UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

TRAN VO ANH TUYEN

INTERNAL MARKET ORIENTATION AND
CUSTOMER-ORIENTED BEHAVIOR
A Study of the Banking Industry in Ho Chi Minh City

MASTER OF BUSINESS (MBUS)

HO CHI MINH CITY_2014


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

TRAN VO ANH TUYEN

INTERNAL MARKET ORIENTATION AND
CUSTOMER-ORIENTED BEHAVIOR
A Study of the Banking Industry in Ho Chi Minh City
ID: 22120116

MASTER OF BUSINESS (MBUS)
SUPERVISOR: LE NGUYEN HAU

HO CHI MINH CITY_2014


satisfaction. For this reason, purpose of the present study is to recognize how
internal marketing orientation affects customer-oriented behavior of service
personnel in banking industry. In the paper, we have used a questionnaire with
twenty-five main questions in order to survey two hundred and fifty tellers and
individual customer relationship officers at joint stock commercial banks in Ho
Chi Minh city. Besides, a model has been designed to show the effect of
components belonging to internal marketing orientation on customer-oriented
behavior through employee commitment factor based on previous literature
review. As well as, a theoretical framework has been developed to prove
empirically with an application of regression analysis. Implications of the
findings for customers' overall satisfaction level replying on customer-oriented
behavior are discussed. From creating the motivation, capacity building, and
opportunity environment for employees show their performance, in order to
bring organizational competitiveness, lead to customer satisfaction. Finally, the
expected contribution of this study is that will be able to gain extend
knowledge about customer-employee interactions in banking industry in
Vietnam.
Keywords: Internal marketing orientation, Customer-oriented behavior,
Employee commitment, Banking industry, Frontline service employees.


TABLE OF CONTENTS
CHAPTER 1. INTRODUCTION
1.1 Research Background ............................................................................. 1
1.2 Research Problem .................................................................................... 2
1.3 Research Objective .................................................................................. 6
1.4 Scope of the Research.............................................................................. 6
1.5 Structure of the Thesis ............................................................................ 7
CHAPTER 2. LITERATURE REVIEW AND RESEARCH MODEL
2.1 Literature Review .................................................................................... 9

5.2.1 Limitations ..................................................................................... 43
5.2.2 Recommendations for the future research ..................................... 44
5.3 Conclusion ................................................................................................ 45
References ...................................................................................................... 47
Appendix ........................................................................................................ 69
Questionnaire ................................................................................................. 71


LIST OF TABLES AND FIGURES
Table 3.1. Measures underlying the constructs ............................................... 25
Table 4.1. Descriptive Statistics of the Constructs .......................................... 31
Table 4.2. Meaning of Mean ........................................................................... 32
Table 4.3. Rating the Acceptance for Constructs of Banks ............................ 32
Table 4.4. Reliability and Convergent validity ............................................... 34
Table 4.5. The Correlation Matrix for Variables............................................. 35
Table 4.6. Summary of results ......................................................................... 37
Figure 2.1. The proposed model of critical factors to customer-oriented
behavior ........................................................................................................... 21
Figure 4.1. Gender Ratio of the Banks Participating in the Survey ................ 28
Figure 4.2. Education Level Ratio of the Banks Participating in the Survey
......................................................................................................................... 29
Figure 4.3. Working Time Ratio of the Banks Participating in the Survey ....
......................................................................................................................... 30
Figure 4.4. Results of causal relations of the model ....................................... 39
Appendix 1: Total Variance Explained ........................................................... 68
Appendix 2a: Model Summaryb ...................................................................... 68
Appendix 2b: Model Summaryb ...................................................................... 69
Appendix 3a: Coefficientsa .............................................................................. 69
Appendix 3b: Coefficientsa ............................................................................. 69



Internal Market Orientation and Customer-Oriented Behavior:
A Study of the Banking Industry in Ho Chi Minh City
2

Following the tendency of western counterparts, service organizations in
fast developing countries, such as: India, China, are implementing marketing
concepts and strategies towards increasing customer satisfaction and loyalty
through improved service quality (Choudhury, 2008; Dutta & Dutta, 2009).
Based on effects found empirically in developed countries (Wright,
Filatotchev, Hoskisson & Peng, 2005), the adoption of internal market
orientation of developing countries comes into question because of their
various contexts: different cultural, social, economic and regulatory conditions
(Lachman, Nedd & Hinings, 1994; Kirkman & Shapiro, 1997; Venkatesh, Bala
& Sykes, 2010). In this regard, rightly pointed out by Zinkhan and Hircheim
(1992), Sheth and Sisodia (1999) and more recently Sheth (2011), marketing is
a contextual discipline, where context matters due to unique characteristics and
existing practices and perspectives of emerging markets.
1.2 Research Problem
The banking sector plays a very important role to the fortunes of the
country's economy (Alfaro, Chanda, Kalemli-Ozcan & Sayek, 2004), where
coordinates currency supply and demand, is bridge, which supports activities
for the development of other industries (Herring & Santomero, 1995; Levine,
1997; Tyler & Stanley, 2007). As we knew, banking industry has a lot of
business operations, but raising capital and credit are traditional operations that
decide the existence of a bank (Grinblatt & Titman, 2002). Besides, banks in
Vietnam are operating on the field: retail banking, because only with this
operation, they can raise capital (Vietnamplus, 2013). Therefore, employees
who interact with customers are a key part of the bank (Jamal & Naser, 2002;
Jayakody & Sanjeewani, 2006) when bank wants to sustainably develop and

develop. They must change internal policies, robustly implement human
resource reform, so that making increase competitive advantage from their own


Internal Market Orientation and Customer-Oriented Behavior:
A Study of the Banking Industry in Ho Chi Minh City
4

differences (Gummesson, 1987; Lings & Brooks, 1998; Lings, 2004).
Considering agents or entities other than customers or competitors becomes
crucial elements in running of the organization (Yoon, Seo & Yoon, 2004). The
workforce has a greatest influence on the business results of any enterprise,
which is an unprecedented strategic importance for system (Post, Preston &
Sachs, 2002). This reality explains the current trend of marketing research into
the sphere of internal organization. Indeed, based on the basis of the theoretical
reference constituted by the stakeholder orientation, the orientation towards
employees and considering them as internal customers of the bank has become
the subject of study that named internal marketing (Collins & Payne, 1991;
Rafiq & Ahmed, 1993; Gounaris, Vassilikopoulou, & Chatzipanagiotou, 2010).
In addition, different papers have centered on the services sector defend the
adoption of internal marketing, favoring the satisfaction of the contact
personnel and their commitment to constructing good relationships with
external customers (Schneider & Bowen, 1985; Rogers, Clow & Kash, 1994).
Rely on the definition by Rafiq and Ahmed (2000), and from scale of
measurement of Lings and Greenley (2005), known as internal market
orientation (IMO). Nevertheless, it is not clear if marketing constructs such as
market orientation (MO) and internal market orientation (IMO) developed and
validated primarily using data from the western world can be employed in
developing countries (Sin, Alan, Yau, Lee & Chow, 2002). Concepts of MO
and IMO are quite novel and pertinent for developing countries, and

judging the quality of a service in each bank (Dwyer, 1987; Choudhury, 2007).
Consequently, the level of customer orientation of bankers is considered as a
crucial leverage for service banks’ success about economic aspect (Bowen &
Schneider, 1985; Bitner, Booms & Tetreault, 1990; Bove & Johnson, 2000;
Sergeant & Frenkel, 2000).
Notice to improve business performance, providing services to clients
better, as well as increase the competitive advantage (Gwinner, Gremler &
Bitner, 1998) of banks in Ho Chi Minh city. Besides, banks aim to find
solutions to improve their face, explore out the main factors affecting their
business activities; in order to offer the appropriate remedial measures (Lings
& Greenley, 2005), so that banks can create higher labor productivity, and keep
talents in the organization; finally, leading to long term profit for organization
(Siguaw & Brown, 1994). However, based on the actual study situation, so far
the number of specific research projects have given the impact factors as well
as the ability of the factors affecting the operation of such banks in Ho Chi
Minh city, is very limited, mainly in qualitative researches. Therefore, in this
context, employees’ customer-oriented behavior (COB) will certainly make a


Internal Market Orientation and Customer-Oriented Behavior:
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difference and betterment in terms of improving customers’ overall satisfaction
in the banks. Given this situation, the paper explores the influence of IMO on
front-line service employees’ customer-oriented behavior in the banking
industry in Vietnam, particularly in Ho Chi Minh city.
1.3 Research Objective
Particularly, this current research is aimed to achieve the following objectives:
 To identify and examine quantitatively the influence of components of

parts as following:
Chapter 1: Introduction
This sector points out that background of the overall situation, the role
and the platform of the banking sector and the current situation of the banking
industry in Vietnam, the urgency of research topic, as well as issues that need
to be clarified in the essay text. Chapter 1 shows out an overview of the
research topic, the scope and object of research.
Chapter 2: Literature Review and Research Model
We have based on previous research by researchers in different
countries. They have studied the same issue, in order that giving the concepts
and definitions about components, about various aspects of the factors in the
research. In addition, this part learns out the effects of the independent
variables on the dependent variable, with the direction and extent of the impact
of them. Thence, we draw hypotheses to present the relationship between


Internal Market Orientation and Customer-Oriented Behavior:
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8

variables. Finally, given a research model rely on previous studies, and the
hypotheses for better overall.
Chapter 3: Research Methodology
This chapter focuses on the items that belong to each component to
compose screening questionnaire, and then, selecting the appropriate number of
samples and conducted surveys at selected banks. After collecting enough
needed data, we conduct data processing, namely selecting tools, appropriate
methods to process and present data.
Chapter 4: Results
Presentation of results through data processing has been done in Chapter

(Saura, Contri, Berenguer, Taulet & Velazquez, 2005). According to Hartline,
Maxham and Mckee (2000) customer orientation is defined as the set of beliefs
that puts the customer's interest first at the firm level. Saxe and Weitz (1982);
Daniel and Darby (1997) define customer orientation as the willingness of
service providers to adjust their service delivery oriented to a customer's
situation, for example, needs, problems, special circumstances... at an
individual level.
Customer-oriented behavior refers to specific behaviors, that personnel
satisfy their customers through serve the service (Farrell, Souchon & Furden,
2001; Winsted, 2000a, b). Customers often rely on the behavior of employees,
who contact customers directly when judging the quality of a service that
belongs to firm (Levesque, & McDougall, 1996; Johnson, Sivadas, &


Internal Market Orientation and Customer-Oriented Behavior:
A Study of the Banking Industry in Ho Chi Minh City
10

Garbarino, 2008). Our conceptualization of customer-oriented behavior is
consistent with three works (Chih, & Li, 2006). Firstly, customer-orientation is
the degree to which an organization or its employees focus their efforts on
understanding and satisfying customers, that is suggested by Saxe, and Weitz
(1982). The second is customer-oriented behavior as the extent to which
service employees use their marketing concepts for helping customers to make
purchase decisions as well as satisfying their needs (Stock, & Hoyer, 2002).
Thirdly, customer-oriented behavior in terms of a tendency of employees to
meet needs of customer in job-related environment (Brwon, Mowen, Donavan,
& Licata, 2002). Consistent with these views, we define customer-oriented
behavior as the extent to which customer-contact employees use their
marketing concepts for satisfying customers’ needs. As a result, the customer

behavior is believed to facilitate achievement of a bank's goal and increase its
performance (Dell, 1991; Johnson, Sivadas & Garbarino, 2008). Banks with
customer oriented employees have the competitive advantage over those do not
perceive customer-oriented behavior as an important factor for long-term
business development (Bruce, Bowman & Brown, 1998).
2.1.2 Internal Market Orientation (IMO)
Internal market orientation arises from the view that customer contact
personnel is of primary importance to service industries, and that satisfied,
committed and motivated front-line employees are essential if customers are to
perceive that they have received good service (Sasser & Arbeit, 1976; Berry,
1984; Berry & Parasuraman, 1991). This means that internal market orientation
focuses on customer contact personnel and treat the employees as customers of
the organization’s jobs is the foundation on which internal market orientation is


Internal Market Orientation and Customer-Oriented Behavior:
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based (Lings, 2004). The role of IMO in facilitating the relationship between
the company and its employees, as a prerequisite to effective relationships
between employees and their customers; so wants marketing be developed,
must to be examined in order that a more comprehensive approach (Chaston,
1994; Heskett, Jones, Loveman, Sasser & Schlesinger, 1994; Tannenbaum,
Beard & Gueutal, 1994; Lings, 2000; Conduit & Mavondo, 2000).
Internal market orientation, in another way, could consider as internal
marketing. Within a service business organization, internal marketing is more
important factor than conventional external marketing (Kotler, 2000).
Furthermore, internal marketing is the key to excellent service and to
successful external marketing, this viewpoint is indicated by Greene, Walls,

2.1.2.1 Internal Information Generation (IIG)
Informal information generation is about the needs and wants of staff in
day to day, face-to-face interactions between managers and employees.
Information generation relates to employees’ perceptions of the inputs to their
jobs, the outputs (what they receive) and the equity of this exchange (Lings &
Greenley, 2005). Lings and Greenley (2005) have also identified three modes
of information generation. They are formal written media, such as:
questionnaires and job satisfaction surveys, formal face-to-face interactions, as
interviews, and performance appraisals and meetings (Cobb, Samuels &
Sexton, 1998).
The necessity to collect information about the internal environment has
been identifiied by several researchers, for instance: Briscoe (1980); GomezMejia (1988); Huseman, and Hatfield (1990); Stauss, and Schulze (1990);
Cobb, Samuels, and Sexton (1998); Johlke, and Duhan (2000). They acquiesce


Internal Market Orientation and Customer-Oriented Behavior:
A Study of the Banking Industry in Ho Chi Minh City
14

generating information about exchanges of value in the internal market (Ewing
& Caruana, 1999), in particular what employees seek from their job, what they
are prepared to give up to get them and what competitors are offering in terms
of rotational employment. Segmenting the internal market based on differences
in the characteristics of employees in order to better identify the different needs
of these employees (Wasmer & Brunner, 1991; Piercy, 1995). The appropriate
internal market information includes: information about important attributes of
jobs, satisfaction of employees with their working conditions, the internal
factors that influence employee satisfaction.
2.1.2.2 Internal Communication (IC)
Communication means transferring information among people inside the

employers and employees in communication has been shown to improve
employee outcomes and performance, especially front-line service staff (Johlke


Internal Market Orientation and Customer-Oriented Behavior:
A Study of the Banking Industry in Ho Chi Minh City
15

& Duhan, 2001). Consequently, in the internal market orientation context,
information dissemination is particularly important; so that adapting to needs of
the internal market, pertinent information has related to the internal market
must be communicated for an organization (Kohli & Jaworski, 1990).
2.1.2.3 Internal Responsiveness (IR)
Another category of IMO is involves the response to the information
among employees together about the wants and needs of individual employees
(Carter & Gray, 2007). Huseman and Hatfield (1990) have stated that internal
response could make some tangible social benefits such as status, recognition
for good work and sense of accomplishment. Therefore, managers need to
consider both the financial and social wants and needs of their employees
(Tansuhaj, Wong & McCullough, 1987).
Briscoe (1980) has also suggested some ways for internal response like
improving individual reward standard, changing working hour, provide flexible
physical settings and providing training. These activities belong to job design.
In addition, according to Huseman and Hatfield (1990), equity theory brings a
highly relevant insight to responsiveness in that the consideration must be
given to the way employees evaluate their jobs in terms of inputs and outputs.
One of the most common applications for IMO information is to create job’s
products, meeting the needs of employees and thus satisfying and motivating
them, which is suggested by several authors: Sasser, and Arbeit (1976); Stauss,
and Schulze (1990); Berry, and Parasuraman (1991). Consequently, internal

Jackson, 1989), or highly committed employee should have a weak intention to
leave organization, in comparision with low commitment has also been
associated with low levels of morale (DeCottis & Summers, 1987) non
committed employees, or negative relationship between turnover intentions and
organizational commitment (Mowday, Porter & Steers, 1982). As a result,


Internal Market Orientation and Customer-Oriented Behavior:
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17

employees who are committed to their respective organization, are not only
more likely to remain with the organization, are but also likely to exert more
efforts on behalf of the organization and work towards organization's success;
so they also exhibit better performance that the uncommitted employees.
Finally, employee commitment can bring benefits to organization; for
instance, it can improve performance and motivation (Mowday, Steers &
Porter, 1979); reduces absenteeism (Steers & Rhodes, 1978; Mathieu & Zajac,
1990), and less turnover absenteeism (Cotton & Tuttle, 1986) in order that
resulting in sustained productivity; thus increasing organization productivity
(Schuler & Jackson, 1996). Mowday, Steers and Porter (1979) have pointed out
that employees with high level of organizational commitment provide a secure
and stable workforce; thence providing competitive advantage to the
organization (Meyer & Allen, 1997; Colquitt, Lepine & Wesson, 2009).
2.2 Hypotheses and Research Model
2.2.1 Hypotheses
Internal information generation and its effect on employee commitment
Belonging to one of the researches of Lings and Greenley (2005), which
focus on the need to corroborate the possible causal order of the dimensions of
IMO. Deshpande and Zaltman (1982); Kohli and Jaworski (1990);

not

directly related

to

explicit

messages

communicated in service directives or training sessions (Lings, Beatson, &
Gudergan, 2008). The internal communications have represented by IMO are
reported to enhance the association that employees feel for the firm and its
services (Bell, Menguc & Stefani, 2004). Communication has been particularly
important in influencing employee behavior such as service orientation
(George, 1990) and loyalty to the banks (Ozment & Keller, 1999). Both
attitudinal and behavioral elements are comprised in loyalty, as well as have
manifested in affective commitment (attitudinal loyalty) and staff retention
(behavioral loyalty). Affective commitment is particular interest, because it
creates changes in employee behavior towards customers. Once employees like
their jobs and feel a sense of affection towards their employers; consequently,