Research on factors affecting effectiveness of mongolian business organizations

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Research on factors affecting effectiveness of mongolian business organizations

Oyunjargal N.

ИССЛЕДОВАНИЕ ФАКТОРОВ, ВЛИЯЮЩИХ НА ЭФФЕКТИВНОСТЬ МОНГОЛЬСКИХ БИЗНЕС-ОРГАНИЗАЦИИ

Оюунжаргал Н.1, Билэгсайхан М.2, Энх-отгон Д.3, Болор Б.4, *

Аннотация

Эффективность - эта одна из ключевых аспектов, которая оказывает на конкурентноспособность организации. На эффективность влияет внутренные и внешние факторы организации. Несомненно, что наиболее влиятельным фактором успешной и эффективной деятельности организации является ее управленческая деятельность.

Цель этого исследования - выявить влияние организационной структуры и управления на эффективность организации. С этой целью мы провели анализ общей информации, текущего состояния организационной структуры и управленческой деятельности, а также корреляции между факторами для монгольских бизнес-организаций. Это исследование проводилось на основе данных “Изучение бизнес среди”, которое было раннее завершено, охватывая 1534 бизнес-организаций. [1, С. 44]

Ключевые слова: Бизнес- организации, бизнес- среда, организационная структура и управление, эффективность.

Research on factors affecting effectiveness of mongolian business organizations

Research article

Oyunjargal N.1, Bilegsaihan M.2, Enkh-otgon.3, Bolor B.4, *

1, 2, 3, 4 National University of Mongolia, Ulan-bator, Mongolia

Abstract

Efficiency is the one of the key operational aspects which indicates the organization's competitiveness. The efficiency is influenced by many organizational internal and external factors. It is certain that the most influencing factor to the organization's successful and efficient operation is its own management activities. Purpose of this research paper is to identify influence of organizational structure and management to the organization's efficiency. With this purpose, we have done analysis on general information, current status of organizational structure and management and correlation between the factors for Mongolian business organizations. This research is done based on the data of “Business environment study” which was previously completed covering 1,534 business organizations. [1, P. 44]

Keywords: Business organizations, business environment, organizational structure and management, efficiency.

This research is aiming for identifying how the organizational structure and management are influencing its efficiency, and it is done based on those criteria included in the questionnaire which is developed for defining Mongolian business environment. We have completed following analyses within this research framework:

Analysis on general information of business organizations

Analysis on current situation of organizational structure and management of business organizations

Analysis on the influencing factors to the organizational efficiency

General information of Mongolian business organizations

80% of the total business entities are of trading, services and industrial sectors, and out of that, 56.9% is trading. This shows Mongolian business structure is mainly consisted of trading businesses. Industrial sector plays a vital role for a country's socio-economic development, thus it is obvious that our government needs to support the industrial sector with right policies to make the business structure more industrial based. From the business owner's liability perspective, the statistics show that Limited Liability Company (LLC) and Individual-owned businesses are the main liability types as total percentage of these two types is 85.4%, here the type of Limited Liability Company is 66.1%. For the ownership type, 95.8% is a private business. 96.4% of the businesses have national investment, and which indicates business environment to support foreign investment is not that adequate yet in Mongolia. Business organizations need to extend their businesses by improving their competitiveness. But above statistics show that 89.8% of the businesses have no any operation in abroad, which indicates competitiveness of Mongolian business entities are in very low level The established year table shows that number of entities has been increased enormously since 1990 when Mongolia transitioned from centralized planned economy to free market economy. There fore the number has increased three times since 2000, and it was a main indicator of the significant economic growth of Mongolia. But starting from 2010, the number has been decreased, which shows Mongolian economic development is not being sustainable and business environment is still not strong yet. For the number of employees, 84% of the entities surveyed are Small and Medium Sized Enterprises (SMEs) which have 1-29 employees. 73.7% of the total surveyed entities have loans for current asset and fixed asset. Current asset loan is the main type of loan. For loan funding source, 74.8% is from local banks. High interest rate, short loan duration and high requirement of guarantee asset are the burdens for the business operations. From the foreign countries' practices, it is proven that international project funding facilitates business operations through lower interest rate and longer payback duration. But in our country, this type of funding percentage is very low.

Above table shows 96% or 1234 entities have national investment. Trading companies are constituting the main portion of the entities. Foreign investment percentage is very low, but 16 services entities have obtained foreign investment, which is relatively a high number compared to the other business types. 1049 entities or 78% of the total surveyed entities have loans of current asset and fixed asset. For the funding source, national bank is the main source. Business organizations are obtaining a current asset loan from local bank at the most.

Current situation of organizational structure and management of business organizations

A descriptive analysis was done using criteria of business operation, human resources and efficiency for identifying current situation of organizational structure and management for business organizations. Criteria were measured by Likert scale 1-5 and, to come up with simplified analysis result, the measures were bundled and converted to 1-3 scale using the “Recode into different variables” command.

Table 1 - Business operations

We have done business operations analysis using above named 5 criteria. Generally the means of them are between 1.55 - 1.69 and standard deviations 0.7. Particularly, the mean for the question - corporate governance 1.69, use of modern management skills 1.66, Whether the organization has contracted relationships with banking, insurance and financial service providers who support normal business operations 1.64, whether the organization adapts advanced new technologies and innovation 1.63, Opportunity to generate revenue with investment 1.55. This shows business activities' performances of the surveyed companies are in medium level.

Table 2 - Operational Efficiency

Organizational efficiency was analyzed based on above three criteria: Total productivity, Labor productitivty and Profitability ratio. In overall, the means of them are between 1.58-1.66 and standard deviations 0.73-0.75. Here, the mean of total productivity is 1.63, labor productitivty 1.66 and profitability ratio 1.58. This identifies that organizational efficiency is in medium level also.

Analysis on influencing factors to the organizational efficiency

Organizational efficiency was analyzed based on three criteria - total productivity, labor productivity and profitability ratio; and Spearman correlation and regression analysis were done to identify the correlation between above named criteria and organizational structure and management.

Table 3 - Total Productivity Correlations

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

From the result in above table, total productivity is correlated with corporate governance, and correlation coefficient is 0.538. Also the criteria - “opportunity to generate revenue with investment” is correlated with total productivity and correlation coefficient is 0.505. In addition, the criteria -“whether the organization adapts advanced new technologies and innovation” is related with total productivity and correlation coefficient is 0.500 These results were regressed as per q95_rt = .160 х q102_rw + .290 х q101_rw + .316 х q 93_rw + 0.38 model to define statistical importance of them. P value of above analysis shows that variables coefficients are correct and this model has a statistical importance. In other words, there is a linear correlation between these variables: total productivity, corporate governance, opportunity to generate revenue with investment and use of new technology. (F=303.940, P= .000).

Table 4 - Labor Productivity Correlations

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

From above analysis, below two criteria have correlations with Labor productivity and correlation coefficient is 0.516 for both: Whether the organization has contracted relationships with banking, insurance and financial service providers who support normal business operations Whether the organization adapts advanced new technologies and innovation.

These results were regressed as per q96_rt = .321 х q102_rw + .328 х q100_rw + 0 model to define statistical importance of them. P value of above analysis shows that variables coefficients are correct and this model has a statistical importance. In other words, there is a linear correlation between labor productivity and these variables: whether the organization has contracted relationships with banking, insurance and financial service providers who support normal business operations, and whether the organization adapts advanced new technologies and innovation. (F = 364,891, P= 000).

Table 5 - Profitability ratio Correlations

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

From above analyses, below two criteria have correlations with efficiency and correlation coefficients are 0.503 and 0.521 respectively: Opportunity to generate revenue with investment. Whether the organization adapts advanced new technologies and innovation These results were regressed as per q97_rt = .321 * q101_rw + .334 * q102_rw + 0.54 model to define statistical importance of them. P value of above analysis shows that variables coefficients are correct and this model has a statistical importance. In other words, there is a linear correlation between organizational efficiency and these variables: opportunity to generate revenue with investment and whether the organization adapts advanced new technologies and innovation (F = 372.649, P = .000).

Summary

We have done a research to identify influence of organizational structure and management to the organization's efficiency for Mongolian business entities, and have come up with following results. From the analysis on current situation of organizational structure and management, the mean is 1.5 for all of the factors: organizational structure and management, human resources and organizational efficiency. The overall mean of 1.5 indicates that overall operation performance of organizations is in medium level.

Following are the results of the correlation and regression analyses for identifying how the organizational structure and management is influencing the efficiency of the business organizations. Whether the organization has contracted relationships with banking, insurance and financial service providers who support normal business operations Opportunity to generate revenue with investment. Whether the organization adapts advanced new technologies and innovation.

Total productivity has high correlation with the criteria: corporate governance, opportunity to generate revenue with investment and whether the organization adapts advanced new technologies and innovation. These three criteria explain 25% of the change to the total productivity respectively and 75% in total.

Labor productivity has been strongly influenced by the criteria: whether the organization has contracted relationships with banking, insurance and financial service providers who support normal business operations and whether the organization adapts advanced new technologies and innovation. These two criteria is responsible for 25% of the change to the labor productivity, and 50% in total. Organizational efficiency is greatly influenced by the criteria: opportunity to generate revenue with investment and whether the organization adapts advanced new technologies and innovation. These two criteria are responsible for 25% of the change to the labor productivity, and 50% in total.

In summary, based on the findings, this research concludes that Mongolian firms need to implement modern management tools and techniques in order to increase the efficiency and productivity of the business. Especially improving the corporate governance, implementing new technology and increasing profitability by ensuring financial stability and economic capability are the key practical significance of our research.

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