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IJRDM
37,7
600
Received March 2008
Revised June 2008
Accepted November 2008
International Journal of Retail &
Distribution Management
Vol. 37 No. 7, 2009
pp. 600-628
q Emerald Group Publishing Limited
0959-0552
DOI 10.1108/09590550910964620
Internal marketing impact
on business performance
in a retail context
George G. Panigyrakis
Department of Business Administration,
The Athens University of Economics and Business, Athens, Greece, and
Prokopis K. Theodoridis
Department of Business Administration of Food and Agricultural Enterprises,
University of Ioannina, Agrinio, Greece
Abstract
Purpose – The majority of research pertaining to internal marketing (IM) is conceptual and still
remains so even at present. The lack of widely accepted definitions of the IM concept and a relevant
valid measure has lead to increased attempts by academia to investigate the relative concepts and
measures. The purpose of this paper is to examine a synthesis of IM and investigates its effect on
business performance in a retail context.
Design/methodology/approach – The context of this paper is within supermarket chains in
Greece with nation wide coverage. A survey is designed and implemented using the branch managers.
Findings – SEM analysis indicates five dimensions of the IM construct: formal interaction, reward
systems, feedback, internal procedures and policies and internal customer orientation (ICO). Retailers
seem to adopt in an embryonic stage a concept of IM. IM indeed has a positive effect on business
performance.
Research limitations/implications – Single key informant, single context of the paper are
considerations when examining research limitations.
Practical implications – The embryonic stage of adopting and implementing IM within
supermarket chains illustrates a certain manner of managing the internal customer; centralisation
of procedures and tactics. Even if the concept of IM is partially exploited, the respective organisational
behaviours clearly have a positive impact on both financial and non-financial aspects of retail
performance, thus revealing their importance.
Originality/value – This paper contributes to the rare empirical investigation of the IM notion in the
firm and provides evidence on both its synthesis and its impact on business performance. The authors
synthesize the concepts of internal market and ICOs providing a new approach to IM. Construct and
research propositions have been axiomatic and in an only conceptual context until recently.
Keywords Internal marketing, Business performance, Retailing, Supermarkets, Greece
Paper type Research paper
Introduction
Since the 1970s, internal marketing (IM) appeared to be a solution to the problem of
delivering high service quality (Berry et al., 1976). The literature devoted to IM is
rapidly growing (Sasser and Arbeit, 1976; Berry, 1981; Grönroos, 1981; Richardson and
Robinson, 1986; Barnes, 1989; George, 1990; Piercy and Morgan, 1990, 1991; Collins and
Payne, 1991; Piercy, 1995; Foreman and Money, 1995; Varey, 1995; Cahill, 1996;
Sergeant and Asif, 1998; Pitt and Foreman, 1999). The majority of the work pertaining
to IM, especially in the 1980s and 1990s, is conceptual and still remains so even at IM impact
present (Flipo, 1986; Grönroos, 1994; Rafiq and Ahmed, 1993; Cahill, 1995; Varey, 1995; on business
Pitt and Foreman, 1999; Varey and Lewis, 1999; Rafiq and Ahmed, 2000; Bansal et al.,
2001; Ballantyne, 2003; Lings, 2004). performance
In the literature IM has two prime motives. First, it complements external strategic
marketing efforts, through interactions between the personnel and customers. These
interactions are perceived as instrumental in encouraging customer attraction and 601
satisfaction. Second, it effectively develops and maintains a workforce which is both
motivated and satisfied (Dunne and Barnes, 2000). This consecutively contributes to
external and strategic marketing objectives as well as to quality, productivity and
efficiency (MacStravic, 1985). So, the IM initiative serves both the organisation and the
individual employee successfully (Dunne and Barnes, 2000).
IM stresses the importance of the marketing concept internally, within the firm, by
focusing on the employee and providing a source of competitive advantage (Sasser and
Arbeit, 1976; Berry, 1984; Berry and Parasuraman, 1991).
There is little empirical evidence of an attempt to construct a valid measure to
elucidate the concept of IM (Lings and Greenley, 2001; Lings, 2004; Table I). The fact is
that there is extremely limited empirical research in the area to provide some evidence
of a paradigm of the philosophy, notion and implementation of IM. Therefore, this lack
could most probably be the main or high percentage factor when considering the rare
presentation of IM in organisations.
Recent studies attempted an operationalized concept of IM mostly through the
adoption of the internal market orientation (IMO) concept: “[. . .] internal market
orientation is about identifying and satisfying the wants and needs of employees as a
prerequisite to satisfying the wants and needs of customers [. . .]” (Lings, 2004, p. 408).
A stream of recent studies are based on the pioneer work of Foreman and Money (1995)
with an appropriate and analogous expansion relative to the market orientation
concept (Kohli and Jaworski, 1990), mirroring and adapting it internally in the firm
(Lings and Greenley, 2001, 2005; Naudé et al., 2003; Lings, 2004; Gounaris, 2006).
This paper takes a step forward as it amalgamates the two major approaches of the
concept of IM. IMO and internal customer orientation (ICO) are incorporated into one
operationalized construct in order to measure the IM notion within a retail context in
Greece.
This paper aims to empirically investigate:
. the operationalization of the IM in terms of measurement; and
.
its impact on business performance in a retail context.

The contribution of this piece of research is threefold. First, it provides a new approach
to IM literature and within the limited empirical attempts it combines the two major
approaches in the subject area which till nowadays have been examined separately.
Second, it provides empirical findings relative to an under-examined relationship
between IM and business performance, hypothesised for years, like an axiom or being
examined in parts. Finally, the context of the paper provides insight into a sector with
only a few empirical results and at the same time in a cultural context of Southern
Europe which is differs from other more researched countries and cultures (the USA,
UK, Asia and Australia). Retailing is an environment with high employee turnover.
This is due on the whole to mediocre or inadequate employee conditions and
IJRDM
Aim – methodology – Main findings –
37,7 Author (year) sample Background – variables discussion topics

Chaston (1994) Internal customer Modified SERVQUAL Barriers [. . .] emphasis on

relations-investigating department goals [. . .]
barriers (M) many gaps
602 Foreman and IM: concept and Instrument construction: Fifteen items representing
Money (1995) measurement-transaction literature review and Berry the IM concept.
cost perspective (V) and Parasuraman (1991), Components: vision,
Berry et al. (1991) reward and development
Boshoff and IM and enhancement of the Causal model using Organisational
Tait (1996) level of service quality (B) reduced Commitment exert a
SERVQUAL positive influence on
Two of the four internal service quality
gaps (1 and 3) perceptions [. . .] so the
role of IM is to...
convincing frontline
employee to accept and
support the
organisational values,
goals and objectives
should be beneficial to
both the organisation and
customers as well as to
employees
Caruana and IM and organisational IM variables (Money and Effect of IM is on the
Calleya (1998) commitment (B) Foreman, 1996) affective commitment [. . .]
no clear boundaries
between IM and Human
Resource practices [. . .]
there is any reason for
different constructs?
Quester and IM practices (B) Definition of IM – who Focus on the IM practices
Kelly (1999) implements IM (Foreman – Involvement of HRM
and Money, 1995) IM as interdepartmental
responsibility
Conduit and ICO and IMO (V) Construct relationships Supported hypotheses:
Mavondo between: IM process, ICO and market
(2001) organisational dynamics, orientation, ICO and
ICO, market orientation management support,
internal communication
and ICO, personnel
management and ICO
Ahmed et al. IM mix, organisational Construction of a battery of IM mix consists of three
(2003) competencies and business items IM mix – synthesis factors
performance (M) of literature IM mix positive related to
business performance
Organisational
competencies are partial
Table I. mediator of business
Major previous performance
quantitative work on IM (continued)
 IM impact
Aim – methodology – Main findings –
Author (year) sample Background – variables discussion topics on business
performance
Naudé et al. Determinants of IM Adoption of Foreman and Perceived market
(2003) orientation level (CS/S) Money (1995) scale orientation of local
managers, aspects of
communication, 603
socialisation and
workplace satisfaction
affect the level of IM
orientation
Lings and Development of a IMO represents the Five dimensions of IMO:
Greenley multidimensional adaptation of market formal face-to-face
(2005) construct – IMO (R) orientation to the context of information generation,
employer-employee informal information
exchanges internally in the generation, information
firm dissemination, formal
written information
generation,
responsiveness. Positive
impact on important
organizational factors
Gounaris IMO measurement (H) Builds on previous Three factor order
(2006) conceptual basis of Lings construct: three
(2004), mirroring Kohli and sub-dimensions: internal
Jaworski (1990) MARKOR market intelligence
generation, disseminate
intelligence, response to
intelligence
Notes: CS, case study; M, manufacturing; B, banks and financial institutions; T, telecommunications;
S, services; Tch, technology firms; R, retailing; H, hotel industry; V, various Table I.

a continual pressure to adapt to new competitive circumstances. Employees therefore,

lack motivation in regards to promoting their company’s goods and services. Until now
the only deemed workable method applied by employers to ensure a form of staff
promotion/service stability was the offering of incentives (usually monetary).
Therefore, if IM as a concept is applied, it should enhance positive interactions
between staff which in turn would ameliorate their relationship with the external
customer. All these reasons provide an attractive context for our research purposes.
The first section of this paper discusses the notion of IM and provides an insight of
the two major approaches in the field. The literature review provides the basis of the
synthesis of the dimensions of the proposed IM concept in terms of organizational
behaviours. Furthermore, business performance is explained within a retail context.
Plus various attempts to examine the impact of a firms’ behaviour when targeting
internal customers and the market on various indicators of business performance are
exposed. Next, methodological issues are explained and the results of the paper are
presented. The last section of the paper provides a discussion of the findings,
limitations of the paper and propositions for future research.
IJRDM Internal marketing – symbiosis and synthesis of internal customer
37,7 orientation and internal market orientation
The lack of a recognised accepted definition of the IM concept and relevant valid
measures (Varey, 1995; Rafiq and Ahmed, 1993; Ahmed and Rafiq, 1995; Rafiq and
Ahmed, 2000; Lings and Greenley, 2005) has led to an increased number of attempts by
academia to investigate the concept and its measures. Even though the studies
604 concerning IM have increased in number within the last 10-15 years, studies that
provide empirical findings do not exceed ten to 12 in number (Table I). Simultaneously,
it is certain that the investigation and evolution of the market orientation concept
and its measure during the 1990s and till nowadays, has influenced the research
stream in IM.
A few major empirical attempts have been made pertaining to the measurement of
the IM concept: Foreman and Money (1995) in a pioneering work developed an
instrument, entitled internal marketing scale. Lings and Greenley (2001) developed a
scale, entitled IMO and Conduit and Mavondo (2001) focused on ICO. More recently
Bruhn (2003) focused on the relationships between internal service quality, internal
customer satisfaction and internal customer retention, in an attempt to create an
internal services satisfaction index. Naudé et al. (2003) investigated potential
determinants of the IM concept. To epitomize the IM concept, the IM scale of Foreman
and Money (1995) was adopted by a UK-based multinational company. They examined
potential different levels of IMO and the factors affecting these levels. The structure of
the scale was explored by principal component analysis, which indicated a different
classification in relation to the original scale. Ahmed et al. (2003) proposed the concept
of an IM mix that could be effectively used to influence employees, so that they are
motivated and act in a customer-oriented fashion. The dimension of the IM mix was
considered to be without correlation within the construct (orthogonal factors; Table I).
After their first empirical investigation in 2001, Lings and Greenley revisited in
2005 and examined and developed an IMO multidimensional construct. Their
construct consisted of five dimensions: informal information generation, formal face to
face information generation, formal written information generation, information
dissemination and responsiveness. The authors deviated from their initial previous
work in terms of which dimensions represent the IMO construct (Lings and Greenley,
2001). Their construct showed evidence of convergent, discriminant and predictive
validity. The most recent paper is that of Gounaris (2006). The author builds on the
conceptual work of Lings (2004) and from the literature, constructs an adapted and
expanded IMO scale conceptually mirroring to a degree the logic of the market
orientation concept of Kohli and Jaworski (1990). Lings and Greenley (2005) have also
followed that same route. The author developed a third-order factor model of IMO
which consisted of three sub-dimensions with ten variables within the hotel industry.
Again the construct showed evidence of convergent, discriminant and predictive
validity.
A critical number of the previous studies in the area are liberally based on the
pioneering work of Foreman and Money (1995) and in some cases there is an analogous
expansion and adaptation relative to the market orientation concept (Kohli and
Jaworski, 1990), mirroring and adapting it internally in the firm (Lings and Greenley,
2001, 2005; Naudé et al., 2003; Lings, 2004; Gounaris, 2006). They incorporated the
notion that: “[. . .] internal market orientation is about identifying and satisfying the
wants and needs of employees as a prerequisite to satisfying the wants and needs of IM impact
customers [. . .]” (Lings, 2004, p. 408). The IMO concept has as a basis the human on business
resources of the firm. This suggests that the success of external marketing depends to
a great degree on the fact that personnel have been firstly satisfied and have received performance
relative motivation and incentives (Sasser and Arbeit, 1976; Berry and Parasuraman,
1991; Berry, 1984). This notion originates from the philosophy of the human resource
management (HRM). It can be viewed as an action taken by the firm, directed at the 605
contact personnel. This approach recognises the effect of interaction between customer
and employee (Lings and Greenley, 2001).
Even this research group presents some similarities in the conceptualization of the
IMO; however, they differentiate in their approach to the IM notion. The work of Lings
and Greenley (2001) have as a starting point that market orientation as it is provides a
more appropriate conceptualization of the marketing of an organization than the
classical marketing mix. Market orientation is preferred when compared to the
traditional notion of the marketing mix, when they are considered as adapted concepts
to be applied to the internal market-IM, in the context of employer-employee exchanges
(Lings, 2004; Lings and Greenley, 2001, 2005). So, the concept of IMO is the appropriate
one for operationalized IM. The work of Gounaris (2006, p. 436) takes the same route:
[. . .] (IMO) represents the synthesis of specific beliefs with specific “marketing-like”
behaviours [. . .] promotes the need to plan and build effective relationships between
company’s employees and management [. . .]
At the same time, he argues that “[. . .] IM is the notion of internal market orientation
[. . .]” and “[. . .] through IMO adoption, IM strategies become more effective [. . .]”
(Gounaris, 2006, p. 436), creating an unclear picture of what differences there really are
between the IM and IMO. The focus of IM is on the participation of management in
decision making and empowerment.
Nevertheless, IM can be approached also on a more comprehensive and broader
viewpoint because it reflects the “totality” of internal and external functions
and relationships necessary to get things done. It is certain that IM focuses on the
important issue of trying to satisfy employees by providing a value to the
firm-employee relationship (IMO). But at the same time IM has to enhance the proper
environment of providing service quality for the “next” internal customer (ICO) (Dunne
and Barnes, 2000). This paper crosses the boundaries between IMO and ICO and
synthesizes both concepts underlining the need that IM has to represent the
requirement of treating the employee as internal customer and at the same time of
adopting the notion that everyone in the firm is internal supplier and customer in the
value chain. Therefore, by adopting the aforementioned context of the IM, the relative
behavioural dimensions of the organizations are now discussed.

Internal customer orientation (ICO)

The concept of the ICO originates from the notion that quality is an internal
progressive function of the value-generation chain of the firm. Better internal service
quality within the internal exchanges and collaborations leads to the provision of
superior quality to the customer (Lings and Greenley, 2001). It is certain the total
quality management philosophy has an affect on the notion of ICO and is the logic that
all inside the firm are internal customers and suppliers (Denton, 1990; Barret, 1994;
IJRDM Lukas and Maignan, 1996). ICO focuses on the various effects of interchanges between
37,7 personnel and departments, in the value or profit chain of the firm and aims at the
creation of added value in all the steps of the chain (Lings, 2000; Rafic and Ahmed,
1993). This concept, underlines the importance of first satisfying the internal customer
in order to ensure the quality provided to the external customer. Therefore, the
provision of a superior quality service to the external customer is influenced directly by
606 the quality of the internal service. The concept of internal customer and supplier has a
wider intra-firm application. This possibly is within all the various business types and
not exclusively in service organisations (Gummesson, 2000). The notion that
everybody in the firm is simultaneously, a customer and supplier of services to other
colleagues or departments, is one of the dimensions of IM.

Job and employee related information, effective internal two-way communication and
feedback
Most of the approaches attempting to describe the IM concept have revealed a common
element: the need of gathering and analysing information relative to the internal
market, i.e. employees (Sasser and Arbeit, 1976; Lings and Greenley, 2001, 2005; Lings,
2004; Gounaris, 2006). There is a need of exploring the desires and the degree of
satisfaction of employees as well as various factors affecting employee satisfaction and
the subject of their work (Lings, 2000; Lings and Greenley, 2001, 2005). Simultaneously,
firms should also investigate the external environment. The task is to collect and
analyse information and further to create intelligence on the competitors’ personnel,
potential employees and relative legislative job subjects. Currently firms compete for
the best-qualified potential employees, which could provide them with a competitive
advantage (Lings, 2000, 2004; Lings and Greenley, 2001, 2005). So, the need of
information (internal and external) relative to employees and employment subjects is a
critical dimension of the IM construct.
Furthermore, it is crucial for an organisation to operate in a transparent way.
Organisations have to be able to openly share with their members information and
intelligence concerning strategy, objectives, performance and financial situation
(Dessler, 1999; Pfeffer and Veiga, 1999; Bansal et al., 2001). As it has been stated, if we
want to create a climate in the organisation where everyone is for everyone, secrets
cannot be kept (Bansal et al., 2001). The exclusion of information within the
organisation, the various departments and the levels of hierarchy prevents personnel
from taking effective decisions (Pfeffer, 1995, 1998). Concurrently, the provision of
information could operate as an effective feedback mechanism for the personnel in
order to evaluate their performance and the degree of their effective and efficient
decision-making (Robbins and Langton, 1999; Slater and Narver, 1994; Bansal et al.,
2001). Consequently, effective internal communication is necessary for both the
external and internal market (Lings, 2000). Two-way communication between middle
managers, top management and personnel provides appropriate feedback to
employees, thus, improving their job performance (Conduit and Mavondo, 2001;
Grönroos, 1990). Employees need information relative to customer needs, firm’s
objectives, as their contribution may be crucial for the firm and the customer (Conduit
and Mavondo, 2001). The provision of information through the procedure of formal
feedback by the firm to employees is another important dimension of the IM.
Internal procedures and policies, reward systems and management consideration to IM impact
employees on business
IM also requires the formulation of a response attitude and behaviour towards
employee related information. This in terms of job design, rewards and other forms of performance
motivation (which are of great importance to employees), training, recruitment,
internal communications, top management support and other strategic activities in
order to support effectively the market orientation of the firm (Berry and Parasuraman, 607
1991; Lings, 2004; Lings and Greenley, 2001). These targeted internal behaviours
describe the degree of a firm’s attitude in job related subjects. It is widely known that
reward and wage systems determine to a certain degree the level of the improvement of
the work of the internal customer. Reward and motivation schemes and systems are
crucial elements of employees’ behaviour (Lawler and Rhode, 1976; Anderson and
Champers, 1985; Jaworski, 1988). Reward systems can motivate employees to adopt
new behaviours and attitudes towards the firm’s market orientation (Ruekert, 1992;
Hauser et al., 1996). But these are not the only ones. Job improvement can be created by
providing care services for employees’ children or older relatives (Comm, 1989). Varey
(1995) gives an emphasis on the social aspect of IM and claims that it is not restricted
only to the financial aspect, taking the form of any wage, bonus or other monetary
incentive (Lings, 2000; Lings and Greenley, 2001). The social aspect of IM is also
presented within the concept of managerial consideration. It refers to the degree that
managers exploit a work climate with psychological support, friendship, help, mutual
trust and respect (Johnston et al., 1990). As the supervisor is the first link between the
employee and the organisation, a positive behaviour with employees could generate
better attitudes towards the firm (Katz and Khan, 1978).
So far, it has been revealed that the “blanket” concept of the IM incorporates
the following aspects:
.
ICO.
. Collection of specific job and employee related information internal and external
to the firm, effective internal two-way communication between all levels of
management, hierarchy and employees as well as the provision of formal
feedback to personnel.
.
Targeted internal procedures and policies describing the degree of the firm’s
responsiveness to job related subjects, wage and reward systems and
management consideration of employees.

IM is a philosophy as it provides a systematic framework underlining the importance

of creating an appropriate internal market with the appropriate “products” and
emphasising the need of creating a value chain where the notion behind the IM
exchange relationships in the firm are the ground for the successful external marketing
orientation and implementation. IM is at the same time a strategy as it should lead
organizational suitable behaviours targeting internal market, customers and suppliers,
exchanges and relationships, fulfilling its directions.
It is certain that organizations have become internal market places as they are split
into multiple business units or profit centres. Even concepts and management
directions revealed by manufacturing retailers during the 1960s are the illustration of
this organizational push (Gummesson, 2000). Stores are the business units of the
retailer, which are continuously evaluated in financial terms and in their contribution
IJRDM to the total performance of the firm. Stores of multiple retailers compete in an indirect
37,7 manner with other stores of the same chain. This provides a picture of small
micro-markets where the relationships deployed between/and within management,
employees and customers are crucial for the market results of the firm. Thus, retailing
comprises an appropriate context for IM evolution and exploitation.
In the following paragraphs, business performance is examined within a retail
608 context in an attempt to reveal its nature in the specific context. Consequently, the
relationship between IM and performance under the light of different approaches,
having as a starting point different management philosophies are also examined.
Business performance in a retail context. An organization adopts specific strategies
to lead to the accomplishment of its objectives. The mean of monitoring and controlling
this process is by the measurement of performance. The most common indicators of
measuring the performance of an organization are financial indicators such as return
on investment (ROI), return on assets (ROA) or return on capital employed. However,
the sole consideration of the financial dimensions of performance, have received a
stream of criticism, because they do not incorporate and represent other dimensions of
the performance (Brignall and Ballantine, 1996).
It is certain that financial dimensions of performance have been used to a great
degree in empirical research (Capon et al., 1990; Dawson, 2005; Reynolds et al., 2005)
and represent the economic aspect of the organizational objectives. On the other hand,
researchers confront serious problems when trying to acquire measures of financial
performance (Dawson, 2005; Dess and Robinson, 1984; Reynolds et al., 2005;
Venkatraman and Ramanujam, 1986). The nature of the information affects its
availability to the public (Ailawadi et al., 1995) and forces researchers to find and adopt
other alternative measurement models. One method is to adopt indirect measures of
financial indicators by, for example, asking managers to evaluate their firm’s
performance in relation to their major competitors. This kind of performance data has
been characterised as subjective or indirect in contrast to data collected internally by
the firm and within its official files (Dess and Robinson, 1984).
In order to obtain precision in measuring the performance of the firm, one has also
to examine non-financial indicators influencing the overall performance of the firm.
Indicators such as product or service quality, market share, customer loyalty and
customer satisfaction could be considered as non-financial indicators (Venkatraman
and Ramanujam, 1986).
To date, it is not clear what type of indicators could be adopted for measuring
performance in financial terms in retailing (Ailawadi et al., 1995; Dawson, 2005;
Reynolds et al., 2005). In the relative literature the most frequently examined financial
indicators are gross margin, rates of return (Bradley and Taylor, 1992; Dobson, 2005;
Reynolds et al., 2005) and sales revenue and growth (Doyle and Hooley, 1992; Dobson,
2005; Greenley, 1995; Hooley et al., 1992; Reynolds et al., 2005). In addition the most
common non-financial indicators are: market share (Cronin and Skinner, 1984;
Hooley et al., 1990; Doyle and Hooley, 1992; Deng and Dart, 1994; Liu and Davies, 1997),
labor and space productivity (Cronin and Skinner, 1984; Ingene, 1982, 1984; Dobson,
2005; Reynolds et al., 2005) and stock turn (Dawson and Shaw, 1989).
Firm performance is a polymorphous subject. There is a need of providing an
integrated view of the evaluation of firm objectives through the examination of both
specific financial and non-financial indicators. This provision can offer a broad IM impact
operationalization of the firm performance (Venkatraman and Ramanujam, 1986). on business
Internal marketing and business performance. The remark that there is little
empirical evidence on IM leads to notional and practical limitations relative to performance
the investigation of its relationship with business performance. Since the literature
provides only few empirical investigations of the concept, it seems logical to bridge the
research gap in exploring the specific relationship. Generally, the specific relationship 609
has been mentioned as axiom within the bibliography.
What the literature provides is the investigation of various relationships between
different dimensions representing the IM or IMO concept with isolated dimensions
representing parts of what can be characterised as performance of the firm.
In services marketing literature, one can find a direct or indirect affect of some of the
IM concept dimensions (examined in an isolated manner) on some categories or
dimensions of business performance indicators, primarily: improving service quality
(Pfau et al., 1991), decreasing the rate of personnel turnover (Gummesson, 1997),
creating customer conscious employees (Grönroos, 1981), improving employee
commitment to the organisation (Wasmer and Brunner, 1991). Moreover, various
relationships have been examined, for instance: employee satisfaction and customer
satisfaction (Heskett et al., 1994; Nagel and Cilliers, 1990), service quality and business
performance (Capon et al., 1990) and internal service quality and business performance
(Caruana and Pitt, 1997).
Having in mind the literature devoted to total quality management, one can find
empirical evidence in the following relationships (indicative): workforce and top
management commitment with ROI (Adam, 1994), senior management involvement
and employee compensation and recognition with financial performance (Adam et al.,
1997), employee fulfilment and customer fulfilment (Anderson et al., 1995), open
culture, employee empowerment and executive commitment with competitive
advantage (Powell, 1995), long-term relationships with suppliers and use of
process-focused improvement tools with ROA and return on sales (Ittner and
Larcker, 1997).
HRM literature demonstrates several empirical attempts at the HRM practices level
and their relationships with some kind of business performance, for example positive
links have been found between: the use of “cooperative and innovative” HRM practices
and productivity (Ichniowski et al., 1993, cited in Hiltrop, 1996), the extensiveness of
recruiting, selection test validation, and the use of formal selection procedures and firm
profits (Terpstra and Rozel, 1993), the adoption of employee training programmes and
financial performance (Russell et al., 1985), the use of “high performance work
practices” and employee turnover, productivity and short- and long-term measures of
corporate financial performance (Huselid, 1995).
The common denominator of all the above research approaches is the attempt of
empirical evidence of the positive affect of business behaviours in relation to the
internal customer and internal market on business performance. They provide a part of
the puzzle as examined separated or isolated dimensions (transformed in relative
variables) of notions nearly to or part of IM concept with some kind of business
performance indicators. Having in mind all these attempts and the restriction in
empirical evidence of a more holistic approach relative to the measurement of IM
IJRDM concept till recently, it reveals the urgent need of providing a deeper insight into the
37,7 subject area which was formulated the genesis of our attempt.
Thus, the aim, of this paper is twofold:
(1) an examination of an IM scale; and
(2) an insight into the impact of IM on business performance in a retail context.
610
Methodology
In order to obtain relevant retail data, supermarket chains with nationwide coverage in
Greece were selected. This choice was for the following reasons. Supermarkets are a
retailing business adding value to products and offering customers an important
aspect of the retail offer; services. Branch managers were approached as they are to
some degree independent and impact on employees. It is widely known that the role of
the manager and especially of the Branch manager in this process of the organisation is
critical, as managerial behaviour and actions have the potential to influence employee
behaviour. This, in turn, could probably affect customers’ perceptions of the “product”
they receive (Hartline and Ferell, 1996).
Initially, 25 branch managers and marketing executives were selected for in depth
interviews, to ensure no potential problems in the wording and or translation of
specific items of the questionnaire into Greek. Qualitative research identified the
adaptation and in some cases the deletion of specific items. This is discussed in the
formulation of the adopted measurements in the last section of the paper. In depth
interviews were conducted in order to specify the pool of the proposed items and then
to pre-test the questionnaire. Respondents were asked to evaluate the meaning and
their relativity of the various notions described within specific items-questions, their
wording as the majority was translation and the relevance of the questions to the
specific organizational context being investigated. Authors provided interviewees with
an evaluation sheet for recommendations. In parallel, the overall comments of
respondents were transcribed and analysed in order to identify potential sources of
both positive and restricted subjects relative to the questionnaire (32 branch managers
and marketing executives). Questionnaires were then sent to 1,288 branch managers.
The final response rate was 265 (20.5 per cent), of which 252 (almost 20 per cent) were
deemed usable.
The adopted construct measures of the IM concept are:
.
ICO is represented by the thus termed scale used by Conduit and Mavondo
(2001). One question has been excluded as it was found to be similar with another
item within the variable of formal interaction which is presented in the next
paragraph.
.
The need of information (internal and external) relative to employees and
employment subjects, effective internal two-way communication between and
within the hierarchy of the organisation have been operationalized by the
following constructs: group interaction, collegial interaction, formal interaction
(have been adapted) and external environment adopted from the work of Lings
and Greenley (2001). The crucial aspect of feedback within the organization and
within employees is represented by the homonym variable “feedback” deriving
from the adaptation of the construct titled “internal communication” adopted by
Conduit and Mavondo (2001). The initial construct has four dimensions:
 organisational perspective, feedback, organisational integration and media IM impact
quality. Questions from the first three dimensions were used. Questions excluded on business
from the questionnaire were those which had almost the same meaning as
questions included in the other dimensions of the IM (formal interaction, performance
feedback).
. According to the literature review, organisations have to depend upon their
internal market in addition to the external customer and market. Procedures and 611
policies targeted internally to the internal customer are crucial for the creation of
a balanced and integrated management of the firm. In order to represent the
responsiveness of the firm towards its internal market, five out of nine items
representing the initial responsiveness variable of the MARKOR scale (Kohli and
Jaworski, 1993) have been adapted in terms of meaning and wording to represent
responsiveness to internal market and the context of the retail organization. The
scale has been titled as internal procedures and policies. Moreover, the scale of
Jaworski and Kohli (1993) named in its initial form reward system orientation,
was adapted, in order to capture the concept of reward systems and motivation
incentives. The initial scale consisted of six questions. Two were excluded from
the questionnaire since they had been developed for a different research and
business context (business market). One question relative to the compensation
system with a direct link to the level of customer satisfaction has been expanded
in order to capture all the hierarchical levels within a typical retail
firm-employees, branch managers and top management. The final measure of
the variable titled reward systems contains five items. The concept of managerial
consideration has been measured adopting the constructs of wage flexibility and
job flexibility from the work Lings and Greenley (2001).

Totally the IM construct incorporates ten variables and 46 items:

(1) ICO;
(2) group interaction;
(3) collegial interaction;
(4) formal interaction;
(5) external environment;
(6) feedback;
(7) internal procedures and policies;
(8) reward systems;
(9) wage flexibility; and
(10) job flexibility.
All the items were measured using a seven-point Likert scale ranging from
1 ¼ “I strongly disagree” to 7 ¼ “I strongly agree”.
Business performance was measured by asking respondents to determine their
business performance in comparison to their major competitor for the last three years
in the following indicators, i.e. subjective and indirect measures (Dess and Robinson,
1984; Conant et al., 1993; Liu and Davies, 1997; Narver and Slater, 1990; van Egeren and
O’Connor, 1998): financial indicators – total sales, growth rate of sales (Doyle and
IJRDM Hooley, 1992; Hooley et al., 1992; Greenley, 1995; Slater and Narver, 1994) gross margin
37,7 (Ingene, 1984; O’Riordan, 1993) and non-financial indicators – market share (Buzzell
et al., 1975; Cronin and Skinner, 1984; Deng and Dart, 1994; Hooley et al., 1990; Liu and
Davies, 1997), space productivity (Cronin and Skinner, 1984; Goodman, 1985; Ingene,
1982, 1984) and stock age (Daswon and Shaw, 1989). We incorporated another two
indicators, i.e. human or employee productivity and return on sales, which were
612 eventually excluded as interviewees claimed difficulties in providing a precise
evaluation. The adoption of both financial and non-financial indicators is a better
approach when measuring the overall performance of the firm (Venkatraman and
Ramanujam, 1986). All the performance items were measured using a seven-point
Likert scale ranging from 1 ¼ “much worse” to 7 ¼ “much better”.

Purifying the measurements

We advocate that the operationalization of IM in terms of a measurement is
represented by a ten factor-latent variable model where all the factors are correlated.
Confirmatory factor analysis (CFA) employing structural equation modelling analysis
using AMOS 5.0 was used to investigate the IM scale. Three CFA models were
estimated and later compared to each other, in order to find the best-proposed model
fitting the specific data:
Model 1. Covariation among items is best explained by the ten factors which are
allowed to correlate.
Model 2. Covariation among items is presented by three factors with each factor
represents a specific component of an artificial IM scale entitling them as;
intelligence generation for the internal market, dissemination of the
intelligence and responsel.
Model 3. Items are incorporated into a single factor model, i.e. a one-dimensional
model in which all the items load into one factor illustrating IM.
Since the nature of the study is exploratory, all three models have been revised
(post-hoc analysis) (MacCallum, 1986) in terms of excluding all indicators-items and/or
latent variables in which computed loadings showed non-statistical significance. For
example, Model 1 has been left with five latent variables and 11 indicators relative to
the initial Model 1 with ten variables and 46 indicators-items. A generation model
strategy was used (Joreskog and Sorbom, 1993). Table II shows the statistics of all the
three competing models.
Excluding the non-significant indicators and latent variables, the three competing
models at the last stage of post hoc analysis have a different number of indicators, as
well as, the differences between the nature of the indicators. The examination of
differences in x 2 (Dx 2) as happens with nested models, cannot be applied (Bentler and
Chou, 1987; Bollen, 1989; Hair et al., 1998). The examination of all the available
statistics in Table II reveals that the Model 1 (Figure 1) with the five correlated factors
and the eleven indicators-items fits the specific data set only slightly better than the
other two models.
The respective reliabilities for all three proposed models were examined as was
discriminant validity in order to select the most appropriate model. It is crucial to
examine the reliability of the proposed models and especially composite reliabilities
 IM impact
Models 1 2 3
on business
Number of factors 5 3 1 performance
x2 87.334 102.337 87.444
Degrees of freedom 34 41 27
GFI/AGFI/PGFI 0.944/0.891/0.486 0.935/0.896/0.581 0.925/0.875/0.555
NFI 0.932 0.89 0.89 613
CFI 0.957 0.93 0.92
PNFI-PCFI 0.576-0.592 0.664-0.693 0.667-0.690 Table II.
RMSEA 0.079 0.077 0.094 Statistics of IM models

0.64
form_1 FORMAL_IN_1 0.80
Formal_INT
0.76 0.87
form_2 FORMAL_IN_2

0.79 0.67
rwd_1 REWARD_1 0.89

0.670.82 Reward systems

rwd_2 REWARD_2 0.48

0.23
inprcd_1 INTEPROCED_1 0.45
0.48 0.59
0.55
0.74 INT_Procedures
inprcd_2 INTEPROCED_2
0.50 0.46
0.84
0.71
inprcd_4 INTEPROCED_4
0.65
0.49
0.77
fdk_1 FEEDBACK_1
0.88
0.49
Fdback
0.78 0.88
fdk_2 FEEDBACK_2
0.72

0.68
imrel_2 IMAREL_2 0.83
ICO
0.57 Figure 1.
0.32 IM – the construct
imrel_5 IMAREL_5 (Model 1)
IJRDM and variance extracted values (Hair et al., 1998). The composite reliabilities and the
37,7 values of variance extracted are shown in Table III and findings reveal that Model 1 is
superior to the other models in terms of reliability. These estimates indicate that trying
to force the items measuring IM onto fewer factors leads to a significant deterioration
of the model fit relative to the five-factor model. Therefore, Model 1 can be proposed as
the model which fits data better than the other two models.
614 It is known that evidence of discriminant validity is provided by a low to moderate
correlation among measures when are designed to measure conceptually different but
related constructs: a value of f coefficient significantly less than one, offers support
for discriminant validity among the constructs (Anderson and Gerbing, 1988). The
inter-factor correlations (f) are shown in Table IV. Another test of discriminant
validity proposed by Fornell and Larcker (1981) was adopted: a construct is empirically
distinct if the average variance explained by that construct’s items is greater than the
construct’s shared variance with every other construct, i.e. the square of the inter-factor
correlations (f 2) between any two constructs. Model 1 shows evidence of discriminant
validity.
SEM analysis indeed indicates that the construct of IM consists of five latent
variables which are allowed to correlate and eleven items (Table V): formal interaction,
reward systems, feedback, internal procedures and policies and ICO. Formal

Model 1 (five factors) Formal interaction Feedback Reward systems Internal procedures ICO
Composite reliability 0.82 0.87 0.84 0.73 0.66
Variance extracted 0.69 0.77 0.72 0.50 0.50
Model 2 (three factors) Generation Dissemination Response
Composite reliability 0.82 0.51 0.96
Variance extracted 0.69 0.34 0.80
Model 3 (one factor) IM
Composite reliability 0.85
Variance extracted 0.40
Table III.
IM models: composite Notes: Construct reliability ¼ (S standardized loading)2/(S standardized loading)2 þ Se j; variance
reliability and variance extracted ¼ (S standardized loading 2)/(S standardized loading)2 þ Se j
extracted Source: Fornell and Larcker (1981)

Model 1 (five factors) Formal interaction Feedback Reward systems Internal procedures ICO

Formal Interaction 1
Reward systems 0.672 1
Internal procedures 0.479 0.455 1
Feedback 0.592 0.505 0.494 1
ICO 0.457 0.651 0.493 0.716 1
Inter-factor correlations (f)
Table IV. AVE
IM Model 1: inter-factor Formal interaction 0.705 0.590 0.730 0.595
correlations (f) – square Reward systems 0.452 0.605 0.745 0.610
of inter-factor Internal procedures 0.229 0.207 0.630 0.495
correlations (f 2) and Feedback 0.350 0.255 0.244 0.635
average variance ICO 0.209 0.424 0.243 0.513
extracted (AVE) Square inter-factor correlations (f 2)
interaction represents the need of gathering and analysing information relative to IM impact
employees. Super market chains explore employee attitudes when considering reward on business
systems and compensation. At the same time, they are concerned about employees’
participation in decisions and actions regarding the branch (Table AI). The reward performance
system seems to concern only the top and middle management (head office branch
managers). There is no evidence of rewarding the “first line” even though it is focusing
on customer satisfaction. In contrast retailers respond to changes in labour issues and 615
to employees’ complaints (internal procedures and policies). Employees receive
feedback from branch managers on their job performance and they know how their
performance is being appraised (feedback). Moreover, one could find the diffusion of
the notion that everybody within the firm is an internal customer and supplier and the
aim is to provide a quality service to other colleagues, branches or departments (ICO)
(Table AI). All these aspects represent the concept of IM within the super market
chains indicating an exploratory route.
The CFA procedure was also employed for the construct of business performance.
Two different models were compared – Model 1, covariation among items is best
explained by two factors which are allowed to correlate, financial performance and
non-financial performance (Figure 2) and Model 2, covariation among items is best
explained by one single factor, business performance. Statistics strongly indicated that
Model 1 fits better than Model 2 to the specific data (Table VI). Model 1 provides
evidence of convergent and discriminant validity as well as composite reliability
(Tables VII and VIII).

Findings
The median respondent – branch manager has the following profile: male (63.10
per cent), 11-15 years of total work experience (58.8 per cent), 4-6 years in the position
of branch manager (59.9 per cent) and possessing only a lyceum (high school) degree
(50.8 per cent; Table IX).
After the methodological procedure indicating the adoption of the best models
regarding the specific data, the relationship between IM and business performance was
examined (Figure 3 and Table X). It was revealed that IM has a positive significant

Indicator Latent variable Estimatesa SE Critical ratio Loadingsb

FORMAL_IN_1 ˆ Formal_INT 1* 0.797

FORMAL_IN_2 ˆ Formal_INT 1.015 0.087 11.632 0.871
REWARD_1 ˆ Reward systems 1 0.887
REWARD_2 ˆ Reward systems 0.846 0.067 12.551 0.819
INTEPROCED_1 ˆ INT_procedures 1 0.483
INTEPROCED_2 ˆ INT_procedures 1.407 0.212 6.64 0.740
INTEPROCED_4 ˆ INT_procedures 1.724 0.248 6.948 0.843
FEEDBACK_1 ˆ Feedback 1 0.877
FEEDBACK_2 ˆ Feedback 1.149 0.081 14.237 0.883
IMAREL_2 ˆ ICO 1 0.826 Table V.
IMAREL_5 ˆ ICO 0.702 0.095 7.369 0.565 IM Model 1: maximum
likehood estimates and
Notes: aUnstandardized values; bstandardized values; *p , 0.001 standardized values
IJRDM 0.72
er_s PER_SALES 0.85
37,7 0.82
0.91 F_PERFORMANCE
er_sg PER_SALES_GROWTH
0.85
0.72
er_gm PER_GROSS MARGIN

616
0.83

0.81
er_ms PER_MARKET SHARE 0.90
Figure 2. 0.79 0.89 NF_PERFORMANCE
Retail business er_sp PER_SPACE PROD
performance – the 0.76
0.57
construct (Model 1) er_ps PER_STOCK

Model 1 2

Number of factors 2 1
x2 19.450 * 113.053
Degrees of freedom 8 9
NFI 0.983 0.901
CFI 0.990 0.908
PNFI/PCFI 0.524/0.528 0.541/0.545
Table VI. RMSEA 0.076 0.215
Statistics of business
performance models Note: *Non-significant at p , 0.013

Indicator Latent Variable Estimatesa SE Critical Ratio Loadingsb

SALES ˆ F_PERFORMANCE 1 0.851

SALES_GROWTH ˆ F_PERFORMANCE 1.011 * 0.054 18.791 0.906
GROSS MARGIN ˆ F_PERFORMANCE 1.04 * 0.063 16.516 0.847
Table VII. MARKET SHARE ˆ NF_PERFORMANCE 1 0.9
Business performance SPACE PROD ˆ NF_PERFORMANCE 0.949 * 0.048 19.648 0.888
Model 1: maximum STOCK ˆ NF_PERFORMANCE 0.843 * 0.058 14.611 0.757
likehood estimates and
standardized values Notes: aUnstandardized values; bstandardized values; *p , 0.001

effect on business performance, both financial and non-financial. Hence, retailers

wishing to improve their performance indicators in financial and non-financial terms
have to focus on the human aspect of their firm and especially to:
.
explore in a formal way the attitudes and needs of their employees;
.
reward everyone in the firm in relation to customer satisfaction and provided
service;
 .
provide feedback concerning assessment methods, employees’ effectiveness, IM impact
corporate and store objectives; on business
.
care about employees’ needs, complaints and job related inquiries; and performance
.
attempt to disseminate the concept within the firm, with personnel acting as
internal suppliers to their colleagues.

Except for the apparent implications for retailers, it is certain that this important 617
empirical evidence provides an amelioration of our knowledge and fills a gap in the
scarce literature devoted to IM.

Financial performance Non-financial performance

f Values
Financial performance 1 Table VIII.
Non-financial performance 0.833 1 Business performance
AVE Model 1: inter-factor
Values of f2 correlations – square of
Financial performance 0.74 inter-factor correlations
Non-financial performance 0.69 (f 2) and average
Composite reliability 0.88 0.72 variances – composite
Variance extracted 0.90 0.75 reliabilities

Frequency %

Gender
Male 159 63.10
Female 93 36.90
Position experience
Up to 3 years 77 30.56
4-6 106 42.06
7-10 59 23.41
10þ 10 3.97
Education
Compulsory 59 23.4
Lyceum 128 50.8
Vocational 35 13.9
University 28 11.2
Postgraduate 1 0.4
Other 1 0.4
Total work experience
Up to 5 years 7 2.78
6-10 67 26.59
11-15 120 47.62
16-20 47 18.65 Table IX.
21þ 11 4.36 Branch managers:
demographic
Note: N ¼ 252 characteristics
IJRDM 0.47
e-1 FORMAL
37,7 0.49 0.6
e-p
e-2 REWARD 9
0.70 0.51
0.46 0.68 0.72
e-3 FEEDBACK IM PERFORMANCE
.60
0.36 0 0.84 0.90
618
65

e-4 INT_PROC
0.

0.71 0.80
0.42
Figure 3. e-5 ICO F_PERFOR PERFOR
IM and retail business
performance
e-9 e-10

Critical Indirect
Estimatesa SE Ratio Loadingsb effects

PERFORMANCE ˆ IM 1.385 * 0.171 8.109 0.717

ICO ˆ IM 1.000 – – 0.646
INT_PROC ˆ IM 1.474 0.189 7.789 0.602
REWARD ˆ IM 1.194 0.135 8.825 0.702
FORMAL ˆ IM 1.227 0.147 8.324 0.687
Table X.
FEEDBACK ˆ IM 1.164 0.132 8.838 0.678
IM and business
PERFOR ˆ PERFORMANCE 1.000 – – 0.896
performance:
F_PERFOR ˆ PERFORMANCE 0.818 0.065 12.495 0.842
unstandardized,
PERFOR ˆ IM 0.643
standardized regression
F_PERFOR ˆ IM 0.604
weights and indirect
effects Notes: aUnstandardized values; bstandardized values and direct effects; *p , 0.001

Discussion and conclusions

This paper aimed to examine a construct of the IM concept and its impact on business
performance within a retail context. The contribution of this piece of research is
threefold. First, it provided a new approach to IM literature and within the limited
empirical attempts as it combines the two major approaches in the subject area, which
till nowadays have been examined separately. The paper examined and validated
a synthesis of the IM dimensions, incorporating both the concepts of IMO and ICO.
Further it indicated that the construct of IM, within the retail industry, consists of five
dimensions: formal interaction, reward systems, feedback, internal procedures and
ICO. The formulation of the construct with five dimensions has to be further discussed.
First, it is apparent to underline the lack of participation of the variables that have been
used by Lings and Greenley (2001): external environment, collegial interaction, group
interaction, wage flexibility and job flexibility. One possible explanation is that the
context of this paper (Greece) is dissimilar from the milieu of the paper of Lings and
Greenley (2001) (e.g. UK), and affects to a certain degree the dimensions of the proposed
construct. The type of retailing (supermarket chains) also could be a reason per se of
differentiation relative to whether the variables would be applicable in a retailing
setting in UK. The paper of Lings and Greenley (2001) was conducted within
the various types of retailing and not specifically in grocery or supermarket chains.
Also it is difficult to make a straight comparison as there are no more details of the IM impact
proportion of the specific type of retailing in their sample. In addition, it is without on business
doubt not surprising that a part of the indicators and latent variables have been
non-significant and excluded. In the previous aforementioned studies the initial pool of performance
items was 60 arriving at 20 after purifying the scales (Lings and Greenley, 2001).
Moreover, the existing style of management needs to be taken into account when
analysing IM and organizational behaviours. Some of the core behaviours designed to 619
be implemented within a participated organizational context could not be found within
a centralised control-based management (Ahmed and Rafiq, 2002).
Moreover, during the procedure of personal interviews it was revealed that retailers
do not employ a particular widely-implemented management policy concerning job
and wage flexibility policies (wage flexibility and job flexibility). Almost half of the
branch managers have indicated that they have limited and sometimes no
responsibility in determining the level of remuneration of their staff in order to
adapt to local conditions. Further, it seems that some of the retail firms permit
employees to have some flexibility concerning their hours of work. This means that
they can choose to work during the morning or noon shifts. However, they have to
pre-determine shifts in order for Branch Managers to efficiently distribute staff among
the six days and operating hours of the store.
Group interaction and collegial interaction are not supported by the SEM analysis to
be two of the dimensions of the IM construct. This finding is very important, as it
indicates that both top management and store management do not fully exploit the
concept of the internal market. Supermarket chains in Greece seem to seek instinctively
the best route to IM. Their attempts to implement an internal orientation, probably
presents the first phase of adopting the concept. The head office remains
predominantly the main source of deciding and implementing whatever strategic
and most of the tactical directions and policies regardless of the marketing concept,
i.e. internal or external to the firm.
There is no evidence of disseminating authority on decision making, but rather a
situation of a responsibility holding culture. The role of the branch manager has been
determined as mostly focusing on practical subjects on a day-to-day store routine.
Additionally, information on local or general employment conditions and firms
competing for the same employees are not found to be significant (external
environment). This finding supports the above thought of the embryonic stage in the
adoption of the IM concept, within the specific retail sector in Greece.
On the other hand, SEM analysis indeed determines five dimensions of the IM
construct. One can easily observe that all the dimensions of the integrated construct are
relevant to a centralised management model. All the items represent firm behaviours,
in which most of the tactics are designed, implemented and directed by the top
management. Retailers (supermarket chains) in Greece seem to adopt, one way or
another, a concept of IM as they:
.
explore in a formal way the attitudes and needs of their employees;
.
reward the various management levels in the firm in relation to customer
satisfaction and provided service;
.
provide feedback concerning assessment methods and employees’ effectiveness;
IJRDM .
are concerned about employees’ needs, complaints and job related inquiries, and
finally; and
37,7
. attempt to disseminate the concept within the firm, by means of personnel acting
as internal suppliers to their colleagues.
It is a clear picture of a centralised formalised organisation where every attempt is
620 directed by the upper levels of hierarchy to the lower levels without reverse routing.
Super market chains in Greece do a lot in the right direction. Adopting and
implementing an IM concept, provides a set of benefits which could lead to a
competitive advantage if fully exploited by:
.
Balancing the external and internal product by providing an adapted “job
product” which meets and satisfies the needs of employees by motivational and
reward systems with a marketing perspective focusing on the external customer
and their satisfaction.
. Supporting decisions made by employees by providing adequate feedback in
order to implement and adopt a market orientation culture and behaviour.
.
Developing a quality and marketing culture, a shared system of beliefs internally
which leads to a customer process orientation for both the internal and external
relationships.

The feeling is that factors like example organisational and structural problems,
demographics and synthesis of the employees and the ratio of turnover, restrict the
exploitation of the concept to the present limits.
The second contribution is the provision of empirical findings relative to an
under-examined relationship between IM and business performance being
hypothesised for certain for years, like an axiom or being examined in parts. The
strength of the hypothesised relationship indicates that IM is an important driver for
business performance, financial and non-financial. Findings provide credence to past
literature that has assumed this relationship as axiom, and hence, this paper
contributes to the academic literature in this area. From a managerial perspective, this
could encourage retailers to cooperate with their personnel in order to create and
maintain long-term relationships. With this approach retailers could build an effective
value chain targeted at both internal and external recipients (employees and customers;
Gummesson, 2000).
Simultaneously in one way or another we have to abandon the practice of one way
internal communication activities to promote business objectives concerning the
external market and customers (Ballantyne, 1997). Following the same logic, the IM,
philosophy and functional activities, cannot include the marketing department or
marketing people exclusively. Top management with human resources and marketing
have to play the crucial roles by actively participating in the strategic formulation and
tactical implementation of the IM concept within the firm (Ballantyne, 2000).
Finally, the context of the paper provides insight of a sector with only few empirical
results and simultaneously in a cultural context of Southern Europe which differs from
other more researchable countries and cultures (the USA, UK, Asia and Australia).
It is certain that single key informant, post-hoc analysis, the single context of the
paper and probably the sample size (concerning the initial measurement model) are
considerations when examining research limitations. Nevertheless, there is a need of
further validation of the IM scale as the behavioural aspect of the IM concept IM impact
implemented in the firm. Its applicability in different retail and service settings is being on business
considered inevitable. The “nice” of the specific type of retailing probably creates
restrictions in generalization of the scale even provides a more analytical insight of the performance
relationships being examined – Ahmed et al. (2003) call for investigation of the concept
in specific service sectors. There is also an urgent need of confirmation and a cross
validation of the IM scale or similar measurements in more contexts and cultures. 621
Context seems to affect the synthesis of the IM construct and probably the
differentiation in the stage of implementing or adopting specific behaviours by the firms.
It is crucial to investigate in a more systematic manner the possibility of casual ordering
within the dimensions of IM by trying to reveal any sequence to the applicability of firm
behaviours. For example, the organisation collects information relative to the employees
and legislate subjects and then reacts with the appropriate policies.
IM is holistic in nature (Ahmed and Rafiq, 2003). It is very difficult to be “grasped”
ignoring the organization and the employees or persons providing a meaning to it.
IM has to enhance integration and co-ordination in being a functional base of external
organizational marketing effectiveness. The route to its deeper understanding is not so
far away but there is a need of a more wide spread investigation.

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Further reading
Grönroos, C. (1984), “A service quality model and its market implications”, European Journal of
Marketing, Vol. 18 No. 4, pp. 36-44.
Varey, J.V. and Lewis, R.B. (Eds) (2000), Internal Marketing: Directions for Management,
Routledge, London.

Appendix

Internal marketing Mean SD

Formal interaction
FORMAL_IN_1 – we survey our staff at least once a year to get information about their
attitudes towards reward systems and compensationb 4.54 1.51
FORMAL_IN_2 – we survey our staff at least once a year to get information about their
participation in the decisions and actions of the branchb 5.19 1.4
Reward systems
REWARD_1 – top management is rewarded for achieving customer satisfactionc 5.15 1.43
REWARD_2 – branch managers are rewarded for achieving customer satisfactionc 5.47 1.31
Internal procedures and policies
INTEPROCED_1 – it takes us forever to decide how to respond to changes in labour
issuesa,c 4.3 1.58
INTEPROCED_2 – for one reason or another we tend to ignore changes in our
employees needsa,c 4.87 1.45
INTEPROCED_4 – employees’ complaints fall on deaf ears most of the timesa,c 4.83 1.56
Feedback
FEEDBACK_1 – employees received feedback from their superiors on their job
performanced 5.58 1.28
FEEDBACK_2 – employees are made aware of how their performance is being
appraisedd 5.56 1.46
ICO
IMAREL_2 – we constantly seek to increase the value of services we provide to the
other departments or branchesd 5.33 1.34
IMAREL_5 – we charge departments the true value of services we provided 4.52 1.37
Notes: The questionnaire is available upon request; areverse order Table AI.
Sources: bLings and Greenley (2001); cKohli and Jaworski (1993); dConduit and Mavondo (2001) Model 1: IM construct
IJRDM About the authors
George G. Panigyrakis is a Professor of Marketing in the Department of Business
37,7 Administration of the Athens University of Economics and Business, in Greece. He received
his PhD in Marketing Management from the University College of Wales, UK. His research
in the areas of brand management, international-export marketing, marketing communications
and services marketing has appeared in a number of books and various journals.
George G. Panigyrakis is the corresponding author and can be contacted at: pgg@aueb.gr
628 Prokopis K. Theodoridis is lecturer in Marketing in the department of Business
Administration of Food and Agricultural Enterprises of the University of Ioannina. He holds
an MSc in Marketing (University of Stirling, UK) and was awarded a PhD from the Athens
University of Economics and Business. His primary research interests include the areas of retail
and services marketing, internal marketing and consumer behaviour.

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