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These proceedings have been published by the Telkom University (Tel-U) and Telkom

Corporate University Center (TCU-C). Postal Address: Faculty of Economic and Business

Telkom University, Jl. Telekomunikasi Terusan Buah Batu Bandung 40257 Indonesia

Knowledge Management & Case Study Center Telkom Corporate University Center 2nd floor Information Building Jl. Gegerkaong Hilir no. 47, Bandung 40152 Indonesia

Statement of review All papers resproduced in these proceedings have been indepedently peer reviewed, by at least two qualified

reviewers, with DIRJEN DIKTI requirement.

All papers reproduced in these proceedings were presented at International Seminar and Conference on Learning

Organzations (ISCLO) held at Ritz-Carlton Hotel, Mega Kuningan, Jakarta, Indonesia between 5 – 6 November,

2014

Disclaimer The opinions, advices and information contained in this publication do not necessarily reflect the views or policies

of the ISCLO Scientific Commitee or its members. Whilst all due care was taken in the compilation of these proceedings, the ISCLO Scientific Commitee does not

warrant that the information is free from errors or omission, or accept any liability in relation to the quality, accuracy

and currency of the information.

Copyright Copyright © 2014 International Seminar and Conference on Learning Organization and the Authors. The author(s) assign to the International Seminar and Conference on Learning Organization (ISCLO) an

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instruction; provided that the article is used in full and this copyright statement is reproduced. The author(s) also

grant a non exclusive licence to the International Seminar and Conference on Learning Organization to publish this

document on the ISCLO website and in other formats for the Proceedings 2nd International Seminar and Conference

on Learning Organization 2014. Any other use is prohibited without the express permission of the author(s). Apart from any fair dealing for the purposes of research or private study, criticism or review, as permitted under the

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List of reviewers (ISCLO Scientific Commitee) The conference organisers would like to express their gratitude for the contribution made by the following reviewers

of papers reproduced in these proceedings.

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Prof. William Hickey, PhD (Solbridge International School of Business, Korea) Prof. Togar Simatupang, PhD (School of Business and Management ITB, Indonesia) Prof. Jann Hidayat Tjakraatmadja (School of Business and Management ITB, Indonesia) Prof. Peter Charles Wood, PhD (Malaysia Multimedia University, Malaysia) Prof. Zulikha Jamaluddin (Universiti Utara Malaysia, Malaysia) Prof. Dr. Ir. Riri Fitri Sari MM MSc (Indonesia University, Indonesia) Prof. Andreas Budiharjo (Prasetiya Mulya Business School, Indonesia) Prof. Dermawan Wibisono (School of Business and Management ITB, Indonesia) Prof. Sucherly (Padjajaran University, Indonesia) Prof. Lim Cher Ping, PhD (Hongkong Institute of Educator, Hongkong) Ade Irma Susanti, Ph.D (Telkom University, Indonesia) Dr. Yudi Pramudiana (Telkom University, Indonesia) Dr. Sutanto (Universite de La Rochelle, France and University of Sebelas Maret Solo, Indonesia) Dr. Ningky Sasanti Munir (PPM School of Management, Indonesia) Dr. Teguh Widodo (Telkom University, Indonesia) Dr. Dodie Tricahyono (Telkom University, Indonesia) Dr. Darwina Binti Hj. Ahmad Arshad (Univeriti Utara Malaysia, Malaysia) Dr. Jafar Sembiring (Telkom University, Indonesia) Dr. Jamari (University of Twente, The Netherlands and Univerisity of Diponegoro, Indonesia)

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Editorial

It is with pleasure that I present the full papers of the 2014 International Seminar and Conference on Learning

Organization (ISCLO).

Each paper represents a substantial contribution to the learning organization in all its defined forms, such as

Corporate Learning, Corporate Univeristy, Leadership Pipeline, Global Competitiveness, Managing Diveristy,

Knowledge Management, Instructional Design System, and Learning Technology & Methodlogy. With such

dynamic business environment, learning organization is required to anticipate any uncertain future. Companies are

required to be able to enhance their business’ excellence and sustainability. Learning organization means that the

corporates should facilitate the learning process for all their members, including their stakeholders, and

continuously make improvements. In addition, an organization is expected to learn collectively and continuously to

obtain, organize and use knowledge for the success of the organization. Learning organization, furthermore, means

empower people in and around it to build a sustainable competitive advantage.

As we all know that the ASEAN Economic Community (AEC) in 2015 is approaching. ASEAN Economic Community

(AEC) will be the goal of regional economic integration by 2015. ASEAN Economic Community whose platform is

similar to the European Economic Community (EEC) can be a serious threat to those who are not ready yet.

Although the spirit behind the establishment of the AEC is to reduce poverty and economic disparities among the

ASEAN member countries through a number of mutually beneficial cooperation, in practice, AEC will also trigger a

frontal competition in the levels of nations, industries, companies, and even, up to the individual (labor).

The crucial issue of AEC is related to the movement of human capital which includes a group of highly skill and

have international certification. Those who have a license and certification can freely enter anywhere including

Indonesian market. And vice versa, with their international certification, experts from Indonesia can freely take part

in other ASEAN countries. This condition undoubtedly becomes a great threat to those who are low competent ; in

contrast, it becomes great opportunities for those who are of global standards.

Like two sides of a coin, AEC could be a deadly threat and at the same time be a lucrative opportunity. AEC pushes

us to let outsiders enter our markets, but it provides us the way to grab far greater and profitable opportunities. The

implementation plan of the ASEAN Economic Community is not merely discussing the economic relations among

the countries that predictably will be more widely open. Basically it is not only the country that has an intention in

this case, but also the people in it. Globalization, undeniably, has made the national boundaries become blurred

(borderless). Through AEC every individual would have equal opportunity to achieve something, to improve his/her

welfare as well.

Overall, there is clear evidence of an emerging body of knowledge around learning organization. Presented in these

proceedings are 66 papers. The conference had 79 papers submitted for review, and these proceedings therefore

represent an 82% success rate upon review. The conference overall had 66 presentations delievered. These

proceedings represent all presentations made at the conference.

Enjoy reading these proceedings and I hope that they contribute further to the advancement of ideas around work-

intergrated-learning and responding to the challenges of this space

Sri Praptini Rahayu 2nd

ISCLO 2014 Chairwoman

email : adeayu@telkom.co.id

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The ISCLO Conference 2014

Influence of Internal Market Orientation on Employee Job

Satisfaction

in Private Sector Organization

Syahputra1,2, Irfan Prarendra1, Aditya Wardhana1, Candra Wijayangka1

1Business Administration Program, Telkom University, Bandung, Indonesia 2PhD candidates, Universiti Utara Malaysia

Abstract

One of the issues in internal marketing in the companies is treating employees as a middle man of customers inside the firm. This

study investigates potential enablers of successful internal market orientation in the industry that can increase employee job

satisfaction. The main objective of this research is to examine the influence of internal market orientation on employee job

satisfaction. In order to measure that, three dimensions of internal market orientation namely internal marketing research, internal

communication, and internal response are used. While, the two dimensions that measure employee job satisfaction are intrinsic

satisfaction and extrinsic satisfaction. Data were gathered through questionnaire survey of staff at a private sector industry.

Regression analysis examines the influence of internal market orientation on employee job satisfaction. The result indicates that

internal market orientation positively influences job satisfaction. This limitation includes the sample, which is only in one private

company due to time and monetary limitation. This result may not apply in other organizations because there is different

management system, policies, and culture within the companies. The result from this research will assist companies to improve

their competitiveness in marketing and human resources.

© 2014 Syahputra, Irfan Prarendra, Aditya Wardhana, Candra Wijayangka. Published by Telkom Pub.

Ltd. Selection and peer-review under responsibility of The ISCLO, Department of Communication,

University of Telkom, 20342 Bandung, Indonesia.

Keywords: internal market orientation, job satisfaction, private sector industry, employee, competitiveness

Introduction

Internal Marketing, according to the conventional view, focuses on external customers, rather than paying attention

to the organization’s employees as “internal” customers. However, internal marketing is a competitive asset in

developing sustainable advantage in the marketplace through a “marketing-like approach directed at motivating

employees for implementing and integrating organizational strategies towards customer orientation” (Ahmed and

Rafiq, 2002). Internal marketing is more important than the traditional external marketing. It happens because

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employees are also consumers, where the organization has to take care of its employees and build organization value

for every member to follow (Kotler, 2004). In addition, Greene, Walls and Scbrest (1994) suggest that internal

marketing orientation is the key to excellent service and success of external marketing.

In other words, internal marketing is a process that operates among various departments within the given firm, also

between the staff and management. Therefore, there is a strong need for marketers to motivate and influence workers

to change the internal process as expected according to an effective external market orientation. This combines all the

activities of the company to convince employees to respond to the market, which includes the capability of adapting

quickly the changes within the external market. However, Atousa (2007) asserts that the fundamental tool for

achieving employee satisfaction is the treatment of employees as customers. The concept of internal marketing has

evolved from the original conceptualization of employee motivation or happiness by treating employees as customers

and profession as products for improving service quality (Sasser and Arbeit, 1976; Berry, 1981) to customer

orientation or market orientation and the use of marketing approach and marketing-like tools internally to motivate

employees (Grönroos, 1990). In other words, organization should respect their employees and treat them as internal

customers. Hence, in order to attract, motivate, and maintain employees, the organization should meet their

requirements and delight them as customers in order to build up employee loyalty.

In order to achieve organizational goals, the employees will be searching for improvement and motivational methods

such as motivation system, training, and job design to increase the organizational and individual performance

(Chi,Yeh and Chiou, 2008). In short, the creation of a market-oriented culture results in internal customer satisfaction

and improved service quality, which leads to customer satisfaction and success in the external market. A number of

firms has regularly recognized and utilized the internal marketing program. One potential reason for this has been the

growing interest in internal marketing as a prerequisite for successful external marketing. In addition, several authors

(Gummesson, 1987; Berry and Parasuraman, 1991; Lings 2004) state that implementing internal marketing campaigns

will result in an increase of service quality. The recognition of employees’ key role in service marketing has given a rise the internal marketing program that is

strongly oriented to employee development (Tansuhaj, Wong and McCullough. 1988; Grönroos, 1995). It seems to

be a very practical approach in industries because the customer-employee interaction determines a significant part of

the market offering. Others argue that the quality of service and efficiency of the service distribution as well as the

effectiveness of the communication effort would depend more directly on the actions of the employees of the

company.

Intensive and high quality communications should be treated as a competitive advantage in order to inform employees

to be always in time about the current nature of the external environment changes. This is a general internal marketing

activity that requires companies to focus on customers and adopt market orientation. The end strong communication

pushes staff to identify the need to change and when it is required, also makes staff feel comfortable about adopting

quickly.

Based on the fact above, the main purpose of this research is to examine the influence of internal market orientation

on job satisfaction, at least in the company where this research conducted. The research seeks to answer the following

questions.

• Is there any relationship between internal market orientations with job satisfaction?

• Are there simultaneous significant influences between the internal market orientations on job

satisfaction?

Literature review

Internal marketing is a philosophy of valuing and treating employees as an intermediate set of customers inside the

firm and enhancing the value provided to employees with the aim of encouraging them to perform the organization’s

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marketing objectives and thus strengthen the competitive position of the firm in the external market (Sasser and

Arbeit, 1976, Berry and Parasuraman, 1991; Greene et al., 1994; Ahmed and Rafiq, 2003). Meanwhile, According to

Berry and Parasuraman (1991), internal marketing is the process of handling staff as internal customers and projects

as internal products that satisfy the needs and desires of the customers and adhere to the company’s goals. Jaworski

and Kohli, 1993 also support that Internal Marketing is the process of promoting the company and its products to the

employees.

As mentioned previously, internal marketing orientation crosses the functional boundaries of marketing and human

resource management. The function of management is to influence employees’ behaviors in the ways that will

positively affect customer’s perceptions of the levels of service they receive (Hartline and Ferrell, 1996). Therefore,

managerial activities can be explained as the equivalent of an external market orientation of the firm. It means that a

strategic overview of cultural change helps the given organization’s marketing orientation as well. Internal marketing

orientation supports organizations to build effective and efficient relationships with its employees, based on a

dedication to provide higher value for employees (i.e. the internal market) by understanding and meeting their

expressed and latent needs in as much in the same way as the commitment required to produce value for the company’s

customers (Gounaris, 2006). • Internal Market Research

Internal marketing uses a marketing perspective for managing an organization's human resource (George and

Gronroos, 1991). It is based on the philosophy of viewing organizations’ jobs as internal products and employees as

internal customers of these (Sasser and Arbeit 1976). This allows organizations to manage the employee and employer

exchange by modifying the existing marketing tools and techniques to the internal environment of the firm (Greene

et al. 1994). This has led to operations of internal marketing that directly reflect those of the external marketing. For

example, Piercy and Morgan (1990) develop an internal marketing mix which directly parallels to the external

marketing mix. In processing internal marketing this way, Piercy and Morgan suggest that jobs or projects constitute

internal products. In the end, it is what the employee has to give up to complete the job, promotions are represented

by internal communications and distribution by meetings in which the ideas are presented to the employees.

• Internal Communication

Communication is the means by which organizations transfer information from one entity to another i.e. disseminating

information (Johlke et al. 2000). Therefore, it impacts the performance of front line staff. Information dissemination

is an important requirement to align employees’ attitudes and behaviors with the organization’s goals (Boswell and

Boudreau 2001; Guest and Conway 2002). Internal communications are the key in this process (Grönroos 1990), the

close physical proximity between managers and employees increases opportunities for such communication,

providing the chance to collect information about the wants and needs of the employees, as described above, and also

to disseminate the information.

The process of communication is also important in fostering organizational identification (Smidts, Pruyn and van Riel

2001), and subordinate job outcomes (Keller 1994). In particular, bi-directional informal communications between

managers and staff have positive outcomes for front-line staff (Johlke and Duhan 2001). In the context of internal

marketing orientation, this is particularly important as the close proximity of staff and their managers means that bi-

directional communications constitute an important part of workplace behavior.

• Internal Response

The internal response dimension comprising the actions has taken in response to the needs of the employees and

consists of designing jobs to meet the needs of the employees. The needs may comprise the followings: adjustment

on the compensation schemes accordingly, building the management more considerate with regard to the employees’

needs, and offering them the necessary training in order to develop the skill and capabilities that their job description

requires (Gounaris, 2008).

• Job Satisfaction

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Job satisfaction is an essential objective of internal marketing programs and, thus, a key performance indicator

regarding the company’s performance in the internal market. Consequently, in much the same manner, that the

company’s degree of market orientation directly influences its performance in the (external) market (Narver and

Slater, 1990; Kohli and Jaworski, 1990; Slater and Narver, 2000). The results of many studies show that employees

need clear directions regarding their work environment, in another word, the task and job design should be given a

higher priority among employees. Job design can be conceived as being similar to an aspect of the job which facilitates

the development of structural, social, and financial bonds.

According to Herzberg (1966) the leading dissatisfactions are company policy, supervision, relationship with line

manager or owner, work conditions, salary, and relationship with peers. The leading satisfactions of a job are

achievable, recognition, the work itself, responsibility, advancement, growth and so on.

Figure 1:

Factors affecting Job Satisfaction (Herzberg, 1966)

Research Methodology

Population and Samples

The population of this research is employees of Palm Oil Company in South Jakarta, Indonesia. This sample is used

due to time and monetary limitation. According to company employees’ database in 2013 there are 450 employees.

Quota sampling will be used in this study. This is to ensure that certain groups are adequately represented in the study

through assignment of a quota (Sekaran and Bougie, 2013). Generally, the quota fixed for each subgroup is based on

the total numbers of each group in the population and convenience sampling method is used. The 50 employees from

the populations (see Table 1) are the samples for this study. Furthermore, Roscoe (1975) as cited in Sekaran and

Bougie (2013), uses the rules of thumb for determining sample size. One of the rules of sample sizes which is larger

than 30 and which is less than 500 are appropriate for most research.

Department Employees Samples

Operation 112 (24.89%) 12

Human Resources and General Affairs 53 (11.78%) 6

Sales and Marketing 119 (26.45%) 13

Finance and Accounting 42 (9.33%) 5

Others 124 (27.55%) 14

Total 450 (100%) 50

Table 1: Data of Employees

Dissatisfaction

Company policy

Relation with Manager/Owner

Work conditions

Salary

Relationships

Satisfaction

Achievement

Recognition

The Work it self

Responsibility

Advancement

Growth

Job

Satisfaction

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• Design

In order to achieve the purpose of this research the regression analysis is used to discover the influence of internal

market orientation on employee job satisfaction. According to Sekaran and Bougie (2013), regression analysis can

suggest that there is influence of independent variable on dependent variables. The independent part is what the

experimenter changes or enacts in order to do the experiments. It is well-known that the quantitative method is the

research technique that is used to gather quantitative data or information dealing with numbers and anything that is

measurable. The research framework of this study is developed based on the view presented in the literature

suggesting that it significantly gives influences between the internal market orientations on the employee job

satisfaction. • Instrument

Measurement of variables is an integral part of the research and is an important design. The total of 65 items are

constructed consisting of 43 items that represent the independent variables and 22 items that represent the dependent

variables. Internal market orientation items are adapted from Gounaris (2008). The job satisfaction items are adapted

from Weiss et al. (1967).

• Reliability and Validity

Data collection is performed through questionnaire method applied to employees with face to face interviews. Before

the survey, pilot study is conducted to realize the validity and reliability of the study. The questionnaire form consists

of 65 questions.

The test was conducted to test the validity of each item in the statement for measuring its variables. The validity

testing in this research was conducted by correlating the scores of each statement presented to respondents with the

total score for all items. Correlation techniques are used to test validity of the statements in this study and Pearson

product moment correlation is also used. The questionnaire statements in this research are valid. Confidence analysis

is implemented and confidence coefficients are calculated to achieve consistency of questions each other and

homology in the measurement. The reliability of the questionnaire was tested by Cronbach’s Alpha or called Alpha

Coefficient to show internal consistency of the questionnaire. According to Sekaran and Bougie (2013), the closes

the reliability coefficient of 1.00 the better it is. In general, reliabilities which are less than 0.60 are considered poor;

those in the range of over 0.80 are considered good and acceptable.

Variables and Dimensions Numbers of Item Cronbach Alpha

Independent Variables 1. Internal Market Research 17 0.77

2. Internal Communication 10 0.65

3. Internal Response 16 0.73

Dependent Variables

1. Job Satisfaction 22 0.71

Table 2: The Results of Reliability Analysis

Data Analysis

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The analysis used in this study is undertaken in two stages. In the first stage, the overall reliability and validity of

internal market orientation and job satisfaction are measured. In the second stage, it measures the influence between

two variables using the covariance based SPSS. These steps are discussed in the following subsections.

Results

A total of 50 questionnaires were distributed to staff at private sector industry (a palm oil company) in South Jakarta.

The response rate is 100%. The Majority of respondents are male (60%). Their education background is divided into

four categories (i.e Diploma, Degree, Master and PhD) and most of the respondents’ education backgrounds are

Degree and Diploma with the percentage of 58% and 26% respectively. From the demographic variables, it can be

seen that many of the staffs in this company have the length of services between 1 to 5 years (52%). The company

staff’s age range is from 26 to 55 years where 48% of them are between the age of 26 to 35 and 18% of them are in

the age between 36 to 45 years. Correlations Result

This research uses correlation analysis Pearson product moment correlation analysis to discover the correlation

between internal market orientations variables and job satisfaction. The hypothesis formulation is described in the

following:

H0: There is no significant relationship between internal market orientation and job

satisfaction. H1: There is a significant relationship between internal market orientation and

job satisfaction.

The result is shown in the following table:

Table 3: Correlations result between variables

1 2 3 4

1.

2.

3.

4.

Job Satisfaction Internal Market Research Internal Communication Internal Response

1 .466** .467** .620**

1 .419** .436**

1 .600**

1

**. Correlation is significant at the 0.01 level (2-tailed).

The result indicates that all the three dimensions of internal market orientation are positively correlated with job

satisfaction. The three dimensions of internal market orientation are internal market research, internal communication,

and internal response, with the coefficient value of 0.466, 0.467 and 0.620 respectively with overall job satisfaction.

Regression Analysis Result

Regression analysis is used to explore predictive ability of internal market orientation on job satisfaction. The

hypothesis formulation is described in the following:

H0: There is no significant influence internal market orientation on job

satisfaction. H1: There is a significant influence internal market orientation on

job satisfaction.

The result is shown in the following table:

Table 4:

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Regression of internal market orientation on job satisfaction

Model Unstandardized Coefficients Standardized Coefficients t Sig.

B Std. Error Beta

(Constant) 46.852 17.474 2.681 .010

Internal market .662 .217 .483 3.049 .004

1 Internal comm

-.125 .311 -.058 -.402 .689

Internal response .029 .232 .018 .123 .903

a. Dependent Variable: job satisfaction

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .470a .221 .170 3.042

Table 4 illustrates the regression results of individual internal market orientation dimensions and job satisfaction. The

result reveals that only 22.1% (R Square=0.221) of the variance in job satisfaction that has been significantly

explained by the three dimensions of internal market orientation, namely internal market research, internal

communication, and internal response. The result also indicates that one dimension of internal market orientation

correlates with job satisfaction at p≤0.05. The dimension is internal market research. Internal market research is found

in the most important factor in explaining job satisfaction because of its high beta value of 0.483, while internal

communication and internal response have beta value of -0.58 and 0.18 respectively.

Discussion

There is a significant relationship between the overall internal market orientation and the overall employee job

satisfaction. The correlation result reveals positive relationship between internal market orientation variables and the

overall job satisfaction. This result sets forward that internal market orientation and employee job satisfaction are

associated with each other. In other words, the positive correlation between internal market orientation and employees

job satisfaction as indicated in this research are in line with what has been discussed by Gounaris (2008). He says that

adopting an internal market orientation indicates an integrated kept organization. Therefore, the aim of the internal

market orientation is excluded to produce employees’ job satisfaction.

Meanwhile, regression analysis indicates that the dimensions of internal market orientation consist of internal market

research, internal communication and internal response. It can be seen that only 47% of the variance are explained by

the independent variables where only internal market research is significant to the job satisfaction. Lings (2004)

discusses that internal market orientation is about identifying and satisfying the wants and needs of employees as a

requirement for satisfying the customers.

Numerous limitations exist throughout this research. This limitation includes the sample, which is only in one private

company due to time and monetary limitation. This result may not apply in other organizations because there is a

different management system, policies, and culture within companies.

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