A Study On Marketing Practices in Select PDF

Mustang Journal of Business & Ethics (2010)
MUSTANG JOURNAL OF BUSINESS AND ETHICS
EDITOR-IN-CHIEF
M. P. (Marty) Ludlum
Assistant Professor of Legal Studies
College of Business
University of Central Oklahoma
SENIOR ADVISORY EDITOR
William T. (Will) Mawer

Dean, School of Education and Behavioral Sciences
Southeastern Oklahoma State University
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Editor-in-Chief
Mustang Journal of Business and Ethics
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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
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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
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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
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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
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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
 H3: Privacy Concern will positively influence consumer attitudes toward
mobile marketing.
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 H4: Personal Attachment will positively influence consumer attitudes

 H5: Behavioral intent will positively influence consumer attitudes toward
mobile marketing.
 H6: Attitude toward mobile will positively influence consumer attitudes
 H7: Consumer Innovativeness will positively influence consumer
attitudes toward mobile marketing.
 H8: Permission to interact will positively influence consumer attitudes
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.
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(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.
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RESULT DISCUSSIONS
3.1 Statistical Presentation
Table -1
University
Cumulative
Frequency Percent Valid Percent Percent
Valid 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
university of lahore 24 14.6 14.6 100.0
Total 164 100.0 100.0
Table -2
GPA
Frequency Percent Valid Percent Cumulative Percent
Valid 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
Valid 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
Total 164 100.0 100.0
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Table -4
Gender
Valid Male 99 60.4 60.4 60.4
Female 65 39.6 39.6 100.0
Total 164 100.0 100.0
Table -5
Age
Valid 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
Total 164 100.0 100.0
Table -6
One-Sample Kolmogorov-Smirnov Test
mobile
permissio marketing attuide
privacy n to depenent usage privacy personal behaviroal toward consumer
concern interact variable characteristics volnerability attachement intent mobile inovativeness
N 164 164 164 164 164 164 164 164 164
Normal Mean 2.7073 3.0183 3.1220 3.2134 2.4604 3.2703 3.2561 3.3028 3.1616
a
Parameters Std. 1.3337
1.44202 1.36017 .86663 1.17618 1.01628 1.40822 .79947 1.06957
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
Kolmogorov-Smirnov Z 2.041 2.236 2.302 1.089 1.559 1.167 2.633 1.232 1.443
Asymp. Sig. (2-tailed) .000 .000 .000 .186 .015 .131 .000 .096 .031
a. Test distribution is Normal.
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Table -7
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .609 .371 .338 1.10633
a. Predictors: (Constant), consumer inovativeness, behaviroal intent, attuide toward mobile, privacy
concern, privacy volnerability, personal attachement, permission to interact, usage characteristics
Table -8
b
ANOVA
Model Sum of Squares df Mean Square F Sig.

a
1 Regression 111.846 8 13.981 11.423 .000
Residual 189.715 155 1.224
Total 301.561 163
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
a
Coefficients
Unstandardized Standardized Collinearity

Coefficients Coefficients Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) -.130 .495 -.262 .793
Privacy concern .048 .069 .047 .698 .486 .882 1.134
Permission to
.326 .068 .346 4.785 .000 .778 1.286
interact
usage characteristics -.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
Behavioral intent .039 .065 .040 .592 .555 .895 1.117
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attitude toward
.197 .122 .116 1.605 .110 .783 1.277
mobile
consumer
.336 .090 .264 3.746 .000 .817 1.224
innovativeness
a. Dependent Variable: mobile marketing depenent variable
Table -10
a
Collinearity Diagnostics
Variance Proportions
attuide
Condition privacy permission usage privacy personal behaviroal toward consumer
Model Dimension Eigenvalue Index (Constant) concern to interact characteristics volnerability attachement intent mobile inovativeness
1 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 attuide
privacy permission depenent Usage Privacy personal behaviroal toward consumer
concern to interact variable characteristics volnerability attachement intent mobile inovativeness
Privacy Pearson * ** * **
1 .102 .199 .145 .245 -.024 .176 .110 .216
concern Correlation
Sig. (2-
.195 .011 .065 .002 .758 .024 .159 .005
tailed)
N 164 164 164 164 164 164 164 164 164
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permission to Pearson ** * ** ** ** **
.102 1 .474 .070 .160 .327 .247 .283 .217
interact Correlation
Sig. (2-
.195 .000 .370 .041 .000 .001 .000 .005
tailed)
N 164 164 164 164 164 164 164 164 164
Mobile Pearson * ** * ** ** * ** **
.199 .474 1 .186 .321 .207 .190 .270 .410
marketing Correlation
depenent Sig. (2-
variable .011 .000 .017 .000 .008 .015 .000 .000
tailed)
N 164 164 164 164 164 164 164 164 164
Usage Pearson * ** * ** **
.145 .070 .186 1 .406 .178 .151 .348 .275
characteristics Correlation
Sig. (2-
.065 .370 .017 .000 .023 .054 .000 .000
tailed)
N 164 164 164 164 164 164 164 164 164
Privacy Pearson ** * ** ** **
.245 .160 .321 .406 1 .032 .077 .115 .266
vulnerability Correlation
Sig. (2-
.002 .041 .000 .000 .683 .324 .142 .001
tailed)
N 164 164 164 164 164 164 164 164 164
Personal Pearson ** ** * ** **
-.024 .327 .207 .178 .032 1 .149 .278 .247
attachement Correlation
Sig. (2-
.758 .000 .008 .023 .683 .058 .000 .001
tailed)
N 164 164 164 164 164 164 164 164 164
Behavioral Pearson * ** *
.176 .247 .190 .151 .077 .149 1 .093 .145
intent Correlation
Sig. (2-
.024 .001 .015 .054 .324 .058 .235 .063
tailed)
N 164 164 164 164 164 164 164 164 164
attuide toward Pearson ** ** ** ** *

.110 .283 .270 .348 .115 .278 .093 1 .160
mobile Correlation
Sig. (2-
.159 .000 .000 .000 .142 .000 .235 .041
tailed)
N 164 164 164 164 164 164 164 164 164
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Consumer Pearson ** ** ** ** ** ** *
.216 .217 .410 .275 .266 .247 .145 .160 1
inovativeness Correlation
Sig. (2-
.005 .005 .000 .000 .001 .001 .063 .041
tailed)
N 164 164 164 164 164 164 164 164 164
*. 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.
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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
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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

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

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.
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.
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 H4: Personal Attachment will positively influence consumer attitudes

regression analysis. Personal Attachment do had positive correlation with the
mobile marketing but its impact on the mobile advertising is not shown that
 H5: Behavioral intent will positively influence consumer attitudes toward

mobile marketing.
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

regression analysis. Attitude toward mobile do had positive correlation with the
mobile marketing. but its impact on the mobile advertising is not shown that
 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

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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.
24
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.
25
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 Cross-

Market 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
26
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.
27
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 5 Agree
2. I use my cell phone to access product or store information

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

games
4. I would provide a website with personal information (such as my e-mail

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

address) to receive discounts on future purchases
6. I look for and read privacy polices on the Web When given the chance, I
opt-out of third party information sharing.
28
7. The type and style of cell phone I use says something about me
8. I would not know what to do if I lost my cell phone

9. My cell phone is a part of me

10. When choosing what new products to buy, other people turn to me for
advice
11. My opinions in areas related to new products seem not to matter with
other people
12. Cell phones help me to be more organized

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

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

15. I am often the first of my peers to try new and innovative products
16. I often surf the Internet to look for new products or services
17. I would be willing to receive coupons for discounts on certain products or

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

products or services on my cell phone
29
30
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: humerajaay@hotmail.com
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
31
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.
33
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
34
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
35
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
36
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.
38
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 five-
point 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
39
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 Role office Meaningless Management Job
ambiguity Conflict Politics Work Role Satisfaction
Mean 2.92 3.41 3.27 3.13 3.28 1.74
Standard Error 0.17 0.15 0.16 0.19 0.18 0.15
Median 2.67 3.50 3.33 3.33 3.33 1.75
Mode 2.67 4.50 3.33 5.00 3.33 2.75
Standard
Deviation 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,
40
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 0.708143
R Square 0.501467
Adjusted R Square 0.490629
Standard Error 0.775668
Observations 120
Coefficients S. Error t Stat P-value

Intercept 5.196586 0.372311 13.95765 3.77E-18
Average Job Stress -0.74596 0.109663 -6.80226 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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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 t-value p-value
Constant
Role ambiguity -0.59538 -5.97983 3.1E-07
Role conflict -0.64824 -5.23137 4.03E-06
Office politics -0.58137 -4.66323 2.7E-05
Meaningless work -0.49522 -5.01564 8.34E-06
Management role -0.6383 -6.80019 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.
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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
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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-of-
mouth.
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 in-
depth 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
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53
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 chi-
square, 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).
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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 well-
connected 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 door-
step 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 Word-
of-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
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.28-
32.
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.
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Com
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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
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“Marketing in small hotels: A qualitative study”, Marketing Intelligence and Planning,
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Publishing House, 1st Edition, New Delhi.
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Achievement : A Study of Hotel Industry Achievement”, Website: www.marketing-
interactive.tk
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a franchise decision-making process”, Journal of Services Marketing, Vol..21, Issue.6 ,
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innovation and customer choices in the hospitality industry”, Managing Service Quality,
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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
10
59
Table-2: Investment incurred by selected hotels

Investment
Number of respondents %
(in Crores)
≤5 46 40.4
6-10 51 44.7
11-15 12 10.5
≥ 16 05 4.4
Total 114 100
Table -3: Annual sales of selected hotels

Annual Sales
Number of respondents %
(in Lakhs)
≤ 25 42 36.9
26-50 52 45.6
51-75 14 12.3
≥ 76 06 5.2
Total 114 100
Table-4: Period of existence of sample hotels
Number of years of existence Number of hotels %
0-5
11 9.6
6-10
11 9.6
11-15
54 47.4
16-20
33 28.9
Above 21
5 3.5
Total 114 100
11
60
Table-5: Employee size of sample hotels
Number of employees Number of hotels %
0-25
21 18.4
26-50
57 50.0
51-75
21 18.4
76-100
11 9.6
Above 100
4 3.5
Total 114 100
Table -6: Number of rooms available Vs Annual Sales of the Hotels
Number of rooms
Annual Sales
available χ2-value
(in Lakhs)
≤ 20 >20
≤ 25 31 11
15.110*
>25 29 43
* Significant at 0.05 level
Table -7: Investment Vs Annual Sales of the Hotels
Annual Sales
Investment (in Crores)
(in Lakhs) χ2-value
≤5 >5
≤ 25 28 14
24.166*
>25 18 54
* Significant at 0.05 level
12
61
Table- 8: Services offered by hotels
No. Of Respondents
Type of Services Offered YES 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 SD
Opinion on Pricing compared to competitors 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
Table-11: Promotion of Services in TV channels

Promotion YES NO
f % f %
Sponsoring programmes
73 64.0 41 36.0
Highlighting firm by the specific
38 33.3 76 66.7
Services in advertisements
Table-12: Availability of Marketing and PR department

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

Response
F %
YES 79.8
91
NO 20.2
23
14
63
Table -15: Physical evidence of Hotels
Infrastructure Facilities f %
Availability of reception counter 110 96.5
Displaying Names and Qualifications of staff 70 61.4

members
Appearance of staff members in uniforms 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 & 98 85.9

Ventilation
Availability of House-keeping Department 109 95.6
Availability of Branches 50 43.9
Table -16: customer’s involvement in enquiring delivery process

Response
F %
YES 64.9
74
NO 35.1
40
Table 17: Explaining the process of service delivery to customers
Motivation Techniques f %
Reception staff 88 77.2
Marketing / PR Personnel 10 8.8
Administrative Personnel 16 14.0
15
64
Table -18: Mean ranks of Marketing Mix variables
No of Respondents (N=114)
Marketing mix
variables 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
66
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
67
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.
68
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
69
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 sub-
groups 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
70
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 Chi-Squared df p-value

How many plastic cards do you have? 24.545 5 0.001
How often do you use your plastic 26.806 4 0.001
cards in a month?
What type of payment do you make 13.088 3 0.005
on plastic cards?
Do you know what interest rate you 12.905 3 0.005
pay on the outstanding balance?
Do you know the charges for late 13.128 3 0.005
payments?
Do you know the charge for going 10.172 3 0.05
over your credit line?
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

cards in a month?
payments?
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
71
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

cards in a month?
What type of payment do you make 19.221 3 0.001
on plastic cards?
payments?
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,
72
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 moskalionov@yahoo.com
**Professor Ludlum can be reached at mludlum@uco.edu
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
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Chu, K. (2009). Credit card fees keep going up. (March 16) USA Today 1b.
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74
75
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
76
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-at-
large. (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
81
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 non-
loyalty 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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Penetration in Japan.” The Japanese Economy, 33(2): 26-53.
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85
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 firm-
specific 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
86
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, high-
convexity bond prices rise faster than the price of low-convexity bonds. Conversely, high-
convexity 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:
n
1 CFt
Convexity t2 t
P (1 y)2 t 1 (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
89
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
91
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, C 1=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
92
∆BR ∆YTM mat sen ∆Convex

Mean -0.07231 0.147297 10.94708 0.559633 -0.00904
Standard Deviation 0.303935 0.722455 7.382979 0.497574 0.273951
Range 1.716667 8.922331 30.3589 1 4.132461
Minimum -0.91667 -0.92766 1.372603 0 -0.95759
Maximum 0.8 7.994671 31.73151 1 3.174872
Sum -15.7634 32.11073 2386.463 122 -1.97025
Count 218 218 218 218 218
∆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
93
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.
94
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
R Square 0.31193
Adjusted R
Square 0.299008
Standard Error 0.229366
Observations 218
ANOVA
Significance
df SS MS F F
Regression 4 5.079965 1.269991 24.14033 1.75E-16
Residual 213 11.20565 0.052609
Total 217 16.28562
Standard
Coefficients Error t Stat P-value
Intercept 0.016125 0.038543 0.418371 0.676097
X Variable 1 -0.12408 0.054714 -2.26787 0.02434
X Variable 2 -0.223 0.022753 -9.80101 5.88E-19
X Variable 3 -0.00108 0.002238 -0.48067 0.631243
X Variable 4 0.01874 0.03337 0.56159 0.574986
V. 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
95
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, 455-
476.
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
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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.
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Pinches, G.E., & Mingo, K.A. (1973). A Multivariate Analysis of Industrial Bond Ratings.
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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.
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Wood, J.H., & Wood N.L. (1985). Financial Markets. Table 10.8. 293. Harcour Brace
Jovanovich. Orlando, Fla.
Stultz, R., & Johnson, H. (1985). An Analysis of Secured Debt, Journal of Financial
Economics, 14, 501-521.
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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98
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, contactmfa@hotmail.com
2
Tahir Masood Qureshi: Assistant Professor, Faculty of Management Sciences, International Islamic
University Islamabad Pakistan, tahirmasood2002@hotmail.com
99
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,
100
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 co-
related 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.
101
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.
102
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% non-
entrepreneurs
On the other hand, three times the number of non-entrepreneurs as
entrepreneurs report being unwilling to take any financial risk.( 38.7% of non-
entrepreneurs 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 non-
entrepreneurs 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;
103
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 Business
Explore
Success
Strategic
Thinking
Creativity and
innovation
Vision
Social
Networking
104
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
105
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
 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.
106
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
107
Table- 1 Age
Cumulative
Frequency Percent Valid Percent Percent
Valid -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 Valid Cumulative

y Percent Percent Percent
Valid male 84 100.0 100.0 100.0
Table- 3 Business

Valid manufacturing 4 4.8 4.8 4.8
Construction 36 42.9 42.9 47.6
service 44 52.4 52.4 100.0

company
Total 84 100.0 100.0
108
Table-4 Business Experience

Valid less than 38 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 301.065

Sphericity df 28
Sig. .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.
109
Table-7 Total Variance Explained
Initial Eigenvalues Extraction Sums of Squared Loadings
Comp % of Cumulative % of Cumulative

onent Total Variance % Total 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.
110
Table-8 One-Sample Kolmogorov-Smirnov Test
BS RM W C
N 84 84 84 84
Normal Parametersa,,b Mean 5.4881 4.6032 5.4286 6.0317
Std. Deviation 1.02815 1.43999 1.31062 1.14260
Most Extreme Absolute .172 .132 .229 .230

Differences Positive .117 .067 .115 .198
Negative -.172 -.132 -.229 -.230
Kolmogorov-Smirnov Z 1.576 1.213 2.099 2.110
Asymp. Sig. (2-tailed) .014 .105 .000 .000
a. Test distribution is Normal.
b. Calculated from data.
Correlation
Table-9 Correlations
RM W C BS
RM Pearson 1 -.249* -.145 -.147

Correlation
Sig. (2-tailed) .022 .188 .182
N 84 84 84 84
W Pearson -.249* 1 .372** .773**

Correlation
Sig. (2-tailed) .022 .001 .000
N 84 84 84 84
111
C Pearson -.145 .372** 1 .626**

Correlation
Sig. (2-tailed) .188 .001 .000
N 84 84 84 84
BS Pearson -.147 .773** .626** 1

Correlation
Sig. (2-tailed) .182 .000 .000
N 84 84 84 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
Mode Adjusted R Std. Error of

l R R Square Square the Estimate
1 .857a .735 .725 .53909
a. Predictors: (Constant), C, RM, W
112
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 Mean
Model Squares df Square F Sig.
1 Regression 64.488 3 21.496 73.966 .000a
Residual 23.250 80 .291
Total 87.738 83
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.
113
Table-12 Coefficientsa
Standardize
Unstandardized d
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant .361 .441 .818 .416

)
RM .051 .043 .071 1.192 .237
W .504 .050 .643 10.131 .000
C .358 .056 .397 6.399 .000
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
114
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 Variance Proportions
l nsion e Index (Constant) RM W C
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
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
115
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

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
116
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.
117
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.
118
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
119
120
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: drbkrishnareddy@yahoo.co.in Andhrapradesh; India
Email: j_sureshreddy@yahoomail.com
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
121
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.
122
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:
123
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 Marital Status Age (in Years)

Male Femal Married Un 15-30 31-40 41-50 51-60
e married
HC 293 107 286 114 150 179 57 14
CC 271 129 283 117 163 207 27 3
MM 293 107 275 125 151 201 43 5
CV 3.952 0.775 22.907
Result Gender of the Marital status of the Age of the customers have its
customers do not customers do not influence on the choice of the
influence the influence the choice mall
choice of the mall of the mall
(Note: HC - Hyderabad Central; CC - City center; MM- MPM Mall; CV - Chi-square Value)
124
2) Malls vs. Profession & Educational qualification
Profession Educational Qualification

Govt Private Busine stud Othe Profes Post- Gradu Inter Othe
servi service ss ent 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
CV 30.516 59.369
Res Profession of the customers have its Educational Qualification of the
ult influence on the choice of the mall customers have its influence on the
choice of the mall
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
CV 11.130 36.364
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
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
CV 122.64 77.084
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
125
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
CV 151.546
Result Amount spent in a single visit by the customer influence the selection of
mall
6) Gender * Amount spent in a single visit
Hyderabad Central City center MPM mall
M F M F M F
Amount ≤500 23 14 8 4 12 3
spent in a 501-1,500 105 45 22 6 69 30
single 1,501-3,500 118 33 191 101 156 66
visit(Rs) ≥3,501 47 15 50 18 56 8
Chi-square Value 5.184 3.278 8.625
Result Gender of the Gender of the Amount spent in
customers have no customers have no a single visit is
influence on influence on influenced by the
spending the spending the Gender of the
amount amount customers
(Note: M-Male; F- Female)
7) Family size * Number of visits in a month
Family Size
Hyderabad Central City Center MPM Mall
≤2 3-4 5-6 ≥ 7 ≤2 3-4 5-6 ≥7 ≤2 3-4 5-6 ≥7
No. of 1 11 31 24 4 3 7 0 1 7 22 23 1
visits 2 11 189 54 5 1 192 43 1 4 195 50 5
in a 3-5 6 45 17 1 2 128 18 0 2 71 15 0
month ≥6 0 2 0 0 0 4 0 0 0 15 0 0
Chi-square 26.242 73.134 43.204
value
Result Family size will Family size will Family size will
influence the number influence the number influence the number
of visits in a month of visits in a month of visits in a month
126
8) Monthly Income * Amount spent in a single visit
Amount spent in a single visit(Rs) Chi- Result

501- 1501- 2501- square
≤ 500 1500 2500 3500 ≥3501 Value
≤ 5,000 16 17 5 3 0 Monthly
5,001- 15 68 8 3 1 Income
Hyderabad Central
10,000 influences
the
10,001- 3 51 35 15 8 270.154 amount
15,000 spent by
the
15,001- 3 10 22 37 19 customers
20,000
≥ 20,001 0 4 10 13 34
≤ 5,000 1 3 0 0 0 Monthly
5,001- 5 11 12 5 0 Income
Monthly Income(Rs)
10,000 influences
City Centre
the
10,001- 2 8 30 30 1 184.703 amount
15,000 spent by
the
15,001- 1 5 58 110 26 customers
20,000
≥ 20,001 3 1 14 33 41
≤ 5,000 2 12 0 1 0 Monthly
5,001- 9 48 14 6 0 Income
10,000 influences
MPM Mall
the
10,001- 1 26 36 21 6 246.028 amount
15,000 spent by
the
15,001- 0 11 39 72 20 customers
20,000
≥ 20,001 3 2 12 21 38
127
9) Family size * Amount spent in a single visit
Family Size
Hyderabad Central City Center MPM Mall
≤2 3-4 5-6 ≥ 7 ≤2 3-4 5-6 ≥ 7 ≤2 3-4 5-6 ≥ 7
≤500 10 17 7 3 2 9 0 1 2 8 2 3
501- 11 95 43 1 4 18 6 0 10 64 23 2
Amount 1,500
spent in 1,501- 4 56 18 2 0 102 11 1 0 78 23 0
a single 2,500
visit(Rs) 2501- 2 58 9 2 0 152 26 0 1 101 19 0
3500
≥3,501 1 41 18 2 0 50 18 0 0 42 21 1
Chi-square value 44.360 83.989 74.729
Result Family size will Family size will Family size will have
have its influence on have its influence on its influence on
amount spent by the amount spent by the amount spent by the
customers customers customers
10) Monthly Income * Number of visits in a month
No. of visits in a month Chi- Result

1 2 3-5 ≥6 square
value
≤ 5,000 13 22 6 0 31.209 Monthly income of
5,001-10,000 26 52 15 2 the customers will
Hyderabad
influence no. of
central
10,001-15,000 16 78 18 0 visits in a month
15,001-20,000 10 68 13 0
≥ 20,001 5 39 17 0
Monthly Income (Rs)

City center
influence no. of
10,001-15,000 2 60 9 0 visits in a month
15,001-20,000 1 125 74 0
≥ 20,001 0 34 54 4
MPM Mall
influence no. of
10,001-15,000 10 69 11 0 visits in a month
15,001-20,000 12 95 35 0
≥ 20,001 4 38 31 3
128
11) Profession * Preferable days for shopping
Preferable days for shopping Chi- Result

Weekd Weeken Other square
ays ds Holidays value
Government 21 32 20 18.196 Profession
service influences
Private 58 101 57 the preferable
Hyderabad
service days for

Business 8 36 11 shopping
central
Student 9 14 4
Others 15 9 5
service influences
Profession

City center
service days for

Student 14 14 0
Others 9 11 9
service influences
MPM mall
service days for

Student 12 12 1
Others 17 10 5
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.
129
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.
130
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, Prentice-
Hall 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
131
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.
132
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Mustang Journal of Business & Ethics (2010)

MUSTANG JOURNAL OF BUSINESS AND ETHICS

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MUSTANG JOURNAL OF BUSINESS AND ETHICS

Acceptance of Mobile Marketing Among University Students,

A Study on Marketing Practices in Select Service Industry

Student Use and Abuse of Credit Cards in Russia

Does Agency Cost of Debt Affect the Bond Convexity?

Buying Behavior in Organized Retailing – A Study of Demographic Factors

Call for Contributors . . . 134

New Journal Announcement . . . 136

ACCEPTANCE OF MOBILE MARKETING

Muhammad Faheem Ashraf

“the use of wireless media as an integrated content delivery and

With increase in mass media advertising effectiveness as more traditional mass

According to Handley (2006) the key to effective marketing is to understand the

1.1 Pakistan Mobile Sector

Mobile sector had grown tremendously in Pakistan. Cellular Mobile density

These indicators suggest that Pakistan is an emerging market of mobile users.

The purposed research will be conducting a survey on Rawalpindi & Islamabad

1.2 Statement of the Problem

1.3 Literature Review

Mobile marketing is used for a number of purposes like brand building,

Mobile advertising can be used with “push” or “pull” marketing strategies to

Mobile Marketing Association (MMA) suggests that increasing numbers of

Mobile providers such as AT&T view mobile marketing as a potential revenue

A Nokia-sponsored survey of 3,300 people across 11 global markets in 2002

Multinational brands are planning to initiate mobile marketing practices by 2008,

These researches had highlight number of influential factors which are

1.4 Research Hypothesis

 H1: Usage Characteristics will positively influence consumer attitudes

 H4: Personal Attachment will positively influence consumer attitudes

1.5 Objective of the Study

2.1 Conceptual Framework

(Roham & Sultan, 2006)

2.2 Data Collection

2.3 Research Instrument

2.4 Data Analysis Methods

3.1 Statistical Presentation

Valid 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

university of lahore 24 14.6 14.6 100.0

attuide toward Pearson *