Journal of Business Research 58 (2005) 446 – 456

Effects of quality management and marketing on

organizational performance
Kee-hung Lai*, T.C. Edwin Cheng 1
Department of Logistics, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, China
Received 1 June 2002; received in revised form 1 March 2003; accepted 1 August 2003

Abstract

We test the relationships among quality orientation, market orientation, and organizational performance. Quality orientation looks at the
level of quality management being implemented, while market orientation examines the level of marketing being practiced. Using data from
304 organizations having operational quality management systems, we test a structural model examining the hypothesized relationships
among the three constructs. The quantitative survey results are supplemented with qualitative data collected from in-depth interviews with
selected respondent organizations having different levels of quality and market orientations. The findings reveal that quality orientation and
market orientation are complementary and substantiate the view that quality management and marketing reinforce each other in enhancing
organizational performance. Management implications for the collective implementation of quality management and marketing are discussed.
D 2003 Elsevier Inc. All rights reserved.

Keywords: Quality; Marketing; Implementation; Performance

1. Introduction that considers the quality management/marketing interface

A number of studies have been conducted to examine the
impact of quality management, particularly TQM (e.g.,
Hendricks and Singhal, 1997), and the impact of marketing
(e.g., Narver and Slater, 1990) on business performance.
However, the literature is short of empirical studies on the
combined effects of quality management and marketing,
although they have been considered complementary busi-
ness approaches for performance improvement (Lai and
Weerakoon, 1998). The objective of this study is to explore
whether quality management and marketing are comple-
mentary business approaches in organizations and, if so, the
extent of their performance impact. To investigate the impact
of these two ‘‘different’’ business approaches, which when
implemented together are expected to bring better perfor-
mance than implemented separately, a mail survey using
structured questionnaire was conducted, complemented by
follow-up in-depth case study analyses. This study adds to
the existing literature by providing a theoretical framework
* Corresponding author. Tel.: +852-2766-7920; fax: +852-2330-2704.
E-mail addresses: lgtmlai@polyu.edu.hk (K. Lai),
lgtcheng@polyu.edu.hk (T.C.E. Cheng).
1
Tel.: +852-2766-5215; fax: +852-2356-2682.
and its impact on organizational performance. Further,
empirical linkages among quality management, marketing,
and organizational performance are examined.
2. Theoretical framework and hypotheses
Quality is an abstract concept depending on the desire of
the individuals involved with a primary emphasis on the
satisfaction of customer’s needs and wants. One important
point to note about the meaning of quality is the multidi-
mensional nature of the concept (Garvin, 1987). To direct
employees’ efforts towards the goal of customer satisfac-
tion, a common understanding of the term quality is
required. Viewed from this perspective, quality has become
a critical strategic issue rather than an operational one. What
a quality management system emphasizes is the organiza-
tional ability to satisfy customer needs precisely and prof-
itably involving all members of an organization.
The marketing concept centers on the management of
market ‘‘exchange’’ between customers and organizations. It
helps organizations to achieve exchange-determined goals
more effectively (Houston, 1986). The marketing concept
requires firms to take a proactive attitude to do business and

0148-2963/$ – see front matter D 2003 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2003.08.001
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
be responsive to customer needs and market changes (Kohli
and Jaworski, 1990).
Quality management can potentially contribute to the
effectiveness of marketing implementation in three aspects
as it plays the role of (1) internal integrator, (2) external
integrator, and (3) efficiency enhancer. On the other hand,
marketing can add substantial value to quality management
implementation through its functions as (1) customer win-
dow and (2) quality leader.
2.1. Quality management as internal integrator
The most severe criticism about the marketing concept
concerns its tendency to be practiced as a set of functional
activities rather than an organization-wide approach (e.g.,
King, 1985). If this should happen, it would hinder the
voices of customers to be translated into internal improve-
ment processes and filtered throughout the organization for
the benefits of customers, thus yielding the risks of losing,
misinterpreting, and distorting the voices of customers
generated from marketing to other internal functions. The
holistic nature of quality management, particularly TQM,
together with its set of management tools and techniques,
are of potential use for effective marketing implementation
(Day, 1994) and breaking down functional barriers (Hack-
man and Wageman, 1995). The consequence of teamwork,
as prompted by the team-base quality management ap-
proach, is penetration of the marketing concept that perme-
ates the whole organization. The total involvement aspect of
quality management and its related tools (e.g., QFD) ensures
congruency between the voices of customers and the voices
of processes for the delivery of customer satisfaction.
2.2. Quality management as external integrator
In addition to managing relations among organizational
functions, relationships with customers and the network
organizations such as suppliers, distributors, and advertising
agencies should not be neglected for effective marketing
implementation (Webster, 1992). One important note about
quality management is its emphasis on establishing mutu-
ally supportive forward relationship with customers, and
backward relationship with the network organizations, par-
ticularly suppliers that have significant impacts on customer
satisfaction (Deming, 1986). The relationship emphasis of
quality management complements marketing, particularly
the relational marketing approach (e.g., Grönroos, 1996) to
the cultivation of long-term relationships with customers
and the network organizations.
2.3. Quality management as efficiency enhancer
Marketing as a business approach is dedicated to both
the achievement of effectiveness, i.e., the ability to create
and keep customers, and the achievement of efficiency,
i.e., the achievement of maximum output from minimum
447
input. While marketing plays the role to ensure ‘‘doing the
right things,’’ quality management complements marketing
with an emphasis on continuous process improvement for
‘‘doing the things right’’ across the whole organization.
From the standpoint of efficiency, this emphasis is of great
value to marketing, particularly at the tactical level involv-
ing a series of operational activities (e.g., advertising
campaigns, new product launches), which needs under-
standing of such process variables as cycle time, capacity,
yield, waste, and flexibility.
2.4. Marketing as customer window
Although quality gurus, such as Deming (1986), have
discussed the importance of customer wants, they give
little practical advice on how to assess wants so that
appropriate product/service specifications could be estab-
lished. Marketing, particularly through its role in promot-
ing listening to the voices of customers in organizations,
has too often been ignored in quality improvement, with
the result that internal process improvement often has had
no clear connection to customer needs (Kordupleski et
al., 1993), for instance, producing products/services that
customers do not want. The role marketing plays is
critical to quality management implementation, as organ-
izations must ensure that their quality improvement
efforts are focused on improving customer satisfaction
rather than on management’s own perceptions of quality
requirements.
2.5. Marketing as quality leader
For successful quality management implementation, it is
important that all involved employees understand the
customer definition of quality and the needs of other
functional areas to meet the customer requirements. Viewed
from this perspective, marketing links requirements from
the external environment with the relevant functional areas
within the organization (Gummesson, 1991) and contrib-
utes to developing priorities of quality improvement and
providing a road map for utilizing company resources. This
creates an environment where employees at all levels
understand how priorities are set and connected with
customer needs, and the network organizations are in-
formed of the customer requirements.
The above discussions highlight that quality manage-
ment and marketing share the concepts of customer
orientation, interfunctional coordination, and continuous
process improvement for successful implementation. The
compatibility of quality management and marketing
implementation for organizational performance improve-
ment is manifested. Thus, we hypothesize the following
relationships.
Hypothesis 1: The quality orientation of a firm correlates
positively with its market orientation.
448 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
Hypothesis 2: The quality orientation of a firm affects
positively its organizational performance.
Hypothesis 3: The market orientation of a firm affects
positively its organizational performance.
3. Research design and results
3.1. Sample
To investigate the performance impact of quality man-
agement, it is necessary for the validity of sample selection
that the sampled organizations demonstrate certain levels of
sophistication in quality management implementation. In
line with previous studies on performance impact of quality
management (e.g., Adam, 1994; Powell, 1995), we sample
quality management practicing firms. The population sam-
pled in this study consists of all companies in Hong Kong
practicing quality management.
As the measures of quality orientation, market orienta-
tion, and organizational performance are typically applied to
the level of business units, the study uses business units of
an organization, or the whole organization as the unit of
analysis if the whole of the organization is accredited with
respect to quality management systems such as the ISO
9000 series. A sampling frame comprising all business
units/organizations in Hong Kong (referred to as companies
below) known to have a quality management system is used
as the sampling population. This sampling frame includes
the Hong Kong Management Association’s (HKMA) qual-
ity award winners and finalists (n = 10) and companies
certified to ISO 9000 series in Hong Kong (n = 1082). We
acknowledge that the sampling frame may result in posi-
tively biased returns because the respondent companies
have considerable experience in quality management imple-
mentation. However, we consider that samples of companies
with no involvement in quality management implementation
have neither the capacity nor the necessary knowledge to
meaningfully respond to the research questions.
We choose the study respondents based on a key-infor-
mant methodology (Phillips and Bagozzi, 1986). Like other
quality management studies (e.g., Adam, 1994; Powell,
1995), we target a single well-informed respondent from
each sampled organization. For each organization, the
respondent is the quality manager or the personnel respon-
sible for quality management in the organization. Because a
quality management system requires a company-wide focus,
it is natural to assume that these informants have a good
understanding of the quality management systems in their
organizations and an appreciation of the impact of such
systems on their marketing practices and organizational
performance. To minimize the common method bias and
to triangulate the survey research findings, we conduct a
post hoc study involving a cross-case investigation of
selected companies showing different degrees of quality
orientation and market orientation. In the post hoc study, the
research design incorporates several techniques for ensuring
the quality of the case studies and confirming the findings
(cf. Eisenhardt, 1989).
3.2. Data collection
We draw a sample of 1092 companies from the buyer’s
guide of the Hong Kong Quality Assurance Agency
(HKQAA), the ISO 9000 directory published by the Hong
Kong Trade Development Council (HKTDC), and the list of
winners and finalists of the HKMA’s quality management
award. We solicit only one response from each sample
company. Measures are taken to cross-check the sample to
avoid double mailing. We send out the questionnaire twice.
The two mailings of the survey questionnaire yield 342
returns with 304 of them valid for data analysis, represent-
ing a usable response rate of 28.6%. The sample consists of
69 manufacturing companies, 107 service companies, 114
construction companies, and 14 public utilities. We conduct
a test on nonresponse bias using the t test, with the
respondents in the first and the second mailings as the
proxy ‘‘respondents’’ and ‘‘nonrespondents,’’ respectively,
to determine if there are significant differences in the mean
scores of the quality orientation, market orientation, and
organizational performance constructs between the two
groups (Armstrong and Overton, 1977). The results show
no differences between the groups at P > .05 level (quality
orientation, t =
0.32; market orientation, t =
0.24; orga-
nizational performance, t =
0.36), suggesting that nonre-
sponse is not a problem in this study.
3.3. Measures
We adopt Black and Porter’s (1996) 10-dimension, 32-
item instrument to measure quality orientation. The instru-
ment represents literature-based and empirically tested ele-
ments of quality management implementation. We find
seven potentially confusing items, each asking two ques-
tions in the Black and Porter’s (1996) instrument during the
panel review of the study. We split each of those items into
two, resulting in a 10-dimension, 39-item instrument mea-
suring quality orientation. The 20-item MARKOR instru-
ment developed by Kohli et al. (1993) is used to measure
market orientation. To increase the content validity of both
the quality and market orientation measures, we add illus-
trative examples to most of the items to facilitate respond-
ents’ understanding of the items. While both quality
management and marketing emphasize satisfaction of dif-
ferent stakeholders, many extant studies about their perfor-
mance impact are confined to financially related indices
only (e.g., Hendricks and Singhal, 1997; Narver and Slater,
1990). To overcome the limitations of these studies, we
define organizational performance using the multimodel
performance framework (MMPF) of Weerakoon (1996) to
address the interests of various stakeholders rather than
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 449

those of stockholders only. We use perceptual measures on a
five-point scale (1 = strongly disagree to 5 = strongly agree)
because of their high level of convergence with objective
measures (Venkatraman and Ramanujam, 1986). The mea-
surement items are provided at Appendix A.
3.4. Validity and reliability
Validity and reliability of the three constructs are initially
assessed using coefficient alpha (Cronbach, 1951) and item –
total correlation analysis. Confirmatory factor analysis (CFA)
is then performed to evaluate the three constructs at both first-
and second-order levels. The results show that all the con-
struct items have a reasonably high loading on their first-
order factors in item –total correlation analysis, ranging from
the lowest loading of .42 to the highest loading of .80. All the
alpha values of all first-order factors of the three constructs
exceed the .70 cutoff level, except two (teamwork structures
for improvement, a=.67, and corporate quality culture,
a=.69), which are just a shade below the benchmark level.
3.5. Measurement model estimation
In CFA, we allow all the first-order factors to correlate
freely in their respective measurement models. All the
construct items, except three with an asterisk in Appendix
A, load significantly, i.e., k>.30, t>2, onto their first-order
factors in the analysis with the loading in the range between
.69 and 1.0, thus establishing the convergent validity of the
items. The three items are retained as other measures such as
item –total correlation coefficient and alpha value in their
first-order factors suggest that there is sufficient internal
consistency among the items in their first-order factors
despite inclusion of those items in the measurement models.
Table 1 provides the means, standard deviations, and
intercorrelations of the 17 first-order factors of the three
constructs. We test discriminant validity with phi estimate,
i.e., intercorrelation among first-order constructs. All phi
values shown in Table 1 are significant at P < .01 level.
Discriminant validity is not achieved in some cases as some
of the first-order factors are highly correlated. This is
expected as the first-order factors are components of the
second-order they are measuring.
Using composite scores of the first-order factors by
taking the arithmetic mean of the items, we perform CFA
to assess the measurement models of quality orientation,
market orientation, and organizational performance. Table 2
presents the CFA results with lambda loadings, standard
errors, t values, and error variance estimates at the second-
order level. Table 3 displays the means, standard deviations,
and intercorrelations among the three constructs.
Table 2 shows that all alpha values for all three second-
order constructs exceed the .70 cutoff level, yielding satis-
factory evidence of internal consistency, with the highest
being .95 for quality orientation, and the lowest being .86
for market orientation. Furthermore, all first-order factors
have large and significant lambda loadings, i.e., k>.30, t>2,
on their corresponding a priori specified second-order
factors. Thus, these measures display adequate convergent
validity. The loadings range from the lowest of .65 to the
highest of .91 for the quality orientation construct, and from
.52 to .69 and from .58 to .60 for the constructs of market
orientation and organizational performance, respectively. In
addition, we evaluate discriminant validity among the three

Table 1
Descriptive statistics and intercorrelations of the first-order factors
No. Mean S.D. 1 2 3 4 5 6 7 8 9 10
of items
1. People and customer management 4 3.61 0.80 1.00
2. Supplier partnerships 3 3.64 0.82 .70 1.00
3. Communications of improvement information 4 3.30 0.83 .74 1.00 1.00
4. Customer satisfaction orientation 6 3.41 0.82 .93 .93 .95 1.00
5. External interface management 3 3.64 0.89 .69 1.00 1.00 .92 1.00
6. Strategic quality management 8 3.46 0.80 .69 1.00 1.00 .92 1.00 1.00
7. Teamwork structures for improvement 2 3.30 0.97 .99 .58 .62 .85 .56 .57 1.00
8. Operational quality planning 3 3.40 0.87 1.00 .68 .71 .91 .66 .67 1.00 1.00
9. Quality improvement measurement systems 4 3.82 0.80 1.00 .68 .71 .91 .66 .67 .99 1.00 1.00
10. Corporate quality culture 2 3.30 0.98 1.00 .71 .74 .93 .69 .70 .99 1.00 1.00 1.00

No. Mean S.D. 11 12 13 14 15 16 17

of items
11. Market intelligence generation 6 3.54 0.79 1.00
12. Market intelligence dissemination 5 3.50 0.83 .73 1.00
13. Responsiveness to market intelligence 9 3.77 0.65 .68 1.00 1.00
14. Motivation performance 5 3.44 0.72 1.00
15. Market performance 3 3.70 0.69 .97 1.00
16. Productivity performance 3 3.52 0.77 .99 .95 1.00
17. Societal performance 4 3.56 0.70 .99 .93 1.00 1.00
All correlation coefficients are significant at .01 level.
450 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456

Table 2 Table 4
Results of confirmatory factor analysis at second-order level Assessment of discriminant validity
Parameter Path S.E. t value Error Test Chi-squared Chi-squared Difference
estimate variance constrained unconstrained
(k)a estimate model (df) model (df)
(d)a Quality orientation and 156.7 (65) 151.2 (64) 5.5 *
Quality orientation(a=.95) market orientation
People and customer .84 – – .29 Quality orientation and 178.9 (77) 156.2 (76) 23.7* *
management (k 1,1)b organizational performance
Supplier partnerships (k 2,1) .65 .06 12.7 .58 Market orientation and 49.8 (14) 44.6 (13) 5.2 *
Communications of improvement .85 .05 19.1 .27 organizational performance
information (k 3,1) Chi-square difference.
Customer satisfaction .84 .05 18.5 .30 * Significant at P < .05 level.
orientation (k 4,1) * * Significant at P < .01 level.
External interface .83 .06 18.3 .31
management (k 5,1)
Strategic quality .91 .05 21.5 .17 observed indicators possess acceptable measurement prop-
management (k 6,1)
erties, we proceed to estimate the structural model.
Teamwork structures .75 .07 15.6 .44
for improvement (k 7,1)
Operational quality planning (k 8,1) .69 .06 14.0 .52 3.6. Structural model estimation
Quality improvement .86 .05 19.5 .26
measurement systems (k 9,1) Table 5 shows the results of individual paths in the
Corporate quality culture (k 10,1) .85 .07 19.0 .28
structural model. The overall fit of the structural model is
Market orientation(a=.86) considered adequate with the results (Model 7) displayed in
Market intelligence .67 – – .27 Table 6. The structural model is estimated and a reasonable fit
generation (k 1,2)a is obtained, where v2 = 300.1, df = 116, P=.00, although the
Market intelligence .69 .07 15.2 .31 chi-square statistic is significant. This is to be expected, given
dissemination (k 2,2)
the large number of variables in the model (Bagozzi and Yi,
Responsiveness to market .52 .05 8.5 .36
intelligence (k 3,2) 1988). However, other indicators suggest that the model fits
well: goodness-of-fit index (GFI)=.90, comparative fit index
Organizational performance(a=.89) (CFI)=.96, normed fit index (NFI)=.93, root mean square
Motivation performance (k 1,3)a .58 – – .35 (RMR)=.022.
Market performance (k 2,3) .59 .06 16.5 .26
The estimates of the loadings of the first-order constructs
Productivity performance (k 3,3) .60 .07 14.4 .41
Societal performance (k 4,3) .59 .06 16.1 .29 on the second-order constructs are also tested through t
a values, and all lambda parameters are found to be significant,
Completely standardized estimate.
b
The corresponding parameter is set to 1.00 (unstandardized) to fix the i.e., t>2. As all of the goodness-of-fit criteria demonstrate
scale of measurement. good ‘‘fit’’ (e.g., GFI, CFI, and NFI >.90), the structure of the
model is considered reasonably accurate, i.e., accounting for
the variability observed in the data and achieving an accept-
second-order constructs using pairwise tests by comparing a able level of model fit. To provide greater confidence for the
model with the correlation constrained to one with the proposed model and to check for better-fitting, more parsi-
unconstrained model. Results in Table 4 show that discrim- monious models, we test the proposed model (M7) against a
inant validity is achieved among the three constructs be- set of alternative models (M1 – M6). The null model in M1 is
cause of the significant differences between the constrained used as the baseline model in this study. The baseline model
models and the unconstrained models. Nomological validity implies that the relationships among the three constructs are
is also supported by the positive, significant intercorrela- independent, i.e., parameters restricted from free estimation
tions among the three constructs as shown in Table 3. to zero. The estimates of the proposed model and the
Having determined that the latent constructs and their goodness-of-fit comparisons with the alternative models are
shown in Table 6.
Comparison of the proposed model with the six alternative
Table 3 models shows support for fitness of M7. Although all seven
Descriptive statistics and intercorrelations between second-order factors models have a significant chi-square value, we find that M7
Mean S.D. Intercorrelations has the best fit to the data as indicated by a smaller chi-square
1 2 3 value, v2 = 300.1, df = 116, P=.00, a higher value in GFI=.90,
Quality orientation 3.37 0.79 1.00 CFI=.96, NFI=.93. A comparison of the RMR among the
Market orientation 3.37 0.62 .89 1.00 models also shows that M7 has a smaller value, implying that
Organizational performance 3.56 0.63 .83 .92 1.00 it has an adequate fit to the observed data comparing with the
All correlation coefficients are significant at .01 level. other six alternative models. However, many of these good-
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456 451

ness-of-fit indicators in M5 are close to those in M7. The Table 6

Comparisons of the goodness-of-fit of the proposed model (M7) with
latter is preferred to the former in model comparison because
alternative models (M1 – M6)
M7 has a smaller chi-square value. Since the proposed model
Path relationship M1 M2 M3 M4 M5 M6 M7
is found to be better than the alternative models for examining
the relationships among quality orientation, market orienta- Quality no no no yes yes no yes
orientation X
tion, and organizational performance, the proposed model is
market
accepted and used for hypothesis testing. orientation
An examination of the path coefficients among the higher Quality no yes no yes no yes yes
order constructs and their associated t values shows that, orientation !
except for the quality orientation to organizational perfor- organizational
performance
Market no no yes no yes yes yes
Table 5 orientation !
Structural model estimates organizational
performance
Path S.E. t value Error
estimatesa variance Goodness-of-fit indices
estimatea Chi-square (v2) 974.8 708.2 648.6 356.2 300.9 616.5 300.1
Structural paths Degree of 119 118 118 117 117 117 116
Quality orientation X market .89 .04 9.76 – freedom (df)
orientation (U 2,1) Probability .00 .00 .00 .00 .00 .00 .00
Quality orientation ! .04 .10 0.33 – GFI .76 .84 .85 .88 .90 .85 .90
organizational NFI .79 .85 .86 .92 .93 .87 .93
performance (c 1,1) CFI .81 .87 .88 .95 .96 .89 .96
Market orientation ! .88 .11 6.80 – RMR .26 .20 .25 .025 .022 .21 .022
organizational
performance (c 2,1)
mance path, the completely standardized path estimates are
Measurement model all significantly different from zero at P < .01 level, with the
Quality orientation
People and customer .84 – – .30
value of the parameter estimates, standard errors, and t values
management (k 1,1)b shown in Table 5. We also find that the models with quality
Supplier partnerships (k 2,1) .65 .06 12.7 .58 orientation and market orientation intercorrelation, i.e., M4,
Communications of .85 .06 18.9 .28 M5, M7, have better model fitness to the observed data than
improvement those without, i.e., M1, M2, M3, M6. This provides support
information (k 3,1)
Customer satisfaction .83 .06 18.3 .31
for the complementary nature of quality management and
orientation (k 4,1) marketing in organizational performance improvement.
External interface .83 .06 18.3 .31
management (k 5,1)
Strategic quality .91 .05 21.6 .16 4. Analysis and implications
management (k 6,1)
Teamwork structures for .75 .07 15.7 .43
improvement (k 7,1) 4.1. Hypotheses testing
Operational quality .69 .06 13.8 .53
planning (k 8,1) Hypothesis 1 is supported, as the value of phi (2,1) is
Quality improvement .87 .05 19.7 .24 positively high and significant with a completely standard-
measurement systems (k 9,1)
Corporate quality .85 .07 18.8 .28
ized path coefficient of .89, a standard error of .04, and a t
culture (k 10,1) value of 9.76. Hypothesis 2 is not supported as the value of
Market orientation gamma (1,1) is positively low and insignificant. The path
Market intelligence .85 – – .28 coefficient is .04 with a standard error of .10 and a t value of
generation (k 1,2)b 0.33. An inspection of the measurement model of the quality
Market intelligence .79 .06 16.5 .38
dissemination (k 2,2)
orientation construct reveals that only two components, i.e.,
Responsiveness to market .83 .04 18.0 .30 people and customer management and customer satisfaction
intelligence (k 3,2) orientation, directly address the customer-oriented aspect of
Organizational performance quality management. Other components of the construct tend
Motivation performance (k 1,3)b .81 – – .35 to focus on internal improvement of the quality management
Market performance (k 2,3) .87 .06 17.6 .25
Productivity performance (k 3,3) .76 .07 14.7 .42
systems. For instance, it is possible that many quality im-
Societal performance (k 4,3) .84 .06 16.7 .30 provement efforts do not deliver the desired results because of
a
Completely standardized estimate. their inward focus. Indeed, the impact of quality orientation
b
The corresponding parameter is fixed to a value of 1.00 (unstandar- on organizational performance is explained by the other
dized) to set the scale of measurement. construct in the model, i.e., market orientation, as the two
452 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
exogenous constructs are highly intercorrelated in the model.
This implies that the performance impact of quality orienta-
tion has to be complemented with market orientation. This is
consistent with the arguments of Kordupleski et al. (1993)
that quality management needs to be outward-looking with a
focus on market needs to drive performance and the role that
marketing plays as a customer window to assure a market
focus in quality improvement efforts. The result suggests that
quality management requires a market focus, while internal
improvement alone (e.g., focus on procedures with manage-
ment prescribed quality) is less likely to drive improvement in
organizational performance. Hypothesis 3 is supported as the
value of gamma (2,1) is positively high and significant. The
path coefficient is .88 with a standard error of .11 and a t value
of 6.80. This supports the notion that firms have to be market-
driven for improvement of organizational performance.
4.2. Post hoc study
To achieve between-method triangulation, we conduct
case studies with selected respondent companies to enhance
the output of the survey research with rich and in-depth
qualitative data. Following the strategy suggested by Miles
and Huberman (1994), a combination of within- and cross-
case analysis is undertaken. A total of four companies are
selected, companies A and B are high (and companies C and
D are low) in both the levels of quality orientation and market
orientation (high: composite mean score >3.50; low: com-
posite mean score < 2.50). The four cases are chosen for
literal replications from each of the above two theoretical
replication conditions. The four individual case study reports
are available from the authors and the cross-case findings are
discussed below.
4.3. Case study findings
In companies A and B, quality management provides
them with a unifying focus and integrates efforts of all
employees, from top management to line staff, to continu-
ously improve their every business operation for customer
satisfaction. Quality management in the two companies
helps to assure customer focus, give employees clear roles
for quality management, and facilitates continuous improve-
ment. All these are reflected in their resulting organizational
performance: increased customer and employee satisfaction,
and improved market performance and productivity. Al-
though quality management is not practiced well in compa-
nies C and D, they recognize and admit the benefits of
quality management. It gives them a well-defined and
formulated quality policy that contributes to standardized
work procedures and reduced job variations. However, the
quality management practices in companies C and D appear
to be inward-focused and concerned with internal documen-
tation and work procedures for maintaining ISO-certified
status. They run the risk of losing sight of market needs and
the voices of customers in their quality improvement
journeys. Because of the lack of a common language for
quality management (e.g., customer satisfaction), collabora-
tion among functional areas and coordination of organiza-
tional activities are not obvious. Consistent with the finding
in the survey research that quality management does not lead
to significant performance improvement, a market focus is
required to enable the quality improvement activities to
contribute towards significant performance improvement.
This would imply that quality management should not
simply focus on documentation and internal improvement
for the sake of meeting standard requirements such as those
in the ISO 9000 series. Rather, it may be appropriate to be
market sensitive and let market orientation drive the perfor-
mance impact of quality management.
The cross-case findings provide support for the findings in
the survey research that quality management and marketing
are complementary business approaches in organizations.
Quality management acts an integrating mechanism to drive
organization-wide efforts to satisfy customers efficiently,
while marketing plays the role of guiding other organizational
members on the importance of customer satisfaction and
assures a market focus on quality management efforts.
4.4. Discussion
In general, we provide empirical evidence that quality
management and marketing are complementary business
approaches for improved organizational performance.
However, the former needs to be market-driven to drive
the performance impact of quality improvement efforts.
The results are in line with the argument of Kordupleski et
al. (1993) that awareness of customer needs and marketing
are required for successful implementation of quality
management. The role of marketing serves as a customer
window to assure a market focus in quality improvement
efforts.
The findings suggest that quality management alone
(particularly when it is confined to internal quality
improvement without customer focus) does not appear
to have a direct effect on performance success. In fact,
the lack of a positive direct relationship between quality
orientation and organizational performance would imply
that firms should not simply focus on internal improve-
ment. Rather, it may be appropriate to develop an
outward-looking improvement focus on market needs,
driving organizational performance through a market-ori-
ented culture. It is evidenced in companies A and B
where their quality management practices are driven with
a focus on the market, but not on internal procedures and
documentation processes as in the case of companies C
and D for maintaining ISO-certified status. This implies
that a market orientation is required for quality manage-
ment to drive organizational performance.
The results, however, do not signify that quality manage-
ment is unimportant. On the contrary, quality management
may be just as important, or even more so, in driving
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
organizational performance. Our results indicate that quality
orientation and market orientation in organizations are highly
correlated and complementary, and that organizational per-
formance is improved when market orientation is high.
Furthermore, models with quality management/marketing
complementarities display better goodness-of-fit than those
lacking it. By employing the two business approaches as
equally important performance drivers, high levels of quality
management implementation and marketing implementation
alignment are conducive to achieving a high level of organi-
zational performance. It is important to pay attention to the
philosophical elements and the complementary nature of
quality management and marketing to ensure their alignment
in implementation.
4.5. Managerial implications
The results suggest that simply implementing a quality
management system such as the ISO 9000 series alone
without the voices of customers and the marketing link
(e.g., a procedural-based quality management system
putting the interests of customers at a lower priority)
does not appear to be comprehensive enough to gain
competitive advantages. In contrast, formulating a quality
strategy with the participation of the whole organization
for continuous improvement, with the interests of the
customers put at the very heart of the business opera-
tions, should provide a more coherent and comprehensive
road map for effective marketing implementation. An
organization-wide focus on both business approaches of
quality management and marketing should be addressed,
and the ways that quality management and marketing can
and should guide the values and attitudes, and ultimately
the activities and performance of the whole organization,
should be recognized.
Marketing must work with other functional areas to
enhance customer value and increase customer satisfaction.
It should act as a window to discern customer needs in the
process of quality improvement, and assure that market
intelligence will be of utmost importance in guiding organi-
zational responses to customer needs and market changes.
Alternatively, quality management provides the structure,
techniques, implementation, and control mechanisms re-
quired by marketing for its effective implementation. The
need to develop an outward-looking focus on market needs
rather than an inward improvement focus for quality im-
provement must be stressed, and the ways quality manage-
ment complements marketing in the delivery of customer
satisfaction must be appreciated.
In addition, the achievement of customer satisfaction
requires organization-wide efforts. Not only should the
quality management/marketing interface in organization
be understood, but it should constantly be reinforced in
the workplace in light of the fact that quality manage-
ment and marketing performance for customer satisfaction
are the responsibility of every organization member,
453
instead of confining it to some specialized departments.
The philosophical elements of quality management and
marketing need to be communicated to both quality and
marketing specialists and other organizational members to
discourage ‘‘departmental focus’’ to broaden the appreci-
ation of quality management and marketing in business
operations.
5. Directions for future research
This study is subject to some shortcomings that limit
the interpretation of the results, and we leave them for
further investigation. First, cross-sectional data are used
to test the research model and the hypotheses that capture
the perceptions of managers at a point in time. Quality
orientation, market orientation, and organizational perfor-
mance are constructs that are dynamic in nature, involv-
ing elements of time, and might be better examined over
an extended period. The cross-sectional data do not
capture any continuous transformations that might affect
the hypothesized relationships. A longitudinal study is
desirable in determining the effect of quality management
and marketing on organizational performance in future
research.
Second, the research model includes only the major
latent constructs of quality orientation, market orientation,
and organizational performance. To examine the interrela-
tionships among them, other important macro variables such
as business and economic environment, national culture,
and technological intensity are not considered. Inclusion of
these moderating variables in model testing may provide
further insights into the relationships among the three
constructs.
Third, the study assesses information only from the
perspectives of the participating organizations. Consequent-
ly, it offers a self-reported, one-dimensional focus. Since the
study is undertaken to understand the links among quality
management, marketing, and organizational performance
from the viewpoints of organizations, this approach is
deemed appropriate. As the survey research only captures
the perceptions of quality managers, it is also useful to
survey other organizational members (e.g., frontline
employees), who are also good informants of the quality
management/marketing interface to minimize the respon-
dent bias problem.
It would be worth devoting another study to evaluate and
compare how the sectoral differences in different business
types would affect the links and the strength of relationships
among the three constructs in the model. Similarly, how the
individual factors of quality orientation and market orienta-
tion relate to the individual dimensions of organizational
performance in different business types would also be a
desirable topic for further study. Furthermore, study of the
quality management/marketing interface in different cultural
and social contexts will not only help to generalize the
454 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
findings, but also contribute to determining how differences
in cultural and social contexts influence the effectiveness of
various systems and practice, and to what extent quality
management and marketing implementation should be stan-
dardized or tailored to local conditions by multinational
corporations. As globalization of world markets has acceler-
ated, the cross-cultural management problem is regarded as
one of the most important issues for multinational companies.
Replication of this study in other cultural and social settings is
recommended. It is also an interesting topic to study the roles
of individual business units and how they contribute to a
larger organization (e.g., multinational corporation) with
respect to the quality management/marketing interface and
the ultimate impact on organizational performance in future
research.
Acknowledgements
This study was partially funded by The Hong Kong
Polytechnic University under grant number A-PE93. We are
grateful to two anonymous referees for their helpful
comments on earlier versions of this article.
Appendix A. List of questionnaire items
Quality orientation
People and customer management
Strategic human resources management (e.g., education, training, and
employee involvement schemes) is a key performance objective of our
company.
Our company monitors the effectiveness of the quality education and
training that support the company’s quality and performance
objectives.
Our company uses employee recognition and performance measurement
schemes (e.g., frequent evaluation of employee participation in quality
improvement) that support the company’s quality and performance
objectives.
Our company employs proactive customer relations (e.g., market
research, follow-up with customers, and use of customer service
standards), i.e., frequent use of customer information to improve
customer satisfaction.
Supplier partnerships
Our company audits suppliers’ quality (e.g., by first-party audits,
management reviews, inspection, and accreditation to ISO series).
Our company takes action (e.g., providing rapid information and data
exchange) to assist and improve the quality and responsiveness of our
suppliers.
Our company considers suppliers as associates rather than as adversaries
(e.g., by reliance on a few dependable suppliers, development of
long-term relations, involvement in the design/development process).
Communication of improvement information
Our company employs quality costs (e.g., appraisal, prevention, and
failure) to facilitate the continuous improvement processes.
Our company assesses the need for quality education and training
(e.g., on-the-job performance improvement, employee growth)
and its subsequent delivery and review.
Benchmarking of processes in noncompeting organizations for process
improvement is practiced in our company (e.g., learn best practice
outside the company’s industry).
Appendix A (continued)
Our company interacts with outside groups (e.g., education, business,
trade, professional groups) for the mutual benefits of quality
improvement.
Customer satisfaction orientation
Our company promotes trust and confidence in our products/services
(e.g., by quality policy, third party assurance, guarantees, and
warranties).
Our company evaluates competitors with respect to the level of customer
satisfaction (e.g., by company-based competitive studies, evaluations
made by independent organizations including customers).
Our company evaluates customer satisfaction with internal performance
objectives (e.g., by comparisons with past customer satisfaction index
or standard set).
Our company determines and improves customer satisfaction (e.g., by
identifying market segments, benefits sought by customer groups, and
the target quality requirements of each segment or group).
Benchmarking of direct competitors’ products/services for improvement
of own products/services is practiced in our company (e.g., learn best
practice within the company’s industry).
Benchmarking of direct competitors’ processes for improvement of own
processes is practiced in our company (e.g., learn best practice within
the company’s industry).
External interface management
Our company recognizes its social responsibilities such as public health
and safety, environmental protection, and waste management (e.g., by
including its public responsibilities in its quality policy and practice).
Our company determines customers’ future requirements and the
relative importance of product/service features (e.g., by survey, focus
group, dialogue with customers).
Our company’s new product/service development process is designed to
ensure satisfaction of customer needs (e.g., by tools such as quality
function deployment, venture team, new product development
committee).
Strategic quality management
Our company uses process capability studies to ensure that product/
service design requirements are delivered by the processes.
Our managers take active leadership in coaching, encouraging,
communicating, and promoting quality issues (e.g., frequent reinforce-
ment of the company’s quality value).
Satisfaction of intrinsic rewards (e.g., employee job satisfaction, sense
of achievement) for employees is considered as a critical factor for
attaining our company’s quality objectives.
Satisfaction of extrinsic rewards (e.g., pleasant working conditions, job
security, fair salary, and promotion) for employees is considered as
critical factor for attaining our company’s quality objectives.
Our top management commits to quality improvement through
involvement and visibility in quality activities and communication of
quality values (e.g., frequent involvement and reinforcement of quality
values within and outside the company).
Our company implements long-term plans (3 years or more) that are
based on customer needs.
Our company implements long-term plans (3 years or more) that are
based on company capabilities.
A continuous improvement program of processes based on objective
analysis of operational performance (e.g., improved cycle time,
productivity, and waste reduction) is carried out in our company.
Teamwork structures for improvement
Our company uses nonhierarchical organizational structures (e.g.,
councils, quality circles, steering committees, and quality improvement
teams) to support quality improvement.
Work is organized in our company according to key business processes
that reflect customer needs, rather than on traditional specialization of
functions.
 K. Lai, T.C.E. Cheng / Journal of Business Research 58 (2005) 446–456
Appendix A (continued)
Quality orientation
Operational quality planning
Our company implements short-term plans (1 – 2 years) that are based
on customer needs.
Our company implements short-term plans (1 – 2 years) that are based
on company capabilities.
Quality goals, measurable and time-based (e.g., reduction of failure
costs by 10% within the next six months), are included in the
development of our short-term plans (1 – 2 years).
Quality improvement measurement systems
Our company evaluates and improves its products/services.
Our company evaluates and improves its business processes.
Our company manages data/information (e.g., data/information on
quality improvement, customer and employee relations, supplier
relations) to support quality improvement efforts.
Our company employs procedures (e.g., regular reviews and time updates)
to ensure reliability, consistency, and rapid access to data and information
throughout the company. *
Corporate quality culture
Quality goals, measurable and time-based (e.g., increase in customer
satisfaction by 20% within the next 3 years), are included in the
development of our long-term plans (3 years or more).
The quality culture (e.g., common value, belief, and behaviors) in our
company is company wide.
Market orientation
Market intelligence generation
Our company meets customers at least once a year to find out what
products/services they will need in the future.
Our company conducts all related market research (e.g., needs analysis of
customer groups, market segments) necessary for effective customer
satisfaction.
Our company is slow to detect changes in our customers’ product/service
preference.
Our company polls customers at least once a year to assess the quality of
our products/services.
Our company is slow to detect fundamental shifts in our industry
(e.g., competition, technology, regulation).
Our company periodically reviews the likely effect of changes in our
business environment on customers (e.g., regulation, competition,
technology).
Market intelligence dissemination
Our company holds interdepartmental meetings at least once a quarter to
discuss market trends and developments.
Our company’s marketing personnel spends time discussing customers’
future needs with the other functional departments.
When something important happens to a major customer in our market,
the whole company knows about it within a short period.
Our company disseminates data on customer satisfaction at all levels in the
company on a regular basis.
When one department finds out something important about the market
(e.g., customers, competitors), it is slow to alert the other departments.
Responsiveness to market intelligence
It takes our company a long time to decide how to respond to our
competitors’ price changes.
For one reason or another, our company tends to ignore changes in our
customer’s product/service needs (e.g., make no response to the
changes).
Our company periodically reviews our product/service development
efforts to ensure that they are in line with what customers want.
Several departments get together periodically to plan a response to
changes taking place in our business environment.
If a major competitor of our company were to launch an intensive
campaign targeted at our customers, our company would implement a
response immediately.
455
Appendix A (continued)
The activities of the different departments in our company are well
coordinated. *
Our company takes no action on customer’s complaints.
Even if our company came up with a good marketing plan, our company
probably would not be able to implement it in a timely fashion.
When our company finds that customers would like us to modify a
product/service, the departments involved make concerted efforts to do
so.
Organizational performance
Motivation Performance
The equity of our company (e.g., wage, promotions, fringe benefits) to
employees has been continuously improving in the past 3 years.
The training function provided to employees for the acquisition of
necessary job skills and knowledge has been continuously improving
in the past 3 years.
The extent of employee job satisfaction has been continuously improving
in the past 3 years.
The extent of employee job security has been continuously improving
in the past 3 years.
The environmental factors affecting the job (e.g., safety of the job
environment) have been continuously improving in the past 3 years.
Market performance
The success rate of our company in introducing new or modified products/
services to satisfy customer needs has been continuously improving in
the past 3 years.
The price of the products/services of our company has remained relatively
competitive to the price trend of the competitors in the past 3 years. *
The ability of our company to satisfy customer needs has been
continuously improving in the past 3 years (e.g., decrease in customer
complaints, product returns).
Productivity performance
The efficiency of materials usage of our company (e.g., ratio of total
output to material input) has been continuously improving in the past
3 years.
The efficiency of labor of our company (e.g., ratio of total output to
labor input) has been continuously improving in the past 3 years.
The efficiency of capital utilization of our company (e.g., ratio of total
output to capital input) has been continuously improving in the past
3 years.
Societal performance
The level of consumer rights of our company has been continuously
increasing in the past 3 years.
The level of recognition of the need to protect the environment in our
company has been continuously increasing in the past 3 years.
The expansion of the product/market of our company has been
continuously increasing in the past 3 years.
The provision of employment opportunities by our company has been
continuously increasing in the past 3 years.
*
Insignificant item in CFA.
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