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Tài liệu The effect of supplier's market orientation and supplier's environmental conditions on manufacturer's trust

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MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY CHUNG NGOC HIEU THE EFFECT OF SUPPLIER’S MARKET ORIENTATION AND SUPPLIER’S ENVIRONMENTAL CONDITIONS ON MANUFACTURER’S TRUST Major : Business Administration Major Code : 60.34.05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: Dr. Nguyen Dinh Tho HOCHIMINH CITY - 2012 ACKNOWLEDGEMENTS First gratefulness to, Dr. Nguyen Dinh Tho, This thesis would not have been possible unless his helps to supervise me. For his wise knowledge and kindly patience, he remained forever in my respect. Second gratefulness to, My colleagues & benefactors in Nestle, Unilever, Coca Cola, Rich, Masan, Doan Ket, Vinamilk, Vina Australia Packaging Labels Co, InterPet Group, Van Don Plastic, Rang Dong Plastic, VinaPlast, Imperial Tobacco, BAT, Kimberly Clark, Tracimexco, Hapro Group, Binh Vinh, Crown, Hercules, Ngoc Nghia Plastic, Bao Van….. For their dedicated supports in questionnaire surveying and answering. Last but not least, gratefulness to, My family, for always being in my side. ABSTRACT This study is desired to investigate about the effect of supplier‘s market orientation and environmental conditions on manufacturer’s trust and was taken the survey in Ho Chi Minh and some South province markets. The main variables included supplier’s market orientation with three inside variables as customer orientation, competitor orientation, and inter-functional coordination; and environmental conditions contained two variables as market turbulence and competitive intensity. From many previous researches about supplier’s market orientation and trust on manufacturer, some main variables have been extracted and selected to synchronize with Vietnamese conditions and after passing the pilot interview with the quantitative method, main variables have been selected for taking the survey for this study. About 300 questionnaire forms have been sent out to 300 respondents who are managing their enterprises in Ho Chi Minh city and south provinces, included Long An, Binh Duong, Dong Nai, about 180 sets have been answered and returned in which 150 sets have satisfied the purpose of the research. The findings from a sample of 150 sets have revealed that the supplier‘s market orientation and environmental conditions has a positive influence on manufacturer’s trust. After analyzing by the Reliability between variables (Cronbach Alpha), Correlation (Exploring Factor Analysis) and test Multiple Regression Model, the research’s results indicated that the supplier’s customer orientation variable and environmental conditions affect significantly on manufacturer’s trust. i CONTENTS CHAPTER 1: INTRODUCTION 1.1 Research background .................................................................................................. 1 1.2 Problem statement....................................................................................................... 3 1.3 Research question and objective ................................................................................. 4 1.3.1 Research question .......................................................................................... 4 1.3.2 Research objective......................................................................................... 4 1.4 Research delimitation ................................................................................................. 4 1.5 Research methodology................................................................................................ 5 1.6 Research implications ................................................................................................. 6 1.7 Thesis structure ........................................................................................................... 6 CHAPTER 2: LITERATURE REVIEW 2.1 Market orientation and supplier’s market orientation ................................................ 8 2.1.1 Customer orientation ........................................................................................... 9 2.1.2 Competitor orientation ...................................................................................... 10 2.1.3 Inter-functional coordination ............................................................................ 10 2.2 Environmental conditions - Market turbulence and Competitive intensity ............ 11 2.3 Trust and manufacturer’s trust .................................................................................. 12 2.3.1 Trust ................................................................................................................. 12 2.3.2 Manufacturer’s trust .......................................................................................... 12 2.4 Theoretical model ..................................................................................................... 12 2.4.1 Independent Variables ..................................................................................... 13 2.4.2 Dependent Variable ......................................................................................... 13 2.4.3 Theoretical model and Hypotheses .................................................................. 14 2.4.3.1 Theoretical model.......................................................................................... 14 2.4.3.2 Research hypotheses ..................................................................................... 14 2.5 Summary .................................................................................................................. 15 CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research design ........................................................................................................ 16 ii 3.1.1 Pilot test............................................................................................................... 16 3.1.2 Main survey......................................................................................................... 16 3.1.2.1 Sample size .................................................................................................... 17 3.1.2.2 Research process ........................................................................................... 17 3.2 Measurement validation ........................................................................................... 18 3.2.1 Measures of Customer orientation ...................................................................... 18 3.2.2 Measures of Competitor orientation .................................................................. 18 3.2.3 Measures of Inter-functional coordination ......................................................... 19 3.2.4 Measures of Market turbulence and Competitive intensity ................................ 19 3.2.5 Measures of Trust................................................................................................ 20 3.3 Summary .................................................................................................................. 21 CHAPTER 4: DATA ANALYSIS AND RESULTS 4.1 Descriptive data analysis .......................................................................................... 22 4.2 Testing factors of research model ............................................................................ 23 4.2.1 Cronbach Alpha Reliability Analysis ................................................................. 24 4.2.2 Exploring Factor Analysis (EFA) ....................................................................... 25 4.2.2.1 EFA results of the independent variables...................................................... 25 4.2.2.2 EFA results of the dependent variables ......................................................... 27 4.3 Hypotheses Testing .................................................................................................. 27 4.3.1 Testing Assumptions of Multiple Regression ................................................... 27 4.3.2 Testing hypotheses between Independent Variables and Dependent variable . 28 4.4 Summary ................................................................................................................... 31 CHAPTER 5: CONCLUSIONS 5.1 Overview .................................................................................................................. 32 5.2 Main findings ........................................................................................................... 32 5.3 Theoretical Implications ........................................................................................... 35 5.4 Managerial Implications ........................................................................................... 35 5.4.1 Supplier’s customer orientation .......................................................................... 35 5.4.2 Supplier market turbulence ................................................................................ 39 5.5 Further research ....................................................................................................... 41 References ......................................................................................................................... 42 iii Appendices ....................................................................................................................... 51 Appendix 1: Questionnaire Form for Pilot Test ........................................................... 51 Appendix 2: Questionnaire in Vietnamese ................................................................... 52 Appendix 3: Questionnaire in English ......................................................................... 54 Appendix 4: EFA results of independent variables ..................................................... 56 Appendix 5: EFA results of dependent variable........................................................... 58 Appendix 6: Testing assumptions of multiple regression ............................................ 59 Appendix 7: Multiple Regression Line results ............................................................. 60 Appendix 8: Histogram, Normal P – P plot and Scatter plot ....................................... 61 iv LIST OF FIGURES Figure 2.4: The conceptual model of the effect of supplier’s market orientation and supplier’s environmental conditions on manufacturer’s trust ........................................... 14 Figure 3.1: Research process. ............................................................................................ 17 Figure 4.4 Histogram, Normal P – P plot and Scatter plot of Dependent Variable Trust ................................................................................................................................... 57 v LIST OF TABLES Table 3.1: Scale of Customer orientation ....................................................................18 Table 3.2: Scale of Competitor orientation .................................................................19 Table 3.3: Scale of Inter-functional coordination........................................................19 Table 3.4: Scale of Environment conditions ...............................................................20 Table 3.5: Scale of Trust..............................................................................................20 Table 4.1: Sample characteristics ................................................................................23 Table 4.2: Cronbach Alpha of observed variables ......................................................24 Table 4.2.2: EFA for independent variables ................................................................ 26 Table 4.3: Multi regression between independent variables and dependent variables 28 Table 4.4: Anova between independent variables and dependent variables .............. 29 Table 4.5: Coefficients between independent variables and dependent variables ..... 29 vi ABBREVIATIONS MO: Market Orientation EFA: Exploring Factor Analysis MRL: Multiple Regression Model 1 CHAPTER 1: INTRODUCTION The introduction chapter identify the research background, present the problem statement, the research questions, and introduce the research methodology, the objectives as well as limitation of the study. Furthermore, the significance of the research problem and thesis structure is also outlined. 1.1 Research background Market Orientation is one of the most important concept in modern marketing (Pandelica et al., 2009). This concept has been researching and developing during past two decades (Brettel et al., 2008). Most of these researches and studies are concentrated on the components of market orientation and the relationship between market orientation and the firm’s business results. Although these researches were studied from variety of fields and categories, many developed and developing countries, many results founds that market orientation had such positive effects with business results (Pandelica et al., 2009). In Vietnam, the research also record that market orientation can explain up to 30% the firm business results (Hung and Hau, 2007). Vietnam economic policies nowadays have been re structuring and developing as market orientation. This step brings for Vietnam to become such very brilliant business environment, attracts the foreign investments to innovate the technique in many fields so far to impulse the development of economy, especially for the transitional economy in Vietnam now. However, from the past two decades, the market orientation concepts has not been populated correspondingly in Vietnam ( Hac and Nghi, 2006). This is considered such as big challenge for Vietnam’s enterprises both are private or government companies, especially when Vietnam is joining WTO. In the literature, market orientation is born from the western – where these concepts nowadays are continuing and leading in the world. Kohli and Jaworski (1990) conceptualized Market orientation as the implementation of the marketing concept and developed a measure (Kohli et al., 1993) that focused on the firm’s activities and behaviors regarding customer needs, competitive information, market intelligence, and the sharing information among organizational functions. Narver and Slater (1990: 21) offer a similar view, suggest that market orientation 2 consists of three behavioral components (customer orientation, competitor orientation, and inter functional coordination), etc… From some research ( Tsui, 2004; Lau., 2002; Rousseau & Fried, 2001), they gave the comment for the global knowledge/value of market orientation concept as western literature results are not enough. They suggest for the contributions from other continents such as South America, Africa or Asia, especially from the impressive developing countries such as Malaysia, Vietnam, Thailand, India and China (Tsui, 2004, p.492). However, there is not much research focus on this concept so as to assess, evaluate and investigate comprehensively it with the business operations or identify the market orientation components so as to apply effectively to specific business culture in Vietnam. Or, with the management team, in case they would like to invest to improve their market orientation, which factors they must contribute or focus on. On the other side, supply chain management also is a fresh category in Vietnam. With the current world wide economy context, managing such good supply chain allows companies to deal with daily challenges related to production, suppliers, retail, inventory, sales, product check and delivery, warehouse operation among other or maximize the use of their resources including finance and human capital. From this, the relationship between supplier and manufacturer takes a very important role; contribute as a link in a chain since input and output of a company. This relation is not simply a transaction “buy – sell” as before, but now, it becomes an integral part of business to business operations. Global competition, tough local market, financial crisis…have affected to all the firms in the business environment. These pressures have encouraged the firms come to decision to decrease their investments in traditional channels, finding alternative (Arthur Andersen & Co., 1995; Frazier and Antia, 1995). Toward to this, the company will be very particular on their relations, especially in choosing their suppliers. In the relation with their supplier, they tends to develop relation with few but selective suppliers ( Kalwai & Narayandas, 1995) and these suppliers have to have ability to response to their requirements, satisfy company needs and contribute to the value of the customers. From these reasons, this research is studied to answer for above problems. By putting the market orientation concept to the relationship between supplier and manufacturer and by using the market orientation component as Narver and Slater (1990) to investigate the market oriented 3 supplier in relations with their customer (manufacturer), the specific targets are verified the affects of market orientation components and environment challenge to the relationship between supplier and manufacturer. 1.2 Problem statement This theoretical model is based on literature review, in which previous research demonstrated that market orientation affects positively the level of customer’s trust (Morgan and Hunt, 1994). The literature suggests market orientation companies increase value for customers (Day, 1994), therefore, these constructs drive more satisfactions for customers (Anderson et al., 1990) and consequently more trust (Morgan and Hunt, 1994). As observed by (Luhmann, 1988), trust is used to reduce the complexity of the absent and gain positive expectation and get competitive advantages and to differentiate themselves on the market place. This study explores the effects of market orientation and environmental conditions of a firm to their customer’s trust over the seller - buyer relationship. Narver and Slater (1990) identifies three market orientation components as customer orientation, competitor orientation, and inter-functional coordination, therefore, the supplier’s market orientation also contain three above components. A market-oriented supplier, can be defined as a customer-focused and goal-oriented firm (George and Weimerskiirch, 1998), throughout their activities, understands well the customer’s needs and satisfies them; always knows well about strengths and weaknesses, capabilities and strategies of their key current and potential competitors (Narver and Slater 1990) and the firm can being responsive to competitor’s activities (Balakrishnan 1996); and, internally, the information is transferred thoroughly across all departments with the same purpose of serving for customer needs. A market oriented supplier can contribute many values to their customers and enrich the customer’s profits. Besides, the literature also recommend as supplier’s environmental factors significantly mediatory influence to their customer’s trust. In this research, market turbulence and competitive intensity in the supplier are stated to influence to manufacturer’s trust. The literature recommends these variables are very significant, so, the author decides include all of them on the conceptual model, is to understand the level of supplier’s market orientation affects on manufacturer’s trust. The empirical test which proposed through the 4 hypotheses might provide evidences on how supplier’s customer orientation, supplier’s competitor orientation, supplier’s inter-functional coordination, market turbulence and competitive intensity affect positively the manufacturer’s trust. 1.3 Research question and objective 1.3.1 Research question Consequently, based on the problem statement and the overall research framework, the main research question of this research is needed to be answered as follows: ► What the key determinants affect on manufacturer’s trust? By evaluating the influence level of the factors on manufacturer’s trust, the importance of focusing on market orientation shall be highlighted to eventually help the supplier company heads identify the right direction of their management and keep their customers under a tough competitive environment. 1.3.2 Research objective Based on this above research question, the objective of this study is outlined to examine the affect of market orientation on manufacturer’s trust. Specially, it explores: ► The impact of Supplier’s Customer Orientation, Supplier’s Competitor Orientation, Supplier’s Inter-Functional Coordination, Supplier’s Market Turbulence and Supplier’s Competitive Intensity on Manufacturer’s Trust. 1.4 Research delimitation The research was narrowed down to Ho Chi Minh city and three Southern provinces as Binh Duong, Dong Nai and Long An. However, they are locating variety of manufacturers in their industrial zones therefore, the taken samples from these areas can represent for whole Vietnam. The research focused on manufacturers which produced the physical products, the products categories such as services and banking, financial services were not included in this study. 5 This study was narrowed by surveying in supplier site and manufacturer perceived the trust from supplier. Data was collected from a single informant in the supplier companies. This is a common practice in marketing research (Philips, 1981). Kumar et al. (1993) have suggested that choosing the appropriate key informant could alleviate some of the potential problems. Then, questionnaires which were sent to member of management team or head of departments such as marketing or sales, did not indicate large differences between the key informant's view of the relationship and the view of others involved in the relationship, providing support for the validity of data collected solely from supplier informants. This study explored the supplier’s market orientation affects on manufacturer’s trust. From this step, further researches can extent more to manufacturer’s long term orientation come to strengthen significantly the relationship between the seller and buyer in nowadays competitive business environment. 1.5 Research methodology From the relationship between the supplier and the manufacturer, this research studied a part of this relation as the manufacturer’s trust under the effect of the market orientation of supplier. The research went through two phases: (1) an exploratory study and (2) a main survey. In exploratory study, a qualitative study was undertaken by a pilot survey. Collected information was used to explore, adjust, and supplement to the measuring scale of the factors affected on manufacturer’s trust for supplier’s market orientation. The main survey was conducted by quantitative research in the form of questionnaire. The result of questionnaire data was presented in the numerical form such as the age groups, job level of respondents who attended this survey, time for doing business with manufacturer and others. These numbers were, then, demonstrate in tables, graphs or other forms of statistics. Conducted in Ho Chi Minh city and some areas nearby were to confirm the components as well as value and reliability of the measuring scales of manufacturer’s trust. Cronbach alpha coefficient, Exploring Factor Analysis (EFA), and Multiple Linear Regression analysis (MLR) were applied through SPSS software; and convenience sampling was used. 6 1.6 The research implications This study has several important implications for both practical business (head of enterprises, marketing managers…of both suppliers and manufacturers; advertising agency and market researchers...) and academic (educators, students of the business administration department especially in supply chain management division) as follows: The research result has been a scientific foundation so that based on it, the supplier managers will make an effective strategy to enhance the manufacturer’s trust. And managers from manufacturers understand its role in this relationship together with the need of market orientation from supplier; will know how to contribute to the success of the relations. The research result contributes additionally to the supply chain management literature in particular in market orientation and trust factor. 1.7 Thesis structure This research is organized in five chapters. The beginning is the introduction chapter. It includes a brief overview of the research background, problems and objectives. The delimitations and research methodology, the implications of research, and structure are also presented. Chapter 2 is the literature reviews and conceptual model. It explores and reviews the extant literature on market orientation, supplier’s market orientation and manufacturer’s trust. The factors of supplier’s market orientation and two environmental conditions impact to manufacturer’s trust are also discussed in this chapter. Based on the literature reviews, a research model is proposed. Chapter 3 is the research methodology. An attention is concentrated on the research design, then interprets and illustrates the way that primary and secondary data is collected. The measurement scales apply for the research factors will be determined clearly and suitably. Chapter 4 analyzes the collected data and presents the findings from the survey in terms of customer orientation, competitor orientation, inter-functional coordination, market turbulence 7 and competitive intensity. Then, the results from the interviews for the effective levels of these factors on manufacturer’s trust are show as well. Chapter 5, the final part of this research is the chapter of conclusion and signification. The researcher will suggest several recommendations for focusing the factors of developing the manufacturer’s trust in terms of the theoretical and managerial significance. In addition, this chapter also made a brief summary about the main content of the dissertation and further research. 8 CHAPTER 2: LITERATURE REVIEW Before carrying out the survey on the effect factors of supplier’s market orientation and its influence level on manufacturer’s trust, this chapter will provide a theoretical background about market orientation, supplier’s market orientation, and environmental factors as market turbulence, competitive intensity, trust and manufacturer’s trust. Based on these, the conceptual model is constructed. 2.1. Market orientation and supplier’s market orientation To study about the supplier’s market orientation definition, a detail consideration of the definitions and characteristics of market orientation (MO) is necessary. Literature on MO is well established and initially postulated by Drucker in 1954. To 1965, King has defined MO as an marketing concept as “a managerial philosophy concerned with mobilization, utilization and control of total corporate effort for the purpose of helping consumers solve selected problems in ways compatible with planned enhancement of the profit position of the firm” – ( King, 1965, p.85). And in 1971, Barksdale and Darden 1971) and McNamara (1972) identify three components of the marketing concept: (1) the customer as a focal point for business activities, (2) the necessity of integrating marketing activities across functions, and (3) the need for a profit orientation. However, in the same period, Bell and Emory (1971) believes that profit is a consequence of customer orientation; therefore, customer orientation should replace the profit orientation while Day and Wensley (1983) assigned that marketing concept needed for a competitor orientation adequately. During that time to 1990s, many researchers have studied and developed the MO to completed definitions. Narver and Slater (1990) with their study found that MO was an organizational culture and consists of three components, included customer orientation, competitors orientation, and inter-functional coordination, include all the activities involved in creating superior value for the buyers in the target market. They insisted that to satisfy the target customers’ current and expected needs, market oriented organization needed to understand and 9 analyze the major current and potential competitors and the coordinated utilization of company resources in creating superior value for target customers. More recently, Becker and Homburg (1999) has conceptualized market oriented management as “a way to promote a business organization’s orientation towards its customers and competitors” (Becker and Homburg, 1999, p.18) or Steinman, Deshpande and Farley (2000) has analyzed the impact of the length and importance of a relationship on the market orientation gap, i.e. the difference between the buyer’s and the seller’s judgment of the supplier’s market orientation. Base on above theoretical concepts, we study in line with Narver and Slater’s proposal to measure market orientation as includes three constructs as customer orientation, competitor orientation and inter-functional coordination. Following this, supplier’s market orientation also measure with three constructs as supplier’s customer orientation, supplier’s competitor orientation and supplier’s inter-functional coordination. 2.1.1 Customer orientation Customer orientation is defined as the understanding of a firm about their customers, their buyers. From this understanding, the buyer’s needs and wants will be fully satisfied in which these needs and wants are considered as buyer’s entire value chain, not only as it is today but also as it will evolve over time (Narver & Slater 1990). In a competitive market, the supplier, by their specialized knowledge, consults and assists the buyer in defining the buyer decision, for example, provides more information about new technology or guides the uses of a new high tech machine that the seller believes it will be good for their buyer. From this, the seller’s customer can be decrease the cost and increase the benefits. In other words, the supplier must put the customer requirements in priority; always customer-focused and goal-oriented (George and Weimerskiirch, 1998). According to Hartline et al (2000), a customer-oriented supplier has to establish a continuous communication channel with its actual and potential customers so as to create such a customer-focused environment for their company. 10 2.1.2 Competitor orientation Competitor orientation is understood as the firm knows well about strengths and weaknesses, capabilities and strategies of their key current and potential competitors (Narver and Slater 1990) and the firm can being responsive to competitor’s activities (Balakrishnan 1996). This might assist the company in performance increasing such as, if we know well about competitor products or a marketing strategy, the company can react by a better strategy or perform a relative products as competitor ( e.g. Ohmae 1982, p.91-98). Or, understanding about competitor strengths or strategies might help the company to know which product markets or parts of those markets to enter or avoid (Porter 1979). 2.1.3 Inter-functional coordination. The term inter-functional coordination appeared, from the perspective of external marketing, as one of the three components of market orientation concept (Narver & Slater 1990); or, Kohli and Jaworski (1990) stated inter-functional coordination as a kind of marketrelated information between departments or functions (p.5-6). It requested a chain of information and resources must be go through and share for all departments. The sharing information could be related to customers, competitors, payment schedule, issue on production, import – export policy…It might help other department or function can adjust its operations to suit with external conditions (Kohli and Jaworski 1990). In recently, there were several definitions for inter-functional coordination such as, Tay & Tay (2007) referred inter-functional coordination as the degree of cooperation between the different functions or departments within an organization. Or, Farzard et al., (2008) was specified inter-functional coordination as “rapid and synchronized flow of information” and “adoption between structure and strategy” (p.1483). From above theories, inter-functional coordination can be identified as two dimensions as (1) the integration and collaboration of different functional areas/departments; (2) the communication and sharing of information and resources. 11 2.2 Environmental conditions – market turbulence and competitive intensity As the analysis of customer orientation and competitor orientation, supplier’s environmental conditions were considered as a factor influence to manufacturer. Slater and Narver (1994) suggested competitive environment as a factor for the market orientation while Jaworski and Kohli (1993) considered market turbulence, competitive intensity and technological turbulence to have effect to manufacturer. Market turbulence was defined as “changes in the composition of consumers and their preferences (Kohli & Jaworski, 1990, p.14). An unstable economic climate, ever changing customer needs, then it continually stirs up market turbulence. The customers are more demanding they want: new, innovative products, increased availability, shorter lead-times, and increased differentiation of product/service, better quality and most of all, at the same price. For example, the mobile phones industry illustrates a market where turbulence exists. There are also thousands of tariffs and dozens of mobile phone handsets to choose from. Every six months there are new mobile phones available with new features and functions. In unstable economic market, the firm has to ensure that they continually improve their business processes and generate new ideas so to take advantages of the business opportunities that such changes offer. Also Jaworski defined the competitive intensity was as the conditions and level of competition in a market due to number and activities of alternative suppliers, i.e. competitors, for the customers in this market (Jaworski & Kohli 1993). Further, in 1998, Appiah-Adu and Singh suggested market dynamism and competitive intensity to have a direct influence on customer orientation, then Gray et al. (1998) considered market environmental conditions as a relevant variable together with market orientation influence on company. In this framework, the researcher use in line with Jaworski & Kohli in suggesting market turbulence and competitive intensity are used to measure the influence of environmental conditions to manufacturer’s trust in supplier.
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