Strategic Marketing Management

Strategic Marketing
Management
Benedict Hunt
Strategic Marketing Management
Edited by Benedict Hunt
Published by The English Press,
5 Penn Plaza,
19th Floor,
New York, NY 10001, USA

Edited by Benedict Hunt
© 2017 The English Press
International Standard Book Number: 978-1-9789-2906-7
This book contains information obtained from authentic and highly regarded sources. Copyright for all individual chapters
remain with the respective authors as indicated. All chapters are published with permission under the Creative Commons
Attribution License or equivalent. A wide variety of references are listed. Permission and sources are indicated; for detailed
attributions, please refer to the permissions page and list of contributors. Reasonable efforts have been made to publish
reliable data and information, but the authors, editors and publisher cannot assume any responsibility for the validity of all
materials or the consequences of their use.
Copyright of this ebook is with The English Press, rights acquired from the original print publisher, Willford Press.
The publisher’s policy is to use permanent paper from mills that operate a sustainable forestry policy. Furthermore, the
publisher ensures that the text paper and cover boards used have met acceptable environmental accreditation standards.
Trademark Notice: Registered trademark of products or corporate names are used only for explanation and identification
without intent to infringe.
Contents
Preface VII
Chapter 1 Extent of application of marketing mix strategy by small and micro scale enterprises in
Osun State, Nigeria 1

Abasilim Angela Nneka
Chapter 2 A new methodology for suppliers selection and order allocation 5
Kambiz Shahroudi and Hajar Rouydel

Chapter 3 Changing face of entrepreneurship in India through innovation 16
Yograj Singh, Charu Agarwal and Ankur Bhatnagar

Chapter 4 An empirical competitive strategy on Taiwanese business 21
Tina C. Chiao and Chin-Chuan Chen

Chapter 5 A conceptual framework proposition for customer loyalty in the short-term
insurance industry - A South African perspective 34

Lauren Strachan and Mornay Roberts-Lombard
Chapter 6 Emerging issues and strategies to enhance M-banking services 46
R. K. Uppal
Chapter 7 Producing innovation: Comments on Lee and Yu (2010) 54
Manuel Au-Yong Oliveira and João José Pinto Ferreira

Chapter 8 Fostering and developing the industry cluster vigorously in China in order to improve
the technology-innovative capability of enterprises 57

Wang Zhi-Xin and Liang Cui
Chapter 9 Effective marketing strategies and the Nigerian construction professionals 61
Grace K. Ojo
Chapter 10 A theoretical and practical model for global business, entrepreneurship and education 70
Charles J. Mambula and Israel Chidi Agwamba

Chapter 11 The relationship between customer focused service and customer satisfaction in the
Nigerian insurance industry 82

Olowokudejo F. F. and Adeleke I. A.
Chapter 12 Customer retention practices of small, medium and large hotels in South Africa:
An exploratory study 90
D. J. Petzer, T. F. J. Steyn and P. G. Mostert
____________________________ WORLD TECHNOLOGIES _____________________________

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Chapter 13 Market orientation and new product performance: The mediating role of
product advantage 101
Azaze-Azizi Abdul Adis and Evelyn Jublee
Chapter 14 Analysis of consumer attitudes towards integrated circuit (IC) cards 113
Yasuo Ishii, Yuki Higuchi and Kazuhiro Takeyasu

Chapter 15 Modified stage-gate: A conceptual model of virtual product development process 135
Nader Ale Ebrahim, Shamsuddin Ahmed and Zahari Taha

Chapter 16 Modelling telecom customer attrition using logistic regression 144
B. E. A. Oghojafor, G. C. Mesike, C. I. Omoera and R. D. Bakare

Chapter 17 A hybrid method for improving forecasting accuracy utilizing genetic algorithm and
its application to J-REIT (office type) stock market price data 152
Yasuo Ishii, Keiko Nagata and Kazuhiro Takeyasu
Chapter 18 A synthesis model of market orientation constructs toward building customer value:
A theoretical perspective 170

Wail Alhakimi and Rohaizat Baharun
Chapter 19 The impact of road accessibility of rural villages on recognition of
poverty reduction opportunities 177

Edith Kwigizile, Jaffu Chilongola and John Msuya
Chapter 20 Impediments to barter trading: Analysis of practitioners and
non-practitioners perceptions 187

Mercy Mpinganjira and Portia Oliver
Chapter 21 Gender differences in organizational strategy execution: A comparative study between
female and male managers in obstacle management 195

Ayandé Alpha and Sabourin Vincent
Chapter 22 Strategy risk research on Chinese aviation market: Based on Analytic Network Process
(ANP) and the Fuzzy assessment method 214

Wang Yong
Chapter 23 The effect of sponsorship on marketing communication performance:
A case study of Airtel Ghana 223

George K. Amoako, Kwasi Dartey-Baah, Robert K. Dzogbenuku and Samuel Kwesie Junior
Chapter 24 Customer base management in a prepaid mobile market:
Usage risk and usage opportunity model 238

Adeolu O. Dairo
Chapter 25 Competitive intelligence and marketing effectiveness in
corporate organizations in Nigeria 248

N. Gladson Nwokah and Frannces E. Ondukwu ane E.
Permissions
List of Contributors

Preface
Strategic planning and management are essential for the success of any business. In the modern times, marketing has
stretched beyond its conventional sense and adopted a more global approach. This book discusses the key topics of
marketing management, like marketing orientation, marketing strategy, market research, distribution, etc. These
topics offer the readers significant insights into this field and facilitate a better understanding for students and
researchers pursuing this discipline.
All of the data presented henceforth, was collaborated in the wake of recent advancements in the field. The aim of this
book is to present the diversified developments from across the globe in a comprehensible manner. The opinions
expressed in each chapter belong solely to the contributing authors. Their interpretations of the topics are the integral
part of this book, which I have carefully compiled for a better understanding of the readers.
At the end, I would like to thank all those who dedicated their time and efforts for the successful completion of this
book. I also wish to convey my gratitude towards my friends and family who supported me at every step.
Editor

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A new methodology for suppliers selection and order

allocation
1 2
Kambiz Shahroudi and Hajar Rouydel
1
Department of Industrial Management, Islamic Azad University, Rasht Brunch, Rasht, Iran.
2
Young Researchers Club, Rash Branch, Islamic Azad University, Rasht, Iran.
One of the main factors in competitive environment is to reduce production costs. Selecting the right
suppliers significantly reduces the purchasing costs and improves corporate competitiveness. That is
why the cost of raw materials and components part constitutes the main cost of a product and most of
the firms have to spend considerable amount of their sales revenue on purchasing. The aim of this
research is to introduce an integrated model for supplier’s selection and order allocation in an
automotive company. Therefore, the research was divided into two phases (conceptual modeling and
mathematical modeling) with four steps. In conceptual modeling, in order to select the best suppliers,
an integrated, Analytic Hierarchy Procees and Technique for Order Preference by Similarity to Ideal
Solution (AHP-TOPSIS) approach was used. Hence, after library studies and interview with experts,
managers and specialists in the supply chain management field, decision criteria were identified
through brain storming which contains the main criteria and sub criteria of the selection process for
suppliers. Then in mathematical modeling in order to allocate every selected supplier in conceptual
modeling, a Multi-Objective Linear Programming (MOLP) model was used. As such, the objectives and
subjectives of suppliers and the Automotive Company were identified. Results show that applying a two
phase AHP-TOPSIS methodology aided the selection of the best suppliers. Also Automotive Company’s
total costs were minimized with using a MOLP model.
Key words: Supply chain, analytical hierarchy process, supplier evaluation, technique for order preference by
similarity to ideal solution (TOPSIS), multi-objective linear programming (MOLP).
INTRODUCTION
Increasing customer demands and diversity, technolo- will be to reduce supply chain risk, production costs,
gical advances in communications and information making the maximum revenue, improve customer’s
systems, competition in the global environment, reducing service, optimize inventory levels, improve business pro-
government regulations and increasing environmental cesses which ends in increasing competitiveness,
awareness, have forced companies to accurately focus customer satisfaction and profitability (Boran and Genc,
more on supply chain management. The term “chain 2009). This chain started with the production of raw
management” is defined as an integration of activities materials, equipment and components by suppliers and
related to preparation of raw materials, its conversion to finally ends with consumption by consumers which will
intermediate goods and final products, and its final then create a strong relationship between suppliers,
delivery to customers (Cebi and Bayraker, 2003). manufacturers and consumers (Chan, 2008). Since in
Generally, the primary goal of supply chain managment many industries, more than 70% of the total cost to
organizations is related to the cost of raw materials
(Chuan, 2009) and companies are forced to spend a
major portion of their revenues on buying raw materials,
*Corresponding author. E-mail: shahroudi@iaurasht.ac.ir. supply management is one of the most important issues
. of supply chain management.

Consequently, selection of appropriate supplier can signi- main research questions:

ficantly reduce purchase cost and improve companies’
competitive position (Cebi and Bayraker, 2003). How to select suitable suppliers in order to meet
Basically, the issues related to supplier selection are of company’s need?
two types. The first type (single sourcing), in which a How to determine the optimal amount of order to each
supplier is able to meet all buyers’ needs including selected supplier?
demand rate, quality, and delivery time. In this condition,
the management should just decide which supplier is the The research is done in the two phases, (conceptual
best? In type II (multiple sourcing) a supplier alone is not modeling and mathematical modeling) and four steps that
able to meet all needs of buyer and buyer must meet their will explain more in the following.
demands through several suppliers. In this case,
management should take two types of decisions: first,
which suppliers are the best? And second, how much LITERATURE REVIEW
should be purchased from each supplier? (Demirtas and
Ustun, 2008; Ting and Cho, 2008). Nowadays, supply chain management tries to obtain the
In many cases, organizations usually choose more than long-term participation with suppliers and use fewer
one supplier for their products, when faced with non- numbers but more reliable suppliers. Therefore, to
competence of one supplier to ensure continuity of choose appropriate suppliers is something more than just
supply. They can also compare prices and services from looking at the list of suppliers’ suggested prices and
various suppliers during the period of time. Hence, in the suppliers selection depends on to many qualitative and
present study, we discussed solving the selection of quantitative factors. Thus, wide multiple criteria decision-
supplier in the state of multiple sourcing. Increasingly, the making approaches (MCDM) proposed for suppliers
importance of selecting appropriate supplier, as a critical selection such as: Analytic Hierarchy Process (AHP), the
decision in supply chain management, lead organizations process of network analysis (ANP), Artificial Neural
into different industries to use systematically formed Networks (ANN), Case-Based Reasoning (CBR), Data
models to choose suppliers and allocate orders to them. Envelopment Analysis (DEA), Genetic Algorithm (GA),
One of these industries is automobile manufacturing Fuzzy Set Theory, Mathematical Programming (MP),
industry which had been significant progress in Iran Simple Multi–Attribute Rating Technique (SMART) and
during the recent years. The study is doing an automobile mixed technique. At least four journal articles have
manufacturing company which despite spending energy, already reviewed the literature related to suppliers’
time and cost to select the appropriate suppliers, evaluation and selection models (Weber et al., 1991;
unfortunately, is faced with deficiencies and drawbacks in Degraeve et al., 2000; De Boer et al., 2001; Ho et al.,
its supply chain. The main problems can be listed as 2010).
following: Talluri and Narasimhan (2004) applied DEA model for
sourcing effective suppliers. The approach was the same
1. Assessment process in the company is being done with the works of Narasimhan et al. (2001) except that
step by step. In other words, it is not given an equal they had used a simple efficiency index while Talluri and
opportunity to suppliers in order to demonstrate their Narasimhan (2004) used statistical models and cross-
competency in all stages and if a supplier fails to obtain efficiencies indicator in the classification of the various
the required score in the first stage, it will be removed categories. Hong et al. (2005) formulated a mixed integer
from competition cycle, while it may have high capability linear programming to solve supplier’s selection problem.
in later stages or vice versa. This model was determined by the optimal number of
2. All suppliers, regardless of the product type they suppliers and optimal order quantity which could
produce; are being assessed together, while the maximize an income. In addition, changes in the
determining factor varies from each product to the other supplier’s supply capacities and needs of customers
(such as quality for product A and price for product B and during a period of time were studied. Percin (2006)
so on). proposed an integrated, Analitical Hierarchy prosess and
3. Finally, the order rate to each selected supplier, is Goal Programming (AHP-GP), approach to assess and
being determined solely based on scores earned during select suppliers. At first, AHP was used to measure the
the assessment process in the sense that a supplier relative importance of potential suppliers according to 20
which obtains the highest score, and the highest amount criteria. Then, the weights were used as coefficients of
of order will be assigned to it, while the supplier may not five objective functions in GP model. This model also
have the capacity to produce that order which in this determined the optimal order quantity from the best
case, they change the amount of order manually. suppliers; while supplier’s productive capacity was also
examined. Amid et al. (2006) constructed a fuzzy multi-
Therefore, the present study using the suggested model objective linear programming model to choose appro-
is done to remove these deficiencies and to answer two priate suppliers. This model was able to control the

A new methodology for suppliers selection and order allocation 7
ambiguity and inaccuracy of the input data, and help structure, performing pairwise comparisons and consis-
decision-makers to find the optimal order quantity of each tency ratio (CR) to determine correct judgments, while
supplier. In this model, three objective functions with TOPSIS does not provide such a possibility. In contrast,
different weights and one algorithm was developed to TOPSIS technique is able to consider distances from the
solve the model. Ramanathan (2007) reported that DEA best and worst answers due to relative proximity to the
can be used to evaluate supplier’s performance apprai- optimal answer simultaneously and in addition find the
sals using qualitative and quantitative information answer and prioritize other options, respectively. As a
obtained by Total Cost of Ownership (TCO) and AHP result, first combining of these two models means to
technique. More exactly, the cost based on the concepts benefit from both techniques (Dagdeviren et al., 2009).
total cost of ownership was used as the input, and Secondly, the speed of decision-making using two
weights obtained by AHP model considered as output in techniques of the AHP and TOPSIS is higher as
DEA model. Lau et al. (2006) developed an integrated compared to the other mathematical models such as
ANN and GA approach for supplier selection. ANN was DEA, ANP, fuzzy logic, and genetic algorithm. Thus, the
used for benchmarking the potential supplier with respect proposed combination technique is a flexible and
to the four evaluating factors. After that, GA was deve- convenient tool for decision-making under different
loped to determine the best combination of suppliers. The conditions (Gumus, 2009).
four evaluating criteria were used again in the fitness
function of GA. Saen (2007) suggested an integrated METHODOLOGY
AHP-DEA approach to evaluate and select suppliers that
somewhat were inconsistent. The experts stated that The research was carried out in automotive industry. Overall, this
study was conducted in two phases (conceptual and mathematical
many of the suppliers are not using their entries and modeling) and four steps. In the first phase (conceptual modeling),
inputs completely to supply and produce outputs. In this in order to answer the first question of the research, concerning
approach, AHP was used to determine the relative weight how to select best supplier(s), after reviewing the research
of each supplier. Then DEA was applied to calculate the literature, interview with the experts, and survey the managers, in a
relative efficiency of each supplier. Kull and Talluri (2008) company custodian to automotive supply chain management group,
developed an integrated AHP-GP approach to evaluate decision-making criteria were identified using brainstorming method
including criteria and sub-criteria affecting on suppliers selection.
and select suppliers according to risk indexes and Then, in order to calculate the weight of each indices and final
product life cycles. In the proposed model, AHP was used ranking of desired parts suppliers, integrated AHP-TOPSIS
to evaluate suppliers according to the risk factors, and techniques were used. In the second phase (mathematical
according to this; some scores were given to the modeling), in order to answer the second question of the research
suppliers and then GP model formulated to assess alter- concerning allocation quantity of orders to each supplier, multi-
native suppliers based on the objectives of multiple risk objective linear programming model (MOLP) was used. First, the
multi-objectives of the company were identified then suppliers’ and
and various hard restrictions. Ho lin (2009) proposed an buyers’ constraints were considered. Finally the equations solved
integrated Fuzzy Analytic Network Process (FANP) by LINGO software and the optimum amount of order to each
approach and multi-objective linear programming for supplier identified. Figure 1 shows the process of the research. The
suppliers selection and order allocation. In this approach, first phase (conceptual modeling) includes three steps.
four criteria including quality, price, delivery, and
technology were considered. Then, ANP specified the Conceptual modeling
priority option of suppliers with the study of interde-
pendence between criteria and its effect on the evaluation Step 1: Identifying evaluation criteria and sub-criteria
and selection of suppliers. Because ANP was just able to In decision-making models, one of the most important parts is to
calculate definite data, the fuzzy set theory was also determine the criteria and measuring indicators. The selected
used. In the last step, multi-objective programming model criteria and indicators for this purpose are important aspects
were identified to determine the amount of order considered in measuring the characteristics of suppliers. In fact,
suppliers’ selection indices indicate the present status and
according to the restriction of suppliers and buyers.
present/future supplier’s performance. Therefore, the design and
selection of indices as the input of decision-making model has a
There are also several articles that used the two direct impact on model efficiency. As in companies and
techniques of AHP and TOPSIS simultaneously (Onut organizations, the criteria and sub-criteria affecting suppliers’
and Selin, 2008; Percin, 2008; Dagdeviren et al., 2009; selection processes differs based on their objectives. In our case
study, automotive company used brainstorming in order to identify
Gumus, 2009; Torfi et al., 2010). In all of the earlier criteria and sub-criteria, with regard to their strategic goals.
mentioned articles, researchers first designed their Therefore, the automotive company in a meeting consists of 32
hierarchical tree and then using the AHP technique deter- managers, experts and specialists in supply chain area identified
mined the relative weights of indices and eventually using the criteria influencing the process of appropriate suppliers
TOPSIS technique dealt with rank available alternatives selection due to their industry targets by using brain-storming
in their model. Using a two-phase AHP and TOPSIS method. The criteria were identified in the form of three main
criteria and 10 sub-criteria as follows:
methodology comes with several advantages. First, the
AHP technique is able to evaluate the hierarchical C1: Quality

Step1: Brain storming method

Identify evaluating criteria and sub-criteria
Establish evaluating criterion hierarchy

Step2: AHP Calculate the criterion weights by AHP
Conceptual modeling
Perform the consistency test
Conduct TOPSIS procedure by using the weights

calculated by AHP
Step3: Topsis Calculate negative and positive ideal solutions and

separation measures
Ranking suppliers
Mathematical modeling
Identify automotive company’s goals and
Step4: MOLP constraints
Determine of order allocation
Figure 1. The overall research processes.
D1: Standardization: To standardize the maker production process, powerful tool for solving complex problems of decision-making with
as the first step to improve production process and to form process regard to quantitative and qualitative criteria (Ting and Cho, 2008).
control program According to the solution algorithm in this technique as shown in
D2: Packaging design: Projects for the first time are prepared or Figure 2, decision-making hierarchical structure is determined to
revised with the aim of increasing customer satisfaction. simplify supplier selection. It should be noted that despite the
D3: PPM (Part Per Million) customers: Measuring the number of frequency of the number of suppliers and parts, in order to test the
returned parts per million delivered parts which is returned by model, some part makers who had the highest evaluation (grade A)
automobile-maker. was able to produce four parts with codes A, B, C, and D was
D4: PPM after sales services: Measuring the number of returned selected.
parts per million delivered parts which returned by the final After the hierarchical structure was drawn; in order to determine
customer. the criteria, and sub-criteria weights, a questionnaire concerning
C2: Cost pairwise comparisons matrix was given to 42 managers, experts,
D5: Price reduced rate: Ability of suppliers to reduce products prices and specialists in the field of supply chain management. Then, the
at lower prices than the year before the contract or if possible data gathered from them was entered into specialized software of
maintaining proposed price in the current year. expert choice to calculate the weight of suppliers indices and to
D6: transportation cost: An expense related to transport products ensure the accuracy of judged and inconsistency rate. Because of
from origin to destination. smaller inconsistency rate from 0.1, the accuracy of judgments
D7: Order cost were confirmed. Table 1 shows the weights obtained for each of the
C3: Delivery criteria, sub-criteria, and the decision-making alternatives using the
D8: On time delivery: Product delivery in time and date specified in AHP technique.
the amount determined by the procurement unit.
D9: achieving over-supply: The ability to increase production
because of the sudden increase in customer’s demands. Step 3: Implementation of TOPSIS technique
D10: percentage of performance realization: Measuring the rate of
realization of customer needs (automotive). TOPSIS is a widely accepted model that was proposed by Huang
and Yoon (1981), and was developed by Chen and Huang (1992).
Step 2: Implementing AHP technique In this method, alternatives are ranked based on the shortest
distance from the positive ideal solution and the farthest distance
AHP technique which was developed by Thomas (1980) is a from the negative ideal solution. In this step, TOPSIS technique

Standardization
Packaging design
Quality S1
PPM Customers
for
PPM after sale services
S2
bestsuppliers
C,D)parts
Price reduced rate
S3
B,
the
Cost Transportation cost
Order cost
Selecting
(A,
S4
On time delivery
Delivery Achieving over-supply S5

Percentage of performance
realization
Figure 2. Hierarchical structure to select best suppliers.
play its role. The weight obtained by the AHP technique using n
2 0.5
Equations 1 and 2 as shown in Table 2 is converted to normalized di { (Vij Vj ) }
weighted matrix. Equations 1 and 2 can be summarised as: j1
(5)
r
nij ij n
m (1) di { (Vij Vj )2}0.5
r2 j1 (6)
i 1 ij In the final stage, relative closeness of suppliers to ideal solution
(2) using Equation 7 is obtained and ranked according to the relative
descending order of suppliers. Table 5 represents the ranking of
V N D wn n suppliers based on the combination of the two techniques of AHP
and TOPSIS. Equation 7 is thus highlighted:
Then, using Equations 3 and 4, positive and negative ideal solution CL di

is obtained in the results as shown in Table 3. Equations 3 and 4 i (di di )
are highlighted thus:
` 0 CLi 1
A {(maxVij j J),(minVij j J )} {V1 ,V2 ,...,Vn }
(3)
i 1,2,...,m
(7)
A {(minVij j J),(maxVij j J )} {V1 ,V2 ,...,Vn }
(4) Table 6 defines all of symbols used in Equations 1 to 7.
The next step of TOPSIS technique is as shown in Table 4 and is

used to calculate the Euclidean distance of each alternative, the
Mathematical modeling
positive and negative ideals using Equations 5 and 6 summarized
as:
As was observed, in the first phase of this study using the two
n
2 0.5 techniques of AHP and TOPSIS in integrated form, suppliers were
di { (Vij Vj ) } classified with regard to criteria and sub-criteria. While in the
j1 (5) second phase, using a mathematical model, how much order
should be allocated to each supplier was identified. Thus, the

Table 1. Final weights of criteria and sub-criteria and alternatives.
Criteria Weights of Sub-criteria Weights of S1 S2 S3 S4 S5

criteria sub criteria
D1: Standardization 0.231 0.513 0.261 0.129 0.163 0.033
Quality 0.330 D2: Packaging design 0.189 0.122 0.425 0.280 0.055 0.055
D3: Customers PPM 0.198 0.200 0.200 0.200 0.200 0.200
D4: After sale customers PPM 0.238 0.267 0.555 0.124 0.254 0.140
D5: Price reducced rate 0.268 0.513 0.261 0.129 0.063 0.133
Cost 0.250 D6: transfer cost 0.091 0.230 0.036 0.476 0.036 0.230
D7: Order cost 0.096 0.079 0.520 0.298 0.074 0.128
D8: On time delivery 0.153 0.041 0.512 0.144 0.260 0.044
Delivery 0.230 D9: Achieving over-supply 0.149 0.352 0.156 0.057 0.029 0409
D10: Percentage of
0.203 0.513 0.216 0.129 0.163 0.133
performance realization
Table 2. The weighted normalized decision matrix.
Variable D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
S1 4.256 2.168 0.700 1.658 3.771 3.397 0.231 7.316 1.564 0.506
S2 2.165 10.089 0.310 0.131 1.118 0.523 8.106 1.948 0.689 1.892
S3 1.070 5.391 0.113 0.589 0.202 6.898 4.645 0.560 3.272 3.504
S4 0.523 1.059 0.052 0.131 1.118 0.532 1.154 3.482 0.294 0.246
S5 0.276 0.558 0.814 0.287 0.525 3.397 0.436 7.419 0.174 0.506
Table 3. the ideal solution and negative solution.
Variable D1 D2 D3 D4 D5 D6 D7 D8 D9 D10
+ 4.256 10.089 0.052 0.131 0.202 6/896 0.231 0.560 1.564 3.504
A
- 0.276 0.558 0.814 1.658 3.771 0.523 8.106 7.419 0.294 0.246
A
Table 4. Separation of each alternative to positive and negative solution.
Variable S1 S2 S3 S4 S5
d+ 16.196 9.935 12.175 15.884 15.997
- 9.224 15.869 13.676 8.191 11.152
d
Table 5. Final ranking in two-phase AHP-TOPSIS approaches.
Alternatives S1 S2 S3 S4 S5
0.363 0.615 0.529 0.340 0.413
Cj
Ranking 4 1 2 5 3
second phase is included in designing a multi-objective linear used designed this way, that at first, automotive company multiple
in the equations. Multi-objective linear programming model was programming model. Table 7 is briefly described to the symbols

Table 6. Description of symbols in first phase.
Symbol Definition
r Value of the ith Alternative according to jth crieteria
ij
n Normalized matrix of ith alternative according to jth crieteria
ij
V Normalized weighted matrix
Wn n A matrix with original diameter of non- zero
A Positive ideal solution
A Negative ideal solution
J Related to profit criteria
J Related to cost criteria
di Edclidean distance to negative ideals
di Edclidean distance to positive ideals
CL Relative closeness to positive ideal solution
targets are formulated as three objectives function that include: The third objective function (Z 3) expressed the minimizing of total
deviation from the delivery date which is determined according to
the contract.
The first objective function (Z1): Purchase costs
Minz m n Limitation of conceptual and mathematical modeling

1 c .x ij ij
The limitation of company's suppliers and automotive company are
i1j1 specified in seven constraints as follows:
c p f o
ij ij ij ij First limitation: Shopping budget
The first objective function (Z1) which is expressed as the minimum m

indicates the minimization of the costs of buying its pieces from
suppliers. These costs include the pure price of product (piece),
transportation costs and the cost of ordering.
pij .xij Bj i
1
The second objective function (Z2): Quality j A, B,C, D i 1,2,3,4,5
Minz2 m n The first limitation represents budget constraints of purchase by the
dij .xij company automotive. This limitation is as ≤ because the total
payments to buy parts to suppliers should not be higher from the
i1j1 set budget.
The second objective function (Z2) expressed minimizing of the
amount due to defects and disadvantages in the parts. Second limitation: Product demand (pieces)
m
The third objective function (Z3): Delivery
x D
m n D
j ij j i1
Minz3
tij .xij
i1j1 j A,B,C,D i 1,2,3,4,5
Table 7. Introducing mathematical parameters model.
Decision variables Definition

x
ij Order quantity of the jth part from the ith supplier
Parameter
C Purchasing cost of jth part from the ith supplier
ij
d Average defect rate of jth part from the ith supplier
ij
t Average delivery delay of the jth part from the ith supplier
ij
p The price of jth part that be suggested by ith supplier to automotive company
ij
f Transportation cost of jth part that be suggested by ith supplier to automotive company
ij
o Ordering cost of jth part that be suggested by ith supplier to automotive company
ij
B Purchasing budget for the jth part
j
Lowest demand for jth part
Dj
Highest demand for jth part
Dj
S Lowest quantity supply of jth part from the ith supplier
ij
Highest quantity supply of jth part from the ith supplier
q
S
ij
Average defect percent of jth part from the ith supplier

ij
Maximum acceptable scarp rate of the jth part
Qj
Lead time of the jth part be delivery by ith supplier to automotive company
Lj
Average consumption quantity of the jth part
Aj
z Objective function
i
K Capacity of a vehicle for carried the jth part in terms of kg
j
u Weight of the jth part that bought from the ith supplier
ij
' Capacity of a vehicle for carried the jth part in terms of m3
K j
v Volume of the jth part that bought from the ith supplier
ij
The second restriction indicated limits of demand for the product by This restriction shows that how much the highest and lowest
automotive company. This restriction shows that how much should production which supplier is able to meet it.
be the highest and lowest demand for concerned parts.
Third limitation: Production capacity Fourth limitation: Quality control
m
Sij xij Sij
qij .xij Q j .D j
j A,B,C,D i 1,2,3,4,5 i1

Table 8. The order quantity allocation.

Part A B C D Total
Alternative
Supplier 1 2500 3000 5200 1600 12300
Supplier 2 6200 3700 6800 4100 20800
Supplier 3 4500 4800 6200 6000 21500
Supplier 4 2100 2000 1500 5600
Supplier 5 3800 4500 3500 1200 13000
Z1 = 681562500 Z2= 93 Z3= 11
Table 9. Model credit assessment in first phase.
Suppliers Final ranking by AHP Final ranking by topsis Final ranking by AHP-TOPSIS Final ranking of company
S1 3 4 4 5
S2 1 2 1 1
S3 2 1 2 2
S4 4 4 5 4
S5 5 5 3 3
j A,B,C,D i 1,2,3,4,5 Seventh limitation: Non-zero limit (integer)
This restriction shows that the total amount of deficiency for each
Xij Integer
piece should not be higher from the maximum acceptable rate of
defects for each piece, so it is express as ≤. j A,B,C,D i 1,2,3,4,5
Fifth limitation: Vehicle weight capacity After gathering data about decision variables and parameters of
mathematical model, the information obtained was entered into a
m software (LINGO). Table 8 shows that in order for the automotive
company to minimize purchase costs, returned rate from defects
uij .xij Kj and delivery time, she must buy from any supplier at the amount
specified by the model.
i1
MODEL CREDIT ASSESSMENT
j A,B,C,D i 1,2,3,4,5
In phase 1 of the research’s aim to select and rank
This restriction indicates constraints in available transportation suppliers for the four parts A, B, C, D, a two-phase AHP
capacity. In the above limitation, KJ is expressed in terms of and TOPSIS approaches was used in the integrated
kilogram (kg), so weight of customized parts should be less than or form. It should be noted that though each of these two
equal to vehicle capacity in terms of kg. techniques alone can also evaluate and rank suppliers,
however, combining the two, caused the weaknesses of
Sixth limitation: Vehicle volume capacity each model covered by the strengths of other models.
m Therefore, to measure the proposed model, one with the
approach of AHP and the other with TOPSIS approach
'
Vij .xij K j was used in single form to solve the decision model, and
i1 then the results along with the results of integrated model
was provided for managers, experts and specialists in
j A,B,C,D i 1,2,3,4,5 supply chain management area. The results expressed
from the integrated AHP-TOPSIS model is closer to the
These limitations indicate the limitations of vehicle capacity. In the
actual results of the company as shown in Table 9 in
which model credit was confirmed in the first phase.
above limitation, K j is expressed the capacity of a vehicle in In phase II, after determining the position of the
3
terms of m . This restriction should be considered in system suppliers to identify the optimum amount of order to each
because it is possible that the cargo which is carried is in high of them, a linear programming model with three
volume relative to its weight. This limitation is written as ≤.

Table 9. Model credit assessment in first phase.
Suppliers Final ranking by AHP Final ranking by topsis Final ranking by AHP-TOPSIS Final ranking of company
S1 3 4 4 5
S2 1 2 1 1
S3 2 1 2 2
S4 4 4 5 4
S5 5 5 3 3
Table 10. Saving in purchase cost after applying suggested model.
Part Real purchasing cost Optimize purchasing cost Saving

A 36800000 31452500 5347500
B 11400000 8910000 2490000
C 782000000 641200000 140800000
D 6500000 5250000 1250000
Total cost 836700000 658512500 149887500
Units are according one thousand Rials- Iran.
Table 11. Optimization results of quality and delivery functions.
Part Defect rate (number) before Defect rate after Delivery delay (day) before Delivery delay after
A 35 12 25 20
B 22 8 30 30
C 42 12 45 30
D 36 10 45 30
objective function and 7 constraints was used. According time and cost. While executing the proposed model
to this, the amount of order that must be allocated to each causes to save energy, cost and time. It is a great
supplier determined. Then the results were compared to privilege for large organizations and industries that seek
documents available in the company. To run the competitive advantage in global markets to adopt this
proposed mathematical model and order allocation given model.
to each supplier as seen in Table 10, purchase costs
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Changing face of entrepreneurship in India
through innovation
Yograj Singh*, Charu Agarwal and Ankur Bhatnagar
Shriram Institute of Management and Technology (PG), Kashipur, Uttrakhand, India.
Entrepreneurship is the risk taking by innovators called entrepreneurs in an economy. Typically,

entrepreneurship involves the creation of new products, new ways to produce products, or new
businesses. Innovation is the intrinsic characteristic of every developed nation. Innovation fuels a
nation’s growth, and a highly innovative country has the potential to reach pinnacle of prosperity. The
actions of entrepreneurs are so valuable to the operation of a dynamic, changing economy that some
economists consider entrepreneurship to be a fourth factor of production joining natural, human, and
capital resources. This paper focuses on the importance of innovation in entrepreneurship development
as it is only innovation, which made the products and services better from the others. This paper clearly
depicts the current role of innovation in entrepreneurship development. It also highlights how these
innovations can lead to economic growth of our country.
Key words: Entrepreneurship in India, growth of Indian economy, innovation in business.
INTRODUCTION
To quote the economist, T. N. Srinivasan, ‘Innovation and be it a product or any feature, which it offers to its
Entrepreneurship is a two-way relationship. In one sense, customers (Sharma and Chrisman, 1999). The vitality of
in innovation, someone finds something but that entrepreneurship and innovation can be highlighted by
somebody may not be equipped to translate that the fact that they form the backbone of a majority of the
something into a commercial proposition. That is where economic s growth in a given country. Thus, if USA is the
Entrepreneurship comes in. largest economy, it can be attributed to the commitment
towards research and innovation.
"Innovation is the specific instrument of In research work, an attempt has taken to explore all
entrepreneurship…the act that endows resources with a important factors in relation of entrepreneurship and
new capacity to create wealth" – (Drucker, 1985) innovation. In India, how education system is playing a
innovation significant role in promotion of entrepreneurship is a very
challenging issue. Data collected from the National
An entrepreneur is a person who is willing and able to Knowledge Commission defines how several numbers of
convert a new idea or invention into a successful entrepreneurs are increasing over a period of time with
innovation. Invention means generation of new ideas innovative business plans.
whereas innovation means bringing that idea into life. The Objective of the study is to understand the role of
Eentrepreneurs are those persons who take the risk to innovation in entrepreneurship development in India, and
bring those ideas into life. The success of a business also try to understand the Government support for
enterprise depends upon its novelty or the unique thing, innovative knowledge enterprises. Furthermore, it tries to
examine the role of education studies in generation of
innovative ideas. The main objective will be to suggest
certain measures; this can be adopted to take the
*Corresponding author. E-mail: dryograjs@yahoo.co.in advantage of innovation.
India has tremendous potential in the field. India offers

Changing face of entrepreneurship in India through innovation 17
a unique incubation environment for most ‘entrepreneurs’, with more curiosity and passion. The schools across
greatly distinguishing it from other western democracies. America follow this flexible system, which has proved to a
A country where almost 50% of the Indian population is blessing in disguise and is now an intangible asset
below 35 years old, it is apparent that India has a large (Drucker, 2007).
working class, which is a great potential and assets for a To encourage entrepreneurship, the academic
nation (Chandra, 2009). In addition, young technocrats institutions must encourage student’s initiatives,
are also looking out for opportunities to exploit their full organizations and unions. Business plans competitions
potential by setting up their own ventures thus becoming should be organized on more frequent basis and proper
“job generators” rather than “job seekers”. They are guidance and assistance to prospective entrepreneurs on
generating job opportunities for the unemployed people. various aspects, such as preparing reports, obtaining
project approvals, loans and facilities from agencies of
In spite of being a developing nation with a population support system, information on technologies, etc
of over billion people, we fail to produce the (Devarajan and Ramnarayan, 2003). History had
entrepreneurs, such as Narayana Murthy, Dhirubhai recorded many school and college leaders blossom into
Ambani, Lakshmi Mittal, Kiran Shaw in large numbers, business pioneers. Be it N Hira Nandani, Lakshmi Mittal
which is required for large nation. This is deep rooted or Arun Jaietly, they were all leaders at their schools,
problem and involves a minutiae analysis of our complex colleges at some point in time. Recently, some young
mindset (Menon and Ramsay, 2008). students from R.A Poddar School start their very own
cookie company under the guidance of the school
authorities. These facts point out to the need of
RELEVENCE OF THE STUDY developing leadership qualities at an early stage in life.
Given the increasing significance and visible impact of

Entrepreneurship in wealth-creation and employment- GOVERNMENT ROLE REGARDING INNOVATION
generation, we consider it critical to India’s growth and
development. This study has been undertaken to explore The government has to be investor and entrepreneur
factors that have advanced Entrepreneurship in India and friendly, in order to exploit the true potential. The
also several other factors that could further encourage government on its part should give a plethora of
and facilitate even greater growth through innovation. incentives to new risk takers in order to make theirs
rather than risky decision that is somewhat easier. These
THE ROLE OF EDUCATION STUDIES IN incentives could include tax benefits, land allocations,
water and electricity supply etc. Novice risk takers should
GENERATION OF INNOVATIVE IDEAS
be provided with trouble shooters and mentors on behalf
As discussed previously, the key generators of wealth of the government, so as to choose the correct path and
from knowledge depends upon the availability of the strategy. Banks and other financial institutions should
skilled human resource. These skills and competencies also provide adequate credit to new ventures, so as to
can be generated in an individual through good education stimulate the business through good liquidity. Besides
system. There is a fact that passion and curiosity form the helping to establish companies, government should also
very base of innovation. An entrepreneur should have regulate these companies in order to ensure that they
good perception of an idea, credible business plan, and abide by the highest standards of business ethics
clarity of what he wants to do to become successful. This (Goswami and Dalmia, 2008).
knowledge and idea about the business can only be built
through sound education system.
The purpose is to fill the gap in preparing today's youth ROLE OF INNOVATION IN ENTREPRENEURSHIP
with a CEO mindset, supported with skills to deal with DEVELOPMENT IN INDIA:
changing critical needs of the knowledge era that is
revolutionizing the global economy. Generating a critical Entrepreneurship is to take the initiative to start a new
mass of entrepreneurs oriented to high levels of growth business venture with an innovative idea or to make
depends on the quality of education provided and the certain amendments in the existing product according to
presence of an environment that encourages innovation the opportunities available to the entrepreneurs. To take
(Maqbool, 2006). repeated action to overcome obstacle that may prevent
The highly rigid educational system should be more them from reaching their goals. Entrepreneurs takes
flexible one, so that students can choose their own action on their own to get information that will help them
subjects of interests and thus design their own to achieve their objectives or clarify problems and to
curriculum. This will result in a greater level of interest, successfully persuades others to buy a product or
which indirectly would result in a greater level of interest service, also to convinces' someone to provide finance,

Figure 1. Entrepreneurship pyramid. Source: Knowledge Commission, India
and finally, to monitor continuous change for further levels.

innovation. Figure 2 clearly highlights the rapid increase in growth
The Entrepreneurship ‘Pyramid’ in India (in terms of rate of level 4 or knowledge intensive enterprises from
sectors and numbers of people engaged) is made up of 10,000 companies in 1991-1992 to 30,000 companies in the
the following: year 2005-2006, while in the other levels, there is no sharp
increase as compared to the level 4. This clearly highlights
Level 1: Agriculture and other activities: Crop production, that now entrepreneurs take the opportunity to make the
Plantation, Forestry, Livestock, Fishing, Mining and road, as well as walking on it. Entrepreneurship is about the
Quarrying. sheer joy of taking an idea and making it work.
Entrepreneurs today are of great pride, passion and self-
Level 2: Trading services: Wholesale and retail trade; respect, from doing things on one’s own. It brings a sense of
Hotels and restaurants. belongingness derived from doing one’s own thing and
providing employment to many. Thus ‘Entrepreneurship
Level 3: Old economy or traditional sectors: provides the opportunity to create wealth and make the best
Manufacturing, Electricity, Gas and Water supply of the economic environment’.
Level 4: Emerging sectors (including knowledge intensive

sectors): IT, Finance, Insurance and Business services, HIGHLIGHTS OF INNOVATIVE ENTREPRENEURSHIP
Construction, Community, Social and Personal Services,
IN INDIA
Supply Chain, and Transport- Storage-Communications
etc. Figure 1. A critical eye on the ‘power of ideas’ that is, innovation
Levels 2 and 3 (Trading and Manufacturing) of the
and ‘bringing ideas into life’ which is done through
aforementioned pyramid comprise of traditional areas of
entrepreneurship together can be considered as
Entrepreneurship. Level 4, on the other hand, is an
innovative entrepreneurship. Here an analysis of some of
emerging/modern sector of Entrepreneurship with high
such innovative ideas and their success in the business
growth rates. In future, the broadening of Levels 3 and 4
field is thus explained futher.
is expected with the activities from Levels 1 and 2
migrating to the other levels. The number of new
companies registered (a proportion of which relate to
Entrepreneurship) has in general been increasing over Suvarna Urja wind power Pvt. Ltd., Pune
the past years (Figure 1). Figure 2 clearly shows that the
number of new companies in Level 4 has been growing at Suvarna Urja wind power designs and manufactures
a much faster rate compared to those in the other wind-turbines and power storage systems specifically for

Changing face of entrepreneurship in India through innovation 19
Figure 2. Registration of new companies according to nature of economic activity. Data for 2001-2002 were not
available. Source: Based on data received from Ministry of Company Affairs.
the Indian rural power market. Since 2009, this small 3. Profile verification: To their surprise, people opted for
company has already received orders to produce wind 3rd party verifications, while searching for their business
turbines and power systems for four Indian states partner on the net
(Ramachandaran et al., 2006). 4. Matrimony reference: Their customers became their
marketers when reference system was put into place.
5. Payment options – Through Sifyi Way, tie ups with
Sustainable technologies and environmental projects banks, creating local associates (who gets commission)
Ltd., Mumbai in various cities.
6. Going mobile: Another trend they spotted to served the
In the focus on oil industry recycling technologies, STEPS needs of their customers
have been developed, such as the “Poly Crack” 7. Partnerships, such as with Tata Sky
technology, to converts plastic waste into diesel. The
process is more efficient than competing technologies All of these innovative ideas lead to the success of
and leaves no heavy metal residues (pollutants). Since Bharatmatrimony.com.
2007, STEPS efforts have received world-wide media
coverage. The company has sold their Poly Crack
conversion system to several companies in India and DhanaX
Europe. Promising new opportunities in the USA and
South East Asia are on the horizon, and STEPS N.A., a In May 2008, 27-year old Rajnish Sinha and his IIM-
North American subsidiary has already been established. Kozhikode batch mate Siva Cotipalli started Bangalore-
based DhanaX. A microfinance firm and the idea of
clubbing it with person to person (P2P) lending, a
Bharatmatrimony.com platform where people contribute small amounts online
as loans. NGOs take up the task of disbursing these
An idea of starting a Tamil portal, which later shifted its loans to needy communities in their areas of operation.
focus on Matrimony, became a world class business. The Interest is charged at 24%, of which DhanaX keeps
innovative ideas of Bharatmatrimony.com are as follows: approximately 6%. So far, DhanaX has helped its four
partner NGOs acquire loans of Rs 20 lakh.
1. Photo Protection: they saw the need from their In summary, in this new era of the knowledge
customers about privacy. revolution, India must seek out and exploit some of its
2. Horoscope matching and creation: Another important inherent strengths to accelerate economic development,
need which created value for their customers. while creating extremely attractive avenues for

employment generation. Bio–Technology (BT) and Entrepreneurship (BIE) by comprehensively exploring

Information Technology (IT) are the two new pillars of the policy options to improve access to financing. While
era of knowledge management. valuable work is being done by Indian incubators, there is
Recent surveys, such as those undertaken by Goldman huge scope for them to become entrepreneurial
Sachs and Price water house Coopers, have estimated themselves by providing services such as market data,
that India has the potential to be among the world’s helping in preparing business models, recruiting skilled
leading economies by 2050.1 In this situation, India employees, etc.
enjoys enormous potential for the creation of wealth If India is able to use its true potential of becoming
through knowledge. Entrepreneurship and Innovation are leader in entrepreneurial activities, then the resultant
the key drivers for generating wealth from knowledge, financial gain are always of benefit to the country. The
supported principally by the availability of skilled human budding sectors to innovate and in which Indian
resources, access to finance and the ability of the State entrepreneurs can prove themselves the leaders are Bio-
to create an enabling environment (Punnathara, 2009). technology and Information Technology (Saxena, 2004).
RECOMMEDATION AND CONCLUSION REFERENCES
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Entrepreneurship is a critical aspect of the knowledge and entrepreneurship potential. Available on the web at
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who have the ability to make a difference and need to be Devarajan RTP, Ramnarayan S (2003). Entrepreneurial Leadership and
nurtured to achieve their potential, and provide a further Thriving Innovation Activity, Proceed of 7th Intl. Conf. on Global
Business and Eco. Development, Bangkok,
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for two reasons – first, to create employment and wealth Entrepreneurship Practice and Principles, Harper and Row, New
and, second, to get the most out of existing opportunities. York, pp. 19-33.
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started that will cerate more interest in the students. pp. 207-243. Corporate Entrepreneurship, Effective Executive, the
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should also take the initiatives by not only providing climate for entrepreneurship, World Summit on Innovation and
adequate support in financial terms but also by rendering Entrepreneurship officially opened in Muscat, April 03, 2006.
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Menon K, Ramsay I (2008). Innovation Track: Innovation and
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Entrepreneurship should be encouraged. There is need
Sharma P, Chrisman J (1999). Entrepreneurship theory and practice,
to enact a uniform legislation for publicly funded research toward a reconciliation of the definitional issues in the field of
that would grant IP the rights for successful results of Corporate Entrepreneurship. J. Bus. Manag., 20(9): 31-41.
research to universities/research centers and also entitle Srinivasan TN (2007). Create a Framework that helps Entrepreneurs,
the inventor to a share of the royalties from commercial- interview to The Hindu, Business Line, April 23, 2007.
lization, as a source of innovation and entrepreneurial
advancement. India’s innovation intensity could also
improve significantly if more PhD and other research
scholars are encouraged by providing a supportive
environment for Entrepreneurship. There is also a need
to significantly increase business incubation for
1See Outlook Business, May 5, 2007; Goldman Sachs’ BRIC report states that
by 2050, India could have a GDP of $37.66 trillion, just marginally less than
USA’s estimated $38.51 trillion. The Price water house Coopers report, ‘The
World in 2050’ states that India could be the fastest growing economy by 2050.

An empirical competitive strategy on Taiwanese
business
1 2
Tina C. Chiao * and Chin-Chuan Chen
1
Department of Business Administration, Yu Da University, Miaoli County, Taiwan.
2
Department of Marketing and Logistics Management, Yu Da University, Miaoli County, Taiwan.
In this research, we take two different types of business areas as sample to investigate visitors’ demand
with external environmental change. Through this research, we can re-arrange business areas’ service
position, improve weakness, increase service quality, and adjust resource allotment. Therefore, first of
all, we reduce difference between visitors’ pre-expectation and satisfaction perception as a premise.
Then we define ranking for visitors’ demand and service quality in order to improve service quality and
increase visitors’ satisfaction. Secondly, by means of field survey and quantitative analysis, we intend
to clarify and compare all respondents’ attitude and buying behavior in these two business areas they
perceived. In addition, we would analyze all quality factors on respondents’ satisfaction. Finally, we will
suggest competitive strategies through SWOT analysis with all information collected and form a new
innovative management paradigm for the business areas. This research adopts quantitative analysis
and qualitative research for the business areas following empirical case study to propose a new
business model as well to carry out. The findings of this research will be beneficial for all domestic
business areas for making successful transformation.
Key words: Economic miracle, business areas, competitive strategy, survey.
INTRODUCTION
Domestic retailers in Taiwan future challenge.

Since the early of 1990s, the government of Taiwan
Over the past 20 years, Taiwan was one of developing (this text hereafter referred to as the government)
countries and here people had never knocked on proposes an important policy of “Business Areas
domestic retailers with vast consumption’s needs as Reconstruction” in order to promote the commerce to be
severe as developed countries did. However, in recent prosperous and stimulate the domestic traditional industry
years, with fast development of economy and upgrade of to recover. This policy linked with the Department of
the national income, consumption consciousness Commerce in Ministry of Economic Affairs and the
resumes gradually. The traditional commercial type is Ministry of Internal Affairs Department that execute "
unable to meet the consumer demand and gradually Improving Commercial Image" and " Creating the New
becomes weaker; in addition, Taiwan officially joins WTO Style and Features in Urban and Rural Areas" to expand
(World Trade Organization) in 2002 and the domestic and improve the business environment. The whole benefit
markets are suddenly open, thus, the large-scale retail of this policy combine that of the city reconstruct planning,
business of America and Europe invades the market of the development of urban and rural areas, the commercial
Taiwan, which make more pressure on domestic style of street, and the block vision…etc., which would
traditional retail business and force domestic transition change the traditional business area of Taiwan to new
from past type of commercial operation to overcome the image. Up to 2001, total 64 places (Table 1) carry out,
including nine places in rural type, twenty-three places in
city type, ten places in cultural type, five places in
sightseeing type and eighteen places in special rebuilding
*Corresponding author. E-mail: uftina@gmail.com. type. This research proposes the

Table 1. Summary of business area.
Place Rural business area Ping-Lin Cultural business area Dashi
Map
Vision
Dashi Street Block lies in the Taoyuan

County and at the southeast edge of
The location is about 38 km of the southeast of “Ancient Shi-Men alluvial plain”. because of
Taipei Center; a branch line can reach Shi-Ding, the interface point of mountain region and
Sheng-Kengthe, about 42 km from Yilan; it is plain and the transportation channel of Da-
Location regarded as an relay site of Bei-Yi Highway Han Stream, it gathers and become one
between Taipei and Yilan passage and becomes group; in the first year of Japan era (1911),
the rest stand passing everytime; it’s also the good Japanese modify the urban area nearby Da-
area for Taipei residents to rest, camping, and roast Han Stream; they remove the building along
meat on vacation. original street line and hire craftsmen to
build decorated archway with magnificent
pattern, roughly forming current area looks.
Ping-Lin is praised as “tea township”because of

the excellent matching of the soil, water,
The business area of Dashi old town is
climate.The featured "Wen-San Bao-Zhong Tea”
characterized by its “Wooden furniture,
collects the strong points with beautiful fragrance
Characteristic table delicacies, building, culture, and
and excellent flavor, famous praise “Beauty among
visiting”. Dashi wooden furniture of early
goods tea” over Taiwan; there are subsidiary tea
stage concentrates in the He-Ping Road
products, such as tea candy, tea soap, tea
and is handed down from age to age to
pudding, tea essence, and tea via rice jelly, etc. as
adopt this old skill.
unique taste in whole Taiwan. The annual tea
productions are about 800,000 kg.

An empirical competitive strategy on Taiwanese business 23
Table 1. Contd.
Dashi wooden furniture is famous distantly and sets

Along Bei-Yi Highway, Shui-Liu-Jiao is the
foundation from the early farm implements and home
necessary site to pass. Whole business is related to
utensil since more than 200 years ago. Besides
the sale of diet, meal, snack, and tea, promoting tea meticulous carving craftsmanship, its repute mainly
and tea snack when the passengers have dinner. comes from the neighboring first-class timber from Fu-
Because of famous Wen-San Bao-Zhong Tea, the Xing Town, such as red Chinese juniper and ash…etc.
Area description automobile drivers so often pass& eacute; andbuy Especially matched with Dashi’s paint material, Dashi
the tea due to commission. In the region, the natural reputation of wooden furniture is widely spread.
retailing tea amount accounts for more than 40% These makes Dashi become the high-quality recreation
of the whole township, and the batches amount business area with highly commercial value, new or old
accounts for 30%; therefore, the district is the cultural exchanges, and industrialized operation
economics lifelines of Ping-Lin. management.
Data source: The combination and analysis of terrain exercises, observation, business interview, local government materials, and secondary
statistical data, etc collected materials, regarded as the evaluation basis of business area.
studying of performance in the different type of business Affairs (2000) suggests the business area is formed by
areas, on customer buying behavior, service quality, many shops, most in retail and services. “Business Areas
customer satisfaction and competitive strategies, the Reconstruction” means to take off the management of
research details are depicted as accordingly. single shop, introduce cluster marketing and regional
image business concept, and merge “community’s
consciousness". Through spontaneous improvement by
RESEARCH PURPOSE the shops’ managers in consumption environment and
service quality to create whole competitiveness of
As the above-mentioned research background and business area and joyful business scenario.
motive, the traditional retail business how to make the The plan of Business Areas Reconstruction (1995) set
transition successfully in the highly competitive scenario, by the Department of Commerce in Ministry of Economic
this research focus on: (1) Analyze the consumers’ Affairs points out that " Business Area " means the
behavior and preference, (2) Sum up the investigation to modernized business area with feature and image which
form the strategy, (3) make an effective strategy model. combines the naturally formed traditional business area
Therefore, the main purpose of this research is: with local humanity, product, and view, etc., introduce
modern management concept, improve commercial basic
1. Probe into visitors’ satisfaction on the service quality of construction, condense the cooperative consciousness of
business area through the questionnaire investigation; business area, and strengthen the competitiveness of
2. Utilize the questionnaire to analyze and sum up the business area.
dimensions, which influence different business area;
3. Compare the difference of all the information collected
for different business area and draft the competition The classification of the business area
strategy;
4. Sum up above-mentioned findings and make an Business areas reconstruction plans have been carried
effective strategy model for business. out nearly ten years so far. It brings up a lot of famous
business areas, which offers the exchange of national
economy, culture, society and concurrently provides the
LITERATURE REVIEW function of recreation, amusement, and shopping. This
research chooses the rural type (Ping-Lin) and the
The definition of business area cultural type (Dashi) separately to be the theme
compared as two different styles.
“Business Area” is defined differently in the relative
research. This paper means a place where various kinds
of retailers and service businesses get together forming a PRESENT SITUATION ANALYSIS
kind of shopping district. American Marketing Association
(AMA) defines it as one region which is determined by its The summary of business area
border and a marketing unit can sell and ship the goods
and offer labor service under the prerequisite of economic This research regards the business area with two different
benefits. styles as the theme of studying, the rural type (Ping-Lin)
The Department of Commerce in Ministry of Economic and the cultural type (Dashi) separately. The comparison

Table 2. SWOT analysis of rural business area.
Environment SWOT Explanation

1. Abundant nature landscape
2. Famous spot of tea museums
Strengths 3. Good local featured product (tea)
4. Tea meal with special flavor
5. Relay site of Bei-Yi Highway
Internal environment 6. Convenient parking
(Ping-Lin) 1. Conservative concept in business operation
2. Disorderly business category and style

Weaknesses 3. Old shop decoration
4. Inconsistent signboard in a mess of the view
5. No creative food and beverage content
6. High price difference in commodity
1. Abundant cultural landscape
2. The famous beauty spot of two Jiang’s tombs

Strengths 3. Unique high-quality wooden furniture
4. Street with special cultural characteristics
5. Not far from the drive of Taipei
Internal environment 6. Standardized signboard
(Dashi) 1. No creativity in business category and style
2. Low repurchasing rate of the wooden furniture

Weaknesses 3. Difference of new and old decoration in the area
4. No feature in the food and beverage menu
5. Low creative value of other goods
6. Low creativity in promotion campaign
1. Recreation atmosphere nationals pursue gradually
2. Visitors’ curiousness to the nature

Opportunities 3. Implementation of two day off in one week
4. Development of business area by the government
5. High potentiality of unique regional products
6. Tour from the alliance of near traveling area
External environment
1. The transit of great public construction
2. Increasing consumers’ consumption consciousness
Threats 3. Difficult to integrate resident's opinion
4. The rise of nearby new business area
5. Group Visitor used to rush the schedule
6. The transit of unique production to Mainland China
of these two basic styles is shown in Table 2. implications for future research to evaluate customers’ perception
of service quality as customer's satisfactory measurement factor;
customers’ perception of service quality would influence their
METHODOLOGY satisfaction (Figure 1).
Research structure
Research design
This research bases on Parasuraman, Zeithaml and Berry’s theory
(1985) which is a conceptual model of service quality and Its This research designs the questionnaire based on relative factors

Determinants of Word of Personal Past
service quality mouth needs experience
1. Shop
2. Vision Expected
3. Environment
service
4. Activity Perceived Customer
service satisfaction
Perceived
quality
service
Figure 1. Research model. Source: Parasuraman, Valarie A. Zeithamal and Leonard L. Berry (1985), A
conceptual model of service quality and its implications for future research “Journal of Marketing, vol.49,
pp.41.
influencing customers’ satisfaction and dissatisfaction, which comes The structure of concept is shown as Figure 1. The features of
from the analysis of relevant documents, the reference of the service quality as the evaluation variances of perceived quality in
questionnaire that other scholars previously used to similar the questionnaire design (Table 3).
research, and the Customer Focus Group Discussion. From the
above-mentioned process, we would know “Shop", "Vision ",
"Environment ", "Activity", etc. dimensions would influence Satisfaction
customers’ satisfaction. The first questionnaire draft is revised and
confirmed after pre-test and the respondent is mainly set on the Customer satisfaction is weighed according to each aspect and
visitors of two representative model of business area, Ping-Lin and whole satisfaction.
Dashi. The sampling investigation begins from 18 August, 2009 to
September 18, 2009. Separately in the fixed sites and period of
these two business areas. Totally, it sends out 275 questionnaires Goods preference
separately; excluding 25 non-retrieve or invalid samples, we
separately get 250 effective samples, up to the effective return rate Goods preference is weighed separately by 15 variances.
91.1%.
Personal data
Questionnaire content
Including gender, age, education, occupation.
The questionnaire used in this research is mainly divided into four
major parts to design the evaluation variances: (1). Consumer Research hypothesis
behavior; (2). Question items of Important degree / satisfaction
quality; (3). Goods preference; (4). Basic questions for four statistics Based on the references model, Parasuraman et al. (1985) theory,
variances. The following statement further shows the details of “A Conceptual Model of Service Quality and Its Implications for
questionnaire aspects and question variances. Future Research”, the four hypotheses are proposed in the
research.
Consumer behavior
1. Hypothesis 1: There is significance between “Quality
expectation” and “Quality perceived "
The consumer behavior is evaluated by ten variances: a. living
place; b. companion; c. region characteristic; d. average monthly 2. Hypothesis 2: There is significance between “Quality
performance” and “Quality perceived "
travel frequency; e. travel period; f. travel purpose; g. means of
3. Hypothesis 3: There is significance between “Quality perceived
transportation; h. information source; i. consumption amount of
" and “Customer satisfaction”
money; j. goods preference.
4. Hypothesis 4: There is significance between “Different
characteristic” and “Customer satisfaction”.
Perceived quality
FIELD SURVEY ANALYSIS
This investigation was done by the analysis of relevant documents
and the use of Parasuraman et al. (1985) theory, “A Conceptual
Reliability test
Model of Service Quality and its Implications for Future Research”,
to probe into the customers’ perceived gap between expectation
and post performance, in order to evaluate the service quality and In this research, Cronbach’s Alpha of all variables and
also find out the relevant dimensions influencing customers’ dimensions are larger than 0.7 and reach reliability
satisfaction. requirement to meet appropriate internal consistency.

Table 3. Questionnaire content.
(1). Shop staff’s service attitude

(2). Goods characteristics sold
Shop (3). Goods quality sold
(4). Rationality of goods price
(5). Characteristic decoration in a shop.
(6). Well-conserved cultural and educational facilities /
Vision Well-conserved historical spots

(7) .Guide tour in tea museum/Guide tour in historical spots
(8). Rich collections in the museum /Rich information historical spots
(9). Convenience to park
Environment (10) Convenient transportation nearby

(11) Unified signboard
(12) Environmental cleanness
(13) Joint activities
Activity (14) Folk festivals in Ping-Lin / Religious activities in Da-shi

(15) Public activities combination
Sample analysis museum in a group in the next place. And other target
customers are knowledge males who purchase high
Visitors are classified according to visitors’ characteristics quality tea regularly. cultural business area mainly targets
to the two Business Areas. The sample distribution is as “past time cherishing group “customers who are
shown in Tables 4 and 5. businessmen and visit historical sites with family
members, and targets “reason group “customers who are
students and seek knowledge by train on their own in the
STP (SEGMENTATION/TARGET/POSITION) ANALYSIS next place. And other target customers are knowledge
people who purchase high quality furniture (Tables 7 and
Segmentation 8).
According to the survey in this research, we analyze

visitors by their gender, age, education, occupation, living Position
places and companions, and find rural business area is
attractive to male, and cultural business area is attractive From the above paragraphs, Pin-lin business area is
to female. Visitors to rural business area are mostly from attractive to those visitors who enjoy food, drink, playing
nineteen to thirty, and account for 39.8%. Visitors to and natural scenery. Pin-lin possesses abundant natural
cultural business area are at the same ages account for resources and specialty and provides customers the
almost 60(56.0%). As to the visitors’ education, colleges functions of shopping and eating. Thus, Pin-lin could be
are at most and high school and Junior college school are positioned as a “Delicious food, shopping and natural
secondary separately. Visitors to rural business area are spots” regional trade area. In the future, Pin-lin could
mostly in business and service industry, and visitors to provide visitors natural scenery and delicious meals. On
cultural business area are mostly students and the contrary, Dashit business area is always the wood
businessmen. Visitors to both business areas are from center for a long time and conserves good cultural assets,
other counties and account for almost 60% (Table 6). therefore it is attractive to students who seek knowledge
and cherish past time. Due to the characteristics of
creativity and past time cherishing, Dashi could be
Target positioned as a “Leisure tour, past time cherishing”
busisness area. These two business area are
Rural business area mainly targets “food group complementary (Figure 2 and Table 9).
“customers who are young and enjoy delicious meals, In addition, we refer to the SWOT analysis for Pin-
and targets “leisure group “customers who like to visit tea Lin/Dashi business area and based on visitor

Table 4. Sample structure.
Characteristic Item Rural business area-Ping-Lin Cultural business area-Dashi

Number Percentage Number Percentage
Gender Male 155 62.0 108 43.2
Female 95 38.0 142 56.8
13-20 years old 9 3.6 12 4.8
21-25 years old 47 18.8 74 29.6

26-30 years old 52 20.8 66 26.4
Age 31-35 years old 42 16.8 32 12.8
36-40 years old 28 11.2 18 7.2
41-45 years old 16 6.4 15 6.0
46-50 years old 35 14.0 24 9.6
50 years old (above) 21 8.4 9 3.6
Middle High school (below) 17 6.8 27 10.8
High school/vocational school 70 28.0 60 24.0

Education Junior college 61 24.4 61 24.4
University 89 35.6 85 34.0
Master (above) 13 5.2 17 6.8
Student 42 16.8 70 28.0
Housewife 18 7.2 27 10.8

Officer 18 7.2 5 2.0
Occupation Labor 30 12.0 19 7.6
Businessman 66 26.4 65 26.0
Farmer 13 5.2 3 1.2
service industry 54 21.6 41 16.4
Others 9 3.6 20 8.0
Table 5. Findings of consumer need survey for rural business area (Pin-Lin) and cultural Business area (Dashi).
Findings of rural business area (Ping-Lin) Item Findings of cultural business area (Dashi)
Male and female visitors account for 62.0 and 38.0% Male and female visitors account for 43.2 and
Gender
separately. Male is more than female. 56.8% separately. Female is more than male.
Visitors aged from21-25 is the most and

Visitors aged from 26-30 is the most and account for
account for 29.6%. Visitors aged from 26-30
20.8%. Visitors aged from 21-25 is secondary and account Age
is secondary and account for 26.4% Young
for 26.4% Young visitors account for about 18.8%.
visitors account for about 56.0%.
University students are the most and account

University students are the most and account for 35.6%.
for 34.0%. Junior College school students
High/vocational school students are secondary and account Education
are secondary and account for 24.4%;
for 28.0%; Visitors are highly educated.
Visitors are highly educated.
Businessmen are the most and account for 26.4%. Service Students are the most and account for 28.0%.
industries are secondary and account for 21.6%; Visitors are Occupation Businessmen are secondary and account for
mainly students. 26.0%; Visitors are mainly students.

Table 5. Contd.
Visitors from other counties account for 60.8%. Visitors from other counties account for
Local visitors account for 39.2% Visitors are mostly Living places 59.6%. Local visitors account for 40.4%
from other places. Visitors are mostly from other places.
Family tours account for 41.2%. Personal

Family tours account for 39.6%. Group tours
Companion tours account for 21.6% Family tours are the
account for 28.4% Family tours are the most.
most.
The regional characteristics of visitor’s

The regional characteristics of visitor’s perception are
Regional perception are sighting spots (32.0%) and
tea (55.6%) and Sighting spots (22.0%). Visitors are
Characteristic Shimen Reservoir (26.0%). Visitors are
greatly impressed by tea.
greatly impressed by sighting spots.
1-2 times are the most (49.6%). 3-4 times are

3-4 times are the most (36.4%). 5-6 times
Average tour frequency secondary (31.2%) 1-2 times account for
are secondary (23.2%).
about 50%.
10:00~13:00 on holiday (22.4%), 10:00~13:00 on 14:00~18:00 on holiday (34.0%), 10:00~13:00

reqular (20.0%). Tour time period is on holiday Visit time period on holiday (19.6%). Tour time period is mainly
and regular morning. on holiday afternoon.
To visit historical spots (28.8%), to

To visit tea museum (29.6%), to restaurant (25.6%). purchase specialty (14.0%), to participate in
Main tour purposes
Main tour purpose is to visit tea museum. activity (14.0%). Main tour purpose is to
visit historical spots.
By vehicles is the most (62.8%) By sightseeing bus By vehicles is the most (62.0%) By train is
Main traffic tools
is secondary (20.0%) secondary (10.0%)
From booklet recommendation (23.6%), from From friends’ recommendation (31.6%),

friend recommendation (18.8%). It is important to Information resources from newspaper and magazines (17.6%). It
gain booklet. is important to gain public praise.
NT$ 500-1000 (33.2%), NT$ 500 (24.0%). NT$ 500-1000 (40.0%), NT$ 500 (24.8%).
Consumption amount Consumption amount is not large.
Consumption amount is not large.
Eating is the most (33.2%). Sighting is Specialty is the most (42.4%). Sighting
Consumption items is secondary (34.8%)
secondary (34.8%)
The top 5 goods characteristics that visitors prefer The top 5 goods characteristics that visitors
are: taste, tea quality, friend recommendation, shop Goods preference prefer are: durability, after-sale service
staff communication, and categories. comfort ability, recommendation, and price.
Table 6. Segmentation for rural business area (Pin-Lin) and cultural business area (Dashi).
Findings rural business area pin-Lin Item Findings of cultural business area (Dashi)
Male Gender Female
Young visitors from nineteen to thirty account for 39.8%. Age Young visitors from nineteen to thirty account for 39.8%
College at most, high school secondly Education College at most, professional school secondly
Business at most, service industry secondly Occupation Students at most, businessmen secondly
Visitors from other counties account for 60.8%. Living place Visitors from other counties account for 59.6%.
Family tour at most, group tour secondly Companion Family tour at most, personal tour secondly

Table 7. Target for rural business area (Pin-Lin).
Customer Target Consumption type Target points

Main target Young business visitors who travel by bicycle many times Warmness food health family
Food group
customers per month, and enjoy meals with family love
Secondary target Leisure Group tour who visit series of scenery spots , especially tea
Joy novelty activity leisure
customers group museum, by sightseeing bus
Other target Shopping Knowledge male visitors who purchase local specialty (tea)
Convenience goods
customers group and emphasize on tea taste and quality relationship service
Table 8. Target for cultural business area (Dashi).
Customer Target Consumption type Target points

Young business visitors who travel by
their own car, travel with family on Warmness, cherishing the past,
Main target customers Food group
holiday afternoon, and enjoy visiting leisure, family love
Secondary target Leisure
historical spots
Young student group who are

female, travel alone by train, and Explanation, creativity, activity, tourism
customers group
enjoy participating in activities
Other target Shopping group
Knowledge visitors who purchase good
local specialty (furniture) and emphasize Convenience, goods, price, service
customers
on durability and after-sale service
Nature
Pin-lin
Food & shopping Leisure tour
Dashi
Past time cherishing

Figure 2. Positioning figure for different business areas.

Table 9. Visitor service quality perceptions toward business areas (Valid sample: 250).
Rural business area (Ping-Lin)

Dimensionranking
Items
mean
Satisfactionranking
Dimensionmean
ranking
Cronbach’salpha
Importance
Satisfactionmean
Importance
Dimension
alpha
4.42 3 3.70 5 1.Shop staff’s service attitude
Cronbach’s
4.14 6 3.71 4 2 Goods characteristics sold
4.20 5 3.83 1 3.Goods quality sold
8480.
Shop
4.10 7 3.68 6 4.Rationality of goods price

4.09 8 3.65 7 3.71 1 5.Characteristic decoration in a shop 0.858
4.11 --- --- --- A1 The importance of Shoparea as a whole
--- --- 3.71 --- A11 The satisfaction degree withSop as a whole
Cultural business area (Dashi)
Satisfactionmean
Dimensionmean
Importancemean
Importanceranking
Dimension
Satisfactionranking
ranking
4.84 4 3.94 5
0.748
4.70 8 3.86 9
4.84 5 3.92 7
4.64 9 3.87 10
4.76 6 3.96 3 3.91 2
4.84 --- --- ---
--- --- 4.06 ---
4.72 7 3.92 8
0.830
4.61 12 3.66 15
4.62 11 3.86 11 3.81 3
4.85 --- --- ---
--- --- 3.99 ---

0.839
4.92 1 3.94 6
4.87 3 3.96 4
4.64 10 4.19 1 4.05 1
4.91 2 4.09 2
4.97 --- --- ---
--- --- 4.00 ---
4.50 14 3.71 13
4.41 15 3.68 14
4.52 13 3.77 12 3.72 4
4.52 --- --- ---
--- --- 3.88 ---
--- --- 4.09 ---
Table 10. Marketing strategies for regional trade areas.
Strategic Items Explanation

Business Area Rural business area (Pin-Lin)
Strategic points Delicate goods, Scene guide tour, Environmental improvement
1. Food group‚
Target ranking position 2. Leisure group,
3. Shopping group
Strategic Health, food convenience, goods, relationship,

positioning service Goods quality sold in the business area
1. Goods quality sold in the business area (3)

2. Environmental cleanness in the business area (12)
Top 5 service quality perception
3. Convenience to park in the business area (9)
(Bracket shows number) 4. Goods characteristics sold in the business area (2)
5. Shop staff’s service attitude
1. Abundant cultural scenery

2. Famous museum
3. High quality local specialty(tea)
Market demand and SWOT analysis
4. Special tea meals
5. A relay station for Bei-I highway
6. Convenience to park in the business area
1. Continuously develop healthy tea meals for family

Competitive strategies
2. Draw in business from Taipei district in order to inject new business concept
3. Attract young visitors via internet marketing
Business area Cultural business area (Dashi)

Strategic points Scene guide tour , goods, creativity, environmental beauty
1. Past time cherishing group

Target ranking position 2. Reason group
3. Shopping group
Strategic Past time cherishing leisure guiding creative goods

positioning price, Unified signboards
1. Unified signboards (11)

2. Environmental cleanness in the business area (12)
Top 5 service quality perception
3. Characteristic decoration in a shop (5)
(Bracket shows number)
4. Convenient traffic nearby the business area (10).
5. Shop staff’s service attitude (1)
1. Abundant cultural scenery

2. Famous scenery spot of pre-President burial place in Dashi
Market demand and SWOT analysis 3. High quality wooden furniture

4. Streets with aroma of culture
5. Not far way from Taipei Station
6. Unified signboards

Table 10. Marketing strategies for regional trade areas.
1. Increase the quality and quantity of guide tourists

Competitive strategies 2. Conserve the historical spots and make
public praise. elaborate Publishing, to gain public praise.
3. Design delicate wooden accessories to strengthen the characteristic
and impression of the business area.
Table 11. Visitors’ satisfaction ranking for service quality dimensions.
Rural business area (Pin-Lin) Service quality dimensions Cultural business area (Dashi)
1. Shop 2
3. Vision 3
2. Environment 1
4. Activity 4
Table 12. Visitor satisfaction ranking for Pin-Lin/Dashi service quality dimensions.
Rural business area (Pin-Lin) Service quality dimensions Cultural business

area (Dashi)
1 Goods quality sold in the business area (3) 7
2 Environmental cleanness of the business area (12) 2
3 Convenience to park in the business area (9) 6
4 Goods characteristics sold in the business area (2) 9
5 Shop staff’s service attitude (1) 5
6 Rationality of goods price (4) 10
7 Characteristic decoration in a shop (5) 3
8 Rich collections in the museum /Rich information of the historical 11
spots (8)
9 Guide tour in tea museum /Guide tour for historical spots (7) 15
10 Well-conserved cultural and educational facilities /Well-conserved 8
historical spots (6)
consumption needs and service quality perception, this SUGGESTION

research draws up competitive strategies for different
business areas, including strategic points, marketing As to the research framework of the overall visitors’
target, strategic position, service quality perception, satisfaction. We provide the following suggestions:
market demand and SWOT analysis, operation and
marketing strategies. The details are showed in Table 10. 1. The development of rural and cultural business area
needs the dissolution of governmental land law.
Otherwise, it is too late to assist the economic
CONCLUSION development of business area due to the long-period of
time land development.
This research takes two different business areas as 2. Find out STP (Segmentation/Target/Position)
survey samples to investigate visitors’ satisfaction with strategies of Pin-Lin and Dashi Business area, and then
business area service quality, analyzes service quality design proper products and service in order to raise
dimensions that influence visitors’ satisfaction, and service quality and attract target customers. However, we
compare the differences between these two business need to set organizational institutionalization of business
areas for better improvements. The conclusions are as area into action so that we can keep the quality of
describe in Tables 11 to 13. business area and customers’ loyalty.

Table13. Summary of Hypothesis test results.
Research hypothesis Consequence

Hypothesis 1: There is significance between
Hypothesis 1 Not reject
“Quality expectation” and “Quality perceived ".
There is significance between

“Quality performance” and “Quality perceived ".
There is significance between

“Quality perceived " and “Customer satisfaction”.
There is significance between ”different

characteristic” and “Customer satisfaction”
3. Visitors in different segments respond different REFERENCES

questions toward service quality perception. Thus we
Parasuraman A, Valarie AZ, Leonard L (1985). Berry A Conceptual
need various strategies and quick response to make Model of Service Quality and Its Implications for Future Research. J.
customers to visit again. Mark., 49: (41-50).
4. If we can efficiently combine the resources of central Parasuraman A, Valarie AZ, Leonard L (1985). Berry SERVQUAL: A
Multiple-Item Scale for Measuring Customer Perceptions of Service.
authorities and regional government, we can focus on the J. Retailing, 64: 12-40.
improvement of shop, scenery, environment and activity http://www.pinglin.tpc.gov.tw
in the trade area and set research and development www.moea.gov.tw
plans into action continuously.

A conceptual framework proposition for customer
loyalty in the short-term insurance industry - A South
African perspective
1 2
Lauren Strachan and Mornay Roberts-Lombard *
1
Department of Marketing Management, University of Johannesburg, South Africa.
2
C-Ring 607, Kingsway Campus, Auckland Park, Johannesburg, 2006, Gauteng Province, South Africa.
The purpose of the study was to investigate CRM and its influence on customer loyalty at selected
short-term insurance providers in Gauteng. The target population included all South Africans who
currently have a policy with at least one of the selected short-term insurance providers, namely:
Outsurance, Santam, Telesure and Hollard. The convenience sampling method was applied and
samples of 500 respondents were selected. Personal interviews were conducted with respondents and
a structured questionnaire was used for the gathering of data. The statistical analysis that was used in
the study included a multiple regression analysis to test the hypotheses formulated for the study and
an analysis of variance test (ANOVA). The study indicated that a significant positive relationship exists
between conflict handling and CRM at four selected short-term insurance providers. It was also
indicated that a significant negative relationship existed between commitment and CRM. It was evident
that no relationship existed between trust and two-way communication and CRM. The study also
revealed that a strong relationship existed between CRM and customer loyalty at the four selected
short-term insurance providers in South Africa.
Key words: Short-term insurance organisation, customer relationship management, customer loyalty, trust,
commitment, two-way communication, conflict handling.
INTRODUCTION
Ndubisi (2007) argues that the aggressively competitive to the fact that they are then able to focus on their most
environment present in the business world has forced profitable customers. Improving the retention rates of the
organisations to build stronger relationships with their organisation provides assistance in building this customer
customers which provide rewards for both parties. He base and therefore improving the level of profitable
further states that organisations fully utilize these strong customers. In a typical service environment such as the
relationships with their customers as this provides them short-term insurance industry, retaining customers has
with insight information relating to the needs and wants of become increasingly important in order to secure the
their customers in order to encourage them to remain future survival and profitability of the organisation.
loyal to the organisation. There are various reasons why Customer retention in the short-term insurance industry is
organisations have the objective to create relationships imperative due to the fact that it is an extremely
with customers. Cambra-Fierro and Polo-Redondo (2008) competitive industry containing many choices for
states that organisations experience positive results when customers. The unstable environment in which short-term
greater attention is paid to their customer base, due insurers in South Africa operate necessitates them to put
greater focus on customer retention. The reasons for this
being the fact that customers are experiencing tough
times and are therefore searching for ways in which to cut
*Corresponding author. E-mail: mornayrl@uj.ac.za. costs. Customers are more likely to choose an alternative
supplier due to the range of choices in order to

A conceptual framework proposition for customer loyalty in the short-term insurance industry - A South African perspective 35
Table 1. South African short-term insurance market share, % and the first quarter of 2010 (Life Offices Association,
share by value in 2009. 2010). With the slowdown in economic activity, short-
term insurance providers have to focus on retaining their
Organisation % share current customers. CRM can be used to improve
Outsurance 22.50 customer loyalty.
Santam 19.20 Relationship marketing will work best when customers
Hollard 14.30 are engaged in relationship building activities (Leverin
Telesure 12.00 and Liljander, 2006).
Other 32.00
Total 100
Customer relationship management (CRM)
Source: Datamonitor (2010a).
Today, many organisations such as banks and life

insurance organisations realise the importance of CRM
and its potential to help them acquire new customers,
decrease their monthly costs.
retain existing ones and maximise their lifetime value
The reasons for the increased emphasis on the (Onut et al., n.d). CRM provides a transition from a
retention of customers is two-fold: firstly customer transaction-based to a relationship-based model that
retention holds a financial benefit for an organisation in concentrates on the acquisition, development and
the form of increased profits and also the fact that it costs retention of profitable customer relationships (Baran et
more to attract a new customer than it does to retain an al., 2008). Kotler and Keller (2006) state that CRM
existing one. Therefore, the focus of this article is to encompasses a process of managing detailed
determine the influence of CRM on customer loyalty in information about individual customers and carefully
the South African short-term insurance industry. The managing all customer touchpoints to maximise customer
influence of the CRM elements trust, commitment, two- loyalty. A customer touch point is any occasion on which
way communication and conflict handling on customer a customer encounters the brand and product, from
loyalty will also be determined. actual experience to personal or mass communication to
casual observation (Ma et al., 2010).
LITERATURE REVIEW
Four important components of CRM
The short-term insurance industry in South Africa
Scholars have listed the virtues that have been theorised
The South African insurance market was characterized in the CRM literature as trust, commitment, two-way
by a gross premium income of $4.9 billion, an increase of communication and conflict handling (Ndubisi and Wah,
31.7% since 2008. Life insurance dominated the South 2005: 544; Buttle, 2004: 15).
African insurance market in 2008 and generated 75.8% of
the market's overall gross premium income and non-life Trust
insurance generated the remaining 24.2% of the market's
aggregate gross premium income. The short-term Trust can be viewed as a partner’s belief that the other
insurance industry exists in a highly competitive partner will perform actions that will result in positive
environment that has grown in recent years. The property outcomes as well as not take actions that will result in
and causality sectors have contributed the most to this negative outcomes (Morgan and Hunt, 1994). The
growth in the industry by contributing 75.3% of the total trusting relationships between customers and
industry income. The accident and health sector organisations are associated with overall positive
contributed the remaining 24.7% (Datamonitor, 2010a). outcomes and trust in the organisation should increase
The annual growth rate in the industry had been 11.2% the benefit derived from transacting with the organisation
between 2004 and 2008 but a decrease in its annual (Botha and Van Rensburg, 2010). Where trust is focused,
growth rate for 2009 and 2013 has been forecasted. The there is a generalised sense of confidence and security in
forecast growth rate is 2.8%, a substantial decrease of the other party. The parties believe that each party will
8.4% in annual growth (Datamonitor, 2010b). The short- act in the interest of the other, that each party will be
term insurance industry is characterised by various role credible and that each party has the necessary expertise
players of which Outsurance, Santam, Hollard and (Lian et al., 2008).
Telesure are the most dominant in terms of market share
(both property and motor vehicle insurance) (Metcalfe,
2010). Table 1 depicts the main short-term insurance Commitment
organisations in South Africa by market share. Economic
activity in South Africa slowed in the last quarter of 2009 Commitment implies that partners forgo short-term

alternatives in favour of long-term benefits associated commitment to repurchase a preferred product or service
with their current partners. Customers will only make in the future, thereby causing repetitive same-brand
commitments to trustworthy partners because purchasing, despite situational influences and marketing
commitment entails vulnerability and leaves them open to efforts having the potential to cause switching behaviour.
opportunism (Read, 2009). Commitment is higher among Customer satisfaction relates to the results of a process,
individuals who believe that they receive more value from however, customer loyalty relates to a relationship.
a relationship, therefore highly committed customers Customer loyalty does not occur at once, it is a long-term
would be willing to reciprocate effort on behalf of an process but customer satisfaction can occur immediately
organisation due to past benefits received (Botha and following a successful process. Loyalty can survive a
Van Rensburg, 2010). Commitment in this context refers negative process (Botes, 2008). Satisfaction is a
to both parties understanding that they are in the market necessary step in loyalty formation, and satisfaction
together for the long run.They are willing to make becomes less significant as loyalty begins to set in
sacrifices for their partners because they are mutually through other mechanisms such as personal determinism
dependent upon each other in their quest to achieve long- and social bonding (Oliver, 1999). To keep customers
term returns on their psychological and financial loyal, they must be satisfied. Customer satisfaction is the
investments (Morgan and Hunt, 1994). customer’s evaluation of the product or service to
ascertain if it met his/her needs and expectations. Failure
by organisations to meet the expectation of customers
Two-way communication
will lead to dissatisfaction with the product or service, as
customer loyalty flows from customer satisfaction
Today there is a new view of communication as an
(Zeithaml et al., 2006).
interactive dialogue between the organisation and its
customers which takes place during the pre-selling,
selling, consuming and post-consuming stages. PROBLEM INVESTIGATED
Communication in a relationship means providing
information that can be trusted, providing information According to Stokes (2008), the surrendering of short-
when problems occur and fulfilling promises (Helkkula term policies is increasing. This is said to be due to the
and Kelleher, 2010; Ndubisi and Wah, 2005). For a fact that organisations do not fully explain the details
customer to perceive a relationship as valuable, the pertaining to their policy and they are therefore less
customer’s needs must be fulfilled. The needs of the reluctant to surrender this policy. The second reason is
customers can be established through gathering due to the fact that individuals are living on a restricted
information from them. This can take place during face- budget that does not consider short-term insurance to be
to-face interviews with customers, focus groups and a priority cost. At the time of the economic recession, the
observing the services customers purchase (Tsai et al., need for the organisation to understand and ensure the
2010). presence of the components trust, commitment,
communication and conflict handling is emphasized, as
Conflict handling these may be the components that encourage the
customer to remain loyal to the customer. The problem
Conflict handling can be described as the supplier’s statement can thus be described as follows:
ability to avoid potential conflicts, solve manifested
conflicts before they create problems and the ability to
The influence of trust, commitment, two-way
discuss solutions openly with customers when problems
communication and conflict handling on customer
do arise (Ndubisi and Wah, 2005). Only approximately
5% of all dissatisfied customers complain and only 50% loyalty through the intervening role of CRM in the
of them report a satisfactory problem resolution. The short-term insurance industry in Gauteng remains
need and the ability to resolve customer problems in a unclear and unexplored
satisfactory manner are critical. On average, satisfied
Figure 1 illustrates that the independent variables of the
customers tell three people of their good experience,
research constitute selected variables as identified in the
while dissatisfied customers will tell eleven people.
literature on CRM. These variables are trust,
Customers whose complaints are satisfactorily resolved
commitment, two-way communication and conflict
often become more loyal towards the organisation than
handling. In this article each variable’s influence was
customers who were never dissatisfied (Botha and Van
assessed through an empirical investigation. The article
Rensburg, 2010).
will further attempt to identify the degree of influence of
CRM on the customer loyalty of selected short-term
Customer loyalty insurance providers in Gauteng, the dependent variable.
The dependent variable, customer loyalty refers to the
Oliver (1999) refers to customer loyalty as a deeply held impact of the underpinnings of CRM on customer loyalty.

Figure 1. Conceptual framework. Source: researcher’s own construct.
Service organisations can benefit from CRM as term insurers in Gauteng.

customers focus on the service aspect and interaction
with the service provider when evaluating a service
organisation as no physical product is involved (Rootman, RESEARCH HYPOTHESES
2006). Short-term insurance organisations need to be
aware of the variables that influence its CRM activities. Relationship between trust, commitment, two-way
This would assist these organisations in adopting the communication, conflict handling and CRM
required variables to ensure the improved application of
the CRM process to strengthen customer loyalty and H01: There is no relationship between the perceived
increase market share in South Africa. trustworthiness of selected short-term insurers and CRM
at these insurance providers in Gauteng.
HA2: There is a relationship between the perceived
RESEARCH OBJECTIVES trustworthiness of selected short-term insurers and CRM
at these insurance providers in Gauteng.
Primary objective HO3: There is no relationship between the perceived
commitment of selected short-term insurers and CRM at
The primary objective of this study is to investigate the these insurance providers in Gauteng.
influence of the variables, trust, commitment, two-way HA4: There is a relationship between the perceived
communication and conflict handling on customer loyalty commitment of selected short-term insurers and CRM at
via CRM at selected short-term insurers in Gauteng. these insurance providers in Gauteng.
HO5: There is no relationship between the perceived two-
way communication of selected short-term insurers and
Secondary objectives CRM at these insurance providers in Gauteng.
HA6: There is a relationship between the perceived two-
The following secondary objectives were identified: way communication of selected short-term insurers and
CRM at these insurance providers in Gauteng.
i) To determine whether trust, commitment, two-way HO7: There is no relationship between the perceived
communication and conflict handling influence CRM at conflict handling by selected short-term insurers and
selected short-term insurers in Gauteng. CRM at these insurance providers in Gauteng.
ii) To investigate the intervening role of CRM on the effect HA8: There is a relationship between the perceived
of trust, commitment, two-way communication and conflict handling by selected short-term insurers and
conflict handling on customer loyalty at selected short- CRM at these insurance providers in Gauteng.

Table 2. Reliability statistics. measurement and the keys to assessing the trustworthiness of any
research conducted. The reliability measurement for this study was
Construct Cronbach's alpha the internal consistency reliability test. Reliability tests whether the
questionnaire will measure the same thing more than once and
Trust 0.894 result in the same outcome every time (Cant et al., 2005; Ndubisi
Commitment 0.849 and Wah, 2005). The extent to which a particular measure is free
Two-way communication 0.856 from both systematic and random error indicates the validity of the
Conflict handling 0.863 measure. In this study, exploratory factor analysis, utilising the
Varimax with Kaiser normalisation technique was performed to
CRM 0.885 assess the discriminant validity of the questionnaire. Validity was
Loyalty 0.95 also confirmed by conducting the Kaiser-Meyer-Olkin (KMO) and
CRM and loyalty 0.869 Bartlett’s test of sphericity (Madiba, 2009). The statistical analysis
that was used in the study included a multiple regression analysis
to test the hypotheses formulated for the study and an analysis of
variance test (ANOVA). The rotation of the factor matrix was also
performed to assess the discriminant validity of the measuring
Relationship between CRM and customer loyalty instrument.
HO9: There is no relationship between CRM and

customer loyalty at selected short-term insurance FINDINGS
providers in Gauteng.
HA10: There is a relationship between CRM and customer Reliability
loyalty at selected short-term insurance providers in
Gauteng. Cronbach’s alpha was used to determine the reliability of
the measurement sets in the study. The measure ranges
from 0 to 1. A value of 1 indicates perfect reliability, whilst
RESEARCH METHODOLOGY the value of 0.6 is deemed to be the lower level of
acceptability (Malhotra, 2007). The reliability statistics for
The study made use of a quantitative research approach and a
the measurement sets are presented in Table 2. It is
descriptive research design. The study was also cross-sectional
since the respondents were only interviewed once. The target evident in Table 2 that the Cronbach alpha values for all
population included all South Africans that currently have a policy seven measurement sets are above the lower limit of
with at least one of the selected short-term insurance providers, acceptability, 0.60. This confirms that the measurement
namely: Outsurance, Santam, Telesure and Hollard in the Gauteng sets used in the study were reliable. It was also proven
province. Non-probability sampling was used to determine the that the measurement instrument had proved itself
sample size for the study. The convenience sampling technique
was applied to select the sample size of 500 respondents. A total of reliable in a previous study. Therefore, the reliability of
431 respondents completed questionnaires. The measuring the current state of affairs was assessed.
instrument used was a structured questionnaire and was developed
and validated by Du Plessis (2010). The empirical research
component of the study consisted of the completion of interviewer Validity
administered questionnaires through personal interviews. The
questionnaire consisted of two sections: Section A was in the format
When assessing validity, the researcher determines
of a seven-point Likert type scale. The statements’ response
continuum ranged from 1 to 7, where 1 = strongly disagree; 2 = whether a measure used in the study actually does
disagree; 3 = somewhat disagree, 4 = neutral, 5 = somewhat agree, measure what the researcher intends it to measure. As
6 = agree and 7 = strongly agree. This section investigated the previously indicated, the measurement instrument
influence of the variables trust, commitment, two-way developed and validated by Du Plessis (2010) was used
communication and conflict handling on customer loyalty through in this study. The instrument was considered valid for the
the intervening role of CRM at selected short-term insurance
providers in South Africa. Section B gathered demographic purposes of the present study.
information from the respondents. This section contained fixed-
alternative questions and open-ended response questions which
the respondents answered in their own words (Zikmund and Babin, DISCUSSION
2007; Roberts-Lombard, 2006; Rootman, 2006; Ndubisi and Wah,
2005; Zikmund, 2003). Trust
The questionnaire was pre-tested in a pilot study in
Johannesburg, South Africa, involving five customers holding
insurance policies from the short-term insurance providers in the The majority of the respondents (84%) agreed that trust
study. Personal interviews were conducted with individuals who is an important variable in the relationship that they have
hold a policy with at least one of the four selected short-term with their short-term insurance provider. ‘I will have a
insurance providers (Outsurance, Santam, Telesure and Hollard). better relationship with my short-term insurance provider
These individuals were approached to complete the questionnaires
if it fulfils its obligations towards me’. This statement was
in the Tshwane Metropole and the Johannesburg Metropole,
respectively. A time frame of thirty days was used to complete the rated the highest under the independent variable trust,
interviews. Reliability and validity are the hallmarks of good and aspects such as the speed of service delivery and

the accuracy of information provided are perceived as that conflict handling is an important variable in the
important characteristics that will support loyalty between relationship that they have with their short-term insurance
the customer and the organisation. ‘My relationship with provider. ‘My relationship with my short-term insurance
my short-term insurance provider depends on whether its provider will be better if they apologise for problems that
employees show respect to customers’. This statement arose.’ This statement was rated the highest under the
was rated the lowest under the independent variable trust independent variable conflict handling, and it is therefore
and it can therefore be assumed that the respect that aspects such as the speed by which problems are
employees have for customers will have the least impact resolved, as well as the manner in which these are dealt
on securing customer loyalty. Therefore, respect is least with which are important characteristics that will support
effective in securing customer loyalty. loyalty between the customer and the organisation. ‘I
have a good relationship with my short-term insurance
provider because it tries to avoid potential conflict with
Commitment me.’ This statement was rated the lowest under the
independent variable conflict handling and it would seem
The majority of the respondents (87%) are of the opinion that the avoidance of conflict is the least effective in
that commitment is not an important factor that influences securing customer loyalty. This may be due to the fact
the relationship that they have with their short-term that avoiding conflict is not clearly evident to the
insurance provider. ‘My relationship with my short-term customer and the customer may not be aware that the
insurance provider depends on the attitude of its avoidance of conflict is taking place.
employees towards customers.’ This statement was rated
the highest under the independent variable commitment,
and aspects such as the helpfulness and friendliness of CRM and customer loyalty
employees are important characteristics that will support
loyalty between the customer and the organisation. ‘I am The majority of the respondents (89%) are of the opinion
very committed to my relationship with my short-term that CRM has an influence on their decision to be loyal to
insurance provider.’ This statement was rated the lowest their short-term insurance provider. ‘My short-term
under the independent variable commitment and it would insurance provider’s customer loyalty depends on
seem that the customers of the four short-term insurance whether it understands the needs of customers.’ This
providers in the study are not strongly committed to them. statement is rated the highest, and it can therefore be
argued that understanding the needs of customers has
the greatest impact on the loyalty of the customer. ‘I will
Two-way communication be a satisfied client of my short-term insurance provider if
I have extensive relationships with my short-term
The majority of the respondents (81%) are of the opinion insurance provider.’ This statement is rated the lowest,
that two-way communication is an important variable in and it would seem that customers do not find it important
the relationship that they have with their short-term to have an extensive relationship with their short-term
insurance provider. ‘My relationship with my short-term insurance provider. Therefore, having extensive
insurance provider depends on whether it makes and relationships with customers in the short-term insurance
fulfils promises’. This statement was rated the highest industry is least effective in securing customer loyalty.
under the independent variable two-way communication,
and illustrates that the ability of a short-term insurance
provider to fulfil and act on promises are important Goodness-of-fit and multiple regression analysis
characteristics that will support loyalty between the
customer and the organisation. ‘The more extensively i The goodness-of-fit model and multiple regression
communicate with my short-term insurance provider, the analysis were performed to assess the relationship
better relationship i develop with them’. This statement between the four independent variables and customer
was rated the lowest under the independent variable two- loyalty as well as the influence of CRM on customer
way communication and it can therefore be assumed that loyalty. The discussion will be guided by Figure 2.
trust will be least restored if employees communicate with
customers on a regular basis. Therefore, the use of
communication alone would not secure the loyalty of Goodness of fit
customers.
Model 1 was the initial model (Figure 1) and when
assessed, it was found to have a RMSEA value of 0.093
Conflict handling (Table 3). According to Byrne (2010), if this value is
between 0.08 and 0.10 it is an indication of a mediocre fit
The largest proportion of respondents (91%) illustrated that can be improved. If this value is greater than 0.10,

Figure 2. Proposed relationship between the independent variables, CRM and customer loyalty. Source: researcher’s own
construct.
Table 3. The goodness of fit model for the predictors.
Model GFI AGFI NFI CFI TLI RMSEA DF CMIN (x)

Model 1 0.764 0.721 0.789 0.825 0.808 0.093 344 1619,513
Model 2 0.837 0.802 0.848 0.88 0.865 0.085 246 1012,681
Model 3 0.879 0.845 0.894 0.92 0.908 0.078 164 597,701
GFI = goodness of fit index/AGFI = adjusted goodness of fit index; NFI = normed fit index; CFI = comparative fit
index; TLI = Tucker-Lewis index; RMSEA = root mean square error of approximation; DF = degrees of freedom;
Min (x) = Chi-square.
Table 4. Removed statements from Model 2 to improve the goodness of fit.
Statement code Statement

A1G My short-term insurance provider is concerned with the protection of my assets.
A2G I am very committed to my relationship with my short-term insurance provider.
A3A The more extensively i communicate with my short-term insurance provider, the better relationship i develop with it.
A4A I have a good relationship with my short-term insurance provider because it tries to avoid potential conflict with me.
this indicates a poor fit. Therefore, the ideal value would RMSEA value to 0.085. However, the model still required
be one that is less than 0.08. Model 1 was therefore not improvement and therefore a third model was considered
found to be a good fit and was adapted. Four statements through the exclusion of four more statements. In Model
were excluded from Model 1 (Table 4) in order to improve 3, the statements in Table 4 were excluded as well as the
the fit. These statements were excluded due to the fact statements in Table 5 that had squared multiple
that their squared multiple correlations were below 0.400. correlations of less than 0.300.
The removal of these statements created Model 2. The The exclusion of the statements in Table 5 decreased
statements earlier mentioned had a negative effect on the the RMSEA to 0.078 which provided a more favourable
goodness-of-fit of Model 1 due to the fact that they may model fit. Thereby, Model 3 was created.
not be specific enough and therefore respondents are
uncertain about how to respond to the statement. Another
reason may be that respondents are simply not able to Multiple regression analysis
respond to the statement. This may have been evident in
statement A4A stating that respondents may not be Influence of trust, commitment, two-way
aware of whether or not the short-term insurance provider communication and conflict handling on CRM
has tried to avoid potential conflict. The exclusion of the
earlier mentioned statements caused a drop in the The aim of the final model was to describe the influence

Table 5. Removed statements from Model 3 to improve the goodness-of-fit.
Statement code Statement

A2F My short-term insurance provider is willing to invest in maintaining relationships with its customers.
A3C My relationship with my short-term insurance provider can improve If it regularly provides me with
information on new or important services through different media sources.

A3F My relationship with my short-term insurance provider depends on whether it tailor makes their
communication to suit my needs.
My relationship with my short-term insurance provider is good because it has the ability to openly discuss
A4B
solutions when problems arise.
Table 6. Influence of the independent variables on CRM.
GFI AGFI NFI CFI TLI RMSEA

Model 3 0.836 0.810 0.877 0.916 0.908 0.066
Table 7. P-values for the different constructs in the study.
Construct P-value
Trust 0.315
Commitment 0.026
Two-way communication 0.290
Conflict handling 0.017
CRM 0.040
of trust, commitment, two-way communication and regression rates for the influence of CRM on customer
conflict handling on CRM. The standardised regression loyalty are illustrated by Figure 2. This figure illustrates
rates for this model are illustrated as solid arrows in the important function of CRM as an intervening factor in
Figure 2. There is low regression between trust, two-way the relationship between the independent and dependent
communication and CRM. There is a moderate variables. This therefore necessitates the need for the
regression between commitment and CRM but this intervening variable, CRM. This is due to the fact that the
relationship is negative. A negative regression implies regression is extremely low when CRM is excluded from
that an increase in one aspect results in the decrease of the model.
the other. The relationship between conflict handling and
CRM is the strongest of the four constructs. A model is
perceived to have a good fit if the RMSEA value is below P-VALUES FOR AN EXACT FIT MODEL
0.08 and the CFI value is higher than 0.09. The evident
good fit from Table 6 indicates that the observed The p-values in Table 7 is based upon the close fit model
measurements obtained illustrated that the different (final empirical model) as illustrated by Figure 3. These p-
independent variables had an overall significant influence values are used to accept or reject the hypotheses in the
on CRM. study. If the significant p-value is larger than 0.05, it
implies that the null hypothesis for a close fit model
Influence of trust, commitment, two-way cannot be rejected.
communication, conflict handling and CRM on
customer loyalty ACCEPTANCE OR REJECTION OF HYPOTHESES
The final model further aimed to determine the regression The following hypotheses are accepted and the
between CRM and customer loyalty. The standardised alternative hypotheses rejected:

Figure 3. Final empirical model of hypotheses acceptance. Source: researcher’s own construct.
H011: There is no relationship between the perceived Africa, based on the same variables as the study at hand,
trustworthiness of selected short-term insurers and CRM revealed that trust is an important factor in the
at short-term insurance providers in Gauteng. development of relationships, and there is a relationship
HA12: There is a relationship between the perceived between trust and CRM and therefore customer loyalty
commitment of selected short-term insurers to customers (Du Plessis, 2010). However, the regression analysis of
and CRM at selected short-term insurance providers in the study at hand revealed that there is no significant
Gauteng. relationship between trust and CRM in the short-term
HO13: There is no relationship between the perceived insurance industry. This could be due to the fact that
two-way communication of selected short-term insurers long-term insurance such as life insurance is perceived to
and CRM at selected short-term insurance providers in be of greater importance than short-term insurance and
Gauteng. this therefore decreases the need for trust. The four
HA14: There is a relationship between the perceived short-term insurance providers must therefore emphasise
conflict handling by selected short-term insurers and the need for short-term insurance in order to highlight its
CRM at selected short-term insurance providers in importance. This can be done by emphasising the
Gauteng. outcome of unforeseen circumstances, and the fact that
HA15: There is a relationship between CRM and the outcome is worse if the customer does not have
intentional customer loyalty at selected short-term short-term insurance. Due to the fact that the majority of
insurance providers in Gauteng. the respondents agreed with the statements relating to
trust, it can be assumed that trust is needed to enhance
Figure 3 illustrates the hypotheses that have been and strengthen a relationship. Short-term insurance
accepted. The null hypotheses are indicated as a dotted providers must therefore enhance the levels of trust by
arrow. communicating regularly with their customers on aspects
such as better deals or better options that will clearly
benefit the customer, and by making sure that insurance
MANAGERIAL IMPLICATIONS claims are managed in a professional manner without
any hassles. If customers are paying a monthly premium,
Trust it is expected that they benefit at a time of need. The
level of trust should be assessed on a regular basis in
A study in the long-term insurance industry in South order to determine any changes that need to be made

relating to staff and strategies. process of reaching mutual understanding in which

The staff of the organisation must be trained in keeping participants not only exchange (encode-decode)
the personal information of clients confidential. They may information, but also create and share meaning’ (Baran
also need training on how to make customers feel that et al., 2008). Although it is clear that there is no
they can trust the organisation, such as reassuring them relationship between two-way communication and CRM,
that their personal details will be kept confidential and recommendations will be made due to the fact that
their requests will be processed in due time. respondents agree with the statements relating to two-
way communication and therefore consider two way
communication to be important in relationship building.
Commitment The short-term insurance industry can ensure
communication by sending monthly newsletters to their
It is evident from the results that commitment is important customers in order to ensure that the customer has the
in building relationships between the short-term insurance opportunity to become aware of any news in the short-
industry and their customers. Customers cannot be loyal term insurance industry. The staff of these providers
if there is a lack of commitment from both the customer must be well trained and fully understand the functioning
and the supplier. The short-term insurance industry can of the organisation in order to have the necessary
encourage commitment by offering incentives such as a information to communicate with the various customers.
no-claims bonus for not claiming over a certain period of These providers should also ensure that customers are
time as well as rewarding customers with lower payments promptly notified should anything happen with any of
and cash back bonuses. These insurance providers must their insurance policies, claims or pay outs. This is where
ensure that the incentives provided are relevant and two-way communication relates to conflict handling, if
appealing to customers. They can do research in order to communication occurs, the need for conflict handling is
determine this. Each customer will have different less likely to be necessary. Monthly statements should be
preferences which will provide the organisations with prepared if the customer deems it necessary. The level of
various options to offer. Some may like the idea of a communication should be assessed regularly in order to
weekend away, financial incentives, meal vouches. determine if the organisation is not communicating
These organisations could go as far as linking up with a enough, or is perhaps communicating too little. The two-
specific car dealership and providing incentives such as way communication of the organisation should be
discounts on vehicles, parts or services for remaining with assessed on a regular basis by means of surveys or
the organisation. The more short-term insurance questionnaires. Organisations must ensure that two-way
organisations adjust their offerings to the individual needs communication is implemented throughout the individual
of their customers, the more likely it is for the customer to departments in order to ensure that each department
be committed and therefore possibly remain loyal to the works in synergy and towards achieving the same
organisation. Commitment is an attribute that contributes objectives.
greatly to the achievement of loyal customers. Short-term An important fact is that CRM is not dependent on one
insurance providers can segment their customers department; it must be implemented and accepted in
according to their life-time value as well as profitability. each department. Organisations must also ensure that
With regard to CRM, organisations should first divide their they are able to communicate in certain language
customers into groups before deciding which customers preferences, using a preferred method such as
have greater potential and therefore need increased telephone, e-mail, post or fax. Some customers may
attention. It may not be viable for a relationship to be built request monthly statements or annual statements.
with each customer.
The four selected short-term insurance providers are Conflict handling

large organisations that have a high number of
customers; it would therefore be too difficult for If an organisation does not handle complaints with urgency
relationships to be developed with each of these and respect, customers will see no reason to trust, commit
customers. The level of commitment of the organisation to or communicate with the organisation. This emphasises
and the customers should be assessed on a regular basis the need for adequate and effective problem recovery. It is
by means of surveys or questionnaires. If commitment is evident from the empirical results that conflict handling is
low, the reason must be determined and corrective important in building relationships. It is important for the
actions must be put into place. short-term insurance industry to realise the benefits of
conflict handling. If these providers resolve conflicts
effectively, customers who experience a problem again will
Two-way communication not hesitate to notify the organisation before it affects any
other customers. Conflict between a customer and an
Two-way communication can be described as a ‘two-way organisation can possibly result in

customer loyalty due to the positive handling of a conflict loyal. Two-way communication and conflict handling also
situation. The short-term insurance industry should make have a link, if a conflict is being resolved, the progress of
the process of laying a complaint problem-free in order to this must be communicated.
encourage customers to notify them of problems as their The short-term insurance providers must ensure that
customers comprise their only source of identifying they offer incentives in order to encourage customers to
problems or areas that need improvement. Short-term be loyal. These incentives include the “pay as you drive”
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at any time. These organisations must also realise the expensive premium. It is the tailoring of offers such as
importance of keeping customers informed regarding the this that encourages customers to be loyal. They could
progress of the resolving of a conflict or problem. It is the also introduce loyalty programmes that track the number
effective resolving of these problems that causes the of claims made and decrease the premiums for every
customer to build greater respect for the organisation and year that no claims are made.
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Emerging issues and strategies to enhance M-banking
services
R. K. Uppal
ICCSR Sponsored Major Research Project, D. A. V. College, Malout, Punjab, India. E-mail: rkuppal_mlt@yahoo.com.
In present day banking, total automation of banking operations is an imperative need for all banks to
attract more customers, provide efficient services, and survive in the emerging new competition, apart
from the profit motive which is the primary objective of the business. In order to achieve these goals of
business, various channels have been developed through technology. ‘Mobile banking’ is one of the
best alternative channels available to customers for quick, correct and efficient service at anytime and
anywhere. The present paper is devoted to explore the extent of mobile banking in Indian banking
industry where cell phone users are increasing at unexpected rate. Time period taken for study is 2000 -
2001 to 2006 - 2007 because this period is the eye-witness of infant condition of IT and during the same
period IT became mature. Simple statistical tools like average, standard deviation, co-efficient of
variation are used to calculate the efficiency of various bank groups providing the service of M-banking.
On the basis of analysis, the paper concludes that the private sector banks are on the top in providing
the M-banking services to their customers and have high profitability as compared to other bank groups
under study except foreign banks. The paper also highlights the benefits of M-banking to customers as
well as to bankers and suggests some strategies with their possible solutions like to spread awareness
regarding M-banking and to increase its area and scope to enhance M-banking services in India,
particularly in rural and semi-urban areas..
Key words: Extent of mobile banking, strategies to enhance M-banking services.
INTRODUCTION
Path breaking changes have taken place in the banking BENEFITS OF MOBILE BANKING TO CUSTOMERS AND
sector in previous years. The ongoing liberalization has TO BANKERS

increased “threat of entry” by plovers from across the To customers
globe while intensifying the rivalry between existing
competitors. The technological advances have opened a - Customers need not stand in the bank counters/front
new front by “quasi-banks”. Mobile banking has been
study but constantly gaining ground. The public percep- offices for various enquiries about his account.
tion of mobile financial services (MFS) has undergone a - Customer can save his valuable time in banking
positive change in past few years. This shift can be transactions and save in travel cost reaching the bank
traced back to the increased need for mobility and to branch etc.
technological advances in the telecommunication sector. - It is a mobile banking to have information of all the 365
Successful MFS offers enable business advantages but days at anytime anywhere about his account.
they also pose certain dilemmas e.g. the choice of a - Customer can pay his utility bills in time and save
suitable technical solution. M-banking solutions so far, paying penalties, since alerts are received from the bank.
however have failed to generate the land of customer - Cheque book requests can be made sitting in his work
response which was expected of them. place.

Emerging issues and strategies to enhance M-banking services 47
To bankers time as well as distance .It is in this context his article

attempts to trace the present status of hi-tech banking in
- M-banking helps banks in saving crores of rupees by way India, visualize its prospects and look at the challenges
of reduced transaction costs. Govt. incurs a cost of Rs. 12- and problems in the tracks to be traversed. He concludes
13 for every Rs.100. Mobile banking helps it reduce the cost that in the scenario of severe competition and escalating
to a mere Rs.2. expectation of customers for newer products and
- Banks can utilize the time saved for expansion of alternative delivery channels, the contours of banking are
business, marketing and sales activities by channel being redefined. The key to survival of banks therefore is
migration of customers to mobile banking. retention of customer’s loyalty by providing them with
- Banks can take advantage of profits by way of value added services tailored to their needs, using state-
commission for cellular companies by selling prepaid talk of- the-art IT. There is no way a bank can remain
time through ATMs. lukewarm to hi-tech and yet hope to grow. It is a choice
- Banks providing mobile banking service can have between survival and extinction.
competitive advantage on those banks, which are not Rao (2002) analyzed the impact of new technology on
providing this service. banking sector. The technology is changing the way the
business is done and opened new vistas for doing the
same work differently in most cost effective manner. Tele-
REVIEW OF LITERATURE banking and internet banking are making forays such that
branch banking may give to home banking. He provided
Avasthi and Sharma (2000 - 2001) have analyzed in their some policies to protect their profitability.
study that advances in technology are set to change the Shastri (2001) analyzed the effect and challenges of
face of banking business. Technology has transformed new technology for banks. Technology has brought a sea
the delivery channels by banks in retail banking. It has change in the functioning of the banks. The earlier
also impacted the markets of banks. The study also manual system of preparing of vouchers, etc. is slowing
explored the challenges that banking industry and its being automated thereby saving a lot of time and effort.
regulator face. The use of ATMs and introduction of more than in the
Janki (2002) analyzed that how technology is affecting past, especially in the post-VRS scenario.
the employees’ productivity. There is no doubt, in India Saxena (2000) also analyzed the importance of IT in
particularly public sector banks will need to use the banking sector. According to him, the future promises
technology to improve operating efficiency and customer to be even more exciting, interesting and challenging.
services. The focus on technology will increase like never The internet has enables us to talk to each customer as
before to add value to customer services, develop new an individual, with different needs and requirements. This
products, strengthen risk management etc. the study IT will affect the productivity and profitability of the banks.
concludes that technology is the only tool to achieve their Vageesh (2000) highly appreciated the new private
goals. sector banks which have adopted IT. The new private
Bhasin (2001) analyzed the impact of IT on banking sector banks with their state-of-the-art technology and
sector. It has transformed the repetitive and overlapping grandiose plans to make inroads into e-banking are now
systems and procedures into simple single key pressing darlings of the stock markets. Banks like HDFC and ICICI
technology resulting in speed, accuracy and efficiency of are foraying into net banking offering great convenience
conducting business and enabling them to enter into the to customers on one hand and results in lower
new activities. transaction cost for the banks on the other hand.
Husain (1988) also highlighted the importance of IT in
various sectors. In the introduction of any new technology
or system various organizational, financial and functional Research gap
problems are faced in the initial stages. People are The review of mentioned studies clearly indicates that no
generally reluctant to accept new system, howsoever comprehensive study has been undertaken regarding the
beneficial it may be. Such various issues, which are extent of mobile banking among various e-channels and
involved in computerization, have been critically and the extent of mobile banking using customers in India.
vividly discussed. Therefore, the present study is devoted to fulfill this gap
Pathrose (2001), banking the world over is undergoing and also to analyze the profit and business per employee
a rapid and radical transformation due to the all-pervasive of those bank groups providing more services through
influence of IT and breath taking developments in the mobile banking.
technology of telecommunications and electronic data
processing. The winds of change are blowing in India too.
The IT which implies the integration of information system OBJECTIVES, RESEARCH METHODOLOGY AND DATA BASE
with communication technology has radically altered the
Objectives
traditional ways of doing banking business and allowed
banks to wipe out the difference in - To explore the extent of mobile banking among various e-.

Table 1. (G-I) Position of M-banking among various e-channels (Percent).
E-Delivery channel 2000 - 2001 01-02 02-03 03-04 04-05 05-06 06-07 Average
Computerized branches 93.29 93.80 94.34 94.31 93.98 99.13 100 95.55
ATM 23.01 30.89 34.87 36.55 37.76 39.09 45.90 35.43
I-banking 11.80 16.25 23.08 32.27 35.08 40.37 51.44 30.04
M-banking 7.37 8.82 10.64 12.42 19.53 17.53 25.89 14.6

T-banking 3.69 4.41 6.68 9.50 12.30 13.62 19.38 9.94
Average 27.38 30.83 33.92 37.01 39.73 41.94 48.52 35.11
Source: Information collected from head offices.
channels. Position of M-banking among various e-channels (G-

- To know the extent of M-banking using customers in various bank I)
groups.
- To make strategies to enhance M-banking services in India.
Table 1 shows the position of M-banking among different
e-channels in G-I. It is clear that G-I has 95.55 PC
Research methodology computerized branches. After that comes the number of
branches providing the facility of ATMs and Internet
The research design of the paper is related to e-technology in banking. Their average percentage is 35.43 and 30.04
Indian banking sector. The present paper focuses on M-banking respectively. G-I has only 14.6 pc branches providing the
services of various bank groups. The whole banking industry makes facility of M-banking.
the universe of the study excluding RRB’s and Co-operative banks
Indian banking industry has been divided into five groups as per the
RBI guidelines. Position of M-banking among various e-channels (G-
II)
G-I – SBI and associate banks (8)
G-II – Other nationalized banks (20) In case of G-II, results are more depressing. It has only
G-III – Old private sector banks (17) 8.55 percent branches providing the service of mobile
G-IV – New private sector banks (8)
G-V – Foreign banks (29) banking. Although, internet- and tele-banking have even
less branches than M-banking but this statistics are not
We have deliberately taken the period in the post IT Act of 2000 satisfactory for a country like India where 98% of
because after this period e-technology became mature in India. The population is availing the facility of mobile phones (Table
study relates with the time period of 2000 to 2007. Some statistical 2).
tools like Mean, S.D, C.V, has been calculated to compare the
various results and to get the desired results.
Position of M-banking among various e-channels (G-
III)
Data base
In case of G-III also, position of M-banking is not satis-
1. Report on Trend and Progress, RBI, 2006 - 2007. factory. It has only 13.27 PC mobile banking branches.
2. IBA, Performance Highlights 2000 - 2006.
Computerized and ATM branches are comparatively on
3. Information collected from the head offices of many banks.
better position (Table 3).
RESULTS AND DISCUSSION Position of M-banking among various e-channels (G-

IV)
To know the extent of M-banking in Indian banking
industry, it is imperative to know the extent of branches of In case of G-IV, the position of all e-channels is quite
different bank groups providing the service of mobile satisfactory. All branches of G-IV are fully computerized
banking and the extent of customers availing this facility. and 72.75 PC branches are providing the facility of
Tables 1 - 5 show the extent of branches providing the Internet banking. After that comes the number of ATM
facility of M-banking for different bank groups differently. branches. G-IV has 66.43 PC mobile banking branches
These tables also show the position of M-banking among which is relatively satisfactory as compared with other
different e-channels. bank groups (Table 4).

Table 2. (G-II) Position of M-banking among various e-channels (Percent).
E-delivery channel 2000 - 2001 01-02 02-03 03-04 04-05 05-06 06-07 Average
Computerized branches 30.52 47.90 63.72 73.41 87.04 92.94 92.91 69.77
ATM 10.07 11.29 11.78 12.58 14.06 19.40 25.47 14.95
I-banking 1.55 1.94 2.74 4.21 5.01 6.65 8.40 4.35
M-banking 1.86 2.19 3.35 8.70 10.05 15.23 18.53 8.55
T-banking 0.94 1.37 2.96 3.53 3.86 6.10 11.40 4.30
Average 8.98 12.93 16.91 20.48 24.00 28.06 31.34 20.38
Table 3. (G-III) Position of M-banking among various e-channels.
Computerized branches 19.69 23.15 46.31 48.59 67.21 71.09 73.19 49.89
ATM 11.81 16.42 22.39 22.67 27.35 62.36 75.41 34.05
I-banking 6.25 7.98 15.05 15.60 17.68 20.71 23.93 15.31
M-banking 6.91 7.17 12.55 13.57 13.44 17.79 21.52 13.27
T-banking 5.74 8.83 10.90 11.44 13.31 18.47 20.64 12.76
Average 10.08 12.71 21.44 22.37 27.79 38.08 42.93 25.05
Table 4. (G-IV) Position of M-banking among various e-channels.
Computerized branches 100 100 100 100 100 100 100 100
ATM 40.66 42.51 58.58 51.65 81.84 89.03 83.60 63.98
I-banking 74.16 72.97 80.80 77.96 62.87 74.22 66.27 72.75
M-banking 64.59 69.63 72.72 71.21 56.59 69.26 61.04 66.43
T-banking 38.27 46.25 65.85 57.57 49.74 41.92 39.25 48.40
Average 63.53 66.27 75.59 71.67 70.20 74.88 70.03 70.31
Table 5. (G-V) Position of M-banking among various e-channels.
Computerized branches 100 100 100 100 100 100 100 100
ATM 132.85 130.61 217.22 188.94 294.32 169.63 202.42 190.85
I-banking 42.14 45.57 47.22 41.93 78.01 47.98 48.98 50.17
M-banking 40.71 40.13 45.00 44.23 75.88 46.96 50.20 49.01
T-banking 42.14 45.57 43.88 40.09 63.82 44.53 59.91 48.56
Average 71.56 72.37 90.66 83.03 122.40 81.69 92.30 87.71
Position of M-banking among various e-channels (G- Comparative position of mobile banking among
V) various bank groups
Although, G-V has less number of mobile banking bran- Table 6 highlights the comparative position of mobile
ches than G-IV but the comparative position of it in G-V is banking among different bank groups. It shows that G-IV
better. It has 49.01 PC branches providing the facility of is on the top position in providing the M-banking service
mobile banking (Table 5). to their customers. It has 66.43 pc mobile banking bran-

Table 6. Comparison of bank groups providing M-banking services.
E-delivery channel G-I G-II G-III G-IV G-IV

Computerized branches 95.55 69.77 49.89 100 100
ATM 35.43 14.95 34.05 63.98 190.85
I-banking 30.04 4.35 15.31 72.75 50.17
M-banking 14.6 8.55 13.27 66.43 49.01
T-banking 9.94 4.30 12.76 48.40 48.56
Overall Average 35.11 20.38 25.05 70.31 87.71
Table 7. Customer using of M-banking service.
Bank group 2000 - 2001 01-02 02-03 03-04 04-05 05-06 06-07
G-I 39171 59716 87477 187541 324175 459646 866677
G-II 16861 28630 39431 81427 188947 325301 463141
G-III 1621 8736 20693 24587 57119 79417 99431
G-IV 69441 101213 531449 867514 1810901 3865719 4993811
G-V 31631 47771 77877 105431 256063 391013 1056065
ches. G-V is on the second position and it has 49.01 pc 1.01 respectively. While G-III and G-I have gained next
branches providing M-banking facility. SBI group (G-I) two positions. In case of G-II, net profit as percentage of
and old private sector banks (G-III) have almost same working funds is only 0.79 PC.
number of branches providing M-banking facility as is
indicated in table. Only 8.55 PC branches of nationalized
banks (G-II) are proving the same service and in this Business per employee of various bank groups
term, this group has gained last position.
Table 8 indicates the business per employee of different
bank groups under study providing the service of mobile
Extent of mobile banking using customers banking. The study reveals that foreign bank groups have
maximum average of business per employee as compare
Table 7 shows the number of customers of different bank to other bank groups. Foreign banks are more benefited
groups availing the service of mobile banking in different than other bank groups. G-III and G-IV have almost same
years. It is clear from table that G-IV holds strong position average of business per employee as shown in tables.
among different bank groups. It has 49, 93,811 But on the other hand, public sector banks have very low
customers in the year 2006 - 2007 availing the facility of average. Co-efficient of variation reveals that maximum
M-banking. In terms of number of customers using M- variations found in G-I, G-II and G-V while least in G-III
banking services, G-V and G-I gained second and third and G-IV (Table 9).
position respectively. They have 10,56,065 and 8,66,677
mobile banking users correspondingly. Compare to these
Profit per employee of various bank groups
three bank groups G-II and G-III have very less M-
banking customers and they are 463141 and 99431 Table 10 shows the profit per employee of those bank
respectively. In all the bank groups customers of M- groups providing the facility of m-banking to their
banking are increasing year by year this indicates the customers. It is clear from table that G-V (9.67 pc) has
increasing popularity of M-banking. maximum average of profit per employee followed by G-
IV (7.42). In this respect, G-II gained the third and G-III
Net profit as a percentage of working funds gained the fourth position respectively. Their average of
profit per employee is 2.48 and 1.77 pc respectively. Co-
All the bank groups under study, more or less, are efficient of variation reveals that the maximum variations
providing M-banking service to their customers. Among found in G-II and G-V and comparatively less in other
these bank groups, G-V and G-IV have maximum net bank groups.
profit as percentage of working funds. On an average, Though, after so many years of the enactment of the IT
their net profit as percentage of working funds is 1.19 and Act, mobile banking has not gained satisfactory position

Table 8. Net profits as a percentage of working funds (Percent).
Years G-I G-II G-III G-IV G-V

2000 - 01 0.42 0.62 0.81 -0.72 0.71
2001 - 02 0.72 1.08 0.41 0.13 0.13
2002 - 03 0.96 1.17 0.90 1.57 1.56
2003 - 04 1.12 1.16 1.22 1.65 1.64
2004 - 05 0.89 0.22 1.13 1.30 1.29
2005 - 06 0.83 0.54 0.99 1.52 1.52
2006 - 07 0.85 0.76 0.92 1.65 1.47
Average 0.75 0.75 0.99 1.03 1.15
S.D. 0.22 0.31 0.30 0.76 0.46
C.V. (%) 29.33 41.33 30.30 73.78 40.00
Source: Performance highlights; various issues, 1997 to 2007, IBA Mumbai.
Table 9. Comparative performance of business per employee in various bank groups (Percent).

2000 - 01 1.60 2.00 7.46 9.03 159.93
2001 - 02 1.91 2.24 8.96 10.07 197.59
2002 - 03 2.15 2.99 10.94 10.31 221.90
2003 - 04 2.47 3.17 8.73 9.57 850.25
2004 - 05 3.06 3.55 8.75 9.40 307.62
2005 - 06 3.69 4.23 9.02 10.08 374.54
2006 - 07 4.61 4.96 8.11 9.95 434.05
Average 2.78 3.31 8.85 9.77 363.69
S.D. 1.07 1.05 1.07 0.45 235.99
C.V. (%) 38.48 31.72 12.09 4.60 64.88
Source: Performance highlights; Various issues, 1997 to 2007, IBA Mumbai.
yet increasing number of M-banking using customers STRATEGIES WITH THEIR POSSIBLE SOLUTIONS
indicates the comparative popularity of it among various TO MAKE M-BANKING MORE POPULAR
e-channels. Among various bank groups, new private
sector banks and foreign banks are on the top position in Awareness regarding M-banking
providing more mobile banking services and their
efficiency is also high as compared to other bank groups. As cell phone users in India are increasing at unexpected
rate, M-banking has greater scope. Therefore, it is
imperative that more customers should be made aware of
EMERGING ISSUES this service.
New techniques brings with it some issues, if these

issues are resolved efficiently then that technology can Possible solutions
prove boon for that area. M-banking is not an exception.
It has also bring with it some issues, like awareness - Banks should provide operational knowledge of M-
regarding M-banking, covering rural and semi-urban area banking with each their functions through SMS, WAP and
under M-banking, widening the scope of M-banking, IVR separately.
transparency and security. These issues must be tackled - Banks should arrange demo-fares or provide
very carefully and wisely to compete in the emerging information to customers at counters.
global order. - Posters consisting list of services provided by mobile

Table 10. Comparative performance of profit per employee in various bank groups (Percent).

2000 - 01 0.77 0.41 0.94 5.12 -6.33
2001 - 02 1.21 1.03 1.83 3.88 1.23
2002 - 03 1.59 1.65 2.62 9.19 15.50
2003 - 04 2.00 7.65 2.76 9.59 15.29
2004 - 05 2.04 2.03 0.57 8.27 11.63
2005 - 06 2.20 2.22 1.61 7.13 14.63
2006 - 07 2.22 2.40 2.09 8.77 15.74
Average 1.72 2.48 1.77 7.42 9.67
S.D. 0.55 2.38 0.81 2.17 8.74
C.V. (%) 31.98 95.98 45.76 29.25 90.38
Source: Performance highlights; various issues, 1997 to 2007, IBA Mumbai.
banking should be displayed at appropriate places. Improvement of HRD systems
The employees of e-banks should be given training to

Rural and semi-urban sector match their skill with the requirements of changing
More than 60 pc of Indian population resides in rural environment. They should at least make them aware of
areas. Therefore, it is need of the hour to capture this all the schemes provided by the banks.
market through e-delivery channels. M-banking is the
best alternative method in this direction. Hence, banks Possible solutions
should make M-banking popular in rural and semi-urban
areas too. - Banks should conduct training to train their staff
regarding ‘how to use various e-channels’ and update
their knowledge time to time.
Possible solution - Arrangements should be made to take regular test of
their employees (particularly Customer Care Executives)
Banks and Cellular service providers should tie-up in this to test their knowledge.
direction and try to provide mobile banking facility to rural
population free of cost (E.g. Bharti Airtel is in process of
tying up with two leading banks to extend its mobile INFERENCE
remittance services to rural areas).
The main inference of the study is that although mobile
banking has wider scope in Indian market but still it has
Wider scope of mobile banking not achieved satisfactory position. To make mobile
banking more popular, combined efforts by the banks and
The banks should make the area of mobile-banking wider cellular service providers are required to a large extent.
by adding some more banking facilities. This will further The study can prove beneficial for banking industry as
strengthen the popularity of M-banking and help to earn well as for other business institutions which can use
more income. mobiles to boost their revenues.
Possible solution Conclusion

Banks should allow the cash transactions of small With the rapid development of transport and communica-
amount (upto 5000) through M-banking. tion, people and services are coming together as if they
were just around the corner. If this is the case for many
services, then why should the banking industry lag
Transparency behind?
E-channels enable the banks to be better connected
The banks should disclose the full information regarding with the customers and vice versa. A customer who is
service charges, service tax, interest, penalty if any, etc. provided with a variety of additional services feels
to the customers to win their confidence. appreciated and is more likely to be loyal to that bank,

which is always a good sign for a bank. Janki B (2002). ‘Unleashing Employee Productivity: Need for a
In the end mobile banking not only helps a bank to Paradigm Shift’. Indian Bank. Assoc. Bull. (March) 24(3): 7-9.
Pathrose PP (2001). ‘Hi- Tech. Banking- Prospects and Problem’, IBA
reduce costs but also helps it to retain its valuable Bull. (July) 23(7).
customers. And as far as customers are concerned, this Husain F (1988). Computerization and Mechanization in Indian Banks
facility enables the customer to bank anywhere, at (New Delhi: Deep & Deep Publication)
anytime and in any condition, definitely a boon if a Rao NV (2000). ‘Changing Indian Banking Scenario: A Paradigm Shift’,
IBA Bull. 24(1): 12-20.
customer is stuck in the middle of nowhere and requires Shastri RV (2001). ‘Technology for Banks in India-Challenges’, IBA Bull.
banking services as soon as possible. (March) 23(3).
Thus mobile banking helps both, the customer as well Vageesh NS (2000). ‘New Private Banks: New Kids on the Block’,
as the bank, to lighten the burden of today’s world and to Business Line (March).
save time, money and energy which is greatly required
and appreciated.
REFERENCES
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Challenges for Regulators’, Prajanan 29(4): 17.

Producing innovation: Comments on Lee and Yu (2010)
1,2,3 1
Manuel Au-Yong Oliveira * and João José Pinto Ferreira
1
INstituto de Engenharia de Sistemas e Computadores do (INESC) Porto, Faculdade de Engenharia, Universidade do
Porto, Rua Dr. Roberto Frias, 4200-465 Porto, Portugal.
2
Department of Economics, Management and Industrial Engineering, University of Aveiro, Campus Universitário de
Santiago, 3810-193 Aveiro, Portugal.
3
Largo de Nevogilde, 125, 4150-527 Porto, Portugal.
There are many examples in the literature of articles As concerns “marketing”, innovativeness and team work
which, due to their inherent message, have merited are crucial as “marketers are playing a key role in the
further attention from peers, in the form of article reviews development of new products by identifying and
or commentaries. One such example in “marketing” is evaluating new-product ideas and working with R&D and
Morgan and Hunt (1994), a highly cited paper. Morgan other areas in every stage of development” (Kotler and
and Hunt’s (1994) “The commitment-trust theory of Keller, 2009: 606).
relationship marketing” was actually ranked at number The article being reviewed (Lee and Yu, 2010) comes
one by ISI Essential Science Indicators SM in the field of at a crucial time as we are experiencing a global financial
Economics and Business, having been cited appro- crisis with “no industry untouched by its effects” (Sinha
ximately four hundred times in a decade (in-cites, 2003). and Ahmad, 2009: 184) and which, accordingly, many
Morgan and Hunt (1994) is similar to Lee and Yu (2010) companies are having difficulty in surpassing. Examples
in so far as both articles are about relationships and both at the time of writing are companies in Greece, Portugal
articles are about cooperation and trust. The purpose of and Spain. In these countries in particular, experiencing
the article being reviewed (Lee and Yu, 2010), a survey difficulty, a positive rebound from the crisis is needed in
by questionnaire with 182 valid responses, is to analyze order to avoid deep-felt long-term negative effects on the
“how different relationship styles of employees in the hi- European Union and innovation (“the adoption of new
tech industry influence innovation performance” (Lee and approaches for an organization and suitable environ-
Yu, 2010: 1703) and indeed its conclusions are that “the ment” (Lee and Yu, 2010: 1704) and “the manipulation of
relationship style of an organization has a significant new knowledge to provide consumers with new products
positive effect on innovation performance” (Lee and Yu, and services they need” (Afuah, 1998) as quoted by Lee
2010: 1707). But what is innovation performance and why and Yu, 2010: 1705)) is seen to be one avenue out of the
is it so important to organizations? The economists’ point crisis as innovation “may consequently create various
of view is that innovation has to do with a new economic performances” (Mansury and Love, 2008, as
development and how it is (successfully) diffused (Knight, quoted by Lee and Yu, 2010: 1705). In countries such as
1967). Certainly new products and services “can trans- Greece, Portugal and Spain power distance (or PDI, “the
form industries and companies” (Kotler and Keller, 2009: extent to which the less powerful members of institutions
605) and in so doing can change lives, both of those and organizations within a country expect and accept that
introducing the innovation (Schumpeter, 1950) as well as power is distributed unequally” (Hofstede, 2001: 98)) is
of those adopting the new approaches. Kotler and Keller high (House et al., 2004: 539) and so employees “are
(2009: 605) state simply that “new-product development afraid to express disagreement with their managers and
shapes the company’s future.” Adis and Jublee (2010: tend to prefer managers with autocratic decision-making
91) stated further that “new product success is a crucial styles” (Çakar, 2006: 11; Oliveira et al., 2008). This is far
business consideration for both small and large firms”. from the ideal environment in which to produce innova-
tion, as suggested by Lee and Yu, and so managers in
these cultures will do well to adapt their approach
following Lee and Yu’s findings. It is possible for
*Corresponding author. E-mail: manueloliv@gmail.com.
companies to adapt their organizational practices, “the
process by which certain means are achieved” (Adis and

Producing innovation: Comments on Lee and Yu (2010) 55
Figure 1. Key words and patterns identified during qualitative research at a software manufacturer.
Jublee, 2010: 91) to go against national cultures as “a accumulated shared learning of a given group, covering
nation is not an organization, and the two types of culture behavioural, emotional, and cognitive elements of the
are of different kinds” (Hofstede, 2001: 393). group members’ total psychological functioning” (Schein,
In contemporary organizations “social understandings” 1992: 10) and “company-member interaction modes”
(Wilkins and Ouchi, 1983: 479) are not “immutable” (Lee and Yu, 2010: 1707). The importance of Lee and
(Wilkins and Ouchi, 1983: 479) and may be altered if Lee Yu’s findings and suggestions cannot be under-
and Yu’s suggestions are followed. Other countries in estimated, suggestions along the lines that improving
which PDI is high include Morocco and Nigeria (which “the intimacy among organizational members can
had the two highest scores for this construct in House et increase the level of innovation performance” (Lee and
al.’s (2004) study), as well as Zimbabwe, Zambia and Yu, 2010: 1707), especially the relationships between an
Namibia – all “Category A” countries in terms of “power employee and the organization, an employee and his or
distance scores” (House et al., 2004: 539) and scoring her supervisor and an employee and his or her
low on the latest Global Competitiveness Index (World colleague. Management tools which can be used involve
Economic Forum, 2010). Firms in these countries thus recruiting talents “with values close to the company” (Lee
need to pay increased attention to organizational culture, and Yu, 2010: 1707) but these authors also suggest
to the fostering of intimate relationships, where disagree- having unhindered communication channels to build up
ment can occur and differing opinions are valued, in order mutual trust, bonuses linked to performance, and
to increase innovation output. A preference for developing conflict-removing measures. Furthermore, the
consultation (or participative decision-making) is found in implement-tation of a mentoring system should be
low power distance cultures such as the USA and the adopted (such as that used by global management
Netherlands (each high scorers on the aforementioned consultancy firm Accenture), as should a participative
Global Competitiveness Index, ranked 4th and 8th decision-making process and praise in public to increase
respectively) and indeed Lee and Yu prove that “the employee fulfillment. Teamwork opportunities should also
better an employee of a hi-tech company gets along with be encouraged.
the organization, supervisor and colleague, the higher the Lee and Yu indicate other studies which support their
organization’s innovation performance due to its high findings on relationship style and innovation performance,
cohesiveness” (Lee and Yu, 2010: 1707). studies such as those by Dickinson and McIntyre (1997) and
In sum, implications for management practice are that Harvey and Speier (2000). We have found similar results
the individual-group emotional connection needs to be through our qualitative research effort at a software
taken into account by a company and positively manufacturer, in Portugal. Quantitative studies can be
influenced to ensure good innovation performance in the refined with qualitative research, which can supply more
organization. This can be achieved, according to Lee and detail concerning the way things happen. After listening to
Yu, through organizational culture. “Organizational culture our interview audio recordings, we applied Graphviz
is responsible for maintaining the social structure within software to the key words and patterns we identified and
the organization (and), it also generates the Figure 1 is a result of this analysis. Figure 1 tells a story “of
organization’s identity and characterizes it from other how the themes are related to one another” (Bernard, 2006:
organizations” (Kwantes et al., 2007: 98), including “the 451). As we can see,

cooperation and collaboration, which are types of rela- Çakar ND (2006). Enhancing innovation capability through human
tionships, are also major factors leading to the innovation resource practices: an empirical study in Turkish SMEs. South-East
Europe Rev., 4: 109-126.
phases NCD (new concept development), COM Deshpande R, Farley JU, Webster (Jr) FE (1993). Corporate culture,
(innovation commercialization) and NPD (new product customer orientation, and innovativeness in Japanese firms: A
development). The process starts with patterns such as quadrad anaylsis. J. Mark., 57: 23-27.
character development, team development and Dickinson TL, McIntyre RM (1997). A conceptual framework for
teamwork measurement. LEA London.
constructive play, and has results including knowledge of Harvey M, Speier C (2000). Developing an inter-organization relational
customer relationships (CR) and creation related to the management perspective. J. Mark. Channels, 7: 23-44.
value proposition (VP) of the firm. Hofstede G (2001). Culture’s consequences: comparing values,
SoftwareOne, a fictitious name given to our case study, behaviours, institutions, and organizations across nations, 2 nd
edition. Sage Publications.
which prefers to remain anonymous, is a very good case House RJ, Hanges PJ, Javidan M, Dorfman PW, Gupta V (Editors)
of collaboration and co-creation, which are “new (2004). Culture, leadership and organizations – The GLOBE study of
platforms for marketing and innovation” (Bhalla, 2011). 62 societies. Sage Publications, Inc.
In-cites (2003). An interview with: Dr. Rob Morgan & Dr. Shelby Hunt.
Verhoef and Leeflang (2009: 14) are concerned with “the
September. At: http://www.in-cites.com/papers/Morgan_n_Hunt.html
decreasing influence of the marketing department within (accessed on 1st December, 2010).
firms”. According to Verhoef and Leeflang the innovative- Knight KE (1967). A descriptive model of the intra-firm innovation
ness of the marketing department in particular represents process, J. Bus., 40(4): 478-496. th
Kotler P, Keller KL (2009). Marketing management, 13 edition.

a major driver of its influence and so this department’s
“pattern of beliefs, values and learned ways of coping Kwantes CT, Arbour S, Boglarsky CA (2007). Organizational culture fit
with experience that have developed during the course of and outcomes in six national contexts: An organizational level
an organization’s history” (Brown, 1995: 32) will be analysis. J. Organ. Cult. Commun. Confl., 11(2): 95-111.
Lee H-W, Yu C-F (2010). Effect of relationship style on innovation
especially important for an organization to thrive. The performance. Afri. J. Bus. Manage., 4(9): 1703-1708.
best performers, according to Deshpande et al. (1993: Mansury MA, Love JH (2008). Innovation, productivity and growth in US
32) “have a market culture and are both highly customer business services: A firm-level analysis. Technovation, 28(1-2): 52-
oriented and innovative”. Companies will do well to follow 62.
Morgan RM, Hunt SD (1994). The commitment-trust theory of
Lee and Yu’s suggestions towards achieving increased relationship marketing. J. Mark., 58: 20-38.
innovation performance, especially first and foremost in Oliveira M, Ferreira JJP, Barandas H (2008). The teaching of innovation
the selection and recruitment of employees who share and entrepreneurship: What professors from leading universities say.
the desired values, as Lee and Yu suggest, but also by In IFIP International Federation for Information Processing, 266,
Innovation in Manufacturing Networks; ed. A. Azevedo, Boston:
implementing other tools as their article’s important Springer: 353–362.
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Fostering and developing the industry cluster vigorously
in China in order to improve the technology-innovative
capability of enterprises
1,2 1
Wang Zhi-Xin * and Liang Cui
1
Institute of Finance Office of the Central Judicial Police No. 103, 71 Middle Road, Baoding, He Bei Province, P. R. China.
2
Northwest University No. 229, Tai Bai North Road, Xi An, Shan Xi Province, P. R. China.
As a form of an organization, enterprises play the fundamental role in the economic development
around the world. Nowadays, many middle and small enterprises are with small market coverage,
backwardness technology, low-level management, week innovative capability as well as the slow rate of
innovation. All of the above seriously hinders the improvement of the innovative capability. Thus, it is a
strategic choice of the improvement of innovative capability for our middle and small enterprises to
vigorously foster and develop the industry cluster and improve the competitive capability in view of the
global value chain. In addition, it is also in accordance with the strategic requirement of building an
innovative society as well as realizing a well-off society.
Key words: Industry cluster, technology-innovative for SMEs, economies of scale, economy of scope.
INTRODUCTION
Speeding up the process of economic globalization has In this paper, the global industrial value chain perspective
led to worldwide economic, political, cultural, social and is to explore how to develop local industrial clusters to
other aspects of major changes, SMEs are also the enhance China's technological innovation capability of
micro-economic agents facing unprecedented SMEs.
opportunities and challenges. To the fast-changing global
market place in the increasingly fierce competition to gain
the initiative, SMEs must have a strong ability in INDUSTRIAL CLUSTERS TO ENHANCE
technological innovation, especially for independent TECHNOLOGICAL INNOVATION CAPABILITY OF
innovation. Technological innovation capability of SMEs SMES IN INTERNATIONAL EXPERIENCE
in China is still very weak, with independent intellectual
property rights, independent brands, a lower proportion of Technological innovation is the innovative businesses
high value-added products. According to statistics, China can use their own internal and external resources,
has only 1% of SMEs in the patent; there are only 25% of through the formal channels to obtain a competitive
R&D institutions, R&D activities, only 30%. Industry advantage. Technological innovation can mainly be
Cluster can in fact cause a lot of industrial enterprises divided into two categories: the first category is graft-
and is closely linked to universities, research institutes type, that is, the original technology-based through
and other concentration in space, access to strong and digestion, absorption and re-creation and other channels
continuous technical innovation, and thus much of the to form the core competitiveness of enterprises; second
concern of scholars (Audretsch and Feldman, 1996; category is endogenous, research and development
Beaudry and Swann, 2001). through the formation of major technological inventions,
originality leading technology, including strategic
innovation, the standard create, brand creation and so
on, leading the entire industry value chain, decomposition
*Corresponding author. E-mail: wzx30615@163.com and reconstruction, in the macro performance of the

re-formation of a competitive pattern. Hsinchu, Taiwan, 6.27 billion U.S. dollars, accounting for half of the entire
China and India, high-tech industry clusters Bangalore Indian software exports. At present, Bangalore has
software industry cluster, a vivid illustration of the formed a comprehensive business-centered R&D system
industrial clusters of SMEs in upgrading technological and a sound technical innovation system. The reason is
innovation capacity in a significant role. that a number of individual enterprises to use well-
developed industry clusters within the network, re-human
resources, scientific and technological achievements,
Hsinchu, Taiwan, high-tech industrial clusters knowledge, information and other factors of production to
optimize the composition and configuration, enhancing
Hsinchu Science-Based Industrial Park, located southeast of technological innovation capability of enterprises. Thus,
Taiwan Hsinchu in 1976, started, officially established in shown is no longer the simple sum of all individual
December 1980, is Taiwan's first Science Park. Park use enterprises formed the competitiveness, but rather a
between enterprises within the cluster are geographically more global vision of the new cluster competitiveness. In
adjacent, closely linked to pass on the advantages of taking the fierce global competition in computer software
the vertical division of labor and resource sharing technology park in Bangalore, area businesses, rely on
competitive strategies, making every enterprise is able to their different kind of technological innovation, not only
update their equipment, using new technology, through defeated the Mumbai and other big cities, many well-
constant adjustment factor combination of inputs, reached a known domestic companies, but also a number of global
general improvement in business technology and total factor multinational companies trounced.
productivity purposes.
After 26 years of development, the Hsinchu Science Hsinchu, Taiwan, China and India, Bangalore, these
based Industrial Park, not only in economic status, two examples of industry clusters, fully shows that the
industry, and achieved total amount of attention to make cluster would have saved a lot of SMEs in the brink of
the world's outstanding achievement in technological bankruptcy, not only to enable them to survive, but also
innovation and its capacity has been greatly expanded enhance their overall competitive advantage.
and accelerated to upgrade. In 1998, the Hsinchu Science
based Industrial Park was selected as the world's fastest-
growing top ten parks in the first place, was the U.S. INDUSTRIAL CLUSTERS ENHANCE THE
"Business Week," called the "Asian Silicon Valley." ECONOMICS OF TECHNOLOGICAL INNOVATION
Scientific research institutes, especially Industrial CAPABILITY OF SMES INTERPRETATION
Technology Research Institute of the synergies and the
participation of the Hsinchu Science-based Industrial Park, As the business conduct of members of a cluster with a
the use of high-tech industry cluster advantages of single enterprise than a more comprehensive, systematic
technological innovation to enhance the park in and integrity, therefore, for industrial clusters to enhance
technological innovation capability of enterprises, enhance the interpretation of technical innovation capability of
the technological content and products industry's SMEs, need a new perspective. In this paper, the basic
international competitiveness. theory of economics, through the three aspects of this be
In 2003, Hsinchu has a number of 3026 patents, more interpreted.
than in 2002 increased 12.6%. According to average,
then, the Hsinchu Science based Industrial Park, each
company will have eight patents, has a number of patents To reduce the cost of business innovation and
29.7 per thousand per million dollars R&D outputs and the entrepreneurial risk
total number of patent 173, the high innovation potential of
enterprises of more than Silicon Valley in the United The geographical concentration of enterprises within the
States. cluster and interrelated, making the entire industry cluster
is more refined division of labor, intermediate inputs and
labor market size scale effect can also be fully effective.
Software industry cluster in Bangalore, India The link between enterprises within the cluster bond,
including blood, marriage, or extended to fellow
Bangalore is located in southern India, is the capital of classmates, friends, mutual trust and commitment
the southern Indian state of Karnataka. In June 1991, sufficient to maintain the specialized division of labor
Bangalore, India established the nation's first computer among enterprises and cooperative relations. Because a
software technology park. After less than 20 years of large number of companies concentrated in a limited
development, Bangalore is now the world's fifth largest geographic range of the latest achievements in
information technology center in India's software. From technological innovation will soon be receiving other
2004 to 2005, India's software exports 12.8 billion U.S. enterprises within the cluster, digestion, absorption and
dollars, of which Bangalore exports amounted to re-creation. They can be shared infrastructure, public

Fostering and developing the industry cluster vigorously in China in order to improve the technology-innovative ....................................................59
services and other organizations of the product, further labor cluster area. In Bangalore, India, for example,
reducing costs and business risks of innovation. Cluster which now attracts three Indian software companies
refinement of the division of labor, lower the cost of INFOSYS, WIPRO and many multinational corporations
innovation, but also create economies of scale, there is such as International Business Machines Corporation,
conducive to economic growth (Henderson, 1986). Figure AT&T, Motorola Inc., Lucent Technologies, Microsoft and
1 is the cost of enterprises to enter the cluster before and so on. These companies bring a lot of expertise and high-
after the changes. quality personnel, and further enrich the software
technology parks in Bangalore, the technological strength
and international competitiveness.
To promote enterprise technological progress and
technology diffusion
THE GLOBAL VALUE CHAIN TO IMPROVE THE
Technological advances rooted in technological PERSPECTIVE OF TECHNOLOGICAL INNOVATION
innovation, technological innovation has come from CAPABILITY OF SMES IN CHINA'S STRATEGIC
technological innovation system. Industrial cluster is an INITIATIVES
important regional innovation system. Industry cluster not
only has many different sizes and organizational forms of Firm as an organizational form of the economic
enterprises, and these enterprises are derived and development of countries in the world plays a
reproduction. Many business owners are mostly fundamental role. Both developed and emerging
concerned with the previous company, but the enterprise developing countries are actively fostering the
or the proposed development strategy is not being taken development of enterprises, especially small and medium
seriously, or to see the potential market, or the invention enterprises. Because China's small and medium
of new technology has been neglected by the old enterprises without in-depth, systematic policy research,
enterprises, etc., and thus to leave the old company there is no unified government regulatory agencies,
which gather to Together, this can often lead to further improved social service system, etc. as well as legislative
innovation in technology and products. A large number of and other issues behind, many SMEs are still unable to
companies coming together to invent the technology will overcome the inherent deficiencies, such as market
soon be absorbed by others and re-innovation, and, coverage narrow, technical equipment poor management
therefore, they have both a huge market pressure, as well skill, innovation is not strong, the slow pace of innovation
as strong impulse to the development of, and actively and low added value, financing channels narrow. Thus, in
carry out technological innovation. The advantages of the global industrial value chain of Perspective cultivate
industrial clusters between enterprises or between and develop industrial clusters to enhance their
enterprises and the market interaction, that is, within the competitiveness, Naishi raise China's technological
symbiotic existence of industrial clusters. Cluster innovation capability of SMEs strategic choice.
formation of this interaction the pressure of competition,
the potential pressure brought a series of technical
innovation, promoting industrial upgrading to speed up. Strengthen the government's rule-making in the
The communication between the external environment,
market, industry guidance, information services,
communication and cooperation process, the company
absorbed advanced technology and scarce resources, policy guidance, etc. functions
increased technology diffusion between the different
clusters. Industrial cluster is between a pure market, and between the
intermediate level of organization, than the market is stable
The accumulation of knowledge and expertise and flexible than the hierarchical organization. Because
outside the enterprise information asymmetry, the interference of interest groups,
functions missing bit (offside, dislocation, vacancy), etc., the
Industrial cluster a large number of companies organized Government's intervention may exist "efficiency trap"
manner, relying on its own with the "flexible specialization", (efficiency trap), mainly for the distortion of market
learning and innovation, cooperation and competition, self- mechanisms to influence the market equilibrium, etc..
organization and other features, is bound to produce clusters Targeted industry clusters with system flaws and market
of enterprises and organizations outside the polarization failures such as inadequate, Porter (2002) that the
effects (polarization), the relevant If the conditions of Government's role is to improve the constraints on cluster
enterprises and organizations will relocate to the cluster development, infrastructure construction and personnel
(Wang, 2001). Some Chinese scholars also believe that by training and education, rather than direct intervention in the
leveraging concentration of economic and competitive cluster development. In Italy, due to excessive government
advantage, industry clusters reduces the average cost of interference had led to its once fell into the quagmire of
every enterprise to improve the region's social capital has led industrial clusters is difficult to get away, and the sincerity of
to significant inflows of capital and China's Zhejiang Province, Pinghu city

government led to the optical and electrical machinery of normative intermediary structure, rules and
investment "seed" enterprises, its professional services to regulations, but a small number of intermediaries, the
facilitate the light mechanical and electrical cluster rapid structure a single, the lack of appropriate mechanisms to
growth. Therefore, China should actively participate in all improve and regulate the problem has seriously hindered
levels of local governments, enthusiastic support, the exchange of information between industry clusters.
strengthening quality management, and promoting the Therefore, it should form a complete set of including
formation of industrial clusters diversified product mix and science and technology achievements and technical
market structure, attaches importance to and strengthen advisory services, talent agency, management
the business information services, encourage the consulting, financial institutions, various rating agencies
development of industry associations, industry and information service institutions, and the provision of
organizations give full play to the self - services, legal, financial management, and other intermediary
coordination and management role. agencies to provide information consultation, training,
assessment, inspection, arbitration, and coordination of
various intermediary services.
To establish a sound risk investment mechanism,
and form private capital as the main risk of multi-
channel investment and financing system We must strengthen the monitoring and management
of the cluster is running the intensity and scientific
In 2006, the National Bureau of Statistics, Nanjing, Wuxi, forecasting and planning future development of the
Suzhou, Changzhou, four SMEs in the city of 160 special cluster
survey of independent innovation of enterprises found that
78% of the surveyed enterprises believe that the financing According to product life-cycle theory, the development of
difficulties are the key issues impeding business industrial clusters through budding, growth, maturity and
innovation. A general lack of operating funds for SMEs in decline, and so on several stages. At each stage, industry
China, local finance is limited; banks have high-risk clusters not only not the same as the number of firms, but is
innovative enterprises generally adopt a "prudent loan-to" not fully consistent with the cluster development strategy.
and other factors that have led companies unable to invest Therefore, we should local conditions, make the best use to
funds for the technological achievements of the rational planning of the clusters, increase the cluster policy,
industrialization and commercialization of new products. both internal and external governance and the cluster
Venture Capital originated from the United States, intensity, for example, in the industrial cluster in its infancy,
because the coordination of venture capitalists, should be enthusiastic support, the availability of funds and
technology experts, investors relations to form a benefit- facilities infrastructure; in the growth stage, we should
sharing, risk-sharing mechanism, much investment in expand the scale of industrial clusters to form a close
high-tech enterprises welcome. Therefore, China should network system; in the mature stage, more attention in the
give full play to open a high degree of private capital, the global industrial value chain on the upgrading of
advantages of more adequate to establish risk investment competitiveness of industrial clusters, rather than blindly
mechanism to encourage the international capital, private obsessed with the scale of expansion. Study of international
capital into the venture capital, private capital as the main best practices, and continuous monitoring of industrial
body to form a multi-channel venture capital financing clusters, and based on the trend of the development of
system for the enhance the competitiveness of industrial industrial clusters rational planning and scientific forecasting
clusters to provide the necessary equity capital. future development of industrial clusters, to avoid lock-in
effect (Lock-in), and by low competition (Race to the
bottom), is the cultivation and development of industrial
clusters to enhance the ability of independent innovation
Vigorously develop science and technology agency,
enterprises an important way.
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Effective marketing strategies and the Nigerian
construction professionals
Grace K. Ojo
Department of Quantity Surveying, Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria. E-mail:
graceo2010@yahoo.co.uk, graceojo@oauife.edu.ng.
All the economic sectors are facing keen competition for survival and sustenance; and the construction
industry is not an exception. Many construction professionals face difficulties in selling their services
due to failure to embrace marketing concept. Effective marketing strategies had been established to
improve the growth of professional services in the competitive environment; therefore this paper
examined the existing marketing strategies with the aim of determining their level of usage and
effectiveness among Nigerian construction professionals. Six marketing strategies were identified for
assessment by the consultants and contractors. These were location of firm, promotion, professional -
client relationship, professional contract, marketing mix (4 ps) and research. The result indicated that
the level of awareness of marketing strategy is low among the construction professionals surveyed
despite the fact that they believed it is very essential in improving productivity. Professional - client
relationship and professional contract were ranked very high as popular and effective marketing
strategies. The paper concluded that the most popular and effective strategy was professional - client
relationship followed by professional contract. However, marketing mix was the most preferred strategy
with other strategies ranked high. Effective marketing strategies will result in profit increase, awareness
creation, professional appreciation by the public and introduction of new attractive professional
development.
Key words: Construction, marketing, professional, strategy.
INTRODUCTION
Marketing is practiced all over the world and it is referred Muhamed, 2008; Arslan et al., 2009; Polat, 2010; Polat
to as the activity of getting company to sell what the and Donmez, 2010). The American Marketing
customer “wants” (goods or services). Its importance for Association Board of Directors in 2007 defined marketing
the survival of companies cannot be overlooked (Waugh, as the activity, set of institutions, and processes for
2004; Arslan et al., 2009). Polat and Donmez (2010) creating, communicating, delivering, and exchanging
established that effective marketing plays an important offerings that have value for customers, clients, partners
role in the overall success of companies and is critical for and society at large (Polat and Donmez, 2010). It can
any business to grow in the competitive environment. also be defined in relation to construction as finding
Although, most construction professionals perceived information about the economy, the client and the
marketing as an unimportant management function competition.
therefore not integrated into the structure of the firms and According to Adegbile (2008), marketing of professional
where it was incorporated, the level of adoption was slow service is defined as the creation of client satisfying
(Winter and Preece, 2000; Bennett, 2005; Jaafar et al., services at a profit to the firm. The professionals in the
2008; Arslan et al., 2009). Recently, there is an construction industry are quantity surveyors, architects,
increasing recognition that marketing has an important civil and building contractors, estate surveyors, structural
role to play in the enhancement of the performance of the and services engineers. Pryor (2001) established that the
construction profession (Arditi et al., 2008; Chen and entire construction industry is based on the concept of

making sure that the owner receives what he requests. strategies in the construction industry and the challenges
Therefore, the professionals in the construction industry facing small to medium enterprises in the development of
bring together expertise and skill to work towards a these strategies. They discovered that there was a lack
common goal of satisfying their client. Adegbile (2008) of understanding of marketing principles within small to
and Jaafar et al. (2008) emphasized that the construction medium enterprises and concluded that majority of
professional firms differ from all other industries. They construction firms were yet to adopt marketing as a
provide highly customized services and thus cannot apply cornerstone of strategy and management. Arslan et al.
many of the marketing management principles developed (2009) investigated the critical factors affecting marketing
for product based industry. Also, professional services success of construction companies in the housing sector
are highly personalized and involve the skill of individual of Turkey. They identified company image and customer
service providers. However, realizing the nature of the satisfaction as vital factors for successful marketing in
construction business environment, it is vital to develop construction business. Polat and Donmez (2010)
appropriate marketing practice to be adopted by the examined the marketing management functions of
professionals for survival in the industry. The construction Turkish construction companies and revealed that
industry is invariably a significant part of the process of Turkish contractors made use of marketing management
developing economy. The process of economic functions to some extent.
development can be enhanced and accelerated by Ene (1995) and Adegbile (2008) assessed marketing
professional services inputs (McNamara, 1999). The practices among Nigerian construction firms and
degree to which service dominates the economy and the concluded that there was little or no use of marketing in
important role played by this sector in Nigeria and other the Nigerian construction industry. They, therefore,
countries was noted by Shen and Dong (2000), Mogbo suggested the need for awareness on the importance of
(2001), Central Bank of Nigeria (2004), Lee et al. (2008), marketing as a tool to withstand the stiff competition in
Dantata (2007) and Arslan et al. (2009). Research the Nigerian construction business environment. Despite
established that improved professional services through the fact that many research works on marketing exist, few
effective marketing can lead to an enhanced economy. It have been recorded on strategies used by Nigerian
is therefore apparent that effective marketing is vital for construction professionals in marketing their services.
Nigerian construction professionals. Hence, this paper identified marketing strategies used by
In view of this, this paper identified marketing principles professionals, examined the degree of effectiveness and
and strategies, assessed their level of adoption and assessed the level of preference attached to them by the
examined the extent of effectiveness and level of Nigerian construction professionals with a view to
preference with a view to improving Nigerian construction creating awareness on marketing practice as an
professional performance in the global competitive important tool in improving professional success rate and
environment. survival in a competitive environment.
PREVIOUS STUDIES ON MARKETING IN THE Marketing strategies adopted by construction

CONSTRUCTION INDUSTRY professionals
There are many studies on the concept of marketing in Marketing strategy is a managerial process of analyzing
the construction industry. Morgan (1990) investigated market opportunities and choosing marketing position
marketing of consulting engineering services and that serves the company’s purpose and objectives. It is
discovered that very few firms had their own marketing the company’s response to external environment and
departments. Yisa et al. (1996) proposed a framework for consistent set of principles through which company
improving the effectiveness of the marketing function hopes to achieve its long run customer and profit
within the construction enterprises. They concluded that a objectives in a competitive environment. Marketing
practical approach for formulating, implementing and strategies are means by which professional firms sell
evaluating corporate marketing programmes can be their services to their intending clients. They play an
represented by the framework. Dikmen et al. (2005) important role in the success of a construction company
examined the perception and attitude of Turkish in this highly competitive industry. Ganah et al. (2008)
contractors against marketing. They found that marketing offered generic strategies to be adopted by any business
capability was not seen as a strategic success factor by but this may not always be applicable to the construction
the majority of the contractors. Jaafar et al. (2008) also industry due to its nature. Zeithaml et al. (1985)
studied the marketing practices of engineering consulting suggested various strategies for problems stemming from
firms in Malaysia. Their analysis showed that many civil unique service features. These include creating strong
and structural consultancy firms had neither marketing organization image, using cost accounting to help set
departments nor employees specifically responsible for prices, engaging in post-purchase communications,
marketing. Ganah et al. (2008) investigated marketing managing consumers, using multisite locations, e.t.c. Lee

Effective marketing strategies and the Nigerian construction professionals 63
et al. (2008) identified marketing strategies of Korea’s more on the market or sales rather that the customers. In
housing construction firms and classified them as green, addition, there is need to exercise caution on the use of
well-being and ubiquitous. Several strategies used by this strategy not to go against the professional ethics.
different researchers have been drawn from literature, out
of which the following were indentified for discussion in
this paper. Professional contract
This strategy may involve members of other related

Location of the firm professions to form a link with prospective client who
needs their services. Ganah et al. (2008) referred to this
This is of importance to professional service firms. There as partnering. Construction Industry Institute (CII, 1991)
are areas where services are regularly in demand highlighted the expected benefits of partnering to include
especially areas of high concentration of construction improved efficiency, cost-effectiveness, increased
activities. It will, therefore, be of benefit to the firms if opportunity for innovation, and the continuous
located in such places to make effective sales. However, improvement of quality products and services. Ganah et
Zeithaml et al. (1995) included the use of multisite al. (2008) established that construction industry is shifting
locations to cater for firms which have projects in different toward partnering which can lead to adding value to the
locations at the same time. However, there is need for professional organizations. This can also take the form of
caution in terms of proper monitoring of these locations a professional recommending another professional
for well representation of the firms. colleague to a prospective client.
Professional-client relationship Marketing mix (4 ps)
Good relationship between the client and the The marketing mix is a rational approach based around
professionals makes a good strategy, as courteous transaction cost and has dominated marketing concepts
service and reliability of the firm’s past performance and practice over for a long period of time (Smyth, 1996).
encourage the clients to come back for further services. Polat and Donmez (2010) opined that companies should
Zeithaml et al. (1995) recommended managing create a successful mix of the right product, sold at the
consumers (clients) as one of the strategies to solve the right price, in the right place, and using the most suitable
problem of inseparability in construction services. Winter promotion when marketing their products or services.
and Preece (2000) stressed the need for relationship They established that marketing mix theory has been
marketing as a strategy for improved performance in successful in the manufacturing industry. However, it
construction industry. Jafaar et al. (2008) identified client provides little help to the construction industry due to the
relations/contact as the most important category of fact that construction is mainly service oriented (Maloney,
marketing strategies because professional services 2002; Cheah and Garvin, 2004; Skitmore and Smyth,
usually involved a high degree of interaction with the 2007; Polat and Donmez, 2010). It composed of the four
client. Polat and Donmez (2010) recognized the P’s: product, prices, place (distribution) and promotion.
importance of building strong relationship with customers These elements appear as core decision variables in any
and marketing partners to achieve the desired objectives. marketing plan. In construction, place is determined by
the project's location, the spread of the offices should be
the primary marketing decisions for the professionals to
Business promotion attract clients. Price, in this case the fee is obviously
important, yet the significance of the fee is less important
This is a method of securing understanding between the than the contribution the product makes to the overall
client and the professionals for the purpose of bringing project price (Smyth, 1996).
about a favourable buying action and at the long run, a In addition to this, promotion is important in the sense
long lasting confidence in the firm. Zeithaml et al. (1995) that the professionals in the construction industry
described this as part of specific effort to encourage enhance the contract offered to the client through
customers to tell others about their services. It is worth effective communication of the benefits of product.
noting that promotional techniques adopted in other
sectors may not be applicable in the construction industry
due to the uniqueness of this sector. Polat and Donmez Research as a marketing strategy
(2010) listed various promotion parameters that can be
used in the construction industry. However, Ganah et al. There is an increasing recognition that research has an
(2008) was of the opinion that much attention should not important role to perform in the enhancement of the
be given to ‘promotion’ as it makes professionals to focus construction profession performance (McNamara, 1999).

Table 1. Rating system for level of usage, effectiveness and preference of marketing strategies.
Rating Level of usage Degree of effectiveness Level of preference

1 Not used Not effective Not preferred
2 Less frequently used Less effective Less preferred
3 Frequently used Effective Preferred
4 More frequently used More effective More preferred
5 Most frequently used Most effective Most preferred
Arditi and Davis (1988), Smyth (1996), McNamara (1998) Nigerian Institute of Quantity Surveyors and Nigerian Society of
and Polat and Donmez (2010) identified marketing Engineers respectively). Sixty (60) members from each of these
professionals were selected using systematic sampling. From the
research as one of the construction marketing activities list of registered firms arranged alphabetically, the first and the
and a powerful strategy. Potential benefits that can be subsequent even numbers were chosen until the targeted 60th
derived in terms of enhancements in economic, social sample was chosen. The questionnaire survey was used for this
and political systems are enormous if research is given study; this questionnaire was divided into 3 sections: the first
desired attention as a marketing strategy. section focused on the respondent’s general information such as
year of existence of the firm, designation of the respondents,
professional qualifications as well as year of professional
experience. The second section focused on questions relating to
Benefits of effective marketing the firms marketing activities and issues relating to marketing
strategies used by the surveyed firms, their effectiveness and the
Many benefits of effective marketing to construction have level of preference. The third section focused on the expected
been highlighted by researchers (McNamara, 1999; outcomes of improving the marketing strategy. The respondents’
Ngowi et al., 2000; Stewart et al., 2003; Dikmen et al., opinions on importance of marketing of professional services were
examined using five-point Likert scale where 1 represented
2005; Ganah et al., 2008; Arslan et al., 2009; Polat and ‘strongly disagree’ and 5 represented ‘strongly agree’. Six
Donmez, 2010). This include survival of the firms, growth marketing strategies (professional-client relationship, professional
sustainability, increase in profits, increase in sales, contract, marketing mix (4 ps - product, price, place and
increase in client satisfaction, development of company promotion), location of firm, research and promotion) from literature
image, development of products/services, better (Zeitham et al., 1985; Arditi and Davis, 1988; Marr et al., 1996;
competitive advantage, creation of opportunity to acquire Smyth, 1996; McNamara, 1999; Ganah et al., 2008; Jaafar et al.,
2008; Polat and Donmez, 2010) were focused in this paper.
knowledge and understanding of construction marketing
Respondents were requested to express their opinion on the level
(business link), entrance to new markets, creation of new of usage, effectiveness and preference attached to each marketing
markets, improvement of customer loyalty, improvement strategy using Likert scale of 1 to 5. Table 1 shows the rating
of reputation, improvement of total quality, e.t.c. Hence, systems used in this paper. Two hundred and forty (240) copies of
properly used strategies will result in increase in profit, questionnaires were administered on the sampled respondents, out
creation of awareness, professional appreciation by the of which 156 were collected and found useful for analysis. The data
were analyzed using mean response analysis (MRA) adapted from
public, increase in integration between related Ojo and Odediran (2010). It was used to determine the prominent,
professionals, introduction of new trends and new effective and preferred marketing strategies. This method of
development that makes the professional more attractive analysis has been employed by many construction management
and therefore leads to competitive advantage. researchers (Akintoye, 2000; Wang et al., 2001; Odeyinka, 2003).
The mean score is determined as follows:
RESEARCH METHODOLOGY 5n5 + 4 n4 + 3n3 + 2n2 + 1n1

The literature review provided a basis for developing the Mean score =
questionnaire used in surveying professional firms. This was (n5 + n4 + n3 + n2 + n1)
conducted to appraise the existing marketing strategies with a view
to determining their frequency of usage and effectiveness of these Where n1 = number of respondents who picked 1; n 2 = number of
strategies for the purpose of achieving improved patronage from the respondents who picked 2; n3 = number of respondents who picked
construction clients. 3; n4 = number of respondents who picked 4 and n5 = number of
respondents who picked 5.
Data collection
RESULTS AND DISCUSSION
The population of this study was the consultancy and construction
firms in Southwestern Nigeria. The targeted respondents were the
architects, builders, the quantity surveyors and the engineers. Their
Respondent’s general information
lists were obtained from the directories of their professional bodies
(Nigerian Institute of Architect, Nigerian Institute of Building, The result from Table 2 revealed that out of one hundred

Table 2. General information of the respondents.
Designation of respondent
Responding officer Frequency Percent (%) Cumulative percent (%)
No response 13 8.33 8.33
Quantity surveyor 47 30.13 38.46
Contractors 42 26.92 65.38
Architect 23 14.74 80.13
Engineer 31 19.87 100.00
Total 156 100.00
Professional qualification of respondent
Professional qualification Frequency Percent (%) Cumulative percent (%)

No response 23 14.74 14.74
MNIOB 32 20.51 35.26
MNIQS 44 28.21 63.46
MNIA 31 19.88 83.33
MNSE 26 16.67 100.00
Total 156 100.00
Year(s) of professional experience
Years Frequency Percent (%) Cumulative percent (%)

1-5 5 3.21 3.21
6-10 22 14.10 17.31
11-15 46 29.49 46.79
16-20 71 45.51 92.31
21-30 7 4.49 96.79
Above 30 5 3.21 100.00
Total 156 100.00
Year(s) of existence of the firm
Year of existence of the firm Frequency Percent (%) Cumulative percent (%)
1-5 10 6.41 6.41
6-10 27 17.31 23.72
11-15 53 33.97 57.69
16-20 40 25.64 83.33
21-30 15 9.62 92.99
Above 30 11 7.05 100.00
Total 156 100.00
and fifty-six (156) responding professionals, 47 (30%) information supplied by them can be relied upon.
were quantity surveyors, 42 (27%) were builders, 23
(15%) were architects while 31 (20%) were engineers.
Eighty-five percent (85%) of them were members of Marketing practice in the Nigerian construction
different professional bodies. Eighty-three percent (83%) industry
of the respondents had more than 10 years of
professional experience in the construction industry, with Respondents were requested to express their opinion on
the majority (73%) of them falling within 11 to 20 years of the marketing practice by indicating their level of
experience and 70% of the firms had been established for agreement with issues relating to marketing practice.
more than 10 years. The result from Table 2 revealed that Majority of the surveyed professionals agreed with the
the Nigerian construction professionals were well issues of marketing practice as indicated in Table 3, 73%
represented; professionally qualified and had many years agreed that marketing is a concept of matching services
of working experience to their credit. Hence, the to wants in the market place, 89% agreed that it creates

Table 3. Marketing practice in the Nigerian construction industry.
Marketing issues Strongly agree F (%) Agree F (%) Disagree F (%) Strongly disagree F (%) Total F (%)
It is a concept of matching services to wants in the market place. 61 (39.10) 54 (34.62) 18(11.54) 23(14.74) 156 (100)
It creates and maintains relationships that will satisfy individual and organisation objectives. 51 (32.69) 88 (56.41) 9(5.77) 8(5.13) 156 (100)
It identifies potential clients and keeps them informed about a firms capability. 56 (35.90) 91 (58.33) 6(3.85) 3(1.92) 156 (100)
Marketing is essential. 49 (31.41) 94 (60.26) 8(5.13) 5 93.21) 156 (100)
Level of practice is low. 85 (54.49) 52 (33.33) 9(5.77) 10 (6.41) 156(100)
Table 4. Assessment of marketing strategies based on frequency of usage, degree of effectiveness and level of preference.
Marketing strategy Identified marketing strategies and their frequency of usage Effectiveness of the identified marketing strategies Preferred marketing strategy
MRA Rank MRA Rank MRA Rank
Professional - client relationship 4.01 1 4.31 1 3.60 3
Professional contract 3.79 2 4.13 2 3.97 2
Marketing mix (4 ps) 3.39 3 2.90 4 4.18 1
Location of firm 3.33 4 3.80 3 3.48 4
Research 1.34 5 1.98 5 3.03 6
Promotion 1.14 6 1.65 6 3.46 5
and maintains relationships that will satisfy practice in Nigeria. respondents except research and promotion
individual and organisation objectives, 94% Marketing should be encouraged and practiced (Table 4). The most frequently used marketing
agreed that it identifies potential clients and keeps appropriately among the Nigerian construction strategy was professional–client relationship (MRA
them informed about a firms capability and 91% of professionals to withstand the stiff competition in = 4.01), other frequently used strategies were
them agreed that it is essential; however, (87%) the construction environment. professional contract (MRA = 3.79), marketing mix
indicated that the level at which marketing is (MRA = 3.39) and location of the firm (MRA =
practiced in the construction industry is very low. 3.33). Rarely used strategies from the findings
This is in agreement with Winter and Preece Marketing strategies used in the Nigerian were research (MRA = 1.34) and promotion (MRA
(2000), Bennett (2005), Adegbile (2008), Jaafar et construction industry - Level of usage and = 1.14). Effectiveness of marketing strategies in
al. (2008) and Arslan et al. (2009). It was clear effectiveness construction industry was also assessed; the
from the result that most Nigerian construction results (Table 4) indicated that professional–client
professionals recognized the importance of Marketing strategies used by professionals in the relationship was the most effective marketing
marketing as a necessary tool for organizations construction industry were identified and listed for strategy (MRA = 4.31) followed by professional
development, but there was an indication that the the respondents to rate based on the frequency of contract (MRA = 4.13) and location of the firm
level of practice of marketing among them is usage. Despite the fact that the level of marketing (MRA = 3.80) while research (MRA = 1.98) and
inadequate. Therefore, there is a need for positive practice was very low, it was observed that all the promotion (MRA = 1.65) were less effective
change in professionals’ attitude to marketing strategies were recognized and used by the marketing strategies
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TECHNOLOGIESWORLD
used by professionals in the Nigerian construction develop these strategies for improved productivity and
industry. It was obvious from the result that professional – profit. Several authors have indicated that there were
client relationship was the most frequently used and most benefits of research as marketing strategy (Zeithaml et
effective strategy in Nigerian construction industry. This al., 1985; Smyth, 1996; McNamara, 1999; Ganah et al.,
result is not unexpected because professional services 2008; Polat and Donmez, 2010). Research focused on
usually involve high degree of interaction with the client. analyzing business opportunities in the market, collecting
The purpose of relationship in marketing is to get close to information about potential customers, competitors and
the client or customer and serve both their immediate and the marketing environment so as to analyze the
long term needs. There is need to build strong and lasting company’s strength and weakness. Research provides
relationship with customers and marketing partners. opportunity of familiarization with new and current
Good relationship between the client and the development and technology in the profession.
professionals makes a good strategy, as previous Application of these new innovations in the services
courteous services of the firm and the reliability of its past rendered by the firm will promote the firm and attract
performance makes the clients come back for further more clients. In addition, it also increases opportunity to
services. It is important to note that it is good to keep the gain knowledge and understanding about construction
existing clients by delivering satisfaction while attracting marketing. Marketing in relation to construction is finding
new ones, good relationship with them can also serve as information about the economy, the client and the
a means of advertisement because they will introduce competition which is the main function of research.
new clients. The result is in agreement with Winter and Zeithaml et al. (1985) included regular collection of
Preece (2000), Ganah et al. (2008), Jaafar et al. (2008) information about the customers’ needs as part of
and Polat and Donmez (2010) who emphasized on the strategies used among services firms. Therefore, it is
importance of keeping strong and lasting relationship with imperative to enlighten the professionals that research
the clients. Relationship between the clients and has an important role to perform in the enhancement of
professionals will determine, to a great extent, flow of the performance of their profession as indicated by
opportunities experienced by construction professionals. McNamara (1999). Although, professionals had displayed
In view of this, the professionals should exploit this little or no interest towards research, there were strong
strategy to improve clients’ patronage. Professional indications that the wrong attitude towards research is
contract was ranked second frequently used and effective changing (Ganah et al., 2008).
strategy; this implied that the Nigerian construction The Agenda for Change (Lay, 1998) imposed the need
professionals attached great importance to collaborative for research about the competitive economic markets of
works. Joint efforts of the construction professionals will which construction forms part. Then, research as
enhance performance and productivity; this is because no marketing strategy should be embraced to enhance
professional will like to work with lazy or negligent consultancy skills and operational effectiveness.
colleague so as to protect his image and integrity. Diligent Promotion as a marketing strategy among construction
professionals will prefer to work together, form business professionals has not been encouraged. This was also
link to source for jobs. This strategy may be an confirmed from Jaafar et al. (2008) who noted that some
opportunity for regular flow of jobs; it may help in keeping professional associations banned the use of promotional
the firms in business even during austere period. activities. This may be due to the incompatibility of
Professional contract which can be referred to as marketing procedure (especially promotion) with
partnering method of procurement can serve as a good professional ethics, but appropriate promotional means
marketing strategy if properly adopted. It can increase which is in accordance with the professional ethics will
opportunity for innovation, enhance understanding and also speak better about the profession. Hence,
knowledge about construction marketing and also considering the merits of promotion as marketing
improve quality of services rendered and the product. strategy, it should be encouraged for adoption but with
This result concurred with Ganah et al. (2008) who strict adherence to the professional ethics.
encouraged the use of partnering for achieving
sustainable growth.
Research and promotion were rarely used by the Level of preference attached to the identified
professionals in the Nigerian construction industry. This is strategies
possible since these strategies were not well known and
therefore could not have been effective. This may be The professionals in the construction industry were
expected and in agreement with NcNamara (1999) and further asked to express their level of preference in using
Jaafar et al. (2008) who noted that professional hardly the identified marketing strategies if there is a request for
embraced research as marketing strategy. However, change in the currently used strategy. All the strategies
creating awareness about these strategies is essential to were preferred as revealed by their high MRA values
develop professional’s interest toward their application. ranged from 4.18 to 3.03 (Table 4). However, marketing
There is need for the construction professionals to mix (MRA = 4.18) was the most preferred strategy,

Table 5. Effect of improved marketing strategy on the professional services.
Effect MRA Rank

Good relationship with client 4.86 1
Acquiring contract 4.76 2
Creation of awareness 4.49 3
Build and maintain image of the firm 4.21 4
Building of sales 3.87 5
followed by professional contract (MRA = 3.97) and the indicators of improved construction professional
professional-client relationship (MRA = 3.60). This result services as evident by their MRA values which ranged
is appropriate because marketing mix consists of from 4.86 to 3.87. These effects were good relationship
variables (place, price, product and promotion) that with client (MRA = 4.86), acquiring contract (MRA =
interact with one another and depend on one another to a 4.76), creation of awareness (MRA = 4.49), build and
certain extent. The variables of marketing mix can be maintain image of the firm (MRA = 4.21) and building of
broken down into some of the other strategies which sales (MRA = 3.87). This is in agreement with Stewart et
implied that marketing mix can be seen as combination of al. (2003), Dikmen et al. (2005), Ganah et al. (2008),
other strategies like location of firm (place), good Arslan et al. (2009) and Polat and Donmez (2010).
relationship which can be developed through good Marketing strategies increase clients’ awareness of the
promotional means (promotion) and research will bring services rendered by the professionals, thereby arousing
about improved product and appropriate price. However, clients’ interest to do business with them which implied
this strategy was not widely adopted; this might be due to growth in clientele. Thus, the more the awareness
the fact that it provided little help to the construction created by the professionals, the more the clients’
industry when comparing with other sectors. High level of patronage and of course the more the profit made by the
preference attached to this strategy by the Nigerian firm. Consequently, this will also improve the status of the
construction professionals may be due to the level of firm and thereafter build up their sales.
awareness on the importance of marketing mix variables
and interactions between these variables. It is important
to note that this strategy has been modified to take care CONCLUSION AND RECOMMENDATION
of the uniqueness of the construction industry. Since
services are intangible, the marketing mix is extended to This paper focused on effective marketing strategies in
include people, physical evidence and process. The Nigerian construction industry and concluded that the
findings from this study confirmed the empirical studies of level of practice of marketing among professionals in
Morgan and Morgan (1991), Fellows and Langford Nigerian construction industry was very low and
(1993), Arditi et al. (2008) and Polat and Donmez (2010). inadequate compared to the level and keenness of
It is important that the construction professionals adopt competition in Nigerian construction industry. Marketing
this strategy for improved productivity. strategies often used in the Nigerian construction industry
The least preferred strategies were research and to market professional services included professional–
promotion. The result may be due to the stressful and client relationship and professional contract while
expensive nature of carrying out a productive research, research and promotion were rarely used as marketing
and the strict conditions for the use of promotional strategies by Nigerian construction professionals.
activities of marketing as laid down by the professional Professional –client relationship, professional contract
ethics and code of conduct. These may discourage the and location of the firm were effective marketing
construction professionals in adopting research and strategies identified by professionals in the Nigerian
promotion as marketing strategies. However, McNamara construction industry, professional –client relationship
(1999) identified research as competitive strategy which being the most effective while research and promotion
based on quality and technical superiority for professional were least effective marketing strategies used. Adoption
improvement. Also, Kotler and Armstrong (2005) of appropriate marketing strategies by professionals
acknowledged promotion as a means of getting clients’ within the Nigerian construction industry will result into
attention. Therefore, considering the benefits, these acquiring more contracts, creating more awareness about
strategies should be developed and exploited for their services, building of sales and maintenance of good
marketing purposes. The result from Table 5 showed the and continuous relationship with their clients. The
effect of improving marketing strategies on services of the professionals in Nigerian construction industry should
construction professionals. The surveyed professionals take cognizance of the benefits of adopting effective
agreed that all the listed effect factors were marketing strategies, allow for the use of research and

promotion as marketing strategies within the context of Marr NE, Sherrard MJ, Prendergast GP (1996). Marketing and
the professional ethics as they could be adopted for professional services: the case of consultancy engineering. J. Serv.
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in Nigeria. Surveying Services, in, COBRA ‘99, Royal Institution of Chartered
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µ
A theoretical and practical model for global

business, entrepreneurship and education
1 2
Charles J. Mambula * and Israel Chidi Agwamba
1
School of Business Langston University Langston, Oklahoma.
2
Founder, AfroTrading, Nigeria.
Among the numerous technological developments of the 21st century in this age of globalization and
the one that seems to have remarkably revolutionized and transformed the manager’s agenda is that of
Information and Communication Technology (ICT). Telecommunication has made countries borderless
and distance non relevant. Through ICT, opportunities have been created for both small and large
businesses alike. Competition through trade has therefore increased as products and customers have
become global. At the same time countries, companies and people have become interdependent on
each other by forming networks and strategic alliances. The concept of afrotrading.com and its
accompanying afrotrading.net has been created to serve as both a theoretical and practical instrument.
The AfroTrading online platform supports entrepreneurs to conveniently and efficiently explore and
identify business opportunities worldwide and as an educational tool is used to train and expose
students to experience the realities of global business and entrepreneurship, while the originators
continue to improve and update the concept through research.
Key words: entrepreneurship, globalization, information technology, education and research.
INTRODUCTION
AfroTrading is an emerging company that has a global commerce and education. It will continue to facilitate
perspective with great potential for growth and expansion. professional growth and expansion of the private sector,
Our main market objective is to develop and execute a encouraging formation of new businesses and interna-
marketing strategy that would help to build membership tional trades. The number of Internet users, especially
of businesses, owners and professionals around the among the professional and business community has
globe and subsequently generate revenue. been growing worldwide over the past decades. Most
The world is fast changing, moving at an alarming pace businesses are now relying on the Internet for research,
toward a global economy, which is facilitated by the communications, marketing and promotion of their
advent of the internet. Electronic commerce over the businesses, while professionals are improving their
Internet is globally affecting trade and finance, opening knowledge and skills through online resources. According
new markets and changing the ways we do business. to a recent research, there will be billions of new Internet
Information Technology (IT) has transformed companies users worldwide within the next decade and millions of
profitably. Herman Miller and Bose (Hill, 2009a) are business establishing online presence. Africa and other
typical examples. According to forecasters and analysts, developing regions are embracing Internet technology
e-commerce accounts for more than $102 billion of the with rapid growth of Internet access and users; a trend
world’s economy. This figure is expected to be on the expected to continue with time. According to Moore’s Law
rising side for years to come as new markets emerge in this trend alongside with computer power is expected to
Africa and other developing regions. Internet has become change and double after every 18 months.
very indispensable and cost effective for communications, Over the past ten years, millions of small and medium
enterprises (SMEs) have been created around the globe
(Burca et al., 2004). This is mainly as a result of local and
international policies that have facilitated the liberalization
*Corresponding authors. E-mail: mambula767@aol.com of private sector. Some of the dramatic events are de-

A theoretical and practical model for global business, entrepreneurship and education 71
centralization of economies such as in China and Eastern and market products and services.
Europe; Formation of regional economies such as
European Union, NAFTA (Cateora et al., 2009; Hill, As a web based company, it is expected to experience an
2009b). exponential growth with the increasing number of global
The trade relationships between the developed and the Internet users and evolution of information technology.
developing countries have been at government level, This is especially so as not many businesspersons in
strictly controlled by global trade and government institu- underdeveloped or poor countries can afford to travel to
tions. However, recently, the developed Countries have countries to explore business opportunities and make
realized that their economic policies and strategies for contacts.
Africa did not yield the desired results. Therefore, Substantial amount of fund will be devoted annually to
Countries like America, UK and especially China, are market the site through different and well-tested
redirecting their efforts in developing and building the strategies.
private sectors in Africa and other developing nations The founder, Mr. Israel C Agwamba, M.S. and
(Ebony magazine, 2008). Professor Charles Mambula 1 PhD, the director for
Due to massive emigration from the lesser-developed business and research development are committed to
nations, there are now millions of people as Africans in building a strong management team with adequate
Diaspora living in different parts of the world, mostly in funding that would assure effective management and
the advanced countries. Many of these are professionals marketing. It is expected that within the next 5 to 6 years,
and experts in various industries, controlling reasonable Afrotrading.com would become one of the most popular
amount of wealth. African immigrant communities in B2B platform and AfroTrading.net, as one of the useful
United States are now changing their status from networking platforms available. Our services will be very
student/working communities to business. Majority of the competitive in the market place and viable enough for
immigrants are embracing America as their home and reasonable return on investment.
taking advantage of the economic opportunities in Ame-
rica by investing and establishing their own businesses.
METHODOLOGY
It is now evident that: With the increasing number of
internet users worldwide, the growing trend of internatio- The methodology for this study is eclectic and uses an inter-disci-
nal trade, the globalization of economies and the plinary systems approach. We reviewed concepts and theories from
emergence of new markets, the opportunities for small related areas of management, marketing, economics, international
businesses and professionals to network, trade and business and information communication technology to create the
explore new markets on a worldwide basis are unlimited concept of the global business platform. By a taking a systems
view, the combination of theories and concepts produced the model
(Scarborough et al., 2009). After analyzing these that materialized into AfroTrading.com/net. Part of our search
evolutionary trends, Mr. Israel Chidi Agwamba started examined information from periodicals, trade and association
developing the concept of AfroTrading Online Platforms materials, journals and web-based surfing. We bench marked with
in the year 2006. other models to create our own peculiar niche for global business,
AfroTrading is an emerging company that provides entrepreneurship and as a tool for learning. To avoid being biased
online networking and marketing platforms for businesses or inclined towards following any particular country’s standards for
trade or business we created an environment that is flexible and
and professionals to explore global opportunities expand open in approach for meeting multi country needs in terms of
market base and maximize their potentials. It will also politics, economics, legal and socio-cultural environments. It is also
serve as a resource center for scholars, students and a learning environment, where participants from different countries
entrepreneurs to exchange and share ideas for profitable can learn from each other, exchange ideas, negotiate and accept
opportunities. offers when a mutual zone of agreement is reached. While applying
The AfroTrading platforms have been uniquely the marketing principle of promotion to introduce AfroTrading as an
information technology (IT) product this paper seeks to describe
designed to collect and store professional and/or together with the other 2Ps of marketing (place and price), the
business data that is provided by its users. The collected nature and facts about the concept of AfroTrading.com/net. How it
and stored data is then used to offer its users a variety of came about, its purpose and future prospects.
opportunities and options that will allow them to make
appropriate decisions to achieve success.
Backed by input from IT and business experts, the Our goal for North America and other developed regions
following online platforms are now available:
We adopted a geographic segmentation approach to divide the
a) AfroTrading.com; a business platform designed to markets into different geographic units (Kotler and Amstrong, 2009).
As a US based company, AfroTrading connects business owners in
profile and connect small and medium sized businesses North American and other developed regions to the rising business
as well as prospective entrepreneurs all around the world. opportunities in the lesser-developed world, especially in Africa as
result of globalization of economies. This allows American
b) AfroTrading.net, a networking and marketing platform businesspersons to gather enough information that they could
designed for business professionals’ scholars and analyze before venturing into unknown territories where there is not
experts all around the world to connect, share information only the potential for business but also reports of risk and other
uncertainties.

The company provides members with specific business data, viii) Analyzing potential customers in international markets before
profiles, benefits and risk factors in a given country based on developing business relationships.
political, economic, philosophical, legal and cultural environments of ix) Keep business growing and expanding beyond the local shores.
that country. This tool helps companies make informed decisions x) Create avenue for networking.
regarding investments or partnership relationships across borders xi) Forming strategic alliances.
in the given country of their choice for business (Johansson, 2009;
Cateora et al., 2009; Deresky, 2008). At afro trading platforms, users can:
a) Profile their companies or professional backgrounds.

Our goal for Africa b) Build product catalog and storefront.
c) Communicate with business executives worldwide and other
Our goal for Africa is to provide a platform that may enhance partici- members.
pation of African businesses in the global trade through the Internet d) Post trade leads and ADS.
and promote the economic opportunities that exist in the continent e) Monitor business inquiries.
alongside other emerging economies. f) Network with other businesses and professionals.
Connecting Africa to the global market place will inspire entrepre- g) Access to the AfroTrading Business Intelligence and more.
neurship, foster economic prosperity and forge new relationship
between Africa and advanced countries, which is based on equal
partnership and mutual benefits. Private enterprise and government Market research
will have access to variety of resources and opportunities world-
wide, ranging from foreign partners to finances and market for their Research makes possible the ability for creativity and innovation
products and services. (Allen, 2007) of ideas that adds value to the overall worth of the
African professionals and experts in diaspora will connect with organization (McDaniel and Rogers, 2010; Kumar, 2000; Cooper
Africa, redirecting their expertise and resources towards the and Schindler, 2008). Since the idea of AfroTrading was initiated
development of Africa. Among the disadvantages most citizens in about couple of years ago, we have been conducting low-level
African countries face is that of obtaining visas to travel to advanced research by using the following different methods:
countries. Due to the fact that most African countries are poor, they
are also viewed as high risk by advanced country embassies based 1. Interviewing potential customers, trade organizations and
in their countries that they may not return back to their home associations and government agencies.
countries. The high number of ‘brain drain’ intellectuals that have 2. Developing questionnaires, which are distributed to potential
emigrated out of Africa and are settled in the western world customers and registered members.
supports this assumption. The services of AfroTrading therefore 3. Developing and conducting online poll questions.
have made it possible for business people to obtain information, 4. Fact-findings from publications, research works, international
make contacts and conduct business online without the need to establishments, as well as monetary and economic development
travel to faraway places or use middle men and brokers who take institutions.
commission so they can put their money to other uses. This way
overhead costs would also be minimized (Hartley, 2004). This As we continue to grow, we will continue to conduct more research,
method of eliminating middle persons to save costs in doing which sometimes may involve other related parties such as insti-
business was how John Bogle, founder and retired Chairman led tutions and organizations. To this end, AfroTrading will be seeking
the Vanguard the largest mutual fund company to become one of to develop relationship with academic institutions, chambers of
most successful marketing firms (Hartley, 2004). commerce and trade organizations in various countries for the
AfroTrading would also provide a business directory in form of a purposes of research, development and support.
central database as well as the profiles of professionals and experts Under the leadership of Professor Charles Jabani Mambula 1,
of African descent in the Diaspora. This will serve as a resources AfroTrading will be establishing business development and market
cent for organizations and governments who are seeking experts for research bases in academic institutions globally including the US
various engagements. and Africa. This approach will enable the development of afro
trading to be constantly current and updated as it continues to
improve through ongoing research.
The mission of afro trading
The mission of AfroTrading is to enable small and medium sized Statistics of internet usage
businesses as well as prospective and emerging entrepreneurs
based upon researched information and via exchange of ideas The advent of Internet has changed the way we communicate,
learn and explore world market opportunities by finding new custo- interact and do business. Below are some statistics of Internet
mers while maximizing their business capabilities and revenue by usage around the globe. (Figures 1- 3)
leveraging the Internet under a secure environment. The afro
trading platforms offer the following benefits to users: Increase in
sales and bottom line. Target audience and market share
i) Very low sourcing cost. Demographic Outlook of Africans from about 54 independent
ii) Maximizing Exposure of products with a low budget. countries and Africans in the diaspora is vast and widespread in
iii) Building loyal customers. many countries. All the populated continents of the world have the
iv) Locating reliable suppliers or buyers. presence of Africans as living residents.
v) Communicating directly with decision makers. Afro trading intends to develop a market base comprising of
vi) Eliminating or minimizing the cost of setting up international people of African origin worldwide. This is considering the advan-
operations market. tages of large population, cultural and economic diversity and
vii) Obtaining a reliable and verifiable business data and economic relations with the rest of the world that could be tapped.
information. Below the demographic outlook of Africa and Africans in the dia-

Figure 1: World internet users and population stats
spora, region-by-region in reference to the online wikipedia is as professionals and business owners and how they could effectively
follows: participate and compete in the global marketplace (Hill, 2009a).
Our target audience also includes the existing small and medium
a) Africa 980,000,000. size companies worldwide, especially in lesser and developing
b) South America 200,000,000. countries and the future potential new businesses, which are now in
c) African Americans 40,000,000. the formation stage (Burca et al., 2004). These may include manu-
d) Immigrants in USA 650,000. facturers, distributors, suppliers, brokers, wholesalers, retailers,
e) The Caribbean 25,000,000. liquidators, purchasing agents, service providers, especially those
that are interested in export and import or developing strategic
There is cultural and economic diversity from region to region as a relationships and foreign markets for their products and services.
result of the history of the continent. However, our main focus is on Typically, the small businesses we are targeting have less than 100

Figure 2: Internet Users in the World by Geographic Regions.

Source: Internet World Stats- www.internetworldstats.com/stats.htm.
Estimated internet user is 1,463,632,361 for Q2 2008
Copyright©2008, Miniwatts Marketing Group
targeting have less than 100 employees and less than $10 The market: Market share and target audience
million in gross revenue per annum.
According to our findings, these categories of businesses may lack E-commerce accounts for majority of the world economy generating
the resources, manpower and capital for: billions of dollars annually, especially in the G8 and other developed
nations of the G20 composition. According to recent research, there
i) Marketing and advertising. will be billions of new Internet users worldwide within the next
ii) Sales Personnel. decade and millions of business establishing online presence. With
iii) Outsourcing. good management and effective marketing strategies, AfroTrading
iv) Traveling. is expected to control at least 0.001% of the market share within
v) Storage facility. this period.
vi) Maintaining offices. Because of the global nature of AfroTrading, the characteristics
and need of customers may vary from region to region and country
Therefore, they are likely to consider other alternatives by using to country. Therefore, in order to characterize and analyze the size
cost effective or efficient means of achieving these goals. of our target audiences, we have specifically categorized the mar-

Figure 3: World Internet Penetration Rates by Geographic Regions.

Source: Internet World Stats- www.internetworldststs.com/stats.htm
Penetration rates are based on a world population of 6,676,120,288 for mid-year 2008 and
1,463,632,361 estimated internet users.
Copyright©2008, Miniwatts marketing group.
markets into the following geographic regions (Kotler, 2009): tries, there could be more than 5 million small and medium sized
companies combined. Customers in North America are most orga-
1. North America nized, better funded and likely to grow and expand their business in
2. South America foreign countries. They are also most likely to benefit and afford the
3. Europe cost of our services. From Figures 1 and 2 above the North
4. Asia American region has among the highest number of Internet users
5. Africa. who could form the bulk of revenue generating base if we can
penetrate that market successfully.
The characteristics and need of our customers and the market size
may vary from region to region due to disparity in economic deve-
lopment and standards in different region. What is considered a South America
small business or medium sized business in one region (e.g. in the
USA the SBA definition of small business is having up to 500 In South American countries, most of the companies may fall within
employees) (Kuratko, 2009) may be a considered a large company the range of our target audience. However, the market size of
in another region (e.g. Africa). This is why we approach every customers in this region is relatively small because of the economic
region differently, especially in our marketing messages, strategies structure in most of the countries. We are seeking to tap into 200 to
and pricing. 300 thousand companies in the region. The current trend of trade
liberations between North and South America, which stimulate the
growth and expansion of the private sector, may boost our market
North America size in South America e.g. Brazil which is fast growing economy.
In the United States alone, there are more than 10 million small and
medium sized enterprises and in Canada, more than 5 million. Asia
These are the 2 major economies of North America that form the
NAFTA bloc together with Mexico. In other North American coun- Asia is another huge market for our business, where the economy

is growing rapidly with constant establishment of new enterprises geneous comprising of a diverse group of cultures, religions,
and expansion of existing businesses. In countries like India, China governmental systems, political background and colonial heritage.
(two of the BRIC countries), South Korea, Taiwan, Indonesia,
Malaysia and Vietnam are millions of small and medium sized
businesses to tap into. The companies in this region especially the The Middle East
Chinese are very active in manufacturing and seeking for expan-
sion in foreign countries. Most customers in this region are likely to The Middle East is a volatile region. However, in some countries
subscribe to and afford the cost of our services. like Israel, Turkey, Egypt and others there are several thousands of
small businesses, which are involved in manufacturing and export
and import and would find AfroTrdaing.com very valuable. The
Europe political instability in the Mid-east region creates opportunities for
AfroTrading as it provides its users to be able to safely conduct
The collapse of communism in the Eastern Europe, the establish- business from a distance even in chaotic environmental conditions.
ment of European Union and with most countries becoming free Generally, with the increasing number of Internet users, business
markets and pro western with Russia as one of the BRIC countries, over e-commerce and globalizing of trades, AfroTrading is tapping
Europe has become a favorable environment for the establishment into a multibillion-dollar industry. The challenge now is how to
and growth of small enterprises. There are now millions of small penetrate into the market.
and medium sized companies in Europe, most of them in countries
like United Kingdom, Germany and France. As other countries
continue to join or solidify their existence in the European Union, Market place trends
the market for our business will continue to grow.
Looking at the future how would the changes in the global economy
or affairs impact our business? AfroTrading is business being
Africa positioned to take advantage of evolutionary trends in the global
market in years to come. The following marketplace trends would
Africa is a region of major focus for our business. For many continue to have positive impact on AfroTrading creating more
decades, the western world and world organizations have been business opportunities and expanding the market size and shares
channeling billions of dollars in form of aid through the governments over the past ten years, millions of small business entities have
in Africa for economic development. However, the funds did not been created around the globe. This is mainly as a result of local
achieve its desired goal of economic stability because of mis- and international policies that have facilitated the liberalization of
appropriation, poor management, corruption and political instability. the private sector (Waddock, 2009). Some of the dramatic events
Small businesses, which are normally the bedrock of any economy over the past decades are:
are not in existence or under developed.
The Advanced countries appear to be redefining their economic a) Decentralization of economies such as in China and Eastern
policies in Africa by focusing on the development of small Europe
businesses, dealing directly with individual entrepreneurs. Iden- b) Formation of regional economies such as EU, NAFTA,
tifying such entrepreneurs may pose a daunting task. This is where MERCUSOR, FTAA, APEC, ASEAN, ECOWAS, COMESAC etc.
the uniqueness and value of Afrotrading.com comes into play.
With the AfroTrading Business Intelligence, we provide a
verifiable business/company directory of data and information that As this trend continues, more businesses will be created
would be useful for investors or financiers to make decision as increasing the market base of AfroTrading.
regards to investment, funding, or partnership relationship in Africa.
We believe this may accelerate the development of small 1. The number of Internet users, especially among the business
businesses in Africa, thereby expanding our market base. community has been growing worldwide over the past decades.
Currently, there are very few organized small business Most businesses are now relying on the Internet for business
enterprises in Africa. Most of the businesses are informal and at the research, communications, marketing and promotion of their
level of buying and selling at local markets, streets and public businesses. According to a recent research (reference:
places. There are very few manufacturing activities, but more of InternetWorldStats.com), there will be billions of new Internet users
importation and trading activities since most of the nations are worldwide within the next decade and millions of businesses
consuming markets. establishing online presence. Africa and other developing regions
Most countries in Africa have abundance of natural and human are embracing Internet technology with rapid growth of Internet
resources and creative minds, which are fundamental for the access and users. This trend will continue in years to come.
thriving of small businesses. Unfortunately, there is no platform 2. The trade relationship between the advanced nations and the
upon which they can thrive. This is where we offer help through developing countries has been at government level, strictly con-
“The AfroTrading Global Business and Ecommerce Initiatives for trolled by trade policies and government institutions. However,
st
Africa in 21 Century”. This is a program the company will continue recently, the developed countries have realized that their economic
to promote and Implement In the years ahead as the African policies and strategies for Africa did not yield the desired results.
economy experiences transformation. Therefore, countries like the USA through programs like the AGOA,
Except for multinational and government owned companies, the EU and China, are redirecting their efforts in developing and
every other business on the African continent is our potential custo- building the private sectors in Africa and other developing nations.
mer. However, very few may be able to afford to pay for our This is a very favorable trend for AfroTrading, as the market share
services although we have very reasonable charges. and relevance will continue to grow.
AfroTrading will continue to explore the markets in other deve-
loping regions of the globe offering the same values for the
development of small businesses. From figures 1 - 3 above we Market competition
notice the relatively small number of Internet users as compared to
other countries of the world, but Africa has a great potential consi- Since the early nineties, millions of Internet based businesses have
dering its population and size. Africa as a region is also very hetero- been created and more are being launched daily worldwide.

However, very few of them have stood the test of time to emerge through thousands of listings to find what they are looking
and remain successful and dominate in the global market. The for. Unlike the search engines, customers could speci-
secret of our success we believe will depend on continuous fically find the products or companies they are looking for
research and proactively monitoring ongoing trends in the age of
by industry category or location more easily.
globalization and information technology development (Jones and
George, 2009; McDaniel and Rogers, 2010). Therefore Afro trading sites saves customers a lot of time
Millions of such businesses have gone under or failed due to by narrowing down their choices from search lists and
competition, paucity of resources, lack of good business strategies filtering information for specific need, most importantly,
or limited patronage. Again, part of what could explain for this less focusing on particular niche (Hisrich, 2004). Our aim is to
than expected performance is lack of research. This is why at Afro- satisfy each and every customer’s needs by meeting them
trading we want to continuously emphasis and embark on constant properly.
research activities in order to sustain our standards and quality.
Because of the universal nature of the Internet and the unlimited
business opportunities it offers, millions of Web based business will Trade leads
be created in years to come increasing the competitive nature of the
market. In order to prepare for any un-sudden changes or sur-prises Unlike search engines, customers may post trade lead or
that might occur our strategy is to proactively forecast and
experiment with ideas and alternative options as much as is find attractive offers for products or services of interest on
possible. AfroTrading.com. Search engines collect general infor-
As a new venture, AfroTrading would naturally be exposed to and mation about company or products, which do not reflect
could face the following challenges (disadvantages): any special offers or trade leads.
i) Competition.
ii) Limited financial and human resources. Direct communication with decision makers
iii) Credibility.
However, our success will depend on our strategies, research, For critical business decisions, it is imperative to reach
market niche and uniqueness of our services. As a Business-to- and communicate directly with the decision makers. This
Business platform the competition we have to overcome now and in is a distinctive value of AfroTrading sites to business
the future are from: owners. It reduces the time and chains of communication
ladder to reach decision makers. As a membership orien-
a) Search engines.
b) B2B platforms.
ted service, it is business owners or decision makers that
c) Auctions and shopping sites. register their companies on AfroTrading sites providing
the contact information of the registrant. Member
companies may communicate among each other with our
Search engines internal communication and networking system.
Contrarily, on search engines, companies’ websites
The major and popular search engines are Google, Yahoo and
Alexa. These are companies that have been in the business for feature the contact information of the lower cadre of the
over a period of time with proven track of success. They control corporate structures thereby making it more difficult to
major shares of Internet business worldwide. As profitable and pu- reach the decision makers when needed.
blic traded companies, they are well funded to embark on any level
of product innovations and market campaign anywhere in the world.
However, because of our size we have the advantage of having Email spam
closer customer contact, of targeting specialized areas of need that
other larger companies may not be willing to serve due to efficiency At Afro trading sites, customers receive only targeted e-
and cost advantages. We intend to also serve customer demands mail for specific need of the customer. This reduces the
and facilitate areas where they need help in handling their
amount of unwanted or unsubscribed email customers
businesses more effectively.
Our current and potential customers use search engines to receive. Email addresses may be extracted from search
research countries, resources, companies, products and other engine, while personal information on afrotrading.com is
relevant information. These are also some of the services we are secure.
offering.
In order for us to reach and attract the same customers in the
market place, AfroTrading is positioning and differentiating its B2B platform
services from other search engines by the followings methods.
One the most successful B2B platform similar to
AfroTrading is Alibaba.com. This is a company founded
SEARCH RESULTS and based in China. Alibaba has revolutionized how busi-
When searching for companies, services or products of nesses all over the world interact with each other and is
particular interest on the search engine, the result returns very popular. Over the past years Alibaba has trans-
millions of listings even when the keywords are typed. formed into a multimillion-dollar operation with enormous
Experience has shown that it is practically impossible to resources to dominate the market for a long time to
browse through all the listings. come.
Most of the potential customers of Afro trading are already
At afro trading sites, customers do not have to browse

registered with Alibaba. It is certain that they enjoy the As a selling tool: AfroTrading online platform features
benefits of the sophisticated services as regards to how tools and network sellers need for selling products and
they buy, sell or market their services worldwide, as well services to thousands of companies and customers
as having access to the extensive database of com- online. Users may make offers to sell and promote their
panies. . These are some of the services we intend to merchandise to entire member network. Members can
offer to our customers, in which AfroTrading may find it search and browse through the offers by product cate-
extremely difficult to compete. However, AfroTrading is gory, location and keywords and respond to the offer with
focusing on a market niche in response to the future the online communication tool. We are motivated as well
global trend and evolution in global business relation- as encouraged and intend to apply what Brian Tracy
ships. AfroTrading is being positioned as the pioneer B2B (1995) in his book advanced selling strategies described
platform for the under developed and untapped market of as, the ‘winning edge concept’. This concept states that
Africa, other developing regions and minority businesses “small differences in ability can translate into enormous
in the western world. Our marketing strategy will focus on differences in results”. What this statement also means is
reaching out to this market audience around the globe that, if you become just a little bit better in certain critical
and presenting AfroTrading as a brand and unique areas of selling, this slight improvement can translate into
platform designed for them. a substantial increase in your sales results.
In contrast to Alibaba, AfroTrading, aims at facilitating
business and market intelligence of businesses in lesser As a buying tool: AfroTrading provides a convenient and
developed countries particularly Africa for foreign automated environment and means that buyers need to
investors and for African businesses overseas in order to buy any product or service directly from suppliers and
establish a viable partnership relationship. AfroTrading manufacturers worldwide. It is a place to find the
will also offer consulting and value-added services to information you need to research, locate and purchase
benefit the market niche and deliver effective projects products specific to your needs.
(Wickham and Wickham, 2008; Fombrun and Nevins, When you place an offer to buy, suppliers will have
2004). In addition, AfroTrading also offers educational re- access to your offer and respond to you. You can com-
sources in global business, entrepreneurship and related municate directly with suppliers, request for information or
areas that students could use as part of their training to request for quotations. All these you do under a private
experience and practice doing business in other and secure environment.
countries.
As a marketing tool: Find new customers and qualify
sales leads fast and easy. A constantly updated database
Auctions and shopping sites of our fast growing members helps you search, sort and
select list of targeted leads. Members can conduct direct
Our potential customers may use auction and shopping marketing campaigns by sending a personalized sales
sites such as eBay, overstock and others for buying or letter and a brochure by mail/post to each company on
selling their products. While these sites are very popular the list. Sending email messages with confidence
with multimillion dollars operation, AfroTrading differs because email addresses are opted calling or faxing to
from these sites by offering potential customers more each company on the list.
than the opportunities to buy or sell their products and
services. At AfroTrading Sites, customers browse for As a networking tool: As an electronic trading market-
companies worldwide, develop and build long-term place, AfroTrading has made the world a small business
strategic relationships, communicate and exchange community so that you can communicate and network
information directly with business executives and enjoy with other businesses around the globe without having to
variety of offers. AfroTrading is specially designed for travel to faraway places and incur huge travel expenses
international trades and education through expert advice and avoid the risk of doing business in unfamiliar
and consulting and not just for buying and selling. territories or spots of turmoil.
As an international chamber of commerce: Due to the

Marketing mix economic down turn of Africa and other lesser-developed
countries (LDCs), there has been a mass exodus of
Within our market niche are inclusive of business entities, citizens through what is commonly referred to as the
trade organizations and chambers of commerce. There “brain drain” to the developed world over the past
are still specific target audience such as purchasing decades. Many people of African origin are now well
agents, sale agents, trade shows and fairs, advertising established in most of the Western and other Asian
agents etc. Therefore, depending on the specific target countries, owning and managing their own businesses.
audience, AfroTrading may be packaged and marketed The overseas Chinese model for the world through the
as any of the following: practice of what is referred to as the Bamboo network
(Deresky, 2008). Through this network the Chinese repa-

triate billions of dollars to their families and friends for As an educational tool: As an educational instrument
business investments. AfroTrading is being positioned the AfroTrading online platforms allows students to
and marketed to the minorities in Western and Asian become exposed to the realities and actual practice of
countries as the Online Chamber Commerce, through global business and entrepreneurship. Students get to
which they can communicate, network and promote their see and identify from a plethora of opportunities that are
products and services to their home countries. This helps available to choose from by engaging in global business.
to facilitate the business process as immigrants who have Students get to become familiar with country specific
not formalized their papers and therefore are restricted to resources, local business rules, cultures and conditions in
travel, in countries where they are based yet can still specific locations for business. Students will have access
make contacts and do business in any part of the world. to resources that they can use and apply theory and
practice to achieve business goals by making decisions
As an advertising tool: AfroTrading provides variety of and solving problems. Students will enhance their
advertising solutions to members and nonmembers, knowledge of the global environment and learn how to
which include: proactively develop skills needed for analyzing countries
for successful business activity. Through the interaction
i) Monthly email newsletter ads. platform students can exchange ideas and information
ii) Website ads: Skyscrapers, Popups, Banners, Buttons, about doing business in countries of their choice.
Rich media.
iii) General B2B network sponsorship. Consultancy services: The management board of
iv) Sponsorship of various (by industry sector) more AfroTrading is made up of experienced professionals and
information. business experts. We double up as consultants who
provide advice to prospective and existing entrepreneurs
As a branding tool: Schweitzer (2009) noted that before
and businesses of International trade and business
you can create a compelling brand, or successfully
development for a fee. We represent and lead trade
market your product or service, it is essential to know
missions to countries and mediate between interested
whom your target consumers are and what they want,
parties. We help governments and communities make the
need, think and feel. Gained through quantitative and
right decisions in identifying investments opportunities
qualitative research, consumer insights can supercharge
and locating experts for implementing projects (Wickham
your messaging, helping you capture the attention of your
and Wickham, 1995; Fombrun and Nevins, 2004).
audience and sharpen your competitive edge. This is
what we intend to do at AfroTrading, while being sensitive As business developers: Another facet of AfroTrading
and specific to cultural peculiarities. is to engage as business facilitators and developers. We
undertake different types of business undertakings. We
As event promoter: At AfroTrading, event organizers
practice what we preach by identifying profitable business
may post and promote upcoming events worldwide as
opportunities ourselves as an avenue for generating
well as receiving response on attendance, scheduling
revenue to sustain our activities. We form partnerships,
and traveling arrangements.
contracts and distribute on behalf of companies globally.
We can carry this out because we have first hand
As a business intelligence tool: This is a special
knowledge of companies in different countries and their
service designed to provide members specific business
needs. At AfroTrading.com, we want to encourage a
data, profiles, benefits and risk factors in a given country
culture of creativity and innovation. Allen (2007) noted
based on political, economic, legal and cultural environ-
that, entrepreneurship is a creative not a scientific
ment of that country. This tool would help potential
process. This is what Afro trading is about. Keeping up
foreign investors to make informed decision regarding
with trends in the global environment through research to
investments or partnership relationships in the given
generate novel ideas for users, including entrepreneurs
country.
and scholars. We are well aware of the fact that it is the
To capture the interest of our target audience we will
creativity in all aspects of the venture that sets the suc-
package and position the services and messages in a
cessful new businesses apart from that merely survive
variety of ways depending on the need of a particular
(Allen, 2007).
audience. In such cases, where within a company, there
are purchasing and sales departments, depending on the
targeted department or agent, AfroTrading online Marketing strategies
platforms will be positioned as the marketplace where
purchasing agents can find a reliable variety of suppliers, We are developing and adopting comprehensive
or where sales agents may find potential and new buyers marketing strategies, which we will continue to implement
for their products. Therefore, in our advertising and as the business evolves and grows. These include:
marketing efforts, separate messages will be formulated
for the respective target audience. 1. In-house marketing.

2. Marketing through agencies and experts participate in link exchange programs, which are offered
by other online advertising agencies like:
While we are seeking to develop contractual relationship MosterLinkSwap.com, ClixGalore etc.
with various marketing agencies and experts, we are
concentrating meanwhile, on our in-house marketing Email marketing: With our unique strategy of collecting
strategies to save some cost. As the business grows with email addresses, we build database of prospects, which
more revenue generated, we can then work more with the may be turned into customers later.
agencies. We create special pages offering specific report or
making special offers and then advertise such pages in
related publications and sites. In order to receive such
In-house marketing
free reports or offers, the prospects are required to
Online marketing provide their email addresses and contact information. By
this method, we develop the database of email addresses
Since AfroTrading is a web-based business, we therefore without much concern about spamming and privacy
devote over 80% of our marketing efforts and budget to issues.
online marketing. This is the easiest and cheapest way to
reach our potential customers worldwide. Search engine listings and optimization: Afro trading
is listed on most major and other minor search engines
The websites: www.afrotrading.com, www.afrotrading. worldwide. Our technical departments are constantly re-
net: The AfroTrading websites are our greatest marketing viewing the programming of the site, the key words and
tools. Therefore we make every effort to make them as other elements that may improve the search optimization
attractive as ever to catch the attention of potential of the site. This helps to increase the traffic to site and the
customers at the first glance. ratings on search engine.
Based on prior research conducted at Oklahoma State
University, they identified seven factors that customers
might consider important in a business-to-business web- Partner sites
site. Using a rigorous scale development procedure and a Creation of Partner Sites is one of our major marketing
field study with 606 business customers, they developed strategies. It does not only help to build markets for Afro
valid and reliable scales for measuring these factors. trading in the various regions, but it serves as another
Results revealed that organization is the most important strategy for a company’s expansion and developing
factor in a website. This is followed by no transaction partnership relationships.
related interactivity, privacy/security and in formativeness. The Afro trading may be customized under a brand
The other factors (transaction related in-teractivity, name to target a particular country, region or industry. It
personalization and entertainment) were found to be gives individuals, group of individuals or business entity
relatively less important. Managerially useful differences to market the site in a given country as part of the
were found in the importance of ratings of these factors broader management and operational network.
for those who use the web for purchase versus those who Based on this model, we intend to create market for
use the web for no purchase activities. Afro trading in the following regions:
Therefore, in order to build a strong market for the
website, we will focus on improving the organization of a) North America
the website, interactivity, privacy/security and the format. b) Asia
In line with Moore’s law, that computer power and c) Africa
efficiency will increase every 18 months we shall continue d) South America
to update our services by constantly monitoring the e) Europe
feedback from existing members and potential customers f) Middle East.
on how we will continue to improve on the web site.
Based on several suggestions and feedbacks, we are up- The operators of the partner sites are primarily respon-
dating and redesigning the website, which will offer better sible for the marketing of the website and the services in
graphics and layout and more tools and features for a given country or region. All partner sites use and share
members. The sites are now launched and operational. the same platform, tools, contents and data, but are
customized individually according to the preference, style
Link exchange program: We have created a link ex- and taste of the operator. The partner sites share
change program, which allows us the exchange text links revenues with AfroTrading.
or banners with related websites. Companies or sites that All activities of the partner sites are monitored and
are interested to link to us are required to complete the controlled from the central site of AfroTrading. Therefore
link exchange forms on the Afro trading sites. After com- we can track and monitor the statistics of member’s regis-
plete review of the sites, we respond favorably to tration, trade leads and purchases of credits and product
exchange links or banners or reject the offers. We also catalogs from each partner site from the central site. The

revenue that is generated from each partner site is com- role information communication technology will play
puted and the proportion of the commission due to each through tools like Afro trading for cost savings, minimi-
operator of a partner site is disbursed accordingly. zing risk and identifying profitable business opportunities
Operators of partner sites may develop their own through learning, making contacts and networks.
marketing strategies and means of generating revenue. We intend to explore business opportunities in the
AfroTrading shares only revenue that may be tracked and emerging markets, especially in Africa, Asia and other
also per agreement with the operators of partner sites. developing nations, building a revenue stream that would
guarantee reasonable return on Investments for the
Investors.
Offline marketing The database of experts, professionals and business
At the moment, we are concentrating our efforts on line owners will also serve as useful resource center for
marketing due to financial constraint. As our financial education, research and consulting.
situation continues to improve, we will intensify our offline
market. The Offline marketing strategies will be a combi- REFERENCES
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for building one of the largest professional and business Sales Ideas, Methods and Techniques Used by Top Salespeople
networks while providing the needed exposure in the Everywhere: Simon Schuster Paper backs, New York, Toronto,
Sydney.
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growth and development assistance for poorer countries. and Effective Project, 3rd Edition: Prentice Hall Financial Times.
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µµ
The relationship between customer focused service

and customer satisfaction in the Nigerian insurance
industry
Olowokudejo F. F.* and Adeleke I. A.
Department of Actuarial Science and Insurance, Faculty of Business Administration, University of Lagos, Nigeria.
The main objective of this study is to find out if there is any relationship between customer focused
services and customer satisfaction in the Nigerian insurance industry. Relevant literature was reviewed
and a model consisting of four variables was conceptualized and tested by means of empirical data
collected through a questionnaire survey. A total of one hundred and eighty (180) copies of
questionnaires were administered, one hundred and forty nine (149) copies were duly completed and
returned. This represents a response rate of 82.78%. The research instruments were validated and a
pilot study was also carried out to test the reliability of the measures. The Cronbach alpha level is above
the required 0.70. Spearman rank correlation and partial correlation were used to test the hypotheses.
Findings show that there is a positive relationship between customer focused and customer satisfaction
in the Nigerian insurance industry. Findings also show that commitment to the use of customer focused
services lead to customer satisfaction in the Nigerian insurance industry. The study recommended that
insurance companies should pay more attention to designing product and services that are focused at
the customer.
Key words: Customer focused services, customer satisfaction, organizational characteristics, insurance
industry.
INTRODUCTION
The Nigerian insurance industry is undergoing a period of needs to understand the needs and demands of their
dynamic change. For a long time, financial service customers (Eisingerich and Bell, 2006). They have to
providers had presumed that their operations were determine ways to successfully meet these needs and
customer-centric, simply because they had customers demands through an appropriate range of financial
and were able to generate profits. However, in the current services offering and marketing strategies to prevent their
era of hyper competition, where only a very slight customers from switching over to the other service
difference exists in the services provided by the major providers. Insurance companies need to know their
players in this industry, their services are homogenous customers, understand their needs and provide services
and the boundaries between the offerings of different that fulfill these needs in order to win them and keep
service providers are becoming increasingly blurred. As them away from competitors. Gan et al. (2006)
competitive activities increase, together with increasingly discovered that retaining current customers is much less
demanding customers, the financial service providers expensive than attracting new ones. The best way to
have to focus on certain critical issues related to their retain customers is to keep them satisfied as customer
consumers in order to find differentiating factors for their satisfaction leads to brand loyalty, repurchase intention,
products. More than ever before, the insurance industry repeat sales and customer retention (Dick and Basu,
1994; Gan et al., 2006) and ultimately, profitability.
Customers’ expectations regarding service and
innovative products have risen (Ravichandran, 2003).
*Corresponding author. E-mail: kudejomrs@yahoo.com. The new rules of competition require recognition of the

The relationship between customer focused service and customer satisfaction in the Nigerian insurance industry 83
importance of consumers and the necessity to address as a tool to improve customer satisfaction. Although,
their needs through innovative products supported by customer satisfaction in the service industry has attracted
new technology. In this environment, the managerial considerable research, there is paucity of research into
challenges include market segmentation, product customer satisfaction in the financial service industry
positioning, innovative delivery channels etc (Kamath et much less in the Nigerian insurance industry. In order to
al., 2003). There is an urgent need to introduce new fill this gap, the aim of this study is to find out if there is
products while existing products need to be delivered in any relationship between customer focused services and
an innovative and cost-effective way by taking full customer satisfaction in the Nigerian insurance industry.
advantage of emerging technologies. The paper is been modified as follows: After this
In the present scenario of falling interest rates and introduction, the subsequent study is on conceptual
increasing number of players, the banking and insurance clarifications; then it deals with methodology, after which
industries are finding it very difficult to meet the high it presents the data gathered and discussed the findings
growth rate expectations (Kamakodi and Basheer, 2008). while it further gives the conclusions and
They are constantly looking for newer ways to achieve recommendations respectively.
organic growth. They are adopting strategies which
enable them to acquire new customers and transform
them into loyal customers. But the success of a firm’s CONCEPTUAL CLARIFICATIONS
strategy depends upon its ability to develop customer
insights and translate them into effective operating Providing a positive service experience for the customer
strategies (Teece et al., 1997). Also, customers of today can be a challenging task. Unlike physical goods, service
have become more demanding, expecting more value is often based primarily on personal interaction or
and benefits from the services they buy (Achumba, information processing, both of which promote the
2006). To survive, these industries like all other creation of customer focused services as the service
organizations must adapt to the changing business provider can now adjust to the perceived needs of the
environment including changing customer needs and customer. Rust and Chung (2006) noted that a service
wants. In order to effectively adapt to the changing based primarily on information gathered from the
environment, achieve set goals and objective as well as customer has a higher potential of satisfying customers’
improve organizational performance, an organization needs better. Customers’ needs are also satisfied by
needs to develop strategies that match the customers’ adjusting an existing service to suit the customers’
changing needs. This can be achieved by having policies purpose and designing new services that are tailored to
that is focused on understanding, the needs and desires the consumers need, to solve a particular problem of the
of the customers. Customer satisfaction is enhanced by customer. According to Fagbemi (2006), customer-
placing these needs at the heart of the business and by centered service incorporates customer's concerns at
integrating them with the organization's strategy, people, every stage of the service design and delivery process.
technology and business processes (Croteau and Li, Rust and Chung (2006) indicate that the satisfaction that
2003). The whole concept of designing ‘customer’ results from creating customer focused services often
focused services lays emphasis on understanding what results in profitability, productivity and improve
customer want and anticipating their future requirements. organizational performance. According to Gan et al.
This is achieved by planning based on what customer (2006) and Varki and Colgate (2005), customer focused
want rather than the firms goals and listening to the services is a variable that has proven to aid and promote
customer rather than forcing the customer to listen to the good relationship between organizations and their
firm. This enables the firms to identify opportunities to customers. In this light, Varki and Colgate (2005) argued
establish and enhance value for customers thereby that nothing can replace customer focused service
promoting continuous and long-term interchange between because service as perceived by the customer has an
the customers and the organization because longer effect on the value of the service rendered by a service
relationships are likely to translate into repeat purchases. provider from the customer viewpoint. In other words, the
Repeat purchase is of interest to organizations because value of the service is enhanced by the extent to which
research has shown that it is generally more profitable to the service can be personalized to meet the customers’
service existing customers than to attract and serve new needs. According to Armstrong and Kotler (2005), no
customers (Aggarwal, 2004; Dwyer et al., 1987; Tseng, matter the quality of the product, if it is not what
2005; Gruen et al., 2000). consumers desire, it will not meet the desired
expectations on sales. Levitt (1983) argues that firms
The belief that customer focused services investments exist to fulfill needs, not to sell products. Wayland and
build stronger, more trusting customer relationships Cole (1997) claim that most businesses suffer from a glut
(Morgan and Hunt, 1994) and improve financial of products that blur the organization’s focus. This is
performance (Ryals and Knox, 2001; Reicheld, 1996) has because they primarily create products for sale and not
led to a wide acceptance of customer focused services necessarily to fill a need/gap which had been identified.

Offering customer focused services is about finding out also serve as the basis for a customer satisfaction
what the customers need and creating a product to surveying program that can ensure that quality
satisfy that need. A deep understanding of customer improvements are properly focused on issues that are
needs provides a new lever for customer satisfaction most important to the customers. On the other hand,
(Gupta and Lehmann, 2005). Customer satisfaction is the insurance companies who do not pay attention to delivery
state of mind that customer have about a company when of customer focused services cannot achieve efficient
their expectations have been met or exceeded over the and effective delivery of their services. This could result
lifetime of the product or service (Fagbemi, 2006). The in overworked employees, an increasing percentage of
achievement of customer satisfaction leads to company dissatisfied customers, high cost of transaction and high
loyalty and product repurchase. rate of claims payment.
Studies of Smith and Bolton (2002), Smith et al. (1999)
and Sparks and Callan (1996) have shown that
Variables in the model
customers are satisfied with different aspects of a
business transaction. For example, the customer
The variables of this study are customer focused
satisfaction may be linked with an on going business
services; customer satisfaction; companies’ image and
relationship, the price or rate charges of a product or
branch network (organizational characteristics variables).
service, satisfaction because a product or service met or
These variables were all selected from previous
exceeded the customers’ expectations, e.t.c. Customer
marketing and management studies. A structured
satisfaction is a key valued outcome of good marketing
questionnaire was designed for this study. These
practice. According to Drucker (1954), the principal
variables were scored on a 5-point Likert scale of 1 to 5
purpose of a business is to create satisfied customers.
from strongly agree to strongly disagree respectively. The
Increasing customer satisfaction have been found to lead
average of all the answers to the questions that relate to
to higher future profitability (Anderson et al., 1994) this is
due to various reasons such as increased customer any particular variable are summed up and averaged to
willingness to pay premiums, provide referrals, increase determine the rating of that variable.
patronage (Reichheld, 1996; Morgan et al., 2005) and
higher levels of customer retention and loyalty (Fornell, METHODOLOGY
1992; Bolton, 1998). Increasing loyalty in turn has been
found to lead to increase in future revenue (Anderson et This research study could be classified as a survey study. The
al., 1994) and reductions in the cost of future transactions sampling frame of this research consists of all the customers of the
entire forty seven (47) recapitalized insurance companies in
(Strivasta et al., 1998). All of this empirical evidence Nigeria. A sample of one hundred and eighty respondents was
suggests that customer satisfaction is important both from drawn from the insurance industry in Lagos state. They were made
the perspective of customer good will and organisation’s to respond to an instrument measuring the relationship between
financial. A firm’s future profitability depends on satisfying customer focused service and customer satisfaction in their
the present-retained customers which should be viewed organization. Out of these, one hundred and forty- nine (149)
as revenue producing assets for firms (Anderson and copies were returned. This represents a response rate of 82.78%.
The descriptive statistics of the mean, standard deviations,
Sullivan, 1993; Morgan et al., 2005). Empirical studies percentages and frequencies were employed in examining each of
(Smith et al., 1999) have found evidence that improved the variables in the study. As the scale of the instrument used in
customer satisfaction may lower costs due to a reduction this research is ordinal, the appropriate statistics for the data
in defective products and service etc. However, the key to generated are the nonparametric statistics (Cooper and Schindler,
building long-term customer satisfaction and retention, 2001).
and reaping the benefits is to focus on the development
of high quality products and services. Customer
satisfaction and retention that are brought through price DATA ANALYSIS AND DISCUSSION OF FINDINGS
promotions, rebates, switching barriers, and other such
means are unlikely to have the same long-run impact on Seventy eight (52.7%) respondents are male and 47.3%
profitability as when such attitudes and behaviors are are female. Two percent (2.0%) are less than 20 years
won through superior products and services (Morgan et old, over forty seven percent (47.6%) are more than
al., 2005). This means that squeezing additional reliability twenty but less than thirty years old. About thirty three
out of a service delivery process may not increase percent (33.3%) are more than forty but les than fifty
perceived quality and customer satisfaction as tailoring years old while less than three percent (2.7%) are over
goods and services to meet customers needs (Fornell et fifty years old. While 46.6% of the customers are single,
al., 1996). another 46.6% are married. Less than five percent (4.7%)
Clearly defining and understanding customer are divorced and over one percent (1.4%) are separated.
satisfaction can help any company identify opportunities Responses show that 63.5% of the respondents hold a
for product or service innovation, and serve as the basis B.Sc certificate or its equivalent, 20.9% possesses a
for performance appraisal and reward systems. It can master’s degree, 8.1% have MBA, 3.4% has a Ph.D and

Table 1. Demographic characteristics of respondents.
Responses in percentage (%)

Sex
Male 78(52.7)
Female 70(47.3)
Age
Below 20 3 (2)
20–30 70(47.6)
30–40 49(33.3)
40 -50 21(14.3)
Marital status
Single 69(46.6)
Married 69(46.6)
Separated 7(4.7)
Widower 2(1.4)
Highest educational qualification
B.Sc or equivalent 94(63.5)

M.sc 31(20.9)
MBA 12 (8.1)
Phd 5(3.4)
Others 6(4.1)
Length of time with the organization
less than a year 35(23.6)

1 but less than 5 years 76(51.4)
15 and above 1(0.7)
Source: Field survey (2010).
4.1% have other qualifications not specified by the their insurance companies always tailor its services to meet
researcher. Most of the respondents (51.4%) had spent their needs; 45.3% chose ‘sometimes’, 2.7% chose
over one year but less than five years with the ‘uncertain’, 0.7% chose ‘seldom’ and another 0.7% chose
organization, 23.6% had spent less than one year, 20.9% ‘never’. While 31.0% claim that their insurance companies
had spent more than five years but less than ten years, always anticipate their changing needs, 51.0% chose
3.4% had spent over ten years but less than fifteen years ‘sometimes’, 13.8% chose ‘uncertain’, another 2.8% chose
and 0.7% had spent over fifteen years with their ‘never’, 1.4% chose ‘seldom’ (Table 2). The respondents
insurance company (Table 1). were asked to rate the extent to which their organizations
The respondents were asked for their occupation. The employ the use of customer focused services in their
occupation indicated cut across various industries such organization. Their responses are analyzed in Table 4. A
as accounting, banking, aviation, engineering, education, good number of the respondents (64.2%) says that their
civil service, law, self employed, health e.t.c. Out of a organizations use customer focused services to a large or
total of one hundred and forty nine people, responses very large extent while 12.9% claim that their organizations
show that there were 4 teachers, 3 accountants, 7 use customer focused services to a small or very small
bankers, 1 biochemists, 3 caterers, 20 civil servants, 2 extent (Table 3).
youth corpers, 3 day care attendants, 7 doctors, 4
engineers, 8 lawyers, 5 computer technologists, 1 soldier,
17 lecturers, 1 farmers, 4 journalists, 22 students, 20 Hypotheses testing
traders, 2 pilots, 5 nurses, 5 underwriters and 5 security
personnel. Seventy five (50.7%) respondents claim that Two hypotheses were proposed for the study.

Table 2. Responses on customer focused services.
Responses in percentage (%)

Tailoring services to meet needs
Never 1(0.7)
Seldom 1(0.7)
Uncertain 4(2.7)
Sometimes 67(45.3)
Always 75(50.5)
Anticipating customer changing needs
Never 2(1.4)
Seldom 4(2.8)
Uncertain 20(13.8)
Sometimes 74 (51)
Always 45 (31)
Table 3. Responses on the extent to which organizations use customer focused services.
Rating Responses in percentage (%)

Very large extent (5) 32.40
Large extent (4) 31.80
Undecided (3) 23.00
Small extent (2) 6.10
Very small extent (1) 6.80
Table 4. Test for the relationship between customer focused services and
customer satisfaction.
Customer satisfaction
Correlation 0.232*
customer focused services
P-value 0.005
*Correlation is significant at the 0.05 level. Source: Field survey (2010).
H1: There is no relationship between customer focused di = xi – yi = the difference between the ranks of
service strategies and customer satisfaction. corresponding values of Xi and Yi, and,
H2: Organizational characteristics do not intervene in the n = the number of pairs of values in each data set (same
relationship between customer focused services and for both sets).
customer satisfaction.
Hypothesis 2 is tested using the partial correlation.
Hypothesis 1 is tested using the Spearman's correlation
coefficient. The Spearman's correlation coefficient (ρ) is
given by: Reliability and validity of the study
The research instruments were validated using

theoretical validity and content validity. The theoretical
validity of this study is established by developing the
Where: measures of the variables under study from well-

Table 5. Test for the intervention of organizational characteristics between

customers focused services and customer satisfaction.
Control variables Correlation P-value

Companies image 0.281* 0.001
Branch network 0.347* 0
*Correlation is significant at the 0.05 level. Source: Field survey (2010).
grounded theory and literature from other studies. The characteristics intervene in the relationship between
content validity is established by giving a set of the draft customer focused services and customer satisfaction.
questionnaire to ten companies’ executives and ten The Hypothesis, H2 is stated as follows:
professors and senior lecturers of management. These
experts reviewed the content of the items in each of the H2: Organizational characteristics do not intervene in the
instruments and confirmed that the items were within the relationship between customer focused services and
linguistic capabilities and understanding of the customer satisfaction.
respondents. A pilot study was also carried out to test the
reliability of the measures. The Cronbach alpha was The partial correlation was used to test this hypothesis.
measured to be 0.946 for 52 items on the questionnaire. The two variables of organizational characteristics
This alpha level is above the required 0.70 therefore the selected are branch network and companies’ image.
instrument can be said to be reliable. Therefore, one can Using each of these variables as the control variable, the
conclude that the instrument will adequately measure the results from the analysis are presented in Table 5.
effects of customer focused services on customer
satisfaction in Nigerian Insurance Industry.
Holding companies’ image as the intervening
Relationship between customer focused services and variable
customer satisfaction in Nigerian insurance industry The computed partial correlation between customer
focused service and customer satisfaction is calculated to
Hypothesis 1 is used to test if there is any relationship
be 0.281 with a p values of 0.001. Since the p value is
between customer focused services and customer
satisfaction and the correlation coefficient and the p value less than 0.05, companies’ image intervenes in the
noted. It is worthy to explain that the ‘p-value’ is the relationship between customer focused service and
probability of obtaining a test statistic at least as extreme customer satisfaction in the insurance industry.
as the one that was actually observed, assuming that the
null hypothesis is true. This leads to the rejection the “null
hypothesis" when the p-value is less than the significance Holding branch network as an intervening variable
level (0.05 in this case). The hypothesis, ‘H 1’ is stated as The computed partial correlation between customer
follows: focused service and customer satisfaction is calculated to
be 0.347 with a p values of 0.000. Since the p value is
H1: There is no relationship between customer focused
less than 0.05, branch network intervenes in the
services and customer satisfaction
relationship between customer focused service and
The responses of the two categories of respondents are customer satisfaction in the insurance industry.
tested using the spearman rank correlation coefficient.
The result from the analysis is presented in Table 4.
There is a correlation between customer focused services CONCLUSIONS
and customer satisfaction. Therefore, the hypothesis that
“there is no relationship between customer focused The main objective of this study is to find out if there is
services and customer satisfaction” is rejected. any relationship between customer focused services and
customer satisfaction in the Nigerian insurance industry.
Findings show that there is a positive relationship
between the variables of the study. This agrees with the
Intervention of organizational characteristics in the findings of Oyeniyi and Abiodun (2008), Zineldin (2006),
relationship between customer focused services and Schwepker (2003) and Varki and Colgate (2001) that a
customer satisfaction successful implementation of customer focused services
leads to customer satisfaction. The study also examined
Hypothesis 2 was used to test whether organizational if organizational characteristics (companies’ image and

Customer focused services Customer satisfaction
Organizational Characteristics
Company’s image
Branch network
Figure 1. A model of the relationship between customer focused services and customer satisfaction. Source:
Researcher (2009).
branch network) affect the relationship between customer customers for the organization. Since it is only customers
focused services and customer satisfaction (Figure 1) that can confirm that the organization’s effort at satisfying
and it was found out that organizational characteristics them is achieving its purpose, organizations should
affect the relationship. Though it may not be conspicuous, regularly organize stakeholders’ forum where they will
the insurance industry adopts the use of customer enlighten their customers on issues of common interest
focused services as a tool to enhance customer such as the development and implementation of new
satisfaction in their organization but in spite of this, the marketing strategies that are customer focused. This will
industry has not achieved a high level of customer also afford them the opportunity to have input from these
satisfaction. This is probably because of the peculiar customers and synchronize all the opinions expressed so
nature of insurance business and other factors in the that organizations can actually put the expectations of the
external business environment of the Nigerian insurance customers in mind when designing their products and
industry. Both companies image and branch network services. Both companies’ image and branch network are
intervene in the relationship between customer focused found to intervene in the relationship between customer
services and customer satisfaction, though branch focused services and organizational performance hence,
network can be said to intervene more than companies insurance companies should therefore recognize the
image (Figure 1). This means that customers are more importance of the image they build for themselves and
satisfied when they do not have to travel any the spread of their branch network to the satisfaction of
considerable distance before making transactions; in their customers and survival, growth and enhanced
other words they like to have branches located near performance of their organization on the long run.
them.
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µ§
Customer retention practices of small, medium and

large hotels in South Africa: An exploratory study
1 2 3
D. J. Petzer , T. F. J. Steyn and P. G. Mostert *
1
Department of Marketing Management, University of Johannesburg, South Africa.
2
Department of Management, School of Business, Cameron University, Lawton, Oklahoma, USA.
3
With the increasing competitive environment organizations are continually looking for innovative ways
to not only acquired but also to retain their customers. The aim of this study is to establish the
perceptions of hotel management of all sizes of hotel regarding the importance of customer retention
practices. An interviewer administered, in office survey was used to collect data from a representative
sample of 56 hotels in Gauteng province, South Africa. Probability, stratified, sampling was used to
separate hotels according to ownership type and size. The findings indicate that no significant
associations exist between the research variables and hotel size. It is evident, however, that significant
differences exist between medium and large hotels when it comes to weekend guests who stay for
business, as well as leisure, purposes. The study contributes to the relatively limited knowledge of
services marketing in the hospitality industry, specifically in the hotel sector.
Key words: Customer retention management, relationship marketing, compatibility management, customer
defection, service failure, service recovery, hotels.
INTRODUCTION
In most developed countries, around 80% of the work- This study focuses on the hotel industry in Gauteng pro-
force is employed in the service sector. Service sector vince, South Africa. Gauteng is home to 8 million people
Industries typically include education, retailing, tourism (Gauteng Provincial Government, 2008) and contributes
and hospitality, medical and hospital services, as well as a third of South Africa’s GDP and 10% of Africa’s GDP
communications and construction services (McColl et al., (Gauteng Economic Development Agency, 2008).
1998). By the early 2000’s it was estimated that services Hotels differ in type and size: Some have up to 800
already accounted for between 70 and 85% of the gross bedrooms; some are full service establishments; some
domestic product (GDP) of developed economies (John- medium sized business class hotels; others do business
ston and Michel, 2008), and 52% of the GDP of deve- in the budget sector; and there are, finally, the small
loping economies (Hill, 2007). The hospitality industry country inns (McManus, 2000). Hotels accounted for 37%
was expected to grow by 6.2% and the tourism industry of total accommodation sales in South Africa in 2004
by 4.1% in 2007 (Economist Intelligence Unit, 2005). (Euromonitor International, 2005).
Indeed, the hospitality industry has grown phenomenally Organizations are continually looking for innovative
since 2001; this has been driven by both leisure and ways to acquire, increase and retain business because
business demand (Kloppers, 2005). Tourism in South the cost of losing customers is rising. Service is viewed
Africa contributes about 5% to the GDP (Dikeni, 2001) as an important factor in customer retention. The role of
and helps to raise the national income, level of employ- service seems to be more critical than ever, a trend which
ment, balance of payments, and foreign exchange rates. will most probably continue well into the future (Choi and
Chu, 2001). Choi and Chu show that those organizations
which can attract, satisfy, and retain customers are more
likely to survive than organizations which do not do this.
*Corresponding author. E-mail: Pierre.Mostert@nwu.ac.za. Successful organizations define what customer retention
means for business and create the necessary measures

Customer retention practices of small, medium and large hotels in South Africa: An exploratory study 91
to quantify their retention rate (Aspinall et al., 2001). Kurtz come the key factors in the implementation of relationship
and Clow (1998) claim that despite the efforts of marketing for many organizations (Nasir and Nasir,
service organizations to attract customers, and to ma- 2005). Gilpin (1996) is of the opinion that the ability of an
nage supply, demand, and productivity in order to provide organization to build positive relationships leads to
high quality service, their customers do not always success in the long run, and that relationship marketing is
remain loyal. Service organizations must go beyond sim- becoming a key issue in hospitality marketing theory and
ply satisfying customers: they should focus on building practice.
relationships which will lead to customer retention (Kurtz Gilbert et al. (1999) argue that relationship marketing is
and Clow, 1998). Claycomb and Martin (2001) show how highly suitable for the hotel industry: hotels already pos-
relationship marketing builds stronger relationships with sess a lot of information about customers gleaned from
customers. Such relationships ultimately lead to long term the guest registration process. Palmer (2001) enume-
business success. Zeithaml et al. (2006) show how an rates the components of relationship marketing as being:
organization that is familiar with the value of a customer a focus on customer retention; long term orientation;
relationship as well as with the cost of losing such a tracing identifiable buyers; distinguishing different levels
relationship will be able to precisely evaluate its of relationship between the buyer and the seller; high
investment in retaining a customer. levels of customer dedication; and service quality as be-
The aim of this study, then, is to establish the percep- ing the responsibility of every employee.
tions of hotel management in small, medium and large
hotels regarding the importance of customer retention Customer retention management
practices which include building relationships with cus-
tomers, managing customer to customer interactions and Blattberg et al. (2001) state that customer retention is
defections, and managing service failure and service taking place when a customer keeps on buying the same
recovery. market offering over a long period of time. For products
with short purchase cycles, they define customer reten-
tion as occurring when ‘the customer continues to pur-
Literature background chase the product or service over a specified time pe-
riod’. For products with long purchase cycles, they define
People undertake trips for holiday and leisure purposes,
customer retention as taking place when the customer
to visit their friends and relatives, for religious purposes, indicates the intention to purchase the product or service
in order to receive health care, or for business purposes at the next purchase occasion.
(South African Tourism, 2001). In many instances these
Payne (2000) defines customer retention rate as ‘the
people need to stay over for one or more nights and end
percentage of customers at the beginning of the period
up booking a room in a hotel. This could result in an
who still remain customers at the end of the period’.
once-off transaction, but in many instances the oppor-
Payne warns, however, that other more complex defini-
tunity exists to lure guests back to the hotel and retain
ions might be more appropriate in instances where cus-
them as customers. Appiah-Adu et al. (2000) are of the
tomers make use of more than one business simulta-
opinion that the tourism industry has been slow in adopt-
neously. In the case of a hotel, it stands to reason that
ing the principles of marketing and that it can improve its
customers may regularly stay at any number of different
performance and customer retention.
hotels. To measure customer retention, therefore, a num-
ber of factors need to be taken into account. These
Relationship marketing include the customer retention rate over time, the cus-
tomer retention rate by market segment in terms of the
The focus of this study is customer retention and the different services or products offered, and share earned
organization’s relationship with its customers as an ante- of the customer’s wallet (Payne, 2000).
cedent for customer satisfaction (and thus retention). For Measuring the customer retention rate is seen as the
the purposes of this study relationship marketing is initial step in improving loyalty to, and the profitability of, a
defined as the process of building and maintaining long service organization (Payne, 2000a), yet many organiza-
term value, and creating relationships with customers tions do not understand the importance of improving
(Buttle, 1996; Christopher et al., 2002; Gordon, 1998; customer retention rates, and the impact of these on
Gummesson, 1997; Palmer, 1997, Payne, 2000b). profitability (Clark, 1997). The customer retention rate
Ryals (2002) states that relationship marketing focuses must be measured and managed and can be calculated
on customer retention as well as on the management of in two ways: a crude customer retention rate, or a weigh-
customer relationships over the lifetime of the customer. ted one (DeSouza, 1992). A crude customer retention
Relationship marketing serves as a foundation for build- rate measures the total percentage of customers the
ing and improving relationships with customers (Clay- organization retains, based on the decline or escalation of
comb and Martin, 2001) and stronger relationships with customers over a specific period of time. The weighted
customers result in competitive advantage over compe- retention rate is calculated by weighting customers
titors. Retaining customers and building loyalty have be- according to the volume of their purchases.

Ahmad and Buttle (2001) state that in the case of ho- Customer retention management has several compo-
tels, measuring retention should involve measuring the nents. It is important to build relationships with custom-
absolute number of customers who have been retained, mers, to manage customer to customer interactions, to
as well as using a weighted rate, which takes into reduce dissatisfaction, as well as to try and reduce poten-
account the ‘share of wallet’, as well as the life time tial defections. In addition, service failures should be
value, of a customer. managed, and hotels should put in place plans for service
Service organizations need to understand why their recovery.
customers remain with them and should not assume that
when customers remain it is a positive, mindful choice on Compatibility management
their part. Customers may stay with a service organi-
zation due to any number of (sometimes intangible) ties The relationships between customers, and specifically
or links with it. Some of these are positive, and increase customer to customer interaction (also referred to as
the dedication of customers as with, for example, compatibility management), can affect customer satisfac-
increased satisfaction. Other links are negative, yet still ion and retention as customers often receiving simulta-
tie the customer to the service organization: a sales neous service with “fellow customers” (Wu, 2007). Row-
representative, for example, is obliged to stay at a parti- ley (2000) adds by explaining that customer to customer
cular hotel every time the customer travels in the area interactions can either enhance or impoverish the service
because of an agreement between his or her company encounter as, for example, a smile or kind word from a
and the hotel. Retained customers represent an oppor- fellow customer may make the service more enjoyable,
tunity to increase profitability as well as loyalty. while obnoxious or rowdy behaviour may have the oppo-
Storbacka et al. (1994) suggest that customer rela- site effect. The challenge is to manage customer compa-
tionship profitability is the result of improved quality in the tibility in order to encourage positive encounters between
service provided by an organization. A satisfied customer customers and minimize negative ones (Martin, 1996). In
creates a strong relationship with the service provider; many instances service experiences occur when other
this leads to relationship durability and customer loyalty customers are nearby. This applies to services that take
and retention. place regularly or routinely such as in public transport
Loyalty is widely considered to include both a beha- used by commuters to get to and from work. It also
vioural, as well as an attitudinal, dimension (Baloglu, applies to services that take place less frequently, even
2002; Colgate et al., 1996; Stum and Thiry, 1991) yet the only on occasion such as playing a round of golf, or stay-
focus in the literature has gradually shifted from an ing at a hotel for business or when on holiday (Grove and
attitude changing effort at creating a satisfied customer, Fisk, 2001; Parker and Ward, 2000).
to a behaviour changing approach that seeks to create a Hotels exhibit many characteristics typical of service
loyal customer who will be retained and who will make organizations that require customer compatibility ma-
referrals. Approaches to relationship marketing in the nagement (Rowley, 2000; Martin and Pranter, 1989).
hotel industry have, in the past, focused largely on tran- Guests are constantly in close contact with one another,
sactional devices such as frequent user programmes, they intermingle in and around swimming pools, or in
gifts for repeat customers, and free stays for meeting conference facilities, for example and verbal commu-
planners to encourage them to use the hotel and its nication between customers is likely in hotel lobbies,
facilities. Yet nowadays researchers indicate that, due to restaurants, and other entertainment areas. Hotels also
competitive pressures, service organizations should re- offer many activities for guests, creating the opportunity
evaluate the gains derived from loyalty programmes. for interaction. All of this suggests that in the hotel Indus-
Reliability of service delivery is also seen as an important try customer compatibility and the management thereof
factor in creating loyalty, since competitors cannot easily requires careful attention.
copy this (Bowen and Shoemaker, 1998).
A study of hotel guests conducted by Bowen and Chen Customer defection
(2001) supports the notion that there is indeed a positive
relationship between loyalty, repeat business (retention), Customer defection is defined as ‘customers forsaking
and profitability. According to Egan (2001) a number of one service provider for another’ (Garland, 2002).
scholars in the field of relationship marketing (Buttle, Reicheld (1996) postulates that an increase in the defec-
1996; Reicheld, 1996) consider the causal links between tion rate results in dwindling cash flow to the business.
satisfaction, loyalty, and profitability to be rather tenuous. This will occur even if the organization is able to replace
They maintain that this model cannot be accepted without lost customers by acquiring new ones: the profitability of
criticism and that accepting this model unconditionally will customers increases over time (Trubik and Smith, 2000).
deceive the marketer (Egan, 2001). The aim of the pre- Although customer defection has a negative impact on
sent study is not to propagate the unconditional accep- profits, few organizations do anything about it (Credle,
tance of this model; its focus is rather to examine custom- 1995). A reduction in the customer defection rate can
mer retention as the heart of relationship marketing. increase profits substantially more than could growth in

in market share, improved profit margins, or factors rela- in lost customers though it does negatively impact on the
ted to competitive advantage (Colgate et al., 1996). customer’s confidence in the organization. It is therefore
The customer defection rate refers to the tempo at important to identify possible failure points in the service
which customers leave the organization over time (Page delivery process, as well as methods to prevent failures
et al., 1996). To understand the full implications of from occurring again (Cranage, 2004; Ahmad, 2002).
defections, the organization must determine the lifetime Cranage (2004) identifies the physical surroundings as
value of a customer and the revenue a customer would a possible source of failure. It is possible to identify three
generate over his or her lifetime (Claycomb and Martin, main types of service failure in the physical environment
2001). in which hospitality services are delivered (Hoffman et al.,
According to DeSouza (1992), Martin-Consuegra et al. 2003): cleanliness issues (e.g. bad odours), mechanical
(2007) and Seawright et al. (2008) the following customer problems (e.g. breakdown of equipment such as toilets
defection groups can be identified: Customers who switch and climate control systems), and facility design issues
to a competitor offering lower prices, customers who (e.g. bedrooms located in noisy or busy areas of the
switch to a competitor offering a better product, custom- hotel, elevators or escalators which cannot cope with
mers who leave because of inadequate service, custom- demand). The role of service recovery to remedy such
mers who are lost because they go out of business, failures is discussed next.
customers who switch to a product or service from out-
side the industry and customers who leave because of
internal or external political considerations. Service recovery
Ahmad (2002) asserts that managers have to make an
Boshoff and Klemz (2005) view service recovery as any
extra effort to institute control devices that keep track of
appropriate strategy which can be put in place to correct
customer defections. Pearson and Gessner (1999) sug-
service failures, with the aim of reinstating the customer’s
gest that a monitoring process be put in place to detect
level of satisfaction and thus keeping the customer loyal.
customer defection since quick response is of the
Organizations should have a ‘win back’ programme in
essence to stop defections. Dove and Robinson (2002)
place to keep high value customers (Griffin, 2001). A
also advocate that organizations should develop systems
service organization should plan for service recovery:
to alert them when customers threaten to defect.
A well executed study of customers who have defected when this is successful it can lead to a higher level of
can provide information that will identify the underlying, satisfaction than that initially felt by the customer
core reasons for their departure. It can also describe (Schoefer, 2008; Baron and Harris, 2003).
employee attitudes toward service quality, develop a Customers who complain are more likely to return to
better understanding of why the customer has ended the the organization even though their complaint is not
business relationship, and show whether or not there is handled satisfactorily than those customers who do not
an identifiable profile of customers who have defected. complain when a service failure is experienced. Service
Such a profile can be used for the early discovery of recovery after customer complaints is as important as (if
customers at risk of leaving (Corner, 1996). not more important than) providing good service initially
(Eccles and Durand, 1998). Satisfying complaints creates
optimal conditions for customer retention (Stauss, 2002).
Service failure Eccles and Durand (1998) stated that a service recovery
operation should be implemented whenever a customer
A service failure can be defined as an error, mistake or complains. Such a strategy should involve the empower-
problem that occurs in the service delivery process ment, training, and management of employees to resolve
(Hedrick et al., 2007), leading to customers’ expectations complaints, the rewarding of successful service recovery
not being met (Chan and Wan, 2008). Customer expec- efforts, as well as communicating ‘best practices’ to all
tation is determined by the standard of service delivery employees.
expected. From the customer’s perspective, service fai- A study of the hotel industry found that hotels most
lure can be viewed as any situation where something in commonly offer coupons, refrain from asking the guest to
relation to received service has gone wrong (Palmer, pay for the room or do not respond to the service failure
2001) and front line staffs have a pivotal role to play in at all and simply present the customer with a replacement
ensuring the quality of service encounters. in order to recover from service failure (Hoffman et al.,
Due to the fact that the production and consumption of 2003).
services cannot be separated, service failures often occur In a study of loyal customers, Craighead et al. (2004)
at the point of consumption. Hotels are characterized by found that loyal customers express greater displeasure
continuous provision of services, as well as by highly when less serious problems occur. When a serious pro-
fluctuating demand. These factors cause the hotel blem occurs, loyal customers tend to be more under-
industry to be especially vulnerable to service failures standing as long as adequate recovery efforts are put in
(Lewis and McCann, 2004). Cranage (2004) is of the place. Loyal customers who experience less serious pro-
opinion that a service failure does not necessarily result blems attach less importance to an apology, but expect

management to deal with the problem quickly. For se- ease. A hotel should also establish a policy concerning
rious (or highly critical) problems, loyal customers expect complaints. This can be done by, for example, publishing
an apology, sincerity, fair compensation, an added value a customer service quality guarantee, which will give
offer and fast recognition of the problem as well as customers the confidence to complain. A recovery stra-
solutions to it. The findings concur with similar results tegy should also be put in place as fast as possible – cer-
obtained by Matilla (2001): customers who are ‘emo- tainly before negative attitudes set in.
tionally bonded’ to an organization has a low tolerance
when it comes to service failure.
McDougall and Levesque (1999) identify the provision Problem statement, objectives and research
of assistance in conjunction with an apology and com- hypotheses
pensation as one of the commonest and most frequently
used recovery strategies. Assistance as a recovery effort In the existing literature on the subject no study could be
involves action to rectify the problem in order to bring the found on the significance of the size of the hotel in
customer back to experiencing the level of service initially relation to customer retention strategies in South Africa.
expected. Matilla (2001) states, furthermore, that service The objective of this study is therefore to establish the
recovery efforts should be made to order, they should perceptions of hotel management of small, medium, and
match the perceptions of a customer regarding the se- large hotels regarding the importance of customer
riousness of the failure. retention practices (building relationships with customers,
According to Colgate and Norris (2001) three major as well as managing customer to customer interactions,
factors influence the decision of a customer to remain defections, service failure and service recovery). For the
with, or leave the organization after a service failure has purpose of this study, hotels with 50 or fewer rooms are
been experienced. The first is the level of satisfaction with classified as small, while those with 51 to 150 rooms are
the service recovery after a complaint has been lodged. classified as medium, and those with 151 or more rooms
Some customers leave even though they are happy with are classified as large.
the service recovery. The second is the level of loyalty The objectives of the study are firstly, to determine
customers have towards the organization. Customers whether or not hotel management of small, medium and
with a strong sense of loyalty tend to remain with the large hotels measures customer retention rates and se-
organization even though a service failure has been condly, to determine the perceptions of hotel manage-
experienced. Customers who are less loyal tend to leave. ment in small, medium and large hotels regarding the
The third factor is the perceived barriers to exit. High importance of activities associated with customer reten-
barriers to exit discourage customers from leaving. tion management.
Magnini and Ford (2004) consider training hotel em- The following hypotheses are formulated, and arise out
ployees to successfully carry out service recovery as of the discussion of the literature on the subject:
critical in the hotel industry. It is impossible for a hotel or
Hypothesis 1: There is an association between the size
any service business to eliminate all service failures,
of the hotel and whether or not customer retention rates
since a hotel cannot control all of the many factors involved in
are measured by the hotel.
service delivery. Hotels are reliant on people and their
Hypothesis 2: There are significant differences between
employees to deal with their guests. Magnini and Ford (2004)
state, furthermore, that five areas need to be covered in a customer retention rates based on the size of the hotels.
service recovery training programme: infor-mation Hypothesis 3: There are significant differences between
processing, emotional responses, arousing guest self the perceived importance of customer retention activities
assurance, empowerment of employees and a and the size of the hotel.
demonstration of how service failure recovery can posi-tively
influence employee satisfaction. A difficult job well done is, METHOD
after all, more likely to lead to work satisfaction than an easy
situation. An interviewer administered, in office survey was used to collect
Boshoff and Staude (2003) state that successful ser- data from hotel managers in Gauteng. The questionnaire was de-
vice recovery can be achieved through communicating signed using insights from the literature study. It contained struc-
tured and unstructured questions and was pre-tested among hotel
with the unhappy customer, being compassionate, pro-
managers (general and marketing managers) before it was fielded.
viding feedback, supplying an explanation for the service Pre-testing involved fielding a number of questionnaires in order to
failure, empowering employees to respond suitably when ensure the questionnaire was free of potential problems. The ques-
receiving complaints, ensuring that employees who deal tionnaire firstly contained a section that introduced the survey and a
with customers are professional when doing so, and number of screening questions. This was followed by a section that
ensuring that employees dealing with customers are explored the purpose for guests stay at the hotel. The third section
examined competitive marketing and customer retention strategies
suitably dressed. Little and Marandi (2003) contend that, employed by the hotel. The last section gained insight into
in addition to these steps, the organization should ensure respondents’ demographics. A representative sample of 125 hotels
that it is easy for the customer to complain by making was drawn from the population under study (the target population
sure that employees are trained to set the customer at contains 182 hotels). A probability sampling technique, namely

Table 1. Reliability statistics
Measurement sets Cronbach’s alpha

Customer retention activities associated with relationship marketing (8 items) 0.754
Customer retention activities associated with customer compatibility management(10 items) 0.898
Customer retention activities associated with customer defection management (9 items) 0.829
Customer retention activities associated with service failure management (9 items) 0.748
Customer retention activities associated with service recovery (10 items) 0.758
stratified sampling, was used to draw a sample from the population years (the mean was 12.83 years).
under consideration. The population was separated into different An analysis of variance (ANOVA) and the Kruskal-
strata according to the ownership type and size of the hotel. A sam-
ple was then selected from the different strata using systematic
Wallis test were performed to determine whether signi-
sampling. Drop down substitution was used to compensate for non ficant differences existed between the means of at least
response error. Drop down substitution involves selecting the next two of the three groups (small, medium and large) of
hotel from the list when the hotel initially selected as part of the hotels studied (SPSS, 2003; Diamantopoulos and
sample could not or would not participate in the study (Burns and Schlegelmilch, 1997). The main finding is that the mean
Bush, 2000). Before results are presented, it is important to report number of years for which the small, medium and large
on the reliability of the measurement sets used in the study as well
as to assess the structure validity of these measurement sets.
hotels studied had been in business, does not differ
significantly.
Reliability
Purpose of stay
The reliability was calculated for the measurement sets which
assess the importance of customer retention activities associated 81% of respondents who stay at hotels in Gauteng during
with relationship marketing, customer compatibility management, the week stay for business related purposes for all sizes
customer defection management, service failure management, and
service recovery. The reliability statistics for the measurement sets
of hotel (small, medium and large) and guests who stay
are presented in Table 1. It is evident from Table 1 that Cronbach’s at Gauteng hotels during the week for leisure amount to
alpha for all measurement sets is above the acceptable limit of 0.70. 19%. Another finding is that the majority (65%) of guests
The measurement set were found to be reliable. who stay at hotels in Gauteng over the weekend stay for
leisure purposes.
Validity An analysis of variance (ANOVA) and the Kruskal-
Wallis test were performed to determine whether signify-
Structure validity was assessed for the above mentioned measure- cant differences exist between the means of at least two
ment sets with the use of factor analysis techniques (Diaman- of the three groups of hotel; small, medium, and large
topoulos and Schlegelmilch, 1997). The extraction method, prince-
pal axis factoring and the rotation method: Varimax with Kaizer
(SPSS, 2003; Diamantopoulos and Schlegelmilch, 1997).
normalization was used (SPSS, 2003). The results of the factor No significant differences exist between the mean per-
analysis are presented in appendix A and the measurement sets centages of guests who stay during the weekend at
were found to be valid. In order to assess content validity, hotel small, medium and large hotels in Gauteng for business
managers who took part in the pilot study validated the questions related and for leisure purposes (ANOVA and Kruskal-
contained in the questionnaire. Wallis test p-values are greater than 0.05). Significant
The following section presents the results together with the statis-
tical techniques used in the study to obtain these results. differences exist, however, between small, medium and
large hotels percentages, since the mean percentages of
guests who stay for business related as well as leisure
RESULTS purposes over weekends are significantly different for at
least two groups (ANOVA and Kruskal-Wallis test p-values are
Sample profile less than 0.05). The Post Hoc test reports that the p-value
associated with Scheffe’s multiple compa-risons test is 0.033
The population of the hotels in Gauteng was 182 and a
when the mean percentages of me-dium and large hotels
sample of 125 hotels was selected. Fifty six hotels (45%)
are compared indicating a signify-cant difference between
of the sample responded. Large hotels constituted 18%, these two groups. Large hotels attract more guests who stay
medium hotels 51%, and small hotels 31% of the sample. for business related purposes over weekends while smaller
70% of the respondents were general managers, the rest hotels attract more guests who stay for leisure purposes over
consisting of assistant general managers, marketing weekends.
managers, operations managers, and personal assis-
tants. Respondents had been in their current positions for
a period of between 10 weeks and 15 years, with a mean Customer retention measurement practices
of 4.04 years. Participants also indicated that their hotels
had been in existence from anything between 2 and 60 Respondents were asked to indicate the customer reten-

Table 2. The number and percentage of small, medium, and large hotels that measure their
customer retention rates
Measure customer retention rate? Total

No Yes
N % N % N %
Small hotels 7 41.2 10 58.8 17 100
Medium hotels 8 27.6 21 72.4 29 100
Large hotels 2 20.0 8 80.0 10 100
Total 17 30.4 39 69.6 56 100
Table 3. Customer retention rates of hotels
Question Mean (%) Standard deviation

What do you estimate the current customer retention rate
66.3 23.7
for guests who stay for business-related purposes to be?
What do you estimate the current customer retention rate
38.1 31.1
for guests who stay for leisure purposes?
What do you estimate the current overall customer
65.8 21.1
retention rate of the hotel?
tion rates (percentages) of guests who stay for business and large hotels that measure their customer retention
related purposes, as well as for guests who stay for lei- rates.
sure. They were asked to also indicate the overall custo- Nearly 70% of hotels in Gauteng measure their cus-
mer retention rate of their hotel. tomer retention rates. It is interesting to note that on ave-
rage 80% of large hotels measure their customer reten-
tion rates, followed by just over 72% of medium sized
Customer retention rates measurement hotels, and nearly 59% of small hotels. The Pearson chi
Respondents were asked whether or not they measure square test for significant association shows a p-value of
the customer retention rates of their hotels. The Pearson 0.460 which indicates support for the null hypothesis that
chi square test was conducted; a p-value of less than measuring customer retention rate is not determined by
0.05 supports the null hypothesis that there is no asso- hotel size. The null hypothesis can therefore not be rejec-
ciation between variables (Diamantopoulos and ted. The size (small, medium and large) of the hotel is
Schlegelmilch, 1997). Also under consideration was whe- thus not significantly associated with whether or not the
ther or not significant associations exist between hotels customer retention rate is measured. A Cramer’s V coef-
which measure their customer retention rates and the ficient of 0.167 indicates a small association between size
size of hotel in question; the Pearson chi square test was and measuring customer retention rate. The main finding
used here. A p-value of less than 0.05 supports the null here is that there is no association between hotel size
hypothesis that there is no association between variables and measuring customer retention rate (hypothesis 1).
(Diamantopoulos and Schlegelmilch, 1997). A Phi
coefficient was also calculated to signify the strength of
the association between the variables; the values repor- Ways of measuring the customer retention rate
ted vary from between 0.00 and 1.00. High Phi coeffi-
cients indicate stronger associations between the varia- Respondents indicated two methods were used to mea-
bles concerned (Diamantopoulos and Schlegelmilch, sure customer retention rates. About 82% said that cus-
1997). Cramer’s V coefficient was also calculated to sig- tomer retention rate is measured using an electronic
nify the strength of the association between the variables database management programme with a guest history
(a value between 0.00 and 1.00). A higher Cramer’s V feature. The rest (18%) indicated the use of question-
coefficient, signals a stronger association between the naires when guests check in. Respondents were also
variables concerned (Tustin et al., 2005; SPSS, 2003; asked what their current customer retention rate was for
Diamantopoulos and Schlegelmilch, 1997). The extent of guests who stayed for business related purposes, as well
the association is determined using the same rules as for as the customer retention rate for guests staying for lei-
the ETA coefficient (Rosenthal et al., 2000). Table 2 sure and what the overall customer retention rate of their
illustrates the number and percentage of small, medium hotel was. The results are given in Table 3.

Table 4. Significance testing of the mean customer retention rates for small, medium and large hotels
Small hotels Medium hotels Large hotels ANOVA Kruskal-Wallis

N Mean % N Mean % N Mean % (p-value) Test (p-value)
Customer retention rate 17 71.2 27 61.7 10 70.0 0.396 0.708
for guests who stay for
business-related purposes 17 36.6 27 41.1 10 32.8 0.758 0.725
Customer retention rate for
guests who stay for leisure 17 73.4 27 60.8 10 66.5 0.157 0.328
Overall customer
retention rate
Table 5. Significance testing of the overall means of different sized hotels’ perceptions of the importance of activities associated
with customer retention
Small hotels Medium hotels Large hotels ANOVA Kruskal-Wallis

N Mean N Mean N Mean (p-value) Test (p-value)
Relationship 17 4.60 27 4.50 10 4.55 0.790 0.879
marketing
Customer 17 3.81 27 3.48 10 3.48 0.458 0.314
compatibility
management
Customer defection 16 4.27 26 4.08 10 4.02 0.585 0.678
management
Service failure 17 4.49 27 4.38 10 4.43 0.791 0.610
management
Service recovery 16 4.53 27 4.47 10 4.51 0.811 0.790
Respondents estimated that approximately 66% of ment were identified, and are listed in the literature sur-
guests who stayed for business related purposes were vey. The insights here were used to formulate questions
retained. Only 38% of guests who stayed for leisure were determining respondents’ perceptions of the importance
retained. The results indicate that a far greater number of of activities associated with customer reten-tion manage-
guests who stay for business purposes are retained than ment. Table 5 contains the composite results for the va-
when it comes to guests who stay for leisure. Respon- rious activities.
dents estimated an average customer retention rate of An analysis of variance (ANOVA) and the Kruskal-
nearly 66% for their hotels. Wallis test were performed to determine whether signify-
Significance testing was conducted to determine whe- cant differences exist between the mean scores of two or
ther or not the mean customer retention rates are signify- more of the three groups (small, medium and large) of
candy different for the different hotel sizes (small, me- hotel, and the importance they attribute to activities asso-
dium and large) and to determine whether or not signify- ciated with customer retention (SPSS, 2003; Diamanto-
cant differences exist between the mean retention rates poulos and Schlegelmilch, 1997). Table 5 presents the
of small, medium, and large hotels. An analysis of va- customer retention activities (relationship marketing, cus-
riance (ANOVA) and the Kruskal-Wallis test were tomer compatibility management, customer defection ma-
performed (SPSS, 2003; Diamantopoulos and Schlegel- nagement, service failure management and service reco-
milch, 1997). The results are presented in Table 4. very) and the importance which different sized hotels
The results of significance testing indicate that the p- attach to these. A five point unlabelled Likert scale was
values associated with differences between the mean used to measure the level of importance (where 1 is ‘not
customer retention rates at small, medium, and large hotels important’ and 5 is ‘very important’) respondents attach to
are all above 0.05. The main finding here is that the mean each customer retention activity.
customer retention rates at small, medium, and large hotels The p-values associated with differences between the
do not differ significantly (hypothesis 2). overall means for the importance attributed by different
sized hotel to activities associated with retaining custom-
Different sized hotels’ perceptions of the importance mers, are all above 0.05. The main finding is that the overall
of activities associated with customer retention means indicating the importance attributed to customer
management retention activities (relationship marketing, customer com-
patibility management, customer defection management,
Questions about activities in customer retention manage- service failure management, and service recovery) by the

different sizes of hotel are not significantly different relationship marketing. It is recommended that hotel ma-
(hypothesis 3). In summary the results of the hypothesis nagement should customize relationships with individual
testing are as follows: guests or groups of guests, as well as maintain a data-
base of guest preferences and guest details.
Hypothesis 1: Stating that there is an association bet- Respondents considered all activities associated with
ween the size of the hotel and whether or not customer customer compatibility management as important, except
retention rates are measured by the hotel, was not the concepts of introduce guests to each other and
supported. oversee interaction between guests. Activities associated
with managing the interaction between guests were rank-
Hypothesis 2: Stating that there are significant diffe-
ed by most hotels in Gauteng as the least important fac-
rences between customer retention rates based on the
tor in retaining customers. The following recommenda-
size of the hotels was not supported although significant
tions are therefore appropriate: attract similar or compati-
differences exist between medium and large hotels in
ble guests to the hotel; promote positive encounters
their ability to retain guests who stay for leisure purposes.
between guests, encourage employees to provide infor-
mation regarding the behaviour of guests to management
Hypothesis 3: Stating that there are significant diffe-
and managing the physical environment to facilitate inte-
rences between the perceived importance of customer
ractions between guests.
retention activities and the size of the hotel was not sup-
The majority of activities associated with customer de-
ported.
fection management were viewed as important. Only two
concepts were considered as being of little importance:
Managing the interaction between guests followed by ma-
DISCUSSION
naging the rate at which guests defect to other accommo-
dation suppliers. Hotels need to identify the reasons why
The aim of this study was to establish the perceptions of
guests leave, they need also to measure their customer
hotel management of all sizes of hotel regarding the
defection rate, identify the key service dimensions that
importance of customer retention practices. The study
lead to the retention of guests and they need to analyse
contributed to the relatively limited knowledge of services
guest complaints more carefully.
marketing in the hospitality industry, specifically in the
Hotels in Gauteng consider all activities associated with
hotel sector.
service failure management as being important. In this
With regards to the hypotheses formulated for the stu-
perception there is no significant correlation to hotel size.
dy, no association was found to exist between the size of
It is recommended that service failure points must be
the hotel and whether or not customer retention rates are
identified and managed, the reasons why service failures
measured by the hotel (Hypothesis 1), there are also no
occur must be determined, employees with good com-
significant differences between customer retention rates
munication skills to successfully handle complaints and
based on the size of the hotels (Hypothesis 2) and finally
serve guests pro-actively needs to be identified and exit
no significant differences could be found between the interviews with departing guests needs to be conducted.
perceived importance of customer retention activities and
the size of the hotel (Hypothesis 3).
service recovery as being important. The activities rela-
The majority of hotels in Gauteng measure their cus-
ted to service failure management and service recovery
tomer retention rate by means of an electronic database
are ranked as the most important in retaining guests,
management programme with a guest history feature.
although there is no significant correlation with the size of
Hotels in Gauteng retain a greater percentage of guests
hotel in question. It is recommended that hotels across
who stay for business related purposes than they do of
the board must provide feedback to guests regarding
guests who stay for leisure. It is recommended that hotels
progress made in rectifying service failures, they need to
should have processes in place to be able to measure
empower, support and involve employees in dealing with
their customer retention rates and then develop strate-
gies to improve their customer retention rates by concen- service failures, they need to use a standardized strategy
trating on maintaining their share of business sector for service recovery that is applicable to all guests and
guests and on improving their retention of guests who they need to vary service recovery strategies according to
stay for leisure purposes. the seriousness of the service failure.
customer retention management especially relationship Limitations and future research
marketing as being important. Activities related to build-
ing and maintaining long term relationships with guests This study was confined to hotels in Gauteng, South Afri-
are ranked as the most important activity associated with ca; representation for the whole of South Africa cannot
retaining guests. There is no significant association bet- therefore, be claimed. As such, findings should not be
ween this attitude and the size of the hotel. Hotels in generalized to other geographic regions. It is recom-
Gauteng frequently perform all activities associated with mended that a further study be carried out using the

same methodology and encompassing all the provinces 16(1): 72-97.

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µ
Market orientation and new product performance:
The mediating role of product advantage
Azaze-Azizi Abdul Adis* and Evelyn Jublee
School of Business and Economics, Universiti Malaysia Sabah, Locked bag 2073, 88999 Kota Kinabalu Sabah
Malaysia.
This study examines the relationship between market orientation and new product performance in
Malaysian property industry. The study also investigates whether the mediating factor of product
advantage strengthens the relationship between market orientation and new product performance. 88
new products from 22 property companies (14.87%) out of 148 companies in Sabah Malaysia
participated in the study. The findings show that market orientation directly influenced new product
performance in the property industry while the mediating factor of product advantage proves to
strengthen the relationship between market orientation and new product performance. This study has
highlighted practically the importance of market preferences in introducing a new project or product. To
literature, the study has supported previous studies on new product performance especially in
developing countries such as Malaysia. Managerial implications are also discussed.
Key words: Market orientation, product advantage, new product performance, property industry.
INTRODUCTION
It is known that new product success is a crucial business However, very few of studies recognize the notion that
consideration for both small and large firms. In the last market orientation is a part of a firm's culture (Narver and
forty years, few studies have emphasized customer Slater, 1990) and the process by which certain means are
preferences. For example, Myers and Marquis (1969) achieved (Kohli and Jaworski, 1990).
found that new products are more successful if they are There are a number of remarkable studies that
designed to satisfy perceived market/customer needs emphasized the market orientation and new product
than if they are developed simply to take advantage of a performance relationship (Slater and Narver, 1994a;
new technology. After that, Rothwell et al. (1974) Pelham and Wilson, 1996; Baker and Sinkula, 1999;
concluded that product success was primarily related to Ramaseshan et al., 2002) which found a strong support
five factors: Understanding of user needs; attention to for the basic proposition that market orientation
marketing and publicity; efficiency of development; influences the overall performance of new products. In
effective use of outside technology and external scientific Malaysia, other than studies done by Ng (2002) and
communication; and seniority and authority of the Azaze-Azizi and Izyanti (2009), there is a lack of research
managers responsible for the development of the on new product performance. This critical area has
product. Other empirical evidence shows that market received less attention by academic researchers in
orientation has a positive relationship with new product Malaysia. This paper aims to investigate the relationship
success (Slater and Narver, 1994a; Pelham and Wilson, between market orientation and new product
1996; Baker and Sinkula, 1999). They also acknowledges performance in the property industry. The role of product
that market-oriented-firms developed products with advantage as a mediating role on market orientation and
greater advantage over the competition because product new product performance relationship is also considered.
advantage is the number-one factor affecting new product
performance (Henard and Szymanski, 2001).
LITERATURE REVIEW
Market orientation
*Corresponding author. E-mail: azizi@ums.edu.my. Market orientation is the implementation of the marketing

concept which is offering products or services that based and, thus, continues superior performance for the
on customer needs and wants (Kohli and Jaworski, business.
1990). West and Ford (2006) noted that in the early
1990s, companies needed to pay equal attention to both
customers and competitors, that is, to adopt market Strategic perspective
orientation. But how significant is the adoption of market
orientation on a firm’s performance? There are various Rueke (1992) emphasized the development and
empirical studies that discussed this issue. For example, execution of a business unit strategy as the main orga-
Kohli and Jaworski (1990) found that market orientation nizing activity of a market orientation (drawing from the
provides a unifying focus for the effort and projects of works by Kohli and Jaworski, 1990; Narver and Slater,
individuals which would lead to superior performance. 1990). The level of market orientation in a business unit is
A study by Narver and Slater (1990) suggested that the degree to which the business unit obtains and uses
market orientation has, in some cases, a substantial information from customers, develops a strategy which
positive effect on profitability. Armstrong and Collopy will meet customers’ needs, and implements that strategy
(1996) claimed that the development of competitor- by being responsive to customer needs and wants.
oriented objectives is detrimental to profitability and,
therefore, firms should look beyond their competitors
when setting objectives, and focus directly on profit From the customers’ perspective
maximization. Both studies strongly confirm that profit
maximization is the ultimate objective of market Deshpande et al. (1993) went back to earlier works in
orientation practice. Hult (1998) discussed on the five marketing and suggested that market orientation is the
dominant market orientation paradigms. same as customer orientation: Customer orientation is
the set of beliefs that puts the customer's interest first,
while not excluding those of all other stakeholders such
Decision-making perspective as owners, managers, and employees, in order to
develop a long-termed profitable enterprise.
Shapiro (1998) conceptualized the market orientation Being market oriented is more than just being
concept as a "decision-making process'' where the focus customer-led. It requires full support from the organi-
is on the management of the firm to be strongly zation’s top management to be implemented in the long
committed to share information interdepartmentally and term and, indeed, may need a complete change in an
practise open decision-making between functional and organization’s culture. Market orientation refers to the
divisional personnel: It’s far more than the cliché; getting organization-wide generation of market intelligence
close to the customer; the term market oriented” through decision support systems, marketing information
represents a set of processes touching all aspects of the systems, marketing research efforts, dissemination of the
company. intelligence across company departments, and
organization-wide responsiveness to the changes taking
place in the environment (Kohli and Jaworski, 1990).
Market intelligence perspective There is a large body of literature dedicated to studying
whether marketing orientation results in superior organi-
Kohli and Jaworski (1990) focused on market intelligence zational performance. A study done by Azaze-Azizi and
(internal and external) in implementing the marketing Izyanti (2009) found that there was an impact of strategic
concept: Market orientation is the organization-wide orientation (customer, competitor, technology and
generation of market intelligence pertaining to current and interfunctional coordination) on new product development
future customer needs, dissemination of the intelligence among Malaysian manufacturers.
across departments, and organization-wide Several studies have verified a strong link between
responsiveness to it. marketing orientation and performance (Greenley 1995;
Matsuno et al., 2002), while other studies did not support
a direct positive relationship between performance and
Behavioral perspective market orientation (Jaworski and Kohli, 1993; Han et al.,
1998). Therefore in this study, the effect of market orien-
Narver and Slater (1990) argue that market orientation tation and new product performance will be examined.
involved behavioral aspects such as customer
orientation, competitor orientation, and inter-functional Market orientation and new product performance
coordination in a firm's effort to implement the marketing
concept: Market orientation is the organizational culture The role of market orientation as an antecedent of
that most effectively and efficiently creates the necessary organization performance has been extensively investi-
behaviors for the creation of superior value for buyers gated in various contexts (Langerak et al., 2004; Desphandé

Market orientation and new product performance: The mediating role of product advantage 103
and Farley, 2004; Voss and Voss, 2000). However, advantage. Besides that, Atuahene-Gima (1995) has
studies concerning the market orientation–new product proven a strong positive relationship between market
performance relationship are less common; despite the orientation and new product’s market performance. In
strategic importance and the high failure rates of new addition, market orientation is also shown to have a
product introduction (Langerak et al., 2004). In contrast, strong positive effect on product advantage and found to
recent study by Hsieh et al. (2008) found that market be an important factor in the success of new product.
orientation indeed moderate the relationship between This is slightly consistent with Hsieh et al. (2008) which
product advantage and new product performance. mentioned that market orientation indeed moderates the
The performance of a new product can be defined as relationship between product advantage and new product
the success of the products or services in fulfilling performance, either as a whole or in respect of different
customers’ requirement which will contribute into high or types of product performance. However, the role of
low sales generation. Hence, it is widely accepted that product advantage as a moderator has not been explored
the short term performance of a new product will be in new product performance.
measured based on its demand, that is, sales. The most Li and Calantone (1998) stated that previous
successful way to develop new products is to emphasize researchers suggested new product attributes, such as
on needs which consumers may not even be aware that new product quality, reliability, newness, and uniqueness,
they have (Narver et al., 2004). That is, in developing which provide a concrete picture of a firm’s ability to meet
new products a business relies solely on what customers customer’s needs. Other studies suggest that differences
say that they want in a new product. Narver et al. (2004) between alternatives on the important attributes provide
also suggests that by paying special attention to what direct evidence of advantage (Day and Wensley, 1988).
customers do, as opposed to what they say, is the key to Besides that, Song and Parry (1997) reviewed measures
the successful development and marketing of a new of product advantage adopted in previous research and
product. found a significant positive relationship between the level
There are a few works which discussed about the of new product success and measures of product
relationship between market orientation and new product competitive advantage, such as the presence of unique
performance. For example, a study by Ramaseshan et features, relatively high product quality and the ability to
al., (1999), shows a strong positive relationship between reduce consumer costs or enable the consumer to
market orientation and the overall performance of new perform a unique task. On new product development,
products. Langerak et al. 2004, found that market orien- empirical studies by Cooper (1983, 1992) and Edgett et
tation only influences new product performance through al. (1992) provide evidence that new product advantage
product advantage and the proficiency in launch tactics. leads to superior product performance. Thus, the im-
Another study done by Wei and Morgan (2004) indicated portance of product advantage to influence new product
that an effort to improve firms’ new product performance performance is also crucial to determine the company’s
is by enhancing the flow and utilization of market success.
intelligence. This paper concentrates on the role of product
advantage in linking between market orientation and new
product performance.
Product advantage and new product performance
Product advantage is defined as the benefit of using that RESEARCH FRAMEWORK AND HYPOTHESES
product compared to other similar products (Langerak et DEVELOPMENT
al., 2004). It also refers to the benefits that customers get
from the new product (Calantone and Di Benedetto In this study a new framework is proposed to
1988). Rogers (1983) proposed that product advantage, conceptualize the relationship between market orientation
compatibility, trialability and observability are related and new product performance and the intervening role of
positively to adoption, whereas, complexity and perceived product advantage as presented in Figure 1.
risk are related negatively to adoption (Gatignon and
Robertson, 1985). Henard and Szymanski (2001) and
Montoya-Weiss and Calantone (1994) suggested that The relationship between market orientation, product
product advantage consistently appears as the most advantage and new product performance
important product characteristic in explaining the adoption
and success of the new product. It is known that market orientation has a significant
A study by Pattikawa (2006) on understanding new relationship with new product development. Bennett and
product project performance revealed that 22 variables Cooper (1981) stated that some researchers have
have a significant relationship with new product project suggested that a strong market-oriented culture may lead
performance, of which only 12 variables have a sizable to imitations and to marginally new products, relating to
relationship including market orientation and product Tauber’s (1974) contention that a market orientation

Market Orientation
• Customer Product New Product

• Competitor
Advantage Performance
• Inter functional
coordination
Figure 1. Framework of the relationship between market orientation and new product performance.
Source: Authors.
inherently is biased toward the development of “me-too” Montoya-Weiss and Calantone, 1994). Previous research
products. It is also important to note the contribution of suggest that product competitive advantage provides a
market orientation in determining the competitive concrete picture of a firm’s ability to meet customer
advantage. For example, listening too closely to needs. Several researchers have found product
customers can constitute a barrier to commercializing competitive advantage to be significantly associated with
new technology and can lead to less competitiveness product success and market performance (Song and
(Christensen and Bower, 1996). Nevertheless, there is a Parry, 1997; Li and Calantone, 1998; Im and Workman,
strong conceptual and empirical evidence that a market- 2004; Langerak et al., 2004 for reviews of the concept
oriented culture enhances the creation of superior value and associated empirical studies). Thus, it is
for customers in relation to competitors (Slater and hypothesized that:
Narver, 1998, 1999).
The role of product advantage is also important to H1 (a): There is a relationship between market orientation
furnish the relationship between market orientation and and product advantage in the property development
performance of new products. Calantone and Di industry in Malaysia.
Benedetto (1988) refer product advantage as the benefits H1 (b): There is a relationship between product
that customers get from the new product. Besides that, advantage and new product performance in the property
the influence of a market-oriented culture on product develop-ment industry in Malaysia.
advantage is a subject of debate (Lukas and Ferrell, H1 (c): Product advantage mediates the relationship be-
2000). It is probable that market orientation is not an tween market orientation and new product performance.
individual factor which contributes to product advantage.
Through Langerak et al. (2004) it has been suggested
that market orientation only influences new product The relationship between market orientation and new
performance through product advantage and the product performance
proficiency in launch tactics.
No doubt that market orientation leads to customer There are few works that discuss about the relationship
satisfaction and of course a repeat business, which also between market orientation and new product
implicitly acknowledges that market-oriented firms deve- performance. It was established that there is a positive
lop products with greater advantage over competition relationship between market orientation and new product
(Atuahene-Gima, 1996). Products with a greater performance (Ramaseshan et al., 1999) and that this
competitive advantage offer more innovative features with relationship is also mediated through product advantage
greater quality to customers. These products should and the proficiency in launch tactics (Langerak et al.,
provide greater returns to the developing firm for a given 2004). In addition, Wei and Morgan (2004) suggested
level of product development investment. that, to improve firms’ new product performance is by
In terms of adoption of new products, Gatignon and enhancing the flow and utilization of market intelligence.
Roberson (1985) suggested that the complexity and Moreover, all studies do not lead to the same conclusive
perceived risk are related negatively to the adoption of link. For example, Subramanian and Gopalakrishna
new product, but Rogers (1983) proposed that product (2001) show an impact of market orientation on new
advantage, compatibility, trialability, and observability are product performance, whereas, no significant link was
positively related to adoption. This point is also supported found by Langerak et al. (2004). These seemingly
by a few studies that mentioned that product advantage contradictory results that have stimulated several studies
has been consistently shown as the most important concerned with the finding of moderators of the
characteristic in explaining the adoption and success of relationship (Atuahene-Gima, 1995; Baker and Sinkula,
the new product (Henard and Szymanski, 2001; 1999; Gatignon and Xuereb, 1997; Slater and Narver, 1994

Data analysis
and as such it is hypothesized that:
A reliability analysis was conducted on the questionnaire items
H2: There is a relationship between market orientation using the Cronbach’s Alpha coefficient model. Descriptive analysis
and new product performance. was conducted to present the main characteristics of the sample.
To test the hypotheses, a simple and hierarchical linear regression
analysis was conducted to determine the expected relationships
between market orientation, product advantage and new product
RESEARCH METHODS performance. Baron and Kenney’s (1986) mediation method was
used to test the mediating role of the product advantage on the
In this study, three types of variables were measured namely, relationship between market orientation and new product
independent, intervening and dependent variables. The measured performance.
outcome or dependent variable in this study is new product The reliability test was conducted to see the consistency of the
performance. The independent variable is market orientation and variables involved in this study. The Cronbach’s alpha values are
the intervening variable is product advantage. In order to measure 0.952 (market orientation), 0.973 (product advantage), and 0.977
the relationship between market orientation, product advantage and (new product performance) showing a strong reliability results for all
new product performance, a set of questionnaire was developed the variables. These show that the constructs for the three variables
based on previous research to measure these variables. Data were are highly reliable (Table 1).
collected from Managing Director, Marketing and Sales Manager or
the Marketing and Sales Executive of the property developer firms,
Sample characteristics
who were the right persons to be surveyed because these people
have better knowledge of their new projects and directly involved
with the project performance. The unit of analysis in this study is the From the twenty two companies which were surveyed, 5 (5.7%) are
new product/project introduced by the property developers in the developer of major products of residential development, while
Sabah, East State of Malaysia. Sabah was chosen as a first state the majority of 16 (18.2%) of the developers are doing a mix of
because there have been no abandoned housing projects in Sabah residential and commercial properties. Only 1 (1.1%) developer is
for the past twenty years based on 2009 report by Sabah Housing involved in residential and real estate activities.
and Real Estate Association. This is consistent with previous The data also found that 19 (21.6%) of the organizations are
studies which were used product as a unit of analysis (Zirger and private limited company, 1 (1.1%) public listed company and 2
Maidique, 1990; Rodriguez et al., 2007). The property developers (2.3%) are either government or semi-government type of organi-
registered under Sabah Housing and Real Estate Developers zation. About 11 companies have operated for more than 10 years,
Association (SHAREDA) and other major property developers that seven companies with 6 -10 years, and four companies with 3-5
have been in operation for at least three 3 years were considered years of experience.
About 17% of these firms have a maximum of 100 employees
as the population. All firms in the sample fulfill an additional criterion
(small companies), 3.4% with more than 1000 (large companies),
which is necessary for measuring the main constructs, namely
2.3% with 101 - 300, and 1.1% with 301 - 500 and 701 - 1000
Market Orientation and New Product Performance. They should
fulltime employees. From the 22 participating companies, 7 firms
have introduced at least a new product during the last three years.
(8.0%) have 6 new products and 5 firms (5.7%) have 2 or 3 new
products. Companies with 1 and 4 new products both have 2.3% (2
The developers were contacted by phone and email to invite in
firms for each) and only 1 firm has more than 6 products (1.1%)
this study. As a result, twenty 22 out of 150 property developers in
(Appendix 1 and 2)).
Sabah were agreed to be interviewed and 88 new products were
considered in this study. Property developers in this study refers to
firms or organizations that develop residential properties such as
houses, apartments, condominiums and commercial properties like RESULTS
shopping complexes and office buildings as well as hotel buildings.
The questionnaire was divided into five major sections which In this section, the overview of the scores of all the
included questions regarding: (1) Market orientation; (2) Product variables: Market orientation, product advantage and new
advantage; and (3) New product performance. product performance is presented in Table 2. As depicted
Market orientation construct was measured using five funda- in Table 3, on a 7 point scale, the mean for market
mental elements with equal weight which was adapted from Narver
and Slater (1990), Gatignon and Xuereb (1997) and Langerak et al. orientation is 5.2028, new product performance is 5.2347
study (2004). The market orientation construct consisted of while product advantage is 5.3438. These results
customer orientation (6 items); competitor orientation (8 items); and indicated that most of the respondents agreed that these
interfunctional coordination (5 items). A 7-point Likert scale (1 = variables are important factors as successful criteria for
strongly disagree; 7 = strongly agree) was used to measure these new products.
items.
The R square value indicated that 55.3% of variance in
Product advantage was measured with 8 items adapted from
Langerak et al. (2004). A 7-point likert scale (1 = strongly disagree; product advantage can be explained by market orien-
7 = strongly agree) was used to measure these items. tation (R² = 0.553; F = 106.582; p < 0.01). The regression
For new product performance, measurement of the variable was results in Table 4 also show that there is a relationship
adapted from Langerak et al. (2004) and Wei and Morgan (2004) between market orientation and product advantage ( =
through six main variables. Specifically, the new product 0.744; p < 0.01). Thus, hypotheses 1(a) is accepted.
performance construct consisted of market-level measures (4 In Table 5, the R square value indicated that 65.4% of
items); financial measure (4 items); customer acceptance measures
(4 items); product-level measures (2 items); timing measures (3
variance in new product performance can be explained
items); firm’s performance (3 items). A 7-point Likert scales of (1 = by product advantage (R² = 0.654; F= 162.535; p < 0.01).
very poor; 7 = very good and, 1 = very low; 7 = very high) was used The regression results also show that product advantage
to measure these items. has a relationship with new product performance ( = 0.809;

Table 1. Reliability test.
Variable No. of item Item deleted

Market orientation 19 - 0.952
Product advantage 8 - 0.973
New product performance 20 - 0.977
Table 2. Descriptive statistics of variable.
Variable Mean Standard deviation

Market orientation 5.2028 0.89356
Product advantage 5.3438 1.28838
New product performance 5.2347 0.95470
Table 3. Simple regression analysis: The relationship Table 6. Hierarchical regression analysis: The relationship
between market orientation and product advantage. between market orientation, product advantage and new product
performance.
Independent variable Value
Market orientation 0.744** Independent variable Dependent variable
F value 106.582 (New product performance)
R² 0.553 Model 1
Adjusted R² 0.548 Market orientation 0.717**
F value 90.958**
**p < 0.01
R² 0.514
Adjusted R² 0.508
Model 2
Table 4. Simple regression analysis: The relationship
between product advantage and new product performance.
Market orientation 0.258*
Independent variable Value Product advantage 0.617**
Market orientation 0.809** F value 91.892**
F value 162.535** R² 0.684
R² 0.654 Adjusted R² 0.676
Adjusted R² 0.650
**p < 0.01, *p < 0.05.
**p < 0.01
related to new product performance ( = 0.717; p < 0.01).

Table 5. Simple regression analysis: The relationship
Thus, H2 is supported.
between market orientation and new product performance.
From Table 6 for model 1, the R square value indicated
Independent variable Value that 51.4% of variance in new product performance can
Market orientation 0.717**
be explained by market orientation (R²=0.514; F=90.958;
p<0.01). The results also showed that market orientation
F value 90.958**
is related to new product performance. In model 2 with
R² 0.514
the inclusion of product advantage as a control variable,
Adjusted R² 0.508 the R square value indicated that 68.4% of variance in
**p < 0.01. new product performance can be explained by market
orientation and product advantage (R² = 0.684; F=
91.892; p < 0.01).
p < 0.01). Thus, hypotheses 1(b) is supported.
The R square value indicated that 51.4% of variance in Hierarchical regression analysis
new product performance can be explained by market
orientation (R² = 0.514; F = 90.958; p < 0.01). The regre- To test for mediation the method by Baron and Kenney
ssion results also showed that market orientation is related (1986) which include the computation of three regression

Table 7. The regression models testing intervening (product advantage).
Model 1 Model 2 Model 3

Y Product New product New product performance
advantage performance (PA is controlled)
2 0.553 0.514 0.684
R
2 0.514 0.170
R change
F 106.582** 90.958** 91.892**
Beta MO 0.744** 0.717** 0.258*
Beta PA 0.617**
**p<0.00; *p<0.05.
models was used. The first regression is between the DISCUSSION

independent variable and the intervening variable.
Secondly, the regression between independent variable Relationship between market orientation and new
and dependent variable and lastly, regressing the product performance
dependent variable on both the independent variable and
the intervening as shown in the research hypothesis. The relationship between market orientation and
According to Baron and Kenny (1986), these three performance of new product is found to be significant.
regression equations provide the tests of the linkages of The finding shows a positive relationship between the two
the mediational model. To establish mediation, the variables and concludes that the independent variable of
following conditions must hold: First, the independent market orientation does positively affect the new product
variable must affect the mediator in the first equation; performance. Thus, this result provides support to
second, the independent variable must be shown to affect Hypotheses 2.
the dependent variable in the second equation; and third, Ramaseshan et al., (2002) provided a strong support
the mediator must affect the dependent variable in the for the basic proposition that market orientation
third equation. If these conditions all hold in the predicted influences the overall performance of new products. The
direction, then the effect of the independent variable on result also provides a strong positive relationship
the dependent variable must be less in the third equation between market orientation and the market performance
than in the second. Perfect mediation holds if the and project performance of new products. It was stated
independent variable has no effect when the mediator is that there is no significant difference in the level of market
controlled. The hierarchical regression results also orientation and the performance of new products either
showed that product advantage mediates the relationship for consumer or industrial products.
between market orientation and new product It is popularly known that the success of new product is
performance ( = 0.617; p < 0.01). Thus, H1(c) is because the product has been developed based on
supported. consumer’s needs and wants and to provide expected
As summarized in Table 7, the results of the three benefits to the target customer. To the developer, the
regressions model for intervening (Product Advantage) success of their project is determined by the success of
shows that the effect of market orientation on the new their project or product has been sold. If the project or
product performance is much less in the third model product has been sold, it has met the consumer’s needs.
compared to the second model. Nevertheless, the R If the project or product cannot be sold or takes time to
square has improved from 0.514 in the second model to sell, it indicates that the product is not fulfilling customer
0.684 in the third model, this results showed that the third requirements. The buyers always inform the developer
model allows partial mediation to explain more variance about their experience and preferences of the property
(R square = 0.684) than in the second model (R² = 0.514) they wish to purchase.
without considering the intervening variable of product
advantage. While the lower R square changed from the
third model compared to the second model indicated that Relationship between market orientation, product
the variance of the population is better or favorably advantage and new product performance
explained by the data. A perfect mediation cannot be
claimed since the beta for market orientation in the third The relationship between market orientation and product
model is still significant where p<0.05. A decrease from advantage in property industry in Sabah is found to be
0.717 to 0.258 of the beta value from the second model significant. This indicates that market orientation contri-
to the third model shows the intervening effect. butes to the prediction of product advantage. The finding

shows a positive relationship between the two variables IMPLICATIONS

and concludes that the independent variable of market
orientation does affect the intervening variable of product For practice
advantage, thus, providing support to Hypotheses 1(a).
The first managerial implication concerns the findings that
This result is consistent with Langerak et al., (2004) market orientation has a significant positive relationship
which concluded that there is a relationship between with new product performance especially in the Sabah
market orientation and new product advantage, where it property industry. Firms hoping to initiate new products
was found that market orientation has a positive should take note of the impact of market orientation on
significant (p<0.01) relationship with product advantage. their product performance. Further understanding of the
Besides that, our findings agree with other studies requirements of customer on the product advantage is
suggesting that a market-oriented culture enhances the critical for the activities of new product development. The
creation of products with greater advantage over compe- second implication is that firms should further strengthen
ting products than their non market-oriented counterparts their market orientation to improve the chances of
(Kohli and Jaworski 1990; Narver and Slater 1990). In success of new products. Increased effort in market
this study, the data collected from property developers orientation would mean more regular research on the
shows that market oriented firm will tend to develop current and changing expectations of customers towards
competitive products that meet potential buyer’s expec- the property industry mainly in the Sabah context.
tation in the market. This is based on the market survey Another important implication of this study is that the
conducted by developers to better understand what impact of market orientation on new product performance
potential consumers or buyers want in terms of the is channeled through the product advantage.
design value for their money. This study also contributes significantly to the industry
A positive and significant relationship between product players. Property developers will benefit from the findings
advantage and new product performance in property which concluded the importance of market orientation
industry in Sabah was also found in this study. It indicates towards the performance of new product and the
that the better the product advantage the higher the intervening factor of product advantage that mediates the
performance of a new product. Thus, this result provides relationship between these two variables. This will help
support to Hypothesis 1(b). property developers specifically in Sabah, in their future
This finding is consistent with past research that project planning in order to ensure the product performs
reveals the importance of product advantage to obtain at the highest expectation. The finding also gives new
higher new product performance (Henard and insights to the Sabah property developers especially on
Szymanski, 2001; Montoya-Weiss and Calantone, 1994; the factors that they should emphasize for competitive
Langerak et al., 2004). As in the property industry, advantage.
potential buyers will look into the maximum advantage
that a product could offer compare to other competitors’
products. This is the main factor that property buyers will For knowledge
search in the first place before making the decision to
purchase. Yet, we must realize that property product is a Academically, the finding of the research adds new
complex and requires the customer to study thoroughly understanding to the literature particularly in the new pro-
before making the decision to purchase. Therefore, duct development area. This study also shed more light
offering a better product advantage would increase the on the factors and their interrelationships that influence
performance of the newly produced. new product success specifically in property industry.
Apart from that, the finding also shows that product Besides that, with the confirmation of the proposed
advantage partially mediates the relationship between framework from this study, it has given significant
market orientation and new product performance. Thus, contribution to the methodological aspect of new product
this result provides support to Hypotheses 1(c). It means development studies.
that the intervening factor of product advantage does play
some important role in the property industry where
customers tend to look into the uniqueness of benefits, For future studies
the quality, whether the product could solve their problem
compared to the competitors’ products and other aspect Similarly to previous works, limitations associated with
pertaining to the advantage of the product offered. By sampling could limit the influences of market orientation
knowing what customers need, it will help developers to and new product performance. The small number of data
develop specific products that will give the best benefits gathered limits the influence of the findings in this study.
to the customers and ultimately determine the success of This was due to the unwillingness of developers to
new products. It is a norm that the better product can participate in the study. Company policies which forbid
provide superior benefits to consumer, thus spurring the such information to be revealed was the main excuse
consumer to buy. given from the organizations.

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Appendix 1. Companies’ profile.
Variables Categories Frequency (%)

Residential 5 5.7
Commercial 0 0.0
Mix development 16 18.2
Company Major activities (Residential and Commercial)
Residential development and 1 1.1
Real estate
Others 0 0.0
ownership
Total 22 100
Private limited company 19 21.6
Public listed company 1 1.1

Government / Semi-Gov. 2 2.3
Established
Total 22 100
Less than 3 years 0 0
3-5 years 4 4.5

6-10 years 7 8.0
More than 10 years 11 12.5
Fulltime employees
Total 22 100
100 or less 15 17.0
101 – 300 2 2.3

301 – 500 1 1.1
501 – 700 0 0.0
701 – 1000 1 1.1
More than 1000 3 3.4
Total 22 100
1 2 2.3
2 5 5.7
3 5 5.7
New products
4 2 2.3
5 0 0.0
6 7 8.0
More than 6 1 1.1
Total 22 100

Appendix 2. List of measurement.
New product performance Competitor orientation

Our firm knows whether competitors are open to complaints by customers
Market-level Our firm knows why customers continue buying from competitors
Unit volume goals Our firm knows whether customers buying from competitors are satisfied
Met revenue goals Our firm know how competitors maintain relationships with customers
Met sales growth goals Our firm monitors customers buying from competitors
Met market share goals Our firm know why customers switch to competitors
Our firm knows which products competitors offer customers
Financial Our firm knows in what way competitors attract customers
ROI or IRR
Met profitability goals Interfunctional coordination
Met contribution margin goals Our firm’s departments coordinate their contacts with customers
Development costs Our firm’s departments jointly satisfy customers’ needs
Our firm’s departments take decisions that affect the relationship with customers
Customer acceptance collectively
Customer acceptance Our firm’s departments are collectively aware of the importance of the relationship
with customers
Customer satisfaction
Our firm’s departments coordinate their activities aimed at customers
Number of customers
Customer competitive advantage
Product-level Product advantage

Met performance specifications The new product offered unique benefits for customers
Met quality specifications The new product provided higher quality than competing products
The new product solved problems for customers
Timing The new product was highly innovative
Launch on time The new product replaced inferior products
Time-to-market The new product was radically different from competitor products
Break even time The new product was superior to competing products
The new product offered solutions not possible with existing products
New product performance
Management satisfaction with new product
performance
Overall new product performance
Market strength attributable to new products
Market orientation
Customer orientation
Our firm gathers information about customers' needs
Our firms has insight into the buying process of
customers
Our firm consults customers to improve the quality of
service
Our firm handles customers’ complaints well
Our firm looks for ways to offer customers more
value
Our firm treats customers as partners

µ
Analysis of consumer attitudes towards integrated

circuit (IC) cards
1 2 2
Yasuo Ishii *, Yuki Higuchi , and Kazuhiro Takeyasu
1
Department of Management Design, Osaka International University, 3-50-1, Sugi, Hirakata, Osaka 573-0192, Japan.
2
This paper analyzes the attitudes of consumers towards integrated circuit (IC) cards, which has a big
influence on the buying behavior of consumers. For this purpose, we created a questionnaire survey of
using IC card on purchasing, and we utilized the text mining method. In reviewing past researches,
some related researches were used, but the analyses were based on simple accumulation, though there
have been a few investigations on this. The purpose of this survey is to examine the attitudes of
consumers to the convenience and need of purchasing with IC card. Additionally, this survey seeks to
clarify the general opinions of consumers concerning an IC card system. Moreover, this survey strives
to learn about consumers’ awareness of the IC card system, their expectations for the IC card system,
and the information they need. Some interesting and instructive results were obtained. These were
utilized for constructing a much more effective and useful IC card system.
Key words: Integrated circuit (IC), consumers, key graph, electronic money, attitudes.
INTRODUCTION
Electronic money usage is widespread at the present Suica and Edy which were easier to issue from 2001.
time such as integrated circuit (IC) traffic cards on the Afterward, 2 major groups of the retailing business newly
railroad. Payment by electronic money has become issued the group cards such as nanaco and WAON in
possible in such places as convenience stores, April 2007. They made the enriched card of the point
supermarkets, and restaurants as well as railroads. program to become popular in promoting payment inside
There are two types of electronic money and they are the convenience store and supermarket. As a result,
categorized by payment method. One type is the prepaid nanaco of the “Seven & Eye Holdings” sprang to the top,
type which is centered on JR East’s Suica, private at the number of the purchase payments within only 2
railways’ PASMO in the Kanto region (metropolitan area) months after being launched in June, 2007. At the same
and bitWallet Edy issues, and the other is the post-paid time, as the rapid popularization of the IC card was
type. There are some electronic money such as iD, promoted, the severity of companies contending for new
QUICPay and Smartplus which are connected to the customers increased greatly.
credit card mainly in the cell phone wallets and private General summary of the prepaid type of electronic
railways’ PiTaPa in the Kansai region. money is shown in Table 1. Number of cards issued by
Use of the traffic system and convenience stores was the prepaid type of electronic money has already
developed mainly in the prepaid type of IC cards such as surpassed 120 million at the time of September 2009. It
means that each person has more than 1 card in
average.
Reviewing past researches including the following
*Corresponding author. E-mail: y-ishii@oiu.jp. (Arcar and Day, 1980; Osawa, 1992; Ueda et al., 1987),
there are some related researches made on this. Oshima

Table 1. General summary of electronic money of prepaid type (Number of card issue at the time of September 2009).
Electronic money Main promoting Starting period Number of card Number of settlement
company issue (Million) (Million)
Edy Sony etc. 2001 52.00 25.00
Suica JR East Japan 2004 27.35 28.37
PASMO KEIO Railway etc 2007 13.42 12.28
WAON AEON 2007 11.30 25.30
nanaco Seven & i Holdings 2007 9.0 35.00
Based on data from Nihon Keizai Shinbun-Sha (6/Nov./2009).
(2005) clarified that electronic money is more superior The major single variable summary results of the
than IC credit for the settlement of small account. questionnaire investigation are shown in Table 2.
Nakashima (2007) made an overview of current Analysis methods were as follows and the questionnaire
Electronic money status in Japan. Oyama et al. (2006) results are analyzed in five methods. Firstly, summary of
built made of cash currency and applied to Electronic single variable is executed in order to examine the
money. Kurokawa A., et al. (2003) analysed the “FeliCa” pattern of responding to each item. Secondly, analysis by
technology and its application. There are some related Multi-corresponding analysis is executed in order to
papers such as these, there are few papers concerning visualize the relationship among the items. Thirdly,
consumers’ analysis for the need of the purchasing with analysis by Factor analysis is executed so as to clarify
IC card. the viewpoints of important factors. Fourthly,
We utilize the Key Graph method for the analysis, Quantification Method is executed in order to analyze the
which is also a relative new method (Osawa et al., 1999; contribution of each item to the total index. Fifthly,
Osawa, 2003) and we can hardly find researches in these analysis by Key Graph is executed in order to grasp the
fields using this method. This paper analyzes how total structure of the items, which are summarized in
electronic money was introduced into the market at Table 3.
present under the rapid popularization of using IC cards,
which have a big influence on the buying behavior of
consumers and how they will become popular in the ANALYSIS BY SINGLE VARIABLE
future. While considering the advantages and
disadvantages of the various kinds of electronic money, a Usage condition of electronic money
true appearance of the development of electronic money
using IC cards is discussed. We show the usage condition of electronic money
The purpose of this survey is to examine the attitudes concerning the following questions in Figure 1.
of consumers to the convenience and need of purchasing
with IC card. Additionally, this survey seeks to clarify the Q1. What kind of electronic money do you have?
general opinions of consumers concerning the IC card Q2. What kind of electronic money do you use?
system. Moreover, this survey strives to learn about Q3. What kind of electronic money do you use the most?
consumers’ awareness of the IC card system, their
expectations for the IC card system, and the information Electronic monies of high holding rate are IC traffic cards
they need. such as Suica, PASMO, ICOCA and PiTaPa. Another
genre card is Edy.
By analyzing Q3 (What kind of electronic money do you
Questionnaire research
use the most?) for Kansai and Kanto regions, we can
obtain Figures 2 and 3. Regional traffic cards occupy
A questionnaire investigation was carried out using IC
more than 70%. In Kansai region, ICOCA and PiTaPa
card on purchasing. The outline of the questionnaire
occupy 73% and in Kanto region, Suica and PASMO
research is as follows:
occupy 88%.
1. Scope of investigation: Student, a member of society
etc., Japan.
2. Period: October to December 2008. Reason to use electronic money (Q4)
3. Method: Mail and self writing.
4. Collection: Number of distribution is 500, number of The biggest reason is “ Able to use as a ticket for a
collection is 348 (collection rate 69.6%) and number of railway and / or bus”, then ““ Able to settle payments
valid answers is 346. without having change”, “ Able to get additional points”

Analysis of consumer attitudes towards integrated circuit (IC) cards 115
Table 2. Major single variable summary results.
Question Answer Number of answer Share

Q1. Hold Electronic Money Hold 265 76.8
Do not hold 80 23.2
-20 13 3.8
-30 137 40.2

Q13. Age -40 86 25.2
-50 61 17.9
-60 42 12.3
60- 2 0.6
Q14. Sex Male 255 74.6
Female 87 25.4
Kanto Region 118 35.1
Q15. Residence Kansai Region 194 57.7
Miscellaneous 24 7.1
Table 3. Analysis method.
!
" # $ % !
& ' ( ) # !
* + ( , - . , !
Figure 1. Usage condition of electronic money (Q1, Q2, Q3).

Figure 2. Most used card (Kansai region).
Figure 3. Most used card (Kanto region).
as shown in Figure 4. shown in Figure 5.
Important points when using electronic money (Q7) The place electronic money is often used (Q8)
We can observe that ““ Able to use when buying at the “ Convenience store” is the most often used and then “
shop (usually used)” is the most important point and then Shop in station”, “ Only railway” and “ Vending Machine”
“ Convenient to settle debts” and “ There are many shops as shown in Figure 6.
in which electronic money can be used” as By analyzing Q8 (Where do you use electronic money

Figure 4. Reason to use electronic money (Q4).
Figure 5. Important points when using electronic money (Q7).
most often?) for Kansai and Kanto regions, we can obtain Average utilization frequency of electronic money
Figures 7 and 8. The tendency is the same. Convenience (Q9)
store is the most often used which occupies nearly 1/3,
then shopping in station is nearly 20% and Vending From Figure 9, we can observe that nearly 30% of people
Machine is nearly 10% as indicated in the figures. use electronic money every day and more than half of the

Figure 6. The place electronic money is often used (Q8).
Department Kansai
store Only railway Miscellaneous
1% 2%
17%
Spcialty
Convenience
storee store
1% 34%
Net-shoping
3%
Super market
6%
Restaurant
4%
Vending
Machine Book store
9% 3%
Shop in station
20%
Figure 7. Often used place (Kansai region).
users use electronic money several times in a week. By analyzing Q10 (How much electronic money do you
By analyzing Q9 (How often do you spend electronic spend in a month?) for Kansai and Kansai regions, we
money in a month?) for under 30 years old and others, can obtain Figures 13 and 14. Usage amount of less than
we obtain Figures 10 and 11. As for heavy users who use 3000 Yen occupies nearly 60% for both Kansai and
electronic money every day, under 30 years old group Kanto. As for higher usage amount of more than 10,000
occupies 32%, while others occupy 23%. Users who use Yen, usage percent is 23% in Kanto and 16% in Kansai.
electronic money for more than two times in a week This may be so because IC card holder rate is high in
occupy nearly 60% for both groups. Kanto region.
Usage amount is analyzed by clustering of different
ages. The case of persons under 30 years of age and
Average usage amount of electronic money per another case of persons that are 30 years old and above
month (Q10) are shown in Figures 15 and 16. The usage amount of
less than 3000 yen occupies nearly 60% for both cases,
Those who spend electronic money less than 3000 but as for the high usage amount of more than 20,000
Japanese Yen for a month take more than half of the yen, the case of persons under 30 years of age takes
share (Figure 12). nearly 5% and the other case takes nearly 11%, which

Department Kanto Miscellaneous

store
Only railway
0% 14% Convenience 4%
Spcialty store
33%
storee
3% Super market
Net-shoping
2%
1%
Restaurant Vending Book store Shop in
Machine
3% 13% 4% station
23%
Figure 8. Often used place (Kanto region).
Figure 9. Average utilization frequency of electronic money (Q9).
suggests that it is influenced by their income. is the most expected and then,” Combine plural electronic
money”, “ Strengthen security”, “ Add additional services
such as points, discounts” and
Reason for not holding electronic money (Q11)
“ Increased places where users can charge money” follow
respectively.
From Figure 17, we can observe that almost 1/4 holders
of electronic money think it is troublesome to hold it and
almost 1/4 holders of electronic money do not feel merit MULTIVARIATE ANALYSIS
by using it.
Multi correspondence analysis
Expectation to electronic money in the future (Q12) We carried out multi correspondence analysis based on
the selection of answers made concerning Q7 (What is
From Figure 18, we can observe that “ Increased amount the important point you note when you use electronic
of shops in which electronic money can be used” money?) and Q12 (What do you expect for electronic

Figure 10. Utilization frequency (Under 30).
Figure 11. Utilization frequency (30 and over).
money in the future?) and analyzed the intimacy among “ Able to confirm residual money”, “ Able to confirm
items from the scattering figure of discrimination purchase history”, and “ Upper bound restriction when
measure. using.” The second one is items concerning safety of
card settlement such as “ Security is strengthened”,
“ Reliable company issues electronic money”, and
Important points when using electronic money (Q7)
“ Convenient to settle debts.” The third one is items
We can observe four clusters from Figure 19. The first concerning additional services such as “ Able to use
one is the group which indicates the easiness in when buying at the shop (usually used)”, “ There are
confirming usage data and the reliability of card such as many shops in which electronic money can be used”,

Figure 12. Average usage amount of electronic money per month (Q10).
¥30000-
¥-30,000 Kansai 1%
5%
¥-20,000 ¥-1,000
10% 27%
¥-10,000
16%
¥-3,000
28%
¥-5,000
13%
Figure 13. Average usage (Kansai region).
“ Points are added”, “ Discount”, “ Able to charge by one is the group which indicates items of the expansion
various means”, “ Ample service besides points and of usage channel and restriction of usage such as
discount”, and “ Many people use it.” The fourth one is “ Increased kinds of mobile phone by which users can
the group which indicates convenience for its usage such use electronic money”, “ Age certification by electronic
as “ Easy to handle”, “ There are many places where we money card when the user enters into a bar or an adult
movie theater”, and “ Upper bound restriction when
can charge money”, and “ Able to use via mobile phone.”
using.”
The second one is the items concerning convenience
of settlement and safety such as “ Able to use by mobile
Expectation to electronic money in the future (Q12) phone”, and “ Have a variety of money charging
services.”
We can observe four clusters from Figure 20. The first The third one is the group which indicates convenience

¥30000-
4% Kanto
¥-30,000
7% ¥-1,000
27%
¥-20,000
12%
¥-10,000
8%
¥-5,000 ¥-3,000
15% 27%
Figure 14. Average usage (Kanto region).
¥-30,000
5% ¥30000-
¥-20,000 0%
11%
¥-1,000
27%
¥-10,000
12%
¥-3,000
33%
¥-5,000
12%
Figure 15. Average usage (Under 30).
for its usage such as “ Increased places where users can money in the future?”
charge money”, and “ Easy explanation on how to use.” Factor analysis is executed so as to extract viewpoints
or axes for the users’ appraisal. As for the extraction
The fourth one is the group which indicates additional method of the factor, “the principal axis factoring” is
adopted, and as for the rolling-method, “the varimax
services such as “ Strengthen security”, “ Add additional
rotation which is accompanied by the normalization of
services such as points, discounts”, Kaiser as orthogonal rotation” is adopted. Also, we
“ Increased amount of shops in which electronic money confirmed the validity of the KMO (Kaiser-Meyer-Olkin)
can be used, “ Combination of credit card function and specimen validity measure.
cash card function”, and “ Age certification by electronic
money card when the user uses Liquor or Tobacco
vending machines.” Important points when using electronic money (Q7)
KMO is 0.877 and we can confirm an appropriate

Analysis by factor analysis common factor. From the factor matrix, after rotation, we
can extract 5 meaningful axes. The accumulated sum of
Factor analysis is used to analyze Q7 “What is the the square of factor loading is 54.941%.
important point you note when you use electronic We can see in Table 4 that the 1st axis is the factor
money?” and Q12 “What do you expect for electronic concerning relief in the use of card based on such items

¥30000-
4%
¥-30,000
7%
¥-20,000
¥-1,000
10%
30%
¥-10,000 ¥-3,000
11% 24%
¥-5,000
14%
Figure 16. Average usage (30 and over).
Figure 17. The reason for not holding electronic money (Q11).
as “ Able to use via mobile phone”, “ Able to confirm card based on such items as “ Security is strengthened”,
purchase history”, and “ Many people use it.” and “ Reliable company issues electronic money.”
The 2nd axis is the axis concerning reliability in the use
of card based on such items as “ Upper bound
restriction when using”, and “ Have a variety of money Expectation to electronic money in the future (Q12)
charging services.”
The 3rd axis is the factor which indicates additional As regards this question, KMO is 0.936 and we can
value when using card based on such items as “ Points confirm an appropriate common factor. From the factor
are added”, “ Discount”, and “ Ample service besides matrix, after rotation in Table 5, we can extract 2
points and discounts.” meaningful axes. Accumulated sum of the square of
The 4th axis is the factor which indicates convenience in Factor loading is 56.651%. We can see that the 1st axis
the use of card based on such items as “ Able to use is the factor concerning improvement of service quality
when buying at the shop (usually used)”, and “ There are based on such items as “ Combine plural electronic
many shops in which electronic money can be used.” The money”, “ Strengthen security”, “ Add additional services
5th axis is the axis concerning safety in the use of such as points, discounts”, “ Increased amount

Figure 18. Expectation to electronic money in the future (Q12).
4 4
4
4
4 4
4
4
4 4
4 4 4 4
4
Figure 19. Important points when using electronic money (Q7).
of shops in which electronic money can be used”, “ Easy explanation on how to use”, “ Combination of
“ Increased places where users can charge money”, credit card function and cash card function,

4
4
4
4
4
4
4
4
4
4
4
4
4 4
4
4
Figure 20. Expectation to electronic money in the future (Q12).
Table 4. Important points when using electronic money (Factor matrix after rotation).
Factor
Q7 What is an important point when you use electronic money? 1 2 3 4 5
Able to use when buying at the shop usually used 0.173 0.057 0.265 0.658 0.212
There are many shops in which electronic money can be used 0.241 0.146 0.151 0.934 0.096
Easy to handle 0.075 0.252 0.228 0.310 0.458
There are many places when we can charge money 0.122 0.246 0.246 0.321 0.227
Points are added 0.124 -0.010 0.788 0.225 0.175
Security is strengthened 0.205 0.328 0.300 0.204 0.542
Discount 0.144 0.176 0.676 0.153 0.272
Able to charge by various means 0.322 0.293 0.353 0.175 0.207
Able to confirm residual money 0.419 0.231 0.182 0.154 0.416
Reliable company issues electronic money 0.291 0.267 0.132 0.142 0.750
Convenient to settle debts 0.307 0.116 0.229 0.280 0.377
Ample service besides points and discounts 0.456 0.286 0.504 0.201 0.107
Able to use via mobile phone 0.627 0.123 0.146 0.173 -0.058
Able to confirm purchase history 0.699 0.206 0.149 0.123 0.330
Many people use it 0.611 0.332 0.071 0.137 0.171
Upper bound restriction when using 0.269 0.706 0.135 0.089 0.115
Have a variety of money charging services 0.268 0.830 0.086 0.132 0.032
Miscellaneous ( ) 0.013 0.062 -0.042 -0.012 -0.224
“ Certification of card owner using the electronic money bound restriction when using”, and “ Have a variety of
card when the user uses net banking”, “ Able to confirm money charging services.”
purchase history”, “ Many people use it”, “ Upper The 2nd axis is the axis concerning convenience by the

Table 5. Expectation to electronic money in the future (Factor matrix after rotation).
.
Q12: What do you expect for electronic money in the future? Factor
1 2
Combine plural electronic money 0.691 0.207
Strengthen security 0.772 0.185
Add additional services such as points, discounts 0.745 0.204
Increased amount of shops in which electronic money can be used 0.791 0.248
Increased places where users can charge money 0.792 0.252
Easy explanation on how to use 0.722 0.290
Combination of credit card function and cash card function 0.532 0.406
Certification of card owner using the electronic money card when the user uses net banking 0.600 0.449
Increased kinds of mobile phone by which user can use electronic money 0.420 0.673
Age certification by electronic money card when the user uses Liquor or Tobacco vending machines 0.311 0.663
Able to use to paying tax 0.447 0.561
Age certification by electronic money card when the user enters into a bar or an adult movie theater 0.343 0.787
Able to use by mobile phone 0.379 0.704
Able to confirm purchase history 0.660 0.403
Many people use it 0.613 0.461
Upper bound restriction when using 0.585 0.452
Have a variety of money charging services 0.558 0.536
Miscellaneous ( ) -0.006 0.264
expansion of utilization channel based on such items as the analysis, which is a kind of purchase behavior theme,
“ Increased kinds of mobile phone by which users can an analysis was carried out by converting the 5 answer
use electronic money”, “ Age certification by electronic level division into a 3 level division, that is, 5, 4 to 3, 3 to
money card when the user uses Liquor or Tobacco 2, 2, and 1 to 1.
vending machines”, “ Able to use to pay tax”, “ Age
certification by electronic money card when the user
Case 1
enters into a bar or an adult movie theater”, and “ Able to
use by mobile phone.” Outer criterion is tagged “Hold or does not hold IC card”.
Explanations for the variables are given for each question
in Q7. Through the result of the coefficient of canonical
Analysis by quantification method II discrimination function, the discrimination equation of the
outer criteria can be stated as follows:
Considering the volume of data and the characteristics of
Z = −6.484 + 0.43Q701 − 0.032Q702 + 0.082Q703 + 0.087Q704 + 0.099Q705

− 0.052Q706 + 0.013Q707 − 0.031Q708 + 0.059Q709 − 0.026Q710 + 0.145Q711
+ 0.060Q712 + 0.073Q713 − 0.030Q714 + 0.154Q715 + 0.095Q716 + 0.194Q717

(1)
where question number is added to Q7**. For example, parameter weight (Equation 1).
Q712 means that the question number is 12 in Q7.

The discriminate hitting ratio is 99.7%. It is quite good Case 2
in this case. We can make good forecasting of “Hold or
does not hold IC card” in utilizing this equation and we
can see the contribution of each item in Q7 by its The outer criterion is tagged in the same way as Case 1.

Explanations for the variables are given for each question discrimination function, the discrimination of the outer
in Q12. Through the result of the coefficient of canonical criteria can be stated as follows:
Z = −1.484 − 0.366Q1201 + 0.377Q1202 + 0.179Q1203 − 0.250Q1204 + 0.075Q1205

− 0.007Q1206 − 0.276Q1207 − 0.214Q1208 + 0.144Q1209 − 0.177Q1210 − 0.107Q1211
+ 0.288Q1212 + 0.111Q1213 + 0.500Q1214 − 0.036Q1215 + 0.194Q1216 + 0.060Q1217
(2)
where question number is added to Q12**. For example, charge money". "Able to settle payments without having
Q1205 means that question number is 5 in Q12. charge" has high co-occurrence rate with "Able to get
The discriminate hitting ratio is 68.7%, which is rather additional point", which also has high co-occurrence rate
good in this case. We can make rather good forecasting with "Able to exchange points" linking "WAON".
of “Hold or does not hold IC card” in utilizing this equation
and we can see the contribution of each item in Q12 by
Attributes of answerers and usage condition of
its parameter weight (Equation 2).
electronic money (Q13-15, Q8-10)
ANALYSIS USING KEY GRAPH Overall, we analyzed six items: Q8 - “Where do you use
electronic money most often?”, Q9 - “How often do you
Key graph is a method used to visualize the data spend electronic money?”, Q10 - “How much electronic
structure using key words. Data occurrences at the same money do you spend in a month?”, Q13 - “How old are
period of time are exhibited by the link of Key graph. you?”, Q14 - “Sex”, and Q15 - “Residence”. From Figure
Jaccard coefficient is utilized for the analysis of co- 23, we can observe one “island”. Items of high co-
appearance rate. occurrence rate are “Kanto”, “Kansai”, “Male”, “20-30
years old”, and “convenience store”. The highest co-
occurrence rate of used money within one month is “less
Kind of electronic money and reason for its usage than 1000”, followed by “¥1000 ¥2000”. The former one
(Q1~Q4) has high co-occurrence rate with “several times in a year”
and “less than 1 time in a month”, while “¥10,000
We analyzed four items altogether by utilizing Key graph: ¥20,000” has high co-occurrence rate with “Every day”.
Q1 - “What kind of electronic money do you have?”, Q2 -
“What kind of electronic money do you use?”, Q3 - “What
kind of electronic money do you use the most?”, and Q4 - Analysis of electronic money's non holders (Q1, Q11,
“Why?” Q13-15)
As shown in Figure 21, we can observe high co-
occurrence rate among “PiTaPa”, “ICOCA”, “Suica”, The analysis of 80 people that did not hold electronic
“Pasmo” and “Edy”. Items concerning convenience are money is shown in Figure 24. The co-occurrence rate is
derived, for example, “ Able to use as a ticket for a high among items "Do not feel merit by using it", "Feel
railway and/or bus”, “ Able to settle payments without uneasy for the security", "Troublesome for subscription",
having change”, “ Able to get additional points.” However, "Uneasy to spend too much for post-paid card", and
“PiTaPa”, “Post-paid” and “Auto-charge” have also rather "Troublesome in making money charge". The former four
high co-occurrence rate. items have high co-occurrence rate with "Kansai region",
where "Troublesome for subscription" and "Uneasy to
spend too much for post-paid card" may depend on the
characteristics of PiTaPa in Kansai region.
Most often used cards and its reasons (Q3-4 and
Those who do not hold electronic money have high co-
Q13-15)
occurrence rate with "20-30 years old", "Do not feel merit
by using it", "Feel uneasy for the security", "Troublesome
As shown in Figure 22, we can observe that co- for subscription", and "Uneasy to spend too much for
occurrence rate is high with ICOCA and PiTaPa in Kansai post-paid card".
region, and Suica and PASMO in Kanto region, though The main results obtained by Key Graph are as follows:
PiTaPa has high co-occurrence rate with Post-Paid style.
"Able to use as a ticket" and "Able to settle payments i) In Figure 21, high co-occurrence rate was observed
without having charge" have high co-occurrence rate with between the IC card often used and its reason for usage.
"Suica", "30-40", "Male", "Kansai" and "Kanto". ii) In Figure 22, high co-occurrence rate was observed
"60-" has high co-occurrence rate with "Safeness in between railways’ IC card for their region (Kanto and
Security" and "There are many places where we can Kansai).

Figure 21. Kind of electronic money and reason to use (Q1~Q4)
Figure 22. Most often used cards and its reason (Q3-4&Q13-15).
and their corresponding regions (Kanto and Kansai security", "Troublesome for subscription", and "Uneasy to
respectively). spend too much for post-paid card".
iii) In Figure 23, the results are similar to those of single
variable analysis. REMARKS
iv) In Figure 24, the reason why 20 to 30 year-old people
do not hold electronic money has high co-occurrence rate The difference between multi correspondence analysis
with "Do not feel merit by using it", "Feel uneasy for the and factor analysis was stated hereafter.

Figure 23. Attributes of answerers and usage condition of electronic money (Q13~Q15, Q8~10).
Figure 24. The analysis of electronic money's non holders (Q11,Q13-15).
Case of Q7 discount”, and “ Many people use it.”

Cluster 4: Convenience for the usage such as “ Easy to
We obtained the following 4 clusters from multi
handle”, “ There are many places where we can charge
correspondence analysis:
money”, and “ Able to use via mobile phone.”
Cluster 1: Easiness in confirming usage data and the
reliability of card such as “ Able to confirm residual In factor analysis, we obtained the following 5 meaningful
axes:
money”, “ Able to confirm purchase history”, and
“ Upper bound restriction when using.” Cluster 4 (1st axis): Relief in using card based on such
Cluster 2: Safety of card settlement such as “ Security is items as “ Able to use via mobile phone”, “ Able to
strengthened”, “ Reliable company issues electronic confirm purchase history”, and Many people use it.”
money”, and “ Convenient to settle debts.” Cluster 1 (2nd axis): Reliability in using card based on
Cluster 3: Additional services such as “ Able to use when such items as “ Upper bound restriction when using”, and
buying at the shop (usually used)”, “ There are many “ Have a variety of money charging services.” Cluster 3
shops in which electronic money can be used”, “ Points (3rd axis): Additional value in using card based on such
are added”, “ Discount”, “ Able to charge by various items as “ Points are added”, “ Discount”, and
means”, “ Ample service besides points and “ Ample service besides points and discounts.”

Cluster 3 (4th axis): Convenience in using card based on Clusters 1 and 2 (2nd axis): Convenience by the
such items as “ Able to use when buying at the shop expansion of utilization channel based on such items as
(usually used)”, and “ There are many shops in which “ Increased kinds of mobile phone by which users can
electronic money can be used.” use electronic money”, “ Age certification by electronic
Cluster 2 (5th axis): Safety in using card based on such money card when the user uses Liquor or Tobacco
items as “ Security is strengthened”, and “ Reliable vending machines”, “ Able to use to pay tax”, “ Age
company issues electronic money.” certification by electronic money card when the user
enters into a bar or an adult movie theater”, and “ Able to
The analyses are relatively similar for both of them. In use by mobile phone.”
detail, factor analysis separated the items of Cluster 3 The results are rather different for both methods. As
into two axes (3rd axis and 4th axis), therefore it can be Q12 depicts an abstract question that seeks to know
conveniently said that factor analysis derives more about the desire and expectation for electronic money in
detailed analysis in this case. the future, factor analysis shows 2 big groups, that is,
“Improvement for service quality” and “Expansion of the
channel”.
Case of Q12
We obtained the following 4 clusters from multi DISCUSSION

correspondence analysis:
Comparison of each method
Cluster 1: The expansion of usage channel and restriction
of usage such as “ Increased kinds of mobile phone by After examining each item, we can observe that the
which users can use electronic money”, “ Age certification results obtained from both single variable and multivariate
by electronic money card when the user enters into a bar analyses are rather similar. While single variable analysis
or an adult movie theater”, and “ Upper bound restriction can make analysis only in one question item, multivariate
when using.” analysis can make versatile analysis among items. In
Cluster 2: Convenience of settlement and safety such as particular, users’ “psychological evaluation” for IC card
“ Able to use by mobile phone”, and “ Have a variety of could be performed utilizing multivariate analysis, where
money charging services.” nominal data are handled.
Cluster 3: Convenience of its usage such as Key graph is used for analysis after visualizing the total
“ Increased places where users can charge money”, and “ structure of items. There is need for further study based
Easy explanation on how to use.” on the results obtained from both the single variable and
Cluster 4: Additional services such as “ Strengthen multivariate analyses. This study demonstrates that Key
graph could grasp the total structure among items;
security”, “ Add additional services such as points,
moreover, it could grasp the psychological structure of
discounts”, “ Increased amount of shops in which each demographic and geographic variable.
electronic money can be used, “ Combination of credit
card function and cash card function”, and “ Age
certification by electronic money card when the user uses Conclusion
Liquor or Tobacco vending machines.”
We made analysis from various aspects and the following
In factor analysis, we obtained the following 2 meaningful results were confirmed:
axes.
1. Nearly 80% of consumers hold IC card. These cards
Clusters 1, 2, 3 and 4 (1st axis): Improvement of service are mainly traffic cards.
quality based upon such items as ““ Combine plural 2. Important points in using electronic money are “having
electronic money”, “ Strengthen security”, “ Add additional many channels” and “convenience in settlement”.
services such as points, discounts”, 3. IC cards are often used in such places as convenience
“ Increased amount of shops in which electronic money store, shop in station, railway ticket and vending machine.
can be used”, “ Increased places where users can charge
money”, “ Easy explanation on how to use”, “ 4. Users are expecting IC card to increase places where
Combination of credit card function and cash card they can use, combine plural electronic money,
function, “ Certification of card owner using the electronic strengthen security and include additional services.
money card when the user uses net banking”, “ Able to 5. Reason for not holding electronic money is that it is
confirm purchase history”, “ Many people use it”, “ Upper troublesome and they do not feel merit in using it.
bound restriction when using”, and “ Have a variety of
money charging services.” We could confirm that Key graph is useful in such

questionnaire investigation analysis. Based on the Osawa Y (2003). Information Technology of Finding Opportunity -
analysis results of the single variable, multi Decision Support for Post Data mining Era. Tokyo Electrics University
Press.
correspondence analysis, factor analysis, quantification
method II and Key graph analysis were implemented. In Osawa Y (1992). Marketing and Consumer Behavior: New wave of the
utilizing them, we could confirm that systematic and Marketing Science. Yuhikaku Publishing.
effective versatile analysis could be made. Various fields Ueda T, Shibata N (1987). Occasion of Using Goods and Price
Organization. Using of Radaring Methods and Text Mining For
should be examined hereafter. example “Beer & Sparkling Sake.” Mark. J.
Oshima K (2005). Appication of Electronic Money to Payments. Univ. J.
Nihon Univ., 6: 335-346.
RESEARCH LIMITATION AND FUTURE RESEARCH Nakashima M (2007). New Development of Electronic money in Japan.
Reitaku Int. J. Econ. Stud., 15(2): 97-112.
DIRECTION Oyama K, Nohara Y, Yasuura H (2006). Modeling of Cash Currency
and Its Application to Implementation of Electronic Money System.
After a comparison of the study’s population was carried IPSJ SIG Technical Report, 2006-MPS-59(9): 33-36.
out, it was observed that the sampling number is limited. Kurokawa A, Morita T, Kusakabe S (2003). Contactless IC card
Technology “FeliCa” and New Approach. International Symposium on
However, making suitable sampling of the population is a Speed-up and Service Technology for Railway and Maglev System
future issue to be resolved. 2003 (STECH’03), 2003.8.19-22 Tokyo, Japan, pp. 323-327.
Based on the results obtained from this study, effective
information was provided to each company concerning
marketing strategy via IC card system, though further
research may be carried out on these areas.
REFERENCES
Arcar DA, Day GS (1980). Marketing Research: Private and Public

Sector Decisions. John Wiley & Sons, Inc.
Osawa Y, Nels EB, Yachida M (1999). Automatic Indexing by
Segmenting and Unifing Co-occurrence Graphs. The Institute of
Electronics, Information and Communication Engineers, Vol. J82-D-I
No.2.

APPENDIX
Questionnaire about using electronic money by IC card
Please answer the following questions. Please write down to the answering items. Plural selection is allowed for
Question 1, 2, 4, 6, 8, 11. Select of the right column for Question 7 and 12.
1. What kind of electronic money do you have?
Q1 Edy Suica PASMO nanaco WAON ICOCA PiTaPa iD QUICPay Smartplus Visa Touch
Pidel(taspo) Cmode Do not have Miscellaneous ( )
2. What kind of electronic money do you use?
Q2 Edy Suica PASMOnanacoWAON ICOCAPiTaPaiDQUICPaySmartplusVisa Touch

3. What kind of electronic money do you use the most?
Q3 Edy Suica PASMOnanacoWAON ICOCAPiTaPaiDQUICPaySmartplusVisa Touch

4. Why ?
Q4 Able to use as a ticket for a railway and/or bus Able to settle payments without having change Able to get additional
points Able to exchange points with other goods/services Able to use when buying at the shop (usually used) There are
many shops in which electronic money can be used Only have that kind of electronic money Because it is a pre-paid style
(not credit card style) Because it is a post-paid style Because it can be charged automatically There are many places
where we can be charged Able to use in net-shopping Able to use an application of mobile phone Safeness in security
Miscellaneous ( )
5. What kind of method do you often use when riding on a railway?
6. Why is that?
Q6 Able to use as a ticket for a railway and/or bus Able to settle payments without having change Able to get additional
points Able to exchange points with other goods/services Able to use when riding on the railway Able to use when riding on
the bus Only have that kind of electronic money Because it is a pre-paid style (not credit card style) Because it is a post-
paid style Charging money is troublesome Able to use via mobile phone Miscellaneous ( )

7. What is the important point you note when you use electronic money?
' $ ! , $
, $$
/
'
'
0
#
'
'
'
1 $
2
!
8. Where do you use electronic money most often?
Q8 Convenience store Super market Shop in station Book store Library Vending Machine Restaurant Net-
shopping Specialty store Department store Miscellaneous ( )
9. How many often do you spend electronic money in a month?
Q9 every day 4-5 times in a week 2-3 times in a week once in a week 3-4 times in a month 1-2 times in a month less than once
in a month several times in a year Do not use/quite few
10. How much electronic money do you spend in a month?
Q10 -\1000 -\3000 -\5000 -\10000 -\20000 -\30000 \30000-

11. Why is there no electronic money?
Q11 Do not feel merit by using it Troublesome for subscription Feel uneasy for the security Troublesome in making
money charge There are few stores in which it can be used Already have too many cards Uneasy to spend too much for
post-paid card Miscellaneous ( )
12. What do you expect for electronic money in the future?
!"#
' 3
-$
-$
$
#
# $$ 4
- 4 $
' $5 ,
'
' $
'
'
1 $
2
!
About yourself
Q13 <Age> -20 20-30 30-40 40-50 50-60 60-

Q14 <Gender> Male Female
Q15 <Address> Prefecture : ( ) City : ( )

µ
Modified stage-gate: A conceptual model of virtual
product development process
Nader Ale Ebrahim*, Shamsuddin Ahmed and Zahari Taha
Department of Engineering Design and Manufacture, Faculty of Engineering, University of Malaya, 50603 Lembah
Pantai, Kuala Lumpur, Malaysia.
In today’s dynamic marketplace, manufacturing companies are under strong pressure to introduce
new products for long-term survival with their competitors. Nevertheless, every company cannot cope
up progressively or immediately with the market requirements due to knowledge dynamics being
experienced in the competitive milieu. Increased competition and reduced product life cycles put force
upon companies to develop new products faster. In response to these pressing needs, there should be
some new approach compatible in flexible circumstances. This paper presents a solution based on the
popular Stage-Gate system, which is closely linked with virtual team approach. Virtual teams can
provide a platform to advance the knowledge-base in a company and thus to reduce time-to-market.
This article introduces conceptual product development architecture under a virtual team umbrella.
The paper describes all the major aspects of new product development (NPD), NPD process and its
relationship with virtual teams, Stage-Gate system finally presents a modified Stage-Gate system to
cope up with the changing needs. It also provides the guidelines for the successful implementation of
virtual teams in new product development.
Key words: Modified stage-gate system, virtual product development, conceptual model.
INTRODUCTION
New product development (NPD) is widely recognized as virtuality in NPD is now technically possible (Leenders et
a key to corporate prosperity (Lam et al., 2007). Different al., 2003). Automotive OEMs (Original equipment manu-
products may require different processes, a new product facturers) have formed partnerships with suppliers to take
idea needs to be conceived, selected, developed, tested advantage of their technological expertise in develop-
and launched to the market (Martinez-Sanchez et al., ment, design, and manufacturing (Wagner and Hoegl,
2006). The specialized skills and talents required for the 2006). As product development becomes the more com-
development of new products often reside (and develop) plex, supply chain also have to collaborate more closely
locally in pockets of excellence around the company or than in the past. These kinds of collaborations almost
even around the world. Firms, therefore, have no choice always involve individuals from different locations, so
but to disperse their new product units to access such virtual team working supported by IT, offers considerable
dispersed knowledge and skills (Kratzer et al., 2005). As potential benefits (Anderson et al., 2007). May and Carter
a result, firms are finding that internal development of all (2001) in their case study of virtual teams working in the
technology needed for new products and processes are European automotive industry have shown that enhanced
difficult or impossible. They must increasingly acquire communication and collaboration between geographically
technology from external sources (Stock and Tatikonda, distributed engineers at automotive manufacturer and
2004). supplier sites make them get benefits in terms of better
Virtualization in NPD has recently started to make quality, reduced costs and a reduction in the time-to-
serious headway due to developments in technology – market (between 20 - 50%) for a new product vehicle.
Although the uses of the internet in NPD have received
considerable attention in the literature, very little is written
about the collaborative tool and virtual team implement-
*Corresponding author. E-mail: aleebrahim@perdana.um. tation in NPD. On the other hand, Stage-Gate system
edu.my. which defines different steps of product development has

some criticism and according to the extent of information bination between the two types of teams (Precup et al.,
and communication technology (ICT) need to modify. In 2006).
forthcoming section the major aspects of new product Given the complexities involved in organizing face-to-
development (NPD), NPD process and its relationship face interactions among team members and the
with virtual teams, Stage-Gate system and finally advancements in electronic communication technologies,
presents a modified Stage-Gate system will be described. firms are turning toward employing virtual NPD teams
(Jacobsa et al., 2005; Badrinarayanan and Arnett, 2008;
Schmidt et al., 2001). IT improves NPD flexibility
NEW PRODUCT DEVELOPMENT (NPD) CALLS FOR
(Durmusoglu and Calantone, 2006). New product deve-
VIRTUALITY
lopment requires the collaboration of new product team
Product development definition used by different resear- members both within and outside the firm (Martinez-
chers in slightly different ways, but generally it is the Sanchez et al., 2006; McDonough et al., 2001; Ozer,
process that covers product design, production system 2000) and NPD teams are necessary in all businesses
design and product introduction processes and start of (Leenders et al., 2003). In addition, the pressure of
production (Johansen, 2005). A multidisciplinary globalize competition forces companies to face increased
approach is needed to be successful in launching new pressures to build critical mass, reach new markets, and
products and managing daily operations (Flores, 2006). plug skill gaps. Therefore, NPD efforts are increasingly
In the NPD context, teams developing new products in being pursued across multiple nations through all forms
the turbulent environments encounter quick depreciation of organizational arrangements (Cummings and Teng,
of technology and market knowledge due to rapidly 2003). Given the resulting differences in time zones and
changing customer needs, wants, and desires (Akgun et physical distances in such efforts, virtual NPD projects
al., 2007). Adoption of collaborative engineering tools and are receiving increasing attention (McDonough et al.,
technology (e.g., Web-based development systems for 2001). The use of virtual teams for new product
virtual team coordination) was significantly correlated with development is rapidly growing and organizations can be
NPD profitability (Ettlie and Elsenbach, 2007). ICT dependent on it to sustain competitive advantage (Taifi,
enhances the NPD process by shortening distances and 2007).
saving on costs and time (Vilaseca-Requena et al.,
2007). New product development process
Kafouros et al. (2008) found that internationalization
enhances a firm’s capacity to improve performance New business formation activities vary in complexity and
through innovation. Since efficiency, effectiveness and formality from day-to-day entrepreneurial or customer
innovation management has different and contradictory prospecting activities to highly structured approaches to
natures, it is very difficult to achieve an efficient and new product development (Davis and Sun, 2006).
innovative network cooperative NPD (Chen et al., 2008b). Today’s uncertain and dynamic environment presents a
Supplier involvement in NPD can also help the buying fundamental challenge to the new product development
firm to gain new competencies, share risks, move faster process of the future (MacCormack et al., 2001). New
into new markets, and conserve resources (Wagner and product development is a multi-dimensional process and
Hoegl, 2006). involves multiple activities (Ozer, 2000). Kusar et al.
New product development (NPD) has long been (2004) summarized different stage of new product
recognised as one of the corporate core functions (Huang development which in earlier stages, the objective is to
et al., 2004). During the past 25 years NPD has increa- make a preliminary market, business, and technical
singly been recognized as a critical factor in ensuring the assessment, whereas at the later stages they propose to
continued existence of firms (Biemans, 2003). The rate of actually design and develop the product(s).
market growth and technological changes has acce-
lerated in the past years and this turbulent environment - Definition of goals (goals of the product development
requires new methods and techniques to bring successful process)
new products to the marketplace (González and Palacios, - Feasibility study (term plan, financial plan, pre-
2002). Particularly for companies with short product life calculation, goals of market)
cycles, it is important to quickly and safely develop new - Development (first draft and structure of the product,
products and new product platforms that fulfil reasonable first draft of components, product planning and its control
demands on quality, performance, and cost (Ottosson, processes)
2004). The world market requires short product develop- - Design (design of components, drawing of parts, bills of
ment times (Starbek and Grum, 2002), and therefore, in material)
order to successfully and efficiently get all the experience
needed in developing new products and services, more Stage-gate system in NPD: Several authors proposed
and more organizations are forced to move from tradi- different conceptual models for the NPD process,
tional face-to-face teams to virtual teams or adopt a com- beginning from the idea screening and ending with the

Modified stage-gate: A conceptual model of virtual product development process 137
Figure 1. The stage-gate system model (source: Cooper, 2006).
commercial launching. The model of Cooper, called the 2007).

Stage-Gate System is one of the most widely acknow-
ledged systems (Rejeb et al., 2008). The Stage-Gate
System model (Figure 1) divides the NPD into discrete DEMAND FOR MODIFIED STAGE-GATE WITH
stages, typically five stages. Each Stage gathers a set of VIRTUAL PRODUCT DEVELOPMENT TEAM
activities to be done by a multifunctional project team. To
Recently, the Stage-Gate system had been modified and
enter into each stage, some conditions and criteria have
adjusted to fitting the real situation in nowadays, called
to be fulfilled. These are specified in the Gates. A Gate is
the Next Generation Stage-Gate (Figure 2). The greatest
a project review in which all the information is confronted
change in Stage-Gate system is that it has become a
by the whole team. Some criticism of the method has
scalable process, scaled to fit very different types and
surfaced, claiming that the steering group assessment in
risk-levels of projects, from very risky and complex
the stage and gate steps halts the project for an
platform developments through to lower risk extensions
unnecessarily long time, making the process abrupt and
and modifications, and even to handle rather simple sales
discontinuous (Ottosson, 2004). A closer integration of
management through virtual team in the process might be force requests.
Managers recognized that any kinds of product deve-
a solution for avoiding such situations.
lopment project have to manage risks and consumption
Stage-gate process: This process is a method of of resources, but it is not all necessary to go through the
managing the new product development process to fulfil five-stage process. The process has revised into
increase the probability of launching new products quickly multiple versions to fit business needs and to accelerate
and successfully. The process provides a blueprint to projects. Stage-Gate XPress for projects of moderate
move projects through the various stages of develop- risk, such as improvements, modifications and
ment: 1.) idea generation, 2.) preliminary investigation, 3.) extensions; and Stage-Gate Lite for very small projects,
business case preparation, 4.) product development, such as simple customer requests (Cooper, 2008).
5.) product testing, and 6.) product introduction. This Although Next Generation Stage-Gate has defined for
process is used by such companies as IBM, Procter and different types and risk-levels of projects, but still team
Gamble, 3 M, General Motors, and others. The process is collaboration in each stage is unveiled. So dealing with
primarily used in the development of specific commercial virtual teams can bring an opportunity to make closer
products, and is more likely to be used in platform integration of team members in the process.
projects than in derivative projects. Virtual product development team by using colla-
borative tools can effectively be used both in the earlier
Auto companies that have modified their Stage-Gates and later stages of the NPD process. Past research has
procedures are also significantly more likely to report (1) mainly focused on the role of Internet in NPD (Ozer,
use of virtual teams; (2) adoption of collaborative and 2004). Almeida and Miguel (2007) have been identified in
virtual new product development software supporting the literature that it seems to exist a lack of a conceptual
tools; (3) having formalized strategies in place specifically model that represents all dimensions and interactions in
to guide the new product development process; and (4) the new product development process. On the other
having adopted structured processes used to guide the new hand, some criticism of Stage-Gate method has surfaced,
product development process (Ettlie and Elsenbach, claiming that the steering group assessment in the gate

Figure 2. An overview of the next generation stag-gate (Source: (Cooper, 2008)).
step halts the project for an unnecessarily long time, mation and communication technologies (e-mail, video-
making the process abrupt and discontinuous (Ottosson, conferencing, telephone, etc.) (Hertel et al., 2005). We
2004). A closer integration of management through virtual define, virtual team is small temporary groups of geogra-
team in the process might be a solution for avoiding such phically, organizationally and/or time dispersed know-
situations. Integration is the essence of the concurrent ledge workers who coordinate their work, predominantly
product design and development activity in many orga- with electronic information and communication
nizations (Pawar and Sharifi, 1997). Ragatz et al. (2002) technologies in order to accomplish one or more
suggest that integration of the supplier’s technology organization tasks.
roadmaps into the development cycle is critical to
ensuring that target costs are met.
To compensate for the lack of a conceptual model that Capturing customer requirements
represents all aspects and interactions in the new product Collaborative tools allow firms to respond quickly to
process and decrease criticism of Stage-Gate system, a specific customer requirements with new, high-quality,
solution called Modified Stage-Gate system is introduced.
innovative products, and it enables firms to build cross-
Figure 3 illustrates new model architecture of the virtual functional competencies, enhance flexibility and share
product development process. The architecture is struc- knowledge (Mulebeke and Zheng, 2006). Capturing
tured in a two-layered framework: Traditional Stage-Gate customer requirements is represented throughout product
system and collaborative tool layer which are supported development will facilitate performing quality function
by virtual team. Merge of Stage-gate system with virtual deployment (Rodriguez and Al-Ashaab, 2005).
product development team lead to increased new product
performance and decreased time-to-market. The
following sections will describe some elements of the Collaborative capabilities
collaborative tool layer in more detail.
Gassmann and Von Zedtwitz (2003) defined “virtual Enabling collaborative capability through virtual teamwork
team as a group of people and sub-teams who interact represents a fundamental transitioning to be more effec-
through interdependent tasks guided by common purpose tive organizational work practices (Susman et al., 2003).
and work across links strengthened by information, com- The use of virtual teams will change the communication
munication, and transport technologies.” Another pattern both within and outside the firm. Successful colla-
definition suggests that virtual teams are distributed work borations require more than the mere use of electronic
teams whose members are geographically dispersed and communication and involve new skills and a supportive
coordinate their work predominantly with electronic infor- context that provides commitment and resources to facili-

Figure 3. Modified stage-gate: model architecture of the virtual product development process.
_____________________________
TECHNOLOGIESWORLD
tate collaboration (Martinez-Sanchez et al., 2006). cisions (Hossain and Wigand, 2004; Paul et al., 2004),
provide greater degree of freedom to individuals involved
with the development project (Ojasalo, 2008;
Company resources Badrinarayanan and Arnett, 2008; Prasad and Akhilesh,
2002), Greater productivity, shorter development times
Virtual team provides cost savings to employees by (McDonough et al., 2001; Mulebeke and Zheng, 2006),
eliminating time-consuming commutes to central offices Producing better outcomes and attract better employees,
and offers employees more flexibility to co-ordinate their Generate the greatest competitive advantage from limited
work and family responsibilities (Johnson et al., 2001). resources (Martins et al., 2004; Chen et al., 2008c; Rice
Virtual teams overcome the limitations of time, space, et al., 2007), Useful for projects that require cross-
and organizational affiliation that traditional teams face functional or cross boundary skilled inputs (Lee-Kelley
(Piccoli et al., 2004) and able to digitally or electronically and Sankey, 2008), Less resistant to change (Precup et
unite experts in highly specialized fields working at great al., 2006), Facilitating transnational innovation processes
distances from each other (Rosen et al., 2007). (Gassmann and Von Zedtwitz, 2003; Prasad and
Top management support is a strong motivational Akhilesh, 2002), higher degree of cohesion (Teams can
factor in the entire new product process. Although colla- be organized whether or not members are in proximity to
borative tools are able to assist top management but one another) (Kratzer et al., 2005, Cascio, 2000; Gaudes
many managers are uncomfortable with the concept of a et al., 2007), Evolving organizations from production-
virtual team because successful management of virtual oriented to service/information-oriented (Johnson et al.,
teams may require new methods of supervision 2001; Precup et al., 2006) and provide organizations with
(Jarvenpaa and Leidner, 1999). Management unprecedented level of flexibility and responsiveness
commitment provides organizational support for change, (Hunsaker and Hunsaker, 2008; Chen, 2008; Pihkala et
generates enthusiasm, provides a clear vision of the al., 1999; Liu and Liu, 2007). Beside these advantages
product concept and assures sufficient allocation of virtual NPD teams are self-assessed performance and
resources (González and Palacios, 2002). high performance (Chudoba et al., 2005; Poehler and
Information sharing has been identified as an important Schumacher, 2007), employees perform their work with-
success factor in NPD (Ozer, 2006). The positive impact out concern of space or time constraints (Lurey and
of information sharing on the success of new products Raisinghani, 2001), optimize the contributions of
has long been established in the NPD literature (Sridhar individual members toward the completion of business
et al., 2007; Furst et al., 2004; Merali and Davies, 2001; tasks and organizational goal (Samarah et al., 2007),
Lipnack and Stamps, 2000). reduce the pollution (Johnson et al., 2001), manage the
Virtual teams reduce time-to-market (Sorli et al., 2006; development and commercialization tasks quite well
Kankanhalli et al., 2006; Chen, 2008; Shachaf, 2008; Ge (Chesbrough and Teece, 2002), Improve communication
and Hu, 2008; Guniš et al., 2007). Lead time or time to and coordination, and encourage the mutual sharing of
market has been generally admitted to being one of the inter-organizational resources and competencies (Chen
most important keys for success in manufacturing et al., 2008a), employees can more easily accommodate
companies (Sorli et al., 2006). Time also has an almost both personal and professional lives (Cascio, 2000),
1:1 correlation with cost, so cost will likewise be reduced cultivating and managing creativity (Leenders et al., 2003;
if the time-to market is quicker (Rabelo and Jr., 2005). Atuahene-Gima, 2003; Badrinarayanan and Arnett,
Virtual teams overcome the limitations of time, space, 2008), facilitate knowledge capture and sharing
and organizational affiliation that traditional teams face knowledge, experiences (Rosen et al., 2007; Zakaria et
(Piccoli et al., 2004) and reducing relocation time and al., 2004; Furst et al., 2004; Sridhar et al., 2007), Improve
costs, reduced travel costs (Bergiel et al., 2008; Fuller et the detail and precision of design activities (Vaccaro et
al., 2006; Kankanhalli et al., 2006; Olson-Buchanan et al., al., 2008), Provide a vehicle for global collaboration and
2007). Virtual NPD teams overcome the limitations of coordination of R&D-related activities (Paul et al., 2005),
time, space, and organizational affiliation that traditional Allow organizations to access the most qualified
teams face (Piccoli et al., 2004). Virtual R&D team is able individuals for a particular job regardless of their location
to tap selectively into a centre of excellence, using the (Hunsaker and Hunsaker, 2008) and Enable organiza-tions to
best talent regardless of location (Criscuolo, 2005; respond faster to increased competition (Hunsaker and
Samarah et al., 2007; Fuller et al., 2006; Badrinarayanan Hunsaker, 2008; Pauleen, 2003).
and Arnett, 2008; Furst et al., 2004). The ratio of virtual R&D member publications exceeded
Virtual team also, respond quickly to changing from co-located publications (Ahuja et al., 2003) and the
business environments (Bergiel et al., 2008; Mulebeke extent of informal exchange of information is minimal
and Zheng, 2006), able to digitally or electronically unite (Pawar and Sharifi, 1997, Schmidt et al., 2001). Virtual
experts in highly specialized fields working at great teams have better team outcomes (quality, productivity,
distances from each other (Rosen et al., 2007), more and satisfaction) (Gaudes et al., 2007; Ortiz de Guinea et
effective R&D continuation decisions (Cummings and Teng, al., 2005; Piccoli et al., 2004), Reduce training expenses,
2003; Schmidt et al., 2001), most effective in making de- Faster Learning (Pena-Mora et al., 2000, Atuahene-Gima,

2003; Badrinarayanan and Arnett, 2008) and finally tion and collaboration in business and manufacturing
greater client satisfaction (Jain and Sobek, 2006). applications. Most companies today are divided in
different departments located in different geographical
places and dealing with specialized tasks. So using
KEY FACTORS FOR SUCCESSFULLY
collaborative tools enables authorized users in geogra-
IMPLEMENT-ING VIRTUAL TEAM IN NPD phically dispersed locations to have access to the com-
NPD is continuing to be an area that is receiving pany’s product data and carry out product development
increased attention, both in practice and academic work simultaneously and collaboratively on any operating
spheres (Shani et al., 2003). Eppinger and Chitkara systems.
(2006) studied global product development (GPD) base The modified Stage-Gate system has demonstrated to
on virtual teams, for companies in the manufacturing be a good development platform for the NPD. In order to
sector by conducting interviews with 30 executives and integrate and share the information and knowledge
surveying over 1150 product development executives and available within geographically distributed companies,
professionals from large manufacturing companies. They this model can be a reference model. The proposed mo-
reported the following ten key success factors for del architecture of a virtual product development process,
successful GPD: does not aim to replace the existing systems in com-
panies but rather to be a support tool for communicating
- Management priority and commitment – Commitment and sharing knowledge among the disperse partners.
from management to make the necessary organization, Modified Stage-Gate system will lead to the production of
process and cultural changes to make GPD work. better and more cost effective products, developed in a
- Process modularity for global distribution – Ability to shorter period of time.
separate activities into modular work packages for global In highly competitive era which forces companies to
distribution. launch a new product faster, the decision on setting up
- Product modularity to develop subsystems or virtual teams and using a modified NPD process is not a
components in different locations – Ability to break down choice but a requirement. The theme of virtual teams and
into subsystems for global distribution. application of a collaborative tool in NPD has not been
- Core competence so the company does not become much explored and researchers in this field are
completely reliant on suppliers or contractors – Good encouraging more studies and analyses to be made.
understanding of what the company’s core competencies
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µ
Modelling telecom customer attrition using logistic

regression
1 2 1 1
B. E. A. Oghojafor , G. C. Mesike *, C. I. Omoera and R. D. Bakare
1
Department of Business Administration, University of Lagos, Lagos State, Nigeria.
2
Department of Actuarial Science and Insurance, University of Lagos, Lagos State, Nigeria.
The Nigeria telecom sector has experienced a major transformation in terms of growth, technological
content, and market structure over the last decade as a result of policy and institutional reforms
culminating to the liberalization of the sector and consequently, resulting in significant rise in
competition. With the industry’s experience of an average of 41% annual churn rate and couple with the
view that the cost of acquiring new customer is five times higher than maintaining an existing customer,
customers retention is now seen to be even more important than customer acquisition. Therefore
retaining customer has becomes a priority for most enterprise and there are compelling arguments for
managers to carefully consider the factors that might increase customer’s retention rate. This study
using logistic regression, therefore examine the effect of socio-economic factors on customer attrition
by investigating the factors that influence subscribers churning one service provider for another.
Key words: Teledensity, customers’ retention, telecom, socio-economic factors.
INTRODUCTION
Nigeria, with a teledensity of 64.70 as at April 2011, is frequently churn from one service provider to another
one of the fastest growing telecommunications market in based on cost comparison and better service benefits,
Africa, with subscriber lines of less than 266, 461 mobile thereby giving rise to the concept of churn or attrition.
(GSM) lines in 2001 and growing exponentially to about An additional multifaceted dimension according to
103, 347, 158 million digital mobile lines by end of April Oyeniyi and Abiodun (2008) to the competitive trend in
2011 as evidenced in Figure 1 (NCC, 2011). The impetus the Nigerian telecommunication industry is the ease and
of these changes is expected to continue, and even at a rate of products and services duplication in the industry
much faster pace. and multi dimension nature of communication.
The telecom sector has experienced a major With the telecommunications industry’s experience of
transformation in terms of growth, technological content, an average of 41% annual churn rate ( NCC, 2011) and
and market structure over the last decade as a result of keeping in view that the cost of acquiring new customer
policy and institutional reforms in the sector. This reform is five times higher than maintaining an existing customer
has led to the liberalization of the telecom sector and (Khan et al., 2010). Customer retention is now seen to be
consequently, the sector has witnessed significant rise in even more important than customer acquisition.
competition. For many existing service providers, retaining highly
In this strongly competitive telecommunication industry, profitable customers is the number one business pain.
customers are continually faced with decision of choosing So, maintaining long-term relationship with customers
a service provider. They become more demanding and becomes an imperative strategy for telecom service
providers in order to pursue more predictable source of
revenues and successive income streams. This study
examines the effect of socio-economic factors on cus-
*Corresponding author. E-mail: mesikegodson@yahoo.co.uk. tomer attrition by investigating the factors that influence

Modelling telecom customer attrition using logistic regression 145
lines 140,000,000
120,000,000
emobil
100,000,000
digital
80,000,000
60,000,000
of
Number
40,000,000
20,000,000
2001 2002 2003 2004 2005 2006 2010 2011
Year
Figure 1. Total telecoms subscribers (2001 to 2011).
influence subscribers churning one service provider for factors are relative importance to loyalty formation
another. compared to economic factors. They asserted that
Customer attrition has become an important issue for service quality directly and indirectly affects customer
many organisations particularly in subscription based loyalty.
businesses, where customers have a formal, contractual In their study, Rahman et al. (2010) identified call rate,
relationship which must be ended (Khan et al., 2010). In service quality, service availability and promotion as
an attempt to identify the determinants of subscriber significant factors influencing customer retention in
churn and customer loyalty in Korean mobile telephony telecom sector (Wong and Sohal, 2003; Lee and Murphy,
market, Kim and Yoon (2004) employed a binomial logit 2008; Kim and Park, 2010; Sathish et al., 2011).
model while Wei and Chiu (2002) developed a data The remainder of this article is organized as follows:
mining based churn prediction technique using call Subsequently, the study discusses the method of
pattern changes and contractual data for mobile analysis, data collection, sampling technique and sample
telecommunication in Taiwan. characteristics. Followed by results and discussion and
In earlier study, Kandampully (1998) discoursed that finally the study was concluded.
service organization’s long-term success in a market is
actually determined by its ability to expand and maintain
METHODOLOGY
a large and loyal customer base. Chen and Ching (2007)
investigated the effect of customer relationship manage- For the purpose of this study, a sample survey was conducted
ment practices on customer loyalty and the moderating between January and April 2011 and was directed at major areas in
effects of brand image in telecom industry. Gan et al. Lagos State. Lagos State was chosen as the study area because of
(2006) in Oyeniyi and Abiodun (2008) also noted that its heterogeneous concentrations of people with many linguistic and
retaining customer has becomes a priority for most enter- cultural groups living together. Well structured and compliant
questionnaires comprising a cover letter which states that the
prise and there are compelling arguments for manager to
research objective were used to collect information from various
carefully consider the factors that might increase telecom subscribers about their perceptions, service satisfaction
customer’s retention rate. and customer attrition of telecom service-providers.
Farn and Huang (2009) investigated and compared the A two stage sampling technique was used in the study because
influences of economic and psychological factors on sample is taken in two steps. The first step is to select a sample of
customer loyalty. Their finding shows that psychological units, called primary units, and the second is to select a sample of

Table 1. Effect of call expenditure and gender on willingness to churn.
Would you like to change your current

Gender Expenditure service provider in the future? Total 2 p-value
Yes No
Below 1,000 6.8 19.5 26.2 52.899 0.00
Male 1000 – 5000 14.5 45.7 60.2
5000 - 10,000 10.4 0.5 10.9
10,000 - 20,000 0.0 2.7 2.7
Below 1,000 5.0 15.5 20.4 63.586 0.000
Female 1000 – 5000 12.7 49.2 61.9

5000 - 10,000 13.3 0.0 13.3
10,000 - 20,000 0.0 4.4 4.4
Table 2. Effect of call expenditure and marital status on willingness to churn.

Marital status Expenditure service provider in the future? Total 2 p-value
Yes No a
78.165
Below 1,000 7.1 18.6 25.8 0.000
Single 10 00 – 5000 13.6 46.1 59.7
5000 - 10,000 11.2 0.3 11.5
10,000 - 20,000 0.0 3.1 3.1
Below 1,000 2.8 15.0 17.8 c 0.000
38.948
Married 1000 – 5000 14.0 50.5 64.5

5000 - 10,000 13.1 0.0 13.1
10,000 - 20,000 0.0 4.7 4.7
subunits from each chosen primary unit. The major advantage of towards the male subscribers as 32% indicated their readiness to
this sampling method is that it is more flexible than one-stage change service provider. The percentage of the female subscribers
sampling as it gives us the possibility of taking smaller units that willing to change their service provider is lower going by the 31%
produce high efficiency (Cochran, 1977). recorded for the question.
A random sample of 14 local government areas were selected for Another cross tabulation carried out was that of call expenditure
our study and 6000 randomly selected subscribers in these local of respondent with marital status and willingness to change service
government areas were examined for customer loyalty and attrition provider (Table 2). The call expenditure figures suggest that
of telecom service providers. The questionnaire captured infor- willingness to change service provider is likely to be more dominant
mation on the income of the respondents, their age, educational among married subscribers who spends between N1000 and
level and employment status in addition to availability of service N5000 monthly. However, it was observed that subscribers who are
provider and readiness to switch from one service provider to single with monthly call expenditure between N1000 and N5000 are
another. Our instruments also attempt to capture accessibility and more willing to change service provider followed by those with call
satisfaction of telecom service providers. expenditure range between N5000 and N10000. Overall, about
62% are willing to change service provider with subscribers who
are single accounting for over 52% of this figures.
Sample characteristic A third cross tabulation carried out was that of call expenditure
with age and willingness to change service provider. This is to
Table 1 provides a cross tabulation of call expenditure of the check whether there is particular age bracket when the willingness
respondents with gender and willingness to change service to change service provider is keen. The outcome is presented in
provider. The result indicates a statistically significant influence of Table 3. The result shows a statistically significant influence of this
this factor on subscribers’ preference to switch to other service factor on subscribers’ willingness to change service provider. The
provider. The income range expenditure on call shows that, of the table reveals that older subscribers tend to change service provider
60 and 62% of male and female subscribers who spend between than those in the age range less than 18 years.
N1000 and N5000 monthly on telecom recharge, 15 and 13% are Lastly, the fourth and fifth cross tabulation carried out was that of
willing to change service provider, respectively. Further the table advertising medium with gender and age and willingness to change
shows that the readiness to change service provider is tilted service provider, respectively. The result is presented in Tables 4

Table 3. Effect of call expenditure and age on willingness to churn.
Would you like to change your current 2
Age (Years) Exp service provider in the future? Total p-value

Yes No
Below 1,000 0.0 19.4 19.4
<18 1000 – 5000 11.1 44.4 55.6 a 0.000
20.049
5000 - 10,000 16.7 0.0 16.7
10,000 - 20,000 0.0 8.3 8.3
Below 1,000 7.7 19.9 27.6
18-25 1000 – 5000 14.9 41.6 56.6 c 0.000

55.754
5000 - 10,000 12.2 0.5 12.7
10,000 - 20,000 0.0 3.2 3.2
Below 1,000 5.0 14.2 19.1
26-33 1000 – 5000 9.9 58.2 68.1 49.132 0.000

5000 - 10,000 9.9 0.0 9.9
10,000 - 20,000 0.0 2.8 2.8
Table 4. Advertising medium, gender and willingness to change service provider in percentage.

Gender Medium service provider in the future? Total 2 p-value
Yes No
TV 8.1 8.6 16.7
Magazine 11.8 9.0 20.8
Male Radio 0.5 32.6 33.0 a 0.000
72.245
Internet 5.9 17.6 23.5
Newspaper 0.9 0.0 0.9
Others 4.5 0.5 5.0
TV 6.6 8.8 15.5 c
58.268
Magazine 12.2 6.6 18.8 0.000

Female Radio 0.6 29.3 29.8
Internet 7.7 24.3 32.0
Others 3.9 0.0 3.9
and 5, respectively. The chi-square and the p-value show a as the categorical response variables. The objective is to assess
statistically significant influence of these factors on subscribers’ the impact of certain demographic and socio-economic factors like
decision to change service provider. age, sex, marital status, education, income, occupational type,
Among the methods that have been used to investigate the effect occupation and advertising medium on willingness to switch current
of socio-economic factors on customer attrition is logit model service provider for another. Thus, these factors are regarded as
regression (Kim and Yoon, 2004). In this study, logistic regression, the explanatory variables.
a sub-class of statistical models known as generalized linear We constructed two models, one using call expenses, type of
models (Menard, 1995) was applied to examine the effect of socio- service, no of mobile connection and advertising medium as
economic factors that influence subscribers switching from one explanatory variables, while the second, in addition to these, also
service provider for another. Logistic regression being a predictive includes age, gender, marital status, education, income,
model for analyzing survey data (Hosmer and Lomeshow, 2004) occupational type, occupation and place of residence.
present a way for modeling the dependence of a binary response
variable on one or more explanatory variables which may be
categorical or continuous (Bewick et al., 2005). It describes the RESULTS AND DISCUSSION
relationship between a dichotomous response variable and asset of
explanatory variables (Friendly, 1995; Riley, 2006; Garson, 2006).
In this study, “Intention to drop current service provider” is taken We examine how socio-economic factors affect subscribers’

Table 5. Advertising medium, gender and willingness to change service provider in percentage.

Age (Years) Medium service provider in the future? Total 2 p-value
Yes No
TV 8.3 8.3 16.7
Magazine 8.3 5.6 13.9 a
18.269
<18 Radio 0.0 41.7 41.7 0.001
Internet 2.8 16.7 19.4
Others 8.3 0.0 8.3
TV 9.0 9.0 18.1
Magazine 13.6 9.0 22.6 c

59.924
18-25 Radio 0.9 26.7 27.6 0.000
Internet 7.2 19.9 27.1
Others 4.1 0.5 4.5
TV 5.0 8.5 13.5
26-33 Magazine 10.6 7.1 17.7 d 0.000

44.031
Radio 0.0 36.2 36.2
Internet 7.1 23.4 30.5
Others 2.1 0.0 2.1
Table 6. Logistic models for telecoms subscribers.
Model 1 Model 2
Odd S.E. 95% C.I. for EXP(B) Odd S.E. 95% C.I. for EXP(B)
ratio Lower Upper ratio Lower Upper
Gender 1.066 0.292 0.601 1.890
Marital status 0.725 0.345 0.369 1.427
Age 0.959 0.223 0.620 1.483
Place of residence 0.950 0.123 0.746 1.209
Occupation 1.369 0.244 0.849 2.206
Income 1.085 0.232 0.689 1.709
Call expenses 6.523 0.307 3.577 11.895 5.149 0.249 3.163 8.381
Employment description 0.797 0.350 0.402 1.582
Educational level 0.879 0.143 0.665 1.163
Advertisement medium 0.588 0.204 0.394 .877 0.580 0.138 0.442 0.760
No of mobile connection 1.597 0.214 1.051 2.427 1.469 0.158 1.077 2.004
Type of service 2.806 0.547 0.961 8.190 2.279 0.363 1.119 4.643
Type of mobile connection 7.029 0.428 3.041 16.249
Which facility attracts you the most? 5.553 0.288 3.156 9.770
Constant 0.000 1.815 0.000
2 0.354 0.340
R
-2 Log likelihood a 332.455
327.705
2 12.553 59.102
Ӽ
subscribers’ decision to switch service provider and how to the data. Table 6 report the result of the two logistic
they help to predict how these factors influence or hinder models at the 95% significant level. The significance of
subscribers changing provider by fitting a logistic model the variables was checked through the Wald’s statistics.

Table 7. Stepwise logistic regression for telecoms subscribers.
Step Factor B S.E. Wald df Sig. Exp(B)

1 Service facilities 1.092 0.219 24.984 1 0.000 2.982
Constant -3.657 0.580 39.768 1 0.000 0.026
Call expenses 1.258 0.211 35.461 1 0.000 3.519
2 Service facilities 1.518 0.243 38.992 1 0.000 4.564

Constant -7.337 0.929 62.401 1 0.000 0.001
Call expenses 1.261 0.208 36.948 1 0.000 3.531
3 No of mobile connection 0.446 0.147 9.202 1 0.002 1.563

Service facilities 1.290 0.245 27.83 1 0.000 3.633
Constant -7.802 0.940 68.866 1 0.000 0.000
Call expenses 1.605 0.243 43.497 1 0.000 4.978
Advertisement medium -0.448 0.135 10.944 1 0.001 0.639

Constant -7.980 0.968 67.927 1 0.000 0.000
Call expenses 1.639 0.249 43.465 1 0.000 5.149
Advertisement medium -0.545 0.138 15.602 1 0.000 0.580

Type of service 0.824 0.363 5.147 1 0.023 2.279
Constant -8.921 1.090 67.009 1 0.000 0.000
It provides estimates for the odd ratios for each of the stepwise logistic regression was conducted as a model
independent variables in the model. It is particularly selection technique in order to obtain the best factors that
instructive to note that for (Model 2), except for type of determine telecoms churn. The result is presented in
service all the factors are highly significant at the 99% Table 7.
level. Table 7 displays results of the stepwise logistic
This is an indication of strong relationship between the regression for telecoms subscribers to obtain the best
independent variables and the explanatory variable. This factors that determine telecoms churn. At the fifth step of
implies that call expenditure, no of mobile connection, the stepwise regression, five variables (factors) are found
type of service, advertisement medium and network faci- to be the major churn determinants in the telecoms
lities all have an influence on the likelihood of churning sector; they are call expenses, providers’ advertisement
service provider. Although, these characteristic are true medium, type of service plan, number of mobile
for both Model 1 and Model 2, however not all the va- connections and providers’ service facilities. The odd that
riables considered in Model 1 were significant. The odds a telecoms subscriber that considers call expenses
ratio for call expenses, type of service offered, no of important will churn his provider is 5.149, while the odd of
mobile connection and type of mobile connection are all subscriber with alternative providers churning is 1.469.
greater than 1. Model 1 shows that the likelihood to churn Comparatively, subscribers with alternative mobile
service provider is very high for subscribers with providers are 2.53 times more likely to churn than those
alternative service provider and those that consider call considering off-beam advertisement medium as a reason
rate as a reason to churn. This is also true for Model 2. to churn. The odds that subscribers would churn as a
Subscribers with alternative service provider are 2.5 result of unattractive service plan is 2.279 while the odds
times likely to churn than those with type of service. The that subscribers will churn as a result of poor service
likelihood to churn for subscribers who consider call rate facilities is 5.553
is 11.9 times higher than those who consider medium of
advertisement.
A comparison of the likelihood value for the two models Conclusion
shows that Model 1 has a lower magnitude for the log
likelihood. It is therefore a better fit. Furthermore, a Customer satisfaction has been hitherto revealed to be a

Providers’
Providers‘
advertisementrtit
medium
Subscribers’
Call expenses no of mobile connection

Telecoms
Customer
Churn
Providers’ Type of service

service facility plan
Figure 2. Telecom subscribers’ attrition model.
consistent antecedent of customer loyalty and retention in harmonized in programs and processes with the
a service framework. This study was undertaken to identified churn determinants to keep customers.
examine and understand the effect of socio-economic
factors on customer attrition by investigating the factors
influencing the propensity to churn service provider for REFERENCES
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µ
A hybrid method for improving forecasting accuracy

utilizing genetic algorithm and its application to J-
REIT (office type) stock market price data
1 2 3
Yasuo Ishii *, Keiko Nagata and Kazuhiro Takeyasu
1
Department of Management Design, Faculty of Business Administration, Osaka International University, 3-50-1, Sugi,
Hirakata, Osaka 573-0192, Japan.
2
Department of Economics, Osaka Prefecture University, 1-1 Gakuenc305-701, Naka-ku, Sakai, Osaka 599-8531,
Japan.
3
Fuji-Tokoha University, 325 Oobuchi, Fuji City, Shizuoka 417-0801, Japan
We proposed earlier that the equation of the exponential smoothing method (ESM) is equivalent to (1,1)
ARMA model equation, a new method of estimating the smoothing constant in the exponential
smoothing method which satisfied the minimum variance of forecasting error. Generally, the smoothing
constant is selected arbitrarily, but in this paper, we utilize the above theoretical solution. Firstly, we
estimate the ARMA model parameter and then estimate the smoothing constants. Thus, the theoretical
solution is derived in a simple way and it may be utilized in various fields. Furthermore, combining the
trend removal method with this method, we aim to improve forecasting accuracy. An approach to this
method is executed in the following method. Trend removal by the combination of linear, 2nd order non-
linear function and 3rd order non-linear function is executed on the stock market price data of J-REIT
(Japan Real Estate Investment Trust) for office type. Genetic algorithm is utilized to search optimal
weights for the weighting parameters of linear and non-linear function. For the comparison, monthly
trend is removed after that. Theoretical solution of the smoothing constant of ESM is calculated for both
the monthly trend removal data and the non monthly trend removing data. Then the forecasting is
executed on these data. This new method shows that it is useful for the time series that has various
trend characteristics. The effectiveness of this method should be examined in various cases.
Key words: Minimum variance, exponential smoothing method, forecasting, trend, genetic algorithm.
INTRODUCTION
Many methods for time series analysis have been time series with trend (Winters, 1984), utilizing Kalman
presented such as Autoregressive model (AR Model), Filter (Maeda, 1984), Bayes Forecasting (West and
Autoregressive Moving Average Model (ARMA Model) Harrison, 1989), adaptive ESM (Ekern, 1982), exponen-
and Exponential Smoothing Method (ESM) (Jenkins, tially weighted Moving Averages with irregular updating
1994; Brown, 1963; Tokumaru et al., 1982; Kobayashi, periods (Johnston, 1993), making averages of forecasts
1992). Among these, ESM is said to be a practical simple using plural method (Makridakis and Winkler, 1983) are
method. presented. For example, Maeda (1984) calculated
For this method, various improving methods such as smoothing constant in relationship with S/N ratio under
adding compensating item for time lag, coping with the the assumption that the observation noise was added to
the system. But he had to calculate under supposed
noise because he could not grasp observation noise. It
can be said that it does not pursue the optimum solution
*Corresponding author. E-mail: y-ishii@oiu.jp. from the very data themselves which should be derived
by those estimations. Ishii (1991) pointed out that the

A hybrid method for improving forecasting accuracy utilizing genetic algorithm and its application to J-REIT (office type) stock ..............................153
optimal smoothing constant was the solution of infinite : 01

smoothing constant (2) is
order equation, but he did not show the analytical re-stated as:
solution. Based on these facts, we proposed a new
method of estimating smoothing constant in ESM before
(Takeyasu, 2002, Takeyasu and Nagao, 2008). Focusing l (3)
that the equation of ESM is equivalent to (1,1) order
xˆt 11 xt l
l0
ARMA model equation; a new method of estimating
smoothing constant in ESM was derived.
By the way, we consider the following (1,1) order ARMA
In this paper, utilizing the above method, a revised
forecasting method is proposed. In making forecast such model.
as stock market price data, trend removing method is
xt xt 1 et et 1 (4)
devised.
In the application, the following five typical stocks are p,q
selected in which investment is concentrated on office Generally, order ARMA model is stated as:
rental field:
㺃 Nippon Building Fund Inc. "NBF" p q
㺃 Japan Real Estate Investment Corporation "JRE"
xa x ebe (5)
t i ti t j t j
㺃 Global One Real Estate Investment Corp "GOR" i1 j1
㺃 NOMURA REAL ESTATE OFFICE FUND, INC ("NOF") Here,

㺃 Daiwa Office Investment Corporation ("DOI")
xt : Ergodic Gaussian
Forecasting is executed on these data. This is a revised Sample process of Stationary
forecasting method. Variance of forecasting error of this
x t t 1,2, , N,
Process
newly proposed method is assumed to be less than those variance
of previously proposed methods. The rest of the paper is e : e2
t Gaussian White Noise with 0 mean
organized as follows. In section 2 (Description of ESM
using ARMA model), ESM is stated by ARMA model and MA process in (5) is supposed to satisfy convertibility
estimation method of smoothing constant is derived using condition.
ARMA model identification. The combination of linear and Utilizing the relation that:
non-linear function is introduced for trend removing in
section 3 (TREND REMOVAL METHOD). The monthly ratio is E e t et 1 , et 2 , 0
referred to in section 4 (MONTHLY RATIO).
Measuring method of forecasting accuracy is exhibited in
5 (FORECASTING ACCURACY). GA model to search we get the following equation from (4).
optimal weights for the weighting parameters of liner and (6)
non-linear function is introduced in 6 (SEARCHING xˆt xt 1 et 1
OPTIMAL WEIGHTS UTILIZING GA). Forecasting is executed in
section 7 (NUMERICAL EXAMPLE), and estimation accuracy is
examined. t
Operating this scheme on +1, we finally get:
xˆt 1 xˆt 1 et (7)
Description of ESM using ARMA model (Takeyasu
and Nagao, 2008) xˆt 1 xt xˆt
t
In ESM, forecasting at time +1 is stated in the following 1
equation. If we set , the above equation is the same with (1), that
is, equation of ESM is equivalent to (1,1) order ARMA
xˆt 1 xˆtxt xˆt (1) model.
Comparing (4) with (5) and using (1) and (7), we get,
xt 1 xˆt (2) a1 1 (8)
Here, b1
xˆ :
t1 forecasting at t 1 From the above, we can get estimation of smoothing
xt : t constant after we identify the parameter of MA part of
realized value at

ARMA model. But, generally MA part of ARMA model In order to have real roots,
1
must satisfy,
becomes non-linear equations which are described
below.
Let (5) be:

1
p 1 (16)
~ xa x
xt t i ti (9) 2
As
i1
q
~ ebe (10)
xt t j t j b1 1
j1
b1 is within the range of
~
xt ~
We express the autocorrelation function of as
r
k and 1 b1 0
from (9), (10) we get the following non-linear equations
which are well known (Tokumaru et al., 1982). Finally we get,
~ qk 1 1412
2
rk ebjbk j (k q) b1
j0 21 (17)
2
0 (k q 1) 121 4
1 1
q 2
~ 21
2
b (11)
r0 e j which satisfy the above condition. Thus we can obtain a
j0
For these equations, recursive algorithm has been theoretical solution by a simple way.
developed. In this paper, parameter to be estimated is TREND REMOVAL METHOD

b
only , so it can be solved in the following way.
1
As ESM is a one of a linear model, forecasting accuracy
From (4) (5) (8) (11), we get:
q 1 for the time series with non-linear trend is not necessarily
good. How to remove trend for the time series with non-
a1 1 linear trend is a big issue in improving forecasting
accuracy. In this paper, we devise a way to remove this
b11 (12) non-linear trend by utilizing non-linear function.
~ 2 2 As trend removal method, we describe linear and non-
r 0 1 b1 e
linear function, and the combination of these.
~ 2
rb
1 1e
Linear function
If we set:
~ We set:
k
r k
~ (13) y a1x b1 (18)
r0 as a linear function, where x
is a variable, for example,
the following equation is derived. y
time and is a variable, for example, stock market price,
a b
1 b1 (14) 1 and 1 are parameters which are estimated by using
1 b 2 least square method.
1
b Non-linear function
We can get 1 as follows,
1 1 42 (15) We set:
1
b1 21 y a x2 b x c (19)
2 2 2

A hybrid method for improving forecasting accuracy utilizing genetic algorithm and its application to J-REIT (office type) stock... 155
3 2
y a3 x b3 x c 3 x d3 (20) Variance of forecasting error is calculated by:
N
2 1 2
i (24)
(a3 ,b3 ,c3 , d3 )

N 1i1
(a2 ,b2 ,c2 ) Where, forecasting error is expressed as:
as a 2nd and a 3rd order non-linear function.
and are also parameters for 2nd and 3rd i xˆi xi (25)
order non-linear functions which are estimated by using
least square method. 1 N
i (26)
The combination of a linear and a non-linear function
N
We set: i1
2
y 1 a1x b1 2 a2x b2x c2 SEARCHING OPTIMAL WEIGHTS UTILIZING GA
3 a3 x 3
b3 x 2
c3 x d3 (21)
Definition of the problem
䚷0 1 1 䚷䚷,䚷 0 2 1 䚷䚷,䚷 0 3 1
(22) We search , , of (21) which minimizes (24) by
1231
1 2 3
utilizing GA. By (22), we only have to determine 1 and

as the combination of linear and 2nd order non-linear and 2.
2
3rd order non-linear function. Trend is removed by ((24)) is a function of 1 and 2 ; therefore we
dividing the original data by (21). The optimal weighting 2 ( , )
express them as 1 2 . Now, we pursue the
parameters 1 , 2 , 3 are determined by utilizing GA. GA following:
method is precisely described in 6(SEARCHING ( , )
2
OPTIMAL WEIGHTS UTILIZING GA). Minimize: 1 2 (27)
䚷0 1 䚷䚷,䚷 0 1 䚷䚷, 1
MONTHLY RATIO Subject to: 1 2 1 2
For example, if there is the monthly data of L years as We do not necessarily have to utilize GA for this problem
stated below, which has small member of variables. Considering the
possibility that variables increase when we use logistics
x curve in the near future, we want to ascertain the
ij i 1, ,L j 1, ,12
effectiveness of GA.
xij R j i
where in which means means month and
The structure of the gene
year and xij is shipping data of i-th year, j-th month, then
~
monthly ratio x j j 1, ,12 is calculated as follows,
L
1 Gene is expressed by the binary system using {0,1} bit.
Domain of variable is [0,1] from (22). We suppose that
x
~ L i1
ij (23) variables are taken down to the second decimal place. As
xj L 12
1 1 x
ij
the length of domain of variable is 1-0=1, seven bits are
L 12 i1 j1 required to express variables. The binary bit strings <bit6,
, bit0> is decoded to the [0,1] domain real number by
Monthly trend is removed by dividing the data by (23). the following procedures (Sakawa and Tanaka, 1995).
Numerical examples for both the monthly trend removal Procedure 1: Convert the binary number to the binary-
case and the non-removal case are discussed in 7
(NUMERICAL EXAMPLE). coded decimal.
bit6 ,bit5 ,bit4 , bit3 ,bit2 , bit1, bit0 2

FORECASTING ACCURACY 6
biti 2i
i0 10
Forecasting accuracy is measured by calculating the
variance of the forecasting error. X' (28)
Table 1. Corresponding table of the decimal, the binary and the real numbers.
The The binary number The

decimal Position of the bit corresponding
number 6 5 4 3 2 1 0 real number
0 0 0 0 0 0 0 0 0.00
1 0 0 0 0 0 0 1 0.01
2 0 0 0 0 0 1 0 0.02
3 0 0 0 0 0 1 1 0.02
4 0 0 0 0 1 0 0 0.03
5 0 0 0 0 1 0 1 0.04
6 0 0 0 0 1 1 0 0.05
7 0 0 0 0 1 1 1 0.06
8 0 0 0 1 0 0 0 0.06
… …
126 1 1 1 1 1 1 0 0.99
127 1 1 1 1 1 1 1 1.00
Table 2. The gene structure.
1 2
Position of the bit
13 12 11 10 9 8 7 6 5 4 3 2 1 0
0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1 0-1
Start Procedure 2: Convert the binary-coded decimal to the

real number.
Generate Initial Population
realmber = (Leftad startingint of themain)
7
X ' ((Right hand ending point of the domain) / ( 2 1)) (29)
Yes
Exceed maximum
The decimal number, the binary number and the
generation?
No corresponding real number in the case of 7 bits are
expressed in Table 1.
Calculate FitnessG 1 variable is expressed by 7 bits; therefore, 2 variables
need 14 bits. The gene structure is exhibited in Table 2.
SelectionG
The flow of algorithm
CrossoverG The flow of algorithm is exhibited in Figure 1.
MutationG
Initial population
M M 100
generation + 1G Generate initial population. Here, .
Generate each individual so as to satisfy (22).
Calculation of fitness
End
First of all, calculate forecasting value. There are 36 monthly
Figure 1. The flow of algorithm. data for each case. We use 24 data (1 to 24) and

StartG Selection
Convert gene(the binary system) to α1,α2,α3(real number)G
Selection is executed by the combination of the general
count=0 elitist selection and the tournament selection. Elitism is
executed until the number of new elites reaches the
count < The number
predetermined number. After that, tournament selection
Yesto be forecasted No is executed and selected.
Shift month and take 24 dataG
Crossover
Calculate parameters of (21)G
Crossover is executed by uniform crossover. Crossover
Trend RemovalG rate is set as follows:
Calculate monthly ratioG (31)
Pc 0.7
Trend Removal by monthly ratioG
Calculate forecasting value using (1) and (17). Multiply Mutation

monthly ratio and trend
Mutation rate is set as follows:
count + 1
P 0.05
m (32)
Calculate the variance of forecasting error using Pm
Mutation is executed to each bit at the probability
25th to 36th forecasting and real data.G
;
therefore, all mutated bits in the population M become
Calculate fitness using the varianceof
forecasting error G Pm M 14.
End
NUMERICAL EXAMPLE
Figure 2. The flow of calculation of fitness.
Application to stock market price data
remove trend by the method stated in 3. Then we The following five typical stocks are selected in which
calculate monthly ratio by the method stated in 4. After investment is concentrated on office rental field.
removing monthly trend, the method stated in 2 is applied
and Exponential Smoothing Constant with minimum 㺃 Nippon Building Fund Inc. "NBF"
variance of forecasting error is estimated. Then 1 step 㺃 Japan Real Estate Investment Corporation "JRE"
forecast is executed. Thus, data are shifted to 2nd to 25 th 㺃 Global One Real Estate Investment Corp. "GOR"
and the forecast for 26th data is executed consecutively, 㺃 NOMURA REAL ESTATE OFFICE FUND, INC.
which finally reaches forecast of 36th data. To examine ("NOF")
the accuracy of forecasting, variance of forecasting error
㺃 Daiwa Office Investment Corporation ("DOI")
is calculated for the data of 25th to 36th. Final forecasting
data are obtained by multiplying monthly ratio and trend.
The above mentioned 5 companies for 2 cases (from
Variance of forecasting error is calculated by (24).
Calculation of fitness is exhibited in Figure 2. January 2009 to December 2011) are analyzed.
Scaling (Iba, 2002) is executed such that fitness Furthermore, GA results are compared with the
becomes large when the variance of forecasting error calculation results of all considerable cases in order to
becomes small. Fitness is defined as follows: confirm the effectiveness of GA approach. First of all,
graphical charts of these time series data are exhibited in
f( , ) U 2
( , ) (30) Figures 3 to 7.
1 2 1 2
Execution results
U ( , ) 2 W
Where is the maximum of 1 2 during the past
GA execution condition is exhibited in Table 3. We made
repetition10 times; the maximum, average and minimum
W
generation. Here, is set to be 5.

Figure 3. Data of NBF.
Figure 4. Data of JRE.
Figure 5. Data of GOR.

G
G
G
Table 3. Execution condition.
GA execution condition
Population 100
Maximum generation 50
Crossover rate 0.7
Mutation ratio 0.05
Scaling window size 5
The number of elites to retain 2
Tournament size 2

G
G
G
G
G
Figure 6. Data of NOF.
Figure 7. Data of DOI.
Table 4. GA execution results (Monthly ratio not used).
Variable The variance of forecasting error Average of convergence

Maximum Average Minimum generation
NBF 1,088,146,306 1,088,146,306 1,088,146,306 4.9
JRE 622,323,409 612,640,873 609,228,939 19.4
GOR 1,884,674,063 1,878,367,620 1,877,666,904 16.7
NOF 259,788,011 259,788,011 259,788,011 8.7
DOI 245,057,177 239,710,519 237,419,094 6.8
Table 5. GA execution results (Monthly ratio used).
Variable The variance of forecasting error Average of convergence

Maximum Average Minimum generation
NBF 1,274,502,902 1,273,045,651 1,272,421,115 15.1
JRE 1,385,530,597 1,385,530,597 1,385,530,597 10.4
GOR 2,626,387,232 2,625,942,748 2,625,893,361 9.9
NOF 570,750,000 570,750,000 570,750,000 18.1
DOI 474,911,255 474,911,255 474,911,255 16.4
of the variance of forecasting error and the average of The case of monthly ratio is not used is smaller than
convergence generation are exhibited in Tables 4 and 5. the case monthly ratio used in the variance of forecasting

Figure 8. Convergence process in the case of NBF (monthly ratio is not

used).
Figure 9. Convergence process in the case of NBF (Monthly ratio is used).
Figure 10. Convergence process in the case of JRE (Monthly ratio is not used).

Figure 11. Convergence process in the case of JRE (Monthly ratio is

used).
Figure 12. Convergence process in the case of GOR (monthly ratio is not used).
Figure 13. Convergence process in the case of GOR (Monthly ratio is used).

Figure 14. Convergence process in the case of NOF (Monthly ratio is not
used).
Figure 15. Convergence process in the case of NOF (Monthly ratio is used).
Figure 16. Convergence Process in the case of DOI (Monthly ratio is not used).

Figure 17. Convergence process in the case of DOI (Monthly ratio is used).
Table 6. Optimal weights and their genes (Monthly ratio is not used).
Variable Position of the bit

1 2 3
13 12 11 10 9 8 7 6 5 4 3 2 1 0
NBF 0.00 0.83 0.17 0 0 0 0 0 0 0 1 1 0 1 0 0 1
JRE 0.01 0.89 0.00 0 0 0 1 1 1 0 1 1 1 0 0 0 1
GOR 0.74 0.01 0.25 1 0 1 1 1 1 0 0 0 0 0 0 0 1
NOF 0.67 0.00 0.33 1 0 1 0 1 0 1 0 0 0 0 0 0 0
DOI 0.54 0.00 0.46 1 0 0 0 1 0 0 0 0 0 0 0 0 0
Table 7. Optimal weights and their genes (Monthly ratio is used).
Variable Position of the bit

1 2 3
13 12 11 10 9 8 7 6 5 4 3 2 1 0
NBF 0.00 0.53 0.47 0 0 0 0 0 0 0 1 0 0 0 0 1 1
JRE 0.00 0.89 0.11 0 0 0 0 0 0 0 1 1 1 0 0 0 1
GOR 0.44 0.00 0.56 0 1 1 1 0 0 0 0 0 0 0 0 0 0
NOF 0.37 0.00 0.63 0 1 0 1 1 1 1 0 0 0 0 0 0 0
DOI 0.33 0.00 0.67 0 1 0 1 0 1 0 0 0 0 0 0 0 0
error in every company. It may be because stock market linear and 3rd order non-linear function model is best in
price does not have definite seasonal trend in general. NOF and DOI. And the combination of linear and 2nd
The minimum variance of forecasting error of GA order non-linear function model is best in JRE and the
coincides with those of the calculation of all considerable combination of 2nd+3rd order non-linear function model
cases and it shows the theoretical solution. Although it is is best in NBF. In the case of monthly ratio used, the
a rather simple problem for GA, we can confirm the combination of 2nd plus 3rd order non-linear function
effectiveness of GA approach. Further study for complex model is best in NBF and JRF. On the other hand, the
problems should be examined hereafter. combination of linear and 3rd order non-linear function
Next, optimal weights and their genes are exhibited in model is best in GOR, NOF and DOI. Parameter
Tables 6 and 7. estimation results for the trend of equation (21) using
In the case of monthly ratio not used, the combination least square method are exhibited in Table 8 for the case
of linear and 2nd+3rd order non-linear function model is of 1st to 24th data.
best in GOR. On the other hand, the combination of Trend curves are exhibited in Figures 18 to 22.

Table 8. Parameter estimation results for the trend of equation (21).
2
Variable a b a b c 2
a3 b3 c3 d3
1 1 2
NBF -4,402 844,688 739 -22,882 924,771 21 -45 -14,881 906,426
JRE 1,444 737,612 500 -11,055 791,776 5 310 -9,115 787,327
GOR 135 646,399 400 -9,860 689,710 68 -2,153 16,187 629,986
NOF -3,957 578,795 31 -4,722 582,110 137 -5,113 47,767 461,758
DOI 2,667 184,915 -172 6,976 166,243 116 -4,512 51,268 64,685
Figure 18. Trend of NBF.
Figure 19. Trend of JRE.
Calculation results of monthly ratio for 1st to 24th data Estimation result of the smoothing constant of minimum
are exhibited in Table 9. variance for the 1st to 24th data is exhibited in Tables 10

Figure 20. Trend of GOR.
Figure 21. Trend of NOF.
Figure 22. Trend of DOI.

Table 9. Parameter estimation result of monthly ratio.
Month 1 2 3 4 5 6 7 8 9 10 11 12
NBF 1.078 0.981 1.030 1.001 1.000 0.975 1.017 0.986 0.988 0.989 0.975 0.983
JRE 1.044 0.998 1.035 0.990 0.983 1.019 1.038 0.999 0.987 0.988 0.934 0.984
GOR 1.083 0.988 1.002 0.921 0.958 1.018 1.065 1.029 0.979 0.946 0.974 1.037
NOF 1.042 0.965 1.009 0.984 0.982 0.992 1.016 0.999 1.006 1.008 0.973 1.024
DOI 0.971 0.825 0.845 0.998 0.954 1.066 1.143 1.160 1.112 1.046 0.923 0.957
Table 10. Smoothing constant of minimum variance of equation (17)

(Monthly ratio is not used).
Variable ρ1 α
NBF -0.1504 0.8460
JRE -0.0441 0.9558
GOR -0.2501 0.7320
NOF -0.0185 0.9815
DOI -0.3369 0.6126
Table 11. Smoothing constant of minimum variance of equation (17)

(Monthly ratio is used).
Variable ρ1 α
NBF -0.3266 0.6283
JRE -0.4058 0.4877
GOR -0.3099 0.6527
NOF -0.5662 0.0800
DOI -0.3789 0.5415
to 11. smoothing constant in the exponential smoothing method

Forecasting results are exhibited in Figures 23 to 27. was proposed before by us which satisfied the minimum
the variance of forecasting error. Generally, the
smoothing constant was selected arbitrarily. But in this
REMARKS paper, we utilized the above stated theoretical solution.
Firstly, we made an estimation of ARMA model
In all cases, that monthly ratio was not used had a better parameter and then estimated smoothing constants.
forecasting accuracy (Tables 4 and 5). JRE had a good Thus the theoretical solution was derived in a simple way
result in 1st+2nd order, NBF had a good result in 2nd+3rd
st nd rd
and it might be utilized in various fields.
order and GOR had a good result in 1 +2 +3
st rd
order. Furthermore, combining the trend removal method with
NOF and DOI had a good result in 1 +3 order. this method, we aimed to improve forecasting accuracy. An
The minimum variance of forecasting error of GA approach to this method was executed in the following
coincides with those of the calculation of all considerable method. Trend removal by a linear function was applied to
cases and it shows the theoretical solution. Although it is the stock market price data of J-REIT for office type.
a rather simple problem for GA, we can confirm the The combination of linear and non-linear function was
effectiveness of GA approach. Further study for complex also introduced in trend removal. Genetic algorithm is
problems should be examined hereafter. utilized to search the optimal weight for the weighting
par-ameters of linear and non-linear function. For the
comparison, monthly trend was removed after that.
Conclusion Theoretical solution of smoothing constant of ESM was
calculated for both of the monthly trend removal data and
Based on the idea that the equation of exponential the non monthly trend removal data. Then forecasting
smoothing method (ESM) was equivalent to (1,1) order was executed on these data. The new method shows
ARMA model equation, a new method of estimation of that it is useful for the time series that has various trend

Figure 23. Forecasting result of NBF.
Figure 24. Forecasting result of JRE.
Figure 25. Forecasting result of GOR.

Figure 26. Forecasting result of NOF.
Figure 27. Forecasting result of DOI.
characteristics. The effectiveness of this method should Johnston FR (1993). Exponentially Weighted Moving Average (EWMA)
with Irregular Updating Periods. J. Oper. Res. Society 44(7):711-716.
be examined in various cases. Kobayashi (1992). Sales Forecasting for Budgeting, Chuokeizai-Sha
Publishing.
Maeda K (1984). Smoothing Constant of Exponential Smoothing
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µ
A synthesis model of market orientation constructs

toward building customer value: A theoretical
perspective
Wail Alhakimi* and Rohaizat Baharun
Management Department, Faculty of Management and Human Resources Development University Teknologi, Malaysia.
This paper aims to develop a synthesis model for integrating the main perspectives of market
orientation constructs. A critical review of the related literature was done. As a result, a synthesis
model was proposed. A lack of empirical research exists in developing and less-developed countries.
Future research need to address this research gap by examining the proposed synthesis model of
market orientation in different environments especially in Asian countries. A review of the literature is not
enough to validate a model. Future quantitative and qualitative studies must be conducted in order to validate
the proposed model. The integration of cultural perspective (customer and competitor orientation) and
behavioral perspective (intelligence processing) of market orientation will improve the firm’s business
performance through building customer value. There is a separate focus on measuring market
orientation as culture and behavior. Recently, a call has emerged in the literature to integrate these
perspectives. Therefore, the main contribution of this paper is the comprehensive model it proposed.
Key words: Marketing concept, market orientation, customer value, intelligence processing, interfunctional
coordination.
INTRODUCTION
Marketing is the process by which companies create mer value is a theory emphasising the implement-tation
value for customers and build strong customer relation- of customer-centric thinking in marketing, and cus-tomer
ships in order to capture value from customers in return value is regarded as the premise to achieve a posi-tive
(Kotler et al., 2008). Despite its growing interest, there business performance.
have been insufficient discussions on issues concerning Over the last decade, market orientation has been
the successful implementation of the marketing concept. assigned top priority status in terms of research needs by
Practitioners are simply expected to accept the concept the Marketing Science Institute. Thus, the marketing lite-
as the core of marketing (Turner and Spencer, 1997). A rature has acknowledged the role of market orientation as
new perspective for viewing the marketing concept has a major source of achieving a sustainable competitive
emerged within the marketing literature to clarify the advantage (Castro et al., 2005). Deshpande and Webster
implementation issue. The term “market orientation” was (1989) first linked the idea of market orientation to the
used by the literature to mean the implementation of the organizational culture literature. Therefore, market orient-
marketing concept (e.g. Narver and Slater, 1990; Kohli tation was viewed as behavioural process through speci-
and Jaworski, 1990; Shapiro, 1998). Consequently, a fic organizational activities (Kohli and Jaworski, 1990),
market-oriented organization has to suit its actions to be and as organizational culture that produces the neces-
consistent with the marketing concept. According to Chen sary behaviours to create superior value for customers
and Quester (2009), the link between market orientation (Narver and Slater, 1990). Furthermore, Hurley and Hult
and customer value has emerged two arguments: custo- (1998) suggest that both – a set of behaviours or an as-
pect of culture– are essential components of market
orientation. Others view market orientation as an innova-
tion (Rogers, 1983; Liu, 1995; Fritz, 1996). One of the
*Corresponding author. E-mail: wail7kimi@yahoo.com. major issues that scholars agree upon is the lack of

A synthesis model of market orientation constructs toward building customer value: A theoretical perspective 171
systematic effort to develop valid measures of market tionalization of market orientation. Their definition sug-
orientation (Kaynak and Kara, 2004). This paper aims to gests that a market oriented firm will exhibit three beha-
build a synthesis model for market orientation constructs. vioural components: a customer orientation, a competitor
This is significant because previous scales (e.g. Kohli and orientation, and interfunctional coordination along with
Jaworski 1990; Narver and Slater 1990) have mea-sured two decision criteria a long-term focus and profitability. In
the market orientation construct from different per- the following sections we are presenting the main mea-
spectives. Therefore, it may be reasoned that the combi- surement scales of market orientation.
nation and modification of some previous relevant scales
will help in achieving a better measurement and under-
MARKOR Scale
standing of the market orientation construct (Osuagwu,
2006). Kohli and Jaworski (1990) have created a view of market
orientation, where an organization includes:
Market orientation
i) One or more departments engaging in activities geared
The marketing literature reflects a remarkable variety of toward developing an understanding of customers’
definitions of market orientation (Tuominen et al., 1997). current and future needs and the factors affecting them.
A widely reviews by Helfert et al., (2002), result in spilt ii) Sharing of this understanding across departments.
the literature of market orientation into three main iii) The various departments engaging in activities
streams: designed to meet select customer needs.
Behavioral perspective: where market orientation is Few years later, Kohli et al. (1993) developed a 20-item
focused on organization-wide market intelligence genera- scale. The conceptual model of factors affecting market
tion, dissemination, and responsiveness to the informa- orientation had previously established by Kohli and Ja-
tion (Kohli and Jaworski, 1990), worski (1990). They argued that the unit of analysis
appears to be the strategic business unit (SBU), rather
Cultural perspective: where market orientation is reflec- than the whole corporation, since different strategic busi-
ted through the values and attitudes of the organization in ness units are likely to represent different degrees of
providing superior customer value through paying atten- market orientation. The scale was constructed using non-
tion to current and emerging customer needs. Narver and linear factor analysis of matched samples of senior mar-
Slater (1990) stated that market orientation is a particular keting and non-marketing executives from 222 SBUs.
form of business culture. MARKOR scale assesses the degree to which a SBU:
Engages in multi-department market intelligence genera-
System-based perspective: where market orientation is tion activities, Disseminates this intelligence vertically and
conceptualized in terms of different organizational active- horizontally through both formal and informal channels,
ties. The management system is divided into five subsy- Develops and implements marketing programs on the
stems: organization, information, planning, controlling, basis of the intelligence generated.
and human resource (Becker and Homburg, 1999).
As a response to these different perspectives of market
orientation, Jaworski et al. (2000) suggest that while there Intelligence generation
might be differences in the precise definition of a market
orientation, the market orientation is a philosophy The marketer’s key strategic weapon is knowledge of
generally means learning about market developments, customers and their dynamic definition of value (Webster,
sharing this information with appropriate personnel, and 1994). Intelligence generation goes beyond the verbaliza-
adapting offerings to a changing market. tion of customer needs and includes analysis of exoge-
nous factors influencing needs and preferences such as
competitive actions, government regulations and techno-
Measurement of market orientation logical change (Diamantopoulous and Hart, 1993).
The starting point of a market orientation is market inte-
Kohli and Jaworski's (1990) definition of market orienta- lligence. Market intelligence generation refers to the col-
tion suggests that the measurement of its need only as- lection and assessment of both customer needs/prefe-
sess the degree to which a company is market oriented, rences and other environmental forces (Kohli et al.,
that is, generates intelligence, disseminates it, and takes 1993). According to Webster (1994), the central question
actions based on it. Other researchers have also sug- that should guide all information gathering is, How does
gested the behavioural conceptualization view of the firm the customer define value and how well are we providing
(Day, 1994; Deshpande and Farley, 1998). On the other it? Whereas, Kohli and Jaworski (1990) defined it as a
hand, Narver and Slater (1990) offer a slightly diffe-rent broader concept than customers’ verbalize needs and
perspective by including competitor information and preferences in that it includes an analysis of exogenous
interfunctional coordination in the domain of their opera- factors that influence those needs and preferences.

Government regulations, technology, competition, and values, experience, and actively threatens their world-
other environmental forces could be monitoring factors views. Therefore, the lower the level of uncertainty
that influence the needs and preferences of the custom- avoidance, the greater is market intelligence utilization
mers. (Nakata and Sivakumar, 2001).
Intelligence dissemination MKTOR Scale
Competitive advantage increasingly lies in firm's ability to Narver and Slater (1990) proposed three components of
use market intelligence not in its access to market intelli- market orientation customer orientation, competitor orien-
gence because competing organizations have access to tation and interfunctional coordination. These compo-
the same market intelligence (Maltz and Kohli, 1996). In- nents interact to foster an organization-wide understand-
telligence dissemination refers to the process and extent ding of customer needs and competitive offerings so that
of market information exchange within a given organi- there is an organizational focus on providing superior
zation (Kohli et al., 1993). Effective dissemination of value to customers. Hunt and Morgan (1995) claim that
market intelligence is important because it provides a having a market orientation requires firms to consider
shared basis for concerted actions by different depart- both customers and competitors since both appear in the
ments (Kohli and Jaworski, 1990). Horizontal communi- marketplace.
cations can play an important role in the dissemination Narver and Slater (1990) developed a 15-item scale
process within and between departments. (MKTOR). The scale was tested on split samples from
A flexible structure in an organization could increase 371 self-administrated questionnaires from top managers
the flow of the information and push the decision making of 140 SBUs of a single corporation. This scale was wide-
to place where changes are made. Research has shown ly used and examined by other studies. Few years later,
the positive effects of the decentralization on information the same authors surveyed a total of 87 of strategic busi-
sharing (Nakata and Sivakumar, 2001). Furthermore, Na- ness units (SBUs) in manufacturing corporations conclu-
kata and Sivakumar (2001) point out that sharing infor- ded that there is clear evidence that those businesses
mation may require a lower level of individualism. For that are market oriented (customer oriented, competitor
effective information distribution, an organization must oriented, interfunctional coordinated) achieve higher rela-
recognize that information can come from multiple sour- tive profitability, sales growth, and new product success
ces. They concluded that the lower the degree of indivi- (Slater and Narver, 1994a). However, they found no evi-
dualism, the greater is the market intelligence dissemi- dence that the competitive and market environment had
nation. any effect on either the strength or nature of this rela-
tionship.
Responsiveness to intelligence
Customer orientation
Responsiveness is the action taken in response to
intelligence that generated and disseminated. This can Customer-oriented selling evolved from the marketing
takes the form of selecting target markets, designing and concept. Saxe and Weitz (1982) propose that customer-
offering products/services that cater to their current and oriented selling is a behavioural concept that refers to the
anticipated needs, and producing, distributing, and degree to which salespeople practice the marketing con-
promoting the products in the way that elicits favourable cept by trying to help their customers make purchase
end customer response (Kohli and Jaworski, 1990). The decisions that will satisfy customer needs. Narver and
source of market intelligence and the very nature of inte- Slater (1990) define customer orientation as the sufficient
lligence may effect its dissemination and utilization. understanding of one's target buyers to be able to create
Individuals in an organization are likely to be more res- superior value for them continuously. It requires that a
ponsive to intelligence generated by individuals who are seller understand a buyer's entire value chain (Day and
regarded as having high expertise and trustworthy-ness Wensley, 1988). This dimension has received a good
(Kohli and Jaworski, 1990). deal of attention in the literature (Deng and Dart, 1994).
Several factors could affect the degree of responsive- Kohli and Jaworski (1990) found in their interviews with
ness to market intelligence. In their study, Nakata and managers that a customer focus is a critical element in
Sivakumar (2001) concluded that the lower the degree of determining market orientation.
individualism, the greater is the market intelligence utili-
zation. They further argued that higher uncertainty avoi-
dance inhibits the use of information. Managers have Competitor orientation
more confidence in using information that is consistence To be market oriented, organization must consider not
over time because it has no surprises (Hu, 1986). The only how well its products suit customer needs but how
resistance to the information may result if this information well it performs relative to its competitors (Hsieh et al.,
are critical to managers, not agree with their expectations 2008). Companies must gather intelligence on the short

and long-term strengths, weaknesses, capabilities and and Slater, (1990); 20 items from Kohli and Jaworski,
strategies of both the key current and the key potential (1990); and 9 items from Deshpande et al., (1993). Desh-
competitors (Hsieh et al., 2008; Narver and Slater, 1990). pande and Farley (1998) asked 82 marketing executives
The analysis of competitors' long-term capabilities, stren- from 27 companies to complete a questionnaire contain-
gths and weaknesses is a key factor in determining mar- ing the three measures mentioned before. The three
ket orientation and culture (Harrison and Shaw, 2004). scales were found to be interchangeable. At the end, 10
Employees from every department in a market-driven items were developed and shown to have intuitive inte-
organization share information about competitors be- grity in that they all deal with customer focus. Finally, their
cause this information can be used to build a competitive analysis led them to conclude that market orienta-tion is
advantage. not a culture (as Deshpande and Webster, 1989 originally
suggested) but rather a set of activities that are a set of
behaviours and processes related to continuous
Interfunctional coordination assessment of serving customer needs.
It is the coordinated utilization of company resources in
creating superior value for target customers. Organiza- MOCCM Scale
tional resources often have conflicting perspectives,
priorities, and strategies (Nakata and Sivakumar, 2001). Carr and Lopez (2007) proposed a market orientation as
Academics and practitioners have long argued that sy- culture and conduct model (MOCCM) in which the three
nergy among organizational members is needed so value components of Narver and Slater (1990) - customer
for customers is continuously created (Day, 1994; Jawor- orientation, competitor orientation, and interfunctional co-
ski and Kohli, 1993). A culture of integrating all functions ordination established a market oriented culture that
toward creating customer value should lead to a market provides the foundation for market-oriented behaviours of
orientation within the organization and successful imple- Kohli and Jaworski (1990) which are the intelligence ge-
mentation of the marketing concept (Harrison and Shaw, neration, dissemination, and responsiveness. They de-
2004). monstrated that the link between firm market-oriented
culture-conduct-behaviour is appropriate and is consis
tent with prior research.
Multi-factor scale The only relationship that was not supported in their
study is between the customer culture and intelligence
Through a critical review of the marketing literature and dissemination behaviours. They gave an explanation of
an empirical analysis of data collected from 248 Cana- this negative result, is that intelligence dissemination an
dian firms, Deng and Dart (1994) established a four com- internal process related to transmitting Information. This-
ponent measure of market orientation (Customer, com- in their opinion is separate and distinct activity from the
petitor, profit orientation and interfunctional coordination). firm’s customer orientation.
They developed a pool of 44 items, drawn from the Finally, they suggest that the firm should focus on
literature and previously published articles. This was later developing a culture that embraces awareness and learn-
reduced to 33 items based on pre-test interviews. Even ing about customers and competitors and also embrace
so the scale was criticized on the inclusion of the profit the importance of cross-functional efforts and communi-
orientation dimension. Deng and Dart (1994) distinguish cation.
between profits as an end point, accounting construct and
profit orientation, which the later an inherent practice in
the day to day operation of most successful business Combination between MARKOR and MKTOR Scales
operations. They gave an example of market segmenta-
tion,which it is a strong indicator of a profit orientation in Like Kohli's et al. (1993) MARKOR scale, Narver and
that it necessarily involves the identification of specific Slater (1990) operationalization of market orientation has
market targets and competitive offerings. gained widespread acceptance as a valid and useful
measures of market orientation. There are obvious simi-
larities between these two measures. First, both focus on
MORTN Scale the central role of the customer in the manifestation of
market orientation. Second, both entail an external orient-
Deshpande and Farley (1998) developed and assessed tation. Third, both recognize the importance of being res-
the content validity and reliability of the MORTN market ponsive to customers at an organization level. Finally,
orientation scale as a managerially oriented alternative to there is recognition that interests of other stakeholders
previously developed measures of market orientation. and/or other forces shape the needs and expectations of
Two dimensions (customer-focus and needs-assess- customers (Mavondo and Farrell, 2000).
ment) were identified and verified. They developed a In addition to, the generation of intelligence, its disse-
synthesis based on a factor analysis of the 44 individual mination, and the design of the response are activities
items from the three original scales (15 items from Narver shared by the different departments and functions of the

organization; such that interfunctional coordination en- with intelligence generation, intelligence dissemination,
compasses all three. Cadogan and Diamantopoulos and responsiveness. In a similar manner, a meta-analysis
(1995) proposed an integrating model which proposed study of three market orientation scales conducted by
that Narver and Slater (1990) and Kohli and Jaworski's Deshpande and Farley (1999) determined that MARKOR
(1990) conceptualization of market orientation share a si- and MKTOR scales are largely interchangeable.
milar nomological network. A study by Gounaris and Nowadays, a call for the integration of the Narver and
Avlonitis (2001) examined the measures developed by Slater’s (1990) and Kohli and Jaworski’s (1990) concept-
Narver and Slater (1990) and Kohli and Jaworski (1990); tualizations has appeared because of their nomological
they concluded that: The measures are behavioural in similarity (Bigne et al., 2003; Cadogan and Diamantopou-
nature, both measures focus on a broad description of los, 1995). Gonzalez-Benito and Gonzalez-Benito (2005)
company practices. concluded that:
By doing so, both measures can be employed to mea- Recently, Gotteland et al. (2007) propose integrating
sure the extent to which a company has developed mar- existing approaches to market orientation. Similarly, Carr
ket orientation as a behavioural notion (and both have and Lopez (2007) discussed that several studies have
been validated for face, discriminate and concurrent vali- debated integrating the two conceptualizations of market
dity). Nonetheless, neither can be utilized in order to orientation – cultural and behavioural, consequently with
assess the alternative orientations (e.g. production or their scales. They recommended that additional research
sales orientation). is needed to test the integrative framework of the two
The key differences between these two seminal opera- scales that are foremost to the study of marketing.
tionalizations of market orientation relate to the type of Accordingly, this study uses the concepts of market
information the organization collects about the market orientation jointly: behavioural activities used by Kohli and
and whether or not interfunctional coordination is inclu- Jaworski (1990) and Kohli et al. (1993), cultural per-
ded in the definition (Darroch et al., 2004). Kohli and Ja- spective proposed by Narver and Slater (1990), and profit
worski's (1990) view interfunctional coordination as an orientation dimension used by Deng and Dart (1994).
antecedent to an effective implementation of market According to Gonzalez-Benito and Gonzalez-Benito (20
orientation. 05), market-oriented culture does not automatically re-sult
in market-oriented behaviors. Therefore, this paper
suggests that interfunctional coordination may be a me-
The synthesis model
diator variable between the two perspectives. In another
Different researchers have developed different market words, interfunctional coordination could be a prerequi-
orientation scales. Some scales are based on a set of site variable for successful market-oriented behaviours. In
cultural components (Deng and Dart, 1994; Narver and our synthesis model, additional dimension was added to
Slater, 1990), behavioural activities (Kohli and Jaworski, the cultural perspective of market orientation, which is the
1990), and organizational strategy (Ruekert, 1992). The profit orientation. Webster (1988) particularly empha-
research instruments by Narver and Slater (1990) – sized the relationship between customer orientation and
cultural perspective- and Kohli and Jaworski (1990) profit orientation of the marketing concept. Kohli and
behavioural perspective- have been considered to be the Jaworski (1990) maintain that profit should be viewed
most used research instruments for determining a com- more as a consequence of market orientation. However,
pany’s market orientation practices. Nevertheless, Bigne Deng and Dart (1994) distinguish between profits as an
et al. (2003) concluded that while extant literature sub- end point, accounting construct, and profit orientation,
mits, there does not seem to be one generally acceptable which the later an inherent practice in the day to day ope-
research instrument for measuring market orientation ten- ration of most successful business operations. Existing
dencies of companies. Moreover, different measures and scales were used to build the synthesis model (Figure 1)
components of the market orientation construct depend- so as to allow for cumulative knowledge development.
ing on the sector and country in focus.
Cadogan and Diamantopoulos (1995) developed a
three-by-three matrix to assess the conceptual and empi- Conclusion
rical overlap between Kohli’s et al. (1993) dimensions Many researchers have dealt with the measurement of
(MARKOR scale) and Narver and Slater’s (1990) dimen- market orientation. However, according to Deng and Dart
sions (MKTOR scale). Customer orientation overlaps (1994), no previously published research has presented a
conceptually with intelligence generation and intelligence comprehensive set of measures that span the literature.
dissemination, and operationally with intelligence genera- Similarly, Bigne et al. (2003) point out the argument that
tion and responsiveness. Competitor orientation overlaps there does not seem to be a single generally accepted
conceptually with intelligence generation and intelligence scale for measuring market orientation; nor is it even
dissemination and operationally with their intelligence clear which variables might affect it (Bigne and Blesa,
dissemination and responsiveness. Finally, interfunctional 2003). Because it depends on the sector being measured, the
coordination overlaps both conceptually and operationally dimensions of market orientation and its attributes might yield

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µ
The impact of road accessibility of rural villages on

recognition of poverty reduction opportunities
1 2 3
Edith Kwigizile , Jaffu Chilongola * and John Msuya
1
Department of General Studies,
2
Stefano Moshi Memorial University College-Tumaini University, Tanzania.
3
Department of Food Science and Technology, Sokoine University of Agriculture, Morogoro Tanzania.
This study was carried out in four villages of Gairo Division, Kilo a district, Morogoro Region-Tanzania.
The overall objective of this study was to assess the impact of road accessibility on recognition of
poverty reduction opportunities. Questionnaire and focus group discussions were used to collect data.
Statistical package for social science (SPSS), version 6.0.1 computer software was used to analyze the
data. Results indicated that: Firstly, poverty reduction opportunities listed in the document of the
National Poverty Eradication strategy (Tanzania) were relatively more known to rural communities in
villages which were more accessible by road than those which were less accessible. Secondly, majority
of rural community members recognize land as the main opportunity for poverty reduction. Thirdly, rural
community members feel that they were not accessing some of the support provided by the international
community for poverty reduction. Fourthly, some development programs were not appropriate for rural
situation. Lastly, rural communities especially in interior areas hardly access information. The study
recommends that in order to achieve poverty reduction goals, awareness on poverty reduction
opportunities should be raised among rural community members, rural roads should be improved; land
utilization should be promoted among rural community members.
Key words: Poverty, accessibility, rural development, opportunities, infrastructure.
INTRODUCTION
Tanzania is one of the world’s poorest countries. Poverty Poverty Eradication Strategy (NPES) United Republic of
is more prevalent in the rural areas as compared to urban Tanzania (URT, 1998) and the National Strategy for
areas as a result of unbalanced rural-urban development Growth and Reduction of Poverty (URT, 2005). The
associated with the absence of basic physical, economic, NPES has put clear considerable opportunities that
social, financial and institutional infrastructure and community members can take advantage in the imple-
services (URT, 2000). This prevents the poor from taking mentation of poverty eradication programs (URT, 1998).
effective initiatives towards income generating oppor- Poverty has remained a problem particularly in rural
tunities and from gaining access to productive assets. In areas (Figures 1 and 2). The government of Tanzania
Tanzania, poverty eradication initiatives have been has reported disparity in achievement of poverty
undertaken for a long time under different names such as reduction between the rural and urban area (URT, 2001).
poverty reduction, poverty alleviation, combating poverty The disparity in achievement can be associated with
and fighting against poverty (Kayunze, 2001). In trying to various factors. This study intends to assess the impact
maximize success in poverty reduction, the Government of road accessibility on recognition of poverty reduction
of Tanzania has formulated national strategies to address opportunities in rural villages.
issues of poverty. The strategies include the National Despite abundant resources and opportunities for
poverty reduction existing in Tanzania, poverty is still a
major problem and so widespread that it cannot be
eradicated in the short run (URT, 2000). Recent surveys
*Corresponding author. E-mail: jchilx@yahoo.co.uk. have revealed that in Tanzania, over fifty percent of the
population still live in poverty and about one-tenth of the

Figure 1. Percentage of households living in below the basic needs poverty line by area of residence in
mainland Tanzania, 1991-1992, 2000-2001 and 2007. Source: NBS 2009.
Figure 2. Global percentage of poverty between rural and urban households. Source: WB 2007
households are severely undernourished (Bagachwa, world’s poorest people do not have access to roads (IDA,
2000). Prevalence of income poverty is high. According to 2009). In fighting against poverty (millennium
the Household Budget Survey of 2000/01, the proportion development goals (MDG-1)), it has been reported that,
of the population below the national food poverty line was Tanzania has relatively progressed significantly in re-
18.7% and that below the national basic needs poverty establishing macro-economic stability in urban areas than
line was 35.7% (URT, 2005). There is also a big disparity the rural areas (URT, 2001). This disparity on the
between urban and rural poverty for both food and basic achievements of the urban and the rural communities on
needs poverty. There is sufficient evidence to indicate poverty reduction impose a series of questions some of
that poverty is more prevalent in rural areas relative to which could be directed to accessibility of rural villages
urban areas (URT, 1998; URT, 2000; URT, 2005). At a and issues related to poverty reduction opportunities. It is
glance, over 1 billion of the not clear whether the rural communities are aware of the

The impact of road accessibility of rural villages on recognition of poverty reduction opportunities 179
opportunities available for their economic development increased by 93%, so the poverty line in 2007 is TShs
and what are their opinions concerning those oppor- 13,998. Poverty is characterized by severe deprivation of
tunities. Furthermore, it is not clear on how recognition basic human needs, including food, safe drinking water,
and awareness on the opportunities is influenced by road sanitation facilities, health, shelter, education and
accessibility. Therefore, the specific objectives of this information. It includes a lack of income and productive
study were to assess the awareness and opinions of the resources to ensure sustainable livelihoods; hunger and
rural communities concerning poverty reduction malnutrition; ill health; limited or lack of access to
opportunities identified by the government and to identify education and other basic services; increased morbidity
the poverty reduction opportunities available in the study and mortality from illness; homelessness and inadequate
area. housing; unsafe environments and social discrimination
Results from this study uncover the impact of road and exclusion.
accessibility on rural communities’ awareness and The causes of poverty are very diverse. According to
recognition of poverty reduction opportunities. Results URT (1998), the phenomenon results from many
from this study also increase awareness of policy makers, mutually reinforce factors, including lack of pro-ductive
development partners and the communities in general on resources to generate material wealth, illiteracy,
the impact of road accessibility hence consider it as prevalence of disease, discriminative socio-economic
important factor in planning for successful poverty and political systems and natural calamities such as
reduction. drought, floods and wars. Ellis and Mdoe (2003) argue
that rural poverty is strongly associated with lack of land
and livestock, as well as inability to secure nonfarm
LITERATURE REVIEW alterna-tives to diminishing farm opportunities. The rural
poor encounter a public sector institutional context that is
Poverty: Definition; causes and characteristics neutral or blocking rather than enabling them to construct
their own pathways out of poverty.
Poverty is a broad phenomenon. However, researchers According to IFAD (2011), households fall into poverty
have attempted to describe it using monetary and non- primarily as a result of shocks such as ill health, poor
monetary measures of welfare. The terminologies ‘poor’ harvests, social expenses, or conflict and disasters. It is
and ‘poverty’ have been described as a monolithic group highly correlated with household characteristics such as
and issue (World Bank, 2002). Sections on poverty profile family size, education and ownership of physical assets,
still differentiate between subgroups of poor as rural, and it is also dependent on good health. Beyond
urban, women or minorities. The phenomenon refers to a household-level factors, economic growth, and local
condition of living below a defined poverty line or availability of opportunities, markets, infrastructure (for
standard of living (Bagachwa, 2000). The line is subject example, roads) and enabling institutions including good
to variation by socio-politico-economic cultural set up. governance are very important in deciding on the level of
However, strategic directions rarely pick this variance up poverty. There seems to be a clear disparity in distri-
subsuming the poor into one homogenous group if bution of poverty between rural and urban households
mentioned at all requiring uniform policy treatment (URT, within each country. Certain groups particularly rural
1998). According to the International Trade Centre (2011) women, youth, indigenous peoples and ethnic minorities
poverty should be defined as much more than just a are often disproportionately held back by disadvantages
shortfall of income (that is living on less than 2 USD per rooted in inequalities in access to opportunities (URT,
day). It should be regarded as a dimensional issue 2005). Addressing these disadvantages requires building
involving all aspects of human development, including people’s assets and strengthening their capabilities both
lack of power, lack of education, lack of opportunities for individual and collective, while creating awareness to
development, lack of sanitation facilities. In summary, it is recognition of locally available opportunities and helping
the lack of access to the fundamental collective or social them to better manage the risks they face.
opportunities that constitute the essence of individual
human dignity.
According to Hoogeveen and Ruhinduka (2009), Global and national poverty situation
individuals are considered poor when their consumption
is less than the ‘basic needs poverty line’. This indicator A major development problem facing the world today is
is based on the cost of a basket of food plus non-food the ever growing phenomenon of poverty (Mashashua et
items. Housing, consumer durables and telecommuni- al., 2009). It is estimated that over 1.3 billion people live
cations are not included, nor are health and education on less than one dollar per day and about one billion
expenses. The poverty line basket was valued using people cannot meet basic requirements (Peralta, 2003).
prices collected in the 2000/01 survey. At that time the Furthermore, it is estimated that about 315 million people
poverty line was TShs 7,253. Between 2000/01 and (one in every two people) in Sub Saharan Africa survive
2007, prices of goods and services in the basket on less than one dollar per day and 184 million people

(33% of the African population) suffer from malnutrition These include ample arable land, a wealth of mineral
(Mashashua et al., 2011). In Tanzania the situation is resources and game reserves. There is also abundant of
worse, as 50% of Tanzanians are considered to be untapped water sources, which could be used for
basically poor with approximately one third of people irrigation, electricity and for domestic use (URT, 1998).
living in abject poverty (URT, 2000). In addition to the The current multiparty democratic process creates and
Household Budget Survey of 2000/01 that the proportion strengthens among Tanzanians culture of self-expression
of the population below the national food poverty line is and reaching consensus on critical national development
18.9 % and that below the national basic needs poverty issues. It also provides opportunity for people’s views
line is 35.7%, indicators of income poverty also show and concerns to be heard at the highest level of
growing disparities between urban and rural population, leadership; and for these views to be reflected into policy
as well as across and within regions and districts; the formulation and design of development programs. In
urban poor constitute about 13% compared to 87% in addition, econo-mic reforms and market liberalization has
rural areas (URT, 2003). National Bureau of Statistics brought many changes in the country. One of the major
(2009) and World Bank Report (2007) also indicated a changes is the withdrawal of the government from direct
higher percentage of households in rural areas are in production, pro-cessing, manufacturing and marketing
poverty than their urban counterparts (Figures 1 and 2). while at the same time promoting private sector
According to the World Bank, the Tanzanian gross participation in production and distribution of goods and
national income per capita (current prices) in 2006 was services (URT, 2005). During recent international forums,
estimated to be $980 (in comparison to the overall African agreement has been reached to support poverty
per capita of $624), which ranked Tanzania as 190 out of eradication initiatives worldwide (URT, 1998).
208 countries (World Bank, 2008). A combi-nation of low This encourages increased flow of international
production, low productivity and low quality of agricultural resources to meet the needs of poor countries. Debt
produce and poor road accessibility has significant relief contributes to poverty reduction. However,
limiting effects on rural growth and therefore on poverty according to the international monetary fund (IMF) and
reduction (Wuyts, 2006). Major factors con-tributing to World Bank (2005), countries that received limited debt
this situation include low levels of education and literacy relief under existing programs have doubled poverty-
among smallholder farmers, exposure to variable weather reducing expenditures from 1999 to 2004. Non-
conditions, price shocks, limited investments and a weak governmental associations such as non-governmental
government investment on infrastructure (feeder roads) in organizations (NGOs), community based organizations
the rural for transportation of crops. (CBOs) and grassroots organizations (GROs) have a
long experience and capacity to work with grassroots
communities (URT, 2005). If adequately involved, they
can greatly contribute to the success of poverty reduction
Poverty reduction opportunities initiatives and achieving the Millennium Development
Goals (TANGO, 2004).
There are a number of factors that affect poverty Information and communication technologies (ICTs)
reduction efforts. Availability of socio-economic services can contribute significantly to poverty reduction in all
such as credit facilities, input supply and extension three dimensions of empowerment, opportunity and secu-
services affect participation of rural communities in rity, and to an attainment of the Multilateral Development
poverty eradication strategies (Freeman and Pankhurst, Goals (Gerster and Zimmermann, 2003). The same
2003). Rural communities lack essential resources author clarify further that ICTs can promote opportunities
required by the target group for change such as skilled for livelihoods: An increase in agricultural productivity, a
manpower. According to the National Poverty Eradication broadening of the food crop basket, improved market
Strategy (URT, 1998), the government of Tanzania access for cash crops, and the creation of employment
believes that it has the capacity to eradicate poverty if the opportunities and higher chances of finding jobs.
available opportunities are utilized. In the strategy, the
government has put clear the opportunities for poverty
reduction. Poverty reduction and accessibility
Among many opportunities, the following are
recognized by the government: Government commitment Poverty reduction include improving the quality of
to eradicate poverty, peace and political stability, natural peoples lives, such as education and healthcare or by
resources and multiparty democracy. Others are improving their access to ways in which they can make
economic reforms and market liberalization, supportive money, either through employment or small businesses
international community, participation of non-government (World Bank, 2002). The relationship between transport
institutions, and enhanced information dissemination and poverty reduction is neither straightforward nor
(URT, 1998). Tanzania is endowed with rich natural automatic (IDA, 2009). According to the same source of
resources, which can be utilized to eradicate poverty. information, it is apparent that improvements in transport

have the greatest impact on poor people when made in comparison were obtained. The characteristics are easily accessed
concert with activities in other sectors. It is becoming by road (Chakwale and Kwipipa villages) and less accessed by
road (Ndogomi and Luhwaji villages). A list of households from
increasingly clear that if infrastructure investments for
each of the study villages was used as a sampling frame. From
example construction of new roads or rehabilitation of old each village, a computer generated randomization list (simple
roads are properly made, they significantly contribute to random sampling technique) was used to select 40 households
poverty reduction (Ahmed and Hossain, 1990). In other used for this study. Primary data was collected using a question-
words, not only can a lack of infrastructure be an naire administered to individual respondents. Open and close
impediment to more investment, but it can also be one of ended questions were used to allow collection of sufficient
information. A checklist or semi-structured interview guide was
the dimensions of the so-called ‘poverty trap’. For used to facilitate focus group discussions so as to supplement
example, most African countries have yet to reach such information gaps from individual respondent interviews. Focus
infrastructure threshold levels, and understanding this group discussions were composed of village leaders and key infor-
helps to explain why it has been difficult to detect any mants from respective villages. Both qualitative and quantitative
significant correlation between infrastructure provision data was collected.
and growth in Africa (Lumbila, 2005). The direct impact of Secondary data was collected from different documents, from
district to village level. Statistical Package for Social Science
roads on poverty reduction is also impressive and shows (SPSS) version 16.0.1 computer software was used to analyze the
that the Government’s consistent policy of improving data. Chi- square test was used throughout to analyze associations
access to a strong hierarchy of roads remains a viable between village accessibility by road and knowledge on poverty
and necessary development strategy (Fang and Kang, reduction opportunities. Content analysis was used to analyze
2005). Transport creates opportunities to increase the information resulting from focus group discussions. This method of
analysis has been defined as a systematic, replicable technique for
productivity of the poor (Antle, 1983). Road as the most compressing a large number of words in the form of text into a
transport mode carry 70% of the country’s freight and compressed content of categories based on explicit rules of coding
90% of the passengers (Mkiaru, 2004). Consistently, (Stemler, 2001). The assumption made is that the words that are
transport is seen as having the most significant impact on mentioned most often are the words that reflect the greatest
the incomes of the poor in communities (Fang and Kang, concerns (Berelson, 1952, Krippendorff, 1980; Weber, 1990).
2005).
Reliable access from villages to markets and social
services is an essential component of the quality of life for RESULTS
rural population. However, many poor villages in
developing countries do not have all-weather road access Characteristics of respondents
and are often cut off for long periods during the wet
season when access roads become impassable. (Dieter The major economic activities in the study area are crop
and Zhi, 2000). Despite this knowledge, an estimated one farming and livestock keeping. Others include forestry,
billion people, or about 40% of the rural population in beekeeping, fishing and trading. In some villages of the
regions served by the international development study area, the majority of the population lives in critical
association (IDA), the World Bank’s fund for the world’s poverty and their access to socio-economic services is
poorest countries, lack direct access to an all-season limited. Major ethnic groups in the district are Pogoro,
road. Poverty is a complex issue thus needs to be tackled Kaguru, Sagara, Gogo, Maasai and Barbaig. Age of
on a range of fronts including, but not limited to, respondents ranged between 20 and 77 years. Most of
improving economic growth. To alleviate poverty, respondents (83.8%) were men and only 16.2% were
countries must attain basic thresholds in several key women. More than ninety-one percent (91.9%) of the
areas: governance, health, education, infrastructure, debt interviewed respondents were married. Others were
levels and access to markets (URT, 2006). widowers (3.8%), separated (3.1%) and widows (1.3%).
Most of them (63.1%) attained primary school education
and 13% were illiterate. This indicates that generally,
RESEARCH METHODOLOGY majority of the community members in the study area had
low level of education. All of the interviewed respondents
A social survey was conducted whereby a descriptive, cross were involved in agriculture whereby 45.6% practiced
sectional study design was adopted. According to Bernard (1996), crop farming only and 51.9% practiced both crop farming
Babbie (1990) and Kothari (2004), cross sectional designs provide
useful information for simple statistical description and and livestock keeping. The remaining minority (2.5%)
interpretation. The methodology was adopted since it entails the practiced small scale business in addition to crop
observation of a sample of the target population at a single point in farming.
time or time interval. This means that costs are minimal and loss to
follow up is not a problem (Grimes and Schultz, 2002). Non
probability sampling was used to obtain the sample population that Opinions of rural community members on
is, household heads who were the ultimate unit of analysis. Total
sample size was 160 respondents who were all household heads. opportunities for poverty reduction
Purposive sampling was applied to obtain a study division and
villages. Whereby Gairo division was chosen among nine divisions Table 1 shows general opinions of rural community
of Kilosa district, four villages with desired characteristics for members on the government claimed opportunities for

Table 1. Opinions of rural community members on the government claimed opportunities for eradicating poverty.
Relatively more accessible villages (Chakwale and Remote and less accessible villages (Ndogomi and
Opportunity Kwipipa) (n = 80) Luhwaji) (n = 80)
Important (%) Not important (%) Not sure (%) Important (%) Not important (%) Not sure (%)
Opportunity (1) 73.75 10.00 16.25 58.75 22.50 18.75
Opportunity (2) 78.75 6.25 15.00 63.75 21.25 15.00
Opportunity (3) 53.75 35.00 11.25 27.50 46.25 26.50
Opportunity (4) 33.75 16.25 50.00 27.50 20.00 52.50
Opportunity (5) 70.00 6.25 23.75 45.00 23.75 31.25
Opportunity (6) 57.50 10.00 32.50 38.75 18.75 42.50
Opportunity (7) 70.00 18.75 11.25 57.50 3.75 38.75
Opportunity (8) 51.25 36.25 12.50 53.75 35.00 11.25
Key to Table 1: Opportunity 1 = Government commitment to eradicate poverty; Opportunity 2 = Peace and political stability; Opportunity 3 = Market
liberalization; Opportunity 4 = Supportive international community; Opportunity 5 = Natural resources; Opportunity 6 = Participation of non
governmental institutions; Opportunity 7 = Information dissemination; Opportunity 8 = Multiparty democracy.
Figure 3. Proportion of respondents who accepted the various government-claimed opportunities to be important in
reduction of poverty. Key to Figure 3: Opportunity 1 = Government commitment to eradicate poverty; Opportunity 2
= Peace and political stability; Opportunity 3 = Market liberalization; Opportunity 4 = Supportive international
community; Opportunity 5 = Natural resources; Opportunity 6 = Participation of non governmental institutions;
Opportunity 7 = Information dissemination and Opportunity 8 = Multiparty democracy.
reduction of poverty, and Figure 3 specifies those who in less accessible villages. This indicates that accessi-
say the opportunities are important. The respondents’ bility of an area affects recognition of poverty reduction
villages were separated in two categories according to opportunities by the residents. Results show that 73.75%
accessibility of the villages that is, more accessible of the respondents from the more accessible villages
(Chakwale and Kwipipa) and less accessible (Ndogomi agreed that government commitment was impor-tant for
and Luhwaji). Results presented in Table 1 and Figure 3 poverty reduction. Similarly, 58.75% of those from less
shows that, for each poverty reduction opportunity listed, accessible villages argue the same (Table 1 and Figure
higher proportions of community members in more 3). On the other hand, 16.25 and 18.75% of respondents
accessible villages accept that the opportunities are very from more accessible villages and less accessible
important for poverty reduction than community members villages respectively were not sure of the importance of

the opportunity. However, chi-square test revealed that Assessment on information dissemination as an oppor-
there was no statistical difference in awareness. tunity revealed that more than half of the respondents
Further results show that more than three quarters (70% from more accessible villages and 57.5% from less
(78.75%) of respondents from the more accessible village accessible villages) agreed that information dissemina-
and 63.75% from less accessible villages, indicated that tion contributed to poverty reduction (Table 1 and Figure
peace and political stability were important for poverty 3). The difference in response was statistically significant
eradication (Table 1 and Figure 3). On the other hand, at chi- square 28.482 and P-value less than 0.01.
15% from each group were not sure of its importance for Furthermore, 38.75% of respondents from less accessi-
poverty reduction. There was statistical significance ble villages and 11.25% from more accessible villages
difference at P 0.05 between the two locations. While were not sure of the importance of the opportunity for
almost half (53.75%) of the respondents from more poverty reduction.
accessible villages acknowledge the importance of Focus group discussions revealed that generally, rural
market liberalization in poverty reduction, only 27.5% communities were hardly accessing information media
from less accessible villages argued the same. On the like newspapers, televisions and radio. For this reason,
other hand, 11.25% of respondents from more accessible these communities mostly either missed information or
villages and 26.5% from less accessible villages were not received information which is outdated. Further assess-
sure whether the opportunity was important for poverty ment on the opportunities showed that about equal pro-
reduction. portions of respondents from both the more accessible
Chi-square test showed that the difference in and less accessible villages (51.25 and 53.75%,
appreciation of the importance of the opportunity between respectively) agreed that multiparty democracy was
respondents from more and less accessible villages was important for poverty reduction. Only 12.5% from more
statistically significant (X2 = 12.831) at P 0.01. It was accessible and 11.25% from less accessible villages
further found that less than a half of the respondents were not sure.
(33.75 and 27.5%) from more accessible and less
accessible villages respectively, agreed that supportive
international community have substantial contribution to Poverty reduction opportunities identified in the
poverty reduction. study area
On the other hand, nearly equal proportions of respon-
dents from each of more accessible and less accessible Focus group discussions and observations revealed that
villages (50 and 52.5%, respectively) were not sure the main opportunities for poverty reduction in the study
whether the supportive international com-munity was an area were agricultural land and the resulting markets for
opportunity for poverty reduction. Results presented in agricultural products. Majority of respondents (97.5%)
Table 1 and Figure 3 shows that, while 70% from more said that the main opportunity they saw around in their
accessible villages support the government opinion that area was farming. Few of them (18.1%) mentioned loans
natural resources are important for poverty reduction, only as opportunities that can be accessed. Only 6.3% of the
46% of the respondents from less accessible villages respondents mentioned opportunities such as markets,
support this opinion. About twenty three percent (23.75%) employment and mining. These results imply that poverty
from more accessible villages and 31.25% from less reduction in the study area is mostly dependent on land
accessible villages were not sure whether the mentioned use. However, agriculture was dominated by small-scale
opportunity was important for poverty reduction or not. Chi- subsistence farming. This is in line with the Ministry of
square statistic test showed statistical significance (X 2 = Agriculture and Food Security (2001) that despite
abundance of underutilized land, Tanzanian agriculture is
13.333) difference at P 0.01 between people from more dominated by small-scale subsistence farming because
accessible villages and those from less accessible villages. of heavy reliance on the hand hoe as the main cultivating
Results indicate that while 57.7% of respondents from tool. This explains why majority of rural community
more accessible villages accepted that participation of members are poor regardless of the abundance of land
non-governmental institutions contributed to poverty they possess.
reduction, only 38.75% of respondents from less
accessible villages recognize the contribution of those
DISCUSSION
institutions. Likewise, 32.5% of the respondents from
accessible villages and 42.5% from less accessible
villages were not sure whether these institutions The respondents from both types of villages (more
contributed to poverty reduction or not. The differences accessible and less accessible) had different opinions
were statistically significant at P 0.05. General observa- concerning the opportunities claimed by the government
tions showed that more accessible villages received for poverty reduction. With exception of multiparty
higher number of non-governmental institutions for deve- democracy opportunity, the opportunities identified by the
lopment support compared to less accessible villages. government are more recognized by the rural

communities in more accessible villages as compared to were less likely to be enjoyed in less accessible villages.
those in less accessible villages. This is in line with Fang and Kang (2005) argue that reliable access from
Ahmed and Hossain (1990) that a new or rehabilitated villages to markets and social services is an essential
road contributes to poverty reduction. The difference in component of the quality of life for rural population.
awareness of community members on poverty reduction Fourthly, supportive International community: The
opportunities between more and less accessed villages majority of respondents who indicated that supportive
can be associated with the rate of interactions of people International community were not important had the
from different parts of the country and access to opinion that in most cases, rural community members did
development services, which may influence exposure on not access support provided by the international
different opportunities and their utilization. Concerning community. This comply with opponents of debt relief
government claimed opportunities: who argue that debt relief is like a 'blank cheque' to
First, government commitment to eradicate poverty: governments, and they fear that the savings may not
The rural community members had opinion that the reach the poor in countries plagued by corruption (IMF
government could have more effect on poverty reduction and World Bank, 2009). This is contrary to the
if it would support farmer’s production. Important support government's argument (URT, 1998) that supportive
needed by the rural communities were identified as international community encourages increased flow of
provision of working capital, ensuring proper expenditure international resources to meet the needs of the poor.
of development funds from different sources and Fifthly, natural resources: Majority of those who
facilitating access to opportunities available for poverty appreciated the importance of natural resources in
reduction. poverty reduction, mentioned land as the main natural
Secondly, peace and political stability: Those who resource accessed and used by the majority of rural
indicated that the opportunity was important had an community members. This confirms reliance of rural
opinion that the opportunity allows for the involvement of communities on land as important means of their
people in poverty reduction activities. This opinion is livelihood and poverty reduction. However, the Ministry of
similar to that of the government that peace and political Agriculture and Food Security (2001) noted that despite
stability allows for the participation of the people in abundance of unutilized land, Tanzanian agriculture is
decision-making process, design, implementation, moni- dominated by small-scale subsistence farming. This is
toring and evaluation of poverty eradication programs because of the heavy reliance on the hand hoe as the
(URT, 1998). main cultivating tool. This is contrary to the argument of
The few who considered this opportunity as not Tanzania government that the country is endowed with
important for poverty reduction argued that peace and rich natural resources, which can be utilized to eradicate
political stability has been there for most of the time but poverty (URT, 1998). The results reveal further that rural
their poverty situation has remained high. In addition, the community members had low understanding on types of
respondents also complained that they were not enjoying natural resources and their utilization; which reflects high
the peace and political stability claimed by the possibility of underutilization and unsustainable use of
government due to poverty related problems which they available resources. Therefore, achievement in poverty
face. They mentioned some of the problems as diseases, reduction will be obtained if the claimed resources that is,
food shortages poor education and health services. arable land, mineral resources and game reserves will be
Although, this study did not go further to assess the properly utilized.
magnitude of the mentioned problems, it shows that in Sixth, participation of non-governmental institutions:
order to make the rural community members appreciate The difference in opinions on contribution of non-
the importance of peace and political stability, the governmental institutions in poverty reduction between
government should strive to address problems associated more accessible and less accessible villages can be
with poverty facing rural communities. associated with different factors. The factors can include
Thirdly, market liberalization: Regardless the level of individual perception, awareness on non governmental
accessibility of the village, the respondents who operations, variation in nongovernmental performance,
recognize the importance of market liberalization in donors’ interests and supporting capacity etc. Respon-
poverty reduction supported their opinion that the oppor- dents felt that some non-governmental institutions were
tunity allows farmers to have a wider choice of selling and formed for the institution owners’ interests but making
buying various products. This opinion is in line with the use of rural communities’ problems to justify project funds
government (URT, 1998) strategy. However, it was from donors. The respondents explained that some
obvious that many people from more accessible villages institutions undertook programs that were not suitable for
acknowledge the importance of market liberalization in conditions of the rural communities. One of such
poverty reduction because transport services affect programs is credit program with high interest rates as
production, processing, manufacturing, marketing and compared to money circulation in rural areas. Similarly,
distribution of goods and services, which are important Frank and Mdoe (2003) argue that the rural poor
outcomes of the market liberalization. These services encounter a public sector institutional context that is

neutral or blocking rather than enabling for them to ACKNOWLEDGEMENTS

construct their own pathways out of poverty.
Seventh: Information dissemination: It was observed This work was carried out by the financial support of the
that rural communities especially those in interior areas Evangelischer Entwicklungsdienst e. V (EED) of
hardly access information particularly through news- Germany and action for relief and development
papers and other publications. These results contradict assistance (AFREDA). This support is highly
with the government opinion (URT, 1998) that there is acknowledged. We acknowledge the support of the
now good communication media to reach everyone that Institute of Development Studies of the Sokoine
can be used to raise people’s understanding and University of Agriculture (SUA), for providing mentorship,
awareness on poverty reduction issues. space and all kinds of technical support in conducting this
Eighth, multiparty democracy: Respondents who research.
indicated that multiparty democracy was important for
poverty reduction supported their opinion that opposition
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§
Impediments to barter trading: Analysis of practitioners

and non-practitioners perceptions
1 2
Mercy Mpinganjira * and Portia Oliver
1
Department of Marketing Management, University of Johannesburg, P. O. Box 524, Auckland Park, Johannesburg,
South Africa.
2
Department of Business Management, University of Johannesburg, P. O. Box 524, Auckland Park, Johannesburg,
South Africa.
This paper imperially investigates impediments to barter trading in domestic market environment using
a sample of firms from the media industry in South Africa. Data was collected from a total of 70 firms,
61 of whom indicated that they practiced barter trade while 9 were non-practitioners. A structured
questionnaire was the main instrument used to collect the data. The questionnaire was designed after a
review of literature and conducting in-depth interviews with some media practitioners conversant with
barter trade. The results show that barter trade is a common practice among firms in the South African
media industry. On the difficulties associated with barter trade, it was found that there are many factors
that can act as impediments to barter trading and that in general non-practitioners perceive more
impediments to barter trading than practitioners. The results further show that although practitioners
can in general be said to perceive few impediments to barter trading, there are wide variations on how
different firms perceive the impediments with some regarding many of them as important impediments
to their barter trading activities and others disagreeing. The results have significant practical
implications on the management of barter trade and these have been highlighted in the paper.
Key words: Barter trade, impediments, media industry, South Africa, barter trade practitioners, barter trade
non-practitioners.
INTRODUCTION
In his 1776 Wealth of Nations report, Adam Smith (2005) observed that there has actually been a
described barter trade as primitive, crude and unrefined resurgence of barter trade in both domestic and
system of exchange (Kaikati, 1976). Barter trade is international trade since the early 1990’s. Davis (2009) as
however still being practiced today in both developed and well as Carlin et al. (1999) observed that the persistence
developing countries. The Universal Barter Group (2008) of barter trade is like a puzzle to some economists.
reported that in 2004, 30% of the world’s total business The purpose of this paper is to empirically investigate
was conducted on non cash basis; 65% of all businesses barter trade within a domestic market. Unlike international
listed on the New York Exchange and one third of all barter trade which takes place between traders located in
small businesses in the US were involved in barter different countries, domestic barter trade takes place
trading. Despite lack of reliable up to date statistics on between traders located with the same market.
barter trading, the Small Business Association (2008) as
well as the International Reciprocal Trade Association
(IRTA) (2009) reported that there are enough indications Research problem and objectives
to show that barter trade is growing by the year. Cresti
Although barter trade as a business practice has been
growing, the growth has not been matched by growing
research interest in the practice. This is particularly so
*Corresponding author. E-mail: mmpinganjira@uj.ac.za. with barter trade within domestic markets. Most of what is
written on the subject is not based on empirical

investigations. The few empirical studies available on African media industry, (b) establish the difficulties
domestic barter trade are mainly based on studies done commonly associated with barter trading, (c) investigate if
in the USA, UK and Australia during the 1980’s and there are differences in perceived difficulties between
1990’s. Furthermore, business literature on barter trade in barter trade practitioners and non-practitioners different
general tends to concentrate more on its benefits, with sizes and (d) discuss the possible implications of the
little attention given to the difficulties and factors that findings to the management of this trade.
would discourage companies from using it. Literature
from the barter industry itself tends to list the many
benefits associated with barter trade without mentioning Literature review
the difficulties that firms may encounter in its use. Such
information may be good in serving as promotional The 2006 edition of Collins English Dictionary defines
material for the industry but for companies interested in barter trade as ‘trading goods, services etc in exchange
barter trading knowledge of the difficulties that may be for other goods, services etc rather than money’. In its
encountered is also of high importance. Such knowledge pure form, barter trade involves the direct exchange of
can help firms be more pro-active in their barter trading goods and/or services between two or more trading
activities so as to avoid the potential difficulties thereby partners without the exchange of money. Hennart (1990)
improve on their chances of reaping more of the benefits observed that barter trade has changed over the years
associated with barter trading. with newer forms commonly referred to as countertrade,
This paper aims at contributing to literature on barter characterised by variations of conditions and agree-
trade by investigating the use of barter trade within a ments. In this paper, barter trade is defined as any form
domestic market environment and understanding its of trade in which full or partial payment for goods and/or
associated difficulties. A sample of firms drawn from the services is made using other goods and/or services.
South African media industry was used in the study. The According to literature as highlighted in the introduction,
media industry was chosen due to the fact that in many barter trade is growing worldwide by the year. A number
countries, domestic barter trading is said to be highly of factors may help explain the growth in barter trade
prevalent in this industry. Barter News (2009) noted that experienced over the past two decades. They include
media is commonly used as the major ‘currency’ in the factors related to developments in information technology
barter market place. South Africa is Africa’s largest as well as the general business environment in which
economy and has the biggest and most diverse media firms have to operate. Technological advances in
industry on the continent (World Advertising Research computers and the advent of the internet in particular has
Centre, 2008). The industry is broadly subdivided into made matching of needs much more easily today than
print media (newspaper and magazines), broadcasting was the case before (Stodder, 2000). The primary reason
(radio and television), outdoor and ‘other’ media. The why barter trade is traditionally associated with high
outdoor media encompasses outdoor displays such as levels of inefficiencies is because of the need for double
billboards, adverting and notices on bus shelters and coincidence of wants from the parties involved. In
vehicles including busses. The ‘other’ media category traditional barter, a prospective seller of cloth looking for
includes online media and use of cinemas to reach the corn needed to find not just a seller of corn but one
public. Sales of advertising time and space are a major looking for cloth at that particular point in time. Through
source of revenue for firms in the South Africa media use of internet, a firm can make its products available to
industry. Media Facts (2009) reported that the total potential barter customers all over the country and even
above-the-line-advertising was at R24.6 billion in 2008. the world making it easy to find interested customers.
This is advertising that reached a wide spectrum of the Developments in information technology have also
population and is channelled through advertising resulted in growth of the barter trade industry especially
agencies. R10 billion of the 2008 advertising revenue third party organizations specializing in mediating
went to television sector, R 9.3 billion to the print sector, between individuals and/or organisations in their barter
the radio sector got R3.3 billion while the remainder went exchanges. The barter brokers often help eliminate the
to the other media sectors. Competition for advertising need for double coincidence of wants, as many of them
revenue is considered to be very stiff in the industry. It is offer trade credits that can be redeemed at a later date
not uncommon for firms to have unfilled advertising time (Orme, 2004).
or space. Additionally, media space and time is highly Apart from developments in information technology, the
‘perishable’ in that it cannot be regained once the time to general business environment that most businesses are
be used lapses. Barter trade has the potential to help operating in is characterised by increasing turbulence
firms prevent loss of revenue from unsold media space resulting often from growing competition among firms
as media companies can exchange their unsold space for and/or unstable economic conditions. Difficult business
other valuable products and services to their firms. environments require more creativity on the part of
The specific objectives of the paper are to (a) managers in order to keep their organisations going if not
investigate how widely used barter trade is in the South thriving. Bazar (2008) noted that barter trade is one such

Impediments to barter trading: Analysis of practitioners and non-practitioners perceptions 189
tool firms use in order to deal with difficult economic and and Palia (1999) found that this can also prove difficult. In
business times. Egan and Shipley (1996) observed that their study on international countertrade practices among
strong latent demand often exists during difficult Australian firms, they found that the number one difficulty
economic times only that it is often not satisfied as need sited by counter traders was to do with the difficulty of
to purchase is not matched with ability to pay. Through reselling goods offered by customers. The fact that some
use of barter trade, firms are able to facilitate payments firms may accept products with the intention of reselling
without the need for cash. Apart from helping during them can also be a disadvantage in that the barter
difficult economic times, barter trade has also been found partners can now become competitors since they will be
to be a strategic tool that firms can use in order to drive offering similar goods to the market.
greater efficiencies and deliver ongoing financial and In order to deal with the demands of barter trade, some
marketing benefits irrespective of economic conditions. firms make use of the services of barter brokers. As
Some of the benefits commonly associated with barter trade noted before, barter brokers can help in facilitating the
include the fact that it helps conserve cash thereby matching of needs between firms as well as eliminate the
improving on cash flow; generate incremental sales and need for double coincidence of needs by offering trade
profits; enhance productivity through increased capacity credits that can be redeemed at a later date. Barter
utilisation; dispose unsold/excess inventory without brokers however charge for their services and Knes
having to discount heavily to normal cash paying (2007) observed that the charges can often be exorbitant,
customers thus maintaining present product price thus diminishing the potential profits from barter trading.
integrity as well as establishing and building long term Problems may also arise in that it may become difficult to
business relationships based on trust (International redeem accumulated trade credits due to continued
Reciprocal Trade Association, 2009b; Ference, 2009; unavailability of products of interest to an organisation.
Cellarius, 2000). As barter trade involves exchanging goods for other
Lithen (2002) noted that barter can indeed be a good goods, it has the potential to negatively impact on the
deal for companies, but only if they enter it with their eyes cash flow of a company if not well managed. Statov
wide open to the full spectrum of pitfalls and oppor- (1996) cautioned that organisations needs to be wary of
tunities. A review of literature on domestic barter trade accepting disproportionate amount of barter business
activities shows that there are many factors that can compared to cash business as they still have expenses
impede on the use of barter trade. Common difficulties that needs to be paid for in cash such as salaries. Barter
range from those associated with negotiations and trade can also be a threat to the value of organisations
administrative requirements; product quality and disposal; products. Lee (2004) noted that most companies are
use of intermediaries as well as with the impact of barter often not willing to go public about their barter dealings as
trade on the financial side of the business. this can negatively impact on the perceived value of their
Ference (2009) observed that barter trade, unlike products. The fact that barter trade is often associated
monetary transactions, is characterised by protracted with inventory that is proving difficult to sell for cash, open
negotiations before an agreement can be reached. While acknowledgement of the existence of such inventory in a
this gives an opportunity for the parties involved of company can greatly reduce the bargaining power of its
knowing each other better, the negotiations can be too sales people. Liesch and Palia (1999) found that
time consuming depriving the staff involved of time for ‘problems with pricing’ are very common among firms
other business activities. Additional administrative staff involved in countertrade. This may be due to difficulties in
may thus be required to not only negotiate but also to assigning monetary value to goods and/or services being
monitor, enforce and control the terms of barter deals. offered for exchange.
Vendig (2003) as well as Mardak (2002) noted that From the review of literature, it is clear that despite its
barter trade often results from excess or ‘distressed’ many associated benefits, there are many potential diffi-
inventory that is proving difficult to sell through normal culties associated with barter trade which may prevent
cash channels. Barter trade can thus be used by firms from engaging in it or optimally reaping its benefits.
companies to offload low-quality products. Verifying the
quality of products offered may sometimes be difficult due
to among other factors lack of knowledge or expertise in RESEARCH METHODOLOGY
a particular product category. It would for example be
As not much empirical research has been conducted in the field of
difficult for a person to verify the quality of software barter trade particularly within domestic markets, a multi-method
program without the necessary information technology skills. research design was used in the study. The first phase consisted of
Neale et al. (1992) cautioned that firms need to be qualitative exploratory research in the form of in-depth interviews
more discerning in the selection of goods receivable. In with five executives from the media industry conversant with barter
their study on countertrade practices among UK firms, trading issues. The objective was to get their perspective on the use
of barter trade in the South African media industry as well as its
they found that the number one difficulty was to do with
associated benefits, difficulties and management practices. The
firms having no ‘in-house use’ for goods offered. Firms current paper focuses on the difficulties of barter trading.
may however accept goods that they do not have ‘in . Convenience sampling method was used to identify the executives
house use’ of with the intention of reselling them. Liesch with the main criteria being demonstrated knowledge and practical

Table 1. Involvement in barter trade by firm size.
Sector/sub-sector Practitioners Sector/sub-sector % Non-practitioners Sector/sub-sector % All firms Overall %

Newspaper 18 90 2 20 20 28.6
Magazine 11 91.7 1 8.3 12 17.1
Television 8 100 0 0 8 11.4
Radio 18 78.3 5 21.7 23 32.9
Outdoor 6 85.7 1 14.3 7 10.0
Total 61 87.1 9 12.9 70 100
experience with this type of trade in the media industry. African media industry as 61 of the 70 respondents
From the findings in the in-depth interviews as well as review of indicated using it. This represents 87.1% usage rate. The
literature, a structured questionnaire was developed for the
results also show that the practice is common across all
quantitative phase of the study. A draft questionnaire was first
developed and pre-tested on a convenience sample of 15 respon- media sectors/subsectors with three of the five sectors/
dents from the media industry before coming up with the final subsectors showing that 90% and over of their firms
version. The main reason for pre-testing the draft questionnaire was included in the sample engaged in the practice. None of
to find out if the questions used were easily understood by the the five sectors/subsectors had less than 75% of its firms
respondents. The respondents were also asked to indicate any involved in barter trading. The findings agree with
further questions that they would like to see investigated in the
study or suggest question modifications if deemed necessary. The
BarterNews (2009:1) observation that barter trade is very
findings during the pre-testing stage showed that no major changes common in the media industry in most countries. The
to the questionnaire were necessary. After pre-testing the draft perishable nature of media space/time makes barter
questionnaire, a final version was developed taking into account the trade a good option to consider as it can help a media
comments received in the pre-testing stage. company convert its unfilled advertising time and/or
The final questionnaire was electronically mailed to a total space into products, services or reciprocal advertising
sample of 120 organisations from the broadcasting, print and
time and/or space that they might otherwise have to pay
outdoor sectors of the media industry in South Africa. Stratified
random sampling was used to select the firms from a sampling for.
frame consisting of a total of 197 firms. The sampling frame used in Table 2 present findings relating to perceived difficulties
the study was developed using media organisations listings by of barter trade. Both practitioners and non-practitioners
South African Government Communication and Information were asked to indicate the extent to which they regarded
Systems (GCIS), Media Contact Directory, the Magazine Publishers a number of factors as important difficulties associated
Association of South Africa (MPASA), and the Out of Home Media
South Africa (OHMSA) members. Stratification was based on the
with barter trade. The perceptions were measured using
media sector/subsector firms come from and included television, a five point Likert scale ranging from 1 (Strongly disagree
radio, newspaper, magazines and the outdoor sector. The firms in (5 = strongly agree). The results in Table 2 include mean
the sample were identified at strategic business unit level and not at values on each of the difficulty investigated for barter
corporate level as the media listings used had the firms at strategic trade practitioners, non-practitioners and all firms
business unit level. respectively.
The electronic mail containing an attachment of the structured
questionnaire was e-mailed to the contact personnel in each of the Since mean values have been used in presenting the
identified firms. The e-mail contained information introducing the results, all mean values of 1 or to the nearest of 1 mean
study and a request that the questionnaire be passed on to the strong disagreement, those of 2 or to the nearest of 2
senior person responsible for barter trade in their organisation or mean disagreement while those of 3 or to the nearest of 3
the marketing manager in the case where there was no such indicated a neutral position. Mean values of 4 or the
person. The e-mails were followed up with telephone calls for the
purposes of finding out if the questionnaires had been received and
nearest of 4 mean agreement while those of 5 or to the
passed on to the appropriate person. Contact details of the nearest of 5 mean strong agreement. Note that the
responding employee were solicited with the intention of making means in the all firms column have been presented
future follow ups. according to rank with the factors having the highest
At end of the data collection process, a total of 70 usable mean on top.
responses were obtained representing a total response rate of 58%. According to Table 2, results in the ‘all firms’ column
The data was analysed using Statistical Package for Social Science
(SPSS) version 18.
show that firms regarded only 3 out of the 18 difficulties
investigated as important difficulties of barter trading.
These included the fact that barter trade could lead to
RESULTS AND DISCUSSION mismanagement and fraud within the company if proper
controls are not put in place; the fact that inability to fully
Table 1 gives some background statistics of the control delivery of products/services provided by third
respondents focusing on a number of practitioners and parties may impact negatively on the image of the com-
non-practitioners by media sector/subsector. The results pany as well as the difficulty associated with fluctuating
show that barter trade is a common practice in the South value of goods as trading arrangements extend over a

Table 2. Mean values – perceived difficulties of barter trading.
Practitioners Std Non- Std All Std

deviation practitioners deviation firms deviation
Barter could lead to mismanagement and fraud
within the company if proper controls are not 4.15 1.09 4.56 0.53 4.20 1.04
put in place 3.52 1.18 4.00 0.00 3.59 1.11
Inability to fully control delivery of

products/services provided by third parties may
impact negatively on the image of the company 3.38 1.08 4.00 0.00 3.46 1.03
Fluctuating value of goods because of trading

arrangements extend over a long period of time
3.21 1.04 4.11 0.33 3.33 1.02
Problems redeeming accumulated trade credits
within the stipulated time period
3.38 1.04 4.00 0.50 3.29 0.99
Diminished working capital flow therefore limiting
financial resources available to the firm
3.15 1.01 4.00 0.87 3.26 1.38
Time consuming negotiations
3.18 1.42 3.67 0.97 3.24 1.03
High brokerage costs when using agents
3.10 1.12 4.11 0.33 3.23 1.11
Product quality not conforming to
specifications promised during negotiations
3.13 1.09 3.56 0.73 3.19 1.05
Uncertainty in projecting the profitability of
any given transaction
3.07 1.11 3.89 0.78 3.17 1.10
High administrative burden associated
with barter trade
3.05 0.97 3.78 0.67 3.14 0.97
Barter trade is a threat to the company's
money paying customer base
3.03 1.17 3.11 1.05 3.04 1.15
Difficulties in determining the monetary value
of goods offered/received in barter
2.92 1.12 3.78 0.44 3.03 1.11
Barter trade can devalue a company's products
Unscrupulous middlemen who 2.89 1.21 3.22 1.12 2.93 1.20
misrepresent goods on offer
2.82 0.91 2.78 0.97 2.81 0.91
Customers become competitors when they trade
products offered in barter to other parties
2.70 1.05 3.56 0.88 2.81 1.07
The difficulty of inspecting the quality of

goods offered in barter
2.44 0.90 2.78 0.83 2.49 0.90
Difficulties in finding in-house use for goods
received/offered through barter trade
2.38 1.00 2.67 1.42 2.41 0.86
Difficulties finding suitable markets for
goods offered
3.09 0.53 3.62 0.28 3.16 0.53
Difficulties - overall

long period of time. These three factors had mean values summated average of the 18 factors. The results on
of 4.20, 3.59 and 3.46, respectively. The results show ‘overall difficulties’ showed that non-practitioners overall
that firms were neutral on all the other factors except one. average was 3.62 while that of practitioners was 3.09.
They disagreed that difficulties in finding suitable markets From the results of practitioners and non-practitioners,
for goods offered was an important difficulty of barter it can be seen that the high neutral values of practitioners
trade. This factor had an overall mean value of 2.41 while contributed a lot to having high neutral means values on
the others had mean value to the nearest of 3. This may most factors when all firms were considered together. A
be due to firms mostly accepting goods and/or services further analysis was conducted on the results of
that they have in house use of. This point actually came practitioners to find out why most of the factors come out
up during the in-depth interviews, with the executives with neutral mean values. This was done by examining
noting that companies are more likely to accept products the distribution of answers along the 5 points of the Likert
and/or services they have internal use for. This is mostly scale. The analysis involved calculating the percentage of
because unlike in other countries notably the developed firms who indicated strong agreement or agreement with
countries of USA, UK and Australia where they have a the factors followed by those who were neutral and those
well developed barter trade exchange or brokerage who indicated agreement or strong agreement. Table 3
system, the industry in South Africa is not all that well presents the results of the analysis.
developed. Most of the barter exchanges would thus be According to Table 3, the only factor to which most of
at a one to one level with very little use made of the respondents agreed or strongly agreed to as being an
dedicated barter brokers although advertising agents important difficulty to barter trade was the fact that barter
would sometimes play the middleman role. trade could lead to mismanagement and fraud within the
Analysis of the difficulties at group level showed that company if proper controls are not put in place. 80.3% of
both practitioners and non-practitioners regarded the fact the respondents agreed or strongly agreed with this
that barter trade could lead to mismanagement and fraud statement, 8.2% were neutral while 11.5% disagreed or
within the company if proper controls are not put in place, strongly disagreed.
the most important difficulty associated with barter trade. Five other factors, making it 6 out of the 18 had levels
There were however wide variations in the perceptions of of agreement/strong agreement or disagreement/strong
practitioners and non-practitioners regarding most of the disagreement of over 50%. 54.1% of the firms agreed/
difficulties investigated. According to the results in Table strongly agreed to two of the five factors being important
2, practitioners regarded only two factors as important difficulties to barter trade. These included the fact that
difficulties associated with barter trade. These included inability to fully control delivery of products/services
the fact that barter trade could lead to mismanagement provided by third parties may impact negatively on the
and fraud within the company if proper controls are not image of the company and the problem of fluctuating
put in place as well as the fact that inability to fully control value of goods because of trading arrangements
delivery of products/services provided by third parties extending over a long period of time. The percentage
may impact negatively on the image of the company. levels of disagreement and strong disagreements were
These two factors had mean values of 4.15 and 3.52, greater than 50% for difficulties relating to finding suitable
respectively. The practitioners were neutral on all other markets for goods offered; finding in-house use for goods
factors except two to which they disagreed. These received/offered through barter trade and the difficulty of
included difficulties in finding in-house use for goods inspecting the quality of goods offered in barter. The
received/offered through barter trade and difficulties in three factors had 62.3, 60.7 and 52.5% of the firms
finding suitable markets for goods offered. These two disagreeing or strongly disagreeing to them being
factors had mean values of 2.44 and 2.38, respectively. important factors to barter trade.
The non-practitioners on the other hand regarded 13 of Of the 14 factors that had neutral mean values, the
the 18 factors as important difficulties associated with results according to Table 3 show that only two factors
barter trade and were neutral on the remaining 5 factors. namely diminished working capital flow therefore limiting
This means that they did not disagree with any of the 18 financial resources available to the firm and unscrupulous
factors being important difficulties associated with barter middlemen who misrepresent goods on offer, had indeed
trade. The results also show that non-practitioners unlike more firms percentage wise who were neutral than the
practitioners not only regarded many factors as important none-neutral ones. This shows that most of the factors
impediments to barter trade but for each of the factors with neutral mean values on the part of practitioners were
except one, namely that customers become competitors due to divergent perceptions with some firms agreeing to
when they trade products offered in barter to other the factors being important difficulties of barter trading
parties; their mean values were higher than those of while many others regarding the same factors as not
practitioners. This means that non-practitioners regarded important difficulties of barter trading. This being the
the difficulties as in general of greater magnitude than the case, it is also important to note that on 11 of the 18
practitioners. This is further supported by overall factors, there was higher percentage of firms agreeing or
perception of difficulties which was calculated as a strongly agreeing to them being important difficulties to

Table 3. Difficulties of barter trading – further analysis of practitioners perceptions.
Practitioners
SDA/DA Neutral A/SA Mean
% % %
Barter could lead to mismanagement and fraud within the company if proper 11.5 8.2 80.3 4.15
controls are not put in place
Inability to fully control delivery of products/services provided by thirds parties may 26.2 19.7 54.1 3.52
impact negatively on the image of the company

Fluctuating value of goods because of trading arrangements extend over a long 26.2 19.7 54.1 3.38
period of time
Problems redeeming accumulated trade credits within the stipulated time period 34.4 16.4 49.2 3.21
Diminished working capital flow therefore limiting financial resources available to 18.0 50.8 31.2 3.38
the firm
Time consuming negotiations 34.4 16.4 49.2 3.15
High brokerage costs when using agents 37.7 19.7 42.6 3.18
Product quality not conforming to specifications promised during negotiations 37.7 19.7 42.6 3.10
Uncertainty in projecting the profitability of any given transaction 32.8 31.1 36.1 3.13
High administrative burden associated with barter trade 36.1 23.0 41.0 3.07
Barter trade is a threat to the company's money paying customer base 37.7 21.3 41.0 3.05
Difficulties in determining the monetary value of goods offered/received in barter 47.5 9.8 42.6 3.03
Barter trade can devalue a company's products 41.0 23.0 36.0 2.92
Unscrupulous middlemen who misrepresent goods on offer 37.7 41.0 21.3 2.89
Customers become competitors when they trade products offered in barter to other 41.0 36.0 33.0 2.82
parties
The difficulty of inspecting the quality of goods offered in barter 52.5 16.4 31.1 2.70
Difficulties in finding in-house use for goods received/offered through barter trade 60.7 23.0 16.4 2.44
Difficulties finding suitable markets for goods offered 62.3 26.2 11.5 2.38
*SDA = Strongly disagree; DA = Disagree; A = Agree; SA = Strongly agree.
barter trade than those that disagreed or strongly barter trade is a very common practice among firms in the
disagreed South African media Industry. Its practice cuts across all the
media sectors and subsectors. The high prevalence rate
of barter trade in the industry offers opportunities for firms
CONCLUSIONS AND MANAGERIAL IMPLICATIONS facing monetary constraints in their efforts of promoting
their products in the market to consider doing some of
From the results of this study, it can be concluded that their business using barter trade. Such firms will need to

find out the kind of products or services they can offer to barter trade in other industries. This would allow for
media organisations in exchange for promotional space comparisons to be made and industry specific factors
and/or time. The high prevalence rate is also a vote of relevant to understanding barter trade uncovered thereby
confidence in the many possible benefits firms can derive further enhancing our understanding of the practice.
from this practice. Instead of completely losing out on
sales or heavily discounting advertising space and/or time
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§µ
Gender differences in organizational strategy
execution: A comparative study between female and
male managers in obstacle management
Ayandé Alpha* and Sabourin Vincent
Strategy Execution Research Group (GRES), Department of Strategy, Social and Environmental Responsibility,
School of Management Science, University of Quebec in Montreal (UQAM) Canada.
This paper investigates the differences faced by women and men regarding their abilities to manage
obstacles inherent in the organizational strategy execution. A survey questionnaire was administered to
282 managers in order to study the five dimensions of the obstacles inherent in organizational strategy
execution identified through a previous research which was designed to validate the set of obstacles
faced by managers. We used principal component analysis to categorize the obstacle dimensions and
then we used ANOVA to examine the link between dimensions of strategy execution and socio-
demographic variables such as age, span of control, number of years in the organization. Past research
produced significant gender differences with respect to the strategy execution of the organizational
objectives of managers. It also disclosed many gender differences in the set of obstacles related to
emotions, immediate action, rules, integrity and initiatives. In contrast with the literature, our first
hypothesis that there would be a gender difference in terms of obstacles between female and male
managers for the dimension of emotions was not supported. However, this study does show a
significant gender difference regarding the obstacle dimensions of immediate action, initiatives and
rules: this hypothesis was supported. The study modeled five obstacle dimensions in order to identify
differences in practice between female and male managers. On an emotional level, women and men face
the same problem-solving in organizational performance development, but for the other dimensions,
their capacity to confront the obstacles is different. On a professional level, our study shows that
women managers who have reached top management positions can perform as many men managers in
terms of the implementation of clear and achievable objectives. At this stage, our model cannot be
generalized and further studies that would better identify the causes underlying these differences in
practice are needed. Additional work is required in order to be able to generalize our findings. This
study proves its contribution by identifying a more refined set of specific obstacles for each facet of
organizational strategy execution faced by women and men managers in the execution of their
objectives.
Key words: Gender, strategy, management, organization, women, leadership, strategy execution, business.
INTRODUCTION
The research on gender in management has been Tonge, 2008; Ezzedeen et al., 2009; Altintas et al., 2008;
interested in the differences in management obstacles Lamsa and Hiillos, 2008; Füsun and Murat, 2008). In this
faced by women and by men. According to several regard, the research on gender in management has
authors, women and men face different obstacles in their identified several obstacles or barriers that women in
professional and work promotion towards top managerial positions face. For instance (Tonge, 2008)
management positions (Linehan and Scullion, 2008; has identified three types of obstacles faced by women in
management - psychological, situational and social. It
has been found that several factors are barriers to
management work of women. Yeganeh (2011)
*Corresponding author. E-mail: ayande7@bluewin.ch. investigated the effects of cultural values on the gender

gap. Ezzedeen et al. (2009), who explored women’s on a factual analysis of the situations in order to set up a
career/advancement and career/family balance, also more coherent and more rational system (Sabourin,
found several obstacles faced by women in their 2009). According to Kolb (1984), this strategy has to do
strategies within work and family contexts. Obstacles with the “abstract conceptualization”. This strategy leads
faced by women in management have also been to the forming of concepts and formulation of
characterized (Linehan and Scullion, 2008) when generalizations which integrate the observations and the
searching for a mentor or an adequate network to accede reflections. For instance, it leads to a “business model”
to a top management position. Several authors have resulting from analysis and rational reflection (Sabourin,
contributed to the literature on gender similarities and 2009).
differences in leadership style and behaviour of Self-efficacy positively predicts performance and
managers (Vinnicombe and Cames, 1998; Phillips, 1995; personal goal-setting in complex decision-making
Govender and Bayat, 1993; Cooper, 1992; Collard, 2001; procedures (Bandura and Wood, 1989; Cervone et al.,
Van Engen, Van der Leeden and Willemsen 2001; Burke 1991; Dickinson and Poling, 1996; Mitchell et al., 1994;
and Collins, 2001; McColl Kennedy and Anderson, 2005). Latham et al., 1996). If self-efficacy predicts
However, very little research on gender management performance, no task-specific overconfidence or
has examined specific factors of the various dimensions underconfidence is present. If self-efficacy does not
of strategy execution in the context of whether or not predict performance, some bias may be present. For
gender differences exist. example, research results show that self-efficacy may not
predict performance in the early stages of a new task
Research objectives (Cervone and Wood, 1995; Stone, 1994). Several studies
show, however, that self-efficacy becomes more accurate
The objective of this research was to analyze the with task experience and objective performance feedback
obstacles faced by women and men managers in the (Bandura and Jourden, 1991; Bandura and Schunk,
1981; Bandura and Wood, 1989; Wood et al., 1990).
execution of their objectives. The two specific objectives
Regarding the clarification of objectives, men report
of this research were the following:
higher self-perceived ability than do women in the
1. Assess differences among female and male managers performance of complex tasks (Busch, 1995b), difficult
for the five dimensions of organizational strategy tasks with uncertainty and few opportunities for feedback
(Heilman, 1994; Lenney, 1977), and in financial decision-
execution identified in previous research on managerial
making (Barber and Odean, 2000; Barber and Odean,
obstacles.
2001; Biais et al., 2005; Gysler et al., 2002; Jones and
2. Asses empirically gender differences for socio-
Tullous, 2002; Prince, 1993).
demographic variables within the framework of
Jones and Tullous (2002) discovered that male
organizational strategy execution.
entrepreneurs reported higher confidence than female
entrepreneurs in their ability to make financial decisions.
Males' estimations of their need for financial consulting
LITERATURE REVIEW were lower than women's estimations. In reality,
however, the male entrepreneurs were overconfident and
A review of the literature on management and on the Kolb required more actual assistance from financial
model (1984) and subsequent empirical work by Richard consultants than did females.
and Sabourin (2009), Sabourin (2009), Ayandé and Evidence suggests that men are more confident than
Sabourin (2010) has led us to support the existence of women in complex financial decision-making. However,
five dimensions implicit in strategy execution. We labelled researchers have not reconciled whether women and
these dimensions as follows: the dimensions of rules, men are accurate, overconfident or underconfident in
emotions, initiatives, immediate action and integrity. In their confidence estimations (Endres, 2008).
the following lines, we review the literature according to Regarding organizational rules Siebers (2009), argued
these five dimensions. that the lack of unequal access to career advancement
and remuneration payment between ethnic majority and
minority employees, shows that this inequality is partly
The rules dimension due to the prevalence of post-bureaucratic methods of
labour control, whereas minority members have an
The rules dimension can be defined as a strategy based interest in bureaucratic forms of labour control.

Gender differences in organizational strategy execution: A comparative study between female and male managers .............................................197
The emotions dimension active participation of the change recipient in the change
effort. It was argued that the necessity to take initiatives
This second dimension encompassing emotions has to depends in large-scale on our own needs of the time and
do with commitment and the developing of employees’ interests we have for achieving the project (Jodyanne,
convictions in the context of strategy execution (Sabourin, 2009; O’Brien et al., 2010). Titus and Roger (2003) found
2009). This is what Kolb (1984) has labelled “reflexive that women managers delegate less than do their men
observation”. This strategy transformation can bring counterparts, and showed no differences between their
about commitment by clarifying the problems, reconciling directive, consultative and participative leadership styles.
the divergent points of view and establishing consensus. Sarah et al. (2005) examined the impact of managerial
In the context of this strategy, the divergent and gender on the subordinates they supervise, and showed
conflicting points of view are comfortably accepted. that women with female supervisors also reported
Van der Boon (2003) indicated that research shows significantly higher levels of job autonomy and work
that women handle emotions and relationships differently absences than did women with male supervisors or men
than do men. Women's empathy and insight are receiving with either male or female supervisors. According to Bass
boardroom attention as companies realize that in an ever- (1990) and Bass and Stogdill (1990, 1991), women are
globalising world these skills are indispensable. less likely to practice management-by-exception,
In this dimension, a relevant topic is the emotional intervening only when something goes wrong. Women
implication in the construction of network relations. For also typically temper criticism with positive feedback.
instance, in this regard, the authors have noted that
although women and men share some barriers to
networking, women practitioners perceived themselves The immediate action dimension
as facing more than twice as many barriers as their male
counterparts, which may increase their reluctance to Fourthly, the dimension of immediate action is carried out
engage in networking activities (Tonge, 2008). Jodyanne through immediate action and allows for immediate
(2009) suggested that both women and men appeared implementation on a small-scale level to obtain results
similarly motivated by a combination of push and pull quickly and which adjust on the basis of feedback
factors. Caldwell et al. (2009), investigated the main (Sabourin, 2009). According to Kolb (1984), results are
effects of differences among workers regarding gender in obtained by means of immediate action. There is an
conjunction with relevant contextual factors that moderate opportunity for fast decision-making without respect to an
these main effects on individuals' procedural justice established plan. Interaction with the others is favoured
judgments. Men are more likely than women to view only as far as it gives results quickly. This strategy is
change-related managerial actions as just, but this pragmatic and acts on the basis of the first obtained
relationship is not significant if the organization has results. Armenakis et al. (2009) mentioned that a relevant
undergone shifts in power structures concurrent with the topic is the assessment of reactions to organizational
focal change. change. Thanos et al. (2011) explored the dynamics of
network emergence that give rise to the outcomes of
process improvement interventions. Davis et al. (2010)
The initiatives dimension examined the effects of CEO gender on market
orientation and performance (growth and profitability)
The initiatives dimension relies on the active among a sample of small and medium-size service
experimentation of initiatives, realization of projects and businesses. They found that in a female-led service, the
continuous improvement of the existing activities SMEs perform significantly better due to their stronger
(Sabourin, 2009). This is what Kolb (1984) called the market orientation compared to those led by males.
process of “active experimentation”. In this context, the Jeanquart-Barone and Sekaran (1994) found that women
hypotheses proposed in new circumstances are verified had more trust in male than in female supervisors. While
in real time projects. Results are obtained through an Valentine et al. (2002) noted that compared to those with
active experimentation of new methods. This strategy male supervisors, both male and female employees who
involves creativity and ideas supporting initiatives and had women supervisors reported lower job responsibility
their implementation. With such a strategy, decisions are and more intent to quit. Peters and Kabacoff (2002)
made after feedback is obtained about the project. suggested that women in executive roles tend to be as
Armenakis et al. (2009) mentioned that one of the oriented to strategic thinking and as willing to take risks
important factors related to organizational changes is the as men.

The integrity dimension self-management behaviour, suggesting that it may send

out a signal to certain employees about how supportive
The dimension of integrity deals with the capacity to the organizational environment is toward career self-
achieve objectives within the values and principles of the management.
organization. Executing objectives in the context of Regarding gender differences in self-efficacy and
integrity, this has to do with the capacity to achieve confidence, the research indicates that men perceive
objectives without compromising the values and their capability to be higher than women do in contexts
principles in the functioning of the organization. such as mathematics (Ackerman et al., 2001; Betz and
Neal-Smith and Cockburn, (2009) mentioned that the Hackett, 1983,1986; Hackett, 1985; Rammstedt and
capacity to innovate and to realize this performance is Rammsayer, 2002), computing and marketing knowledge
linked to the opportunity to produce a more inclusive (Busch et al., 1995a), complex computer tasks (Busch,
culture in order to improve the working culture for women, 1995b), entrepreneurial action (Chen et al., 1998;
and to appreciate the diversity that women bring to an Chowdhury and Endres, 2005; Scherer et al., 1990), and
organization. Beverly et al. (2008) argued that concepts in cognitive ability (Furnham, 2005; Furnham et al., 2005;
of diversity and equality should be taken into account in Rammstedt and Rammsayer, 2002).
the values and the processes with executing strategies or In conclusion, the literature review on the gender
managing the organization with an idea to integrate the management obstacle in relation with strategy execution
global and local socio-cultural and sociopolitical brings out five main hypotheses:
environment of the project: a real asset for organizational H1: There would be gender differences between
development priorities. Gill (2010) mentioned that if managers in the obstacles to management regarding the
females are more ethical than males, as the literature on emotions dimension: lack of commitment and form of
the subject generally suggests, engaging and resistance to change, of employees in the execution of
encouraging females in their careers would certainly their objectives.
promote a more ethical environment. The findings
provided evidence that female business students are
more ethically predisposed than are their male H2: There would be difference between female and male
counterparts. Females appear to demonstrate greater managers regarding obstacles connected to the
sensitivity when dealing with ethical issues. Manda and immediate action dimensions: taking value added action
Myumi (2010) found that women managers face different and facing emergencies in the execution.
value challenges than do men managers. They found that
role conflict and certain features of the organizational H3: There would be gender difference between managers
work culture, particularly the management culture, which in the obstacles to management regarding the dimension
was generally perceived as strongly masculine, were the initiatives: translating the objectives into concrete
factors that contributed to delaying or avoiding accession projects/empowerment.
to the post of headship in schools.
H4: There would be difference between female and male
Gender in management, socio-demographic and managers in the obstacles to management regarding the
degree of control factors in strategy execution rules dimension: clarifying and aligning the objectives.
In the review of literature, few researchers have H5: There would be gender difference between managers
examined the role played by socio-demographic factors, in the obstacles to management regarding the integrity
such as age, tenure or span of control, to explain strategy dimension: executing with integrity in the scope of the
execution. organizational values and principles.
Regarding variables such as the locus of control,
Sturges et al. (2010), highlighted that women and men METHODOLOGY
are shown to act in different ways, depending on the level
of POS (perceived organizational support) that they This research is part of a broader research on managerial strategy
receive, whereas POS encourages individuals with an execution and was conducted in four major steps.
internal locus of control to engage in internal career self-
management behaviour, in line with the trait activation Step 1: Empirical validation of the dimensions of our
theory. POS moderates the relationship between both conceptual framework
gender and locus of control, and internally focuses career
1. Data were collected from managers through structured training in

the countries of the Organisation for Economic Co-operation and Step 5: Data analysis
Development (OECD). Three regions of the world, namely, Europe,
North America and Australia, were selected. A group of 168 This study presents our findings regarding the principal component
respondents completed the questionnaire. The characteristic of the analysis and the socio-demographic variables. The PCA shows the
group lies in the fact that all respondents carry out their activities in obstacles dimension in order of importance. The socio-
the private sector. Their administrative position at the professional demographic variables reveal the correlations between the
hierarchy of the company is between the status of middle managers obstacles dimension. The results also revealed that 49% of those
and head of a department. surveyed were male managers and 51% were female managers.
2. The measuring instrument (Kolb and Kolb, 2005) which is the The reliability of our findings was examined in detail using the KMO
“learning style inventory” was used since the initial variables were and Bartlett’s test (Table 3). In the KMO and Bartlett’s sphericity’s
related to the modes of learning. We validated the questions during test results on the reliability of data sets, the KMO value of 0.905
an executive seminar with three managers of the organization. was close to 1.0 and thus, very significant statistically. This adds
3. To ensure that each of the questions was properly understood, good confidence and weightage to our PCA analysis.
the validation was preceded by a pre-test which was conducted on To get a perspective of the five dimensions that regroup the 25
15 referees of the Belgian Management Training Association. All variables of our conceptual framework, the principal component
questions were suitably understood after adjustments were made to analysis (PCA) was employed using SPSS analysis tools. The raw
one of them in order to clarify its understanding by the respondents. scores were standardized to allow a uniform unbiased distribution
4. Descriptive analyses were completed to identify certain of all variables. The correlation matrix was derived and the
characteristics of the sample. A frequency analysis and the eigenvalues of these variables drawn from the matrix were used for
Cronbach Alpha test were completed. The results of R-square multivariate principal component extractions. The first five
(degree of variance explained by the model) and factorial analyses significant principal components with a cut-off of >1.0 were
were used to verify the hypotheses. As shown in Table 2, reference selected.
is made to the Cronbach alpha test, an indicator of reliability with a Table 4 shows that more than 63.46% of the total variance was
scale of measure between 0 (not reliable) and 1 (reliable). attributed to these five principal components. From 25
5. Four of the five dimensions of our conceptual framework have observations, only 17 were taken into account after the PCA. The
been validated in previous research. The first four dimensions had a most important obstacle that both women and men must deal with
positive Cronbach alpha and the fifth dimension was added initially is the emotions dimension, followed by immediate action,
afterwards, subsequent to focus group feedback. Table 1 presents rules, initiatives and incidental integrity. For each observation, we
the concept definitions and the variances and reliability obtained in have the mean, standard deviation, communalities, and finally the
previous work (Richard and Sabourin, 2009). weight. The components are classified (Table 4) by their loading,
eigenvalues, total percentage of the explained variance, and the
cumulative percentage of the explained variance. If the principal
Step 2: Focus groups to identify managerial obstacles component analysis allows us to identify the weight of each
dimension in terms of barriers and its importance in the obstacles
Twelve focus groups were conducted with an average of 15 management, it also allows us to determine the weight and the
managers per group to identify obstacles faced by managers. The importance of each observation that composes the dimensional
obstacles identified were used as input to elaborate the obstacles.
measurement instrument related to obstacles. The PCA (Table 4) shows the dimensions, in order of importance,
which are classified as follows: the emotions dimension (getting a
commitment to the objectives), the immediate action dimension
Step 3: Development of a measurement instrument (value added actions and dealing with urgent matters), the rules
dimension (clarifying and aligning the objectives), the initiatives
We further developed an instrument, a tool to measure the role of dimension (translating the objectives into projects), and finally, the
the 25 obstacles that were identified by the focus groups. The integrity dimension (executing within the integrity of values and
questionnaire was administered and the questions were principles).
sequentially adjusted for five groups of approximately 25 managers
per group. For each of the 25 variables (Table 2), the indications of
intensity were measured by using a five-point Likert-type scale. All Step 6: Findings
of the constructs were measured by using multi-item scales
anchored by 1 (strongly agree) and 5 (strongly disagree).
ANOVA analysis of gender differences
Step 4: Surveys of managers to identify the five dimensions The ANOVA analysis aims to verify the existence of
with principal components analysis (PCA) differences between the gender (female and male)
variable and the variables of the number of years as an
Step 4 consisted of surveying a group of 282 managers. The
participants were all managers and project managers with an employee (Nyae), number of years in the position (Nytp),
information technology background and were in charge of keeping control (Contrl), capacity to succeed (Success),
supervising information technology projects. The group was time lost in management (Tme) and performance
selected to ensure the homogeneity of the respondents in terms of improvement (Pmv). For each group of variables cited
origins, tasks and functions. above, an analysis was performed in order to examine

Table1. Concepts and definitions.
Concept definitions Variances and reliability

Variance explained: 53.5%
Rules (abstract conceptualization): theoretical conceptualization by means of rules, postulates and models to systematize information.
Alpha of Cronbach: 0.799
Variance explained: 60 %
Emotions (reflexive observation): problem recognition and capacity to develop convictions and to get commitment.
Alpha of Cronbach: 0.831
Initiatives (active experimentation): select a model to test its possible consequences. Learn by trying, finding new ways to put new ideas into Variance explained: 53%
practice. Support initiatives to responsibilize employees. Alpha of Cronbach 0.8
Immediate action: oriented action that is immediate and concrete. Action oriented towards direct contacts and apprehension rather than Variance explained: 52.6%
comprehension. Quick adjustments resulting from feedback. Alpha of Cronbach: 0.740
Integrity: ability to meet organizational objectives respecting the integrity of the mission. Active and deliberate construction of the
Not applicable
organizational values into the structure of the organization’s everyday actions.
Table 2. Description of measurement questions in the dimensions.
Obstacle Dimensions and variables Measurement-questions

Dimension of rules
The actual results I am expected to achieve with my manager and my
Obs1 V1- Lack of clarity in expected results
organization are not clear.
We have goals to meet financial expectations and have established

V2- Too much emphasis on financial and
Obs2 rules to be followed, but no goals have been established to improve
compliance rules
customer services.
V3- Lack of understanding of the results to Even though they were informed, my employees do not clearly
Obs3
be achieved by employees comprehend the results to be achieved..
V4- Lack of clear expectations of other

Obs4 The expectations of other departments are not often clear.
departments
V5- Lack of procedural clarity for the I notice that many issues I deal with involve costs that the
Obs5
rewards organization pays little attention to.
____________________________
_____________________________
TECHNOLOGIESWORLD
Table 2. Contd.
Dimension of emotions
V6- Lack of commitment to established
Obs6 My employees do not contribute to my goals (do not “buy-in”).
goals by employees (“buy-in”)
V7- Lack of awareness of the importance of

Obs7 My employees are not fully aware of the importance of my objectives.
objectives by employees.
V8- Lack of motivation on behalf of

My employees are not very motivated to outdo themselves to achieve my
Obs8 employees to outdo themselves in achieving
goals.
goals
Obs9 V9- Lack of trust among employees There is a lack of trust among my employees.
Obs10 V10- Lack of clarity among team members There are team members who complain that we are not always fair.
Dimension of initiatives
V11- Lack of accountability for their actions
Obs11 My employees are not generally held accountable for their actions.
by employees
V12 Lack of willingness and capability of

Obs12 My employees are not entirely able and willing to take initiatives.
employees to take initiatives.
V13- Lack of autonomy of employees When I am absent, my team members are not able to address problems
Obs13
on their own.
V14- Lack of sense of initiative and

Initiatives are not often undertaken because there is a tendency to
Obs14 improvement implementation of
leave things as they are.
employees
V15 - Lack of team coherence and common

We represent a group of individuals rather than work as a team with
Obs15 objectives/ Measurement-question
clear, common goals
Dimension of immediate action

V16- Difficulty planning for and dealing with
Obs16 We have difficulty planning for and dealing with emergencies.
emergencies
____________________________
_____________________________
TECHNOLOGIESWORLD
Table 2. Contd.
V17- Too many emergencies and last-

Obs17 We handle too many emergencies and last-minute requests.
minute requests
V18- Urgent issues unresolved without
Obs18 Urgent issues go unresolved without ever finding durable solutions.
finding durable solutions
V19- Difficulty creating profitable action

Obs19 We have difficulty creating profitable action plans with long-term results.
plans with long-term results
V20- Too many meetings and non-

We hold too many meetings and non-productive activities with no
Obs20 productive activities with no concrete action
concrete action taken.
taken
Dimension of integrity V21- Lack of

Obs21 shared organizational values At times, I don’t think we all share the same values in my organization.
V22- Lack of process compliance When under pressure, we do not always follow the procedures and work
Obs22
methods.
V23- Gap between personal and Sometimes, I notice differences between my values and the values of
Obs23
organizational values the organization.
V24- Lack of focus on building the Sometimes, in my work, I don’t feel I am actively working towards building
Obs24
organization’s reputation the organization’s reputation.
Obs25 V25- Sense of obligation Employees do not all seem to have a sense of obligation.
Table 3. KMO and Bartlett test.
Kaiser-Meyer-Olkin measure of sampling adequacy 0.90.5

Approximate Chi-square 2873.131
Bartlett's test of sphericity df 190

Significance 0.000
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Table 4. Obstacles output summary by PCA Model.
Communalities Components
Obstacle Mean Standard deviation Initial Extraction Emotions Immediate action Rules Initiatives Integrity
Obs7 3.75 0.967 1.000 0.786 0.859
Obs6 3.9 0.894 1.000 0.784 0.821
Obs9 4.06 0.893 1.000 0.665 0.753
Obs8 3.57 1.035 1.000 0.681 0.685
Obs10 3,52 1.142 1.000 0.439 0.509
Obs18 3.01 1.208 1.000 0.777 0.831
Obs17 2.54 1.243 1.000 0.695 0.82
Obs19 2.97 1.106 1.000 0.671 0.735
Obs16 3.20 1.139 1.000 0.622 0.705
Obs20 3.15 1.231 1.000 0.508 0.61
Obs4 3.28 1.082 1.000 0.595 0.727
Obs1 3.63 1.131 1.000 0.511 0.694
Obs2 3.80 1.140 1.000 0.516 0.682
Obs3 3.63 0.972 1.000 0.539 0.645
Obs5 3.14 1.248 1.000 0.467 0.546
Obs12 3.06 1.118 1.000 0.686 0.787
Obs13 3.91 0.971 1.000 0.664 0.763
Obs11 3.68 1.082 1.000 0.679 0.665
Obs14 3.30 1.119 1.000 0.536 0.587
Obs21 2.81 1.156 1.000 0.652 0.687
Obs23 3.24 1.134 1.000 0.748 0.841
Obs24 3.70 1.108 1.000 0.573 0.613
Eigenvalues 7.511 2.282 1.799 1.196 1.175
% Variance explained 34.139 10.373 8.177 5.437 5.343

Cumulative % variance explained 34.139 44.512 52.689 58.126 63.469
the difference in terms of mean scores and in HYPOTHESIS TESTING gender differences in management, we retained
terms of the five dimensions of obstacles. the following research hypotheses:
As a result of the PCA analysis, we conducted Based on the five obstacle dimensions of our
an ANOVA analysis to determine which variables conceptual model (Table 4) and connected to our H0: “There are no significant gender differences in
are correlated. However, prior to ANOVA, it is previous literature review showing the research the sample of managers surveyed”. In that case
necessary to test our research hypotheses. findings of several authors that emphasized H0 should be accepted: the level of significance
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= p > 0.05. obstacle present when managers must fulfill their

organizational goals. These variables concern Obs 7,
H1: There are differences between female and male Obs6, Obs9, Obs8 and Obs10 (Table 4). The variable
managers in the obstacles regarding the emotions Obs7: lack of awareness of the importance of managers’
dimension: lack of commitment and resistance to change objectives accounts for the highest factor loading with
by employees in the execution of their objectives. 0.859. The variable Obs6: lack of commitment to
established goals by employees is the second factor
H2: There are differences between female and male loading with 0.821. The variable Obs9: lack of trust
managers in the obstacles regarding the immediate among employees is the fourth factor in terms of loading
action dimension: in taking value added action and facing with 0.753. The variable Obs8: lack of motivation of
emergencies in execution. employees to outdo themselves in achieving goals is the
fifth factor with a loading of 0.685. The variable Obs 10:
H3: There are differences between female and male lack of clarity among members represents the sixth factor
managers in the obstacles regarding the rules dimension: loading with 0.509.
in clarifying and aligning the objectives.
H4: There are differences between female and male Component2: Obstacles of the immediate action
managers in the obstacles regarding the taking of dimension
initiatives dimension: in translating objectives into
concrete projects and empowerment. Immediate action related variables are the second set of
obstacles that managers have to deal with in strategy
H5: There are differences between female and male management execution. The Component2 explains 10.3%
managers in the obstacles regarding the integrity of the internal variance with an eigenvalue of 2.28 (Table
dimension: in executing with the values and norms 4). This Component2 represents the second dimension in
predefined by the organization. terms of importance. The immediate action dimension
concerns the Obs18, Obs17, Obs19, Obs16, and Obs20
The test of hypotheses will be conducted by an ANOVA (Table 4). These are defined as taking immediate action
analysis. This also allows the validation of the null to respond to urgent matters or to take value added
hypothesis H0: “there are no significant gender actions. The variable Obs18: urgent issues unresolved
differences in the sample of managers surveyed”. In that without finding durable solutions, accounts for the highest
case, H0 should be accepted, significance = p > 0.05; in factor loading with 0.831. The Obs 17: Too many
emergencies and last-minute requests accounts the
the case where H0 should be rejected, this would imply
that there is a significant level of gender difference second factor loading with 0.820. The variable Obs 19:
between the sample group and therefore, significance = p difficulty creating profitable action plans with long-term
< 0.05. results represents the third factor loading with 0.735. The
variable Obs16: difficulty planning for and dealing with
emergencies is the fourth factor loading with 0.705. The
Part A. The dimension of organizational strategy variable Obs20: too many meetings and non-productive
execution regarding obstacles activities with no concrete action taken is the fifth factor
loading with 0.610.
This first part presents our findings for each of the five
dimensions previously identified by our PCA analysis.
Component3: Obstacles of the rules dimension
These findings are presented below by dimension and
order of importance. The Component3 explains 8.1% of the internal variance
with an eigenvalue of 1.79. This signifies that variables
related to rules are the third set of obstacles that
The Component1: Obstacles of the emotions managers have to deal with in strategy management
dimension execution. The Component3 takes into account the
variable related to the Rules dimension and concerns:
Obs4, Obs1, Obs2, Obs3 and Obs5 (Table 4). The Obs 4:
The Component1 explains 34.1% of the internal variance
lack of clear expectations of other departments has the
and screens an eigenvalue of 7.51 (Table 4). A higher
loading of variables from the emotions dimension marks highest factor loading with 0.727. The variable Obs 1: lack
of clarity in expected results represents the second factor
the importance of this Component1. This dimension
loading with 0.694. The variable Obs 2: Too much
addresses reflexive observations such as: problem
emphasis on financial and compliance rules is the third
recognition and capacity to develop convictions and to
get commitment. As shown in Table 4, it should be noted factor loading with 0.682. The variable Obs3: lack of
that the emotions dimension is the most important

understanding of the results to be achieved by employees employee (Nyae), number of years in the position (Nytp),
is the fourth factor loading with 0.645. The variable Obs 5: keeping control (Control), capacity to success (Success),
lack of clarity in the procedure of rewards is the fifth factor time lost in management (Tme) and performance
loading with 0.546. improvement (Pmv). In order of importance, the
dimension for which the largest number of gender
differences was recorded regarding strategy execution
Component4: Obstacles of the initiatives dimension
was the immediate action dimension followed by the
The fourth important set of obstacles that managers Initiatives dimension, the rules dimension and finally, the
faced in the execution of their organizational objectives integrity dimension for which we found no difference with
are inherent to the taking of initiatives. The Component 4 regard to the five obstacle dimensions. The differences
represents 5.437% of the internal variance with an that were identified between female and male managers
eigenvalue of 1.19. The Component 4 is connected to the are primarily derived from the comparison of means after
Initiatives dimension and is defined as translating analysis of the variance (ANOVA). Thus, we found the
objectives into concrete projects. The Component 4 takes some differences for each dimension as shown in Table 5
into account the variable related to taking initiatives, and
concerns Obs12, Obs13, Obs11, and Obs14 (Table 2). The The emotions dimension
variable Obs12: lack of willingness and capability of
employees to take initiatives has the highest factor Interestingly enough, not a single difference was found
loading with 0.787. The variable Obs 13: lack of autonomy between female and male managers with respect to the
of employees represents the second factor loading with dimension of emotions (making a commitment to your
0.763. The variable Obs11: lack of accountability by objectives). It is extraordinary that the F value = 0.58 and
employees for their actions is the third factor loading with the level of significance = 0.81 is greater than 0.05 (Table
0.665. The variable Obs14: lack of sense of initiative and 5). Therefore, in terms of the obstacles related to
improvements implemented by employees is the fourth emotions, no significant level of difference between
factor loading with 0.587. females and males was determined.
Component5: Obstacles of the integrity dimension The immediate action dimension
The Component5 explains 5.34 % of the internal variance The managers’ attitude towards their ability to cope with
with an eigenvalue of 1.17. The dimension of integrity is urgent actions oriented towards direct contacts and
the least important set of obstacles that female and male apprehension rather than comprehension, showed
managers have to face when executing their strategic differences in management practices and in achieving
objectives. The Component5 is related to obstacles that their organizational goals. We found five significant
are connected to Integrity. This dimension was defined as results.
executing tasks within the Integrity of the values and
principles of the organization. The Component 5 takes into 1. The capacity of the managers to deal with immediate
account the variable related to Integrity and concerns action obstacles is linked to the variable (Nytp). Once
Obs21, Obs23, and Obs24 (Table 2). The variable Obs21: female and male managers acted upon their objectives,
lack of shared organizational values has the highest the results show that they did not behave identically to
factor loading with 0.687. The variable Obs23: gap the obstacles they faced in their management. These
between personal and organizational values represents differences are highlighted across the variable gender
the second factor loading with 0.841. The variable Obs 24: and the variable Nytp. There is a significant level of
lack of focus on building the organization’s reputation is correlation which allows concluding that there is a link
the third factor loading with 0.613. between immediate action taken by female and male
managers and the Nytp. We noted an F value = 4.139
and a level of significance = 0.043 (Table 5). The mean
Part B. Gender differences and socio-demographic scores show this difference which is higher for men
variables of strategy execution regarding obstacles (mean (M) = 0.089, standard deviation (SD) = 0.953)
than for women (M = -0.077, SD = 1.055). This suggests
This study presents our findings for the set of socio- that women face fewer obstacles for Immediate Action in
demographic variables which are: number of years as an relation to Nytp. Accordingly, the more their careers

Table 5. Summary ANOVA and gender difference in management of obstacles.
Components Means Standard deviation

Male Female Male Female F-value Significance
Component1 emotions
Gender 0.015 -0.008 1.000 1.010 0.58 0.81
Component2 immediate action 0.043*
Nytp 0.089 -0.077 0.953 1.055 0.139

Time lost 0.075 -0.082 0.961 1.051 0.198 0.000*
Performance 0.077 -0.062 0.947 1.055 0.923 0.025*
Control 0.089 -0.079 0.953 1.052 0.578 0.000*
Success 0.089 -0.079 0.953 1.052 0.978 0.009*
Component3 rules 0.008*
Nytp -0.074 0.085 0.990 1.024 0.971

Time lost -0.060 0.076 0.990 1.025 0.664 0.001*
Component4 taking initiatives 0.012*
Nyae -0.649 0.118 1.013 0.986 0.349

Gender -0.649 0.118 1.013 0.986 0.867 0.05*
Success -0.064 0.134 1.013 0.985 0.953 0.027*
Component5 integrity
Gender 0.048 0.000 0.938 1.035 0.031 0.86

* Significance level of difference: significance < 0.05 or significance = 0.
progress and they gain experience in their position, female managers wasted less time than men managers
female managers cope better with Immediate Action in terms of immediate action obstacles, and this is
obstacles than do their male counterparts. emphasized by their lower mean (M = -0.082). In
2. When female and male managers implemented conclusion, women were more efficient than men in their
immediate actions for organizational performance immediate action operational stage within the
development, we noted differences in Tme: the time organizational framework.
devoted for the development of efficient measures to 3. Through the survey results, we noted that female
cope with the emergency. Indeed, the results showed that managers encountered fewer difficulties in implementing
men have higher Tme than do women in the context of measures to improve the performance of their
the implementation of immediate action in the company. organization. There is a linkage between the variables
Our findings indicate an F value = 20.315 and a level of Pmv and Component2 (immediate action dimension).
significance = 0.000. This allows us to conclude that there This relationship is highlighted by an F value = 1.923 and
is a relationship between the variables of Gender and a level of Significance = 0.025. The mean scores for men
Tme. The mean scores reveal for women (M = -0.082 and (M = 0.077; SD = 0.947) and for women (M = -0.062; SD
SD = 1.051) a better score than for men (M = 0.075 and = 1.055) are shown in Table 5. Due to the high mean (M=
SD = 0.961) (Table 5). This result shows that male 0.077), men met more obstacles coming from the
managers met more obstacles in the implementation of immediate action dimension than did women in terms of
actions with the aim of performing, and this is performance improvement. The lower mean (M= -0.062),
emphasized by their higher mean (M= 0.075). Thus, male leads us to conclude that women performed better than
managers lost more time in the implementation of did men in developing skills to reduce the obstacles to an
emergency operations. Accordingly, immediate action operational stage within the

organizational framework. 2. By referring to the management obstacles that are

4. Female and male managers do not have the same bound to the compliance of regulations, priorities and
capabilities of process control when it comes to the clarification of objectives, we found that female managers
implementation of immediate actions. This is highlighted lost much more time than did male managers in
by an F value = 9.578; a level of Significance = 0.000. In connection with the execution of organizational
terms of control, the female managers obtained a better strategies. In reality, women lost much more time in
score than did male managers. Respectively, the mean implementing and enforcing standards that were
scores are revealed for women (M = -0.079, SD = 1.052) applicable in their organizations in order to achieve the
and for men (M = 0.089, SD = 0.953) in Table 5. goals that were set. This is highlighted by, the correlation
Accordingly, women managers (M = -0.079) between the Component3 (the rules dimension) and the
demonstrated a better capacity than did men managers variable Tme. This linkage is characterized by an F value
(M= 0.089) in the controlling process and immediate = 5.664, and a level of significance = 0.001. The mean
action obstacles. scores revealed for male managers are (M = -0.074, SD
5. In terms of considering that their success resulted from = 0.0990), and for female managers (M = 0.064, SD =
“being lucky”, women also achieved a better means 1.025) (Table 5. Male managers achieved a better score
score. Female and male managers have different because of the lower mean they screen in terms of Rules
perceptions of their success through the implementation obstacles related to Tme. Female managers faced more
of immediate action in urgent situations. There is a difficulties because of their higher mean and they needed
linkage between the variables gender and success: this is more time per day than male managers to implement the
highlighted by an F value = 3.978 and a level of rules dimension in order to clarify and align their
significance = 0.009. Respectively, it has been noted for objectives in the organization.
women (M = -0.079, SD = 1.052) and for men (M = 0.089,
SD = 0.953) in Table 5. Female managers did not The initiatives dimension
consider that their success resulted merely from an
external factor such as luck. In conclusion, women
The ability of managers to take initiatives (Component 4)
considered more so than men managers that their
success was linked to their capacity to master reveals differences in practice between females and
management practices. males. Taking initiatives is characterized by the aspects
related to the selection of a model and the testing of its
consequences: learning by trying, finding new way to put
The rules dimension new ideas into practice. Thus, we noted that the male
managers surveyed had a better mean score than did the
This dimension is defined as a strategy based on factual female managers.
analysis of the situation to set up a more coherent and
more rational system. Our ANOVA analysis highlights two 1. Initially, we observed through the results that women
specific findings for the rules dimension: managers have experienced more obstacles than men
managers in taking initiatives within their respective
1. The female managers face more obstacles than do organizations. This is highlighted by an F value = 3.867
male managers in the implementation and respect of the and a level of significance = 0.05. The results show that
standards and current regulations. It is highlighted by the with a growing Nyae, female managers faced more
correlation between the variable Nytp and the obstacles than male managers in taking initiatives within
Component3 (obstacles related to rules), which shows an their respective organizations. This is emphasized by an
F value = 4.971 and a level of significance = 0.008; that is F value = 6.349 and a level of significance = 0.012. The
a noteworthy level of linkage with obstacles related to the mean scores were higher for women (M = 0.118, SD =
Rules dimension (Table 5). This implies that according to 0.986) than for men (M = -0.649, SD = 1.013) (Table 5).
our findings men obtain (M = -0.074 and SD = 0.990), a The capacity of the managers to deal with the obstacles
better means score than the women (M = 0.085 and SD = related to taking initiatives is linked to the Nyae. In the
1.024). Male managers face fewer obstacles compared to two sample groups, women demonstrated lower
women regarding the dimension of rules when they have capacities to implement initiatives.
more experience in their managerial position. On the 2. Female and male managers have different perceptions
contrary, female managers met more obstacles in the of their success through the implementation of initiatives.
observance of rules as they pursued their path toward a In terms of considering whether their success resulted
management position. from being lucky, men achieved better mean scores than

women. This is highlighted by an F value = 4.953, and a that there are differences between women and men. As
level of significance = 0.027. The mean scores for men pointed out by Davis et al. (2010) through their study that
(M = -0.064, SD = 1.013) and for women (M = 0.134, SD highlights differences between women and men
= 0.985), are shown in Table 5. Male managers obtained managers in the implementation of growth strategies and
a better score in terms of success in the management of market development to promote their businesses,
obstacles. Men managers consider their success in the female-led firms were slightly better than their male-led
context of taking initiatives as being linked to luck. counterparts in translating market performance into
financial performance. Sarah et al. (2005) emphasized in
their study, that not only should we not expect large
The integrity dimension differences in behaviour between supervisory level
women and men in organizations with strong managerial
The integrity dimension concerns the ability to meet role expectations, but that even small differences, when
organizational objectives actively respecting the they recur over time, can accumulate to produce
institutional values and the mission. This component did significant impacts. Our study also found gender
not show a correlation between female and male differences among female and male managers regarding
managers. This is highlighted by an F value = 0.031 and the immediate action dimension. The study found
a level of significance = 0.86 (Table 5). In conclusion, significant differences in terms of Nytp, Tme,
female and male managers did not show differences performance improvement, Control and Success when
regarding the obstacles which are bound to the Integrity female and male managers had to deal with urgent
dimension. situations. Our hypothesis was supported.
H3: There are differences between female and male

DISCUSSION managers in the obstacles regarding the “rules”
dimension: clarifying and aligning the objectives.
Table 5 shows that 3 out of 5 hypotheses were supported
by the comparative study between female and male Several authors highlighted some differences between
managers in the scope of organizational strategy female managers and male managers regarding the
execution. formulation of concepts and of generalizations which
integrate the observations and reflections (John and
H1: There are gender differences between female and Tullous, 2002; Endres, 2008; Bandura and Wood, 1989).
male managers when executing their objectives with According to Sean et al. (2009), women are generally
respect to the emotions dimension obstacles such as lack more ethical than are men. Being a woman was related
of commitment and resistance to change by employees. to increased ethical judgment, being a woman and older
Although Van Der Boon (2003) notes in his research that was associated with increased ethical intention, and
women and men handle their emotions differently; this being a woman and a supervisor was related to a higher
assertion appears inconsistent with the results of our level of altruism. The assertion made by the
study which found no difference between female aforementioned authors appears to be consistent with the
managers and male managers, when facing the findings of our study, which showed gender differences
emotional challenges associated with managing their among female and male managers regarding the rules
businesses. Our hypothesis was rejected. We found no dimension. This study found significant differences in
gender differences between female and male managers terms of Nytp and Tme when female and male managers
with regards to the emotions dimension in the obstacles had to deal with priorities, clarification and alignment of
they face as managers. The rejection of this hypothesis objectives. Our hypothesis was supported.
supports the assertion of Jodyanne (2009), that both
women and men appeared similarly motivated by a H4: There are differences between female and male
combination of push and pull factors. managers in the obstacles regarding the taking of
initiatives dimension: translating objectives into concrete
H2: There are differences between female and male projects and empowerment.
managers in the obstacles regarding to the “immediate Our hypothesis was supported and appeared
action” dimension: taking value added action and facing consistent with the findings of many authors. For
emergencies in the course of execution. example, Sarah et al. (2005) suggested that women and
There are several authors who reinforce our hypothesis men often possess differences in managerial style,

that if present, could have some effect on subordinates’ 2. A contribution would be to show that, men would
work experiences and related outcomes if the necessity encounter more obstacles related to the immediate action
to take initiatives depends on personal needs of time and dimension in terms of time management and number of
interest needed for achieving the project (Jodyanne, minutes lost per day because of these obstacles. Men
2009). This could result in differences in approaches, face a larger number of obstacles than do women in
methods and motives for launching change within their relation with factors such as the incapacity to take value
organizations, for both female managers and male added actions, and the number of real and false
managers, Bass (1990) and Bass and Stogdill (1990, emergencies.
1991); Rosener, 1990; Phillips, 1995). 3. Another contribution related to immediate action is that
We found gender differences between female and male men perceive these obstacles as more significant on the
managers regarding the taking of initiatives dimension. performance assessment of their organizations. Men
This study found significant differences in terms of Nyae, discern more than do women that obstacles related to the
Gender and Success when female and male managers inability to take immediate action would have a greater
had to deal with translating objectives into concrete impact on the organizational performance.
projects and empowerment. 4. With regard to this dimension, women have a better
focus on control than do men. In a consistent manner,
H5: There are differences between female and male women attribute less to luck and more to their own
managers in the obstacles regarding the “integrity behaviour and to a lack of control those obstacles related
dimension”: executing according to values and norms to immediate action.
predefined by the organization. 5. Another contribution related to immediate action is that
Our hypothesis was rejected. We found no gender women managers see their success as a set of events or
differences between female and male managers as a planned program of activities fairly well intertwined
regarding the Integrity dimension, when female and male and made compatible, whilst male managers often think
managers had to comply with the standards and that success is more a matter of luck.
regulations of their organizations. This is unlike the
results obtained by the studies of Neal-Smith and Gender difference regarding the obstacles of
Cockburn (2009), Beverly et al. (2008) which reaffirmed initiatives dimension
the importance for an organization to take into account all
the characteristics that are related to ethnic diversity and The second most important dimension related to gender
gender mainstreaming in the workplace. It is important to difference is the initiatives dimension, which suggests
note that the lack of adequate measures for the three critical gender differences:
implementation of such programs to promote gender and 1. For the initiatives dimension, women faced more
diversity in the workplace can seriously hinder the ability obstacles than did men regarding the initiatives taken.
of a manager to flatten out organizational obstacles. This means that female managers face more obstacles
According to Gill (2010), promoting female executives
based on factors such as the lack of empowerment, and
would provide an opportunity for an organization to gain a
employees’ sense of responsibility.
higher sense of ethical issues.
2. We found that female managers with substantial years
Among all the different dimensions, the dimensions for
of experience as an employee of the organization (Nyae)
which the largest number of gender differences regarding
took more initiatives than their male colleagues with the
strategy execution was found were for immediate action,
same number of years of experience in the organization.
initiatives and the rules dimension.
3. Regarding the Initiatives dimension, we found that
female managers have less control on the obstacles
Gender differences regarding the obstacles of related to the taking of initiatives than do male managers.
immediate action dimension Indeed, female managers demonstrated a lower degree
of control than did men in their ability to take initiatives
We found four significant results for this dimension. while executing their organizational objectives.
1. Women face fewer obstacles regarding immediate
action than do men in relation to Nytp. This implies that Gender difference regarding the obstacles of the
men perceive managerial obstacles related to immediate rules dimension
action as more important than do women who have more
senior. For the rules dimension, our research put into perspective

three specific contributions: As some authors have argued, the differences noted in
the ability to manage the obstacles in each category do
1. Regarding the rules for clarity and alignment with not mean that one manager is better than another. This
organizational objectives, women faced more obstacles skill which should be developed by both women and men
than did men. This implies that obstacles that are related managers to assist them in overcoming the obstacles
to compliance with informal and formal rules in the they face in connection with the execution of
organization represented a large part of the efforts that organizational strategy, extends far beyond mere
women managers had to deploy. Conversely, men observation. This dissimilarity calls for another more
managers did not experience more obstacles than did insidious reality and reveals more than ever, that the
women in the process of respectfully following business environment, the trajectory of the manager and
organizational rules. the psycho-sociological aspects are factors which can
2. Another contribution regarding the rules dimension is deeply influence the behaviour of these managers in
highlighted by the fact that female managers with several overcoming obstacles. Indeed, in light of the results of
years of experience in a management position (Nytp) this study, we wonder whether the companies surveyed
significantly perceive more obstacles than do men, with had implemented programs to promote diversity and
the same number of years of experience in a gender equality. However, it should be noted that the
management position. This results in more challenging social composition of team-managers or team-projects
attitudes among female managers than male managers in can sometimes be a hindrance to the woman or man who
the implementation of standards and in compliance with is responsible for leading its employees. As stressed by
rules and procedures. Indeed, the more experience the Manda and Myuni (2010), women and men managers
women had in their jobs, the more obstacles they had face a different psycho-sociological challenge when the
met in following the organizational rules of their concerns deal with conflictual situations.
businesses.
3. Consistently, our findings also show that the degree of
control of female managers is lower than that of male Limitations and further research
managers. Female managers perceive themselves as
less capable than men in controlling the obstacles related There are some limitations to this research mainly
to the rules dimension. because it was completed using an OECD sample. More
research to be done in other countries is necessary in
order to augment the external validity of the survey
Implications for management findings. However, what seems essential to internalize in
light of the results of this study is to avoid focusing simply
Our research has implications for the career management on the weaknesses of female or male managers. Such a
of both women and men. It shows that a specific focus wider scope would allow us to clearly identify differences
should be placed on the obstacles male managers have which, as such, do not hold too much importance when
had to deal with. Even if this study emphasized many attempting to unearth the real causes. It thus represents
gender differences, it did not elucidate why male an important limitation to the development of further
managers encountered more obstacles related to research, but there is also another issue, one that would
immediate action. Then, in the case of female managers, integrate other disciplines such as sociology,
a specific focus should be put on the obstacles that are anthropology and psycho-sociology, so as to grasp the
related to initiatives and rules. Our research has real reasons behind these great differences in the
implications for social action in relation to the complex flattening out of obstacles that hinder the implementation
subject matter of gender equality. For instance, an of corporate strategy.
organizational context in which women are discriminated
against could hinder their efforts to perform and to
accede to top management positions. Our research has Conclusion
implications for economic action in order to promote
diversity and gender mainstreaming. Our research also This study is focused on the differences between female
has implications for managerial action, in the sense that it and male managers related to strategy execution and
will always be beneficial to an organization to have organizational performance. We compared the
different sensibilities and approaches to problem-solving importance of each of the five dimensions of obstacles
expressed within its framework in order to promote associated with gender, Nyae, Nytp, Tme, Success,
participative management. Control, and performance improvement. Taken as a

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§§
Strategy risk research on Chinese aviation market:

Based on Analytic Network Process (ANP) and the
Fuzzy assessment method
Wang Yong
School of Management, Shanghai University, Shanghai 200444, China. E-mail: sfmab@126.com.
At present, Chinese aviation market is a bloody competition market, to compete from the strategy
management point is a new thinking. Based on a review of related concepts, this article identifies the
strategy risks in Chinese aviation market through WBS-RBS and interview methods. The Analytic
Network Process (ANP) method is used to assess strategy risk and to rank strategy risk factor within
Chinese aviation markets. Using triangular fuzzy numbers this study determines the differences
between the strategy risks of various Chinese airlines. Among 16 strategy risk factors, strategy change
and environment are the biggest risks. Of the 12 Chinese airlines studied, Air China has lowest strategy
risk, and Okay Airways has the highest strategy risk.
Key words: Strategy risk, ANP, triangular fuzzy numbers, airlines market, risk assessment.
INTRODUCTION
The aviation market has an essential function in a management. The second phase lasted from 1990 to
country’s economy and defense security. After 30 years 1998 at which time the only strategy for airlines was to
of existence, the Chinese aviation market has recently expand services and create more routes, the market
experienced fast development, yet there is still a big gap came to being. The third phase consists of forming
when compared with developed countries. The Civil strategy management and extends from 1998 to present.
Aviation Administration of China recently proposed that In this phase, strategy management has been gradually
China would strive to construct a powerful country on civil accepted by the airlines and competition became fierce in
aviation market. the market. For example, Hainan Airlines created its
The Chinese aviation market currently faces low development strategy in 2001, meanwhile China
margins, big risks, and a complex and fluctuating environ- Southern airlines appointed Roland Berger to set its
ment, because it is easily influenced by external factors strategy. Price battle spread into every corner of the
such as international politics, the economy and the aviation market, and today, almost every airline has an
environment (Li, 2008). At present, most research official strategy management. The increasing importance
focuses on direct internal and external risks, such as cost of strategy management for Chinese airlines is balanced
control, human resources, disaster risks, risk of govern- by a need to control the strategy risk, an essential
ment intervention, and fuel risks, yet no research has element for success.
been done on the risk of airline strategy management
based on the market competition strategy. Meanwhile,
Chinese airlines are paying increasing attention to LITERATURE REVIEW
strategy management to compete, a field that has
experienced three separate phases. The first phase was From the marketing point, there are thousands of
defined by a period of company creation from 1980 to researches on how to compete and how to get bigger
1990, when aviation changed from a military to a market share, in reality, every airline company within
commercial endeavor. Airlines operated based on a top- China have involved into this blood market competition.
down model and there was no market and strategy Based on the marketing competition, strategy

Strategy risk research on Chinese aviation market: Based on Analytic Network Process (ANP) and the Fuzzy..................................................... 215
management is a new thinking and better solution for the management process includes three inter-influenced
development of aviation market. parts: strategy position, strategy choice and strategy
The basic job of strategy risk research is to unify the implementation, as seen in Figure 1. This is the essential
definition of strategy risk. According to a summary of the definition of strategy management in this paper. The
pertinent theories, there are three definitions of strategy whole strategy management process will be sub-divided
risk. The first one is the risk of strategy. Because of into many strategy risk factors, and the main purpose of
changes and mistakes, such as environment change, this paper is to identify and assess the strategy risk for
planning error and poor implementation, strategy Chinese airlines.
management fails or the strategy goal cannot be realized.
The second understanding is strategic risk. According to STRATEGY RISK IDENTIFICATION FOR CHINESE
Quinn (1980), strategic risks are the factors which can
influence company direction, culture, survival ability and AVIATION MARKET
company achievement. Similarly, Simons (1999) points Strategy risk identification attempts to point out potential
out that strategic risk can weaken a manager’s “ability to risk sources and to differentiate strategy risk factors from
implement original strategy, and strategic risks are the real strategy risks based on investigation and analysis. It
unpredicted factors or conditions. For this definition, has two steps, finding out the strategy risk source
strategic risks are those risks that can influence overall (strategy risk factor) and identifying the changing con-
development, the core business or vital matters. The third dition. A strategy risk factor can transform into a strategy
definition is risk management via the strategy manage- risk only under certain conditions, therefore, through the
ment method. The company can set a risk strategy plan analysis of the transforming condition, the company can
and implement its risk strategy, in short, it has a coherent cut the transforming channel, decrease the risk
strategy management. probability and mitigate the loss. In theory, the
Strategy includes a series of actions and activities, uncertainty which influences a strategy goal is an infinite
including the process of strategic thinking, strategy muster, in order to make it easy to operate, in this article,
making, strategy choice, strategy implementation and the uncertainty of strategy risk is regarded as a limited
strategy control. Every step can, however, deviate from cluster.
the original goal and cause losses. At present, only a few The basic strategy risk identification framework is
studies (Adrian, 2004; Aswath, 2008; Baird, 1985; Zhang presented in Figure 2. Through interviews with aviation
and Huo, 2007; Sayan et al., 1999) have focused on the experts, as noted in the framework of Figure 2, the final
risk of strategy (Gong et al., 2008), as showed on Table strategy risks are summarized in Table 2.
1. Wintrey and Budd (1997) pointed out that strategy risk Table 2 shows the two-level strategy risk factors of
stems from the relationship between enterprise and the Chinese aviation market, according to the strategy risk
whole environment, and the relationship between identification framework, the following step is to analyze
resource and market. Yang (2002) focuses on environ- the conditions for transforming potential strategy risk
ment risk, resource risk, strategy ability risk and company factors into real strategy risks. Taking the environment
direction risk. Liu (2004) argues that strategy risks are the factor (R11) as an example, environment is the key factor
risks related to enterprise strategy intention, strategy for company survival, and a favorable environment can
resources, company competition ability, company facilitate the company’s strategy goal, while a fluctuating
leadership and the strategic environment. In the action of and bad environment will restrain company development.
strategy, how to control, identify and assess the risk of In summary, when the environment is unpredictable and
strategy is very important (Michael et al., 2008). Zhou et fluctuating, environment will be the strategy risk.
al. (2003) indicate that the essence of strategy is in the
interaction between company and a changing
environment. In a different environment and with a STRATEGY RISK ASSESSMENT OF CHINESE
different background, the definition, idea, paradigm and AVIATION MARKET
its application will be different.
There are many different concepts and studies on risk Strategy risk assessment is based on strategy risk
in different fields, such as finance, accounting, organi- identification, and for Chinese airline companies, the
zation behavior and strategy management. According to assessment will be implemented according to occurrence
the ISO31000 (2009) published by the International probability, influence scope and uncontrollability.
Standardization Organization, risk is the effect of Considering the dependence and feedback within and
uncertainty on an objective. Based on this concept, the between clusters and elements, Analytic Network
strategy risk in this paper is the effect of uncertainty on a Process (ANP) proposed by Saaty (1996) based on the
strategy objective. Analytic Hierarchy Process (AHP), is used in the assess-
Strategy management has been studied from many ment of Chinese airlines. The AHP with its dependence
different angles and under varying circumstances. assumptions on clusters and elements is a special case
According to Johnson and Scholes (2004), strategy of ANP.

Table 1. Studies on the risk of strategy.
Year Author(s) Variables Conclusion

Macroeconomic risks
Baird Inga Skromme Industry risk
Risks are from external and internal of an
1985 Organization risk
Howard Thomas organization
Strategy problem risk
Decision makers risk
Frank L Winfrey Company open risk

1997 Operation risk Risks are from the relationship between
James L Budd. Competition risk company and environment
Operation risk
1999 Simons, R. Capital loss risk Risks are from the competition, customer
Competition risk needs changing, supplier changing.
Goodwill risk
Sayan Chatterjee.
Strategy risk is more important
1999 Michael H Lubatkin CAMP is not enough for strategic risk.
than traditional risk.
William S Schulze.
Environment risk Economy, political, industry and market

Resource risk structure and competition
2002 Yang Jianghua
Strategy ability Resources lack
Developing direction Weak company ability
Value Chinese culture has a key influence on

2003 Zhou Sanduo
Culture strategy management, environment cause
Zou Tongqian history the risk of strategy
Technology innovation
Consumer risk
New business risk Low technology, changing customer need,
2004 Adrian Slywoztky bad quality, weak brand management,
Brand risk
industry recession and market stagnate
Competition risk
Industry and market risk
Political, technology, manager, Company strategy content, strategic

2004 Liu Shengfu organization, market, resource ability, strategic resource, competition
2004 Gerry Johnson Kevan and operation ability, leader, strategic environment.
Strategy position
Risks are from every steps of the process
strategy choice strategy
Scholes of strategy management.
implementation
2007 Zhang Ronglin
Strategy hypothesis Power balance among stakeholders
Strategy governance Stragtegy analysis, vision and technology
Huo Guoqing Strategy dislocation within company
2008 Michael A.Hitt Strategy rigid Value and governance structure
Different company should have different

Strategy theory is complex and
R Edwarf Freeman strategy management, and different
full of schools
Jeffrey S Harrison strategy risk.

Table 1. Contd.
Firm value
Risk assessment Great companies become great because
2008 Aswath Damodaran they seek out and exploit intelligent risks,
Real options
not because they avoid all risk.
Risk taking
Source: summarized through the literatures
comparison matrices is measured by calculating the

Strategy consistency ratio (CR). CR can be calculated as:
implementation
C CI
RI
R (1)
where CI represents the consistency index and RI

represents random consistency index. CI can be
formulated as follows:
Strategy Strategy max
CI n
position choice
n 1 (2)
Figure 1. The strategy management model from Johnson and

max
Scholes (2004) where represents the maximum eigenvalue for the
matrix. RI is determined empirically as the average CI of
a large sample of randomly generated comparison
CR 0.1
The ANP structure and principle matrices. If , then the level of inconsistency is
acceptable based on Saaty's rule of thumb. Otherwise,
the inconsistency is high and the decision maker may
The ANP is a coupling of two parts. The first one consists need to re-estimate the relative importance of each
of a control hierarchy or network of criteria and sub- criterion to realize better consistency.
criteria that control the interactions, including goal and Because of the exhaustive computing work, re-
decision rule. The second one is a network of influences searchers always use software to run this ANP operation.
among the elements and clusters. The network varies
from criterion to criterion and a different supermatirix of
limiting influence is computed for each control criterion. At The strategy risk assessment result of Chinese
the end, each of these supermatrices is weighted by the aviation market
priority of its control criterion and the results are
synthesized through addition for all the control criteria. Using the ANP principle, one Chinese airline’s ANP
The principle and typical structure is shown in Figure 3. structure is represented in Figure 4. In this figure the
According to dominance theory, two elements under control hierarchy includes probability, loss and
the same criterion can be ranked directly, and they can uncontrollability; in the network hierarchy it includes three
also be indirectly compared, to analyze the degree of inter-influenced factors, strategy position, strategy choice
influence between the two elements and sub criterion and strategy implementation.
under certain criterion. Generally the operation involves A 1-9 ratio scale is used in the comparison among
five successive steps. criterion, elements and clusters. Based on interviews with
5 aviation experts, the data was input into the Super
(1) Determine the ANP structure Decisions software. As an example, comparing between
(2) Determine supermatrice elements probability, loss and uncontrollability using the Super
(3) Determine the cluster weight matrix Decision software, the matrix and weight vectors are
(4) Determine supermatrices by weighting shown in Table 3.
(5) Find final index weights and element weights After the test,
Once the weights are determined, consistency of the CR 0.0176 0.1

Strategy risk factors

1. WBS-RBS: all strategy risk factors Strategy
2. Expert interviews and literature review Transforming condition
risk
3. Define the strategy risk factors
Figure 2. Strategy risk identification framework
Table 2. Strategy risk factors of Chinese Airlines.
Environment R11
R1 Strategy ability R12
Strategy position Expectation and goal R13
Strategy hypothesis R14
Direction and choice R21
Internalization R22
R2 Diversification R23
Strategy choice Stakeholder strategy R24
Strategy alliance R25
M& A R26
Low price strategy R27
Competition strategy R28
Resource fit R31
R3 Organization structure R32

Strategy implementation Strategy change R33
Enterprise culture R34
Source: from Johnson and Scholes (2004) and expert interview.
So the matrix has a satisfactory consistency. STRATEGY RISK DIFFERENCE ANALYSIS BASED
The computed results of the super decision software ON TRIANGULAR FUZZY NUMBERS
are shown in Table 4 and Table 5.
As shown in Table 5, the top five strategy risks are Strategy risk assessment alone is not, however, enough
strategy change, environment, strategy direction and for the aviation market, because strategy management is
choice, resource fit, expectation and goal, and the lowest the main management activity for airlines. As a result, it
risk is M & A. For the present Chinese aviation industry, is necessary to assess different airlines using the same
strategy change is the top risk, and airlines should have criterion. Different companies have different strategy risk
stable strategy to manage this risk. Because of the levels. To compare our test group of 12 Chinese airlines,
vulnerability, every environment change will have a showed as Table 6 and 5, Chinese aviation experts were
serious influence on aviation industry, such as interviewed. The expert’s descriptions are uncertain and
earthquake, storm and so on. For the concept of fuzzy and triangular fuzzy numbers can be used to
environment, there are also political environment and average the fuzziness.
social environment. As the Table 5 showed, we can The scale includes 7 levels expressing relative impor-
explain in detail the ranked strategic risks in the further tance using, for example: very low, lower, low, middle,
research. high, higher, very high. One triangular fuzzy weight

Goal
Control hierarchy
Principle 1 Principle 2
Cluster A Cluster B
Cluster C1
Cluster Cn
The elements in cluster A influence
the elements in Cluster B
Network
Cluster C2
Cluster C j
Cluster C
The elements within cluster C

inter-influence
Cluster C3
Figure 3. Typical ANP structure from Saaty Thomas L, Luis G Vargas (2006).
Strategy Goal
Control hierarchy
Probability Loss Uncontrollability

Strategy Strategy
position implementatio
risk n risk
Network Strategy
choice
risk
Figure 4. ANP structure of Chinese airlines.
cluster is set as W6* 0.6,0.8,1

W1*,W2*,W3*,W4*,W5*,W6*,W7* W7* 0.8,1,1
The membership function of the 7 triangular fuzzy
And numbers are shown in Figure 5. Using the evaluating
W1* 0,0,0.2 data from the 5 experts concerning 12 Chinese airline
W2* (0,0.2,0.4) companies, after defuzzification, and combined with the
strategy risk weight of the whole aviation market, the
W3* 0.2,0.35,0.5 outcome of the strategy risk difference between the 12
airlines is shown in Table 7. Higher risk value means
W4* 0.3,0.5,0.7 higher strategic risk for the concerned airline company,
W5* 0.5,0.65,0.8 all 12 airlines were ranked according to the risk value, Air

Table 3. Weight of control hierarchy from super decisions
Comparisons wrt’Goal’ node in ‘Control Criteria’ luster

Graphic Verbal Matrix Questionnaire
1.L 9.5 98765432123456789 9.5 No comp. P
1.L 9.5 98765432123456789 9.5 No comp. U
1.P9.598765432123456789 9.5 No comp. U
Priorities
The inconsistency index i=0.0176. It is desirable to have a value of less than 0.1
L 0.319618
P 0.121957
U 0.558425
Table 4. Strategy risk priorities for Chinese airlines
Super decision main window risk1.mod: Priorities

Here are the priorities
Icon Name Normalized by cluster Limiting
No Icon L 0.00000 0.000000
No Icon P 0.00000 0.000000
No Icon U 0.00000 0.000000
No Icon Goal 0.00000 0.000000
No Icon R11 0.34198 0.083045
No Icon R12 0.18636 0.045255
No Icon R13 0.25148 0.061067
No Icon R14 0.22018 0.053468
No Icon R21 0.26750 0.077289
No Icon R22 0.19605 0.056644
No Icon R23 0.01692 0.004889
No Icon R24 0.18462 0.053341
No Icon R25 0.06874 0.019862
No Icon R26 0.01210 0.003497
No Icon R27 0.22045 0.063695
No Icon R28 0.03360 0.009709
No Icon R31 0.25649 0.120098
No Icon R32 0.17229 0.080675
No Icon R33 0.36929 0.172916
No Icon R34 0.20193 0.094549
Table 5. Rank and priorities of Chinese airline strategy risk.
Strategy Risk Weight Rank Strategy risk Weight Rank

R33 Strategy change 0.36929 1 R22 Internalization 0.19605 9
R11 Environment 0.34198 2 R12 Strategy ability 0.18636 10
R21 Direction and choice 0.2675 3 R24 Stakeholder strategy 0.18462 11
R31 Resource fit 0.25649 4 R32Organization structure 0.17229 12
R13 Expectation and goal 0.25148 5 R25 Strategy alliance 0.06874 13
R27 Low price strategy 0.22045 6 R28 Competition strategy 0.0336 14
R14 Strategy hypothesis 0.22018 7 R23 Diversification 0.01692 15
R34 Enterprise culture 0.20193 8 R26 M & A 0.0121 16

Table 6. Basic information of 12 Chinese Airlines.
Airlines Founded Lines Flights Property List on Business type

SC 1994 110 60 State-owned Shenzhen network
MU 1988 650 207 State-owned HK,NY, SH network
CA 1988 250 256 State-owned HK, London, SH network
CZ 1992 600 350 State-owned HK,NY, SH network
HU 1989 500 148 Joint venture SH network
ZH 1992 300 150 Private network
3U 1986 130 51 State-owned network
MF 1984 140 69 State-owned network
BK 2005 20 11 private regional
9C 2004 40 15 private Low cost
G5 2006 25 30 Joint venture regional
HO 2005 30 14 private regional
Source: summarized through the data from Civil Aviation Administration of China http://www.caac.gov.cn/
1 * * * * * * *
W1 W2 W3 W4 W5 W6 W7
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Figure 5. The membership function of 7 triangular fuzzy numbers.
Table 7. Differences between 12 Chinese airlines.
Airline Risk value Rank Airline Risk value Rank

SC 0.573915 7 3U 0.554226 8
MU 0.604738 6 MF 0.551635 9
CA 0.430191 12 BK 0.732763 1
CZ 0.530385 10 9C 0.64111 3
HU 0.467754 11 G5 0.644721 2
ZH 0.618306 5 HO 0.636595 4
China (CA) has the lowest strategy risk and OKAIR (BK) strategy risk factors using the ANP method. As a result,
has the greatest strategy risk. According to the result of the 16 most important overall strategy risks can be
risk value, we can know the difference among airlines, ranked. The top five strategy risks are strategy change,
and for the managers, they can do further research to find environment, strategy direction and choice, resource fit
the reasons. and expectation and goal. Based on this result, airline
company can get the competitive advantage from the
focus on strategy change, environment, strategy direction
CONCLUSION and choice, resource fit and so on. Further study using
triangular fuzzy numbers shows Air China has lowest
Strategy risk identification highlights the important strategy risk and OKAIR (BK) has greatest strategy risk.

For Air China, it is the flag airlines of China, and it has Baird IS, Howard T (1985). Toward a Contingency Model of Strategic
enough resource and capital to deal with all kinds of risks. Risk Taking. A.M.R. 10(2): 230-243.
Gong Y, Ding D, He J, Wu G (2008). The theory, model and application
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http://www.iso.org/iso/catalogue_detail?csnumber=43170
strategic resource and strategic ability to conquer Johnson G, Scholes K (2004). Exploring Corporate Strategy. Posts &
strategy risk. For the managers, it is helpful to have a Telecom Press, Beijing. pp. 9-19.
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high risks. Based on this research, further researches can Management. Oriental Press, Beijing, pp. 312-330.
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Saaty TL (1996). Decision Making with Dependence and Feedback:
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management. Wharton School Publishing, pp. 57-61

§
The effect of sponsorship on marketing communication

performance: A case study of Airtel Ghana
1 2 1
George K. Amoako *, Kwasi Dartey-Baah , Robert K. Dzogbenuku and
1
Samuel Kwesie Junior
1
Central Business School, Central University College, Accra, Ghana.
2
University of Ghana Business School Accra, Ghana.
The purpose of this study is to have a clear understanding of how sponsorship contributes positively to
marketing communications performance. The methodology is based on social survey technique, which
examines opinions, behaviors, and perceptions by asking people questions. Questionnaires were used
to collect quantitative data to ensure a structured approach. An increase in brand awareness, brand
preferences, brand recall, projecting the company’s image and above all goodwill, can lead to increased
sales, and consequently increase organizational value, indicating that sponsorship contributes
positively to marketing communication performance. Due to the limited resources, future research
needs to examine sales as an additional factor to measure the effect of sponsorship on marketing
communication performance to give a better view of the effect of sponsorship. For firms, the study
indicates that sponsorship contributes positively to marketing communication performance and
consequently increase organizational value.
Key words: Sponsorship, Ghana, brand image, goodwill and marketing communication performance.
INTRODUCTION
Despite wide acceptance among practitioners, sponsorship organization by providing money or other resources that
activity has attracted little academic interest especially value to the sponsored event. This is usually in return for
Ghana and Africa. Therefore, the aim of this research is to advertising space at the event or as part of the publicity
generate research interest in sponsorship in Ghana. for the event. There are many kinds of sponsorship:
Sponsorship as a promotional activity has grown remarkably Television and radio program sponsorship, sports
in recent years estimated at $ 48.7 billion in 2011 sponsorship, arts sponsorship and educational
th
(www.Reuters.com Accessed 11 October, 2011) sponsorship. Sponsorship is again on the rise, and
commercial sponsorship represents one of the most rapidly marketers have called for new efforts by researchers to
growing sectors of marketing communication activity. measure the business value of this form of marketing
Marketing communications are means by which firms communication. The methodologies appro-priate to
attempt to inform, persuade, and remind consumers-directly making sponsorship accountable are similar to those
or indirectly-about the products and brands they sell. In a used for other forms of advertising.
sense, marketing communications represents the “voice” of
the company and its brand, and are means by which it can
establish a dialogue and build relationships with consumers. Sponsorship in Ghana
Sponsorship on the other hand involves supporting an event,
activity or is of Sponsorships in Ghana is now taking a new shift, since
most corporate institutions in the country are engaging in
more sponsorship activities as a means of achieving
organizational corporate and marketing goals. Engaging
*Corresponding author. E-mail: gako2001us@yahoo.com. in such an innovative communication activity helps in
increasing brand awareness, brand preferences, brand

recall, projecting the company’s image and above all performance?

goodwill. These activities can lead to sales increase and 2. Is there any relationship between sponsorship and
consequently increase organizational value. Fan Milk sales?
Limited Ghana recently donated a number of litter bins 3. Does sponsorship have any impact on corporate brand
and footballs to a few first and second cycle schools at value?
Techiman in the Brong-Ahafo region. The items were 4. Does sponsorship have recall and persuasion effect on
presented by the National Chairman of Ghana National consumers?
Scholarship Beneficiaries Association (GNASBA) and
were in appreciation of the schools participation in the
GNASBA schools, Environmental Protection Education LITERATURE REVIEW
Campaigns. Fan Milk Ghana has been the main sponsor
of the program for the past 17 years. The GHASBA Definitions of sponsorship
chairman announced that Fan Milk Limited had been
operating in Ghana for 50 years and was giving out items Sponsorship is a two way mutually beneficial partnership
such as litter bins, footballs and seedlings, to help between an organization being sponsored and the
intensify environmental cleanliness and tree planting in sponsor. Sponsorship works on the premise that
the nation in commemoration. association largely affects image and that the sponsor
may exchange money and /or goods or services in kind
return for the association that the sponsorship provides.
Association (GCA) Those being sponsored may include groups or teams,
events, charities, individuals, buildings and TV program.
The assorted clothes which forms part of a Ten thousand Fill and Hughes (2008: 65).
US Dollars ($ 10,000.00) sponsorship to the GCA Furthermore, sponsorship is an investment, in cash or
includes a set of track suits, playing jerseys and polo in kind, in return for access to exploitable business
shirts. The move by Airtel is to boost the morale of the potential associated with an event or highly publicized
team ahead of the competition, demonstrate their support entity. The key words in this definition are ‘investments’,
and commitment to assist lesser known sports and fulfill “access” and ‘exploitable’. By constantly looking at
their social responsibilities. sponsorship as an investment opportunity, where there is
a viable pay back in the form of brand recognition and
brand value. Rather using the word investment auto-
Statement of problem matically implies that value will be returned to the
investor. Secondly, access to means having the ability to
Despite all indicators pointing to the need for a clear capitalize on your association with that particular offering
understanding of the business value of sponsorships, (event, sports, festival, etc). Lastly, “exploitable” which
marketers today remain unsure of how sponsorship means “to take the greatest advantage of” the
works and how to properly measure its business value. relationship. In other words, allowing sponsors to make
Marketers see sponsorship as something different from the greatest use of their investment and capitalize on
advertising but there has been no general clarification of their relationship (Allen, 2010).
how sponsorship differs from advertising in promoting Sponsorships are often considered as altruistic forms
goods and services since advertising is mostly used to of support like patronage or fundraising. Even though
support sponsorship activities. sponsorships are historically related to these forms of
support, they need to be clearly distinguished. The key
difference is that sponsoring relies on mutuality. The
Research objectives sponsor expects a reward for his support, which he most
commonly utilizes for communication purposes Hund-
1. To establish if there is a positive link between Göschel (2009).
marketing performance and sponsorship. From the aforementioned definitions, it means
2. To access the relationship between sponsorship and sponsorship involves investments in events or causes for
sales. the purpose of achieving various corporate objectives
3. To identify the impact of sponsorship on brand value. such as increasing sales volume, enhancing a company’s
4. To establish if sponsorship has recall and persuasion reputation or brand image and increasing awareness. It
effect on consumers. also means the company provides financial resources,
personal services, equipment or facilities to create an
alliance with the event. In return, the company obtains
Research questions direct exposure to the public targeted by the event.
There are both primary and secondary objectives
1. Does sponsorship increase marketing communication associated with using sponsorship. The primary reasons

The effect of sponsorship on marketing communication performance: A case study of Airtel Ghana 225
are to build awareness, develop customer loyalty and marketing communication because it provides an
improve the perception held of the brand. Secondary excellent means of targeting selected market segments.
reasons are more contentious, but generally they can be As Sleight (1998) pointed out, sponsorship works best if it
seen to attract new users, to support dealers and other fulfills the most important criterion of a communication
intermediaries and to act as a form of staff motivation and medium- it allows a particular audience to be targeted
morale building (Reed, 1994). with a particular message (Picton and Broderick, 2005).
Why sponsorship has grown in prominence Types of sponsorship

The growth of sponsorship as a form of marketing Sport sponsorship
communication can be attributed to a number of factors.
This is the distribution of resources (money, people,
Concerns over traditional promotional methods equipment by an organization (sponsor) directly to a
sponsee for example, (sport personality, sport authority,
First, many corporations have become concerned about body or code) to enable the sponsee to pursue some
the value of traditional forms of marketing. Concomitantly, activity (for example, participation by the individual or
technological advancement have resulted in an explosion event management by the authority or sport body or in
of marketing possibilities ’with the attendant problem of the return for rights contemplated in terms of the
clutter and cost efficient access (Meenaghan, 1998). As sponsors marketing communication strategy, (cross-
the number of commercial television and radio station has impact and leverage between sponsorship and other
risen, traditional advertising has produced a proli-feration marketing communication variables employed before,
of messages within the medium. Sponsorship is seen as during and after the sponsorship campaign). And which
an alternative and often cheaper form of gaining can be expressed in terms of corporate, marketing, sales
exposure that avoids clutter and allows a sufficiently and/or media objectives and measured in terms of linking
distinctive message to be seen and or heard. the objectives to a desired outcome in terms of return on
investment in monetary and non-monetary terms. For
example, sports kit giants Nike, presented soccer
Creation of favorable association equipment worth several thousands of dollars to last
year's MTN Soccer Academy, (2010 edition) Ghana-
Sponsorship has increasingly been viewed as a way in Nigeria edition. By the gesture, Nike is now the official kit
which to generate audience awareness while at the same sponsor for the soccer reality show, inducting seven
time create an association between the values the Ghanaians and seven Nigerians into the academy house
sponsored entity exemplifies and the sponsoring to battle for supremacy (Aduonum, 2009).
company (Meenaghan, 1998).
Overcomes linguistics/cultural barriers Programme sponsorship
Sponsorship has the ability to transcend cultural and Television programme sponsorship is normally used to
linguistic barriers. It is no coincidence that sports, arts deliver engaging content in collaboration with brands or
and music are the areas that receive the most amount of organizations, With Outdoors TV, programme sponsor-
sponsorship funding as these are activities with global ship can be used in many ways: to associate a brand or
appeal. organization with a particular programme or strand; to
deliver a TV version of a print magazine; to create a
documentary series about a specific organization that
Multiple target audience appeal delivers valuable exposure and PR benefits or, perhaps a
competition or challenge based in a specific destination,
Sponsorship as a marketing medium can be used to sponsored by a tourist agency. Programme sponsorship
influence strategic partners, company staff, civic official puts organization immediately on the side of the viewer
and government regulators, while at the same time because among other organizations by this provide views
appealing to customers and, as such, influence a with entertainment which is more likely to gain
company’s ’bottom line’. organization view support and loyalty.
Selective targeting Educational sponsorship
Finally, sponsorship has grown in popularity as a form of This can take several forms, from the sponsoring of

individuals student at college through to the provision of The example of great benefits derived from the
books and computers. In other words, educational sponsorship can be the Coca-Cola Company, which used
sponsorships involve providing funding to help students Olympic Games to advertise and sell its products for
pay for their education or providing any assistant to quite long period of time. In Athens, it has purchased the
students with respect to their education. An example of right to be the "official soft drink" of the Games and paid
such institution in Ghana is former Zain, but now Airtel, solid sums for numerous advertising spots. At 1984
with their educational sponsorship that is the African Olympic Games in Los Angeles, Coca Cola was the
Challenge which gives financial support to participating second leading advertiser having spent $ 29,875,000 on
students and their various institutions. A school in promotion of its drinks. At 1996 Olympics in Atlanta,
Himankrom in the Ahanta West District of the Western Coca Cola spent $ 73,645,900 on promotion (Eastman,
Region of Ghana is the first to benefit from Airtels 2000), becoming the leading advertiser of the Games
‘adopted School Programme’ initiated to provide good and making Olympics its biggest and most important
quality basic education and to empower under privileged event in promotional company.
children to realize their full potential. (Business Week, 22 One of the main reasons of inefficiency of Olympic
February, 2011: 10) games is that companies have not decided definitely on
their expectations from sponsoring Olympics. Sponsor-
ship can prove effective only in case when the company
Forms and levels of sponsorship hits its potential targeted audience that relates itself to
the Olympics and associates itself with them. Sponsors'
Sponsorship of individuals attempts to attract consumers around the world are
useless as long as their image and activity is conceived
The sponsorship of individual, particularly sportsmen and differently in various parts of the world. For instance,
women, has become an increasingly popular type of there is no point in trying to influence American and
arrangement. Here, an individual performer is paid a fee European people in the same way with Olympic
to endorse a particular product or service. Endorsement, advertisement. According to the same Dynamic Logic poll
because they involve individuals, are someway riskier data (Dedyukhina, 2004), only 58% of Americans and
than sponsoring a team or event. For example Dede 39% of Europeans understand that it is predominantly
Ayew a footballer of Marseille fame involvement with Fan due to sponsors that Olympic Games take place and can
milk company limited-Ghana, and Michael Essien of be broadcasted on TV. Another example is the result of
the same poll where 66% of American people and only
Chelsea Football fame for Fan Yogurt. This enables
51% of Europeans attach particular importance to
consumers to transfer their liking for these celebrities to
advertisement with the Olympic logos.
the product or brands (Daily Graphic, 1 June, 2011).
There were ten companies that were granted by the
international Olympic committee (IOC) to market
themselves worldwide in association with the 1994 winter
Other forms of sponsorship and the 1996 summer Olympics games, for the 40 million
dollars they paid for the privilege. These companies were
Other opportunities that have been embraced by able to make use of all the Olympic marks and
corporate sponsors are art and entertainment sponsor- appropriate Olympic designations on their products. They
ship which include award ceremonies such as the MTV were also given exclusive hospitality opportunities at the
music awards by Airtel. Arts festivals such as December games, granted preferential access to broadcast
to Remember by Chatter House and Citi Fm have all advertisement, and had on-site concession and product
been in the interest of Ghanaian. The leading mobile sale or showcase opportunities (Olympic Marketing Fact
telecommunication company, Vodafone supported the File, 1994; Picton and Broderick, 2005).
fourth Fetu Afahye festival by the people of Cape Coast.
Vodafone donated a total of GHC 52,000.00 in cash and
items to support and assure the chiefs and people that
Official sponsorship
the company is keen on developing a strong collaboration
with communities to bring about change in their lives While the Olympic games may be pinnacle of
(Ghanaian Chronicles 27 August, 2010). sponsorship, similar tiers of support can be found in less
grandiose events. Some sponsors are designated as
‘official’. Tarkwa Gold Mines one of the title sponsors of
Levels of sponsorship the Black Stars the senior football team in Ghana
announced a $ 560,000 package to the Black Stars for
Sponsorship may be provided at a number of different the South – Africa World Cup. Another example is
levels. The most visible example of this occurrence is the Vodafone as the official sponsors for the T.V reality show
structure of the Olympic games sponsorship programme. Ghana’s most beautiful.

The benefits of sponsorship covering the event may include sponsors names and/or
photos. In addition, the kind of media coverage a sponsor
What is the motivation of companies to be willing to may get is often unaffordable if the company were to
spend such large amounts of money on different forms of think of purchasing it, and if it were available. To
sponsorship? What are the gains and potential losses maximize this objective, it is important for the sponsoring
that can emanate from this form of marketing activity? company to have a comprehensive media campaign to
One of the benefits attributed to sponsorship is that it can augment the regular media coverage promoted by the
be more efficient than other forms of marketing organizers. Sponsorship can often generate media
communication because it can generate both audience coverage that might otherwise not have been available.
appeal and link the values of the sponsored entity to the
sponsor. Furthermore, sponsorship can also transcend
cultural and geographical boundaries. It is effective at Media leverage
targeting different audience, and can help forge links with
local business and political communities, and can be Because many of the events that receive sponsorship
used to improve employee relations (Barrett, 1993). money are high profile, sponsors are often able to
For instance, taking Ghanaian love for football, a typical capitalize on the media attention that follows these types
instance will be our involvement in the South African of activities. This coverage has also allowed some
world cup of nations. Since Ghanaian have a great sense companies to circumvent regulations on their products
of excitement when it comes to football, companies who which state that they are unable to advertise on
sponsor football related events are likely to appeal to television-alcohol and tobacco products being the most
and/or have favorable response from these audiences. obvious examples. Globacom Ghana limited for instance
While these characteristics have been widely cited as gained considerable exposure for its support of the
contributing to the rapid growth of sponsorship, they are Ghana premier league. Something it would not be able to
not the only benefits. Others may include: get through normal advertising channels. Even when
there are restrictions on sponsorships, with the advent of
satellite broadcasting local regulatory restrictions can be
Marketing tool overcomed by sponsoring activities known to gain
international coverage.
Sponsorship of events in particular can be especially
effective as a marketing tool because it can be a means
of accessing a wide range of audiences such as decision Differentiating from competitors
makers in business, government entities, and of course
customers. It can be particularly beneficial for companies The mere act of sponsoring an event, especially an
that take part in international trade because sponsorship exclusive sponsorship, is a significant way to create
transcends cultural and language barriers. Events allow competitor differentiation. The name of the company
business owners or executives relate directly with their sponsoring has the opportunity to stand out head and
customers, while they give customers the opportunity to shoulders above the competition. This is particularly
try out the products of a company firsthand. helpful if a company wants to combat a competitor with a
larger advertising budget. Sponsorship allows smaller
companies to compete with their industry giants.
Enhancing image/shaping consumer attitudes Target audiences often perceive sponsorship in a
positive way. The sponsoring company makes a greater
Often companies are looking forth to improve on how effort to support the event, often allowing more or better
they are perceived by their target audience. Sponsoring activities to take place as a result of your sponsorship.
events that appeal to their market are likely to shape
buying attitudes and help generate a positive reaction.
Coca Cola, for example is always looking, to generate a Marketing leverage
positive influence of their products in the minds of their
consumers and as such regularly support events they feel Sponsorship also appeals to corporations as a marketing
can influence consumer opinions. communication medium because it can be tied to other
marketing activities that are designed to influence both
customers and strategic partners. Howard and Crompton
Creating positive publicity/heightening visibility (2005) suggested that it moves a customer from the
interest stage of the product adoption process to the
Every sponsor is seeking wide exposure in both desire stage, the stage which involves a serious
electronic and print media. Positive publicity helps create evaluation about whether or not to purchase a product.
heightened visibility of products/services. Various media They provided the example of the manufacturers of ‘Ultra

fuel’ high carbohydrate drink that felt it will not compete activities mainly event sponsorship and cause related
with the advertising budget of Gatorade but wanted to get sponsorships. However, they merely show an increase in
its drinks into the hands of to class athletes. It therefore, sponsorship activity without providing any explanation for
sponsored a series of multi-sport and cycling events at it. Because corporate investments in sponsorships have
which the product was available for sampling, thus grown significantly around the world and scholars are
achieving its objective at minimum expense. developing an interest in the subject, the value of such
descriptive analyses in understanding sponsorship is
limited. Another approach adopted in the past to
Risk of sponsorship legitimize sponsorship has been to define it as a
phenomenon clearly distinct from other established
Evaluation problems promotional activities. One of the definitions most
commonly used in past research was proposed by
Sponsorship is risky because, like other marketing
Meenaghan (1983) "sponsorship can be regarded as the
communication tools, while it can have significant benefits
provision of assistance either financial or in-kind to an
these are extremely hard to assess empirically. There are
activity by a commercial organization for the purpose of
multitudes of techniques used by marketing companies achieving commercial objectives." The goal of
which range from surveying customers to see if they are sponsorship according to Meenaghan (1991) remains
influenced by sponsorship to evaluating the amount of unclear, as his definition does not specify the
media exposure a sponsored event receives. communication objectives and does not allow for
Despite its importance, research assessing sponsor- noncommercial sponsorships. (Gardner and Shuman,
ships effectiveness is still in its early stages of develop- 1988) provide a clearer understanding of sponsorship's
ment. Scholars have not adopted any specific theoretical goals: "Sponsorship may be defined as investments in
framework that could guide investigations of consumers' causes or events to support corporate objectives (for
reactions to sponsorships. Instead, discussions have example, by enhancing corporate image) or marketing
pertained essentially to the measurement techniques objectives (such as increasing brand awareness)”
believed to be most appropriate for evaluating the
effectiveness of sponsorship.
Strategic nature of sponsorship
Negative associations: In some situations the image of
the sponsored entity may have a negative impact on the
In much of literature, sponsorship has been described as
company providing support. While this is most likely to be
a strategic activity. It is strategic because, as Slack and
the case where an endorsement of an individual athlete is
Bentz (1996) point out, it concerns decisions about the
made, it can also involve a team or an event. For
allocation of resources to achieve organizational
example, a sports team which does not perform well or a
objectives and also because it is used to align an
theatre production that flops is unlikely to provide its
organization with the pressures and demands of its
sponsor with the type of image they are expecting from
environment.
the association.
Sponsorship can be used strategically as part of an
Development of controversies leading to negative expansion strategy, in turnaround situations, or to create
attitudes: The presence of competitors is on its own, a competitive advantage; like any other strategic initiative it
disadvantage for sponsors. There will always be a also influences, and is influenced by, corporate culture,
challenger to each company to stay on top. Controversies organizational structure and company leadership. Much
that affect the sponsor will often lead to faltered belief of the writing that has suggested that sponsorship is a
from its consumers and would at most also create a strategic activity has focused on the way in which this
negative sponsor-sponsee association. type of activity can be used to attain corporate objectives.
Abratt et al. (1987) produced a list of such objectives for
Absence of standardization: The partnership between a sport sponsorship and suggested that potential television
company and its supported individual, organization, or coverage, promoting corporate image, and the
event is of benefit the both parties. Different methods of opportunity for media coverage were the most important
support are applied to sponsees depending on their reasons given by 45 corporations who responded to their
needs and the sponsor's needs as well. This points out to study. In a similar work, (Witcher et al., 1991) surveyed
a lack of standardization, and therefore requires more 140 ‘large commercial companies’ and found the main
time on planning and evaluation. objectives cited were the promotion of corporate image,
television, radio, and press exposure and the promotion
of brand awareness. While these types of studies have
Nature of sponsorship merit, they do not go far enough in enhancing our
understanding of the strategic nature of sponsorship.
Generally, there are two main types of sponsorship Objectives, while useful at one level are, often ‘nothing

more than post facto rationalizations of a particular marketing communications were based on the premise
sponsorship activity. In an attempt to go further than the that sale of a product must be immediate or direct for
work which has merely identified the objectives of advertising to be considered effective. For example, a
sponsorship initiatives, (Amis et al., 1999) have utilized good advertisement should:
an approach known as the resource-based view of the
firm. Their work has shown how sponsorship can be used 1. Attract attention (awareness)
strategically to establish and retain a position of 2. Stimulate interest
competitive advantage. They argue that sponsorship 3. Create a desire
needs to be seen as a resource in as much the same way 4. Bring about action (AIDA model)
that a company sees its other physical or human
However those beliefs have now changed, sales no
resources. Resources, such as sponsorship, can thus, be
longer have to be immediate or direct, rather marketing
a source of competitive advantage; however, to attain this
position they must fulfill four criteria. communications should:
Strategic fit: First, those companies that succeed in 1. Prompt trial

achieving competitive advantage through sponsorship do 2. Cause the brand to be added to the consumer
so by establishing a better ‘fit’ between themselves and repertoire
the entity they sponsor than similar initiatives by other 3. Work through people’s attitudes with a view to
companies. changing their behavior
4. Establishing a relationship with the consumer for
Difficult to imitate: However, it is not simply enough for example, through a social media strategy (a good
a company to have a superior sponsorship resource as example is Dove's Campaign for Real Beauty Campaign
any competitive advantage will be lost if that resource can and Johnny Logan's McDonalds Euro saver).
easily be replicated. Therefore, the second criteria for a
sponsorship to be a source of competitive advantage are This shift from sales objectives to communication
that it must be difficult for a competitor to imitate. In order objectives is one of the factors which have given rise to
the concept of Integrated Marketing Communication- It is
for this to occur, the sponsorship undertaken must tie in
defined as a concept of marketing communications
‘with other facets of the sponsoring firm’s image to
planning that recognizes the added value of a
produce a resource capable of discouraging industry
comprehensive plan that evaluates the strategic roles of
competitors from directly competing with the resource.
a variety of communication disciplines and combines
Tradability of resource: The resource (in the form of the these disciplines to provide clarity, consistency and
sponsorship) should be non-tradable or, if tradable, be of maximum communications impact. For practitioners,
integrated marketing communication (IMC) has; 1)
greater value in the firm that is currently employing it.
become widely accepted, 2) has pervaded various levels
Integrated marketing communication and within the firm, and 3) has become an integral part of
sponsorship: Marketing communications: The brand strategy that requires extensive brand
communication of information which facilitates or developmentactivities within the firm before beginning
expedites the exchange process. The role of marketing any external brand communications efforts. Regarding
communications is to inform, persuade, remind, reassure academics, (Vargo and Lusch, 2004) argued in a recent
the customers and differentiate the organization in the paper that marketing is evolving toward a dynamic and
minds of the customers. There are three requirements for evolutionary process one that is based on a service-
successful marketing communications: centered view. In keeping with this evolution, Vargo and
Lusch (2004) suggest that (1) IMC should replace
diverse, limited-focus promotional tools, and (2) brand
Relevance originality impact management should be used for initiating and
maintaining a continuing dialogue with the customers and
Communication is about engaging with your target market for enhancing relationships.
and it takes the following form: Kitchen and Schultz (2003), emphasize that
"strategically oriented integrated brand communications
Sender encoding => Message (Medium) => Receiver can help businesses move forward in the highly
encoding. competitive world of the 21st century". For Schultz
(1998), brands are central to this integrated marketing
There are several categories of marketing communi- communication. Keller (1993) points out that customer-
cations, such as advertising, personal selling, public based brand equity emanates from the consumer's
relations, sales promotion, direct marketing, internet/ familiarity and strong, favorable associations with the
interactive, sponsorship. In a group, these are known as brand. For Keller (1993), "marketing communications
the “Communication Wheel.” represent the voice of a brand and the means by which

companies can establish a dialogue with consumers sponsorship is often construed as a form of advertising.
concerning their product offerings" That is, marketing Although, sponsorship may work in an analogous way to
communication may provide the means for developing advertising, essentially it is an effective promotional tool
strong, customer-based brand equity (Keller, 2003). Fahy in its own right. Sponsorship is a legitimate element of a
et al. (2004) noted that the emerging strategic view of company’s communications mix alongside the traditional
sponsorship is seen as a potential source of competitive tools of advertising, public relations, sales promotion and
advantage, and their paper concludes that conceptual personal selling.
arguments should be further developed, especially in the Isolating the effects of sponsorship is complicated due
area of international marketing. It also demonstrates the to the difficulty in distinguishing its effect from other
breadth of the resource mix that underpins successful communication elements. Subsequently, many marketers
sponsorship and delineates the nature of the relationship incorporate and categorize sponsorship mentioned
between sponsorship-related resources and superior communication variables. For example, Witcher et al.
performance in the market place. They claim that it is (1991) classify sponsorship as a form of advertising.
important and significant to develop contributions towards However, researchers have highlighted that there are
"understanding the mechanics of sponsorship manage- many distinguishing factors between the two mediums,
ment and that this should be further developed and tested thus, refuting the claim that sponsorship falls under the
empirically in future research" (Fahy et al., 2004). The domain of advertising. Marketers have less control over
literature review undertaken by Cornwell (2005) deals sponsorship messages signaled to consumers in
primarily with the exploration of theoretical explanations comparison to advertising messages (Hastings, 1994;
of how sponsorship works and open questions for Gross et al., 1987; Javelins et al., 1994). Sponsorship is
research, bringing together variables such as individual a less direct means of communication which involves a
(and group) factors, as well as market and management two-way relationship between the sponsor and sponsee.
factors, with the aim of understanding their influence on Although, sponsorship, just like advertising, can be
sponsorship processing mechanics and related used to serve short-term goals, like product trial and
outcomes. O'Reilly and Quester (2007) assert that a need market penetration, its main strength lies in the long-term
exists for continued development of theory and support of brand awareness and brand image, and other
practitioner tools applied in the evaluation of Integrated Marketing Communication (IMC) tools are
sponsorships. Sophisticated, grounded theoretical needed to stimulate buying behavior in the short run.
models are required. Although further empirical work in However, compared to advertising, sponsorship has a
evaluation is needed, their research provides a good number of distinct characteristics, advantages, and
example of how a sponsorship can be evaluated. disadvantages. Sponsorship can benefit from the strong
association with an event, a good cause, or a television
program. Therefore, it is a potentially more powerful
Sponsorship and marketing communication image builder than advertising, and it can effectively link
performance the brand to a particular market segment. The key point
about sponsorship is that it needs to be part of an
Despite the apparent agreement among scholars on the integrated marketing communications campaign, and its
definition of sponsorship, much confusion remains about popularity as a communications method is growing year
the distinction between sponsorship and other forms of on year. This calls for more research to further
promotional communications. For example, Cunningham understand sponsorship impact on customers buying
et al. (1993) had difficulty differentiating sponsorship from behavior.
event marketing: "The term event marketing encom-
passes the notion of event sponsorship; however, it is
METHODOLOGY
also used to describe the integration of the marketing mix
elements, especially the promotional mix elements, Sampling size
around an event theme for the purpose of reaching
strategic marketing objectives. Hundred and twenty (120) target audiences were sampled that are
It has been widely acclaimed that sponsorship representatives of the population. Both men and women were
reached. A three paged 15 item questionnaire, about sponsorship
influences a consumer in a somewhat similar, but not
effect on marketing communication performance. A close ended
identical, fashion to show advertising affects consumers. type of questionnaire was used.
Nicholls and Laskey (1999) detail that as consumers are
exposed to messages promoting a given brand by a
sponsor, there is an expectation that consumers will Procedures
develop favourable associations with that brand, secure
A total of 120 questionnaire was distributed. And a total of hundred
top-of-mind awareness of the brand, have greater
(100) were retrieve from participants, comprising of equal number of
preference for the brand, therefore, leading the consumer males to females so as to ensure and control extraneous variables such
to purchase the brand. A common misconception is that as gender that might affect the outcome of the study.

Analysis of data completely answered and retrieved from customers.

Responses from these questionnaires where coded into
Data was analyzed using the SPSS.
the Statistical Package for Social Science (SPSS) in
order to enable us generate tables and test the
Data analysis procedures hypothesis.
This software was used because of its availability,
For this study, descriptive analysis and tabulation method were flexibility and ease of use. Frequency tables, charts,
mainly used. Simple statistical such as percentages were employed diagrams and statistical tests were used where
where necessary. The research questions of the study were
answered by using the relevant data in organized tables.
applicable in order to summarize, illustrate and confirm or
dispute statements made at the earlier stage of this
report, all in an effort to address the objectives and
Data presentation and analysis hypothesis of the study.
Pre-testing of instrument
Demographic data of respondents
A pre-test of the instrument was done to reveal the problems with
the items in the research instrument. During the pre-test period it
was realized that the questionnaire was free from obscurity and In order to understand the results and conclusions drawn,
ambiguity and that respondents had less difficulty in responding to it is important to assess the background of the sampled
the items. However it was realized that during certain times of the targets. This information in isolation does not add much
day it was difficult to get the attention of the people as they were all information in addressing the set objectives, however, in
busy going about their daily activities. For this reason, there was the combination with other variables, could revile and enable
need to find willing and less busy respondents to administer the
concrete assumptions to be formulated, tested and
questionnaires to.
conclusions drawn during the cause of the analysis. The
major demographic variable explored was the gender of
Validity and reliability of the instrument respondent.
The bar chart on Figure 1 depicts the gender
Validity is how well or correctly a test measures what it seeks to distribution of respondents. It is shown that 50% of the
measure and reliability is how the test produces the same results
when used on different occasions. The instrument used was respondents were male and the other 50% are female. It
carefully structured to target issues relating to the research is important to notice at this point that, equal percentages
questions sequentially. The items in the questionnaires strictly of male and female respondents gives us an opportunity
sought to inquire from respondents relevant issues pertaining to the to reduces any form of biases which might have been
study. The construction of the questionnaire made it possible that gender based. It will also enable us to examine and
the items were clearly stated, and instructions were made with no
compare the views of both gender and draw conclusions
trace of complexity so that what the researchers sought to measure,
even on different occasions remained unchanged. The same fairly.
questionnaires were used throughout the research. Evidence of
reliability was obvious after data collected was compared to those
collected during pre – testing. Sponsorship packages and their impact on
beneficiaries
DATA ANALYSIS AND INTERPRETATION One of the main objectives of this study was to examine
and understand how sponsorship contributes positively to
Here, the research reports covers the statistical analysis marketing communication performance. In order to arrive
and interpretation of the research data collected from the at this conclusion, it will be important to examine how
primary source. It mainly addresses the objectives and sponsorship affects the beneficiary, their perception and
hypothesis of the study; it aims to examine the effect of how this creates an image of the sponsor company in
sponsorship on marketing communication performance their mind. It can be assumed that, in order for a
based on the response collated from the primary data. marketing communication to be effective, it must carry
This exploratory analysis will give clues and insight to messages that create a lasting image in the minds of its
enable us understand factors that impacts on targets. From the response, when respondents were
sponsorship, determine whether sponsorship is a form of asked about how excited there are about sponsorships in
promotion or advertisement, investigate whether which they were beneficiaries, the following frequency
sponsorship has any recall or persuasive effect on table displays the results.
marketing communication purposes and whether The results on the frequency table indicate that 77% of
sponsorship affect brand perception. the respondents claim to be excited about sponsorships
A structured questionnaire (mostly closed ended) were Table 1. This is a positive indication of the impact
used in this study targeting consumers or beneficiaries of sponsorships have on the customers of sponsoring
these sponsorship programs from the telecommunication companies. It can be assumed that, if consumers are
industry. In total, hundred (100) questionnaires were excited when a company sponsors a program, it also

Figure 1. Bar chart of respondents gender.
Table 1. Does sponsorships makes consumers and customers excited.
Responses Frequency Percent Cumulative percent

Yes 77 77.0 77.0
No 23 23.0 100.0
Total 100 100.0
implies that if there are no sponsorships for major that a sponsorship affects their choice of brand. If this response
sponsor company wants to send out might not be the one truly reflects the action taken by customers of these
the customers are reading. It might also revile other sponsors companies, it implies a great disadvantage for
useful information and impact of sponsorship on their companies that do not involve in sponsorship program.
customers which might not have been their initial aim of This could also imply a decline in the patronage of a
the marketing communication. company’s brand, hence decline in customers and
The frequency table depicts the results of the various ultimately sales. In an era where the product and
responses in frequencies and percent-ages. Table 2 services of competitors in other tele-communication
depicts the impact of sponsorship on branding, based on networks are quite similar, it takes only very small
the response. It can be notice that, when respondents differences to be ahead of the competition. It can further
were asked about how sponsorship impact on their brand be observed that 58% of the respondents had testified
preference, 65% responded in the affirmative that that they transfer their like for a company sponsorship to
programs, the customers will notice that something is its brand. This is a very important revelation as it
missing in the program. indicates the impact sponsorship and the value it creates
for these companies. Respondents went to confirm the
importance of these impacts with 75% agreeing that,
Sponsorship impact on brand sponsorship is good to be practices by all companies as
it communicates the right message to it target audience
Respondents were asked series of questions to (77%). The afore-mentioned responses clearly indicate
determine how sponsorship impacts on their brand the positive impacts of sponsorship in generating good
preferences, their understanding of the concept of will and creating brand awareness (76%). As one, of the
sponsorship and the message that sponsorship objects of this study is to determine whether sponsorship
communicate to them and how clearly they understand affect perception of brand, it can be concluded that,
that message. It is important to notice that, the message based on the responses, sponsorship does have an

Table 2. Sponsorship and brand.
Research question Response Percent (%) Cumulative percent (%)

Does sponsorship affect your brand preference? Yes 65 65
No 35 100
Do you transfer you like for a company sponsorship to its brand? Yes 78 78
No 22 100
Is sponsorship good to be practiced by all companies? Yes 75 75
No 100 100
Do companies use the sponsorships to communicate a clear message about brand to target audience? Yes 77 77
No 23 100
Does sponsorship generate goodwill and brand awareness? Yes 76 76
No 00 100
impact on respondent perception of a sponsored that they have a similar objective which is to some respondents who will prefer to purchase
company’s brand. create a perception of the sponsored companies from a company who sponsor events rather than
brand in the minds of the public. 58% claim that those that do not. This could be attributed to the
sponsorship does have a recall and persuasive fact that, these promotions aid in the recall of
Sponsorship and advertising effect like advertising. 75% believe that sponsor- advertisement than companies that do not
ship change consumer perception of specific advertise. It also displays the kind of sponsorships
The other two objectives of this study was to seek sponsor. This could be the reason that 77% of the that can easily be recalled.
and understand from respondents perspective respondents claim that they have favorable From the results on Table 4, it be can observed
whether they view sponsorship as a method of attitude towards sponsors and their products. This that 76% prefer to purchase from companies who
advertisement or another kind of social result indicates the benefit that sponsors derive sponsor events, 80% believed sponsorship can be
responsibility of telecommunication companies from their beneficiaries in the long run. This clearly used to communicate a company’s product and its
and also seeks to address whether sponsorship confirms that companies project their image benefit, 72.7% recall sponsored advertisement
has a recall and persuasive effect on marketing positively when they offer sponsorship as and 74% recall sponsorship ads that were seen on
communication purposes or not. From the indicated by the 76% respondents. television.
frequency, Table 3, respondent’s opinion about
the difference between sponsorship and advertis-
ing are access. It also displays respondent’s Benefit of sponsorship and recall of Research hypothesis
opinions about whether sponsorship has recall companies products
and persuasion effect like advertising does, or not The study set out to address the following three
as well as it impact on their perception of the The research questionnaire went further to hypotheses:
sponsored company. examine how sponsorship is used to communicate
This results displayed clearly indicates that, a company’s product and it benefits and Null Hypothesis 1: Sponsorship has recall and
65% says that yes, sponsorship is quite different respondents’ understanding of those strategies. persuasion effects like advertising does. In order
from advertising. Even though, it can be notice Responses indicated that, there were to test this hypothesis, a cross tabulation of
____________________________
_____________________________
TECHNOLOGIESWORLD
Table 3. Sponsorship and its impact on recall and persuasive effect.

Is sponsorship different from direct advertising? Yes 65 65
No 35 100
Sponsorship has recall and persuasion effect like advertising does? Yes 58 58
No 42 100
Does sponsorship change the consumer perception of a specific sponsor? Yes 75 75
No 100 100
Do you have a favorable attitude towards sponsors and their product? Yes 77 77
No 23 100
Does a company project their images positively when they offer sponsorship? Yes 76 76
No 100 100
Table 4. Benefit of sponsorship and recall of companies products.

Would you prefer to purchase from a company who sponsor events? Yes 76 76
No 24 100
Can sponsorship be used to communicate a company’s product and its benefit? Yes 80 80
No 20 100
How often do you recall a sponsored advertisement Quiet often 72.7 72.7
Very often 23 100
Which sponsorships do you recall faster? One attended 26 26
One saw on TV 74 100
gender and whether sponsorship has recall and determine whether this difference in numbers is due to chance. Meaning that, the difference in
persuasion effect like advertising on respondents due to chance or for real. That is to say, can we figures is not significant to enable a statistical
was generated as shown in Table 5a. statistically conclude that this change is conclusion to be drawn that sponsorship has recall
The results indicated that, among male significant? That leads to the next table which and persuasion effects like advertising does. We
respondents, 19 agreed that sponsorship has uses the chi-square test to examine the therefore reject the null hypothesis that
recall and persuasion effect like advertising does , significance difference in the variation of sponsorship has recall and persuasion effects like
while 31 disagreed. Similarly for the female 22 responses Table 5b. advertising does.
agree and 28 disagree. From this figures it can be The Pearson chi-square value of 0.372 and the Null hypothesis 2: Sponsorship operates
seen that, more people disagree than agree. It can corresponding significant value of 0.542 which is through different cognitive process than those
however, not be concluded without a test to greater than 0.05 indicates that, the difference is utilized by traditional advertising.
____________________________
_____________________________
TECHNOLOGIESWORLD
Table 5a. Gender * Sponsorship has recall and persuasion effect like advertising does cross tabulation
Variable Sponsorship has recall and persuasion effect like advertising does
Yes No
Male 19 31 50
Gender 22 28 50
Female
Total 41 59 100
Table 5b. Chi-square tests.
Variable Value Df Asymp.Sig. (2-sided)

Pearson Chi- square 0.372 1 0.542
No. of valid cases 100
Table 5c. Gender * is sponsorship different from advertising cross tabulation.
Variable Is sponsorship different from advertising

Yes No
Male 31 19 50
Gender 28 22 50
Female
Total 59 41 100
Table 5d. Chi-square tests.
Variable Value df Asymp. Sig. (2-sided)

Pearson chi-square 0.372 1 0.542
Table 5e. Chi-square test.
Variable Value Df Asymp. Sig. (2-sided)

Pearson chi-square 0.603 1 0.034
In order to these this hypothesis, effort was made to operates through different cognitive process than those
examine whether respondent perceive sponsorship utilized by traditional advertising. We therefore, reject the
different from advertisement. From the cross tabulation, null hypothesis based on respondents’ responses that,
those who said sponsorship is different from sponsorship operates through different cognitive process
advertisement are 59 and those said they are the same than those utilized by traditional advertising.
are 41 (Table 5c). Hence, we use the Chi-square test on Null hypothesis 3: Advertising changes the consumer
Tables 5d and 5e to reach a conclusion as to whether this perception of a specific product while sponsorship
difference is statistical significant enough to enable a changes the consumer’s perception of a specific sponsor
significant conclusion to be drawn. which can rub off positively on the brand of that sponsor
The conclusion is similar to the first objective as the in terms of willingness to purchase those brands.
Pearson Chi-square value of 0.372 and significant value From previous analysis, it has been established that
of 0.542 (which is greater than 0.05) indicating that, the consumer perception of a specific product changes
difference is not significant to conclude that sponsorship consumers perception of specific sponsor which affect

positively on the brand of the sponsor in terms of pitfall. Management should carefully select the
willingness to purchase those brands. Table 2 confirm appropriate sponsorship type for the communication
this fact. It can be noticed that, 78% claimed they intent. Due to the limited resources, we recommend
transferred their liking for a company sponsorship to it’s further research to be conducted using sales as an
brand or products. additional factor to measure the effect of sponsorship on
The high Pearson Chi-square value (0.664) and the low marketing communication performance to give a better
significant value (0.040) which is less than 0.05 confirms view of the effect of sponsorship. Future research should
that, the difference in the response is significant. It can measure separately the impact television and radio on
therefore be concluded that, the data fails to reject the marketing communication performance. This will help
null hypothesis that advertising and sponsorship changes establish whether sponsorship alone contributes
the consumer perception and can rub off positively on the positively towards creating brand awareness, brand
brand of that sponsor in terms of willingness to purchase preferences, brand recall, projecting the company’s
those brands. image, above all goodwill etc., as expected by sponsors
of communications.
Conclusion
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Competitive intelligence and marketing effectiveness in
corporate organizations in Nigeria
N. Gladson Nwokah* and Frannces E. Ondukwu ane E.
1
Department Of Marketing, Rivers State University of Science and Technology, P.M.B. 5080, Port Harcourt, Nigeria.
2
Office and Information Management Department, Rivers State University of Science and Technology, P.M.B. 5080, Port
Harcourt, Nigeria.
The purpose of this paper is to assess the impact of competitive intelligence on the marketing
effectiveness of corporate organizations. While much empirical works have centered on marketing
effectiveness, the generalizability of its relationship to competitive intelligence in the Nigerian context
has been under researched. A 36- item survey questionnaire to measure competitive intelligence and
marketing effectiveness was developed and 108 corporate organizations in Nigeria were selected from
the gazette of Nigeria stock exchange as sample of this study. Postal survey was conducted with key
informants in the organizations. Returned instruments were analyzed using multiple regression and
non-parametric correlation through the use of the Statistical Package for Social Sciences (SPSS)
version 12. The results of the study reported in this paper validated the earlier instruments and finds
strong association between competitive intelligence and marketing effectiveness of corporate
organizations in the Nigerian context. The main finding of this study is that competitive intelligence lead
to marketing effectiveness in corporate organizations in Nigeria. The implications of the results of this
study are clear for scholars and managers. For managers this paper has implications on the
investigation of the link between competitive intelligence and marketing effectiveness of corporate
organizations in Nigeria. In the first place, this paper provides a direct test of the applicability of a
western management paradigm to Nigeria marketing system different from other cultures. This paper
significantly refines the body of knowledge concerning the impact of competitive intelligence on
marketing effectiveness in the Nigeria context. This paper will, no doubt, contribute to the body of
existing literature on competitive intelligence and marketing effectiveness.
Key words: Competitive intelligence, marketing effectiveness corporate organization, Nigeria.
INTRODUCTION
Unlike mental or cognitive and emotional intelligence, data and information from a very large and strategic view,
competitive intelligence focuses on monitoring the com- allowing a company to predict or forecast what is going to
petitive environment with the aim of providing actionable happen in its competitive environment (Bose, 2008). It
intelligence that will provide a competitive edge to the allows company to pro-actively rather than reactivity anti-
organization. Competitive intelligence is a very important cipates market development and remains competitive by
tool of an organization strategic planning and manage- improving its strategic decisions which leads to good
ment process. The formal exploration process of the mar- marketing effectiveness.
keting strategy paradigm has been linked with the envi- Marketing effectiveness simply defines how companies
ronmental scanning interactive as a basis for gathering go to market with the goal of optimizing their market
and processing the information and the information pro- spend to achieve even better results for both short-term
cessing theory paradigm (Dishman and Calof, 2008). and long-term objectives. In the study reported in this
Competitive intelligence on the other hand, pulls together paper, we examined the influence of competitive intelli-
gence on marketing effectiveness of a corporate organi-
zation; we adopted the Fahey’s (2007) marketing intelli-
*Corresponding author. E-mail: juglad@yahoo.co.uk. gence model as our predictor variables and Kotler (1997)
as cited by Nwokah and Ahiauzu, (2008) marketing effec-

Competitive intelligence and marketing effectiveness in corporate organizations in Nigeria 249
tiveness model as our criterion variable. We shall in this Jesus Christ over to a mob that was armed with swords
paper, described Fahey’s (2007) competitive intelligence and clubs. Judas had given them a prearranged signal:
model and the concept of marketing effectiveness. We “you will know which one to arrest when I go over and
shall describe how the empirical study was undertaken; give him the kiss of greeting” (verse 48). Verse 49 record-
present the research results and findings as well as the ed that Judas Iscariot went straight to Jesus, greeted him
discussion of the findings. The conclusions and the and kissed him. You notice that Judas Iscariot exhibited a
recommendations are stated finally. high level of intelligence to be able to let the mob know
The next section of the paper examines the origin and which among the twelve (Jesus and the other eleven
development of the competitive Intelligence, the major disciples) was Jesus Christ. This could be used to trace
fundamental elements and issues that embody the the importance of competitive intelligence.
concept, and it’s interaction with organizations’ marketing Though, the techniques of intelligence were not sys-
effectiveness. temized and the people who performed this sort of work
were not a distinctive group with unique methods and
traditions. Competitive intelligence emerged as a distinct
The concepts of competitive intelligence and market- discipline in its own right in recent time. The theoretical
ing effectiveness account of the development of competitive intelligence
has been recorded (Walle, 1999; Wright et al., 2002;
Competitive intelligence, as a distinct field, started as a Viviers et al., 2005).
specialized activity nested under marketing research In his work, Walle (1999) believed that the work of Wil-
known as “marketing intelligence” (Walle, 1999). Wright liam T. Kelley can be used to suggest the origins of com-
et al. (2002) have distinguished competitor intelligence petitive intelligence as a distinct entity. Walle argues that
from competitive intelligence. According to them, com- Kelley’s book marketing intelligence (1965), introduced
petitor intelligence is defined as those activities by which the field of intelligence, while his influential article in the
company determines and understands its competitors, journal of marketing (Kelley, 1968) provides a short and
determines and understands their strength and weak- readable account which was easily available to manage-
nesses, and anticipates their moves. They believe that ment of marketing. Kelley’s seminal work was quickly fol-
the underpinning words are identified/determined, under- lowed up with Richard L. Pinkerton’s influential five article
stand and anticipate industry and competitors but this series (Walle, 1999) in industrial marketing titled “How to
according to them only defines competitor intelligence. develop a marketing intelligence system” Walle further
Competitive intelligence on the other hand extends the argues that these documents can be seen as represent-
role to include consideration of competitor responses to tatives of pioneering intellectual foundations of the field.
consumer/customer needs and perceptions and one’s The next phase in the evolution of competitive intelli-
own responses in the strategic decision-making process. gence as recorded by Walle (1999) seems to be the se-
The implication of this is that competitive intelligence is cond stage of competitive intelligence as recorded in
wider in scope than the competitor intelligence. Wright et Vivier et al. (2005). These centers on the work of Michael
al. (2002) cited Lauginie et al. (1994) in their descriptive E. Porter. Porter’s (1980) well-known work on strategic
and succinct distinction. management and competitive analysis which focused on
Competitor intelligence is not competitive intelligence tracking specific competitor behavior and linking compe-
but only a part of it. The focus of competitor intelligence titor analysis to competitive strategy, created the back-
tends to be on problems associated with the daily profit- ground for the development of competitive intelligence as
able marketing of a company’s products or services. The a business discipline (Peyrot et al., 2002) as cited in
scope of competitive intelligence is a value-added con- Viviers et al. (2005).
cept that associates competitor intelligence and strategic In 1980 and 1990s, practitioners while continuing to fo-
planning. Some activities concerning competitive intelli- cus on how decision makers can use business intelli-
gence could be traced back to the biblical creation of the gence in strategic ways, have begun to concentrate more
universe. In Genesis 1:1-2, God created the universe and more upon the techniques of the field (Walle, 1999).
after His Spirit had moved upon the surface of the earth Viviers et al. (2005) argue that competitive intelligence is
which was without form and void. The earth was created synonymous with business intelligence, but it is believed
through the intelligence of satisfying the unsatisfied that competitive intelligence implies true purpose of
needs of the void earth. A clear case of competitive intel- intelligence that is to gain strategic advantage. They iden-
ligence actually began in the Garden of Eden. Man was tify the basic key factors of competitive intelligence to
given all the pleasures and good foods, in the garden to include competitor intelligence as well as intelligence
eat freely but was forbidden from eating the fruit of life. collected in customers, suppliers, technologies, environ-
Through competitive intelligence, they were able to dis- ments, or potential business relationship. Nwokah and
cover what man could do to disobey God and man was Maclayton (2006) identify these factors as the moderating
made to eat the forbidden fruits. Also, Judas Iscariot was variables in the relationship between customer-focus and
bribed into revealing Christ’s Location (Walle, 1999). In business performance.
Mathew 26: 47-49, Judas Iscariot intelligently handed Walle (1999) noted that the work of Leonard fuld, how-

ever, is perhaps, the most representative of the current fully committed to learning about the firm’s strategy.
state of the competitive intelligence. Fuld’s (1985) defini- The current strategy provides the framework for identi-
tive work is his competitive intelligence. Walle further fying and shaping the extension of current opportunities.
argues that as the years went on, Fuld has emerged as a The second strategy input of Fahey (2007) is the
keystone figure, not merely because of his writing but potential market place opportunities. The author argues
also because he is the founder of a major consulting firm that the executive team also needs to develop strategy
dedicated to competitive intelligence, which provides where possible, will be a winner tomorrow’s strategy. He
training, performs consulting services that are tailored to believes that the charge for intelligence is to help identify
the needs of specific clients and the Fuld organization the market place opportunities that will be focus of tomor-
has a web site which provides a wide range of informa- row’s strategy. Fahey outlined some examples of how
tion and device. intelligence teams in a number of firms assess current
In their own work, Wright et al. (2002) have outlined and projected change to alert executives to emerging
chronologic breakdown of relevant competitive intelli- potential market place opportunities.
gence articles. Though, none of these articles tested the
relationship of competitive intelligence and performance 1). Follow regulatory developments as a means to project
measure or marketing effectiveness, Wright et al., (2002) the emergence or demise of specific regulations that
outlined a total of 359 articles published on com-petitive open up access to new markets and/or allow the sale of
intelligence from 1984 to 2006. specific products.
2). Track and project research and development progress
in specific research domains as one input to identify
Strategic inputs of competitive intelligence potential new product breakthroughs at some point in the
future.
Fahey (2007) has outlined five strategic inputs an intelli- 3). Conduct patent analysis to identify patterns in the
gence researcher needs to focus on. These are market transition from research technology developments likely
place opportunities, competitor threats, competitive risks, to lead to new products or significant product modifi-
key vulnerabilities and live assumptions. He argues that cations.
each type of intelligence input requires considerable judg- 4). Use of projections competitor’s strategy to identify
ment and value-added on the part of intelligence profess- potential new products and thus emerge customer needs.
sionals. 5). Use projections of technology developments in related
product areas to identify new products or solutions that
Market place opportunities could be in the market place in two or more years.
A marketplace opportunity is a strategy which is con- Competitor threats

cerned with creating and realizing a new market place
opportunities. Opportunities define new ways of creating In competitor threats, the author noted that opportunities
and developing value for customers: new products or would be so much easier to realize were it not for the pre-
solutions; extending existing product lines, reconfiguring sence of current and potential competitors. He defines
existing solutions. Fahey (2007) noted that the executive competitor’s threats as ways that a rival can inhibit a
team continuously addresses two types of new marketing company’s strategy from succeeding in the market place.
opportunities: If threats are detected too late, resources tied up in
supporting a strategy may be substantially waste, if
1). Extending current opportunities. How can we extend threats are detected long before coming to full friction,
opportunities that are the focus of our current strategy? strategy can be adapted to eliminate, ameliorate or avoid
2). Potential market place opportunities. What oppor- the threat. The author believes that executive should
tunities beyond the reach of our current strategy should pose the following three questions:
we be considering? What opportunities may be lurking
but not yet fully evident in market place change? 1). How might competitors most adversely affect our
In extending current opportunities, Fahey (2007) be- current strategy?
lieves that short-term opportunities often centre on identi- 2). Which competitors are most likely to do so?
fying ways to modify the current strategy to add value for 3). How might we best “handle” these threats?
customers. Highlighting how intelligence created assess- Fahey argues that intelligence thus must assess current
ments leading to new opportunities to extend and leve- and potential competitor change for its strategy implica-
rage the current strategy using three industries as exam- tions for threats. The executive team must be alerted to
ples, the Fahey notes that two key exchanges must occur current or potential competitor threats.
between strategy and intelligence professionals: First, the
executive team must “challenge” the intelligence team to
Competitor risks
identify and develop the contours of new opportunities.
Second, the intelligence team must demonstrate that it is In competitive risks, the author argues that strategy is

played over time in a market place or competitive context an ideal world, marketers would have perfect information
that extends well beyond competitors. Change in and on how they act as well as how their competitors act. In
around the market place (being driven by customers, many industries, competitive marketing information is
channels, suppliers, governmental agencies, technology hard to come by.
houses, political parties, etc.) is the source not only of
marketing opportunities and competitor threats but of Customers: Understanding and taking advantage of how
competitive risks. He explained competitive risks to customers make purchasing decisions can help mar-
include any market place change that could negatively keters improve their marketing effectiveness. Groups of
impact the firm’s current or potential strategy. He advised consumers act in similar way leading to the need to seg-
that an executive team therefore should always pose the ment them. Based on these segments, they make
following three questions to its intelligence team. choices based on how they value the attributes of a pro-
duct and the brand, in return for price paid for the pro-
1). What competitive risks does our strategy face? duct. Consumers build brand value through information.
2). What competitive risks might we face in the future? Information is received through many sources, such as,
3). How can we best manage these risks? Tailoring res- advertising, word of mouth and in the (distribution) chan-
ponse to these broad questions compels the intelligence nel often characterized with the purchase funnel.
team to look beyond competitive trends, patterns and
discontinuities to isolate and assess risks and demon- Exogenous factors: There are many factors outside the
strate how they negatively impact the pursuit of specific immediate control that can impact the effectiveness of
opportunities. marketing activities. These can include weather, interest
rates, government regulations and many others.
Key vulnerabilities and assumptions
Understanding the impact these factors can have on
Discussing on the issues of vulnerabilities, Fahey argues consumers can help us to design programs that can take
that assessment involves confronting the question: To advantage of these factors or mitigate the risk of these
what is our strategy (or potential strategy) most vulnera- factors if they take place in the middle of our marketing
ble? Or, as stated in some firms: what is it that could campaigns. There are five factors driving the level of
most critically affect our strategy and that we can least marketing effectiveness that marketers can achieve
control? Such assessment forces both intelligence pro- (Nwokah, 2006; Nwokah and Ahiauzu, 2008).
fessionals and executives to go beyond merely listing
competitor threats, competitor risks and key assumptions. Marketing strategy: Improving marketing effectiveness
It compels analysis and ranking of current and potential can be achieved by employing a superior marketing stra-
threats and risks to identifying those that could most se- tegy. By positioning the product or brand correctly, the
verely impede a strategy’s success. product/brand will be more successful in the market than
Base on the forgoing, we deduce that competitive intel- competitors’ products/brands. Even with the best strate-
ligence requires a complete view of competitors. But how gy, marketers must execute their programs properly to
does the emphasis on this competitive intelligence in- achieve extraordinary results.
fluence marketing effectiveness. First let us now briefly
examine the construct of marketing effectiveness. Marketing creative: Even without a change in strategy,
better creative can improve results. The introduction of
new creative concept in an organization can increase
The concept of marketing effectiveness growth rate.
The wikipedia free encyclopedia (2006) defines market-
Marketing execution: By improving how marketers go to
ing effectiveness as the function of improving how marke-
market, they can achieve significantly greater results
ters go to market with the goal of optimizing their market-
without changing their strategy or their creative execu-
ing spend to achieve even better results for both the
tion. At the marketing mix level, marketers can improve
short-term and long-term objectives. There are four basic
their execution by making small changes in any or all of
dimensions of marketing effectiveness (Nwokah, 2006;
the 4-Ps (Product, Price, Place and Promotion) without
Nwokah and Ahiauzu, 2008). These are:
making changes to the strategic position or the creative
Corporate: Each company operates within certain execution marketers can improve their effectiveness and
bounds. These are determined by their size, their budget deliver increased revenue. At the program level marke-
and their ability to make organizational change. Within ters can improve their effectiveness by managing and
these bounds marketers operate along the five factors executing each of their marketing campaigns better.
described later in this paper. Whether it’s improving direct mail through a better call to
action or whether its editing web site content to improve
Competitive: Each company in a category operates with- its organic search results, marketers can improve their
in a similar framework as described later in this paper. In marketing effectiveness for each type of program.

Marketing infrastructure: Improving the business of phy.

marketing can lead to significant gains for companies. H2: Competitive intelligence influences integrated mar-
Management agencies, budgeting, motivation and coordi- keting efforts.
nation of marketing activities can lead to improved com- H3: Competitive intelligence influences marketing Infor-
petitiveness and improved results. mation.
H4: Competitive intelligence influences strategic orienta-
Exogenous factors: Generally, out of the control of mar- tions.
keters, external or exogenous factors also influence how H5: Competitive intelligence influences operational effi-
marketers can improve their results. Taking advantage of ciency.
seasonality, interests or the regulatory environment can
help marketers improve their marketing effectiveness. The next section describes the empirical study which
includes the methods of data collection and operatio-
The concept of marketing effectiveness has been exten- nalisation of variables. The section shows that data were
sively discussed because of its strong association with collected from primary and secondary sources. Primary
many valuable organizational outcomes such as stable, data were collected through the use of questionnaire from
long-term growth, enhanced customer satisfaction, a key informants. The results of the analysis of data are
competitive advantage and a strong marketing orientation also presented.
(Webster, 1995). Although, respective researches have
conducted empirical investigations involving the concept THE EMPIRICAL STUDY
of marketing effectiveness, a few conceptual measures of
the construct exist. Appiah-Adu et al. (2001) operationa- Research methodology
lised marketing effectiveness as amalgam of five compo-
Two extreme points of view can be identified in research metho-
nents, notably: customer philosophy, integrated market- dology namely; quantitative and qualitative. Those who take the first
ing organization, adequate marketing information, strate- approach argue that there is a similarity between social and natural
gic orientation and operational efficiency. Appiah-Adu et phenomena and similar methods can be used to study both phenol-
al. (2001) further argued that, first it is imperative to iden- mena. They favor the positivistic quantitative methodology in social
tify the importance of studying the market, recognizing science research. Those who take the second approach believe
that social and natural phenomena are different. According to them,
the numerous opportunities, selecting the most appro- a positivistic quantitative approach is inappropriate for studying so-
priate segments of the market to operate in and endea- cial phenomena. They favor a humanistic, subjective or qualitative
voring to offer superior value to meet the selected cus- approach. Due to the nature of this study, we adopted mainly the
tomer’s needs and wants. The firm argument must be quantitative paradigm.
suitably staffed to enable it perform marketing analysis,
planning and implementation. Sequentially, marketing Sample selection
effectiveness calls for management to have sufficient
information for the purpose of planning and effective A sample frame was compiled from 2007 edition of Nigerian stock
resource allocation to varying markets, products and terri- exchange gazette. 108 corporate organizations were systematically
tories. Marketing effectiveness is also contingent upon selected from the 365 corporate organizations listed in the stock
the adeptness of managers to deliver profitable strategies exchange gazette. The choice of the sample is rationalized as fol-
lows. Those listed organizations are indicative of the most
from its philosophy, organization and information re- progressive organizations in Nigeria, and have their headquarters in
sources. Lagos. The choice of Nigerian Stock Exchange is based on the fact
Therefore our purpose in this paper as stated earlier is that companies listed therein are publicly quoted companies with re-
to examine the relationship between Competitive Intelli- challenging responsibility and performance to their corporate
gence domain and marketing effectiveness. In doing this stakeholders including share holders and customers. To obtain
reliable information for this study, the key informant approach was
specific attention will be focused on the relationship bet-
used. Therefore, two key informants in each of the corporate orga-
ween the two constructs of competitive intelligence do- nizations among the sample size constituted the respondents.
mains, identified in the literature (Market place oppor-
tunity, competitor threat, competitor risks, key vulnera-
bilities and core assumptions), and the associated ma- Validity and reliability of research instrument and
measurement scales
trices for marketing effectiveness (consumer-philosophy,
integrated marketing efforts, marketing information, stra- The validity of an instrument refers to the extent to which it mea-
tegic orientation and operational efficiency. The hypothe- sures what it was intended to measure. The validity of the scales
sized relationship between emotional intelligence and utilized in this study was assessed for content and construct
Kotler’s (1977, 1997) five marketing effectiveness con- (convergent) validity. A measure can be said to possess content
structs are shown in Figure1 validity if there is general agreement among the subject and
researchers that constituent items cover all aspects of the variables
Based on the foregoing and the operational conceptual being measured (Nwokah and Maclayton, 2006). Content validity
frame work, we hypothesized thus was enhanced via the conventional process for measure develop-
ment. The competitive Intelligence and marketing effectiveness
H1: Competitive intelligence influences customer philoso- scales were tested for construct (convergent) validity. A measure

Competitive Intelligence Marketing Effectiveness

(CI)competitive risks
(ME)
Marketplace
opportunities
Competitor
threats
Competitor
risks
Key
Vulnerabilities
Operational
Core Efficiency
assumptions
Figure 1. Operational conceptual Framework: Relationships between competitive intelligence

and marketing effectiveness.
can be said to have construct validity if it measures the theoretical neration requirements, it was considered that responses should be
construct or trait that it was designed to measure. The correlation elicited from sources knowledgeable in the organization’s com-
among the component of competitive Intelligence and the corre- petitive Intelligence and marketing activities so as to limit mea-
ation among the components of the marketing effectiveness may surement error (Bowman and Abrosin, 1997). In this regard, intelli-
provide evidence of convergent validity to the extent that they are gence staff and head of marketing in each sample organization
high; that is, they are converging on a common underlying con- were treated as the key informants. With the key informants
struct. approach; data were collected from an intelligence staff on issues
After the survey had been completed the reliability of the scales relating to marketing intelligence, and a marketing manager on issues
was further examined by computing their coefficient alpha (Crom- relating to marketing effectiveness. Therefore two copies questionnaire
bach Alpha). All scales were found to exceed a minimum threshold were distributed to a company making a total of 168 copies of ques-
of 0.7 as used in previous studies (Seeman and O’Hara, 2006; tionnaire distributed. It was assumed that such managers have the best
Nwokah and Maclayton, 2006). Convergent validity is also sug- advantage point to provide the most accurate responses. A total of 158
copies of questionnaire were returned, out of which 16 were not useable
gested when the individual variable scores are combined into a
on the basis that the respondents declared no wish to take part in the
single scale to give a Cronbach alpha of 0.7982. The actual results study for various reasons.
of the scale reliability analysis are reported in Table 1 and 2. To analyze our data, SPSS for windows version 12.0 was used. A total
of 142 copies of useable questionnaire were returned and used in the
study. Raw data were put into the spread sheet of the SPSS and were
Data collection and analysis later transformed to obtain the sum of the values of competitive
intelligence and marketing effectiveness. A multiple regression analysis
A survey questionnaire was developed for this study to measure the was carried out to obtain our r 2 value, standard deviation and the sum of
study constructs. Given the nature of this study as regards data ge- competitive intelligence was regressed to the sum the square of market-

Table 1. Scale reliability of competitive intelligence elements
S/No Scale items Item to total Scale alpha if item deleted

Competitive intelligence correlation
A Marketplace opportunities
(Coefficient alpha for scale 0.7322)
1. We follow regulatory developments as a means to project the emergence or 0.4187 0.7953
demise of specific regulations that open up access to new markets and/or allow
the sale of specific products
2. We tract and project R & D progress in specific research domains as one input to 0.4854 0.7717
identifying potential new product breakthrough at some point in the future
3. We conduct potent analysis to identify patterns in the transaction from research to 0.4740 0.7797
technology developments likely to lead to new products or significant product
modifications
4. We use projections of a competitor’s strategy to identify potential new products 0.4545 0.7761
and thus emerging customer needs.
5. We use projections of technology developments in related product areas to 0.3965 0.77436
identify new products or solutions that could be in the marketplace in two or more
years.
B Competitor threats
6. We are usually at alert to current or potential competitor threats.. 0.4126 0.7471
7. Opportunities are not so much realize because of the presence of potential and 0.4121 0.7412
current competitors
8. Our strategies are formulated to win rivals. 0.4552 0.7554
9. Rivals current and potential actions pose threats to any strategy’s success 0.3900 0.7036
10. Competitor’s threats are defined as ways that a rival can inhibit a company’s 0.4690 0.7814
strategy from succeeding in the marketplace.
C Competitive risks
11 Competitive risks include any marketplace change that could negatively impact 0.4935 0.7724
firm’s current or potential strategy.
12 We usually know as early as possible, what marketplace risks may be associated 0.4555 0.7797
with current strategy or with potential strategy shifts intended to pursue new
opportunities.
13 Intelligence-based assessment of the implications of risks can shift the executive 0.4452 0.7717
team’s “understanding” of an opportunity of a strategy alternative.
14 Some risks may be immediate and totally evident in today’s competitive 0.3889 0.7471
landscape.
D Core assumptions
15 Assumptions about marketplace change underpin our current strategy. 0.4298 0.7471
16 We usually assume that no major rival would introduce a breakthrough new 0.4822 0.7412
product for at least two years.
17 We often assume that over the next three years, customers would continue to 0.4452 0.7814
purchase at the same average rate as in the prior three years.
18 We often assume the regulatory environments would not product any negative 0.4254 0.7614
surprises.
E Vulnerabilities
19 We always investigate those factors that could critically affect our strategy. 0.4441 0.7824
20 We are compelled to analyze and rank current and potential threats and risks to 0.4444 0.7826
identify those that could most severely impede a strategy’s success.
21 Assessment forces both intelligence professionals and executives to go beyond 0.4242 0.7737
merely listing competitor threats, competitor risks and key assumptions.
SPSS output version 10.0 on research data

Table 2. Scale reliability of marketing effectiveness elements
S/No Scale items Item to total Scale alpha if

Marketing effectiveness correlation item deleted
A Customer philosophy
Management recognizes the importance of designing the company to 0.4965 0.77536
serve the needs and wants of chosen markets.
Management develops different offerings and marketing plans for 0.4965 0.77436
different segments of the market
Management takes a whole marketing system view (suppliers, channels, 0.4138 0.7468
competitors, customer, and environment) in planning its business.
B Integration and control of the major marketing functions
There is high-level marketing integration and control of the major 0.4187 0.7953
marketing functions
Marketing management work well with management in research, 0.4854 0.7717
manufacturing, purchase, physical distribution, and finance.
New product development process in our company is well organized 0.4740 0.7797
C Gathering adequate marketing information
We regularly conduct marketing research to study customers, buying 0.3965 0.77436
influences, channels and competitors.
Management usually have full knowledge of the sales potential and 0.3965 0.77436
profitability of different market segments, customers territories, products,
channels and other sizes.
Effort is expanded to measure the cost-effectiveness of different 0.4138 0.7468
marketing expenditures.
D Existence of strategic orientation
Management develops an annual marketing plan and a careful long- 0.4187 0.7953
range plan that is updated annually.
The quality of current marketing strategy is clear, innovative, data-based 0.4854 0.7717
and well-reasoned.
Management formally identifies the most important contingencies and 0.4740 0.7797
develops contingency plans
E Operational efficiency
Marketing thinking at the top are communicated and implemented down 0.3965 0.77436
the line
Management is doing an effective job with the marketing resources? 0.3965 0.77436
Management show a good capacity to react quickly and effectively to on- 0.4138 0.7468
the-spot development
SPSS output version 10.0 on research data.
ing effectiveness to obtain the regression (r 2) values. The analysis how- tral tendency. It was found that the Cronbach Alpha
ever, reveals (as shown in Table 5) that there is a relationship between
Competitive Intelligence and marketing effectiveness.
coefficient for market place opportunities is 0.7322, com-
petitor threat is 0.7331, competitive risks is 0.7221, core
assumption is 0.7231 and vulnerabilities is 0.7212. Also
RESEARCH RESULTS AND FINDINGS item total scale correlation analyses calculated all varia-bles
Scale construction to be positive and highly statistically significant in their
relationship with competitive intelligence index. Mar-keting
Competitive intelligence: The descriptive findings of the Com- effectiveness: Factor Analysis was conducted in this
petitive Intelligence are reported in Table 3. It can be section to determine the dimensionality of marketing effec-
observed that the mean scores range from 3.12 to 3.81 with tiveness measurement scales and item purification. Prin-cipal
a reasonable dispersion about this measure of cen- analysis with varimax rotation was carried out to

Table 3. Competitive Intelligence Scale statistics
S/No Competitive intelligence Mean St. Item-total scale

Dev correlation
A Marketplace opportunities
1. We follow regulatory development s as a means to project the emergence or 3.12 1.03 0.4615
demise of specific regulations that open up access to new markets and/or allow the
sale of specific products
2. We tract and project R & D progress in specific research domains as one input to 3.45 1.11 0.4868
identifying potential new product breakthrough at some point in the future
3. We conduct potent analysis to identify patterns in the transaction from research to 3.66 1.21 0.4833
technology developments likely to lead to new products or significant product
modifications
4. We use projections of a competitor’s strategy to identify potential new products and 3.00 0.98 0.4545
thus emerging customer needs.
5. We use projections of technology developments in related product areas to identify 3.50 0.99 0.4852
new products or solutions that could be in the marketplace in two or more years.
BB Competitor threats (Coefficient alpha for scale 0.7212)
6 We are usually at alert to current or potential competitor threats 3.80 1.05 0.5004
7. Opportunities are not so much realize because of the presence of potential and 3.11 0.97 0.4562
current competitors
8. Our strategies are formulated to win rivals. 3.81 1.06 0.5005
9. Rivals current and potential actions pose threats to any strategy’s success 3.52 0.97 0.4925
10. Competitor’s threats are defined as ways that a rival can inhibit a company’s 3.55 0.99 0.4771
strategy from succeeding in the marketplace.
C Competitive risks
Coefficient alpha for scale 0.7221
11. Competitive risks include any marketplace change that could negatively impact 3.62 0.93 0.4887
firm’s current or potential strategy.
12 We usually know as early as possible, what marketplace risks may be associated 3.70 0.96 0.4781
with current strategy or with potential strategy shifts intended to pursue new
opportunities.
13 Intelligence-based assessment of the implications of risks can shift the executive 3.52 0.97 0.4925
team’s “understanding” of an opportunity of a strategy alternative.
14 Some risks may be immediate and totally evident in today’s competitive landscape. 3.55 0.99 0.4771
Core assumptions
15 Assumptions about marketplace change underpin our current strategy. 3.21 0.93 0.4871
16 We usually assume that no major rival would introduce a breakthrough new 3.33 0.98 0.4772
product for at least two years.
17 We often assume that over the next three years, customers would continue to 3.55 0.99 0.4771
purchase at the same average rate as in the prior three years.
18 We often assume the regulatory environments would not product any negative 3.52 0.97 0.4925
surprises.
Vulnerabilities
19 We always investigate those factors that could critically affect our strategy. 3.81 1.06 0.5005
20 We are compelled to analyze and rank current and potential threats and risks to 3.88 0.96 0.5514
identify those that could most severely impede a strategy’s success.
21 Assessment forces both intelligence professionals and executives to go beyond 3.81 0.93 0.5441
merely listing competitor threats, competitor risks and key assumptions.
SPSS output version 10.0
out to identify a set of underlying dimensions of the con- scales used to capture dimensions of organization’s mar-
struct using factor loadings greater than 0.5 and Crom- keting effectiveness are displayed in Table 4. It indicates
bach’s alpha greater than 0.6 as the cut off criteria. The that there are five factors to measure marketing effec-

Table 4. Principal component analysis of marketing effectiveness
S/No Scale items Factor Item to Crombach

Marketing effectiveness loading total
correlation
A Customer philosophy 0.7842
1 Management recognizes the importance of designing the 0.992 0.8498
company to serve the needs and wants of chosen markets.
2 Management develops different offerings and marketing plans 0.994 0.8477
for different segments of the market
3 Management takes a whole marketing system view (suppliers, 0.973 0.8039
channels, competitors, customer, and environment) in
planning its business.
B Integration and control of the major marketing functions 0.7564
4 There is high-level marketing integration and control of the 0.993 0.8498
major marketing functions
5 Marketing management work well with management in 0.993 0.8482
research, manufacturing, purchase, physical distribution, and
finance.
6 New product development process in our company is well 0.944 0.7982
organized
C Gathering adequate marketing information 0.7252
7 We regularly conduct marketing research to study customers, 0.994 0.8498
buying influences, channels and competitors.
8 Management usually have full knowledge of the sales 0.948 0.8479
potential and profitability of different market segments,
customers territories, products, channels and other sizes.
9 Effort is expanded to measure the cost-effectiveness of 0.914 0.7982
different marketing expenditures.
D Existence of strategic orientation 0.7312
10 Management develops an annual marketing plan and a 0.976 0.8498
careful long-range plan that is updated annually.
11 The quality of current marketing strategy is clear, innovative, 0.972 0.8459
data-based and well-reasoned.
12 Management formally identifies the most important 0.995 0.7907
contingencies and develops contingency plans
E Operational efficiency 0.7223
13 Marketing thinking at the top are communicated and 0.979 0.8498
implemented down the line
14 Management is doing an effective job with the marketing 0.993 0.8429
resources?
15 Management show a good capacity to react quickly and 0.995 0.8152
effectively to on-the-spot development
SPSS output version 10.0.
tiveness, as previously conceptualized by Kotler (1977, Regression analysis

1997).
Principal components analysis was used to asses the Competitive intelligence and customer philosophy
underlying relationship of each dimension within mar-
keting effectiveness. Table 4 illustrates that in all cases; a Table 5 shows the multiple regression results of the com-
single factor was extracted, suggesting the homogeneity petitive intelligence dimensions on perceived marketing
within each factor. The dimension most emphasized by effectiveness. The findings on Table 5 indicate significant
organizations in their overall marketing effectiveness ap- and positive associations between market place oppor-
pears to be customer philosophy. tunity, competitor threat, competitor risks, core assump-

Table 5. Multiple regressions of competitive intelligence and marketing effectiveness
Competitive Marketing effectiveness Spearman Significance 2

Multiple R
intelligence correlation values
Marketplace Customer Philosophy 0.623 0.904 0.691
opportunity Integration and control of the 0.608 0.904
Gathering adequate 0.654 0.771
marketing information
Existence of strategic 0.566 0.777
orientation
Operational efficiency 0.688 0.825
Competitor threats Customer Philosophy 0.661 0.908 0.688
Integration and control of the 0.612 0.908
orientation
Competitive risks Customer Philosophy 0.651 0.931 0.677
orientation
Core assumptions Customer Philosophy 0.632 0.775 0.667
orientation
Vulnerabilities Customer Philosophy 0.621 0.956 0.659
orientation
Source: SPSS 10.0 output.
and vulnerability and customer philosophy. These results Competitive Intelligence and Information gathering
provide strong support for H1
The findings on Table 5 indicate a significant and positive
association between all elements of competitive intelli-
Competitive intelligence and integrated marketing gence and adequate information gathering, these results
efforts provides strong support for H3.
The findings on Table 5 indicate a significant and positive
association between all elements of competitive intelli- Competitive intelligence and strategic orientation
gence and integrated marketing efforts. These results
again provide support for H2 The findings on Table 5 indicate a significant and positive

association between all elements of competitive intelli- tionalization of business operations has led to the conjec-
gence and strategic orientation, these results again pro- ture that marketing theories and models might well be
vides support for H4 transportable across national and cultural borders (Sin et
al., 2001), the direct application of these model to sub-
jects from another culture without any validation might
Competitive intelligence and operational efficiency create a “category fallacy”.
The findings on Table 5 indicate a significant and positive Moreover, an uncritical emulation and extrapolation of
association between all elements of competitive intelli- the experiences of USA marketing practices to country
gence and operational efficiency. These results again with different cultures and economic environments might
provide support for H5. lead to inefficient and ineffective performances of orga-
In the following section of this paper, each of the find- nizations in those countries. Our findings increase our
ings is discussed and conclusions are made based on the confidence in the cross-cultural applicability of Kotler’s
findings scale and model in studying marketing effectiveness. Of
course, this research must be replicated in other diverse
market environments and overtime to increase the
DISCUSSION generalizability of the theory. For managers, this paper
helps to assess the effectiveness of competitive intelli-
Table 5 demonstrates clearly, that where Competitive gence and marketing effectiveness in the transitional eco-
0Intelligence is deemed to be effectively taking place in nomy of Nigeria. The inconsistent growth of the Nigeria
this exploratory study, there is evidence to suggest that it economy has caught worldwide attention in recent years.
is contributing to overall marketing effectiveness of cor- Understanding more about business strategies in Nigeria
porate organizations. Moreover, the underpinning hypo- can be enormously helpful for foreign organizations inte-
theses, as stated earlier are clearly substantiated by the rested in collaborating and / or competing against Nigeria
results of this study. In general, there is a strong rela- enterprises. This paper represents the first of a series of
tionship between the competitive intelligence of a cor- studies investigating competitive intelligence and mar-
porate organizations and its marketing effectiveness. keting effectiveness in the context of corporate organiza-
Each competitive intelligence component contributes to tions in Nigeria. Given the theoretical and managerial
the marketing effectiveness measure examined, although significance of this research, it will not be the last study of
their relative influences vary according to the specific its type.
marketing effectiveness dimension.
As can be seen from Table 5, the most significant pre-
dictor of the competitive intelligence based marketing Conclusions and Recommendations
effectiveness measure is information gathering. Further-
more, from the findings, there are implications regarding The survey results suggest that a valid instrument for
possible linkages amongst the five marketing effect- measuring the competitive intelligence and marketing
tiveness dimensions utilized. These tentative results lend effectiveness of corporate organizations in Nigeria has
credence to the propositions advanced by both scholars been developed. Competitive intelligence seems to con-
and practitioners that there is a relationship between sist of five dimensions (Fahey, 2007) and be measured
competitive intelligence and organizational performance using 21 questionnaire items.
(Ahiauzu, 2006). Customer philosophy is conceived as Marketing effectiveness appears to consist of five
the key component underlying the relationship between dimensions (Kotler, 1977, 1997) and be measured using
one of the five effectiveness measures in this exploratory 15 questionnaire items which demonstrate content, crite-
paper and this is obvious in the marketing effectiveness rion and construct validity. A customer philosophy
dimensions for all the results. In essence; this paper includes management recognition of the importance of
reinforces the need for corporate organizations in Nigeria designing the company to serve the needs and wants of
to emphasis the nurturing of a sound competitive intelli- chosen markets, management development of different
gence if they are to benefit fully from increased marketing offerings and marketing plans for different segments of
effectiveness rates. the market and management decision to take a whole
The implications of the results of this study are clear for marketing system view (suppliers, channels, competitors,
scholars and managers. For managers, this paper has customer, environment) in planning its business. An
implications on the investigation of the link between com- integration and control of the major marketing functions
petitive intelligence and marketing effectiveness of cor- include a high level of marketing integration and control of
porate organizations in Nigeria In the first place, this pa- the major marketing functions, marketing management
per provides a direct test of the applicability of a western working well with management in research, manu-
paradigm to Nigeria economic system different from other facturing, purchase, physical distribution, and finance;
culture. The marketing effectiveness rating scales (Kotler, and Management usually having full knowledge of the
1977, 1997) were developed in the context of the Wes- sales potential and profitability of different market seg-
tern cultural setting. Even though the continued interna- ments, customers territories, products, channels and

other sizes. Adequate marketing information include re- Appiah-Adu K, Fyall A, Singh S (2001). “Marketing effectiveness and
business performance in the financial services industry”, J. Serv.
gularly conducting marketing research to study custom- Mark. 15(1): 18-34.
mers, buying influences, channels and competitors; Bowman C, Ambrosini V (1997). “perceptions of strategic parties,
management having full knowledge of the sales potential consensus and firm performance,” J. Manag. Stud., 34(2): 41–58.
and profitability of different market segments, customers Brooksbank R, Taylor D (2002). “The adoption of Strategic Marketing
and its contribution to the competitive success of New Zealand
territories, products, channels and other sizes; effort is companies”, Mark. Intell. Plan., 20(7): 452 – 461.
expanded to measure the cost effectiveness of different Fahey L (2007). “Connecting strategy and competitive intelligence:
marketing expenditures. Strategic orientation consists of refocusing intelligence to produce critical strategy inputs”, Strategy
management developing an annual marketing plan and a Leadersh. 35(1): 4-12.
Fuld LM (1985). “Competitive intelligence: How to Use It, How to get It”,
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data based and welled reasoned; management formally Mark.
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Harvard Business Review, November – December. pp. 67 – 75.
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keting thinking at the top are communicated and imple- implementation and control”, Prentice-Hall, Upper Saddle River, NJ.
mented down the line; management doing an effective Lauginie JM, Mansillon G, Dubouin J (1994). Strategy and Leadership.
job with the marketing resources and management show- Action Commerciale Mercatique Foucher, Paris.
Nwokah NG, Maclayton DW (2006). “Customer focus and business
ing a good capacity to react quickly and effectively on the performance the study of food and beverages organizations in
spot development. Nigeria”. Measuring Business Excellence, 10(4): 65 – 76.
This paper has sought to contribute further to the know- Nwokah NG, Ahiauzu AI (2008). “Managerial competency and
ledge concerning competitive intelligence and marketing Marketing Effectiveness in corporate organizations in Nigeria”. J.
Manag. Dev.,27(8) 858-878.
effectiveness by applying the established marketing Peyrot M, Childs N, Van Doren D, Allen K (2002). “An empirically based
effectiveness model to corporate organizations in Nigeria model of competitor intelligence use”, J. Bus. Res., 55: 747-758.
under some what unique circumstances. However, in fur- Porter ME (1980). “Competitive strategy: Techniques for Analysing
therance to the realization of set objectives, we make the Industries and competitors”, Free Press, New York, NY
Seeman ED, O’ Hara M (2006). “Customer relationship Management in
following recommendations: higher education, using information systems to improve the student-
school relationship”. Campus-wide infor. Syst. 23(1): 24–34.
1) Organizations in Nigeria should always create a com- Sin YM, Ise CB, Yan HM, Lee SY, Choro R, Lau BY (2001). “Market
petitive Intelligence unit to regularly monitor the activities Orientation and business performance: an empirical study of
of competitors and to evaluate the organizations actions Mainland china”, J. Glob. Mark, 14(3): 5 – 29.
Viviers W, Saayman A, Muller M (2005). “Enhancing a competitive
in line with that of competitors intelligence culture in South Africa”, Inter. J. Soc. Econ. 32(7): 576-
2) Management must consistently motivate its intelli- 589.
gence team so that it will analyze the customer’s needs, Walle AH (1999). “From Marketing research to competitive intelligence:
seek to satisfy them, and try to adapt the products to Useful generalization or loss of focus?”, Manag. Decis, 37(6): 516-
525.
these needs, react to competitors’ actions and res- Webster (1995). “Marketing Culture and Marketing Effectiveness in
ponses. Service Firms”, J. Serv. Mark. 9(2): 6 – 21.
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other workers in the company and share information Firms: a typology”, Mark. Intell. Plan. 20(6): 349-360.
about customers and competitors with these workers.
4) Research efforts in the future should consider certain
themes and issues that have emerged from this paper. In
line with this, attention could be devoted to examine the
relationship of these constructs in other cultural envi-
ronments other than Nigeria.
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service administration for senior civil servants of Imo State, Nigeria.
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evidence from foreign and domestic manufacturing firms in a
liberalized developing economy”, Mark. Intell. Plan. 16(7): 436-442.

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List of Contributors
Abasilim Angela Nneka João José Pinto Ferreira

Department of Management Science, Wesley University INstituto de Engenharia de Sistemas e Computadores do
of Science and Technology, Ondo, Nigeria (INESC) Porto, Faculdade de Engenharia, Universidade
do Porto, Rua Dr. Roberto Frias, 4200-465 Porto, Portugal
Kambiz Shahroudi
Department of Industrial Management, Islamic Azad Wang Zhi-Xin
University, Rasht Brunch, Rasht, Iran Institute of Finance Office of the Central Judicial Police
No. 103, 71 Middle Road, Baoding, He Bei Province, P. R.
Hajar Rouydel China
Young Researchers Club, Rash Branch, Islamic Azad Northwest University No. 229, Tai Bai North Road, Xi
University, Rasht, Iran An, Shan Xi Province, P. R. China
Yograj Singh Liang Cui
Shriram Institute of Management and Technology (PG), Institute of Finance Office of the Central Judicial Police
Kashipur, Uttrakhand, India No. 103, 71 Middle Road, Baoding, He Bei Province, P. R.
China
Charu Agarwal
Shriram Institute of Management and Technology (PG), Grace K. Ojo
Kashipur, Uttrakhand, India Department of Quantity Surveying, Obafemi Awolowo
University, Ile-Ife, Osun State, Nigeria
Ankur Bhatnagar
Shriram Institute of Management and Technology (PG), Charles J. Mambula
Kashipur, Uttrakhand, India School of Business Langston University Langston,
Oklahoma
Tina C. Chiao
Department of Business Administration, Yu Da Israel Chidi Agwambarrrr
University, Miaoli County, Taiwan Founder, AfroTrading, Nigeria
Chin-Chuan Chen F. F. Olowokudejo
Department of Marketing and Logistics Management, Yu Department of Actuarial Science and Insurance, Faculty
Da University, Miaoli County, Taiwan of Business Administration, University of Lagos, Nigeria
Lauren Strachan I. A. Adeleke
Department of Marketing Management, University of Department of Actuarial Science and Insurance, Faculty
Johannesburg, South Africa of Business Administration, University of Lagos, Nigeria
Mornay Roberts-Lombard D. J. Petzer
C-Ring 607, Kingsway Campus, Auckland Park, Department of Marketing Management, University of
Johannesburg, 2006, Gauteng Province, South Africa Johannesburg, South Africa
R. K. Uppal T. F. J. Steyn
ICCSR Sponsored Major Research Project, D. A. V. Department of Management, School of Business,
College, Malout, Punjab, India Cameron University, Lawton, Oklahoma, USA
Manuel Au-Yong Oliveira P. G. Mostert
INstituto de Engenharia de Sistemas e Computadores do School of Business Management, North-West University:
(INESC) Porto, Faculdade de Engenharia, Universidade Potchefstroom Campus, South Africa
do Porto, Rua Dr. Roberto Frias, 4200-465 Porto, Portugal
Department of Economics, Management and Industrial Azaze-Azizi Abdul Adis
Engineering, University of Aveiro, Campus Universitário School of Business and Economics, Universiti Malaysia
de Santiago, 3810-193 Aveiro, Portugal Sabah, Locked bag 2073, 88999 Kota Kinabalu Sabah
Largo de Nevogilde, 125, 4150-527 Porto, Portugal Malaysia

/LVWRI&RQWULEXWRUV §3
Evelyn Jublee Kazuhiro Takeyasu

School of Business and Economics, Universiti Malaysia Fuji-Tokoha University, 325 Oobuchi, Fuji City, Shizuoka
Sabah, Locked bag 2073, 88999 Kota Kinabalu Sabah 417-0801, Japan
Malaysia Wail Alhakimi
Yasuo Ishii Management Department, Faculty of Management and

Department of Management Design, Osaka International Human Resources Development University Teknologi,
University, 3-50-1, Sugi, Hirakata, Osaka 573-0192, Japan Malaysia
Yuki Higuchi Rohaizat Baharun
Osaka Prefecture University, 1-1 Gakuenchou, Sakai, Management Department, Faculty of Management and
Osaka-fu 599-8531, Japan Human Resources Development University Teknologi,
Kazuhiro Takeyasu Malaysia
Osaka Prefecture University, 1-1 Gakuenchou, Sakai, Edith Kwigizile

Osaka-fu 599-8531, Japan Department of General Studies, Stefano Moshi Memorial
Nader Ale Ebrahim University College-Tumaini University, Tanzania
Department of Engineering Design and Manufacture, Jaffu Chilongola

Faculty of Engineering, University of Malaya, 50603 Kilimanjaro Clinical Research Institute, Moshi Tanzania
Lembah Pantai, Kuala Lumpur, Malaysia John Msuya
Shamsuddin Ahmed Department of Food Science and Technology, Sokoine

Department of Engineering Design and Manufacture, University of Agriculture, Morogoro Tanzania
Faculty of Engineering, University of Malaya, 50603 Mercy Mpinganjira
Lembah Pantai, Kuala Lumpur, Malaysia
Department of Marketing Management, University of
Zahari Taha Johannesburg, P. O. Box 524, Auckland Park, Johannesburg,
Department of Engineering Design and Manufacture, South Africa
Faculty of Engineering, University of Malaya, 50603 Portia Oliver
Lembah Pantai, Kuala Lumpur, Malaysia
Department of Business Management, University of
B. E. A. Oghojafor Johannesburg, P. O. Box 524, Auckland Park, Johannesburg,
Department of Business Administration, University of South Africa
Lagos, Lagos State, Nigeria Ayandé Alpha
G. C. Mesike Strategy Execution Research Group (GRES), Department

Department of Actuarial Science and Insurance, University of Strategy, Social and Environmental Responsibility,
of Lagos, Lagos State, Nigeria School of Management Science, University of Quebec in
C. I. Omoera Montreal (UQAM) Canada
Department of Business Administration, University of Sabourin Vincent

Lagos, Lagos State, Nigeria Strategy Execution Research Group (GRES), Department
R. D. Bakare of Strategy, Social and Environmental Responsibility,
School of Management Science, University of Quebec in
Department of Business Administration, University of Montreal (UQAM) Canada
Lagos, Lagos State, Nigeria Wang Yong
Yasuo Ishii
School of Management, Shanghai University, Shanghai
Department of Management Design, Faculty of Business 200444, China
Administration, Osaka International University, 3-50-1,
Sugi, Hirakata, Osaka 573-0192, Japan George K. Amoako
Keiko Nagata Central Business School, Central University College,
Accra, Ghana
Department of Economics, Osaka Prefecture University,
1-1 Gakuenc305-701, Naka-ku, Sakai, Osaka 599-8531, Kwasi Dartey-Baah
Japan University of Ghana Business School Accra, Ghana

§4 /LVWRI&RQWULEXWRUV
Robert K. Dzogbenuku E. Frannces

Central Business School, Central University College, Department Of Marketing, Rivers State University of
Accra, Ghana Science and Technology, P.M.B. 5080, Port Harcourt,
Samuel Kwesie Junior Nigeria
Office and Information Management Department, Rivers
Central Business School, Central University College, State University of Science and Technology, P.M.B. 5080,
Accra, Ghana Port Harcourt, Nigeria
Adeolu O. Dairo E. Ondukwu ane

Etisalat Nigeria, Lagos, Nigeria Department Of Marketing, Rivers State University of
N. Gladson Nwokah Science and Technology, P.M.B. 5080, Port Harcourt,
Nigeria
Department Of Marketing, Rivers State University of Office and Information Management Department, Rivers
Science and Technology, P.M.B. 5080, Port Harcourt, State University of Science and Technology, P.M.B. 5080,
Nigeria Port Harcourt, Nigeria
Office and Information Management Department, Rivers
State University of Science and Technology, P.M.B. 5080,
Port Harcourt, Nigeria

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Strategic Marketing

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© 2017 The English Press

International Standard Book Number: 978-1-9789-2906-7

Osun State, Nigeria 1

Kambiz Shahroudi and Hajar Rouydel

Yograj Singh, Charu Agarwal and Ankur Bhatnagar

Tina C. Chiao and Chin-Chuan Chen

insurance industry - A South African perspective 34

Manuel Au-Yong Oliveira and João José Pinto Ferreira

the technology-innovative capability of enterprises 57

Charles J. Mambula and Israel Chidi Agwamba

Nigerian insurance industry 82

____________________________ WORLD TECHNOLOGIES _____________________________

Yasuo Ishii, Yuki Higuchi and Kazuhiro Takeyasu

Nader Ale Ebrahim, Shamsuddin Ahmed and Zahari Taha

B. E. A. Oghojafor, G. C. Mesike, C. I. Omoera and R. D. Bakare

A theoretical perspective 170

poverty reduction opportunities 177

non-practitioners perceptions 187

female and male managers in obstacle management 195

(ANP) and the Fuzzy assessment method 214

A case study of Airtel Ghana 223

Usage risk and usage opportunity model 238

corporate organizations in Nigeria 248

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A new methodology for suppliers selection and order

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Consequently, selection of appropriate supplier can signi- main research questions:

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Step1: Brain storming method

Establish evaluating criterion hierarchy

Conduct TOPSIS procedure by using the weights

Step3: Topsis Calculate negative and positive ideal solutions and

Determine of order allocation

Figure 1. The overall research processes.

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Price reduced rate

Cost Transportation cost

Delivery Achieving over-supply S5

Figure 2. Hierarchical structure to select best suppliers.

Then, using Equations 3 and 4, positive and negative ideal solution CL di

The next step of TOPSIS technique is as shown in Table 4 and is

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