Luận văn Thạc sĩ Quản trị kinh doanh: Improving business performance at Petrolimex Chemicals Limited Company

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The goal of the topic is to: Systematize the theoretical basis of business performance in general; analyzing and assessing the current status of the business performance of Petrolimex Chemical Co., Ltd. from 2017 to 2019. From there, find out the existing aspects that affect the business performance of Petrolimex Chemical Co., Ltd; proposing some solutions to improve the business performance of Petrolimex Chemical Co., Ltd. in the future.

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ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGUYỄN HẢI LONG NÂNG CAO HIỆU QUẢ HOẠT ĐỘNG KINH DOANH CỦA CÔNG TY TNHH HÓA CHẤT PETROLIMEX IMPROVING BUSINESS PERFORMANCE AT PETROLIMEX CHEMICALS LIMITED COMPANY LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2020
ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGUYỄN HẢI LONG NÂNG CAO HIỆU QUẢ HOẠT ĐỘNG KINH DOANH CỦA CÔNG TY TNHH HÓA CHẤT PETROLIMEX IMPROVING BUSINESS PERFORMANCE AT PETROLIMEX CHEMICALS LIMITED COMPANY Chuyên ngành: Quản trị kinh doanh Mã số: 8340101.01 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. HOÀNG ĐÌNH PHI HÀ NỘI - 2020
DECLARATION The author confirms that the thesis's research outcomes result from the author's independent work during the study and research period, and it is not yet published in other's research and article. The other's research results and documentation (extraction, table, figure, formula, and another document) used in the thesis are correctly cited, and permission (if required) is given. The author is responsible for the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for the declaration mentioned above. Hanoi, June 30th, 2020 NGUYEN HAI LONG
ACKNOWLEDGEMENTS First of all, I would like to express my sincere thanks to Assoc. Prof. Dr. Hoang Dinh Phi, for his patience, motivation, inspiration, passion, and vast knowledge, continuously supporting me throughout the study course and thesis research. Besides the primary instructor, I would like to thank the HSB faculty and support staff to study and research my thesis. I want to thank the Board of Directors of Petrolimex Chemical Co., Ltd., and my colleagues for creating all conditions for me to implement the topic and use the unit's data to complete the article. Mainly, I would like to thank my family for all the support and encouragement during this Master's course and in my life. Hanoi June 30th, 2020 NGUYEN HAI LONG
TABLE OF CONTENT DECLARATION ACKNOWLEDGEMENTS LIST OF ABBREVIATIONS LIST OF TABLES, CHARTS, AND DIAGRAMS INTRODUCTION .................................................................................................................... 6 1. The urgency of the topic ......................................................................................................... 1 2. The research objectives of the topic ....................................................................................... 2 3. Object and scope of the study ................................................................................................. 2 4. Research question ................................................................................................................... 2 5. Research methods ................................................................................................................... 3 5.1. Data collection methods....................................................................................................... 3 5.2. Data analysis method ........................................................................................................... 4 6. The significance of the topic ................................................................................................... 5 7. Structure of the topic............................................................................................................... 6 CHAPTER I: THEORETICAL BASIS OF BUSINESS PERFORMANCE ...................... 7 1.1. Overview of business performance...................................................................................... 7 1.1.1. The concept of business performance ............................................................................... 7 1.1.2. Distinguish between business performance and results .................................................... 8 1.1.3. The persuasive nature of business operations ................................................................... 8 1.1.4. Classification of business performance .......................................................................... 10 1.1.5. The Necessity and Meaning of Improving Business Operations. ................................... 11 1.2. Content and consumption indicators in business performance analysis. ........................... 12 1.2.1. Content analysis of business results................................................................................ 12 1.2.2. Overall effect .................................................................................................................. 14 1.3. Evaluate the efficiency of input resources. ........................................................................ 15 1.3.1. Effective use of Labor..................................................................................................... 15 1.3.2. Effective use of fixed assets............................................................................................ 15 1.3.3. Effective use of liquid assets .......................................................................................... 15 1.4. Factors affecting business performance ............................................................................. 16 1.5. Content and analytical methods ......................................................................................... 16 1.5.1. Content analysis .............................................................................................................. 16
1.5.2. Analytical method ........................................................................................................... 17 1.6. Directions and measures to improve business performance .............................................. 21 CHAPTER II. BUSINESS PERFORMANCE ANALYSIS OF PETROLIMEX CHEMICALS COMPANY LTD ........................................................................................... 24 2.1. Overview of Petrolimex Chemicals Company Limited. .................................................... 24 2.1.1. History and development of Petrolimex Chemicals Company Limited. ........................ 24 2.1.2. Characteristics of business activities at Petrolimex Chemicals Company Limited. ....... 24 2.1.3. Organizational and managerial characteristics at Petrolimex Chemicals Company Limited. ..................................................................................................................................... 25 2.2. Overview of industrial chemicals and industrial chemical business activities .................. 28 2.2.1. Characteristics of chemical products and industrial chemical business ......................... 28 2.2.2. Characteristics of industrial chemical trading ................................................................ 30 2.3. Analyzing the business performance of Petrolimex Chemical Co., Ltd. in the period 2017-2019 ................................................................................................................................. 30 2.3.1 Overview of production and business results of Petrolimex Chemical Co., Ltd. in the period 2017-2019 ...................................................................................................................... 30 2.3.2 Analysis of general financial indicators of Petrlimex Chemical Co., Ltd in the period 2017-2019 ................................................................................................................................. 37 2.3.3 Analysis of other primary financial ratios of Petrolimex Co., Ltd in the period 2017- 2019 .......................................................................................................................................... 45 2.3.4 Analysis of the results of investment in the construction of technical materials of Petrolimex Chemical Co., Ltd in the period 2017-2019 ........................................................... 49 2.3.5 Classification of salary and income of officers and employees of Petrolimex Chemicals Co., Ltd in the period 2017-2019 ............................................................................ 52 2.4. Analysis of the criteria for evaluating the business performance of Petrolimex Chemical Company Limited from 2017 to 2019 ...................................................................... 55 2.4.1 Evaluate the effectiveness of profitability ....................................................................... 55 2.4.2 Evaluate the efficiency of using assets ............................................................................ 56 2.4.3 Evaluate the efficiency of capital use .............................................................................. 58 2.4.4 Evaluate the efficiency of cost use .................................................................................. 59 2.4.5 Evaluation of the efficiency of labor use ......................................................................... 60
CHAPTER III: SOLUTIONS TO IMPROVE BUSINESS PERFORMANCE OF PETROLIMEX CHEMICALS COMPANY LIMITED .............................................. 62 3.1. Development orientation of Petrolimex Chemicals Co., Ltd in the future ........................ 62 3.1.1. The main goals of the company ...................................................................................... 62 3.1.2. Medium and long term development strategy ................................................................ 62 3.2. Several solutions to improve the business performance of Petrolimex Chemicals Co., Ltd. ............................................................................................................................................ 63 3.2.1 Solution to increase revenue. ........................................................................................... 63 3.2.2. The solution to increasing cost-efficiency. ..................................................................... 66 3.2.3. The solution to increasing the efficiency of labor use. ................................................... 68 3.2.4. The solution to increasing the efficiency of capital use .................................................. 69 3.2.5. Solution on risk management. ........................................................................................ 72 3.3. Some recommendations for effective implementation of the above solutions .................. 73 CONCLUSION ....................................................................................................................... 74 LIST OF REFERENCES ....................................................................................................... 76 APPENDIX 1 ............................................................................................................................. 1 APPENDIX 2 ........................................................................................................................... 18
LIST OF ABBREVIATIONS BH Sales BHXH Social insurance BHYT Health Insurance BQ Average CNHC Chemicals branch CP Cost CPSX Production expense CSVCKT Technical facilities DMHC Chemical solvents DT Revenue ĐTXD Construction investment GTGT Added value GTTSL Value of total output HĐ Work HĐQT Administrative Council HĐSXKD Production and business activities KDHC Chemicals business KPCĐ Union funds LN Profit NCC Supplier NLĐ Workers QLDN Business management SSL Profitability SSX Productivity SXKD Manufacturing business TCKT Accounting financial TĐLC Rotation speed TNDN Corporate income TNHH Limited TSCĐ Fixed assets TSLĐ Liquid assets XDCT Building construction
LIST OF TABLES, CHARTS, AND DIAGRAMS LIST OF TABLES Table 2. 1: Output structure of the company's key business items from 2017 to 2019 ............ 30 Table 2. 2: Summary of business performance of Petrolimex Chemical Company Limited in the period of 2017 - 2019...................................................................................................... 32 Table 2. 3: The Company's assets and capital sources in the period 2016-2019 ...................... 38 Table 2. 6: Other primary financial ratios of the company in the period 2017-2019 ............... 46 Table 2. 9: Results of the company's construction of technical materials from 2017 to 2019 . 49 Table 2. 10: Salary and income of the company's officers and employees from 2017 to 2019 .......................................................................................................................................... 52 Table 2. 11: Indicators reflecting the profitability of the company from 2017 to 2019 ........... 55 Table 2. 12: Indicators for evaluating the efficiency of using assets of the company from 2017 to 2019 ............................................................................................................................. 56 Table 2. 13: Indicators for evaluating the efficiency of the company's capital use from 2017 - 2019 ........................................................................................................................................ 58 Table 2. 14: Indicators for evaluating the efficiency of cost management of the company from 2017 to 2019..................................................................................................................... 59 Table 2. 15: Indicators for evaluating the efficiency of the company's labor use from 2017 to 2019 ...................................................................................................................................... 60 Table 3. 1: Plan for the year 2021-2025 of Petrolimex Chemical Company Limited .............. 62 LIST OF CHARTS Chart 2. 1: Sales structure of essential business products of the company from 2017 to 2019 .......................................................................................................................................... 31 Chart 2. 2: Indicators reflecting the profitability of the company from 2017 to 2019 ............. 56 Chart 2. 3: Indicators for evaluating the efficiency of using assets of the company from 2017 to 2019 ........................................................................................................................................... 58 Chart 2. 4: Indicators for evaluating the efficiency of the company's capital use from 2017 to 2019 ...................................................................................................................................... 59 Chart 2. 5: Indicators for evaluating the efficiency of cost management of the company from 2017 to 2019..................................................................................................................... 60
Chart 2. 6: Indicators for evaluating the efficiency of using the labor of the company for the period 2017 to 2019 ............................................................................................................ 61 LIST OF DIAGRAMS Diagram 2. 1: Organizational chart of Petrolimex Chemical Company Limited ..................... 27 Diagram 2. 2: Organizational chart of the Chemical Business Department ............................. 27 Diagram 2. 3: Sales process of Petrolimex Chemical Company Limited .................................. 2 Diagram 2. 4: Domestic purchase process of Petrolimex Chemical Company Limited ............ 7 Diagram 2. 5: The import process of Petrolimex Chemical Co., Ltd. ...................................... 11 Diagram 2. 6: The management process of suppliers and contractors of Petrolimex Chemical Company Limited ..................................................................................................... 15
INTRODUCTION 1. The urgency of the topic Today, globalization and international economic integration bring new business opportunities. They also pose many challenges that threaten the development of Vietnam's economy in general and businesses' survival. According to the World Bank, Vietnam is one of the developing countries moving to a market-oriented economy with open economic policies and strategies to participate in international economic integration. The development of the market-oriented economy has a significant impact on Vietnam's economy in general and enterprises in particular, which is even more profound in international competitiveness to attract customers and scale up the business domestically and internationally. In a market-oriented economy, domestic enterprises must manage their production and business activities effectively to maintain and grow in the market once there is no government protection. It is always a challenge for entrepreneurs to frequently do market research and find out the best way to thrive and generate profits. It involves expanding business scale, improving employee's quality of life, applying advanced technology, allocating resources efficiently, and promoting international integration. These all set the foundation for sustainable development, which is crucial for a business to maintain and grow. Solvents and industrial chemicals play a significant role in the economy as the price of solvents and industrial chemicals significantly impacts many other goods' input prices. They are mostly determined by the law of supply and demand in the market. The cost of solvents and industrial chemicals also depends heavily on the oil price on the world market. The solvent and industrial chemical businesses are completely proactive in deciding their business outcomes, not regulated to the government's selling prices like petroleum businesses. For enterprises operating in the solvent and industrial chemical business, they must show their pioneering role in integrating into the platform, which is continuously changing within the regions and worldwide. In that context, Petrolimex Chemical Co., Ltd. has quickly seized the opportunity, renovated its organizational structure and operation. Thereby, the company can proliferate, make significant contributions to the chemical business, industrial solvents in particular, and the national economy. To make this happen, measures that help to improve business performance are essential at this time. Facing many difficulties and challenges, improving business performance is vital, which is always the 1
company's top priority. It is a fundamental goal for the existence and development of the company. Therefore, the company strives to research and adjust its operation direction, promote product consumption, effectively use production factors, and study the influence, the level, and the tendency of each factor. Recognizing the importance of improving the performance of production and business activities for each enterprise, the author chose the topic "Improving business performance at Petrolimex Chemicals Limited Company" as the dissertation theme. 2. The research objectives of the topic The goal of the topic is to: - Systematize the theoretical basis of business performance in general. - Analyzing and assessing the current status of the business performance of Petrolimex Chemical Co., Ltd. from 2017 to 2019. From there, find out the existing aspects that affect the business performance of Petrolimex Chemical Co., Ltd. - Proposing some solutions to improve the business performance of Petrolimex Chemical Co., Ltd. in the future. 3. Object and scope of the study - The object of study: issues related to the business performance of Petrolimex Chemical Company Limited. - Research scope: + Regarding the content: Analyze and evaluate the business performance of Petrolimex Chemical Co., Ltd from 2017 to 2019, point out the weaknesses, opportunities, and challenges of the company in the period 2017-2019; now, propose some solutions to improve the business performance of Petrolimex Chemical Company Limited. + About space: Thesis researching business performance at Petrolimex Chemical Company Limited. + About time: Evaluate the business performance of Petrolimex Chemical Co., Ltd. in the period 2017-2019, propose orientation and solutions for development in the period of 2021-2025. 4. Research question The research of the topic aims to answer the following in-depth questions: - How was the business performance of Petrolimex Chemical Co., Ltd. in the period 2017-2019? - What are the shortcomings in the chemical business, industrial solvents of Petrolimex Chemical Co., Ltd. over the past years? 2
- What solutions to adopt to contribute to improving the business performance at Petrolimex Chemical Co., Ltd? 5. Research methods 5.1. Data collection methods The thesis surveys the current status of Petrolimex Chemical Co., Ltd. from 2017 to 2019. ❖ Data source Data used in the thesis is mainly secondary data, including: - Decrees, Decisions, Circulars of the Government, ministries, departments, and branches related to the operation of enterprises in general, industrial chemicals and solvents businesses in particular; - Scientific works and domestic and foreign research works related to the business performance of the enterprise; - Other documents related to natural conditions such as geographical location, population distribution, infrastructure, business environment, etc. in the study area; - The data related to the research process of the topic has been officially announced. The data includes: relevant research results that have been conducted previously, data related to the business activities of companies in the industrial chemical and solvent trading sector; - Financial reports and reports on business strategies, tasks, and development projects of Petrolimex Chemical Co., Ltd. in 2017-2019. ❖ Methods of data collection Methods of collecting secondary data are done through the following ways: - Study, search by keywords, inherit datasets of previous studies from Statistical Yearbook sources, Ministry of Finance, Ministry of Planning and Investment, Ministry of Labor - Invalids - Social Affairs, books, magazines such as Economic development magazine, banking magazine, Finance magazine, Research and exchange magazine, and other journals; Dataset of previous studies related to the topic; legal documents about business performance such as Decrees, Circulars, Decisions, etc. of the Government and relevant agencies. - Direct observation method: through observing the production and business operation at Petrolimex Chemical Company Limited. 3
5.2. Data analysis method The thesis uses some information analysis methods to evaluate the business performance of Petrolimex Chemical Co., Ltd. from 2017 to 2019 as follows: ❖ Statistical analysis method - Statistical analysis synthesizes a specific nature of socio-economic phenomena and processes in certain historical conditions through numerical manifestations. In particular, statistical analysis determines the variation's level, expressing the unique relationship's nature and level. Statistical analysis must take statistics as a document, using statistical methods as a research tool. - Statistical analysis is of great importance in the economic management process. Thanks to rich theory and methodology, statistics can map out the causes of the completion of the plan and the management decisions; analyze the effects of factors on resource use, and determine the relationships and the general rule of the system. In statistical analysis, the system requires an approach in both directions: analysis and synthesis. ❖ Method of comparison - A method of considering an analytical indicator based on the comparison with a baseline (first indicator). It is the most commonly used method to analyze business activities and analyze and forecast socio-economic indicators in the macroeconomic field. This method compares the data over time with each type of chemical products, solvents, and different market segmentation) to determine the trends and fluctuations of analytical indicators. It helps to synthesize documents, calculate the correct criteria, and help the document analysis be scientific, objective, and adequately reflect the critical content research. - After synthesizing the data, we compare data between years, thus making comments and evaluations through the results of synthesis and calculation of data on the business performance of industrial chemicals and solvents at Petrolimex Chemical Co., Ltd. in the period 2017-2019. The dissertation using the specific comparison method is: - Absolute numerical method: The difference between two criteria: analysis period and primary indicator. Comparative numerical method: A percentage of the analysis period index compared to the first indicator shows the completion level or the absolute difference rate compared to the first criterion to know the growth rate. 4
The comparison method allows us to accurately assess the growth or decline of the indicators representing the company's business performance, thus making comments on the business's right and wrong sides at Petrolimex Chemical Company Limited. 6. The significance of the topic Improving business performance has been mentioned in many previous studies by domestic and foreign authors. For example, in his research, the author Truong Thanh Tu (2010) has researched and proposed some solutions to improve service business performance on VNPT Hanoi's fixed telephone network. The author focuses on providing solutions to improve business performance on a fixed-line fixed network, to keep existing customers, attract new customers, and increase revenue for service providers. All these solutions aim to improve business performance for the unit. [1] The author Vo Viet Chuong (2015) again focused on improving the business performance of the Joint Stock Commercial Bank for Investment and Development of Vietnam - Ha Tinh Branch. The author of Chuong also focuses on providing solutions to develop the network and improve Marketing activities, diversify and improve the quality of products and services, improve credit quality to reduce risks, contribute to the increased signal. Business results for businesses. [2] Recently, the author Doan Thi Nhat Hong (2014) offers some solutions to improve the business performance of SIMCO Song Da Joint Stock Company. The author proposes that the Song Da Joint Stock Company should complete the capital structure, and use reasonable costs, improve the qualifications and capacity of human resources, improve the quality of equipment - technology all contribute. part to improve the performance of the unit in the future. [3] The author Le Thi Hoa (2016) again studies the problem of improving the performance of production and business at Tam Chien Company Limited. The author believes that the application of cost-effective, reasonable and efficient use of input factors and the survey to expand the market, boost consumption will help the Company to be more successful in the future. It is also a factor that helps increase the business performance of the Company. [4] In general, the above studies have achieved certain results such as providing a theoretical system for the field they researched, analyzing the current situation of use, administration, and business performance at the unit and enterprise. Many solutions to improve the performance of using human resources for their units/businesses. Solution groups focus on improving cost management, saving input costs, increasing revenue ... At Petrolimex Chemical Co., Ltd., in recent years, there have been some researches on enterprises, but these studies focus on market expansion or analysis to offer solutions to 5
improve business performance. In the coming time, there is no research to analyze the current situation and propose solutions to improve business performance for the unit. Therefore, the author has chosen this study with the desire to make a small contribution to the Company by analyzing and offering some solutions to improve business performance for Petrolimex Chemical Co., Ltd. shortly. In terms of science: The topic has systematized a relatively complete theoretical basis of business performance in the enterprise. In practical terms: The issue has been analyzed in-depth, assessed the current status of the company which is the production and business performance in the period 2017-2019, from which proposed appropriate and highly feasible measures improve the performance of the production process and business activities of the company in the coming years. 7. Structure of the topic In addition to the introduction and conclusion, the thesis includes three chapters: Chapter I: THEORETICAL BASIS OF BUSINESS PERFORMANCE Chapter II: BUSINESS PERFORMANCE ANALYSIS OF PETROLIMEX CHEMICAL COMPANY LIMITED Chapter III: SOLUTIONS TO IMPROVE BUSINESS PERFORMANCE OF PETROLIMEX CHEMICAL COMPANY LTD. Due to the limitations of time, capacity, and qualifications, this thesis still has room for improvement. We hope that the instructor's suggestions will help to improve the topic. 6
CHAPTER I: THEORETICAL BASIS OF BUSINESS PERFORMANCE To survive and grow, a business, whether large, medium, or small, operating in any field, must be run effectively. To know the current status of business operations, analyzing business performance plays a crucial part. It helps the enterprise leaders to run the business better based on analyzed data. 1.1. Overview of business performance In a market-oriented economy, the overarching and long-term goal of every business enterprise is to maximize profits. To achieve the goal, it must develop an effective strategy in each phase, adapt to the changing business environment, allocate and manage resources effectively and always check to see if the business is making any progress. 1.1.1. The concept of business performance Business performance is an economic category associated with a market mechanism related to all production and business processes such as labor, capital, machinery, and raw materials. An enterprise can only achieve high performance when using the essential elements of the business process effectively. When referring to business performance, economists consider different aspects in order to give different definitions For businesses to achieve their goals, it is necessary to pay attention to internal conditions, promote production factors' sufficient capacity, and minimize the costs. The requirement of improving business performance is to use reasonable inputs to achieve maximum results with minimum costs. However, to understand the nature of efficiency, it is also necessary to distinguish efficiency from production and business activities. We can draw the efficiency concept as follows: "Efficiency is the comparison of outputs and factors of input resources" [according to Nguyen Ngoc Lan - the topic of economic performance]. That comparison can be a relative comparison and an absolute comparison. Outputs are often expressed in terms of value, revenue, and profit. The resource input factors are labor, cost, assets, and capital. Besides, it is also said that "Business performance is an economic category in depth, reflecting the level of resource exploitation and costs. Resources in the process of reproduction to achieve business goals "[according to Do Huu Tung - textbook of financial management]. Today's business performance becomes more critical for economic growth and is the basis for assessing its economic goals in each period. The absolute efficiency is determined as follows: A=K-C The relative efficiency index is determined as follows: 7
A = K/C Inside: • A: Business performance • K: Business results (by the following criteria: Total value, Total revenue, profit) • C: Input resources (including Labor, cost, capital, equipment) 1.1.2. Distinguish between business performance and results From the above concepts, we can understand that business performance is an economic category that reflects using resources (equipment, machinery, fuel, and capital) to achieve the business's goal. Business performance reflects the organizational structure and is determined by the results' ratio and its cost to achieve that result. It is an increasingly important measure of economic growth and a basis for assessing the implementation of enterprises' production and business goals in each period. The better the business performance, the more conditions to expand and develop investment in machinery and equipment procurement, improve workers' lives, and fulfill all obligations to the government. Besides, we need to distinguish the difference and the relationship between business performance and business results. The production and business activities are absolute numbers that reflect the enterprise's output scale and business activities after each period. In the process of production, it is necessary to achieve the goal being set earlier. The results are represented by some quantitative indicators such as sales, revenue, profit, and qualitative indicators such as reputation, product quality. In terms of effectiveness, the results are different. The business results reflect the remaining significant scale that demonstrates the comparison between expenditures and revenues. Business results are measures of the product and operational performance of a business. Results demonstrate the quality and value of products and services that lead to customer satisfaction and customer engagement. The results only show that the scale achieved is large or small and does not reflect the quality of production and business activities. Products come after efficiency. Results are used to calculate and analyze performance in each business cycle. Therefore, results and effects are two different but closely related concepts. 1.1.3. The persuasive nature of business operations In general, economic performance is the category reflecting management skills, ensuring high results on socio-economic tasks set out at the smallest cost. 8
The economic category is understood from qualitative and quantitative perspectives. Quantitative: The economic performance of performing each socio-economic task shows the correlation between the results obtained and its cost. If considering the synthesis, people can only get economic performance when the result is more remarkable than the cost spent; the more significant the difference, the higher the performance. In terms of qualitative results: The level of economic performance obtained reflects production and business management ability. The two qualitative and quantitative aspects of business performance are not separated. Economic performance is not consistent with economic results. Economic performance is the category of comparison, expressing the concern between the give-out and the gain. The result is only a necessary factor to analyze and evaluate the efficiency itself. The results have not shown how much it is created and at what cost, which means the results have not shown the quality of creation outward. The essence of economic performance is to show economic development goals and production and business activities to satisfy the market's needs better. Efficiency refers to the degree of satisfaction, demanding the selection and use of limited resources; that is to say, the economic results satisfy the need. Another effective indicator is KPI: A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages. Often success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects, 10/10 customer satisfaction), and sometimes success is defined in terms of making progress toward strategic goals. Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. What is deemed important often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales. In summary, improving the economic performance of social production and all other production and business activities is the most basic requirement of development goals. 9
1.1.4. Classification of business performance Performance is a broad aggregate category. When approaching, analyzing, and evaluating this indicator, it is necessary to know the diversity of efficiency indicators and efficiency indicators classification according to the bases. Performance indicators differ from business drivers and aims (or goals). A school might consider the failure rate of its students as a key performance indicator which might help the school understand its position in the educational community, whereas a business might consider the percentage of income from returning customers as a potential KPI. The key stages in identifying KPIs are: •Having a pre-defined business process (BP). •Having requirements for the BPs. •Having a quantitative/qualitative measurement of the results and comparison with set goals. •Investigating variances and tweaking processes or resources to achieve short-term goals. Key performance indicators (KPIs) are ways to periodically assess the performances of organizations, business units, and their division, departments and employees. Accordingly, KPIs are most commonly defined in a way that is understandable, meaningful, and measurable. They are rarely defined in such a way that their fulfillment would be hampered by factors seen as non-controllable by the organizations or individuals responsible. Such KPIs are usually ignored by organizations. KPIs should follow the SMART criteria. This means the measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the improvement of a KPI has to be Relevant to the success of the organization, and finally it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period. In order to be evaluated, KPIs are linked to target values, so that the value of the measure can be assessed as meeting expectations or not. For the business performance of an enterprise, it is divided into: • General business performance • Division business performance. General business performance provides an overview of the business. It shows the business performance of an enterprise's entire production and business process (or a division of the business) in a time. 10