STRUCTURAL ANALYSIS OF TOTAL QUALITY MANAGEMENT, ISO ... · Tinjauan melalui soal selidik dijalankan untuk memastikan tahap pelaksanaan ... 4.4.8.2 Structural Equation Modeling (SEM)

STRUCTURAL ANALYSIS OF TOTAL QUALITY MANAGEMENT, ISO/TS16949

AND ORGANIZATIONAL PERFORMANCE IN MALAYSIAN AND THAILAND

AUTOMOTIVE INDUSTRY

NORHAYATI BINTI MOHMAD ZAKWAN @ ZAKUAN

A thesis submitted in fulfilment of the

requirements for the award of the degree of

Doctor of Philosophy (Mechanical Engineering)

Faculty of Mechanical Engineering

Universiti Teknologi Malaysia

DECEMBER 2009

ABSTRACT

The implementation of total quality management has not occurred at the samepace in different regions of the world. Despite the number of publications on totalquality management, little empirical work has been carried out in developing countriesespecially on comparative studies amongst ASEAN countries involving the automotiveindustries. A comparative study can provide an overall perspective and understanding ofthe main differences and similarities in total quality management implementation.Furthermore, based on previous studies acquiring quality management systems such asISO standards appeared to improve the performance of automotive industry.ISO/TS16949 is a specification which is comparatively new to the ASEAN automotiveindustry. Due to its short history, there is still confusion about the effects ofISO/TS 16949 registration and efforts on total quality management and organizationalperformance relationships. The aim of this study is to compare and develop a model thatincorporates total quality management implementation, ISO/TS 16949 efforts and theirimpact on organizational performance between Malaysian and Thailand automotiveindustries. Two structural models have been proposed which are moderator andmediator research models. To that end a survey was conducted to determine the extentof total quality management implementation and ISO/TS 16949 efforts in Malaysian andThailand automotive industries as well as their relationship with organizationalperformance. Data were obtained from 161 and 150 automotive companies and relatedsuppliers in Malaysia and Thailand with 25% and 21% response rate respectively.Structural Equation Modeling technique was utilized to perform the required statisticalanalysis of the data from the survey. Exploratory factor analysis, reliability analysis andconfirmatory factor analysis to test for construct validity, reliability, and measurementsloading were performed. Having analyzed the measurement model, the structural modelwas then tested and confirmed. The testing and confirmation results revealed that thereare significant differences between total quality management implementation inMalaysia and Thailand, where total quality management implementation is better inThailand. Furthermore, the results indicate that ISO/TS 16949 certification does notaffect the relationship between TQM and organizational performance. However, theassessment reveals that efforts on ISO/TS 16949 registration assist in improvingorganizational performance when coupled with total quality management. The studycontributes to knowledge on quality management and provides practical guidelines forautomotive practitioners to improve their organizational performance. This is a theoretical, methodological, and analytical detailed empirical study that adds to thelimited existing literature on quality management especially in ASEAN context. Thestudy provides valuable groundwork for further studies on the improvement oforganizational performance through total quality management and ISO/TS 16949.

v i

ABSTRAK

Pelaksanaan pengurusan kualiti menyeluruh adalah tidak seragam di setiapkawasan di seluruh dunia. Walaupun terdapat banyak penerbitan dihasilkanmengenainya, hanya sedikit sahaja kajian empirikal yang melibatkan negaramembangun dan sehingga kini didapati tiada kajian berkaitan pelaksanaan pengurusankualiti menyeluruh yang melibatkan perbandingan sektor automotif dikalangan negaraASEAN. Secara amnya, perspektif dan pemahaman mengenai perbezaan dan persamaandi dalam pelaksanaan pengurusan kualiti menyeluruh dapat dilihat daripada kajianperbandingan. Di samping itu, berdasarkan kajian sebelum ini, sesebuah syarikat yangmemperoleh sijil sistem pengurusan kualiti seperti piawai ISO dapat membantumenaiktaraf prestasi organisasi tersebut. ISO/TS16949 adalah merupakan spesifikasiyang baru diperkenalkan khas untuk sektor automotif terutama di negara ASEAN. Olehkerana sejarah yang pendek, maka terdapat banyak kekeliruan kesan spesifikasi tersebutterhadap hubungan pelaksanaan pengurusan kualiti menyeluruh dan prestasi organisasi.Tujuan kajian ini adalah untuk membangunkan model penyelidikan yang melibatkanantara pelaksanaan pengurusan kualiti menyeluruh, ISO/TS 16949 dan di samping itujuga mengkaji kesannya terhadap prestasi organisasi di antara sektor automotif diMalaysia dan Thailand. Dua model telah dicadangkan iaitu model moderator danmediator. Tinjauan melalui soal selidik dijalankan untuk memastikan tahap pelaksanaanpengurusan kualiti menyeluruh dan usaha-usaha bagi memperoleh sijil ISO/TS 16949berserta petunjuk prestasi organisasi. Di Malaysia, 161 soal selidik telah berjayadikumpulkan membawa kepada 25% kadar balasan. Sementara itu, di Thailand 150 soalselidik diperolehi membawa kepada 21% kadar balasan. Teknik struktur persamaanmodel telah digunakan untuk menganalisa data yang diperolehi daripada hasil tinjauantersebut. Penjelajahan analisis faktor, analisis kebolehpercayaan dan penetapan analisisfaktor bagi tujuan pengesahan konstruk, kebolehpercayaan dan model pengukuran telahdilaksanakan. Setelah pengukuran model ini dilakukan, model struktur diuji. Hasildaripada ujian yang telah dijalankan, terdapat perbezaan didalam pelaksanaanpengurusan kualiti menyeluruh diantara Malaysia dan Thailand, dimana kadarperlaksanaan di Thailand adalah lebih baik. Selain daripada itu, hasil kajian jugamenunjukkan bahawa sijil ISO/TS16949 tidak memberi kesan kepada hubunganpengurusan kualiti menyeluruh dan prestasi organisasi. Walau bagaimanapun, kajian inimenunjukkan usaha bagi mendapatkan pengiktirafan sijil ISO/TS 16949 jikadigabungkan dengan perlaksanaan pengurusan kualiti menyeluruh memberi kesan yanglebih baik kepada prestasi organisasi. Kajian ini telah menghasilkan sumbangan darisegi implikasi teori dan juga implikasi pengurusan. Ini adalah merupakan kajianempirikal yang telah melalui kaedah dan analisis terperinci dan menyumbang kepadapemahaman yang terhad didalam pengurusan kualiti terutama di konteks ASEAN.Kajian ini juga dapat memberi asas kepada kajian lanjutan bagi menaiktaraf prestasiorganisasi iaitu melalui perlaksanaan pengurusan kualiti menyeluruh dan ISO/TS 16949.

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TABLE OF CONT E NT S

C H A P T E R T I T L E PAGE

DECLARATION ii

DEDICATION iii

A C K N O W L E D G E M E N T S iv

ABSTRACT v

ABSTRAK vi

TABLE OF CONTENTS vii

LIST OF TABLES xiv

LIST OF FIGURES xviii

LIST OF ABBREVIATIONS xxi

LIST OF APPENDICES xxiii

1 I N T R O D U C T I O N

1.1 Background of Research 1

1.2 Problem Definition 4

1.3 Research Questions 5

1.4 Research Objectives 6

1.5 Scope and Assumptions 6

1.6 Significance of Research 7

1.7 Definition of Terms 8

1.8 Research Contributions 10

1.9 Outline of Thesis 11

1.10 Summary 13

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2 LITERATURE REVIEW

2.1 Introduction 14

2.2 Overview of the Malaysian and Thailand Automotive

Industry 15

2.2.1 Overview of the Malaysian Automotive Industry 15

2.2.2 Overview of the Thailand Automotive Industry 16

2.2.3 Comparison of Malaysian and Thailand

Automotive Industries 18

2.3 Quality and Total Quality Management 19

2.3.1 Quality in International Context 19

2.3.2 Quality Assessment Framework 23

2.3.2.1 Deming Prizes (DP) 24

2.3.2.2 European Quality Award (EQA) 24

2.3.2.3 Malcolm Baldrige National Quality

Award (MBNQA) 25

2.3.3 The Importance of Total Quality Management 26

2.3.4 TQM Evolution 28

2.3.5 TQM Definitions and Components 29

2.3.6 TQM in Malaysia 30

2.3.7 TQM in Thailand 31

2.3.8 TQM Research and Current Trends 33

2.4 ISO/TS 16949 36

2.4.1 Background of ISO/TS 16949 36

2.4.2 Relationship between ISO/TS 16949 and TQM 38

2.5 Performance Management Systems (PMS) 40

2.5.1 PMS Definitions 40

2.5.2 PMS Evolution 41

2.5.3 Roles of Performance Measurement 43

2.5.4 PMS Models 44

2.5.5 Shortcomings of the Existing Performance

Measurement Systems 46

2.5.6 Relationship between TQM and Organizational

Performance 50

2.6 Summary ' 52

DEVELOPMENT OF RESEARCH MODEL AND RESEARCH

HYPOTHESES

3.1 Introduction 53

3.2 TQM Constructs 53

3.2.1 Analysis of Developed Constructs 54

3.2.2 Defining TQM Constructs 58

3.3 ISO/TS 16949 Efforts 60

3.3.1 Control Plan 62

3.3.2 Management Tools and Techniques 63

3.3.3 Improvement Activity 65

3.3.4 Internal Audit 67

3.4 Organizational Performance Measures 68

3.4.1 Level of Satisfaction 69

3.4.1.1 Customer Satisfaction 69

3.4.1.2 Employee Satisfaction 71

3.4.2 Business Results 73

3.4.2.1 Product Quality Effectiveness 73

3.4.2.2 Financial Performance 74

3.5 Research Model 76

3.5.1 A Review on Structural Equation Modeling 76

3.5.2 A Proposed Research Model 80

3.5.3 Research Hypotheses 82

XI

3.6 Summary 89

4 RESEARCH METHODOLOGY

4.1 Introduction 91

4.2 Research Design 91

4.3 Overall Structure of Research Methodology 92

4.4 Survey Methodology 95

4.4.1 Questionnaire Development 95

4.4.2 Expert Validation 102

4.4.3 Pilot Study 105

4.4.4 Population and Sampling of the Study 109

4.4.5 Data Collection 110

4.4.5.1 Treatment for Missing Data 112

4.4.5.2 Test of Response Bias 113

4.4.6 Reliability 114

4.4.7 Validity 115

4.4.8 Statistical Analysis 116

4.4.8.1 The SPSS 117

4.4.8.2 Structural Equation Modeling (SEM) 117

4.5 Summary 124

5 SURVEY RESULTS AND ANALYSIS

5.1 Introduction 125

5.2 Respondent General Descriptive Statistic 126

5.2.1 The Number of Year in Business 126

5.2.2 Types of Ownership 127

5.2.3 Number of Employees 128

5.2.4 Types of Products Manufactured 130

XI

5.2.5 Types of Quality System Certification 131

5.2.6 Current Position in the Company 131

5.3 Exploratory Factor Analysis (EFA) 132

5.3.1 EFA on TQM Constructs 133

5.3.1.1 Initial Solution Results 134

5.3.1.2 Rotated Component Matrix Results ' 134

5.3.2 EFA on Organizational Performance (OP) 136


5.3.2.2 Rotated Component Matrix Results 137

5.3.3 EFA on ISO/TS 16949 Efforts 138


5.3.3.2 Rotated Component Matrix Results 139

5.4 Reliability Analysis 139

5.4.1 Reliability Analysis of TQM Constructs 140

5.4.2 Reliability Analysis of OP Measures 141

5.4.3 Reliability Analysis of ISO/TS 16949 Efforts 141

5.5 Confirmatory Factor Analysis (CFA) 142

5.5.1 Confirmatory Factor Analysis - Single Factor 142

5.5.1.1 CFA: Single Factor for TQM Constructs 143

5.5.1.2 CFA: Single Factor for Organizational

Performance (OP) Measures 154

5.5.1.3 CFA: Single Factor for ISO/TS 16949

Efforts 157

5.5.2 First Order Confirmatory - Multiple Factors 163

5.5.2.1 TQM Constructs with Eight Factors 164

5.5.2.2 Organizational Performance (OP)

Measures with Two Factors 170

5.5.2.3 ISO/TS 16949 Efforts with Three

Factors 171

5.6 Conclusions on EFA, Reliability, and CFA 174

5.7 Test of Hypotheses

5.7.1 Comparative Analysis of TQM Implementation

between Malaysia and Thailand

5.7.2 Analyzing the Effect of ISO/TS 16949

Certification - Moderator

5.7.2.1 The Effect of ISO/TS 16949 Certification

in Malaysia Automotive Industry

5.7.2.2 The Effect of ISO/TS 16949 Certification

in Thailand Automotive Industry

5.7.3 Measuring the Impact of ISO/TS 16949

Efforts - Mediator

5.7.3.1 Mediating Effect of ISO/TS 16949

Efforts in Malaysia

5.7.3.2 Mediating Effect of ISO/TS 16949

Efforts in Thailand

5.8 Summary

DISCUSSIONS AND IMPLICATIONS

6.1 Introduction

6.2 The Findings of TQM Constructs Measurement

Model

6.3 The Findings of Organizational Performance (OP)

Measurement Model

6.4 The Findings of ISO/TS 16949 Efforts Measurement

Model

6.5 Comparisons of TQM Implementation between

Malaysia and Thailand

6.6 The Moderating Effect of ISO/TS 16949 Certification

6.7 The Mediating Impact of ISO/TS 16949 Efforts

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6.8 Implications of the Study 211

6.8.1 Theoretical Implications 211

6.8.2 Managerial Implications 212

6.9 Summary 214

7 CONCLUSIONS AND RECOMMENDATIONS

7.1 Introduction 215

7.2 Research Contributions 215

7.2.1 Academic and Practical Contributions 215

7.2.2 Disseminations of Knowledge through Publications 216

7.3 Fulfillment of Research Objectives 219

7.4 Limitations of the Research 220

7.5 Recommendations for Future Research 222

7.6 Conclusions 223

REFERENCES 224

APPENDICES A - K 2 6 2 - 3 1 6

xiv

LIST OF TABLES

TABLE NO. TITLE PAGE

2.1 Countries investigated and the number of corresponding articles

(Sila and Ebrahimpour, 2003) 22

2.2 Research on comparative study in quality practices

implementation between countries from the year 2000 to 2007 23

2.3 Criteria for ISO 9000 and ISO 14000 certifications 24

2.4 The European Quality Award criteria 25

2.5 Malcolm Baldrige National Quality Award criteria 25

2.6 Criteria for Quality Management Awards 26

2.7 Summarized findings of studies 27

2.8 Summarized of performance measurement definition 41

2.9 Examples of PMS model and their critical problems 49

3.1 Constructs proposed from literature 55

3.2 Comparison of quality management constructs across

different studies 57

3.3 ISO/TS 16949 efforts and their measurement items 61

3.4 Performance measures proposed by literature 69

3.5 Summary of past-related research using SEM approach 79

4.1 TQM constructs and their measurement items 96

4.2 ISO/TS 16949 efforts and their measurement items 99

4.3 Organizational performance measures and their measurement

Items 102

4.4 Summaries of comments and suggestions from quality experts

and practitioners' 104

XI

4.5 Types of products manufactured 107

4.6 Types of quality system certification 108

4.7 Pilot results of internal consistency analysis for TQM constructs 108

4.8 Pilot results of internal consistency analysis for OP measures 108

4.9 Pilot results of internal consistency analysis for ISO/TS 16949

Efforts 109

4.10 Summary of final dataset 113

4.11 Symbol in SEM 118

4.12 Recommended values of goodness-of-fit measures 121

5.1 The number of year in business for Malaysian respondents 126

5.2 The number of year in business for Thailand respondents 127

5.3 Percentage of type of ownership for Malaysian companies 127

5.4 Percentage of type of ownership for Thailand companies 128

5.5 Type of material used for Malaysia 130

5.6 Type of material used for Thailand 130

5.7 Types of quality system certification for Malaysia respondents' 131

5.8 Types of quality system certification for Thailand respondents' 131

5.9 Current position in the company for Malaysia respondents' 132

5.10 Current position in the company for Thailand respondents' 132

5.11 KMO and Bartlett's Test for TQM constructs 133

5.12 Results of total variance explained for TQM items 134

5.13 KMO and Bartlett's Test for OP measures 136

5.14 Results of total variance explained for OP items 137

5.15 KMO and Bartlett's Test for ISO/TS 16949 efforts 138

5.16 Results of total variance explained for ISO/TS 16949 efforts 139

5.17 Results of internal consistency analysis for TQM constructs 140

5.18 Results of internal consistency analysis for OP measures 141

5.19 Results of internal consistency analysis for ISO/TS16949 efforts 141

5.20 Regression weights of QL construct 145

5.21 Regression weights of CFS construct 146

5.22 Regression weights of QIA construct 147

xvi

5.23 Regression weights of HRD construct 149

5.24 Regression weights of SPM construct 150

5.25 Regression weights of SQM construct 151

5.26 Regression weights of QR construct 152

5.27 Regression weights of QA construct 154

5.28 Regression weights of LS construct 155

5.29 Regression weights of BR construct 157

5.30 Regression weights of CP factors 158

5.31 Regression weights of MTT factors 160

5.32 Regression weights of Improvement Activity factors 162

5.33 Regression weights of Internal Audit factors 163

5.34 Results of internal consistency analysis for QRA items 166

5.35 Regression weights of seven TQM constructs 167

5.36 Regression weights of two OP measures 171

5.37 Regression weights of three ISO/TS 16949 efforts 173

5.38 Summarizes of EFA, reliability and CFA results 174

5.39 Assessment of multivariate normality 175

5.40 Descriptive of survey respondent 177

5.41 Correlations matrix between TQM constructs 177

5.42 Independent sample t-test for mean country TQM construct

comparison 178

5.43 Results of TQM implementation in Malaysian and Thailand

automotive industries 179

5.44 Standardized regression weight between TQM and OP for

"None ISO/TS 16949 certification companies" in Malaysia 182


"ISO/TS 16949 certification companies" in Malaysia 184


"None ISO/TS 16949 certification companies" in Thailand 186


"ISO/TS 16949 certification companies" in Thailand 187

x v u

5.48 Standardized regression weight of path model for

Malaysia automotive industry 191

5.49 Direct (DE) and Indirect Effects (IE) analysis for Malaysia

automotive industry 192

5.50 Standardized regression weight of path model for

Thailand automotive industry 194

5.51 Direct (DE) and Indirect Effects (IE) analysis for Thailand

automotive industry 194

6.1 The difference between eight-factor and seven-factor model

for TQM constructs 198

6.2 Organizational performance (OP) measures with two-factor

model 199

6.3 ISO/TS 16949 efforts with three-factor model 200

6.4 Correlations matrix between TQM constructs 202

6.5 The structural relationship between TQM and OP for

Malaysian automotive industries 204


Thailand automotive industries 205

6.7 Summary results on moderating effect 207

6.8 Inner and outer regression weights for the structural relationship

between TQM and OP with a mediation of ISO/TS 16949

efforts for Malaysian and Thailand automotive industries 209

6.9 Inner regression weights between latent variables in the

structural model for Malaysian and Thailand automotive

industries 210

xvii i

LIST OF FIGURES

FIGURE NO. TITLE PAGE

1.1 The world vehicle market for year 2000 and projected for

2010 (The Malaysian Automotive Association, 2006) 3

1.2 Organization of the thesis 12

2.1 Modified TQM slope from ISO 9000 to TQM through

ISO/TS 16949 (Cohen, 1995) 39

2.2 The evolutionary process of performance measurement

(Folan and Browne, 2005) 42

3.1 TQM constructs 56

3.2 ISO/TS 16949 efforts 62

3.3 Customer satisfaction measures 71

3.4 Employee satisfaction measures 73

3.5 Product quality effectiveness measures 74

3.6 Financial performance measures 75

3.7 The model of the structural relationship between TQM and

two organizational performances (Prajogo and Sohal, 2004) 77

3.8 Conceptual SEM for Taiwan and Hong Kong data

(Lin et al, 2005) 77

3.9 A proposed theoretical structural equation model

(Sanchez-Rodriguez et al., 2006) 78

3.10 A proposed moderator research model 80

3.11 A proposed mediating research model 81

4.1 Overview of overall structure research methodology 94

4.2 Type of company ownership 106

xix

4.3 Distribution of companies according to number of employees 107

4.4 Six stage process for structural equation modeling

(Hair et al., 1998) 120

4.5 Flowchart of analysis steps 123

5.1 Distribution of Malaysian companies according to number

of employees 129

5.2 Distribution of Thailand companies according to number

of employees 129

5.3 QL-Statistic results and factor loading 144

5.4 CFS-Statistic results and factor loading 145

5.5 QIA-Statistic results and factor loading 147

5.6 HRD-Statistic results and factor loading 148

5.7 SPM-Statistic results and factor loading 149

5.8 SQM- Statistic results and factor loading 150

5.9 QR- Statistic results and factor loading 152

5.10 QA-Statistic results and factor loading 153

5.11 LS- Statistic results and factor loading 155

5.12 BR-Statistic results and factor loading 156

5.13 CP-Statistic results and factor loading 158

5.14 MTT-Statistic results and factor loading 159

5.15 Improvement activity-Statistic results and factor loading 161

5.16 Internal audit-Statistic results and factor loading 162

5.17 The output path diagram for eight factors TQM model 165

5.18 Modified TQM model: The output path diagram with

seven factors 169

5.19 The output path diagram for two factors OP model 170

5.20 The output path diagram for three factors ISO/TS 16949 model 172

5.21 Research model - Moderator 180




XI






5.26 Research model - Mediator 189



efforts for Malaysia automotive industry 191



efforts for Thailand automotive industry 194

LIST OF ABBREVIATIONS

AGFI Adjusted goodness of fit index

BOI Board of investment

BR Business results

CBU Complete built-up

CFA Confirmatory factor analysis

CFI Comparative fit index

CFS Customer focus and satisfaction

CKD Complete knocked-down

CP Control plan

DP Deming prize

EFA Exploratory factor analysis

EQA European quality award

FMEA Failure mode and effect analysis

GFI Goodness of fit index

HICOM Heavy industries Corporation of Malaysia berhad

HRD Human resource development

IATF International automotive task force

KVP Kelab Vendor Perodua

LS Level of satisfaction

MACPMA Malaysian Automotive Component Parts Association

MBNQA Malcolm baldrige national quality award

MEM Mitsubishi electric Malaysia

MTT Management tools and techniques

OP Organizational performance

PMQA Prime minister quality award

PMS Performance measurement system

xxi i

PMS Performance measurement system

PVA Proton vendors Association

QA Quality assurance

QFD Quality function deployment

QIA Quality information and analysis

QL Quality leadership

QMS Quality management system

QR Quality results

QRA Quality results and assurance

RMSEA Root mean square error approximation

SEM Structural equation modeling

SMEs Small and medium enterprises

SPM Strategic planning management

SPSS Statistical package for social sciences

SQM Supplier quality management

TLI Tucker lewis index

TQA Thailand quality award

TQM Total quality management

TSC Toyota supplier club

xxii i

LIST OF APPENDICES

APPENDIX TITLE PAGE

A The survey instrument (English version) 262

B List of international, national experts and pilot study companies 269

C The survey instrument (Thailand version) 271

D An example letter sent to quality experts 281

E An example cover letter for pilot study 282

F An example cover letter for final survey 283

G An example cover letter for final survey (Thailand version) 284

HI Results of total variance explained for TQM items 286

H2 Results of total variance explained for OP items 287

H3 Results of total variance explained for ISO/TS 16949 288

11 Summary results of rotated factor matrix - Varimax with

Kaizer Normalization (TQM) 289


Kaizer Normalization (OP) 290


Kaizer Normalization (ISO/TS 16949) 291

J1 Results of reliability analysis for TQM constructs 292

J2 Results of reliability analysis for OP measures 297

J3 Results of reliability analysis for ISO/TS 16949 efforts 299

K Publications 302

CHAPTER 1

INTRODUCTION

1.1 Background of Research

In a competitive market, the demand for quality is emerging as the single most

critical factor for companies to survive in the ever expanding global market place.

Quality is vital in determining the economic success of manufacturing companies

(Garvin 1988; Curkovic, et al., 2000). World class manufacturing companies gain

competitive edge and greater market share through extraordinary levels of performance

by providing a quality product with a competitive price as required by demanding

customers.

The concept of Total Quality Management (TQM) has been developed as the

result of intense global competition. Organizations with international trade and global

competition have paid considerable attention to TQM philosophies, procedures, tools

and techniques. According to Juran, international competition requires higher levels of

quality by organizations (Blackiston, 1996).

However, the implementation of quality management has not occurred at the

same pace in different regions of the world. Early implementation started in Japan, US,

Europe, and followed by the developing countries. In order to compete in the global

market, these countries need to implement quality management practices, tools, and

techniques within all sections of their industries. Despite the number of publications and

2

quantity of research on TQM, little empirical work has been carried out in developing

countries, particularly in the ASEAN region.

In Malaysia automotive industry itself, there are a few studies that have been

conducted on the implementation of quality practices. Noviyarsi (2005) had developed a

framework for quality engineering implementation which can assist the automotive

companies to meet their customer satisfaction. Deros et al. (2004) had suggested a

framework for benchmarking implementation for automotive manufacturing SMEs.

Meanwhile, Sohail et al. (2003) had compared the TQM practices and organizational

performances of companies with and without ISO 9000. They pointed out there are

significant differences in performances between certified and non-certified companies.

However, all of them focus within Malaysian context, and till date no research has been

conducted in quality practices and implementation especially on comparative study

among ASEAN country dedicated to automotive industries.

Since the realization of ASEAN Free Trade Area (AFTA) in 2005, it shows the

impact on Malaysia's car manufacturer sales. Prior to AFTA, most of Malaysian

automotive market is protected by the government with instruments such as tariffs,

refunds schemes and investment control in order to compete with their overseas

competitors. Actually, AFTA, for automotive industries, in a positive perspective would

drive the regional manufacturing integration and cost competitiveness among ASEAN

countries rather being a threat to them. Based on analysis for the world vehicles market

for the year 2000 and projected 2010 by The Malaysian Automotive Association report

(2006), as shown in Figure 1.1, ASEAN is the fifth largest market in the world and

Malaysia is far behind when compared to Thailand by the year 2010.

4

relationship between TQM and organizational performance. In order to survive in a

competitive market place, quality practices implementation is one of the key issues that

can help align organization's to stay competitive. Besides that, based on current

situation, comparative study among ASEAN, especially Thailand, could provide an

overall perspective and understanding of the main differences and similarities for TQM

practices and the impact of ISO/TS 16949 certification. Those strength that exist within

the Malaysian automotive practices can be maintained, while those lacking in practices

from Thailand counterparts could probably be absorbed and copied by Malaysian

automotive industry players.

1.2 Problem Definition

Malaysia used to be the largest auto market in ASEAN but recently it has been

overtaken by Thailand and Indonesia and now is in third place (Ahmad, 2006). Prior to

AFTA, the Malaysian automotive industry enjoyed considerable growth but now faces

intense competition from ASEAN and other global manufacturers. Furthermore, to help

the National Automotive Policy (NAP) achieve one of their objectives which is to

promote Malaysia as an automotive regional hub, further research is essential. By

implementing TQM practices, it is believed workforce productivity and production

efficiency will be upgraded to be competitive and customer focused.

In the automotive industry, the demand for ISO/TS 16949 registration is

increasing rapidly, as many car manufacturers require that their suppliers to obtain it.

ISO/TS 16949 registration requires the existence of proper quality plans, programs,

documentation, and procedures. Despites being demanding, there is still considerable

confusion surrounding the effects of ISO/TS 16949 registration efforts on the TQM

practices and organizational performance. A review of the literature identified a lack of

study especially on the effects of ISO/TS 16949 in the automotive industry.

5

Besides that, the main motivating factor for conducting this research was to find

out the gap between the Malaysian and Thailand automotive industries on the

relationship between TQM practices, ISO/TS 16949 and organizational performance.

Parast et al. (2006) pointed out that more comprehensive and comparative studies of

successful quality practices implementation would be helpful especially for those who

are still struggling. It is strongly believed that the findings of this research will be

suitable, effective and help local car manufacturers and suppliers in their effort to

become more effective and competitive.

1.3 Research Questions

Four research questions to be addressed in this research are:

i. To what extent Malaysian and Thailand automotive industries implement TQM?

ii. Does TQM implementation contribute to organizational performance in

Malaysian and Thailand automotive industries?

iii. Does ISO/TS 16949 contribute to organizational performance in Malaysian and

Thailand automotive industries?

iv. Does ISO/TS 16949 affect the relationship between TQM and organizational

performance in Malaysian and Thailand automotive industries?

6

1.4 Research Objectives

The research has three main objectives, which are as follows:

i. To identify and assess the TQM constructs, ISO/TS 16949 efforts and

organizational performance measures for Malaysian and Thailand automotive

industries.

ii. To develop a research model of the TQM, ISO/TS 16949 and organizational

performance relationship.

iii. To analyze and compare the relationship of TQM, ISO/TS 16949 and

organizational performance between Malaysia and Thailand automotive

industries.

1.5 Scope and Assumptions

To make the research more effective and manageable, the research scope of this

study focused on three main areas, which are as follows:

i. This research will focus on the TQM implementation and efforts on

ISO/TS 16949 registration in Malaysia and Thailand automotive industries.

ii. The population and samples of survey respondents targeted in this research will

comprise of automotive industries operating in Malaysia and Thailand.

iii. The proposed research model can act as a guideline for Malaysian automotive

industries to improve their performance. Actual implementation in any company

is beyond the scope of this research.

7

The following assumptions were made regarding this research:

i. The instruments applied in this research measure TQM constructs, ISO/TS 16949

efforts and organizational performance are valid and reliable.

ii. The distributions of the randomly selected subjects were assumed to be normal

and provide a valid representation of the population of the study.

iii. Respondents of the questionnaire would give honest answer to survey questions

regarding their organization.

1.6 Significance of Research

Research on quality management practices in the ASEAN region will add to the

total knowledge of quality management and could help to develop a unique model for

quality management. The implementation of TQM practices and implementation has

been enhanced to compete with new challenges in business and to satisfy the emerging

quality paradigm (Thia et al., 2001; Linderman et al., 2004). Several authors have

pointed out the need for more empirical research (Flynn et al., 1995; Walton and

Handfield, 1996), and also the need for more sophisticated research designs in the study

of quality practices field among developing countries (Parast et al. 2006). While, with

the impressive growth of ISO/TS 16949 registration implies that awareness exists for the

importance of this certification. Surprisingly, it may seem there are only small numbers

of empirically based attempt to test the significance of ISO/TS 16949 certification.

Additionally, there is no empirical studies that examine the relationship between TQM,

ISO/TS 16949 and organizational performance.

Several researchers have pointed out the importance of international quality

practices research extended to other countries and regions around the world. Lin et al.

(2004) conducted a comparative study of quality practices between three countries in

automotive industries; USA, Japan and Taiwan. They have identified the differences and

8

pointed out what practices lead to efficient or inefficient performance. While, Iwaarden

et al. (2006) had focused on quality management practices for European countries in

automotive industries. They found that the management control model in the quality

management is useful in explaining what changes are necessary to maintain high quality

levels. Most of these studies, however, use different methodology, instruments and

constructs for comparing quality practices across countries around the world. No study

was found comparing quality practices in automotive industries within ASEAN

countries.

The model developed in this research will hopefully facilitate and simplify the

quality practices implementation process for local car manufacturers and suppliers; help

them identify the gap between their current practices and best practices compared to

their competitors and develop a plan to reduce the gap. So, the needs of the Malaysian

automotives industries for a proper quality implementation and practices is significant

and clear in order to jump to a higher level of global competition.

The research findings will lead to a better understanding and provide new

insights for quality management area where TQM and ISO/TS 16949 registration efforts

are important to improve organizational performance. As such, it is expected to benefit

both researchers and practitioners.

1.7 Definition of Terms

The following definitions are adopted in the context of this thesis:

a) Direct Effect (DE)

Direct effect is a directional relationship between two variables with no

intervening variables (Hoyle, 1995)

9

b) Endogenous Variables

Endogenous variables are those influenced by factors that are inside the

structural model (Mueller, 1996)

c) Exogenous Variables

Exogenous variables are those influenced by factors that are outside the

structural model (Mueller, 1996)

d) Indirect Effect (IE)

Indirect effect is the effect on one variable (independent) on another (dependent)

through one or more mediating variables (Hoyle, 1995).

e) ISO/TS 16949

ISO/TS 16949 is an ISO technical specification that represents a comprehensive

quality management system for the global automotive industry to achieve world

class levels of product quality, productivity, competitiveness and continual

improvements.

f) Latent variable

Latent variable is an unobserved variable.

g) Organizational Performance

Measurement of the performance of one company's against those of another

company.

h) Structural Equation Modeling (SEM)

Structural equation modeling is a multivariate analytic tool, which incorporates

both the theoretical and empirical aspects of research and is supported by

powerful computer software packages such as AMOS (Chinna, 2009)

10

i) Total Quality Management (TQM)

A customer-focused management philosophy and strategy management, which

seeks continuous improvement in business, process using tools and techniques,

which encompasses the participation of all employees.

1.8 Research Contributions

This study examines the relationship among TQM, ISO/TS 16949 and

organizational performance in Malaysian and Thailand automotive industries. The

research findings are expected to contribute to the theory and practice of automotive

industry.

This study provides an academic contribution, with its empirical evidence and

validation which would makes it generally applicable within automotive organizational

performance measurement in quality management area. The developed and tested

content of this study fills the research gap by providing a reliable and useful reference

material on the critical factors of TQM implementation and ISO/TS 16949 registration

efforts on organizational performance.

On top of that, the contribution for practitioners is to provide important

guidelines for automotive and related companies to implement TQM with ISO/TS 16949

registration efforts to improve organizational performance. The measurement

instruments developed in this study should be a valuable tool for organizations to

evaluate and compare their current practice.

11

1.9 Outline of Thesis

This thesis is organized into seven chapters as shown in Figure 1.2. The first

chapter has highlighted the background of research. It has also outlined the research

questions, objectives, scope and assumptions, the significance of this research,

definitions of terms and finally research contributions. Chapter two presents some

review of literature to understand the issues of the research. The review describes about

automotive industries in Malaysian and Thailand, total quality management and

performance measurement systems.

Chapter three critically reviews the development of TQM constructs,

ISO/TS 16949 efforts and performance measures constructs. This is followed by brief

review on the use of structural equation modeling by past researchers. Based on that, a

proposed research model has been developed which will be used in this study for

Malaysian and Thailand automotive industries. Finally, this chapter provides a research

hypotheses development.

Chapter four is to illustrate the methods and procedures that will be used in the

study. It gives a detail description of the research process and discusses each of the

research stages. This chapter starts with a research design, a discussion on the overall

structure of the research methodologies, and survey methodology. In survey

methodology section, a detailed explanation has been provided on questionnaire

development, expert validation, pilot study, population and sampling of the study,

reliability, validity, and statistical analysis.

The fifth chapter presents the results of the survey. It discusses the respondents'

general descriptive statistics, validation of the survey instruments by using reliability

and validity test. The chapter also presents a set of hypothesis testing included to test

significant difference in TQM implementation in Malaysian and Thailand automotive

industries, moderator analysis and mediator analysis.

13

1.10 Summary

This chapter has laid the foundation for the thesis. Among others, it has

introduced the background of the research and described the objectives and scope of the

research. The research significance is briefly described, definition of terms used in this

research is presented, research contributions are highlighted and the organization of the

thesis is outlined.

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

The structure of this chapter is divided into five main sections. The first section

is the introduction and followed by second section which is to provide an overview of

the Malaysian and Thailand automotive industries. This section will discuss the history

of the Malaysian automotive industry, Thailand automotive industry and followed by

comparison of Malaysian and Thailand automotive industries. The third section provides

an extensive review on quality and total quality management (TQM). This section will

review various aspects on quality including international context, quality assessment

framework, the importance of TQM, TQM evolution, TQM definitions and components,

TQM in Malaysia and Thailand and TQM research and current trends. The fourth

section discusses the background of ISO/TS 16949 and the relationship between

ISO/TS 16949 and TQM. Finally, the fifth section provides an extensive review on

performance measurement system (PMS). This section will review on PMS definition,

PMS evolution, PMS models and followed by review on the relationship of TQM and

organizational performance.

15

2.2 Overview of the Malaysian and Thailand Automotive Industry

In the early years of industrial development around 1960's, both Malaysia and

Thailand adopted variations in the import substitution strategy of building their

respective automotive industry, the two countries have exhibited remarkable differences

in subsequent development paths. This section gives a historical background of the

development of automotive industry in Malaysia and Thailand.

2.2.1 Overview of the Malaysian Automotive Industry

The development of the automotive industry in Malaysia started in the 1980s.

Early attempts in the 1960s and 1970s to create an automotive industry aimed at import

substitution were not successful because of competition among numerous assembly

firms producing different models, making it impossible to reap the benefits of the

economies of scale (Fujita and Hill, 1997). In the early 1980s, the government launched

a programme to develop heavy industries. To spearhead this project, the government

established the Heavy Industries Corporation of Malaysia Berhad (HICOM). Two other

national development objectives were formulated which played complementary roles in

the heavy industrialization programme. Under the first development objective called the

"Look East Policy", the Prime Minister encouraged learning from Japan's work ethics.

Under the heavy industrialization project, the automotive industry became one of the

targeted sectors for the Malaysian economy.

The Malaysian National Car Project was officially launched by the formation of

Perusahaan Otomobil Nasional Berhad in 1983.The project is aimed at rationalizing and

localizing the automotive industry. In 1990, a second national car project was

announced. The second national car manufacturer, Perusahaan Otomobil Kedua Sdn.

Bhd. (Perodua), was established as a joint venture between Malaysia firms and Daihatsu

16

(MIDA, 1999). In short, Malaysia's automotive industry has been built around national

car firms which depended on government support for capturing a large share of the

domestic market.

The strategy to form a national car in Malaysia had followed a particular

sequence (Dicken, 1998):

• Stage 1: Import of complete built-up (CBU) vehicles by distributors.

• Stage 2: Assembly of semi or completely knocked-down (CKD) vehicles by

subsidiaries or licensed or franchised domestic companies, importing parts and

components from the brand corporation.

• Stage 3: Assembly of CKD vehicles but with increasing local content.

• Stage 4: Full-scale of manufacturer of automobiles.

Currently, given the significant challenges facing the automotive industry, in

particular globalization, liberalization and increasing competition issues, there is a need

to review the strategic direction and policy for the domestic automotive sector. This is

crucial in an effort to maintain the competitiveness of participants in the automotive

sector, and in order for them to be viable in the long term.

2.2.2 Overview of the Thailand Automotive Industry

The emergence of automotive industry in Thailand dates back to the early 1960s.

In 1962, the Board of Investment (BOI) provided incentives for automotive assembly

plants to locate in the country (Panichapat and Kanasawat, 1997). This policy proved to

be successful in attracting foreign investors from US, Japan, and Europe to set up joint

ventures with Thai businesses. In 1971, the Automobile Development Committee,

which had been established under the Ministry of Industry, announced a policy requiring

progressive increases in localization ratios to 25% for passenger cars, 20% for

17

commercial cars with windshields, and 15% for commercial cars without windshields by

1975 (Fujitaand Hill, 1997).

The automotive industry in Thailand encountered difficulties during the period

from the late 1970s to the mid-1980s. After 1987, the industry started to expand rapidly,

led by rapid growth of the Thai economy. The early 1990s saw a drastic change in the

policy towards liberalization of the auto industry. Officially, the policy shift was

intended to strengthen international competitiveness of the industry by increasing

competition amongst local producers who had enjoyed protection for long period, and

also to benefit consumers by lowering car prices (Panichapat and Kanasawat, 1997). In

1991, the government lifted the ban on import of CBU passenger cars and the import

duty rates on CKD kits were substantially reduced. In 1992, further tariff reductions

were implemented on six important components and materials. In 1993, the government

announced approval for establishing new passenger vehicle assembly plants

(Poapongsakorn and Fuller, 1998).

The automotive industry in Thailand has expanded continuously compared with

the year 2002 (Limsavarn, 2007). Until now, the automobile car assembly companies

and parts producers in Thailand have been protected from the three main policies such

as:

• High rate of import tariff

• Protected and controlled import

• Investment promotion

At present, the booming industry has returned to the glory days seen before the

1997 financial crisis and now nearly all of the world's major manufactures such as Ford,

Nissan, General Motors and Toyota have assembly operations in Thailand. Thailand had

outlined a policy to further promote automotive parts manufacturing by offering support

in the form of credit lines extended by state-sponsored financial institutions, as part of

the policy to turn Thailand into the "Detroit of Asia".

18

Even though General Motors plan to close 13 assembly plants in United States

(Pitsuwan, 2009), it will have no impact on its Thai unit. The Thai plant operation is

operating as normal. The suspension in the United States was aimed at better managing

inventory and to enable the company to launch new products as planned. According to a

statement by Carlisle, the Thailand-based president of GM Southeast Asia operations,

the Thai unit was a separate legal entity and self-dependent unit, responsible for its own

operating cash for funding itself (Business Week, 6 t h April 2009). However, auto sales

in Thailand are down about 30% in the first two months of 2009 due to global economic

crisis.

2.2.3 Comparison of Malaysian and Thailand Automotive Industries

The development of automotive industry in both countries has gone through a

different process. Both countries encountered the problem of small domestic markets,

which makes it difficult to benefit from the economies of scale, and they experienced the

difficulties of developing competitive local manufactures and parts suppliers through

technology transfer from foreign multinational. While automotive industry in both

countries started out with import substitution through protective measures, their

fundamental strategies and subsequent policy developments show differences, which

can be summarized into the following points.

First, whereas Thailand has attracted multinational companies to lead the

automotive industry, Malaysia has focused exclusively on the 'national car' program. In

Thailand, foreign car manufacturers formed joint ventures with Thai firms, providing

technology, equipment and facilities, as well as management. The government attempted

to develop local parts suppliers by gradually strengthening the local contents

requirement for foreign assemblers. On the other hand, Malaysia has concentrated its

effort on establishing a national car firm to produce its own brand.

19

Second, the Thai government has been relatively less interventionist compared to

the Malaysian government. Although the Thai government offered extensive protection

for the industry and regulated new entry to encourage scale economies, the policies were

never firm-specific, and they created some competitive pressure for firms located in the

country. On the other hand, the Malaysian government played a much more active role

in developing the automotive industry. In other words, the national car project was

assigned a political role and this gave a reason for the government's interventionist role

and persistent protection.

2.3 Quality and Total Quality Management

The importance of quality management in business organizations has increased

significantly over the past 20 years. TQM from an international perspective require

studying different countries and aims at understand TQM in a global context. The

concept of international serves as the motivation for developing a global TQM standard

for evaluating TQM practices within countries (Rao et al, 1999). The practice of TQM

also affects from the national level to the international level which helps organizations to

compete internationally and gain a competitive edge in the global market.

2.3.1 Quality in International Context

Currently, developed and developing countries are in different stages of the

quality movement especially in automotive industries. In this industry, most quality

practices research has focused on developed countries since the early 1990's such as

United States and Japan (Benson et al, 1991; Ebrahimpour and Johnson, 1992; Flynn,

1992; Rogers, 1993). Studies on the implementation of quality practices in developed

countries are found to be very common and thus most quality practices nowadays is

20

based on the experienced of developed countries such as Toyota, GM and Ford (Dale,

2003; Womack et al., 1990). Benito and Dale (2001) had reported some empirical

observation of the way in which Spanish auto components industry is implementing

supplier quality practices. They pointed out that suppliers which are more advanced in

the use of quality practices are achieving better operational performance in terms of

quality, reliability, cost, flexibility and design. Johnson and Khan (2003) had conducted

a study into the use of failure mode and effect analysis (FMEA) in the automotive

industries in the UK. He had established how the effectiveness of FMEA could be

determined. A recent study by Iwaarden et al. (2006) in a European automotive

manufacturer showed that the application of a management control model in the field of

quality management practices is found to be useful in explaining what changes are

necessary to maintain high quality levels.

Quality practices research has been extended beyond developed countries to

other countries around the world such as China and India (Rao et al., 1999). In China,

Lee (2004) conducted a study to investigate the status of quality practices and its

perception among Chinese small manufacturing companies. He pointed out that by

adopting certain quality management practices, it can help Chinese small manufacturers

to achieve competitive advantages in both domestic and international markets. Lin et al.

(2004) showed that Taiwanese and American firms can benchmark the efficient

practices of Japanese firms in order to be the best-in-class. The study found that the

efficiency of quality management practices for Japanese-owned firms is the highest,

even though almost all of their employees are Taiwanese; also, American-owned firms'

efficiency is higher than that of Taiwanese-owned firms.

Some studies have compared quality practices between developed and

developing countries. Yoo et al. (2006) discusses the differences in implementation of

quality practices in manufacturing companies amongst four countries which are Korea,

USA, Mexico and Taiwan. They noted that transferring quality practices from a home

country to another country or in the other way are required to achieve overall business

objective and to consider similarities and differences in the context globalization.

Meanwhile, Raghunathan et al. (1997) surveyed 228 USA, 78 China and 168 Indian

manufacturing including automotive industries. They found that it is important to

consider quality practices between developed and developing countries to understand

the status and provide opportunities for developing countries to learn from the successes

and failures of the quality practices of developed countries. They also suggested,

whether commonalities and differences found that both developed and developing

countries need to use uniform instruments and method analysis in future studies.

Aziz et al. (2000) surveyed 540 Malaysian and 180 UK companies emphasizing

on manufacturing small and medium enterprises (SMEs). From the survey results, they

found there is a reliance on inspection and relatively low use of more sophisticated

statistical methods for quality improvement for both countries. They also stated that the

types of quality practices used by the UK and Malaysian SMEs are related to the types

of quality practices promoted by their own governments. Parast et al. (2006) conducted

a comparative analysis of quality management practices between USA and Mexico

manufacturing companies, using the Malcolm Baldrige National Quality Award

(MBNQA) criteria as a framework. The results show there are differences between the

critical success factors of quality management practices within USA and Mexico. In

both countries, social responsibilities and supplier quality were significant in explaining

variability of quality results. More similarities in both countries were found in the effect

of quality management practices on customer focus and satisfaction.

Schniederjans et al. (2006) conducted a study on quality management practices

in manufacturing companies between three countries which are India, Mexico and USA.

A reason for selecting the USA and Mexico for comparison can be suggested by the

movement of USA firms to Mexico under the North American Free Trade Agreement

(NAFTA). Another, reason for selecting the USA and India for comparison is the

outsourcing phenomenon that is a result of Indian firms being the greatest beneficiary of

USA firms that outsource to India (Lee et al., 2003). Schniederjans et al. (2006) stated

that cross comparison study may be helpful in understanding the similarities and

differences in quality management practices in various countries.

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