Post on 11-Feb-2022
Strategic Management and Financial Performance in
South Korean Apparel Retail Stores
Eun Jin Hwang
Dissertation submitted to the faculty of the Virginia Polytechnic Institute and
State University in partial fulfillment of the requirements for the degree of
Doctor of Philosophy
In
Apparel, Housing, and Resource Management
Marjorie J. T. Norton, Chair
Jessie H. Chen-Yu
LuAnn R. Gaskill
Dong Jin Lee
James E. Littlefield
Kent F. Murrmann
November 16, 2005
Blacksburg, VA
Keywords: Strategic Management, Korean Retailing, Market Orientation,
Organization Structure, Perceived Environmental Uncertainty,
Copyright 2005, Eun Jin Hwang
Strategic Management and Financial Performance in
South Korean Apparel Retail Stores
by
Eun Jin Hwang
Marjorie J. T. Norton, Chair
Apparel, Housing, and Resource Management
ABSTRACT
The research objectives were to determine (a) interrelationships among
components of Korean apparel retail stores’ management strategies, (b) effects of
perceived environmental uncertainty on their management strategies, (c) effects of stores’
management strategies on their performance, and (d) market-orientation strategies the
stores have implemented. Four hundred top managers of Korean apparel stores in Seoul,
Busan, Suwon, Daejeon, and Daegu completed a questionnaire. A structural equations
model was used to test the hypotheses concerning relationships between the research
variables. The exogenous variables include components of perceived environmental
uncertainty (market turbulence, competitive intensity) and top management’s willingness
to adapt a changing market (top-management emphasis and risk aversion). The
endogenous variables include components of market-orientation strategy (intelligence
generation, intelligence dissemination, response design, response implementation),
organicity of organizational structure (centralization, formalization, specialization), and
satisfaction with store performance (relative to other Korean retail stores, relative to key
competitors).
iii
Many of the hypotheses were supported. Perceived market turbulence positively
affected stores’ market-orientation strategies and functional specialization. Market-
orientation strategy positively affected stores’ functional specialization and centralization
of decision making. Intelligence generation positively affected satisfaction with store
performance relative to other Korean retail stores and relative to key competitors, and
response implementation positively affected satisfaction with store performance relative
to other Korean retail stores. Some positive relationships were found between perceived
environmental uncertainty and top management’s willingness to adapt to a changing
market. Also, seven of the eight tested relationships were significant and positive
between market-orientation strategy and top management’s willingness to adapt to a
changing market. Top-management emphasis positively affected organicity of
organizational structure. Formalization of store structure positively affected satisfaction
with store performance relative to other Korean retail stores and relative to key
competitors.
A major conclusion is that Korean apparel stores’ top managers did not view
environmental conditions as important influences on their stores’ performance, although
their perceptions of environmental uncertainty affected their stores’ strategic
management in such terms as response design, intelligence generation, and intelligence
dissemination.. In addition, despite the positive effects of perceived environmental
uncertainty on stores’ centralization and functional specialization, the top managers
appeared reluctant to fundamentally change their stores’ organizational structures.
iv
TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................... iv LIST OF FIGURES .............................................................................................................x LIST OF TABLES............................................................................................................. xi CHAPTER 1 INTRODUCTION .........................................................................................1
Market Opening in South Korea .....................................................................................2
Retailing in South Korea.................................................................................................4
Before Market Opening ........................................................................................4
After Market Opening...........................................................................................4
Statement of the Problem................................................................................................7
The Need for the Study ...................................................................................................8
The Proposed Model .....................................................................................................10
Purpose of the Research................................................................................................12
Overview of the Research Design.................................................................................13
Contribution of the Study..............................................................................................14
Organization of the Dissertation ...................................................................................15
CHAPTER 2 LITERATURE REVIEW – PART I............................................................16
Environment..................................................................................................................16
Definition of Environment......................................................................................16
Environmental Uncertainty.....................................................................................18
Definitions of Environmental Uncertainty..........................................................19
Perceived Environmental Uncertainty ................................................................23
Two Factors of Perceived Environmental Uncertainty.......................................24
Perceived Market Turbulence ..................................................................24
Competitive Intensity...............................................................................26
Measuring Environmental Uncertainty...................................................................27
v
Top Management ..........................................................................................................29
Business Strategy .........................................................................................................31
Market Orientation...................................................................................................32
Benefits of Market Orientation ..........................................................................33
Market Orientation and Strategy........................................................................34
Market-oriented and Customer-led Business Strategies ..........................37
Components of Market Orientation ................................................................37
Intelligence Generation............................................................................38
Intelligence Dissemination.......................................................................39
Responsiveness ........................................................................................39
Measuring Market Orientation........................................................................40
Organizational Structure ...............................................................................................41
Mechanistic vs Organic Organizational Structure ....................................................42
Dimensions of Firm Structure...................................................................................45
Formalization ..................................................................................................46
Centralization..................................................................................................46
Specialization..................................................................................................47
Business Performance...................................................................................................47
Measuring Firm Performance ...................................................................................48
Multi-dimensional vs Uni-dimensional Measures ...........................................49
Subjective Measures and Judgmental Measures.............................................50
Retail Performance....................................................................................................51
Summary .......................................................................................................................51
CHAPTER 3 LITERATURE REVIEW – PART II ..........................................................53
Introduction...................................................................................................................53
Interrelationships Among the Components of
Strategic Management and Hypothesis Development ................................................53
Environment..............................................................................................................53
Environment and Business Strategy .................................................................54
vi
Perceived Environmental Uncertainty and
Business Strategy Relationship........................................................................58
Environment and Organizational Structure ........................................................60
Environment and Firm Performance...................................................................64
Relationship Among Environment, Business Strategy, and
Organizational Structure ...................................................................................65
Relationship Among Environment, Business Strategy, and
Firm Performance .............................................................................................66
Relationship Among Environment, Organizational Structure,
and Firm performance.......................................................................................67
Relationship Among Environment, Business Strategy,
Organizational Structure, and Firm Performance .............................................67
Business Strategy......................................................................................................69
Business Strategy and Organizational Structure.................................................69
Market-orientation Strategy and Organicity of
Organizational Structure .......................................................................70
Business Strategy and Firm Performance ...........................................................74
Relationship Among Business Strategy,
Organizational Structure, and Firm Performance .............................................80
Top Management .....................................................................................................81
Top Management and the Environment...............................................................81
Top Management and Business Strategy (Market Orientation) ..........................83
Top Management and Firm Performance ............................................................86
Relationship Among Top Management, Environment,
and Organizational Structure ............................................................................88
Firm Performance Measures ....................................................................................90
Organizational Structure ..........................................................................................93
Firm Performance and Organizational Structure ...............................................93
Summary .......................................................................................................................95
vii
CHAPTER 4 METHODOGY............................................................................................97
Research Questions and Hypotheses ............................................................................97
Research Design..........................................................................................................102
Background on the Operationalization of Constructs
in the Proposed Model ..............................................................................................103
Exogenous Constructs.............................................................................................103
Perceived Environmental Uncertainty ..............................................................103
Top Management’s Willingness to Adapt to
a Changing Market..........................................................................................104
Mediate Endogenous Constructs.............................................................................105
Market Orientation Strategy ............................................................................105
The MARKOR Scale .................................................................................105
Organicity of Organizational Structure............................................................106
Ultimate Endogenous or Dependent Construct.......................................................107
Store Performance..........................................................................................107
Data Collection Methods ............................................................................................108
Sampling and Sample Size and Selection..............................................................112
Data Collection Process .........................................................................................112
The Questionnaire.......................................................................................................113
Respondent and Store Demographic Information...................................................114
Perceived Environmental Uncertainty ....................................................................115
Top Management’s Willingness to Adapt to
a Changing Market................................................................................................116
Market Orientation Strategy ...................................................................................117
Organicity of Organizational Structure...................................................................119
Store Performance...................................................................................................121
Pilot Test of the Survey Instrument ............................................................................122
Reliability and Validity of the Survey Questionnaire.................................................123
Reliability................................................................................................................123
viii
Validity ...................................................................................................................124
Statistical Analysis......................................................................................................125
Preliminary Data Analysis ......................................................................................125
Data Analysis for Hypothesis Testing ....................................................................128
Summary .....................................................................................................................128
CHAPTER 5 RESEARCH RESULTS AND DISCUSSION..........................................129
Return Rate of the Survey...........................................................................................129
Demographic Profile of the Sample............................................................................131
Instrument Reliability .................................................................................................135
Mean Rating and Standard Deviations of the Variables.............................................136
Perceived Environmental Uncertainty ....................................................................136
Top Management’s Willingness to Adapt to a Changing Market ..........................138
Market-Orientation Strategy ...................................................................................140
Organicity of Organizational Structure...................................................................143
Satisfaction with Store Performance.......................................................................148
Pearson Correlations for Measured Variables ............................................................148
Correlation Coefficients Among the Constructs.........................................................152
Multicollinearity Diagnostics......................................................................................152
Incomplete Data ..........................................................................................................156
Overall Fit of the Measurement Model.......................................................................158
Results Research and Discussion of the hypothesis Testing ......................................163
Perceived Environmental Uncertainty and Market-Orientation Strategy................163
Perceived Environmental Uncertainty and
Organicity of Organizational Structure...............................................................167
Perceived Environmental Uncertainty and Store Performance ...............................170
Market-Orientation Strategy and Organicity of Organizational Structure ..............172
Market-Orientation Strategy and Store Performance ..............................................174
Perceived Environmental Uncertainty and
Top Management’s Willingness to Adapt to a Changing Market ......................177
ix
Top Management’s Willingness to Adapt to a Changing Market and
Market-Orientation Strategy ...............................................................................179
Top Management’s Willingness to Adapt to a Changing Market and
Organicity of Organizational Structure...............................................................181
Top Management’s Willingness to Adapt to a Changing Market and
Store Performance...............................................................................................181
Organicity of Organizational Structure and Store Performance ..............................185
Summary of the Results of Hypothesis Testing..........................................................188
Chapter Summary .......................................................................................................188
CHAPTER 6 IMPLICATIONS, LIMITATIONS, AND
SUGGESTIONS FOR THE FUTURE RESEARCH .................................................192
Summary and Conclusions.........................................................................................192
Implications of the Research Findings........................................................................195
Limitations and Suggestions for Future Research ......................................................197
REFERENCES ................................................................................................................199
APPENDIX A Human Subjects Approval ......................................................................266
APPENDIX B Cover Letter to Managers of South Korean Retail Stores
For the Pilot Test................................................................................268
APPENDIX C Cover Letter to Professors in South Korean University
For the Pilot Test................................................................................270
APPENDIX D Cover Letter to Managers of South Korean Apparel Retail Stores
For the Final Data Collection.............................................................272
APPENDIX E Questionnaire (English) ...........................................................................274
APPENDIX F Cover Letter to Managers of South Korean Apparel Retail Stores
For the Final Data Collection (Korean) .............................................279
APPENDIX G Survey Questionnaire (Korean)...............................................................281
APPENDIX H Vita ..........................................................................................................287
x
LIST OF FIGURES
Figure 1 Research Model ................................................................................................11
Figure 2 Research Hypotheses in the Proposed Model ....................................................99
Figure 3 Respondents’ Years of Employment in the Stores
Where They Currently Worked .................................................................133
Figure 4 Respondents’ Length of Employment in the Korea Retailing Industry ...........133
Figure 5 Years When the Respondents’ Stores Opened .................................................134
Figure 6 Number of Employees per Store ......................................................................134
Figure 7 Research Results for Hypothesis 1 ...................................................................165
Figure 8 Research Results for Hypothesis 2 ...................................................................168
Figure 9 Research Results for Hypothesis 3 ...................................................................171
Figure 10 Research Results for Hypothesis 4 .................................................................173
Figure 11 Research Results for Hypothesis 5 .................................................................176
Figure 12 Research Results for Hypothesis 6 .................................................................178
Figure 13 Research Results for Hypothesis 7 .................................................................180
Figure 14 Research Results for Hypothesis 8 .................................................................182
Figure 15 Research Results for Hypothesis 9 .................................................................184
Figure 16 Research Results for Hypothesis 10...............................................................187
xi
LIST OF TABLES
Table 1 Chronology of Market Opening in South Korean Retailing................................3
Table 2 Research Results on Moderators of the Link Between
Market Orientation and Performance............................................................68
Table 3 Summary of Operationalization of Constructs ..................................................109
Table 4 Statistical Analysis.............................................................................................126
Table 5 Survey Response Rates by City .........................................................................130
Table 6 Respondents’ Job Titles .....................................................................................132
Table 7 Cronbach’s Alpha Coefficient ...........................................................................135
Table 8 Means and Standard Deviations for perceived Environmental Uncertainty......137
Table 9 Means and Standard Deviations for Top Management’s
Willingness to Adapt to a Changing Market................................................139
Table 10 Means and Standard Deviations for Market-Orientation Strategy ..................141
Table 11 Means and Standard Deviations for Organicity of Organizational Structure..144
Table 12 Means and Standard Deviations for Satisfaction with Store Performance......149
Table 13 Pearson Correlation Coefficients for Market-Orientation Strategy.................151
Table 14 Pearson Correlation Coefficient for Organicity of Organizational Structure ..151
Table 15 Correlation Among the Constructs of the Five Research Variables................153
Table 16 Collinearity Diagnostics on the Independent Variables –
Condition Indices .........................................................................................154
Table 17 Collinearity Diagnostics on the Independent Variables –
Variance Inflation Factors............................................................................157
xii
Table 18 The Research Variables and the Number of Missing Values
Replaced for Each .......................................................................................159
Table 19 Goodness-of-fit Measures for the Measurement Model ..................................160
Table 20 Summary of the Research Results ...................................................................189
1
CHAPTER 1
INTRODUCTION
The growing liberalization of economies and international trade is radically
transforming the global business environment. Firms are facing turbulent operating
environments characterized by changing technologies and markets that represent both
problems and opportunities. Retail systems have undergone transformation over time in
response to changes in the environment. Many researchers have investigated
environmental changes including ecological, cyclical, and conflict factors (Bucklin, 1972;
McNair & May, 1958; Schumpeter, 1934). Bucklin saw external environments,
including changes in technology and economic conditions, as influencing institutional
change ecologically. McNair and May conceptualized “the wheel of retailing” to show
the changes over time in retailing due to cyclical factors such as in the economy,
technology, and consumer behavior. According to Schumpeter’s theory of economic
development, institutions are affected and changed by conflict with their competitors.
Competition among firms in the South Korean retailing industry has become more
intense since the country began market opening in the 1990s. The opening of the
industry to large-scale foreign firms, especially retail discount stores, accelerated changes
as the newcomers introduced modern business styles, new networking methods, and a
larger scale of operations. These in turn instigated increased competition among local
firms, which pushed some retail businesses to conglomerate while others went out of
business. Numerous South Korean retailers have experienced losses in market share,
profits, and occupancies. Increased domestic and global competition has forced many
South Korean retailers to reevaluate the basic nature and purpose of their organizations.
Many of the retailers have had difficulty in keeping up with the rapid changes in the
market or in taking advantage of expert advice. On top of such developments, the 1997
financial crisis accelerated all these trends. The liberalization policy in 1996 and the
financial crisis in 1997 forced reorganization on the South Korean retailing industry.
According to Brown and Fisk (1964), companies that cannot adapt quickly to a changing
market environment will ultimately fail.
2
Market Opening in South Korea
Historically, South Korea kept its major retailing operations closed to foreign
ownership. And further, South Koreans have been taught from youth that exports are
good and imports are bad for the economy. Exporters have been treated well and
importers have not. Foreign trade officials have been caricatured or even attacked in
effigy. For decades, South Korea discouraged foreign direct investment (FDI) by
companies, although it financed its economic development through foreign borrowing.
In 1988, the South Korean government began a series of five-year plans to
improve the efficiency and productivity of the country’s retailing industry. One of the
major programs was the opening of the domestic market to foreign trade. The first stage
of the program, which began in 1989, included the relaxation of regulations on the
establishment of foreign companies’ subsidiaries and FDI. The second stage of the
opening policy, from 1991 through 1992, allowed foreign retailers to open no more than
10 stores, with each at a maximum size of 1,000 m2. The limitations on the number and
size of foreign companies’ retail outlets were further relaxed in the third stage of the
program, beginning in 1993. In this phase, foreign companies were allowed to open up to
20 stores, but each store could not exceed 3,000 m2. Effective January 1, 1996, market
liberalization allowed foreign retailers to enter South Korea on their own, or with a South
Korean partner, unencumbered by the restrictive regulations that for decades kept most
retail outlets under the control of South Korean owners. This liberalization of the retail
sector was part of a general liberalization to allow foreign investors to participate in
South Korean markets, as required for South Korea to become a member of the
Organization for Economic Cooperation and Development (OECD) in 1996. In
accordance with South Korea’s trade agreements during the negotiations in the Uruguay
Round of the General Agreement on Tariffs and Trade (GATT), foreign retailers now
have greater access to the South Korean market (see Table 1).
3
Table 1 Chronology of Market Opening in South Korean Retailing
Date
Name of Action
Major Feature
July, 1981
Limited allowance of foreign investment
Allowed less than 333 m2 per store for one-item retailing.
October, 1982
Relaxation of the space limit
Expansion to 660 m2.
July, 1984
Lifting of limits on merchandise volume
Expansion to 700 m2 and in number of stores.
October, 1988
Announcement of a three-phase plan for market opening
January, 1989
1st-phase market opening
Drastic expansion in technology introduction and in wholesale investment scope.
July, 1991
2nd-phase market opening
Allowed up to 10 stores with unit store size less than 1,000 m2.
July, 1993
3rd-phase market opening
Expansion to up to 20 stores with store size less than 3,000 m2.
December, 1993
Market-opening plans submitted to GATT negotiators
The government submitted plans to GATT negotiators to completely lift existing restrictions on the number of stores and maximum floor space allowed.
January, 1996
Full market opening initiated
Full lifting of limits on the number and size of stores, and opening to foreign retailers.
1997
Entrance of foreign retailers
Foreign retailers enter the local distribution sector.
Note. Compiled from Korea: KOTRA to hold active investment promotion activities. (1996, January 17). The Korean Economic Weekly; Korea: Retail distribution market overview. (1996, July 22). International Market Insight Reports. Chamber World Network International, Ltd.; and Local Retailers brace for a foreign onslaught. (1993, September). Business Korea, 11(3), 53-54. Conversion applied: 1 Pyong = 3.3 m2.
4
Retailing in South Korea
Before Market Opening
Throughout the past four decades, mainly small, family-operated mom-and-pop
stores have characterized the South Korean retail industry. This type of store has an
average space of 10 m2 and typically employs one person. These stores, which account
for a major share of the retail market and a large portion of total retail employment, have
been a prime factor in the persistently low productivity in this industry. South Korean
retail trade remained almost exclusively a domestically owned and operated industry
before market opening. Competition between retailers was severely lacking. The South
Korean retailing sector is still lagging behind, unable to keep up with the impressive
advances in the country’s manufacturing industry.
After Market Opening
Market liberalization has had a positive impact on the distribution industry in
general, in terms of boosting its output and productivity, by exposing Korean companies
to such global players as Carrefour, Price-Club, and Wal-Mart. Furthermore, market
opening has helped reduce retail prices, which is often regarded as one of the most
important contributions of market liberalization.
Increases in imports and property prices, as a result of market opening, have been
minimal, although these were major concerns for government officials. Concerning
possible negative effects on employment, it is difficult to evaluate the impacts because of
the few studies on this matter. It is still too early to evaluate the precise impacts because
less than 10 years have passed since the South Korean market was fully opened. It is
certain, however, that the liberalization process has driven the Korean government's
regulatory reform program. Furthermore, liberalization has led to fundamental changes
in the structure of the Korean retail market. As foreign retailers have entered the market,
retail formats have become increasingly diverse. Consequently, competition among
inter-type retail formats as well as intra-type retail companies has become fiercer.
5
Market opening is also expected to improve Korean retailers' management practices
through knowledge transfers by exposure to the world's best practices.
Until 1996 when the South Korean retail sector was opened to international
competition, Korea's retail market was mainly composed of 98 department stores, about
2,000 conventional outdoor markets, and many more mom-and-pop stores. Until the
1990s, department stores were the only competitive retail format in South Korea. As a
group, they enjoyed more than a 20% annual sales growth rate since 1994; however, due
to the intense competition from both foreign and domestic retailers after the full-scale
market opening, more than 20 department stores have gone bankrupt, including New
Core, the biggest department store chain, and Midopa, one of the oldest department stores
in South Korea. The arrival of foreign retailers and the introduction of their new retail
formats in South Korea subsequently intensified competition between these retail formats
and the existing ones. The most apparent new development was the emergence of large-
scale discount stores, both foreign and domestically owned. Department stores located
outside of Seoul have lost their competitiveness and are expected to face great difficulties
in coming years. Due to changing consumer behavior, discount stores have expanded
rapidly in both number and sales volume at the expense of conventional markets and
department stores. In the ongoing competition, discount stores have taken a sizeable
market share from department stores and conventional outdoor markets, which were the
most developed retail formats in South Korea prior to the 1990s (Korea Retail Research
Group, 1999).
In 2003, South Korea’s economy became worse due to shrinkage of domestic
demand during the first half of the year. South Korean consumers felt uncertain about the
economy due to massive household debt that had built up over 2000 and 2001 when
heightened consumer expenditure led economic recovery. Sluggish domestic demand is
continuing with household expenditures posting negative growth rates since the second
quarter of 2003. South Korea has been in an economic recession since that time. Both
low-income and high-income households have been cutting their spending, and further
reduction in consumption is expected. Total retail sales in South Korea grew throughout
the period from 1999 to 2003, although at a slowing pace. Although relative economic
recovery and growth occurred from 2000 to 2002, the South Korean retailing industry’s
6
total sales have been disappointing since the beginning of 2003. In addition, much
consolidation in the retail sector has been occurring, such as among department stores.
The consolidation is eliminating many independent, individual stores that have long
spotted the country (Kim, 2004).
The competitive environment for South Korean retailing companies has changed
drastically in recent years. South Korean customers in geographically dispersed,
emerging, and established markets now demand quality products at a lower cost in a
shorter time than in the past. In addition, South Korean consumers increasingly desire
the most current models of goods and services, which independent retailers appear to be
incapable of providing. The hardship of the economic crisis in the late 1990s changed the
spending patterns of consumers who became willing to make longer journeys to find
quality items at lower prices. As a result, South Korean retailing firms have been forced
to reorganize their merchandise sourcing activities, including the development of global
strategies. The new competitive pressures from foreign and domestic retailers are forcing
South Korean retailers to compete on the basis of more than one dimension. New types
of retailers and mixed merchandising have combined to create more types of competition
for both department stores and mass merchandisers; for example, department stores
compete with each other and with mass merchandise chains, but also with discount stores,
furniture stores, warehouse outlets, variety stores, catalog showrooms, and an assortment
of specialty stores, both chain and independent. In the coming years, as more new types
of retailers develop and merchandising practices become increasingly scrambled, the
competition is likely to grow even more diverse and intense.
Some research on retailing competition has emphasized linkages between the
emergence and development of retail institutions and the ways they respond to changes in
their economic, technological, and demographic environments (Bogart, 1973; Coles,
1999; Hollander, 1960; Lowry, 1997; McNair & May, 1978; Radaev, 2004). Coles
(1999), McNair and May (1978), and Davidson, Bates, and Bass (1976) focused on
specialty stores, discount stores, mass merchants, department stores, and nonstore
retailing. Stock, Greis, and Kasarda's (1999) framework proposed that a firm’s business
strategy reflects its competitive environment. All current patterns, including changing
customer needs, increased competition, technological advances, globalization, and a more
7
diverse workforce, propel a trend toward a system-level redesigning of tomorrow's
organizations, at least for those organizations that survive and thrive in the future.
Statement of the Problem
The opening up of the South Korean retail industry will most likely continue to
have both positive and negative impacts. Over time, market opening could be beneficial
to domestic market growth, the creation of more jobs for South Koreans, the
improvement of South Korea’s logistical and distribution systems, and the expansion of
consumer choices. Foreign retailers opening stores in South Korea create high
competition for South Korean retailers. Since full liberalization of the domestic retail
market in 1996, South Korean firms have been struggling against multinational giants
advancing into the domestic industry with more financial resources and sophisticated
marketing know-how. Foreign retailers are receiving financial support from their parent
companies, in many cases outpacing the support South Korean retailers receive from their
parent companies.
Because the South Korean retailing industry was closed to the outside world for
many years, it did not accumulate the experience or skill to compete with foreign retailers
who are highly experienced in competing with others and have more skilled managers.
South Korea's many small, traditional stores are particularly affected by competition from
foreign companies. The Korean Institute of External Policy stated that full opening of
South Korea's markets would force 15% of its small retailers out of business and would
hurt the least competitive big distributors as foreign concerns gained market share
("World Wire," 1992). Although market liberalization presents opportunities for South
Korean retailers, they have a great deal of catching up to do to survive in the new
competitive environment. Also, the financial crisis of 1997 and the resulting drop in
demand had a negative impact on the retail industry. According to Shinsegae's Research
Institute of Distribution, the total sales volume of the retail industry decreased 13.8%
(US$74.17 billion) in 1998 (Lee, 1999). Similarly, retailers were negatively affected in
2003 in the face of greatly reduced domestic demand.
8
The Need for the Study
In order to survive and prosper in the new environment of participation in a global
economy, South Korean retailers must identify effective strategies, implement them
properly, and evaluate them appropriately. Management strategies that emphasize the
systemic relationships among the important components of strategic management,
including the business environment, strategy itself, organizational structure, and strategy
implementation, can lead to better firm performance. In spite of the importance of
strategy and the match among the components of strategic management for successful
operation of a firm in an extremely competitive business environment, no research has
addressed strategic management in the South Korean retail industry, either prior to or
since the advent of market opening. Research on strategic management, in general, has
been conducted to examine the interrelationships among the components of strategic
management and the impact of these relationships on firms’ performance (Dev, 1988;
Elwood, 1991; Ketchen, Snow, & Street, 2004; Kor & Mahoney, 2005; Murthy, 1994).
No study, however, has investigated how changes in the environment due to South
Korea’s market opening have affected South Korean retailing firms’ strategy, top
management’s willingness to adapt to changing market conditions, organizational
structure, and firm or store performance, either before or after market opening. This
study involves the development of a model that incorporates interrelationships among
components of strategic management, and the application of the model in the case of
South Korean retailing, since market opening.
The development of a strategic management paradigm for retailing firms has long
been an important focus for researchers (Holmberg & Morgan, 2004; Spillan &
Ziemnowicz, 2003; Werner, McDermott, & Rotz, 2004). Several studies over the years
have analyzed the role of the strategic management process in firms’ performance.
Kwock (1999) defined strategic management as consisting of an organization’s strategy
formulation in relation to its environment, strategy implementation to design the
organization to achieve its objectives, and evaluation of the organization’s performance.
Determining the relationships among the components of strategic management and
9
achieving effective congruence among them are critical if the purposes of an organization
are to be achieved.
David (1997) defined strategic management as the art and science of formulating,
implementing, and evaluating the cross-functional decisions that enable an organization
to achieve its objectives. As the definition implies, strategic management focuses on
integrating management, finance/accounting, production/operations, research and
development, information systems, and other factors, and matching them with external
environmental factors in order to achieve organizational success. Hofer and Schendel
(1978) added that the goal of strategic management is to determine a firm’s strengths and
weaknesses, and then match its resources with the threats and opportunities in the
environment in order to achieve long-term viability.
The adoption of a market orientation has been the cornerstone of many strategic
marketing plans (Drummond, Ensor, Laing, & Richardson, 2000; Palmer & Pels, 2005).
Market orientation is defined as “organization culture…that most effectively and
efficiently creates the necessary behaviors for the creation of superior value for buyers
and, thus, superior performance for the business” (Pelham & Wilson, 1999, p. 21). It
involves “the organization-wide generation of market intelligence pertaining to current
and future customer needs, dissemination of the intelligence across departments and
organization-wide responsiveness to it” (Kohli & Jaworski, 1990, p. 6). Researchers
have emphasized the importance of considering market orientation in the study of firms’
strategy and performance (Deal & Kennedy, 1982; Schein, 1984; Wilkins & Ouchi,
1983). Those researchers postulated that organizational performance could not be
accurately understood without an understanding of the culture and strategy of the
organization. Their findings supported this notion in showing relationships between
corporate culture, strategy, and performance. Generally speaking, strong recognition has
been given in the literature to the influence of organizational culture on strategy. Weick
(1985) went so far as to suggest that an organization’s culture is synonymous with
strategy.
Dobni, Dobni, and Luffman (2001) defined organizational culture as a “conscious
pattern of shared values and beliefs that help employees understand organizational
functioning and thus provide them with norms for behavior in the organization” (p. 401).
10
They stressed the need to understand the culture of an organization in order to understand
the organization’s strategy and performance. They stated that behavior is culture and
culture is strategy; therefore, one must manage culture to manage strategy. The
marketing culture or behaviors of employees drive marketing strategy in an organization.
Preliminary efforts have been made to reveal relationships among the elements that
bridge market orientation and business performance, those being strategy type and to
some degree, specific strategy elements (Matsuno & Mentzer, 2000; Palmer & Pels,
2005; Zajac, Kraatz, & Bresser, 2000).
The Proposed Model
Researchers (Bourgeois, 1978; Harrington, Lemak, Reed, & Kendall, 2004;
Mador, 2000; Paine & Anderson, 1977; Pearce II, 1981; Shrivastava & Grant, 1985) have
been interested in the effect of the business environment on strategy formulation and
processes. A firm’s management must be aware of and respond to the external
environment in order to formulate strategy (Kwock, 1999). The proposed model for this
research is an adaptation of a model by Kwock (see Figure 1). An overview of the model
is provided here, and a detailed description is given in Chapters 2 and 3. In this model,
top managers’ perceptions of environmental uncertainty and their willingness to adapt to
a changing market are assumed to affect each other component of strategic management,
including market orientation strategy, organicity of organizational structure, and store
performance.
Astley and Van de Ven (1983) and Chandler (1962) have investigated
environmental variables, which they conceptualized as including performance. They also
examined the relationship between performance and other organizational variables.
According to Ackoff (1970), the choice of strategy may result in different adaptations and
responses by similar organizations operating within the same industry. Structure can be
defined as "the way in which the various parts of an organization are arranged" (Kwock,
1999, p. 17). Organizational structure is a system of communication and authority that
links people and groups together to accomplish tasks that serve an organizational purpose
11
Figure 1. Research Model Note: Compiled from Jaworski, B., & Kohli, A. (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57(3), 53-70; Kwock, Y. (1999). A theoretical integration and empirical test of strategic management: Environment, strategy, structure, implementation, and performance in the hospitality industry. Unpublished doctoral dissertation, Virginia Polytechnic Institute and State University, Virginia.
ENVIRONMENT
Perceived Environmental Uncertainty
Market Turbulence
Competitive Intensity
BUSINESS STRATEGY
Market Orientation Strategy
Intelligence Generation
Intelligence Dissemination
Response Design
Response Implementation
STORE PERFORMANCE
Satisfaction with Store Performance
Compared to other stores
in the retail industry
Compared to the store’s
key competitors
TOP MANAGEMENT
Top Management’s Willingness to Adapt to a Changing Market
Emphasis
Risk Aversion
ORGANIZATIONAL
STRUCTURE
Organicity of Organizational Structure
Formalization
Centralization
Specialization
12
(Kwock). According to Stonich (1982), successful firm performance depends on
effective implementation and rationalization of the basic strategic elements. Strategy
implementation involves the actions of establishing policies and annual objectives and
allocating resources so that a formulated strategy can be accomplished. "A firm's
performance generally has been considered to be the result of a strategic management
process which contains all possible situations and activities, including the external
environment, and internal factors, including a firm's size, age and structure, and strategy
choices" (Kwock, p. 7).
Purpose of the Research
What does it take to make the changes needed in South Korean retailing for stores
in the industry to respond effectively to increased competition, oversupply, globalization,
work-force diversity, and customer demands for better, faster, cheaper services? It will
be necessary to rethink and redesign South Korean retailing organizations. Enz (1993)
suggested that making such changes in an industry would take new ways of seeing
competitors, both foreign and domestic, as well as employees.
The overall purpose of this research is to investigate the effects of environmental
conditions, such as those brought about by market opening and other changes in the
economy, on the strategic management and financial performance of South Korean retail
stores. South Korean retailers sought and received protection in the form of import
barriers in the 1980s, and then beginning in the late 1980s, they experienced the opening
of their industry to the global market. This research focuses on reactions of South
Korean retailers to uncertainty about their external environment. The objectives of the
research are to determine: (a) the interrelationships among the different components of
South Korean retailers’ management strategies; (b) the effects of perceived
environmental uncertainty on the components of South Korean retailers’ management
strategies, (c) the impact of the components of Korean retailers’ management strategies
on their stores’ performance; and (d) the market-orientation strategies that South Korean
retailers have implemented in the competitive environment they currently face. The
13
proposed model has been designed to explore the relationships among the selected
constructs and to examine certain relationships among the selected constructs concerning
strategic management in the South Korean retailing industry, including the external
business environment, business strategies, organizational structures, top management’s
willingness to adapt to environmental changes, and stores’ performance.
Overview of the Research Design
The unit of analysis is South Korean retail stores in major cities and towns in
South Korea. A questionnaire was used to gather the research data. Because the number
of South Korean retailers is small, the questionnaire was sent to retailers in all major
cities and towns within cities in South Korea in order to have a large enough sample size..
The questionnaire was sent with a letter that explained the study and asked that the store
managers complete the questionnaire. The focus is retailers who carry apparel products,
and the survey recipients include department stores, discount stores, specialty stores,
membership stores, chain stores, and boutiques that are not fully owned by foreigners.
The survey respondents were asked questions about their stores that relate to the
components of strategic management. The respondents were also asked to indicate their
degree of satisfaction with their stores’ financial performance in the areas of return on
investment, earnings growth, sales growth, market share, return on assets, and cash flow
compared to those of other stores in the industry and of the stores’ key competitors.
These measures of financial performance are the same as those used by Greenley (1995a)
and Kwock (1999).
The researcher went go to South Korea to distribute and collect the questionnaires.
The questionnaires were sent by mail to stores that did not have FAX numbers, but when
FAX numbers were found, the questionnaires were sent by FAX. The respondents were
also able to return the questionnaires by FAX. The mailing system in South Korea is not
dependable, so it was preferable to send the material by FAX. In March 2003, a Korea
Information Security Agency survey found that an average of more than 90% of
commercial e-mail received by users was unsolicited (Williams, 2003). Such unsolicited
14
e-mail has driven many people to avoid using e-mail. Many people are concerned that
wanted e-mail will be lost in the clutter of unwanted e-mail. Others fear that spammers
may co-opt e-mail addresses of friends and family. For the above reasons, the surveys
were not sent by e-mail.
Contributions of the Study
This research is expected to advance theory and practice in the area of South
Korean retail management by discovering and empirically testing interrelationships
among the components of South Korean retailers’ strategic management, including the
external business environment, market orientation strategy, organizational structure, top
managements’ willingness to adapt to environmental changes, and stores’ performance.
This study contributes to theoretical advancement in the field of strategic management by
providing and empirically testing a structural model that describes strategic management
and its influences in the case of South Korean retail stores’ performance. This study
illustrates the structure of strategic management in South Korean retailing and the
interactive and simultaneous characteristics of the variables in South Korean retailers’
strategic management that affect their stores’ performance. This study helps in
understanding the processes and context of strategic management in South Korean
retailing. The study also explores certain congruencies or matches among the constructs
in strategic management. An understanding of how these constructs and their
correspondence contribute to a store’s performance is of benefit for practitioners in
planning and implementing strategy. An investigation of the strategic management
practices by South Korean retail stores could contribute to more effective strategic
planning and implementation, in general.
15
Organization of the Dissertation
This dissertation is organized as follows. Chapter 1 discusses the origin and
importance of the study, the overall purpose of the study, the objectives, the research
questions, and the need for the study. It also introduces the model proposed in this study.
Chapter 2 is Part 1 of the literature review and presents each construct of the model,
including the external business environment, market-orientation strategy, organizational
structure, top management’s willingness to adapt to environmental changes, and
organizations’ performance. Chapter 3 is Part 2 of the literature review and explains the
relationships among the constructs in the model. Chapter 4 outlines the procedure used
in the research, including the survey instrument. Chapter 5 presents and discusses the
results of the preliminary data analysis and the hypothesis testing. Chapter 6 summarizes
the research, draws conclusions, and discusses implications of the findings and
limitations of the study, and provides suggestions for future research.
16
CHAPTER 2
LITERATURE REVIEW PART 1
The literature review consists of two parts. Chapter 2 comprises Part 1, which
reviews the literature pertaining to each construct in the model that guided the study (see
Figure 1). The constructs of the model are interactive, and therefore, Chapter 3 is a
review of the literature that examines the relationships among the constructs, including
environment, market-orientation strategy, organizational structure, top managements’
willingness to adapt to environmental changes, and organizations’ performance.
Environment
Definition of Environment
Bourgeois (1980b) summarized the discussion of the environment as treated in the
organizational theory literature, both in terms of the main ways of conceptualizing the
environment and some examples of their operationalization in empirical research.
According to Kunz (1995), environments, including cultural, ecological, economic,
political, regulatory, social, and technological, may strengthen or limit an apparel firm’s
behavior. For apparel firms, environment is the complex of conditions that impact the
nature of a firm’s operation, including the above factors. As defined by Duncan (1972a,
p. 314), environment consists of “the totality of physical and social factors that are taken
directly into consideration in the decision-making behavior of individuals in the
organization.” West (1990) discussed the business environment on the basis of the work
of Selznick (1948). Selznick characterized the business environment as the flows of
information that pertain to setting and achieving goals and that influence the decision-
making process due to management’s perceptions and the objective dimensions of the
structure of the industry.
The marketing environment is a set of forces that directly or indirectly influence a
business’ acquisitions of inputs or generation of outputs (Dibb, 1996). Kotler (1991, p.
17
129) defined the marketing environment as “the actors and forces that affect the
company’s ability to develop and maintain successful transactions and relationships with
its target customers. It comprises ‘non-controllable’ actors and forces that impact on the
company’s market and marketing practice.”
Although early research (Tung, 1979) treated the environment as a single, huge
unit, more recent studies have emphasized the importance of different sectors of the
environment, each of which may have a distinct influence on an organization. Numerous
aspects of the environment, including environmental turbulence, complexity, uncertainty,
and heterogeneity, have been demonstrated to impact the strategic process (Fredrickson
& Mitchell, 1984; Keats & Hitt, 1988; Miller, Dröge, & Toulouse, 1988).
Many researchers have focused on categorizing the environment by its
dimensions and characteristics. According to Duncan (1972a), the environment can be
categorized as the internal and external environments. The internal environment consists
of the relevant physical and social factors within the boundaries of the organization or a
specific decision unit, such as organizational structure and the size and age of
organizational culture, that are taken into direct consideration in the decision-making
behavior of individuals in that system. On the other hand, the external environment
consists of the relevant physical and social factors outside the boundaries of the
organization or specific decision unit, such as customers, suppliers, competitors, and
regulatory groups, that are taken into direct consideration (Duncan).
Environments also can be categorized into their objective and perceived states
(Bourgeois, 1980b). The objective environment consists of the task and the general
environments. The task environment includes customers, suppliers, competitors, and
regulatory groups, whereas factors within the general environment include economic,
political, social, cultural, and ecological factors (Dill, 1958). Dill’s task environment, to
which Duncan (1972a) added the technological requirements of an industry, appears to be
the most useful in identifying with whom or with which an organization must contend or
compete in its pursuit of goals. Thompson’s (1967) dual-factor approach to
environmental attributes formed the basis for Duncan’s ideas. Duncan’s measure of
perceived environmental uncertainty (PEU) is the most useful to date.
18
Along with attempting to categorize the environment, many researchers have
investigated the general characteristics or dimensions of the environment. According to
Duncan (1972a) and Lawrence and Lorsch (1967), the environment also may be viewed
as a multidimensional form. Aldrich (1979) developed a scheme of six environmental
dimensions on which there is an “emerging consensus among researchers” (Dess & Beard
1984, p. 54). According to the degree of interaction among the dimensions of the
environment, including complexity, uncertainty, and dynamism, Emery and Trist (1965)
suggested that four types of environments exist (placid and randomized, placid and
clustered, disturbed and reactive, and dynamic). Aldrich’s codification of environmental
dimensions is represented in a more confined set as follows: munificence (capacity),
dynamism (stability-instability, turbulence) and complexity (homogeneity-heterogeneity,
concentration-dispersion). Utterback (1979) applied the dimensions of complexity and
change to his typology of the environment. Other authors have argued that change is an
important characteristic of the environment (Dill, 1958; Thompson, 1967); Perrow (1967)
has stressed the heterogeneity of the environment.
Conceptual and empirical studies have identified several specific environmental
dimensions, which include dynamism (Dess & Beard, 1984; Thompson, 1967),
complexity (Child, 1972; Dess & Beard, 1984; Mintzberg, 1979; Thompson, 1967; Tung,
1979), and hostility (Miller & Friesen, 1978; Mintzberg, 1979). Many investigators have
identified six important dimensions of organizations’ environments: environmental
capacity; environmental homogeneity-heterogeneity; environmental stability-instability;
environmental concentration-dispersion; domain consensus-dissensus; and environmental
turbulence (Aldrich, 1979). Dess and Beard used factor analysis to break down five of
the six dimensions into a more parsimonious set of three: munificence, dynamism, and
complexity. These three dimensions are conceptually similar to those proposed by others
(Jurkovich, 1974; Minztberg, 1979; Pfeffer & Salancik, 1978; Scott, 1981).
Environmental Uncertainty
According to Smart and Vertinsky (1984), the degree of environmental stability is
one important dimension of the external environment of an organization. In the model
19
proposed in the present research (see Figure 1), environmental uncertainty is investigated
as a factor that affects top management’s willingness to adapt to a changing market,
market-orientation strategy, organizational structure, and a store’s performance. Over
recent years, the environments of many businesses have been overwhelmed by change –
change informed by deregulation, increasing consumer expectations, new information
technology, changing professional standards, and an increasingly global marketplace
(Lovelock, 1996). The environment creates opportunities and threats for an organization.
It affects organizational structure, processes, and managerial decision making (Duncan,
1972a; Keats & Hitt, 1988). Abell (1978) suggested that, because a technology
developed in one industry is used to exploit a new product opportunity in another, quite
frequently an unexpected environmental change takes place. Another source of
unexpected change is the emergence of new global competitors disrupting the status quo
in domestic industries. These changes have caused increasing uncertainty in the
marketplace (Grewal & Tansuhaj, 2001; Murtha, Lenway, & Bagozzi, 1998; Utterback,
1979). The environment creates uncertainty for an organization’s managers and
influences information processing needs within the top management team. Managers
must cope with uncertainty by identifying opportunities, recognizing problems or threats,
and implementing strategic adaptations (Hambrick, 1980; Jemison, 1984).
Definitions of Environmental Uncertainty
The concept of uncertainty has been defined in a variety of ways in the literature.
Knight (1921) and Luce and Raiffa (1957) defined uncertainty as the inability to assign
probabilities to events. Information theorists have defined the concept of uncertainty in a
narrow fashion (Attneave, 1959; Garner 1962). Garner operationally defined the
uncertainty of an event as “the logarithm of the number of possible outcomes the event
can have…” (p. 19). Decision theorists Knight (1921) and Luce and Raiffa (1957)
defined uncertainty as those situations where the probability of the outcome of events is
unknown, as opposed to risk situations where each outcome has a known probability.
Lawrence and Lorsch (1967) stated that uncertainty consists of three components: the
lack of clarity of information, the long time span of definitive feedback, and the general
uncertainty of causal relationships.
20
Miller (1993) defined uncertainty as “the unpredictability of environmental or
organizational variables that have an impact on corporate performance” (p. 694). Miller
proposed that managers might perceive uncertainty in a threefold categorization: (a)
general environment, (b) industry, and (c) firm-specific variables. General environmental
uncertainties include macroeconomic uncertainty and political and governmental policy
instability. Industry uncertainties include input market, product market, competitive, and
technological uncertainties. Firm-specific uncertainties include uncertainties with respect
to operations, research and development, and management and employee actions.
Milliken (1987) developed a general definition of environmental uncertainty as an
individual’s perceived inability to predict [an organization’s environment] accurately”
because of a “lack… of information” or “an inability to discriminate between relevant
and irrelevant data” (p. 136). He identified three types of uncertainty in environments:
effect, response, and state. Effect uncertainty is an inability to predict the nature of the
effect of a future state of the environment on the organization, and response uncertainty is
an inability to predict the likely consequences of a response choice. State uncertainty
refers to perceived environmental uncertainty (Bunchko, 1994). Milliken stated that,
when administrators could not predict an organization’s environment, perceived
environmental uncertainty occurred. He also stated that, when executives are unable to
predict future changes in components of the environment or processes, and have an
incomplete understanding of the relationships among components of the environment,
perceptions of environmental uncertainty occur.
Duncan (1972a) proposed that environmental uncertainty could be defined by
three components. The first is lack of information regarding the environmental factors
associated with a given decision-making situation. The second component of
environmental uncertainty is not knowing the outcome of a specific decision in terms of
how much the organization would lose if the decision were incorrect. And the last
component is inability to assign probabilities, with any degree of confidence, regarding
how environmental factors will affect the success or failure of the decision unit in
performing its function.
Kahneman and Tversky (1982) asserted that a more insightful approach to
uncertainty is to equate it with unpredictability, the incapability to predict future events.
21
Uncertainty can be ascribed to the external world or to one’s state of knowledge (external
uncertainty versus ignorance). This, in turn, closely relates to a more general distinction
between external and internal attributions of experience. Kahneman and Tversky
proposed that external uncertainty could be determined in two ways. In the first instance,
it can be determined through a distribution mode where the case in question is seen as an
instance of a class of similar cases for which the relative frequencies of outcomes are
known or can be estimated. The second instance is a singular mode in which
probabilities are assessed by the inclination of the particular case at hand.
Complexity and rate of change are two characteristics of the environment that
affect environmental uncertainty (Duncan, 1972a; Tung, 1979). Child (1972) suggested
that complexity was caused by the heterogeneity of relevant environmental events.
Diversity and a large number of external events produce high environmental complexity.
Rate of change involves the frequency of changes occurring in the external environment
(Daft, Sormunen, & Parks, 1988). Duncan determined that the degree of environmental
uncertainty perceived by strategic decision makers increased with the increased
complexity and rate of change in environmental sectors.
Much of the literature on organization theory, business-policy theory, and
strategic management has dealt with dynamism, which primarily reflects instability
(volatility). The dynamism construct is manifest in the degree of instability or turbulence
of such key operating concerns as market and industry conditions, as well as more
general technological, economic, social, and political forces (Aldrich, 1979; Dess &
Beard, 1984; Emery & Trist, 1965; Mintzberg, 1979; Sharfman & Dean, 1991). These
theories suggest that the best measures of environmental stability-instability are
unpredictability and the absence of pattern (Dess & Beard).
Miles, Snow, and Pfeffer (1974) and Jurkovich (1974) indicated that it was
important to differentiate between the rate of environmental change and the degree of
uncertainty (unpredictability of environmental change). Dess and Beard (1984)
commented that dynamism should be restricted to change that is hard to predict and that
engenders uncertainty for key organizational members. Members of organizations
competing in a dynamic industry will be likely to segment similar elements of their
environments to enable them to cope with uncertainty (March & Simon, 1958).
22
Thompson (1967) considered dealing with uncertainty as the “essence of the
administrative process” (p. 159). Uncertainty also will affect organizational structure
more as task uncertainty increases. The more uncertainty a firm faces, the more types of
information the decision makers will need to use in achieving a given level of
performance (Galbraith, 1973).
Dynamism has been empirically related to such macro-organizational phenomena
as structural form (Burns & Stalker, 1961; Lawrence & Lorsch, 1967), strategic
diversification (Keats & Hitt, 1988), the strategy-making process and strategy content
(Miles & Snow, 1978; Miller, Dröge, & Toulouse, 1988), organizational postures toward
innovation (Zahra & Pearce, 1994), and corporate goal structures (Bourgeois, 1985)
Environmental complexity and dynamism have been closely linked to the
information-uncertainty perspective (Lawrence & Lorsch, 1967; Thompson, 1967),
whereas hostility has been tied to the resource-dependence perspective (Aldrich; 1979;
Pfeffer & Salancik, 1978). These perspectives offer a better understanding of the impact
of each environmental dimension on the formulation of a firm’s strategy. These
dimensions affect top management’s perception of uncertainty, which in turn influences
such strategic decision characteristics as propensity for risk taking, proactiveness, and
defensiveness (Miles & Snow, 1978; Miller & Friesen, 1982). Venkatraman and Prescott
(1990) predicted that a fit between environmental dimensions and strategic orientation
would lead to better organizational performance.
In the organizational context, Hickson, Hinings, Lee, Schneck, and Pennings
(1971) defined uncertainty as a “lack of information about future events, so that
alternatives and their outcomes are unpredictable” (p. 219). Lawrence and Lorsch (1967)
and Thompson (1967) suggested that environmental complexity and dynamism were key
dimensions affecting uncertainty.
A significant amount of theoretical and empirical research has been conducted to
understand the nature and effects of environmental uncertainty on organizations (Jauch &
Kraft, 1986; Milliken, 1987; Tymon, Stout, & Shaw, 1998). Efforts have been made
primarily toward such substantive research issues as the nature of the theoretical
relationships among environmental uncertainty (Harrison, 2003; Schwab, 1980) and such
variables as organizational structure (Kim & Burton, 2002; Koberg & Ungson, 1987), a
23
firm’s strategy (Choe, 2003; Gerloff, Muir, & Bodensteiner, 1991; Hitt, Ireland, & Palia,
1982), and economic performance (Kim & Burton, 2002; McCabe, 1990; Sawyerr,
McGee, & Peterson, 2003). Also, March and Simon (1958) and Thompson (1967)
identified environmental uncertainty as a central problem of organizations. Little effort
has gone toward studying such measurement issues as the development of a systematic
body of literature on the relationships among results, operational definitions, and
underlying theoretical constructs (Hinkin, 1995; Schwab, 1980).
Perceived Environmental Uncertainty
This study focuses on top management’s perceptions of uncertainty in the
business environment. Perceived environmental uncertainty refers to the absence of
information with regard to organizations, activities, and events in the environment (Daft,
Sormunen, & Parks, 1988). Ebrahimi (2000) observed that major emphases of research
have been perceived environmental uncertainty and the subjective rather than the
objective data produced and used by strategic decision makers. Uncertainty has been
characterized as either an objective component of the external environment or as the end
result of the process of decision makers’ perceptions through which they designate
meaning and interpret situations (Milken, 1987). Coping with uncertainty is one of the
central issues of organizations’ adaptations to their environments in order to remain
competitive (Crozier, 1964; Thompson, 1967). Adorno, Frenkel-Brunswick, Levinson,
and Sanford (1950) and Berlyne (1968) indicated that people differ in their perceptions
and tolerance for ambiguity or uncertainty.
The extensive research on the concept of the external environment has focused on
distribution channels (Achrol, Reve, & Stern, 1983; Achrol & Stern, 1988; Arndt, 1983;
Dwyer & Welsh, 1985; Stern & Reve, 1980). These studies have identified decision-
making uncertainty as the key outcome of external environmental uncertainty.
Uncertainty in decision making has been characterized as perceptual. Many researchers
have stated that the environment could be considered certain or uncertain only to the
extent that decision makers perceive it to be so (Achrol & Stern, 1988; Aldrich, 1979;
Duncan, 1972a; Emery & Trist, 1965; Pfeffer & Salancik, 1978).
24
Organizational theorists emphasize that organizations must adapt to their
environments if they are to remain viable. One of the main issues in this process is
coping with uncertainty. Duncan (1972a), based on the work of Dill (1958) and Emery
and Trist (1965), investigated perceived environmental uncertainty. He identified a two-
dimensional view of environment: the simple-complex, and the static-dynamic. The
number of factors taken into consideration in making decisions in the simple-complex
and the static-dynamic dimensions is affected by the degree to which those factors in the
decision unit’s environment remain basically the same over time or are in a continual
process of change. Empirical results have indicated that individuals in decision units
facing dynamic, complex environments experienced the greatest amount of uncertainty in
decision making.
Dibb (1996) stated that, when the marketing environment changes, companies
face uncertainty, threats, and opportunities. He suggested that retailers must be ready to
predict likely outcomes and act quickly in order to capitalize on such opportunities.
Keegan (1989) said that retailers need to particularly watch consumer goods because
these products are very sensitive to environmental factors. Dibb, Simkin, Pride, and
Ferrell (1994) stated that, when marketing managers fail to recognize changes in
environmental factors, their firms are left unprepared to take advantage of marketing
opportunities and may suffer from threats that are created by environmental changes.
Two Factors of Perceived Environmental Uncertainty
In the model proposed in this research, market turbulence and competitive
intensity are identified as two factors of perceived environmental uncertainty included in
the environment construct.
Perceived market turbulence. Changes in the environment facing a firm can be
both dramatic and sudden. As environments become more dynamic, threatening, and
complex, traditional managerial orientations are proving to be deficient. The result is all
too often a loss in market position, declining profits, or outright business failure (Cooper,
1979; Covin & Slevin, 1989; Hayes & Abernathy, 1980; Waterman, 1987). Early
researchers of this proposition identified the concepts of turbulence and its opposite,
placidity (Emery & Trist ,1965). Smart and Vertinsky (1984) broadly defined turbulence
25
as change that occurs in the factors or components of an organization’s environment.
One end of the change continuum is a static environmental state (no change), and the
other end is a turbulent or dynamic state where all factors are in constant flux. The
amount of environmental turbulence closely relates to the degree of uncertainty facing a
firm. As the environment becomes increasingly turbulent, factors become less
predictable and more uncertain, and the values of important variables and the variables
themselves move in an unpredictable manner (Smart & Vertinsky). According to Drucker
(1980) and Huber (1984), turbulence displays dramatic increases in the number of events
that occur within a given period.
Wang and Chan (1995) discussed the characteristics of information in a turbulent
environment. In the works of Duncan (1972a), Emery and Trist (1965), Terreberry
(1968), and Thompson (1967), two characteristics contribute to the uncertainty of the
environment: complexity and dynamism. Wang and Chan defined complexity as “the
number and diversity of external factors facing the firm”; they defined dynamism as “the
degree of change exhibited in those factors” (p. 34). Ansoff and McDonnell (1990)
suggested complexity, novelty, rapidity of change, and visibility of the future as four
characteristics of turbulence of the environment. Complexity refers to the variety of
factors that management must consider when making decisions. Novelty refers to the
discontinuity of successive challenges that the firm encounters in the environment.
Rapidity of change is the ratio of the speed of the evolution of changes to the speed of the
firm’s response. Visibility of the future is measured by the predictability of information
about the future that is available at the time of decision making (Ansoff & McDonnell,
1990; Wang & Chan, 1995). Wang and Chan suggested that changes in a turbulent
environment possess one or more of the following characteristics: high complexity, high
novelty, high dynamism, and low visibility.
According to Wang and Chan (1995), “high complexity requires top managers to
consider a large number of factors from various environmental segments (e.g.,
competitive, economic, political, technological, global) to make decisions. High novelty
means that relevant events and trends are discontinuous and unfamiliar to top managers.
High dynamism indicates that relevant environmental factors are in a continuous process
of change. Low visibility means that, by the time that top managers must make decisions,
26
the content of available information is very vague and ambiguous” (p. 34). Wang and
Chan determined that top managers faced a turbulent environment when prevailing
information was highly complicated, novel, dynamic, or ambiguous.
Simon (1973) emphasized that organizations need to resemble information-
processing and decision-making systems, rather than production systems, in order to
respond effectively to environmental turbulence. Douglas (1999) suggested that, as a
condition for success in today’s environment, organizations must make timely, informed
decisions and that information processing is a fundamental factor in this success.
Kohli and Jaworski (1990) noted that market turbulence is a subset of
environmental turbulence that is characterized by rapid change in the composition of
customers and their preferences. In support of this notion, Egeren and O’Connor (1998)
determined that market instability or dynamism could come from changes in consumers
and in consumer preferences. They stated that an organization has little need to adjust its
marketing mix in environments characterized by unchanged consumer preferences. On
the other hand, in an environment remarkable because of rapidly changing sets of
consumers and consumer preferences, the possibility is greater that the organization’s
offerings will differ from consumer needs. Miller (1987) developed measures of the
dynamism, heterogeneity, and hostility components of environmental turbulence. Kohli
and Jaworski’s market turbulence is similar to “heterogeneity.” Miller described
heterogeneity as the change in diversity of production methods and marketing tactics
required to address customers’ needs. Pelham and Wilson (1999) indicated that it seemed
likely that the greater the change in customer preferences, the greater the required
diversity of value-creation efforts to satisfy those needs; therefore, they noted that the
Miller construct of heterogeneity adequately captured the meaning of market turbulence.
They also stated that market turbulence implies changing market strategies in the face of
changing customer needs. In a continually changing business environment, the ability to
adapt and respond to the shifting needs of customers is important to business success. In
order to analyze and fulfill customer needs, and also to assist in monitoring the
competition, the small-business executive may develop externally focused activities.
Competitive intensity. Yasai-Ardekani and Haug (1997) stated that, in highly
competitive environments, advanced environmental signals must be detected,
27
environmental information must be transmitted to key decision makers in a timely
fashion, and the speed of decision making in the implementation of strategic decisions
becomes critical to attainment of organization-environment alignment. Eisenhardt (1989)
characterized highly competitive environments as those with intense price and non-price
competition. Such intense rivalry is often associated with rapid and sometimes
discontinuous changes in the market and in competitive and technological conditions.
Competitors’ actions and reactions may be highly unpredictable, and the speed of
adjustment to market and technological conditions become the key to survival of
participants in such environments (Eisenhardt).
Among retailers, intra-type competition and inter-type competition are the most
common and representative models of modern retail competition today (Berry, 1995;
Miller, Reardon, & McCorkle, 1999; Mishra. 2004). Yet, for most retailers, inter-type
competition is the most challenging (Berry). Increasing inter-type competition has made
it harder for retailers to identify and monitor their competition. Intra-type competition is
defined as “competition between two retailers of the same type, such as two drugstores”
(Mason & Mayer, 1987, p. 208). Inter-type competition is defined as “competition
between different types of retail outlets selling the same merchandise” (Mason & Mayer,
p. 208).
Douglas (1999) maintained that firms must become more flexible in responding
to changes in an external environment characterized by intense competition. As
competition becomes stronger, the choices available for consumers increase. Kohli and
Jaworski (1990) suggested that a business must become more aggressive in discovering
customer wants and building superior customer value in order to satisfy consumers in the
face of increased competition. An organization must monitor and respond to consumers’
changing needs and preferences to insure that they select its products/services over its
competitors’ (Egeren & O’Connor, 1998).
Measuring Environmental Uncertainty
The literature contains examples of the operationalization of environmental
uncertainty. Early research relied primarily on two scales to measure perceived
28
environmental uncertainty. Lawrence and Lorsch (1967) developed the first scale to
examine the uncertainty associated with specific jobs in an organization. They measured
uncertainty in terms of degree of clarity of information, degree of clarity of cause-effect
relationships, and the time span of feedback from the environment. Their instrument was
a nine-item questionnaire that they designed to measure uncertainty in three sub-
environments: marketing, manufacturing, and research. The questions and response
categories ascertain the perception of each sub-environment according to the following
characteristics: degree of clarity of information, general degree of uncertainty of causal
relations, and the time span of feedback about results. Milliken (1987) and Miller (1993)
indicated that this scale might not be an appropriate measure of perceptions of the general
environment of an organization because it focuses on particular jobs or functions. A
further difficulty was pointed out by Tosi, Aldag and Storey (1973) and Downey,
Hellriegel, and Slocum (1975) who found that the Lawrence and Lorsch uncertainty
subscales did not show adequate reliability.
The second scale, which Duncan (1972a) developed, provides an index of
perceived uncertainty, including the degrees to which information from the environment
is lacking, to which information about the outcomes of decisions is lacking, and to which
probabilities cannot be assigned. He conceptualized environmental uncertainty as having
two dimensions: complexity and dynamism. Three operational indicators of these
dimensions were developed: the adequacy of information about the particular factor in
question; the importance of the factor to the firm’s performance; and the predictability of
the environmental consequences of the decisions of the firm’s executives regarding the
factor. Milliken (1987) indicated that the scales to measure these dimensions may
measure alternative forms of perceived environmental uncertainty and that they are not
consistent with Duncan’s conceptual definition of perceived environmental uncertainty as
state uncertainty.
State uncertainty refers to “a perceptual uncertainty about the state of the
environment. It relates directly to unpredictability about the state of the world.
Administrators experience state uncertainty if they perceive that the environment or some
component of the environment is unpredictable” (Gerloff, Muir, & Bodensteiner, 1991, p.
754). Furthermore, Buchko (1994) stated that Duncan’s (1972a) scale might not be an
29
adequate measure of executives’ perceptions of environmental uncertainty. Duncan’s
perceived environmental uncertainty instrument contains five components of the external
environment: customers, suppliers, competitors, socio-political, and technological. His
measure of perceived uncertainty reduces multiple items to a single index. He pooled
respondents’ scores on the five components to obtain a two-dimensional index of
perceived environmental uncertainty, with one dimension being a continuum from simple
to complex and the other dimension being a static-dynamic continuum. Miller (1993)
argued that the pooling of perceived uncertainty scores on multiple items into a single
index presumes that environmental uncertainty is a single, unidimensional construct.
Downey, Hellriegel, and Slocum (1975) criticized Duncan’s measure of perceived
environmental uncertainty for deficiencies in scale construction and low scale reliability.
Miller (1993) developed and tested the reliability of another instrument for
measuring managers’ uncertainty perceptions. Miller’s analysis of data that he collected
from an international sample provides insights into the importance of different country
and industry factors for explaining managers’ perceptions of environmental uncertainty.
Werner, Brouthers, and Brouthers (1996) tested the reliability of Miller’s scales, using
samples of both manufacturing and service firms, and found that the scales had generally
high internal consistency. The findings suggested, however, the need for several changes
in the measurement of perceived environmental uncertainty, which led to their refinement
of Miller’s measure; they labeled the refined measure PEU2. Following Milliken (1987)
and responding to calls for an assessment of perceived environmental uncertainty (PEU)
measures, Ashill and Jobber (2005) viewed PEU measures in terms of state, effect, and
response dimensions. They developed three distinct scales of environmental uncertainty
and assessed these scales’ psychometric properties in terms of dimensionality, reliability,
and validity.
Top Management
As emphasized by Felton (1959), Hambrick and Mason (1984), and Webster
(1988), top managers play an important role in shaping an organization’s values and
30
orientation. According to Mason and Mayer (1987), management needs information to
augment its perceptions and experience as it manages the many issues that emerge from
the firm’s internal and external environments. The political, social, technological, and
economic forces that surround the organization can be considered parts of the external
environment. Technological trends, legislative trends, workforce availability, and the
actions of potential competitors are key external factors on which information is needed.
Financial resources, company strengths and weaknesses, and merchandise quality are
examples of internal information (Mason & Mayer). Anderson and Paine (1975) used a
perceptual model of strategic formulation dependent on managers’ interpretation of
environmental certainty and uncertainty and of high and low need for change. They
maintained that, depending on perceptions of both environmental and internal properties,
managers have considerable leeway in making strategic choices to meet various
contingencies. Cunningham (1977) and Palmer, Veiga, and Vora (1979) also supported
the notion of the influence of management’s perceptions of environmental properties on
resulting strategic changes.
Bourgeois (1978) found that unpredictable environmental changes risked the
survival of a firm and that management’s perceptions and evaluations of risks influenced
the strategic decisions it took in attempting to effectively posture the firm with respect to
those changes; therefore, environmental change, or volatility, interacted with managerial
efforts at strategy making in attaining some level of firm performance.
Risk taking refers to the active willingness to pursue a perceived opportunity
notwithstanding a reasonable chance of costly failure (Caruana, Morris, & Vella, 1998).
Davis and Morris (1991) concluded that the risk-taking dimension of management
involves managers’ “willingness to commit significant resources to opportunities having
a reasonable chance of costly failure” (p. 45). They also stated that entrepreneurship does
not require reckless decision making, but rather a reasonable awareness of the risks
involved and an attempt to manage these risks.
31
Business Strategy
Business strategy has its main value, for both profit-seeking and non-profit
organizations, in determining how an organization defines its relationship to its
environment in the pursuit of its objectives (Bourgeois, 1980b). Although this view
would probably receive little dispute in the field, it is only implicit in most of the
definitions found in the literature. Uniform treatment of the concept is not evident in
these definitions, and this lack of uniformity has led writers such as Hatten and Schendel
(1975) to point out that it is still not clear “what strategy is,” or, more recently, for
Anderson and Paine (1978) to decry the field’s difficulty in defining what is meant by the
term.
Two general types of literature have historically characterized the field of
business policy. The normative works of several researchers have typically instructed
managers on “how to” formulate strategy by scanning the firm’s environment to seek
opportunities that could be matched with the firm’s capabilities (Ackoff, 1970; Andrews,
1971; Ansoff, 1965; Cannon, 1968; Katz, 1970; Steiner, 1979; Uyterhoeven, Ackerman,
& Rosenblum, 1977; Vancil, 1976). The descriptive literature tends to rely on case
analyses to explain how strategy is “really” formed (Allison, 1971; Bower, 1970;
Chandler, 1962; Cyert & March, 1963; Lindblom, 1959).
Among the many definitions of strategy are two underlying connotations: one that
refers to the differentiation and definition of that segment of the environment in which
the organization will operate, and one that refers to the provision of guidance for
subsequent goal-directed activity within that environment. Strategy can be
conceptualized in a hierarchical manner into the following two levels. Domain strategy
refers to the organization’s choice of domain and/or the change of domain that occurs
when a firm diversifies into particular products or markets (Chandler, 1962; Miles &
Snow, 1978). Although Ansoff’s (1965) limited focus concentrates entirely on this level,
Hofer (1973), Hofer and Schendel (1978), Vancil (1976), and Vancil and Lorange (1975)
referred to this level of strategy as “corporate” or “portfolio” strategy, in contrast to
“business” strategy. Their concepts are related to the domain direction-finding strategy.
Domain direction-finding strategy refers to competitive decisions made within a
32
particular task or product market environment. Thus, once a “domain consensus” has
been achieved and a competitive arena defined, the organization then becomes subject to
the environmental constraints to which the contingency theorists attribute primacy (Levin
& White, 1961).
Market Orientation
The subject of market orientation in one form or another has had the center stage
in the theory and practice of marketing since the late 1980s (Kotler, 1977; Levitt, 1960;
Shaprio, 1988; Webster, 1988). Only recently, however, have researchers built a theory
of the antecedents and consequences of market orientation, developed a valid measure of
the construct, and tested its effect on business performance (Kohli & Jaworski, 1990;
Narver & Slater, 1990). Kohli and Jaworski described and offered a theory of market
orientation. They stated, “A market orientation appears to provide a unifying focus for
the efforts and projects of individuals and departments within the organization, thereby
leading to superior performance” (p. 13). Narver and Slater developed a measure of
market orientation and tested its effect on business performance. Their measure of
market orientation consists of three behavioral components–customer orientation,
competitor orientation, and inter-functional coordination–all of which are critical and
related to creating sustainable superior value for customers.
In recent years, the number of empirical studies based on the market orientation
concept has increased (Atuahene-Gima, 1995; Deng & Dart, 1994; Diamontopoulos &
Hart, 1993a; Pitt, Caruana, & Berthon, 1996). Many studies have examined the links
between market orientation and various correlates. Market orientation was first applied
in consumer packaged-goods industries (Chandler, 1977). Later on, it broadened into
other sectors such as aerospace (Reynold, 1966), health service (Zaltman & Vertinsky,
1971), fundraising (Mindak & Bybee, 1976), promotion of social objectives (Kotler &
Zaltman, 1971), banking and financial services (Davies, 1974), nursing (Lewis, 1977),
railways (Christoper, 1975), tourism (Greenley & Matcham, 1986) and apparel
manufacturing (Socha, 1996). As early as 1965, Frame argued that many large U.S.
retailers focused mainly on product, rather than on customers, and suggestions were made
33
to correct this. Berry, Gresham, and Millikan (1990) observed that, despite significant
research on the market orientation of manufacturing firms and a growing interest in the
application of market orientation to business areas other than manufacturing, research on
the implementation of market orientation in retailing remained limited. An extensive
search of the literature showed that such research concerning retailing remains limited to
the present.
Research has been conducted to examine the role of the marketing departments of
retailing companies (Piercy & Alexander, 1988) by comparing UK department stores’
and supermarkets’ operational marketing practices (Greenley & Shipley, 1992) and by
looking into retailing organizational selling behavior (Hogarth-Scott & Parkinson, 1993).
Greenley and Shipley conducted a survey of UK retailers’ attitudes towards marketing
mix factors, customer services, and sources of information for marketing decision making.
Piercy and Alexander (1988) found that 6% of the sample firms were “merchandising
orientated,” 29% were “sales orientated,” and 65% were “marketing orientated.” Many
studies have found that market orientation leads to greater customer satisfaction (Siguaw,
Brown, & Widing, 1994), teamwork, and organizational commitment (Jaworski & Kohli,
1993).
Literature pertaining to market orientation is primarily concerned with large firms,
and relatively little research has concerned small and medium-sized businesses, though
some such research does exist. Peterson (1989) and Sriram and Sapienza (1991) found
that most small U.S. manufacturing businesses adopted a production orientation, and
focusing on sales was the second most common orientation. Meziou (1991) found areas
of strength and weakness in small-business efforts to adopt the marketing concept. These
findings suggest that the marketing concept is part of the managerial philosophy of many
executives, particularly those who have attended training courses on marketing.
Benefits of Market Orientation
The benefits of having a market orientation are noted in numerous scholarly
papers, textbooks, and speeches (Kotler, 1988; Webster, 1988). Market orientation has
been theorized to be the central construct behind successful modern marketing
management and strategy. Jaworski and Kohli (1993) and Narver and Slater (1990)
34
linked high market orientation to high business performance. Many studies have
identified the development of a strong market orientation as an important factor to the
success of a business in firms in the U.S. and similar countries because a strong market
orientation in a company will increase its ability to adapt to changing market conditions,
will increase its ability to be innovative, and will generally increase the performance of
the company (Atuahene-Gima, 1996; Day, 1994; Jaworski & Kohli, 1993; Kohli &
Jaworski, 1990; Narver & Slater, 1990; Ruekert, 1992; Slater & Narver, 1994b).
Theoretically related to the study of market orientation are three research topics.
The first topic is the antecedents of market orientation, which comprise organizational
factors such as structure, climate, conflict coordination, and motivational reward
(Jaworski & Kohli, 1993; Kelley, 1992; Ruekert, 1992). The second is the consequences
of market orientation, including business performance and employee attitudes
(Deshpandé, Farley, & Webster, 1993; Jaworski & Kohli, 1993; Narver & Slater, 1990;
Siguaw, Brown, & Widing, 1994). The last concerns the environmental moderators of
the relationship between market orientation and its consequences (Narver & Slater, 1990;
Slater & Narver, 1994a); however, empirical research has not supported the influence of
environmental moderators (Jaworski & Kohli, 1993).
Previous research has several limitations. As the unit of analysis, most studies
have used strategic business units (SBUs) of a few select corporations, particularly for-
profit business corporations. Only one study (Jaworski & Kohli, 1993) tested the
influence of antecedents on market orientation. Many researchers have indicated the
need to investigate the role of additional influences on market orientation within
organizations (Hambrick, 1987; Jaworski & Kohli, 1993; Siguaw, Brown, & Widing,
1994). Kohli, Jaworski, and Kumar (1993), Narver and Slater (1990) and Deshpandé,
Farely and Webster (1993) have attempted to systematically develop valid measures of
market orientation, but have produced limited results.
Market Orientation and Strategy
Egeren and O’Connor (1998) stated that market orientation is a business strategy.
Andrews (1980) defined corporate strategy as “the pattern of decisions in a company that
determines and reveals its objectives, purposes, or goals; and produces the principal
35
policies and plans for achieving those goals, and defines the range of business the
company is to pursue, the kind of economic and human organization it is or intends to be,
and the nature of the economic and noneconomic contribution it intends to make to its
shareholders, employees, customers, and communities” (p. 18).
For more than a decade, the nature and benefits of a market orientation have been
discussed in the strategic marketing literature, and market orientation has been accepted
as a successful business strategy by academics and practitioners (Day, 1990; Homburg,
Krohmer, & Workman, 2004; Kohli & Jaworski, 1990; Narver & Slater, 1990; Yoon &
Lee, 2005; Zhou, Gao, Yang, & Zhou, 2005). The subject of market orientation in one
form or another has had the center stage in the theory and practice of marketing (Kotler,
1977; Levitt, 1960; Shapiro, 1988; Webster, 1988). Because customer needs and
expectations constantly change with time, the offering of consistently superior quality
products and services calls for continuous tracking and responsiveness to changing needs
in the business environment–in other words, being market oriented (Kohli & Jaworski).
Kumar, Subramanian, and Yauger (1997) summarized the range of the research on
market orientation, some of which has focused on understanding the construct and
examining its relationship to performance.
Kohli and Jaworski (1990) were among the first in recent years to study firms’
market orientation as a research topic, followed by Narver and Slater (1990), Ruckert
(1992), Jaworski and Kohli (1993), Siguaw, Brown, and Widing (1994), and Slater and
Narver (1994a, 1994b). Until the 1990s, the call to adopt market-oriented practices was
more an article of faith than empirically grounded theory. Early researchers suggested
that market orientation was an organizational culture (Narver & Slater, 1990), a
philosophy (Lichtenthal & Wilson, 1992), or a set of behaviors (Jaworski & Kohli, 1990)
that most effectively and efficiently created superior value for the customer and superior
business performance for the organization. The early work served as a reason for
subsequent research examining the effect of market orientation on business profitability
(Kohli & Jaworski, 1990; Kohli, Jaworski, & Kumar, 1993; Narver & Slater, 1990; Slater
& Narver, 1994a, 1994b).
The literature reveals a number of meanings ascribed to market orientation.
Kanopa and Calabro (1971) defined it from the customer perspective and compared that
36
emphasis to a product/cost emphasis. Other researchers have indicated that various
activities were integrated in the marketing function (Felton, 1959; McNamara, 1972),
with the types of activities and the extent of integration depending on whether the
marketing function had a leadership role (Viebranz, 1967). Deshpandé and Webster
(1989) defined market orientation as an organization-level culture–a set of shared values
and beliefs about putting the customer first in business planning. Market orientation also
was defined and operationalized by Narver and Slater and by Kohli and Jaworski in 1990.
Researchers have suggested that market orientation involves an external or outward-
looking perspective of a firm, which is a focus on not only customers but also
competitors. Narver and Slater (1990) operationalized market orientation in terms of
three behavioral dimensions–customer orientation, competitor orientation, and
interfunctional coordination, and two decision criteria–long-term focus and profitability.
The three behavioral components were treated as equally important. They included two
stakeholder groups, customers and competitors, in a firm’s task environment because
these two elements of the task environment are critical for gaining a sustainable
competitive advantage.
Lately, market orientation has been defined, and so measured, as a set of activities
or behaviors relating to market-intelligence gathering, market-intelligence dissemination
cross-functionally within a firm, and the action responses based on this intelligence.
Based on both a literature review and field interviews of managers, Kohli and Jaworski
(1990) identified the market-orientation construct as consisting of three basic
components: intelligence generation, intelligence dissemination, and responsiveness.
Their market-orientation conceptualization put particular emphasis on the firm’s
activities in dealing with information regarding customer needs and the market
environment (Jaworski & Kohli, 1993; Kohli & Jaworski, 1990). Greenley (1995a)
suggested that both pairs of researchers’ approaches to defining the market-orientation
construct were similar in emphasizing behavioral issues. According to both approaches,
the construct involves collecting information about the task environment and
disseminating the information to all organizational units. And in order to provide value
to the customer, the organization must be ready to act on the information. Both
approaches also operationalize the market-orientation construct as a multidimensional
37
concept in which each dimension measures a different feature of market orientation.
Finally, both studies view an organization’s magnitude of market orientation as the sum
total of its relative emphasis on the different components of market orientation. Peters
and Waterman (1982) indicated that the most important component of market orientation
is an emphasis on the customer, but others have suggested that a balance between
customer and competitor is most beneficial. Kohli, Jaworski, and Kumar (1993)
contended that market orientation includes customer, competitor, and technology-
information generation, dissemination, and response implementation.
Market-oriented vs. customer-led business strategies. Because market-oriented
businesses resemble customer-led businesses, confusion exists about what is market-
oriented and what is customer-led (Slater & Narver, 1998). Compared to customer-led
businesses, market-oriented businesses scan the market more broadly, have a longer-term
focus, and are much more likely to be generative learners (Senge, 1990). Slater and
Narver (1995, 1998) described the foundation behaviors of market-oriented businesses.
They indicated that, through the processes of acquiring and evaluating marketing
information in a systematic and anticipatory manner, market-oriented businesses are
committed to understanding both expressed and latent needs of the customers. And, the
businesses develop superior solutions to those needs and the capabilities and plans to be
competitive (Day, 1994; Kohli & Jaworski, 1990; Narver & Slater, 1990; Slater & Narver,
1995, 1998). By sharing market knowledge broadly throughout the organization and by
acting in a coordinated and focused manner, market-oriented businesses continuously
create superior customer value (Slater & Narver, 1995).
Although market orientation has been generally seen in a positive light, customer
orientation has been criticized for contributing such negative outcomes as trivial product
development efforts (Bennett & Cooper, 1979), confused business processes (Macdonald,
1995), and a decline in U.S. industrial competitiveness (Hayes & Wheelwright, 1984).
Components of Market Orientation
Researchers of market orientation have cited five main components of a strong
market orientation (Atuahene-Gima, 1996; Day, 1994; Jaworski & Kohli, 1993; Kohli &
Jaworski, 1990; Narver & Slater, 1990, Ruekert, 1992; Slater & Narver, 1994a, 1994b).
38
The first component is the systematic and continuous generation of market intelligence,
including detailed information about customers, competitors, and the general market
environment. The second component is the dissemination of market intelligence
throughout the organization. The next component is cross-functional coordination and
the inclusion of all employees in focusing their activities toward satisfying customer
needs at all levels of the organization. The fourth component is rapid response to
changing customer needs or market conditions. The last component is a dynamic
strategic-planning process incorporating a long-term perspective (Martin, Martin, &
Grbac, 1998).
Market orientation can refer to the organization-wide generation of market
intelligence pertaining to current and future needs of customers, dissemination of
intelligence within the organization, and responsiveness to it (Kohli & Jaworski, 1990).
This integrated view has three key features. The first feature is an expanded focus on
market rather than customer intelligence. The second feature is an emphasis on a specific
form of interfunctional coordination with respect to market intelligence, and the last
feature is a focus on activities related to intelligence processing rather than the effects of
these activities (Kohli, Jaworski, & Kumar, 1993). Kohli and Jaworski also described
three basic components: intelligence generation, intelligence dissemination, and
responsiveness.
Intelligence generation. Kohli and Jaworski (1990) and Jaworski and Kohli
(1993) suggested that market intelligence relates to observing customer needs and
preferences and that it also involves an analysis of how the needs and preferences might
be affected by such factors as government regulation, technology, competitors, and other
environmental forces. Market-intelligence generation refers to the collection and
assessment of both customer needs/preferences and the forces (task and macro
environments) that influence the development and refinement of those needs.
Importantly, multiple departments should engage in this activity because each has a
unique market lens (Kohli & Jaworski). Researchers have described market-intelligence
generation as including four distinct notions: (a) gathering, monitoring, and analyzing
information pertaining to the current and future needs of customers; (b) monitoring and
analyzing exogenous factors outside the industry that influence the current and future
39
needs of customers (e.g., government regulations, technology, the general economy, and
other environmental forces); (c) monitoring and analyzing competitive actions that
influence the current and future needs of customers; and (d) gathering and monitoring
market intelligence through both formal and informal means (Day & Wensley, 1983;
Houston, 1986; Kohli & Jaworski, 1990) (see Figure 2).
Egeren and O’Connor (1998) proposed that, although market development relates
to consumer needs and preferences, it includes an analysis of how external factors might
affect technological changes, competitive actions, government regulations, and other
environmental forces. Market-intelligence generation includes environmental scanning
activities (Kohli & Jaworski, 1990).
Intelligence dissemination. Intelligence dissemination refers to the process and
extent of market-information exchange within a given organization. Attention should be
balanced between both horizontal (interdepartmental) and vertical transmission of
marketplace information because the dissemination’s focal point is the entire strategic
business unit (SBU). The dissemination of intelligence occurs both formally and
informally (Kohli & Jaworski, 1990). Jaworski and Kohli (1990) and Kohli and Jaworski
(1990) maintained that intelligence dissemination extends beyond collecting information
about customer needs and preferences to include information about an organization’s
entire task environment. They also suggested that intelligence dissemination relates to
the communication and transfer of intelligence information to all departments and
individuals within an organization through both formal and informal channels. Jaworski
and Kohli (1993) and Slater and Narver (1994a) indicated that market-intelligence
dissemination has two distinct aspects. The first aspect is sharing both existing and
anticipated information throughout the organization (i.e., ensuring vertical and horizontal
flows of information within and between departments) concerning the current and future
customer needs, exogenous factors, and competition. The second aspect is ensuring
effective use of disseminated information by encouraging all departments and personnel
to share information concerning current and future customer needs, exogenous factors,
and competitors.
Responsiveness. Responsiveness is action taken in response to intelligence that is
generated and disseminated. On the planning side, the focus is on the degree to which
40
marketplace needs play a role in the evaluation of market segments and the development
of marketing programs. Action on the basis of market intelligence concerns the speed
and coordination in implementing marketing programs (Kohli & Jaworski, 1990). Those
authors observed that an organization accomplishes nothing if it does not respond to
information. Kohil and Jaworski (1990) and Kumar, Subramanian, and Yauger (1997)
stated that an organization must communicate, disseminate, and oftentimes “sell” market
intelligence to relevant departments and individuals in the organization in order to be
market oriented. They added that a market-oriented organization responds to or acts on
the market intelligence that is gathered and disseminated. Kohli, Jaworski, and Kumar
(1993) and Narver and Slater (1990) stated that responsiveness requires three distinct
activities. They are (a) developing, designing, implementing, and altering goods and
services (tangible and intangible) in response to the current and future needs of
customers; (b) developing, designing, implementing, and altering systems to promote,
distribute, and price goods and services that respond to the current and future needs of
customers; and (c) utilizing market segmentation, product differentiation, and other
marketing strategies in the development, design, implementation, and alteration of goods
and services and their corresponding systems of promotion, distribution, and pricing.
Measuring Market Orientation
Narver and Slater (N-S) developed a 15-item factor-weighted scale to measure
market orientation, for which the weighting factors included some that were firm-specific
(size, growth, and return on investment) and others referring to the external environment
(market growth, buyer and seller power, industry concentration and ease of entry, and
technological change). The 15-item market-orientation scale was tested, along with the
measures of the weighting factors. They tested the market-orientation scale on split
samples using 371 self-administered questionnaires from top managers of 140 strategic
business units (SBUs) in a single corporation. They found positive and significant effects
of market orientation on firm performance for commodity and noncommodity SBUs
(Narver & Slater, 1990).
41
Deshpandé, Farley, and Webster (D-F-W) developed a customer-orientation scale
as part of a broader study of the impact of corporate innovation and market orientation on
firm performance. Their nine-item scale was developed from a list of 30 items, along
with measures of item salience, using results from an earlier study of 138 Japanese
executives (Deshpandé, Farley, & Webster, 1993).
In 1993, Kohli, Jaworski, and Kumar (K-J-K) published MARKOR, a
freestanding 20-item scale used in their study of market orientation, but they did not
attempt to explain dependent variables or use other explanatory factors in their study.
Earlier, Kohli and Jaworski (1990) developed a conceptual path model of factors
affecting market orientation. Their scale was made using nonlinear factor analysis of
matched samples of senior marketing and nonmarketing executives from 222 SBUs,
including firms that were members of the Marketing Science Institute.
Each of the scales mentioned above was used in later research. Deshpandé,
Farley, and Webster (1995) extended their previous research to international comparisons.
Slater and Narver (1994a) examined whether the competitive environment moderated the
market orientation-performance relationship using the N-S scale. Using the K-J-K scale,
adding a series of antecedent and performance measures, Selnes, Jaworski, and Kohli
(1996) conducted a cross-country comparison.
Organizational Structure
Theorists have defined organizational structure in various ways. Miller and
Dröge (1986) defined structure as capturing centralization of authority, formalization,
complexity, and integration. Organ and Battement (1986) defined structure as “the
formal, systematic arrangement of the operations to one another” (p. 607). Griffin and
Moorhead (1986) perceived structure as including the organization’s task reporting and
the various relationships within the organization. Although these definitions appear
similar, Daft’s (1989) definition of organizational structure is more comprehensive than
the others above. Daft (1989) defined structure as consisting of formal reporting
42
relationships, including the number of levels in the hierarchy, the span of control of
managers and supervisors, and the communication across the organization’s departments.
Mechanisitc vs. Organic Organizational Structure
Many researchers have worked to dimensionalize and explain diversity and
variety in the structure of organizations (Burns & Stalker, 1961; Lawrence & Lorsch,
1967; Woodward, 1965). They have drawn a principal contrast between mechanistic or
bureaucratic structures and organic ones. A mechanistic structure has vertical hierarchies,
numerous departments, limited decentralization, and many rules and procedures. It tends
to have authority centralized at the top of the system, considerable standardization and
formalization, and tight specification of duties, and interaction is primarily in the vertical
direction (Bantel, 1993; Marsden, Cook, & Kalleberg, 1994). On other hand, an organic
structure tends to be open; it has less structural complexity, fewer rules, extensive
decentralization, and a less rigid definition of methods, duties and powers, and it is prone
to rich, horizontal interaction (Bantel, 1993; Johnson & Scholes, 1993; Marsden, Cook,
& Kalleberg, 1994). Özsomer, Calantone, and Benedetto (1997) stated that the
appropriate organizational structure can change through time and, therefore, must be
explicitly managed by the firm.
Burns and Stalker (1961) investigated 20 manufacturing firms and concluded that,
depending on the nature of a firm’s external environment, either the mechanistic or
organic organizational form could be successful. The more bureaucratic form,
mechanistic, thrives when the environment is stable, but experiences difficulty when the
environment is rapidly changing and uncertain. In this environment, the much less
bureaucratic organic form performs best. Utterback (1979) suggested that firms with
flexible production processes and organizational structures tend to be better at product
and process innovation than more rigidly structured firms. Mechanistic organizations are
highly bureaucratic in form and have the characteristics of centralization, many rules,
precise division of labor, narrow spans of control, and formal coordination (Peters &
Waterman, 1982; Schermerborn, 1993).
43
Several studies have found that, in unpredictable environments, organic structures
allow rapid organizational response to changing external forces, whereas mechanistic
structures are better suited to predictable environments where rapid organizational
responses are not typically required (Burns & Stalker, 1961; Covin & Slevin, 1989;
Khandwalla, 1977; Lawrence & Lorsch, 1967). Bourgeois, McAllister, and Mitchell
(1978) supported the idea that organic structures allow rapid response in the face of
turbulent environments. Burns and Stalker showed that organic structures were effective
in conditions of environmental dynamism. They found that such structures were likely to
be more positively related with firm performance under dynamic than under stable
environmental conditions. Because environmental dynamism influences
structure/performance relationships, the effects of this variable were controlled in the data
analysis.
A long tradition of support exists for the notion that environment moderates the
effectiveness of organizational structure. Lawrence and Lorsch’s (1967) study of the
influence of a business’s technological, market, and economic setting on its pattern of
organization and administration is the practical beginning of this stream.
According to contingency theory, differences in structure largely relate to the
level of uncertainty and complexity that an organization faces. Uncertainty could be a
result of conditions in the customer environment or of technological requirements or
limitations. Mechanistic structure is often found under stable and well-understood
conditions, in situations requiring efficient execution or repetitive tasks. Organic
structure would be found in the presence of substantial uncertainty, in conditions
involving innovation or adjustment to changing circumstances. Researchers attempting
to explain coordination strategies have looked, therefore, beyond organizational
boundaries.
Özsomer, Calantone, and Benedetto (1997) proposed that the firm should adapt
not only its strategic posture to the environment, but also its organizational structure.
Bourgeois (1985) and Porter (1980, 1985) explained that, through its strategic posture, a
firm selects and interprets its environment, responds to those elements it considers fixed,
and adapts its strategy to the requirements of the environment.
44
Morris, Avila, and Allen (1993) found that environmental turbulence could lead
to increased formalization in decision making and that such turbulence was also
associated with higher levels of entrepreneurship (Covin & Slevin, 1989; Davis, Morris,
& Allen, 1991). Schaffer (1984) discovered that organizations operating in relatively
stable environments had a tendency to be more mechanistic and could better utilize
prescribed procedures, methods, and rules for governing and controlling their operations.
Conversely, organizations operating in dynamic environments did better with organic
structures, which provided more flexibility in uncertain environments.
Several authors have argued that organizational effectiveness is a function of the
correctness and tightness of fit between the structure and processes of an organization
and its environment (Burns & Stalker, 1961; Dill, 1958; Hage & Aiken, 1970; Lawrence
& Lorsch, 1969; Lorsch & Morse, 1974). Lawrence and Dyer (1983) argued that an
organic structure is best suited to coping with or adapting to a turbulent environment.
Mintzberg (1979) indicated that the low degree of formality and high degree of
information sharing and decentralization of an organic structure help improve an
organization’s flexibility and ability to adapt to continual environment change. He also
indicated that a generally accepted principle of organizational theory is that
environmental dynamism drives the structures of organizations toward greater organicity.
The impulsiveness of dynamic environments can work against any benefit that would
result from the adoption of mechanistic structures. In such environments, firms must be
able to rapidly respond to changing conditions. Accordingly, organic structures have
been found to be particularly common and effective in dynamic environments (Miller &
Friesen, 1984).
Peters and Waterman (1982) described organistic structures as “loose” and having
formal means of capturing the advantages of informal structures. This type of structure
utilizes networks of alliances and interpersonal relationships, which provides the
resources needed to operate successfully.
45
Dimensions of Firm Structure
Researchers began in the 1940s to identify the dimensions of firm structure. As a
result of findings about the dimensions of organizational structure, the attention of
researchers in the area shifted in the 1970s to attempts to formulate a typology of
structure. Typologies of structure most often include the degree of each dimension, such
as formalization, centralization, and specialization of structure. According to Boyd,
Walker, and Larreche (1995), three structural variables–formalization, centralization, and
specialization–are important in shaping the performance of both a strategic business unit
and its marketing department within the environment of a given competitive strategy.
Covin, Slevin, and Schultz (1994) defined organizational structure as “the
arrangement of the workflow, authority, and communication relationship within a firm,”
adding that “structure can be operationally defined in several ways: in terms of the
organization of departments or work units, as in functional structures, product structures,
and matrix structures, and in terms of its core dimensions, like formalization and
centralization” (p. 484). Schaffer (1984) and Miller and Dröge (1986) defined the
dimensions of an organization’s structure as the degree of formality (rules and
procedures), the degree of complexity (the degree of specialization and task diversity),
and the degree of centralization (the distribution of decision authority within the
organization’s hierarchy), capturing centralization of authority and integration. A firm
should adapt both its strategic posture and its organizational structure with regard to the
environment.
Ghoshal, Korine, and Szulanski (1994) described organizational structure as
simply the differentiation between organizations according to centralization or
decentralization. Habib and Victor (1991) categorized multinational corporations into
“pure” structures, including world-wide function, international division, world-wide
product division, geographic region, and matrix. These categories refer to differences in
the relationship of foreign operations to the corporate head office. Another categorization
of organizational structure includes function, project, and matrix. Yet another approach
is the mechanistic-organic continuum of structure (Burns & Stalker, 1961), as previously
discussed. Stock, Greis, and Kasarda (1999) stated, “each of these methods in some way
46
differentiates organizations in terms of how tasks are allocated among organizational
units and how decision-making authority is specified” (p. 42).
Chandler (1962) determined that organizational structure could be regarded as
comprising the parameters that define the way an organization is assembled. Schaffer
(1984) stated that, when the dimensions of the organization’s structure are such that they
allow the organization to complete its purpose and meet its goals and objectives, it has
established structural effectiveness.
Formalization
Ruekert, Walker, and Roering (1985) defined formalization as the degree to
which decisions and working relationships are managed by strict rules and standard
policies and procedures. It also refers to the existence of formal rules and regulations and
the organization’s efforts to enforce those rules. Zeithmal, Berry, and Parasuraman
(1988) observed that, in a highly structured environment, employees perform
standardized responsibilities which are regulated by strict rules and operating procedures.
Galbraith (1973) and Daft and Lengel (1986) found that formalization might increase the
level of certain types of information processing and information use.
Centralization
Centralization refers to the extent to which decision-making power is
concentrated at the top level of the organization (Massie, 1965; Sisk & Williams, 1981).
Boyd, Walker, and Larreche (1995) noted that middle- and lower-level managers are
more self-sufficient and participate in a wider range of decisions in more decentralized
units. In McGregor’s (1960) Theory X, the qualities of centralization in terms of
discipline, standardization, single-mindedness, and effective control were underpinned by
a set of assumptions. Such a management system favors efficiency over effectiveness
and presupposes a stable, constant, and clearly defined external environment (Spillard,
1985). In many studies, reduction in centralization has been associated with growing
uncertainty in the external environment of firms. And, such uncertainty tends to help the
entrepreneurial process through the opportunities it creates (Davis, Morris, & Allen,
1991; Morris, Avila, & Allen, 1993).
47
Specialization
Specialization refers to the division of tasks and activities across positions within
the organizational unit. A highly specialized marketing department has a large number of
specialists, such as market researchers, advertising managers, and sales promotion
managers, who direct their efforts to a narrowly defined set of activities (Boyd, Walker,
& Larreche, 1995).
Kast and Rosenzweig (1973), Dunn (1971), and Chakravarthy (1982) suggested
that the structural characteristics of an organization with a high level of adaptability are
flexibility and decentralization, similar to an organic structure. Chakravarthy (1982),
Khandwalla (1977), and Slevin (1989) proposed that an organization with a low level of
adaptability would have the structural characteristics of tight control, centralized decision
making, strict adherence to formally prescribed rules and procedures, and clearly
structured reporting relationships similar to a mechanistic structure. Highly specialized
organizations have a high proportion of “specialists” who direct their efforts to a well-
defined set of activities (Rueker, Walker, & Roering, 1985). In complex environments,
specialists are experts in their respective areas and are typically given considerable power
to determine the best approach to complete their tasks (Mintzberg, 1979). This expertise
allows the organization to respond rapidly to changes in its environment (Walker &
Ruekert, 1987).
Business Performance
Both in terms of definition and measurement, performance is a difficult concept.
Organizational performance is central to the study of business strategy or policies
(Bourgeoise & Astley, 1979; Cheng & McKinley, 1983; White & Hamermesh, 1981).
Researchers frequently take the performance of organizations into account when
investigating such organizational phenomena as structure, strategy, and planning;
however, in the literature, researchers disagree on what creates effective performance of a
firm and how to measure performance. Various researchers have focused on modeling
the antecedents and consequences of market orientation and on developing a valid
48
measure of the construct to test its effect on organizational performance (Jaworski &
Kohli, 1993; Kohli, Jaworski, & Kumar, 1993; Narver & Slater, 1990; Siguaw, Brown, &
Widing, 1994; Slater & Narver, 1994a).
Measuring Firm Performance
Measuring firms’ performance has been a major challenge for researchers.
Strategic management researchers have raised questions about how performance should
be measured (Connolly, Conlon, & Deutsch, 1980; Ford & Schellenberg , 1982.)
Because performance is a multidimensional construct, any single index may not provide a
comprehensive understanding of the performance implications related to the constructs of
interest (Chakravathy, 1986). Firm performance can be measured according to many
different methods. According to Welch (1993), the three most important things to
measure in business are customer satisfaction, employee satisfaction, and cash flow. Bart
and Baetz (1998) indicated that the relationship of firms’ mission statements to
performance can be assessed with five measures, four of them financial and one
behavioral.
Many researchers agree that “hard” measures, such as economic measures, are
more reasonable for use in measuring a firm’s performance than subjective measures.
The advantages of hard measures, such as economic or financial measures of
performance, are their usefulness for practitioners (Cheng & McKinley, 1983).
Bourgeois (1980a) suggested that the use of hard measures increases the level of
confidence in the reported relationships and is more meaningful to managers than soft
measures. Several financial performance measures are return on sales (ROS) (Brush &
VanderWerf, 1990; McDougall, Covin, Ribinson, & Herron, 1994); return on assets
(ROA) (David, 1989; Roth & Ricks, 1994); the percentage of annual change in sales
(Brush & VanderWerf, 1990; McDougall, Covin, Ribinson, & Herron, 1994); and the
percentage of annual change in profits. ROA is a presumed aim of most businesses and
is a measure often used in research (Bettis & Hall, 1982; Hambrick, 1983a; Hoskisson,
1987). When the sample includes small, privately-held firms, growth measures are also
useful performance measures (Bagby & Shull, 1987; Dess & Robinson, 1984). Hofer and
49
Schendel (1978) suggested sales growth as one reflection of how well an organization
relates to its environment. Schaffer and Litschert (1990) suggested that revenue and
profit are important variables for measuring a firm’s performance. They used the
percentage change in total revenue and the average change in operating profit to measure
firm performance.
According to Dess and Robinson (1984), researchers face major problems in
allocating the assets and sales of multi-industry firms among the various industries in
which they do business. Because of the confidential nature of the data and the variation
among participating firms with regard to accounting procedures, accurate estimates are
difficult to obtain by survey techniques and represent a major source of measurement
error. Many studies have addressed the problems associated with the accuracy of
performance data from documentary sources (Anderson & Paine, 1975; Buzzell, Gale, &
Sultan, 1975; Glueck & Willis, 1979; San Miguel, 1977). The researcher investigating
small firms is often confronted with an inability to obtain objective performance
measures on a consistent basis because of restricted access to performance data on
privately-held firms. Even if access to such information is obtained with a sample of
privately-held firms, there is great risk of error attributable to varying accounting
procedures in these firms. Owners of privately-held firms are very sensitive about
releasing any performance-related data. Also, organizational forms, such as sole
proprietorship, partnership, or corporation, can evince artificial differences (Dess &
Robinson).
Multi-dimensional vs. Uni-dimensional Measures
Researchers have debated reliability issues in measuring firm performance
(Prehalad & Hamel, 1994; Waddock & Graves, 1997). Prahalad and Hamel (1994)
argued that changing social aspects, such as customer expectations, regulatory shifts, the
problem of excess capacity, and environmental concerns, have a significant influence on
strategy and performance. They have also suggested that firm performance should be
measured by not only economic aspects, but also social aspects. The social and economic
aspects of firm performance have proved difficult to operationalize, however (Dess &
Robinson, 1984; Kirchhoff, 1977). Even though measuring firm performance from two
50
aspects should be more reliable than just one aspect, it is not easy to access data about the
social aspect. For this reason, the economic measure is often viewed as the appropriate
measurement for firm performance. Firm performance reflecting the perspective of
strategic management has traditionally been operationalized in terms of economic or
financial criteria. It is generally measured with respect to such objectives as sales, profits,
costs, quality, and product performance.
Subjective Measures and Judgmental Measures
A subjective measure of firm performance has often been used in order to
overcome the problems of gathering performance data across industries (Dess &
Robinson, 1984; Govindarajan, 1988; Miller, 1988). Many studies have used subjective
measures. Subjective measures have been compared with objective data for a sample of
firms from a regional newspaper industry (Bourgeois, 1980a; Dess, & Robinson, 1984;
Wooldridge & Floyd, 1990). In Bowman and Ambrosini's (1997) study, all members of a
top management team were asked to rate their firm's performance relative to other firms
in their industry. Then those ratings were averaged to produce for each firm single
measures of relative profitability and of relative sales performance. According to
Bowman and Ambrsini, selecting firms from the same industry could control the effects
of industry conditions. They also stated that individual firms in the same industry are
likely to have the same underlying cost and revenue structures. Selecting firms broadly
from the same industry, the researchers were able to compare profitability ratios.
Raju, Lonial, and Gupta (1995) suggested that business performance can be
measured through a judgmental measure and an objective measure, although market
orientation can be measured using a multidimensional instrument. They stated that a
judgmental measure might ask respondents to rate only the overall performance of the
business compared to major competitors, and an objective measure could be market share
in monetary terms. They found that a considerable market orientation had an impact on
the judgmental performance measure, but no impact on market share. In addition, they
suggested that, for cross-sectional studies, judgmental measures of performance might be
more suitable than objective performance measures.
51
Retail Performance
Pearce (1998) argued that a focus on retail performance can and should occur at
several levels in a firm. He stated that the measures of retail performance in use vary
greatly in terms of level. Overall measures of both financial performance (return on
common equity) and marketing performance (image positioning in the competitive
marketplace) are used at the firm level, whereas units’ asset-use performance measures,
such as dollar contribution per square meter of selling space, are used at various
operational levels (divisions, regions, stores, departments). Many merchandising levels
(groups, classifications, categories, lines, items) use buying and selling indicators, such as
gross margin return on investment in inventory and direct product profitability, to
measure performance.
In the present study, retail store performance was measured with a modified
version of an instrument developed by Gupta and Govindarajan (1984). The respondents
were asked to indicate on a five-point Likert-type scale, ranging from highly dissatisfied
to highly satisfied, the extent to which they were currently satisfied with their own stores’
performance on each of the following financial performance criteria: return on
investment, earnings growth, sales growth, market share, return on assets, and cash flow.
Summary
This chapter comprises a review of the literature that relates to the constructs of
the model guiding this research. These include the external business environment,
market-orientation strategy, organizational structure, top management’s willingness to
adapt to a changing market, and store performance. In this chapter, each construct in the
model was defined and discussed in terms of the factors measured in this research.
Under the category of environment, the main ways that environment is
conceptualized and some examples of empirical research were given. Also discussed was
environmental uncertainty, which is a significant factor that affects firm performance, as
shown in the model. The perception of environmental uncertainty by top management is
a focus of the study, and the relevant literature was discussed in this chapter. In the
52
model, under the construct of environment, market turbulence and competitive intensity
were identified as two factors of perceived environmental uncertainty.
Chapter 2 also included discussion of studies and concepts relating to top
management’s’ perceptions of environmental stability or turbulence and the resulting
strategic choices. Market orientation is a business strategy that includes intelligence
generation, intelligence dissemination, and responsiveness, which is seen as action taken
in response to intelligence that is generated and disseminated. The construct of
organizational structure was discussed, and in particular, organicity of organizational
structure as it relates to formalization, centralization, and specialization. Organic
structure, as opposed to mechanistic structure, has been found to be best suited to coping
with adapting to a turbulent environment (Lawrence & Dyer, 1983).
Finally, this chapter reviewed literature relevant to the construct of firm
performance. Measurement of firm performance has been difficult because firm
performance is a multidimensional construct. This study focuses on store performance,
rather than firm performance. The measurement of store performance in this research
focuses on return on investment, earnings growth, sales growth, market share, return-on-
assets, and cash flow. For the purposes of this study, store performance is measured
using a modified version of an instrument developed by Gupta and Govindarajan (1984),
which uses a five-point Likert-type scale ranging from highly dissatisfied to highly
satisfied.
53
CHAPTER 3
LITERATURE REVIEW
Part 2
Introduction
Chapter 2 presented a detailed discussion of each construct in the research model
(see Figure 1). Chapter 3 focuses on research that deals with the interrelationships
among the constructs of environment, business strategy, organizational structure, top
management’s willingness to adapt to environmental changes, and firm performance.
Research has linked two, three, or four of these constructs, but none of the previous
research has investigated the relationships among all five of the constructs addressed in
this study. This chapter presents the hypotheses on relationships between the constructs
that form the variables in this study, and also reviews the literature which provided the
basis for deriving each of the hypotheses.
Interrelationships Among the Components of Strategic Management and
Hypothesis Development
Environment
This section discusses literature that links environment with other constructs in
this study. The relationships discussed include the effects of the environment, market-
orientation strategy, and organizational structure on firm performance. Recent research
has shown that general environmental dimensions, such as level of industry stagnation
and dynamism, may affect small-firm performance (Miller & Toulouse, 1986; Peterson,
1985). Many researchers have conducted conceptual and empirical studies to introduce
new theories and to examine relationships between the following variables: environment,
structuring, strategic planning and organizational performance, especially financial
performance (Jogaratnam, 1995; West, 1988; West & Olsen, 1989).
54
The model developed in this study (see Figure 1) shows the interrelationships of
the variables that are the components of strategic management, including perceived
environmental uncertainty, top management’s willingness to adapt to a changing market,
market-orientation strategy, organicity of organizational structure, and store performance.
The proposition that the constructs in the strategic management process are causally
related leads to the following overall hypothesis, under which all the other hypotheses in
this study are subsumed.
Hypothesis : Causal relationships will be found among the strategic management
constructs, including perceived environmental uncertainty, top management's
willingness to adapt to a changing market, market-orientation strategy, organicity
of organizational structure, and store performance.
Environment and Business Strategy
Strategy has a strong connection to environment. Many researchers have found
that the environment can affect firms’ strategies (Clark, 1971; Hambrick, 1983a; Jauch,
Osborn, & Glueck, 1980; Jemison, 1981; Rockart, 1979; Selznick, 1948; White &
Hamermesh, 1981). The traditional contingency literature suggests that environment can
and should influence strategy (Burns & Stlker, 1961; Dess & Beard, 1984; Hambrick,
1983b, 1985; Miller & Friesen, 1984; Zaltman, Duncan, & Holbek, 1973). Anderson and
Paine (1975) noted that both strategy and environment have been explored as
determinants of a third variable, usually organizational structure, but they have rarely
been studied together.
Porter (1980) and Scherer (1980) have adopted a similar stance, claiming that
industrial structure influences strategy, but that a firm can select from a range of
strategies (Child, 1972; Hrebiniak & Joyce, 1985). Paine and Anderson (1977) stated
that firms in uncertain environments tend to utilize inventive strategies. Lenz (1981)
indicated that strategy can influence environment, causing a firm to be attracted to
customers with particular preferences and inviting a kind of revenge from competitors.
Caves and Rosen (1982) observed that, even though each large or small firm has its own
strategic methods, these are not always equally effective for dealing with uncertainty.
55
Miller (1988) stated that “both causal directions interact in an iterative, dynamic process:
strategy defines for attention particular niches of an environment, and environment,
through customer needs and competitors’ challenges, induces strategic adaptation. Such
mutual causality is likely to be the rule” (p. 282). Miller also argued that the matching of
strategy and environment can influence performance and that a poor match could hurt a
firm’s performance.
Andrews (1971) and Schendel and Hofer (1979) indicated that organizational
managers change their strategies to reflect changing conditions in their environment. On
the other hand, other strategy theorists have argued that organizations are constrained in
their ability to adapt (Boeker, 1989; Hannan & Freeman, 1984; Kelley & Amburgey,
1991; Pfeffer & Salancik, 1978; Quinn, 1980).
Several studies have analyzed the relationship between different environmental
factors and the effects of moderating influences on organizational variables (McKee,
Varadarajan, & Pride, 1989; Snow & Hreveniak, 1980.) It has been suggested that firms
should monitor their external environments when considering the development of a
strong market-oriented culture (Houston, 1986; Kohli & Jaworski, 1990). Because
market-oriented firms are externally oriented, the construct of market orientation is
related to the industry environment. Golden, Doney, Johnson, and Smith (1995)
examined four factors to determine the influence of the external environment on market
orientation in transition economies. The four factors are demand changes, product
obsolescence, competitive pressures, and product technology. These variables appear to
reflect four external factors, specifically market growth/demand, market turbulence,
competitive intensity and technological turbulence, which Kohli and Jaworski identified
as potential moderators of the market orientation and performance link.
The importance of the market-orientation concept has generated a continuous
flow of research in the literature. Appiah-Adu (1998) observed that most empirical
studies on the subject have been conducted in industrialized economies. In recent years,
several researchers have paid attention to developing nations that are making the
transition from centralized economies to a more free-market orientation (Aggarwal &
Singh, 2005; Chang & Chen, 1998; Chelariu, Ouattarra, & Dadzie, 2002; Darroch &
McNaughton, 2003; Kim, 2004; Kuada & Buatsi, 2005; Kwon & Ho, 2000; Mavondo,
56
1999; Sittimalakorn & Hart, 2004). Because of the economic and structural changes
taking place through economic reforms in many developing nations, business
environments in such countries are rapidly evolving and thereby influencing firms to
change from production to sales and market orientations. Bhuain (1996) indicated that
these developments in emerging economies could provide appropriate grounds for
analysis of market orientation and the links with its various correlates.
In the management literature, environmental turbulence is identified as an
important construct in the planning and implementation of strategy (Golden, Doney,
Johnson, & Smith, 1995; Lusch & Laczniak, 1987; Slater & Narver, 1994a). Davis and
Morris (1991) stated that environmental turbulence has latent implications for a firm’s
marketing orientation. Moreover, Davis, Morris, and Allen (1991) found that perceived
environmental turbulence was positively related to a firm’s level of market orientation
due to the firm’s desire to minimize uncertainty and the importance of market
segmentation in such markets. Researchers have given much attention to potential
environmental moderators such as competitive intensity, market turbulence, and
technological turbulence, but they have given little attention to the actual mechanism
responsible for transforming market-oriented behavior into superior corporate
performance (Greenley, 1995a; Jaworski & Kohli, 1993; Slater & Narver, 1994a). Davis
Morris, and Allen indicated that environmental turbulence has implications for firms’
market orientation. Khandwalla (1977) suggested that marketing activities are a principal
mechanism for dealing with the uncertainty inherent in turbulent environments. Kohli
and Jaworski (1990) noted that, in a stable environment where customer types and
preferences do not change frequently over time, a market orientation would likely have a
limited impact on performance because minimal modification to a marketing mix is
required to serve such markets effectively.
Some researchers have maintained that only through marketing inputs can
perspectives regarding changing social, economic, political, and technological
environments be effectively utilized in the planning and development of corporate
strategy (Jain, 1983; Murray, 1984). Buzzell explained more concisely that, if firms must
change in order to compete, then marketing suddenly becomes an important function
(“Marketing: The New,” 1983). Houston (1986), Kohli and Jaworski (1990), and Narver
57
and Slater (1990) determined that firms examine the external environment prior to
adopting a highly market-oriented organizational behavior as the strategy of choice. Day
and Wensley (1988) indicated that environment might effect the necessary focus, either
on customers or competitors, when a firm has a market orientation. Kohli and Jaworski
(1990) also suggested that certain characteristics of the market environment might affect
the strength (or the importance) of the relationship between market orientation and
performance. Such environmental factors as turbulence in the market and technology
have been cited. Turbulence in the market and technology typically are generated by
heterogeneity in consumer preferences or by irresolution of industry technological
standards, respectively.
On the basis of the literature, two possible principal moderator effects of a
competitive environment on market orientation can be identified (Day & Wensley, 1988;
Kohli & Jaworski, 1990; Slater & Narver, 1999). First, in a competitive environment, a
low rate of market growth could affect the strength of the market orientation-performance
relationship (Kohli & Jaworski). According to Kohli and Jaworski, executives and
managers will assess carefully the expected benefits and the necessary resource
commitment and cost of increasing their businesses’ market orientation. These authors
identified four contexts in an “environmental moderator,” which are expected costs of
increasing or maintaining a market orientation. They noted that these costs could exceed
the expected benefits of a market orientation, and therefore may not be strongly related to
business performance. Jaworski and Kohli (1992) found that the environmental variables
of market turbulence, competitive intensity, and technological turbulence had no
moderating effect on the strength of the relationship between market orientation and
performance. Second, in a competitive environment, the number and power of
competitors could affect the focus of the external emphasis within a market orientation,
leading to a greater emphasis on either customer analysis relative to competitor analysis
or vice versa within a given magnitude of market orientation (Day & Wensley, 1988).
Pfeffer and Salancik (1978) stated that, when extensive, rapid, or adverse changes
characterize the market, managers tend to simplify the changes or selectively attend to
certain aspects of the changes. Day and Wensley indicated that these processes often
lead to adoption of either a customer- or competitor-focused market perspective. They
58
also stated that managers analyze the relative importance of customer or competitor to
their businesses’ ability to create and sustain superior value for customers.
Egeren and O’Connor (1998) noted that the greater the technological change in a
market, the more diverse will be the opportunities to create value for consumers. In this
situation, a firm would seek a stronger market orientation. Previous research had found a
positive relationship between market orientation and a high degree of turbulence (Kohli
& Jaworski, 1990; Slater & Narver, 1994a).
Perceived Environmental Uncertainty and Business Strategy Relationship
A market-oriented strategy takes into account environmental change. Changes in
the environment do more than create a need for entrepreneurial and marketing
orientations; they are the basis of these orientations (Davis & Morris, 1991). The
entrepreneurial firm becomes an agent of change instead of simply adapting to external
developments (Burgelman, 1984). Similarly, Zeithaml and Zeithaml (1984) suggested
that marketing be reconceptualized as a proactive effort whose aims are to effect and
manage change. Accordingly, the marketer would try to redefine the product and market
context within the organization rather than simply choosing a strategy within a given
environment.
Market turbulence is characterized by changes in consumers’ needs and
preferences. The firm does not need to adjust the marketing mix strategy in order to
respond efficiently to consumers’ behavior when consumers’ needs and preferences are
stable, so the firm might be a less market-oriented organization. Kohli and Jaworski
(1990) and Slater and Narver (1994) indicated that if the degree of consumers’
preferences is unstable over time and a firm does not respond to consumers’ needs in a
timely fashion, the firm’s performance may be adversely affected. Thus, the firm will
become a market-oriented organization when consumer preferences are unstable.
Therefore, turbulent preferences of consumers will influence the market orientation of a
firm. Jaworski and Kohli (1993) found that market turbulence has a positive effect on the
market orientation-performance relationship, but on the contrary Slater and Narver
showed a negative effect of market turbulence on this relationship.
59
Diamantopoulos and Hart (1993a) found competitive intensity to be an important
environmental variable. In highly competitive business environments, customers tend to
be faced with several different options to satisfy their needs and wants. In such
competitive environments, firms tend to become more sensitive and responsive to the
needs of customers (Lusch & Laczniak, 1987). In a highly competitive market, the firm
should respond to consumers’ needs and preferences sensitively, but monopolistic or
oligopolistic markets may reduce the necessity to modify product and service strategies
for matching variable consumer preferences. Thus, a business that is not market-oriented
would be in peril of losing customers to competitors, causing market orientation to
become an important determinant of business performance. The company under a greater
competitive environment could become more market oriented than a company under a
lesser competitive environment (Kohli & Jaworski 1990; Slater & Narver 1994). Later
studies of Jaworski and Kohli (1993) and Slater and Narver (1994) showed, however, that
competitive intensity does not have a significant effect in the market orientation-
performance relationship.
Jaworski and Kohli (1993) searched for the moderating effect of the combination
of market turbulence, competitive intensity and technological turbulence on the
relationship between market orientation and business performance, but found no evidence
of these environments affecting this relationship. Pelham and Wilson (1996) found that
the degree of market orientation among small firms was not influenced by market
dynamism or competitive intensity. In other words, under certain conditions market
orientation is not critical. Singh (2003) found that the link between market orientation
and business performance was stronger when competitive intensity was high and market
dynamism was low.
The discussion above indicates somewhat mixed results on the effects of
perceived market turbulence and perceived competitive intensity on market-orientation
strategy. Some studies have shown positive effects of market turbulence and competitive
intensity on firms’ market orientation. Although some other studies have found results
that contradict those findings, yet another study (Jaworski & Kohli, 1993) was focused
more on determining whether market turbulence and competitive intensity, along with
technological turbulence, had moderating effects on the relationship between market
60
orientation and business performance. The presented study focuses instead on the direct
effects of market turbulence and competitive intensity on the four components of market
orientation and hypothesized the effects would be positive, partly on the basis of the
argument of Davis and Morris (1991) that changes in the environment do more than
create a need for entrepreneurial and marketing orientations; they are the basis of these
orientations. Thus, the first hypothesis is as follows.
Hypothesis 1: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on each component of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination, and response
design, and response implementation).
Environment and Organizational Structure
Many studies have related the strategy-making process to environment and
organizational structure (Andersen, 2004; Grinyer, Yasai-Ardekani, & Al-Bazzaz, 1980;
Miller & Friesen, 1978, 1984; Mintzberg, 1973; Nwachukwu & Tsalikis, 1990/1991,
Okumus, 2003; Spanos & Prastacos, 2004). A significant amount of literature exists on
the relationship between the environment and structure (Burns & Stalker, 1961;
Lawrence & Lorsch, 1967), but few studies have addressed the influences of the
environment on structure (Preffer & Salancik, 1978). Other than the research by
Chandler (1962) and his followers, which was rather specialized, none has systematically
attempted to relate strategic content to process, structure, and environment. Barnard
(1938) was among the first to identify the system properties of organizations and their
interdependence with the environment. Dill (1958) defined the components of an
organization’s task environment and proposed a causal relationship in which this task
environment affects managerial independence. Since his investigation of two firms,
researchers have subsequently sought both to increase the sample sizes used to examine
this issue, expand on the causal effects of the environment on organizational structure,
and/or develop the definitions of environment and structure.
Terreberry (1968) stressed that, in order for an organization to continue to exist, it
must adapt to external forces. May Sammons of Fred Meyer Inc. indicated that
61
methodical change requires a balance of technology, organizational structure, cultural
factors, and procedures (Brooks, 1995). Woodward (1965) and Perrow (1967) added
technological determinism to the contingency idea. Galbraith (1973) associated
environment and technology by concentrating on the environmental information-
processing needs of the organization. Slevin and Covin (1997) analyzed the effects of a
company’s organizational structure and environmental context on the relationship
between that company’s dominant strategy-formation pattern and its sales growth rate.
They collected data from 112 manufacturing firms operating in 78 industries. The results
of data analysis indicated that planned strategies were positively related to sales growth
among firms having mechanistic structures and operating in hostile environments. On
the other hand, they found that among firms with organic structures sales growth and
operating in benign environments were even more positively related.
Researchers who have investigated organizational adaptation from a contingency
perspective became increasingly interested in the linkage between perceived
environmental uncertainty and structure (Duncan, 1972b; Hrebiniak & Snow, 1980;
Lawrence & Lorsch, 1967; Miles, Snow, & Pfeffer, 1974; Pugh, Hickson, Hinnings, &
Turner, 1969; Segal, 1974). Contingency theory suggests that differences in structure are
significantly related to the level of uncertainty and complexity that an organization faces.
The traditional view holds that the external environment has a considerable influence on
organizational structure. Pugh et al. (1969) stated, “The structure of an organization is
closely related to the context within which it functions, and much of the variation in
organization structure might be explained by contextual factors” (p. 91). The literature
has strongly supported this (Bourgeois, McAlliaster, & Mitchell, 1978; Hrebiniak &
Snow, 1980).
Uncertainty could be a result of technological requirements or limitations, or a
product of conditions in the technical/task environment. Under stable and well-
understood conditions, in situations requiring efficient execution or repetitive tasks,
mechanistic structure can be found. Organic structure would be found in the presence of
substantial uncertainty, in conditions involving innovation or adjustment to changing
circumstances; therefore, researchers attempting to explain coordination strategies have
looked beyond organizational boundaries. Yasai-Ardekani and Haug (1997) also noted
62
that organizations that operate in highly competitive environments would tend to develop
strategic planning processes that emphasize great flexibility in their structures; high
levels of competitive pressure may be unsuitable to formalized structuring of planning
processes.
Environment as an independent variable and organizational structure and process
as dependent variables are discussed extensively in the literature. For instance, studies
have focused on aspects of an organization’s environment, such as the task environment
(Dill, 1958; Thompson, 1967), the domain of an organization (Levine & White, 1961),
critical constituencies (Holden, 1966), the enacted environment (Weick, 1969), internal
and external environments (Duncan, 1972b), general types of environment (Emery &
Trist, 1965), and general and specific environments (Hall, 1972). Terreberry (1968)
discussed organizations’ dependence on their environments in detail, and several studies
have examined the relationships between organizational environment and structure (Child,
1972; Inkson, Pugh, & Hickson, 1970; Pugh, Hickson, Hinings, & Turner,1969;
Thompson, 1967). Research and theory also have focused on the relationships between
organizational environment, organizational structure, and environmental uncertainty
perceived by organizational decision makers.
The linkage between perceived environmental uncertainty and organizational
structure has drawn considerable attention from researchers who have investigated
organizational adaptation from a contingency perspective (Duncan, 1972b; Hrebiniak &
Snow, 1980; Lawrence & Lorsch, 1967; Miles, Snow, & Pfeffer, 1974; Pugh, Hickson,
Hinnings, & Turner, 1969; Segal, 1974). The traditional view assumes that the external
environment has a considerable influence on organizational structure. Pugh, Hickson,
Hinnings, and Turner (1974) express this perspective. They proposed that:
The structure of an organization is closely related to the context within which it
functions, and much of the variation in organization structure might be explained
by contextual factors (p. 91).
Research findings have largely supported this assumption (Bourgeois, McAllister,
& Mitchell, 1978; Hrebiniak & Snow, 1980). Studies of relationships between
63
environment and structure have typically focused on the effects of environmental
uncertainty on the structures of organizations. The hypotheses of these studies have
linked greater environmental uncertainty to higher levels of structural complexity, low
formality, and greater decentralization of decision making (Downey, Hellriegel, &
Slocum, 1975; Duncan, 1972b; Lawrence & Lorsch, 1967). Although such hypothetical
relationships may truly reflect organizational responses to perceived environmental
uncertainty in munificent conditions, different responses may be expected in conditions
of scarcity. Uncertainty has been identified as a key variable in explaining organizational
behavior (March & Simon, 1958). Several studies have indicated that environmental
uncertainty exerts considerable influence on organizational structures and processes
(Huber, O’Connell, & Cummings, 1975; Hurber & Daft, 1987). Dependency theory
suggests that organizations structure their external relationships in response to the
uncertainty resulting from dependence on elements in the environment (Pfeffer &
Salancik, 1978). Burns and Stalker (1961) and Lawrence and Lorsch (1967) argued that
organizations structure themselves internally in response to environmental uncertainty.
The level of environmental turbulence is critical to survival and growth of companies. It
is particularly important in the case of small and medium sized enterprises (SMEs)
because these companies are presumed to be sensitive to changes in business conditions.
Despite the fact that SMEs have the ability to be flexible in terms of organizational
structure and that they are responsive to environmental changes, they are also challenged
by unfavorable and hostile environments (Covin & Slevin, 1989). On the basis of the
literature discussed above, it was hypothesized that perceived market turbulence and
perceived competitive intensity would positively affect each component of organicity of
organizational structure (i.e., formalization, centralization, and specialization). Specific
hypothesis is as follows.
Hypothesis 2: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on organicity of organizational structure (i.e.,
will be lead to more specialization and less formalization and centralization).
64
The preceding discussion focused on the linkage between environment and
business strategy (including market orientation). The following sections link
environment with pairs of constructs that are used in the present study.
Environment and Firm Performance
External environments, such as the strength of the economy, market growth,
market turbulence, and competitive intensity, have been found to be factors which have
impacts on business performance (Cooper, 1979; Miller & Freisen, 1983; Miller &
Toulouse, 1986; Peterson, 1985). Carilin and Horvath (1999) tested the impact of
competition on performance. Aghion and Schankerman (2000) developed a simple
model to investigate the effects of competition on firms’ productivity and welfare in
“competitive” industries. Nickell, Nicolotsas, and Dryen (1997) showed that firm
performance is positively related to the presence of a majority shareholder and to the
degree of competition in the market. Other researchers observed that enterprises present
in markets where competition is relatively intense are characterized by a high
productivity growth rate (Januszewsik, Koke, & Winter, 1999). Power and Reid (n.d)
studied the performance of long-lived small firms in relation to market turbulence and
flexibility. Their measure of market turbulence had a negative effect on firm
performance. They concluded that turbulence had a larger impact on performance than
did firm flexibility in adjusting to change, but compared to the unambiguous effect of
flexibility, the effect of turbulence on performance was less clear. In general, a large
number of organizational changes would reflect a high degree of turbulence and vice
versa; however, the changes do not automatically imply improved performance.
Reid and Smith (2000) found that both poorly performing (“stagnant”) firms and
high performing (“adaptive”) firms have relatively active and flexible policies. Whereas
stagnant firms frequently adopt organizational changes to counteract the consequences of
inflexibility in terms of poor performance, adaptive firms frequently adopt organizational
changes to promote growth and other aspects of improved performance. Markusen and
Teitz (1985) addressed the underlying dynamics of the competitive environment in which
mature small firms operate; they found that the markets of such firms were turbulent.
Some researchers have failed to show effects of strategic alignment on the financial
65
performance of a firm because they did not consider contextual variables, such as the
environment (Chan & Huff, 1993; Chan, Huff, Barclay, & Duncan, 1997). Sawyer,
McGee, and Peterson (2003) developed a model of the effects of perceived uncertainty on
personal networking activities of small business owners-managers and the subsequent
impact on the financial performance of their firms. On the basis of the literature
discussed above, perceived market turbulence and perceived competitive intensity were
hypothesized to have positive effects on the degree of satisfaction with store performance.
The specific hypotheses follow.
Hypothesis 3: Perceived market turbulence and perceived competitive
intensity will have significant positive effects on the degree of satisfaction with
store performance.
Hypothesis 3-a: Perceived market turbulence and perceived competitive
intensity will have significant positive effects on the degree of satisfaction
with store performance relative to other stores in the industry.
Hypothesis 3-b: Perceived market turbulence and perceived
competitive intensity will have significant positive effects on the
degree of satisfaction with store performance relative to key
competitors.
Relationship Among Environment, Business Strategy, and Organizational Structure
Chandler (1962) noted that, although many studies address strategy and structure,
it is clear that some strategies and structures are more effective than others, depending on
the situation. Schaffer (1986) stated that the “process of matching structure, strategy, and
environment is the basis of the ‘strategic choice’ model of organizations” (p. 76). He
also posited that, because of the dynamics of the market environment, the choice of
strategy and structure is not a one-time incident. A general concept in strategic
management is that managers manage changes in their firms’ external environments
through choosing appropriate structures and designing matching strategies (Andrews,
66
1971; Ansoff, 1979; Schendel & Hofer, 1979). Chandler suggested that a dynamic
environment would effect a flexible organizational structure and that a highly stable
environment would not need the same degree of flexibility. Organizations tend to adopt
structures and strategic postures as a response to the uncertainty and hostility within their
environments (Khandwalla, 1972, 1976/1977). Özsomer, Calantone, and Benedetto
(1997) stated that changes in the environment appear to shape the firm’s ability to
respond to them by helping to define the strategic postures and structures the firm adopts.
An internal factor is the manner in which organizations gather and process information
about their external environments (Daft & Macintosh, 1981; Katz & Kahn, 1978; Morgan,
1986). It is costly to obtain the information about the environment that is needed to find
out whether a change is required in strategy or structure.
Relationship Among Environment, Business Strategy, and Firm Performance
Empirical studies in strategic management have examined the firm-level strategy-
performance relationship (Capon, Farley, & Hoening, 1990; Husseini & O’Brien, 2004;
Jennings, Rajaratnam, & Lawrence, 2003; Parnell, 2002; Sharama, 2004; Sinkovits &
Roath, 2004). Many of these studies have investigated the role played by the
environment in the strategy-performance relationship, and theorists have postulated the
effects of environment on that relationship.
Researchers have indicated that external environmental factors, such as market
dynamism and competitive intensity, affect the market orientation and performance
relationship (Egeren, Trinh, & O’Connor, 2000; Grewal & Tansuhaj, 2001; Harris, 2001;
Kirca, Jayachandran, & Bearden, 2005; Pulendran, Speed, & Widing, 2000; Slater &
Narver, 1994a; Greenley, 1995b) and a firm’s market-oriented actions (Dianmontopoulos
& Hart, 1993a; Ottesen & Gronhaug, 2004; Pelham & Wilson, 1996). Although it has
been demonstrated that market orientation can improve business performance, it has also
been acknowledged that environmental uncertainties might affect the postulated
relationship (Day & Wensley, 1988; Kohli & Jaworski, 1990). Carpano, Chrisman, and
Roth (1994) stated that, depending on the competitive situation that firms face, the
performance of firms following a particular strategy can vary. Others have added that, in
certain environments, certain strategies would lead to significantly higher performance
67
than other strategies (Belderbos & Sleuwaegen, 2005; Powell, 2003; Williamson, Jenkins,
Cooke, & Moreton, 2004). The contingency theory of business strategy, which was first
proposed by Hofer (1975), supports these relationships noted by Carpano, Chrisman, and
Roth (1994) and the other cited authors. The moderator effects of environmental
variables on the link between market orientation and business performance are presented
in Table 2.
Relationship Among Environment, Organizational Structure, and Firm Performance
Peterson (1985) contended that industry structure and environmental dimensions
significantly influence small-firm performance. Khandwalla (1977) examined, with a
sample of 103 large Canadian firms, the relationships among structure, environmental
context, and firm performance. He found that high-performing firms in industries
characterized by intense, diverse, shifting competitive pressures adopted organic
structures, and high-performing firms in industries with minimal competitive pressure
adopted more mechanistic structures. It may be inadvisable, however, to generalize to
small-firm settings the findings of research based on samples of large firms.
Eisenhardt and Bourgeois (1988) found that, when power is centralized in firms
that operate in rapidly changing environments, low levels of strategic decision rationality
resulted in good economic performance; strategic decision rationality was measured in
terms of political activity within firms’ top management teams. Hage and Aiken (1970)
found that power centralization is a critical dimension of organizational structure.
Relationship Among Environment, Business Strategy, Organizational Structure, and Firm
Performance
This section reviews literature that takes a more inclusive approach than that cited
above in linking environment with business strategy, organizational structure, and firm
performance. Many researchers have proposed linkages among environmental
characteristics and firms’ organizational strategy, structure, size, and performance
outcomes (Andrews, 1980; Blau & Schoenherr, 1971; Burns & Stalker, 1961; Grinyer &
Yasai-Ardekani, 1981; Hofer & Schendel, 1978; Lawrence & Lorsch, 1969; Prescott,
1986; Pugh, Hickson, Hinings, & Turner, 1969; Thompson, 1967). Early work addressed
68
Table 2
Research Results on Moderators of the Link Between Market Orientation and Performance
Authors
Moderating Effect
Performance Measure
Market Turbulence
Diamantopoulos & Hart (1993a)
Mixed
Performance
Kohli & Jaworski (1993) No Performance
Slater & Narver (1994a) Yes Return on Assets
Greenley (1995a) Yes Return on Investment
Appiah-Adu (1997) Yes Return on Investment
Appiach-Adu (1998) Yes Return on Investment
Singh (1998) Yes Return on Investment
Appiah-Adu & Singh (1998) No Return on Investment
Tay & Morgan (2002) No Business Performance
Competitive Intensity
Jaworski & Kohli (1993)
No
Performance
Diamantopoulos & Hart (1993a) Yes Sales Growth
Slater & Narver (1994a) No Performance
Atuahene-Gima (1995) Yes New Product Success
Bhuian (1996) Yes Organizational Performance
Langerak, Nijssen, Droogenbroeck, &
Delissen (1996)
Yes Competitive Advantage
Appiah-Adu (1997) Yes New Product Success
Appiah-Adu (1998) Yes Sales Growth
Singh (1998) Yes Sales Growth
Grewal & Tansuhaj (2001) Yes After Crisis
Tay & Morgan (2002) No Business Performance
Singh (2003)
Yes Return on Investment
69
the simultaneous relationships among strategy, structure, and environmental variables
(Miller & Friesen, 1978). Miller and Toulous (1986) suggested that environment is the
main variable among several contextual variables that measure the appropriateness of
strategies and structure. Miller (1986) argued that relationships between strategy and
structure cannot be separated from their context. Many investigations have attempted to
identify linkages among environmental conditions, organization size, strategy, and
economic performance (Fahey & Christensen, 1986); however, few have examined those
linkages in a systematic manner.
Much research has been concerned with perceptions of environmental uncertainty
and their linkages with strategy, structure, and performance (Bourgeois, 1985; Dess &
Origer, 1987; Miller, 1987; 1988; Tung, 1979). Pennings (1975) found no relationships
among perceived environmental uncertainty, performance, and structure. Aldag and
Storey (1975) determined that firms with the same degree of perceived uncertainty could
have divergent performance outcomes and that externally induced uncertainty appeared
to require flexibility, whereas internally induced uncertainty could be reduced by
heightened structure.
Business Strategy
Business Strategy and Organizational Structure
This section links the construct of business strategy to organizational structure,
with an emphasis on organic organizational structure. The relationships between strategy
and structure have received much attention in the literature. Chandler (1962) found that
structure follows strategy. This finding was supported by the results of the work of other
researchers (Channon, 1973; Miles & Snow, 1978; Miller & Friesen, 1978, 1980, 1983;
Mintzburg, 1973; Parthasarthy & Sethi, 1991; Rumelt, 1974). Mintzberg (1979)
concluded that organizational effectiveness results when a match exists between an
organization’s strategy and its structure. Unfortunately, however, researchers who have
characterized strategy have largely ignored the relationship between strategy and
structure. Many empirical analyses have failed to consider the structural dimensions of
70
the relationships between environment and strategy (Hambrick, 1983a, 1983c, 1985;
Hofer, 1975; Jauch, Osborn, & Glueck, 1980; Miller & Friesen, 1986); however,
characterizations of business strategies have moved toward detailed examinations of the
relationships of strategy to both its structural and environmental contexts (Miller, 1986;
Porter, 1980; Venkatraman & Camillus, 1984).
Traditional contingency theorists argue that innovation, and the uncertain
environments that seem to necessitate it, require organic (Burns & Stalker, 1961),
decentralized, differentiated (Lawrence & Lorsch, 1967), and intensively integrated
(Galbraith, 1973; Thompson, 1967) structure. Traditional contingency theorists see
strategies as necessary responses to environments, rather than as influences on
environments (Child, 1972). The theorists have taken performance to be a function of the
match between organization and environment, without explicitly considering strategy.
Bourgeois (1980b), Child (1972), Hrebiniak and Joyce (1985), and Lenz (1981)
attempted to ascertain the impact of strategic choice on environment and structure in
order to avoid determinism; however, Chandler (1962), Channon (1973), Rumelt (1974),
and others analyzed the relationships between only strategy and structure.
Market-orientation strategy and organicity of organizational structure. Lear
(1963) was one of the first researchers to recognize organizational structure as a potential
obstacle to improving levels of market orientation. He argued that, whereas a market-
oriented approach is suited to the needs, wants, and demands of customers, the approach
induces “massive complications” in terms of organizational structure. He, therefore,
contended that the efficiency demands of organizational structure can restrict the level of
market orientation which the organization can achieve. At a more micro-level, Harris
(1998) reinforced these ideas through his finding that efficient task allocation of retail
stores acted as an impediment to developing market orientation.
Lichtenthal and Wilson (1992) adopted a sociological structural perspective and
applied it to an analysis of market-orientation development. They found that structural
resistance had two main forms. First, the development of high levels of market
orientation was significantly hindered by the lack of appropriate complementary
relationships. Secondly, structural distance influenced the potential and speed of market-
oriented change to the extent that structurally distinct organizational components would
71
be unaffected by efforts to change. The theoretical literature posits that three dimensions
of organization structure may be associated with market orientation: formalization;
centralization; and specialization (Walker & Ruekert, 1987; Kohli & Jaworski, 1990).
Jaworski and Kohli (1993) emphasized that certain types of structure can impede market
orientation and that organization structure is part of a system which is antecedent to
market orientation. They identified formalization, centralization and departmentalization
as elements, or characteristics, of organizational structure and employed measures of
those three elements. According to Hall, Haas, and Johnson (1967), formalization is the
degree to which rules define roles, authority relations, communications, norms and
sanctions, and procedures. Also, centralization involves the converse of the delegation of
decision-making authority throughout an organization (Aiken & Hage, 1968).
Departmentalization refers to the number of departments into which organizational
activities are separated and isolated (Jaworski & Kohli).
Significant research has found a negative effect of certain types of organizational
structure on the adoption of a market orientation (Deshpandé & Zaltman, 1982; Levitt,
1969; Stampfl, 1978). Jaworski and Kohli (1990) suggested that the quality of market
orientation is influenced by an organization’s ability to generate, disseminate, and
respond to information on markets. Deshpandé and Zaltman (1982) and Baligh and
Burton (1979) indicated that the structure of an organization establishes the
organization’s ability to respond to information on markets. Deshpandé and Zaltman
(1982), Hage and Aiken (1970), and Zaltman, Duncan, and Holbek (1973) noted that
formalization and centralization are oppositely related to information utilization.
Jaworski and Kohli (1996) found that centralization of structure impeded market-oriented
change. Whereas a centralized structure clearly facilitates efficient decision making, the
remoteness and comparative isolation of centralized decision makers appears to delay
market-responsive or innovative change.
Some researchers link the extent of structural formalization negatively to market-
orientation levels (Harris, 2000; Jaworksi & Kohli, 1993; Lear, 1963; Lichtenthal &
Wilson, 1992). In this context, information utilization corresponds to designing programs
in response to market intelligence; therefore, it appears that formalization and
centralization are inversely related to an organization’s responsiveness (Stampfl, 1978).
72
Jaworski and Kohli (1993) posited that structural formalization aids the organizational
processes involved in the generation and dissemination of market intelligence. Similarly,
Lundstrom (1976) and Levitt (1969) discussed departmentalization as a barrier to
communication and, therefore, to market-intelligence dissemination. Deshpandè and
Zaltman (1982) argued that formalization could have a negative impact on market
orientation if the emphasis on rules makes the organization less adaptive to the
environment; however, it could have a positive impact on market orientation if the rules
enhance customer satisfaction. Tay and Morgan (2002) suggested that the specialization
and market orientation of the firm are positively linked for two reasons: (1) specialization
affords the firm a finely grained view of its market by focusing specialists’ attention on
specific aspects of the market environment, and (2) by providing great access to
knowledgeable marketers, specialization allows the firm to respond effectively to market
changes.
Many researchers have indicated that organizational structure might not affect the
three components of market orientation (intelligence generation, intelligence
dissemination, responsiveness) in the same way. Kohli and Jaworski (1990) suggested
that market orientation might be viewed as a form of innovative behavior because the
development and implementation of a market orientation essentially involves doing
something new or different in response to market conditions. Zaltman, Duncan, and
Holbek (1973) argued that organizational dimensions, such as formalization,
centralization, and departmentalization, might have different effects on the two stages of
innovative behavior, which are the initiation stage and the implementation stage. The
initiation stage is the stage of awareness and decision making, and the implementation
stage carries out the decision (Zaltman, Duncan, & Holbek). These researchers suggested
that formalization, centralization, and departmentalization may be inversely related to
market-intelligence generation and dissemination and to response design, but positively
related to response implementation.
Jaworski and Kohli (1993) noted that formalization, centralization, and
departmentalization might slow down innovative behavior, but improve the
implementation stage of innovative behavior. According to their results, significant and
positive interdepartmental connections influenced market orientation, but formalization,
73
centralization, and departmentalization had no effect on market orientation. Kohli and
Jaworski (1990) proposed that greater departmentalization, formalization and
centralization lead to lower intelligence generation and dissemination and greater
response to intelligence. Generally, they found that connectedness supports a market
orientation and that centralization serves as a barrier to a market orientation. Neither
formalization nor departmentalization was found to significantly impact a market
orientation. Selnes, Jaworksi, and Kohli (1996) extended the Jaworski and Kohli (1993)
study and found that neither centralization nor formalization was significantly related to
market orientation. Harris (2000) hypothesized centralization and formalization as
having negative relationships with market orientation, but his results supported only the
negative relationship between centralization and market orientation. Matsuno, Mentzer,
and Ozomer (2002) hypothesized negative antecedent relationships between
formalization, centralization, and departmentalization and market orientation. They
found that the identified structural paths from formalization and centralization to market
orientation were non-significant. The path from departmentalization to market
orientation was found to be negative and significant. Research of significance found a
negative effect of organizational structure on the adoption of market orientation
(Deshpandé & Zaltman, 1982; Levitt, 1969; Stamfl, 1978). Jaworski and Kohli (1990)
suggested that the quality of market orientation is influenced by an organization’s ability
to generate, disseminate, and respond to information on markets. Deshpandé and
Zaltman (1982) and Baligh and Burton (1979) contended that the structure of an
organization establishes the organization’s ability to respond to information on markets.
Jaworski and Kohli (1993) studied internal antecedents to market orientation, including
organizational structure.
The present study focuses on South Korean apparel retail stores, which tend to
have a high level of centralization and low levels of formalization, departmentalization,
and control systems. Korean companies traditionally have hierarchical systems and a
high centralization with authority concentrated in senior levels (Kim, 2005). Pelham and
Wilson (1996) indicated that, as managers increase the levels of formalization,
differentiation in structure, decentralization, and control systems in their companies, they
should also increase the levels of market-information gathering and dissemination.
74
Deshpandé and Webster (1989) tested for differences in business performance among a
sample of Japanese firms on the basis of four culture typologies–clan, adhocracy,
hierarchy, and market–and found that performance ranked from best to worst according
to the following types of corporate culture: clan, adhocracy, hierarchy, and market. In a
competitive market environment, it is expected that a firm’s degree of market orientation
will also vary according to the category of culture. According to Deshpandé et al. (1993)
model, the hierarchical culture, with its focus on smooth operations and predictability in a
bureaucratic organization, is likely to lead to a low level of market orientation. On the
hand, the adhocracy culture, with its emphasis on entrepreneurship, innovation, and risk
taking is expected to lead to a relatively higher degree of market orientation than would
clan culture. The clan culture, which stresses tradition, loyalty, and internal maintenance,
could result in a lack of attention to changing market needs and in turn, could lead to a
low degree of market orientation. Appiah-Adu and Blankson (1998) found that the
hierarchical organization was the least market oriented. They also found that market,
adhocracy, and clan cultures are positively associated with market orientation, whereas
hierarchical culture is negatively associated. The above is the basis for the hypothesis in
the present study that market-orientation strategy will positively affect organicity of
organizational structure.
Hypothesis 4: The four components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and response
implementation) will have significant positive effects on organicity of
organizational structure (i.e., will lead to more specialization and less
formalization and centralization).
Business Strategy and Firm Performance
During the 1990s, a body of research focused on the concept of market orientation
and its impact upon business performance (Diamantopoulos & Hart, 1993b; Greenley,
1995b; Jaworski & Kohli, 1993; Kohli & Jaworski, 1990; Narver & Slater, 1990; Pitt,
Caruana, & Berthon, 1996; Ruekert, 1992). Kohli and Jaworski (1990) wrote, “A market
orientation appears to provide a unifying focus for the efforts and projects of individuals
75
and departments within the organizations, thereby leading to superior performance” (p.
13). This idea has been refined and built upon, measures of the market-orientation
construct developed, and a strong relationship demonstrated between market orientation
and specific measures of business performance, including profitability, sales growth, and
new-product success (Jaworski & Kohli, 1993; Narver & Slater, 1990; Slater & Narver,
1994b). However, some research on the relationship between market orientation and
profitability has produced mixed results. How a market orientation influences
profitability is not clear. Jaworski and Kohli found no significant relationship between
market orientation and market share or profit and strategic business units’ return on
equity. On the other hand, their study described a significant relationship between
market orientation and overall performance. Narver and Slater (1990) also found mixed
results: a positive relationship between market orientation and return on investment for
specialty-product strategic business units (SBUs) and a negative relationship for
commodity-product SBUs. Esslemont and Lewis (1991) stated that marketers had long
assumed a positive relationship between being market oriented and good company
performance; for example, Kotler (1991) states that a company operating according to the
marketing concept “creates profit through customer satisfaction” (p. 17).
Recently, assumptions have been subjected to serious empirical study. Jaworski
and Kohli commented in 1996, “Over the past ten years, significant progress has been
made in the market orientation area. Scholarly attention has focused on the definition,
measurement and impact of a market orientation” (p. 119). Since 1990, a substantial
number of studies have examined the relationship between market orientation and
company performance. The external and internal environments have been motivating
factors for the continued investigation into the relationship between firm performance
and marketing implementation through market-oriented behaviors (Pelham & Wilson,
1996).
The significance of including market orientation in an integrated model of
determinants of performance is highlighted by several research findings that indicate a
notable influence of market orientation on customer orientation (Siguaw, Brown, &
Widing, 1994), organizational commitment, and esprit de corps (Jaworski & Kohli, 1993).
Previous research typically had predicted a positive relationship between market
76
orientation and performance on the assumption that a market orientation provides a firm
with a better understanding of its environment and customers, which ultimately leads to
improved customer satisfaction. Empirical studies have offered results that suggest
positive relationships between market orientation and managers’ perceptions of overall
firm performance (Jaworski & Kohli, 1993), of financial performance (Pelham & Wilson,
1996; Slater & Narver, 1994a), of sales growth (Slater & Narver, 1994a), and of new-
product performance (Atuahene-Gima, 1995; Pelham & Wilson, 1996; Slater & Narver,
1994a). Moreover, a positive relationship has been established between market
orientation and financially based performance measures, such as relative return on assets
(Narver & Slater, 1990), long-run financial performance (Ruekert, 1992), sales growth
(Pitt et al., 1996; Slater & Narver, 1994a), and profitability (Pelham & Wilson, 1996; Pitt
et al., 1996; Slater & Narver, 1994a). Narver and Slater (1990) found a positive
relationship between market orientation and return on assets (ROA), and Slater and
Narver (1994a) found a positive relationship between market orientation and sales growth.
They found that market orientation (controlling for market environment) significantly
affected return on assets. Chang and Chen (1998) and Caruana, Gauci, and Ferry (1995)
also corroborated these findings in studies of Taiwanese and Maltese firms.
In an investigation of the market orientation-performance relationship in the U.K.,
Malta, Pitt, Caruana, and Barton (1996) concluded that the hypothesized positive
association between market orientation and profitability held, regardless of cultural
context and level of economic development. Pelham and Wilson’s (1996) study
established similar findings using a sample of small U.S. firms. Jaworski and Kohli
(1993) found a positive relationship between market orientation and a “judgmental”
measure of business performance, which is a measure based on respondents’ assessments
of their firms’ performance as well as their firms’ performance relative to competitors;
however, they found no significant relationship between market orientation and objective
measures of business performance in terms of market share and return on equity.
Deshpandé, Farley, and Webster (1993) found that businesses’ customer
orientation, as reported by customers, was positively related to business performance, as
measured on a four-item scale. The scale combined three-point scale evaluations of
relative profitability, size, market share, and growth. The authors did not find a similar
77
relationship between businesses’ customer orientation, as reported by sellers, and the
four-item performance scale.
Analysis of the effect of market orientation on the key dimensions of business
performance is clearly warranted. Empirical evidence from the U.S. provides strong
support for a positive relationship between market orientation and performance (Jaworski
& Kohli, 1993; Narver & Slater, 1990; Slater & Narver, 1994a; Rukert, 1992;. Studies
undertaken in other countries, especially the U.K., provide mixed findings. Pitt et al.
(1996) found a positive link between market orientation and performance;
Diamantopoulos and Hart (1993a) identified a weak association; and Greenley (1995b)
found no direct linkage. Even though the last two studies did not indicate a positive
relationship between market orientation and performance, the two studies identified
possible moderating influences on the relationship. In the U.K. context, empirical
findings appear to support the unreliability of the assertion that market orientation makes
for better business performance. Based on these findings, Appiah-Adu (1998) suggested
that further empirical research was required to establish the impact of a market
orientation upon firm performance.
Raju, Lonial, and Gupta (1995) noted that an increased market orientation could
be expected to result in higher performance because it facilitates clarity of focus and
vision in an organization’s strategy, generates pride in belonging to an organization, and
generates commitment. Nevertheless, several analyses do not support a direct, positive
relationship between performance and market orientation; for example, in two analyses
that used objective measures of performance as the dependent variable, market
orientation was not related to a firm’s actual market share (Jaworski & Kohli, 1993) or
actual net income growth (Han, Kim, & Srivastava, 1998). Using perceptual measures of
performance, Atuahene-Gima (1996) reported no direct effect of market orientation on
perceived new-product market performance, and Pelham and Wilson (1996) reported no
direct effect of market orientation on perceived market share or perceived growth in
market share. Using a sample of commodity businesses, Narver and Slater (1990)
reported a negative coefficient on market orientation, and a positive coefficient on market
orientation squared, which suggests a curvilinear relationship between market orientation
and perceived financial performance.
78
Over the decades, marketing scholars and managers have continued to argue that
a business that improves its market orientation would enhance its performance, although
small businesses have a propensity for a low effect of market orientation on performance
(Kotler & Andreasen, 1987; Levitt, 1960). It has been suggested, however, that market
orientation is likely to be a vital factor for the success of small firms because they usually
lack the financial means to pursue other sources of business profitability, such as research
and development, competitive advantage, low-cost leadership, or skilled staff to develop
effective planning strategies (Pelham & Wilson, 1996).
Studies of manufacturing organizations have supported a positive relationship
between the degree of market orientation and various performance criteria, including
sales growth, new-product success, and return on investment or capital. Nevertheless,
little empirical evidence exists on the performance of companies that may have similar
degrees but different forms of market orientation. Kumar, Subramanian, and Yauger
(1997) suggested that the assumption that some type of relative emphasis on, or a
reasonably balanced form of, market orientation will lead to superior performance is a
question open to empirical research. They commented that, even if one would not expect
to find a statistically significant effect between any given form of market orientation and
all performance measures, it is reasonable to believe that specific forms of market
orientation may be associated with superior performance on specific criteria.
Numerous researchers have examined the relationship between market orientation
and company performance. Ngai and Ellis (1998) provided a summary of these studies
from 1990 to early 1999. Some of the extant literature has reported a direct positive
relationship between the degree of market orientation and performance. For many years,
it has been widely assumed that market orientation is related to better company
performance. McKitterick (1957) suggested that this relationship had a theoretical basis.
He emphasized that, in a competitive environment, organizations must be highly
conscious and responsive to customer needs, or else rivals will devise products to
accommodate those needs and capture their business. This assertion is also based on the
argument of Aaker (1988) and Day and Wensley (1988) that market orientation requires
the efforts of a firm’s employees and provides a sustainable competitive advantage
through the ability to develop long-term superior value for its customers. The notion of
79
sustainable competitive advantage implies an expectation that market orientation can
offer a firm the potential to outperform its competitors. A firm’s greater understanding of
customers and competitors can result in more effective decision making, leading to
higher sales growth (Pelham & Wilson, 1996). The tracking of customer satisfaction by a
market-oriented firm and the firm’s timely response to the information generated would
result in higher customer retention, which could positively influence sales growth.
Narver and Slater (1990) explained this view further, stating that if a business has a
strong market orientation, great effort will be expended to offer superior value to buyers,
and so there will be a greater possibility that superior value will be offered; therefore, the
highly market-oriented business will enjoy an advantage over competition in the
perception of customers, which will lead to better profitability. Moreover, Slater and
Narver (1994b) reported a positive relationship between market orientation and sales
growth (controlling for market environment). Pitt et al. (1996) and Caruana, Gauci, and
Ferry (1995), who both treated sales growth as one component of their three performance
measures, established a similar link. On the basis of these ideas and findings, a market-
orientation strategy was hypothesized to have a positive effect on store performance in
the present study.
Hypothesis 5: The four components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and response
implementation) will have significant positive effects on the degree of satisfaction
with store performance.
Hypothesis 5-a: The four components of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination,
response design, and response implementation) will have
significant positive effects on the degree of satisfaction with store
performance relative to other stores in the industry.
Hypothesis 5-b: The four components of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination,
80
response design, and response implementation) will have significant
positive effects on the degree of satisfaction with store performance
relative to key competitors.
Relationship Among Business Strategy, Organizational Structure, and Firm Performance
In this section, the construct of firm performance is added to the linkage between
business strategy and organizational structure. This strategy-structure-performance
assumption has received much empirical attention (Carpano & Shao, 1994; Dass &
Ozment, 1998; Davis, Brannon, Zinn, & Mor, 2001; Pierce, 2003; Puerto, 1999; Van
Clieaf, 1992). A key argument in the conceptual literature on organizational change and
adaptation is that managers cope with changes through the choice of an appropriate
strategy and the design of a matching structure in their firms’ external environment
(Andrews, 1971). Chakravarthy (1982) argued that most favorable strategy-structure
matches produce superior performance. Further, he suggested that performance would be
different for organizations having different levels of adaptation. He proposed that
organizations would have specific strategy and structure alignments and that performance
would differ among these organizations in each adaptive state. He also argued that
organizations with the best possible strategy-structure match would have superior
performance when compared to other organizations in the same adaptive state. He noted
that the level of the strategy-structure match depends on the resources available to the
organization and the adaptive ability of its managers.
Other theorists have provided insights that also explain why performance
differences would occur between organizations with an optimal strategy-structure and
those without. March and Simon (1958) explained that some organizations reach a
satisfactory level of performance, though not the maximum level for their industry,
because of inability to reach the maximum. Organizations sometimes try to perform at a
level that satisfies at least the minimum expectations that their strategic constituencies
impose on them (Hall, 1975).
Pelham and Wilson’s (1999) development model is based on the management
literature and, specifically, on the conventional theories involving industrial,
organizational, and business policy. The model defines the expected relationships
81
between small-firm performance and market structure, organizational structure, and firm
strategy. They illustrated the relationships predicted by the management literature;
however, management theories do not agree on the direction of
influence of these variables.
Park and Mason (1990) demonstrated a weak fit of existing models of
performance to observed relationships among business strategy, organizational structure,
and firm performance. They indicated that this is at least partly because the models do not
all take into account some influences on these three variables. Pelham and Wilson’s
(1999) model expands on conventional management theory on firm performance by
taking a more a comprehensive view that incorporates market orientation, along with
other potential determinants of performance that the conventional theory does not address.
Their model applies to small firms in particular. It employs Narver and Slater’s
definition of market orientation: “organization culture…that most effectively and
efficiently creates the necessary behaviors for the creation of superior value for buyers
and, thus, superior performance for the business” (as cited in Pelham & Wilson, 1999, p.
21). The model also incorporates firm-structure variables, including formalization,
coordination, and control systems, based on Robinson and Pearce’s (1984) finding that
formal planning has a strong positive impact on performance.
Top Management
Top Management and the Environment
This section discusses literature that links top management’s adaptability to a
changing environment, about which the managers are uncertain. Özsomer, Calantone,
and Benedetto (1997) stated that a key role of management is to deploy resources
available to the firm in a way that minimizes the impact of environmental threats. A firm
interprets its environment and adapts its strategy to respond to those elements of the
environment that it believes are fixed (Bourgeois, 1985; Porter, 1980, 1985). Smart and
Vertinsky (1984) indicated that it is important to study the nature of human perception in
the evaluation of environmental uncertainty. Weick (1969) noted that individual
perceptions need not correspond to any objective reality. Managers will “enact” an
82
environment that is consistent with their psychological mind-set. An environment that
one organization perceives as simple, static, and having little uncertainty may be
perceived by another organization as complex, dynamic, and having a high degree of
uncertainty. Organizations and different parts of the same organization will respond
differently to an identical environment (Starbuck, 1973).
Environments are neither certain nor uncertain in themselves, but are simply
perceived differently by representatives of organizations (Achrol, Reve, & Stern, 1983;
Pfeffer & Salanak, 1978). Uncertainty, complexity, and other factors are not constant
features of a firm’s environment; rather, they are dependent on the prior beliefs of
individual organization members (Starbuck, 1973). Individual tolerances for ambiguity
and uncertainty thus become critical factors in determining organizational responses to
environmental stimuli (Smart & Vertinsky, 1984).
Managers’ perceptions of environmental conditions may play a key role in the
process of structural adaptation. Aldrich and Pfeffer (1976) argued that some
environments may severely constrain managerial choices and that managers must
correctly perceive the nature and dictates of those environments. Hambrick (1982)
discussed the central role of environmental scanning and managerial perceptions of the
environment in strategy planning. Pelham (1999) noted that a market-oriented firm’s
managers may not be familiar with objective measures of the general competitive
environment, but could be well informed about the needs and/or satisfaction levels of
customers and the capabilities of immediate competitors. Khandwalla (1976) found that,
when managers perceived their environments as being dynamic and uncertain, their
strategies were more likely to be extensive, comprehensive, and involved. Environmental
turbulence strongly influences the relative importance of both the entrepreneurial and
marketing orientations (Davis & Morris, 1991).
Weick (1969) argued that organizations come to know their environments only
through managers’ perceptions. Similarly, Miles, Snow, and Pfeffer (1974) indicated that
organizations respond to what they perceive, so that unnoticed events do not affect
organizations’ decisions and actions. Yasai-Ardekani (1989) determined that managers’
perceptions of environmental conditions were critical to structural adaptations to
environments. Various studies have found that a high degree of innovativeness, risk
83
taking, and proactiveness in certain environmental conditions appear to facilitate
environmental responsiveness, whereas other conditions produce results which are less
entrepreneurial (Baklnoff & Brannon, 1984; Brockhaus & Nord, 1979; Kent, 1986).
Bagozzi (1975), Hunt (1976), and McCarthy and Perreault (1987) determined that the
argument regarding the nature and scope of marketing has created at least one general
conclusion–that successful marketing concerns exchange processes between
organizations and their environments.
Researchers have identified most external environments of firms (e.g., legal,
technological, economic, supplier, customer, competitive, financial, and social
environments) as dynamic, threatening, and complex (Ansoff, 1979; Drucker, 1980;
Jenkins, 2005; Khandwalla, 1977; Miller & Friesen, 1983; Ottesen & Grønhaug, 2004).
Environmental turbulence has many implications. Hayes and Abernathy (1980), Jain
(1983), and Stevenson and Gumpert (1985) found that the greater the environmental
turbulence perceived by managers, the more likely the managers were faced with small
decision windows, diminishing opportunity streams, changing decision constituencies,
increased resource specialization, lack of predictable resource needs, fragmented markets,
a great risk of resource and product obsolescence, and a general lack of long-term control.
The above discussion is the basis for the hypothesis in the present study that perceived
market turbulence and perceived competitive intensity positively affect top
management’s willingness to adapt to a changing market.
Hypothesis 6: Perceived market turbulence and perceived competitive intensity
will be significantly and positively related to each component of top
management’s willingness to adapt to a changing market (i.e., emphasis and risk
aversion).
Top Management and Business Strategy (Market Orientation)
In this section, the construct of top management is linked with business strategy,
with an emphasis on market-orientation strategy. In research based on the work of
Downey (1974) and Miles, Snow, and Pfeffor (1974), Anderson and Paine (1975)
addressed the subject of management’s perceptions and strategic behavior. They argued
84
that researchers need to recognize that managers depend on their perceptions of both the
environment and internal properties of the firm and have considerable leeway in making
strategic choices to meet various contingencies. They found that managers’ perceptual
interpretations of the environment as either certain or uncertain, combined with either a
high or low perceived need for internal change, were an important aspect of a firm’s
contingency plan. They also determined that these perceptions influenced a firm’s
mission, objectives, strategies, organizational structure, and thus performance.
The research of Gupta and Govindarajan (1984) indicated that different
strategies result from dealing with task environments that vary in uncertainty levels and
that operationalizing particular strategies requires different amounts of risk with respect
to the associated uncertainty. They found that, compared to “harvest” strategies, “build”
strategies, which have higher external dependencies and environmental conflict,
necessitated greater willingness to take risks. A harvest strategy, as defined in the Boston
Consulting Group (BCG) growth-share matrix, means simply maintaining current
business (reaping profits) without any further investment; this strategy is found most in
mature businesses (D. J. Lee, personal communication, March 6, 2005). The BCG
growth-share matrix maps a business unit’s position within two important determinants
of profitability: market growth and market share compared to the unit’s largest
competitor. Market growth serves as a proxy for competitive advantage (NetMBA.com,
2005). Henricks (1997) and Harrigan and Porter (1983) stated that the harvest strategy is
a technique that entrepreneurs can use to maximize profits from a slow-growing product
line. Prahalad, as cited by Henricks (1997), recommended harvesting as a basic
competitive strategy. According to Hill and Jones (2001), a harvest strategy requires a
company to cut all new investments in capital equipment, advertising, R&D, and the like.
They also suggested this strategy as the best choice when a company wishes to exit a
declining industry and, perhaps in the process, optimize cash flow.
Although much of the literature has focused on the consequences of market
orientation and the assessment of scales for measuring market orientation, several works
have examined the antecedents of market orientation. Jaworski and Kohli (1993), Harris
and Piercy (1998), and Narver and Slater (1990) indicated key management behaviors
that are essential to organizations that seek to become market oriented. Jaworski and
85
Kohli (1993) identified diverse organizational abilities that are characteristic of market-
oriented businesses. Their work and that of others have examined various organizational
changes directed at building market-oriented organizations (Day, 1994; Lings, 2004;
Pulendran, Speed, & Widing, 2000; Qu & Ennew, 2003; Tay & Morgan, 2002; Zebal,
2003).
Piercy (1992) stated that top management needs to support risk taking, but that
researchers had ignored this issue. Jaworksi and Kohli (1993) indicated that top
managements’ support of risk taking is needed to shape an organization’s values toward
risk taking. Response to changing market needs often requires introducing new products
and services to match changing customer needs and expectations. New products, services,
and programs tend to be more salient than established ones, but often have a
correspondingly high risk of failure. Biggadike (1979) found that businesses that
emphasized new products and activities faced high uncertainty because the market
response to these changes was unknown. Researchers have noted that product breadth is
also associated with high uncertainty, as it results in confronting a complex task
environment (Chandler, 1962; Govindarajan, 1988; Gupat, 1987).
Jaworski and Kohli (1993) found that the amount of emphasis senior managers
placed on market orientation had an effect on both the acquisition of and responsiveness
to information and that market orientation required risk taking on the part of senior
managers. Kohli and Jaowrski (1990) posited that if top management shows a
willingness to take risks and accept occasional failures as being natural, junior managers
would more likely suggest and introduce new offerings in response to changes in
customers’ needs. Jaworski and Kohli (1993) concluded that the amount of weight
placed by top management on market orientation seemed to influence a firm’s degree of
market orientation and its intelligence generation, intelligence dissemination, and market
responsiveness. Moreover, market orientation appears to require a certain level of risk
taking by top management.
The literature reviewed in this section suggests that the degree to which firms use
market-orientation strategies is positively affected by the degree to which the firms’ top
managers are willing to take risks as well as the degree to which the managers are
sensitive to, or emphasize, market forces. This notion led to the following hypothesis.
86
Hypothesis 7: The two components of top management’s willingness to
adapt to a changing market (i.e., emphasis and risk aversion) will have
significant positive effects on each component of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination, response
design, and response implementation).
Research and theory have suggested a positive association between structural
organicity and the use of a participative top-management style; for example, in Burns and
Stalker’s (1961) study of the structural correlates of innovative behavior, participative
management was commonly observed among organizations with organic structures.
Adler and Dockerty (1998) confirmed that as environmental changes become more
manifold, less predictable, and more rapid at the same time, it becomes increasingly
important that all subunits and all individual employees in the corporation are capable
and motivated for change. Such uncertainties force managers to keep their resources in a
highly liquid condition, so that they can easily adapt to unpredictable circumstances by
reallocating their capital, by migrating to other contexts, by exchanging their personnel,
and by redefining procedures and organizational structures. In addition, the managers
must to promote higher levels of functional differentiation, so that more specialized roles
and subunits are available for expanding or redirecting the range of tasks and activities.
This notion led to the following hypothesis.
Hypothesis 8: The two components of top management’s willingness to adapt to
a changing market (i.e., emphasis and risk aversion) will have significant positive
effects on organicity of organizational structure (i.e., will lead to more
specialization and less formalization and centralization).
Top Management and Firm Performance
Many studies have addressed risk taking and its effect on performance at the firm
level by using various financial indicators as alternatives for the firm’s level of risk
(Aaker & Jacobson, 1987; Bowman, 1980). No study, however, has used perceptual
measures of top management’s risk-taking propensities. Gupta (1984) suggested that top
87
management’s characteristics are related to firm strategies and performance. And many
researchers have attempted to explain a variety of strategy formulation and
implementation and performance issues using top management’s characteristics
(Hambrick & Mason, 1984; Gupta. 1984). The results of these studies suggested that the
characteristics of a company’s top managers have important consequences for firm
performance. Knight, Durham, and Locke (2001) conducted a laboratory experiment to
test the effects of many variables, including risk assessment, on task performance. They
found a positive relationship between managerial risk assessment and task performance.
Thus, showed that managerial risk proclivities can have a positive influence on certain
types of organizational outcomes related to performance.
The discussion above provides evidence that top mangers’ willingness to take
risks positively affects the performance of their organizations. This led to the hypothesis
in the present study that top mangers’ risk aversion would positively affect their stores’
performance. On the other hand, the literature provides no evidence on the question of
whether or how the degree of top managers’ sensitivity to, or emphasis on, market force
would influence their organizations’ performance. The present study proposes, however,
that an organization’s performance would be positively influenced by the degree of its
top managers’ emphasis on market forces. This proposition is based on the following
line of reasoning. As noted earlier in this chapter, market orientation has been shown to
improve business performance (Day & Wensly, 1988; Kohli & Jaworski, 1990; Pelham
& Wilson, 1996). As also noted earlier, the degree of top managers’ emphasis on market
forces positively effects market orientation (Harris & Piercy, 1998; Jaworski & Kohli,
1993). If top managers’ emphasis on market orientation positively affects performance,
then the degree of managers’ emphasis on market forces may positively affect
performance. Thus, the following hypotheses were formulated.
Hypothesis 9: The two components of top management’s willingness to adapt to
a changing market (i.e., emphasis and risk aversion) will have significant positive
effects on the degree of satisfaction with store performance.
Hypothesis 9-a: The two components of top management’s
88
willingness to adapt to a changing market (i.e., emphasis and risk
aversion) will have significant positive effects on the degree of
satisfaction with store performance relative to other stores in the
industry.
Hypothesis 9-b: The two components of top management’s
willingness to adapt to a changing market (i.e., emphasis and risk
aversion) will have significant positive effects on the degree of
satisfaction with store performance relative to key competitors.
Relationship Among Top Management, Environment, and Organizational Structure
This section links top management, environment, and structure. The following
discussion emphasizes managers’ perceptions of the environment as they relate to
organizational structure. Objective and perceptual approaches in studies on relationships
between environment and structural adaptations have produced inconclusive results.
These studies typically have relied on the concept of environmental uncertainty, assumed
that all firms had the same structural responses to environmental uncertainty, and
provided only a partial view of structural adaptations. Objective and perceptual
approaches have supposed one-way causality. The models employed have assumed that
organizations adjust their structures to meet requirements forced by their environments.
Working from such models, researchers have sought to empirically estimate the
relationship between environments and organizational structure (Yasai-Ardekani, 1986).
Yasai-Ardekani (1986) was critical of two-component unidirectional models. He
stated that these models had been unsuccessful in showing the complexity of
relationships between environments and organizational structures. A more complete
model would include objective environmental attributes and managers’ perceptions as
separate components of structural adaptation. Yasai-Ardekani also contended that
managers’ perceptions of their firms’ environments arbitrate between environments and
organizational structure. Perceptions influence decisions about altering structural
properties of organizations to meet the requirements imposed by environments. Although
variations in objective environments affect perceptions, individuals’ characteristics and
89
organizational structures also influence decisions to change structural properties of
organizations.
Some studies have used published industry data to represent environments and
have tried to establish links between environments and organizational structures (Child,
1975). Child used erratic industry sales to characterize a changeable environment, and
R&D intensity to represent environmental complexity. He disputed the use of perceptual
measures of environment. He determined that organizational attributes influenced
managers’ perceptions of their firms’ environments, and he concluded that perceptual
data confused environmental characteristics with companies’ own characteristics. On the
other hand, Weick (1969) argued that organizations come to know environments only
through managers’ perceptions. In the same way, Miles, Snow, and Pfeffer (1974)
indicated that organizations respond to what they perceive and that unobserved events do
not affect organizations’ decisions and actions; therefore, they stated that, unless
perceived, objective environmental attributes would not affect organizational structures.
They added that perceptions are important to structural adaptations. Yet, research
focusing on objective approaches has often failed to include managers’ perceptions.
Yasai-Ardekani (1986) pointed out that the assumption that perceptions strongly
affect structural adaptations requires the additional assumption that all organizations
perceive objective environmental attributes similarly. He also stated that organizations
might perceive the same environmental attributes differently. Starbuck (1976)
commented that an environment that one organization perceives as unpredictable,
complex, and evanescent might be seen by another organization as static and easily
understood. In fact, Miles, Snow, and Pfeffer’s (1974) study of publishing companies
discovered that top managers in some organizations perceived no changes or
uncertainties in their environments, whereas top managers in other organizations
perceived continuous changes and great uncertainty. Lawrence and Lorsch (1967) and
Duncan (1972b) empirically investigated the relationships between environments and
organizational structures. They emphasized that managers’ perceptions about their
environments lie at the heart of structural adaptations; however, they failed to note that
factors other than environments also influence perceptions.
90
Schoonhoven (1981) indicated that different findings from various studies have
caused scholars to raise serious questions about the causal links between environment and
structure. Even as far back as the 1970s, Huber, O’Connell, and Cummings (1975)
proposed reciprocal links between environmental uncertainty and organizational structure,
and Bourgeois, McAllister, and Mitchell (1978) provided persuasive arguments for
supporting such reciprocal linkages. From a perceptual perspective, it has been argued
that environmental characteristics become known to decision makers only through
perceptual processing and that such perception is fundamentally influenced by the
structure within which the focal manager functions (Child, 1972; Miles, Snow, & Pfeffer,
1974; Yasai-Ardekani, 1986). Paswan, Dant, and Lumpkin (1998) determined that the
underlying principle of the above findings is that, as the perception of environmental
uncertainty increases, firms would become more responsive to retaining resources and
would exercise increasingly greater control over their operations.
Firm Performance Measures
Numerous studies have confirmed positive relationships between market
orientation and various performance measures. Chakravarthy (1986) found that no single
measure of profitability identified excellent firms. One common feature of research into
the effect of a market orientation on company performance is the incorporation of
subjective measures of performance as dependent variables. The term “subjective” is
used to mean that a company’s performance rating is derived using ordinal scales with
anchors such as “very poor” to “very good,” or “much lower” to “much higher,”
compared to competitors. These contrast with an “objective” measure that would be an
actual percentage figure for sales growth or profitability. Jaworski and Koli (1996)
pointed out that the reliance on subjective performance measures was a limitation of the
research to date (Hartenian & Gudmundson, 2000; Olsen, 2001; Styles, 1998).
Many researchers found a significant relationship between market orientation and
performance (Avlonitis & Gounair, 1997; Appiah-Adu, 1998; Balakrishnan, 1996; Deng
& Dart, 1994; Deshpande & Farley, 1998b; Deshpandé, Farley, & Webster, 1993;
Greenly, 1995b; Jaworski & Kohli, 1993; Narver & Slater, 1990; Pelham & Wilson,
91
1996; Pitt, Carvara, & Berthon, 1996Slater & Narver, 1993). Appiah-Adu (1998) and
Greenly (1995) that the environment moderated the relationship. Many studies have used
objective performance measures (Au & Tse, 1995; Diamantopoulos & Hart, 1993b;
Esslemont & Lewis, 1991; Jaworski & Kohli, 1993; 1996; Ruekert, 1992; Tse, 1998a).
Jaworski and Kohli (1993; 1996) used subjective and objective performance measures.
They found positive association for subjective measure but not objective measures.
Studies that used or included objective performance measures, Ruekert (1992),
Diamantopoulos and Hart (1993) found a significant relationship, Esslemont and Lewis
(1991) and Tse 1998a) found no relationship, and Au and Tse (1995) only a weak
relationship. Dawes (1999) observed that the substantive implications of this body of
research appear to depend heavily on the validity of subjective performance measures.
Dawes (1999) pointed out several reasons for using subjective measures. The
first is that managers may be hesitant to report actual performance if they consider it to be
commercially sensitive or confidential (Dess & Robinson, 1984). Second, subjective
measures may be more appropriate than objective measures for comparing profit
performance in cross-industry studies. Third, because companies’ profit levels can vary
considerably across industries, a subjective measure of company performance may be
more appropriate than an objective measure in cases where research has not established
the relationship between firm performance and other variables pertinent to business
operations. Managers can take the relative performance of their industry into account
when responding to subjective-measurement questions, such as “rate the profit
performance of your firm relative to others in your industry” (Dawes, 1999, p. 67). A
fourth reason is that a company’s profitability may vary over time due to variation in its
level of investment in R&D or marketing activity, which might have long-term effects
and mean that profitability or other performance measures at one point in time may not
accurately reflect the underlying financial health of a company. And finally, significant
numbers of studies that have examined the relationship between these two types of
measures have shown a strong correlation between objective and subjective measures
(Covin, Slevin, & Schultz, 1994; Dess & Robinson, 1984; Hart & Banbury, 1994; Pearce,
Robbins, & Robinson, 1987; Venkatraman & Ramanujam, 1985).
92
On the basis of the strong role that a market orientation theoretically plays in
generating superior customer value, market orientation would be expected to positively
affect a firm’s total profits by positively affecting both the firm’s sales growth and its
return on investment. Researchers gathered both objective and subjective data on
multiple aspects of performance, such as sales growth, market share, and profitability
(Dess & Robinson, 1984; Hart & Banbury, 1994; Pearce, Robinns, & Robinson, 1987).
They found significant relationships between the two types of performance measures.
Balabanis, Stables, and Phillips (1997) analyzed the link between past levels of
market orientation and current performance, using data that they gathered at the same
point in time. The authors mentioned that a shortcoming to their research was the
inability of executives to accurately report or recall their organizations’ level of market
orientation from five years ago. Pelham and Wilson (1996) measured current levels of
market orientation and performance, along with numerous other control or moderator
variables during the same period, with a time lag of one year. They found that market
orientation was positively related to current profitability when they lagged other
independent variables by one year, and also when they lagged the previous year’s
profitability by one year. This finding provides strong evidence that a market orientation
affects current performance, rather than simply being related to it. Pelham and Wilson’s
study is a valuable contribution, though the focus of their study was only on small firms.
Narver and Slater (1990) and Kohli and Jaworski (1990) conceptualized market
orientation as a uni-dimensional construct, but one comprised of several different
components. In spite of that, both of those studies used a single aggregated measure of
market orientation to examine its relationship with performance, based on the assumption
that each component contributed equally to the construct (Kohli & Jaworski, 1990;
Narver & Slater, 1990). Almost all the studies in Table 12 also used this approach.
Greenley (1995a) described different types of market orientation, including customer-
focused, competitor-focused, and comprehensive market orientation. His study was
conducted under the assumption that the components differed among firms. He found
little difference in performance between firms utilizing the different forms of market
orientation. This finding indicates that the components of market orientation do not have
a highly interrelated relationship with performance; otherwise there would be greater
93
differences between firms with a customer or competitor focus compared to a
comprehensive market orientation (Dawes, 2000).
Kohli and Jaworski (1990) and Jaworski and Kohli (1993) hypothesized that three
industry characteristics–market turbulence, technological turbulence, and competitive
intensity–moderate the market orientation/performance relationship. Empirical results
have failed to support these hypotheses, leading Jaworski and Kohli to conclude that
either the market orientation/performance relationship is not robust across environments,
or the statistical tests lacked sufficient power to detect the effects.
Organizational Structure
Firm Performance and Organizational Structure
Research has shown that firm structure may have a powerful effect on the
performance of new business ventures (Sandberg, 1986). Negandhi and Reimann (1972),
who used a sample of 30 Indian manufacturing firms, examined the relationship between
decentralization, performance, and the competitiveness of the firms. They measured
performance on the basis of financial criteria, including profit and sales growth, and
behavioral criteria such as morale, turnover, and interdepartmental relations. They
determined that decentralization was positively related to effectiveness under all
conditions, but the strength of the relationship differed by the degree of competition.
They concluded that decentralization and performance were weakly related under non-
competitive conditions. They also concluded that structure is generally important under
competitive conditions (Negandhi & Reimann). Most likely, operations must be
decentralized in dynamic competitive situations in order to fit with the environment. It is
not clear whether low performance causes centralization, or vice versa. Decentralization
is one of the structural variables used by most researchers. Research has shown no direct
support for the notion that organic or decentralized organizations perform better than
centralized organizations under uncertain environments (Mohr, 1971; Pennings, 1975).
Lorsch and Morse (1974) found that high performers on routine tasks had
mechanistic organizations and that high performers on non-routine tasks had organic
structures. They also concluded that the low performers had mechanistic structures for
94
non-routine tasks, and organic structures for routine ones. Burns and Stalker (1961) and
Lawrence and Lorsch (1967) found that mechanistic structures that stressed
standardization and formalization control were especially common and often associated
with superior performance. Burns and Stalker (1961) argued that in a dynamic
environment, formalization decreases organizational adaptability to environmental
changes and increases the risk of organizational failure. Several empirical studies of
mature organizations support an inverse correlation between formalization and
performance in dynamic environments (Glisson & Marin, 1980; Wally & Baum, 1994).
Tse (1991) conducted an empirical analysis of organizational structure and financial
performance in the restaurant industry. She found that companies with a high degree of
formalization, a high degree of specialization, and low centralization had a higher
average return on assets and sales than did companies with other structural configurations.
Specialization, the concentration of tasks assigned to any one individual, is one of
the critical structural features of a formal type of organization (Pugh et al., 1963). Role
formalization and functional specialization are interrelated as the former relates to the
formal recognition and delineation of tasks within the organization and the latter captures
the extent to which individual team members focus their efforts on a narrower or broader
set of tasks. According to Burns and Stalker (1961), specialization increases coordination
costs and decreases the flexibility of the organization and therefore its ability to react to
environmental changes. The relationship between specialization and performance has
received little attention from empirical researchers, however, and is still undetermined
(Dalton, Todor, Spendolini, Fielding, & Porter, 1980).
The discussion above, mixed ideas and results on the relationship between
organicity of organizational structure and performance when examined in different
industries and different environmental conditions. It appears, however, that an organic
organizational structure leads to worked better performance than a mechanistic structure
in unstable environmental conditions. An organic organizational structure has a higher
level of specialization in function and lower levels of formalization and centralization
than does a mechanistic structure. On this basis, hypothesis 10 and its two subhypotheses
were formulated.
95
Hypothesis 10: Organicity of organizational structure will have significant positive
effects on the degree of satisfaction with store performance; that is, specialization will
positively affect satisfaction with store performance, and formalization and centralization
will negatively affect satisfaction with store performance.
Hypothesis 10-a: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to
other stores in the industry; that is, specialization will positively affect \
satisfaction with store performance, and formalization and centralization will
negatively affect satisfaction with store performance relative to other stores in the
industry.
Hypothesis 10-b: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to key
competitors: that is, specialization will positively affect satisfaction with store
performance, and formalization and centralization will negatively affect
satisfaction with store performance relative to key competitors.
The present research applies the above hypothetical relationships in the context of
South Korean apparel retailing firms, in order to discover the effect of each construct on
the South Korean apparel retailing industry under the current competitive conditions
since market opening.
Summary
According to previous research, the constructs of the model developed for this
study – environment, business strategy, organizational structure, top management’s
willingness to adapt to a changing market, and store performance – are interrelated and
interactive. This chapter presented a review of the literature pertaining to the
relationships among those above constructs. Some of the studies reviewed have linked
96
two, three, or four of the constructs, but no studies to date have linked all five of the
constructs.
The chapter also discussed subjective and objective performance measures. The
review of the literature revealed that several studies have shown a positive correlation
between objective and subjective measures and that several good reasons exist for using
subjective measures, such as the unwillingness of top management to reveal confidential
performance information.
97
CHAPTER 4
METHODOLOGY
Research Questions and Hypotheses
The objectives of this research, as stated in Chapter 1, are to determine (a) the
interrelationships among the different components of South Korean retailers’
management strategies, (b) the effects of perceived environmental uncertainty on the
components of South Korean retailers’ management strategies, (c) the impact of the
components of South Korean retailers’ management strategies on their stores’
performance, and (d) the market-orientation strategies that South Korean retailers have
implemented to survive and prosper in the competitive environment they currently face.
To fulfill these objectives, several research questions are addressed as follows.
1. Do factors in the external environment influence the extent to which South
Korean retail stores use a market-orientation strategy?
2. Do factors in the external environment influence the organizational structure of
South Korean retail stores?
3. Do factors in the external environment influence the performance of South
Korean retail stores?
4. Does the external environment influence top management’s willingness to adapt
to changes in the South Korean retailing market?
5. Does the use of a market-orientation strategy influence the organizational
structure of South Korean retail stores?
6. Does the use of a market-orientation strategy influence South Korean retail stores’
performance?
7. Do the organizational structures of South Korean retail stores influence the stores’
performance?
8. Does the use of a market-orientation strategy influence the organizational
structures and performance of South Korean retail stores?
98
9. Are the causal relationships among the constructs in the proposed model
applicable to South Korean retail stores?
In addition to the research objectives and questions, this study is guided by three
underlying propositions. The first underlying proposition is that certain direct
relationships exist among the constructs in the proposed model. The second is that there
are certain indirect relationships, in which a construct influences another construct
through a mediate construct, and that there are causal relationships among the constructs.
Finally, certain congruencies among the examined variables help to improve performance
of business organizations. From these underlying propositions, the hypotheses below
were derived from the strategic-management literature. Chapter 3 presents a discussion
of literature that supports these hypotheses. Figure 2 provides a diagram of the research
hypotheses.
Hypothesis: Causal relationships will be found among the strategic management
constructs, including perceived environmental uncertainty, top management's
willingness to adapt to a changing market, market-orientation strategy, organicity
of organizational structure, and store performance.
Hypothesis 1: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on each component of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination, response design,
and response implementation).
Hypothesis 2: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on organicity of organizational structure (i.e.,
will lead to more specialization, and less formalization and centralization).
Hypothesis 3: Perceived market turbulence and perceived competitive
intensity will have significant positive effects on the degree of satisfaction
with store performance.
99
Figure 2 Research Hypotheses in the Proposed Model H 3 H 1 H 5 H 6 H 2 H 4 H 7 H 10 H 8 H 9
ENVIRONMENT
Perceived Environmental Uncertainty
Market Turbulence
Competitive Intensity
BUSINESS STRATEGY
Market Orientation Strategy
Intelligence Generation
Intelligence Dissemination
Response Design
Response Implementation
STORE PERFORMANCE
Satisfaction with Store Performance
Compared to other stores
in the retail industry
Compared to the store’s
key competitors
TOP MANAGEMENT
Top Management’s Willingness to Adapt to a Changing Market
Emphasis
Risk Aversion
ORGANIZATIONAL
STRUCTURE
Organicity of Organizational Structure
Formalization
Centralization
Specialization
100
Hypothesis 3-a: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on the degree of satisfaction with store
performance relative to other stores in the industry.
Hypothesis 3-b: Perceived market turbulence and perceived competitive
intensity will have significant positive effects on the degree of satisfaction
with store performance relative to key competitors.
Hypothesis 4: The three components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and
response implementation) will have significant positive effects on organicity of
organizational structure (i.e., will lead to more specialization and less
formalization and centralization).
Hypothesis 5: The three components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and
response implementation) will have significant positive effects on the
degree of satisfaction with store performance.
Hypothesis 5-a: The three components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and
response implementation) will have significant positive effects on the
degree of satisfaction with store performance relative to other stores in the
industry.
Hypothesis 5-b: The three components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and
response implementation) will have significant positive effects on the
degree of satisfaction with store performance relative to key competitors.
Hypothesis 6: Perceived market turbulence and perceived competitive intensity
101
will be significantly and positively related to each component of top
management’s willingness to adapt to a changing market (i.e., emphasis and risk
aversion).
Hypothesis 7: The two components of top management’s willingness to adapt to a
changing market (i.e., emphasis and risk aversion) will have significant positive
effects on each component of market-orientation strategy (i.e., intelligence
generation, intelligence dissemination, response design, and response
implementation).
Hypothesis 8: The two components of top management’s willingness to adapt to a
changing market (i.e., emphasis and risk aversion) will have significant positive
effects on organicity of organizational structure (i.e., will lead to more
specialization and less formalization and centralization).
Hypothesis 9: The two components of top management’s willingness to adapt to a
changing market (i.e., emphasis and risk aversion) will have significant positive
effects on the degree of satisfaction with store performance.
Hypothesis 9-a: The two components of top management’s willingness to
adapt to a changing market (i.e., emphasis and risk aversion) will have
significant positive effects on the degree of satisfaction with store
performance relative to other stores in the industry.
Hypothesis 9-b: The two components of top management’s willingness to
adapt to a changing market (i.e., emphasis and risk aversion) will have
significant positive effects on the degree of satisfaction with store
performance relative to key competitors.
Hypothesis 10: Organicity of organizational structure will have significant positive
effects on the degree of satisfaction with store performance; that is, specialization will
102
positively affect satisfaction with store performance, and formalization and centralization
will negatively affect satisfaction with store performance.
Hypothesis 10-a: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to
other stores in the industry; that is, specialization will positively affect
satisfaction with store performance, and formalization and centralization will
negatively affect satisfaction with store performance relative to other stores in the
industry.
Hypothesis 10-b: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to key
competitors: that is, specialization will positively affect satisfaction with store
performance, and formalization and centralization will negatively affect
satisfaction with store performance relative to key competitors.
Research Design
The overall purpose of this research is to investigate the effects of perceived
environmental conditions, such as those brought about by market opening and other
changes in the economy, on the strategic management and financial performance of South
Korean retail stores. The model (see Figure 1) represents an integration of relationships
among pertinent constructs determined from the review of literature, especially drawing
from the models of Jaworski and Kohli (1993) and Kwock (1999). Besides showing the
pertinent constructs and the relationships among them, Figure 1 indicates the variables
that are used to operationalize the constructs in the model.
South Korean retail stores were selected for the study for the following
methodological and practical reasons: (a) South Korean retailing companies are
recognized as forming a major industry that is affected by the external environment; (b)
stores operated by these companies are believed to provide a diverse set of strategic
management types that are expected to create varying responses from the research
103
participants; and (3) no prior research has analyzed strategic management in this industry.
Background on the Operationalization of Constructs in the Proposed Model
Figures 1 and 2 show the constructs and related variables used in this research. In
order to obtain valid empirical results, the constructs had to be defined and measured
appropriately. The constructs include perceived environmental uncertainty, that is, top
management’s perception of environmental uncertainty; top management’s willingness to
adapt to a changing market; organicity of organizational structure; market-orientation
strategy; and store performance. Among these, store performance is the ultimate
dependent or endogenous construct, and organicity of organizational structure and
market-orientation strategy are the two mediate endogenous constructs. The model
proposes that these constructs would influence store performance. The independent or
exogenous constructs are perceived environmental uncertainty and top management’s
willingness to adapt to a changing market. Thus, it was hypothesized that these
exogenous constructs would influence the mediate endogenous constructs, which in turn
would influence store performance.
Exogenous Constructs
Perceived Environmental Uncertainty
According to Selznick (1948), the business environment includes all events,
including physical and social factors, that could influence a business or the decision-
making behavior of individuals in an organization (as cited in Duncan, 1972a). As
discussed in Chapter 2, the business environment can be categorized into the internal and
external environments. According to whether the decision makers in an organization
consider environment in their strategic planning, both the internal and external
environments can be objective or perceived (Bourgeois, 1980b). This study focuses only
on the perceived external environment. Environmental uncertainty as perceived by a
firm’s top management is important in an investigation of the relationships among the
104
components of strategic management because the dimensions of environment are closely
related to degrees of uncertainty, which relate to all the external events that affect the
organization and evolve from the dynamic and complex relationships of all the variables
comprising the environment, and because perceptions of the environment vary according
to the type of management in an organization.
Top Management’s Willingness to Adapt to a Changing Market
Although researchers have analyzed the process by which managers come to
perceive, interpret, and act upon environmental information, an increasing number have
attempted to understand the cognitive aspects of organizational life (Daft & Weick, 1984;
Eisenhardt, 1989; Isabella, 1990; Thomas & McDaniel, 1990). Ireland, Duane, Hitt, and
Porras (1987) studied differences in environmental uncertainty perceptions across
managerial levels. They found significant differences in uncertainty perceptions between
top and lower managerial levels in organizations, but not between top and middle
managers. In the case of strategic management, one of the major problems has been the
increasing turbulence and uncertainty of many firms’ external environments, which can
lead to misperceptions by top management of environmental changes. How top
managers perceive the environment affects the strategic decisions they make for their
firms and, by implication, the firms’ performance (Analoui & Karami, 2002; Ansoff &
McDonnell, 1990; Daft & Weick, 1984; Hambrick & Mason, 1984; Hatten & Scendel,
1975; Papadakis & Barwise, 2002; Smircich & Stubbart, 1985; Talaulicar, Grundei, &
Werder, 2005; Yasai-Ardekani, & Nystrom, 1996).
Duncan (1972a) observed that, as the rate of change increases in the environment,
top managers become more uncertain and less confident about courses of action
anticipated in the future. Even though managers recognize the external environment’s
importance and attempt to collect as much information as possible, they may face the
uncertainty that accompanies a fast-changing environment. The way top managers
interpret the environment leads them to create organizational structures capable of
responding to characteristics of the environment and to the environmental demands.
105
Mediate Endogenous Constructs
Market-Orientation Strategy
Market-orientation scales differ in their conceptual definitions and measurement
(Cadogan & Diamantopoulos, 1995; Farrell, 2002; Kara, Spillan, & DeShields, 2005;
Kohli & Jaworski, 1990; Lichtenthal & Wilson, 1992; Lings & Greenley, 2005; Matsuno,
Mentzer & Rentz, 2005; Narver & Slater, 1990; Ruekert, 1992). In the late 1980s and
early 1990s, Narver and Slater (1990), Kohli and Jaworski (1990), and Deshpandé, Farley,
and Webster (1993) developed three different but syntactically similar scales that
measured the extent of a firm’s market orientation. Since then, many studies have found
a positive relationship between market orientation and firm performance.
The MARKOR scale. The MARKOR scale is one of the most widely used
market-orientation scales for empirical investigation (Jaworski & Kohli, 1993; Selnes,
Jaworski, & Kohli, 1996; Siguaw, Simpson, & Baker, 1998). This scale, which derives
from Kohli and Jaworski’s (1990) definition of market orientation, focuses on a set of
specific behaviors as a basis of measurement. By concentrating on key intelligence-
based activities, Kohli and Jaworski’s construct appears capable of tapping a firm’s
specific behavioral responses to critical aspects of the market orientation-competition,
customer, regulatory, societal, and macroeconomic forces (Day & Wensley, 1988;
Jaworski & Kohli, 1996; Kohli, Jaworski, & Kumar, 1993). The structure-conduct-
performance paradigm (Thorelli, 1977; Vermon, 1972) and constituency-based theory
(Anderson, 1982; Connolly, Conlon, & Deutsch, 1980; Kotler, 1972; Pfeffer, 1978;
Pfeffer & Salancik, 1978; Sturdivant, 1977; Zeithaml & Zeithaml, 1984) provide strong
support for an operationalization of a market environment that includes multiple
stakeholders; however, the MARKOR scale is operationalized to represent a limited
number of stakeholder domains. The MARKOR scale focuses on domains for
understanding the market environment, but it mostly captures customers and competitors
and does not address specifically how other market factors suggested in the literature,
such as the legal and regulatory environment and the macroeconomic environment, may
influence competition and customers (Jaworski & Kohli, 1996; Kohli, Jaworski, &
Kumar, 1993). For the purpose of this study, a modified version of the MARKOR scale
106
was used to measure market orientation.
Organicity of Organizational Structure
In the present study, organizational structure is considered an organizational
component. David (1997) defined organizational structure as “a collection of people in a
division of labor working together to achieve a common purpose or common direction”
(p. 5). Organizational theory has extensively covered the dimensions and determinants of
organizational structure. Campbell, Bownas, Peterson, and Dunnette (1974) identified 63
different organizational structure qualities. Their definition of organizational qualities
relates those qualities to physical characteristics, such as size/sub-unit size, span of
control, flat/tall hierarchy, and administrative intensity, which can be utilized as tools for
strategy implementation. Structuring, on the other hand, includes policies and activities,
such as specialization, formalization, and centralization that prescribe or restrict the
behavior of organization members. From the viewpoint of organization theorists, these
dimensions of structuring are critical to the definition of structure. The present research
focuses on the specialization, formalization, and centralization, aspects of structuring
because business strategies and organization theorists suggest that structuring is a core
concept of organizational structure and that structure is a sub-category of strategy
implementation.
For the purpose of this study, the three dimensions of organizational structure–
specialization, formalization, and centralization–are used as the indicators of the degree
to which a firm has a mechanistic versus organic structure. Those three dimensions of
organizational structure are the ones that researchers have most commonly examined.
Centralization is defined as the locus of decisions about structure (Pugh, Hichson,
Hinings, & Turner, 1969). A measure of the degree of centralization is the degree of
participation in decision making at lower organizational levels (Aiken & Hage, 1968).
Formalization can be characterized as the degree to which norms, rules, and regulations
are explicit to an organization’s members (Hage & Aiken, 1970). It can be measured by
the extent to which rules, procedures, communication methods, and regulations are
written and made available (Pugh et al., 1968). Pugh et al. suggested that specialization,
which is similar to complexity, has to do with the division of labor, the distribution of
107
official duties among a number of positions, and the degree of individual expertise in an
organization. It can be measured through an assessment of the existence of various
functional activities, including advertising, personnel hiring and training, purchasing and
inventory control, financial resource management, operations and quality control,
research and development, and administrative procedures (Tse, 1988). A number of
researchers have examined the three dimensions of structure mentioned above
(Cunningham & Rivera, 2001; Fredrickson, 1986; Krokosz-Krynke, 1998; Miller &
Dröge, 1986; Paszkowska, 1998; Reimann, 1973; Schaffer, 1986; Tse, 1988; Vasiu &
Vasiu, 2004). The measures of these dimensions that were described above were applied
to measuring the organicity of South Korean retail stores in the present study.
Ultimate Endogenous or Dependent Construct
Store Performance
This study focuses on the performance of South Korean retail stores, of which
some may be independent and others may be part of companies that operate multiple
stores and possibly additional types of businesses. The stores’ performance were
assessed using performance measures normally associated with firm performance.
Generally, the choice of firm performance measures depends on the purpose and
context of the research. Performance has been conceptualized and measured under
various schemes, depending on such factors as the research questions, disciplinary focus,
and data availability. In this research, the economic or financial performance of a store is
measured according to several performance measures that were discussed in the previous
chapter. It is important to note that business performance is a multidimensional construct
and may be characterized in a number of ways, including effectiveness, efficiency and
adaptability. Further, performance on one dimension may run counter to performance on
another dimension. Therefore, in this study, different measures were used to obtain a
comprehensive view of the performance of the business while reducing the impact of
individual bias of any particular dimension (Schlegelmilch & Ross, 1987; Shoham &
Ross. 1993). It is difficult to compare absolute performance across companies (Dess,
Ireland, & Hitt, 1990). Because of this difficulty, respondents were asked about their
108
stores’ return on investment, earnings growth, sales growth, market share, return on assets
(ROA), and cash flow compared to those of other stores in their industry. Each
respondent was also asked his/her level of satisfaction with his/her store’s ROA, cash
flow, return on investment, earnings growth, sales growth, and market share relative to
those of the store’s key competitors. Measurement of these performance-related variables
affords a multi-dimensional view of performance.
This study uses the approach of gathering performance data through respondents’
self-reports because acquisition of secondary data on financial performance was expected
to be severely restricted. Firm-level financial data are not generally publicly available,
and firms are known to be sensitive about releasing any performance-related data (Dess
& Robinson, 1984).
It is important to define and measure the variables properly to have reliable and
valid results. Table 3 summarizes the operationalization of the constructs utilized in this
study. Efforts were made to define the variables in accordance with previous research
and arrive at appropriate measurement methods.
Data Collection Methods
Researchers have utilized various data collection methods, including field
experiments, laboratory experiments, judgment tasks, and critical simulation (McGrath,
Martin, & Kulka, 1982). Each of these methods has advantages and disadvantages. In
selecting a research method, it is important to maximize generalizability, have control
over variables, and have existential realism. This study utilized a population-sampling
survey method to satisfy these objectives with regard to the stated hypotheses and
conditions. The advantage of such a sample survey method is that it maximizes effective
sampling of the population units under study, thus maximizing population generalizability.
On the other hand, according to McGrath et al., the sample survey method has relatively
low levels of precision and realism of context.
109
Table 3 Summary of Operationalization of Constructs
Kind
Constructs
Measures
Sources
Exogenous
Perceived Environmental Uncertainty
2 Scales (10 items) - Market Turbulence
- Competitive Intensity
- Jaworski & Kohli (1993)
- Khandwalla (1972)
- Khandwalla (1977)
Top Management’s Willingness to Adapt to a Changing Maket
2 Scales (6 items) - Top-Management Emphasis
- Top-Management Risk Aversion
- Jaworski & Kohli (1993)
(table continues)
110
Table 3 (continued).
Kind
Constructs
Measures
Sources
Endogenous
Market-Orientation Strategy
4 Scales (14 items) - Market Orientation (Intelligence Generation) - Market Orientation (Intelligence Dissemination) - Market Orientation (Response Design) - Market Orientation (Response Implementation)
- Jaworski & Kohli (1993)
Organicity of Organizational Structure
3 Scales (10 items) - Formalization
- Centralization
- Specialization
- Khandwalla (1976/77)
- Aiken & Hage (1968)
- Ferrell & Skinner (1988)
- Inkson, Pugh, & Hickson (1970)
- Pugh & Hickson (1976)
- Khandwalla (1974)
(table continues)
111
Table 3 (continued).
Kind
Constructs
Measures
Sources
Endogenous
Store Performance
6 items
- Return on Investment
- Earnings Growth
- Sales Growth
- Market Share
- ROA
- Cash Flow
- Boyd (1991)
- Miller & Friesen (1984)
- Powell (1995)
- Ramanujam, Venjatraman, &
Camillus (1986)
112
Sampling and Sample Size and Selection
The unit of analysis is South Korean retail stores that carry apparel products. The
questionnaire was sent to such retailers in major cities and towns within cities in South
Korea, Seoul, Deajeon, Suwon, Daegu, and Busan, in order to have a large enough
sample size. These cities were selected because they are a relatively high level of
economic development and a relatively high density of retail stores tat offer apparel, and
they are fashion-oriented. The retailers to which the questionnaire was sent include
department stores, discount stores, specialty stores, membership stores, chain stores, and
boutiques. The retailers were systematically selected from A National Department Store
Yearbook, Fashion Retail Guide Book, and Korea Fashion Brand Yearbook. The protocol
for selecting the retailers was to choose every fourth one listed in each of the three
directions just mentioned, but to the extent possible, to avoid duplication and retailers
known to be no longer in business, the next one on a list was selected and the selection of
every fourth retailer was resumed from the next one.
The sample needed to include at least approximately 200 respondents because a
minimum of about 200 responses is required for the structural equations statistical
technique that was used in the main part of the data analysis. Past studies that have used
this technique in analyzing other industries have had response rates of 10.5% to 30.7%
(Crawford-Welsch, 1990). The expected response rate in the present study was 20-25%,
which required a target sample size of approximately 1,000. A total of 1,000 firms was
systematically drawn from the sample pools in the manner described above, and a
questionnaire was sent to each of those.
Data Collection Process
The primary data collection was through self-administered, mailed questionnaires
that were sent to top managers in the retail stores. In the pilot test of the questionnaire
(described later), it was determined that it took about 15 minutes to complete the
questionnaire. The mailing to each manager included a cover letter (see Appendix B), the
questionnaire (see Appendix G), and a postage-paid return envelope. The cover letter
113
indicated the nature of the research, a request for cooperation, and an outline of benefits
to the organization, which included a summary of the research results. In addition, the
letter requested that the recipient or another of the store’s top managers complete the
questionnaire. The questionnaire contained questions that so what information
concerning the operational profile of each store, such as the store’s age and number of
employees, and the recipient’s perception of the store’s business environment, the
business strategies the store employed, and the store’s structure and performance. The
questionnaire and cover letter were written in English and also translated into Korean,
with the translated version sent to the Korean retailers. The questionnaire also was
translated back into English to ensure that no meaning was lost when translated into
Korean. The researcher went to South Korea to distribute and collect the questionnaires.
The questionnaires were sent by mail to stores that did not have FAX numbers, but
otherwise were sent by FAX. The mail system in South Korea is not dependable, making
it preferable to send the material by FAX. The respondents were able to return the
questionnaires by FAX or mail.
To increase the response rate, Dillman’s (1978) total design method was used.
One week after the questionnaires were mailed to the stores, a reminder phone call was
made to each. Permission for research with human subjects was obtained from the
Institutional Review Board (IRB) at Virginia Polytechnic Institute and State University
prior to the collection of any data, including in the pilot test (see Appendix A).
The Questionnaire
The questionnaire used to collect the data was structured in terms of question
format, order of questions, layout, and length. The questionnaire contained questions
about the respondents’ and stores’ demographics, as well as questions to measure the
research variables. Modifications of existing scales were used to measure the research
variables concerning the sample stores’ organizational characteristics in terms of
formalization, centralization, and specialization, overall performance, market orientation,
top management’s willingness to adapt to a changing market,, and perceived
114
environmental uncertainty. One type of modification to the original scales was the
elimination of some items to make the questionnaire as short as possible and still enable
the measurement of each variable with no fewer than three items. Most eliminated items
were more applicable to manufacturing firms than to retailers. The other modifications
were in the wording of items to use terms applicable to this study (e.g., store, rather than
firm or business unit) and to replace colloquial expressions with equivalent phrases
considered more meaningful to a Korea (e.g., “well established,” rather than “tried and
true”). Discussion of the measure for each variable follows below. The questionnaire
contained six sections. The actual questionnaire is in Appendix D.
Respondent and Store Demographic Information
The first section of the questionnaire contained the seven questions shown below,
which were designed to obtain demographic profiles of the respondents and their stores
and to help ensure each respondent’s appropriateness for the study in terms of being in a
position to have knowledge about the information requested later in the questionnaire.
Section A
What is your title in your store?…………………………………............................_____________
How long have you been employed in the store where you currently work?.....…._____________
How long have you been employed in the retailing industry in Korea?..................._____________
Is your store the only store in your company?……………………_________ Yes _________ No
What year did your store open? …………………..……………………………...._____________
What is the current number of employees in your store?………………..……......_____________
115
Has the number of employees in your store increased, decreased, or
stayed the same since the store opened?…………...………………..…………...._____________
Perceived Environmental Uncertainty
Two scales comprising four and six items, respectively, measured the two
components of perceived environmental uncertainty: perceived market turbulence and
competitive intensity. The response format for each item was a 5-point Likert scale from 1
= strongly disagree to 5 = strongly agree. The scale to measure perceived market
turbulence addressed the degree to which an organization’s customers and their preferences
or purchase criteria were perceived to change over time. The four perceived market-
turbulence items were adapted from ones developed and utilized by Jaworski and Kohli
(1993). The intensity of competition faced by a firm was measured according to the
perception of the respondent from that firm. The motivation for the use of perception,
rather than the actual level of competition, arose from the argument by Lawrence and
Lorsch (1967) that it is the perception of competition, rather than its actual level, that
influences the decisions that managers make in response to their organizations’ operating
environment. This study adopted the method used by Khandwalla (1972; 1977) in which
intensity of competition was measured using perceptions of top management. The
perceived competitive-intensity scale measured the respondents’ perceptions of the degree
of competition in South Korea’s retailing industry. The market-turbulence and
competitive-intensity scales are as follow.
Section B Please indicate the extent to which the following items describe your store’s market, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
A. Market Turbulence Strongly disagree Strongly agree
Sometimes our customers are very price sensitive, but on other occasions, price is relatively unimportant to them ..................................................................... 1 2 3 4 5
116
Strongly disagree Strongly agree We are witnessing demand for our products and services from customers who never bought them before ............. 1 2 3 4 5 New customers tend to have product-related needs that are different from those of our existing customers.................................................................. 1 2 3 4 5 Our customers tend to look for new products all the time............ 1 2 3 4 5 B. Competitive Intensity
Strongly disagree Strongly agree
Many promotion wars occur in our industry ................................ 1 2 3 4 5 Anything that one competitor in our industry can offer, others can match readily............................................................... 1 2 3 4 5 One hears of new competitive moves in our industry almost every day .................................................. 1 2 3 4 5 The current business environment is threatening the survival of our store............................................. 1 2 3 4 5 Tough price competition is threatening our store......................... 1 2 3 4 5
Competitors’ product quality or novelty is threatening our store ..................................................................... 1 2 3 4 5
Top Management’s Willingness to Adapt to a Changing Market
A six-item scale adapted from scales developed by Jaworski and Kohli (1993) was
used to measure top management’s willingness to adapt to a changing market. The first
three items in this scale shown below addressed top-management emphasis, in terms of
the verbal reinforcement the managers provided for market-oriented activities. The last
three items in the scale measured top managers’ risk aversion, in terms of their intentions
toward innovative action in the face of risk and uncertainty. All items in this scale were
scored on a 5-point scale ranging from strongly disagree to strongly agree. The last item
was reverse coded.
117
Section 3.
Please indicate the extent to which the following items describe your management style, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
Strongly disagree Strongly agree
I believe that our store’s survival depends on its adapting to market trends.................................................... 1 2 3 4 5
I often tell employees to be sensitive to the activities of our competition ................................................... 1 2 3 4 5
I believe that serving customers is the most important thing our business does ................................................ 1 2 3 4 5 I believe that it is worth taking high financial risks for high rewards ................................................................... 1 2 3 4 5
Top managers in my store like to take big financial risks ............ 1 2 3 4 5 Top managers in my store like to implement plans only if they are very certain that they will work........................... 1 2 3 4 5
Market-Orientation Strategy
Market orientation was measured with a 14-item scale adapted from one
developed by Jaworski and Kohli (1993). Three items in the scale relate to market-
intelligence generation, five to intelligence dissemination, three to response design, and
three to response implementation. Of the six responsiveness items, three measured the
extent to which an organization developed plans in respond to market intelligence
(response design), and the remaining three measured the actual implementation of these
plans (response implementation). Woven into the items in the scale that measure the four
components – generation, dissemination, response design, and response implementation –
are issues related to the needs and preferences of customers or end-users and to
competitors’ moves. The 14 items in the scale are shown below. Each item was scored on
a 5-point scale ranging from “strongly disagree” to “strongly agree.”
118
Section 4. Please indicate the extent to which the following items describe your store, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number. A. Market Orientation (Intelligence Generation)
Strongly disagree Strongly agree
In my store, we do a lot of in-house market research................... 1 2 3 4 5 We collect industry information through informal means (e.g., lunch with industry friends, talks with trade partners) .............................................................. 1 2 3 4 5 We periodically review the likely effects of changes in our business environment (e.g., regulation) on customers................................................................................. 1 2 3 4 5 B. Market Orientation (Intelligence Dissemination)
Strongly disagree Strongly agree A lot of informal talk among employees in our store concerns our competitors’ tactics or strategies ............................. 1 2 3 4 5 We have interdepartmental meetings at least once a quarter to discuss market trends and developments ......................................................................... 1 2 3 4 5 Marketing personnel in our store spend time discussing customers’ future needs with other functional departments in the store ..................................... 1 2 3 4 5 When something important happens to major customers or market segments, all the store’s employees know about it in a short period ....................................................................1 2 3 4 5 Data on customer satisfaction are disseminated at all levels in our store on a regular basis.................................... 1 2 3 4 5 C. Market Orientation (Response Design)
Strongly disagree Strongly agree It takes us a long time to decide how to respond to our competitors’ price changes ................................... .1 2 3 4 5
119
Strongly disagree Strongly agree We periodically review our product development efforts to ensure that they are in line with what customers want .................................................................... 1 2 3 4 5 Several departments in my store get together periodically to plan responses to changes taking place in our business environment .................................... 1 2 3 4 5 D. Market Orientation (Response Implementation)
Strongly disagree Strongly agree If a major competitor were to launch an intensive campaign targeted at our store’s customers, we would implement a response immediately............................. 1 2 3 4 5 When my store finds out that customers are unhappy with the quality of our service, we take corrective action immediately ......................................... 1 2 3 4 5 We are quick to respond to significant changes in our competitors’ pricing structures........................................... 1 2 3 4 5
Organicity of Organizational Structure
A three-item scale, adapted from one developed by Khandwalla (1976/77), was
used to measure organicity of organizational structure. Three structural variables –
formalization, centralization, and specialization – are considered in this study. Organicity
is the extent to which an organization is structured organically versus mechanically.
Compared to a mechanical structure, an organic structure tends to be more open; has less
structural complexity, fewer rules, and extensive decentralization; is more prone to rich,
horizontal interaction; and has less rigid definitions of methods, duties, and powers
(Bantel, 1993; Marsden, Cook, & Kalleberg, 1994).
Organizational specialization was measured with four items that were adapted from
ones developed by Inkson, Pugh, and Hickson (1970), Pugh and Hickson (1976), and
Khandwalla (1974). These items were scored on a 5-point scale, as shown below.
120
Section 5. A. Specialization
Please indicate, for each pair of statements below, the extent to which you believe the statement at the left or the right describes the management philosophy in your store. Circle the most appropriate number from 1 to 5 for each pair of statements.
In general, the management philosophy in my store favors…
Highly structured channels of Open channels of communication communication and highly with important financial and restricted access to important operating information flowing financial and operating throughout the organization. information. 1 2 3 4 5
A strong emphasis on holding A strong emphasis on altering
fast to well established management practices as the business practices, despite changes environment changes, without too in business conditions. 1 2 3 4 5 much concern for past practices.
Tight formal control of most Loose, informal control and heavy operations by means of dependence on informal sophisticated control and relationships and norms of information systems. 1 2 3 4 5 cooperation for getting work done.
A strong emphasis on ensuring A strong tendency to let the that employees adhere closely requirements of the situation and to their formal job the employee’s personality define descriptions. 1 2 3 4 5 proper on-the-job behavior.
Formalization and centralization were measured with items adapted from widely
used scales that were developed by Aiken and Hage (1968) and Ferrell and Skinner (1988),
with the latter based on earlier work by John (1984). The three-item formalization scale
shown below measured the extent to which jobs in the organization were codified and
emphasized observing rules. These items were scored on a 5-point scale ranging from
“strongly disagree” to “strongly agree”. The first and third items were reverse coded. The
three-item centralization scale to measure the degree of hierarchical authority in a store is
shown below. These three items were scored on a 5-point scale ranging from “strongly
disagree” to “strongly agree”.
121
B. Formalization Please indicate the extent to which the following items describe your store, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
Strongly disagree Strongly agree Employees in our store are allowed to make their own decisions without checking with anybody else ............ 1 2 3 4 5 My usual experience with our store involves doing things “by the rule book”.................................................... 1 2 3 4 5 Many activities in my store are not covered by formal procedures.................................................................... 1 2 3 4 5 C. Centralization
Strongly disagree Strongly agree Even small matters in our store must be referred to someone higher up for a final answer........................................... 1 2 3 4 5
Any major decisions that employees make must have the approval of top managers ....................................................... 1 2 3 4 5 Employees who want to make their own decisions would be quickly discouraged ...................................... 1 2 3 4 5
Store Performance
Section 6 of the questionnaire was designed to measure financial performance
using a set of well established perceptual measures of financial performance from the
literature (Boyd, 1991; Miller & Friesen 1984; Powell, 1995; Ramanujam, Venkatraman,
& Camillus, 1986). In the first part of this section, the respondents were asked to rate
their degree of satisfaction with their stores’ performance in six categories (return on
investment, earnings growth, sales growth, market share, return on assets, and cash flow)
relative to other stores in their industry. The second part of Section 6 of the questionnaire
asked the respondents about their degree of satisfaction with their stores’ financial
performance in the same six categories noted above in comparison to their stores’ key
competitors.
122
Section 6 Please rate your degree of satisfaction with your store’s overall performance in each of the following areas compared to other stores in your industry, with 1 = highly dissatisfied and 5 = highly satisfied. Circle the most appropriate number. Highly Highly dissatisfied satisfied
a. Return on investment...................................................... 1 2 3 4 5
b. Earnings growth ............................................................. 1 2 3 4 5
c. Sales growth ................................................................... 1 2 3 4 5
d. Market share ................................................................... 1 2 3 4 5
e. Return on assets.............................................................. 1 2 3 4 5
f. Cash flows ...................................................................... 1 2 3 4 5
Please indicate, your degree of satisfaction with your store’s performance in each of the following areas compared to the store’s key competitors, with 1 = highly dissatisfied and 5 = highly satisfied. Circle the most appropriate number. Highly Highly dissatisfied satisfied
g. Return on investment...................................................... 1 2 3 4 5
h. Earnings growth ............................................................. 1 2 3 4 5
i. Sales growth ................................................................... 1 2 3 4 5
j. Market share ................................................................... 1 2 3 4 5
k. Return on assets.............................................................. 1 2 3 4 5
l. Cash flow……………………………………………….1 2 3 4 5
Pilot Test of the Survey Instrument
Before distributing the primary survey, a pilot test was conducted by sending the
questionnaire to a sample of managers in 10 South Korean retail stores and to five faculty
members in a major university in South Korea. A pilot test of a measurement instrument
can help insure that the instrument measures what is intended for a study, check for
reliability, and improve the quality of the questionnaire (Conant & Mokwa, 1986). In the
123
pilot test in this research, managers in the retail firms were asked to complete the self-
administered questionnaire in Korean and provide comments relating to content, wording,
comprehension, time to complete the questionnaire, and appropriateness of questions.
The five South Korean faculty members were asked to review the questionnaire in
Korean for content, wording, comprehension, and appropriateness of questions with their
knowledge of research methodology and strategic management and South Korean
retailing industry.
Reliability and Validity of the Survey Questionnaire
Reliability and validity are important issues in the measurement of research
variables. Neuman (2003) explained that both issues concern the accuracy of measures
or indicators. It is virtually impossible to achieve perfect reliability and validity.
Reliability
Reliability is the degree to which the measure of a variable contains error (Stone,
1978). It deals with an indicator’s dependability. A dependable indicator provides
information that does not vary as a result of the characteristics of the indicator, instrument,
or measurement design itself. According to Stone, the definition of reliability can be
approached in three ways. First, if the same set of objects is measured again and again
with the same or a comparable measuring instrument, the same or similar results will be
obtained each time. The second approach involves the question of whether the measures
obtained from a measuring instrument are the “true” measures of the property. This
question addresses the accuracy of an instrument. Finally, one may inquire into the error
of measurement. Measurement errors can be either systematic or random. Systematic
variance of a measure biases the results toward high or low, or positive or negative values.
Random, or error, variance is self-compensating in that obtained values tend to be first
one way and then the next.
Neuman (1994) identified three types of reliability: stability, representative, and
124
equivalence. Stability reliability addresses the question of whether or not a measure
delivers the same answer across different time periods. This is examined by the test-
retest method. Representative reliability concerns sub-populations. It addresses the
question of whether a measure delivers the same answer across different sub-populations.
Neither stability nor representative reliability were addressed in this study, largely due to
financial and time limitations. Finally, equivalence reliability concerns multiple
indicators, that is, the question of whether different indicators yield consistent results.
This study addressed equivalence reliability by using Cronbach’s alpha statistical test.
Validity
Validity refers to the degree to which a measure actually measures what it is
supposed to measure (Nunnally, 1967). Neuman (1994) explained that it refers to the
degree of fit between a construct and the indicators of the construct, or how well the
conceptual and operational definitions fit with each other. In this study, face and content
validity were assessed. A specialist group judged face validity in terms of whether the
indicators in the questionnaires really measured the constructs they were intended to
measure. This was part of the pilot test. The specialist group consisted of university
faculty members who were familiar with research methodology and with strategic
management and the South Korean retailing industry. As is face validity, content validity
is a judgmental question (Stone, 1978). Content validity involves the question of whether
a measure of a construct represents the full content of the definition of the construct. To
address the content validity issue in a study, the main variables are measured by several
attributes (Churchill, 1979; Farh, Hoffman, & Hegarty, 1984). To reduce the threat to
content validity in the present study, the questions included in the questionnaire to
measure the variables had a basis in the literature. In addition, the specialist group of
competent judges mentioned above assessed the questions for content validity.
125
Statistical Analysis
The data analysis to address the research objectives and test the hypotheses
involved the use of descriptive statistics, condition indices, Pearson correlations, the
variance inflation factor (VIF), Cronbach’s alpha, goodness of fit, and path analysis with
structural equations modeling (SEM). Table 4 summarizes the statistical techniques that
were used. The Statistical Package for the Social Sciences (SPSS) and Analysis of
Moment Structures (AMOS) program were used in the data analysis. The descriptive
statistics calculated in this study include averages, frequency distributions, standard
deviations, and correlations of the response values in Section A of the questionnaire to
provide profiles of the respondents and their stores. In addition, Pearson correlation
coefficients between the research variables, as well as the variance inflation factor and
the condition number of each variable, were calculated to help detect multicollinearity.
Preliminary Data Analysis
According to Pedhazur (1982), multicollinearity is a threat to the interpretation of
the influence of independent variables on the dependent variable in a regression.
Multicollinearity is a result of strong correlations between independent variables
(Wesolowsky, 1976). Multicollinearity exists when the predictors are highly correlated
with each other (typically above .90) (Allison, 1999). If independent variables are highly
correlated, the influence of each of those variables on the dependent variable may be
misinterpreted.
The presence of multicollinearity between independent variables makes it
impossible to separate the effects of two (or more) of them on a dependent variable. If
two variables are significantly collinear, it becomes impossible to determine which of the
variables accounts for the variance in the dependent variable. The problem primarily
occurs when independent variables are more highly correlated with each other than they
are with the dependent variable (Lynch, 2003). The examination of the correlations
(continuous and ordinal variables) and associations (nominal variables) between
independent variables was the first diagnostic tool for detecting the multicollinearity
126
Table 4
Statistical Analysis Technique
Objective of Use
Related Hypotheses
Descriptive Statistics
To describe the sample and summarize the raw data
N/A
Cronbach’s Alpha
To evaluate the reliability of indicators of constructs
N/A
Pearson Correlations
To examine the correlations between the of independent variables in regression
N/A
Variance Inflation Factor (VIF)
To detect multicollinearity
N/A
Goodness of Fit
To determine the goodness of fit between the hypothesized model and the sample data
N/A
Structural Equations Modeling (SEM)
To examine relationships among the constructs
H1-10
127
problem (“Multicollinearity in Logistic,” n.d.). Collinearity among more than two
independent variables cannot be detected, however, by viewing a correlation matrix of
the independent variables. Correlation matrices will not reveal higher-order collinearity
(“Condition Indicies,” 2003). A better diagnostic tool for detecting mulitcollinearity is
the variance inflation factor (VIF), which represents the inflation that each regression
coefficient experiences above the ideal. The VIF is better for detecting mulitcollinearity
because it builds in the regressing of each independent on all the others. Inspection of the
correlation matrix reveals only bivariate multicollinearity, with the typical criterion being
bivariate correlations > .90. The VIF for the ith independent variable equals 1/1-Ri2,
where Ri2 is the square of the coefficient of multiple determination of regression, which is
produced by regressing variable Xi against the other independent variables. The ith
independent variable has a strong linear association with the remaining independent
variables when its VIF value is large. A VIF value can range from 1 to infinity. If a VIF
is larger than 10, critical multicollinearity is indicated (Myers, 1990). A variable with a
low condition index is said to be well conditioned, and one with a high condition index is
said to be ill conditioned (“Condition Number,” 2005). A condition index can range
between 0 and 100 .Condition indices between 30 and 100 indicate moderate to strong
collinearity.
Cronbach’ alpha was used to assess the reliability of the measures. Cronbach’s
alpha measures how well a set of variables measures a single unidimensional latent
construct. When data have a multidimensional structure, Cronbach’s alpha will be low.
A Cronbach’s alpha reliability coefficient of .60 or higher was considered acceptable in
this study.
It is important to determine whether a models used in a study adequately reflects
the sample data. This is called "goodness of fit". Goodness of fit is a statistical test in
which the validity of one hypothesis is tested without specification of an alternative
hypothesis (Bock, 1998). The task is to determine the goodness of fit between the
hypothesized model and the sample data. In this study, goodness of fit was tested by
three types of measures: absolute goodness-of-fit measures, incremental fit measures, and
parsimonious fit measures.
128
Data Analysis for Hypothesis Testing
The following describes the statistical analysis conducted to test the research
hypotheses that are listed earlier in this chapter. A structural equations model (SEM) was
used to test hypotheses 1-10. An analysis under SEM is for examining a series of
dependence relationships simultaneously in a research model. This technique provides a
straightforward method of dealing with multiple relationships simultaneously, while
providing high statistical efficiency. SEM develops a systematic and holistic view of
problems by assessing the relationships among a set of variables comprehensively (Hair,
Anderson, Tatham, & Black, 1995). SEM is used to evaluate a system of non-
manipulated constructs and to infer causal relationships among the constructs (Billings &
Wroten, 1978). In applying SEM in testing hypotheses 1-10, ordinary least squares
regression was used to estimate causal relationships among the indicated set of variables.
The details of the data analysis under SEM are presented in the next chapter.
Summary
This chapter presented the design of the proposed model on the strategic
management process, which is based on an extensive review of the relevant literature.
The hypotheses and research framework were also discussed. Following this was a
discussion of how the constructs and variables were selected and operationalized for the
investigation of the relationships among the constructs. Then, the data collection and
sampling procedure, as well as the survey instrument were described. Finally, this
chapter indicated the statistical techniques used for the preliminary data analysis and for
testing the hypotheses. The results of the statistical analysis and hypotheses testing are
presented in the next chapter.
129
CHAPTER 5
RESEARCH RESULTS AND DISCUSSION
The purpose of this research is to determine (a) the interrelationships among the
different components of South Korean retailers’ management strategies, (b) the effects of
perceived environmental uncertainty on the components of South Korean retailers’
management strategies, (c) the impact of the components of South Korean retailers’
management strategies on their stores’ performance, and (d) the market-orientation
strategies that South Korean retailers have implemented to survive and prosper in the
competitive environment they currently face. This chapter presents and discusses the
results of the data analysis and hypothesis testing. The chapter also presents the
conclusions drawn from the results. The chapter includes the following sections: (a)
return rate of the survey; (b) profile of the sample; (c) instrument reliability; (d)
preliminary analysis of the measured variables; (e) results of the hypothesis testing; (f)
discussion of the results; and (g) the conclusions.
Return Rate of the Survey
A self-administrated, questionnaire was sent by mail in July 2005 to a ststematic
sample of 1,000 apparel retail stores in Seoul, Busan, Suwon, Daejeon, and Daegu, with
100 retail stores per city. Reminder phone calls were made a week after mailing the
questionnaire.
A total of 427 surveys was returned, for a 42.7% response rate. Initially, 229
completed surveys were returned, including 75 from Seoul, 76 from Suwon, 48 from
Daejeon, and 30 from Busan. Another 198 were returned after the follow-up phone calls,
including 50 from Seoul, 24 from Suwon, 8 from Busan, and 116 from Daegu. Of the
427 returned surveys, 27 were unusable for the final data analysis and were eliminated
(see Table 5). After eliminating those from respondents who did not meet the sample
criteria and those completed incorrectly, 400 were kept for data analysis, for an overall
response rate of 40.0%. The retained questionnaires included some that were considered
130
Table 5
Survey Response Rates by City
Cities
Initial Respondents
(Non-respondents)
Final Respondents
Seoul
125 ( 75)
114
Suwon 100 (100) 94
Busan 38 (162) 34
Daejeon 48 (152) 48
Daegu 116 ( 84) 110
Total
427 (573)
400
Note. The final respondents were those who remained after eliminating unusable questionnaires.
131
useable even though they did not have all the questions answered. The computer
programs used for each part of the statistical analysis replaced missing values for
variables included in the respective statistical procedures.
Demographic Profile of the Sample
This section describes the demographic characteristics of the overall sample of the
400 respondents whose responses were used in the final data analysis. The largest
portion of the respondents’ was shop managers (53.3%), followed by presidents (16.3%),
sales persons (15.8%), and assistant managers (6%) (see Table 6). Even though they are
not considered top managers, the sales persons were included for the data analysis
because they are presumed to have enough knowledge to answer the questions because
top managers in Korean stores often keep sales persons apprised of details of the stores’
operations and performance. As with any other respondent, a sales person who did not
know the answer to a question could leave it blank. The most common lengths of time
the respondents had been employed in the stores where they currently worked were, in
order by frequency, less than one year (17.2%), two years (14.8%), three years (13.0%),
one year (7.3%), and four years (7.3%) (see Figure 3). In terms of years of employment
in retailing in Korea, 29.8% of the respondents had worked in this industry for five or
fewer years, 10.3% had worked for 10 years in this industry, and 27% of them had
worked in the industry for more than 10 years (see Figure 4).
Most of the stores where respondents worked had opened between 2000 and 2003
(35%) (see Figure 5), and most had less than five employees (60.8%) (see Figure 6).
When the respondents were asked whether the number of employees in their stores had
increased, decreased or stayed the same since the store opened, 46.8% said the number
had stayed the same, 31.3% said it had increased, and 17.0% said the number of
employees had been decreased since their stores opened. To the question about whether a
respondent’s store was the only in the company, 56% said their stores were not the only
stores in their companies and 42% said they were.
132
Table 6
Respondents’ Job Titles
Respondents’ Job Titles
Frequency
Percent
Assistant Manager
24
6.0
Auditor 1 0.3 Deputy Manager 4 1.0 Director 1 0.3 Executive Director 1 0.3 General Manager 8 2.0 Manager 13 3.3 President 65 16.3 Senior Executive Director 1 0.3 Secretary 1 0.3 Shop Manager 213 53.3 Sales Person 63 15.8 Treasurer 1 0.3 No Response 4 1.0
Total
400
100.0
133
Figure 3. Respondents’ Years of Employment in the Stores Where They Currently Worked
Years Figure 4. Respondents’ Length of Employment in the Korea Retailing Industry
0.00 5.00 10.00 15.00 20.00 25.00 30.000
10
20
30
40
50
60
70
Freque
ncy
Years
0.00 5.00 10.00 15.00 20.00 25.000
10
20
30
40
50
60
70
Freque
ncy
134
Figure 5. Years When the Respondents’ Stores Opened
1975 1980 1985 1990 1995 2000 20050
20
40
60
80
100
Freque
ncy
Years Figure 6. Number of Employees per Store
1 3 5 7 9 10 13 16 27 98 150
190
250
400
500
800
2004
2600
5000
7000
0
5
10
15
20
25
Perce
nt
Number of Employees
135
Instrument Reliability
Cronbach’s alpha values were computed to test the internal consistency aspect of
reliability of the multi-item scales measuring perceived environmental uncertainty, top
management’s willingness to adapt to a changing market, market-orientation strategy,
organicity of organizational structure, and store performance. All of these five scales had
alpha values greater than .60 (see Table 7). A scale is considered to have good reliability
if it has an alpha value greater than .60 (Schuessler, 1971). Reliability estimates between
0.6 and 0.7 represent the lower limit of acceptability for reliability estimates (Hair et al.,
1998). The determination was made, therefore, to use an alpha value greater than 0.6 to
indicate reliability in this study. The coefficients shown in Table 18 indicate good
reliability for the five multi-item variables (i.e., perceived environmental uncertainty, top
management’s willingness to adapt to a changing market, market-orientation strategy,
organicity of organizational structure, and store performance.)
Table 7
Cronbach’s Alpha Coefficients
Scales
Cronbach’s
Alpha
Perceived Environmental Uncertainty (10 items total)
0.69
Top Management’s Willingness to Adapt to Changing Market (6 items total)
0.67
Market Orientation Strategy (14 items total)
0.81
Organicity of Organizational Structure (10 items total)
0.64
Store Performance (12 items total)
0.94
136
Mean Ratings and Standard Deviations of the Variables
The research variables are perceived environmental uncertainty, top
management’s willingness to adapt to a changing market, market-orientation strategy,
organicity of organizational structure, and store performance. Tables 8-11 show the mean
ratings (scores) and standard deviations for each of these variables and for the items
(statements) in the questionnaire for measuring the variables. The tables list the items in
the order they appeared in the questionnaire. The response format for each item was a 5-
point scale, ranging from strongly disagree (1) to strongly agree (5), for all but the
specialization component of organicity of organizational structure. A 5-point scale was
also used to measure specialization, but this scale measured the degree to which either of
two dichotomous statements in each items described the management philosophy in a
respondent’s store.
Perceived Environmental Uncertainty
Perceived environmental uncertainty includes two factors: market turbulence,
with four items; and competitive intensity, with six items. Table 8 shows the mean scores
and standard deviations for those 10 items and for the two perceived environmental
uncertainty factors. As shown in the table, the mean scores for market turbulence and
competitive intensity are both in the mid range of the scale, although that for market
turbulence (3.47) slightly exceeds that for competitive intensity (3.28). Overall, the
respondents tended to agree that their stores’ customers were price sensitive at times, but
not at other times (m = 3.34). Somewhat more strongly, they agreed that their stores were
witnessing demand for their products and services from customers who never bought
them before (m = 3.48). This suggests that they perceived customers as not being loyal to
just one store. The two remaining items for market turbulence received the highest mean
scores (3.52 and 3.53). The respondents agreed, on average, that the product-related
needs of their stores’ new customers tended to differ from those of their existing
customers and that their stores’ customers were always looking for new products.
When it comes to competitive intensity in the retailing industry, the following two
137
Table 8
Means and Standard Deviations for Perceived Environmental Uncertainty Perceived environmental uncertainty
Means
SD
Market turbulence
3.47
1.09
Sometimes our customers are very price sensitive, but on other occasions, price is relatively unimportant to them.
3.34
1.12
We are witnessing demand for our products and services from customers who never bought them before.
3.48
1.07
New customers tend to have product-related needs that are different from those of our existing customers.
3.52
1.12
Our customers tend to look for new products all the time.
3.53
1.05
Competitive intensity
3.28
0.94
Many promotion wars occur in our industry.
3.68
1.13
Anything that one competitor in our industry can offer, others can match readily.
3.67
1.15
One hears of new competitive moves in our industry almost every day.
3.56
.99
The current business environment is threatening the survival of our store.
2.76
1.12
Tough price competition is threatening our store.
3.06
1.18
Competitors’ product quality or novelty is threatening our store.
2.93
1.22
138
items received the highest and nearly equal mean scores: many promotion wars occur in
the industry (m = 3.68); and anything that one competitor could offer, others could match
readily (m = 3.67) (see Table 19). The respondents agreed somewhat less strongly with
the statement that one hears of new competitive moves in their industry almost daily (m =
3.58). Finally, three items dealing with competitive intensity received mean scores in the
2.76 to 3.06 range and all involve threats to the respondents’ stores. Those threats are the
current business environment in general, tough price competition, and competitors’
product quality or novelty. All together, it appears that the respondents perceived a
medium amount of competitive intensity in the retailing industry.
Top Management’s Willingness to Adapt to a Changing Market
Top management’s willingness to adapt to a changing market includes two factors
with three items each: top-management emphasis; and top-management risk aversion.
Table 9 shows the mean values and standard deviations for those six items and for the
two factors of top management’s willingness to adapt a changing market. As shown in
the table, the mean scores for top-management emphasis are somewhat above the mid
range of the scale. The emphasis with the highest mean score is a belief that serving
customers is the most important thing the respondents’ businesses do (m = 4.13). In
addition, the respondents expressed a belief that their stores’ survival depended on
adapting to market trends (m = 3.74). Perhaps related to this, they also said that they
often tell employees to be sensitive to the activities of their stores’ competition (m = 3.47).
For top-management risk aversion, note that the last item shown in the Table 9
was reverse coded; thus, for all three items, the higher the score, the more the willingness
to take risks and; conversely, the lower the score, the more the risk aversion. The
respondents fairly strongly agreed that high financial rewards were worth high financial
risks (m = 3.24). They agreed less strongly that their stores’ top managers liked to take
big financial risks (m = 3.00), but even less strongly that the top managers liked to
implement plans only if they were certain to work (m = 3.30). Taken together, and
considering the overall mean score of 2.98 for top-management risk aversion, it appears
the stores’ managers were not big risk takers but nor were they very averse to accepting
139
Table 9
Means and Standard Deviations for Top Management’s Willingness to Adapt to a Changing Market Top management’s willingness to adapt to a changing market
Means
SD
Top-management emphasis
3.78
1.08
I believe that our store’s survival depends on its adapting to market trends.
3.74
1.10
I often tell employees to be sensitive to the activities of our competition.
3.47
1.10
I believe that serving customers is the most important thing our business does.
4.13
1.03
Top-management risk aversion
2.98
1.05
I believe that it is worth taking high financial risks for high rewards.
3.24
1.08
Top managers in my store like to take big financial risks.
3.00
1.06
Top managers in my store like to implement plans only if they are very certain they will work.
3.30
1.02
Note. The last item in top-management risk reversion was reverse coded.
140
some risk.
Market-Orientation Strategy
Market-orientation strategy includes four factors: intelligence generation, with
three items; intelligence dissemination, with five items; response design, with three
items; and response implementation, with three items. As shown in Table 10, the mean
scores for intelligence generation, intelligence dissemination, response design, and
response implementation are all in the mid range of the measurement scale, although that
for one item in response design is below 3.00.
Intelligence generation has a mean score of 3.32. The intelligence-generation
item with the highest mean score is a lot of in-house market research in the respondents’
stores (m = 3.45). Along with this, the respondents tended to agree that their stores’
personnel periodically reviewed the effects of changes in their business environment on
customers (m = 3.36) and collected industry information through informal means (m =
3.16).
Intelligence dissemination has a mean score of 3.41. The intelligence-
dissemination items address the means of disseminating information among store
personnel, the types of information disseminated, and the extent of information
dissemination among store personnel. These three issues are intermixed in the
intelligence-dissemination items. On the basis of the mean scores for the first three items
listed under intelligence dissemination in Table 10, the most common way of
disseminating intelligence in the respondents’ stores was interdepartmental meetings at
least quarterly, followed by discussions of marketing personnel with other functional
departments and lastly informal talk among store employees. Types of information
disseminated among store personnel are included in each intelligence-dissemination item
(see Table 10). It is not surprising that the most common types of information
disseminated were the most general, that is, market trends and developments as well as
important things happening to major customers or market segments. These are contained
in the second and fourth intelligence-dissemination items listed in Table 10. The next
most common types of disseminated information were customer-satisfaction data and
141
Table 10
Means and Standard Deviations for Market-Orientation Strategy Market-orientation strategy
Means
SD
Intelligence generation
3.32
1.08
In my store, we do a lot of in-house market research.
3.45
1.05
We collect industry information through informal means.
3.16
1.16
We periodically review the likely effects of changes in our business environment (e.g., regulation ) on customers.
3.36
1.02
Intelligence dissemination
3.41
1.15
A lot of informal talk among employees in our store concerns our competitors’ tactics or strategies.
3.15
1.10
We have interdepartmental meetings at least once a quarter to discuss market trends and developments.
3.56
1.25
Marketing personnel in our store spend time discussing customers’ future needs with other functional departments in the store.
3.44
1.04
When something important happens to major customers or market segments, all the store’s employees know about it in a short period.
3.52
1.14
Data on customer satisfaction are disseminated at all levels in our store on a regular basis.
3.49
1.09
(table continues)
142
Table 10 (continued). Market-orientation strategy
Means
SD
Response design
3.47
1.11
It takes us a long time to decide how to respond to our competitors’ price changes.
3.14
1.20
We periodically review our product development efforts to ensure that they are in line with what customers want.
3.67
1.13
Several departments in my store get together periodically to plan responses to changes taking place in our business environment.
3.60
0.99
Response implementation
3.59
1.10
If a major competitor were to launch an intensive campaign targeted at our store’s customers, we would implement a response immediately.
3.56
1.11
When my store finds out that customers are unhappy with the quality of our service, we take corrective action immediately.
3.85
1.06
We are quick to respond to significant changes in our competitors’ pricing structures.
3.37
1.14
Note. The first item in response design was reverse coded.
143
customers’ future needs. Less so, but still common, were competitors’ tactics or
strategies, contained in the first item listed under intelligence dissemination in the table.
The means scores for the last two items under intelligence dissemination in Table 10
(3.52 and 3.49) suggest fairly widespread dissemination of customer-related information
among store employees. The manner of stating the other three items in this section allow
less definite conclusions about how widespread the respondents considered the
information dissemination; for example, the interdepartmental meetings in the second
item may or may not have involved all store employees.
Response design has a mean score of 3.47. The response-design item with the
highest score is periodically review product development efforts to ensure that they are in
line with what customers want (m = 3.67). In addition, the respondents tended to agree
that several departments in their stores get together periodically to plan responses to
changes in the business environment (m = 3.60). The response-design item with the
lowest mean score is it takes a long time to decide how to respond to competitors’ price
changes (m = 3.14). Note that, because this item was reverse coded, the respondents
tended to disagree with this statement.
Response implementation has a mean score of 3.59. The most common type of
response to market intelligence that the sample stores implemented appears to have been
immediate corrective action when customers were found to be unhappy with the quality
of the service a store (m = 3.85). Somewhat less, but still relatively common responses to
market intelligence were implementing an immediate response if a major competitor
launched on intensive campaign aimed at a store’s customers (m = 3.56) and responding
quickly to significant changes in competitors’ pricing structures (m = 3.37).
Organicity of Organizational Structure
Organicity of organizational structure includes three factors: formalization, with
three items; centralization, with three items; and specialization, with four items. Table 11
shows the mean values and standard deviations for those 10 items. As shown in the table,
the mean scores for formalization, centralization, and specialization range from 3.06 to
3.26, which are in the mid range of the scale. This range of mean scores suggests that the
144
Table 11
Means and Standard Deviations for Organicity of Organizational Structure Organicity of organizational structure
Means
SD
Formalization
3.06
1.12
Employees in our store are allowed to make their own decisions without checking with anybody else.
3.05
1.17
My usual experience with our store involves doing things “by the rule book.”
3.38
1.06
Many activities in my store are not covered by formal procedures.
3.14
1.13
Centralization
3.26
1.16
Even small matters in our store must be referred to someone higher up for a final answer.
3.56
1.16
Any major decisions that employees make must have the approval of top managers.
3.39
1.23
Employees who want to make their own decisions would be quickly discouraged.
2.83
1.08
Note. The first and third formalization items were reverse coded. (table continues)
145
Table 11 (continued). Organicity of organizational structure
Means
SD
Specialization
3.24
1.24
In general, the management philosophy in my store favors…
Highly structured channels of communication and highly
restricted access to important financial and operating information.
Versus
Open channels of communication with important financial operating information flowing throughout the organization.
3.22
1.26
A strong emphasis on holding fast to well established
management practices, despite changes in business conditions. Versus
A strong emphasis on altering practices as the business environment changes, without too much concern for past practices.
3.42
1.22
(table continues)
146
Table 11 (continued).
Organicity of organizational structure
Means
SD
Specialization
3.24
1.24
In general, the management philosophy in my store favors…
Tight formal control of most operations by means of
sophisticated control and information systems. Versus
Loose, informal control and heavy dependence on informal relationships and norms of cooperation for getting work done.
3.09
1.16
A strong emphasis on ensuring that employees adhere closely
to their formal job descriptions. Versus
A strong tendency to let the requirements of the situation and the employee’s personality define proper on-the-job behavior.
3.23
1.32
147
structures of the respondents’ stores were fairly formalized, centralized, and specialized
and thus somewhat more mechanistic than organic. In the formalization category, the
respondents tended to agree that they had experienced doing things “by the rule book” in
their stores (m = 3.38). In addition, given the reverse coding of the first and third
formalization items, the respondents tended to disagree that their stores’ employees could
make their own decisions without checking with anybody else (m = 3.05) and that many
activities in their stores were not covered by formal procedures (m = 3.14).
The overall mean score of 3.26 for centralization suggests a moderate degree of
centralized decision making in the respondents’ stores. This mean score is, however, the
result of some ambivalence on the part of the respondents. Although they indicated the
need to refer even small matters to someone higher up for a final answer (m = 3.56), they
agreed somewhat less strongly that employees’ major decisions required top managers’
approval (m = 3.39) and even less strongly that employees would be quickly discouraged
from making their own decisions (m = 2.83).
In considering the mean scores for specialization in Table 11, it is important to the
bottom item on the right and with the 1-5 scale between them. This means, in terms of
Table 11, that the higher (lower) the score, the stronger a respondent’s indicated belief
that the bottom (top) item described the management philosophy in that individual’s store.
Further, this means that the lower the score, the less specialization a store’s management
philosophy favored, and conversely, the higher the score, the more specialization was
favored in terms of labor division in the store.
The mean score of 3.22 for the first specialization pair indicates a slight leaning
toward a management philosophy that favors open channels of communication with
important financial operating information flowing throughout a store organization. The
mean score of 3.42 for the second specialization pair suggests that somewhat more
tendency toward specialization, in leaning toward a philosophy that favors a strong
emphasis on altering practices as the business environment changes, without much
concern for past practices. On the other hand, the mean score of 3.09 for the third
specialization pair indicates respondents’ neutral position on whether their stores’
management philosophy favored tight, formal control or loose, informal control. Finally,
the mean score of 3.23 for the fourth specialization pair indicates respondents’ slight item
148
in each listed pair on the left and leaning toward believing that their stores’ management
philosophy favored letting the requirements of situations and employees’ personalities
define proper on-the-job behavior.
Satisfaction with Store Performance
Satisfaction with store performance includes two factors, each with six items:
compared to other stores in the industry; and compared to key competitors of a
respondent’s store. The two factors include the same six measures of store performance.
Table 12 shows the mean scores and standard deviations for the 12 components of store
performance and for the two store performance factors. Overall, the respondents tended
to be satisfied with their stores’ performance compared to other stores in the industry (m
= 3.11) and to the stores’ key competitors (m = 3.10). The mean scores differed little for
the different performance measures within and between the two factors, ranging only
over 3.00 and 3.21; however, the respondents expressed the most satisfaction with market
share, whether compared to other stores in the industry (m = 3.21) or to key competitors
(m = 3.17).
Pearson Correlations for Measured Variables
This section reports the Pearson correlations between the measured constructs that
compose each of the research variables. The correlations are examined to see linear
relationships between the variables or constructs.
The presentation of the correlation coefficients begins with those between the
constructs of each of the variables, which include perceived environmental uncertainty,
top management’s willingness to adapt to a changing market, market-orientation strategy,
organicity of organizational structure, and store performance. Then, the correlations
among all the constructs are presented. Note that the sample size for each construct is
400. Despite missing responses from participants in some cases for each construct,
149
Table 12
Means and Standard Deviations for Satisfaction with Store Performance Satisfaction with store performance
Means
SD
Compared to other stores in your industry
3.11
1.03
Return on investment
3.06
.96
Earnings growth
3.08
1.01
Sales growth
3.17
1.09
Market share
3.21
1.08
Return on assets
3.10
0.98
Cash flow
3.03
1.05
Compared to the store’s key competitors
3.10
1.02
Return on investment
3.00
1.03
Earnings growth
3.09
0.99
Sales growth
3.02
0.98
Market share
3.17
1.06
Return on assets
3.05
1.02
Cash flow
3.00
1.05
150
AMOS, the computer program used for the correlation analysis provided values for the
missing responses through the full-information maximum likelihood method. The
correlation coefficients indicated in the text and tables in this section were calculated
after replacing the missing values.
Three of the variables include only two constructs. One such variable is
perceived environmental uncertainty, whose two constructs – market turbulence and
competitive intensity – are significantly and positively correlated (r = 0.297). This
indicates that the stronger (weaker) respondents’ perception of market turbulence, the
more strongly (weakly) they perceived competitive intensity in the retailing industry.
Another variable with two constructs is top management’s willingness to adapt to a
changing market. Its two constructs – top-management emphasis and risk aversion – are
positively and significantly correlated (r = 0.104). This indicates that the more (less) risk
the top managers in the respondents’ stores were willing to take, the more they
emphasized market-oriented activities. The third two-construct variable is satisfaction
with store performance, for which satisfaction with performance relative to other stores in
the Korean retailing industry and relative to key competitors are significantly and
positively correlated (r = 0.777). This indicates that the higher (lower) the respondents’
satisfaction with their stores’ performance compared to other stores in the retailing
industry, the higher (lower) their satisfaction with the performance compared to key
competitors.
Table 13 shows the correlation matrix for the four constructs of market-
orientation strategy. The results show positive and significant correlations among these
four constructs. Thus, for example, the greater (lesser) the stores’ market intelligence
generation, the greater (lesser) their market intelligence dissemination, market response
design, and market response implementation.
Table 14 shows the correlation matrix for the three constructs of organicity of
organizational structure: centralization, formalization, and specialization. Centralization
and formalization are each significantly correlated with one of the other two organicity
constructs. The positive correlation between centralization and specialization indicates
counterintuitively that the more (less) centralized the decision making in the stores, the
more (less) specialization occurred in the stores. The negative correlation between
151
Table 13 Pearson Correlation Coefficients for Market-Orientation Strategy
MOSIG
MOSID
MOSRD
MOSRI
MOSIG
1.000
MOSID
0.500**
1.000
MOSRD
0.262**
0.212**
1.000
MOSRI
0.314*
0.344**
0.334**
1.000
Note. The correlation coefficients were calculated after replacing missing values. MOSIG: market-orientation strategy – intelligence generation MOSID: market-orientation strategy – intelligence dissemination MOSRD: market-orientation strategy – response design MOSRI: market-orientation strategy – response implementation **. p < 0.01, two-tailed
Table 14
Pearson Correlation Coefficients for Organicity of Organizational Structure
OOSCEN OOSFOR
OSSSPE
OOSCEN
1.000
OOSFOR
-0.001
1.000
OSSSPE
0.148**
-0.138**
1.000
Note. The correlation coefficients were calculated after replacing missing values. OOSCEN: organicity of organizational structure –centralization OOSFOR: organicity of organizational structure –formalization OOSSE : organicity of organizational structure –specialization *. p < 0.05, **. p < 0.01, 2-tailed
152
formalization and specialization indicates that the more (less) formalization in the stores’
structures, the less (more) specialization of functions in the stores.
Correlation Coefficients Among the Constructs
Finally, the correlation matrix for all the constructs in the measured variables
indicated that 50 of the 78 correlations among the constructs were statistically significant
at p < 0.01(see Table 15). This result implies strong relationships among the constructs,
which is one of the preliminary conditions for structural equation modeling.
Multicollinearity Diagnostics
The collinearity among the independent variables was examined through variance
inflation factors (VIF) and condition indices. The presence of multicollinearity between
independent variables makes it impossible to separate the effects of two (or more) of
them on a dependent variable. If two variables are significantly collinear, it becomes
impossible to determine which of the variables accounts for variance in the dependent
variable. The problem primarily occurs when independent variables are more highly
correlated with each other than they are with the dependent variable (Lynch, 2003).
Collinearity among more than two independent variables cannot be detected by viewing a
correlation matrix of the independent variables. Correlation matrices will not reveal
higher order collinearity (“Condition Indicies,” 2003). Thus, the VIF and the condition
number of the independent variables were examined.
A condition index k = ( maxλ / minλ )1/2 meaning that it equals the square root of the
largest eigenvalue ( maxλ ) divided by the square root of the smallest eigenvalue ( minλ ). A
variable with a low condition index is said to be well conditioned, and one with a high
condition index is said to be ill conditioned (“Condition Number,” 2005). Condition
indices between 30 and 100 indicate moderate to strong collinearity. The condition index
for each independent variable in this study is below 33, which is acceptable (see Table
16). VIF is calculated by 1/(1-R2i) where R2
i is the squared multiple correlation for the
153
Table 15
Correlation Among the Constructs of the Five Research Variables
MT
CI
TOP EMP
TOP RA
MOS
IG
MOS
ID
MOS RD
MOS
RI
OOS FOR
OOS CEN
OOS SPE
SPI
SPC
MT 1.000 CI .297*** 1.000 TOPEMP -.019 .164** 1.000 TOPRA .066 .144** .104** 1.000 MOSIG .129** .232** .182** .245** 1.000 MOSID .075 .331** .142** .283** .500** 1.000 MOSRD .186** .069 .126 * .085 .262** .212** 1.000 MOSRI .030 .276** .145** .212** .314** .344** .344** 1.000 OOSFOR .063 -.034 .012 -.040 .071 .047 .161** -.168** 1.000 OOSCEN .088 .249** .128* .167** .256** .311** .101* .231** -.001 1.000 OOSSPE .088 .082 .097 .197** .162** .216** .111* .131** -.138** .148** 1.000 SPI .032 .073 -.114 * .238** .238** .186** .082 .213** -.082 .213** .058 1.000 SPC .001 .057 -.035 .230** .230** .142** .038 .115* -.008 .116* .012 .777** 1.000 Note. The correlation coefficients were calculated after replacing missing values. MT: market turbulence; CI: competitive intensity; TOPEMP: top-management emphasis; TOPRA: top-management risk aversion; MOSIG: market
orientation strategy – intelligence generation; MOSID: market orientation strategy – intelligence dissemination; MOSRD: market orientation Strategy – response design; MOSRI: market orientation strategy – response implementation; OOSFOR: organicity of organizational structure - formalization OOSCEN: organicity of organizational structure –centralization; OOSSEP: organicity of organizational structure – specialization; SPI: satisfaction with
store’s performance compared to other stores in the retailing industry; SPC: satisfaction with store’s performance compared to the competitors.
* p < 0.05, ** p < 0.01, two-tailed.
154
Table 16 Collinearity Diagnostics on the Independent Variables – Condition Indices
Variables
Eigenvalue
Condition Index
Constant
9.587
1.000
Market-orientation strategy
Intelligence generation
0.103
9.639
Intelligence dissemination
0.071
11.628
Response design
0.062
12.403
Response implementation
0.052
13.650
(table continues)
155
Table 16 (continued).
Variables
Eigenvalue
Condition Index
Organicity of organizational structure
Formalization
0.042
14.261
Centralization
0.030
17.950
Specialization
0.025
19.598
Store performance
Compared to other stores in the retailing industry
0.012
27.981
Compared to the store’s key competitors
0.009
30.166
Note. The dependent variables are perceived market turbulence, perceived competitive intensity, and two components of top management’s willingness to adapt to a changing market (i.e., emphasis and risk aversion).
156
regression of Xi on the other X independent variables. A VIF value of 10, is used to
determine whether collinearity is a problem (Lynch, 2003). The VIF for each
independent variable in this study is less than the standard comparison score of 10, which
indicates mulitcollinearity is not serious (see Table 17).
Incomplete Data
Missing data are almost always a problem in research. Item non-response,
differential attrition of respondents, failure to obtain measurements at equal time intervals,
and unbalanced panel designs used to be difficult to analyze at best and were threats to
the validity of a study. A related technical problem, which is strongly related to validity
threats, is that most multivariate statistical methods require complete data (Little,
Schnabel, & Baumert, 2000). McArdle (1994) noted that missing data can lead to
negative consequences and problems. Because incomplete data can seriously bias
conclusions drawn from an empirical study, they must be addressed, regardless of the
reason for the missing data. The extent to which such conclusions can be biased depends
on both the amount and pattern of missing values.
Incomplete data are sometimes handled by deleting entire records, or pairs of
variables, with missing values. Sometimes a researcher substitutes sample means for the
missing values. These approaches tend to improvise the data so they can be analyzed by
methods designed for complete data, but the use of improvised data has little theoretical
justification (Little & Rubin, 1987; Rubin, 1976).
By far, the most popular method today for dealing with incomplete data is full-
information maximum likelihood (ML) estimation. This is a theory-based approach to
the treatment of missing data (Arbuckle, 1996; Little & Rubin, 1989). ML estimates of
means and covariances are obtained by maximizing with respect to first and second
moments. An ML estimate uses all the information of the observed data, including
information about the mean and variance of missing portions of a variable, given the
observed portions of other variables (Little, Schnabel, & Baumert, 2000). AMOS, the
computer program used in this research for the data analysis to test the hypotheses under
a structural equations model (SEM), uses ML estimation to replace any missing data.
157
Table 17
Collinearity Diagnostics on the Independent Variables – Variance Inflation Factors
Variables
Variance Inflation (VIF)
Market-orientation strategy
Intelligence generation
1.478
Intelligence dissemination
1.498
Response design
1.228
Response implementation
1.372
Organicity of organizational structure
Formalization
1.145
Centralization
1.179
Specialization
1.097
Store performance
Compared to other stores in the retailing industry
3.142
Compared to the store’s key competitors
2.977
Note. The dependent variables are perceived market turbulence, perceived competitive intensity, and two components of top management’s willingness to adapt to a changing market (i.e., emphasis and risk aversion).
158
Because SEM is based on the hypothesis that the covariance matrix follows a
Whishart distribution, complete data are required for calculating the probability density
(Bentler & Chou, 1987; Boomsna, 1985). The Wishart distribution is any of a family of
probability distributions for nonnegative-definite matrix-valued random variables
(Wikipedia, 2005). Betler and Chou (1987), and Boomsma (1985) discussed various
problems that can arise when the covariance structure is based on incomplete data. The
data for the present study are incomplete, with a total of 61 missing values. Table 18
shows the number of missing values for each variable that was replaced by ML with the
AMOS program before performing the SEM analysis.
Overall Fit of the Measurement Model
An absolute-fit index directly assesses how well an a priori model reproduces the
sample data (Rick, 1995). The fit index consists of several statistics, including chi-square,
the non-centrality parameter (NCP), the goodness-of-fit index (GFI), the standardized
root mean square residual (RMSR), and the root mean square error of approximation
(RMSEA). The overall fit of the measurement model in this study was assessed by three
types of measures: absolute goodness-of-fit measures, incremental fit measures, and
parsimonious fit measures. The results of these measures are presented in Table 19.
One type of measure of absolute goodness of fit is likelihood ratio chi-square
statistics. For the model in this study, the chi-square (χ2) value is 166.153 with 55
degrees of freedom and a probability of less than .0001 (p < .0001), which suggests that
the fit of the data to the hypothesized model is not entirely adequate. This statistic
indicates, nevertheless support for believing that the differences between the predicted
and actual matrices are not significant, indicative of an acceptable fit. One of the first fit
statistics to address the problem was the χ2/degrees of freedom ratio (Wheaton, Muthén,
Alwin, & Summers, 1977). A χ2/degrees of freedom ratio less than 3 suggests a well-
fitted model. For the model in this study, the χ2 /degree of freedom ratio is 3.021,
indicating the model is well fitted.
Another measure of absolute goodness of fit is the root mean square residual
159
Table 18
The Research Variables and the Number of Missing Values Replaced for Each
Variables
Missing Values Replaced
Valid Cases
MT1
0
400
MT2 1 400 MT3 0 400 MT4 7 400 CI1 2 400 CI2 1 400 CI3 1 400 CI4 2 400 CI5 1 400 CI6 1 400 TOPEMP1 1 400 TOPEMP2 3 400 TOPEMP3 3 400 TOPRA1 5 400 TOPRA2 8 400 TOPRA3 6 400 MOSIG1 1 400 MOSIG2 2 400 MOSIG3 3 400 MOSID1 5 400 MOSID2 0 400 MOSID3 0 400 MOSID4 1 400 MOSID5 0 400 MOSRD1 0 400 MOSRD2 1 400 MOSRD3 0 400 MOSRI1 1 400 MOSRI2 5 400 MOSRI3 1 400 OOSFOR1 0 400 OOSFOR2 7 400 OOSFOR3 4 400 OOSCEN1 1 400 OOSCEN2 2 400 OOSCEN3 4 400 OOSSPE1 15 400 OOSSPE2 15 400 OOSSPE3 16 400 OOSSPE4 17 400 SPI 12 400 SPC 6 400 Note. MT: market turbulence; CI: competitive intensity; TOPEMP : top management emphasis; TOPRA: top management risk aversion; MOSIG : market orientation strategy – intelligence generation; MOSID: market orientation strategy– intelligence dissemination; MOSRD: market orientation strategy – responsive design; MOSRI: market orientation strategy – responsive implementation; OOSCEN : organicity of organizational structure –centralization; OOSFOR : organicity of organizational structure – formalization; OOSSEP : organicity of organizational structure – specialization; SPI: degree of satisfaction with store’s performance compared to other stores in retailing industry; and SPC: degree of satisfaction with store’s performance compared to key competitors.
160
Table 19 Goodness-of-fit Measures for the Measurement Model
Measures
Goodness-of-fit Statistics
Absolute fit measures
Chi-square 166.153 with 55 df = 3.021 (p < .0001)
NCP 111.153
GFI .944
RMR .033
RMSEA .071
Incremental fit measures
AGFI .908
NFI .838
Parsimonious fit measures
PNFI .591
PGFI .571
CFI .882
IFI .885
RFI
.770
Note. NCP = non-centrality parameter; GFI = goodness-of-fit Index; RMSR = root mean residual; RSMEA = root mean square error of approximation; AGFI = adjusted goodness-of-fit index; NNFI = non-normed fit index; NFI = normed fit index; PNFI = parsimonious normed fit index; PGFI = parsimonious goodness-of-fit index; CFI = comparative fit index; IFI = incremental fit index; and RFI = relative fit index
161
(RMR), which represents the average residual value derived from fitting the variance-
covariance matrix for a hypothesized model, Σ(θ), to the variance-covariance matrix of
the sample data. The standardized RMR represents the average value across all
standardized residuals, and ranges from 0 to 1.00; in a well-fitting model this value will
be small, say, .05 or less. The RMR value of .033 shown in Table 18 for the model in this
study is less than the critical value of .05. Yet another absolute fit statistic is the root
mean square error of approximation (RMSEA). This was first proposed by Steiger and
Lind (1980) and was only recently recognized as one of the most informative criteria in
covariance structure modeling. The RMSEA takes into account the error of
approximation in the population and asks the question, “How well would the model, with
unknown but optimally chosen parameter values, fit the population covariance matrix if it
were available?” (Browne & Cudeck, 1993, pp. 137-138). Any discrepancy, as measured
by the RMSEA, is expressed per degree of freedom, thus making the index sensitive to
the number of estimated parameters in the model. Values less than .05 indicate good fit,
and values as high as .08 represent reasonable errors of approximation in the population
(Browne & Cudeck). MacCallum, Browne, and Sugawara (1996) elaborated on these cut
points and noted that RMSEA values ranging from .08 to .10 indicate mediocre fit and
those greater than .10 indicate poor fit. Given these criteria, the RMSEA value of .068
for the model in this study is acceptable.
The goodness-of-fit index (GFI) measures the relative amounts of variance and
covariance in sample data that are jointly explained by a hypothesized model (Mulaik,
James, Van Alstine, Bennett, Lind, & Stilwell, 1989). The AGIF differs from the GFI
only in that it adjusts for the degrees of freedom in the specified model. The GFI and
AGFI can be classified as absolute indexes of fit (Hu & Bentler, 1995). Both indexes
range from 0 to 1.00, with values close to 1.00 indicating good fit. The values of GFI
(.944) and AGIF (.908) for the model in this study are close to the recommended level of
1.00 (see Table 19). In addition, Bentler and Bonett’s (1980) normed fit index (NFI) has
become the practical measure of choice for incremental fit, as evidenced by the current
“classic” status of their original paper (Bentler, 1992); however, because the NFI tends to
underestimate model fit in cases of small samples, Bentler (1990) revised the NFI to take
sample size into account and proposed the parsimonious comparative fit index (CFI).
162
The values of both the NFI and CFI range from 0 to 1.00. A value greater than .90 for
either was originally considered to represent a well-fitting model (Bentler, 1992), but a
revised cutoff value close to .95 has been recommended (Hu & Bentler, 1999). The
values of NFI (.838) and CFI (.882) for the model in this study are each close to the
recommended level of .95, thus indicating marginally acceptable fit.
Another index of fit shown in Table 30 is the parsimonious goodness-of-fit index
(PGFI), which James, Mulaik, and Brett (1982) introduced to take into account the
complexity of a hypothesized SEM in assessing its overall fit to the sample data. Mulaik,
James, Van Altine, Bennett, Lind, and Stulwell (1989) noted that PGFI values in the .50
range are not unexpected. Thus, the PGIF value of .571 found for the model in this study
would seem to be consistent with the other fit statistics mentioned above. The relative fit
index (RFI) represents a derivate of the NFI; as with both the NFI and CFI, the RFI
coefficient values range from 0 to 1.00, with values close to .95 indicating superior fit
(Hu & Bentler, 1999). The incremental index of fit (IFI) was developed by Bollen (1989)
to address the issues of parsimony and sample size, which were known to be related to
the NFI. As such, its computation is basically the same as the NFI, except that degrees of
freedom are taken into account. Thus, it is not surprising that the IFI value of .885 for the
model in this study is consistent with the CFI value of .882 in reflecting a well-fitting
model. The parsimonious normed fit index (PNFI) is a modification of Bentler-Bonett's
normed fit index that takes parsimony of the model into account (James, Mulaik, & Brett).
The Bentler-Bonnet normed fit index for the model in this study is close to 1 which
confirms that the proposed model works well. The PNFI uses the same parsimonious
factor as the parsimonious GFI. Thus, the PNIF value of .591, the IFI value of .885, and
the RFI value of .770 for the model in this study are indicating good fit.
In summary, the values of the goodness-of fit measures found for the model in
this study indicate no reason to reject this model. The results for the overall fit measures
led to the conclusion that the model fit well and represented a reasonably close
approximation of the sample data.
163
Results and Discussion of the Hypothesis Testing
The hypotheses developed in this study were tested by utilizing structural
equations modeling (SEM). The effects of exogenous constructs on endogenous
constructs and of endogenous constructs on other endogenous constructs, as well as
relationships among exogenous constructs, can be tested in SEM simultaneously. In the
present study, the four exogenous variables are the two components of perceived
environmental uncertainty (market turbulence, competitive intensity) and the two
constructs of top management’s willingness to adapt a changing market (top-management
emphasis and risk aversion). The nine endogenous variables are the four components of
market-orientation strategy (intelligence generation, intelligence dissemination, response
design, response implementation), the three components of organicity of organizational
structure (centralization, formalization, specialization), and the two components of
satisfaction with store performance (compared to other stores in the Korean retailing
industry, compared to a store’s key competitors). This section presents the results of the
data analysis to test the hypothesized relationships between the research variables, as
shown in Figure 10. The following presentation of the results is according to the stated
hypotheses. The overall research hypothesis, labeled H, encompasses each of the other
hypotheses; that is, all the other hypotheses are subsumed under H.
H : Causal relationships will be found among the strategic management constructs,
including perceived environmental uncertainty, top management's willingness to adapt to
a changing market, market-orientation strategy, organicity of organizational structure, and
store performance (see Figure 2).
Brief comments about hypothesis H follow the presentation of the results for all
the other hypotheses.
Perceived Environmental Uncertainty and Market-Orientation Strategy
Hypothesis 1: Perceived market turbulence and perceived competitive intensity will have
164
significant positive effects on each component of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and response
implementation).
Although the results indicate a lack of support for hypothesis 1 as stated, the
coefficients on the components of perceived environmental uncertainty are significant
and positive in five of the eight tested cases (see Figure 7). In only one instance do the
results indicate a positive effect of market turbulence on market-orientation strategy.
That one instance is the positive effect of market turbulence on response design. This
means that the more (less) market turbulence the store managers perceived, the more
(less) they designed responses to address market forces. On the other hand, competitive
intensity is significantly and positively related to each of the four components of market-
orientation strategy. Competitive intensity positively affected intelligence generation and
dissemination as well as response design and implementation. The first and second of
these effects imply that the more (less) the perceived competitive intensity, the more
(less) the store managers gathered information about the market and the more (less) the
intelligence dissemination in the stores about the market. The findings of positive
relationships between at least some aspects of perceived environmental uncertainty and
market-orientation strategy are consistent with Jaworski and Kohli’s (1993) findings on
such relationships.
It was hypothesized that both perceived market turbulence and perceived
competitive intensity would positively affect each component of market-orientation
strategy (i.e., intelligence generation, intelligence dissemination, response design and
response implementation). The hypothesized positive effect of perceived market
turbulence and perceived competitive intensity on the components of market-orientation
strategy is based on the work by many researchers (Greenly, 1995; Jaworski & Kohli,
1993; Kim, 2004; Kohli & Jaworski, 1990; Lush & Lacziak, 1987; Slater & Narver,
1994). None of these researchers, however, had examined these relationships in the
context of Korean retailers, much less Korean apparel retailers.
As noted previously, the results in the present study do not fully support the
hypothesized relationships in the case of Korean apparel retailers. The finding of a
165
Figure 7. Research Results for Hypothesis 1
.048 .299*** -.032 .363*** .178*** -.007 -.075 .399*** Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
***. p < .001, two-tailed.
Intelligence Dissemination
Intelligence Generation
Market Turbulence
Competitive Intensity
Response Design
Response Implementation
166
positive effect of perceived market turbulence on response design implies that top
managers in Korean apparel stores are increasingly (decreasingly) driven to develop
plans to respond to market intelligence, the more (less) turbulent, or unstable and
unpredictable, the stores’ business environment as perceived by the managers. This result
makes sense in that the top managers would seek to adjust their stores’ strategies to match
changes in the market, even if predicting future changes is difficult. By the same token, it
makes sense that the top managers would see little need to develop plans for change
when their stores’ business environment seemed stable; in essence, they could maintain
the status quo.
The results for hypothesis 1 also indicate positive effects of perceived competitive
intensity on three components of market-orientation strategy (i.e., intelligence generation,
intelligence dissemination, response design and response implementation). These results
imply that top managers in Korean apparel stores are increasingly (decreasingly) driven
to employ most of the full range of actions of a market-orientation strategy, the more
(less) intensely competitive their stores’ business environment as perceived by the
managers. In other words, the stronger the competition as perceived by the top managers,
the more the managers focused on protecting their stores’ customer markets and from
competitors by first generating market intelligence, then disseminating that intelligence
throughout their organizations, and acting on the intelligence by implementing plans in
respond to the competition. The mangers’ actions to respond to market conditions could
encompass cross-functional coordination in their stores and the inclusion of employees at
all levels of their organizations in activities to ensure customer satisfaction and
responsiveness to changing customer needs.
The results for hypothesis 1 suggest that top managers in Korean apparel retailing
stores may respond more to competitive intensity than to market turbulence. Market
turbulence usually affects every firm or store in an industry, including competitors, but
when competition becomes intense, it can differentially affect firms or stores in an
industry. Thus, it would not be surprising that the more intense, and perhaps threatening,
top managers perceive the competition, the more they would employ a market-orientation
strategy to attempt to meet, or beat, the competition. In order to survive and prosper in
the saturated Korean apparel retailing industry, top managers may need to act decisively
167
and quickly.
Perceived Environmental Uncertainty and Organicity of Organizational Structure
Hypothesis 2: Perceived market turbulence and perceived competitive intensity will have
significant positive effects on organicity of organizational structure (i.e., will lead to more
specialization and less formalization and centralization).
As for hypothesis 1, the results do not support hypothesis 2 as stated; however,
some significant relationships between perceived environmental uncertainty and the
dependent variables are evident (see Figure 8). Neither market turbulence nor
competitive intensity significantly affected the degree of formalization of the structures of
the respondents’ stores. Market turbulence did positively affect the degree of
specialization, although competitive intensity had no significant effect on the degree of
specialization. Thus, the more (less) the perceived market turbulence, the more (less) the
degree of specialization of functions within the stores. In addition, competitive intensity
positively affected the degree of centralization, but market turbulence did not. Thus, the
more (less) the competitive intensity, the more (less) the centralization of decision
making within the respondents’ stores.
It was hypothesized that perceived market turbulence and competitive intensity
would positively affect each component of organicity of organizational structure (i.e.,
formalization, centralization, and specialization). The testing of hypothesis 2 produced
only two significant results: the positive effects of perceived market turbulence on
specialization and of perceived competitive intensity on centralization. Many researchers
have indicated that a firm in a stable, uncomplicated business environment tends to utilize
a more mechanistic than organic organizational structure, thus, a more centralized and
formalized structure with less specialization, in order to maximize efficiency, and a firm
in a complex, dynamic environment adopts a more organic structure, that is, one that is
decentralized, less formalized, and characterized by more specialization in functions
(Burn & Stalker, 1961; Dill, 1958; Lawrence & Lorsch, 1967; Miles & Snow, 1978). The
positive effect of market turbulence on specialization found in the present study coincides
168
Figure 8. Research Results for Hypothesis 2
.065 -.120* .008 .288*** .169* .098 Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
*. p < .05, ***. p < .001, two-tailed.
Formalization
Market Turbulence
Competitive Intensity
Centralization
Specialization
169
with these arguments, but the remaining results found in testing #2 in regard to apparel
retail stores in Korea run counter to these arguments.
Conditions in the business environment may be of little importance to top
managers in Korean apparel retail stores when it comes to their stores’ organizational
structures, but it may be that the managers have come to expect and live with the
dynamic Korean business environment that has been changing frequently. Changing a
store’s organizational structure requires a great amount of time, effort, and expense on the
part of the store’s managers and other employees. The lack of effects of environmental
uncertainty on most aspects of organizational structure may be because it difficult for a
store to change its organizational structure to catch up with rapid changes in the
environment. When top managers perceive environmental uncertainty, they may only
change minor aspects of their stores’ organizational structure. As seen in the results,
market turbulence as perceived by top management positively affected specialization.
This may imply that when the top managers perceived the market as turbulent, they
delegated more authority to employees in certain specialized functional areas of their
stores to respond quickly to changing consumer preferences without overseeing every
single decision of those employees. On the other hand, the finding of a positive effect of
perceived competitive intensity on centralization may imply increased centralization of
decision making to respond quickly to increased competitive challenges.
A final possibility that may account for this set of results is that top managers in
Korea are naturally reluctant to utilize an organic organizational structure, regardless of
how they perceive the environment, because an organic structure implies a decrease in
top management’s power. Korea is known for its vertical social structure based on age
and social status. The organizational arrangement of Korean companies is highly
centralized with authority concentrated in senior levels. High-ranking individuals tend to
have more power over their subordinates than in the West. Consequently, decision
making in Korea tend to follow a formal process in which senior-level approval is
necessary (Kim, 2005).
170
Perceived Environmental Uncertainty and Store Performance
Hypothesis 3: Perceived market turbulence and perceived competitive intensity will have
significant positive effects on the degree of satisfaction with store performance.
Hypothesis 3-a: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on the degree of satisfaction with store
performance relative to other stores in the industry.
Hypothesis 3-b: Perceived market turbulence and perceived competitive intensity
will have significant positive effects on the degree of satisfaction with store
performance relative to key competitors.
The results indicate that hypotheses 3-a and 3-b are not supported. As shown in
Figure 9, none of the relationships is statistically significant between the components of
perceived environmental uncertainty and those of satisfaction with store performance.
Thus, according to the results, perceived market turbulence and competitive intensity did
not affect the respondents’ degree of satisfaction with their stores’ performance.
The hypothesis that perceived market turbulence and competitive intensity would
positively affect satisfaction with store performance has been tested empirically by only a
few researchers (Januszewsik, Koke, & Winter, 1999; Nickell, Nicolotsas, & Dryen,
1997; Power & Reid, n.d). In the present study, two sub-hypotheses were developed to
test the effect of perceived environmental uncertainty on store performance. These sub-
hypotheses are shown above.
Neither of the two sub-hypothesis is supported by the results. This finding
disagrees with that of Nickell, Nicolotsas and Dryden (1997), who found a positive
relationship between firm performance and the degree of competition in the market and a
negative relationship between market turbulence and performance. Their results may
differ from those in this study because of the use of different performance measures.
Whereas the measure in the present study is satisfaction with performance, Nickell,
Nicolotsas and Dryden contrasted an objective measure with a subjective measure.
171
Figure 9. Research Results for Hypothesis 3 .024 .074 -.013 .068 Note. SPI: satisfaction with store’s performance compared to other stores in the retailing industry;
SPC: satisfaction with store’s performance compared to key competitors. The numbers in the
figure are the coefficients on the independent variables (shown on the right) that were estimated
by regression. Hypothesis supported Hypothesis not supported.
Market Turbulence
Competitive Intensity
SPC
SPC
172
Another possible reason for the discrepant results is the types of industries from
which the samples were drawn. The sample population for the present study is the
apparel retailing industry in Korea, and that for their study was small mature firms in
various industries in Scotland.
Market-Orientation Strategy and Organicity of Organizational Structure
Hypothesis 4: The four components of market-orientation strategy (i.e., intelligence
generation, intelligence dissemination, response design, and response implementation)
will have significant positive effects organicity of organizational structure (i.e., will lead
to more specialization and less formalization and centralization).
The results for hypothesis 4 follow the pattern of those for hypotheses 1 and 2 in
not supporting the hypothesis as stated, but indicating one positive effect of the
independent variables on the dependent variables (see Figure 10). For hypothesis 4, the
results indicate positive effect of intelligence generation on the degree of centralization of
the structures of the respondents’ stores, but no significant effects on formalization and
specialization. The results also indicate that intelligence dissemination positively
affected both centralization and specialization, response design positively affected
formalization, and response implementation positively affected centralization. Thus, the
more (less) the generation of intelligence in the stores, the more (less) centralized the
decision making. And the more (less) the dissemination of intelligence in the stores, the
more (less) centralized the decision making and the more (less) the degree of
specialization of functions within the stores. The more (less) the response design to
address market forces, the more (less) the formalization of store structure. In addition,
the more (less) the response implementation to address market forces, the more (less)
centralized the decision making. The effects just mentioned agree with theoretical
literature which posits a positive association between market orientation and organicity of
organizational structure (Kohli & Jaworski, 1990; Walker & Ruekert, 1987). Indeed, this
theoretical literature was the basis for hypothesis 4. One the other hand, the findings for
hypothesis 4 do not entirely agree with those of Jaworski and Kohli (1993) and other
173
Figure 10. Research Results for Hypothesis 4
.058 .013 -.206*** .200*** .120* -.036 .188*** .148** .075 .244** .078 .077 Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
*. p < .05, **. p < .01, ***. p < .001, two-tailed.
Intelligence Generation
Intelligence Dissemination
Response Design
Response Implementation
Formalization
Specialization
Centralization
174
researchers who found that formalization, centralization, and specialization are inversely
related to market-intelligence generation and dissemination and to response design, but
positively related to response implementation (Deshpande & Zaltman, 1982; Jawoski &
Kohli, 1993; Levitt, 1969; Lundstrom, 1976; Zaltman, Duncan, & Holbeck, 1973). The
findings for hypothesis 4 also disagree with those of Selnes et al. (1996). Selnes et al.
who analyzed data from a Scandinavian sample and found that neither centralization nor
formalization was significantly related to market orientation. The discrepancy between
the results in the present study and the cited ones may be partly because of the different
types of industries from which the samples were drawn. The sample population of the
present study is the apparel retailing industry in Korea, and those in the cited studies were
small business units in various industries in the United States and Scandinavia. In
addition, the structure and hierarchy in Korean companies are different from those in
Western companies. Korea is known for its vertical social structure and highly
centralized business structures with authority concentrated in senior management levels.
Consequently, decision making in Korea follows a formal procedure in which senior-
level approval is necessary. Even if a Korean company uses a type of market-orientation
strategy. The company may maintain a structure characterized by company maintain a
structure characterized by formalization, centralization, and limited specialization.
Market-Orientation Strategy and Store Performance
Hypothesis 5: The four components of market-orientation strategy (i.e., intelligence
generation, intelligence dissemination, response design, and response implementation)
will have significant positive effects on the degree of satisfaction with store performance.
Hypothesis 5-a: The four components of market-orientation strategy (i.e.,
intelligence generation, intelligence dissemination, response design, and response
implementation) will have significant positive effects on the degree of satisfaction
with store performance relative to other stores in the industry.
Hypothesis 5-b: The four components of market-orientation strategy (i.e.,
175
intelligence generation, intelligence dissemination, responsive design, and
responsive implementation) will have significant positive effects on the degree of
satisfaction with store performance relative to key competitors.
As for some other hypotheses, hypothesis 5 is not supported as stated, but some
significant effects of the independent variables on the dependent variables are evident
(see Figure 11). Of the four tests of hypothesis 5-a, two produced significant results, and
of the four tests of hypothesis 5-b, only one produced a significant result. As seen in
Figure 11, both intelligence generation and response implementation positively affected
the respondents’ satisfaction with their stores’ performance relative to other stores in the
Korean retailing industry, and intelligence generation positively affected their satisfaction
with their stores’ performance relative to key competitors. Thus, the more (less) that
intelligence was generated in the stores, the more (less) satisfied the respondents were
with their stores’ performance relative to other stores in the Korean retailing industry and
relative to the stores’ key competitors. In addition, the more (less) the stores’ responsive
in implementing actions to address market forces, the more (less) satisfied the
respondents were with their stores’ performance relative to other stores in the Korean
retailing industry.
A basic assumption of research on strategic management is the positive
contribution of strategy to a firm’s performance, regardless of the type of strategy utilized.
This assumption has been tested empirically by many researchers (Dess & Davis, 1984;
Jaworski & Kohli, 1993; Kumar & Subramanian, 1998; Naver & Slater, 1990; Slater &
Narver, 1994b), although the results have not been conclusive. A hypothesis with two
sub-hypotheses was derived to test the effect of market-orientation strategy on
satisfaction with performance relative to other stores in the Korean apparel retailing
industry and to a store’s key competitors.
As hypothesized, intelligence generation was found to positively affect
satisfaction with store performance relative to other stores in the Korean retailing
industry and relative to key competitors, and response implementation was found to
positively affect satisfaction with performance relative to other stores in the Korean
retailing industry. These results suggest that top managers in Korean apparel retail stores
176
Figure 11. Research Results for Hypothesis 5 .160** .048 -.035 .139** .211*** .005 -.048 .653 Note. SPI: satisfaction with store’s performance compared to other stores in the retailing industry;
SPC: satisfaction with store’s performance compared to key competitors. The numbers in the
figure are the coefficients on the independent variables (shown on the right) that were estimated
by regression. Hypothesis supported Hypothesis not supported.
**. p < .01, ***. p < .001, two-tailed.
Intelligence Generation
Intelligence Dissemination
Response Design
Response Implementation
SPI
SPC
177
were more (less) satisfied with their stores’ performance relative to other stores in the
retailing industry and relative to key competitors, the more (less) they gathered
information pertaining to current and future customer needs and the more (less) they
implemented actions to address customer needs.
Perceived Environmental Uncertainty and
Top Management’s Willingness to Adapt to a Changing Market
Hypothesis 6: Perceived market turbulence and perceived competitive intensity will be
significantly and positively related to each component of top management’s willingness to
adapt to a changing market (i.e., emphasis and risk aversion).
The results do not support hypothesis 6 as stated, but some significant
relationships were found between perceived environmental uncertainty and top
management’s willingness to adapt to a changing market (see Figure 12). Note that,
because the four constructs in hypothesis 6 are all exogenous, no directionality was
hypothesized for the relationships between these constructs. The significant relationships
are the positive ones between competitive intensity and top-management emphasis and
between competitive intensity and top-management risk aversion. Thus, the greater
(lesser) the perceived competitive intensity, the more (less) willing the top managers in
the respondents’ stores emphasized market forces and were willing to take risks.
Various studies have analyzed firms’ innovativeness, risk taking, and
proactiveness under certain environmental conditions (Baklnoff & Brannon, 1984;
Brockhaus & Nord, 1979; Kent, 1986). These studies have shown that the greater the
environmental turbulence perceived by managers, the more likely the managers were to
face small decision windows, changing decision constituencies, resource risks, and a
general lack of long-term control. Certain factors may underlie the results obtained for
the effect of perceived environmental uncertainty on top management’s willingness to
adapt to a changing market. One possibility is the dynamic nature of the Korean business
environment. The Korean business environment has been undergoing many changers
recently, so Korean retail managers might hesitate to take risks to adapt to a turbulent
178
Figure 12. Research Results for Hypothesis 6
-.062 .174*** .011 .134* Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
*. p < .01, ***. p < .001, two-tailed.
Market
Turbulence
Competitive
Intensity
Top Management
Emphasis
Top Management
Risk Aversion
179
market environment. The managers may see a need, however, to take risks in order that
their stores can survive intense competition.
Top Management’s Willingness to Adapt to a Changing Market and
Market-Orientation Strategy
Hypothesis 7: The two components of top management’s willingness to adapt to a
changing market (i.e., emphasis and risk aversion) will have significant positive effects
on each component of market-orientation strategy (i.e., intelligence generation,
intelligence dissemination, response design, and response implementation).
The results of hypothesis 7 in Figure 13 show considerable support for this
hypothesis, but not enough to fully support it as stated. All but one of the eight tested
relationships are significant between market-orientation strategy and top management’s
willingness to adapt to a changing market, and all are positive as hypothesized. On the
basis of those significant results, the top managers in the respondents’ stores were
increasingly (decreasingly) driven to put emphasis on market forces, the more (less) the
intelligence generation and dissemination in their stores and the more (less) their design
and implementation of plans in their stores to respond to market forces. In addition, the
greater (lesser) the top managers’ willingness to take risks, the more (less) the
intelligence generation and dissemination in their stores and the more (less) their
implementation of plans to respond to customer needs. The findings involving risk fully
support the argument of Kohli and Jaworski (1990) that top managers’ risk aversion is
inversely related to market-intelligence generation and dissemination and to response
design and implementation.
According to the results, the willingness of top managers in Korean apparel retail
stores to adapt to a changing market led the managers to encourage employees in their
stores to track changes in the market, share market information with each other, and
respond to changing market needs. Responsiveness to changing market needs often calls
for the introduction of new products and services to match evolving customer needs and
expectations. The top managers in this study appear to demonstrate a sensitivity to
180
Figure 13. Research Results for Hypothesis 7
.279*** .249*** .181** .270*** .187** .063 .249*** .221*** Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
**. p < .01, ***. p < .001, two-tailed.
Intelligence Dissemination
Intelligence Generation
Top Management
Emphasis
Top Management
Risk Aversion
Response Design
Response Implementation
181
customer needs and a willingness to take risks. And further the managers appear to have
been willing to accept occasional failures that accompany risk taking and to introduce
new offerings in response to changes in customer needs.
Top Management’s Willingness to Adapt to a Changing Market and
Organicity of Organizational Structure
Hypothesis 8: The two components of top management’s willingness to adapt to a
changing market (i.e., emphasis and risk aversion) will have significant positive effects
on organicity of organizational structure (i.e., will lead to more specialization and less
formalization and centralization).
The testing of hypothesis 8 produced several significant relationships between
organicity of organizational structure and top management’s willingness to adapt to
changing markets, but as above, not in every case as hypothesized. Despite the lack of
support for this hypothesis as stated, top-management risk aversion positively affected
specialization (see Figure 14). Given the scoring of the risk-aversion items, this means
the more the top managers were willing to take risks, the more their stores were
specialized in function. A possible reason for the lack of significant for hypothesis of
except in one case, relationships is top managers’ aversion to employ an organic
organizational structure, regardless of how they perceived the environment, because an
organic structure implies a decrease in the top management’s power. The organizational
arrangement in Korean companies is highly centralized with authority concentrated at
senior levels. Korean employees are trained to accept orders, and the company leaves
little room for the imagination of its employees. Employees are not involved in the
decision-making process because it is reserved for the top management only (Janelli,
1993).
Top Management’s Willingness to Adapt to a Changing Market and Store Performance
Hypothesis 9: The two components of top management’s willingness to adapt to a
182
Figure 14. Research Results for Hypothesis 8
.007 -.030 .188** 2.815 .156** .163 .299*** Note. The numbers in the figure are the coefficients on the independent variables (shown on the
right) that were estimated by regression. Hypothesis supported
Hypothesis not supported.
**. p < .01, ***. p < .001, two-tailed.
Formalization
Top Management
Emphasis
Top Management
Risk Aversion
Centralization
Specialization
183
changing market (i.e., emphasis and risk aversion) will have significant positive effects
on the degree of satisfaction with store performance.
Hypothesis 9-a: The two components of top management’s willingness to adapt to
a changing market (i.e., emphasis and risk aversion) will have significant positive
effects on the degree of satisfaction with store performance relative to other stores
in the industry.
Hypothesis 9-b: The two components of top management’s willingness to adapt
to a changing market (i.e., emphasis and risk aversion) will have significant
positive effects on the degree of satisfaction with store performance relative to key
competitors.
As seen in Figure 15, the results do not support hypothesis 9. This indicates that
top-management emphasis and risk aversion did not have significant positive effects on
the respondents’ satisfaction with the performance of their stores relative to other stores
in the Korean retailing industry and to their stores’ key competitors. Note that the results
show some significant effects of top-management emphasis and risk aversion on
satisfaction with store performance, but the effects are negative and thus counter
hypothesis 9. Top-management emphasis negatively affected satisfaction with store
performance relative to other stores in the retailing industry, and top-management risk
aversion negatively satisfaction with store performance relative to key competitors. One
of these results implies that the more (less) the top managers emphasized the market, the
less (more) satisfied they were with their stores’ performance. The other result implies
that more (less) the mangers were willing to take risks, the less (more) satisfied they were
with their stores’ performance relative to key competitors.
It was hypothesized that each component of top management’s willingness to
adapt to a changing market would positively affect satisfaction with store performance
relative to other stores in the Korean retailing industry and relative to key competitors.
Although no prior research has tested this specific hypothesis, the relationship between
firm performance and top management’s willingness to adapt to a changing market has
184
Figure 15. Research Results for Hypothesis 9
-.171* .106 -.072 -.171* Note. SPI: satisfaction with store’s performance compared to other stores in the retailing industry;
SPC: satisfaction with store’s performance compared to key competitors. The numbers in the
figure are the coefficients on the independent variables (shown on the right) that were estimated
by regression. Hypothesis supported Hypothesis not supported.
*. p < .05, two-tailed.
Top Management
Emphasis
Top Management
Risk Aversion
SPI
SPC
185
been tested empirically by various researchers (Asker & Jacobson, 1987; Bowman, 1980;
Gupta, 1984; Hambrick & Mason, 1984; Knight, Durham, & Locke, 2001).
The lack of support for hypothesis 9 in the present study is not consistent with the
results of Gupta (1984) and Knight, Durham, and Locke (2001) who found positive
effects of managerial risk proclivities on certain types of organizational outcomes. A
reason for the inconsistency may be that those other researchers’ measured of
performance by actual financial performance, rather than satisfaction with performance.
Another possible reason is the different types of samples used in their studies and in the
present study: samples composed of small business units in various industries in the
United States versus a sample composed of only Korean apparel retail stores.
A possible reason for the negative effect of top-management emphasis on
satisfaction with store performance compared to other stores may be the following. The
Korean retail market is in the throes of greatly increased competition, especially as a
result of opening the market to foreign retailers. Small stores often have difficulty
competing in this changing market. Recall that a high proportion of the respondents’
stores in this research are small. As managers of such stores become increasingly
sensitive to customer and competitor trends, and their awareness of actions taken by other
stores in Korean retailing increases, they may become less and less satisfied with the
performance of their own stores compared to others. A possible reason for the negative
effect of top-management willingness to take risks on satisfaction with stores
performance compared to other stores is the following. In today’s highly competitive
Korean retail market, top mangers who were willing to take risks may have taken some
risks that did not pay off, engendering dissatisfaction with their stores’ performance
relative to other stores. On the other hand, top managers who were unwilling to take
risks may have seen the competitive position of their stores deteriorate as managers in
other stores, perhaps stores with more resources and thus flexibility, were taking risks
that paid off.
Organicity of Organizational Structure and Store Performance
Hypothesis 10: Organicity of organizational structure will have significant positive
186
effects on the degree of satisfaction with store performance; that is, specialization will
positively affect satisfaction with store performance, and formalization and centralization
will negatively affect satisfaction with store performance.
Hypothesis 10-a: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to
other stores in the industry; that is, specialization will positively affect satisfaction
with store performance, and formalization and centralization will negatively
affect satisfaction with store performance relative to other stores in the industry.
Hypothesis 10-b: Organicity of organizational structure will have significant
positive effects on the degree of satisfaction with store performance relative to key
competitors: that is, specialization will positively affect satisfaction with store
performance, and formalization and centralization will negatively affect
satisfaction with store performance relative to key competitors.
The results for hypothesis 10 do not support the hypothesis. As seen in Figure 16,
centralization of store structure positively affected the respondents’ satisfaction with their
stores’ performance relative to other stores in the Korean retailing industry and relative to
the stores’ key competitors. Thus, the more (less) centralized in decision making, the
more (less) satisfied the respondents were with their stores’ performance relative to other
stores in the Korean retailing industry and relative to the stores’ key competitors.
It was hypothesized that organicity of organizational structure Korean retailing
would positively affect satisfaction with store performance relative to other stores in the
industry and relative to key competitors. Although no other study has tested this specific
hypothesis, Tse (1991) conducted an analysis of the relationship between organizational
structure and financial performance in the restaurant industry. She found that companies
with high degrees of formalization and centralization and low degrees of specialization
had higher average sales and return on assets than did companies with other structural
configurations.
The results of the present study partially support those of Tse (1991), although not
187
Figure 16. Research Results for Hypothesis 10
-.111 .202*** .014 -.025 .114* -.014* Note. SPI: satisfaction with store’s performance compared to other stores in the retailing industry;
SPC: satisfaction with store’s performance compared to key competitors. The numbers in the
figure are the coefficients on the independent variables (shown on the right) that were estimated
by regression. Hypothesis supported Hypothesis not supported.
*. p < .01, ***. p < .001, two-tailed.
Formalization
Centralization
Specialization
SPI
SPC
188
hypothesis 10 in the present study. The only significant results were the positive effects
of centralization on satisfaction with store performance relative to other stores in the
Korean retailing industry and relative to key competitors. The possible reasons for the
discrepancy between these findings and those of Tse are similar to ones mentioned above.
Not only was Tse’s sample drawn from a different type of industry; she also measured
performance by actual financial figures, rather than satisfaction with performance.
Summary of the Results of Hypothesis Testing
The results of statistical analysis partially supported eight of the 10 hypotheses. A
summary of the hypothesis testing is presented in Table 20. Casual relationship were
found between some of the strategic management constructs, including perceived
environmental uncertainty, Top management’s willingness to adapt to a changing market,
market-orientation strategy, organicity of organizational structure, and store performance.
Environmental uncertainty as perceived by top managers in Korean apparel retailing
stores was found to cause some components of market-orientation strategy and of
organizational structure to respond to changes.
Chapter Summary
This chapter presented and discussed the results of the statistical analysis
performed on the data provided by top managers in the Korean apparel retailing industry.
Several data-related issues, including data collection, sample characteristics, and validity
and reliability were also discussed.
The statistical analysis served several purposes. Analysis of goodness-of-fit was
conducted to test the fit of the model to the sample data, and Pearson correlations
between the variables were calculated to test the validity and reliability of each indicator
and construct. The SEM analysis was conducted to test the hypotheses. The results
partially supported eight out of the 10 hypotheses. The next chapter summarizes the
189
Table 20 Summary of the Results from Testing the Hypotheses
Hypothesis
Description of Hypothesis
Conclusion
H1
Positive effects of perceived market turbulence and competitive intensity on each component of market-orientation strategy.
Partially
Supported
H2
Positive effects of perceived market turbulence and competitive intensity on each component of organicity of organizational structure.
Partially
Supported
H3
Positive effects of perceived market turbulence and competitive intensity on the degree of satisfaction with store performance.
Rejected
H3-a
Positive effects of perceived market turbulence and competitive intensity on the degree of satisfaction with store performance relative to other stores in the industry.
Rejected
H3-b
Positive effects of perceived market turbulence and competitive intensity on the degree of satisfaction with store performance relative to key competitors.
Rejected
H4
Positive effects of the four components of market-orientation strategy on each component of organicity of organizational structure.
Partially
Supported
H5
Positive effects of the four components of market-orientation strategy on the degree of satisfaction with store performance.
Partially
Supported
H5-a
Positive effects of the four components of market-orientation strategy on the degree of satisfaction with store performance relative to other stores in the industry.
Partially
Supported
H5-b
Positive effects of the four components of market-orientation strategy on the degree of satisfaction with store performance relative to key competitors.
Partially
Supported
(table continues)
190
Table 20 (continued).
Hypothesis
Description of Hypothesis
Conclusion
H6
Positive effects of perceived market turbulence and competitive intensity on each component of top management’s willingness to adapt to a changing market.
Partially
Supported
H7
Positive effects of the two components of top management’s willingness to adapt to a changing market on each component of market-orientation strategy
Partially
Supported
H8
Positive effects of the two components of top management’s willingness to adapt to a changing market on each component of organicity of organizational structure
Partially
Supported
H9
Positive effects of the two components of top management’s willingness to adapt to a changing market on the degree of satisfaction with store performance.
Partially
Supported
H9-a
Positive effects of the two components of top management’s willingness to adapt to a changing market on the degree of satisfaction with store performance relative to other stores in the industry.
Partially
Supported
H9-b
Positive effects of the two components of top management’s willingness to adapt to a changing market on the degree of satisfaction with store performance relative to key competitors.
Partially
Supported
H10
Positive effects of the three components of organicity of organizational structure on the degree of satisfaction with store performance.
Rejected
H10-a
Positive effects of the three components of organicity of organizational structure on the degree of satisfaction with store performance relative to other stores in the industry.
Rejected
H10-b
Positive effects of the three components of organicity of organizational structure on the degree of satisfaction with store performance relative to key competitors.
Rejected
191
research, draws conclusions, and discusses the implications of the results, as well as
limitations of the study and suggestions for future research.
192
CHAPTER 6
SUMMARY, CONCLUSIONS, IMPLICATIONS, LIMITATIONS, AND
SUGGESTIONS FOR FUTURE RESEARCH
This final chapter summarizes the research, draws conclusions, and discusses
implications of the findings and limitations of the study. The chapter also provides
suggestions for future research.
Summary and Conclusions
This study is an investigation of the effects of environmental conditions, such as
those brought about by Korea’s recent market opening and other changes in its economy,
on the strategic management and financial performance of South Korean apparel retail
stores. No prior research has examined Korean retailers’ strategic management, much
less the effects of environmental conditions on their strategic management and financial
performance. The objectives of the research are to determine (a) the interrelationships
among the different components of the retailers’ management strategies, (b) the effects of
perceived environmental uncertainty on the components of their management strategies,
(c) the impact of the components of South Korean apparel retailers’ management
strategies on their stores’ performance, and (d) the market-orientation strategies that
South Korean retailers have implemented to survive and prosper in the competitive
environment they currently face.
On the basis of theoretical and empirical literature, a strategic management model
was developed to guide the research. The model links perceived environmental
uncertainty to top management’s willingness to adapt to a changing market, organicity of
organizational structure, market-orientation strategy, and store performance. Hypotheses
were formulated concerning the relationships between these variables in the context of
Korean apparel retail stores, and a questionnaire was developed to measure the variables.
The questionnaire was sent to 1,000 top managers in Korean department stores, discount
stores, specialty stores, membership stores, chain stores, and boutiques in Seoul, Busan,
193
Suwon, Daejeon, and Daegu. A total of 400 completed questionnaires was returned, for a
40% response rate. The data gathered were used to test the hypotheses through structural
equations modeling (SEM) using the AMOS program.
The analysis involved testing the effects of the exogenous variables on the
endogenous variables and of endogenous variables on each other, as well as relationships
among the exogenous variables. The exogenous variables are two components of
perceived environmental uncertainty (market turbulence, competitive intensity) and two
components of top management’s willingness to adapt a changing market (top-
management emphasis and risk aversion). The endogenous variables are four
components of market-orientation strategy (intelligence generation, intelligence
dissemination, response design, response implementation), three components of
organicity of organizational structure (centralization, formalization, specialization), and
two components of satisfaction with store performance (compared to other stores in the
Korean retailing industry, compared to a store’s key competitors).
Although the results do not support all the hypotheses, they reveal causality
between some variables in the model. Perceived market turbulence positively affected
market-orientation strategy. Market turbulence positively affected the degree of
functional specialization in the structures of the respondents’ stores. Market-orientation
strategy positively affected the degree of functional specialization in the respondents’
stores. Both intelligence generation and responsive implementation had positive effects
on the respondents’ satisfaction with their stores’ performance relative to other stores in
the Korean retailing industry, and intelligence generation positively affected their
satisfaction with their stores’ performance relative to key competitors. Some significant
relationships were found between perceived environmental uncertainty and top
management’s willingness to adapt to a changing market. In addition, all but one of the
eight tested relationships were significant between market-orientation strategy and top
management’s willingness to adapt to a changing market, and each was positive as
hypothesized. Top-management risk aversion positively affected the degree of functional
specialization in the structures of the respondents’ stores. Formalization of store
structure positively affected the respondents’ satisfaction with their stores’ performance
194
relative to other stores in the Korean retailing industry and relative to their stores’ key
competitors.
The findings of this study contribute to a better understanding of the strategic
management process in the Korean apparel retailing industry by revealing various
relationships among strategic management constructs. A major conclusion is that top
managers in the Korean apparel retailing industry did not perceive the environment as an
important factor contributing to their stores’ performance. In addition, the top managers
appear reluctant to change the organizational structures of their stores.
Environmental conditions as perceived by top managers of Korean apparel retail
stores affect strategic management in the stores in terms of response design, intelligence
generation, intelligence dissemination, specialization, and centralization. Korean apparel
retail stores are highly sensitive to changes in their customers and competitors. When
changes occur in the economy, customers react by either opening or closing their purses
to retailers. Customers are no longer loyal to particular stores, and when competitors
offer better products or services, they switch to competitors. Top managers in toady’s
Korean retail stores must therefore respond to environmental changes or lose out against
their competitors. Korean companies have very hierarchical. Because the hierarchical
structure is embedded in Korean culture, it would be difficult for many Korean
companies to change their structure toward an organic organizational structure, which
according to the literature, is better suited for responding to environmental change than
the mechanistic structure common in Korea. The results of the present study suggest that
top mangers in Korean apparel retail stores have made only minor structural changes in
their stores in the face of environmentl uncertainty. The minor changes consisted of
increased specialization to divide functions among different departments within the stores.
The results showed no statically significant relationships between the components
of perceived environmental uncertainty and those of satisfaction with store performance;
however, they showed positive effects of some components of market-orientation
strategy and organicity of organizational structure on satisfaction with store performance
relative to other stores in their industry and relative to key competitors. The results also
showed that some components of top managements’ willingness to adapt to a changing
market positively influenced satisfaction with store performance.
195
The results of the present study suggest that Korean apparel retailers have
implemented some market-orientation strategies to survive and prosper in the intensely
competitive business environment they currently face. The results imply that top
managers in Korean apparel retail stores are increasingly driven to employ market
intelligence generation, intelligence dissemination, and response implementation the
more their perception of competitive intensity.
Implications of the Research Findings
The research findings on the strategic management process in Korean apparel
retail stores suggest several important implications of the practice of strategic
management in the industry that comprises these stores in Korea. One implication
involves the relatively limited effect of the environment on the strategic management
process in Korean apparel retail stores that was found in this study. Although many
researchers have addressed the importance of business environments to firms
(Diamantopoulos & Hart, 1993a; Jaworski & Kohli, 1993; Singh, 1998; Slater & Narver,
1994a; Tay & Morgan, 2002), the top retail managers who participated in the present
study did not appear to perceive the environment as having an important influence on
their stores’ performance. This top-management perception of the environment may
endanger its business performance in the long run because of possible discrepancies
between customers’ desires and a store’s products and services offered to customers. An
action that may help resolve to this dilemma is to invest more in R&D (West, 1988) that
enables top mangers to become more and continuously informed about the internal and
external environments. Top managers in Korean apparel retailing store may need to
increase their sensitivity to environmental changes by systematically monitoring the
environment. However, a factor that may stand in the way of increased and improved
environmental scanning by many Korean apparel retail stores in the expense of the
scanning. Recall that a high proportion of the respondents’ stores in this study were
small; this pattern is characteristic of much of the retailing industry in Korea. Small
196
stores may lack the resources to invest in market R&D on their own, and may need to
contribute to an R&D investment by a retail trade association.
The results of the statistical analysis indicated only certain effects of perceived
environmental uncertainty on organicity of organizational structure. The results revealed
that although top manages seemed to realize the growing importance of organic
organizational structure to be able to respond flexibility to a complex and uncertain
environment, the managers appeared reluctant to change their stores’ structure. Top
management may be reluctant to delegate decision-making power to lower-level
managers. Also, altering an organizational structure is changing a fundamental feature of
the firm or store, which requires a great amount of money, time, and effort. Furthermore,
it is not certain that a changed structure would yield better efficiency and performance.
In addition, top management is always interested in short-term profitability, whereas
changing an organization’s structure is generally a long-term task that may not pay off in
the short run.
For many years, the foundations of organizational structure have rested on the
traditional “pyramid” form of organization, or a mechanistic structure (Janelli, 1993).
However, a pyramid structure may be too inflexible to keep up with the many pressures.
Under pressure for change, organizational structures are becoming increasingly less rigid,
with an emphasis on employee involvement and customer service. Organizations are
moving toward less unity of command, more delegation and employee empowerment,
and decentralization. Stores in the Korean apparel retailing industry may need to follow
this trend to survive in today’s complex and dynamic environment. Many researchers
have indicated that in unpredictable environment, organic structures allow rapid
organizational response to changing external forces (Burns & Stalker, 1961; Lorsch &
Morse, 1974). And Lawrence and Dyer (1983) suggested that an organic structure is
better suited than a mechanistic structure to coping with or adapting to a turbulent
environment. Even though top managers in Korean retail stores might know that the
modern business environment calls for a less formalized structure, with less centralized
decision making and more specialization of functions among different departments, their
long experience with a hierarchical structure may make it hard to change.
197
Another factor to consider is that the research cited above in support of an organic
organizational structure was conducted in the West. The present study is the first to
examine relationships between strategic management constructs in a Korean context. An
open question is the extent to which an organic structure would work well in Korea’s
currently unstable environmental conditions and in the Korean culture; however, in order
to respond to the external changes, top managers in Korea apparel retailing stores may
need to allow employees greater participation in decision-making process and more
opportunities to share their ideas through a less formalized structure than has been
customary.
Another implication of the result of this study relates to the possibility that many
stores in the Korean retailing industry are practicing market-orientation strategies under
that traditional mechanistic, or pyramid type of, organizational structure. Results in the
present study revealed some significant relationships between market-orientation strategy
and components of organicity of organizational structure, and also between market-
orientation strategy and satisfaction with store performance. As discussed above, the
increasing complexity and high rate of change in Korea’s business environment to day
are bringing ever more pressing challenges to bear on traditional management systems.
More organic and flexible management systems may be required in Korea’s apparel retail
stores in order to improve store performance. Top managers of Korean apparel retailing
stores may need to increase their stores’ market-orientation activities by making their
organizations more flexible in being able to respond to environmental changes.
Limitations and Suggestions for Future Research
As McGrath, Martin, and Kulka (1982) stated, every study has inherent
limitations. The limitations of the present study are discussed here. One of the
limitations involves the generalizability of the results. Due to time and budget constraints,
it was not feasible to select a sample population that was representative of the entire
population of units in Korea’s retailing industry. The data and results may not represent
the whole population of the retailing industry. In addition, this study is industry specific,
198
so the results may not reflect any industry in Korea besides apparel retailing.
Generalizability can be achieved by repeating measures across different contexts. Thus,
it is recommended that the model developed in this study be applied in future studies in
which efforts are made to use truly representative samples and in which a data are
collected from various Korean industries.
A second limitation of this study is the absence of longitudinal characteristics,
which made it impossible to analyze the effects of time lags of market environment,
adapting to environmental changes, implementing strategy, altering organizational
structure, and store performance. A longitudinal study might capture ongoing
transformations that could influence the relationships among the strategic management
constructs. Incorporating longitudinal characteristics in future research may produce
significant findings.
A third limitation of this study is the lack of some potentially relevant variables.
An important variable may be the use of information technology because it may have
effect the strategic management process. Other important variables may be new strategy
and strategy implementation concepts, such as total quality management, restructuring,
and reengineering. The new concepts may have an impact on modern strategies and
organizational structure. Including these variables in future research could achieve a
better understanding of the strategic management process.
A final limitation of this study is the subjective nature of some data; in particular
store performance was measured by top management’s satisfaction level. Utilizing
objective financial data combined with subjective performance data may provide a better
understanding of the relationships among antecedent constructs and the ultimate
dependent construct of store performance.
In spite of its limitations, this study contributes to the understanding of the
strategic management process, the relationships among the constructs in the process, and
the effects of specific constructs on satisfaction with performance. The findings of this
study will be of benefit in planning and implementing strategy by practitioners in Korean
apparel retailing.
199
REFERENCES
Aaker, D., & Jacobson, R. (1987). The role of risk in explaining differences in
profitability. Academy of Management Journal, 30, 277-296.
Aaker, O. (1988). Strategic market management (2nd ed.). New York: Wiley.
Abell, D. (1978). Strategic windows. Journal of Marketing, 42(3), 21-26.
Achrol, R., Reve, T., & Stern, L. (1983). The environment of marketing channel
dyads: A framework for comparative analysis. Journal of Marketing, 47(4), 55-
67.
Achrol, R., & Stern, L. (1988). Environmental determinants of decision-making
uncertainty in marketing channels. Journal of Marketing Research, 25, 36-50.
Ackoff, R. (1970). A concept of corporate planning. New York: Macmillan.
Adorno, T., Frenkel-Brunswick, E., Levinson, D., Sanford, R. (1950). The
authoritarian personality. New York: Harper & Row.
Aghion, P., & Schankerman, M. (2000). A model of market-enhancing infrastructure.
(CERP Discussion Papers No. 2462). London: Centre of Economic Policy
Research.
Aiken, M., & Hage, J. (1968). Organizational interdependence and intra-organizational
structure. American Sociological Review, 33, 912-930.
Aldag, J., & Storey, R. (1975). Environmental uncertainty: Comments on objective and
perceptual indices. Proceedings of the 35th Annual Meeting of the Academy of
Management, 203-205.
200
Aldrich, H. (1979). Organizations and environments. Englewood Cliffs, NJ: Prentice-
Hall.
Aldrich, H., & Pfeffer, J. (1976). Environments of organizations. Annual Review of
Sociology, 2, 79-105.
Allaire, Y., & Firisotu, M. (1984). Theories of organizational culture. Organization
Studies, 5, 193-226.
Allison, G. (1971). Essence of decision: Explaining the Cuban missile crisis. Boston,
MA: Little, Brown.
Allison, P. (1999). Multiple regression. Thousand Oaks, CA: Pine Forge Press.
Analoui, F., & Karami, A. (2002). How chief executives’ perception of the
environment impacts on company performance. Journal of Management
Development, 21, 290-305.
Andersen, T. (2004). Integrating decentralized strategy making and strategic planning
processes in dynamic environments. The Journal of Management Studies, 41,
1271-1299.
Anderson, C., & Paine, F. (1975). Managerial perceptions and strategic behavior.
Academy of Management Journal, 18, 811-823.
Anderson, C., & Paine, F. (1978). PIMS–a reexamination. Academy of Management
Review, 3, 602-612.
Anderson, P. (1982). Marketing, strategic planning and the theory of the firm. Journal
of Marketing, 46, 15-26.
201
Andrews, K. (1971). The concept of corporate strategy. Homewood, IL: Dow Jones.
Andrews, K. (1980). The concept of corporate strategy. Homewood, IL: Richard D.
Irwin.
Ansoff, H. (1965). Corporate strategy. New York: McGraw-Hill.
Ansoff, H. (1979). Strategic management. New York: Wiley.
Ansoff, H., & McDonnell, E. (1990). Implanting strategic management (2nd ed.).
Englewood Cliffs, NJ: Prentice-Hall.
Appiah-Adu, K. (1997). Market orientation and business performance: Do the findings
established in large firms hold in the small business sector? Journal of
EuroMarketing, 6, 1-26.
Appiah-Adu, K. (1998). Market orientation and performance: Empirical tests in a
transition economy. Journal of Strategic Marketing, 6, 25-45.
Appiah-Adu, K., & Blankson, C. (1998). Business strategy, organizational culture, and
market orientation. Thunderbird International Business Review, 40, 235-256.
Appiah-Adu, K., & Ranchhod, A. (1998). Market orientation and performance in the
biotechnology industry: An exploratory empirical analysis. Technology Analysis
& Strategic Management, 10, 197-210.
Appiah-Adu, K., & Singh, S. (1998). Customer orientation and performance: A study
of SMEs. Management Decision, 36, 385-394.
Arbuckle, J. (1995). AMOS for windows: Analysis of moment structures, version 3.5.
Chicago, IL: SamllWaters.Corp.
202
Arbuckle, J. (1996). Full information estimation in the presence of incomplete data. In
G. A. Marcoulodes & R. E. Schymacker (Eds.), Advanced structural equation
modeling: Issues and techniques (pp. 243-277). Mahwah, NJ: Lawrence Erlbaum
Associates.
Arndt, J. (1983). The political economy paradigm: Foundation for theory building in
marketing. Journal of Marketing, 47(4), 44-54.
Ashill, N., & Jobber, D. (2005, March). Measuring perceived environmental
uncertainty: Scale development and validation (Working Paper No. 05/12). Emm
Lane, Brandford: Bradford University School of Management.
Astely, W., & Van de Ven, A. (1983). Control perspectives and debated in
organizational theory. Administrative Science Quarterly, 28, 245-273.
Attneave, F. (1959). Applications of information theory to psychology: A summary of
basic concepts, methods, and results. New York: Holt.
Atuahene-Gima, K. (1995). An exploratory analysis of the impact of market orientation
on new product performance. Journal of Product Innovation Management, 12,
275-293.
Atuahene-Gima, K. (1996). Market orientation and innovation. Journal of Business
Research, 35, 93-103.
Au, A., & Tse, A. (1995). The effect of marketing orientation on company
performance in the service sector: A comparative study of the hotel industry in
Hong Kong and New Zealand. Journal of International Consumer Marketing, 8,
77-87.
Avlonitis, G., & Gounairs, S. (1997). Marketing orientation and company performance.
203
Industrial Marketing Management, 26, 385-402.
Bagby, D., & Shull, S. (1987, November). Measuring performance in small business.
Proceedings of the Southern Management Association, USA, 193-195
Bagozzi, R. (1975). Marketing as exchange. Journal of Marketing, 39(4), 32-39.
Baklnoff, E., & Brannon, J. (1984). Forward and backward linkages in a plantation
economy: Immigrant enterpreneurship and industrial development in Yucatan,
Mexico. The Journal of Developing Areas, 19, 82-94.
Balabanis, G., Stables, R., & Phillips, H. (1997). Market orientation in the top 200
British charity organizations and its impact on their performance. European
Journal of Marketing, 31, 583-603.
Balakrishnan, S. (1996). Benefits of customer and competitive orientations in industrial
markets. Industrial Marketing Management, 25, 257-269.
Baligh, H., & Burton, R. (1979). Marketing in moderation–The marketing concept and
the organization structure. Long Range Planning, 12, 92-96.
Bantel, K. (1993). Top team, environment, and performance effects on strategic
planning formality. Group & Organization Management, 18, 436-458.
Barnard, C. (1938). Functions of the executive. Cambridge, MA: Harvard University
Press.
Bart, C., & Baetz, M. (1998). The relationship between mission statements and firm
performance: An exploratory study. Journal of Management Studies, 35, 836-853.
Belderbos, R., & Sleuwaegen, L. (2005). Competitive drivers and international plant
204
configuration strategies: A product-level test. Strategic Management Journal, 26,
577-593.
Bennett, R., & Cooper, R. (1979, June). Beyond the marketing concept. Business
Horizons, 76-83.
Bentler, P. (1990). Comparative fit indexes in structural models. Psychological Bulletin,
107, 238-246.
Bentler, P. (1992). On the fit of models to covariances. Psychological Bulletin, 88, 586-
606.
Bentler, P., & Bonett, D. (1980). Significance tests and goodness of fit in the analysis
of covariance structure. Psychological Bulletin, 88, 588-606.
Bentler, P., & Chou, C. (1987). Practical issues in structural modeling. Sociological
Methods & Research, 16, 78-117.
Berlyne, D. (1968). The motivational significance of collative variables and conflict. In
R. Abelson, E. Aronson, W. McGuire, T. Newcomb, M. Rosenburg, & P.
Tennenbau (Eds.). Theories of cognitive consistency: A sourcebook (pp. 257-267).
Chicago, IL: Rand-McNally.
Berry, L. (1995). Stores with a future. Arthur Andersen Retailing Issues Letter, 7(2), p.
n/a.
Berry, L., Gresham, L., & Millikin, N. (1990). Marketing in retailing.: A research
agenda. The international Review of Retail, Distribution and Consumer Research,
1, 5-16.
Bettis, R., & Hall, W. (1982). Diversification strategy, accounting determined risk, and
205
accounting determined return. Academy of Management Journal, 25, 254-264.
Bhargawa, M., Dubellarc, C., & Ramaswami, S. (1994). Reconciling diverse measures
of performance: A conceptual framework and test of a methodology. Journal of
Business Research, 31, 235-246.
Bhuian, S. (1996, Summer). Examining market orientation, its antecedents and
consequences among Saudi manufacturing companies. American Marketing
Association, 370-371.
Bhuian, S. (1997). Exploring market orientation in banks: An empirical examination in
Saudi Arabia. The Journal of Services Marketing, 11, 317-328.
Bhuian, S. (1998). An empirical examination of market orientation in Saudi Arabian
manufacturing companies. Journal of Business Research, 43, 13-25.
Biggadike, R. (1979). The risky business of diversification. Harvard Business Review,
57(3), 103-111.
Billings, R. M., & Wroten, S. P. (1978). Use of path analysis in industrial/organizational
psychology: Criticisms and suggestions. Journal of Applied Psychology, 63, 677-
688.
Blau, P., & Schoenherr, R. (1971). The structure of organizations. New York: Basic
Books.
Bock, R. (1998, April 7). Goodness-of-fit test. Retrieved October 18, 2005, from
http://rkb.home. Cern.ch/rkb/AN16pp/node109.html
Boeker, W. (1989). Strategic change: The effects of founding and history. Academy of
Management Journal, 32, 489-515.
206
Bogart, L. (1973). The future of retailing. Harvard Business Review, 51(6), 16-32.
Bollen, K. (1989). A new incremental fit index for general structural models.
Sociological Methods & Research, 17, 303-316.
Boomsma, A. (1985). Nonconvergence, improper solutions, and starting values in
LISEREL maximum likelihood estimation. Psychometrika, 50, 345-370.
Bourgeois, III, L. (1978). Strategy making, environment, and economic performance: A
conceptual and empirical exploration. Unpublished doctoral dissertation,
University of Washington, Seattle.
Bourgeois, III. L. (1980a). Performance and consensus. Strategic Management Journal,
1, 227-248.
Bourgeois, III. L. (1980b). Strategy and environment: A conceptual integration.
Academy of Management Review, 5, 25-39.
Bourgeois, III. L. (1985). Strategic goals, perceived uncertainty, and economic
performance in volatile environments. Academy of Management Journal, 28,
548-573.
Bourgeois, L., & Astley, W. (1979). A strategic model of organizational conduct and
performance. International Studies of Management and Organization, 9(3), 40-
66.
Bourgeois, L., McAllister, D., & Mitchell, T. (1978). The effects of organizational
environments upon decisions about organizational structure. Academy of
Management Journal, 21, 341-365.
Bower, J. (1970). Managing the resource allocation process. Boston, MA: Harvard
207
Business School Division of Research, Graduate School of Business
Administration.
Bowman, C., & Ambrosini, V. (1997). Perceptions of strategic priorities, consensus, and
firm performance. Journal of Management Studies, 34, 241-258.
Bowman, E. (1980). A risk/return paradox for strategic management. Sloan
Management Review, 21(3), 17-31.
Boyd, B. (1991). Strategic planning and financial performance: A meta-analytic review.
Journal of Management Studies, 28, 353-374.
Boyd, H., Walker, O., & Larreche, J. (1995). Marketing management –A strategy
approach with a global orientation. Chicago, IL: Irwin.
Brockhaus, R., & Nord, W. (1979). An exploration of factors affecting the
entrepreneurial decision: Personal characteristics vs. environmental conditions.
Proceedings of the Academy of Management Annual Meeting, 364-368.
Brooks, J. (1995, May). Rapid change vital to survival. Apparel Industry Magazine, 56,
68-69.
Brown, F., & Fisk, G. (1964). Department stores and discount stores: Who dies next?
Journal of Retailing, 41, 15-27.
Browne, M., & Cudeck, R. (1993). Alternative ways of assessing model fit. In K. A.
Bollen & J. S. Long (Eds.), Testing structural equation models (pp. 445-455).
Newbury Park, CA: Sage.
Brush, C., & VanderWerf, P. (1990). Measuring performance of new ventures. Paper
presented at the Babson Entrepreneurship Conference, Wellesley, MA.
208
Buklin, L. (1972). Competition and evaluation of the distributive trades. Englewood
Cliffs, NJ: Prentice-Hall.
Buchko, A. (1994). Conceptualization and measurement of environmental uncertainty:
An assessment of the Miles and Snow perceived environmental uncertainty scale.
Academy of Management Journal, 37, 410-425.
Burgelman, R. (1984). Designs for corporate entrepreneruship in established firms.
California Management Review, 26(3), 154-166.
Burns, T., & Stalker, G. (1961). The management of innovation. London: Tavistock.
Buzzell, B., Gale, T., & Sultan, R. (1975). Market share: A key to profitability.
Harvard Business Review, 53(2), 97-106.
Buzzell, R. (1981). Are there natural market structures? Journal of Marketing, 45(1),
42-51.
Buzzell, R. (1987). The PIMS principles. New York: Free Press.
Cadogan, J., & Diamantopoulos, A (1995). Narver and Slater, Kohli and Jaworski, and
the market orientation construct: Integration and internationalization. Journal of
Strategic Marketing, 3, 41-60.
Campbell, J., Bownas, D., Peterson, N., & Dunnette, M. (1974). The measurement of
organizational effectiveness. A review of the relevant research and opinion. San
Diego, CA: Navy Acquisition Research and Development Center.
Cannon, J. (1968). Business strategy and policy. New York: Harcourt, Brace, and
World.
209
Capon, N., Farley, J., & Hoening, S. (1990). Determinants of financial performance: A
meta-analysis. Management Science, 36, 1143-1159.
Carlin, W., & Horvath, R. (1999). Competitive pressures and enterprise performance
in transition economies: Conceptual issues and empirical evidence. London:
University of College, London.
Carpano, C., Chrisman, J., & Roth, K. (1994). International strategy and environment:
An assessment of the performance relationship. Journal of International Business
Studies, 25, 639-657.
Carpano, C., & Shao, A. (1994). Strategy, structure, and resources in multinational
advertising agencies. Multinational Business Review, 2(2), 25-32.
Caruana, A., Guaci, S., & Ferry, M. (1995). Market orientation and business
performance: Some evidence from Malta. In D. Jobber & M. Uncles (Eds.),
Making marketing work (Vol. 1, pp. 123-132). Bradford, UK: Marketing
Education Group.
Caruana, A., Morris, M., & Vella, A. (1998). The effect of centralization and
formalization on entrepreneurship in export firms. Journal of Small Business
Management, 36(1), 16-29.
Caruana, A., Pitt, L., & Berthon, P. (1999). Excellence-market orientation link: Some
consequences for service firms. Journal of Business Research, 44, 5-15.
Caruana, A., Ramaseshan, B., & Ewing, M. (1998). Do universities that are more
market orientated perform better? International Journal of Public Sector
Management, 11, 55-70.
Caves, R., & Rosen, J. (1982). Uncertainty, transactions costs, and the size distribution
210
of rival firms: Theory and evidence from the women’s outerwear industry.
Quarterly Review of Economics and Business, 22(3), 6-22.
Chakravarthy, B. (1982). Adaptation: A promising metaphor for strategic management.
Academy of Management Review, 7(1), 35-44.
Chakravarthy, B. (1986). Measuring strategies performance. Strategic Management
Journal, 7, 437-458.
Chan, Y., Huff, D., Barclay, D., & Duncan, G. (1997). Business strategic orientation,
information systems strategic orientation and strategic alignment. Information
Systems Research, 8, 125-150.
Chan, Y., & Huff, S. (1993). Investigating information systems strategic alignment. In
J. I. DeGross, J. I. Bostrom, & D. Robey (Eds.), Proceedings of International
Conference on Information Systems (pp. 345-363). Orlando, FL: Association for
Information Systems.
Chandler, A. (1962). Strategy and structure. Cambridge, MA: M.I.T. Press.
Chandler, A. (1977). The visible hand: The managerial revolution in American business.
Cambridge, MA: Harvard University Press.
Chang, T., & Chen, S. (1998). Market orientation, service quality, and business
profitability: A conceptual model and empirical evidence. The Journal of Service
Marketing, 12, 246-264.
Channon, D. (1973). Strategy and structure in British enterprise. Boston, MA: Harvard
Graduate School of Administration.
Chelariu, C., Ouattarra, A., & Dadzie, K. (2002). Market orientation in Ivory Coast:
211
Measurement validity and organizational antecedents in a Sub-Saharan African
economy. Journal of Business and Industrial Marketing, 17, 456-470.
Cheng, J., & McKinley, W. (1983). Toward an integration of organization research and
practice: A contingency study of bureaucratic control and performance in
scientific settings. Administrative Science Quarterly, 28, 85-100.
Child, J. (1972). Organizational structure, environment and performance: The role of
strategic choice. Sociology, 6, 1-22.
Child, J. (1975). Managerial and organizational factors associated with company
performance–Part II. A contingency analysis. Journal of Management Studies,
12, 12-28.
Choe, J. (2003). The effect of environmental uncertainty and strategic applications of IS
on a firm’s performance. Information and Management, 40, 257-268.
Christopher, M. (1975). Rail freight marketing: Some UK perspectives. European
Journal of Marketing, 9, 178-187.
Churchill, G. (1979). A paradigm for developing better measures of marketing
constructs. Journal of Marketing Research, 16, 64-73.
Clark, B. (1971). Belief and loyalty in a college organization. Journal of Higher
Education, 42, 499-515.
Coles, T. (1999). Competition, contested retail space, and the rise of the department
store in imperial Germany. The International Review of Retail, Distribution and
Consumer Research, 9, 275-289.
Conant, J., & Mokwa, M. (1986). Strategic management styles and marketing
212
management performance. Working paper. Harvard Business School.
Connolly, T., Conlon, E., & Deutsch, S. (1980). Organizational effectiveness: A
multiple-constituency approach. Academy of Management Review, 5, 211-217.
Cooper, R. (1979). The dimensions of industrial new product success and failure.
Journal of Marketing, 43(3), 93-103.
Covin, J., & Slevin, D. (1989). Strategic management of small firms in hostile and
benign environments. Strategic Management Journal, 10, 75-87.
Covin, J., Slevin, D., & Schultz, R. (1994). Implementing strategic missions: Effective
strategic, structural and tactical choices. Journal of Management Studies, 31,
481-505.
Crawford-Welsch, S. (1990). An empirical examination of mature service environments
and high performance strategies within those environments: The case of the
lodging and restaurant industries. Unpublished doctoral dissertation, Virginia
Polytechnic Institute and State University, Blacksburg.
Crozier, M. (1964). The bureaucratic phenomenon. Chicago, IL: University of Chicago
Press.
Cunningham, G., & Rivera, C. (2001). Structural designs within American
intercollegiate athletic departments. The International Journal of Organizational
Analysis, 9, 369-390.
Cunningham, J. (1977). Approaches to the evaluation of organizational effectiveness.
Academy of Management Review, 2, 463-474.
Cyert, R., & March, J. (1963). A behavioral theory of the firm. Englewood Cliffs, NJ:
213
Prentice-Hall.
Daft, R. (1989). Organizational theory and design (3rd ed.). St. Paul, MN: West.
Daft, R., & Lengel, K. (1986). Organizational information requirements, media
richness and structural design. Management Science, 32, 554-571.
Daft, R., & Macintosh, N. (1981). A tentative exploration into the amount and
equivocality of information processing in organizational work units.
Administrative Science Quarterly, 26, 207-224.
Daft, R., Sormunen, J., & Parks, D. (1988). Chief executive scanning, environmental
characteristics, and company performance. Strategic Management Journal, 9,
123-139.
Daft, R., & Weick, K. (1984). Toward a model of organizations as interpretation
systems. Academy of Management Review, 9, 284-295.
Dalton, D. R., Todor, W. D., Spendolini, M. J., Fielding, G. J., & Porter, L. W. 1980.
Organization structure and performance: A critical review. Academy of
Management Review, 5: 49-64.
Dandridge, T., Mitroff, I., & Joyce, W. (1980). Organizational symbolism: A topic to
expand organizational analysis. Academy of Management Review, 5, 77-82.
Darroch, J., & McNaughton, R. (2003). Beyond market orientation–Knowledge
management and the innovativeness of New Zealand firms. European Journal of
Marketing, 37, 572-593.
Dass, P., & Ozment, J. (1998, December). Strategy, structure, and performance of
rural transportation companies. Retrieved April 20, 2005, from University of
214
Arkansas for Mack-Blackwell Rural Transportation Study Center Web site:
www.mackblackwell.org/research/ finals/MBTCOldFinals/MBTC1058.pdf
David, F. (1989). How companies define their mission. Long Range Planning, 22(1),
90-97.
David, F. (1997). Strategic management (6th ed.). Upper Saddle River, NJ: Prentice-
Hall.
Davidson, W., Bates, A., & Bass, S. (1976). The retail life cycle. Harvard Business
Review, 54(6), 89-96.
Davies, G. (1974). Marketing financial services: A review note. European Journal of
Marketing, 8, 83-88.
Davis, D., Morris, M., & Allen, J. (1991). Perceived environmental turbulence and its
effect on selected entrepreneurship, marketing and organizational characteristics
in industrial firms. Journal of the Academy of Marketing Science, 19, 43-51.
Davis, J., Brannon, D., Zinn, J., & Mor, V. (2001). Strategy, structure and
performance in a nursing facility. Advances in Health Care Management, 2, 291-
313.
Dawes, J. (1999). The relationship between subjective and objective company
performance measures in market orientation research: Further empirical evidence.
Marketing Bulletin, 10, 65-75.
Dawes, J. (2000). Market orientation and company profitability: Further evidence
incorporating longitudinal data. Australian Journal of Management, 25, 173-197.
Day, G. (1990). Market-driven strategy. New York: Free.
215
Day, G. (1994). The capabilities of market-driven organizations. Journal of Marketing,
58(4), 37-52.
Day, G., & Wensley, R. (1983). Marketing theory with a strategic orientation. Journal
of Marketing, 47, 79-89.
Day, G., & Wensley, R. (1988). Assessing competitive advantage: A framework for
diagnosing competitive superiority. Journal of Marketing, 52(2), 1-20.
Deal, T., & Kennedy, A. (1982). Corporate cultures: The rites and rituals of corporate
life. Reading, MA: Addition-Wesley,
Deng, S., & Dart, J. (1994). Measuring market orientation: A multi-factor, multi-item
approach. Journal of Marketing Management, 10, 725-742.
Deshpandé, R. (Ed.). (1999). Developing market orientation. Thousand Oaks, CA: Sage.
Deshpandé, R., & Farley, J. (1998a). Measuring market orientation; Generalization and
synthesis. Journal of Market Focused Management, 2, 213-232.
Deshpandé, R., & Farley, J. (1998b). The market orientation construct: Correlations,
culture, and competitiveness. Journal of Market Focused Management, 2, 237-
239.
Deshpandé, R., Farley, J., & Webster, F. (1993). Corporate culture, customer
orientation, and innovativeness in Japanese firms: A quadrad analysis. Journal of
Marketing, 57, 23-27.
Deshpandé, R., Farley, J., & Webster, F. (1995). A five-country comparison of how
corporate culture and climate, customer orientation, and innovativeness affect
business performance (Working Paper). Hanover, NH: Dartmouth College, Amos
216
Tuck School.
Deshpandé, R., & Webster, F. Jr. (1989). Organizational culture and marketing:
Defining a research agenda. Journal of Marketing, 53(1), 3-15.
Deshpandé, R., & Zaltman, G. (1982). Factors affecting the use of market research
information: A path analysis. Journal of Marketing Research, 46, 91-101.
Dess, G., & Beard, D. (1984). Dimensions of organizational task environments.
Administrative Science Quarterly, 29, 52-73.
Dess, G., Ireland, D., & Hitt, M. (1990). Industry effects and strategic management
research. Journal of Management, 16, 7-27.
Dess, G., & Origer, N. (1987). Environment, structure, and consensus in strategy
formulation: A conceptual integration. Academy of Management Review, 12,
313-330.
Dess, G., & Robinson, R. (1984). Measuring organizational performance in the
absence of objective measures: The case of the privately-held firm and
conglomerate business unit. Strategic Management Journal, 5, 265-273.
Dev, C. S. (1988). Environmental uncertainty, business strategy and financial
performance: A study of the lodging industry. Unpublished master's thesis,
Virginia Polytechnic Institute and State University, Blacksburg.
Diamantopoulos, A., & Hart, S. (1993a). Linking market orientation and company
performance: Preliminary work on Kohli and Jaworski’s framework. Journal of
Strategic Marketing, 1, 93-122.
Diamantopoulos, A., & Hart, S. (1993b). Measuring organizational performance in the
217
absence of objective measures. Strategic Management Journal 5, 265-273.
Dibb, S. (1996). The impact of the changing marketing environment in the Pacific Rim:
Four case studies. International Journal of Retail & Distribution Management,
24(11), 16-30.
Dibb, S., Simkin, L., Pride, W., & Ferrell, O. (1994). Marketing: Concepts and
strategies. Boston, MA: Houghton Mifflin.
Dill, W. (1958). Environment as an influence on managerial autonomy. Administrative
Science Quarterly, 2, 409-443.
Dillman, D. (1978). Mail and telephone surveys. New York: Wiley.
Dobni, B., Dobni, D., & Luffman, G. (2001). Behavioral approaches to marketing
strategy implementation. Marketing Intelligence & Planning, 19, 400-408.
Douglas, C. (1999). Organization redesign: The current state and projected trends.
Management Decision, 37, 621-627.
Downey, H. (1974). Perceived uncertainty: Conceptual frameworks and research
instruments. Proceedings of the Annual Academy of Management Meeting, 106-
115.
Downey, H., Hellriegel, D., & Slocum, J. (1975). Environmental uncertainty: The
construct and its application. Administrative Science Quarterly, 20, 613-629.
Doyle, P., & Wong, V. (1998). Marketing and competitive performance: An empirical
study. European Journal of Marketing, 32, 514-535.
Drucker, P. (1980). Managing in turbulent times. New York : Harper and Row.
218
Drummond, G., Ensor, J., Laing, A., & Richardson, N. (2000). Market orientation
applied to police service strategies. The International Journal of Public Sector
Management, 13, 571-587.
Duncan, R. (1972a). Characteristics of organizational environments and perceived
environmental uncertainty. Administrative Science Quarterly, 17, 313-327.
Duncan, R. (1972b). Multiple decision-making structures in adapting to environmental
uncertainty: The impact on organizational effectiveness. Human Relations, 26,
273-291.
Dunn, E. Jr. (1971). Economic and social development: A process of social learning.
Baltimore, MD: Johns Hopkins University Press.
Dwyer, F., & Welsh, A. (1985). Environmental relationships of the internal political
economy of marketing channels. Journal of Marketing Research, 22, 397-414.
Ebrahimi, B. (2000). Perceived strategic uncertainty and environmental scanning
behavior of Hong Kong Chinese executives. Journal of Business Research, 49,
67-77.
Egeren, M., & O’Connor, S. (1998). Drivers of market orientation and performance in
service firms. Journal of Service Marketing, 12, 39-58.
Egeren, M., Trinh, H., & O’Connor, S. (2000). The influence of top management team
and external environmental characteristics on market orientation and performance
in service firms: A test and refinement of a causal model. Journal of Professional
Services Marketing, 20, 5-22.
Eisenhardt, K. (1989). Making fast strategic decisions in high-velocity environments.
Academy of Management Journal, 32, 543-576.
219
Eisenhardt, K., & Bourgeois, L. (1988). Politics of strategic decision making in high-
velocity environments: Toward a midrange theory. Academy of Management
Journal, 31, 737-770.
Elwood, C. M. (1991). An empirical analysis of the strategic implications of type of
entrepreneur in the restaurant industry. Unpublished master's thesis, Virginia
Polytechnic Institute and State University, Blacksburg.
Emery, F., & Trist, E. (1965). The causal texture of organizational environments.
Human Relations, 18, 21-31.
Enz, C. (1993). Organizational architectures for the 21st century: The redesign of
hospitality firms. HE & RJ, 17(1), p. n/a.
Esslemont, D., & Lewis, T. (1991). Some empirical tests of the marketing concept.
Marketing Bulletin, 2, 1-7.
Everitt, B., & Dunn, G. (2001). Applied multivariate data analysis. London: Edward
Arnold.
Fahey, L., & Christensen, H. (1986). Evaluating the research on strategy content.
Journal of Management, 12, 167-183.
Farh, J., Hoffman, R., & Hegarty, W. (1984). Assessing environmental scanning at the
sub-unit level: A multitrait multimethod analysis. Decision Sciences, 15, 197-220.
Farrell, M. (2002). A critique of the development of alternative measures of market
orientation. Marketing Bulletin, 13, Retrieved May 1, 2005, from
http://marketing-bulletin.massey.ac.nz
Felton, A. (1959). Making the marketing concept work. Harvard Business Review,
220
37(5), 55-65.
Ferrell, O., & Skinner, S. (1988). Ethical behavioral and bureaucratic structure in
marketing research organizations. Journal of Marketing Research, 25, 103-109.
Ford, J., & Schellenberg, D. (1982). Conceptual issues of linkage in the assessment of
organizational performance. Academy of Management Review, 7, 49-58.
Fredrickson, J. (1986). The strategic decision process and organizational structure.
Academy of Management Review, 11, 280-297.
Fredrickson, J., & Mitchell, T. (1984). Strategic decision processes: Extensions,
observations, future directions. Academy of Management Journal, 27, 399-423.
Galbraith, J. (1973). Designing complex organizations. Reading, MA: Addison-Wesley.
Garner, W. (1962). Uncertainty and structure as psychological concepts. New York:
Wiley.
Gerloff, E., Muir, N., & Bodenstiner, W. (1991). Three components of perceived
environmental uncertainty: An exploratory analysis of the effects of aggregation.
Journal of Management, 17, 749-768.
Ghoshal, S., Korine, H., & Szulanski, G. (1994). Interunit communication in
multinational corporations. Management Science, 40, 96-110.
Glisson, C., & Martin, P. 1980. Productivity and efficiency in human service
organizations as related to structure, size and age. Academy of Management
Journal, 23: 21- 38.
Glueck, W., & Willis, R. (1979). Documentary source and strategic management
221
research. Academy of Management Journal, 4, 95-102.
Golden, P., Doney, P., Johnson, D., & Smith, J. (1995). The dynamics of a market
orientation in transition economies: A study of Russian firms. Journal of
International Marketing, 3, 29-49.
Govindarajan, V. (1988). A contingency approach to strategy implementation at the
business unit level: Integrating administrative mechanisms with strategy.
Academy of Management Journal, 31, 828-853.
Gray, B., Matear, S., Boshoff, C., & Matheson, P. (1998). Developing a better
measure of market orientation. European Journal of Marketing, 32, 884-903.
Greenley, G. (1995a). Forms of market orientation in UK companies. Journal of
Management Studies, 32, 47-66.
Greenley, G. (1995b). Market orientation and company performance: Empirical
evidence from UK companies. British Journal of Management, 6, 1-13.
Greenley, G, & Foxall, G. (1997). Multiple stakeholder orientation in UK companies
and the implications for company performance. Journal of Management Studies,
34, 259-284.
Greenley, G., & Matcham, A. (1986). Marketing orientation in the service of incoming
tourism. European Journal of Marketing, 20(7), 64-73.
Greenley, G., & Shipley, D. (1992). A comparative study of operational marketing
practices among British department stores and supermarkets. European Journal
of Marketing, 26(5), 24-37.
Grewal, R., & Tansuhaj, P. (2001). Building organizational capabilities for managing
222
economic crisis: The role of market orientation and strategic flexibility. Journal
of Marketing, 65(2), 65-80.
Griffin, R., & Moorhead, G. (1986). Organizational behavior. Boston, MA: Houghton
Mifflin.
Grinyer, P., & Yasai-Ardekani, M. (1981). Strategy, structure, size and bureaucracy.
Academy of Management Journal, 24, 471-486.
Grinyer, P., Yasai-Ardekanii, M., & Al-Bazzaz, S. (1980). Strategy, structure, the
environment and financial performance in 48 United Kingdom companies.
Academy of Management Journal, 23, 193-220.
Gupta, A. (1984). Contingency linkages between strategy and general management
characteristics: A conceptual examination. Academy of Management Review, 9,
399-412.
Gupta, A. (1987). SBU strategies, corporate SBU relations, and SBU effectiveness in
strategy implementation. Academy of Management Journal, 30, 477-500.
Gupta, A., & Govindarajan, V. (1984). Business unit strategy, managerial
characteristics, and business unit effectiveness at strategy implementation.
Academy of Management Journal, 27, 25-41.
Habib, M., & Victor, B. (1991). Strategy, structure, and performance of US
manufacturing and service MNCs: A comparative analysis. Strategic
Management Journal, 12, 589-606.
Hage, G., & Aiken, M. (1970). Social change in complex organizations. New York:
Random House.
223
Hair, J., Jr., Anderson, R., Tatham, R., & Black, W. (1995). Multivariate data
analysis (4th ed.). New York: Macmillan.
Hall, R. (1972). Organizations: Structure and process. Englewood Cliffs, NJ: Prentice-
Hall.
Hall, R. (1975). Organizations and the social structure (2nd ed.) Englewood Cliffs, NJ:
Prentice-Hall.
Hall, R., Haas, E., & Johnson, N. (1967). Organizational size, complexity and
formalization. American Sociological Review, 9, 193-206.
Hambrick, D. (1980). Operating the concept of business-level strategy in research.
Academy of Management Review, 5, 567-576.
Hambrick, D. (1982). Environmental scanning and organizational strategy. Strategic
Management Journal, 2, 159-174.
Hambrick, D. (1983a). High profit strategies in mature capital goods industries: A
contingency approach. Academy of Management Journal, 26, 687-707.
Hambrick, D. (1983b). Some tests of the effectiveness and functional attributes of Miles
and Snow’s strategic types. Academy of Management Journal, 26, 5-26.
Hambrick, D. (1983c). An empirical typology of mature industrial-product
environments. Academy of Management Journal, 26, 213-230.
Hambrick, D. (1985). Strategies for mature industrial product businesses. In J. Grant
(Ed.), Strategic management frontiers (pp. 320-356). New York: JAI Press.
Hambrick, D. (1987). The top management team: Key to strategic success. California
224
Management Review, 30, 88-108.
Hambrick, D., & Mason, P. (1984). Upper echelons: The organization as a reflection of
its top managers. Academy of Management Review, 9, 193-206.
Han, J., Kim, N., & Srivastava, R. (1998). Market orientation and organizational
performance: Is innovation a missing link? Journal of Marketing, 62(4), 30-45.
Hannan, M., & Freeman, J. (1984). Structural inertia and organizational change.
American Sociological Review, 29, 149-164.
Harrigan, K., & Porter, M. (1983). End game strategies for declining industries.
Harvard Business Review, 83(2), 111-120.
Harrington, R., Lemak, D., Reed, R., & Kendall, K. (2004). A question of fit: The
links among environment, strategy formulation, and performance. Journal of
Business and Management, 10, 15-38.
Harris, L. (1998). Barriers to market orientation: The view from the shopfloor.
Marketing Intelligence and Planning, 16, 221-228.
Harris, L. (2000). The organizational barriers to developing market orientation.
European Journal of Marketing, 34, 598-624.
Harris, L. (2001). Market orientation and performance: Objective and subjective
empirical evidence from UK companies. Journal of Management Studies, 38, 17-
43.
Harris, L., & Piercy, N. (1998). Identifying the barriers to market orientation: British
retail companies. Developments in Marketing Science, 21, p. n/a.
225
Harrison, J. (2003). Perceived environmental uncertainty: Validation of a measure from
the accounting literature. Australasian Journal of Business & Social Inquiry, 1.
Retrieved May 5, 2005, from http://www.scu.edu.au/ schools/socialsciences/ajbsi/
papers/vol1/harrison.html
Hart, S., & Banbury, C. (1994). How strategy-making processes can make a difference.
Strategic Management Journal, 15, 251-269.
Hartenian, L., & Gudmundson, D. (2000). Cultural diversity in small business:
Implications for firm performance. Journal of Developmental Entrepreneurship,5,
209-219.
Hatten, K., & Schendel, D. (1975). Strategy’s role in policy research. Journal of
Economics and Business, 8, 195-202.
Hayes, R., & Abernathy, W. (1980). Managing our way to economic decline. Harvard
Business Review, 4, 67-77.
Hayes, R., & Wheelwright, S. (1984). Restoring our competitive edge: Competing
through manufacturing. New York: Wiley.
Henricks, M. (1997). Harvest time. Entrepreneur, 25(9), 72.
Hickson, D., Hinings, C., Lee, C., Schneck, R., & Pennings, J. (1971). A strategic
contingencies theory of intra-organizational power. Administrative Science
Quarterly, 16, 216-229.
Hill, C., & Jones, G. (2001). Strategic management theory: An integrated approach
(5th ed.). Boston, MA: Houghton Mifflin.
Hill, C., & Pickering, J. (1986). Divisionalization, decentralization, and performance in
226
large United Kingdom companies. Journal of Management Studies, 1, 26-50.
Hinkin, T. (1995). A review of scale development practices in the study of organizations.
Journal of Management, 21, 967-988.
Hitt, M., Ireland, R., & Palia, A. (1982). Industrial firms’ grand strategy and
functional importance: Moderating effects of technology and uncertainty.
Academy of Management Journal, 25, 265-298.
Hofer, C. (1973). Some preliminary research on patterns of strategic behavior. Academy
of Management Proceedings, 46-60.
Hofer, C. (1975). Toward a contingency theory of business strategy. Academy of
Management Journal, 18, 784-810.
Hofer, C. (1979). Strategic management: A new view of business policy and planning.
Boston, MA: Little Brown.
Hofer, C., & Schendel, D. (1978). Strategy formulation: Analytical concepts. St. Paul,
MN: Westview.
Hogarth-Scott, S., & Parkinson, S. (1993). Who does the marketing in retailing?.
European Journal of Marketing, 27(3), 51-62.
Holden, M. Jr. (1966). Imperialism in bureaucracy. American Political Science Review,
60, 216-229.
Hollander, E. (1960). Competence and conformity in the acceptance of influence.
Journal of Abnormal and Social Psychology, 61, 365-369.
Holmberg, S., & Morgan, K. (2004). Retail marketing channel franchise failure: A
227
strategic management perspective and longitudinal analysis. Journal of
Marketing, 11(2/3), 55-76.
Homburg, C., Krohmer, H., & Workman, J. (2004). A strategy implementation
perspective of market orientation. Journal of Business Research, 57, 1331-1340.
Horng, S., & Chen, A. (1998). Market orientation of small and medium-sized firms in
Taiwan. Journal of Small Business Management, 36, 79-85.
Hoskisson, R. (1987). Multidimensional structure and performance: The contingency of
diversification strategy. Academy of Management Journal, 30, 625-644.
Houston, F. (1986). The marketing concept: What it is and what it is not. Journal of
Marketing, 50, 81-87.
Hrebiniak, L., & Joyce, W. (1985). Organizational adaptation: Strategic choice and
environmental determinism. Administrative Science Quarterly, 30, 336-349.
Hrebiniak, L., & Snow, C. (1980). Industry differences in environmental uncertainty
and organizational characteristics related to uncertainty. Academy of
Management Journal, 23, 750-759.
Hu, L., & Bentler, P. (1995). Evaluating model fit. In R. H. Hoyle (Ed.), Structural
equation modeling: Concepts, issues, and application (pp. 76-99). Thousand
Oaks, CA: Sage.
Hu, L., & Bentler, P. (1999). Cuttoff criteria for fit indexes in covariance structural
analysis: Conventional criteria versus new alternatives. Structural Equation
Modeling: A multidisciplinary Journal, 6. 1-55.
Huber, G. (1984). The nature and design of post-industrial organizations. Management
228
Science, 30, 928-951.
Huber, G., & Daft, R. (1987). The information environments of organizations. In F.
Jablin, L. Putnam, K. Roberts & L. Porter (Eds.), Handbook of organizational
communication (pp. 130-164). Beverly Hills, CA: Sage.
Huber, G., O’Connell, M., & Cummings, L. 91975). Perceived environmental
uncertainty effects of information and structure. Academy of Management
Journal, 18, 725-740.
Huber, G., O’Connell, M., & Cummings, L. (1975). Perceived environmental
uncertainty: Effects of information and structure. Academy of Management
Journal, 18, 725-740.
Hunt, S. (1976). The nature and scope of marketing. Journal of Marketing, 40(3), 17-28.
Husseini, S., and O’Brien, C. (2004). Strategic implications of manufacturing
performance comparisons for newly industrialising countries. International
Journal of Operations & Product Management, 24, 1126-1148.
Ikävalko, H. (2005). Strategy process in practice–Practices and logics of action of
middle managers in strategy implementation. Unpublished doctoral dissertation,
Helsinki University of Technology, Finland.
Inkson, J., Pugh, D., & Hickson, D. (1970). Organization context and structure: An
abbreviated replication. Administrative Science Quarterly, 15, 318-329.
Ireland, R., Duane, M., Hitt, R., & Porra, D. (1987). Strategy formulation processes:
Differences in perceptions of strength and weakness indicators and environmental
uncertainty by managerial level. Strategic Management Journal, 8, 469-485.
229
Isabella, L. (1990). Evolving interpretations as a change unfolds: How managers
construe key organizational events. Academy of Management Journal, 33, 7-41.
Jacobson, R. (1988). Distinguishing among competing theories of the market share
effect. Journal of Marketing, 52(4), 68-80.
Jain, S. (1983). The evolution of strategic marketing. Journal of Business Research, 11,
409-425.
James, L., Demaree, R., Muliak, S., & Ladd, R. (1992). Validity generalization in the
context of situational models. Journal of Applied Psychology, 77, 3-14.
James, L., Mulaik, S., & Brett, J. (1982). Causal analysis: Assumptions, models, and
data. Beverly Hills, CA: Sage.
Janelli, R. (1993). Making capitalism: The social and cultural construction of a South
Korean conglomerate. Stanford, CA: Stanford University Press.
Januszewski, S., Koke, F., & Winter, J. (1999). Product market competition, corporate
governs and firm performance: An empirical analysis of Germany. Discussion
Paper 99-63. University of Mannheim.
Jauch, L., & Kraft, K. (1986). Strategic management of uncertainty. Academy of
Management Review, 11, 777-790.
Jauch, L., Osborn, R., & Glueck, W. (1980). Short-term financial success in large
business organizations. Strategic Management Journal, 1, 49-63.
Jaworski, B., & Kohli, A. (1990). Market orientation: Antecedents and consequences.
Paper presented at the Marketing Science Conference, No. 90-123.
230
Jaworski, B., & Kohli, A. (1992). Market orientation: Antecedents and consequences
(Report No. 92-104). Cambridge, MA: Marketing Science Institute.
Jaworski, B., & Kohli, A. (1993). Market orientation: Antecedents and consequences.
Journal of Marketing, 57(3), 53-70.
Jaworski, B., & Kohli, A. (1996). Market orientation: Review, refinement, and
roadmap. Journal of Market Focused Management, 1, 119-135.
Jemison, D. (1981). The contributions of administrative behavior to strategic
management. Academy of Management Review, 6, 633-642.
Jemison, D. (1984). The importance of boundary spanning roles in strategic decision-
making. Journal of Management Studies, 21, 131-152.
Jenkins, W. (2005). Competing in times of evolution and revolution–An essay on long-
term firm survival. Management Decision, 43, 26-37.
Jennings, D., Rajaratnam, D., & Lawrence, F. (2003). Strategy-performance
relationships in service firms: A test for equifinality. Journal of Managerial
Issues, 15, 208-220.
Jogaratnam, G. (1995). Environmental munificence, strategic posture and performance:
An empirical survey of independent restaurants. Unpublished doctoral
dissertation, Virginia Polytechnic Institute and State University, Blacksburg.
John, G. (1984). An empirical investigation of some antecedents of opportunism in
marketing channel. Journal of Marketing Research, 21, 279-289.
Johnson, G., & Scholes, K. (1993). Exploring corporate strategy (3rd ed.). Thousand
Oaks, CA: Sage.
231
Jurkovich, R. (1974). A core typology of organizational environments. Administrative
Science Quarterly, 19, 380-394.
Kahneman, D., & Tversky, A. (1982). Variants of uncertainty. Cognition, 11, 143-157.
Kanopa, L., & Calabro, P. (1971). Adoption of the marketing concept by large
northeastern Ohio manufacturers. Akron Business and Economic Review, 2, 9-13.
Kara, A., Spillan, J., & DeShields, Jr., W. (2005). The effect of a market orientation
on business performance: A study of small-sized service retailers using the
MARKOR scale. Journal of Small Business Management, 43, 105-118.
Kast, F., & Rosenzweig, E. (1973). Contingency views of organization and
management. Chicago, IL: Science Research Associates.
Katz, D. (1970). Cases and concepts in corporate strategy. Englewood Cliffs, NJ:
Prentice-Hall.
Katz, D., & Kahn, R. (1978). The social psychology of organizations (Rev. ed.). New
York: Wiley.
Keats, B., & Hitt, M. (1988). A causal model of linkages among environmental
dimensions, macro organizational characteristics, and performance. Academy of
Management Journal, 31, 570-598.
Keegan, W. (1989). Global marketing management (4th ed.). Englewood Cliffs, NJ:
Prentice-Hall.
Kelley, D., & Amburgey, T. (1991). Organizational inertia and momentum: A dynamic
model of strategic change. Academy of Management Journal, 34, 591-612.
232
Kelley, S. (1992). Developing customer orientation among service employees. Journal
of the Academy of Marketing Science, 20, 27-36.
Kent, C. (1986). The environment for entrpreneurship. Lexington, MA: D.C. Heath.
Ketchen, D., Jr., Snow, C., & Street, V. (2004). Improving firm performance by
matching strategic decision-making process to competitive dynamics. The
Academy of Management Executive, 18, 29-43.
Khandwalla, P. (1972). Environment and its impact on the organization. International
Studies of Management and Organization, 2, 297-313.
Khandwalla, P. (1974). Mass output orientation of operations technology and
organizational structure. Administrative Science Quarterly, 19, 74-97.
Khandwalla, P. (1976). The techno-economic ecology of corporate strategy. The
Journal of Management Studies, 13, 62-75.
Khandwalla, P. (1976/77). Some top management styles, their context and performance.
Organization and Administrative Science, 7(4), 21-51.
Khandwalla, P. (1977). The design of organizations. New York: Harcourt Brace
Jovanovich.
Kim, G. (2004, November 9). High-income earners’ spending curb. Retrieved May 3,
2005, from http://english.lgeri.co.kr/economy/domestic/article.asp?grouping=
0210100&seq=183&srchtype=0&scrchword=
Kim, I. (2005). Hiring Practices in South Korea. Chincago, IL: Heidrick & Struggles
International Inc.
233
Kim, J., & Burton, R. (2002). The effect of task uncertainty and decentralization on
project team performance. Computational & Mathematical Organizational
Theory, 8, 365-384.
Kim, Y. (2004). Relation between market orientation and market environment et al. in
Korean firms entering to North American markets. International Journal of Asian
Management, 3, 37-51.
Kirca, A., Jayachandran, S., & Bearden, W. (2005). Market orientation: A meta-
analytic review and assessment of its antecedents and impact on performance.
Journal of Marketing, 69(2), 24-41.
Kirchhoff, B. (1977). Organization effectiveness measurement and policy research.
Academy of Management Review, 2, 347-355.
Knight, D., Durham, C., & Locke, E. (2001). The relationship of team goals,
incentives, and efficacy to strategic risk, tactical implementation, and
performance. Academy of Management Journal, 44, 326-338.
Knight, F. (1921). Risk, uncertainty and profit. New York; Harper & Row.
Koberg, C., & Ungson, G. (1987). The effects of environmental uncertainty and
dependence on organizational structure and performance: A comparative study.
Journal of Management, 13, 725-737.
Kohli, A., & Jaworski, B. (1990). Market orientation: The construct, research
propositions, and managerial implications. Journal of Marketing, 54(2), 1-18.
Kohli, A., Jaworski, B., & Kumar, A. (1993). MARKOR: A measure of market
orientation. Journal of Marketing Research, 30, 467-477.
234
Kor, Y., & Mahoney, J. (2005). How dynamics, management, and governance of
resource deployments influence firm-level performance. Strategic Management
Journal, 26, 489-496.
Korea: KOTRA to hold active investment promotion activities. (1996, January, 17). The
Korean Economic Weekly, (369), p. N/A.
Korea: Retail distribution market overview. (1996, July 22). International Market
Insight Reports, p. n/a.
Korea Retail Research Group. (1999). Retail industry in Korea: Current situation and
outlook. Seoul, Korea: Korea Department Stores Association.
Kotler, P. (1972). A generic concept of marketing. Journal of Marketing, 36(2), 46-54.
Kotler, P. (1977). From sales obsession to marketing effectiveness. Harvard Business
Review, 6, 67-75.
Kotler, P. (1988). Marketing management. Upper Saddle River, NJ: Prentice-Hall.
Kotler, P. (1991). Marketing management. Englewood Cliffs, NJ: Prentice-Hall.
Kotler, P., & Andreasen, A. (1987). Strategic marketing for non-profit organizations.
Englewood Cliffs, NJ: Prentice-Hall.
Kotler, P., & Zaltman, G. (1971). Social marketing: An approach to planned social
change. Journal of Marketing, 35(3), 3-12.
Krokosz-Krynke, Z. (1998). Organizational structure and culture: Do individualism/
collectiviem and power distance influence organizational structure? Retrieved
235
March 2, 2005, from Miami University, Richard T. Farmer School of Business
Web site: http://www.sba.muohio.edu/ABAS/ 1998/krokosz.pdf
Kuada, J., & Buatsi, S. (2005). Market orientation and management practices in
Ghanaian firms: Revisiting the Jaworski and Kohli framework. Journal of
International Marketing, 13, 58-88.
Kumar, K., Subramanian, R., & Yauger, C. (1997). Performance-oriented: Toward a
successful strategy. Marketing Health Service, 17(2), 10-20.
Kunz, G. (1995). Behavioral theory of the apparel firm: A beginning. Clothing and
Textile Research Journal, 13, 252-261.
Kwock, Y. (1999). A theoretical integration and empirical test of strategic
management: Environment, strategy, structure, implementation, and performance
in the hospitality industry. Unpublished doctoral dissertation, Virginia
Polytechnic Institute and State University, Blacksburg.
Kwon, Y., & Ho, M. (2000). Market orientation among small Korean exporters.
International Business Review, 9. 61-75.
Langerak, F., Nijssen, E., Droogenbroeck., S., & Delissen, J. (1996). Exploratory
results on the influence of market orientation on the competitive advantage of
small and medium sized high tech firms in the Netherlands. American Marketing
Association.
Lawrence, P., & Dyer, D. (1983). Renewing American industry. New York: Free.
Lawrence, P., & Lorsch, J. (1967). Organization and environment. Boston, MA:
Harvard Business School.
236
Lear, R. (1963). No easy road to market orientation. Harvard Business Review, 41(3),
53-60.
Lee, S. (1999, August). Retail landscape is plowed into new shape. Business Korea, 16,
68-70.
Lenz, R. (1981). ‘Determinants’ of organizational performance: An interdisciplinary
view. Strategic Management Journal, 2, 131-154.
Levine, S., & White, P. (1961). Exchange as a conceptual framework for the study of
inter-organizational relationships. Administrative Science Quarterly, 5, 583-601.
Levitt, T. (1960). Marketing myopia. Harvard Business Review, 38(4), 45-56.
Levitt, T. (1969). The marketing mode: Pathways to corporate growth. New York:
McGraw-Hill.
Lewis, B. (1977). Marketing of nursing as a career. European Journal of Marketing, 11,
433-441.
Lichtenthal, J., & Wilson, D. (1992). Becoming market-oriented. Journal of Business
Research, 24, 191-207.
Lin, Z., & Li, D. (2004). The performance consequences of top management
successions–The roles of organizational and environmental contexts. Group &
Organization Management, 29, 32-66.
Lindblom, C. (1959). The science of muddling through. Public Administration Review,
19, 79-88.
Lings, I. (2004). Internal market orientation–Construct and consequences. Journal of
237
Business Research, 57, 405-413.
Lings, I., & Greenley, G. (2005). Measuring internal market orientation. Journal of
Service Research, 7, 290-305.
Little, R., & Rubin, D. (1989). The analysis of social science data with missing values.
Sociological Methods and Research, 18, 292-326.
Little, T., Schnabel, K., & Baumert (Eds.). (2000). Modeling longitudinal and
multilevel data: Practical issues, applied approaches, and specific examples.
Mahwah, NJ: Lawrence Erlbaum Associates.
Local retailers brace for a foreign onslaught. (1993, September). Business Korea, 11,
53-54.
Lorsch, J., & Morse, J. (1974). Organizations and their members. New York: Harper
and Row.
Lovelock, C. (1996). Service marketing (3rd ed.). Upper Saddle River, NJ: Prentice-
Hall.
Lowry, J. (1997). The life cycle of shopping centers. Business Horizons, 40(3), 77-86.
Luce, R., & Raiffa, H. (1957). Games and decisions. New York: Wiley.
Lundstrom, W. (1976). The marketing concept: The ultimate in bait and switch.
Marquette Business Review, 20, 214-230.
Lusch, R., & Lacziak, G. (1987). The evolving marketing concept, competitive
intensity and organizational performance. Journal of the Academy of Marketing
Science, 15(3), 1-11.
238
MacCallum, R., Browne, M., & Sugawara,. H. (1996). Power analysis and
determination of sample size for covariance structure modeling. Psychological
Methods, 1, 130-149.
Macdonald, S. (1995). Too close for comfort: The strategic implications of getting close
to the customer. California Management Review, 37(4), 8-27.
Mador, M. (2000). Strategic decision making process research: Are entrepreneur and
owner managed firms different? Strategic Decision Making, 2, 215-234.
March, J., & Simon, H. (1958). Organizations. New York: Wiley.
Marketing: The new priority. (1983, November 21). Business Week, Retrieved January,
2004, from LexisNexis ™ Academic.
Markusen, A., & Teitz, M. (1985). The world of small business: Turbulence and
survival. In D. J. Storey (Ed.), Small firms in regional economic development:
Britain, Ireland and the United States. Cambridge, UK: Cambridge University
Press.
Marsden, P., Cook, C., & Kalleberg, A. (1994). Organizational structures. American
Behavioral Scientist, 37, 911-929.
Martin, J., Martin, B., & Grbac, B. (1998). Employee involvement and market
orientation in a transition economy. Journal of Managerial Issues, 10, 485-502.
Mason, J., & Mayer, M. (1987). Modern retailing: Theory and practice (4th ed.).
Plano, TX: Business Publications.
Massie, J. (1965). Management theory. In J. G. March (Ed.), Handbook of
organizations (pp. 387-422). Chicago, IL: Rand McNally.
239
Matsuno, K., & Mentzer, J. (2000). The effects of strategy type on the market
orientation-performance relationship. Journal of marketing, 64(4), 1-16.
Matsuno, K., Mentzer, J., & Rentz, J. (2005). A conceptual and empirical comparison
of three market orientation scales. Journal of Business Research, 58, 1-8.
Mavondo, F. (1999). Market orientation: Scale invariance and relationship to generic
strategies across two countries. Journal of Market Focused Management, 4, 125-
142.
Mayers, R. (1990). Classical and modern regression with application (2nd ed.). Boston,
MA: PWS-Kent.
McArdle, J. (1994), Structural factor analysis experiments with incomplete data.
Multivariate Behavioral Research, 29, 409-454.
McCabe, D. (1990). The assessment of perceived environmental uncertainty and
economic performance. Human Relations, 43, 1203-1218.
McCarthy, E., & Perreault, W. (1987). Basic marketing. Homewood, IL: Irwin.
McDougall, P., Covin, J., Robinson, Jr., R., & Herron, L. (1994). The effects of
industry growth and strategic breadth on new venture performance and strategy
content. Strategic Management Journal, 15, 537-554.
McGrath, J., Martin, J., & Kulka, R. (1982). Judgment calls in research. Beverly
Hills, CA: Sage.
McGregor, D. (1960). The human side of enterprise. New York: McGraw-Hill.
McKee, D., Varadarajan, P., & Pride, W. (1989). Strategic adaptability and firm
240
performance: A market-contingent perspective. Journal of Marketing, 53(3), 21-
35.
McKitterick, J. (1957). What is the marketing management concept. In F. Bass (Ed.),
The frontiers of marketing thought and science (pp. 71-92). Chicago, IL:
American Marketing Association.
McNair, M., & May, E. (1958). Significant trends and developments in the postwar
period. In A. Smith (Ed.), Competitive distribution in a free high level economy
and its implications for the university. Pittsburgh, PA: University of Pittsburgh
Press.
McNair, M., & May, E. (1978). The next revolution of the retailing wheel. Harvard
Business Review, 56(3), 81-91.
McNamara, C. (1972). The present status of the marketing concept. Journal of
Marketing, 36(1), 50-57.
Meziou, F. (1991). Areas of strength and weakness in the adoption of the marketing
concept by small manufacturing firms. Journal of Small Business Management,
29(4), 72-78.
Miles, R., & Snow, C. (1978). Organizational strategy, structure and process. New
York: McGraw-Hill.
Miles, R., Snow, C., & Pfeffer, J. (1974). Organization-environment: Concepts and
issues. Industrial Relations, 13, 244-264.
Miller, C., Reardon, J., & McCorkle, D. (1999). The effects of competition on retail
structure: An examination of intratype, intertype, and intercategory competition.
Journal of Marketing, 63(4), 107-120.
241
Miller, D. (1986). Configurations of strategy and structure: Towards a synthesis.
Strategic Management Journal, 7, 233-249.
Miller, D. (1987). The structural and environmental correlates of business strategy.
Strategic Management Journal, 8, 55-76.
Miller, D. (1988). Relating Porter's business strategies to environment and structure:
Analysis and performance implications. Academy of Management Journal, 31,
280-308.
Miller, K. (1992). A framework for integrated risk management in international business.
Journal of International Business Studies, 23, 311-331.
Miller, K. (1993). Industry and country effects on managers’ perceptions of
environmental uncertainties. Journal of International Business Studies, 24, 693-
714.
Miller, D., & Dröge, C. (1986). Psychological and traditional determinants of structure.
Administrative Science Quarterly, 31, 539-560.
Miller, D., Dröge, C., & Toulouse, J. (1988). Strategic process and content as
mediators between organizational context and structure. Academy of
Management Journal, 31, 544-569.
Miller, D., & Friesen, P. (1978). Archetypes of strategy formulation. Management
Science, 24, 921-933.
Miller, D., & Friesen, P. (1980). Archetypes of organizational transitions.
Administrative Science Quarterly, 25, 268-292.
Miller, D., & Friesen, P. (1982). Innovation in conservative and entrepreneurial firms:
242
Two models of strategic momentum. Strategic Management Journal, 3, 1-25.
Miller, D., & Friesen, P. (1983). Strategy-making and environment: The third link.
Strategic Management Journal, 4, 221-235.
Miller, D., & Friesen, P. (1984). Organizations: A quantum view. Englewood Cliffs,
NJ: Prentice-Hall.
Miller, D., & Friesen, P. (1986). Porter’s generic strategies and performance.
Organization Studies, 7, 255-261.
Miller, D., & Toulouse, J. (1986). Strategy, structure, CEO personality and
performance in small firms. American Journal of Small Business, 10(3), 47-62.
Miller, K. (1992). A framework for integrated risk management in international business.
Journal of International Business Studies, 23, 311-331.
Miller, K. (1993). Industry and country effects on managers’ perceptions of
environmental uncertainties. Journal of International Business Studies, 24, 693-
714.
Milliken, F. (1987). Three types of perceived uncertainty about the environment: State,
effect, and response uncertainty. Academy of Management Review, 12, 133-143.
Mindak, W., & Baybee, H. (1971). Marketing’s application to fund raising. Journal of
Marketing, 35(3), 13-18.
Mintzberg, H. (1973). Strategy making in three modes. California Management Review,
16, 44-58.
Mintzberg, H. (1979). The structuring of organizations. Englewood Cliffs, NJ:
243
Prenctice-Hall.
Mishra, C. (2004). Group identification: The influence of group membership on retail
hardware cooperative members’ perceptions. Journal of Small Business
Management, 42, 155-173.
Mohr, L. (1971). Organization technology and organization structure. Administrative
Science Quarterly, 16, 444-459.
Morgan, G. (1986). Images of organizations. Beverly Hills, CA: Sage.
Morris, M., Avila, R., & Allen, J. (1993). Individualism and the modern corporation:
Implications for innovation and entrepreneurship. Journal of Management, 19,
595-612.
Mulaik, S., James, L., Van Altine, J., Bennett, N., Lind, S., & Stilwell, C. (1989).
Evaluation of goodness-of-fit indices for structural equation models.
Psychological Bulletin, 105, 430-445.
Multicollinearity in logistic regression. (n.d.). Retrieved May 8, 2005, from http://www.
uky.edu/ComputingCenter/SSTARS/Multicollinearityin LogisticRegression.htm
Murray, J. (1984). A concept of entrepreneurial strategy. Strategic Management
Journal, 5, 1-13.
Murtha, T., Lenway, S., & Bagozzi, R. (1998). Global mind-sets and cognitive shift in
a complex multinational corporation. Strategic Management Journal, 19, 97-114.
Murthy, B. (1994). Measurement of the strategy construct in the lodging industry, and
the strategy-performance relationship. Unpublished doctoral dissertation.
Virginia Polytechnic Institute and State University, Blacksburg.
244
Narver, J., & Slater, S. (1990). The effect of a market orientation on business
profitability. Journal of Marketing, 54(4), 20-35.
Negandhi, A., & Reimann, B. (1972). A contingency theory of organization re-
examined in the context of a developing country. Academy of Management
Journal, 15, 137-146.
Net.MBA.com. (2005). The BCG growth-share matrix. Retrieved May 1, 2005,
from http://www.netmba.com/strategy/matrix/bcg
Neuman, W. (2003). Social research methods: Qualitative and quantitative approaches
(5th Ed.). Needham Heights, MA: Allyn and Bacon.
Ngai, J., & Eillis, P. (1998). Market orientation and business performance: Some
evidence from Hong Kong. International Marketing Review, 15, 120-136.
Nickell, S., Nicolotas, D., & Dryden, N. (1997). What makes firms performance well?
European Economic Review, 41, 783-796.
Nunnally, J. (1967). Psychometric theory. New York: McGraw-Hill.
Nwachukwu, O., & Tsalikis, J. (1990/1991). Environmental heterogeneity, strategy-
making, structure and small business performance: A path analytic model.
Journal of Applied Business Research, 7(2), 38-44.
Oczkowski, E., & Farrell, M. (1998). An examination of the form of market orientation
in Australian companies. Australasian Marketing Journal, 6, 3-12.
Okumus, F. (2003). A framework to implement strategies in organizations.
Management Decisions, 41, 871-882.
245
Olsen, H. W. (2001). Market orientation: Towards an understanding in developing
marketplaces of South America. Unpublished doctoral dissertation, Old
Dominion University, Norfolk, VA.
O’Reilly, C. (1989). Corporations, culture, and commitment: Motivation and social
control in organizations. California Management Review, 31, 9-25.
Organ, D., & Bateman, T. (1986). Organizational behavior. Plano, TX: Business
Publication.
Ottesen, G., & Gronhaug, K. (2004). Exploring the dynamics of marketing orientation
in turbulent environments: A case study. European Journal of Marketing, 38,
956-973.
Özsomer, A., Calantone, R., & Benedetto, A. (1997). What make firms more
innovative? A look at organizational and environmental factors. Journal of
Business & Industrial Marketing, 12, 400-416.
Paine, F., & Anderson, C. (1977). Contingencies affecting strategy formulation and
effectiveness: An empirical study. Journal of Management Studies, 14, 147-158.
Palmer, D., Veiga, J., & Vora, J. (1979). Managerial value profiles as predictors of
policy decisions in a cross-cultural setting. Academy of Management Proceedings,
133-137.
Palmer, R., & Pels, J. (2005). Marketing practice and market orientation: An
exploratory international study. Journal of Euromarketing, 14, 59-86.
Papadakis, V., & Barwise, P. (2002). How much do CEOs and top managers matter in
strategic decision-making? British Journal of Management, 13, 83-95.
246
Park, M., & Mason, J. (1990). Toward an integrated model of determinants of business
performance. Research in Marketing, 10, 157-202.
Parnell, J. (2002). A business strategy typology for the new economy:
Reconceptualization and synthesis. The Journal of Behavioral and Applied
Management, 3, 206-230.
Parthasarthy, R., & Sethi, S. (1991). The impact of flexible automation on business
strategy and organizational structure. Academy of Management Review, 17, 86-
111.
Paswan, A., Dant, R., & Lumpkin, J. (1998). An empirical instigation of the linkages
among relationalism, environmental uncertainty, and bureaucratization. Journal
of Business Research, 43, 125-140.
Paszkowska, G. (1998). Does the degree of uncertainty avoidance and social
masculinity influence organizational structure? Retrieved March 2, 2005, from
Miami University, Richard T. Farmer School of Business Web site: http://www.
sba. muohio.edu/ABAS/1998/paszkowska.pdf
Pearce II, J. (1981). An executive-level perspective on the strategic management process.
California Management Review, 24, 39-48.
Pearce II, J., Robbins, D., & Robinson, Jr., R. (1987). The impact of grand strategy
and planning formality on financial performance. Strategic Management Journal,
8, 125-134.
Pearce, M. (1998). The retail performance dynamic. Ivey Business Quarterly, 62(4), 62-
64.
Pedhazur, E. (1982). Multiple regression in behavioral research: Explanation and
247
prediction (2nd Ed.). New York: Holt, Rinehart & Winston.
Pelham, A. (1999). Influence of environment, strategy, and market orientation on
performance in small manufacturing firms. Journal of Business Research, 45, 33-
46.
Pelham, A., & Wilson, D. (1996). A longitudinal study of the impact of market
structure, firm structure, strategy, and market orientation culture on dimensions of
small-firm performance. Journal of the Academy of Marketing Science, 24, 27-43.
Pelham, A., & Wilson, D. (1999). Does market orientation matter for small firms? In
R. Deshpandè (Ed.), Developing a market orientation (pp. 167-194). Thousand
Oaks, CA: Sage.
Pennings, J. (1975). The relevance of the structural-contingency model for
organizational effectiveness. Administrative Science Quarterly, 20, 393-410.
Perrow, C. (1967). A framework for the comparative analysis of organizations.
American Sociological Review, 32, 194-208.
Peters, T., & Waterman, R. (1982). In search of excellence. New York: Harper & Row.
Peterson, R. (1985). Creating contexts for new ventures in stagnating environments. In
J. Hornaday, E. Shild, J. Timmons, & K. Vesper (Eds.), Frontiers of
entrepreneurship research (pp. 258-283). Wellesley, MA: Babson College,
Center for Entrepreneurial Studies.
Peterson, R. (1989). Small business adoption of the marketing concept vs. other
business strategies. Journal of Small Business Management, 27(1), 38-46.
Pfeffer, J. (1978). Organizational design. Arlington Heights, IL: AHM.
248
Pfeffer, J., & Salanick, G. (1978). The external control of organizations: A resource
dependence perspective. New York: Harper & Row.
Pierce, J. (2003, November 26). Does organizational structure affect firm strategy and
performance? Evidence from consumer automobile leasing. Retrieved May 3,
2005, from University of California Web site:
http://groups.haas.berkely.edu/imio/pierce120403.pdf
Piercy, N. (1992). Market-led strategic change. Oxford, UK: Butterworth Heinemann.
Piercy, N., & Alexander, N. (1988). The status quo of the marketing organization in
UK retailing. Service Industries Journal, 8, 155-175.
Pitt, L., Caruana, A., & Berthon, P. (1996). Market orientation and business
performance: Some European evidence. International Marketing Review, 13, 5-
18.
Porter, M. (1979). How competitive forces shape strategy. Harvard Business Review,
57(3), 137-145.
Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and
competitors. New York: Free.
Porter, M. (1985). Competitive advantage. New York: Free.
Powell, T. (1995). Total quality management as competitive advantage: A review and
empirical study. Strategic Management Journal, 16, 15-37.
Powell, T. (2003). Varieties of competitive parity. Strategic Management Journal, 24,
61-86.
249
Power, B., & Reid, G. (n.d). Turbulence, flexibility and performance of the long-lived
small firm. Retrieved October 1, 2005, from http://www.st- andrews.ac.uk/ crieff/
paper/dp0207.pdf
Prahalad, C., & Hamel, G. (1994). Strategy as a field of study: Why search for a new
paradigm? Strategic Management Journal, 15 (Special Issue), 5-16.
Preffer, J., & Salancik, G. (1978). The external control of organizations. New York:
Harper & Row.
Prescott, J. (1986). Environments as moderators of the relationship between strategy and
performance. Academy of Management Journal, 29, 329-346.
Puerto, L. (1999). Strategy, structure and technology as influential factors on
performance in SME’s. Retrieved March 15, 2005, from Luleå Tekniska
Universitet Web site: http://www.ies.luth.se/org/ Rapporter/AR9937.pdf
Pugh, D., & Hickson, D. (1976). Organizational structure in its context. Westmead,
Farnborough, England: Saxon House.
Pugh, D., Hickson, D., Hinings, C., & Turner, C. (1969). The context of
organizational structures. Administrative Science Quarterly, 14, 91-114.
Pugh, D., Hickson, D., Hinings, C., Turner, C., & Lupton, T. (1968). A conceptual
scheme for organization analysis. Administrative Science Quarterly, 8, 289-315.
Pulendran, S., Speed, R., & Widing, R. (2000). The antecedents and consequences of
market orientation in Australia. Australian Journal of Management, 25, 119- 143.
Qu, R., & Ennew, C. (2003). An examination of the consequences of market
orientation in China. Journal of Strategic Marketing, 11, 201-214.
250
Quinn, J. (1980). Strategies for change: Logical incremenatlism. New York: Irwin.
Radaev, V. (2004). Competitive changes on Russian markets: The example of retail
chains. Problems of Economic Transition, 47(6), 66-93.
Raju, P., Lonial, S., & Gupta, Y. (1995). Market orientation and performance in the
hospital industry. Journal of Health Care Marketing, 15, 34-41.
Ramanujam, V., Venkatraman, N., & Camillus, J. (1986). Multi-objective assessment
of effectiveness of strategic planning: A discriminate analysis approach.
Academy of Management Journal, 29, 347-372.
Reid, G., & Smith, J. (2000). The impact of contingencies on management accounting
system development. Management Accounting Research, 11, 427-450.
Reimann, B. (1973). On the dimensions of bureaucratic structure: An empirical
reappraisal. Administrative Science Quarterly, 18, 462-476.
Reynolds, W. (1966). The marketing concept and the aerospace business. Journal of
Marketing, 30(2), 9-11.
Rick, H. (1995). Structural equation modeling: Concepts, issues, and applications.
Thousand Oaks, CA: Sage.
Robinson, R., & Pearce II, J. (1984). Research thrusts in small firm strategic planning.
Academy of Management Review, 9, 128-137.
Rockart, J. (1979). Chief executives define their own data needs. Harvard Business
Review, 57(2), 81-93.
Roth, K., & Ricks, D. (1994). Goal configuration in a global industry context.
251
Strategic Management Journal, 15, 103-120.
Rubin, D. (1976). Inference and missing data. Biometrika, 63, 581 -592.
Ruekert, R. (1992). Developing a market orientation: An organizational strategy
perspective. International Journal of Research in Marketing, 9, 225-245.
Ruekert, R., Walker, O., Jr., & Roering, K. (1985). The organization of marketing
activities: A contingency theory of structure and performance. Journal of
Marketing, 49(1), 13-25.
Rumelt, R. (1974). Strategy, structure, and economic performance. Boston, MA:
Harvard University Press.
Sabherwal, R., & Sabherwal, S. (2003). How do knowledge management
announcements affect firm value?: A study of firms pursuing different business
strategies. Retrieved May 5, 2005, from University of Minnesota, MIS Research
Center Web site: http://misrc.umn.edu/workshops/2003/fall/sabherwal_
100303.pdf
San Miguel, J. (1977). The reliability of R & D data in COMPUSAT and 10-K reports.
The Accounting Review, 52, 638-641.
Sandberg, W. (1986). New venture performance: The role of strategy and industry
structure. Lexington, MA: Lexington.
Sawyer, O., McGee, J., & Peterson, M. (2003). Perceived uncertainty and enterprise
performance in SMEs: The role of personal networking activities. International
Small Business Journal, 21, 269-290.
Schaffer, J. (1984). Strategy, organization structure and success in the lodging industry.
252
International Journal of Hospitality Management, 3(4), 159-165.
Schaffer, J. (1986). Structure and strategy: Two sides of success. The Cornell Hotel and
Restaurant Administration Quarterly, 26(4), 76-81.
Schaffer, J., & Litschert, R. (1990). Internal consistency between strategy and
structure: Performance implications in the lodging industry. Hospitality Research
Journal, 14, 35-53.
Schendel, D., & Hofer, C. (1979). Strategic management: A new view of business
policy and planning. Boston, MA: Little, Brown.
Scherer, F. (1980). Industrial market structure and economic performance. Boston,
MA: Houghton-Mifflin.
Schermerborn, Jr., J. R. (1993). Management for productivity (4th ed.). New York:
Wiley.
Schien, E. (1984). Coming to a new awareness of organizational culture. Sloan
Management Review, 25(2), 3-16.
Schlegelmilch, B., & Ross, A. (1987). The influence of managerial characteristic on
different measures of export success. Journal of Marketing Management, 3, 145-
158.
Schoonhoven, C. (1981). Problem with contingency theory: Testing assumptions hidden
within the language of contingency theory. Administrative Science Quarterly, 26,
349-377.
Schuessler, K. (1971). Analyzing social data. Boston, MA: Houghton Milfflin.
253
Schumpeter, J. (1934). The theory of economic development. Cambridge, MA: Harvard
University Press.
Schwab, D. (1980). Construct validity in organizational behavior. In. B. M. Staw & L.
L. Cummings (Eds.), Research in organizational behavior (pp. 2-43). Greenwich,
CT: JAI.
Scott, W. (1981). Organizations: Rational, natural, and open systems. Englewood
Cliffs, NJ: Prentice-Hall.
Segal, M. (1974). Organization and environment: A typology of adaptability and
structure. Public Administrative Review, 34, 212-220.
Selnes, F., Jaworski, B., & Kohli, A. (1996). Market orientation in the United States
and Scandinavian countries: A cross-cultural study. Scandinavian Journal of
Management, 12, 139-157.
Selznick, P. (1948). Foundations of theory of organization. American Sociological
Review, 13, 25-35.
Senge, P. (1990). The fifth discipline. New York: Doubleday.
Shapiro, B. (1988). What the hell is “market oriented”? Harvard Business Review,
66(6), 119-125.
Sharfman, M., & Dean, J., Jr. (1991). Conceptualizing and measuring the
organizational environment: A multidimensional approach. Journal of
Management, 17, 681-700.
Sharma, B. (2004). Marketing strategy, contextual factors and performance–An
investigation of their relationship. Marketing Intelligence & Planning, 22, 128-
254
143.
Shivers-Blackwell, S. (2004). Using role theory to examine determinants of
transformational and transactional leader behavior. Journal of Leadership and
Organizational Studies, 10(3). 41-50.
Shoham, A., & Ross, G. (1993). Export performance: A meta-analytical integration. In
M. Levy & D. Grenal (Eds.), Development in marketing science. Academy of
Marketing Science, 16, 230-234.
Shrivastava, P., & Grant, J. (1985). Empirically derived models of strategic decision-
making processes. Strategic Management Journal, 6, 97-113.
Siguaw, J. , Brown, G., & Widing, R. (1994). The influence of the market orientation
of the firm on sales force behavior and attitudes. Journal of Marketing Research,
31, 106-116.
Siguaw, J., Simpson, P., & Baker, T. (1998). Effects of supplier market orientation on
distributor market orientation and the channel relationship: The distributor
perspective. Journal of Marketing, 62(3), 99-111.
Simon, H. (1973). Applying information technology to organization design. Public
Administration Review, 33, 268-278.
Singh, S. (1998). A study of the relationship between market orientation and business
performance with particular reference to the machine tool industry based in the
UK. Unpublished doctoral dissertation, Nottingham Trent University-
Southampton Institute, Southampton, England.
Singh, S. (2003). Effects of a transition economy on the market orientation business
performance link: The empirical evidence from Indian industrial firms. Journal
255
of Global Marketing, 6(4), 73-96.
Sinkovics, R., & Roath, A. (2004). Strategic orientation, capabilities, and performance
in manufacturer-3PL relationships. Journal of Business Logistics, 25(2), 43-64.
Sisk, H., & Willams, J. (1981). Management and organization. Cincinnati, OH: South
Western.
Sittimalakorn, W., & Hart, S. (2004). Market orientation versus quality orientation:
Sources of superior business performance. Journal of Strategic Marketing, 12,
243-253.
Slater, S., & Narver, J. (1993). Product-market strategy and performance: An analysis
of the Miles and Snow strategy types. European Journal of Marketing, 27(10),
33-51.
Slater, S., & Narver, J. (1994a). Does competitive environment moderate the market
orientation-performance relationship? Journal of Marketing, 58(1), 46-55.
Slater, S., & Narver, J. (1994b). Market orientation, customer value and superior
performance. Business Horizons, 37(2), 22-28.
Slater, S., & Narver, J. (1995). Market orientation and the learning organization.
Journal of Marketing, 59(3), 63-74.
Slater, S., & Narver, J. (1996). Competitive strategy in the market-focused business.
Journal of Market Focused Management, 1, 159-174.
Slater, S., & Narver, J. (1998). Customer-led and market-oriented: Let’s not confuse
the two. Strategic Management Journal, 19, 1001-1006.
256
Slevin, D. (1989). The whole manager. New York: AMACOM.
Slevin, D., & Covin, J. (1997). Strategy formation patterns, performance, and the
significance of context. Journal of Management, 23, 189-209.
Smart, C., & Vertinsky, I. (1984). Strategy and the environment; A study of corporate
responses to crises. Strategic Management Journal, 5, 199-213.
Smircich, L., & Stubbart, C. (1985). Strategic management in an enacted world.
Academy of Management Review, 10, 724-736.
Snow, C., & Hrebeniak, L. (1980). Strategy, distinctive competence and organizational
performance. Administrative Science Quarterly, 25, 317-336.
Socha, M. (1996, July 12). A new direction from the North; Canadian makers becoming
more marketing-oriented. Daily News Record, 26, pp. S4-S6.
Spanos, Y., & Prastacos, G. (2004). The effects of environment, structure, and
dynamic capabilities on product innovation strategy. International Journal of
Entrepreneurship and Innovation Management, 4, 620-638.
Spillard, P. (1985). Organization and marketing. Kent, UK: Croom Helm.
Spillan, J., & Ziemnowicz, C. (2003). Strategic management in small retail businesses:
The case of Guatemala. International Small Business Journal, 21, 461-478.
Sriram, V., & Sapienza, J. (1991). An empirical investigation of the role of marketing
for small exporters. Journal of Small Business Management, 29, 33-43.
Stampfl, R. (1978). Structural constraints, consumerism, and the marketing concept.
MSU Business Topics, 26, 5-16.
257
Starbuck, W. (1973). Organizations and their environments. Kyiv, Ukraine:
International Institute of Management.
Starbuck, W. (1976). Organizations and their environments. In M. D. Dunnette, (Ed.),
Handbook of Industrial and organizational psychology (pp. 1069-1123). Chicago,
IL: Rand McNally.
Steiger, J., & Lind, J. (1980, June). Statistically based tests for the number of common
factors. Paper presented at the Psychometric Society Annual Meeting, Iowa City,
IA.
Steiner, G. (1979). Strategic planning: What every manager must know. New York:
Free Press.
Stern, L., & Reve, T. (1980). Distribution channels as political economies: A
framework for comparative analysis. Journal of Marketing, 44(3), 52-84.
Stevenson, H., & Gumpert, D. (1985, March). The heart of entrepreneurship. Harvard
Business Review, 63, 85-94.
Stock, G., Greis, N., & Kasarda, J. (1999). Logistics, strategy and structure: A
conceptual framework. International Journal of Physical Distribution &
Logistics, 29, 224-239.
Stone, E. (1978). Research methods in organizational behavior. Santa Monica, CA:
Goodyear.
Stonich, P. (1982). Implementing strategy: Making strategy happen. Cambridge MA:
Ballinger.
Sturdivant, F. (1977). Business and society: A managerial approach. Homewood, IL:
258
Richard D. Irwin.
Styles, C. (1998). Export performance measures in Australia and the United Kingdom.
Journal of International Marketing, 6(3), 12-36.
Talaulicar, T., Grundei, J., & Werder, A. (2005). Strategic decision making in start-
ups: The effect of top management, team organization, and processes on speed
and comprehensiveness. Journal of Business Venturing, 20, 519-541.
Tatsuoka, M. M. (1971). Multivariate analysis: Techniques for education and
psychological research. New York: Wiley.
Tay, L., & Morgan, N. (2002). Antecedents and consequences of market orientation in
chartered surveying firms. Construction Management and Economics, 20, 331-
341.
Terreberry, S. (1968). The evolution of organizational environments. Administrative
Science Quarterly, 12, 590-613.
Thomas, J., & McDaniel, R. (1990). Interpreting strategic issues: Effects of strategy
and the information-processing structure of top management teams. Academy of
Management Journal, 33, 286-306.
Thompson, J. (1967). Organizations in action. New York: McGraw-Hill.
Thorelli, H. (1977). Strategy + structure = performance. Bloomington, IL: Indiana
University Press.
Tosi, H., Aldag, R., & Storey, R. (1973). On the measurement of the environment: An
assessment of the Lawrence and Lorsch environmental uncertainty subscale.
Administrative Science Quarterly, 18, 27-36.
259
Tse, A. (1998a). Market orientation and performance of large property companies in
Hong Kong. International Journal of Commerce & Management, 8, 57-69.
Tse, E. (1988). An exploratory study of the impact of strategy and structure on the
organizational performance of restaurant firms. Unpublished doctoral
dissertation, Virginia Polytechnic Institute and State University, Blacksburg.
Tse, E. (1991). An empirical analysis of organizational structure and financial
performance in the restaurant industry. , 12(2), 59-72.
Tse, E. (1998b). Defining corporate strengths and weakness: Is it essential for successful
strategy implementation? International Journal of Hospitality Management, 10,
59-72.
Tung, R. (1979). Dimensions of organizational environments: An exploratory study of
their impact on organization structure. Academy of Management Journal, 22,
672-693.
Tymon, W., Stout, D., & Shaw, K. (1998). Critical analysis and recommendations
regarding the role of perceived environmental uncertainty in behavioral
accounting research. Behavioral Research in Accounting, 10, 23-46.
Utterback, J. (1979). Environmental analysis and forecasting. In D. Schendel & C.
Hofer (Eds.), Strategic management: A new view of business policy and planning
(pp. 134-143). Boston, MA: Little, Brown.
Uyterhoeven, H., Ackerman, R., & Rosenblum, J. (1977). Strategy and organization:
Text and cases in general management. Homewood, IL: Irwin.
Van Clieaf, M. (1992). Strategy and structure follow people: Improving organizational
performance through effective executive search. Human Resource Planning, 15,
260
33-46.
Van Egeren, M., & O’Connor, S. (1998). Drivers of market orientation and
performance in service firms. Journal of Service Marketing, 12, 39-58.
Vancil, R. (1976). Strategy formulation in complex organizations. Sloan Management
Review, 17, 1-18.
Vancil, R., & Lorange, P. (1975). Strategic planning in diversified companies.
Harvard Business Review, 53(4), 81-90.
Vasiu, O., & Vasiu, L. (2004. September 1-4). A conceptual framework of leadership
in justice organizations: Context, organizational characteristics and skills from a
Romanian perspective. EGPA 2004 Annual Conference. Ljubljana, Slovenia.
Venkatraman, N., & Camillus, J. (1984). Exploring the concept of ‘fit’ in strategic
management. Academy of Management Review, 9, 513-525.
Venkatraman, N., & Prescott, J. (1990). Environment-strategy coalignment: An
empirical test of its performance implications. Strategic Management Journal, 11,
1-24.
Venkatraman, N., & Ramanujam, V. (1985). Construct validation of business
economic performance measures: A structural equation modeling approach.
Paper presented at the annual meeting of the Academy of Management, San
Diego, CA.
Vermon, J. (1972). Market structure and industrial performance: A review of statistical
findings. Boston, MA: Allyn & Bacon.
Viebranz, A. (1967). Marketing’s role in company growth. MSU Business Topics, 15(2),
45-49.
261
Waddock, S., & Graves, S. (1997). The corporate social performance-financial
performance link. Strategic Management Journal, 18, 303-319.
Walker, O., & Ruekert, R. (1987). Marketing’s role in the implementation of business
strategies: A critical review and conceptual framework. Journal of Marketing,
51(7), 15-33.
Wally, S., & Baum, J. R. 1994. Personal and structural determinants of the pace of
strategic decision making. Academy of Management Journal, 37: 932-956.
Wang, P., & Chan, P. (1995). Top management perception of strategic information
processing in a turbulent environment. Leadership & Organization Development
Journal, 16, 33-43.
Waterman, R. (1987). The renewal factor. New York: Bantam.
Webster, F. Jr. (1988). The rediscovery of the market concept. Business Horizons,
31(3), 29-39.
Weick, K. (1969). The social psychology of organizing. Reading, MA: Addision-
Wesley.
Weick. K. (1985). The significance of corporate culture. In P. J. Frost, L. F. Moore, M.
R. Louis, M. R., Lundberg, & C. C. Martin (Eds.), Organizational culture (pp.
381-389). Beverly Hills, CA: Sage.
Welch, J. (1993, January 25). Jack Welch’s lessons for success. Fortune, 127, 86-94.
Werner, S., Brouthers, L., & Brouthers, K. (1996). International risk and perceived
262
environmental uncertainty: The dimensionality and internal consistency of
Miller’s measure. Journal of International Business Studies, 27, 571-587.
Werner, U., McDermott, J., & Rotz, G. (2004). Retailers at the crossroads: How to
develop profitable new growth strategies. The Journal of Business Strategy, 25(2),
10-17.
Wesolowsky, G. (1976). Multiple regression and analysis of variance: An introduction
for computer users in management and economics. New York: Wiley.
West, J. (1988). Strategy, environmental scanning, and their effect upon firm
performance: An exploratory study of the food service industry. Unpublished
doctoral dissertation, Virginia Polytechnic Institute and State University,
Blacksburg.
West, J. (1990). Strategy, environmental scanning and firm performance: An integration
of content and process in the foodservice industry. Hospitality Education and
Research Journal, 14, 87-100.
West, J., & Olsen, M. (1989). Environmental scanning and its effect upon firm
performance: An exploratory study of the foodservice industry. Hospitality
Education and Research Journal, 14, 87-100.
Wheaton, B., Muthén, B., Alwin, D., & Summers, G. (1977). Assessing reliability
and stability in panel models. In D. R. Heise (Ed.), Sociological methodology,
1977 (pp. 84-136). San Francisco, CA: Jossey-Bass.
White, R., & Hamermesh, R. (1981). Toward a model of business unit performance:
An integrative approach. Academy of Management Review, 6, 213-223.
Wilkins, A., & Ouchi, W. (1983). Efficient cultures: Exploring the relationship
between culture and organizational performance. Administrative Science
263
Quarterly, 28, 468-481.
Williams, M. (2003, September 15). Spam falls after South Korea strengthens e-mail
law. Computerworld, 37, p. n/a.
Williamson, D., Jenkins, W., Cooke, P., & Moreton, K. (2004). Strategic
management and business analysis. Oxford, UK: Elsevier/Butterworth-
Heinemann.
Wood, V., Bhuian, S., & Kiecker, P. (200). Market orientation and organizational
performance in not for profit hospitals. Journal of Business Research, 48, 213-
226.
Woodward, J. (1965). Industrial organization: Theory and practice. New York: Oxford
University Press.
Wooldridge, B., & Floyd, S. (1990). The strategy process, middle management
involvement, and organizational performance. Strategic Management Journal, 11,
231-241.
World wire: South Korean protectionism. (1992, August 6). Wall Street Journal, p. 45.
Yasai-Ardekani, M. (1986). Structural adaptations to environments. Academy of
Management Review, 11, 9-21.
Yasai-Ardekani, M. (1989). Effects of environmental scarcity and munificence on the
relationship of context to organizational structure. Academy of Management
Journal, 32, 131-156.
Yasai-Ardekani, M., & Haug, R. (1997). Contextual determinants of strategic planning
processes. Journal of Management Studies, 34, 729-767.
264
Yasai-Ardekani, M., & Nystrom, P. (1996). Designs for environmental scanning
systems: Tests of a contingency theory. Management Science, 42, 187-204.
Yoon, S., & Lee, S. (2005). Market-oriented culture and strategy: Are they synergistic?
Marketing Bulletin, 16, 1-20.
Zahra, S., & Pearce, J. (1994). Corporate entrepreneurship in smaller firms: The role of
environment, strategy and organization. Entrepreneurship, Innovation and
Change, 3, 31-44.
Zajac, E, Kraatz, M., & Bresser, R. (2000). Modeling the dynamics of strategic fit: A
normative approach to strategic change. Strategic Management Journal, 21, 429-
455.
Zaltman, G., Duncan, R., & Holbek, J. (1973). Innovations and organizations. New
York: Wiley.
Zaltman, G., & Vertinsky, I. (1971). Health service marketing: A suggested model.
Journal of Marketing, 35(3), 19-27.
Zebal, M. (2003). A synthesis model of market orientation for a developing country –
The case of Bangladesh. Unpublished master’s thesis, Victoria University of
Technology, Melbourne, Australia.
Zeithaml, C., Berry, L., & Parasuraman, A. (1988). Communication and control
processes in the delivery of service quality. Journal of Marketing, 52(2), 35-48.
Zeithaml, C., & Zeithaml, V. (1984). Environmental management: Revising the
marketing perspective. Journal of Marketing, 48(2), 46-53.
265
Zhou, K., Gao, G., Yang, Z., & Zhou, N. (2005). Developing strategic orientation in
China: Antecedents and consequences of market and innovation orientations.
Journal of Business Research, 58, 1049-1058.
269
July 4, 2005
Dear Manager,
I would like to express my sincere appreciation in advance to you and your company for
completing the enclosed questionnaire. My name is Eun Jin Hwang. I am a Ph.D. candidate in
the Department of Apparel, Housing, and Resource Management (concentrating in business
analysis of apparel) at Virginia Polytechnic Institute and State University. Currently, I am
conducting a study on the relationship between the market environment and various aspects of
retail organizations. The main focus of the study is to examine how certain aspects of business
strategy and organizational structure relate to a retail store’s financial performance.
In this packet, you will find questionnaire which is sent to only a select group of store managers;
therefore, your answers are very important to the study. Please complete the questionnaire and
make comments on the content, wording, time to complete the questionnaire, and appropriateness
of questions. In addition to completing the survey, please write any comments you have about it
directly on the questionnaire. The success of this study depends greatly on your participation in
filling out the survey completely and in providing comments of the types noted in the previous
sentence.
Yon can be assured that any information you provide is intended for academic research only and
will be kept strictly confidential. In recompense for your time and efforts, a summary report of
the study results will be provided to you. If you have any questions, feel free to contact me at
011-9999-1932 or by e-mail at ehwang@vt.edu.
Thank you again for your time and assistance with this important study.
Sincerely,
Eun Jin Hwang Marjorie Norton, Ph.D
Ph.D. candidate Professor
271
July 4. 2005
Dear Professor,
I would like to express my sincere appreciation in advance to you for evaluating the enclosed
questionnaire. My name is Eun Jin Hwang. I am a Ph.D. candidate in the Department of
Apparel, Housing, and Resource Management (concentrating in business and analysis of apparel)
at Virginia Polytechnic Institute and State University. Currently, I am conducting a study on the
relationship between the market environment and various aspects of retail organizations. The
main focus of the study is to examine how certain aspects of business strategy and organizational
structure relate to a retail store’s financial performance.
In this packet, you will find questionnaire which is sent to only a select group of professors;
therefore, your comments are very important to the study. This questionnaire will be sent to
managers of South Korean retail stores. Please make comments on content, wording, expected
comprehension and time to complete the questionnaire, and appropriateness of questions. You
may write your comments directly on the questionnaire or provide a letter with your comments.
The success of this study depends greatly on your participation in providing comments of the
types noted in the previous sentence.
Yon can be assured that any information you provide is intended for academic research only and
will be kept strictly confidential. In recompense for your time and efforts, a summary report of
the study results will be provided to you. If you have any questions, feel free to contact me at
011-9999-1932 or by e-mail at ehwang@vt.edu. You may also send questions to my advisor, Dr.
Marjorie Norton, at nortonm@vt.edu.
Thank you again for your time and assistance with this important study.
Sincerely
Eun Jin Hwang Marjorie Norton, Ph.D
Ph.D. candidate Professor
272
APPENDIX D
Cover Letter to Managers of South Korean Apparel Retail Stores
for the Final Data Collection
273
July 18, 2005 Dear President, I would like to express my sincere appreciation in advance to you and your company for completing the enclosed questionnaire. My name is Eun Jin Hwang. I am a Ph.D. candidate in the Department of Apparel, Housing, and Resource Management (concentrating in business analysis of apparel) at Virginia Polytechnic Institute and State University. Currently, I am conducting a study on the relationship between the market environment and various aspects of retail organizations. The main focus of the study is to examine how certain aspects of business strategy and organizational structure relate to a retail store’s financial performance.
In this packet, you will find a questionnaire which is sent to only a select group of retail businesses; therefore, your answers are very important to the study. The success of this study depends greatly on your participation in completely filling out the questionnaire.
You, the Chief Executive Officer or President, of your store should complete this questionnaire. If for some reason this is not possible, then the next senior officer in your store’s chain of command should complete it.
Several of the questions ask for information that you may not have at your fingertips. If this is the case, please estimate the information to the best of your ability. If you have any questions, feel free to contact me at 011-9999-1932 or by e-mail at ehwang@vt.edu. Yon can be assured that any information you provide is intended for academic research only and will be kept strictly confidential. In recompense for your time and effort, a summary report of the study results will be provided to you.
To make responding to this survey as convenient as possible, I am providing a pre-addressed, postage-paid return envelope and FAX number for your use. Please send me the completed questionnaire July 25, 2005.
Thank you again for your time and cooperation. Sincerely, Eun Jin Hwang Marjorie Norton, Ph.D. Ph.D. candidate Professor
275
Questionnaire on Retail Management
Section A What is your title in your store?…………………………………................................._____________ How long have you been employed in the store where you currently work?.....…._____________ How long have you been employed in the retailing industry in Korea?..................._____________ Is your store the only store in your company?………………………_________.Yes _________.No What year did your store open? …………………..…………………………………...._____________ What is the current number of employees in your store?…………………..……......_____________ Has the number of employees in your store increased, decreased, or stayed the same since the store opened?…………...………………..……………...._____________ Section B
Please indicate your degree of agreement that the following items describe your store’s market, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
Strongly Strongly disagree agree
Sometimes our customers are very price sensitive, but on other occasions, price is relatively unimportant to them…...…………...1 2 3 4 5 We are witnessing demand for our products and services from customers who never bought them before……………….....1 2 3 4 5 New customers tend to have product-related needs that are different from those of our existing customers……………………..1 2 3 4 5 Our customers tend to look for new products all the time………………….1 2 3 4 5 Many promotion wars occur in our industry………………………………….1 2 3 4 5 Anything that one competitor in our industry can offer, others can match readily……………………………………………………….1 2 3 4 5 One hears of new competitive moves in our industry almost every day………………………………..………….…1 2 3 4 5 The current business environment is threatening the survival of our store………………………………………….1 2 3 4 5 Tough price competition is threatening our store……………………………1 2 3 4 5
Competitors’ product quality or novelty is threatening our store...………...1 2 3 4 5
276
Section C Please indicate your degree of agreement that the following items describe your store, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
Strongly Strongly disagree agree
In my store, we do a lot of in-house market research…………………..1 2 3 4 5 We collect industry information through informal means (e.g., lunch with industry friends, talks with trade partners)………………..1 2 3 4 5 We periodically review the likely effects of changes in our business environment (e.g., regulations) on customers………………...1 2 3 4 5 A lot of informal talk among employees in our store concerns our competitors’ tactics or strategies…………………………………………1 2 3 4 5 We have interdepartmental meetings at least once a quarter to discuss market trends and developments………………………………...1 2 3 4 5 Marketing personnel in our store spend time discussing customers’ future needs with other functional departments in the store.…1 2 3 4 5 When something important happens to major customers or market segments, all the store’s employees know about it in a short period…………………………………………………………………1 2 3 4 5 Data on customer satisfaction are disseminated at all levels in our store on a regular basis…………………………………..1 2 3 4 5 It takes us a long time to decide how to respond to our competitors’ price changes……………………………………………….1 2 3 4 5 We periodically review our product development efforts to ensure that they are in line with what customers want……………………..1 2 3 4 5 Several departments in my store get together periodically to plan responses to changes taking place in our business environment…………………………………………………..1 2 3 4 5 If a major competitor were to launch an intensive campaign targeted at our store’s customers, we would implement a response immediately……………………………………………………..…1 2 3 4 5 When my store finds out that customers are unhappy with the quality of our service, we take corrective action immediately…………1 2 3 4 5 We are quick to respond to significant changes in our competitors’ pricing structures……………………………………………1 2 3 4 5 Employees in our store are allowed to make their own decisions without checking with anybody else…………………..1 2 3 4 5
277
Strongly Strongly disagree agree
My usual experience with our store involves doing things “by the rule book.”……………………………………………….1 2 3 4 5 Many activities in my store are not covered by formal procedures……….1 2 3 4 5 Even small matters in our store must be referred to someone higher up for a final answer………………………………………..1 2 3 4 5
Any major decisions that employees make must have the approval of a top manager………………………………………..……….1 2 3 4 5
Employees who want to make their own decisions would be quickly discouraged……………………………………..1 2 3 4 5
Section D Please indicate your degree of agreement that the following items describe your management style, with 1 = strongly disagree and 5 = strongly agree. Circle the most appropriate number.
Strongly Strongly disagree agree
I believe that our store’s survival depends on its adapting to market trends…………………………….………………...1 2 3 4 5
I often tell employees to be sensitive to the activities of our competition…………………………………………….…1 2 3 4 5
I believe that serving customers is the most important thing our business does……………………………………………1 2 3 4 5 I believe that it is worth taking high financial risks for high rewards………1 2 3 4 5
Top managers in my store like to take big financial risks…………………..1 2 3 4 5 Top managers in my store like to implement plans only if they are very certain that they will work………………………………1 2 3 4 5 Section E Please indicate, for each pair of statements below, the extent to which you believe the statement at the left or the right describes the management philosophy in your store. Circle the most appropriate number from 1 to 7 for each pair of statements.
In general, the management philosophy in my store favors… Highly structured channels of Open channels of communication communication and highly restricted with important financial access to important financial and operating information flowing operating information. 1 2 3 4 5 throughout the organization.
278
A strong emphasis on holding A strong emphasis on altering fast to well established management practices as the business practices, despite changes environment changes, without too in business conditions. 1 2 3 4 5 much concern for past practices.
Tight formal control of most operations Loose, informal control and heavy by means of sophisticated control dependence on informal and information systems. relationships and norms of 1 2 3 4 5 cooperation for getting work done.
A strong emphasis on ensuring A strong tendency to let the that employees adhere closely requirements of the situation and to their formal job descriptions. the employee’s personality define . 1 2 3 4 5 proper on-the-job behavior.
Section F
Please rate your degree of satisfaction with your store’s performance in each of the following areas compared to other stores in your industry, with 1 = highly dissatisfied and 5 = highly satisfied. Circle the most appropriate number. Highly Highly dissatisfied satisfied Return on investment…………………………………………………………..1 2 3 4 5
Earnings growth………………………………………………………………...1 2 3 4 5
Sales growth…………………………………………………………………….1 2 3 4 5
Market share…………………………………………………………………….1 2 3 4 5
Return on assets……………………………………………………………..…1 2 3 4 5
Cash flow………………………………………………………………….…….1 2 3 4 5
Please rate your degree of satisfaction with your store’s performance in each of the following areas compared to the store’s key competitors, with 1 = highly dissatisfied and 5 = highly satisfied. Circle the most appropriate number.
Highly Highly dissatisfied satisfied
Return on investment…………………………………………………………..1 2 3 4 5
Earnings growth………………………………………………………………...1 2 3 4 5
Sales growth…………………………………………………………………….1 2 3 4 5
Market share…………………………………………………………………….1 2 3 4 5
Return on assets……………………………..…………………………………1 2 3 4 5
Cash flow……………………………………………………………..………….1 2 3 4 5
Thank you for your time and cooperation in completing this questionnaire!
279
APPENDIX F
Cover Letter to Managers of South Korean Apparel Retail Stores
for the Final Data Collection (Korean)
280
July 18, 2005
메니저님께,
우선 동봉한 설문지에 수록된 모든 질문에 답변해주실 사장님 여러분과 귀사에 진심으
로 감사의 뜻을 표하고자 합니다. 제 이름은 황 은진입니다. 저는 현재 미국 버지니아 주
립 공과대학의 의복, 주택 및 자원 관리 학과에서 박사 학위 과정(주로 의복 사업 분석에
중점을 두고 있음)을 공부하고 있는 학생입니다. 저는 지금 시장 환경이 소매 조직의 다
양한 측면과 이루는 관계에 대해 연구를 수행하고 있습니다. 저의 연구는 주로 사업 전
략과 조직 구조의 특정한 측면이 소매점의 재무 성과와 어떤 상관 관계가 있는지를 조사
하는데 중점을 두고 있습니다.
본 우편물에는 소매 업계에 종사하는 업체 중 일부를 엄선해 이들 업체만을 대상으로 전
달되는 설문지 1장이 동봉되어 있습니다. 따라서 귀하의 설문 응답은 저의 연구에 있어
매우 중요한 자료가 됩니다. 본 연구의 성패는 귀하가 동봉된 설문지의 모든 질문 항목
에 빠짐없이 응답하는지 여부에 따라 결정된다고 해도 과언이 아닙니다.
귀사 소매점에서 최고 경영자 또는 사장의 직책으로 활동 중인 귀하는 본 설문지의 질문
에 빠짐없이 응답하시기 바랍니다. 만약 특정한 사유로 인해 모든 질의에 빠짐없이 응답
하실 수 없는 경우, 귀사의 경영 계통에서 차 상위급에 해당되는 임원이 귀하를 대신해
본 설문에 참여할 수 있도록 해 주십시오.
몇몇 설문 항목에서는 귀하가 쉽게 파악할 수 없는 수준의 정보를 요구하고 있습니다.
이러한 질문의 경우, 해당 사항을 귀하의 능력껏 추정해 기재하시기 바랍니다. 본 설문
에 관한 의문이 있으신 분들은 언제든지 제 전화 011-9999-1932 또는 전자 우편
ehwang@vt.edu로 문의하시기 바랍니다. 귀하가 제공하는 정보는 학술 연구 목적으로
만 사용되며 비밀은 철저히 유지됩니다. 본 설문에 참여하는데 소요되는 귀하의 시간과
노력에 보답하고자 차후에 본 연구의 결과를 간략히 정리한 요약 보고서를 귀하에게 배
부할 계획입니다.
본 설문 조사에 참여하시는 응답자 여러분들의 편의를 도모하기 위해 이미 주소가 기재
된 우편 요금 선불 반송용 우편 봉투와 팩스 번호를 함께 보냅니다. 설문 응답이 완료된
설문지는 7월 25일까지 제게 보내주시기 바랍니다.
잠깐 시간을 내어 본 설문에 참여해주신다면 고맙겠습니다.
황 은진 Marjorie Norton
(박사 학위 준비 학생) (교수, 박사)
282
소매점 경영에 관한 설문 사항
A 항 질문
귀 점포에서 귀하의 직책은 무엇입니까?................................................__________________
귀하는 현재 근무 중인 점포에서 일하신 지 얼마나 되었습니까?.................__________________
귀하는 한국 소매 업계에 종사한 지 얼마나 되었습니까?...........................__________________
귀 소매점은 귀사의 유일한 점포입니까?................................................ ____ Yes ____ No
귀 소매점이 첫 영업을 개시한 년도는 언제입니까? .................................__________________
현재 귀 소매점에서 일하는 종업원들은 총 몇 명입니까? ..........................__________________
소매점 영업이 개시된 이후 귀 소매점에서 일하는 종업원들의 수는 증가 내지 감소했습니까?
아니면 변화가 없는 상태입니까? ........................................................__________________
B 항 질문
아래에 나열한 각 항목이 귀 소매점의 시장을 얼마나 잘 설명하고 있는지를 1에서 5까지의 점수
로 평가해 보십시오(참고: 1 = 전혀 그렇지 않다, 5 = 매우 그렇다). 이 때 아래의 점수들 중 가장
해당되는 점수에 동그라미를 치면 됩니다.
전혀 매우
그렇지 않다 그렇다
당사의 고객들은 때때로 가격에 매우 민감한 반응을 보이지만
간혹 가격에 대하여 대체로 무관심한 반응을 보일 때도 있다 .....................1 2 3 4 5
이전에 구입한 적이 없는 새로운 제품 및 서비스를 원하는
고객들의 수요가 있다........................................................................1 2 3 4 5
신규 고객들은 기존 고객들의 경우와는 차별화된
제품 관련 욕구를 갖고 있는 경향이 있다 ...............................................1 2 3 4 5
당사의 고객들은 항상 새로운 제품을 찾는 경향이 있다 ............................1 2 3 4 5
당사가 종사하는 업계의 경우, 판촉 경쟁이 치열한 편이다 ........................ 1 2 3 4 5
당사가 종사하는 업계의 경우, 어떤 경쟁 업체가 제공할 수 있는
제품이 있다면 나머지 업체들도 그 비슷한 제품을
즉시 시장에 내놓을 만한 능력을 갖고 있다 ............................................1 2 3 4 5
당사가 종사하는 업계의 경우, 경쟁 업체의 새로운 움직임
283
내지 동향에 관한 소식을 거의 매일 들을 수 있다 ....................................1 2 3 4 5
전혀 매우
그렇지 않다 그렇다
현재의 비즈니스 환경은 당사 소매점의 생존을 위협할 정도로
불리한 실정이다...............................................................................1 2 3 4 5
치열한 가격 경쟁은 당사 소매점을 위협하는 요인이 되고 있다 ..................1 2 3 4 5
경쟁 업체의 품질 또는 혁신은 당사 소매점을 위협하는 요인이 되고 있다.....1 2 3 4 5
C 항 질문
아래에 나열한 각 항목이 귀 소매점을 얼마나 잘 설명하고 있는지를 1에서 5까지의 점수로 평가
해 보십시오(참고: 1 = 전혀 그렇지 않다, 5 = 매우 그렇다). 이 때 아래의 점수들 중 가장 해당되
는 점수에 동그라미를 치면 됩니다.
전혀 매우
그렇지 않다 그렇다
당사 소매점의 경우, 당사는 자체 시장 조사 활동을 상당수
수행하고 있다..................................................................................1 2 3 4 5
당사는 비공식적인 수단을 통해 업계 정보를 수집하고 있다.
(예: 업계 동료들과 점심 식사, 거래 협력 업체와의 회의) ..........................1 2 3 4 5
당사는 현재 직면하고 있는 비즈니스 환경의 변화(예: 법규)가
고객들에게 미칠 수 있는 영향을 수시로 검토하고 있다 ............................1 2 3 4 5
당사 소매점의 종업원들간에 이루어지는 비공식 회의 중 상당수는
경쟁 업체의 판매 술책 내지 전략과 관계가 있다 .....................................1 2 3 4 5
당사는 최근의 시장 동향 및 발전 현황을 논의하기 위해
분기별로 최소한 1회 이상 부서간 회의를 개최하고 있다...........................1 2 3 4 5
당사 소매점에 종사하는 마케팅 담당 인력들은 소매점 내 여타
기능 부서와 함께 고객의 향후 욕구 변화를 논의하는데
시간을 할애하고 있다........................................................................1 2 3 4 5
주요 고객 또는 시장 부문에서 중대한 현상 내지 사건이 발생하면
얼마 지나지 않아 소매점 내 모든 종업원들이 그러한 사실을 알게 된다........1 2 3 4 5
당사 소매점의 경우, 고객 만족에 관한 데이터는 모든 조직 계층에
걸쳐 정기적으로 전파되고 있다 ...........................................................1 2 3 4 5
당사의 경우, 경쟁 업체의 가격 변동에 대응할 방법을 결정하는데
상당한 시간이 소요되는 편이다 ...........................................................1 2 3 4 5
284
전혀 매우
그렇지 않다 그렇다
당사는 제품 개발을 위한 당사의 노력이 고객의 요구 사항에
부응할 수 있도록 그러한 노력을 수시로 점검하고 있다 ............................ 1 2 3 4 5
당사 소매점 내 몇몇 부서는 당사의 비즈니스 환경에서 발생하고 있는
변화에 대처하기 위한 계획을 수립하기 위해 수시로 협력하고 있다 ............1 2 3 4 5
주요 경쟁 업체 중 한 곳이 당사 소매점을 찾는 고객들을 대상으로
집중적인 캠페인을 벌일 경우, 당사는 이에 즉각적인 대응
조치를 취하는 편이다........................................................................1 2 3 4 5
당사의 소매점에서 고객들이 당사 서비스의 품질에 만족하지 않는다고
판단되면 당사는 이에 즉각적인 개선 조치를 취한다 ................................1 2 3 4 5
경쟁 업체의 가격 결정 구조에서 중대한 변화가 있을 경우,
당사는 이에 즉각적인 대응 조치를 취한다 .............................................1 2 3 4 5
당사 소매점의 종업원들은 다른 제 3 자와의 의논 없이
자체적인 의사 결정을 수행할 수 있다 ...................................................1 2 3 4 5
당사 소매점에서 내가 직면하는 일상적인 경험은
"규칙서"의 내용에 따라 일을 수행하는 것과 관계가 있다 .........................1 2 3 4 5
당사 소매점에서 이루어지는 활동 중 상당수는
공식적인 절차에 포함되어 있지 않다 ....................................................1 2 3 4 5
당사 소매점의 경우, 아무리 작은 일이라도 상위 직책의 누군가에게
보고한 후 최종적인 결론을 도출해야 한다 .............................................1 2 3 4 5
종업원들의 주요 의사 결정 사안은 반드시
최고 경영진의 승인을 거쳐야 한다 .......................................................1 2 3 4 5
자체적인 의사 결정을 원하는 종업원들은
(경영진의 판단에) 쉽게 실망하는 편이다...............................................1 2 3 4 5
D 항 질문
아래에 나열한 각 항목이 귀 소매점의 경영 스타일을 얼마나 잘 설명하고 있는지를 1에서 5까지
의 점수로 평가해 보십시오(참고: 1 = 전혀 그렇지 않다, 5 = 매우 그렇다). 이 때 아래의 점수들
중 가장 해당되는 점수에 동그라미를 치면 됩니다.
전혀 매우
그렇지 않다 그렇다
당사 소매점의 생존 여부는 시장 동향에 대한 적응 능력에
285
달려 있다고 생각한다........................................................................1 2 3 4 5
전혀 매우
그렇지 않다 그렇다
나는 종업원들에게 당사와 경쟁 관계 있는 업체들의
활동에 대하여 기민하게 대처할 것을 주문할 때가 많다 ............................1 2 3 4 5
고객 서비스는 당사의 비즈니스에서 가장 중요한
부분을 차지하고 있다고 생각한다 ........................................................1 2 3 4 5
많은 보상을 얻기 위해서는 높은 재무 위험이라도
감수해볼 만한 가치가 있다고 생각한다 .................................................1 2 3 4 5
당사 소매점의 최고 경영진들은 상당한 수준의
재무 위험을 기꺼이 감수하는 편이다 ....................................................1 2 3 4 5
당사 소매점의 최고 경영진들은 성공할 것으로 확실시되는
계획만을 기꺼이 실행에 옮기는 편이다 .................................................1 2 3 4 5
E 항 질문
아래에 한 쌍씩 진술된 내용 중 왼쪽 또는 오른쪽의 내용이 귀 소매점의 경영 철학을 얼마나 잘 설
명하고 있는지를 1에서 7까지의 점수로 평가해 보십시오(1=왼쪽 진술 내용에 전적으로 동의, 7=
오른쪽 진술 내용에 전적으로 동의). 이 때 아래의 점수들 중 가장 해당되는 점수에 동그라미를
치면 됩니다.
대체로 당사 소매점의 경영 철학은 매우 조직적인 의사 소통 채널을
선호하는 반면, 주요 재무/영업
정보에 대해서는 매우 제한된
접근 경로를 선호하는 편이다.
1 2 3 4 5
사내 조직 전반에 걸쳐 주요 재무
영업 정보를 전파하는 개방적인
의사 소통 채널을 선호하는
편이다.
비즈니스 환경의 변화에도
불구하고 확고 부동한 경영
방식을 고수하는데 상당히 중점을
두는 편이다.
1 2 3 4 5
대체로 과거의 영업 관행에
얽매이지 않고 비즈니스 환경의
변화에 따라 영업 방식을
바꾸는데 상당히 중점을 두는
편이다.
정교한 통제/정보 시스템을
활용해 대부분의 운영 수단을
공식적으로 철저히 통제하는
1 2 3 4 5
완만하면서도 비공식적인 통제를
선호하는 반면, 과업 완수를 위해
비공식적인 협력 관계 및 규범에
286
편이다. 상당히 의존하는 편이다.
종업원들이 공식적인 업무 사항을
철저히 엄수하도록 하는데
상당히 중점을 두는 편이다. 1 2 3 4 5
주어진 상황에 따른 요구 사항과
종업원의 개성을 통해 현장 작업
수행을 적절히 정의하려는
경향이 강하다.
F 항 질문
다음에 나열한 각 항목에서 귀사가 종사하는 소매 업계의 타 점포와 비교해볼 때 귀사의 영업 실적
에 대한 귀하의 만족도를 1에서 5까지의 점수로 평가해보십시오(1= 매우 불만, 5= 매우 만족). 이
때 아래의 점수들 중 가장 해당되는 점수에 동그라미를 치면 됩니다.
매우 매우
불만 만족
투자 수익률(ROI)..............................................................................1 2 3 4 5
이익 증가율.....................................................................................1 2 3 4 5
매출 증가율.....................................................................................1 2 3 4 5
시장 점유율.....................................................................................1 2 3 4 5
총자산 이익률(ROA) .........................................................................1 2 3 4 5
현금 흐름........................................................................................1 2 3 4 5
다음에 나열한 각 항목에서 귀 소매점의 경쟁 업체와 비교해볼 때 귀 점포의 영업 실적에 대한 귀
하의 만족도를 1에서 5까지의 점수로 평가해보십시오(1= 매우 불만, 5= 매우 만족). 이 때 아래의
점수들 중 가장 해당되는 점수에 동그라미를 치면 됩니다.
매우 매우
불만 만족
투자 수익률(ROI)..............................................................................1 2 3 4 5
이익 증가율.....................................................................................1 2 3 4 5
매출 증가율.....................................................................................1 2 3 4 5
시장 점유율.....................................................................................1 2 3 4 5
총자산 이익률(ROA) .........................................................................1 2 3 4 5
현금 흐름........................................................................................1 2 3 4 5
바쁜 시간에도 불구하고 본 설문에 빠짐없이 응답해주신 데 대해 감사 드립니다!
288
Eun Jin Hwang
SUMMARY OF QUALIFICATIONS
4 and half years experience in teaching at universities in Korea. Excellent communication skills Strong computer skills Excellent ability to work in a team-based environment Good ability to communicate effectively in oral and written format
EDUCATION
Ph.D., 2005, Clothing and Textiles, Virginia Polytechnic Institute and State University, Blacksburg, VA – Conferred December 2003
M.S., 1998, Clothing and Textiles, Virginia Polytechnic Institute and State University, Blacksburg, VA – Conferred December 1998
B. A., 1993, Fashion Merchandising, Marymount University, Arlington, VA PROFESSIONAL EXPERIENCE
Kangnam University, Yong In, Korea 2004. 09. 01 – 2005. 02. 28 Part-Time Lecturer, Department of International Trade, School of Economics
& International Trade • International Business
iTree co., Ltd., Seoul Korea 2004. 08. 01 – 2004. 12. 28
Fashion Marketing CRM Consultant, Technical Service Department, Consulting Unit.
Pai Chai University, Daejon, Korea 2000. 09. 01 – 2005. 02. 08
Part-Time Lecturer, College of Fashion and Tourism, Department of Clothing and Textiles
289
• International Fashion Business 2004. 09. 01 – 2005. 02. 28 • Fashion Promotion 2004. 03. 01 – 2004. 08. 31 • International Fashion Business 2003. 09. 01 – 2004. 02. 28 • Fashion Promotion 2003. 03. 01 – 2003. 08. 31 • Clothing Consumer Behavior 2002. 09. 01 – 2003. 02. 28 • International Fashion Marketing 2002. 03. 01 – 2002. 08. 31 • Clothing Consumer Behavior 2001. 09. 01 – 2002. 02. 28 • International Fashion Marketing 2001. 03. 01 – 2001. 08. 31 • Clothing Consumer Behavior 2000. 09. 01 – 2001. 02. 28 • Consumer Behavior 2000. 09. 01 – 2001. 02. 28
Kymyung University, Dagu, Korea 2004. 03. 31 – 2004. 08. 31 Part-Time Instructor, Department of Advertising
• Practice of Publication Media Advertising 2004. 03. 01 – 2004. 08. 31
Konkuk University, Seoul, Korea 2002. 09. 01 – 2004. 02. 28
Part-Time Instructor, College of Art and Human Environment, Division of Apparel & Textile Design • Fashion Production Retailing, Graduate School of Design
2003. 09. 01 – 2004. 02. 28 • Fashion Marketing, Statistics Graduate School of Design
2003. 03. 10 – 2003. 08. 31 • Fashion Business English, College of Design & Human
Environment 2002. 09. 01 – 2003. 02. 28
Hansung Digital University, Seoul, Korea 2003. 09. 01 – 2004. 02. 28 Part-time Instructor, Department of Creative Literature Writing
• Advertising Copy Writing
Yuhan College, Bucheon, Korea 2003. 02. 29 – 2004. 08. 31 Part-Time Instructor,, Department of Distribution Management
290
• Merchandising 2004. 03. 01 – 2004. 08. 31 • Introduction of CRM, Promotion Management
2003. 02. 29 – 2003. 09. 01
Virginia Polytechnic and State University 1996, Spring – 1997, Fall Graduate Assistant,
• Idea Development and Creativity • Basic Apparel Assembly • Oris Gilsson Historic Costume and Textile Collection • Housing
PUBLICATIONS
Dissertation – Strategic Management and Financial Performance in South Korean Apparel Retail Stores
International Textile and Apparel Association Annual Conference, Alexandria, Virginia,
November 1-6, 2005. Special Topic Session, Trade Liberalization through the MFA Phase-Out. Eun Jin Hwang and Marjorie Norton.
South Korea’s Rapid Globalization: Effects of Foreign Direct Investment, Eun Jin
Hwang & Marjorie Norton at Second Annual Interdisciplinary Graduate Student Conference: Broadening Our Scope for a New Millennium, University of Southern California, April 3, 1999.
International Textile and Apparel Association Annual Conference, Santa Fe, New
Mexico, November 10-13, 1999. Poster Session, South Korea’s Market liberalization and Its Retail Industry. Eun Jin Hwang and Marjorie Norton.
Proceedings 1999, 56 Years, International Textile and Apparel Associations, 121-122,
South Korea’s Market Liberalization and Its Retail Industry.
Thesis – Effects of South Korean Market Liberalization on the South Korean Retailing