Market Orientation and the Performance of Sri Lankan Apparel Manufacturers in the Post MFA ...

309 Pages·2008·1.83 MB·English

University of South Australia

Market Orientation and the Performance of Sri
Lankan Apparel Manufacturers in the Post MFA
Environment

Nalaka Harshijeeva Godahewa

BSc. Eng.(Hons), MBA

Submitted in fulfilment of the requirements of the degree of Doctor of
Philosophy

November 2007

International Graduate School of Business

University of South Australia
Declaration

I declare that this thesis titled ‘Market Orientation and the Performance of Sri Lankan
Apparel Manufacturers in the post MFA Environment’, submitted in fulfilment of the
requirements of the degree of Doctor of Philosophy, is the result of my own work. I also
declare that the thesis contains less than 100,000 words and does not contain any material
that has been accepted for the award of any other degree or diploma. To the best of my
knowledge and belief it contains no material previously published by any other person
except where due reference is made in the text.

----------------------------------------
Nalaka Harshijeeva Godahewa

15th November 2007

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Acknowledgements

Education has always been a passion for me. It was also my means of progress in life.
Most of the progress I have made in my professional career could be attributed to my
commitment to read and learn on my own. My educational goals were clear from the very
beginning; a BSc. degree in Engineering, professional qualifications in both Finance and
Marketing, an MBA and finally a PhD. When I started my journey reading for this PhD 5
year ago, I had already achieved the other milestones, so I was ready for the task

Throughout this journey there were many who supported me and I wish to thank them all.

My wife, Manouri, an engineering graduate like myself, gave up her career early in life to
support mine and look after our family. She was always my motivator and my closest friend
and had learnt to tolerate my dedication to work which often resulted in neglecting family
commitments. Someone with a sharp eye for detail, Manouri also deserves special thanks
for painstakingly proof- reading this thesis and making some valuable observations with
regard to the contents and the structure.

My supervisor, Dr Steven Goodman from the University of Adelaide, who was also a great
motivator, helped me shape my work to the required academic standard, constantly
providing me with valuable feedback through numerous cycles of improvements. I thank
him for his valuable time, intellectual support and constant encouragement. Being someone
who could easily relate to me, Dr. Steven knew exactly how I felt at different stages of this
journey and always had the right formula to get me back on track.

I must thank Prof. Bobby Banerjee, Prof. David Richards, Prof. Barry Elsey and Prof.
Margaret Patrickson of the University of South Australia and Prof. Douglas Lamont from
USA, who helped me during the early stages of my proposal development. Special thanks
should go to Prof. Barry Elsey for giving me confidence at the early stages of my research. I
must also thank Dr. Brianne Hastie of the University of South Australia who reviewed the
statistics component of my research work and gave me some valuable advice.

The staff of Asia Pacific Management Institute, who coordinated the study programme
displayed professionalism all throughout. I experienced the same level of professionalism
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whenever I contacted the staff of the University of South Australia too. I would like to
recognise their contribution and thank them.

I would also like to thank Dr. Saman Kelegama, Director of the Institute of Policy Studies of
Sri Lanka and Mr. Tuley Coorey, Secretary General of the Joint Apparel Associations
Forum of Sri Lanka for recognising this research project as one of national interest and
endorsing the same.

Finally, I wish to thank all the respondents who spent time responding to the questionnaire
despite their busy schedules managing one of the most strenuous industries in the world.
Without their support this research would not have been possible.

This work is dedicated to my mother who worked tirelessly to provide me with my early
education, without the support of my father who passed away when I was not even one
year old.

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Abstract

Following the abolition of the Multi Fibre Agreement (MFA) which governed the global
apparel and textile trade for 30 years, the apparel industry of Sri Lanka, the largest export
revenue earner of the country, is going through a difficult transition period. The country is
actively seeking solutions that could enhance the performance of the industry.

This thesis studies the impact of market orientation on the business performance of the Sri
Lankan apparel manufacturing organizations in the post MFA environment. An attempt is
made to enhance the existing market orientation theory by addressing a research gap and
highlighting the importance of the relationship perspective in business to business
marketing. A four dimensional market orientation construct is developed to overcome the
limitations identified in the extant market orientation theories. The study also identifies
resource availability as an antecedent of market orientation along with six other
antecedents which are commonly discussed in literature. It further investigates whether the
market orientation-business performance relationship is moderated by the prevailing
business environment. The proposed modifications to the theory are empirically tested
within the context of the apparel industry.

Adopting a positivist paradigm and a quantitative approach, the research used a cross
sectional design, where data was collected from key informants of the participating firms
using a self-administered questionnaire. Of the 212 companies contacted, 99 responded
resulting in a response rate of 45.8%, after removing two questionnaires which were
incomplete. Statistical analysis was carried out using SPSS 13 software for Microsoft
Windows. The main analytical technique used was multiple regression analysis.

According to the conceptual framework, the market orientation construct comprises of four
main components; (a) customer orientation, (b) competitor orientation, (c) inter-functional
coordination and (d) relationship emphasis. The conceptual framework was developed
combining the learnings from two streams of research; market orientation and relationship
marketing. It supports the emerging view that in most, if not all, business to business
marketing situations, inter-organizational relationships have a significant influence on the
final outcome, thereby highlighting certain limitations of the traditional market orientation
thinking.

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Subjective measures were used to investigate the relationship between market orientation
and business performance. Three key performance indicators; (a) sales growth, (b) return
on investment and (c) customer retention were used to measure the performance of the
organization. The empirical findings show a positive relationship between market orientation
and all three performance indicators.

The research investigated seven possible antecedents of market orientation;(a) top
management emphasis, (b) top management risk averseness, (c) interdepartmental
connectedness, (d) inter departmental conflict, (e) centralisation, (f) reward systems
availability and (g) resource availability. When the hypotheses were tested, five of them
were supported by the empirical findings and two were not. Accordingly, the research
identified top management emphasis, connectedness, centralisation, rewards systems
availability and resources availability as antecedents of market orientation. Of these, top
management emphasis, inter departmental connectedness, rewards systems availability
and resources availability led to greater market orientation within the company, whereas
centralisation was found to be a barrier to market orientation.

The research also investigated the influence of two environmental factors; (a) market
turbulence and (b) competitive intensity on the market orientation-business performance
relationship. The hypotheses that market turbulence and competitive intensity act as
moderators of market orientation-business performance relationship were not supported by
the findings and were therefore rejected. Hence, it can be concluded that market orientation
leads to greater performance regardless of the environmental conditions.

This research has been endorsed by both the National Institute of Policy Studies and the
Joint Apparel Exporters Associations Forum of Sri Lanka as a study of national interest.
The empirical findings offer a clear message to the Sri Lankan apparel manufacturers that
market orientation could help improve their performance in the post MFA environment.

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Table of Contents

Page

Declaration i
Acknowledgements ii
Abstract iv
Table of Contents vi
List of Tables xii
List of Figures xv

Chapter 1 – Introduction

1.1 Objectives and the structure of the chapter 1
1.2 Research questions 1
1.3 The origins of the research 2
1.4 Research gap 4
1.5 The significance of the research 6
1.6 Conceptual model 7
1.7 Understanding key constructs 9
1.8 Research method 11
1.8.1 Data collection 11
1.8.2 Measuring instruments 11
1.8.3 Conducting the survey 12
1.8.4 Analytical techniques used 13
1.9 Thesis overview 13
1.10 Chapter summary 15

Chapter 2 – The Research Context: Apparel Industry

2.1 Objectives and the structure of the chapter 16
2.2 The significance of the industry 16
2.3 The global apparel industry 17
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2.3.1 The world trade in apparel 18
2.3.2 Market segmentation in apparel sourcing 20
2.3.3 Distribution channels in global apparel 22
2.3.4 Broadening of global apparel sourcing networks 24
2.4 Multi-Fibre Agreement 31
2.4.1 Multi-Fibre Agreement and the impact of its phasing out 31
2.4.2 The global impact of MFA phase-out 36
2.5 Apparel industry in Sri Lanka 40
2.5.1 Industry background 40
2.5.2 Strategic initiatives 44
2.5.3 The post MFA experience and challenges ahead 48
2.5.4 The emphasis on the need to be market oriented 52
2.6 Chapter summary 53

Chapter 3 - Literature Review

3.1 Objectives and the structure of the chapter 54
3.2 The evolution of the marketing concept 55
3.3 Operationalising the marketing concept 57
3.4 Market orientation 58
3.4.1 Evolution of different perspectives of market orientation 58
3.4.2 Theories on market orientation 65
3.4.3 Measures of market orientation 70
3.4.4 Market orientation and business performance 76
3.4.5 Measuring performance 78
3.4.6 Antecedents and barriers of market orientation 82
3.4.7 Moderators of market orientation 92
3.5 Extending market orientation theory 95
3.5.1 Market orientation and organizational culture 95
3.5.2 Market orientation and learning organization 97
3.5.3 Market orientation and innovation 99
3.5.4 Market orientation and organizational leadership 103
3.5.5 Market orientation and strategy 106
3.6 Relationship marketing 108
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3.6.1 Evolution of relationship marketing 109
3.6.2 Domain of relationship marketing 110
3.6.3 Relationship marketing in the current context 113
3.6.4 Role of trust and commitment in relationship building 113
3.6.5 Consequences of relationship marketing orientation 115
3.7 Relationship perspective of market orientation 117
3.8 Defining and measuring relationship emphasis 120
3.9 The importance of resource availability 121
3.10 Chapter summary 122

Chapter 4 - Conceptual Framework and Hypotheses

4.1 Objectives and the structure of the chapter 124
4.2 Research questions 125
4.3 Developing the conceptual framework 125
4.4 Key components of the conceptual framework 127
4.4.1 Market orientation 128
4.4.2 Antecedents of market orientation 128
4.4.3 Business performance as a consequence of market orientation 128
4.4.4 Moderators of market orientation 129
4.5 Research hypotheses 129
4.5.1 Hypotheses related to antecedents 129
4.5.2 Hypotheses related to performance 135
4.5.3 Hypotheses related to moderators 136
4.6 Chapter summary 137

Chapter 5 - Research Methodology

5.1 Objectives and the structure of the chapter 138
5.2 Selection of the research paradigm, method and design 138
5.2.1 Research paradigm 139
5.2.2 Selection of methods 140
5.2.3 Research design 141
5.3 Sampling procedure 143
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5.3.1 Sampling frame 143
5.3.2 Sampling method 144
5.3.3 Sample size 144
5.3.4 Units of analysis 145
5.3.5 Research participants 146
5.3.6 Testing for informant bias 147
5.4 Developing survey instrument 148
5.4.1 The measurers used 148
5.4.2 Pre-testing the questionnaire 151
5.5 Data Collection 153
5.6 Data preparation 155
5.7 Data analysis procedure 156
5.7.1 Getting a feel for the data 156
5.7.2 Testing the goodness of data 157
5.7.3 Method of testing the hypotheses 157
5.7.4 Reliability 157
5.7.5 Validity 159
5.7.6 Factor analysis 160
5.7.7 Common method variance in self reports 162
5.8 Selection of multivariate techniques 164
5.8.1 Correlation analysis 167
5.8.2 Multiple regression analysis 168
5.9 Testing for the moderator effect 169
5.10 Chapter summary 171

Chapter 6 - Analysis of Data and Research Findings

6.1 Objectives of the chapter 173
6.2 Data preparation 173
6.2.1 Analysis of responses 173
6.2.2 Testing for non response bias 174
6.2.3 Testing for differences between the responses from key informants 175
with different durations of service experience

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