This paper deals with an empirical study to measure the performance of some
selected hardware companies. The methodology was based on Data Envelopment
Analysis (DEA). The performance (efficiency) of the selected hardware
companies were determined over a period of three years (2001-03) in order
to examine if there is a trend.
The performance of Indian hardware companies have been analyzed primarily in terms of their
total revenue earnings as well as other accounting and financial ratios such as Return on Capital
Employed (RoCE), Return on Assets (RoA), Return on Investment (RoI) or similar ratios. These
methods have their own inherent limitations as they fail to capture the true performance of the
companies (firms) when multiple inputs are converted to multiple outputs. The performance of
a particular company may be considerably good in terms of its total revenue earnings even when
some of its input and output parameters are not showing good figures. In such a scenario, a
company (firm) may be apparently making profits and earning impressive revenues in the
short-run while there is a possibility that the company (firm) is actually making losses in the
long-run. Considering the Indian hardware industry, where the MNC brands are increasingly
making a strong presence in the domestic market, it becomes imperative for the Indian hardware
companies to be operating efficiently to remain competitive.
2. Brief Survey of Literature.
Earlier several studies have used financial statements for assessing the performance of the
company. Some of them are Abriksten and Forsund (1990), Sickles and Streitwieser (1992),
Banker and Johnston (1993), Charnes et al., (1993), Forsund (1993). Thore, Kozmetsky and
Philips (1994) used financial statements data to estimate the evolution of productive
efficiency in the US computer industry.
Other studies are by Thanassoulis, Boussofiane and Dyson (1996). Thompson,
Dharmapala, Rothenberg and Thrall (1994, 1996) employed single industry group as a tool
for analyzing financial statements. Worthington (1998) used financial statements data for
measuring the performance of Australian Gold Production and Exploration. |
