Journal of Business Research 58 (2005) 446 – 456

Effects of quality management and marketing on

organizational performance
Kee-hung Lai*, T.C. Edwin Cheng 1
Department of Logistics, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China
Received 1 June 2002; received in revised form 1 March 2003; accepted 1 August 2003

Abstract

We test the relationships among quality orientation, market orientation, and organizational performance. Quality orientation looks at the
level of quality management being implemented, while market orientation examines the level of marketing being practiced. Using data from
304 organizations having operational quality management systems, we test a structural model examining the hypothesized relationships
among the three constructs. The quantitative survey results are supplemented with qualitative data collected from in-depth interviews with
selected respondent organizations having different levels of quality and market orientations. The findings reveal that quality orientation and
market orientation are complementary and substantiate the view that quality management and marketing reinforce each other in enhancing
organizational performance. Management implications for the collective implementation of quality management and marketing are discussed.
D 2003 Elsevier Inc. All rights reserved.

Keywords: Quality; Marketing; Implementation; Performance

1. Introduction that considers the quality management/marketing interface

and its impact on organizational performance. Further,
A number of studies have been conducted to examine the empirical linkages among quality management, marketing,
impact of quality management, particularly TQM (e.g., and organizational performance are examined.
Hendricks and Singhal, 1997), and the impact of marketing
(e.g., Narver and Slater, 1990) on business performance.
However, the literature is short of empirical studies on the 2. Theoretical framework and hypotheses
combined effects of quality management and marketing,
although they have been considered complementary busi- Quality is an abstract concept depending on the desire of
ness approaches for performance improvement (Lai and the individuals involved with a primary emphasis on the
Weerakoon, 1998). The objective of this study is to explore satisfaction of customer’s needs and wants. One important
whether quality management and marketing are comple- point to note about the meaning of quality is the multidi-
mentary business approaches in organizations and, if so, the mensional nature of the concept (Garvin, 1987). To direct
extent of their performance impact. To investigate the impact employees’ efforts towards the goal of customer satisfac-
of these two ‘‘different’’ business approaches, which when tion, a common understanding of the term quality is
implemented together are expected to bring better perfor- required. Viewed from this perspective, quality has become
mance than implemented separately, a mail survey using a critical strategic issue rather than an operational one. What
structured questionnaire was conducted, complemented by a quality management system emphasizes is the organiza-
follow-up in-depth case study analyses. This study adds to tional ability to satisfy customer needs precisely and prof-
the existing literature by providing a theoretical framework itably involving all members of an organization.
The marketing concept centers on the management of
market ‘‘exchange’’ between customers and organizations. It
* Corresponding author. Tel.: +852-2766-7920; fax: +852-2330-2704.
E-mail addresses: [email protected] (K. Lai),
helps organizations to achieve exchange-determined goals
[email protected] (T.C.E. Cheng). more effectively (Houston, 1986). The marketing concept
1
Tel.: +852-2766-5215; fax: +852-2356-2682. requires firms to take a proactive attitude to do business and

0148-2963/$ – see front matter D 2003 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2003.08.001
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 447

be responsive to customer needs and market changes (Kohli input. While marketing plays the role to ensure ‘‘doing the
and Jaworski, 1990). right things,’’ quality management complements marketing
Quality management can potentially contribute to the with an emphasis on continuous process improvement for
effectiveness of marketing implementation in three aspects ‘‘doing the things right’’ across the whole organization.
as it plays the role of (1) internal integrator, (2) external From the standpoint of efficiency, this emphasis is of great
integrator, and (3) efficiency enhancer. On the other hand, value to marketing, particularly at the tactical level involv-
marketing can add substantial value to quality management ing a series of operational activities (e.g., advertising
implementation through its functions as (1) customer win- campaigns, new product launches), which needs under-
dow and (2) quality leader. standing of such process variables as cycle time, capacity,
yield, waste, and flexibility.
2.1. Quality management as internal integrator
2.4. Marketing as customer window
The most severe criticism about the marketing concept
concerns its tendency to be practiced as a set of functional Although quality gurus, such as Deming (1986), have
activities rather than an organization-wide approach (e.g., discussed the importance of customer wants, they give
King, 1985). If this should happen, it would hinder the little practical advice on how to assess wants so that
voices of customers to be translated into internal improve- appropriate product/service specifications could be estab-
ment processes and filtered throughout the organization for lished. Marketing, particularly through its role in promot-
the benefits of customers, thus yielding the risks of losing, ing listening to the voices of customers in organizations,
misinterpreting, and distorting the voices of customers has too often been ignored in quality improvement, with
generated from marketing to other internal functions. The the result that internal process improvement often has had
holistic nature of quality management, particularly TQM, no clear connection to customer needs (Kordupleski et
together with its set of management tools and techniques, al., 1993), for instance, producing products/services that
are of potential use for effective marketing implementation customers do not want. The role marketing plays is
(Day, 1994) and breaking down functional barriers (Hack- critical to quality management implementation, as organ-
man and Wageman, 1995). The consequence of teamwork, izations must ensure that their quality improvement
as prompted by the team-base quality management ap- efforts are focused on improving customer satisfaction
proach, is penetration of the marketing concept that perme- rather than on management’s own perceptions of quality
ates the whole organization. The total involvement aspect of requirements.
quality management and its related tools (e.g., QFD) ensures
congruency between the voices of customers and the voices 2.5. Marketing as quality leader
of processes for the delivery of customer satisfaction.
For successful quality management implementation, it is
2.2. Quality management as external integrator important that all involved employees understand the
customer definition of quality and the needs of other
In addition to managing relations among organizational functional areas to meet the customer requirements. Viewed
functions, relationships with customers and the network from this perspective, marketing links requirements from
organizations such as suppliers, distributors, and advertising the external environment with the relevant functional areas
agencies should not be neglected for effective marketing within the organization (Gummesson, 1991) and contrib-
implementation (Webster, 1992). One important note about utes to developing priorities of quality improvement and
quality management is its emphasis on establishing mutu- providing a road map for utilizing company resources. This
ally supportive forward relationship with customers, and creates an environment where employees at all levels
backward relationship with the network organizations, par- understand how priorities are set and connected with
ticularly suppliers that have significant impacts on customer customer needs, and the network organizations are in-
satisfaction (Deming, 1986). The relationship emphasis of formed of the customer requirements.
quality management complements marketing, particularly The above discussions highlight that quality manage-
the relational marketing approach (e.g., Grönroos, 1996) to ment and marketing share the concepts of customer
the cultivation of long-term relationships with customers orientation, interfunctional coordination, and continuous
and the network organizations. process improvement for successful implementation. The
compatibility of quality management and marketing
2.3. Quality management as efficiency enhancer implementation for organizational performance improve-
ment is manifested. Thus, we hypothesize the following
Marketing as a business approach is dedicated to both relationships.
the achievement of effectiveness, i.e., the ability to create
and keep customers, and the achievement of efficiency, Hypothesis 1: The quality orientation of a firm correlates
i.e., the achievement of maximum output from minimum positively with its market orientation.
448 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456

Hypothesis 2: The quality orientation of a firm affects orientation and market orientation. In the post hoc study, the
positively its organizational performance. research design incorporates several techniques for ensuring
the quality of the case studies and confirming the findings
Hypothesis 3: The market orientation of a firm affects (cf. Eisenhardt, 1989).
positively its organizational performance.
3.2. Data collection

3. Research design and results We draw a sample of 1092 companies from the buyer’s
guide of the Hong Kong Quality Assurance Agency
3.1. Sample (HKQAA), the ISO 9000 directory published by the Hong
Kong Trade Development Council (HKTDC), and the list of
To investigate the performance impact of quality man- winners and finalists of the HKMA’s quality management
agement, it is necessary for the validity of sample selection award. We solicit only one response from each sample
that the sampled organizations demonstrate certain levels of company. Measures are taken to cross-check the sample to
sophistication in quality management implementation. In avoid double mailing. We send out the questionnaire twice.
line with previous studies on performance impact of quality The two mailings of the survey questionnaire yield 342
management (e.g., Adam, 1994; Powell, 1995), we sample returns with 304 of them valid for data analysis, represent-
quality management practicing firms. The population sam- ing a usable response rate of 28.6%. The sample consists of
pled in this study consists of all companies in Hong Kong 69 manufacturing companies, 107 service companies, 114
practicing quality management. construction companies, and 14 public utilities. We conduct
As the measures of quality orientation, market orienta- a test on nonresponse bias using the t test, with the
tion, and organizational performance are typically applied to respondents in the first and the second mailings as the
the level of business units, the study uses business units of proxy ‘‘respondents’’ and ‘‘nonrespondents,’’ respectively,
an organization, or the whole organization as the unit of to determine if there are significant differences in the mean
analysis if the whole of the organization is accredited with scores of the quality orientation, market orientation, and
respect to quality management systems such as the ISO organizational performance constructs between the two
9000 series. A sampling frame comprising all business groups (Armstrong and Overton, 1977). The results show
units/organizations in Hong Kong (referred to as companies no differences between the groups at P > .05 level (quality
below) known to have a quality management system is used orientation, t =
0.32; market orientation, t =
0.24; orga-
as the sampling population. This sampling frame includes nizational performance, t =
0.36), suggesting that nonre-
the Hong Kong Management Association’s (HKMA) qual- sponse is not a problem in this study.
ity award winners and finalists (n = 10) and companies
certified to ISO 9000 series in Hong Kong (n = 1082). We 3.3. Measures
acknowledge that the sampling frame may result in posi-
tively biased returns because the respondent companies We adopt Black and Porter’s (1996) 10-dimension, 32-
have considerable experience in quality management imple- item instrument to measure quality orientation. The instru-
mentation. However, we consider that samples of companies ment represents literature-based and empirically tested ele-
with no involvement in quality management implementation ments of quality management implementation. We find
have neither the capacity nor the necessary knowledge to seven potentially confusing items, each asking two ques-
meaningfully respond to the research questions. tions in the Black and Porter’s (1996) instrument during the
We choose the study respondents based on a key-infor- panel review of the study. We split each of those items into
mant methodology (Phillips and Bagozzi, 1986). Like other two, resulting in a 10-dimension, 39-item instrument mea-
quality management studies (e.g., Adam, 1994; Powell, suring quality orientation. The 20-item MARKOR instru-
1995), we target a single well-informed respondent from ment developed by Kohli et al. (1993) is used to measure
each sampled organization. For each organization, the market orientation. To increase the content validity of both
respondent is the quality manager or the personnel respon- the quality and market orientation measures, we add illus-
sible for quality management in the organization. Because a trative examples to most of the items to facilitate respond-
quality management system requires a company-wide focus, ents’ understanding of the items. While both quality
it is natural to assume that these informants have a good management and marketing emphasize satisfaction of dif-
understanding of the quality management systems in their ferent stakeholders, many extant studies about their perfor-
organizations and an appreciation of the impact of such mance impact are confined to financially related indices
systems on their marketing practices and organizational only (e.g., Hendricks and Singhal, 1997; Narver and Slater,
performance. To minimize the common method bias and 1990). To overcome the limitations of these studies, we
to triangulate the survey research findings, we conduct a define organizational performance using the multimodel
post hoc study involving a cross-case investigation of performance framework (MMPF) of Weerakoon (1996) to
selected companies showing different degrees of quality address the interests of various stakeholders rather than
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 449

those of stockholders only. We use perceptual measures on a consistency among the items in their first-order factors
five-point scale (1 = strongly disagree to 5 = strongly agree) despite inclusion of those items in the measurement models.
because of their high level of convergence with objective Table 1 provides the means, standard deviations, and
measures (Venkatraman and Ramanujam, 1986). The mea- intercorrelations of the 17 first-order factors of the three
surement items are provided at Appendix A. constructs. We test discriminant validity with phi estimate,
i.e., intercorrelation among first-order constructs. All phi
3.4. Validity and reliability values shown in Table 1 are significant at P < .01 level.
Discriminant validity is not achieved in some cases as some
Validity and reliability of the three constructs are initially of the first-order factors are highly correlated. This is
assessed using coefficient alpha (Cronbach, 1951) and item – expected as the first-order factors are components of the
total correlation analysis. Confirmatory factor analysis (CFA) second-order they are measuring.
is then performed to evaluate the three constructs at both first- Using composite scores of the first-order factors by
and second-order levels. The results show that all the con- taking the arithmetic mean of the items, we perform CFA
struct items have a reasonably high loading on their first- to assess the measurement models of quality orientation,
order factors in item –total correlation analysis, ranging from market orientation, and organizational performance. Table 2
the lowest loading of .42 to the highest loading of .80. All the presents the CFA results with lambda loadings, standard
alpha values of all first-order factors of the three constructs errors, t values, and error variance estimates at the second-
exceed the .70 cutoff level, except two (teamwork structures order level. Table 3 displays the means, standard deviations,
for improvement, a=.67, and corporate quality culture, and intercorrelations among the three constructs.
a=.69), which are just a shade below the benchmark level. Table 2 shows that all alpha values for all three second-
order constructs exceed the .70 cutoff level, yielding satis-
3.5. Measurement model estimation factory evidence of internal consistency, with the highest
being .95 for quality orientation, and the lowest being .86
In CFA, we allow all the first-order factors to correlate for market orientation. Furthermore, all first-order factors
freely in their respective measurement models. All the have large and significant lambda loadings, i.e., k>.30, t>2,
construct items, except three with an asterisk in Appendix on their corresponding a priori specified second-order
A, load significantly, i.e., k>.30, t>2, onto their first-order factors. Thus, these measures display adequate convergent
factors in the analysis with the loading in the range between validity. The loadings range from the lowest of .65 to the
.69 and 1.0, thus establishing the convergent validity of the highest of .91 for the quality orientation construct, and from
items. The three items are retained as other measures such as .52 to .69 and from .58 to .60 for the constructs of market
item –total correlation coefficient and alpha value in their orientation and organizational performance, respectively. In
first-order factors suggest that there is sufficient internal addition, we evaluate discriminant validity among the three

Table 1
Descriptive statistics and intercorrelations of the first-order factors
No. Mean S.D. 1 2 3 4 5 6 7 8 9 10
of items
1. People and customer management 4 3.61 0.80 1.00
2. Supplier partnerships 3 3.64 0.82 .70 1.00
3. Communications of improvement information 4 3.30 0.83 .74 1.00 1.00
4. Customer satisfaction orientation 6 3.41 0.82 .93 .93 .95 1.00
5. External interface management 3 3.64 0.89 .69 1.00 1.00 .92 1.00
6. Strategic quality management 8 3.46 0.80 .69 1.00 1.00 .92 1.00 1.00
7. Teamwork structures for improvement 2 3.30 0.97 .99 .58 .62 .85 .56 .57 1.00
8. Operational quality planning 3 3.40 0.87 1.00 .68 .71 .91 .66 .67 1.00 1.00
9. Quality improvement measurement systems 4 3.82 0.80 1.00 .68 .71 .91 .66 .67 .99 1.00 1.00
10. Corporate quality culture 2 3.30 0.98 1.00 .71 .74 .93 .69 .70 .99 1.00 1.00 1.00

No. Mean S.D. 11 12 13 14 15 16 17

of items
11. Market intelligence generation 6 3.54 0.79 1.00
12. Market intelligence dissemination 5 3.50 0.83 .73 1.00
13. Responsiveness to market intelligence 9 3.77 0.65 .68 1.00 1.00
14. Motivation performance 5 3.44 0.72 1.00
15. Market performance 3 3.70 0.69 .97 1.00
16. Productivity performance 3 3.52 0.77 .99 .95 1.00
17. Societal performance 4 3.56 0.70 .99 .93 1.00 1.00
All correlation coefficients are significant at .01 level.
450 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456

Table 2 Table 4
Results of confirmatory factor analysis at second-order level Assessment of discriminant validity
Parameter Path S.E. t value Error Test Chi-squared Chi-squared Difference
estimate variance constrained unconstrained
(k)a estimate model (df) model (df)
(d)a Quality orientation and 156.7 (65) 151.2 (64) 5.5 *
Quality orientation(a=.95) market orientation
People and customer .84 – – .29 Quality orientation and 178.9 (77) 156.2 (76) 23.7* *
management (k 1,1)b organizational performance
Supplier partnerships (k 2,1) .65 .06 12.7 .58 Market orientation and 49.8 (14) 44.6 (13) 5.2 *
Communications of improvement .85 .05 19.1 .27 organizational performance
information (k 3,1) Chi-square difference.
Customer satisfaction .84 .05 18.5 .30 * Significant at P < .05 level.
orientation (k 4,1) * * Significant at P < .01 level.
External interface .83 .06 18.3 .31
management (k 5,1)
Strategic quality .91 .05 21.5 .17 observed indicators possess acceptable measurement prop-
management (k 6,1)
erties, we proceed to estimate the structural model.
Teamwork structures .75 .07 15.6 .44
for improvement (k 7,1)
Operational quality planning (k 8,1) .69 .06 14.0 .52 3.6. Structural model estimation
Quality improvement .86 .05 19.5 .26
measurement systems (k 9,1) Table 5 shows the results of individual paths in the
Corporate quality culture (k 10,1) .85 .07 19.0 .28
structural model. The overall fit of the structural model is
Market orientation(a=.86) considered adequate with the results (Model 7) displayed in
Market intelligence .67 – – .27 Table 6. The structural model is estimated and a reasonable fit
generation (k 1,2)a is obtained, where v2 = 300.1, df = 116, P=.00, although the
Market intelligence .69 .07 15.2 .31 chi-square statistic is significant. This is to be expected, given
dissemination (k 2,2)
the large number of variables in the model (Bagozzi and Yi,
Responsiveness to market .52 .05 8.5 .36
intelligence (k 3,2) 1988). However, other indicators suggest that the model fits
well: goodness-of-fit index (GFI)=.90, comparative fit index
Organizational performance(a=.89) (CFI)=.96, normed fit index (NFI)=.93, root mean square
Motivation performance (k 1,3)a .58 – – .35 (RMR)=.022.
Market performance (k 2,3) .59 .06 16.5 .26
The estimates of the loadings of the first-order constructs
Productivity performance (k 3,3) .60 .07 14.4 .41
Societal performance (k 4,3) .59 .06 16.1 .29 on the second-order constructs are also tested through t
a values, and all lambda parameters are found to be significant,
Completely standardized estimate.
b
The corresponding parameter is set to 1.00 (unstandardized) to fix the i.e., t>2. As all of the goodness-of-fit criteria demonstrate
scale of measurement. good ‘‘fit’’ (e.g., GFI, CFI, and NFI >.90), the structure of the
model is considered reasonably accurate, i.e., accounting for
the variability observed in the data and achieving an accept-
second-order constructs using pairwise tests by comparing a able level of model fit. To provide greater confidence for the
model with the correlation constrained to one with the proposed model and to check for better-fitting, more parsi-
unconstrained model. Results in Table 4 show that discrim- monious models, we test the proposed model (M7) against a
inant validity is achieved among the three constructs be- set of alternative models (M1 – M6). The null model in M1 is
cause of the significant differences between the constrained used as the baseline model in this study. The baseline model
models and the unconstrained models. Nomological validity implies that the relationships among the three constructs are
is also supported by the positive, significant intercorrela- independent, i.e., parameters restricted from free estimation
tions among the three constructs as shown in Table 3. to zero. The estimates of the proposed model and the
Having determined that the latent constructs and their goodness-of-fit comparisons with the alternative models are
shown in Table 6.
Comparison of the proposed model with the six alternative
Table 3 models shows support for fitness of M7. Although all seven
Descriptive statistics and intercorrelations between second-order factors models have a significant chi-square value, we find that M7
Mean S.D. Intercorrelations has the best fit to the data as indicated by a smaller chi-square
1 2 3 value, v2 = 300.1, df = 116, P=.00, a higher value in GFI=.90,
Quality orientation 3.37 0.79 1.00 CFI=.96, NFI=.93. A comparison of the RMR among the
Market orientation 3.37 0.62 .89 1.00 models also shows that M7 has a smaller value, implying that
Organizational performance 3.56 0.63 .83 .92 1.00 it has an adequate fit to the observed data comparing with the
All correlation coefficients are significant at .01 level. other six alternative models. However, many of these good-
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 451

ness-of-fit indicators in M5 are close to those in M7. The Table 6

Comparisons of the goodness-of-fit of the proposed model (M7) with
latter is preferred to the former in model comparison because
alternative models (M1 – M6)
M7 has a smaller chi-square value. Since the proposed model
Path relationship M1 M2 M3 M4 M5 M6 M7
is found to be better than the alternative models for examining
the relationships among quality orientation, market orienta- Quality no no no yes yes no yes
orientation X
tion, and organizational performance, the proposed model is
market
accepted and used for hypothesis testing. orientation
An examination of the path coefficients among the higher Quality no yes no yes no yes yes
order constructs and their associated t values shows that, orientation !
except for the quality orientation to organizational perfor- organizational
performance
Market no no yes no yes yes yes
Table 5 orientation !
Structural model estimates organizational
performance
Path S.E. t value Error
estimatesa variance Goodness-of-fit indices
estimatea Chi-square (v2) 974.8 708.2 648.6 356.2 300.9 616.5 300.1
Structural paths Degree of 119 118 118 117 117 117 116
Quality orientation X market .89 .04 9.76 – freedom (df)
orientation (U 2,1) Probability .00 .00 .00 .00 .00 .00 .00
Quality orientation ! .04 .10 0.33 – GFI .76 .84 .85 .88 .90 .85 .90
organizational NFI .79 .85 .86 .92 .93 .87 .93
performance (c 1,1) CFI .81 .87 .88 .95 .96 .89 .96
Market orientation ! .88 .11 6.80 – RMR .26 .20 .25 .025 .022 .21 .022
organizational
performance (c 2,1)
mance path, the completely standardized path estimates are
Measurement model all significantly different from zero at P < .01 level, with the
Quality orientation
People and customer .84 – – .30
value of the parameter estimates, standard errors, and t values
management (k 1,1)b shown in Table 5. We also find that the models with quality
Supplier partnerships (k 2,1) .65 .06 12.7 .58 orientation and market orientation intercorrelation, i.e., M4,
Communications of .85 .06 18.9 .28 M5, M7, have better model fitness to the observed data than
improvement those without, i.e., M1, M2, M3, M6. This provides support
information (k 3,1)
Customer satisfaction .83 .06 18.3 .31
for the complementary nature of quality management and
orientation (k 4,1) marketing in organizational performance improvement.
External interface .83 .06 18.3 .31
management (k 5,1)
Strategic quality .91 .05 21.6 .16 4. Analysis and implications
management (k 6,1)
Teamwork structures for .75 .07 15.7 .43
improvement (k 7,1) 4.1. Hypotheses testing
Operational quality .69 .06 13.8 .53
planning (k 8,1) Hypothesis 1 is supported, as the value of phi (2,1) is
Quality improvement .87 .05 19.7 .24 positively high and significant with a completely standard-
measurement systems (k 9,1)
Corporate quality .85 .07 18.8 .28
ized path coefficient of .89, a standard error of .04, and a t
culture (k 10,1) value of 9.76. Hypothesis 2 is not supported as the value of
Market orientation gamma (1,1) is positively low and insignificant. The path
Market intelligence .85 – – .28 coefficient is .04 with a standard error of .10 and a t value of
generation (k 1,2)b 0.33. An inspection of the measurement model of the quality
Market intelligence .79 .06 16.5 .38
dissemination (k 2,2)
orientation construct reveals that only two components, i.e.,
Responsiveness to market .83 .04 18.0 .30 people and customer management and customer satisfaction
intelligence (k 3,2) orientation, directly address the customer-oriented aspect of
Organizational performance quality management. Other components of the construct tend
Motivation performance (k 1,3)b .81 – – .35 to focus on internal improvement of the quality management
Market performance (k 2,3) .87 .06 17.6 .25
Productivity performance (k 3,3) .76 .07 14.7 .42
systems. For instance, it is possible that many quality im-
Societal performance (k 4,3) .84 .06 16.7 .30 provement efforts do not deliver the desired results because of
a
Completely standardized estimate. their inward focus. Indeed, the impact of quality orientation
b
The corresponding parameter is fixed to a value of 1.00 (unstandar- on organizational performance is explained by the other
dized) to set the scale of measurement. construct in the model, i.e., market orientation, as the two
452 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456

exogenous constructs are highly intercorrelated in the model. journeys. Because of the lack of a common language for
This implies that the performance impact of quality orienta- quality management (e.g., customer satisfaction), collabora-
tion has to be complemented with market orientation. This is tion among functional areas and coordination of organiza-
consistent with the arguments of Kordupleski et al. (1993) tional activities are not obvious. Consistent with the finding
that quality management needs to be outward-looking with a in the survey research that quality management does not lead
focus on market needs to drive performance and the role that to significant performance improvement, a market focus is
marketing plays as a customer window to assure a market required to enable the quality improvement activities to
focus in quality improvement efforts. The result suggests that contribute towards significant performance improvement.
quality management requires a market focus, while internal This would imply that quality management should not
improvement alone (e.g., focus on procedures with manage- simply focus on documentation and internal improvement
ment prescribed quality) is less likely to drive improvement in for the sake of meeting standard requirements such as those
organizational performance. Hypothesis 3 is supported as the in the ISO 9000 series. Rather, it may be appropriate to be
value of gamma (2,1) is positively high and significant. The market sensitive and let market orientation drive the perfor-
path coefficient is .88 with a standard error of .11 and a t value mance impact of quality management.
of 6.80. This supports the notion that firms have to be market- The cross-case findings provide support for the findings in
driven for improvement of organizational performance. the survey research that quality management and marketing
are complementary business approaches in organizations.
4.2. Post hoc study Quality management acts an integrating mechanism to drive
organization-wide efforts to satisfy customers efficiently,
To achieve between-method triangulation, we conduct while marketing plays the role of guiding other organizational
case studies with selected respondent companies to enhance members on the importance of customer satisfaction and
the output of the survey research with rich and in-depth assures a market focus on quality management efforts.
qualitative data. Following the strategy suggested by Miles
and Huberman (1994), a combination of within- and cross- 4.4. Discussion
case analysis is undertaken. A total of four companies are
selected, companies A and B are high (and companies C and In general, we provide empirical evidence that quality
D are low) in both the levels of quality orientation and market management and marketing are complementary business
orientation (high: composite mean score >3.50; low: com- approaches for improved organizational performance.
posite mean score < 2.50). The four cases are chosen for However, the former needs to be market-driven to drive
literal replications from each of the above two theoretical the performance impact of quality improvement efforts.
replication conditions. The four individual case study reports The results are in line with the argument of Kordupleski et
are available from the authors and the cross-case findings are al. (1993) that awareness of customer needs and marketing
discussed below. are required for successful implementation of quality
management. The role of marketing serves as a customer
4.3. Case study findings window to assure a market focus in quality improvement
efforts.
In companies A and B, quality management provides The findings suggest that quality management alone
them with a unifying focus and integrates efforts of all (particularly when it is confined to internal quality
employees, from top management to line staff, to continu- improvement without customer focus) does not appear
ously improve their every business operation for customer to have a direct effect on performance success. In fact,
satisfaction. Quality management in the two companies the lack of a positive direct relationship between quality
helps to assure customer focus, give employees clear roles orientation and organizational performance would imply
for quality management, and facilitates continuous improve- that firms should not simply focus on internal improve-
ment. All these are reflected in their resulting organizational ment. Rather, it may be appropriate to develop an
performance: increased customer and employee satisfaction, outward-looking improvement focus on market needs,
and improved market performance and productivity. Al- driving organizational performance through a market-ori-
though quality management is not practiced well in compa- ented culture. It is evidenced in companies A and B
nies C and D, they recognize and admit the benefits of where their quality management practices are driven with
quality management. It gives them a well-defined and a focus on the market, but not on internal procedures and
formulated quality policy that contributes to standardized documentation processes as in the case of companies C
work procedures and reduced job variations. However, the and D for maintaining ISO-certified status. This implies
quality management practices in companies C and D appear that a market orientation is required for quality manage-
to be inward-focused and concerned with internal documen- ment to drive organizational performance.
tation and work procedures for maintaining ISO-certified The results, however, do not signify that quality manage-
status. They run the risk of losing sight of market needs and ment is unimportant. On the contrary, quality management
the voices of customers in their quality improvement may be just as important, or even more so, in driving
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 453

organizational performance. Our results indicate that quality instead of confining it to some specialized departments.
orientation and market orientation in organizations are highly The philosophical elements of quality management and
correlated and complementary, and that organizational per- marketing need to be communicated to both quality and
formance is improved when market orientation is high. marketing specialists and other organizational members to
Furthermore, models with quality management/marketing discourage ‘‘departmental focus’’ to broaden the appreci-
complementarities display better goodness-of-fit than those ation of quality management and marketing in business
lacking it. By employing the two business approaches as operations.
equally important performance drivers, high levels of quality
management implementation and marketing implementation
alignment are conducive to achieving a high level of organi- 5. Directions for future research
zational performance. It is important to pay attention to the
philosophical elements and the complementary nature of This study is subject to some shortcomings that limit
quality management and marketing to ensure their alignment the interpretation of the results, and we leave them for
in implementation. further investigation. First, cross-sectional data are used
to test the research model and the hypotheses that capture
4.5. Managerial implications the perceptions of managers at a point in time. Quality
orientation, market orientation, and organizational perfor-
The results suggest that simply implementing a quality mance are constructs that are dynamic in nature, involv-
management system such as the ISO 9000 series alone ing elements of time, and might be better examined over
without the voices of customers and the marketing link an extended period. The cross-sectional data do not
(e.g., a procedural-based quality management system capture any continuous transformations that might affect
putting the interests of customers at a lower priority) the hypothesized relationships. A longitudinal study is
does not appear to be comprehensive enough to gain desirable in determining the effect of quality management
competitive advantages. In contrast, formulating a quality and marketing on organizational performance in future
strategy with the participation of the whole organization research.
for continuous improvement, with the interests of the Second, the research model includes only the major
customers put at the very heart of the business opera- latent constructs of quality orientation, market orientation,
tions, should provide a more coherent and comprehensive and organizational performance. To examine the interrela-
road map for effective marketing implementation. An tionships among them, other important macro variables such
organization-wide focus on both business approaches of as business and economic environment, national culture,
quality management and marketing should be addressed, and technological intensity are not considered. Inclusion of
and the ways that quality management and marketing can these moderating variables in model testing may provide
and should guide the values and attitudes, and ultimately further insights into the relationships among the three
the activities and performance of the whole organization, constructs.
should be recognized. Third, the study assesses information only from the
Marketing must work with other functional areas to perspectives of the participating organizations. Consequent-
enhance customer value and increase customer satisfaction. ly, it offers a self-reported, one-dimensional focus. Since the
It should act as a window to discern customer needs in the study is undertaken to understand the links among quality
process of quality improvement, and assure that market management, marketing, and organizational performance
intelligence will be of utmost importance in guiding organi- from the viewpoints of organizations, this approach is
zational responses to customer needs and market changes. deemed appropriate. As the survey research only captures
Alternatively, quality management provides the structure, the perceptions of quality managers, it is also useful to
techniques, implementation, and control mechanisms re- survey other organizational members (e.g., frontline
quired by marketing for its effective implementation. The employees), who are also good informants of the quality
need to develop an outward-looking focus on market needs management/marketing interface to minimize the respon-
rather than an inward improvement focus for quality im- dent bias problem.
provement must be stressed, and the ways quality manage- It would be worth devoting another study to evaluate and
ment complements marketing in the delivery of customer compare how the sectoral differences in different business
satisfaction must be appreciated. types would affect the links and the strength of relationships
In addition, the achievement of customer satisfaction among the three constructs in the model. Similarly, how the
requires organization-wide efforts. Not only should the individual factors of quality orientation and market orienta-
quality management/marketing interface in organization tion relate to the individual dimensions of organizational
be understood, but it should constantly be reinforced in performance in different business types would also be a
the workplace in light of the fact that quality manage- desirable topic for further study. Furthermore, study of the
ment and marketing performance for customer satisfaction quality management/marketing interface in different cultural
are the responsibility of every organization member, and social contexts will not only help to generalize the
454 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456

findings, but also contribute to determining how differences Appendix A (continued)

in cultural and social contexts influence the effectiveness of Our company interacts with outside groups (e.g., education, business,
various systems and practice, and to what extent quality trade, professional groups) for the mutual benefits of quality
management and marketing implementation should be stan- improvement.
Customer satisfaction orientation
dardized or tailored to local conditions by multinational
Our company promotes trust and confidence in our products/services
corporations. As globalization of world markets has acceler- (e.g., by quality policy, third party assurance, guarantees, and
ated, the cross-cultural management problem is regarded as warranties).
one of the most important issues for multinational companies. Our company evaluates competitors with respect to the level of customer
Replication of this study in other cultural and social settings is satisfaction (e.g., by company-based competitive studies, evaluations
made by independent organizations including customers).
recommended. It is also an interesting topic to study the roles
Our company evaluates customer satisfaction with internal performance
of individual business units and how they contribute to a objectives (e.g., by comparisons with past customer satisfaction index
larger organization (e.g., multinational corporation) with or standard set).
respect to the quality management/marketing interface and Our company determines and improves customer satisfaction (e.g., by
the ultimate impact on organizational performance in future identifying market segments, benefits sought by customer groups, and
the target quality requirements of each segment or group).
research.
Benchmarking of direct competitors’ products/services for improvement
of own products/services is practiced in our company (e.g., learn best
practice within the company’s industry).
Acknowledgements Benchmarking of direct competitors’ processes for improvement of own
processes is practiced in our company (e.g., learn best practice within
the company’s industry).
This study was partially funded by The Hong Kong
External interface management
Polytechnic University under grant number A-PE93. We are Our company recognizes its social responsibilities such as public health
grateful to two anonymous referees for their helpful and safety, environmental protection, and waste management (e.g., by
comments on earlier versions of this article. including its public responsibilities in its quality policy and practice).
Our company determines customers’ future requirements and the
relative importance of product/service features (e.g., by survey, focus
group, dialogue with customers).
Appendix A. List of questionnaire items Our company’s new product/service development process is designed to
ensure satisfaction of customer needs (e.g., by tools such as quality
Quality orientation function deployment, venture team, new product development
People and customer management committee).
Strategic human resources management (e.g., education, training, and Strategic quality management
employee involvement schemes) is a key performance objective of our Our company uses process capability studies to ensure that product/
company. service design requirements are delivered by the processes.
Our company monitors the effectiveness of the quality education and Our managers take active leadership in coaching, encouraging,
training that support the company’s quality and performance communicating, and promoting quality issues (e.g., frequent reinforce-
objectives. ment of the company’s quality value).
Our company uses employee recognition and performance measurement Satisfaction of intrinsic rewards (e.g., employee job satisfaction, sense
schemes (e.g., frequent evaluation of employee participation in quality of achievement) for employees is considered as a critical factor for
improvement) that support the company’s quality and performance attaining our company’s quality objectives.
objectives. Satisfaction of extrinsic rewards (e.g., pleasant working conditions, job
Our company employs proactive customer relations (e.g., market security, fair salary, and promotion) for employees is considered as
research, follow-up with customers, and use of customer service critical factor for attaining our company’s quality objectives.
standards), i.e., frequent use of customer information to improve Our top management commits to quality improvement through
customer satisfaction. involvement and visibility in quality activities and communication of
Supplier partnerships quality values (e.g., frequent involvement and reinforcement of quality
Our company audits suppliers’ quality (e.g., by first-party audits, values within and outside the company).
management reviews, inspection, and accreditation to ISO series). Our company implements long-term plans (3 years or more) that are
Our company takes action (e.g., providing rapid information and data based on customer needs.
exchange) to assist and improve the quality and responsiveness of our Our company implements long-term plans (3 years or more) that are
suppliers. based on company capabilities.
Our company considers suppliers as associates rather than as adversaries A continuous improvement program of processes based on objective
(e.g., by reliance on a few dependable suppliers, development of analysis of operational performance (e.g., improved cycle time,
long-term relations, involvement in the design/development process). productivity, and waste reduction) is carried out in our company.
Communication of improvement information Teamwork structures for improvement
Our company employs quality costs (e.g., appraisal, prevention, and Our company uses nonhierarchical organizational structures (e.g.,
failure) to facilitate the continuous improvement processes. councils, quality circles, steering committees, and quality improvement
Our company assesses the need for quality education and training teams) to support quality improvement.
(e.g., on-the-job performance improvement, employee growth) Work is organized in our company according to key business processes
and its subsequent delivery and review. that reflect customer needs, rather than on traditional specialization of
Benchmarking of processes in noncompeting organizations for process functions.
improvement is practiced in our company (e.g., learn best practice
outside the company’s industry).
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 455

Appendix A (continued) Appendix A (continued)

Quality orientation The activities of the different departments in our company are well
Operational quality planning coordinated. *
Our company implements short-term plans (1 – 2 years) that are based Our company takes no action on customer’s complaints.
on customer needs. Even if our company came up with a good marketing plan, our company
Our company implements short-term plans (1 – 2 years) that are based probably would not be able to implement it in a timely fashion.
on company capabilities. When our company finds that customers would like us to modify a
Quality goals, measurable and time-based (e.g., reduction of failure product/service, the departments involved make concerted efforts to do
costs by 10% within the next six months), are included in the so.
development of our short-term plans (1 – 2 years).
Quality improvement measurement systems Organizational performance
Our company evaluates and improves its products/services. Motivation Performance
Our company evaluates and improves its business processes. The equity of our company (e.g., wage, promotions, fringe benefits) to
Our company manages data/information (e.g., data/information on employees has been continuously improving in the past 3 years.
quality improvement, customer and employee relations, supplier The training function provided to employees for the acquisition of
relations) to support quality improvement efforts. necessary job skills and knowledge has been continuously improving
Our company employs procedures (e.g., regular reviews and time updates) in the past 3 years.
to ensure reliability, consistency, and rapid access to data and information The extent of employee job satisfaction has been continuously improving
throughout the company. * in the past 3 years.
Corporate quality culture The extent of employee job security has been continuously improving
Quality goals, measurable and time-based (e.g., increase in customer in the past 3 years.
satisfaction by 20% within the next 3 years), are included in the The environmental factors affecting the job (e.g., safety of the job
development of our long-term plans (3 years or more). environment) have been continuously improving in the past 3 years.
The quality culture (e.g., common value, belief, and behaviors) in our Market performance
company is company wide. The success rate of our company in introducing new or modified products/
services to satisfy customer needs has been continuously improving in
Market orientation the past 3 years.
Market intelligence generation The price of the products/services of our company has remained relatively
Our company meets customers at least once a year to find out what competitive to the price trend of the competitors in the past 3 years. *
products/services they will need in the future. The ability of our company to satisfy customer needs has been
Our company conducts all related market research (e.g., needs analysis of continuously improving in the past 3 years (e.g., decrease in customer
customer groups, market segments) necessary for effective customer complaints, product returns).
satisfaction. Productivity performance
Our company is slow to detect changes in our customers’ product/service The efficiency of materials usage of our company (e.g., ratio of total
preference. output to material input) has been continuously improving in the past
Our company polls customers at least once a year to assess the quality of 3 years.
our products/services. The efficiency of labor of our company (e.g., ratio of total output to
Our company is slow to detect fundamental shifts in our industry labor input) has been continuously improving in the past 3 years.
(e.g., competition, technology, regulation). The efficiency of capital utilization of our company (e.g., ratio of total
Our company periodically reviews the likely effect of changes in our output to capital input) has been continuously improving in the past
business environment on customers (e.g., regulation, competition, 3 years.
technology). Societal performance
Market intelligence dissemination The level of consumer rights of our company has been continuously
Our company holds interdepartmental meetings at least once a quarter to increasing in the past 3 years.
discuss market trends and developments. The level of recognition of the need to protect the environment in our
Our company’s marketing personnel spends time discussing customers’ company has been continuously increasing in the past 3 years.
future needs with the other functional departments. The expansion of the product/market of our company has been
When something important happens to a major customer in our market, continuously increasing in the past 3 years.
the whole company knows about it within a short period. The provision of employment opportunities by our company has been
Our company disseminates data on customer satisfaction at all levels in the continuously increasing in the past 3 years.
company on a regular basis. *
Insignificant item in CFA.
When one department finds out something important about the market
(e.g., customers, competitors), it is slow to alert the other departments.
Responsiveness to market intelligence
It takes our company a long time to decide how to respond to our
competitors’ price changes.
For one reason or another, our company tends to ignore changes in our
customer’s product/service needs (e.g., make no response to the
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