uIr7iWilliam?" I This is to certify that the dissertation entitled Quick Response and Global Sourcing: Organizational and Performance Implications for U.S. Retailers presented by Lisa Phillips Fairbairn has been accepted towards fulfillment of the requirements for Ph.D. degree in Marketing and Supply Chain Management ,I( % 07/ W/ / MSU i: an Affirmative Action/Equal Opporlunily Institution 0-12771 Alf ,' «53315319» W QUICK RESPONSE AND GLOBAL SOURCING: ORGANIZATIONAL AND PERFORMANCE IMPLICATIONS FOR U.S. RETAILERS By Lisa Phillips Fairbairn A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree Of DOCTOR OF PHILOSOPHY Department of Marketing and Supply Chain Management 1997 ABSTRACT QUICK RESPONSE AND GLOBAL SOURCING: ORGANIZATIONAL AND PERFORMANCE IMPLICATIONS FOR U.S. RETAILERS By Lisa Phillips Fairbairn A retailer’s competitive strategy is to a large extent realized through the deployment of its overall assortment. And while the consumer Of "today" and "tomorrow" wants it all -- price, quality, timely delivery -- quick response (QR) and global sourcing each provide different facets of the overall assortment. Global sourcing offers a low-cost alternative to domestic sourcing and QR yields timely domestic merchandise. These two strategies are among the most visible advances in retail sourcing practices in recent years. Because of their substantial impact on the retailer’s competitive position, these practices have changed the way firms view sourcing -- elevating sourcing to a position of strategic importance. Part I of this dissertation looks at factors that cause and accompany QR implementation and the implications on retailer performance. A theoretical framework is developed and several propositions are tested regarding the environment-strategy- stmcture-performance framework as it pertains to QR in the U.S. retailing industry. Part H examines both the environmental antecedents and the effectiveness of QR and global sourcing. Based on the well-accepted premise that QR emerged in response to offshore competition, global sourcing is typically viewed as an alternative Strategy. However, because developing a better understanding of the strategy-performance relationship is an incremental process, two scenarios and their performance implications are considered. First, QR and global sourcing will be viewed as Strategic alternatives. Then, the two strategies will be assumed to coexist. To test the model (and variations of), a retail industry field study of large, diverse non-food retailers was conducted. A multi-stage methodology was employed. Hypothesis testing was conducted through regression analysis, structural equations modelling, and analysis of covariance. The research proposed and executed in the dissertation contributes to the theory, method, and application of QR in particular, and also global sourcing. This was achieved by conceptually and methodologically integrating several core concepts of strategic management, retailing, and marketing. Conclusions from this research offer a number of important insights and help to fill a void in both academic research and managerial application regarding retailer strategy implementation. Copyright by LISA PHILLIPS FAIRBAIRN 1997 Mm Dedicated with love to Mom, Dad, and Paul ACKV llishtoacknowlcdgclhcgu: u'mml in u: oomplaior DY- Dms‘ my dissertation mmmm. ft EWMmodel. 919111101: foropcmng [h ”WWW: mCtl'lodolc Dr'cawfolhkldaofm “W’Sfmmm, ACKNOWLEDGEMENTS I wish to acknowledge the guidance and support of several people who have been very instrumental in the completion of this dissertation and throughout my doctoral program: Dr. Droge, my dissertation committee chair, for mentoring me in all my endeavors throughout the program, for being demanding, and most importantly for being an exemplary role model. Dr. Calantone for opening the doors to the doctoral program in Marketing and for all of his leading-edge methodological insights. Dr. Cavusgil for his idea Of incorporating global sourcing into my dissertation and for CIBER’s financial support. Dr. Cooper for his attention to real-world details and his continued support throughout the dissertation process. Dr. Stemquist for being the catalyst in my decision to pursue a doctoral degree. Most of all, my Mom and Dad for their continued love, support, and patience throughout all of my academic endeavors. My wonderful husband, Paul, for making my life more complete and for accepting my career aspirations. My very special friend, cm, for his encouragement throughout my graduate Studies. Thanks to all of you for believing in me and for making this process more bearable. vi EMOFTABLB ......... [Mill-161MB ......... W1 lWCllON.LOGlC.RI-ISEA mmmmunoss . lbU.S.Rmillndmuy . mum WWDR: lngicofllr'lhsis: lngitofthelhetis: WWW (Mm NW.S‘IRATEGY.SI mimmummnc Reliablfiverview .. WWW QIickRupomeSm GlobulSourcthtr OrganintiomlSml RehfiomhipSmIem announem' Uneen Woflitennmkefl W3 lttmmronmcum httLQuiekRespome: AI QRStntegy: Antec anitomnem: Ante: AWochfl Suategy.SmIa TABLE OF CONTENTS LIST OF TABLES ...................................... ix LIST OF FIGURES ................................ ' ...... xi CHAPTER 1 INTRODUCTION, LOGIC, RESEARCH THEMES AND EXPECTED CONTRIBUTIONS ............................... 1 The U.S. Retail Industry ............................... 1 Introduction and Overview .............................. 5 Competitive Strategies in Retailing ......................... 6 Logic of the Thesis: What is Quick Response? ............. 7 Logic of the Thesis: What is Global Sourcing? ............ 14 Dissertation Justification .............................. 20 Major Research Themes/Expected Contributions ................ 21 CHAPTER 2 ENVIRONMENT, STRATEGY, STRUCTURE AND PERFORMANCE LITERATURE IN MARKETING ............................. 31 Basic Model: Overview ............................... 31 Model Components/Past Operationalizations .................. 34 Quick Response Strategy ......................... 35 Global Sourcing Strategy ......................... 37 Organizational Structure ......................... 40 Relationship Structure .......................... 47 Environment Uncertainty ......................... 55 Performance ................................ 60 Summary of Literature Review .......................... 65 CHAPTER 3 MODEL AND THEORETICAL FRAMEWORK .................... 67 Part I - Quick Response: Antecedents and Consequences ........... 67 QR Strategy: Antecedent to Structure ................. 79 Environment: Antecedent to Strategy and Structure ......... 89 Antecedents of Performance: Environment, Strategy, Structure .......................... 94 vii OMEN Part II - Quick Response and Global Sourcing: Drivers and Performance Implications ........................... 101 Drivers of Quick Response and Global Sourcing .......... 101 Strategic Performance Implications .................. 103 CHAPTER 4 RESEARCH METHODOLOGY ............................. 107 Questionnaire and Measures ........................... 107 Sampling Frame .................................. 120 Data Collection ................................... 121 Data Analysis .................................... 122 CHAPTER 5 ANALYSES AND FINDINGS .............................. 124 Response Rate and Nonresponse Bias ..................... 124 Sample Characteristics .............................. 125 Data Quality and Reliability of Constructs .................. 126 Hypotheses Testing ................................ 134 Part I .................................... 135 Part H ................................... 152 Summary ...................................... 159 CHAPTER 6 DISCUSSION AND CONCLUSIONS .......................... 161 Antecedents and Consequences of QR ..................... 161 Theme 1 .................................. 163 Theme 2 .................................. 169 Theme 3 .................................. 171 Drivers and Performance Implications ..................... 172 Theme 4 .................................. 173 Theme 5 .................................. 175 Directions for Future Research ......................... 178 Limitations of Current Study ..................... 179 Additional Relationships ........................ 181 Logical Extensions ............................ 183 Summary ...................................... 184 APPENDIX Nonnormality Assessment ............................ 186 LIST OF REFERENCES .................................. 188 viii 3-14 Stmmry of Key Constructs H EwimmSu-ucgy Rehtic ii Fatima-8mm Relati l3 hum-Pm R: 34 Strategy-8mm Relationslt i5 Swen-Perform Relatio 36 WW Rem Table 1—1 l-2 1-3 2-1 2-2 2-3 2-4 2-5 2-6 2-7 2-8 2-9 2-10 2-11 2-12 2—13 2-14 3-1 3—2 3-3 3-4 3-5 3-6 5—1 5~2 5-3 5-4 5-5 5-6 5—7 5-8 5-9 5-10 5-11 5-12 LIST OF TABLES Page Benefits of Quick Response .............................. 8 Research Questions - Part I ............................. 22 Research Questions — Part II ............................ 27 Quick Response: Measurement ........................... 37 Global Sourcing: Measurement ........................... 39 Empirical Studies of Internal Organizational Structure ............. 41 Centralization/Decentralization: Measurement .................. 44 Formalization/Performance Control: Measurement ............... 46 Integration: Measurement .............................. 47 Empirical Studies of Relationship Structure ................... 49 Flexibility: Measurement .............................. 52 Information Exchange: Measurement ....................... 53 Solidarity: Measurement .............................. 54 Empirical Studies of Environment Uncertainty ................. 57 Environment Uncertainty: Measurement ..................... 59 Performance Measurement: Select Business Literature ............. 64 Summary of Key Constructs ............................ 65 Environment-Strategy Relationship ........................ 70 Environment-Structure Relationship ........................ 72 Environment-Performance Relationship ...................... 74 Strategy-Structure Relationship ........................... 75 Strategy-Performance Relationship ......................... 76 Structure-Performance Relationship ........................ 78 Assessment of Nonresponse Bias ......................... 125 Sample Characteristics ............................... 127 Strategy Reliabilities ................................ 130 Organizational Structure Reliabilities ...................... 131 Relationship Structure Reliabilities ........................ 132 Performance Reliabilities ............................. 133 Environment Reliabilities ............................. 133 Correlation Analysis ................................ 138 Regression - Antecedents of Performance ................... 140 Regression - Antecedents of Integration .................... 142 Regression - Antecedents of Performance Control .............. 142 Regression - Antecedents of Operations Decentralization .......... 142 ix Ill ham-Wot ill hum-Mot HS ham-Wot ll ham-AWN II? buyotFmdin ... 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Table 5-13 5-14 5-15 5-16 5—17 5-18 5-19 5-20 5-21 5-22 5-23 LIST OF TABLES (cont’d) Page Regression — Antecedents of Scheduling Decentralization .......... 143 Regression - Antecedents of Information Exchange ............. 145 Regression - Antecedents of Flexibility ..................... 145 Regression - Antecedents of Solidarity ..................... 145 Summary of Findings ............................... 149 Two-Group Path Analysis Results (High— vs. Low—Performers) ...... 151 Regression - Drivers of Quick Response .................... 154 Regression - Drivers of Global Sourcing .................... 156 Analysis of Covariance (ANCOVA): QR strategy vs. GS strategy . . . . 158 Analysis of Covariance (ANCOVA): single vs. hybrid strategy ...... 159 Summary of Results ................................ 160 HWofSuhmmive Rel Figge 1-1 1-2 1—3 1-4 2—1 2-2 3-1 3-2 5-1 6-1 LIST OF FIGURES Page Replenishment Cycle Comparison ......................... 10 Quick Response in Theory ............................. 12 Global Sourcing: Costs and Benefits ........................ 16 The Global Sourcing Process ............................ 19 Basic Model ...................................... 33 Conceptualization of Model Components ..................... 34 Proposed Model .................................... 69 Model and Hypotheses: A Summary ...................... 100 Path Analysis Results ............................... 136 Summary of Substantive Relationships ..................... 162 xi 1mm. Exp THEE! Overdrpastfmyws. reu mm. adjusted for inflation. @1995}. llrWalmans and Waterman): This; mm“misting opporm WM lhmugbml ml“Miami Competitive 's mliwuthiu own “le MW Winovuvicw of m on lmsdissertttion. CHAPTER 1 Introduction, Logic, Research Themes and Expected Contributions THE U.S. RETAIL INDUSTRY Over the past five years, retail sales in the U.S. have been growing at an average annual rate, adjusted for inflation, Of approximately 3 percent (U.S. Bureau of the Clasps 1995). The Walmarts and the Gaps are exceptions to the rule, but the average is under 3 percent annually. This problem of relatively stagnant growth is not due to a lack of stores or Shopping opportunities: competitive "sameness" is perhaps the most encompassing problem throughout the industry. While no retail industry is excluded from the problem of competitive "sameness" or other problems (e. g., saturation), each industry is faced with its own unique challenges. The following paragraphs, compiled from the Chain Store Age Executive (1995) issue on the "State of the Retail Industry", provide an overview of trends occurring in specific retailing industries (see Pollack 1995). Retailers from each industry discussed below will comprise the sampling frame for this dissertation. The apparel specialg store industg, led in sales by The Limited and The Gap, is experiencing stagnant growth rates. The industry as a whole is currently challenged by value~conscious consumers and is under siege from department stores, off—pricers and discount department stores. Expected future developments include continued industry consolidation and a more favorable long-term outlook due to an anticipated shift in consumer spending away from larger ticket durables. The department store industry, lead by Sears and JCPenney, is characterized by 335: north. Consolidation an 1'3,”th fewer. stronger play garter; sorts. traditional depan ”me am‘ most hat-c co: 2m Th: tritium} has MM! me‘ ms'. Futurc grt hammer: to the sragnant Kmart Stores. the dixount t ifi-Iiic‘x‘ltgi: grosm Walman. m it rich 5 [IS closest compctt is.) ctanctcnzed as mature :5, 1" '~ ' manager} killers. Give] ftiim ' ‘ ' ' it} IS unreasmgly brig} Toys 'R' Us and Circuit Ct tram - ‘ \tsm‘. Hard line specialty I We ,t ,Oods. consumer electronic: r . to ”Kim - , has expenenced stron: it ' WEOOds stores are the best pt 1 0 I The CO ' n Ventencc store indust "his (7cm; and Circle K mite small Emily stores going illitnje "06. and strategic differentia 2 modest growth. Consolidation and smaller stores going out-Of—business has left the industry with fewer, stronger players. Also challenged by off-pricers and discount department stores, traditional department stores are streamlining operations to eliminate cost-redundancies and most have converged on moderate price points as their best value statement. The industry has witnessed an emphasis on private labels to retaliate against cbmpetitive "sameness". Future growth is expected to be modest. In comparison to the stagnant growth rates experienced by apparel Specialty stores and department stores, the discount department store industpv boasts 5 consecutive years of double-digit growth. Walrnart, the industry leader, is experiencing a growth rate three times as much as its closest competitor in the industry, Kmart. Despite its growth, the industry is characterized as mature with limited geographic expansion potential and is threatened by category killers. Given the value-consciousness of consumers, the outlook for this industry is increasingly bright. Toys "R" Us and Circuit City Stores are the leaders in the hard line specialty store industg. Hard line specialty retailers include retailers of office supplies, books, sporting goods, consumer electronics, furniture and toys. For three consecutive years, this industry has experienced Strong growth. In general, consumer electronics and sporting goods stores are the best performers and book stores performed poorest. The industry outlook is for slower, but sustained growth. The convenience store industg is another strong performer, led by Southland Corporation (7-Eleven) and Circle K Corporation. Trends behind this industry’s growth include small grocery stores going out—of-business, consumers increasingly seeking convenience, and strategic differentiation. Regarding differentiation, convenience stores mm min: or with Wmmmm a tributary is very origin due 10 m the dallengts p0! aim my strategies are mammogram MW (‘18-. cost cffi mmwmlechnologk mm‘mhmmfihip W 1992C). That from W" mm "'1'" W view of th M “995) featured mm W195). The article W! WWW or Whips b wmmmfiwmm it -. ngtheyqngambmfl‘ 3 are increasingly teaming up with fast—food operators, are preparing their own fresh- prepared store—brand products and are locating in nontraditional sites. The future outlook for this industry is very bright due to changing markets and consumers. To meet the challenges posed by the competitive and dynamic U.S. retailing environment, many strategies are consistently being implemented across retailing industries. Most notably, these strategies include: downsizing, consolidation, cost-cutting reorganization, internationalization, technological sophistication, retailer-supplier partnerships, among others. Many retailers today are seeking competitive advantages through efliciencies (e.g., cost efficiencies, time efficiencies, inventory efficiencies). Due largely to increasing technological sophistication, most top U.S. retailers believe that strategic retailer-supplier partnerships are the key source of competitive advantage (M Store Age Executive 1992c). That is, partnerships are a critical means of obtaining efficiency-driven competitive advantage. In their annual review of the "State of the Retail Industry", Chain Store Age Executive (1995) featured retailer-supplier partnerships as their keynote article (see Pollack 1995). The article stresses that in retail sourcing, there is a trend toward long— term relationships or partnerships between retailers and their suppliers and that these partnerships are both critical and mutually beneficial. In sum, "more and more retailers are recognizing they can gain better ejficiency when they look at the whole supply chain, without boundaries, from the production line to the checkout line " (Pollack 1995, p.11A). This trend is extremely interesting and important given its radical departure from the traditional, adversarial relationship. Most partnerships fall into two basic categories: those that focus on efficiencies use that form on creating magazine of a domestic or 3:53 React. 'Collaborattte Imp lerween companies. is 1.7:: k of the apply chain. rim: £993» In the domestic fists QRI. efficient consumer «$.52 station thIt In [ht "-751 31mm Retailers bar 1:03.: First. the) ma} 1( mm's' - ‘ l~ sin... 0 Second. buyers may Opt 11““- ......~.;:cz and 2m 1994» MS. retailers strive to cor «the DI of the supply function in . llolgod by sourcing experts tl 4 and those that focus on creating value (Pollack 1995). In use, retailer-supplier partnerships can be of a domestic or international nature. The seminal article in Harvard Business Review, "Collaborative Advantage: The Art of Alliances", suggests that partnerships between companies, whether they are from different parts of the world or different ends of the supply chain, are extremely important for business survival today (see Kanter 1994). In the domestic retailing arena, these partnerships may include quick response (QR), efficient consumer response (ECR), category management, or vendor- managed inventory (VMI). In the international arena, retailers may develop global sourcing partnerships. Retailers have two basic options for long-term relationships with foreign suppliers. First, they may look for local suppliers and help them build an export capability. Second, buyers may opt to work with foreign firms that are already exporting (Dominguez and Zinn 1994). As U.S. retailers strive to compete in the most efficient manner possible, effective management of the supply function is becoming increasingly important. It is widely acknowledged by sourcing experts that supply management will play a major role in the restructuring and restoration of American industry (Leenders and Blenkhom 1988), including the retailing industry. One aspect of supply management is finding and selecting world-class suppliers. However, depending on the nature of the competitive advantage being sought, "world—class suppliers cannot always be found in the U.S." (V ickery, Carter and D’Itri 1993, p.38). Two contemporary retail sourcing strategies, based on partnerships, are quick response (QR) and global sourcing. The former seeks efficiencies mostly in terms of time and inventory (e.g., Fiorito, May and Straughn 1995; Phillips and Droge 1995a,b), the latter seeks efficiencies mostly in terms of costs (e.g., m1989,l992; Lin and McGol [\TRODUt Qt‘rchspomc (QR). one it titanium. As inother int Wimotfslm. 'lttlrlue 19805. approxim Winders.me .mlhtformatitm of Mufti): Council was at him on our 1?me 5 Kotabe 1989,1992; Liu and McGoldrick 1995). INTRODUCTION AND OVERVIEW Quick Response (QR), one form of time-based competition, is revolutionizing the U.S. retail industry. As in other industries, the catalyst for a tirne—based movement was competition from offshore. "In the late 19805, approximately 50 percent of the apparel and textiles purchased in the U.S. were sourced from the Orient. Drowning in a flood of imports, domestic producers and retailers realized that the future of their business depended on a healthy domestic business. Seeking competitive advantage, industry leaders perceived that nationalistic slogans would not be their salvation. For today’s sophisticated worldly consumer, an appeal to the emotions and patriotism of the consumer is less likely to succeed than one based on time, quality, and price. The outcome Of the debate over this issue within the apparel industry group called the Crafted with Pride in the U.S.A. Council was the formation of the Quick Response (QR) movement. The thinking of the Council was as follows: "There must be a competitive advantage based on our proximity to customers. We must be able to seize that advantage and to satisfy U.S. consumers’ needs more quickly than firms overseas. " In the 1990s, American retailers have found an opportunity to change the rules of the game by focusing on time with QR. Thus, foreign competition has compelled U.S. firms to reorient their corporate strategies toward time (Blackburn 1991, p. 246,7)". The above excerpt from Blackbum’s (1991) book, Time—Based Competition, suggests that a domestic strategy with quick response is the key differentiator for retailers (and producers who sell to them) seeking competitive advantage in the 19905. It also implies that QR, a time-based strategy, and global sourcing, usually a cost-based strategy, are strategic alternatives in retail sourcing. Aside from this more "traditional" view, however, there is evidence in the literature to entertain the notion that these two strategies coexist quite successfully. In Part I of this dissertation, the main focus is QR mnmjnuomformamgemfi Dtillcnrttitlstiotltthreat/trout! minimum): intending. COMPETITIVE Amfler's unpaid»: 9 mm of its overall assom 'mm' ms i all ~ price. Mueller-uptown: drum @3th “My: to C We. MMW‘ “Imus. W0 mmmhavc clung Mormon of ngic h meitmloglcal forcr ”Minis from “ch. the: Wildilllomdo“ not. F0” llofmmingmmammm WWEM"WM "Witt is that of buy"‘stlpplier p“ Fathom °flhis digs openlti0118mm!”“Witter . and its implications for management practice, both internally and with major suppliers. Part II examines both the environmental antecedents of and the effectiveness of QR and another major strategy in retailing, global sourcing. COMPETITIVE STRATEGIES IN RETAILING A retailer’s competitive strategy is to a large extent realized tltr'ough the deployment of its overall assortment. And while the consumer of "today" at "tomorrow" wants it all -- price, quality, and timely delivery -— quick response and global sourcing each provide different facets of the overall assortment. Global sourcing offers a low-cost alternative to domestic sourcing and QR yields timely domestic merchandise. These two Strategies are among the most visible advances in retail sourcing practices in recent years. Because of their substantial impact on the retailer’s competitive position, these practices have changed the way firms view sourcing activities —- elevating sourcing to a position of strategic importance. While it seems logical for companies to desire integrating these two strategies to gain the benefits from each, these two approaches to strategic purchasing are often considered to be inherently incompatible -- one suggests movement towards zero— inventories and one does not. For example, Fawcett and Birou (1992) found that nearly 2/3 of purchasing and material managers studied reported that they believed JIT, a time- based strategy in manufacturing, and global sourcing to be incompatible. The most basic conflict is that of buyer-supplier proximity (Fawcett and Birou 1992). For the purpose of this dissertation, the scope of quick response is limited to domestic operations and the scope of global sourcing refers only to sourcing from foreign m in other words. the seminal context is excluded fro he ire manta “hm" "he 330mg T1153: What is OW (iii Resronse IQRI is a at; the 131153)} standard 5 Elia-rates the providers of ran in gain reg. apparel manu -e cement Storesr into one S\ :.tlppareli. OR in total app 3335' ' data from retailers to merchr Rho ' the merchandise noeded to 33.1 i ' ”mtedcooperauvely by the ret 7 countries. In other words, the case wherein quick response is practiced in an international context is excluded from consideration. Similarly, global sourcing does not include the instances wherein the source of foreign supply produces and distributes domestically . Logic of the Thesis: What is Quick Response? Quick Response (QR) is a time-based strategy in the retailing industry and is becoming the industry’s standard system for automatic reordering and replenishment. It incorporates the providers of raw materials (e.g., textile suppliers), the producers of finished goods (e.g., apparel manufacturers) and the marketers of the finished product (e.g. , department stores) into one system that is driven by market information (Maltz and Srivastava 1994). It is designed to reduce turnaround time from wholesaler to retailer (e.g., in apparel). QR in total application involves "on—line electronic communication of sales data from retailers to merchandise vendors, with the vendors promptly supplying retailers the merchandise needed to return the inventory in stores to levels previously deterniined cooperatively by the retailer and the vendor" (Fiorito, May, and Straughn 1995, p.12). In other words, the ultimate QR system connects supplier, manufacturer, warehouser, retailer and consumer by (1) matching product flows to consumption and (2) associating perfectly to product flows a timely information flow (Germain, Droge and Daugherty 1994). Therefore, "QR hinges upon moving from push strategies (attempting to artificially stimulate demand by trying to push inventory down the pipeline), to pull strategies (where consumer demand is the driver)" (Chain Store Age Executive 1994, p.18MH). Since its conception nearly ten years ago, this revolutionary movement has Imam {891115. making [ 2": success of 1'5. retailing g 33. ;r;ens refer to OR as U :3: main aims 151:5. amat The terrain of qurclt tesptm 35‘. : list: it Srivastava 19% re! messing merchandise tur 11m missed sales. [3] there ms 15 sales at the retail level. time efficiency due to mon “7330f quick responsc typicall} 3t sun are presented in Table 3.11. Benefits of Quick Respo \ i " ' .flm So am a} ' ppltets : m produce-loom . C33 resources I rating Improved rttur 335m (I995 8 produced dramatic results, making U.S. manufacturing more competitive and contributing to the success of U.S. retailing giants like Walrnart, Kmart and JCPenney. Some industry experts refer to QR as the biggest non-price advantage a competitor in the retailing industry enjoys (McNamara 1993). The benefits of quick response have been estimated in quantifiable terms (Salmon 1987; in Maltz & Srivastava 1994): [1] lowers safety stock requirements for retailers, thereby increasing merchandise turnover, [2] fewer out—of-stock situations results in a reduction in missed sales, [3] increases in sales for manufacturers and suppliers due to increases in sales at the retail level, [4] allows manufacturers and raw material suppliers to increase efficiency due to more predictable scheduling. In more general terms, benefits of quick response typically realized by retailers, suppliers, consumers and the total system are presented in Table 1-1. Table 1-1. Benefits of Quick Response profits fewer markdowns lower operating _ expenses Improved customer service hi ess resources used Improved return on assets lower prices improved variety fewer stock-outs (timely response) satisfaction Suppliers Consumers Total S stern increased sales & roduce-to-order improved quality efficiency source: Phillips and Droge (I995a) W; Fiorito,.llaymiStmEhnt dmanRmmhinC time “I? oounmmicate m. Madnttiiseiniormatior usud'nsentothe supplier v utmofrunining a ptutl midsummer. Wm j“Nitritethernociu‘srequire Withdrawn“: re my‘30“thproduced. Th "mimic“ When floor] WW‘ QR Wires e) Mauvunm (Florin Day "mm“mms (19 WWW Cycle by co Ethniqwthfi"nutty‘tcttimga; Theme,“ bytetailm is Whittle, _ W m (1%er ’ QR for basics for Wen), QR al 3° mom "Wise W Fiorito, May and Straughn (1995) describe the typical flow of merchandise, data, and finances in a QR partnership between a retailer and supplier. Consumers initiate the QR process as they communicate their needs and wants to the store through their purchases. Merchandise information (e.g., size, color) is collected through scanning bar- codes, and is sent to the supplier via electronic data interchange (EDI) rather than the typical process of remitting a purchase order. These sales data are compared with the store’s inventory model. Production is ordered for the specific items needed to restore the inventory to the model’s requirements. Notification of the expected shipping data is transmitted to the shipper and the retailer. Production orders are transmitted to the plant where the goods are produced. The merchandise is packed and shipped to the retailer. The cycle is complete when floor-ready merchandise arrives at the store. In terms of channel structure, QR requires extensive changes in working relationships between retailers and vendors (Fiorito, Day, and Straughn 1995). Kurt Salmon Associates (1993) depicted the dramatic effect of QR on a typical retailer replenishment cycle by comparing replenishment stages under QR to pre-QR techniques -- the former yielding a 75 percent typical reduction in lead—time (Figure 1-1). The tendency by retailers is to implement QR in the basic areas first. Basics are more profitable, demand forecasting is easier because of year round demand and shorter pipelines, and QR for basics requires less vendor participation (Chain Store Age Executive 1991). QR also promises significant benefits for non—basic and fashion merchandise. Many firms are moving away from the dominant use of pre—distribution due to the realization that various segments of their business are too unique to be served Tm m Wt Uni _ 10 fime 77me ma (Days) names (Days) Item sold _ Item sold —- Create, approve Create & 8 mail purchase 20 transmit order 4 order via EDI Enter P.O., pick a ship order ’5 4 Ship via . . consolidator ’0 3”" “e“ 3 Reoeive'at DC 14 & cross-dock 2 Receive at Receive at store. restock 3 store, restock 2 shelf shelf TOTAL 62 TOTAL 15 Figure 1-1. Replenishment Cycle Comparison source: Kurt Salmon Associates (1993) ‘3 omi'rrhicaily tdeRoulet 199.. r. m orders to closely monitor 5:: Age Executive 1991 r. Phillips and Droge (1995 miss noes of cooperattl mm for mini quick I is: m: the three key dimcm matte mngemem betwetr l‘mhn exchange; and [3] Sizer}: The focus of their mo W. Assuming unccn F'T'ttrttrt‘c harrrcwork for exp] tmronmcnm to make them morr ml uncertainty by both retz More Specifically. demanc manufacturers. Resource depent . 1 . hpemem certain strategic cm In - . ltits of achievmg organiutiona triers this call. QR is pro; “to lltty on the Part Of both TCI 11 monolithically (deRoulet 1992). In the fashion area, the approach is to place smaller pre- season orders to closely monitor initial sales and to quickly re-order fast sellers (Chain Store Age Executive 1991). R in Theo Phillips and Droge (1995a) have developed a model that endeavors to explain the successive types of cooperative relationships between retailers and manufacturers necessary for successful quick response implementation. The model (see Figure 1-2) posits that the three key dimensions of a QR alliance are: [1] relational exchange, a cooperative arrangement between channel dyads; [2] routinization, of task and real time information exchange; and [3] minimization of slack resources, mainly time and inventory. The focus of their model is QR alliances as delimited by resource dependence $R__D) theory. Assuming uncertainty in the environment, RD theory provides a rich predictive framework for explaining how organizations operate on their supply environments to make them more stable (Handfield 1993). QR is posited as a means of reducing uncertainty by both retailers and manufacturers. More specifically, demand uncertainty is a common obstacle for both retailers and manufacturers. Resource dependence (RD) theory suggests that organizations tend to implement certain strategic operations or mechanisms in response to uncertainty as a means of achieving organizational stability (i.e., transaction certainty). Quick response answers this call. QR is proposed to constitute a three-dimensional response to uncertainty on the part of both retailers and manufacturers. More specifically, the first )so.c0>c.\0E.h : OOCCLOIW ; Q ooocaooom l 3:. e a...» TIN x063." GOCQCOXW @N.E.::2 CO.~6N.C..DO .QCO_~E_0C » ~, 51': Q mwzon—mmm ¥0~30 «ammo: omEQ ENE RSER 62:8. Doug. E “seamed M230 .Né oSmE 38:82 gum—w he =o=§§§E 05 SEEM 05 acted—5:8 95 532w 05 358:4 doc—.3532 coo—commas: c8 3:589 05 530% 0:. 69:20.3 3.5qu o. 0.3 meg—v 06 EEEEoo 955 2: .EEEEES .8 mop—mow watt? ‘8 325:? m0 9 ozafiaueom & ESE 05 6.8205. .EoEuEEoo 3:252 Co 933% he 8:8 E 33.8va 3 .255 05 35 3529:» 32:3 2? ”082 1. uDHBUNwH—fldz II: 2 Homecomnm 5 r in. 35350 V 35350:: n cozomwcmch t ucmEoo >._o.:o>:_\oE_.—. V< oucasoxm 2 3050on ii 2.: a is. it xoflm oucmcoxw 3:552 5:32:32” .mco:m_om W i. I waOme—m x050 nevi a QR alliame is n Helm b60061) [hf “‘0 P4 zetadegree of relational ex irritation exchange and operat rm and lack of infonnatio root}: This results tn the thr :t‘e tier] proposes that the : eraser. tenant). or stabrlrt} hail-eh ters'ten R and 1 1T lhe similarities and diffr Fete. Day. and Straughn 199 cording to Gemrain. Droge a tired Ill system. The most ft 3-3311 inherent lack of literature 0 filter to base this research or let«trrhed issue of time-based c0 l'fllbediscussed its two tim here and assume C‘based supply cha Differences between “arm will differences identif dliittem "19"“ and therefore 0 rtuition flows (Blackburn 19 13 phase of a QR alliance is relational exchange, or some degree of cooperative arrangement between the two parties. Routinization, the second phase in QR, results when a degree of relational exchange already exists and there is standardization of information exchange and operating tasks. Routinization enables the substitution of task variability and lack of information for two of the retailer’s most valuable assets, time and inventory. This results in the third phase in QR; i.e. , slack resource minimization. The model then proposes that the successful implementation of a QR results in future transaction certainty, or stability, for both retailers and manufacturers. Parallels between QR and JIT The similarities and differences between QR and JIT have been noted (6. g Fiorito, Day, and Straughn 1995; Blackburn 1991) and are important to this thesis. According to Germain, Droge and Daugherty (1994), QR is essentially an industry- tailored JIT system. The most fundamental similarity among JIT and QR is tirne. Due to an inherent lack of literature on quick response outside of the trade journals, there is a need to base this research on preexisting time-based theory. By far, the most researched issue of time-based competition is JIT in manufacturing and purchasing. As will be discussed here and assumed throughout this dissertation, the differences between these two time-based, supply chain strategies are few. Differences between JIT and QR are mostly in practice, not theory. Simply, three major differences can be identified: [1] different locations in the supply chain; [2] different inputs, and therefore, different outputs; and [3] the different direction of information flows (Blackburn 1991). While the first two points are obvious, the last a need of clarifies“ liming are onedrmensrot 361333 lilr‘tl Li. W lS attamo cr;naiori.e..QR1. there 15 1 ice; asses and urforrnatron fit I epcnuhment orders The araethe velocity of flows in are gods forts‘ard faster; that Life shipment times between 5 3171‘s“? the responsiveness of Slime: preferences back to 2 was made in the QR n user of bidirectional flows" l B 1“it of the then: What is Glc With the globalization of n , .. rhuudrtron for an international f if rigifll 991). Many retailing frm or manufacturers in developing in developed countries have bi lute Nations 1985) More specifically, the e\ What ' 10118 maxuniZe the use of o 14 point is in need of clarification. "Conventional approaches to time reduction in manufacturing are one—dimensional: The objective is to move product faster through the pipeline; that is, speed is attained by moving forward faster. However, in the retailing supply chain (i.e. , QR), there is flow in two directions: Product flows forward in value— added stages and information flows backward from consumers as demand is translated into replenishment orders. The innovative feature of QR is that actions are taken to increase the velocity of flows in both directions. The QR campaign involves steps to move goods forward faster; that is, to shrink cycle times at each stage of manufacture and the shipment times between stages. However, the unique features were those taken to improve the responsiveness of the system through improved, faster communication of consumer preferences back to all members of the chain. In sum, the conceptual breakthrough made in the QR movement was recognizing that the supply chain is a system of bidirectional flows" (Blackburn 1991, p.253,4). Logic of the thesis: What is Global Sourcing? With the globalization of markets, global sourcing is increasingly becoming a precondition for an international firm’s success in the 19903 (Monczka and Trent 1991a; Fagan 1991). Many retailing firms find a better combination between price and quality from manufacturers in developing countries. In fact, increasing numbers of retail firms from developed countries have been setting up buying offices in developing countries (United Nations 1985). More specifically, the ever-changing business environment necessitates that corporations maximize the use of organizational buying overseas in order to :[1] maintain gmifirerrss. [3] cut costs. AW] edge r'llerbtg and ( be: use: as a reactite response szttrghrncreasingi} being “5‘3 not. Yapraii‘ and Yeoh 199 Compared to traditional 1 :1": it more proactive in the a 17"?" in the decision-making 15:1 tn ani McGoldrick 190 C rote in obtaining merchar go‘s Lu and McGoldrick 1199. “W the grossth of git More Specifically. there a; stint sourcing. Kotabe (1989.1' 15 competitiveness, [2] cut costs, [3] establish a quality product, and [4] maintain a technological edge (Herbig and O’Hara 1993). While global sourcing has traditionally been used as a reactive response to global competitive pressures, more recently, global sourcing is increasingly being used as a proactive strategy to gain competitive advantages (Cavusgil, Yaprak and Yeoh 1993). Compared to traditional importing, international sourcing implies that retailers tend to be more proactive in the acquisition of sources of supply and their own strategies dominate in the decision-making as to where, when, what, how much and from whom to buy (Liu and McGoldrick 1995). With traditional importing, retailers often play a passive role in obtaining merchandise, with suppliers taking the initiative in providing goods. Liu and McGoldrick (1995) summarized the benefits and costs that have driven and constrained the growth of global sourcing (Figure 1-3). More specifically, there appears to be a consistent perspective of the benefits of global sourcing. Kotabe (1989,1992) argued that global sourcing is being increasingly used to acquire and sustain cost competitiveness. Similarly, better/lower price is typically credited as the most important benefit (Fawcett and Birou 1992; Dowst 1987; Monczka and Trent 1991a). Min and Galle (1991), however, report that quality is becoming the most important factor in global sourcing. Other benefits include: accessibility, enhanced customer service, increases in supply options, and assistance in developing a global market presence (Fawcett and Birou 1992). Hayes, Wheelwright and Clark (1988) eloquently summarize that global sourcing’s competitive impact extends beyond "traditional" cost containment and'includes competitive dimensions of quality, PUSH enemies hairpins ixiofprodw minim GLOBAL souncm k who mug 0mm 10pm CONSTRAINTS "mil tin: “Chant! rate (MW Control Paperwork 131181113: Wm POIitics We bam'm nationalism Figure 1-3. 16 DRIVING FORCES PUSH PULL FACILITATORS domestic prices cost pressures few suppliers lack of product innovation competitive prices improving quality greater diversity consistency of supply global retailing buying alliances single market better transport/ communications L 1 I LGLOBAL souncme policy strategy organization logistics POSSIBLE IMPACTS 1 competitive product mix differentiation strategy A profit and performance pressure on domestic suppliers presence in foreign markets CONSTRAINTS transit time exchange rate quality control paperwork language inspection contracts politics trade barriers nationalism J COSTS export taxes exchange costs global transport insurance tariffs obsolescence brokerage rejects letters of credit damage in transit Global Sourcing: Costs and Benefits source: Liu and McGoldrick (1995) t‘ Willy {minty “1 m mformmg gIOb in min drew: 10"“: w mummw transmutation“ in": immmmm" to m I'm ”PPM costs with mmmvebecou: a‘mmdpmfls~ Rm" imitation of low price and liliillmhand Trent 19915) Wm of their supply, to mp W (Iiu and McGoldrick 199 “NS. The five most uponam cc “It; [2] foreign exchange m: We; and [5] language (I ”“11 Wet obstacles: an inai We practices; human and ; at insufficiem world ml . Wares (Monczka am 17 dependability, flexibility and innovation as well. Reasons for sourcing globally are many. Liu and McGoldrick (1995) identified four major driving forces: cost reduction; competitive products from overseas; availability, and the internationalization of retailing. Regarding cost reduction, the trends of retailer concentration and increasing competition, means little opportunity for retailers to raise prices in an effort to increase profits. Many are pursuing an alternative strategy of reducing supplier costs with global sourcing. Regarding overseas competition, developing countries have become, and are becoming increasingly competitive in the area of manufactured products. Retailers are finding that many items with higher quality or a combination of low price and quality can be found in developing countries (Fagan 1991; Monczka and Trent 1991b). Some retailers opt to source globally to enhance the reliability of their supply, to supplement their domestic sources, or to meet increased demand (Liu and McGoldrick 1995). In many cases, certain products can only be found overseas. The five most important constraints of global sourcing include: [1] transportation delays; [2] foreign exchange rate fluctuations; [3] travel costs; [4] quality assurance uncertainties; and [5] language (Min and Galle 1991). International sourcing can also entail ’softer’ obstacles: an inadequate understanding of international business and purchasing practices; human and organizational resistance to change; domestic market nationalism; an insufficient working knowledge of international sources, language and cultural differences (Monczka and Trent 1991b). )th Sourcmg’ Compared to global sourcrr that: lead and transrt time rues and the loser costs in I eat; a retailer ma} accept hi 5.2.") associated- Wllh domestic ' .2615er Soure’ Process Beats: of the diversm ( 3337*: 2 ' ' .._..t1ieiel o: the sourcrnrz .lltny {me have adopted simple Nile sources it shoes fl Fit different target markets. a thirties. An empirical study c illitttes the designer label field Ito labels (Harris and Heppel 19 Se . lectton of suppliers is 18 Domestic Sourcing Compared to global sourcing, the benefits of domestic sourcing (e.g., QR) include the shorter lead and transit times, the ability to monitor closely the total production process and the lower costs in terms of management time and communications. In general, a retailer may accept higher prices in exchange for the lower risk and cost usually associated with domestic sourcing. The Global Sourcing Process Because of the diversity of approaches and contexts available for international sourcing, a model of the sourcing process can offer only a simple abstraction (Figure 1- 4). Many firms have adopted a policy of sourcing from multiple countries. For example, Nike sources it shoes from South Korea, Taiwan, Thailand and Hong Kong. For different target markets, a firm may source the same product from different countries. An empirical study of international apparel sourcing has found that Italy dominates the designer label field, while Hong Kong is the leading choice for retailers’ own labels (Harris and Heppel 1991). Selection of suppliers is one of the retailer’s most important decisions in international sourcing. The principle of purchasing used by both industrial and retail buyers is "making the goods available at the right price at the right time" (Webster 1984). Retailers must also decide whether to source a product from a single supplier or from multiple suppliers. Considering the two options, the firms needs to balance the trade-off between operating costs and risks, particularly in the international context. i % lithe 14. The Global 30min! some; Liu and Ma consumer needsl corporate demand analysis objectives product assortment . l muirement specifications Analysrs 0f Requrrements analysis of quantity. timing, back-up / \ / \ merchandise from merchandise for H domestic suppliers global sourcing / \ research countries I— domestic source & suppliers manufacture internationally country & '_ supplier selection formulate buying - }ni— own import | strategies factories unfinished abroad merchandise * i~_ L place orders ‘1!- outward { evaluate outcomes ]‘I— processing ' Domestic Sourcing Global Sourcing Figure 1-4. The Global Sourcing Process source: Liu and McGoldrick (1995) ICflllorRm-ch Whilemchintheuu Rheumatism: 15 my Waugh is unions, as I] Wofgoodsshouldbe “Mohammad: Similarly,withmeglobal Wondization ofretail 20 Single sourcing has the benefit of cost reduction, but bears the risk of ’putting all the eggs in one basket’. Once a supplier is selected, purchasing strategy is developed concerning the volume, frequency, target price, time of delivery and trade channels. A number of alternative trade channels to organize the transaction exist—~an international trading firm, overseas buying office, internal buyers and/or buying group. Many retailers prefer overseas buying offices because direct contact with suppliers can reduce the possibility of misunderstanding or poor communication between the two parties. The choice of trade channels also depends on the expected volume and frequency of purchase. The retailer also negotiates prices and terms with the foreign supplier. In addition, the management of the retailer-supplier relationship is fundamental. A healthy and harmonious long—term business relationship is beneficial to both retailers and their suppliers. DISSERTATION JUSTIFICATION A Call for Research While research in the area of JIT, as applied to purchasing and manufacturing, has been ongoing for 15 some years (Hage 1980), research on QR is in its infancy. This oversight is curious, as the desire to eradicate "waste" and ensure a rapid throughput of goods should be greatest at the retail level, where finished goods represent the highest value stocks in the whole system (Delbridge and Oliver 1991, p.20). Similarly, with the globalization of business and markets, one dimension of the internationalization of retail operations that has been largely overlooked is sourcing. Pill-Wm: hlofmisd'mumionlooksat fin: mm and their im iIncliliscleveloped and sew “Emma-performance re tsmmgmm. MI“lengthen! research questit MMbrieflymmmed. Each. 21 Most empirical research on international sourcing has largely concentrated on U.S. manufacturing firms or European and Japanese multinationals in the U.S. (Kotabe and Murray 1990; Kotabe and Omura 1989; Monczka and Trent 1991a, 1991b; Davidson 1982). Although it is evident that many international retailers actively engage in global sourcing operations, both conceptual and empirical work on international retail sourcing has been very limited (Liu and McGoldrick 1995). MAJOR RESEARCH THEMES/EXPECTED THEORETICAL CONTRIBUTIONS Part I - Quick Response: Antecedents and Consequences Part I of this dissertation looks at factors that cause and accompany quick response in the retailing industry and their implications on retailer performance. A theoretical framework is developed and several propositions are tested regarding the environment— strategy-structure-performance relationship as it pertains to quick response (QR) in the U.S. retailing industry. The three general research questions to be addressed in Part I are presented in Table 1—2 and then briefly outlined. Each question will be thoroughly addressed in Chapter 3. LAW 0.; Mil! .1 08' TilfirstfllenieisthatQR adrelafionshipmaure. msuncmthumicmnl chingesinorganimiomls Sitaflmfime.thepmpo: 22 Table 1—2. Research Questions — Part I [1] Research Question 1 What, if any, changes in management practice (i.e., organizational structure) and channel relationships (i.e., relationship structure) occur as the extent of involvement with QR increases? Research Question 2 What, if any, changes in the extent of involvement with QR strategy and structure (i.e., organizational and relationship) occur as the extent of environmental uncertainty increases? Research Question 3 What, if any, implications does extent of QR strategy implementation, environment uncertainty, and structure (i.e., both organizational and relationship) have on retailer performance? What, if any, changes in management practice (i.e., organizational structure) Ed channel relationships (i.e., relationship structure) occur as the extent of involvement with QR increases? The first theme is that QR strategy has a large influence on both organizational and relationship structure. This is consistent with the dominant theme in strategic management that structure follows strategy. Chandler (1962) observed that major changes in organizational strategy were followed by changes in structural form. Since that time, the proposition that "structure follows strategy" became widely accepted. Selection of the organizational structure variables was guided by literature reviews that have consistently identified integration, formalization, and decentralization as major interrelated dimensions of organizational structure. It Qkpuumups. It will mltshanmense’ in flamilaam its suppli vuiuyofcomexts. M ‘E | . I Wm kw Models of the relation: mutiny as antecedent Mm (both org well-mpported in the li 23 will be argued that the implementation of quick response results in increased integration, formalization, and decentralization of operations. This relationship has been confirmed in a variety of contexts, including JIT exchange and cost vs. differentiation. Relational norms (the higher-order construct comprised of flexibility, information exchange, solidarity) was chosen to represent the relationship or boundary- spanning structure. This selection was guided by literature on channel relationships (i.e., behavioral-orientation) and the relevance of the construct to QR partnerships. It will be argued that the implementation of quick response results in an increase in flexibility, information exchange and solidarity between the retailer and its suppliers. This relationship has also been confirmed in a variety of contexts. What, if any, changes in the extent of involvement with QR strategy and structure i.e. or anizational and relationshi occur as the extent of environmental uncertaing increases? Models of the relationships between strategy and structure often include uncertainty as antecedent to strategy, structure or both. In this dissertation, environmental uncertainty is posited to directly affect QR strategy implementation and structure (both organizational and relationship). Each of these arguments are well-supported in the literature. lisfrnoolmionisoon madman: ammuncrnngei mammals ihfmplacid. Lam mlhlyovenllasenvii amimmnuncemim hummuimyh litmus of organizz miislnvefmndthnun agznic suueunes, rypic: Windufldeeem'alia tintasumertamty' in: Ammuend in relationshipbetween en Mnelationalnormfl Wbymine Thereforetheargument emergcinmcfweofunc orientation 24 This first contention is consistent with the traditional contingency literature that suggests environment can and should influence strategy. The argument has long been made that changes in ways of conducting business are unlikely to be considered in placid environments. The current status of the retail environment is far from placid. Literature suggests that radical strategic initiatives become more likely overall as environmental uncertainty increases. It will be argued that as environment uncertainty increases, the extent of QR implementation also increases. Environment uncertainty has also been found to have important implications for the structures of organizations. Regarding organizational structure, several studies have found that uncertainty in the environment creates the need for more organic structures, typically characterized as more integrated, specialized, formalized and decentralized than bureaucratic ones. Therefore, it will be argued that as uncertainty increases, organizational structures become more organic. A more recent trend in the literature is the establishment of the existence of a relationship between environment uncertainty and relationship structure. In general, relational norms (i.e., information exchange, solidarity, flexibility) buffer uncertainty by serving as a general protective device against deviant behavior. Therefore, the argument will be made that exchange relationships that typically emerge in the face of uncertainty will tend to be more relational (vs. discrete) in orientation. 2'41! ii, if "I' . W nmmmu ommmm Miminchding: minmsedsellingspl lgnudlhtuQRstme Wmmaswei llrmimmnem has been mietyofoomexts. Specifi hminydfnoadlr Mahmometounai ‘f—7 25 [3] What, if any, implications does extent of QR strategy implementation, environment uncertainty, and structure (i.e. , both organizational and relationship) have on retailer performance? The traditional stance in the literature is that strategy influences performance. QR strategy implementation is expected to enhance retailer performance for several reasons, including: fewer markdowns, lower operating expenses, higher turns, increased selling space and improved customer service. Thus, it will be argued that as QR strategy implementation increases, performance can be expected to increase as well. The environment has been found to influence organizational performance in a variety of contexts. Specific to this dissertation, in any environment characterized by uncertainty, if no adaptation mechanism is cultivated, the costs of making changes in response to unanticipated events will eventually undermine the returns an organization derives. For this reason, the argument will be made that as environment uncertainty increases, retailer performance decreases. The influence of organizational structure on performance has been demonstrated in the literature. Specific to this dissertation, several studies have found organizational performance to be significantly linked to organic structures. Retailer performance, it will be argued, increases as organizations become more integrated, formalized and decentralized in their structure. L__ — Whinflrmo ham Whips Minshon-supp album. Relation] memguhnng Weinbem magmwlilariryin hmmmu for Ilium; m'QRndGlobal hillofthisdlmertation e Mmmokandmhcr WWWMQ Wistypicallyvicwedas humanism Wedge concept of inf M11 themes are associated 26 Regarding the influence of relationship structure on performance, retailers with long-term relationships can achieve competitive advantage by receiving merchandise in short-supply, information on new and best—selling products and competitive activity, best allowable prices, and advertising and markdown allowances. Relational norms, in turn, are considered to be important mechanisms for regulating long—term relational exchanges. In this case, retailer performance will be argued to increase as the norms of informational exchange, flexibility and solidarity increase. These general themes will be formally discussed in Chapter 3 of this dissertation and tested in Chapter 5. Part II - QR and Global Sourcing: Drivers and Performance Implications Part H of this dissertation examines both the environmental antecedents of and the effectiveness of QR and another major strategy in retailing, global sourcing. Based on the well-accepted premise that QR emerged in response to offshore competition, global sourcing is typically viewed as an alternative strategy. The former offers the retailer a low-cost alternative to domestic sourcing and the latter yields a strategy based on the cutting-edge concept of information replacing inventory in the supply chain. Three research themes are associated with Part II of this research (see Table 1-3). til-3. WW - MW4 mums l =——_.‘ RmchQIxsimé ‘ i j i 14% Thinnofthismearehl mmbycxaminin Petornateimplications of the Imminent: [4] fir Table 1-3. Research Questions — Part II 27 Research Question 4 What environmental factors, if any, are catalysts of QR and/or global sourcing implementation? Research Question 5 Comparing QR and global sourcing as strategic alternatives, which strategy has the largest influence on performance? Research Question 6 Will retailers implementing both QR and global sourcing outperform retailers implementing only one strategy? What environmental factors, if any, are catalysts of quick response and/or global sourcing implementation? The intent of this research theme is simply to gain a better understanding of these two strategies by examining the effects of a variety of facets in the retailer’s environment on strategy implementation. Factors identified in the literature as potential external drivers of QR and/or global sourcing implementation include, but are not limited to: environment uncertainty, competition (domestic and foreign), and the internationalization of retailing. Factors in the retailer’s internal organizational environment include, but are not limited to: degree of retailer internationalization, retailer power, technological sophistication, corporate goals, innovativeness, and marketing orientation. Performance implications of the two strategies are now discussed. Because developmg a better understanding of the strategy-performance relationship in service industry — me an 'iruememl glimmiosand their p mmgldnlmingwill misrillhemmedtoeoex SE . 'l Gimrheuadirimlno mammary kahgyvn’ll exceed ti Iglolnlmcingsuateg f [5] 28 environments is an "incremental process" (Cappel, Wright, Wyld and Miller 1994, p.211), two scenarios and their performance implications are considered. First, quick response and global sourcing will be viewed as strategic alternatives. Second, the two strategies will be assumed to coexist. Comparing quick response and global sourcing as strategic alternatives, which strategy has the largest influence on performance? Given the traditional notion, that QR and global sourcing are strategic alternatives, it will be argued that the performance of retailers competing with a QR strategy will exceed the performance of retailers competing on the basis of a global sourcing strategy. Literature based on Porter’s generic strategies provides support for this performance contention. In Porter’s terminology, QR is characteristic of a differentiation strategy and global sourcing is characteristic of a cost-leadership strategy. Will retailers irn lementin both uick res onse and lobal sourcin strate ies 0u erform retailers im lementin on] one strate ? Extending the more traditional notion that QR strategy and global sourcing are strategic alternatives, there is some recent evidence to suggest that the two Strategies may coexist much to the benefit of the retailer. Several recent studies Suggest that competing with a combination of strategic approaches may be associated with higher profitability and larger market shares. It will be argued that the performance of retailers simultaneously implementing both QR and global Magnum will b ”rimmlhypothrset developed ragtime. (liters: non-food atoms). A thorougl film. Research findings 1 Bad 0“ the main: of Pa 3am Whitiom to exism ”am and i4] imcrnatior M We: will Contribute Wilma. and also, SIGNIFK Intelltlusion, this dissex mull”. First, QR is an em to competition am to ‘ lot which can be comm Wilmer. 3mm allhou; milk (1% the amide 29 sourcing strategies will be greater than retailers implementing only one of these strategies. These general themes will be formally discussed in Chapter 3 of this dissertation. The formal hypotheses deve10ped in Chapter 3 will be tested by a retail industry field survey of large, diverse non-food retailers. Specific retailers to be studied include: department stores, general merchandisers, discounters, and various specialty stores (e.g. , apparel, toys, books). A thorough discussion of the research methodology is the focus of Chapter 4. Research findings will be presented in Chapter 5. Based on the nature of Part I and Part II, this dissertation is expected to make theoretical contributions to existing literature bases on: [1] retailing, [2] logistics, [3] management, and [4] international business. Each of the six previously discussed research themes will contribute directly to the conceptual understanding of quick response, in particular, and also global sourcing. SIGNIFICANCE OF THE RESEARCH In conclusion, this dissertation will prove to be important for three reasons in Particular. First, QR is an extremely timely topic, both literally and figuratively. Time- based competition appears to be the key differentiator of the 1990s (Stalk 1988). Quality, which can be considered the differentiator of the 1980s, has instead become an order qualifier. Second, although there are a plethora of company examples in the trade journals documenting the upside and downside of both global sourcing and QR, very few quitoidltrflkpfess titanium. misdisa flmiintltlitenmrt. mfllhmmflefliflly wwzmsm rm. lbminderofthis dis mmdofned and opera Mminmdneed and di minm.Clnpte155 a umamhuomormi 30 attempts outside of the trade press have endeavored to explain these strategic initiatives in the retailing industry. This dissertation is an attempt to fill an obvious theoretical and empirical void in the literature. Third, and finally, the conclusions drawn from this research will be very managerially relevant. As academic research is often criticized for being "unpractical", this dissertation should prove to have many practical implications and applications. The remainder of this dissertation is organized as follows. In Chapter 2, key constructs are defined and operationalized. In Chapter 3, the theoretical model and hypothesis are introduced and discussed in detail. In Chapter 4, the methodological process is set forth. Chapters 5 and 6, respectively, provide a critical discussion of the results and the implications of this research, both theoretically for managerially. PM Sm Lit! humanist "am'nisfollo‘edbymei i'rqncifr mdcl to be tea nu lnpanimlar. kc} “1010111129390th Windmill-swam: BASIl hlhis difiemtion (in Ch Rhioped regarding the slimmmeasrlnypermn' to lbgemisoftlnmodel CHAPTER 2 Environment, Strategy, Structure, and Performance Literature in Marketing In this chapter, the basic model is overviewed. In particular, the general relationships between enviromnent, strategy, structure and performance are introduced. This overview is followed by the identification and justification of the major components of the specific model to be tested in this dissertation, their meanings, and their measurement. In particular, key constructs include: environment uncertainty, quick response (QR) strategy, global sourcing strategy, organizational structure, relationship structure and retailer performance. BASIC MODEL: OVERVIEW In this dissertation (in Chapter 3), a theoretical model and several propositions are developed regarding the relationships among enviromnent-strategy-structure— performance as they pertain to quick response (QR) in the U.S. retailing industry. The genesis of the model to be developed and tested is represented by Figure 2-1. The figure reveals the key constructs and the expected relationships between them. The model proposes that: [1] the environment influences strategy and structure; [2] strategy influences structure; and [3] the environment, strategy and structure all influence an Organization’s performance. Justification for the model is threefold: [1] the classical "strategic management" stance that strategy engenders structure (e. g., Chandler 1962); [2] models of the relationship between strategy and structure often include the environment as antecedent 31 L‘ — MEI-W or both (e.g. bgnnnghrm; 1994): and mm have been denmsu .n‘llrsmdabontionol‘the sp . act. lirrehriurnhipsproposed mm are well-confirm heflnmenmphs of am» infirm strategy has 1994; Frazier. Spelt wmfihoovanghavan 1.119941. Environmemhas be: “Met development (Cali innit Droge and Dan 1994:1164:me 1992; ch “Strip 1995; Camgil and ”dined 1994; Tan and ' Remand daCosta 1989) 32 to strategy, structure or both (e.g., Miller and Droge 1986; Prescott 1986; Germain, Droge and Daugherty 1994); and [3] strategy, in particular, and also structure and environment, have been demonstrated to influence performance. Later, Figure 2-2 provides an elaboration of the specific components of the model to be developed in Chapter 3. The relationships proposed in Figure 2-1 among environment, strategy, structure and performance are well—confirmed in the literature. They are discussed in detail in Chapter 3, but some examples of supporting literature are given here. Environment has been found to influence strategy in the context of JIT exchange (Germain, Droge and Daugherty 1994; Frazier, Spekman and O’Neal 1988), new products (Calantone, diBenedetto and Bhoovaraghavan 1994), exporting (Naidu and Prasad 1994; Cavusgil and Zou 1994). Environment has been found to influence structure in a variety of contexts-— new product development (Calantone, diBenedetto and Bhoovaraghavan 1994), JIT (Germain, Droge and Daugherty 1994), channel relations (Robicheaux and Coleman 1994; Heide and John 1992; Klein, Frazier and Roth 1990; Noordewier, John and Nevin 1990), among others. Past studies have also demonstrated that a variety of marketing strategies lead to structural changes, including those of new product development (Calantone, diBenedetto and Bhoovaraghavan 1994), cost vs. differentiation (Miller 1988) and JIT (Gilbert, Young and O’Neal 1994; Germain, Droge and Daugherty 1994). Similarly, performance has been found to be influenced by the environment (e.g., Heide and Stump 1995; Cavusgil and Zou 1994; Kaynak and Kuan 1993), strategy (e. g., Naidu and Prasad 1994; Tan and Litschert 1994; Richardson 1993; Webster 1993; Geringer, Bearnish and daCosta 1989) and structure (e. g., Kaynak and Kuan 1993; Mahajan and 33 moz<2mOmeL mmDhODmhm h — >0mh Environment Uncertainty Facilitators of Quick Response Facilitators of Global Sourcing Strategy --------------- > Quick Response Quick Response (vs.) Global Sourcing Sthtlii'C -------------- > Organizational (integration, formalization, decentralization) Relationship (relational norms) Performance --------------- > Efficiency Efficiency Effectiveness Effectiveness Adaptability Adaptability Figure 2-2. Conceptualization of Model Components tannerquickrtwom irratishkadtamcs in retail Multinationmeretailet's nihilism saluting activit m Gitenthe important militiamen were selected in“ RESPONSE (on) and Mr academic and m Mam; 382 an 'on-line e We “MOB. with [ht “idiom the invemow in WI and ‘1“ Vendor (Fi mm“ “‘31 Pulls things i MW of the old-fashions. Whilmw the Pipeline "MM 0081 of a retailer‘s b”toting and Electronic Data Mt . hmqlle for Shonen'mg t 35 STRATEGY In Chapter 1, quick response (QR) and global sourcing were described as among the most visible advances in retail sourcing strategies in recent years. Because of their substantial impact on the retailer’s competitive position, these practices have changed the way firms view sourcing activities -- elevating sourcing to a position of strategic importance. Given the importance of these two contemporary retailing strategies, QR and global sourcing were selected as the strategic components of this dissertation. QUICK RESPONSE (QR) and its measurement In the academic and trade literature, quick response (QR) has been defined by various authors as: an "on-line electronic communication of sales data from retailers to merchandise vendors, with the vendors promptly supplying retailers the merchandise needed to return the inventory in stores to levels previously determined cooperatively by the retailer and the vendor" (Fiorito, May, and Straughn 1995, p.12); "a consumer- driven strategy that pulls things though the pipeline and lets consumers decide what they want instead of the old—fashioned way of trying to forecast what the consumer wants and then push it through the pipeline " (Blackburn 1991, p.248); "a strategy for reducing the time and cost of a retailer’s merchandise replenishment cycle through the use of barcoding and Electronic Data Interchange" (Chain Store Age Executive 1992a, p.73); the "technique for shortening the time it takes fiber to reach the mills, fabric to get to the apparel maker, and the finished garment to make it onto the retailer’s floor" (McNamara 1993, p.28); and a "strategy of customer service that uses technology to make possible an industry pipeline so flexible and efficient that, ideally, retailers can % mammary will sell! niurtflm' colors gilt. liote WY» “hm hm" mWfiW rtztt‘tiiltttlsul’l’1 dn‘itttstrydliimd JIT 53“ itisdmttion. quid: "a mmhmedon amt hahmnin'nniuslackm Olit'omoifical mid)" Wilton (i.e.. Fiorito. l mmonmm Mannie] basis for the 7"“ limiter for the Operat 36 forecast today what they will sell tomorrow and have the merchandise in the stores, on time, in the right quantities, colors, sizes and styles" (Chain Store Age Executive 1991a, p.4B). More simply, others have described quick response (QR) as: a "technology- driven, co-operative retailer/ supplier relationship" (Larson and Sijbrands 1991, p.10); and an "industry-tailored JIT system" (Germain, Droge and Daugherty 1994, p.471). In this dissertation, quick response is defined as a technology-driven domestic sourcing strategy based on a cooperative relationship between retailer and supplier that seeks to minimize slack resources (i.e. time and inventory) in the supply chain. Only one empirical study was found that directly operationalized " quick response" implementation (i.e., Fiorito, May and Straughn 1995). However, based on the similarities between QR and JIT (as discussed in Chapter 1), the JIT literature could also serve as a parallel basis for the measurement of QR. Table 2-1 reveals a sample of relevant measures for the operationalization of quick response in this dissertation. iii-1.0m Wm (QR): Linn 915—,» giggling! mam til)! .73: mt 11th min .311 "=1?th 6‘99}: hum“ mm in mm f1” mum in him h‘hliwh m 3U! “MM!!! him“ \ MEAL SOURCING and its Global 5011ng has beet mm“ SuNocturne“ tit resale regardless of wh trial" (Swamidass 1993, pt ts to serve Various ma] . products worldwidet ( dicisio . , ns dammmg w 37 Table 2—1. Quick Response (QR): Measurement Authors (date) Sampling Unit Context Measures Fiorito, May & Straughn retailers QR degree of implementation of 15 components of QR; use (1995) IJRDM POS, barcoding, promotional price look-up system, source(s): original Germain, Droge & Daugherty manufacturers (1994) JMR sounds): Frazier & Rody (1991) Gilbert, Young & O’Neal manufacturers (1994) JBR source (5): wu'dennjfied Handfield (1994) make-to-order firms 10M sounds): original Fawcett & Birou (1992) purchasing and materials IJPD&LM managers source(s): unidentified JIT strategic organizational planning for QR, UPC scanning, full price look-up system, training of key employees about QR changes, automatic replenishment of basic goods, vendor-marked merchandise, pre—season planning with vendor, automatic forecasting for staple goods, EDI, store receipt of products directly from vendor, bar-coded shipping container labels, automatic forecasting for fashion goods. single item. "percentage of sales made on a JIT basis". twoitems, "self r ' . r -. . 1 ., , definition of HT systems " and "number of JIT suppliers used". four 7-point items, "to what extent: [1] are orders placed and delivered on a daily basis with the critical supplier; [2] is the critical supplier located locally; [3] is the critical supplier actively involved in new product design decisions; " lotsized Hf ' ‘ r I, danGICd?" 1 (alpha = . 74) single item, "do you have a JIT sourcing program?" GLOBAL SOURCING and its measurement Global sourcing has been broadly defined as: the "acquisition of raw materials, components and subassemblies from international sources for use in fabrication, assembly or for resale regardless of whether the import source is internal or external to the company" (Swamidass 1993, p.672); the " setting up of production operations in different countries to serve various markets, or buying and assembling componentS, parts or finished products worldwide" (Murray, Kotabe and Wildt 1995, p.181); or it refers to "those decisions determining which production units will serve which particular markets _ ibrmmvillbc an: on global ming. mammalian 1995) MW. fours speci amt-gm global Mumbmponem Table 2-2 reveals a saw Mminginthisdissenam Webmailingbnimtead‘ ltEllmmnand Japanese mul 1995), 38 and how components will be procured for production" (Kotabe and Swan 1994, p.118). Literature on global sourcing, from a retailing perspective, was extremely scarce. A chapter in the recent (i.e. , 1995) book, International Retailing: Trends and Strategies, by Liu and McGoldrick, focus specifically on global sourcing from a retailing perspective. In the retailing context, global sourcing implies that "retailers tend to be more proactive in the acquisition of sources of supply and their own strategies dominate in the decision— making as to where, when, what, how much and from whom to buy" (Liu and McGoldrick 1995, p.100. Global sourcing, therefore, differs from tradition importing in that with importing "retailers often play a passive role in obtaining merchandise, with suppliers taking the initiative in providing goods " (Liu and McGoldrick 1995 , p.100). In this dissertation, global sourcing is defined as a retailer-driven international sourcing strategy wherein the retailer serves as the catalyst in sourcing the merchandise or subcomponents from abroad. Table 2-2 reveals a sample of relevant measures for the operationalization of global sourcing in this dissertation. All studies found in the academic literature were not specific to retailing, but instead were found to largely focus on U.S. manufacturing firms or European and Japanese multinationals operating in the U.S. (Liu and McGoldrick 1995). AsdepictedinFigure: Wold: model rel: Momliationofstmctufl WIQR WW“ madame. D“ Mammarwm‘i _. _____.._. __ 39 Table 2-2. Global Sourcing: Measurement Authors (date) Sampling Unit Measures Mun'ay, Kotabe & Wildt U.S. subsidiaries of foreign single item, "percent of total value of all non-standardized (1995) IRS multinationals components in the products sourced internationally". rounds): unidentified Thorelli & Glowacka industrial buyers eight S—point items, "likelihood of purchasing a component product (1995) JBR from foreign suppliers located in eight countries if he/she were to become dissatisfied with the performance of the current supplier". sounds): original Endpoints include: 1=very unlikely to buy, 5=very likely to buy. Kotabe & Swan (1994) U.S. parent firms single item, "ratio of the sum of U.S.-manufactured imports from JBS foreign affiliates plus platform exports from affiliates to third countries divided by U.S. parents' total sales for each industry". sourced"): Kotabe (1989) and Gaines (1993) Fawcett & Birou (1992) purchasing and materials single item, "do you have a global-sourcing program?" managers source (3): unidentified Min & Galle (1991) multinational U.S. firms single item, " ' K r, r , 'seuucutycai purchases IJP&MM were overseas?" source(s): original Kotabe & Omura (1989) U.S. subsidiaries of foreign single item, "ignoring transportation costs, approximately what JIBS multinationals ‘ percent of the total value of components in the product could be sourced from local firms in newly industrialized countries such as Taiwan, South Korea and Brazil without technical assistance from sourced"): original your firm?. STRUCTURE As depicted in Figure 2-2, for the purpose of this dissertation, the "structure" component of the model relates only to QR implementation. The most common operationalization of structure in the business literature is organizational structure. Certainly, QR implementation can be expected to influence the retailer’s internal organizational structure. Decentralization, integration and performance control were chosen to represent organizational structure based on their relevance to QR. It is also M used inkcy studies ma. Evidufrom the tat White been studied in lttfieunain. DrogeandDau moral 1988), marketing 1993).mmfacutring(e.g., t llll,Ftedrickson 1986 ). am: Won. formalization and teach. Ihccomepmalimi tannin, Droge and Dam 4O likely to expect that QR implementation influences the retailer’s relationship with its QR suppliers, or relationship structure. Information exchange, flexibility and solidarity were chosen to represent relationship structure based on literature on channel relationships that identified relational norms as a key factor in QR partnerships. For these reasons, both organizational and relationship structure were selected to represent the structure components of the model. ORGANIZATIONAL STRUCTURE and its measurement Internal or organizational structure refers to an organization’s internal pattern of relationships, authority and communication (Thompson 1967). Organizational structure has been measured in many empirical studies over the last decade and has been characterized on a variety of dimensions. The individual facets and measurement approaches used in key studies in marketing and management are summarized below in Table 2-3. Evident from the table is the consistency in which the facets of organizational structure have been studied in the past decade in a variety of contexts, including: JIT (e. g., Germain, Droge and Daugherty 1994; Giunipero and Law 1990; Frazier, Spekrnan and O’Neal 1988), marketing mix variables (e.g., Moorman, Deshpande and Webster 1993), manufacturing (e.g., Miller and Droge 1986), strategic processes (e.g., Miller 1991, Fredrickson 1986 ), among others. In particular, the dimensions of centralization, integration, formalization and specialization have dominated this area of organizational research. The conceptualization in this dissertation relies on these works, especially that of Germain, Droge and Daugherty (1994) regarding JIT. Iii-3. Inpnnl" Studies of Elihu” Rh! hi, i” inh- Piedmont an. m Faith. mun ”M um “um Made-y or Woman tom-ton 41 Table 2—3. Empirical Studies of Internal Organizational Structure Sum Publication Facets of Structure Context Pelham & Wilson (1996) Journal of the Academy Decentralization of Marketing Science Coordination Formalization Differentiation Germain, Droge & Journal of Marketing Decentralization JIT Daugherty ( 1994) Research Formalization Integration Specialization Jaworski & Kohli Journal of Marketing Formalization antecedents of marketing orientation (1993) Centralization Departtnentalization Moorman, Journal of Marketing Centralization advertising Deshpande & Formalization Webster ( 1993) Complexity Bucklin & Sengupta Journal of Marketing Formality co-marketing alliances (1993) Menon & Joumal of Marketing Fonnalization knowledge utilization Vandarajan Centralization (1992) Miller (1991) Management Science Integration maliversified, autonomous companies Forrnalization Specialization Decentralization Giunipero & Law Production & Inventory Integration JIT (1990) Management Journal Decentralization Yasai-Ardekani Academy of Management Complexity electrical engineering fums (1989) Journal Formalization Decentralization Fmifl. Spekman Journal of Marketing Integration OEM & O'Neal (1988) Performance control Decentralization Specialization Miller (1988) Koberg & Ungson (1987) Academy of Management Joumal Joumal of Management Liaison devices Technocratization Delegation Formal Controls Nonfonnalization Decentralization uniiversified, aritommous companies schools rrtvj—rrm 1W“ . l) . , tit-Neat“). g_____m_ Iii-.m- Mada, all In:- it»; M-nm x M- mutationoflheinu 11mm tint have mm mom other Mn(e.g.,Mimzberg 197 “mind in Germain. 1 Mm'mtiomlm "um Followingadiscussior Tables24thmtgh2-6 presen ijmunals that t sthttnclfor analysis in this d’ l! l‘ . n lngeneml, decentral' lounfdecision-making au MillttandDroge 1986). In 42 Table 2-3 (cont’d). Studv Publication Facets of Structure Context Fredrickson (1986) Academy of Management Centralization strategic decision process Review Formalization Complexity Miller & Droge Administrative Science Forrnalization mostly manufacturing (1986) Quarterly Complexity Centralization Integration The selection of the internal structure variables for this dissertation was guided by literature reviews that have consistently identified integration, formalization and decentralization, among others, as major interrelated dimensions of organizational structure (e.g., Mintzberg 1979; Miller 1991). These dimensions are consistent with those analyzed in Germain, Droge and Daugherty {1994) regarding HT. In this research, organizational structure is comprised of decentralization, formalization and integration. Following a discussion of the variations in meanings of the three constructs, Tables 2-4 through 2-6 present a selection of studies identified in the top marketing and management journals that focus on the three dimensions of organizational structure selected for analysis in this dissertation, and their measurement. Decentralization In general, decentralization (or the reverse——centralization) refers to the vertical locus of decision-making authority in the firm (Germain, Droge and Daugherty 1994; Miller and Droge 1986). In particular, decentralization "divides decision—making tasks immgumbiISJOdl minimum-1W m mutation an: arm lnguml. open Q-WJMW WMMWW thinnkmdebecause 'I “EMMWGem murmur ournlim William an arm durum—making'(, humps»; «may l"Millikan:oftmrporatesu imam: decisions and i182). and more simply, ' demjan 1992. p.63). tn lewgauimfionthat has Mammal, electroni mdmpplie selection, etc. fit 43 into more management bits, reducing collective cognitive limitations and allowing more planned and analytical approaches" (Miller 1987, p. 12; Fredrickson 1986, p.287). Both operations decentralization and scheduling decentralization are considered in this dissertation. In general, operations decentralization refers to "how" things are done (e.g., personnel) and scheduling decentralization refers to "when" (e.g., information and product flow and tinting) things are done (Germain, Droge and Daugherty 1994). Such a distinction is made because “the concept of time—based competition elevates ’when’ to strategic initiative status" (Germain, Droge and Daugherty 1994, p.473). Others describe decentralization (or centralization) as: the "amount of delegation of decision—making authority throughout an organization and the extent of participation by organizational members in decision-making" (J aworski and Kohli 1993, p.56; Moorman, Deshpande and Zaltman 1993, p.85); "the degree of influence a manager has on major decisions relative to the influence of corporate supervisors" (Gupta 1987, p.484); "the degree to which the right to make decisions and evaluate activities is concentrated" (Fredrickson 1986, p.282), and more simply, "the locus of authority and participation" (Menon and Varadarajan 1992, p.63). In this dissertation, decentralization refers to the level in the organization that has authority to make decisions in relevant areas such as inventory control, electronic data interchange (EDI), pricing, promotion, product and supplier selection, etc. rim. (emanation/lbw L____m.lil__ ’ helm ”as III In hmtm um dignit- am sup-m Barnum], WGMd Elli-gram hint-t1“ tritium: we: can I In flatly 09667968; Iflfiubpsldayl than hwu may. “(Will u; “MI?” 0952; human output 3 Irm- Ind. (1965) ifdilutions, and communica which mks define roles, au Procedures“ (Jaworski and 11-85), 'the extent to whic behavior (swarm 19 tenuous, cost and quali 1987, p. 12). T______77, Smdy Sampling Unit Germain, Droge & Daugherty manufacturers (1994) JMR rource(r): Inkron, Pugh & Hickson (1970) and Pugh & Hickson (1976) also adapted for use by: Miller 0988/1991) Yasai—Ardekani (1989) and Miller & Droge (I986) Pelham & Wilson (1996) Jaworski & Kohli (1993) member companies of MSI JM sounds): Aiken & Huge (1966/1968) Moorman, Deshpande & research department Zaltman ( 1993) JM users rource(r): Deshpande & Zaltman (1982) Gupta (1987) AM] corporate SBU's source(s): Tannenbaum (1968) aLro adapted for use by: Koberg dz Ungron (1987) 44 Table 2—4. Centralization/Decentralization: Measurement Measures operations decentralization - five 7-point items: "Ratings on [1] the number of workers required, [2] allocation of work among available workers. [3] internal labor disputes, [4] overtime at the plant level, [5] plant equipment or machinery to be used". (alpha=.77) scheduling decentralization — two 7-point items with same endpoints. "Ratings on [1] delivery dates to customers and priority of orders, [2] production scheduling". (alpha= . 77) nine 5-point items. assessed the extent to which jobs in the rules (e. g., "How things are done around here is leftup to the person doing the work"). Endpoints include: 1 = strongly agree, 5 = strongly disagree. (alpha =.88) eight 4-point items, for example: “ [ 1] How frequently do you usually participate in decisions on the adoption/deletion of new products? [2] There is little action taken in my job until a superior approves the decision [3] I have to ask my boss before I do almost anything ". Endpoints include: l=never, 4=always. 2 items-‘T'he first concerned the influence of SBU’s managers and their corporate superiors, both line and staff, on the formulation of business units' long range strategic plans; the second sought similar data for the formulation of business units' annual operating budgets. Formalization Formalization has been defined as: "the extent to which procedures, rules, instructions, and communications are written down" (Child 1972, p. 164); "the degree to which rules define roles, authority relations, communications, norms and sanctions, and procedures" (Jaworski and Kohli 1993, p.56; Moorman, Deshpande and Zaltman 1993, p.85), "the extent to which an organization uses rules and procedures to prescribe behavior" (Fredrickson 1986, p.283), and "the use of formal procedures and job descriptions, cost and quality controls, specialists, and professional technocrats" (Miller 1987, p. 12). — Canisterwith other st: imi'miorttteextetloffonr he and Dargheny 1994). mmmhasized t margarkawmskLSu nmdlflexchang mung and Daugher mustn'urpn‘ eornnl. iLbedlmrking) can also WIMmAB). Int] ifflmlintion) is defused Hardwithindustrysun Offlevariablesselecte Wisdeleastconsi M linkages that coordina P542). Others have rcfe 19811988). Liaison device mauve devices seek to " mitts among decision- Winiu, and reconcile Monrhwonk r.._._____._.wn e.” .. 45 Consistent with other studies, the focus in this dissertation is on one aspect of formalization: the extent of formalized performance control (Khandwalla 1974; Germain, Droge and Daugherty 1994). Performance control was selected because many researchers have emphasized the importance of the performance appraisal system in marketing overall (Jaworski, Stathakopoulos and Krishnan 1993) and in the establishment and maintenance of JIT exchange in particular (e.g., Frazier, Spekman and O’Neal 1988; Germain, Droge and Daugherty 1994). "A narrow definition equates performance control with ’output’ control, but more generally the results obtained by competitors (i.e., benchmarking) can also be monitored on formal basis" (Germain, Droge and Daugherty 1994, p.473). In this dissertation, performance control (i.e., a dimension of formalization) is defined as the extent to which performance (or output) is compared with industry standards or competitors. Of the variables selected to represent organizational structure in this dissertation, integration is the least considered in the literature. Integration has been defined as: "lateral linkages that coordinate differentiated subunits, reduce conflict and duplication, foster mutual adjustment, and coalesce subunits toward meeting overall organizational objectives" (Germain, Droge and Daugherty 1994, p.472; Miller and Droge 1986, p.542). Others have referred to integration as the use liaison devices (e.g., Miller 1987/1988). Liaison devices include task forces and coordinative committees. Such integrative devices seek to "encourage rationality in decision-making by precipitating contacts among decision-makers that may motivate systematic attempts to develop, scrutinize, and reconcile divergent perspectives" (Miller 1987, p.11). In this dissertation, integration is defined as the extent to which decision-making at top but”!!! w I!” min. M & Ema um dfitfihl um iflpnby:flauwi "IMHIIMHI mou- mflnlflm rim-7965: hum-ta man ham. II has In I)“ l 7‘— (I982! tiling-um» Wt m «batman Wit): Me (I 974) bum-diam»: mans Droge 46 Table 2-5. Formalization/Performance Control: Measurement Authors (date) Sampling Unit Formalization Germain, Droge & Daugherty manufacturers (1994) JMR sounds): Inkson, Pugh & Hickson (1970) and Pugh & Hickson (1976) also adaptedfor use by: Miller (1983) Yasai—Ardekani (1989) and Miller & Droge (1986) Pelham & Wilson (1996) laworski & Kohli (1993) JM member companies of MSI source(s): Aiken & Huge (1966/1968) Moorman, Deshpande & research department Zalunan (1993) JM users sourced).- Deshpande & Zaltman (I982) Bucklin & Sengupta (1993) suppliers & distributors source(s) Ruekerr & Walker (I 98 7) Performance Control Germain, Droge & Daugherty manufacturers (1994) JMR source(s): KImndwalla (1974) also adaptedfor use by: Miller J: Droge (1986) OR Measures eight dichotomous (yes/no) items; "which of the following documents are used in your firm: [1] information booklets, [2] an organizational chart, [3] written job descriptions, among others. five 5-point items, assessed to degree of hierarchical authority within the organization (e.g.. "A person who wants to make his own decisions would be quickly discouraged here". Endpoints include: 1=strongly agree, 5=strongly disagree. (alpha=.76) fifteen 4-point items, for example: [I] lean make my own decisions in my job, [2] I make up my own rules on this job, [3] There is not a specific rule manual detailing what I do, [4] We follow strict operational procedures at all times. Endpoints include: l=definitely true, 4= definitely false. four 5-point items. "Rate extent to which: [1] written documents spell out detailed tasks, activities and schedules for both parties, [2] “ ”Jr 'W ’ .' 'h' 'r ..[31This partnership is based on a shared informal understanding rather than specific terms" and "[4] What is the approximate number of pages in the agreement?" (alpha=.65) four 7-point items. “rate the extem to which perfomiance is co with industry standards or competitors on [1] functional costs. [2] customer service, [3] productivity levels. [4] operations. Endpoints include: l=used rarely orfor small part of operations, 7=used frequently or throughout the firm. (alpha = .86). hhtm met in .250": 'flfiflbfu 0.70m dialing: am Mablceitherexttemcsof Philosophies, high levels of 47 levels in the firm is characterized by participative, cross-functional committees in which different departments, functions or divisions get together to decide specific classes of decisions (e. g., distribution/operation, buying, merchandising). Table 2-6. Integration: Measurement my Sampling Unit Measures Germain, Droge & Daugherty manufacturers (JIT) "integrative committees" - four 7—point items; “rate the extent to (1994) JMR which decision-making at top levels are characterized by participative, cross-functional committees in which different departments get source: Miller (1983) together to decide: [1] distribution service strategy, [2] marketing also adaptedfar use by: Miller (1987/1988/1991) strategy, [3] capital budget decisions, [4] long—term strategies. and Miller dc Droge (I986) Endpoints include: 1=rare use of committees, 7=frequent use of committees. (alpha: .81). RELATIONSHIP STRUCTURE and its measurement Researchers interested in the broad topic of marketing channels, as contrasted with the physical distribution aspects of channels, began to adopt a behavioral orientation in the late 19605 (Brown, Lusch and Koenig 1984). Since that time a significant stream of research in this area has resulted in the distribution channel being viewed as a set of behavioral relationships involving power, dependence, conflict and relational norms. Mohr and Nevin (1990) conceptualize channel structure as the degree to which firms resemble either extremes of the discrete/relational exchange continuum. System structure is established through dominant norms of behavior understood by bother parties to be necessary for transacting (Boyle and Dwyer 1995). Discrete transacting norms include an emphasis on individual goals, minimal investment in a partner, and formal communications. Relational norms are characterized by win-win negotiation Philosophies, high levels of mutual, long-term investing, and informal communications mammal Fatsofrehtiomhip momma. le' mmmhdinT mlhtiminthis ' authoritarian: Asthp‘nedin'l‘able hhulefrunsmrebur immmmmipst finhtg—mnoriuntiom humanism mic-Ingenunonnsm ll“groupofdecision—rnalt (Him and Kelley 1959) commits (Bendor and M Despite the diversi bewavergemc on its basi 48 (Dwyer, Schurr and Oh 1987). Facets of relationship structure have been measured in several empirical studies over the last decade. The individual facets and measurement approaches used in those studies are summarized in Table 2-7, adapted from Robicheax and Coleman (1994). The conceptualization in this dissertation relies on these works but clarifies how the various facets relate to quick response partnerships. As depicted in Table 2-7, the study of relationship structure has evolved in the last decade from a more bureaucratic context to one of relationalism. Mohr and Nevin (1990) viewed relationship structure from Macneil’s (1980) attempts to distinguish short- from long—run orientations in commercial exchange by attending to important norms (Boyle, Dwyer, Robicheaux and Simpson 1992). Relational norms is the facet of relationship structure studied in this dissertation, based on its relevance to the research topic. In general, norms are expectations about behavior that are at least partially shared by a group of decision-makers (Gibbs 1981; Moch and Seashore 1981; Heide and John 1992). Since the early study by Sherif (1936), the concept of norms has been at the core of research in several branches of the social sciences, including social psychology (Thibaut and Kelley 1959), political science (Axelrod 1986), law (MacNeil 1980), and economics (Bendor and Mookherjee 1990) (in Heide and John 1992). Despite the diversity of literatures in which the concept appears, there seems to be convergence on its basic meaning (Heide and John 1992). Relational or social norms are defined as patterns of accepted and expected sentiments and behavior that are shared by members of an exchange system and have the force of social obligation or pressure (Birenbaum and Sagarin 1976; Jackson 1966). Norms represent an overarching, complex flit-H tut-tux. indium Eli-MI him I multilin- In ”thatch-x lip-mm “norm “than” D'NHIM (ms) Judd! Judo“ 49 Table 2—7. Empirical Studies of Relationship Structure Studv Gundlach, Aehrol & Mentzer (1995) Heide (1994) Pilling. Crosby & Jackson (1994) Dant & Schul (1992) Heide & John (1992) Kaufmann & Dam (1992) Noordewier, John & Nevin (1990) Boyle, Dwyer, Robicheaux & Simpson (1992) Dwyer & 0h (1987) Rev: & Stern (1986) Driver & Welsh (1985) Min (1984) Publication Journal of Marketing Journal of Marketing Journal of Business Research Journal of Marketing Journal of Marketing Marketing Letters Journal of Marketing Journal of Marketing Research Journal of Marketing Research Marketing Channels: Relationships and Performance Journal of Marketing Research Journal of Marketing Research Facets of Sn'ucture Solidarity Mutuality Flexibility Role integrity Harmonization of conflict Flexibility Information Exchange Benefit/Burden Sharing Installing Operating Controls Solidarity Role Integrity Mutuality Flexibility Information Exchange Solidarity Planning and consent Solidarity Limited power use Role integrity Harmonization of conflict Flexibility Mutuality Flexibility Information exchange Assistance Monitoring Continuity expectations Flexibility Solidarity Mutuality Formalization Centralization Participation Vertical interactions Formalization Centralization Formalization Centralization Specialization Participation Formalization Centralization Control Context relational norms flexibility relationalism relational norms relational nomis relational exchange relational syndrome relationalism relationalism interorganizational form channel decision structure bureaucratic structure mmoomposod of a mint nithvebemopmtionaliz 121.1991;me initiation 5th 1988. 15 ml? solidami mmalif)’ mutationolconflict. As used in this disc W norms commute mom: flexibility, infc Wm based on m M“ Mb do not co W“? indicators of Blowing a mission of m labial-8 mg}, 2.10 rcpr Mom. HeXibility has been ‘ W0” °f the subflance i that cOnfrorlt 1 1995 n Welter] 0r Changing c0 1] 1464)», . I bl] arm] expects 50 construct composed of a number of elements (N oordewier, John and Nevin 1990). Many norms have been operationalized from previous conceptualizations in the literature (Boyle et al. 1991; Gundlach and Achrol 1993; Heide and John 1992; Kaufmann and Dant 1992; Kaufman and Stern 1988, 1992; Macneil 1980; Noordewier, John and Nevin 1990), namely solidarity, mutuality, information exchange, flexibility, role integrity, and harmonization of conflict. As used in this dissertation, and as characterized by Heide and John (1992), relational norms constitute a higher order construct consisting of the following dimensions: flexibility, information exchange and solidarity. Selection of these dimensions were based on their relevance to this research. The three relational norms in this research do not constitute an exhaustive set, but they seem central and representative indicators of relationship structure in quick response partnerships. Following a discussion of the various meanings attached to each of these constructs, Tables 2—8 through 2-10 represent how these three facets of relational norms have been operationalized. Flexibility Flexibility has been described as: "implying good faith modification and the adaptation of the substance and terms of exchange in light of unforeseen or changed circumstances that confront parties to an agreement" (Gundlach, Achrol and Mentzer 1995, p.84); " smooth alterations in practices and policies by trading partners in light of unforeseen or changing conditions" (Boyle, Dwyer, Robicheaux and Simpson 1992, 9-464); "a bilateral expectation of willingness to make adaptations as circumstances inge' (Heide 1994, p.74; l~ and hiyervlequeaod adjust 19111183). In this M ' *3“me '2'nlmion e 0i lit three dimens m exchange has re W has been defined 4 W information useful to “all“ lfllolmauon, pan m informanon- (Noon W"! long-term fora: W by exchange pm“ Jackson 1994, p.242), In ‘ him exDeflation that 9 Mil (Heide and John 19 51 change " (Heide 1994, p.74; Heide and John 1992, p.35); and "the reaction of suppliers toward buyer-requested adjustments or change requests" (Noordewier, John and Nevin 1990, p.83). In this dissertation, flexibility is defined as a bilateral expectation of willingness to make adaptations as circumstances change (Heide and John 1992). Information Exchange Of the three dimensions of relational norms selected in this dissertation, information exchange has received the least attention in the literature. Information exchange has been defined as: "a bilateral expectation that parties will proactively provide information useful to the partner" (Heide and John 1992, p.35); "the exchange of atypical information, particularly long-term forecasting, proprietary, and structural planning information" (Noordewier, John and Nevin 1990, p.84); and "the nature (i.e., proprietary, long-term forecasting, product design) and the timeliness of information shared by exchange partners" (Anderson and Narus 1990, p.46; Pilling, Crosby and Jackson 1994, p.242). In this dissertation, information exchange is defined as a bilateral expectation that parties will proactively provide information useful to the partner (Heide and John 1992). lit 28. Flexibility: Mw it! kl “indium “be: 351! Min liner-(aid 331991.11! m ¥ swim me (“than (M8; IMMJahdhir-m Hindu-mama)». “imam mutt-m 3’" 4mm mung himflhhra “with“ m "WM- & sen. um; '1 Due 0990; infusion; 0m 547mm, [y P“ Watt-aim \ Table 2-8. Flexibility: Measurement Authors (date) Sampling Unit Gundlach, Achrol & Mentzer manufacturers & (1995) JM distributors source (s): unidentified Heide (1994) JM manufacturers & changes suppliers sourcds): Kaufmann & Stern (1988) and Noordewier, John & Nevin (1990) also adapted for use by: Heide & John (1992) Gundlach & Achrol (1993) manufacturers & PM distributors sourcds): unidentified Boyle, Dwyer, Robicheaux & automobile dealers & Simpson (1991) JMR sourcds): Kaufmann & Stern (1988) and Dwyer (I990) Noordewier, John & Nevin (1990) JM OEM purchasers sourcds): original Measures one of 5 items that measure relational norms; "[1] this relationship is flexible in accommodating one another if special problems/needs arise“. three 7-point items: "[1] flexibility in response to requests for is characteristic of this relationship, [2] the parties expect to be able to make adjustments in the ongoing relationship to cope with changing circumstances, [3 J L the parties would rather work out a new deal than hold each other to the original terms". Endpoints include: l= —completely inaccurate description, 7=completely accurate description. four items, scales unidentified: "Ratings onextent to which [1] terms are modified in response to change, [2] terms are modified where predictions fail, [3] accommodating are made in response to special problems, [4] original agreements strictly are adhered to (R)". three S-point items "[1] we are usually wiiiiug ' J, to contracts in the face of problems or special circumstances, [2] m. my " Shug lU work through difficult problems, [3] we are apt to rework prior agreements when " .Endpoints include. I=always, 5=never. four 5-point items; [1] supplier is flexible in response to requests we make, [2] supplier can readily adjust inventories to meet unforeseen needs that might occur, [3] supplier hands change well, and [4] supplier can provide emergency deliveries. Endpoints include: l=strongly agree, 5=strongly disagree. ‘ 1&28. lnforuntion Ext M fllhflmr N m Int: mlfi-‘hllm- mus».- m Hut-n 0mm Yummy lull!“ M! The fiml facet of 1 may Solidarityhssbe Wishipflmarisesfromo Idlliomhip' (Gumllach, Ac lhighvalueisplaeed on Whichtle preservation of Warmers as being 5mm 1991, p.464); and “Ringimportam in and 0 193841.540). Inthis ‘ atrimmerspricedon 53 Table 2-9. Information Exchange: Measurement Authors (date) Sampling Unit Heide & John (1992) JM manufacturers & suppliers sounds): Kaufmann & Stern (1988) and Noordeweir, John & Nevin (1990) Measures four 7-point items: "In this relationship, it is expected that: [1] any information that might help the other party will be provided to them, [2] exchange of information in this relationship takes place frequently and informally, and not only according to a prcspecifred agreement, [3] the parties will provide proprietary information if it can help the other party, [4] we each other informed about events or changes that may affect the other party". Endpoints include: l=completely inaccurate description, 7=completely accurate description. Noordewier, John & Nevin (1990) JM OEM purchasers four 5-point items; "[1] we give supplier usage information to help them plan for our needs, [2] we keep our supplier informed of production plans, [3] we regularly provide supplier with long-range forecasts of supply requirements, and [4] we inform supplier in advance of impending design changes". Endpoints include: l=strongly agree, 5=strongly disagree. source (s): original Solidarig The final facet of relational norms to be considered in this dissertation is solidarity. Solidarity has been defined in the literature as: "the extent to which unity or fellowship that arises from common responsibilities and interests dominates an exchange relationship" (Gundlach, Achrol and Mentzer 1995, p.84); "a bilateral expectation that a high value is placed on the relationship" (Heide and John 1992, p.36); "the degree to which the preservation of the unique and continuing relationship is internalized by the exchange partners as being important in and of itself" (Boyle, Dwyer, Robicheax and Simpson 1991, p.464); and "the extent to which the involved parties view the exchange as being important in and of itself" (Dam and Schul 1992, p.43; Kaufmann and Stern 1988, p.540). In this dissertation, solidarity is defined as a bilateral expectation that a high value is placed on the relationship (Heide and John 1992). m 2.10. Solidarity: M: M “Him —fl It. duh m M at“ "”3; —h:: M nit-w hibil’fir I! m WI mtg-lama!!! dmkh‘h'ou hummus! all lurch & kn am HM (1990: Table 2—10. Solidarity: Measurement Authors (date) Samplfig Unit Gundlach, Achrol & Mentzer manufacturers & (1995) JM distributors sourced): wu'dentified Gundlach & Achrol ( 1993) manufacturers & JPPA’LM distributors sourcds): midennfied Heide & John ( 1992) JM manufacturers & suppliers sourcds): Karoinann & Stern (1988) and Noordewier, John & Nevin (I990) Boyle, et. al (1991) JMR automobile dealerships sounds): Kaufmann & Stern (1988) and Dwyer (I990) Measures one of 5 items that measure relational norms; "[1] staying together in the face of adversity/challenge is very important to both fums". four items, scales unidentified: "Ratings on extent to which [1] sacrifices are made to keep the relationship intact, [2] the parties act together in seeking unified solutions, [3] the parties stay together in the face of adversity, [4] one party seeks to benefit one’s own organization (R)". three 7—point items; "[1] problems that arise in the course of this relationship are treated by the parties as joint rather than individual responsibilities, [2] the parties are committed to improvements that may benefit the relationship as a whole, and not only the individual parties, [3] the parties in this relationship do not mind owing each other favors". Endpoints include: l=completely inaccurate description, 7=completely accurate description. three 5-point items: "[1] my firm is committed to the preservation of good working relationships with this customer, [2] [consider my fum and my primary manufacturers‘ firm to be partners in the industry, [3] I am apt to be very conscientious, responsive, and resourceful to maintain a cooperative relationship with this manufacturer". Endpoints include: I=always, 5=never. inaccurate description, 7=completely accurate description. mks’arvirmisi bimnnnlmimyfi ‘Ikt'mrmrobemly. mimicstoadoptei mmmm ddkrottime two strut mimmlstmegicdn’v NIROWI'AL UNC] ll: cuvimmnent can mutations must adapt to 1967). Much ofthe literaun Hing with the enviro Pile (1994) compiled a a Wins: uncertainty. imity or variety, dynam' dOltrinoonsensus, turbul 0’ Moore or resourcefu dilution of uncertainty is WWW. In Part Hr 55 ENVIRONMENT In this dissertation, the environment is an important component because the retailers’ environment is increasingly characterized as dynamic and ever—changing. Environmental uncertainty (i.e. , dynamism, unpredictability, heterogeneity) are suggested in the literature to be catalysts of QR implementation. Also, little is known about what inspires retailers to adopt either QR or global sourcing strategies. As a result, it is also important to examine environmental factors that could potentially influence the adoption of either of these two strategies. For these reasons, environmental uncertainty and environmental strategic drivers were selected as the environmental components in this dissertation. ENVIRONMENTAL UNCERTAINTY and its measurement The environment can be viewed as a dynamic but amorphous reality in which organizations must adapt to and also act upon (Lawrence and Lorsch 1967; Thompson 1967). Much of the literature on organizational environments portrays decision makers dealing with the environment in terms of abstract dimensions. Clark, Varadarajan and Pride (1994) compiled a table highlighting the most important of these dimensions, including: uncertainty, threat level, dependency or power volume, homogeneity or diversity or variety, dynamism or stability or volatility, rate of change, routineness, domain consensus, turbulence or causal texturr'ng, complexity or connectedness, capacity or munificence or resourcefulness. In Part I of this dissertation, only the environmental dimension of uncertainty is studied and its impact on quick response (QR) strategy implementation. In Part II, a variety of these environmental dimensions are considered mp5). However. er mhdienmketingchan makinwumeminry has Wind: context of (1994mm Crosby (1983). Otliereontexts in w t: rev product devel Motions] structure In “WWW! 56 as drivers of QR and global sourcing strategies. In general, environment uncertainty has been defined in the marketing and management literature as: "the degree to which probability can be assigned with any degree of confidence to how environmental change will affect the organization" (Clark, Varadarajan and Pride 1994, p.28); "the degree of dynamism and unpredictability in the environment" (Germain, Droge and Daugherty 1994, p.474; Duncan 1972); "the unpredictability of environmental or organizational variables that have an impact on corporate performance" (Miller 1993, p.694); and “the extent to which decision makers perceive unpredictable changes in their external environment" (Koberg 1987, p.800). Environmental uncertainty can take many forms in channel relationships (e. g., QR partnerships). However, environment uncertainty has not been investigated to a large extent in the marketing channels literature (Brown, Lusch and Koenig 1984). Table 2-17 reveals how uncertainty has been dirnensionalized in the business literature. Studies of uncertainty in the context of marketing channels include: Germain, Droge and Daugherty (1994), Pilling, Crosby and Jackson (1994), Ganesan (1994), and Etgar and Valency (1983). Other contexts in which uncertainty has been studied include, but are not limited to: new product development, logistics strategy, cost vs. differentiation, and organizational structure. In this dissertation, environment uncertainty is defined as the degree of dynamism, unpredictability and heterogeneity in the environment. liU-ll. Enpir'ul Stud an.” Jun-I a hall”: luau hath ”ll-l ° til-1M luau: -. kid a list In: hub-ll!!!) 'II-DN- Jun! 0 HI-IMI Jud 0 M” “It“ Jar-l a 33 Ian lilti- Ade-y m Jan-l Main hand a In: hut-(19m hum “580987) hunch-n “Hiram Elm: M) hum land 0983) 57 Table 2-11. Empirical Studies of Environment Uncertainty Study Publication Facets of Uncertain“! Context Pelham & Wilson Journal of the Academy Dynamism of Marketing Science Competitive Intensity Germain, Droge & Journal of Marketing Dynarnism JIT Daugherty (1994) Research Unpredictability Heterogeneity Pilling, Crosby & Journal of Business Static-Dynamic relational bonds Jackson (1994) Research Number of Market Factors Calantone, Journal of Business Uncertainty new products diBenedetto & Research Hostility Bhoovaraghavan (I994) Ganesan (1994) Journal of Marketing Volatility long-term relationships Diversity Handfield (1993) Journal of Operations Demand Uncertainty JIT Management McGinnis & Kohn Journal of Business Munificence logistics strategy (1993) Logistics Dynarnism Heterogeneity Hostility Yasai-Ardenkani Academy of Management Munificence organizational structure (1939) Journal Scarcity Achrol & Stern Journal of Marketing Diversity decision-making (1983) Research Dynarrtism Concentration Capacity Keats & Hitt (1988) Academy of Management Munificence strategy and structure Journal Instability Complexity Miller (1988) Academy of Management Dynamism Porter‘s strategies Journal Unpredictability Heterogeneity K0“!!! (1937) Academy of Management Uncertainty organizational behavior Journal Scarcity Steams, Hoffman Academy of Management Complexity performance & Heide (1987) Journal Scarcity Uncertainty Mm" & Droge Academy of Management Dynamism organizational structure (1985) Journal Unpredictability Heterogeneity Elgar & Valency Journal of Retailing Stability channel contracts (1983) Turbulence Capacity mammal mayhemulltothed twigs'lable 2-121 Windrhstd ntmplingunitsandt WWI Atmacrolevel. in: Ii‘hafirmwemesbothi Mlfishertationlooksa biennium ' aquic hairline. but are no Wmfrornabroad) ofilltctit'itionalinttion, re Warm, and marketin 58 The information provided in Table 2—11 above reveals two important problems that exist in the characterization of organizational environments. First, there is much overlap and duplication in the dimensions. Second, and perhaps of greatest relevance, there may be no end to the dirnensionalization process (Clark et al., 1994). Despite these shortcomings, Table 2-12 reveals the various ways environment uncertainty has been operationalized in the last decade in the business literature. Also included in the table are the sampling units and the originating sources. Environmental Strategic Drivers At a macro level, many authors have attempted to categorize the environment in which a firm operates both internally and externally (e.g., Cavusgil and Zou 1994). Part H of this dissertation looks at factors in the retailer’s environment that serve as a catalyst in the implementation a quick response and/or global sourcing strategy. External driving forces include, but are not limited to: environment uncertainty and competitiveness (domestic or from abroad) as a motivating factor. Internal driving forces include: degree of internationalization, retailer power, technological sophistication, sophistication of management, and marketing orientation. labial-12. Environment l hlhmll’xt If new (LI-DREAM 3m m-n-u. (1974/1977, HE ””3; "What; Minn 0935, “m‘ 00:! (IN; harming “whammy $3.1m ht: HE‘S”! (I973; “him :WL'M (1972 ’ mhw"'h'reau at “Miami "Wm?“ will}: MW hawk-H1983)" WWW (1979, 59 Table 2—12. Environment Uncertainty: Measurement Study Sampling Unit Measures Maltz & Srivastava (1994) retailers single item, expected sales—actual sales MSI actual sales sounds): unidentified Germain, Droge & Daugherty manufacturers (1994) JMR source(s): lfltandwalla (1974/197” and Miller (1983) also adopted for use by: Miller (1988) and Miller & Droge (1986) Handfield (1993) 10M make-to-order firms source(s): St. John & Heriot (1993) Miller (1993) JIBS managers source(s): Miles & Snow (1978) Koberg (1987) secondary schools source(s): Duncan (1972) also adapted for use by: Bourgeous (1985) Brown, Lusch & Koenig retailers (1984) IJPDJLMM source(s).- original Etgar & Valency (1983) JR retailers source: Aldrich (1979) four 7-point iterm with endpoints describing environmental opposites. Right hand anchors include: our firm must change its marketing pracu‘ces extremely often, actions U] r r almost unpredictable, the production process changes often in major ways. single item, demand uncertainty, "average weekly % -. K,. .1. mcmjm product line in the last year". thirty—five 7-point scales; "in the primary industry and country where you work, evaluate the aspects of your environment": 7 segments comprise of 35 items: “[1] government and policies, [2] economy, [3] resources and services used, [4] product market and demand, [5] competition, [6] industry technology". nine 5-point items; "indicate your ability to anticipate or accurately predict changes and the effects of the following items: [1] supply or availability of teachers, [2] supply of educational materials, [3] governmental regulatory control, [4] relationship with school board, and so on". Endpoints include: l=none, 5= very high. seven 7-point items designed to reflect uncertainty in estimating how much inventory to carry (i.e., reliability of supplier’s deliveries, predictability of seasonal fluctuations in demand, supplier'sorder—filling accuracy, availability). sum of variables measuring environmental stability, turbulence, and capacity. Fulcrum is a reel hiring rangers. Whil: storms are widely ava m ml debates abOt “limit 0! organizationa "Mm and Ramanuj: The mom: of bu “Wmmw 1356:. mommy the Wm Most 5m; mm” Performance "“1 W (schema and Hofe MW Mb Studie “Wot muggy Content ; Nominee is all too cvic firemen, walk“ a11d Rueken . Wed three Performame truss um, managers 60 PERFORMANCE Performance is a recurrent theme that is of interest to both academic scholars and practicing managers. While prescriptions for improving and managing organizational performance are widely available, the academic community has been preoccupied with discussions and debates about issues of terminology, levels of analysis (i.e., individual, work—unit, or organizational), and conceptual bases for assessment of performance (Venkatraman and Ramanujam 1986). The importance of business performance in strategy research can be argued along three dimensions-—theoretical, empirical, and managerial (Venkatraman and Ramanujam 1986). Theoretically, the concept of performance is at the center of strategic management. Most strategic management theories either implicitly or explicitly underscore performance implications, since performance is the ultimate test of any strategy (Schendel and Hofer 1979: Venkatraman and Ramanjam 1986). Empirically, most strategy research studies employ the construct of business performance to examine a variety of strategy content and process issues. The managerial importance of business performance is all too evident in the many prescriptions offered for performance improvement. Walker and Ruekert (1987) in a comprehensive review of marketing literature identified three performance dimensions of primary importance to top corporate and business unit managers. Eflectt‘veness is the success of a business’ products and programs in relation to those of its competitors in the market. Effectiveness measures are commonly called subjective performance measures as they involve managers’ perceived intake of the environment. This performance mm is typically in ROS and ROI relative performs: measures (4 superiors or industry) Ejiciarn is the outcor resurrect employed in tritium: are cornn perform as they dc: maritime: sales. R05. sales per employer W is the basin mm 1111 opportum lumber of ways, dc Won (e.g., per W in P351 5 year mum; PERFORM 1m mailing literat 31mm much debated. mm or “during issue: m "d Mclmyre (195 ”pm 0f Mailing may be v1 rrlre logOOds which have b War of Which the pl 61 dimension is typically measured by financial performance measures (e.g., ROS and ROI relative to competitors or industry) and/or strategic performance measures (e.g. , market share or sales growth rate relative to competitors or industry). Efficiency is the outcome of a business’ programs in relation to the resources employed in implementing them. Efficiency measures of performance are commonly referred to as objective or economic performance as they deal with actual operating performance. Conunon measures include: sales, profitability as a percentage of sales, ROI, ROA, ROS, sales per employee. Adaptability is the business’ success in responding over time to changing conditions and opportunities in the environment and can be measured in a number of ways, depending on the environmental context of the organization (e.g., percentage of sales accounted for by products introduced in past 5 years). RETAILING PERFORMANCE and its measurement In the retailing literature, an operational definition of performance has also been elusive and much debated. Two articles on "general" retailer performance provide an overview of enduring issues in measuring performance at the retail level: Achabal, Heineke, and McIntyre (1984) and Goodman (1985). Goodman summarized that the output of retailing may be viewed either as (a) the provision of service, that is, adding value to goods which have been "produced" by others, or, alternatively (b) providing a total product of which the physical goods provided are merely an ingredient. Although the latter concept is more in accord with modern views of the totality of utility, performance measures such as productivity, efficiency, and effectiveness can be defined using either perspective. In any case, the definition and measurement of output is necessary before the other measures can be derived (Goodman 1985, p. 77). Achahal. Heinekc :11 W1 clarity to cancer mm: dry made use: mint factor to an out Mimics the effects 0 mm in whirl 135mm of goal achicv sawing WI) mt (Goodman 1985). Athahal‘ Heineke, an mm mm on mm tum (1985) suggests n M“ “53‘ managers mu m (W Current ROI, g ”We. both long-term a ”mu. Amen] PerSpequ mm “113% 1984). 62 Achabal, Heineke and McIntyre (1984) endeavored to provide definitional and conceptual clarity to concepts in the elusive area of performance measurement. More specifically, they made useful distinctions between (a) productivity, which relates to a single input factor to an output measures, other inputs assumed constant, (b) efiiciency, which measures the effects of all inputs in combination and thus recognizes that all inputs and the proportions in which they are employed may vary, and (c) efiectiveness, which takes account of goal achievement as well. A major area of difficulty at all three levels is in identifying conceptually relevant and measurable outputs for retailing or any service industry (Goodman 1985). Achabal, Heineke, and McIntyre, taking an organizational perspective, suggest long-run return on investment as the appropriate goal. While conceptually sound, Goodman (1985) suggests that this may} create some operational problems when, as is often the case, managers must work in terms of shorter—term, more readily measurable goals (e.g., current ROI, growth in sales or market share). In more recent retailing literature, both long-term and short-term measures operationalize the performance construct. A societal perspective would need to take consumer shopping productivity into account (Ingene 1984). If the output of retailing is service to consumers, then any measure of social productivity should consider the extent to which the preferred service affects not only the outputs which consumers receive but also the inputs which the consumer must incur. These include time, efforts of various sorts such as those to acquire and process information, and money or other things sacrificed as part of the shopping process. Based on the nature of research in this dissertation, an organizational mt ofraailct pcrft pmveofmailcr perfo im showing Prod For parsimony. per WinClnpterS dml 1wmmli.e.. mi 3 W of Table 2-13 i"I'm“!lkrformance 1 ‘Wwformame link) Mam from T2 Weiergmfiom l tantalum, in this dig infirm-1| and Strategic 63 perspective of retailer performance is utilized. However, for a review of the societal perspective of retailer performance, Ingene ( 1984) provides a discussion of the elements of consumer shopping productivity and a survey of relevant research. For parsimony, performance measurement was limited to those studies to be presented in Chapter 3 that have empirically demonstrated the existence of a link between model constructs (i.e., environment, strategy, structure) and performance. Therefore, the scope of Table 2-13 is confined by select studies contained in Table 3—3 (environment-performance link), Table 3-5 (strategy-performance link) and Table 3—5 (structure-performance link). As is evident from Table 2-13, no consensus exists regarding the most appropriate measures of organizational performance. Consistent with the suggestion of Walker and Ruekert (1987), in this dissertation, performance is defined in terms of effectiveness (i.e., financial and strategic), efficiency (i.e., economic) and adaptability dimensions. Ill: 2-13. Performmh L,___C£sn_ mama m1 mun: SmilZailflr m hlhllnl m. h‘hm’lWl mm I‘Mtlml w. hullllml mm man. my: (mum) ”at. - . ”MWWM Mr: "11:!an l (986 “by. Mr: 64 Table 2-13. Performance Measurement: Select Business Literature Study Calantone, diBenedetto & Bhoovaraghavan (1994) Cavusgil & Zou (1994) Kotabe & Swan (1994) Maltz & Srivastava ( 1994) Tan & Litschert (1994) Kaynak & Kuan (1993) Kotabe & Murray (1990) Kotabe & Omura (1989) Robinson & Pearce (1988) Gupta (1987) Pearce, Robbins & Robinson (1987) Miller & Toulouse (1986) Context strategy-performance environment-performance strategy-performance strategy-performance environment—performance strategy-performance environment-performance strategy-performance structure-performance strategy-perfonnance strategy-performance strategy—perfonnance strucmre-performance strucmre-perfonnance strategy ~perfo nnance stmcture-perfonnance l‘ ‘ Measure [1] overall rated financial success of firm's new product development program over past five years, [2] rated degree of success or failure of the product. [1] extent to which initial strategic goals of management were achieved, [2] average annual growth rate of export sales over five years, [3] overall profitability of exporting over five years, [4] management's perceived success of the venture. [1] global market share equals ratio of firm’s consolidated global sales to total production of ten OECD countries and five NIC countries, [2] profitability equals consolidated retum on sales. realized value equates the ratio of potential R01 to no-option ROI rate performance relative to close competitors based on after-tax retum on total assets, [2] after-tax return on total sales, [3] total sales growth, [4] overall performance and success, [5] competitive positions. [1] export sales, [2] export profitability, [3] percentage of total profit from exporting. [4] percentage of total profit from exporting. [1] relative market share, [2) sales growth rate, [3] pre-tax profitability. [l] product's relative market share in the U.S., [2] product‘s pre—tax profitability in the U.S. [1] firm sales, [2] retum on assets, [3] return on sales. rate SBU performance relative to superior's expectations on: [1] sales growth rate, [2] market share. [3] profit to sales ratio, [4] cash flow, [5] R01, [6] new product development, [7] R&D activities. [8] cost . ‘ PM I I I [am I" I: up affairs. [1] firm sales, [2] retum on assets, [3] retum on sales. Actual percentage over pastS years: [1] average annual growth rate in sales, [2] average annual growth rate in net income, [3] average rate of ROI. Perceived performance relative to industry average in: long-run profitability. [2] growth in sales or revenues. SUM! labieZ-Mpmvidcs tiriiomndimponams lttl-lthmmryofk \: WI Den-a. \ 1m hm imam ”WWII Wm WNW ”mum" twitch» \ flan 5”! Amman “wry-4 Wmaum "Writing“ iron hm. ham...“ ““8me BMW; Willem “Mama." chmoldunm WHOMHRUQURE _ mmmm EHMMmu CW mexfimmm MOMHO Wham ”W 65 SUNIMARY OF LITERATURE REVIEW Table 2-14 provides a summary of the key constructs in this dissertation, their definitions, and important sources. Table 2—14. Summary of Key Constructs Alternative Variable Definition Critical Sources Labels Recent Studies STRATEGY Fnrit), May & Straight) Quick Response A technology-driven domestic JIT work (e.g., Germain, JIT in (1995), Femie(1995), sourcing strategy based on a Droge & Daugherty 1994) retailing Phillips & Droge cooperative relationship 09958.!” retailer and supplier that seeks to minimize slack resources in the supply chain. STRATEGY International Global Sourcing sourcing strategy wherein the retailer serves as the catalyst in sourcing the merchandise or subcomponents from abroad. ORGANIZATIONAL 57RUCTURE Inl’igration The extent to which decision- making at top levels in the firm is characterized by participative, cross-functional committees in which different departments get together to decide specific classes of decisions. \ ORGANIZA 770NAL STRUCTURE I:Ormalization The extent to which nrles and procedures are written down. 1’leormance The extent to which Control performance (or output) is compared with industry standards or competitors. \ A retailer—driven international manufacturing (e.g., Kotabe & Omura 1989. Min & Galle 1991) Miller (1983) Hage (196611968), Inkson, Pugh & Hickson (1970). Pugh & Hickson (1976) Khandwalla (1974) sourcing. offshore sourcing, global purchasing Liaison devices Liu & McGoldrick (1995), Kotabe & Swan (1994) Germain, Droge & rty(l994).Mfller (l991/1988),Mi1|er& Droge (1986) Germain, Droge & Daugherty (1994). Jaworski & Kohli (1993), Miller(l991). Miller& Droge (1986) Germain, Droge & Daugherty (1994), Miller & Droge (1986) ‘ 1% 2-14 (m'd). m mar: h.‘ mind-8a: hum, I dun-mt Ionian-nu 5‘. Aidan. 66 Table 2-14 (cont’d). Alternative Variable Definition Critical Sources Labels Recent Studies ORGANlZdTTONAL STRUCTURE Decentralization The level in the organization Inkson, Pugh & Hickson Decentralization Germain, Droge & that has authority to make (1970), Hickson & Pugh Delegation Dangherty(l994),Miller decisions in areas such as, (1976) (1991/1988).Miller& inventory control, EDI, pricing. Droge (1986) RHATTONSHIP STRUCTURE Flexibility A bilateral expectation of Kaufmann & Stern (1988), —--- Gundlach, Achrol & willingness to make adaptations Noordewier, John & Nevin Mentzer (1995), Heide as circumstances change. (1990), Dwyer (1990) & John (1992) REZATTONSHIP STRUCTURE Information A bilateral expectation that Kaufi'nann & Stern (1988), -—-—— Heide & John ( 1992) Exchange parties will proactively provide Noordewier, John & Nevin information useful to the (1990) partner. RHATTONSHIP STRUCTURE Solidarity A bilateral expectation that a Kaufmann & Stern (1988), --—-— Gundlach, Achrol & high value is placed on the Noordewier, John & Nevin Mentzer (1995), Heide relationship. (1990), Dwyer (1990) & John (1992) ENVIRONMENT Environment The degree of dynamism, Khandwalla (1974/1977), volatility, diversity Germain, Droge & Uncertainty unpredictability and Miles & Snow (1978), scarcity, capacity, Daugherty(1994),Mjner heterogeneity in the Miller (1983) environment. hostility (1993) Based on the information contained in this chapter, in Chapter 4 (methodology), the operationalization of these constructs for the purpose of this research will be introduced. In Chapter 3, the relationships among constructs will be discussed and hypotheses set forward. ‘ hum! 1. qni murmilinsthu Muslim mmdmwom mimivetodomm manym mm. Int! “aluminum-tee lnPutIofth'ts n “mm. bod mwrmwu Wotoaawmp WON: (QR) in the U.S. Mistakenthatstrategy WWW CHAPTER 3 Model and Theoretical Framework In Chapter 1, quick response (QR) was described as a key strategy in contemporary retailing that evolved from offshore competition. Global sourcing was introduced as an alternative sourcing strategy to the more domestic QR strategy, as most sources regard the two strategies as sourcing opposites. Global sourcing offers a low— cost alternative to domestic sourcing and QR yields timely merchandise. Chapter 2 introduced the key constructs and provides a summary of corresponding definitions and measurement issues. In this Chapter, the links between the model’s constructs are justified and empirically-testable hypotheses are set forth. In Part I of this research, the main focus is QR and its implications for management practice, both internally and with major suppliers, and its related performance implications. In Part 11, drivers of the two strategies are examined and the effectiveness of QR is compared to the effectiveness of global sourcing. PART I - QUICK RESPONSE: ANTECEDENTS AND CONSEQUENCES Part I of this dissertation looks at factors that cause and accompany quick response in the retailing industry and their implications on retailer performance. In particular, a theoretical model and several propositions are developed regarding the relationships among environment-strategy-structure-performance as they pertain to quick response (QR) in the U.S. retailing industry. The classical "strategic management" stance is taken that strategy engenders structure. While the argument can be made that Structure influences strategy (e. g., Miller 1987; Fredrickson 1986), the dominant 67 ‘ maeqstntegyinfl lheemintbemest mglnsasignifiam i1 mathematical MofaQRstra IMMMM 'Idmimhkcmimnm trJflhmiDmgem 'nlten: to be address Whymviromnem inmfinfullmo: ll] mimmem mint) mm; [2] QR impietnen 68 paradigm (i.e., strategy influences structure) is maintained in this dissertation. Three main themes guide part I of this dissertation. The first theme is that QR strategy has a significant influence on structure, both organizational and relationship structure. The second is that environment uncertainty has a significant influence on the implementation of a QR strategy and both organizational and relationship structure. This is consistent with more recent models of the relationship between strategy and structure that often include environment uncertainty as a predictor of strategy, structure, or both (e.g., Miller and Droge 1986; Miller 1988; Germain, Droge and Daugherty 1994). The final theme to be addressed in Part I is that retailer performance is significantly influenced by environment uncertainty, QR strategy implementation, and structure. In sum, the full model proposed in this dissertation (see Figure 3-1) posits that: [1] environment uncertainty directly influences the implementation of QR strategy and structure; [2] QR implementation directly influences both organizational and relationship structural changes; and [3] that environment uncertainty, strategy and structure each directly impact retailer performance. Regarding indirect effects, the model implies that the QR strategic initiative in retailing mediates the relationship between environment uncertainty and structure. Similarly, organizational and relationship structure are believed to mediate the relationship between QR strategy and performance. Tables 3-1 through 3—6 that follow, show that the general existence of the relationships proposed in Figure 3-1 are supported by past research. In the remainder Of this chapter, supporting arguments for the specific links proposed in the model are discussed, starting first with the main contention that strategy engenders structure. 382 8835 .3 23E mocmEcoton ..wzgom ougosbw >099 Em w 90 5 $0 35330:: EmE:o:>cm ‘ Iii 3—l. Barnum -Sl i ! name lam mum Rena mm 1m 3%! mummy WIMHWI lama”: at r? 5 ti “£33th Jam 33o Logi: rllllllillel Strung Vin-m & hum States '19)) low: Mimi»: loam "M of M WI. 5pm & (Imam Wham M988) Kiln, Droge & Team (1988) “mama “mm (1987) 70 Table 3-1. Environment—Strategy Relationship Study Germain, Droge & Daugherty (1994) Calantone, diBenedetto & Bhoovarghavan (1994) Cavusgil & Zou ( 1994) Naidu & Prasad (1994) Tan & Litschert (1994) McGinnis & Kohn (1993) Wiersema & Bantel (1993) Venkatraman & Prescott ( 1 990) Lusch & Laczniak (1989) Frazier, Spekman & O’Neal (1988) Keats & Hitt (1988) Miller (1988) Miller, Droge & Toulouse (1988) Dominguez & Vanmarcke (1987) Journal Journal of Marketing Research Journal of Business Research Journal of Marketing Journal of Business Research Strategic Management Journal Journal of Business Logistics Strategic Management Journal Strategic Management Journal Journal of the Academy of Marketing Science Journal of Marketing Academy of Management Journal Academy of Management Journal Academy of Management Journal Journal of Macromarketing F indings Environment uncertainty found to influence the implementation of J IT selling strategy. " ' J found [0 have positive effects on strategic posture. Environment hostility found to negative effects on strategic posture. External and internal forces in the environment found to influence export strategy. Factors in international marketing environment found to influence a firm’s export development strategy. Environment uncertainty found to positively influence defensive strategies and negatively influence proactive strategies. Logistics strategy will vary depending on the firm's perceived environment. Environmental munificence and environmental instability found to be positively related to strategic change. An eight-environmental typology found to influence strategic resource deployments. Increased competitive intensity found to influence nonprice marketing strategy. Environment uncertainty posited to influence JIT exchange. Environment instability found to have a negative effect on levels of diversification and divisionalization. An differentiation strategy is most likely to be pursued in uncertain environments. A cost leadership strategy is most likely to be pursued with stable and predictable environments. Environment uncertainty found to influence product innovation. The more competitiveness in the market, the greater the use of marketing mix elements. ittil twm'dl- '—'- Journa M_‘__———-— LTC; i933 Amdzr Mm: 71 Table 3—1 (cont’d). Study Journal Findings Fennell & Alexander Academy of Institutional environment found to affect hospitals’ (1987) Management Journal choice of boundary spanning strategies. Koberg (1987) Academy of The greater the environment uncertainty and scarcity Management Journal of resources, the greater the frequency of strategic organizational adjustments. ltbk 3-2. Environment-St m Journal (inn. diBenedetto Journal that“: Rm (994) cm Drug: & Journal m ”99“ Reset um & Coleman Journal :9" of M: Edithhnt1992) Janna] {mummy on“ ‘W (1991) m Mina “35(1ng Mung mm Frazier & Roth 10mm] (1990) Resea W” JOlin & j ““111 (1990) W hat - (1939) 121:1: DES it On'gCI (I987) AW Mam V 1 mm (1987) 0;: Ht "987) MW" we: Man: “it: (1937) Amt! Mam \ 72 Table 3-2. Environment-Structure Relationship Studv Journal Journal of Business Research Calantone, diBenedetto & Bhoovaraghvan ( 1994) Journal of Marketing Research Germain, Droge & Daugherty (1994) Robicheaux & Coleman (1994) Journal of the Academy of Marketing Science Heide & John (1992) Journal of Marketing Umanath & Kim (1992) Decision Sciences Alexander (1991) Academy of Management Journal Miller (1991) Management Science Klein, Frazier & Roth (1990) J oumal of Marketing Research Noordewier, John & Nevin ( 1990) Journal of Marketing Lusch & Laczniak Journal of the Academy (1989) of Marketing Science Dess & Origer (1987) Academy of Management Review Dominguez & Journal of Vanmarcke (1987) Macromarketing Fennell & Alexander Academy of (1937) Management Journal KOberg (1987) Academy of Management Journal Findings Environment hostility found to have positive effects on organizational structure. Environment uncertainty found to lead to changes in organizational structure. Internal and external polity and economy posited to influence channel relationship structure. Uncertainty found to affect level of integration or joint action. Uncertainty in the task environment found to affect decision-making structure. Organizations found to practice selective decentralization under conditions of increasing uncertainty. Environment uncertainty found to positively influence formalization, specialization and use of technocrats and liaison devices and negatively influence centralization. Volatility and diversity in environment found to affect relationship structure. Performance enhanced when relational elements introduced in response to uncertainty. Resource constraints found to influence structural fluctuations. Model proposes that firms competing in complex and dynamic environments are required to differentiate their structure into several distinct subsystems. The more competitive a market, the greater the extent of departmentalization and the more likely the use of marketing experts. Complexity in institutional environment posited to be matched by complexity in firm organization. Organic structures found to be influenced by conditions of high environment uncertainty and resource scarcity. ltblt J2 tconl'd). 3;; Journal tar; & [Rpm Journa 9T“ VirtDrog: Adam anthzlttl986t And: Man \ 73 Table 3-2 (cont’d). Study Journal Findings Koberg & Ungson Journal of Management Environment uncertainty found to be negatively related (1987) organic structures. Miller & Droge Administrative Science Hypothesized that environment influenced structure, (1986) Quarterly but only a weak relationship found. Jauch & Kraft (1986) Academy of r. I Irnnpnfif'r‘i In I 1:1 ‘ “ A Management Review 1:th. Environment-l by Jon mmum Joum Rea MUM ’ Journ 195! Bus: m 51 lot! {1994) Journ In it 5mm Ms] J 72R} Kaitlin-mm; 1m Rest Mimi) 1m R54 “hm 11993) BM SEW our Mlm&t (1991) hm 10pm :3: Wflotfim W937) & “at“ an I Man ”W193” \M. 74 Table 3-3. Environment-Performance Relationship Studv Heide & Stump (1995) Shane & Kolvereid (1995) Cavusgil & Zou (1994) Maltz & Srivastava (1994) Kaynak & Kuan (1993) Okoroafo (1993). Wiersema & Bantel ( 1993) McArthur & Nystrom (1991) Steams, Hoffman & Heide (1987) Jauch & Kraft (1986) Hambrick (1983) Journal Journal of Business Research Journal of Small Business Management Journal of Marketing MSI Working Paper Journal of Business Research Journal of Business Research Strategic Management Journal Journal of Business Research Academy of Management Journal Academy of Management Review Academy of Management Journal Findings Volume unpredictability (i.e., environment) found to have negative effects on performance. Most of the performance of start-up firms was explained by the national environment faced by the entrepreneur. Firm characteristics found to influence export performance. Environment uncertainty found to have a positive impact on realized values of interorganizational information technology. Dimensions of organizational environment (i.e., organizational characteristics, decision—maker characteristics, foreign target market) found to influence performance. Environmental changes (i.e., improved financial infrastructure and production costs) found to have a significant positive effect on performance. Environmental munificience and environmental instability found be positively related to firm performance. Environmental dynamism exhibited a direct effect on performance. Environment uncertainty found to have a direct effect on television station performance. Environment proposed to directly influence organizational performance. Performance influenced by environment (i.e., product life cycle stage and industry new product innovation). m Jou walkout) Journ momma: Res: 5.593.» am Ding: 5: Jam Dam H994; Res arms Joum 0H0”) Rag autumnal» Sum Jom Miriam. 1mm Vet with) UN) tom Eco M933, Aw Ma “but: it AC1} Morgans) Ma Table 3-4. Strategy-Structure Relationship Study Calantone, diBenedetto & Bhoovaraghavan ( 1994) Germain, Droge & Daugherty (1994) Gilbert, Young & O’Neal (1994) Habib & Victor (1991) Covin & Slevin (1990) Chang & Chio (1988) Miller (1988) Miller, Droge & Toulouse ( 1988) Journal Journal of Business Research Journal of Marketing Research Journal of Business Research Strategic Management Journal Journal of Business Venturing Journal of Industrial Economics Academy of Management Journal Academy of Management Journal 75 Findings Strategic posture found to have a positive effect on organizational structure. J IT selling found to influence changes in organizational structure. Firms actively engaged in J IT found to exhibit a strong orientation toward diversity, duration, facilitation and symmetry in their relationships with suppliers. MNCs found to choose their organizational structure consistent with the kind of strategy they are pursuing. Entrepreneurial strategic postures found to influence organic organizational structures. Diversification strategy found to result in multidivisional structure. Porter’s generic strategies found to influence organizational structure. Intended rationality of the strategy-making process found to increase structural formalization and integration. Increased product innovation found to increase structural formalization and integration and decrease centralization. ms. Strategy-Perf0 5y. Jow Emtflmtmm Joan: of hitDnuthSt Joum um. diBenedetto Joum ihmmghmn Res ‘29?!) Mitlwtlw» Joum 1mm r1994. Joum Bus Wil’rsadtmtt Joum Res T"I'M-il-‘Ciltn(199i) Sum Jou KimMinimu993) Jonm Res “mm (1993) hum Woman Sm Jow tantrum) 10m Res ColitiSlCVinuggo) Joum Vet mild (19%) Sim: Jom “Met Murray (19%) 101111] tut 8‘“ 8‘Bass (1990) Mark \ 76 Table 3-5. Strategy-Performance Relationship Studv Journal Pelham & Wilson (1996) Journal of the Academy of Marketing Science Journal of Business Research Boyle & Dwyer (1995) Journal of Business Research Calantone, diBenedetto & Bhoovaraghavan (1994) Cavusgil & Zou (1994) Journal of Marketing Kotabe & Swan (1994) Journal of International Business Studies Naidu & Prasad ( 1994) Journal of Business Research Tan & Litschert ( 1994) Strategic Management Journal Kaynak & Kuan (1993) Journal of Business Research Mosakowski ( 1993) Journal of Management Richardson ( 1993) Strategic Management Journal Webster (1993) Journal of Business Research Covin & Slevin (1990) Journal of Business Venturing Fesser & Willard (1990) Strategic Management Journal Kotabe & Murray (1990) Journal of International Business Studies Parry & Bass (1990) Marketing Letters Findings Low-cost strategy significantly and positively influences growth/share. Influence strategies showed significant detrimental effects on relationship performance. Strategic posture found to significantly influence new product success (i.e., financial performance). Export marketing strategy found to positively influence performance. Extent of offshore sourcing found to be weakly negatively related to U . S. multinational ’s profitability. Export development strategy found to influence export performance. Defensive strategies found to positively influence performance. Export marketing strategy found to influence performance. When focus and differentiation strategies are established, performance is higher than for other firms. Parallel sourcing found to positively influence supplier performance. Significant relationship found between the importance placed on marketing culture (i.e., strategy) and firm profitability. Strategic posture found to influence firm performance. Strategy found to be an important input at a very early stage into the subsequent performance of the firm. Degree of internal sourcing is found to explain market performance independently of innovative actrvrties. Pioneers were observed to have higher market shares than followers. Iii: i5 (com’d). m Jon M ' .Jdm& Jourr $21119”) (cm. Bearnish & Slmr $121199}! Jou Mk0mll9891 Jourr Bus Limfil’wu Sum ‘:%l ’w Him1933.1 Joum [:3le Am 1:936» Sin: Mai \ Table 3-5 (cont’d). Study Noordewier, John & Nevin (1990) Geringer, Bearnish & daCosta (1989) Kotabe & Omura (1989) Robinson & Pearce (1988) Walters ( 1988) Miller & Toulouse (1986) Dess & Davis (1984) Journal Journal of Marketing Strategic Management Journal Journal of International Business Studies Strategic Management Journal Journal of Retailing American Journal of Small Business Academy of Management Journal 77 Findings Relational elements in purchase arrangements found to positively influence performance. Diversification strategy found to positively influence performance. Product market performance found to be positively related to the internal components sourcing strategy. Strategic orientations focusing on product innovation linked to high levels of performance. Direct mail promotions found to have a positive effect on retailer profit. Success linked to more explicit strategies. Commitment to at least one of the generic strategies will result in higher performance. In this study, overall cost leadership had highest performance level. 1mm. Smtcmre-Per lmm ’1 item it Coleman Jour 11% of his (1993) Amt Mi Wkath) Jour Rt: haltkinllWO) Jour. Vc WNW: Joun Wllmt h&m0ll988) Joun Ea mammoth to“, W, [in]! 8; J M (1988) oun Guam) Acad Ma ““9011 (192m Am Ma K m)& [mm Joan Pan Robb' .’ ms & Miriam) 3:: int - . “Meow!“ Acad Mai Miller & (1936) T011101)“ \Sm: 78 Table 3-6. Structure-Performance Relationship Author(s) Journal Findings Robicheaux & Coleman Journal of the Academy Channel relationship structure posited to influence (1994) of Marketing Science Parkhe (1993) Academy of Management Journal Kaynak & Kuan (1993) Journal of Business Research Covin & Slevin (1990) Journal of Business Venturing Noordewier, John & Nevin (1990) Journal of Marketing Chang & Chio (1988) Journal of Industrial Economics Mahajan & Wind (1988) Long Range Planning Schul, Little & Pride (1988) Journal of Retailing Gupta (1987) Academy of Management Journal Hoskisson (1987) Academy of Management Journal Koberg & Ungson Journal of Management (1987) Pearce, Robbins & Strategic Management Robinson (1987) Journal Gupta & Govindarajan Academy of (1986) Management Journal Miller & Toulouse American Journal of (1986) Small Business polity and economic performance. Interfirm strategic alliance structure linked to performance. Export operating unit structure found to positively effect performance. Organic structures found to influence firm performance. Relational elements (e.g., long-term orientation) enhance the performance outcomes in buyer-seller relationships. Business groups that have a multidivisional structure found to show superior economic performance. Profitability found to be influenced by synergy building (i.e., a cooperative relationship structure). Franchisees’ perceptions of structure were found to be significantly correlated with various dimensions of channel satisfaction. CnTnmt._SBU . 1- - . . , 1 to SBU effectiveness. Multidivisional structure found to affect firm performance. Performance is significantly linked to organic structure. Planning formality linked to all indicators of objective performance. Resource sharing (i.e. , a form of governance structure) found to influence SBU effectiveness. Success linked to delegation of decision-making authority. QR 5”“ m m of QR S“ W (1962) ‘ W dispersion' vc moot tom 5"“ d on: strategy (Stc Tab" moor; new Wu“ 6 no in (er-t Gem 1994]. WWW (I toot1991). W)“g 0”“ AsJUSIified in Ch daemon was glided b) formalization and decent! Willie (e.g., Mmtzberg hparauel those in Ge" that, on average. firms 5 lllsut, the following TC! practice 0Ccur as the exten tsitiificant positive 11111 DIterations decentralizati‘ itemization. 79 QR STRATEGY: ANTECEDENT TO STRUCTURE The Impact of QR Strategy on Organizational Structure Chandler (1962) observed that major changes in organizational strategy (e. g., geographic dispersion, vertical and horizontal integration) were followed by changes in structural form. Since then, many have confirmed this dominant view that structure follows strategy (see Table 3—4). In particular, this association has been confirmed in the domain of : new product development (c. g., Calantone, diBenedetto and Bhoovaraghavan 1994); JIT (e.g., Germain, Droge and Daugherty 1994; Gilbert, Young and O’Neal 1994), entrepreneurship (e.g. , Covin and Slevin 1990), global strategy (e.g., Habib and Victor 1991), among others. As justified in Chapter 2, selection of the internal structure variables for this dissertation was guided by literature reviews that have consistently identified integration, formalization and decentralization as major interrelated dimensions of organizational structure (e.g., Mintzberg 1979; Miller 1991). In this section, arguments are developed that parallel those in Germain, Droge and Daugherty (1994) regarding JIT. Assuming that, on average, firms select the appropriate structure for the strategy they plan to pursue, the following research question is addressed: what changes in management practice occur as the extent of involvement with QR increases? It is argued that QR has a significant positive impact on organizational integration, performance control and operations decentralization and a significant negative impact on scheduling decentralization. mum Teamwork is a b hires practice that ma mgr-anon refers to the . mailed by panic W. finrctions or ‘i-ludismmnlopcratit inasimmsedim The Impact of QR on Integration Teamwork is a buzzword in the 1990s, and it is a concept in contemporary business practice that mandates organizational integration. As defined in Chapter 2, integration refers to the extent to which decision-making at top levels in the firm is characterized by participative, cross—functional committees in which different departments, functions or divisions get together to decide specific classes of decisions (e.g., distribution/operations, buying, merchandising, pricing). Just as increased integration among purchasing, engineering, production, materials management, marketing and distribution is often hypothesized under JIT exchange (e.g., Frazier, Spekman and O’Neal 1988; Giunipero and Law 1990; Natarajan and Weinrauch I990; Germain, Droge and Daugherty 1994), integration among distribution, marketing, merchandising and buying functions can be hypothesized under QR. Reduction in slack resources (particularly time and inventory), the desired outcome of QR partnerships (Phillips and Droge 19953), "increases the need for tight interdepartmental linkages as variance in the output of one department cannot be absorbed by that of another" (Germain, Droge and Daugherty 1994, p.472). In other words, successful QR implementation involves integration within the company so that implementation problems are looked at in total, versus unique to each different department. For these reasons, the following hypothesis is set forth. I—Ila: As QR implementation increases, integration increases. It: iM of QR on Ft Formalization is postures are written dr it merit of formalized Dnghern 1994). 'Pert flriasizcd the importan hitch. Slammpoulo iiiil exchange in parti 9“? and Daugherty 19 lieuseofformarr mm First QR retail. him elifilinatior. if information replacing i Marinas in demand c; WWC of time~base humility QR Pannershj; mm) Wires intensive c idler Service and quality F hirown Prmesses, they . thaUghmy 1994, M thiflte: They are Still res] its trends, merchww Marketplace. But With Q 81 The Impact of QR on Formalization (i.e., Performance Control) Formalization is defined in this dissertation as the extent to which rules and procedures are written down. In this study, the focus is on one aspect of formalization—— the extent of formalized performance control (Khandwalla 1974; Germain, Droge and Daugherty 1994). "Performance control was selected because many researchers have emphasized the importance of the performance appraisal system in marketing overall (Jaworski, Stathakopoulos and Krishnan 1993) and in the establishment and maintenance of JIT exchange in particular (e. g., Frazier, Spekman and O’Neal 1988"; Germain, Droge and Daugherty 1994, p. 473). The use of formalized performance control should increase with QR for two major reasons. First, QR retailers have reduced overall inventory levels, supporting QR as a slack resource elimination strategy (Phillips and Droge 1995a). Therefore, the scenario of information replacing inventory requires intensive controls of inputs/outputs as large fluctuations in demand cannot be filled with the minimal, if any, safety stock that is characteristic of time-based strategies. Second, intensive managing of the elements that accompany QR partnerships (e.g., new technology and processes, long—term partnerships, trust) requires intensive controls. QR retailers "are asked to simultaneously provide better service and quality products at lower costs, and if they do not meticulously manage their own processes, they will eventually absorb the costs themselves" (Germain, Droge and Daugherty 1994, p.473). Under QR, the primary mission of retailers does not Change: They are still responsible for understanding the customer demands, analyzing sales trends, merchandising products and maintaining the correct image in the marketplace. But with QR, they are also more accountable for managing financial, W profitablllll' moaning “3 “m j, retailer with belief co m m bottom-line mmm mm: the the line. mu Waring and invent hills: W119 perm E'QR unplemcntation int Hlb: As QR impl W In its most general ”tiling authority in the fit lithe level in the organi million control, electror wi’iiier selection, etc. Br honideroo As discus ll'how"1hillgs are done [W ’l he“ (Clo iIlfOfIIt'rtion GerIIllin, Droge al l W suggests that In t 82 bottomline profitability (Chain Store Age Executive 1991). As QR improves merchandising, the distribution/warehousing function, and store operations, it rewards the retailer with better customer service and lower operating expenses... benefits that translate into bottom-line results. In fact, "QR affects every component of a retailer profit-and—loss statement: above the line, sales improve and markdowns are minimized; below the line, operating expenses are reduced for merchandising, distribution, administrating and inventory management" (Chain Store Age Executive 1991, p.8B). For these reasons, performance control by retailers is expected to increase as the extent of QR implementation increases. Hlb: As QR implementation increases, performance control increases. The Impact of QR on Decentralization In its most general form, decentralization refers to the vertical locus of decision— making authority in the firm. More specifically, in this research, decentralization refers to the level in the organization that has authority to make decisions in areas such as, inventory control, electronic data interchange (EDI), pricing, promotion, product and supplier selection, etc. Both operations decentralization and scheduling decentralization are considered. As discussed in the previous chapter, operations decentralization refers to "how" things are done (e.g., personnel) and scheduling decentralization refers to "when" (e.g., information and product flow and timing) things are done. Germain, Droge and Daugherty (1994), suggest and confirm that although the literature suggests that JIT exchange partnerships may be more decentralized (e. g., Davy, ilit- Mali“ and Gritzr a be mlsladint (p41 zit dimmed [0 HT SC molding Emmi titanium” decision llore WWII)" mange. mentore- n mmhilih’ *0 it ”I” not in lurch loith the m an that mmgcmem 3' nu maize “‘5 ”mm ppm of moonlit unions deceflnalllfi‘lo' ch: As QR implf Lliking at scheduling do provide nippliers with tirn iii involve suppliers wit thine information is ev 111dDaugherty1994, p.47 hillbilly of these critil h it lthlened inpo 83 White, Merritt and Gritzmacher 1992; Giunipero and Law 1990), "such a generalization may be misleading" (p.473). In their research, they found operations decentralization to be unrelated to JIT selling and scheduling decentralization to be negatively related. This finding is consistent with Carter and Cullen’s (1984) contention that not all domains of organizational decision-making are necessarily centralized or decentralized equally. More specifically, QR is a company-wide commitment to continuous improvement and change. Therefore, regarding operations decentralization, QR requires authority and responsibility to be pushed down the hierarchy so decisions can be made by the people most in touch with the marketplace (Chain Store Age Executive 1991). This does not mean that management abdicates its responsibility. Rather it means that management must recognize the potential and develop the skills of subordinates to allow this increased delegation of responsibility (Chain Store Age Executive 1991, p.9B). In this case, operations decentralization is posited to increase as QR increases. ch: As QR implementation increases, operations decentralization increases. Looking at scheduling decentralization, in QR partnerships, retailers must proactively provide suppliers with timely, proprietary information (e. g., inventory and sales data) and involve suppliers with related decisions and processes. "The sharing of such sensitive information is evidence of the critical importance of timing" (Germain, Droge and Daugherty 1994, p.473). As a result, managers may become averse to delegating responsibility of these critical decisions downward in the organization. Therefore, given the heightened importance of scheduling to both the retailer and supplier and given the nrliesrequiredonF untoward shift in the Hld1AsQR impl In gunman hyp times. so do integratil Wm decennalizatic H" ["93“ 0‘ QR Stral WM intere illhl'sical disUlbution a hint 19605 (Brown, u With in this am has hhvioni lehtionshjps i Miflflining the dominam illnpositod to effect Ih AS disc"886d in C1 guided by literature on c] factor in QR partnership; hieenatrhe Core of re definition is that “0mm 8: a Will 0f decisi0n_m 84 timeliness required of QR-related decisions, it is posited that QR implementation results in an upward shift in the vertical locus of organizational decision-making. Hld: As QR implementation increases, scheduling decentralization decreases. In summary, hypotheses Hla through Hld suggest that as QR implementation increases, so do integration, operations decentralization and performance control, while scheduling decentralization decreases. The Impact of QR Strategy on Relationship Structure Researchers interested in the broad topic of marketing channels, as contrasted with the physical distribution aspects of channels, began to adopt a behavioral orientation in the late 1960s (Brown, Lusch and Koenig 1984). Since that time a significant stream of research in this area has resulted in the distribution channel being viewed as a set of behavioral relationships involving power, dependence, conflict and relational norms. Maintaining the dominant view that structure follows strategy, the implementation of QR is also posited to effect the retailer’s structure of relationships with its major suppliers. As discussed in Chapter 2, selection of the relationship structure variables was guided by literature on channel relationships that identified relational norms as a key factor in QR partnerships. Since the early study by Sherif (1936), the concept of norms i has been at the core of research in several branches of the social sciences. A working definition is that norms are expectations about behavior that are at least partially shared by a group of decision-makers (Gibbs 1981; Heide and John 1992). As used in this mm and as defii igherordercomuct cor iiiiaIiI}. Asmming the WWW to pun am] relationships ( mmokhmposi h 0f R on late 1“ Chapter 2 of thi W“ that parties w SW 0“ the f1lndama WES new bUSiness pm limiters bUSiness o Wham “Change inch wheeler manage van'abilir lseoflimiwdtime (White for QR. In QR, inform MW" “he Uadition however, must Share infor nflll at the 0m but “Hon: The objectives of m for . QR Implementation, 1 ”We [Ween retailers 85 dissertation, and as defined by Heide and John (1992), relational norms constitute a higher order construct consisting of the dimensions information exchange, flexibility, and solidarity. Assuming that, on average, firms select the appropriate structure for the strategy they plan to pursue, the following research question is addressed: what changes in channel relationships occur as the extent of involvement with QR increases? It is argued that QR has a positive impact on information exchange, flexibility and solidarity. The Impact of QR on Information Exchange In Chapter 2 of this dissertation, information exchange was defined as a bilateral expectation that parties will proactively provide information useful to the partner. QR is based on the fundamental premise of information exchange. The QR partnership requires new business practices, starting with a cooperation that stems from a knowledge of each other’s business objectives, opportunities, and constraints. Basic objectives of information exchange include: improving joint knowledge of future consumer demand, to better manage variability and gain control of the volumes and to make more effective use of limited time (Whiteoak 1993). Information exchange is the enabling mechanism for QR. In QR, information is exchanged more openly, not as in an adversarial relationship (the traditional retail—supplier relationship) (Jackson 1985). Retailers, however, must share information to help vendors plan production and distribution not only at the onset but throughout the duration of the relationship. The objectives of information exchange discussed above are fundamental not only for QR implementation, but also for successful long-term execution. Information exchange between retailers and vendors is expected to become increasingly important in will QR pamm in termed levels of Eugene QR pannershi 360mb changing I mnge by the QR pa iris. unless informant reds can not be readily We at the onset of ti inn [if increasingly . m be woeessful in u firth. Hla:AsQR imy WM Flexibility Was de ad‘Pialions as mm“ illicit) good-faith mod lithium “mummies Tillre is the new e] lbs likely merchandise W 'Q“i°kR°$i>0nse is a Stra bribery pipeline so fl ll bathe)! will Sell IOmm 86 successful QR partnerships as the relationships mature for a combination of two reasons. First, increased levels of information exchange enable the trust and loyalty required for long-term QR partnership success. Second, today’s dynamic retailing environment and the constantly changing needs of consumers demands efficient and accurate information exchange by the QR partners if the relationship is to evolve successfully. In other words, unless information is exchanged truthfully and in a timely manner, consumers” needs can not be readily met. Therefore, the need for information exchange not only occurs at the onset of the partnership, but even more so as the relationship matures. Without the increasingly accurate and efficient exchange of information, QR partnerships cannot be successful in the long-run. For these reasons, the following hypothesis is set forth. H2a: As QR implementation increases, information exchange increases. The Impact of QR on Flexibilig Flexibility was defined earlier as a bilateral expectation of willingness to make adaptations as circumstances change. It represents insurance that the relationship will be subject to good-faith modification if a particular practice proves detrimental in the light of changed circumstances. Time is the new enemy in retailing because the longer the forecasting period, the less likely merchandise will meet customer demand (Chain Store Age Executive 1991). "Quick Response is a strategy of customer service that uses technology to make possible an industry pipeline so flexible and efficient that, ideally, retailers can forecast today What they will sell tomorrow and have the merchandise in the stores, on time, in the gm quantities colors. titling this timely resi lease COINIIDCI’S mds Lem retailers and Si minors to variations W key aspects ( mm for flexibilit mespond to rapidly ch “1‘ Miles in IOday's N011 the notion of ' men of QR inplcmema Hlb: ‘5 QR hp W “is research, S Died on the relationship WM“- QR is base. Forboth, the partnership r it[reborn a kaledge 01 in Store A 6 Emma “it. benefit and infomm it mention my en 87 right quantities, colors, sizes and styles" (Chain Store Age Executive 1991, p.4B). Achieving this timely response requires flexibility between retailers and suppliers. Thus, because consumers needs, wants and desires change daily, a flexible working relationship between retailers and suppliers is required. Each party must be willing to make adaptations to variations in demand. Information technology and efficient information exchange, key aspects of a successfully implemented QR system, are the enabling mechanisms for flexibility. The speed and flexibility with which a supplier and retailer can respond to rapidly changing circumstances (i.e. , consumer demand), may determine who survives in today’s competitive retailing environment. Therefore, because QR is based on the notion of "timely response", flexibility is expected to increases and the extent of QR implementation increases. Hence, H2b: As QR implementation increases, flexibility increases. The Impact of QR on Solidarity In this research, solidarity refers to a bilateral expectation that a high value is placed on the relationship. It prescribes behaviors directed specifically at relationship maintenance. QR is based on a new type of relationship between retailers and vendors. For both, the partnership requires new business practices, starting with a cooperation that stems from a knowledge of each other’s business objectives, opportunities and constraints (Chain Store Age Executive 1991). Such cooperative relationships may be formed for cost, benefit and information sharing purposes (Germain, Droge and Daugherty 1994). Such cooperation may emerge out of a wide variety of starting conditions, such as preexisting friendship tie it Vet] 1994). Benefr merged depeMcnce (SI nrnrplementary skills. 0i1987i. Relatiombip mar JIll’flliOn. A siccessfi 35335! and supplier (e In: exchanges. Comn W immunity are 0' W QR (Lain n. W through rim We may feel 1mm, iWidens in SUbsequer, MOM. the following by 111%, hyp minimum increases “11 solidamy. 88 preexisting friendship ties, institutional mandates, or resource dependence (Ring and Van de Ven 1994). Benefits of cooperative relationships include: reduced uncertainty, managed dependence (Spekman, Strauss and Smith 1985), exchange efficiency, access to complementary skills, and social satisfactions from the association (Dwyer, Schurr and 0h 1987). Relationship maintenance, a requirement of success in QR, is built on cooperation. A successful QR partnership is a mutually cooperative relationship between a retailer and supplier (e. g., strategic alliance) and is based on commitment regarding future exchanges. Commitment from both the retailer’s own management and from the vendor community are overwhelmingly viewed as the most important success factors in implementing QR (Chain Store Age Executive 1993). As these cooperative transactions are repeated through time, and if they meet basic norms of equity and efficiency, the parties may feel increasingly secure in committing more of their available resources and expectations in subsequent cycles of cooperation (Ring and Van de Ven 1994). For these reasons, the following hypothesis is set forth. H2c: As QR implementation increases, solidarity increases. In summary, hypotheses H2a through H2c suggest that as the extent of QR implementation increases, the following also increase: information exchange, flexibility and solidarity. NECEI Models of ‘1” m as a predicto m1986: Germain mini is Wm di mm] m relalk mm. the propoglliOI ailment and menu My ml]. Comp? ham are nonsignifica n'enkinm1989). Pa llt‘emimy on structure a he Impact of EnVironu The effect of the 0 hi Widely studied (McG normative Strategic manag 011 accurate assessments . Wily was defined a Weenvironment. It is well- As demonstrate ll learned in the liter 89 ENVIRONMENT UNCERTAINTY: ANTECEDENT TO STRATEGY AND STRUCTURE Models of the relationships between strategy and structure often include uncertainty as a predictor of strategy, structure or both (e.g., Miller and Droge 1986; Prescott 1986; Germain, Droge and Daugherty 1994). In this dissertation, environment uncertainty is posited directly affect QR strategy implementation and structure (both organizational and relationship). Since it has already been proposed that QR predicts structure, the propositions as a set imply that QR mediates the relationship between environment and structure. Mediation is one type of "fit" definition in contingency theory research. Complete mediation occurs if the direct effects of uncertainty on structure are nonsignificant and the indirect effects through QR strategy are significant (V enkatraman 1989). Partial mediation occurs if both the direct and indirect effects of uncertainty on structure are significant (Venkatraman 1989). The Impact of Environment Uncertainty on QR Strategy Implementation The effect of the organization’s external environment on logistics strategy has not been widely studied (McGinnis and Kohn 1993). However, a common proposition in the normative strategic management literature is that strategists should make decisions based on accurate assessments of their external environments. In Chapter 2, environment uncertainty was defined as the degree of dynamism, unpredictability, and heterogeneity in the environment. It is posited that uncertainty leads to the implementation of a QR strategy. As demonstrated in Table 3—1, this link between environment and strategy is well-confirmed in the literature. For example, this relationship has been found to exist it rim or conlcx m and Bhooval m and m 1994 am ”02° and D In the £121ng lite were that changes i tail environments. Tl Rahal strategic initiatir Minn increases (GE in similar research on tiller hypothesized that mailer, as it offers a n UWithin. Similarly, Gr [mg more volatile envir Environmental unc relliler, Uncertainty arise: “WW impossible t We, uncertainty s Whilst from the sup] him are Winerahle to t clliltl underestimate the p ll W generate EXCeSSi‘ 90 in a variety of contexts, including: new product development (e.g., Calantone, diBenedetto and Bhoovarghavan 1994), export strategy (e.g., Cavusgil and Zou 1994; Naidu and Prasad 1994), logistics strategy’ (e.g., McGinnis and Kohn 1993), JIT (Germain, Droge and Daugherty 1994; Frazier, Spekman and O’Neal 1988), among others. ' In the strategy literature (e.g., Child 1972; Duncan 1972), the argument has long been made that changes in ways of conducting business are unlikely to be considered in placid environments. The current status of the retail environment is far from placid. Radical strategic initiatives, like QR, become more likely overall as environmental uncertainty increases (Germain, Droge and Daugherty 1994). This logic is consistent with similar research on JIT practice. For example, Frazier, Spekman and O’Neal (1988) hypothesized that uncertainty should increase the appeal of JIT exchange in particular, as it offers a relatively low risk means of channel coordination without costly ownership. Similarly, Germain, Droge and Daugherty (1994) found that organizations facing more volatile environments increasingly adopt JIT selling as a strategic response. Environmental uncertainty can take many forms in channel relationships. For the retailer, uncertainty arises largely from inabilities to precisely gauge product demand. It is almost impossible to predict consumer demand (Women’s Wear Daily 1993). Therefore, uncertainty surrounds demand if there is not enough time to receive merchandise from the suppliers that is demanded by consumers. More specifically, retail buyers are vulnerable to two types of risk caused by environmental uncertainty. They could underestimate the popularity of the style and lose potential sales or overestimate sales and generate excessive inventories and subsequent markdowns. QR allows retailer under member or m mt exposure as, The “51‘ °f a m net and 0'53” ca" 33m“ 1994)- In sum QR hell mm 5m“ qualit! set to Obtain longer CC he. and Dangbenl' ‘9 ointment may more achngesiehaSQR Ofl Hi: As enviromn increases- helnpact of Environ! In addition to thi dialled above, enviro: illDilutions for the stator Iron a variety of busint Itittionship. For eXam It 91 to order merchandise on a weekly or biweekly basis. Thus, buyers can make use of recent market exposure and information, which allows them to better estimate actual sales. The risk of a large difference between expected and actual sales is significantly reduced, and orders can be placed to better reflect actual market conditions (Maltz and Srivastava 1994). In sum, QR helps buffer the retailer from uncertainty by improving overall customer service, quality and productivity. The competitive advantage gained can be used to obtain longer contracts, enhance market share and increase profits (Germain, Droge and Daugherty 1994). The net effect is that a retailer confronting an uncertain environment may more avidly seek the competitive security that a relational trading exchange such as QR offers. Hence. H3: As environment uncertainty increases, the extent of QR implementation increases. The Impact of Environment Uncertainty on Structure In addition to the association between environment uncertainty and strategy discussed above, environment uncertainty has also been found to have important implications for the structures of organizations. Table 3-2 revealed a sampling of studies from a variety of business disciplines that have confirmed the existence of such a relationship. For example, the environment has been found to be a predictor of structure in the contexts of: channel relationships (e.g., Heide and John 1992; Noordewier, John and Nevin 1990; Klien, Frazier and Roth 1990), new products (e.g., Calantone, m, and 8W“ mm mm to B“ [m il987i mm itinerant) W' enter WM' fl 2mm enviromms meantime new (Germain Dm mm]; (1967) and ( nironnem Wins a Wired managerial lX devices to imam"3 ”‘3 ‘ 1991,p.36). Retard“g have they enhance in; training perfonmnce c‘ legend Daugherty (19 incisive perfolmance C refinance control 8y! "titration cycle time’ t titanic strncuires that b when, formaliZed an 92 diBenedetto and Bhoovarghavan 1994), among others. The Impact of Environment Uncertainty on Organizational Structure According to Burns and Stalker (1961), Thompson (1967), and Koberg and Ungson (1987) uncertainty creates the need for more organic (as compared to bureaucratic) structures. Organic structures are typically characterized as more integrated, specialized, formalized and decentralized. The rationale is simple: "because uncertain environments result in both highly complex, nonrepetitive tasks and administrative difficulties, a premium is placed on flexibility and adaptive organizational response" (Germain, Droge and Daugherty 1994, p.474). More specifically, "Lawrence and Lorsch (1967) and Galbraith (1973) contend that uncertainty in the organizational environment requires a differentiated organization structure with a broad array of formalized managerial positions and specialized tasks and a consequent need for liaison devices to integrate the efforts of the many specialists performing these tasks" (Miller 1991, p.36). Regarding decentralization, less centralized structures become preferred because they enhance managerial ability to maneuver and react quickly. And finally, regarding performance control and uncertainty in the similar context of JIT, Germain, Droge and Daugherty (1994) suggest that "uncertain environments may require [1] more extensive performance control systems to improve the accuracy and [2] real—time performance control systems to enhance flexibility and adaptivity by decreasing ’information cycle time’ to match environmental dynamics more closely " (p.474). Thus, organic structures that typically emerge in the face of uncertainty tend to be more integrated, formalized and decentralized than bureaucratic ones. Hi: 55 mm (a) mic mm“ W In addition to 111 mm mm film of the ext: mm or W- shrink (e.g.. Noordt II he been argu grime mechanism 1 nadifficult. if not imPt when. ”as Wm linemen; put a strain 0 nungenties into effect" heonlude that when intentions of relational n initiator, regarding em'irvmnents result in i dthirties, a premium i: bilge and Daugherty 199 litre- Finany, Solida ' in an possible a 93 H4: As environment uncertainty increases, the following all increase: (a) integration, (b) performance control, (c) operations decentralization, (d) scheduling decentralization. The Impact of Environment Uncertaingg on Relationship Structure In addition to the more traditional view that environment uncertainty affects organizational structure, a more recent trend in the marketing literature is the establishment of the existence of a relationship between environment uncertainty and relationship or boundary-spanning structure. Several studies have proposed or confinned such a link (e.g., Noordewier, John and Nevin 1990; Klein, Frazier and Roth 1990). It has been argued that uncertainty has a large impact on the appropriate governance mechanism for a given exchange because unanticipated changes render it more difficult, if not impossible, to identify all possible contingencies beforehand. More specifically, "as uncertainty increases, the limited cognitive capabilities of human agreements put a strain on their ability to craft a priori agreements that take all relevant contingencies into effect“ (Noordewier, John and Nevin 1990, p.82). Thus, it is possible to conclude that when uncertainty surrounds interorganizational exchange, various dimensions of relational norms (i.e., flexibility, information sharing, solidarity) increase. In particular, regarding flexibility and information exchange, because uncertain environments result in both highly complex, nonrepetitive tasks and administrative difficulties, a premium is placed on flexibility in organizational responses (Germain, Droge and Daugherty 1994), which is largely in part facilitated by proactive information exchange. Finally, solidarity in an uncertain environment makes the limitation of not identifying all possible contingencies a priori trivial. Simply, solidarity in exchange ”mien the WW I mainfwd contingencii jolted. In general. no gin dm'am behavic maintains that typicall tr. dim) in orienrari H5: As environn (a) inforu AN ENVIR Inlables 3-3, 3-5 WWW Organimjom imam hYpotlicses mg memenlation, have retailer perfomlance lie 1mm 0‘ QR Sam The tTaditiona] Sta le. dimonmated the link be! fielion cts (e.g_’ Calai 94 buffers the uncertainty by knowing that value is placed on the relationship and that unidentified contingencies can be dealt with in a manner acceptable to the parties involved. In general, norms buffer uncertainty by serving as a general protective device against deviant behavior (Stinchcombe 1986; Thaibaut 1968). Thus, exchange relationships that typically emerge in the face of uncertainty tend to be more relational (vs. discrete) in orientation. Hence, H5: As environment uncertainty increases, the following also increase: (a) information sharing, (b) flexibility, (c) solidarity. ANTECEDENTS OF PERFORMANCE: ENVIRONMENT, STRATEGY & STRUCTURE In Tables 3-3, 3-5 and 3-6, the environment, strategy and structure were shown to influence organizational performance in a variety of business contexts. Specific to this dissertation, hypotheses are set forth suggesting that environment uncertainty, QR strategy implementation, and structure (i.e., organicity and relationalism) each directly have retailer performance implications. The Impact of QR Strategy Implementation on Performance The traditional stance in the literature is that strategy influences performance (e.g., Dess and Davis 1984; Hambrick 1985; Miller and Friesen 1986). Table 3-5 demonstrated the link between strategy and performance in many contexts, including: new products (e.g., Calantone, diBenedetto and Bhoovaraghavan 1994; Parry and Bass 1990l. exporting (6-2. leg. Kotabe and St 1988): and channel it Select examples of pt 'For the typical r Sill) value. W] expense of labor. pipeline. both reu predictiviry and Executive 1991). 'lCPeImey, a It: will Haggar Lil inventories of a \ orders to custom process (towards allowing invento 1D the come enhance Mailer pet Operating elllleltses, (Phillips and Droge and Straughn (1995 “it POSitive itnpac and/o; befler prici] Under QR, [he 0pm“)! to sink requirement Stivistava 1994)_ 1f 95 1990), exporting (e.g., Naidu and Prasad 1994; Cavusgil and Zou 1994); global sourcing (e. g., Kotabe and Swan 1994; Kotabe and Murray 1990), promotion (e.g., Walters 1988); and channel relations (e.g., Noordewier, John and Nevin 1990), among others. Select examples of performance implications in retailing include: "For the typical retailer, the cost of carrying inventory averages $.17 per $1.00 value. When that 17% of non-value-added cost -- caused by the expense of labor, facilities and borrowed money —— is squeezed out of the pipeline, both retailers and manufacturers stand to improve their inventory productivity and reduce carrying costs significantly" (Chain Store Age Executive 1991). "JCPenney, a leader in quick response, in a three-way partnership with Eddy Haggar Limited and Milliken Mills, all parties maintained minimum inventories of a very successful women’s pant, while fulfilling 96% of the orders to customers’ satisfaction. A re-engineering of the manufacturing process (towards routinization) eliminated 30 days from the cycle time, allowing inventory turns to double" (Oesterreicher 1993). In the context of this dissertation, QR strategy implementation is expected to enhance retailer performance for several reasons, including--fewer markdowns, lower operating expenses, higher turns, increased selling space and improved customer service (Phillips and Droge 1995a)—-all contributing to increased sales and profits. Fiorito, May and Straughn (1995) report that "most retailers who have implemented QR have realized net positive impacts on their financial operating data, which result in higher profits and/or better pricing to consumers" (p.12). Under QR, inventory is received by the retailer as needed, affording the retailer the opportunity to convert storage space into selling space. Similarly, QR lowers safety stock requirements for retailers, thereby increasing merchandise turnover (Maltz and Srivistava 1994). Fewer out-of-stock situations results in a reduction in missed sales and nnermeincustomcr Whammy HttAsQRsu-atl llrlmpact of Environ In Table 3.3. the ”if misty of come Slip l995l. entreprene Carmel and Zou 199 mtirons found to dir Mutton] character We. [fichrtolog COttSistent with trim Of a specific 1 “-8-. Heide and Stump 1 1937). Empirical organj W are detriment a55(tthtionis SiInple, In minim is Cultivated, till ”initially Untierm rivhoflmehta] Condition llltlllttittte Strategic 0r 1 M Stump 1995). Thu 96 an increase in customer service. For these reasons, increased retailer performance is expected to accompany QR implementation. H6: As QR strategy implementation increases, retailer performance increases. The Impact of Environment Uncertainty on Performance In Table 3-3, the link between the environment and performance was shown in a wide variety of contexts, including: buyer-supplier relationships (e.g., Heide and Stump 1995), entrepreneurship (e.g., Shane and Kolvereid 1995), export strategy (e.g., Cavusgil and Zou 1994; Kaynak and Kuan 1993), among others. Environmental conditions found to directly influence performance include, but are not limited to: organizational characteristics, decision-maker characteristics, foreign target market, infrastructure, technology, competition, industry characteristics, and uncertainty. Consistent with the scope of this dissertation, several studies revealed the existence of a specific relationship between environment uncertainty and performance (e.g. , Heide and Stump 1995; McArthur and Nystrom 1991; Stearns, Hoffman and Heide 1987). Empirical organization theory holds the assumption that high levels of perceived uncertainty are detrimental to performance (Bourgeois 1985). The logic behind such an association is simple. In any environment characterized by uncertainty, if no adaptation mechanism is cultivated, the costs of making changes in response to unanticipated events will eventually undermine the returns an organization derives. In other words, environmental conditions (like uncertainty) will adversely affect performance unless appropriate strategic or structural arrangements are designed to deal with them (Heide and Stump 1995). Thus, in the absence of a structure designed to handle changing m. 1“] wlfliilon netheW°fm Hirsen‘im“ The [film of Organiz Rdee the 5‘ mm link in a V eg. Robicheaux and C gimme 1988). C! Le Conn and Slevin Both Covin and initiation] performar Mailed as more hrtartratie ones. Sin positively contributed to I Toulouse (1986) linked SI folowing hypothesis is s 97 environmental conditions (e. g., uncertainty), performance will be expected to decline. This is the essence of the following hypothesis. H7: As environment uncertainty increases, retailer performance decreases. The Impact of Organizational Structure on Performance Regarding the structure-performance link, Table 3-6 confirmed the structure- performance link in a variety of different contexts, including: interfirm relationships (e.g., Robicheaux and Coleman 1994; Parkhe 1993; Mahajan and Wind 1988; Schul, Little and Pride 1988), export behavior (e.g., Kaynak and Kuan 1993), entrepreneurship (e.g., Covin and Slevin 1990), among others. Both Covin and Slevin (1990) and Koberg and Ungson (1987) have found organizational performance to be significantly linked to organic structures, typically characterized as more integrated, specialized, formalized and decentralized than bureaucratic ones. Similarly, Gupta (1987) found that corporate decentralization positively contributed to organizational performance. Regarding integration, Miller and Toulouse (1986) linked success to delegation of decision-making. For these reasons, the following hypothesis is set forth. H8a-d: Organizational structures characterized as organic (i.e., more integrated, formalized, and decentralized), will result in increased retailer performance. mmofwon Noordewicl- ”hr My, supp'm 35151 E eWOD of con 2min MN m mmcmlmcture never. 'mflm With retire merchandise in 35min achVit)" beS‘ m 1994‘ pi). :eehtrtsms f“ regulat truer1995l- Form relational “0mm”! Momm' H9a-e: ExChang informatii retailer DE Additional ternmmnce Another central pr til exhibit significinI environment, so that the tie ti and structure Wi" l' lller (1988) largely c0 98 The Impact of Relationship Structure on Performance Noordewier, John and Nevin (1990) found that relational elements (i.e., supplier flexibility, supplier assistance, information provided to supplier, monitoring of supplier and expectation of continuity) enhance the performance outcomes in buyer-seller relationships. Most recent studies, however, provide only indirect support for the link between channel structure and performance (Robicheaux and Coleman 1994). Intuitively, however, "retailers with long-term relationships can achieve a competitive advantage by receiving merchandise in short-supply, information on new and best-selling products and competitive activity, best allowable prices, and advertising and markdown allowances" (Ganesan 1994, p.1). Relational norms, in turn, are considered to be important mechanisms for regulating long-term relational exchanges (Gundlach, Achrol and Mentzer 1995). For these reasons, it will be tested in this dissertation that an increase in relational nonns--information exchange, flexibility, and solidarity--enhances retailer performance. H9a-c: Exchange structures characterized as relational (i.e., high in information exchange, flexibility, solidarity) will result in increased retailer performance. Additional Performance Implications Another central performance contention of this research is that good performers will exhibit significant complementarities of strategy with both structure and environment, so that the relationships predicted in Figure 3-1 between environment, strategy and structure will be more pronounced among good than among bad performers. Miller (1988) largely confirmed this contention in the context of Porter’s business mgies llierefore. centre and emiromner :‘re associated more so no: The associ: in groups In surnman Fig W direction of the hithtset. 99 strategies. Therefore, the complementarities or congruencies of QR strategy with structure and environment uncertainty suggested by hypotheses 1 through 4 are expected to be associated more so with good performance than with poor performance. Hence, H10: The associations predicted by Hypotheses 1 through 4 will be stronger in groups of high performers than in groups of low performers. In summary, Figure 3-2 provides a representation of the full model and the proposed direction of the links between model constructs as suggested by the preceding hypotheses. z " i 2 2. :1 2 ‘° °' 1 :5 ‘ 3 oz :1 _ LO ul x 5" A: h i o: ‘ I ~ \ ‘ + + I. N N + + + ~ SEE—5 < ”885233 “Ea 382 .N-m Emmi >.:¢h.J.fl.XWJk u02<30xw ZOZZIEOuhz. mehODEhm 575202.435". >0mhtttttionauzE 113 The remaining four questions capture the domain of scheduling decentralization. In particular, decentralization is operationalized in the following way: Which level has the authority to make the following decisions? 1=CEO, chairman, president 2=executive, sr. vice-president, GMM 3=DMM, director (e.g., MIS, store operations) 4=buyer, regional manager 5=distn'ct stores manager 6=store manager 7=assistant stbre manager 1. inventory control/order processing software adoption 1 2 3 4 5 6 7 2. warehousing technology (e.g., robotics, software) adoption 1 2 3 4 5 6 7 3. electronic data interchange (EDI) adoption 1 2 3 4 5 6 7 4. retail technology adoption (e.g., POS scanning technology) 1 2 3 4 5 6 7 5. the number of retail workers required 1 2 3 4 5 6 7 6. internal labor disputes 1 2 3 4 5 6 7 7. overtime at the retail level 1 2 3 4 5 6 7 8. number of retail outlets to operate 1 2 3 4 5 6 7 9. number of warehouses/distribution centers to operate 1 2 3 4 5 6 7 10. pricing policy 1 2 3 4 5 6 7 11. in-store promotions/advertising 1 2 3 4 5 6 7 12. product selection 1 2 3 4 5 6 7 13. supplier selection 1 2 3 4 5 6 7 14. retail location decisions 1 2 3 4 5 6 7 15. warehouse/distribution location decisions 1 2 3 4 5 6 7 16. production scheduling (e.g., programming deliveries) 1 2 3 4 5 6 7 17. product delivery schedules from vendor 1 2 3 4 5 6 7 18. warehouse-distribution product receiving decisions 1 2 3 4 5 6 7 19. store deliveries 1 2 3 4 5 6 7 Performance Control. Performance control is one aspect of the broader construct of formalization. For the reasons set forth in Chapter 2, the specific dimension of performance control was deemed more relevant to this research than was the more general concept of formalization. In this dissertation, performance control is Operationalized as follows: be the extent to which is tuned 17 cost t 18 produ 19 Gusto 20 custc Relationship Strr For the pi of relational non relational norms flexibility, infer provided at 5am; of relational no Heide and Join (1988) and No this dissertatio M Ragaldlng your I Flexibil 2‘ The p: 3' When 114 Rate the extent to which the performance of your firm is monitored in each of the following areas. used rarely used often 16. functional costs (e.g., operations, selling) 1 2 3 4 5 6 7 17. cost controls by fixing standard costs and analyzing variation 1 2 3 4 5 6 7 18. productivity analysis 1 2 3 4 5 6 7 19. customer satisfaction and follow—up 1 2 3 4 5 6 7 20. customer service (e.g., no lines, rainchecks) 1 2 3 4 5 6 7 Relationship Structure For the purpose of this research, relationship structure is conceptualized in terms of relational norms. As characterized by Heide and John (1992), in this dissertation, relational norms constitute a higher order construct consisting of the dimensions: flexibility, information exchange and solidarity. Tables 2-8 through 2-10 in Chapter 2 provided a sample of relevant measures for the operationalization of these selected facets of relational norms. The main source for the Operationalizations of these dimensions is Heide and John (1992). However, the origin of these scales are Kaufmann and Stern (1988) and Noordewier, John and Nevin (1990). These scales were adopted for use in this dissertation without modification. Flexibility. In this dissertation, flexibility is operationalized as follows: Regarding your relationship with your largest suppliers, how accurate are the following descriptions? completely completely inaccurate accurate 1- Flexibility in response to requests for change is a characteristic of this relationship 1 2 3 4 5 6 7 The parties expect to be able to make adjustments in the ongoing relationship to cope with changing circumstances 1 2 3 4 5 6 7 When some unexpected situation arises, the parties would rather work out a new deal than hold each other to the original terms 1 2 3 4 5 6 7 1mm in these relatrr mrgh i r mange 0 Ex and agrt itsexpeded tin “56W cha Solidarin at follows: 5 Problems 1 ll 9 The pame r 10 The name PerlOrmance Walke‘ literature idea and business m bllSiness‘ pr: This 9911011 and/or stran ‘0 rePresent “"0 Ititres 115 Information Exchange. Information exchange is operationalized as follows: completely completely inaccurate accurate 4. In these relationships, it is expected that any information that might help the other party will be provided to them 1 2 3 4 5 6 7 5. Exchange of information in this relationship takes place frequently and informally, and not only according to a prespecifled agreement 1 2 3 4 5 6 7 6. It is expected that the parties will provide proprietary information if it can help the other party 1 2 3 4 5 6 7 7. It is expected that we keep each other informed about events or changes that may affect the other party 1 2 3 4 5 6 7 Solidarity. The final dimension of relationship structure, solidarity, is operationalized as follows: completely completely inaccurate accurate 8- Problems that arise in the course of this relationship are treated by the parties as joint rather than individual responsibilities 1 2 3 4 5 6 7 9. The parties are committed to improvements that may benefit'the relationship as a whole, and not only individual parties 1 2 3 4 5 6 7 10- The parties in this relationship do not mind owing each other favors 1 2 3 4 5 6 7 Performance Walker and Ruekert (1987) in a comprehensive literature review of marketing literature identified three performance dimensions of primary importance to top corporate and business unit managers: effectiveness, efficiency, and adaptability. mm. In the performance context, effectiveness is the success of a business’ product and programs in relation to those of its competitors in the market. This performance dimension is typically measured by financial performance measures ' ' sed and/or strategic performance measures. Both strategic and financ1al measures are u to represent effectiveness -- the first three items represent strategic measures and the last - - ' ' ows: two represent financial measures. The dimenswns are operationalized as foll Ra‘s you! “931111390". market share 2 sale 9M a profit <3Wm i return on tml return on $31 Deane nodule your market she sales grew profit grow return on I return on f a 2 5 Efficier relation to th Performance 2 Willi actual or fellows: Please indicate annua return 3' lElUl'l For I Changing c this dither 116 Rate your organization’s performance over the past 5 vears relative to the competition in your primagy industgy. well below well above industry average industry average 1. market share growth 1 2 3 4 5 6 7 2. sales growth 1 2 3 4 5 6 7 3. profit growth 1 2 3 4 5 6 7 4. return on investment (ROI) 1 2 3 4 5 6 7 5. return on sales (ROS) 1 2 3 4 5 6 7 Please indicate your company’s success in meeting expectations in the following areas. well below well above our expectations our expectations 1. market share growth 1 2 3 4 5 6 7 2. sales growth 1 2 3 4 5 6 7 3. profit growth 1 2 3 4 5 6 7 4. return on investment (ROI) 1 2 3 4 5 6 7 5. return on sales (ROS) 1 2 3 4 5 6 7 My. Performance efficiency is the outcome of a business’ programs in relation to the resources employed in implementing them. Efficiency measures of five or economic performance as they deal performance are commonly referred to as objec With actual operating performance. In this dissertation, efficiency is operationalized as follows: Please indicate your company's performance on the following dimensions. 1. annual corporate sales ($) L’— 2. return on inventory (ROI) ———-— 3. return on sales (ROS) ____—— Ada tabili . Adaptability is the business’ success in responding over time to changing conditions and opportunities in the environment. Two original items comprise this dimension of performance. The operationalization is as follows: Fat the extent to wit Our WW m 2 Our oompai thl W developed. In are of interes performance d strategies haw currently impl the perceived sourcing gm] In general, how A quic A glo 3‘ ll yoL 4- ltyo. Strategy 1 have be] 117 Rate the extent to which your company is characterized by the following statements. to a very to a very little extent great extent 1. Our company has successfully responded to changing conditions in the environment. 1 2 3 4 5 6 7 2. Our company has successfully responded to opportunities in the environment. 1 2 3 4 5 6 7 Strategy performance. Several performance items specific to this research were developed. In particular, the perceived success of quick response and global sourcing are of interest. Four items were developed to represent this research-specific performance dimension. The first two items tap the retail executive’s belief that the strategies have positive performance implications regardless of if the retailer is not currently implementing a QR or global sourcing strategy. The second two items consider the perceived performance of only those retailers currently implementing a QR or global sourcing strategy. In general, how strongly do you agree or disagree with the following statements? strongly strongly disagree agree 1. A quick response strategy contributes greatly to the 6 7 overall success of a retailer. 1 2 3 4 5 2' ' tr'butes reatl to the A global sourcrng strategy con I g y 1 2 3 4 5 6 7 overall success of a retailer. very very dissatisfied satisfied 3- If your company is currently implementing a quick response strategy, how satisfied are you with its results? 1 2 3 4 5 6 7 n/a 4- If your company is currently implementing a global sourcing strategy. how satisfied are you with its results? 1 2 3 4 5 6 7 n/a Strategy Drivers As discussed in Chapter 3, several drivers of quick response and global sourcing ' ' ' ower, have been identified in the literature (e. g., envuonment uncertamty, “3113113? P loreign compel“j Chatelaine the ‘ drivers of quick goals and strate operating envirt How w sltalggtes cost redu important wearefi or newt risk-ave DnMr difleren IS centi we hav Overall industi we mt SOUI’O 118 foreign competition, degree of internationalization). Three scales were developed to characterize the retailer and its perceived environment on dimensions that are potential drivers of quick response, global sourcing, or both. Items in the first scale tap corporate goals and strategies. Items in the second scale tap the retailer’s perceptions of their operating environment. Items in the third scale tap management characteristics. 1. How would you best characterize your company's corporate goals my strategies? cost reduction tactics are very 1 2 3 4 5 6 7 cost reduction strategies are not important to us very important to us we are first to adopt new products 1 2 3 4 5 6 7 we are last to adopt new products or new technologies or new technologies risk-averse 1 2 3 4 5 6 7 risk-taker price-driven 1 2 3 4 5 6 7 quality-driven differentiation from competitors 1 2 3 4 5 6 7 differentiation from competitors is central to our strategy is not central to our strategy we have established overseas 1 2 3 4 5 6 7 we have domestic operations only operations industry-follower 1 2 3 4 5 6 7 industry-leader we mostly rely on domestic 1 2 3 4 5 6 7 we mostly rely on foreign sources of supply sources of supply . . . 9 2- How would you best characterize the envmonment in which our com an o crates. we have very little power over our r 1 2 3 4 5 6 7 . we have a lot of power over ou largest suppliers largest suppliers stable demand for our products large fluctuations in demand 1 2 3 4 5 6 7 for our products foreign competition is our 1 2 3 4 5 6 7 domestic competition is our t concern greatest concern greates 2 3 4 5 6 7 few competitors have overseas - as 1 - many competitors have overse operations operations \[rq l I “nor" waould) our manage ml of inter emenenoe we have a l mtemationa innovative receptive 1 Due to l laworski and 1 items lap intell lbefinaltwo Rate the extent 1 1 We oft: 2- We do 3- Depar 4- Datai ll taki 6' We ll Context Th Were dew 1 19 3. How would you best characterize Lour company's management profile? our management possesses a great 1 2 3 4 5 6 7 our management possesses domestic deal of international business business experience only expenence we have a long history of 1 2 3 4 5 6 7 we have no international business international business involvement involvement innovative 1 2 3 4 5 6 7 traditional receptive to change 1 2 3 4 5 6 7 not receptive to change Due to the complexity of the construct, the following questions were adapted from Jaworski and Kohli (1993) to tap the retailer’s "marketing orientation". The first two items tap intelligence generation, the second two items tap intelligence dissemination, and the final two items tap market responsiveness. Rate the extent to which you agree or disagree with the following statements. strongly strongly disagree agree 1. We often meet with customers to find out what products they will need in the future. 1 2 3 4 5 2. We do a lot of in-house market research. 1 2 3 4 5 3. Departments get together periodically to discuss market trends and developments. 1 2 3 4 5 4. Data on our customers are regularly disseminated to our stores. 1 2 3 4 5 5. It takes us a long time to decide how to respond to our competitors’ new campaigns. 1 2 3 4 5 6. We tend to ignore changes in our customers’ product or service needs. 1 2 3 4 5 Context The following set of questions, appearing at the beginning of the questionnaire, were developed to obtain descriptive company profiles. annual 001v number olt number ol 1 number of number of number of number 01 9 ownershlr. 9 percentt 10 percent ll What is superm departn Speoal A re Collect the for lesfmg all the mo Re rtittilers s Included of $100 1 general r 120 annual corporate (or business unit) sales ($) 2. number of full-time equivalent (FI'E) employees 3. number of U.S. retail outlets warehouses/distribution centers __ 4. number of foreign retail outlets warehouses/distribution centers __ 5. number of SKU’s __ 6. number of suppliers who are manufacturers 7. number of suppliers who are wholesalers 8. ownership [ ] U.S. [] Canadian [ ] European, specify country []Asian, specify country []other, specify country 9. percent of sales beyond the home market? ______°/_o 10. percent of outlets beyond the home market? _____fl/g 11. What is your primary retail industry? supermarket/grocery [] general merchandisor [ ] department store [ ] specialty hardline [ ] specialty apparel [ ] other _ _ _._ __ l ] SAMPLING FRAME A retail industry field survey of large, diverse non-food retailers is conducted to collect the primary data. A multiple industry retailer design is a valid research design for testing the proposed model because the design systematically generates variance in all the model constructs. Retailers selected for this research will be derived from a list of large U.S. retailers supplied by Ward’s Business Directory of U.S. Private and Public Companies. Included in the database will be only those nonfood retailers with annual sales in excess 0f $100 million. Specific retailers to be included in the list include: department stores, general merchandisers, discounters, and various specialty stores (e. g. , women’s apparel, toys. hooks)- A designated respo: Data co mm by l telephone com Although not meme rates ac“lilting the via telephone approval has questionnaire CXpla‘ms the importance. the questim ‘ “1300mm executiVei renders se a“emit to AS Sugget followup I 121 toys, books). A minimum sample of 150 randomly sampled retailers is desired. The designated respondent will be either the GMM or the top logistics/distribution executive. DATA COLLECTION Data collection for this research will involve three phases, similar to that suggested by Dillman’s (1978) Total Design Method (TDM). In the initial phase, telephone consent to participate in the study initiates the data collection process. Although not included in the TDM, it was decided that due to the typically very low response rates obtained when sampling retailers, the most financially efficient means of acquiring the desired sample size is to establish verbal contact from the sampling units via telephone. Questionnaire packets will only be sent to the retailers where verbal approval has been obtained. Included in the packet are: a personalized cover letter, a questionnaire, and a postage-paid first class business reply envelope. The cover letter explains the purpose of the research and its significance to retail practice, states the importance of participation in the study, describes the time and effort needed to complete the questionnaire, assures confidentiality, promises a summary benchmarking report if the completed questionnaire is returned with a business card, and thanks the business executive in advance for his/ her participation. An estimated response rate of 25 percent renders sending out approximately 800 questionnaires in the initial mailing (with an attempt to obtain approximately equal representation from the various types of retailers). As suggested by Dillman (1978), exactly one week after the first mailout, a postcard follow-up reminder is sent to all recipients of the questionnaire. A second phase of data collection will begin three weeks after the initial mailing [Dillman 1978). and a postage-l responded. The executive to tal questionnaire. : nailing. Assumf collection wil mailout. a me A m potential noi terms of m Statistics f0. be assesset strategy, Si he Dillifie cofielatioi anillysis o and mm dissertati Illihe e. 122 (Dillman 1978). A personalized cover letter, a replacement copy of the questionnaire, and a postage-paid business reply envelope will be sent to everyone who has not responded. The cover letter will restate the importance of participation and will urge the executive to take some time to complete and return the enclosed questionnaire. The questionnaire, and the business-reply envelope will be identical to that sent in the initial mailing. Assuming that the desired sample size has not been reached, a third phase of data collection will begin. As suggested by Dillman (1978), seven weeks after the first mailout, a new cover letter and a replacement questionnaire is sent by certified mail. DATA ANALYSIS A multi—step approach to data analysis will be adopted in this dissertation. First, potential non response-bias will be evaluated by comparing early and late respondents in terms of annual sales and number of full-time employees. Second, the descriptive statistics for all scale items will be calculated and potential nonnormality problems will be assessed. Third, the reliability of the constructs perta'ming to the environment, strategy, structure and performance will be evaluated and the measurement model will be purified. Fourth, a test of the research hypotheses will be conducted through correlation analysis, multiple regression analysis, structural equations modelling and analysis of covariance. More specifically, the intended tool of evaluation for the model and corresponding hypotheses (i.e., H1 through H10) presented in Part I of this dissertation is correlation analysis, regression analysis and structural equations modelling. In the event of poor model fit, the model will be disaggregated and the relationships between individr regression analy in the disaggre analysis and an Hipotheses 11 tested using re relationships) 123 between individual elements will be analyzed. Given the present form of the hypotheses, regression analysis is an appropriate method to test the strength and direction of each link in the disaggregated model. To test the hypotheses in Part II, multiple regression analysis and analysis of covariance are the intended tools of evaluation. In particular, Hypotheses 11 and 12 (regarding drivers of quick response and global sourcing) will be tested using regression analysis. Hypotheses 13 and 14 (regarding strategy-performance relationships) will be tested using analysis of covariance. A mult nonresponse l retailers on tht for all scale Third. the rel and perform: of the reset analysis, stn Amr longer in bi inability ()1- ifld tetumt As versus non time equii “is, or. nonreSpm comllare T. CHAPTER 5 Analyses and Findings A multistep approach to data analysis is adopted in this research. First, potential nonresponse bias is assessed by comparing responding retailers with nonresponding retailers on the basis of sales and number of employees. Second, the descriptive statistics for all scale items are calculated and potential nonnonnality problems are assessed. Third, the reliability of the constructs pertaining to the environment, strategy, structure and performance are evaluated and the measurement model is purified. Fourth, a test of the research hypotheses are conducted through correlation analysis, regression analysis, structural equations modelling and analysis of covariance. RESPONSE RATE & NONRESPONSE BIAS Among the 389 retailers contacted from Ward’s Business Directog, 19 were no longer in business (N=370). Out of the 370 retailing executives contacted, 56 indicated inability or unwillingness to participate. A total of 141 questionnaires were completed and returned. Thus, an overall response rate of 38.11 percent (141/370). As a preliminary step, nonresponse bias was assessed by comparing responding versus nonresponding retailers on the profile variables of annual sales and number of full— time equivalent (FTE) employees. While it is true that retailers can differ in many other ways, these were the only comparative data available for the responding and nonresponding groups. Moreover, it is a common practice in business research to compare such groups with respect to sales and number of employees. Table 5-1 reports the results of the t-test comparisons. Based on average annual 124 sales. retailers did not respon equivalent (FT those that did Table 5-1. As Characterisr \ \ AnnualS \ Number Full-Tin Employ: ; Ta retillers, Regarding Ptrcent W. 11.5 pew 125 sales, retailers that responded to the survey were not significantly larger than those that did not respond (t=2.47,p> .21). Similarly, based on average number of full-time equivalent (FTE) employees, retailers that responded were not significantly larger than those that did not (t=1.18,p> .79). Table 5-1. Assessment of Nonresponse Bias Characteristics Category Mean t—value Signif. Level Annual Sales Respondents 2847.4m 2.47 .213 Nonrespondents 2392. lm Number of Respondents 16.86k Full—Time 1. 18 .793 Employees Nonrespondents 15.81k SAMPLE CHARACTERISTICS Table 5-2 summarizes the major characteristics of the final sample of 141 retailers. U.S. ownership characterizes 131 (or, 95.4 percent) of these retailers. Regarding primary industry classification, 5.8 percent were general merchandisers, 10.1 percent were discount department stores, 22.3 percent were specialty apparel retailers, 11.5 percent were specialty hardline retailers, 6.5 percent were drug stores, 1.4 percent were convenier miscellaneous average numb centers. 0n 1 outlets and 0.2 averaged $2.5 number of str (FIE) emplo Regal quick respor resPoise, 31 not impleme To 2 each item . column, th the means with 30m Column ti examinari below 2p Coltnm1 tr 126 were convenience stores, 24.5 percent were department stores, and 18.9 percent were miscellaneous retail operations (e.g., accessories, sporting goods, gift/novelty). The average number of U.S. retail outlets was 306.8 and 3.7 warehouses or distribution centers. On the international level, the retailers had an average of 8.6 foreign retail outlets and 0.3 foreign warehouses or distribution centers. Annual sales of the retailers averaged $2,847.4 million and average organizational age was 50.3 years. The average number of stock-keeping-units (SKU) was 1264.2. The number of full-time equivalent (FT E) employees averaged 16,213. Regarding retail strategy implementation, 40.5 percent were implementing both quick response and global sourcing, 12.9 percent were implementing only quick response, 31.0 percent were implementing only global sourcing, while 15.5 percent were not implementing either strategy. DATA QUALITY AND RELIABILITY OF CONSTRUCTS To assess data quality, the means, standard deviations, kurtosis, and skewness of each item were computed; the information is reported in Appendix 5—1. In the first column, the variable names for each construct are listed. The second column contains the means from the seven-point scales used to measure how strongly respondents agree with some items and disagree with others (1 =strongly disagree, 7=strongly agree). Column three displays the standard errors associated with each variable. A close examination of the fourth column reveals that kurtosis for the majority of variables is below 2.00, a level beyond which nonnormality becomes a concern. Similarly, the fifth column reveals that the skewness of all items is smaller than the lower bound of concern Table 5-2. Sat .___’——— I Characterist Industry '\ Ownership \ Title of R Silalegy F Table 5-2. Sample Characteristics 127 Characteristic Cases Percent Industry general merchandiser 8 5.8 department store 34 24.5 discount department store 14 10.1 specialty apparel 31 22.3 specialty hardline 16 11.5 drug store 9 6.5 convenience store 2 1.4 miscellaneous 25 18.9 Ownership U.S. 131 95.4 Europe/Asia 6 4.6 Title of Respondent CEO, president 17 12.6 GMM, sr. vice-president 65 48.1 DMM, director 34 25.2 buyer, regional manager 19 14.1 Strategy Implementation quick response (QR) & 47 40.5 global sourcing (GS) QR only 15 12.9 GS only 36 31.0 neither QR or GS 18 15.5 of 5.00. Then variables used Each questionnaire 1971) was or dropping iter were found minimum at through 5-7 each constr correction C(instructs. Due PlinCiple c factor that elgtnttalue Variance( iOllow, Rt 5‘7). Ft organ-pm Variables high to 128 of 5.00. Therefore, the kurtosis and skewness of the items provide no indication that the variables used in this research are distributed nonnormally. Each construct in the proposed model was measured by multiple items in the questionnaire. To assess the reliability of the constructs, a coefficient alpha (Cronbach 1971) was computed for each construct. After purifying the measurement model by dropping items with low item—construct correlations, all recalculated coefficient alphas were found to be adequate. These levels of internal consistency are all above the minimum acceptable level of .600 (Nunnally 1967). The first column of Table 5—3 through 5-7 names the construct and then lists the corresponding items used to measure each construct. The second column reports the item-construct correlations after correction for attenuation. The last column reports the coefficient alpha for the constructs. Due to the many ways in which performance was operationalized in this study, principle components factor analysis with varimax rotation was used to identify the one factor that best represents the performance construct. Four factors emerged with eigenvalues greater than one. An eight—item factor explaining the largest percent of the variance (51.03 %) was selected for use as the performance construct in all analyses that follow. Reliabilities for all constructs are within acceptable limits (see Tables 5—3 through 5-7). For both strategy variables, coefficient alphas are greater than .800. All four Organizational structure variables exceed .700 and the three relationship structure variables also exceed .700. The performance scale is very reliable, as indicated by its high coefficient alpha of .909. Of all the constructs, the coefficient alpha for % environment ll of over .600 ( similar scales 1980. 129 environment uncertainty was least reliable at .639, but is still within the acceptable limit of over .600 (Nunnally 1967) and is within the range of other studies using the same or similar scales (e. g., Germain, Droge and Daugherty 1994; Brown Lusch and Koenig 1984). Table 5-3. Str ___———-— "_——— CONSTRUC items (VAl #prvH ‘1 o_ «.1- 000 l. ll. leCK REE . crossdr we pro . we pro . we lIIVt (QR . shippir we list . we hat (QT - WCSCT WHDI l‘l W611 we II: it GLOBAL weh ClOsr - alau WC 0111' 130 Table 53. Strategy Reliabilities CONSTRUCT item- construct Cronbach’s items (VAR NAME) correlation alpha QUICK RESPONSE STRATEGY .813 l. cross-docking is part of our operations (QR13) .392 2. we provide vendors with stock-out data (QR14) .614 3. we provide vendors with sales data (QR15) .639 4. we involve vendors with inventory replenishment processes (QR16) .636 5. shipping container marking is used (QR17) .421 6. we use advance shipping notice to our stores (QR18) .398 7. we have a quick response team that meets with vendors (QR21) .652 8. we scan transactions at the SKU level (QR22) .318 9. we make daily small lot shipments from warehouses/DCs to . retail outlets (QR23) .257 10. we use electronic data interchange (EDI) to order from suppliers (QR24) .478 11. we use electronic communications to replace retail outlet inventory from than held in warehouses/DCS (QR25) .455 GLOBAL SOURCING STRATEGY .862 1. we have a supplier selection process that extensively evaluates suppliers regardless of their country-of-origin (GS6) .404 2. close relationships with global suppliers is key to our strategy (GS7) .669 3. a large percentage of our merchandise is procured from outside the U.S. (GS8) .544 4. we have our own offices in foreign countries to oversee production (G89) .733 5. our buyers often travel overseas to evaluate and select suppliers (GSIO) .714 6. we produce most of our private label brands overseas (G51 1) .606 7. we have efficient global transportation and logistics systems (G312) .747 8. most of our global shipments preclear customs (GS13) .476 Table 54. Or; . ORGANTZATIT items (VAR NUSRATIO Participativc.c l. distributior 1. marketing/ 3. purchasing 4. long-term 5. interdepar eng: 6. tasklorce depa 7. liaisonpc dd PERFORMA 1- function: cost cont aria producti customs CUSIOIIIC .4 MAE...) OPERATE Level of ant lnvento Wareho electror retail u “Huber interim numb: numbc 9' P110111 10. in-stor 11- Pmdu 12. Suppl 13. retail 14- Warel L”Cl 0f : 1‘ DIOdr , (h 4; 1.2".) on 0‘ . . . . . . 131 Table 5—4. Organizational Structure Reliabilities ORGANIZATIONAL STRUCTURE CONSTRUCTS item- itcms (VAR NAME) construct Cronbach’s correlation alpha INTEGRATION .811 Participative, cross-functional committees in decision-making used in: l. distribution/operations strategy (0824) .598 2. marketing/merchandising strategy (0825) .520 3. purchasing/buying strategy (0826) .395 4 long-term planning (0827) -615 5. interdepartmental committees set up to allow departments to engage in joint decision-making (0828) .704 6. task forces or temporary bodies set up to facilitate inter- departmental collaboration on specific projects (0829) .588 7. liaison personnel whose job is to coordinate the efforts of several departments for a project (0830) -421 PERFORMANCE CONTROL -711 1. functional costs (e. g. operations selling) monitored (081) .452 2. cost controls monitored by fixing standard costs and analyzing variation (082) 370 3. productivity analysis (083) '540 4. customer satisfaction and follow-up (084) 502 5. customer service (e.g., no lines, rainchecks) '(085) 479 OPERATIONS DECENTRALIZATION 35“ Level of authority in decision-making: l. inventory control/order processing software (086) -471 2. warehousing technology (e.g., robotics, software) (087) .669 3. electronic data interchange (EDI) (088) 483 4. retail technology (e.g., P08 seaming technology) (089) '629 5. number of retail workers required (0810) '425 6. internal labor disputes (0811) '321 7. number of retail outlets to operate (0812) '588 8. number of warehouses/DCS to operate (0813) ~662 9. pricing policy (0514) ‘01 10. in-store promotions/advertising (0815) '398 11. product selection (0816) '397 12. supplier selection (0817) '441 13. retail location (0818) ‘458 14. warehouse/distribution location (0819) '459 SCHEDULING DECENTRALIZATION '834 Level of authority in decision-making: 1. production scheduling (e. g. programming deliveries) .701 (0820) 682 2. product delivery schedules from vendor (0321) ' 692 3. warehouse- distribution product receiving (0822) ' 581 4. store deliveries (0823) ' Table 5-5. R RELATIONS iICMVA HEXIBET 1. flexibilil SUP 2. the part chat 3. Wheat! out INFORMA 1. itiscx pa: 2. cxchar no 3. it is ex in‘ 4. i1 ise ch SOLIDA] 1. prob] n 2- 1116p r 3- the; \ 132 Table 5—5. Relationship Structure Reliabilities 3- the parties do not mind owning each other favors (811) RELATIONSHIP STRUCTURE CONSTRUCTS item- construct Cronbach’s item (VAR NAME) correlation alpha FLEXIBILITY .750 1. flexibility in response to requests for change characterize our supplier relationships (82) .620 2. the parties expect to be able to make adjustments to cope with changing circumstances (S3) .593 3. when unexpected situations arise, the parties would rather work out a new deal than hold each other to original terms (84) .771 INFORMATION EXCHANGE .860 1. it is expected that any information that might help the other party will be provided to them (85) .714 2. exchange of information takes place frequently and informally, not only according to a prespecified agreement (86) .679 3. it is expected that the parties will provide proprietary information if it can help the other party (87) .721 4. it is expected that we keep each other informed about events or changes that may affect the other party (88) .711 SOLIDARITY 702 1. problems that arise in these relationships are treated as joint rather than individual responsibilities (S9) .664 2. the parties are committed to improvements that may benefit the relationship, not only individual parties (810) 2;: Table 56. PI 11mm 1 . profit g return ( return ( quick r success success “I‘l‘a‘wkwg‘aw 133 Table 5-6. Performance Reliabilities PERFORMANCE CONSTRUCT item- factor Cronbach’s items (VAR NAME) correlation alpha FIRM PERFORMANCE .909 performance over past 5 years relative to competition in primary industry: 1. market share growth (P1) .822 2. sales growth (P2) .826 3. profit growth (P3) .728 4. return on investment (P4) .790 5. return on sales (P5) .795 6. quick response (P7) .538 7. successful response to changing conditions in environment (P20) .723 8. successful response to opportunities in environment (P21) .623 Table 5-7. Environment Reliability ENVIRONMENT CONSTRUCT item- . factor Cronbach’s item (VAR NAME) correlation alpha ENVIRONMENT UNCERTAINTY .639 1. many new products are introduced in our industry during a typical year (ENVl) .446 2. many new competitors appear in our industry during a typical year (ENV2) .458 3. competitor marketing practices change rapidly (ENV4) .440 Consi 3. this scene: techniques a To test the strategy imp path analys berween N particularly hypomesizt different 5: evaluatest cOIIIIiIst t( Controlled Variable. Simultane Will beb etplore ; bWeen 11 drivers( Then, v Win,e 134 HYPOTI-IESES TESTING Consistent with the manner in which the hypotheses were presented in Chapter 3, this section on-hypotheses testing will consist of two parts. In Part I, several different techniques are used to assess hypotheses set forth in Chapter 3 (i.e., H1 through H10). To test the proposed model of the antecedents and consequences of quick response strategy implementation (H1 through H9), correlation analysis, multiple regression and path analysis are employed. Correlation analysis simply assesses the relationship between two variables without controlling for the effects of other variables, and is particularly useful in exploring relationships between variables that were not hypothesized. It also helps in associating the results to those in past research that used different sets of variables. Multiple regression analysis, a more sophisticated technique, evaluates the impact of several independent variables on a given dependent variable. In contrast to simple correlation analysis, all other variables included in the model are controlled for when examining the relationships between the dependent and any one variable. Then, using structural equations modelling, the path model in entirety is simultaneously estimated. Decisions to support or refute the hypotheses (H1 through H9) will be based on these three different analyses. Finally, a two-group path model will explore any differences in the environment-strategy—structure portion of the model between high— and low-performing retailers (H10). In Part 11, multiple regression analysis is used to evaluate the internal and external drivers of quick response (QR) and global sourcing implementation (i.e., H11 and H12). Then, various combinations of strategy-performance relationships (i.e., H13 and H14) will be tested using analysis of covariance (ANCOVA). 00'! In thi significance for introduc provide prel model with into four di three indep analysis. ' or refute [1 between h Path Ana Pa 10 test (h generatec‘ Weighs) Ii “50d to j (t=or accepiai desirab] 135 PART I: HYPOTHESES TESTING QUICK RESPONSE(QR): ANTECEDENTS & CONSEQUENCES In this section, the findings to Hypothesis 1 through 10 are presented. First, the significance of the overall path model is introduced and briefly discussed. The reason for introducing the overall results of the path model at the onset is that the findings provide preliminary support for the soundness of the set of relationships proposed in the model within the context of the retailing industry. Second, the model is broken down into four distinct sets of hypotheses and results are discussed from the perspectives of three independent analytic techniques: correlation analysis, multiple regression and path analysis. Third, consistencies among the analyses are summarized and used to support or refute the relationships proposed in the model. Finally, any differences in the model between high— versus low-performing retailers are assessed. Path Analysis Path analysis, with the generalized least squares (GLS) criterion, was performed to test the overall path model, using the covariance matrix as the input. The EQS- generated estimates (Bentler 1991) of the path coefficients (i.e., the standardized beta weights) and the model fit statistics are presented in Figure 5-1. In line with recommendations of Bagozzi and Yi (1988), multiple indicators were used to judge the overall fit of the model. The X is 31.48 with 17 degrees of freedom (p=.017). The XZ/df ratio is 1.85, which is less than 2, and is therefore deemed acceptable. The Bentler~Bonett normed fit index is 0.988, which is well above the desirable value (0.90) indicated by Bentler (1990). This index is better than conventional Who. 136 £38m $9252 53 vamdnxocfi HE 0333980 o_.Vm H ... mwmdnxocfi :m connoccoz :oaoméoucom mo. Va n ...... $3185 .5 8882 accomeczecm 8. Va n a... Scene .2 n .3 .wm.xuc.a=um-_eu .88 8535:. an sodium >.:¢.:J_D_xwr~u .ehvw. w02<10xw z°:.<§¢0uz. mow. wmzkoamhw &_IwZO_.P<.._wE >Gw._. integration .274 2.631 a .293 quick response ---> performance control .383 3.904 a .431 quick response -—-> operations decentralization .286 2.832 a .274 quick response --- > scheduling decentralization -.025 ~.301 a -.033 environment uncertainty ---> integration -.018 -.173 a -.020 environment uncertainty --— > performance .074 .772 a .088 control environment uncertainty ---> o erations . -.092 -.950 a -.094 ecentralizatlon environment uncertainty —--> scheduling _ .043 .531 a .059 decentralization Antecedents of Relationship Structure quick response --— > information exchange .324 3.351 a .320 quick response ---> flexibility .219 2.023 a .184 quick response ~-- > solidarity .182 1.771 a .197 environment uncertainty ---> information .048 .519 a .050 exchange environment uncertainty ---> flexibility .208 2.013 a .186 environment uncertainty --—> solidarity -.039 -.407 a -.045 Antecedent of Quick Response environment uncertainty —--> quick response .204 2.317 a .217 a = not significantly different Chi Square=74.64, d.f.=49, p=0.011 across groups Bentler—Bonett Norrned Fit Index=0.974 Bentler—Bonett Nonnormed Fit Index = 0.987 Comparative Fit Index = 0.991 suggests tl substantin as well as can be to complete} SilllCilll’C QUlCl urnur multipl- tesporr combir analyst initiall Strat- hYpot lfllplt set 0 and: 152 suggests that the relationships hypothesized in the model are purely linear and that the substantive relationships found in the single-group path model exist for high performers as well as for low performers. The standardized path estimates and significance levels can be found in Table 5-18. As is evident from the table, QR strategy implementation completely mediates the relationship between environment uncertainty and organizational structure for high-performing retailers as well as for low-performing retailers. PART II: HYPOTHESES TESTING QUICK RESPONSE & GLOBAL SOURCING: DRIVERS & PERFORMANCE IMPLICATIONS In this section, the findings to Hypothesis 11 through 13 are presented. First, multiple regression analysis is used to evaluate the internal and external drivers of quick response (QR) and global sourcing implementation (i.e., H11 and H12). Then, various combinations of strategy—performance relationships (i.e., H13 and H14) are tested using analysis of covariance (ANCOVA). Both environment uncertainty and retailer size are initially included in the model as covariates. Strategy Drivers In Chapter 3, several drivers of quick response (QR) and global sourcing were hypothesized (i.e., H11, H12). Using multiple regression analysis, QR strategy implementation and global sourcing strategy implementation were each regressed on a set of fourteen internal and external antecedent dimensions. The regression beta weights and significance levels for all fourteen dimensions on QR, and then global sourcing, are reported it Qt variance i 73.4 perc technolog p=.060) p= .019) only (B= uncerta'n model it did not orient-at being a over SL1 153 reported in Tables 5-19 and 5-20. Quick Response Drivers. The R2 for the regression model, or percent of variance in QR implementation explained by the fourteen hypothesized antecedents, was 73.4 percent and the model was highly significant (p=.001). Table 5-19 shows that technological sophistication (B=.182, p=.001), marketing orientation (B=.003, p = .060), differentiation orientation (B = .512, p = .001), risk—taking orientation (B = .237, p=.019), receptiveness to change (B=.114, p=.063), and having domestic operations only (B = .048, p= .098) are internal drivers of QR strategy implementation. Environment uncertainty (B=.055, p= .094) was the only external driver included in the regression model found to significantly influence quick response. Internal and external factors that did not have a significant impact on QR implementation include: quality control orientation, cost-reduction orientation, being first to adopt new products/technologies, being an industry leader, having a reliance on domestic sources of supply, having power over suppliers and stable product demand. Table 5-l INTEF techno? go marke‘ M differt risk-t2 fust t prodt indus 18081: \ domt .lel-el Q S / ’U 0 5: Ila—T 154 Table 5—19. Regression - Drivers of Quick Response Regression Significance Beta Level Weight (p= ) INTERNAL technological sophistication .182 .001 quality control orientation —.041 .181 marketing orientation .003 .060 cost-reduction orientation .091 .182 differentiation orientation .512 .001 risk-taking orientation .237 .019 first to adopt new .202 .395 products/technologies industry-leader —.035 .364 receptive to change .144 .064 domestic operations only .048 .098 reliance on domestic sources of -.074 .263 supply EXTERNAL environment uncertainty .055 .094 power over suppliers .029 .135 stable demand for products -.041 .385 Model R2=.734 Model F=4.53 Model p=.001 §_l variance anteceder 5-20 sht orientatit a reliano of globa was lou over su influent orientat an indt 155 Global Sourcing Drivers. The R2 for this regression model, or percent of variance in global sourcing implementation explained by the fourteen hypothesized antecedents, was 74.6 percent and this model was also highly significant (p= .001). Table 5—20 shows that technological sophistication (B= .305, p= .001), quality control orientation (B= .162, p = .011), cost-reduction orientation (B= .610, p = .001) and having a reliance on foreign sources of supply (B=.108, p= .083) are significant internal drivers of global sourcing implementation. No external driver included in the regression model was found to significantly influence global sourcing -- environment uncertainty, power over suppliers or stable product demand. Internal factors that did not significantly influence global sourcing implementation include: marketing orientation, differentiation orientation, risk-taking orientation, being first to adopt new products/technologies, being an industry leader, being receptive to change, having overseas operations. Table II la la la HZ II o 9 l [Tin-1’0"!!!” 156 Table 5-20. Regression - Drivers of Global Sourcing Regression Significance Beta Level Weight (p= ) INTERNAL technological sophistication .305 .001 quality control orientation .162 .011 marketing orientation —.021 .492 cost—reduction orientation .610 .001 differentiation orientation -.024 .345 risk—taking orientation .095 .152 first to adopt new .089 .498 products/technologies industry-leader .092 .212 receptive to change .013 .448 overseas operations -.005 .334 reliance on domestic sources of -.108 .083 supply EXTERNAL environment uncertainty -.015 .216 power over suppliers —.O65 .254 stable demand for products .118 .158 Model R2=.746 Model F=7.33 Model p=.001 envirom size w: lberefo hypoth- compel bt gret (i.e., l Strateg perfor adjust adjust for it imple Detfo Strat- 157 Strategy-Performance Findings Two dominant combinations of strategy-performance relationships (i.e., H13 and H14) are tested using analysis of covariance (ANCOVA). Both firm size and environment uncertainty were included in the analysis as covariates; however, only firm size was found to significantly influence the strategy-performance relationships. Therefore, in the analyses that follow, firm size Was the designated covariate. QR and Global Sourcing as Competing Strategies. In Chapter 3, it was hypothesized that in the event that quick response (QR) and global sourcing (GS) are competing strategies, the performance of retailers implementing only QR strategies will be greater than the performance of retailers implementing only global sourcing strategies (i.e., H13). To test this hypothesis, the sample was divided into two groups on the basis strategy implementation. Analysis of covariance (AN COVA) on firm performance was performed, with firm size as the designated covariate. In other words, the covariance adjusted performance means of retailers implementing only QR were compared to the adjusted means of retailers implementing only GS. As revealed in Table 5—21, the mean for those retailers implementing only QR is significantly larger (X=4.48) than those implementing only GS (X=3.81). Therefore, Hypothesis 13 is supported; the performance of retailers implementing only (or primarily) QR strategies will be greater than the performance of retailers implementing only (or primarily) global sourcing strategies . Table 5-2 QR str GS str- hypoth strateg be gre QR or again the c Signit Ther- unpl- Stat 158 Table 5—21. Analysis of Covariance (ANCOVA): QR strategy vs. GS strategy Firm Performance significance LSMEANS (p= ) ll QR strategy only 4.48 .055 ll GS strategy only 3.81 covariate = size Model R2=.183 Model F=5.16 Model p= .010 QR and Global Sourcing as Complementagy Strategies. It was further hypothesized that if quick response (QR) and global sourcing (GS) are complementary strategies, the performance of retailers implementing hybrid strategies (QR and GS) will be greater than the performance of retailers implementing only single strategies (either QR or GS) (i.e., H14). Analysis of covariance (ANCOVA) on firm performance was again performed, with firm size as the designated covariate. As revealed in Table 5-22, the covariance adjusted mean for those retailers implementing a hybrid strategy is significantly larger (X=4.62) than those implementing a single strategy (X=4.02). Therefore, Hypothesis 14 is supported; the performance of retailers simultaneously implementing both QR and GS strategies is greater than retailers implementing only QR strategies or GS strategies. Table 5-2 single (QR 0 hybrid he unplic follou 159 Table 5-22. Analysis of Covariance (ANCOVA): single vs. hybrid strategies Firm Performance significance LSMEANS (p= ) single strategy 4.02 .006 (QR or GS only) hybrid strategy 4.62 (QR and GS) covariate = size Model R2=.163 Model F=8.75 Model p=.001 SUNIMARY Table 5-23 summarizes the overall results of the hypothesis testing. The implications of the findings presented in this chapter are discussed in detail in the following chapter. Table 5-2 H10 160 Table 5-23. Summary of Results Hypothesis Description of Relationship # of # of Conclusion Set Expected Supported Effects Effects H1 Main effects of QR implementation 4 3 strongly on organizational structure supported H2 Main effects of QR implementation 3 3 strongly on relationship structure supported H3 Main effect of environment on QR 1 1 strongly implementation supported H4 Main effects of environment on 4 0 not organizational structure supported H5 Main effects of environment on 3 2 supported relationship structure H6 Main effect of QR implementation 1 1 strongly on performance supported H7 Main effect of enviromnent on 1 0 not performance supported H8 Main effects of organizational 4 2 supported structure on performance H9 Main effects of relationship 3 1 supported structure on performance H10 Effect of performance split on the 6 0 not relationships between environment, supported strategy and structure (H1-H6) H11 Main effects of environmental 14 7 supported drivers on QR implementation H12 Main effects of environmental 14 4 supported drivers on GS implementation H13 Performance effects of competing l 1 strongly strategies (QR vs. GS) supported H14 Performance effects of hybrid (QR 1 1 strongly & GS) vs. single strategies (QR or supported GS) ( that are delineat practitit an imp enviror perforr stratcg themes from t raised discus r(flail Part ‘ their prop Strar Figt CHAPTER 6 Discussion and Conclusions Conclusions from this research offer a number of important insights into issues that are of significant managerial as well as theoretical interest. First, the findings help delineate quick response (QR) strategy for both the academic community and practitioners in terms of environmental antecedents and structural consequences. Second, an important link between QR strategy and performance is substantiated. Third, environmental drivers of both global sourcing and QR are revealed. And finally, performance implications of QR and/or global sourcing provide interesting insight into strategy—performance relationships in retailing. In the following sections, five major themes and associated substantive conclusions that emerged from the study are discussed from two perspectives: theoretical and managerial. Each theme addresses issues first raised in the research questions posed in Chapter 1. Limitations of the study are discussed and directions for future research are suggested. ANTECEDENTS & CONSEQUENCES OF QUICK RESPONSE Quick Response (QR), although not well understood, is revolutionizing the U.S. retail industry. In an effort to gain a broader understanding of this time-based strategy, Part I of this dissertation looked at factors that cause and accompany quick response and their implications on retailer performance. In particular, a theoretical model and several propositions were developed and tested regarding the relationships among environment- strategy-structure-performance as they pertain to QR in the U.S. retailing industry. Figure 6-1 presents a summary of the findings revealed from testing the hypotheses set I-(ZO. 162 KEV-cocafim guafimnsm mo bean—am .70 953mm _ >._..K._.:_o.xm4u moz0mh._.Z_<._.mw02 PZwEZOmsz forth in diagram follow view r with] organ the It theor andl Inar Fm 199 163 forth in Part I. Only the relationships found to be significant have been included in the diagram. From the pattern of significant relationships, three major themes are identified. Theme 1: The classical "strategic management" stance upon which the model was based, that strategy engenders structure, was upheld in the context provided by this study. Quick Response (QR) implementation was found to increase the following dimensions of organizational structure: integration, performance control and operations decentralization. QR implementation was also found to increase the following dimensions of relationship structure: information exchange, flexibility and solidarity. Chandler (1962) observed that major changes in organizational strategy were followed by changes in structural form. Since then, many have confirmed this dominant view that structure follows strategy. Most studies of strategy-structure relationships are within the context of internal organizational structure. In addition to examining organizational structure, in this study, the scope of structure was broadened to include the relationship structure of retailers with their suppliers. In the following paragraphs, theoretical rationale and managerial implications for the findings between QR strategy and both organizational and relationship structure are discussed. QR Strategy Implementation Increases Integration Just as increased integration among purchasing, engineering, production, materials management, marketing and distribution is often found under JIT exchange (e.g., Frazier, Spekman and O’Neal 1988; Giunipero and Law 1990; Natarajan and Weinrauch 1990; Germain, Droge and Daugherty 1994), integration among distribution functions, marketir function resouru (Phillip rarianc commi liaison brougl impler that in atint accc ltus film 164 marketing/merchandising functions, buying functions and long-term strategy planning functions were found to exist as a result of QR implementation. Reduction in slack resources (particularly time and inventory), the desired outcome of QR partnerships (Phillips and Droge 1995a), "increases the need for tight interdepartmental linkages as variance in the output of one department cannot be absorbed by that of another" (Germain, Droge and Daugherty 1994, p.472). For example, interdepartmental committees may be set up to allow departments to engage in joint decision—making, or liaison personnel whose job is to coordinate the efforts of several departments may be brought in to more efficiently execute QR exchanges. In other words, successful QR implementation mandates integrative mechanisms and teamwork within the company so that implementation problems and opportunities associated with quick response are looked at in total, versus unique to each different department. R Strate Im lementation Increases Performance Control Formalized performance control was found to increase with the implementation of QR. There are two likely reasons. First, because QR retailers have reduced overall inventory levels, the process of information replacing inventory requires intensive controls of inputs/outputs as large fluctuations in demand cannot be filled with the minimal, if any, safety stock. Second, intensive managing of the elements that accompany QR partnerships (e. g. , new technology and processes, long-term partnerships, trust) requires intensive controls. For example, with QR, retailers are forced to monitor functional costs, productivity and customer satisfaction based on the following rationale: QR retailers "are asked to simultaneously provide better service and quality products at lower t eventut Under for un- implt conu resp- peop CXaI det rel 165 lower costs, and if they do not meticulously manage their own processes, they will eventually absorb the costs themselves" (Germain, Droge and Daugherty 1994, p.473). Under QR, the primary mission of retailers does not change. They are still responsible for understanding customers demands, analyzing sales trends, merchandising products and maintaining the correct image in the marketplace. But with QR, the retailers are also more accountable for managing financial, bottomline profitability (Chain Store Age Executive 1991). QR Strategy Implementation Increases Qperations Decentralization Operations decentralization was also found to increase with quick response (QR) implementation. Because QR is a "time-based" strategy, requiring company-wide commitment to continuous improvement and change, it requires authority and responsibility to be pushed down the hierarchy so "how to " decisions can be made by the people most in touch with the marketplace (Chain Store Age Executive 1991). For example, under QR, decisions regarding inventory control, technology adoption, pricing, number of workers required, product and supplier selection, and location are best made by functional managers. This does not mean that upper management abdicates its responsibility. Rather it means that management must recognize the potential and develop the skills of subordinates to allow this increased delegation of responsibility (Chain Store Age Executive 1991, p.9B). Contrary to expectations, QR strategy implementation did not increase scheduling decentralization. Compared to operations decentralization, scheduling decentralization refers to "when" things are done (e. g., timing of information and product flows). After going t reveale largely signifrt always traditi- regard store - In 0th (tradi of W] Print that clip] afr be- 166 going back and reviewing univariate statistics to lend insight into this inquiry it was revealed that, compared to operations decisions, authority over scheduling decisions were largely decentralized at the onset. It is likely that the reason why QR does not significantly influence scheduling decentralization is that buyers and store managers have always typically made these scheduling decisions, whether they are operating under a traditional mode or a QR mode. Regardless of their chosen mode or strategy, decisions regarding production scheduling, product deliveries, warehouse product receiving and store deliveries in today’s retailing environment are largely set up on a cue, or a priori. In other words, when inventory levels reach a prespecified minimum, orders are written (traditional mode) or automatic replenishment processes (QR mode) are initiated, either of which do not require centralized decision-making. In sum, scheduling decisions are primarily decentralized regardless of QR implementation. This finding is the antithesis of both that originally hypothesized in this thesis and that found under JIT selling (Germain, Droge and Daugherty 1994), and is somewhat puzzling given the critical importance of "timing" in QR. For these reasons, further exploration of decentralization dimensions within a retailing context is warranted and is a fruitful area for future research. QR Strategy Implementation Increases Information Exchange Information exchange was found to increase with quick response (QR) implementation. Information exchange between retailers and vendors is expected to become increasingly important in successful QR partnerships as the relationships mature for a combination of reasons. First, increased levels of information exchange enable the is expe will be QR. e accord envirt inforr There 167 trust and loyalty required for long-term QR partnership success. More specifically, it is expected that any information (including proprietary) that might help the other party will be provided to them in a timely manner. Second, given the tirne—based nature of QR, exchange of information must take place frequently and informally, not just according to a prespecified agreement. In other words, today’s dynamic retailing environment and the constantly changing consumer needs demands efficient and accurate information exchange by the QR partners if the relationship is to evolve successfully. Therefore, the need for information exchange not only occurs at the onset of the partnership, but even more so as the relationship matures. QR Strategy Implementation Increases Flexibiligg Time is the new enemy in retailing because the longer the forecasting period, the less likely merchandise will meet customer demand (Chain Store Age Executive 1991). As a result, flexibility was found to increase with QR implementation largely because it represents insurance that the relationship will be subject to good—faith modifications if a particular practice proves detrimental in the light of changed circumstances. More specifically, "quick response is a strategy of customer service that uses technology to make possible an industry pipeline so flexible and efficient that, ideally, retailers can forecast today what they will sell tomorrow and have the merchandise in the stores, on time, in the right quantities, colors, sizes and styles" WW 1991, p.4B). Achieving this timely response to consumers’ requests requires utmost flexibility between retailers and their suppliers. For example, when unexpected situations arise, the parties need to be flexible enough to work out a new deal rather than holding each other to the . changr suppli main partrr futur QR mai crir ber CO( eq- 1hr 168 to the original terms of the contract. Thus, because consumers needs, wants and desires change frequently, a flexible working relationship under QR between retailers and suppliers is essential. QR Strategy Implementation Increases Solidarity Solidarity, a bilateral expectation that a high value is placed on relationship maintenance, was also found to increase with quick response (QR) implementation. A QR partnership is a mutually cooperative relationship and is based on commitment regarding future exchanges, very different from the traditional, adversarial relationship. Because QR is based on this new type of relationship between retailers and suppliers, the partnership requires new business practices, starting with a cooperation that stems from a knowledge of each other’s business objectives, opportunities and constraints m Store Age Executive 1991). Large investments (e. g., in technology, equipment, time) and long—term partnerships require that a high value be placed on relationship maintenance. The ability to treat problems that arise as joint rather than individual is critical. Similarly, retailers and their suppliers must be committed to improvements that benefit the partnership as a whole, not just the individual interests. Therefore, as these cooperative transactions are repeated through time, and if they meet basic norms of equity and efficiency, the parties may feel increasingly secure in committing more of their available resources and expectations in subsequent cycles of cooperation (Ring and Van de Ven 1994). Ther the r strut betw as a p: Germ only 1 inabil there custo lose and : or b infer httv bett- buft pro- avi- Th1 169 Theme 2: Quick Response (QR) strategy implementation completely mediates the relationship between enviromnent uncertainty and organizational structure. QR strategy implementation partially mediates the relationship between environment uncertainty and flexibility. Models of relationships between strategy and structure often include uncertainty as a predictor of strategy, structure or both (e.g., Miller and Droge 1986; Prescott I986; Germain, Droge and Daugherty 1994). In this research, environment uncertainty was only found to directly influence strategy. For the retailer, uncertainty arises largely from inabilities to precisely gauge product demand. That is, uncertainty surrounds demand if there is not enough time to receive merchandise from suppliers that is demanded by customers. As a result, retail buyers could underestimate the popularity of the style and lose potential sales or they could overestimate sales and generate excessive inventories and subsequent markdowns. QR allows the retailer to order merchandise on a weekly or biweekly basis. Thus, buyers can make use of more recent market exposure and information, allowing them to better estimate sales. The risk of a large difference between expected and actual sales is significantly reduced, and orders can be placed to better reflect actual market conditions (Maltz and Srivastava 1994). In sum, QR helps buffer the retailer from uncertainty by improving overall customer service, quality and productivity. The net effect is that a retailer confronting an uncertain environment more avidly seeks the competitive security that a time-based strategy, such as QR, offers. Thus, one way retailers are confronting environment uncertainty is through the implementation of time-based strategies. Through indirect paths, environment uncertainty was found to influence dimern both c contin uncerr are si UIlCCl' implt perfc UIICC copi are ‘ med org: the 9.11)] 311) lin- ret 170 dimensions of both organizational structure and relationship structure. The mediator in both cases was QR strategy implementation. Mediation is one type of "fit" definition in contingency theory research. Complete mediation occurs if the direct effects of uncertainty on structure are nonsignificant and the indirect effects through QR strategy are significant. Partial mediation occurs if both the direct and indirect effects of uncertainty on structure are significant (Venkatraman 1986). While uncertainty in the environment leads to increased QR strategy implementation, and QR strategy implementation leads to increased integration, performance control and operations decentralization (i.e. Theme 1), environment uncertainty does not lead directly to increased integration, performance control or decentralization. This simply means that in an uncertain environment, QR is a strategic coping mechanism and the effects of environment uncertainty on organizational structure are indirectly realized through quick response implementation. Hence, QR completely mediates the relationship between environment uncertainty and the three dimensions of organizational structure. These findings should be encouraging to retail managers given the determination that QR strategy implementation can buffer the retail organization from environmental uncertainty. Looking at the effect of uncertainty on relationship structure, it appears that environment uncertainty directly and indirectly (through QR) affects retailer-supplier flexibility. Hence, QR partially mediates the relationship between environment uncertainty and flexibility. This finding suggests that when faced with uncertainty, retailers seek security via flexible supply chain relationships, QR or otherwise. As for information exchange and solidarity, there is no evidence to suggest that they are utilized merely impl is (p reta sell? incr situ Mc ret 6X] 171 merely as a response to uncertainty. Theme 3: Quick Response (QR) strategy implementation was found to increase retailer firm performance. In addition to the direct effect of QR on performance, the effect was also mediated by two dimensions of organizational structure (i.e. , performance control and scheduling decentralization) and one dimension of relationship structure (i.e. , flexibility). That is, indirect effects of QR on performance exist through control, scheduling decentralization and flexibility in addition to the direct effects of QR on performance. R Strate Im lementation Increases F inn Performance One of the most important findings of this study was that quick response (QR) implementation had a direct and positive effect on retailer performance. The rationale is quite simple, although multidimensional. Under QR, inventory is received by the retailer as needed, affording the retailer the opportunity to convert storage space into selling space. Similarly, QR lowers safety stock requirements for retailers, thereby increasing merchandise turnover (Maltz and Srivistava 1994). Fewer out-of-stock situations results in a reduction in missed sales and an increase in customer service. More specifically, QR strategy implementation was most likely found to directly enhance retailer performance for several reasons, including-«fewer markdowns, lower operating expenses, higher turns, increased selling space and improved customer service (Phillips and Droge l995a)--all contributing to increased sales and profits. Additional effects of QR on performance were mediated by performance control, scheduling decentralization and flexibility. Scheduling decentralization leads to increased performance. The likely explanation is that because decision-makers are hierarchically closer event perfo QR i love CV61? like? wor reta 172 closer scheduling decisions, they are theoretically able to better make decisions, which eventually leads to better performance. Driven largely by QR implementation, increased performance control would lead to performance enhancement due simply to the more intensive managing and control over the new elements that accompany QR processes. QR retailers "are asked to simultaneously provide better service and quality products at lower costs, and if they do not meticulously manage their own processes, they will eventually absorb the costs themselves" (Germain, Droge and Daugherty 1994, p.473). Similarly, driven largely by QR implementation, increased retailer-supplier flexibility likely enhanced performance because QR is based on "timely" exchanges. In other words, the ability to respond to rapidly changing circumstances (i.e., flexibility) enables retailers to satisfy consumer demand while keeping costs (i.e., inventory and time) at a minimum. DRIVERS & PERFORMANCE IMPLICATIONS A retailer’s competitive strategy is to a large extent realized through the deployment of its overall assortment. And while the today’s consumer wants it all —- price, quality, and timely delivery -- quick response (QR) and global sourcing each provide different facets to the overall assortment. As discussed in Chapter 1, these two strategies are among the most visible advances in retail sourcing practices in recent years. Because of their potential impact on the retailer’s competitive position, these practices have changed the way firms view sourcing activities -- elevating sourcing to a position of strategic importance. Regardless of the excitement over these strategies, relatively little is known about what causes retail firms to engage in quick response (QR) or global sourc impo prelii llIlplt and repo (11'th of n WCl't SOlll Sev prt glt 173 sourcing. In Chapter 1, the origin of quick response (QR) was attributed to the threats imposed by global sourcing. So as to provide a context for the discussion that follows, preliminary research revealed that 40.5 percent of the retailers included in the study were implementing both QR and global sourcing, 12.9 percent were implementing only QR, and 31.0 percent were implementing only global sourcing, while 15.5 percent were reportedly not implementing either strategy. Part II of this dissertation looked at potential internal and external environmental drivers of these two strategies and examined performance implications. The performance of retailers implementing only QR versus retailers implementing only global sourcing were compared. Further, the performance of retailers implementing both QR and global sourcing were compared against retailers implementing only one of these strategies. Several interesting conclusions, as captured by two major themes, emerged. Theme 4: Quick Response (QR) results largely from a corporate mentality of "differentiation" and global sourcing results largely from a corporate mentality of "cost leadership". Environments can and should influence organizational strategy. In this preliminary inquiry into what inspires retailers to implement quick response (QR) and global sourcing strategies, several logical antecedents emerged. Factors found to be environmental drivers of QR, in order of importance, include: differentiation orientation, risk-taking orientation, technological sophistication, receptiveness to change, environment uncertainty and having primarily domestic operations. Similarly, factors found to be drive techr of St SOllll expr glob ofs rese 174 drivers of global sourcing, in order of importance, include: cost-reduction orientation, technological sophistication, quality control orientation and reliance on foreign sources of supply. The only factor found to influence both QR implementation and global sourcing implementation was technological sophistication, or the extent to which certain technologies have been adopted by their company (e. g. , robotics, POS scanning, in-store expert systems). A rather interesting finding is that quality control orientation influenced global sourcing implementation and not quick response. This may suggest that retailers implementing QR sacrifice quality control for more timely merchandise. The possibility of such tradeoffs was not a subject of this thesis but is an interesting avenue for future research. Perhaps the most important conclusion regarding strategic drivers is that QR implementation is largely driven by a corporate mentality that stresses "differentiation" and GS implementation is largely driven by a mentality that stresses "cost reduction". GS offers the retailer a low—cost alternative to domestic sourcing while QR is a strategy based on the cutting-edge concept of information replacing inventory in the supply chain. It can be argued that QR is primarily a differentiation strategy because having merchandise in the stores when consumers want it "is something that is perceived industrywide as being unique" (Porter 1980, p.37). This is not to say that QR retailers are not concerned with costs. According to Porter (1980), "a differentiation strategy does not allow the firm to ignore costs, but rather they are not the primary strategic target". Thus, these findings are consistent with Porter’s definitions of cost leadership and differentiation and are useful in explaining the strategy—performance relationships discussed in the following section. tier rel: 175 Theme 5: While quick response (QR) and global sourcing both lead to enhanced retailer performance, retailers implementing only QR outperform retailers implementing only global sourcing. Further, retailers simultaneously implementing QR and global sourcing outperform those implementing only one of the strategies. QR is expected to enhance retailer performance for several reasons -— including fewer markdowns, lower operating expenses, higher turns, increased selling space and improved customer service (Phillips and Droge 1995)—~all contributing to increased sales and profits. Global sourcing’s competitive impact extends beyond cost containment to influence performance along the competitive dimensions of quality, dependability, flexibility and innovation (Hayes, Wheelwright and Clark 1988). Because developing a better understanding of the strategy-performance relationship is an "incremental process" (Cappel et al. 1994, p.211), this dissertation limits itself to discussing two scenarios and their performance implications. First, the performance implications of implementing either quick response or global sourcing were examined. Second, the performance implications of implementing a hybrid strategy (i.e., QR and GS) versus a single strategy (i.e., QR or GS) were examined. Quick Response and Global Sourcing as Competing Strategies While it seems logical for retailers to desire integrating these two strategies to gain the benefits from each, the more traditional view is that these two approaches to strategic purchasing are considered to be inherently incompatible —- one suggests movement towards zero-inventories and one does not. The most basic conflict is that of buyer-supplier proximity (Fawcett and Birou 1992). In this study, while 31.0 percent oftb impl as c sour con dis: Por son is] 176 of the retailers were implementing global sourcing and not QR, only 12.9 percent were implementing only QR and not global sourcing. This more traditional view that global sourcing and QR are strategic alternatives is consistent with Porter’s work (e.g., Porter 1980,1985). In Porter’s terminology and as confirmed in this research, QR is characteristic of a differentiation strategy and global sourcing is characteristic of a cost—leadership strategy. While many aclmowledge that a common outcome of successful QR implementation is cost-reduction, it is argued in this dissertation that QR is primarily a differentiation strategy for the following reason. Porter’s (1980) definition of differentiation is that the "offering of the firm creates something that is perceived industrywide as being unique" (p. 37) and QR’s end result is having merchandise in the stores when consumers want it, unarguably an outcome perceived to be unique throughout the retailing industry. This is not to say that QR retailers are not concerned with costs. According to Porter (1980), "a differentiation strategy does not allow the firm to ignore costs, but rather they are not the primary strategic target" (p. 37). Porter argued that with the exclusive pursuit of a single generic strategy, be it cost leadership or any of a variety of differentiation approaches, businesses can realize significant competitive advantages over their rivals. In Porter’s view, being "stuck in the middle" should be avoided. Further, in retailing, it has been argued that retailers competing primarily with a differentiation strategy should outperform those competing on a low-cost basis (Wright, Hotard, Kroll and Tanner 1990). This contention was confirmed in this research. In particular, those retailers implementing only QR, largely a differentiation strategy, outperformed those retailers implementing only GS, a cost- redr COD adv ofit 177 reduction strategy. There are two likely reasons for this finding. First, retailers competing primarily with the differentiation strategy (i.e., QR) obtain a competitive advantage, in spite of their higher cost structures, since their unique more timely offerings allow the alternative of charging higher prices and/ or taking fewer markdowns. Second, in the "mutually exclusive" world of Porter and given that QR is believed to have emerged in response to offshore sourcing, it seems logical to find that for retailers to initiate a QR strategy, the perceived advantages must outweigh other strategic options (e.g. global sourcing). Quick Response and Global Sourcing as Complemen_tar_y Strategies Some argue that competing on a combined approach of differentiation and low cost may be beneficial because the differentiated outputs (products and/or services) have the advantage of higher pricing, while emphasis on low costs maintains costs in comparison to competitors (i.e., Miller 1992). Past research indicates that the result of competing with a combination of approaches may be associated with higher profitability and larger market shares (e.g., Miller and Friesen 1980; Phillips, Chang and Buzzell 1983; Jones and Butler 1988; Wright et al. 1990). Extending the more traditional notion that QR strategy and global sourcing are strategic alternatives, there is evidence in the trade press (e.g., Sungchil 1994-QR; Vickery 1989—JIT) that the two strategies coexist in a manner advantageous to the retailer. In this study, the majority of retailers (40.5 percent) were found to be simultaneously implementing both QR and global sourcing, compared to 30.1 percent implementing global sourcing only and 12.9 percent implementing QR only. COII ICSi 0111 fur 178 Cappel, Wright, Wyld and Miller (1994) suggest that retailers employing a combination low cost/differentiation strategy will outperform those competing solely on the basis of low cost or differentiation. This contention was also confirmed in this research. That is, retailers implementing both quick response and global sourcing outperformed those retailers implementing either quick response or global sourcing. In summary, although the strategy—performance link is one of the most fundamental and important relationships in business, there is little consensus over what strategy combinations offer the largest performance rewards. This study lends support to the school of thought that argues hybrid strategies lead to enhanced performance (e.g. , Miller 1992; Wright et al. 1990; Jones and Butler 1988; Phillips, Chang and Buzzell 1983; Miller and Friesen 1980). Specifically, the performance of retailers implementing a hybrid QR—global sourcing strategy exceed the performance of retailers implementing a single one of these strategies. Further, the performance of retailers implementing only QR exceed the performance of those implementing only global sourcing. DIRECTIONS FOR FUTURE RESEARCH Directions for future research can be derived from three different sources. First, they can be derived from limitations realized from the design and execution of the current study. Second, they can be generated from the study of additional relationships included in the study, but not hypothesized. Finally, they can be logical extensions of the completed research. Lin que the ind 179 Limitations of Current Study First, while the present study requested that respondents answer many of the questions with reference to specific time frames (e. g., over the last 5 years, currently), the research design is not longitudinal, and there is no review of whether the respondents , indeed took into account the specified time frames when they responded to the questions. Future research should consider adopting a longitudinal design. Second, it should be mentioned that for the model representative of the antecedents and consequences of QR, the following sequential ordering was assumed to exist: environment uncertainty, QR strategy, organizational and relationship structure, performance. Although this sequence is a classic one, other sequences are not implausible. For example, both organizational structure and relationship structure could influence QR strategy implementation, and QR strategy implementation could conceivably lead to perceptions of increased uncertainty in the enviromnent. Without longitudinal data, these possibilities cannot conclusively be ruled out. Third, the sample size of this study is moderate, which primarily resulted from the small size of the sampling frame. After specifying a minimum sales figure of $100 million annually, there were only approximately 400 retailers eligible for inclusion. Future research may direct more resources to data collection so as to increase the sample size by including smaller firms. The relationships among key constructs may be different in smaller firms because, for example, size has been consistently shown to affect Organizational structure. Finally, the reliability of environment uncertainty, although within acceptable “MS, is a possible cause for concern. The key question in terms of future research 180 implications is: Are the managerial implications from this study (and future studies) potentially biased due to the relatively low reliability of the model’s only truly exogenous variable -— environment uncertainty? A question of this nature can be addressed on two different levels: conceptual and empirical. Empirically, a number of issues can be examined for research focusing on environmental aspects. First, the variance of environment uncertainty can be examined relative to the variance of other variables in the model to determine if a transformation would bring a comparatively large variance within range. Based on post hoc analyses in this research, such a corrective situation is not suitable based on examination of the input variance/covariance matrix. Second, analyses could be performed to determine if the study’s main results about strategy, structure, performance hold if environment uncertainty is excluded from the model. In this research, the relationships between strategy, structure and performance were virtually the same when the model was reanalyzed without the inclusion of environment uncertainty. Third, environment hostility could be substituted for environment uncertainty and the model reanalyzed. This raises a curious question regarding the appropriateness of using an environment uncertainty scale in a retail setting. The context of its use, to date, has primarily been manufacturing. It is possible that in retailing, environment uncertainty may simply be viewed as a " constant". For instance, environment uncertainty scales tap rate of change, which most leading edge retailers probably consider a given in the 19905. Therefore, scales such as environment hostility may be more appropriate given the generally uncertain environment in which all retailers operate. From a conceptual level, the effect of environment uncertainty on strategy, 5111 ml As urr 5hr Se re At av ct 181 structure and performance is less bothersome. Simply, managers have little, if any, direct influence over environment uncertainty, as they do with the other variables in the model. As a result, managerial implications are not substantively affected by environment uncertainty, regardless of its level of reliability. However, future research in retailing should be aware of the possible ramifications of using environment uncertainty scales. Several methodological suggestions have been given, based on the findings from this research, for future research involving environmental antecedents. Additional Relationships Several relationships, in addition to the ones studied in this dissertation, are viable avenues for future research. I First, the main focus of this dissertation was quick response (QR), but researchers could ask parallel questions about the antecedents and consequences of global sourcing. For example, global sourcing may cause organizational structure to become more organic (i.e., more formalized, more integrated, more decentralized). Compared to traditional importing, global sourcing implies that retailers tend to be more proactive in the acquisition of sources of supply and their own strategies dominate decision-making as to where, when, what, how much and from whom to buy (Liu and McGoldrick 1995). Second, further examination of the issues of decentralization within a retailing context should be explored. In this study, QR implementation influenced operations decentralization but did not influence scheduling decentralization. For the reasons described earlier in this chapter, this finding is curious. Also, while scheduling decentralization was found to influence performance, operations decentralization was not. 182 These conclusions are similar to those drawn by Germain, Droge and Daugherty (1994) and also Cullin and Carter (1984) who contend that not all domains of organizational decision—making are necessarily centralized or decentralized equally. Given these results, issues of operations versus scheduling decentralization within any time-based competitive strategy, such as QR, remains a very rich area for future research. Third, interesting subsample analyses based on key variables could provide greater insights into the relationships unveiled in this study so far. Comparisons between some SIC-code retail industry classifications may reveal parallels or discrepancies. For example, relationships may be more pronounced in industries characterized mainly by "basic" products (i.e. , hardline specialty), as compared to industries seeking competitive advantage based on "seasonal" or “ fashion" offerings. Also, comparisons may be fruitful for general merchandisers, department stores, discount department stores, specialty apparel stores, specialty hardline stores and drug stores. Interesting comparisons are also likely based on the length of time retailers have been implementing QR. In this study, approximately half of the retailers had been implementing QR for five year or less, and the other half, between six and ten years. It would seem probable that the strategy—structure-performance relationships confirmed in this study would be more pronounced for retailers with greater experience with QR implementation. Of greatest interest would be the effect of QR on performance by retailers implementing the strategy for longer periods of time. Another key variable for subsample analysis is the supply chain member to initiate QR relationships, either the retailer or manufacturer. In this study, retailers were found to initiate QR in 65 percent of the cases and manufacturers, 26 percent. In instances wl 183 when retailers are the initiating party, relationships between QR and structure, and QR and performance, may be greater. Finally, because developing a better understanding of the strategy-performance relationship is an "incremental process", the effects of both QR and global sourcing on other dimensions of performance are worthy of consideration. In addition to basic firm performance, other specific dimensions of performance include: financial, strategic, objective (or economic), environmental adaptability, and perceived QR and global sourcing success. Logical Extensions First, the present study surveyed only non-food retailers. The most logical extension of this research would be to study food retailers. In food retailing, ECR (Efficient Consumer Response) is QR’s equivalent. In general, there are three major differences between QR and ECR that would make comparisons between these broad industries particularly interesting: [1] food retailers deal with far fewer supplier than nonfood retailers, [2] they have far fewer SKUs, and [3] their product turnover is much larger. These differences mean that it would be near impossible to maintain adequate stock in the grocery industry with the reorder lead times common in general merchandise. For this reason (plus the premium on food shelf space), inventory is held at a distributor’s warehouse, providing a one or two day lead~time for food store reorders. Unlike the general merchandise industry, the grocery industry does not have a major out-of-stock problem, so the potential sales increases from improved in-stock positions are much less. However, there is some similarity between the general lllt th- 184 merchandise industry’s difficulty in managing short—lived fashion products and the grocery distributors challenge in managing perishable products. Also, replenishment in the grocery industry works differently because automatic reorders are based on warehouse trigger points instead of POS replenishment. Second, the present study surveyed only retailers based in the U.S. As the result, the findings do not necessarily have worldwide applicability. There are two potential options for future work. First, the main themes of this research could be replicated by studying the same relationships of foreign retailers operating in the U.S. Second, this work could be replicated in other countries. In both cases, one goal would be to define how the research findings can be generalized. If the research cannot be generalized across national boundaries, then factors that limit generalizability (i.e., cultural, political, economic) should be investigated. SUMMARY This chapter reviewed the managerial and theoretical contributions, limitations and directions for future research. In Part I of this dissertation, a model that simultaneously and rigorously examined the antecedents and consequences of quick response (QR) strategy implementation was developed and tested. In Part 11, drivers and performance implications of QR and global sourcing were explored. The research proposed and executed in this dissertation contributes to the theory, method and application of QR implementation in particular, and global sourcing to a lesser extent. This was achieved by conceptually and methodologically integrating several core concepts of strategic management, retailing and marketing. This research 185 should help fill a void in both academic research on retailing strategy and managerial application regarding QR strategy implementation. APPENDIX Variable ENV1 ENV2 ENV3 ENV 4 ENV5 ENV6 ENV7 0S1 0S2 0S3 0S4 0S5 OS6 0S7 0S8 0S9 OS 10 0S1 1 OS12 OS 13 OS 14 OS 15 OS16 OS 17 OS 1 8 0819 0820 OS21 OS22 OS23 OS24 OS25 OS26 OS27 S2 S3 S4 SS Mean 5.41 3.93 4.51 4.59 4.42 3.84 4.07 6.25 5.28 5.27 5.62 5.68 2.40 2.01 2.27 2.11 3.35 2.74 1.36 1.39 2.54 2.95 3.36 3.19 1.78 1.71 3.51 3.68 3.34 3.90 4.59 5.39 4.80 5.26 4.53 5.09 4.98 4.96 0.12 0.12 0.11 0.13 0.10 0.14 0.10 0.08 0.13 0.11 0.11 0.11 0.07 0.08 0.08 0.08 0.15 0.15 0.07 0.07 0.10 0.11 0.07 0.08 0.10 0.09 0.10 0.08 0.09 0.13 0.14 0.12 0.13 0.14 0.11 0.11 0.11 0.13 APPENDIX Std. Error Kurtosis 0.03 -0.60 -0.38 -0.86 0.15 -0.90 -0.43 3.38 0.54 0.28 -0.48 0.56 -0.54 2.18 —0.52 0.87 -0.87 -0.03 22.32 19.91 1.22 0.45 -0.18 -0.94 4.78 6.19 1.11 3.31 2.02 -0.67 -0.76 0.82 —0.34 —0.12 —0.35 0.82 -0.02 -0.59 186 NONNORMALITY ASSESSMENT Skewness -0.72 -0.01 -0.03 —0.22 -0.26 0.24 0.09 -1.63 -10.5 -0.64 -0.63 -0.98 -0.07 0.91 0.16 0.68 0.44 0.96 4.04 3.55 1.06 0.86 -0.92 -0.52 2.06 1.98 0.60 0.30 0.96 0.38 -0.50 -0.55 -0.91 —0.36 —0.81 -0.63 —0.38 Cases 134 134 134 134 132 133 134 132 128 132 132 131 130 130 131 128 128 123 129 129 131 131 130 130 130 126 101 104 103 105 130 133 133 133 125 128 129 128 Variable S6 S7 S8 S9 sro s11 QR13 QR14 QR15 QR16 QR17 QR18 QR19 QR20 QR21 QR22 QR23 QR24 QR25 GS6 GS7 G88 GS9 GSlO GSll (3512 GS13 G814 G815 GS16 P1 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P20 P21 Mean 5.19 4.52 5.27 4.89 5.17 4.61 4.54 4.37 4.94 4.81 4.81 4.42 4.76 3.93 3.36 6.12 4.49 4.39 4.38 4.56 5.10 3.44 4.16 4.19 3.97 3.66 4.01 4.19 3.65 4.52 4.57 4.37 4.26 4.28 3.90 3.71 3.90 4.00 3.86 3.90 3.87 4.17 3.93 4.77 4.73 Std. Error 0.11 0.14 0.11 0.11 0.10 0.13 0.19 0.17 0.16 0.16 0.18 0.19 0.16 0.15 0.20 0.15 0.21 0.23 0.22 0.19 0.17 0.19 0.26 0.23 0.21 0.22 0.21 0.21 0.21 0.19 0.12 0.12 0.13 0.12 0.12 0.16 0.20 0.15 0.15 0.15 0.15 0.15 0.16 0.18 0.13 0.13 187 Kurtosis —0.27 -0.63 0.77 -0.54 -0.24 -0.47 -1.17 -1.07 -0.55 —0.72 —0.74 -1.38 -0.88 -0.86 -1.33 3.50 -1.39 -1.78 -1.53 -0.93 0.41 -l.14 -1.69 -1.41 -1.15 -1.30 -1.21 -1.23 -1.19 -1.25 -0.60 —0.13 -0.68 —0.47 -0.46 -0.41 -1.28 —0.63 -0.51 -0.56 -0.45 -0.57 -0.65 -0.96 -0.26 0.03 Skewness -0.57 -0.43 -1.00 -0.32 -0.56 -0.32 -0.38 -0.30 -0.65 —0.54 -0.70 -0.44 -0.48 0.05 0.44 -2.12 -0.35 -0.26 -0.29 -0.33 —1.05 -0.21 0.34 -0.24 -0.37 -0.26 0.07 -0.06 -0.24 0.07 -0.10 -0.25 -0.27 -0.11 0.03 -0.09 -0.05 0.13 —0.01 -0.01 0.19 0.09 —0.28 -0.11 —0.58 -0.46 Cases 129 128 128 LIST OF REFERENCES LIST OF REFERENCES Achabal, Dale D., John M Heineke, and Shelby H. 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