ABSTRACT
An Effect of Small and Medium Manufacturer’s Internal Marketing on Customer Orientation, Market Orientation and Business Performance

Kim, Kwang-Ho

Department of Business Administration,
Seoul Venture University,
Seoul, Korea

(Supervised by professor Park, Hyeon-Suk)


The number of small and medium manufacturing enterprises has reached about 3.12million in 2010, accounting for 99.9% of total business enterprises, and its proportion is gradually increasing. The competitiveness of small and medium business enterprises is too low and vulnerable compared to that of large businesses and global businesses. `Management strategies to develop core corporate competency and to strengthen corporate competitiveness focused on external customers in the past, whereas the inner-directed internal marketing focused on site employees, the internal customers who are interacting with customers, is increasing in recent years.
Regarding the employees in the administrative departments as core human resource, this study considers their satisfaction to be the starting point for strengthening corporate competitiveness.
Thus this study has derived the influence factors that increase the satisfaction of employees, the internal marketing activities, and verified the effect of internal marketing on customer orientation, market orientation and business performance, a correlation between latent factors and whether customer orientation and market orientation serve as medium between internal marketing and business performance. Furthermore on the basis of the results of empirical analysis, this study intended to suggest strategic implications to the management of small and medium manufacturers.
To this end, literature study and empirical study were parallelled. Theoretical review was conducted through literature study and preliminary study and on the basis of the results, a research model was designed and hypotheses were established. For empirical analysis, 1000 questionnaires were distributed to the employees of small and medium manufacturers in Gyeonggido. Out of total 674 returned questionnaires, 63 questionnaires with inconsistent and insincere answers were excluded and 183 questionnaires for the employees with occupations that were inconsistent with the purpose of this study were used as the data for additional analysis.
428 questionnaires that were consistent with the purpose of this study were used for empirical analysis. For empirical analysis, SPSS 18.0 was used to conduct demographical analysis, exploratory factor analysis , reliability analysis and correlation analysis. Validity was secured through confirmatory factor analysis using AMOS 18.0; the conformity of overall measurement model and study model were verified.
The implications derived from the above process can be summarized as follows.
First, as for the employees in the administrative departments of small and medium manufacturers, a reward system, an internal marketing activity, had a greater effect on customer orientation than the delegation of authority whereas training and management’s support did not have significant effect. Therefore it is essential the management of small and medium manufacturers reward employees in due course of time through a proper range of reward system in order to maximize the job satisfaction of the employees in the administrative departments, and affect on the customer orientation. There should be incentives to reward the organizations for their various efforts, and there is a necessity of the delegation of authority facilitating the harmonious control of the limit in authorities and responsibilities by respecting their creative thoughts, depending on their decision and granting discretionary authority to them for decision making.
Second, as for the internal marketing activities, a reward system has a significant effect on market orientation, followed by management support and the delegation of authority, whereas training has no significant effect. Thus it is essential to establish the corporate cultures allowing employees to approach the management with ease as well as a reward system in order to induce employees to participate in planning and decision making process and to delegate authorities for them to make decision within certain range of business. In addition, the gradually appropriate training of employees is considered effective for increasing the market orientation.
Third, delegation of authority and training have a direct effect on business performance and the delegation of authority has greater effect; yet the management support and reward system do not have a direct effect on business performance. Such result suggests that the employees in administrative department can reduce complaints through discretionary authority for decision making, and training, which will in turn reduce absence and turnover rates to eventually lead to direct achievement of business objectives.
Fourth, customer orientation and market orientation directly affect business performance and customer orientation still has a greater effect, indicating there is a lack of training regarding market orientation and of market orientation awareness; continuous corporate-level training regarding market orientation are considered necessary.
Fifth, customer orientation serves as medium between the delegation of authority, reward system and business performance and as a result the delegation of authority and reward system greatly affect the business performance in conjunction with customer orientation.
Finally, the results of additional analysis suggest the conceptual awareness of internal marketing, customer orientation, market orientation and business performance is lower in female employees, young employees and the employees in administrative departments who have less service years. Thus it is essential to improve their awareness through training, which will in turn double the effect of internal m