THE EFFECT OF MARKET ORIENTATION ON COMPANY
PERFORMANCE WITH SUPPLY CHAIN MANAGEMENT
STRATEGY AS AN INTERVENING VARIABLE
ARIZONA STATE UNIVERSITY
SCM 502 - OPERATIONS AND SUPPLY CHAIN MANAGEMENT
SPRING 2024
Introduction:
Microenterprises (MS) are one of the backbones of the Indonesian economy because
they are a resilient type of business and are able to survive the economic crisis. Large
employment opportunities can be provided by Micro Enterprises (MS) with a role in reducing
the number of unemployed. The development of MS over the past 5 (five) years in the
Special Region of Yogyakarta (DIY) shows a positive aspect based on the number of
business units and the increase in business volume. Seen from the business sector, the types
of UM businesses are categorized into 4 (four) sectors, including: trade, various businesses,
agricultural and non-agricultural industries. The increasing number of UM can encourage
business competition. The emergence of business competition is not only between UM
business actors, but also competition between suppliers. Competition from UM in obtaining
consumers and encouraging the creation of consumer loyalty and competing in order to
obtain suppliers with good performance. Managed customer relationships with suppliers can
result in the creation of loyalty and satisfaction.
The increasingly fierce competition and increasingly advanced technology are
unstoppable, so that certain company products will grow to reach the maximum point, while
between these products it will be difficult to distinguish. In order to win the competition, the
current marketing of the manufacturer's products not only look at the quality of the product,
but also follow the strategy of the company. Thus, there are two general strategies used by
companies, namely organizational performance and market orientation (Green et al, 2006).
According to Kohli and Jaworski (1990), market orientation is a corporate culture that
can lead to improved marketing performance. Narver and Slater (1990) define market
orientation as the most effective and efficient organizational culture to create the behaviors
needed to create superior value for buyers and produce superior performance for the
company, especially in a highly competitive environment. In a highly competitive
environment, only companies that have more value will survive. Narver and Slater (1995)
explain that companies that have made market orientation an organizational culture will focus
on the needs of the external market, market wants and demands as a basis for strategy
development for each business unit in the organization, and determine the success of the
company.
Green et al (2006) explained that the success of market orientation in improving
performance in manufacturing companies is strongly supported by strategies in supply chain
management. The results of his research show that the SCM strategy of manufacturing
companies significantly mediates the relationship between market orientation and company
performance. Increasing efficiency, one of which can be done by integrating the company's
supply chain activities, so that there are no difficulties in the supply chain operational
planning process.
Organizational performance is the actual result of the organization which is then
measured and compared to the expected output (Jahanshahi, et al., 2012). So that
organizations can compete and have maximum organizational performance, so that it can be
supported through the application of Supply Chain Management (SCM). SCM is a series of
approaches in making efficient integration of suppliers, warehouses, storage and
manufacturing, so that goods are produced and distributed at the right location, quantity and
time in order to reduce costs and provide service satisfaction for consumers. Based on the
opinion of (Christopher, 1998) SCM is an organizational network by including downstream
and upstream relationships in different activities and processes that provide value in the form
of services and products for consumers.
Li, et.al (2006) examined Supply Chain Management (SCM) with the development of
five dimensions of SCM practices namely Customer Relationship, Strategic Supplier
Partnership, Level of information quality, Information Sharing and Postponement and tested
the relationship between SCM practices on firm performance and competitive advantage. The
results showed that the better SCM practices positively affect the increase in competitive
advantage and the improvement of firm performance. Furthermore, competitive advantage
directly affects the company's performance. Supply Chain Strategy must be structured for
each member organization that is the focus of the organization through HR, Organizational
Design, Organizational Performance and Data Technology ( IT) (Esper, et al., 2014) navy,
2010). The efficiency of SCM to conclude activities will match the management philosophy
(Mentzer, et navy, 2001). Activities among members are defined as including an integrated
attitude, sharing of risks and data as well as cooperation, respect, focus and common goals
towards process and customer integration.
Although SCM sometimes falls short of achieving desired results (Keah, 2002), it is
now a strategic tool for improving competitive positioning and a core concern for top-level
managers. Specialized posts on SCM emerged in the late 1980s (Tyndall, 1988) as the focus
on opportunities for competitive advantage began to shift from within the manufacturing
plant, to ties to suppliers, and then to proximate ties to customers. By the mid-90s,
manufacturers were already applying SCM philosophies and practices to achieving time and
payment efficiencies, transporting purchasing and logistics to improve manufacturing and
marketing (Morgan, 1997). Industries today view the adoption of SCM philosophies and
practices as facilitating competitive advantage.
Increased revenues and cost cutting result in competitive advantage from SCM, thus
playing a strong role in improving organizational performance from financial to market
performance. The high level of competition in the manufacturing industry in Bantul Regency
is not only experienced by various large companies but also by the Micro Manufacturing
Business industry in Bantul Regency. Various changes in the manufacturing industry include
increased industrial competition, decreased exports to foreign countries and rising raw
material prices. The increasingly fierce level of competition in the manufacturing industry
due to the decline in domestic market share, thus requiring these various companies to carry
out the right strategy against constantly changing environmental conditions and a fluctuating
corporate environment.
2.1. Previous Research
Tukamuhabwa's (2011) research title is "Mediating Variables in the Relationship
between Market Orientation and Supply Chain Performance: A Theoretical Approach." The
research objective is empirical testing of the relationship between market orientation and
supply chain performance. The application of the conceptual model between supply chain
management strategy, supply chain innovation, organizational learning, commitment,
collaboration and trust has a mediating role on supply chain performance and market
orientation relationships. This research uses a theoretical approach and the results put forward
orientation increases organizational learning, trust, supply chain innovation, supply chain
management strategy and commitment. Increased commitment, collaboration and trust and all
variables are combined to improve supply chain performance.
Green et al (2006) conducted a study entitled "Does supply chain management
strategy mediate the association between market orientation and organizational
performance?" This study aims to test the relationship between SCM, organizational success
and market orientation and show model development on the relationship between the three.
This study uses a survey approach to sales managers with the aim of collecting data on SCM
strategy, market orientation and organizational performance. The data analysis technique
used Structural Equation Model (SEM) and it was found that the strategy of SCM in
manufacturing firms mediates the relationship between organizational performance and market
orientation. This finding supports that market orientation is very important for manufacturing
companies so that the implementation of SCM strategies is also important.
Shehu & Mahmood's research (2014) entitled "The Relationship between Market
Orientation and Business Performance of Nigerian SMEs: The Role of Organizational
Culture." The purpose of the study was to test the relationship between market orientation
and business performance of Nigerian MSEs. Although the UM association has accepted the
substance of scientific interest, various studies have been conducted among Nigerian MSEs.
However, the research objective also tested the mediating role of organizational culture on
the relationship between business performance and market orientation. The role of MSEs in
the growth of the Nigerian economy is very important. MS are considered a major source of
job creation, poverty reduction and contribute significantly to gross domestic product. On the
basis of theoretical considerations, the development of a framework to investigate the
relationship. Testing the model on firms with 640 samples with self-administered
questionnaire survey. It was found from the results of correlation analysis that there is a
strong relationship between market orientation, business performance and organizational
culture. However, it is found in the regression results that there is no significant relationship
between UM performance and market orientation and is not supported by mediation tests.
Chan T.L and Eric W.T (2016) conducted a study entitled "The effects of strategic
and manufacturing flexibilities and supply chain agility on firm performance in the fashion
industry" this study aims to analyze the problem with a resource-based perspective as a lens
in the fashion industry explores the key antecedents and consequences of supply chain agility
at the strategic and operational levels. This research utilizes the conceptual framework
method for arguments developed and tested through empirical studies of selected industry
practitioners. Data from a sample of 141 garment manufacturers were analyzed using
structural equation modeling. The results show that manufacturing and strategic flexibility
positively affect supply chain agility. However, strategic flexibility directly and significantly
affects firm performance. As for manufacturing flexibility, it has no effect. Furthermore, supply chain
agility plays an important role in mediating the effects of strategic and manufacturing flexibility on
performance.
Chin So. Ou et. al (2010) conducted a study entitled "A structural model of supply
chain management on firm performance". This study aims to examine the relationship
between SCM management practices and their impact on firm financial and non-financial
performance. Sample data was collected from Taiwan's information-related industries, where
firms face increasing global competitive pressures and heavily utilize SCM to maintain their
competitive advantage. The results presented in this paper show that external customer-firm-
supplier relationship management positively impacts firms' internal contextual factors, which
in turn positively affects firm performance. The findings suggest that successful
implementation of SCM not only directly improves operational performance, but also
indirectly improves customer satisfaction and financial performance.
2.2. Theoretical Foundation
2.2.1 Market Orientation
Market Orientation is an important thing for companies as global competition
increases and customer needs change where companies realize to always be close to
customers. In addition, market orientation is a committed organizational business culture so
that it always innovates and excels in value to customers. Narver & Slater (1990) explain
market orientation is defined as a culture of market orientation. The most effective
organization from the creation of behavior towards the emergence of value advantages for
business performance and purchasing.
Uncles (2000) defines market orientation as the processes and activities related to the
creation and satisfaction of customers by continuously assessing customer wants and needs.
Applied market orientation can improve performance for the company. Slater & Narver
(1990) suggest that market orientation includes 3 behavioral components, namely
interfunctional coordination, competitor orientation and customer orientation.
Customer orientation and competitor orientation and all their activities are involved in
obtaining information about buyers and competitors in the market and disseminating it
through the business, while interfunctional coordination is based on customer and competitor
information and includes coordinated business efforts. Deeper customer orientation is defined
as adequate understanding of the customer's buying targets in order to create superior value
for the buyer on an ongoing basis. This includes understanding the entire value chain of
current purchases and future developments. Achieving this effort can be done through the
process of finding information about customers (Uncles, 2000). Through this information, the
selling company will understand who its potential customers are today or in the future and the
needs of current and future customers.
Competitor orientation means that companies with competitor orientation are often
seen as having strategies and ways of distributing information about competitors, how to
respond to competitors' action responses when discussing competitor strategies with top
management (Narver & Slater, 1990). Competitor orientation such as salespeople trying to
gather competitor information and share this information with other functions within the
company. This information can be in the form of delivering information to the product
research and development division or discussing with company leaders about the
development of corporate strategy and competitor strengths (Ferdinand, 2000).
Narver and Slater (1990) state that competitor orientation means that the company
understands the short-term strengths, weaknesses, long-term capabilities and strategies of its
potential competitors. This understanding includes whether competitors use new technology
to retain existing customers. Competitor-oriented companies are often seen as companies that
have a strategy and understand how to obtain and share information about competitors, how
to respond to competitors' actions and also how top management responds to competitors'
strategies.
Narver and Slater (1990) state that interfunctional coordination is the use of company
resources that are coordinated in creating superior value for targeted customers.
Interfunctional coordination refers to specific aspects of the organizational structure that
facilitate communication between different organizational functions. Interfunctional
coordination is based on customer and competitor information and consists of business
alignment efforts, typically involving more than the marketing department, to create superior
value for customers. Interfunctional coordination can enhance communication and exchange
between all organizational functions with respect to customers and competitors, as well as to
inform the latest market trends. This helps develop both trust and independence among
separate functional units, which in turn creates a corporate environment that is more willing
to accept a completely new product based on customer needs. Green et al (2006) reveal
market orientation measurement tools, namely:
1. Customer satisfaction.
2. Customer needs orientation.
3. Competitive advantage strategy
4. Systematic measurement.
5. Customer service procedures
6. Focus
7. Confident in business
8. Feedback
2.2.2. Supply Chain Management Strategy
Djokopranoto & Indrajit (2005) suggest that the supply chain was originally used by
several logistics consultants in the 1980s, then more deeply analyzed by academics in the
1990s, thus the concept of SCM emerged. Furthermore, Heizer & Render. (2017) suggests
the definition of supply chain management is a process that shows the coordination of supply
chain activities as a whole starting from raw materials and ending with customer satisfaction.
SCM aims to coordinate supply chain activities in order to maximize competitive advantage
and supply chain benefits for end consumers. The supply chain has a key feature in the role of
its members for the benefit of the team within the company.
Stevenson & Chuong (2014) suggest that the supply chain is a series of facilities-
organizations, functions and activities in the production and delivery of services or products.
The beginning of the sequence is from the basic supplier of raw materials to the end
customer. With facilities including factories, warehouses, processing, centers, retail stores,
distribution centers and offices. Activities and functions include forecasting, purchasing,
inventory management, information, scheduling, quality assurance, production, delivery,
distribution and customer service. SCM aims to coordinate supply chain activities to optimize
the benefits and competitive advantage of the supply chain for end consumers.
Munas & Desi (2013) suggest SCM performance as a performance about the quality
of activities related to the movement of objects, from raw materials to consumer consumption
related to funds and data. For Haizer & Render (2001) SCM includes determining: (1)
transporters, (2) suppliers, (3) cash or credit transfers, (4) payables and receivables,
(5) banks and distributors, (6) warehouses, (7) order fulfillment, and (8) demand data
distribution, inventory creation and control activities. The underlying rationale is to focus on
reducing errors and maximizing supply chain value. The activities of supply chain managers
include marketing, accounting disciplines, finance and surgical management.
Heizer and Render (2015) define supply chain management as the coordination of all
supply chain activities, starting with raw materials and ending with satisfied customers.
Christopher (2011) defines supply chain management as a reciprocal relationship between
providers and customers to deliver highly optimized values to customers at a fairly low cost
but providing overall benefits. Haming and Nurnajamuddin (2014) define supply chain
management as the process of planning, implementing and controlling the operations of the
supply chain with the aim of meeting customer needs as efficiently as possible.
Based on several definitions of supply chain management above, it can be concluded
that supply chain management is an approach used to achieve more efficient integration of
various organizations from raw materials to finished goods. Supply chain management in
general examines logistics issues that stretch from basic materials to finished goods used by
end consumers and are organized as a supply chain. Green et al (2006) revealed SCM strategy
measurement tools, namely:
1. Create a level of supplier trust
2. Identify additional supply chains.
3. Responsive to the supply chain
4. Compatible communication
5. Involving members in planning
2.2.3. Company Performance
Company performance is a measure of the success rate of a company in making
products that are seen during a predetermined time for later evaluation. Furthermore, the
results of the evaluation are used as a measuring tool for assessing each activity that has been
designed and then carried out to be able to assess whether the strategy made is correct or even
needs further improvement. According to Hafeez et al., (2011) explains that company
performance is basically is a measure of achievement obtained from the overall process of
marketing activities of a company or organization. In addition, company performance can
also be seen as a concept used to measure the extent of market performance that has been
achieved from the products produced by the company. Thus, performance is about doing
work and the results achieved from that work. Performance is about what is done and how it
is done.
For Chan et al. (2016), an efficient organization when conducting business can be seen
based on industry performance. It can also be stated as a key dimension to ensure the value of
success, or perhaps survival in the organization. Industry performance is a relevant construct
in the field of business research and is often thought of as the end result of business models.
This research takes solid performance as the main impact of the supply chain. Industry
performance can be measured from a number of methods. The description of industry
performance is so diverse that it facilitates comprehensive thinking, balance and eliminates
the reliance on stages that are prone to engineering to capture aspects of business
performance.
For Chan et al. (2016), industry performance is the performance of the totality of the
industry as far as measures of operational excellence, customer ties, revenue growth, and
financial performance (such as profit margins, return on investment, and sales growth).
According to Chan et al. (2016) Performance has the following indicators:
1. Product delivery time
2. Timeliness of service
3. Productive
4. Customer trust
5. Broad insights
6. Increased sales
7. Solutive
2.3. Hypothesis Formulation
2.3.1. The relationship between market orientation and company performance
Green et al., (2006) suggest that market orientation is often expected to increase the
effectiveness of communications, plans, and strategies, coupled with customized product
offerings and other aspects of the marketing mix, it has the ability to positively drive
company performance. Green et al. (2006) suggest that market orientation affects how
companies are able to create a competitive advantage against responding to major changes in
the external environment. Market orientation shows the company's ability to mobilize skills
in having decisions in consumer opportunities. This proves it is time to stop or reverse the
commitment of existing resources and act quickly in response to various market changes.
Results research journal Green et al. (2006) shows that market orientation positively affects
company performance.
2.3.2. The relationship between market orientation and SCM strategy
According to Green et al. (2006), market orientation in a dynamic environment can be
achieved by companies through the development of strategies in the form of alternative
programs of action, thus requiring a fundamental approach to the management of the supply
chain and distribution available. The SCM strategy positively encourages an increase in the
company's capacity to respond to the market environment, through object adjustments
supported by superior capabilities and knowledge in determining a quality supply chain.
Based on the findings from Tukamuhabwa's (2011) research that analyzed the similarity of
SCM with market orientation, the researcher took a hypothesis that if market orientation is
lower than the level of an organization, it indicates that the tendency of SCM synergy is very
strong. Assertiveness in feedback, the researcher's proposal for market orientation is a
necessary activity in the SCM strategy. When cooperation is needed between the supply
chain members of the SCM together from all supply members so that the end consumer is
satisfied. Appropriate means of SCM strategy for improving orientation
better organizational performance.
2.3.3. The relationship between SCM strategy and company performance
Green et al. (2006) suggested that supply chain strategy is related to the company's
external and internal capabilities. Along with key suppliers and consumers in responding
quickly and adapting to market changes and even actual revocation and potential, it
contributes to supply chain shrewdness. The measurement of performance through sales, new
product sales, profits, customer loyalty and relative performance of competitors. Based on the
results of the research journal Green et al. (2006), shows that SCM strategy positively affects
company performance. From the next hypothesis related to the influence of supply chain
management strategies on marketing performance. In accordance with the results of research
by Chin So. Ou et., al (2010) which shows that the relationship between supply chain
management and the performance of a company or organization is very stable and effective.
When companies focus on the strength of the SCM strategy, which is a marketing strategy
that pays attention to the satisfaction and needs of end customers or to the end members of
supply chain management. When the better the SCM strategy, the more the company seeks to
satisfy customers, thus the company's market share is also getting better, and there are even
some companies that have a better market share.
2.3.4. The relationship between market orientation and firm
performance through SCM strategy
SCM is supposed to mediate the effect of market orientation on industry performance.
In this problem, researchers guess that SCM strategy mediates the effect of market orientation
(predictor) on marketing performance (predicted). The opinion is that SCM acts as a special
alternative strategy to the application of market orientation in organizations. Therefore, the
research results of Green et navy (AL) (2006) create if the research reinforces the need for
manufacturers to adopt market orientation. Further results in recognizing the application of
SCM as a strategic initiative by increasing the market with the totality of industrial
orientation. A successful manufacturing industry depends on the industry's expertise in
satisfying customers and the implementation of SCM strategies towards improving company
performance. SCM and market orientation have a very strong bond. Managers seek to satisfy
customers through better service and seek to improve the market orientation of the industry
through the adoption of SCM strategies. Tukamuhabwa (2011) reported with an argument
that if the industry focuses on the strengths of SCM strategy as a marketing strategy that
emphasizes the satisfaction and needs of the end consumer as part of the market orientation
strategy, the industry will be able to improve its market orientation supply chain
management.
3.1. Data Analysis Method
3.1.1. Descriptive Analysis
Descriptive analysis is a statistic used to analyze data by describing or describing the
data that has been collected as it is without intending to make general conclusions or
generalizations. (Sugiyono, 2017).
3.1.2. Inferential Analysis
3.1.2.1. Multiple Regression Analysis
Multiple regression analysis is used to predict the effect of two or more independent
variables (independent variables) on one dependent variable (d e p e n d e n t v a r i a b l e ) or
to prove whether or not there is a relationship between the two variables. Functional
relationship between two or more independent variables (x) and a dependent variable (y)
(Rahmawati, et al 2015). The formula is as follows:
Y1 = β1 X1 + e
Y2 = β2.Y2 + β3.Y1 + e
Where:
β : Regression coefficient X1: market orientation Y1: SCM strategy
Y2 : Company Performance e: Standard error
3.1.2.2. Hypothesis Test
1) Individual Direct Effect Test (t test)
The t-test serves to determine whether the independent variable partially affects the
dependent variable significantly in statistics. The t-test can be done by looking at the t-value
and the results of each significant level. The confidence level used is 5%. The variable has no
statistical effect, if the significant test is greater than 0.05. Otherwise, the significant test is
less than 0.05, then the variable affects the dependent variable significantly statistically. The
following is the statistical notation of each hypothesis that will be tested through the t-test.
2) Simultaneous Effect Test
The F-test is used to determine whether the independent variables affect the
dependent variable simultaneously or not. The confidence level used is 5%. If the significant
test is greater than 0.05, then the independent variable does not affect the dependent variable
at all. On the other hand, if the significant test is less than 0.05, then it is concluded that at
least one of the independent variables does affect the dependent variable in a statistically
significant way.
3) Path Coefficient Test
The coefficient of determination is used to see how much influence the independent
variables have in explaining the overall dependent variable and its effect which can be seen in
the Adjusted R square value. The Adjusted R square value is between 0 and 1. If R square is
large (close to zero), then the magnitude of the contribution of the independent variable to the
dependent variable is getting smaller. So the amount of Adjusted R Square is between 0 - 1.
4) Classical Assumption Test
a. Normality Test
The normality test aims to test whether the dependent variable and the independent
variable in the regression model have a normal distribution or not. A good regression model
is to have a normal or near normal data distribution (Ghozali, 2001). To test normality, you
can analyze by looking at the Kolmogorov- Smirnov Z probability value. The basis for
decision making is if the probability value> 0.05, then the regression model fulfills the
assumption of normality.
b. Multicolonierity Test
The multicolonierity test is used to determine whether in the regression model there is
a correlation between the independent variables in a good regression model there should be
no correlation between the independent variables. A good regression model should not have a
correlation between the independent variables. To detect the presence or absence of
multicolonierity in the regression model, the VIF or tolerance value can be seen. If the
Tolerance value> 0.10 then there is no multicolonierity and if the Tolerance value <0.10 then
there is no multicolonierity 0.10 then multicolonierity occurs. If there is no multicolonierity
between variables, the analysis path test can be continued. (Utami & Kusumawati, 2017)
c. Heteroscedasticity Test
The heteroscedasticity test aims to test whether in the regression model there is an
inequality of variance from the residuals of one observation to another (Ghozali, 2011).There
are several ways to determine the presence of heteroscedasticity in regression, one of which is
the Glejser test. The Glejser test is regressing between the independent variables and the
absolute residual variable. If the significance is above the 5% confidence level, then it does
not contain heteroscedasticity (Ghozali, 2011).
RESULTS AND DISCUSSION
The results of research on the effect of market orientation on company performance
with SCM strategies on Micro Manufacturing Enterprises in Bantul Regency were obtained
through distributing questionnaires to 100 respondents. Primary data is the result of
respondents' answers which will be used to answer the formulation of this research problem.
The results are displayed with descriptive analysis of respondent characteristics and SPSS.
Conducting analysis through adjusting the SPSS stages described in the previous
chapter. After seeing the results of data processing, so that the proof of the hypothesis
developed is obtained and as a reference in drawing conclusions.
4.1. Instrument Testing
4.1.1 Validity Test
The validity test in this study uses the product moment correlation value (r). The
significance level used is 0.05. This validity test uses the SPSS program. Testing the validity
of each question item is done by calculating the product moment correlation between the item
score and the total score. A question item is said to be valid if the significance value is <0.05.
4.1.2 Reliability Test
Reliability test is carried out using Cronbach's Alpha. The variable is declared reliable
if Alpha Cronbach is greater than 0.6 (Ghozali, 2011: 250). The Alpha Cronbach reliability
test results obtained for each variable are shown in the following table:
Table 4.4 Reliability Test Results
Variables
Cronbach Alpha
Market Orientation (X1)
0,656
Supply Chain Management Strategy (Y1)
0,620
Company Performance (Y2)
0,615
Cronbach's Alpha value for each variable is more than 0.6 so it can be said that the
instruments used in the study have good reliability (Hair et al., 2006). From the results of the
validity and reliability tests that have been carried out, it can be concluded that the
questionnaire is suitable for use as a research instrument.
4.2. Descriptive Analysis
4.2.1. Description of Micro Manufacturing Business Characteristics.
In this section, it will be described or described from the data of each information
regarding the age of the micro business, the number of employees, and the amount of capital
in descriptive form will display the characteristics of the sample used in this study.
Based on the questionnaires collected from 100 respondents, data regarding the age of
micro businesses were obtained. Descriptions of respondents based on business age can be
seen in table 4.5 below:
Table 4.5 Descriptive analysis of age
Age
Frequency
%
< 5 th
30
30.0
5 - 10 yrs
22
22.0
11 - 15 th
13
13.0
> 15 yrs
35
35.0
Total
100
100.0
From the data above, it can be concluded that the age of most MSMEs is more than 15
years of business, and the least is at the age of 10-15 years of establishment.
Based on the questionnaires collected from 100 respondents, data regarding the
number of employees was obtained. Descriptions of respondents based on the number of
employees can be seen in table 4.6 below:
Table 4.6 Number of Employees
Number of Employees
Employees
Frequency
%
< 25 people
21
21.0
25 - 40 people
27
27.0
41 - 55 people
20
20.0
> 55 people
32
32.0
Total
100
100.0
Based on the questionnaires collected from 100 respondents, data regarding the
amount of capital was obtained. Descriptions of respondents based on the amount of capital
can be seen in table 4.7 below:
Table 4.7 Total capital
Total Capital
Capital
Frequency
%
Rp. 10,000,000 -
Rp. 20,000,000
35
35.0
IDR 21,000,000 -
IDR 30,000,000
25
25.0
> IDR 31,000,000
- Rp. 40,000,000
40
40.0
Total
100
100.0
From the data table above, it can be concluded that the establishment of the highest
Micro and Medium Enterprises with capital above Rp 100,000,000, which is 40% of the
number of samples I took.
4.2.2. Description of Research Variables
This research variable is measured using the lowest score of 1 (very low) and the
highest score (very high) of 5. According to Sugiyono (2010: 242) the interval in determining
the respondent's research criteria is as follows:
1. Strongly Disagree is scored 1
2. Disagree is given a score of 2
3. Neutral is scored 3
4. Agree is given a score of 4
5. Strongly Agree is given a score of 5
Descriptive analysis of the average value, this study consists of three (3) variables
which are analyzed through several statements that have been answered by respondents. The
results of the descriptive variables are presented in table 4.8 as follows:
Table 4.8 Variable Description
Variables
Mean
Criteria
Market orientation
4,22
Good
Supply chain strategy
4,25
Good
Company performance
4,23
Good
Table 4.8 above shows the results of respondents' research on research variables. Based
on the table above, it is known that the average score on the market orientation variable is
4.22 in good criteria. Furthermore, the average supply chain strategy variable of 4.25 is
included in the good criteria, and finally the average company performance score of 4.23 is
included in the good criteria.
It can be concluded that market orientation alone is not enough to improve company
performance in these MSMEs, because other factors are also needed to encourage increased
company performance.
4.3. Inferential Analysis
4.3.1 Hypothesis Test of Direct Effect
The linearity test aims to determine whether two variables have a linear relationship
or not significantly. This assumption states that for any linear regression equation, the
relationship between the independent and dependent variables must be linear.
1. Hypothesis testing model I
Table 4.9 Summary of Regression Results Model I
Dependent
Variable
Independent
Variable
Coef.
Regression
(β)
Se
th
Sig
Y1
X
0,302
0,83
3,134
0,002
Adusted R Square: 0.0082; Fh = 9.820; Sig = 0.02
2. Model II hypothesis testing
Table 4.10 Summary of Regression Results Model I
Dependent
Variable
Independent
Variable
Coef.
Regression
(β)
Se
th
Sig
Y2
X
0,461
0,70
6,179
0,000
Y1
0,423
0,423
5,667
0,000
Adusted R Square: 0.0499; Fh = 50.296; Sig = 0.000
4.3.2 Hypothesis testing of indirect effects
The following is the indirect effect of exogenous variables on endogenous variables,
which includes the indirect effect of X (market orientation) on Y2 ( company performance)
through Y1 ( SCM strategy).
4.4. Discussion
4.4.1. The effect of market orientation on company performance
It is evidenced from the results of the study that there is a positive significant effect of
market orientation on company performance. This shows a better market orientation, so that
there is an increase in company performance. The results of this study are in line with
research from Green et al (2006) with the finding that market orientation has a positive and
significant effect on organizational performance. So that hypothesis 1 states that market
orientation has a positive influence on company performance has been proven.
Market orientation includes competitor and sales orientation, including activities
when obtaining information about competitors and buyers in the target market and
disseminating it through business. It is explained in depth that customer orientation means
understanding the customer's buying target with the aim of creating superior value for buyers
in a sustainable manner. This understanding includes understanding all of the buyer's value
chain. Competitor orientation means that salespeople will try to gather information about
competitors and share this information with other functions in the company, namely for the
product research and development division or conduct discussions with company leaders
regarding strategy development and competitor strengths.
4.4.2. The influence of market orientation on SCM strategy
From the research results, it can be proven that market orientation has a significant
positive effect on SCM strategy. This means that the better market orientation so that the
SCM strategy will increase. The results of this study are in line with Tukamuhabwa's research
(2011) which suggests that market orientation has a significant positive effect on supply
chain management strategies. So hypothesis 2 which states that market orientation has a
positive influence on SCM strategy has been proven.
Narver & Slater (1995) explain that companies that have made market orientation an
organizational culture always focus on external market needs, market demands and desires as
the basis for strategizing for each business unit of the organization, and as a determinant of
the company's success. The company always strives to increase customer trust, identify and
participate in additional supply chains. Frequent contact and communication with supply
chain members, and supply chain members are even involved in product marketing planning.
4.4.3. The effect of SCM strategy on company performance
From the research results, it is proven that there is a significant positive effect of SCM
strategy on company performance. This means that the better the SCM strategy, the more
there is an increase in company performance. The results of this study are in line with the
research of Green et al (2006) which suggests that supply chain strategy significantly
positively affects organizational performance. Thus hypothesis 3 which states that SCM
strategy has a positive effect on company performance has been proven.
There is a positive relationship from the SCM strategy to company performance, so
when companies dock on the strength of the SCM strategy as a way to improve company
performance that emphasizes the satisfaction and needs of end consumers from the supply
chain management section.
The better the SCM strategy so that the company will strive to satisfy customers, thus
the company's market share There was even an improvement in market performance.
4.4.4. The effect of market orientation on firm performance through SCM strategy
From the results of the study it is evident that the SCM strategy positively mediates
the relationship between market orientation and company performance. This means that
market orientation is getting better so that there is an increase in supply chain strategy and an
increase in company performance. The results of this study are in line with research by Green
et al (2006) suggesting that the SCM strategy of manufacturing companies significantly
mediates the relationship between market orientation and company performance, so that the
success of market orientation towards improving the performance of manufacturing
companies is supported by supply chain management strategies. One way to increase
efficiency is through the integration of the company's supply chain activities, so that there are
no difficulties in the supply chain operational plan process. Thus hypothesis 4 which states
that market orientation has a positive effect on firm performance through SCM strategy has
been proven.
The means of gaining a competitive advantage is the application of SCM, as for the
competitive advantage of SCM, namely from cutting costs and increasing revenue, thus it can
play a role in improving organizational performance. The concept of supply chain
management (MRP) can incorporate the management of various management functions in an
inter-organizational relationship formed from an integrated and mutually supportive system
(Mutakin, 2010). MRP or SCM is the application of a series of approaches to integrate
suppliers, entrepreneurs, warehouses or other storage places efficiently. Produce products that
are then distributed with the right quantity, place and time in order to satisfy consumers and
reduce costs.
5.1. Conclusion
Based on the analysis and discussion of the effect of market orientation on company
performance with supply chain management strategy as a mediating variable (Study on
Manufacturing UM in Bantul Regency), the conclusions that can be drawn are:
1. There is a significant positive effect of market orientation on company performance. This
means that the better market orientation so that there is an increase in company
performance.
2. There is a significant positive effect of market orientation on SCM strategy. This means
that market orientation is getting better so that there is an increase in the SCM strategy.
3. There is a significant positive effect of SCM strategy on company performance. This
means that the SCM strategy is getting better so that there is an increase in company
performance.
4. There is a positive and significant effect of market orientation on company performance
through SCM practices in Micro Manufacturing Enterprises in Bantul Regency. This
means that the better the market orientation, the better the supply chain strategy.
