Review Article: 2021 Vol: 27 Issue: 2S
Khrystyna P. Danylkiv, Lviv Polytechnic National University
Lev G. Kloba, Lviv Polytechnic National University
Mário Nuno Mata, ISCAL-Instituto Politécnico de Lisboa
José Moleiro Martins, Instituto Universitário de Lisboa (ISCTE-IUL)
Anabela Batista Correia, ISCAL-Instituto Politécnico de Lisboa
Rui Miguel Dantas, ISCAL-Instituto Politécnico de Lisboa
Iryna Zelenitsa, Kyiv National University of Trade and Economics
Maryana Havran, Lviv Polytechnic National University
ABC-XYZ Analysis, Mathematical Analysis, Innovation, Innovative Products, Small Businesses, Lviv Region.
The article examines the peculiarity, role and importance of small business in a market economy. The basic approaches to understanding the content of innovation activity of small business structures are presented. The opinions of different authors on the definitions of "innovation activity" and "innovation-active enterprise" are summarized.
O32, O18, L25, M11
Modern economy, as a complex system, covering almost all spheres and system of social production of the state, is impossible without the presence in its structure of various organizational-production subsystems that perform appropriate functional actions. Small business is rightly regarded as one of such subsystems in the overall structure of the economy, since it is an integral element of the market system, a powerful manufacturing sector, a special type of production and trading activity, an important factor for innovative development and efficient functioning of the domestic economy.
The peculiarity, role and importance of small business in a market economy and in society in general is that it is one of the leading sectors of national economies, as it determines the pace of economic development, demonstrates the expansion and renewal of offers in the domestic market of goods and services, ensures the growth of gross product, promotes competition in the innovation sphere, leads to saturation of the domestic market and filling the state budget, and makes a significant contribution to improvement and diversification market structure in the economy. With small scales of activity, these businesses respond to the expectations of the target markets and have the flexibility and ability to adapt quickly to new circumstances. The regional dimension affects the rationalization of the use of all types of resources, the activation of human capital accumulation and the accumulation of scientific and technical potential. In the conditions of systematic restructuring of the national economy, this business sector plays its leading role and acts as a guarantor of the stability of the economy and raising the standard of living of its citizens.
In the conditions of dynamic development of modern society, the main direction of stimulating the economic growth of small business entities is innovative development, which involves the use of fundamentally new advanced technologies, the transition to the production of high-tech products and the development of mechanisms for implementing management decisions in innovation.
Understanding the content of innovation activity of small business structures can be reduced to three main approaches. Two points of view are the most popular: the first is when innovation is seen as a purposeful activity in the field of innovation creation and implementation (Zamryha, 2014, p.95), and the second is as a characteristic of innovation activity (Illiashenko & Bilovodska, 2010; Khoma, 2014 ; Khoma, 2015; Shinkevich et al., 2016) reflecting the ability of a small business to update elements of a productive innovation system. According to the first point of view, the category "innovation activity" is identified with innovation activity and covers "a set of actions aimed at developing and introducing new or improved products (Chumak, 2009), technological processes (Polozova & Kryvtsun, 2015; Moroz, Khoma & Horyslavets, 2021), methods related to the sale of innovative products" (Khoma, 2013; Tsogla, 2016; Oliinyk et al., 2018). Accordingly, the system of indicators on the basis of which determine the level of innovation activity of small businesses, includes the diagnosis of indicators of efficiency and effectiveness of small businesses in the field of innovation. In this interpretation, any enterprise that conducts innovative transformations can be considered innovative indicates O. Polinkevych (2016a, p.60; 2017; 2018). In fact, this approach is applied in international innovation statistics.
According to the classification of UNESCO Institute for Statistics, all enterprises engaged in any activity related to creation of innovation during a certain reporting period (OECD/Eurostat, 2019), belong to the category of innovative-active, regardless of whether the specified activity led to real introduction of innovations.
Innovations are an important factor conditioning the development of small and medium enterprises since the development of innovativeness in these companies is one of the indicators of their competitiveness (Lisowska & Stanisławski, 2014, p. 319).
Scientists & Phlegont (2009, p.13) defines innovative activity as "the enterprise's actions to innovate without taking into account their intensity, level of novelty, and other similar characteristics that allow the enterprise to improve or maintain its existing position in the market environment".
Innovation activity writes Zhuk (1995, p. 40) is also considered as “a complex characteristic of small business innovation activity, which determines the degree of efficiency and intensity of actions for development, creation (or acquisition), development and introduction of new products, processes, organizational or marketing changes, as well as their timeliness, ability to mobilize innovation potential”. That is, innovative activity characterizes not the end result of activity of the enterprise, but only its opportunities in sphere of development of innovations (Kaigorodova, Mustafina & Alyakina, 2018), (Koziuk et al., 2019), economic development (Polinkevych, 2016b; Achkasova, 2020; Danylkiv et al., 2020) and promotion on the market (Trynchuk, 2011; Horyslavets, Plonka & Trynchuk, 2018; Polinkevych & Kamiński, 2018), investment in education (Kaigorodova et al., 2017; Cwynar, 2019) and environmental protection (Grzebyk & Stec, 2015; Klapkiv et al., 2019; Trunina, Khovrak & Bilyk, 2020; Glonti et al., 2020).
The third group of definitions treats the innovative activity of entrepreneurship as a sign of its innovative activity, the economic essence of which is related to the intensity of actions to create and implement innovations. Thus, according researcher Trifilova (2005, p.52), innovative activity "reflects the intensity of activity of economic entities in the development and attraction of new technologies or improved products to economic circulation".
The realization that small businesses play an active role in innovation has led to a number of insights about the mechanisms by which small businesses improve and introduce new products and services (Danylkiv, 2013; Danylkiv, 2017). The researchers R. Rothwell & Whiston (2007, p.196) suggests that small firms can have an innovative advantage due to differences in management structures. Similarly, Scherer (1991, p.26) argues that the bureaucracy in large firms is not conducive to undertaking risky R&D.
The solution of many socio-economic problems of innovatively active small business structures lies in the plane of an effective system of sales of innovative goods and services, which depends on the range of products being produced. Product range management requires consideration of the influence of many factors and the use of appropriate analysis methods for criterion decision making. One of the effective tools for solving this problem is the widely used ABC-XYZ analysis approach, developed by General Electric in the 1950s (Dickie, 1951, р.93).
Conduct monitoring and analysis of innovatively active small business structures in Lviv region on the basis of the proposed ABC-XYZ analysis algorithm. This, in turn, will allow to identify the enterprises-leaders of innovative activity and the most effective leaders of innovatively active small enterprises, as well as to create conditions for stable development, implementation and realization of innovative activity.
The most available monitoring method is the ABC-XYZ analysis. ABC analysis allows you to identify the most and least innovative enterprises. XYZ analysis allows evaluating the stability of implementation, implementation and acquisition of innovations on innovatively active business structures. The consolidation of both methods leads to the assumption that not all innovative enterprises are characterized by the same impact on the effectiveness of innovation management (Figure 1).
The application of the ABC-XYZ analysis method is carried out in three stages, which includes carrying out the ABC analysis (Ng, 2007), XYZ analysis (Dhoka & Choudary, 2013) and the combination of the results of the two steps in the ABC-XYZ matrix (Pandya & Thakkar, 2016, p.84; Stojanović & Regodić, 2017, p.37). So, first, it is advisable to consider each method individually, and then in interaction.
It should be noted that ABC analysis is an important method that can be used to identify the key points and priorities of innovation. This, in turn, makes it possible to identify the most significant areas of activity, to direct business activity in the field of increased economic importance and at the same time reduce costs in other areas by eliminating unnecessary functions and types of work and increase the effectiveness of organizational and management decisions due to their target orientation.
In our case, the use of ABC analysis is based on the Pareto principle of "Rule 80:20" or the law of "important minority" (first discovered and theoretically substantiated in 1897), which can be formulated as follows: "for most possible results, 80% a relatively small number of reasons corresponds to 20%, that is, 80% of the annual sales volume of innovative products is provided by 20% of innovative enterprises". In particular, innovative small businesses are divided into three groups.
Group A: includes small innovative enterprises that account for approximately 80% of the annual sales of innovative products.
Group B: includes small businesses that account for approximately 15% of the annual sales of innovative products.
Group C: Includes innovative small businesses that account for approximately 5% of annual sales of innovative products.
The ultimate goal of ABC analysis is to focus on the priority areas for the development of innovative small businesses, as well as to identify real ways to increase the sales of their innovative products.
XYZ analysis is an important method that can be used to group and classify innovation assets. XYZ analysis can be formulated as follows: "the accuracy of forecasting the reliability of innovation, which is ensured by effective management, depends on the stability of innovation activity, which is manifested in the periodic implementation of costs for innovation, implementation, implementation and acquisition of any innovations".
Group X: characterizes sustainable innovation. Effective management of innovative activities leads to stable implementation of costs for implementation, implementation and acquisition of innovations at the enterprises of Lviv region. The coefficient of variation is 0-10%.
Group Y: characterizes moderate, possibly unstable innovation activity. It characterizes instability and instability in the costs of implementation, implementation and acquisition of innovations in small business structures of Lviv region. The coefficient of variation is 10-25%.
Group Z: characterizes unstable and irregular innovation activity. The coefficient of variation is more than 25%.
The ultimate goal of ABC-XYZ analysis is to analyze the leading innovation activities and to formulate conclusions and proposals on the effectiveness of management in innovatively active small enterprises in the Lviv region.
Let's take a closer look at the ABC-XYZ analysis method on the example of innovative small enterprises in Lviv region.
Investigating the management of innovation activity, we determine that the object of analysis is to select innovatively active small enterprises in the Lviv region in 2019-2020, for which ABC and XYZ analysis will be conducted. From the statistical data of the Main Directorate of Statistics in the Lviv region and the accounting of enterprises, we form data on the state of innovation activity of small business structures in the Lviv region: the number of innovatively active enterprises, the list of innovative small enterprises, the directions of innovation activity.
We perform the ABC analysis, which is performed in the following sequence:
- From the statistical data the list of innovative small enterprises of the Lviv region in 2018 is formed.
- From the accounting data provided by innovatively active enterprises of the Lviv region, data on the annual volume of innovative products sold by cost are selected.
- The dimensions of the annual volume of innovative products sold by value are recorded in the ranking list in order from larger to smaller.
-The share of each small innovative enterprise in the Lviv region is determined by the cost of Cі in the total annual volume of innovative products sold as a percentage.
- The cumulative sum of the value of the annual volume of innovative products sold at the cost ΣCі of each innovative small enterprise of Lviv region is found.
- The innovative enterprises of Lviv region are classified according to groups A, B and C according to the cumulative share of the indicator ΣCі in the order of its growth (80%/15%/5%).
- The calculated results are shown in Table 1 and are shown in Figure 2.
Results Of Innovatively Active Small Business Structures Of Lviv Region According To ABC Analysis
|No||Legend||Name of Company||The relative part||Cumulative part||Normalized object number||Group|
|1||D7||PUBLIC JOINT STOCK COMPANY "GALICHFARM"||0,443||0,331||0,05||A|
|2||D5||"SAN GARDEN" SUBSIDIARIES||0,449||0,423||0,07||A|
|3||D14||AGROTORG TRADE AND MANUFACTURING COMPANY, LLC||0,453||0,453||0,08||A|
|5||D13||"JOINT UKRAINIAN-GERMAN ENTERPRISE" ELECTRONTRANS LLC||0,247||0,800||0,16||A|
|6||D15||ADDITIONAL LIABILITY COMPANY "SPRING-WEST"||0,033||0,831||0,18||B|
|8||D11||"GREEN MOUNTAIN" LLC||0,030||0,861||0,24||B|
|9||D12||LIABILITY COMPANY "IMVO" SCIENTIFIC AND MANUFACTURING COMPANY||0,026||0,887||0,29||B|
|10||D28||"HETMANN"RESEARCH AND PRODUCTION COMPANY||0,025||0,912||0,35||B|
|11||D8||LLC RESEARCH AND PRODUCTION ENTERPRISE"TECHNOWAGS"||0,027||0,912||0,35||B|
|12||D24||"EMBAVUD" UKRAINE LLC||0,019||0,912||0,35||B|
|13||D6||"SAFE GLASS FACTORS" LLC||0,018||0,927||0,40||?|
|18||D18||"FAKRO LIVES" LLC||0,014||0,965||0,53||C|
|22||D20||UKRAINIAN-ENGLISH JOINT VENTURE IN THE FORM OF LLC "HALKA LTD"||0,001||1,000||0,73||C|
|23||D21||PRIVATE JOINT STOCK COMPANY "ENZYM COMPANY"||0,000||1,000||0,79||C|
|24||D23||PRIVATE JOINT STOCK COMPANY "LVIV REFRIGERATOR"||0,000||1,000||0,87||C|
|26||D22||"LIABILITY INVEST" LLC||0,000||1,000||1,00||C|
|27||D19||"AKO INDUSTRIES" LLC||0,000||1,000||1,00||C|
|28||D16||"TAIFUN-PLUS" PRIVATE ENTERPRISE||0,000||1,000||1,00||C|
We perform XYZ analysis, which is performed in the following sequence:
- The list of small innovative enterprises of the Lviv region for the years 2019-2020 is formed from the statistical data.
- From statistical data information on directions of realization of innovative activity is formed: introduction of innovative types of products, realization of innovative production, new for the market, realization of innovative production, new for the enterprise, introduction of new technological processes, acquisition of a new technological line, realization of innovation costs of each innovative active small business.
- The coefficient of variation Vj,k is calculated for each innovative small enterprise of Lviv region according to a separate direction of innovation activity. To calculate the coefficient of variation Vj,k we use the following formulas:
where, Vj,k – is the coefficient of variation; σj,k – is the root mean square deviation; j,k –is the arithmetic mean of the indicator by the sum of periods; хі – is the i-th value of the indicator(in a certain period); n – is the number of periods; j, k – is the number of an innovative small business enterprise and the direction of innovation activity.
- The generalized coefficient of variation Vj of each innovative small business is calculated using the following formula:
where, V j – is the generalized coefficient of variation; t – number of directions of innovative activity; t=6.
- The generalized coefficient of variation Vj of innovatively active industrial enterprises of Lviv region is decreasing from the lowest to the largest.
- Classification of innovatively active industrial enterprises of the Lviv region by groups X, Y and Z is carried out according to the range of changes of the calculated coefficient of variation.
- The results of the calculation are summarized in Table 2.
Results of Innovatively Active Small Business Structures of Lviv Region By XYZ-Analysis
|No||Legend||Name of Company||The coefficient of variation||The cumulative value of the coefficient of variation||Normalize d object number||Group|
|1||D27||"HETMANN" RESEARCH AND PRODUCTION COMPANY||0,5640||0,5640||0,05||Z|
|2||D23||PRIVATE JOINT STOCK COMPANY "LVIV REFRIGERATOR"||0,6721||1,2360||0,07||Z|
|3||D19||"AKO INDUSTRIES" LLC||0,6824||1,2472||0,08||Z|
|4||D12||LIABILITY COMPANY "IMVO" SCIENTIFIC AND MANUFACTURING COMPANY||0,8080||2,0441||0,14||Z|
|6||D15||ADDITIONAL LIABILITY COMPANY "SPRING-WEST"||0,8333||3,7107||0,18||Z|
|7||D7||PUBLIC JOINT STOCK COMPANY "GALICHFARM"||0,8351||4,5458||0,21||Z|
|8||D14||AGROTORG TRADE AND MANUFACTURING COMPANY, LLC||0,8881||5,4339||0,24||Z|
|9||D22||"LIABILITY INVEST" LLC||0,9171||6,2400||0,29||Z|
|10||D20||UKRAINIAN-ENGLISH JOINT VENTURE IN THE FORM OF LLC "HALKA LTD"||0,9261||6,3600||0,35||Z|
|11||D21||PRIVATE JOINT STOCK COMPANY "ENZYM COMPANY"||0,9435||7,3034||0,35||Z|
|14||D13||"JOINT UKRAINIAN-GERMAN ENTERPRISE" ELECTRONTRANS LLC||0,9962||8,2997||0,44||Z|
|16||D8||LLC RESEARCH AND PRODUCTION ENTERPRISE "TECHNOWAGS"||1,0000||10,2641||0,46||Z|
|17||D16||"TAIFUN-PLUS" PRIVATE ENTERPRISE||1,0000||10,2963||0,47||Z|
|19||D11||"GREEN MOUNTAIN" LLC||1,0000||12,2963||0,59||Z|
|20||D24||"EMBAVUD" UKRAINE LLC||1,0000||13,2671||0,65||Z|
|23||D5||"SAN GARDEN" SUBSIDIARIES||1,0000||14,2762||0,79||Z|
|24||D18||"FAKRO LIVES" LLC||1,0000||15,2741||0,87||Z|
|25||D6||"SAFE GLASS FACTORS" LLC||1,0000||15,2862||0,92||Z|
Integrate ABC and XYZ analysis into the combined Table 3.
Integration Of Abc And Xyz Analysis Of Innovatively Active Industrial Enterprises Of Lviv Region
|No||Name of Company||Legend||ABC and XYZ analysis|
|1||PUBLIC JOINT STOCK COMPANY "GALICHFARM"||D7||A Z|
|2||"SAN GARDEN" SUBSIDIARIES||D5||A Z|
|3||AGROTORG TRADE AND MANUFACTURING COMPANY LLC||D14||A Z|
|4||AGROPOBUTSERVICE LLC||D1||A Z|
|5||"JOINT UKRAINIAN-GERMAN ENTERPRISE" ELECTRONTRANS LLC||D13||A Z|
|6||ADDITIONAL LIABILITY COMPANY "SPRING-WEST"||D15||B Z|
|7||"DOMAIN-PRINTING" LLC||D25||B Z|
|8||"GREEN MOUNTAIN" LLC||D11||B Z|
|9||LIABILITY COMPANY "IMVO" SCIENTIFIC AND MANUFACTURING COMPANY||D12||B Z|
|10||"HETMANN" RESEARCH AND PRODUCTION COMPANY||D28||B Z|
|11||LLC RESEARCH AND PRODUCTION ENTERPRISE "TECHNOWAGS"||D8||B Z|
|12||"EMBAVUD" UKRAINE LLC||D24||B Z|
|13||"SAFE GLASS FACTORS" LLC||D6||? Z|
|14||"KORMOTECH" LLC||D10||C Z|
|15||"SNEZHKA-UKRAINE" LLC||D26||C Z|
|16||"BAKER-UKRAINE" LLC||D4||? Z|
|17||"FURNITURE-SERVICE" LLC||D9||C Z|
|18||"FAKRO LIVES" LLC||D18||C Z|
|19||"VEEM-METALAVTOPROM" LLC||D27||C Z|
|20||"HINKEL-KOGUT" LIMITED LIABILITY COMPANY||D3||? Z|
|21||"FARMATRADE" SUBSIDIARY||D17||C Z|
|22||UKRAINIAN-ENGLISH JOINT VENTURE IN THE FORM OF LLC "HALKA LTD"||D20||C Z|
|23||PRIVATE JOINT STOCK COMPANY "ENZYM COMPANY"||D21||C Z|
|24||PRIVATE JOINT STOCK COMPANY "LVIV REFRIGERATOR"||D23||C Z|
|25||"ELGRAF" LIMITED LIABILITY COMPANY||D2||C Z|
|26||"LIABILITY INVEST" LLC||D22||C Z|
|27||"AKO INDUSTRIES" LLC||D19||? Z|
|28||"TAIFUN-PLUS" PRIVATE ENTERPRISE||D16||C Z|
Based on the calculations made, in order to analyze and draw conclusions about innovatively active industrial enterprises in the Lviv region, it is necessary to use the matrix representation method of integrated ABC and XYZ analysis, which is shown in Figure 3.
As a result of combining ABC analysis and XYZ analysis into an integrated matrix of ABC-XYZ analysis, we will get 9 groups that will allow us to form conclusions on innovation management at small enterprises in Lviv region (Figure 4).
Figure 4: Integrated ABC And XYZ Analysis Matrix On Managing Innovation In Small Businesses Lviv Region
Analyzing the results of the integrated matrix ABC-XYZ-analysis, it is found that out of seventeen innovative small enterprises of Lviv region only Public JSC "Galichfarm", "San Garden" Subsidiaries, Agrotorg Trade and Manufacturing Company, LLC and Agropobutservice LLC have a high volume of innovative products, but low. In particular, Additional Liability Company "Spring-West", "Domain-Printing" LLC, "Green Mountain" LLC, Liability Company "IMVO" Scientific and Manufacturing Company, "Hetmann" Research and Production Company, LLC Research and Production Enterprise "Technowags" and "Embavud" Ukraine LLC, is characterized by an average sales volume of innovative products. It is determined that all other research enterprises have low volume of sales of innovative products, low degree of reliability of the forecast due to stochastic innovation activity.
Therefore, the use of combined ABC and XYZ analyzes allows:
- identify the functional areas of innovation and innovation management in innovative small enterprises;
- identify key factors for effective innovation management that affect the number of small innovative enterprises;
- to increase the efficiency of the innovation management system in innovatively active enterprises;
- increase the share of innovatively active industrial enterprises by taking on the experience of effective management of innovative activity;
- redistribute management efforts according to skills and experience.
The implementation of these measures will allow industrial enterprises of Lviv region and Ukraine, in particular, to update products, technologies, receive information, financial, tax, legal support for the implementation of innovative programs, fully implement the innovative development strategy.
Positive experience gained by the region can be a potential example in the implementation of innovation policy in other regions of Ukraine in order to balance the level of their socio-economic development.