Achieving Sustainable Performance Through TQM and Market Orientation: A Proposed Framework for Empirical Investigations - Page 3

Firm Internal- External Orientation

As earlier noted, Internal-external focused as one of the dimensions of business orientation reflects the relative emphasis of the firm’s activities during the duration of a particular strategy implementation. Quality advocates such as Shiba et al., (1993) also referred to the concept of ‘company-focused’ and ‘customer-focused’ in terms of process aspects of TQM. Explicitly, the external orientation is reflective of customer-focused TQM behaviour, which concerns with the front end of the business that is the transaction of company’s products and services with the buyer customers. It is concerned about the relationships with the external customers as sources of revenue to the firm.

Among others, external orientation aims to optimise design processes, gaining market advantage, and enhance firms’ market value by exploiting those advantages to increase the revenue (e.g. Reed et al., 1996). It thus represents a proactive response to market dynamics and management of environmental opportunities to create and sustain its “outside-in capabilities” or “market-based orientation” that is guided by the customers and other market forces (Day, 1994).

This behavioural emphasis consequently leads a firm to be either oriented more towards the customers or its internal operations. Therefore, the firms that adopt TQM can either be operation-focused or market-focused (customer oriented) as their primary emphasis. Since TQM fundamental advocates customer satisfaction, it is self evident that TQM firms display some degree of customer focus. However, their intensity of customer focus varies depending on the TQM goals and the kinds of TQM programmes implemented. It is expected that the degree of customer focus in TQM companies is lower than of market-oriented firms that embrace TQM.

Customer focus is a primary pillar of market orientation that is the behavioural characteristic of market-driven organisation (e.g. Narver and Slater, 1990; Kohli and Jaworski, 1990; Day, 1994). TQM firms and market-oriented firms though embrace the customer focus as their central philosophy, but might have applied different operating principles and tools thus achieved different degree of customer focus. Since TQM philosophy and market orientation themes converge, and for simplicity of our discussion, internal operations emphasis for TQM companies is equivalent to low concerned to external customers in market-driven organisations. In another word operation focused firms tend to be less customer orientated, which could mean that internal efficiency does not necessarily suited to meeting customers’ critical requirements - one of conditions for winning and retaining customers.

Furthermore, some of the important and unique market-based behaviours might be obscured in firms that only practice TQM. For example, continuous improvement typically focuses on operational processes and procedures are targeted at satisfying existing customer needs better. Whereas, external market focus stimulates new ideas and responsiveness to market dynamics hence targeted at anticipated needs (Day, 1994; Jaworski and Kohli, 1993; Sinkula et al., 1997, Slater and Narver, 1994, 1995), thus more proactive to future needs of the customers. Based on these arguments, firm’s orientation is a trade-off between a customer focused and internal-external emphasis. Customer focused is a subset of external emphasis, which could also means competitor focused or technology-led. Therefore, external emphasis does not necessarily mean customer focus. Figure 1.1 below illustrates the firms’ orientation in terms of operations and customer emphasis.

Figure 1.1 Firm relative emphasis on customer and operations.

Firm relative emphasis on customer and operations.

In stressing a different emphasis, firm may have followed a set of operating principles. Because firm operates in contextual environment and under varied uncertainty levels, the same precepts or philosophical orientations could mean different things among the firms. Its actual operating principles are context-specific and determined to a large extent by what the firms want to achieve and how to go about achieving it. Some authors argue for example, firm pursues TQM effort for enhancing operational control: improving existing activities, for learning and exploration or a balanced combination of these goals (Sitkin et al., 1994; Reed et al., 1996).

Conversely, different goals require different operating principles, which yield a particular emphasis in the firm’s business orientation. A growing research in market orientation (e.g. Desphande et al., 1993; Jaworski and Kohli, 1993; Narver and Slater, 1990; Pelham and Wilson, 1995; Slater and Narver, 1994), showed that firms are market oriented to a different extent, which suggests that emphasis on different elements of market orientation will yield a particular form of firm’s orientations.

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