The Practice of Internal Marketing is Influence the Market Orientation and Innovation

Transcription

1 The Practice of Internal Marketing is Influence the Market Orientation and Innovation Yafang Tsai Associate Professor, Department of Health Policy and Management, Chung-Shan Medical University, Taiwan ext.17176, Shih-Wang Wu Assistant Professor, Dept. of Hospital and Health Care Administration, Chia Nan University of Pharmacy & Science, Taiwan PhD Candidate, Graduate Institute of Business Administration, National Chung Cheng University, Taiwan ext.5225, Hsien-Jui Chung Professor, Dept. of Business Administration, National Chung Cheng University, Taiwan ext.34313, ABSTRACT The purpose of this study is to explore that how hospitals administrators apply the practice of internal marketing to influences hospitals market orientation and innovation. The research subjects are 491 contracted hospitals with the evaluated level as district hospital and above to investigate presidents and high-level managers of hospitals in Taiwan. There were 106 valid questionnaires retrieved and the response rate was 21%.According to the result, this study found that: Internal marketing influence the market orientation significantly; Internal marketing influence the organizational innovation significantly. Keywords: Hospital management, Healthcare service, Market orientation, Innovation, Internal marketing INTRODUCTION The Taiwanese National Health Insurance Program has been successfully implemented over the years however just like the hospitals in countries like Europe or the United States, they faced increasing market competitions and managerial challenges upon implementing insurance pay out program. In order to sustain its competitive advantages, standing out within the Medical market, over the past years hospital administrators in Taiwan have devoted their effort in improving internal control systems, hopping through better medical service procedure and well maintained doctor patient relationship, will build a long term partnership

2 with patients in securing stable patient source. The objective for a good medical care is to create value attended to patients needs (Porter & Teisberg, 2006).The basis of this value creation is to satisfy patients needs (Quinn et al., 2009). This is to provide suitable medical service centered on patients needs. The internal marketing department will provide a specific vision to all employees, through establishing internal education and training which will strengthen employees service ability and efficiency where further improving overall service quality ultimately achieving customer satisfaction. Therefore, for this reason internal marketing is crucial especially to medical institutions (Tsai & Tang, 2008). Besides using practical internal marketing in improving employee s service ability, hospital administrators needed to assign a clear service objective. With the current advancement in medical technology and technique, hospitals will strive for continuous innovation, improving the technical knowhow of medical personals or at the same time introducing state of the art equipments so to provide stable medical service quality (Lega, 2009) in order to maintain long term patient relationship. This will not only generate stable income for the hospitals but also build up a strong competitive advantage against other competing hospitals. BACKGROUND Internal Marketing The implementation of internal marketing within hospitals not only gives employees a clear working target (Boshoff & Tait, 1996) but can also used in resolving employee s working needs and desire. Through internal practical marketing, organisation can increase employee s work satisfaction furthermore team members will also be taking a more positive role in completing tasks assigned by institution (Bernstein, 2005). Internal administrators applied practical human resource practice; motivate, mobilize, co-operation and manage to understand the working needs of internal customer(employees), then by satisfying those working needs employees will be happy to contribute to the organization (Joseph, 1996) The frontline employee plays a vital role in the process of delivering service (Congram & Friedman, 1991). Organisation s long term vision is communicated to the frontline staff allowing the frontline staff to identify themselves with the vision at the same time influencing employees service behavior so as to improve the service quality provided to the external customers. Tsai & Tang (2008) applied Factor Analysis that classified hospital s internal marketing practice into 3 different programs, Service training programmes, Performance incentives and Vision about excellence service. They discovered that among these 3 programs, Service training programme and Vision about excellence service had influences on employee s attitude towards service quality. Lara & Mesa (2006) believed that Market Orientation is the most crucial marketing strategy within the medical industry in the 21 st century. The concept of Market Orientation is

3 suggested by 2 great schools of thoughts Kohli, & Bernard(1990) and Slater & Narver(1994). They viewed that the traditional marketing concept emphasis heavily on the execution of marketing activities and planning which were too constricted. They felt that organization should be more active in gathering external market intelligence, disseminating those intelligence to members of relative departments hence induce immediate response to this information (Kohli, & Bernard, 1990). Organisation performance can be improved through switching to a market orientated focus organization culture (Slater & Narver, 1994). This market orientated organization culture is formed by 3 behavioral combinations: customer orientation, competitor orientation and inter-functional coordination. Besides fulfilling the demands and needs of external customers, organization must also keep abreast of any changes in competitors marketing strategy, passing through market intelligence to members of relative departments then further by cross functional communication and discussion, research and develop a product or services which conform to customers needs allowing an immediate response to customers needs by the organization. The concept of market orientated marketing provided organization with an operational philosophy that the focus of organisation s key coordination activities should be placed on how to satisfy customers needs (Tay & Tay, 2007), with the aim of creating customer value. For this reason, organizations who possessed market orientated culture will communicate frequently, sharing intelligence relating to customers needs at the same time respond to those needs (Narver & Slater, 1990). Therefore customer value is created through such efficient and result driven method. In the long term perspective, it would generate returns to the organization (Slater, & Narver, 1994b; Harris, 2001). Organizational innovation The effectiveness of bringing innovative concepts into practice by health care personals is an important topic within heath care industry (Mylopoulos & Scardamalia, 2008). Organisation that possessed an innovative culture generally has an open attitude in accepting new concepts (Hurley, & Hult, 1998). With the advancement in technology, health care organizations are forced to adopt innovative concepts (Shekelle et al., 2005). When facing the competitive health care industry, with an aim in continuous innovation, hospitals should build a working environment which encourages creative behaviors within employees. Innovative environment is centered around effective management in organization s basic infrastructure to support creativity; innovative behavior is centered around employees, the execution innovative activities in organization is lead by the unique behaviors of employees (Dobni, 2006). An organization which possessed an innovative culture should comprise these characteristics including market orientation, innovation-friendly ruling coalition and promoting organization structure (McCosh et al.1998). Within these characteristics promoting organization structure relates to innovative environment. Integration of market orientation

4 and innovation can be achieved through employee behavior, technical knowhow or ability. Damanpour, & Evan(1984)were in the opinion that innovative management occurred within organisation s community system that include factors such as human resource, reward system, procedure control system and organization structure. Technology innovation refers to products, service and manufacturing technology which interconnects with product or procedures. Organisation that possessed innovative culture should also possess the ability in both innovative management and technical innovation (Kim, & Srivastava ; Gopalakrishnan, & Damanpour, 1997). The effect of internal marketing to market orientation Hospital managers practice internal marketing in communicating organisation s vision and mission to the employees then through education and training, service skills are then developed ultimately building a customer focus culture within the organization. Such practice will enhance employee s service attitude towards external customers, ensuring a more efficient delivery of service value to external customers (Brad, 2004) achieving the objective of market orientation. Market orientated organization will utilize its managing philosophy in providing behavior, attitude and operation guidance to its members (Loubser, 2000) so to increase internal operation efficiency in achieving better results. The application of internal marketing concept is to inspire employees in skills development and by applying those skills within organization (Grönroos, 1985), achieving external customer satisfaction through improved service efficiency. In order to fulfill the concept of customer orientation, organizations who value this concept will communicate this idea with internal customer (employee) (Hopkinson, 2003) conveying organisation s vision and mission to their employees. Organisation s commitment to service quality is then passed through by providing value added service to external customers by its employees. Therefore, the practice of internal marketing within organization will affect the forming of market orientation culture. Hypothesis 1 Practice of internal marketing within organization will affect the forming of market orientation culture. The effect of internal marketing to organization innovation Organisation projects or activities often require co-ordination (Kouvelis & Lariviere, 2000). When market intelligence is gathered through interactions between frontline staffs and customers, this intelligence must be shared and communicated within inter-functional departments (Song, Michael, Mitzi, & Schmidt, 1997) so to transform this information into a practical new product development concept resulting a quicker response to customer demands. The advantage of inter-functional cooperation allows better utilization of knowledge, through brain storming session team members are challenged in formulating new product or service concepts (Boyd, 2007). This is particularly beneficial in new product or service exploitation or creation. Internal marketing stressed the importance of building a good

5 internal communication channel by administrators further encouraging cooperation between inter-functional departments allow information and knowledge sharing within members. This will enhance creativity in organization members (Tsai, 2002). Value added service is often provided by the frontline employee through interaction with the customers (Edvardsson et al., 1997). Market intelligence can be gathered in the course of first point interaction between frontline employee and customers however this information must be transmitted to members of various departments through internal communication allowing better understanding of customer needs. New product, service or new manufacturing process is then created through further inter-functional communication and coordination at the same time current operation strategy may also be amended accordingly (Cheng & Van De Ven 1996). This highlights the benefits of practicing internal marketing in organization innovation. Hypothesis 2 The application of internal marketing is beneficial to organization innovation. METHOD This research adopt a cross sectional study approach, using questionnaires in gathering research data based on certified hospitals who joined The Taiwan National Health Insurance Program between the Year of 2001 to Researchers posted out in total 491 copies of questionnaires on October Based on both postal and phone interview in total 106 copies of questionnaires were received, overall collection rate is 21%. Internal marketing- Measurement of internal marketing is based on factor analysis by Tsai & Tang(2008) after analyzing internal marketing practice can be classified into 3 different programmes: service training programmes (Cronbach s alpha =.92), performance incentives (Cronbach s alpha =.82), and vision about excellence service (Cronbach s alpha =.86), in total 14 questions. Cronbach s alpha is Market orientation- This research is based on by Slater & Narver(1994), in total of 14 questions. Based on Likert s 5 point measuring scale, responses are classified as totally not agreed, not agreed, average, agreed and totally agreed. Questionnaire Cronbach s alpha is Organisation innovation- Organisation which possessed innovative culture, should also include management and technology innovation (Kim & Srivastava; Gopalakrishnan & Damanpour, 1997). This research is measured according to management and technology innovation, in total of 19 questions. Using Likert s 5 point measuring scale, responses are classified as totally not agreed, not agreed, average, agreed and totally agreed. Questionnaire Cronbach s alpha is Research data is analyzed by using SPSS for Window 17.0 Statistics analysis programme.

6 RESULTS This research is based on linear regression to exam the hypotheses 1 to 5. According to the research analysis result, it was discovered that (1)Internal marketing has substantial effect on market orientation (R 2 =0.347, β=0.589, P=0.000). (2) Internal marketing has substantial effect on organization innovation (R 2 =0.664, β=0.815, P=0.000). (3) Service training programme in internal marketing had obvious effect on organization innovation (R 2 =0.631, β=0.794, P=0.000). CONCLUSION AND IMPLICATION Health care service is a form of behavior which requires interaction between employees and patients then through employee organization s commitment in its service value is then achieved. Besides emphasizing on satisfying external customer needs, it is also important to value employee s working needs, by satisfying those needs, gaining employee s recognition and sense of belonging creating a happier workforce which will commit to the organization. This research found, hospitals that practices internal marketing will affect its attitude towards market orientation, in other words hospitals that implement internal marketing will affect employee s attitude towards customers. It is recommended to hospital administrators to utilize internal marketing activities, attract and retain outstanding medical professions, increase service capability which will provide positive effect on becoming a customer orientated organization. Health industry in Taiwan is currently facing a structural transition period for example; enormous operational pressure caused by changes in health care and health insurance pay out policies. In order to secure a stable income flow, hospitals need to secure a well maintained relationship between hospital and patient. For this reason, hospital management should emphasis the importance of customer orientation, by providing better health care service only then will it out perform competitions. In addition, both internal marketing and innovative concept emphasized on building an effective inter-communication system, this encourages members from inter-functional departments in reaching a common ground. When members shared the same managing philosophy with administrators that would benefit future communication. This research discovered that, the performance of internal marketing will affect the level of innovation attitude thus it is recommended besides encouraging inter-functional cooperation and coordination through internal marketing, integrating and maximizing internal resources as well as cross functional communication in designing innovative health care service delivering diverse service. REFERENCES References available upon request from Yafang Tsai.