fever. The fever was so high that even though the temperature was nearly 40 degrees, I shivered with cold. However, I could not find any replacement to take my class at that time. Therefore, I took on my thick coat and other winter clothes, trembling for over five hours to teach in the classroom. Also on the day when my daughter was born, the doctor told us the expected delivery time was 9p.m., but I had classes between 6:30 p.m. and 9:30 p.m., and I chose to go to the classroom and leave my wife alone in the hospital. When I rushed to the hospital after finishing my classes, my daughter had already opened her eye to witness this strange world. In the Beijing of the 1990s, it was common to see blackouts without any prior notices, and sometimes the whole classroom was interrupted in shire darkness a few minutes after a class began. It would be unacceptable to ask the students to leave after they had made not insignificant efforts and squeezed in buses to get here. So I distributed a candle to each student and every time when there was a blackout, a few hundred candles would be lit to light up the classroom building, and the teachers made every effort to give a rewarding lecture. Countless students thought about this experience filled in a touching mood in retrospect, and many of them went to further advance their education in renowned excellent universities from the candle light in New Oriental classrooms. Over the past 15 years, New Oriental’s classrooms have been equipped with increasingly better facilities and the working conditions at New Oriental became even better, but one thing was never missing – that is being committed to excellence, challenging the extremes, breeding hope


from desperation situations and pursuing achievements through arduous efforts. We call this the ‘New Oriental spirit’.” CEIBS

CEIBS (China Europe International Business School) was founded in November 1994 by the Chinese government and the European Commission as a non-profit joint venture. Thehe Academic Degree Committee of the State Council officially recognized it and it targeted to train international management executives. According to Financial Times, it is one of Asia’s first and China’s only top 10 globally ranked business schools, and it is Asia’s only business school whose core courses are ranked as world’s top 30 for many years.

It is also the first business school in China to receive both accreditation from the AACSB International (the Association to Advance Collegiate Schools of Business) and the European Quality Improvement System (EQUIS).

As a pioneer among China’s business schools, CEIBS is the first business school in mainland China that offers English-teaching full-time MBA, Executive MBA and a wide array of executive education programs. As of 2011, CEIBS has graduated over 10,000 MBA and EMBA graduates and provided management training for over 90,000 executives.

Culture: The organizational culture is reflected in its statements of principles, missions and vision.

• The CEIBS Principle: Conscientiousness, innovation and excellence • The CEIBS Mission: To educate responsible leaders versed in 'China Depth, Global Breadth'. • The CEIBS Vision: To become the most respected international business school by linking East

and West in teaching, research, and business practice and by promoting China's social and economic development through high-impact knowledge creation and dissemination.

CEIBS’ success however is not because of these statements themselves, but because of the way, they

have been consistently implemented since the school’s foundation. As the author previously mentioned, all of the core courses it provided are ranked as the world’s top 30. In addition, its pursuit for excellence is exemplified in every part of its operations, i.e. the recruitment of faculty, students and campuses, which constitutes the business operation mode of CEIBS.

Model: The pursuit for the most distinguished faculty team

CEIBS has distinguished itself among Asian business schools for having the best faculty team. Below is a list of the three most prestigious professors:

• Wu Jinglian: Prof. Wu Jinglian is one of the founding professors of CEIBS. He has been a Member of the Academic Council of CEIBS since the school was founded and has been a CEIBS faculty member since 1996. Prof. Wu is a renowned Chinese economist. He is the Honorary President of the International Economic Association (IEA). Prof. Wu is also a Senior Research Fellow at the Development Research Centre of the State Council; Deputy Director at the Advisory Committee for State Informatization, Deputy Director of Committee for State Planning, Member of Advisory Committee to the State Council, a Standing Committee Member of CPPCC and Deputy Director in the Economic Commission of the CPPCC. He has been a visiting fellow or visiting professor at Yale University, Oxford University, Stanford University and MIT. Prof. Wu received the Sun Yefang Award in Economics for five consecutive years. He was honored with the International Academy of Management's (IAM) Award of Excellence and won the first ever China Economics Prize – Outstanding Contribution to China's Economy Award.

• John Quelch: Professor Quelch is a Distinguished Professor of International Management, Vice President and Dean at CEIBS. Previously, he was Senior Associate Dean at Harvard Business School and Dean of London Business School. Over the past twenty years, his case studies have sold over 3.4 million copies, the third highest in HBS history. Professor Quelch has served as an


independent director and non-executive director of 14 publicly listed companies in the USA and UK. He has also served pro bono as Chairman of the Port Authority of Massachusetts.

• Pedro Nueno: Dr. Pedro Nueno is Professor of Entrepreneurship and President at CEIBS. As one of the founders of CEIBS, he has been a member of the Board of Directors and Chairman of the Academic Council of CEIBS since 1994. He is the current Vice-Chancellor and the past Chancellor of the International Academy of Management. He is a member of the Board of Directors at Harvard University. He has served as a consultant for international institutions and corporations including the World Bank, OECD, and Morgan Stanley. He has taught at several American universities including Harvard University and Michigan University, and has been a member of the Advisory Board of many renowned European business schools. His dedication to business was also recognized by the Government of Spain, with the Order of Civil Excellence, and the Government of Catalonia with the Saint Jordi Cross.

• The pursuit for excellent students: All students recruited by CEIBS each year will undergo rigorous selection. In any given year there will be 800-1000 applicants selected to take the entrance exam, of whom 330 will be selected for interview and of those 128 will recruited. At the end of each academic year, one or two students will not be promoted to the next year if they failed in certain aspects. One of the selection criteria is that the students will bring positive contribution to other students. CEIBS students have diverse backgrounds: they come from all sectors including finance, manufacturing, consulting, industrial and consumer goods; some of them are senior managers and executives of foreign companies and Chinese companies, entrepreneurs, government officials (the highest ranking are deputy ministers), and also children of government dignitaries (including the president’s daughter and the grandson of a former US president.) Take CEIBS' EMBA for example, the school wants this program to serve as a place where business leaders can build up their visions. It is the aim of the CEIBS EMBA to help develop its students into world-class management pioneers. The EMBA graduates at CEIBS can not only excel in the actual business environment, but also master good knowledge in specialized sectors, management and international practices. They pursue accomplishments beyond business success, driven by their depth in thoughts and richness in personal charisma. The EMBA students admitted into CEIBS age 40 on averages, with an average working experience of 16.7 years and 93% of them are senior corporate managements.

• Pursuit of the best designed campus and facilities: CEIBS claims to have one of the most beautiful campuses among all business schools anywhere in the world. It is the world’s only college campus designed by world-renowned architects, Pei Cobb Freed and Partners, and the school's architectural beauty combines Western architecture with the subtlety of Chinese beauty and grace and is both artistic and user-friendly. As an international business school founded by a team of Chinese and Western stakeholders and an international faculty team, student body, and way of teaching, CEIBS embodies a combination of Eastern and Western architectural features, mentalities and cultures. The school has the world class convention centers and other facilities which technologically advanced and second to none in mainland China.

Less Successful Service Providers

The author chose ChinaCast Education and Tsinghua University as the examples of China’s less successful training service providers. ChinaCast Education was one of China’s private training service institutions listed in the stock market after the New Oriental. Tsinghua University is China’s most renowned university but its executive training programs lag behind those provided by CEIBS, despite a momentous launch. ChinaCast Education

ChinaCast Education is China’s leading distance training service and content provider. Founded in 1999, the company was listed on the NASDAQ in October 2007. The company has invested in three institutions of higher education and plans to invest in another seven within five years. The company aims


to become China’s leading private higher education provider to train students with practical and professional skills. The company provides higher education, professional training and international exchange experience to students and establishes China’s biggest online education and professional training platform.

On 2 April 2011, ChinaCast Education failed to file its form 20F for 2011 on time and was suspended for trading on NASDAQ. On 9 May 2011, ChinaCast received a notification from the NASDAQ saying it has made a determination to delist the company’s securities in view of its significant losses, the inability to control bank account because of the disappearance of its official seal, and an inability to provide audited financial reports of the previous fiscal year on time. On 21 June 2011, after further consideration and taking into account its ongoing investigations into various matters involving former management and its continuing delay in reporting its financial results, the company withdrew its request to appeal this delisting determination. After being delisted from NASDAQ, ChinaCast commenced trading on OTC Markets on 25 June 2011, with the company’s shares plunged to USD $.82 per share on the first day of being traded on the pink sheet market.

Then CFO of ChinaCast Education Group revealed in March 2012 that former Chairman Chan Tze Ngon pilfered the company’s coffers of RMB 500 million from 1 July to 28 December 2012 through 12 transactions and that the money was mostly from the two most profitable subsidiaries of the company. After his resignation, he took with him the business licenses of the two subsidiaries, the official seal and financial records. In addition, Chan Tze Ngon had transferred the core assets of ChinaCast Education Group to several natural persons (Zheng and Zeng, 2012).

Although both New Oriental and ChinaCast are listed companies, ChinaCast’s development diverged so sharply from New Oriental’s because of a distinctly different culture and spirit. Tsinghua University

Tsinghua University is one of China’s top universities and holds the famous motto of “self-discipline and social commitment”. However, Tsinghua University’s market-oriented training college is not faithfully following this motto. It focuses more on monetary profit while ignoring the Tsinghua culture. It focuses more on recruiting students but not on improving teaching quality.

For example, the two highlights of its executive education recruitment advertisement are that students can receive a diploma issued by Tsinghua University, fulfilling their dream to become a Tsinghua student, and that students can expand their business network during the course. In China, very few students have filed law suit against their universities. However, in 2008, Yu Bo, a company management who studied in Tsinghua’s training program sued the university because he was not happy with its sub-par teaching standard.

According to media reports, Yu Bo applied for the 28th “Executive Class” at Tsinghua University School of Continuing Education in January 2008 and paid a tuition fee of RMB 37, 000. Contrary to what the recruitment advertisement said that some influential experts and scholars, including Lin Yifu and Lang Xianping, would be teaching some courses, Yu and his classmates found out that none of them showed up. In addition, the quality of teaching faculty was disappointing. The small class originally designed for 60 students finally became a big class for 170 students. Other problems included loose management and shortened courses. On 10 October 2008, Yu Bo filed a lawsuit to Haidian District Court asking Tsinghua University to strictly follow its commitment written on the recruitment advertisement, make a public apology through the media and compensate RMB100, 000 for his monetary losses and psychological distress.

Both CEIBS and Tsinghua University are elite schools that train China’s top executives. However, is there such a huge difference in their rankings? The difference is simply that one strictly follows its commitment, the other does not, and the results are accordingly very different.


The Hopeful Service Provider The author believes that China’s training service market will embrace a group of new comers. Hejun

Business School is one of them to surpass its predecessors. It distinguishes itself with its unique culture and business model. Culture

Hejun Business School was set up by Hejun Consulting Group, which was founded in the spring of 2000 in Beijing and has now become one of the biggest general consulting firms in mainland China with more than 1,000 management consultants and investment bankers. Hejun now comprises the largest group of consultants educated and trained in China. Altogether, the team has served more than 2,000 clients from diverse backgrounds. Hejun Consulting Group adopted the “one body two wings” business model, which means the main consulting segment (management consulting + investment banking) is supported by two wings, i.e. capital investment and business schools business. (Wang, 2012)

Mission

• Mission: Hejun’s mission is to nurture China’s leading entrepreneurs and create China’s leading enterprises.

• Living like a lotus: Hejun believes that people should live like a lotus; success is like the lotus flower, whose fate is decided by its roots in the murky waters below. When lotus flower blooms, its beauty is breath-taking. People are stunned by its beauty but they don’t know the gorgeous moment comes after a long and lonely waiting. The gentleman works hard on the basic principles.

• Three dimensional training: Hejun believes people need to go through three dimensional training, i.e. personality, attitude and depth. Personality determines destiny, attitude affects situation and depth determines career success. Personality, attitude and depth are like the root of the lotus flower. After careful training and years of accumulation, success will come naturally.

• Have dreams and have a warm heart: Hejun tries to ignite people’s hope, and light their life with a warm heart. It tries to waken their beautiful mind and encourage them to be brave, idealistic and persistent.

• Be enthusiastic and determined: Hejun believes people should treat their career as their first love and pursue it religiously.

• The spirit of water: Hejun respects the spirit of water: accommodating capable people, not being deterred by difficulties, braving challenges, and becoming powerful along the way. Be adaptable to the changing environment. Be patient in tackling difficulties and be poised for take-off. Be committed to your dreams and be motivated.

• Respect peace and respect other people: To have a peaceful mind and to be a decent person. • Targeted, patient and practical: Refuse to be loud, impetuous and pretentious. Refuse to take

short-cuts, be patient and nurture sophistication. In the end, you will have a successful career and a fabulous life.

• Carrying forward the Chinese spirit is to have a brave heart. A brave heart serves justice, a sharp mind produces eloquence. Be cautious not to bring damage to the career. Be yourself and not to be misled. Show great foresight. Be brave enough to shoulder more responsibilities.

Business Model

• Dreams and ambitions: Hejun Business School believes talents must have dreams and ambitions. When Mencius was asked, “What is the true business of a scholar?” he answered that the true work of work of a scholar is to align your ambition with the highest ideals of benevolence and righteousness. Zhu Xi said, “If one is not good with studies, he can study hard; if one is good not with comprehension, he can think carefully; but if one does not have ambition, he will be useless.” Zhu Xi also said: “No ambition, no success.” Hejun believes that to establish oneself,


one has to have strong ambition and that a person without a dream will have a tedious life. Living a day without a dream is like living a day without a soul. The true faith resides in a belief that one holds to achieve the very top of career progression overlooking the universe one passes. Without such a drive, one will be confined to various dangerous endings: either worrisome cowards or excessively arrogant beings neglecting all things around. If that become true, one will never make any meaningful achievements. Only with such a belief can one set his or her foot on the very top of their career and social establishments with great leeway to progress even higher. It’s vital to set up an easy and well-established gateway towards success as dreams are ignited by passion and achieved through one’s daily life habits. It is Hejun’s belief that one’s success is achieved through natural progression instead of forced by an instant passion or temporary hard work. A true successful winner can trace its story back to the gradual accumulation of good deeds that turn the theoretical preaching into daily practices. Only by doing so can success be at your next stop. Seeing the best in each student, respect them as they are living to their full potential. Hejun Business School is based on a way of thinking that regards each of its students as if they were living to their full and incredible potential. This is their practice of a belief that everybody is born equal, and with an equal inherent ability to be trained to greatness. The urge to manifest one’s inborn greatness, the Hejun philosophy holds, is the most fundamental, formative, and powerful desire that any one is born with. As long as this desire is nurtured and disciplined, good fortune will befall the subject, thus adding to a world that cherishes love and harmony. So how does Hejun awaken and serve this healthy desire? Simply put, as long as you have a belief that treats each of the people around you as an angel they will become the angels that you see them as, and that as you treat each one as an invaluable member of the community, with unique and praiseworthy talents, that they will consistently make efforts to progress in that direction. The richness of one’s expertise determines the height of his career, and a reasonable knowledge structure supports the top-notch professional’s career progression. Hejun Business School’s training courses aim to structure its students’ knowledge from a combination of management, capital and industries, forming one’s rich expertise supporting a lifelong progression of career development.

• Truth Grounded in Practice: theoretical preaching is pale and experience from practice is everlasting. Hejun Business School’s training program encourages its students to be deeply involved in the local business community, and to find impetus and stimulation from the real business environments and management scenarios to fuel the drive to learn, activate the knowledge in mind, accumulate incremental knowledge and train new leaders of entrepreneurship.

• Teaching: Hejun Business School’s teachers do not teach knowledge in the first place because they think knowledge is acquired through the students’ own experience and study. What is required from the students in their knowledge structuring has been specified in the reading list provided at the beginning of the study. What the Hejun Business School teaches and communicates in the classroom is always what the students cannot find in the textbooks– the practices, observations, interpretation, understanding, and even the subtle feelings of what can only be achieved from an experience gained through business dealings. The soft skills were taught and can benefit for life. The classroom courses that could have been boring lecturing thus become an art that can carry far-reaching implications. Teaching in this context could be better thought of as an art creation or a symphony that provokes the meaning of life and listening to the courses would rather be taken as an art appreciation or immersion in a spiritual fulfillment.

• Hejun Business School’s Vision: People Oriented: People come first and then the enterprises and career progression. Integrity and morality come before the success of a business. There are six key components of successful management: namely strategic planning, strategic organization,


standardized systems, informatization, uniformed IT platforms and platform automation. Harmonious learning environment: always appreciate the merits from other people. Hejun Business School is an organization with outstanding excellence, with no intention to compete with others and yet standing in a prime height supported by its inner establishments. Its noble accomplishment resides in its humble way of breeding the very best. It’s fair to believe that within 20 to 30 years, it will become the best business school with the Chinese characteristics internationally. (Wang, 2013)

CONCLUSIONS

“The times we live in are far from peaceful, with chaos and uncertainty of future. The material life is rich, but our spirit is empty; we have a good supply of food and clothes but have no good manners; we are able to act freely, but are less able to feel; and hard work can create everything, but with pessimism, some even commit crimes or make scandals. Without thinking and solving of problems based on the fundamental values, the society would be more turbulent, and the future would be more obscure – I am not the only one feeling such urgent awareness of crises and anxiety.” (Kazuo, 2012)

The Japanese society described by Mr. Kazuo Inamori is a reflection of the Chinese society, and the underlying crises he perceives are exactly what happen in China. As a practitioner in college education and training the author , sincerely and enthusiastically cares about the culture of China’s education and training market, and to put forward, in a high-profile way, the concept of cultural dividend, or spiritual belief or value. Spiritual culture is the soul and core that determines one’s success. It is time for China and the world to pay high attention to culture and civilization (Liu, 2012). The management challenges of the times are a fundamental transformation: from innovations that are based on the capture of natural and social capitals and aimed at private profits, to innovations of health and well-being that can benefit the society and ecosystem(Senge, 2011).

Like the overall Chinese society, now it should be a stage of China’s training service market attaching great importance to cultural and spiritual value. Alternatively, the uncivil primary development stage would never end. The preliminary comparison of this paper shows that despite the current absence of a decent culture in China’s training service market, cases of success driven by a decent culture are abundant, and they will be chosen as the biggest winners in a competitive market. China is a country that enjoys a long and prosperous history, and it’s hopeful that its training service market will enjoy a prosperous current and future. Successors in the market will do an even better job. This market deserves more attention and investments from investors and peers in the US. REFERENCES Cao, Jianhua (2013), 2009-2012 China Training Service Industry Analysis and Investment Prospect. http://www.chinairn.com/doc/50150/402445.html. Kazuo, Inamori (2012), A Compass to Fulfillment: Passion and Spirituality in Life and Business, Eastern Press Liu, Shaojie (2012), A Re-evaluation on the Role of Cultural Studies in Chinese Sociology, Xinhua Digest, 2012 (24), P16. Liu, Raymond and Tan, Violet, 2010 China Business School Ranking, Forbes. http://zhidao.baidu.com/question/155600601.html Peter, M. Senge (2011), The Fifth Discipline, China CITIC Press, 2011.


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Ruan, Xiuxing and Zhou, Yonggang (2011), China Business Times: Executive Training, Remove Your Makeup.http://edu.sina.com.cn/bschool/2011-04-15/1347292136.shtml. Wang, Mingfu (2012), Sandu Discipline, China Machine Press. Wang, Mingfu (2013), Temperament, Citic Publishing House Wang, Shi (2006), Twenty Years with Wanke, Citic Publishing House. Wen, Hua (2013), 2013-2017 China Training Service Industry Future Prospect and Investment Strategy, China Industry Research Network. http://www.chinairn.com/report/20130325/144909592.html Wu, Jianmei (2013), Thoughts after 11 Private Education Institutions Went Public. http://blog.sina.com.cn/s/blog_4fb3673a0101788r.html. Yu, Minhong (2010), A Detachment of Life, Qunyan Press. Yu, Minhong (2003), Standing Upright on the Remains of Loneliness, Failure and Humiliation, World Affairs Press, 2003. Yuan, Mei (2013), Introduction on China Europe International Business School (CEIBS). http://baike.baidu.com/view/468450.htm. Zheng, Zhi and Zeng Hang (2012), ChinaCast management removed RMB500 million, alleged transfer of asset and emptied the Group, 21st Century Business Herald http://money.163.com/12/0516/01/81JD3PVD00253B0H.html.


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