Impact of quality and innovation strategies on business performance of Bosnian B2B and B2C companies

The aim of this paper was to compare two business models, namely business to business and business to customer. The first model is oriented towards the delivery of intermediate goods ordered by an immense foreign market leader that is outsourcing a part of its business. The second model is consumers oriented and is more about innovation and the creation of goods ready to be immediately sold on the market. Bosnia is a developing country, and often a place for establishing B2B businesses. However, we are lacking in innovation, our own know-how, and the creation of challenging business opportunities. It also faces the problem of brain drain; therefore, it is in a need of a plan for retaining the youth within the country. The analysis aimed to show how the boosting jobs and living standards in Bosnia, are affected by the investments, exports, and salaries within the B2B and B2C companies. The results showed that Bosnia has a significant potential for raising living standards, employment and salary, if investments are directed towards innovations, knowledge-intensive and B2C businesses instead of labor-intensive investments.

Business to business models are common for the large companies, whose part of the business is outsourced to lower wage countries, since they reduce their cost of production. At certain point, the living standard in lower wage countries the standard increases and works ask for higher wages [10]. This paper aimed to analyze the position of these two business models by examining the Agricultural, Energy, Mining, Manufacturing, and IT sectors in Bosnia with the aim to determine which business model provides higher benefit to the country. Specifically, the research paper investigates the influence of quality management systems [1] and innovation strategies on the performance of B2B and B2C oriented companies in Bosnia. For the purpose of this study, companies from Bosnia are classified into two groups: the first group consists of companies using business-to-consumers model (B2C), meaning that the companies are producing goods that can be immediately sold to the end-users for the consumption [11]. Food, furniture, defense products and electricity are some examples of companies that can deliver this sort of products. Second group of companies consists of companies using business-to-business model (B2B). These companies are usually producing intermediate goods, which are further used in value chain such as manufacturing process. Supply chain consists of all parties contributing to value creation including suppliers of raw materials, intermediate goods producers, assembly companies and distributors [12]. Companies in Bosnia, which use this model, are generally part of the supply chain and they are export oriented. These companies are more labor intensive and operate under the following tasks: the production is concentrated on delivering products that are someone else's design (use of supply chain to reduce the costs of production) [13], they are a part of the supply chain and they rely on a few core buyers [14], they do not generate revenue from own know-how, they generate revenue dominantly from labor, they live in a fear to lose their core buyers, since losing them might mean the end of their business [15]. The mutual interests of both groups are to reduce the business risk to the minimum, to become more competitive in the market and get better margin from the sales. Some solutions can be proposed for this problem. One of them is to invest in innovation and new product development. Bosnian supply chain companies are mostly in the metal industry. There is very little built-in domestic knowhow in the products and services they are delivering, and therefore the profit margin is low. For this reason, investments in innovation need to be undertaken to increase the competitiveness and to increase the profit margin [16]. Profit margin is proportional to the embedded knowledge. This means that the more knowledge is embedded in the product, the higher margin will be achieved. The focus should be on development of end-user products. These products increase the margin as well. If success in developing the end-user products is achieved, as a result the dependency on the core customers would be reduced. Supply chain disruptions affect all participants involved in the process [17]. One situation on Germany automotive industry sector can be taken as example. Namely, Robert Bosch, the largest autoparts supplier experienced serious disruptions in supply chain in 2005. They detected problems with the sockets produced by another company within the supply chain. This resulted in severe losses and a pause of assembly process [14]. Creation of end-user products should be supported with the IT advancements. Supply chain management has greater efficiency in use and operating with IT advancement. This could enable the domestic companies to respond to market demands quicker and give them and easy time developing end-user-oriented goods [18].
The key for success is to develop the domestic know-how [19]. They should look at the potential of youth at universities, and look for establishing cooperation with higher education institutions, to keep the future of this country within the borders and to create competitive businesses [20]. Besides, this sort of knowledge might have a creative approach and create new ways of problem solving [21]. There are many researchers concerned with these topics. The importance of these studies is seen in the role they are having while adopting laws and policies regarding the economic development of the country or sector [22]. Investing in product quality development will result in lower level of imports, and generally, the dependency on core customers for intermediate export goods produced domestically [22]. The simplest demand model of being a function of relative prices and income can be upgraded [22]. Owen and Wren-Lewis [23] showed in their research market improvements of UK during the 1980s which resulted in enlarged exports. This was the result of high investment as well as Research and Development measures. Krugman [24] and Grossman and Helpman [25] have noticed that countries with higher income elasticities have higher variety of products produced domestically and exported [24] [25]. Besides the development of new products, innovation is also important in the improvement of already existing goods and services produced domestically because the innovation becomes obsolete over time [26]. Development of supply chains for end-user goods needs regular revision and updates [27]. To come up with the best proposals for investment direction, domestic market should be carefully studied and understood [28]. This paper will be focused on grouping companies in two categories B2C and B2B and investigating the differences between these two groups of Bosnian companies as well as certain relationships. Variables that were analyzed are net salaries, total employment, investments, education and export. The influence of export, investment and education (explanatory variables) to net salaries as well as to the employment (dependent variables) were investigated for each group category. Data for this research was taken from Agency for Statics of Bosnia for period of 2003 to 2018 [29] [30] [31] [32] . Therefore, the following hypotheses were tested: • H1: ( 1 ) are more-attractive to more-qualified workers then B2B ( 2 ).
• H5: At least one explanatory variable is significant contributor to the level of employment and the net salaries in B2B category. • H6: At least one explanatory variable is significant contributor to the level of employment and the net salaries in B2C category.
Significance and scope of this research is detecting the problems in Bosnian market (including labor market) and discussing possible solutions. One of the major problems of labor market in Bosnia is the brain drain. Which sector, B2B or B2C is more successful and more attractive for local labor market is also the subject of this paper. Highly qualified people, especially youth, are leaving the country and finding better paid jobs abroad. Some parts of Bosnia facing the lack of workers in manufacturing and service sectors [33]. As one of the extreme examples happened recently is a B2B company that published a vacancy for 400 positions in manufacturing but they received two applications only [34]. Therefore, the biggest challenge in upcoming period for Bosnian industry will be to make themselves more attractive for workers. As limitation of this study, it is important to say that we have faced several obstacles in our research such as: very limited data from statistical agencies in Bosnia were available, as well as inconsistency of data obtained. Thus, each data set was analyzed for the available time conclusions were drawn.

Research method
Research method in this study is based on hypothesis testing. These tests were done with assumption that a hypothesis is true [35]. To conclude whether hypothesis can be accepted or rejected test statistics based on ttest and regression are applied.

T-test and ANOVA
The methods for calculating test statistics used in this work are: t-test and ANOVA testing. t-test is used to calculate and determine whether two examples are significantly different from each other. Another method used for calculating statistical data is ANOVA testing [36]. The principle of ANOVA is similar to the t-testing, but with difference that this testing is used when we want to calculate and find out the significance of more than two samples. In addition, ANOVA testing involves several more formulas when calculating the dataset [37].
The following represent the formulas and steps in calculating both t-test and ANOVA. Total sum of squares for ANNOVA is calculated as follows: Where, is sum of square from treatments and is sum of squares from error. Based on [37] the previous formula can be written as: where, yij represents i -th observation taken for the group , ̅ • average of group i, ̅ •• average of all group averages (grand average), n is sample size, a is number of groups. Finally, observed F statistic can be calculated as: where, ( − 1) represents degrees of freedom between groups, ( − 1) represents degrees of freedom within the groups, is mean square of treatments and is mean squares of error. If the observed value of from Equation (3) is less than critical value taken from table ( > or p-value < α ), it indicates that the model is statistically significant, which means that at least one significant difference exists between the groups, otherwise significant differences do not exist. This test does not tell which pairs differ significantly, if it is the case. To determine significant differences between the pairs, a post-hoc t-tests comparisons needs to be used. Observed t-test statistics is determined as follows: where, ̅ 1 and ̅ 2 represent the mean values of group one and group two, Δ is hypothesized mean difference which is set to be zero in this case, s1 and s2 are variances of each group, while n1 and n2 represent sample size for each group. Generally, if the observed to value is less than tcr value taken from statistical table (to > tcr or p-value < α ), it indicates that there is significant difference between the groups. Since there is more than one comparison in this study, post hoc Bonferroni correction is applied for level of significance α. The primary purpose of the Bonferroni correction is to correct the probability values when making multiple statistical tests so as to avoid type I error. The model introduced by Carlo Bonferroni, has become popular in using and widely applicable in many experimental contexts, among which are comparison of groups with the baseline, measuring the relationship among the variables, examining more than one end point and clinical trials [38] [39] [40]. So, the significance level α needs to be lowered by the amount of comparisons being performed. To perform the correction, the critical value P( ) is divided by the number of comparisons made (k). The result becomes a new statistical value for comparisons [41]. * = Where, α* is Bonfferoni corrected significance level, α the original significance level and k is number of comparisons. Number of comparisons is calculated as: where, n is sample size.
This research is based on comparison of seven groups thus, the number of comparisons is determined as follows: Applying the Bonferroni Correction, the new significance level is * = = 0.05 21 = 0.00238 (8) Therefore, hypotheses tested with ANOVA and t-test are the following:

Multiple linear regression model
In addition to comparison tests, multiple regression was used for understanding whether the relationship between independent variables and the dependent variable exists [37]. Here it was done to understand does the independent variable shape the deepened or in the other words does it affect negatively or positively. A general multiple linear regression model with k regressor variables can be written as: = 0 + 1 1 + 2 2 + ⋯ + + (9) where, y is response variable, βj, βj, j = 0, 1, 2, …, k, are slopes or estimated parameters that influence change in response variable, xj is regressor variable or input variable, ε is random error. The general multivariate linear regression model in matrix form can be written as follows [37]: Estimated parameters are obtained in the way that sum of squared errors ε 2 is minimized. Solving the following matrix beta parameters are obtained: ̂= ( ′ ) −1 ′ (11) To test significant relationship between input variables and output variables it is assumed that a least one parameter differs from the others.

Results and discussion 3.1. Difference analysis
To test the differences-based hypotheses, B2C and B2B companies were assessed per three criteria: export, employment and investment. Table 1 shows t-test results based on H1 hypothesis.  Table 3), B2C companies are significantly more successful in the field of exports. More export makes more money for the country and reduces deficit. Therefore, the B2C model should be crucial for investors who intend to invest money in a new business. Although B2B companies are slightly more attracted to investors, there is no significant difference between investing in B2B and B2C companies. Overall, with this analysis H1 hypothesis is partially proved. Another important criterion is average salary. The analysis which group of companies has better average salaries is shown in Table 2. It was observed that significantly higher net average salaries are associated with B2C than with B2B companies, thus B2C companies might be attractive to local employees. Although, B2C have significantly higher salaries, there is a significantly higher variation of salaries associated with these companies than with B2B. Base on this finding H2 was supported and it is expected that B2C are more attractive to employees.
Bosnian B2B companies are mainly labor intensive an it is expected that the employs more people than B2C. Table 3 shows an average employment in Bosnian B2B and B2C over years. The results show that the average employment in Bosnian B2C over the years is significantly lower than in B2B companies. This analysis support H3 hypothesis with P = 0.0002. F-test confirmed a significantly higher fluctuation of work forces is associated with B2B companies. This is expected since there B2B companies are mainly labor intensive and operate in manufacturing sector making components for automotive industry and the other big companies abroad. So, they are part of somebody's else system and they do not offer own unique systems or solutions. Based on the abroad companies demand local B2B companies frequently hire or fire employees making a high fluctuation of workers. This way the local B2B companies are more likely a part of their solution, instead of providing own solutions. This is another reason why this sector is not attractive for local employees.
Paying a higher wage encourages those who are hired not to be lazy or in another way jeopardize an attractive job. Paying above market wages to attract and retain more-productive workers is called efficiency wages, which was done the first time by Henry Ford with invention of the assembly line. The efficiency wages are way to attract skilled workers and motivate existing workers to increase productivity and reducing employee turnover [42]. Additionally, this was investigated by analyzing the educational background of employees in each group, and it was found that there is significant difference in employee education between B2B and B2C companies. Table 4 show statistical results for number of employees with a higher education. Average number of employees with higher education over the years is significantly higher in B2C companies. This fact supports H4 hypothesis, and it can be said that Bosnian B2C companies are more knowledge intensive. As that, these companies are more oriented towards creating added value through providing solutions in which the share of know-how is significantly represented. It is expected that B2Cs make better selling margin and they can afford higher salaries for their employees, which makes them more attractive to more-qualified workers.
The influence of export, investment and education (explanatory variables) to net salaries as well as to the employment (dependent variables) were investigated for each group category.

Relationship analysis
Hypothesis (H5) was tested using multiple regression model. The goal is to investigate whether any of the regressors (export, investment and education) is significant related to the number of employees or net salaries. Applying multiple multivariate linear regression on each category of Bosnian companies there were found certain significant relationships. The results are shown in Table 5. Correlations among variables were investigated and the discussion is comprised of two parts involving the analysis of sectors in Bosnia.  Table 5, observed ANOVA is significant (F > Fcr) suggesting that at least one regressor is significant contributor to the net wage. Looking at multiple regression results, it was observed that the investment in B2B companies significantly contribute to increasing net salaries. Also, significant relationship was not found between the regressor variables (export, investment and education) and employment in B2B companies. Table 6 shows the influence of export, investment and education on the net wage in B2C companies. Also, significant positive relationship was found between the education degree and the employment in B2C category. This is expected since this category has a significantly higher number of workers with a higher education. This implies that B2C companies are attracting more skilled people with a higher educational degree.
The results are show in Table 7.

Conclusion
Bosnian industry faces problem of retaining its workforce, especially the youth. The country currently faces the problem of braindrain, and it uses its future workforce. The country is also at the expense for educating those people and letting them go. Young people are educated and speak foreign languages and they look for more attractive jobs for them in EU countries and over the globe. Our analysis aimed to show that the B2C sector is better for both the country and its citizens than B2B. B2B companies in Bosnia are usually lower paid jobs, and work done for some other giant foreign market leader. In order to stabilize the situation, country should invest in B2C companies that pay higher wages, contribute to domestically created goods and make the people living and working here. B2B employs a significantly larger number of workers (where, the number with higher education employees is significantly lower than in B2C), they have significantly lower wages and significantly lower exports. The reason is that B2B companies are mainly labor intensive and make lower margin compared to B2C. It is expected that Bosnian B2Bs make a small margin and accordingly they pay lower wages. As consequence, the major problem today associated with Bosnian B2Bs is lack of qualified workers. Local workers are increasingly finding more attractive and better paid job around the world since the local B2B are less attractive to them. It has also been observed that investment in B2B companies is significant contributor to the increase of net salaries. B2C companies in total employ significantly lower number of workers but they are also significantly more attractive to more-skilled workers, they pay significantly higher wages, and they are significantly more successful in exports. The reason is that B2Cs are predominantly based on creating added value that includes know-how and brands, dominantly offer solutions and they are rarely part of someone's solutions. Therefore, it is expected that B2C companies achieve higher margins and that they can afford attractive salaries for their employees. Also, this study showed that that investment in B2C companies and hiring more skilled workers significantly contribute to the increase of net salaries in B2C category. Significant positive relationship was found between the level of education and the number of employees in B2B companies, which implies that B2C are more knowledge intensive companies and as such they are more successful in business.
Overall, owners of capital from Bosnia are still not aware of that they overnight become a part of the global labor market. Thus, they cannot look for only for recruiting local people they have to start looking for people from the global market. Currently the business they are running (especially B2B) is mainly labor intensive and there is not enough potential to be sustainable and to attract worker and engineers from the global market as well. Therefore, to be able to attract people from global labor market, the businesses they are running must have potential to increase salaries and benefits to be more attractive. Currently the business is predominantly labor intensive and have no potential to make salaries and benefit packages more attractive. Thus, this is warning sing for business owners to act as soon as possible to revise their business strategies. On this track, B2B companies must start thinking about diversification to less laborintensive forms of business. They should start creating innovative products and services to create extra margin from know-how and branding. By creating and selling know-how, employers will generate significant added value and margin, thus they will make themselves more attractive for young workers, engineers, managers, etc. over the world.