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Mustang Journal of Business & Ethics (2010)

MUSTANG JOURNAL OF BUSINESS AND ETHICS VOLUME 1 (2010) Table of Contents Title Page . . . 1 Editor’s Note . . . 3 Reviewers . . . 5 Table of Contents . . . 7 Acceptance of Mobile Marketing Among University Students, Muhammad Faheem Ashraf and Yasir Kamal . . . 9 The Impact of Job Stress of Job Satisfaction among Academic Faculty of a Mega Distance Learning Institution in Pakistan, Humaira Jahanzeb . . . 31 A Study on Marketing Practices in Select Service Industry B. Sudhir and Tharaka Rami Reddy . . . 50 Student Use and Abuse of Credit Cards in Russia Sergey Moskalionov and Marty Ludlum . . . 67 Chaebol and Keiretsu, a Look at Today and What Tomorrow May Bring Gary D. Tucker, Jr. . . . 76 Does Agency Cost of Debt Affect the Bond Convexity? Minjie Jung, Randal Ice, Stephen Black, and Ronald Shaw . . . 86 Risk Taking and Essential Success Factors: A Comparative Analysis in 21st Century Entrepreneurial Decisions Muhammad Faheem Ashraf and Tahir Masood Qureshi . . . 99 Buying Behavior in Organized Retailing – A Study of Demographic Factors B. Krishna Reddy and J. Suresh Reddy . . . 121 Call for Contributors . . . 134 New Journal Announcement . . . 136

Mustang Journal of Business & Ethics (2010)

Mustang Journal of Business & Ethics (2010)

ACCEPTANCE OF MOBILE MARKETING AMONG UNIVERSITY STUDENTS Muhammad Faheem Ashraf Dr Yasir Kamal ABSTRACT Mobile Marketing is a new trend of marketing which is emerging world wide. It has a great potential in Pakistan because of high mobile penetration (55.39%) and great popularity of Short Massaging Service (One billion/day). Purpose of this research paper is to see the factors effecting the acceptance of mobile marketing in the consumer mind, A tested questionnaire was used to collect the primary data on different factors that effect the acceptance of mobile marketing. Data was analyzed by correlation & regression technique in order to understand the relationship between the determining factors and acceptance of mobile marketing. Permission to interact, Consumer innovativeness and privacy vulnerability are found to be the three most important factors in consumer mind that affect the attitude toward mobile marketing. These variables degree of impact is different in more developed countries due to socio economic differences. This study suggests the mobile medium could be an alternative to traditional advertising media because it allows for more successful marketing to specific target audiences. Second, it is important for managers to recognize the various drivers of acceptance of mobile marketing practices in the Pakistan. Third, Brands entering in Pakistan may emphasize the mobile platform for advertising and promotional efforts. 1 INTRODUCTION Technology advancement had not given us new products and services, but they had changed the meaning of many words. Mobile marketing which was earlier referred as marketing in a moving fashion - for example - road shows or moving billboards due to technology advancement now understand as marketing on or with mobile / cellular device. Mobile Marketing Association (2008), defines mobile advertising as “the use of wireless media as an integrated content delivery and direct response vehicle within a cross-media or stand alone marketing communication program.” With increase in mass media advertising effectiveness as more traditional mass media had reduced. Now advertiser is looking for new and presumably less

Mustang Journal of Business & Ethics (2010)

cluttered media. The current age of digital media had given consumer choices to opt in and opt out of marketing messages and advertising. Consumers are getting more control of what they want and when they want. All these things are moving toward the interactive marketing. (Newell & Merier, 2007; Kondo & Nakahara, 2007) According to Handley (2006) the key to effective marketing is to understand the audience. Now the customers want more integrated marketing so be more emphasis toward more integrated marketing communications. Mobile is an ideal platform for integrating messages, developing relationship and direct marketing. Its two unique characteristics of interaction and target audience had made it as most effective medium of advertising. It gives power to marketer to access the customers virtually any time and anywhere that‟s why Addidas Mobile media manager call it “Brand in hand” (Sultan & Rohm, 2005). Consumer also enjoys to “choose and respond” to the ads of its interest (Chowdhury et al. 2006). Marketers are now viewing mobile devices as an ideal platform for marketing communications (Ranchand , 2007: Roham & Sultan , 2006) ,while Jun , lee (2007) are of the view that mobile phones and other wireless communication devices will soon become the most important medium for advertisers. 1.1 Pakistan Mobile Sector Mobile sector had grown tremendously in Pakistan. Cellular Mobile density which was 3.29% in 2004 had now risen to 55.39% in September 2008. GST (General Sales Tax) in 2003-04 received from mobile sector was only 5.2 billion PK Rs had risen to 36.8 billion PK RS in 2008. Foreign Direct Investment (FDI) which was 6.1 $ Million in 2001-02 raised to 1438.60 $ million USD in 2007-08. (pta.gov.pk , 2008). The rising popularity of SMS has created a new channel for mobile advertising. Recently, the use of mobile information services and SMS has increased dramatically since 2001. In Pakistan 4 billion text messages are daily exchanged. (propakistani.com, 2008) These indicators suggest that Pakistan is an emerging market of mobile users. This had huge potential growth for the marketers. High mobile density results in more mobile marketing. (Chowdhury et a.l, 2006) The purposed research will be conducting a survey on Rawalpindi & Islamabad university student and judge their perception and acceptance of mobile advertising. 1.2 Statement of the Problem

Mustang Journal of Business & Ethics (2010)

Determine the factors which influence the consumer attitude toward mobile marketing. Study is focused not only to determine factors affecting the consumer attitude toward mobile marketing but also see the willingness of consumer to accept mobile marketing in their life. 1.3 Literature Review Mobile marketing is used for a number of purposes like brand building, prospecting customers, advertising announcement, products features and stuff (Henly et al, 2006). Mobile advertising can be used with “push” or “pull” marketing strategies to reach consumers. Push mobile advertising refers to the marketer sending unsolicited advertising directly to a consumer‟s mobile phone. Pull mobile advertising refers to a consumer responding to and requesting or “pulling” information from the marketer (Dickinger et al. 2004) Since mobile is very personal device of the consumer few researcher suggests to take permission from the consumer and gave them incentive to participate in the advertisement. (tsang, 2004) Mobile Marketing Association (MMA) suggests that increasing numbers of consumers are willing to accept mobile advertising, provided they are given relevant content and sufficient incentives to do so (Openwave.com 2005 cited in Rohm & Sultan, 2006) Tsang, et al. (2004) suggested that mobile advertising should require consumers‟ permission, and that entertainment and incentive are important variables to improving mobile advertising attitudes. Mobile providers such as AT&T view mobile marketing as a potential revenue stream, with a 2012 projection of $1.4 billion in spending in the U.S. for mobile search and display advertising (Booth, 2007). (Newell & Meier 2006) A Nokia-sponsored survey of 3,300 people across 11 global markets in 2002 found that 86 percent of respondents agreed there should be a trade off for accepting ads on their cell phones. As per Leppäniemi and Karjaluoto (2005) InterQuest and the Mobile Marketing Association conducted a survey. The result of the survey revealed that 43% of European market voted in the favor of mobile advertising where as only 7%voted against it. The survey was carried among 10,000 to 30,000 test users

Mustang Journal of Business & Ethics (2010)

aged between 16 to 26 years in the UK, Italy, and Germany in 2002. Around 80% of the test users remembered the m-advertisement after 15 days. Moreover, about 70% was willing to refer those m-advertising services to other people. Multinational brands are planning to initiate mobile marketing practices by 2008, and more than half of these brands plan to devote as much as 25% of their total marketing budget toward the mobile platform (Roham & Sultan 2006). There must be some incentives for the customers who are opting for the mobile marketing. Hanley et al. (2006) in their study suggested free ring tones and air time minutes were the most popular incentives, followed almost equally by music, service upgrades, gifts and access to the internet. (Chowdhury et al. 2006) Mobile advertising is a new trend and had been less academic work on this subject. Even the marketers had been prominence it for last few years but yet there had been few academic research which tries to determine the factors which are influencing the customer performance and consumer acceptance of mobile advertising. These academic researches mostly tried to formulate the conceptual frame work on mobile advertising. (Hanley et al 2006) There is no specific mobile theory emerged which clearly explain the mobile advertising acceptance. Each writer had used different old theories to build their own model. Most common theoretical model used to describe the mobile advertising adopted optimal stimulation theory, theory of cognitive and dissonance, technology acceptance models (TAM), uses and gratification theory and theory of perceived risk. (Roham & Sultan ,2006, Hanely et al 2006) These researches had highlight number of influential factors which are Incentives, message relevance, personalization, privacy cost message processing cost monetary benefits, advertising value , content value, entertainment value, Brand trust, usage attitude toward mobile advertising, fashion, usage privacy, consumer innovativeness, permission to interact with mobile network and monetary benefits ( Roham & Sultan ,2006, Tsang et al, 2004, Henly et al , 2006, chowdhury et al, 2006, Tanakinjal 2008) 1.4 Research Hypothesis  H1: Usage Characteristics will positively influence consumer attitudes toward mobile marketing.  H2: Privacy Vulnerability will positively influence consumer attitudes toward mobile marketing.  H3: Privacy Concern will positively influence consumer attitudes toward mobile marketing.

Mustang Journal of Business & Ethics (2010)

 H4: Personal Attachment will positively influence consumer attitudes toward mobile marketing.  H5: Behavioral intent will positively influence consumer attitudes toward mobile marketing.  H6: Attitude toward mobile will positively influence consumer attitudes toward mobile marketing.  H7: Consumer Innovativeness will positively influence consumer attitudes toward mobile marketing.  H8: Permission to interact will positively influence consumer attitudes toward mobile marketing. 1.5 Objective of the Study A very few number of studies had been on mobile marketing; due to its interactive nature it had been more effective than traditional advertising. High increase in mobile penetration and more Multi National Companies coming in Pakistan will surely increases the mobile marketing in Pakistan. Objective of the study was to determine the influencing factors in consumer mind that affect the mobile marketing. 2. METHODOLOGY 2.1 Conceptual Framework For this research I will be adopting the Roham & Sultan model. This model had characteristics of Usage and gratification model and Technology Acceptance Model. These theories had been used to explain the acceptance of new products & services in consumer mind.

Mustang Journal of Business & Ethics (2010)

(Roham & Sultan, 2006) This model shows the eight variables which influence the mobile marketing which are 1) Usage Characteristics 2) Privacy Vulnerability 3) Privacy Concern 4) Personal Attachment 5) Behavioral Intent 6) Attitude Toward Mobile 7) Consumer Innovativeness 8) Permission to interact 2.2 Data Collection The research is based on primary data, which were collected by means of survey questionnaire from university graduates students in Islamabad and Karachi. Survey was conducted in following universities 1. SZABISIT , Islamabad 2. Bharia University , Islamabad 3. Hamdard , Islamabad Campus 4. University of Lahore, Islamabad Campus 5. IBA Karachi 6. Others In addition to manual distribution of questionnaires, questionnaires were circulated among online student communities. 164 responses were obtained over a three week period during December 2008- January 2009. 2.3 Research Instrument For designing the questionnaire, I had studied various articles and research papers. I adapted the research questionnaire of Roham & Sultan , (2006) keeping in view the Pakistani environment. Please refer to appendix A for the Research questionnaire. 2.4 Data Analysis Methods Data has been analyzed through SPSS 16 application. Different Statistical tools had been applied. Tests which had been applied in studies are as follow 1. Frequency Tables used for Demographic profiling of the respondents. 2. Kolmogorov Smirnov test is used to verify normality assumption of the data. 3. Regression Analysis to see the impact on dependent variable 4. Collinearity Diagnostic to see the multicollinearity among the independent variables 5. Correlation used to see the relation on dependent variable.

Mustang Journal of Business & Ethics (2010)

RESULT DISCUSSIONS 3.1 Statistical Presentation Table -1 University Cumulative Frequency Valid

Percent

Valid Percent

Percent

Szabist

60

36.6

36.6

36.6

Bharia

47

28.7

28.7

65.2

hamdard

24

14.6

14.6

79.9

iba ka

3

1.8

1.8

81.7

Others

6

3.7

3.7

85.4

24

14.6

14.6

100.0

164

100.0

100.0

university of lahore Total

Table -2 GPA Frequency Valid

Percent

Cumulative Percent

Valid Percent

2-3

40

24.4

24.4

24.4

3-3.5

72

43.9

43.9

68.3

3.5-4

52

31.7

31.7

100.0

Total

164

100.0

100.0

Table -3 Degree Frequency Valid

Percent

Valid Percent

Cumulative Percent

Bachelors

86

52.4

52.4

52.4

Master

67

40.9

40.9

93.3

MS / M phil

11

6.7

6.7

100.0

164

100.0

100.0

Total

Mustang Journal of Business & Ethics (2010)

Table -4 Gender Frequency Valid

Percent

Cumulative Percent

Valid Percent

Male

99

60.4

60.4

60.4

Female

65

39.6

39.6

100.0

164

100.0

100.0

Total

Table -5 Age Frequency Valid

Percent

Cumulative Percent

Valid Percent

16-22

74

45.1

45.1

45.1

22-30

86

52.4

52.4

97.6

30-40

3

1.8

1.8

99.4

40-

1

.6

.6

100.0

164

100.0

100.0

Total

Table -6 One-Sample Kolmogorov-Smirnov Test mobile permissio marketing

N Normal Parameters

privacy

n to

concern

interact

depenent

attuide usage

privacy

personal

variable characteristics volnerability attachement

intent

consumer

mobile inovativeness 164

164

3.2703

3.2561 3.3028

3.1616

1.17618

1.01628

1.40822 .79947

1.06957

164

164

164

164

164

164

Mean

2.7073

3.0183

3.1220

3.2134

2.4604

Std.

1.3337

1.44202

1.36017

.86663

a

behaviroal toward

164

Deviation

3

Most Extreme

Absolute

.159

.175

.180

.085

.122

.091

.206

.096

.113

Differences

Positive

.159

.175

.131

.085

.122

.091

.206

.093

.091

Negative

-.133

-.147

-.180

-.080

-.107

-.074

-.204

-.096

-.113

2.041

2.236

2.302

1.089

1.559

1.167

2.633 1.232

1.443

.000

.000

.000

.186

.015

.131

Kolmogorov-Smirnov Z Asymp. Sig. (2-tailed) a. Test distribution is Normal.

.000

.096

.031

Mustang Journal of Business & Ethics (2010)

Table -7 Model Summary Model

R

1

.609

R Square a

Std. Error of the Estimate

Adjusted R Square

.371

1.10633

.338

a. Predictors: (Constant), consumer inovativeness, behaviroal intent, attuide toward mobile, privacy concern, privacy volnerability, personal attachement, permission to interact, usage characteristics

Table -8 ANOVAb Model 1

Sum of Squares

df

Mean Square

Sig.

F

Regression

111.846

8

13.981

Residual

189.715

155

1.224

Total

301.561

163

.000

11.423

a

a. Predictors: (Constant), consumer inovativeness, behaviroal intent, attuide toward mobile, privacy concern, privacy volnerability, personal attachement, permission to interact, usage characteristics b. Dependent Variable: mobile marketing depenent variable

Table -9 Coefficients

1

Unstandardized

Standardized

Collinearity

Coefficients

Coefficients

Statistics

B

Model (Constant)

a

Std. Error -.130

.495

.048

.069

.326

Beta

t

Sig.

Tolerance

VIF

-.262

.793

.047

.698

.486

.882

1.134

.068

.346

4.785

.000

.778

1.286

-.058

.120

-.037

-.484

.629

.699

1.431

privacy vulnerability

.212

.084

.183

2.509

.013

.761

1.313

personal attachment

-.011

.095

-.008

-.111

.912

.804

1.244

.039

.065

.040

.592

.555

.895

1.117

Privacy concern Permission to interact usage characteristics

Behavioral intent

Mustang Journal of Business & Ethics (2010)

attitude toward

.197

.122

.116

1.605

.110

.783

1.277

.336

.090

.264

3.746

.000

.817

1.224

mobile consumer innovativeness a. Dependent Variable: mobile marketing depenent variable

Table -10 Collinearity Diagnosticsa Variance Proportions attuide privacy permission

Condition Model Dimension Eigenvalue 1

usage

privacy

personal

behaviroal toward

(Constant) concern to interact characteristics volnerability attachement

Index

intent

consumer

mobile inovativeness

1

8.212

1.000

.00

.00

.00

.00

.00

.00

.00

.00

.00

2

.195

6.484

.00

.31

.18

.00

.17

.03

.03

.00

.00

3

.157

7.243

.00

.41

.00

.01

.29

.00

.20

.00

.01

4

.131

7.926

.01

.08

.66

.03

.07

.02

.07

.01

.01

5

.119

8.313

.00

.11

.00

.00

.23

.05

.64

.02

.03

6

.074

10.507

.01

.01

.00

.03

.00

.01

.01

.08

.87

7

.055

12.251

.01

.04

.06

.10

.11

.82

.00

.10

.04

8

.034

15.583

.06

.02

.07

.82

.11

.02

.01

.36

.01

9

.024

18.453

.91

.01

.02

.01

.01

.05

.04

.42

.03

a. Dependent Variable: mobile marketing depenent variable

Table -11 Correlations mobile marketing privacy permission depenent

attuide Usage

Privacy

personal

concern to interact variable characteristics volnerability attachement Privacy

Pearson

concern

Correlation

1

Sig. (2tailed) N

164

.102

.199

*

.145

.195

.011

164

164

behaviroal toward

consumer

mobile inovativeness

intent

**

**

-.024

.176

*

.110

.065

.002

.758

.024

.159

.005

164

164

164

164

164

164

.245

.216

Mustang Journal of Business & Ethics (2010)

permission to Pearson interact

Correlation Sig. (2tailed) N

Mobile

Pearson

marketing

Correlation

depenent

Sig. (2-

variable

tailed) N

Usage

Pearson

characteristics Correlation Sig. (2tailed) N Privacy

Pearson

vulnerability

Correlation Sig. (2tailed) N

Personal

Pearson

attachement

Correlation Sig. (2tailed) N

Behavioral

Pearson

intent

Correlation Sig. (2tailed) N

attuide toward Pearson mobile

Correlation Sig. (2tailed) N

**

.070

.160

.000

.370

.041

.000

.001

.000

.005

164

164

164

164

164

164

164

164

**

1

.102

1

.195 164 .199

*

.474

.474

.011

.000

164

164

.145

.070

.186

.065

.370

.017

164

164

164

.245

**

.160

*

.186

*

.321

*

**

.327

.207

**

**

164

164

164

164

164

164

*

1

.321

**

.406

**

.178

*

.000

164

164

164

164

164

164

**

1

.032

.077

.115

.683

.324

.142

.001

164

164

164

.406

.032

1

.178

.758

.000

.008

.023

.683

164

164

164

164

164

*

.151

.149 .278

**

164

164

164

164

.077

.149

1

.093

.145

.235

.063 164

.054

.324

.058

164

164

164

164

164

164

164

164

**

.115

**

.093

1

**

.348

**

.001

.015

.270

.247

**

.000

.001

**

.266

.058

.024

.283

**

.000

*

.190

.275

.054

164

**

**

.023

164

.207

.151 .348

.000

164

.110

**

164

164

**

.410

.000

164

.247

**

**

.000

164

*

.270

.217

.015

.000

.176

*

**

.008

.000

**

.190

.283

.000

.041

.327

**

.017

.002

-.024

.247

.278

.159

.000

.000

.000

.142

.000

.235

164

164

164

164

164

164

164

.160

*

.041 164

164

Mustang Journal of Business & Ethics (2010)

Consumer

Pearson

inovativeness Correlation Sig. (2tailed) N

.216

**

.217

**

.410

**

.275

**

.266

**

.247

**

.145

.160

*

.005

.005

.000

.000

.001

.001

.063

.041

164

164

164

164

164

164

164

164

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

3.2 Results Interpretations 3.2.1 Characteristics of Respondents Before analyzing the data, it is important to give the demographics profile of the respondents of this study. The demographic characteristics of the respondents are shown in Table 1-5 university name, GPA, Degree pursuing, Age and gender. Among the 164 respondents 60.4% were male and 39.6% were Female. Most of the respondents from SZABISIT follow by Bahria University, Islamabad Campus. The age was divided among 4 categories, but most participants (52.4%) were between the ages of 22 and 30. Similarly most of the respondents were pursuing the bachelor (52.4%) degree. 3.2.2 Normality of Data Kolmogorov Smirnov test is used to verify normality assumption of the data for further analysis of Regression and correlation. The test result in Table 6 suggested that all of the variables are normally distributed with little or neglected deviation from normality. 3.2.3 Regression Analysis A simple Regression Analysis was run on SPSS. Table 7 show Model summary table suggest that model is fit, R square value is .371 means 37.1% of these variables do affect the dependent variable. Anova Table-8 suggests that model is fit; the significance value is 0.00 which strongly suggests for the model. Value of F is also 11.42 which are much more than the required Value of F that is more than 2.

1

164

Mustang Journal of Business & Ethics (2010)

Mobile Marketing is regressed on its factor component, to see which component has a statistically significant impact on mobile marketing.

The result are

summarized in the following equation Mobile Marketing = a +b (Privacy Concern) + c (permission to interact) + d (usage characteristics) + e (privacy Vulnerability) + f (Personal Attachment) + g (Behavioral Intent) + h (attitude toward mobile) + I (consumer innovativeness) Mobile Marketing = -.13 +0.047 (Privacy Concern) + 0.346 (permission to interact) -.037 (usage characteristics) + .183 (privacy Vulnerability) -.008 (Personal Attachment) + 0.04 (Behavioral Intent) + .116 (attitude toward mobile) + .264 (consumer innovativeness) Result suggested that only three variables are significant contributors to the mobile marketing. Most important one is permission to interact which had T Vale of 4.78 and significance of .000 which indicates it had very strong influence it is followed by Consumer innovativeness which had T Value of 3.74 and significance value of 0.00. privacy vulnerability is the third influencing factor it also had T value is 2.57 having a significance value of 0.013. 3.2.4 Collinearity Diagnostic There is always a chance of multicollinearity in regression that adversely impacts the results of regression equation. Collinearity Diagnostic test is used to see any of the variables are multicollinearity. Collinearity table -10 suggests that none of the Variables are close to multicollinearity. Eigen value of all the variables were less than 0.3 3.2.5 Correlation Correlation test was applied to see the relationship between the variables. Correlations Table -11 suggests all the variables are positively co related to the mobile marketing. The most correlated variable was permission to interact which had Pearson correlation of .474 and significance value of 0.000 it was followed by

Mustang Journal of Business & Ethics (2010)

the consumer innovativeness which had Pearson correlation of .410 and significance value of 0.00. Third important variable were privacy vulnerability which had correlations of .321 and also significance value of 0.00. Fourth one was the attitude toward mobile which had person correlation of .271. Personal attachments correlation of .207.

Privacy concern, behavioral intent and usage

characteristics show week but positive correlation. Independent variables also show correlation between themselves however in Collinearity diagnostic test none of the variable show multicollinearity. 3.3 Hypothesis Finding  H1: Usage Characteristics will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in correlation analysis however it was rejected in regression analysis. Usage Characteristics do had positive correlation with the mobile marketing but its impact on the mobile marketing is not shown that significant in regression analysis.  H2: Privacy Vulnerability will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in Regression and Correlation analysis. Privacy Vulnerability had positive influence on the mobile marketing, mobile seem its more advance to accept the mobile advertising medium.  H3: Privacy Concern will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in correlation analysis however it was rejected in regression analysis. Privacy Concern do had positive correlation with the mobile marketing but its impact on the mobile advertising is not shown that significant in regression analysis.

Mustang Journal of Business & Ethics (2010)

 H4: Personal Attachment will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in correlation analysis however it was rejected in regression analysis. Personal Attachment do had positive correlation with the mobile marketing but its impact on the mobile advertising is not shown that significant in regression analysis.  H5: Behavioral intent will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in correlation analysis however it was rejected in regression analysis. Behavioral intent do had positive correlation with the mobile marketing but its impact on the mobile advertising is not shown that significant in regression analysis.  H6: Attitude toward mobile will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in correlation analysis however it was rejected in regression analysis. Attitude toward mobile do had positive correlation with the mobile marketing. but its impact on the mobile advertising is not shown that significant in regression analysis.  H7: Consumer Innovativeness will positively influence consumer attitudes toward mobile marketing. Hypothesis is accepted in Regression and Correlation analysis. Consumer Innovativeness had positive influence on the mobile marketing, mobile seem its more advance to accept the mobile advertising medium.  H8: Permission to interact will positively influence consumer attitudes toward mobile marketing.

Mustang Journal of Business & Ethics (2010)

Hypothesis is accepted in Regression and Correlation analysis. Permission to interact had positive influence on the mobile marketing, mobile seem its more advance to accept the mobile advertising medium. 4 CONCLUSION AND POLICY IMPLICATIONS Mobile advertising is emerging as one of the most effective medium of advertising in the world. With ever increasing mobile penetration in Pakistan it is assumed mobile advertising will strongly emerge in Pakistan market as well. A study was conducted to see the acceptance of mobile advertising in Pakistan youth. We used Roham & Sultan (2006) model which is based on Technology Acceptance Model and User & gratification theory which explain the acceptance of new products among consumer. This model will help us in determining the influencing factors which impact on mobile marketing among university students. The result indicates that Permission to Interact, Consumer Innovativeness and Privacy Vulnerability are significant predictors toward mobile marketing. Permission to Interact and Privacy Vulnerability had been significant influencing variable in Roham & Sultan (2006) however this study highlights another important variable that is Consumer innovativeness which was not significant variable in Roham & Sultan (2006). Difference between the variables impact on mobile marketing occur due to Scio economic differences in the country. This study suggests several implications to managers as well. First, the mobile medium could be an alternative to traditional advertising media because it allows for more successful marketing to specific target audiences. Second, it is important for managers to recognize the various drivers of, and perhaps challenges to, acceptance of mobile marketing practices across markets. In the Pakistan, Permission to Interact, consumer innovativeness and Privacy Vulnerability were strong predictors of behavioral intent. Third, Brands entering in Pakistan may emphasize the mobile platform for advertising and promotional efforts.

Mustang Journal of Business & Ethics (2010)

5 LIMITATION OF THE STUDY This study had the following limitations Time period to conduct the study was very limited. Some of the respondents don‟t answer the question seriously Sample size was limited to one city which cannot be easily applicable to all population of Pakistan. Only student of specified universities was chosen for the test analysis.

Mustang Journal of Business & Ethics (2010)

References 1. Jay Newell, Morgan Meier (2007) „Desperately Seeking Opt-In: A Field Report From A Student-Led Mobile Marketing Initiative‟ International Journal of Mobile Marketing , 2 (2), pp 53-57 2. Fumiyo N. Kondo, Mariko Nakahara (2007) „Differences In Customers‟ Responsiveness To Mobile Direct Mail Coupon Promotions‟ International Journal of Mobile Marketing. 2 (2), pp 68-74 3. Geoffrey Handley (2006) „Effecting Social Change In Asia: Mobile Interactivity -The Gateway To A New Future‟ International Journal of Mobile Marketing, 1 (2), pp 43-49 4. Ashok Ranchhod (2007) „Developing Mobile Marketing Strategies” International Journal of Mobile Marketing, 2 (1), pp 76-83 5. Fareena Sultan And Andrew J. Rohm (2005) „Brand In The Hand: An Exploratory Study Of Mobile Marketing Communications” International Journal of M communications 6. Humayun Kabir Chowdhury, Nargis Parvin, Christian Weitenberner, Michael Becker (2006) „Consumer Attitude Toward Mobile Advertising In An Emerging Market: An Empirical Study‟ 1 (2) , Pp 33-42 7. Andrew J. Rohm And Fareena Sultan (2006) „An Exploratory CrossMarket Study Of Mobile Marketing Acceptance‟ International Journal of Mobile Marketing, 1 (1) pp, 4-12 8. Jong Woo Jun, Sangmi Lee (2007), „Mobile Media Use And Its Impact On Consumer Attitudes Toward Mobile Advertising‟ International Journal of Mobile Marketing, 2 (1), pp 50- 58

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9. Pakistan telecommunication Authority (2008) available at http://www.pta.gov.pk/index.php?cur_t=vtext access on October 2008. 10. Matti Leppäniemi And Heikki Karjaluoto (2005) „Factors Influencing Consumers‟ Willingness To Accept Mobile Advertising: A Conceptual Model‟ International Journal Of M Communications , 3 (3), Pp 197- 213 11. Tsang, M., Ho, S.-C., & Liang, T.-P. (2004, Spring). “Consumer Attitudes Toward Mobile Advertising.” International Journal of Electronic Commerce, 83(3), 65-78 12. Bauer, H., Barnes, S., Reichard, T., & Neumann, M. (2005). “Driving Consumer Acceptance of Mobile Marketing: A theoretical Framework and Empirical Study.” Journal of Electronic Commerce & Research, 6(3) 13. Mobile Marketing Association (2008), available at http://mmaglobal.com/uploads/glossary.pdf accessed on October 2008.

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7 Appendix SURVEY Dear Respondents, I am student of MS MS in SZABIST Islamabad, this research questionnaire is for the Qualitative Research, please take few minutes from your valuable time and fill this forum. Background Information

University/institute name --------------------------------------------------------------------------Current GPA: Major and Degree you are seeking? Gender: M

F_

Age

1. My friends and I use our cell phones as a way of keeping in touch with my friends or family

Disagree

1

2

3

4

2. I use my cell phone to access product or store information

Disagree

1

2

3

4

5

Agree

5

Agree

3. I use my cell phone to access entertaining content such as downloads and games

Disagree

1

2

3

4

5

Agree

4. I would provide a website with personal information (such as my e-mail address) to be entered in a contest

Disagree

1

2

3

4

5

Agree

5. I would provide a website with personal information (such as my e-mail address) to receive discounts on future purchases

Disagree

1

2

3

4

5

Agree

6. I look for and read privacy polices on the Web When given the chance, I opt-out of third party information sharing.

Disagree

1

2

3

4

5

Agree

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7. The type and style of cell phone I use says something about me

Disagree

1

2

3

4

8. I would not know what to do if I lost my cell phone

Disagree

1

2

9. My cell phone is a part of me

Disagree

1

2

5

Agree

3

4

5

Agree

3

4

5

Agree

10. When choosing what new products to buy, other people turn to me for advice

Disagree

1

2

3

4

5

Agree

11. My opinions in areas related to new products seem not to matter with other people

Disagree

1

2

3

12. Cell phones help me to be more organized

Disagree

1

2

3

4

5

Agree

4

5

Agree

5

Agree

5

Agree

13. Cell phones are not very helpful in simplifying my life

Disagree

1

2

3

4

14. I like to use my cell phone to chat with my friends

Disagree

1

2

3

4

15. I am often the first of my peers to try new and innovative products

Disagree

1

2

3

4

16. I often surf the Internet to look for new products or services

Disagree

1

2

3

4

5

Agree

5

Agree

17. I would be willing to receive coupons for discounts on certain products or services on my cell phone

Disagree

1

2

3

4

5

Agree

18. I would be willing to receive information on where to buy certain products or services on my cell phone

Disagree

1

2

3

4

5

Agree

Mustang Journal of Business & Ethics (2010)

Mustang Journal of Business & Ethics (2010)

1 THE IMPACT OF JOB STRESS ON JOB SATISFACTION AMONG ACADEMIC FACULTY OF A MEGA DISTANCE LEARNING INSTITUTION IN PAKISTAN. A CASE STUDY OF ALLAMA IQBAL OPEN UNIVERSITY.

Humaira Jahanzeb *

Abstract The primary objective of this research is to explore the relationship between job stress and job satisfaction and to assess the impact of different sources of stress on job satisfaction individually. The sources of job stress that have been investigated in this study include role ambiguity, role conflict, office politics, meaningless nature of work and management role. The population consists of all faculty members from the different academic departments working for the only public sector distance learning University in Pakistan, Allama Iqbal Open University. The results reveal that job stress has a significant negative relationship with job satisfaction. On the basis of these results, the sources of stress have been identified in terms of their importance with respect to their impact on dissatisfaction among the academicians of this distance learning university.

Keywords Non-formal and Distance learning, job stress factors, job satisfaction

* The Author is a Lecturer, Department of Business Administration Allama Iqbal Open University, H-8/4, Islamabad, Pakistan. Email: [email protected]

1. Introduction Distance learning provides convenience to its beneficiaries in terms of time and quality. This stems from the fact that the learner can enjoy the distance education opportunities without having to worry about numerous likely constraints such as time, transport, personal and professional life. The demand for distance learning has increased among a wide array of classes in the society such as professionals, adults, house-wives and school drop outs etc. According to a World Bank report, distance learning in which students attain knowledge through the use of television and radio has grown exponentially in the past decade. The five biggest distance learning programs, which have been established since 1978, are all based in developing countries. These top five universities show a total enrollment of two million students and account for a ten percent increase in developing countries during the past decade. The potential for distance learning in developing countries cannot be ignored owing to the fact that masses of people who were barred from education due to multiple reasons now have an opportunity to educate themselves through the ease that these distances learning institutions provide. The future of distance

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2 learning education is certainly bright. While it is a very attractive development, it also has a downside to it in terms of quality control and other forms of supervision. Distance Education System at Allama Iqbal Open University Allama Iqbal Open University (AIOU) was established in 1974 as the pioneer university providing non-formal distance learning in Pakistan. It is the second distance learning university in the world, the first one in the United Kingdom. It is now included in the seventeen mega-distance learning universities in the world. It is of particular significance in Pakistan is due to the opportunity it offers to the female population to study within the premises of their homes as demanded by a generally male-dominated society. Similarly, it also reaches far-flung areas which have never before been exposed to a system of education. In 2007-8 the student enrollment at AIOU reached 1,031,951 with a course enrollment of 2,982,420 out of which female participation rate has been 51%. About 2 million books besides other allied materials are printed and sent to students annually. The key apparatus of A.I.O.U’s multi media package are the following:      

    



Correspondence materials including self-learning study package and supplementary study materials (Readers, textbooks and study guides). Radio and television broadcasts generally relate to the study materials of the package. Satellite transmission: AIOU broadcasts its educational material on television which can be viewed in more than 45 countries. Online Teaching: Various regions have already been linked for online education. Online classes have started through teleconferencing. Video Conferencing: The Computer Science department has carried out a series of video conferencing lectures with US and other scholars in the past semesters. Non-broadcast media including slides, audio cassettes, fillip charts, and leaflets (generally for basic functional and literacy level courses) and also audio/video cassettes are an integral part of the learning material. Tutorial instruction through contact sessions and academic guidance facilities at study centers (mostly in the afternoons). Face-to-face teaching has recently started for courses that require intensive practical/lab work or skill development. Group training workshops for post-graduate programmes, generally at M.A/M.Sc/M.Phil and Diploma levels. Internship of short term and long term duration in industrial or business concerns for B.B.A. and M.B.A programmes. Course assignments as an instrument of instruction, continuous assessment and general academic guidance for students. These assignments are evaluated by the respective tutors. Final examination is held for each course, at the end of the semester.

At present there are 4 basic faculties at AIOU with a total of 37 academic departments performing multifarious tasks to meet an assorted mix of job demands.

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3

A little something about stress! Stress is an affliction of life in today’s modern world. Occupational stress, also known as job stress, has been defined as the experience of negative emotional states such as frustration, worry, anxiety and depression attributed to work related factors (Kyriacou, 2001). Occupational stress is an individual experience, depending on the traits of individuals, in that not all people react to events the same way (Manthei & Gilmore, 1996; McKenna, 1987). According to a substantial body of literature, teaching can be a very stressful occupation and teacher stress appears to have increased in recent decades (Bernard, 1990; Chaplain, 1995; Kyriacou, 2001; Laughlin, 1984; Manthei & Gilmore, 1996; Munt, 2004; Otto, 1986; Punch & Tuetteman, 1996). Of all the stressors working in an individual’s life, job stress is one of the leading causes of stress. Workplace has become a source of extreme stress as a result of technological changes, mass retrenchment, information overload, and demand for greater productivity, fierce competition and uncertain future. So as to keep pace with this competitive world, employees in the work place spend most of their time striving to meet their job obligations hence ignoring the “stressors” that have adverse effects on their domestic, social and personal life. In a drive to attain their career objectives, employees at times over look the way they treat their peers. Demands of the work place may prove harmful to the employee both mentally and physically. Employees might attain a phase of mental, physical and emotional exhaustion termed as “burn-out” as a result of being stressed at work. Excessive job-related stress is not a small or isolated problem. Over one-third of all American workers thought about quitting their jobs in 1990. One-third believe they will burn-out in the near future, and one-third feel that job stress is the single greatest source of stress in their lives. Nearly three-fourths of all workers feel that job stress lowers their productivity, and they experience health problems as a consequence. (Lawless, 1991, 1992) Furthermore, this is not exclusively a United States phenomenon. A Japanese poll conducted by the Health and Welfare Ministry in 1988 indicated that 45 percent of workers felt stress from their jobs. (Asahi News Service, 1990). Extreme stress can lead to decreased productivity and an overall negative impact on the organization itself. It is there fore of utmost importance to recognize the causes of stress and then explore ways in which management can reduce stress in themselves and their subordinates. Job satisfaction has been defined as the extent to which a staff member has favorable or positive feelings about work or the work environment (De Nobile, 2003). It refers to the positive attitudes or emotional dispositions people may gain from work or through aspects of work (Furnham, 1997; Locke, 1976). Conversely, job dissatisfaction refers to unhappy or negative feelings about work or the work environment (Furnham, 1997). Student enrollment has increased tremendously at Allama Iqbal Open University over the last several years. Faculty recruitment has not kept pace. The teaching staff is consequently under pressure to aggressively tackle goals and objectives. As a result, their jobs have become stressful and negatively impacted their level of satisfaction and overall physical and mental health.

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4 This study aims to assess the multi-factorial job stressors like role ambiguity, role conflict, office politics, meaningless nature of work and management role among faculty members at Allama Iqbal Open University and its effects on job satisfaction.

2. Literature Review Unfortunately, little research has been carried out on the subject of job experience in terms of stress and satisfaction of a distance education teacher. It has generally been accepted that managing students is a cumbersome and nerve-racking experience for carrying out a distance learning course, the support of staff is limited to technical and instructional design (Gates, 2000). Exclusive attention has not been given to teaching experience in a distance learning education environment and its effect on the personal and social lives of faculty and staff in terms of stress and satisfaction. An important issue that has a significant impact on the stress and satisfaction level of staff at distance learning institutions is the exact description of the teachers “domain” in this environment. The “scale and scope” of what teaching might mean in the distance learning university is still not concrete. According to (Paulson, 2002) the roles conventionally coupled with the professorate are “unbundled” by the distance education institutions through the creation of such an organizational structure. Thus with such unbundling and division of roles, the traditional teaching functions are changed and individualized. This mostly means limiting the distance learning faculty to task based instruction actions.(Sherron & Bettcher,1997). To some, this might bring satisfaction by welcoming them to exclusively focus their attention to individual tasks and duties, however for other educators it could also work as a force eating away on a significant chunk of their occupational contentment by detracting them from duties which brought them reward and fulfillment, previously. Cooper in 1998 investigated that the innovation in technology has increased expectations of people in terms of speed of response, regardless of the magnitude of information and workload.(Cooper, 1998) (p.314). The student perceiving the distance learning institution as an always “open enterprise or forum” adds to the pressure felt by distance learning educators. (Kimball; 1998). The relationship between stress and job satisfaction has been studied in a variety of professions. A study by Chung and Fong (1990) on general medical practitioners in Hong Kong found that though the medical practitioners' job is considered hard work, the majority of practitioners were generally satisfied with their work. In another study on military pilots, Ahmadi and Alireza (2006) found that during peace times in Iran, 13.5 % out of 89 military pilots studied experienced high stress. In another study on role stress of scientists and defence personnel in the Antarctic expedition by Roy and Deb (1999), role stress was found to be correlated with job related tension and alienation. Organizations these days demand more and more from their employees in terms of productivity which causes them to be stressed at work. Stress has usually been defined in terms of internal and external conditions that cause challenging situations and the symptoms that people experience when they are under tension. Arnold and Feldman (1986) define stress as "the reactions of individuals to new or threatening factors in their

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5 work environment." Since our work environments often contain new situations, this definition suggests that stress in inevitable. This definition also highlights the fact that reactions to stressful situations are individualized, and can result in emotional, perceptual, behavioral, and physiological changes. Williams and Huber (1986) define stress as "a psychological and physical reaction to prolonged internal and/or environmental conditions in which and individual's adaptive capabilities are overextended." They argue that stress is an adaptive response to a conscious or unconscious threat. They point out that stress is a result of a "perceived" threat, and is not necessarily related to actual environmental conditions. The amount of stress that is produced by a given situation depends upon one's perception of the situation, not the situation itself. In other words, stress is a relativistic phenomenon. It is thus extremely important for individuals to identify stressors that they face at work. Several demographic factors also influence the behavior of university faculty at work. Bhagat (1983) has accounted that work progress can seriously be harmed due to external stressors. There are many features of work life that can become exterior stressors. These include authority as used by managers, boredom, issues of structure, no growth situations, disproportionate responsibilities, vague demands, value clashes, and impracticable work loads. A person's personal life (e.g., family, friends, health, and financial situations) can also cause stressors to negatively impact job performance. Role ambiguity is another aspect that affects job stress at work. According to Beehr et al. (1976), Cordes & Dougherty (1993), Cooper (1991), Dyer & Quine (1998) and Ursprung (1986) role ambiguity occurs when individuals are not sure about their job responsibilities. Jackson & Schuler (1985) and Muchinsky (1997) studies found that role ambiguity lead to such harmful results as low confidence, a sense of hopelessness, anxiety, and depression. Among the major sources of work stress cited in the research literature, role conflict and role ambiguity are the most prominent ones. (Fisher & Gitelson, 1983). The demand to perform in two or more irreconcilable ways is what causes role conflicts to occur and this has been tied conclusively to occupational stress in Western research. It has also been established to be a cause of job dissatisfaction and inclination to leave the organization one works for ever since the classic work of Kahn and his colleagues (Kahn, Wolfe, Quinn, Snoeck & Rosenthal, 1964; Rizzo, House & Lirtzman, 1970; House & Rizzo, 1972; Hamner & Tosi, 1974; Van Sell, Brief & Schuler, 1981; Stout & Posner, 1984; Fang & Baba, 1993; Cordes & Dougherty, 1993). On the other hand, Role ambiguity, the lack of understandable, exact and specific information regarding work role necessities, has also been linked time after time with job stress and low job satisfaction (House & Rizzo, 1972; Hamner & Tosi, 1974; Ivancevich & Donnelly, 1974; Wright & Thomas, 1982; Cordes & Dougherty, 1993). Role conflict and role ambiguity, the two major stress issues faced in most western organizations are also a major source of concern in Allama Iqbal Open University. Various researches have emphasized the harmful consequences of work overload. Work overload and deadlines constraints were a prominent contributor to stress caused among

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6 nurses. According to Wilkes et al. (1998) Overload is frequently created by excessive time pressures, where stress increases as a deadline approaches, and then rapidly subsides. Under load is the result of an insufficient quantity, or an inadequate variety of work. Both overload and under load can result in low self-esteem and stress related symptoms, however, under load have also been associated with passivity and general feelings of apathy. (Katz and Kahn, 1978). Another important aspect which determines job stress is peer relationships. A review by Sorcinelli (1994) Peer relationships also seem to be important. A review by Sorcinelli (1994) emphasizes that seclusion and lack of support from senior faculty is a significant cause of job stress. Duquette et al. (1995) highlights that support at work from peers and supervisors is associated with less burnout. In addition, fresh employees would be at an advantage by establishing relationships with seniors who would serve as mentors and provide guidance and orientation towards the norms and procedures to be followed at work. This is a relatively difficult task with pre established norms of relationships with older employees. Management role is also one of the important organizational stressors that impacts work related stress among workers (Alexandros-Stamatios et. al., 2003). Role stress is the stress experienced by employees because of their role (job) in the organization. They assume a role based on what they expect from themselves and others for example peers and management at the work place. This includes role ambiguity and role conflict. (Alexandros-Stamatios et. al., 2003) An organizational role which affects employees adversely is role stress (Kahn and Quinn, 1970). In this regard an unclear policy leading to vague directionless aims is also an issue that is prominent in many work settings. Research carried out by Roffey Park, a UK-based executive education and research organization, suggests that the decline in command and control-style leadership has meant that managers had to become far more adept at influencing, negotiating and navigating organizational networks – playing politics, in other words- in order to get things done. At the same time, the demise of the traditional career ladder now means that the only way to get ahead is to spend far more time influencing and networking than would have bee the case a decade ago. As a result of these trends, Roffey Park's "Management Agenda 2007" survey found that while in organizational politics was ranked bottom by managers in a list of demotivators in 1998, today it has risen above the issues of increased workload and management style to be the highest causes of stress. Six out of 10 of all those surveyed reported an "increase in political behavior in their organization in recent years", with the figure rising to more than three-quarters (77 per cent) for those working in the public sector.

3. Theoretical framework and hypothesis development Numerous researches have been carried out to determine whether there is a link between job stress and job satisfaction. Most of these studies have found job stress to be inversely

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7 related to job satisfaction. (e.g., Hollon Chesser, 1976; Miles, 1976; Miles & Petty, 1975). Similar findings of the indirect effect of stress on turnover intentions through job satisfaction have been reported by Hendtix, Ovalle, and Troxier (1985) and Kemery, Bedian, Mossholder, and Touliatos (1985). Drory and Shamir (1988) examined the negative effects of intra organizational factors, (e.g., role conflict, role ambiguity, management support), extra organizational factors, (e.g., community support, family-role conflict), and task characteristics on the job satisfaction and burnout of 266 Israeli prison guards. In a study of burnout and job satisfaction in a chronic care hospital, the researchers confirmed a negative correlation between increased stress or “burnout” and decreased job satisfaction (Belicki & Woolcott, 1996). Although many factors, such as rate of pay, job security, and benefits, have been correlated with the level of job satisfaction, many researchers have demonstrated that an increase in stress level is associated with a decrease in job satisfaction (e.g., Spector, 1997; Murphy & Schoenborn, 1989; Benner, 1984). Carlson and Thompson (1995) conducted research on the effects of stress and job “burnout” on satisfaction and turnover in public school teachers. New research for National Stress Awareness Day (held on Wednesday 6 November) shows that almost two-thirds of the UK workforce is suffering the effects of stress at work – up from just over half of the workforce in 2001. Commissioned by the International Stress Management Association UK (ISMA UK) in association with AXA Insurance, the research also found that almost two-thirds (64 per cent) of people who are suffering stress at work believe that it is reducing their job satisfaction, and more than a third (36 per cent) stated that it is reducing their productivity. The relationship between job stress and variables such as psychological and physical health of academicians is a very important one. If a definite link exists between two variables, it could be possible for an academician to provide intervention in order to increase the level of one of the variables in hope that the intervention will also improve the other variable. (Koslowsky, et al., 1995). This research aims to investigate the extent of the relationship between job stress and job satisfaction among a public distance learning university faculty in Pakistan. A theoretical framework for the job stress behavior is developed keeping in view the literature review in this context. The aim of this study is to categorize the significant variables which lead to job stress and thus approximate their impact on several outcomes, job satisfaction being an important one. This framework is developed consistent with previous researches to estimate the effect of features that lead to occupational stress in university faculty. 1. The proposed model below comprises of two main variables namely, job stress and job satisfaction.

Figure1: A Schematic diagram of the conceptual framework

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8

Role Ambiguity Role Conflict

Office Politics

Job Stress

Job Satisfaction

Meaningless Work Management Role

This study shows that there is a negative relationship between job stress and job satisfaction. The following hypothesis have been developed as a result of the study Hypothesis 1: there is negative relationship between job stress and job satisfaction Hypothesis 2: there is negative relationship role ambiguity and job satisfaction Hypothesis 2: there is negative relationship between role conflict and job satisfaction Hypothesis 3: there is negative relationship between office politics and job satisfaction Hypothesis 4: there is negative relationship between meaningless work and job satisfaction Hypothesis 6: there is negative relationship between management role and job satisfaction

4. Methodology Population: The University has three types of departments namely the Academic, Administrative and Servicing departments. The academic department is further divided into four faculties namely, the faculty of Arabic and Islamic studies, the faculty of education, the faculty of Sciences and the faculty of Social Sciences and Humanities. All four faculties have a total of thirty seven departments. The population of this study is all the faculty members from the four faculties working under the academic department.

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9 Sampling method: The data for this research was collected through the convenience sampling technique. Two hundred questionnaires were circulated out of which one hundred and twenty five were received. So as to avoid biased results, five of the received questionnaires were discarded on the grounds that they had been answered irrationally and contained extreme values for all the questions asked. The actual survey was carried out over a time period of one month whereby the respondents were interviewed personally. Firstly, this form of personal interaction allowed for the actual screening of the eligibility of respondents. Moreover, it permitted a closer interaction between the respondents and interviewers whereby any confusion on the part of the respondents could be handled interactively in an easy manner. There was a 67.6% response rate out of which 63.5% were males and 36.4% females. The average age of the faculty members is 37 years with an average income level of thirty thousand rupees per month. Instrument Development The questionnaire used in this study consists of three parts. The first part of the questionnaire contains demographic questions like age, gender, highest level of education, income level and experience in years with the Institution. The second part of the questionnaire measures job stress which is the independent variable. The Independent variable is further divided into the different sources of job stress explained in the literature review. Job stress is measured by “Job Stress Questionnaire, JSQ” proposed by Caplan et al. (1975) and Sahu and Gole(2008). This scale included two dimensions from Caplan et al (1975), namely (1) role ambiguity (2) role conflict. Questions for the remaining three stressors i.e. office politics, meaningless nature of work and management role have been designed by following the guidelines of NIOSH general job stress questionnaire. The questions have been varied to some extent keeping in mind the work set up at Allama Iqbal Open University. Each of the job stressors is measured on a fivepoint Likert Scale in which 1 indicates “strongly disagree”, 2 Indicates “disagree”, 3 indicates “uncertain”, 4 indicates “agree” and 5 indicates “strongly agree”. The third part measures job satisfaction. Each stressor is further divided into three to four sub variables with the aim to extract a detailed insight of the respondents. A total of eight questions constitute this part of the questionnaire. The questions designed to measure the level of job satisfaction are taken from the existing literature. On the Likert scale Job satisfaction represents 1 for highly dissatisfied , 2 representing dissatisfied, 3 indicating uncertain,4 indication satisfied and 5 indicating highly satisfied. Data Analysis Techniques Linear regression has been applied to infer results from the data. Descriptive statistics have also been reported to describe the data collected from the respondents. All the sources of stress have been aggregated to regress with job satisfaction. The sources of stress are not regressed in multivariate regression due to inherited multicolineraity among

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10 the independent variables (stressors). To debate on the individual impact of various job stresses, they have been regressed separately with job satisfaction. This has been done with a view that the multicolliniarity among the sources of job stress will distort the results. Separate regression results enable the enlisting of the sources of stress according to their significance and impact on job satisfaction.

5. Results and discussion Descriptive Statistics The following table is a summary statistics of the data. Greater mean values of all the sources of stress indicate that the academicians are stressed generally. Lower mean value of job satisfaction depicts that academicians are not satisfied with their job. The responses are consistent among the respondents; therefore the value of standard error and standard deviation is significantly low. Table 1. Role ambiguity

Mean Standard Error Median Mode Standard Deviation

Role Conflict

office Politics

Meaningless Work

Management Role

Job Satisfaction

2.92 0.17 2.67 2.67

3.41 0.15 3.50 4.50

3.27 0.16 3.33 3.33

3.13 0.19 3.33 5.00

3.28 0.18 3.33 3.33

1.74 0.15 1.75 2.75

1.18

1.01

1.07

1.29

1.20

1.06

The above mean value of every stressor is above 3, which indicates that the results show an inclination towards job stress. The satisfaction level is mostly noted to be 2 which show a general trend of dissatisfaction among the respondents. The mean values indicate that data is consistent with the perceived negative relationship between job stress and job satisfaction because al the mean values are leaning towards dissatisfaction. In the next section, the results of regression analysis will be discussed and explained. All the results are organized in the same order as was used in the hypothesis development section. Regression Analysis The regression result of the impact of average job stress on job satisfaction. (Equiation-1)

Job stress has been regressed with job satisfaction. The average value of all the job stressors has been regressed with job satisfaction so as to avoid the issue of multi co linearity. The results revealed in Table 2 show that job satisfaction and job stress have a significant negative relationship (-0.74596, t value = -6.8). Thus, we accept our null hypothesis; the relationship is significant at 99% level of confidence. The negative sign with the coefficient is indicative of negative relationship between the two variables,

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11 higher job stress results in less job satisfaction. The value of R Square 0.50 and adjusted R Square value 0.49 indicate that the variation in this job satisfaction is approximately 50% explained by the variables chosen for job stress.

JSFT= α + β JSTR+ ε

(equation 1)

Where, JSFT is Job Satisfaction, JSTR is Job Stress

Table 2

Results of Equation-1 Regression Statistics

Multiple R R Square Adjusted R Square Standard Error Observations

Intercept Average Job Stress

0.708143 0.501467 0.490629 0.775668 120 Coefficients S. Error 5.196586 0.372311 -0.74596 0.109663

t Stat 13.95765 -6.80226

P-value 3.77E-18 1.8E-08

The different variables of job stress (stressors) have also been individually regressed with dependant variable i.e. job satisfaction. The results of regression analysis are all significant and depict negative relationship with job satisfaction. Therefore, every independent variable is regressed individually to determine the significance of causal relationship between job satisfaction and each of the job stressors. The justification for the individual regression of each stressor on job satisfaction has been given earlier. The regression result of each of the job stressors on job satisfaction (Equation 2-6) The results of following regression equations have been accumulated and presented in this section.

1. JSFT= α + β RLMB+ ε ……..… equation 2 2. JSFT= α + β RCNF+ ε ………. … equation 3 3. JSFT= α + β OFCP+ ε ….……… equation 4 4. JSFT= α + β MNOW+ ε ……….. equation 5 5. JSFT= α + β MNGR+ ε ………… equation 6 Where

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12 JSFT is Job Satisfaction RLMB is Role Ambiguity RCNF is Role Conflict OFCP is Office Politics MNOW is Meaningless Nature of Work MNGR is Management Role All the sources of stress (stressors) have a significant negative relationship with job satisfaction; however the coefficient of role conflict has the highest value. It indicates that role conflict has a major contribution towards job dissatisfaction. In other words, role conflict affects the academicians of a distance learning system more than any other stressor. It is quite natural because the designations of academicians in distance learning institutions are the same as the teachers working for a formal system but in reality the distance educators have to perform more work of the administrative nature. Table 3 Results of equation 2-6 variable Beta Constant Role ambiguity -0.59538 Role conflict -0.64824 Office politics -0.58137 Meaningless work -0.49522 Management role -0.6383

t-value

p-value

-5.97983 -5.23137 -4.66323 -5.01564 -6.80019

3.1E-07 4.03E-06 2.7E-05 8.34E-06 1.82E-08

According to the results, the first significant stressor is role conflict, followed by management role, role ambiguity, office politics and finally the meaningless nature of work. All these stressors affect job satisfaction negatively.

6. Conclusion On the basis of the results, it is reported that all the sources of stress such as role ambiguity, role conflict, office politics, meaningless work and the management role have a significant negative impact on the job satisfaction level of the academicians at Allama Iqbal Open University. It is further observed that “role conflict” affects the university academicians the most out of all the stressors that have been investigated. Most academicians feel that their role on job is not consistent with their designation and job description. This conflict of role cause stress and thus leads to dissatisfaction. Their performance evaluation is carried out on the parameters which are inconsistent with their role. Role conflict also occurs when the job responsibilities often interfere with social and personal obligations.

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13

Role ambiguity also has a prominent impact on job stress among the faculty members of Allama Iqbal Open University. A thorough job description provided to the newly recruited staff members would greatly work towards eliminating the issue posed by role ambiguity. At the same time, fresh employees should be given proper orientation and a socialization session so as to clarify their roles and responsibilities to them. The management role in the context of job stress and satisfaction has a great role to play. The management should ensure the clear communication of its goals and strategies to the employees. Moreover, employees should be recognized for their individual contribution towards work. The management should also facilitate the use of new technology at work for improved efficiency and effectiveness in daily work routines. Office politics is another stress factor that has debilitating effects on the workforce. This happens when the employee has the impression of being repeatedly discriminated against at work. This could lead to frequent arguments with superiors, co-workers or lower staff causing employees to feel disgruntled. To prevent unnecessary job stress, measures such as on the job trainings, work orientation of newly inducted staff, stress management workshops and grievance handling should be implemented. Another important issue is the lack of a proper human resource department. As companies grow, there is a need to administer the HR function. What necessitates a Human resource department are the functions that no one else is ready to or capable of doing. From recruiting to orienting new employees, from writing job descriptions to tracking attendance, and from instituting and monitoring policies to monitoring benefits, there has been a need for an HR generalist to assist senior management in both establishing a structure to holding down costs of administration. By incorporating the above changes, the efficiency of the academicians can be enhanced while at the same time their productivity increased. Limitations: The scope of this study is limited to only AIOU academic staff so the results can not be generalized to all distance learning institutions. More variables could be included in the study as there are many other stress factors beside the ones that have been investigated in this study.

References: Alexandros-Stamatios G. A., Matilyn J.D., and Cary L.C., 2003. “Occupational Stress, Jobsatisfaction, and health state in male and female junior hospital doctors in Greece”, Journal of Managerial Psychology, 18(6), pp. 592-621 Bhagat, R. S. 1983. "Effects of stressful life events on individual performance effectiveness and work adjustment processes within organizational settings: A

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14 research model." Academy of Management Review. 8(4): 660-671. Beehr, T.A., Walsh, J.T., & Taber, T.D. 1976. “Perceived situational moderators of the relationship between subjective role ambiguity and role strain’, Journal of Applied Psychology, 61, pp.35-40. Belicki, K., & Woolcott, R. (1996). Employee and patient designed study of burnout and job satisfaction in a chronic care hospital. Employee Assistance Quarterly, 12(1)37-45. Benner, P. E. (1984). Stress and satisfaction on the job: Work meanings and coping of mid-career men. New York: Praeger. Chaplain, R.P. (1995). Stress and Job Satisfaction: A Study of English Primary School Teachers. Educational Psychology, 15 (4), 473-489. Cooper, G. L. (1998). The changing nature of work Community, Work & Family, 1 (3), 313-316. Cordes, C. & Dougherty, T., (1993), A review and an integration of research on job burnout, Academy of Management Review, 18, pp. 621-656. Carlson, B. C., & Thompson, J. A. (1995). Job burnout and job leaving in public school teachers: Implications for stress management. International Journal of Stress Management, 2, 15-29. Drory,A., & Shamir, B. (1981). Occupational tedium: Relationship to stress, task characteristics, support, and satisfaction. Paper presented at the 89th convention of the American Psychological Association, Los Angeles, California. Dyer, S., & Quine, L. 1998. “Predictors of job satisfaction and burnout among the direct car staff of a community learning disability service”, Journal of Applied Research in IntellectualDisabilities, 11 (4), pp.320-332. Furnham, A. (1997). The Psychology of Behaviour at Work. Hove: Psychology Press Fisher, C.D., & Gitelson, R. 1983. “A meta-analysis of the correlated of the role conflict and ambiguity”, Journal of Applied Psychology, 68, pp.320-333. Fang, Y. & Baba, V., (1993), Stress and turnover intention: A comparative study among nurses, International Journal of Comparative Sociology, 34, pp. 24-38. Gates, G. S. (2000). Teaching-related stress: The emotional management of faculty. The Review of Higher Eduaction, 23 (4), 469-490. Hamner, W. & Tosi, H., (1974), Relationship of role conflict and role ambiguity to job involvement measures, Journal of Applied Psychology, 59, pp. 497-499.

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Hendrix, W., Ovalle, N.K., & Troxler, R.G. (1985). Behavioral and physiological consequences of stress and its antecedent factors. Joural of Applied Psychology, 70: 188-201. Hollon, C.J., & Chesser, R.J. (1976). The relationship of personal influence dissonance to job tension, satisfaction, and involvement. Academy of Management Journal, 19: 308-314.

Ivancevich, J. & Donnelly, J., (1974), A study of role clarity and need for clarity for three occupational groups, Academy of Management Journal, 17, pp. 28-36. Jackson, S.E., & Schuler, R.S. 1985. “A meta-analysis and conceptual critique of research on role ambiguity and role conflict in work settings”, Organisational Behavior and HumanDecision Processes, 36, pp.16-78 Kemerym E.R., Bedeian, A.G., Mossholder, K.W.,& Touliatos, J. (1985). Outcomes of role stress: A multisample constructive replication. Academy of Management Journal, 28:363-375. Kyriacou, C. and Suttcliffe, J. (1977). Teacher Stress: A Review. Educational Review, 24 (4), 299-306. Laughlin, A. (1984). Teacher Stress in an Australian Setting: The Role of BiographicalMediators. Educational Studies, 10 (1), 7-22

Manthei, R. and Gilmore, A. (1996). Teacher Stress in Intermediate Schools. Educational Research, Vol. 38, No. 1, pp. 3-19. Munt, V. (2004). The Awful Truth: A Microhistory of Teacher Stress at Westwood High.British Journal of Sociology of Education, 25 (5), 578-591 Manthei, R. and Gilmore, A. (1996). Teacher Stress in Intermediate Schools.Educational Research, Vol. 38, No. 1, pp. 3-19. Munt, V. (2004). The Awful Truth: A Microhistory of Teacher Stress at Westwood High. British Journal of Sociology of Education, 25 (5), 578-591. Mendenhall, W., and Sincich, T. (1992), Statistics for Engineering and the Sciences (3rd ed.), New York: Dellen Publishing Co.

Punch, K.F. and Tuetteman, E. (1996). Reducing Teacher Stress: The Effects of Supportin the Work Environment. Research in Education, 56, 63-72

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16 Paulson, K. (2002). Reconfiguring faculty roles for virtual settings. The Journal of Higher Education, 73 (1), 123-140. Punch, K.F. and Tuetteman, E. (1996). Reducing Teacher Stress: The Effects of Supportin the Work Environment. Research in Education, 56, 63-72. Roy and Deb (1999) Role Stress Profiles of Scientists and Defence Personnel in fifteenth Antarctic Expidition, department of ocean development, technical publications no 13, pp 371-375 Rizzo, J.R., House, R.J., Lirtzman, S.I. 1970, “Role conflict and ambiguity in Complex organizations”, Administrative Science Quarterly, 15(June), pp.150-63. Sorcinelli, M. D. 1994. Effective approaches to new faculty development. Journal ofCounseling & Development 72(5): 474-477. Spector, P. E. (1997). Job satisfaction: Application, assessment, cause, and consequences. Thousand Oaks, CA: SAGE Publications.. Ursprung, A.W. 1986. “Incidence and correlates of burnout in residential service settings”, Rehabilitation Counselling Bulletin, 29, pp.225-239. Van Sell, M., Brief, A. & Schuler, R., (1981), Role conflict and role ambiguity: Integration of the literature and directions for future research, Human Relations, 34, pp. 43-71. Wilkes, L., Beale, B., Hall, E., Rees, E., Watts, B., & Denne, C. 1998. “Community nurses’ descriptions of stress when caring in the home”, International Journal of Palliative Nursing, 4 (1)

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Wilkes, L., Beale, B., Hall, E., Rees, E., Watts, B., & Denne, C. 1998. “Community nurses’ descriptions of stress when caring in the home”, International Journal of Palliative Nursing, 4

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17 Arnold, H. J., and Feldman. (1986). Organizational Behavior. New York: McGraw Hill. Asahi News Service. (1990). "Japanes move quickly to fight job stress.". In the Minneapolis Star/Tribune. March 11, 1990. Benner, P. E. (1984). Stress and satisfaction on the job: Work meanings and coping of mid-career men. New York: Praeger. Chan Nang Fong.(1990) Job stress and occupational stress among general practioners in hong kong, 12(2) Feb,1990 Cooper, C.L., 1991. Stress in organizations. In M. Smith (Ed.). Analysing Organisational Behaviour. London: MacMillan. De Nobile, J. (2003). Organisational Communication, Job Satisfaction and Occupational Stress in Catholic Primary Schools. Unpublished doctoral thesis, University of New South Wales, Sydney. House, R., & Rizzo, J., (1972), Role conflict and role ambiguity as critical variables in a model of behavior, Organizational Behavior and Human Performance, 7, pp. 467505. Katz, D., and Kahn, R. L. 1978. The Social Psychology of Organizations. New York: Wiley. Kahn, R.L., & Quinn, R.P. 1970. Role stress: A framework for analysis, In A. McLean (Ed.), Occupational mental health, New York: Wiley. Kyriacou, C. (2001). Teacher Stress: Directions for Future Research. Educational Review, 53 (1), 27-35. Kimball, L. (1998). Managing distance learning: new challenges for faculty. In R. Hazemi, S. Hailes & S. Wilbur (Eds.) The Digital University : Reinventing the Academy . London : Springier-Verlag. Koslowsky, M., Kluger, A., & Reich, M. 1995. Commuting Stress: Causes, Effects, and Methods of Coping. Plenum, New York. Lawless, P. 1991. Employee Burnout: Amerca's Newest Epidemic. Minneapolis, MN: Northwestern National Life Employee Benefits Division.[14]Lawless, P. 1992. Employee Burnout: Causes and Cures. Minneapolis, MN: Northwestern National Life Employee Benefits Division. Locke, E.A. (1976). The Nature and Causes of Job Satisfaction. In Dunnette, M.D. (Ed.) Handbook of Industrial and Organizational Psychology. (pp. 1297-1349).Chicago: Rand McNally

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18 Locke, E.A. (1976). The Nature and Causes of Job Satisfaction. In Dunnette, M.D. (Ed.) Handbook of Industrial and Organizational Psychology. (pp. 1297-1349). Chicago: Rand McNally Muchinsky, P. 1997. Psychology applied to work: An introduction to industrial and organizational psychology (5th Ed.). Pacific Grove, CA: Brookes/Cole Publishers. Murphy, L. R. & Schoenborn, T. F. (Eds.). (1989). Stress management in work settings. New York: Praeger. McKenna, E.F. (1987). Psychology in Business: Theory and Applications. London: Lawrence Erlbaum Associates. Otto, R. (1986). Teachers Under Stress: Health Hazards in a Work-Role and Modes of Response. Melbourne: Hill of Content

Sherron, G., & Bettcher, J. (1997). Distance learning: The shift to interactivity . EDUCAUSE Professional Paper Series #17. Boulder , CO :EDUCAUSE. Accessed February 22, 2006 fromhttp://www.educause.edu/LibraryDetailPage/666?ID=PUB3017 . Stout, J. & Posner, J., (1984), Stress, role ambiguity and role conflict, Psychological Reports, 55, pp. 747-753. Vinokur-Kaplan J.X. 1991. “Job Satisfaction among Social Workers in Public and VoluntaryChild Welfare Agencies”, Child Welfare, 155, pp. 81-91. Williams, J. C., and Huber, G. P. 1986. Human Behavior in Organizations. Cincinnati, OH: South-Western Publishing. “Job stress before it reduces you” Health and Safety, November 1992, pages 40-43 Zikmund, W.G.. 2000, Exploring Marketing Research, 7th Edition, Dryden Press, Fort Worth.

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A STUDY ON MARKETING PRACTICES IN SELECT SERVICE INDUSTRY Dr. B. Sudhir* Mr. Tharaka Rami Reddy**

Abstract Today’s market has become consumer driven and the marketer has to delight the customer to achieve success. To achieve this service firms have to identify needs of the customer, design the product mix, communicate price to the public and promote the services in such a way to position that in an attractive manner and in different way than the competitor. Marketing expenditures and practices are important for service innovation, customer satisfaction, customer loyalty, and organizational practices, which in turn influence future profitability and value of the firm. Hotel industry has been selected for the study. This study mainly concentrated on service marketing mix variables (7Ps) and also the importance given for these elements by the selected hotels. Marketing practices of the select hotels have been identified with reference to 7Ps and findings are discussed elaborately. Hypothesis are formed and tested to determine the relationship between investments, annual sales and supply of services. Price, physical evidence and promotions are the first three elements among the 7Ps preferred by the respondents. Developing infrastructure facilities, use of information technology and establishing full pledged marketing department are some of the suggestions made to improve the marketing practices of the hotel industry. INTRODUCTION: Marketing practices in Service Industry: The marketing concept is valid for both products and services. The marketing mix is one of the most important universal concepts, which has been developed in marketing. All the variables are inter-related and interdependent on each other. It is appropriate to reconsider the traditional marketing mix in the context of services. Several authors have agreed that a different marketing mix is needed for services, while some have expanded the traditional 4Ps of the Marketing Mix to make it more appropriate recognizing the diversity of service marketing.

*Associate Professor, Dept of Management studies, S.V.University, Tirupati, India. **Research Scholar, Dept of Management studies, S.V.University, Tirupati, India.

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The strategies for the 4 Ps require some modifications when applied to services due to the special features of the services. The challenges encountered by the service marketer – like heterogeneity – the requirements of customers, interaction with customers while delivering service and perishability or absence of inventory, intangibility of offer and absence of patent protection etc., necessitate the extension of the marketing mix to include people, process and physical evidence.

Gronroos defines marketing orientation as that a firm or organization plans its operation according to market needs. The objectives of the firm should be to satisfy customer needs rather than merely using existing ready facilities or raw materials. It is imperative to say that within service firms it is nearly impossible to be totally marketing oriented. Customers cannot be given everything they want because of the constraints imposed by the services operating system. HOTEL INDUSTRY IN INDIA: Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry is inextricably linked to the tourism industry and the growth in the Indian tourism industry has fuelled the growth of Indian hotel industry. The thriving economy of the Indian hospitality industry is projected to grow at a rate of 8.8% during 2007-16, placing India as the second-fastest growing tourism market in the world. Initiatives like massive investment in hotel infrastructure and open sky policies made by the government are all aimed at propelling growth in the hospitality sector. LITERATURE REVIEW Rogerson (1983), specified that in marketing or selling quality hotel product, high price will increase its reputation and brand loyalty. In an effort to build and maintain reputation, good service quality which has been promised has to be fulfilled. Having a good reputation can increase selling, attract new customer by word of mouth activities and reduce unsatisfied customer. Leonid Julivan Rumambi and S. Pantja Djati (2007) stated that, Hotel industry is a form of an intense interaction between employee and consumer. When hotels choose to perform in a perfect manner, then every operational mistake will be considered as a loss and lowering brand asset value in consumer‟s mind. Brand can be the most valuable asset of a company. In this case, a hotel actually can develop its market size and consumer amount growing rate by their loyal 2 51

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consumer. This approach surely gives more advantage than other marketing activities such as discount or promotion program. Beside, it‟s cheaper for a hotel to give a best serve to its existing consumer than trying to get new consumers. A satisfied consumer will become a success standard and also become a free promotion for the hotel. The more consumers satisfy, then the more positive message they will spread to their friends, family and colleagues through word-ofmouth. Giribaldi (2003), defines brand in terms of hotels as a combination of attributes which is communicated through name or symbol which can influence consumer‟ mind in buying decision process. Brand is an un-separate part of world market nowadays. American Marketing Associations gives definitions of brand as a name, term, sign, picture or symbol or the combination of those mentioned before which propose to identify a single or group of seller‟s product or service and to differentiate their product or service from its competitor. Nan Hua; Basak Denizci; Anna S. Mattila; Arun Upneja (2008), examined the effect of marketing expenditures and practices of hotel firms. They argued that marketing expenditures and practices are important for service innovation, customer satisfaction, customer loyalty, and organizational practices, which in turn influence future profitability and value of the firm.

Rajasekhara Mouly Potluri (2008), Stated that, creating effective communication with customers is the most important aspect in hotel services marketing. To date we still have poor understanding of the role of effective communication with customers in attracting and maintaining prospective and present customers. He evaluated the effectiveness of advertising and personal selling practices of Ethiopian Service Sectors especially hotels in communicating with its customers with the aim of finding solutions to improve the existing communication and customer satisfaction. Jane Moriarty, Rosalind Jones, Jennifer Rowley, Beata Kupiec-Teahan (2008), contributed to the understanding of marketing in small hotels specifically, and, more generally, to the area of SME or entrepreneurial marketing. – A deductive-inductive approach based on interviews with 15 small hotel owner-managers, supported by web site analysis and three indepth case study interviews, was used to provide a profile of marketing activities in small hotels in North Wales.

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OBJECTIVES OF THE STUDY: 1. To study the marketing practices of hotel industry. 2. To identify the importance of marketing mix variables with respect to hotel industry. 3. To suggest ways and means, if needed, for strengthening hotel industry for better marketing practices.

HYPOTHESES: H1. There is no significant relationship between number of rooms available and annual sales of the hotels. H2. There is no significant relationship between investment and annual sales of the hotels.

METHODOLOGY: i. Data Sources: This study requires both Primary and Secondary data. The Primary data has been collected from hotels located in Andhra Pradesh. Secondary data is collected from journals, publications and various websites. ii. Data collection method: Questionnaire is used as research instrument followed by personal interview to collect primary data. iii. Research Instrument: The questionnaire consists of Part-A and Part-B. Part-A, consists of questions related to socio-economic factors of the hotels such as Size, Annual Sales, Investment, Year of Establishment and Location of the hotel. Part-B consists of the questions related to Marketing mix and ranking of 7P‟s iv. Sampling: The questionnaire was pre-tested using a sample of 10 respondent hotels and lodges. The samples were selected by using, non-probability sampling procedure and in specific, Quota Sampling technique has been adopted to select the sample. To make the sample more 4 53

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representative of the entire state, sample has been selected from all the three regions of Andhra Pradesh state in India namely Coastal, Telangana, and Rayalaseema. The questionnaires were distributed to the target respondent firms and 114 valid responses were received. v. Data Analysis: The collected data is coded, tabulated and summarized. Friedman test and Chi-Square tests have been applied for analyzing the data. MAJOR FINDINGS: Hypothesis Testing: H1. There is no significant relationship between number of rooms available and annual sales of the hotels. The study explored whether there is any relationship between Annual sales of hotels and Number of rooms available. Chi-square test is used to find whether any relationship exists or not. From the table-6, the obtained Chi-square value is 15.110. At 5% level of significance the critical value of chi-square for 1 degree of freedom is 3.841. Since the calculated value is greater than the critical value of chi-square, it can be concluded that Number of rooms available in the hotels has influence on its Annual sales.

H2. There is no significant relationship between investment and annual sales of the hotels.

The study explored whether there is any relationship between Annual sales of hotels and their investment. Chi-square test is used to find whether any relationship exists or not. The Chi-square value from the table-7 is 24.166. At 5% level of significance the critical value of chi-square for 1 degree of freedom is 3.841. Since the calculated value is greater than the critical value of chisquare, it can be concluded that Investment incurred by the hotels has influence on their Annual sales. 88.4% of the hotels have up to 30 number of rooms, 95.6% of the hotels invested up to Rs.15 crores amount, 94.8% have 75 employees and 96.5% have up to20 years of experience in the field of their service, but they are achieving fair revenue. As a result it can be concluded that financially they are not doing up to the level of expectation (Table-1, 2, 3, 4&5). 5 54

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All hotels have failed to offer full range of services to their customers. Based on availability of the Customer‟s requirements and professionals, few selected services are offered. Except communication services, reception services and boarding services, other services like Personal care, entertainment services are offered rarely. The reasons identified are lack of facilities and equipment (Table-8). Adhoc pricing mechanism is adopted by hotels. Hotels are preferring method of pricing based on cost, competition, goodwill and economic condition of the customers. The price structure is intimated to the customers in advance and differential pricing and discounted price are also offered to the customers based on their income, referral source, and regularity and Government nominee. It is understood that „price of their services compared to competitors is high (mean=2.47), and they are highly satisfied with their present price. (Table-9) Hotels agreed to a great extent that location advantage affects sales growth. Place wellconnected to others, Good Market, Availability of Expert staff are affecting the hotels to choose convenient location for establishing their firm. Providing services through internet and at doorstep is seen from majority of hotels. (Table-10) All hotels are giving importance to promotion activities and undertaking those activities for the promotion of their services. It is understood from marketing perspective that they are not able to work out on elaborate and well defined promotional strategies because most of them do not have separate marketing department and marketing professionals. They believed that Wordof-mouth helps in promotion. Advertisements are preferred mostly in television and concentrated much on hotel‟s image in its content. (Table-11&12) Employees in hotel industry are taking much care and supervising well for their effective performance. Majority of the hotels are well organized. But very few hotels have branches at different places. It is opined by them that infrastructure of the hotel building is convenient. Process of the service delivery is same for all customers. Even though customers are involving directly in enquiring the service delivery process on their own but the level of their involvement by the customers in knowing the service delivery process is Medium (Mean=2.58) and their satisfaction is also medium (Mean=2.40).( Table-13,14,15.16&17)

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It is found that hotel industry has given first priority to „Price‟ of the services offered. Second priority has given to „Physical evidence‟ and third priority awarded to „Promotion‟ (Table-18)

It is found that, all hotels are agreed with every statement regarding their approach towards marketing practices. The mean values are in the range of 1.82 to 2.45 (Table-19). SUGGESTIONS TO HOTEL INDUSTRY: Developing Infrastructure Facilities and Diversified Products/ Services In order to distinguish their services among the competitors, it is suggested that hotels should give importance to Entertainment, Personal care and Shopping services. They need to concentrate more on providing reservation services, local transportation and information assistance on customer demand to sustain in highly competitive market. Special Tariffs in Drooping Seasons Hotels should have more flexibility about the price offered to the customers in order to meet their satisfaction and budget set. Special tariffs may be offered to the customers in drooping season. Use of Information Technology for effective Distribution The internet appears to be influencing the customers in searching the information. It is found that limited number of hotels are having website and providing guidance through internet. For effective zero-level distribution without depending on intermediaries, it is suggested that the hotels should provide guidance through internet which helps customers especially in terms of booking rooms in advance and from far distance places. Providing on-line services to the customers is having many advantages and may be helpful for better promotion.

Maintaining Public Relations It is suggested that hotels may offer benefit packages for individuals and families during week ends. Hotels should sponsor the local events, meetings and special programmes, maintain relationship with business houses and official visitors, mail brochures, offer special benefits to card 7 56

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holders, and distribute pamphlets at various travel points and tourists destinations. This may

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increase the room occupancy rate during slack periods. They should place large size hoardings at vantage points of town/city and pilgrim places to attract customers especially tourists. Establishing Marketing Department As few hotels have marketing department separately for the promotion of their services and image, it is suggested that hotels should establish a marketing department with well defined goals to succeed in the competitive markets. Marketing department need to be headed by qualified and experienced marketing professional. Designing Evaluation forms Hotels should design evaluation forms and distribute to the customers at exit point to get feedback about quality of services. CONCLUSION: The research was conducted in Andhra Pradesh to study the marketing practices in various hotels. This study mainly concentrated on service marketing mix variables (7Ps) and also the importance given for these elements by the selected hotels. Number of rooms available & investment in the hotels have influence on their annual sales. The study identified important elements among 7Ps preferred by the hotel industry. The study can be expanded to star hotels. References: 1. Amy Wong ooi Mei, Alison M Dean and Christopher J White, 1999 “Analyzing the Service Quality in the hospitality Industry”, Managing Service Quality, Vol.9, Issue:2, Pp.136-143. 2. Berry, L., Lefkowith, E, Claek, T. (1988). “Harvard Business Review”, Vol. 66, Pp.2832. 3. Campbell, Margaret, C. (2002). “Building Brand Equity”. International Journal of Medical Marketing: Henry Stewart Publications. 4. Fotis C. Kitsios, (2006), “Services Marketing in the Hospitality Economy: An exploratory study”-Paper presented at the 98th EAAE Seminar „Marketing Dynamics within the Global Trading System: New Perspectives‟, Chania, June – July. 5. Giribaldi, V. (2003).”The Fundamentals of Branding”. Website: www.brandchannel. Com 8 57

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6. Hilary Catherine Murphy and Christian D kiegast, (2008), “Do small and medium sized hotels exploit search engine marketing?”- International Journal of Contemporary Hospitality Management, Vol.20, Issue: 1, Pp.90-97. 7.

Jane Moriarty, Rosalind Jones, Jennifer Rowley, Beata Kupiec-Teahan, (2008), “Marketing in small hotels: A qualitative study”, Marketing Intelligence and Planning, Vol.26, Issue.3, Pp. 293-315.

8. Krishna mohan G, Krishna Naik C N (2006), Healthcare Marketing, Discovery Publishing House, 1st Edition, New Delhi. 9. Leonid Julivan Rumambi and S. Pantja Djati, (2007), “Hotel Management And Brand Achievement : A Study of Hotel Industry Achievement”, Website: www.marketinginteractive.tk 10. Levent Altinay, (2007), “The internationalization of hospitality firms: factors influencing a franchise decision-making process”, Journal of Services Marketing, Vol..21, Issue.6 , Pp.398 – 409. 11. Liana Victorino, Rohit Verma, Gerhard Plaschka, Chekitan Dev, (2005),

“Service

innovation and customer choices in the hospitality industry”, Managing Service Quality, Vol.15, Issue.6. Pp.555-576. 12. Minakshi Trivedi, Michael S Morgan And Kapesh Kaushik Desai, (2008) “ Consumer‟s value for informational role of agent in service industry”, Journal of Services Marketing, Vol.22, Issue.2, Pp.149-159. 13. Nan Hua; Basak Denizci; Anna S. Mattila; Arun Upneja , (2008), “Marketing Outlays: Important Intangible Assets in the Hotel Industry?”, Journal of Quality Assurance in Hospitality & Tourism, June, Vol.8, Issue.4, Pp. 61 - 76 . 14. Prof.Kripa Kalro(2009), “Hotel and Catering Services(Hospitality)”, Notes for TYBMS, Sem 5th, No.1, Pp.1-17. 15. Rama Yelkur, Paul Herbig in 1997 “Differential pricing for services”, Marketing Intelligence & Planning, Vol.15, Issue: 4, Pp.190 – 194. 16.

Rajasekhara Mouly Potluri(2008), “Assessment

of effectiveness

of marketing

communication mix elements in Ethiopian service sector”, African Journal of Business Management, March, Vol. 2, No.3, Pp. 59-64.

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17.

Ray Pine, Hanqin Qiu Zhang, Pingshu Qi (2000), “The Challenges and opportunities of franchising in China‟s hote Industry”, International Journal of Contemporary Hospitality Management, Vol. 12, and Issue. 5, Pp. 300-307.

18. Rogerson, W.P. (1983). "Reputation and product quality", The Bell Journal of Economics, Vol. 14. 19.

Thanika Devi Juwaheer, Darren Lee oss (2003), “A study of Hotel Guest Perceptions in Mauritius” , International Journal of Contemporary Hospitality Management, Vol.15, Issue: 2, Pp.105 – 115.

20. Thouraya Gherissi-Labben, Roland Schegg and Jamie Murphy, (2003), “e-mail customer service in the Tunisian hotel industry”, Tourism Review, Vol: 58, Issue: 2, Pp.18-26.

Websites: www.bambooweb.com www.balckwellpublishing.com www.iloveindia.com www.sagepub.com

APPENDIX: Table-1: Number of rooms available No. Of Rooms available

Number of respondents

%

0 – 10

11

9.6

11 – 20

49

42.9

21-30

41

35.9

≥ 31

13

11.6

Total

114

100

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Table-2: Investment incurred by selected hotels Investment

Number of respondents

%

≤5

46

40.4

6-10

51

44.7

11-15

12

10.5

≥ 16

05

4.4

Total

114

100

(in Crores)

Table -3: Annual sales of selected hotels Annual Sales

Number of respondents

%

≤ 25

42

36.9

26-50

52

45.6

51-75

14

12.3

≥ 76

06

5.2

Total

114

100

(in Lakhs)

Table-4: Period of existence of sample hotels Number of years of existence 0-5 6-10 11-15 16-20 Above 21 Total

Number of hotels

%

11

9.6

11

9.6

54

47.4

33

28.9

5

3.5

114

100

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Table-5: Employee size of sample hotels Number of employees

Number of hotels

%

21

18.4

57

50.0

21

18.4

11

9.6

4

3.5

114

100

0-25 26-50 51-75 76-100 Above 100 Total

Table -6: Number of rooms available Vs Annual Sales of the Hotels Number of rooms

Annual Sales

χ2-value

available

(in Lakhs) ≤ 25

≤ 20

>20

31

11 15.110*

29

>25

43

* Significant at 0.05 level

Table -7: Investment Vs Annual Sales of the Hotels Annual Sales (in Lakhs)

Investment (in Crores) ≤5

>5

≤ 25

28

14

>25

18

54

χ2-value

24.166*

* Significant at 0.05 level

12 61

Mustang Journal of Business & Ethics (2010)

Table- 8: Services offered by hotels No. Of Respondents YES

Type of Services Offered

NO

f

%

f

%

Reception

102

89.5

12

10.5

Boarding

94

82.5

20

17.5

Lodging

65

57.0

49

43.0

Entertainment

56

49.1

58

50.9

Personal care

45

39.4

69

60.6

Shopping

74

64.9

40

35.1

Communication

105

92.1

09

7.9

Table-9: Opinion on Pricing compared to competitors Hotel (N=114) Response Mean

Opinion on Pricing compared to competitors

SD

2.47

1.099

5 point scale: 1- Very High……………. 5- very low

Table-10: Distribution of Service No. Of Respondents(N=114) Service distribution

YES

NO

f

%

f

%

Through internet

68

59.6

46

40.4

Delivery at door step

28

24.5

86

75.5

13 62

Mustang Journal of Business & Ethics (2010)

Table-11: Promotion of Services in TV channels No. Of Respondents(N=114) Promotion

YES

Sponsoring programmes Highlighting firm by the specific Services in advertisements

NO

f

%

f

%

73

64.0

41

36.0

38

33.3

76

66.7

Table-12: Availability of Marketing and PR department No. Of Respondents(N=114) Promotion

YES

NO

f

%

f

%

Marketing department

49

42.9

65

57.1

Public Relation Department

114

100

0

0

Table -13: Techniques adopted for Motivation of employees No. Of Respondents (N=114) Motivation Techniques

f

%

Continuous performance appraisal

23

20.2

Rewards

45

39.5

Awards

46

40.3

Table 14: Same Service delivery to all customers No. Of Respondents (N=114) Response F

%

YES

91

79.8

NO

23

20.2 14 63

Mustang Journal of Business & Ethics (2010)

Table -15: Physical evidence of Hotels No. Of Respondents (N=114) Infrastructure Facilities

f

%

Availability of reception counter

110

96.5

Displaying Names and Qualifications of staff members Appearance of staff members in uniforms

70

61.4

91

79.8

Segregation into departments

84

73.7

Provision of well-equipped Cabins to staff members

91

79

Furnishing the building with A/C, Lighting & Ventilation Availability of House-keeping Department

98

85.9

109

95.6

Availability of Branches

50

43.9

Table -16: customer’s involvement in enquiring delivery process No. Of Respondents (N=114) Response

F

%

YES

74

64.9

NO

40

35.1

Table 17: Explaining the process of service delivery to customers No. Of Respondents (N=114) Motivation Techniques

f

%

Reception staff

88

77.2

Marketing / PR Personnel

10

8.8

Administrative Personnel

16

14.0 15

64

Mustang Journal of Business & Ethics (2010)

Table -18: Mean ranks of Marketing Mix variables Marketing mix variables

No of Respondents (N=114) Mean Rank Rank

SD

Product/ Service

4.10

4

1.729

Price

2.88

1

1.500

Place

4.17

5

1.784

Promotion

3.33

3

1.572

People

5.15

6

1.934

Physical evidence

3.12

2

2.293

Process

5.25

7

1.703

Table -19: Approach towards marketing practices-Friedman test

Friedman Test Hotel (N=114)

Statement Marketing helps the organization to build image

2.85

Marketing can increase productivity of organization

3.44

Marketing creates awareness about wellness programmes

3.27

Marketing helps to generate revenue

3.77

Marketing helps customer to select best service organization

3.82

Marketing provides scope for organization expansion

3.85

16 65

Mustang Journal of Business & Ethics (2010)

Mustang Journal of Business & Ethics (2010)

STUDENT USE AND ABUSE OF CREDIT CARDS IN RUSSIA Dr. Sergey Moskalionov, Ulyanovsk State University, Russia * Dr. Marty Ludlum, University of Central Oklahoma **

ABSTRACT In America, credit cards on campus have been a disaster, leading to students buried in debt before graduation, often with little hope of paying off the debt before high fees and interest double the amount. This research details an exploratory survey of Russian college students and their use of credit cards. In the current project, we surveyed Russia’s current business students (n=540) in spring of 2008. We found significant differences between Russian and American students on their use of credit cards. We found Russian students showed much more control and restraint with the use of credit. When we divided the Russian students by several demographic factors (age, courses taken, employment, and gender) we found significant results. We conclude by discussing the implications for further research in this area.

INTRODUCTION A credit crisis has engulfed the world. Economies from around the globe suffered. The primary culprit was the tidal wave of easy credit which was used and misused, with the risk passed on to others. America suffered under this problem, and nowhere more than on college campuses. Students, often without any current income, received credit cards and used them without abandon. We were curious whether the problem of student credit extended beyond North America. In the current project, we surveyed Russia’s current college students (n=540) in the spring of 2008 concerning their use of credit cards. In support of this research, we described America’s obsession with credit, the hidden costs of credit, and the problem of credit availability on campus. Next, we explained rationales for the abuse of credit in America and question whether the problem was specific to America. Third, we reviewed the literature on Russian college students and their beliefs and behaviors. Finally, we discussed our results and findings. We found Russian students showed much more control and restraint with the use of credit. We concluded by discussing the implications for further research in this area. AMERICA’S OBSESSION WITH CREDIT America has had a very healthy appetite for easy credit and the convenience of credit cards. Financier Arkadi Kuhlmann described credit cards as “the opium of consumerism” (Roane, 2006). In 1995, Americans paid more with credit cards than cash, for the first time (Nichols, 2006; Stern, 2006). Consumer debt among Americans increased $461.8 billion in 2001-2006 (Loonin and Renuart, 2007). By 2005, Americans had nearly 700 million credit cards (Mercatante, 2008). Lenders sent nearly five billion credit card solicitations in mail in 2001 (Nichols, 2006). For example, Capital One has issued over 37

Mustang Journal of Business & Ethics (2010)

million cards in America, one card for every six adults (Silver-Greenberg, 2009). The market was so saturated that lenders must find new markets of consumers. The new target was our college students. It has worked. Sallie Mae found that 84% of undergraduate students have a credit card (Block, 2009). HIDDEN COSTS OF CREDIT Most Americans do not understand the terms of their credit cards (Hensarling, 2009). It would be funny if it were not true. The banks knew this. Credit card businesses profit off of consumer mistakes (Acohido, 2008). We have often revised the credit card rules to protect consumers with little effect. The Schumer Box (named after Senator Schumer (D., N.Y.) was designed to help consumers make more informed choices (Rosato, 2008). For example, cash advance fees have been overwhelming. Lewis (2009) commented that withdrawing your own cash can cost you, and you would be paying for the rest of your life. This is not an exaggeration. Penalty fees will generate $20 billion for credit card issuers in 2009 (Chu, 2009). Consumers wanted change. When the Federal Reserve asked for comments on new proposed credit card rules, 62,000 consumers responded in writing (Harris, 2008). Credit cards generated more consumer complaints than any other industry except cable television (Sullivan, 2008). Recently, the Military Lending Act of 2007 curbed some of the abuses target to our military families (Harris, 2008). When will we protect our students? CREDIT ON CAMPUS IN AMERICA Credit on campus can only be described as a plague. In 2007, the average college senior had four credit cards and $3000 debt (Cahill, 2007). By 2009, the average increased to over $4100 (Block, 2009). This is not a new problem, just an existing problem getting worse. A decade ago, one in five students had greater than $10,000 in credit card debt (Parks, 1999). It only gets worse, as college graduates double their credit card debt shortly after graduation (Adams and Moore, 2007). Slick marketing was the problem. Lenders, eager for new customers, come to campus to sign up fresh meat (Parks, 1999). College students are solicited for credit cards 25-50 times a year (Cahill, 2007). Incentives include everything from t-shirts to ipods for students to sign up (Block, 2009). College students are getting credit without planning because of these slick marketing tactics (Cahill, 2007). A third of students never discuss the credit card decision with their parents (Block, 2009). The lenders have eliminated income and employment requirements to make credit cards easier to get for college students (Cahill, 2007). American students are inundated with credit card marketing schemes (Adams and Moore, 2007). This has caused some to exclaim that credit cards are greater threat on campus than alcohol or sexually transmitted diseases (Parks, 1999). Nearly half (47%) of full time students have credit cards in their own names in 2005 (Nichols, 2006). A recent survey found that a quarter of college students graduate with more than $5,000 in debt (Harris, 2008). This has led some to call for the ban of issuing credit cards to college students (Acohido, 2008). Is the problem specific to America? Adams and Moore (2007) found that international students in the United States take less credit risks than domestic students. Perhaps the problem was not the access to credit (which international students would also have) but instead the American cultural mindset about credit.

Mustang Journal of Business & Ethics (2010)

SURVEY OF CURRENT LITERATURE ON RUSSIA Russian students are different from their American counterparts. First, few of the Russian students use the internet to make purchases, which would require a credit card. In the USA, 39% of students have used the internet for buying (Palesh, Saltzman and Koopman, 2004). In contrast, less than 6% of Russian students use internet for buying (Palesh, Saltzman and Koopman, 2004). Russian students seem poised for the marketing of credit card lenders. A majority of college students feel material prosperity was very important (Mogilchak, 2006). Russian college students are greedy for easy wealth (Sokolov, 2006). The majority of Russian students think selfishness was necessary for success (Sokolov, 2006). A third of Russian college students say there are no dishonest ways of making money (Lisauskene, 2007). While students have put a high value on education, and the rewards it offers, the Russian bureaucracy has not responded as positively. While 22% of adults have higher education (Shcherbakova, 2008), and 70% of Russians see higher education as essential (Lisauskene, 2007), the Russian higher education system was not really modernized (Dubin, 2008). Higher education in Russia has been described as a desert island, cut off from the rest of the world (Dubin, 2008). Innovation was rare, and reform was unlikely in Russian higher education (Dubin, 2008). METHOD FOR THE RUSSIAN SURVEY A convenience sample of business majors were taken from large survey classes at Ulyanovsk State University in the spring semester of 2008. The University has an enrollment of over 10,000 students and over 1000 faculty. The University offers over fifty degree programs for undergraduates and graduates. Students were asked to complete the questionnaire during class time. All students participated. A total of 540 completed surveys resulted. No surveys were rejected because of incomplete answers. The majority (74%) of survey participants were business majors. The group was fairly distributed among the first four academic years (Russia uses a five year degree program). The respondents were in the following academic classes: First year, 29%; second year, 47%; third year, 15%; fourth year, 9%. Since most students were in the first two years of the business program, many had not completed the core business classes. Less than 16% had taken a class in business ethics. Just over a third (34%) had taken a class in business law. In contrast, 80% had taken macroeconomics and 62% had taken microeconomics. Females outnumbered males by two-to-one. By age, the group consisted of traditional students. Most (63%) were under age 20. Less than 2% were over age 26. Less than 7% of the respondents were married, and about 24% used tobacco. Most students did not work while attending school (73%). Of those who were employed, only a third of the students were employed full-time. This contrasts with past research which found a large faction of Russian students worked full time while attending school. Estimates were from 32% (Mogilchak, 2006) to 40% (Lisauskene, 2007). Fewer than 10% owned any stock or securities. As far a political identity, previous research found very broad support for President Putin and his political party. In fact, in 2006, 79% of the Russian business students

Mustang Journal of Business & Ethics (2010)

identified with Putin, among five choices of political parties (Ludlum, Moskalionov and Machiorlatti, 2008). In the current survey in 2008, Putin’s popularity was nearly 76%. Further, 65% of the Russian college students indicated they would vote for Putin again, should he be eligible to run. These findings were in stark contrast to the expectations in the West. Many have complained that Putin was not popular, but used political power to suppress opposition (Economist, 2007a; 2007b). Recently, the Weekly Standard reported that Russia’s election was not fair (Kimmage and Sidorov, 2007). However, our findings contradicted these views. We found a strong base of support for Putin and his political party from 2006-2008. FINDINGS Our findings among Russian college students were much more positive. We found that 38.7% of Russian college students did not have a credit card, and 43.15% had only one credit card. Further, 58.89% did not use the card more than once a month (emergency use). Another 28.7% used it less than five times a month. The constant shopping by college students was a rarity in Russia. When paying for education, credit use was not a problem. Over half, (56.11%) rely on their parents, while fewer than 1% (0.93%) borrowed funds for college. Fewer than 2% of Russian students used credit cards to pay for tuition, and less than 5% used credit cards for school books and supplies. This was welcome information, as it appeared Russian students have avoided the credit trap which plagued the college campuses in America. However, when we examined the views of those who used their credit cards, the results were not positive. Only 17.04% of Russian students paid their credit card in full each month. Just as many (18.15%) paid only the minimum payment. This left the majority of students with some indeterminate amount of credit card debt each month. This might not be a problem if students were aware of the dangers of credit. However, we found that Russian students are just as lost at their American counterparts on credit card knowledge. Only 14.26% of Russian students knew the interest rate they paid on credit. In contrast, 60.74% had no idea on the interest rate. A small portion, 12.59%, knew of late payment charges while 63.7% had no idea of late payment charges on their credit card. Another small group, 11.48%, knew the penalty for being over their credit balance. However, 61.48% had no idea about overbalance penalty. On the whole, the results offer little good news. While it may seem positive that few students in Russia use credit cards, they have not had access to credit, but that is quickly changing. On the negative side, Russian students seem oblivious to the many hidden traps of credit use. Once the use of credit cards starts to expand, the problems with credit on campus will geometrically grow. We wanted to examine what traits or demographic factors affected student use of credit in Russia. We divided our Russian sample by age, year in school, gender, employment, major, and courses taken. We found several significant results when the subgroups were compared. As expected, we found employed students to be more likely to use credit cards than unemployed students. In the six questions related to credit card use, all six showed significant results based on employment. Employed students were twice as likely to have a credit card as their unemployed counterparts. Employed students also used their cards

Mustang Journal of Business & Ethics (2010)

more often, with employed students using their cards about 15 times a month, compared to 10 times a month for unemployed students. Further, employed students claimed more knowledge about the costs of credit than unemployed students. For full results, see Table 1.

Table 1. Differences by Employment Question How many plastic cards do you have? How often do you use your plastic cards in a month? What type of payment do you make on plastic cards? Do you know what interest rate you pay on the outstanding balance? Do you know the charges for late payments? Do you know the charge for going over your credit line?

Chi-Squared 24.545 26.806

df 5 4

p-value 0.001 0.001

13.088

3

0.005

12.905

3

0.005

13.128

3

0.005

10.172

3

0.05

When we compared students based on gender, we also found significant results. Interestingly, males had slightly fewer credit cards, but used their credit cards slightly more often. Males were much more aware of their credit costs in three of the four questions than their female counterparts. Results are shown in Table 2.

Table 2. Differences by Gender Question How many plastic cards do you have? How often do you use your plastic cards in a month? Do you know what interest rate you pay on the outstanding balance? Do you know the charges for late payments? Do you know the charge for going over your credit line?

Chi-Squared 14.024 8.37

df 5 4

p-value 0.05 0.100

28.241

3

0.0001

21.421

3

0.0001

19.105

3

0.0001

We expected courses in college to have an impact, and most did. Taking course in business law, macroeconomics, and microeconomics had modest differences in a couple of the questions. However, when we compared students based on taking business ethics, the

Mustang Journal of Business & Ethics (2010)

differences were surprising large and significant on all six credit questions. Students who had taken ethics would have twice as many credit cards as their counterparts. Students who had taken ethics would be far more likely to use the credit cards each month. Further, students who had taken ethics were much more aware of the costs of credit on all four questions. The results are shown in Table 3.

Table 3. Differences by Taking Ethics Course Question How many plastic cards do you have? How often do you use your plastic cards in a month? What type of payment do you make on plastic cards? Do you know what interest rate you pay on the outstanding balance? Do you know the charges for late payments? Do you know the charge for going over your credit line?

Chi-Squared 30.758 45.74

df 5 4

p-value 0.0001 0.0001

19.221

3

0.001

26.807

3

0.0001

33.765

3

0.0001

24.976

3

0.0001

By far, the biggest impact on student knowledge of credit and its costs was taking a class in ethics. Obvious from this example, in Russia, the ethics course spends a great deal of time on the use of credit. In America, this subject was covered in other courses. The final note of interest in the Russian sample was the factor of time. A student’s chronological age (19, 20, 21, etc.) made little difference in their knowledge or use of credit cards. However, students further in their education (first year, second year, etc.) showed greater understanding of the costs of using credit. This would support the conclusion that students gain an understanding of the costs of credit not from life experiences, but from inside the classroom. This is positive news for Russian business educators. CONCLUSION These results were troubling. Many Russian students avoid the use of credit cards. This is promising, however it must be discounted. Russia is about to enter a time of rapid consumer credit for the first time. The results indicated that Russian college students who used credit cards were completely blind to all the interest charges and penalties they faced from using credit cards. When we examined sub-groups of the Russian student population, we found that students who were male and/or employed were more knowledgeable about the costs of using credit. In addition, students better understood the costs of credit as they progressed in years in school. The students also benefitted from taking classes in business law,

Mustang Journal of Business & Ethics (2010)

microeconomics, and macroeconomics. However, the biggest impact was seen from having taking a course in business ethics. This demonstrates that business education in Russia can have a significant impact on reducing the harms from student abuse of credit. This should serve as a strong justification for more business courses for all students as they prepare for adulthood and the use of credit after their years on campus.

AUTHORS *Professor Moskalionov can be reached at [email protected] **Professor Ludlum can be reached at [email protected] For a complete copy of the survey questions, please contact the authors. ACKNOWLEDGEMENTS The authors wish to express their thanks to Inga Iyevleva for her many hours of input on the survey results. Any errors or omissions are solely that of the authors. REFERENCES Acohido, B. (2008). Credit card support could toughen rules. (Nov. 28) USA Today 5b. Adams, T. and Moore, M. (2007). High-risk health and credit behavior among 18- to 25year-old college students. 56.2 Journal of American College Health 101-108. Avtonomov, V. (2006). Balancing state, market and social justice: Russian experiences and lessons to learn. Journal of Business Ethics 66.1 (June), 3-9. Cahill, T.P. (2007). Credit card caution. New England Journal of Higher Education (Fall), 21-22. Chu, K. (2009). Credit card fees keep going up. (March 16) USA Today 1b. Deshpande, S.P., J. Joseph, and V.V. Maximov. (2000). Perceptions of proper ethical conduct of male and female Russian managers. Journal of Business Ethics 24, 179-184. Dubin, B.V. (2008). Russian universities. 50.2 Russian Education and Society 6-22. Dugas, C. (2007). Credit card fees still rankle some. (July 31). USA Today 3b. Economist. (2007a). United to win; Russia’s parliamentary election. Dec. 1, 20. Economist. (2007b). Putin’s phoney election; Russia’s election. Dec. 1, 64. Economist. (2007c). The big fix; Russia’s food prices. Oct. 27, 63. Field, A.M. (2007). Four new cornerstones. Journal of Commerce (Jan. 8), 50. Harris, M. (2008). Wake up, Washington. (Dec.). Money 101-103. Hensarling, J. (2008). Choices benefit consumers. (August 13) USA Today 10a. Kimmage, D. and D. Sidorov. (2007). The next Putintate; to follow the Russian elections, follow the money. Weekly Standard 13.9 (Nov. 12), 24. Lewis, P. (2009). Your 50 Pound bill for life. (Feb. 12). Community Care, 34. Lisauskene, M.V. (2007). The next generation. 49.4 Russian Education and Society 76-86. Loonin, D., and Renuart, E. (2007). Symposium: The middle class crunch: The life and debt cycle: The growing debt burden of older consumers and related policy recommendations. Harvard Journal on Legislation 44, 167-203.

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Ludlum, M.P., Moskalionov, S., and M. Machiorlatti. (2008). Perceptions of proper ethical conduct of Russia’s future managers: A replication of Deshpande, Joseph and Maximov. Business Review, Cambridge 11.1 (Dec.) 267-272. Mercatante, S. (2008). The deregulation of usury ceilings, rise of easy credit, and increasing consumer debt. 53 South Dakota Law Review 37-51. Mogilchak, E.L. (2006). The economic orientations of college students. Russian Education and Society 48.9 (Sept.), 18-28. Nichols, N.C. (2006). When Harry met Sally: Client counseling under BAPCPA. 15 Widener Law Journal 641-666. Palesh, O., Saltzman, K., and C. Koopman. (2004). Internet use and attitudes towards illicit internet use behavior in a sample of Russian college students. 7.5 Cyber Psychology & Behavior 553-558. Parks, C. (1999). Credit card abuse puts students at risk. The Black Collegian 72-78. Roane, K.R. (2006). Arkadi Kuhlmann. 141.11 U.S. News & World Report EE8. Rosato, D. (2008). Check out a credit card offer. 37.8 Money 37. Shcherbakova, E.M. (2008). The trend of education in Russia. 50.4 Russian Education and Society 26-41. Silver-Greenberg, J. (2009). Credit card deal a losing hand to Cap One. (Jan. 26). Business Week, 11. Sokolov, A.V. (2006). Intellectual and moral differences among today’s college students. 48.9 Russian Education and Society 43-59. Stern, L. (2006). How good is debit? 147.12 Newsweek, 77. Sullivan, B. (2008). Don’t get hooked by hidden fees. 246.6 Good Housekeeping, 103-104.

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Mustang Journal of Business & Ethics (2010)

CHAEBOL AND KEIRETSU, A LOOK AT TODAY AND WHAT TOMORROW MAY BRING Gary D. Tucker, Jr. Instructor of Business Northwestern Oklahoma State University

Korea‟s chaebol and Japan‟s keiretsu systems have been known internationally for their systems of operations in business. These systems are based in their countries social system and are well-accepted in their respective countries. (McGuire, J. and Dow, S., 2009) As globalization moves forward at a quickening pace, businesspeople must understand how these systems will affect their attempts to enter Korea and Japan. This paper will address each system separately, while providing some comparison of the two systems when appropriate. The author will also discuss potential future implications of each operating system. In providing this information the author hopes to foster a greater understanding of these systems and to provide the tools necessary to operate within or alongside them.

Korea’s Chaebol System-Yesterday and Today “Chaebol are Korea's vertically integrated industrial conglomerates controlled by a founding family.” (Lee, 2008) In considering the chaebol system, we must first understand its history and its operating status today. Many of today‟s chaebol companies were founded in the late 1940‟s under Syngman Rhee's First Republic. These companies were often built with Japanese assets that were left behind when the Japanese ended their colonial possession of the country. (Boje and Joh, 2006) Many of these “leftover” companies became much of the primary development in Korea‟s industrialization. While important to the country‟s development, these “pre-chaebol” operations were crucial to the development of the chaebol system. These operations were also a source of political graft. “Special favors” have been to known to occur between Korean businesspeople and the country‟s governing body. The favors have been two-fold as each group has supported the other to benefit each. The Korean government realized the need to industrialize its newly independent country and contributed capital and eased licensing. The Korean businessmen understood the power the central government wielded over their operations, so facilitating payments and other niceties were standard operating procedures. Over time, this relationship has been tested and reworked to fit the current governing body‟s desires. Government and business relationships in Korea remain a constant source of negotiations in the everyday operations of this country. This was evidenced as late as 1997 when the International Monetary Fund (IMF) stipulated a change in the ways chaebol were run as a condition for IMF funds for Korea‟s ailing

Mustang Journal of Business & Ethics (2010)

economy. (Boje and Jo, 2006) The future of the chaebol strength lies in their ability to maintain a symbiotic relationship with the governing body. The IMF requirements forced the government to adopt an 8-prong system of change. The items included increased transparency in management, eliminating the ability to guarantee debt to creditors across sister organizations, reformation of financial operating structures, increased management responsibility, reducing business influence on the financial sector, impeding the circular nature of the chaebol operations, and preventing insider transactions. The Korean government, in answer to the IMF stipulations, has enacted numerous changes in the law and regulatory arenas. Unfortunately, researchers have found that these changes are more superficial than actual shifts in operation requirements. (Boje and Joh, 2006) The IMF charge led to strengthened efforts to keep the chaebol out of the financial services sector, but as has been witnessed, this is a very tenuous position to maintain. Through history, Korea has attempted to maintain this separation of business and finance as a method of control over each operation. A company that wants funding for growth or survival is going to be very agreeable to government suggestions when faced with this reality. Nevertheless, chaebol have managed to work their way into financial holdings. Chaebol ownership of banks has created much strife in the Korean financial system. (Lee, 2008) The history of the chaebol has been troubling at times. Chaebol organizations are known for supporting unsuccessful business ventures with revenues from their more successful brethren. This practice and the overdevelopment of industries prompting an extreme abundance of excess capacities have prompted Korea to adopt sanctions and restrictions on the chaebol system to protect smaller business groups and the economy-atlarge. (Lee, 2008) Chaebol operations, being firmly established for over 40 years, continue to dominate the Korean economy. As the global economy becomes one with Korea‟s economy, a new focus on chaebol operations will emerge. Chaebol management will face further scrutiny on every front. Human rights of employees, corporate governance and environmental sustainability are just a sampling of critical issues that have been raised by observers of the chaebol system. (Boje and Joh, 2006) Each of these areas is an area of concern for companies operating in the mainstream global economy, so it is not a surprise to see an organization operating within a semi-closed economy coming under fire for these issues. As the Korean government moves to address these issues, chaebol will need to choose to comply or begin working to alter the government‟s plan of action. An interesting aspect of this realization is that a paradigm shift in operating procedures will be precipitated to achieve the modifications necessary to satisfy the global economy. “For chaebol to become critically postmodern, they would have to be managed and organized in an entirely new way. This concerns in particular the reformation of chaebol‟ raison d‟être, along with the restructuring of ownership structure, corporate governance, and anachronistic concept of corporation.” (Boje and Joh, 2006)

Korea’s Chaebol System-Tomorrow and Beyond One of the most significant hurdles to the globalization of the chaebol appears to be the need to separate the ownership and management functions of the business operations. Traditionally, these functions have been integrated to the point of inseparability. Additionally, chaebol operations have not been recognized for their

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democratic operations or for being knowledge-based businesses. Chaebol have tended to be “monarchial” and “experiential” in their decision-making processes. (Boje and Joh, 2006) Modern global businesses have learned the necessity of group-based and knowledge-derived decision making. As the traditional chaebol system relies on the owner/manager for its decision making, it becomes very susceptible to inappropriate decision making based solely on the knowledge, feelings and beliefs of its leader. Focused interest groups and centralized decision making provide the global company with efficiency-seeking processes that will better the company‟s interests. In the chaebol‟s system, the same processes can lead to an inefficient and slow-reacting decision-making process. (Horowitz, 2002) As globalization pressures mount on the Korean economy, the chaebol will face the increased pressures stated previously. Interestingly, the chaebol system has been proclaimed “too big to fail” by many observers of the Korean economy during the late 1990‟s. (Horowitz, 2002) During this time, the chaebol had the ability to obscure some of their less-than-ideal financial outcomes through the use of inter-affiliate accounting practices. Horowitz points to the fact that, for FY1999, nine of the sixteen largest chaebol did not have sufficient income to cover their expenses, yet demonstrated a profit on their consolidated earnings reports. It becomes increasingly obvious that the Korean government allows the chaebol system an extreme amount of discretion in its reporting techniques. As the world‟s financial crisis continues to unfold and is worked through, the chaebol system will continue to face the difficulties of adaptation. The financial crisis of 1997 precipitated the demise of the weaker chaebol and saw the survival of the healthiest of the operations. (Lee, 2008) Today‟s global economy will surely re-sort the chaebol structure as it is in other countries and industries. The Korean public is still in a quandary on whether or not chaebol reform should occur. The system has become a comfortable, understood process even if it is known to have problems. The progressive constituents are pushing for more far-reaching reforms, while the conservative faction favors a more status quo reform. (Lee, 2008)

Japan’s Keiretsu System-Yesterday and Today In the early 1900‟s Japan realized the need to open the country to the western world. This meant adapting to many of the western world‟s modes of operations. The Japanese leaders realized that the easiest way to control the “colonization” movement of the island was to simply adopt a western attitude to doing business. Interestingly, the Japanese keyed in on the successful companies of the day-huge conglomerates like the American JP Morgan Chase and German Krupp, which were the leaders of the modern world. This was the birth of the zaibatsu system that would lead to the modern keiretsu. (Flath, 2005) Four companies or zaibatsu emerged from the development undertaking: Mitsui, Mitsubishi, Sumitomo, and Yasuda. Zaibatsu are generally defined as sizable financial and industrial groupings that are held under a common control structure such as a holding company that has centralized control through a single family. From the conglomeration ideas of these four frontrunners, the keiretsu system was born. World War I gave the Japanese a taste of what being a “global” player meant. As European suppliers left the market to address wartime needs, the Japanese conglomerates stepped in to fill the gaps. This opportunity proved to be a great success as the Japanese suppliers were able to enjoy healthy margins during this time of discovery. (Flath, 2005)

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This success continued through World War II. The zaibatsu enjoyed very efficient operations, successful management practices and impressive margins during their reign over Japanese business operations. Unfortunately, the end of the war brought a decimating toll to the zaibatsu as the United States occupation of Japan forced their owners to forgo their power and control. During the reconstruction phase, the American overseers rebuilt the “ancient zaibatsu” while establishing “new zaibatsu” and the keiretsu. The keiretsu were to be large conglomerates charged with focusing on large manufacturing industries such as automobiles and electronics. As time would prove, the term zaibatsu was dropped and all conglomerates would be known as keiretsu. These new creations were charged with rebuilding Japan‟s decimated economy, but were prevented from becoming recreations of their predecessors. Keiretsu maintained their vertical relationships while following the desires of the United States in relation to the amount of cross-ownership that could occur. (Flath, 2006) The world would soon find that the restrictions put in place in reconstruction could not stop the ingenuity of the Japanese business person. The Japanese government has been an active participant in the development of the Japanese industrialization movement. In order to prevent colonization of their country, the Japanese government encouraged and assisted the development of industrial production. This realization prompted the governing body to invest heavily in industrializing the country in the late 1800‟s. The initial governmental push included the areas of metallurgy, ship building, mining, and rail road construction. These were the areas of main concern for the government as their desire to remain a sovereign state was of utmost concern. As the government worked to industrialize Japan in the heavy manufacturing arena, private citizens began the movement to industrialize other areas of production. The concentration of private investment came in the areas of textiles and foodstuffs. These arenas meshed well with the government‟s push to become “war-ready” as the military would require both to be successful. As Japan‟s industrialization progressed, it became evident that the government would need to give up control of many of their state-run entities to allow growth and further development in the sector. (Flath, 2006) The keiretsu system has always relied on the smaller, sometimes independent firm to maintain their business needs. It was quickly discovered that as the keiretsu system developed the need for more labor and resources required bringing in these smaller businesses to assist in completing the job. A thorough study of the German failure in World War I would lead to further efforts to ensure that Japanese industry could support its military if ever needed. The Japanese government, after a military semi-coup, stepped in to reinforce the concept that any future victories would be accomplished only by combining ability with spiritual ability. The government, now with military figures in key positions, worked quickly to build capacity for a “future” war that would turn out to be World War II. In fast-forwarding to post-war Japan, we again address the ramifications of the new regulations placed on Japanese businesses by the United States. The United States government sought to get the Japanese economy back on track in an expedient manner. This meant allowing Japanese companies access to needed materials while still meeting regulatory standards. Strict controls continued during the United States occupation. As

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the United States oversight waned, the Japanese government sought to better its economy in the most effective fashion possible. The Japanese government decided to protect certain privileged companies by way of allowing them sole access to international trade. The theory was that government support would provide the selected companies the ability to develop a competitive advantage. (Flath, 2006) Another benefit of the protected status for these companies was the assurance that these companies would not be targets for takeovers, either from domestic competitors or from foreign operations. On the surface this stood as a great boost to the selected companies, but the truth of this process was that the non-favored firms that remained confined to domestic markets were suffering because they could not work towards achieving economies of scale. In the 1960‟s-70‟s, Japan worked to eliminate “non-performing” sectors from their industrial society. These sectors were not promoting national welfare or providing “spill-over” technology. The non-contributing sectors were not provided any type of protection from foreign competition and even at times were forced to discontinue operations. (Flath, 2006) The decision was prompted by a belief that if Japan only sustained highly competitive, contributing industries the country would be in a better position to compete with the rest of the world. As the keiretsu form has matured, the design has remained much the same. Management decisions are forced to be made with a focus on efficiency and performance. (Douthett, et al., 2004) Japanese institutional investors are allowed much more freedom in stock ownership and as such, hold management to a higher standard than American institutional investors. These institutional investors are known to hold enough power that management can and will be changed if decisions about company operations do not result in positive outcomes for the investors. This factor tends to differentiate the keiretsu company from its chaebol relative in that the chaebol does not have this factor to address. History also demonstrates that the Japanese government is lax in passing anti-trust legislation that would limit the keiretsu system. (Suetorsak, 2007) In choosing to ignore the ramifications of monopolies, Japan has elected to face the reality that monopolistic firms are not always the most efficient firms in an industry. In a global economy, monopolistic firms in typically open industries can be placed in a disadvantaged position due to inherent inefficiencies that may follow. In contrast to the Korean government‟s attempt to keep finance and business separated, the Japanese government has ignored the potential implications and allowed banks to not only loan money to businesses but to allow ownership also. The fact that a bank loans money to a company it also has an ownership interest in can affect both the bank and the company in question. The bank is encouraged to assume more risks to rescue a struggling company when it is not only risking a loan default, but also a loss of investment capital. In this setting the potential temptation becomes painfully obvious. Additionally, the company that has secured a financial institution as both creditor and investor stands to potentially expect preferential treatment from their creditor/investor in times of difficulty. This establishes a situation that can be conducive to making decisions that are not necessarily the best or most productive because the operation knows they will be bailed out by their creditor/investor. During the Japanese financial crisis or the late 1980‟s, we see examples of just his situation occurring. (Suetorsak, 2007)

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Research has found that keiretsu that have very close relationships with their financial providers are less likely to have undertaken partnerships with in-country operators when entering a new market. (Flath, 2005) Clearly the keiretsu system sets up expectations that may not prove to be successful. When entering the United States economy, the Japanese found a system that would adapt to new offerings that did not follow traditional routines. In less-open economic systems, the Japanese keiretsu leader may have difficulty adapting to their surroundings.

Japan’s Keiretsu System-Tomorrow Japanese keiretsu will export their mode of operation to non-domestic settings. This process has met with mixed outcomes. Many times the arrangement proves to be successful, such as Toyota Motors‟ foray into Thailand. Toyota managed to maintain a Japan-specific group of suppliers while producing and providing vehicles to the Taiwanese public. (Hatch, 2005) This principle, in theory, allows the Japanese firms to continue to operate as they do in their domestic market. Allowing the supply chain to develop very quickly additionally provides the ability to achieve economies of scale much sooner. In considering this move, the Japanese firm must determine if a non-host country supply chain is most appropriate. When the non-host country method is deemed as less than optimum, the Japanese firm will typically attempt to include as few host-country operations as possible. When utilizing these host-country providers, typically the companies will be selected for peripheral, low-value added operations while Japanese firms are charged with supplying the majority of products. As the future becomes the present day, suppliers for keiretsu may be tempted to change keiretsu as the economy changes. Research has indicated that the vertical keiretsu may have a weakness in its suppliers. (Banerji, 2004) As the Japanese economy contracted in the late 1990‟s the keiretsu witnessed supplier‟s propensity to switch keiretsu affiliations. This switching was evidenced by long-term suppliers, typically born of the keiretsu they are supplying, moving to supply another keiretsu exclusively or in tandem with their “parent” keiretsu. This realization may come into play in current day Japan and will certainly play out again in the future. The strength of the keiretsu is based mainly on the bargaining power and cohesiveness of the keiretsu. If the vertical keiretsu cannot prevent suppliers from abandoning the agreement in times of economic downturns, then the keiretsu is not as invincible as it once was thought. The keiretsu may need to work towards rebuilding supplier loyalty and also increasing cross-investments between the firms. Both undertakings will serve to strengthen the keiretsu and to slow departures during economic downturns. The main issue for the keiretsu is the large outlay of monetary and personnel resources. During economic downturns, this may be a tax on struggling keiretsu. As the global economy spreads further into the Japanese market, the keiretsu may become less valuable to supplier firms. For much of history, the keiretsu has been viewed as an insurance policy for supplier companies that can be used to carry the supplier through lean times. (McGuire and Dow, 2009) The reliance on the keiretsu as a savior will lessen as supplier firms are able to establish relationships outside of their domestic market. Non-keiretsu firms may find a ready source of suppliers as the Japanese domestic suppliers become aware of this opportunity. The ability of the keiretsu to adapt to this changing environment will determine their continued success. Without the ability to build

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loyalty among suppliers, the keiretsu will surely face increased competition for its supplier base. As the global market expands and the keiretsu are subjected to greater competition, both domestically and abroad, change must come to Japan. The world is calling for better financial controls and greater accountability. Both of these issues are not easily addressed in the keiretsu culture. Traditionally, the keiretsu have relied heavily on intermingling of ownership and investing. Additionally, the keiretsu has been very authoritative in its decision-making processes. These two factors stand to be the greatest potential weaknesses in the keiretsu structure and outside competition may be able to capitalize on the situation. Keiretsu face more extreme competition than ever before. These conglomerates have weathered reconstruction of a country and tough financial climates. Today‟s challenges bring in new forces that the keiretsu may not be equipped to address. The keiretsu, as a mode of operation, has lost much of their original desirability in the Japanese public‟s eyes. (Huh and Kim, 1993) Considering new competition and an expanding market base, the drop in public concern could signal an end to the keiretsu era. Another stressor on the keiretsu will be the economic crisis the global economy is facing.

Chaebol and Keiretsu-What They Mean to an American Consumer Fifty years ago, the general population of the United States had no knowledge about Korea‟s chaebol or Japan‟s keiretsu system. On the surface, members of the United States population would find some similarities to their domestic conglomerates, but government control and the inclusion of lender/owners would surely raise some concerns. Today‟s story would be much different. Today the American public has come to accept government control of industries, i.e. General Motors. The typical American also has come to understand global competition more fully. As a public, we know we buy from “domestic” companies that may or may not be manufacturing abroad. Japan‟s keiretsu and Korea‟s chaebol systems tend to have considerable similarities to one another. Both systems have enjoyed the protection of their government in some shape and fashion. Both systems have been born out of a need to protect the home country‟s market and resources. Additionally, the Japanese and Korean systems have seemingly mastered the art of building relationships-either vertically or horizontally. The similarities end when we begin to compare regulatory controls. The Korean government has consistently worked to keep finance and manufacturing separate to protect the country‟s economic health. The belief is that the system will run in a more realistic manner and require companies to act in a responsible manner. Korean officials have witnessed many cases of improper business dealings within their country, choosing to participate themselves at times. This fear of improper practices, combined with a desire to contribute to a stable economy has pushed the Korean government to monitor the intermingling of banks and manufacturers. The Korean government has been successful at times in achieving this separation, but chaebol ingenuity seems to keep the target moving. In Japan, the government has allowed the keiretsu and banking industry to intermingle. Instituted as an answer for ensuring the success of a budding industrial sector, this intermingling seems to have contributed to Japan‟s financial crises. This intermingling has raised concerns in the world‟s marketplace as financial scandals have rocked the confidence of investors.

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To an American consumer, these two systems represent a system that is providing products to our economy. The Japanese and Korean manufacturers have changed expectations of where products are made and also have affected customers‟ expectations related to quality and service. The American consumer has developed a trait of nonloyalty to traditional domestic brands. The earliest Japanese products were seen as cheap and low-quality. Today‟s Japanese products are viewed as high-quality and reliable. Korean products are quickly achieving the same outcomes. The American consumer may struggle with the true meaning of keiretsu and chaebol, but they understand what these words mean to product purchases. The Japanese and Korean systems are seen as the drivers of lower prices and higher quality goods. Domestic companies have lost some loyalty due to these factors, but also due to neglecting the company‟s focus on quality and pricing. To today‟s typical consumer, it is no longer a purchase decision based on “where the product is made.” Today‟s consumer is more focused on the quality, value, reliability, and pricing of an item.

Chaebol and Keiretsu-An American Manufacturer’s View American manufacturing companies have worked through the same issues of consolidation that the Japanese and Korean companies have faced. The major difference in the American system and the chaebol/keiretsu systems is that the Asian populations tend to be much more group oriented. This leads to an easing of the difficulties of finding common grounds for compromises in terms of labor relations and production schedules. American manufacturers have been known to voice concerns over “unfair labor practices” and dumping activities. These charges are usually leveled against recently developing countries such as China, but have been claimed against Japanese and Korean firms also. A focus on quality was missing from American firms as we entered the dawning of the global business age. American manufacturing had come to rely on past sales as drivers for new sales and believed that brand loyalty would carry the day. These same firms are intensely focused on quality and cost controls today. The realization that foreign manufacturers, some producing in the domestic firm‟s own back yard, cannot be ignored has prompted a return to a reliable American product. The focus on simply selling a customer something has been replaced with selling a customer something they want.

Conclusions The chaebol and keiretsu systems have provided Korea and Japan tremendous opportunities to develop their manufacturing economies in a fast-track manner. The cooperation of their respective governments has allowed the systems to flourish as hoped. The major drawback from these systems is the intermingling that instinctively comes from this type of operation. The Korean and Japanese governments must work to constantly monitor their economy to insure that a financial crisis is not precipitated on the people. As the world develops global markets more fully, the chaebol and keiretsu systems may become outdated. In a setting of pure cooperation and no restrictions on domestic/foreign relationships, these systems may find themselves unable to interact in a competitive manner. The willingness to adapt to transparency and competitive requirements will definitely affect the ability of both the chaebol and the keiretsu to remain going concerns.

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BIBLIOGRAPHY (2006). “Foreign Capital and Chaebol Under Scrutiny.” Asia Monitor, 13(6): 1. Banerji, K. and Sambharya, R. B. (2004). “Cracks in the Vertical Keiretsu: Switching Behavior of Suppliers in the Japanese Automobile Industry.” Academy of Management Best Conference Paper, 2004: G1-G6. Boje, D. and Joh, T. T. H. (2006). “Can Chaebols Become Postmodern?” Problems and Perspectives in Management, January 2006: 200-222. Cheh, J. J. (2006). “An Application of Self-Organizing Maps to Financial Structure Analysis of Keiretsu versus Non-Keiretsu Firms in Japan.” Review of Pacific Basin Financial Markets and Policies, 9(3): 405-429. Douthett, E. B., et al. (2004). “Keiretsu Affiliation and Equity Values in Japan.” Review of Pacific Basin Financial Markets and Policies, 7(4): 525-545. Flath, D. (2005). “Distribution Keiretsu, Foreign Direct Investment, and Import Penetration in Japan.” The Japanese Economy, 33(2): 26-53. Hatch, W. F. (2005). “Transplanting Keiretsu.” The Japanese Economy, 33(2): 54-66. Horowitz, S. (2002). “Democratization, Dispersed Interest Groups, and Economic Reform in South Korea: Understanding the Decline of the „Chaebol Republic‟.” East Asia, Spring, 2002: 81-106. Huh, C. G. and Kim, S. B. (1993). “Japan‟s Keiretsu and Korea‟s Chaebol.” FRBSF Weekly Letter, July 16, 1993: 1-3. Kawai, N. (2009). “Shifting Gears.” Japan, Inc., Spring 2009: 10-12. Kim, D. (2003). “Interlocking Ownership in the Korean Chaebol.” Corporate Governance, 11(2): 132-142. Kim, W. S., et al. (2005). “The Wealth Effects of Capital Investment Decisions: An Empirical Comparison of Korean Chaebol and Non-Chaebol Firms.” Journal of Business Finance and Accounting, 32(5) & (6): 945-971. Lee, S. J. (2008). “The Politics of Chaebol Reform in Korea: Social Cleavage and New Financial Rules.” Journal of Contemporary Asia, 38(3): 439-452. McGuire, J. and Dow, S. (2009). “Japanese Keiretsu: Past, Present, Future.” Asian Pacific Journal of Management, 26: 333-351. Miwa, Y. and Ramseyer, J. M. (2002). “The Fable of the Keiretsu.” Journal of Economics and Management Strategy, 11(2): 169-224. Suetorsak, R. (2007). “Keiretsu and Risk: An Examination of the Risk Exposure of Keiretsu Banks in Japan.” Journal of Economics and Finance, 31(2): 268-282.

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DOES AGENCY COSTS OF DEBT AFFECT THE BOND CONVEXITY? Minje Jung * Randal Ice ** Stephen Black *** Ronald Shaw ****

Abstract Convexity is a measure of bond’s inherent capability to resist price decline as interest rates rise. It is also a measure of bond’s natural quality to increase in as interest rates fall. Obviously, convexity is a desirable characteristic of bond, and yet it has not been included in the set of attributes used by bond rating agencies. Agency costs of debt are the sum of costs to be borne by bondholders for monitoring and bonding, and the decline in firm’s earnings owing to two risk incentives of shareholders: debt overhang and asset substitution. Agency costs of debt are firmspecific depending upon asset structure and capital structure as determined by the manager and shareholders with different risk incentives than the bondholders. Changes in bond ratings are the direct results of financial market’s reevaluation of the bond’s default risk. We conjecture that the change in bond ratings is the market’s reassessment of the bond’s quality that is affected by its inherent financial risk and agency costs of debt. Using the change in bond ratings as a measure of agency costs of debt, we empirically examined how agency costs of debt affect bond convexity. We tested further whether other agency costs of debt-related variables, maturity and seniority, affect convexity.

*Minje Jung is a Professor of Finance, at the University of Central Oklahoma, Edmond, Oklahoma. ** Randal Ice is a Professor of Finance and Department Chair, at the University of Central Oklahoma, Edmond, Oklahoma. *** Stephen Black is a Professor of Finance, Department of Finance at the University of Central Oklahoma, Edmond, Oklahoma. **** Ronald Shaw is a Professor of Finance, Meinders School of Business at the Oklahoma City University, Oklahoma City, Oklahoma

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I.

Introduction

Convexity is a measure of bond’s inherent capability to resist price decline as interest rates rise. It is also a measure of bond’s natural quality to promote price increase as interest rates fall. Obviously, convexity is a desirable characteristic of a bond, and yet it has not been included in the set of attributes used by bond rating agencies. It is well documented that bond ratings have a significant effect on bond price. However, it has not been investigated whether bond ratings have same positive effect on convexity, thus enhancing a bond’s characteristic such that it reduces its interest rate risk. Agency costs of debt arise due to the shareholder incentives: (1) the risk incentive to replace less risky assets with riskier assets (i.e., asset substitution) in their pursuit of increased wealth at the expense of bondholders; (2) the underinvestment incentive to abandon projects that increase firm value yet might decrease equity value as most of the gain in value leaks to bondholders due to the debt overhang.

Contracting costs of monitoring and

bonding the associated risk incentive problem and loss in firm value due to the underinvestment problem constitute agency costs of debt for a firm. Clearly, the shareholder vs. bondholder conflict of interest and the ensuing agency costs of debt should increase the financial risk of the firm that is to be reflected on the bond ratings.

Rating agencies’ bond quality assessment

represents the market’s view and perception on the quality of the issuing firm and risk of the bonds issued by them. Thus, a change in bond ratings is used as a proxy variable for the agency costs of debt such that upgrading and downgrading is tantamount to decreased and increased agency costs of debt.

Changes in bond ratings are the direct results of financial market’s reevaluation of the bond’s default risk as that is perceived to be the most significant financial risk in bond market.

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Upgrading or downgrading of the bond ratings imparts the rating agency’s changed view on the quality of bonds to the markets.

Rating agencies’ reevaluation of bond quality is taken as

impartial, unbiased reassessment of the issuing firms’ financial risk, and it reflects the changes in market participants’ views and opinion on the quality and risk of the bond. Improvement in bond ratings (i.e., upgrading) conveys positive information about the quality of bond due to a lower level of default risk, whereas deterioration in bond ratings (i.e., downgrading) transmits negative information to the markets. As employed by Crabbe and Helwege (1994) for their test of asymmetric information related agency costs of debt, we use the change in bond ratings as an indicator of market-wide perception of the firm’s agency costs of debt. Increase or decrease in the agency costs of debt are to be reflected on the rating agency’s announcement of downgrade or upgrade, respectively. The main purpose of this paper is to examine the relationship between the agency costs of debt and bond convexity. By regressing independent variables-change in bond ratings, change in yield to maturity, maturity and seniority, we examine how agency costs of debt affect bond convexity. The paper proceeds as follows: Section II reviews literatures on bond convexity, bond ratings and agency costs of debt and develop hypothetical models for empirical testing; Section III describes the data and sample statistics; Section IV presents results of regression analysis; and conclusions are in Section V.

II.

Literature review and empirical models

1. Convexity The convexity of bond’s price-yield function is the curvature of the function. The more convex (i.e., bent) the price-yield curve is, the more favorable is the effect of interest rate changes on bond prices. That is, as interest rates fall, the prices of high convexity bonds rise more than those of low convexity bonds. As interest rates rise, the prices of high convexity

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bonds fall less than those of low convexity bonds. Convexity is the bend, or curvature, of the price-yield function, and it is defined as the change in duration for a change in yield. Duration is equal to the slope of the bond’s price-yield curve, and it is, in fact, the first-order derivative of the convex bond price-yield function. Convexity is, therefore, the second-order derivative of the convex bond price-yield function. Thus, a higher convexity bond’s price will increase more as rates drop, and its price drops less as interest rates rise, than a lower convexity bond (Grantier, 1988). Thus, convexity is often cited as a desirable characteristic of bond. The magnitude of convexity indicates the strength of resistance of the bond price decline as interest rate rises. The larger the magnitude (i.e., the more convex the curve is), the less the decline in the value of bond as interest rate rises. As interpreted by Dunetz and Mahoney (1988), as interest rates fall, highconvexity bond prices rise faster than the price of low-convexity bonds. Conversely, highconvexity bond prices decline less than low-convexity bond prices when rates rise. Therefore, high convexity bonds also outperform low convexity bonds in an environment of rising or falling interest rates. The formula for the convexity of a bond with a maturity of n years making annual coupon payment is:

Convexity

1 P (1 y) 2

n

t 1

CFt t2 t (1 y)

t

where CFt is the cashflow, and P and y denote price and yield to maturity, respectively. 2. Bond rating Bond rating agencies, such as Standard and Poor’s Corporation and Moody’s Investor Services, analyze various features of bonds and indicators of the issuing corporations’ financial soundness before assigning quality ratings. Market participants want ratings to be a view of an

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issuer’s relative fundamental credit risk, which they perceive to be a stable measure of intrinsic financial strength (Moody’s Investors Service, 2002). Bond ratings are indicator of default risk, and prices of corporate bonds generally respond to the announcement change in bond ratings that are based on careful and deliberate analysis of long-term financial risks. Despite empirical findings that changes in bond and stock prices precede rating changes (Weinstein, 1977, Griffin & Sanvicente, 1982), bond ratings appear to have significant impact on the market prices of both bonds and stocks (Hand, Holthausen, and Leftwich, 1992). Previous studies on the relationship between bond ratings and default rates in each category of bond ratings show that the percentage of firms that defaulted was higher in the lower rated group than in the higher rated group (Pye, 1974, Wood & Wood, 1985).

Bond ratings are based on the level and trend of the issuer’s

financial ratios and the significance and size of the business of the issuing firms (Pinches and Kaplan and Urwitz, 1979). As to the relationship between bond rating and convexity, Jung and Black (2008) found a negative relationship between the two parameters for both callable and non-callable bonds. 3. Agency Costs of Debt Taggart and Bodie (1978), Barnea et al. (1980) and Thatcher (1985) examine how a call feature can reduce the agency costs of debt associated with asymmetric information. When bondholders appear to reap most of profit from the low risk, albeit profitable, projects, stockholders would not be interested in investing in these types of projects, resulting in underinvestment. This particular agency cost can be reduced by callable bonds. By including early call provisions on the bonds, stockholders capture a larger portion of the gain from undertaking low-risk but profitable projects by limiting the bondholders’ gain to just the call premium. Stockholders’ incentive to increase their wealth at the expense of bondholders by

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investing in high risk, albeit unprofitable, projects can also be lessened by call features because the value of the stockholders’ call option declines with a fall in firm value due to the high-risk albeit unprofitable projects. An empirical paper by Crabbe and Helwege (1994) fails to support reduction in the agency cost of debt due to a call feature. First, they note that agency theories such as asymmetric information, asset substitution, and the underinvestment problem are difficult to distinguish empirically; then, they test the theories for agency cost reduction from the issuance of callable bonds. Overall, they find little support for any of the theories suggesting that call features can mitigate the agency problem. Secured debt has an inherent contractual protection for creditors in that assets are pledged as collateral until the debt is fully redeemed. Stultz and Johnson (1985) demonstrate how secured debt moderates the contracting cost associated with mitigating the underinvestment agency problem. Secured debt holders’ first claim to the profits of low-risk albeit profitable projects limit the gains realized by the outstanding unsecured debt holders. Stockholders end up with a wealth gain due to an increase in firm value resulting from a higher market price for the new secured debt. Shareholders’ manipulation of debt structure induces another form of conflict of interest between secured bondholders and unsecured bondholders. By having them pit against each other, shareholders gain as firm value increases due to adding senior debt to the existing debt structure.

III.

Data Description

For those bonds whose ratings changed during year 2001, data on bond rating, market price, coupon, maturity, yields and seniority are collected one month before and after the day of rating changes from the Mergent Annual Bond Report at the end of January 2001.

Also

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calculated is convexity one month before and after rating change using then price, yield, and remaining time until maturity before and after, respectively. For regression analysis, qualitative bond rating is quantified following the scale shown below:

Aaa3=27, Aaa2=26, Aaa1=25, Aa3=24, Aa2=23, Aa1=22, A3=21, A2=20,

A1=19, Baa3=18, Baa2=17, Baa1=16, Ba3=15, Ba2=14, Ba1=13, B3=12,

B2=11, B1=10, Caa3=9, Caa2=8, Caa1=7, Ca3=6, Ca2=5, Ca1=4, C3=3, C2=2, C1=1.

There were in total 218 bonds whose ratings changed during the year of 2001. The sample includes mortgage bonds, subordinate notes, superior notes, guaranteed notes, and debentures.

For one of the independent variables of this study, “seniority”, which is binary,

mortgage bonds, superior notes and guaranteed notes are sorted into 122 senior bonds and the rest subordinate notes and debentures are sorted into 96 junior bonds. Descriptive statistics of the variables are reported in Table 1. The average ratings change is a 7.23 percent downgrade from 15.23 to 14.30 which is equivalent to the change from approximately Ba3 to Ba2. The average rate of change in yield to maturity is a 0.147 percent increase, while the average rate of change in convexity is a 0.009 decline that corroborates the negative relationship between yield and convexity. The maturity of sample bonds ranges between 1.37 years to 32 years with an average maturity of 10.94 years.

Table 1 Summary Statistics

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Mean Standard Deviation Range Minimum Maximum Sum Count

∆BR -0.07231 0.303935 1.716667 -0.91667 0.8 -15.7634 218

∆YTM 0.147297 0.722455 8.922331 -0.92766 7.994671 32.11073 218

mat sen ∆Convex 10.94708 0.559633 -0.00904 7.382979 0.497574 0.273951 30.3589 1 4.132461 1.372603 0 -0.95759 31.73151 1 3.174872 2386.463 122 -1.97025 218 218 218

∆BR: rate of change in bond ratings ∆YTM: change in yield to maturity Mat: Maturity of bond Sen: seniority ∆Convex: chamge in convexity

IV.

Results

To examine how convexity change is related to the variables for the agency costs of debt, an empirical regression analysis is performed: Δ(Convexity) = α + β1∙Δ(Rating) + β2∙Δ(Yield) + β3∙Mat + β4∙Sen + ε where Δ represents change in each variable. Table 2 reports the results of the regression analysis. The change in bond ratings, that is the reflection of the market’s reassessment of the financial risk and agency costs of debt of the issuing firms, is negatively related to the change in convexity. Change in bond ratings can be positive (i.e. an upgrade) or negative (i.e. a downgrade) depending upon the revelation of favorable or unfavorable asymmetric information about the issuing firms. According to BHS (1980), the asymmetric information itself is what causes wealth transfer from bondholders to shareholders i.e. agency costs of debt. The innate nature of asymmetric information that is detrimental to bondholders (whilst beneficial to shareholders) is reflected on the change in bond ratings, thus an upgrade (downgrade) is proxy for mitigation (aggravation) of the agency costs of debt. That is, a decrease in agency costs of debt results in an upgrade that increases the price of bonds, and as the price rises, convexity declines. As shown in Table 2, the negative relationship

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is consistent with the above theoretical relationship between the convexity and the agency costs of debt as proxied by ratings change.

The coefficient of the variable is -0.12408, and it is

statistically significant. with a p-value of 0.02434. The result clearly supports the hypothesis that the mitigation of agency costs of debt has a significant positive effect on bond convexity. Change in yield appears to be significantly negatively related to change in convexity with a p-value of 5.88E-19 which is almost zero. This result is consistent with the negative relationship between yield and convexity as shown in the convexity equation because an increase in the agency costs of debt increases the risk of the issuing firm (i.e. higher yield to maturity), hence convexity falls. Thus, it is construed that the agency costs of debt are negatively related to bond convexity. Maturity is also related to the agency costs of debt. The model of Barnea et al. (1980) suggests that long-term securities provide less discipline on borrowing firms. Hence, long-term bonds should carry higher agency costs. Therefore, it is hypothesized that maturity is negatively related to bond convexity. Test results appear to be consistent with the hypothesized negative relationship.

Nonetheless, the coefficient of the variable at -0.00108 is not statistically

significant. Lastly, seniority, which is an indicator variable for priority structure, should be positively related to bond convexity. Bonds with senior standing should have a higher priority of getting paid than junior bonds, and as shown in Bulow and Shoven’s study (1978), seniority can overrides time priority especially when bankruptcy is declared. Thus, it is hypothesized that seniority is positively related to bond convexity.

Test results are consistent with the

hypothesized positive relationship, but like maturity, its coefficient of 0.01874 is statistically insignificant.

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The R-Square of 0.31193 is indicative of the sufficient explanatory power of independent variables (i.e., changes in bond rating and yield, maturity and seniority) for convexity change. Also, our regression model appears to be robust enough with a F-Statistics score of 24.14033 which is statistically significant with a p-value of 1.75E-16. Table 2 SUMMARY OUTPUT Regression Statistics Multiple R 0.558507 0.31193 R Square Adjusted R 0.299008 Square Standard Error 0.229366 Observations 218 ANOVA df Regression Residual Total

Intercept X Variable 1 X Variable 2 X Variable 3 X Variable 4

4 213 217

SS MS F 5.079965 1.269991 24.14033 11.20565 0.052609 16.28562

Coefficients 0.016125 -0.12408 -0.223 -0.00108 0.01874

Standard Error t Stat P-value 0.038543 0.418371 0.676097 0.054714 -2.26787 0.02434 0.022753 -9.80101 5.88E-19 0.002238 -0.48067 0.631243 0.03337 0.56159 0.574986

V.

Significance F 1.75E-16

Conclusion

We examined how agency costs of debt affect bond convexity. For regression analysis, we employed four proxy variables for agency costs of debt: change in bond ratings, change in yield to maturity, maturity and seniority. It is found that the mitigation of the agency costs of debt has a significant positive effect on bond convexity. It is also supported that the yield to

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maturity is negatively related to convexity.

The effect of other two variables, maturity and

seniority are found to be consistent with the prediction of past theories, but they turn out to be statistically insignificant. In a nutshell, a decrease in the agency costs of debt as proxied by a bond upgrade, enhances bond convexity.

References Barnea, A., Haugen, R.A., & Senbet, L.W. (1980). A Rationale for Debt Maturity Structure and Call Provisions in the Agency Theoretic Framework. Journal of Finance, 35, 1223-1234. Bhojraj, S., & Sengupta, P. (2003). Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors. Journal of Business, 76, 455476. Crabbe, L., & Helwege, J. (1994). Alternative Tests of Agency Theories of Callable Bonds. Financial Management, 23, 3-20. Dunetz, M.L., & Mahoney, J..M. (1988). Using Duration and Convexity in the Analysis of Callable Bonds. Financial Analyst Journal. May-June. Grantier, B.J. Convexity and Bond Performance:The Benter, the Better. Financial Analyst Journal. November-December. 79-81. Griffin, P.A. , & Sanvicente, A.Z. (1982). Common Stock Returns and Rating Changes: A Methodological Comparison. Journal of Finance. March, Vol. 47, No.1, 103-119. Jensen, M.C., & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs, and Capital Structure. Journal of Financial Economics, 3, 305-360. Jung, M & Black, M.S. (2008). Do Bond Ratings Enhance Convexity? Journal of Business and Accounting, Volume 1, Number 1, Fall 2008. Kaplan, R.S., & Urwitz, G. (1979). Statistical Models of Bond Rating: A Methodological Inquiry. Journal of Business. April. Vol. 52. No.2. 231-262. Kritzman, M, (1992). What Practitioners Need to Know About Duration and Convexity. Financial Analyst Journal. November-December. 17-20.

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Myers, S., & Majluf, N. (1985). Corporate Financing and Investment Decisions when Firms have Information that Investors do not have, Journal of Financial Economics, 13, 187-221. Mergent, Inc. (2002). Mergent Bond Report. February. Vol. 69. No.2. Pinches, G.E., & Mingo, K.A. (1973). A Multivariate Analysis of Industrial Bond Ratings. Journal of Finance. March. 1-31. Pye, G.(1974). Gaugaing the Default Premium. Financial Analyst Journal. January -February. 49-52. Schnabel, J.A. (1990). Is Benter Better? A Cautionary Note on Maximizing Convexity. Financial Analyst Journal. January-February. 78-79. Weinstein, M.I. (1977). The Effect of a Rating Change Announcement on Bond Prices. Journal of Financial Economics. December. Vol. 5. No.3. 329-350. Wood, J.H., & Wood N.L. (1985). Financial Markets. Table 10.8. 293. Harcour Brace Jovanovich. Orlando, Fla. Stultz, R., & Johnson, H. (1985). Economics, 14, 501-521.

An Analysis of Secured Debt, Journal of Financial

Taggart, R., & Bodie, Z. (1978). Future Investment Opportunities and the Value of the Call Provision on a Bond. Journal of Finance, 33, 1187-1200. Thatcher, J.S. (1985). The Choice of Call Provision Terms: Evidence of the Existence of Agency Costs of Debt. Journal of Finance, 40, 549-561. Tirole, J. (2006). The Theory of Corporate Finance. Princeton, NJ: Princeton University Press.

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RISK TAKING AND ESSENTIAL SUCCESS FACTORS: A COMPARATIVE ANALYSIS IN 21ST CENTURY ENTREPRENEURIAL DIMENSIONS Muahmmad Faheem Ashraf1 Tahir Masood Qureshi2 Abstract Risky behavior of the entrepreneurs is thought to be their success factors. To discover the core success factors of Pakistani entrepreneurs is the idea of this study .New model was created which consists of most essential factors that found in the previous studies. Questionnaire was distributed among the Pakistani businessman and sample size was 84. Model was tested by Factor analysis. Only three important factors Risk Measure, Willingness and Confidence and determination were selected. These variables were analyzed by correlation & regression techniques in order to understand the impact of core factors on business success. Willingness was found to be most essential factors followed by confidence and determination. Risk taking behavior was insignificant suggested that Entrepreneurs don’t find themselves to be risky infect their perception regarding the risk was different. Future research should emphasize on risk assessment and management rather than classification of entrepreneurs as high, moderate or low risk-takers.

Introduction Entrepreneurs are the movers of the economy, as they reject the relative security of employment. They believe they can make future by their decision and actions and work with the people who share the same philosophy of wealth generation and asset collection, which make them popular. As per many scholars, one‟s ambitions and hard work is the key to his economic survival. (Sarasravthy, 2001). Entrepreneurship drives economic innovation. Through self employment and creation of small business drive job formation; these jobs pave a route out of 1

Faheem Ashraf- Research Scholar, SZABIST Pakistan, [email protected] Tahir Masood Qureshi: Assistant Professor, Faculty of Management Sciences, International Islamic University Islamabad Pakistan, [email protected]

2

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poverty. As a general rule, the more entrepreneurial activity the faster will be the growth of economy. (Barth et al ,2006) Large numbers of people like the profession of entrepreneurship. According to International Social Survey Program of 1989, 63% American followed by 49% Germans and 48% Britons were likely to choose being self employed. (Blanch Flower & Oswald, 1998)

Pakistan‟s history of six decades have witnessed continues focus towards primary industry, i.e., agriculture and the irony is, that nothing have changed after sixty years in this regard. Our country‟s main attention is still on agriculture rather than manufacturing or technology related industry. Per capita income is $1050, which is much bellow than minimum international standards. Now majority of the people are struggling to stare up from bred & butter philosophy to security zone. For this purpose they are shifting from employment to business. Entrepreneurs are backbone of any economy. They generate new business and create new jobs from their spin off effect while the whole economy gets back on right track. Purpose of this study is to understand the success factors of prevailing entrepreneurs of Pakistan. These key factors can be polished in other non-entrepreneurs so that they can start successful new business adventure. Literature Review The idea of entrepreneurship was introduced by Richard Cantillon. He envisaged the importance of risk bearing in entrepreneurship. This risk bearing habit of the entrepreneurs is marked as important factors by many scholars for decades from Mill (1848), Schumpeter (1934) and Carland (1984) etc. Each passing year adds to the list of contributors. On a broader aspect,

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Entrepreneurship is anthology of philosophies of business strategy, sociology, economics, psychology and many others. (Alsaaty, 2007) Scholars had not yet agreed on one single definition of the entrepreneurs. William B. Gartner (1988) stresses on the persona of entrepreneur which is associated with the establishment of business. Puri and Robinson (2006) defines entrepreneurs as those individuals who are self employers, optimistic and risk takers. Whereas these traits are not much corelated but conclude different aspects of decision making. A term entrepreneur is well defined as; those individuals who are in constant search of business opportunities (Krueger and Brazeal, 1994).Opportunities in business attract “entrepreneurship” and “entrepreneurs”. Individuals who avail those opportunities are considered entrepreneurs by Grave and Hofer (1991) Finally, According to Mcmullen and Shepherd (2006) entrepreneur is the individual who acts upon significant opportunity. Entrepreneurs have the ability to discover wealth generating ideas, take initiative that is goal oriented and act upon it. This philosophy makes them role model for their competitors and employees. (Norton & More, 2006). As de Bono (1984) (cited in Alsaaty 2007) indicates that success of entrepreneur depends upon factors like spotting good opportunities, talent, luck strategic thinking and ability to negotiate deals. Successful entrepreneurs are in constant search of opportunities and hence participate in job creation and innovations, which differentiate them from other strategic thinkers.

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Alsaaty

(2007)

and

Bird

(1988)

have

different

opinion

regarding

entrepreneurship .Alsaaty (2007) believes that interaction situations and cultural factors are the core ingredients for entrepreneurial formations. Whereas Bird(1988) gives

credit

to entrepreneur „s intentions, communication and

commitment As per Sarasvathy (2001), all entrepreneurs share the below traits like 1) Their aptitude, their taste, their individuality (2) Their learning, basic talent and proficiency, and skill, (3) Their social circle. A research by Bruerderl and Preisendoerfer (1998) explains that support of social circle and professional network is key factor for endurance and growth of new business. The ability to synchronize between individuals and organizations is considered significant for the success of business. The development of business enterprise has been classified in to three phases by Rotefoss and Kolvereid (2005), which are (1 Persuing an entrepreneurial career. (2) Attempt to start a new business. (3) The actual start-up of a new business. Entrepreneurs are largely described as risk takers, innovators, result oriented and totally committed for the success of their business. Risk taking has been singled out as key difference between Entrepreneurs and non entrepreneurs. Risk taking and optimism are interrelated; Former involves incremental approach towards goal i.e. actions based on perceived distributions while later involves forming distributions over future while considering the current facts.

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When unpredictable consequences are involved in decision making, risk is natural. In establishing a new business, both entrepreneur and their investors both experience a certain degree of risk while considering the current situation of the venture. (Papay, 2006) Puri & Robinson (2006) in their research found that ratio of entrepreneurs are twice than of non-entrepreneurs who are willing to take considerable or above average risk for above average return. Substantial risk: 9.86% entrepreneurs versus 4.46% non-entrepreneurs Above average risk : 32.28% entrepreneurs versus 17.45% nonentrepreneurs On the other hand, three times the number of non-entrepreneurs as entrepreneurs report being unwilling to take any financial risk.( 38.7% of nonentrepreneurs versus 12.94% of entrepreneurs). Entrepreneurs are also long range planners. More than 63% of entrepreneurs have planning term for more than 5 years, whereas less than 44% of nonentrepreneurs do. Hence entrepreneurs are vigilant and tolerant while taking risk. The relation between the both risk tolerances and planning horizon is against the concept of entrepreneurs as reckless risk-takers. (Puri & Robinson, 2006) According to. Norton & More, Entrepreneurs evaluate risk differently, they do not engage in riskier behavior necessarily. Risky projects provide lotteries over future wealth that eliminate this non concavity and are particularly valuable to entrepreneurs with wealth levels close to this threshold. It is to be noted that usually that risk-taking happens only once;

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if the result is positive and favorable, the entrepreneur takes no further risk and continue his enterprise. (Hopenhayn & Vereshchagina 2002) Based on literature review entrepreneurs are visionary individual who is willing to take necessary course of action to materialized actual value of his current assets Conceptual Frame work A Conceptual Frame work was drafted after studying various research papers on entrepreneurship. Most common factors were enlisted from these studies. A Model was then tested using Factor analysis on initial 20 persons. Model seem to be highly localized and describing major contributors in the success factors of entrepreneurs

Risk Taking Confidence and Determination Willingness Ability to Explore Strategic Thinking Creativity and innovation Vision Social Networking

Business Success

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Dependent Variable Business Success means achievement of doing business profitably. This success also counts for the satisfaction not only Monterey term but also fulfilled with their career and people are seeking guidance considering them to be booming individual. Independent Variables Risk Taking is the habit of taking risk. By risk it is meant that doing a work or project in which there is probably of having lost. The out come of the work or project is vulnerable. Confidence and determination means entrepreneurs had trust and faith in his business plan and how purposely he is pursuing it. Willingness means an entrepreneur is acting on its business plans. Ability to explore means that how entrepreneur is finding new business and opportunities. Strategic thinking plays vital role in effective decision making process through which an individual pursue and avail opportunities for successful ventures.

Creativity and innovation means coming up with new ideas‟ Vision is an intelligent foresight

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Social Networking means Entrepreneurs are very friendly and inclined to seek out or enjoy the company of others and spent lot of time making friendly relations Research Hypothesis  H1-1 : Risk taking is a critical contributor in the entrepreneurship success  H1-2 : Wiliness is a critical contributor in the entrepreneurship success  H1-3:Confidence and Determination are critical contributor in the entrepreneurship success  H1-4 : Ability to explore is a critical contributor in the entrepreneurship success  H1-5 : Strategic thinking is a critical contributor in the entrepreneurship success  H1-6 : Creativity and innovation are critical contributor in the entrepreneurship success  H1-7 : Social Network is a critical contributor in the entrepreneurship success  H1-8 : Vision is a critical contributor in the entrepreneurship success

Research Methodology Data Collection The research is based on primary data, which were collected by means of survey questionnaire from entrepreneurs of Islamabad region. In addition to manual distribution of questionnaires, questionnaires were also circulated online. 84 responses were obtained over a two week period during May – June 2009.

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Research Instrument

For designing the questionnaire, I had studied various articles and research papers. I created the research questionnaire keeping in view the Pakistani environment. Please refer to appendix A for the Research questionnaire. Data Analysis Data has been analyzed through SPSS 17 application. Characteristics of Respondents Before analyzing the data, it is important to give the demographics profile of the respondents of this study. The demographic characteristics of the respondents included in the questionnaire were Age and gender, business and business experience. Among the 84 respondents 100% were male. The age was divided among 4 categories, but most participants (52.4%) were between the ages of 30 and 40. Most of the respondents(52.4%) from service related industry having a business experience of less than 10 years.

Respondent‟s characteristics tables of the survey are as follow

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Table- 1

Age Cumulative

Valid

Frequency

Percent

Valid Percent

Percent

-24.00

4

4.8

4.8

4.8

24-30

28

33.3

33.3

38.1

30-40

44

52.4

52.4

90.5

40-

8

9.5

9.5

100.0

Total

84

100.0

100.0

Table-2

Gender Frequenc y

Valid male 84

Cumulative

Valid Percent Percent

Percent

100.0

100.0

Table- 3

100.0

Business Frequenc y

Valid manufacturing 4

Valid

Cumulative

Percent Percent

Percent

4.8

4.8

4.8

Construction

36

42.9

42.9

47.6

service

44

52.4

52.4

100.0

84

100.0

100.0

company Total

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Table-4

Business Experience Frequenc y

Valid less

than

38

Cumulative

Valid Percent Percent

Percent

9.5

9.5

9.5

year 3-10

44

52.4

52.4

61.9

10-20

28

33.3

33.3

95.2

20-

4

4.8

4.8

100.0

Total

84

100.0

100.0

Factor Analysis Table- 6

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling

.610

Adequacy. Bartlett's Test of

Approx. Chi-Square

Sphericity

df Sig.

301.065 28 .000

KMO and Barletts Test suggest sample is aduqate. Value comes out to be .610 and the minimum requirement is .50. it suggest that sample of the survey is adequate to interpret the result. Barlets Test of Sphericity is also significant.

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Table-7

Total Variance Explained Extraction Sums of Squared Loadings

Initial Eigenvalues % of

Cumulative

Variance

%

Comp onent

Total

Total

% of

Cumulative

Variance

%

1

3.474

43.425

43.425

3.474

43.425

43.425

2

1.342

16.772

60.197

1.342

16.772

60.197

3

1.021

12.765

72.962

1.021

12.765

72.962

4

.833

10.416

83.378

5

.589

7.358

90.737

6

.389

4.861

95.598

7

.254

3.173

98.771

8

.098

1.229

100.000

Extraction Method: Principal Component Analysis.

First three components explained the total 72%. According to factor analysis. Risk Measure, Willingness and Confidence and determination were included. Rest of the factors were discarded in the result. Normality of Data Kolmogorov Smirnov test is used to verify normality assumption of the data for further analysis of Regression and correlation. The test result suggested that all of the variables are normally distributed with little or neglected deviation from normality.

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Table-8

One-Sample Kolmogorov-Smirnov Test BS

RM 84

84

84

84

5.4881

4.6032

5.4286

6.0317

N Normal Parametersa,,b Mean

1.02815 1.43999

Std. Deviation

C

W

1.31062 1.14260

Most Extreme

Absolute

.172

.132

.229

.230

Differences

Positive

.117

.067

.115

.198

Negative

-.172

-.132

-.229

-.230

1.576

1.213

2.099

2.110

.014

.105

.000

.000

W

C

BS

-.249*

-.145

-.147

.022

.188

.182

84

84

84

84

-.249*

1

.372**

.773**

.001

.000

84

84

Kolmogorov-Smirnov Z Asymp. Sig. (2-tailed) a. Test distribution is Normal. b. Calculated from data. Correlation Table-9

Correlations RM

RM

Pearson

1

Correlation Sig. (2-tailed) N W

Pearson Correlation Sig. (2-tailed) N

.022 84

84

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C

Pearson

-.145

.372**

1

.626**

.188

.001

84

84

84

84

-.147

.773**

.626**

1

.182

.000

.000

84

84

84

Correlation Sig. (2-tailed) N BS

Pearson

.000

Correlation Sig. (2-tailed) N

84

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

Most important contributor in the Pearson correlation was the willingness with Pearson value of 0.773 at a significance value of 0.0 follow by the Confidence and determination with correlation of .626 at a significance value of 0.00. Interestingly Risk Taking was not significant. Regression A simple Regression Analysis was run on SPSS.

Table-10

Model Summary Adjusted R Std. Error of

Mode l

R

1

.857a

R Square

Square

.735

a. Predictors: (Constant), C, RM, W

.725

the Estimate .53909

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Model summary table suggest that model is fit, R square value is .735 means 73.5% of these variables do affect the dependent variable.

Table-11

ANOVAb Sum of

Model 1

Squares

Mean df

Square

Regression

64.488

3

21.496

Residual

23.250

80

.291

Total

87.738

83

F 73.966

Sig. .000a

a. Predictors: (Constant), C, RM, W b. Dependent Variable: BS

Anova Table suggests that model is fit the significance value is 0.00 which strongly suggests for the model. Value of F is 73.96% which are much more than the required Value of F that is more than 2.

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Table-12

Coefficientsa Standardize d

Coefficients

Coefficients

B

Model 1

Unstandardized

Std. Error

Sig.

t .818

.416

.071

1.192

.237

.050

.643

10.131

.000

.056

.397

6.399

.000

.361

.441

RM

.051

.043

W

.504

C

.358

(Constant

Beta

)

a. Dependent Variable: BS

Business success is regressed on its factor component, to see which component has a statistically significant contributor in business success.

The result are

summarized in the following equation Business Success = a +b (Risk Measure) + c (Willingness) + d (Confidence and Determination) Business Success = .361 +.071 (Risk Measure) + .643 (Willingness) + .397 (Confidence and Determination) Result suggested that only two variables are significant contributors to the business success. Most important one is willingness which had T Vale of 10.13 and significance of .000 which indicates it had very strong influence it is followed

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by confidence and determination which had T Value of 6.39 and significance value of 0.00. Risk measure is insignificant in regression as well. Collinearity Diagnostic There is always a chance of multicollinearity in regression that adversely impacts the results of regression equation. Collinearity Diagnostic test is used to see any of the variables are multicollinearity. Collinearity table suggests that none of the Variables are close to multicollinearity. Eigen value of all the variables were less than 0.3 Table-13

Collinearity Diagnosticsa

Mode Dime Eigenvalu

Condition

e

Variance Proportions (Constant)

RM

W

C

l

nsion

1

1

3.862

1.000

.00

.01

.00

.00

2

.098

6.285

.00

.57

.11

.02

3

.027

11.925

.02

.10

.78

.50

4

.013

17.294

.98

.33

.10

.47

Index

a. Dependent Variable: BS

Research Hypothesis Result  H1-1 : Risk taking is a critical contributor in the entrepreneurship success In simple correlation and regression this Hypothesis is rejected.  H1-2 : Wiliness is a critical contributor in the entrepreneurship success

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H1 is accepted in simple Correlation and regression. This turn out to be most contributing factor which shows the importance of willingness of entrepreneurs in their success.  H1-3:Confidence and Determination are critical contributor in the entrepreneurship success H1 is accepted in simple Correlation and regression. They turn out to be one of the important contributing factors in the success of entrepreneurs.

Conclusion Entrepreneurship is considered be a key factor for the better financial system. Yet the determinants of entrepreneur‟s success are not well understood. This study addresses this question by examining different factors associated with their success. Understanding of these issues may help to assess the determinants of business success. A primary research had been made to test this model. Factor analysis was used to select the most influential factors. Interestingly Risk taking of entrepreneurship was a non significant factor which was portrayed as important element in their success in past studies. This study result support the result of Pori and Robinson (2006) and Norton and More (2006) in which claim entrepreneurs are not risky. Their perception on the risk is different from non entrepreneurs because they had Vision. Willingness being the most influential factors followed by the Confidence and determination in success of Pakistani businessman. . Future research should emphasize on risk assessment and management rather than classification of entrepreneurs as high, moderate or low risk-takers. Limitation of the study

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This study had the following limitations Time period to conduct the study was very limited. Some of the respondents don‟t answer the question seriously Sample size was limited to one city which cannot be easily applicable to all population of Pakistan. Only business individual was chosen for the test analysis.

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References 1.

Saras D. Sarasvathy (2001)What makes entrepreneurs entrepreneurial?, Harvard Business Review

2. James R. Barth, Glenn Yago and Betsy Zeidman (2006), Barriers to Entrepreneurshipin

Emerging

Domestic

Markets:

Analysis

and

Recommendations, Report Milken Institute 3. David G. Blanchflower and Andrew J. Oswald (1998), What Makes an Entrepreneur?, Journal of Labor Economics, 1998, 16(1), pp. 26-60 4. Falih M. Alsaaty (2007) , Entrepreneurs: Strategic Thinkers In Search Of Opportunities, Journal of Business & Economics Research – February 2007 Volume 5, Number 2 5. Barbara Bird, (1988). Implementing Entrepreneurial Ideas: The Case for Intention. Academy of Management Review, (13) 3, 442-453 6. Beate Rotefoss, and Lars Kolvereid, (2005). Aspiring, Nascent, and Fledgling Entrepreneurs. Entrepreneur-ship & Regional Development, (17) 2, 109-127 7. William B. Gartner,

(1998), who is an Entrepreneur?" Is the Wrong

Question, American Journal of Small Business, 12 (4), 11-32 8. MANJU PURI AND DAVID T. ROBINSON (2006), WHO ARE ENTREPRENEURS AND WHY DO THEY BEHAVE THAT WAY? 9. Norris F Krueger Jr,. and Deborah V Brazeal (1994). Entrepreneurial Potential and Potential Entrepreneurs. Entrepreneurship: Theory and Practice, (18) 3, 91-104. 10. William D. Bygrave, and Charles W. Hofer, (1991). Theorizing about Entrepreneurship. Entrepreneurship: Theory and Practice, (16), 2, 13-22.

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11. Jeffery S Mcmullen,. and Dean A Shepherd,. (2006). Entrepreneurial Action and the Role of Uncertainty in the Theory of Entrepreneurship. Academy of Management Review 12. William I. Norton Jr and William T. Moore (2006), The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions Small Business Economics (2006) 26: 215–226 13. Raduan Che Rose, Naresh Kumar and Lim Li Yen (2006), THE DYNAMICS

OF

ENTREPRENEURS‟SUCCESS

FACTORS

IN

INFLUENCING VENTURE GROWTH, Journal of Asia Entrepreneurship and Sustainability, Volume II, Issue 2 14. John L. Thompson, The world of the entrepreneur ± a new Perspective, Journal of Workplace Learning: Employee Counselling Today . 209±224 15. J. Bruederl, & Preisendorfer, (1998). Network Support and the Success of Newly Founded Businesses. Small Business Economics, 10 (3), 213-225. 16. Edward de Bono, (1984). Tactics: The Art and Science of Business. Boston; Little, Brown and Company 17. Francis A. Papay, 2006, RISK TRANSFERENCE AND RISK PERCEPTION ANALYSIS

OF

SERIALENTREPRENEURS

AND

VENTURE

CAPITALISTS, Conceptual Framework 18. Hugo A. Hopenhayn, (2002) Risk taking by entrepreneurs, Conceptual Framework 19. John L. Thompson, The world of the entrepreneur ± a new Perspective, Journal of Workplace Learning: Employee Counselling To, dayVolume 11 . Number 6 . 1999 . pp. 209±224

Mustang Journal of Business & Ethics (2010)

Mustang Journal of Business & Ethics (2010)

BUYING BEHAVIOUR IN ORGANIZED RETAILING A STUDY OF DEMOGRAPHIC FACTORS

B. Krishna Reddy,

J. Suresh Reddy,

Department of Business Management,

Department of Business Management,

Osmania University,

Vivekananda College of Comp. Sciences,

Hyderabad – 500 007, AP. India

Shadnagar; Mahabubnager (Dist)-509216

Email: [email protected]

Andhrapradesh; India Email: [email protected]

Abstract In the today’s complex world coupled with globalization, the customer purchase decision process has become complicated and consuming lot of time for comparing and deciding on various products. It is interesting and also equally important for the retail service providers to know the buying behaviour of customer in the organized retailing. The present paper attempts to study various demographic factors that influence the buying patterns of customer’s in the retailing sector. 1200 customers from three retail malls have been studied for their buying patterns on Ten (10) demographic factors, namely, Age, Gender, Monthly Income, Profession, Educational Qualification, Family Size, Religion, Marital status, Amount Spent in a single visit and Number of visits per month. Analysis is conducted in number of ways and the Comparison of three malls is made for the select demographic factors. ) Key words: Purchase decision, buying behaviour, demographics

INTRODUCTION: Purchasing decision are most complex and include many factors that most consumers do not even aware of. Five steps are involved in every purchase made, namely: (i) Need Recognition, (ii) Information Search, (iii) Evaluation of Alternatives, (iv) Purchase Decision, and finally (v) Post purchase Behavior. Even the simplest purchase can include any or all of these steps. (Brown, 2005) Purchase decisions are further influenced by personal, psychological, and

Mustang Journal of Business & Ethics (2010)

social factors. Marketers need to study the thought process undergone by consumers, to compare it with their demographic data, and use the resulting information to market their products. Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. It includes every sale to the final consumer. The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman-the retailer, who links the producers and the ultimate consumers. Often people think of retailing only as sale of product in stores. But retailing also involves sale of services, medical facilities, boarding, lodging, services of food, after-sales service

for

repair,

etc.

Retailers

attempt

to

satisfy

customers

by

selling

right

product/service/merchandise mix at right price, at the right place when the consumer wants it. Retailers provide assortment of products and services, break the bulk produce by holding adequate inventory with additional services. Retailing is a dynamic industry- constantly changing due to shifts in the needs of the consumers and the growth of technology. Therefore, in order to survive in retailing, a firm must do a satisfactory job in its primary role, i.e., catering to customers.

CONSUMER BUYING BEHAVIOUR IN RETAILING Buying behavior is the decision process and acts of people/ prospective customers involved in buying and using products. It helps in understanding: 

Why consumers make the purchases differently individual to individual?



What factors influence consumer purchases?



The changing factors in our society.

Mustang Journal of Business & Ethics (2010)

Consumer Buying Behavior refers to the buying behaviour of the ultimate consumer. A retailer needs to analyze buying behaviour for: 

Buyer’s reaction to a retailer’s marketing strategy has a great impact on the retailer’s success.



The marketing concept stress that a retailer should create a marketing strategy that satisfies (Gives utility to) customers, therefore need to analyze what, where, when and how consumers buy.



Retailers can better predict how consumers will respond to marketing strategies.

Buying behaviour may influence by many factors, they are Personal, psychological and social factors. Personal factors are Unique to a particular person. Demographic Factors like Sex, Race, and Age etc. Who in the family is responsible for the decision-making? Young people purchase things for different reasons than older people. Demographics normally play a major role in the buying process, since social, religious, and economic factors all influence a person’s thought processes. Objectives of the study: The study is an attempt to observe some of the important areas of the customer purchasing patterns in relation to the personal factors like Gender, Family size and Age in the organized retailing. Such as: 1) To study and analyse the relationship between Income and purchasing patterns. 2) To study and analyse the relationship between Family size and purchasing patterns. Sources of Data:

Mustang Journal of Business & Ethics (2010)

To increase our understanding of shopping behavior, it was decided to conduct an exploratory study to identify major preferences among shoppers. It involved conducting a field survey in three selected malls. The customers were administered a structured questionnaire to collect the primary data. Sample: A sample size of 1200 customers was selected from three retail malls from Hyderabad city namely, Hyderabad Central, Panja gutta; City Centre, Road no: 1, Banjara hills; and MPM mall, Abids. Sample is drawn from each mall 400 customers were selected with systematic random sampling. Data Analysis: 1) Malls vs. Gender, Age & Marital Status Gender Male Femal e HC 293 107 CC 271 129 MM 293 107 3.952 CV Result Gender of the customers do not influence the choice of the mall

Marital Status Married Un married 286 114 283 117 275 125 0.775 Marital status of the customers do not influence the choice of the mall

15-30

Age (in Years) 31-40 41-50 51-60

150 163 151

179 57 14 207 27 3 201 43 5 22.907 Age of the customers have its influence on the choice of the mall

(Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value)

Mustang Journal of Business & Ethics (2010)

2) Malls vs. Profession & Educational qualification Profession Private Busine stud service ss ent

Educational Qualification Govt Othe Profes PostGradu Inter Othe servi rs sion gradua ation /SSC rs ce tion HC 73 216 55 27 29 90 163 113 32 2 CC 24 246 73 28 29 123 222 49 6 0 MM 45 236 62 25 32 100 190 89 19 2 30.516 59.369 CV Educational Qualification of the Res Profession of the customers have its customers have its influence on the ult influence on the choice of the mall choice of the mall (Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value) 3) Mall vs. Religion & Family Size Religion Family Size Hindu Islam Christi Sikh Others ≤2 3-4 5 -6 ≥7 an HC 337 27 30 3 3 28 267 95 10 CC 350 33 15 1 1 6 331 61 2 MM 342 29 25 0 4 13 293 88 6 11.130 36.364 CV Result Religion of the customers do not Family Size of the customers have influence the choice of the mall its influence on the choice of the mall (Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value) 4) Mall vs. Monthly Income & No. of visits in a month Monthly Income(Rs) No. of visits in a month 5001 10,001 15,001 > ≤5000 20,000 1 2 3- 5 ≥6 10,000 15,000 20,000 HC 41 95 112 91 61 70 259 69 2 CC 4 33 71 200 92 11 237 148 4 MM 15 77 90 142 76 53 254 88 5 122.64 77.084 CV Result Monthly Income of the customers No. of visits in a month by the influences the choice of the mall customers influences the choice of the mall

(Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value)

Mustang Journal of Business & Ethics (2010)

5) Mall * Amount spent in a single visit Amount spent in a single visit (Rs) ≤ 500 501- 1500 1501 – 2500 2501 – 3500 ≥ 3501 HC 37 150 80 71 62 CC 12 28 114 178 68 MM 15 99 101 121 64 151.546 CV Amount spent in a single visit by the customer influence the selection of Result mall (Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value) 6) Gender * Amount spent in a single visit Hyderabad Central Amount ≤500 spent in a 501-1,500 single 1,501-3,500 visit(Rs) ≥3,501 Chi-square Value Result

M 23 105 118 47

City center

F 14 45 33 15

M 8 22 191 50

5.184 Gender of the customers have no influence on spending the amount

MPM mall

F 4 6 101 18

3.278 Gender of the customers have no influence on spending the amount

M 12 69 156 56

F 3 30 66 8

8.625 Amount spent in a single visit is influenced by the Gender of the customers

(Note: M-Male; F- Female) 7) Family size * Number of visits in a month

No. of 1 visits 2 in a 3-5 month ≥6 Chi-square value Result

Family Size City Center 3-4 5-6 7 0 192 43 128 18 4 0 73.134

Hyderabad Central ≤2 3-4 5-6 ≥ 7 11 31 24 4 11 189 54 5 6 45 17 1 0 2 0 0 26.242

≤2 3 1 2 0

Family size will influence the number of visits in a month

Family size will influence the number of visits in a month

≥7 1 1 0 0

≤2 7 4 2 0

MPM Mall 3-4 5-6 22 23 195 50 71 15 15 0 43.204

≥7 1 5 0 0

Family size will influence the number of visits in a month

Mustang Journal of Business & Ethics (2010)

City Centre MPM Mall

Monthly Income(Rs)

Hyderabad Central

8) Monthly Income * Amount spent in a single visit

≤ 5,000 5,00110,000

Amount spent in a single visit(Rs) 5011501- 2501≤ 500 1500 2500 3500 ≥3501 16 17 5 3 0 15 68 8 3 1

10,00115,000

3

51

35

15

8

15,00120,000 ≥ 20,001 ≤ 5,000 5,00110,000

3

10

22

37

19

0 1 5

4 3 11

10 0 12

13 0 5

34 0 0

10,00115,000

2

8

30

30

1

15,00120,000 ≥ 20,001 ≤ 5,000 5,00110,000

1

5

58

110

26

3 2 9

1 12 48

14 0 14

33 1 6

41 0 0

10,00115,000

1

26

36

21

6

15,00120,000 ≥ 20,001

0

11

39

72

20

3

2

12

21

38

Chisquare Value

Result

Monthly Income influences the 270.154 amount spent by the customers

Monthly Income influences the 184.703 amount spent by the customers

Monthly Income influences the 246.028 amount spent by the customers

Mustang Journal of Business & Ethics (2010)

9) Family size * Amount spent in a single visit

≤500 501Amount 1,500 spent in 1,501a single 2,500 visit(Rs) 25013500 ≥3,501 Chi-square value Result

Family Size Hyderabad Central City Center ≤2 3-4 5-6 ≥ 7 ≤2 3-4 5-6 ≥ 7 10 17 7 3 2 9 0 1 11 95 43 1 4 18 6 0

≤2 2 10

MPM Mall 3-4 5-6 ≥ 7 8 2 3 64 23 2

4

56

18

2

0

102 11

1

0

78

23

0

2

58

9

2

0

152 26

0

1

101 19

0

1 41 18 2 0 50 18 0 44.360 83.989 Family size will Family size will have its influence on have its influence on amount spent by the amount spent by the customers customers 10) Monthly Income * Number of visits in a month

City center MPM Mall

Monthly Income (Rs)

Hyderabad

No. of visits in a month 1 2 3-5 ≥6 ≤ 5,000 5,001-10,000

13 26

22 52

6 15

0 2

10,001-15,000

16

78

18

0

15,001-20,000 ≥ 20,001 ≤ 5,000 5,001-10,000

10 5 1 7

68 39 2 16

13 17 1 10

0 0 0 0

10,001-15,000

2

60

9

0

15,001-20,000 ≥ 20,001 ≤ 5,000 5,001-10,000

1 0 7 20

125 34 8 44

74 54 0 11

0 4 0 2

10,001-15,000

10

69

11

0

15,001-20,000 ≥ 20,001

12 4

95 38

35 31

0 3

0 42 21 1 74.729 Family size will have its influence on amount spent by the customers

Chisquare value 31.209

Result

107.741

Monthly income of the customers will influence no. of visits in a month

64.692

Monthly income of the customers will influence no. of visits in a month

Monthly income of the customers will influence no. of visits in a month

Mustang Journal of Business & Ethics (2010)

City center MPM mall

Profession

Hyderabad central

11) Profession * Preferable days for shopping Preferable days for shopping Weekd Weeken Other ays ds Holidays Government 21 32 20 service Private 58 101 57 service Business 8 36 11 Student 9 14 4 Others 15 9 5 Government 4 13 7 service Private 87 100 59 service Business 27 30 16 Student 14 14 0 Others 9 11 9 Government 13 25 7 service Private 81 100 55 service Business 22 29 11 Student 12 12 1 Others 17 10 5

Chisquare value 18.196

Result

13.663

Profession influences the preferable days for shopping

12.733

Profession influences the preferable days for shopping

Profession influences the preferable days for shopping

Findings: 1) From the study it is observed that, less than 2 percent of customers only visiting the malls, whose age is more than 50 years. 2) It is observed that majority of the customers of all three malls i.e., 87.6 percent of the customers are in between the age group of 15-40 years. Hence it can be concluded that the customers are young and their views, opinions and experiences are more from the recent past.

Mustang Journal of Business & Ethics (2010)

3) From the study it is identified that, 74.3 percent of customer’s family size is 3-4 members. 4) It is observed from the study that 30.8 percent of the customers spending the amount of Rs 2500- 3500 in a single visit. In the same way 24.6 percent of the customers are spending Rs 1500- 2500 and 23.1 percent of the customers are spending Rs 500- 1500 in a single visit 5) The study found that higher income customers are spending higher amounts. 6) The study found that 64.64 percent of the customers whose family size is 3 – 4 members are visiting the mall twice in a month. 7) The study found that 34.94 percent of customers whose family size is 3 – 4 members are spending Rs 2500 – 3500 in single visit. 8) The study found that 44.7 percent of the customers prefer to do shopping in weekends, 33.1 percent of the customers in weekdays and 22.3 percent of the customers do shopping in other holidays. Hence it is concluded that majority of the customers prefer to do shopping during holidays only. Conclusion: As even this small study has proven, marketers must be constantly aware of the consumer’s thought processes and buying behaviors, since even the simplest decisions can involve many factors. Market researchers should carefully study consumers and come up with innovative ways of persuading the consumer, at each of the buying stages, that their product is the best fit. If they are successful, then the true concept of marketing – building profitable relationships, will be met.

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REFERENCES 1)

Barry Berman & Joel R.Evans, “Retail Management- a strategic approach” 9th edition, Prentice-Hall of India private limited, New Delhi, 2005.

2)

Chetan Bajaj, Rajnish Tuli & Nidhi Srivastava, Retail Management, Oxford University Press, New Delhi,2006.

3)

Harpreet Singh and Narinder Kaur; “Retailing in India: recent trends & challenges”,

Indian Journal of Marketing, volume: XXXVIII Number 4;

April’2008. 4) Philip Kotler& Gary Armstrong, Principles of Marketing, 11th Edition, PrenticeHall of India private limited, New Delhi, 2006. 5) Suja R.Nair, Retail Management, 1st Edition, Himalaya Publishing House, Mumbai, 2006.. 6) Brown, A. (2005). Chapter 6. consumer buying behavior notes. Retrieved Jan. 14, 2006, from Alex Brown's Page Web site: http://www.udel.edu/alex/chapt6.html. 7) Karunakaran.K, “ Marketing Management [ Text and Cases in Indian Context]”, Himalaya Publishing House, Mumbai, 2009. 8) Arif I. Sheikh & Dr Kaneez Fatima,” Mall Management”, Himalaya Publishing House, Mumbai, 2009. 9) Chunnawala .S.A, “ Contours of Retailing Management”, Himalaya Publishing House, Mumbai, 2006. 10) Rajeev Kumra.Dr,” Consumer Behaviour”, Himalaya Publishing House, Mumbai, 2008. 11) B N Dastoor,” Customer satisfaction Delight, The success mantra of the 21st

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century”, Excell Books, New Delhi. 12) Ronald L.Bond,”Retail in Detail”, Mc-Grawhill publishing house. 13) Willard N.Ander & Neil Z.Stern,”Winning at Retail: Developing a sustained model for retail success”; John wiley&sons Inc. 14) Patrik M. Dunne & Robert F. Lusch, ”Retail Management”, Cengage Learning India private Ltd, New Delhi,2008. 15) Bhatia.S.C,”Retail Management”, Atlantic Publishers & Distributors (p) Ltd, New Delhi, 2008. 16) Andrew J.Newman & Peter Cullen, “ Retailing: Environment&Operations”, Cengage Learning India private Ltd, New Delhi, 2008. 17) Gilbert David, “ Retail Marketing Management”, 2nd Edn, Pearson Education Ltd, New Delhi, 2009.

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Mustang Journal of Business & Ethics (2010)

Mustang Journal of Business & Ethics (2010)