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Standardization Today and Tomorrow 
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Wi! fried Hesser 


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University der Bundeswehr Hamburg 

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ISBN 978-3-940385-06-2 

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Text in English, 33 pages plus 19 figure pages. 15 references 

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ABSTRACT (Maximum 200 words) 


Standardization is as old as human culture. In Germany alone, there are more than 20,000 standards, affecting all spheres of everyday life. 
They are not only an important foundation for the manufacture of all kinds of products, but also play an important role in jurisdiction. The 
standards elaborated by voluntary amalgamations of industry and all interested groups, represent the status of a country's technology and are 
an important basis for drawing up contracts and for settling legal disputes. On the road to achiev ing a common European market, for which 
free trading in goods is an absolute prerequisite, standards are an important instrument for putting the guidelines issued by the European 
Commission into concrete terms 


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1SL, German, Standardization, Industry, Technical standards. Technical specifications 

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Standardization 


TODAY 

and 

TOMORROW 


Herausgeber: Wilfried Hesser 


Important note 


This document was commissioned by the European Committee for Standardizations (CEN) 
Technical Cooperation Unit in the framework of a project financed by the European 
Commission through the Phare programme. The findings, conclusions and interpretations 
expressed in this document are those of the author(s) only and should in no way be taken to 
reflect neither the policies or opinions of the European Commission nor those of CEN. 

This paper is protected by copyright laws. You must keep it in strict confidence and treat it 
like any other copyrighted material. 

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in 
any form or by any means, electronical, mechanical, photocopying, recording or otherwise, 
without the prior written permission of the publisher. 

You will find further information about the Department of Standardization and Technical 
Drawing in the internet: 

Internet: http://www.unibw-hamburg.de/MWEB/nif/fnm/fnm.html 


ISBN 978-3-940385-06-2 



Preface 


The contributions presented in this book were drawn up as part of an EU project that took 
place in Poland in 1997 under the heading of 

Strengthening the Management Capacities ofPKN 

It was financed by and the responsibility of the PHARE/CEN-TCU/DIN consortium. 

The objectives in conducting the project were as follows: 

to create promotional material presenting the benefits of standardization, 
to present the benefits of participating in standardization activities and applying 
standards in business management to industry. 

A further task was to present part of the contributions at one-day conferences in three Polish 
cities. 

The conferences were held in October and November of 1997 in Katowice, Mikolajki and 
Warsaw. 

The conference agenda and the conference documentation were of impressively high quality. 
Particular mention should be made of the conference documents. These were provided to 
participants as a book written in Polish. This indicates the extraordinary level of commitment 
on the part of the PKN staff in preparing the conference programme. Sincere thanks are 
extended to them on behalf of the speakers. 

The conferences clearly showed that, in a society undergoing rapid economic development, 
standardization can only be repositioned by involving industry and business associations. 
Participants from these groups posed questions that primarily concentrated on the following 
areas: 


the economic importance of standardization for industry and commerce 
the organization development of standardization in the European Community 
the importance of standardization in the European legal structure. 

Our special thanks go DIN, Deutsches Institut fur Normung e.V., and the coordinator for their 
outstanding organization and cooperation during this project. 


Hamburg, May 1998 


Prof. Dr.-Ing. W. Hesser 



' Polish Committee for Standardization 


20071113019 



Contents 


Standardization in every day life 
Roland Hildebrandt 

Standard battles 
Jens Kleinemeyer 

Chances and risks of the implementation of ISO 9000 and ISO 14000/ 
EMAS 

Wilfried Hesser 

Standardization Strategies for a Company 
Axel Czaya 

Company Standardization 
Hendrik Adolphi 

Company standardization and strategic management 
Hendrik Adolphi and Jens Kleinemeyer 

CE-Marking and Trade into the European Union 
Roland Hildebrandt 

The standardization cycle 
Jens Kleinemeyer 

Function and structures of national Standards Institutes as a basis for 
securing their economic existence 
Wilfried Hesser 





Standardization in everyday life 


Standardization in Everyday Life 


Roland Hildebrandt 









Standardization in everyday life 


Contents 

1 Prolog 

2 The Development of Standardization 

3 Standardization as a Market Instrument 

4 Standards in Technical Law 

5 Summary 

6 References 


Page 


3 







Standardization in everyday life 


1 Prolog 

Well, here I am, sitting in my study and deliberating on how I will ever find a lead-in to such an 
extensive subject. So I take a sheet of paper, try to outline a structure and before I know it, I am 
right in the midst of the subject. This sheet of paper is of German DIN A4 standard size, the ball¬ 
point pen I am using has a refill cartridge designed according to DIN 16554. On the left side of 
this sheet of paper, there are punch holes that match DIN 821.1 am sitting on an office chair 
made according to DIN 4551 at a table made according to DIN 4549 and these pieces of furni¬ 
ture are standing on a fitted carpet made according to DIN 54345 and TFI EDV 2. In front of me 
is a computer (IBM standard) with a keyboard designed according to DIN 2137. Attached to the 

i 

computer is a printer designed for using DIN A4 paper that is able to convert the print data from 
my IBM-compatible PC into graphic characters. 

It is only when you look at the world around you with your eyes open that you realize how many 
spheres of everyday life voluntary standardization has found its way into. We sleep in sheets 
and blankets of standardized sizes, wear clothes from standardized size ranges and use electri¬ 
cal appliances that meet certain safety requirements. 


2 The Development of Standardization 

You could well think that standardization has developed because consumers want to be sur¬ 
rounded by a world they can easily grasp. 

But standardization in the sense of a general definition is as old as human culture. The origin of 
the word gives an impression of the long history of standardization. In Greek, the word "gno- 
mon' 1 (a standard is also called a "norm") means someone who has knowledge of or can judge 
something and it also designates the hand of a sun dial. This double meaning is also an indica¬ 
tion of what is the probably the oldest form of a definition or standard that can be found in his¬ 
tory. Long before man used defined characters to transmit information, and long before the first 
standards in today's sense were defined, in Mesopotamia, for the size of sun-baked bricks, the 
knowledge of certain courses in nature and the knowledge of time were decisive for the begin¬ 
nings of agriculture. Seedtime for the first cultivated field crops was determined by the position 
of the sun in the course of the year. The definition of this exact time, the establishment and re- 


4 







Standardization in everyday life 


turn of which were often connected with religious rituals, therefore constitutes the first definition 
and so in the furthest sense "standardization" in the history of mankind. 

But if you look at the origins of standardization work as it is today, you can soon see that it was 
the producers who were the first to try and lay down recurring product specifications. This can 
easily be accounted for on the one hand by the advantages of mass production that were 
achieved by making and using parts that were always the same and on the other hand by a 
certain regulation of the market due to the fact that competitors could reach agreement on spe¬ 
cific characteristics for their products. At the same time, the wide variety of parts on the market 
altogether and in the companies was narrowed down, a development that led to a simplification 
in the selection of purchase parts required. The fact that standardization was strongly influenced 
and speeded up from the outside in times of war can be explained by the general shortage of 
resources and the demands by the military for exchangeable components. This compatibility of 
products from various manufacturers plays a role that has recently become more and more im¬ 
portant in standardization, especially in the field of information and communication technology. It 
is not the existence of different systems side by side that ensures suppliers the possibility of 
being accepted by the consumers, but the ability to combine these different systems. By getting 
together in due time to determine standards or define interfaces between different systems, the 
suppliers of technical products ensure themselves market shares from the beginning. This not 
only saves them development costs, but also avoids expensive and costly fights over positions 
in the market that frequently end in the loss of all market shares, as the example of the dispute 
over the video recorder system (VHS, Betamax, Video 2000) shows. In the end, Sony’s Be- 
tamax system, which was superior in quality but more expensive, just could not hold its own on 
the market against the market pressure of JVC's lower-priced VHS system for which large num¬ 
bers of feature films were offered at favorable prices. The producers of more complicated and 
expensive technologies learned from this and with regard to the development of the CD player 
and digital versatile disc (DVD) agreed in due time on certain technical specifications. 

Although there are still suppliers in various fields who try to get their products accepted as de 
facto standards, but they either have a dominating position in the market or fill a specific market 
niche in which their products can hold their own. Experience shows that it is even more exciting 
to watch which digital television supplier will be able to succeed with his decoder system and 
whether agreement will be reached in the future on a joint interface between the different sys¬ 
tems on offer. 


5 





Standardization in everyday life 


Consumers also derive a benefit from industry's standardization activities that should not be un¬ 
derestimated - even though most of them are probably not aware of this. It is only because of 
the fact that the dimensions of many items of everyday use are standardized that it is possible 
for consumers to handle them so easily. What good is a light bulb that does not fit any lamp? 
Standardizing sockets is the only way of enabling the consumer to decide if he would prefer a 
colored, a frosted or a clear light bulb. An excellent example of the confusion caused by different 
standards can be seen again and again in clothes stores. The different trouser sizes given by 
European and American clothes manufacturers time and again give rise to amusing incidents. 
Who knows if his trousers must be size "94" or maybe "32 x 34"? At least you can be sure that 
once you have memorized the sizes, they will be right the next time, unless you have "grown 
out" of them. What benefit do textile manufacturers have from such a size system? They can sell 
their goods to all customers in a larger marketing area, and the customers can be sure that the 
clothes with the appropriate size label fit. Minor deviations are accepted. Some items of clothing 
"just differ". 

Specifying certain sizes and adhering to the specifications is the only way, for instance, of using 
Polish paper in American printers that are adapted to the requirements of the European market. 

It is a well-known fact that the Americans still hold on to their deviating paper standard ("Letter"). 


3 Standardization as a Market Instrument 

Sometimes, however, work with standards does produce some strange results. A German 
gauze manufacturer produces his gauze bandages without chemical additives. This leads to pa¬ 
tients being less allergies to them than when he used gauze treated with the approved bleaching 
agents. But unfortunately he does not treat his products as specified in DIN 61630. According to 
this standard, gauze is "a cleaned and bleached absorbent fabric [...] made of cotton". The stan¬ 
dard also contains the specification that "gauze must be white". As German hospitals may only 
buy material that conforms to the specifications of certain standards - and this includes DIN 
61630 - this company cannot sell its unbleached and untreated products to German hospitals 
because it does not manufacture its products in accordance with the specifications of the stan¬ 
dard. Due to the procurement directives of German hospitals, DIN 61630 assumes a de facto 
liability by which this manufacturer is excluded from the market. 


6 









Standardization in everyday life 


A farther example of the attempt made to render a market inaccessible for foreign products by 
the use of standards was the attempt by Japanese industry to prevent European and American 
ski manufacturers from importing their products onto the Japanese market by claiming that 
these manufacturers' products were not suited for Japan. The reason given was that Japanese 
snow had a different consistency to European or American snow. Only when the French threat¬ 
ened to investigate if maybe the roadway paving in France might have different characteristics 
to that in Japan - which could have had an immediate influence on the sales of Japanese cars 
on the French market - were the Japanese authorities ready to make concessions. 

This is how voluntary standardization was for a long time used by countries to prevent foreign 
competitors from selling goods in their own countries (a situation that conflicts with the idea of a 
common European market and the planned elimination of technical trade barriers due to differ¬ 
ent technical specifications in the member states) or even to exclude competitors from the mar¬ 
ket. This can and may of course not be the aim of voluntary standardization work by industry. 

On the contrary, the real concern is that agreement is reached on the joint determination of 
minimum requirements for technical products. Such regulation is of particular importance in the 
field of product reliability. For a consumer, it is important that his toaster only toasts the bread 
and not the kitchen. A person working in the facade or building trade must also be able to rely 
entirely on the fact that in the event of an accident his safety rope will really save him from a 
nasty fall. 

The far-reaching consequences of standardization can clearly be seen from the example set by 
the "bolt war" the Americans unleashed in the early 70's. Under the lead of General Motors, the 
so-called "Optimum Metric Fastener System (OMFS)" was developed, the threads of which were 
around 30 % less deep. This meant that washers could be slimmer as the core diameter of the 
washers was smaller, but at the same time they had to become longer to achieve the same 
strength due to the reduction of the effective diameter. American industry supported this project. 
The consequence would have been that 90 % of the metric bolts used on the international mar¬ 
ket would have had to be replaced by new ones. The West Europeans together with the East 
European nations asserted themselves against the Americans at the time of the "Cold War" 
(which required complicated behind-the-scenes diplomacy) and thus prevented the threat of bil¬ 
lions of dollars having to be spent to convert all the West and East European production facili¬ 
ties. 


7 






Standardization in everyday life 


But it would be too one-sided to regard standardization in this context just as a means of demar¬ 
cation. Leading economists are of the opinion that voluntary standardization is an absolute must 
for extensive and free international trade. No country can have a healthy economy if it does not 
face free competition in the world market. On the other hand, free standardization in the interest 
of industry is imperative if companies are to stand a chance of surviving on the international 
market. International economic experts have noted that ill-designed standards or standards that 
are not adopted in time can in the long term pose an obstacle to trade. In this context, early 
standardization, that often already takes place while a technical product is still under develop¬ 
ment, assumes ever higher status. Free standardization work based on consensus does not im¬ 
pede creativity or even hold up progress. It gives everyone concerned with technology the pos¬ 
sibility to influence and promote it. 


4 Standards in Technical Law 

In addition to considering standardization from the purely market economy angle, its importance 
in the jurisdiction of the European nations must not go unmentioned. Standards assume special 
importance when they constitute the interface between public law and technical specifications. 
The rule in Germany is that standards established by private standards organizations cannot be 
legally valid as the German constitution stipulates that the monopoly for law-making rests solely 
with the government. These standards do not become legally valid either if references are made 
to standards in laws. Nevertheless, there are various ways of making standards established by 
private standards organizations binding in application. 

Standards become legally binding, for example, whenever they are part of contracts between 
different parties who according to the contract are liable to observe these standards. These can, 
for example, be delivery contracts in which the manufacturer is liable to manufacture products 
according to the requirements of a certain standard. These kinds of regulations are often found 
in the building trade. Building constructors are liable under a contract to carry out work on the 
basis of specific construction standards and to use standardized construction material. They can 
also be membership agreements of certain organizations under which members are obliged to 
meet certain product requirements (in Germany, these are DEMETER in the field of food 
manufacturing or RAL for paints and varnishes). 


8 








Standardization in everyday life 


Nevertheless, standards not referred to in contracts can contain requirements that have a nor¬ 
mative character in the legal sense. This derives from the demands made by standards that as 
many addressees of the standards as possible, ideally all of them, use it and implement the re¬ 
quirements they contain. Every general industrial standard is based on the expectation that it will 
be used in practice. Standards must therefore not be seen merely as recommendations for so¬ 
lution to problems, but as a call concerning how to implement the requirements they contain. 

Pursuant to the German legal system, this call applies in particular for safety standards. It de¬ 
rives from the protective functions they contain. Safety standards serve to protect life, health and 
material goods and so, for the field of technology, express the requirements laid down in the Ba¬ 
sic Law with regard to physical integrity in concrete terms {see the German Basic Law, Article 2, 
first sentence: "(2) Everybody has the right to life and physical integrity. In terms of sub¬ 
stance. they are a reference to the idea of law, although they must be understood as technical 
standards and not as legal standards. Legal claims are affected when potentially dangerous ap¬ 
pliances / facilities are used. 

This form of organization can also be found at international level. The specification of uniform 
EU standards has been applied to the European standardization institutions of CEN, CENELEC 
and ETSI. They elaborate technical details of the basic safety requirements established in the 
EU guidelines. Just like German DIN standards, the technical specifications are of no obligatory 
or legally binding character. The protective goals specified in them can and may also be 
achieved technologically in ways other than those described in the standard. 

Standardization associations organized under private law thus make decisions that concern im¬ 
portant areas of social and business life. They therefore perform an important public function. 

The effects of safety standards in particular are clearly visible in the great importance for juris¬ 
diction in the field of technical safety. The law on technical safety in Germany, for example, 
comprises all the laws, ordinances and administrative provisions that deal with protection 
against dangers emanating from technical products or hazardous materials. The jurisdiction is 
characterized by the close coordination practiced between governmental jurisdiction and private 
technical rules. Governmental jurisdiction is limited to the legal determination of protection goals 
whereas standards contain detailed rules on safety needed to implement it. 


9 




Standardization in everyday life 


As the legal foundations for technical safety deliberately do not contain exact statements on the 
implementation of certain safety requirements, which instead are described generally by protec¬ 
tion goals, it is up to the producers of such technical products to decide on these goals are to be 
achieved. 

The precise purpose of technical standards is to provide the technician, who does not have the 
possibility to make adequate examinations, general guidance on conduct so that he is able to 
exclude individual faults, in particular in the field of technical safety. Nevertheless, every user of 
standards must check whether the standards that he or she is using really do adequately cover 
a certain danger. Someone only violates the necessary duty to take due care if they fail to notice 
obvious deficiencies in a technical standard that they should have recognized without special 
examination. They may not use standards that are obviously not right. Above and beyond that, 
they are not required to carry out any further examinations. 

In jurisdiction, standards are of high probative value. As they are established by a variety of 
qualified experts working together, they are often used by courts of law as a basis for the 
evaluation of technical matters. 

But authorities and courts of law are not obliged to use standards as a basis for decisions with¬ 
out examination. They can also decide in specific cases to seek an expert's opinion. 


5 Summary 

Standardization is as old as human culture. In Germany alone, there are more than 20,000 
standards, affecting all spheres of everyday life. They are not only an important foundation for 
the manufacture of all kinds of products, but also play an important role in jurisdiction. The stan¬ 
dards elaborated by voluntary amalgamations of industry and all interested groups represent the 
status of a country's technology and are an important basis for drawing up contracts and for set¬ 
tling legal disputes. On the road to achieving a common European market, for which free trading 
in goods is an absolute prerequisite, standards are an important instrument for putting the 
guidelines issued by the European Commission into concrete terms 


10 







Standardization in everyday life 


6 References 

Reuter, C.: 

DIN - Ordnung fur die ganze Welt; in: GEO Vol. 4 April 1995; p. 118 - 132; Hamburg 1995 
{DIN - Order for the Whole World) 

Eberstein, H.-H.: 

Sicherheitstechnisches Recht und Normen; in: Peters. O. H. u. A. Meyna: Handbuch der Si- 
cherheitstechnik; Miinchen, Wien: Hanser, 1986 
(Safety Law and Standards) 

Hildebrandt, R.: 

Entwicklung einer Methodologie zur Bereitstellung von Arbeitsschutzwissen fur den 
Entwicklungs- und Konstruktionsbereich - Working Paper, Bundeswehr University of Ham¬ 
burg, 1995 

(Development of Methodology for Providing Knowledge on the Protection of Labor for the 
Development and Design Sector) 

Landis, J. W.: 

Freie Welt - freier Handel -freie Normen; in: DIN-Mitteilungen 57. 1978, Vol. 1; S. 12-14 
(Free World - Free Trade - Free Standards) 

DIN 476 

"Papier-Endformate" und DIN 198 "Papier-Endformate nach DIN 476" 

("Trimmed Paper Sizes" and "Trimmed Paper Sizes to DIN 476") 

DIN 16554 

"Kugelschreiber-Minen" 

("Ball point pen refills") 

DIN 821 T 2 

"Schriftgutbehalter; Abheftlocher fur Schriftgut, Mafce und Anordnung" 

("Files and folders; Filing holes for records, dimensions and layout" 

DIN 4551 

"Buromdbel; Burodrehstuhle..." 


11 






Standardization in everyday life 


("Office furniture; Swivel office chairs ...") 

DIN 4549 

"Buromobel; Schreibtische ..." 

("Officer furniture; Desks ...") 

DIN 54345 T 3 

"Priifung von Textilien; elektrostatisches Verhalten ..." 

("Examination of textiles; electrostatic behavior...") 

TFI Information Sheets 

a 

TFI EDV 2 Guidelines 

"Textile Fulibodenbelage in Raumen mit elektronischer Datenverarbeitung" 
("Textile carpets in rooms used for electronic data processing") 

DIN 2137 T 2 

"Alphanumerische Tastaturen; Deutsche Tastatur fur Text- und Datenverarbeitung 
("Alphanumerical keyboards; German keyboard for word and data processing ...") 



12 






Standard Battles 


c: + n:\kp\Sekretariat Kampf um den Standard - Standard battles (JK) 16.11.98 / 14 01 99 


Standard Battles 


Jens Kleinemeyer 


Standard battles 


Contents p a g e 

1 Coincidences and Luck 4 

2 VHS Video Recorder versus Beta 2000 5 

3 The introduction of a New Credit Card 7 

4 The Development of the Personal Computer (PC) 9 

5 High-Definition Television 11 

6 Results 12 


2 








Standard battles 


1 Coincidences and Luck 

The long-term success of an enterprise depends on its capability to motivate its personnel, to 
produce at a low cost and to offer consistently good quality, but sometimes also on coincidences 
and a good measure of luck. The knowledge that coincidences have a decisive influence on the 
development of markets and enterprises is attributed to the theory of dynamic systems devel¬ 
oped in the 1970s. One of the core statements of this theory is that small changes at the begin¬ 
ning of a development can lead to considerable changes at the end. This view is also known as 
the chaos theory and has been applied to a host of systems such as the weather, the contrac¬ 
tion behavior of the heart, stock quotations, and also the behavior of certain product markets. 

While these dynamic aspects seem to be of less importance to some of these markets, such as 
construction materials, food and clothing, they do play a considerable role in other fields. The 
best-known examples are telecommunication, computers or entertainment electronics. In these 
markets there is a tendency for the product of one single company to become the leading prod¬ 
uct and to oust other products from the market. In the field of computers, the DOS / Windows / 
WIN95 operating system and the internet program Netscape immediately come to mind, in the 
field of entertainment electronics, the VHS standard for video cassette recorders (VCRs), the 
Philips and Sony CD format, and in the field of telecommunications, the "de facto standards" for 
fax machines, mobile radio or the telephone per se. 

The success of a company in global and regional standardization is thus becoming a prerequi¬ 
site for survival in an increasing number of lines of business. The first conflicts concerning stan¬ 
dardized technologies took place at the end of the 19th century, going largely unnoticed by the 
public. The determination of the track width for trains, the question of whether alternating or di¬ 
rect current should be used as a basis for national electricity networks or of what voltage should 
be used to operate these networks, or the question of what means of propulsion should be used 
for automobiles all occurred at this time. 

In the meantime, public interest in standardization processes also clearly gained in significance. 
Due to the fact that coincidences can let these processes turn in favor of any one technology 
there is always the possibility that a technology will establish itself as a de facto standard even 
though there are technically superior alternatives. This explains why, today, we must agree that 
gasoline-driven engines, for example, have major ecological disadvantages such as noise and 
pollutant emission and also political disadvantages, such as dependence on oil imports. 


3 



Standard battles 


A change from this technology, that can also be regarded as a de facto standard, to a different 
means of propulsion such as electricity, gas, alcohol, sun power etc., has failed because these 
means were either too expensive or there was no or is an adequate network of (gasoline) sta¬ 
tions available to supply the fuel required. What we would like to do here is to tel! the stories of 
some of these de facto standards and norms. 

2 VHS Video Recorder versus Beta 2000 

For a long time, it seemed that a device for recording, storing and reproducing TV pictures was 
only a product that television stations used to archive their shows. At the end of the 1950s, how¬ 
ever, a few companies recognized that there could also be a demand in private households, but 
the devices available at that time were too big, too heavy and clearly too expensive. 

The beginnings of this technology were characterized by a small number of cooperation projects 
and a large number of companies going it alone. This resulted at times in six companies were 
working on different technologies. The "famous" thing about these technologies was their abso¬ 
lute lack of compatibility, i.e. one producer's video cassettes did not fit into the devices of an¬ 
other. 

In the late 1960s and early 1970s, Sony in particular tried to open the market for the home use 
of these technologies, albeit in vain. It was some time before companies learned to understand 
consumer needs. These were, on the one hand, the possibility to record a TV show and watch it 
later and, on the other, to buy feature films and watch them any time they wanted to. Finally, the 
consumer also wanted the device to be transportable. These consumer demands led to a direct 
requirement with regard to the running time of the cassette: it was to be at least 90 minutes 
(which at that time was approx, the standard length of a feature film). The problem of the tech¬ 
nologies that entered the market up to the mid-1970s was that they provided less than 60 min¬ 
utes of running time and were still too heavy and too expensive. So technological development 
concentrated on the increase of running time, the reduction in weight and/or the lowering of 
costs and thus of the price. In this competition between several companies, the technological 
lead changed all of the time. 

In 1974, Sony was able to introduce the first prototype of the Betamax® Systems with a running 
time of 60 minutes. It was at least possible to reduce size of the format and obtain an acceptable 
price. In the meantime, Betamax® is generally considered to be the first technology for video 
cassette recorders. Betamax® was also the first system that was accepted by the consumers. 


4 










Standard battles 


Therefore in 1976 - the year it was introduced into the market - 70 000 Betamax® VCRs and in 
the following year 213 000 were sold in the USA - the USA being the most important market. 
Before the introduction of Betamax® into the market, Sony approached Matsushita and pro¬ 
posed a cooperation agreement aimed at helping the Betamax® technology to conquer the 
market. But Matsushita declined and decided in favor of the VCR technology of a an affiliated 
company - JVC. This system, the so-called Video Home System, better known as VHS, ousted 
Sony's Betamax® from the market within an extremely short time and from 1988 onwards, Sony 
was compelled to produce recorders to the VHS standard. 

About a year after Betamax®, JVC introduced VHS into the American market. Sony was able to 
cancel out the technological lead of a 120-minute running time compared with Betamax® within 
a few months, but in a short time Matsushita was also able to extend this time to 240 minutes. 
The two systems were not compatible, the Betamax® cassette being smaller than the VHS one. 
This explains the advantage that is turning out to be more and more true with regard to the run¬ 
ning time: a larger cassette simply has more room for magnetic tape than a smaller one. 

As we know today, it took VHS only eight years to completely oust its competitor, who started 
out at the same time, from the market. In 1988 no Betamax® recorders were produced, except 
for a very small number that were produced by Sony itself. VHS and Betamax® were not com¬ 
petitors in the usual sense in a market, but about a market. So the competitors chose different - 
practically diametrical - strategies, Sony tried to make profits by applying a rigid licensing policy, 
whereas JVC to a large extent renounced exercising its privileges and granted licenses at very 
moderate conditions so as to intensify the propagation of its own technology. Profits were to be 
obtained, on the one hand, from the expected amount of royalties and, on the other, from play¬ 
ing the role of technological trailblazer. 

It is meanwhile generally known that the "strategy of open licensing" pursued by JVC was deci¬ 
sive for the success over Sony's "strategy of closed licensing". On the other hand, it cannot be 
denied that by choosing its format more for technical than for strategic reasons, VHS had a per¬ 
sistent advantage with regard to the running time of the cassettes; a criterion of great impor¬ 
tance when it comes to buying. If Sony had chosen a large format like VHS and had achieved a 
similar running time, it is absolutely conceivable that households would now have Betamax® re¬ 
corders and VHS would be a thing of the past. A small change in this factor can have a large or 
even decisive influence on the development of product markets. Sony’s defeat hit a company 


5 




Standard battles 


with a financial backing large enough to compensate for the losses due to the VCR business, A 
defeat of this kind could have meant the end of the line for a smaller company. 

3 The Introduction of a New Credit Card 

Another example, one that does not have a directly technical character, took place in Germany 
in the late 1980s. In the early 1970s, credit cards started to propagate in Germany, though they 
could not really compete against the established means of payment. This changed when Ameri¬ 
can Express and Diners Club, the companies that had hitherto been active in Germany, were 
joined by further companies offering the Eurocard and Visa-Card. The analogy to the other de 
facto standards lies in the fact that even in the case of credit cards, the system tends to estab¬ 
lish the dominance of some few cards, the de facto standard for credit cards. In this case techni¬ 
cal interfaces are substituted by the willingness of retailers to accept the cards. 

The advertising drive the credit card companies made in the 1980s led to a further increase in 
the number of credit card holders and deep concern on the part of the retail trade. An increasing 
number of stores were forced to accept credit cards in order to avoid losing customers to their 
competitors or to facilitate impulsive buying. 

This increase in the credit card business led to louder and louder concern being expressed be¬ 
cause of the low sales revenue of retailing. It is true that credit card companies finance them¬ 
selves on the one hand by charging the credit card holders fees, but on the other hand - and this 
is of considerably greater importance - the store accepting them does not receive the total sales 
amount, some of the credit card companies even retaining up to 7 % of the sales amount as a 
charge. 

This situation led to the parent organization of the German retail trade presenting a credit card of 
its own in 1987: the Deutsche Kreditkarte (German credit card). It was to be offered on definitely 
more favorable terms than the known credit cards. The places willing to accept the credit cards 
were, for instance, supposed to pay 2,75 % in fees. 

The competitors' reaction to the Deutsche Kreditkarte was more positive than negative. With the 
introduction of this new credit card, they admittedly had a new competitor to contend with, but 
this additional company would help to promote the acceptance of credit cards as a means of 
payment. This effect would in the end be of advantage to all suppliers of credit cards. Only GZS 
(an amalgamation of German banks and credit institutions), the supplier of Eurocard, reacted 


6 








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negatively to the new competitor. After the breakdown of top-level discussions between the 
amalgamation of the German retail trade and the GZS, the GZS developed a strategy designed 
to prevent the introduction of the Deutsche Kreditkarte. 

It decided to introduce a credit card of its own, as competition for the Deutsche Kreditkarte. This 
card was to be superior to the Deutsche Kreditkarte in almost all points of interest. It was to be 
designed for international use ( Deutsche Kreditkarte: only national use), have banking functions 
{Deutsche Kreditkarte: does not have any) and be of less charge. The name was also supposed 
to clearly show its intention of providing competition for the Deutsche Kreditkarte: German 
Banking Card or Europlus . This competition product was to be introduced in the following year. 

The aim of this German Banking Card was and is clear: to be such a strong competitor that the 
introduction of the Deutsche Kreditkarte into the market would be impossible due to the fact that 
not enough places that would accept the Deutsche Kreditkarte and that it would not be possible 
to prompt enough customers to acquire the card. In order for a credit card to be a success, it 
must be widely spread among the credit card holders and a large number of places must also 
be willing to accept it. So while the one side was trying to establish these two networks in order 
to be able to introduce the Deutsche Kreditkarte, the other side was trying to do all it could to 
prevent it from being introduced. When signs began to emerge that it was difficult to establish 
both networks simultaneously, the retail trade amalgamation intensified its efforts to find places 
willing to accept the card. 

Just at that time an association, the members of which have stayed anonymous to this day, fifed 
a suit against the Deutsche Kreditkarte, complaining about the use of the term "Deutsche" and 
the colors "black, red, gold". The suit was based on the fact that the network of the Deutsche 
Kreditkarte did not cover all regions, so its name was misleading. This suit not only delayed the 
introduction of the card into the market, but also increased the sense of insecurity among the 
potential credit card holders and places of acceptance. The establishment of the networks of 
card holders and places of acceptance was successfully prevented. The Deutsche Kreditkarte 
project was officially ended on April 13th, 1989 - almost exactly two years after its announce¬ 
ment. This also marked the end of the efforts of the GZS to introduce the German Banking Card. 

4 The Development of the Personal Computer (PC) 

The first PCs were introduced in 1977, but the dynamic development of this market only started 
four years later with the entry of IBM into the market. When IBM introduced its own PC, it was 


7 





Standard battles 


enormously pressed for time. It therefore had to fall back on a number of additional purchase 
parts in order to be able to offer its own product on the PC market: e.g. the INTEL processor, the 
Zenith monitor or the Microsoft operating system. So due to the standardization power of IBM 
the PC had an open architecture: i.e. competitors are able to make IBM-compatible PCs without 
acting in violation of IBM patents. The only technology still in IBM’s possession - BIOS (Basic- 
Input / Output System) - became available to all other suppliers through a similar product of an¬ 
other company just a short time later. So IBM used its standardization power in the PC market, 
but did not have the means to turn it into profits. 

To remedy this evil, IBM decided to utilize the increasing advances in technology and use its 
own standardization power for the next PC generation, though with a number of protected tech¬ 
nologies in order to improve its own profits again. IBM's idea was to introduce a 32-bit computer 
and so to set a new de facto standard. IBM considered it a matter of importance to keep this 
project secret as long as possible in order to avoid undermining the sales of its own products 
and to leave its competitors no time for the development, preparation and implementation of 
counterstrategies. 

It came as a complete surprise to IBM when in September 1986 one of its long-standing com¬ 
petitors, emerging from IBM’s shadow, and no longer waited for powerful IBM to take the next 
step and beat IBM to it. Compaq presented its own 32-bit PC: the Compaq 386. This was a triple 
blow to IBM: firstly, its already damaged image as technological leader was further undermined; 
secondly, Compaq was trying to establish itself as a technological leader; and thirdly, this step 
marked the start for the build-up of a Compaq network of Compaq PCs and possibly set a de 
facto standard that would render all of IBM’s efforts, research and development work on a 32-bit 
technology of its own useless. 

IBM was in an extremely awkward situation. Its own product was far from ready for series pro¬ 
duction; so ways had to be found to prevent or at least delay the growth of the Compaq 386 . 

IBM decided to take a number of measures to undermine the potential Compaq 386 users' 
sense of security with regard to the success and compatibility of this new PC and the related 
software. This strategy proved to be exceptionally effective. In the important application domain 
of business, the Compaq 386 was only able to make very small profits. In addition, remarks 
were made at press conferences indicating that a breakthrough at IBM and in the PC market 
was imminent; this was generally understood to mean that IBM wanted to market a 32-bit PC of 
its own. 


8 








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At the beginning of 1987 IBM placed its new PC on the market: the PS/2. The fact that had for¬ 
merly been criticized with regard to the Compaq 386 had definitely and deliberately not been re¬ 
alized with the new IBM PC; its compatibility with the existing de facto standard. The heart of the 
IBM strategy was the idea of offering a complete system that in large companies would be able 
to interconnect high-capacity computers, mainframe computers and PCs. This was a task that 
could not be achieved with the old technology. Of the four new IBM PC models, only one in the 
end still came up to the existing de facto standard. The other three were based on another tech¬ 
nology for data transmission in the processor and on other computer components (bus). The 
older architecture can only carry out the parallel transmission of 8 or 16 bits, whereas the new 
IBM allowed the parallel transmission of 32 bits. Of course, IBM owned the rights for this MCA 
technology (microchannel architecture). This computer was to be supported or its performance 
optimized by the IBM operating system OS/2. 

The introduction of the two products "computer" and "operating system” was accompanied by 
intensive advertising worth a total of several million dollars. The first positive sales results were 
presented to the media effectively to make sure that there were no doubts about the success of 
the introduction of the PS/2. Even more important than the actual introduction of the computer 
was and still is the availability of software (remember the importance of the acceptance of credit 
cards or of video cassettes and the availability of feature films). IBM was able to attract a num¬ 
ber of software companies (such as Lotus and Microsoft) to OS/2; they all announced that they 
were going to develop software in the OS/2 format. 

In spite of these activities, insecurity in the market with regard to the future development of the 
PC market was so strong that no more than a few units were sold Nevertheless, IBM stuck to 
their patents and their restrictive licensing policy. They did so, expecting that the sales figures 
would rise by themselves as soon as all the components of the technically superior PS/2 and 
OS/2 systems became available. Even though IBM even stopped the delivery of the previous 
PC generation, that was selling very well, and so indicated very clearly that IBM was definitely 
and irrevocably committing itself to the PS/2, the insecurity in the market could not first of all be 
overcome. 

IBM then finally decided to grant licenses, but only to "good" competitors and on no account to 
low-price suppliers from the Far East. This move improved the penetration of the market with 
PS/2 PCs, but the PS/2 was not able to establish itself as a dominant de facto standard. Com¬ 
paq was still very successful in the market with its 286 PC. The performance of this computer 


9 




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was able to be constantly improved. Only 15 months later, IBM introduced a 286-compatible PC 
into the market and thus signaled the end of the PS/2 technology. What was left was just the 
compatibility of this PC with IBM's own OS/2 operating system. In order to deal the IBM technol¬ 
ogy the final death-blow, a consortium in collaboration with Compaq improved and enlarged the 
present bus structure (ISA). From today's point of view, it can be said that the introduction of the 
PS/2 PC technology and also the attempt to attack the position that Microsoft held with 
DOS/Windows by introducing the OS/2 operating system has failed. IBM's massive develop¬ 
ment and marketing effort was in vain. But much worse for IBM is the loss of its reputation as a 
technology leader and standard setter; a position that in the meantime has been taken over by 
other companies such as Compaq. 

5 High-Definition Television 

If the impression up to now has been that only companies participate in the dispute over com¬ 
patibility standards, then this impression is deceiving. Whole nations or amalgamations of coun¬ 
tries were and are involved time and again. The next story deals with the settling of such a con¬ 
frontation at political level. An organization affiliated with the United Nations is in this case the 
stage. It is the CCIR (now ITU-R), the committee responsible for the awarding of frequencies 
and standards for radio and television. 

At the general assembly of the CCIR in Dubrovnik in 1986, the Japanese delegation proposed 
the acceptance of the standard for high-definition television (HDTV) developed by a Japanese 
consortium with the support of the Japanese Department of Industry. While the American dele¬ 
gation took a quite positive view of this proposal, it met with considerable resistance from the 
European participants. Japanese industry had after all built up a dominant position in the hi-fi 
market and a successful standardization initiative would have clearly worsened the European 
TV set producers' still well-established position. The US position resulted from the fact that at 
this time there was indeed only one independent American TV producer. 

So after the Japanese proposal had been turned down due to the efforts of the European dele¬ 
gation, Europe started an extensive initiative to develop its own standard for HDTV. The frame¬ 
work used for this was EUREKA 95, a European Union research and development program. 
Within the scope of this program, the HD-MAC standard costing approximately 750 million dol¬ 
lars was developed between 1986 and 1992. 


10 






Standard battles 


While the US at first had a favorable opinion of the Japanese proposal, this attitude changed in 
1989. In its specifications for an American standard for high-definition television, the Federal 
Communications Commission (FCC), the competent authority, laid down requirements that the 
Japanese technology did not meet. The requirement for reverse compatibility in the new stan¬ 
dard played a decisive role in this. Reverse compatibility is a standard when older TV sets are 
able to read and recognized the new TV signal and therefore there is no necessity to buy a new 
TV set. 

Moreover, American policy-makers had in the meantime noticed that a new standard for high- 
definition television could well be seen as a possibility to bring American enterprises back into 
the market for TV sets. The FCC reacted by putting the new standard up for competition. Enter¬ 
prises were called upon to submit their new technologies so that they could be tested and the 
best technology established as standard. Shortly before the deadline for tenders was reached, 
the first completely digital system was submitted, whereas all the other competitors had submit¬ 
ted analog or analog/digital systems. In order to still give them a chance, the deadline was ex¬ 
tended and in the end four digital technologies competed for the new HDTV standard. After ex¬ 
tensive tests, the FCC found that no one technology was superior to all of the others, but that 
each had its strengths and weaknesses. The FCC then approached the enterprises with the 
proposal to either eliminate these weaknesses, submit and test the technologies again or to co¬ 
operate and combine the best components of each technology. The enterprises decided in favor 
of the fatter and founded the "Digital HDTV Grand Alliance". Since the beginning of 1997, the 
FCC has accepted the technology developed by this alliance as a standard. 

As the American market is the most important market for program production as well as world¬ 
wide sales, the US decision has far-reaching consequences. In 1993, the European Broadcast¬ 
ing Union officially declared that the efforts made to implement a European standard of its own 
were being called off and that it would now follow the decision of the FCC. Thus the European 
rejection of the Japanese proposal in Dubrovnik in 1986 and the subsequent initiative to develop 
the European HD-MAC standard were solely a (successful) attempt to ward off a Japanese 
standard. More important than the successful introduction of the European standard was evi¬ 
dently the warding off of the Japanese standard. 

6 Results 


11 



Standard battles 


Obviously the success and failure of enterprises or nations lie at times very close together: two 
enterprises offer comparable products to the market at the same time, one product having an 
edge in quality and the other in quantity, and after a short time one enterprise conquers the 
whole market while the other withdraws from the market. In another instance the introduction of 
a new product is prevented entirely by a product that has only just been announced. And then 
again it can happen that an enterprise successfully introduces a product and within no time at all 
loses control over the associated de facto standard and the suppliers of complementary prod¬ 
ucts make an enormous profit, while the innovator does not even attain an average share of the 
profit. 

The fact that the systems described here are dynamic systems leads to only one product design 
or only one enterprise staying in the market. So the enterprises display fierce determination in 
the question of capturing or defending these markets. Friends and allies must be won to in¬ 
crease the power of standardization; misinformation is used as a means to impede competitors 
or competitors are cut off or excluded from important resources such as television and feature 
films, computer programs or music productions. 

Of course, these are usually disputes between enterprises; consumer involvement is secondary 
at most. But ultimately it is the consumer who uses the products (video cassette records, credit 
cards, HDTV televisions or PCs). In the case of the European standard for high-definition televi¬ 
sion, it was in fact even the European taxpayers who had to pay for the development of a com¬ 
petitive standard to the Japanese proposal (without being asked to do so). So consumers 
should pay attention to how such trade rivalries are carried out. Because in the end the aim will 
always be to defend a market against competing enterprises or nations and in particular with re¬ 
gard to disputes between nations, the interests of just a few enterprises often determine policy. 
The knowledge of how such markets function and the behavior of those involved is therefore an 
essential prerequisite for the democratic control of this kind of dispute. 


Introductory literature could be found in H. Landis Gabel, 1991, "Competitive strategies for 
product standards: the strategic use of compatibility standard for competitive advantage", 
Gerhard Hess, 1993, "Kampf um den Standard", and Peter Grindley, 1995, "Standards, Strat¬ 
egy, and Policy". 


12 












Chances and Risks in Implementing 
Management Systems 

ISO 9000 ff. and ISO 14000 ff. and/or EM AS 


by 


Wilfried Hesser 









Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EMAS 


Contents page 

1 Introduction 3 

2 Management Systems 4 

3 Management Systems, e. g. ISO 9000 ff. and ISO 14000 ff. 5 

3.1 Management System ISO 9000 ff. 6 

3.2 Management System ISO 14000 ff. and/or EMAS 9 

4 Chances and Risks of Implementation 16 

5 Summary 20 

6 References 22 


2 










('/lances and Risks in the Implementation of the 
Management Systems ISO 9000 ff. and ISO 14000ff. and/or EMAS 


1 Introduction 

In view of the growing globalization in industry and trade, the more the products resemble 
each other in terms of price, design, quality etc., the more important the image of a manufac¬ 
turing country and thus the image of its products become as a factor determining the custom¬ 
ers decision to make a purchase. 

In the world league, for example, German products, with 35.1 % of the votes, are at present 
second as regards the assessment of their quality behind league leader Japan, whose products 
are rated excellent or very good by 41.2 % of the people questioned. They are followed by the 
USA with 34.9 %, the UK with 21.2 % and France with 20.8 %. Brazil is bottom of the league 
with 4.4 %, behind Mexico with 4.6 % and Russia with 5.3 %' 

Among the European consumers, the reputation of German products is unbeatable; 44.6 % 
consider goods from Germany excellent or very good. 

“Made in Germany”, a label German products were forced to bear for the first time 110 years 
ago by English industry, is still an indication for product quality, regardless of the increased 
internationalization of trade (figure 1/la). 

The industry of a country therefore not only has to produce high-quality goods; it also has to 
develop and safeguard an image that inspires the consumer to decide to make a purchase. 1 2 
Even though the Eastern European countries do not appear in the Bozell and Gallup survey, 
some of them are catching up. Burdened with an economy that was unable to meet competi¬ 
tion, most Eastern European nations have meanwhile embarked on an offensive economic 
course. Poland, Hungary, Slovakia and the Czech Republic are at the top. As far as economic 
growth is concerned, Slovakia and Poland are in the lead with a rate of 6 %. Poland’s econ¬ 
omy has benefited from a powerful boost in gross investments, which rose by 16% in 1996 
(figure 2). Success could also be achieved in the development of prices. While in 1991 and 
1993 there still were four-digit inflation rates, the figures in 1996 had dropped to 5.3 % in 
Slovakia, 8.6 % in the Czech Republic, 18.6 % in Poland and 19.8 % in Hungary. If this trend 


1 Bozell/Gallup Press Release 1996 

2 "Die Welt", 3 June 1995 - Wirtschaft (business section) 


3 








Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EMAS 


continues, the development will lead to an increase in productivity of the businesses and so to 
an improvement in the countries' competitiveness, 3 . 


2 Management Systems 

Asked about the objectives of their businesses, managers will simply answer: 

The objective is to constantly make a profit. 

In order to attain this objective, a product has to constantly hold its own on the market. A pre¬ 
requisite for this is qualified management, which essentially means management methods, i. e. 
techniques designed to ensure the efficient performance of management tasks. 4 

The most important qualitative management methods are: 

Management by objectives: Business management based on clearly defined opera¬ 
tional objectives, e. g. increase in turnover, improvement of quality, etc. 

Management by exception: Delegation of full responsibility for individual decisions to 
subordinates, consultation of superiors being confined to well-founded cases. 
Management by system: Systematization of management and control functions using 
regulations to ensure the consistent performance of recurrent activities. 

The quantitative management methods above all include the network technique, operations 
research, system analysis and various optimization techniques for consistent performance of 
recurrent activities 5 . 

If the first definition is used, the quality management system according to ISO 9000 ff. is a 
qualitative management method designed to ensure the optimization and consistent perform¬ 
ance of recurrent activities. 

3 "Osteuropas Reformstaaten hoien auf", Gerhard Krause, Deutsche Bank Research, "Anlage-Management", 

No. 4/1997, p.6/7 

4 "Was isl Qualitiitsmanagernent?" 


4 








Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EM AS 


The significance of research and development within businesses is generally recognized in 
Western Europe. As competition becomes keener, however, cuts are made even in this area. 
At the same time, doubts are being expressed that these cuts in the research and development 
budgets might in the long run jeopardize innovative power and thus competitiveness on the 
international market. The growth of the businesses, however, can only be achieved by means 
of accelerated product, process and structure innovations. 5 6 

The competitiveness of a country is only in part determined by the big businesses; innovative 
small and medium-sized businesses engaged in new economic fields are of equal importance. 
They make up the infrastructure environment in which the economic development of a coun¬ 
try can take place. According to a statistical investigation conducted by the Federal Ministry 
of Economics in 1991, approximately 90% of all Genna businesses have staffs of less than 
20 . 

3 Management Systems, e. g. ISO 9000 ff. and ISO 14000 ff. 

Certification according to ISO 9000 ff. experienced a boom all over the world in 1995. By 
December 1995, more than 127.000 businesses in 99 countries of the world had received a 
certificate according to ISO 9000 and 257 businesses in 19 countries an environmental certifi¬ 
cate. The leading countries as regards the implementation of ISO 9000 in Europe are the UK 
with 52,591 certificates issued, Germany with 10,236 and France with 5.535. In table 1. the 
Central and Eastern European countries are listed, e. g. Hungary with 309 with certificates 
according to ISO 9000, the Czech Republic with 180, Poland with 130 and Slovakia with 59, 
ahead of Russia with 22 and Bulgaria with 3 such certificates. 7 . In the sector of environmental 
certification shown in table 2, Great Britain is in the lead, with 61 companies having imple¬ 
mented the standards, ahead of Germany with 35 and Denmark with 21 .* 

5 Meyers Taschen lex ikon, Vol. 6, 1985 

4 "Deutschland ist von einerakuten Innovationsschwache befallen", Roland Berger. MB No. 61, 27.3.1997, p. 

16 

7 The Mobil Survey, ISO 9000. 

* The Mobil Survey, ISO 9000 NEWS, Vol. 5. No. 6. Nov./Dec. 1996 


5 









Chances and Risks in the Implementation of the 
Management Systems ISO 9000 ff. and ISO 14000ff. and/or EMAS 


Quality and the environment are being declared a "strategic goal" in many businesses. The 
cost increase resulting from this decision is offset by the fact that less products are faulty (no 
rework and rejects) and in particular disposal costs are reduced. 


3.1 Management System ISO 9000 ff. 

The ISO 9000 ff. standard series implemented in 1987 describes the requirements for a quality 
management system as well as possible methods for the verification of and by quality man¬ 
agement systems according to ISO 10011. ISO 9000 is a quality management and quality as¬ 
surance standard. It is also a guideline for the selection of the three models ISO 9001, 
ISO 9002 and ISO 903. With regard to quality assurance, these models describe the following: 

ISO 9001 Design/development, production, installation and servicing 
ISO 9002 Production, installation and servicing 
ISO 9003 Final inspection and test. 

A business is free to choose the model on which its quality management system is built and 
certified. 

ISO 9004, which provides the elements of the quality management system, is composed of 
two parts 

Part 1 Guidelines 

Part 2 Guidelines for service providers. 

ISO 9004 is intended to enhance the appreciation and support the implementation of the re¬ 
quirements of ISO 9001 to 9002 9 


9 "Qualitatsmanagemenl", JOrg O.R.Schwinning, 1996 


6 









C/uinces and Risks in (he Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EMAS 


Section 4 of ISO 9001, the standard which is most frequently used, describes the demands on 
a quality management system, grouping them in 20 elements. These elements include man¬ 
agement responsibility, quality management, contract review etc., down to servicing and sta¬ 
tistical techniques. ISO 9001, however, does not deline the level of quality, i. e. the quality of 
a product or service of a business. 

The time it takes to implement it is stated in specialist literature and varies from 5 to 
15 months. The assumed cost of the certification lies between 10,000 DM and 250,000 DM, 
depending on the line of business and size of the business concerned. The internal costs the 
business has to bear are between 100,000 DM and 1 million DM 10 . 

Jutting refers to studies conducted in several medium-sized businesses. He discovered that 
approximately 75 % of the spending on the implementation of ISO 9001 goes on internal 
costs and about 25 %, i. e. about 3,000 DM, can be ascribed to the certification". According 
to Sprenger, small businesses in Germany have to pay at least 10.000 DM, medium-sized ones 
up to 45,000 DM and large ones indeed some 100,000 DM. 12 . 

Certification of a quality management system is fundamentally optional. The certification 
procedures are essentially the same with all certification companies and include the following 
phases: 

the submission of the request. 

the optional pre-audit. 

the review of the documents, 

the audit at the business premises and 

surveillance and re-auditing. 


10 (vgl. Unteniehmensqualitat als Standortvorteil; Axel Poslinett, HB Nr. 31. 13.02.96, S. 19 

11 Jiltting, K.; Kom, G.; Mobius, M.: "Qualitatsmanagcmentsysteme in kleinen imd mittleren Untemehmen", 
VDI-Z. 135 (1993), No. 7-July, p. 34 - 37 

"Der ISO-Wahnsinn ..." 


7 










Chances and Risks in the Implementation of the 
Management Systems ISO 9000 ff. and ISO 14000ff. and/or EMAS 


With most certification companies, the certificate is valid for 3 years, with a review audit be¬ 
ing conducted every year. 

In the course of the implementation of quality management systems, more and more compa¬ 
nies decide to build up a quality management system and prepare for the certification without 
calling for external advice. The immediate realization by the staff is considered a particular 
advantage. The quality handbook is written in teamwork between the personnel in each area 
and the quality management department. 

According to a study by Leimbach 13 , the "claim to optimum work processes" is the main rea¬ 
son why most businesses opt for the certification (figure 3). 

A certificate does not protect a company from going bankrupt; in the long run, only busi¬ 
nesses that do not confine themselves to the certificate, but that subject both its product and its 
management system to a continuous improvement process will have a competitive edge. 

The industrial change is drastically affecting most small and medium-sized businesses, in¬ 
cluding the trade companies in Eastern Europe. In order to safeguard their existence and re¬ 
main competitive, these businesses will have to adapt quickly and effectively to new tech¬ 
nologies (new materials and manufacturing processes) as well as to adjust their quality man¬ 
agement systems and environmental management system to today's demands. 

If in the course of the structural change in industry, small and medium-sized businesses want 
to receive orders from large businesses, i. e. become a part of their manufacturing process, 
quality and environmental protection will play an important role in the selection of the ancil¬ 
lary suppliers. A study on the adoption of ISO 9000 in small companies, however, revealed 
deficiencies in the documentation of job contents and working processes. This tendency was 
confirmed at the 1996 Hanover Fair. Many small and medium-sized enterprises are unable to 
establish a quality management system according to ISO 9000 ff. and have it certified due to 
the high cost involved, particularly since it is not possible to apportion the expenses to the 


8 







('Ounces and Risks in the Implementation of the 
Management Systems ISO 9000 ff, and ISO 14000ff. and/or EM AS 


product prices. On the other hand, the implementation of a quality management system ac¬ 
cording to ISO 9000 is supported with EU and national funds. Up to 80 % of the costs accrued 
for consulting and certification are taken over. 

The trades organizations are responsible for supporting the companies in the implementation 
of quality management systems that match the size of each company concerned and the serv¬ 
ices it provides as well as for suggesting a certification that corresponds to its financial ca¬ 
pacities. As an economic group of a country, the trade companies (small and medium-sized 
businesses) play an important role. This group provides the subcontractors for the large busi¬ 
nesses of our country. In the future they will only receive orders if they arc able to fulfill the 
requirements of these businesses. In order to meet the increasing demand for quality manage¬ 
ment systems of the subcontracting companies faced with the requirements of the large-scale 
businesses and searching for technically suitable solutions, the author considers it necessary to 
build up certification companies within the trades organizations. By employing choice con¬ 
sultants who have many years of experience and can therefore take account of the peculiarities 
of the small and medium-sized trade companies, it will be possible for auditors and certifiers 
to conduct tailor-made certification audits at reasonable prices. N . The buildup of such struc¬ 
tures will also be required in the Eastern European countries in order to stop untrustworthy 
consultants. 

In contrast to the distinctly positive development in the industrial sector, only about 340 trade 
companies in Germany, from the motorcar workshop to the butcher, had certificates according 
to ISO 9000 ff. in 1995. 

3.2 Management Systems ISO 14000 ff. and/or EM AS 

Ecology must be worthwhile, the VDI-Nachrichten, one of Germany's best-known and recog¬ 
nized journals for engineers, wrote on 19 April 1996. The question is: Worthwhile for whom? 
For the businesses, for the shareholders, for the state or the government, for the people or even 

13 Study: "ISO 9000 ini Praxistest" 


9 









Chances ami Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff and/or EMAS 


for the certifiers? With the waste mountains rising exorbitantly, rivers stinking and treasury 
funds spent, some governments are recalling the old polluter pays principle, i. e. those who 
cause the damage have to bear the costs resulting from it. 

But how can entrepreneurs/ m an age rs be moved to go easy on the environment? For years, 
governments and parliaments in Western Europe have counted on regulatory measures, the 
result being innumerable acts and a situation in which the government authorities have in 
practice long since been unable to monitor the observance of the regulations due to the lack of 
funds and personnel in the Lander administrations. In this respect, the EU government is pin¬ 
ning its hopes on deregulation, direct responsibility and voluntary action on the part of the 
businesses, without government control. 

With the adoption of the EU EMAS regulation (environmental audit regulation) in 1993, 
Brussels gave a first signal. Every company carrying on a trade or business which proclaims 
war on the waste of energy, the emission C0 2 , the unlawful disposal of waste oil etc. may - if 
it has passed a test conducted by an independent environmental verifier - attach an eco label to 
its letterhead,. 

Whether many companies will in practice subject their business to the environmental certifi¬ 
cation remains uncertain. But as in the case of the ISO 9000 ff., major enterprises are expected 
to urge their subcontractors to have their businesses certified because they (the major enter¬ 
prises) are held liable by banks and insurance companies for environmental damage caused by 
their products via corresponding liability and risks classes and the respective premiums. The 
environmental audit is thus also intended to reduce risks in terms of civil and criminal law. 
Finally, certified businesses may expect exemption from administrative regulations, for any¬ 
one taking part in the environmental audit is intended to be exempted from certain reporting 
duties. 


The Environmental Audit Act, including its implementing regulation, has been in force in 
Germany since April 1995. It is based on the I993EC environmental audit regulation (EMAS 


Erste Erfahrungen mit Zertifizierung", Max -Dieter Behr, HB No, 75, 17.4.1996, p. B15 


10 











Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000 ff. and/or It MAS 


regulation), It requires particular importance to he attached to the proper performance of the 
environmental audit act prior to the build-up of an environmental management system. The 
actual slate must be established in accordance with Appendix 1 C of the regulation. Appendi¬ 
ces I C and 11 contain information in support of the environmental review of the company. 
The environmental policy of a business should not only be focused on the observance of laws; 
continuous improvement of the environmental management is part of the obligation as well. 
Environmental targets must be defined and quantified and deadlines for reaching these targets 
must be fixed. As far as possible and reasonable, the business must determine, for example, 
the percentage by which and the period in which it intends to reduce its current waste vol¬ 
ume 15 . According to the environmental audit regulation, an independent environmental veri¬ 
fier declares the environmental statement of the business valid. The companies inspected ac¬ 
cording to the environmental audit regulation are registered at the chambers of industry and 
commerce or at the chambers of crafts. The location of the business is entered in the EU reg¬ 
ister of sites and published in the official journal of the EU (figure 4). 

The manufacture of a product has an impact on the environment. For this reason, it is neces¬ 
sary to define limits for the impact businesses have on the environment: this is particularly 
true for air, water and soils. 

Environmental management systems are nowadays also certified according to ISO 14000 ff. 
Electrical engineering, food and mechanical engineering companies are trail blazers in envi¬ 
ronmental management. 

The ISO 14000 ff. standard series may be regarded as another international management stan¬ 
dard. It comprises general standards for the implementation of an effective environmental 
management system including the related necessary audits. This standard series specifies re¬ 
quirements for an effective environmental management system whose elements can be con¬ 
nected with other management requirements. There is no intention to create unfair trade barri¬ 
ers or to change obligations of the organizations based on laws. 


IS "Oko-Audit-Vcrordnung oder ISO 14001", Interview Josef Stoll, DQS, March 1996 








Chances ami Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000 ff. ami/or EMAS 


All the requirements ISO 14001 contains can be audited objectively. This work can be done 
by means of certification or self-declaration. 

This standard is applicable to all companies and organizations aiming at: 

a) implementing, maintaining and improving an environmental management system, 

b) ensuring conformity with their company environmental policy, 

c) proving this conformity towards others, 

d) having the company management certified by an external organization or by 

e) determining and declaring conformity with this international standard themselves. 16 

Particular attention should be attached to section 4 of ISO 14001. It describes the require¬ 
ments for an environmental management system which is to be introduced by an organization 
The ISO 14004 standard, "Environmental Management Systems - General Guidelines for 
Principles, Systems and Tools", is intended to support organizations in the introduction or 
revision of an environmental management system. 

ISO 14010 contains general principles for the performance of environmental audits which 
have to be observed by organizations, auditors and their customers in the auditing. 

ISO 14011 contains "Guidelines for Environmental Auditing - Auditing of Environmental 
Management Systems". 

"Guidelines for Environmental Auditing - Qualification Criteria for Environmental Auditors" 
are comprised in ISO 14012, 

At present ISO 14040 exists in draft form. It specifies principles and general requirements for 
life cycle assessment within the scope of environmental management. 

Further standards of the ISO 14000 series are currently being prepared: ISO 14041 (Environ¬ 
mental Management - Life Cycle Assessment - Goal and Scope Definition and Inventor}' 
Analysis), ISO 14042 (Environmental Management - Life Cycle Assessment - Impact As- 


16 ISO 14001, p. 6 


12 











Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO MOOOff. and/or EM AS 


sessment), ISO 14043 (Environmental Management - Life Cycle Assessment - Evaluation) 17 
and ISO 14050 (Environmental Management - Vocabulary) 1 \ 

The data required for an environmental management system should already be available in the 
businesses, since they are obliged to submit documentation and report under existing legisla¬ 
tion, e. g. the Federal Immission Control Act. |y 

The first step in the introduction of an environmental management system is the analysis 
phase which starts with an assessment of the present situation. One result of the basic analysis 
is the relevance table which provides a qualitative survey on the environmental impacts of the 
individual activities of the business, including the respective degree of importance. These data 
may be used to draw up a detailed list of all environmentally relevant activities 20 . 

Both documents, ISO 14000 and the environmental audit regulation EMAS, require a respon¬ 
sible environmental policy involving adequate measures by the management. One difference 
between the two documents is their origin. ISO 14000 is a standard applicable at international 
level and is therefore above all important for businesses engaged in worldwide activities. It 
thus applies to all sites, whereas the environmental audit regulation is only applicable within 
EU territory. 

Most authors drawing a comparison between the EMAS regulation and ISO 14001 point out 
the correspondence between the two as regards content. 

Both treat elements such as environmental policy, environmental programs and environmental 
management systems and both are based on a regular performance of environmental reviews 
or environmental audits. Both systems are applied on a voluntary basis. 

'The fundamental differences between the EMAS regulation and ISO 14001 are as follows: 

EMAS obliges the companies to publish an environmental statement, a document not 
required by ISO 14001, which calls for a certificate to be issued subsequent to auditing 

17 ISO 14040, p. 5 
'* ISO 14010, p. 7 

19 Myska, "Nacli deni QM", p. 161 -162 


13 







Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EM AS 


and leaves the question of informing the public about the receipt of the certificate at the 
discretion of the management. 

EMAS provides for an authorized environmental verifier to deliver an opinion, while, 
according to ISO 14000, a certification is performed by an auditor on the basis of a pri¬ 
vate law contract. 

EMAS requires that the internal audit is conducted in compliance with environmentally 
relevant laws; such a clear requirement is not contained in ISO 14000 ff. 

The two systems also differ in their performance requirements. Both systems use the term 
continuous improvement. 

In the ease of EMAS, this means the continuous improvement of the environmental per¬ 
formance of the business, whereas the ISO standard uses this term in the sense of the 
continuous improvement of the environmental management system. 

The EMAS system uses a further two criteria: 

The requirement for the economically viable application of best available technology , 
and - described in more detail in the appendix - the term good management practices. 
ISO 14000, in contrast, includes the declaration to avoid environmental impact 21 

The EMAS regulation is criticized, however, for the fact that the observance of statutory pro¬ 
visions alone is not considered a sufficient reference criterion. Another danger is seen in the 

* 

fact that an expert opinion according to EMAS does not provide any information about the 
environmental compatibility of a product, this subject being covered by a separate EU regula¬ 
tion. Another cause for criticism is the fact that the validation process only has to be repeated 
after three years, so that the companies can use the eco label during that period without having 
to furnish evidence of the improvement of their environmental performance 22 . 


20 Haflinger, "Kombiniert Oder getrennt". p. 44 - 45 

21 Dyllick, Hummel, p. 24-28. 

22 Kuhlmann, "Es Grtlnt.,'', p, 42 - 45 


14 







Chances and Risks in She Implementation of the 
Management Systems ISO 9000ff. and IS() 14000jf and/or EM AS 


Literature provides only little information about the costs. Between 1993 and 1995, 
14 businesses were supported by the Hessian state government in the introduction and con¬ 
duct of an eco audit. An audit cost between 15,000 DM and 114,000 DM. In his article, 
Schwarz quotes auditing costs for pilot projects ranging from 15,000 DM to 1 million DM.” 

An existing quality management system may be regarded as a favorable basis for the estab¬ 
lishment of an environmental management system. There are evident structural similarities 
between ISO 14001 and ISO9001. Both systems show the same basic structure and differ 
only in terms of emphasis. Whereas a quality management system is primarily adjusted to the 
requirements of the customers, an environmental management system is aligned to the entire 
environment of a business. 

A business which has already adopted a quality management system can choose from several 
possible methods of introducing an environmental management system: 

The environmental management system are completely integrated into the existing 
quality management system. 

All quality-related terms in the quality management system are neutralized. 

The quality and environmental management systems are integrated into a process- 
oriented management system. 

The environmental management system is introduced, regardless of the existing quality 
management system. 

The decisive aspect for a business is the environmental relevance of its activities. For busi¬ 
nesses which are in (he public eye or under severe observation as regards the environmental 
issue, an integration into the quality management system should not be favorable. It is ex¬ 
pected, however, that there is a trend towards integrating the requirements of the environ¬ 
mental management system into the quality management system. 24 


2> Schwarz, "Zuc kerb rot’, p. 201 
24 Hafliger, "Kombinierl oder getrennt", p. 46 


15 




Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff and ISO 14000ff. and/or EMAS 


4 Chances and Risks of Implementation 

The analysis of recognized technical journals in consideration of this article revealed that 
since 1994, more and more articles have appeared that make criticism of the way in which 
ISO 9000 ff. is being commercialized a topic of public debate. 

The introduction of a quality management system and its certification according to 
ISO 9000 ff. have almost become a must and may therefore be called de facto standard prac¬ 
tice. 

More and more certification companies are striving to get a share of the developing certifica¬ 
tion market. One result of this is that the certification audits are becoming increasingly sim¬ 
pler and cheaper. Also, the businesses have discovered that many certificates can in practice 
only be regarded as an admission ticket to the market and so represent not more than the com¬ 
pletion of formalities. In particular with businesses which strive for a quality management 
certification merely due to market compulsions, there is the danger that an artificial quality 
management system is established that has no effect on the qualities of products or services. 
There is all too sharp criticism of this approach, and the certifiers themselves are to blame for 
the doubtful value of their certificates. Businesses are responding to this practice of the certi¬ 
fiers by trying to get a certificate at minimum expense. 

This inevitably leads to the question: "Who certified your business?" "The Big Three", Ford, 
GM and Chrysler, set the standard back in 1995. A joint quality guideline known as QS 9000 
replaced their differing regulations. Anyone who wants to become a subcontractor of Ford, 
Opel or Chrysler in the future will in future have to fulfill the requirements of these compa¬ 
nies 25 . 

f 

Consultants are particularly criticized whenever they present their run-of-the-mill concepts 
and introduce formal structures without taking account of existing processes in businesses. 
Prof. C. Niedereichholz stales that the economic damage that gamblers and adventurers have 
caused in Eastern Germany after reunification and in Poland, the Czech Republic, Hungary 

25 "Nac!i der Euphoric droht Konfusion", Klaus Kayser, MB No. 187 of 27.9.95, p. 33 


16 






Chances and Risks in (he Implementation of the 
Management Systems ISO 9000Jf. and ISO 14000 ff. and/or EMAS 


and above all Russia after the opening of Eastern Europe, runs into billions. The holder of the 
chair of management consulting deplores the fact that there are "many incompetent and dubi¬ 
ous elements" on the consulting market 26 . 

Consultants often take recourse to formal and outdated concepts when implementing the 
ISO 9000. This suits many managers very well, as they tending to feel well on safe ground 
only, but it is often an impediment as far as the qualification of staff members is concerned'. 

It must be emphasized that the set phrase "quality management according to ISO 9000 ff." 
implies that the use of this standard guarantees quality. This is by no means the case, since 
certification according to ISO 9000 alone does not say anything about the quality of a product 
or service. 

Not least, consultants are said to be only interested in the money, a claim towards which ma¬ 
jor businesses in particular adopt an anti stance. The attitude of the consultants to want to earn 
as much money as possible is nothing really out of the ordinary, considering that the entire 
consulting and certification market in Germany is estimated to be worth approximately 
5 billion DM 28 . 

In order to counter the above-mentioned development in the certification sector, Hetrick con¬ 
siders it necessary to take the following measures 29 : 

to improve the competence of the accreditors; 

to ensure the effective examination and monitoring of the certifiers for minimum com¬ 
petence by the accreditors; 

to improve the competence of the certifiers beyond the minimum requirements; 


26 HB No. 169, 1.09.95, p. K1 

27 Essay, "Der ISO-Wahnsinn"; Re in hard Sprenger, Indusiriemagazin, 10/95 

2 * "Nach der Euphoric droht Konfusion”; Klaus Kayser, HB No. 187, 27.09.95, p. 33 
29 Dr. Klaus Petrik, "Extrempositionen zum Thema..,", DQS 03/97 


17 








Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff and ISO 14000ff. and/or EMAS 


to encourage organizations (businesses, administrations etc.) to select from among the 
accredited certifiers the ones who show having particular competence as well as to es¬ 
tablish and propagate selection criteria. 

The chances of implementing ISO 9000 lie in the reorganization and improvement of com¬ 
pany processes. Irrespective of all the criticism voiced, this has also been recognized by the 
managers. 

Strategic company objectives beyond the formal framework of ISO 9000 are derived by 
means of well-aimed project management. Such objectives are: 

using certification as a launching platform for an overall business concept for realizing 
understandable, documented and improved internal processes; 

getting certification accomplished within 12 to 15 months by a certifier recognized 
among experts. 

During an analysis and planning phase, the quite general requirements of the standard series 
are interpreted and transferred to a company's parameters. It is necessary to adapt the host of 
individual requirements to the actual conditions of the company. 

The most important tasks during the buildup and introduction phase are on the one hand to 
inform the staff and on the other to determine the scope and precision of the documentation, 
with account being taken of the specific conditions of the company. This gives the businesses 
the chance to identify the processes and procedures that are essential lor a stable and constant 
improvement of product quality. Documented in a quality management handbook, this forms 
the typical basis of a quality management system. 

The documentation of the quality management system can be divided into system-related and 
product-related documents. 

* 

Another important element of the quality management system arc the internal quality audits, 
which must be regarded as instruments designed to improve products and processes. The cru¬ 
cial questions are: 


18 







Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff, and ISO 14000ff. and/or EMAS 


Have the quality management measures been adopted? 

Are the written instructions at the workplaces? 

Arc the instructions being followed? 

Are the measures adopted effective? 10 

In order to constantly improve both the management system and product quality, it is neces¬ 
sary to constantly take corrective measures. These must be regarded as part of the manage¬ 
ment system. 

The quality management system, built up as a formal structure, will contribute little to the 
success of the company. Only a continuous improvement of its processes and products will 
make it competitive. 


50 "Qualitatsmanagcment-Systeme in kieinen Jutting, VDI-Z 135. 1993, No. 7 - July 


19 







Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff, and/or EM AS 


5 Summary 

Technical Committee (TC) 176 (about 300 representatives from 40 countries), the so-called 
"Quality Management and Quality Assurance" committee of the ISO, continues to adhere to 
the 'VISION 2000' strategy paper in its revised form. 

Strategic objectives for the standards of the ISO 9000 and ISO 10000 series are: 
general acceptance, compatibility now and in the future; 

consideration of an organization and its quality management system as a 'network of 
processes'; 

integration of customers, owner(s), staff members), suppliers and society; 

attachment of more importance to process assessment, QM system audits and QM sys¬ 
tem assessments; 

distinct positioning of the QM system within a super-ordinate management system, 

harmonization of QM standards with related standard management sectors such as the 
ISO 14000 series on environmental management systems 31 . 

The ISO 14000 series may be regarded as another set of international management standards. 
It will be far more difficult to implement them successfully than it was the ISO 9000 series. 

Environmental management is intended to be part of the strategic objectives of a business. 
Agreement must be reached on what the company's target environmental strategy is to be. 
When environmental management systems are established in practice, they are often found to 
have an end-in-itself character 3 *. 


31 Re-Vision 2000: "ISO/TC 176 geht in die langwierige Phase II Revision", Klaus Petrick, 1995/1996) 

32 "EMAS und/oder ISO 14001?" Dyllick, Uniwelt Wirtschafts Forum, volume 3. No. 3. Sept.]995 


20 






C 'fiances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000 ff. and/or EMAS 


Articles giving an outlook for the future say that there are plans to combine the quality and 
environmental management systems with other management components, e. g. employment 
protection management, to form a comprehensive management system' 1 (figure 5). 

Management systems are only aids and instruments for attaining objectives in an efficient 
manner. This is applies both to the quality management and the environmental management of 
a business. 

The objective of every business/manager, to constantly make a profit, cannot be reached by 
the introduction of modem structures alone, i. e. standard management systems, but only by 
the provision of innovative, high-quality and environmentally sound goods and services. 
Standard management systems are therefore always only pail of a successful business strat¬ 
egy. 


13 Presse-Info 05-97: http://www.din.de/aktuelles, vom 20.03.1997 


21 









Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000jf. and/or EM AS 


6 References 

Bozell/Gallup Press Release: 

Japan, Germany, U.S. Maintain Lead in Manufactured Goods. The Gallup Organiza¬ 
tion, INC., 47 Hulfisch Street, Princeton, N.J. 08542, USA 

Berger, Roland: 

Deutschland ist von einer akuten Innovationsschwache befallen 
(Germany is seized by an acute innovative weakness) 

Handelsblatt No. 61, p. 16,27.03.1997 

Behr, Max-Dictcr: 

Erste Erfahrungen mit der Zertifizierung 
(First experience with certification) 

Handelsblatt No. 75, special supplement 15, 17.04.1996 

Dyilik, T.; Hummel, J.: 

EMAS und/oder ISO 14001? Wider das strategische Defizit in den Umweltmanage- 
mentsystemnormen. 

(EMAS and/or ISO 14001? Against the strategic deficiencies in the environmental 
management system standards.) 

Umwelt-Wirtschafts-Forum, Volume 3 (1995), No. 3, p. 24 - 28 

Haflinger, Beat: 

Kombinierte oder getrennte Qualitats- und Umweltmanagementsysteme? 

(Combined or separate quality and environmental management systems?) 

Qualitat SAQ ASPQ, Volume 30 (1995), November/December edition, p. 42 - 46 

ISO 14001, p. 6 

ISO 14040. p. 5 


22 








Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EM AS 


ISO 14010, p. 7 

Jutting, Klaus; Korn, Goy; Mobius, Matthias: 

QualitStsmana ge mentsy ste me in kleinen und niittlercn Unternehmen. 

(Quality management systems in small and medium-sized businesses) 

VDI-Zeitung 135 (1993), No. 7 - July, p. 34 - 37 

Kayser, Klaus: 

Nach der Euphoric droht K on fusion. 

(Threat of confusion after euphoria) 
i landelsblatt No. 187, p. 33, 27.09.1995 

Krause, Gerhard: 

Osteuropas Reformstaaten holen auf. 

(Reformist states in Eastern Europe are catching up) 

"Deutsche Bank Research' Anlage-Management, No. 4, p. 6/7, 1997 

Kulilniann, Ulrike: 

Es griint so grun. Produkte umweltgcrccht entwickeln. 

(Things are growing so green. Developing environmentally sound products) 
Elrad-Magazin fur Elektrotechnik und technische Rechneranwendung, No. 4, p. 40 - 
45, 1996 

Lcimbach, Andreas: 

Studie: ISO 9000 im Praxistest 
(Study: ISO 9000 tested in practice) 

VDI-Nachrichten, Nr. 19, S. 10, 10 May 1997 


Made in Germany ist gefragt: 

(Strong demand for products made in Germany) 


23 



Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff. and ISO 14000ff. and/or EM AS 


Die Welt, 3 June 1995 - (financial section) 

Meyers Taschenlcxiknn: 

Volume 6, 1985 

Myska, Martin: 

Nach dem Qualitatsmanagement nun das Umweltmanagement? 

(First quality management - now environmental management?) 

Labor-Praxis, Volume 20 (1996), "Labor 2000" edition, p. 160 - 162 
'Labor 2000' 

Nicdereichholz, Christel: 

Besser als ISO-Zertifikate schiitzt ein Berufsrecht den Beralermarkt 
(Professional code provides better protection for the consultant market than ISO cer¬ 
tificates) 

Handelsblatt, No. 169, p, K 1.01.09.1995 

Petrick, Klaus: 

Re-Vision 2000; ISO/TC 176 geht in die langwierige Phase II Revision. 

(ISO/TC 176 enters the tedious phase II revision process) 

DQS-Berlin 1995 

Petrik, Klaus: 

Extrempositionen zum Thema... 

(Extreme positions on the issue of...) 

DQS 03/97 


24 





Chances and Risks in the Implementation of the 
Management Systems ISO 9000ff, and ISO 14000ff. and/or EMAS 


Petrick, Klaus;Renate Eggert: 

Umwelt- unci Qualitatsmanagementsysteme 
(Environmental and quality management systems) 

HanserVerlag 1995 

Postinctt, Axel: 

Untemehmensqualitat als Standorlvorteil 
(Business quality as a site advantage) 

Handelsblatt No. 31, p. 19, 13.02.1996 

Press release 05-97: 

Entscheidung zum Arbeitsschutzmanagement 
(Decision on industrial safety management) 
http://www.din.de/aktuelles, of 20.03.1997 

Schwarz, Peter: 

Zuckerbrol statt Peitsche. Die Oko-Audit-Verordnung markiert eine Wende in der eu- 
ropaischen Umweltpolitik 

(Carrot instead of stick. The eco audit regulation marks a turning point in European 
environmental policy) 

Umwelt, Volume 25, No. 5/6, p. 201, 1996 

Schwinning, Jiirg O.R.: 

Was ist Quali mismanagement? 

(What is quality management?) 

http:\www.worldemail.com/wetc/ubq/js, 1996 


25 



Chances ami Risks in the Implementation of the 
Management Systems ISO 9000 ff. and ISO 14000ff. and/or EM AS 


Stoll, Josef: 

Oko-Audit-Verordnung oder ISO 14001 
(Eco audit regulation or ISO 14001) 
DQS, March 1996 


The Mobil Survey: 

ISO 9000 NEWS, Volume 5, No. 6 Nov./Dec. 1996 


Environmental policy: 

Rechtsvorschriften fur die Ausfiihnmg der EG-Umweltauditverordnung 
(Legal provisions governing the implementation of the EC environmental audit regu¬ 
lation) 

Bundesministerium fur Umwelt, Naturschutz und Reaktorsicherheit 

(Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) 

Bonn 1996. 











Jan 93 

Sep 93 

June 94 

Mar 95 

Dec 95 

Austria 

101 

200 

434 

667 

1133 

Belgium 

180 

464 

870 

1226 

1716 

Bulgaria 




1 

3 

Croatia 



2 

8 

22 

Cyprus 


1 

5 

5 

7 

Czech Republic 


18 

47 

101 

180 

Denmark 

326 

608 

916 

1183 

1314 

Estonia 



1 

1 

1 

Finland 

185 

324 

496 

646 

772 

France 

1049 

1586 

3359 

4277 

5535 

Germany 

790 

1534 

3470 

5875 

10236 

Gibraltar 



2 

3 

4 

Greece 

18 

46 

90 

162 

248 

Hungary 

3 

23 

58 

125 

309 

Iceland 

2 

3 

4 

4 

12 

Ireland 

100 

893 

1132 

1410 

1617 

Italy 

188 

864 

2008 

3146 

4814 

Liechtenstein 



14 

14 

19 

Lithuania 





2 

Luxembourg 

4 

10 

21 

40 

48 

Macedonia 





1 

Malta 


1 

3 

7 

12 

Monaco 

1 

1 

2 

5 

5 

Netherlands 

716 

1502 

2718 

4198 

5284 

Norway 

91 

172 

400 

679 

890 

Poland 

1 

1 

16 

41 

130 

Portugal 

48 

85 

181 

257 

389 

Romania 



6 

15 

42 

Russia 


5 

8 

15 

22 

Slovakia 


5 

11 

27 

59 

Slovenia 

3 

16 

43 

62 

99 

Spain 

43 

320 

586 

942 

1492 

Sweden 

229 

365 

618 

871 

1095 

Switzerland 

410 

569 

945 

1520 

2065 

Turkey 

26 

65 

106 

270 

434 

Ukraine 


1 

4 

7 

8 

Yugoslavia 

1 

1 

1 



Europe excl. UK 

4515 

9683 

18577 

27810 

40019 

% Share 

16.23 

20.79 

26.40 

29.20 

31.41 

Countries 

23 

29 

34 

34 

36 


Table 1 : ISO 9000 Certification in Europe 

TE 265, ] - MB - Prof, Hesscr / Hr. Czysch 

TA BELLE 1DGC 
































Environmental certificates worldwide on 1995-12-31 


Argentina 

1 

Australia 

1 

Austria 

11 

Brazil 

2 

Denmark 

21 

Finland 

10 

France 

3 

Germany 

35 

India 

1 

Ireland 

3 

Japan 

4 

Netherlands 

74 

Norway 

3 

Korea 

19 

Sweden 

2 

Taiwan 

2 

Turkey 

3 

United Kingdom 

61 

USA 

1 

Total 

257 



Table 2 : Worldwide Environmental Certification 

TE 265 .1 - MB - Prof. Hesser 1 1 lr. Czysch 

TABEIXE2.DOC 

02.09.1997 








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University of the Federal Armed Forces 
Chair of Standardization and Technical Drawing 
Univ.-Prof. Dr.-lng. W. Hesser 



Standardization strategies for a company 


Univ.-Prof. Dr.-lng. W. Hesser 
Dipl.-Volksw. Axel Czaya 


September 1998 


Holstenhofweg 85, 22043 Hamburg 
Tel.: (040) 6541-3311; Fax: (040) 6541-2861 
e-mail: czaya@unibw-hamburg.de 





Introduction 


The increasing globalization of economic relations and the continuing integration of the 
worldwide data and information flow is to a large extent based on standards. In modem 
industrial societies decisions with regard to standards are of great importance. They determine 
the characteristics of the interdependencies of technological systems as well as their 
development capacities and they open up new market opportunities. In this context companies 
play an important role: They develop and market standards or participate (e. g. in committees) 
in their selection. 

In the beginning of the industrial revolution engineers recognized early the economic, 
technical and practical advantages of in-house standardization, i. e. harmonization of parts, 
products and processes. Company standardization is an integral feature of the transition from 
manual production to modem mass production based on the division of labor. In-house 
standardization leads to a reduction of variety, which in turn primarily leads to a reduction in 
costs by reducing the expense for storage, materials management and construction as well as 
by extending machine running times. In the following decades engineers in companies, 
committees and standardization institutions coordinated the industry- and nationwide 
harmonization of standards. With the increasing regional and international economic and 
technological interdependence of modern economies there has also developed an increasing 
requirement for a regional and international harmonization of standards, which is taken into 
account in the corresponding standardization institutions. Today the decision of which 
technologies will gain acceptance (especially in the promising fields of the computer and 
information industries) is primarily made in the marketplace. In this respect standards and "de 
facto standards" have significant a strategic influence. 

Although today many managers are well acquainted with the consequences of in-house 
standardization, they do not recognize the strategic dimension of standards and de facto 
standards. The intent of this contribution is to make clear what strategies can be employed by 
companies concerning standards and de facto standards vis-a-vis their environment. The 
description of company strategies is illustrated using examples primarily from the field of 
computer and information technology. 


Discussion of some terms 

Company environment 

First of all, the environment a company faces in a modern industrial society is of particular 
interest. The characteristics of the company environment effect considerably the scope of 
action of a company. 


2 







Elements of the company environment include the markets, where the company offers its 
products, competes - together with its competitors - for the favors of customers, procures 
intermediates (e. g. raw materials), hires workers and raises capital. 

National, regional and international standardization committees - in the following simply 
called committees -, in which the company meets with other companies of its industry as well 
as with other experts, decide on the introduction and the forms of standards. 

National, regional and international standardization institutions deal quasi 'full-time' with 
standards and exert great influence on the introduction and the forms of national, regional and 
international standards. 

The scope for formative action of the companies is influenced by the state, e. g. in its role as 
lawmaker or important customer. 

The legal system defines the companies' scope for formative action. 

Furthermore, the company is integrated into the "super system" society, representing social 
order, prevailing ethics and moral principles, manners, customs and the like. This super 
system induces 'rules of conduct' to which the company must submit if it wants to ensure its 
existence; elementary or permanent violations of these rules threaten the continued existence 
of the company. 

In principle the company environment is complex. A company strategy will always be 
oriented towards one or several of its elements. 

What is a company strategy? 

In the following a company strategy is defined as a plan for the conduct of a company serv ing 
its long-term business objectives and taking into account the company environment and its 
future (expected) development. 

Company strategies are determined by the company's business objectives. Business objectives 
are manifold, consisting of diverse, sometimes contradicting sub-objectives and may change 
in the course of time, Typical business objectives are for example maximizing profits, 
achieving a high market share or opening up new markets. Business objectives are not 
exclusively egoistic but extend also to the well-being of the company environment. In 
principle the prevailing objective is to secure permanently the existence of the company. 

What does standardization mean? 

The reader surely has an idea of the term 'standards' that can be used without any problem in 
everyday life. In decades of work the institutions dealing with standards have indeed 
developed a number of definitions clearly defining the objects and providing a good starling 
point for the following remarks. According to DIN EN 45020, at the European level the valid 
definition is: 

'Standardization: Activity of establishing, with regard to actual or potential problems, 
provisions for common and repeated use, aimed at the achievement of the optimum degree of 
order in a given context.' 


3 


Compatibility and network effects 


The subsequently described strategies primarily refer to standards whose purpose is to permit 
compatibility. These standards determine the ways in which technical products work together. 
Compatibility frequently permits establishing networks, which in turn are characterized by so- 
called network effects. The larger the number of users of a network, the greater the benefits 
for each individual user. This is the case, for example , in a telephone system. The benefit for 
the individual user is determined by the number of people he can reach. Since the number of 
users in the telephone system is very large, there is no incentive to fall back on other, less 
widespread means of communication. In addition to the benefits from the large number of 
users, a new network user can expect mature products and good service. 

Markets with network effects are frequently prone to monopolistic tendencies, i. e. in the end 
only one company or one technical solution dominates the market. 


Gaining acceptance for a de facto standard in the marketplace 

A company may try to establish its product in the market as a so-called de facto standard. The 
term de facto standard was coined in economic theory and refers to a product dominating the 
market due to network effects. 'WIN95', for example, dominates the market for personal 
computer operating systems. 

Gaining acceptance in a market means for a company, in particular, convincing customers that 
it has the better product. In general the target is to give the company a favorable market 
position, i. e. a big profit or a large market share. This should be particularly successful if the 
product is superior to competing products with regard to quality, performance characteristics 
or extended product features when it enters the market. If the product cannot be distinguished 
from competing products on the basis of its product features, a company may offer a better 
service, start a comprehensive advertising campaign or create a distinct image for itself by 
way of an unusual design. These strategies, however, are universally valid and may be applied 
by companies in every conceivable competitive situation. With regard to standards and de 
facto standards the following strategies are of particular interest. 

Cutting production costs by reducing the number of different parts 

A company that produces more economically than others can set a lower cost-covering price 
than its competitors and thus gain their customers. Reducing the number of different parts 
through company standards means reduced unit costs in materials management, storage, 
administration and engineering. Consistent orientation of manufacturing towards less varying 


4 





parts and products or towards extended machine running times can also lead to a reduction in 
unit costs. 

In development and production, for example, the introduction of a family or modular design 
may lead to a faster, more economical and safer design. In the case of modular design a 
number of follow-on designs are derived from one basic design in accordance with certain 
laws. The follow-on designs may, for example, differ from the basic design in size but have 
the same proportions. In modular design, on the other hand, standardized modules with 
different functions are combined into different overall solutions. 

Fixing of prices that do not cover the production costs 

If a company wants to increase the market share of its product, it may offer it at a price, which 
is lower than the production costs. This is generally called 'dumping'. If other companies 
pursue the same strategy, the result may be 'price wars', which may have negative effects on 
some of the participating companies or on the whole industry. 

Dumping is frequently observed in the ease of products that form the technological basis for 
the use of other products (the latter are called complementary products). If a customer chooses 
a certain product, he may be committed to the choice of complementary products. If the 
company offers these complementary products as well, it has the chance to at least 
compensate for the revenues lost through price dumping by a corresponding price increase for 
application software. 

In the extreme case prices are reduced to zero. Software companies sometimes give away 
their products to tie customers to their product range. A similar policy is to give away or to 
provide without cost complete versions which are only operational for a limited period of 
time, or operational demonstrator versions. 


The scope for formative action of a company whose product 
has gained acceptance as a de facto standard 

A company whose product has successfully gained acceptance as a de facto standard enjoys a 
monopoly and has far-reaching pricing and product styling opportunities. 

Setting excessive prices 

Such a company may set excessive prices because there are no competitors who may exert 
pressure by way of their pricing. The lack of competition may also lead to inefficient 
production and insufficient product quality. 


5 


Staggering of product introduction over time 

A company may dynamically stagger the introduction of products based on the de facto 
standard to maximize profit or revenue in the market in the course of time. 

Dynamic structuring of innovation cycles 

A company that has succeeded in setting a de facto standard may also dynamically structure 
the innovation cycles of its technology. Since there are no competitors, it is possible to stretch 
innovation cycles. Here the target is also to maximize profits or revenues. Especially in 
innovative industries competition exerts strong innovation pressure on all companies 
involved. A company in the computer industry, for example, that cannot cope with the 
enormous innovation pressure quickly falls behind. In this industry innovation cycles arc 
sometimes only 5 months. For a company with a de facto standard the innovation pressure 
may not be very pronounced. 

Exerting pressure on the manufacturers of complementary products 

Because of their market power, companies with a de facto standard can exert pressure on the 
product and innovation styling of the manufacturers of complementary products. For example, 
in the press there is a discussion of the influence of Microsoft on INTEL with regard to 
INTEL'S MMX technology, which was introduced in the beginning of 1997. The capability of 
INTEL'S MMX processors with regard to multimedia applications is greater than that of the 
generation of their predecessors. It is suspected, however, that MMX technology was not at 
the limit of what was technologically possible for INTEL. It was supposed that Microsoft, on 
the other hand, would have had problems in supporting a more capable technology than 
MMX technology with its software, and that Microsoft had therefore exerted pressure on 
INTEL to introduce the technologically inferior MMX technology in order to 'technologically 
keep in step' INTEL and Microsoft. This example shows that the shortcomings of a de facto 
standard can obviously also influence the technological progress in the complementary 
markets. 

The problems of replacing an inadequate de facto standard 

A de facto standard establishes a so-called 'installed basis': All actors involved are committed 
to one product, have more or less come to terms with this situation and can change to another 
product only at a considerable cost. Even if the shortcomings of the installed basis are 
common knowledge and there is also a better technology, the shift to a new product may be 
accompanied by social costs, which - if it is not imposed by the state - will prevent it. A 
company with an installed basis therefore enjoys a particularly secure market position due to 
the high costs involved in the replacement of the product by the users. 


6 








Strategic implications of downward compatibility 

In the computer industry the question of downward compatibility is of particular interest. This 
means the compatibility between one product generation of a company and the previous one. 
The advantage for a company is that the supply of complementary products is not reduced. On 
the other hand, when the company wants to guarantee downward compatibility over several 
product generations, this may become a self-inflicted problem. The reason for this is that 
downward compatibility affects the technical capability of the newest product generation 
(possibly exceeding the desired extent). A common example is the Microsoft operating 
system MS-DOS. Over many years and product versions Microsoft guaranteed the downward 
compatibility of MS-DOS to make a large amount of software accessible to the user. The 
result was, however, that all later versions of MS-DOS and Windows transported the 
deficiencies of the early MS-DOS versions. 

The technical shortcomings of the defacto standard in turn give other companies the oppor¬ 
tunity to attack it because of its apparent deficiencies. Whether such a strategy is successful 
depends on the market position of the de facto standard and the starling position of the 
challengers. 

On the other hand, a well-established company may give up or restrict the downward 
compatibility of its product quasi overnight. Then the customers arc often forced to adapt to 
this strategy or to choose (he more expensive product of another company. 


Strategies of companies without their own de facto standard 

Even if a company with a de facto standard obviously has a large scope of formative action, 
its competitors can also apply a number of strategies to improve the market positions of their 
products. 

Adaptation to the de facto standard 

The company may adapt its own products and technologies to the de facto standard as far as 
this can be done technically and with acceptable costs. An example is a software firm that 
previously wrote programs for APPLE computers and now, due to the small market share of 
APPLE products, writes programs for PCs. The competitors can try to gain market shares 
from the dominating company on the basis of its de facto standard. In the 80s this happened 
to IBM with its PCs. 

Replacing or circumventing the de facto standard 

If a company does not want to adapt to the established de facto standard, it can try to develop 
its own technology that is suitable for replacing or ’circumventing’ it, i. e. rendering it 


7 





superfluous. One example is a software-based solution with the potential to replace a 
hardware standard. 

Development of an adapter 

It is furthermore possible to develop an adapter that makes one's own technology compatible 
with the de facto standard of the competitor. One example is a PC emulator for APPLE 
computers used for running PC programs on the APPLE computer. 

The influence of coincidence 

Another important factor is coincidence. During the phase in which several products penetrate 
the market which are all capable of becoming a de facto standard, i. e. in the 'infiltration 1 
phase, frequently factors that cannot be influenced by the company decide on success or 
failure. This includes, for example, the (possibly insufficient) level of information of the 
customers, their expectations with regard to the future development, unpredictable variations 
in the preferences of the customers, historical circumstances and the more or less accidental 
sequence of the first buying decisions, which due to network effects already favor a certain 
product. The victorious product, however, does not in any way have to represent the best 
technology. 

IBM's decision to select Microsoft's 'MS-DOS’ as the operating system for its personal 
computers can be interpreted as a 'lucky coincidence': Without this decision Microsoft would 
hardly enjoy the dominant market position it has today. 

The possibilities of influencing committees and the state 

In addition to the application of market-directed strategies, companies can also influence other 
social institutions (e. g. the state or a committee). 

The influence of companies in committees 

The influence of companies in committees largely depends on the decision and voting 
mechanisms that apply there, In general each company participating in a committee will be 
eager to promote its own technology as the best solution and to implement at least some of its 
elements into the standard on which the committee is to decide. Companies with a de facto 
standard are sometimes interested in preventing decisions that are directed against their 
standard. Particularly when decisions must be taken unanimously, this is easy. Under these 
circumstances a veto may block an undesired decision. Voting mechanisms have their special 


8 





characteristics, which may favor a certain result. The participant who is aware of this may use 
it to gain a strategic advantage in committees. 

Influencing the state 

"Lobbying" is an instrument with which companies or whole industries exert direct influence 
on the state. Here influence is exerted on the representatives of political power by certain 
representatives of company interests such as associations. The latter spend their time in the 
sphere of political power, articulating the claims and demands of the companies. 

In most states the entanglement of companies and the power of the state has progressed very 
far. Businessmen are active in politics, promoting their own interests, and politicians are 
working quasi 'part-time' for companies, but always in elevated positions, for example as 
members of the supervisory board. 

Due to its prominent position, the state is a particularly important customer. Because of their 
significance, the procurement decisions of the state often directly define a de facto standard. 
For companies able to provide the relevant technology it is very tempting to exert influence 
on national decision makers in this context. 


Legal means of a company 

Patents, copyrights and licensing 

The legal system allows a company a number of possibilities to protect its own technology, e. 
g. through patents, protected designs and copyrights. 

Patents may exclude other parties for a certain period of time from the use of the patented 
technology. It is possible, however, to grant other companies the right to use this technology 
through licensing. In many situations licensing has proven its value as a strategic instrument 
for the market penetration of a company's technology. For this purpose a company may 
basically use two strategies: On the one hand it may generously grant licenses to spread its 
own technology widely; on the other hand it may try to collect all profits from the use of its 
own technology with a restrictive licensing policy. A well-known example for the superiority 
of generous licensing in contrast to a more restrictive policy is the victory of the JVC VMS 
format over SONY'S Betamax format in the VCR market. 

The role of litigation 

Another alternative for pushing through one's interests, e. g. against competitors, is litigation. 
The stormy development of the computer industry since the beginning of the 80s has been 
accompanied by a large number of legal disputes. Here regularly company X charges 
company Y of illegally copying the patented technology of X. At issue are therefore the rights 
to the sole use of one’s own technology, which very often has the potential to become a de 
facto standard. 


9 


But the litigation wave is also an expression of the fact that the existing legislation is 
inadequate for dealing with the radically different circumstances in the computer industry that 
is undergoing a stormy development. Companies aware of the legal system's deficiencies of 
the (e. g. a lawsuit takes very long, while the product life cycles in industry are very short) can 
gain a strategic advantage at this level. 

At the same time the attempt to apply these laws to new technologies can not only hinder, but 
even become an existential threat to technological development. The Internet, for example, 
poses totally new challenges to the traditional copyright because it can be used to download 
all kinds of data (which may be copyrighted) to one’s own computer and to use them at will. 
At the end of 1996 an international meeting in Geneva discussed measures to tighten the 
copyright in the Internet. According to computer experts, this could be the end of the Internet 
as a data highway. 


Dynamics of contemporary growth markets 

The presentation of company strategies and of the corresponding examples shows that 
especially in the future markets, for example in information technology, standardization 
questions play a prominent role. The specific market conditions open up enormous growth 
potentials and the chance to obtain a monopoly and make large profits. These markets are 
characterized by a stormy, sometimes incalculable development, but also by a number of 
bizarre phenomena: For example, quasi overnight coalitions are formed between companies, 
which even experienced market observers had never expected to cooperate, and these 
coalitions are dissolved as quickly as they were established. Companies that cooperate do so, 
for example, to be able to confront a powerful competitor who might have a de facto standard 
or to jointly launch a new technology offering new growth potentials. Frequently companies 
working together in one market are fierce competitors in other markets. Because of the 
complex interrelations it is sometimes difficult even for experts to find out the real motives of 
company strategies. 


Conclusions 

Today standardization is an important factor not only in high technology markets, but also in 
practically all industries and spheres of life. When standards are introduced by national, 
regional and international standardization organizations, companies have the opportunity to 
make essential contributions to the formation of these standards. In connection with standards 
companies have special opportunities (e. g. with regard to possible profits), but also a special 


10 





responsibility, because standards have a special influence on social well-being due to their 
general scope of validity. 

Even industries in which at first glance standardization questions do not play a large role can 
be directly affected very quickly by standardization decisions in other areas (e. g. at the 
international level). Frequently companies without their own standardization department have 
difficulties in recognizing the importance of national, regional and international standards for 
the company and in reacting to relevant situations. The reason for this is that the 
responsibilities, the know-how and the relevant data are spread over different divisions and 
that there is no division witli direct responsibility for standardization in the company. The 
inability to implement appropriate strategies in standardization matters can have lasting 
negative effects for a company. It is therefore advisable to be informed about the national, 
regional and international development of standards to be able to react to future standards and 
their development. 


References 

for further information the interested reader may refer to: 

1, Besen, Stanley M. and Joseph Farrell (1994): 

"Choosing How to Compete: Strategies and Tactics in Standardization; in: Journal of 
Economic Perspectives Vol.8. pp. 117-131. 

Tit is article from the field of management science deals with standardization; it is readily 
comprehensible even for non-economists and introduces the reader to the ways of thinking of 
economists. 

2. The DIN-Mineilungen published by ’Deutsches Institut fur Nonnung e. V.' deal with a wide 
variety of facets of standardization mostly from the point of view of engineering. 


It 



Company standardization 


Hendrik Adolphi 







Contents 


Page 


1 Introduction 

2 Company Standardization 

2.1 Aims 

2.2 Areas of Employment 

2.3 The Standards Pyramid 

3 Integration of Company Standardization into Firms 

3.1 Task Areas 

3.2 Organizational Aspects 

3.3 Examples 

4 Evaluation of Company Standards 

4.1 Costs and Benefits 

4.2 Cost Effectiveness 

5 Conclusion 

6 Annex 





1 Introduction 


National, European and international standards influence companies in many ways: conformity 
with them may be a prerequisite for market entry or may be demanded by customers. Moreover, 
standards form an important basis for international trade and enable markets to merge while at 
the same time reducing trade barriers. There are various reasons for this: 


1. Standards define the minimum requirements for the exchange of goods and services between 
different markets. 

2. Standards influence customers' satisfaction with goods and services. 

3. Standards guarantee compatibility between different components of a system. 

4. Standards permit problem-free transfer of know-how and technology between commercial 
partners. 


One example of the great significance of standards for companies is the EN 81 standard which 
standardizes, amongst other things, the technical safety requirements for passenger lifts. When 
this standard was passed in 1978, it radically changed the passenger lift market in Europe. 
Closed national markets with individual safety requirenrfents were turned into one common 
market. As a consequence, large enterprises operating throughout Europe were able to reduce 
their production costs because different versions no longer had to be built for individual 
countries. At the same time, competition increased because the common market was then also 
of interest to companies which had up to then operated only at national level. 


The considerable importance of standards for companies also becomes apparent when looking 
at the purchase volume. An examination of American enterprises showed that between 50 and 
90 per cent of all procured parts and material are defined by standards. 







Due to the considerable significance of standards for their economic success, companies must 
concern themselves seriously with standardization and its various aspects. Within the context of 
this paper, one of these aspects, company standardization, will be dealt with in depth. For the 
purpose of this paper, the concept of "company standardization" designates the standardization 
of material and immaterial objects used recurrently for the benefit of the company. 


Firstly, aims and areas of employment of company standards are described while the 
subsequent section deals with the integration of company standardization into the firms and, 
finally, the evaluation of company standardization is briefly discussed. 


2 Company Standardization 

2,1 Aims 

Company standardization can be used to pursue various aims. One can differentiate between 
three primary aims (see fig. 1). 


The first primary aim refers to the market requirements. The market, i. e, the customers of a 
company, demand that certain standards with regard to company products or the organization of 
the company must be observed. These demands must be integrated. 


The second primary aim - influencing surrounding factors - requires a number of activities, for 
example passing information about relevant standards on to customers or participating in 
standardization committees. 

The implementation of the third primary aim leads to positive savings within the company. These 
result from, for example, a reduction in the variety of individual items or products, from 
safeguarding company know-how by means of company standards and from implementing 
government directives, for example EC-directives. 



This short description of primary aims underlines the comprehensive character of company 
standardization and gives initial hints as to the benefits of an active company standardization 
policy. 


2.2 Areas of Employment 

The areas in which company standardization can be employed are not only on the technical side 
of a company but also, for example, in the commercial and administrative departments. The 
following is a description of how company standardization using an integral approach is reflected 
in six different areas: 


1. Sales and Marketing 

Examples of company standardization in sales and marketing are optimum packaging design as 
the prerequisite for smooth-running logistics or a consistent concept for the processing of 
orders. An additional task area results from the need to inform the customers in what way the 
products of a company are compatible with national, European or international standards. 

2. Research and Development 

The classic area of company standardization is reduction in variety, for example, with regard to 
recurrent parts, semifinished products or products, which is achieved by employing appropriate 
classification and identification methods which guarantee a retrieval of solutions already 
available. In addition, calculation and design procedures can be standardized, too, 

3. Quality Assurance 

Company standardization is a vital prerequisite for high quality products because it documents 
the main processes of quality assurance as well as the specifications to be observed. 







4. Management 


In the management field, company standardization is used in cost accounting and, above all, in 
data processing. The definition of cost accounting procedures by means of company standards 
guarantees the compatibility of data from different branches of one company. The 
standardization of interfaces for the exchange of data between different user programs, on the 
other hand, constitutes the basis for problem-free flow of computer-supported information within 
the company. 


5. Personnel Management 

Company standards can constitute a basis for personnel policy when they define, for example, 
vacancy descriptions, salary structures or training plans. 


6, Production 

As far as production is concerned, company standards can on the one hand define the 
machinery and plants to be procured so that stocks of spare parts can be reduced whilst on the 
other setting out optimum work procedures and processes . 


2.3 The Standards Pyramid 

Company standardization is an integral part of national, European and international 
standardization: Company standards form the basis for standards above company level (see fig. 
2). However, some standards above company level are derived from company standards. At the 
same time there are considerable differences between the standard levels described: 
International standards are a compromise between the interests of the different countries while 
company standards can be developed in accordance with the individual requirements of every 
company. Moreover, company standards, as a rule, are more up-to-date and are technologically 
more advanced than standards above company level because they can be elaborated without 
having to undergo time-consuming agreement processes 





These interrelations underline the significance of active participation of companies in 
standardization above company level: This applies not only to national but also to European and 
international standardization. The number of national standards is decreasing in proportion to an 
increasing number of European and international standards. In Germany 80 per cent of all DIN 
(German Industrial Standard) standardization projects referred to national standards in 1984. By 
1995 this proportion had dropped to only 25 per cent. Many large companies have reacted to 
this development and have consciously made their standardization strategies consistent with a 
participation in European and international standardization. A company which does not 
participate in European and international standardization foregoes its opportunity to influence 
standards to its own advantage. 


3 Integration of Company Standardization into Firms 

3.1 Task Areas 

The explanations in the previous section gave an initial overview of the various facets of 
company standardization as well as of the areas in which it is employed within a company. Four 
task areas of company standardization can thus be identified: 

1. Identification of standardization needs 

The starting point for company standardization is the identification of potential standardization 
needs within the individual company departments. 


2. Development of company standards 

If no adequate standards above company level are available to cover standardization needs, 
appropriate standards have to be developed or standards above company level must be 
adapted so that they will satisfy the needs of companies. 

3. Availability of company standards and standards above company level 











The prerequisite for the implementation of standards is their availability, i. e. the employees of a 
company should have direct access to the respective documents. First, standards above 
company level must be obtained. Additionally, it is necessary to make copies of company 
standards and standards above company level and to distribute them within the company. A 
further task is the establishment of a standards information system with the aid of which 
employees can obtain information on whether company standards and standards above 
company level exist. 


4. Influencing standards above company level 

Within the context of this fourth task area, participation in standardization committees is decided 
upon and the aims of such participation defined. 


3.2 Organizational Aspects 

Successful work in these various task areas calls for an appropriate organizational framework. 
Within this framework, for instance, the various tasks are allocated to individual employees and 
activities taking place simultaneously are coordinated. 


The structure of the respective organizational framework depends on a number of factors, 
among others 


• the size of the company 

• internal company organization 

• the product program and 


the personnel structure. 




Therefore, it is not possible to define an optimum organizational structure for all companies. 
Rather, each company must develop a company-specific structure of its own, taking the factors 
just mentioned into consideration, independent of such deliberations, various organizational 
aspects of company standardization are described below which give an overview of the 
alternatives basically possible in structuring such an organization. 

The first aspect deals with performing tasks in these four areas, whereby three forms of 
organization are conceivable (see fig. 3). The characteristic of the first one is complete 
delegation of the various task area to the respective specialist departments. These specialist 
departments decide as part of their daily routine who is to perform tasks in these areas, there is 
no centralized coordination of activities in the specialist departments. In contrast, in the second 
form of organization all task areas are dealt with by one department in the company, for 
example the Standardization Department. This department is autonomous in its decisions and 
acts independently of the other specialist departments. Finally, the third structure is a 
combination of the previous two, some tasks being carried out centrally for the whole company 
and others being taken care of in a decentralized process by the specialist departments. 

Each of these types of organization have their advantages and their disadvantages which result 
from tensions between centralization and decentralization. If a high degree of autonomy of the 
specialized departments is part of the company aims, for example, within the framework of a 
profit-center organization, the first type of organization should be implemented. The 
centralization of tasks within a standardization department will, on the other hand, result in 
synergy and permit specialization with regard to questions involved in company standardization. 
The third organization is characterized by the possibility of using the know-how of the specialist 
departments whilst at the same time specializing in the field of company standardization. Thus it 
seems to be appropriate for many companies. 


With regret to the last type of organization mentioned, the emphasis of tasks of a centralized 
standardization department is on coordination of activities taken over by the specialist 
departments, initiation of standardization projects and making company standards and 
standards above company level available. The specialist departments, on the other hand, 
elaborate company standards and are responsible for exerting influence on standards above 
company level. 





The question of which sector of the company the standardization department - whether yet to be 
established or already in existence - is to be allocated is a second point to be considered. In 
Germany, more than 50 per cent of all standardization departments are assigned to R&D and 10 
per cent are directly subordinate to the management. Despite these statistics, it would be more 
beneficial to assign the standardization department directly to the management as its tasks 
concern all sectors of the company. The direct support of company management is necessary 
so that the standardization department can coordinate the activities in the different specialist 
departments to an optimum extent. Moreover, if the standardization department ranks high 
within the company hierarchy this corresponds to the significance of company standardization 
for firms. 

Finally, the third aspect relating to organizational structure, the choice of personnel for the 
standardization department, will now be considered. The emphasis here is not so much on the 
number of staff but on their qualifications. As already described in section 2.3, standardization 
above company level increasingly takes place at European and international fevel. Therefore, 
successful participation in the respective committees requires specialists who are not only 
experts in their fields besides being proficient in languages but who also have some knowledge 
in steering group processes: within the framework of committee work, coalitions have to be 
formed, the interests of the other committee members have to be understood whilst 
simultaneously pursuing own aims . 


Apart from that, these experts must be given the necessary financial resources and sufficient 
time to be able to prepare themselves to an optimum extent for their committee work and - if 
required - take over the chair of a committee. Beside expert knowledge relating to 
standardization, members of the standardization department should have excellent 
interdisciplinary know-how so that they will be accepted as a partners in discussion by all 
specialist departments and are able to familiarize themselves with questions pertaining to that 
specialist field. 


3.3 Examples 





Building upon this theoretical description of the three organizational aspects relating to company 
standardization, some organizational models of selected companies will now be outlined. These 
examples underline what was previously stated and give an overview of the wide spectrum of 
possible solutions. 


The standardization department of a company with 700 employees is directly subordinate to the 
management. The two employees responsible have the following tasks; the development of 
company standards, the procurement and administration of standards as well as the assignment 
of item numbers. 


In the second company with about 13,000 employees the standardization department is 
allocated to one of four sections. The task emphases are: development of company standards, 
the administration and updating of company standards and standards above company level as 
well as the assignment of item numbers. 24 employees are responsible for these activities. The 
employees of the standard department as well as those of specialist departments are actively 
involved in standardization committees. 


In a third company with 55,000 employees, the standardization department is an external, 
autonomous company, a profit center with 8 employees. Their tasks are participation in 
standardization committees dealing with more than one subject, the administration of standards 
as well as information and advice in the area of standards above company level. All services of 
the standardization department are charged to the departments which have placed the order. 


4 Assessment of Company Standardization 

4.1 Costs and Benefits 

Company standardization has many positive effects, however, it also requires equivalent effort. 
The costs and, above all, the benefits of company standardization are the subject of the 







following remarks. However, it is only possible to mention a few aspects as a comprehensive 
description would be beyond the scope of this paper. 

With regard to the costs of company standardization, one as to distinguish between variable and 
fixed overheads. Fixed overheads which accrue independently of the number and quality of 
standardization activities are for example the expenses for the standardization department, for 
membership in the PCS (Polish Committee for Standardization) or for the administration of 
company standards and standards above company level. Variable overheads, on the other 
hand, such as the expenses for membership in standardization committees, for the development 
of company standards or the implementation of standards depend directly on company 
standardization activities. 


Apart from these quantifiable costs, non quantifiable costs which may result from company 
standardization must also be taken into account. These occur, for example, when possibilities of 
choice are restricted by standards or when the market position of the own company is 
weakened by standardizing product characteristics which would previously have permitted 
differentiation by the competitors. 

Company sector Benefits 

Procurement - fewer procurement procedures 


- simpler procurement 


R&D 


- faster design 


Storing 


- fewer stock items 


Production 


- greater availability of plants 


- higher productivity 


Quality Assurance 


- fewer inspection orders 



Sales/Service 


- fewer spare parts 


Table 1: Benefits of company standardization resulting in reduced variety 


The positive effects of company standardization, too, can be divided into quantifiable and non- 
quantifiable benefits. The quantifiable benefit results mainly from the savings resulting from 
many company standardization activities (see fig. 1). Examples of such benefits due to variety- 
reducing company standards are depicted in Table 1. The selection underlines the scope of the 
positive effects that a company may gain from just one single company standard. 


Examples of non-quantifiable benefits are an enhanced image due to the implementation of 
standards, improved communication with suppliers or an fewer problems with internal data 
exchange. Moreover, participation in standardization committees leads to non-quantifiable 
benefits such as 

• early knowledge of current standardization activities above company level. 

• obtaining of information about potential competitors and 

• being able to influence standards in the company’s own interests. 

4.2 Cost Effectiveness 

Company standardization is not an end in itself, which is to say that the necessary costs must 
be justified by commensurate benefits. The cost effectiveness is derive from the cost/ benefit 
quotient. The prerequisite for the calculation of cost effectiveness is the existence of quantitative 
statements because comparisons on the basis of verbal evidence are difficult and subjective. 


Several problems have to be solved with regard to the determination of costs and benefits: 





• As already described in the previous section, costs and savings are mostly not quantifiable. 
Thus, there no objective basis for the corresponding standardization activities. 

• As a rule, savings resulting from company standardization occur in different company sectors 
so that considering only one sector leads to incorrect results. 

• The effects of company standardization activities generally extend over a prolonged period of 
time (sometimes several years). For a correct analysis of the effects the entire period must 
be taken into account. 

• As a rule, company standardization activities concern more than one cost area and cost 
category. It is therefore only possible to a very limited extent to identify them by means of 
traditional cost accounting . 

These points show the difficulties which have to be resolved when attempting an exact 
evaluation of the cost effectiveness of standardization. At the same time they also give an idea 
of the effort necessary to prove the cost effectiveness. For this reason, it makes sense in many 
cases to use simple checklists permitting initial assessment of a standardization activity's 
expediency before the activity commences. A corresponding list for the assessment of company 
standards is shown in Table 2. 


Table 2: Checklist for the assessment of company standards 


Kriterien 

criteria 

Aufwand 

effort 

Bedeutung 

significance 

GrofJ 

high 

Klein 

low 

Bedarf fur die betrieblche Norm 

need for company standard 

Erwartete Umsetzung im Untemehmen 

implementation expected within the company 

Erwartete Lebensdauer der betrieblichen Norm 

anticipated applicability of company standard 

















Wirkung der betrieblichen Norm auf die 

Qualitat 

effect of company standard on quality 

Wirkung der betrieblichen Norm auf die 

Sicherheit 

effect of company standard on security 

Wirkung der betrieblichen Norm auf die Vielfalt 

effect of company standard on variety 

Konformitat zu nationalen Normen 

conformity to national standards 

Konformitat zu internationalen Normen 

conformity to international standards 


5 Conclusion 

With competition becoming increasingly intense, the consistent implementation of company 
standards can be a decisive competitive advantage to a company. These advantages result 
from savings and other manifold positive effects which result from company standards. The 
prerequisite for this is a consistent company standardization strategy which must take into 
account company parameters as well as the competitive situation of the company. 


A standardization strategy should not only be restricted to company aspects such as the 
development of company standards, the establishment of a standardization department and a 
company standards information system. The aspects above company level must be considered, 
too. Especially active participation in standardization committees above company level can lead 
to important impulses for the company and be a positive influence on its competitive position. 












6 


Annex 



Figure 1: Primary Aims of Company Standardization 
























Figure 2: Standards Pyramid 















1 st type of organization 


2 nd type of organization 


3 rd type of organization 



Legend: 

FA = specialist department 

NA = standardization department 

UL - company management 


Figure 3: Types of Organization 














































Bundessprachenamt - Referat SM 12 
Auftragsnummer E2872 


Ubersetzung aus dem Deutschen 


Company Standardization and Strategic Management 


(Originaltitel: Innerbetriebliche Normung und strategisches Management) 


Autoren: Hendrik Adolphi und Jens Kleinemeyer 






Company Standardization and Strategic Management 
Hendrik Adolphi and Jens Kleinemeyer 



Company Standardization and Strategic Management 


Contents Page 

1 Introduction 4 

2 External and internal problems 6 

2.1 External problems 6 

2.2 Internal problems 9 

3 The effects of standards in companies 11 

3.1 Internal effects 11 

3.2 External effects 12 

4 The origin of company standards 13 

5 Implementation of the standardization program 15 

5.1 Integration of company standards into the organizational structure 15 

5.2 Internal implementation and promotion of the standardization program 17 

6 Standing up to competition by means of standardization 18 

7 Standardization and management strategy - an example 21 

8 Final remarks 24 

Bibliography 26 


Executive summary 


27 








Company Standardization and Strategic Management 


1 Introduction 

The traditional viewpoint with regard to company standardization' restricts its function to the 
reduction of the variety of parts. Thus, material and storage costs can be lowered and larger 
production batches can be completed. However, company standardization is in fact more than 
just that: 

1. Binding requirements, for example in the areas of environmental protection and safety are 
processed for application within companies and made available to them. 

2. The communication flow within a company is defined. Many problems in companies are 
caused by the very fact that information channels are not standardized, which is to say they 
are not formally defined and dry up when the respective persons leave their positions. Unless 
information is passed on quickly and efficiently, wrong decisions on account of incomplete 
and/or wrong information are inevitable. 

3. Company standardization is the basis for consistent and reliable quality of production and 
products. 

4. It is a necessary prerequisite for participation in standardization projects above company 
level at national, regional and international level and for at least influencing these projects for 
the company's own benefit, if not even for steering them. 

In short: Company standards have effects on every company section. They influence 
relationships between the company and others (customers, suppliers, authorities and 
competitors) as well as within the company (between departments, production plants etc.). 
Figure 1 illustrates the comprehensive effect of standards on the sections of a company. Here, a 
connection is established between the items that can possibly be standardized and the 
respective company departments. 

It becomes obvious that every company section can also be considered a potential 
standardization section. 


1 In order to avoid misunderstandings, we would like to define the term "standard" as used in the following: 

Standard: Harmonization of material and immaterial items for recurrent use to the benefit of the 
company. 






Company Standardization and Strategic Management 


Section to be 
Standardized 

personnel 

administration 

design 

purchase 

C 

O 

i 

CL 

quality assurance 

sales 

material administration 

storage and shipping 

packaging 

repair 

customer service 

purchased parts 



X 

X 

X 

X 






X 

own parts 



X 


X 

X 


X 




X 

raw materials 



X 

X 

X 

X 


X 


X 



machinery 



X 


X 

X 

X 


X 

X 


X 

production processes 



X 


X 

X 


X 





design procedures 



X 


X 

X 






X 

procedures/formalities 

X 

X 

X 

X 





X 




colors 



X 

X 

X 

X 

X 

X 




X 

packaging 



X 

X 



X 

X 


X 


X 

tools 






X 





X 


spare parts 



X 

X 

X 

X 



X 

X 


X 

terminology 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

test procedures 



X 

X 

X 

X 

X 






safety 

X 

X 

X 

X 

X 

X 

XJ 

X 

xl 

X 

X 

X 


Figure 1: Possible standardization sections (source: Brown, p, 141) 


Such an important tool of company management must be checked for its efficiency at all times. 
In the following, the activities which are necessary for this are designated the standardization 
program of a company. This program consists of a considerable number of steps as illustrated 
in the overview in figure 2. 


As a first step, it is important to recognize a problem and to analyze whether it is internal or 
external. Subsequently, it must be examined whether the problem recognized can be eliminated 
or resolved with the help of company standards, As the effects of company standards, as 
illustrated above, are generally not restricted to one section, it must be ascertained which 
company sections will be concerned by the new company standard. If this information is 
available, the question arises as to whether the company should develop its own standard or 
adopt one from outside, When developing a new standard, the question about the participants 
and their competencies will, of course, have to be put and answered. The standard which was 







































Company Standardization and Strategic Management 


developed or adopted must now be implemented in the company sections concerned. The 
company standardization program is rounded off by an internal control. 


Irecognition and analysis of problem 



check voluntary, standards adopt binding 

for suitability standard 

• national standards? 

• regional standards? 

• standards from a competitor? 


implementation in all relevant areas 

internal control 


Figure 2: The most important steps of a company standard program 

This will form the basis for the remainder of this paper. In the following section, various possible 
external or internal problems are described for which a company standardization program 
should be considered. Some effects of company standards in various company sections are 
described in the third section. 


2 External and Internal Problems 


2.1 External Problems 











































Company Standardization and Strategic Management 


External problems may arise due to national authorities requiring binding standards or due to 
one or more of the five so-called competitive forces in accordance with PORTER 1980: 


1. The competitors lower their sales prices 

The competitors are competing directly with the company to gain customers and by lowering 
sales prices they may force the company to introduce innovative products or to reduce prices. 


2. Customers want variety and low prices 

The significance of the "customer" as a factor of competition depends primarily on their power 
with regard to the company. The more power customers have, the more easily they can force a 
company, for example, to decrease its prices or to use a certain technology or a specific 
standard. Customers are especially powerful when there is only a few of them or the company 
cannot switch to other markets. 


3. Suppliers demand high purchase prices 

Suppliers must be considered within the framework of a company strategy particularly in cases 
where they have a monopoly for an indispensable technology, or a substantial raw material or its 
own products can only be used in connection with suppliers' products. The latter case is called 
complementary production, which is to say that the products are of greater benefit if used 
together rather than individually. Examples of this are films and cameras, vacuum cleaners and 
vacuum cleaner bags, CDs and CD-players, discs and computers etc. 


4. Potential competitors have a negative influence on the sales price 

Potential competitors are companies which may want to offer competing products in future. The 
prerequisite for this is a lack of barriers to the entry to the market. The mere existence of 






Company Standardization and Strategic Management 


potential competitors who will enter the market as soon as the profit margin becomes lucrative 
enough for them is enough to keep own prices and profit margins low. 


5 Potential substitutes force sales prices to be kept low 

As a fifth competitive force, potential substitutes must be integrated into the competition 
strategy. In particular, price limits must be defined above which one can expect customers to 
resort to substitutes. This depends, of course, on whether own products can be substituted. 




Company Standardization and Strategic Management 


Excursus: Company Strategy 

Building upon the five competitive forces mentioned, we can distinguish between four strategies 
that a company can pursue in competition 2 . 

With the goal of low-cost leadership a company pursues a strategy of always offering its 
products at a lower price than the competitor. This can be achieved through, for example, 
efficient production, strict control of expenses or the optimum use of production plants. 

A second strategy is called differentiation. It necessitates conferring a special image on the 
product. This is based, for example, on special quality of the product, innovative product design 
or customer-friendly service. 

Focussing is a restriction to a chosen market sector, which is to say, the company concentrates 
on market niches. These could be a special clientele, a clearly defined market sector or a limited 
range of products (core competencies). 


The strategy of dominance pursues the aim of obtaining as large a market section as possible 
or establishing own technology as a de-facto standard. 


2.2 Internal problems 

The most important internal problems and symptoms of a company are, among others: 

• high scrap rates 

• exceeding delivery deadlines 

• low productivity 

2 The strategies of cost leadership, differentiation and focussing are based on PORTER 1980; the strategy of 
dominance is based on LEE et al. 1995 










Company Standardization and Strategic Management 


• poor motivation of employees 

• lack of identification of employees with the company 

• willful destruction of products and machinery by employees 

• insufficient maintenance of appliances and machinery, etc. 

In some cases, these problems are characterized by considerable interaction. This can be put 
down to just a few causes. The most important mistakes are those made by the management as 
well as a lack of communication or senseless communication. Often, the passing on of 
communication by the management to the employees and vice versa is unsatisfactory 3 . 


It must be pointed out that the competitive forces - with the exception of the customers - have an 
influence on costs which is also one of the most important problem areas in the case of internal 
problems. 


In contrast to this, there are areas which influence the profit side of the company such as 
customer satisfaction or the compatibility of own products with the technology dominating on the 
market. 


An efficient standardization program must always consider these two areas; concentration on 
only one area may lead to fatal effects. Based on these two fundamental problems, two kinds of 
standards can be distinguished. On the one hand, standards may serve to solve problems which 
lie exclusively within the company. Here we speak of internal standards However, these 
standards may also serve to solve problems which exist between the company and its 
surroundings. Standards concerning this field are called external standards. 


3 The fact that, for example, IBM was driven out of the lucrative PC-market had its causes in long information and 
decision-making processes within the company that were not adequate for such a dynamic market. Compare 
CARRQL 1995. 






Company Standardization and Strategic Management 


3 The Effects of Standards in Companies 

3.1 Internal Effects 

With regard to research and development, company standards make product systemization 
possible as well as (linked to this) recurrent use of available individual parts and assemblies. 
Thus, the necessary design effort can be reduced. 


Modular and series designs, for example, constitute the basis for product systemization. In the 
case of series design, follow-on designs are derived from a basic design; they differ in size from 
their basic design but have the same function whilst employing the same solution. In the case of 
modular design, however, standardized modules with different solutions are combined to form 
the respective overall solutions. 


The recurrent use of individual parts and assemblies can be achieved by means of their 
documentation in company standards. The engineers can see from these standards which 
individual parts and assemblies are available in the company and integrate them straight away 
into their development projects. Product systematization as well as recurrent use reduce the 
necessary design effort as it is possible to fall back on available solutions. 


In production, company standards particularly result in so-called increasing economies of 
scale. This describes the fact that it is possible to double the output with less than twice the 
production means. "Learning effects" are one example of economies of scale. Employees and 
workers can carry out actions faster and with an ever-decreasing error ratio the more often they 
repeat them. This means that repetition of work is an instrument for achieving economies of 
scale, and company standards are a basis for these repetitions. The respective standards 
define, for example, specific work steps which have to be repeated during every operation 4 . 


4 It cannot be dented that continuous repetition of an activity can lead to dissatisfaction of the employee thus 
reducing his productivity. In other words, a balance must be struck between the two effects. 






Company Standardization and Strategic Management 


3.2 External Effec ts 

When making decisions about the procurement of capital goods such as machinery and 
materials, company standards can simplify and substantially expedite the selection process. 
They can define the basic parameters of the capital goods to be procured so that compatibility 
with the machinery and plants already present in the company is guaranteed. 

From the point of view of the standardization program, the management will has to decide 
whether to develop its own standard or to adopt a national one. A general guideline is that this 
decision depends upon the specificity of the investment 5 . The more specific an investment is, 
the less suitable will general national standards be and the greater is the need for the definition 
of own standards. 

Also The procurement of materials is simplified by company standards, as well: The 
requirements to be met by the materials no longer need to be defined for each procurement. 
Reference to the respective company standard is sufficient. At the same time on-receipt 
inspection may be dispensed with if suppliers have undertaken to fulfill the requirements defined 
in these standards. It is an additional advantage if standards are based on, for example, EN- 
standards. In this case a change of suppliers can be realized without difficulties. Thus, it 
becomes clear in which cases it is more beneficial to develop own standards: If demands made 
on the material - this includes very high as well as low demands - are company- specific, it is 
advisable to develop own standards. In the case of commonly used materials, however, in 
customary qualities, on the other hand, it is obviously better to base company standards on 
national or regional ones. 


If the products to be manufactured are mainly homogenous - which means that the price is the 
main criterion for consumers and customers - this is an argument for the adoption of a national 
standard This way, a product can be manufactured that does not differ from those of the 
competitors. If the objective is to manufacture a product the differs totally or substantially - in 
design, quality or function - from the products of the competitors, though, it is more beneficial to 
develop own standards. 


5 The specifity of the investment serves as a measurement of its salability. The more specific an investment is, the 
less well it can be sold because it has been tailored to the specific needs of the company. 








Company Standardization and Strategic Management 


Due to these effects, areas to which standards should apply can be defined. Having completed 
this step, the contents of the standardization program must be decided upon This addresses 
the question of how standards should be developed within a company or which standards 
should be adopted. 


4 The Origin of Company Standards 

Now we come to the question of how standards should be developed within a company or which 
standards should be adopted. 

External as well as internal standards can have different sources As described in more detail in 
the paper "Kreis der Normung" (Circle of Standardization), company standards can be products 
of an autonomous development. In addition, a company standard can be based on a national 
standard such as those developed, for example by PKN in Poland, DIN in Germany or CEN at a 
European level. In the meantime, National standards in Poland are now of a voluntary character 
which is to say that their contents consist of non-binding proposals and possible solutions for 
problems. Beside these, there are still a number of (state) regulations which must be observed 
by the companies. A company standard may therefore also contain the implementation of 
binding regulations by State authorities, for example safety or environmental regulations. The 
last possibility is that company standards can also adopt complete technologies available on the 
market. 

When deciding upon the standardization program to be applied, the respective advantages and 
disadvantages must be seen clearly. A standard on the basis of an internal development has the 
advantage of relating to special individual problems of the respective company while the 
adoption of a national standard represents a general solution which may not necessarily be 
tailored to the needs of the company. On the other hand, the national standard offers the 
advantage of enabling a company to build upon the experience of other companies so that an at 
least acceptable solution to an internal problem may be available within a relatively short time. 


Conformity to binding standards - often also called regulations - is compulsory. Non-conformity 
would lead to sanctions imposed by authorities if they take action. Sanctions can extend from 
reminders to adhere to the binding standard in future to withdrawal of operating licenses. 





Company Standardization and Strategic Management 


The decision to adopt a technology established in the market can have many reasons that are 
linked closely to one other. Many small and medium-sized companies are in no position to 
maintain a research and development department of their own. The automatic consequence is 
that they mainly use the innovative know-how of other companies and make this know-how 
available for their own companies. However, the adoption of an existing technology may 
practically be enforced by the market. This is increasing true for the areas of telecommunication 
and information technology with regard to which a single company cannot afford to offer an 
independent product which is not compatible to the dominating technology in the market. One 
only has to recall standards such as exist in the computer field in which the so-called IBM- 
standard has asserted itself to such an extent that producers of individual components such as 
CD-ROM devices, hard disks or disks are forced to design their own products in such a way that 
they can be connected to existing devices. The attempt to search for a niche outside this "IBM- 
standard” is probably condemned to t failure 6 . 


For many companies in Poland, however, the question is not whether to create new de-facto 
standards on the world market of computer products. Similar structures can be found with 
regard to other products where the importance of compatibility is not quite so obvious. The 
spectrum extends from toys which interlock to model railways to vacuum cleaner bags. 


Consequently, the company management has to decide upon which standardization programs 
can or must be chosen. Every decision in favor of one of the standardization programs to 
choose from in many cases has a substantial impact on the company itself (internal standards) 
and its surrounding {external standards ). These decisions are of a strategic nature: on the one 
hand they determine the internal structures of a company in the long term, on the other hand 
they have an influence on the behavior of competitors and customers. 


6 A similar structure exists with regard to office software. In Poland, too, Microsoft has asserted itself to a large 
extent. Of the local companies only Malkom with QR-Text and QR-office can compete (to a limited extent) with 
Microsoft. 







Company Standardization and Strategic Management 


5 Implementation of the Standardization Program 

5.1 Integration of company standards into the organizational structure 


The prerequisite for successful implementation of company standards is an appropriate 
organizational framework within which, amongst other things, tasks are delegated to individual 
employees. For this, there are basically two alternatives available: 


If tasks are delegated to the specialist departments, the efforts that would necessary for 
separate company standardization office can be dropped so that company standardization 
efforts altogether can possibly be reduced. At the same time, this approach has its advantages if 
there is a close connection between the contents of the previous task spectrum of the specialist 
department and the respective activities in company standardization. 


On the other hand, the establishment of a company standardization office permits specialization 
on standardization issues as employees in this department are exclusively concerned with these 
issues. Moreover, with this approach there is a point of reference within the company for all 
questions related to company standardization. This approach, however, is more cost intensive 
compared to the assignment of tasks to specialized departments. 


Both approaches have their advantages and their disadvantages so that none of them can be 
considered ideal. The right way seems to be a combination of these two approaches: some 
tasks are concentrated in a standardization office, the rest are assigned to the specialist 
departments. 








Company Standardization and Strategic Management 


Consequently, those tasks that concern the whole company should be carried out by the 
standardization office. Those tasks related to the departments themselves and requiring expert 
knowledge, however, should be assigned to the specialist departments. 


Thus, the following three task areas can be identified for the organizational integration of 
standards into the company: 


1. Information 

The first task area comprises all informative activities related to company standards. Among 
these are procuring standards and making them available but also information and advice about 
standards. 


2. Company standardization 

This task area comprises all tasks that serve directly or indirectly for the elaboration of company 
standards, from planning to the complete standard. 


3. Standardization above company level 

The observation of standards above company level with regard to outside standardization 
activities that are of relevance to the company as well as participation in standardization 
committees constitute the third task area. 


It follows from this that the standardization office is responsible primarily for the first of the three 
areas while the others should be delegated to the specialist departments. Additionally, however, 
the standardization office is responsible for coordination and planning. This concerns 
elaboration of company standards as well as participation in standardization committees above 
company level. 


16 | 





Company Standardization and Strategic Management 


Up to now only a standardization office has been mentioned. However, this term can designate 
various organizational solutions, such as: 


• a standardization representative 

• a standardization group or 

• a standardization department. 

The basic difference between these variants is the number of employees involved. This number 
results primarily from the task spectrum of the standardization office and has no connection to 
the size of the company: companies with 3000 employees, for example, have standardization 
offices between one and eleven employees. As a result, no general recommendations about the 
"right size" can be given, it is the company-specific parameters that need to be considered. 


A further question within the framework of the organization of company standardization is the 
assignment of the standardization office to a certain company section. According to our own 
research, more than 50% of all standardization offices interviewed are part of the "research" and 
"development" departments while 10% are directly responsible to the management (Adolphi 
1996, p. 4). Despite the fact that a high percentage of standardization offices are in practice of 
assigned to the research and development section, this is not an optimal solution as the tasks - 
as indicated above - concern the whole company and do not only concern the technical section. 
In the course of the general description of company standardization, the cross-departmental 
significance was already pointed out. 


For these reasons it makes sense, as a rule, to assign the standardization office directly to the 
company management. This way it can take action throughout the entire company and is not 
restricted to one section only. 





Company Standardization and Strategic Management 


5.2 Internal Information and Promotion of the Standardization Program 

The best company standard is of no use if it is not implemented and used within the company. 
Thus, the promotion of implementation becomes one of the most important tasks of the 
management within the framework of the standardization program. The most important issue is 
to foster the conviction of the employees so that they will apply the standard. There are a 
number of ways of ensuring that employees are prepared to support the standardization 
program to the necessary extent, some of which are listed below (Henise 1990, p. 64): 

• short seminars about the internal standardization program 

• short seminars about standardization activities in certain (important) company sections 

• internal directives 

• regular situation reports to the management 

• temporary participation of employees in standardization organizations and work groups 

• contributions in company news letters (if these exist) or in magazines from associations 
(chambers of commerce etc.) 

• information about new standardization activities to the responsible specialists 

• integration of standardization into company-internal training programs such as 

• quality assurance 

• management and 

• technical areas. 

6 Standing up to competition by means of standardization 

Which strategies can as a general rule be pursued by a firm with regard to company 
standardization? Basically, there are a total of six different procedures, which will now be 
discussed briefly: 








Company Standardization and Strategic Management 


The aim of the first strategy is the establishment of a de-facto-standard. Examples of de-facto 
standards are, for example, the DP-operating system "Windows” and VHS-technology for video 
recorders. A de-facto-standard is targeted against competitors and potential co-applicants as 
well as against sub-agents. Three different approaches to the establishment of de-facto- 
standards, can be presented, as in the follows. 

1. In the first approach, several companies try to make their product a de-facto-standard. This 
means that several incompatible products are in direct competition with one another which can 
be characterized as follows: 

• Each company will attempt to obtain as large a market share as possible. 

■ Each company will strive to improve the choice of required complementary products. 

• Each company will announce product innovations as early as possible in order to stop the 
customers from buying a competitor’s product. 


2. In the second approach, companies agree that a joint de-facto-standard would be of benefit to 
each of them. Within this context, the following measures can be taken: 

• The companies bind themselves to the chosen de-facto-standard by making considerable 
investments in the respective technology. 

• Licenses for the technology on which the de-facto-standard is based are issued at moderate 
conditions. 


3. In the third approach the companies have diverging interests with regard to a de-facto- 
standard: company A wants it, company B does not. Consequently, the two companies will 
pursue different interests: Company A will attempt to achieve compatibility with the de-facto- 
standard via imitations while company B will strive to prevent compatibility by means of a swift 
product innovations or patents. 







Company Standardization and Strategic Management 


The second strategy, compatibility and entry to the market, is closely connected to the third 
approach just mentioned. Especially for small companies, the compatibility of their products with 
the products of the market leader can be of utmost importance for their economic success. 
Therefore, their aim must be to guarantee this compatibility, for example via licenses. If the 
market leader refuses to issue such licenses, smaller companies must produce an interface to 
the products of the market leader by means of reverse engineering. 


The primary aim of company standardization is a reduction of the costs. Thus, the third strategy 
pursues the aim of achieving relative cost advantages These can be realized in different 
ways. 

• The Participation in the standardization process leads to direct cost advantages as the 
standard can be influenced to the benefit of the company. Thus, the implementation of this 
standard will result in only low costs, 

• Additionally, indirect cost advantages can be obtained by means of participation in the 
standardization process as this process makes it possible to obtain a considerable amount of 
information about the technologies and developments of competing companies without great 
effort. 

• A further advantage is the considerable experience that a company gains through regular 
participation in standardization processes. Thus, own technology can be asserted as a 
standard. Moreover, an experienced company can force competitors to participate in the 
standardization process which means that they, too, have to bear the costs of participation. 

• Additionally, a company standard can lead to cost advantages with regard to product liability. 
If regulations governing product liability require proof that the products are safe, this can be 
proved by observing the relevant standards. 

4. As a fourth strategy, the exploitation of complementarities will now be described: If a 
company has a dominant position within the market, it can try to transfer it to the market for 
complementary products. A possible implementation of this aim, for example, is the 
documentation of the interface between product and complementary product within the 
framework of company standards and thus to protect it from competitors. This way, buyers of a 
product can be forced to buy complementary products from the same company, as well. 





Company Standardization and Strategic Management 


5. Reduction in variety is the fifth strategy. This can be implemented in varous areas: 

Products: A restriction to certain market segments or a product systematization (for example 
modular systems) will result in a reduction in product variety. 

Additional purchase parts: If variety can be reduced in this area, this will lead to more 
favorable conditions and may reduce dependence on suppliers. 

Individual parts: Here, larger production batches with lower setup costs can be achieved. 
Production methods and processes: The company specializes in certain production methods. 

6. Finally, the last strategy refers to the implementation of management standards such as 
the ISO-9000 or the ISO-14000 series. Often, the implementation of management standards is a 
vital prerequisite for entry to the market. Beside this external necessity, the introduction of these 
standards can also produce internal advantages as the grown information structures with their 
manifold inadequacies are replaced by a systematic, continuous flow of information. 

7 Standardization and management strategy - an example 

Why should a company have its own strategy in the field of company standardization or why 
should company standardization be taken into account when establishing a management 
strategy? These questions will now be examined by taking EN 81 part 1 as an example : 

EN 81 harmonizes the safety technical requirements for electric passenger, service and small- 
freight elevators. This standard was passed as a European standard and as the German DIN 
EN 81 standard in 1978. Before that, there were different technical requirements relating to 
safety for elevators in each country. At the same time, there was a discrepancy between North 
and South : The number of accidents in the northern countries was well below that in the 
southern countries. Despite this, producers were compelled to fulfill just the respective 
requirements of the purchasing countries even though they were higher in their own country. 

Due to the new standard, the necessity to adapti products to the different standards can be 
dispensed with so that the market is now open (PLINKE 1990, p. 662). 








Company Standardization and Strategic Management 


A simplified illustration of the structure of the elevator industry can be seen in figure 3. Basically, 
the customers are prime contractors who choose an elevator supplier for the owner of the 
building. On the supply side, several producers are compete with one another, some of them 
obtaining their elevator components from subcontractors. 



Figure 3: Structure of the elevator industry {on the basis of PLiNKE 1990, p.) 

The elevator suppliers can be divided into three groups. The first group are the large companies 
that have branches throughout Europe and manufacture all components themselves. The 
second group consists of medium-sized companies that are restricted to the national market and 
obtain some of their components from suppliers; they are more specialized than the companies 
from the first group. The third group, finally, is made up of small companies that operate only 
regionally, have limited product variety and mainly deliver individual installations. 


The consequences which result from the introduction of the EN 81 standard for those three 
groups can be seen in table 1. Large companies can now reduce their production costs due to 
the harmonization of safety standards as they can now manufacture one product for all 
countries - the production of individual variants for different countries is no longer necessary. At 
the same time, competition wiil increase as the enlarged market becomes interesting for non- 
European (for example Japanese) and medium-sized companies. 















Company Standardization and Strategic Management 



changes to the 

relevant 

market 

rivalry among 

existent 

manufacturers 

new 

manufacturers 

emerge 

changes in the 
negotiation 
strength of 
suppliers 

changes in the 
negotiation 
strength of 
customers 

prospects of 
a large 
manufacturer 

regionally 

none 

factually yes 
(1x12 instead 
of 12x1) 

increases 

non-European 

competition 

basically none 

increases due 
to new 
competitors 

prospects of 
a medium¬ 
sized 

manufacturer 

increases to 
the whole of 
Europe 

increases 

European and 
non-European 
competition 

decreases 

increases 

prospects of 
a small 
manufacturer 

no changes 

unchanged 

rare 

decreases 

unchanged 


Table 1: Effects of harmonization on the elevator industry (source: PLINKE 1990) 


Due to the changed parameters, medium-sized manufacturers have to adapt their market 
(Europe instead of national markets) and their product range and, if necessary, restrict 
themselves to certain market segments. Smaller manufacturers do not need to react much, 
which is to say that harmonization has little effect on their market and their competitors. 

What conclusions can be drawn from this European harmonization process with regard to the 
standardization program? 

Firstly, companies are called upon to participate actively in the European standardization 
process so that their specific national requirements are taken into consideration in the 
standards being developed will be considered. If not, far-reaching disadvantages in competition 
may be the consequence for national companies. 


















Company Standardization and Strategic Management 


For large and medium-sized companies, the changes to the relevant market present an 
opportunity to reduce variety by means of company standardization activities - especially 
through the development of series and modular systems - and to reduce costs and thus remain 
competitive. The strategy of smaller companies to concentrate on special customer wishes is 
largely unaffected by European harmonization. 


This, of course, entails the requirement for a smooth internal flow of information. In the case of 
small companies this is important with regard to the correct transmission and implementation of 
.special customer wishes while for medium-sized and large companies is more important to the 
keep delivery deadlines. 


For all companies, the documentation of information and data accrumg during the life-cycle of 
the product {in accordance with the ISO 9004 standard) is becoming increasingly important. 
There must be written instructions - which is to say company standards - regulating for 
employees the information route, responsibilities and the file system. On the one hand, these 
steps become necessary due to certification in accordance with the ISO-9000 standards family, 
the significance of which is still increasing in importance. On the other hand, many products 
require a CE-marking before being put on the market within the EC national market which 
documents the conformity to the requirements of EC guidelines 7 This is implemented by 
integrating relevant European standards into company standards. Together with appropriate 
documentation this can prove conformity to EC guidelines in doubtful cases. 


For smaller companies, the documentation of design solutions is of vital significance as 
documentation thereof with the possibility of reuse can cut the design effort substantially as well 
as the number of subsequent mistakes in the production and installation process. The designers 
must have clear instructions in terms of standards as to how they have to document their results 
and, at the same time, how they can check if a solution for a certain problem has already been 
developed within the company. 


7 more information on this can be found in the presentation by R. Hildebrand! 


24 






Company Standardization and Strategic Management 


8 Final Remarks 

The effects of standards are not only restricted to reduction in variety, as has become clear in 
the course of this paper. Company standards can also make a substantial contribution to the 
structuring of information channels and thus form a better basis for decision-making for all 
persons responsible. The question which arises for companies is not so much whether to 
develop a standardization program at all; the more important issue is the decision about which 
standards are to be applied in this program. The question whether to develop own standards or 
to integrate standards above company level can be answered in accordance with the specificity 
of the problem to be solved; The more company-specific a problem is, for example the 
procurement of material or machines, the more appropriate it is to develop a company standard. 


However, one fact that must not be neglected is the possibility of structural similarities existing 
also in other companies so that it would be beneficial for all to learn from one another. The 
participation in respective standardization committees of national standardization organizations 
is a good opportunity to establish contacts and to obtain a platform for exchange of information. 


One of the most important tasks of the management within the framework of a standardization 
program is the implementation of company standards. On the one hand, organizational 
decisions must be made about the establishment of a standardization department etc, and the 
allocation of tasks. On the other hand, employees should not only be informed about the existing 
standards, they should also be convinced about the advantages for all employees. 








Company Standardization and Strategic Management 


Bibliography 

Adolphi, Hendrik: Die Stellung von Normenabteilungen working paper, Professur 
Normenwesen und Maschinenzeichnen, Universitat der Bundeswehr, Hamburg, March 1996 

Besen, Stanley; Farrell, Joseph: Choosing how to compete; strategies and tactics in 
standardization, in: Journal of Economic Perspectives Vol. 8, 1994, p. 117-131 

Brown, Hubert K.: What and when do we standardize at a manufacturing company, in: Toth, 
Robert B.: Standards management - a handbook for profits, ANSI, New York 1990 

Carroll, Paul: Big blues: the unmaking of IBM, Orion. New York 1995 

Franck, Egon; Jungwirth, Carola: Produktstandardisierung und Wettbewerbsstrategie 
Freiberg working papers 95/22, 1995 

Gabel, H. Landis: Competitive strategies for product standards, McGraw-Hill, London 1991 

! 

Henise, David E.: Staffing and professional development, in: Toth, Robert B.: Standards 
management - a handbook for profits, ANSI, New York 1990 

Lee, Ji-Ren; Donald E. O’Neal; Pruett, Mark W.; Thomas, Howard: Planning for dominance: 
a strategic perspective on the emergence of a dominant design, in: R&D Management Vol. 25, 
1995, p. 3-15 

Plinke, W.: Auswirkungen der europaischen Normung auf die Investionsguter-lndustrie - Eine 
Branchenanalyse DIN-Mitteilungen 69, 1990, No. 12, p. 660-665 

Porter, Michael: Competitive strategy, Free Press, New York, 1980 


26 





Company Standardization and Strategic Management 


Executive summary 


Standardization has been seen as a technical tool for the reduction in variety of parts and 
products for a long time. But standardization can do a lot more for the company. Although its 
effects sometimes are not obvious, they can be found in every department of a company: 

• Standardization can improve the flow of information by reducing the number of 
decisions based on false or incomplete information. 

• Standardization can make external know-how available to the employers, leading to a 
reduction in mistakes, e.g. in production, design, or management processes. 

• Standardization is an important tool to guarantee the compatibility of the company’s 
assets, i.e. machines, materials, and human capital. 

• Standardization of products 

As standards play an important role the way a company standard is developed becomes an 
important aspect; there are four different ways of developing a standard: 

• The development of a company standard by employees of the company themselves. 

• The adoption of a national or international standard, i.e, taking the national standard 
and using it as a company standard. 

• The adaptation of a national or international standard, i.e. using this standard and 
changing it slightly, in accordance with the requirements of the firm. 

• The adoption of a de-facto-standard, i.e. a technological design that dominates the 
market. 

Which of these strategies the company should adopt depends on the specificity of the 
underlying problem. The more company-specific the problem is and therefore the solution 
should be, the better it is for the company to develop its own standard. 

Finally both the standard and the strategy of standardization that have been chosen have to be 
implemented. The acceptance of the standard by the employees can be fostered by different 
means such as seminars, information, integration of employees etc. The processes necessary 
to carry out a standardization program can be focused in a standardization department that can 
be structured in various ways with respect to responsibility, number of members etc. (there is no 
trend as to whether large companies have large departments and vice versa) or the processes 
can be allocated to different departments. Both organizational set-ups have their weaknesses 
and strong points. 

As a last remark, the way standards and standardization can be used against the competitive 
forces, that lower the profits, is described and illustrated by an example. 









CE Marking and Trade in the European Union 


Roland Hildebrandt 


1998 






CE Marking and Trade in the European Union 


Contents Page 


1 Introduction 4 

2 Legal prerequisites 4 

2.1 The new approach 4 

2.1.1 Mutual recognition 5 

2.1.2 Notification 5 

2.1.3 Legal harmonization 5 

2.2 EC directives in accordance with the new approach 5 

2.2.1 Directive on simple pressure vessels 6 

2.2.2 Directive on the safety of toys 7 

2.2.3 Directive on electromagnetic compatibility 8 

2.2.4 Machinery directive 8 

2.2.5 Directive on appliances burning gaseous fuels 8 

2.2.6 Directive on telecommunications terminal equipment 9 

2.3 CE marking 9 

2.4 Use of standards 10 

3 Adoption of EC directives 11 

3.1 Methods 12 

3.1.1 Preparing company standards on the basis of EC directives 12 

3.1.2 Preparing company standards on the basis of European standards 12 

3.2 Means 13 

3.2.1 Company standards 13 

3.2.2 Flowcharts 18 

3.2.3 Checklists 20 

4 Summary 21 

5 References 22 

6 Summary 23 


3 





CE Marking and Trade in the European Union 


1 Introduction 

Along the path to establishing a common European market it was inevitable that a large 
number of different regulations were issued which are valid throughout Europe Many com¬ 
panies found this flood of regulations annoying. Companies that prepared themselves for the 
changes at an early stage and implemented the harmonized European regulations have a 
competitive advantage. These regulations not only apply to all companies in the countries of 
the European Union but also to companies in states which will be future EU members as well 
as to companies in non-EU member states which intend to supply the European market, es¬ 
pecially if their country strives for membership of the European Union Hence this means that 
the sooner these regulations are adopted, for instance by Polish companies, in their everyday 
routine, the sooner they can find their feet in the entire European market and the fewer con¬ 
versions will be necessary when Poland joins the EU, 

2 Legal prerequisites 

An important prerequisite for a closer economic integration of the European market was the 
removal of technical barriers to trade which had evolved in the past due to different technical 
regulations in the member states of the European Union. The original approach of including 
detailed technical specifications in directives failed because it was impossible to implement. 
During the ten years which in some cases were needed to develop directives, the specifica¬ 
tions elaborated were outpaced by technical progress. In addition, decisions were delayed or 
prevented owing to the unanimity rule. 

2.1 The new approach 1 

Within the framework of the so-called new approach, a new procedure was developed in 
1985 which permits the passing of directives within a reasonably short period of time. By 
changing Articles 100 and 118 of the Treaty establishing the European Economic Commu¬ 
nity, which provided for the unanimity rule to be applied in passing directives for the safety of 
technical products and for occupational safety and health protection, into a majority rule, the 
elaboration and adoption of directives was additionally speeded up. 

The EC directives prepared in accordance with the new approach in future only include the 
basic safety requirements to be met by technical products. Technical shaping of these gen¬ 
eral regulations is carried out in European standards which are mainly elaborated by CEN 

’ For more details of this topic see EG 1985, EG 1992, Schwappach 1996 


4 





CE Marking and Trade in the European Union 


and CENELEC as instructed by the European Commission. These are implemented without 
modifications by the national standardization bodies which are members of CEN. 

The removal of technical barriers to trade is founded basically on three principles: 

1. Mutual recognition, 

2. notification, 

3. legal harmonization. 

2.1.1 Mutua[ re cognition 

Mutual recognition aims at facilitating free movement of goods by recognizing national tech¬ 
nical specifications as long as regulations have not yet been harmonized. 

2.1.2 Notification 

The individual member states will be put under obligation to inform the European Commis¬ 
sion about all drafts of national technical standards and specifications before they come into 
force (notification) in order to prevent the creation of new technical barriers to trade. 

2.1.3 Legal harmonization 

The aim of legal harmonization is to prepare technical EC directives which are to be imple¬ 
mented by the European Union member states. With this a uniform legal basis is to be cre¬ 
ated throughout Europe. 

2.2 EC directives in accordance with the new approach 

Below are some of the areas for which directives have been prepared according to the speci¬ 
fications of the new approach: 

• General principles, 

• electrical engineering, information systems engineering, 
telecommunications, 

(e.g. electromagnetic compatibility 

(e.g, telecommunications terminal equipment 

• medical technology, 

• toys, consumer goods, 

(e.g. safety of toys 88/378/EEC) 

5 


89/336/EEC) 
91/263/EEC) 











CE Marking and Trade in the European Union 


• mechanical engineering, 
(e.g. safety of machinery 


89/392/EEC) 


metrology, 


pressure vessels, 
e.g. simple pressure vessels 


87/404/EEC) 


• energy- using appliances, gas appliances, 
(e.g. appliances burning gaseous fuels 


90/396/EEC) 


• construction products, 

• personal safety equipment, 

• industrial safety, 

• noise emission, 

• bioengineering, 

• hazardous materials, 

• drugs, 

• transportation, shipbuilding, 

• environmental law, general regulations, 

• waste disposal, waste recycling, waste avoidance. 

Brief descriptions of some selected directives are to be found below. 

2.2.1 Directive on simple pressure vessels 

The directive on simple pressure vessels stipulates that the equipment used to absorb air or 
nitrogen under this regulation must be installed and operated in accordance with the re¬ 
quirements referred to in the annexes and otherwise according to the generally recognized 
technical rules (e.g. standards, regulations laid down by the working group on pressure ves¬ 
sels, safety regulations). For the purposes of this directive, 'simple pressure vessel' means 
any group of pressure vessels or any array of tubes subjected to an internal gauge pressure 
greater than 0.5 bar. The objectives regarding safety (criteria) to be achieved for the elabora¬ 
tion of technical regulations are specified in the annexes. These include: 


6 








CE Marking and Trade in the European Union 


• Materials, 

• vessel design, 

• manufacturing processes and 

• vessel operation. 

Pressure vessels which meet the requirements under this directive are labeled with the CE 
mark. 

2.2.2 Directive on the safety of_ toys 

Toys are defined in this directive as all products designed or intended for use in play by chil¬ 
dren of less than 14 years of age. 

The directive includes basic specifications of 

• design, manufacture, composition, 

• use, 

• risks from using the toy, 

• minimum age of child for whom it is intended and 

• labels and warnings. 

In addition, other stipulations are made regarding the warnings and instructions for use, such 
as: 

• Physical and mechanical characteristics, 

• flammability, 

• chemical characteristics, 

• electrical properties, 

• hygiene and 

• radioactivity. 

Toys that meet the provisions of this directive are labeled with the CE mark. 


7 












CE Marking and Trade in the European Union 


2.2.3 Directive on electromagnetic compatibility 

The directive on electromagnetic compatibility applies to all equipment liable to cause elec¬ 
tromagnetic disturbance or the performance of which is liable to be affected by such distur¬ 
bance. 

This includes the following equipment: 

• Private radio and television receivers, 

• commercial wireless equipment and radio telephones, 

• medical and scientific apparatus and instruments, 

• household appliances, 

• electronic equipment for educational purposes. 

Equipment that fulfils the requirements of the directive is labeled with the EC mark. 

2.2.4 Machinery directive 

The machinery directive prescribes basic requirements of safety and health which have to be 
met by all machines that are sold or offered for sale in the European internal market. For the 
purposes of this Directive, 'machinery’ means "an assembly of linked parts or components, at 
least one of which moves,joined together for a specific application, in particular for the 
processing, treatment, moving or packaging of a material" (see machinery directive). 

Individual components which perform a safety function are treated separately in this directive. 

Machines that fulfil the requirements of the directive are labeled with the EC mark. 

2.2.5 Directive on appliances burning gaseous fuels 

This directive applies, amongst other things, to appliances burning gaseous fuels used for 
cooking, heating, hot water production, refrigeration, lighting or washing. 

The directive makes stipulations regarding: 

• General operational provisions, 

• materials and 

• design and manufacture of the appliances. 


8 









CE Marking and Trade in the European Union 


In addition, procedures for certifying conformity, for CE marking and for preparing the design 
documentation are specified. 

2.2,6 Directive on telecommunications terminal equipment 

Terminal equipment’ for the purposes of this directive means equipment intended to be con¬ 
nected to the public telecommunications network or which directly interacts with a public tele¬ 
communications network. 

The respective annexes of the directive specify precise instructions for: 

• Production quality assurance, 

• full quality assurance and 

• marking. 

Here, too, the CE mark is the externally visible sign to the consumer stating that a technical 
product meets the safety requirements of the technical EC directives elaborated on the basis 
of the new approach. 

2.3 CE marking 

By means of CE marking, the manufacturer of a product makes it clear that the product 
manufactured by him meets the basic safety requirements of the applicable EC directives. 
Even if the product has been tested by a notified agency, the manufacturer is under obliga¬ 
tion to affix the CE mark. However, the manufacturer may not be apply the CE mark until he 
has carried out the conformity assessment procedures and drawn up an EC declaration of 
conformity. 

If the manufacturer is not established within the European Union, his local authorized repre¬ 
sentative must issue the EC declaration of conformity and affix the CE mark. Its shape and 
size is prescribed and must comply with the sample shown below: 


9 








CE Marking and Trade in the European Union 



Figure 1: Sample of the CE mark 2 

The CE mark is io be applied, for instance, on the type plate of the machine. The following 
information must be added: 

Name and address of the manufacturer, 

designation of series, type and serial number 

year of construction of the machine. 

The operating instructions must contain the same information as the information with which 
the machinery is marked. For this reason many manufacturers include a copy of the machin¬ 
ery marking information in the operating instructions 

2.4 Use of standards 

Using European standards implies that the basic safety requirements of the EC directives are 
fulfilled. 3 Hence it is useful to translate the specifications laid down in European standards 
into the internal set of company standards. Acquisition of the right to use these standards is 
an important prerequisite for this. The purchaser of a standard obtains this right. It is not per¬ 
missible to copy a standard for the company without prior permission from the German Stan¬ 
dards Institution (DIN) because DIN standards are copyright-protected. Members pay an an¬ 
nual lump sum for making copies and thus acquire the right to copy standards in electronic 
form or on paper for internal purposes. These copies must be made from their own original. 
The copies must be marked as such. Non-members or members who do not make a lump¬ 
sum payment for making copies need special permission to make copies from the legal 

*EC 1993, Annex I B. d) 1. 


10 

































































































































CE Marking and Trade in the European Union 


branch of the DIN institution. Permission to make copies is granted six months after publica¬ 
tion of the DIN standard at the earliest. It applies only to the number of copies stated in the 
permission. Companies which are not established in Germany must submit the application for 
making copies to the standards institution responsible. All copies are liable to a charge, irre¬ 
spective of the form or format of the copies; this also includes storage by electronic means. 
The charge to be paid is 30 per cent of the net price of the standard copied plus VAT. 

Further details can be found in the copyright law and DIN leaflet 3. 4 

DIN retains the right to translate the standards into foreign languages. If it is not planned to 
translate a standard into foreign languages or if a translation has already been made, DIN 
grants the translation rights on application; this is to be filed in writing to the DIN legal branch. 
Applications for translations filed by companies which are not established in Germany are to 
be submitted via the standards institution responsible. If the translation is approved, its format 
must be such that it cannot be confused with the original. The translation may be used for 
own purposes. DIN is to be provided with an author's copy of the translation. Copies may 
only be made on the aforementioned terms. 

Further details can be found in DIN leaflet 5. s 

There is no reason why the contents of standards cannot be adopted into company stan¬ 
dards if they are independent documents which are the product of elaboration and reshaping 
of the standards for pompany purposes. The content of the standard must then be expressed 
in the company's own words. In this case the adoption of short quotations is not considered 
to be a copy, provided that such quotations are used to make the independently prepared 
text more specific and is therefore not subject to prior permission. Merely replacing the 
header with company data and classification or omitting the outer frame does not constitute 
reshaping in this sense. 6 

3 Adoption of EC directives 

EC directives are directly aimed at individuals or companies. They are to be converted into 
national law by the governments of the member states of the European Union within a given 


3 Art, 5 (2) EC Machinery Directive 
1 DIN 1995, p. 423-424 
s DIN 1995, p 427-428 

* For more details see DIN 820 Part 1, para. 7 


11 












CE Marking and Trade in the European Union 


time limit. These national laws contain the stipulations which are to be observed by the 
manufacturers of technical products, 

3.1 Methods 

As adoption of European directives into national law is not obligatory for non-EU states, they 
have the opportunity to work in a fundamentally different way with these directives, as com¬ 
pared with EU member states. If products are to be sold to the European Union, they must 
meet the basic requirements of the EC directives. There are basically two possible proce¬ 
dures for fulfilling these basic safety requirements. Both of these approaches are explained 
briefly below. 

3.1.1 Preparing company standards on the basis of_ EC directives 

Preparation of company standards on the basis of the text in the directives presupposes ex¬ 
perience in dealing with the translation of generally formulated demands into detailed re¬ 
quirements. The work of incorporating the specifications of these general demands amplified 
by means of basic safety standards {Type A standards) and group standards (Type B stan¬ 
dards) into detailed company standards - as for instance the basic safety requirements laid 
down in the EC machinery directive - has to be performed by appropriate specialist staff (le¬ 
gal experts, standardizes, environmental experts, etc.), 

3.1.2 Preparing company standards on the basis of European standards 

The use of European standards also remains voluntary for manufacturers from member 
states of the European Union. Since the harmonized standards have been prepared on the 
general basis of the safety requirements set forth in the directives, it may be presumed that if 
European standards are adopted and used, then the basic safety requirements of the direc¬ 
tives will also be met. 7 This presumptive effect is laid down in the directives. This process of 
deduction can naturally also apply to manufacturers from non-EU states who label their prod¬ 
ucts with the required EC declaration of conformity and the CE mark. The products can then 
be offered and sold in the entire European economic area. 

It is left to the manufacturers of technical products to decide whether they will use the Euro¬ 
pean standards. If a product attains the same level of safety without using European stan¬ 
dards, it may also be sold in the European market without limitations, but only on condition 


12 ' 


7 See. for instance, EC Machinery Directive, Art 5 (2) 











CE Marking and Trade in the European Union 


that the manufacturer proves within the scope of EC type testing that the same level of pro¬ 
tection has been attained, that an EC declaration of conformity has been issued and that the 
CE mark has been affixed. A body certified (notified) on the basis of series EN 45000 is to be 
tasked with carrying out the conformity assessment procedure. 

3.2 Means 

Various organizational means are already available within companies which can be used to 
implement and apply the directive specifications. Taking the most important organizational 
means as an example, a brief description is given below as to how they can be used to adopt 
EC directives and European standards. 

3.2.1 Company standards 

The main contents of the EC directives, the European standards as well as of the national 
standards can be summarized in company standards for internal use. This is useful because 
these standards often contain specifications which are not needed in the companies in their 
entirety. They are supplemented by internal specifications prepared for the company, such as 
manufacturing tolerances, material selection or procedures, terms and definitions specifically 
laid down. Thus they develop into independent documents of the companies to which the 
conditions listed in paragraph 0 apply. 

The rules laid down in paragraph 0 regarding DIN standards also apply to the adoption of 
European standards. 

The EC machinery directive is taken as an example of such a company standard: 


13 












CE Marking and Trade in the European Union 


Company's Name 

CE Marking of Machinery 
(i.a.w. EC Machinery Directive) 

Date of Issue 


Contents 


0 Introduction 


1 Purpose 


1.1 

Requirements 


1.2 

Prerequisites 


2 Definitions and comments 


2.1 

EC declaration of conformity 


2.2 

CE marking 


2.3 

Manufacturer's declaration 


3 Definition of the term 'machinery' 


3.1 

Individual machine 


3.2 

Complex machinery/installation 


3.3 

Interchangeable equipment 


3.4 

Safety components 


3.5 

Machinery which cannot function independently 


3.6 

Used machinery 


4 Manufacture for own use 


0 Introduction • All maintenance measures or adapta¬ 

tions to the state-of-the-art technology 
Member States shall apply the EC Ma- without modifying machinery functions 

chinery Directive (89/392/EEC) including or performance are not covered by the 

the amendments and supplements provisions laid down in the EC machm- 

(91/368/EEC, 93/44/EEC and 93/68/EEC) e ry directive, 

with effect from 01 January 1995 for plac¬ 
ing on the market and putting into service • Spare parts or machinery parts needed 

of machinery within the European Internal to carry out maintenance measures 

Market, must meet the requirements laid down 

in the directive. 

The following shall apply to machinery 

which has already been put into service or • The EC machinery directive shall ap- 

placed on the market before ply to existing machinery only if 

01 January 1995: modifications are carried out which 

affect the function, technology or 

• It is not required to retrofit machinery in performance of the machinery, 

order to meet the requirements of the 

EC machinery directive. 


TT 








CE Marking and Trade in the European Union 


1 Purpose 

This standard describes the approach to 
applying the CE mark and manufacturing 
the machinery/installations and defines 
important terms. 

1.1 Requirements 

• Compliance with the basic safety and 
health requirements laid down in the EC 
machinery directive. 

• Issuance of an EC declaration of con¬ 
formity for any independently operating 
machine, installation and interchange¬ 
able equipment and for any safety 
component by the manufacturer. 

• Application of the CE mark. 

1.2 Prerequisites 

• Technical documentation prepared by 
the manufacturer. 

• Operating instructions to be supplied in 
the language of the country in which the 
machinery is to be used. 

2 Definitions and comments 

An EC declaration of conformity shall be 
issued only if the technical prod¬ 
uct/machinery can function independently 
and no other attachments are required. 
Otherwise a manufacturer's declaration 
without a CE mark shall be issued. 

2.1 EC declaration of conformity 

In the EC declaration of conformity, the 
signatory certifies on his own and sole re¬ 
sponsibility that the machinery conforms to 
the applicable EC directives. 

The obligation to draw up and issue the 
EC declaration of conformity applies to any 
machinery - also to machines manufac¬ 
tured only once -, to custom-built products 


and interchangeable equipment as well as 
to each machine belonging to a series. 

The obligation to issue the EC declaration 
of conformity applies to any machinery - 
irrespective of the fact whether it is used in 
the commercial, industrial or private sec¬ 
tor. 

The obligation to issue the EC declaration 
of conformity applies to the commercial 
sector even if the machinery is constructed 
by the manufacturer himself. 

The same obligation to issue an EC decla¬ 
ration of conformity also applies to any 
person assembling machinery or parts 
thereof of various origins. 

The EC declaration of conformity shall be 
issued in particular if a machine which 
cannot function independently and for 
which no EC declaration of conformity has 
been drawn up, is incorporated into other 
machinery or assembled with other ma¬ 
chinery to form a complex installation. The 
machinery must not be put into service un¬ 
til an EC declaration of conformity has 
been issued. 

The EC declaration of conformity is an 
official document and specifies the 
relevant provisions met by the machin¬ 
ery. 

The underlying standards, directives, 
regulations and technical specifications 
shall be stated. The EC declaration of 
conformity shall be signed in a legally 
binding form. 

The EC declaration of conformity must 
accompany the documentation of each 
machine supplied. 

2.2 CE Marking 

Signing of the EC declaration of conformity 
entitles the manufacturer to affix the CE 
mark to the machine. 


15 







CE Marking and Trade in the European Union 


Each machine may bear only one CE 
mark. 

Interchangeable equipment is an excep¬ 
tion to this principle and shall be individu¬ 
ally marked. 

If machines are incorporated into other 
machinery or assembled with other ma¬ 
chinery to form a complex machine or in¬ 
stallation whose individual machines can 
function independently, each individual 
machine shall be marked. But if these ma¬ 
chines are linked with each other to form a 
complex machine as a result of having 
been assembled such that they can no 
longer function independently, only one 
CE mark may be applied. 

The CE mark shall be affixed to machinery 
distinctly and visibly and indelibly. 

Marks or inscriptions liable to be confused 
with the CE mark shall not be put on ma¬ 
chinery. 

The CE mark is affixed by the manufac¬ 
turer of the machinery. 

2.3 Manufacturer’s declaration 

By issuing the manufacturer's declaration, 
the manufacturer certifies that the product 
in question is intended to be incorporated 
into machinery or assembled with other 
machinery to constitute a complex ma¬ 
chinery or installation and does not func¬ 
tion independently. 

The manufacturer's declaration shall be 
issued for any machinery which can func¬ 
tion independently. 

This machinery must of course satisfy the 
basic safety requirements laid down in the 
EC machinery directive and all other rele¬ 
vant directives. 

The manufacturer's declaration basically 
contains the same information as the EC 
declaration of conformity. In addition, it 
must contain a statement that the machin¬ 
ery must not be put into service until the 


complex machinery into which it )s to be 
incorporated has been declared to con¬ 
form with the provisions of the directive. 

3 Definition of the term 'machinery' 

3.1 Individual machine 

For the purposes of the EC machinery di¬ 
rective, 'machinery' means an assembly of 
linked parts or components, at least one of 
which moves, with the appropriate actua¬ 
tors, control and power circuits, etc., joined 
together for a specific application, in par¬ 
ticular for the processing, treatment, mov¬ 
ing or packaging of a material. 

3.2 Complex machinery / installation 

For the purposes of the EC machinery di¬ 
rective, the term 'machinery' covers an as¬ 
sembly of machines which are arranged 
and controlled so that they function as an 
integral whole. 

3.3 Interchangeable equipment 

For the purposes of the EC machinery di¬ 
rective, ’interchangeable equipment' 
means equipment used to change the 
function of the machinery and which can 
be exchanged by the operating personnel. 

3.4 Safety components 

Safety components are components which 
the manufacturer places on the market to 
fulfil a safety function when in use and the 
failure or malfunctioning of which endan¬ 
gers the safety or health of exposed per¬ 
sons in the danger zone of the machinery 
equipped with the safety component. 

3.5 Machinery which cannot function inde¬ 
pendently 


16 







CE Marking and Trade in the European Union 


Machinery that is exclusively intended to 
be incorporated into machinery or assem¬ 
bled with other machinery and cannot 
function independently is also covered by 
the provisions laid down in the EC ma¬ 
chinery directive, 

3.6 Used machinery 

The EC machinery directive does not ap¬ 
ply to the sale of or trade with used ma¬ 
chinery. 

If used machinery is integrated into 
complex machinery/installations for the 
first time or if modifications are made 
to used machinery which change the 
original safety precautions, this is 
equivalent to putting it into service or, 
in the case of sales, placing it on the 
market for the first time within the 
meaning of the EC machinery directive. 
The EC machinery directive shall then 
be fully applied. Any person who ef¬ 
fected the modifications thus shall be 
regarded as the manufacturer for the 


purposes of the EC machinery directive 
and shall fulfil the same requirements 
which apply to new machinery. 

4 Manufacture for own use 

The manufacturer is obliged to carry out a 
hazards analysis. Machinery construction 
must ensure that operation, setup and 
maintenance of the machinery does not 
endanger persons when the machinery is 
used for its intended purpose. 

The basic safety and health requirements 
referred to in the EC machinery directive 
shall apply. 

An EC declaration of conformity shall be 
issued (usually by the responsible design 
engineer in charge of carrying out the haz¬ 
ards analysis) which shall be signed by the 
responsible superiors empowered to sign. 


17 





CE Marking and Trade in the European Union 


3.2.2 Flow charts 

Process or flow charts open up the possibility of structuring procedures and processes within 
the companies and making them comprehensible. At the same time they make it possible to 
implement those measures that are listed in the ISO 9000 catalogue (e.g. definition of proce¬ 
dures and processes). 

The example listed below summarizes the steps required to ensure that machinery meets the 
safety requirements formulated in the EC machinery directive. First, it is necessary to define 
the limits of the machinery, to define intended conditions of use and to determine and evalu¬ 
ate the hazards involved. Finally, it must be specified how construction can be adapted to 
avoid the hazards or how the risk caused by them can be reduced. If the hazards are then 
not completely eliminated, it must be considered whether they can be reduced by technical 
protection measures. If this is still not sufficient, the user's guide must include notes on this. If 
these measures are still not sufficient to ensure an adequate level of safety, the limits of the 
machinery must be redefined. 

As these flow charts are independent products of the companies, the contents of standards 
or directives can be used to elaborate them. 


18 




CE Marking and Trade in the European Union 



Figure 2: Example of a flow chart used to define product safety 6 


5 i.a.w. Johannknecht I Warlich 1994 


19 





































CE Marking and Trade in the European Union 


3,2.3 Checklists 

Checklists are useful in preparing flow charts when recurring sets of tasks have to be struc¬ 
tured. The contents of the European standards can be used in these checklists, too. The fol¬ 
lowing is an example of a checklist to be completed prior to the delivery of a technical prod¬ 
uct: 


Checklist of machinery acceptance 

1. For the purposes of the EC machinery directive, "product" 
means 

a machine 

interchangeable equipment 
a safety component 

2. An EC declaration of conformity is available 

including the harmonized standards used 
including the national standards used 

3. Technical documentation (i.a.w. the EC machinery directive) 

is available 

4. Operating instructions in the language of the recipient coun¬ 

try are available 

5. Operating instructions in the language of the manufacturing 

country are available 

6. Type plate has been applied 

7. CE marking has been applied 

Name: . 

Date: .. 

Signature: .. 


yes 

no 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

o 

o 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 

Ol 


20 









CE Marking and Trade in the European Union 


4 Summary 

The objective of this presentation was to give a brief description as to how access to the 
common European market can be facilitated for companies in non-EU countries. A brief out¬ 
line of the current legal basis for harmonizing legal provisions was given and various means 
and procedures required to implement the European set of rules were briefly described. The 
possibilities and legal foundations for adopting and implementing technical rules into the 
companies were illustrated by means of examples. 



21 










CE Marking and Trade in the European Union 


5 References 

DIN 1995 

Deutsches Institut fur Normung (Hrsg.): Grundlagen der Normungsarbeit des DIN; 
DIN-Normenheft 10; Berlin, Wien, Zurich: Beuth, 1995 

EG 1985 

Amt fur amtliche Veroffentlichungen der Europaischen Gemeinschaften (Hrsg ): Voll- 
endung des Binnenmarktes - WeitJbuch der Kommission an den Europaischen Rat; 
Luxemburg 1985 

EG 1992 . 

Amt fur amtliche Veroffentlichungen der Europaischen Gemeinschaften (Hrsg.): Eine 
neue gemeinsame Normungspolitik - Das neue Konzept fur die Harmontsierung; Lu¬ 
xemburg 1992 

EG 1993 

Beschlufl 93/465/EWG des Rates vom 22. Juli 1993 uber die in den technischen 
Harmonisierungsrichtlinien zu verwendenden Module fur die verschiedenen Phasen 
der Konformitatsbewertungsverfahren und die Regeln fur die Anbringung und Ver- 
wendung der CE-Konformitatskennzeichnung; ABI, EG Nr. L 220 vom 30.08.1993; 
S.23 

Johannknecht / Warlich 1994 

Johannknecht, A. und H. J. Warlich: Maschinen in Europa; Wiesbaden: Universum 
Verlagsanstalt, 1994 

Hahn 1995 

Hahn, H. P.: CE-Kennzeichnung leicht gemacht: ein praktischer Leitfaden; Munchen, 
Wien: Hanser, 1995 

Schwappach 1996 

Schwappach, J. (Hrsg.): EU-Rechtshandbuch fur die Wirtschaft; Munchen: Beck, 

1996 


22 




CE Marking and Trade in the European Union 


6 Summary 

It was intended to give an introduction into European policy in the field of technical directives. 
Therefore it was explained on which legal basis directives are prepared and what has to be 
done to implement them into companies. Some of the most important technical directives 
were introduced and it was shown how to fulfil the basic requirements in the field of technical 
safety and health in using European standards and how to use the CE marking. 

Because there are certain difficulties in using copyrighted material it was explained how to 
adopt technical directives and European standards into company standards without violating 
intellectual property rights by quoting and transforming the original papers into own stan¬ 
dards. 


23 









Translation from German 


THE STANDARDIZATION CYCLE 


By 


Jens Kleinemeyer 






Contents 


Page 

1 Introduction. 3 

2 The Standardization Cycle. 4 

3 Intracompany Standardization.. 6 

4 The Structure and Problems of National Standardization. 7 

4.1 The Structure of a National Standardization. 7 

4.2 The Origin of National Standards. 8 

4.3 Free Riders of Standardization. 9 

5 Participation of Companies in National Standardization. 11 

5.1 Effects of a Standard and Effects of Participation in Standardization. 11 

5.2 Effects of a Standard and Effects of Participation in Standardization on 

the Costs .. 13 

6 Possible Methods of Financing Standardization . 15 

7 National Standardization as Representation of Interests . 17 

8 Summary . 19 

References ... 20 


2 


















1 Introduction 


In many countries which are in the process of evolving from a centrally planned economy to a 
market economy there are binding standards developed by a government authority or on its be¬ 
half. Therefore, deviations from these government standards are not permitted. Participation - 
in particular of public enterprises - in the standardization process may be decreed. However, 
mandatory participation usually leads to this obligation being met without any great involvement. 
Thus, many producing enterprises or collective combines became mere recipients of standards 
and engineering directives. They virtually did not contribute anything to the preparation of these 
technical specifications. Because the government financed national standardization, the natio¬ 
nal standards could be passed on at very low cost. When the market economy was introduced, 
which involved the privatization of a great number of former state functions, national standard¬ 
ization was also restructured. It was adapted to Western systems by changing over to voluntary 
standardization, often organized under private law. 

The changes in the area of standardization must be seen in the context of political and econo¬ 
mic developments in Central and Eastern Europe. The economic reforms — in praticular with re¬ 
gard to price decontrol and general privatization - inevitably lead to enterprises which can no 
longer be forced to participate in national standardization. In principle, the government may pro¬ 
vide funds for national standardization even in a market economy but this will be difficult to get 
accepted politically, since national standardization would primarily benefit the enterprises. Go¬ 
vernment funding of national standardization would thus be nothing but a subsidization of the 
enterprises. This policy would neither go with the attempt to meet the criteria of the European 
Monetary Union nor facilitate accession to the European Union. Of course, this does not affect 
the fact that the development of individual standardization projects serving the general welfare 
may also be sped up by granting government aid. 

The formerly centrally controlled economic systems are now faced with the problem that they 
have to turn former recipients into producers of technical specifications, who should also be 
prepared to fund this process. This becomes necessary because the new standardization orga¬ 
nizations have neither the know-how nor the financial resources to perform the actual work and 
produce the required standards. Structures like those that have evolved in the Western econo¬ 
mic systems since World War I and resulted in approximately 20,000 standards in Germany, 
France and Great Britain today cannot be „conjured up out of thin air". Nevertheless, the coun¬ 
tries in transition have great resources of technical know-how that may be used for technical 


3 






standardization. However, mechnisms have to be found which permit these resources to be 
tapped, i.e. it must be possible to fund the standardization work, 

2 The Standardization Cycle 

Within a national economy, standardization occurs at various levels. For instance, it may occur 
at the lowest level - the individual company - or at a higher level, e.g. within a branch of busi¬ 
ness or industry, or at a comprehensive national level. Standardization as practised in the We¬ 
stern industrial nations can best be illustrated by Figure 1. Inter-branch or national standards 
are normally developed on the basis of intracompany standardization. In turn, these standards 
are then used by the enterprises and incorporated into their own standards. This may be done 
by complete adoption, with or without amendments, or partial adoption. But national standards 
may also serve as a basis for regional or global standardization. 


Global 

Standardization 





Fig. 1 The Standardization Cycle 1 


1 Naturally, links may be established between all elements of the standardization cycle, but the emphasis was placed 
here on the links between the company and the national level . 


4 










The standardization cycle can, of course, also begin at levels other than intracompany stan¬ 
dardization, i.e. through a national, regional or global standardization initiative. But it becomes 
clear that, regardless of the origin of the standard, it must be adhered to within the enterprise 
and integrated into intracompany standardization to be successful. From a historical point of 
view it is difficult to tell what came first: intracompany standardization at the national, regional or 
global level. An intracompany standard was first established in the German Reich by Siemens & 
Halske, who in 1976 gave a written definition for the characteristics of a thread {Wolcker, p. 28). 

Figure 1 looks so simple and uncomplicated at first glance, but when we take a closer look it 
turns out to be a network of a great number of interconnected relationships and problems. 

1. Intracompany standards are incorporated into national standards. As is generally known, ab¬ 
solutely conflicting interests may clash during this process. As a rule, competing enterprises 
are not very inclined to agree to a competitor's proposal to establish a standard because this 
might provide him with a competitive advantage. If the companies have finally reached an 
agreement, then their position will probably be in contrast to the consumers' and/or the trade 
union's position. 

2. The fact that the consumers' position is only rarely considered by standardization bodies is a 
problem frequently voiced in the Federal Republic of Germany. The reason for this is the lack 
of opportunities for consumers to organize and to raise funds for the representation of their 
interests. Thus, the organizations setting the standards are increasingly becoming the focal 
point of interest for the supervisory authorities enforcing fair competition, because it cannot 
be ruled out that the standardization bodies reach not only technical agreements but also 
agreements on prices and quantities. 

3. What applies to the consumers is also true for national standardization as a whole. It costs 
money and thus requires money. The attitude of many companies not to participate in vo¬ 
luntary standardization but to make use of the product of this process is called Jaking a free 
ride“ - not only in the company. These companies avoid sharing the costs for the develop¬ 
ment of standards in order to cheaply use the know-how contained in the standards after¬ 
wards. If a sufficient number of companies demonstrate this attitude, national standardization 
will collapse or not even come into being. This problem will be dealt with in more detail in 
section 4.3, „Free Riders of Standardization". 


5 



3 Intracompany Standardization 


Within the framework of intracompany standardization, standards may originate in various ways. 
As outlined in detail in the contribution on the strategic importance of intracompany standard¬ 
ization, this can be done by company development or by adopting an intercompany standard. 
Intracompany standardization is intended, firstly, to lower the costs, and secondly, to increase 
the proceeds of the company. 

Standards for Increasing Output 

Standards are developed and implemented to either increase the production output at the same 
production cost or to lower the production cost while the output remains constant. It is a well- 
known phenomenon that the repetition of operations will lead to these operations being perform¬ 
ed at a higher speed. Intracompany standards will ensure a sufficiently great similarity -between 
the individual operations. Standards are thus the prerequisite for mass production. 

However, efficient standardization also provides for a reduction in the variety of parts, assem¬ 
blies and even end products, if necessary. A reduction in the number of parts becomes notice¬ 
able through lower production cost, e.g. on account of larger production batches or lower pro¬ 
curement costs, since the purchased parts can be produced at a better price and increased 
competition will lead to lower prices. 

When speaking of or writing about technical standardization, this generally concerns standards 
which lead to the effects described above. 

Standards for Improving Intracompany Communication 

Directives concerning communication and information flow within the company are very rarely 
regarded as standards. The reason for this is that the standards for improving communication 
are not directly technical and also cannot be represented as technical drawings. Nevertheless, 
standards for improving communication are of at least equal importance; this all the more since 
the factor ..information" has become the fourth production factor, placed on a level with the fac¬ 
tors „work“, ..capital* 1 (machines, etc.) and „real estate". The internal processes and channels of 
communication can be clearly defined with the aid of standards. 

Standards are a common basis for the company's employees and more or less define its termi¬ 
nology. Thus, standards cause less misunterstandings and help to reduce errors in the produc¬ 
tion process. 


6 



Quality Assurance Standards 


Standards play different roles in quality assurance. Firstly, standards are necessary for asses¬ 
sing deviations from a technical reference value, i.e. whether they fall within the tolerance range 
and the product may therefore be sold, or whether the limits have been exceeded and the pro¬ 
duct must therefore be entered in the books as a reject. The standards therefore include the 
measuring method and the measuring conditions as well as ideal values and tolerances in order 
to ensure the constant quality of a product. Secondly, standards are necessary to ensure that 
these standards are observed. An example for this is the well-known ISO 9000 family. 

Many intracompany standards are based on national standards which are adapted to the spe¬ 
cial requirement of the company, if necessary. For many companies, national standardization 
thus is a frequently used source of technical knowledge. 

4 The Structure and Problems of National Standardization 

4.1 The Structure of National Standardization 

When considering the various legal and organizational forms of national standardization, recur¬ 
ring patterns may be perceived, but also a number of contradictions. 

Thus, contradictions (which will be dealt within more detail in the following contribution on the 
organization of national standardization) exist between 

• the binding force and the voluntariness of standards, 

• the centralized and decentralized development of standards, 

• privately , and government-funded national standardization, 
and 

• the private and government development of standards. 

Similarities exist especially in the organizational structure where the actual standardization is 
carried out. At national as well as international level we can see a specialization of standardiza¬ 
tion in the field of electrical engineering from the standardization in other fields. This has pro¬ 
duced the combinations ISO - CEN - DIN and TEC -CENELEC - DKE But the structure of 
these organizations also shows symmetries. A connecting criterion is the subdivision into tech¬ 
nical committees, subcommittees, working groups and subworking groups. 


7 






The more complex a problem is which is to be solved with the aid of one or several standards, 
the more complex the organizational structures become, since a single working group will 
usually not be able to develop the necessary number of standards. Thus, the task of coordi¬ 
nating the work will gain in importance, as well. This standardization project will not only be¬ 
come more expensive because more standards have to be developed, but also because of the 
greater coordination effort. There is also the danger that several differing solutions will be pre¬ 
pared for certain problems which ultimately leads to no standard being developed after all. The 
costs incurred for the actual standardization work as well as for the coordination of this work 
must be funded; otherwise national standardization will remain incomplete. 

4.2 The Origin of National Standards 

The origin of a future standard is a point to be considered both for the purpose of national stan¬ 
dardization and for standardization within an individual company. 

t. Should the national standard be newly developed? 

2. Should a regional or international standard be adopted as the national standard? 

3. Should a regional or international standard be adopted in a modified form? 

Various determining factors will influence the decision on what approach to choose for develo¬ 
ping a national standard. 

First, the economic importance of a country plays a role. A small country which wants to get clo¬ 
ser to the European Union will be well advised to put the emphasis on adopting mostly Europe¬ 
an standards and develop its own standards only in exceptional cases. Lithuania is pursuing 
such a strategy, for example. Small countries often do not have the variety of industries that 
exist in larger countries. Therefore, the network of relationships, i.e. products and services pro¬ 
duced, bought and sold exclusively within the respective country, will be smaller than that in a 
larger country. 

A second factor is the political attitude towards international and regional trade. As is well 
known, standards may be technical trade barriers. Again and again they are misused as a tool 
for protecting domestic industry or trade against foreign (and generally cheaper) competition. If 
a country therefore pursues a policy aimed more at protectionism, then national standards 
would have to be developed, of course. 


8 











Orientation towards free trade and the world market will automatically lead to more international 
or regional standards being adopted as national standards. 

However, the political attitude towards integration into the European Union, for example, also 
plays a role in the selection of the national standardization strategy. If a country aspires to as¬ 
sociation with or later admission into the European Union, incorporating both European directi¬ 
ves into national laws and European standards into national standards suggests itself in order to 
thus create the technical basis for a smooth admission - e.g. into the European Union. That this 
is of considerable relevance for Poland, for example, is revealed by a look at the structure of the 
Polish foreign trade (see Table 1). As can be seen, the Federal Republic of Germany has by far 
the greatest importance for Poland’s foreign trade. For the Polish national standardization, this 
means that following the German national standards, in addition to complying with regional Eu¬ 
ropean standards, is an important prerequisite for the success of Poland’s foreign trade in the 
long term. 


Country 

1996 

Turnover 

(in million 

US dollars) 

Export 

(in million 

US dollars) 

Import 

(in million 

US dollars) 

Share 

Export 

; in % 

Import 

Germany 

16 514.1 

8 777.5 

7 736.6 

38.34 

26.63 

Italy 

3 604.1 

1 121.9 

2 482.2 

4.90 

8.54 

Russia 

3 234,0 

1 274.2 

1 959.8 

5.57 

6.75 

Netherlands 

2 606.6 

1 288.6 

1 318.0 

5.63 

4.54 

Great Britain 

2 419.6 

916.9 

1 502.7 

4.00 

5.17 

France 

2 239.9 

818.2 

1 420.7 

3.58 

4.89 

USA 

1 758.0 

621.1 

1 136.9 

2.71 

3.91 

Czech Republic 

1 589.9 

698.2 

891.7 

3.05 

3.07 

Sweden 

1 490.5 

581.0 

909.5 

2.54 

3.13 


Table 1: Poland’s most important trading partners 

(Source: Ministry for Economic Cooperation with Foreign Countries) 

4.3 Free Riders of Standardization 

Now we come to the probably greatest problem facing national standardization. The product 
STANDARD has some special features. In some cases, the production of a standard involves 
considerable expenditure. WEISS and SPRING (1995, p. 7), for example, estimate that the pro¬ 
duction of the lOBaseT Ethernet standard (IEEE 802.3i) cost between 8.7 and 


9 




















13 million US dollars. Thus, every participating organization has to pay between 120,000 and 
185,000 US dollars. However, not only the participants in the standardization process may 
make use of this standard but also enterprises which have not been involved. Those enterprises 
which have not shared the costs yet want to reap the benefits are called „free riders". This free¬ 
riding by companies involves the risk that a standardization process will not materialize at all 
because nobody is willing to meet ail the expenses alone. For this reason, national standardiza¬ 
tion must be organized in such a way that, firstly, the companies participating in the standard¬ 
ization process can realize benefits which others cannot realize, and secondly, the production 
costs of a standard are also shared to a larger extent by those companies not pariticipating but 
using the standard. 

Table 1 illustrates this situation and the dilemma connected with it. Company A must now deci¬ 
de whether it wants to participate in the standardization process or not. If it participates, then it 
will have to pay the costs for participating in the process: ..participation costs". Even if only one 
company participates in the process, a standard is produced. The benefit resulting from it in the 
form of technical information will become accessible to all: ..benefit". 

If all the companies decide against participation, then they will neither incur costs nor will a 
standard be produced from which they may benefit: „0 U . 



All other companies 


participate in the production 
of the standard 

do not participate in the produc¬ 
tion of the standard 

participates 
in the produc¬ 
tion of the stan¬ 

Benefit 

minus participation costs 

Benefit 

dard 

Benefit 

Benefit 


minus participation costs 

minus participation costs 

does not parti¬ 
cipate in the 
production of 
the standard 

Benefit 

Minus participation costs 

0 


Benefit 

0 


Company 

A 


Table 2: Strategic situation from the perspective of many companies 


10 







The two most significant parameters for companies participating in the standardization process 
have thus been identified: 

• the amount to be paid for participating in the standardization process, and 

• the level of benefit to be derived from a standard by the individual company. 

The decision of the company or its managers is clear if all the other companies participate in the 
production of the standard. The participation would only involve expenses for Company A, so it 
will decide against participation. However, if all the other companies do not participate in the 
production of the standard, Company A will have neither expenses nor any benefit if it does not 
participate in the standardization body either. If it participates in the standardization process, 
however, it will not only benefit from the standard but it will also incur participation costs. If one 
excludes the extreme cases where the benefit from a standard is greater than the costs for na¬ 
tional participation (even for only one company), a situation arises where Company A will not 
participate in standardization irrespective of what all the other companies do. Because of the 
symmetry, this also applies to all the other companies so that in the end none of the companies 
will participate in the standardization, and national standardization will not come about. 

5 Participation of Companies in National Standardization 

5.1 Effects of a Standard and Effects of Participation in Standardization 

Thus, it seems clear that participation in a national standardization body cannot be justified from 
an economic point of view. However, the description contained in Table 2 neglects a number of 
facts which many decision makers in companies also fail to see. Their view is shown in Table 2. 

Let us now proceed to Table 3. The benefit of participation in a national standardization process 
is not only that it will in the end result in a standard that may be used both by the companies 
that contributed to the development of the standard but also those which use the standard wi¬ 
thout making any contribution of their own. The benefit is also that the participating companies 
already gain an advantage through their participation. This can happen in various ways: 

Information Collection 

Participation in national standardization may serve as a source of information about the 
developmental status and intentions of competitors. It may also provide insights into the 
competitor's assessment of the market development or technological innovations. 


11 






All other companies 


participate in the production 
of the standard 

do not participate in the produc¬ 
tion of the standard 

participates 
in the produc¬ 
tion of the stan¬ 
dard 

Benefit from the standard 
plus benefit from participation 
minus participation costs 

Benefit from the standard 
plus benefit from participation 
minus participation costs 

Benefit from the standard 

Benefit from the standard 

plus benefit from participation 
minus participation costs 

does not parti¬ 
cipate in the 
production of 

the standard 

Benefit from the standard 
plus benefit from participation 
minus participation costs 

0 


Benefit from the standard 

0 


Company 

A 


Table 3: Strategic situation when taking a differentiated view of the effects of 
participation in standardization on the benefit 

Exchange of Experience 

Within the standardization body, there may be an exchange of experience that may benefit all 
the participating companies. This applies, for example, to the problems and solutions connected 
with the implementation of the ISO 9000 family, to products conforming to European directives, 
to general documentation problems, etc. 

Cooperation and Joint Ventures 

A standardization body can already be regarded as the basis for potential technological coope¬ 
ration between one or several of the participating enterprises. The fact that this body unites 
companies which operate on similar or identical markets results in the body being almost made 
for sounding out and, if possible, preparing opportunities for technological cooperation or for 
joint ventures on a more technical level. Of course, this not only applies to national standardiza¬ 
tion but to a similar degree also to international standardization. 


12 









5.2 Effects of a Standard and Effects of Participation in Standardization on the Costs 


Participation in the production of a standard does not only affect the benefit side but also the 
cost side. This particularly applies to the proportion of costs incurred by the participating com¬ 
panies and those incurred by companies which only want to use the standard. 

A standard or the know-how accumulated in this standard does not provide any benefit if it is 
not put to use, Companies not participating in the standardization process are, on the one hand, 
faced with the problem that they must or want to use a standard that does not incorporate the 
wishes and ideas of the company; on the other hand, there may also arise terminological pro¬ 
blems, since only those companies which participated in the development of the standard know 
what certain phrases refer to. This cannot really be expected from free riders. For this reason, 
putting a standard to use may be more cost-effective in companies which participated in its de¬ 
velopment than in those which only want to use the finished standard. Participation in a stan¬ 
dardization body may therefore be used as a tool for raising the costs for competitors and thus 
to obtain a cost benefit, and thereby a competitive advantage, 


13 




All other companies 


participate in the production 

do not participate in the produc¬ 


of the standard 

tion of the standard 


Benefit from the standard 

Benefit from the standard 

participates 
in the produc¬ 
tion of the stan¬ 
dard 

plus benefit from participa¬ 
tion 

minus participation costs 

minus the costs of putting 
the standard to use 

minus the costs of putting 
the standard to use 


Benefit from the standard 

Benefit from the standard 


plus benefit from participation 

plus benefit from participation 


minus participation costs 

minus participation costs 


minus the costs of putting the 

minus the costs of putting the 


standard to use 

standard to use 


Benefit from the standard 
plus benefit from participa¬ 

0 

does not parti¬ 

tion 


cipate in the 

minus participation costs 


production of 

the standard 

minus participation costs 

minus the costs of putting 
the standard to use 



Benefit from the standard 
minus the costs of putting the 
standard to use 

0 


Company 

A 


Table 4: Strategic situation when taking a differentiated view of the effects of 
participation in standardization on the benefit and costs 


14 















Thus the participating company gains a number of advantages over the company taking a free 
ride: 

• participation in the standardization process will result in an additional benefit through the op¬ 
portunities for establishing contacts, exchanging and collecting information; 

• the costs of putting the standard to use will be lower because the standard ist more likely to 
be tailored to the needs of the participating company and there will be no misunterstandings 
when interpreting the standard. 

This will change the strategic situation of the companies. If the companies view the matter as 
shown in Table 2, their decision not to participate in national standardization will be justified. 
However, this no longer applies when the implicit effects of participation in national standardiza¬ 
tion on both the benefit and the cost side are also considered. 

6 Possible Methods of Financing Standardization 

In addition to the companies' strategy of fully mediating the effects of participation in the natio¬ 
nal standardization process, ways of lowering participation costs while at the same time increa¬ 
sing the benefits of participation may also be looked for. 

National standardization may be financed in various ways. In one extreme case it may be finan¬ 
ced solely from tax money, while in another extreme case financing may be based exclusively 
on one's own proceeds which, in turn, may derive from various sources such as the sale of 
standards, certification and also consultation and training. Each of these financing methods has 
its advantages and disadvantages. 

In many countries it was decided to establish standardization as a largely self-supporting institu¬ 
tion with little government support. This concept of not letting the general public pay for some¬ 
thing that will benefit only a few (business enterprises) may be expanded so that standardizati¬ 
on is financed exclusively by those who benefit from it directly. 

When considering the phases of disaggregated standardization, we notice that this condition is 
most likeiy to be met in the implementation phase. Here, all companies benefiting from the 
standard have to integrate it into their production process and, as a rule, certify that their pro¬ 
ducts comply with the national standard. If these conformance structures are created in such a 
way that they also record how often the conformance of a product to a standard is certified, i.e. 
how big the production is, then the costs for financing the standardization can be fairly allocated 


15 





to the users. This means that a quantity-related conformance fee has to be paid, to be used to 
support both the preparation and propagation of the standard and to ensure the provision of au¬ 
xiliary functions. 

The currently customary practice of distributing the costs among the companies by selling the 
standard has the disadvantage that companies benefiting greatly (e.g. in the form of great pro¬ 
duction quantities) from the standard contribute just as much to its financing as those compa¬ 
nies which benefit only a little {e.g. in the form of small production quantities). 

The proceeds derived from a quantity-related conformance fee must then be used for both pre¬ 
paring and propagating the standards and ensuring the provision of auxiliary functions. 

However, what should be the mechanism to ensure the financing of the preparation of stan¬ 
dards? 2 

1. The costs of preparing standards will be fully refunded by the national standards orga¬ 
nization, which use the proceeds from the conformance fee for this purpose. This 
financing model involves several problems, however: The participating companies are in¬ 
duced to state higher costs than they actually incurred. This further involves the risk that 
enterprises will only participate in the standardization process because of this pecuniary 
compensation so that they can improve their turnover ratios. In this case there will be no 
incentive for the participating companies to save costs, since they can pass them on com¬ 
pletely to the national standards organization. 


3 In addition to efficiency aspects, other factors also seem to play a role here If, for example all interested groups are 
to participate in the standardization process, then it should be made possible to participate free of charge, with 
compensation for all costs. If all participate, this will probably lower the quality of the standard because the smallest 
common denominator they can agree on will be smaller than if there are only a few participants. In this respect, the 
matter of costs or financing can also be interpreted as a matter of what would be the optimum number of participa¬ 
ting companies. If only a few participate in the standardization process, then extended participation will provide a 
better standard. However, if many already participate in the process, additional participants will impair the quality. 
Two contrary factors are the reason for this. Firstly, more participants will increase the technical know-how and in¬ 
put. Secondly, however, more participants will also increase the coordination costs. 


16 







2. Each company could receive a lump-sum subsidy which would encourage the companies 
to handle costs more carefully. This also counteracts the problem of claiming excessively 
high costs. However, a new problem arises, since there is now an incentive for the com¬ 
panies to participate in as many standardization projects as possible and with as little ex¬ 
penditure as possible in order to receive the cost subsidy and realize this as nonoperating 
revenue. So there will be a wide range of participants, but this will not necessarily make 
the standardization process more effective. 

3. The companies participating in the standardization process do not pay any or only a re¬ 
duced conformance fee. This will obviously have the result that the participating compa¬ 
nies will neither inflate their costs nor push their effective costs. However, this tool alone 
cannot prevent that many companies will try to obtain the benefit of using the standard 
(practically) free of charge. This may be countered, however, by sufficiently high mem¬ 
bership dues to be paid prior to participation in the standardization process. In this way it 
is possible to ensure that only those who actually benefit from the standard and who are 
therefore willing to invest the appropriate capital will participate in the standardization 
process. 

7 National Standardization as Representation of Interests 

A frequently overlooked aspect of national standardization is the concentration of national inte¬ 
rests and their transformation into regional and international standardization bodies. This espe¬ 
cially applies to the two European standardization organization CEN and CENELEC, in whose 
technical committees only representatives of the respective member organizations may partici¬ 
pate. In the third European standardization organization - ETS1 - the companies may partici¬ 
pate directly in the technical committee. 

In order to be able to represent the national interests - which undoubtedly are also the interests 
of the industry or, more generally, the producing sector - in CEN or CENELEC, these intere- 
rests must be formulated and presented in the appropriate forum. This is normally a so-called 
„mirror committee 11 in which the interested and affected companies meet at the national level to 
determine the strategy that the chairman of this body should implement in the technical com¬ 
mittee at the European level. Without national standardization there can be no effective con¬ 
centration and formulation of one's own interests, and thus there can be no successful influence 
on the regional or, in this specific case, the European standardization process. 


17 




In addition, a national representative body also has the task of concentrating the interests so that 
the different groups will not work against each other at the international level. Something like that 
happened in a big internationally operating German group of affiliated companies, whose depat- 
ments represented opposite positions in different workung groups (and also in different countries) 
and where the lack of internal coordination contrasted with the speed of the standardization 
process. The same situation may occur if there is no coordination at the national level. 

A national standardization organization or participation in the standardization process is not only 
important for companies which move on the international stage and are thus interested in a 
strong and internationally operating standardization organization, but smaller and medium-sized 
companies can also concentrate their interests in standardization bodies and get them accep¬ 
ted, if necessary. 

An important motive for companies to participate in the national standardization process is the 
opportunity to influence both the process itself and the standard. This can, firstly, prevent that 
the national standard runs counter to company interests and, secondly, preclude the possibility 
of a competitive advantage for participating competitors. Irrespective of their binding force, 
standards set a signal not only for a great number of companies, but also for consumers. 
(Especially in Central and Eastern Europe, referring to standards - e.g. the ISO 9000 family for 
quality management systems - is gaining importance even in government procurement.) If a 
company keeps out of the standardization process, then its competitors can be expected to try 
to gain a competitive advantage through the resulting standard. 

Differing interests, e.g. between small and medium companies on the one hand and big compa¬ 
nies on the other, are to be expected with regard to standardization. Thus, small and medium 
companies prefer to operate on markets with more generalized standards because with precise 
standards the price of the product will be the decisive argument, and big companies with larger 
production facilities will therefore have a competitive advantage (KLEINALTENKAMP and 
MARRA). 

The wish not to have any standard or only a general standard does, however, not release the 
small and medium companies from participating in the standardization process, because other¬ 
wise the big companies will see to it that a (very precise) standard will be developed. Thus, the 
small and medium companies must use the standardization process to either totally prevent a 
standard or influence the standard in such a way that the advantages of smaller and medium 
companies - proximity to the costumer and flexibility - are not eliminated by the standard. 


18 








8 Summary 


Even if company and intercompany national standardization are not necessary mutual prerequi¬ 
sites, they nevertheless show great complementarities, i.e. the positive effects of company 
standardization are enhanced by intercompany standardization and vice versa. The standar¬ 
dization cycle is therefore a self-reinforcing structure. An increased intercompany standardiza¬ 
tion activity will lead to better results at the company level and thus also increase intracompany 
standardization activities, which will simultaneously enhance intercompany national standard¬ 
ization. For both company and national standardization it is vital to get this process going. 

While at the company level the decision and implementation are the exclusive responsibility of 
management, at the national level it is possible for the government to influence this develop¬ 
ment in a formative way. However, more important than direct government support is to convin¬ 
ce the companies that their participation in the standardization process will be worth the effort in 
the medium and long term. Government financial support can be limited to two exceptions: first, 
standardization to serve the general welfare, and second, to get the standardization cycle in 
motion. 

The former structure of national standardization in Central and Eastern Europe was character¬ 
ized, first, by forced participation in standardization and, second, by government funding. In this 
form it is not compatible with the market-oriented economy because it leads to distorted prices 
and inefficiencies. It is understandable that from today’s point of view, a part of the former 
structures, in particular the assumption of costs, is considered positive, but it should not be 
overlooked that this was accompanied by the „state" owning the companies, while today the 
objective is privatization of the companies, which has already been accomplished to a large 
extent. 

Market economics and private property ownership always require the transactors' initiative. The 
positive development of the Polish economy during the past few years shows that the Polish 
people have so much initiative and, ultimately, so much enterprise that they were able to over¬ 
come the depression following the shift from the centrally planned economy to the market eco¬ 
nomy. In the final analysis, standards are products or commodities, like any others; so there is 
no reason not to use the successful initiatives of private enterprise for standardization, as is do¬ 
ne in other areas. In the short term one cannot expect the same results in Poland as in other 
Western economies, but in the medium and long term a standardization cycle based on the in¬ 
itiatives of private companies will gain momentum and benefit all the participants. 


19 




References 


Foray, Dominique. „Users, standards and the economics of coalitions and committees". Infor¬ 
mation Economics and Policy, Vol, 6, 1994, p. 269-294. 

Kleinaltenkamp, M. and A. Marra. „Schaffen Normen Markte?" 

VDI-Z 136 (1994), No. 3, p. 74-77. 

Weiss, Martin B.H. and Michael B. Spring. ..Alternatives to Financing the Standards Develop¬ 
ment Process". University of Pittsburgh, February 1995. 

Wolcker, Thomas. „Entstehung und Entwicklung des Deutschen Normenausschusses". 
Thesis, Freie Universitat Berlin, 1991. 


20 





Translation from German 


FUNCTIONS AND STRUCTURES OF NATIONAL STANDARDS 
INSTUTUTES AS A BASIS FOR SECURING THEIR 
ECONOMIC EXISTENCE 


By 


Wilfried Hesser 






2 


Contents Page 

1 Introduction... 3 

2 Basis for the Change in Standardization Systems. 4 

3 Functions and Structures of Standard-Setting Organizations.8 

3.1 AFNOR - Association Frangaise de Normalisation.8 

3.2 BSI - British Standards Institution. 10 

3.3 ANSI - American National Standards Institute. 13 

3.4 DIN- Deutsches Institut fur Normung e.V....16 

4 Functions of Standard-Setting Organization.*.jg 

5 Future Development of National Standard-Setting Organizations.22 

5.1 Developments in Eastern Europe. 24 

5.2 Funding of National Standards Institutes.26 

6 Summary..... 29 

7 References.. 32 























3 


1 Introduction 

Standard-setting organizations exist in every country. They may have the status of institutions 
under either private law or public law. These organizations emerged at the beginning of this 
century, with World War I accelerating the development. 

In the course of the progressing industrialization, the prime objective of these organizations was 
to support the rationalization of the production process in private companies. The emphasis was 
placed on the traditional rationalization, such as the reduction and standardization of products 
and manufacturing methods. In this way the companies realized effective production processes 
and economic success. 

In the past, national standards institutes concentrated their efforts on national companies, since 
the standards were used in the sense of traditional rationalization, and the companies thus had 
a largely homogeneous interest. 

This common interest in rationalization explains why the national industries joined standard¬ 
setting associations and organizations and why there developed consensus-oriented decision¬ 
making rules for the preparation of standards. 

The situation in which standard-setting organizations find themselves today differs decisively 
from the situation in which they emerged during the industrialization process at the beginning of 
the 20th century, in Europe, national standards institutes - and this must be especially remem¬ 
bered - essentially are organizations which resulted from the merger of national companies. 

Today, however, these companies not only compete with each other at the national level but 
also, and mainly, on a European and increasingly also on a global level (e.g. Germany exports 
60 percent of its mechanical engineering output). 

National and European markets are increasingly replaced by regional markets such as ASEAN, 
North American Free Trading Area, or MERKOSUR in Latin America. These regions establish 
or have established their own standard-setting organizations with the objective of developing 
uniform standards, but also to protect their markets. 

This is only one aspect that will result in changes for the national standards institutes in Europe. 






4 


2 Basis for the Change in Standardization Systems 

A The decisive change will result from the changing quality of the standards. 

If in the past the focus of standardization work was placed, on the rationalization of production, 
then today standards are prepared to ensure the compatibility of products, procedures, and 
services. 

This change is most obvious in the case of technologies based on or requiring a functional 
compatibility. Examples are the computer and also the telecommunications industries and their 
products. 

Because of this development, it can no longer be assumed that there is a homogeneous interest 
of national companies in traditional standardization, with the aim of rationalizing the production. 
On the contrary, the companies have realized that standards which center on the aspect of 
compatibility beyond the individual enterprise may simultaneously be used as a strategy or tool 
for placing their products on the market. 

In the companies this obviously raises questions such as whether participation in standardiza¬ 
tion processes that take up to 5 years to complete can actually be justified from an economic 
point of view. At the same time there is the question of more efficient forms of standard setting, 
e.g. by the merger of companies and by preparing publicly evailable specifications (PAS). 

The importance attached to compatibility standards can be most clearly seen in the K-CIM and 
the Q-CIM projects realized in Germany. From 1988 to 1996 the Federal Ministry of Education, 
Science, Research and Technology funded these projects with approximately 36 million DM. 

The objective of these projects was to standardize interfaces for computer-integrated manufac¬ 
turing (CIM). 

The results of this work must be subsumed under the general term "compatibility standards". 

B Purely national standardization projects will continue to decrease in favor of European 
standardization projects, which will continue to increase in importance. 

Only the development of European standards will contribute to a common European market. 
National standards cannot be mutually recognized by the national standards institutes. They 
thus do not contribute to the integration of the European market. 








5 


The national standards institutes can play a meaningful role only if the leading companies par¬ 
ticipate in European standardization. 

Trade and industry, by their own behavior, will decide whether they will become participants or 
onlookers in European standardization and whether they will actively determine the technologi¬ 
cal level, i.e. the contents of European standards, or passively accept the technical require¬ 
ments defined in standards. 

Currently, hundreds of European standards (Fig. 1 and 2) are being prepared; they will supple¬ 
ment the technical legislation (e.g.machinery regulations) of the European Union. After the 
European standards have been adopted and the laws have been implemented, they will have to 
be translated into national law, with the consequence that the companies will have to comply 
with them, or considerably more expensive alternatives will have to be developed. 

Only if the national companies represented by the national standards institutes participate in the 
European standardization process can the interests of the national trade and industry be en¬ 
sured. 

C There will be a continued change from printed standards to standards and standard-like 
information in digital form. 

It does not require great foresight to propose the hypothesis that there will be a continued de¬ 
velopment of computer networking, i.e. of the information and communication technology in 
Europe. 

The currently existing database PERINORM contains bibliographical data on standards and 
draft standards of ISO/IEC, CEN, CENELEC and ETSI as well as AFNOR, BSI and DIN. 

A European standards database which provides digital standards and standard information is 
considered essential. 

The state of the art of the electronic publishing of scientific-technical documents already allows 
the SGML-based preparation and provision of standard documents. SGML structured standards 
can be provided as electronic products on marketable media (CD-ROM, diskettes) and also via 
public networks. 1 


1 DIN Geschaftsbericht (Business Report} 1995/1996, 






6 


Only this form of provision gives the user up-to-date access via computer networks. This objec¬ 
tive of providing the standard in digital form gives the user quick access to the desired standard 
documents as well as individual data by means of fulltext searching. For future users of a Euro¬ 
pean standards database it should not only be a matter of course to be able to obtain the biblio¬ 
graphical data on national and European standards, but also to have access to the actual 
documents. 

In addition, the overall standardization process can be made more effective by including ad¬ 
vanced communications technologies. The advanced network technologies should not only be 
used in the sense of electronic mail, but also as a communication channel for discussing the 
prepared draft standards. Reports on current standardization activities at both the national and 
the European level can also be provided via this medium. 

D The political demand to improve both the efficiency within the standardization organiza¬ 
tions and their mutual cooperation is most clearly defined in the "Green Paper of the 
European Commission on the Development of European Standardization" 2 . 

It is imperative to improve the efficiency, since the established bulwarks, i.e. the national stan¬ 
dards, are a considerable barrier for the free trade of products within a single European market. 
Only by harmonizing the standards, i.e. establishing a European standards system based on 
European standards, can the economic rationalization and competitive effect be achieved in the 
single European market, as has been stated as an objective in the EEC treaty (see "Green Pa¬ 
per". p. 5). 

European standardization has a strategic significance for the realization of the single European 
market. 

1. The European standards define the technological requirements for the manufacture of 
products in the European market. 

2. They form the basis for a common European technical legislation (European standards are 
imperative for enforcing a uniform product legislation within the European Union). 

3. The Commission has allocated a prominent role to the European standards in the opening 
up of public procurement markets. The EC directives on deliveries and performances for the 
public sector require that the purchasing agencies refer to European standards. 


2 ,, 


Green Paper”. 









7 


Thus the prepared European standards will have a decisive influence on the technological 
structure of the entire European market; they will not only change the terms of trade on the ex¬ 
port markets, but also on the individual national markets (see "Green Paper", p. 23). 

The standard-setting organizations must respond to these changes by questioning their struc¬ 
tures and functions, and they must face up to the new requirements. 

E Entire industrial structures are breaking out of national thinking. 

The changing environment in which standardization takes place results in an increasingly 
stronger friction between those for whom the standards are produced and those who are to pre¬ 
pare these standards. The opening of markets, both in Europe and worldwide, provides the 
companies with opportunities to exploit new markets for their products. For this purpose the 
products must comply with the technical standards of the respective market. If national, Euro¬ 
pean or international standards do not yet exist for the products in the markets, as is partially 
the case in information and communication technology, the companies will endeavor to set their 
own standards as de facto standards or prepare de facto standards, i.e. technical specifications, 
through consortia 3 within a very short time. 

The competitive situation of the companies in and for the market is at the center of this ap¬ 
proach. The definition of the technical specification can ensure that systems of different manu¬ 
factures can cooperate, or it will guarantee that an application program can run on different 
computers or operating systems. Such an approach is inconsistent with the principles of pre¬ 
paring standards 4 at national standards institutes. 

Irrespective of this, CEN, CENELEC and ETSI provide a platform at the European level by abo¬ 
lishing their own principles. 

If required, consortia will be established under the roof of the European standards institutes. 

In this case, the national delegation principle will not apply. 

There will be no public opposition proceedings. 

The work results will be called specifications and published as European PAS. 

3 Normung in Europa und das DIN - Ziele fur das Jahr 2005 , p. 18 

4 DIN Geschaftsbericht (Business Report) 1995/1996, p. 19. 



8 


- A fee will be charged to participating companies. 

The secretariat will be managed by a national standards institute 5 

These examples show that in a democratically managed market economy, companies have the 
power to abolish the traditional principles of national and European standards institutes. 

Entire industry sectors - in particular the information and communication technology sectors - 
have left the level of national thinking. The success of the companies is decided on the Euro¬ 
pean and international markets. To integrate these companies into the standardization system 
even at the European level will require significant structural and organizational changes. Hold¬ 
ing on to traditional principles will exclude the companies from participation in European stan¬ 
dardization. 

3 Functions and Structures of Standard-Setting Organizations 

For an economic assessment it is necessary to understand the existing structure of intercom¬ 
pany standardization. Four national standards institutes are therefore important for our discus¬ 
sion; they will be briefly presented here, and the important differences will be pointed out. These 
standards institutes are; 

AFNOR - Association Frangaise de Normalisation 
ANSI - American National Standards Institute 

BSI - British Standards Institution 

DIN - Deutsches Institutfur Normung e.V. 

3.1 AFNOR - Association Frangaise de Normalisation 

Today's AFNOR organization is based on the Act of 24 May 1941. It is an association under pri¬ 
vate law but is recognized by the government in its public function and is managed by a super¬ 
visory board whose composition was stipulated by the Minister of Industry and Science in a di¬ 
rective of 1970, In 1941, the Ministry of Agriculture and Industry was charged with drawing up a 
charter to regulate standardization, which contributes to the preparation of standards and their 
introduction into the public area. 


5 DIN Geschaftsbericht (Business Report) 1995/1996, p. 19. 






9 


Four groups were considered essential as cooperation partners and collaborators in the stan¬ 
dardization process: 

• government agencies, 

• technically specialized national institutions, e.g. government testing institutes, 

• trade associations, and 

• consumer organizations. 

Up to the present, the Act of 1941 has not undergone any significant changes. The structure of 
1941 was confirmed in a new act of 1984. There were only a few minor corrections of designa¬ 
tions. Thus the "Commissioner for Standardization" is today called "Interministerial Delegate for 
Standardization". 

AFNOR is bound by regulations to the Ministry of Industry, which thus exerts a strong influece 

(Fig. 3 and 4). 

AFNOR's functions are described in Article 8 of the decree for French standardization. The most 
important functions are as follows: 

• Transmittal of the directives of superior ministries or the Delegate for Standardization, and 
monitoring their compliance. 

• Supporting the standards offices in the preparation of technical standards. 

• Testing and coordinating projects that have been completed. 

• Representing the French standards in international standards organizations. 

• Disseminating and publishing information on standardization to all who are affected by the 
standardization. 

In sum it can be said that AFNOR has approximately 560 staff, manages, approx. 15,230 stan¬ 
dards, and has approx. 1,100 publications per year 6 . In 1991, AFNOR's overall budget 


6 Florence Nicolas: "Gemeinsame Normen fur Europa" (Common Standards for Europe), 1995, p. 26. 





10 


amounted to approx. 360 million francs (Fig. 5), of which 28 % were government subsidies, 

71 % were own receipts, and 1 % was income of the previous year. 

in the receipt portion of 71 %, 24 % resulted from the sale of standards and other publications, 
15 % from business contracts and trade agreements, 10 % from certification, and 9 % from 
training services (Fig. 6). 

3.2 BSI - British Standards Institution 

The British Standasrds Institution (BSI) was established in 1901 as the world's first national 
standards institute. Its aim is coordinating and developing national standards. It received its 
statutes, the Royal Charter, in 1929. According to the Royal Charter, the BSI is the only organi¬ 
zation in Great Britain with the task of preparing standards and providing for their implementa¬ 
tion as well as performing the EC conformity certification. The BSI is subdivided into the follow¬ 
ing functional areas (Fig. 7) 7 : 

1. BSI Standards 

2. BSI Quality Assurance 

3. BSI Product Certification 

4. BSI Testing 

5. BSI Training Services 

The BSI is an association under British law; it operates autonomously and independent of trade 
organizations, the government, and industry, 

The BSI is the largest European standards institute and has approx. 1,800 staff (as of 1996). In 
the functional area of BSI Standards (Fig. 8), approx. 490 staff are employed (Fig. 9). They are 
distributed among various sections, as can be seen from the table below. The predominant por¬ 
tion of the staff is employed in the sections Sales and Marketing (23.5 %) and Development of 
Standards (49 %). 


r BSI Annual Report of 30 March 1996. 






11 


Distribution of Ma npower in BSI Stan da rds 
A ccording to Function s 


Staff 

Distribution 

Planning, Business Analysis, Strategic Membership 

10 

Quality Function 

2 

Sales and Marketing 

115 

Production (production of standard media, printing, EDP) 

113 

Development of Standards 

240 

Internationality 

10 

Total Staff 

490 


In 1996, the BSI had a turnover of 88 million £, distributed regionally as follows (Fig. 10): 


Region 

Turnover in million £ 
in 1996 

Turnover in million £ 
in 1995 

Great Britain 

67 

68 

Remainder of the EU 

5 

6 

North America 

8 

5 

Far East and Australia 

4 

5 

Rest of the world 

4 

1 

Total 

88 

85 


The BSI attained 75 % of its turnover at home but it attempts to increasingly internationalize its 
activities. It expanded its activities in the various regions (increase from 1995 to 1996, from 
17 million £ to 21 million £), mainly in the areas Qualitiy Assurance and Product Certification 
(increase from 6 million £ in 1995 to 9 million £ in 1996). 







































12 


The turnover is distributed over the various functional areas as is shown in the following table 
(Fig. 11): 


Functional Area 

Turnover in million £ 
in 1996 

Turnover in million £ 
in 1995 

Standards (sale of standards) 

23 

23 

Quality Assurance 

47 

44 

Testing 

7 

8 

Training Services 

2 

3 

Product Certification 

9 

6 

Others 


1 

Total 

88 

85 


The distribution of the turnover and of the staff figures shows that the present BSI turnover is 
attained in the areas Quality Assurance and Standards (sale of standards). 

During the fiscal year from April 1995 to March 1996, the BSI made an operational profit of 
6,937 million £. 


The work of the BSI was supported by the Department of Trade and Industry (DTI) with a total 
of 6.67 million £, with the support decreasing from year to year (Fig. 12). 



1993/94 

1994/95 

1995/96 

1996/97 

Total support for the standardiza¬ 

tion work in million £ 

7.90 

7.30 

6.91 

6.67 


In 1996, approx. 26,000 companies were members of the BSI. Currently there are approx. 
15,000 effective British standards, and approx. 17,627 standardization projects are being 
processed. 

In 1996, the BSI sold a total of 435,000 standards. In that year it staffed 53 secretariats in the 
European standards organization CEN and 18 in CENELEC. 

























13 


3.3 ANSI - American National Standards Institute 

The United States Pharmacopoeial Convention was founded in 1829. It was the first standard- 
setting organization in the United States and dealt with the standardization of drugs. In 1852 
there followed the American Society of Civil Engineers, the first scientific-technical organization, 
and in 1855 the American Iron and Steel Institute. These were the first trade organizations to be 
concerned with standardization (GARCIA 1992, p. 533). 

Later, a great number of organizations which concentrated on developing standards in their 
particular branches of trade was established. These organization were thus based on financing 
by the private sector and received no public support. In the United States, the government virtu¬ 
ally kept out of standardization until World War I® As was the case in the European industrial 
nations, Worid War I made it clear to the USA as well what the consequences of insufficient co¬ 
ordination of standardization would be. As a result, a "Commercial Economy Board" was estab¬ 
lished which had the task of facilitating the employment of work, capital, and machinery. In the 
immediate postwar era, the dwindling American economy was to be strengthened by govern¬ 
ment-supported standardization (GARCIA 1992, p. 532). However, the government was con¬ 
fined to supporting the private standardization organization, without actively interfering. 

On the grounds that there was no intention to create any predominant standardization organiza¬ 
tion, the coexistence of a great number of organization was promoted. According to a survey of 
standard-setting organizations in the United States in 1991, the number amounts to over 75tf. 

The dilemma of American intercompany standardization is clearly shown by the fact that the 
many standards-setting organizations are not only competing against each other but have also 
developed contradictory standards. This has led to the realization that a national coordination of 
standardization is imperative [...]. 

In addition to the lack of coordination, the United States has also discovered that it had no tool 
for concentrating its own interests at the international level and for exercising influence on the 
international standardization work according to its own wishes. This has led to the desire for a 
concerted national standardization policy and the related concentration of the coordination in a 
single organization (GARCIA 1992, p. 534), Upon objections by government agencies and 


8 Exceptions were the "Office of Weights and Measures" and the "Bureau of Standards" (GARCIA 1992, p. 532). 

9 TOTH 1991, p V. 





14 


fair-competition authorities it was agreed to name the organization the "American National 
Standards Institute" (ANSI). It would not produce any standards of its own 

Only organizations which are concerned with the development of standards may become mem¬ 
bers of ANSI. ANSI serves as a kind of accreditation authority for American standardization and 
is the only organization entitled to issue "American National Standards". The function of coordi¬ 
nating American standardization may be performed by ANSI in three ways (CARLTON and 
KLAMER 1983, p. 449, and CARGILL 1989, p. 103 ff): 

canvass method or accredited sponsor method [...], 

accredited organization method [...], and 

accredited committee method („ J 10 . 


10 A detailed description is contained in the doctoral thesis of J. Kleinemeyer. 









15 



Fig. 13 Organizational Structure of the American National Standards Institute 

(Source: Cargill, Carl, "Information technology standardization: theory, 
process, and organization", 1989, p. 165) 


The ANSI members elect the Board of Directors which is responsible for the organization and 
strategic orientation Here, the predominance of one pressure group is to be avoided or pre¬ 
vented. The specific interests of the various interest groups are concentrated in the subordinate 
bodies - the councils for the individual member organizations. 

The actual coordination of the standardization is carried out by the Executive Standards Coun¬ 
cil. This Council also coordinates the participation of the various American standard-setting or¬ 
ganizations in the international standardization process. In this it is supported by eight Stan¬ 
dards Panels which support the Executive Standards Council in their respective areas of re¬ 
sponsibility with regard to management and coordination of the standardization process [...]. 

The large number of these organizations and government agencies makes it impossible to pro¬ 
vide a comprehensive survey of the American organizations 
















































16 


During the past few years, dissatisfaction with the inter-company standardization in the United 
States 11 has led to the development of standardization outside of the traditional structures 
(WEISS and CARGILL 1992, p.559). So-called "consortia" are created in which enterprises 
combine to jointly develop the standards they need in a quick and unbureaucratic manner. If 
these consortia are to actually work as efficiently as they want to they must depart from the re¬ 
quirement for general access, on the one hand, and from the rule of consensus on the other. In 
particular the limited access to these consortia has led the fair-competition authorities to take a 
critical view of them 12 and ... 13 . 

3.4 DIN- Deutsches Institut fur Normung e.V. 

The DIN (German Institute for Standardization) was established in 1917 under the name 
"Deutscher Normenausschuli - DNA" (German Standardization Committee); it has the well- 
known designation "DIN e.V." since 1973. 

Economic considerations were the reason why standardization was organized in an association 
in 1917. Its products, the DIN standards and the national standardization system, were to be 
exported to other countries in order to open up markets and, in addition, to make it more difficult 
for competitors in neighboring countries to enter the German market. 

DIN is an organization under private law, i.e. it is a registered and incorporated association 
(e.V.) working exclusively on a non-profit basis. 

According to the DIN charter, the DIN bodies are: the General Assembly (approx. 5,900 14 mem¬ 
bers in 1996) and the Executive Committee (represented by approx. 35 to 40 members), which 
may appoint panels to accomplish its tasks (e.g. Standards Review Activity, Consumer Council). 


11 The same also applies to the situation in other countries, as the comments made by representatives of Siemens 
AG and IBM Germany to the DIN dearly show, See KUNERTH, p. 19, and RICHTER, p. 88 f,, in "Normung in Eu- 
ropa und das DIN - Ziele fur das Jahr 2005". 

12 See ANTON and YAO, 1995. 

13 Kleinmeyer, J. 1997. The author replaced the term "standards" with the term "Norm". 

14 DIN Geschaftsbericht (Business Report) 1995/1996. 





17 


The General Assembly 15 is responsible for accepting the Annual Report, for relieving the Ex¬ 
ecutive Committee, and for electing the members of the Executive Committee The Executive 
Committee establishes the principles of standardization policy and decides on the business and 
financial policy of the DIN and its subsidiaries (represented by broken-line boxes in the organ¬ 
izational chart. Fig. 14). The DIN Director is its business manager, who may set up an executive 
body to handle his functions. The business management is concerned with the following func¬ 
tions: 

(a) Standard Conformance and Certification 

In this functional area, primarily conformance verifications and certifications are carried out, 
mostly by the subsidiaries subordinate to this functional area. 

(b) Standardization 

This functional area is responsible for the practical preparation of the standards and for the cul¬ 
tivation of international relations in the field of standardization 

(c) Administration and Publishing 

Activities within this functional area deal with administrative functions (personnel, social, finan¬ 
cial, etc.) as well as sales and distribution (publishing and selling standards) (Fig. 14) 

DIN 820 regulates the development of a DIN standard. Fig. 14a shows the development from a 
request for standardization to a German standard. A general and partnership agreement be¬ 
tween the Federal Republic of Germany and DIN of 1975 states that DIN is the competent na¬ 
tional standards organization and that it will protect the interests of the Federal Republic of 
Germany in international standardization bodies. The DIN also undertakes to consider the pub¬ 
lic interest in its standardization work and to inform and advise the Federal Government in stan¬ 
dardization matters. In return, the government agreed to provide direct financial assistance 
amounting to approx. 15 % to 20 % of the DIN budget. In addition, the agreement states that 
standardization is not a government task but a private task to be performed by trade and indus¬ 
try. 


15 Only legal entities may be DtN members, not private persons. 




18 


The DIN is established as a non-profit association and has developed into an enterprise which 
had approx. 825 1S employees in 1996. The DIN subsidiaries have another 235 staff; however, 
DIN staff also hold positions in the subsidiaries. During the years 1993 to 1996, the overall 
budget almost consistently amounted to approx. 159 million DM {Fig, 15 and 16). 

In 1996 there existed approx. 24,000 DIN standards and approx. 8,500 DIN draft standards 17 . 
Fig. 14 provides an overview of the current DIN organizational structure. 

In the following, the DIN subsidiaries will be briefly considered; they are of great importance for 
accomplishing the tasks of the German Institute for Standardization. 

In the functional area Standard Conformance and Certification : 

Deutsche Gesellschaft fur Produkt Information GmbH (DGPI) is responsible for preparing 
type sheets (in accordance with EC regulations) on products which are subject to the compul¬ 
sory provision of information in order to provide the consumer with the means required to com¬ 
pare articles of daily use. 

Deutsche Gesellschaft zur Zertifizierung von Qualitatsmanagementsystemen mbH (DQS) 

is responsible for certifying quality management systems in accordance with DIN ISO 9000. 

Gesellschaft zur Vereinfachung von Handelsverfahren und Forderung der EDI- 
Anwendung (DE-PRO) is responsible for distributing data structured in accordance with the 
Electronic Data Interchange (EDI) program, up to and including the interchange of product de¬ 
fining data within the scope of computer aided logistic support (CALS). 

Deutsche Akkreditierungsstelle Chemie GmbH (DACH) is responsible for accrediting chemi¬ 
cal laboratories. 

Gesellschaft fur Konformitatsbewertung mbH DIN-CERTCO (formerly DGWK) is responsible 

j 

for certifying products and services. 


16 DIN Geschaftsbericht (Business Report) 1995/1996. 

i? 


DIN Geschaftsbericht (Business Report) 1995/1996. 








19 


In the functional area Standardization: 

Technorga GmbH is responsible for developing and preparing standards in cooperation with 
DIN and the Federal Office of Defense Technology and Procurement (BWB). 

In the functional area Administration and Publishing: 

Beuth-Verlag GmbH (BV) is responsible for printing, publishing and distributing DIN standards 
and technical rules; its DIN Software section is responsible for procuring, preparing and distrib¬ 
uting DIN-standard files, programs and standards on machine-readable media. 

Verlag fur technische Regelwerke GmbH (VTR) is responsible for printing, publishing and 
selling other DIN products (e.g. special information brochures). 

As can be seen from this list, DIN (including its subsidiaries) is not only concerned with ques¬ 
tions of technical standardization but also with matters of conformance, certification, and ac¬ 
creditation. It should be realized that the subsidiaries have to be regarded as a permanent part 
of DIN, which considerably increases its responsibilities. 

DIN is the largest German national standardization organization, and it attempts to organize all 
the functions of a national standards organization under one roof. The emphasis is on the pri¬ 
mary function of standard preparation and the provision of standard contents; this is done via 
Beuth-Verlag. It is important to realize that the testing and certification of conformance is in¬ 
creasingly gaining in significance. This finds expression in the growing number of subsidiaries 
which perform these functions in various sectors of industry. 

4 Functions of Standard-Setting Organization 

This part of the paper is not intended to provide a theoretical discussion of the functions of 
standard-setting organization but rather to state the functions that have to be performed if suc¬ 
cessful standardization is to be guaranteed. Those functions are discussed which are the same 
for all standard-setting organizations and which ensure the efficiency of the institutional proc¬ 


esses. 









20 


Adolphi 18 and Kleinemeyer 19 take a closer theoretical look. According to Kleinemeyer, four func¬ 
tions of national standardization which complement each other can generally be identified 


(Fig. 17): 




First, 

the function 

- 

preparation of standards 

Second, 

the function 

- 

dissemination of standards 

Third, 

the function 

* 

implementation of standards 

Fourth, 

the auxiliary functions 

“ 

standardization, organization, 

coordination, testing and 

general research 


The function .. preparation of standards 1 ' results from the secondary functions 

- provision of potential standard contents, 

- technology-peculiar research, and 

- establishing the results of the standardization work. 

This function is essentially defined by the provision of standard contents derived from a stan¬ 
dardization committee as well as governmental or private research and development work. 

The function .. dissemination of standards " comprises the secondary functions 

- providing standard contents, 

- making information on standards available, 

- performing public relations work, 

- training and 

- counseling. 


1B H. Adolphi: „Funktioner> nationaler Normunginstitue 

19 J. Kleinemeyer: ..Standardisierung zwischen Kooperalion und Wetthewerb 














21 


This function essentially results from two focal points: first from the reproduction, distribution 
and archiving of standards; secondly from the provision of information about standards, the 
standardization process, and the possibilities of participating in it and influencing it, and about 
the structure of national standardization. 

The function .. implementation of standards ' 1 is based on 

- testing standard conformance and 

- certifying standard conformance. 

The background to the function ..implementation of standards" ist that products and services are 
tested with regard to their conformance to the standards controlling them. This includes the de¬ 
velopment of standardized testing procedures and the announcement of the test results, i.e. a 
conformance test and the issuance of a mark of conformity. 

The defined auxiliary functions can be described as follows: 

The so-called auxiliary functions support the functions such that a national standardization 
organization can function. These tasks include the organization and coordination of the stan¬ 
dardization work and the reviewing of standards for their conformance with other standards 
and the law. 

The general requirements for standardization must also be considered, which concerns the 
impact of standardization on society, trade and industry, up to the impact on changing mar¬ 
kets. 



22 


Characteristics of National Standards Institutes 


Characteristics 

AFNOR 

ANSI 

BSI 

DIN 

Private-law 

X 

X 

X 

X 

Governmental 





Mainly private financing 

X 

X 

X 

X 

Mainly government financing 





Centralized organizational structure 

X 


X 

X 

Decentralized organizational structure 


X 



Membership of standard-preparing organiza¬ 
tions only 


X 



Standards organization based on law 

X 




Agreement with the government 

X 


X 

X 

No agreement 


X 




5 Future Development of National Standard-Setting Organizations 

When we consider the national standardization organizations such as AFNOR, ANSI, BSI. and 
DIN described in the previous chapters, it is obvious that their organization, functions and legal 
status, including their funding, can only be understood and evaluated within the framework of 
the historical context. 

As to legal status, in Western Europe different forms of legal status of national standardization 
organizations can be found, from contractual arrangements in the form of cooperation agree¬ 
ments to standardization acts. This will not be evaluated in this paper. 

In Western Europe the national standard-setting organizations are essentially centralized, at 
least when we consider the dominant organizations such as AFNOR, BSI, and DIN, 

ANSI is a clearly decentralized organization with regard to the development of standards. Only 
organizations concerned with the development and preparation of standards may become 
members of ANSI: These organizations represent the most diverse sectors of business and in¬ 
dustry, ANSI itself is not supposed to prepare any standards. 



















23 


The following is a summary of the functions and tasks of the standard-setting organizations in 
Western Europe. 

The functions 

- preparation of standards, 

- dissemination of standards, 

- implementation of standards, 

- organization, coordination of standardization including standard testing and general research 
as auxiliary functions 

are performed by AFNOR, BSI, and DIN in various ways. 

From these functions, tasks are derived which are to be performed by the national standard- 
setting organizations. 

These include: 

- standardization or development of standards, 

- publication and dissemination of standard information, including the software of electronic 
products, 

- testing for and certifying conformance to standards, 

- training the staff of business and industry, 

- consulting and providing expert opinions with regard to standardization, certification, and 
quality assurance, etc. 

There are definite trends concerning the future development. 

AFNOR, BSI and DIN are pursuing a strategy of integrating all functions under one roof. As a 
result, the marketing of electronic products and the testing and certification (i.e the indication) 
of conformance to standards will become more and more important. At DIN this finds ist expres¬ 
sion in a growing number of subsidiaries. 



24 


This general development will be intensified by the special developments discussed in Chap¬ 
ter 2, to which the national standard-setting organizations are no exception. 

These are: 

- the change from the quality of standards to the compatibility of standards, 

- the decline in purely national standardization projects and the increase in European stan¬ 
dardization projects {Fig. 18), 

- the change form the printed standard to standards and standard information provided in 
digital form in a European and global computer network (e.g. the Internet), 

- the political demand for efficient European organizational structures in the field of standardi¬ 
zation, and 

- the shift of entire segments of industry from national thinking or traditional ties toward a 
common European market, especially in Eastern Europe. 

These constraints are forcing the West European standard-setting organizations to change their 
organizational structures and to moving to new fields of activity in order to ensure their survival 
in the long term, especially their economic survival. These fields of activity are being defined 
especially in the services sectors Jesting, certification, quality assurance 1 * and in the provision of 
information, although it is precisely here that a strong competition between the national stan¬ 
dardization organizations has already begun. 

5.1 Developments in Eastern Europe 

A prerequisite for the successful entry of the East European countries into the West European 
and world markets is the implementation of a functional standardization structure in trade and 
industry and the establishment of a national standard-setting organization. Standards are an 
important part of the environment required for the build-up of markets. 

Establishing a national standard-setting organization should therefore have priority in the proc¬ 
ess of transformation toward a market-oriented society. 

Traditionally the East European countries had self-contained and uniformly structured MSTQ Z0 
infrastructures which were (and partly still are) organizationally assigned to a ministry. In some 

20 

MS TQ - metrology , standardization, testing, quality. 










25 


countries the standardization element has been separated and more or less successfully trans¬ 
formed into an independent national standard-setting organization. 

The basis for the successful establishment of such an organization is the formation of an eco¬ 
nomically independent unit, i.e, an organizational structure that is economically mostly self- 
supporting. 

It is understandable that some pressure groups want a decentralized organization of the na¬ 
tional standard-setting organization, comparable to ANSI. In a democratically oriented market 
economy, it is always a matter of asserting group or branch interests to achieve economic ad¬ 
vantage. However, the structure of ANSI clearly shows that such an organizational structure im¬ 
pedes the establishment of an effective national standard-setting organization. The dilemma of 
the American intercompany standardization is clearly shown by the fact that the numerous stan¬ 
dard-setting organizations (all in all nearly 750) not only compete with each other but also de¬ 
velop contradictory standards. 

They also discovered that apart from their lack of coordination they also had no tool for concen¬ 
trating their national interests at the international level and for influencing the international stan¬ 
dardization work as they wished. It was this bitter experience that led to the establishment of 
ANSI. 

The structure of a national standard-setting organization must include all the interest groups of a 
society. In addition to integrating the consumers and trade unions, it is important to make the 
various interest groups of trade and industry part of a national standardization organization. Of 
course, the individual groups will justify their demand for a decentralized organizational structure 
with reference to the European standard-setting organizational structure, as represented by 
CEN, CENELEC, and ETSI. 

Comparable deficits have become apparent, and could only be cleared up after many years, not 
only in the European, but also in the German (i.e. national) standard-setting organization, repre¬ 
sented by DIN, VDE, and VDI. 

The establishment of a national standard-setting organization in the various East European 
countries thus provides an opportunity to avoid just copying the partly ineffective and historically 
evolved, national and European structures, and not to waste the scarce human and capital re¬ 
sources in disputes for the benefit of individual pressure groups. 


26 


It is to be recommended that one national standard-setting organization should include all func¬ 
tions and should have the required legal competence and contractual obligations; and, in addi¬ 
tion, it should represent or defend the national interests in a united Europe. 

When revising the national standards it should be taken into account that the long-term aim is a 
complete convergence of the technical standards in Europe. Today, the national standardization 
organizations in Western Europe are already subject to a ..standstill rule", which implies that na¬ 
tional standards must not be prepared if European standards either already exist or are being 
developed or prepared. 

Apart from the introduction of European standards, the priority task in the years to come should 
therefore be to improve the specific national standards so that the quality and the technical 
product requirements of the European market will be achieved. 

The Commission’s „Green Paper" clearly states that national standardization is to be replaced 
by European standardization (p. 37). 

5.2 Funding of National Standards Institutes 

Successful national standardization depends on the involvement and motivation of those who 
want to use the national and European standards. The European Commission is of the opinion 
that the industrial and business enterprises which want to benefit from a single European mar¬ 
ket, and other interested groups such as users and consumers of industrial products, ought to 
ask themselves whether they have an adequate strategic concept for participation in national 
and European standardization. 

Thus it is obvious that standardization is not a government task but a private task of trade and 
industry, consumer organizations and trade unions, i.e. of all interested segments of society. 

This alternative is preferable to government regulations for organizing the market. 

Standardization organizations - both national and European - require personnel and resources 
to effectively accomplish their tasks. It is therefore recommended (with qualifications) that there 
should be direct financial subsidies by the European Commission or the respective govern¬ 
ments to meet the costs of the standardization organizations, whether at the European or the 
national level. 

f 

The real costs of standardization, however, result from the participation of trade and industry in 
the standardization process and negotiations, due to the temporary assignment of technical 








27 


specialists from businesses to the technical committees for the development of standards. In 
Germany the number of volunteers is estimated to be approx. 34,000 21 . 

Companies wanting to exert influence on their future technological environment have no choice 
but to participate in standardization. Companies which do not participate in national or Euro¬ 
pean standardization will be at a disadventage as compared to their competitors. 

Trade and industry naturally have the option of participating in national and European stan¬ 
dardization, or to combine into consortia - particularly at the European level - in order to de¬ 
velop publicly available specifications (PAS) together with the most powerful forces in the mar¬ 
ket. Companies wanting to influence the definition of new technologies have to get involved. 
What form this will take is not so crucial for the time being. 

The funding of national standards institutes will now be discussed with reference to institutes 
such as AFNOR, BSI, and DIN. Like the European organizations CEN and CENELEC, the na¬ 
tional organizations essentially receive their income directly from the private sector of the econ¬ 
omy, i.e. from membership dues and the sale of standards. 

The funding of DIN illustrates this most clearly. In 1996, the overall DIN budget amounted to 
159.2 million DM. 66.5 % came from publishing proceeds and services (sale of standards and 
publications related to standards), 17.5 % from contributions by trade and industry, and 16 % 
from support by the public sector. 22 

AFNOR and the BSI have similar turnover structures, but it must be pointed out that the portion 
of turnover resulting from the sale of standards and standard-like information amounts to only 
approx. 24 % for AFNOR and to 27 % for the BSI, as compared to approx. 66.5 % for DIN 

In the long run it will not be possible for the national standards institutes to maintain these 
funding structures. 

1. This is due to the European Commission's demand for an efficient organization of the 
European standardization system, including its funding. 

Thus it is expected that in the future, part of the proceeds from the sale of European stan¬ 
dards will go directly to the European standards institutes that are responsible for the 

2 ’ DIN Geschaftsbericht (Business Report) 1995/1996. 

77 DIN Geschaftsbericht (Business Report) 1995/1996. 









28 


preparation of these standards. This means that the proceeds will be divided among the 
European and national standards institutes in a way that recognizes the significant contri¬ 
bution of the latter. Thus the proceeds will be divided between the European standards in¬ 
stitute responsible for the standards, the organization selling them, and all the national 
standards institutes. 

The discussion about the copyright of standards and thus the right to market them, is not 
affected by this. Thus, in the German legal debate, standards are defined as ..public prop- 
erty'\ thereby calling the copyright into question. 

What effects this may have on the future budgets of the national and European standards 
institutes is most clearly demonstrated by the DIN budget. The natural consequence of 
this would be additional financing through membership fees, 

2. A considerably more effective cooperation of the groups participating in standardization 
can be achieved by introducing up-to-date information and communication systems into 
the European standardization process. 

In a few years it will be taken for granted that advanced information technologies are not 
only used as an electronic mail system but also as a means of communication for discus¬ 
sions in the preparation of draft standards”. 

In the future, this technology will permit everyone to participate in the work of a technical 
committee, as organized in a computer network internet. This will enhance the direct par¬ 
ticipation of individual members rather than representation by national delegations. This is 
already done in the European Telecommunications Standards Institute (ETSI) and the 
European Workshop for Open Systems (EWOS). 

If the European standardization system changes in this way, i.e. if the national delegation 
principle is abandoned, then this will mean a trend towards the companies leaving the na¬ 
tional standardization system. This will be accompanied by a reduction in the number of 
members (i.e. companies) in the national standards institutes, and thus in the income from 
membership dues. 


23 Pmf. W. Kunerth, a member of the Executive Board of Siemens ^G, has stated: ,Forthe year 20051 expect that 
80 % of the actual harmonization work will be supported by electronic document communication ;... the participants 
should agree on a virtual network or experts' (p. 19). 







29 


To summarize this development: In the future, the funding for all the national standards insti¬ 
tutes in both Eastern and Western Europe will only be assured to a limited degree on the basis 
of the sale of standards and standard-like information as well as membership dues, i.e. financ¬ 
ing by companies. 

National standards institutes in Western Europe have already recognized this development, as 
is clearly demonstrated by the BSI. They are countering this development with a future financing 
strategy by improving their services. The data make it easy to understand why a quality sector 
has been established at the BSI and the sectors Electronic Products, Software, Certification, 
Testing, Training and Consulting have been created at DIN subsidiaries (Fig. 19). 

When removing national standardization functions from governmental structures, that is, when 
privatizing the national standardization system, services must therefore be considered as func¬ 
tions of the private national standardization organization. 

A separate privatization of services will deprive the private national standards institute of its fi¬ 
nancial basis and thus jeopardize its future development. 

6 Summary 

The change in the national and European standardization systems must keep up with the speed 
of European integration. 

This not only means a reorganization of the European standardization structures; rather, the 
national standards institutes in particular are called upon to abandon obsolete structures and 
principles. 

The dynamics of the change will be determined by the social changes in Europe, but in particu¬ 
lar by the dynamic developments in information and communication technology. 






30 


The essential aspects of the change will be the following: 

A The decisive change will be a result of the changing quality of standards. 

B There will be a continued decline in purely national standardization projects and an in¬ 

crease in the importance of European standardization projects. 

C The change from the printed standard to standards and standard-like information pro¬ 
vided in digital form will continue. 

D There is a political demand for the improvement of both the efficiency within standardi¬ 

zation organizations and their mutual cooperation. 

E Entire industrial sectors are being removed from national thinking. 

The European Commission is of the opinion that the industrial and business enterprises which 
want to benefit from a single European market, and other interested groups such as users and 
consumers of industrial products, ought to ask themselves whether they have an adequate 
strategic concept for participation in national and European standardization. 

Thus it is obvious that standardization is not a government task, but a private task of trade and 
industry, consumer organizations and trade unions, that is, of all the interested segments of so¬ 
ciety, and that this alternative is preferable to government regulations for organizing the market. 

Companies wanting to exert influence on their future technological environment have no choice 
but to participate in standardization. Companies which do not participate in national and Euro¬ 
pean standardization will be at a disadvantage as compared to their competitors. 

Using AFNOR, ANSI, BSI and DIN as examples, the existing national structures and the begin¬ 
nings of their reorganization have been described. An important finding based on the data is 
that the standards institutes aim to develop a strategy for integrating all the functions such as 
the development of standards, publication and dissemination of standard information, provision 
of software for standards management, testing for and certifying conformance to standards, 
training, consulting, and providing expert opinions concerning standardization, certification, and 
quality assurance. 

A financing concept based on the sale of standards and membership dues will not ensure the 
establishment and the future of standards institutes, especially in Eastern Europe. 





31 


National standards institutes in Western Europe have recognized this development, as is most 
clearly demonstrated by the BSI. They counter this with a future financing strategy by improving 
their services. An example of this is the increasing establishment of sections for the quality 
sector at the BSI and of the sectors Electronic Products, Software, Certification, Testing, Train¬ 
ing, and Consulting at DIN subsidiaries. 

The financing strategy is determined by the fact that services are the future and will be the fi¬ 
nancial basis for the standards institutes. This is most clearly demonstrated by the BSI, which 
achieved a turnover of 53.5 % in the quality assurance sector in 1996. When removing national 
standardization functions from governmental structures, that is, when privatizing the national 
standardization system, it must therefore be considered that the above-mentioned services are 
being removed as functions of the private national standardization system. 

A separate privatization of the services will deprive the private national standardization system 
of its financial basis, and thus jeopardize its future development. 


32 


7 References 

Adolphi, Hendrik; Hesser, Wilfried; Hildebrand, Roland; Inklaar, Alex; Kleinemeyer, Jens; 
Meyer, Rolf (1994). 

"Funktionen Nationaler Normeninstitutionen". EURAS Discussion Paper Series, Volume 2, 
Adolphi, Hendrik: 

"Strategische Konzepte zur Organisation der betrieblichen Standardisierung". Doctoral 
thesis, Bundeswehr University, Hamburg, 1997. 

AFNOR: 

Annual Report, 1992. 

Anton, James J. and Yao, Dents A. (1995). 

"Standard-setting consortia, antitrust, and high-technology industries". Antitrust Law Jour¬ 
nal, Vol. 64, pp. 247-265, 

BSI: Annual Report and Accounts, 1995. 

DIN: Geschaftsbericht (Business Report) 1995/1986. 

European Commission Green Paper on the Development of European Standardization: 
"Measures fora faster technological integration in Europe". Brussels, October 1990. 

Garcia, Linda (1992). 

"Standard setting in the United States: public and private sector roles". Journal of the 
American Society for Information Science, Vol. 42, pp. 531-537. 

Kleinemeyer, Jens: 

"Standardisierung zwischen Kooperation und Wettbewerb". Doctoral thesis, Bundeswehr 
University, Hamburg, 1997. 

Kunerth, W. (1996). 

"Erwartungen der Industrie an das DIN". Pp. 17-29 in: Normung in Europa und das DiN - 
Ziele fur das Jahr 2005. Published by DIN, Berlin, at Beuth-Verlag. 

Nicolas, Florence; Repussard, Jacques (1995). 

"Common standards for companies." Brussels. 





33 


Normung in Europa und das DIN - Ziele fur das Jahr 2005 

DIN (Deutsches Institut fur Normung e,V.), Berlin, Wien, Zurich; Beuth-Veriag, 1996. 

Toth, Robert B. (ed.), (1991). 

"Standards activities of organizations in the United States". NIST Special Publications, 
806. Gaihtersburg: National Insitute of Standards and Technology, 

Weiss, Martin B.H.; Cargill, Carl (1992). 

"Consortia in the standards development process". Journal of the American Society of In¬ 
formation Science, Vol. 43, pp. 559-565. 























































































































































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Figure 3 : Organization of AFNOR 





.CDR (Seite 1) / 02.09'-97' 
































































































































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Figure 12 : Overall Funding for Standardization Work from the 

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Figure 13 : Organizational Structure of the American National Standards 

Institute ” Source: Cargill 1989 , P 165 






































Figure 14 : The organizational structure of the DIN 
including subsidiaries 


TE 265.1 - MB - Prof. Hesser/ Hr. Czysch 
ABB_14.CDR (Seite 1) l 02.09.97 


































































































Standardization Proposal 



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TE 265.1 - MB - Prof. Messer / Hr. Czysch 
ABB_14a.CDR {Seite 1> / 02.09.97 


Figure 14a ; Survey of the steps from a standardization 

proposal to a German DIN standard, (after 
DIN 820 Teil 4: Normungsarbeit, 1986, R 1) 


























DIN - Budget DM 159.2m 



Contributions! 
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15.77% 


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services 

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66.58% 


Contributions from 
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DM 28.1m 
17.65% A 


TE 265.1 - MB - Prof. Hesser/ Hr. Czysz 
ABB 15.CDR (Seite 2) / 02.09,97 


Figure 15 

(Source: DIN Annual Repport 1995/1996) 









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57.293 


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alterations 
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capital 12.489 


159.247 158.581 159.200 

. 


72.399 77.062 77.400 

16.479 16.547 17.500 

60.393 50.040 54.260 






159.702 


jHtk 

9.976 14.932 10.040 

‘ ‘ ~“' =1 ' • - 


159.247 158.581 159.200 


TE 265.1 - MB - Prof. Hesser / Hr. Czysch 
ABB_16.CDR (Seite2) / 02.09.97 


Figure 16: 

(Source: DIN Annual Report 1995/1996) 














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