Revisiting internal market orientation: a note

Revisiting internal market orientation: a noteGurjeet Kaur Sahi

Post-Graduate Department of Commerce, University of Jammu, Jammu, India

Subhash Lonial and Mahesh Gupta

College of Business, University of Louisville, Louisville, Kentucky, USA, and

Nitasha Seli

Post-Graduate Department of Commerce, University of Jammu, Jammu, India

AbstractPurpose – This paper seeks to further the understanding of the domain of the IMO construct in a developing country, as suggested by Lings andGreenley. It seeks to build on their proposed construct and provide empirical evidence of its impact in the context of the Indian banking industry.Design/methodology/approach – The behavioral dimensions of the construct are confirmed in a manner consistent with established marketorientation (external) construct. The paper validates scale pertaining to the wants and needs of bank employees for effective intelligence generationand dissemination as well as for effective response implementation.Findings – The authors find a positive significant relationship between internal market orientation and staff attitude and perceived customersatisfaction. Further, the impact of staff attitude on employee job satisfaction is also significant.Research limitations/implications – Internal market orientation, with the passage of time, may not be as prevalent and exhaustive as it is nowbecause the nature of the marketing environment is extremely dynamic. So, there is a need to make changes as time evolves so that this scale remainsfocused with a high level of reliability and validity.Practical implications – To generate internal market intelligence, bank management should not only rely on internal customer surveys, but also theintelligence obtained through a variety of formal and informal means, such as meetings and discussion with internal customers; analysis of sales reportsand worldwide customer databases; and formal market research, such as employees’ attitude surveys and sales response in a test market.Originality/value – The present research would be of value to managers across the world for identifying key requirements of internal customers,which need to be evaluated consistently from time to time, for different strategic actions.

Keywords Internal market orientation, Indian banking, Scale development, Market orientation, Banking, India

Paper type Research paper

An executive summary for managers and executive

readers can be found at the end of this article.

Introduction

Since 1990, considerable conceptual and empirical research

efforts have been directed to understand what market

orientation (MO) is, what it consists of, and what its

relationship is with organizational performance across

national as well as multinational industries. One widely

acknowledged conceptualization refers to MO as a set of

management behaviors that enable a firm to collect market

intelligence, to disseminate it across functional areas, and

initiate a response to this intelligence to create a value for

customers. This process creates a sustainable business

performance (Jaworski and Kohli, 1996; Kohli and Jaworski,

1990). Researchers have argued that a MO conceptualization

primarily focuses on the external environment of the firm

(e.g. needs of customers and shareholders, nature of

competition) and sidelines, if not totally ignores, internal

factors such as employees, processes and the nature of

employer-employee relationships (Carter and Gray, 2007).

In an almost parallel research stream, especially pertaining

to the service organizations, many researchers have

investigated the impact of encounters between employees

and customers on improved customer satisfaction and have

argued that an adequate focus on service personnel is a

significant element of the firm’s marketing mix (Gronroos,

2006). This research stream can be traced back to the internal

marketing (IM) concept introduced by Berry et al. (1976).

They suggested that the regulations that apply to the

company’s external market are, by similarity, relevant for its

internal market as well. The focus of internal marketing

efforts is the management of relationship between internal

customers and internal suppliers (George, 1990; Lings and

Brooks, 1998) for service-mindedness and customer-oriented

behavior (Berry, 1981; Gronroos, 1989), and importantly for

successful exchanges with external markets (Flipo, 1986).

The number of companies successfully implementing IM

remains small, largely due to lack of unanimously-agreed-

upon definitions and lack of clarity with respect to the

operationalization of the IM concept. Towards this end, Lings

and Greenley (2005) developed an instrument to measure

internal market orientation (IMO) in a retail industry and

suggested that the IMO construct should be further validated

in different service contexts and be tested in different cultural

settings.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0887-6045.htm

Journal of Services Marketing

27/5 (2013) 385–403

q Emerald Group Publishing Limited [ISSN 0887-6045]

[DOI 10.1108/JSM-09-2011-0131]

385

Service organizations in fast developing countries (e.g. India

and China), following the trends of their western

counterparts, are implementing marketing concepts and

strategies towards increasing customer satisfaction and

loyalty through improved service quality (Choudhury, 2008;

Dutta and Dutta, 2009). Many scholars have questioned

whether the empirical findings of research performed in

developed countries can be generalized to developing

countries because of their unique cultural, social, economic

and regulatory conditions (Kirkman and Shapiro, 1997;

Lachman et al., 1994; Venkatesh et al., 2010). In this regard,

rightly pointed out by Zinkhan and Hircheim (1992), Sheth

and Sisodia (1999) and more recently Sheth (2011),

marketing is a contextual discipline, where context matters

due to unique characteristics and existing practices and

perspectives of emerging markets. Thus, it is not clear if

marketing constructs such as MO and IMO developed and

validated primarily using data from the western world can be

employed in developing countries.

While all types of service industries are important, the

Indian banking industry has gone through turbulent financial

reforms (including deregulation) over the past two decades.

Consequently, the Indian banking industry has witnessed

significant growth in private as well as foreign banks, which

has spurred a market-oriented competitive environment

(Nicholls and Roslow, 1989; Sin et al., 2005; Zhao et al.,

2009). Concepts of MO and IMO are quite novel and

pertinent for fast-developing countries, and specifically, the

banking industry has been slow to adopt marketing as a

management discipline (Calantone and Mazanec, 1991).

Therefore, it is believed that an investigation of internal

market orientation in the banking industry can enhance the

overall understanding of the concept of market orientation in

banking in particular and the service industry context in

general. To the best of our knowledge, we could not trace any

study conducted to examine the concomitant impact of the

three major dimensions of IMO (along with their sub-

dimensions) on the success of internal and external markets in

terms of staff attitude, employee job satisfaction, and

perceived customer satisfaction in context of fast-emerging

economies, particularly India.

Thus, the purpose of this paper is to further our

understanding of the domain of the IMO construct and to

examine the relationships between IMO and staff attitude,

employee job satisfaction, and perceived customer satisfaction

in the context of the Indian banking industry as theorized in

Lings and Greenley’s (2005) study. Based on the data

collected from the employees of both public- and private-

sector banks in India, we present a validated scale pertaining

to the needs and wants of the bank employees for effective

intelligence generation and dissemination, as well as for

effective response design and implementation in the Indian

banking industry.

More specifically, this paper consists of four sections. First,

we briefly discuss the dimensionality of the IMO construct in

delineating managerial behaviors associated with employee-

employer relationships. We direct readers’ attention to Lings

(2004) for elaborate discussion and literature review. Second,

we discuss the development and validation of IMO

measurement scale following Lings and Greenley’s (2005)

study. Third, we discuss our findings in terms of the

relationship between IMO and staff attitude and employee job

satisfaction as well as perceived customer satisfaction. Finally,

we highlight the implications for bank managers, especially in

the context of a developing country like India and present

directions for future research.

The changing Indian service economy

During the last two decades, the Indian market has undergone

a sea change. From 1951 to 1985, India was an economy that

discouraged consumption in preference to saving and

investment. A large discontented middle class with many

hang-ups and a conservative mindset ruled the consumer

market (Chen et al., 2005; Das, 2007). India’s development

strategy emphasized import substitution and large-scale

industrialization through government investment in public

sector enterprises. These policies created recurrent shortages

of foreign exchange and made the balance of payments

vulnerable to sudden changes in international markets (World

Bank, 1999a). By early 1991, India, faced with double-digit

inflation (almost 14 percent), was on the verge of defaulting

on its external debt obligations (Agarwal et al., 1995; World

Bank, 1999a). July 1991 was the beginning of a new era when

the new government dismantled most of the economic

policies adopted and implemented the new economic policy, a

set of radical market-friendly reforms.

Recommendations for India included the devaluation of the

rupee, an increase in interest rates, and an increase in imports

and foreign investment in capital-intensive and high-tech

activities. Additionally, they promoted massive privatization of

major national industries including power generation,

telecommunications, and toll roads and bridges and a

decline in the economic role of the public sector (World

Bank, 1999b; India Weekly, 1991; WEDO, 1998). The neo-

liberal economic reforms exposed the country to a new open-

market economy, marked by industrialism and consumerism,

including the opening up of many Indian bank branches

abroad, the introduction of many foreign banks to the Indian

market, and the start of debit cards and credit cards. It

ushered in myriad players both from the domestic front as

well as from abroad. The opening up of the consumer goods

segment to foreign investors, the approval of technology

transfers, and the collaboration and reduction of import

duties on several categories of goods have brought about

substantial changes in the demand-supply situation in the

domestic market (Subramanian and Gopalakrishna, 2001).

A hallmark of the new economic policy of India has been

the gradual liberalization of its financial sector. The

immediate effect of reforms in this sector has been a

perceptible rise in the level of activity in various financial

markets (Gouri, 1997; Chossudovsky, 1997; Arora, 1999;

Guha-Khasnobis and Bhaduri, 2000). The steady growth of

consumer finance options and curtailment of inflation at

reasonable levels over the past decade and a half has resulted

in a general increase of income levels of the middle and rich

classes in India (Agnihotri, 2004; Kumar and Sarkar, 2008;

Mishra and Dash, 2008). The changing demographic profiles,

increasing income levels, urbanization, technology, and

globalization have brought about a dramatic shift in

consumer taste and preferences (Sharma, 2011). Consumer

segments in India are maturing faster than ever.

The most striking feature of the structural change in the

Indian economy in recent decades has been the pre-eminence

of the services sector as the major contributor to growth,

raising its share rather sharply in the national output (Verma,

Revisiting internal market orientation: a note

Gurjeet Kaur Sahi, Subhash Lonial, Mahesh Gupta and Nitasha Seli


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2008). Now the service sector constitutes about 60 percent of

GDP with the growth rate of 7 percent and increased

specialization in all fields (Singh and Pachori, 2007). The

service sector is the fastest growing sector in India where

competition, changing market conditions, new technologies,

economic uncertainties, more demanding customers, and the

changing climate are becoming fiercer day-by-day and have

presented an unprecedented set of challenges (Sureshchandar

et al., 2002; Jham and Khan, 2008). India is currently in the

second phase of the retail evolution cycle, with consumers

becoming more demanding with their rising standard of living

and changing lifestyles. Major factors fuelling this growth spur

are the increase in people’s disposable income, improved

lifestyles, increased international exposure and increased

consumer awareness. Indian consumers have used the retail

boon to their advantage, and they have more options than

ever before and they exert their power of knowledge very well

(Choudhari and Rumilla, 2009). Although the recent global

economic recession has had some impact on the information

technology, real estate and manufacturing sectors, still

economists are of the opinion that India will not suffer a

great impact. A.T. Kearney’s Global Retail Development

Index (2008) suggested that India is still the best investment

destination for the retail sector, followed by Vietnam. The

Consumer Confidence Index (2008) further revealed that

Indian consumer intentions to spend on personal comfort

such as new clothes, home improvements/decorating, and

technology products are stronger than the global average.

The rapid change in the Indian consumers’ attitudes and

profiles made it difficult for organizations to cater to their

needs. Indian companies, more used to licensing policies and

under-production during the pre-liberalization period, faced

the uphill task of catering to the changing consumer taste and

preferences (Kumar and Sarkar, 2008). Thus, it can be

concluded that India is undergoing unique changes in its

marketing context. These changes are so unique and

profound that brand strategies practiced in developing

markets require a significant adaptation to the Indian

context. For marketers, investment in brands today is

necessary to secure brand loyalty for better times ahead

(Sharma, 2011). In this regard, Sheth (2011) has aptly

pointed out that the failure of well-established (in well-

developed nations) products in emerging markets can be

attributed to a lack of sensitivity to local cultures (Ghemawat,

2001; Hofstede, 2001) as part of the brand’s strategy to

connect consumers with the brand’s proposition is critical.

The combination of cultural value with functional utility is a

powerful strategy adopted by a few successful brands in the

recent times. In this context, State Bank of India (SBI),

known as “Banker to every Indian” with its five associates and

22 subsidiaries has succeeded in offering an attractive salary

package, in empowering its work force with a strong service

culture, introducing effective HR policies for exploring and

exploiting employees’ potential, ensuring regular internal

communication programs, in reversing feedback and ideas

from bottom up, in taking decisions through consensus and

unilaterally, and in organizing family gatherings, etc. (Lal and

Tahilyani, 2011). This is one bank where both functional

benefits in terms of bringing efficiency in banking operations

and cultural cues through family gatherings have been

extensively used. Besides, cultural nuances of the country

require a proper balance of emerging western values and

strongly entrenched Indian values (Kumar et al., 2007).

Western cultural values are well established in the existing

consumer theory as regards luxury consumption (Wong and

Ahuvia, 1998). The extensive research of Hofstede (1991,

2001) and Hofstede and Bond (1988) on culture has found

that the East Asian culture of interdependent values differs

from Western independent values. They identified five

cultural dimensions of interdependent versus dependent

cultural values: power distance, individualism and

collectivism, masculinity and femininity, uncertainty

avoidance, and short and long-term orientation. Thus,

Indian culture is quite different from western culture, and

requires special and distinct attention of marketers, policy

makers and practitioners. In this context, the present study

intends to validate the Internal Market Orientation construct

in the Indian setting.

Dimensionality of IMO and hypothesesformulation

Drawing from “external” market orientation

conceptualization (Kohli and Jaworski, 1990), Lings and

Greenley (2001), IMO involves generating and disseminating

intelligence, satisfying the wants and needs of employees

(i.e. internal customers), and designing and implementing

appropriate responses to meet those wants and needs. Based

on the extensive literature review, they presented five

behavioral dimensions of IMO, viz., the formal generation

of internal information; the informal generation of internal

written information; the formal face-to-face generation of

internal information; the dissemination of information

generated from employees; and the design and

implementation of the managers’ response. Additionally, in

order to establish nomological validity of the dimensions,

Lings and Greenley (2005) identified various consequences of

IMO behaviors, such as customer satisfaction, staff attitude,

compliance, retention etc. Each of these variables was

measured using a survey administered to UK retail

managers from a wide range of retail outlets.

From this pretext, our study intends to confirm the

significant role played by information generation, information

dissemination and responsiveness, towards predicting the

IMO level in the Indian banking industry:

H1. Internal market orientation in the Indian banking

industry is significantly influenced by information

generation, information dissemination and

responsiveness.

While examining the impact of IMO on the internal success of

an organization, Lings and Greenley (2005) identified a

significant relationship between IMO and important internal

organizational factors, viz., staff attitude and employee job

satisfaction. In addition, the Gounaris (2006) model

explained a significant amount of the variance accounted for

by the IMO construct for job satisfaction. Further, Carter and

Gray (2007) argued that internal market orientation can be

achieved through reward systems designed to meet their

needs so they in turn are more motivated towards customer

orientation. Thereafter, Gounaris (2008) observed that job

satisfaction is positively correlated with the practice of internal

marketing. Thus, empowering employees has a positive effect

on their job satisfaction both directly and indirectly (through

role conflict and ambiguity reduction). Finally, Lings and

Greenley (2009) concluded that IMO has a direct positive




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impact on employee motivation. Hence, we may infer that

IMO impacts employees’ attitude:

H2. Internal market orientation significantly influences

employee attitude.

In order to study the impact of IMO on customer satisfaction,

the Lings and Greenley (2005) study revealed that IMO plays

a significant role in enhancing relationship quality between

employees and customers, thereby ensuring service quality,

customers’ satisfaction and financial performance. Snipes et al.

(2005) pointed out that employee job satisfaction is one of the

major factors influencing customer satisfaction. This

perspective views employees as the organization’s internal

customers, linking to the concept of external customers. Lings

and Greenley (2009) examined the significant relationship

between internal market orientation, employee motivation,

and external marketing success (market orientation, financial

performance, and customer satisfaction). Further, Tortosa

et al. (2009) revealed that internal market orientation,

through the informal generation of information, influences

the satisfaction of contact personnel, and ultimately, the

perception of quality and satisfaction of customers receiving

the service. Hence, we posit that IMO will have a significant

impact on external market success in terms of perceived

customer satisfaction:

H3. Internal market orientation significantly influences

external aspects of performance in terms of perceived

customer satisfaction.

Employees form attitude towards their jobs by taking into

account their feelings, beliefs and behaviors (Robbins, 2005;

Akehurst et al., 2009). Actually, managers do not spend

enough time learning about human behavior, communication

and how their attitude and behavior impact employees’

performance. Moreover, management requires a keen

understanding of human nature, the basic needs, wants and

abilities in order to improve staff attitude, which has a

significant impact on employees’ job satisfaction (Babin and

Boles, 1996; Lings and Greenley, 2005). Managers at all

levels cannot cause an employee to become motivated; they

can create an environment for individuals to motivate

themselves. Since job satisfaction has a strong correlation

with job performance, it is very important to reinforce this by

applying the right human resource policies (Gelade and Ivery,

2003). If employees are highly satisfied with their work,

supervision, co-workers, pay and derive a high level of overall

job satisfaction, they are more likely to be committed to their

organization (Karia and Asaari, 2006). Positive organizational

climate exerts and enhances employees’ attitude and job

satisfaction; hence, they are less likely to look for jobs

somewhere else. Thus, keeping good employees is critical to

business success, and organizations should make employee

retention a part of corporate culture. Further, recognition and

respect are highly important, especially for those employees

who are in direct contact with the customers. Recognition

from managers for good performance is vital in increasing job

satisfaction and is central to boosting morale. A supportive

management style, demonstrated through open

communication, respect and recognition, greatly enhances

and improves employees’ attitudes and in turn leads to

employee job satisfaction (Rad and Moraes, 2009). In this

context, it can be assumed that IMO helps achieve employee

job satisfaction by creating their positive attitude towards the

organization and their role in it. Thus we hypothesize:

H4. Staff attitude significantly influences employees’ job

satisfaction.

Research methods

This study adopted the IMO scale developed by Lings and

Greenley (2005) to measure its three dimensions (intelligence

generation, intelligence dissemination and responsiveness) as

well as other constructs, namely: staff attitude, employee job

satisfaction, and perceived customer satisfaction. Because the

original instrument was developed within a retail setting, the

wording of the original scale items was modified to make the

items more suitable for use in a banking context. The final

draft of the IMO instrument consisted of 78 items distributed

among its three major dimensions (i.e. intelligence

generation-20, intelligence dissemination-21 and

responsiveness-37), five staff attitude items, nine items

addressing employee job satisfaction and four items

pertaining to perceived customer satisfaction. Response

options employed a five point Likert-type scale, anchoring

from “highly satisfied” (5) to “highly dissatisfied” (1).

“Intelligence generation” encompassed formal written and

face-to-face information generation, informal information

generation and segmentation of the internal market.

“Intelligence dissemination” included the relationship

between employee and employee, the attitude of managers,

and the organizational climate. Finally, “responsiveness”

covered job design to meet wants and needs of employees;

incentives in the form of bonus, salary, loan and other

allowances; management considerations; and training

(Figure 1).

Pre-testing was done in three discernible stages

(i.e. qualitative assessment of instrument items by the

consultative panel, vetting of the instrument, and self-

administered instrument to randomly selected employees of

different bank branches). As the instrument was intended to

be administered in a different cultural and service setting (at

least different from western culture), its qualitative validity

was confirmed through item-to-item discussion with a panel

of marketing researchers and bank employees.

Intuitively, one could accept that the firm’s customers (the

direct customer as well as the end user) are in a good position

to judge the degree of market orientation of an organization

(Gabel, 1995; Webb et al., 2000). Thus, for the final survey,

responses were generated from the internal customers of three

major banks (labeled Bank1, Bank2, and Bank3 for purposes

of confidentiality) in the retail Indian banking industry.

According to an unpublished report composed by the Reserve

Bank of India (2008), these banks rank among the largest and

most strongly profitable public and private banks. Each enjoys

a strong retail presence in a metropolitan city with a large and

diverse population in the northern region of India. In all,

there were 37 branches of Bank1, 14 of Bank2 and 16 of

Bank3 in the metro area. All branches were contacted to

gather requisite information pertaining to IMO. All 194

employees of Bank1, 129 of Bank2 and 125 of Bank3 were

approached. After three visits, 143, 69 and 80 instruments

respectively were completely filled out by the employees,

constituting a 74, 64 and 53 percent response rate

respectively, with an overall response rate of 65 percent.




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Analysis and discussion

We used confirmatory factor analysis (CFA) to evaluate the

dimensionality of the IMO scale (Anderson and Gerbing,

1988). We analyzed the covariance matrix of dimension-wise

items by capturing the three components of IMO and data

from bank employees using AMOS 16.0. As suggested by

Hair et al. (1998, p. 605), we employed maximum likelihood

estimation. We first tested the measurement model to assess

how well the items corresponded to their respective latent

variables and to establish the relationship between latent

constructs in this study. We examined the CFA measurement

model by allowing each of the ten latent constructs of three

dimensions (see Figure 1 conceptual model) to correlate with

each other, while constraining the measurement items and

their error terms to be uncorrelated. The CFA fit statistics

(x2 ¼ 1265.637; df ¼ 585; GFI ¼ 0.899; IFI ¼ 0.876;

CFI ¼ 0.874; RMSEA ¼ 0.063) indicate acceptable levels of

convergence, discriminant validity, and unidimensionality,

leading us to fit the structural equation model. Table I

summarizes the measurement models for intelligence

generation, intelligence dissemination, and responsiveness,

respectively. Table I shows the standardized regression

weights for variables that entered the model at both the

individual factor level as well as the aggregate level. The factor

level analysis includes only the indicators for each factor

(i.e. variables loading on that factor). The aggregate

measurement model then combines the specific factors that

form a latent variable (such as intelligence generation,

intelligence dissemination, and responsiveness) in order to

examine the relationships between the factors. The

standardized regression weights for all variables in Table I

are highly significant for both levels of analyses. Goodness-of-

fit indexes for this analysis are shown in Table II and all

support the model fit.

Examining the individual standardized loadings of each

item (Table I) affirms that employees’ regular interaction with

their management has a significant impact on their job

satisfaction, which is indicative of an interdependent

organizational culture. Further, management’s attempt to

inquire about employee satisfaction has an even greater

impact on the staff attitude, as it has a long-term impact on

the organizational as well as individual’s performance. This

finding is also supported by Lings and Greenley (2010), as

they concluded that informal methods of collecting

information from employees, hall talk and casual

conversations have the most significant impact on

information dissemination and response. Thus, informal

and friendly relations among employees as well as the

organization’s serious attempt to ensure employee job

satisfaction have significant implications for disseminating

the intelligence so generated, which predicts collectivism in

vogue. Finally, a helping and empathetic attitude of managers,

the opportunity for professional development of employees,

and the existence of organizational policies to update

employees’ job-related information for better performance

are the most influential aspects of organizational

responsiveness and a long-term orientation towards

employees.

After conducting a confirmatory factor analysis on the

measurement model to validate the internal and external

consistencies among factors, we constructed a second-order

measurement model (Figure 1) for the three latent constructs

(intelligence generation, intelligence dissemination, and

responsiveness). These models examine the relationships of

these factors with latent variables to determine if sufficient

justification exists to combine the factors into one latent

variable. To conserve the degrees of freedom for the analysis

(as the sample size is small), the factors for each construct

were represented by the summated scores of the variables, as

opposed to using all individual variables in the analysis. To

conserve space, the detailed results are not reproduced here.

The goodness-of-fit indices were quite high, providing

additional validation for the factor structure of intelligence

generation, intelligence dissemination, responsiveness and for

overall model of IMO (x2/df ¼ 2.364; RMSEA ¼ 0.068,

Figure 1 Conceptual model for internal market orientation




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Table I Results of CFA: standardized factor loadings and t-values

Individual Aggregate

Sub-scale

Regression

weights t-value

Regression

weights t-value

Intelligence generation

1. Formal intelligence generation

– Management conducts survey to identify major influence on employee’s behavior 0.830 * 0.771 11.180

– Management frames questionnaires to identify your wants and needs 0.568 7.869 0.566 8.737

– Bank conducts survey with employees at least once a year to assess the quality of employment 0.738 8.523 0.790 *

– Management meets employees at least once a year to find out what expectations they have for

future jobs 0.940 6.806 0.582 8.914

– Management interacts directly with employees to find out how to make them satisfied 0.647 8.121 0.574 8.781

2. Informal intelligence generation

– Managers frequently talk with the staff about their work 0.775 * 0.729 *

– Managers try to solve the problems causing change in behavior of employees 0.670 3.609 0.712 2.799

3. Segmentation of internal market

– Staff welfare is looked after satisfactorily by human resource development dept. 0.323 * 0.329 4.678

– Ample opportunities are available for informal talks among different depts. 0.825 4.857 0.750 6.711

– Employees are accessible to those in other departments 0.818 4.879 0.899 *

Intelligence dissemination

1. Between Employee and Employee

– You are friendly with other employees in Bank 0.430 * 0.612 *

– You get respect from them 0.703 6.795 0.654 9.534

– Employees develop friendly relationship with each other 0.918 6.861 0.969 12.554

2. Attitudes of managers

– Managers make sure that employees are happy with their jobs 0.881 * 0.831 *

– Bank considers employees as important resource for service delivery 0.755 12.785 0.787 14.434

– Keeping employees satisfied is as important as keeping customers satisfied 0.634 10.446 0.690 12.291

– Managers understand all factors that affect employees’ satisfied 0.636 10.891 0.658 11.605

– Managers help employees in official problems 0.603 10.252 0.616 10.726

3. Organization climate

– Organization is genuinely concerned with the welfare of all its employees 0.810 * 0.764 *

– Organization tries to accommodate different personal needs of employees 0.360 5.256 0.391 6.111

– Organization does not recognize the importance of its employees 0.302 7.248 0.280 4.368

– Organization treats all employees in a way they are valued 0.795 4.466 0.836 11.854

Responsiveness

1. Incentives

– Your salary commensurate with work 0.502 * 0.782 *

– You get housing loans at nominal interest rate 0.976 9.273 0.622 5.793

2. Management consideration

– Manager develops a work climate of psychological support 0.681 * 0.608 *

– Supervisors recognize employees as an individual and treat them with respect and dignity 0.628 9.353 0.537 11.636

– Manger develops a work climate of helpfulness 0.828 11.560 0.954 9.065

– Management respects your individuality 0.719 10.500 0.645 9.242

– Manger develops mutual trust and respect with employee 0.696 10.218 0.572 8.401

3. Training

– Bank arranges regular training both on and off the job 0.761 * 0.742 *

– Bank arranges adequate training facilities for its employees 0.845 15.721 0.834 14.486

– Employees are regularly sponsored for various need-based training courses 0.953 18.246 0.957 16.758

– Employees are constantly acquainted with the changing procedure and regulation through

refresher courses 0.957 18.342 0.959 16.793

– Development of employees is given due recognition in this bank 0.730 13.182 0.727 12.788

4. Job design

– Employees have enough opportunities for advancement 0.903 * 0.896 *

– Bank regularly plans for career development of its employees 0.916 21.000 0.920 21.198

– Growth opportunities are open to every employee, which motivates them for higher responsibility 0.794 17.319 0.797 17.397




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GFI ¼ 0.952; AGFI ¼ 0.917; CFI ¼ 0.921; TLI ¼ 0.899)

(Table II). Therefore, the revised second-order scale for

IMO was deemed adequate for the purpose of this study. For

subsequent analysis and hypothesis testing, we use summated

scales for the first order constructs.

The data indicate that IMO, although conceptually similar

to external market orientation, has a three-factor structure,

representing information generation, information

dissemination and responsiveness.

The study tested the psychometric properties of three IMO

sub-scales through Cronbach’s alpha. Convergent validity was

established, since the standardized factor loadings of the

majority of the items under the three dimensions of IMO were

above 0.50, exceeding the recommended minima suggested

by Hair et al. (1998). Further, discriminant validity was

established by a low to moderate correlation among measures

designed to evaluate conceptually different but related

constructs. The inter-factor correlations for the three sub-

scales of IMO suggest that all three discriminate between

themselves. Additional evidence of discriminant validity is

provided when the average variance explained by a construct

is greater than the construct’s shared variance with other

constructs – the square of the inter factor correlations

between any two constructs (w2). Average variance explained

(AVE) are reported in Table III.

In order to test the hypotheses, we run a structural equation

model (SEM) with internal market orientation (IMO), staff

attitude (SA), employee job satisfaction (EJS) and perceived

customer satisfaction (PCS) as the latent constructs

(Figure 2). The standardized loadings for most of the items

are above the recommended level of 0.50. Further, all t-values

are significant at the 0.01 level (Table IV). The AVE from the

four constructs and their respective construct reliability is

above 0.50, supporting convergent validity. The overall

second order model in Figure 2, using CFA, provides

evidence for discriminant validity. Table V summarizes these

results. The proportion of AVE to the squared correlation

between the two constructs is well above unity, thus providing

evidence of discriminant validity (Table V).

SEM results pertaining to the relationships among latent

constructs indicate that IMO is significantly explained by all

the three dimensions, though it is best explained by

responsiveness (b ¼ 0.97), followed by Intelligence

Generation (b ¼ 0.86) and lastly, intelligence dissemination

(b ¼ 0.84). Hence, we accept H1 that IMO is significantly

predicted by intelligence generation, intelligence

dissemination and responsiveness. Information generation

relates to employees’ perceptions of the inputs to their jobs,

the outputs (what they receive) and the equity of this

exchange (Lings and Greenley, 2005). Generating and

understanding adequate information about the internal

exchange will allow suppliers to formulate appropriate

responses to their internal markets and make internal

products more attractive to the potential and existing

employees (Lings, 2004).

Further, when analyzing the relationship between IMO and

staff attitude, it becomes clear that SA is strongly and

significantly predicted by IMO (b ¼ 0.80). This result

confirms our second hypothesis (H2). More specifically, the

analysis reveals a significant effect of IMO on staff attitude,

which corroborates the findings of previous studies conducted

by Ahmed et al. (2003); Gounaris (2008); Lings and Greenley

(2005); Naude et al. (2003) etc. In this regard, Lings and

Greenley (2005) revealed that IMO significantly predicts staff

attitude.

The relationship between IMO and PCS also is significant

(b ¼ 0.66). Thus, IMO also directly influences perceived

customer satisfaction, offering support to H3. The majority of

related studies shows the positive influence of job satisfaction

on the performance of the contact personnel and therefore on

the quality of services received as perceived by external

customers (Hartline and Ferrell, 1996; Malhotra and

Mukherjee, 2004; Snipes et al., 2005; Yoon et al., 2004).

Thus, internal market orientation is grounded in the belief

that external marketing success is in part dependent on the

firm having satisfied and motivated internal customers (Berry

and Parasuraman, 1991; Greene et al., 1994). Further, Lings

Table II Second order CFA results confirming goodness of fit statistics

Description X2 X2/df RMSEA GFI AGFI CFI TLI


Formal information generation 6.324 1.58 0.045 0.991 0.967 0.995 0.987

Segmentation of internal market 2.202 2.202 0.064 0.996 0.962 0.995 0.972

Informal information generation * * * * * * *

Aggregate model 57.438 1.853 0.054 0.962 0.932 0.967 0.952


Between employee and employee 1.150 1.150 0.023 0.997 0.984 0.999 0.998

Attitude of managers 8.240 2.060 0.060 0.989 0.958 0.992 0.981

Organization climate 6.060 6.060 0.032 0.990 0.898 0.978 0.871

Aggregate model 131.274 2.524 0.072 0.932 0.898 0.937 0.920

Responsiveness

Incentives 5.076 2.538 0.073 0.991 0.957 0.995 0.985

Training 9.384 3.128 0.086 0.987 0.936 0.995 0.984

Job design 1.564 1.564 0.044 0.997 0.973 0.999 0.995

Management consideration 7.277 2.426 0.070 0.990 0.951 0.993 0.978

Aggregate model 123.356 1.486 0.041 0.944 0.919 0.985 0.982

Path model (IMO) 75.633 2.364 0.068 0.952 0.917 0.921 0.889




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Table III Results of confirmatory factor analysis for internal market orientation constructs – correlations, average variance extracted, and compositereliabilities

iig seg fig orglim attmgr bemem trn mcon jobdes incen

iig 0.69 * * *

seg 0.190 * * 0.69

fig 0.112 0.173 * * 0.79

orglim 0.134 * 0.194 * * 0.297 * * 0.75

attmgr 0.243 * * 0.230 * * 0.375 * * 0.615 * * 0.835

bemem 0.155 * * 0.126 * 0.166 * * 0.246 * * 0.255 * * 0.80

trn 0.168 * * 0.150 * 0.191 * * 0.199 * * 0.333 * * 0.106 0.92

mcon 0.124 * 0.166 * * 0.506 * * 0.430 * * 0.489 * * 0.204 * * 0.137 * 0.884

jobdes 0.076 0.217 * * 0.206 * * 0.247 * * 0.310 * * 0.074 0.333 * * 0.198 * * 0.787

incen 0.046 0.046 0.366 * * 0.221 * * 0.397 * * 0.125 * 0.385 * * 0.222 * * 0.272 * * 0.83

AVE 0.525 0.410 0.455 0.450 0.510 0.590 0.710 0.618 0.697 0.570

Notes: *Correlation is significant at the 0.05 level (two-tailed); * *correlation is significant at the 0.01 level (two-tailed); * * *composite reliability is on thediagonal; abbreviations used: iig ¼ intelligence generation; seg ¼ segmentation of internal market; fig ¼ formal information generation;orglim ¼ organization climate; attmgr ¼ attitudes of managers; bemem ¼ between employee and employee; trn ¼ training; mcon ¼ managementconsideration; jobdes ¼ job design; incen ¼ incentives

Figure 2 Structural model for internal market orientation




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and Greenley (2005) also revealed that IMO has significant

impact on customer satisfaction.

Finally, the impact of employees’ positive attitude on their

job satisfaction is also found to be significant (b ¼ 0.516),

which lends to the acceptance of our last hypothesis (H4).

Lings and Greenley (2005) also found positive impact of IMO

on employee satisfaction. Further, Gounaris (2008) also

observed that IMO is a significant variable in explaining

employee’s job-satisfaction.

On the whole, it can be concluded that IMO is significantly

predicted by the identified three dimensions. Further, IMO

has significant direct impact on SA and PCS and indirect

impact on EJS through SA. The relationship between IMO

and staff attitude/employee job satisfaction has been proved to

be robust and significant; thus it provides support to the

pertinent assertions placed by Lings and Greenley (2005).

Moreover, the study’s finding, as it pertains to the significant

impact of IMO on customer satisfaction, further affirms and

substantiates the validity of the research findings obtained by

Gronroos (1990); Lings and Greenley (2005), and Reynoso

and Moores (1995).

On analyzing the goodness-of-fit statistics, it becomes

evident that measurement models of intelligence generation,

intelligence dissemination and responsiveness have reached

the minimum acceptable threshold values of various fit

indices. The structural model of IMO has also qualified

various goodness-of-fit indices, viz., x2/df (1.760), GFI

(0.921), AGFI (0.881), CFI (0.948), TLI (0.929), and

RMSEA (0.051). Thus, it provides support that all indicators

are consistent in assessing an acceptable fit of the

hypothesized model to the data. Overall, the structural

model exhibits good fit with all fit indices approaching the

minimum acceptable values.

Since the data were collected from three bank branches, an

important extension of the above analysis would be to explore

if there are any significant differences among the three

Table V Squares of the parameters estimate between dimensions andaverage variance extracted for pairs of dimensions

Sub-scale IMO SA EJS PCS

IMO 0.88 0.74 0.78 0.67

SA 0.44 (0.66) 0.92 0.64 0.53

EJS 0.30 (0.55) 0.21 (0.46) 0.87 0.57

PCS 0.29 (0.54) 0.19 (0.44) 0.16 (0.40) 0.85

Notes: Inter-factor correlations (in parenthesis) and square of inter-factorcorrelations appear below the diagonal; average variance extracted appearsabove the diagonal and construct reliability on the diagonal

Table IV Results of SEM analysis: standardized factor loadings and t-values

Sub-scale IG ID R SA EJS PCS


1. Formal intelligence generation 0.271 (3.377)

2. Informal intelligence generation 0.704 (5.253)

3. Segmentation of internal market 0.386 *


1. Between employee and employee 0.325 (4.929)

2. Attitudes of managers 0.881 (10.576)

3. Organization climate 0.665 *

Responsiveness

1. Incentives 0.574 (6.297)

2. Management consideration 0.580 (6.328)

3. Training 0.552 *

4. Job design 0.486 (5.761)

Staff attitude

1. Staff members are generally happy working here 0.743 *

2. Staff members are happy to put extra efforts when needed 0.850 (15.090)

3. Employees are well motivated 0.811 (14.366)

4. Employees have positive thoughts towards management 0.691 (11.945)

Employee job satisfaction

1. You are satisfied with your job 0.894 *

2. Your work is both interesting and challenging 0.832 (15.938)

3. You are satisfied with rules and conditions of the job 0.722 (13.647)

Customer satisfaction

1. Customers are satisfied with bank services 0.647 *

2. Bank prides on friendliness attitude of staff 0.435 (6.455)

3. Customer service is the key factor to differentiate from

competitors 0.884 (9.050)

Note: t-value in parentheses




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dimensions of IMO from each of the three banks’ perspective.

Do these banks differ on their internal market orientation?

Consequently, we performed bank-wise analysis so as to

validate IMO scale for three banks under study. ANOVA

results confirm that significant difference between three banks

exist; and thus, supports our assertion of testing the structural

model separately for each bank. An L-S-D post hoc test reveals

no significant difference between the two public sector banks

but finds significant difference between the responses of

public and private banks. Hence, the study further validates

the IMO scale for public and private banks.

We found that the measurement model was a good fit for

private (x2/df ¼ 1.603, GFI ¼ 0.945, AGFI ¼ 0.892,

CFI ¼ 0.953, TLI ¼ 0.924, and RMSEA ¼ 0.065) as well

as public banks (x2/df ¼ 1.808, GFI ¼ 0.931, AGFI ¼ 0.878,

CFI ¼ 0.942, TLI ¼ 0.921, and RMSEA ¼ 0.074). Further,

the structural models of IMO both for public and private

banks have qualified various goodness-of-fit indices, viz., x2/df

(public ¼ 1.196; private ¼ 1.232), GFI (public ¼ 0.897;

private ¼ 0.896), AGFI (public ¼ 0.884; private ¼ 0.879),

CFI (public ¼ 0.963; private ¼ 0.973), IFI (public ¼ 0.952;

private ¼ 0.964), and RMSEA (public ¼ 0.036;

private ¼ 0.040). The detailed results of public and private

banks can be obtained from the corresponding author on a

special request (the Appendix is included for reviewers).

Thus, our analysis shows that IMO is significantly predicted

by information generation, information dissemination and

responsiveness for both categories of banks. IMO also has a

significant effect on both staff attitude and perceived

customer satisfaction. Staff attitude significantly determines

employees’ job satisfaction for both the sectors. Hence, all

hypotheses stand accepted for both categories of banks. After

further analysis of the descriptive statistics of both public and

private sector banks, it becomes clear that these banks have

not succeeded in generating formal face-to-face and written

information pertaining to bank employees’ job requirements.

Moreover, management does not meet employees regularly so

as to extract their job-related needs and wants. Thus,

managers do not understand various factors that affect

employees’ job satisfaction. Specifically in the case of the

private bank, management does not understand the personal

needs of its employees. The public sector bank employees feel

that their pay package is not commensurate with their work.

Moreover, regular on- and off-the-job training programs are

not being organized for employees of public banks.

To conclude, we comprehend that the most significant

indicators of IMO are satisfying employees’ job requirements,

management consideration and employees’ career

development. Thus, in addition to the monetary incentives,

whether employees stay in the organization is best predicted

by the treatment and respect they receive at their work.

Hence, management must place equal emphasis on the

generation and dissemination of the internal market

intelligence as well as being quite effective in responding to

the intelligence so generated.

Managerial implications

The efforts of Indian banks to generate internal market

intelligence are scarce. Hence, bank management should not

only rely on internal customer surveys; rather, a variety of

formal and informal means like meetings and discussion with

internal customers, worldwide customer databases, and

formal market research such as employees’ attitude surveys,

staff appraisal meetings and sales responses in test markets

can also be explored. The survey associated with internal

customer orientation needs to place more emphasize on

creating awareness about internal service quality, on

identifying internal customers’ expectations in terms of

financial and non-financial incentives, and on generating

and understanding the information for formulating an

appropriate response to internal marketing in terms of job

products, etc. An online employee suggestion system can also

be introduced (Lal and Tahilyani, 2011).

Bank management can utilize informal methods of

communication, such as setting a suggestion box or a

discussion board on the intranet to let staff express their

problems through a disclosed method or anonymously.

Managers’ responses for all the problems will benefit the

outcome of internal communication between management

and staff. Further, coordinating activities of different business

units for breaking existing silos (Lal and Tahilyani, 2011) can

also ensure effective dissemination of information pertaining

to internal markets.

Bank management should focus more on formal and on-

the-job training practices, as it plays a crucial role not only in

imparting relevant skills but also in infusing the right kind of

professional approach in solving the diverse banking

problems. Management needs to focus on organizing more

training programs, viz., lectures, group discussions,

conferences, case studies, program instructions so as to raise

employees’ knowledge towards banking service. Tie-ups with

top Indian business schools to regularly train the employees

can boost the morale of the employees (Lal and Tahilyani,

2011).

Development programs can be designed to include:. special assignments, supervisory coaching, planned job

rotation and job enrichment to develop the potential of

employees;. an effective appraisal system to provide an objective

assessment of current performance and future potential of

employees; and. employees should be encouraged to set personal

development goals and develop action plans for

achieving them.

Efforts should be made through continuous self-monitoring

to integrate the goals of individuals with organizational goals,

so that the values of being a long-term collectivist society can

be maintained.

Literature pertinent to Indian banking reveals that private

banks are more successful than public sector banks in terms of

implementing TQM initiatives, particularly in context to HR,

customer focus, and top management commitment

(e.g. Sathye, 2005; Selvaraj, 2009). Hence, public sector

banks need to redefine the customer service parameters in

order to compete with the private sector banks, which are

widely perceived as being more customer-oriented (Mallya,

2003). They must concentrate their efforts on instilling an

organizational culture that views employees as internal

customers and should focus more on TQM practices, as

they have significant influence on employees’ work-related

attitudes such as job involvement, job satisfaction, career

satisfaction and organizational commitment. These banks

must place due emphasis on the change management, internal

marketing and employees empowerment, so as to ensure




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requisite service quality. Moreover, pay and job satisfaction

are the primary factors for the bank employees, which need

considerable attention so as to achieve the long term goals of

the bank (Sowmya and Panchanatham, 2011). Determinants

such as the work itself, relationships with co-workers,

supervision and opportunities for promotions have been

found to contribute to job satisfaction (Opkara, 2004).

Therefore, public sector banks need to increase employees’

pay satisfaction by introducing a differential pay system based

on one’s merit and efforts. In addition, human resource

practices must be effectively and fairly used to enrich one’s

job, as these practices assist in formulating employees’ career

paths by ensuring proper implementation of growth and

training programs.

Future research agenda

The present study involved a single-informant method of data

collection. As such, common method variance may be a

problem since information on the dependent and independent

variables was collected from the same respondents. Following

Podsakoff and Organ (1986), we conducted the Harman’s

one-factor test. A factor analysis of the dependent and

independent variables did not yield a single-factor structure

that would account for a majority of the variances. This

suggests that the common method variance is not a concern in

the sample.

However, there are several methodological issues that limit

the generalizability of our findings and thus direct attention at

future research. Although internal market orientation is both

valid and reliable in the context of the present study relating

to the Indian banking scenario, rigorous testing in different

service settings is necessary to establish IMO as generalizable

to wider organizational context. Further, IMO in context to

non-profit organizations can also be explored in the near

future and a comparative evaluation of IMO level can be

undertaken between profit and non-profit making

organizations.

The present research could be of immense use to the

managers’ world over for identifying key requirements that

need to be evaluated consistently from time to time for

different strategic actions. IMO, with the passage of time, may

not be as prevalent and exhaustive as it is now because the

nature of marketing environment is extremely dynamic.

Hence, there is a need to make changes as time evolves so that

this scale remains focused with high level of reliability and

validity.

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Appendix

Table AI Results of CFA for private bank: mean scores, standardized factor loadings and t-values


Sub-scale

Mean

value

Regression

weights t-value

Regression

weights t-value



– Management conducts survey to identify major influence on employee’s behavior 2.83 0.977 – 0.923 –

– Management frames questionnaires to identify your wants and needs 2.18 0.757 – 0.738 –

– Several departments plan work periodically 2.78 0.942 – 0.981 20.653


– Managers frequently talk with the staff about their work 4.05 0.841 – 0.606 4.057

– Managers try to solve the problems causing change in behavior of employees 3.80 0.631 – 0.877 –


– Departments look after different segments 4.14 0.519 4.949 0.546 5.389

– Staff welfare is looked after satisfactorily by Human resource development dept. 3.89 0.620 – 0.678 –

– Goals of respective department are in harmony 3.92 0.498 4.788 0.531 5.256

– Ample opportunities are available for informal talks among different depts. 3.65 0.694 6.085 0.656 6.236

– Employees are accessible to those in other departments 3.77 0.784 6.366 0.734 6.684


1. Between employee and employee

– You are friendly with other employees in Bank 2.43 0.642 6.452 0.650 6.501

– You get respect from them 2.22 0.985 5.530 0.972 5.813

– Employees develop friendly relationship with each other 1.84 0.589 – 0.597 –


– Managers make sure that employees are happy with their jobs 4.02 0.882 5.288 0.861 6.907

– Bank considers employees as important resource for service delivery 4.06 0.816 5.706 0.783 6.605

– Keeping employees satisfied is as important as keeping customers satisfied 3.98 0.680 6.244 0.695 6.163

– Managers understand all factors that affect employees’ satisfied 3.08 0.598 6.385 0.646 5.879

– Managers help employees in official problems 4.14 0.527 – 0.562 –


– Organization is genuinely concerned with the welfare of all its employees 3.99 0.881 4.253 0.840 8.326

– Organization tries to accommodate different personal needs of employees 3.01 0.507 4.270 0.504 4.400

– Organization treats all employees in a way they are valued 3.70 0.705 – 0.743 –

Responsiveness

1. Incentives

– Your bank is giving best salary 4.22 0.924 8.865 0.914 8.937

– Your salary commensurate with work 3.87 0.822 8.902 0.836 8.882

– Salary is revised from time to time 4.15 0.699 – 0.693 –


– Manger develops a work climate of helpfulness 4.07 0.743 11.056 0.745 11.296

– Management respects your individuality 4.05 0.865 14.103 0.867 14.643

– Manger develops mutual trust and respect with employee 4.03 0.972 – 0.969 –

3. Training

– Bank arranges regular training both on and off the job 3.92 0.796 – 0.741 –

– Training meets the needs of both employees and bank. 4.13 0.637 6.845 0.580 6.895

– Training methods are tailored through your development 3.97 0.625 7.310 0.618 7.367

– Bank arranges adequate training facilities for its employees 3.89 0.847 10.350 0.847 10.417

– Employees are regularly sponsored for various need-based training courses 3.90 0.905 11.185 0.904 11.193


refresher courses 3.94 0.926 11.456 0.922 11.438

4. Job design 0.753 8.996 0.747 9.049

– Employees have enough opportunities for advancement 3.81 0.908 12.329 0.898 12.290

– Bank regularly plans for career development of its employees 3.86 0.922 12.378 0.905 12.384

– Employees are provided with adequate job security 4.43 0.601 7.425 0.613 7.516

– Bank provides sound working conditions to its employees 4.31 0.553 6.751 0.567 6.836

– Growth opportunities are open to every employee, which motivates them for higher responsibility 4.17 0.799 – 0.802 –




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Table AII Results of CFA for public banks: mean scores, standardized factor loadings and t-values


Sub-scale

Mean

value

Regression

weights t-value

Regression

weights t-value



– Management conducts survey to identify major influence on employee’s behavior 2.89 0.993 10.742 0.967 11.369

– Management frames questionnaires to identify your wants and needs 2.20 0.514 6.407 0.490 6.397

– Several departments plan work periodically 3.02 0.882 – 0.904 –


– Managers frequently talk with the staff about their work 3.85 0.894 – 0.800 2.041

– Managers try to solve the problems causing change in behavior of employees 3.21 0.637 – 0.605 –


– Ample opportunities are available for informal talks among different depts. 3.77 0.851 – 0.892 3.136

– Employees are accessible to those in other departments 3.83 0.844 – 0.794 –


1. Between employee and employee

– You get respect from them 2.47 0.549 3.785 0.524 3.806

– Employees develop friendly relationship with each other 1.82 0.761 3.822 0.756 3.976

– You help your colleagues in improving themselves 3.39 0.531 – 0.512 –


– Managers make sure that employees are happy with their jobs 3.30 0.726 6.325 0.722 6.069

– Bank considers employees as important resource for service delivery 3.46 0.768 6.455 0.775 6.235

– Keeping employees satisfied is as important as keeping customers satisfied 3.09 0.654 5.953 0.630 5.611

– Managers understand all factors that affect employees’ satisfied 2.50 0.613 – 0.586 –


– Organization is genuinely concerned with the welfare of all its employees 3.53 0.888 – 0.814 –

– Organization treats all employees in a way they are valued 3.20 0.692 – 0.728 –

Responsiveness

1. Incentives

– Your bank is giving best salary 3.22 0.714 5.378 0.733 5.527

– Your salary commensurate with work 2.58 0.758 5.267 0.731 5.528

– Salary is revised from time to time 3.24 0.579 – 0.589 –


– Manager develops a work climate of psychological support 3.34 0.916 5.628 0.916 5.623

– Supervisors recognize employees as an individual and treat them with respect and dignity 3.46 0.810 5.562 0.810 5.557

– Manger develops a work climate of helpfulness 3.67 0.676 5.188 0.676 5.183

– Manger develops mutual trust and respect with employee 3.91 0.463 – 0.463 –

3. Training

– Bank arranges regular training both on and off the job 3.08 0.745 8.911 0.743 8.837

– Training methods are tailored through your development 3.55 0.572 6.847 0.569 6.788

– Bank arranges adequate training facilities for its employees 3.15 0.840 10.041 0.838 9.952

– Employees are regularly sponsored for various need-based training courses 3.22 0.961 11.458 0.961 11.355


refresher courses 3.24 0.963 11.477 0.962 11.364

– Development of employees is given due recognition in this bank 3.45 0.708 – 0.704 –

4. Job design

– Employees have enough opportunities for advancement 3.23 0.865 11.540 0.868 11.746

– Bank regularly plans for career development of its employees 3.35 0.916 11.855 0.911 12.085

– Growth opportunities are open to every employee, which motivates them for higher

responsibility 3.58 0.791 – 0.799 –




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Table AIII Second order CFA and SEM results confirming goodness of fit statistics

Description X2 X2/df RMSEA GFI AGFI CFI TLI

Intelligence generationPrivate bank 34.099 1.176 0.035 0.954 0.913 0.992 0.987

Public banks 14.264 1.189 0.036 0.974 0.939 0.994 0.990

Intelligence disseminationPrivate bank 50.233 1.288 0.045 0.940 0.899 0.981 0.973

Public banks 66.779 1.805 0.074 0.925 0.867 0.926 0.890

ResponsivenessPrivate bank 154.408 1.309 0.047 0.899 0.886 0.978 0.972

Public banks 91.856 1.021 0.012 0.932 0.898 0.999 0.998

Measurement modelPrivate bank 44.884 1.603 0.065 0.945 0.892 0.953 0.924

Public banks 56.047 1.808 0.074 0.931 0.878 0.942 0.921

Structural modelPrivate bank 213.136 1.232 0.040 0.896 0.879 0.973 0.964

Public banks 207.654 1.196 0.036 0.897 0.884 0.963 0.952

Table AIV Results of confirmatory factor analysis for internal market orientation constructs – correlations, average variance extracted, and compositereliabilities in case of private bank


Iig 0.68 * * *

seg 0.353 * * 0.76

fig 0.337 * * 0.220 * * 0.85

orglim 0.339 * * 0.409 * * 0.186 * 0.69

attmgr 0.355 * * 0.451 * * 0.266 * * 0.660 * * 0.82

bemem 0.212 * 0.214 * 0.402 * * 0.204 * 0.192 * 0.77

trn 0.143 0.290 * * 0.234 * * 0.289 * * 0.249 * * 0.109 0.91

mcon 0.434 * * 0.404 * * 0.090 0.476 * * 0.505 * * 0.015 0.206 * 0.89

jobdes 0.211 * 0.357 * * 0.195 * 0.362 * * 0.432 * * 0.022 0.288 * * 0.341 * * 0.87

incen 0.505 * * 0.417 * * 0.200 * 0.337 * * 0.325 * * 0.237 * * 0.312 * * 0.302 * * 0.259 * * 0.84

AVE 0.553 0.410 0.805 0.510 0.508 0.576 0.637 0.748 0.596 0.673

Notes: *Correlation is significant at the 0.05 level (two-tailed); * *correlation is significant at the 0.01 level (two-tailed); * * *composite reliability is on thediagonal; abbreviations used: iig=intelligence generation; seg ¼ segmentation of internal market; fig ¼ formal information generation; orglim ¼ organizationclimate; attmgr ¼ attitudes of managers; bemem ¼ between employee and employee; trn ¼ training; mcon ¼ management consideration; jobdes ¼ jobdesign; incen ¼ incentives

Table AV Results of confirmatory factor analysis for internal market orientation constructs – correlations, average variance extracted, and compositereliabilities in case of public banks


iig 0.60 * * *

seg 0.064 0.84

fig 0.068 0.184 * 0.82

orglim 0.200 * 0.130 0.040 0.75

attmgr 0.236 * * 0.071 0.057 0.462 * * 0.78

bemem 0.200 * 0.082 0.285 * * 0.116 0.195 * 0.59

trn 0.084 0.127 0.130 0.070 0.227 * * 0.163 * 0.92

mcon 0.447 * * 0.008 0.074 0.359 * * 0.332 * * 0.069 0.005 0.81

jobdes 0.152 0.008 0.152 0.017 0.024 0.121 0.259 * * 0.000 0.89

incen 0.175 * 0.085 0.113 0.102 0.241 * * 0.142 0.318 * * 0.038 0.102 0.72

AVE 0.603 0.718 0.676 0.634 0.481 0.387 0.657 0.542 0.738 0.473

Notes: *Correlation is significant at the 0.05 level (two-tailed); * *correlation is significant at the 0.01 level (two-tailed); * * *composite reliability is on thediagonal; abbreviations used: iig ¼ intelligence generation; seg ¼ segmentation of internal market; fig ¼ formal information generation;orglim ¼ organization climate; attmgr ¼ attitudes of managers; bemem ¼ between employee and employee; trn ¼ training; mcon ¼ managementconsideration; jobdes ¼ job design; incen ¼ incentives




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Table AVI Results of SEM analysis: standardized factor loadings and t-values for private banks



1. Formal intelligence generation 0.553 *


3. Segmentation of internal market 0.642 (6.829)





Responsiveness

1. Incentives 0.547 (5.632)


3. Training 0.629 *

4. Job design 0.649 (6.547)

Staff attitude










4. Customers are satisfied with bank services 0.537 *



competitors 0.887 *





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Table AVII Results of SEM analysis: standardized factor loadings and t-values for public banks



1. Formal intelligence generation 0.573 *


3. Segmentation of internal market 0.678 (3.648)





Responsiveness

1. Incentives 0.613 (4.172)


3. Training 0.474 *

4. Job design 0.282 (2.372)

Staff attitude










7. Customers are satisfied with bank services 0.571 (4.326)



competitors 0.976 *


Table AVIII Squares of the parameters estimate between dimensions and average variance extracted for pairs of dimensions in case of private bank


IMO 0.98 0.715 0.657 0.69

SA 0.402 (0.634) 0.93 0.758 0.792

EJS 0.012 (0.108) 0.015 (0.123) 0.80 0.734

PCS 0.167 (0.409) 0.16 (0.400) 0.003 (0.051) 0.92

Notes: Inter-factor correlations (in parenthesis) and square of inter-factor correlations appear below the diagonal; average variance extracted appears above thediagonal and construct reliability on the diagonal

Table AIX Squares of the parameters estimate between dimensions and average variance extracted for pairs of dimensions in case of public banks


IMO 0.96 0.574 0.596 0.572

SA 0.165 (0.406) 0.91 0.745 0.721

EJS 0.003 (0.058) 0.008 (0.091) 0.86 0.743

PCS 0.0001 (0.002) 0.001 (0.033) 0.013 (0.114) 0.86

Notes: Inter-factor correlations (in parenthesis) and square of inter-factor correlations appear below the diagonal; average variance extracted appears above thediagonal and construct reliability on the diagonal




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Corresponding author

Gurjeet Kaur Sahi can be contacted at: gurjeetkaur18

@gmail.com

Executive summary and implications formanagers and executives

This summary has been provided to allow managers and executives

a rapid appreciation of the content of this article. Those with a

particular interest in the topic covered may then read the article in

toto to take advantage of the more comprehensive description of the

research undertaken and its results to get the full benefits of the

material present.

Although there are big differences in running a business in a

developing country and doing it in a developed Western

country, some aspects remain the same. If, for instance, a

study into banking concluded that the most significant

indicators of internal market orientation are satisfying

employees’ job requirements, management consideration

and employees’ career development, are we talking

developed or developing country?

Need another clue? The researchers go on to say: “In

addition to the monetary incentives, whether employees stay

in the organization is best predicted by the treatment and

respect they receive at their work. Hence, management must

place equal emphasis on the generation and dissemination of

the internal market intelligence as well as being quite effective

in responding to the intelligence so generated.”

What’s being talked about here is the Indian banking

industry which has gone through turbulent financial reforms

– including deregulation – over the past two decades, and has

witnessed significant growth in private as well as foreign

banks, which has spurred a market-oriented competitive

environment. But references to internal market intelligence,

response to the intelligence generated, and treatment of and

respect for employees is surely applicable globally.

Concepts of Market Orientation (MO) and Internal Market

Orientation (IMO) are quite novel and pertinent for fast-

developing countries although the banking sector has been

rather slow to adopt marketing as a management discipline. In

their paper “Revisiting internal market orientation: a note”

Gurjeet Kaur Sahi et al. examine the relationships between

IMO and staff attitude, employee job satisfaction and

perceived customer satisfaction in the context of the Indian

banking industry. Economic reforms have resulted in the

opening up of many Indian bank branches abroad, the

introduction of many foreign banks to the Indian market, and

the start of debit cards and credit cards usage, a hallmark of

India’s new economic policy being the gradual liberalization

of its financial sector.

The efforts of Indian banks to generate internal market

intelligence are scarce. Consequently the authors recommend

bank managements not to rely only on internal customer

surveys, but rather a variety of formal and informal means like

meetings and discussion with internal customers, worldwide

customer databases, and formal market research such as

employees’ attitude surveys. Staff appraisal meetings and sales

responses in test markets can also be explored.

A survey associated with internal customer orientation

needs to place more emphasis on creating awareness about

internal service quality, on identifying internal customers’

expectations in terms of financial and non-financial

incentives, and on generating and understanding the

information for formulating an appropriate response to

internal marketing.

Bank management can utilize informal methods of

communication, such as setting a suggestion box or a

discussion board on the intranet to let staff express their

problems through a disclosed method or anonymously.

Managers’ responses for all the problems will benefit the

outcome of internal communication between management

and staff. Bank management should focus more on formal

and on-the-job training practices, as this plays a crucial role

not only in imparting relevant skills but also in infusing the

right kind of professional approach in solving diverse banking

problems. Management needs to focus on organizing more

training programs, such as lectures, group discussions,

conferences, case studies, program instructions so as to raise

employees’ knowledge towards banking service.

Tie-ups with top Indian business schools to regularly train

the employees can boost the morale of the employees.

Development programs can be designed to include: special

assignments, supervisory coaching, planned job rotation and

job enrichment to develop employees’ potential; an effective

appraisal system to provide an objective assessment of current

performance and future potential of employees, or employees

should be encouraged to set personal development goals and

develop action plans for achieving them. Efforts should be

made through continuous self-monitoring to integrate the

goals of individuals with organizational goals, so that the

values of being a long-term collectivist society can be

maintained.

Indian private banks appear to be more successful than

public sector banks in terms of implementing total quality

management TQM initiatives, particularly in context to HR,

customer focus, and top management commitment. Hence,

public sector banks need to redefine the customer service

parameters in order to compete with the private sector banks,

which are widely perceived as being more customer-oriented.

They must concentrate their efforts on instilling an

organizational culture that views employees as internal

customers and should focus more on TQM practices, as

they have significant influence on employees’ work-related

attitudes such as job involvement, job satisfaction, career

satisfaction and organizational commitment.

Public-sector banks need to increase employees’ pay

satisfaction by introducing a differential system based on

merit and effort. In addition, human resource practices must

be effectively and fairly used to enrich the job – for example

appropriate implementation of growth and training programs.

(A precis of the article “Revisiting internal market orientation: a

note”. Supplied by Marketing Consultants for Emerald.)




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