The capability and competitiveness of the. North-Estonia and South-Finland region. INNOREG project. Client: Tallinn Enterprise Board

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1 The capability and competitiveness of the mechatronics Project field INNOREG in the North-Estonia and South-Finland region INNOREG project Client: Tallinn Enterprise Board Prepared by: HeiVäl Consulting and project expert group 1

2 The compilation of the questionnaire, questioning and the study analysis was carried out in the frame of Innoreg project (SFE23). Study questionnaire was compiled by the members of project` partner organisations and experts: Jüri Riives, Tauno Otto, Kaia Lõun, Ingrid Hindrikson, Jaanus Vahesalu, Jaak Lavin, Marko Kokla, Veli-Pekka Esala, Antti Lassila, Jussi Karlsson, Jukka Kallio. The study analysis was executed by a working group of HeiVäl Consulting consultants: Kaido Väljaots (consultant in the cluster field), Kaisa Kase (project manager for the study), Raili Paat (statistician-analyst), Tõnu Hein (technology consultant). 2

3 Contents Contents Short introduction of the study General data about the companies Number of workers in the companies Company turnover in Company profits in Summary of the companies general data Business environment and management of the companies Business environment of the companies Products and services being offered Customer segments by industry Distribution of customers by size Customers purchasing motives Position compared to competitors Market potential in various markets today (2010) and in the future (2015) The reasons for searching for new markets The value chain today (2010) and in the future (2015) Summary of the business environment Management of the companies Use of management techniques today (2010) and in the future (2015) Structural forms today (2010) and in the future (2015) Frequency of the changes made in the structure and operations Sources of new customers Products and services developed and implemented by the companies Summary of the management of the companies Companies technological capabilities Manufacturing methods in use Manufacturing principles in use Equipment overview Monitoring principles in use Software in use Summary of the companies technological capabilities Development of products and technology Role and objectives of innovation Objectives of product development

4 5.3. Organization of product development in the companies R&D investments Summary of the development products and technology Personnel System for improving labour productivity Use of an objective-based management system Organization of the system for making suggestions for improvements Evaluation of the value chain competences Summary of personnel Issues related to information and communication technology (ICT) Software solutions used in the management of business operations Number of computerized workplaces Financial software in use Computer-based functions used in production management Use of technology-oriented systems Number of CAD, CAM, CAE, and CAPP software users Summary of ICT questions Quality assurance and control Quality management systems Types of control used for quality assurance Key indicators Internal process control Use of measurement equipment Indicators being measured Calibration of measurement equipment Providers of calibration services Importance of accreditation in the selection of calibration services providers Sufficiency of calibration services providers Importance of the traceability of the measurement results when choosing a calibration services provider Use of Metrosert and MIKES services Summary of quality assurance and control Cooperation Participation in various forms of cooperation Reasons for participating in cooperation Main cooperation partners

5 9.4. Objectives of cooperation Extent of the cooperation area Summary of cooperation Summary and conclusions of the analysis of North-Estonia and South-Finland companies and the study of Western European technological areas

6 1. Short introduction of the study This study titled The capability and competitiveness of the mechatronics field in the North-Estonia and South-Finland region was organized within the framework of the INNOREG project. In the course of the study, a survey was conducted of 15 North-Estonia companies and 15 South-Finland companies in the field of mechatronics and the information was analysed. The organization of the report is based on the structure of the questionnaire that formed the basis for the survey. The results are divided into general data about the companies and the following seven fields of activity: business environment and management; technological capability; development of products and technology; personnel; ICT solutions; quality assurance and control; and cooperation. The main conclusion of the analysis is presented in the upper diagrams. At the end of section there is a summary of the main conclusions. The 15 North-Estonia and 15 South-Finland mechatronics companies included in the sample are hereinafter called the Estonian and Finnish companies. The objective of the study was to map and analyse the following aspects of the companies: main competence, markets and products; market geography; technological capability; research and development capability; personnel competence; experience related to participation in cluster-based cooperation. The study on the capability and competitiveness of mechatronics in the North-Estonia and South- Finland region was commissioned by the Tallinn Enterprise Board and compiled by HeiVäl Consulting. The basis for executing the study was the completed survey questionnaires provided by the client, as well as the initial assignment established by the client and the information provided at meetings. The companies were queried by recognised Estonian and Finnish experts in the mechatronics field in August and September 2011 and the report was prepared in October The study was executed by a working group of HeiVäl Consulting consultants, including the following: Kaido Väljaots consultant in the cluster field; Kaisa Kase project manager for the study; Raili Paat statistician-analyst; Tõnu Hein technology consultant. 6

7 2. General data about the companies 2.1. Number of workers in the companies The study succeeded in examining companies of similar size in both regions. Figure 1. Distribution of the Estonian and Finnish companies by size In order to assess the size of the companies, the representatives of the companies were asked to answer the following question: What is the number of total employees in the company? The respondents were not given a range but where asked for a specific number. All 30 companies included in the sample answered the question. To analyse the results, the companies were divided into three groups: companies with 1-26 employees; companies with employees; and companies with 100 or more employees. These ranges were employed because this resulted in an equal number of companies in each group. The units on the vertical axis of the chart indicate the number of companies in each group. In the sample, there are an equal number of companies with 100 or more employees from both countries. In the sample there are two more companies with 1 to 26 employees in Estonia. In the sample there are two more companies with 27 to 99 employees in Finland. Based on the above, it can be said that generally, the companies from both countries were similar in size, although the sample companies from Estonia were somewhat smaller than the ones from Finland. 7

8 A comparison of the total number of employees in the Estonian and Finnish companies shows they are similar and the distribution between various jobs is also similar. Figure 2. Total number of employees in the Estonian and Finnish companies In figure 2, the answers to the following question have been totalled by country: What is the total number of employees? The respondents were not given a range but where asked for a specific number. All 30 companies included in the sample answered the question. The chart shows that the total number of employees is almost equal in both countries and the number of employees in various jobs is also quite similar. 8

9 2.2. Company turnover in 2010 The sample includes companies with large and small turnovers from both countries. The turnover per employee in the Estonian companies is lower than in the Finnish companies. Figure 3. Distribution of Estonian and Finnish companies by turnover In order to assess each company s turnover, they were asked to indicate their 2010 turnover in euros with one number. Thirteen Estonian companies and fourteen Finnish companies answered the question. Fifteen companies from each country were included in the sample. In order to analyse the results, the answers were divided into five groups. The unit indicated on the horizontal axis of the chart indicates the number of companies in the given group. The similarities between Estonia and Finland are the equal number of companies in the highest and lowest range of turnovers. The main differences between Estonia and Finland are the following: There are four Finnish companies in the group with turnovers totalling between 1 and 2.5 million euros, while there is only one company in Estonia; There are five Estonian companies in the group with turnovers totalling between 2.5 and 10 million euros, while there were only two companies in Finland. The Finnish companies were somewhat more uniformly distributed by turnover than were the Estonian companies. 9

10 Figure 4 show the average turnover per employee in the Estonian and Finnish companies in The average is calculated based on the 13 Estonian companies and 14 Finnish companies that answered the question. Based on this calculation, it can be said that the average turnover per employee in the Estonian companies is somewhat lower than in the Finnish companies.. Figure 4. Average turnover per employee in Estonian and Finnish companies 2.3. Company profits in 2010 In 2010 almost half the mechatronics companies that responded did not earn a profit or earned relatively small profit. The average profit per employee in the Estonian companies is lower than in the Finnish companies. Figure 5. Distribution of Estonian and Finnish companies by profit earned To calculate the companies profits, the respondents were asked to indicate their 2010 profits in euros with one number. Thirteen companies answered from both Estonia and Finland. To analyse the results, the answers were divided into five ranges. The unit indicated on the horizontal axis of the chart indicates the number of companies in the given group. 10

11 Almost half the companies that answered from both countries did not earn profit in 2010 or their profit was less than 100,000. Only Finnish companies were represented among the companies that earned profits of more than 1 million. Figure 6 shows that the average profit per employee in the Estonian and Finnish companies in The profit per employee is calculated as a quotient of the profit earned by the companies and the total number of employees. Twelve companies have been left out of the calculation four companies did not provide information and eight companies had no profits or suffered losses. Figure 6 shows that the average profit per employee in Estonian companies is significantly lower than in Finnish companies. The results are affected by one Finnish company, which a profit per employee ratio that is significantly higher than the other Finnish companies. If this company is not included, the average profit per employee in the Finnish companies would be 13,604. The same indicator for Estonia is still almost 60% lower. Figure 6. Average profit per employee in Estonian and Finnish companies 11

12 2.4. Summary of the companies general data The general data of the companies treated in the study include the number of employees, turnover and profit. The companies provided information on the number of workers in total as well as by jobs. The study sample includes companies of the same size from both countries. Based on 2010 turnover, the sample includes companies with less than 1 million and over 50 million of turnover. The turnover per employee is somewhat lower in Estonian companies than in Finnish companies. In 2010, about half the mechatronics companies did not earn any profit or earned a relatively small profit. The average profit per employee in Estonian companies was lower than in Finnish companies. 12

13 3. Business environment and management of the companies 3.1. Business environment of the companies Products and services being offered The Estonian companies are focused on final products and half-finished products, and the Finnish companies on half-finished products and production equipment. Figure 7. The products and services offered by the Estonian and Finnish companies Figure 7 describes the products and services that the companies offer to the market. In order to determine the products and services, the representatives of the companies were asked to answer the following question: Which products and services does the company offer and what is their relative importance? The respondents were presented with the categories shown in figure 7 (consumer goods, final products, etc.). The respondents indicated the percentage of the products and services in each category relative to their turnover. The units indicated on the horizontal axis of the chart indicate the average percentage of the products and services in the category relative to the turnover of the companies that answered in each country. For instance, if there had been only two companies in the sample and the services comprised 6% of the company s turnover, and the services comprised 20% of the other company s turnover, the average percentage of the service relative to the turnover of all the companies that answered would be 13%. The largest difference between the Estonian and Finnish companies was the relative importance of final products on average; they comprise 40% of the turnover of Estonian companies but only a tenth of the turnover of Finnish products. The main similarity between Estonian and Finnish companies is the percentage of services relative to turnover in Estonia the average is 13%, in Finland 11%. 13

14 In Estonian companies, the largest percentage of the turnover is generated by final products (40.7%), which are followed by half-finished products (32.2%). Finnish companies put more emphasis on halffinished products and production equipment, with percentages of 51.8% and 26.4% respectively relative to turnover. In conclusion, Estonian companies are focused on the production of final products and half-finished products, and Finnish companies on half-finished products and production equipment. The percentage of consumer goods and services relative to turnover is quite low in both countries. 14

15 Customer segments by industry The Estonian companies have the most customers in the automotive industry, the Finnish companies in the apparatus industry. Figure 8. Customer segments of the Estonian and Finnish companies Figure 8 shows the customer segments of the companies. To obtain this information, the representatives of the companies were asked to answer the following question: What are your company s customer segments by industry? The respondents were presented with the industry categories shown in figure 8 (automotive, aviation, etc.). The respondents indicated the percentage of each category relative to the company s turnover. Eight of the companies in Estonia chose other, of which one mentioned agriculture and the other did not specify the industry. In Finland, four of the companies chose other, of which one mentioned shipping, another construction and two did not specify the industry. The units on the horizontal axis of the chart show the average percentage of the turnover of the customers in the given category relative to the turnover of the all the companies that responded. The average percentage of each category is calculated based on the answers of all the companies. This means that when calculating the average, the companies that indicated that the given customer segment comprises 0% of their turnover have also been included. The greatest differences between Finnish and Estonian companies are in the percentages of turnover generated by the following industries: automotive industry, apparatus industry, health care industry, electronics and other. 15

16 In Estonia, it is worth noting that the large percentage of turnover is generated by customers in the automotive industry (21.9%). Customers in the following industries generate more than 4% of the average turnover: the apparatus industry, defence industry, energy and electronics. In Finland, the largest percentage of average turnover is generated by customers from the apparatus industry (37.8%). Customers in the following industries generate more than 4% of the average turnover: health care industry, energy and mining. In conclusion, it can be said that the largest percentage of the turnover of Estonian companies was generated by customers from the automotive industry, while in Finland it was general by customers in the apparatus industry. In the automotive industry, where the Estonian companies have a large percentage, more of the turnover is generated by companies with large numbers of employees. In the apparatus industry, where more Finnish are active, both smaller and large companies are more evenly represented. Figure 9. Customer segments of companies of various sizes Figure 9 shows both the companies distributed by size and the customer segments of those companies. The units on the horizontal axis of the chart show the average percentage of the turnover in this customer segment relative to the total turnover of all the companies that responded. For instance, customers from the automotive industry generate an average of 24.6% of the turnover of companies with more than 100 employees. 16

17 Of the turnover of companies with 1 to 26 employees, customers from the apparatus industry generate the largest average percentage of the turnover (31.8%). Four companies chose other and none of them specified the customers field of activity. The customers of companies with 100 or more employees come primarily from the automotive and apparatus industries (the average percentages of turnover are 24.6% and 22.8% respectively). The customers of the companies with 27 to 99 employees are more evenly divided among the fields of activity. Among companies with 27 to 99 employees, three companies mentioned agriculture, construction and shipping under other and two companies did not specify the other field of activity. The customers of the companies earning the greatest profits come from the automotive and health case industries. Figure 10. Customer segments of companies in different profit ranges Figure 10 shows the companies distributed by profit and the customer segments of those companies. The units on the horizontal axis of the chart show the average percentage of the turnover in this customer segment relative to the total turnover of the companies with profits in this range. For instance, of the companies earning profits of more than 400,000, an average of 39.6% of their turnover is generated by customers from the automotive industry. In 2010 the customers of companies that earned more than 400,001 in profits came mainly from the automotive and health care industries. The average percentage of these customer segments relative to the total turnover of the companies with profits in this range is 39.6% and 16.7% respectively. 17

18 One of the companies that chose the option of other mentioned shipping and four of the companies did not specify the field of activity. In 2010, the customers of companies that earned 150,001 to in profits are primarily from the apparatus industry (average percentage of turnover 38.1%) and the automotive industry (average percentage of turnover 16%). In 2010, the largest average percentage of the turnovers of companies that earned less than in profits was generated by companies classified as other. Two of the companies specified agriculture and construction in this context and the remaining five companies did not specify the field of activity Distribution of customers by size Finnish mechatronics companies serve larger customers than Estonian companies Figure 11. Distribution of Estonian and Finnish companies by the size of their customers Figure 11 shows the Estonian and Finnish companies distributed by the size of their customers. To make this determination, we asked the representatives of the companies to answer the following question: To which group do your main customers belong? The respondents were presented with the categories on the chart (large companies, mid-sized companies, etc.). The respondents indicated the percentage of their turnover that is generated by the customers in each category. The value indicated by each respondent had to total 100%. The units indicated on the horizontal axis of the chart indicate the average percentage by the customers of this size in the turnover of all the companies that responded. Separate results are shown for Estonia and Finland. Finnish companies stand out by serving more large companies and their average percentage of turnover is 67.8%. The largest customer group for Estonian companies are also comprised of large companies, but in comparison with Finland, there are more average- and small-sized companies 18

19 among the customers of Estonian companies. In conclusion, it can be said that Finnish mechatronics companies serve larger customers than Estonian companies. Large companies serve more large customers; smaller companies serve more smaller customers. Essentially, the mechatronics companies do not provide products to end users. Figure 12. Distribution of various sized companies by the size of their customers The vertical axis on figure 12 shows the sizes of the companies customers. Every respondent was asked to indicate the percentage of their turnover is generated by the turnover from the customers in each size range (large company, mid-sized company). The value indicated by each respondent had to total 100%. The distribution of the companies based on size represented by the bars includes the companies from both countries. The customer base of companies with 1 to 26 employees is most evenly distributed among the size categories. Generally, the larger companies serve more large companies and the smaller companies serve more small customers. 19

20 Customers purchasing motives The main differences between Estonian and Finnish companies are the greater importance of price and flexibility for the customers of the Estonian companies and the greater importance of brand loyalty for the customers of the Finnish companies. Figure 13. The assessment of the Estonian and Finnish companies regarding the purchasing motives Figure 13 shows the purchasing motives of the sample companies customers. To make the determination, the representatives of the companies were asked to answer the following question: What are the customers purchasing motives? The respondents were provided with the factors shown on figure 13 (brand loyalty, price, quality, etc.). The respondents marked the factors on a scale of 1 to 5, regarding how important they thought they given factor was for their customers when making their purchasing decision. When analysing the data, the answers given on a scale of 1 to 5 have been transformed to a scale of 0 to 100. For instance, the average assessment given by Estonian companies to the factor Price shows how important the Estonians think price is in the decision-making process of its customers. The largest differences between Finnish and Estonian companies are in the importance of brand loyalty, price and flexibility to its customers the representatives of the Estonian companies think that price and flexibility are much more important to their customers. The Finnish companies believe it is brand loyalty. The greatest similarities between Estonian and Finnish companies that should be mentioned are that both groups believe that the most important purchasing motives are quality and delivery accuracy. 20

21 The customers of the larger companies place greater emphasis on brand loyalty and place less emphasis on price Figure 14. Distribution of various sized companies based on the customers purchasing motive Figure 14 shows the importance of the customers purchasing motives, but this time the companies are not divided into groups by country, but the size of the responding companies. The greatest differences between different sized companies are that the customers of larger companies consider brand loyalty to be more important and price less important than smaller companies. 21

22 Position compared to competitors In figures 15 to 17 below, the positions of the sample companies is compared to their competitors. To make the determination, the representatives of the companies were asked to answer the following question: How do you rate your company s position today compared to the competitors? The respondents were provided with the five options shown on the charts (my company is a market leader, etc.) and they were asked to indicate the most suitable answer. The respondent had to make the choice regarding the company s position based on technological and financial aspects. For instance, the company could answer that it considers itself a market leader from the financial viewpoint, but its competitiveness from the technological viewpoint is weak. The horizontal axis of the chart shows the number of companies that chose the given answer. The companies rate their technological and financial competitiveness Figure 15. The assessments of the companies of their market position from the technological and financial viewpoint. All the sample companies are presented together in figure 15. Two of the companies indicated they were market leaders from a technological viewpoint and only one from a financial viewpoint. Approximately half of the respondents considered themselves to be at the same level of their competitors. An interesting difference is that the more of the companies believed themselves to more competitive from a technological viewpoint. 22

23 In the comparison between Finnish and Estonian companies, the Finnish companies tend to rate themselves as better than their competitors from a technological viewpoint and the Estonian companies from a financial viewpoints. Figure 16. The assessments of the Estonian and Finnish companies regarding their market positions based on the technological aspect. Figure 16 shows the assessments of the respondents regarding their market position based on the technological aspect. Based on this, it can be said that the greatest difference between Estonia and Finland is that over half of the Estonian companies consider themselves to be at the same level as their competitors, but over half the Finnish companies consider themselves to be better than their competitors. A positive similarity is that only one company in both samples believes its technological competitiveness is poor. In the comparison of the Finnish and Estonian companies based on the financial aspect the Finnish companies tend to consider themselves to be better than their competitors, and the Estonian companies tend to consider themselves to be at the same level. This opinion of the companies is also supported by the higher profitability of the Finnish companies referred to above. Figure 17. The assessments of Estonian and Finnish companies regarding their market position based on the financial aspect Figure 17 shows the assessments of the respondents regarding their market position based on the financial aspect. The comparison is presented by country. Based on this, it can be said that the 23

24 greatest difference between Estonia and Finland is that more Estonian companies consider themselves to be at the same level as their competitors. It is also interesting that none of the Estonian companies consider their financial competitiveness to be poor. Two respondents in the sample of Finnish companies made this assessment Market potential in various markets today (2010) and in the future (2015) The following figures (18 and 19) show the assessment of the sample companies regarding their own market potential today and in the future. To determine this, the representatives of the companies were asked to answer the following question How do you evaluate your company s potential regarding different markets today (2010) and in the future (2015)? The respondents were presented with the markets shown in the figure (home market, Baltic market, etc.), and asked to assess what percentage of their turnover the market comprises in 2010 and what the forecast is for The amounts for each respondent had to total 100%. The horizontal axes of the charts show the average percentage of the market relative to the turnover of the companies that answers. The answers are presented by country The Finnish companies consider their home market to have the greatest potential and the Estonian companies consider the Nordic countries to have the greatest potential. Figure 18. The potential of the Estonian and Finnish companies in The greatest differences between the Estonian and Finnish companies is that fact that the greater than average percentage of the Finnish companies turnover in 2010 is comprised of the home market, while for the Estonian companies it is the Nordic countries. For the companies in both countries, the Central and Western European market followed the home and Nordic markets. The average percentage of the turnover generated from sales in other markets is quite low in both countries. 24

25 2015 The Finnish companies consider their home market to have the greatest potential and the Estonian companies consider the Nordic countries to have the greatest potential. For Estonian companies the importance of the Central and Western European market will increase, while for the Finnish companies, in addition, growth will also occur in the Nordic and Russian markets. Figure 19. The market potential of Estonian and Finnish companies in 2015 In Estonia, we do not see any great changes between 2010 and The percentage of average turnover generated by the Nordic market is similar. The potential of the home market decreases somewhat, while the importance of the Central and Western European market increases. In the forecasts of the Finnish respondents, the importance of the home market has decreased by 10% compared to 2010, and the turnover from the Nordic market, Central and Western European market, as well as Russia has increased. 25

26 The reasons for searching for new markets Estonian companies assess all the reasons for exporting higher than the Finnish companies. The most important reason for Estonian companies is an ambitious company strategy, while for Finnish companies it is greater production capacities. Figure 20. The importance of the reasons for exporting of the Estonian and Finnish companies Figure 20 shows the reasons for exporting of the sample companies. In order to make a determination, the representatives of the companies were asked to answer the following questions: What is forcing you your company to search for new markets? The respondents were presented with the 20 factors indicated on the chart (my company has greater production capacities, etc.). The respondents rated the factors on a scale of 1 to 5 regarding how important each factor was as a reason for searching for new markets. When analysing the data, the answers given on a scale of 1 to 4 have been transformed to a scale off 0 to 100. The largest difference between the Estonian and Finnish companies was that the Estonian companies an ambitious company strategy to be a significantly more important reason for searching for new markets. Another difference is that all the factors are more important for the Estonian companies than for the Finnish ones, which may be explained by the fact that export generally is more important for Estonian companies, and comprises a large percentage of their turnover. Development along with infrastructure is considered to be the least important factor by the companies in both countries. 26

27 The value chain today (2010) and in the future (2015) The following figures (21 and 22) show the assessment of the sample companies regarding their own value chains today and in the future. To determine this, the representatives of the companies were asked to answer the following questions How do you place your company in the value chain today and 2015? The respondents were asked to rank the stages of the value chain, with 1 being the most important and 8 the least important stage. The horizontal axes of the charts indicate the importance of the stages of the value chain on a scale of 0 to 100. In order to transform the answers, 1 or most important in the given scale was equated with 100 and 8 or least important was equated with The companies of both countries give a high rating to production, while the Estonian companies also do the same for technological development and the Finnish companies for sales. Figure 21. Importance of the stages of the value chain for Estonian and Finnish companies in The greatest difference between Estonian and Finnish companies is the fact that the Estonian companies give a much higher rating to technological development and a somewhat higher rating to the role of production in the value chain. In addition, there is an approximately 10-point difference in the importance of after-sales servicing, which the Finnish companies rate as most important. The Finnish companies place themselves mostly in the sales and production stage, the Estonian companies in the production and technological development stage. 27

28 2015 In Estonia, the importance of marketing and product development increases, in Finland the importance of product development tends to decrease. Figure 22. The importance of the various stages of the value for Estonian and Finnish companies in 2015 In the future, marketing, product development and after-sales servicing should increase for Estonian companies. For Finnish companies, the importance of product development should decrease, and the importance of after-sales servicing and marketing should increase further Summary of the business environment The examination of the companies business environment included products and services, customer segments, size of the customers and purchasing motives, as well as the market position of the companies. The companies were asked to assess the geographical location of their customers in 2010 and the market potential for 2015; also the companies motives for exporting, as well as their value chain and the forecast for its future. In regard to the products and service offered by the companies, the Estonian companies are focus on the production of final products and half-finished products, while Finnish companies are focused on producing half-finished products and production equipment. Mechatronics companies essentially do not provide any products to end users. The Estonian companies have the most customers in the automotive industry, while the Finnish companies have the most in the apparatus industry. In the automotive field, where the Estonian companies have a large percentage, larger turnover is earned by the companies with the most employees. In the apparatus industry, where the Finnish companies are more active, smaller and large 28

29 companies are more evenly represented. The customers that earn more profits are in the automotive and health care industries. In regard to the size of the customers, it can be said that the Finnish companies serve large customers than the Estonian companies. It is also apparent that larger companies generally serve larger customers, while smaller companies serve larger numbers of small customers. In regard to the purchasing motive, there were significant differences between the countries price and flexibility were more important to the customers of the Estonian companies and brand loyalty was more important to the customers of the Finnish companies. It was also apparent that the customer of the large companies place great importance on brand loyalty and consider price to be less important than do the customers of smaller companies. In the comparison with competitors, the sample companies consider their technological competitiveness to be better than their financial competitiveness. The Finnish companies tend to consider themselves to be better than their competitors from both technological and financial viewpoint, while Estonian companies tend to consider themselves to be on the same level with their competitors. In 2010 and in the future, the Finnish companies see their home market as their largest potential market, while the Estonian companies see the Nordics as their largest potential market. In the comparison for 2010, it can be said that the Estonian companies see the potential of the home market declining somewhat, and the importance of the Central and Western European market increasing. In Finland, the respondents forecast an increase in the percentage of their turnover coming from the Nordic, Central and Western European as well as Russian markets. The Estonian companies give higher ratings to all the reasons for exporting than do the Finnish companies. For Estonian companies, the most important reason for exporting is an ambitious company strategy, while for Finnish companies is the possession of larger production capacities. In the value chain, the companies in both countries are positioned mostly in the production and sales stages. For the Estonian companies, the technological development stage is important. In the forecasts for 2015, increases are projected in the importance of marketing, product development and after-sales servicing for the Estonian companies. For the Finnish companies, the importance of product development will decrease somewhat and the importance of after-sales servicing and market will increase even further. 29

30 3.2. Management of the companies Use of management techniques today (2010) and in the future (2015) The main techniques used in the Estonian and Finnish companies are house rules and the ISO 9001 standard. In 2015, there are plans to increase the use of Lean Principles, Balanced Scorecard and 6-sigma. Figure 23. The management techniques used in the companies in 2010 and 2015 Figure 23 shows the management techniques used in the companies in 2010 and in the future, in In order to make the determination, the representatives of the companies were asked to answer the following question: Which management techniques does your company use and is planning to use? The respondents were presented with the categories (house rules, Theory of Constraints, etc.) shown in figure 23. Several options could be chosen. The option other was chosen for both periods by one Finnish company and four Estonian companies, of these one Estonian company named authoritarian management and the other SMED, while the remainder did not specify a management technique. As of 2010, the most popular management technique used by the companies is house rules and ISO 9001 quality management. Approximately half the companies already use Lean Principles. By 2015, the companies plan to expand the use of Lean Principles, Balanced Scorecards and 6-sigma. There will be a decrease in the number of companies that use house rules and ISO The companies believe that the most popular management technique along with ISO 9001 will become adherence to Lean Principles. 30

31 In the future the use of Balanced Scorecards and 6-sigma will increase in various sized companies. The percentage of those using Lean Principles will increase in companies with 26 or fewer employees. Figure 24. Percentages for the management techniques in use in various sized companies in 2010 and 2015 Figure 24 shows the percentages for the management techniques used in different years and in various sized companies. The percentages in each size range of companies total 100% for that size range. The vertical axis indicates the percentage of companies using the particular management technique in that size range. From the division by company size, we see that the use of house rules and ISO 9001 will decrease in all groups. The percentage of companies using Lean Principles will increase most in smaller companies. The use of Balanced Scorecards and 6-sigma will increase in all size ranges. 31

32 Structural forms today (2010) and in the future (2015) In the following figures (25 to 27) show the structural forms of the companies today (2010) and in the future (2015). The given results were obtained when the representatives of the companies were asked to answer the following questions Which type of organization structure does your company have today and will have in the future? Each respondent was given the opportunity several appropriate answers from the presented options (hierarchical structure, structure based on product families, etc.). The horizontal axis of the chart indicated the number of companies that chose the given structural form. The majority of the companies have hierarchical structures, but in the future the number of such companies will decrease. Figure 25. The structural forms of the companies in 2010 and 2015 Figure 25 shows the structural forms of the Estonian and Finnish companies in 2010 and Currently, companies with hierarchical structures are predominant among the companies, but by 2015, they should decline about almost half. The other structural forms are represented among the companies relatively evenly. In the future, the hierarchical structural form should decrease (only 9 companies in 2015) and the number of other structural forms should increase somewhat. In addition, two companies hope to implement a self-learning organizational structure. 32

33 In 2010, a structure based on product families is also used in Finnish companies along with a hierarchical structure. Figure 26. Structural form in Estonian and Finnish companies in Figure 26 shows the structural forms in the Estonian and Finnish companies in The biggest difference is that structures based on product families are only implemented in Finland. Hierarchical structures are the most popular in the companies in both countries and the remaining structural forms are distributed quite evenly by country. By 2015, the use of structures based on product families will increase in the Finnish companies and the use of project-based structures will increase in the Estonian companies. Figure 27. Structural forms in Estonian and Finnish companies in Figure 27 shows the structural forms in the Estonian and Finnish companies in The biggest difference between Estonia and Finland is that structures based on product families are still planned only for implementation in Finland, while project-based structures predominate in Estonia. In the time comparison, it is worth noting that there are plans to reduce the use of hierarchical structures in both countries. Compared to 2010, the greatest increase in Estonia is in the use of project-based structures, while in Finland, the use of structures based on product families will increase somewhat. 33

34 Frequency of the changes made in the structure and operations The following figures (28 to 30) show the frequency of the changes made in the companies structures and operations. To make the determination, the representatives of the companies were asked to answer the following question. How often do you make changes in your company s structure and operations? The respondents were asked to choose one of the presented options (after less than six months, after six months to a year, etc.). The horizontal axis of the chart indicates the frequency which option the company chose. Changes in the companies operations are made more often than in the structure. Figure 28. Frequency of the changes made in the companies operations and structure. Figure 28 shows the frequency of the changes made in all the companies. The changes made in operations and management structures have been differentiated. The figure shows that changes in operations are made more often about two-thirds of the sample companies made these changes more frequently than every two years. Changes in processes are made somewhat less frequently. Estonian companies change their operations more often than Finnish companies. Figure 29. Frequency of the changes in operations made in Estonian and Finnish companies 34

35 About two-thirds of the Finnish companies change their operations every three years or even less frequently. All the Estonian companies change their operations every two years or even more frequently. The Estonian companies change their structure more often the Finnish companies. Figure 30. Frequency of the changes made in the structure in Estonian and Finnish companies. The same trend is apparent in regard to structure almost two-thirds of the Finnish companies change their structures every three years or even less frequently. All the Estonian companies change their structures every two years or even more frequently. In figures 31 and 32, the bars provide a comparison based on the various sized companies in the sample (1-26 employees, etc.). In addition, the adjacent bars provide a comparison of the Estonian and Finnish companies in the corresponding size group. The answers from all the companies in the corresponding size group and the companies each country total 100%. Frequency of changes in operations larger companies in Finland make changes in operations less frequently than smaller companies. Figure 31. Frequency of making changes in operations in various size Estonian and Finnish companies 35

36 In the comparison between the various size groups, the chart shows that in Estonia companies with 99 or less employees change their operations more frequently. As anticipated, in Finland smaller companies also make changes more frequently. Surprisingly, Finnish companies with 1-26 employees also make changes in operation less frequently than every three years. Frequency of changes in structure larger companies in Finland also make changes in structure less frequently than smaller companies. Figure 32. Frequency of making changes in structure in various size Estonian and Finnish companies In the comparison between the various size groups, the same trend is apparent for structural changes. In the Finnish sample, a certain connection between the size of the company and the frequency of changes can be discerned. This is not as clearly apparent in Estonian companies. However, it can still be stated the larger Estonian companies (100 or more employees) make changes more often than companies that are smaller. 36

37 Sources of new customers Estonian companies deal more actively with sales, while Finnish companies rely on the reputations of their companies to find new customers. Figure 33. Sources of new customers for Estonian and Finnish companies. Figure 33 shows the sources of new customers for the companies. To determine the percentages, the representatives of the companies were asked to answer the following question: How do you find new customers? Various sources were presented as options and the respondents indicated the percentage of their turnover generated by the customers that came from the corresponding source. The units on the horizontal axis of the chart indicate the average percentage of the turnover of all the responding companies that was generated by customers that came from the corresponding source. The Estonian companies assigned the highest percentages to active sales, while Finnish companies assigned the highest percentages to reputation of the company, which caused the customers to find the company themselves. Another difference between the countries is that, Estonian companies also rate participation in fairs, and finding customers on the Internet higher than Finnish companies as a way to generate turnover. 37

38 Products and services developed and implemented by the companies The Estonian companies deal more with the development of new products and services, while the Finnish companies deal with the modification and improvement of existing products. Figure 34.The importance of the opportunities for the development of products and services in Estonian and Finnish companies The Estonian companies consider the development of existing products to be most important, but they consider the addition of new products into the product range, the creation of totally new products and introducing new products to new markets to be more important than Finnish companies do. However, Finnish companies consider the development of existing products and constant improvement of existing products to be more important than Estonian companies do. Smaller companies deal more with the improvement of existing products, while larger companies deal more with the development of new products. Figure 35. The importance of the opportunities for the development of products and services in various sized companies. Figure 35 shows the results of the examination of new products and serviced based on the following question: Which products or services are developed and implemented by your company? The respondents were provided with the possibilities shown in figure 35 (new products and services for new markets, totally new products, etc.) and asked to assess how they feel each option is on a scale of 1 to 38

39 5. When the data was analysed, the answers given on a scale of 1 to 5 were transformed to a scale of 0 to 100. The companies with 1 to 26 employees considered the addition to, modification and improvement of existing products to be the most important. Companies with 27 to 99 employees placed great importance on the development, modification and improvement of existing products and services. Companies with over 100 employees also considered the addition to, modification and improvement of existing products to be most important, but compared to the others, they gave a significantly higher rating to introducing new products and services to new markets Summary of the management of the companies In regard to changes and developments at the companies, the following were examined: the use of management techniques and possible changes therein, the structural forms of the companies today and in the future, frequency of making changes, finding sources for new customers, and the development of goods and services. House rules and the ISO 9001 standard are the main management techniques used by the Estonian and Finnish companies. By 2015, the companies plan to increase the use of Lean Principles, Balanced Scorecards and 6-sigma. All the various sizes of companies plan to increase the use of Balanced Scorecards and 6-sigma in the future. Companies with less than 26 employees plan to increase the use of Lean Principles. Today, the companies structural forms are predominantly hierarchical. However, in the future, fewer companies plan to keep using hierarchical structural forms. By 2015, the use of structures based on product families will increase among Finnish companies and the number Estonian companies using project-based structures will increase. In regard to the frequency of making changes, these are made more often in the companies operations and less often in their structures. Estonian companies change their operations and structures more often than Finnish companies. The reason for the higher frequency in the Estonian countries may be related to the fact that they are more involved with the development of new products and services, which may in turn, be related to project-based structures. To find new clients, Estonian companies devote more time to active sales, while Finnish companies rely on their reputations. 39

40 Estonian companies deal more with the development of new products and services, while the Finnish companies spend more time on the modification and improvement of existing products. Considering the size of the companies, it is apparent that the smaller companies deal more with the improvement of existing products, and the large companies devote more time to the development of new products. 40

41 4. Companies technological capabilities 4.1. Manufacturing methods in use The greatest use is made of mechanical machining on CNC equipment and welding and assembly with conventional equipment. Figure 36. Conventional and CNC-type manufacturing methods used in the companies When examining manufacturing methods, the representatives of the companies were asked to indicate the manufacturing methods used by their companies, and whether CNC or conventional equipment was used for the given method. The horizontal axis of the chart shows the number of answers for each manufacturing method provided by the companies. The respondents were asked to indicate all the methods in use and their type. The most popular was mechanical machining on CNC equipment and welding and assembly on conventional equipment. In the comparison of CNC and conventional equipment, in the most often mentioned fields of activity, CNC methods are used more often in mechanical machining and sheet metal machining, and conventional methods are used in assembly, surface coating technologies, welding and finishing technologies. 41

42 Of the manufacturing methods in electronics, the most popular were manually executed manufacturing methods Figure 37. The automatically and manually executed manufacturing methods used by the companies When examining the manufacturing methods, the representatives of the companies were asked to indicate the manufacturing methods used by their companies and what are the technological capabilities of the equipment (manual or automatic). The horizontal axis of the chart shows the number of answer for each manufacturing method and type provided by the companies. Several options could be indicated. The most popular were manual manufacturing methods for assembly, testing and final inspection, the composition of printed circuits and adjusting. 42

43 4.2. Manufacturing principles in use The companies in both countries predominantly employ the single workplace principle. The Finnish companies also use group technology. Figure 38. The manufacturing principles used in Estonian and Finnish companies In regard to manufacturing principles, the representatives were asked to indicate all the manufacturing principles in use. The horizontal axis of the chart indicated the number of companies making the corresponding choice. The most popular was the use of single workplaces in both Estonian and Finnish companies. The main difference is that group technology is more popular in Finland than in Estonia. However, compared to Finland, flow manufacturing and multi-flow manufacturing is more popular in Estonia than in Finland Equipment overview Estonian companies have more conventional equipment, while Finnish companies have more CNC machine tools. Figure 39. Equipment used in Estonian and Finnish companies When examining the equipment in use, the representatives of the companies were asked to indicate the amount of the corresponding type of equipment. Conventional equipment was most popular in both Estonian and Finnish companies, although in the sample there were 44 more pieces of equipment in 43

44 Finnish companies than in Estonian companies. There was a significant difference in the number of CNC machine tools there were 140 more in Finland Monitoring principles in use There are more monitoring methods used simultaneously in Finnish companies. Figure 40. Monitoring principles used in Estonian and Finnish companies. In order to get the results shown in figure 40, the representatives of the companies were asked to indicate all the monitoring principles used by their companies. In both Estonian and Finnish companies, the most popular principle in the Estonian and Finnish companies was inspection at the workplace after the operation and the final inspection of products. The main difference between the Finnish companies and the Estonian ones was the more frequent use of active monitoring during machine-tooling and monitoring in the coordinate measuring machine (CMM). Larger companies use a large variety of monitoring methods. Figure 41. The monitoring principles used by various sized companies. Figure 41 shows the monitoring principles used in various sized companies. As one might expect the number of monitoring methods used increases along with the number of employees in the companies. The only principle, which is used equally in different sized companies, is inspection at the workplace after the operation. 44

45 4.5. Software in use In Finnish and Estonian companies CAD and CAD/CAM software is most popular. Figure 42. Software used in Estonian and Finnish companies. Figure 42 shows the software used in the companies to present and deliver product data. The horizontal axis of the chart shows the amount of the corresponding software used the companies. The companies in both countries primarily use CAD and CAD/CAM. Of the Estonian companies, only one uses DNC software, which is used by six companies in Finland. In addition, four Finnish companies use virtual manufacturing. 45

46 4.6. Summary of the companies technological capabilities In regard to the technological capabilities, the following aspects of the companies were examined: the manufacturing methods, manufacturing principles, equipment, monitoring principles and the presentation and delivery of product data. The most popular is mechanical machining on CNC equipment and welding and assembly with conventional equipment. Of the manufacturing methods in electronics, the most popular were manually executed manufacturing methods. In regard to manufacturing principles, in the companies of both countries the most popular in the single workplace principle, while group technology is also used in Finland. As far as equipment, in Estonian companies, mostly conventional equipment is used, while in Finnish companies there are significantly more CNC machine tools. In regard to monitoring principles, more monitoring methods are used simultaneously by Finnish companies. The most popular in both countries is monitoring at the workplace after the operation and the final inspection of products. Larger companies use a large variety of monitoring methods. In Finnish and Estonian companies, CAD and CAD/CAM is most popular. In Finnish companies, the use of DNC and virtual manufacturing is more popular. 46

47 5. Development of products and technology 5.1. Role and objectives of innovation Estonian and Finnish mechatronics companies deal most with product improvements and gradual modifications. Figure 43. Ways of dealing with innovation in Estonian and Finnish companies Figure 43 provides the assessment of the companies representatives regarding the role and objectives of innovation in their company s strategy. To make this determination, they were asked to choose the appropriate answers from the following options: Do not deal with targeted innovation. Innovation focuses on the improvement of products and/or gradual modification of operations. Focused on the development of new-generation products Development and implementation of new high-tech technologies Deal with the development of new products, operations, and technologies based on the development of environmentally friendly technologies and the recycling of resources Slightly less than half of the companies in both countries are focused on the improvement of products and gradual modification. 47

48 The companies that earn higher profits invest the most in the development of new-generation products and the development of high-tech technologies. Figure 44. How Estonian and Finnish companies in different profit ranges deal with innovation. The bars on figure 44 show a comparison of companies in different profit ranges (1 to 26 employees, etc.). In addition, on adjacent bars a comparison is provided of the Estonian and Finnish companies in the same profit range. The answers of all the companies in each profit range and each country total 100%. In the comparison between Estonia and Finland, the most similar group of companies is the one with profits between 150,000 and 400,

49 5.2. Objectives of product development The Estonian companies place greater importance on new product development based on customer needs, while the improvement of existing products and expansion of the product mix are more important for the Finnish companies. Figure 45. The importance of the product development objectives in Estonian and Finnish companies To make the determination regarding the product development objects, the companies were asked to indicate the importance of each objective for their company on a scale of 1 to 5. When the data was analyzed, the answers provided on a scale of 1 to 5 were transformed into a scale of 0 to 100. Estonian companies consider new product development based on customer needs to be the most important, while, Finnish companies consider the improvement or modernization of existing products to be most important. The greatest difference between the countries is the fact that the improvement and modernization of existing products and the expansion of the product mix as product development objects are twice as important in Finnish companies. Estonian companies placed much more importance on increasing the technological nature of existing products. 49

50 5.3. Organization of product development in the companies Estonian companies deal with product development primarily in their own development departments, while most Finnish companies do not have development teams or create them temporary based on the corresponding needs. Figure 46. Organization of product development in Estonian and Finnish companies To make the determination about the organization of product development, the representatives of the companies were asked to answer the following question: How does product development occur in your company? The respondents were asked to indicate their answer as a percentage of relative importance so that the answers total 100%. The average of all the percentages is shown on the horizontal axis of the chart. On the Estonian companies, product development occurred mostly in their own resources, for instance, a development engineer, or product development and/or development department. A larger percentage of Finnish companies also had their own product development department, but the answer with the next largest percentage was the answer that the company does not have a product development department. The main differences between the two countries were that Finnish participate in more cooperation networks and clusters and make significantly more use of temporary development teams based on need. 50

51 5.4. R&D investments Estonian companies make more investments in technological development, while Finnish companies invest similar amounts in the development of products, technology and the company. Figure 47. R&D investments in Estonian and Finnish companies. The data shown in figure 47 is compiled from the following question asked of the company representatives: How large are the annual R&D investments on average? Separately, the respondents were asked to provide an assessment of the investments for the development of products, technology and the company. The respondents were also asked to indicate the amount of the investment in euros and its percentage of turnover. Seven companies answered the question four in Estonia and three in Finland. On average, the Estonian companies invest the most in technology development, while the Finnish companies invest evenly in technology and company development. 51

52 5.5. Summary of the development products and technology In the chapter on the development of products and technology, the following were examined: the role of innovation in the company s strategy, the objectives and organization of product development, and R&D investments. In regard to innovation, the Estonian and Finnish mechatronics companies place the greatest emphasis of the improvement of products and gradual modifications. When analysing different sized companies, it turns out that the companies earning the highest profits invest most in new-generation products and high-tech technologies. In regard to the objectives of product development, the Estonian companies place greater importance on new product development based on customer needs, while the improvement of existing products and expansion of the product mix are more important for the Finnish companies. Estonian companies deal with product development primarily in their own development departments, while most Finnish companies do not have development teams or create them temporary based on the corresponding needs. Estonian companies make more investments in technological development, while Finnish companies invest similar amounts in the development of products, technology and the company. 52

53 6. Personnel 6.1. System for improving labour productivity In order to improve labour productivity, approximately two-thirds of the Estonian mechatronics companies systematically compare the competence of their employees with the actual needs in their organization. In Finnish companies the opportunities for increasing labour productivity are ascertained mostly in discussion at the department level. A programme for increasing labour productivity has been implemented at the company level in only three Estonian and four Finnish companies. Figure 48. Systems for improving labour productivity in Estonian and Finnish companies. In order to determine the companies measures for improving labour productivity, the respondents were asked to answer the following question: Does your company have a system for improving labour productivity? Five possible answers were supplied and the respondents were asked to indicate the appropriate answer. The units indicated on the horizontal axis of the chart show how many companies chose the corresponding answers. In the interests of clarity, abbreviated versions of the possible answers have been included in figure 48. The original answers included in the questionnaire are presented in table 1. The greatest difference between the Estonian and Finnish companies is that more Estonian companies than Finnish companies use a systematic approach for improving labour productivity. In Estonian companies more solutions are used simultaneously the representatives of Estonian companies provided a total of 21 answers regarding the existence of different systems; the representatives of Finnish companies provided only 15 answers. The most popular method in Estonian companies is the systematic comparison of employees competences with the necessary skills. Six of the Estonian companies stated that there is no direct system for improving labour productivity in the company, but the opportunities for increasing labour 53

54 productivity are discussed in the departments. The most frequent answer provided by Finnish companies was that the only method is having discussions at the departmental level, and four Finnish companies have implemented a programme for increasing productivity at the company level. In addition, one Finnish company has indicated that it has not thought about improving labour productivity. Abbreviated answers on the chart: Complete versions of the answers presented in the questionnaire: None Have not thought about improving labour productivity There is no direct system, although the departmental managers discuss the None, discussions held in company s/department s strengths and weaknesses with the employees and departments discuss possibilities for improving productivity Systematic comparison of The knowledge and skills of employees are systematically ascertained and these employees competences are compared to the necessary skills, in order to get a clear picture of the with necessary skills. strengths and weaknesses Systematic analysis of Systematic analyses are carried out on how the employees knowledge and skills employees competences help to increase productivity, and what are the strengths and weaknesses of the for increasing productivity department. A system for measuring and analyzing productivity has been implemented at the Programme for increasing department level. The results are analysed at the department level as well as productivity at the company comprehensively at the company level. A productivity improvement programme level exists. Table 1. Correlation between the abbreviated questions in figure 48 and the complete questions in the questionnaire. 54

55 6.2. Use of an objective-based management system In Estonian companies, responsibility has mostly been delegated to departmental heads, while Finnish companies use various management principles relatively evenly. Figure 49. Use of objective-based management systems in Estonian and Finnish companies In order to determine the companies management systems, the respondents were asked to answer the following question: Does your company use a system of objective-based management? Four possible answers were included in the questionnaire and the respondents indicated the answer that described the situation in their company. The units indicated on the horizontal axis of the hart how that how many companies chose the corresponding answer. In the interest of clarity, abbreviated versions of the possible answers have been included in figure 49. The original answers included in the questionnaire are presented in table 2. The greatest difference between the Estonian and Finnish companies is that in more Estonian companies than Finnish companies, a system of objective-based management is unsystematically implemented by managers at the departmental level. One-third of the Estonian companies employ a system of objective-based at the top management level and three companies have developed a system implemented at the company level. In the Finnish companies the use of the various systems is distributed more evenly. Systems encompassing the entire company are most popular in Finland. Objective-based management systems that encompass the entire company are implemented in almost one-third of the companies. Not in use In use at the top management level Unsystematically used by managers at the departmental level Objective-based management is not implemented Objective-based management is implemented only at the top management level Department managers determine the main objectives and the means for achieving them in their departments, but not systematically, but based on need A system of objective-based management has been developed along with a System in use encompasses mechanism for analyzing the documented objectives, key indicators and the entire company achievements, which covers the entire company and has been made known Table 2. Correlation between the abbreviated questions in figure 49 and the complete questions in the questionnaire. 55

56 6.3. Organization of the system for making suggestions for improvements The mechatronics companies of both countries relatively equally use an approach wherein the employees discuss their ideas with their direct superiors. The systems for collecting suggestions for improvements vary somewhat more in Estonian companies. Figure 50. Use of systems for making suggestions for improvements in Estonian and Finnish companies. In order to determine the systems used in companies for making suggestions for improvements, the companies representatives were asked to answer the following question: How is the system for making suggestions for improvements organized in your company? Five possible answers were included in the questionnaire and the respondents were asked to choose the appropriate answer. In the interest of clarity, abbreviated versions of the possible answers have been included in figure 50. The original answers included in the questionnaire are presented in table 3. An equal number of Estonian and Finnish companies lack a definite procedure for dealing with ideas if employees get good ideas, they tell their direct superiors. However, compared Finnish companies, Estonian companies have more different ways of dealing with suggestions for improvements in four companies, a person has been assigned that deals with the suggestions, and in two companies, an annual competition takes place to choose the best suggestion. Three Estonian companies and four Finnish companies use a documented system for improvement suggests that is connected to the motivation system, that is only a quarter of all the companies in the sample. Of Finnish companies, two stated that they lacked any systematic approach. No systematic approach exists Employee tells his/her direct superior. A person for collecting suggestions and procedure for dealing with them Competition to determine the best suggestion Documented system, which is connected to a motivation system. No systematic approach exists If an employee has a good idea, he/she discusses it with his/her direct superior. No procedure/system exists for handling the ideas A person has been assigned to coordinate the handling of improvement suggestions and a procedure has been established for dealing with the improvement suggestions Improvement proposals are clearly appreciated and every year a competition is organized to choose the best idea A documented system exists for promoting innovation by the employees and this is connected to the motivation system 56

57 Table 3. Correlation between the abbreviated questions in figure 50 and the complete questions in the questionnaire Evaluation of the value chain competences The companies in both countries give the highest evaluation to their production competences. In Estonian companies this was followed by R&D competences, while in Finnish companies this was followed by selling competences. Figure 51. Level of value chain competences in Estonian and Finnish companies In order to evaluate the competences, the respondents were asked to answer the following question: How do you evaluate the situation in your company in different parts of value chain, compared to the maximum level? The representatives of the companies evaluated the competences in five areas of activity on a scale of 1 to 5, in which 1 was the worse level and 5 the best level. When making the analysis, the values assigned by the respondents were transformed into a scale of The units indicated on the horizontal axis of figure 51 show the transformed average evaluation by the companies of each competence. The competences of the Estonian companies that were given the highest evaluations were the production and R&D competences. The Finnish companies give the highest evaluations to production and selling competences. Both Estonian and Finnish companies gave the highest evaluations to production competences. The main difference was that Estonian companies gave the highest evaluations to R&D competences. The Finnish companies consider themselves to be stronger than Estonian companies in regard to selling and marketing competences. Finnish companies also gave somewhat higher assessments to their production competences. 57

58 6.5. Summary of personnel In the personnel area, the systems in the companies for the improvement of labour productivity, objective-management and making suggestions for improvements were under examination. In addition, it was ascertained what the level of the competences are in the companies at various stages of the value chain. In regard to the systems for improving labour productivity, the most popular method is the systematic comparison of employees competences with the necessary skills. In Finnish companies, the most popular method for ascertaining the possibilities for increasing labour productivity is having discussions at the departmental level. Systematic approaches are used, but only a quarter of the companies in the sample have productivity programmes encompassing the entire company. In regard to objective-based management, responsibility has mostly been delegated to departmental heads. Finnish companies use various management principles relatively evenly. Objective-based management systems that encompass the entire company are implemented in almost one-third of the companies. In regard to the system for making suggestions for improvements, in Estonian companies more systems for making suggestions are employed. In most Finnish companies there is no systematic approach. A quarter of the companies in the sample have a documented system that is connected to the motivation system. The evaluation of the value chain competences showed that the companies of both countries give the highest evaluation to their production competences. In Estonian companies this was followed by R&D competences, while in Finnish companies this was followed by selling competences. In conclusion, it can be said that in both countries, there is room for development in the implementation of productivity programmes at the company level, as well as documented systems for making suggestions that are connected to motivations systems. Each of these was used by only a quarter of the sample companies. An interesting result is that Estonian companies give their selling competences a lower assessment than Finnish companies. At the same time, we see from chapter that sales activities are a greater source for Estonian companies to find clients than it is for Finnish companies. In this connection, the competences of Estonian companies apparently need further development. The fact that Estonian companies give higher marks to their R&D competences was to be expected, because, as it turns out from chapter 5.3, more R&D is done in-house in Estonia. 58

59 7. Issues related to information and communication technology (ICT) 7.1. Software solutions used in the management of business operations ERP systems are the ones used most often by companies in both countries. Finnish companies use significantly more software solutions than Estonian companies. Figure 52. The software solutions used for the management of business operations in Estonian and Finnish companies. In order to make the determination about the software solutions used in the companies to manage their business operations, the respondents were asked to answer the following question: Which software solutions do you use for the management of business operations? Four different systems were provided as possible answers in the questionnaire. The respondents were also provided the opportunity to add their own system and they could choose more than one answer. The units on the horizontal axis of figure 52 indicate how many companies chose the given option. ERP systems are the ones used most often and relatively equally, in both Estonian and Finnish companies. Finnish companies use over twice as many software solutions as Estonian companies the number of answers provided by Estonian companies was 11, Finnish companies provided 23 answers. Two Estonian companies use MRP II systems, and one company used another system, which was not specified on the questionnaire. In addition to ERP systems, Finnish companies also use MRP I and MRP II systems. One Finnish company also uses a PLM system, and three companies have indicated they use other software solutions, with one company specifying the use of c900 Logica. 59

60 7.2. Number of computerized workplaces The number of computerized workplaces ranges from 11 to 50 in approximately half of the sample companies. Figure 53. The number of computerized workplaces in Estonian and Finnish companies. In order to determine the number of computerized workplaces, the representatives of the companies were asked to indicate the correct size range from the six that were provided on the questionnaire. The units on the horizontal axis of the chart show how many companies have the same number of computerized workplaces as in the given range. In most Estonian and Finnish companies the number of computerized workplaces is between 6 and 50. Two of the Finnish companies have fewer than 6 workplaces and none of the Estonian companies do. Two Estonian companies and three Finnish companies have more than 60 computerized workplaces. 60

61 7.3. Financial software in use As of 2010, almost all the Finnish companies use data table systems. In Finland generally, more types of financial software are used and other software is used simultaneously with data tables systems. Figure 54. The financial software used in Estonian and Finnish companies in In order to determine the financial software used by the companies, the respondents were asked to answer the following question: Which financial software do you use today and plan to use in the future? Five possible answers were provided and the respondents had to indicate which software was being used in 2010 and which they planned to be using in The respondents could choose as many answers as they wished. The units indicated on the horizontal axis of the chart show ho many companies chose the corresponding answer. Figure 54 shows the financial software used by the companies as of We can see that the Finnish companies can be differentiated most by the abundance of data tables systems they use. The Estonian companies gave 17 positive answers, and the Finnish companies gave 25 positive answers. Based thereon, it can be concluded that more financial software is generally used in Finland, and in addition to data tables systems, Finnish companies simultaneously also use other software. In addition to data tables systems, Finnish companies also use many mid-sized ERP packages and packages for small companies. The Estonian companies are characterized by the more even distributed use of various financial software solutions. The use of mid-sized ERP packages, software packages for small companies and data tables systems is relatively evenly distributed. 61

62 In 2015, the Finnish companies plan to continue using data tables systems, while among Estonian companies the number of users for packages for small companies and mid-sized ERP systems should increase. Figure 55. The financial software to be used in Estonian and Finnish companies in Figure 55 describes the use of financial software planned in the companies for Several appropriate answers have been indicated, if necessary, and two Estonian companies did not answer the question. Generally, the situation regarding the use of financial software does change much between 2010 and Finnish companies continue to be differentiated by the abundance of data tables systems and the same number of companies will be using mid-sized ERP systems as were in Among Estonian companies, the number of users of data tables systems should decrease and the number of uses of packages for small companies and mid-sized ERP packages should increase. 62

63 7.4. Computer-based functions used in production management Finnish companies use computer-based functions in the management of more areas of activity. Figure 56. Use of computer-based functions in production management in Estonian and Finnish companies In order to make a determination about the use of computer-based functions in the companies, the representatives of the companies were asked to answer the following question: Which computerbased production management functions are used in your company? A choice of ten areas of activity was provided. When answering, it was possible to choose more than one and, if necessary, unnamed areas of activity could be added to the questionnaire. The units indicated on the horizontal axis of the chart indicate how many companies chose the given option. The greatest similarity in figure 56 is that almost all the Estonian and Finnish companies use financial management and accounting computer-based functions. However the difference between the companies of the two countries becomes apparent in almost all other field of activity. Estonian companies outpace Finnish companies in the use of computer-based functions to a small extent in only production planning and management. However, two-thirds or more of the Finnish companies use computer-based functions in cash flow management, material flow management, supply chain management, personnel management and product data management. Computer-based functions are used the least in both countries for customer service and project management. 63

64 The percentage of the use of computer-based functions for material flow management and production data management increases in larger companies. Figure 57. Percentages of the use of computer-based functions for production manage in various sized companies. Figure 57 describes the percentage of fields of activity managed by computer-based functions in various sized companies. The number of answers in each range of companies totals 100% for that range. The vertical axis describes the percentage in the corresponding range of companies. The figure shows that all the fields of activity included in the questionnaire are represented in each size range of companies. In companies with 1 to 26 employees, financial management has the largest percentage and quality management the smallest. In companies with 27 to 99 employees, computer-based functions are implemented the least in project management. In companies with 100 or more employees, financial management, production planning and management, and materials flow management all have the highest percentage in regard to the use of computer-based functions. Generally, the chart demonstrates that in larger companies, there is an increase in the use of computer-based functions for material flow management, product data management, and to smaller extent, cash flow management. 64

65 7.5. Use of technology-oriented systems The companies in both countries have used CAD and CAM systems for the longest. The Estonian companies have used all technology-oriented systems for a shorter period of time. Figure 58. Average time that technology-oriented systems have been in use in Estonian and Finnish companies. In order to evaluate the use of technology-oriented systems, the respondents were asked the following question: Which technology-oriented systems does your company use or plans to use? When answering, the respondents had to indicate how many years the system had been in use, and in case the company planned to start using the system, when the system would be implemented. When analyzing the answers, only those companies were taken into consideration that had indicated how many years they had used a specific system. Based on the answers, the average number of years that various systems have been in use was found. The sequence of the average time that various systems have been in use in Estonian and Finnish companies is similar. CAD systems have been in use the longest (13 Estonian and 13 Finnish companies that answered), followed by CAM systems (11 Estonian and 10 Finnish companies), and in both countries, the CAE systems are in third place (2 Estonian companies and 4 Finnish companies). On average, Estonian companies have used all the given programmes for shorter periods of time than Finnish companies. In addition to the three systems mentioned above, Finnish companies also use CAPP and CAPM systems (2 and 3 companies respectively). Only three companies answered the question whether and when the companies plan to start using some other technology-oriented system. One Estonian company plans to start using CAE systems in 2014 and another company plans to start using CAPP systems in The third company plans to start using CAPP systems in 2011 and CAPM systems in

66 7.6. Number of CAD, CAM, CAE, and CAPP software users In approximately two-thirds of the Finnish companies, two to five employees use CAD, CAM, CAE or CAPP software, and in about one-third of the companies the number of users is more than 11. In the majority of Estonian companies the number of software users is between two and ten. Figure 59. Number of CAD, CAM, CAE and CAPP software users in Estonian and Finnish companies To assess the number of CAD, CAM, CAE and CAPP software users, the representatives of the companies were asked to answer the following questions: How many CAD, CAM, CAE, and CAPP software users are there in your company? The six possible answers were provided in the questionnaire and the respondents had to indicate the appropriate range of numbers. The units indicated on the horizontal axis of the chart show how many companies have users in the corresponding range. In the majority of Estonian companies the number of users is between two and ten. In three companies, the number of software users is between 11 and 50. In most of the Finnish companies, two and five employees use the given software. In five companies, the number of users is between 11 and

67 7.7. Summary of ICT questions The ICT questions were used to examine the following issues: software solutions used in the management of business operations, the number of computerized workplaces, financial software in use, computer-based functions used in production management, use of technology-oriented systems and the number of software users. ERP systems are the popular software solutions used in the management of business operations in both countries. In addition, it turns out that Finnish companies make significantly more use of software solutions than Estonian companies do. In half of the sample companies the number of computerized workplaces is between 11 and 50, and in the majority it is less than 50. As far as financial software, all the Finnish companies in the sample used data tables systems in Generally, a greater variety of financial software are used in Finland, and in addition to data tables systems, Finnish companies use other software simultaneously with data tables systems. From the plans for 2015, it turns out that Finnish companies plan to continue using data tables systems. The use of software packages for small companies and mid-sized ERP systems will increase in the Estonian companies. The use of computer-based functions used in production management is more popular in Finland. As expected, almost all the sample companies use them in financial management and accounting. Over two-thirds of the Estonian companies use them for production planning and management, while twothirds or more of the Finnish companies use them for materials flow management, supply chain management, cash flow management and personnel management. As expected, the use of computer-based functions in materials flow management and product data management increases as companies grow. Estonia has lots to learn from Finland when it comes to the use of computer-based function in production management. CAD and CAM systems have been used the longest in both countries. On average, the Estonian companies have used technology-oriented systems for a shorter period of time. CAPP and CAPM systems are used only in Finland, and here too, it is possible to learn from the better practices of Finnish companies. Especially, since two Estonian companies have indicated that they plan to start using CAPP and/or CAPM systems in the near future. 67

68 8. Quality assurance and control 8.1. Quality management systems Almost all the mechatronics companies in the sample have implemented quality management systems based on the ISO 9001 standard. Almost half of the companies in the sample have also brought their management systems into conformity with the ISO standard. An interesting fact is that the same number of companies in Estonia and Finland have implemented ISO 9001 and ISO standards. Figure 60. Use of quality management systems in Estonian and Finnish companies In order to assess the use of various quality management systems, the respondents were asked to choose the systems used in their companies from the choice presented in the questionnaire. More than one option could be chosen, and if necessary, another quality management system could be specified. The units on the horizontal axis of the chart indicate the number of companies that chose the given option. The same number of Estonian and Finnish companies uses a quality management system that conforms to the ISO 9001 standard. It is used by almost all the organizations. The ISO environmental management system is used in almost half of the organizations in the sample. The other quality management systems mentioned in the questionnaire are used by only a few Estonian and Finnish companies. Three Finnish companies use other quality management system standards. They are NADCAP and AQAP 2010 NATO certificate. 68

69 The larger companies use a greater variety of quality management systems. Figure 61. Percentage of the use of quality management systems in various sized companies. Figure 61 shows the percentages indicated by the respondents of the quality management systems used in various sized companies. The percentages in each size range total 100% in the range. The vertical axis describes the percentages of quality management systems in the corresponding size range. The figure shows that ISO 9001 and ISO are used in all companies, regardless of size. A greater variety of quality management systems are implemented in companies with 100 or more employee as compared to smaller companies. Generally, based on figure 61, it can be stated that the large the number of employees in a company, the larger the variety of quality management standards that are implemented in the organization. 69

70 8.2. Types of control used for quality assurance In both countries, the greatest use is made of final inspection, customer feedback and internal control. Figure 62. Types of control used for quality assurance in Estonian and Finnish companies In order to evaluate the quality assurance, the representatives of the companies were asked to answer the following question: Which type of control does your company use for quality assurance? The respondents were given a choice of six differ control types and more than one answer could be chosen. The units on the horizontal axis of the chart show the number of companies that chose the given option. Estonian and Finnish companies monitor customer feedback to almost the same extent and it is executed in almost all the companies along with final inspections and internal controls. Estonian companies make more use of internal process controls than do Finnish companies. Finnish companies make slightly more use of RR tests, although companies in both countries make little use of other methods. 70

71 8.3. Key indicators Estonian companies make the greatest use of the calculation of internal quality performance and the monitoring of reject costs. Finnish companies tend to use the calculation of customer reclamations (PPM), and calculations of internal quality performance. Figure 63. Use of key indicators in Estonian and Finnish companies For the assessment of key indicators, the representatives of the companies were asked to answer the following question: Which key performance indicators are used in your company? The respondents were given a choice of six different answers, and several options could be chosen. The units indicated on the horizontal axis of the chart show the number of companies that chose the given option. The Estonian companies make the greatest use of the following: the calculation of internal quality performance, monitoring and calculation of reject costs, and the calculation of customer reclamations or PPM. The Finnish companies make the greatest use of the following: the calculation of customer reclamations or PPM and the calculation of internal quality performance. 71

72 The larger companies make greater use of the calculation of customer reclamations (PPM), and less use of the monitoring of reject costs, and the calculation of the time required for inspection and reprocessing. Figure 64. Percentage of the use of key indicators in various sized companies. Figure 64 shows the percentage of the use of different key indicators in various sized companies. In each size range, the answers totalled 100% for the range. The vertical axis shows the percentage of key indicators in the corresponding size range. The chart shows that many different key indicators are used in every sized company. The only difference is the use of TPM, which is not implemented by companies with 1 to 26 employees. Compared to the others, more companies with 100 or more employees use the calculation of customer reclamations or PPM. Among companies with 27 to 99 employees, more use is made of the calculation of internal quality performance, and in companies with 1 to 26 employees, the monitoring of reject costs and the calculation of internal quality performance are used to the same extent. Generally, it can be stated that larger companies make more use of the calculation of customer reclamations or PPM. 72

73 8.4. Internal process control Internal process control is carried out in both Estonian and Finnish companies with the help of measuring devices. Figure 65. Methods for internal process control in Estonian and Finnish companies In order to assess the measures for the companies internal process control, the respondents were asked to answer the following question: How is internal process control organized in your company? A choice of six different answers was provided and more than one answer could be chosen. The units indicated on the horizontal axis of the chart show the number of companies that chose the given option. The greatest similarity occurs in the use of measuring devices by Estonian and Finnish companies. All the Estonian companies and almost all the Finnish companies use measuring devices for the calculation of internal quality performance. The differences are that Estonian companies make somewhat more use than Finnish companies of Poka Yoke and control automation systems, including visual control that was indicated by one respondent under others. Slightly more Finnish companies use intelligent control. 73

74 8.5. Use of measurement equipment Significantly more use is made of different measurement equipment in Finnish companies than in Estonian companies. Figure 66. Use of measurement equipment in Estonian and Finnish companies In order to determine the rate of the use of various measurement equipment the respondents were asked to answer the following question: Which measurement equipment is used in your company? Six different possible answers were provided and more than one answer could be chosen. The units on the horizontal axis of the chart show the number of companies that chose the given option. From the chart, we see that the companies of both countries primarily use masters and calibrators. The greatest difference is that Finnish companies make greater use of all measurement equipment. Estonian companies primarily use masters and calibrators and make the least use of 2-D and 3-D measurement equipment. Along with masters and calibrators, almost all the Finnish companies use specialized measurement equipment and a large number also use 1-D and 3-D measurement equipment. 74

75 Larger companies use a larger variety of measurement equipment. Figure 67. Percentages related to the use of measurement equipment in various sized companies. Figure 67 shows the percentages of the various sized companies that use measurement equipment. The answers provided in each size range of companies total 100% in the range. The vertical axis shows the percentage related to the type of measurement equipment. The use of masters is most popular in companies with 1 to 26 employees. Companies with 27 to 99 employees, make the most use of calibrators. All the different types of measurement equipment, except for 2-D measuring devices, are represented relatively evenly in companies with 100 or more employees. Generally, it can be stated that large companies make use of a greater variety of measurement equipment, which is why the percentages for masters and calibrators decreases. 75

76 8.6. Indicators being measured Finnish companies make measurements of a greater variety of parameters. Figure 68. Parameters being measured in Estonian and Finnish companies In order to examine the parameters being measured by the companies, the respondents were asked to answer the following questions: Which indicators do you measure in your company? Twelve different indicators were provided as possible answers in the questionnaire and the option was provided to specify some other unnamed parameter. The units indicated on the horizontal axis of the chart show the number of companies that chose the given option. Practically all the companies in both countries measure length and angle, and only one Estonian company indicated that it did not measure angles. The greatest difference is the fact that significantly more Finnish companies measure gears and pressure. A large number of the Estonian companies also measure flatness and almost half also measure cylindricality, surface roughness, threads and mass. Under others, one Estonian company added the measurement of signals. Almost all the Finnish companies measure flatness and cylindricality and threads. In the questionnaire, one of the Finnish companies indicated that it measures some other parameter, although did not specify. Generally, a conclusion can be drawn from figure 68 that significantly more parameters are measured by Finnish companies than by Estonian companies. 76

77 8.7. Calibration of measurement equipment In the companies of both countries, the measurement equipment is calibrated primarily inhouse by their personnel and some of the measurement equipment is calibrated outside the company. Figure 69. Calibration of measurement equipment in Estonian and Finnish companies In order to assess how the calibration of measurement equipment takes place in the companies, the respondents were asked to answer the following question: Where are your company s measuring instruments inspected/calibrated? Four possible answers were provided and more than one answer could be chosen. The units indicated on the horizontal axis of the chart show the number of companies that chose the given option. The complete wording of the abbreviated answer on the chart is: Some calibrations are done by our own personnel, some of the measuring devices are calibrated outside the company and this is preferred by the companies in both countries. An even number of companies in both countries answered that daily calibration and settings are carried out in-house. There is one company in each country where all calibration is done outside the companies. A difference between the two countries is that there are slightly more Finnish companies that carry out all calibration in their own calibration room.. 77

78 8.8. Providers of calibration services Estonian companies use more accredited calibration laboratories, while Finnish companies use just as many unaccredited laboratories. Figure 70. Use of providers of calibration services in Estonian and Finnish companies In order to assess the companies preferences for providers of calibration services, the representatives of the companies were asked to answer the following question: Which providers of external calibration services are used? Four possible answers were provided in the questionnaire and the opportunity was provided to add some unnamed type of service provider. More than one answer could be given. The units indicated on the horizontal axis of the hart show the number of companies that chose the given option. In the companies of both countries, accredited calibration laboratories or national standard laboratories are the most popular. Unlike Estonian companies, Finnish companies use the same number accredited laboratories as unaccredited calibration laboratories. Only a few Estonian companies use accredited calibration laboratories along with other service providers. One company indicated it used another service provider, but did not specify in the questionnaire. Finnish companies use accredited and unaccredited laboratories to almost the same extent, and other services providers are used by few companies. One Finnish company indicated the use of another provider but did not specify. 78

79 8.9. Importance of accreditation in the selection of calibration services providers Finnish companies consider the accreditation of laboratories to more important than Estonian companies Figure 71. Importance of accreditation for Estonian and Finnish companies in the selection of calibration services providers In order to assess the importance of the accreditation of calibration laboratories, the respondent were asked to answer the following question: How important is accreditation as a factor when selecting a provider of calibration services? The importance could be assessed as follows: not important at all; somewhat important; or very important. In addition, it was possible not to provide an assessment by indicating the option don t know. Although more then one answer could be given, this was only done by one Finnish company (that indicated somewhat important and very important simultaneously). The units indicated on the horizontal axis of the chart show the number of companies that indicated the given option. The majority of companies in both countries indicated that the accreditation of the laboratory was somewhat important or very important. Two Estonian and two Finnish companies indicated that the accreditation of the laboratory was not important at all. Compared to the Estonian companies, three more Finnish companies considered the accreditation of laboratories to very important. 79

80 8.10. Sufficiency of calibration services providers The majority of Finnish companies are satisfied with the number of available calibration services providers, while there is some dissatisfaction among Estonian companies. Figure 72. Satisfaction of Estonian and Finnish companies with the availability of calibration services providers. The representatives of the companies were asked to answer the following question: Are there enough providers of calibration services? Three possible answers were provided there are not enough; there are some; there are enough. In addition, it was possible not to provide an assessment by indicating the option don t know. Every respondent indicated one answer and only one Finnish company did not answer the question. The units indicated on the horizontal axis of the chart indicate the number of companies that chose the given option. The chart shows that none of the Finnish companies considered the number of calibration services providers to be insufficient, or totally sufficient. The majority of the Finnish companies thought the number of calibration services providers is somewhat sufficient. Two Estonian companies thought the number of service providers is insufficient and approximately two-thirds of the companies thought the number was somewhat sufficient or totally sufficient. 80

81 8.11. Importance of the traceability of the measurement results when choosing a calibration services provider Finnish companies consider the traceability of measurement results to be more important than Estonian companies. Figure 73. Importance of the traceability of measurement results for Estonian and Finnish companies In order to assess the importance of the traceability of the measurement results, the respondents were asked to answer the following question: How important is the traceability of the measurement results when choosing a calibration services provider? Three possible answers were provided not important at all, somewhat important, and very important. The fourth option was don t know. Each company indicated one option and only one Estonian company did not answer the question. The units on the horizontal axis of the chart show the number of companies that chose the given option. Three Estonian companies indicated they thought the traceability of the measurement results of the calibration services provider is unimportant. However, all the Finnish companies (except for one that didn t know how to answer) indicated that the traceability of the measurement results of the calibration services provider is either somewhat or very important. 81

82 Traceability is more important for the larger companies. Figure 74. Importance of the traceability of the measurement results of the calibration services provider for various sized companies. Figure 74 shows the percentages related to the importance of the traceability of the measurement results of the calibration services provider for various sized companies. The vertical axis indicates the percentage for each option in each size range. The answers given in the given size range total 100% for the range. The figure shows that the largest number of those who consider the traceability of measurement results to be unimportant is among companies with 1 to 26 employees. This size range also has the largest percentage of companies that did not know how to answer the question. However, in companies with 100 or more employees, 70% of the respondent considered the traceability of measurement results to be very important and the remaining 30% considered it to be somewhat important. Generally, based on this chart, one can conclude that the importance of the traceability of measurement results increases in large companies. 82