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 China -U SA
Busine ss Revie w
Volume 16, Number 8, August 2017 (Serial Number 170)

Contents
Research on Naming Strategies of English and Chinese Shops 351

Jian Li

Research Overview of “Communist Party of China and Changes of Urban Society” 360

Zhao Xin, Chen Wei

The Impact of Financial Reward on Job Satisfaction and Performance: Implications

for Blue Collar Employees 369

Wael S. Zaraket, Farouk Saber

The Predominant Role of IT as a Competitive Global SCM Strategy: The Case of

Roland DG Japan, a Manufacturing Company 379

Jorge Calvo

Factors Affecting Investment in the Iranian Oil and Gas Sector 394

Sanaz Jahan Bozorgi, Farzaneh Taheri

China-USA Business Review, Aug. 2017, Vol. 16, No. 8, 351-359
doi: 10.17265/1537-1514/2017.08.001
D DAVID PUBLISHING

Research on Naming Strategies of English and Chinese Shops

Jian Li
Emporia State University, Kansa, USA
Shandong Women’s University, Jinan, China

The shop name is the soul of a shop, being the identification of its products or service. Shop name, as a source of
sustainable competitive advantage, plays an important role in the formulation of business strategies. Through
generalizing a comprehensive overview of shop-naming features and methods with abundant typical examples both
in Chinese and English shop names, this study aims to examine the naming strategies of well-known shops from the
perspectives of language, culture, and psychology, with the final purpose of generating the most desirable naming
strategies and providing useful recommendations for both consumers and businessmen.

Keywords: shop name, brand name, shop brand, naming strategies

Introduction
With the development of the economy, people’s shopping has been developing so fast and more and more
shops, either domestic or overseas, spring up in a surprising large number. In order to attract more consumers
and have more advantages in the severe competition, to have a sound shop name becomes of great importance
for every single shop. A good shop name has a large potential for increasing the shop’s ability to compete with
its competitors as well as enhancing its profitability. Based on the theory of Rao and Ruekert, shop name, just
like brand name, has been presented to convey information of a shop or a product and represented the images of
them (Rao & Monroe, 1998). It means that a good shop name can either distinguish the shop or service from
other competitors, or stimulate the consumption by boosting customers’ buying desires.
On the other hand, shop name also has a big influence on consumers so that the customers can make their
effective choices according to the shop name. It can affect consumers’ evaluation’s process and help them to
perform decision-making. For consumers, a trusted shop commands strong preference and provides a high level
of name awareness. Recognizing more satisfying shops by naming makes consumers’ shopping more efficient,
so that consumers can avoid unsatisfied shops while becoming loyal to those favorite shops and make easier
decision-making by eliminating the need for an external search. So how to give a proper and appealing name to
a shop appears quite necessary in today’s business, and is also the research focus of this paper.
Based on previous researches of naming strategies, the paper has generalized a comprehensive overview
of shop-naming strategies with abundant typical examples both in Chinese and English shop names from the
perspectives of language, culture, and psychology. The main purposes are appreciating and concluding the
shop-naming strategies of famous shops, then generating the most favorable naming strategies and providing

Jian Li, visiting scholar, Emporia State University, Kansa, USA; associate professor, Shandong Women’s University, Jinan,
China.
Correspondence concerning this article should be addressed to Jian Li, 1112 Merchant Street, Apt S7, Emporia, Kansas, USA.
352 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS

useful recommendations to shop owners who want to create a conspicuous shop name through critical
evaluation of those favorable strategies used in general and in specific shops.

Literature Review
With regard to the previous studies on shop naming strategies, first of all, the shop name should be related
to the brand name to be examined, as the former belongs to the latter and the brand naming is more widely
discussed. The shop name is one part of a brand that can be vocalized and it is a brand’s most visible
communication. Many scholars have investigated the problem on how to create a good and powerful brand
name. Chan (1990) and Chan and Huang (1997; 2001) analyzed brand-naming strategies using top 100 valuable
global brands from the perspective of linguistics. However, their articles just concluded what are the preferred
naming strategies without any further discussion on the reasons. Turley and Moore (1995) divided
brand-naming strategies into three aspects: descriptive strategy, allusive strategy, and imaginative strategy.
Then they further investigated the value of Apple’s brand name by analyzing brand identity of Apple only
using allusive strategy, but without any research on the other two strategies. Charmasson (1988) studied two
brand naming strategies: 1) selecting a name and establishing it in the consumers’ mind through repetition,
called as the “Juliet Principle”; 2) the “Joyce Principle” involving creating a name that conveys favorable
phonetic symbolism, but without any further study on the deep meaning carried by each sound. Further, Dodds
(1991), Krishnan (1996), and Klink (2000) used the taxonomy methods showing that phonetic symbolism can
be used to make an attractive name. They claimed that semantic appositeness meaning fit of name with object
and initial plosives such as b, d, g, k, p, t was largely used in the top 200 brand names in the world. But their
research couldn’t go further to investigate the reasons. Robertson (1989) suggested two dimensions on how to
create a powerful and desirable brand name: 1) the inherent ability of the name must be easily encoded into and
retrieved from memory; 2) to what degree the brand name improves the expected strategic orientation of the
product or service. So a perfect brand name should be simple, novel, meaningful, and evocative benefits that
the product or service brought. Murphy and Enis (1986) classified the naming strategies as follows: personal
names like Chanel; place names like Lancôme; scientific names like Panasonic, which usually changes into
generic names; good associative names like Benefit; artificial names like Kodak as well as descriptive names.
Turley and Moore (1995) illustrated the naming strategies should be diverse, and a brand name could be vocal,
verbal, or entail words, numbers, letters, etc.
Lots of scholars have worked on the guiding criteria in selecting a good brand name. However, the
standards mentioned so far differ from person to person. In order to make up the lack of consistency in terms of
the naming principles and capture the universality, Chan and Huang (1997) made a comparison of the four
studies in three directions: marketing, legal, and linguistic. This study, due to its research focusing on the
shop-naming strategy, selects a new angle in such elements as language, culture, and psychology, which should
be considered a deep research in a wide and comprehensive range with comparison and large amounts of
examples.

Research Methods
The majority of trademarks used in this thesis are selected from Fortune Global 500, and the others are
selected from top shop brands according to National Bureau of Statistics of China. The descriptions of naming
stories for each trademark are collected in a few ways such as browse in Wikipedia, the official website of
 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS 353

those famous corporations and other web sources. The reasons why these examples or stories are chosen are
that, firstly, they are the main shop brands well-known to the public and can represent most shop categories in
the world; secondly, most of these names are closely associated to people’s daily life, so the research can win a
storm of publicity to satisfy the aims of this study. In addition, the main instrument used in the research is the
qualitative analysis which divides the naming strategies into three parts: language strategy, culture strategy, and
psychology strategy. Each of these strategies contains several approaches such as rhetorical method, lexical
method, associative method, empathizing method, and novelty. In addition, the contrastive analysis method is
employed to compare the similarities and differences between Chinese shop names and English shop names.

Research Results and Discussion

Language Strategy in Naming Shops
As a language phenomenon and a symbolic system, shop name bears with its distinct features from other
systems, and moreover, it performs an obvious pragmatic function as well. In fact, shop name is considered as a
brief and short advertisement, and the core of the advertisement is a noun phrase, which intends to motivate the
customers to purchase what the shops want to sell. Usually, the noun phrase is modified and has a figurative
meaning and effect. A rhetorical noun phrase can highlight its pertinence and readability, adding to the
concreteness and figurativeness of the shop name (Bernstein, 1974). For example, The Barber’s, as an ordinary
shop name, could specifically identify itself in concreteness, but lack in figurativeness. If it adopts a sort of
rhetorical method and changes into a new one like Golden Scissors, it will really make a difference. The clever
boss tends to use the lexical means to make the common names become uncommon in arousing people’s
imagination. Therefore, figurative language is characteristic of shop name, and it can be deduced that both
lexical and rhetorical strategies have always been adopted to add some color to these advertisements for shops.
1. The rhetorical method in naming Chinese shops
As it is readily seen that the figurative vocabulary appears more frequently in Chinese shop names, it can
be inferred that the rhetorical method is most commonly applied in naming Chinese shops, which would make
the name attractive and vivid in expressing its uniqueness. There are a variety of examples in Chinese shop
names as follows: in Golden Scissors, a tailor’s store, the word “Golden”, as an adjective, is to modify the noun
“Scissors”, and in such drugstores as in Shen Nong Drug Store, “Shen Nong” consists of an adjective plus a
noun expressing something magical which specifically refers to a man with a magical power; in Hui Chun Tang,
“Hui Chun”, showing a nice picture that the spring coming back in the surface meaning, is herein used as a
metaphor implying going back to the state of well-being for the patients; in Le Ren Tang, “Le Ren” consists of
two adjectives indicating happiness and kindness; in Jiu Sheng Tang, “Jiu Sheng”, an adjective plus a noun,
means living a long life. In some spectacle shops like Kang Ming Spectacles, “Kang Ming” are two adjectives
referring to being healthy and bright in eyesight; in Jing Liang Spectacles, “Jing Liang” is paralleled as bright
as crystals; and in some shoe shops like Shuang Xing Shoes, “Shuang Xing” is equivalent to double stars; in
Yuan Da Shoes, “Yuan Da” is a metaphor indicating to reach as far as possible by wearing their shoes, and in
Shou Wang Shoes, “Shou Wang” is the king of animals, implying that their shoes are all made up of real and
good leathers.
2. The lexical method in naming English shops
The case is the same with English shop names. For example, the copy industry is quite developed in
America, and generally, Copy Shop or Copy Man is commonly used as a copy shop name. However, these
354 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS

names only indicate the differences between industries, but fail to list their advantageous characteristics, so
they have relatively less power upon the consumers. For the shop names with adjectives as modifiers that
confine or describe the center words like nouns, if proper modifiers are applied, it will provide a vivid and
strong exhibition to the typical nature of any shops. Some merchants would like to take full advantage of such a
feature to name a copy shop like Quick Copy or Clean Copy to skillfully propagate the service that they could
offer so that the customers’ requirement for speed or quality can be well satisfied.
It is said that some adjectives in English advertisements appear quite frequently, among which the
commonest are such adjectives as “new, good/better/best, fine, big, great, free, fresh, special, sure, clean safe”
(Li, 1988). They serve to describe any aspect of the products, like the size, shape, look, brilliance, color, or the
inner quality. Because such adjectives are capable of showing the best inner and outer qualities of products and
they are the most appealing to the consumers, they are widely used in advertisements or slogans.
The adjectives or the modifiers in English shop names are similar to those in advertisements in that the
words used by the merchants aim to attract the consumers or to cater to their psychological needs, thus lots of
effective and attractive noun phrases are created. The examples are such shop names as Good Year, Good Will,
Pretty Good Café, Best Buy, Big Lots, Hot Lips, Payless Drugs, etc. Sometimes some compounds composed by
adjectives plus nouns are used, like Supervalu, Safeway, Thrift Way and so on.
In the shop names mentioned above, the lexical method of creating impelling noun phrases with adjectives
as modifiers, and such rhetorical method as metaphor or hyperbole are both used to specify the specialties of
different industries and features of products, so that the consumers’ imagination is stimulated in various aspects
like safety, economy, practicality, originality, and magnificence implied by the shop names. As a result, the gap
between consumers and the merchants is well bridged.
Cultural Strategy in Naming Shops
In the colorful contemporary world, the public’s needs for culture could be generalized in two aspects: to
keep the tradition and to pursue the modern fashion. Such a cultural tendency is also well reflected in the shop
name. The definition of a name or a brand is not only a special symbolic system for identification, but also a
tool to build a cultural atmosphere by businessmen to arouse the attention of consumers, stimulating their desire
of purchase, and finally driving them to consume.
China is an old civilized nation deep-rooted in the influence of the traditional culture, and Chinese people
still prefer to imitate the style of their ancestors. To show their great talent and learning, people prefer to refine
their words in pursuit of grace. Therefore, graceful words or finely crafted vocabulary with an air of great
antiquity in shop names could well cater for people’s psychological needs.
In terms of structure, such Chinese shop names are also noun phrases consisting of a modifier and a center
word it modifies, and most of them originate from the ancient poems or allusions, with such the core words as
“Zhai, Ge, Xuan, Tang, Lou, Ting, Yuan” and so on (Liu, 2000). For example, in Wen Bao Zhai, a stationary
store, “Wen Bao” is the short form for “Wen Fang Si Bao” which refers to the scholar’s four jewels or the four
precious articles of the writing table, such as writing brush, ink stick, ink slab, and paper. In the shop name Gu
Yuan Lou, the phrase “Gu Yuan”, quoted from a poet written by Du Fu, a famous ancient poet, means a man’s
native place or former residence. In a hotel name Shun Geng Shan Zhuang, “Shun Geng” is originated from the
legend of the plowing by Shun, one of the Chinese ancient empires. And Grand View Garden, a shopping mall,
comes from one of four Chinese masterpieces A Dream of Red Mansion. In a restaurant name Ren He Tang,
 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS 355

“Ren He” comes from Mencius’ verse, showing a harmonious state of people living together, in which “Ren”
means people and “He” means being harmonious, and in many other restaurants’ names like in Shun He Yuan,
“Shun He” consists of two adjectives indicating being lucky and peaceful; in Ming Yue Xuan, “Ming Yue” is a
bright moon; in Chun Hao Tan, “Chun Hao” is a noun plus an adjective meaning the spring being beautiful. All
the names mentioned above have their own originations.
Due to cultural differences, the Chinese peculiar lexicon usually fails to find its equivalent in western
culture, and vice versa. Such a phenomenon is regarded as “lexical shortage in culture” (Jia, 1997). For
example, people seem not capable of offering exact English equivalents for the Chinese words “Zhai, Ge, Xuan,
Tang, Lou, Ting, Yuan”, while just using the words “shop”, “store”, “restaurant”, or “hotel” to name a shop,
and usually such words are often omitted, like in Smith’s, Barber’s, MacDonald’s, Macy’s, Ethan Allen, The
Pierre, etc.
What should be pointed out is that some words that reflect British feudal hierarchical concept have left
their trace in today’s English shop names, like the words “king, queen, prince, noble, knight, loyal, palace, a
freeman” and so on. Shop names constituted by such words are King’s Garden, Victoria’s Secret, Burger King,
Dairy Queen, Maui Prince, Royal Manor, Nobleman’s Food, Knight’s Inn, Church’s Fried Chicken, Hickey
Freeman, etc.
However, some western countries, especially America, have relatively vague hierarchical concept, mainly
due to its short history, or not so deeply influenced by its traditional culture as China or Britain, their shop
names have no obvious trace in history and culture. The shop names listed above only intend to show how
sumptuous the shops are or what a good service they can provide, although a few of them carry a stint of
hyperbole with Burger King and Dairy Queen as typical examples. In any case, as symbols for the traditional
concept and a fine brand, these shop names are of exceptional charm in metropolis pervasive with modern
fashions.
Psychological Strategy for Seeking Originality
Various as English and Chinese shop names are or how they differ in cultural heritage, they all hold one
goal—to grasp the consumers’ attention. From the psychological and linguistic perspective, original or
foregrounded things will most easily catch people’s eye, stimulate their curiosity, and then come the behavior
to meet the curiosity (Hawkes, 1997). This kind of seeking originality or novelty strategy can be concluded as a
psychological one.
1. Originality in pronunciation and vocabulary
Usually, original things will cause psychological reaction by stimulating sensory organs (especially the
sight and the hearing). Take the Chinese shop name Hao Lai Wu for an example: its Chinese pronunciation
could bring people to associate it with the American film and industry center, Hollywood. Similar examples are
Si Wei Te (a cake shop), Dao Kou (a stationary store), and Bu Ke Shu Wu (a book store) whose pronunciations
are similar to their English pronunciations with “sweet”, “document” with “docu.” as its shortened form and
“book”. Besides, such shop names as Lao Yu Tou (a restaurant, with its English translation as old fish head),
Gou Bu Li (a stuffed bun shop, implying dogs taking no interest), Guang Gun Ji (a chicken shop, which can be
translated as a bachelor chicken), Yu Ren Shu Wu (the Fool’s book store), and Hu Tu Cha Guan (a tea house,
with “Hu Tu” meaning confusion) create novelty and originality by those vivid and fantastic words.
356 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS

English shop names can display no less color of novelty than Chinese ones. The fish in Mr. Fish, a sea
food store, acts as a pun with two possible meanings: one being a “surname”; the other representing an animal’s
name. Mr. Submarine, a hot-dog shop, stimulates abundant associations by the idea that a submarine has a
similar shape with a hot dog. The Gap, a youth’s clothing store, refers to the generation gap implying that the
clothing style suits only the young. Similar instances are Gepettois (a pan cake shop, as the name is the puppet
maker in the story of Pinnochio), Creature’s Family (a pets’ clinic), From Head to Toes (a beauty shop), Hit or
Miss (a lady’s clothing store, with its original meaning of adventure, but here reminding people of never
missing a good opportunity).
Some English shop names demonstrate the feature of phonetic similarities as well, like Bi-lo (a grocery
with the association of “buy low”), Toys’ R Us aiming to let people know “Toys are (for) us” with the word “us”
functioning in bring the businessmen and consumers closer, and “for” in “Food-4-less” being similarly
pronounced with “four”, so that it could be understood as food-4-less by which people can judge how cheap the
food can be allowed to be (Jia, 1993).
2. Originality in numbers
What is worthy to be mentioned is that in shop names, numbers serve a particular function. Some numbers
carry with them a special cultural color in a given cultural atmosphere. For Chinese people, eight (8) and six (6)
symbolize luck and wealth, while for the westerners, they prefer odd numbers like one (1) or three (3) except
thirteen (13). The westerners prefer to present gifts in odd numbers, like one box of candies, three apples, etc.
(Huang & Ma, 2000). In westerners’ eye, the number seven (7) is a lucky one, because one usually wins the
game if the number seven comes to him or her. While five thousand years of Chinese culture has nourished
many historical allusions and vivid metaphors, the Chinese shop names with numbers are characterized as
being simple in structure and explicit in meaning. In particular, such names are original and easy to be
memorized, thus they tend to catch people’s attention easily. For example, in Yi Pin Xiang Cai Guan, a
restaurant, “Yi” stands for number one and “Yi Pin Xiang” means being delicious at the first taste. In Si Xi
Tang, “Si” stands for number four and “Si Xi” means four kinds of happiness. In Wu Huan Bin Guan, a hotel,
“Wu” equals number five and “Wu Huan” means five rings with a further implication of union. In Jin Liu Fu
Jiu Lou, a restaurant, “Liu” stands for number six and “Jin Liu Fu” means full of golden happiness. In Wan Fu
Supermarket, “Wan” is equivalent to ten thousand and “Wan Fu” means having as much happiness as possible.
In foreign countries, shop names with numbers are not as common as in China, but such shops are closely
related with people’s clothing, food, shelter, and transportation. Therefore, they are exceptionally appealing. In
terms of structure, English shop names with numbers are divided into two categories: one completely composed
of numbers and the other consisting of numbers and non-numbers. The former is such shop names as 21 (a
fancy restaurant in New York), 99 (a grocery in which each commodity is no more than one dollar), 7-11 (a
convenient shop), 5-7-9 (a clothing shop, with 5-7-9 symbolizing the sizes in variety). The latter is represented
by such shops as 33 Flavors (an ice cream store), Big 5 (a sports shop), Lumber 88 (a building material shop),
123 DVD, Four Seasons (a restaurant), and Super 8 Motel (a hotel with only $8 per day).
Psychological Strategy for Returning to Nature
The process of industrialization and urbanization offers a brand-new life mode for people. However, while
enjoying the fruit of modern civilization, people are also suffering pressure from all aspects of life:
overgrowing population, crowded transportation, environmental pollution, fast pace of life and so on. They
 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS 357

have to seek everywhere for somewhere relaxing and tranquil so as to recover mentally and physically. “Back
to Nature” or “Naturalization” has been regarded as a spiritual pursuit and universal cultural fashion.
Businessmen know very well about the consumers’ psychology of desiring to return to nature. Therefore,
they spare no effort to create a country-like atmosphere where people can meet various lovely animals and
recover their original simplicity, which serves as an irresistible temptation to those who are bored with the
bustle and hustle of the city life. As a commercial need, “shop name” is apt to take the theme of nostalgia and
intimate the relationship with animals or plants, aiming to appeal to customers and stimulate consumption.
1. Highlighting local features and pastoral life
Several Chinese shop names carry their distinct local features, such as Xi Bei Jiao Zi Cheng (a dumpling
restaurant in Northwest), Yi Meng Xiao Chi (a snack shop in Yi Meng district), Shan Xian Yang Rou Tang (a
mutton soup shop in Shan County), Tai Wan Chan Zui Ya (a kind of Tai Wan’s famous gluttonous duck), De
Zhou Pa Ji (a chicken shop in De Zhou city), and Wei Shan Hu Yu Guan (a fish restaurant, with the district
“Wei Shan Hu” being abundant with fish).
Similarly, English shop names are also trying to work on the theme of embracing nature. The instances as
follows will clearly illustrate that Chinese and Western cultures are alike in this respect: Kentucky Fried
Chicken, Monroe Hardware, Carolina Waterbeds, Home Depot, Taco Bell, Bob’s Big Boy, Red Roof Inn,
Broadway Furniture, Log Cabin Inn, Old Country Buffet, Pizza Hut, Cliff House, Somerfield, Sand Lane Hotel,
Bun and Burger Chain, Old Spaghetti, Country Kitchen, Bloomingdale’s, Ming Village, Time for You and so
on.
2. Empathizing to plants
The names of plants, especially those of flowers, grass, and trees representing beauties and health are often
taken as shop names, and it’s quite simple to justify this phenomenon. Some plants in Chinese culture are
symbols of beauty that everybody admires. For example, in Orchid Tang, “orchid” stands for nobility; in Red
Peony Mall, “Peony” refers to sumptuousness; in Red Bean Clothing, “Red Bean” leaves us with a miss feeling;
in Pine Hotel, “Pine” symbolizes a strong will; in Rose Singing Hall, “Rose” stands for love (He, 2002).
The plants with special symbolic meanings can also be found in English shop names, like Rose Garden (a
restaurant, with rose for love), Lily Hotel (lily for purity), Daffodil (a lady’s clothing shop, daffodil symbolizing
spring and happiness in England) (Huang & Ma, 2000).
3. Encouraging consumers’ associations with animals’ names
According to Chinese expression habits, the animal names in Chinese shop names are often modified by
another word, mostly an adjective, to constitute a disyllabic one, such as Golden Horse Hotel, Spring Swallow
Restaurant, Silver Elephant Clothing, and Soaring Eagle Hardware Store. In addition, some shop names are
only animal names without any modifiers, like Lark Acoustics Store, Five Wolves Clothing Store, Woodpecker
Clothing Store, Crocodile Clothing Store, etc. There are some shops named with the legendary “dragon” and
“phoenix” to show nobility, like Golden Phoenix Clothing Store, Dragon and Phoenix Wedding Gift Shop and
so on.
Westerners take a fancy to animals, so shops with animals’ names just cater to such an animal-loving mind.
Animals as small busy bees, majestic and brave King Lion, arrogant and holy eagle, loyal dogs, and powerful
bears are all people’s favorites. For example, as for these shops like Bee-Rite (a convenient store), Lion’s Share
(a restaurant), Bear’s Larir Food Fair (a food store), Army Eagle (a material store), Man’s Best Friend (a pets’
shop), Bird Hut (a pets’ shop), Happy Bear’s Kitchen Center, Red Lobster (a sea food store), Red Lion Inn, the
358 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS

animals’ names in these shop names will surely leave a deep impression on customers and bring benefits for
businessmen.
What deserves to be mentioned here is that due to cultural differences, what is auspicious and honorable in
oriental people’s eye may be evil and brutal to the westerners, like the animals “bats” and “dragons”. Chinese
people prefer to name their shops with these two animals, while westerners rarely do it. In China, “dogs” are,
more than often, related with what is degrading or humble, such as the proverbs “look like a dog threatening
people on the strength of its master’s power”, “no ivory issues from the mouth of a dog”, while westerners
regard dogs as their faithful friends so that the proverb “man’s best friends” came into being. In the eastern and
western cultures, the different associations or imaginations caused by respective culture reflect the diversities in
personality or features existed in different cultures, and such diversities will directly affect people’s ideas about
how to name their shops (Deng & Liu, 1994).

Conclusions
In today’s business world, to give a shop a better name plays a crucial role in the success of a certain
product or service. For businessmen, a good shop name can even cut down millions of dollars for a shop since
it can be easily recognized and remembered by consumers, describe the shop’s advantages, and evoke
consumers with good will. For customers, an impressive shop name can assist them to make preliminary
judgements about shops, and make their shopping time-saving and more efficient. Therefore, the naming
strategies for a shop appear more and more significant both for consumers and businessmen.
In exploring the strategies for naming shops, the three elements—language, culture, and psychology—are
considered in the paper and they are the most important elements leading to a successful decision-making on
name choices. Among them, culture is the most nucleuses and basic one because it is deep-rooted in people’s
daily life, bearing the language and deciding people’s behavior and psychology. In examining and analyzing
Chinese and English shop names, both similarities and differences are incarnated by comparisons and
conclusions from the perspective of the above three elements, among which the cultural difference is mostly
mentioned and regarded, and it influences the other two factors.
As discussed above, there is a superb collection of shop names so that they themselves constitute an
amazing world. Short as the shop names are, they are capable of exhibiting the simplicity of language and
displaying the essence of language. They are the crystallization of the businessmen’s wisdom and the fruits of
the old civilization and the modern fashion. As an applied language, shop name not only means the mark for
business success, but also reflects people’s ideal and changeable psychology as well as the colorful
connotations of the specific culture. It is considered as the cultural language phenomenon, reflecting different
social psychology and regional cultures from various aspects. Therefore, the research on shop names is a
multi-disciplinary and multi-cultural study, and such a research is getting more and more important in today’s
world with rapid economic development and strengthening cultural exchange.

References
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Advertising,16(4), 320-335.
 RESEARCH ON NAMING STRATEGIES OF ENGLISH AND CHINESE SHOPS 359

Chan, A. K. K., & Huang, Y. Y. (2001). Chinese brand naming principles: The case of drinks. Marketing Intelligence and
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Charmasson, H. (1988). The name is the game—How to name a company or product. Homewood, IL: Dow Jones-Irwin.
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Huang, Y., & Ma, Q. (2000). American culture exploration: Stories behind custom. Xi’an: Xi’an Jiao Tong University Press.
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Klink, R. R. (2000). Creating brand names with meaning: The use of sound symbolism. Marketing Letters, 11(1), 5-20.
Krishnan, H. S. (1996). Characteristics of memory association: A consumer-based brand equity perspective. International Journal
of Research in Marketing, 13, 389-405.
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Li, Z. (1998). Advertising English. Changsha: Hunan Education Press.
Liu, F. (2000). A cultural perspective on the naming of commercial buildings. Rhetorical Study.
Murphy, P. E., & Enis. B. E. (1986). Classifying products strategically. Journal of Marketing Research, 50(7), 24-42.
Rao, A. R., & Monroe, K. B. (1998). The effect of price, brand name and store name on buyers’ perception of product quality: An
integrative review. Journal of Marketing Research, 26(8), 351-357.
Robertson, K. (1989). Strategically desirable brand name characteristics. Journal of Consumer Marketing, 6(4), 61.
Turley, L. W., & Moore, P. A. (1995). Brand name strategies in the service sector. Journal of Consumer Marketing, 12(4), 42-50.
China-USA Business Review, Aug. 2017, Vol. 16, No. 8, 360-368
doi: 10.17265/1537-1514/2017.08.002
D DAVID PUBLISHING

Research Overview of “Communist Party of China and

Changes of Urban Society”

Zhao Xin, Chen Wei

Qilu Normal University, Jinan, China

Since the Communist Party of China entered cities, the changes of urban society are worthy of research and
thinking. Numerous scholars interpreted this problem from the aspects of regime, economy, culture, and urban
planning. This paper tries to sort out these research findings, looking forward to a more in-depth research on this
problem.

Keywords: Communist Party of China, urban society, changes

Overview of Research Status

Urban modernization is a part of national modernization. Since the Communist Party of China came into
power, both the urban structure and function had significant changes. After the Communist Party of China as a
heterogeneous force entered cities in that period, our urban society had changes that are widely different from
that of the traditional society in politics, economy, culture, etc. How did the Communist Party of China
complete the transformation of urban society, and become an important force undertaking the process of
modernization? It has aroused widespread concern in the academic circles.
After the reform and opening up, China’s urbanization process has been accelerating, and such problems
as urban construction and urban management have become a significant realistic problem in front of the
Communist Party of China. Thus, the research on the relationship between the Communist Party of China and
urban modernization, as well as the experience and enlightenment contained therein provides a reference and
guidance for urban construction today. Scholars discussed this problem from respective professional fields and
disciplinary perspectives. And relevant research findings are fruitful. This paper intends to systematically sort
out relevant research findings so as to produce benefits for the propelling and deepening of researches on this
problem.
There are many articles interpreting urban changes from the perspective of the Communist Party of China.
According to different viewing angles, horizons, and research contents, such articles can be classified as the
following aspects.

Communist Party of China and Liberation & Takeover of Cities

Most of such works are focused on interpreting the policies of liberation of cities and the policies of

Zhao Xin, master, School of Marxiem, Qilu Normal University, Jinan, China.
Chen Wei, master, School of Marxiem, Qilu Normal University, Jinan, China.
Correspondence concerning this article should be addressed to Zhao Xin, Qilu Normal University, No. 2 Wen Bo Road, Zhang
Qiu District, Jinan City, China.
 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY” 361

takeover of cities in the early period, and compiling and analyzing such a series of policies.
Li (2000) carried out a systematic research on this problem. He systematically expounded and
theoretically analyzed the policy evolvement of takeover cities, the alternation of new and old regimes, the
urban renewal and development, the takeover of old cultural undertakings, the external relations, and the
transformation of urban society from six aspects, carried an in-depth study on the subject of the takeover of
cities by the Communist Party of China, and summarized the experience and enlightenment on the takeover of
cities. The Research Office of CPC History of CPC Jinan Municipal Committee and the Jinan Municipal
Archives (1998) introduced the liberation and takeover process of Jinan in detail, i.e., the process of
establishing a revolutionary order upon takeover, rooting out enemy agent organizations, stabilizing finance for
the resumption of work, providing the people with a stable life, and implementing socialist transformation of
cities. Through sorting out and analyzing the takeover and transformation process and policies of cities in the
initial post-liberation period, they try to show the world, “The Communist Party of China not only has the
ability to destroy an old world, but also does well in building a new world.” The Communist Party of China is
able to accomplish the work of urban management and construction. Liu (1997) and the City Takeover and
Social Transformation book series, including Henan Volume (2000), Tangshan Volume (1998), Jilin Volume
(2002), Tianjin Volume (1998), Shenyang Volume (2000), Kunming Volume (1998), Jiangsu Volume (1997),
Xi’an Volume (1997), Guangxi Volume (2003), Zhejiang (Hangzhou) Volume (1996), Qinhuangdao Volume
(1997), Shashi Volume (1998), Urumqi Volume (1997), Chongqing Volume (1995), and Nanyang Town
Volume (1998) have views similar to the above. Only the cities taken over and transformed are different. The
above research findings are mainly focused on describing and sorting out the policies in that period and the
policies and process of acceptance to takeover, and recording this historical process from the perspective of the
revolutionary history. In addition, the cultural and historical data of some local literature also have much
involvement in this aspect. All these are data arrangements, which play a helping role in the research.

Communist Party of China and Governance of Urban Society

City was an unfamiliar and “hostile” field for the Communist Party of China as the Party grew up in rural
society. Therefore, after entering cities, the Communist Party of China attached great importance to regime
construction and the reconstruction of urban governance structure, and did a lot of work in urban regime
construction and urban governance. Accordingly, the governance of urban society becomes a vital problem in
the research on the Communist Party of China and the changes of urban society. Scholars carried out researches
from different perspectives.
Such research findings are characterized by new perspectives and large quantities. The scholars
interpreting it from the perspective of the unit system mainly include: Yang and Zhou (1999), Liu (2000), L. L.
Li and H. L. Li (2000), Wang (2007), Li (2004), Lu (1992), Man and Ge (2008); the scholars carrying out
researches from the perspectives of urban regime and society include: Guo (2006), Liu (1997), Chen and Xie
(2002), Chen, Kong, and Lu (2007); the scholars reflecting the status of urban society in that period from the
perspective of citizens’ life include: Tang (2009), Jin (2011), et al.
Selecting Shanghai as the object of study, Guo (2006) investigated the vanishing of such social
organizations as old charities and townsmen associations, as well as the founding process of neighborhood
committees in Shanghai in the early post-liberation period, researched how the Communist Party of China
“placed the government authority among the people in an unprecedented way” to realize the unity of the state
362 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY”

and society, and theoretically reproduced the historical process of the regime of New China forming,
developing, and constructing a social foundation compatible with itself in a urban space with a high degree of
heterogeneity. Through establishing a series of political institutions, the Communist Party of China broke the
original social strata, and successfully established a new governance system of urban society. The author holds
that the Kuomintang tried to build a new state regime in reliance upon the existing social elites, without
completely changing the pre-existing social structure, so finally it failed to let the state will take root in society.
In the revolution process, the Communist Party of China unswervingly swept away the authorities of old
society and their organizations, established its own organization system (neighborhood committee in replace of
the Baojia system) and social support basis, and took the place of them to construct a new society and its own
national foundation, thereby, achieving success. As we know, after the Communist Party of China entered
urban society, the most obvious sign of urban society is the unit system. Danwei China—Individual,
Organization and State during the Process of Reconstruction of Social Regulation System by Liu (2000) is a
work that carries out a systematic research on the unit organization and the unit system from the perspective of
politics. It shows to what extent the units and unit system meet the need for China’s modernization, and under
what conditions they would turn into the retardation force of modernization. This book tries to provide a
scientific and rational interpretation of “Danwei China” (Unit China). It analyzes the CPC’s social integration
approach after they entered urban society from the aspect of the formation and impact of the unit system, and
concludes that the unit system formats the entire society spatially, and forms a special social mobilization and
integration mechanism. As the Communist Party of China extended the state power towards the society to the
utmost extent, the private space vanished and people became the appendages of state relations. The two works
both carry out lots of in-depth analyses on the structural changes of cities in China, with profound
interpretations.

Communist Party of China and Economic Changes of Cities

After 1949, the Communist Party of China began the process of economic modernization. The economic
modernization strategy is aimed at giving priority to developing cities. Conversely, economic modernization is
also the core content of urban modernization. After the Communist Party of China came into power, the cities
in Chinese Mainland began implementing a modernization mode greatly different from the tradition. The
process of urban & economic modernization had a great fluctuation, which was related to policies, economy,
and the thoughts of each development stage, and the urban economy showed a zigzag track of changes.
Therefore, the role of the Communist Party of China in urban & economic modernization aroused the interest
of many scholars who carried out researches from different perspectives.
For the research on the problem, there are generally two research ideas. The first one places emphasis on
the research of the CPC’s urban economic development strategy, which is embodied as the summary and
analysis of the economic layout and industrial development strategy after the founding of New China. The
second one lays emphasis on the research of urban economic development content, which is embodied as the
sorting and compilation of economic figures. The former includes Reform and Development—Modernization
Study of Chengdu, Inland City of China edited by He (2002). This book focuses on the main line of the
transition of Chengdu from a traditional agricultural city to a modern industrial city, and divides the urban
modernization process of Chengdu since the mid-19th century into two stages. The first stage is the launch and
preliminary development period of urban modernization of Chengdu…The period from the founding of the
 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY” 363

People’s Republic of China to the late 20th century is the second stage for urban modernization development of
Chengdu.” 1 It applies a lot of research methods to carry out an in-depth analysis on the development track of
economic institution development of Chengdu in the modernization process in the 20th century, adding a sense
of times and a stereoscopic sensation to urban development. In addition, it also includes From Giving Priority
to Political Center to Giving Priority to Economic Center—Transformation of the Dynamic Mechanism of
China’s Urban Development from Agricultural Era to Industrial Era by He (2004), A Comparative Study of
Beijing and Shanghai Development in the 20th Century by Qiu (2003), China’s Urbanization Path and Its
Development Trend by Wang (1993), “An Evolutionary Study of the Urban Form of Modern Jinan” (Modern
Urban Research, 2009 (10)) by Wang (2009) and so on. The latter includes A Century of Urban Changes by
Zhao and Wang (2000), and A Century of Urban Development History of Jinan—Jinan since Port Opening
edited by Dang and Lin (2004). Relying on detailed archives and document literature, the above works take
Jinan as an individual case to summarize and sort out the urban layout, as well as the development status of
urban industry, commerce and finance of Jinan since 1949, and describe the transformation track of Jinan from
a political city to an industrial city, from a traditional industrial path to a modern city.

Communist Party of China and Educational & Cultural Changes of Cities

“Certain culture (as ideology) reflects certain politics and economy, gives a great influence and acts on the
politics and economy of certain society.” 2 As a city is China’s social and cultural center, the success or failure
to remove the old culture and to establish a new one concerns whether a regime can achieve real survival in
urban society. Therefore, after entering urban society, the Communist Party of China must replace the old with
the new in the cultural and ideological spheres while taking over the regime and resuming production. Finally,
it rapidly established an ideological and cultural system matching its regime. The things behind the invisible
ideological war are filled with academic charm to many scholars.
The works in this aspect include Identity Construction and Material Life by Wang (2008), “Primary and
Secondary Education in Beijing under the Guidance of ‘Proletarian Politics’(1949-1966)” by Sui (2012), and
“People’s Concept Reconstruction and Unified Front State Regime—A Perspective of State Construction by
the Communist Party of China” by Xiao (2008). Besides, this can be found in comprehensive works concerning
city changes, e.g. Reform and Development—Modernization Track of Chengdu, Inland City of China by He
(2002), which describes urban education development; A Section of Five Thousand Years of History: Chinese
City in 1949 by Zhang (2009), which analyzes the reconstruction of the urban cultural psychology structure of
Nanjing by the Communist Party of China after it entered Nanjing; A Century of Urban Development History of
Jinan—Jinan since Port Opening (Qilu Press, 2004) edited by Dang and Lin (2004). In addition, there are some
collections of local education development information, e.g., Jinan Cultural and Historical Data Library of the
20th Century (Education Volume) (Huanghe Press, 2004 version) edited by the Cultural and Historical Records
Committee of the Jinan Municipal Committee of the CPPCC (2004), etc.
The achievements in this aspect can be divided into two types. The first type reflects the cultural changes
of cities through the reconstruction of urban ideology. For example, Identity Construction and Material Life
edited by Wang (2008) uses rich file information and takes Shanghai as an example to analyze the ideological

1
Wei Yingtao: New View of Research on Urban Development History—Review on Reform and Development—Modernization
Track of Chengdu, Inland City of China, Forum on Chinese Culture, 2002(02).
2
Selected Works of Mao Zedong Vol. 2 [M]. People’s Publishing House, 1991 Version, pp. 663-664.
364 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY”

remodeling process of the working class in the city after the Communist Party of China entered urban society.
The Communist Party of China organized the Learning Culture Movement centered on literacy to arouse
workers’ political and state concepts, completed the reconstruction of class consciousness by democratic means
to enable the mental state and lifestyle of the working class to have a significant change, thereby, finally
realizing “socialization”. The work theoretically analyzes the process of the Communist Party of China
rebuilding thoughts and theories. The paper “Primary and Secondary Education in Beijing under the Guidance
of ‘Proletarian Politics’ (1949-1966)” by Sui (2012) conducts a systematic research on the primary and
secondary education in Beijing from 1949 to 1966. “Proletarian Politics” is the guiding thought of primary and
secondary education. Since 1949, the setting, teacher management, student management, teaching and moral
education activities, etc. of primary and secondary schools are all closely related to “Proletarian Politics”. It
understands the development track of education serving politics from the aspects of the historical tradition of
unification of politics and education in ancient China, as well as the management of educational institutions, the
determination of educational aims, the selection of teaching contents, and so on in the transition period of
modern education. However, People’s Concept Reconstruction and Unified Front State Regime—A Perspective
of State Construction by the Communist Party of China by Xiao (2008, pp. 23-26) holds that:
After the collapse of the imperial system, both the country and the society failed. Beset with internal disorder and
foreign invasions, the society was on the verge of collapse. China did not form an internal social force that could allow the
political party to promote social development. It required the political party to embed itself in the society and achieve social
cohesion from outside.

The way of achieving social cohesion is “entering the society from the outside via a certain political
carrier”. The main political carrier selected by the Communist Party of China is social revolution. The
Communist Party of China got deeply involved in the society through a series of movements, and completed
the ideological reform of the social group, i.e., the “peopling” process of citizens. The other type describes the
development status of education and cultural undertakings of cities. For example, A Century of Urban
Development History of Jinan—Jinan since Port Opening edited by Dang and Lin (2004) summarizes and
describes the general education, higher education, adult education, special education, and scientific &
technological development of Jinan in the education part, and reflects the development status of the socialist
education cause under the leadership of the Communist Party of China since 1949. Perfect education system,
complete educational facilities as well as rich educational forms all show the earth-shaking changes of urban
education compared to that before the founding of New China.

Communist Party of China and Urban Planning & Layout

In 1949, Chinese cities started to stride towards the open pattern of economic modernization. While the
function of Chinese cities had a huge change, the urban layout as the carrier of industrialization path had a huge
change as well. The change of the urban layout reflects the change in economic strategy of the Communist
Party of China. Thus, the contents in this regard have attracted academic attention in recent years.
The achievements in this regard include “On Urban Layout Thoughts of the Three-Generation Leaders of
the CPC” by Miao (2002b), “An Analysis on the Urban Layout Concept and Policy Performance of the
Three-Generation Leaders” by Miao (2002a), “156 Projects and Development of Industrial Cities of New China
(1949-1957)” by He (2007), “An Initial Discussion on the Theoretic System Framework for City Planning in
China” by He (1994), and “Literature Review of Urban Planning Theory Typology” by He (2009).
 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY” 365

The systematical researches on urban layout include “On Urban Layout Thoughts of the Three-Generation
Leaders of the CPC” by Miao, as well as “An Analysis on the Urban Layout Concept and Policy Performance
of the Three-Generation Leaders” by Miao (2002b), which systematically expound the urban layout theories,
methods, and gains & losses in practice of the three-generation leaders of the Communist Party of China since
the founding of New China. These articles summarize and review the urban layout thoughts of the
three-generation leaders of the Communist Party of China from the perspective of economics, including Mao
Zedong’s layout thought of “coastal cities and inland cities”, and Deng Xiaoping’s urban layout strategy of
“giving priority to developing coastal regions to achieve common prosperity”; besides, Jiang Zemin raised the
“coordinated development of cities in eastern, central and western regions” and seized the opportunity to put
forward the strategic thought of China’s Western Development. In addition, these articles evaluate the urban
development status of China, and point out the imbalance of China’s urban development. “156 Projects and
Development of Industrial Cities of New China (1949-1957)” by He and Zhou (2007), researches the urban
industrialization strategy in the early days of New China, indicates the impact of the strategy of limited
development of heavy industries, and reconstructs the industrialized regions of New China. Thenceforth, China
officially opened the new chapter for orderly construction and prior development of the modern industry. From
1949 to 1957, the cities of New China set out on the development path—new development mode of heavy
industrial city construction oriented to prior development of heavy industries, which was different from that in
other historical periods. The basic framework of China’s urban development under the planned economic
system was basically formed, and produced a great impact on China’s urban system. Most of other research
results are researches on urban planning from the perspectives of urban buildings, urban planning, and
historical geography thereof, e.g., “An Initial Discussion on the Theoretic System Framework for City Planning
in China” by He (1994), “Literature Review of Urban Planning Theory Typology” by Shi, Wu, Zhi, and Sun
(2009). They analyzed this problem from different disciplinary perspectives, with great enlightening
significance.
Seen from the existing results, the researches on “Communist Party of China and Changes of Urban
Society” have the following characteristics:
First, most researches are focused on sorting out policies and interpreting institutions after the Communist
Party of China entered cities in the initial post-liberation period. Most are simple sorting and listing of takeover
policies, industry, and commerce policies, as well as policies and regulations of resuming production and
stabilizing social order of cities in the initial post-liberation period, without any extension from the research
perspective. In the research process of this period of history, they only give description, summarization, and
analysis from the perspective of the ruling party. The research of historical science includes not only the simple
research of “revolutionary history”, but also the past social events and feelings. In this way, we may have an
insight into the multiple dimensions of a history to obtain a more intuitive and perceptual understanding.
Moreover, such a research is beneficial to amend the historical research paradigm of “Revolution-Centered
Theory” in historical science.
Second, the research on the social governance system of cities is slightly insufficient in terms of the
systematicness and comprehensiveness of contents, with only analyses on one city or one aspect. A city is a
complicated organism, and its governance system also includes dominant (e.g., administrative setup) and
recessive levels (e.g., psychological identity of a regime). The research on a certain level is insufficient to have
an all-around understanding of the problem. It lacks refined and empirical sorting of the social governance
366 “COMMUNIST PARTY OF CHINA AND CHANGES OF URBAN SOCIETY”

structure and changes of cities, fails to summarize the basic paradigm of social governance since the
Communist Party of China entered urban society, and lacks further comprehensive description and theoretical
analysis of the urban governance mechanism. The research specific to the governance system means having a
full grasp of the change process of this field, carrying out an in-depth research to reveal the rules, and fully
grasping the changing process of the urban governance system to deepen the research on this subject.
Third, the rise of the research on China’s modern urban history and the remarkable progress achieved are
breakthroughs to the theoretical discussion on urban history research, preliminarily forming the theoretical
framework and research method of China’s modern urban history with Chinese characteristics. As increased
importance is attached to the research on China’s modern urban history and the research field is continuously
expanded, lots of academic monographs and papers have been published. There are few works concerning the
research of urban society with the new perspective of urban social research—“Communist Party of China and
Changes of Urban Society” as the point of penetration. A number of problems and shortcomings still exist in
the aspects of theoretical system, research methods, research fields, etc., and need to be solved. So far, some
scholars have proposed revealing the relationship between the changes of urban society and the political
force—the Communist Party of China in the aspects of politics, economy, culture, society, etc. from multiple
dimensions. The research in this regard is also faced with the problem of how to increase and comprehensively
and fully reflect the advantages and characteristics of “overall and comprehensive researches” on the basis of
researches on single cities so as to prevent the research results of regional urban history from appearing in the
form of a simple combination of research results of single cities.
Seen from the current research conditions, the research on the problem is still in the preliminary stage.
While making gratifying achievements, it also has weak links. On the existing basis, the subsequent researches
shall strive to be comprehensive, multi-angle, and multi-dimension, and try to restore historical appearance. In
addition, there are a lot of one-sided researches on this problem, but only a few overall researches. The research
on a certain aspect of the problem is beneficial to have a full recognition of the problem on the basis of detailed
investigation and to form a real and all-around understanding. In fact, the overall research can help us to grasp
the characteristics of this historical process so as to grasp the role and significance of the Communist Party of
China in urban society on the whole. The subject research can avoid the void and overbroad tendency of the
overall research on the basis of one-sided research and detailed investigation, and take a typical city as an
individual case to deepen the research on the problem.
Fund Program: Research Program of Political Education in Colleges and Universities of Shandong Social
Scientific Planning—“Research on the Practical Teaching Mode of Integrating Entrepreneurial Talent
Cultivation into Ideological and Political Courses in Colleges and Universities” (Program No. 15CSZJ38)
Phased Research Results.
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China-USA Business Review, Aug. 2017, Vol. 16, No. 8, 369-378
doi: 10.17265/1537-1514/2017.08.003
D DAVID PUBLISHING

The Impact of Financial Reward on Job Satisfaction and

Performance: Implications for Blue Collar Employees

Wael S. Zaraket, Farouk Saber

American University of Science and Technology, Beirut, Lebanon

Job satisfaction has been tested and proven as one of the factors that connect employees to their organization.
Additionally, job satisfaction leads to better employee performance. Hence, the main purpose of this study is to
investigate the impact of financial rewards on job satisfaction and employee performance of the Blue Collar
employees in the construction, contracting and printing industries in Lebanon. The data for this study were
collected using self-administered questionnaires from 250 employees working in the construction contracting and
printing sectors in Lebanon. The response rate was 52 percent (129 employees) after data screening; the data were
analyzed using SPSS to describe the demographic profile of respondents and multiple linear regression analysis to
test the relationship between variables. The hypotheses proposed to be tested through the research were verified. As
expected, the results show a significant relationship between financial rewards and job satisfaction. Furthermore,
job satisfaction bears positive relationship on employee performance. The organization should consider financial
rewards as one of the factors in promoting job satisfaction that leads to employee performance among employees in
the construction contracting and printing sectors.

Keywords: Lebanon, financial reward, job satisfaction, employee performance

Introduction
This study shows the impact of financial rewards on job satisfaction and performance of first level
employees in the construction contracting and printing sector in Lebanon. Job satisfaction is an important factor
which influences employee’s performance and the predictors of work behavior. The benefits of job satisfaction
for an organization are to reduce complaints and grievance regarding workers, better turnover and lower
absenteeism, reducing cost of training as termination of employees, and improving the punctuality and work
morale of the workers.
In view of a study of 200,000 workers, Gostick and Elton (2007) infer that if employee acknowledgment is
directed appropriately, it can build productivity and client benefit levels. In addition, it can improve the
engagement and the work satisfaction level of employee.
Gerald and Dorothee (2004) and Clifford (1985) found that rewards are altogether identified with

Wael S. Zaraket, assistant professor, DBA, Faculty of Business & Economics, American University of Science and Technology,
Beirut, Lebanon.
Farouk Saber, MBA student, Faculty of Business & Economics, American University of Science and Technology, Beirut,
Lebanon.
Correspondence concerning this article should be addressed to Wael S. Zaraket, Alfred Naccache Ave. Ashrafieh, Beirut
16-6452, Lebanon.
370 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE

professionalism and job satisfaction. Job satisfaction is affected by employment rewards (Clifford, 1985). Prior
research work shows that the employment rewards incorporates the whole work benefits. Subsequently, the
work of Kalleberg (1977) had brought up issues about the way work values influence job satisfaction. Also,
Kalleberg recognizes work values and occupation rewards.
This research will be helpful to the C-suit management level and the head of human resource department
in analyzing the effect of financial rewards on job satisfaction and job performance on employees in their
organizations. This study will be useful in providing the company with an innovating solution for their recent
situation. The focal concern for the researcher is to investigate thoroughly this triangular relationship between
financial reward, job satisfaction, and job performance. This is due to the need of acquiring new information
and results that can expedite his management style to empower, motivate, and increase employee effectiveness.
Actually, this rapport between financial rewards and job satisfaction and their effect on the job performance is a
newly covered subject in the Lebanese business research environment. Therefore, to ensure that there is a
relationship between the variables, the researcher submits this study as a vanguard study for the construction
contracting and printing sector and other industries in Lebanon. This is for the sake of understanding the
idiosyncrasies of each business sector and the employees that were hired.
The business practitioners on a continuous basis seek consultation and recommendation on how to develop
their human capital. Thus, they are motivated and are willing to make changes within the organization.
Consequently, the organizations are confronting the efficiency challenge of becoming highly effective at low
costs. This was without increasing expenses. That is why this study is covering the divergence or, on the other
hand, the rapport between job satisfaction and rewards. If there is a positive relationship between these two
variables, does this relation affect the job performance?

Literature Review
Financial Rewards
Financial rewards include pay, bonuses, transportation facility, health insurance, and pensions. Therefore,
employees receive financial payments from their employers in the form of salary or commissions. Basically,
there are different types of financial rewards. A bonus can be defined as an additional compensation given to an
employee as a motivator or a reward for his/her hard work. It is given to workers majorly due to their
performance. These performances might include: creating more deals, increasing sales, or inspiring new
production line. Therefore, managers use bonuses to motivate their subordinates toward specific goals. Then
there is the pay: It is a compensation program in which a portion of a person’s pay is considered to be at risk. It
can take the form of bonus or stock options. Good incentive pay packages provide an optimal challenge. Also,
employees are offered a financial reward for their services called pay. Pay must be closely linked to the
performance. Employees who do their best want reasonable pay that satisfies their needs. Money is major
means for creating motivation because they need money to satisfy their basic needs of life. Third is the fringe
benefits classified as a benefit that employee is given in addition to pay. Fringe benefits create an optimistic
and motivating work environment and increase output and sales. It plays a significant role in motivating
employees as it compels employees to put extra efforts. The management should focus on creating an effective
benefit program for the employees to give them the opportunity to improve their performance. Pension, is a
deferred income that employees gather during their working lives and that belong to them after retirement.
After workers complete one year, they enter into the pension plan. After a certain period of time decided upon
 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE 371

by the company and after retirement, then workers can earn this amount of money. The objective of this plan is
to make employees have the sense that they belong to the organization. Also, it serves as a motivating factor to
workers for staying with the company until retirement. In addition, employees who were fired or resigned from
the company cannot be granted pension. Commissions are form of reward usually given to sales staff. The staff
may get a low pay, but will later be given commissions. The upside of commissions is that they ought to
persuade deals staff to accomplish higher deals. This is because their rewards rely upon it, and they imply that
the extensive part of sales gets to be a distinct factor. Last the health insurance is offered when medical and
insurer pays surgical expenses of the employee, it is referred to as health insurance. It serves as a source of job
satisfaction and motivation and also attracts the competent employees because health cost has increased
nowadays.
Job Satisfaction
Hoppock (1935) defined job satisfaction as any combination of psychological, physiological, and
environmental circumstances that causes a person to truthfully say: I’m satisfied with my job. Locke (1976)
stated that “Job satisfaction is actually an enjoyable and exciting emotional condition which someone derives
from his/her work. Job satisfaction is important for reducing turnover rate and increasing motivation.”
Consequently, job satisfaction is considered to be the most important element in the organization. In order to
succeed, organization must keep their employees satisfied (Wubuli, 2009). According to the study of Heathfield
(2012), pay is a settled measure of cash or compensation paid to employees by a business in return for a
beneficial work performed. Compensation framework assumes a vital part in deciding employee’s level of
employment satisfaction. Furthermore, the developing needs of families with higher standard of living have
driven workers into looking for higher pay that can ensure their future and life satisfaction. A condition of
passionate disappointment occurs when employees observe that they are not repaid well. Thus, this passionate
error will develop and aggregate over circumstances along these lines which make employees become
unsatisfied working for the association. Pouliakas (2010) found that there is a huge negative relationship
between bonus payments and the satisfaction of workers with the actual job itself. Financial motivators
positively affect worker’s utility and performance. Millán, Hessels, Thurik, and Aguado (2011) in their study
reported that for both workers and the self-employed, having higher work wages helps to improve the
probability of being happy with the sort of work. As indicated by Bozeman and Gaughan (2011), the view of
being paid what one is worth predicts work satisfaction. Individuals who agree that they are paid “what they are
worth” in the market have a tendency to have more elevated amounts of job satisfaction than the individuals
who do not agree. Noordin and Jusoff (2009), concentrated on the levels of job satisfaction among Malaysian
scholarly staff, argue that the pay seems to speak to one of the precursor states based on general satisfaction.
Moreover, in Lebanon the work of Zaraket and Halawi (2017) covered the effect of Human resource practices
on employee performance in the Lebanese banking sector, where within the practices is compensation and
benefits that reflect high significant impact on the employees’ performance.
Fredrick Herzrberg specified that workers would not be satisfied just by meeting their lower-level needs.
Without any doubt, increasing fundamental advantages and pay rates, and having a fitting workplace, would not
basically make the staffs become pleased or contented with their employments. Along these lines, by
concentrating on his hypothesis, employees attempt to discover higher needs and various level of satisfaction
alluding to their mental personalities like gratefulness, change, and greater responsibility. This additionally
372 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE

suggests to occupational change and makes an attempt to arrange the assignments to create open doors for
individual achievement, singular development, and acknowledgment (Herzberg, 1966). Subsequently,
Herzberg’s dual factor hypothesis incorporates cleanliness and inspiration elements which have appeared to be
successful as a result of the change of employee’s performance. As indicated by the scholar, inspiration
elements are required to propel the specialists to carry out their employments and conceivable with their most
astounding capacity levels. On the opposite side, cleanliness elements are important to guarantee that the staff
is not miserable and disappointed. As such, the creator examined that the elements prompting occupation
satisfaction (and inspiration) were not at all like those prompting employment disappointment. Through this
way, he upgraded the inspiration cleanliness hypothesis to elucidate these outcomes. In addition, he regarded
the satisfier as a motivator, and called the dissatisfier the hygiene ones. The reason behind the application of the
“hygiene” name is that these components are upkeep ones which are important to be separated from
disappointment. Also, they don’t give satisfaction themselves.
The explanation behind isolating hygiene and motivation components is that Herzberg, Mausner, and
Snyderman (1959) found that the elements prompting satisfaction are not the same as those which cause
disappointment. However, these two sentiments cannot just be examined as contrary energies of the other.
Besides, Herzberg said that two alternate points of view of human needs are accessible.
It is basic to concentrate on the idea of job satisfaction and to demonstrate the degree to which it is
influenced by money related and non-monetary rewards. The expression “job satisfaction” is likewise an
extremely critical one, which is broadly utilized inside the writing of human asset administration. Job
satisfaction is a hypothetical development firmly identified with inspiration speculations and it is pertinent to
drive hypotheses of employment conduct (Smith, Kendall, & Hulin, 1969). Throughout the years, a developing
number of behavioral researchers have created a gathered learning with their examination on the critical issue
of job satisfaction and motivation. The most illustrative hypotheses are those of Maslow (1954), Herzberg
(1957), McGregor (1960), and the Hawthorne Experiments (Cameron, 1973). The study of Maslow (1954) is
focused on a cycle of the chain of importance of the individual’s needs, which works on a climbing scale. As
one gets to be distinctly satisfied, the following ascendant need is revealed. Besides, the individual can “return”
to the past stage if sentiment instability assumes control. When this need is met, the individual will come back
to his previous range of needs (Simpson, 1983). In a hierarchical setting, when necessities are not being met
and are exhibited in conduct, administrators must make a domain in which motivation can occur. At the end of
the day, in order to stay away from the outcomes when the requirements are dissatisfied, directors ought to have
the capacity to execute the correct activity at the perfect time (Simpson, 1983).
Rewards assume a fundamental part in deciding the critical performance in employment. Also, it is
emphatically connected with the procedure of motivation. Lawler (2003) contended that there are two elements
which decide on how much a reward is alluring. The first is the measure of reward which is given, while the
second is the weightage an individual provides for a specific reward. Deeprose (1994) is of the view that “Good
managers recognize people by doing things that acknowledge their accomplishments and they reward people by
giving them something tangible.” Fair chances of advancement, as indicated by employee’s capacity and
aptitudes, make worker become more faithful to their work and it turns them into a wellspring of applicable
workability for the employee. Bull (2005) places a view that when employees encounter achievement in
rationally difficult occupations which permits them to practice their aptitudes and capacities, they encounter
more prominent levels of job satisfaction. Incentives rewards and acknowledgment are the key parameters of
 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE 373

today’s motivation programs as per the majority of the associations. This, however, results in a quandary of the
achievement which is considered with the employee’s performance. Zaraket and Halawi (2016) affirm that
advancements make the open door for self-awareness, expanded levels of duty, and an expansion on social
standing. So also, the acknowledgment which is a main issue towards employee motivation worships a worker
through gratefulness. Also, it allots a status at the individual level notwithstanding being a worker of the
association. Consequently, employees are nearer to their association as their job can turn into the significant
satisfaction in their life in the wake of having an appropriate rewards and acknowledgment at their occupation
(Zaraket & Halawi, 2015). Rewards improve the level of profitability and performance at employment whether
it is a first time performance or a rehashed movement at the occupation logically.
Therefore, based on the aforementioned literature review in the majority of related studies, this
research hypothesizes:
y H1 : Financial reward will have a positive relation with job satisfaction,
y H2 : Job satisfaction will have a positive relation with job performance,
y H3 : Financial reward will have a positive relation with job performance.

Research Model and Hypothesis

The aim of this study is to determine the relationship between financial rewards, job satisfaction, and
employee performance amongst Blue Collar employees in the construction, contracting and printing industries
in Lebanon. Figure 1 depicts the conceptual model of the variables where a survey was adopted focused on
field workers so that the researcher can get information from respondents that are practically identical to each
other with a specific end goal to dissect their insight. A probability sampling method where the sample is
chosen in a way that each member in the population has a known chance of being selected (Saunders, Lewis, &
Thornhill, 2009). Therefore, it is possible to generalize the results derived from probability sampling methods
since findings from sample can statistically be projected for the whole population.

Figure 1. The conceptual model.

374 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE

The questionnaires were distributed on respondents from different ages, educational levels, and
backgrounds by taking into consideration the research ethics and confidentiality. After meeting with the HR
departments and getting the permission to distribute the survey, 250 surveys were distributed and recollected
from three facilities within two months. Out of the 250 questionnaires that were distributed, 129 (52 percent)
were completed and returned, 31 errors, and 90 no response.
The instrument for primary data collection was a structured questionnaire survey to collect the primary
data in this study. The questionnaire was in three pages. It was designed by the researchers and it consists of
four sections.
Section A: required the respondents to provide personal information such as gender, age, level of
education, type of contract (fixed or contractual), level of employment (fourth of third level), and income level.
Section B: financial rewards questions.
Section C: designed to test the employees level of employees’ job satisfaction in their workplace.
Section D: designed to test the employees job performance.
The questions were designed to facilitate the respondents to identify the various variables which are
contributing towards job satisfaction and employees’ performance. The respondents were requested specifically
to ignore their personal biases and use their best decision on a five-point Likert scale. The purpose of this
exercise was to make the response a true reflection of organization reality, rather than an individual opinion.
All items were measured using a five-point Likert-type scale (ranging from one strongly disagree to five
strongly agree).

Findings and Discussion

The reliability of the collected data was measured by using Cronbach’s alpha coefficient; the reliability
test was conducted to check for inter-item correlation of financial reward, job satisfaction, and employee
performance in the questionnaire. The test results for the three variables are 0.786, 0.790, and 0.855
perceptively which exceeded the acceptable limit (Zikmund, Babin, Carr, & Griffin, 2010). The values of
kurtosis and skewness for each variable are to check the normal distribution of each variable. The linear
regression for the tests was conducted using 129 cases. As a result, there is the need to check the normal values
to ensure that all variables have acceptable normal distribution and a linear relationship between the
independent and dependent variable(s). The skewness and kurtosis values are between -1 and +1, reflecting an
acceptable level.
A regression analysis was used to examine the impact of financial reward on job satisfaction and employee
performance. The result indicates there is significant relation of the financial reward on job satisfaction for the
Blue Collar employees (R2 = 0.253, p < 0.05). This suggests that the final model can explain 26% of variability.
Hence the hypothesis is supported.
As for the second hypothesis, the results indicate that there is a significant relation between job
satisfaction and job performance for Blue Collar employees (R2 = 0.558, p < 0.05). This suggests that the final
model can explain 56% of variability. Hence again the hypothesis is supported. Covering the third hypothesis:
for the relation between financial rewards and job performance. The relation is significant between financial
reward and job performance (R2 = 0.355, p < 0.05). This suggests that the final model can explain 36% of
variability. Hence the hypothesis is supported. In a nutshell, the results show a significant relation between all
three variables and all three hypotheses are supported.
 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE 375

Discussion of Findings
The aim of this research is to test whether there is positive relationship between financial reward on job
satisfaction and job performance among the employees in the construction contracting and printing sector in
Lebanon. The results concur with the aforementioned information in the literature review that higher rewards
for employees at work play an important role both in the advancement of employee job satisfaction and higher
profitability in associations. From the outcomes, most of respondents stated that job satisfaction would enhance
their job performance which would expect increment associations’ benefits edge. Also, some of respondents
expressed that job satisfaction will encourage workers’ enthusiasm to work even at odd circumstances.
In the current focused business condition, the associations are confronting a considerable measure of
difficulties. Among these issues, getting the correct workers and holding them are a standout amongst the most
vital ones. Today, what is more is the advantage of human asset measured to be one of the most imperative
points of interest of any association. By keeping in mind the end goal to get the outcomes with the highest
efficiency and effectiveness from human asset, motivation and satisfaction of employee are exceptionally basic.
Indeed, employees will do their highest when they feel or expect that their hard work is to be compensated
by their managers. In such manner, many components are accessible to change employees’ performance, for
example, worker and manager relationship, working conditions, employer stability, chance of development, and
general compensating approaches of the organization. Likewise, among the components which affect
employees’ performance, motivation and satisfaction are the most critical perspective.
Motivation is characterized as the development of various procedures which express and control people
behavior to accomplish some particular objectives (Baron, Bryne, Nyler, & Branscombe, 2006). Subsequently,
understanding its significance is exceptionally fundamental for all associations’ supervisors. The greatest level
of laborers’ performance happens when they feel their attempt is remunerated and repaid totally. Some other
successful components on employees’ performance incorporate work conditions, the association amongst
worker and business, procedure of training, professional stability, and complete approaches of firm rewarding.
Also, motivation, as the consequence of satisfaction, influences the staffs’ behavior and their performance
specifically. Really, among every single compelling component on employees’ performance, motivation, and
satisfaction, which is the result of fulfilling, are the most critical and basic components. This idea comprises of
various procedures which influence employees’ behavior to accomplish some clear objectives (Baron et al.,
2006). Extant research emphasized relationships between job satisfaction with reward and employee
performance. As a result, this research highlights the mediating role of job satisfaction in the relationship
between reward and employee performance. Future study can be concentrated on testing the proposed
framework of this study in different scopes and industries.
Financial rewards have witnessed a great impact on job satisfaction. When high salaries or bonuses are
given to employees, it is clearly shown that most of them are well satisfied with their jobs which affect the job
performance directly. This satisfaction could be because of their needs or life difficulties which urge them to
perform well in return for the financial rewards which are offered to them (Edwards, Cable, Williamson,
Lambert, & Shipp, 2006).
The results indicate that there is a significant relationship between financial rewards as independent
variable with job satisfaction. Thus, this was mentioned in the literature review that the financial rewards have
an impact on job satisfaction, especially for Blue Collar employees.
376 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE

The results show that there is a positive correlation between financial rewards and job satisfaction. This
finding affirms the writing as it demonstrated that pay and advantages are keys for workers’ satisfaction.
Consequently, it bolstered the speculation that the specialist recommended for the relationship between both.
This outcome is likewise upheld by Mason (2001). Nevertheless, his review uncovers that compensation, for
example, pay and advantages are fundamentally identified with job satisfaction. Also, it is considered as basic
variables to job performance. Here comes the significance of financial rewards, whereby it is considered as the
principle factor that increases the level of performance.
Based on the Lebanese monetary circumstances, and the cost of living in Lebanon, monetary related
elements have turned out to be vital in the Lebanese citizen everyday life. In addition, they swung to be the
fundamental objective to be accomplished by every Lebanese. Through this way, the satisfaction of each
worker has turned out to be identified with the monetary related satisfaction, and what is superior to the
budgetary rewards in the occupation for the satisfaction of worker’s needs.
As examined in the writing in Maslow’s (1943), the hypothesis states the need of individuals begins from
fundamental need to high level. Thus, these requirements are made available to each person. Consequently, if
there is inability to fulfill essential need, then the next need in pecking order cannot be accomplished. As
indicated by the aftereffects of the review, the workers are happy with the advantages gotten from their work.
However, the consequence of the review demonstrates a positive relationship with job performance.
An employee that feels involved and happy about his job is willing to work extra hours to get the job done.
In addition, job satisfaction is a great stimulator for good performance. When employees are satisfied with their
jobs financially and psychologically, they are more able to perform their work successfully. Companies with
committed employees can expect increase in productivity, profit, safety, and high retention among employees.
Therefore, the higher the satisfaction, the higher the performance is.
In this study, financial rewards showed a significant positive relation to job performance as a straight
relation and without excluding job satisfaction as a mediator. Hence, managers in the research topic sector can
work on increasing employees’ performance just by focusing on increasing the financial rewards for their
employees. Here, Lebanon from the work of Halawi and Zaraket (2017) disseminated the level of high work
contentment Lebanese workers in the service sector compared to US workers. Such findings can be found also in
the construction and printing sector in Lebanon. Hence, a comprehensive human resource strategy is needed to
have a direct boost towards job performance. This result is a new result where by regular research trend, it
shows always that financial reward will lead to job satisfaction and in return to higher employee performance.
In Lebanon, in the construction contracting and printing sector, a new result was tested where financial reward
carries a direct positive relation on employee performance excluding job satisfaction as a mediator.

Conclusion and Implications

This study has added to human resource administration new information and practices. The examination
adds to the business learning by affirming the relevance of the idea of financial reward relatedness to employee
job satisfaction and job performance. It was found that job satisfaction can or cannot be a mediator between the
financial rewards and the job performance. However, the study can increase the human resource knowledge
such that the development of plans to motivate the workers can be a decisive factor in matching the short-term
view of employees and the long-term objectives of the company.
 THE IMPACT OF FINANCIAL REWARD ON JOB SATISFACTION AND PERFORMANCE 377

This study also infers that a decent reward framework ought to incorporate both financial and
non-financial rewards that are focused in view of the predominant market rates. Thus, such a reward gives a
feeling of representative inspiration henceforth boosting their level of execution/efficiency and duty to their
work. This, however, is the basic for the association to experience development and pick up an aggressive edge
against its competitors
In view of the findings, the recommendations were made based on the Lebanese idiosyncrasies as there
should be a requirement for the association to build their monetary incentives to all staff and to have a higher
increment on efficiency and productivity. In addition, serious thought ought to be given to a slight increment in
payment and other remuneration related incentives to allow the workers to perform jobs at the highest amount.

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doi: 10.17265/1537-1514/2017.08.004
D DAVID PUBLISHING

The Predominant Role of IT as a Competitive Global SCM

Strategy: The Case of Roland DG Japan,
a Manufacturing Company

Jorge Calvo
GLOBIS University Graduate School of Management, Tokyo, Japan

This paper, written in a business case format, introduces Roland DG as an example of how a Japanese company
approaches the paradigm shift of Industry 4.0. The aim is to propose a conceptual model: The SCM 4.0, under the
general assumption that global high performers must build efficient and agile value networks by taking advantage
of emerging technologies such as IoT, AI, and big data. Roland DG owns a digital production cell system and is
making strategic investments to build IT infrastructure to manage in real time all global SCM end-to-end flows.
The first step has been the implementation of advanced global SI&OP and control tower systems, delivering quick
results. In this early stage of Industry 4.0, it is necessary to make the differentiation of SCM 4.0 as a derivate of
growth implicit to Industry 4.0 as the main assumption. Global companies that want to maintain their high
performance and competitiveness in the future need to build efficient and agile business networks with real-time
digital information flows to take maximum advantage of emerging technologies such as IoT and AI. Authors
conclude that there is a set of six key success factors that are a sine qua noncondition, necessary but not sufficient.

Keywords: Industry 4.0, supply chain management, Internet of Things, Artificial Intelligence, IT, business
digitalization

Introduction
Global markets are not exclusively available to large corporations. Small companies can succeed in
challenging industries and remain competitive, profitable, and sustainable despite frequent disruptions. Roland
DG is a worldwide leader in large format ink-jet printers for B2B. In 1981, the firm pioneered new
manufacturing processes based on unique digital technologies that control the XYZ axes, or lateral, longitudinal,
and vertical movement. The current line-up of products consists of wide-format inkjet printers targeting a
variety of markets, including the sign, industrial, and textile digital printing industries. Recently, the product
portfolio has been expanded to include the health care industry, developing and manufacturing CAD/CAM
devices for dental implant solutions and innovative computer peripherals such as the 3D-Printer.
Roland DG achieves a global impact with a relatively small size by entering into disruptive digital markets.
It operates and succeeds in the global printing industry against giant corporations, yet it does so with fewer
employees. That provided the flexibility to make impactful decisions much more quickly.

Jorge Calvo, Ph.D., deputy dean, professor, GLOBIS University Graduate School of Management, Tokyo, Japan.
Correspondence concerning this article should be addressed to Jorge Calvo, GLOBIS University Graduate School of
Management, Tokyo 102-0084, Japan.
380 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY

In 2013, Roland DG created the Global Supply Chain Management Division to support its expansion and
organic growth by leading the global integration of logistics operations, inventory management, and demand
planning. Roland DG shares the idea that supply chains compete, not companies, and that sustainable growth is
determined ultimately by customer satisfaction (Christopher, 2011). The new division was strategically
designed under the definition of1 SCM given by Ellram and Cooper (1990): “an integrating philosophy to
manage the total flow of a distribution channel from supplier to ultimate customer”.
This paper describes how Roland DG is building and designing an IT-supported lean and incrementally
agile globally integrated SCM approach based on the technological know-how acquired during 30 years
developing digital solutions for B2B markets. The ultimate objective is to achieve the highest competitiveness,
responding to global changes and emerging technologies such as the Internet of Things (IoT) and Artificial
Intelligence (AI).
This paper proposes a conceptual framework, termed SCM 4.0, for the approaching paradigm shift of the
Fourth Industrial Revolution (Schwab, 2016), a tentative road map that starts with the implementation of an
integrated sales inventory and operations planning system (SI&OP) and concludes with expected key success
factors. With the conclusion that in a cross-cutting approach, visionary strategic planning is supported by a
cross-functional culture (Morita, Flynn, & Ochiai, 2011), a collaborative management system and an
incremental learning-by-doing execution provide quick gains and secure the long-term competitiveness of the
company.

Literature Review
The academic study of logistics began in the early twentieth century (Kent & Flint, 1997). Indeed, both
industrial engineering and operations research have their origins in logistics. Fredrick Taylor, author of The
Principles of Scientific Management in 1911 and considered the founder of industrial engineering, focused his
initial research on improving loading processes. Research operations began when scientists demonstrated the
value of analytics in the study of military processes in the 1940s. While industrial engineering and operations
research have tended to maintain different identities, most of their successes were achieved when they applied
an integrated framework to the analysis of the problems of supply chains and logistics (Georgia Tech Supply
Chain & Logistics Institute). According to Kent and Flint (1997), logistics has evolved since then as a concept
that is expanding in scope, from “the perspective of the physical distribution with the differentiation of
operations and marketing (1927)” to “the efficient down-stream movement of products” and “the end-to-end
integration of supply chain functions and planning (1976)”, through to “the management of the information
flows (1985)” and “the concepts of services and customer satisfaction (1992)”. The advent of computers and
the internationalization of trade have changed the traditional paradigm for an innovative tendency towards
digitalization of planning and logistics management. Prior to that, transactions and records were done manually,
and communications were slow and not very technologically advanced. Computerization has allowed greater
analytical capacity and more efficient inventory management and planning of lorry transport routes (Georgia
Tech Supply Chain & Logistics Institute). LaLonde (1983) introduced the concept of a segmented supply chain
consisting of three disciplines, with an approach that was probably the first step towards the notion of supply
chain management.
1
. The views expressed in this paper belong exclusively to the author and do not necessarily reflect the views or opinions of the
companies and institutions mentioned in any form.
 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY 381

There is no single academic definition of supply chain management. Stock and Boyer (2009) gathered and
reviewed 173 definitions drawn from a total of 2,892 articles published between 1994 and 2008. The various
concepts of how supply chain management should be defined mean there is a lack of understanding of what
supply chain management is, a conflict that negatively impacts on both researchers and practitioners.
The public recognition of the term supply chain management began with the globalization of production in
the 1990s with the entry of China into the world economy. Annual US imports of products manufactured in
China grew from US$ 45 billion in 1995 to more than US$ 280 billion. A greater focus on developing logistics
strategies to manage the increasing complexity of international supply networks then began to appear (Georgia
Tech Supply Chain & Logistics Institute).
One of the first strategic approaches to supply chain management and its benefits for companies was
provided by Stevens (1990): “Companies that consider supply chain in their strategic debates, managing it as an
only entity and ensuring appropriate utilization tools and techniques to meet market needs, get real beneficial
impact increasing its market share with lower asset utilization”. Christopher (1998), in a customer-oriented
perspective, defined the end-to-end supply chain as “the network of organizations involved, through unions
up-stream and down-stream, in the different processes and activities that produce value in the formation of
products and services to reach the end-consumers”. Ellram and Cooper (1990) offered a philosophical
perspective of SCM as “an integrating philosophy to manage the total flow of a distribution channel from
supplier to ultimate customer”.
As a result of economic globalization and its set of transformations that are driving the world markets, in
the last decade a wide variety of industries have opted to develop strategic plans for geographic expansion and
business process outsourcing, setting up their own business ecosystems and giving the area of supply chain
management and its executives a key role in the growth and sustainability of companies in order to manage the
increasing complexity of the contexts in which they operate at a competitive advantage (Lai, Ngai, & Cheng,
2002). According to Christopher (2011), supply chain management contributes two fundamental competitive
advantages: cost and value.
Companies started to implement supply chain management in order to increase the effectiveness of their
organizations, achieve their goals, use resources better, and increase profits (Lee, 2000). Porter (1985)
identified customer value and customer cost as critical to gaining a competitive advantage. The management of
these strategic elements is a key component in supply chain management, emphasizing the importance of
delivering products and services to customers according to the promise of sale, at the right time, with the right
conditions, in the right amounts, and at the lowest possible cost (Lai et al., 2002). In organizations where
supply chain management is part of the overall business strategy, and is therefore represented at board level,
economies in terms of overall costs related to customers were almost double (8.0% versus 4.4%) that of
companies with a purely operational vision in which responsibility for supply chain management resided in
lower levels of the organization (Heckmann, Shorten, & Engel, 2003). Supply chain management strategies are
pivotal to success in most contemporary companies, including those that do not make any profit (Hines, 2013).
A new supply chain management scope emerged with the incremental globalization of markets with highly
demanding customers, aggressive competitors, and the uncertainty reigning in many territories, being top of the
class in product characteristics or cost-driven, as order-winning criteria are not enough (Hill, 1993). Lambert
(2008) linked supply chain management to value generation: “(SCM is) the integration of key business
processes across the supply chain in order to create value for customers and stakeholders.”
382 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY

Numerous authors link the strategic management of SCM directly to business strategy (Cavinato, 1992;
Cooper, Lambert, & Pagh, 1997; Cooper & Ellram, 1993; Ellram & Cooper, 1990; Lee & Billington, 1992;
Novack, Langley, & Rinehart, 1995; Tyndall, Gopal, Partsch, & Kamauff, 1998) as a competitive advantage in
both cost leadership and differentiation (Porter, 1985).
The main motivation for implementing supply chain management in a company is to increase
competitiveness (Global Logistics Research Team, Michigan University, 1995; Monczka, Handfield, Giunipero,
& Patterson, 2009). For LaLonde and Bernard (1997), it improves customer satisfaction and the economies of
the company, while adding value through the supply chain. According to Giunipero and Brand (1996), it
improves profit and competitiveness of the company and earns customer satisfaction. More specific benefits
include achieving customer satisfaction by providing the necessary inventory to meet demand (Cooper &
Ellram, 1993). Several authors relate customer satisfaction with improved services (Mentzer, DeWitt, Keebler,
Min, Nix, Smith, & Zacharia, 2001). Excellent management of a supply chain can increase market share,
reduce costs, improve customer services, and increase market value through a return on assets (Raz, 2008).
For many global companies only 20% of the net output ratio (Batra, 2012), or 20% of what the customer is
willing to pay, is produced intra-firm. Can we say that companies compete with the products they produce? As
such, no; 80% of the value corresponds to their external supply networks and how these are managed:
“Companies do not compete individually, their supply chains compete” (Christopher, 1992). V. K. Fung, W. K.
Fung, and Wind (2008) conclude:
Companies used to see the company-against-company competition. But the networked world is like a team sport—the
final result depends not only on a player, but the strength of the entire team. The best network wins. The competition is no
longer between companies; instead, it is supply chain against supply chain.

Currently, there are numerous examples of leading global companies that strategically manage their
well-orchestrated supply chain as a key factor of competitiveness. Procter & Gamble, Seven-Eleven Japan, Dell
Computers, Zara, and Walmart are evidence of this (Raz, 2008) and have been extensively studied
academically.
However, the most efficient supply chains focus on mass production, often becoming uncompetitive, as
they do not adapt to sudden structural changes in markets (Lee, 2004). Markets where the company operates
and the order-winner criteria are availability, a combination of lean and agile hybrid strategies is the supply
chain management model that best fits a company’s strategy (Christopher & Towill, 2001). While Lean and
Agile can be considered as different paradigms, by the contrast between the robust and agile concepts. The
agile model can be understood as an extension of the lean model to be applied in markets of great uncertainty in
predicting demand, where the opportunities of a high standardization of processes are limited. It aims to meet
efficiently and rapidly changing demand in terms of sudden changes in production volume, variety required in
the product portfolio and variability in demand for these products. As such, it is a model that seeks to provide
quick responses to unpredictable market changes (Christopher, 2011).
Mentzer et al. (2001) framed the challenges of globalization as the global orientation and increased
performance base of competitors, together with the rapidly changing technological and economic conditions
that contribute to market place uncertainty, demanding more flexibly in supply chain relationships. The concept
of agility as a business strategy was introduced by Dove in 1996 as the ability of an organization to manage the
continuous changes in unpredictable business environments. Christopher and Towill state (2001):
 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY 383

Creating an agile supply clearly requires a number of significant changes to the status quo. Supply chain managers
today need also to be change managers—not just managing change within the organization, but managing change in the way
that relationships between organizations are structured. Companies used to see the company-against-company competition.
But the networked world is like a team sport—the final result depends not only on a player, but the strength of the entire team.
The best network wins. The competition is no longer between companies; instead, it is supply chain against supply chain.

The strategic importance of supply chain management is growing due to the increased cost and complexity
of each company’s global operations. In 2003, companies invested annually more than US$ 19 trillion in
information technology related to supply chain management, according to a study by Data Corporation.
Investments have since maintained sustained growth, with a 2014 growth forecast of 10.6% according to
Richard Gordon, managing vice president of the world’s leading IT consultancy, Gartner Inc. (Gartner Inc.,
2014).
With regard to the various SCM frameworks, it has been reviewed the link between practitioners and
academia through eight key components (Cooper et al., 1997): business processes and functions (Lambert,
2008); three dimensional networks (Lambert, Cooper, & Pagh, 1998); supply chain operations reference
(SCOR) (APICS, 2016; Naslund & Williamson, 2010); four key critical components of customer
value—quality, service, cost, and time (QSCT) (Johansson, McHugh, Pendlebury, & Wheeler, 1993);
integrated chain management (ICM) (Cooper et al., 1997; Lambert et al., 1998; Kane, 2008; Lambert, 2008);
collaborative planning, forecasting and replenishment (CPFR) (VICS, 2010; Toiviainen & Hansen, 2011); the
Mentzer supply chain reference model (Mentzer et al., 2001; Naslund & Williamson, 2010); demand-driven
value networks (DDVN) (Davis, Aronow, Barrett, Jacobson, & Sterneckert, 2011); and the absolute supply
chain orientation strategy (ASCOS) (Morita, Machuca, Flynn, & Pérez de los Ríos, 2015).
According to Naslund and Williamson (2010), the most common supply chain management models are
SCOR, QSCF, and CPFR. Many case studies show that CPFR model achieves inventory reductions of 10-40%
across the supply chain and product enhancements in stock of 2-8% (Toiviainen & Hansen, 2011). The Net
Value model of Bovet and Martha (2000) has been also considered because it fits digital supply chain processes
and Internet business models.
The origins of the CPFR conceptual framework date back to 1995 with an initiative by Walmart, the
University of Cambridge and the developer of software for strategic management, Benchmarking Partners.
There are antecedents of the Net Value framework in the perspective of the “integrative approach of value
added” proposed by Giunipero and Brand (1996), and the Net Value model developed by Brandenburger and
Nalebuff (1996), identifying the key players in the ecosystem of a company’s business and therefore to be
considered in strategic decisions: customers, suppliers, and “complementors”.
Morita, Machuca, Flynn, and Pérez de los Ríos (2015) remarked that:
Technologically innovative developments tend to be more expensive in terms of cost and time. They demand a
well-focused and designed development strategy to satisfy the market’s cost-effectiveness criterion. In addition,
technological innovations must be aligned with competitive features and a fast ramp-up of technological processes.

Supply chain management’s continuous improvement “will allow a company’s competitiveness to be

sustainable, adapting its value creation capability to competitive and changing environments” (Machuca,
Morita, & Flynn, 2011).
Once the highest level of maturity in the implementation of supply chain management is attained,
information technology plays an important role in the orchestration of the supply chain as a single entity,
384 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY

managing information flows throughout the value network and making decisions agreed upon with the relevant
members at all times. “The incrementally complex and often virtual supply chains of global companies require
an understanding of all end-to-end processes and the involvement of IT executives to create a vision, execute,
delegate to the various teams and institutionalizing” (McNeill, 2014).
Iansiti and Lakhani (2014) remark on the importance of digital adaptation:
Adapting to ubiquitous digital connectivity is now essential to competitiveness in most sectors of our economy. The
paradigm is not displacement and replacement but connectivity and recombination. Transactions are being digitized,
data are being generated and analyzed in new ways, and previously discrete objects, people, and activities are being
connected. Incumbents can use their existing assets, dramatically increase their value, and defend against (or partner with)
entrants.

There are more evidence of the link between SCM and IT by Ellram and Cooper (1990), and Lee (2000):
“On the supply side, a key driver of SCM is the availability of cost-effective information IT technologies”. And
the positive impact on business generation of the link between SCM and Internet: “The impact of the Internet
on supply chain management has led to business opportunities far beyond supply chain integration. Supply
chain structural changes resulted in important new profit centers” (Lee, 2011).

Paradigm Shift of the Fourth Industrial Revolution

Industry 4.0 is not only related to manufacturing and SCM, it is an entire social-economic-technology shift.
The World Economic Forum at Davos assessed the importance of Industry 4.0 as “Mastering the Fourth
Industrial Revolution”, driven by emerging technologies such as big data, cloud computing, IoT, RFID,
3D-printing, robotics, mobility, global digital networks, artificial intelligence, etc.
Industry 4.0 is characterized by a range of new technologies that are fusing the physical, digital, and biological worlds,
impacting all disciplines, economies, and industries, and even challenging ideas about what it means to be human. The
resulting shifts and disruptions mean that we live in a time of great promise and great peril. The world has the potential to
connect billions more people to digital networks, dramatically improve the efficiency of organizations and even manage
assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial
revolutions (Schwab, 2016).

With the confluence of social and business trends of Industry 4.0 and emerging technologies, the value
chain will become fully digital and globally integrated, from suppliers, factories through to customers.
Digitalization has started through the integration of information flows and the incremental digitalization of
products and services supported by IoT. Next will be the implementation of intelligent processes, fostered by
AI. Global SCM will play a key role in the new paradigm, looking holistically beyond the existing silos and
functions. The decentralized and intelligent supply chain optimization will involve both hyper-communication
and big data to achieve the greatest agility.
Awareness of the pressure for digital supply chain transformation is high. However, results are lower than
expected. In research carried out by GT Nexus (2016), 75% of respondents said that digital transformation of
the supply chain is “important or very important”. However, 33% of respondents said they are “dissatisfied”
with progress so far and only 5% are “very satisfied”.
 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY 385

It is possible to argue that this gap between expectations is due to the fact that new management cultures
and systems have not yet been embedded: 48% of respondents admit that right now “traditional” methods such
as phone, fax, and email are still the predominant means of interacting with supply chain partners.

The IoT and the Supply Chain

The IoT will connect the physical and digital worlds allowing the bidirectional communication between
them (Lee, 2016). Day by day more physical objects are equipped with emerging technologies that enable them
to get, send, and receive information via fixed-wire or wireless communications connected to the Internet. The
McKinsey Global Institute defines IoT devices as “those can monitor their environment, report their status,
receive instructions, and even take action based on the information they receive” (McKinsey Global Institute,
2013).
From the SCM perspective and IoT, there is an example on the following description:
IoT refers to data communication among a large range of assess or devices—from your fridge to your oven or, more
pertinently, from your inventory to its container, from the container to the carrier, from the pallet to the warehouse. The more
your assets can “speak” to one another and share data, the more they can work together to help you improve tour processes
(One Network Enterprises, 2014).

Lee (2016) selects three basic components that make a device able to get information from its environment,
“think” and communicate: sensors, connectivity, and processors.
Lee (2016) also lists nine areas where IoT and SCM are currently coexisting successfully and provides
examples: 1) transparency and visibility of the supply chain; 2) proactive replenishment; 3) predictive
maintenance; 4) reduction in asset loss; 5) manufacturing flow management; 6) product development and
commercialization; 7) risk management; 8) operational efficiency; and 9) improved fleet management. Being
the top conclusion the improvement of transparency and visibility: “The transparency and end-to-end visibility
afforded by IoT creates new opportunities that supply chain professionals can leverage in order to optimize
supply chains and generate value” (Lee, 2016); “The internet of things leads to a high transparency regarding
the status of the supply chain and its nodes” (Akinlar, 2014).
Another perspective related with the supply chain “end-to-end” integration is the utilization of IoT for
designing new services. “The Internet of Thinks envisions a multitude of heterogeneous objects and
interactions with the physical environment.”…“The vision of IoT relies on the provisioning of real-world
services” (De, Barnaghi, Bauer, & Meissner, 2011). IoT supports the integration of several technologies by “the
result of synergic activities conducted different fields of knowledge, such as telecommunications, informatics,
electronics, and social science” (Atzori, Iera, & Morabito, 2010).

The Control Tower Approach: Supply Chain Visibility and Segmentation

The potential using SCM, IT, and emerging technologies is high, but improving transparency and visibility
is not enough (Akinlar, 2014), it is a prerequisite also to acquire supply chain agility and responsiveness, by the
supply chain segmentation. According to an Aberdeen Group research conducted by Heaney (2014) with Chief
Supply Chain Officers of 166 companies, the new logistics formats require a wider perspective, understanding
business models, as well the financial and cost-serve components with visibility processes. “Top performers use
a Control Tower approach to leverage their internal capabilities, but also leverage their supplier and
manufacturing partners and collaborative optimization technologies” (Heaney, 2014). It has been taken for this
386 THE PREDOMINANT ROLE OF IT AS A COMPETITIVE GLOBAL SCM STRATEGY

paper the definition of Control Tower approach as “a set of integrated processes and technologies that support a
seamless flow of product from source to end consumer, regardless of global complexity, or sales and logistics
channel preferences of customers” (Heaney, 2014). The Control Tower approach provides visibility end-to-end
and business intelligence on the analysis to managers and executives, with an interface they can understand,
operate, and interact rather that show just information. Having the right information at the right time, is crucial
for the supply chain orchestration.

Hypothesis
The main hypothesis is towards the paradigm shift. Global companies that want to maintain their high
performance and competitiveness in the future need to build efficient and agile business networks with digital
information flows to take maximum advantage of emerging technologies such as IoT and AI.
Secondary hypothesis is that new skills, competences, and SCM systems are needed, together with a
top-down leadership that promotes cross-functional innovation, thereby removing existing functional silos. The
Lehman crisis contributed to improving the strategic competences of supply chain managers and executives,
positioning them on the board of directors of global companies (Knowledge@Wharton, 2011). A top executive
holistic vision is needed for the changing future. The consequences of implementing digital innovation in
isolated vertical functions would result in quick gains in efficiency improvement but would have a long-term
negative impact on the reinforcement of silos, which could jeopardize the integration of the supply chain.
Sevket confirms the need of a change in the organization culture, and the lack of knowledge about that changes:
“For the management of supply chains the 4th industrial revolution raises new requirements regarding its
organization,”…“Today’s centralized structures have to be changed in order to be able to decide locally and
fast and flexible. All the organizational implications of industry 4.0 have currently not been analyzed
sufficiently” (Akinlar, 2014).
Under the paradigm shift of Industry 4.0, it is necessary to change the way a company plans, sources,
makes, and serves, placing the customer at the center of an incrementally digitalized and collaborative business
ecosystem. Because of the exponential speed of digital innovation and emerging technologies implementation,
the main assumption is that best way is to have an initial conceptual framework and a road map of
cross-functional projects and actions as an initial reference, evolving through a learning-by-doing approach and
acting quickly before our competitors.

Envisioning SCM 4.0

In this early stage of Industry 4.0, it is necessary to make the differentiation of SCM 4.0 as a derivate of
growth implicit to Industry 4.0 as the main assumption. Many academics and practitioners consider Industry
4.0 as innovation in manufacturing (Factory 4.0), which may be the case of the German and Japanese approach
(Ota, 2016). Others, especially in the USA, have a marketing perspective of Industry 4.0 as the digitalization of
logistics flows connected with the customer by IoT—Logistics 4.0. A new term is needed to emphasize the
superior and holistic vision of SCM, developing new efficiencies and business models in Industry 4.0.
The proposed SCM 4.0 model integrates IT and emerging technologies, supported by IoT, AI, and big data
in a holistic cross-functional approach, with the strategic leadership of the supply chain (Figure 1). The main
characteristics of the new supply chain are:
 T
THE PREDOM
MINANT ROL
LE OF IT AS A COMPETIITIVE GLOB
BAL SCM STR
RATEGY 387

1) Increementally diggitalized inform

mation flows;;
2) Shouuld pursue agiility;
3) Struuctured in a neet value approach;
4) Deciision-making should be datta driven;
5) Reall time track-annd-traceability
y;
6) A coontrol tower syystem should be implemennted;
7) Respponsive to thee changes in thhe environmennt;
8) It shhould be sensittive to deman
nd uncertainty and customerr behaviors;
9) It shhould be ready to implemeent future AI aand big data analytics
a deveelopments forr business proocesses
optimizationn and demandd prediction;
10) It should be soccial in order to connect noot only to customers but also a to their social
s networrks and
potential customers’ Interrnet communiities.
Considdering this inttegrative mod del requires a learning-by-ddoing approacch, because iff companies w wait to
see what othher companies are doing orr what academ mia says, theyy may risk lossing their susttainable comppetitive
advantage. Therefore,
T a nnew managem ment system is needed. As GT G Nexus (2016) concludedd that system should
be focused on o business vvalue, ready to
o fail fast to suucceed faster,, with an evollutionary goveernance modeel, with
talent managgement, develloping a partn nership ecosysstem and imprroved risk man nagement.

Figure 1. S
SCM 4.0 framew
work.

AT
Tentative Road
R Map foor Incremental Implem
mentation
Every company
c willl need to impllement a tailoored road mapp, depending ono an As Is annalysis and sttrategic
visions and goals. In this case, after prroceeding witth an As Is annalysis of Rolaand DG, the case
c shows thhat data
integration and transpareent informatio on, flowing accross the endd-to-end supplly chain, willl be a criticall factor
before dealiing with the ccomplexities presented
p by IoT and big data (Figure 2). Starting with
w SI&OP eenables
quick gains, while the syystems are im mplemented annd teams becoome familiar with the conccept of data ssharing
and collaborrative processses. New talennt needs to be incorporated at the same tiime.
388 T
THE PREDOM
MINANT ROL
LE OF IT AS A COMPETIITIVE GLOB
BAL SCM STR
RATEGY

Figure 2. Exam
mple of an increemental SCM 4..0 road map 2015-2020.

The seecond step is the control of data, the “real time” track-and-trac
t ce of all end-to-end flowss, both
upstream annd downstreamm. Roland DG G is now developing a global database platform
p that acts as an innterface
with the usser. Figure 3 shows screen n shots of thhe user interfa
face prototypee of the end--to-end produuct and
information flows and thee technologiess supporting thhe data gatherring at each node of the vallue network.
Globbal Control Tow
wer [Big Data Supplierss & Factory [RFID] Reg
gional Logistics Center [RFID]
Platform
m]

Reggional Logistcs C
Center to BU BU to VAR (Dealers)) VA
AR to Customer [RFID] [IoT]

Figure 3. Track-&-trace control

c tower prrototype (© Rolaand DG Corporaation, © Map Boox).

Curren
nt SCM IT S
Systems and
d Quick Ga
ains
Sales Inven
ntory & Operrations Plann
ning System
The coompany is impplementing a global databaase structure anda a global SI&OP
S for collaborative planning
and executioon, running pplanning proceesses simultanneously at its headquarters and local bussiness units w
with the
aim of achieeving a consensus on demaand and invenntory planningg and sharing global and loocal data in reaal time
with full trannsparency.
 T
THE PREDOM
MINANT ROL
LE OF IT AS A COMPETIITIVE GLOB
BAL SCM STR
RATEGY 389

The SII&OP system and a new pllanning and innventory mannagement systtem provided in the first phhase of
implementattion lead to a reduction in
n days inventoory outstandinng of about 28%,
2 31% forr products, 122% for
consumablees, and 14% foor parts.
IoT “On Su
upport” Servvice System
Some company’s
c prooducts such laarge format diigital printers have an IoT system, comm mercially calleed “On
Support” thaat enables thee device to be monitored in real-time for service purpo oses by digitall user-interfacce. The
IoT service system—currrently in “betta-version”— —reports severaal real-time data
d like prodduction printedd, inks
consumptionn, print-head status, color profiles,
p etc.
The big data gatherred by the IoT service sysstem will be used in the third t step of SCM 4.0 roaad map
(Figure 2) tot strengthen the Cloud CP PFR by feediing CRM andd SI&OP systtems, throughh the cloud pllatform
(Figure 4) for
fo inventory ooptimization, demand plannning and demand forecast purposes,
p incrreasing the cuustomer
centricity off the SCM, annd allowing the connection end-to-end off information flows.
f

Figure 4. IoT services systems and thee cloud connection to CRM and SI&OP systemss.

Digital Prod
duction Cell System
The coompany owns a digital prod duction cell syystem (D-shopp) that won th he “Japan Infoormation Proccessing
Developmennt Corporationn (JIPDEC) President’s
P Priize” at the 20003 Japan IT Management
M A
Awards.
D-shopp allows produuction operatoors to assemble products att their own paace. A computter and screenn guide
and control the process. It provides parts
p automattically, sets upp tools for eaach specific process,
p and checks
quality (Figgure 5). D-Shoop achieved a reduction in production tiime of nearly 30%, improvved space effiiciency
by 30%, annd increased fflexibility by 30%. Currenntly the compaany is implem menting a diggital productioon line
system baseed on accumullated know-ho ow and utilizinng latest technnologies.
390 T
THE PREDOM
MINANT ROL
LE OF IT AS A COMPETIITIVE GLOB
BAL SCM STR
RATEGY

Figure 5. Digitaal production cell system.

Coonclusion
This is just the beginnning of a lonng journey, ass the SCM 4.00 is in its initiial embryonicc state it is a joourney
to the new paradigm of Industry 4.0, not a destinaation. Howevver, there is a set of key suuccess factorss to be
considered that
t are a sinee qua non cond dition, necessaary but not suufficient:
(1) SCM M 4.0, like innnovation, shoould be introdduced into thee corporate strrategy agendaa through a fivve-year
plan linked tot other comppanies’ functioons.
(2) A top-down
t leaddership is req
quired to spreead the sense of urgency to t all stakehoolders. Rolandd DG’s
Chairman Mr.M Tomioka and Presidentt & CEO Mrr. Fujioka issuued this messsage, availablee on the com mpany’s
web site, too stakeholderss, including cuustomers, parrtners, employyees, sharehollders, and invvestors (Rolannd DG,
2016):
N
Now, in recent yeears, we are expperiencing the rise of IoT and AI,
A what many arre calling the 4thh Industrial Revvolution.
We aree rising to the chhallenge this Ind
dustry 4.0 presennts by working toowards a new erra where people, things, and datta are all
conneccted via networkks. As we cultivaate markets, utillizing new digitaal technology, we
w find ourselvess back at the tim
me of our
founding—a time where sustainable growth throughh business creattion and a shiftt of business moodel were necessary to
survivee.

(3) Impplementing innnovative pro ojects needs aan agile projeect managemeent methodology (Boehm, 2002;
Highsmith, 2009).
(4) Inteensive trainingg and educatio
on encouragess and secures its execution..
(5) Hirre people withh new skills.
(6) Divversity matters. Build diverrse and inclussive teams to foster creativiity and innovation, as diveersity =
creativity.
Furtherr research mayy be conducteed by taking oone or more off the above pooints as a reseaarch hypothessis.

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D DAVID PUBLISHING

Factors Affecting Investment in the Iranian Oil and Gas Sector

Sanaz Jahan Bozorgi, Farzaneh Taheri

Islamic Azad University of Marvdasht, Marvdasht, Iran

The aim of this study was to investigate factors affecting investment in the oil and gas sector. Therefore, the
required data and statistics from the national accounts, economic websites, and the Islamic Republic of Iran Central
Bank were collected by using case analysis Econometrics model ARDL. In order to investigate the relationship
between investment in the oil and gas sector and variables affecting it, in the first test, the assumption of the
classical study of the problem in your case and the correlation between linear time failed to see the variance. A
study on the existence or absence of malpractice in the desired pattern by using the results of that test was done, the
R-Ramzi showed the lack of test by error in the template. The results of this study showed that in the long run the
price of oil and the amount of export of the oil and gas sector are positive and statistically significant (5% level) on
investment in the oil and gas sector. Also, the added value and the exchange rate variables were positive and
negative relationship with investment in the oil and gas sector, as well as oil income has a positive impact on the
investment amount which is the estimated coefficient, though this is not a politically significant variable.

Keywords: investment, oil, gas, Iran, ARDL

Introduction
Small and medium enterprises (SMEs) contribute to economic development by virtue of their employers’
numbers and increasing share in Gross National Product (GNP) (Mehrjerdi, Talebi, & Akbari, 2014; Talebi,
Mehrjerdi, & Akbari, 2016). Agriculture plays an essential role in gulf security and employment, production
and food security and the country had a major share of GDP allocated to will (Akbari & Mehrjerdi, 2011;
Kohansal & Akbari, 2013), but the country’s oil industry, one of the leading industries and at the same time
with the importance and the advantages in the country that has a significant share in the exports, the national
government and the production of incomes and its monopoly which are more accurate in the government can be
said more activities of this section which is done by the government. The petroleum sector includes three
sections: the extraction of crude oil, gas extraction, and production of petroleum products. This sector is very
capital-intensive, due to the high dependence on the politicaland international crisis and highly vulnerable to
the effect of any changes it makes, influencing on other sectors.
Foreign direct investment (FDI), one of the most important economic variables that could be major
economic countries fulfills the goals. In the meantime, some factors can affect the absorption of foreign
investment. Awareness of how to affect these variables can affect decisions and macroeconomic variables such
as production and employment. Optimal policies of investment in the oil and gas sector in order to supply the

Sanaz Jahan Bozorgi, M.Sc. of Agricultural Economics, Islamic Azad University of Marvdasht, Marvdasht, Iran.
Farzaneh Taheri, assistant professor of Agricultural Economics, Islamic Azad University of Marvdasht, Marvdasht, Iran.
Correspondence concerning this article should be addressed to Farzaneh Taheri, Faculty of Agricultural Economics, Islamic
Azad University of Marvdasht, Marvdasht, Fars, Iran.
 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR 395

country’s national interest, one of the key objectives of macro in the country in recent years is considered
(Arimon, Gonzalez-Paramo, & Rolldan, 1997; Bairam & Bert, 1993).
Certainly, any kind of policy is on the run due to some problems and the obstacles, we will reach the
optimal macro-objectives in trouble, on the same basis, the aim of this study was to identify and explore factors
affecting foreign investment in Iran’s oil and gas sector. As one of the most important elements of production
in the economy of capitalism, capital is composed of movement that comes and gets on earning money, as well
as investing in which a capital goods for the production of other goods and services (Emran, Imam, & Forhad,
2003; Balts, 1999; Loony, 1999).
In different patterns of economic growth, one of the main factors of growth, is foreign investment and
capital accumulation because of it. However, the impact of this factor and the strengths and weaknesses in
accelerating the economic growth of a country depend on several factors, which, if the set of these factors does
not operate correctly; the effect of investment on economic growth also will be ambiguous. In Iran, the
performance of some of these factors is as follows (Siddiki, 2000; West & Pan, 1994):
A) Not withstanding that the investment rate especially in Iran is often high, but due to its extreme
dependence on the massive oil resources and revenues from the sale of crude oil, caused by currency
fluctuations on the system. The negative momentum of the two oil products direction limit: one of the
limitations of the imported goods (materials, semi-finished goods needed by manufacturing process) because of
currency restrictions and limitations of the financial resources of the order necessary for investment.
B) Political instability is another characteristic of Iran’s economy and influences the increasing investment
risk. Iran has always been under global and regional threats and wars (the Iran-Iraq war, Afghanistan war, Iraq
war and Kuwait...) and has been suffering in the regional.
C) Institutional rules and regulations and complex disorders in Iran are a significant share of the bad
investment performance due to the complex processes of administrative, often private investors leave the
country or work in Non-productive sections, it creates a slight and weak competition and less innovation and
classification in the economic system.
Study on oil and the factors affecting the amount of investment in this sector is a very important issue and
as far as the amount of investment in the oil and gas sector impacts of major developments in the creation of
economic stability as recession and inflation.

Methodology
In order to examine the long-term relationship and get this relationship for investment in Iran’s oil and gas
sector, its pattern of ARDL offered by Pesaran and Shin (1995), has been used. This method is the ability to
estimate short- and long-term components to synchronize. This template estimates the compatibility of the long
term analysis that are asymptotic normality and regressions can be I(0) and I(1), no longer need I(1) and these
variables are suitable for small samples too. So far, different methods to test the validity of variables have been
introduced, but these tests are lacking this feature to distinguish between the variables which is a package of
grade a, I(1) has been, but that series is almost sticky I(1) can be distinguish. While no method (ARDL) does
not have unit roots and for variables that are sticky or are having a valid unit root. Therefore, the use of
different test methods will lead us to different results, but the problem with the aforementioned methods
(ARDL) will largely be fixed (Pesaran, Shin, & Smith, 1999).
Pesaran and Shin (1995), approach (ARDL) is divided into two stages:
396 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR

In the first stage of the existence of the convergence of F-test for being a significant break with the
variables, and then the table of Pesaran and Shin (1996), we use. It’s a critical comparison with two indices
which has value because it is the unit root test which must be creative because according to the terms of Avatra
(2004), if the template variables I(2) are in this case, the F statistics relating to test (Pesaran & Shin,1996) is not
valid because this test is done under the assumption that the variables are I(0). Therefore, the unit root test in
the case of (ARDL) (Pesaran & Shin, 1996) should also be taken to ensure that none of the template variables
are I(2). If this statistic is greater than the critical value of high convergence which will be accepted, and if this
value is smaller than the critical statistics there is convergence of the bottom (Kohansal & Akbari, 2013).
The second step involves estimating the equation and determining the coefficients estimated using
methods (ARDL).
In order to estimate the relationship between short-term balances of error correction (ECM), which is a
short-term imbalance to balance values, long-term relationship, we use.
Generally, if the pattern of ARDL is considered as follows:

ϕ (l , p )y t = ∑ β i (l , qi )xit + δ ′wt + u t
k

i =1
(1)

ϕ (l , p ) = 1 − φ1L − φ2 L2 − ... − φ p LP
So that:

β i (l , qi ) = β i0 + β i1L + β i 2 L2 + ... + β iqi Lqi

i = 1, 2, …, k
L Operation is interrupted so that Ly t = yt −1 and wt A vector s × 1 . The categorical variables such as
the intercept, seasonal dummy variables, process variables and exogenous variables are constant interruptions.

( )
Long-term coefficients are calculated as follows:

βˆi 1, qˆ i βˆi 0 + βˆi1 + ... + βˆiqˆi

( )
θi = =
φˆ 1, pˆ 1 − φˆ1 − φˆ2 − ... − φˆ pˆ
ˆ (2)

i = 1, 2, …, k
where p̂ and q̂ i for i = 1, 2, …, k selected values (estimated) p and q i , according to one of the criteria
which is mentioned.
To get the error correction model coefficients, (ECM), the autoregressive distributed lag model, ARDL,
the pattern (1) according to a standstill, and the first difference variables, x1t , x 2t , …, x kt and y t rewrote.
y t = Δ y t + y t −1
t −1
yt − s = yt −1 − ∑ Δyt − j S = 1,2,..., p wt = Δwt + wt −1 x1t = Δ x1t + x1 , t −1
j =1
t −1
S = 1,2,..., q i xi , t − s = xi , t −1 − ∑ Δxi , t − j
j =1
By replacing the top of the pattern (1) we will have to rewrite it:
 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR 397

( )
pˆ −1 k qˆt −1
Δyt = −φ 1, pˆ ECt −1 + ∑ βi0Δxit +δ ′Δwt − ∑ φ j Δyt − j − ∑ ∑ βij∗Δxi ,t − j + ut
∗
k

i =1 j =1 i =1 j =1
(3)

So that the error correction EC t is defined as follows:

ECt = yt − ∑ θˆi xit − ϕˆ ′wt

k

i =1
So that φ (1 , pˆ ) = 1 − φˆ1 − φˆ 2 − ... − φˆ pˆ such error correction, defined it which should be noted that the
importance and validity of the measurement error is corrected. Other factors such as φˆ ∗ j and β ij
∗

representing the remaining short-term relationships are dynamic. These coefficients are calculated according to
the following formula:
φ1∗ = φ pˆ + φ pˆ −1 + ... + φ 3 + φ 2 φ 2∗ = φ pˆ + φ pˆ −1 + ... + φ3 φ p∗ˆ −1 = φ pˆ
Error correction factor represents the speed of adjustment towards long-run equilibrium which is expected
to be smaller than a minus.
So because of the number of static variables in the model of Autoregressive distributed lag method is used.
In the present study, the Dickey-Fuller unit root test will use stationary time series data (data that are
collected over a period) (Bahmani-Oskoee & Chiwing, 2002).
So overall pattern of investment is considered to be in the following form:
Y = F(X1, X2, X3, X4, X5)
Y: Investment in oil and gas sector
X1: Value added
X2: The price of oil
X3: The oil and gas exports
X4: Oil income
X5: Currency
Evaluation of the variables to methods is not staged using Eviews software package. Also, regression
equation was estimated with the help of Pro 4.1 Microfit and using the method of ARDL. The method of ARDL
has the ability to estimate the long- and the short-term components simultaneous. This method is also able to fix
the problems related to the removal and correlation variable (Siddiki, 2000). The required data and statistics
from the national accounts, economic websites, and the Islamic Republic of Iran Central Bank were collected.

Results
Because of the importance of investing in the Iranian oil and gas sector, we should be aware of the impact
of this variable on other economic variables, so in order to investigate the relationship between investment in
the oil and gas sector and influencing variables that, in the first test, the assumption of the classical study of the
problem in your case and the correlation between linear time and variance was proposed. A study on the
existence or absence of malpractice in the desired pattern by using the results of that test was done and
R-Ramzi showed the lack of test by error in the template. In addition, using the method of variables no
investigated stage which results in Table 1 may be significant.
398 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR

Table 1
Test Results of Static Variables Using 9-Step Method
Variable p-value
Investment in oil and gas sector I(1) 10%
Oil income I(1) 1%
Oil price I(1) 5%
Value added I(0) 5%
Currency I(1) 10%
Export I(1) 10%

As may be observed, the variables in the static model are the degree of one and zero. Thus, the collective
also known as ARDL analysis can be used. In order to choose the type of function in terms of linear or linear,
diagnosis test results showed that the suitable model for the study of the study variables, is linear model.
The statistics based on the existence of artificial model F or the lack of a long-term relationship between
the dependent variable and description of variables equal to 75.595% confidence level was significant,
therefore, the existence of a long-term relationship between the investment in the oil and gas sector and the
variables in the models was confirmed. Table 2 represents the outcome of long-term relationships.

Table 2
Results of Long-term Coefficients
Variable Coefficient t
Oil price 0.38 2.24
Value added 0.15 1.95
Currency -0.086 -2.17
Export 0.18 1.95
Oil income 0.016 1.15

Table 2 shows that in the long run the price of oil and the amount of export of the oil and gas sector are
positive and statistically significant (at the 5% level) on investment in the oil and gas sector. Also, the added
value and the exchange rate variables were positive and negative relationship with investment in the oil and gas
sector, as well as oil income has a positive impact on the investment amount which is the estimated coefficient,
though this is not a politically significant variable. Table 3 represents short-term analysis of the pattern of the
ECM.

Table 3
The Results in the Short-term Coefficients
Variable Coefficient t
Oil price 0.24 2.12
Value added 0.11 1.91
Currency -0.027 -2.04
Export 0.13 1.87
Oil income 0.010 0.89
ECM (-1) -0.70 -4.12
R2 0.78
DW 2.8
 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR 399

The results of Table 3 show that the price of oil and the amount of variables to export oil and gas sector
had a significant and positive impact on investment in the oil and gas sector. The added value of variables,
coefficients of oil and gas sector, and exchange rate also which had a significant value on investment in the oil
and gas sector, were not in the short term, but it should be added that the value of the variable of the positive
effect of the oil and gas sector and exchange rate were also negative effects on investment in oil and gas sector.
The error correction coefficient such as ECM (-1) is equal to 70.0 and as expected, the 99% confidence level in
the negative and statistically significant. This coefficient reflects that in every year, there is 70% of the lack of
balance in a period in the course of later modification. In other words, after nearly one year and four months the
effect of policies in the field of investment in the oil and gas sector will be seen. For the study of the parameters
estimatein the ARDL model test, the result presented 2 (CUSUMQ) and the sum of the squares of stacking and
it used by Brown and partners (1975), totally including the accumulation of squares of range of disturbing the
banks have been determined and the estimated coefficients on the structural stability of the desired course with
a significant level of 5%. In other words of the estimated model coefficients stability hypothesis about the
sensitivity analysis confirmed investment. The results of the estimation of drawing investment toward more
effective operating in the long term and short term are in Table 4.

Table 4
Results Obtained From the Elasticity of Investment With Respect to Factors Affecting It
Variable Long-term Long-short
Oil price 0.86 0.58
Value added 0.55 0.47
Currency -0.61 -0.14
Export 0.65 0.49
Oil income 0.51 0.38

As in Table 4 may be more variable, see the price of oil in the oil and gas sector in the short term and long
term, respectively, 86.0% and 58.0%. That concept, which assumes the other conditions being constant, if the
price of oil increased one percent, investment in this sector in the long term and short term (86.0% and 58.0%
respectively) will increase. Recall also that the increase of one percent of the amount in the case of export of
the oil and gas sector, investment in the oil and gas in the short- and long-term (65.0% and 49.0%) increase
respectively. In the circumstances of the other factors constant, and the value added to the 1% rate increase is
expected, then, that the increase in the oil and gas investment rate is 55% in the long term and 47% in the short
term realization. With the increase of one percent of this in between in the exchange rate, investment in the oil
and gas sector in the long term and short term (61.0% and 14.0%) will be showed. It may be stated that such
investment in the oil and gas sector in the long term and in the short term the highest reaction against the oil
price and the exchange rate has shown, therefore, more efficient management systems in the oil and gas sector
may be used for investment in this sector. Also, as the data of Table 4 show, the lowest sensitivity of
investment in the oil and gas sector is relative to the oil income.

Discussion and Conclusion

The mentioned topics can be inferred that the price of oil had a positive and significant relationship with
the amount of investment, and with the price increase, the amount of investment has also increased and for a
unit change in the price of oil, assuming other conditions being constant, 86% of investment in long-term and
400 FACTORS AFFECTING INVESTMENT IN THE IRANIAN OIL AND GAS SECTOR

58% in short-term will change. Value added is also a positive relationship with the amount of investment in
circumstances that have a unit change in the variable 55.0 to the amount of investment in the long term and
short term 47.0. We also remind that the amount of investment in the oil and gas sector with the exchange rate
relationship between photos, meaning that with the increasing rates of exchange of the amount of investment
will be eased and with constant regardless of other conditions, long-term investments in the amount of 61.0 and
14.0 in the short term will be reduced. Between the export of oil and gas and the amount of investment, there is
a significant correlation and per a unit increase in exports as well as investment to the size of the 65.0, 49.0 in
the short term and in the long term will be changed. Between the oil revenues and the amount of investment is
also a positive relationship, there is significant if a unit increases revenues, investment will increase 51% in
long-term and 38% in short-term. So it can be stated that the investment in the oil and gas sector has the most
reaction against the oil price and the exchange rate in the short-term and long-term interval show itself, also in
the oil revenues between the lowest impact on the amount of investment in the oil and gas sector.

Offers
1. With regard to the results achieved single-tiered currency, revenue and expenditure of the oil sector
transparency and proper management in order to increase the oil contracts, oil prices and security of supply will
offer foreign investors.
2. Upgrade and efficient building management system in oil and gas sector in order to attract investors.
3. Effective interaction with advanced countries in terms of technology in the oil industry in order to
encourage foreign investment.
4. Easy regulation to improve the rules governing investment.
5. The formation of a joint investment fund with the presence of Iranians outside the country.

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