Improving the economic competitiveness of South African agribusiness firms : the role of ISO 9000 quality assurance standards.

Abstract

Global free trade presents both challenges and opportunities for South African agribusiness firms. To improve their competitiveness, firms need to become more customer orientated and cost effective. Product differentiation (adding value to products) and niche marketing are just two approaches firms can use to satisfy consumer wants. Cost leadership can be achieved through economies of size, reducing transaction costs and adopting cost-saving technology. This study presents recognised strategies that firms can adopt to meet the challenges of competition. Total Quality Management (continuous process improvement) can be used in conjunction with process reengineering (radical process redesign), whilst both concepts are integrated into process management. The main focus of this study is on quality issues, especially the experiences with the ISO 9000 quality assurance standards amongst South African agribusiness firms. Worldwide, the ISO 9000 standards have received considerable support from firms seeking to improve their economic competitiveness. A postal survey was conducted in 1998 amongst 92 South African agribusiness firms to establish the extent of adoption of the ISO 9000 quality assurance standards, reasons for certification and the costs and benefits of adopting these standards. Almost 36 percent of respondent firms were ISO 9000 certified. The desire to improve customer service, a basis for quality improvement and the need to improve operational efficiency (reduce wastage) were the most important factors influencing certification. Certification had a positive impact on most performance indicators, in particular on documented processes (e.g. record-keeping), overall firm performance and quality of output.Total costs of achieving ISO 9000 certification did not exceed 1,02 percent of turnover. Cost economies were evident for large firms. Two-group and three-group Discriminant analyses were conducted to identify and rank factors that distinguish between firms which had adopted the ISO 9000 standards, those which had adopted alternative quality assurance systems, and those operating without any formal quality assurance standards. Results revealed that ISO 9000 certified firms tended to be larger, established firms with parent company affiliation, manufacturing products derived from agricultural output and exporting to developed countries. Most non-ISO 9000 certified firms had adopted an alternative quality assurance system. Firms with no recognised form of quality assurance tended to be cooperatives involved in service provision. The most important variable distinguishing ISO 9000 adopters from adopters of alternative quality assurance systems was turnover (firm size). The presence of size economies could prevent small firms from adopting ISO 9000. Due to the fact that the ISO 9000 quality assurance standards are internationally recognised and have received considerable international support, government might consider subsidising the costs of ISO 9000 certification amongst small and medium-sized enterprises wanting to export to developed countries. In addition, government and business associations could increase awareness of ISO 9000 and its associated costs and benefits amongst South African firms by disseminating relevant information.