The effect of suppliers market orientation and suppliers environmental conditions on manufacturers trust

The main variables included supplier’s market orientation with three inside variables as customer orientation, competitor orientation, and inter-functional coordination; and environmenta

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

CHUNG NGOC HIEU

THE EFFECT OF SUPPLIER’S MARKET

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Nguyen Dinh Tho

HOCHIMINH CITY - 2012

ACKNOWLEDGEMENTS

First gratefulness to,

Dr Nguyen Dinh Tho,

This thesis would not have been possible unless his helps to supervise me

For his wise knowledge and kindly patience, he remained forever in my respect

Second gratefulness to,

My colleagues & benefactors in Nestle, Unilever, Coca Cola, Rich, Masan, Doan Ket, Vinamilk, Vina Australia Packaging Labels Co, InterPet Group, Van Don Plastic, Rang Dong Plastic, VinaPlast, Imperial Tobacco, BAT, Kimberly Clark, Tracimexco, Hapro Group, Binh Vinh, Crown, Hercules, Ngoc Nghia Plastic, Bao Van…

For their dedicated supports in questionnaire surveying and answering

Last but not least, gratefulness to,

My family, for always being in my side

ABSTRACT

This study is desired to investigate about the effect of supplier‘s market orientation and environmental conditions on manufacturer’s trust and was taken the survey in Ho Chi Minh and some South province markets The main variables included supplier’s market orientation with three inside variables as customer orientation, competitor orientation, and inter-functional coordination; and environmental conditions contained two variables as market turbulence and competitive intensity

From many previous researches about supplier’s market orientation and trust on manufacturer, some main variables have been extracted and selected to synchronize with Vietnamese conditions and after passing the pilot interview with the quantitative method, main variables have been selected for taking the survey for this study About

300 questionnaire forms have been sent out to 300 respondents who are managing their enterprises in Ho Chi Minh city and south provinces, included Long An, Binh Duong, Dong Nai, about 180 sets have been answered and returned in which 150 sets have satisfied the purpose of the research The findings from a sample of 150 sets have revealed that the supplier‘s market orientation and environmental conditions has a positive influence on manufacturer’s trust

After analyzing by the Reliability between variables (Cronbach Alpha), Correlation (Exploring Factor Analysis) and test Multiple Regression Model, the research’s results indicated that the supplier’s customer orientation variable and environmental conditions affect significantly on manufacturer’s trust

CONTENTS

CHAPTER 1: INTRODUCTION

1.1 Research background 1

1.2 Problem statement 3

1.3 Research question and objective 4

1.3.1 Research question 4

1.3.2 Research objective 4

1.4 Research delimitation 4

1.5 Research methodology 5

1.6 Research implications 6

1.7 Thesis structure 6

CHAPTER 2: LITERATURE REVIEW 2.1 Market orientation and supplier’s market orientation 8

2.1.1 Customer orientation 9

2.1.2 Competitor orientation 10

2.1.3 Inter-functional coordination 10

2.2 Environmental conditions - Market turbulence and Competitive intensity 11

2.3 Trust and manufacturer’s trust 12

2.3.1 Trust 12

2.3.2 Manufacturer’s trust 12

2.4 Theoretical model 12

2.4.1 Independent Variables 13

2.4.2 Dependent Variable 13

2.4.3 Theoretical model and Hypotheses 14

2.4.3.1 Theoretical model 14

2.4.3.2 Research hypotheses 14

2.5 Summary 15

CHAPTER 3: RESEARCH METHODOLOGY

3.1.1 Pilot test 16

3.1.2 Main survey 16

3.1.2.1 Sample size 17

3.1.2.2 Research process 17

3.2 Measurement validation 18

3.2.1 Measures of Customer orientation 18

3.2.2 Measures of Competitor orientation 18

3.2.3 Measures of Inter-functional coordination 19

3.2.4 Measures of Market turbulence and Competitive intensity 19

3.2.5 Measures of Trust 20

3.3 Summary 21

CHAPTER 4: DATA ANALYSIS AND RESULTS 4.1 Descriptive data analysis 22

4.2 Testing factors of research model 23

4.2.1 Cronbach Alpha Reliability Analysis 24

4.2.2 Exploring Factor Analysis (EFA) 25

4.2.2.1 EFA results of the independent variables 25

4.2.2.2 EFA results of the dependent variables 27

4.3 Hypotheses Testing 27

4.3.1 Testing Assumptions of Multiple Regression 27

4.3.2 Testing hypotheses between Independent Variables and Dependent variable 28 4.4 Summary 31

CHAPTER 5: CONCLUSIONS 5.1 Overview 32

5.2 Main findings 32

5.3 Theoretical Implications 35

5.4 Managerial Implications 35

5.4.1 Supplier’s customer orientation 35

5.4.2 Supplier market turbulence 39

5.5 Further research 41

References 42

Appendices 51

Appendix 1: Questionnaire Form for Pilot Test 51

Appendix 2: Questionnaire in Vietnamese 52

Appendix 3: Questionnaire in English 54

Appendix 4: EFA results of independent variables 56

Appendix 5: EFA results of dependent variable 58

Appendix 6: Testing assumptions of multiple regression 59

Appendix 7: Multiple Regression Line results 60

Appendix 8: Histogram, Normal P – P plot and Scatter plot 61

LIST OF FIGURES

Figure 2.4: The conceptual model of the effect of supplier’s market orientation and

supplier’s environmental conditions on manufacturer’s trust 14 Figure 3.1: Research process 17 Figure 4.4 Histogram, Normal P – P plot and Scatter plot of Dependent Variable - Trust 57

LIST OF TABLES

Table 3.1: Scale of Customer orientation 18

Table 3.2: Scale of Competitor orientation 19

Table 3.3: Scale of Inter-functional coordination 19

Table 3.4: Scale of Environment conditions 20

Table 3.5: Scale of Trust 20

Table 4.1: Sample characteristics 23

Table 4.2: Cronbach Alpha of observed variables 24

Table 4.2.2: EFA for independent variables 26

Table 4.3: Multi regression between independent variables and dependent variables 28 Table 4.4: Anova between independent variables and dependent variables 29

Table 4.5: Coefficients between independent variables and dependent variables 29

ABBREVIATIONS

MO: Market Orientation

EFA: Exploring Factor Analysis

MRL: Multiple Regression Model

CHAPTER 1: INTRODUCTION

The introduction chapter identify the research background, present the problem statement, the research questions, and introduce the research methodology, the objectives as well as limitation of the study Furthermore, the significance of the research problem and thesis structure is also outlined

1.1 Research background

Market Orientation is one of the most important concept in modern marketing (Pandelica et al., 2009) This concept has been researching and developing during past two decades (Brettel et al., 2008) Most of these researches and studies are concentrated on the components of market orientation and the relationship between market orientation and the firm’s business results Although these researches were studied from variety of fields and categories, many developed and developing countries, many results founds that market orientation had such positive effects with business results (Pandelica et al., 2009) In Vietnam, the research also record that market orientation can explain up to 30% the firm business results (Hung and Hau, 2007) Vietnam economic policies nowadays have been re structuring and developing as market orientation This step brings for Vietnam to become such very brilliant business environment, attracts the foreign investments to innovate the technique in many fields so far to impulse the development of economy, especially for the transitional economy in Vietnam now However, from the past two decades, the market orientation concepts has not been populated correspondingly in Vietnam ( Hac and Nghi, 2006) This is considered such as big challenge for Vietnam’s enterprises both are private or government companies, especially when Vietnam is joining WTO

In the literature, market orientation is born from the western – where these concepts nowadays are continuing and leading in the world Kohli and Jaworski (1990) conceptualized Market orientation as the implementation of the marketing concept and developed a measure (Kohli et al., 1993) that focused on the firm’s activities and behaviors regarding customer needs, competitive information, market intelligence, and the sharing information among organizational

consists of three behavioral components (customer orientation, competitor orientation, and inter functional coordination), etc… From some research ( Tsui, 2004; Lau., 2002; Rousseau & Fried, 2001), they gave the comment for the global knowledge/value of market orientation concept as western literature results are not enough They suggest for the contributions from other continents such as South America, Africa or Asia, especially from the impressive developing countries such as Malaysia, Vietnam, Thailand, India and China (Tsui, 2004, p.492) However, there is not much research focus on this concept so as to assess, evaluate and investigate comprehensively it with the business operations or identify the market orientation components

so as to apply effectively to specific business culture in Vietnam Or, with the management team, in case they would like to invest to improve their market orientation, which factors they must contribute or focus on

On the other side, supply chain management also is a fresh category in Vietnam With the current world wide economy context, managing such good supply chain allows companies to deal with daily challenges related to production, suppliers, retail, inventory, sales, product check and delivery, warehouse operation among other or maximize the use of their resources including finance and human capital From this, the relationship between supplier and manufacturer takes

a very important role; contribute as a link in a chain since input and output of a company This relation is not simply a transaction “buy – sell” as before, but now, it becomes an integral part of business to business operations Global competition, tough local market, financial crisis…have affected to all the firms in the business environment These pressures have encouraged the firms come to decision to decrease their investments in traditional channels, finding alternative (Arthur Andersen & Co., 1995; Frazier and Antia, 1995) Toward to this, the company will be very particular on their relations, especially in choosing their suppliers In the relation with their supplier, they tends to develop relation with few but selective suppliers ( Kalwai & Narayandas, 1995) and these suppliers have to have ability to response to their requirements, satisfy company needs and contribute to the value of the customers

From these reasons, this research is studied to answer for above problems By putting the market orientation concept to the relationship between supplier and manufacturer and by using the market orientation component as Narver and Slater (1990) to investigate the market oriented

supplier in relations with their customer (manufacturer), the specific targets are verified the affects of market orientation components and environment challenge to the relationship between supplier and manufacturer

1.2 Problem statement

This theoretical model is based on literature review, in which previous research demonstrated that market orientation affects positively the level of customer’s trust (Morgan and Hunt, 1994) The literature suggests market orientation companies increase value for customers (Day, 1994), therefore, these constructs drive more satisfactions for customers (Anderson et al., 1990) and consequently more trust (Morgan and Hunt, 1994) As observed by (Luhmann, 1988), trust is used to reduce the complexity of the absent and gain positive expectation and get competitive advantages and to differentiate themselves on the market place This study explores the effects of market orientation and environmental conditions of a firm to their customer’s trust over the seller - buyer relationship

Narver and Slater (1990) identifies three market orientation components as customer orientation, competitor orientation, and inter-functional coordination, therefore, the supplier’s market orientation also contain three above components A market-oriented supplier, can be defined as a customer-focused and goal-oriented firm (George and Weimerskiirch, 1998), throughout their activities, understands well the customer’s needs and satisfies them; always knows well about strengths and weaknesses, capabilities and strategies of their key current and potential competitors (Narver and Slater 1990) and the firm can being responsive to competitor’s activities (Balakrishnan 1996); and, internally, the information is transferred thoroughly across all departments with the same purpose of serving for customer needs A market oriented supplier can contribute many values to their customers and enrich the customer’s profits Besides, the literature also recommend as supplier’s environmental factors significantly mediatory influence to their customer’s trust In this research, market turbulence and competitive intensity in the supplier are stated to influence to manufacturer’s trust

The literature recommends these variables are very significant, so, the author decides include all of them on the conceptual model, is to understand the level of supplier’s market

hypotheses might provide evidences on how supplier’s customer orientation, supplier’s competitor orientation, supplier’s inter-functional coordination, market turbulence and competitive intensity affect positively the manufacturer’s trust

1.3 Research question and objective

1.4 Research delimitation

The research was narrowed down to Ho Chi Minh city and three Southern provinces as Binh Duong, Dong Nai and Long An However, they are locating variety of manufacturers in their industrial zones therefore, the taken samples from these areas can represent for whole Vietnam The research focused on manufacturers which produced the physical products, the products categories such as services and banking, financial services were not included in this study

This study was narrowed by surveying in supplier site and manufacturer perceived the trust from supplier Data was collected from a single informant in the supplier companies This

is a common practice in marketing research (Philips, 1981) Kumar et al (1993) have suggested that choosing the appropriate key informant could alleviate some of the potential problems Then, questionnaires which were sent to member of management team or head of departments such as marketing or sales, did not indicate large differences between the key informant's view

of the relationship and the view of others involved in the relationship, providing support for the validity of data collected solely from supplier informants

This study explored the supplier’s market orientation affects on manufacturer’s trust From this step, further researches can extent more to manufacturer’s long term orientation come

to strengthen significantly the relationship between the seller and buyer in nowadays competitive business environment

1.5 Research methodology

From the relationship between the supplier and the manufacturer, this research studied a part of this relation as the manufacturer’s trust under the effect of the market orientation of supplier The research went through two phases: (1) an exploratory study and (2) a main survey

In exploratory study, a qualitative study was undertaken by a pilot survey Collected information was used to explore, adjust, and supplement to the measuring scale of the factors affected on manufacturer’s trust for supplier’s market orientation

The main survey was conducted by quantitative research in the form of questionnaire The result of questionnaire data was presented in the numerical form such as the age groups, job level of respondents who attended this survey, time for doing business with manufacturer and others These numbers were, then, demonstrate in tables, graphs or other forms of statistics Conducted in Ho Chi Minh city and some areas nearby were to confirm the components as well

as value and reliability of the measuring scales of manufacturer’s trust Cronbach alpha coefficient, Exploring Factor Analysis (EFA), and Multiple Linear Regression analysis (MLR) were applied through SPSS software; and convenience sampling was used

1.6 The research implications

This study has several important implications for both practical business (head of enterprises, marketing managers…of both suppliers and manufacturers; advertising agency and market researchers ) and academic (educators, students of the business administration department especially in supply chain management division) as follows:

The research result has been a scientific foundation so that based on it, the supplier managers will make an effective strategy to enhance the manufacturer’s trust And managers from manufacturers understand its role in this relationship together with the need of market orientation from supplier; will know how to contribute to the success of the relations

The research result contributes additionally to the supply chain management literature in particular in market orientation and trust factor

1.7 Thesis structure

This research is organized in five chapters The beginning is the introduction chapter It includes a brief overview of the research background, problems and objectives The delimitations and research methodology, the implications of research, and structure are also presented

Chapter 2 is the literature reviews and conceptual model It explores and reviews the

extant literature on market orientation, supplier’s market orientation and manufacturer’s trust The factors of supplier’s market orientation and two environmental conditions impact to manufacturer’s trust are also discussed in this chapter Based on the literature reviews, a research model is proposed

Chapter 3 is the research methodology An attention is concentrated on the research

design, then interprets and illustrates the way that primary and secondary data is collected The measurement scales apply for the research factors will be determined clearly and suitably

Chapter 4 analyzes the collected data and presents the findings from the survey in terms

of customer orientation, competitor orientation, inter-functional coordination, market turbulence

and competitive intensity Then, the results from the interviews for the effective levels of these factors on manufacturer’s trust are show as well

Chapter 5, the final part of this research is the chapter of conclusion and signification

The researcher will suggest several recommendations for focusing the factors of developing the manufacturer’s trust in terms of the theoretical and managerial significance In addition, this chapter also made a brief summary about the main content of the dissertation and further research

CHAPTER 2: LITERATURE REVIEW

Before carrying out the survey on the effect factors of supplier’s market orientation and its influence level on manufacturer’s trust, this chapter will provide a theoretical background about market orientation, supplier’s market orientation, and environmental factors as market turbulence, competitive intensity, trust and manufacturer’s trust Based on these, the conceptual model is constructed

2.1 Market orientation and supplier’s market orientation

To study about the supplier’s market orientation definition, a detail consideration of the definitions and characteristics of market orientation (MO) is necessary Literature on MO is well established and initially postulated by Drucker in 1954 To 1965, King has defined MO as an marketing concept as “a managerial philosophy concerned with mobilization, utilization and control of total corporate effort for the purpose of helping consumers solve selected problems in ways compatible with planned enhancement of the profit position of the firm” – ( King, 1965, p.85) And in 1971, Barksdale and Darden 1971) and McNamara (1972) identify three components of the marketing concept: (1) the customer as a focal point for business activities, (2) the necessity of integrating marketing activities across functions, and (3) the need for a profit orientation However, in the same period, Bell and Emory (1971) believes that profit is a consequence of customer orientation; therefore, customer orientation should replace the profit orientation while Day and Wensley (1983) assigned that marketing concept needed for a competitor orientation adequately

During that time to 1990s, many researchers have studied and developed the MO to completed definitions Narver and Slater (1990) with their study found that MO was an organizational culture and consists of three components, included customer orientation, competitors orientation, and inter-functional coordination, include all the activities involved in creating superior value for the buyers in the target market They insisted that to satisfy the target customers’ current and expected needs, market oriented organization needed to understand and

analyze the major current and potential competitors and the coordinated utilization of company resources in creating superior value for target customers

More recently, Becker and Homburg (1999) has conceptualized market oriented management as “a way to promote a business organization’s orientation towards its customers and competitors” (Becker and Homburg, 1999, p.18) or Steinman, Deshpande and Farley (2000) has analyzed the impact of the length and importance of a relationship on the market orientation gap, i.e the difference between the buyer’s and the seller’s judgment of the supplier’s market orientation

Base on above theoretical concepts, we study in line with Narver and Slater’s proposal to measure market orientation as includes three constructs as customer orientation, competitor orientation and inter-functional coordination Following this, supplier’s market orientation also measure with three constructs as supplier’s customer orientation, supplier’s competitor orientation and supplier’s inter-functional coordination

2.1.1 Customer orientation

Customer orientation is defined as the understanding of a firm about their customers, their buyers From this understanding, the buyer’s needs and wants will be fully satisfied in which these needs and wants are considered as buyer’s entire value chain, not only as it is today but also as it will evolve over time (Narver & Slater 1990)

In a competitive market, the supplier, by their specialized knowledge, consults and assists the buyer in defining the buyer decision, for example, provides more information about new technology or guides the uses of a new high tech machine that the seller believes it will be good for their buyer From this, the seller’s customer can be decrease the cost and increase the benefits In other words, the supplier must put the customer requirements in priority; always customer-focused and goal-oriented (George and Weimerskiirch, 1998) According to Hartline

et al (2000), a customer-oriented supplier has to establish a continuous communication channel with its actual and potential customers so as to create such a customer-focused environment for their company

2.1.2 Competitor orientation

Competitor orientation is understood as the firm knows well about strengths and weaknesses, capabilities and strategies of their key current and potential competitors (Narver and Slater 1990) and the firm can being responsive to competitor’s activities (Balakrishnan 1996) This might assist the company in performance increasing such as, if we know well about competitor products or a marketing strategy, the company can react by a better strategy or perform a relative products as competitor ( e.g Ohmae 1982, p.91-98) Or, understanding about competitor strengths or strategies might help the company to know which product markets or parts of those markets to enter or avoid (Porter 1979)

2.1.3 Inter-functional coordination

The term inter-functional coordination appeared, from the perspective of external marketing, as one of the three components of market orientation concept (Narver & Slater 1990); or, Kohli and Jaworski (1990) stated inter-functional coordination as a kind of market-related information between departments or functions (p.5-6) It requested a chain of information and resources must be go through and share for all departments The sharing information could be related to customers, competitors, payment schedule, issue on production, import – export policy…It might help other department or function can adjust its operations to suit with external conditions (Kohli and Jaworski 1990)

In recently, there were several definitions for inter-functional coordination such as, Tay

& Tay (2007) referred inter-functional coordination as the degree of cooperation between the different functions or departments within an organization Or, Farzard et al., (2008) was specified inter-functional coordination as “rapid and synchronized flow of information” and

“adoption between structure and strategy” (p.1483) From above theories, inter-functional coordination can be identified as two dimensions as (1) the integration and collaboration of different functional areas/departments; (2) the communication and sharing of information and resources

2.2 Environmental conditions – market turbulence and competitive intensity

As the analysis of customer orientation and competitor orientation, supplier’s environmental conditions were considered as a factor influence to manufacturer Slater and Narver (1994) suggested competitive environment as a factor for the market orientation while Jaworski and Kohli (1993) considered market turbulence, competitive intensity and technological turbulence to have effect to manufacturer

Market turbulence was defined as “changes in the composition of consumers and their preferences (Kohli & Jaworski, 1990, p.14) An unstable economic climate, ever changing customer needs, then it continually stirs up market turbulence The customers are more demanding they want: new, innovative products, increased availability, shorter lead-times, and increased differentiation of product/service, better quality and most of all, at the same price For example, the mobile phones industry illustrates a market where turbulence exists There are also thousands of tariffs and dozens of mobile phone handsets to choose from Every six months there are new mobile phones available with new features and functions

In unstable economic market, the firm has to ensure that they continually improve their business processes and generate new ideas so to take advantages of the business opportunities that such changes offer Also Jaworski defined the competitive intensity was as the conditions and level of competition in a market due to number and activities of alternative suppliers, i.e competitors, for the customers in this market (Jaworski & Kohli 1993) Further, in 1998, Appiah-Adu and Singh suggested market dynamism and competitive intensity to have a direct influence on customer orientation, then Gray et al (1998) considered market environmental conditions as a relevant variable together with market orientation influence on company

In this framework, the researcher use in line with Jaworski & Kohli in suggesting market turbulence and competitive intensity are used to measure the influence of environmental conditions to manufacturer’s trust in supplier

2.3 Trust and manufacturer’s trust

2.3.1 Trust

Trust is appeared in most of relationship models (Wilson, 1995) and is a necessary measurement of successful relationships (e.g, Mohr and Spekman, 1994; Morgan and Hunt, 1994) Given from this theory, the higher level of trust increases, the higher of long cooperation between the participants is committed Morgan and Hunt (1994) also defined trust as “the perception of confidence in the exchange partner’s reliability and integrity” (p.23) , mean that a firm expects their partners not only provide activities resulting in positive outcomes for the firm but also, not perform any actions that harming to the firm outcomes ( Anderson & Narus, 1990)

2.3 2 Manufacturer’s trust

In supplier – manufacturer relationships, the manufacturer’s trust in supplier means the manufacturer believes supplier can respond for their requirements and needs, satisfies for all manufacturer’s wants; by supplier’s activities, provide the best services and products to the manufacturer and perform as an useful partner in maximizing the value returns for manufacturer Given from this, a market – oriented supplier is likely to demonstrate to the manufacturer that (1) the supplier will provide the best products and services, (2) the supplier is behaving in the best interests of the manufacturer because the market orientation of the supplier creates customer values and satisfies customer needs, and (3) the supplier is less likely to act opportunistically for its own benefits (Anderson, Fornell, & Lehmann, 1994; Joshi & Randall, 2001)

2.4 Theoretical model and Hypotheses

Base on the literature review and the findings in the exploratory study, the conceptual model was built, to understand the level of supplier’s market orientation affects on manufacturer’s trust The hypotheses were proposed from the empirical test to examine the relationships between the independence variables and dependent variable

2.4.1 Independent variables

The independent variables were those factors affecting the Manufacturer’s Trust They were selected from some last relevant researches in literature review, basically from Narver and Slater (1990); and Jaworski and Kohli (1993) There were two factors as supplier’s market orientation and environmental conditions

Supplier orientation factor included three components as customer orientation, competitor orientation and inter-functional coordination Environmental conditions included two components as market turbulence and competitive intensity These five components were this research’s independent variables

2.4.2 Dependent variable

Manufacturer’s trust was the key dependent variable of this research In this research, the definition of manufacturer’s trust was developed by Morgan and Hunt (1994); Anderson and Narus (1990)

2.4.3 Theoretical model and Hypotheses

2.4.3.1 Theoretical model

2.4.3.2 Research hypotheses:

According to the literature stating that the manufacturer tends to develop relationships with few but selective suppliers (Kalwani &Narayandas, 1995), respond with great trust to the devoted supplier (Siguaw et al., 1998) while market-oriented supplier is purposed to serve for the manufacturer’s needs Therefore, the following hypotheses were proposed as supplier’s market orientation directly proportional to manufacturer’s trust:

Hypothesis H1: Supplier’s customer orientation is positively related to the Manufacturer’s Trust

in the supplier

Hypothesis H2: Supplier’s competitor orientation is positively related to the Manufacturer’s Trust in the supplier

Table 1: The conceptual model of the effect of supplier’s market orientation and

supplier’s environmental conditions on manufacturer’s trust

Table 1: The conceptual model of the effect of supplier’s market orientation and

supplier’s environmental conditions on manufacturer’s trust Figure 2.4: The conceptual model of the effect of supplier’s market orientation

and supplier’s environmental conditions on manufacturer’s trust

Hypothesis H3: Supplier’s inter-functional coordination is positively related to the Manufacturer’s Trust in the supplier

In such a highly uncertain and competitive environment, the consumers ‘choices and preferences changes rapidly ( Kohli & Jaworski, 1990), the supplier’s assistances are important for manufacturer’s business strategies By their high market turbulence and competitive intensity, market-oriented supplier will reflect rapidly the fluctuation in consumer’s demands and react quickly to the competitive environment and the competitors

Hypothesis H4: Supplier’s market turbulence is positively related to the manufacturer’s trust in the supplier

Hypothesis H5: Supplier’s competitive intensity is positively related to the manufacturer’s trust

in the supplier

2.5 Summary

This chapter summarizes the previous theories and research results of research models which are reckoned basic theories and inheritability knowledge to support this study Based on literature review, we select and adjust the appropriate elements for the research - the supplier’s market orientation factors in Ho Chi Minh City and some south province markets Along with the research, we also consider the dependence of manufacturer’s trust variable impacted by the five independent variables concluding supplier’s customer orientation, supplier’s competitor orientation, supplier’s inter-functional coordination, supplier market turbulence and supplier competitive intensity The theories and concepts are shown that the supplier’s market orientation having the influence to the manufacturer’s trust By passing the research method, the data collection process and method of data analysis and through the research methodology of the next chapter, the researcher will present all of these problems

CHAPTER 3: RESEARCH METHODOLOGY

The methodology consists of four main stages: (1) questionnaires design, (2) pilot test, (3) data collection, (4) hypothesis testing Each stage of the methodology will be discussed briefly in this section of this chapter A more detailed discussion can be found in Chapter 3

3.1 Research design

Through the previous relevant researches, the questionnaire was built then running the pilot test for checking the efficiency and the meaning of the questions The pilot test was purposed to explore and define the relevant items and buiding a completed questionnaire Then, the main survey was published to respondents for surveying, data collection, analysis of collected data as well as model measurement

3.1.1 The pilot test

In the pilot test, the 30 questionnaire forms were sent to 30 head of enterprises and head

of departments for answering After five days, the forms have been returned and from the outcome of this pilot test, some small changes on the questionnaire form so as to synchronized and fitted with the nature of respondents and made clear for the questions in forms Appropriate adjustment in measurement scale also was adjusted from five Likert scales to seven Likert scales

so as to make more choices on the answer for respondents and aligned with some previous researches before going live with the main survey in Ho Chi Minh City and south provinces as Long An, Dong Nai, Binh Duong

3.1.2 Main survey

The main survey was a quantitative research which was conducted in Ho Chi Minh city, Long An, Dong Nai and Binh Duong with convenient sampling; and the final questionnaires were sent to Head of enterprises, Management Board, Head of Department, especially for

Marketing and Sales Department, in summary, the questionnaires were sent to the decision makers who are leading the enterprises and giving the decisions For each enterprise, we sent only one questions form so as to get single informant

Base on as above study, the research has taken sample size was 150 samples

3.1.2.2 Research process

The research process was demonstrated in figure 3.1 as below:

Figure 3.1 Research process

3.2 Measurement

Measurement scale used in this study was multi-item seven point Likert scales, which developed and validated by previous researches (including Narver and Slater (1990); Morgan and Hunt (1994); Anderson and Narus (1990); Jaworski and Kohli (1993)…)

3.2.1 Measure of Customer Orientation

Customer orientation implies that a firm puts the customer’s interest first (Deshpande, Farley, & Webster, 1993; Joshi & Randall, 2001) From a total quality perspective, all strategic decisions a company makes are “customer-driven” In other words, the company shows constant sensitivity to emerging customer and market requirements (Evans and Dean, 2000) Knowing the customer is basically a customer satisfaction measurement process (Player and Keys, 1999) The best measures are customer-focused and goal-oriented (George and Weimerskiirch, 1998) Six observed variables with a seven-point Likert from Narver & Slater (1990) and Gray et al (1998) were primarily used to measure Customer orientation

Table 3.1: Scale of Customer Orientation

Customer

Orientation

We closely monitor and assess our level of commitment in

Our business strategies are driven by the goal of increasing

Our competitive advantage is based on understanding

Our business objectives are driven by customers

3.2.2 Measure of Competitor orientation

Competitor orientation is understood as the firm knows well about strengths and weaknesses, capabilities and strategies of their key current and potential competitors (Narver and Slater 1990) and the firm can being responsive to competitor’s activities (Balakrishnan

1996) Understanding well about competitors, it may allow the firm prevent and minimize the adverse effects (e.g Dickson 1996, p 102 - 106)

Competitor orientation was measured on three observed variables, a seven-point Likert scale developed by Narver & Slater, (1990) and Jaworski and Kohli (1993)

Table 3.2: Scale of Competitor orientation

Competitor

orientation

We respond fastly to competitive actions that threaten

We target customers where we have an opportunity for

Top Management often discuss competitor's strategies COMO3

3.2.3 Measure of Inter-functional coordination

Measurement scales for perceived quality factor were developed by Narver & Slater, (1990) The firm always requires inter-departmental coordination and sharing of information and resources Inter-departmental coordination was defined as the coordinated utilization of company resources in creating superior value for target customers (Narver & Slater, 1990)

Four observed variables with a seven-point Likert from Narver & Slater (1990) were used to measure inter-functional coordination as below table

Table 3.3: Scale of Inter - functional coordination

Inter - functional

coordination

Information about customers if freely communicated

Business functions within are integrated to serve the

In our organization, salespeople share information about

3.2.4 Measure of Environmental conditions

Market turbulence is defined as “changes in the composition of consumers and their

” (Kohli & Jaworski, 1990, p 14) Competitive intensity is the degree of competition

that a firm faces Great market turbulence helps to predict market accurately and from this, along with market turbulence, a high competitive intensity would respond rapidly to manufacturer’s needs from a market – oriented supplier Market turbulence and competitive intensity were measured by a seven – point Likert on three – item scale and four –item scale, developed by Jaworski and Kohli (1993) then adjusted by the author for easy understanding with Vietnamese respondents, including:

Table 3.4: Scale of Environmental conditions

Market turbulence

In our kind of business, customers' product preferences

Our customers tent to look for new products all the time MATUR2 Sometimes our customers are very price - sensitive, but on

other occasions, price is relatively unimportant MATUR3

Competitive

intensity

There are many " promotion wars" in our industry COMIN2Anything that one competitor can offer, others can match

Table 3.5: Scale of Trust

Trust

In our relationship, this manufacturer can be trusted at

In our relationship, this manufacturer can be counted

In our relationship, this manufacturer keeps promises it

In our relationship, this manufacturer has high integrity TRUST4

3.3 Summary

This chapter accomplished to present the research methods, the process of data collection, the method of analysis and measurement scales that were proposed to apply in this dissertation With questionnaire and the pilot interview to some Head of enterprises in Ho Chi Minh city, then a 300 official questionnaire forms were sent out for Head of enterprises, included President, Chairman, Directors, Head of Marketing Department and Sales Department, called generally were decision makers to answer for the questionnaires Only one set has been sent to each enterprise so as to avoid duplicate answer view About 180 sets have been returned and after verifying, 150 samples have been approved for test The survey was processed in Ho Chi Minh City, Long An, Dong Nai and Binh Duong provinces Quantitative data were collected and used

as a source of primary data Quantitative analysis was combined effectively and efficiently in order to handle these collected data for the next chapters of research results

CHAPTER 4: RESEARCH RESULTS

The purpose of this chapter was to present findings which were collected from the actual questionnaire survey Besides, the researcher proposed an official assessment of measures and also carried out the analysis to give the accurate answers for the research questions, hypotheses testing in the chapter two

4.1 Descriptive data analysis

The collection of data was set up based on the relationships between

supplier-manufacturer in Vietnam The firms were chosen from variety of industries which included packaging industry, beverages industry, FMCG industry, furniture industry…called manufacturer The researcher in here defined manufacturers were the enterprises that produced the products because when the enterprises produced the products, the interrelation between market oriented supplier and manufacturer were presented better then a manufacturer in service category So, in this research, we did not survey from service manufacturer such as financial or banking enterprises

Approaching to few head procurement directors and executive buyers in some famous brand name and from personal relations, letters were sent to these directors buyers in each firm for asking their cooperation Each buyer was asked to provide the contact details of their key suppliers who had doing business with manufacturers About 65 buyers were involved in this survey and assigned more than 300 their current suppliers to contact for surveying Letter from buyers, included questionnaire form were sent out to suppliers for introducing author to them so

as to prepare for survey

A total of 300 set of questionnaires were sent to suppliers On the first week after letter sending out, there were about 45 forms in returns During second week to the fourth one, 85 set were in returns From some calls directly to the respondents, around 180 set of questionnaires were returned after one month (the returned questionnaire ratio reached 60%)

After checking, there were 30 respondents which were not met the requirements of the study because of un-answered, missing information, similar answers or dishonest answers with

the same mark The rest of 150 respondents were analyzed, and the characteristics of the survey sample were presented as below

Table 4.1 – Sample characteristics

4.2 Testing factors of research model

As presented in chapter 3, the research model included four research concepts which were measured by five independent variables: (1) Supplier’s customer orientation, (2) Supplier’s competitor orientation, (3) Supplier’s inter-functional coordination, (4) Supplier’s market turbulence and (5) Supplier’s competitive intensity These components were evaluated through Cronbach Alpha coefficiency and Exploring Factor Analysis

The reliability of each observed variable was measured by Cronbach Alpha After checking, all observed variables which had Cronbach Alpha over 6.0 meeting the reliability standard would be analysis in EFA

4.2.1 Cronbach Alpha Reliability Analysis

According to Nunnally & Bernstein (1994), the observed variables which were item – total correlation value over 0.3 and the Cronbach alpha over 0.6 would be accepted

Table 4.2 showed the result of Cronbach alpha of each scale Results from the official assessment of the measures were closed to the preliminary assessment results Therefore, all observed variables would be continuously analyzed in EFA

Table 4.2 Cronbach Alpha of observed variables

Scale Mean if Item Deleted

Scale Variance

if Item Deleted

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Supplier's Competitive Intensity (Alpha = 0.701)

4.2.2 Exploring Factor Analysis

There were some criteria considered to explore factor analysis as follows:

► KMO (Kaiser – Meyer – Olkin) coefficient should be more than 0.5; significant rate of Bartlett should be less than 0.05

► Factor loading coefficient should be equal or more than 0.5 If any observed variable has factor loading coefficient less than 0.5, it should be eliminated

► Total variance explained criterion have to be more than 0.5 (>50%)

► Eigenvalue index have to be equal or more than 1 following Kaiser’s standard (Gerbing & Anderson, 1988)

► Differentiation of factor loading of a observed variable with factors should be more than 0.3 (Jabnoun & Al – Tamimi, 2003)

Principal components analysis with Varimax rotated method was applied together with the above mentioned criteria in this study

4.2.2.1 EFA results of independent variables

All the independent factors were run through the principal component analysis, using the Varimax rotation method There were 20 items of independent variables to enter EFA with Eigenvalue equal 1 The analysis results indicated that there were 19 items of independent factors being created Total Variance Explained index equal 60.47%; it meant that these created five factors could explain 60.47% of the varying data

Moreover, KMO coefficient also got the research criteria with 0.668 (>0.5), and the factor loading of the observed variables were meet the research requirement (>0.5) (Appendix 1) Therefore, the new five factors would be continuously analyzed in Regression analysis The specific new five components were attached in Appendix 2

Table 4.2.2: EFA for independent variables

Rotated Component Matrix a

Component

1 2 3 4 5 COSO5 CUSTOMER SATISFACTION MEASUREMENT 935

COSO4 CUSTOMER SATISFACTION TARGET 701

MATUR3 CUSTOMER 'S ATTITUDE ON PRICE 726

COMIN4 RELATIVELY STRONG COMPETITOR 673

MATUR2 CUSTOMER TENTS TO LOOK FOR NEW PRODUCTS 536

CORO3 COMPETITOR INFORMATION SHARING BETWEEN SALESMAN 837

CORO2 INTERNAL DEPARTMENT COORDINATION 753

CORO4 SHARING INFORMATION WITH OTHER BUSINESS UNIT 701

CORO1 INTERNALLY FREELY CUSTOMER INFORMATION 607

COMO1 RESPOND FASTLY TO COMPETITIVE ACTIONS 846

Extraction Method: Principal Component Analysis

Rotation Method: Varimax with Kaiser Normalization

Rotation converged in 5 iterations

The names of factors were identified as below:

 Factor 1 consisted of COSO1, COSO2, COSO3, COSO4, COSO5 which was named as Customer Orientation and it was abbreviated to F1

 Factor 2 comprised COMIN1, COMIN2, COMIN4, MATUR2 and MATUR3 that was named Competitive Intensity, abbreviated as F2

 Factor 3 included CORO1, CORO2, CORO3, CORO4 that was named Functional Coordination, it was F3 for short

Inter- Factor 4 included COMO1, COMO2, COMO3 that was named Competitor Orientation; it was F4 for short

 Factor 5 included MATUR1, COMIN3 that was named Market Turbulence; it was F5 for short

4.2.2.2 EFA results of dependent variable

The dependent variable also was used Varimax method to analyze EFA There were four observed items in dependent variable The only one factor was extracted from the analysis results All requirement criteria was met (Total variance explained = 69.549%, KMO = 0.737, all factor loading > 0.5) We can see the results in Appendix 3 clearly

Dependent variable was included TRUST1, TRUST2, TRUST3, TRUST4 which was named Manufacturer’s trust, and it was Trust for abbreviation

4.3 Hypotheses testing

4.3.1 Testing Assumptions of Multiple Regression

All the assumptions of multiple regressions were tested to make sure that the data did not make any violation

Sample size

The sample size applied for the research was 150 which were satisfied the required minimum sample size according to Tabachnick and Fidell (1996) as mentioned in part 3.1.2.1 above to ensure generalisability