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.
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).
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.