Research on the Evaluation Model of Market-oriented
Transformation Process of Military Enterprises
Yan Wen, Haiqi Zhao and Zhiguo Tu
Beijing Orient Institute of Measurement and Test, Haidian, Beijing, China
Keywords: Military Enterprises, Market-Oriented Transformation, Evaluation Model, Value Tree, Delphi Method.
Abstract: Facing the increasing market competition, military enterprises are escalating the market-oriented
transformation. This paper adopts the value tree to construct the evaluation index system of market-oriented
transformation process and Delphi method to calculate the index weights and build evaluation model of
market-oriented transformation process. The aim is to evaluate the market-oriented transformation degree in
an objective way and discover the gap between the transformation process and the target goals so that the
basis can be provided for the effective formulation of the next step work plan.
1 INTRODUCTION
With the vigorous implementation of the national
civil-military integration policy and a more open and
fierce competitive market environment, military
enterprises gradually increase the pace of market-
oriented transformation based on their own
development strategic plans (Lu 2016). The
implementation of each five-year plan becomes an
important task for the market-oriented transformation
of military enterprises (He 2016).
It is a long-term process for enterprises to become
more market-oriented. The measurement of market-
orientation degree has a strong dynamic nature (Liang
2015). In order to track and analyze the market-
oriented transformation process and identify its
weaknesses, this paper conducts a study on the
evaluation model of the market-oriented
transformation process to highlight the guidance on
the direction of market-oriented transformation.
2 RESEARCH METHODOLOGY
2.1 Design Approaches
Since the 1990s, domestic and international research
has been conducted to evaluate the degree of market-
orientation, and the common practice is to measure
the market-oriented process by constructing a
specific index system. The Heritage Foundation of
the United States has developed a method for
measuring economic freedom in 10 areas: trade
policy, taxation, government intervention, monetary
policy, capital flow and foreign trade policy, finance,
wage and price control, property rights, rules and
black market. The Fraser Institute of Canada created
a way of evaluating seven areas: the size of
government, economic structure and market use,
monetary policy and price stability, freedom to use
different currencies, legal structure and guarantees of
private rights, freedom of foreign trade, and freedom
of exchange in the capital market (Peng 2013).
The studies by the American Heritage Foundation
and the Canadian Fraser Institute are consistent in
their basic logic. They both follow a process to
integrate basic indicators with composite indices. The
result of doing so is to more fully reflect the richness
of economic freedom. In terms of the definition of
economic freedom, the former is relatively narrowly
defined, while the latter is relatively broadly defined.
In terms of the content of the measure, the former
focuses on the reflection of policy and institutional
content and on the input side of economic freedom;
the latter focuses on the output side of economic
freedom (Zhang 2000).
The construction of the model to evaluate the
market-oriented transformation process of enterprises
is based on the relevant research results of market-
orientation at home and abroad as well as the
connotation of the market-orientation of enterprises.
It starts from the national policy direction and basic
aspects of economic activities of enterprises. The
150
Wen, Y., Zhao, H. and Tu, Z.
Research on the Evaluation Model of Market-oriented Transformation Process of Military Enterprises.
DOI: 10.5220/0011166600003440
In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 150-155
ISBN: 978-989-758-593-7
Copyright
c
 2022 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

model consists of four dimensions: domain, factors,
sub-factors, and indicators. The domain covers the
basic aspects of the economic activities of
enterprises; the factors reflect the main contents of
the market-oriented business activities of enterprises;
the indicators are the specific measures of the market-
oriented degree of enterprises. The domain level is
embodied by the factor level, and the factor level is
characterized by the specific indicator level.
2.1.1 Construction of Domain Level
The evaluation model of market-oriented
transformation process can be divided into three
fields: market-oriented production elements, market-
oriented organization and operation, and market-
oriented products. These three fields cover all
economic activities carried out by military enterprises
under market rules, and each area reflects an
important aspect of market-orientation.
Market-oriented production elements mean that
enterprises acquire and manage production elements
in accordance with market mechanisms to achieve the
optimal allocation of resources and maximize the
value of production elements.
Market-oriented products mean that enterprises
develop and produce products, set prices, and sell
products in a market-based manner following the
laws of the market to meet customers’ demands and
further guide and nurture the market.
Market-oriented organization and operation
means that enterprises establish the enterprise
structure and let the market mechanism play the role
in the internal operation and management activities as
much as possible following the concept of modern
enterprise system. This can regulate the enterprise
operation and improve the organization efficiency.
2.1.2 Construction of Factors Level
The first is the market-orientation of production
elements. Based on the realities of military
enterprises, two factors under the field of production
elements-labor and capital-can be chosen and
decomposed into basic indicators to evaluate the
market-orientation degree.
Market-oriented labor forces show that the hiring
and employment mechanism of the enterprises are
market-based. Market-oriented capital refers to the
more efficient ways of allocating and using capital in
economic organization in accordance with the market
mechanism.
The second is the market-orientation of products.
In the construction of market-oriented products field,
Jerome McCarthy ’ s 4P marketing theory can be
selected to design factors to evaluate the degree of
products market-orientation and select four factors of
product development, pricing, channels and sales
based on the realities of military enterprises.
Market-oriented product development means that
the tangible and intangible products and product
portfolio developed and produced by enterprises can
meet the needs and desires of target customers. This
generally includes factors such as product input and
output, product portfolio, quality, trademark, brand,
etc.
Market-oriented pricing refers to the ability of
enterprises to set and adjust product prices in
accordance with the requirements of the law of value
in order to increase sales revenue and improve profits.
It generally includes independent pricing rights, basic
prices, discount prices, payment terms, commercial
credit and other factors.
Market-oriented channel refers to the enterprise’s
independent selection of target markets and
intermediaries according to market demands, as well
as the degree of openness of target markets and
intermediaries. It generally includes factors such as
channel establishment, channel maintenance, and
target market revenue.
Market-oriented sales refer to the introduction of
market mechanisms into the field of product sales by
enterprises to increase the pressure on sales staff, with
the aim to reduce inventory, expand product sales,
and get payback in due course. It generally includes
factors such as sales results, product inventory levels,
promotions, etc.
The third is the market-orientation of organization
and operation. As one kind of organization form, the
enterprise organizes and operates mainly in two
aspects. One is the corporate legal entity governance
structure in the legal sense of external control, which
focuses on the setting of authority at the top of the
hierarchy and thus determines the form of authority
separation at the top of the organizational structure.
The other is the organizational management in the
internal operational sense of the authority allocation
and carrying out operational activities. Therefore,
under this area, the two factors of governance
structure and organizational management are selected
to evaluate the degree of market-orientation.
Market-oriented governance structure is a
management system of decision-making and the
rights for operation management supervision
established by economic organizations with reference
to the requirements of modern enterprise system
under market economy conditions, thereby ensuring
efficient operation and competitiveness of
Research on the Evaluation Model of Market-oriented Transformation Process of Military Enterprises
151

enterprises. The governance structure is the product
of the combination of a mandatory external system
and a spontaneous internal system. The basic content
of the governance structure regulates the relationship
of power, responsibility and benefits among the
subjects of interests in the enterprise. Its goal is to
solve the problems resulting from interests, risks,
incentives and constraints among different subjects of
interests, so as to realize the three mechanisms of
scientific decision-making, effective motivation and
supervision.
Market-oriented organization management means
that economic organizations are designed to form
organizational structures under market economy
conditions in accordance with the concept of
scientific, streamlined and efficient operation. It is to
ensure the clarity of responsibilities and authority of
each department and the smooth operation of the
organization’s internal processes. It can finally realize
the reasonable distribution of operation and
management authorities and the supervision and
control of management rights at all levels, while at
the same time it can optimize the organization
efficiency.
2.1.3 Construction of Indicator Level
The value tree model was used to further decompose
each factor into sub-factors, and then find the most
critical indicators of the market role in each sub-
factor. All the indicators are tested in four aspects:
measurability, credibility, low-cost accessibility, and
market relevance so as to filter and determine the
subordinate indicators of each sub-factor. The details
are as follows in Table 1.
Table 1: Indicators Validity Test Table.
No. Assessment Indictor Measurability Credibility Low-cost access Relevance to the market
1 Management talents ratio
Y Y Y Y
2
Marketing training investment to
training cost ratio
Y Y Y Y
3
Labor remuneration per capita
as a share of operating income
Y Y Y Y
4
Maintenance and appreciation of
state-owned assets rate
Y Y Y Y
5 Total asset turnover ratio
Y Y Y Y
6
Total R&D investment as a
percentage of operating revenue
Y Y Y Y
7
Revenue share of stereotyped
products
Y Y Y Y
8
Percentage of revenue from
main business
Y Y Y Y
9
Percentage of revenue from
horizontal projects
Y Y Y Y
10
Share of revenue from
international business
Y Y Y Y
11
Share of the two funds in
operating income
Y Y Y Y
12 Asset liability ratio
Y Y Y Y
13 Security surplus cash multiples
Y Y Y Y
14
Total labor productivity growth
rate
Y Y Y Y
15 Cost rate
Y Y Y Y
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On this basis, 15 variable indicators were
identified. The Delphi method was used to calculate
the weights of each indicator following the
integration process of “indicator, sub-factor, factor
and domain”. The details are as follows in Table 2.
Table 2: Evaluation Model and Indicator Weights of Market-oriented Transformation Process.
Domain Factors Sub-factors Indicators Indicator Weight
Market-oriented
production elements
(30%)
Labor force
(50%)
Staff structure
(60%)
Management talents
ratio (100%)
9.00%
Talents inputs
(40%)
Marketing training
investment to training
cost ratio (60%)
3.60%
Labor remuneration
per capita as a share of
operating income
(40%)
2.40%
Capital
(50%)
Capital return
(50%)
Maintenance and
appreciation of state-
owned assets rate
(100%)
7.50%
Capital efficiency
(50%)
Total assets turnover
ratio (100%)
7.50%
Market-oriented
products
(45%)
Products development
(30%)
Products R&D
investment
(50%)
Total R&D investment
as a percentage of
operating revenue
(100%)
6.75%
New products
development
(50%)
Revenue share of
stereotyped products
(100%)
6.75%
Pricing (20%)
Pricing
(100%)
Percentage of revenue
from main business
(100%)
9.00%
Channel
(30%)
Horizontal project
markets
(60%)
Percentage of revenue
from horizontal
projects
(100%)
8.10%
International markets
(40%)
Share of revenue from
international business
(100%)
5.40%
Sales
(20%)
Two funds
(100%)
Share of the two funds
in operating income
(100%)
9.00%
Market-oriented
organization
（
25%
）
Governance structure
(50%)
Risk control
(100%)
Asset liability ratio
(50%)
6.25%
Security surplus cash
multiples
(50%)
6.25%
Organization
management (50%)
Management
efficiency
(60%)
Total labor
productivity growth
rate (100%)
7.50%
Management benefits
(40%)
Cost rate
(100%)
5.00%
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153

2.2 Calculation Methods
According to the constructed model, the base value of
market-oriented transformation evaluation is
calculated as:
(1)
Mab is the base value of market-oriented
transformation evaluation. Vabc is the value of the
cth evaluation index of a military enterprise b in year
a. fc refers to the weight of the cth index, and n refers
to the number of evaluation indexes.
The degree of market-oriented transformation of
military enterprises is calculates as:
ξab=[(Mab-Mtb)/Mtb]×100%
(2)
ξab is the degree of market-oriented
transformation of a military enterprise b in year a, and
t is the data base period of market-oriented
transformation evaluation of a military enterprise.
Ideally, it is between 0 and 100%, but in actual
operation, there are cases that some enterprises ’
market-oriented transformation is greater or less than
100%.
2.3 Evaluation Procedure
The evaluation procedure of market-oriented
transformation can be divided into the following three
steps. First, the 15 evaluation indicators of market-
oriented transformation are calculated. Secondly, the
base value of market-oriented transformation
evaluation is calculated based on the weights of each
indicator. Finally, a comparison is made with the data
base period to calculate the degree of market-oriented
transformation.
3 RESEARCH RESULTS
This paper takes Beijing Orient Institute of
Measurement and Test as the sample and uses 2015
as the data base period for the evaluation of market-
oriented transformation. The degree of market-
oriented transformation is calculated based on each
year of the 13th Five-Year Plan period.
The 15 base values of market-oriented
transformation evaluation from 2015 to 2020 are
calculated according to Equation 1. The details are as
follows in Table 3.
Table 3: Base Values of the Institute’s Market-oriented Transformation Evaluation From 2015 to 2020.
No. Domain
M
2015
M
2016
M
2017
M
2018
M
2019
M
2020
1
Market-
oriented
production
elements
0.150 0.167 0.173 0.164 0.153 0.159
2
Market-
oriented
products
0.189 0.247 0.214 0.200 0.237 0.212
3
Market-
oriented
organization
0.074 0.026 0.069 0.096 0.078 0.156
Total 0.413 0.440 0.456 0.459 0.468 0.527
Base values of the Institute ’ s market-oriented
transformation evaluation are shown in Figure 1. It
can be seen that base values of market-oriented
transformation evaluation increase year by year
during the 13th Five Year Plan period.
Figure 1: Base Values of Market-oriented Transformation
Evaluation From 2015 to 2020.
fcVabcMab
n
c
×=

=1
0
0,2
0,4
0,6
2015 2016 2017 2018 2019 2020
Base Value of Market-oriented
Transformation Evaluation
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154

Taking 2015 as the data base period, the degree of
the Institute’s market-oriented transformation during
the 13th Five Year Plan period is calculated in
accordance with Equation 2. The details are as
follows in Table 4.
Table 4: Degree of the Institute ’ s Market-oriented
Transformation from 2016 to 2020.
Categories 2016 2017 2018 2019 2020
Degree of
market-
oriented
transform
ation
6.5%
10.5
%
11.2
%
13.4
%
27.6
%
It can be seen from Figure 2 that the degree of the
Institute’s market-oriented transformation during the
13th Five Year Plan period has increased year
by year.
Figure 2: Degree of the Institute ’ s Market-oriented
Transformation From 2016-2020.
From the evaluation results of the Institute ’ s
market-oriented transformation from 2015 to 2020, it
can be seen that the evaluation model of the market-
oriented transformation process can objectively
reflect the actual situation of the Institute’s market-
oriented transformation. This verifies the rationality
of the indicator design. At the same time, it also
shows that the Institute has well accomplished its
13th Five-Year Plan, and the measures related to
market-oriented transformation have been effectively
implemented.
4 CONCLUSIONS
As the country continues to deepen its market-
oriented reform and reinforces its requirements for
improving basic management capabilities, it will be
increasingly important to quantitatively evaluate the
degree of market-oriented transformation of each
work unit. This paper constructs an evaluation model
of market-oriented transformation process which
includes evaluation index system, evaluation
algorithm, and evaluation procedure, etc. It can
provide excellent references for market-oriented
transformation work.
This evaluation model can be used for both
horizontal comparisons of different units in the same
period and for time sequence comparison of related
units as well as for comprehensive comparison of
sample data from each unit across periods.
Especially, it can provide strong support for the
midterm adjustment of the plan since it can make a
vertical comparison analysis for the market-oriented
process of each military unit during each five-year
plan period.
Analyzing the degree of market-oriented
transformation of military enterprises through the
market-oriented transformation evaluation index
system can prompt military enterprises to clarify their
own development, provide policy reference and
decision-making support for releasing their internal
creativity and enhancing their external influence. It
can guide them to identify their gaps and weaknesses
in the process of market-oriented transformation and
take active measures to accelerate the market-
oriented transformation process.
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