Introduction
Retail competition in Japan has become more intense because of multiple reasons. The income and population composition are changing, and many international retailers have entered the Japanese market. It is important for Japanese retailers to differentiate from competitors and maintain a competitive advantage in the long run. To do so, Japanese retailers focus on increasing customer value by controlling their value chains. Therefore, market orientation and supply chain orientation have become very important for Japanese retailers who try to expand their market shares in the Japanese retail market. This study develops and empirically tests a model of the impact of market orientation and supply chain orientation on business performance in Japanese retailing.
Theoretical Development
Previous literature provides evidence on the positive impact of market orientation on business performance (e.g. Cano et al., 2004; Murray et al., 2011; Morgan, 2012; Ngo & O’Cass, 2012). There are also a few studies in the context of retailing (e.g. Griffith et al., 2006; Kajalo & Lindblom, 2015; Moore & Fairhurst, 2003; Yu et al., 2014). However, only a few studies are focusing on the relationship between supply chain orientation and marketing orientation and the impact of their interplay on business performance (e.g. Martin & Grbac, 2003; Min et al., 2007). Market orientation can be seen as the foundation for customer relationship management. The effectiveness of customer relationship management depends heavily on market intelligence. To attract new customers and retain old customers firms have to satisfy not only existing needs but also latent needs. In retailing, market orientation is very important because the organization of retailing is based on the multi-unit organization where sales staff in stores is in close contact with customers and can get direct information from the customers. Supply chain orientation (SCO) is separated into two concepts: strategic supply chain orientation and structural supply chain orientation (Patel et al., 2013). Strategic SCO is defined as the supply chain directed motivation and objectives arising from executive strategic plans and decisions. Structural SCO is defined as the behaviors and actions related to supply chain management in the implementation of its strategic plan. Therefore, strategic SCO is the antecedent of structural SCO. In retailing, many retail buyers search and negotiate with the suppliers who have the ownership of strong brands and distribution networks. In the buying process, retail buyers can get market information from suppliers. Thus, a retailer can collect market information from internal and external sources. This information is useful for the retailer to not only make marketing plan but also to revise marketing plan during its implementation process. To sum up, customer relationship management and supply chain orientation have a positive impact on marketing capabilities. Similarly, marketing capabilities have a positive impact on business performance. The theoretical framework of the study is presented in Figure 1.
Data and Measurement
To test the framework, we conducted a mail survey (N=243) among Japanese retailers in 2017. The scales were adapted or developed from existing literature. Market orientation (MO) was based on questions adapted from Narver and Slater (1990). Strategic SCO (STRACO) and structural SCO (STRUSCO) scales were based on Patel et al. (2013). Customer relationship management (CRM) was based on Vorhies et al. (2011), marketing capabilities (MKGCAP) was based on Morgan et al. (2003) and Vorhies and Morgan (2005). Business performance was based on Hooley et al. (2005). The measurement model was assessed using Mplus 8. The measurement model specification allows each construct to covariate with all others. The fit indexes of the measurement model were satisfactory (CFI: 0.95; TLI: 0.94; RMSEA: 0.05; SRMR: 0.05). Next, we tested the reliability and validity of measurements. The convergent and discriminate validity of the latent variables were tested by confirmatory factor analysis where all constructs are correlated (Table 1). Also, we tested the common methods variance using two methods: Harman’s single factor test and the common latent method. The results of these methods suggest that common method variance is not a problem in this study.
Results and Conclusions
We tested the hypotheses by applying structural equation modeling (SEM) using Mplus 8. The results are presented in Figure 1. The proposed model provides a good fit to the data (χ2= 517.1, d.f.=290, p < 0.000; CFI = 0.94; TLI = 0.94, RMSEA = 0.06, SRMR = 0.08). In addition, we assessed the mediating role of marketing capabilities by employing a bootstrapping routine (Table 2). Figure 1 presents the results of the SEM. Most hypotheses were supported, and overall the study provides evidence of the importance of market orientation and strategic SCO on business performance. The most interesting findings are related to the role of marketing capabilities and structural SCO. First, the results show that marketing capabilities serve as a mediator between business performance and customer relationship management (H7). The main aim of CRM is to establish and keep the relationship with target customers. CRM contributes to increasing the marketing capabilities by helping retailer achieve marketing objectives more effectively and efficiently (Chang et al., 2010). Second, marketing capabilities is not a mediator between business performance and structural SCO (H8). The structural SCO has a negative direct impact on business performance, while structural SCO has a positive impact on marketing capabilities which in turn has a positive impact on business performance. Japanese retailer-supplier relationships are different from that in the western economy (Chung et al., 2006). The channel members in Japan have a long-term orientation when they establish a relationship with each other. The findings of our study reflect this cultural aspect of Japanese retailing environment. Japanese retailers purchase products and services from suppliers on long-term. Economic performance is not a single decision making criteria. Instead, relationships with suppliers who do not contribute fully to economic performance continue. The result of H8 refers to this character of Japanese retailing environment.

• Yuji Sakagawa(Hokkaido University, Japan)
• Sami Kajalo(Aalto University School of Business, Finland)
• Fumikazu Morimura(Kobe University, Japan)