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Article

The Effects of External and Internal Factors on Competitive Advantage—Moderation of Market Dynamism and Mediation of Customer Relationship Building

by
Romina Cheraghalizadeh
1,
Hossein Olya
2,* and
Mustafa Tumer
1
1
Department of Business Administration, Eastern Mediterranean University, Famagusta 99628, North Cyprus, Turkey
2
Research Development for Marketing & CCI, Sheffield University Management School, Sheffield S10 1FL, UK
*
Author to whom correspondence should be addressed.
Sustainability 2021, 13(7), 4066; https://doi.org/10.3390/su13074066
Submission received: 4 February 2021 / Revised: 9 March 2021 / Accepted: 30 March 2021 / Published: 6 April 2021
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Abstract

:
Using a resource-based view and dynamic capabilities approach, this study investigates both the internal and external factors influencing competitive advantage in the hotel industry. For this purpose, we examine how organizational capabilities may lead to customer relationship building and in turn to competitive advantage. We further test the moderation role of market dynamism on the relationship between organizational capabilities and customer relationship building, and also investigate the mediation effect of customer relationship building on the association between organizational capabilities and competitive advantage. A questionnaire-based study was conducted among hotel employees in Northern Cyprus to test the conceptual model. A set of approaches was applied to detect common method bias and test the validity and reliability of the questionnaire. Correlation and regression analyses were conducted to evaluate the relationships between the variables, and bootstrapping analysis was applied to assess the mediation and moderation effects. The results revealed that organizational capabilities enhance customer relationship building and competitive advantage. Market dynamism as an external factor moderates the relationship between organizational capabilities and customer relationship building. There is also an indirect association between organizational capabilities and competitive advantage through the mediation of customer relationship building. The theoretical and practical implications of the findings are discussed.

1. Introduction

Companies, specifically hotels, need to stay competitive. This competitiveness is based on how hotels, for instance, set themselves apart from their competitors and build good relationships with customers [1]. Organizational capacities and resources perform a set of functions to attain certain outcomes [2] and help companies to be competitive. However, these are not the only factors leading to organizational success or failure [3]. Environmental factors have also become crucial in the hospitality and tourism industry [4,5,6]. Therefore, a hotel’s success depends on the management’s ability to identify environmental changes and adopt organizational strategies to boost competitive advantage [2].
In order for hotels to meet strategic targets, they must effectively combine management and the reinforcement of organizational resources and competencies. Such competencies include the ability to conceive and implement unique business plans and practices to achieve better organizational outcomes [1]. They are also reflected in how an organization reacts to dynamism in the market. Market dynamism is defined as changes in the marketing forces within an organization’s specific market environment [7]. These changes make it difficult to predict the future and to adapt to environmental changes; consequently, outcomes are affected [1].
Tourism is one of the fundamental forces behind the development and growth of regional economies [8]. The hospitality industry is a key driver of the economy in Northern Cyprus and contributes to the development of the economy in the country. In addition to the unique natural and geographical characteristics of this island, there is a potential to create a significant advantage in the competitive hotel market. This path of the economic development needs to be obtained through a long-term plan for sustainable growth through proper application of marketing strategy for the service providers [9].
For the development of the hotel industry in Northern Cyprus, it is critical to investigate the factors that may affect the sustainable economic outcomes. However, nowadays, economic activities along with social and economic dimensions are influenced by the sustainability of the businesses [10]. In times of existing complexity and changes in the business environment, the possibility of forecasting is increasingly limited. Adaptability is crucial, not only for obtaining a sustainable competitive advantage in the sector but also for the survival and competitiveness of the business [11]. In addition to competitive advantage, the issue regards management activities conducted to maintain the unique attributes of the business [12]. Elidemir et al. [13] argued that firms must reinforce heterogeneous and tacit capabilities (rather than easy-to-imitate resources), but it is difficult for competitors to do so in a sustainable fashion.
Since the competitiveness existing in the markets has become more intense, building customer relationships is required as an immediate action by firms in order to create a sustainable advantage [10]. Strategic management of the resources and capabilities helps hotels to create a proper relationship with customers. It enables them to differentiate themselves from rivals, benefit financially from the relationship with customers, and remain competitive, which may lead to sustainable competitive advantage. As a result, continuous improvement of such resources can help hotels to support economic development and lead to economic sustainability in the long run.
To explain the link between capabilities and competitive advantage, previous studies have considered specific organizational capabilities, such as the company’s IT (e.g., [14]), human capital (e.g., [15]), and innovation capabilities (e.g., [16]) across several different fields (e.g., [14,17] Son et al. 2012). However, the hospitality and hotel industry is a highly competitive sector known for its continuous transformation [18] and differs from other industries [19]. Cruz-Ros and Gonzalez-Cruz [20] asserted that studies of capabilities regarding the service industry would advance strategy creation in this field. Despite the importance of this area, few studies have been conducted regarding the effects of organizational capabilities on competitive advantage in the hotel industry. Therefore, consideration of the organizational capabilities as pertaining to hotels (and in a general sense) is still needed.
Furthermore, market dynamism as an external factor has been considered in the literature (e.g., [7,21]). However, relevant research on the hospitality industry considered hotels utilizing different visual concepts, such as green hotels (e.g., [7]), or the research was conducted in various geographical destinations other than islands (e.g., [21]). This study is conducted in Northern Cyprus, an island destination, whose market characteristics differ from those of other destinations.
Specifically, the present research investigates how organizational capabilities can improve customer relationship building and how this can lead to a competitive advantage. Notably, a particular strategy for creating a relationship with customers might not be useful for all organizations, as each company has different resources and capabilities and may face distinct environmental factors. Considering this, we examine how the relationship with a particular target, such as customers, can be affected by organizational capabilities and dynamism in the market.

2. Theoretical Framework

2.1. Organizational Capabilities and Customer Relationship Building

The resource-based view posits that an organization is a set of specific physical assets and human resources and assumes that if these resources are rare, valuable, non-substitutable, and inimitable, it may lead to value creation strategies and sustainable competitive advantage [22,23,24]. Previous studies have considered these dimensions as antecedents of customer outcomes. For instance, Teece et al. [25] focused on satisfaction and mentioned that managers try to create customer satisfaction by capitalizing on their unique capabilities. Further, Ramanathan and Ramanathan [26] examined the effect of organizational capabilities on customer loyalty and considered positive word of mouth and intention to re-use. They indicated that valuable resources and capabilities translate into client loyalty. Additionally, according to Tehubijuluw [27], loyalty is a key element in the quality of the relationship between companies and customers.
The resource-based view also emphasizes the essential role of intangible (as well as tangible) resources in achieving better outcomes. For instance, Cheraghalizadeh and Tumer [1] considered the effect of managerial capabilities on customer relationships by applying the resource-based view, finding that the existence of competent managers in an organization improves customer relationships. They indicated that managers who utilize organizational resources effectively are more likely to offer excellent and specialized services to customers and have high-quality relationships with them.
Moreover, capabilities help organizations apply new strategies and are essential for responding to changes in market conditions through transforming and combining existing resources in different ways [25]. The dynamic capabilities approach posits that markets are dynamic; companies should differentiate themselves in terms of their capabilities when obtaining and deploying resources. Wang and Feng [28] mentioned that some organizations have failed because they were not successful at expanding their customer relationship management. Furthermore, they could not improve their capabilities enough to help them manage their relationships with customers to attain a competitive advantage. Thus, organizational flexibility towards changes in the business environment helps companies to be more responsible regarding customer demands and improve their relationships with such customers.
Several studies have delved deeper into this topic by considering the linkage between specific organizational capabilities with regard to creating a relationship with customers; examples include marketing (e.g., [29]) and technological capabilities (e.g., [30]). For instance, Rizan et al. [31] and Wibowo et al. [32] indicated that the tactics of relationship marketing are linked to customer outcomes, such as customer satisfaction, trust, and loyalty. Furthermore, Trainor et al. [30] found that suitable technological capabilities enable companies to interact with their customers more efficiently and to coordinate efforts to collect client information that will allow them to better respond to their needs. Considering the abovementioned literature, the present study hypothesizes the following:
Hypothesis 1 (H1).
There is a positive association between organizational capabilities and customer relationship building.

2.2. Customer Relationship Building and Competitive Advantage

Organizational resources are internal determinants connected to a company and can be managed by decision makers. Furthermore, a business relationship with customers is considered an organizational resource since the creation of a long-term relationship with clients decreases removal rates and increases benefits; therefore, it ensures the viability and progress of the organization. On the other hand, competitive advantage is considered a situation where a firm implements a value-creating strategy that is not simultaneously implemented by its competitors [33]. Customers are considered a company’s most powerful resource, and, thus, the company–customer relationship should be valued. Roger-Monzó et al. [34] asserted that customers are becoming more selective and that securing their loyalty and ensuring the provision of high-quality services are essential for companies to compete. Jiang and Zhang [35] emphasized the key role of customer loyalty, stating that it can be considered an intangible organizational asset in terms of the creation of competitive advantage. Further, according to Baumann et al. [33], it may affect the likelihood of positive word of mouth and cross-buying as well as the duration of the company–customer relationship.
Berry [36] mentioned that the primary concept of relationship marketing within a company is attracting new customers and creating long-term connections with them. Idiosyncratic relationships are sources of competitiveness and enhance the lifetime value of customers; they may contribute to fulfilling customers’ needs and help to develop trust and long-term relationships. Feng, Sun, and Zhang [37] also evaluated the effect of customer involvement on organizational outcomes using a resource-based view, finding that customer involvement enhances flexibility in terms of the process, reliability of delivery, and quality of products, therefore creating competitive advantage. Similarly, Alipour and Mohammadi [38] found that the ability to quickly respond to customers’ needs leads to improved competitiveness. Further, Pai and Tu [39] noted that retaining a good connection with customers improves organizational image and enhances competitive advantage.
Although there are studies considering customer relationships and their dimensions as an antecedent of organizational outcomes, as, to date, no consensus exists regarding the exact dimensions that constitute this relationship (e.g., [40,41]). For instance, Hennig-Thurau et al. [40] considered the two factors of satisfaction and commitment as dimensions of relationship quality, while Walsh et al. [41] applied satisfaction, trust, and commitment. This research considers customer relationship building as one general dimension through which to understand customers’ demands and to establish a close and strong relationship with them. Based on the abovementioned literature, the present study hypothesized the following:
Hypothesis 2 (H2).
There is a positive association between customer relationship building and competitive advantage.

2.3. The Mediating Effect of Customer Relationship Building

While existing theoretical studies indicate that dynamic capabilities are important for achieving a competitive advantage, it is critical to know how this occurs. Due to the important role of customers in organizational success, service-providing companies are increasingly seeking novel ways of providing services, attracting new clients, and retaining existing customers. On the other hand, according to the resource-based view, organizational capabilities are sources of competitiveness; they enable organizations to build strong relationships with customers and achieve better outcomes. That is, if these resources can be applied effectively, companies will perform better. A good relationship with customers implies higher satisfaction and trust, both of which are antecedents of competitive advantage. Kuo et al. [42] indicated the importance of developing a long-term relationship with customers and providing them with high-quality services. Based on their study, a company with higher dynamic capabilities is more likely to improve competitiveness and organizational performance.
Leonidou et al. [7] considered the relationship creation as an organizational capability that helps companies understand customers, respond to their demands effectively, and provide better opportunities. According to Cherghalizadeh and Tumer [1], organizations perform more efficiently if managers possess the capabilities and necessary qualifications to build strong relationships with customers. Their study showed that good managerial capabilities and skills facilitate better quality relationships with customers and, in turn, improve competitive advantage. Furthermore, Neirotti and Raguseo [14] assessed the effect of IT capabilities on competitive advantage. They mentioned that capabilities enable companies to better respond to customer needs, and they enable firms to spend less time serving customers. Based on the abovementioned literature, the present study hypothesized the following:
Hypothesis 3 (H3).
Customer relationship building mediates the association between organizational capabilities and competitive advantage.

2.4. The Moderating Effect of Market Dynamism

Market dynamism refers to irregularities in the market, and its main factors are rapid changes in technologies, variations in the structure of markets, inconsistency in market demand, high fluctuations in supply, and the possibility of market shocks [43]. An organization’s dynamic capabilities concern their capacity to combine, create, and reconfigure its internal and external competencies to negotiate swiftly changing environments [25]. Jantunen et al. [44] mentioned that the key concept of the dynamic capability view is the positive association between dynamic capabilities and success in terms of the organization’s performance. Although studies have highlighted the relationship between capabilities and performance outcomes, the mechanisms and conditions under which these effects can occur remain unclear [44]. Building a good relationship with customers requires an understanding of customer demands as well as the application of the appropriate organizational capabilities to respond to them. However, because of dynamism in the market, it may not always be possible to apply such capabilities effectively [1]. To explain the effects of the external environment, when complexity increases, behavioral patterns become less predictable, and using existing information to plan is not always efficient.
Less dynamic markets are determined by infrequent changes by which organizations can usually predict regular or anticipated changes that occur in roughly predictable paths. Therefore, modifications of the organization’s services and products are required less often [45]. Organizations that are stable (or only mildly unstable) may experience more benefits since, in a volatile environment, organizations have lower incentives to capture all changes in comparison with those that do not operate in high-volatility markets [46].
However, Li et al. [47] mentioned that firms in higher volatility environments are less reliant on existing resources prepared over time. A high level of variation in customer preferences is more likely to cause difficulties in long-run planning, coordination, and inventory decisions. Furthermore, a dynamic environment brings major contingencies and, thus, enhances the uncertainty faced by decision makers. Such conditions force companies to revise the strategies they then must implement.
Seo and Chae [48] found that when dynamism in the market is high, companies are required to understand their customer preferences. Doing so allows them to withstand turbulence in the market and remain competitive. Furthermore, linkage with the environment is affected by regularities in companies’ responses based on their capabilities and structures [14].
Based on the abovementioned content, the effect of organizational capabilities and customer relationship building is likely to vary depending on market dynamism, and there seems to be an interaction effect between the variables. Therefore, a hypothesis that combines the dimension of organizational capabilities with market dynamism as a moderator is proposed:
Hypothesis 4 (H4).
Market dynamism moderates the association between organizational capabilities and customer relationship building.
Based on the resource-based view and the dynamic capabilities approach, this study explains the hypothesized relationships. Through this research, we attempt to understand how organizational capabilities can lead to organizational outcomes, such as customer relationship building and competitive advantage. We also evaluate the extent to which market dynamism operates as an external factor affecting the association between organizational capabilities and customer relationship building. The proposed relationships are presented in Figure 1.

3. Materials and Methods

3.1. Procedure

Hotel employees in Northern Cyprus participated in the present study. Northern Cyprus is a part of the island of Cyprus that is only politically recognized by Turkey [49], and the tourism industry is at the forefront of development in this country [50].
A questionnaire-based study was conducted in order to collect data. Before the distribution of the questionnaire on a large scale, 26 hotel employees were approached to conduct a pilot test. This was carried out to determine whether more time or resources were needed on specific aspects of the research design, such as length, timing, or method, and also to ensure there were no issues in terms of the understandability of the scale items. Test results confirmed there was no confusion over the items.
After the purpose of the study was explained to the hotel managers and supervisors, they agreed to distribute the questionnaire to 264 of their employees. Purposive sampling was applied in approaching participants in an attempt to ensure questionnaires were distributed among employees who have enough knowledge, information, and experience to answer the questions appropriately. Managers, supervisors, senior employees, and personnel with at least two years of work experience at the relevant hotel were selected. Targeted participants had a connection with customers. Respondents were informed that their responses would be treated entirely anonymously and confidentially. Participants were asked to answer the questions in a self-administrative manner. After collecting the questionnaires, 201 were deemed usable (76% response rate).
In order to determine whether sample data were taken from a normally distributed population, the normality test was conducted. That is, the normality of data was confirmed by testing skewness and kurtosis. Moreover, a set of reliability tests (Dijkstra-Henseler’s rho, Cronbach’s alpha, and composite reliability) was applied to assess internal consistency among scale items, and confirmatory factor analysis was used to determine the convergent and discriminant validity of the study measures.
This research applied both procedural and statistical remedies of common method bias. Harman’s single-factor test, common latent factor, and common marker variable techniques were the three approaches to statistically detect the common method bias [51].
To test the hypotheses, correlation and regression analyses were applied to evaluate the relationships between the variables. A bootstrapping analysis with a sample size of 5000 generated at a 95% confidence interval was conducted to assess the mediation and moderation effects.

3.2. Survey

To address the risk of the presence of common method bias, psychological separation was applied as a procedural remedy during the questionnaire’s design process [51], and a cover letter was included before both parts of the questionnaire in order to separate the items of the predictor from the other variables. Consequently, the predictor variable was not directly proposed to be linked to the other variables, and no specific relationship between these variables was presented in the questionnaire.
Questionnaires were distributed and collected by hotel managers (not directly by researchers). Therefore, in order to avoid social desirability bias (when some individuals seek to depict themselves in a desirable way, regardless of their actual feelings about a subject) [51], envelopes were given to the participants so that their answers would remain anonymous when the questionnaires were returned to supervisors. Furthermore, selected respondents spent less than 10 min filling in the questionnaire, which may have minimized non-response bias that can arise due to a time limit. Short length scales may reduce some kinds of bias generated by respondents’ carelessness and fatigue [52].
Since the official language in Northern Cyprus is Turkish, distributed questionnaires used in this research were in both English and Turkish, and back-translation was used as a part of the data collection procedure. After completion of the first version of the translation, two native English speakers with a tourism and hospitality background were asked to translate the Turkish version of the questionnaire back into English. Researchers compared both the back-translated and original versions of the questionnaire to the maintained original content.
Scale items were adapted from the existing literature and slightly adjusted in order to be more consistent with the context of this study. Organizational capabilities were measured using eight items developed by Lopez-Cabrales et al. [53]. Three items from Kaleka [54] evaluated customer relationship building; three items from Tuan and Yoshi [55] assessed competitive advantage; seven items from Sarin and Mahajan [56] evaluated market dynamism. Items were measured on five-point Likert scales. Scales ranged from 1 to 5 (strongly disagree to strongly agree).

4. Results

4.1. Demographic Characteristics

This study comprises a sample of 201 hotel employees with at least two years of work experience who had direct contact with customers, with 62% male and 38% female respondents. About 31% of respondents were between 18 and 27 years old, 29% ranged between 28 and 37, 26% were between 38 and 47, and the rest (13%) were older than 48. Further, 64% of respondents were married, while only 36% were single. Respondents with primary and secondary school education made up 26% of the sample, while 49% held 2 to 4 years of university education, and the rest (24%) had graduate degrees. Additionally, 33% of respondents had 2 to 5 years of work experience, 39% had 6 to 10 years of experience, 21% had worked for 11 to 15 years, and only 7% had more than 16 years of work experience.

4.2. Measure Assessment

To statistically test the existence of the common method variance, this research applied the common latent factor approach suggested by Podsakoff et al. [51]. A common factor was added and connected to all other observed variables of constructs in the structural model, and all of these paths were constrained to be equal. The common variance was measured as the square value of the common factor associated with each path before standardization [57]. The result shows that the value for the common latent factor is B = 0.279 and the square of this value is 0.078, which means common method bias in the data is not a threat to measurement since the value (7.8%) is below the threshold of 50% [57].
To apply a common marker variable, this research added a construct (job satisfaction) that was not related to at least one of the variables in the research model in theoretical grounds [51]. The added measures were loaded on marker variables and with all manifest variables associated with a common method factor. All of the loadings of the common method manifest variables were assumed to be equal. The common variance was measured as the square value of the common factor associated with each path before standardization [57]. The result shows that the common latent factor value is B = 0.262 and the square of this value (0.068), which shows that a common method bias does not affect the study measures negatively [57].
Furthermore, the results of the Harman’s single-factor test show that no factor with a high variance percentage (>40%) emerged, which indicates that a common method bias does not seem to affect the measurements [51]. Confirmatory factor analysis was used to test the validity of the questionnaire. Two items from organizational capabilities were dropped during low-level factor loading. As shown in Table 1, other items were loaded significantly under assigned factors (λ > 0.5, p < 001).
Table 1 also presents the internal consistency reliabilities. Dijkstra-Henseler’s rho (ρA), Cronbach’s alpha, and composite reliability (CR) were used as three measures to test the reliability. Values for all three measures were deemed to be acceptable and to be greater than the commonly accepted cut-off level of 0.7 [58].
The construct validity test, including convergent and discriminate validity, was checked. Table 2 provides results of the average variance extracted (AVE) that indicate the validity of study constructs as AVE values are above 0.5, which is the commonly accepted cut-off. Results of the heterotrait–monotrait ratio of correlation (HTMT) confirm discriminate validity, as HTMT values were lower than the cut-off level of 0.85 [58].

4.3. Hypothesis Testing

H1 hypothesized the existence of a positive association between organizational capabilities and customer relationship building. The results presented in Table 3; Table 4 show that organizational capabilities are positively associated with customer relationship building (β = 0.347, t = 5.218, p < 0.01). Therefore, H1 is supported. H2 hypothesized that there is a positive relationship between customer relationship building and competitive advantage; Table 3; Table 4 confirm this, demonstrating that customer relationship building indeed has a positive effect on competitive advantage (β = 0.406, t = 6.272, p < 0.01). Thus, H2 is also supported.
H3 assumed that customer relationship building plays a mediating role between organizational capabilities and competitive advantage. A bootstrapping method using PROCESS Model 4 with a sample size of 5000 was applied to assess the indirect effect. Table 5 shows that customer relationship building mediates the effect of organizational capabilities on competitive advantage (indirect effect = 0.157, lower level confidence interval (LLCI) = 0.069 and upper level confidence interval (ULCI) = 0.257, p < 0.01) and the bootstrapped confidence interval does not include zero [59]. Therefore, H3 is supported.
Testing of the moderation effect is shown in Table 6. A bootstrapping method using PROCESS Model 7 with a sample size of 5000 was used to test the moderation effect. Results show that the interaction effect of organizational capabilities and market dynamism on customer relationship building is significant (β = −0160, LLCI = −0.227, ULCI = −0.093, p < 0.01). Based on the results shown in Table 3, depending upon employees’ perceptions of market dynamism, the market does not appear to be highly dynamic in Northern Cyprus (mean = 3.084). However, this moderate dynamism sheds light on the association between organizational capabilities and customer relationship building. These results lend empirical support to H4, that market dynamism moderates the relationship between organizational capabilities and customer relationship building.

5. Discussion and Conclusions

This study investigated how organizational capabilities affect customer relationship building and competitive advantage. Furthermore, the role of customer relationship building as a mediator between organizational capabilities and competitive advantage was also investigated. It was further tested whether market dynamism operates as a moderator between organizational capabilities and customer relationship building. Our research supports arguments in the literature review regarding the effect of organizational capabilities and customer relationship building on competitive advantage. This finding is consistent with prior studies, which have found connections between organizational capabilities on building customer relationships [1]. A good relationship with customers can be primarily based on the ability of organizations to satisfy their clients. Ideally, customers’ needs can be quickly understood and responded to, and a better company–customer relationship can be built. This study further proposes that a better relationship with customers is a source of competitive advantage; specifically, when an organization can maintain a relationship with customers in various situations and satisfy their varying needs, it leads to an improved competitive advantage. Consistent with Barney [22], organizational capabilities in building a good relationship with customers lead to proper strategies and an enhanced competitive advantage.
Our research also supports our hypothesis regarding the mediating effect. Customer relationship building has a mediating effect between organizational capabilities and competitive advantage in the hotel industry. This research found that improvement in capabilities enhances customer relationship building and, in turn, improves organizations’ competitive abilities. More specifically, when employees are qualified to handle diverse situations and apply available resources to satisfy customers and build good relationships with them, a greater competitive advantage is obtained [1]. In line with Kuo et al. [42], companies with higher dynamic capabilities are more likely to improve competitiveness, and this can be attained through creating a long-term relationship with customers and by also providing them with high-quality services.
The moderating effect of market dynamism in the relationship between organizational capabilities and customer relationship building was also confirmed. Results revealed that the presence of market dynamism stimulates the association between organizational capabilities and customer relationship building. These findings suggest that organizational capabilities are less effective in building better relationships with customers in a dynamic market in Northern Cyprus as an island destination. Consistent with Jantunen et al.’s [44] research, a company can coordinate the capabilities in a changing internal environment; however, this might be insufficient in order to respond to the external environment effectively.
Overall, all hypothesized relationships were supported. That is, to improve competitiveness, organizations must consider their resources and apply suitable capabilities. Doing so enables them to create better relationships with customers, manage dynamism in the market, and improve their competitive advantage.

5.1. Theoretical Implications

This study’s findings contribute to hotel management literature in several ways. Firstly, this study extends empirical research in tourism and hotel management literature by considering and testing the relationship between organizational capabilities and the company–customer relationship. The findings concur with the resource-based view and dynamic capabilities approach, indicating that organizational capabilities improve relationships with customers. This finding is consistent with previous literature considering the effects of organizational capabilities on customer outcomes (e.g., [1,26]). The service industry requires employees to work under conditions that can prioritize customers, even ill-mannered customers; this job requirement can sometimes be difficult. Organizational capabilities in dealing with such situations help improve company–customer relationships, which in turn leads to an enhanced competitive advantage. However, customer relationship building is considered a first-order dimension in this research. This contrasts with previous studies (e.g., [40,41]) that have primarily focused on dimensions, such as customer satisfaction and loyalty.
Secondly, the current research contributes to ongoing studies in the hotel industry. It indicates the moderating effect of market dynamism on the association between organizational capabilities and relationship building with customers, which has rarely been studied in the literature. The findings also show that market dynamism is an essential factor affecting customer outcomes and should always be considered in decision making. The research indicates that dynamic markets require more managerial attention than markets characterized by lower levels of dynamism. This result contrasts the findings of Leonidou et al. [7], which show no moderating effect of market dynamism in the green hotel industry or between an environmental marketing strategy and competitive advantage. However, the study Leonidou et al. [7] conducted concerning different concepts, and in green hotels, might have different outcomes. There are certain studies conducted in Northern Cyprus taking into account its status as an island destination known for its sun, sea, and sand, among other qualities [60]. Characteristics like these make this island different from other tourist destinations in terms of internal and external factors. These findings also contribute to the hotel industry literature, specifically as it pertains to island destinations, which provides helpful suggestions to managers and decision makers in this field.

5.2. Managerial Implications

The current research also entails important managerial implications. For hotels to improve their competitive advantage, managers must first identify customer demands and accordingly allocate and adapt organizational capabilities and resources to satisfy them. Gathering information about customers, along with their preferences and expectations, may provide good opportunities for applying, maintaining, and improving distinctive capabilities. Employees also need to be aware of the benefits arising from a good company–customer relationship. This relationship can originate from organizational culture and transform into common practice by training employees and holding regular sessions. Employee performance can be continuously observed and assessed by supervisors and accompanied by a reward system, as this motivates employees to create better connections with customers.
Dynamism in the market makes it difficult to predict and understand customer demands; therefore, this dynamism affects companies’ relationships with customers. Managers must improve their capabilities to predict and control ongoing changes within the environment and learn how to quickly respond to dynamism in the market. Understanding the organizational capabilities and implementing them correctly allows the managers to react to dynamism in the market in a more professional manner. This understanding will help in identifying customer behavior patterns and environmental changes, as these capabilities may trigger appropriate responses to customers and the adaptation of marketing strategies accordingly. Correct application of organizational capabilities to address market dynamism enables companies to reconcile themselves with new trends in the market and with customer needs.

5.3. Limitations and Suggestions for Further Research

The present study has several limitations to be addressed. First, this research, similar to other studies using surveys with self-reported data, might enhance the probability of common method bias; however, we tried to ensure the appropriateness of the data by applying procedural and statistical remedies of common method bias. Second, the findings of this research are restricted in generalizability. Data were collected from hotel employees in Northern Cyprus, which is an island destination. Different countries and contexts may show different results. Moreover, the R-squared value of the current research shows a low effect size (<0.3). Future studies should employ more predictors to increase this value and eliminate this limitation. Furthermore, for data collection, researchers were not allowed to distribute and collect the questionnaires directly; hotel managers conducted the data collection. This may have enhanced the potential of socially desirable bias. Despite the efforts made to solve this problem by keeping the responses anonymous, however, this still counts as a limitation for this study. In this research, customer relationship building was assessed as a general factor, considering the perception of service providers towards the relationship with their customers. It is recommended that quality relationships with customers pertaining to satisfaction, loyalty, trust, commitment, etc. should be considered for future studies.

Author Contributions

Conceptualization, R.C. and M.T.; methodology, R.C. and H.O.; formal analysis, R.C. and H.O.; writing—original draft preparation, R.C., H.O. and M.T.; writing—review and editing, R.C. and H.O.; supervision, H.O. and M.T. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study. Participants were informed that their responses to the questionnaire would be treated entirely anonymously and confidentially.

Data Availability Statement

The data are available from the corresponding author upon request.

Conflicts of Interest

The authors declare no conflict of interest.

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Sustainability 13 04066 g001 550
Figure 1. Research model.
Figure 1. Research model.
Sustainability 13 04066 g001
Table
Table 1. Results of confirmatory factor analysis and reliability.
Table 1. Results of confirmatory factor analysis and reliability.
Scale ItemsLoadingrho_AαCR
Organizational capabilities [53] 0.8630.8600.895
OC1Our hotel emphasizes on reinforcement of organizational culture.0.758
OC2Our hotel emphasizes on obtaining the employee potential.-
OC3Our hotel emphasizes on strategic vision.-
OC4Our hotel emphasizes on flexible design.0.754
OC5Our hotel emphasizes on innovation and reengineering.0.747
OC6Our hotel emphasizes on quality of services.0.795
OC7Our hotel emphasizes on service diversity.0.810
OC8Our hotel emphasizes on company-customer loyalty and relationship.0.733
Market dynamism [56] 0.8480.8460.883
MD1In our kind of business, the mix of product/services available changes very frequently.0.728
MD2In our kind of business, marketing strategies change very frequently.0.675
MD3In our kind of business, standards change very frequently.0.843
MD4In our hotel, customer preferences in service features change very frequently.0.682
MD5In our kind of business, the technology employed changes very frequently.0.690
MD6In our kind of business, the frequency of major competitors entering/leaving the industry is very high.0.765
MD7In our kind of business, customer preferences in the price of the service offered change very frequently.0.649
Customer relationship building [54] 0.7290.7220.843
CRQ1We understand customers’ requirements.0.813
CRQ2We establishing close relationships with customers.0.823
CRQ3We create strong relationships with our customers.0.766
Competitive advantage [55] 0.7920.7830.874
CA1We try to focus on cost strategy through emphasising on cost reductions via process innovation, in business operation system, improving productivity and operations of employees.0.792
CA2We try to focus on quality strategy through focusing on product quality, strict quality control, meeting customer needs and their requirements about services.0.869
CA3We try to focus on innovation strategy through striving to be the first to introduce new services, stressing service providing process innovation, and engaging in novel marketing.0.842
Note: α: Cronbach’s alpha; CR: composite reliability.
Table
Table 2. Results of convergent and discriminate validity.
Table 2. Results of convergent and discriminate validity.
HTMTOrganizational CapabilitiesMarket DynamismCustomer Relationship BuildingCompetitive Advantage
Organizational capabilities0.588
Market dynamism0.2420.521
Customer relationship building0.4410.3750.641
Competitive advantage0.3530.1880.5420.698
Note: HTMT: heterotrait–monotrait ratio of correlation, AVE (average variance extracted) is provided in diagonal in bold.
Table
Table 3. Means, standard deviations, and correlations among variables.
Table 3. Means, standard deviations, and correlations among variables.
VariableOrganizational CapabilitiesMarket DynamismCustomer Relationship BuildingCompetitive Advantage
Organizational capabilities1
Market dynamism0.189 **1
Customer relationship building0.347 **0.299 **1
Competitive advantage0.292 **0.144 *0.406 **1
Mean3.7863.0843.7363.950
Standard deviation0.6610.4750.6630.863
Note: ** significant in the level of 0.01, * significant at the 0.05 level.
Table
Table 4. Regression analysis.
Table 4. Regression analysis.
Independent VariableDV: Customer Relationship BuildingIndependent VariableDV: Competitive Advantage
βtβt
Organizational capabilities0.3475.218 **Customer relationship building0.4066.272 **
ΔR2 0.116 **ΔR2 0.161 **
F 27.224 **F 39.343 **
Note: DV stands for dependent variable. ** significant in the level of 0.01.
Table
Table 5. Bootstrapping findings of the mediation effect of customer relationship building.
Table 5. Bootstrapping findings of the mediation effect of customer relationship building.
Hypothesized Mediating EffectIndirect EffectLLCIULCIp-Value
Organizational capabilities→
Customer relationship building→0.1570.0690.257<0.01
Competitive advantage
(0.347 a × 0.451 b)
Note: A bootstrapping method was adapted to test the significance of indirect effect. LLCI: lower level confidence interval, ULCI: upper level confidence interval. a: coefficient for the association between organizational capabilities and customer relationship building, b: coefficient for the association between customer relationship building and competitive advantage.
Table
Table 6. Moderation effect of market dynamism between organizational capabilities and customer relationship building.
Table 6. Moderation effect of market dynamism between organizational capabilities and customer relationship building.
Hypothesized Mediating EffectβLLCIULCIp-Value
Organizational capabilities0.2300.1470.312<0.01
Market dynamism0.0920.0060.179<0.05
Organizational capabilities × Market dynamism−0.160−0.227−0.093<0.01
Note: A bootstrapping method was adapted to test the significance of indirect effect. LLCI: lower level confidence interval, ULCI: upper level confidence interval.
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Cheraghalizadeh, R.; Olya, H.; Tumer, M. The Effects of External and Internal Factors on Competitive Advantage—Moderation of Market Dynamism and Mediation of Customer Relationship Building. Sustainability 2021, 13, 4066. https://doi.org/10.3390/su13074066

AMA Style

Cheraghalizadeh R, Olya H, Tumer M. The Effects of External and Internal Factors on Competitive Advantage—Moderation of Market Dynamism and Mediation of Customer Relationship Building. Sustainability. 2021; 13(7):4066. https://doi.org/10.3390/su13074066

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Cheraghalizadeh, Romina, Hossein Olya, and Mustafa Tumer. 2021. "The Effects of External and Internal Factors on Competitive Advantage—Moderation of Market Dynamism and Mediation of Customer Relationship Building" Sustainability 13, no. 7: 4066. https://doi.org/10.3390/su13074066

APA Style

Cheraghalizadeh, R., Olya, H., & Tumer, M. (2021). The Effects of External and Internal Factors on Competitive Advantage—Moderation of Market Dynamism and Mediation of Customer Relationship Building. Sustainability, 13(7), 4066. https://doi.org/10.3390/su13074066

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