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All content following this page was uploaded by Nurul Fadly Habidin on 18 September 2015.
Nurul Fadly Habidin, Anis Fadzlin Mohd Zubir, Nursyazwani Mohd Fuzi,
Nor Azrin Md Latip, Mohamed Nor Azhari Azman
Abstracts: The purpose of this study is to examine the sustainable performance measures for Malaysian
automotive industry using confirmatory factor analysis. In this study, sustainable performance measures
focused on environmental sustainability, economic sustainability and corporate social responsibility
sustainability. Confirmatory factor analysis was employed to test the model on a sample of 227 respondents
in Malaysian automotive industry. The results of confirmatory factor analysis show that three factors for
sustainable performance measures for Malaysian automotive industry were valid and reliable. This research
provides fundamental knowledge and direction for researchers in further research as well as practitioners to
constantly improve organizational performance through the implementation of sustainable performance in
Malaysian automotive industry.
Corresponding Authors: Nurul Fadly Habidin, Department of Management and Leadership, Faculty of Management
and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia.
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such as reducing cost, improving quality and ensuring and global market. Thus, a regulatory structure practice
timely delivery in an attempt to achieve an excellent level was gazetted to protect and control the automotive
in world class performance [4]. manufacturing activity. South Africa, for example, could
According to PROTON Annual Report [5], three risk sustain their economic performance by adopting an import
factors were highlighted by PROTON which should be substituting policies [16].
effectively managed because the existential risks might The Brazilian automotive industry could create a
affect the sustainable performance (SP) of Malaysian fairly competitive automotive industry, based on a range
automotive industry. Longenecker and Ariss [6] pointed of import substituting policies [17]. Current study by Wad
out that many organisations fail to accomplish desired and Govindaraju [18], the Malaysian automotive industry
performance result when implementing quality initiative expanded in terms of sales, production, employment and
programmes because of ineffective planning practices and local content, but failed in industrial upgrading and
failure to remove performance barriers. Thus, it is requires international competitiveness.
a strategic quality improvement practice [7, 8] such as SP For this reason, the ASEAN Free Trade Area (AFTA)
in the attempt to jump to a higher level of the global and the National Automotive Policy (NAP) were
competition. announced as industry protections to support the local
Therefore, it is necessary for organisations to automotive industry. Both AFTA and NAP have set up
understand and measure their performance improvement the main goal on the well-being of the Malaysian
in SP perspectives which aim to address the social, automotive industry in terms of competitiveness and
environmental and economic performance aspects [9-12]. industry expansion. For example, according to the AFTA
Moreover, it assists the organisation to achieve its goals, policy, there are three main objectives namely: (i) to create
understand its current situation and current issues and a single market and an international production base; (ii)
alternative solutions [13]. Effective performance to attract foreign direct investments; and (iii) to expand
measurement can be considered a significant factor in way intra-ASEAN trade and investments [19].
of doing something, customers’ satisfaction, continuous Thus, to face many challenges in the automotive
improvements and work under control [14]. environment, these policies could bring many advantages
for the local automotive industry. Various efforts have
Literature Review been made by the Malaysian government in an attempt to
Malaysian Automotive Industry: Among the Southeast establish the Malaysian automotive industry, directly and
Asia region, PROTON has transformed itself from a sub industry, indirectly.
humble car assembler to Malaysia’s largest auto
manufacturer and indigenous original equipment Sustainable Performance (SP): The successful
manufacturer [5] until the establishment of the secondary implementation of sustainable development could improve
national car marker, PERODUA in 1993. Both PROTON more than one dimension of SP namely environmental
and PERODUA dominated the local automotive industry sustainability, economic sustainability and social
to bring Malaysia into a journey which is best summed up responsibility sustainability [20, 21].
as one of pride, passion and progress. In addition, existing performance measurement is
Strategically located in the centre of Association of used to improve organisational performance such as
Southeast Asian Nations (ASEAN), Malaysia offers vast helping the organisation measure progress towards its
opportunities for global automotive and component goals, understand its current situation, address the key
manufacturers in order to set up manufacturing and issues and the options available [13]. According to Ghosh
distribution operations. Evidence show that Malaysia has [22], effective performance measurement can let us know
been attracted global automotive companies (e.g. Toyota, about a way of doing something, achieve the goals,
Honda, Nissan, BMW and Peugeot) and international customers’ satisfaction, work under control and
component manufacturers (e.g. Delphi, Continental, improvements are necessary.
Denso and Bosch) in order to launch their product in this Gadenne et al. [23] found that customer value, new
country and meet the highest consumer demands [15]. product development and information capital performance
However, Malaysian government should also are linked with a single sustainability performance
regulate the entry of foreign products in order to ensure management practices, whereas the other four
the local automotive performance can survive in the local performances such as environmental, employee value and
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Table 2: Cronbach's Alpha Rule of Thumb identifying the indicator measure for each construct. Both
Cronbach's Alpha Internal Consistency of them have similar functions but the scope of
0.9 Excellent
measurement framework is different. EFA framework is to
0.8 < 0.9 Good
0.7 < 0.8 Acceptable
delete the suggested items and place where the item
0.6 < 0.7 Questionable should be added. In contrast, CFA framework is used to
0.5 < 0.6 Poor test and examine the extent to which the data set can fit
< 0.5 Unacceptable the measurement structure.
enhance society's basic order, which is defined as Statistical Analysis: In this research, the data collection
consisting of obligations which cover both the legal from the final survey instrument was analysed using two
structure and social conventions. statistical software packages (SPSS version 20.0 and SEM
AMOS version 20.0).
Methodology: All the data in this research was collected Via SPSS version 20.0, the researcher had utilised it to
through a survey design with online and offline make smarter decisions, solve problem and improve
questionnaire. The questionnaire was administered outcome in the form of frequency, percentages,
simultaneously in each PROTON and PERODUA vendor cumulative frequency and cumulative percentages in an
by researcher. The questionnaire was mailed to the attempt to describe the characteristics of the sample with
General Manager Level/Quality Control Manager or the respect to the demographic variables. In addition, to
person with the equivalent position in the company. verify the validity and reliability of the instruments, EFA
These persons are best suited to self-report the decisions and reliability analysis had been performed using the
made regarding the manufacturing practices and the SPSS software as well.
results of the quality program implementation. During the Structural Equation Modelling (SEM) approach
data collection, 227 questionnaires were answered involves the construction of a structural model. A
completely by General Manager Level/Quality Control structural model demonstrates both the predictive
Manager in the Malaysian automotive industry. relationship and the associative relationships between
the concepts and other potential indicators. In this
Reliability Analysis: Reliability issues in current
research, AMOS version 20.0 had been selected to
accounting literature have generally focused on the
perform the SEM analysis. AMOS uses the basic overall
quantitative approach [52, 53]. According to Cronbach
goodness-of-fit measures to assess the compatibility
[54], Allen and Yen [55], Anastasi and Urbina [56] and
of the purpose model according to six criteria: Chi-
Aiken [57], the first important thing for the researcher is to
square over degree of freedom (x2 /df), goodness of
achieve an acceptable level of reliability.
Fit Index (GFI), Adjusted Goodness of Fit Index
The recommended Cronbach’s Alpha value and
(AGFI), Comparative Fit Indexes (CFI), Tucker Lewis Index
internal consistency used in this study is in line with
(TLI) and Root Mean Square Error Approximation
Cronbach [54] and the summary as shown in Table 2.
(RMSEA).
Validity Analysis: In quantitative research, validity is
RESULTS AND DISCUSSION
one of the most essential manifestations of research
method. Validity refers to the extent to which the number
obtained truly reflects what the user intended to Exploratory Factor Analysis (EFA): EFA with varimax
measure. Particularly in quantitative accounting research, rotation by 14 items from SP was done on random sample
Ryan et al. [58] raise the ultimate question on whether the (n=227) of Malaysian automotive industry to produce
researcher can draw valid conclusions from the research basic details of each SP namely: EN, EC and CSR
design. Buckley et al. [59] seem to suggest they already performance. KMO measurement showed the sampling
believe that validity is not a belonging of the measure, but adequacy as 0.92 which was greater than 0.70, signifying
instead refers to the reliability of the conclusions which that the current data was suitable for principal component
are drawn from the measure. analysis. Similarly, Bartlett’s test of sphericity was
Exploratory factor analysis (EFA) and Confirmatory significant at (p <0.001), indicating sufficient correlation
factor analysis (CFA) were adapted in order to meet the among items to proceed for analysis as described in
requirement of specifying the measurement model and Table 3.
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Fig. 1: Modified SP model: the output path diagram with three factors
As shown in Table 4, these factors in initial solution SP Measures with Three Factors: The first order
had larger Eigen values from unity. The three factors confirmatory with multiple factors tested was SP with
taken into account were accounted as 75.03% of the total three steps consisting of EN, EC and CSR performance.
variance. This shows that three latent influences are The diagram is presented in Figure 1.
associated. The last column of cumulative percentage The CFA result demonstrated a good fit. Statistics of
indicated that the variance explained by extraction x2 was 134.88 (degree of freedom = 74, p < 0.001); with a
solution was also 75.03%. ratio of x2/df, the value was 1.82 which was less than 3.0
Relating to the building of SP, 14 items were fitted in thus exhibiting a good fit. GFI was 0.92 and AGFI was
three factors as recommended. A varimax rotation was 0.89. CFI was 0.97, TLI was 0.97. The score was very close
also done. The EN, EC and CSR items were incorporated to 1.0, signifying perfect fit. RMSEA was 0.06 and less
into the expected structuring as originally designed. than 0.08 and reflected good fit. RC indicated a value of
The load factor was higher than 0.40 to the factors and no less 1.00, implying that discriminant validity was
item were suggested to be removed. acceptable. Therefore, it confirms the ability of the three
factors to measure the SP.
Confirmatory Factor Analysis (CFA): Through the measurement model of SP measures,
Measurement model test is the test whereby SP three factors of model analysis as measurement model for
measures are tested using the first order confirmatory SP measures demonstrated good fit and proved that this
model and confirmed for evaluating construct validity by model is valid and reliable for Malaysian automotive
using the maximum likelihood method with multiple industry. Finally, SP is represented by three variables
factors. namely, environmental, economic and CSR.
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World Appl. Sci. J., 33 (6): 1017-1024, 2015
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